Monday, May 9, 2016
Buying Cars on Credit: the 1920s
A related issue to that of Sloanism and a "car for every purse and purpose", however, was how to get traditionally frugal Americans to open their purses. That was done by the creation of finance plans, immensely popular by the mid-1920s, and highly profitable to General Motors with its own finance division, GMAC. The rise of consumption in the 1920s, and the connected topic of advertising, is at the heart of understanding he automobile and American life during the 1920s. While purchasing on time had its origins during the years before WWI, it was during the 1920s that the practice became immensely popular, so much so that by 1925 some 75.5% of Americans bought their cars on credit. Due to intense competition, the required amount of money down as a percentage of purchase price dropped from typically 40% or 50 % to as low as 10%, leading to failures among dealers and finance companies. In 1927 the instability of this business was rectified by the National Association of Finance Companies and the National Automobile Dealers Association reforms. Recommendations for future credit purchases included that buyers put 33% of the purchase price down with a set term of 12 months.