When it comes to bolstering car sales, Cash for Clunkers did its job. The federal program sparked 690,000 sales, pushing up August volume to 1.2 million units at a time when monthly volume averaged 860,000 units.
I know a good percentage of those sales were paid for in cash, and the overall credit quality of the buyers was relatively high. But might we start to see higher-than-normal delinquencies among car buyers who financed their C4C purchases?
“This seems like a good thing; the government subsidizes car sales to allow people to buy cars they would not normally be able to afford. The problem is that the majority of these people have never had a new car before, they’ve never made monthly car payments, and the insurance spike is surely substantial.”
I’m not sure where the author got his information about whether C4C participants had previous auto loans, but when the program ended, I read an interesting stat from CNW Research about buyers’ remorse: Of nearly 1,000 C4C participants, 17% had “some” or “serious” doubts about their new-vehicle purchases. Typically, buyers’ remorse affects 6% to 8% of buyers.
What are your expectations for delinquencies and defaults on C4C-originated loans?
