Consumer Car Buying Advice Blog

Will consumers continue to shy away from making major purchases even as auto lenders broaden their scope and manufacturers pour thousands into rebates

If no news is good news I’m ready to turn off the TV

The offices of Auto Credit Express are located in a suburb just north of Detroit. Since we live in Michigan, most of us here have been involved in a recession since 2005. As such, we have, with some success, managed to maintain an attitude of optimism for much of that time. But as the nation has followed the auto industry down the slippery slope of recession, the difficulty in maintaining that attitude has increased.

A recent article penned by Christopher Scinta of Bloomberg News pointed out that personal bankruptcy filings in January were up 34% - up by more than a third over last year and outpacing those in December by 4.5%. The article also pointed out that the American Bankruptcy Institute expects more than 1.4 million consumers will file for bankruptcy in 2009 versus 1.06 million in 2008 and 801,840 in 2007.

Auto Lenders Respond

The automakers, for their part, have been fighting valiantly to stem the sales slide that began in the second half of 2008. Less than two days after the Treasury Department approved $6 billion in loans to prop up GMAC, General Motors announced a lowering of its minimum credit threshold (FICO score) and 0% financing for its most qualified customers. Two weeks later, Chrysler’s financing arm received $1.5 billion and it, too, sought to stoke the fire.

At the end of January, all either company had to show for its efforts was a further drop in sales. GM’s sales fell by 48.8 % and Chrysler was down by 55%.

Loss in consumer confidence

Clearly, both companies, as well as the rest of the auto industry, are running out of options at this point. In January, the Conference Board’s confidence index fell to its lowest level since monthly records began in 1967.

Auto lenders up against the wall

Worries about job security and falling home values continue to plague consumers even as many lenders continue to offer 0% finance rates and automakers offer rebates. Short of lowering their credit score thresholds even further, a perilous move in these volatile economic times, lenders are also finding themselves up against the wall.

At this point in time, it seems that the only solution to the problem is an economic recovery – something that promises to be very slow and, for most Americans, very painful.

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