Car loans and the current financial crisis
Posted by Mike Sylvester - 10/2/08 @ 10:44 am - Filed Under National Politics
Pretty much every financial expert I have talked to or whose articles I read feel that there is too much debt in the US economy. This is something I have blogged about for years. The US Economy is a “house of cards” built on debt.
Much of this debt is incurred to purchase a house, to purchase one or more cars, or to purchase various items on high interest rate credit cards.
If the current financial crisis has taught us anything, it should be that as a nation we have too much debt.
Sadly, that is not the message we are getting from the majority of our politicians in Washington DC. Rather they are saying that they want to “loosen up” the credit markets so Americans can continue to go out and secure loans that they often cannot afford.
Anyone with GOOD credit can secure a loan today with no problem! Please call a local bank or car dealership and they will certainly extend you credit if you are a good credit risk.
Reuters has a story that you should take the time to read, it discusses the drop in new car sales in September.
The political “herd” in Washington DC is doing their best to convince the public that we have to restore the credit markets so that lending institutions will continue to loan vast sums of money to Americans. Their arguments center around their opinions that:
- If Americans do not continue to purchase goods (Which they must borrow money in order to do) then many portions of the US economy will contract. For example if Americans purchase fewer new cars then the automobile industry will contract since Americans are purchasing fewer new cars. Note that I agree that this will happen, it is what SHOULD happen.
- They argue that many American companies need to borrow money in order to make payroll, purchase inventory, to maintain their current operations, and to expand their business. Unfortunately this is true; however, it is a sad state of affairs when a company has to borrow money to make their payroll. Companies have expanded too fast and have taken out too much debt in my opinion.
In summary here is Washington’s solution to the current financial crisis: The taxpayers will be forced to directly subsidize the banks and “bail them out” so that they can continue to make bad loans.
Instead what should happen is we should allow the economy to correct and we should allow the free market to “teach” people to borrow less money. Then we should repeal the bad Congressional mandates that lowered the lending standards.
Unless you live in a city with a great mass transit system like New York most Americans need a car. In fact, most households need multiple cars. My family has two cars. Cars are often the second largest purchase that most Americans make.
Believe it or not the average price of a new car in the United States is around $28,000 each.
Per the Reuters story, 12.5 million new cars were sold in the last twelve months and that is way down. Per the Reuters story last September 90% of car loans were approved at the largest US auto dealership group and this year it dropped to 60%.
Good. That is want we should want to happen. We need Americans to “tighten their belts” and we need our financial institutions to stop loaning money to people with poor credit.
THose Americans who are turned down when they are trying to purchase a new car they cannot afford should instead go and and purchase a used car. Americans do not have “the right” to purchase a new car.
Congress is out of control.
I highly suggest that you vote for fresh faces this year!
Mike Sylvester
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3 Responses to “Car loans and the current financial crisis”
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Mike …you are SO right on this.
And it’s all because some lending agencies could NOT just say “no”.
Sounds like a lot of parents these days too.
No wonder we have a generation as dysfunctional (financially and educationally-speaking) as we do.
Wonder what happens when the “old guard” passes away?
One the good side, if it all does go down the crapper, we won’t be around to witness it.
I’d like to think we’re in the running for a much better legacy as a nation.
B.G.
An excellent blog. American industry, government AND the American public needs to step back and move to “within their means”. We seem to have fallen for every advertizing gimic that comes down the line. A cell phone in every pocket, GPS in every car to direct us to the grocery, $2000 patio sets and hot tubs. “No payments’till 2010″. AND Congress has fallen for the same line. Pork in every bill including the so-called “rescue”.
Bob G. is right.”we won’t be around to witness it”. But our kids and grand-kids will spend most of their lives paying for it. And, they better learn to speak Chinese!
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