9 Investigates: Used-car interest rates

CHARLOTTE, N.C. — Talk about sticker shock: North Carolina used car dealers can charge you 29 percent interest.  South Carolina ones can charge whatever they want.  But now, because of this Action 9 investigation, the law may change.
 
Madonna McCree had bad credit, so she settled on a car that was 11 years old, with high mileage and a high interest rate.  By the time she paid it off, she had spent twice the sticker price.  She felt she had no choice. 
 
"I needed a car, so, and I didn't feel like I could go to another dealership and get approved, so I just sucked it up," said McCree. 
 
She feels the law should change.  In North Carolina, used car dealers can charge you anywhere from 18-29 percent interest, depending on how old the vehicle is.  The older the car, the higher the cap.
 
 In South Carolina, businesses can charge any interest rate they want.  If they go over 18 percent, they just have to alert the state's Department of Consumer Affairs and post it at the dealership.
 
Now, hearing about this Action 9 investigation, N.C. Sen. Malcolm Graham feels it's time to lower the North Carolina cap. He plans to raise the issue in the Senate this fall.  He says he'll push for an official bill to study used car interest rates.  If approved, you could see that study begin in early 2015.  "Certainly dealerships should make a profit, but not at the expense to everyday citizens who are trying to make a living for themselves and their family," said Graham.
 
But others say don't forget why those rates are as high as they are.  Car dealers, like Debbie Thomas, who owns Phil Jackson Auto Sales, take a lot of risk, selling vehicles to people with bad or no credit.  Those customers miss payments often.  Sure, Thomas can repossess the vehicles.  But that's assuming she can find them.  She says she's had to hire people to track down vehicles as far as Baltimore and Louisiana.  And, even when she does get the vehicle back, who knows what condition they're in.  A lot of times, people run them into the ground.  She ends up with a collateral that's almost worthless and it's up to her to fix it if she wants to resell it.
 
Action 9:  "If they change the law and they made the cap really low, would it hit the point where you would decide, 'Look it's just not even worth the risk to sell a car to somebody who doesn't have the right credit?'"
Tomas:  "That is correct. Yeah. If we don't make money on it, it wouldn't be worth us taking the risk."
 
It's a risk McCree understands.  She doesn't want dealers thinking twice about selling used cars to people with bad or no credit.  But she still worries about people in the same situation she was in: parents, trying to hold down jobs, relying on their cars, stuck with double-digit interest rates, living with a constant fear of losing their rides.
 
"The minute you can't make your car payment, they'll come and take it," she said.
 
And she had an advantage many don't have.  She works in debt collection.  And even she couldn't figure out a way around those interest rates.

Click here for more information on the North Carolina law.

Click here for more information on the South Carolina law.

WSOC