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Posted: 3/12/2006 11:31:57 AM EDT
Seems that all I hear on Radio/TV are car ads that target people with credit problems or no credit at all..Some dealerships even have "Credit" in their name. Is it the high interest that they get charged? Are people with bad credit more likely to buy on impulse? Or is this a way to attract customers who might not be in the country legally?
Link Posted: 3/12/2006 11:34:31 AM EDT
It's called the "sub-prime" market. Yes, they charge a LOT of interest to people who couldn't otherwise have a car b/c nobody would finance them. They pool thousands of bad credit people together and assume that a certain percentage will not pay after a while. Then they repossess the cars.
Link Posted: 3/12/2006 11:34:44 AM EDT
You can still quantify the risk involved, so you do. Then you charge more money for your services to make up for the extra risk. Then you profit.

Link Posted: 3/12/2006 11:34:57 AM EDT
They sell to them at insanely high interest rates.

You can make a choice to not pay your bills, but you're going to pay for it at one point or another.

Link Posted: 3/12/2006 11:39:23 AM EDT

Originally Posted By VoodooChile:
Seems that all I hear on Radio/TV are car ads that target people with credit problems or no credit at all..Some dealerships even have "Credit" in their name. Is it the high interest that they get charged? Are people with bad credit more likely to buy on impulse? Or is this a way to attract customers who might not be in the country legally?


Thats the key, allot of the paper is sold to other people besides the car lot and the numbers look good for the car people so its a win win deal for them and the credit people have the defaults percentages figured in. So you now see what hell of markups are in the auto industry and why theres a car lot on every corner in some towns
Link Posted: 3/12/2006 11:40:54 AM EDT
Many years ago, a friend of mine bought a crappy Mitsubishi from one of those places. His interest rate? 26%

I think the car died about halfway into the loan period. He got screwed.

Same guy decided that the locksmithing-by-mail classes were his ticked to fame and fortune. First lesson had a photocopied book, a coulpe key blanks and a set of cheap files. I think he paid for a year of "classes" before he realized it was worthless.
Link Posted: 3/12/2006 11:45:11 AM EDT

Originally Posted By photokirk:
Many years ago, a friend of mine bought a crappy Mitsubishi from one of those places. His interest rate? 26%

I think the car died about halfway into the loan period. He got screwed.






Originally Posted By Johnny_Reno:

You can make a choice to not pay your bills, but you're going to pay for it at one point or another.


Link Posted: 3/12/2006 1:42:37 PM EDT
Get the vehicle "you deserve"..........

The can insure the loan, they get to charge higher interest and have no risk in the event of default
Link Posted: 3/12/2006 7:02:44 PM EDT
[Last Edit: 3/12/2006 7:03:09 PM EDT by Floppy_833]
This service market is supposed to be one of the big expanders over the next few years.
Places that deal with selling to low-income people: rent-to-own, check cashing, payday loans and bankless used auto sales.

The few people I've known who regularly used these kinds of places,,,, ehhhh..... -really weren't real sharp on their math skills. I'd be surprised if any would know how to compute compound interest, and I tended to think that they really never knew how much money the items were costing them.
~
Link Posted: 3/12/2006 7:17:37 PM EDT
They prey on enlisted servicemembers too. One SFC started talking about them one night while we were sitting around waiting for someone to get the fuel truck out of the motor pool. Apparently the Army tries to tell the kids to go see their platoon sgt or other NCO for advise/help before buying a car, but many dont bother to and get screwed.

An 18yo with a $10k signing bonus and 3 months of pay in his account is a big target for the lemon lots outside every large military facility.

Kharn
Link Posted: 3/12/2006 7:22:31 PM EDT
Secured Debt

Plus, everyone wants/needs a car
Link Posted: 3/12/2006 7:31:14 PM EDT
My sons buddy had to go to a mandatory Car Buying class at Sheppard AFB last week. Sheppard is one of the first stop schools just out of boot camp for AF troops. He didn't need it. (Has worked at Best Buy, Sports Chalet, and bought his first two cars, etc) But some of those But their are guys that are at the schools who suddenly have money and are soon allowed to have a car on base AND they are easy pickings for the shysters at the "WE finance E-2" guys just off the base.

And the general public has a high percentage of "graduates" from the public school system, that have no clue about the concept of interest, numbers of monthly payments, legally binding contracts, and OH YEAH taxes, where'd all the money go?

“Man, biologically considered, and whatever else he may be in the bargain, is simply the most formidable of all the beasts of prey, and, indeed, the only one that preys systematically on its own species” William James
Link Posted: 3/12/2006 7:37:12 PM EDT
I sell cars. We are a mainstream, high volume dealer of new and used cars in a very nice part of town, but we advertise "bad credit ok" too, and we have a special finance department to get loans for people with dogdy credit.

Here's why, as far as I can tell:

People with bad credit often have no choice but to buy a used car. We make a ton more profit on used vs. new.

People with bad credit are not in a position to negotiate price, so much. Get whatever cash they can put down, try to come up with a payment they think they can manage, and booyah! You sell a car with $3000 profit in the deal. For those following along at home, that's almost a grand for the sales guy. This is particularly good now, with the lower income set getting huge tax refunds.

People with bad credit tend to be loyal if they know you can get them financed. They will come back to you for another car sooner or later.

People with bad credit don't tend to shop around to other dealers, becasuse they are embarassed by their credit. Make them feel comfortable and they're all yours.

These are just my take on the subject. I am most certainly NOT privy to the operational details of the dealership. But we do a ton of special finance deals.
Link Posted: 3/12/2006 7:49:25 PM EDT

Originally Posted By Floppy_833:
The few people I've known who regularly used these kinds of places,,,, ehhhh..... -really weren't real sharp on their math skills. I'd be surprised if any would know how to compute compound interest, and I tended to think that they really never knew how much money the items were costing them.



These are the same people who rent furniture, consumer electronics, and tires.
Link Posted: 3/12/2006 8:06:23 PM EDT

Originally Posted By mucknuggle:
People with bad credit are not in a position to negotiate price, so much. Get whatever cash they can put down, try to come up with a payment they think they can manage, and booyah! You sell a car with $3000 profit in the deal.

People with bad credit tend to be loyal if they know you can get them financed. They will come back to you for another car sooner or later.

People with bad credit don't tend to shop around to other dealers, becasuse they are embarassed by their credit. Make them feel comfortable and they're all yours.




pretty much on the head
I sold cars but not at a buy here pay here a friend of mind did at one of the nationwide franchinse ones and also repoed for um

Intrest rates can run as high as 30%+

also as said above, a car i could barely get 2500-3000 for
they would sell it on their lot for 5000-6000 plus get the outragous intrest and ask a pretty decent sized downpayment if the credit is really bad


sure some default but look at it this way


i sell a car noramlly for 3000 guy with ok credit gets a loan for less than 10% he defaults we lose money


you get take the same car sell it for 6K with 30% intrest and a huge downpayment

they always pay good at first makes payments for awhile then defaults I have probably turned a profit already

Worst case they repo the car they still have probably made cost +10% on the thing first time around and now get to resell it
Link Posted: 3/12/2006 8:26:05 PM EDT

Originally Posted By Skibane:

Originally Posted By Floppy_833:
The few people I've known who regularly used these kinds of places,,,, ehhhh..... -really weren't real sharp on their math skills. I'd be surprised if any would know how to compute compound interest, and I tended to think that they really never knew how much money the items were costing them.



These are the same people who rent furniture, consumer electronics, and tires.



and jewelry, gyms, etc.

They are not selling goods or services, they are selling credit and using the g & s as the path to the customers wallet.
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