What a fun trend.
Photo: David Zalubowski (AP)

Every morning I wake up, splash some water on my face, and say, to no one in particular, “Today’s the day we’ll see the auto industry start trending away from absurdly long loan terms. Surely everyone will realize, today, that this can’t end well.” Today is not that day. In Canada, we’re told by way of the CBC, more than half of all new car loans carry 84-month terms. Weeeeee...

That newfound, glaring trend was uncovered by everyone’s favorite market research firm, JD Power, which according to the CBC collects sales data on more than 1,200 dealerships across Canada, and found:

In a nutshell, “long-term financing has exploded in Canada,” the company’s automotive expert Robert Karwel said. At one point earlier this year, 55 per cent of all new car loans were for at least 84 months.

This is like what we’ve seen in the U.S. on steroids. More people are taking out loans that last up to 96 months, which is an incredible amount of time for a machine that depreciates immediately upon being purchased.

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I’ve said it time and again, but it’s certainly worth restating once more: a record amount is being spent on a new car, a record amount of people are behind on their car loan payments, and a record amount of auto loan debt remains outstanding. Longer loan terms are used to justify all of this by facilitating lower monthly payments, but the extended amount of time the loan takes to amortize has been shown to be associated with an increased risk of default.

What I’m saying is, this is a bad trend. I’m sure I’ll be saying this again relatively soon.