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Car financing is going to cause the next financial crash Watch

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    (Original post by Treeroy)
    Because car financing is generally only ~3 years worth of money, even on expensive cars it's not going to amount to more than £10K or so. which in the grand scheme of things is not a massive amount of money. Unlike the housing crisis where houses that are worth 100s of thousands went kaput.

    so the financers are in a very secure position.
    From the article I linked in my previous post -

    "Overall, the situation has been more than 10 years in the making, though the explosion in loans dates back to 2013 and the first signs of recovery from the 2008 crash. UK households borrowing last year to buy cars was up 12% on the year before. This year, the total borrowed is expected to exceed £40bn. Cash purchases are almost unknown, and a record 2.7m new cars were sold in Britain last year – the fifth year in a row of increasing sales. Of those, 1.3 million were diesels. The British are now buying more cars per head than any other large country in Europe."

    £40 billion is hardly petty cash. If the auto industry falls on its ass then that's a fairly hefty chunk of our economy.
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    (Original post by IWMTom)
    What's the problem if they can afford it? This type of financing is nothing new, don't overdramatise things.
    Because a lot of them can't afford it. Some probably can if they make sacrifices, but for someone on a budget it's far smarter to buy used. They may be able to afford the initial payments, but only barely. One unexpected expense and the whole thing could collapse.

    I'm skeptical of the "next financial crisis" claim, but I think it can be quite a big problem.
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    (Original post by TheMindGarage)
    Because a lot of them can't afford it. Some probably can if they make sacrifices, but for someone on a budget it's far smarter to buy used. They may be able to afford the initial payments, but only barely. One unexpected expense and the whole thing could collapse.

    I'm skeptical of the "next financial crisis" claim, but I think it can be quite a big problem.
    Credit and affordability checks aren't exactly easy to pass - if someone's managed to get finance, especially with a main dealer, they've proven they are capable of making repayments.

    It's not a problem though - the finance companies account for nonpayment; they can just take the car back.
 
 
 
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Updated: July 18, 2017
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