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Cheap Auto Loans--Is Now the Time to Act?

[Jul 5, 2010.]

 

Auto Loans and the Economy

Many Americans had to sit out the last recession with old, unreliable cars simply because auto loans became rarer than President Obama fans at a Tea Party rally. Now, some economists are predicting a double dip recession, which could mean that those who haven't yet traded in their old jalopies might be stuck with them for years to come.

One such economist is Vahan Janjigian who wrote for Forbes July 1:

A few months ago, it was a faux pas to talk of a double dip recession. Today, it is de rigueur. A double dip is by no means a certainty, yet the odds are certainly growing in its favor.

Car Sales Down

In what just might turn out to be one of the first signs of this possible recession's impact on the light vehicles market, car sales were down last month. MarketWatch reported that total sales nationwide fell 4.7 percent in June.

That brings the seasonally adjusted annual rate rate of sales down to 11.08 million, a low last seen in February.

Auto Loans and Car Dealers

According to the July edition of the New Yorker, there are currently about $850 billion in auto loans in this country, and about 80 percent of them were brokered by car dealers. That's an amazingly high proportion, especially when you consider the scams and gouging that consumer groups accuse some dealers of perpetrating. The New Yorker piece went on to list just three of these practices, and arguably picked some of the mildest:

  1. Accepting incentive payments for pushing a borrower to a particular lender
  2. Using financing as a way to add on extra fees
  3. Charging borrowers a higher rate than than the lender demands, and then keeping the difference

The Center for Responsible Lending calculates that that third practice alone costs American consumers about $20 billion (yes, that should read billion) a year. And it describes a scam (to use its word) that the New Yorker didn't mention:

"Yo yo" sales use classic bait-and-switch scams. Car dealers change the financing terms after the buyer has already taken possession of the car. After hearing that "the financing fell through," the buyer is forced to return the car and renegotiate the contract.

Cheap Auto Loans Now

Someone once said: "Economists were invented to make astrologers look good." And we've certainly seen in recent years just how poor some of their forecasts can be.

So it could be a mistake to act too hastily in anticipation of a double dip recession that may never happen. But if you want to change your car anyway, now could be a good time. And you can avoid any risk of dealer scams by finding auto loans--regardless of your credit--here.

 

About Author:

Peter Andrew has been writing about -- and for -- business for more than two decades. For the last couple of years, he has found himself increasingly specializing in the U.S. financial sector.

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