Low-income car buyers often end up paying more?as much as two to three times more?for the exact same vehicle than buyers in more favorable financial situations who have a stable job and healthy credit. Cash or credit, it doesn?t matter. This is a brutal reality that used-car dealers see every day.
The reason has less to do with the specific cars involved and far more to do with all the unpredictable events that can happen in between. One example in this author’s recent past provides a perfect case: One cash-strapped buyer ended up paying a total of $11,835 to finance a seven-year-old Mercury Grand Marquis, as proved by the bill of sale and an unfortunate repair estimate found in the glovebox when the car was bought at a dealer auction. The original price that the buyer paid was only about $5500, but the bill of sale showed that the buyer only put down a small amount of money?presumably because he couldn’t afford to pay more?and financed the rest over several years. The final financed deal added up to more than double the price for a car that, in this particular case, the customer didn?t even get to keep. That’s right; a subsequent transmission failure was quickly followed by repossession once the owner couldn’t afford to fix the car?why continue payments on a car he couldn’t use" Only 5000 miles later, I purchased the vehicle at a dealer auction for just under $2300. One $700 transmission replacement later, and I had a loaded Grand...