The pandemic, if anything, saw the divide between rich and poor grow more and more, and not only the super rich, with the world of auto lending a lens as good as any other. Subprime borrowers – or those with the worst credit histories – are falling further and further behind, according to a new report.
Subprime borrowers tend to get the highest interest rates on auto loans, because they have poor credit ratings, which makes sense on paper, because the lender is taking more risks, but in the real world it configures many poor people fail. This is especially so in a pandemic economy, where many jobs for the working class – as a bartender – simply do not exist.
From Wall Street Newspaper:
About 10.9% of subprime borrowers with outstanding auto loans or leases were past due for more than 60 days in February, down from 10.7% in January and 8.7% in the previous year, according to the firm TransUnion credit reporting. It marked the sixth consecutive month-on-month increase and the highest level in monthly data since January 2019.
More than 9% of subprime car borrowers had been past due for more than 60 days in the fourth quarter, the highest quarterly figure in data since 2005.
What happens after you fall behind on your car loan is usually repossession, or the lender withdraws the collateral, but that is also not always the end of the story. The WSJ story has some tales of sadness, but none as infuriating as this one:
Nick Goodwin was starting a road transport school when the pandemic hit and he did not qualify for unemployment insurance. But with his unemployed girlfriend, he called the auto finance company to ask for help. The lender, Westlake Services LLC, said it did not qualify for relief because it was not late in its payments.
Goodwin began to miss the monthly payment, an approximately $ 560 bill on a Dodge Ram, in May. “Things started to get tough,” he said. “None of us [were] Working; I am doing a side job to try to survive and take care of our children. “
Westlake gave him several extensions that prevented the truck from resuming. But when that was over, Mr. Goodwin was still unable to pay his monthly bill, and the truck was repurchased in October. Goodwin said a family friend gave him about $ 900 to get them back. Then he received more monthly extensions because he was unable to pay the bill.
A Westlake employee said the company “strives to keep all lines of communication open to our customers and to provide as much help as possible to those who are experiencing immediate difficulties.”
Goodwin said he and his girlfriend found work recently and are making payments. But they cannot use the truck because it was damaged during repossession and needs a new transmission, he said.
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I’m assuming that Mr. Goodwin is still not making payments on a Dodge Ram, but rather a Ram, because Dodge Ram did not exist in over a decade, but, holy shit, if someone took over my car and broke into the transmission in the process (probably during towing) and then returned to me that way, I would be so crazy. Hopefully, Mr. Goodwin is in contact with a good lawyer.
And the easy reaction here is to always embarrass people for taking out loans that they cannot repay, but I hope that the past year has led some people to reconsider that opinion, given the economic calamity. Because, if you’ve ever been in a terrible situation, you know you have no more options.