Couple feel 'robbed' by 25% interest TD car loan

[swiper]

http://www.cbc.ca/news/canada/british-columbia/couple-feel-robbed-by-25-interest-td-car-loan-1.2483342

crazy stuff

[stevesteve]

"I went in willingly to get the loan, because we needed a car. But, from what I was told and what I was promised when I went in — now I feel like I've been lied to," said Hauser, who insists they were assured their interest rate could be lowered, substantially, after a year.

They said Okanagan Chrysler Jeep Dodge sold them a 2010 Dodge Avenger, by promising them if they made their payments faithfully for a year, the dealer would then secure another TD loan, perhaps on a trade-in, at a much lower interest rate.

I do think it's a problem when banks / auto dealers prey on and mislead poorly educated (at least financially) people.  Obviously, buying a $21,000 car in their position was probably not the wisest move knowing they were signing on that interest rate even with some assurance of lower rates in the future.

If 25 per cent of TD’s $14 billion in indirect auto loans are subprime, with roughly the same terms Hauser and Gamarra have, the bank would stand to make approximately half a billion dollars a year, in interest payments alone — if all of the customers made their payments.

“[The couple] would have gotten a cheaper loan if they had used Visa to buy the car. And yet people are complaining — and the federal government is expressing concern — about high credit card interest rates.”

The article does say some misleading things about finance in general.  Sure, a 25% rate brings in a ton of money if there are no delinquencies but they're lending to people with past delinquencies.  It's also unlikely that someone with such poor credit history has a limit of $21,000 so the Visa comparison is pretty irrelevant too.  The article seems to have no point except that it would be nice if these people could have gotten a loan with a lower rate to buy the same car irrespective of whether or not that would be a risk the private market would or should be willing to take.

[GuitarStv]

GuitarStv wants to know why they 'needed' a car.

[Jamesqf]

It's also unlikely that someone with such poor credit history has a limit of $21,000 so the Visa comparison is pretty irrelevant too. 

The question, though, is why they thought they needed a $21K car.  I have bought cars on a credit card a couple of times, and IIRC none cost much over $3K.

Hell, in comparison to these folks I'm filthy rich, and still have never paid more than $8500 for a car (which has lasted me 10 years, and still going).  Humm...  You think that might have something to do with WHY I'm (relatively) rich?

[daverobev]

Yeah not much sympathy for them. I can't blame TD; they are a business. If you're stupid enough to sign at 25%... And believe the *word* of a car dealer... Ugh.

Just makes TD look bad (not that I have any love for TD) when they haven't actually done anything technically wrong.

The couple should really facepunch themselves. Hard.

[mensa]

The couple should really facepunch themselves. Hard.

Followed by the "Go Public" author and the CBC for calling this "news".

[kms]

Whoever signs a 25% loan should not be allowed to make any decisions in life anymore. Ever.

[arebelspy]

Yeah not much sympathy for them...The couple should really facepunch themselves. Hard.

Whoever signs a 25% loan should not be allowed to make any decisions in life anymore. Ever.

Wow.  So many posters here are being so hard on the people themselves.

Ask yourself what you would do if you needed a car to commute (naturally bike, public transportation, blah blah - give them the benefit of the doubt and assume it's too far such that this is unfeasible - they could move or quit and try to find a new job), had bad credit due to a foreclosure.

Your car breaks down, and you are told if you pay 25% interest for a year, they will refinance your rate to something reasonable. Do you say no, and then do... what?

Or do you suck it up, say "this sucks, I know this is a terrible interest rate, etc." but scrape by?

I'm all for facepunching them if it showed their house with a 50" TV, they have the latest iPhone, etc.  But just given what we have, they were people living too close to the line, got sold on something, and their biggest mistake that I can see is not getting it in writing (which they couldn't have gotten anyways, as I'm sure the dealership won't guarantee that, in case their credit gets even worse in the meantime).

No one has any sympathy for that? 

In a different life I can imagine myself in their shoes, and I feel for them.

The question, though, is why they thought they needed a $21K car.  I have bought cars on a credit card a couple of times, and IIRC none cost much over $3K.

If you read the article, the dealership forced them to choose a more expensive one, because they wouldn't finance them for a cheaper one.

I believe them that they were told they could refi after a year.  I doubt they made that up, then went to the hassle of contacting the dealership, the bank, and eventually the news with their made up story.  They made what they thought was, even though on it's face a bad decision, the best alternative of a bunch of crappy ones at the time, thinking it would get better in a year.  Sucks.

Plenty of credit cards have this same interest rate, those tend to be much more deserving of a face punch, IMO, if they're using it for (non grocery) shopping.

[lithy]

Meh, I don't have a whole lot of sympathy.  Yes, they were almost definitely told that they could refinance in after a year of good payments, but again, shame on them for taking the word of anyone trying to sell them 20k worth of goods.

I worked over 2 years in a collections office handling 30-90 day past due accounts for Capital One Auto Finance.

It was a hardening experience.  Many of these accounts were perpetually late.  I'm talking about halfway through a 5-6 year loan and EVERY SINGLE PAYMENT has been over 30 days past due.  You think that these people with 20% APR don't have good reason to be deemed high risk?  When they buy the car, they can't even make the first payment on time. 

There was the occasional bad luck account.  Someone had something happen, had slowly dwindled their savings and finally couldn't help it, and the payments were late.  Usually these accounts were under 10% APR, you could tell by just a few account notes when people were serious.  We had some options available to them, we could defer a couple payments, and they would have to bring the account current.  Often if they knew at that point that they could get back on track, they would do it, we would never see the account again.  Some would know right then and there, with their payment just 30 days past due, that they would never get right with the loan again and would ask for a repossession process.  Those were the tough ones.  Those are the people that while I'm sure weren't necessarily shining beacons of Mustachian behavior, were at least within their means at year 0 on the loan, just maybe not by year 4.

The ones with cars more expensive than I could ever dream of buying, financed at 20+%, late every single payment, were just the risky borrowers that the lenders said they were.  They were just staving off repossession of the vehicle for as long as possible.  Hiding the car, making a payment as repo truck is literally there talking to the customer, etc., etc.  I saw outrageous payments, but I also saw the loan docs, the page in big letters that says "THIS IS YOUR MONTHLY CAR PAYMENT", with all of the details spelled out.  $1,200 dollar payments on 60k SUVs.  I saw accounts where more than a year into the loan, the payoff amount was MORE than the original loan balance.  Just moronic stuff.

But I think as so often comes up on this board.  Until these people want to do something differently, this is how their lives will play out.  I often times tried to explain how the loan was working to some of these accounts, detailing how it was costing more than it was even supposed to, but it seemed to mostly fall on deaf ears.  I was just one bill collector, trying to get whatever money I could from them.

Oh and lots of 70-90 year old grandparents that had co-signed loans for their 20-something bum of a grandkid.  Those were depressing. 

[arebelspy]

It was a hardening experience.  Many of these accounts were perpetually late.  I'm talking about halfway through a 5-6 year loan and EVERY SINGLE PAYMENT has been over 30 days past due.  You think that these people with 20% APR don't have good reason to be deemed high risk?  When they buy the car, they can't even make the first payment on time. 

Sure, that can be true.  But it's irrelevant here; these people have been on time for 26 months in a row, and were told they could refi after a year (12 months) of on-time payments.

Yeah, we can say "sucks to be them."   I still can empathize.  They're in a tough spot, trying to do what they can, and it's not working out.

I can't say I would have done much better in another life.

/shrug

[daverobev]

Arebelspy, there are ads on Kijiji all over the place saying 'we finance anyone, good credit bad credit' for $5k cars.

ONE dealership? NO shopping around? Taking a MUCH more expensive car than they wanted because the dealer said that's the only one they could have?

YOU WALK AWAY. No... you RUN away! Screaming!

The thing I disliked about the article is that it's mostly pointing the finger at TD - when the dealer should be the one under the spotlight. If they can't finance a $12k vehicle, they can't finance a $20k vehicle - that's just dishonest (because clearly they *could* finance the cheaper one because there is LESS RISK, not more!!).

Dealers were arseholes (what's new!), bank is just doing what bank does (taking money by loaning it), people are stupid. Stupid. Stupid.

No, sorry. I have no sympathy.

[mpbaker22]

It was a hardening experience.  Many of these accounts were perpetually late.  I'm talking about halfway through a 5-6 year loan and EVERY SINGLE PAYMENT has been over 30 days past due.  You think that these people with 20% APR don't have good reason to be deemed high risk?  When they buy the car, they can't even make the first payment on time. 

Sure, that can be true.  But it's irrelevant here; these people have been on time for 26 months in a row, and were told they could refi after a year (12 months) of on-time payments.

Yeah, we can say "sucks to be them."   I still can empathize.  They're in a tough spot, trying to do what they can, and it's not working out.

I can't say I would have done much better in another life.

/shrug

Yes, the dealer lied to them, and shame on the dealer.  But they still bought an expensive car with a 25% loan, so shame on them.  Besides, it's all hearsay anyway.  It's quite possible the dealer said he would help them try to refinance in a year, and they took that to mean he would refinance them.  Final point is they took a loan on an expensive car instead of getting a smaller loan on a cheaper car at a different dealer.

[MrsPete]

What I'm seeing is a string of mistakes: 

- Credit card debt
- Bankruptcy
- Their car was falling apart, yet they saved nothing for a new one.   
- They bought a more expensive car than they wanted; yeah, the dealer pushed them, but do we know whether they negotiated at all?
- They say the dealer promised them they could refi, but they're clearly not educated consumers, so I wonder whether this is true at all. I wonder if -- at the time -- they just wanted to get into the car, and they figured it'd all work out somehow. 
- They must've seen the figures when they agreed to the purchase. 

This isn't a matter of one mistake spiraling out of control.

[grmagne]

It was a hardening experience.  Many of these accounts were perpetually late.  I'm talking about halfway through a 5-6 year loan and EVERY SINGLE PAYMENT has been over 30 days past due.  You think that these people with 20% APR don't have good reason to be deemed high risk?  When they buy the car, they can't even make the first payment on time. 

Sure, that can be true.  But it's irrelevant here; these people have been on time for 26 months in a row, and were told they could refi after a year (12 months) of on-time payments.

Yeah, we can say "sucks to be them."   I still can empathize.  They're in a tough spot, trying to do what they can, and it's not working out.

I can't say I would have done much better in another life.

/shrug

I agree with you. They've made some bad choices but they didn't have a network of friends that could have assisted them with better financial advice or help with carpooling after losing their original carn, etc. Without any proper advice and with a car salesman trying to close an extra sale, the deck was stacked against them. Hopefully after this experience, and their previous bankruptcy, they start to learn more about frugal living.

And ideally, people reading the article will think twice before making major purchases on credit.

[BlueMR2]

If they think the interest rate is robbery, just wait until they find out about depreciation!

[kms]

Sorry arebelspy, I have absolutely no sympathy for stupidity. When life gives you lemons, make lemonade. When life gives you a 25% interest rate, make way for the stupid train 'cause  it's about hit the fan.
Seriously, you don't take it. You just don't. It's simple math.

[Jamesqf]

Ask yourself what you would do if you needed a car to commute (naturally bike, public transportation, blah blah - give them the benefit of the doubt and assume it's too far such that this is unfeasible - they could move or quit and try to find a new job), had bad credit due to a foreclosure.

I've been there, and I certainly didn't buy a nearly-new $21K car.  What's wrong with driving an older car?  And note that I have practicing what I preach: my newer car is now 14 years old, the pickup is 26.

...you are told if you pay 25% interest for a year, they will refinance your rate to something reasonable.

Just for clarification: they SAY they were told this.  Presumably they have nothing in writing, nor a recording of the alleged conversation.

If you read the article, the dealership forced them to choose a more expensive one, because they wouldn't finance them for a cheaper one.

I'm sure there is more than one used car dealer in Kelowna: http://www.yellowpages.ca/search/si/1/Used+Car+Dealers/Kelowna+BC  Not to mention a bunch of listings under $2K on Craigslist: http://kelowna.en.craigslist.ca/search/cta?catAbb=cta&query=&zoomToPosting=&minAsk=&maxAsk=2000&autoMinYear=&autoMaxYear=&autoMakeModel=

And again, they say the dealer forced them to choose the expensive car, but do we have any evidence to support this? 

[SpacemanSpiff]

Dang.  People are cold up in here.  Maybe its from being holed up by this blizzard (sidenote: was bummed that it was too rough outside to do the workout I had planned for today ... until I shoveled for 75 min - problem solved.  Even finished before the neighbor using a snowblower who started right before I did. Was pretty pumped about that). 

As somone who paid cash for both of our family's used cars, I cringed when reading about their decision to finance that expensive of a car given their current financial situation.  However, that doesn't mean the point about it being a shame that less financially-inclined people were lied to about refinancing options.  Some people, no matter how much they try to read the fine print, won't be able to parse out which sentences actually mean anything from the rest of the BS legalese CYA in there for the dealer.  I'm not ready to grab a torch and pitchfork and go after the dealer, but I can acknowledge the validity of both of his 2 seperate points:

1) They made an awful financial decision when choosing to finance the car that they did.

2) It was a shame that less financially inclined people were lied to/taken advantage of.

I was lucky enough to be taught Mustachian values at a young age by some (definitely not all haha) of my family members. I usually feel sorry for people who tell me that they have never even heard/considered the ideas I discuss with them when I talk to them about anything PF-related.  If they choose to ignore once they've had a nice dose of the voice of reason... well that's another story.

Eh, maybe I'm just soft

[arebelspy]

...you are told if you pay 25% interest for a year, they will refinance your rate to something reasonable.

Just for clarification: they SAY they were told this.  Presumably they have nothing in writing, nor a recording of the alleged conversation.

As I said, above:

I believe them that they were told they could refi after a year.  I doubt they made that up, then went to the hassle of contacting the dealership, the bank, and eventually the news with their made up story.

You think it's more likely they were:
a) mislead by a used car salesman (gasp!), or
b) weren't told that and made it completely up out of thin air, then pursued it?

I think a is much more likely.  Who knows though.

Eh, maybe I'm just soft

That's okay.  Apparently we could use a little more empathy around here.

Yes, they made dumb decisions.  It's tough when you're down though.

[Financial Threedom]

We were talking about this one at the office today as well.  Most didn't feel too bad for the couple.  They made yet another bad financial decision by buying a way to pricey car.   What have they learned from declaring bankruptcy?  Nothing it appears. 
As to why they didn't buy a reasonable used car for cash, they have no cash, they haven't learned to SAVE anything.  They NEEDED financing, this, according to them, was the only financing they could get.  They were lucky to get any financing after declaring bankruptcy.  Hopefully they've learned something this time around.

[Zamboni]

plus, Avengers look cool . . . someone might even think you're driving a Charger! . . . and that's the main thing.

[gooki]

Considering one can purchase a working car with just one months payment this has stupidity written all over it.

And shame on the dealer for lying.

[Sydneystache]

Sorry arebelspy, I have absolutely no sympathy for stupidity. When life gives you lemons, make lemonade. When life gives you a 25% interest rate, make way for the stupid train 'cause  it's about hit the fan.
Seriously, you don't take it. You just don't. It's simple math.

I have a friend who is in the same situation at 23.99% and I worry for him. When he told me the interest rate my eyes just popped out. He has 2-3 years left. I didn't probe but I think he has been rejected by the mainstream finance companies. I don't want to pile on it as it is a sensitive issue and he'd tell me to piss off and mind my business. I think a large part is due to the lack of financial education all around. Lack of responsibility too but if most of your friends have a car loan, there is a certain amount of peer pressure or acceptance of debt.

[greenmimama]

It's very sad all around, they are being preyed upon, no doubt, but they are also letting themselves be preyed upon. Now I understand why their are so many family loans, I guess if I G-d forbid was in the same situation, I would ask family before I ever paid 25% I would aslo buy a 1k beater though, but that's just me I guess and every other MMM follower.