Canadians are stretching out their payments over 72 or 84 months, even those shopping luxury brands like BMW and Audi.
There are good reasons why BMW, for instance, is offering a 4.99 per cent finance rate for 7 years on the X1 crossover and Audi has 2.9 per cent financing for 84 months on the A3. This tactic reduces the monthly payment at a time when middle class incomes in Canada have been largely stagnant for many years.
But there is more to explain why the Power Information Network is reporting that 68 per cent of Canadians finance their vehicles for 72 months or longer: vehicle longevity.
Research from DesRosiers Automotive Consultants shows the average expected useful life of a vehicle is nearly 400,000 km, or perhaps as long as 20 years at an average of 20,000 km of driving a year. Truth is, survival rates have increased significantly over the last three decades, notes Dennis DesRosiers in a note to clients.
"For instance, in the year 2000 only, 33.7 per cent of vehicles survived 15 years of ownership. Today some 54.0 per cent of vehicles survive 15 years of ownership," notes DesRosiers.
Yes, the quality story is very real in the auto industry. Consider this, says DesRosiers: in 1990, Canada's roads were filled with four million vehicles older than 10 years; in 2010, eight million vehicles on Canada's roads were older than 10 years. Today's buyer can assume that the shiny ride in a showroom now might still be doing its work in 2035. Yes, 2035.
This explains the growing popularity of six, seven or eight-year loan terms. "Since a vehicle holds its value so well and is still a very enjoyable and reliable ride well into its ownership cycle, the average length of ownership of a vehicle, if it was bought new, has increased," notes DesRosiers, adding, "Now that they (vehicles) last a lot longer, loan repayment schedules have followed suit."
One takeaway: if you choose to stretch out your "deal" in payments over six, seven or eight years, by year nine when you're loan-free, that vehicle may still have another six, seven, eight or nine years of serviceable life in its tank.
Deals of the Week consulted with www.unhaggle.com, Car Help Canada, www.carcostcanada.com, and other sources on these offers. As usual, pricing information here is subject to change and dealer discounts vary, so consult your dealer for all the final details, including expiry dates for all offers.
2015 BMW X1 xDrive35i
- MSRP: $39,990
- Freight, dealer prep, air conditioning tax: $2,230
- Dealer discount (estimated): $1,950
- Factory discount: $2,500 (manufacturer incentive)
- Factory discount: $1,000 (loyalty incentive)
- Taxable subtotal: $36,770
- Total price with 13 per cent HST: $41,550.10
- The manufacturer rebate is available with 0.9 per cent financing for 48 or 60 months, 4.99 per cent for 84 months or a lease rate of 1.9 per cent for 48 months. A loyalty rate reduction of 0.75 per cent is available with finance and lease rates.
2015 Audi A4 2.0 TFSI Quattro Technik + Tiptronic
- MSRP: $48,500
- Freight, dealer prep, AC tax: $2,230
- Dealer discount (estimated): $2,629
- Factory discount: $2,500 (manufacturer incentive)
- Factory discount: $1,000 (loyalty incentive)
- Taxable subtotal: $44,601
- Total price with 13 per cent HST: $50,399.13
- A $1,500 manufacturer incentive and any dealer rebates are available with 1.9 per cent financing for 48 or 60 months, 2.9 per cent for 84 months, or a lease rate of 2.9 per cent for 48 months. A one per cent loyalty reduction is available with lease and finance rates.
2015 Jaguar XF Base 4WD
- MSRP: $61,500
- Freight, dealer prep, fees and air conditioning tax: $2,230
- Dealer discount (estimated): $3,650
- Factory discount: $4,500 (manufacturer incentive)
- Factory discount: $2,000 (loyalty incentive)
- Taxable subtotal: $55,580
- Total price with 13 per cent HST: $62,805.40
- All incentives can be combined with 0.9 per cent financing for 48 or 60 months, or a 4.9 per cent lease rate for 48.
2015 Mercedes-Benz E-Class E 250 BlueTEC 4MATIC
- MSRP: $59,500
- Freight, PDI, AC tax: $2,210
- Dealer discount (estimated): $2,855
- Factory discount: $2,000 (manufacturer incentive)
- Taxable subtotal: $56,855
- Total price with 13 per cent HST: $64,246.15
- The manufacturer rebate is available with 0.9 per cent financing for 48 or 60 months, or a 1.9 per cent lease rate for 39 or 45 months. A loyalty rate reduction of 0.75 per cent is available for lease and finance offers.
and
. Calculations based on Ontario customers. Please note that while the information above is accurate at the time of publication, incentives are given at the discretion of individual dealers, and may be changed or discontinued at any time. Where noted, "dealer discounts" are negotiated with the customer on a case-by-case basis. Unhaggle Savings are actual discounts received by Unhaggle customers.
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