Back in the early '90's I was designing software that was being sold to these "buy here - pay here, everybody drives" car lots & what they were doing was a total scam. I actually felt bad for their customers (even tho I rarely feel bad for losers with shit credit).
They were in bed with the auto warranty places, who were also making a fortune off this crap. The way the scam works is they get these trash credit ppl to come buy one of the crap cars on their lot. The finance contract was typically a 'rule of 78's' loan + they forced the ppl to buy an extended warranty thru their approved company. Any down payment & the initial payments went to paying off the warranty, then loan interest, then principle.
Basically, more than 80% of these loans defaulted in the 1st 6 - 9 months. The dealer would repo the car & put it back on the lot & the way the warranty thing was set-up they essentially 'repo'd' that as well. The dealer would cash out the warranty & keep the $ + the loan interest and of course, there was never any equity to payback to the buyer.
The remaining 20% were not out of the woods yet ! The lot would call them, sweet talk them about how good they have been doing with the payments, and bug them to come in & 'upgrade' to a newer/better car (with a higher payment of course). Few resisted and those that got sucked in eventually ended up in the 80% that get repo'd group.
A lot of states put laws in place to curtail much of this, but I'd bet next months pay there are still scumbag dealers out there running some version of this scam.
