Jennifer's husband walked out to the parking lot at 1 a.m. three months ago after another long night running the casino floor at a restaurant near Phoenix. He had no way to get home. The couple's 2006 Ford Focus was gone.
Not stolen, but repossessed. Jennifer says they were two payments and one day late.
“No notice, no warning. He just walked out at 1 a.m. and it was gone," she said. "(They) claimed they called my husband’s work to warn him of the repo but they don't have to notify you, you agree to it to purchase."
Jennifer agreed to tell Credit.com what it's like to have a car repossessed only if her identity was protected – her name has been changed -- to avoid future trouble with employers or lenders. In fact, only quick thinking preserved her husband's job that night.
"He called me, stranded. I told him, 'Grab your boss, now!’ He did. He got home safely which was my main concern," she said. "Then we made plans to get him back to work. They'll just fire you here if you don't have a car, so we had to just pretend it was a mistake."
The real mistake, Jennifer now says, was buying a car from a dealer who specializes in bottom-feeding. The couple has poor credit, and wanted to avoid "buy here, pay here" lots that blanket their Arizona neighborhood. With "buy here, pay here" deals, drivers must return to the dealership every two weeks and drop off payments. Instead, she bought from a firm that offers more traditional, high-interest loans and requires a GPS device and an ignition cut-off switch.
"I really had no choice,” she said.
Still, their complex loan was no bargain. They paid about $200 every two weeks for a car that today would be worth about $4,000 in a private sale.
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The couple paid for about a year, missing a payment once and suffering immediate consequences.
"They woke us in the morning ... to report the car was shut off until we paid, which of course we did immediately, but it was jarring," she said. "We'd had it for months and lived under this constant threat."
Then this summer, her husband's hours were cut in half, and their financial situation went downhill fast.
They called the dealer and asked to renegotiate the loan, but were rebuffed, even though Jennifer says the dealer had said renegotiation would be an option back when the sale was closed. They were told they had 13 months left to pay -- nearly $6,000. They'd already paid about $5,000 on a car worth even less than that.
"We tried to keep the car, but the payments were just too much," she said. "When you are holding up four walls with two hands, one tends to crash."
The Subprime Surge
Subprime auto loans are big business. Three years ago, the L.A. Times published an extended series on the exploding investment in poor-credit used car auto dealerships, fueled by the exact same kind of Wall Street securitization that led to the housing bubble and meltdown. The investment surge then has supported a flurry of new subprime dealerships today. Many investors now prefer subprime car loans to home loans because it's much easier to repossess cars than foreclose on homes.
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Like Jennifer, many subprime borrowers are required to give dealers the ability to track cars using GPS devices. That made taking the couple's 2006 Ford Focus from his workplace easy. (Subprime borrowers are those with low credit scores.)
It also gives dealers the chance to double- and triple-dip on used cars. One tracking company employee who requested anonymity told me it's common for auto dealers to sell, repossess and re-sell the same car many times. That technique has worked for furniture rental stores for years, renting the same television or bedroom set to multiple borrowers who inevitably run out of money before they make enough payments to fulfill rent-to-own obligations.
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Jennifer is pretty sure that's what happened to her car.
"Now, they have the car, I have nothing, and they have a new victim to pay an inflated price on it," she said.
Her husband is looking for more work so they can build up enough savings to afford reliable transportation again. For now, the couple is living a carless life in a suburb where it’s nearly impossible to get around without wheels. Jennifer walks to the local Walmart, only a few blocks away, to get whatever the couple needs. Jennifer's husband is staying with their son three nights each week, because it's much closer to the restaurant, and easier to catch a ride.
“We stay home other than those two things,” she said. “It is our fault, but it's not quite fair.”