Subprime and Extended Auto Loans: A Potential Consumer Debt Crisis?


Shahram Prymak


Automobile Consumer Coalition (ACC)




The Automobile Consumer Coalition (ACC) researched the extent, risks, and benefits of extended-term and subprime automobile loans (auto loans). The ACC also researched the present extent of regulation with respect to auto loans in the industry and its possible benefits to the consumer. The objective was to draft a set of workable recommendations that consumers, industry, and government bodies could pursue to reduce potential and actual problems for the consumer, and for others.

A number of important facts about extended-term and subprime loans were revealed after a review of previously published literature, and a series of interviews with industry stakeholders. In particular, 25 to 35 percent of all automotive financing is subprime, and loans that are financed for 72 months or longer make up 69 percent of all auto loans in Canada.

Based on the findings of the report, the ACC makes recommendations in a number of areas: Regulators should implement the use of a disclosure statement, amortization schedule, income verification, down payment requirement, and restrict the use of immobilization devices, vehicle repossessions, and misleading advertising. Financial institutions should form a self-regulating council to help prevent or eliminate the use of predatory tactics by some private lenders. Regulators and dealerships should increase public awareness of the pitfalls of taking out long-term and/or subprime loans through an extensive education campaign.

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OCA Funded Research
This research received funding support through the Office of Consumer Affairs' Contributions Program.

Contact information

Automobile Consumer Coalition
208-1110A Wilson Ave
North York, ON
M3M 1G7
(416) 651-0555
(416) 651-5465

Source: Consumer Policy Research Database

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