High gas prices and a struggling economy aren’t the only reasons for declining car sales. Many would-be buyers aren’t purchasing new cars because they can’t withdraw the cash from their their home equity lines of credit.

Detroit Free Press reports:

“The home equity crunch hurts consumers and consumer-driven companies, including Detroit’s automakers.

Art Spinella, president of CNW Research in Bandon, Ore., said new car sales are likely to continue to struggle in some states because some home equity lines have been trimmed or reduced to nothing. He noted that one-third of new vehicle sales in California were made with the use of a home equity line of credit.”

A HELOC may not be the smartest way to fund a new car purchase. However, many buyers were able to pay significantly less interest on their car purchases by using their home’s equity.

Now that this source of cash has dried up for a lot of homeowners, many are choosing to stay away from new car lots altogether.

See Also:

Common HELOC Questions and Answers

What Happens to a HELOC in Foreclosure? 

Tags | Heloc, heloc freeze, home equity line of credit, mortgage crisis