Car title loan delivery: numbers $2,140 $950 rent

Desperate consumers who are out of borrowing options are using their automobiles as collateral and paying $3.5 billion a year in interest for the so-called "title loans," the Center for responsible lending said in a report issued this week. The average loan is $950, and borrowers take on average 10 months to repay the loans, meaning they'll spend $2,140 to borrow the money, the report said.

The size of the title loan market is roughly equal to the size of the payday loan market, which has received far more attention from regulators, according to the report. Title loans are only allowed in roughly half of U.S. states, making the size of the market even more surprising, said report author Uriah King.

"The market size is comparable because of the sheer size of the title loans," said King, adding that loans are title, on average, roughly three times larger than payday loans: some 7,730 calendar make $1.6 trillion in title loans annually, the group estimates.

The consumer group estimated the size of the market, and drew other conclusions about title loans, based on loan-level data from a calendar made public as the result a nickname filed against the industry.

Aggressive late-night television ads pitch title loans as a solution who for consumers find themselves needing short term loans but can't use default options, such as credit cards. Generally, consumers can borrow up to 26 percent of the assessed value of their car, which they must own free and clear. Loans are often issued at 25 percent interest per month: in other words, it costs $250 to borrow $1,000 for a month. The risk, of course, is that borrowers can lose their cars to repossession if they default. Borrowers must often leave a copy of their car key with the lender to make repossession easy exist.

Another unique and concerning ABB. of title loans: issuers often do not make any assessment of a borrower's ability to repay the loan. In fact, some brag in advertisements that they do not run credit checks, and borrowers don't need to prove employment to obtain the loans.

To lenders, there is almost no risk in the loans, because they are "completely collateralized", King said. Borrowers are highly motivated to repay the loan because their automobiles are usually their most valuable piece of property – borrowers are most renters - and cars are needed for transportation to work.

Repossession, which costs on additional $300 to $400 in fees, means outstanding loans nearly always are repaid.

"This is a loan of virtually no risk," King said. "I heard one branch manager say these are 'all blue sky' loans, because as soon as one interest payment is made, the rest is all (profit)."

Title loans, like payday loans, have long fall into a gray area for regulators because they are non-traditional, short-term lending products. Until the creation of the consumer financial protection Bureau (CFPB), lenders did not have to answer to federal lending regulators and were governed only by state laws. When the CFPB was created, its regulatory powers were extended to such short-term loan instruments.

Loan payday lenders argue that annual percentage Council and other standard measures are unfairly applied to their product because consumers often borrow money for only a few weeks. So expressing a $20 fee for a two-week $200 loan as having a 2000 percent APR, for example, doesn't fairly represent the true cost of the lending product, they say.

However, the Pew Center for the States reported recently that the average payday borrower takes five months to repay a loan, arguing that annual percentage interest Council are indeed relevant to assessing those loans.

There is no such debate in title loans, however, King argues, because of the size of the loans.

"There's no way this loan is getting repaid in a month, it's just not going to happen," he said. "A lot of middle-class families would struggle to pay off a $1,200 loan (interest plus principal average) in a month." Instead, the loans typically are renewed each month for on average of 10 months, he said.

Calls and e-mails to the two top title loan issuers, Max and Loan Max title, went unanswered. On its website, title Max says it has more than 1,000 title lending stores across 12 states and provides car title loans to more than 2,000 people daily.

A chat operator for TitleMax said she would pass on NBC News' inquiry to officials at the company.

"I have done all that I can do this is the sales chat, like I have stated before." "Your best option would be to contact customer care all I can do is pass this information to them," said the operator, who identified herself as "Tiffany." Calls to customer service went unanswered.

The title loan industry set up a trade group and political action committee, the American Association of responsible auto lenders, several years ago to champion its product. The group's Web site is no longer functional, and calls to former board members went unanswered. It did submit a public comment in 2011 to the consumer financial protection Bureau, arguing against that agency's intentions to regulate the industry. A copy of the comment letter was provided to NBC News by the Center for responsible lending.

In the letter, the group argues that can't title loans are a good alternative for consumers who borrow money from other sources.

"Our customers prefer car title loans to alternatives such as overdraft fees, bounced check fees or late fees that may also have negative credit consequences," said the association.

The letter claimed that 1 million consumers obtain title loans worth $6 billion annually, but so said the industry what substantially smaller than the payday loan business, which it pegged at $38 billion annually. The size of the payday loan industry is disputed because of how consumer groups and industry groups count recurring loans.

The association said the average title loan of which under $1,000, and which typically repaid in six months.

"Car title loans are often the only legitimate option that individual and small business owners have, since in many cases their low credit scores would exclude them from doing business with commercial banks and credit unions even if these institutions were willing to lend in the amounts typically sought by auto title borrowers," the association wrote.

It therefore argued that title only 6 to 8 percent of cars used as are loan collateral repossessed. The Center for responsible lending reported that nearly 17 percent of title loan customers face repossession fees. King said it has no way of knowing how many of those cars are ultimately repossessed.

"I'm actually surprised that repossessions aren't higher," King said.

The Center for responsible lending loan title argues that firms should be required to assess borrowers' ability to repay before issuing loans, and that interest Council be capped at 36 percent.

Read More

Lies, damned lies and fuel economy numbers

DetroitBureau

Heather Peters with her 2006 Honda Civic Hybrid.

By Paul A. Eisenstein , TheDetroitBureau.com

Heather Peters was mad as hell and wasn’t going to take it anymore.  So she decided to take Honda to court, alleging that the Japanese maker sold her a car it knew wasn’t likely to get anywhere near the mileage she had been promised.

In a case commanding national attention, former corporate attorney Peters is now waiting for a decision from a small claims court in suburban Los Angeles that could award her as much as $10,000 – though she claims Honda actually defrauded her to the tune of $122,112 by convincing her to buy a 2006 Civic Hybrid.

“The sales force said 50 miles per gallon, but they didn’t say if you run your air conditioning and you remain in stop-and-go traffic, you’re going to get 29 to 30 miles per gallon,” said the 46-year-old Peters prior to the trial. “If they did, I would have gotten the regular Civic.”

Peters isn’t alone. A number of manufacturers have been hit with criticism and, in some cases, with class action lawsuits, contending that the numbers they promote in window stickers and in advertisements are far more optimistic than buyers should expect.

And the situation only seems to be getting worse as fuel economy has become one of the single biggest factors Americans consider when shopping for a new car.  When it comes to compact and subcompact models, 40 has become the new norm, the minimum number needed in terms of highway mileage to ensure shoppers consider a particular product.

Hyundai recently announced plans to add a fourth model to its line-up rated at 40 mpg or higher.  But, in the process, it is taking fire from the Washington-based Consumer Watchdog which claims the figure quoted for the compact Hyundai Elantra is “deceptive.” The organization is asking the maker to stop using it in ads – while also demanding the Environmental Protection Agency re-test the vehicle’s fuel economy.

In a letter to Hyundai, the group said that, “With this mileage issue in the public arena, Consumer Watchdog believes you should acknowledge the real-world gap to potential buyers, or risk losing their trust.”

For its part, a statement by the Korean maker says that, Hyundai stands behind the EPA fuel economy ratings of the Elantra and we have no intention of removing our fuel economy numbers from our advertising. Simply put, the charges being made by Consumer Watchdog don’t hold up.”

The maker actually acknowledges that the testing done by a variety different magazines and consumer groups has resulted in lower fuel economy than the EPA has gotten when testing the same vehicles – but Hyundai stresses that is true across the board, not just limited to its own products.

“Enthusiast magazine fuel economy reporting (Car & Driver, Motor Trend, etc.) and even USA Today, testing typically results in lower-than-EPA results for almost all vehicles, as was found with Elantra,” said the Hyundai statement.

Part of the problem, said an industry source asking not to be identified by name, “is that manufacturers typically tune their cars to maximize their performance in the EPA test cycle.  In some cases they might actually do better in real world conditions, but in many cases they’ll get lower mileage in consumers’ hands.”

The EPA has been well aware of such discrepancies and has periodically tweaked its testing procedures to try to generate numbers that are more in-line with real-world results.  The most recent changes, made in 2008, were aimed primarily at correcting what were admittedly overstated numbers for most hybrids – such as Heather Peters’ Civic.

In some instances, the EPA has had to tweak its formula to be more generous.  Ford's Derrick Kuzak has noted that the automaker is reluctant to start offering costly start-stop technology on its vehicles because the current EPA methodology doesn’t reflect its benefits.  Start-stop systems briefly shut off a vehicle’s engine rather than idling, say, at a stoplight.  The engine automatically re-starts when the driver’s foot lifts off the brake pedal.  The EPA is considering ways to reflect the use of start-stop when determining the final rating of a vehicle.

But, more often than not, fuel economy numbers have tended to be overstated, something manufacturers are well aware of.  But, at the hearing on Peters’ complaint in a small claims courtroom in Torrance, California a Honda representative insisted, “We have no choice” but to use the EPA figures.  “We have to put these numbers on the label,” argued technical specialist Neil Schmidt.

Not so, countered an EPA spokesman, who said that federal mileage testing provides only the maximum number a maker may quote.  If a vehicle is more likely to deliver 35 in real-world conditions an automaker has the right to go with that figure, though sticking with an EPA-sanctioned 40 MPG is more likely to catch a consumer’s eye.

But the push for a high EPA rating can occasionally backfire.  When J.D. Power and Associates downgraded Ford in its Initial Quality Survey last year, one of the reasons was a balky transmission in the new Ford Focus that had been specifically tweaked to maximize mileage.  The maker has since revised the software used to balance fuel economy and ride comfort but it remains to be seen if that will drop Focus below the sought-after 40 mpg figure.

That number is, it should be pointed out, based on the highway portion of the EPA testing process.  The government actually provides three numbers: City, Highway and Combined, the latter being “the one we think is most likely to reflect what a consumer will really get in real world conditions,” noted Nissan’s chief U.S. spokesman Dave Reuter.

Unfortunately, that’s seldom a number that you’ll see quoted in advertising.

“The convention in the industry has been to promote the highway number…to represent the best competitive position,” noted Doug Scott, Ford’s Truck Group Marketing Manager.

Nonetheless, the story isn’t entirely bad.  With automakers putting more and more emphasis on fuel economy, many of the latest products are achieving 5, 10, even 15% overall – real world — gains compared to the products they replace.

Credit new technologies like direct injection, turbocharging, six-, seven- and even eight-speed gearboxes and, yes, start-stop.

Yet, a new study by MIT economist Christopher Knittel suggests that the industry could do even better if it weren’t for the fact that today’s cars are both bigger and heavier than ever.  Take the Honda Civic.  It’s now nearly big enough to be considered a midsize but debuted as a subcompact.

According to Knittel, the average gas mileage of vehicles sold in the U.S. increased by just over 15%.  Over the same period their average curb weight rose 16% — while their horsepower soared by an average 107%.

Had the typical car maintained its weight and power the typical U.S. automobile would today be getting about 37 mpg, rather than 27, Knittel noted in a new research paper, “Automobiles on Steroids,” published in the American Economic Review.

“Most of (the recent) technological program has gone into (compensating for) weight and horsepower,” he wrote.

Read More

Car buyers not only buy, they are more numbers

Scott Olson / Getty Images

Chrysler, led by sales of its Jeep signs, belonged to the largest sales winner in November.

By Joseph Szczesny, the Detroit Bureau

The best result in months, sales of new cars, written climbed truck and transitions to an annualized rate of 13.5 million revenue increases double-digit in November like virtually all domestic, Asian and European brands.

In fact, several makers - including Audi and Hyundai - announced eternal Hall of Fame for November.

But the effects of strong monthly results can be felt far beyond the automotive industry. After a solid October, when sales of so-called catch up were intended, many analysts feared that the November numbers along with the rest of the economy would slide. But the strong result in the automotive market is more life to the economy as a whole than many had expected.

Among Detroit's big three Chrysler Group LLC reported a 45 percent increase in sales last month while Ford Motor Co. posted an increase of 13 percent, including a 20 percent increase in retail. General Motors co. sales by 7 percent on strong retail.

Hyundai, KIA, Mitsubishi, Volkswagen/Audi, Mercedes-Benz all reported increase of 40 percent or better, Nissan, Mazda, Suzuki, Porsche and BMW Group with two-digit increases content had to.

Increase Toyota as sales for the first time in months. Although only a modest 2.4 percent win it the first sign that the company began, its way out of the production was still crisis triggered by the earthquake in March to work and tsunami, which devastated Japan.

Brand reported a decline in large, jumping only Honda of 4.5%, with sales of Honda vehicles by nearly 10 percent. The vendor was was hoping for a stronger November but Thai floods which cut was made in the availability of the most important models.

The increase in revenues as a whole says industry only part of the story. Automotive data tracking service TrueCar.com estimated, average transaction price for light vehicles in the United States to $30.317 in November 2011, $1,163, or 4.0 per cent from November 2010 and to $164, or 0.5 percent, from October 2011 has increased.

"Prices have you back up after a slight decline in average prices (again) about $30 K, in August with new vehicle was creeping", said Jesse Toprak, VP of industry trends and insights for TrueCar.com. "We are really incentives in December until the end of the year from strong push automakers see,", he predicted.

Chrysler is among the biggest winners, credit, new products, and a string these cars won awards in the last few months.

"With sales growth of 45 per cent, November was another great month for the Chrysler Group and our highest year-over-year of increase in sales by 2011," said Reid Bigland, President and CEO/Dodge brand and head of U.S. sales.

The new 2012 Chrysler 200 medium-sized sedan sales to increased 496 percent in November compared with sales of its predecessor in the same month a year ago. Jeep Wrangler record an additional monthly sales, the SUV sixth consecutive following monthly record this year.

Meanwhile GM reported revenues increased 7 percent as delivered it more than 180,000 cars and trucks in November.

Retail deliveries rose by 15 percent over the same month a year before and had a 77 percent share of GM. Deliveries to the fleets were 14 per cent.

"We see a wide range of customers back to the market", said Don Johnson, Vice President for sale US operations. "Sales showed truck a solid increase, as we expected, but the momentum behind our vehicles most fuel-efficient was even stronger buildings."

So far in this year all four GM, brands have increased their sales compared to the same period a year ago, on the strength of the two-digit increases in the retail sales.

Ford brand the retail sales was with double-digit gains posted by Fiesta, fusion, escape, Explorer, for most products, F-series and Econoline Ranger.

"With gas prices still higher than in the last year, continue to consumers value fuel economy – no matter what size or type of vehicle at best their needs matches", said Ken Czubay, Ford Vice President of U.S. marketing, sales and service. "The most Ford products deliver best-in class fuel economy and offer customers the opportunity to choose, what best works for you EcoBoost technology or electrified vehicles."

Ford plans 675,000 vehicles in the first quarter of 2012, by 3 per cent compared to the first quarter of 2011.

The November sales figures according to particular buyers in virtually all important segments of the market return. Reversed the car would Nissan driver, with sales rising 38 percent, but the Japanese manufacturer reports SUV and truck sales rose by 32 percent.

"We see a broad range of clients back on the market," was GM Johnson. Industry were at least some of the credit for the increased availability of credit officials. But it seems to keep stable less concerns fuel costs as pump prices or to reject even in most parts of the country.

If consumers supply could have received gift for the upcoming holiday season, Hyundai officials said that she experienced a strong increase in demand on post Thanksgiving Black Friday. The manufacturer's band was 22 percent for November, there is a record for the month.

In the meantime, Audi, ended the month associated with a 15.2 percent profit - the 104.906 of the year-to-date total sales. However, hit that, the German manufacturer of all time record total 101.629 that it for all 2010 included.

Audi brand sibling Volkswagen was a different fixed exporting for November with a 40.7 per cent on the previous year by 40.1 percent.

"November was a huge month for Volkswagen,", said Jonathan Browning, President and CEO, Volkswagen Group of America, Inc. "with the 2012 Passat named motor trend car of the year expected improvements in j.d power sales satisfaction index and again double-digit growth, the proof that German engineering and our commitment to the US market are all starting points, together, to come."

Paul A. Eisenstein contributed to this report.

Read More