According to a CIBC Capital Markets report, rising car prices, rising borrowing costs and rising costs of living are making it difficult for some Canadians to keep up with their car payments.
“Auto loan delinquency rates are now at pre-pandemic levels and are likely to rise further in 2023,” CIBC analyst Paul Holden, lead author of the report, said Wednesday. Stated.
“The average size of auto loans has increased as prices have risen, increasing borrowers’ monthly payments. Inflation, interest rates and economic pressures have made it difficult for consumers to pay these high payments. I have.”
Auto loan delinquencies reached 2% in the third quarter of last year, up from 1.7% a year earlier and above the pre-pandemic average of 1.8% in 2018 and 2019.
CIBC notes that from April 2020 to December 2022, new and used car prices jumped 30% and 60%, respectively.
With some household budgets stretched beyond their limits, Canadians must choose which debts to pay and which to fall behind.
“Usually, when consumers are in dire straits financially, they pay off credit cards, lines of credit, personal loans, etc. Scott Terrio, Licensed Credit Counselor and Consumer Insolvency Manager at Hoyes, Michalos Licensed Insolvency Trustees, said:
“But when choosing between shelter payments and a car loan, the car loan is always the first to be delinquent.”
But these Canadians are still taking a gamble, adds Terrio.
“They will take advantage of the possibility that the secured lender does not want to repo the car until absolutely necessary, as they will most likely end up with losses and expensive recovery pursuits. ‘ he said.
The average Canadian still has some surplus savings outside of the pandemic, but there are growing concerns about the ability of low-income families to pay, according to CIBC.
Michelle Zadikian is a Senior Reporter at Yahoo Finance Canada. follow her on her twitter @m_zadikian.
