New car prices continue to rise as the pandemic comes to an end. The average new car price has hit a new record of $50,000. Just a few years ago, it was very uncommon to see clients have car loans that approached and exceeded $100,000. Now these types of car loans are becoming more common and a new reason why debtors are now filing for bankruptcy.
Prior to the Covid-19 pandemic it was unheard of to see a car loan in excess of $100,000 for a “regular” car. A car loan over $100,000 would have indicated an exotic car, like a Ferrari or Bentley or maybe even a high end Mercedes Benz. But now we are seeing car loans that exceed $100,000 on “regular” cars like new Toyota Tundras and other new cars. And the people who are able to obtain these car loans are not “high income” individuals…they are regular blue collar, middle income people who really have no business having a car loan that is so large.
In many ways, it reminds one of the housing crisis of the early 2000’s. Mortgage loans were given out to people who were not necessarily the best candidates, home prices continued to rise due to the ease at which people could obtain the loans, and as a result demand increased and continued to push the prices higher and higher. Until the entire financial industry crashed and burned as a result.
The unprecedented rise in new car prices and the willingness of banks to fund these high prices for questionable borrowers may result in a similar meltdown in the automotive industry. However, when an individual comes to the realization that their monthly car payment is too high because it is usually approaching or over $1,000 a month….bankruptcy can help them get a new start and get relief from their bad car loan.
Chapter 7 bankruptcy can help to liquidate debt and Chapter 13 Bankruptcy can help to reorganize their debt. And in either chapter, the car can be surrendered and given back to the bank. Bankruptcy can help the borrower to start over, just as it did for millions of people during the home loan crisis of the early 2000’s.
Contact a bankruptcy lawyer with MacLean Chung Law Firm to review your options and assess your qualifications for bankruptcy.