Canadian auto debt continues to rise, but what’s most surprising is that young buyers — a group thought to have little interest in vehicle ownership — are shouldering much of the credit.
Credit-reporting agency TransUnion came to the conclusion when it analyzed consumer debt in 2017 for its quarterly Canada Industry Insights Report.
According to the report, the average Canadian consumer’s auto balance stood at $20,160 in the fourth quarter of 2017, a year-over-year gain of a 1.47 per cent, with Generation-X, millennial and Generation-Z buyers increasing their non-mortgage debt by as much as 23 per cent year over year. Baby boomers, by contrast increased debt by just less than one per cent.
The report supports a warning by credit-rating company Moody’s that longer-term car loans and auto debt are putting a strain on Canadian banks’ credit quality.
The numbers also contradict the assumption that younger consumers are instead keen on Uber and Lyft ride-hailing services as well as hourly rentals. Indeed, people living in major urban centres will gravitate to such modes of transportation, but many still find themselves desiring ownership, despite costs associated with parking, insurance and general maintenance.
For automakers, dealers and lenders, that would appear to be welcome news. Millennials account for more of the auto market than ever before, and Matt Fabian, director of research and analysis at TransUnion Canada, anticipates that Gen Z-ers will eventually make up about 30 per cent of the population.
Given younger buyers’ inclination to complete as much of the shopping process online as possible, Fabian said it will be crucial for dealers and lenders to adjust their business models to accommodate that.
“We’re starting to see, when we talk to our clients in the automotive space, they’re starting to think more about the digital space and how you rebuild your businesses for that.”