I don't think that it will be as severe. The big banks are largely insulated from this. I do think that it will be a buyers market for late model used cars for cash buyers. I'm already seeing signs of this. It's just not quite there yet but I bet I can get a car at 50% traditional market price soon.
I think the banks as in the car manufacture's finance arms will be hit the most: when it hit they are the ones who are suddenly owners of a car that they owe more on than it is worth. They will have to sell these cars at a loss. If they try to make up for that loss by raising lease rates those who turned their car in will be forced buy a used car at greatly reduced rates (few have the ability to afford much larger payments)
Those who buy their car have a known payment, they might owe far more than the car is worth but that payment won't chance and other than an accident they eventually have a paid off car. They might not be able to trade their car in as soon as they would like, but they at least have a car.
Agreed. All the credit arms of the manufacturers will be hit hard. I didn't mention this in my parent comment but you alluded to another great point. 60+ month loans can mean that those who drive more than 20k miles can use their car up before it's even paid for.
