Used-vehicle loans with financing terms of 84 months now account for about 45 per cent of the used-vehicle market, up from 38 per cent last year and 25 per cent in 2021, says J.D. Power Canada.
Rising interest rates and high prices are pushing more used-vehicle buyers into “frighteningly” lengthy loans, stretching consumer budgets while creating both opportunities and risks for Canadian automobile dealers.
J.D. Power collects used-vehicle data from franchised dealers and a number of used-vehicle centres, Karwel said. That means the sample skews to the “newer and nicer” side of the used-vehicle market, with most vehicles up to eight years old.Buyers with poor credit or no credit are also increasingly opting for a “term stretch” to 84 months to keep their monthly payments within reach, said Andrew Abraham, CEO of the Ottawa-based subprime lender OCM Auto Financing Group Ltd.
“We’re seeing things come down a little bit, but we’re still far and above even where we were in 2021.” Ross, Karwel and Abraham see little relief in sight for buyers as both new- and used-vehicle inventories remain tight.Finance and insurance products, once pitched when selling new-vehicle sales, are increasingly common on the used side, Ross said.
“It’s not surprising that consumers are also buying more and more surety products to make sure that they don’t face an expensive out-of-pocket repair, based off the fact that their used car was more expensive than ever, and they took a longer term to finance it than ever,” he said.Though dealers are making more money on F&I, there is a downside to the current environment, Karwel said.
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