It's almost impossible to get anywhere these days without a car. Commuting for work, visiting distant relatives, going to school and getting the kids where they need to go are all very valid reasons for owning a car. Consumers these days are even turning to their cars to finance the cost of living. Auto and car title loans are overwhelmingly popular as the cost of living goes up and those who are simply trying to make it from paycheck to paycheck look for ways to support their households.
According to the Annie E. Casey Foundation created by the founder of UPS, Jim Casey, 1 in every 4 U.S. families does not own or have access to a car. Without access to mass transit either, those people are left with no form of transportation; no way to get work.
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Studies have shown that low-income individuals and families who have access to a car are more likely to work, have an increased income, get off public assistance, have better access to healthcare and be involved in community activities.
The inability for low-income individuals and families to buy a car from a traditional car dealer has driven them into the arms of "buy here pay here" car dealers. These dealers are often times known for selling cars at outrageous prices with stiff markups and unreasonably high interest rates.
A large portion of people who come to these dealers to buy a car eventually default on their loan payments and inevitably get their car repossessed. The car dealer then resells the car with the same unreasonable loan terms. Some cars are resold several times over as a result of being repeatedly repossessed.
Ken Shilson, founder of the National Alliance of Buy Here Pay Here Dealers in Houston states "If we don't finance these people, they have no way to get to their job" and claims they are providing a service that no one else will. But if people are buying cars from these types of dealers, spending a large portion of their paycheck to make the payment, and eventually defaulting on their loan and having their car repossessed, how are these dealers helping?
When a person goes into buy a car at a "buy here pay here" dealer, not only do they need to make sure they understand their loan terms, they need to seriously consider whether or not they can afford the car and the payment that comes along with it. In a desperate attempt to have some form of transportation to get to work, and in so many words "survive", consumers are being duped because they have no other choice.
Taking out any kind of loan requires serious thought and some homework on the part of the borrower. As tough as it is to try and go through life without a car, it's even harder when you risk your savings and paycheck to buy a car that will eventually be taken back.
The same goes for car and auto title loans that are taken out based on the equity of a person's car or truck. These loans can come with a high price in the way of interest and fees. When taking out an auto title loan for whatever reason, the lender asks for the pink slip to the automobile. If the borrower defaults on their payments, the lender has the right to repossess the car. At the time it may seem like you can handle the payment, just like purchasing a car, but if you think you are making a desperate decision, think twice; it could end up costing you your car.
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