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Auto loans: a new subprime lending area?

In recent years, auto loans have proved to be the safest for creditors. According to the Washington Post in an article from July 6, 2012, for example, Americans faced a rocky mortgage market during the same time. It seems that Americans are more likely to walk away from the home than to default on their car payments. There are advantages to lending for auto loans as well as risky drawbacks.

As it has become easier to borrow money for a car in the United States, more people have bought cars and have traded in older ones. Auto loans totaled $47.5 billion in the first quarter of 2012. That is the highest in the past seven years. Home sales have not been as frequent.

The auto loan market is different than the mortgage market. One major difference is that it is much easier to repossess a car than it is to foreclose a home. Also, the Consumer Financial Protection Bureau (CFPB) does not regulate car dealerships that provide loans. Moreover, banks can treat and package auto loans differently than mortgages—in a less risky, but more profitable way.

There are still some concerns, though. According to a spokesperson for the CFPB, auto loan repayments may last beyond the lifetime of the purchased car. Car loans are offered at high interest rates and have many fees. Also, banks and other lenders may ease standards too much and eventually end up loosing money.

To learn more about your legal rights in finance, visit, the official website of Jayson Lutzky, P.C. If you are considering bankruptcy, we encourage you to contact a lawyer. Mr. Lutzky has over 29 years of experience practicing law in New York. Call his office at (800) 660-5299 to set up a free consultation.

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