Posted on 02/05/2008 6:49:36 AM PST by Notary Sojac
Auto payment defaults doubled last year and are expected to get worse. It is another financial meltdown waiting to happen similar to the crisis in the home mortgage industry, according to one consumer group. A CBS 5 ConsumerWatch investigation has found consumers locked into cars they cannot afford.
According to Power Information Network, 1.85 of the 9.6 million customers in 2006 who leased or financed a new car were subprime borrowers or consumers with weak credit.
Vivian Snyder has strong credit and is not classified as subprime, but she is one of many consumers who can't afford the car she leased. Snyder drives a brand new convertible BMW with a MSRP listed at approximately $100,000.
Most consumers can't afford it, and neither can Vivian. That's because the monthly lease payment is $1,300. It eats up half her income which is a $2,500 disability check.
Yet, she got it at BMW of Fremont without showing a drivers license, pay stub, or any proof of income.
How did this happen? Apparently, her income was inflated by nearly 150%.
According to consumer advocate Rosemary Shahan with Consumers for Auto Reliability and Safety the practice is common.
"This is an epidemic of loan applications being falsified. In fact, the model for the meltdown we're seeing in real estate and home mortgage lending was auto lending."
Vivian's story starts like so many others. She went to the dealership which is owned by Autonation, the largest automobile retailer in the country just to look.
She got caught up in the excitement and said she told the salesperson about her $2,500-a month income. But, what ended up on the credit application was the amount she could be making if she was not on disability.
"He (the salesperson) put what he thought I needed to get qualified for the car," according to Vivian.
She admits she signed the lease credit application with her income inflated.
But CBS5 reviewed the lease application handed to Vivian as she left and compared it to a page from the same multi-layer document she retrieved days later.
Vivian's income had been changed once again - from $6,000 to $8,600 without her knowing.
General Manager Larry Long said a salesperson insists he changed the figure while Vivian was present.
"I witnessed that sale. I saw her and congratulated her. She was so thankful. She was so passionate about wanting that car and would have done anything to get that car," Long said.
Larry directs the blame on the finance company - BMW Financial Services.
"It's up to them to look at the credit application and they will see it at face value what the customer puts on paper as to be the truth," Long said.
Martha McKinley, a spokesperson with BMW Financial Services, said, "We have investigated this matter internally, and we are satisfied that BMW Financial Services acted appropriately at all times during the application and credit review process."
Vivian has only a few options. She can plead with the finance company to release her from the lease or have the car repossessed, losing her good credit and a $30,000 down payment which consisted of her entire retirement savings.
"I'm greatly embarrassed," Vivian said. "I should have looked over the contract better."
The woman in the story is so full of stupid, it’s hard to know where to start.
Vivian is an idiot.
I agree that she is an idiot. I also think that if you loan money to an idiot, and that idiot defaults, you need to suck it up, take your losses and don’t come whining to the taxpayers for help.
Question; What’s the difference between a used car salesman and a politician?
Actually, I would have expected something to happen in the auto industry like this YEARS ago, way before mortgages. A majority of people with car loans owe more than they are worth - I do in fact, I’ll admit, but only slightly - and at 0% interest.
The problem is that every year, they lengthen the terms of car loans 5,6,7 years so that you have no choice but to be either in major negative equity or put a huge down payment down. Add to that the fact that you get screwed on trade-in value and many people already had negative equity in a prior car...
I’m surprised this didn’t happen well before the mortgage problems, is all.
If you buy a brand new car with nothing down, even at zero percent interest you WILL have negative equity for about 2 years unless you do a loan term of 36 months or less.
“...losing her good credit and a $30,000 down payment which consisted of her entire retirement savings.”
This is the ideal Democrat, one who will vote for the government to take care of them because they are obviously too stupid and undisciplined to take care of themselves. Pathetic.
Oh, I don't know - she got to drive a nice car for a few weeks. For some, the memories of that brief moment of ego-boosting glory might be worth the trade. ;)
It’s actually been rather common for 90% of auto lenders to NOT ask for proof of income. I’ve gotten several car loans at various credit scores from 620 to 720 and the only one to ever ask for proof of income was a credit union I went to. I offered it, but was told “don’t worry about it” each time.
Did you think, back in the spring of 2007, the subprime lending issue was “contained”?
I’ve been thinking that the best way to expand the conservative base to minorities is to just set up volunteers to teach basic life-skills. “Buy your car with a conservative day” or something like that.
I've seen this before - in fact I think this is a worse epedemic than people overbuying houses.
I can't tell you how many people have come to me for a mortgage loan over the years (and fully documented income) who were not able to get a mortgage because of the 2 $550 car payments against their $65,000 yearly income.
You can vote a politician out of his job?
If you have to finance a luxury car...
—used car salesmen can’t put the government gun to your head—
What disability can a person have if they are able to drive a BMW convertible? Is it some kind of "special" BMW that has a wheelchair ramp?
May this idiot lose her disability check.
This story of a woman buying a $100,000 dollar car I would suspect is not typical of the vast majority of auto loans in the current market place.
“Question; What’s the difference between a used car salesman and a politician?”
The plaid jacket? (Paging Herb Tarlek).
This makes me so angry. People are stupid, the banks enable, now we all pay for the mortgage bail out. People are stupid, the dealers and banks enable, we will all pay. Just wait until the credit card mess hits the fan.
The common thread in all this, from my perspective is: I live within my means. I pay for what I buy. Now, I get to help pay for other’s greed and stupidity.
Grrrrrrrr.
I remember in the '80s my father having the same issues...I think it's been common for some time now.
Efficiency. The car salesman can only screw people over one at a time.
I remember in the '60s my father griping about the price of a new Oldsmobile, to which the salemans replied, that there would come a day when General Motors would not have a car that sold for under $10,000. LOL
Not much, unfortunately both often say what they think you want to hear, and then do just the opposite.
We had really bad experiences at more than a few car dealerships just a couple months ago. We wanted to buy our son a car for a college graduation present (he went to college on full scholarship, so we had paid nothing for his tuition, etc.) Anyhoo, the "kid" learned a wonderful lesson by going car shopping with his dad. Dad had to leave several dealerships after the deal was supposedly "done" because they would come back with a contract that was different than the agreed upon price/fees, etc. We were paying cash, so credit didn't play into it. But I hope our son learned the lesson to just get up and leave rather than try to negotiate with someone who's trying to pull a fast one on you (there are some good dealerships and honest salespersons, we finally found one.)
Vivian’s story starts like so many others.
ROTFLMAO!!!! Liberals always use that canned line.
Sue Kwon is using a terrible example with this idiot woman and her $100,000 BMW.
But this article is correct in many respects.
There is no income verification going on when you purchase a car.
But what really drives the repossession industry is not overstating income, rather it’s the loan to value ratio.
And sub-primers are the worst.
The typical customer brings in a car they owe too much on. In other words they are upside down. The dealership agrees to pay off the note on the used car by adding the difference on top of the new note.
What happens is the customer leaves the dealership owing $30,000 on a car that will be worth some $15,000 in a few short months.
Anyone remember Mitsubishi’s zero zero zero fiasco?
Why would you put your “entire retirement” as a down payment on a car lease???? Anyway you go about it the money is lost with nothing in return.
You mean zero down, zero percent interest, zero payments for 12 months? That was negative equity waiting to happen. I have a Mitsubishi and did the zero percent with minimal down, but started payments right away (didn't take the 12 mos no payments crap) and STILL owe more than the damn thing is worth, since I drive 30,000 miles per year - however, I'm rounding the corner and should be above water by mid summer.
30,000 down payment which consisted of her entire retirement savings.
Good Lord what was she thinking. I pray she was only 25 years old so she can still get smart and start her retirement savings over again. Something tells me she is in her 50’s though. I tried to see if her age was there but it did not list it.
Illegals buying houses and cars with no down. When Mexico calls ... they are out of here, with the money.
Stakeholders are required for a functioning Republic.
I see people even now with ~30k in income (who can’t buy a house here, outside the ghetto anyway with real estate prices in this area) and a $450 car payment.
>>Vivian Snyder has strong credit and is not classified as subprime, but she is one of many consumers who can’t afford the car she leased. Snyder drives a brand new convertible BMW with a MSRP listed at approximately $100,000.<<
Then screw her.
Instead of bailing out idiots who bought 100K cars they can’t afford we should be punishing them
“Snyder” doesn’t seem to me to be the name of an illegal immigrant...
Also sounds like an ad I heard recently for a furniture store. How do these people make money doing that...? Oh wait, I guess the 500% markup helps a bit.....?
Two words: Repo business..
It all comes down to the “fairness” line that the liberals have sold to and the American people have bought into. If the rich guy can buy a BMW or Mercedes, I should be able to, as well.
I haven’t financed a car since 1985 and don’t plan to any time soon. I usually buy cars that are 4 to 6 years old, paying cash and drive them for 5 or 6 years. I do my own maintenance and most of my own repairs. I tend towards BMW’s or such, because the maintenance cost is so high most buyers stay away from them, driving the price down, and I do a very thorough inspection before I buy so I know what I’m getting into and what repairs will cost. I plan on putting $1000 to $1500 per year into the car for maintenance and/or repairs, but that’s way cheaper than monthly payments. My current ride is a ‘94 BMW 740iL. I may upgrade soon to a 2001 750iL, if I can find the right one. Since I can do any repairs myself, the costs aren’t that bad (buy parts online instead of paying inflated dealer prices).
I live in the VA, MD, DC area. Everyone has to replace their cars every two years. About 50% of the car and trucks are leased. I own three vehicles. I own them all.
FReeper comments BUMP!
Very good points. My wife and I both ‘bought’ two new vehicles a few years ago, and I’m not sure we’ll ever do that again. They cost allot, and by the time they are paid off you can’t give them away. Unless one has allot of disposable income, I believe they are a waste of money. I plan on just driving my Mustang until the wheels fall off, to avoid getting screwed on the trade in and starting the mess all over again with another new car.
Oh give it a rest.
this story has to be fake-there is no way anyone is as stupid as the “Vivian” in this story.
Furniture is one thing that goes down in value 60% the second you take it out of the store.
However, good used furniture is quite difficult to find.
That’s because the monthly lease payment is $1,300. It eats up half her income which is a $2,500 disability check.
+++++++++++++++++++
Obviously the measly disability income is not nearly enough. There should be a government program to help people like her. /sarc
Yes, that says it for me.
“Also sounds like an ad I heard recently for a furniture store. How do these people make money doing that...? Oh wait, I guess the 500% markup helps a bit.....?”
Furniture store here is doing no interest for 4 years. Gotta make payments though.
Proud owner of one Focus.
OK - so what - so my everyday car is cheep and gets good gas mileage. I’m not a slave to fashion. :-)
That was the problem. Dealers make money on loans.
My next car may be a used Ford Focus. I like those cars.
You can actually do quite well to buy cars that are 3-4 years old - they cost half what the same car did new, still look and feel “new” and you can put down a modest down payment and finance for three years and keep it affordable while staying above water. The greatest depreciation occurs in the first two years of a car’s life.
Of course, I drive so many miles I always end up with a car that’s worthless when I’m done with it - I don’t get these people that manage to only put 18,000 miles on a car each year - I do 25k to 30k easily - which is also why I can’t lease.
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