New cars that are fully loaded — with debt - Los Angeles Times

New cars that are fully loaded — with debt - Los Angeles Times: "When Jennifer and Bobby Post traded in their 2001 Chevy Suburban last year for a shiny new Ford F-350 turbo diesel with an extended cab, it seemed like a great deal. Even though they still owed $9,500 on their SUV after the trade-in value, they didn't have to put a penny down.

The dealership, near the Posts' home in Victorville, made it easy; it just added the old debt to the price of the new truck and gave the couple a seven-year, $44,276 loan.

The Posts were a little worried about taking on such a long obligation, but they couldn't pass up a monthly payment under $700."
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"The job of a successful dealer is to find a funding package that's acceptable to the customer," said Paul Taylor, chief economist of the National Automobile Dealers Assn. "These loans allow them to get a luxury car rather than a more modestly priced vehicle."

There's a cultural shift in America. It used to be shameful to lose one's house, and families would do everything possible to make their mortgage payment. Now, it is considered impractical to live without a credit card and a car, and families will lose their homes before they put their wheels at risk. But in a time when it is common to be upside-down on car and home, to have no savings but high credit-card balances, there are an awful lot of people teetering on the brink. With negative net worth at $15k on the car, $15k on the plastic, and $100k on the house, what motivation do these families have to hang on? When push comes to shove, are they going to work three jobs to keep up the payments on all these underwater loans, or are they going to throw in the towel and move in with their parents? If people start letting their cars go, buying old clunkers, what will that do to the economics of "keeping up with the Joneses"?

"And even those who keep paying their bills may reach a point, like Gerhardt, where they simply can't afford another car. That could send vehicle sales down the drain, a nightmare scenario for an industry that has already taken a hit this year from slower consumer spending and higher gas prices."