Usurious interest rates and bad car buys
December 2, 2009
Here’s a What would you have done? scenario.
I got a call from my girlfriend recently. She and her husband were looking at cars to replace both their beater car and the truck he’d crashed into a telephone pole one icy night, several months ago. He was fine, thank goodness, but their car was most decidedly not.
I worry about their finances as she’s described them to me. He’s been unemployed on and off for months, though always diligently hunting and trying to bring home income one way or another. He wasn’t too proud to go back to delivering pizzas while training for his paramedic license, trying out for the sheriff’s department, and basically beating every bush possible. She’s gone back to a desk job even though she hates it and she’s not physically a desk job kind of gal – it knocks her back a-kilter something fierce. But she deals, as well.
It took several weeks but they found their “deal”: a 2000 4-door sedan for $8,000. It seemed like a great price if they could get decent financing in her name. [He’d declared bankruptcy a year ago, and so they won’t be putting anything in his name for a while.] With a mid 700s credit score, I wasn’t terribly concerned about their chances.
Except the shady dealership offered them 15% APR! And then “gave” them a “discount” to make up for the fact that as they were signing the papers, the shady salesman revealed that the car had been in an accident that caused structural damage.
/headdesk/
At that point I really wanted to
a) beg them to walk away;
b) beg them to consider alternate financing options, and find another car that didn’t have structural damage;
c) beg them to walk away, consider better financing options, and find another car that didn’t have structural damage.
She told me, in the crickets-chirping silence as I debated the above options, that her brother in law the mechanic had checked the car and deemed it driveable, but I still felt uncomfortable with their decision to proceed with the sale.
Am I paranoid? What would you have done?
Shady, indeed. I would have given the same advice — walk away. I bet with her credit score, she could have gotten better than that 15% rate from a bank — if they still wanted the car after hearing it was in an accident. Bad, bad, choice on their part.
Has it been 3 days? They need to return that car. Did they sign before or after his insightful revelation? Guess this is a case for those car fax commercials. If it’s a scavenge title they will have a hard time selling and may not be ablt to trade it in.
Karen
I had no idea that cars with structural damage could be sold. Oh wait. They can be sold. as SCRAP METAL. 15% APR? She should have gone through a credit union or a bank.
I would have ran away from that “deal”.
Sounds shady. I’d walk away.
Yeah, I’d have asked her to walk away just based on APR alone! Add in the last-minute “by the way, this was in an accident” and you have ample cause for the alarm bells ringing in your head.
But since it’s not you, you have to be careful, I would guess. I would simply ask, gently, if they couldn’t get a better APR than this. I mean, a brand new Kia or a Ford Focus are not much more than this 9-year-old car that’s been in an accident. And the dealer would probably give them a much better rate.
That sounds super shady.. but we can only help our friends as much as they want to be helped. Make the suggestion that they turn the offer down or return the car maybe, and if they decide to take the advice it’s up to them…
a b and c. Truly though, if it’s too late, bite your tongue. No one likes the bearer of bad news. And I’ve had friends disregard similar warnings–sometimes good advice brings out the defiance in people.
Runaway, runaway, runaway.And is a sedan like a four door car? Why do I think that’s alot of money for a 2000 model?
I wouldn’t have felt good about that, either. Well, hopefully it works out okay…no going back now.
I think that your friend should work away from this deal. Shopping around in this time is better than taking the first one that comes.
This is the thing that terrifies me about buying a used car! It is why I will probably always, always, buy a new car.
That said, I have gotten screwed on financing before. I simply didn’t know any better, and they had reasoning for why the rate was so high. It was only after I got into PF that I realized the rate was ridiculous (11%) and refinanced. They probably felt that it was their only option.
@RainyDaySaver: I’m very surprised that they didn’t get a better offer from a bank or a credit union, myself.
@Karen: They signed after the revelation, I got this news after the deal had been struck and they were driving home. 🙁
I didn’t think they could return it within three days to a used car dealership?
@L.A.Daze: Exactly my thoughts. These guys were shady in so many ways.
@me in millions: agreed.
@Abigail: I suggested that better APRs were to be had, and offered to do some research, which I then did, but they were intent on this car. And you got exactly the point – there’s only so much a friend can say that will be heard and not be found offensive.
@HighClassLowIncome & FrugalScholar: Right on both counts. I tried.
@Serendipity: For a 9 year old 4-door with that kind of accident history? Yes, $8000 is way too much. If it were in excellent shape with low mileage, I don’t think that’d be too much. (would it?)
@eemusings: so far it’s been ok, but I’m keeping my fingers crossed that it stays that way.
@Financially Smart: I’m not sure why they were so intent on THIS deal happening, perhaps they were tired of shopping?
@paranoidasteroid: You may be right. When you’re not financially strong, you tend to be more willing to take what looks like a good deal because it’s a quick fix. [Seen that happen in my own family.]
But some of my best friends have gotten EXCELLENT used cars from a variety of places: car forums, Craigslist, private sellers, and even Ebay! As long as you’re careful about the selection process and know what you’re doing or bring someone who does, you can get a really good car at a fair or good price. I’m not there yet, personally, but I’ll have to be when I need another car! 🙂