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Saturday, September 6, 2014

Bad credit? No problem! WTF?!?

For years now, the car dealership commercials screaming, "Bad credit? No problem!" have irked me. Does no one else get irritated by this? I understand people often need vehicles to get to work, so they can make money, so they can pay their bills and fix their credit problems, but does anyone with a partially functioning brain think that, by getting them further into debt with a car loan they can't repay is really helping? Does anyone really think the car dealer is doing this out of the goodness of their corporate heart to help poor, put-upon Bernie-Bankrupt?

A typical car dealership ad (From Route 23 Honda)


In the middle of the banking and Wall Street meltdown, the ads ran rampant, no slow down,  no discretion, no inkling that, "Gee, lending money to people who couldn't pay it back was a big contributor to the current economic crisis, so maybe we should stop doing this." One would think there's be some sort of awakening of the public's consciousness and a demand for greater fiscal responsibility on everyone's part when the government laid out 80 million of our tax dollars to bail out US automakers.

But no.  The same people who rant and rave about welfare, rail against giving assistance to those in need, see no incongruity in giving loans to those with bad credit, making them even less able to pay their bills. So that our tax dollars can bail out the lending institutions. Again.

Hello?! Mortgage crisis? People buying more home than they could pay for? Just because the bank, Ford motor credit, or other lending entity is stupid enough to loan you money, you should  be responsible enough to realize, "Gee, I can't pay this back." Yes--personal responsibility.

Flip side of the coin, just because the law allows you to make a housing or car or whatever type of loan available to Wally-in-his-wife-beater doesn't mean you have to! Corporate responsibility means not making those risky loans, no matter how tempting it is to collect 18, 20, 22% interest off the idiot who's bad at math. Because you know your company will get bailed out, restructure, or in some other way not only avoid being penalized, but actually get rewarded for sleazy business practices.

Don't think it's only those pesky welfare recipients taking advantage of these deals. It's every self-righteous moron who thinks they deserve a new, bigger, more expensive vehicle every three years. Hey--the ad on the radio said, "Owe too much on your vehicle? No worries, we'll pay it off for you!" so of course it's ok, I can afford it.

Let me explain "upside down" to you: You paid $25,000 for your new car (but really, you only paid $1000 down and financed for 72 months--5 years--because that got you the lowest payments.) When you put the tags on, it became a used car and immediately lost about 1/3 of it's value. Your day-old new car is worth about $17,000. It depreciates yearly from there. Three years later (during which time you religiously paid you monthly car payment of $500, when you think you deserve that bigger, better, updated version--sticker price now $30,000--you still owe about $18-20,000 on a car that's worth about $12,000. That amount is tacked on--amortized into the loan for your new car--so they aren't paying for it, you still are, along with the loan for your new, bigger, better vehicle. You now owe not only 1/3 more than what your new, and now used, vehicle is worth, but tack on the remaining portion of the loan on your previous car. You now owe more than your car is, ever was, or ever will be. For more on some common car dealer practices, here's a great explanation of the car salesman's magic wand, the four-square.

Car salesmen's magic wand--works like the shell game. They can hide the money
anywhere and most people will never know where.  (Image from theconsumerist.com)

So, no. It isn't just the unemployed, homeless, and "welfare queens" those ads are aiming at. They're aimed at Phil-flunked-math, who still thinks he can keep up with the Jones's. (He can, but only in the debt department.)

If we're really going to yell and scream about personal responsibility, and corporations are people, too now, isn't it time we made them--and ourselves--fiscally responsible for our own foibles? One way or the other, our tax dollars pay for it. Time to demand an end to the stupidity. Refuse to do business with places that brag about their ability to finance the un-financeable. Their responsible customers subsidize those risky loans, tax-payers subsidize the risky loans, and they laugh all the way to the bank at what a bunch of suckers we all are.

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