What homes have to do with cars
If you think the only connection between homes and cars is the garage, you're not considering the housing market's impact on lending.
Wachovia's economists write today that more people "are facing tougher financing terms for new and used vehicles" because the tighter lending standards for mortgages are finding their way to auto loans:
Auto lenders are competing for space on balance sheets at a time when nearly all lenders are becoming more cautious. As a result, lenders will make fewer and smaller loans, require higher credit scores and larger down payments. With greater constraint in auto financing and growing economic uncertainty, auto sales are weakening. ...Manufacturers and dealers are responding to today’s tougher operating environment by lengthening the terms of loans and offering more aggressive lease terms. The problem with longer loan maturities is that many potential buyers are already in a position where they owe more on their car than they can sell it for.
Comments
"....many potential buyers are already in a position where they owe more on their car than they can sell it for."
Owing more than it can sell for is the new American way. Easy credit allowed us to make up for falling wages or said differently less purchasing power, but this same easy credit also tomorrows money and used it today. Credit only allowed use to in-debt ourselves...now that easy credit is gone how will we make up for the lost purchasing power? Oh yeah, and pay back the credit? The middle class will be something our grandchildren read about in history books.
Posted by: Kevin | April 16, 2008 8:58 PM