Extending loan terms is becoming increasingly common in Canada, according to a report from Bloomberg. The average loan term for light vehicles in Canada is 69 months, but loans with terms as long as 96 months are growing in popularity. Government regulators have echoed the International Monetary Fund in calling near-record consumer debt levels a threat to the country’s well-being.
Auto sales in Canada are at record levels. In May, $0.37 of every retail dollar spent in Canada was auto-related, according to a government statistics bureau. This compares with $0.31 of every retail dollar in the United States going toward autos in the same period. Scott Hannah, president of the Credit Counseling Society, said 10% to 15% of the 30,000 people his company meets with every year seek advice about auto loans. Hannah counsels customers to avoid loan terms exceeding five years. ”If you can’t put down 20% including taxes, you aren’t ready to buy a car,” he said. “It’s not in the customer’s best interest to take out a longer term loan for a depreciating asset.” Still, delinquency rates in Canada remain at record lows, according to Equifax Canada.
