In 2016, the amount of auto loan delinquencies was on the rise with seemingly no end in sight. Now that it’s 2017, those rates have stabilized. See what that means for the used car industry and beyond.
A Drop in Oil Prices in 2016
Last year’s drop in oil prices was a big contributing factor to the large number of auto loan delinquencies. The lower oil prices weakened the Canadian dollar, which had an immediate effect on purchasing power and, therefore, on the amount of money people had to pay bills each month.
The Western Provinces were affected the most by the drop in oil prices, but now things are finally starting to look like business as usual again.
A Rise in Oil Prices in 2017
Experts were concerned when their models predicted that the increase would continue on through 2017, and they weren’t sure when it would stop. We can now say with some certainty that it’s not getting any worse. However, it’s not getting exceptionally better either.
Oil prices have risen back to where they were in 2015 before the sudden drop in 2016. The Canadian dollar has also risen back to the same levels as before. Luckily, this seems to have ceased the bleeding in terms of auto loan delinquencies.
A Weaker Canadian Dollar Is Good for Some
A weaker dollar may reduce consumer purchasing power, but that’s actually a good thing for some businesses. Certain product manufacturers do not complain when the dollar is weak. The products they create end up looking more attractive to other countries because they can buy more with the same amount of their own currency. All of that shifts backward when the Canadian dollar rises.
Canadian casinos near American borders also benefit from a weaker Canadian dollar. Americans will cross the border to have more money to gamble with and to bet in higher denominations than they would in an American casino.
Despite these few positive instances, a weaker dollar is not good for most Canadians. It means they can’t buy as much as they could before. Traveling becomes more expensive—not just getting there, but buying things while you’re there.
Global Cause, Local Effects
It can be hard to conceptualize that a large-scale factor like the price of oil can cause auto loan delinquencies. Many consumers likely thought it was their own personal problem that they weren’t able to pay their car loan on time. They may have been left scratching their heads, considering that they made the same amount of money, bought the same groceries, and adhered to the same budget, but things just weren’t working out anymore.
It’s like the analogy of the frog in hot water. If you gradually turn up the heat, you can boil the frog. But, if you try to put him in boiling water, he’ll jump right out. Consumers likely didn’t realize anything was wrong until it was too late, and the damage already was done. The last resort was to stop paying their car loan.
How Does This Relate to the Used Car Industry?
With delinquent auto loans on their record, more drivers are going to end up with subpar credit. When this happens, they will need to visit a dealership that is able to finance those with bad credit and get them into a used car.
Some of these people may find themselves with the first negative item on their credit report, while, for others, it might be the final straw that ultimately turns their credit poor or bad.
More high-quality car dealerships that help those with tarnished credit are needed. These dealers need to work with lenders that are used to handling loan applications from consumers with less-than-perfect credit, all the way down to bad credit.
We Can Get You Approved
If you suffered from an auto loan delinquency last year, then know that you’re not alone. It shouldn’t stop you from being able to get a quality used car at a fair price. At Ride Time, we are all about helping you recover from your delinquency and ensuring that you will enjoy the car you drive. Stop in today, and drive away in a car you’re sure to love.