Delinquencies on Auto Loans Increase
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by: laurawilder
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A report released recently by TransUnion, one of the major credit reporting agencies in the U.S., showed that the delinquency rates for auto loans went up more than 17 percent in the 3rd quarter of 2008. That rate is up when compared to delinquencies on auto loans for the same time period of previous years. Edmunds.com estimated that delinquencies in auto loans would lead to over a million and a half car repossessions in 2008. The delinquency rates on auto loans are not surprising, given the recent increase in delinquency rates for credit cards and mortgage loan payments. Given the downturn in the economy, consumers in some situations are having to decide which payments they should make and which ones will have to wait. Auto loans will usually rank below mortgage payments, utility bills and groceries. It is not an easy choice, since most people in this country depend upon their cars to get to work and take care of everyday necessities. Mass transportation is not an option for most people, unless they live in a larger metropolitan areas. Cars are a necessity in most parts of this country and they are a big ticket item that many consumers use auto loans to purchase.
Not so long ago, people often saved up and bought a car with cash. The trend in easy financing and available credit of the past decade has made auto loans more acceptable and accessible. In many cases, someone could purchase a car with no down payment. In the wake of the credit crisis, though, lenders are tightening lending standards, requiring bigger down payments and offering fewer loans. The struggling car makers are offering some unprecedented discounts and financing offers to entice potential car buyers right now. The big question for consumers will be whether to purchase with cash or consider taking on auto loans.
The path of least resistance when purchasing a new car is to purchase it with cash. This allows you to be debt free. You also do not have to be concerned with owing more on a loan the car is worth. You do not have to send in monthly payments. You own the title from day one. Ideally, if you cannot pay for it in cash, you should save up until you can. If you have to take on auto loans, then know what you can afford in payments before you purchase. Do not purchase a car whose price is beyond your current financial means. Keep in mind that you will also have to pay for licensing, registration, insurance, maintenance and repairs on the car. Downsize to something more reasonable, if the payments will be tight for you. Do not let yourself be talked into purchasing something more expensive than your budget will allow, even if you have been approved for financing or auto loans for that amount. The loan and payments will be in your name. And you are the only one who knows what you can afford.
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