Cracks are starting to show in the supposedly good news of rising new auto sales. Sales are stimulated artificially by zero interest loans auto loans. Financing is given to individuals who may not normally have qualified or barely qualified. This is a recipe for potential trouble. Typically auto sales are up when the economy is in good shape. but these are not normal times. Sales are being pumped up artificially with low interest rates auto loans, easy credit, and lax qualifications. Does this sound like the same recipe that caused the housing bubble and flood of bankruptcies, foreclosures and financial ruin? Does this sound like the same recipe that caused so much pain to homeowners that found themselves underwater when either they lost their jobs, the teaser low rate of interest expired and the adjustable mortgage interest rate skyrocketed, or the balloon payment came due. People were offered new cars at low or zero interest rates. The normal thirty-six month auto loan of the past was now extended in some cases to 78 months. All of these mechanisms were used to enable people to by more car than they could normally afford. When the car buyer encountered economic stress they could often no longer afford the payments. They then have a car that is worth less than the amount of the loan they owe. The default rate on new car loans has gone up dramatically. This means there are a lot more recently purchased cars that were defaulted on available for sale. We now see the index for used car prices is now also falling. This is the Precious Metals Investing podcast version of the video which can also be found here at You can find all of the Precious Metals Investing podcast episodes at iTunes by clicking on this link to either listen to individual episodes or subscribe: Ted Sudol interviews Paul Mladjenovic author of Precious Metals Investing for Dummies, Stock Investing For Dummies and High Level Investing For Dummies. To learn more about the services Paul offers visit his resource page here at preciousmetalsinvesting.com
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