The new phrase that explains the issues with auto loans is: “foreclosure epidemic on wheels” People everywhere are defaulting on their car loans. Some of them are making that choice; it’s either the house or the car and you know what comes first. The auto loan crisis has been brewing for years. Companies that make auto loans changed their business models and were making loans to people who couldn’t afford the payments. Instead of refusing them they just extended the terms of repayment so they could lower the monthly payments. It was a practiced that was doomed from the start, but these lenders felt like they could handle the losses, until the bottom fell out of the economy.
Oil prices hit the roof and people scrambled to get rid of gas-guzzlers so they could purchase cheaper fuel friendly models. Instead of being able to sell those vehicles they were stuck with them; they owned more than they were worth. Those that could sell them quickly found out that even with good credit they couldn’t get a new loan. Used car lots were filling up with SUVs’ that nobody wanted including the dealer.
This crisis is in full swing and it appears the worst is not behind us yet. Repossessions climb everyday because of people losing their jobs, life savings and peace of mind.
The inability for people to get an auto loan is creating a giant mess for the auto dealers. GM says it is losing 12,000 sales a month because people can’t get loans. The auto loan crisis is changing the way people are thinking about their cars. Instead of buying a new car every 100,000 miles, people are realizing that there is much more life than that in their old home on wheels. A car that is paid for is a blessing. A car that has been serviced regularly has much more life in it that the dealers want us to know. The old is becoming new again. A new car is not an asset until it’s paid for and who knows when that will be based on the current economic conditions. That new car smell is not as important as it use to be, but having it paid off is.
The auto loan crisis will become history at some point. Steps are being taken by consumers, dealers, manufacturers and government to remedy the situation. It’s a lesson we all needed to learn. We don’t need credit but we do need cash. The world is reshaping itself and new boundaries are being set-up to control useless spending and borrowing. Equity is more important than debt, regardless of your tax bracket. Cash always talks and any asset that can be converted to cash quickly is a sound investment. The days of paper wealth are changing and a new way of buying is beginning to surface. We will become stronger and more aware thanks to these auto problems. Our old cars will show us how beautiful they are and we will thank the auto industry for reminding us that a crisis is a message of change.