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Auto Purchases or How We Learned to Stop Worrying and Use Consumer Credit

A short history of consumer credit and financing


A little history is never out of style, especially not when we think about the way our economy works today and our concept of what it means to buy stuff. America has a consumer culture that likes to spend money on quality products and is always looking to upgrade.  Today, a lot of what we do runs on credit. We live in a country of innovation, where things are always getting better, improving, and changing and this leads to better products. When it comes to automobiles, America has a great history of being at the forefront of the industry from its inception. As soon as the car was introduced into our society, there were major changes in a variety of sectors and areas of public life. Let’s take a look at the way the country developed its current system of borrowing.

The history of purchasing through credit has its roots way before the Ford Model T, but this is a good starting point for looking at how the automobile industry contributed to our current system of consumer culture. In 1908, the Ford Model T emerged. This car is particularly important in history because it was offered at a much more reasonable price and makes automobiles accessible to the general public. Well, sort of.  The cars were still technically too expensive for the general person to afford. Ford would offer a kind of layaway system that allowed families to choose a car, pay into an account, and get their car once their account has enough money. This was still a big deal, however, since the average person could technically now afford this and suddenly the average Joe could theoretically purchase one of these vehicles and suddenly be mobile, move from place to place much more easily.

It is then another car company comes along to solve this problem. GM starts lending people the money they need to get a new car with the help of the General Motors Acceptance Corporation set up by GM president Alfred P. Sloan. This allowed people to get a new car as long as they had enough for a 35 % down payment and could pay the car in installments within a year. Many people thus credit GM as one of the early arbiters of the consumer credit culture.

The Ford Motor Company was known to be somewhat more fiscally conservative and tried to hold off as long as possible from doing business this way. Henry Ford was personally against this type of financing and instead kept his company on the more traditional layaway process. Yet, the demand for good cars was exorbitantly high and GM’s payment scheme was the preferred of the two.

It was not long after that Americans began purchasing more than their vehicles on this installment plan. By the 1930’s most appliances, furniture, radios, and at least two-thirds of automobiles, were purchased through some type of installment plan.

In the years following World War II, consumer credit expanded even more because of growing industries and demand in home appliances and furnishings. Popular charge cards like Diners Club and American Express began the era of the credit card. Not long after the creation of companies like MasterCard, Visa, and Discover that grew and popularized the concept of buying with plastic.

Today’s auto industry still depends on financing options for customers. This is an important part of what we do. We ensure that our financing options allow people to get their dream cars without trapping them in a debt trap that takes years to escape. Express Auto Credit knows that people deserve a well-running car to take them where they need to go. We like to help make that happen.

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