By on August 24, 2017


Car buyers who borrowed money to finance their purchase are seeing higher loan debt per borrower rates, along with higher delinquency rates. And it’s happening on both sides of the border.

Let’s start with Canada. Automotive News picked up a report from TransUnion showing that average auto-loan debt per borrower has gone up in the second quarter, and so too have delinquency rates. This is happening as vehicle prices have also risen during the same time period. Consumers are also rolling in other debt and parts of the country are still in recovery mode from the recent economic crisis.

To be precise, the report says the average balance per borrower on car loans is $20,477, an increase of 2.4 percent over last year. A Canadian TransUnion analyst told AN that rising vehicle prices and the rolling over of negative equity were key reasons.

60-day delinquency rates rose slightly, as did 90-day rates. TransUnion Canada blames the decline in the oil industry in parts of the country as a cause of the problem. Alberta and Saskatchewan are especially struggling.

There was also a shift in loan originations away from subprime towards prime, prime-plus, and superprime categories. It’s unclear if this is because lenders are exercising more caution, or if subprime borrowers are spending their income on other items due to economic struggles.

This follows reports from earlier this summer of a booming market for subprime auto loans in the United States. A Bloomberg piece from July includes a chart showing 90-day delinquencies jumping to almost 4 percent in the first quarter, which appears to be a post-financial-crisis high. The article then delves deep into the regulatory scrutiny that lender Santander has been under.

There was a rise in lending for new cars last year, and now we’re seeing a rise in average new vehicle transaction prices (in Canada and the U.S.) and laxer lending standards from Wall St. when it comes to subprime auto loans. Subprime auto loans may be less risky in terms of economic crisis than subprime mortgages, but that doesn’t mean these numbers aren’t worth keeping an eye on.

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24 Comments on “Canadian Borrowers Seeing More Loan Debt While U.S. Sees Subprime Loans Rise...”

  • avatar

    There should be a counter next to the rear badge on cars that shows how much debt is owed on the vehicle.

    • 0 avatar
      SCE to AUX

      Building on your idea, there should be a net equity counter next to the odometer, which subtracts the loan debt from the resale value. For many people, the net equity meter wouldn’t go positive for years.

    • 0 avatar

      That’d be great. I’d love to know how people afford some of the bling-mobiles I see on the road. I assume they’re just in debt up to their eyeballs.

      • 0 avatar

        Lease, lease, lease.

        • 0 avatar

          Leases can still end up costing a lot and then you’ve got nothing to show for at the end, you’re just in a perpetual new car/lease cycle. Apparently a number of people are cool with that.

          • 0 avatar

            I’ve been on both sides. The days of $600 truck payments are way over for me. maybe its a maturity/age thing for me. I leased in the 1990’s and just started to again since residuals are decently high and cap costs and money is cheap. Having an extra $400 a month is awesome as is 40 mpg.

            Everyone is different though. I can afford that truck payment but now it just doesnt make sense to me.

          • 0 avatar

            It all depends on the lease and how you use a vehicle. If you are one of those people who trades as soon as your payments on your loan are up AND you don’t drive many miles per year – it makes sense. If I was under 12,000 a year and didn’t mind say leasing a Fusion cheap and washing my hands of it after 3 years, then its the right choice for me.

            Now for someone doing 20,000 miles a year like I am and who also insists on accessorizing my vehicles a lease makes little sense.

            Regardless of whether you buy or lease, you spend 100s of thousands of dollars on automobiles during your life and what do have when you die? A vehicle sitting in the garage depreciating a little bit day by day.

          • 0 avatar

            The opposite is true as well – I don’t drive enough miles to lease. I might put 5K on my GTI this year. I put about 2K on my BMW in the past year, and that is unlikely to increase anytime soon.

            It makes waaay more sense to buy and hold, but if you must have the new shiny you should at least run the numbers on a lease. But with the various fees they are rarely the way to go unless heavily subvented.

    • 0 avatar


      Sure, because it makes SOOO much sense to take money out of the market, pay the brokers fees, pay the capital gains tax, and forego the potential years of future gains, to save the lousy less than 2% interest a car loan will cost you if you are in a position where you should be considering more than the most modest new car in the first place.

      I believe this is the definition of “penny wise and pound foolish”.

      • 0 avatar

        If everyone who buys a new car has amazing investment portfolios and are making killer returns while driving a shiny new car using OPM, why is everyone worried by the debt level? It’s because reality isn’t like this.

        Half the US population is living paycheck to paycheck. A quarter in the US don’t have emergency savings. Most people are broke and the idea of unexpected maintenance on a used car is terrifying to them. So the new car, either leased or purchased over 84 months, is attractive and gives them a sense of security.

        That’s why a lot of people buy new when really they should be buying a beater until they get their financial house in order. It has nothing to do with market returns and using OPM and all to do with the symptoms of poor financial education and lack of behavior control from consumers.

        • 0 avatar

          Ultimately, there is a lot to be said for a known, utility-like bill for transportation that can be budgeted for with few surprises if you are broke. But the whole “pay cash for a new car” meme is stupid. If you have the wherewithal to pay cash for a new car, there are MUCH better things you can do with the money. Which is my entire point. I *could* have paid cash for my last four new cars, but it would have been stupid. The interest cost is too low to bother with at this point in time. I had the ability to deal with driving relative beaters when I was a lot less well off than I am now. But not everyone can do that. Cars are expensive to fix if you have to pay someone to do it.

          Cars aren’t houses. They are easy to repossess and resell, and thus angst over subprime lending for cars is misplaced. I’d put it FAR down the list of financial issues to be worried about, after housing debt, high interest credit card debt, medical debt, and student loan debt. And subprime auto debt tends to be priced properly. The big issue with the housing crisis was that the subprime debt was priced largely the same as the prime, and not differentiated when it was sold.

    • 0 avatar

      Instead of guessing, it’s easier to find your ranking here:

    • 0 avatar
      Big Al From 'Murica

      Well so long as we are passing harsh judgement, I prefer to simply sit out on my deck and look down the mountain I’m building on at all of the “little people” and ponder how everyone seems to hate my politics but have no problem accepting their cut off all of the tax dollars I pay.

  • avatar

    This is completely irresponsible. Why can’t we go back to the good old days of car financing, the ones where your raid your HELOC to pay for the car so you can deduct the interest and the car is paid off long before the bank forecloses on your house and you’re 1,000 miles away?

  • avatar

    My new company is about to open.

    We finance the finance charges people in North America incur.

    Debt serfdom is the biggest, fastest-growing industry in the world, and especially in the U.S., U.K., Canada, Australia, New Zealand, Spain, Italy, and France.

    We are going to lien organs such as livers, hearts, kidneys and eyes as collateral.

  • avatar

    A huge potion of the Canadian population live in The Greater Toronto Area. G.T.A housing prices jumped 40 percent in the space of a year..Thousands of home owners became “paper” millionaires over night. The attitude was on of “Hey I’m a millionaire I can afford a $70 K BMW”

    In April the provincial government slapped a 15 percent tax on foreign ownership. Around the same time the banks started to get antsy, and tightened the screws on the money. Within 60 days prices dropped 25-30 percent, and are still dropping.

    People that had committed to an unconditional offer found themselves trying to close a deal on a property worth $80 K less than it was when they bought..Thousands of house deals went sour. The Lawyers, and the courts ,will be years straightening everything out.

    Meanwhile the guy with the $70 K BMW owes more on his house than what its worth. Household debt in Canada was, and still is, obscene.

    As my mother would say “The chickens have come home to roost”

    • 0 avatar

      Toronto also offers a traditional GO train from downtown out to the suburbs. We don’t seem to know what those are in ‘Murica.

    • 0 avatar


      I think GTO real estate is just experiencing the pain from the 15% communist tax. It won’t take years for the lawyers to straight things out. It will only take 1 year, when the price reaches a new high to straight things out by itself.

    • 0 avatar

      mikey, I don’t pretend to know the market in Oshawa, but in Toronto itself things are not as you describe.

      Prices did indeed plateau in late May-June, and lenders have become fussier, but there have not been dramatic reductions – only the usual summer doldrums. We’ll see what hapens as the market reawakens after Labour Day.

      The fundamentals, though, have not changed. The GTA sytill attracts net inbound migration of about 100,000 people/year, which creates demand for 70,000 new housing units every year. People have jobs, and interest rates are low. The foreign buyer tax is a solution looking for a problem. And mortgage delinquency rates (according to TransUnion) are steadily falling, running at 0.54% in June 2017.

      So, it looks like the frenzy has died down, and maybe we’ll return to a more “traditional” market, where the long-term appreciation rate tends to run in the range 0f 6-8% per annnum. As the Zen master famously said, “we’ll see”.

  • avatar

    I don’t have a car payment …My 407 and 412 charges are bad enough : (

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