Canadians Pile On Auto-Related Debt To Fund Luxury Car Purchases
Canadian auto debt is on the rise despite warnings from government financial policy planners concerning the amount of money owed by Canadian households. According to a report from the Automotive News, a surge in luxury vehicle sales has helped to push auto-related debt in Canada to three times its 2007 level. Key indicators that luxury cars are driving vehicle borrowing in Canada are not hard to find. For example, in 2012, BMW sold more 3 Series entry-level premium cars in the country than Honda did Accord mid-size family sedans.
Canadian household debt currently hovers around 165 percent of disposable income, a fact that is directly tied to the 1 percent Bank of Canada interest rate. This rate, which is a legacy of the global financial crisis, continues to see mortgages and loans stay cheap for Canadian families comfortable with borrowing. Per person Canadians owe, on average, $27,485.
Auto loans, as measured in the third quarter of 2012, stood at $54 billion. This is in contrast to their fourth-quarter 2007 status of $17.3 billion. Luxury car sales have skyrocketed at the rate of 30 percent over the past eight years, which is more than three times the standard growth rate for the industry as a whole.
