LJ: credit crunch affecting consumers yet?

[SteveDallas]

LJ... or anybody else who has thought.... why the hell would a bank lend somebody 115% of the price of a car? I mean, yeah, I'm sure they check the credit ratings they'll only give it to people who are good for it. But it just sounds like a bad move on the face of it.

[HungLikeJesus]

LJ gets the extra 15%.

[xoxoxoBruce]

.

[lumberjim]

Originally Posted by SteveDallas

LJ... or anybody else who has thought.... why the hell would a bank lend somebody 115% of the price of a car? I mean, yeah, I'm sure they check the credit ratings they'll only give it to people who are good for it. But it just sounds like a bad move on the face of it.

If you are a good risk, TD bank will actually lend 130% of retail value. why? because many people are carrying negative equity from one car to the next. Or they don't have liquid cash to put down to cover the tax and tags. They are in business to lend the money, so the more they can lend to customers that have demonstrated their reliability,the better..... and the safer that money is out there earning interest.

If you are sloppy about repaying your debts, or have limited ability to repay...they impose limits to mitigate their risk....such as max amount financed call backs, or payment ceiling stipulations. OR...they offset that risk with potential greater rewards....ie..higher interest rates. If they're going to have to call and remind you to pay, or initiate collection activities, they want to be compensated for that expense.

[xoxoxoBruce]

[Minx]

I've spent the last 4 months in Alice Springs,as a random sample, 2/3 of those I worked with were trying to get rid of their 4WD's.

Perth, WA - the Texas of Australia - is even seeing a decrease in the petrol guzzlers.

Credit Cards? Me too, at least once a week,some bank is trying to give me one. Or Amex or Diners Card.

[TheMercenary]

Thanks for that chart Bruce. I new it was bad but it is worse than I thought.

[HungLikeJesus]

Bruce, are those numbers US or worldwide?

[Sundae]

Got to be US

[xoxoxoBruce]

I think it's US, but can't swear to it.
I wonder how much of the drop is actually a shortage of money/credit by the consumers, vs nervousness about the news?

[ZenGum]

I saw a TV show last night that said in Britain, home mortgage applications are down 98% (!!!!!) on 12 months ago.

I think I heard that right. If I did, that means that section of the economy has basically stopped dead. Housing drives a lot of the economy. I hope I heard it wrong.

[tw]

In order to create more debtors, creditors need people to borrow money on disposable items such as couches, computers, and even cars. Nobody in their right mind borrows money on items that neither create wealth nor maintain value. And yet that is exactly what the rich need to maintain their creditor status - to get rich while everyone works more hours.

If you cannot afford the car, then you don't buy it. Creditors love it when the debtor also takes out a car loan. Means there will always be more debtors.

[Undertoad]

If you cannot afford the car, then you don't buy it.

If you need the car to drive to work to make money to buy the car, then you buy it.

A car is unique amongst things you buy on credit, because the car itself is collateral for the loan -- and, unlike everything else you buy on consumer credit, does not quickly lose value and can easily be moved to where it can be sold to cover the debt. (Because it has wheels.)

If you are uncertain about your ability to pay for it, you can buy "gap insurance" which LJ will explain to you in detail.

[tw]

Originally Posted by Undertoad

If you need the car to drive to work to make money to buy the car, then you buy it.

Or you take mass transit, or car pool, or move near to work, or get a job you can afford ... a car is not a necessity. Almost anyone can get a car without taking out loan. There are plenty of simple working cars for only a few $thousand - no car loan required.

Car loans keep creditors as creditors. Do you buy your clothes using a loan? Of course not. Those are also necessary for a job. But only a fool or the financially destitute take out loans for clothes.

They *need* the SUV? Therefore they need a car loan? Nonsense. This is how debtors remain debtors. To make it easier to remain a debtor - gap insurance? Just another bill to make it easier for a debtor to remain a debtor. To make it easier to finance a luxury car he does not need and cannot afford.

There are many solutions - all without car loans. The person who *needs* a car loan is typically so financially destitute as to be one step away from bankruptcy. No financially responsible person needs a car loan. But car loans are how to live fast today - while enriching the creditors and remaining a debtor.

Equally foolish are the many who will maintain a credit card balance so as to keep money in a savings account. Just another way to remain a debtor and just as foolish as taking out a car loan.

[slang]

Originally Posted by tw

Almost anyone can get a car without taking out loan. There are plenty of simple working cars for only a few $thousand - no car loan required.

I completely agree. That's disturbing.

What next? Something that Radar says that will make perfect sense too?