Canadians are getting lured into signing long-term car loans.
Thinking about buying a new car right before purchasing a home? See why economists are concerned about auto loans and the impact it is having for Canadians across the country.
Consumer across Canada have been taking advantage of stretched amortization periods for multiple loans in recent years in order to lower their monthly obligation payments. One such loan that has Canadian economists watching closely are auto loans.
This has resulted in Canadians buying more car than they can afford, paying more interest in the long run and in some cases buying a new car before the original loan has been fully repaid.
The average new car loan last year had a term longer than 72 months, up from the average of 65 months back in 2010.
What also has economists worried is that auto loans have quickly outpaced and outgrown the red hot mortgage loans, credit cards and lines of credit. Auto loans have increased to $64 billion from $16 billion in seven years.
Car loans are often one of the biggest monthly obligations we carry and definitely have an impact on your mortgage approval. Are you considering purchasing a new vehicle and a new home within the next year or so? Speak with a mortgage broker to see how this loan can potentially impact your mortgage pre-approval down the road.