On the Crippling Burden of Car Loans
A recent piece in MarketWatch reveals some staggering statistics on auto loan debt:
In 2019, about 85% of new car buyers in the U.S. used a loan to pay for their car, according to Public Interest Research Groups, a consumer advocacy organization.
Americans currently owe about $1.5 trillion in auto loan debt.
The average monthly payment now exceeds $700 — and cars are financed on terms up to 84 months.
As it turns out, some auto lenders can be pretty unscrupulous.
One prominent auto lender, Credit Acceptance, is being sued by New York’s Attorney General and by the Consumer Financial Protection Bureau (CFPB) for unfair and deceptive practices.
“Credit Acceptance obscured the true cost of its loans to car buyers, leading to severe financial distress for borrowers and subjecting them to aggressive debt collection tactics on loans its own systems predicted that borrowers can’t afford to repay,” said CFPB Director Rohit Chopra. “The CFPB and the New York Attorney General seek to halt Credit Acceptance’s illegal practices and make consumers whole.”
In some cases, these car loan debts can land a borrower in jail.
For their story, MarketWatch talked to the authors of a recent book (Cars and Jails: Freedom Dreams, Debt and Carcerality) that highlights the connections between cars and jail.
The authors, NYU Professors Julie Livingston and Andrew Ross, explain that while defaulting on a debt won’t lead you to prison, the failure to appear in court can result in a bench warrant.
The net result of this really is a crushing burden on people and it’s not optional. If you don’t want student debt, you don’t have to go to college, but in almost all parts of this country, you have to have a car, so that is an automatic debt burden and it’s increasingly a crushing debt burden.
Just as with traffic fines, which can lead to detention, these civil debts can also put you behind bars. Mostly for contempt of court, technically speaking you can’t be jailed for failing to make a debt payment, but you can be jailed for contempt of court and…