Consumers Are Using Installment Loans To Buy Cars
Consumers are once again turning to installment loans as they move back into car-buying mode. Throughout the recession, many people have put off purchases of big-ticket items such as cars and homes. Dealers all over were feeling the crunch of the economy as many people fell into the unemployment lines and struggled financially to get by. The car-buying industry as a whole saw a decline of 40 percent in purchases, down to 10 million vehicles a year. The buying drought is part of what caused GM and Chrysler to file for bankruptcy this year.
Fortunately, data is showing that the car market is on the upswing. This week Ford Motor Company reported a 24 percent drop in sales for last month, but a 20 percent increase in sales this month. And GM sales are up 11 percent from last month. Auto industry analyst Ken Elias confirmed, “We’re off the bottom. … People will want new cars because they have deferred purchasing a car since last fall. We think it’s a positive sign for U.S. automakers.”
Despite the good news
The country is still regrouping from the recession. There is still a rise in unemployment and a rise in foreclosures. Add to that the banking and lending industries still being tight-fisted about lending and there is a lot more for the economy to sort out before it returns to normal.
Experts insist that despite the bad news still lingering, there are good things to keep in mind:
- Consumers seem to have confidence in the small signs of economic growth
- There are signs the economy is bottoming out
- Stocks are on the upswing
- Demands for cars was put on hold, making people eager to buy
- Applications for installment loans are on the rise
Karl Bauer, editor of Edmunds.com, stated, “There are more people looking at and seriously researching new car purchases. … There’s a sense among a lot of people that we’ve hit bottom and the economy will be coming back.” Bauer cites Edmunds.com increased traffic as proof that the car-buying public is eager to buy. Data has shown that increased traffic to the web site normally signals an increase in actual sales within 30-90 days.
Analysts are hopeful that there will be a rush in car-buying activity due to the long hiatus. Bauer confirmed, “You could see a pretty strong surge back into the showroom because sales have been so low and people haven’t been buying for so long.”
However, VP for JD Power and Associates Gary Dilts added, “Credit is key to any sales recovery, and there’s only been a slight improvement in credit availability so far.”
Credit and car buying
Many impatient buyers are looking to installment loans as a way to help fund the down payments of their car purchases. Installment loans can be quick and simple for qualified buyers and their structures are easy to manage. With this type of lending available, there may be hope for the car- buying industry sooner.
Without big banks returning to normal lending policies, consumers may have to rely on alternative options for funding. Despite the credit issues, eager buyers may very well be the ones who pull the car-buying industry back to its normal selling rate.