Map your pathway towards buying an affordable car: FCAC releases new online guide to help consumers navigate car financing options

News Release

For Immediate Release

June 8, 2016 – Ottawa, Ontario – Financial Consumer Agency of Canada

With long-term car loans boosting Canadian household indebtedness, the Financial Consumer Agency of Canada (FCAC) has published new online material to help consumers weigh the pros and cons of various car financing options.

FCAC’s “Financing a car” information is based on the research it recently published on long-term car loans. This information helps consumers navigate their options, needs and risks before financing what may be among the biggest purchases they will make, next to a home. “Financing a car” helps consumers understand the impact of the regular payments they choose, and the total cost of their car over time. It also outlines what to consider when assuming long-term car debt.

Quick facts

  • Stretching out your repayment term over six, seven or even eight years, as compared to the more traditional five-year term, can lower your monthly payments. But each year you add to the loan means more interest paid on an asset that loses value over time.
  • Consumers tend to trade in cars around the four-year mark. If they opt for a seven-year loan and trade in after four years, they will still owe three years’ worth of payments. This is where the debt treadmill starts.
  • Consumers may be given the option to roll over what’s left of their loan into a new loan for another car. That means consumers could find themselves deeper in debt, owing much more than their car is worth, and essentially making payments on two cars.
  • Last March, FCAC published Auto Finance: Market Trends, a research report highlighting a worrisome trend toward longer-term car loans posing risks that Canadian consumers should consider carefully before financing a car.

Car shopping smarts

  • Create a realistic budget so you know how much you can afford to spend on a car.
  • Anticipate how many years you’ll likely keep the car, and what that implies for the loan term.
  • Ask your dealer and your bank for financing options.
  • Compare costs, negotiate and shop around for the best financing possible.
  • Choose the shortest-term loan your budget will allow.


“If you’re shopping for a new car, you may be inclined to choose a loan with a repayment term of six, seven or eight years. That’s a stretch from the traditional loan of five years or less. I encourage consumers to use the information we have developed to help them determine how much car they can truly afford and the financing option that best suits their needs. As much effort should be put into shopping for your car financing as shopping for the car itself.”

Lucie Tedesco, Commissioner, Financial Consumer Agency of Canada

“FCAC’s ‘Financing a car’ information was created to help Canadians of all ages understand some of the key considerations when buying or leasing a car. Empowering consumers with the information they need when they are about to make one of the biggest purchases of their lives assists them in ensuring that they are making the right decision according to their needs.”

Jane Rooney, Financial Literacy Leader, Financial Consumer Agency of Canada

Associated links


Natasha Nystrom
Media Relations Officer
Financial Consumer Agency of Canada

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