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Information on mortgages, home equity loans, and consumer credit to help you use the power of financing to your advantage.
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Loans > Auto
Credit: It's the way to go
Copyright Associated Press
NEW YORK (AP) _ The trick in getting the economy to cool down is to convince consumers to save rather than spend, even as they are offered fistfuls of cash without so much as asking.
It isn't the only financial enticement offered. Below-cost loans and rebates from automotive companies, no-cash down terms, no interest payments for a year, bonuses to repeat customers, two-for- one sales.
This is the age of genius marketing, a time of financial creativity where everything seems to be on terms that make it hard to say no. And not all the lures are financial; this is a time of perpetual advertising too.
In dealing with the task of keeping the economy on a track that avoids extremes of inflation and recession, modern financial society may be a challenge the Federal Reserve isn't fully qualified to handle.
Consumer credit in September soared by $13.4 billion in August, a 10.9 percent annual rate that startled those who analyze such numbers, many of whom had expected the total to be almost $3 billion less.
As expected, most of the total was through the use of credit cards, which continue to be promoted as the smart way to go, and in fact have become necessities in transactions conducted over the Internet.
To say that money is offered unsolicited to individuals is not an exaggeration, as can be attested to by consumers who receive bank checks in the mail, the cashing of which automatically opens a credit account.
Most other people regularly receive solicitations, many of which offer initially low rates to attract users. In fact, a marketing research firm estimates that consumers were inundated with 992 million solicitations in just the April-June period, the greatest volume in more than a decade.
While the same company, BAIGlobal Inc. reported that the response rate was just one in 250, it doesn't necessarily indicate that interest in cards is waning. Most people already have at least one actively used card.
Besides, other sources of funds are available. The unemployment rate is down to 3.9 percent of the work force, perhaps about as low as it is likely to go. If paychecks aren't sufficient, they already have fallback credit.
Buying a car was never easier. Thanks to the marketing genius of makers and financial innovation, including low or even no down- payment leases, the roads were never more clogged with the very latest models.
The ability of manufacturers to produce more than 17 million cars and light trucks a year could never been accomplished without the heavy and sometimes total use of credit, and easy credit at that.
Neither could new and used homes be sold in such volume. New- home sales in August were at a rate of 893,000 a year, and sales of existing homes soared to an annual rate of 5.27 million units.
No wonder; credit plays a dual role as cause and effect. Families buy homes on easy credit terms, and as they pay down the mortgage and housing prices rise they have a new, easily-tapped source of credit in the equity.
Families who lived through the Great Depression of the 1930s, a shrinking number, don't need statistics to tell you about the great credit revolution. Borrowing on home equity indicated a tragedy back then.
Today, it's the way to go.
End Adv PMs Tuesday, October 24.
Reproduced with permission of the copyright owner. Further reproduction or distribution is prohibited without permission.
Dateline: NEW YORK
Text Word Count 557
The tips on this website should be considered food for thought only. Lendingtips.com is a clearinghouse of ideas, not a professional adviser. Before any important decision, please consult the appropriate professionals (lawyer, accountant, real estate agency, broker etc.).
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• Loans >Auto Loan Articles Archive
• Auto rebate vs. low financing Use this calculator to help you determine whether you should take advantage of low interest financing or a manufacturer rebate.
• Simple payment calculator Determine your car payment based upon purchase price and interest rate.
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• Car Cost Comparison Calculator This calculator will not only help you to forecast the real cost of buying and owning a car, but it will also help you to more accurately compare the real cost of one car buying scenario with the real cost of a second car buying scenario.
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