A recent report issued by Lucie Tedesco, Commissioner of the Financial Consumer Agency of Canada shows a "worrisome" growing trend of long-term auto loans of more than six years.
Long term auto loans
According to Lucie Tedesco, Commissioner, Financial Consumer Agency of Canada, "Recent trends in extended-term car loans have raised several concerns. Consumers must carefully examine their needs and their financial situation to ensure they can repay their car loans without undue strain, and with a full appreciation of the total interest charges and value of the car throughout the loan period."
Quick facts found in the report
Here are some facts the report uncovered:
The focus should not be on the payment
According to Ms. Tedesco, "Consumers and auto dealers tend to focus on the monthly loan payments required for a car purchase. Few take issues such as negative equity into account when choosing between different car loan terms. This is one of the reasons why FCAC will work with stakeholders to make sure that consumers are getting enough information and know which questions to ask."
The problem is made worse for credit-challenged borrowers. The higher interest rates they're charged mean that these consumers with long-term loans will be upside down longer, while paying even more in interest charges.
Here's what these buyers should consider if they need a car loan:
The bottom line
The trend towards long-term loans is not a good one for credit-challenged Canadian borrowers. These consumers should keep the amount financed as low as possible and the length of the loan as short as they can manage for their best chances at successfully completing an auto loan.
One more tip: If you have credit issues, we want you to know that you can get a reliable and affordable vehicle as well as the opportunity to put your credit back on track with help from Canada Auto Loan. We can connect you with a dealer in your area who is qualified to work with a broad range of credit situations.
Our service is free, our process is fast, and you are under no obligation to buy when you fill out our simple and secure online application. Get started now.