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Saturday, January 07, 2012

Buy Here Pay Here


From a three-part article in the Los Angeles Times last fall, we learn some interesting things about those buy and drive used car lots we see all over the place:

When the time came, they exchanged the Mitsubishi for a decade-old Mercedes-Benz E-Class with 80,000 miles, three previous owners and a repossession in its past.
At $13,998, the price was about $5,500 above Blue Book. The balance of the old loan was rolled into a new one, also with an interest rate of 25.99%, according to the new contract. Their payments climbed to $498, stretched out into 2014.
By then, the total cost of the Mercedes with interest would be more than $25,000. [Link.]

Your 401k money might even be invested in these car lots:

Loans on decade-old clunkers are being bundled into securities, just as subprime mortgages were a few years ago. In the last two years, investors have bought more than $15 billion in subprime auto securities.
Although they're backed mainly by installment contracts signed by people who can't even qualify for a credit card, most of these bonds have been rated investment grade. Many have received the highest rating: AAA. [Link.]

While the government will help you buy a house, get an education, and go to the doctor, among other things, it won't help you get a car:

About 1 in 4 needy U.S. families do not have a car, according to the Annie E. Casey Foundation. That's a serious handicap for the millions of Americans who don't have access to robust mass transit.
A nationwide survey of 353 people who bought cars with help from a nonprofit group called Ways to Work found that 72% reported an increase in income. Of those who were on public assistance when they acquired a car, 87% were no longer receiving it a few years later. [Link.]

Even if it's the only way to get to your job. Read the whole thing: Part 1 * Part 2 * Part 3. [Via.]

Photo: Ninth Street (a/k/a Business 55, a/k/a Loop 66).

Posted by Marie at January 7, 2012 8:02 PM


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