First off, I'm not excusing auto dealers. Or lenders.
They have a moral and business responsibility to try to stop their customers from doing something stupid, such as buying a vehicle with a sticker price that will stick them with an oppressive debt.
But customers have responsibilities, too. It is their purchase, their money and their car payments. It is up to them, more than anyone else, to know their financial limitations and not cross them.
Yet, so many consumers today buy too much vehicle. Then, when the financial squeeze becomes eye-popping, they look for someone to blame. The dealership and lender make nice targets. Seldom do the debt-ridden blame themselves.
I pondered that while reading a Los Angeles Times article headlined, “New Cars That Are Fully Loaded — With Debt.”
The story tells how some Americans of average means roll over an existing loan on an expensive vehicle in order to get another expensive vehicle. They end up with two loans in one, when they couldn't afford one.
That is childish behavior, like wanting a pony, no matter what. Only back then, at least you had your parents telling you “no.”
Also infantile is the finger pointing that ensues when consumers without self-control fall deep into debt.
“Not one dealership ever said this was a problem,” a vehicle buyer told the Times. “Ever.”
She owes $43,000 on two trucks. Combined, they are worth $28,000. She got in deep because she rolled over debt after debt during three vehicle purchases in five years.
Fooled once, shame on you. Fooled twice, shame on me. What about the third time?
Did she need to be told that might be a problem? My office is on the 27th floor of a high rise. Do I have to be told that if I jump out of my window, I might encounter a problem 27 stories later?
The article is accompanied by a photo of the woman and her husband looking sad while standing beside one of their two vehicles. It is a Ford Expedition. She is a secretary. Should a secretary have bought a $46,000 SUV as a second vehicle?
Perhaps she is the one to answer that.
As noted, I'm not holding dealerships harmless. Dealers should help people find vehicles priced within their means, not aid and abet them in reckless purchases.
“It is up to us to explain options to customers,” says Kelly Mankin, a vice president at Chrysler Financial.
Frank Bennett, business manager of S&L Motors, a Chrysler-Dodge-Jeep store in Pulaski, WI, prides himself on trying to keep over-eager customers out of trouble by recommending financing alternatives, such as leasing.
That way, a secretary can drive a Ford Expedition without being driven into debt.
But another dealer, Marshall Friedman of Dartmouth Motor Sales in Newport, NH, tells me if you stand too firmly between what customers can afford and what they want, you can counsel them right out the door and to a competitor.
Whatever happened to personal responsibility in car financing? Did it disappear, along with the quaint practice of putting a big down payment on an affordable vehicle and paying it off in a few years?
This is the age of the so-called “empowered” consumer. Car shoppers supposedly use the Internet for research, then march into the dealership knowing more about the product than the salesperson does.
That knowledge should include understanding the pitfalls of assuming an 84-month loan on a high-priced product with a rapid depreciation rate.
The level of consumer financial ignorance is so bad, even the National Automobile Dealers Assn. is trying to help. An important NADA initiative is AWARE (Americans Well-Informed on Automobile Retailing Economics).
“Our goal is to help educate consumers, so they are as aware about their financing as they are about the vehicles they are buying,” an AWARE spokesman says.
They have work to do.