Bad news: 8 year loans on the rise
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TORONTO — Loans with terms of 84 months or longer made up more than 50 per cent of all automotive financing in Canada in the first half of 2019, according to J.D. Power. While this number is consistent with previous years, 96-month loans are on the rise.Mitigating that risk is prompting dealers to offer insurance products that allow consumers to literally walk away from car payments in the event they can no longer support them, said David Hertzog of BDO Canada, an accounting, tax and advisory firm for a variety of sectors.
“Walkaway insurance would be the one that would cover off [buyers] if there’s negative equity on the vehicle. “If you’re upside-down on your loan — let’s say you’ve got to get out after four years, you lose your job or you’re sick and you can’t make the payments — walkaway insurance will cover you off, depending on what coverage you get,” said Hertzog, who works with dealers in the Greater Toronto Area.
“F&I departments in dealerships are being urged to sell this policy because it protects the customer, but it’s obviously a revenue-generating product for the dealer.”