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Originally Posted by P.C.
If a dealer is selling vehicles to a clientele who have a high rate of non-payment/repossession episodes, is he justified in selling his cars at above-market prices and charging borderline usurious interest rates?
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Yes.
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Could he stay in business selling these cars to the same clientele if he cleared 10% on the sale? Could the lender continue to offer financing to this same clientele at a competitive rate, suffer losses due to non-payment of debt, and still remain in business?
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No.
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An automobile insurance company has the latitude to vary its policy premiums based on prior loss experience. Say that you are a 45-year-old married male living in rural Kansas with a clean driving record and no accident history. Your annual premium for your 2010 Chevy Impala is $825 per year. The policy premium is set based upon prior loss experience. The same company is also insuring a 20-year-old unmarried male living in UES Manhattan who is driving a 2013 Porsche 911 Turbo Cabriolet. In the last year he picked up two speeding tickets for doing 95 in a 65. In your opinion, should that same insurance company offer an $825 annual premium to the Porsche owner? Their prior loss experience with this type of policyholder indicates that the likelihood of a six-figure claim in the next three years is about 60%.
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Are those figures hypothetical, or do you have a data source? I'm curious because $825 for the Impala seems high to me. OTOH, it wouldn't shock me to see the Justin Bieber type paying two grand a month or more.
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Whoever said there's nothing more expensive than a cheap Mercedes never had a cheap Jaguar.
83 300D Turbo with manual conversion, early W126 vented front rotors and H4 headlights 400,xxx miles
08 Suzuki GSX-R600 M4 Slip-on 22,xxx miles
88 Jaguar XJS V12 94,xxx miles. Work in progress.
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