Car Loans—The Next Meltdown?

An article in today’s Washington Post, "Running on Empty," talks about the rising tide of national auto loan delinquencies.

According to the article, the percentage of car loans that are 30 days or more late for the 4th quarter in 2007, 3.1%, is the highest level in 17 years…and the trend line is accelerating. Why are things gettomg worse?

There are a number of reasons. The downturn in the economy and ballooning mortgage payments force homeowners to have to decide between making the mortgage payment and making the car payment. Another problem is that the length of car loans is increasing. Seven year loans are not uncommon, with the result that most cars are "upside down"–you owe more on them than they’re worth–for longer periods of time.

According to Edmunds, about 1.6 million cars will be repossessed this year, a 10% increase from last year.