Owning a car can be convenient, but also costly
After all, the 2022 MNP Consumer Debt Index Report reveals that less than a quarter of Canadians are confident that they could cope with an unexpected auto repair without going further into debt.Olivier Boyd, a licensed insolvency trustee at MNP, believes that fixed expenses must be prioritized.
For example, a person making $30,000 a year, should probably budget no more than $400 a month after deductions and taxes, and factoring in the insurance, elaborated Boyd. Doyle also emphasizes the importance of leaving some money for unexpected expenses in case of the “wheels coming off.” This emergency stash is highly recommended for people with older cars that will likely require maintenance.
Equifax Canada’s 2022 Market Pulse Quarterly Credit Trends report revealed that non-bank auto delinquencies went up 14.7 per cent in the last quarter of 2021 . This means more people struggled to repay their car loans. “We see that a lot in our practice,” Doyle added. “We get people who are paying 45 per cent, 50 per cent. They’re paying penalties. They take out a loan for $500 and now they have to pay $5,000 back.”
“I said, ‘No.’ They can charge me for the amount that’s on the loan, which was $400,” he said. “I am not going to give them that right.”
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