John Oliver took issue with the U.S auto lending industry on Sunday’s Last Week Tonight and warned of a coming crisis. With the help of Keegan-Michael Key, Oliver explained why the current auto lending bubble may be reminiscent of the housing crisis.
“Nearly a quarter of all car loans are of the high-risk subprime variety,” Oliver said in the segment. “In fact, so many are being issued, they recently reached a 10-year high. And if the phrase ‘A boom in subprime loans’ is making your eye twitch with flashbacks to the mortgage crisis, just wait — we will get there.”
Oliver began his investigation of the subprime auto industry with buy-here-pay-here dealers. “Theoretically, it is a good thing that car dealers lend money to people who can’t get financing elsewhere, but in practice, these dealerships can trap people with few options into paying vastly more than a car is worth,” he said. “It’s just one of many ways in which when you are poor everything can be more expensive.”
Customer can pay as high as 29 percent in interest on their cars, and one woman was charged $13,000 for a $3,000 car. “It’s no wonder that buy-here-pay-here loans had an average default rate last year of nearly one in three, with most customers who default doing so just seven months after taking out the loan.”
To drive the point home, Oliver brought out Key to play the proprietor of Crazy Johnny’s auto dealership. Watch the clip to see them sell a “pre-pre-pre-pre-pre-owned 2003 Kia Optima.”