by Calculated Risk on 1/03/2008 12:30:00 PM

From Bloomberg: Ford Motor's December U.S. Auto Sales Declined 9.2%

Ford Motor Co. said its December U.S. auto sales fell 9.2 percent ... sales dropped to 212,094 vehicles from 233,621 a year earlier ....

Americans bought about 16.1 million cars and light trucks in 2007, the least since 1998 ... The company's full-year sales slid 12 percent.

Most of the automakers will report today. It looks like December was awful across the board, and most forecasts are for another decline in 2008.

And as difficult as 2007 was (and 2008 will probably be), the automakers are building a time bomb with debt. From the LA Times: New cars that are fully loaded — with debt

Gone are the days of the three-year car loan. The length of the average automobile loan hit five years, four months in October, up more than six months from 2002, according to the Federal Reserve. And nearly 45% of loans written today are for longer than six years. Even some staid lenders owned by the carmakers, such as Toyota Financial Services and Ford Credit, are offering seven-year financing. And a few credit unions, particularly in the West, are tinkering with the eight-year note.

There is a basic guideline when financing a purchase - match the length of the financing to the life of the asset. Thirty years for a house, maybe 5 years for a car. Then, when the asset becomes worthless, you are no longer paying for it and you can afford to replace the asset. That is the general idea.

Of course money is fungible, and this is just a guideline, but the buyers in the LA Times story are violating this guideline - they are still paying for the automobile after they sell it (by rolling the debt into their new car), and eventually this will lead to more consumer loan delinquencies and probably fewer car sales.