John Oliver: Auto Loans

Subprime loan

A loan given to individuals with low credit scores at a higher interest rate due to their classification as "riskier" borrowers.

Get dealt higher interest rate loans

Prime borrower

A borrower who is offered lower interest rate loans due to their higher credit score.

Auto loan market power

The power in the auto loan market lies entirely with the lender, who can threaten repossession and car shutoff to control the borrower.

Competitive market and interest rates

In a competitive market, the interest rates on auto loans should fall as more firms enter the industry, as lower interest rates attract borrowers.

Impact of increased firms in the auto loan market

The increased number of firms in the auto loan market has led to lenders becoming more aggressive and misleading in their marketing, increasing interest rates, and targeting poorer individuals. They have also offered longer-term loans with higher interest rates but less upfront money, taking on more risk.

Bundling

The practice of offering multiple products and services as a single combined service.