(07-21-2014 03:00 PM)olliebaba Wrote:  Don't be stupid, niu, it's not a matter of interest rates it's a matter of morality. There's a verse for that in the Bible if you want I'll show you. It's under usury in your Concordance.

But if your interest rates aren't high enough to cover your cost of doing business, you won't be 'moral' for very long... which is why he asked what the margins were.

If they're making 50% ROI, then their margins are immoral and their rates are too high. If they're making 10%, they seem neither immoral nor are their rates too high.

You can't just decide that 200% on this loan is too high... It could easily be that 200% isn't nearly enough... if you sell a guy a $10,000 car for $10,500... he makes a year of payments... totals it... and walks on the loan balance. That is pretty common, and a lender only has to have that happen once for them to become completely unprofitable.

The problem is that you're making a loan on something that inherently costs far more than its value as scrap.

People are complicit in these problems because they often buy far more car than they can actually afford. If you can really afford the payments, then it doesn't really matter WHAT the interest rate is OR the price of the car. That's only an issue if you run into trouble.

Yes, cash for clunkers took the $1500 and less, easy to work on/non-computer driven cars off the streets... which is a significant part of this problem.

First of all, this article is fairly ridiculous. It talks about a woman buying a van at 300% Loan-To-Value including back-end products like warranty and GAP insurance. Banks and finance companies simply don't do that type of a loan. It also talks about someone with a $26,000 car they couldn't afford. What stopped that person from getting a $14,000 car they could afford. It makes non-prime buyers sound like a bunch of fools who got swindled in by the medicine man. The truth is that they often times simply buy more car than they can afford. If they don't like the payments, they shouldn't sign the contracts that get put in front of them.

There is a bigger point that car loan rates for most people have never been lower. People are regularly paying less than 4%, even with used cars. I'd also add, that most lenders don't allow a rate markup of more than 3% from the buy rate.

People, regardless of credit, want to buy a car. Have you tried getting around without a car? If you want a lending market to exist for non-prime and sub-prime lenders, there is going to have to be a higher rate that is commensurate with the risk involved. Without a higher rate, there is no economic incentive to provide the financing. Now, let's take people with REALLY bad credit. The dealerships use a hand full of deep non-prime lenders that don't pay a penny of dealer participation and actually charge a fee to finance a deal for someone who is a real dog. If you've got a repo and a 480 credit score, you're going to pay a lot for a car. Most of those folks go to the "Buy here, Pay Here" lots or pay cash for a really crappy car. The super sub-prime market is expensive for customers, who've honestly done a very poor job of paying their bills. 25% sounds high for some, but some people are just really bad at paying their debts on time. There is still a strong chance the car is getting repoed.

You also have Ford, Nissan, Ally, etc buying low in the market. Right now, they're making loans at below-market rates just in order to move new cars. A person with bad credit can buy a new car with a payment they can afford. It may not be a Tahoe with leather seats, but the market is great for non-prime buyers to get a reliable car with a payment they can afford.

With a 550 credit score and no negative equity, you could buy a new 2014 Nissan Sentra for around $350/month with zero down. A good down payment or trade could get that number under $350

(07-21-2014 12:29 PM)vandiver49 Wrote:  

(07-21-2014 11:09 AM)HeartOfDixie Wrote:  

(07-21-2014 11:07 AM)vandiver49 Wrote:  

(07-21-2014 10:59 AM)HeartOfDixie Wrote:  I've long supported tougher usury laws, on the state level, as well as a Federal statute.

The cards are stacked against the poor in a big way.

Is this any different that pay-day loan places?

I don't think so. I think those places are downright criminal.

So far, we've done a good job of averting a European style petty loan crisis, with 3800% interest rates.

I don't like them either, but I don't want to go so far and try to legislate against people's own stupidity. Which is what tougher usury laws would be akin to doing.

Well not if you assign more risk to high interest loans to the lender.. Make it easier to get out of a 25% interest loan without it affecting your other assets.

No one is forcing people to sign anything

you can't fix stupid

Bought my first car when I was 15/16 and paid IIRC $500.00. 70 VW Beetle. Ripped it down and built it back up.

That reminds me...I need to go do another test drive in the new BMW 535. Think im leaning that way for a second car.

Credit Acceptance, Americredit, Westlake, etc aren't banks....They're finance companies borrowing money on the securities market. Wells Fargo, Bank of America, and Ally are able to offer lower rates, in part, because they're banks borrowing money at virtually interest free.

Ally's and other captive financiers have pushed down market rates on prime and non-prime paper. That's pushed some rates under 2%, which isn't economically feasible given the default risk involved and cost of funds. Indirect auto finance portfolios have to be profitable, so there is a certain pressure on higher rates in certain parts of the market to generate a greater return across the portfolio.

Now, the government has decided in their infinite wisdom that rate mark-ups are inherently discriminatory. Removing dealer participation isn't going to reduce interest rates for consumers, it'll just get produce fewer options for consumers.

Subprime auto loans go after those who've earned the right to only qualify for subprime loans. If you have good credit not much difference between new car and used car rates.

(07-21-2014 03:55 PM)olliebaba Wrote:  Niu, I never said that businesses were moral, did I? I said that usury is immoral. There may be some that are run with moral precepts but they are far and few between.

One business that I can count as moral is, trumpets please, Wal Mart. They have a huge amount of policies that actually help put food on your table. Their return policy is also one of the best. They have a policy of hiring veterans first too. Unfortunately, they are hated by both cons and libs. They are an equal opportunity victim, LOL.

Wal-Mart is not moral. They were a great business when Sam Walton was alive. He would only buy from American manufacturers and only sell American made products. Wal-Mart is one of the single most reasons for the decline of manufacturing jobs in America.

(07-21-2014 10:04 PM)hawghiggs Wrote:  

(07-21-2014 03:55 PM)olliebaba Wrote:  Niu, I never said that businesses were moral, did I? I said that usury is immoral. There may be some that are run with moral precepts but they are far and few between.
One business that I can count as moral is, trumpets please, Wal Mart. They have a huge amount of policies that actually help put food on your table. Their return policy is also one of the best. They have a policy of hiring veterans first too. Unfortunately, they are hated by both cons and libs. They are an equal opportunity victim, LOL.

Wal-Mart is not moral. They were a great business when Sam Walton was alive. He would only buy from American manufacturers and only sell American made products. Wal-Mart is one of the single most reasons for the decline of manufacturing jobs in America.

No, those jobs had declined precipitously before Wal-Mart started going overseas. One big driver in going overseas was that US manufacturing had already declined so far that they couldn't get the merchandise they wanted here.

I've never paid more than $9k for a car. The last one I bought I paid $7,200. Cars are not a good investment. A lot of research will show you what the low value, reliable cars are. I like Volvos. The lose their value quickly and are good for 200,000 miles. They are expensive new, but the one I just bought would have been upward toward $20k had I gotten the BMW or Mercedes in the same class and it will last just as long. Not to mention, it is easier to DIY fix minor issues.