Watch Out for Much Higher-Interest Loans at Used-Car Lots, Government Report Warns
Subprime borrowers at 'buy here, pay here' dealerships pay more than those at banks and credit unions
Potential car buyers with low credit scores who get loans through auto finance companies and so-called buy-here, pay-here dealerships pay substantially higher interest rates than those who get loans at banks or credit unions, according to a new government report.
The analysis, from the Consumer Financial Protection Bureau, found that borrowers with a credit score of 620 or less got interest rates of 15 to 20 percent at auto finance companies, which provide financing for loans arranged by car dealers, and buy-here, pay-here dealerships, a different type of dealers that fund and keep loans on their books. That compares with average interest rates of about 10 percent at banks and credit unions.