By: Klon Perez Updated 13 Apr 2022, 03: 45 pm EDT
Buying a car today, with a pandemic and a war in Europe that has put many supply chains in doubt, can be difficult. There are currently shortages of some products that generate long waiting times for car buyers.
Consumer Reports, an American magazine dedicated to research and unbiased product testing, has been tasked with collecting data on nearly a million auto loans in recent months.
This research was done around 10 major auto lenders. What was discovered is worrying and will force those who want to have financing to take precautions.
The prices of new cars have increased in recent months in the United States and the world, but that is not the only reason why the payment monthly average of a car has increased to $ 568 dollars, which represents a 13 % more than a decade ago.
What is happening is that there is no good monitoring of credit practices. According to Consumer Reports (CR), the auto loan industry operates in a “regulatory swamp” and this results in many consumers being trapped in high-risk loans. risks with interest rates almost impossible to pay.
The total amount of debt of Americans was estimated a few months ago at $1.4 trillion dollars and part of that is that CR calls “financial sinks” with long-term car loans with such high interest that they end up being a disaster for those who are “beneficiaries”.
In the most striking cases, there are clients who end up paying up to 25 % in annual interest rates, but even a 19 % means that you are paying much more than the price that truly corresponds to the car
One of the most troubling examples CR has placed in his investigation is the case of a Texas customer who purchased a new Chevrolet Suburban with a loan. This buyer ended up paying at 13.55 % with a monthly payment of $1,628 for more than six years, resulting in a total payment of $ 150,000 for a vehicle with a value of $ 45,148 Dollars.
This type of figures makes it not seem strange at all that in 2021 near to 10 % of people in the US with a car loan have been late more than 71 days. In most of these cases, buyers owed more on the loan than on the cost of the vehicle.
The truth is that in many cases even those with less income end up paying higher interest than someone with a higher credit limit. The justification of some lenders is the risk that someone who has less income will not pay.
Therefore, before entering into a financing plan, you must read all the fine print and, if possible, obtain legal advice.
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