Tis the Season to Stretch Your Money | Automotive Training Centre

Photo source: The Canadian Finance Blog

The first few weeks after the holidays are always pretty tough. The parties are all over, the tree and decorations come down, and we all return to our everyday work/school schedule. But the toughest part of it all is recuperating from the holiday shopping. Starting the New Year with thinner wallets has kicked most of us into saving mode. And if you think you’re the only one counting dollars and cents, think again. As far as auto sales and leasing goes, it looks like the whole country is trying to trim down on spending.

Most auto sales college students and graduates would be interested in knowing that the majority (57 per cent) of Canadians are taking out longer term car loans of 72 months or more. Fifty-seven per cent is quite significant seeing as how only 12 per cent of Canadians took out long-term loans in 2007. That means in just five years almost five times the number of people are looking for ways to stretch out their car payments.

While the Canadian economy hasn’t been pummeled quite as hard as our American neighbour, Canadians have less cash up front. So, what does this mean for people with automotive careers in general?

First of all, longer car loans usually cost more money. The monthly payments are smaller but stretching out our payments means having to pay more interest over time. It also means if your loan is long term you’re going to want to keep your car on the road longer, which is not necessarily a bad thing for people looking to become a mechanic, but things could get pricey for the car owner in the long run.

Despite all this, the car industry is not at risk just yet. From an auto sales perspective, the increased payment plans actually caused a drop in car leasing but not a drop in car sales. Even  though most people would rather have leased a car, the long-term payment plans led more people to decide to finance.

A forward forecast depends on what you think the economy is going to do in the next half decade. If there’s an upswing it’ll probably flip back to leasing. If not, people are still going to need cars regardless of the state of their pocket books, so expect a trend towards ‘budget’ options.

What do you all think: Are long-term loans a good or bad thing?

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