14 hours ago
‘I can't afford $800 a month': Ontario driver with credit issues finds car ownership too expensive
The majority of buyers have to finance their vehicle purchase and if you have a bad credit rating a car loan will cost you substantially more.
The average price of a new car in Canada is now more than $66,000, according to
Due to the high costs, a large majority of car buyers finance their purchase and the average loan interest rate currently sits at about seven per cent.
However, a bad credit rating could leave you paying much more.
'I do need a car, I just can't afford $800 a month,' Marva Yeboah of Bolton, Ont., told CTV News.
Yeboah said she bought a 2016 Mazda CX-5 three years ago, but had credit problem when she made the purchase and received her loan.
Her contract shows she borrowed $40,064 for the vehicle at an interest rate of 12.64 per cent over six years. The cost of borrowing is $17,194, bringing the total cost of the loan to $57,258.
'My credit score was just below 600 so it was hard to get any loan. They approved me but it was at a high interest rate' said Yeboah.
After paying almost $800 a month for the past three years, Yeboah was shocked to find out she still owes almost $30,000 for the car even though she believes it's worth less than half that amount.
'It's really, really frustrating and I just don't know what to do,' said Yeboah.
A recent survey by found that even if you have good credit, the total cost of car ownership in Canada averages $1,370 a month.
Shari Prymak with Car Help Canada says vehicle ownership is becoming a luxury for more and more Canadian drivers.
'The data is showing the negative equity in car loans is higher than it has ever been,' said Prymak.
Car Help Canada said anyone with poor credit or who has declared bankruptcy can end up with never-ending car payments.
'The interest costs of financing ends up being incredibly high so that it drowns the car buyer in debt and they're left with a vehicle that is worth significantly less then what they originally paid for it,' explained Prymak.
Tina Filion with the Credit Counselling Society said it's important to maintain a good credit rating to avoid having to take out loans with high interest lenders.
'If you miss one payment regardless of what it is it can have a real impact on your credit score, so you want to be careful with that,' said Filion.
'There is no easy way out of it. You just have to pay down the debt as quickly as you can, pay off the vehicle and just hold on to it,' said Prymak.
Yeboah said she reached out to her lender to see if there are options to help reduce her payments.
According to Statistics Canada, owning a vehicle takes about 15 per cent of a person's household income and is now the third largest expense after housing and food.
