Auto Loans: The Next Subprime Crisis?

The U.S Subprime Housing crisis in the late 2000s dealt a huge blow to the national and world economy. Fast forward to 2014 and some are saying that a new subprime crisis is on it’s way, in the retail automotive industry.

The New York Times did an in depth piece on the potential for an auto industry loan crisis. They highlighted borrowers who couldn’t afford their loans, however, they also looked deeper into what may make individuals with bad credit continually take on car loans that they cannot afford. The piece claims that low credit borrowers are targeted and charged “legal loanshark” rates. However, these individuals weren’t forced to apply for loans, thus who’s at fault if they get approved?

One bankruptcy attorney who commented on the story revealed that his clients who had already filed for bankruptcy, been through foreclosure and repossession, still received auto loan applications in the mail.

The question for dealers out there is whether or not dealerships that advertise to a lower credit crowd are contributing to a potential auto loan credit crisis. The answer, as always, is up to you.