A government shutdown could happen again soon, possibly over the next week. This happens when Congress runs out of money to pay its employees by the end of the fiscal year and, as a result, only essential government functions continue to operate (such as firefighters, police, military and others).
For citizens, this could mean a break from bankruptcy cases, problems with the distribution of unemployment checks and the dismissal of many employees.
Typically, when the government closes, government employees are put on leave and their pay suspended. According to The Washington Post, this could mean that many “essential” employees will continue to work, but will not be paid. Employees working without pay or on leave without pay can likely be forced to drain their savings to stay afloat.
Additionally, it could mean that consumers have difficulty obtaining passports, business loans, or immigration procedures. And without current income, new credit, such as a car loan, is unlikely to be an option while you are on leave or unemployed.
Typically, auto lenders do not approve auto loans for unemployed borrowers or those who have been on leave. Unemployment is considered temporary income that will not last for the life of a car loan, resulting in a loan denial letter in most cases.
Two of the most essential elements for car loan eligibility are employment history and income. However, some lenders may be more willing to work with an employee on leave because their income is simply suspended rather than gone altogether – but these situations are considered on a case-by-case basis.
Employees at risk of losing their income may need to consider delaying the purchase of a car until more concrete news of a government shutdown is released. Many lenders require proof of income dating back 30 days. Contract and 1099 employees will likely be asked to provide two to three years of recent tax returns and, therefore, might not be as affected by a government shutdown when it comes to buying a car.
To top it off, inventory is short for new and used cars, and prices are high. Incentives for new vehicles change monthly. Therefore, buying a new car deal right now may not be to your advantage, unless you are looking to buy in the next month.
The Washington Post points out that the last closure in 2018 “cost around $ 3 billion in economic activity”. This shutdown lasted 35 days. Since we are still in the midst of a pandemic, who knows the real economic impact of a government shutdown might be right now.
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