Core Insights - The article discusses the challenges faced by subprime borrowers in the auto financing market, highlighting the high interest rates and negative equity situations that can arise from poor financial decisions [1][4][11]. Subprime Financing - Subprime borrowers often face significantly higher interest rates, with average rates at finance companies and buy-here-pay-here dealerships ranging from 15% to 20%, compared to approximately 10% at banks [1][4]. - Borrowers with credit scores between 300 and 500 pay average rates of 15.81% for new cars and 21.55% for used cars, with rates potentially exceeding 30% [1][2]. Financial Struggles - A case study of a couple reveals they are paying $1,800 monthly for two vehicles, which is nearly equivalent to their $2,000 rent, indicating a precarious financial situation [2][4]. - The couple's financial difficulties are exacerbated by negative equity, where they owe more on their loans than the vehicles are worth, often due to rolling previous loan balances into new purchases [4][11]. Loan Terms and Costs - Extended loan terms, such as 84-month loans, have become more common, comprising nearly 20% of new-car financing, which can lead to significantly higher total interest payments [6]. - For example, a typical 2025 new car loan of $41,473 at an average APR of 9.4% over 84 months results in over $15,000 in interest [6]. Add-ons and Fees - Subprime lenders may impose additional costs through service contracts and GAP insurance, which inflate the loan principal and monthly payments [7][8]. - These products are often presented as mandatory, although they are technically optional, making it crucial for borrowers to understand their financing terms [8]. Behavioral Changes and Financial Management - Experts suggest that the couple should consider personal loans from credit unions to consolidate debt and reduce monthly payments, emphasizing the need for behavioral changes to avoid repeating past mistakes [10][11]. - By adhering to a budget strategy, the couple could potentially free up $1,500 to $2,000 monthly, which could lead to significant financial improvement over three years [12][14].