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Are Sub-Prime Mortgages Hurting the Automotive Industry?

 Janna's Blog - Posted: 11/20/2007
It seems that the declining housing market is taking the blame for more than just foreclosures. It has been projected that as many as 2.3 million sub prime mortgages will switch to higher interest rates by the end of next year. That’s bad news for home buyers who will face higher monthly payments as a result. But the sub prime mortgage disaster is also taking the heat for some of the automotive industry’s losses.

Wait, what? It’s true: financial analysts have predicted that the increase in mortgage payments will leave less liquidity for the purchase of cars. The numbers seem to bear this out; Ford Motor Credit Co. and GMAC Financial Services had more delinquencies during September and October than they have had in recent years. Another concern is that, as home buyers take hits to their credit scores from delinquencies, foreclosures and bankruptcies, fewer buyers will be approved for car loans. Fewer approvals mean fewer sales and less money for the car companies.

The auto giants aren’t worried – yet. Representatives of both auto companies maintain that higher delinquency rates are normal for the third quarter.

Sadly, it’s impossible to predict how the housing market crash will affect everyone’s daily lives. Analysts claim that it will definitely affect the automotive industry. But how much is anyone’s guess at this point.


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