Car Loans Now a Part of Stimulus Plan

March 5, 2009

It should come as no surprise to anyone by now that the unprecedented economic bailout of North America’s big three automakers did not succeed in pulling those manufacturers out of the abyss… at least, not entirely. While it may be the case that these automakers are now able to retain more workers and produce more vehicles without going bankrupt, there is one factor for success that has not been sufficiently addressed by the bailouts: namely, that no one is buying cars!

There is now, however, a new attempt to change this trend.

In recent weeks, the Democratic Party has been championing a stimulus package designed to inject funds into those areas of the economy that are most in need, including education and the mortgage industry. Automakers, who received their own bailout a few months ago, were not part of the discussion at present, until now. However, now that attention is being paid to the automaker, it’s not, as many suspected, just a plan to give more money to the manufacturers themselves, but rather an incentive in the form of a tax credit for consumers buying cars.

Hoping that the tax break will allow more people to buy cars in the first place, and entice them to do so in spite of crumbling economic conditions, the proponents of the bill are hopeful that this change would be enough to spark a rise in the slumping automotive industry. As the automotive industry employs a significant number of workers in America, this is a larger issue than just whether or not car loans will be more easily acquired, but given that the focus of these articles are those individuals attempting to rebuild their credit, that’s where we shall focus.

So, what does this stimulus plan mean for the individual trying to rebuild credit? Should one rush out and buy a new car just because there’s a good opportunity to do so?

Well, in the event that one were in need of a new car in the first place, there’s no arguing that now is a good time for buyers. On the other hand, buyers of course have to be careful not to spend beyond their means. Before you lock yourself into an auto loan, even at favorable rates and with a tax credit to absorb some of the burden, be sure to conduct the usual feasibility analysis in order to determine how much of your total income this new payment would occupy.

In general, your total debt each month should be less than 50 or ideally 40 percent of your gross income. While there is some flexibility in this rule as a result of the current conditions we live under, it is still a sound guideline for making new purchases… especially one as significant as a new car.

Democrats claim that they hope to vote on this bill and the rest of the stimulus package within a week. Should it pass, it will indeed be an enticing time for buyers to look into financing a new car. However, pleasant economic conditions should never take the place of good old-fashioned common sense and analyzing your own financial state. Always be certain to take stock of your own finances first, and worry about “the market” second.

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Comments

One Response to “Car Loans Now a Part of Stimulus Plan”

  1. Joseph McKenzie on March 23rd, 2009 7:11 pm

    I believe that myself like many other people that purchased cars during the difficult time the auto industry was having, and got loans that was high intrest and can almost make payments should be given new loans and rebates.

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