Living Car Free - Outrageous: Folding Dealers Shock Car Buyers(AP)

I read this in the paper today, thought it was actually from Monday's paper. Link to the full article at the bottom of the page.


ACRAMENTO, Calif. – The national wave of auto dealership closures has come crashing down on thousands of people who are on the hook for used-car loans that dealers were supposed to absolve.

When a car buyer still owes money on a vehicle he is trading in, the dealer promises to pay off the outstanding loan, then resells the vehicle. But as more dealers go out of business, some are sticking consumers with the bill. Lenders can then go after the previous owner who thought the debt was paid, or repossess the car from the new owner who assumed it came with clear title.

"It's devastating for people when it happens because they have two car payments and they can't afford them," said Rosemary Shahan, president of Consumers for Auto Reliability and Safety, a Sacramento-based nonprofit that lobbies on behalf of vehicle owners. "Their credit is destroyed for no fault of their own because the dealer defaulted."

Regulators in California and other states, including Florida, Iowa and Washington, are seeing a surge in consumer complaints. They warn the problem is sure to grow this year because of the deepening recession and continued trouble in the auto industry.

About a quarter of all car buyers are vulnerable because they still owe money on their trade-in or lease when they buy another vehicle, according to industry tracker Edmunds.com. It's become more common for a driver to owe money on a trade-in as people stretch their car payments over six or seven years to make them more affordable.http://news.yahoo.com/s/ap/20090201/ap_on_bi_ge/dealer_defaults

Less of an argument for car-free as much as it is an argument against car-culture.

And even more of an argument against the "buy what you can't afford" financial strategy.

If you read the whole article, this happened to a couple who bought not 1 but 2 Mercedes and now cant afford either of them! lol

If you read the whole article, this happened to a couple who bought not 1 but 2 Mercedes and now cant afford either of them! lol

yes and it is happening to people buying less expensive cars too, they just happened to be the one interviewed:rolleyes:

Aaron:)

Hyundai has a new plan where they'll take back your new car in the first 12 months, with no damage to your credit rating. Hyundai is also the only car company to ost an increase in sales in January. I bet the other car manufaacturers will be following suit real soon.

In other car news, GM just offered EVERY one of their more than 20,000 hourly workers a buyout. They get $20,000 + a new car. The speculation here in a big GM town is that the only workers who will take the buyout are those who are pretty sure they'll be laid off anyway.

Less of an argument for car-free as much as it is an argument against car-culture.

Wait, so are you saying this article is a good reason to be against car-culture? If so, it doesn't follow. The problem there isn't people having or buying cars, but bad practices or loopholes in the system that can screw the customer over.

Less of an argument for car-free as much as it is an argument against car-culture.

Sounds to me like a pretty good argument to start sending defaulting dealers to prison for fraud.

Less of an argument for car-free as much as it is an argument against car-culture.

I think it's a very good argument to go car free!

I had no idea until several months ago that auto loans were being carried over when a new car was purchased. This simply confimed what I believed all along that motoring has become too expensive for the middle class to continue.

Whenever I looked at new car prices, it made me cringe at how expensive these vehicles were and how can anyone afford this! When I found out how people were doing it, I felt more than ever, my decision to become car free was correct all along. The bad news for the motorist seems like it never ends.

The only solution for these folks with car loans from bankrupt dealers is to go car free.

Debt caused the Great Depression, now debt is causing the Bush Depression.

What did that Santayana fellow say about those who forget history? Hmmm. Can't remember. It probably wasn't important any way. ;)

Debt caused the Great Depression, now debt is causing the Bush Depression.

What did that Santayana fellow say about those who forget history? Hmmm. Can't remember. It probably wasn't important any way. ;)

But this doesn't make sense, for several days now I've been hearing on the radio that the government is trying to craft the stimulus package so that people stay in debt and spend money rather than saving or paying off credit card balances. If debt is the cause then the government would want to design the stimulus package to remove the cause not keep it the same or make it worse. We keep harping on the idea that living car-free helps us live debt free, are we bringing the economy down by not being in debt or did we make the Bush Depression less severe with our lack of debt? It can't be both. If I were upside down on a car loan, would I be helping the economy or hurting it? According to the discussions on the radio I shouldn't use any windfall from the stimulus package to get out of debt but rather stay in debt and buy more stuff. It sounds like from the radio broadcasts that they think the debt free are the ones who hurt the economy.

But this doesn't make sense, for several days now I've been hearing on the radio that the government is trying to craft the stimulus package so that people stay in debt and spend money rather than saving or paying off credit card balances. If debt is the cause then the government would want to design the stimulus package to remove the cause not keep it the same or make it worse. We keep harping on the idea that living car-free helps us live debt free, are we bringing the economy down by not being in debt or did we make the Bush Depression less severe with our lack of debt? It can't be both. If I were upside down on a car loan, would I be helping the economy or hurting it? According to the discussions on the radio I shouldn't use any windfall from the stimulus package to get out of debt but rather stay in debt and buy more stuff. It sounds like from the radio broadcasts that they think the debt free are the ones who hurt the economy.

IMHO excessive debt is the entire root of the problem. Whether personal, corporate or government. People have been over extended for years and now it is time for a correction. We built an economy based on consumption, problem was we were not producing the items we were consuming so capital was leaving the country. Without capital you cannot invest in new equipment or materials to produce more items, or the research and development of new products.

Me? I prefer to be debt free and have savings in the bank, versus driving the newest and shiniest car on the block, or a big house in the suburbs that takes two salaries to support. I can pick and choose the things that please me and not be a slave to the paycheck. Very few people in today's society can say that.

Run a search for Fractional Banking...makes for some interesting and scary reading.

Aaron:)

But this doesn't make sense, for several days now I've been hearing on the radio that the government is trying to craft the stimulus package so that people stay in debt and spend money rather than saving or paying off credit card balances. If debt is the cause then the government would want to design the stimulus package to remove the cause not keep it the same or make it worse. We keep harping on the idea that living car-free helps us live debt free, are we bringing the economy down by not being in debt or did we make the Bush Depression less severe with our lack of debt? It can't be both. If I were upside down on a car loan, would I be helping the economy or hurting it? According to the discussions on the radio I shouldn't use any windfall from the stimulus package to get out of debt but rather stay in debt and buy more stuff. It sounds like from the radio broadcasts that they think the debt free are the ones who hurt the economy.

What they want is for you to take on as much debt as humanly possible so that CEO's of these huge corporations can keep their private jets while you are stuck paying for it through the nose. If you dont do this, your a bad American and the "cause of the problem." This happy little system goes wrong when people take on so much dept that they go bankrupt and dont pay any of it... by the way, big credit card companies have top lawyer lobbiests in Washington right now trying to change the bankruptcy laws so that you can be a slave to it for your entire life, and that of all of your family too! One of the many reasons that 17-18 year old kids get so many credit card apps, they want to get you wjhile your young, like smoking. :) Check o0ut the documentary film "maxed out." Ill take dept free and car-free any day!

But this doesn't make sense, for several days now I've been hearing on the radio that the government is trying to craft the stimulus package so that people stay in debt and spend money rather than saving or paying off credit card balances. If debt is the cause then the government would want to design the stimulus package to remove the cause not keep it the same or make it worse. We keep harping on the idea that living car-free helps us live debt free, are we bringing the economy down by not being in debt or did we make the Bush Depression less severe with our lack of debt? It can't be both. If I were upside down on a car loan, would I be helping the economy or hurting it? According to the discussions on the radio I shouldn't use any windfall from the stimulus package to get out of debt but rather stay in debt and buy more stuff. It sounds like from the radio broadcasts that they think the debt free are the ones who hurt the economy.

Sadly, from a macroeconomic perspective, this is true. It's called the paradox of thrift (http://www.msnbc.msn.com/id/28965133/). Basically, if you have 40,000 dollars and are 60,000 dollars in debt, you basically have a 100,000 dollar economic footprint. Whereas, if you only had 40,000 dollars of savings, you only have a 40,000 dollar footprint. That contracts your contribution to the economy. If everyone does, the economy shrinks. Right now, our economy is a debt based economy. So to keep the finance industry going, they would prefer you to be in debt so that they are making money off it.

I personally think it's a sick perspective. Cars are the perfect debt vehicle. They are expensive, have a pretty strong demand curve, they depreciate fast and the loan methods are well documented.

They say that savings impede cash flow. But I think that's BS. The banks have your savings, but I guess they aren't lending that out. But the individual is getting blamed. As we know, the bailout bucks are going to buy banks, and pay bonuses, not getting lent out. Then again, if you are savings, you are not in the loan market.

So me, I'm glad I've got savings not debt. It's just one more way to rebel. :thumb:

paradox of thrift (http://www.msnbc.msn.com/id/28965133/).

So me, I'm glad I've got savings not debt. It's just one more way to rebel. :thumb:

The paradox of thrift article makes it seem like when we debt free are in the minority, we are in league with the big money capitalists preying on the debt slaves. On the other hand if a large proportion of the population chooses to live debt free- that is if not enough small money people pay interest and fees to the big money guys- the whole economic system goes topsy-turvey? That seems like a self serving story line put out by the bankers. The debts come due sometime why not pay up front and cut out the interest and fees? The goods you pay up front for will still have to be produced. Its the period of adjustment as people pay off their debts that will reduce demand but only until people get out of debt. I smell a rat. It seems like money is flowing from working people to bankers because the bankers are threatening the politicians that if the politicians don't just hand our money to the bankers they'll cause an economic depression.

Me? I prefer to be debt free and have savings in the bank, versus driving the newest and shiniest car on the block, or a big house in the suburbs that takes two salaries to support. I can pick and choose the things that please me and not be a slave to the paycheck. Very few people in today's society can say that.

Aaron:)

+1 I'm the same way.

Aaron #2

According to the discussions on the radio I shouldn't use any windfall from the stimulus package to get out of debt but rather stay in debt and buy more stuff. It sounds like from the radio broadcasts that they think the debt free are the ones who hurt the economy.

That's because our society is no longer based on culture but on a cult of consumption.

In reality, the current economy is like a campfire burning down. The stimulus package is like a small cup of gasoline. You toss the gasoline on the fire and you get a quick, impressive flareup that makes everyone feel better for a few moments. But without any more real fuel, the fire goes right back down and no long term improvements have been made. The fire is still burning down.

Az

I found this snippet from "Social and Economic Consequences of Buying on the Instalment Plan" was published by Wilbur Plummer, Ph.D. from the University of Pennsylvania. It was written in 1927. He blames cars just like Dahon.Steve does. "the automobile is said to be responsible for our looking at this old practice in a new light. "

It seems like the 1920s, the 1960s and the 2000s(Bush years or Naughts) have brought us culture shifts. I guess the depression ended the generation of spendthrifts didn't it?

The Effects of Installment Buying on the Character of the Individual

Instalment Buying Is Creating a Generation of Spendthrifts — It is the view of some people that "this system of allowing individuals to buy more than they can pay for" is creating a generation of improvident people--spendthrifts. It is causing individuals to form habits of extravagant spending, rather than the socially desirable habit of saving. The practice of thrift has been a copybook maxim for generations and our parents brought us up to believe that saving is a virtue. There was a time when being in almost any kind of debt was considered somewhat of a family disgrace. Moreover, buying on the instalment plan was considered one of the lowest forms of debt that one could contract--it was looked down upon socially. It was considered an arrangement for persons who were poor, improvident--not able to take care of their own affairs. They needed a collector to tell them under threats how to dispose of their money on pay day. Now what has happened? Respectable people, without any feeling of shame, ride around in motor cars, even expensive one, which are not paid for. When one's neighbor drives out in a new car, the odds are exactly three to one that he is borrowing from the future, living beyond his means. Respectable people are wearing expensive furs and jewelry, bought on time. Instalment buying has acquired an air of respectability; the automobile is said to be responsible for our looking at this old practice in a new light. It is the opinion of some people that the conditions here described are having a deteriorating effect upon the character of individuals. And what is more important, children are being reared in this environment, and they, not having had lessons of thrift instilled into them, will be economically less responsible than their instalment-buying parents.

But this doesn't make sense, for several days now I've been hearing on the radio that the government is trying to craft the stimulus package so that people stay in debt and spend money rather than saving or paying off credit card balances. If debt is the cause then the government would want to design the stimulus package to remove the cause not keep it the same or make it worse. We keep harping on the idea that living car-free helps us live debt free, are we bringing the economy down by not being in debt or did we make the Bush Depression less severe with our lack of debt? It can't be both. If I were upside down on a car loan, would I be helping the economy or hurting it? According to the discussions on the radio I shouldn't use any windfall from the stimulus package to get out of debt but rather stay in debt and buy more stuff. It sounds like from the radio broadcasts that they think the debt free are the ones who hurt the economy.
After the initial bail out, I am convinced that, either our government is beyond clueless on who they should be helping and/or how to do that, or they know perfectly well that they are helping certain companies (and more specifically the wealthiest people in those companies) but not the American people as a whole. As you stated later, I smell a rat. :mad:

But this doesn't make sense, for several days now I've been hearing on the radio that the government is trying to craft the stimulus package so that people stay in debt and spend money rather than saving or paying off credit card balances. If debt is the cause then the government would want to design the stimulus package to remove the cause not keep it the same or make it worse. We keep harping on the idea that living car-free helps us live debt free, are we bringing the economy down by not being in debt or did we make the Bush Depression less severe with our lack of debt? It can't be both. If I were upside down on a car loan, would I be helping the economy or hurting it? According to the discussions on the radio I shouldn't use any windfall from the stimulus package to get out of debt but rather stay in debt and buy more stuff. It sounds like from the radio broadcasts that they think the debt free are the ones who hurt the economy.

In a debt-driven consumer economy, the thrifty savers ARE hurting the economy. If Americans begin saving more and paying off debt they will buy fewer superfluous goods and services. Decreased demand will force many companies to decrease production and layoff workers. This is production and work that wouldn't have existed if most Americans had chosen to live within their means. The same thing will occur if more people become less "stuff" oriented as many in this subforum would hope. It just makes sense that if people buy less stuff then less stuff needs to get made and those who profit off of or work for such industries will find themselves out of a job.

I see the current job losses as an opportunity for many Americans to examine their lives and decide if they like what they see. Perhaps some will decide to pursue a more beneficial and enjoyable existence. I wish the global economy could be realigned without this recession but given human nature, I see it as a necessary evil/wakeup-call. I'd love to see more articles in mainstream media about the benefits of a smaller economy where Americans work less and lead richer lives.

In a debt-driven consumer economy, the thrifty savers ARE hurting the economy. If Americans begin saving more and paying off debt they will buy fewer superfluous goods and services. Decreased demand will force many companies to decrease production and layoff workers. This is production and work that wouldn't have existed if most Americans had chosen to live within their means.

Well said. :thumb:


I'd love to see more articles in mainstream media about the benefits of a smaller economy where Americans work less and lead richer lives.

That'll be the day. Media's advertisers would choke. But dreaming is good.

If you read the whole article, this happened to a couple who bought not 1 but 2 Mercedes and now cant afford either of them! lol

Actually, they could afford them. The $40K they owe is the car dealer's debt that they've been forced to assume, so this was the dealer's screwup and not theirs. I think that owning luxury cars is ridiculous too, but still, ya gotta get the facts right.

And there's nothing funny about getting screwed over by an unscrupulous business, even if it happens to people who buy stupid symbols of the comsumptive lifestyle like Mercedes cars.

Actually, they could afford them. The $40K they owe is the car dealer's debt that they've been forced to assume, so this was the dealer's screwup and not theirs. I think that owning luxury cars is ridiculous too, but still, ya gotta get the facts right.

And there's nothing funny about getting screwed over by an unscrupulous business, even if it happens to people who buy stupid symbols of the comsumptive lifestyle like Mercedes cars.

Ahh, well I must have misread something. Still, I find it hard to feel bad for them.... my bias is ever present.

This is production and work that wouldn't have existed if most Americans had chosen to live within their means. The same thing will occur if more people become less "stuff" oriented as many in this subforum would hope. It just makes sense that if people buy less stuff then less stuff needs to get made and those who profit off of or work for such industries will find themselves out of a job.

People who are not willing to spend lots of money on personal possessions may still contribute a lot to the economy. It wouldn't hurt us to try to keep our economy afloat by spending lots of money / time creating homes that aren't dependent on fossil fuels for electricity and temperature control. It would be just fine if we spent lots of money and time creating superb train systems for eco-friendly transportation. It wouldn't hurt if some of our economic activity went into making sure that, to the extent we lose jobs to foreign countries making cheap goods for our consumption, the manufacturers will steer clear of child labor, life threatening working conditions, and unfair pay rates. (surely if $3 per hour is too little in the USA, $0.20 per hour is too little in any country!) Maybe we'd feel the need for fewer wars if our country put more effort in to stopping the exploitation of the world's least wealthy people for our own benefit.

In a debt-driven consumer economy, the thrifty savers ARE hurting the economy. If Americans begin saving more and paying off debt they will buy fewer superfluous goods and services. Decreased demand will force many companies to decrease production and layoff workers. This is production and work that wouldn't have existed if most Americans had chosen to live within their means. The same thing will occur if more people become less "stuff" oriented as many in this subforum would hope. It just makes sense that if people buy less stuff then less stuff needs to get made and those who profit off of or work for such industries will find themselves out of a job.

I see the current job losses as an opportunity for many Americans to examine their lives and decide if they like what they see. Perhaps some will decide to pursue a more beneficial and enjoyable existence. I wish the global economy could be realigned without this recession but given human nature, I see it as a necessary evil/wakeup-call. I'd love to see more articles in mainstream media about the benefits of a smaller economy where Americans work less and lead richer lives.

I agree that in a debt driven society people like myself are not helping the economy, but we aren't really hurting it either. I have plenty of things and paid cash for most if not all of them. Access to easy credit allows people to spend more than they normally would, good thing for the economy...as long as they pay their bills.

In reality a person that saves up and pays cash has more purchasing power, because they are not wasting money on interest and credit fees. The big losers in a cash transaction are the banks and credit card companies and other financial interests. I paid $15,000 cash for my last truck. If I had to finance that same truck it would have cost me over $20,000 if I had made payments. That is $5,000 that I still have and the banks do not. However that same $5,000 is in the bank which means it is available to the bank as collateral, or I can use it to purchase another product.

Credit by itself is not an issue but excessive use of credit and over extension of credit as well as misuse of credit is in part what has led to the current problems. Throw in revolving credit on credit cards. This is a neat interactive calculator (http://www.controlyourcredit.gov/html/credit_score.html). Too many people ran up credit card debt, then used their homes as a cash account and took out HELOC's and other interesting things, paid of the credit card debt and ran them up again. Nothing like having that fancy steak dinner you ate a year or two ago as part of your home mortgage.

Aaron:)

People who are not willing to spend lots of money on personal possessions may still contribute a lot to the economy. It wouldn't hurt us to try to keep our economy afloat by spending lots of money / time creating homes that aren't dependent on fossil fuels for electricity and temperature control. It would be just fine if we spent lots of money and time creating superb train systems for eco-friendly transportation. It wouldn't hurt if some of our economic activity went into making sure that, to the extent we lose jobs to foreign countries making cheap goods for our consumption, the manufacturers will steer clear of child labor, life threatening working conditions, and unfair pay rates. (surely if $3 per hour is too little in the USA, $0.20 per hour is too little in any country!) Maybe we'd feel the need for fewer wars if our country put more effort in to stopping the exploitation of the world's least wealthy people for our own benefit.

Agreed, this is the type of economic activity that I support and hope that we transition to as that portion of the economy devoted to debt-fueled over-consumption collapses from its own unsustainablity. It'd be best if this could be an easy, purposeful change but it seems like most folks won't think long term unless the short term provides little comfort.


Sort of...I have plenty of things and paid cash for most if not all of them. Access to easy credit allows people to spend more than they normally would, good thing for the economy...as long as they pay their bills.

I partially agree. Easy credit does allow greater flexibility in when the purchaser has to pay for their purchase which does "grease the wheels of commerce", but I disagree that allowing people to spend more than they normally would is a benefit of credit. I see this as credit's main drawback. Folks just don't seem to understand that credit isn't more money or even increased access to money, it's simply a fancy, expensive way to write an IOU.


In reality a person that saves up and pays cash has more purchasing power, because they are not wasting money on interest and credit fees. The big losers in a cash transaction are the banks and credit card companies and other financial interests. I paid $15,000 cash for my last truck. If I had to finance that same truck it would have cost me over $20,000 if I had made payments. That is $5,000 that I still have and the banks do not, but that same $5,000 is in the bank which means it is available to the bank as collateral. Credit by itself is not an issue but excessive use of credit and over extension of credit as well as misuse of credit is in part what has led to the current problems.

Good for you! Sometimes when someone tells me about their latest home or car purchase I ask how much of it they bought and when they'll be able to afford the whole thing! As to your comments on credit, I sometimes wonder if all the associated problems with credit are due to the nature of credit itself and if the benefits of credit (I'm talking credit from financial institutions, not loans between individuals) are worth the drawbacks.

I don't think credit from an institution is a bad thing...in moderation. We had a small retail business up until this year. We started the business with cash we had saved and borrowed a bit from a couple of relatives that were interested in investing (they have been paid back). Early on we realized we needed to purchase an inventory control system versus the manual system we were using. Our sales volume had grown much faster than we anticipated as well as the sheer number of items we were inventorying. We did not really have the extra cash to purchase the system outright and the longer we waited the harder and more expensive it was going to be to implement. We went to the bank and were able to get a signature loan for the full amount of the system. After our peak season we were able to pay the loan off in full. If that money had not been available, we would probably have had to spend nearly the equivalent amount in extra salaries and hours worked to stay on top of our inventory as well as probably avoid quite a few expensive human initiated errors. Because of this we were able to handle the increase in sales with a corresponding profit, and the system is still in place and working today for the new owner. On the flip side we purchased some stock at a bankruptcy sale where the owner was constantly buying stock on credit and not paying her bills in a timely manner with the profits.

Also when a company uses credit the cost is passed on to the consumers. Ditto when they accept credit cards. We always offered a discount for cash. Credit costs and is hidden in just about everything you buy.

Credit is a tool, but not a crutch. When used properly and with caution is a useful tool.

Aaron:)

That's why I use a cash back credit card to get 4% back for groceries... I assume that the prices are inflated for accepting credit card. So why should I use cash and subsidize everyone else' credit card usage? Kind of a catch 22.

Credit is a tool, but not a crutch. When used properly and with caution is a useful tool.

Aaron:)

Right. I think it's important to keep in mind that ordinary business is almost impossible without credit. The most basic form of credit is the invoice. If businesses had to take cash to a supplier each time they bought something, the entire system would be impossible.

Right. I think it's important to keep in mind that ordinary business is almost impossible without credit. The most basic form of credit is the invoice. If businesses had to take cash to a supplier each time they bought something, the entire system would be impossible.
Maybe maybe not. I have run small businesses that were always COD and we did just fine. But you had to make sure the money was in place prior to placing your order. It is all in the way you run your business. FWIW our shop was about half and half. Invoicing vs COD. Either way worked for us. Our initial inventory was purchased for cash and replenished as necessary.

You can run a business on a cash basis, but credit can help you to expand and over the slow times.

Aaron:)

Right. I think it's important to keep in mind that ordinary business is almost impossible without credit. The most basic form of credit is the invoice. If businesses had to take cash to a supplier each time they bought something, the entire system would be impossible.

Yeah, English needs two words, one for borrowing to buy non-productive assets and one for borrowing to profit, like the farmer borrowing for seeds or the tradesman borrowing for a new more efficient tool. This is what I don't get about the stimulus discussions, they say the banks need cash to make the productive kind of loan but don't want the banks to receive the cash from people paying off the non-productive type of loan, but rather they want the banks to receive cash directly from the taxpayers and still carry those non-productive loans? I don't get why the government desperately wants so many of it's citizens as debt slaves.

Actually when I saw 'folding' and 'car dealership', I thought of when I returned my car to the dealership. They asked me how I was going to get home. I said, 'Watch and learn.' I then took my Montague Paratrooper out of the trunk, unfolded it, put the front wheel on, tossed the keys to the manager and said, "So long!" and pedaled off into the sunset. (Literally, as it was PM and my house was west of the dealership.)