Almost half of Americans are clueless about financing anything

Is the thrill of possibly appearing in the newspaper just too irresistible for a growing number of Americans who are in debt up to their eyeballs that they'll willingly make fools of themselves, or do they somehow think that they'll find a sympathetic audience?

Just look at this couple from this LA Times story.

Cindy Gerhardt of Clinton, Okla., shown with her husband, Steven, and their Ford Expedition, has rolled over so much debt on vehicle purchases — five in three years — that she now owes almost $43,000 on two trucks worth no more than $29,000 and, she says, perhaps as little as $22,000.

They just look so pitiful next to their new SUV that they bought because someone was willing to lend them the money to do so.

Here's a shocker for those of you who have been so distracted with the goings-on in mortgage lending that you haven't kept up with what's been happening in the auto finance industry:

Almost half of all new car loans are financed for more than six years!?!

And, like mortgage backed securities, we have the wonderful "innovation" of debt securitization to thank for this and other developments that have enabled so many Americans to buy so much stuff that they really can't afford.

About 30% of the loans that are originated by banks, and 100% of those issued by automaker financiers, are, like mortgages, repackaged and sold as securities, according to the Consumer Bankers Assn.
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Today, most lenders offer financing on 100% or even 125% of the sticker price, and some offer the most credit-worthy buyers loans for twice the value of the vehicle they're purchasing. Last year, the average amount financed for new cars reached 99%, according to the Consumer Bankers Assn., up from 95% in 2005.

Lenders are beginning to brace themselves; many have said they intend to tighten standards and require larger down payments.

Despite warnings from S&P, the Consumer Bankers Assn., Lehman Bros. and others, there is little sign that the automobile industry is willing -- or, with consumers demanding low payments, even able -- to reduce the lengths of the loans they issue.

"For banks, it's a matter of meeting consumer demand: no money down and extend the term," said SunTrust's Pregmon. "But as a lender, you've got a moral obligation as well. Are we putting the clients in loans they can't afford?"

Since when have lenders had a moral obligation to anything other than the bottom line? They must be talking about what things were like in the last century.

When you think about it though, the relaxing of credit standards for new car purchases up until the recent credit crunch really did make sense ... financing a house had become as easy as financing a new car, so financing a new car just had to get easier.