More than a dozen conventional dealerships turned the couple down for a loan. Then they heard an ad on the radio for M.K. Auto Inc. near their suburban Sacramento home.
The Cvitanovs said a salesman collected information to check their credit and told them the only car they qualified for was a 2003 Mitsubishi Galant. It had been driven more than 100,000 miles.
The price was $7,999, according to their sales contract — double the Kelley Blue Book value at the time. The couple said they could manage a $1,000 down payment, and the dealer offered to finance the rest at 25.99%. Their monthly payment would be nearly $290.
The Cvitanovs said they signed the contract, reluctantly, after the dealer promised they could trade it in for something better if they kept up their payments for six months.
When the time came, they exchanged the Mitsubishi for a decade-old Mercedes-Benz E-Class with 80,000 miles, three previous owners and a repossession in its past.
At $13,998, the price was about $5,500 above Blue Book. The balance of the old loan was rolled into a new one, also with an interest rate of 25.99%, according to the new contract. Their payments climbed to $498, stretched out into 2014.
By then, the total cost of the Mercedes with interest would be more than $25,000.
“A couple of years ago, we could have leased a brand-new Mercedes for less money,” Chris Cvitanov said.
The couple made payments on the sedan for six months, trying to renegotiate the loan at the same time.
After those efforts failed, they filed suit in January claiming that they were deceived about the loan terms. The dealership settled two months later. M.K. Auto took the Mercedes back and gave the Cvitanovs a $6,000 credit toward a 2003 Chevrolet Tahoe.
The dealer, Magdi Saad Gendi, did not respond to a request for comment.
Chris Cvitanov, who recently found a job in heating and air conditioning, said he was satisfied with the outcome. He declined to reveal terms of his new loan but said one thing had not changed: Because of his poor credit rating, the interest rate is still high.
A different vibe
At traditional auto dealerships, the buying experience is a well-polished routine. Coffee flows freely, and the salesman may spring for lunch. The car rolls off the lot with a full tank of gas.
It's a different vibe at Buy Here Pay Here lots. Banners promise to “finance anyone” and say that bad credit is “no problema.”
In addition to advertising on radio and TV, dealers buy lists of recent bankruptcy filers to target with mail solicitations and phone calls.
Rarely are prices displayed on car windshields. Instead, negotiations focus on how much the customer can put down upfront and then pay each month.
Many dealers don't worry about buyers' credit scores — knowing they can't be good — but they almost always insist on long lists of references so they can pressure friends and family when a payment is missed.
They also frequently help customers apply for the earned income tax credit for low-income workers — and then offer a loan against the anticipated refund to use as a down payment. Dealers report a surge in sales in the three months leading up to tax day.
Stan Schwarz has frequented Buy Here Pay Here lots for more than a decade, selling “payment devices” such as GPS beacons that can be concealed on cars.