Investors place big bets on Buy Here Pay Here used-car dealers

[bemildred]

What could go wrong? I was down south recently, and there were auto title loan places all over the place. Guess what happens to the cars when those loans are not paid back?

The J.D. Byrider used-car dealership in Visalia, Calif., sits amid a jumble of tow yards, hubcap vendors and vacant lots littered with empty beer cans. It may not look like much, but selling aging cars to waitresses, secretaries and farmworkers is a lucrative business. That's why private equity firm Altamont Capital Partners of Palo Alto bought the J.D. Byrider chain in May for a reported $50 million.

Altamont's offices, on the 10th floor of a luxury office tower overlooking Stanford University, are 200 miles and a world away from the Visalia lot.

On a recent morning, a dozen executives could be seen huddled in a glass-walled conference room, reviewing a slide presentation on plans to buy some franchised Byrider lots. It's part of a strategy to boost profit at the 135-lot chain, which had sales of $740 million last year.

Firms like Altamont pride themselves on being the smart money, identifying profitable opportunities ahead of the herd. Lately they and other investors are finding just such a windfall in a little-noticed niche of the used-car business known as Buy Here Pay Here.

http://www.latimes.com/business/buy-here-pay-here/la-fi-buyhere-payhere-day-two-20111101,0,3779131.story

[GreenPartyVoter]

1. Oh my gosh! We need laws against this kind of predatory lending and security bundling!

[Marazinia]

2. These are all over the place where I live

The main issue I have with it is the cars tend to be very junkie. People I know who have bought cars from these lots tend to start having problems less than three months after they buy the cars, which leaves them making car repairs and making payments in a desperate attempt to stay mobile.

[dixiegrrrrl]

3. Jeebus.....A whole predatory system surrounds the new serfs.