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Today on the Daily News You Can Use, Ray and Zach discuss troubling data from S&P Global that shows auto loan delinquencies have surpassed the Great Recession….(read more)
BREAKING: Recession News
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Consumers ABANDONING Their CAR LOANS (Worse Than the Great Recession)
In a shocking development, consumers are increasingly opting to abandon their car loans, leading to severe consequences for both individuals and the auto industry as a whole. This phenomenon, which is being dubbed “worse than the Great Recession,” has raised concerns about the overall state of the economy and has left experts wondering what the future may hold.
During the Great Recession that occurred from 2007 to 2009, the auto industry was hit hard as unemployment rates soared and many individuals struggled to make loan payments. However, the current situation is proving to be even more dire as consumers are now simply walking away from their car loans, leaving lenders in a precarious situation.
There are several reasons why consumers are choosing to abandon their vehicle loans. One prominent factor is the increased cost of living, which has put immense pressure on households’ finances. With rising prices in housing, education, healthcare, and daily essentials, individuals are finding it difficult to meet their loan obligations.
Another significant factor is the ease with which car loans were granted in recent years. Lenders have been offering lower credit standards and longer repayment terms to attract more customers. However, this lax lending has led to a sharp increase in borrowers who were not adequately qualified to handle the financial responsibility.
The COVID-19 pandemic has also played a role in exacerbating this issue. With widespread job losses, reduced working hours, and an overall economic downturn, many individuals have found themselves unable to make ends meet, let alone meet their car loan payments.
The consequences of consumers abandoning their car loans are far-reaching. Lenders are left with vehicles that hold significantly less value than the outstanding loan amounts. This situation, often referred to as being “upside down” on the loan, leads to losses for lenders when they attempt to sell the repossessed vehicles.
Additionally, the auto industry will undoubtedly suffer from consumers walking away from their loans. A decrease in car purchases and increasing levels of repossessed vehicles will have a detrimental effect on both automakers and dealerships. This, in turn, could result in job losses within the industry, adding yet another blow to the already struggling economy.
It is vital that policymakers and financial institutions take immediate action to address this issue. Implementing stronger lending criteria can help ensure that loans are only approved for those who truly have the means to repay them. Increased financial literacy education could also play a vital role in helping consumers make informed decisions about their finances.
Furthermore, assistance programs can be created to aid struggling individuals in managing their loan payments during times of economic instability. Working with borrowers to restructure their loans or offer temporary payment relief options could be instrumental in preventing widespread loan abandonments.
The ongoing trend of consumers abandoning their car loans is undeniably concerning. It not only highlights the challenges faced by individuals in a challenging economic climate but also raises questions about the overall stability of the economy. Immediate action is necessary to prevent this situation from spiraling further out of control, and a collaborative effort between all relevant stakeholders is imperative to prevent further repercussions.
What happened to putting 20% down on the agreed price after trade in?
Most cars and trucks are about $10k over priced for the new market. Now large SUVs are at least $30k over priced but until people stop paying these crazy prices for them the market will not change. I don't under stand why banks are financing these crazy prices and allowing buyers to keep burying dead equity into another over priced vehicle.
Great buys for dealers!!
Is that a vintage Heuer Autavia on Ray’s wrist?
So how much longer before dealers are going to have to bring down there prices on new cars and trucks and when will the late model car price coming down my vehicles are paid for years before they were suppose to be and patiently waiting for awesome deals on higher valued cars and trucks that I wanted more than the nice ones I have now
Goofy
Any body I know? Probably. Was in LA. 2 days ago auction lot was running over
Great video, all very Factual and very accurate.
Have fun in Ventnor ! … I love it there … hopefully this rain clears sooner then later !
Federal Reserve is tring to kill America's best economy in 40 years. By raising interest rates the Fed is breaking the back of any business that has floorplan inventory. This will kill the car industry, housing market, and so much more. People can't pay their high interest loans because of high interest rates.
Great recession??? You mean in the 1970s. If you mean 2007/8 then please get real. That was a down turn, possibly a recession but much milder than the 1970s disasters. You may have a point but exaggerating like mad undermines your argument.
Does this mean in 5 years we will actually be able to buy a car without being ripped off? I gave up and quit looking.
Worse than the great depression because back then people had some pride. Today? Meh!
Great show. Ray and Zach. Love pop's advise!
Wow, how do people let themselves get into a mess like this? Do they not have a voice of reason in their lives? There are used cars that cost less than a single payment for some of these loans. Why?
Food or car loan?? Yeah.
While I'm now 20+ years removed from automotive retail/mgmt, this situation has gotten out of hand. The ability finance a car with crazy LTVs like this just shows how greedy and short sided dealers and banks have gotten. This will bite them hard as they lose customers over crazy dealer mark ups. Your insight to the process is great.
Love watching you guys!
Lenders are tightening their credit requirements again. I had a cpl try and finance a 15k $ truck from me yesterday. Both had decent credit scores and jobs. They were denied by 2 different banks because they didn't have any money to put down. A few months ago, there wouldn't have been any problem with them obtaining a loan with no skin in the game.
We supposed to feel bad for consumers who paid 75k for a Kia Telluride
And consumers default on their loan, banks and repo company hire me to find the vehicle. So yeah, I guess, lol. I guess I'm in a recession proof industry.
In 2004 I use to think 300-400 monthly car payments were high, now look at 700 to 1500 monthly car payments smh.
Stupity is costly.
Guys, people aren't abandoning their car loans because they can't afford them. They're abandoning their car loans because once they decide that they want a new car they find themselves upside down in their car's value. Then rather than pay the deficit, they purchase the next car while still in good standing with the previous car loan. Once the paperwork goes through for the new car, debtors abandon their previous responsibility, destroying their own credit all for the sake of driving a new model complete with new ridiculously high payments. Given enough time, the injury to their credit falls off the record. Subsequently the whole process starts anew.
When people have to start paying back their college loans after the 3 yr deferment I anticipate a big change in car buying/selling.
The bank shouldn't be loaning more than the value of the vehicle ONE YEAR from purchase.
I am 59. I have never borrowed money to buy a car.
The biggest expenses with a car are the depreciation and interest repayments.
I bought my current everyday driver 4 months ago for $2500. Spent $5000 on it. I expect to get 10 years reliable motoring out of it with only routine maintenance. (budget $1500 per year)
This is a fraction of buying new.
In the end, home prices will drop. Take a look at how much the new mortgage rates have impacted the average mortgage payments. To that, we may add the worsening economy and stricter mortgage regulations. The current rate of growth in the US real estate market is 13% How long it will be until the market returns to normal, I can't say…SMH
Its like the cable guy said, sometimes yah gatta reck them to psy for them.
Insurance is out of control.
Well, banks loaned more thinking they could repo and unload those cars for full value because used cars were just comming off a market on fire. That market has now come back to burn them.
Vulture financing.
Ah, but there is no money left over.
The tighter the job market the more loan defaults. The more inflation, the more loan defaults.
But! For Seniors, those living on SS, they can not get a loan. Seniors are driving rat traps. This keeps Seniors out of the job market as well.