The Boston Globe reports, "more Americans, under growing economic pressure, are deciding to surrender their rides rather than the roofs over their heads: The rate of auto-loan defaults recently reached a 10-year high of 3.4 percent." With gas prices reaching all-time inflation-adjusted highs and the economy suffering a downturn, "consumers are looking to downsize to cheaper, more fuel-efficient models, and reduce their payments." Many can't sell vehicles they purchased in recent years because they owe more than the car is worth. As a result, defaults and repossessions are on the rise. "Nationwide, repossessions are up about 15 percent so far this year." Many analysts, however, warn that allowing your car to be repossessed often doesn't free buyers from their obligation. "They still may owe money if the lender sells the car for less than the balance owed. Moreover, the repossession typically stays on consumers' credit reports for up to seven years."
In an editorial, California's Whittier Daily News places blame for the crisis on some "auto lenders and financiers" who "made loans to people with questionable credit or with limited ability to pay." Attorney Alec Trueblood told the Daily News "Unscrupulous dealers who finance their own loans" sometimes "collect deposits and payments from people they know can't afford them -- that way, they can repossess the car and resell it over and over." He reports that he has seen dealerships "knowingly misstate a buyers' income -- either with or without the buyer's knowledge -- so the lender would accept the loan application."