Long-term financing and its focus on small monthly payments can be troublesome for many consumers and dealers, cautioned a recent Financial Consumer Agency of Canada (FCAC) report.
This wasn’t news to car dealers.
Long-term financing has been rising steadily in Canada since 2010.
The problems it can create -- including negative equity trade-ins when consumers want or need to change vehicles before they build any equity in those 72-, 84- or 96-month loans -- have to be confronted in some manner every business day at dealerships across the country.
Roughly 30 per cent of all trade-ins now have some negative equity.
Typically, it gets rolled into another long-term loan, and no surprise how that story plays out: deals get harder to make, and when they do come together, consumers wind up taking on more debt.
When it comes to negative equity, nobody’s a fan. But outside of more leasing, the only ways to turn around the negative equity ship appear to be small adjustments in dealer processes, and more consumer awareness.