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"I took into account my current pay, salary, and then I took into account my bills such as insurance and gas," explains Paula.
Everything checked out, so Paula took the truck. But about a year into her loan, the SUV broke down and needed a new engine. She had no warranty, nor the $6,000 to cover repairs.
"I was having financial troubles. I needed transportation to get to and from work," said Paula.
So she missed a loan payment. Immediately, her lender started calling. It's a story auto experts are hearing more and more. In fact, delinquencies on auto loans are at the highest rate in nearly two decades, with repossessions expected to jump 10 percent this year alone.
"We estimate that 1.6 million cars will be repossessed this year," said Philip Reed from Edmunds.com.
It's such a problem some auto auction companies are running out of space.
"On several of our auctions that have received a large number of these repos, we've had to procure off-site lots in order to store the vehicles," said Tome Kontos from Adesa Auto Auction.
Banking and auto experts say there's no doubt the economic trouble first felt in the housing market is spreading.
"There's job losses out there, there's fewer new jobs being created to reemploy people. It's plain and simple an economic consequence."
To complicate things more many carowners now lock into longer loans, five, six, even seven years. Then, if they have to get out, they're often 'upside down', meaning they owe more than the car is worth! No matter what the circumstances, if you miss a payment or even think you're in trouble all the experts we spoke with agree:
"The lender always wants to work with the borrower, because they don't want to get that car back," said James Chessen from the American Bankers Association.
So you may have power to strike a deal. But it's critical to address the problem head on and contact your lender immediately.
"Essentially what they do is they may give you a small grace period, several months to keep up," explains Reed. "But at least they won't begin the process of repossession."
Paula's lender agreed to push her loan term back two months, giving her some extra breathing room.
"I was really surprised the lender was willing to work with me," said Paula.
If you have a lease and are behind in your payments, there are a number of Web sites that will find someone who will take over lease:
- Swapalease
Click here to visit www.swapalease.com - LeaseTrader.com
Click here to visit www.leasetrader.com - LeaseTrade.com
Click here to visit www.leasetrade.com - Car Detective
Click here to visit www.cardetective.com
