A growing number of Quebecers are not only affected by their mortgage payments, but also by car loans.
As a result of sharply rising car prices and inflation, the nation’s auto loan delinquency rate of 90 days or more jumped 29% in one year, Equifax recently revealed.
According to the president of Jean Fortin et Associés, Pierre Fortin, a licensed insolvency practitioner, two phenomena have mainly contributed to the significant increase in monthly car payments.
“First, there is the significant increase in the value of vehicles: with the pandemic there has been a shortage of vehicles that has pushed up prices: this year, a person has to pay an average of $15,000 more for a new car than last year,” he explains in an interview with TVA Nouvelles.
“The second phenomenon refers to the interest rate: we no longer have a promotional rate from the manufacturers, which allowed to rent or buy with 0% interest, or 1-2%. Now, these are more common loans as they say, bank loans at 7-8-9% and for second chances, it’s often 12-15-20% interest,” he explains again.
The presenter Michel Jean, for his part, wonders during an interview about a possible change in consumption habits, which could explain the recent increase in the delinquency rate. Two decades ago, he argues, certain car brands, such as BMW and Mercedes, were owned by a wealthy minority of the population.
He also argues that the SUVs that proliferate on our roads often cost far more than the small cars they replaced.
“Isn’t there that too? Everyone thinks it’s normal to have a vehicle for $40,000, $50,000, $70,000…,” he argues.
“That’s a very good point,” agrees Pierre Fortin.
The expert points out to car owners and lessees who can no longer pay the monthly payments that the market is currently favorable to sellers, and that, in this sense, it can be strategic to put your car up for sale.
“So you need to check the market value of your vehicle, on platforms like Kijiji and others, to verify the value. If we are able to sell for at least the same price as what we owe, or more, so much the better, we can get rid of a payment”, he explains.
For all the details, listen to the full interview with Pierre Fortin in the video at the beginning of the article.