The commercials are all over TV, the ones for car dealerships that will buy any car, even if you push it into their lot. And they will sell you a car even if you’re bankrupt or have a horrible credit score.
That’s all thanks to subprime auto loans, the focus of Sunday’s episode of “Last Week Tonight with John Oliver.”
Oliver describes how the industry has taken advantage of people who are poor and in desperate need of a car just so they can get to work on time (instead of taking three buses and a train) or get groceries for their families.
People with terrible credit can turn to “Buy Here, Pay Here” dealerships. But buyers are at the mercy of the dealers, who take advantage of their economic situation by providing the potential buyers with insane interest rates, averaging 19% and at times up to 29%.
The show points out that often the car these people are buying can be two to three times what the Kelley Blue Book value of the car is.
A remarkable example of how far these dealerships can milk this kind of deal is when the show highlights a 2011 LA Times story that tracks the sale of a 2003 Kia Optima from a Kansas City Buy Here, Pay Here dealership.
The car, which the show points out had a Kelley Blue Book value of $5,350, was sold in April of 2008 for nearly $11,000. It was then repossessed (or returned to a dealer) and resold eight times in three years each time at a price that was double or triple its Blue Book value.
“At which point you almost feel bad for the car,” Oliver jokes.
But the show didn’t stop there. They tracked down the car since being featured in the LA Times story and learned that it has been sold, repossessed, sold again, and the last listed owner said it had been stolen.
And if this sounds familiar to what happened with subprime home loans that lead to the market crash in 2007, Oliver said we might see a repeat of that as companies are now bundling those high-interest subprime loans and selling them on Wall Street.
Time for everyone to take a break and go watch “The Big Short” again. But before you do that, watch the full “Last Week Tonight” segment below:
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