Heading for an Unhappy Ending

The way I see it, there are only two conclusions you can draw from the above: either Americans are unduly -- even wildly -- optimistic about their car-buying plans -- and, by extension, their future prospects -- or their ability to buy a new car depends on something other than their earning power and economic circumstances.

If the latter, perhaps it has something to do with this:

"Subprime Car Loans Return to Favor Among Auto Lenders" (Detroit News)

Consumers without top-tier credit are finding it easier to get new car loans, as banks and other lenders are lowering the scores needed to qualify.

While that means additional sales for automakers, and enables more motorists to get into new cars and trucks, it raises questions as to whether lenders are falling into the same risky lending practices they followed before the recession.

"There's a lot of lenders now that are into the subprime business," said Jody Lee, sales manager at Taylor Chevrolet. "What used to be a good score at a 650 or 700, now 550 is a good score."

During the first quarter of this year, total U.S. car loans totaled $52.5 billion. That's 49 percent higher than the same period in 2009 — the recession's low point — according to Equifax's National Consumer Credit Trends Report.

Also during the first quarter, the average amount financed on new vehicles rose by $589, to $25,995, and for used cars by $411, to $17,050.

Furthermore, buyers are stretching out payments for longer terms: The average length of new- and used-vehicle loans jumped a full month during the first three months of this year, to 64 and 59 months, respectively.

More loans and looser lending restrictions have helped boost new car and truck sales to levels not seen in four years. Estimates call for 14 million to 15 million vehicles to be sold in the U.S. this year, about 30 percent higher than in 2009.

Either way, it's hard not to think that the extraordinary divergence between the two markets -- jobs and autos -- will lead to an unhappy ending.

Comments

[Tom]

Repo man gonna be BUSY in the months to come!

Geez Louise - don't these people ever learn? It's almost like they WANT to bring on another bubble and crash scenario - as if our economy can handle it or another bailout.

[J.Webber]

But the question is does the impact of auto credit really pack the punch as against say housing loans? That being said, going by the above seems clear that lessons have definitely 'NOT' been learnt at all.

[Marion Shaw]

There are some success stories out there
based on hard work, guts and determination. I know a guy who dropped
out of highschool and got in on the ground
floor of the airline business baggage
handling. Today he is in midmanagement,
almost finished an on line college degree
he paid for, and trades in a new car
every year for pennies on the dollar. He
has no debts. He also holds a night job
between his day job. Is he a workaholic?
yes. Does he have much sympathy for those
who stand around waiting for opportunity?
None. He may mellow with time.

[John G.]

Wow, what a chart, Michael!

I place my money on your side. I bet there will be extraordinary year end discounts in December, to help clear the federally-financed channel stuffing that has been going on.

[unhappy endings]

‘Economic suicides’ shake Europe as financial crisis takes toll on mental health

So many people have been killing themselves and leaving behind notes citing financial hardship that European media outlets have a special name for them: “economic suicides.” Surveys are also showing increasing signs of mental stress: a jump in the use of antidepressants and illicit drugs, a rise in depression and anxiety among workers worried about salary cuts or being laid off, and an increase in the use of sick leave due to psychological problems.

“People are more and more uncertain about their future, which is leading to a sharp rise in mental health problems,” said Maria Nyman, director of Brussels-based Mental Health Europe, a multinational coalition of mental health organizations and educational institutions.

In recent years, researchers in the United States and elsewhere have repeatedly identified a correlation between suicides and unemployment or other economic distress. The U.S. Centers for Disease Control and Prevention reported last year that suicides increased during periods of economic stress, including the Great Depression, the oil crisis of the 1970s and the double-dip recession of the 1980s. Other studies have estimated that people with employment difficulties are two to three times as likely to commit suicide than the population as whole.

http://www.washingtonpost.com/business/economy/economic-suicides-shake-europe-as-financial-turmoil-takes-toll-on-mental-health/2012/08/14/3c2e5df0-c6d4-11e1-916d-a4bc61efcad8_story.html

[roger]

A propaganda tool on par with (The power of the Will),Adolph's favorite.
Individual success stories amid a sea of misery, a favorite of TV news
channels, it is supposed to make everybody else feel guilty of not succeeding.

[Tom]

All this and we're heading for a rigged election this fall: which brand of Republicanism will you vote for - the incumbent assassin in chief or the bat-shit crazy far-right version that'll kill medicare and social security? The Republicans are trying to stack the deck in several states with voter i.d. laws passing their state legislature just in time to take effect this fall, despite being unconstitutional.

So don't expect anything to change for the better. In fact, it's only going to get worse no matter who is elected.

[Walter Wit Man]

My guess:

Most American people need cars. Even the poor need them. People put off buying a new car the last few years and now they "need" one.

Of course one doesn't save much money with a used car and with the low interest payments and government support buying a new car may be the best option for lots of people.

I have been pricing new and used cars and I'm surprised that there is almost no option for less than $450-$600/month--that's the TOTAL cost of ownership. Even used cars cost at least that much (assuming 15,000 miles a year).

[sharonsj]

This info is for total car loans, so I'll make you a bet that most of the loans are for second-hand vehicles. There are a lot of businesses that are the equivalent of payday loans for cars; these are for poorer people who don't have good credit. The terms are outrageous but some people have no choice.