{"id":23217,"date":"2026-03-04T18:21:46","date_gmt":"2026-03-04T18:21:46","guid":{"rendered":"https:\/\/infinpros.com\/?p=23217"},"modified":"2026-03-04T18:21:47","modified_gmt":"2026-03-04T18:21:47","slug":"how-predatory-but-legal-auto-loans-are-systematically-taking-advantage-of-people-with-subprime-credit","status":"publish","type":"post","link":"https:\/\/infinpros.com\/?p=23217","title":{"rendered":"How predatory but legal auto loans are systematically taking advantage of people with subprime credit"},"content":{"rendered":"
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This is a story about a predatory loan that can ensnare you in a matter of hours and lead to crushing debt \u2014 and perhaps wrecked credit \u2014 that can span years.<\/p>\n

It\u2019s also a story about how it\u2019s all perfectly legal.<\/p>\n

Increasing numbers of consumers are caught in the cross hairs of car loans, which face far less scrutiny than other lending products, according to our reporting. Consider: A record number of us are upside down on auto loans, our collective delinquency rate has reached a 15-year high and repossessions increased by 43% between 2022 and 2024. These signs of consumer strain are a result, in part, of rising car prices and varying eligibility criteria.<\/p>\n

Reputable dealers and finance companies, which also originate millions of above-board car loans each year, denied 15.2% of loan applications last October, double the 6.7% reported in June, according to the Federal Reserve Bank of New York. Yet the not-so-reputable lenders \u2014 namely, \u201cbuy here, pay here\u201d used car lots \u2014 continue to offer predatory-but-legal loans, particularly to consumers with subprime credit. We know this because the average auto loan APR awarded to borrowers with credit scores below 600 continues to hover around a credit card-like 20%, according to Experian\u2019s latest data.<\/p>\n

At Bankrate, we\u2019ve interviewed car buyers, advocates, lawyers and industry insiders to better understand how dealers are exploiting unknowing consumers in favor of commissions. This is what we think you should know \u2014 so that the next time you finance a car, you know what you might be up against.<\/p>\n

The consumer experience<\/h2>\n

Until April 2024, Torry Holmesly had never owned a car in tip-top condition. So, when Holmesly, 50, received a mailer from DriveTime, a local used car lot with locations nationally, saying she was preapproved, she thought it was her lucky day. After all, she needed a reliable vehicle to drive to clients for her job as a home care aide.\u00a0<\/p>\n

\u201cSomething I could walk out in the morning and it was going to start,\u201d says Holmesly, who previously spent hundreds of dollars on beaters or, most recently, $1,500 for a 2008 Dodge Ram pickup on its last legs. \u201cAnd I didn\u2019t do my research on it\u2026 I\u2019ve always rented or paid cash for everything, you know?\u201d<\/p>\n

Holmesly went to the lot and picked out a 2020 Chevy Equinox, financing it through DriveTime\u2019s financing partner, Bridgecrest. She learned later she had agreed to repay the auto loan to the tune of a 20% APR for a loan amount of more than the car\u2019s worth.<\/p>\n

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See more of Holmesly\u2019s predatory loan contract.<\/em><\/p>\n

\u201cThey saw me coming from a mile away,\u201d says Holmesly, who lives in a rent-to-own RV in Azle, Texas, working 40 to 70 hours per week.<\/p>\n

Despite making on-time payments, Holmesly is now \u201cupside down\u201d on the Equinox. Her lender made that a foregone conclusion by:<\/p>\n