As subprime auto borrowers default, collection suits pile up in local courts

[DemMomma4Sanders]

Source: St Louis Post Dispatch

As of Friday, the company has taken $22,600 of Lesinski’s wages. Because Missouri court judgments can carry the interest from the initial contract, little of that money has gone toward principal. Lesinski assumed the balance was near zero. In fact, he still owes almost $13,000.

High-interest car loans for cash-strapped borrowers with bad credit are nothing new. But as the U.S. auto market has come roaring back since the financial crisis, the share of car loans that are subprime has steadily risen.

At the lowest rung of this subprime boom are thousands of borrowers in the St. Louis region — many of whom would be considered below subprime because of their poor credit histories. For many of them, the end product of these loans is a default, repossession, court judgment and wage garnishment.

To get a sense of how lenders use the courts to recoup losses on loans to risky borrowers, the Post-Dispatch analyzed court data from suits involving three area auto finance companies.

Read more: http://www.stltoday.com/business/local/as-subprime-auto-borrowers-default-collection-suits-pile-up-in/article_241c726e-3532-537c-b1d2-b17e166cf92d.html

[ForgoTheConsequence]

1. Another bubble.

But by all means, buy that new $60,000 F150. You totally need it for your job in sales, and gas will be 2 dollars a gallon forever.

[CountAllVotes]

4. A

Last edited Mon Jun 6, 2016, 12:11 AM - Edit history (1)

[passiveporcupine]

2. This is so depressing

For a long time people have been buying cars on credit, because the price of a new car, like a house, is usually more than people can come up with in cash.

Because of that, the prices of cars (like houses) keep going up...you just pay more on your loan over a longer loan life for a much more expensive product than you can actually afford. And then things like this happen, where incomes have not gone up, but high interest credit is available to buy the cars (and homes), so people go for it.

I have the oldest car in my town (other than the refurbished oldies). My car is 29 years old and when I bought it new in '87, it was 11K (Acura Integra 5-door hatch). My income then was twice what it is now, and yet now, decent,nice cars, like my Acura, cost at least three times as much. I don't know what I will do if my car ever dies. I can't afford a new one and don't trust used ones from dealers (plus they charge too much). I've been watching for private sales, but right now can't afford that either...and it's still risky. I need a small pickup with a shell on the back now, that is all-wheel drive. I have to deal with deep snow in the winter, and my Acura doesn't do snow well. Especially slushy snow as it starts melting.

I'm glad they are talking about raising minimum wages now (finally) but it's not enough to help people with vehicle and home purchases. Many people are just going to keep accruing high interest debt to be able to live a stressful life.

Thanks all of you people who support the neo-liberalism this country is now based on.

[CountAllVotes]

8. Those trucks with a shell on them are

= a death trap on icy roads.

I had a horrible commute driving one of these things. I used to drive over 100 miles r/t in it until one day I hit black ice.

The next day, I drove past the same spot on that road and there in the black ice off to the side of the road was a pick-up truck with a shell identical to the one I had and it had flipped upside-down and two passengers were crawling out of the windows (cops were already there luckily as it was 5:00 a.m!).

[bucolic_frolic]

3. Everything's been mismanaged here

Buying a car you can't afford to put gas in let alone repay is not very bright

Car companies knew what they wanted: profits. My 1980s car was less than
$10k. It's still on the road. Is it true auto manufacturers lobbied for regulatory reform to permit
SUV's and Bill Clinton signed off on it? I read that somewhere, but can't confirm.

Push advertising. If you see it on TV, you gotta have it. Prestige factor. Sane
people see it as affluenza.

Banks and lenders love loans. They're not prudent anymore.

Cash for Clunkers fueled the recovery. So there was a political factor.

[CountAllVotes]

5. 1980s car was less than $10k

That is correct! I bought a 1982 Toyota Corolla (new) for $6400.00 tax and license included. It was used a lot and driven a lot. I sold it for $2500.00 in 1991 and bought a new Honda Civic for $9000.00 out the door.

Today a new Accord goes for about 30K. I'm keeping the one I bought in the early 2000 and I hope to god it lasts forever! I traded in my old 1997 Civic and took out a loan for 11K to buy it (got $10K for the Civic as a trade-in which was not a bad deal at all).

[elleng]

6. I'm happily driving my Dad's '93 Camry wagon,

160,000 miles, and hope I never have to buy a car! Dad paid cash for it.

Autos = the 'new' bubble.

[bucolic_frolic]

9. Yeah, Mine's a Civic too!

I'm doing work on it (myself) this summer, but throw $350 at it for parts
and 50 to 70K more miles are mine.

I really don't think I could ever part with it. I learned emotional attachment
to cars from my family.

[Kelvin Mace]

14. A $6,400 car from 1982 would cost about $16,000 today

adjusted for inflation. A stripped down 2016 Accord can be had for around $22,000 and change. I found a used 2008 Accord 55,000 with miles for around $13,000. The problem is the interest you pay if you don't have sterling credit. Twelve years ago after my business went under and my credit was hammered, they charged me 15% for a used car. Last year with my credit in much better shape a used car cost me 2%. If I had the credit rating today I had in 2004, they would be charging me 29%+.

Most people on the low end of the income scale have to go to "Buy Here/Pay Here" places and those places make a tidy profit. Your down payment will be what the dealer paid for the car, so every payment you make is profit for them. They generally will price the car at 2-3 times what it cost them. If you default, they repo the car, then sell it to someone else the same way. Meanwhile, they will sell your defaulted note for 10 cents on the dollar to a debt collection company, who will then hound you for the rest.

It is a very lucrative game as long as you have no soul.

[Massacure]

13. $10,000 in 1989 had the same buying power as about $19,300 dollars today

To put that in perspective, these cars have a MSRP under $19,300 for their base models.

Ford Fiesta
Ford Focus
Chevy Sonic
Chevy Cruze
Toyota Yaris
Toyota Corolla
Honda Accord
Honda Insight
Kia Forte

Note that if I change the inflation calculator from 1989 to 1986, the buying power of $10,000 changes to $21,300. Changing it to 1983 improves it to $24,000.

[wolfie001]

7. $40,000- $50,000 car or truck.........

......7 year, 84 month payments. And these are the "prime" loans. This has been bubbling up for awhile. Yikes!!!!

[PasadenaTrudy]

10. I have a brand new

Camry, and I love it! I have monthly payments I can easily afford.

[sarcasmo]

11. 12 payments left on my Honda Odyssey.

Only 50,000 miles and I'M gonna drive it until the wheels fall off.

[dembotoz]

12. friend of mine has a ford suv type thing she bought used

she has had it long enuf that the extended warrrenty the dealer saddled her with has long expired.....

anywho

due to financial mishaps she really needs to unload the thing but she still owes 3 x what the pig is worth.

she just doesn't get it...my 2001 paid for in cash used kia recently needed about 150 in work done to it.
she seriously offered to introduce me to her car salesman because i need a newer car like she has......

[Kelvin Mace]

15. I would not touch an SUV at any price

They are subpar on reliability and they lose massive amounts of resale value the moment you drive them off the lots, new or used. And when gas prices climb, they kill you.