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Financing getting tougher, but it's out there, analysts say

November 17, 2010

Credit availability has been a top issue in the automotive industry for months, leading to serious congestion for new-car buyers who want financing.

But one dealer blames the problem not on Wall Street woes, but on customers who are upside down in their trade-ins.

With 72-month loans now commonplace, many customers have trade-ins that are worth less than what they still owe on them, forcing the amount due on the old car to be wrapped into the new-car payments.

Tawny Arnaud said the financing problem facing dealers has been brought on by dealers and auto financing companies themselves.

"People really should be thinking in terms of short-term financing," said Arnaud, vice president of sales for Galpin Motors, a chain of nine dealerships in the Los Angeles area.

Almost all dealers surveyed recently by Automotive News said they were having a harder time finding loans for customers with poor credit. About 60 percent said they are having more trouble getting financing even for customers with good credit.

During the housing boom, home equity loans often were used to finance car purchases. But the housing market collapse has put more pressure on auto financing.

J.D. Power and Associates forecasts a very slight upturn in auto sales, from a projected 14.2 million sales in 2008 to 14.3 million next year.