With high-risk subprime loans at a 10-year high in the auto industry, some experts are predicting a bubble burst eerily reminiscent of the 2008 mortgage crisis. John Oliver unpacked that troubling topic on Sunday’s Last Week Tonight.
As Oliver notes, many “Buy Here, Pay Here” dealers use subprime loans to target individuals with bad or non-existent credit. “We don’t even know what a credit score is,” Oliver says, mocking one dealer ad. “What is a good one? PG-13? 640 on the verbal, 710 on math? Three under par? Is that a good credit score? We’ve got no idea, and that’s why you should trust us!”
As Oliver notes, these dealers end up locking low-income people into paying “vastly more than a car is worth” – at an average interest rate of 19 percent. He reports that the average default rate last year was 31.45 percent, with most defaults happening seven months after taking out the loan.
Overall, the influx of subprime auto loans is causing many experts to fear a repeat of the 2008 mortgage crisis, documented in 2015’s The Big Short.
To iron home his point, Oliver and Keegan-Michael Key filmed a fake commercial, portraying greedy, cowboy hat-wearing used car dealers. “Is your credit so bad that giving you a high-interest loan will basically trap you under a mountain of debt of which there is no hope of escape?” Oliver asks, pushing a button to trigger the voice sample, “We don’t give a fuck!”
Find out five things we learned from John Oliver. Watch here.