Auto Dealer Has an Offer for Drivers With Bad Credit, but There's a Catch
By ROBYN MEREDITH
Published: August 30, 1999
A car dealer here is making a big push into leasing used cars to poor people with no credit or bad credit. But the deals come with streetwise terms: miss a payment and the car won't start.
The dealer, Mel Farr, the former Detroit Lions football player, leases the cars to anyone who can come up with at least $50 a week. The catch is that a payment is due every Friday and customers must pay up weekly to get a code they must punch into a device attached to the dashboard. Otherwise, the car stays parked.
Is Mr. Farr an angel for making cars available to those who otherwise could not afford them, for giving people a reliable way to get to work and an opportunity to re-establish their credit? Doing business with him isn't cheap: car buyers who qualify for bank loans can borrow at about 9 percent, and Mr. Farr charges more than twice that on comparable leases to customers with the coded device. Does that make him a vulture getting top dollar for old, beat-up cars by preying on those who have nowhere else to turn?
It depends on whom you talk to. Mr. Farr, the owner of the Mel Farr Automotive Group, says the unusual arrangement is a boon to inner-city residents who might otherwise have to rely on spotty public transportation -- or their feet. Customers seem to be generally satisfied, though two have filed a lawsuit contending that their engines shut down as they were driving the cars.
Mr. Farr's biggest supporters are among the country's political and economic elite. Prodded by the Rev. Jesse L. Jackson, Wall Street recently showered Mr. Farr's company, the biggest black-owned business in the United States, with $36.5 million in new financing that enables him to expand in urban markets. And in a public relations coup last month, President Clinton publicly thanked him for bringing cars ''to every community in this country.''
Some critics, though, portray Mr. Farr less as a do-gooder than an exploiter. ''It is a no-fault system of consumer oppression by an auto dealer who should know better,'' Ralph Nader said. ''It is an electronic form of consumer servitude.''
Mr. Nader objected to Mr. Farr's interest rates, which fall between 22 and 25 percent, and to his marketing to people so desperate for transportation that ''they'll take anything.'' He also worried about the danger of accidents if the devices malfunctioned.
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In a telephone interview last week, Mr. Jackson defended Mr. Farr's unorthodox leases, saying that although the interest rates are high, they are legal and they are a good first step to providing credit where none is available now. ''As we seek to greenline these redlined zones, you must introduce access and then competition and then bring prices down -- that's the way our system works,'' Mr. Jackson said.
Since late June, when the deals were first offered, 280 people have signed up, most in Detroit and the rest in the Dayton, Ohio, area. None are behind on their payments, the company says. And many of those questioned about the leases seemed content.
''When you come in walking, you don't squawk,'' said Betty A. Ware of Detroit, who rode the bus to one of Mr. Farr's dealerships to lease a bright red 1995 Ford Aspire for $77 a week.
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The lawsuit concerning the on-time device was filed by two women who blamed the contraption for shutting off their engines. The women, who had made their payments on time, are seeking revocation of their leases as well as unspecified damages, and they want the dealership barred from using the devices.
According to their lawsuit, the women were not told that their cars would carry the devices until after they had given the dealership their down payments.
Their lawyer, Kenneth N. Hylton Jr., said the women had gone separately to Mr. Farr's dealership to buy cars but had been told they lacked good credit and were instead steered toward leasing cars with the on-time device. ''They were desperate for transportation,'' he said.
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To inspire customers to pay up, Mr. Farr shows them a video of himself giving money-management tips. Mr. Farr appears in his trademark tan suit and red cape and urges those on limited budgets not to waste money on fancy hairdo's, manicures, clothes or fast food. Those who pay on time for a year are promised the chance to trade up to a nicer car. So far, he says, many customers are paying three payments ahead of time, to be sure their cars will start.
''If you don't pay us, I'll do everything in my power to find you and take my car back,'' Mr. Farr says sternly in the video. ''So make the most of this opportunity.''
After all, he is. ''I see no competition,'' Mr. Farr said. ''They are customers that no one wants.''
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