Are Car Loans the Next Big Forgiveness

Americans are drowning in auto loan debt, delinquencies, defaults and repossessions.

Cars are more expensive than ever, according to a Consumer Federation of America report. The average vehicle now sells for nearly $50,000, and almost 20% of new car buyers are paying $1,000+ per month. Twenty percent of those loans are for seven years. Naturally, I did the math. The full $50k, over 84 months, at 7.5%... equals $766 per month. Considering a down-payment is required, a $1,000 monthly payment would equate to a very expensive vehicle.

A seven-year loan is three more years than the standard loan of three decades ago. The longer the loan, the more you pay in interest. In the above example, the interest adds $14,420 to the cost, or an additional 28%.

Americans owe more than $1.66 trillion in auto debt and – wait for it – a “crisis”, is happening as our alleged federal watchdogs have supposedly reduced oversight and enforcement of predatory practices in the auto market.

I can see it now! I can almost guarantee it will happen eventually. Car payment loan forgiveness - just like educational loan forgiveness. There no doubt in my mind since American citizens no longer seem to be held responsible for their own bad decisions.

CFA is sending the report to members of Congress, calling for an end to "exploitative practices," such as interest-rate kickbacks, in which dealers and lenders allegedly conspire to secretly inflate interest rates and share in the extra profits. We don’t need more protections. There are plenty.

What we need is smarter consumers. However, because America has been dumbed down over the last few decades, few of those exist. Let me make it easy with three simple rules.

Rule #1: Never buy what you can’t afford. That’s a lost concept. Everyone wants the best of everything, even if only earning a small paycheck. Settling for less is not evil or degrading. It’s smart.

Rule #2: Banks will usually give you better rates than a car dealer. (A dealer wanted to charge my friend 5.9% for six years on a one-year-old car. My friend told him he could get 4.1% at his bank [not a bluff]. The dealer matched it. He then proceeded to pay the car off in four years because he followed rule #1.

Rule #3: Always ask about all fees involved and NEVER SIGN ANYTHING without a full understanding of what you are signing. Yes, read it – or get a lawyer to do so. We're talking tens of thousands of dollars.

The report claims the Consumer Finance Protection Bureau is receiving record high numbers of complaints about auto loans. I can’t help but wonder, what percentage of those are because of consumer’s lack of financial skills? Based on the number of delinquent education loans to those who couldn’t afford them, my guess is the percentage is rather high.

Perhaps if schools worried more about teaching life’s necessities instead of multi-culturalism and inclusion, this country wouldn’t be so financially inept and begging Congress to be their life-long Nanny.

Source used: Ars Technica