The New Boom in Subprime Auto Loans

Monday, July 28, 2014

Cars waiting for a buyer in Weston, FL. (emilio labrador/flickr)

There's been a 130% increase in the number of loans to people with poor credit scores to buy used cars since the financial crisis. Michael Corkery discusses his investigation for the New York Times, the risks for banks and investors, and how these loans have amounted to disaster for many low-income borrowers.


Michael Corkery

Comments [22]

Eugenia Renskoff from NYC

Hi, Subprime is subprime whether it is a house or a car. Tracy's story made me feel sad for her and for me. I never own or will own a car, but in 2003 I too was charged very high interests rates when I bought my condo in GA.I had a very high credit score of 754 and got 9.75% and 13% interest rates. For about 3 years I paid the mortgage while t the same time I looked for a way out. I found none and lost my home to foreclosure in Nov.2005.It is a devastating feeling, something I will never get over. Hopefully Tracy can solve her problem.

Jul. 28 2014 03:33 PM
Walter from Across the Hudson


I did pay cash for a used car nearly 15 years ago. I scrimped and saved my money while using public transportation, and eventually bought a cheap, reliable car. I still drive the same car.

That said, I sympathize with people who cannot use public transportation and need a car to get to work. I'm sure in many cases it's a catch-22 situation.

Jul. 28 2014 02:24 PM
Meghan from New Jersey

For Tracy: I would go back to my credit union and see how much the interest rate on a personal loan is. At my credit union the Personal Loan rate is 11.5% which would shave off some savings for her payments. So if you either refinance the car at 10.5% and finance the remaining $5K on a personal loan OR refinance the entire amount on a personal loan. Then either way, you would have a much reduced interest rate and you would be looking at some amount of savings.

Jul. 28 2014 11:46 AM
Michael McMahon from Valatie, NY

Recently my wife and I purchased a new car and realizing our credit rating was on the low end we didn;t expect the greatest rate. However, we were pleasantly surprised that the finance manager packaged our loan in a pool with customers who had above average credit so we walked away with a very favorable rate. In retrospect I feel he did this because he used our new found money to upsell us with extras which is money for the dealer.

Jul. 28 2014 11:46 AM
Mary from Manhattan

For Tracy: go to and see if you qualify to get a different lower interest loan to pay off your car loan in full. Then you pay off your lower monthly payment Prosper loan.

Jul. 28 2014 11:42 AM
Truth & Beauty from Brooklyn

What I don't understand is why Trac(e)y agreed to such a high loan rate. If she's had the car that long, it means she bought it during a period when car dealers were offering 0% 60 month loans. My first piece of advice, then, is to shop around. When I bought my first car, even though I was sent loan offers by my credit union, I never saw any rate in the double digits. But once I saw ads that car companies were offering 0% 60 month loans, I threw away all the offers I was getting in the mail and just grabbed a 0%. AND I paid it off early. Whatever the monthly rate was, I paid an extra $100/month or something to that effect and had it paid off in less than four years. I HATE being in debt, so the sooner I could pay it off, the better I could sleep.

Second, her husband needs to get himself employed ASAP. Doing anything. If she wants to refinance, the more income they have, the better.

Third, take some of the money saved by not paying insurance and put it toward paying the loan off early. Pay an extra $100/month if possible. It will decrease the ultimate interest due and it will increase credit rating. It will also help you sleep better.:-)

Take the 6 hour defensive driving course every three years without fail. It will reduce your insurance rates significantly. $25 to do it on line (not to mention being able to do it in your pajamas), and it's worth every penny.

Jul. 28 2014 11:39 AM
Sheldon from Brooklyn

Tracy the caller, your (responsible) credit union gave you that loan limit for a reason. You supposedly needed a bigger (I'm almost certain, nicer) vehicle for your family and you took out a terrible loan from the same dealer you bought your car from (almost never a good idea). There is no doubt you were duped but again, you have to take some responsibility for you predicament.

Jul. 28 2014 11:33 AM
Amy from Manhattan

Several years ago, a neighbor enthusiastically told me he was investing in...I don't remember what--maybe gold?--but he ended by saying, "...& it never goes down!" I said, "That's what they used to say about real estate." I hope it made an impact.

Jul. 28 2014 11:32 AM
Mary from Manhattan

For Tracy: go to and see if you qualify to get a different lower interest loan to pay off your car loan in full. Then you pay off your lower monthly payment Prosper loan.

Jul. 28 2014 11:31 AM
Chriss from Montclair, NJ

Rather than "coding" classes. We need financial literacy in our schools.

Many of these stories are about folks who simply don't understand the basics of loans and interest.

Jul. 28 2014 11:26 AM

This kerfuffle (Brian's favorite word) discussion borders on the surreal !!

BRIAN said this was "eerily familiar" from 2009.

DUH .... same host, same newspaper, same bogus outrage, same blame game.

Jul. 28 2014 11:20 AM
gene from NYC

It's undoubtedly the SAME people. Why aren't they in jail??

Remember the Enron guy who mocked "Ah, Grandma's losing her home"?

Never went to jail, so he's out doing what he knows best--screwing people any way he can.

Jul. 28 2014 11:20 AM
Estelle from Brooklyn

The guest is wrong. In the 1980's, house prices went down. A friend lost her savings when she had to sell her house.

Jul. 28 2014 11:19 AM
The Truth from Becky

This is NOT here pay here financing has existed for YEARS!!

Jul. 28 2014 11:19 AM

@Walter - You paid cash for your last car? Really? New or used?

Jul. 28 2014 11:17 AM
Walter from Across the Hudson

@Sheldon, agreed.

Jul. 28 2014 11:13 AM
Sheldon from Brooklyn

@ Walter, unfortunately, most people in the US need a vehicle to get around - which they may need to finance.

That being said, many people buy more "car" than they can afford but I'm not going to let banks of the hook.

There is nothing wrong about sub-prime loans (for housing/cars) - charging people with poor credit, sightly higher but affordable rates to borrow money, but as with the housing crisis, a lot of these loans were downright fraudulent. Banks knew or should have known but they didn't care because they sold the loans and the risk off to Wall Street.

Jul. 28 2014 11:01 AM
Walter from Across the Hudson

Financial Rule #1: Never borrow money to buy a depreciating asset.

Jul. 28 2014 10:44 AM

Sounds like a 'cash only' buyer will have themselves plenty to pick from in a few weeks/months/years.

Same thing is happening to much of the 'distressed' homes being foreclosed. Consortiums of private capital are snapping them up for rentals.

Follow on to last week's call-in on ambivalence...This story (tangentially) adds to the fiction that the mortgage meltdown was caused by sub-prime lending. It was not. Sub-prime mortgages and the constructions of financial instruments to participate in sub-prime lending were built on the falsehood that housing prices would always rise. [They may speed up and slow down but they would always rise.] Bush II overstressed that relationship by doing nothing to stop $4/g gasoline. Too many households couldn't afford their mortgage and their commute.

Jul. 28 2014 09:51 AM

It does seem like in a post-2008 world we're in the "fool me twice" stage of history with regard to loans. No bailouts!

Jul. 28 2014 09:43 AM

LOL, it's the same old story ... scream racism, write a few editorials and send in the activists because evil, racist lenders won't give loans to people who can't afford to carry them.
Then, when the inevitable happens, send in the "news" team to write the usual breathless "Pulitzer-eligible" expose' of the denial of credit to hard working American families by the evil financial industry.

Welcome to the surreal intersection of Saul Alinsky, Barry Obama and self-righteous, biased, agenda-driven liberal journalism.

Jul. 28 2014 08:31 AM

From their story-

"Rodney Durham stopped working in 1991, declared bankruptcy and lives on Social Security. Nonetheless, Wells Fargo lent him $15,197 to buy a used Mitsubishi sedan.

“I am not sure how I got the loan,” Mr. Durham, age 60, said."

DUH !!!!!!! Infantilization in the service of victim-hood.

Jul. 28 2014 08:30 AM

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