Jul 22, 2013
The car companies and banks are burying car buyers under a mountain of debt. The average length of time people are borrowing for new cars is now up to 65 months, or almost six years, according to Experian, a credit reporting company. And many new car loans are for eight, nine and even ten years!
Of these new car loans, about 25 per cent are considered “subprime.” That’s a higher share of subprime auto loans than in 2007, right before the financial crash. Buyers now stuck with these sub-prime loans are paying interest rates of up to 10 per cent for longer periods of time. Of course, the longer the loan, the higher the finance charges, thus guaranteeing fat profits for the banks and finance companies.
This growing debt has helped fuel the car companies’ renaissance. Not only are they selling almost twice as many cars as they did just four years ago – all the way up to an expected 16 million this year. But the average price they are getting for new cars – over $31,000 – is $3,000 higher than it was just four years ago.
Thus, at least for a time, the car companies, banks and finance companies are making huge profits, despite the lousy economy and high unemployment.
Sound familiar? By burying the consumer in increasing debt – not only are the capitalists sowing increasing misery, they are also laying the groundwork for a new debt crisis and financial collapse.