Covid 19's Effect on Car Loans in Canada
It’s amazing how much can change in just a week. Everyone here at Car Loans Canada wishes you and your family all the best during this difficult time and hope that you’re taking the recommended precautions to avoid exposure to COVID-19. Nothing is more precious than your health, and we hope that you continue to enjoy it through this pandemic and beyond.
Car Loans Canada has created a division dedicated to helping people during the pandemic. We’re going to cover some of the biggest impacts that COVID-19 has had on the lending and automotive industries, how they could affect you, and how our new division can help. First we'll talk about lending and interest rates, secondly, we'll talk about dealing with your car loan payments.
Lower Interest Rates
As you may know, the Bank of Canada has just lowered interest rates to a new low of point seven-five percent. The major Canadian banks (BMO, CIBC, Desjardins, RBC, Scotiabank, and TD) have responded in kind, cutting their prime lending rates down to two point nine-five percent. It’s described as a "proactive measure taken in light of the negative shocks to Canada's economy arising from the COVID-19 pandemic and the recent sharp drop in oil prices.”
How will this affect you?
The intent behind the low rates is to limit the spillover from social distancing and business closures onto the wider economy. The lower rates will (hopefully) encourage people like you to continue borrowing money and making big purchases. Basically, the banks and the government intend to create the kind of climate in which you want to buy a new car.
Although it’s certainly not the priority at a time like this, you’re set to save some money if you’re interested in buying a new car through an auto loan or refinancing an existing one. If you’ve recently been rejected for financing, the lowered rates may also mean that you may now qualify (more on that later in the week).
Even manufacturers are following suit, with GM now offering zero-interest loans for up to eighty-four months for customers in top credit tiers. They’re also making an effort to anticipate financial struggles on the part of their current borrowers, giving them the option to delay payments during the pandemic.
Dealing With Loan Payments
Aside from those suffering from the virus, the impact of COVID-19 has perhaps been most acutely felt by those who’s employers have had to suspend operations. As you may already know, the federal government is set to unveil a twenty-five billion dollar aid package for people and small businesses affected by shut-downs during the pandemic.
This money is primarily intended to help cover mortgage, rental, and student loan fees, but it's possible that more funds will be made available for things like auto loan payments. Make sure you follow the news so that you know as early as possible when the relief you need becomes available.
In the wake of the shut-downs caused by the unfolding pandemic, calls for a national “payment holiday” are increasing. Such a holiday would mean that, for the duration of the COVID-19 pandemic, all loan payments (including auto loans) would be suspended. Obviously not good news for lenders, but potential relief for you if you’re not sure when you’ll be returning to work.
It may only be a matter of time before such a policy comes into effect, as BMO, CIBC, National Bank, RBC, Scotiabank, and TD have all just announced that they will allow mortgage payment deferrals of up to six months. It’s still not known whether interest is going to accrue during these deferral periods, but any decision made on this will likely be carried over when/if a payment holiday is granted on other types of loans.
Several auto manufacturers have actually outpaced the banks and begun offering their own payment deferrals for customers experiencing financial struggles during the pandemic. If you’re received financing through Ford, GM, Hyundai, Nissan, or Toyota, visit their website for more information on the number of days your payments can be deferred and whether interest will continue to accrue (there is no uniform policy as of this writing, but, as you’ve seen, the situation is changing rapidly). Finally, if you’ve been affected financially by the pandemic and fear that you may begin missing payments on your car loan, be proactive and get in touch with your lender before it happens.
We’re Here For You
No matter how long the COVID-19 lasts, Car Loans Canada will continue working for you. Stay tuned to our blog over the coming days for more coverage on the effect of the pandemic on our industry. We wish you and yours good health in the meantime.