Defaults Newest Financial Meltdown, Auto loans

Auto payment defaults doubled last year and are expected to get worse. It is another financial meltdown waiting to happen similar to the crisis in the home mortgage industry, according to one consumer group. A CBS 5 ConsumerWatch investigation has found consumers locked into cars they cannot afford.

Vivian Snyder has strong credit and is not classified as subprime, but she is one of many consumers who can't afford the car she leased. Snyder drives a brand new convertible BMW with a MSRP listed at approximately $100,000.

Most consumers can't afford it, and neither can Vivian. That's because the monthly lease payment is $1,300. It eats up half her income which is a $2,500 disability check.

Martha McKinley, a spokesperson with BMW Financial Services, said, "We have investigated this matter internally, and we are satisfied that BMW Financial Services acted appropriately at all times during the application and credit review process."

Vivian has only a few options. She can plead with the finance company to release her from the lease or have the car repossessed, losing her good credit and a $30,000 down payment which consisted of her entire retirement savings.

"I'm greatly embarrassed," Vivian said. "I should have looked over the contract better."

http://cbs5.com/local/auto.loan.defaults.2.645976.html

She shouldn't have been driving a $100,000 car while on disability anyway. She should be embarrassed, she's an idiot.

Definitely an idiot. That's the sort of person it takes to put their entire retirement savings off as a down payment on a car they can't afford anyway.

That said, I don't think that this will be nearly as big a deal as the home mortgage thing. For one thing, cars are cheaper to buy initially, as I don't think there are anywhere near as many people getting equity loans on their cars as did with their houses.

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Originally Posted by pgengler

That said, I don't think that this will be nearly as big a deal as the home mortgage thing. For one thing, cars are cheaper to buy initially, as I don't think there are anywhere near as many people getting equity loans on their cars as did with their houses.

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There also isn't the risk of banks losing billions of dollars on bad car loans...if the bank repossesses your car, there's no risk that they can't resell it and get their money. With housing, there are supply-and-demand issues that might make it hard for the bank to resell a foreclosed house.

This woman is an moron... I know tons of people who are driving expesive cars that they can't afford. My one friend has a used BMW 5 series paying 800 a month for it and has been trying to sell it for 2 years now, he's stuck. He made fun of me when I got my Nissan Altima but my payments are all up to date and I can afford the car. I have another firend who had to get a second job to pay for his MB, another zipper head who laughed when I got my Nissan...who's laughing now?

Hell I'd love to get a Q45 but the fact is I can't afford it! Once my car is paid off I'm keeping it until the dam engine falls out. These people just amaze me...they are either house poor or car poor.

Hearing this woman talk she clearly isn't all there, which is probably related to her disability status. I kinda feel bad for her.

Yes, there are a lot of people who are dumb and buy cars they can't afford, but this is a bad example because: a.) it looks pretty clear that the dealer committed outright fraud; b.) a lease isn't exactly the same thing as a loan; c.) this woman is a few crayons short of a Crayola 64-pack with sharpener.