What Is Happening
Car loans are going bad at an alarming rate, according to a recent report by the Federal Reserve Bank of New York. About 7 million car loans are seriously delinquent. That’s about 1 million more car loans than at the height of the great recession!!
Average new car prices and loan payments have been increasing steadily for the past five years, hitting $37,000 last month, according to Kelley Blue Book. Loan payments averaged $550 per month last year.
Does It Really Matter Why?
Explanations involve higher interest rates, a bad economy, and many other factors. But we don’t need the economic reasons to understand the problem.
Car loans are longer and have higher monthly payments than ever before.
Almost a half of all cars traded in have more owed on them than what they are worth.
What To Do
You might have already decided that your car payments are just too much. If the payments are one-half or more of your rent or mortgage payment, they are probably too high.
But almost all of us need our own transportation. We do not live in an area with good mass transit.
You might consider a “strategic” default. This is where you voluntarily surrender your car to the lender.
First Question: What will you do for transportation? You may not need daily transportation. If you’re lucky, you have a friend or family member who can give you rides or lend you a vehicle. But, usually, you’ll need your own vehicle. You then might have to settle for a high interest loan or a buy-here, pay-here car lot.
Next Question: What will you do about the“deficiency.” After the lender has sold your vehicle at wholesale auction, they’ll come after you for the amount they did not get out of the sale. This is called the “deficiency.” You may need to file bankruptcy to avoid a wage garnishment. You may benefit from other legal maneuvers and be able to avoid bankruptcy (check with me about this option).
Summary
YOU ARE NOT ALONE if your car payments are too high, you’ve already had to let it go back, or it’s just not worth what you owe on it. Sometimes people have to get out from under a car payment. Sometimes, the hardest part is finding alternate transportation. If you are in this situation, you can often benefit from a free consultation with me. I’d be glad to see if I can help!!
For over 35 years, listening to clients and putting them at ease, while finding solutions and helping achieve future goals, in Marion County, Lake County. Citrus County, Sumter County, and The Villages.
