As I watch the news about the price of fuel and the consequences for the average American who has to pay these ridiculous prices I have flash backs. When I was working at my family owned and operated fueling station back in Boston during the 1974 oil (Gasoline) shortage. It was our first wake-up call! I was one of the fueling attendants during those times. For some of you who do not remember or never had someone put the fuel in your vehicle, washed your window and checked your fluids under the hood that was my first job in the family business. Fuel or gasoline was about 30 cents a gallon! Yes, .30 cents a gallon. That was until the year 1974! Long lines and gas prices changed daily, people where not ready for this significant life style change. Most vehicles at that time average 6 to 12 miles per gallon! Wow! Do the math here. These vehicles had 20 + gallon fuel tanks. At today fuel prices that would be $100 per fill up at $5.00 dollars a gallon versus $6.00 a fill up at .30 cents a gallon! Time has changed. I remember many customers stating “if the fuel problem did not correct itself they were going to park their vehicles or purchase more fuel efficient vehicle”. The biggest difference back then was the amount of vehicle financed by our financial institutions. Most people owned these vehicles and had no vehicle payments to make.
Let’s accelerate to today’s highly volatile fuel market and the biggest difference. Most people have $20,000 to $30, 000 dollars financed on today’s gas guzzling vehicles. I mean lots of them. What if the American people decide that the cost of fueling these vehicles is not worth it? What if they decide that they are going to walk away from the big vehicle payment and let the vehicle go back to the banks? Do you see where I am going with this? If people walk away from these vehicle payments because of the cost of fuel, who is going to buy them? Who would want them? The banks would be stuck with vehicle packed with negative equity.
This would be another bubble burst for the country’s financial system. Could you imagine millions of vehicles owned by the banks and no way of recouping the revenue! Who is going to “bail this one out”? It is a real concern for me. The biggest lender of money for vehicles is credit unions. What will they do with all these vehicles no one wants or can afford to drive? The negative equity on these vehicles could cripple this industry. I see this as the next potential “Bubble” to burst in our great country.
I do not blame us consumers. We did our part and bought into these gas guzzlers with all the marketing we were exposed to. Hell why not! I need a big SUV to impress everyone and show how I can afford 40 plus thousand for a vehicle. We have been sold the lifestyle of owning very expensive luxury crafts to commute to work and use for everyday errands. The sad part is we are still buying these vehicles at an alarming rate and financing them with banks and credit unions. I could not find a statistic that showed how much money we have invested in loans for theses vehicle by our financial institutions but I have to believe enough to cripple them if people walk away from these vehicles like they did with houses.
I have some suggestions for our financial institutes to get out of this potentially dangerous situation. My interested rate is based on the banks ability to loan money for a profit. I suggest we change the vehicle loans process based on one more criteria for interest rate, the miles per gallon rating (MPG). Treat gas guzzling vehicles like luxury boats! Not a necessity but a luxury! Interest rate should be better on fuel efficient vehicles and higher on guzzlers. After all if you agree with my comments they are now high risk loans. Follow the EPA and consumer guidelines for fuel economy. I think the new guide line is 23 mpg target. Vehicles that get 23 plus mile per gallon get great interest rates! This would also get financial institutes into the “Green” movement! Just think about how these interest rates would affect people’s buying decisions. This would make fuel efficient vehicles affordable and a better choice for consumers. Let’s face it gasoline and diesel fuels have been going up on average a $1.00 a year in the last four years and there are no signs of it going down. We need to make it as attractive as possible for people to get into environmentally friendly and fuel friendly vehicles. Financing these vehicles would make sense and lower the risk of people just walking away from the vehicle and loan due to fuel cost.
I would suggest that you contact your bank or credit union and find out how much money (Your money) is tied to gas guzzler loans that could put your money at risk if people have to walk away from these vehicles do to the cost of fuel!