At least the pandemic has seen the rift between the rich and the poor getting wider and wider, and not only the super rich, with the car loan world being as good a lens as any other. Subprime borrowers – or those with the worst credit history – are falling further and further behind, according to a new report.
Subprime borrowers generally get the highest interest rates on auto loans because they have bad credit scores, which makes sense on paper as the lender takes more risk, but in the real world, many poor people put together fail. That’s especially in a pandemic economy where many working class jobs – such as bartending – simply don’t exist.
From The Wall Street Journal
According to credit reporting company TransUnion, about 10.9% of sub-prime borrowers with outstanding auto loans or leases were more than 60 days past due in February, up from 10.7% in January and 8.7% a year earlier. It was the sixth consecutive month-on-month increase and the highest level in monthly data dating back to January 2019.
More than 9% of subprime auto loans were more than 60 days past due in the fourth quarter, the highest quarterly figure in data dates back to 2005.
What happens after you’re way behind on your car loan is usually repossession, or the lender taking back the collateral, but that’s not always the end of the story, either. The WSJ story has a few contractions, but none as furious as this:
Nick Goodwin was starting a trucking school when the pandemic hit and was ineligible for unemployment benefits. But since his girlfriend was out of work, he called his car loan to ask for help. The lender, Westlake Services LLC, said he was ineligible for relief because he was not in arrears.
Mr. Goodwin started missing out on the monthly payment, an approximately $ 560 bill on a Dodge Ram, in May. “It was starting to get difficult,” he said. “None of us [were] to work; I do side work to try to come over and take care of our children. “
Westlake gave him several extensions that prevented the truck from being confiscated. But when those were over, Mr. Goodwin still couldn’t pay his monthly bill, and the truck was rolled back in October. Mr. Goodwin said a family friend gave him about $ 900 to get it back. After that, he received more monthly renewals because he couldn’t pay the bill.
A Westlake official said the company “is committed to keeping all lines of communication open to our customers and providing as much assistance as possible to those suffering immediate hardship.”
Mr. Goodwin said he and his girlfriend have recently found work and are making payments. But they won’t be able to use the truck because it was damaged during the take back and needs a new transmission, he said.
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I guess Mr. Goodwin is still not making payments for a Dodge Ram, but rather a Ram, because Dodge Ram hasn’t been around for over a decade, but, holy shit, if someone took possession of my car and returned the transmission the process (presumably while towing) and then sending it back to me that way, I’d be so damn angry. Hopefully Mr. Goodwin contacted a good lawyer.
And the easy response here has always been to shame people for taking out loans they ultimately can’t pay off, but I hope the past year has caused some people to reconsider that view, given the economic disaster. Because if you’ve ever been in a dire situation, you know you’re on your final options.