Why a car at the top of this post, read on.
There has been a ton of coverage on the MSM about the number of "homeowners" (you really don't own it, the bank does) defaulting or getting two or more months behind on payment.
The big question seems to be, who is to blame, the company that lent them the money, or the guy who was probably pretty sure it was going to be tough making the payments, particularly if interest rates started to creep up.
I can use something that happened in my life to illustrate what happened with these loans.
Shortly after I started working full time, I decided I wanted, not really needed, a new car. My rent was ridiculously low, I was single and I had no debt hanging around. The Porsche 924 just came out and I thought this was the hottest car since the '65 Stingray. (I also learned, don't just go by how a car looks, but that's another story.) My trade-in (another mistake), a 1976 TR-7 was in mediocre shape so I didn't bring the out-the-door cost down much.
The final numbers worked out that it would cost me about $600/month. That was more that two weeks wages back then. I still had to by insurance, gas, registration and all those other "little" things you don't think about when you are in love....and food, utilities and maybe be able to go someplace in that cool new car.
Needless to say, after a year I was already behind and the car got repo'd. In this case it was early enough in my life that I just said goodbye to the car The fact I was disappointed in buying a fancy body on an Audi frame with a "Premiere" name made it easy.
What it boiled down to was I knew deep down from the get-go it would be almost impoosible to make the payments, and the company (thanks GMAC) knew it too.
I now pay cash for damn near everything. I have one credit card with a $1500 limit that I use for emergencies, real ones, not "I have to have a 72" HDTV for the Super bowl next week". It gets used for big ticket items like new refrigerators. only. The credit company always wants to raise the limit, but I decline. If they want me to use it more, lower the interest rate.
One of my close friends worked at a bank as a loan officer and always used my saga as benchmark for approving loans. If the deal looked wobbly over the long run, he squelched it. I've always felt that because of that, I may have saved others from screwing up like I did.
In the end, you had someone trying to take on debt they weren't ready to handle, and a company that saw a slight chance on profit with no concern for how it would affect the poor schmuck if they failed.
They both were wrong, but I shift more of the blame onto the lender, they should be the adults in this situation. Saying no to someone may hurt for a bit, but if they are better off in the long run, you've save them years of grief.
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