Have Car Loans Been Lent Carelessly?

By: Carys Robshaw

There has been much discussion over the free and accessible way in which we have been able to obtain credit for cars or other luxuries.

In light of the current credit crunch, many feel that the wide availability of credit has led many people into situations where they are in severe debt and find their homes and cars repossessed.

However economist Tom Webb believes that credit was not provided in a careless manner, saying "They [banks] weren't making a lot of bad loans. It's just that the market has turned. You can almost guarantee that repossessions will be down in 2009 because the tightening of lending standards has been very severe."

Other analysts disagree with Mr Webb, feeling that car loans were freely given out to people who could not possibly repay those loans.

"There are some people who are basically living beyond their means, and the only way to get into products is to push the envelope," said Keith Leggett, senior economist with the American Bankers Association. "What you're seeing is that the risk factors have increased."

GMAC, the worlds largest car loan provider, says that they are taking measures to reduce the number of repossessions, by increasing phone calls to their most at risk customers.

As? a result, the delinquency rate for GMAC has actually fallen since last year, bucking the trend of car loans in general which people are struggling to repay.

"The credit environment being what it is has created a lot of stress in the marketplace, and we haven't turned a blind eye to that" says a spokesman for GMAC.

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