DriveTime is a chain of car dealerships that use the buy here, pay here model. Essentially, the dealership finances the cars it sells directly. The approach is most commonly considered by individuals with poor credit who struggle to secure financing through traditional means, such as via a bank or credit union. While these types of services can make car ownership possible for those with bad credit, there are usually some significant catches to consider. With that in mind, here are ten scary facts about DriveTime.
1. Incredibly High Interest Rates
While DriveTime advertises interest rates as low as 7.9 percent, that isn’t what the typical DriveTime buyer receives. Instead, the “average deal” listed on the DriveTime website has an interest rate of 22.6 percent (based on data between January 2023 and April 2023). Since that’s an average deal, while some customers do get a better rate, a significant number of DriveTime buyers end up with a higher one.
One of the reasons for the high-interest rate is that DriveTime mainly targets subprime borrowers. However, subprime is classified as having a credit score between 580 and 619, with deep subprime being anyone with a score below 580. Based on data from Experian, the average deal offered by DriveTime has a higher interest rate than the overall average for subprime and deep subprime auto loan customers, which come in at 18.55 percent and 21.32 percent, respectively. Ultimately, that means DriveTime interest rates are likely higher than the average rate for people with bad credit.
It’s also critical to note that DriveTime can charge an interest rate as high as the maximum rate allowed by your state. For some states, the cap is around 36 percent, but a few states have no upper limit. As a result, you’ll need to check your local usury laws to determine the highest allowed rate in your area just to make sure you’re aware, particularly if you have bad credit.
Additionally, DriveTime will allow you to secure your own auto loan if you want to purchase from one of its dealerships. In many cases, that’s worth considering, as you may get more favorable terms.
2. Very Short Limited Warranty
When you buy a car from DriveTime, you may find it enticing that the dealer offers a limited warranty on its vehicles. However, the limited warranty only lasts up to 30 days or 1,500 miles, whichever comes first. Additionally, a limited warranty doesn’t cover every component of a vehicle, so some problems will be your responsibility to fix regardless of when they occur.
Now, local laws may offer you protection against major defects, issues of safety, or other problems. However, getting a dealership to provide services related to the implied warranty typically covered in those rules can require effort, regardless of where you buy a car. Still, since the warranty supplied by DriveTime is so brief, if you experience a problem beyond that period, you’ll have to fight for the implied warranty.
3. DriveTime May Track Your Vehicle
When you buy a car from DriveTime, it comes equipped with a GPS device. In some limited circumstances, DriveTime may use the GPS tracker to determine the location of your vehicle. One such situation could occur if you fail to make your payments, as the GPS data helps the company recover the car.
Before buying a car from DriveTime, it’s critical to understand when the company may use the device. Additionally, ensuring it’s removed after the purchase is complete is potentially wise.
4. No-Haggle Pricing Limits Negotiating
While no-haggle pricing may sound like a positive – and it certainly can be in some situations – it does mean that your ability to negotiate is potentially limited. Whether that’s problematic depends on whether the car you’re considering is being sold at a reasonable price. Fortunately, online tools can help you estimate the value of a vehicle based on its make, model, condition, mileage, and other factors, allowing you to see if the price listed by DriveTime is fair.
5. You’ll Likely Need a Down Payment
Putting a down payment on a car is typically wise, as it lets you limit how much you borrow to reduce the amount you’ll pay in interest and avoid being underwater on your loan. Still, if you’re short on cash, the idea of a $0 down payment is attractive. The issue is that only 10 percent of DriveTime customers who use the company’s financing options are eligible for a $0 down payment, meaning 90 percent will have to make a down payment.
How much the down payment is largely depends on your credit score, and anything but an excellent score typically means having to put money down. Additionally, the price of the vehicle plays a role.
6. Extended Warranty Cover Is Costly
While DriveTime offers a brief limited warranty on any vehicle, if you want to extend the coverage, that may cost a pretty penny. Precisely how much does vary depending on the car involved and the terms selected. However, some customers have been charged nearly half the cost of buying the vehicle.
Some customers also experience issues when attempting to use the extended warranty they purchase, even when the issues seem like they should be covered. Considering the price, that isn’t what most people would expect.
7. No Loaner Vehicles for Covered Repairs
If your car needs a repair that’s covered by the warranty, DriveTime doesn’t have loaner vehicles available to keep you on the road. Additionally, the rental reimbursement amount provided – up to $25.99 per eight hours of labor required to complete the repair – isn’t usually enough to cover the cost of a rental. While the exact price varies based on the vehicle selected and the person’s location, rental cars can run between $50 and $100 a day or more, so the reimbursement may cover as little as half of the cost.
8. Available Cars Can Have High Mileage
While DriveTime does sell a variety of vehicles, many are near or over the high mileage point. Typically, a car is high mileage once it hits about 100,000 miles, and that’s usually a time when higher-cost repairs and maintenance are necessary to keep the vehicle in good shape.
Now, many modern cars have plenty of life, even if they’re classified as high mileage. However, that’s potentially dependent on how well the vehicle was cared for previously. Since maintenance records may not be available through DriveTime – mainly depending on whether they were provided when DriveTime acquired the car – there’s no guarantee it was well maintained previously. As a result, if the mileage is high, issues may begin developing quickly, which can make the cost of ownership go up dramatically in relatively short order.
9. Hundreds of Complaints
While any company can experience its fair share of complaints, there are hundreds of them recorded on the Better Business Bureau website alone. Many of them discuss similar issues, such as a car experiencing a mechanical issue within a relatively short period after the vehicle was purchased. Complaints about challenges when getting repairs are also common, including when trying to use the warranty.
Now, DriveTime also has positive reviews, including many listed on Trustpilot. Still, it’s critical to understand that both good and bad experiences have happened, ensuring you make the best possible choice if you’re considering a vehicle purchase from DriveTime.
10. No Extended Test Drive
Some people prefer to take extended test drives to get a better feel for a vehicle or to take a car they’re considering to a trusted mechanic. If you’re buying from DriveTime, that’s not an option. While a traditional test drive is part of the equation, if you want your own mechanic to examine the vehicle, they’ll need to come to the dealership with you.
Additionally, most DriveTime dealerships don’t have their own service centers on-site. That means they can’t put the vehicle on a lift to make the underside of the car visible for an inspection. As a result, what you or your mechanic can inspect is limited, so even an experienced mechanic may not be able to spot every potential issue if you bring them along.
Do you know of any other scary facts about DriveTime? Have you tried DriveTime and want to tell others about your experience? Share your thoughts in the comments below.
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Tamila McDonald is a U.S. Army veteran with 20 years of service, including five years as a military financial advisor. After retiring from the Army, she spent eight years as an AFCPE-certified personal financial advisor for wounded warriors and their families. Now she writes about personal finance and benefits programs for numerous financial websites.