Author Topic: 27% interest  (Read 12190 times)

New Mom and Dad

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27% interest
« on: March 29, 2016, 08:59:33 AM »
Today a co-worker proudly told me that he just bought a 2016 Ford focus. He said that he was offered 16% interest as he and his fiance have no credit. He said he turned this down because they were only offering him $500 for his Jeep. Instead he took their offer of 27% interest if they gave him $1800 for his Jeep. 27% interest. No that's not a typo.

He said they told him he can "probably" refinance to 2% in a few months. He said he got a steal and that the car pays for itself because of the good mpg.

Gaahhhh it was so hard not to punch him.
« Last Edit: March 29, 2016, 09:08:30 AM by New Mom and Dad »

EngineerYogi

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Re: 27% interest
« Reply #1 on: March 29, 2016, 09:10:16 AM »
:0

>_<

Yikes. I'm essentially speechless.

MgoSam

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Re: 27% interest
« Reply #2 on: March 29, 2016, 09:14:33 AM »
This also belongs in "Overhead at Work."

Wow, that's insane. A bunch of years there was a salesmen here that had a car loan around that amount and the big boss nearly tore into him, "What are you going to do if I have to let you go?" He was trying to convince him to be more responsible financially, from what I heard, the guy wasn't interested.

New Mom and Dad

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Re: 27% interest
« Reply #3 on: March 29, 2016, 09:15:43 AM »
I thought this deserved it's own thread because of the extent of anti-mustachianism

zephyr911

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Re: 27% interest
« Reply #4 on: March 29, 2016, 09:15:57 AM »
There's no way he'll refi at 2% on a used car if the best he can do on a new one is 16%. The extra 9% alone, assuming (conservatively) a $15k balance, will take less than a year to eat the $1300 in extra trade value.

Math. If only people knew it.

MgoSam

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Re: 27% interest
« Reply #5 on: March 29, 2016, 09:37:42 AM »
I thought this deserved it's own thread because of the extent of anti-mustachianism

Fair enough

CmFtns

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Re: 27% interest
« Reply #6 on: March 29, 2016, 09:42:08 AM »
I don't understand how he could even afford this because just the interest on the loan would be $350-400 per month at the beginning of the loan
« Last Edit: March 29, 2016, 09:46:55 AM by comfyfutons »

CmFtns

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Re: 27% interest
« Reply #7 on: March 29, 2016, 09:46:19 AM »
just to do some comparison and amaze myself

let's assume
$16,000
5 year loan

2%
$280.44/mo
For a grand total of: $16,826.40

27%
$488.57/mo
For a grand total of: $29,314.20

holy shit guys
« Last Edit: March 29, 2016, 09:48:53 AM by comfyfutons »

RWD

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Re: 27% interest
« Reply #8 on: March 29, 2016, 09:53:35 AM »
You didn't give vehicle specifics, so I'm going to make some up to run the numbers on how dumb this is.

Let's assume he had a 1991 Jeep Grand Wagoneer (4WD). With a 5.9L V8 and 3-speed automatic it gets 10/12 mpg (11 mpg combined). I couldn't find a less efficient Jeep on fueleconomy.gov.

And let's assume he bought the most fuel efficient Focus, with the 1.0L 3-cylinder EcoBoost engine (30/42/35 mpg). This probably costs no less than $20k out the door, depending on fees and taxes.

Over 5 years of driving 15k miles per year he would save $9.5k in fuel costs compared to the Jeep. And in the same time frame he will have lost about $10k to depreciation and $15.1k to interest (!), assuming a 5-year loan. In order for the Focus to "pay for itself" in fuel savings he would need to be driving over 40k miles per year...

And that's the best case scenario. Most likely his Jeep was more fuel efficient than this example and we should also consider alternative efficient used cars he could have purchased instead of the Focus.

New Mom and Dad

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Re: 27% interest
« Reply #9 on: March 29, 2016, 09:58:04 AM »
You didn't give vehicle specifics, so I'm going to make some up to run the numbers on how dumb this is.

Let's assume he had a 1991 Jeep Grand Wagoneer (4WD). With a 5.9L V8 and 3-speed automatic it gets 10/12 mpg (11 mpg combined). I couldn't find a less efficient Jeep on fueleconomy.gov.

And let's assume he bought the most fuel efficient Focus, with the 1.0L 3-cylinder EcoBoost engine (30/42/35 mpg). This probably costs no less than $20k out the door, depending on fees and taxes.

Over 5 years of driving 15k miles per year he would save $9.5k in fuel costs compared to the Jeep. And in the same time frame he will have lost about $10k to depreciation and $15.1k to interest (!), assuming a 5-year loan. In order for the Focus to "pay for itself" in fuel savings he would need to be driving over 40k miles per year...

And that's the best case scenario. Most likely his Jeep was more fuel efficient than this example and we should also consider alternative efficient used cars he could have purchased instead of the Focus.

Im not sure of the model/ year of jeep, but he said he averaged 14 mpg. He said his focus is averaging 42 mpg hwy and cost $18,000.

I should also add this guy has a child with another on the way and makes maybe $12/hr.

gardeningandgreen

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Re: 27% interest
« Reply #10 on: March 29, 2016, 10:02:40 AM »
I just don't understand how this is not predatory lending. CREDIT Cards which are an unsecured loan have lower interest rates. The guy in this situation is an idiot but in all honesty this lending should be illegal. There should be a little bit of protection for stupidity...

New Mom and Dad

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Re: 27% interest
« Reply #11 on: March 29, 2016, 10:10:33 AM »
I just don't understand how this is not predatory lending. CREDIT Cards which are an unsecured loan have lower interest rates. The guy in this situation is an idiot but in all honesty this lending should be illegal. There should be a little bit of protection for stupidity...

i agree. However this loan is from the single biggest dealer within hundreds of miles. Probably how they got so big considering things like this happen often around here....

slugline

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Re: 27% interest
« Reply #12 on: March 29, 2016, 10:14:36 AM »
You didn't give vehicle specifics, so I'm going to make some up to run the numbers on how dumb this is.

Let's assume he had a 1991 Jeep Grand Wagoneer (4WD). With a 5.9L V8 and 3-speed automatic it gets 10/12 mpg (11 mpg combined). I couldn't find a less efficient Jeep on fueleconomy.gov.

And let's assume he bought the most fuel efficient Focus, with the 1.0L 3-cylinder EcoBoost engine (30/42/35 mpg). This probably costs no less than $20k out the door, depending on fees and taxes.

Over 5 years of driving 15k miles per year he would save $9.5k in fuel costs compared to the Jeep. And in the same time frame he will have lost about $10k to depreciation and $15.1k to interest (!), assuming a 5-year loan. In order for the Focus to "pay for itself" in fuel savings he would need to be driving over 40k miles per year...

And that's the best case scenario. Most likely his Jeep was more fuel efficient than this example and we should also consider alternative efficient used cars he could have purchased instead of the Focus.

And if you throw in the comprehensive/collision insurance he would be required to keep on a brand-new Focus, the math gets even worse.

BDWW

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Re: 27% interest
« Reply #13 on: March 29, 2016, 10:16:55 AM »
This is fairly standard practice for sub-prime lenders. There are a couple dealers here that are always on the radio saying things like "Everybody gets approved","Rebuild your credit", etc.

It's been discussed here before, but I have a friend who bought a car from one of these places. His interest was only 24.9% though. They also put in a remote ignition interlock thing. If you were late on a payment, it would beep for 30 seconds before you could start it. If you were more than 10 days late, it would refuse to start.

New Mom and Dad

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Re: 27% interest
« Reply #14 on: March 29, 2016, 10:21:35 AM »
This is fairly standard practice for sub-prime lenders. There are a couple dealers here that are always on the radio saying things like "Everybody gets approved","Rebuild your credit", etc.

It's been discussed here before, but I have a friend who bought a car from one of these places. His interest was only 24.9% though. They also put in a remote ignition interlock thing. If you were late on a payment, it would beep for 30 seconds before you could start it. If you were more than 10 days late, it would refuse to start.

Ive never heard of that, thats crazy! Pretty cool though lol i cant blame them for not wanting someone driving their vehicle if they wont pay for it.

ncornilsen

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Re: 27% interest
« Reply #15 on: March 29, 2016, 10:41:12 AM »


Ive never heard of that, thats crazy! Pretty cool though lol i cant blame them for not wanting someone driving their vehicle if they wont pay for it.

I thought those were illegal? something about being unsafe?

At any rate, it's a good gig if you have no soul... sell a car, at an inflated price to someone with poor credit. Collect the payments for 6 months 'till they stop paying. Repo. Rinse, repeat. Each time, pick up a trade in at a massively LOW value, and rope even more suckers. spend all the profits filling the empty spot in your life with hookers and coke.

New Mom and Dad

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Re: 27% interest
« Reply #16 on: March 29, 2016, 11:08:09 AM »


Ive never heard of that, thats crazy! Pretty cool though lol i cant blame them for not wanting someone driving their vehicle if they wont pay for it.

I thought those were illegal? something about being unsafe?

At any rate, it's a good gig if you have no soul... sell a car, at an inflated price to someone with poor credit. Collect the payments for 6 months 'till they stop paying. Repo. Rinse, repeat. Each time, pick up a trade in at a massively LOW value, and rope even more suckers. spend all the profits filling the empty spot in your life with hookers and coke.

Hookers can be nice ladies... But yes that is pretty evil sounding

jinga nation

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Re: 27% interest
« Reply #17 on: March 29, 2016, 12:02:13 PM »
Math. If only people knew it.
Is too hard. Is there an app for that?

BarkyardBQ

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jinga nation

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Re: 27% interest
« Reply #19 on: March 29, 2016, 12:17:30 PM »
Math. If only people knew it.
Is too hard. Is there an app for that?

Yes, https://www.wolframalpha.com/input/?i=27%25+interest+on+15000+for+60+months
I don't understand URLs. Is there an iPhone app, coz Android users are cheap bastards. /sarcasm

Nederstash

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Re: 27% interest
« Reply #20 on: March 29, 2016, 12:36:19 PM »
Speaking of hookers, I can't wrap my head around the fact that they are illegal but interest rates like these aren't. Hookers are arguably cheaper and are upfront about you getting f*cked.

MilesTeg

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Re: 27% interest
« Reply #21 on: March 29, 2016, 01:00:11 PM »
We can thank our benevolent corporate overlords for doing away with those evil commie usury laws.

MgoSam

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Re: 27% interest
« Reply #22 on: March 29, 2016, 01:02:53 PM »
Can you ask your co-worker if he got dressed up and put on makeup before signing the offer? If you're going to get fucked that badly, mind as well look nice.

I'm a red panda

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Re: 27% interest
« Reply #23 on: March 29, 2016, 01:11:10 PM »
Math. If only people knew it.
Is too hard. Is there an app for that?

Yes, https://www.wolframalpha.com/input/?i=27%25+interest+on+15000+for+60+months
I don't understand URLs. Is there an iPhone app, coz Android users are cheap bastards. /sarcasm

Wolfram Alpha has an app too :)
Don't worry, you can get it on an Iphone.

Scandium

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Re: 27% interest
« Reply #24 on: March 29, 2016, 03:14:19 PM »
I just don't understand how this is not predatory lending. CREDIT Cards which are an unsecured loan have lower interest rates. The guy in this situation is an idiot but in all honesty this lending should be illegal. There should be a little bit of protection for stupidity...

"predatory lending" always struck me as a totally idiotic term. Unless the car dealers push you into a van, tie you to a chair and put a gun to your head nobody is forced to borrow money for these things. As far as I know they don't to this, yet..? And before someone argue that a car is necessary to get to work etc; yes maybe, but a latest year Focus is not. A 10 year old beater would also get you to work, or the bus..

If we protect everyone from all possible forms of stupidity how will they learn?! Have you seen the two documentaries Idiocracy, and Wall-E? The "protection" is the dealer telling you what the interest rate is beforehand, then you're on your own to accept it.

ketchup

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Re: 27% interest
« Reply #25 on: March 29, 2016, 03:35:59 PM »
Yep.  My sister-in-law bought a 2011 Kia a few years ago with 27% interest.  $485/mo (plus insurance which was ~$150) for a Kia.  Then she beat it up and drove 40,000 miles between oil changes.  Now she still owes 14k on a car with 100,000 miles on it that looks like trash and is worth maybe $3500 on a good day.

"Predatory lending" indeed.  But she signed the papers.  Can't feel *too* bad for her...

Cassie

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Re: 27% interest
« Reply #26 on: March 29, 2016, 03:55:51 PM »
Tell him to go to Rategenius.com.    His app will be sent to a bunch of lenders and they will offer better rates. 

protostache

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Re: 27% interest
« Reply #27 on: March 29, 2016, 04:41:04 PM »
I just don't understand how this is not predatory lending. CREDIT Cards which are an unsecured loan have lower interest rates. The guy in this situation is an idiot but in all honesty this lending should be illegal. There should be a little bit of protection for stupidity...

"predatory lending" always struck me as a totally idiotic term. Unless the car dealers push you into a van, tie you to a chair and put a gun to your head nobody is forced to borrow money for these things. As far as I know they don't to this, yet..? And before someone argue that a car is necessary to get to work etc; yes maybe, but a latest year Focus is not. A 10 year old beater would also get you to work, or the bus..

If we protect everyone from all possible forms of stupidity how will they learn?! Have you seen the two documentaries Idiocracy, and Wall-E? The "protection" is the dealer telling you what the interest rate is beforehand, then you're on your own to accept it.

The predatory part is where the dealer takes advantage of unsophisticated people by shopping them payments instead of purchase price and interest rate. When they shop payments, they can and do do all kinds of shady things like bundling rust protection and extended "lifetime" warranties into the loan, along with inflating the interest rate beyond all reasonableness.

forummm

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Re: 27% interest
« Reply #28 on: March 29, 2016, 04:49:14 PM »
My relative did a similar thing. He was never able to get the rate below 22%:

Another relative had a several year old car that worked just fine, but wanted to buy a brand new car to drive on long trips (because putting lots of miles on the new car is the way to go, right?). He bought a nicer car than he needed (probably paying too much for it). He owed more on the old car than he got in trade-in credit (probably got screwed on the trade-in), so he rolled that extra debt into the loan for the new car. And his new, giant loan was at 26%! I didn't even know that was possible. His interest payments are 5 times his principle payments. In the end, the interest will cost him over 5 times the purchase price of the car when including the opportunity cost of the funds.

Scandium

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Re: 27% interest
« Reply #29 on: March 30, 2016, 09:51:01 AM »
I just don't understand how this is not predatory lending. CREDIT Cards which are an unsecured loan have lower interest rates. The guy in this situation is an idiot but in all honesty this lending should be illegal. There should be a little bit of protection for stupidity...

"predatory lending" always struck me as a totally idiotic term. Unless the car dealers push you into a van, tie you to a chair and put a gun to your head nobody is forced to borrow money for these things. As far as I know they don't to this, yet..? And before someone argue that a car is necessary to get to work etc; yes maybe, but a latest year Focus is not. A 10 year old beater would also get you to work, or the bus..

If we protect everyone from all possible forms of stupidity how will they learn?! Have you seen the two documentaries Idiocracy, and Wall-E? The "protection" is the dealer telling you what the interest rate is beforehand, then you're on your own to accept it.

The predatory part is where the dealer takes advantage of unsophisticated people by shopping them payments instead of purchase price and interest rate. When they shop payments, they can and do do all kinds of shady things like bundling rust protection and extended "lifetime" warranties into the loan, along with inflating the interest rate beyond all reasonableness.

unsophisticated? This isn't the middle ages where only the priest class has access to information. Everyone has access to practically all information in the world at this point, these things aren't secret! And like I said I'm pretty sure the law already state that rates, costs, fees, bundled warranties have to be disclosed in the paperwork. If people don't read it that's only their fault! What more do we need to do, appoint government chaperones (say a nanny..) to accompany people when they buy cars and have them explain everything? Reasonableness is whatever people are willing to accept.

Protecting people from stupidity leads to more stupidity, not less.

Tjat

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Re: 27% interest
« Reply #30 on: March 30, 2016, 12:54:24 PM »
This is brilliant. I wonder if when I trade in my crappy car, I can claim financial ineptitude like this guy and get more money for my trade-in in exchange for a higher interest rate. Then the next day, pay it off.

Screw predatory lending - this is mustachian predatory borrowing baby!

Rural

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Re: 27% interest
« Reply #31 on: March 30, 2016, 01:09:25 PM »
This is brilliant. I wonder if when I trade in my crappy car, I can claim financial ineptitude like this guy and get more money for my trade-in in exchange for a higher interest rate. Then the next day, pay it off.

Screw predatory lending - this is mustachian predatory borrowing baby!


 My husband once did exactly this,  only with price, not trade-in.

MgoSam

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Re: 27% interest
« Reply #32 on: March 30, 2016, 01:10:32 PM »
This is brilliant. I wonder if when I trade in my crappy car, I can claim financial ineptitude like this guy and get more money for my trade-in in exchange for a higher interest rate. Then the next day, pay it off.

Screw predatory lending - this is mustachian predatory borrowing baby!

That's a fairly brilliant idea. If you do do it, please let me know how it works out.

bobechs

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Re: 27% interest
« Reply #33 on: March 30, 2016, 01:14:04 PM »


unsophisticated? This isn't the middle ages where only the priest class has access to information. Everyone has access to practically all information in the world at this point, these things aren't secret! And like I said I'm pretty sure the law already state that rates, costs, fees, bundled warranties have to be disclosed in the paperwork. If people don't read it that's only their fault! What more do we need to do, appoint government chaperones (say a nanny..) to accompany people when they buy cars and have them explain everything? Reasonableness is whatever people are willing to accept.

Protecting people from stupidity leads to more stupidity, not less.


Your free-floating libertarian rage has been noted and the appropriate discount applied in the marketplace of ideas --unfortunately leaving you with only loose change for carfare back to your cave-ish moated castle.

Please play again soon.

protostache

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Re: 27% interest
« Reply #34 on: March 30, 2016, 01:22:48 PM »
unsophisticated? This isn't the middle ages where only the priest class has access to information. Everyone has access to practically all information in the world at this point, these things aren't secret! And like I said I'm pretty sure the law already state that rates, costs, fees, bundled warranties have to be disclosed in the paperwork. If people don't read it that's only their fault! What more do we need to do, appoint government chaperones (say a nanny..) to accompany people when they buy cars and have them explain everything? Reasonableness is whatever people are willing to accept.

Protecting people from stupidity leads to more stupidity, not less.

Yes, unsophisticated. I know it's hard to believe, but outside of the minuscule FI bubble there exist millions of people who don't know how to read a contract or do the math on loan terms, nor do they know what tricks the dealer will pull to extract the maximum amount of money while still getting them the monthly payment they can afford.

Heck, I just bought a new car with dealer financing and the sales contract was very confusing even to me, someone who generally knows how loans work. They don't present the numbers in any kind of way that makes sense. For example, the price I negotiated with the salesperson didn't appear once on the contract. I pointed that out to the finance guy and he explained it so I signed the contract, but I had to call back again the next day and get a better explanation because I still felt like I had been screwed.

tomsang

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Re: 27% interest
« Reply #35 on: March 30, 2016, 01:26:34 PM »
20 some years ago I bought a new car after researching prices at a number of dealers.  I went in to the closest local dealership and told them a price that was $1,000 less than the next lowest price and that I was walking if I didn't get it. They asked me what interest rate I was willing to pay.  I said a % that was approximately 4% over my local credit union rate.  They accepted my price and I refinanced the same day at my credit union.  I am not 100% sure that I got the price because I was saying that I was willing to be reamed on the loan, but I think that was the case.  I was just not willing to be reamed for more than a few hours.  The payoff was so quick there was no interest added to the price. 

MilesTeg

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Re: 27% interest
« Reply #36 on: March 30, 2016, 02:09:47 PM »
20 some years ago I bought a new car after researching prices at a number of dealers.  I went in to the closest local dealership and told them a price that was $1,000 less than the next lowest price and that I was walking if I didn't get it. They asked me what interest rate I was willing to pay.  I said a % that was approximately 4% over my local credit union rate.  They accepted my price and I refinanced the same day at my credit union.  I am not 100% sure that I got the price because I was saying that I was willing to be reamed on the loan, but I think that was the case.  I was just not willing to be reamed for more than a few hours.  The payoff was so quick there was no interest added to the price.

A good strategy (I've done similar myself, though it involved taking a loan out and repaying it in full the same day, hah), but always read the fine print! Some loans have pre-payment penalties on them specifically for this reason.

MilesTeg

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Re: 27% interest
« Reply #37 on: March 30, 2016, 02:12:25 PM »
This is brilliant. I wonder if when I trade in my crappy car, I can claim financial ineptitude like this guy and get more money for my trade-in in exchange for a higher interest rate. Then the next day, pay it off.

Screw predatory lending - this is mustachian predatory borrowing baby!

That's a fairly brilliant idea. If you do do it, please let me know how it works out.

Been there, done that. You have to really thoroughly understand the terms of the loan though, as some have pre-payment penalties.

JAYSLOL

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Re: 27% interest
« Reply #38 on: March 30, 2016, 08:37:53 PM »
I just don't understand how this is not predatory lending. CREDIT Cards which are an unsecured loan have lower interest rates. The guy in this situation is an idiot but in all honesty this lending should be illegal. There should be a little bit of protection for stupidity...

"predatory lending" always struck me as a totally idiotic term. Unless the car dealers push you into a van, tie you to a chair and put a gun to your head nobody is forced to borrow money for these things. As far as I know they don't to this, yet..? And before someone argue that a car is necessary to get to work etc; yes maybe, but a latest year Focus is not. A 10 year old beater would also get you to work, or the bus..

If we protect everyone from all possible forms of stupidity how will they learn?! Have you seen the two documentaries Idiocracy, and Wall-E? The "protection" is the dealer telling you what the interest rate is beforehand, then you're on your own to accept it.

The predatory part is where the dealer takes advantage of unsophisticated people by shopping them payments instead of purchase price and interest rate. When they shop payments, they can and do do all kinds of shady things like bundling rust protection and extended "lifetime" warranties into the loan, along with inflating the interest rate beyond all reasonableness.

unsophisticated? This isn't the middle ages where only the priest class has access to information. Everyone has access to practically all information in the world at this point, these things aren't secret! And like I said I'm pretty sure the law already state that rates, costs, fees, bundled warranties have to be disclosed in the paperwork. If people don't read it that's only their fault! What more do we need to do, appoint government chaperones (say a nanny..) to accompany people when they buy cars and have them explain everything? Reasonableness is whatever people are willing to accept.

Protecting people from stupidity leads to more stupidity, not less.


I've witnessed first-hand sales managers downplaying the interest rate and telling people how easy it will be to get a much lower rate "very soon" and how good this all is for your credit score, blah blah blah.  This is LYING to make a sale.  This is predatory.  It is not remotely easy for a person with bad credit to "just make a few payments" and then score a lower rate.  It should be outright illegal to suggest to a potential buyer they can refinance at all IMHO, it's just not a part of the deal being made.  It doesn't matter how stupid or smart a buyer is, nobody deserves to be taken advantage of.  I'm not saying sellers or lenders shouldn't charge what they want, I don't care if dealers offer 200% interest-rate financing on a car as long as it's presented in a way that is honest and doesn't push people into a sale with the promise of a much lower rate in the future.

ringer707

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Re: 27% interest
« Reply #39 on: March 31, 2016, 07:47:19 AM »
Yep.  My sister-in-law bought a 2011 Kia a few years ago with 27% interest.  $485/mo (plus insurance which was ~$150) for a Kia.  Then she beat it up and drove 40,000 miles between oil changes.  Now she still owes 14k on a car with 100,000 miles on it that looks like trash and is worth maybe $3500 on a good day.

"Predatory lending" indeed.  But she signed the papers.  Can't feel *too* bad for her...

40,000?!?!?! I didn't even think the car would keep running that long without an oil change!

ncornilsen

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Re: 27% interest
« Reply #40 on: March 31, 2016, 08:08:41 AM »
I just don't understand how this is not predatory lending. CREDIT Cards which are an unsecured loan have lower interest rates. The guy in this situation is an idiot but in all honesty this lending should be illegal. There should be a little bit of protection for stupidity...

"predatory lending" always struck me as a totally idiotic term. Unless the car dealers push you into a van, tie you to a chair and put a gun to your head nobody is forced to borrow money for these things. As far as I know they don't to this, yet..? And before someone argue that a car is necessary to get to work etc; yes maybe, but a latest year Focus is not. A 10 year old beater would also get you to work, or the bus..

If we protect everyone from all possible forms of stupidity how will they learn?! Have you seen the two documentaries Idiocracy, and Wall-E? The "protection" is the dealer telling you what the interest rate is beforehand, then you're on your own to accept it.

The predatory part is where the dealer takes advantage of unsophisticated people by shopping them payments instead of purchase price and interest rate. When they shop payments, they can and do do all kinds of shady things like bundling rust protection and extended "lifetime" warranties into the loan, along with inflating the interest rate beyond all reasonableness.

unsophisticated? This isn't the middle ages where only the priest class has access to information. Everyone has access to practically all information in the world at this point, these things aren't secret! And like I said I'm pretty sure the law already state that rates, costs, fees, bundled warranties have to be disclosed in the paperwork. If people don't read it that's only their fault! What more do we need to do, appoint government chaperones (say a nanny..) to accompany people when they buy cars and have them explain everything? Reasonableness is whatever people are willing to accept.

Protecting people from stupidity leads to more stupidity, not less.


I've witnessed first-hand sales managers downplaying the interest rate and telling people how easy it will be to get a much lower rate "very soon" and how good this all is for your credit score, blah blah blah.  This is LYING to make a sale.  This is predatory.  It is not remotely easy for a person with bad credit to "just make a few payments" and then score a lower rate.  It should be outright illegal to suggest to a potential buyer they can refinance at all IMHO, it's just not a part of the deal being made.  It doesn't matter how stupid or smart a buyer is, nobody deserves to be taken advantage of.  I'm not saying sellers or lenders shouldn't charge what they want, I don't care if dealers offer 200% interest-rate financing on a car as long as it's presented in a way that is honest and doesn't push people into a sale with the promise of a much lower rate in the future.

A dealer lying like this is pretty shitty, and perhaps outlawing the bait-and-switch of "you can refi later" wouldn't be unreasonable.

But what can we really do about 'predatory lending', that won't make it even harder for someone to rebuild their credit? if you outlaw the interest rates needed to offset the outsized risk of someone with a bad history, either the option won't be available for someone to claw thier way to better credit, or they'll find other ways to game them that are not yet widely known.

ShoulderThingThatGoesUp

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Re: 27% interest
« Reply #41 on: March 31, 2016, 08:20:00 AM »
Know who isn't subject to the CFPB? Loan sharks, the guys who will beat your ass if you don't make your payments.

Like with anything else, crack down too hard on something people do voluntarily and they'll just do it illegally. I think I read that Washington made legal marijuana difficult and weird, so they still have a huge black market, while Colorado made things relatively simple and they are raking in the dough.

ketchup

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Re: 27% interest
« Reply #42 on: March 31, 2016, 09:01:43 AM »
Yep.  My sister-in-law bought a 2011 Kia a few years ago with 27% interest.  $485/mo (plus insurance which was ~$150) for a Kia.  Then she beat it up and drove 40,000 miles between oil changes.  Now she still owes 14k on a car with 100,000 miles on it that looks like trash and is worth maybe $3500 on a good day.

"Predatory lending" indeed.  But she signed the papers.  Can't feel *too* bad for her...

40,000?!?!?! I didn't even think the car would keep running that long without an oil change!
Yeah, I just about fainted when she so casually mentioned that...

nobodyspecial

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Re: 27% interest
« Reply #43 on: April 02, 2016, 02:52:43 PM »
Always seemed odd that interest rates, and prohibition thereof, is one bit of Biblical scholarship that all fundamentalist politicians seem to skip
   

MilesTeg

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Re: 27% interest
« Reply #44 on: April 02, 2016, 03:51:09 PM »
Yep.  My sister-in-law bought a 2011 Kia a few years ago with 27% interest.  $485/mo (plus insurance which was ~$150) for a Kia.  Then she beat it up and drove 40,000 miles between oil changes.  Now she still owes 14k on a car with 100,000 miles on it that looks like trash and is worth maybe $3500 on a good day.

"Predatory lending" indeed.  But she signed the papers.  Can't feel *too* bad for her...

40,000?!?!?! I didn't even think the car would keep running that long without an oil change!

Modern cars and oil are a lot better than in the past. The 3,000mi/3month mantra (reasonable when introduced in the 50-60s) is pure marketing bullshit at this point. That Kia probably has a manufacturers suggested interval of around 10,000mi/1year for the non-severe schedule.

BMW typically has a 15,000mi interval recommendation.

So, 40,000, while extremely dumb and has certainly caused serious damage, 40,000 is possible without immediate complete failure. Especially considering the vehicle has obviously been used mostly for long distance travel (100k miles in ~4-5 years). Take apart her engine and it will look like this:



But will still run (though poorly and with a lot of emissions) due to the wonders of modern engineering.

Travis

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Re: 27% interest
« Reply #45 on: April 02, 2016, 04:51:52 PM »
Yep.  My sister-in-law bought a 2011 Kia a few years ago with 27% interest.  $485/mo (plus insurance which was ~$150) for a Kia.  Then she beat it up and drove 40,000 miles between oil changes.  Now she still owes 14k on a car with 100,000 miles on it that looks like trash and is worth maybe $3500 on a good day.

"Predatory lending" indeed.  But she signed the papers.  Can't feel *too* bad for her...

40,000?!?!?! I didn't even think the car would keep running that long without an oil change!

Modern cars and oil are a lot better than in the past. The 3,000mi/3month mantra (reasonable when introduced in the 50-60s) is pure marketing bullshit at this point. That Kia probably has a manufacturers suggested interval of around 10,000mi/1year for the non-severe schedule.

BMW typically has a 15,000mi interval recommendation.

So, 40,000, while extremely dumb and has certainly caused serious damage, 40,000 is possible without immediate complete failure. Especially considering the vehicle has obviously been used mostly for long distance travel (100k miles in ~4-5 years). Take apart her engine and it will look like this:



But will still run (though poorly and with a lot of emissions) due to the wonders of modern engineering.

We had a 150KW diesel generator in Afghanistan run for over 2400 hours nonstop without an oil change.  That was a gross oversight by the maintenance contractor, but it shows that it's possible to go over the recommended time frame.  The engine kept shutting itself down from overheating, and when they finally changed the oil it came out looking like thick black applesauce.  They had to change it twice in two days to be sure they got all the old stuff out because it was so congealed.  And two days later the engine exploded and launched a rod 10 feet away anyways.  Even if the system can survive it, stick to the manual and don't tempt fate.

nobodyspecial

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Re: 27% interest
« Reply #46 on: April 02, 2016, 07:10:18 PM »
Boss bought a new BMW. Same model as he had in Germany, checked it was the same spec, built in same factory etc
At 6000km (4000mi) the check engine light comes on for an oil change, it was 20,000km/12,000mi in europe
BMW must have some crappy oil over here.
 

MilesTeg

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Re: 27% interest
« Reply #47 on: April 03, 2016, 01:30:16 AM »
We had a 150KW diesel generator in Afghanistan run for over 2400 hours nonstop without an oil change.  That was a gross oversight by the maintenance contractor, but it shows that it's possible to go over the recommended time frame.  The engine kept shutting itself down from overheating, and when they finally changed the oil it came out looking like thick black applesauce.  They had to change it twice in two days to be sure they got all the old stuff out because it was so congealed.  And two days later the engine exploded and launched a rod 10 feet away anyways.  Even if the system can survive it, stick to the manual and don't tempt fate.

Yep, change your oil according to manufacturer specs.

Bbqmustache

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Re: 27% interest
« Reply #48 on: April 03, 2016, 03:52:44 AM »
I work for a credit union service organization, and I have heard some doozies:

Pick up truck loan with a $64,700 balance

Call for a payoff from a dealer, car being traded in still had a $28,000 loan balance.    Real fun to roll your old car debt into your new car loan with that kind of balance.  That person his heading toward some major financial pain sooner or later.

ketchup

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Re: 27% interest
« Reply #49 on: April 04, 2016, 07:43:30 AM »
So, 40,000, while extremely dumb and has certainly caused serious damage, 40,000 is possible without immediate complete failure. Especially considering the vehicle has obviously been used mostly for long distance travel (100k miles in ~4-5 years). Take apart her engine and it will look like this:



But will still run (though poorly and with a lot of emissions) due to the wonders of modern engineering.
I know you were giving her the benefit of the doubt, but it has not been mostly used for long distance travel.  It's been mostly used for pizza delivery.



So it probably looks even worse than that.