Richard Parker locked down a job at a Ford plant in the Detroit area, and, like most residents of the region, needed a car to get to work. It was 1991, and at the time he had shaky credit, so it was plenty difficult finding a company willing to lend him money for the purchase. That changed with Credit Acceptance Corporation, one of the largest subprime auto lenders in the U.S. But he never imagined he’d spend the next two decades paying for it. In May of that year, Parker went to a dealership owned by Credit Acceptance’s founder, Don Foss, in Redford, a Detroit suburb that borders the city’s west side. After talking it over, a salesperson at the dealership scratched out an agreement for Parker to purchase a grey 1988 Chevy Blazer for $16,000. Parker put $3,390 down up front; Credit Acceptance agreed to finance a $9,198 loan at 22 percent interest, meaning Parker would have to pay about $3,500 in additional finance charges over the life of the 36-month loan. The original MSRP for a 1988 Blazer was about $12,700, and like any used car, it had already depreciated in value by the time Parker had signed the sales contract. Parker knew it wasn’t the best deal, but that’s often the reality for a subprime car buyer with rough credit and not a lot of cash: dealers and their financiers are essentially free to set rates and purchases as they please. The reason for high-interest transactions, the… [Read full story]
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