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Cash Strapped Consumers Choosing Between Risk of Car Repossession and Foreclosure?

Well, apparently the credit card companies see some problems down the road if the economy continues to worsen, which is what is predicted. The Economic Stimulus Plan is of interest because consumer studies show that when consumers know they are going to get a check in the mail, they generally spend it three-times. That's right, studies show that consumers spend 3 times the amount of their refund checks from the IRS, and allot the reasoning for doing so, "because I am going to get a check in the mail!" scary yes, but it is true and this is a known thing.

This means that they will most likely try to charge things in advance knowing they will get this check in the mail. Credit Card companies are already trying to hedge their risks by tightening on credit, because they know that folks are already in over their heads, just like many homeowners are underwater. Now with credit card missed payments spiking upwards, the credit card companies have no choice but to cut people off, these consumers are addicted to spending.

repo man cometh!

Now the latest consumer credit research shows that car loan repos up 17% in last two years over all in some markets over 35%, which is highest in 10-years. Credit Card and Student Loans are also in default and with college students and those just out of school. Folks who get behind in credit cards end up with higher insurance rates also. This has many banks, economists and Think Tanks a little unnerved, the Online Think Tank stated, that they see some dark clouds for many consumers on the horizon and its time to pay the piper.

We already know what is going on in the housing markets with the glut of foreclosures driving down home prices. Another harsh indicator is in the small business sector. Small business loan requests down 14%, which means less new equipment being bought and very little expectation of growth, a good indicator of future unemployment figures, realize 75% of Americans are employed by small business. Many credit counselors are now saying that folks are trying to choose between car repossession, credit card cutoff and/or foreclosure. And that quite frankly has me a little concerned.

Posted by Lance Winslow on 02/24/2008 07:34 AM

Comments (7)

foreclosure or car repossession, credit card cut off and car loan failures, economic stimulus, irs refunds and retail sales, small business

7 Comments on Cash Strapped Consumers Choosing Between Risk of Car Repossession and Foreclosure?

FEB

2008

As car repo's rise I wonder if it will cause the price of used cars to drop....I guess if enough get repo-ed.

I'm afraid it's going to get uglier before it gets better. Rising crime stats are next.

Gary, Yes! I know when our company worked on contract to clean Auto-auction cars www.CarWashGuys.com that normally went to used car dealerships that even a little hick-up or increase in cars drastically changes the dynamics of the used car market. This has a cascading effect too, as those with newer cars trying to get out from under the payments cannot sell their cars easily, causing more repos. Its funny how similar the housing and car markets really are sometimes, but that is how indusrty sector rotations play out. Lance

Amanda, Yes! that is already happening too, for every 1% increase in forclosures, crime goes up statistically 2.4% and that means some areas are in for a real tough go of it. Worse, when foreclosures mount and economies tank regionally, there is less money in the budget for police to stop the crime, OUCH!:

http://www.lancewinslow.org/nmwp.shtml

http://activerain.com/blogsview/389554/More-Foreclosures-There-Goes

http://activerain.com/blogsview/390045/Will-Digital-Cameras-and

Lance, I know people that came to me too late that are selling their new cars short and buying something else for cash to free up money to make mortgage payments. They do not have the equity to refinance. If they can work out a deal, that is great, but I do not know if this is going to forstall forclosure. AJ

Lance, delusional overspending (enabled by ridiculously low interest rates) was the only thing propping up our new service economy. Unfortunately we're now coming to grips with our post-manufacturing reality.

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