Chart Of The Day: 8 Years A Slave
Today’s Chart comes from J.D. Power, showing the growth of long term loans in the Canadian car market. While 96 month loans are just starting to hit American consumers, the 8 year loan terms have been present in the Great White North for some time. A friend was recently looking at a modestly equipped Big Three Pickup, which would be used for work. The truck, with an MSRP of $35,000 CAD (plus 13 percent sales tax), was offered at 96 months for 3.99%. That would have added up to $6,000 in interest payments over the loan term.
Faced with less disposable income and higher vehicle costs, 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. While the Honda Civic is still Canada’s best-selling passenger car (advertised at $39 per week), and Canadians opt for more modest choices overall, credit rating agencies are already sounding the alarm over the rapid expansion of auto loans to unworthy consumers, driven largely by Canada’s banking sector.
More by Derek Kreindler
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I realize this is already being done in some ways by luxury marques, and car sharing/rental services...but these long term loans need to be bundled with service to reduce the risk for the consumer. Of course it would be a profit opportunity for the vendor of such a setup and if the OEM does it, could make the customer more sticky. I have been doing this with managed IT services for years now, I think a similar business model would work for car ownership.
All Canada is is a protected boundary for 5 banks.
There is nothing at that $30-50k new level that cannot be accomplished in $15k or less. Especially in Canada where used and new car prices (where everything rusts) is retarded. Best bet- make a nice holiday and buy a texas or AZ car, get all work done there, tires, fluids, brakes, even clutch, etc. and bring it back up to Canada. Couple things. 1. know what you are going to buy see if you can import it. 2. buy a KM speedo, bring it with or have sent to the dealership where you are buying it to have it installed. as you have to have a KM speedo - the 2 places you can get this done in canada charge a fortune or do shoddy work or both... 3. USA dealerships in this case are really great, they really help and sometimes will even pick you up at the airport- sometimes you just tell the sales rep $50-100 bucks to pick me up. 4. stay in the city a couple days and drive around- just to be sure. 5. if private deal then you will pay GST on whatever that receipt says. 6. bring your new plates & insurance down for full insurance coverage. Have a fun driving holiday back up.
These loan lengths, current sales. One word: "Bubble" Enjoy, Dennis