Tightening of the Credit Belt

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I came across this article on Yahoo! Finance and thought I would share my feelings on how the current economic crisis will impact the average family with regard to being able to purchase new cars. The article lists 6 key ways car shopping has changed and for the most part I think the changes are good. We have been brainwashed into believing that we must have a new car for a variety of reasons, all of which are just not true. A good 2 year old used car is still reliable and because of the way depreciation works can be purchased for a very reasonable price. Here is the list:

End of 100 percent financing
Restrictions on zero percent financing
Plunging trade-in values
Reduced inventory
Disappearing dealers
Tougher credit requirements

Except for the dealerships going out of business, I like the list. I understand the impact that loosing a job can have on a family, and I am concerned about how bad behavior by a lot of companies has brought about the inevitable closing of a lot of smaller car dealers. The thing I find interesting about the list is that we are making changes to return to the days of our grandparents, when it was “not cool” to buy things on credit. Four of the six items on the list, deal with the continued desire to buy a car that you cannot afford. When you roll the depreciation of that new car into the equation, buying a new car just doesn’t make sense. I am glad that it will now be more difficult for people to chain themselves to car debt.

Our country has taken what used to be a common sense approach to finances (buying only what you can afford) and inserted risk; in some cases and for some people a lot of risk. If you need another car or a car to replace your current car, then do something really strange. Save the amount of the average car payment for 10 months and then go buy a used car. It will get you where you need to go, with no payments being dragged behind you.