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What is The Average Car Payment in Canada?

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Financing an automobile, especially a newer model or a higher-quality brand, can be one of the more reasonable options. Unfortunately, many drivers are unable to afford the accompanying expenditures or qualify for a decent car loan, at least one with a reasonable interest rate and payback schedule. If you find yourself in this circumstance, it may be time to reconsider your options.

Do you want to know if auto financing is the best option for your next vehicle and, if so, what the average car payment might be?

Canada’s Automobile Market

Over the last few years, Canada’s car market statistics have steadily improved, with the biggest percentages coming from Ontario and Quebec, which account for more than 60% of the country’s registered consumer vehicles. Ontario, being our most populous province, has well over 8 million motor vehicles on the road today.

Although a vehicle is not required for all Canadians, some rely greatly on their automobiles. In truth, there are a variety of situations in which you might want regular access to a road vehicle, including but not limited to:

  • Groceries, household goods, and other necessities are transported.
  • Going to work, school, or other locations when alternative modes of transportation are unavailable
  • Travelling and vacationing in all types of weather
  • Furniture, appliances, and other bulky/heavy things must be moved.
  • When you have health or mobility concerns, getting about might be difficult.
  • Professional driving (transporting clients, materials, goods, etc.)

Whatย Affectsย theย Priceย ofย aย Carย Payment?

Getย aย loanย costย estimateย fromย yourย lenderย beforeย applyingย forย vehicleย financingย anywhereย inย Canadaย (usuallyย obtainedย onlineย orย overย theย phone).ย 
Itย mayย alsoย beย beneficialย toย understand theย reasonsย thatย canย causeย theย costย ofย yourย paymentsย toย fluctuate,ย suchย as:

Amountย ofย theย loan

Theย moreย moneyย youย wantย toย borrow,ย theย greaterย theย riskย yourย lenderย assumes.ย 
Asย aย result,ย aย largerย carย loanย usuallyย entailsย aย longerย paybackย periodย andย moreย interestย overย time.ย 
Whileย youย mayย beย ableย toย getย aย loanย withย aย shorterย term,ย yourย paymentsย andย interestย rateย willย beย greater.

Interest

Ifย youย haveย poorย credit,ย aย poorย financialย situation,ย orย aย lotย ofย outstandingย obligations,ย youย mayย beย consideredย aย riskierย clientย andย onlyย beย eligibleย forย aย higherย rateย (andย viceย versa).ย 
Furthermore,ย someย lendersย chargeย variableย interestย ratesย thatย fluctuateย inย accordanceย withย theย Bankย ofย Canada’sย primeย borrowingย rates.

Termย ofย theย Loan

Theย amountย ofย interestย youย payย onย yourย autoย loanย isย alsoย affectedย byย theย lengthย ofย yourย repaymentย period.ย 
Even though a longer term has a low rate and payments, you may end up paying significantly more interest than you youย wouldย withย a shorter term,ย evenย ifย the longer termย hasย aย higherย rate.

Fees

Throughout the length of your car loan, you may be charged one-time or recurring fees by your lender for administrative purposes such as document processing and loan origination.

Inย addition,ย eachย late,ย short,ย orย missedย carย paymentย mayย resultย inย aย penaltyย cost,ย asย wellย asย additionalย interest.

How Much Does a Car Payment Cost on Average in Canada?

As you can see, there are numerous elements that influence the price of your car, making it difficult to forecast exactly how much you’ll pay in loan payments. Most lenders and auto dealers can only provide you with a basic pricing quote, and the actual cost of your car loan may change over the course of your repayment plan.

Household Debt and Car Payments

The following are the results of a 2014 survey performed by the Bank of Montreal:

  • Every five years, Canadian drivers spend an average of $26,044 on a new car.
  • The total cost of the car loan, insurance, fuel, and maintenance was $5,250 per year and $437.48 per month.
  • Car payments are now the third-largest source of household debt in Canada, trailing only housing expenditures (32.5%) and food prices (18.82%).
  • Car costs account for 15% of the average household budget, which is 7% higher than what drivers spend on savings and investments (8 per cent total).
  • That’s 9% more than the average Canadian spends on other debts like credit cards, lines of credit, and other loans (6 per cent of the average budget).

Most of these figures will have risen in line with Canada’s ever-increasing population of drivers since this poll was performed. Nonetheless, you may get a general estimate of how much a car loan might cost you. In general, Canadians spent $5,250 per year on their car, or $437.48 per month, which included monthly payments, gas, insurance, and maintenance.

How Canadians Do Car Payments?

According to the same BMO analysis, more Canadians buy automobiles than lease them, with 83 per cent of survey respondents claiming to own at least one car and 82 per cent stating that they would prefer to own their vehicle next time around. That suggests that just roughly 20% of drivers are now leasing a car (or are considering doing so in the future).

Of those drivers polled:

  • 49% stated they took out a loan to pay for their new car.
  • 11% said they used a credit card.

Canadian drivers, it appears, prefer the advantages that come with owning a car. After all, once you’ve paid off your automobile, it’s your property, and you may drive it whenever and wherever you want. You can also use the car’s title as collateral to qualify for a secured loan, resell it, or trade it in for a better bargain on your next vehicle if you keep it in good shape and maintain its resale value over time.

Why Do Some People Lease Their Automobiles?

Leasing, on the other hand, allows you to check out a new car every few years. Instead of taking on the burden of ownership, you simply return the vehicle to the dealership at the conclusion of your payment period. Typically, there will be a defined mileage and damage limit that you must adhere to in order to complete your lease without incurring any additional fees.

However, many drivers still choose to own a car because leasing a car over time might result in significantly more interest being paid in the long run. You’ll have to go through the approval process again if you receive a new lease. If you didn’t make all of your payments the past time, you might not be able to get a good lease the following time around. Furthermore, you will never be able to use the vehicle as collateral, resell it, or trade it in.

Need Some Quick Cash? Let Us Help!

Are you struggling with your financial needs and need some extra cash? Lionsgate can help. Just fill out the form below, letting us know all your cash or mortgage requirements and we will find the best lender for you. Amazing thing? The process is free and you can quit it at any time.

We have a team of experts that analyze your requirements and pick the best lender for you, with prudent advice.

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If you found this article helpful, please share it with someone you care about. Also, visit our blog to read similar helpful articles on finance, real estate, and getting mortgages.

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