Consumer beware: Auto financing sources getting risky
Posted on Friday, July 22, 2016 at 1:51:36 PM
There is no denying that the automotive financing arena is in an exceptional position through the eyes of consumers. Rates are extremely low, the mix of different loans available is massive, and more banks are willing to lend to borrowers who would not have had an easy time getting a traditional loan only a few years ago. However, as is the case in any time period when a specific area of the economy is thriving, some of the tactics of certain lenders have made it on to the radar of regulators in Washington and among state legislatures.
Unfortunately, this high growth period of auto lending has appeared to translate to more instances of irresponsible lending, putting consumers at risk of facing very uncomfortable debts in the coming years. Consumers need to be careful when choosing a lender.
CNN recently reported that the Office of the Comptroller of Currency has issued a warning to consumers regarding the rapidly increasing figures surrounding delinquencies on auto loans, affirming that some lenders might not be making the full breadth of terms known to their customers.
According to the news provider, this particular government agency is not only working to ensure that consumers understand the threat, but is also trying to educate the heads of the massive financial institutions that are approving the loans. The source pointed out that the auto loan debt volume has increased by 40 percent between 2009 and today to exceed $1 trillion. Just as was the case with Too Big To Fail back around the recession, concerns are growing that the auto lending market might hit a dangerous bubble soon.
Longer terms not always great
Bankrate reported that one of the driving forces behind the massive increases in delinquency rates is the longer term average on loans that have been seen in the past couple of years. The news provider pointed out that the average term of an automotive financing program increased by five months to 67 months between 2010 and 2015.
All of this goes to show the importance of properly understanding loan terms. Consumers who are looking for a safe option to finance their new and used car purchases should always consider working with their local small bank. These institutions tend to take a more educational approach, ensuring that each customer gets approved on the best possible program in accordance with their needs and financial stature.