Car owners fall behind on loan payments
The USA Today reports that "Car loans that were 60 days past due - and likely to soon go into default - were up 17% in the fourth quarter, says Experian Automotive credit tracking. And the share of loans 60 days past due is expected to be up 40% by December, compared with the share in December 2007, TransUnion Credit says."
Unlike home loans, there's nothing really particularly sad about people defaulting on car loans: It's just people making bad decisions and overextending themselves. In the fourth quarter of 2008, the average new car loan was $24,444 -- significantly more than is needed to get a set of wheels to get to work and drop the kids off at school.
When it comes to car loan defaults, here's what consumers need to know: Never take out a car loan unless you're just doing it to take advantage of a super-low interest rate while investing the money you would have spent on the car elsewhere. In other words, only buy a car that you could afford to pay for with cash. If that's a $3,000 car, then so be it.
I promise: That methodology will probably put you in a very different car than what most of your friends are driving but in the long run, you will be far, far richer for it.