For the first few decades of automobile history, cars were luxury items. The people who bought them did so for the fun of it, and typically paid cash. By at least the 1910s, however, motorized trucks and passenger cars found a market among small businessmen who recognized their value for deliveries and short-distance transport of heavy goods, but could not put up the entire purchase price at once. The auto finance industry was born. Today, the total value of car loans outstanding in the United States—about $850 billion—is about equal to the nation’s credit card debt. 23
In the 1920s, auto financing took a giant leap forward when the car manufacturers entered the game. In 1924, GM launched the General Motors Acceptance Corporation (GMAC), an innovative financing arrangement that shared the risk of car loans between dealer and manufacturer. Its goals were, initially, to smooth out seasonal fluctuations in sales, but the ultimate effect was to dramatically increase the numbers of units sold.
Henry Ford’s refusal to follow suit led in large part to Ford’s loss of market share in the 1920s. Ford, who believed that buying cars on credit was morally reprehensible, responded to GMAC with a surge in advertising and an unpopular program that encouraged customers to use their local Ford dealer as a savings bank until they had accrued the full purchase price. In 1918, half of all cars on the road were Fords, but by 1930, three out of four cars and trucks were bought “on time,” most of them from other manufacturers. 24
A rare surviving collection of papers from a dealership in Plymouth, Massachusetts illuminates the day-to-day workings of 1920s-era automobile financing. Briggs Motor Sales helped its customers finance their car and truck purchases in collaboration with a variety of institutions: local banks, manufacturers’ own financing operations, and specialized auto finance firms like Commercial Credit Corporation and Commercial Investment Trust. Individual cases reveal that in Plymouth, as in the rest of the country, borrowers would go to extraordinary lengths to fulfill their contracts, even in the depths of the Great Depression.
23 James Surowiecki, “Masters of Main Street,” The New Yorker, July 12, 2010.
24 Calder, Financing the American Dream, 184-199.