car loans

Owning a car can give you the freedom to go where you want and when you want, but there are costs that are rarely calculated. Unless you plan on paying for your car with cash, monthly car loan payments generally last from 3 to 8 years.

Things have changed in the new and used car market since the pandemic. There is apparently a microchip shortage that is impacting manufacturers across the globe. But what does that mean to you?

Licensed Insolvency Trustee, Francyne Myers takes a look under the hood. Is it better to lease or finance a new car? What is happening in the used car market? 

Francyne also covers:

  • Questions to ask before you sign the financing agreement
  • What to watch out for when you a leasing a vehicle
  • Tips for reducing you car costs
  • The difference between depreciable and appreciable assets
  • When you aren’t able to afford to have a car any more

Licensed Insolvency Trustees are considered some of the best financial advisors in the country and the only ones licensed by the federal government of Canada. You can be assured of receiving unbiased advice about managing your finances and reducing your debt.

Wayne Kay 00:04
Welcome to the Debt Matters podcast, where we help Canadians find solutions to their debt with Licensed Insolvency Trustees from across Canada. I’m Wayne Kay, and in today’s show, we’re going to talk about car loans. Loans and how the car buying market has changed over the last year. 

What do you do if you want to drive a newer car? Should you be trading up every few years? Even now with the chip shortages, how about financing a car? What questions do you need to ask? We’ll talk about that also. To lease or to finance? That is the question as well. And what if you can’t afford a car anymore because all the other costs in life are too much – what can you do? 

My guest today is Francyne Myers from Allan Marshall and Associates, Licensed Insolvency Trustee with office locations in Alberta, New Brunswick, Nova Scotia and Prince Edward Island. 

Francyne, thanks for being here.

Francyne Myers 00:59
It’s a pleasure, Wayne. Thanks for having me.

Wayne Kay 01:01
Oh, I’m looking forward to this discussion because cars are one of those things that it’s just such a temptation that we want to buy and drive new cars.

Francyne Myers 01:11
It’s very much an emotional buying decision, isn’t it?

Wayne Kay 01:16
It is. And seeing what happens in the car market over the last while, it’s kind of like last time we were talking about real estate and seeing that going through the roof. The same thing with the used car market. It is wild how much people are getting for their cars.

Francyne Myers 01:34
You know what, when the Pandemic started – the rental cars, there was just a lot on the market because rental cars, nobody was renting them. So the rental companies got rid of so many cars and then that caused everything to go on its end because there weren’t as many cars around anymore, because nobody was getting them, because nobody was renting them.

And then we introduced this lovely little phrase called supply chain problem. And I don’t know how many times you’ve heard this over the past year as an excuse for everything from the price of eggs to robotics. And here’s what’s happened.

Basically how it’s affected cars – you’ve got this little thing called a microchip, that does almost everything in today’s modern car. So there’s a global, what we call a global semiconductor shortage, which is part of the microchip used in so many products and you can’t get them anymore. So late model cars are modern cars that do everything with these microchips that can’t be manufactured. Or you’re waiting six to twelve months for a new car. 

Here’s what I’ve heard has been happening. They’re just taking the options off because certain options, they just can’t offer them anymore in a car. So you’re getting a car, but the lovely options you would have got three years ago don’t exist anymore because they’ve got to manufacture the cars and they can’t wait for these microchips anymore. 

So again, it seems to be that everybody’s saying wait until late in 2023 and early 2024 and things will all come back to the way it was. I’m not so sure, Wayne. But that is what Market Watchers are saying.

In the meantime, you just can’t get a new car. So what’s happening is the late model used cars are actually selling some of them as more than what a new model would sell.

Wayne Kay 04:02

Francyne Myers 04:04

Wayne Kay 04:05
So I was looking at a newer car, a brand new car –  it’s a new model. I’m not going to say what it was, but I decided to stop by the dealership and I went into the big city and walked in and said, do you have this car? And they said no. We have one coming in. And I said, well, what about this one? And they said no.

They had one new car on the lot. Everything else was used, but yet they looked new. They were beautiful. And the used cars were selling more than the brand new ones. If I wanted to order one, I could get that one cheaper than I could the one that was two years older.

Francyne Myers 04:50
I know. It boggles the mind.

Wayne Kay 04:54
I can’t do it.

Francyne Myers 04:56
Yes, I’m telling you I was speaking with a gentleman who works at a local car dealership here. And he said to me, here’s what happened. He’s in purchasing. He bought a used car of the kind that they sell for $29,000, and you can get a new one for $25,000. And he sold it within a week for $32,000.

Wayne Kay 05:28

Francyne Myers 05:29
Because they can’t get the new cars in.

Wayne Kay 05:34
Right. What are we supposed to do? From a Licensed Insolvency Trustee who teaches about taking care of your credits, being better with your money. What is your advice when it comes to these car loans and cars?

Francyne Myers 05:51
All right, my number one advice is first of all, do not make an emotional decision on anything and look very practically at the cost of a new car. Because a car is what you call a depreciable asset, which means that as soon as you drive it off the lot, most of us know this – it’s going to lose probably about 25% of its value. Right?

Wayne Kay 06:23

Francyne Myers 06:23
And I do hear-  well I like to drive a new car. Well, you don’t need to have a new car every few years.

Today’s cars should last you at least five or six years before they really start, and sometimes more before they start costing you money. Now that means maintaining it properly, oil changes, etc. And it doesn’t take a lot to maintain a car.

And keep in mind, within the first few years, most cars have lost most of their value. So let somebody else take the hit on depreciation. If you can maintain your car, hold on to it. Ride it out as long as you can, because you’re going to end up paying more for a car right now, even a used car. 

And it’s kind of even worse than real estate in a way, Wayne, because real estate will either hold its value or appreciate. It’s one of those appreciable assets that if you hold onto it, it’ll probably get worth more in value. Not a car, right?

Wayne Kay 07:31

Francyne Myers 07:31
Unless it’s a collector’s item. I mean, there’s always exceptions.

Wayne Kay 07:34

Francyne Myers 07:35
Most cars, as soon as you take them, they’re going to lose more of their value. So to keep buying a new car and losing money every few years, it’s probably not the best buying decision at this point.

Wayne Kay 07:48
So here’s a question for you, because I physically know people who are buying $100,000 trucks, driving them for six months or a year, and then selling them for the same amount of money – exactly what they paid for them, or even a little bit more because of, as we mentioned, the chip shortage and you can’t get vehicles.

Francyne Myers 08:11
Got you.

Wayne Kay 08:12
Here’s my question. How are people buying $100,000 vehicles? Because I know a guy who does finance – and a dealership, he said the average loan is for an $86,000 truck. That’s average.

Francyne Myers 08:28
Yes. You know what? Here’s the answer to that. Sales people are very good at what they do. When you’re buying a vehicle now, they don’t deceive you on the cost of the vehicle. They just don’t focus on the cost of the vehicle.

Francyne Myers 08:53
And they don’t tell you you’re going to have an eight year car loan.

Wayne Kay 08:56

Francyne Myers 08:57
What they focus on is what you can afford every pay or every week or every month, but not really explain to you what you’re actually paying over the cost of a loan. And really, Wayne, I think sometimes people don’t want to know because they want their vehicle, right?

Wayne Kay 09:19
And he said that people love it and they have no problem paying each month. They love it for the first five or six years, but after that, they’re paying all this money for a vehicle that’s depreciated a fair amount. So exactly what you were saying.

Francyne Myers 09:36
And it’s starting to cost you in repairs.

Wayne Kay 09:40
So when you’re financing a car, what are some things that we should ask?

Francyne Myers 09:44
Well, definitely don’t just focus on, and you see these all the time, all the dealerships, we can put you in this car for $125 a week. All right, well, that doesn’t seem like very much, but when you start multiplying that, figure out how much that is for a month, and then you realize that you’re paying that for eight years or seven years, it starts to be an awful lot of money. So always ask, what is this actually going to cost me over the cost of the loan? You may get a bit of an eye opener.

Don’t just say, well, how much can you afford as a payment? Because that’s how people sell cars, right. Also ask, are there any added fees? A lot of times dealerships will put added fees that can be negotiated.

So be very aware when somebody says, oh, we have to add that on. I would question that. It doesn’t hurt to ask. It can always be a point of negotiation.

What’s the interest rate? What am I actually paying as an interest rate? Not just how much can you afford. And always be really clear on the warranty that comes with the car.

Now, here’s the problem, though, with car buying these days, you can’t really negotiate as much because everybody’s chasing the same car. It used to be that you could go in and say, well, what can you do for me now? It’s like, if you don’t want to pay the price, I’m sorry, we’ve got 20 people behind you who will pay it.

Wayne Kay 11:20

Francyne Myers 11:21
So it’s very much becoming a seller’s market when it comes to cars. You’ve got to be really savvy. The other thing to keep in mind when you’re buying a car or truck is fuel consumption. When you’re paying $125 to fill up, as I did today, a midsize SUV, it makes you pause as to what you’re going to drive, how much you’re going to drive.

Wayne Kay 11:51
It is my son’s work truck. He just filled it up and he said it was $180 to fill it. And then if you add in premium vehicles, premium vehicles that take premium fuel. Oh my gosh, Francyne. It’s absolutely something to be aware of, for sure.

Francyne Myers 12:07
Well, you definitely keep that in mind. Now, keep in mind, they say, with premium vehicles, and people do say that, well, I’m not going to buy something that takes premium gas. Keep in mind that – and honestly, I have not done a lot of research on this, but the explanation for that, I guess that the premium, is that it does keep your engine cleaner. Maybe that’s just good marketing on part of the gas station. I’ve checked into it and apparently you are supposed to get more kilometers to the liter.

Wayne Kay 12:42

Francyne Myers 12:43
So it may actually work out, but it is a bigger hit at the pump, for sure. That’s something that you should check with any vehicle, no matter what the cost of it is and especially if you’re buying a used vehicle. There are some very good reviews because they look back on what the costs of repairs were, the fuel consumption of a car. So that you can always look that up when you’re looking to make a decision on what kind of car you should get.

Keep in mind when you’re looking at fuel consumption of a car, I always think that they’re test driving them along a highway with no wind, sunshine, and driving 90 km an hour. Because I’m not a real big fast driver – I don’t speed a lot, but I never seem to get what they say I’m going to. So I think it’s under ideal conditions. So keep that in mind. Sometimes when they do that, it’s flat, sunny, and everybody’s doing 90.

Wayne Kay 13:49
Yeah, good point. Now, what about the leasing option? Should you lease or finance a car these days? Any ideas there?

Francyne Myers 13:58
You know what, I can see how it is. So much of a temptation. Because it comes down to, well, if I lease, I can afford more of a car. Or, like you said, these $85,000, $100,000 pickups – and people really do like their pickups.

There are a lot of them around. So then you can actually afford more. But can you really, when you think about it? Because the lease, to me, unless you can use it in a business as a tax write off, I’d always recommend that people finance. There are so many conditions when you lease.

You can only put so many kilometers on it over three or four years. You have to do all your repairs and all your maintenance at the dealership. And at the end of the lease, there usually is a fairly hefty buyout. So then what happens is you either have to finance the car in a way to keep it, or you’re going to end up in another lease making the same payment. So you never really own the car at the end of the year or the end of the term of the lease.

So I’d say you’d be really careful. Not just look at a smaller payment, but consider everything with a lease as to what’s going to cost you, what the conditions are. Ask questions and read the fine print.

Wayne Kay 15:19
What about if you can’t afford the car anymore? I mean, you help people who are in situations where their debt is now out of control. They need help. And for many that might mean the car, because the car is extremely expensive. What can they do?

Francyne Myers 15:38
That’s two things that are happening right now. Number one is where people can’t afford the car anymore.

So you have to ask yourself, what can’t I afford? Is it the gasoline? Is it the car payments? Is it the insurance? There are different ways that you could look at reducing your car costs.

Number one, drive at a lower speed. If you are prone to speeding on the highway, well, you know what? That comes at a cost. So slow down, don’t accelerate so much quickly. Just have better driving habits that will probably save you some gasoline. That would help.

Same thing with insurance. Insurance companies are competitive. If your rate has gone up or you think you’re paying too much for insurance, shop around. You’d be amazed at what you can get.

You say, okay, I’ve done all that. I’ve brought my insurance down. My gas is pretty good. Now I’ve got it down as well, and I still can’t afford it.

You don’t have a lot of options, Wayne. If the car can be sold for the cost of the loan, then you’re okay. And you are having that now because used cars are commanding more of a price. So that may work. The other option is trying to trade it in because again, car dealerships are giving you more for your used cars or you can negotiate it because they need them.

They need them because a lot of people are looking for them. Keep in mind though, you’re going to have to find something that’s probably used or wait a while for a new car. So you always think of that.

Apart from that, if you’re really, what we say underwater and you owe way more on a car than the value, you’re almost stuck with it. Unless you’re looking at, I hate to say it, doing a Bankruptcy to get rid of any deficiency or anything like that or you’re just going to have to pay the deficiency on the car and kind of bite the bullet – which is probably not the best situation because you need a vehicle. So it’s not one that I would recommend. I would try and reduce my cost of ownership of the car before I ever went to one of those drastic solutions.

Wayne Kay 18:01
Right. And this is perfect for if somebody does have questions regarding this. This is what a Licensed Insolvency Trustee does and Francine, you and the rest of the team are there to offer different solutions as you have said here. Final words of advice regarding car loans, auto advice.

Francyne Myers 18:23
Try not to get yourself to another one right now. If you can stay with it – if it’s not costing you too much to fix, stay with the car you have or try and get yourself into a good used car without paying too much for it. Sometimes, again, private sellers may be the way to do it and keep it maintained. And again, try and ride out the craziness that car financing is these days, absolutely.

Wayne Kay 19:01
Always a pleasure. Thanks very much.

Francyne Myers 19:03
You’re welcome, Wayne. Take care of yourself.

Wayne Kay 19:06
Well, my guest today, Francyne Myers. You can learn more or schedule a free consultation with Allan Marshall and Associates Licensed Insolvency Trustees by going to their website 

So that’s it for today’s Debt Matters podcast. Make sure you subscribe wherever you get your favorite podcast from. And of course, if you want more information, you can always check out And if you know of somebody who needs help with this kind of information, please pass along our podcast to them. Thank you very much for listening.

About Francyne Myers

In 2012, Francyne left her 23 year public service career and joined Allan Marshall & Associates where she completed her education and became a Licensed Insolvency Trustee in 2013. Alongside with her work she is actively involved in her local Trustee Association. In her spare time Francyne can be found fishing and spending time with her family.

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