No Hope for Detroit Until We End Rip-Off Financing

The indebted consumer can't afford cars
By Victoria Floethe,  Newser User
Posted Dec 24, 2008 2:49 PM CST
General Motors Corp. headquarters is shown in Detroit   (AP Photo/Paul Sancya)
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(Newser) – Congress' plan to bail out Detroit ignores one fundamental problem: Americans owe so much on their current cars—often more than the vehicles are worth—that they can't buy new ones, writes Stephanie Mencimer in Mother Jones. Detroit—along with the "great scourge of the American consumer market: the car dealer"—makes its real money selling not cars but dodgy loans. The result: negative equity for consumers, the same problem vexing the housing industry.

"Ultimately, no matter how much money Congress throws at the automakers, it's car buyers who will rescue them or not," said one consumer lobbyist. So let's help them: Learn the lesson from the housing bailout, which is flailing because it offers no relief to homeowners.Two easy suggestions: Cap the amount that car dealers can increase interest rates on loans and reverse the bill requiring individuals who file bankruptcy to repay the entirety of car loans.