SASKATOON -- When purchasing a car or truck, Saskatchewan’s consumer protection agency is reminding buyers to do the math before signing on the dotted line.
While four to five-year vehicle loans were traditionally the standard, now financing arrangements can span seven or eight years, the Financial and Consumer Affairs Authority said in a news release.
“While getting an extended-term loan to help finance a vehicle over a period of seven or eight years may seem like a good idea, having these loans can result in negative equity when a consumer wants to trade in their vehicle prior to paying the loan off,” FCAA deputy director of consumer protection Denny Huyghebaert said.
“We have seen situations where a consumer has traded in their old vehicle for a $70,000 new truck, but due to the debt still owing on their previous vehicle, the consumer actually had to pay $110,000 to acquire the new truck.”
To avoid negative equity, it’s important to consider shorter-term loans, make a sizable cash down payment when buying a vehicle and pay off existing vehicle loans instead of rolling debt forward when buying a vehicle, the FCAA said.
The FCAA also suggests buyers have a strict budget in mind when buying a car or truck and to consider the total price of the vehicle over time, not just the monthly payment.
