From Eric Dash at the NY Times: As Credit Tightens, the Auto Industry Feels the Pain
Home equity loans, which had been used in at least one of every nine deals, when lenders were more generous, are no longer a source of easy money for many prospective buyers.According to the NY Times graphic "Mortgaging the House to Buy a Car" (see article), about 1.9 million new cars were purchased using HELOCs in 2007, or 11.8% of the 16.2 million total new cars sold in 2007.
As home values have declined, millions of consumers have maxed out on home equity debt. In hot markets like California, nearly 30 percent of all consumers tapped into the value of their homes to help finance their new cars, according to CNW Marketing Research. In Florida, about 20 percent used home equity loans. New car sales in both states are down about 7 percent.
Although HELOCs were used for a variety of household expenditures, probably the two most common uses were for new cars and home improvements. It's not surprising that these two areas are being severely impacted as lenders sharply restrict HELOC borrowing.