In the second of a three-part series on “Buy Here Pay Here” dealerships, used car lots that target subprime borrowers with easy credit and triple the national average interest rates, the Los Angeles Times looks at how private equity firms have flocked towards the growing industry, lured by 38% margins.
The Los Angeles Times has an excellent investigation into the national “Buy Here Pay Here” auto dealership phenomenon. These used car sellers purposefully target bad credit borrowers and offer them what no one else will: the chance to buy a car on credit. All they have to do is agree to 20-30% interest rates, a price well above the car’s Blue Book Value, and aggressive repo practices if they fail to pay up. But it’s not a big deal if they don’t. Borrower failure is baked into the business plan.
Easy credit of dubious worth isn’t some new and unparalleled scandal; in fact, our nation’s economy was built upon it. [New York Times Magazine]