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45% of used-vehicle loan terms ‘frighteningly’ long at 84 months, up from 25% in 2021

With high vehicle values ​​and high interest rates compromising affordability, buyers — particularly entry-level ones — have been forced to extend borrowing time frames, Ross said.

“Consumers are looking to stay in a consistent monthly payment range to what they used to previously, so the only thing they have is to elongate that loan term,” he said.

Ross, Karwel and Abraham saw little relief in sight for buyers as both new- and used-vehicle inventories remained tight.


For dealers, however, the longer loan timelines are creating opportunities.

Finance and insurance products, once pitched when selling new-vehicle sales, are increasingly common on the used side, Ross said.

“As much as you’d previously have said, ‘No, I’m not interested in that kind of stuff,’ now you have to stop and … think about it because now you’re going to be owning that vehicle for so many more years,” he said.

Higher used-vehicle prices are also pushing customers into cars that are a few years older and thus already or nearly out of warranty, Karwel said. Coupled with the longer loan parameters, this allows dealers to sell service contracts “left, right and center.”

“It’s not surprising that consumers are also buying more and more surety products to make sure that they don’t face an expensive out-of-pocket repair, based off the fact that their used car was more expensive than ever, and they took a it’s longer term to finance than ever,” he said.


Even though dealers are making more money on F&I, there is a downside to the current environment, Karwel said.

If a customer puts the minimum down on a used vehicle and takes as much as seven years to pay it off, it will take a long time for that buyer to become a repeat customer.

Dealers will connect with customers on the service side, but long-term financing puts buyers on the sidelines for years, as opposed to in the market for a new vehicle, said Ross of Canadian Black Book.

“You’re not going to see that customer all that often, so that’s not as big a profit center,” he said. “Now you’re going to have to look at conquering more customers.”

The longer terms could also affect vehicle supply.

Used-vehicle prices are already high by historical standards, Ross said. But with longer loan terms, those vehicles will be coming back on the market less frequently, hollowing out inventory and potentially driving prices up further.

The booming sales of service contracts and other surety products indicate that consumers are already “digging in” with the vehicles they have, Karwel said. Facing high prices, high interest rates and the challenge of simply finding a vehicle over the past 21⁄2 years, Canadians, he said, are increasingly planning to “keep this ride for as long as humanly possible.”

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