Installment Loans May Be the Answer in a Struggling Economy

The Auto Industry

Installment loans are remaining staples in budgeting as the economy struggles. One indicator of how the economy is doing can be seen by watching the auto industry. On average, Americans purchased 16 million cars yearly for the past decade. In 2009 the projection is that only 10 million will be sold. The big car manufacturers are all suffering. Here are some startling statistics on two auto manufacturers alone: Chrysler filed for bankruptcy and GM is cutting 2,600 dealers and eliminating or selling Pontiac, Hummer, Saturn and Saab. With these two industry giants struggling, it’s no wonder the American public is flailing for help through the economy.

There are some basic policies car manufacturers have to come to terms with should they turn their industry around.

1. In the past, car sales grew faster than the population. This is because urban sprawl brought the need for 2 vehicles per household. Now those numbers are evening out because the US can’t keep at that pace forever. It’s estimated there are 200 million drivers on the road and already 250 million cars in American driveways. It’s foolish to think that the sales of cars will remain the same, especially because of the disparity.
2. A lot of the past popularity with car sales can be attributed to the “keeping up with the Joneses” mentality. Urban sprawl also brought about competition between neighbors. With a driveway a few feet away, many urbanites wanted to have the same, or better, vehicle than people next to them. It’s foolish to think this will last, particularly in a recessive economy. People everywhere are in financial straits and a new car is the last thing they are looking to purchase.
3. The car business has been on a decline since the 60s. In particular the profit and loss statements of GM from 2005-2007 were all in the red. Most revenues come from lending, and not from manufacturing or sales of vehicles. It’s beneficial to take a good honest look at the numbers and realize that with the number of cars being manufactured, a loss is sure to be a reality sooner or later.

When industry giants are facing bankruptcy, it’s no wonder that the American public is under the same financial strains. Some consumers are relying on family loans, installment loans or credit cards to get them through to the next payday.

The future

So what does the auto industry’s future hold? No one knows for sure, but it seems like the cars that are truly holding on in sales are small, efficient cars and hybrids. People also are keeping their cars for longer periods of time. In 2000 people kept their cars on average for just 39 months. Recent years have shown that people are now keeping their vehicles for more than 50. Janice Ianne of Maplewood Minnesota stated, “We used to love buying a new car every two years, for both me and my husband. Now that’s a long-gone luxury we just can’t afford.” Ianne is not alone as most Americans are following suit, preferring to repair sturdy cars than purchase new ones.

Evolution

Hopefully the auto industry will move through an evolution where only the strongest survive and in the end, flourish. Until then, it’s up to the American people to continue their reliance on wise decision-making policies, additional funding such as installment loans, and each other for solace.