Faced with less disposable income, higher taxes, housing costs and more expensive vehicle costs (not to mention more expensive fuel and insurance), the discourse in the Canadian market has gradually shifted to one where bi-weekly and even weekly payments have become the advertised norm, with 72, 84 and 96 month loans appearing as a fixture of the new and used vehicle marketplace. And with household debt levels reaching record heights in Canada, the chart above should be deeply concerning.
While the trend of long term loans has been brewing for some time in Canada, February marked a milestone. Nearly 70 percent of consumers opted for loan terms of 72 months or longer. Consumers will, in all likelihood be paying thousands of dollars on interest alone on what would normally be a modestly priced vehicle.
One scenario, outlined by a friend, saw him go into a new car dealer to purchase a truck for both his primary vehicle and a work vehicle. The truck was a modestly equipped domestic full-size truck, already deeply discounted to $35,000 CAD (plus 13 percent sales tax). The loan terms offered were 96 months for 3.99%. That would have added up to $6,000 in interest payments over the loan term.
While Canadians are apt to buy smaller, cheaper passenger cars, full-size trucks still reign at the top of the sales charts, and transaction prices of these vehicles are going nowhere but up.
Chart courtesy J.D. Power via The Globe and Mail
The post Chart Of The Day: 8 Years A Slave, Redux appeared first on The Truth About Cars.
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