New Sort Of Sticker Shock On Car Lots

On America's car lots, there's a credit crunch. Lenders are slamming on the brakes, CBS News correspondent Mark Strassmann reports.

Brent Epps needed a loan. A high interest rate would be a deal-breaker.

"So you wanted a truck, right," Strassman asked.

"Badly," Epps said.

A Chevy Silverado is the truck he wants - but not so badly he'll blow the family budget.

"Something would have to go if I couldn't make this note," he said. "I can't walk to work, and the family's gotta have a place to live, so that's what wins."

These days, having good credit just isn't good enough.

It has to be perfect - or there's a new type of sticker shock on the car lots. Not the price of the cars - but the interest rate on the loan.

Take a $26,000 new car loan over five years. A great credit score - 700 or higher - might mean an interest rate of 7.5 percent - a payment of $522 a month.

Same loan, with a more typical credit score of 650 - and the interest rate and monthly payment both soar to $592 a month.

Even worse credit, and banks are denying the loan altogether - unless customers have a down payment of at least $2,000 to $3,000.

"The car industry is definitely in a credit freeze right now," said Micheline Maynard, auto analyst and author. "And for the automakers, this is a disaster."

Already this year, dropping sales have shuttered roughly 600 dealers, with hundreds more expected to close.

"It's very difficult to have a business model or to adjust to a 30 or 40 percent drop, particularly if it occurs very abruptly," said Jimmy Ellis, who owns a car dealership.

Brent Epps got a good deal - with a great credit score of more than 750.

Now he owns a new truck.

"Everything is automatic," he said. "And idiot-proof. And how can you deny that smell?"

The thrill of that new car smell.

The whole car industry wants to experience it.

  • Mark Strassmann

    Mark Strassmann was named CBS News Transportation correspondent in August 2011. He has been a CBS News correspondent since January 2001, and is based in the Atlanta bureau.