Wednesday, April 29, 2015

Sub-Prime Auto Loans: Set Up for Failure



The need for transportation to get to work, and other important appointments can make a car a necessity. Some lenders exploit that need – approving borrowers who can't afford their payments. They set their borrowers up for failure, late fees, and penalties.

Sub-Prime Auto Loan Tactics

Several years ago, sub-prime mortgages were big news as the bubble burst. But that's not to say lenders learned their lesson. Instead, they changed their focus to auto loans.
The tactics are the same. Car dealerships inflate prices far above market value. Then they add on up-charges like warranties and charge exceptionally high interest rates. When the buyer falls behind, the lender tacks on penalties and late fees that drive the cost up even more. Then they turn the accounts over to collections agencies which harass the buyer to get them to pay.

A Cautionary Tale

Consider The Liblang Law Firm's client, Chris. Chris is a cancer patient who needs a vehicle to get to doctors. She bought a 12 year old Dodge Durango, with an accident and almost 170,000 miles in its history. It was worth $4,750, but the dealership charged her $7,500. The dealer then convinced her to purchase a $2,200 warranty on the vehicle. The dealership offered Chris a loan with an interest rate of almost 24% spread out over 4 years. All together, the cost of the SUV was $14,584, nearly $10,000 over market value.
Just two months after she bought the car, she found out there as a problem with the engine that would cost $5,600 to fix – more than the value of the car. What was worse, the warranty would only cover a small portion of the cost.
That's when she turned to attorney Dani Liblang with the Liblang Law Firm. Dani is a consumer law expert with 30 years experience helping consumers fight back against dealerships who sell them lemons at high prices.
"They’re upside down from day one because of the inflated price," said Liblang. "Secondly they’re being charged just horrendous interest rates."
The sub-prime auto loan is gaining popularity. Auto dealers don't care what happens after the car is sold as long as the bank makes a profit and they get their commission. Nor are they concerned with the quality of their warranties. Some sales associates don't even know what is covered by the products they are selling.

That's why Attorney Dani Liblang encourages consumers to stay away from sub-prime lending. Do your budgeting and know what you can afford to pay before you start shopping. If possible, seek an auto loan from an independent lender, like your bank or credit union. And if you do get caught up in a sub-prime auto loan scheme, contact The Liblang Law Firm, P.C., to help you protect you from the collectors' predatory lending strategies.

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