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Seems like a great recipe for another loan bubble. People owing more on their cars then they are worth, then defaulting.
by odonnellryan 9y ago
Seems like a great recipe for another loan bubble.
People owing more on their cars then they are worth, then defaulting.
- jeffdavis 9y agoI think there needs to be some other factor to really drive a bubble, like a subsidy or a government that absorbs all the risk without watching it. This just seems like a cycle. The traditional car industry is in a slump. Defaults will happen. All normal.
- sjg007 9y agoCash for clunkers was a subsidy of sorts.
- sjg007 9y agoIt's definitely a dynamical system. There is a limit to the new car's price due to used cars (both availability as a function of increased reliability, exchangeability and the economy), leases [a bet on the future], the competition, as well as transactional costs and don't forget interest rates. So if you own a car manufacturer what do you do? :)
- aianus 9y ago> People owing more on their cars then they are worth, then defaulting. I read somewhere that car loans are some of the safest secured loans for lenders. People will skimp on food, rent, and everything else before they default on their car.
- Infinitesimus 9y agoHouse loans were also pretty secure at some point and we all know how that story went
- nradov 9y agoIt's not really comparable. Most people need a car to get to work, or even look for work. You can sleep in your car but you can't drive your house. So they really will default on the car payment last.
- justin66 9y agoCar loans are safe for lenders (and therefore pretty cheap) largely because repossession is simple and easy, in both a practical and legal sense.