Tag Archives: subprime car loan

Tip Your Flight Attendant & Don’t Advertise Your Credit

Next time you fly, don’t forget to tip your flight attendants!

Whatever you think should be the priorities of your flight attendants, you may be wrong: Yes, you read that right – it’s here: Frontier Airlines wants you to tip flight attendants when they sell you drinks, juice, duty-free, or what airline pretend is a meal. The credit or debit card machine is programmed for you to enter a tip, and even has the suggestion that you should tip 15 or 20 or 25 percent. It works exactly like the machines in a restaurant, just at 30,000 feet.

Their media relations department spins it to say that millions of dollars in tips have already been generated which they claim proves their passengers love the idea. (In an interview with Clark Howard).

Behind the scenes, and the real reason for it, is that the low cost airlines want to reduce costs. You pay tips which lets them negotiate lower wages… Flight attendants lose in eventual lower base wages and you lose by paying baggage fees, carry-on fees, seat selection fees and now tipping your flight attendant. And yes, it’ll start coming to other airlines. Count me as one of the people who will NEVER be doing that…Good idea or horrific?

Don’t advertise your credit problems:

Here’s a heads up for two people I passed on the highway yesterday and many others: Subprime car financing is for people with bad credit. Most of those lenders do it through car dealers, but two of them lend direct by also selling you their retail-priced vehicle, and make money on both ends. After all, people with poor credit aren’t in a  position to negotiate the price or the rates.

The rates are around 15 to 19 percent and upwards of $1,000 in fees. If the person stops and does the math, it will literally be cheaper to take a cab or Uber daily for a year or two until their credit rating is healed. Instead of a rate 500% too high, spend the $20 on the Money Tools book from Mosaic!

But the heads up is actually to make sure the subprime dealer does not put their decal on the back! It’s great to have a student drive sign, but these dealer decals tell the whole world you have REALLY bad credit. That might be something you don’t want to advertise everywhere you go.

This Couple’s 25% Car Loan Has Lots Of Insights

Last week the CBC did a story of a couple in Kelowna who signed up for a 25% subprime car loan. It exploded on my Facebook page with large numbers of shares.

It’s commendable that the CBC did this feature, and great education, but I’m guessing they didn’t put this family in touch with anyone that could actually help them. But, that aside, I have 20 minutes worth of learning and warnings here, and five minutes to share them. As always, I’ll post the rest of the story on my website.

This couple had a recent bankruptcy on their credit. For five years that guarantees a rate of 20% or higher for a car loan. The dealer got them financed through the TD Automotive division. Where is it the TD’s fault this couple is really high risk. Hello? They defaulted on all their debts in bankruptcy – whatever the reason! Risk equals rate – always will. Just look at the fine print of most credit cards that range from 10% to 27%, or lines of credit from prime to prime plus 6%.

Yes, the dealer probably made over $5,000 on a huge markup of interest rate, fees, and price of the vehicle. They didn’t even get to pick a vehicle – they were told it had to be this one to get financed – not true, but it’s one of so many red flags in this story. Yes, the dealer lied when they promised (if they did promise) the couple could refinance at a decent rate in a year. That was never going to happen, but I hear that promise all the time to get people to sign up for insane financing thinking it’s only for a short time. And if this promise wasn’t in writing it wasn’t true. Never rely on verbal promises as you’ll never collect on them. Now the dealer is offering 5% financing on a new car? THAT would make things so much worse. But that’ll take too long to explain. Someone get this couple in touch with someone who can help, or go to Mosaic and get them my $20 It’s Your Money book – it would have saved them $5,000 or more.

How often does the average person buy a vehicle? Maybe every five years? Well, a salesperson sells 10-12 a month, and the business manager deals with 5-8 a day. So, you have one purchase experience versus 600 sales versus the finance manager having financed and upsold 6,000 times in those five years. With a score of 6,000 to 1 that’s like bringing a knife to a machine gun fight. You don’t have a chance – this couple didn’t have a chance.

Yes, this couple got massively ripped off. But they CHOSE to be ripped off. I’m sick and tired of our ever diminishing personal accountability. I can already think of three options this couple had, other than signing up for a loan that will end up costing them 2 ½ times the price of the vehicle.

But I can already hear a lot of people thinking that this isn’t fair and no wonder the rich get richer. Yup – they have investments and savings while YOU have debt and payments. 90% of millionaires did not inherit their wealth – they became millionaires on their own. 75% of millionaires do not finance their cars. Well – they’re rich…yes, because they don’t do dumb financing. If you want to be a millionaire, get a $2,000 car instead of a $500 car payment. Then start setting aside some money. When you have some savings, step up and buy a newer vehicle. But a $500 car payment will guarantee that you’ll be stuck in debt for another decade and won’t ever be able to save. Go look up what Warren Buffet drives if you want some more evidence.

The average guy can’t get ahead – yes you can – get your finances under control, get rid of the killer car payments, or sell that house that’s eating up 50% of your income. I haven’t had a raise in two years – well – go get a raise. Good chance you get paid what you’re worth in the market place. So up your game, get to work earlier, work smarter or harder, or upgrade your skills. The average guy can’t get ahead? Come on – stop thinking like a victim. This is Canada and not North Korea.

I’m sick of the victim mentality. Repeat after me: If it is to be it’s up to me. The government, or two people in the story stating there should be more regulations, isn’t going to fix your financial life. It’s gotta be you. My apologies if I’m being unclear.

Whatever your borrowing today, at whatever rate or payments, may seem like a good idea and the only solution. But whether it’s a car, a line of credit, a payday loan, or your credit card, it will make things worse, much worse, down the road.

When you say you can’t do it, it wasn’t your fault, you have all these payments, you had to get that loan, or it’s too hard, you’re going to spend the rest of your live proving that you’re right.

PS: Why would a new vehicle loan at 5% make things so much worse?

This couple’s first 30 months of payments has paid almost 75% of the total interest at 25% as it’s very front loaded when they owe the highest balance. Having overpaid on the price and paid very little principal, they’d still owe at least $7,000 more than the car is worth. That shortfall has to be “rolled” into the new loan. Almost 50% of people owe more on a trade than it’s worth – this couple is the rule and not the exception. A new vehicle depreciates 30% in the first year. Even if it’s a $20,000 vehicle, the moment they drive it off the lot, it’s worth $6,000 less. A $6,000 loss and $7,000 hangover of their old one means they instantly owe $13,000 more on the new vehicle…and things get worse and worse and the vicious cycle continues with no hope of trading that one for six or seven years, huge payments again because the $7,000 loss is hidden in the new one and heavens forbid it’s written off or stolen because the insurance pays the real value and not the massive over-financed loan.