Warning About Dealers And Their Pricing

[JethroB]

A friend used to manage a chain furniture store. He once said the down payment, on say a sofa, pretty much covers their cost of it. The payments covered their overhead and was profit including the 20+ percent interest charged. Preferred folks to finance. Huge markup in furniture and mattresses.

 

[Jstpssng]

A friend used to manage a chain furniture store. He once said the down payment, on say a sofa, pretty much covers their cost of it. The payments covered their overhead and was profit including the 20+ percent interest charged. Preferred folks to finance. Huge markup in furniture and mattresses.

I was told the same thing about the used car dealerships mentioned above. I also remember looking for a refrigerator, and going into one of those "Rent to own" appliance stores. Then I went down the road and bought a new GE scratch and dent with full warranty for less than what they wanted for a deposit on their off brand unit.

 

[Cahaba Valley Farm]

I was told the same thing about the used car dealerships mentioned above. I also remember looking for a refrigerator, and going into one of those "Rent to own" appliance stores. Then I went down the road and bought a new GE scratch and dent with full warranty for less than what they wanted for a deposit on their off brand unit.

Low income, uneducated and suckers are how most people make their fortunes in business unfortunately.

 

[RSR]

I just bought a Toyota minivan in January. The only incentive was $500 off IF you financed (no cash discount). So, I financed $1,000, and then paid it off when the first bill came due.

The shocking part to me was that as I was writing a check for the price minus the $1,000 in financing, I made the comment, "well, I think that's the biggest check I've ever written in my life." To which the salesman, who has worked there for over 10 years remarked, "It's certainly the largest I've ever received."

I am by no means a wealthy individual, but avoid paying interest at all costs. Apparently there are very few people that live like that anymore.

 

[Muhammad]

Do you guys think this will be the impetus for people to learn more about personal finance? I guess if there are people gaming the system with bankruptcy etc that's one thing, but there are also many downsides to being in that financial situation. I think having a high interest loan that makes people pay more than the cost of the car in interest is a more common outcome to having bad credit. For most people having a car is a gateway to employment so as one poster said, just getting approved is the goal and overpaying for the car and interest is their only option. It world be great if people realized how important creditworthiness is from age 18-40 or so as you want to do things like get jobs, start a family, buy a home, etc.

 

[IndyJay]

Do you guys think this will be the impetus for people to learn more about personal finance? I guess if there are people gaming the system with bankruptcy etc that's one thing, but there are also many downsides to being in that financial situation. I think having a high interest loan that makes people pay more than the cost of the car in interest is a more common outcome to having bad credit. For most people having a car is a gateway to employment so as one poster said, just getting approved is the goal and overpaying for the car and interest is their only option. It world be great if people realized how important creditworthiness is from age 18-40 or so as you want to do things like get jobs, start a family, buy a home, etc.

These high interest loans are not completely predatory. They are often high risk for the lender. There is a reason most of these folks cannot get a "regular" loan.

 

[Muhammad]

These high interest loans are not completely predatory. They are often high risk for the lender. There is a reason most of these folks cannot get a "regular" loan.

Very true. I think the solution is for people to avoid taking loans that they can't afford.

 

[TractorNoob39]

High interest loans are necessary because it's either that or no credit will be extended which will punish low income and typically uneducated folks. Unfortunately, it seems like predatory loans or usery but something is better than nothing.

 

[Jstpssng]

High interest loans are necessary because it's either that or no credit will be extended which will punish low income and typically uneducated folks. Unfortunately, it seems like predatory loans or usery but something is better than nothing.

It's not just the high interest rate, however. When it comes to auto loans, those same dealers are able to get top dollar for lower quality, high mileage vehicles. When it inevitably starts breaking down they will "take it in trade", then roll the cost over into another bottom quality vehicle. Also, it may be different now but the major "buy here pay here" dealer around here used to "warranty" them. The way it worked was if you have a repair, you pay for it then they deduct it off the balance. People doing business with them aren't apt to have money for a new transmission or transaxle, so they would lose their vehicle.
They once had a nearly new extended cab Ranger 4x4 on the lot. I was shopping so stopped and asked about it. I could have gone down to the Ford dealer down the road and bought a brand new one for less. That's what I find frustrating. Too many of the clean used cars which are too old for a new car dealer to sell themselves are going to the "Buy here pay here" places where they can get exorbitant prices, taking them out of the market for those of us who want to buy them outright. I have been looking for years for a clean 3/4 ton basic pickup, but there's no way I'm paying close to new prices from one of those dealerships.

As has been mentioned before often the down payment covers what they have in the car; everything else is profit.

 

[IndyJay]

Very true. I think the solution is for people to avoid taking loans that they can't afford.

Sadly, often people have little choice. Sometimes they are in a bad position due to bad decisions, other times due to things beyond their control. Medical bills, furnace going out, car repairs while living paycheck to paycheck is tough. It is a snowball effect, any of these causing you to get behind on bills, affecting your credit score. My wife and I went through this when we first started out. She lost her job shortly after we bought our farm. I was working 12 hours a day, often 7 days a week, until we finally got caught up. Lessons well learned about saving for emergencies and making better decisions about "need" vs "want".