Dealerships Give Car Buyers Some Advice: Just Stop Paying Your Loan. Car sellers are telling hard-up borrowers to have their old cars voluntarily repossessed. Lenders and borrowers are losing out.

Wall Street Journal ^ | February 15, 2020 | AnnaMaria Andriotis and Ben Eisen

[HereInTheHeartland]

Anyone who follows financial advice from a car dealer is stupid.”

Why?
Car salesman are the best financial advisors ever!

[Babba Gi]

“They wanted my cash, but I gave them my SOUL”

[KevinB]

Credit is ruined if you don’t make the payments. How does one expect to get a loan for a new car when they just defaulted on the loan for the old one?

[sauropod]

Precisely.

[scrabblehack]

Apparently the car dealerships are deceiving the lenders; they’re able to get loans for the buyers. It doesn’t matter if the buyer defaults; the dealer isn’t out the money, the lender is.

The story says it’s not sure how prevalent the practice is.

[mad_as_he$$]

The first thing you should do when you buy a keyless entry car is reset the key system to only recognize the fobs you have in your possession. Of course that doesn't stop the illegal scanners.

[redfreedom]

BINGO!

I just love the secure feeling of knowing what we possess we actually own.

Another benefit is earning interest instead of paying it.

[Stirner]

“Best advice anyone ever game me: Avoid debt.”

I have followed that advice all my life, but I’m not sure if I have been rational in doing so. I just feel so much more comfortable not being in debt. But if there is significant inflation going on, borrowing now to purchase appreciating assets and paying back later in depreciated dollars is the “smart” move. The official statistics say that inflation is low, even “too” low. Looking at prices (and incomes), it doesn’t seem that way to me. But even if running up debt makes sense, I can’t do it for emotional reasons.

[marktwain]

So, about 1% of vehicles purchased on credit end up being repossessed. That is a much better ratio than I thought.

[MrEdd]

The really sad part.
The part that makes me weep for my country...

Is that there are so very many Americans so ignorant of how to live frugally and within your means that they cannot concieve of living a life without credit and actually spew economic advice which chastises people who do not structure their life around borrowing.

The founders would be appalled.

[marktwain]

Having the car repossessed does not remove the obligation of paying off the loan.

It would only work *if* the lender would accept the car as payment, in full, of the loan.

If they were willing to do that, the owner could sell the car for more.

The entire premise of the article makes no sense at all.

[Tennessee Conservative]

Goodness! I drive a vehicle until it starts to cost more in repairs than it would to buy a newer one. My GMC truck is 20 years old and has 270,000 miles. It runs like new and has never had any costly repairs so I keep driving it. I drive them until they start making me walk. :-) I can’t imagine trading one while it’s still good. After that I sell them cheap to somebody that can’t afford a new one but has the mechanical skills to keep one running.

[E. Pluribus Unum]

I only drive Dave Ramsey vehicles.

[billyboy15]

“Dealerships “could not sustain carefully cultivated relationships” with lenders “if they were to engage in the type of behavior alleged,” a spokesman said.”

This is spot on. Unless the dealer wants to personally lend the buyer the money or go on the note as a co-maker no lending institution would lend a cent to a dealer caught advising customers to stop paying. In any case even if a buyer “stops paying” and the vehicle is repossessed they are still responsible for the balance of the loan minus any proceeds the lender gets from the sale at auction of the vehicle.

The borrowers credit takes a horrendous hit which will dog them for 7 yrs and impact their ability to get any credit at all or if they do manage to find a lender pay the max interest rate permissible by law.

[OldSmaj]

Well, I don't know whether it's "prevalent", as that is defined, since it is hardly talked about.

However, I know it was suggested to my daughter, who attempted to trade in a car she had kept (against my advice) after it was dropped off of a roll-back wrecker, subsequently repaired and involuntarily re-titled as a "Salvaged" vehicle...meaning the trade-in value plummeted to way below what she owed on it.

It was a Toyota, financed through the World Omni Toyota Financial services.

According to the Toyota dealer, he had no association with them and it would not come back on him, nor would it hurt her credit rating as she would then finance her new purchase through him, with the World Omni services.

Kinda convoluted shenanigans there, I thought, but according to the dealer owner, it is a common practice and one of the reasons that Toyota dealers can offer 0%/0 down finance packages.

Don't know if it would work too well with just a regular bank or credit union financing, since they actually put their money up, whereas the World Omni services are an actual part of the Toyota worldwide industry.

So...she parked it on the dealer lot in a spot they directed her to, got into a new Camry and her credit score went up 60 points.

That was three years ago and there has not been a downside to her credit scores, no letters, no contacts, and the car mysteriously disappeared from the dealers lot within a few days.

Now...what would happen were she to attempt to finance a car through a bank/credit union?

No idea, but she continues to build on her credit and that "repossession" has not shown up on anything.

[trebb]

Woo hoo! My house will be mine, free and clear!
Won’t have to pay for my phone or car or gas or food or...anything!
I don’t think the casinos would be that forgiving though...but w/o all them other bills, who cares?

The secret that credit card companies don’t want us to know.....(those ads piss me off royally).

[HotHunt]

When I lived in Arizona, I bought my used cars from a leasing company. The last pick up I bought required almost no time or effort on my part. I have excellent credit and the sale went through in no time while I had a cup of coffee.

But at the next table over, there were at least 20 people hanging out. I asked my sales guy what was going on. He said the buyer had terrible credit and some repossessions. Those people were his friends and family in there willing to co-sign to get some finance company to agree to buy the loan from the leasing company. The guy never got the loan because of his bad credit and previous repossessions, so the sale fell apart.

Just goes to show you that you can't "paper over" bad credit. His must have been real bad if he couldn't get a car loan for a used car.

[kearnyirish2]

“People get upside on auto loans more or less the minute they drive off the lot.”

Finish the sentence: “if they put $0 or small amounts down”.

I know how it works, and have never bought a new car; I’ve saved a lot of money by buying newer used cars, though. With homes, there is additional insurance required until the borrower owns about 20% of the home - to protect the lender if they are forced to re-sell it due to default. Having never bought a new car, I just assumed the same “gap insurance” existed - to protect the lender in the same fashion.

[kearnyirish2]

Thanks for the tip; I’ve never owned a car that used those systems. To be honest, I’ve never defaulted on a loan, either.

Gets a little weird when you buy a home or used car and the lender wants just me (not my wife) on the paperwork; my credit is better than our combined credit (and we’ve been married for many years).

[Old Yeller]

Ms. Parks, 63, says employees told her that she couldn’t trade in the Soul, but that she could buy another car. To get rid of the Soul, the dealership told her, she should have the lender repossess it, Ms. Parks said.