John Oliver Examines Insanely Predatory Practice Of Subprime Auto Lending

Subprime loans - those predatory loans that led to the 2008 recession - are back in the news. But this time, lenders are bilking poor people with bad credit through car loans instead of mortgages, according to John Oliver. The latest episode of HBO's Last Week Tonight spotlighted how some car dealers are profiting by exploiting loan agreements that allow consumers to buy cars with money borrowed from the dealership itself.

These dealers often proudly say that they won't hold your credit score against you - even if you have a history of defaults, foreclosures and bankruptcies.  In fact, Oliver found that some actually target poor people by bombarding the mailboxes of people who have recently declared bankruptcy with flyers promising pre-approved loans.

"Theoretically, it is a good thing that can't get financing elsewhere," Oliver says. "But in practice, it can trap people with few options into paying vastly more than the car is worth. It's just one of the many ways in which when you are poor, everything can be more expensive. The average interest rate at a 'buy here, pay here' lot is 19 percent with some paying up to 29 percent."

So it's no surprise that over 30 percent of those loans defaulted last year, according to Oliver. So why do car dealers get involved in this failed business model? Because they can make money by repossessing and reselling cars again and again. To prove how absurd the industry can get, Oliver summarized a Los Angeles Times article that followed the sale and resale of a 2003 Kia Optima over three years.

"It had a Blue Book value of $5,350. But in April of 2008, it was sold for nearly $11,000 - or double its Blue Book value. The original buyer complained of mechanical problems and refused to make payments, so the car was repossessed and sold again in August before being repossessed again four months later. It was then resold after just three weeks before being repossessed again from a mother of three, who without transportation, lost her job at Walmart. It was then resold again in May 2009 to an owner who complained of transmission trouble, so the dealer took it back and resold it just four weeks later, after which it was - you'll never guess - repossessed again from an owner who later filed for bankruptcy, thanks in part to payments he owed on this piece of shit demon car."

"But wait, we are not done," Oliver added after catching a breath. "It was sold again that December and was repossessed just five months later before being resold in May. And it was then - surprise, surprise - repossessed again, even though the owner - a mother of four - claimed she made every payment. And was sold one last time before being repossessed one month later....Now that is where the LA Times left it, but we felt so emotionally involved that we actually tracked that car down and discovered that since then it has been sold again, repossessed again and then sold yet again. And when we called the last listed owner, she said it had been stolen. And I really hope whoever did that drove it straight off a fucking cliff. Although, I'm guessing even then some sleazy lobster wound up selling it to a poor, unsuspecting fish."

So in total, that one overpriced car had 12 different owners (excluding the fish) in three years.

And subprime auto-lending doesn't just effect poor people. It could impact the economy like the subprime mortgage scheme did. Check out the full clip - featuring a guest appearance by Keegan-Michael Key - to find out more.


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