Car owners falling behind on loan payments

Thursday, July 3rd 2008, 5:17 pm
By: News 9

By Jacqueline Sit, NEWS 9

The number of Americans falling behind on their car loan has increased along with the prices of food and fuel. Paula San Gabriel said she never buys thing she cannot afford. Before buying her SUV, she first made sure the payments were within reach.

"I took into account my current pay, salary, and then I took into account my bills such as insurance and gas," Gabriel said.

With everything balanced, Gabriel bought the vehicle. About a year into her loan, the SUV broke down and Gabriel needed to replace the engine. She had no warranty or the $6,000 to cover the repairs.

"I was having financial troubles," Gabriel said. "I needed transportation to get to and from work."

Needing to save for the new engine, Gabriel had no choice but to miss a loan payment.

Immediately, her lender started calling.

"If you are having difficulty making your auto loan right now, you're definitely not alone," Philip Reed of said.

Delinquencies on auto loans are at the highest rate in nearly two decades, with repossessions expected to jump 10 percent this year.

"We estimate that 1.6 million cars will be repossessed this year," Reed said.

To complicate things, many car owners are locked into longer loans. If they want to get out of the longer loan, they're often left "upside down," meaning they owe more than the car is worth.

"That means if they were trying to get out their car loan, it would be nearly impossible," Reed said.

No matter what the circumstances, if a car owner misses a payment, many financial experts encourage the consumer to speak with the lender.

"The lender always wants to work with the borrower because they don't' want to get that car back," James Chessen of the American Bankers Association said.

Gabriel's lender agreed to push her loan term back two months, giving her some extra breathing room.

"I was really surprised the lender was willing to work with me," Gabriel said.

Gabriel said she's back on track paying her auto loan and has saved money to get her SUV back on the road.

In the meantime, she's purchased another car for $1,600 in cash to get to and from work.