Investment Riches on Subprime Auto Loans to Poor

[d00df00d]

Originally Posted By: eljefino
Yes but anyone with the option to buy a ten year old cavalier vs a BMW should know the BMW will be more expensive to tag and insure let alone maintain and finance.

Will it really? I don't think the car matters so much if all you're getting is the mandatory minimum insurance.

However, either way...


Originally Posted By: eljefino
Dingbat should have stood her ground and said she wanted something cheaper.

Agreed, obviously. There had to be something.

 

[philipp10]

Originally Posted By: Pop_Rivit
Originally Posted By: AdRock
I'm not rich by any means, but I also don't really fault someone for making money in this situation. Nobody held a gun to anyones head to sign u for something they can't afford. If they are so ignorant as to not look at their finances and make the right decision then they get what they signed up for. I don't feel sorry for them. It's the complete lack of personal responsibility that runs rampant these days. If I signed up for a ripoff loan then I'd be the idiot, not the person giving me the loan.


Agreed. Everyone has a choice to manage their finances responsibly-it makes no difference if you make $20,000/year or $200,000/year.

And not surprisingly, irresponsible financial management runs rampant among the rich as well as the poor. Common sense isn't all that common.


You are correct, there are always stupid (financially speaking) people in ALL income levels. My accountant friend that does taxes related to me a story of a family with 2 kids of modest means that thru the years was able to become quite well off, all due to watching every penny. The other family who pulled in over 160K and had no kids were always broke. Of course, they drove the fancy Hummers and BMW’s.

I don’t blame the guy charging 23%. People will always find a way to be broke. Making it illegal will just direct them to the next dumb place to blow their money. I sleep well at night, I just don’t want to bail these loosers out.

 

[SwampSurvivor]

I grew up "poor" but comfortable. My family never fell for things like this. I'm sure my parents could have financed a Land Cruiser or BMW ... but they didn't and lived within their means.

A lot of people feel they are "entitled" to a brand new car. I have friends that have financed 5 or 6 year old cars, for a decent interest rate ... with very, very poor credit.

You don't NEED a Dodge Charger. Saying someone doesn't need a car at all is a bit ignorant - here where I am, public transit is pretty much non existant. If his financial situation was dire enough that he needed to finance a used car (we've all been there, I'm sure), there could have been a better choice than a Dodge Charger. There's lots of Yaris/Versa/Focus on CL that can be reliable. Financing a $5000 Focus at 23.5% interest is a bit better than financing a $20,000 used Dodge Charger at 23.5%.

There's wants and needs.

On the other hand, financing a car at 23.5% interest is pretty much pure profit for the banks. Do they need to charge that much? Absolutely not. Is it right? Nope.

 

[philipp10]

Another example of stupid is my brothers step son. Kid gets 80K back in 1992, 18 years old from his deceased fathers estate. Gone within 18 months. Gets another 80K at age 26. Again, blown within a year or two. He rents, does not own a home, not a penny to his name.

Another example, some friends of my wife, a married couple inherited approximately 100k back in 1992, instead of buying a home with this cash, proceeded to blow it over the next 10 years. Today, they have a $275k home with a mortgage of about 375K. You can’t fix stupid.

Neither of these people ever borrowed money at 23% for a car, but they still found a way to be broke. No law will protect the stupid from themselves.

 

[SwampSurvivor]

Originally Posted By: d00df00d
Originally Posted By: HerrStig
Nobody starves in the US today, not even illlegals. I see MANY suffeing from the problems caused by BAD nutrition, not starvation. EBT cards will buy solid nutrition, or slap it on the table junk food.

I sincerely wish that were true. A buck just doesn't buy much these days.

The main problem is that poor people never have enough money at a time to buy more than one-off meals (as opposed to, say, batches of ingredients to cook with). In most places where poor people live, the cheapest one-off meals are all colossally unhealthy.


EBT card gets refilled on the 4th or 5th of the month. They can go to Aldi and buy food.

I'm not sure about everyone else's situation, but I have been spending about $35/week on groceries lately. I used to spend about $20 ... but I figured I would start indulging and eating differently.

I survived, healthily, on $20 a week from Aldi. At someone who is working on eating healthy, losing weight and getting healthier, I just look at food as means of sustinence. That means, I eat basic and healthy foods.


Originally Posted By: philipp10
Another example of stupid is my brothers step son. Kid gets 80K back in 1992, 18 years old from his deceased fathers estate. Gone within 18 months. Gets another 80K at age 26. Again, blown within a year or two. He rents, does not own a home, not a penny to his name.

Another example, some friends of my wife, a married couple inherited approximately 100k back in 1992, instead of buying a home with this cash, proceeded to blow it over the next 10 years. Today, they have a $275k home with a mortgage of about 375K. You can’t fix stupid.

Neither of these people ever borrowed money at 23% for a car, but they still found a way to be broke. No law will protect the stupid from themselves.


If I inherited the equivalent of $80K 1992 dollars today, first two things I would do is pay cash for a
I dream of the day that I have no student loans, no rent/mortgage. 2/2015 will be my first month without a car payment. Makes me feel great already!

 

[Cujet]

Originally Posted By: LT4 Vette
If you are entitled to food stamps, EBT, SNAP, WIC....

Shouldn't you also be entitled to a fancy car ?


Of course! Clearly, there is no limit to entitlements. It starts with government cheese (food) then morphs into food for starving families, then into feeding the children, then the children don't live in good conditions, so they need a real home, then, of course, those people need medical attention, and of course, they can't call 911 when necessary, and, oops, they can't drive the kid to the ER at 3AM, so they need viable transportation.

Did I miss anything?

Food
Housing
Medical
Communication
Transportation

Oh, and "IF" they want to work, they are entitled to a "living wage", regardless of skill level, criminal behavior, bad decision practices and so on.

I'm off to work, millions on welfare depend on me.

 

[d00df00d]

Originally Posted By: Miller88
I grew up "poor" but comfortable. My family never fell for things like this. I'm sure my parents could have financed a Land Cruiser or BMW ... but they didn't and lived within their means.

Unless you're referring to total beater Land Cruisers and BMWs, this sounds solidly middle class.

 

[d00df00d]

This may be instructive:

http://www.slate.com/articles/life/famil...annoyances.html


Tons of other articles like this around.

 

[dishdude]

Originally Posted By: 02SE
Originally Posted By: eljefino
At what point did that woman on food stamps with no income think that buying her daughter a BMW was a swell idea?


Life is hard. It's even harder when you're stupid.


So who was more stupid? The broke woman with no income that drove a BMW a few months for free, or the bank that approved the loan?

 

[SwampSurvivor]

Originally Posted By: d00df00d
Originally Posted By: Miller88
I grew up "poor" but comfortable. My family never fell for things like this. I'm sure my parents could have financed a Land Cruiser or BMW ... but they didn't and lived within their means.

Unless you're referring to total beater Land Cruisers and BMWs, this sounds solidly middle class.


I was trying to think of expensive mid 90s vehicles. I don't think I did so well haha.

 

[02SE]

Originally Posted By: dishdude
Originally Posted By: 02SE
Originally Posted By: eljefino
At what point did that woman on food stamps with no income think that buying her daughter a BMW was a swell idea?


Life is hard. It's even harder when you're stupid.


So who was more stupid? The broke woman with no income that drove a BMW a few months for free, or the bank that approved the loan?


According to the article, the broke woman signed her name to a legally binding contract to buy her Daughter a car. I'd say she, the bank, and the Carter Administration that started the whole "sub-prime lending" debacle, are all equally stupid.

 

[Mr Nice]

Originally Posted By: Cujet
Originally Posted By: LT4 Vette
If you are entitled to food stamps, EBT, SNAP, WIC....

Shouldn't you also be entitled to a fancy car ?


Of course! Clearly, there is no limit to entitlements. It starts with government cheese (food) then morphs into food for starving families, then into feeding the children, then the children don't live in good conditions, so they need a real home, then, of course, those people need medical attention, and of course, they can't call 911 when necessary, and, oops, they can't drive the kid to the ER at 3AM, so they need viable transportation.

Did I miss anything?

Food
Housing
Medical
Communication
Transportation

Oh, and "IF" they want to work, they are entitled to a "living wage", regardless of skill level, criminal behavior, bad decision practices and so on.

I'm off to work, millions on welfare depend on me.


Just keep working hard and pay your taxes, without your taxes these 'poor' folks would starve.

 

[javacontour]

Discussed on the Diane Rehm show this AM.

http://thedianerehmshow.org/shows/2015-01-28/concerns_about_the_rise_in_subprime_auto_loans


The graph is somewhat misleading as 2010 had little sub prime lending of this sort, so a 300% increase is from cherry picked numbers. When taken in full historical context, sub-prime lending is down about 5% from long term historical averages.

The bottom line is Caveat Emptor. If you ding your credit, and depend on credit to buy, you will pay more.

Pay cash for your cars and this is a non problem.

I recall hearing on the radio show that the cars were 100K miles cars and one of the guests said they were worn out.

Some maybe. But frankly that's where I'm shopping. I'll buy an 8 year old car for $5k or under with about 90-100k on the odometer and put another 150k on top of that.

Consumers are sold a bill of goods when they buy the lie that you can't get a good used car with 100K on the odometer.
Originally Posted By: Donald
This makes me sick. More taking advantage of the poor. Almost as bad as places that rent tires for a car and require a weekly payment or you will find your car on blocks with no tires.

http://dealbook.nytimes.com/2015/01/26/i...;pgtype=article

 

[supton]

Originally Posted By: 02SE

According to the article, the broke woman signed her name to a legally binding contract to buy her Daughter a car. I'd say she, the bank, and the Carter Administration that started the whole "sub-prime lending" debacle, are all equally stupid.


Since I was in diapers when Carter was running things... is this a jab at his administration of malaise; or did he oversee something that impacted sub-prime lending?

 

[javacontour]

Then get an expert 2nd opinon. If you know you are not a SME, then engage a SME.

Claiming ignorance really isn't an excuse. The consumer is responsible for his/her competence in evaluating a transaction. If they don't possess the acumen, there is no shame in engaging a third party acting on your behalf.

Originally Posted By: Donald
Originally Posted By: Subdued
The people taking these loans are portrayed as victims, when the reality is they're simply incredibly stupid and make horrible decisions based entirely on image.


I am sure there people did not set out to be stupid. But not everyone is bright and financially savvy.

 

[02SE]

Originally Posted By: supton
Originally Posted By: 02SE

According to the article, the broke woman signed her name to a legally binding contract to buy her Daughter a car. I'd say she, the bank, and the Carter Administration that started the whole "sub-prime lending" debacle, are all equally stupid.


Since I was in diapers when Carter was running things... is this a jab at his administration of malaise; or did he oversee something that impacted sub-prime lending?


The Community Reinvestment Act, got the sub-prime lending debacle started. Basically it was Government mandated legislation enacted by the Carter Administration, that basically required Banks to grant loans to those with low-income, and low or no credit. This sub-prime lending was expanded in the mid 90's, when Clinton was President.

Banks were compelled by Government legislation to make risky loans, or face charges of discrimination.

It doesn't take a genius to see that if enough risky loans fail, eventually the Banks will run out of money, and fail.

An economics Professor explains this here: Sub-Prime Lending

Senator Richard Shelby states the obvious at the end of the article: “Federal policy, not free market decisions, fueled risky loans to unqualified borrowers.”

 

[dishdude]

The CRA was for housing lending, and already debunked as a factor in the 2008 housing crisis, and certainly had nothing to do with a bank lending on a 2011 BMW to a borrower with no income.

Subprime lenders make the loans because they think they can make big money on them, not because they are forced to by some government regulation.

 

[02SE]

"Debunked" by those that can't handle or refuse to acknowledge the truth.

Furthermore, I said it got the idea of Sub-Prime lending started.

 

[supton]

Thanks, will read that link.

 

[shinyWheels]

Originally Posted By: supton
Thanks, will read that link.


On the CRA stuff, here's a CSPAN video showing they knew there would be a higher default rate, but pushed it anyways.