Reply #4: Car loans are very hard to get now [View All]

[quiller4]

and according to reports in my local paper, used car financing is even more difficult to obtain than new car credit. Used car sales have declined at a more dramatic rate than new car sales in the last quarter. This may be a temporary problem and credit may loosen up as a result of the infusion of cash into the system by Congress and action by the Fed.

There are longer-term problems, too. Individuals defer major purchases of all kinds when they feel insecure about their financial situation. As unemployment rates rise, insecurity grows. Purchases of big ticket items like cars and appliances don't usually pick up until the second or third quarter of a recovery.

This is not a Detroit-only problem. Sales of all imports are off, too, and stock of new imports is backing up at West Coast ports.

As people keep and drive old cars longer, there will be an increase in business for repair shops. That is a silver lining of sorts but not as big a one as it might have been a few decades ago. Cars last far longer than they used too. In the 1950s and 60s the useful life of an engine used to be 100,000 miles. Now it is not unusual for an engine to go 200,000 without needing a major overhaul.

My personal experience supports that contention. I currently drive a 2000 Chrysler Voyager with 124,000 miles on it. Other than replacing the timing belt as recommended intervals, it has needed no expensive repair. It doesn't use any oil, runs smoothly, shifts smoothly and in general operates as dependably as it did 100,000 miles ago. My spouse drives a 1995 F150. It has over 175,000 miles, has never broken down, doesn't use a drop of oil and hasn't needed anything but routine maintenance during its operating life. We have no real incentive to replace two vehicles that still perform well and meet our needs.

We will probably visit our mechanic before we visit a dealer but he isn't making much performing the routine tasks that we could do at home if we were a bit younger.