Economic Impact, Financial, Business, L6s

We love our cars! No matter what, Americans have a visceral need to hit the open road. Why has public transportation in America not caught up with or exceeded the systems in Europe and Asia? If you have travelled outside of the US, you will quickly find the ease and availability of public transportation available at an affordable price. There are many opinions why there is such a disparity.  Now, we see that Americans are ‘hitting the wall’ and have just stopped making payments on their beloved vehicles.

Vehicle Ownership and Economics

Let’s skip through some of the basic of financial elements and get right to it. Financial indicators show that 6 million Americans are delinquent on their auto loans. That number terrifies financial experts and shows a negative economic impact. The trend is appearing in the sub-prime lending sector. Studies are revealing that the sub-prime market is ballooning in size, with outstanding loan balances at $280.2 billion, compared to $249.5 billion in 2007. Subprime loan originations hit $31.3 billion in the 3rd quarter, which was down from $33.6 billion in the 2nd quarter. It clearly indicates the subprime delinquency rate is increasing while the market is also ballooning in size. Most of the loans are 90 days or more delinquent. This has a significant economic impact.

Economic Impact and Outlook

Even though these indicators show major concerns in the subprime market, the prime market remains in balance. There are numerous factors for this disturbing trend. American incomes are falling below levels where they cannot pay their bills. When these stressed households were asked what debt they were most likely to default on, auto loans ranked third, behind credit cards and student debt.

Despite the dismal financial outlook, it is highly unlikely that Americans will stop buying their beloved automobiles, but figure out a way to finance them and make ends meet.

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