More Canadians missed payments on their
in the third quarter, this trend was most pronounced among the youngest and oldest
.
Number of people aged 25 years and under who
The rate of missed payments among people aged 26 to 35 rose to 2.94 per cent of all auto loans, up 9.24 per cent from a year ago, according to Equifax Canada.
Borrowers ages 56 to 65 who missed three or more payments made up 1.33 percent of all loans, up 14.88 percent from last year, while the rate of delinquencies among borrowers 65 and older rose to 1.03 percent, up 16.02 percent.
Overall, 1.88% of borrowers missed three or more payments, up 10.77% from a year ago.
The current situation is the result of a lingering hangover from COVID-19, in which supply chain disruptions and chip shortages have limited vehicle supplies and contributed to rising prices for new and used vehicles. But once those problems were resolved, the Bank of Canada began raising interest rates in 2022, eventually raising the overnight rate to five percent from 0.25 percent.
“You find yourself in a situation
where is the availability of vehicles
This was a serious, serious problem,” said Rebecca Oaks, vice president of advanced analytics at Equifax.
The combination of this with wider inflation and higher housing costs has made housing affordability a major policy issue. Oakes said
car prices have gone up so much
that borrowers are taking out long-term loans, sometimes seven or eight years, on used cars that may not last that long.
And
that provide loans for new and used cars are also struggling. Car loan balances from borrowers age 25 and younger with three or more missed payments accounted for 1.91 percent of the total balance of all loans in the third quarter. This is 23.75 percent more than a year ago.
Generally,
three missed payments in the third quarter accounted for 1.03 percent of all loans, up 4.87 percent from last year.
Oakes said insurance rates have also increased, further increasing the cost of vehicle ownership.
“Obviously, affordability is still a real issue,” she said. “We're starting to see average auto loan interest rates come down a little bit,” but they're not going down as fast as the Bank of Canada's overnight rate, which is 2.25 percent.
Estimates of how much car prices have changed in Canada in recent years vary. The average price of a new car in Canada fell 4.9 per cent year over year to $63,264 in the third quarter, according to AutoTrader.ca, an online marketplace for new and used cars. But used car prices rose 3.2 percent year over year to $36,911.
Baris Akyurek, vice president of research and analytics at Trader Corp., which operates online marketplace AutoTrader, said auto sales will be strong in 2025, but there are nuances to the trend as some of the demand has shifted toward more affordable cars from luxury vehicles.
He estimates that between 2020 and 2023, 1.5 million fewer vehicles entered the Canadian market than expected. As a result, there are fewer used cars that are three to five years old now, which is partly why used car prices aren't falling like they are for new cars.
Dan Park, chief executive of Clutch Technologies Inc., a Toronto-based online used-car dealer that refurbishes and resells used vehicles, said there are a lot of mixed signals in the market.
In November, Clutch reported that the average used car price in its market was $34,352, up 6.21 percent from last year.
Clutch also tracks what it calls “negative equity,” which is when a borrower owes more on a car loan than the car is worth.
Park reported that 18.1% of people who considered selling their car to Clutch in the third quarter lost an average of $8,100. In the first quarter, 23.5% of Clutch's potential sellers were in the dark.
but by a lower average amount of $7,710.
.
However, market conditions have clearly deteriorated. In the first quarter of last year, 7.2% of potential Clutch sellers lost an average of $5,050.
“That means people were buying cars at very high prices during the pandemic,” he said.
However, the current market can be described as neutral or slightly soft, Park said.
“Economic data shows we are in a fairly moderate to good economy, but sentiment is negative,” he said.
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