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ECON A record 7 million Americans are 3 months behind on their car payments
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  1. #1
    Join Date
    Nov 2003
    Between Holy & Crap

    21 A record 7 million Americans are 3 months behind on their car payments

    Not good. I wonder if it's the people with the student loans? Yup.

    A record 7 million Americans are 3 months behind on their car payments, a red flag for the economy

    February 12

    A record 7 million Americans are 90 days or more behind on their auto loan payments, the Federal Reserve Bank of New York reported Tuesday, even more than during the wake of the financial crisis.

    Economists warn that this is a red flag. Despite the strong economy and low unemployment rate, many Americans are struggling to pay their bills.

    “The substantial and growing number of distressed borrowers suggests that not all Americans have benefited from the strong labor market,” economists at the New York Fed wrote in a blog post.

    A car loan is typically the first payment people make because a vehicle is critical to getting to work, and someone can live in a car if all else fails. When car loan delinquencies rise, it is usually a sign of significant duress among low-income and working-class Americans.

    ['Repo men' are doing better than ever]

    “Your car loan is your No. 1 priority in terms of payment,” said Michael Taiano, a senior director at Fitch Ratings. “If you don’t have a car, you can’t get back and forth to work in a lot of areas of the country. A car is usually a higher-priority payment than a home mortgage or rent.”

    People who are three months or more behind on their car payments often lose their vehicle, making it even more difficult to get to work, the doctor’s office or other critical places.

    The New York Fed said that there were over a million more “troubled borrowers” at the end of 2018 than there were in 2010, when unemployment hit 10 percent and the auto loan delinquency rate peaked. Today, unemployment is 4 percent and job openings are at an all-time high, yet a significant number of people cannot pay their car loan.

    Most of the people who are behind on their bills have low credit scores and are under age 30, suggesting young people are having a difficult time paying for their cars and their student loans at the same time.

    Auto loans surged in the past several years as car sales skyrocketed, hitting a record high in 2016 of 17.5 million vehicles sold in the United States. Overall, many borrowers have strong credit scores and repay their loans on time, but defaults have been high among “subprime” borrowers with credit scores under 620 on an 800-point scale.

    The share of auto loan borrowers who were three months behind on their payments peaked at 5.3 percent in late 2010. The share is slightly lower now — 4.5 percent — because the total number of borrowers has risen so much in the past several years. Still, economists are concerned because the number of people impacted is far greater now and the rate has been climbing steadily since 2016 even as more people found employment.

    Experts warn Americans to be careful where they get their auto loan. Traditional banks and credit unions have much smaller default rates than “auto finance” companies such as the “buy here, pay here” places on some car lots.

    Fewer than 1 percent of auto loans issued by credit unions are 90 days or more late, compared with 6.5 percent of loans issued by auto finance companies.

    “The No. 1 piece of advice I have is to not get your financing from a car dealership,” said Christopher Peterson, a law professor at the University of Utah and former special adviser to the Consumer Financial Protection Bureau. “Shop separately for the vehicle and the financing. Go to a credit union or community bank to get a low-cost loan.”

    [Federal Reserve chair calls income inequality the biggest challenge of the next 10 years]

    Rates can vary substantially depending on a borrower’s credit score and where they obtain a loan. A “prime” borrower with a credit score in the range of 661 to 780 can get an auto loan rate of about 4.5 to 6 percent, according to NerdWallet. In contrast, a subprime borrower is typically looking at rates between 14.5 and 20 percent.

    After the financial crisis, the government placed heavy restrictions on mortgages to make it harder to take out a home loan unless someone could clearly afford to make the monthly payments. But experts warn that there are far fewer restrictions on auto loans, meaning a consumer has to be savvier about what they are doing when they take out a loan.

    "Predatory lending practices and a lack of real transportation options leave many households trapped in debt with few ways out,” said Faye Park, president of the U.S. Public Interest Research Group, which advocates for consumer protections.

    Repossessing a car is also a quick process thanks to technology and the laws in many states. Some cars are installed with devices that prevent the car from turning on if someone misses a payment and it has become easier to geo-locate a car to tow it away.

    [Millions of Americans could be stunned as their tax refunds shrink]

    “It’s a lot easier to repossess a vehicle than to foreclose on a home,” Taiano said.

    He noted that non-prime and subprime auto loans increased from 28 percent of the market in 2009 to 39 percent in 2015, a reminder of how aggressively lenders went after borrowers who were on the margin of being able to pay. More lenders are giving people six or seven years to repay now vs. four of five years in the past, according to Experian, another tactic to try to make loans look affordable that might not otherwise be.

    While defaults on auto loans are a red flag, they are unlikely to take down the entire financial system as mortgages did in the lead-up to the 2008-2009 financial crisis. The total auto loan market is just over $1 trillion, far smaller than the $9 trillion home mortgage market.

    The amount of money people borrow to buy a car is also much smaller — typically under $35,000 — vs. a home loan, where people often borrow several hundred thousand dollars.

    Editor’s note: Are you unable to pay your car loan? Or are you struggling? The Washington Post would like to hear from you. Email:
    Attached Images
    So when's the Revolution? God or Money? Choose.

  2. #2
    Join Date
    Mar 2007
    West Virginia
    How many of the default loans are illegal aliens working with stolen ID?

  3. #3
    Join Date
    Jul 2004
    Quote Originally Posted by Publius View Post
    How many of the default loans are illegal aliens working with stolen ID?
    Now that's a good question.

  4. #4
    Join Date
    Jul 2001
    Purdy area, Western WA
    I only buy used cars and pay cash.
    Jesus didn't MERELY only physically "die on the cross". He so loved us that
    It was God, suffering, bearing the sin, shame, guilt and punishment
    for every single person who had, or would ever live.
    So Justice could be preserved, Enabling Grace and Mercy to all who believe.

  5. #5
    Join Date
    Jan 2005
    Portland, Oregon
    Something of a dup. This thread was started yesterday by Blacknarwhal:

    Debt Crisis In America: A Record Number Of Americans Are Behind On Car Payments

  6. #6
    Join Date
    Apr 2008
    Right here in far WKY, at Caeli.
    Behind, we are ahead, had to buy a new truck cause he had a diabetic adventure and crashed. 6 months later and he has over 30,000 miles on it.
    Madness does not always howl. Sometimes, it is the quiet voice at the end of the day saying, "Hey, is there room in your head for one more?"

  7. #7
    Join Date
    Mar 2011
    Looking Up
    Zero down and zero percent interest forever just is not a good idea to justify the prices of new vehicles. What is that old song "How much does it cost? I'll buy it. The time is all we lost. I'll try it." Oh well each generation has to learn cause you can't tell them anything. AOC will take care of them.
    "They wanted to be left alone to face challenges head-on, and to prosper from their own hard work and ingenuity...harsh country tends to produce strong people."-John Erickson

  8. #8
    Join Date
    Aug 2007
    Maine, inland moutains
    It will only get worse, as so very many people are financially illiterate.
    This is part of our education system’s objective to create stupid, compliant, dependent debt slaves.
    The new slavery.

  9. #9
    Somehow I just dont believe that. Its been that or worse before. Seems like this is a whoo-doo-voo-doo of the facts to hurt Donald Trump.

    "A human being should be able to change a diaper, plan an invasion, butcher a hog, conn a ship, design a building, write a sonnet, balance accounts, build a wall, set a bone, comfort the dying, take orders, give orders, cooperate, act alone, solve equations, analyze a new problem, pitch manure, program a computer, cook a tasty meal, fight efficiently and die gallantly. Specialization is for insects."---- Robert A. Heinlein

  10. #10
    Join Date
    Mar 2011
    Concord, NC
    Car dealers are lending banks these days.............the sell financing loans and just happen to use cars as a commodity in the transaction.

    Dealers sell new cars for next to cost and make all the profits on dragging out as long a term as they can in the financing dept..........they also love to sell you long term maintenance contracts...........

    Selling the consumer a transaction with monthly payments gives a business a predictable income in which to manage and grow their business.

    They are smart and the consumer is dumb...........Dumb sells in today's society.

    Look at the junk they call pop music not to mention the rot of rap and hip hop...........dumb sells and the car dealers know how to exploit that.

    They especially love getting you out of your old car hear that on car dealer ads all the time.

    The are lending banks....

    When I buy a new car (in this case a 2018 Chevy Cruze hatchback last year) I do the whole sell pitch, test drive etc............and get them to the point on the price I want to purchase at...............and then when it comes time to buy they tell me with a credit score of 825 (which I know already) that I can get great terms on my loan.

    Well I've nailed them to an out the door price and then I pull out my check book .....they say "oh you are going to make a down payment that's good!"

    Then I tell them no I'm writing a check for the total amount of the should see the face of the sale person........they run and get the manager and try to get me in a loan.

    I look at the manager and say....."see the Corvette out there?...........its what an L-88? or something like that?.............."

    Yes they tell me.........

    I say to them, "what's the sticker price on that about 120K?........."

    They say.........."well is 114K here"

    Okay I tell you want me to write a check out for that?

    Then they shut up about my purchase of a Cruze......and I'm on my way.

    I buy new with cash because I am more than able to afford that......and I drive less that 5,000 miles a year in a it will last me a long time......

  11. #11
    Already being discussed at the link posted in post #5. And if you read that thread, you'll see that percentage-wise, the "problem" is just more fake news.



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