LA Times investigation. Part 3: A hard road for the poor in need of cars

No car, no work. That's the conclusion Lisa Twombly reached as she fought to hang on to her job as a caretaker for an elderly San Diego couple. Taking the bus and bumming rides from friends wasn't cutting it, and she was repeatedly late for work.

Told she'd be fired if it happened again, Twombly put down $4,000 — all her savings — on a 9-year-old Chrysler Sebring with 95,000 miles. The dealership lent her the $2,600 balance at a steep 18% interest rate.

A few months later, the Sebring broke down and she got into a dispute with the dealer over who should pay for repairs. Twombly quit making loan payments, and Dig's Wheels of Escondido, Calif., repossessed the car.

She again struggled to get to work on time and was fired. That set off a chain of events that left the 38-year-old single mother and her two children homeless for six weeks. "I don't know what I'm going to do," said Twombly, who is still out of work. "I lost my job because I lost my car."

For more than a century, efforts to help the disadvantaged have focused on education, healthcare, nutrition and housing. Almost nothing has been done to help the working poor afford cars, despite research that indicates it would help alleviate poverty.

Read on.

LA Times investigation: Investors place big bets on Buy Here Pay Here used-car dealers

Subprime auto loan issues now represent a larger percentage of all auto-loan securitizations than at any time since 2006, according to Moody's.

That means people who have never set foot on a Buy Here Pay Here lot, including retirement savers, own a small piece of the business.

OppenheimerFunds, which has more than $188 billion in assets and 11 million shareholders, holds DriveTime securities in at least six of its mutual funds, company reports show.

The returns on subprime auto-loan securities vary, but one offering sold late last year paid 3.5% annually on A-rated bonds maturing in three years — about six times the yield on comparable U.S. Treasury notes. On a $1-million investment, an investor would expect a return of $105,000, plus the principal, over the three years.

Read on.

Another predatory lending: Sign, drive, default, repossess and resell — that's the game at Buy Here Pay Here dealerships.

Tiffany Lee wanted a car. She was weary of the two-hour bus ride to her job at a UCLA Health System clinic. She hated having to ask friends to drive her 7-year-old son to his asthma treatments.

But as a single mother with three children, bad credit and a $27,000-a-year salary, she couldn't find a bank or dealership willing to give her a loan.

Then a friend steered her to Repossess Auto Sales in Hawthorne.

Another buyer might have balked at the deal she was offered. Lee figured she had no choice. She put $3,000 down and drove off in a 2007 Ford Fusion, agreeing to pay $387 a month for four years. The interest rate: 20.7%, nearly triple the national average for a used-car loan.

A year and a half later, Lee fell behind on her payments and filed for bankruptcy. So she was relieved when the dealership called and offered to make her loan more affordable. The sales manager even promised to throw in a free smog check. Lee, 35, drove back to Repossess Auto on a rainy Monday evening, handed the keys to an attendant and sat down with the manager.

Moments later, she said, employees parked four cars tightly around the Ford, blocking it in.

There would be no new deal. Lee's car was being repossessed. She and her children waited in the rain until a friend could drive them home.

Lee, who described that night as “one of the worst experiences of my life,” had stumbled into the bare-knuckle world of Buy Here Pay Here used-car sales.

In this little-known but fast-growing corner of the auto market, dealers command premium prices for road-worn vehicles and finance the sales at interest rates that can top 30%.

 Read more: http://t.co/gQW6Ysb7

Part 2 from the LA times will be on Tuesday: Why Wall Street is betting on Buy Here Pay Here