CHARLOTTE ń Last month, more than 700,000 cars were sold during the enormously successful “Cash for Clunkers” program.
Now, the reality of monthly payments is setting in for new car owners whose clunkers may have been paid off years ago. Other car owners bought their cars several years ago before the economic downturn began and are now having trouble making their car payments.
With more people struggling to pay their car payments, repossessions are rising. According to Manheim Consulting, the number of repossessed vehicles jumped 12 percent to 1.67 million nationally in 2008 and is expected to increase by another 5 percent in 2009.
If you are having trouble making your car payments, the Better Business Bureau has tips to help you protect your credit and keep your car from being repossessed. “The worst thing you can do if you fall behind on a car payment is to ignore the problem,” said BBB President Tom Bartholomy. “To prevent repossession, and to mitigate the damage to your personal credit report, you need to address the issue with your lender immediately.”
The Better Business Bureau has this advice for car owners in danger of losing their cars:
Contact your lender. According to the American Financial Services Association (AFSA), auto repossessions cost creditors about $8,000. Therefore, your lender would prefer to keep you in your car and to keep you making payments. Your lender may be willing to work with you to refinance your loan, extend or defer payments, or change your payment due date.
Buy a less expensive vehicle. If you are not upside down on your loan, you could sell your higher priced car, pay off your loan, and buy a less expensive vehicle with more affordable monthly payments.
Be careful about working with debt management services. Some businesses offer assistance in debt management and repossession prevention. Be extremely wary of offers and sales pitches that require upfront fees, and always research the organization with the BBB before you contract with them. Consider enlisting the help of a credit counseling agency that offers free or low cost debt management assistance. You can find a credit counseling agency near you through the National Foundation for Credit Counseling at http://www.nfcc.org/
For more advice from the BBB on managing personal finances and debt, please visit www.bbb.org or call 1-877-317-7236 toll-free in N.C. and S.C.