Auto Loan Defaults Newest Financial Meltdown

[RobertB]

Auto Loan Defaults Newest Financial Meltdown
KPIX TV (San Francisco) ^ | Feb 5, 2008 | Sue Kwon

Posted on 02/05/2008 6:49:36 AM PST by Notary Sojac

Auto payment defaults doubled last year and are expected to get worse. It is another financial meltdown waiting to happen similar to the crisis in the home mortgage industry, according to one consumer group. A CBS 5 ConsumerWatch investigation has found consumers locked into cars they cannot afford.

According to Power Information Network, 1.85 of the 9.6 million customers in 2006 who leased or financed a new car were subprime borrowers or consumers with weak credit.

Vivian Snyder has strong credit and is not classified as subprime, but she is one of many consumers who can't afford the car she leased. Snyder drives a brand new convertible BMW with a MSRP listed at approximately $100,000.

Most consumers can't afford it, and neither can Vivian. That's because the monthly lease payment is $1,300. It eats up half her income which is a $2,500 disability check.

http://www.freerepublic.com/focus/f-news/1965278/posts

[heybales219]

My roommate is one of those. He voluntarily surrendered his truck a few weeks ago (I drove it mostly though) so we're going to share my car. Was a bad decision from the get go, tried to make it work but couldn't. Everything else was falling behind. This will be better because now he'll be able to catch credit cards/personal loans up and pay them off fairly quickly (6-9 months) before the lender comes after him for the remainder of the truck's loan.

As for the lady from the OP, what in world was she thinking getting a vehicle that cost $1300 a month on $2500/month income?

[Nova]

I watched the video clip. She also put down her entire retirement savings of $30K toward the car. So how exactly did she expect to be able to afford $1300/month on a $3000 income? Boggles the mind.

If they wanted to do a piece on poor lending practices in the auto industry, why choose a case like this one (where the buyer was obviously in over her head by choice)? It looks like the car dealership did change the figures on the application. And that the lender didn't verify income. Those are real issues worth exploring.

http://cbs5.com/local/auto.loan.defaults.2.645976.html