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Nov 1, 2008 6:05 pm US/Eastern
Car Loan Defaults Could Reach Record Numbers
TALLAHASSEE (AP) ―
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Many people picking up new cars will default on their loans this year.
CBS
Home foreclosures are hitting high numbers, but there are also a large number of car loans being defaulted on in these tough times. The vehicle auction company ADESA predicts there will be around 1.9 million repossessed vehicles this year, a new record.
1.9 million vehicles would be a 20 percent rise from 2007. A large number of those vehicles are luxury cars and SUVs, which is a sign that tough times are hitting people with normally high credit scores.
The news is bad for lenders, who are losing billions on defaulted loans. Worse, the prospects for recovering that cash are low, because repossessed vehicles don't generally bring in what they're worth at auction. Odds are lenders will only make about half the balance remaining on defaulted loans.
However, the news is good for those with loans, because now, lenders are becoming more flexible with customers who are close to defaulting on mortgages or car loans. Taking on foreclosed homes and repossessed cars can be an expensive headache for bankers. "Banks do not want to be in the position of having a car dealership to sell these cars they have to repossess," Florida Bankers Association member Anthony DiMarco says, "They are trying to work with their customers to avoid that situation for both the customer and for the financial institution."
Realtor Cindy Crona-Hudson says she's seen a changing attitude among mortgage lenders in the past few months. This includes an enthusiasm for offering options to help keep homeowners out of foreclosure. She also says that while some companies have tightened their lending criteria, overall, there's plenty of credit available. "For first time homebuyers or second homes, kitty condos, we have a tremendous amount of money in Florida."
(© 2010 CBS Broadcasting Inc. All Rights Reserved. This material may not be published, broadcast, rewritten, or redistributed. The Associated Press contributed to this report.)
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