Fellow consumer attorney Ian Lyngklip of Michigan produced this helpful video that you should watch if you are stressed about bills during work interruption from COVID-19.
Good Washington Post Article on How Car Dealers Rip You Off with Financing
Ian Ayres is the William K. Townsend professor at Yale Law School.
As websites such as Cars.com and TrueCar have made car pricing more transparent, auto dealers have turned to boosting their profits with hidden fees on loans.
When a consumer chooses in-house financing with an auto dealer, the dealer sends the customer’s financial information to a lender and is told the rate that the customer qualifies for. But it’s legal for the dealer to turn around and charge the customer a higher interest rate. You might qualify for a 5.9 percent interest rate, but if the dealer can get you to agree to a loan at 11 percent, the lender will kick back more than $1,000 to the dealership as pure profit. This discretionary markup of the interest rate allows auto dealers to arbitrarily increase their fees.
An analysis by the independent online auto-loan marketplace Outside Financial has found that dealers are charging an average markup of $1,791 per loan. By contrast, in 2003, Vanderbilt University economist Mark Cohen estimated that 10 percent of loans to Nissan’s borrowers were marked up more than $1,600. Now the average loan is boosted more than that.
. . .
Economists have had evidence for decades that car dealers tend to charge minorities higher prices. A series of studies I authored and co-authored in the 1990s found that auto dealers consistently charge black consumers prices that are hundreds or thousands of dollars more than their offers to white shoppers. These inflated prices can more than double the dealer’s profits compared with selling the same vehicle to a similar white customer.
. . .
The CFPB and other government agencies should be on the lookout for ways to better curtail dealership lending abuses. Yet instead of stepping up enforcement and protecting customers, the CFPB has rolled back rules on discriminatory lending practices and decreased enforcement of existing protections. Just last year, the Senate used the Congressional Review Act to overturn a CFPB rule that explicitly banned auto lenders from charging discriminatory fees on the basis of race. . . .
Turns out I'm not alone in recognizing that most used car dealers (not all, but most) are really just shady payday lenders disguised as merchants.
But I've been too optimistic!
Below is a quoted comment from an auto industry expert in the midwest. And this ins't me talking or another consumer attorney. This is a car industry guy talking - someone who helps dealers!
BHPH = "buy here, pay here" -- the classic small independent car lot.
He warns that even the big chain used car places have the same practices!
For used car dealers, the car is just the bait for the important part -- selling you an outrageous loan and optional "extras" that give the dealer much more profit than the car ever could. (Because, think about it -- the only reason 99% of the customers step onto the lot at one of these places is that they have such poor credit that they have to buy the car that someone else felt good about getting rid of.)
With the horrible increase in economic inequality in the US, this isn't going to change anytime soon.
But at least understand what you're dealing with -- if you feel like you have to buy a used car from a dealer, do everything possible to GET YOUR OWN FINANCING first, before you get anywhere within 100 miles of a dealer. Know what you are approved for IN TOTAL as well as in weekly or monthly payments, and walk away the minute the dealer tries to sell you financing.
Dealers are pushing out financing terms to absurd lengths to make used cars "affordable," but that just puts you into a negative equity trap (you owe much more than the car is worth) at trade-in time ... if the car even lasts long enough for a trade to be possible.
I am not a bankruptcy attorney, but I have helped many clients understand when they should look into bankruptcy and when there is no need for a bankruptcy filing because the clients have no assets that creditors can reach. If you are concerned that you are drowning in debt and don't know a good bankruptcy attorney to consult, you can make an appointment with my assistant and discuss your situation; I will be happy to refer you to good consumer bankruptcy attorneys if we decide that bankruptcy is appropriate for your situation.
Below is another article in the terrific series by the National Consumer Law Center on this important subject.
Deciding Whether to File for Bankruptcy: Consumer Debt Advice from NCLC
A consumer-rights leader and expert sends the following comment:
Oregonian opinion columnist Elizabeth Hovde wrote an execrable column the other day that proposed cutting food stamps for the "not so needy" -- you know, the folks with smartphones and on foodstamps.
Hovde's column shows that if she ever had any understanding of just how damn expensive it is to be poor in America, her perch of privilege has long since helped her forget that crucial fact. So I wrote a letter to the editor in response, which they ran today (below).
If you have no idea what I mean when I say it's really costly to be poor in America, click the image over there, which is to a great book, Shortchanged: Life and Debt in the Fringe Economy, which every politician in America should have to read and pass a test on before being allowed to legislate.
Letter: Cellphones don't always signal prosperity
Another Oregon attorney writes:
(hat tip to "The Housekeeping Report")
NCOA Issues Updated Guide for Seniors Considering a Reverse Mortgage
The National Council on Aging (NCOA) today issued the 2013 version of Use Your Home to Stay at Home™, the official reverse mortgage consumer booklet approved by the U.S. Department of Housing & Urban Development (HUD). The guide is designed to help seniors understand the pros and cons of a reverse mortgage. Reverse mortgages allow homeowners who are 62 or older to convert home equity into cash while remaining in the home.
Amy Ford, director of NCOA’s Reverse Mortgage Counseling Services Network, called the guide “an older homeowner’s best resource when it comes to examining whether a reverse mortgage is right for them.”
A free copy of the guide is available (download the pdf by clicking here).
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LAWYERLY FINE PRINT:
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