How Wall Street's Woes Affect Car Shoppers

Usedsuvs

Unless you have Bill Gates’ credit history — or you are Bill Gates — you may have trouble getting a loan to buy a car these days, dealers say.

It isn’t the price of gas that’s keeping people from buying cars, automakers say, it’s car shoppers’ inability to get loans that’s making them leave showrooms empty-handed. Dealers confirm that theory as well.

Credit is tight, and banks that are already treading water from carrying too many high-risk mortgages are shying away from adding to their woes by making auto loans.

When Lehman Brothers, a huge investment banker in business since before the Civil War, filed for bankruptcy Monday, the credit troubles were magnified.

"Gas at $4 a gallon changed the type of vehicles people buy. The credit crunch, however, has changed their ability to buy,” said Bill Stasek, a Wheeling, Ill., Chevy dealer. “When they do get approved for a loan, sometimes it's for less money than they wanted."

"Some banks have stopped making loans for used cars, some for new cars, and some simply have stopped making any auto loans," said Paul Cook, general manager of Larry Roesch Chrysler-Jeep-Dodge in Elmhurst, Ill.

Banks are actually checking credit references on loan applications and are more particular about credit histories, one dealer said.

"When banks were making money on mortgages, they were willing to absorb some losses on car loans, but they're more stringent now,” said Mark Scarpelli, a Chevrolet dealer in Antioch, Ill. “If there's a bump or bruise on your credit history, the loan will be rejected.

"Some banks insist they haven't stopped giving auto loans, but they're charging such high interest they don't get any auto loan business."

Dealers admit losing sales because their customers couldn’t get loans, but they wouldn't say how many sales have been lost. General Motors marketing chief Mark LaNeve, however, says GM alone is losing up to 12,000 sales a month because of credit problems. Chrysler and Ford are suffering as well, though their numbers appear to be lower.

"We're absolutely losing sales from the credit-crunch challenge," Stasek said. "There are fewer sources willing to make a loan to those who aren't prime credit customers. If banks are willing, they're lending less money and demanding higher down payments than a year ago, and that costs us business."

Dealers say the most credit-worthy customers are having no trouble getting approved for a loan, but when they’re approved they find banks charging them higher interest rates than they were expecting— or willing — to pay.

If a customer can't get a loan from a local bank or savings and loan, an alternative is to use the automaker's captive financing subsidiary, like GMAC or Ford Motor Credit.

"The captives historically were more aggressive in giving loans, but they're as tight as banks now," one dealer said.

Also in danger are shoppers who are upside down on their trade-in, meaning they owe more than the car is worth. For many years, those shoppers would just roll the amount they owed into their new car purchase. Not anymore.

"Rolling over a loan has become very difficult," Scarpelli said. "Banks don't wants to advance more money on a new car when the lender is already upside down on the old one."

And what if you want to buy a big gas-guzzling SUV whose residual value is likely to continue falling over the life of your loan?

"Some banks have sent notice that if they make a loan it will only be on 85% of the invoice on a big SUV," Stasek said, so you should expect to pay more for your down payment.

By Jim Mateja | September 16, 2008 | Comments (8)

Comments 

Auto loan - I recently (2 days ago) went online to apply with my bank for an auto loan and within 10 seconds I was approved... granted, I have my mortgage, credit cards, checking and savings acct. with this bank and have never been late on any payments, but it was so easy... one would not think that we're in such a "credit crunch"

my credit is above average(710-720) and I have literally no money in my savings account but I still didn't experience any difficulty in getting a 15k loan for a used car.

Moral of the story - you never get what you don't ask for... I say, if you need a car - go to your bank first... Oh! - the interest rate for the loan is 7.6%...

To purchase your new vehicle, you'll need the right financing. Thousands of people apply for auto loans each year, whether through banks, credit unions, online lenders or the dealers themselves.

Rose.

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garcia

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Jerico

Use a smart process. My dad bought two cars and uses this process, http://excarsalesman.typepad.com/

Insurance companies can vary on the policy prices. Hence make sure to get a few quotes for gap car insurance for your used vehicle. Also don't forget to do the figures to make sure you need gap insurance for your used car.

http://crash456.blog.co.uk/2009/09/29/tips-on-car-insurance-for-used-cars-7061974/

Thanks a lot blogger for such a nice and informative post about car insurance in UK .For any parent one of the best ways of keeping motor insurance premiums down is to keep their kids off the policy. Whilst there are specialist motor insurance brokers who can get you the best premiums on the market.IIn order to get cheaper insurance, you need to know who to ask, often there are too many options and some of the contributory factors are beyond your control such as having a high risk job such as in entertainment or as a mini-cab driver. Other factors such as having an imported car can push up your insurance. This is why you need to use an independent broker with a telephone support line to guide your through the minefields.t is still going to be an expensive business getting cheap car insurance with a young driver on the policy.

Thanks for sharing. I didn't realize wall street was affecting car buyers in this way. I will keep my eye out for more information about this topic. I am very interested in Wall Street and the stock market.

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