Will Underwater Loans Sink The Auto Industry?
Hello! It's podcast time yet again!
This week, we discuss upside down/underwater car loans with Edmund's Ivan Drury. We also chat about glass cleaner and NASCAR's regular-season finale with TTAC contributor Matthew Guy.
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We thank Ivan Drury and Matthew Guy for their time, and we thank Matt Posky for editing. Most of all, we thank you for listening!
We’ll see you next time!
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Tim Healey grew up around the auto-parts business and has always had a love for cars — his parents joke his first word was “‘Vette”. Despite this, he wanted to pursue a career in sports writing but he ended up falling semi-accidentally into the automotive-journalism industry, first at Consumer Guide Automotive and later at Web2Carz.com. He also worked as an industry analyst at Mintel Group and freelanced for About.com, CarFax, Vehix.com, High Gear Media, Torque News, FutureCar.com, Cars.com, among others, and of course Vertical Scope sites such as AutoGuide.com, Off-Road.com, and HybridCars.com. He’s an urbanite and as such, doesn’t need a daily driver, but if he had one, it would be compact, sporty, and have a manual transmission.
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Nope it won't. The industry will be fine as it always is. They may get some form of bailout if it gets too rough, which is unfortunate, because the banks should have to feel the pain. I have zero sympathy for people who are dumb enough to take on too much car loan. I have zero sympathy for the banks that write these risky loans. Repo men are gonna be making bank though, and that's great for them. As was stated in another comment: the automakers and dealers already got their money from the idiots borrowing more than they can afford, the worst that will happen for either of them is a slowdown in new car sales. But with all the repos hitting the used market, the dealers will make up the difference. The automakers will do what they always do during a slowdown, they'll idle a plant or two for a couple months until things blow over, then business as usual.
Unfortunately what will also happen is the idiots who took loans they couldn't possibly afford will continue their bad behavior. Because no matter how bad their credit gets, there will always be some sheisty bank willing to write a loan for them.
I live in a Southern California suburb, we have a mix of mostly single-family homes and some apartments/condo buildings. the average car in the apartments is nicer than the ones parked outside those single-family homes, it is obvious there are 2 main camps...
1- Pay a slightly lower rent and drive a performance sportscar or a big and flashy SUV.
2- Pay a mortgage a bit higher than rent and drive an older car of any brand...but build equity on a house.