Subaru driver paying 28% interest calls his car loan ‘highway robbery’
This year, I’ve focused a lot of my coverage on car loan literacy. Why? Well, after studying up on the perceived affordability of cars these days (meaning the general sense that they aren’t for many folks), I’m finding that certain individual stories tend to catch our attention. At best, they help us remember that vehicle financing is a for-profit industry that can be bad…really bad…for drivers the moment they sign the loan papers. Here’s another one.
Yusef Benallal co-owns Legacy Motor Cars in Atlanta. He often shares conversations he has with customers about their current car loan situation.
In this call, the driver has a base model 2018 Subaru WRX that he purchased in February. He paid $25,000 for the car. He’s looking to trade it toward a 2011 Ford Mustang Shelby GT500 on the Legacy Motor Cars lot.
First off, using MotorBiscuit’s seamless car buying tool, I checked on 2018 base WRX model prices in my area. It looks like listings average around $19,000. While it’s possible prices have dropped since February, $25K reads like a higher trim than the caller got.
Next, Benallal asks the caller about his monthly payment, which is close to $800. Benallal is surprised.
Indeed, since the average used car interest rate as of October is between 11% and near 14% (which is still a bit yikes, no?), the payment would normally come in much lower.
The caller’s car loan interest rate is a whopping 28%. This is double the national average.
The WRX owner calls his rate “highway robbery.”
The dealer and I agree on the correct response to the driver’s remark.
Benallal turns to the phone and says, “Hey man, look, you signed the papers, right?”
The dealer offers the caller about $14,000 for the WRX, which has 70,000 miles and a clean CarFax.
Unfortunately, this means in order to secure the Mustang, the caller would need to hand over a fairly large chunk of cash up front…even after trading the WRX toward the sports car.
In the end, the caller says he’s mostly interested in getting the interest rate down. Benallal advises that if the driver wants a cheaper payment, refinancing is his best bet, not rolling his negative equity into a more expensive car loan.
Here’s the thing…if the caller’s attitude is that he was taken advantage of on the 28% interest rate, to continue to shop for cars that would only make his payment higher is mind-boggling to me.
Folks, understand that a car dealership is ultimately not responsible for helping you determine how much of a car payment or how high of an interest rate you can afford. For better or worse, you are. Now, I’m absolutely not saying that vehicle financing isn’t predatory. I’m sure in some cases it totally is, and what a shame.
However, just like anything else, knowledge is power. If you fully understand what you’re getting into, and have the financial means and personal interest in properly maintaining a certain make or model, go right ahead with your car loan. Just don’t call what you willingly sign “highway robbery.”
