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Consumer Automobile Debt Skyrockets With Rolling Debts

Consumers that borrow money to purchase automobiles increasingly find themselves with debts that far outweigh the value of their cars, according to a new article in the Wall Street Journal. In one noteworthy case, one man found himself with a $45,000 loan on a car worth $27,000. Some commentators have compared this growth of automobile debt to the spate of high-interest mortgages that were common prior to the 2008 housing market crash and are concerned what this high level of debt means for consumers.

There are a few reasons given for this enormous increase in automobile debt. First is simply the increasing cost of cars, which require people to take out bigger loans to cover the higher price. Second, lending standards have been relaxed over the past few years, making it easier for people to take out loans, and by extension, to get swamped by debt.

However, the biggest problem is the practice of “rolling” old loans into new ones. Essentially, if a person wants to buy or lease a new car but still owes money on their old car, they can roll the unpaid remainder of the old debt into their new car loan and can do so as many times as lenders will allow. Depending on how often someone purchases or leases a new car, and thus how often they take out a new loan, they can wind up with debts more than twice the value of their new car.

Some experts fear this current trend of ballooning automobile debt is unsustainable. These debts can easily lead to financial strain for consumers, and even bankruptcy in some cases. When financial problems and bankruptcies became more commonplace, it could be the signal for a new economic crash, like the global recession of 2008-09.

If you are experiencing financial distress, contact an experienced New Jersey bankruptcy attorney to discuss your options. The Law Offices of Hunziker, Jones & Sweeney are experienced in helping families and individuals deal with the devastating effects of financial distress and in mapping out potential strategies, including the possibility of filing for bankruptcy, to help them cope and to see the light at the end of the tunnel. The attorneys at the firm understand that financial distress is an extremely emotional and difficult time for anyone to go through. If you are experiencing severe financial distress and may be considering bankruptcy as an option or want to learn more about what a bankruptcy filing may do to help you, call The Law Offices of Hunziker, Jones & Sweeney at (973) 256-0456 or fill out our contact form for a consultation.

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