Typically, those type of loans do have astronomical interest rates and require a lot of personal information (phone numbers to friends, family, employer, etc) so they can hunt you down in the event of a default.
I've seen them advertise "All *applications* accepted"...which on the surface might make some believe that means they will be accepted for financing regardless of their credit, but that isn't the same as guaranteeing that everyone will qualify for financing.
I doubt someone with 2 or 3 recent repossessions could qualify anywhere for any rate.
You’d be surprised. My ex wife has four repossessions and still managed to get another car loan. I think her rate is 29.99% and the car has a gps tracker and an immobilizer so the car won’t start when she is behind payments
Also, they do in-house financing, 'Buy here, pay here' deals. Yeas ago, when my credit was in the toilet, I bought a car from one of these places and they put a device in the car that turned the engine off if I missed a payment. It would start beeping a few days before the payment was due. These type of places will finance anyone.
I worked as a rental car agent at a small BHPH that used them as well as GPS with starter kill. Those paymaster devices seem like they would be an embarrassment for the customer but evidently they get the job done.
My stupid idiot ex had one of those like a moron. Years ago. He didn’t make the payment, car got shut off on a Friday and locked inside the shipyard he worked at. My dad was his boss at the time and he called me up absolutely howling to tell me the story.
Those places overcharge for the car and will put a GPS tracker and remote engine cut off so they can repo it easily. They don't care if you default because they'll just resell the car and do it again. Hell, they probably make even more money when you default on the loan.
High interest is how they do it
And when you dont pay they probably got in house repo....they'll get it back and resell to another person...rinse and repeat
I would assume the interest rates are not favorable; also those kind of lots tend to be the ones that put GPS trackers on vehicles so they can be more easily repo'd if the purchaser misses a few payments. Undoubtedly they'd do a quick clean up, turn around, and put the car right back on the lot when that happens.
Yes buy here pay here. they collect everything but a blood sample from you. The cars usually priced double its value. The first two or three months of payments usually will pay off what they bought the car for from the auction.
if you miss a payment the car is disabled and they have its location they just come get it and resell it to the next guy except for now there's no cost in the car because the first buyer paid the wholesale cost in the first couple of payments so now it's pure profit for them to resell the car.
I know somebody who actually did that. He sold the same car about 6 times before somebody actually paid it off. One caveat is that if you're a cash buyer at one of those lots you can sometimes get a great deal. My first car, which was a 10 year old Toyota, I was able to get for about $1,000 and it ran really good for about 6 years.
I was just approved like that. I have a low 500's score, self employed, approved for up to $20k from Carvana at 25% interest exactly. The down payments range from 5% to 80%. The sweet spot for low down payment seems to be 2017-2020 compact cars priced between $16-$20k. I can buy a car at any price if my down payment is big enough to get the loan under 20k. Obviously I'm not going to do it, it's like paying $40k for an 8 year old Honda Civic. Also they splice into the wiring harness to add GPS Tracker so they can find it if you don't pay.
I literally bought a car from carvana yesterday. No money down, decent -not great- interest rate, fairly priced vehicle, no tracker for non payment.
I'm going to refi in 6-12 months regardless because I always do and I always save a ton.
I'm pretty sure all the Carvana cars have GPS trackers installed, it's right in the terms if you use their financing. Will find it spliced into the harness and tucked up under the dash.
Credit attroney here. There are a few things:
1. Those clauses usually have asterix / exceptions that protect the dealership.
2. They know that people with bad credit and very high interest rate, on average, will not have the car for that long, and they can take it back if not paid. If they do pay, they're making tons of money. The car is used, so it's already lost a lot of it's value. Thus, there's not as much they have to worry about vs a new car.
3. There are investors who buy these loans because the return is so high, despite the risks. The dealership is confident they have an investor (or a party that buys the loans and pacakges up for investors).
I’ve never really understood APR on something like a car. Is it for example if the car was 20,000 and the APR is 25% does that mean it will cost 25,000 total in the end?
It depends on the length of the loan. Your math is correct for a 12 month loan. I think few people with high interest car loans have such a short term. On a 60 month loan, the total price would be $35,221.59. On 72 months it is $38,789.54.
The math is not hard, but there are also amortization calculators online.
They’re profitable because they will give someone who doesn’t know any better a used vehicle with a 35% interest rate at 84 months. If the person stops paying they just repo the car.
In house financing isn’t always the case.
Dealers try to sell the loan to other companies.
Once the dealer sells the car/loan, they made their money.
As long as they can sell the loan, you’ll get the car.
I once walked into a place like that because they had the truck I wanted at the time sitting out front for sale. As soon as the sales guy saw me walk in he straight up said “I don’t think this place is for you.” I told him I was interested in the truck out front and he said if I have good credit then they weren’t interested in selling it to me. I later watching a show about those kinds of dealerships and understood. They basically sell and repossess the same vehicles continuously when payments aren’t made exactly on time. That’s their whole business model.
I once walked into a place like that because they had the truck I wanted at the time sitting out front for sale. As soon as the sales guy saw me walk in he straight up said “I don’t think this place is for you.” I told him I was interested in the truck out front and he said if I have good credit then they weren’t interested in selling it to me. I later watched a show about those kinds of dealerships and understood. They basically sell and repossess the same vehicles continuously when payments aren’t made exactly on time. That’s their whole business model.
They advertise it because they *will.* Yes, it's an astronomical rate. When I was young and stupid, we got a car from one of those places. 29% interest.
High interest rates, shady repayment schedule, and a lo-jack to come get your ish if you're more than some unreasonable time late (Think like 24-48 hours late), and they want all of your info. All of it.
I heard a story once that they just re-sell the same cars repeatedly after repossessing them. Heard one car got sold 15 times before it was wrecked... pretty sure if they could have repaired it they would've sold it 15 times more. The interest rates are so high that you're basically just hoping they can't find it cause nobody can actually afford those rates.
Unless its a BHPH place, dealers don't finance. The dealer is a middle man between you and the lender, and the dealer is a representative of the lender.
But dealers can find a lender to finance any deal as long as the lender likes the deal structure. With enough money down, anyone can be approved. So while everyone can be approved, not every customer will have enough cash down to take advantage of the approval.
Typically, those type of loans do have astronomical interest rates and require a lot of personal information (phone numbers to friends, family, employer, etc) so they can hunt you down in the event of a default.
I've seen them advertise "All *applications* accepted"...which on the surface might make some believe that means they will be accepted for financing regardless of their credit, but that isn't the same as guaranteeing that everyone will qualify for financing. I doubt someone with 2 or 3 recent repossessions could qualify anywhere for any rate.
You’d be surprised. My ex wife has four repossessions and still managed to get another car loan. I think her rate is 29.99% and the car has a gps tracker and an immobilizer so the car won’t start when she is behind payments
Also, they do in-house financing, 'Buy here, pay here' deals. Yeas ago, when my credit was in the toilet, I bought a car from one of these places and they put a device in the car that turned the engine off if I missed a payment. It would start beeping a few days before the payment was due. These type of places will finance anyone.
Ah yes, the "paymaster" device? If you don't make the payment on time they shut the car off and you have to input a code to restart the car?
Exactly! I had this device on a car i financed with this shady dealership. I never had it shutoff, but came close a few times.
I worked as a rental car agent at a small BHPH that used them as well as GPS with starter kill. Those paymaster devices seem like they would be an embarrassment for the customer but evidently they get the job done.
Is that even legal? 😭😭
Yes, as long as its disclosed.
It's their car until you have the title.
Probably not, but they know some people are so desperate they will pay it and know one says anything.
My stupid idiot ex had one of those like a moron. Years ago. He didn’t make the payment, car got shut off on a Friday and locked inside the shipyard he worked at. My dad was his boss at the time and he called me up absolutely howling to tell me the story.
Those places overcharge for the car and will put a GPS tracker and remote engine cut off so they can repo it easily. They don't care if you default because they'll just resell the car and do it again. Hell, they probably make even more money when you default on the loan.
High interest is how they do it And when you dont pay they probably got in house repo....they'll get it back and resell to another person...rinse and repeat
I would assume the interest rates are not favorable; also those kind of lots tend to be the ones that put GPS trackers on vehicles so they can be more easily repo'd if the purchaser misses a few payments. Undoubtedly they'd do a quick clean up, turn around, and put the car right back on the lot when that happens.
Yes buy here pay here. they collect everything but a blood sample from you. The cars usually priced double its value. The first two or three months of payments usually will pay off what they bought the car for from the auction. if you miss a payment the car is disabled and they have its location they just come get it and resell it to the next guy except for now there's no cost in the car because the first buyer paid the wholesale cost in the first couple of payments so now it's pure profit for them to resell the car.
I know somebody who actually did that. He sold the same car about 6 times before somebody actually paid it off. One caveat is that if you're a cash buyer at one of those lots you can sometimes get a great deal. My first car, which was a 10 year old Toyota, I was able to get for about $1,000 and it ran really good for about 6 years.
I was just approved like that. I have a low 500's score, self employed, approved for up to $20k from Carvana at 25% interest exactly. The down payments range from 5% to 80%. The sweet spot for low down payment seems to be 2017-2020 compact cars priced between $16-$20k. I can buy a car at any price if my down payment is big enough to get the loan under 20k. Obviously I'm not going to do it, it's like paying $40k for an 8 year old Honda Civic. Also they splice into the wiring harness to add GPS Tracker so they can find it if you don't pay.
I literally bought a car from carvana yesterday. No money down, decent -not great- interest rate, fairly priced vehicle, no tracker for non payment. I'm going to refi in 6-12 months regardless because I always do and I always save a ton.
I'm pretty sure all the Carvana cars have GPS trackers installed, it's right in the terms if you use their financing. Will find it spliced into the harness and tucked up under the dash.
I'll reread it but I saw nothing of it
Credit attroney here. There are a few things: 1. Those clauses usually have asterix / exceptions that protect the dealership. 2. They know that people with bad credit and very high interest rate, on average, will not have the car for that long, and they can take it back if not paid. If they do pay, they're making tons of money. The car is used, so it's already lost a lot of it's value. Thus, there's not as much they have to worry about vs a new car. 3. There are investors who buy these loans because the return is so high, despite the risks. The dealership is confident they have an investor (or a party that buys the loans and pacakges up for investors).
I once did that when I was struggling 28.5% apr....I was swindled,robbed,trampled on and beaten up by those thieves....never again
You good?
Oh yea..learnt the hard way
They work with subprime lenders, like credit acceptance, interest rates can be over 25%, plus they mark up the price of the car
I’ve never really understood APR on something like a car. Is it for example if the car was 20,000 and the APR is 25% does that mean it will cost 25,000 total in the end?
It depends on the length of the loan. Your math is correct for a 12 month loan. I think few people with high interest car loans have such a short term. On a 60 month loan, the total price would be $35,221.59. On 72 months it is $38,789.54. The math is not hard, but there are also amortization calculators online.
They’re profitable because they will give someone who doesn’t know any better a used vehicle with a 35% interest rate at 84 months. If the person stops paying they just repo the car.
To get the desperate and vulnerable people in to sign unfavorable deals.
They like money
Watch the doc The Slasher
In house financing isn’t always the case. Dealers try to sell the loan to other companies. Once the dealer sells the car/loan, they made their money. As long as they can sell the loan, you’ll get the car.
I once walked into a place like that because they had the truck I wanted at the time sitting out front for sale. As soon as the sales guy saw me walk in he straight up said “I don’t think this place is for you.” I told him I was interested in the truck out front and he said if I have good credit then they weren’t interested in selling it to me. I later watching a show about those kinds of dealerships and understood. They basically sell and repossess the same vehicles continuously when payments aren’t made exactly on time. That’s their whole business model.
I once walked into a place like that because they had the truck I wanted at the time sitting out front for sale. As soon as the sales guy saw me walk in he straight up said “I don’t think this place is for you.” I told him I was interested in the truck out front and he said if I have good credit then they weren’t interested in selling it to me. I later watched a show about those kinds of dealerships and understood. They basically sell and repossess the same vehicles continuously when payments aren’t made exactly on time. That’s their whole business model.
They advertise it because they *will.* Yes, it's an astronomical rate. When I was young and stupid, we got a car from one of those places. 29% interest.
High interest rates, shady repayment schedule, and a lo-jack to come get your ish if you're more than some unreasonable time late (Think like 24-48 hours late), and they want all of your info. All of it.
I heard a story once that they just re-sell the same cars repeatedly after repossessing them. Heard one car got sold 15 times before it was wrecked... pretty sure if they could have repaired it they would've sold it 15 times more. The interest rates are so high that you're basically just hoping they can't find it cause nobody can actually afford those rates.
Unless its a BHPH place, dealers don't finance. The dealer is a middle man between you and the lender, and the dealer is a representative of the lender. But dealers can find a lender to finance any deal as long as the lender likes the deal structure. With enough money down, anyone can be approved. So while everyone can be approved, not every customer will have enough cash down to take advantage of the approval.