I had to break our normal publishing form this week and write an extra post on this pretty fantastic video I watched from John Oliver’s hit HBO show Last Week Tonight. Oliver, who does a lot of commentary on current events as well as social issues does a good job when it comes to financial issues, as he has done several.
Sub-prime lending is where a lender loans someone with less than prime credit money coupled with a higher than average interest rate. For car buying it is anywhere between 10%-30%.
Sub-prime loans are a monstrosity. They, much like payday lending, target people who are on hard times as they set their business model up in a way where they hope the buyer doesn’t follow through with their payments. The dealer can then repossess the car and sell it again, which sets up a vicious cycle. Oliver documents this happening with one particular car eight times over a three year period in the video link below.
Folks, sub-prime loans are garbage and if you are a sub-prime loan dealer, you’re crippling American people to turn a quick dollar, you should be ashamed of yourself. Most people who are seeking those types of loans can’t afford the payments (which is why they are in your office). They don’t know how to manage money or think long-term which is why they are in their current financial situation.
By sub-prime auto lenders making these deals with our members of society who are on hard times, they are just perpetuating the cycle of financial stress. I cannot tell you how frustrated sub-prime loan dealers are. If I meet them in person, I will always tell them why their business model fails and is a stain on society.
I place sub-prime loan dealers in the same category as payday lenders, loan sharks, and Ponzi scheme organizers. They are that bad.
That being said, there is a certain level of personal responsibility, too, that comes into play here. While the scum sub-prime lenders are making these deals, most times they are not forcing the signature of the signee. Friends, if you know someone who is considering a sub-prime auto loan or if you are, please refrain. At 20% interest on an overpriced car it will drain your net capital for the month and inhibit you from saving or checking off goals long-term.
Don’t have the money? Scrape up $1,000 and get a beater (Craigslist, friends, etc.), use public transit, or contact a local church for assistance. I will do everything in my power to help someone avoid this crummy “financial product”.
To close here, while I don’t always agree with your political positions, John, thank you for shining light on this industry that should be abolished and punished for their criminal acts on society.
[Editor’s note: Last Week Tonight is an HBO program so there is some mild to strong language in the video below]