How To Avoid Car Financing Mistakes In 2025

·31 min·2 clips

Doug and Ted expose how average car debt hit over $23,000 while vehicles were worth only $21,000, creating widespread negative equity.

Host Doug Hoyes and his co-host Ted Michalos tackle the financial pitfalls of car loans in a 2025 economic climate. This episode of Debt Free in 30 provides a practical guide for navigating auto financing during a recession. The hosts, both licensed insolvency trustees, draw from their professional experience with clients in financial distress. They cite an AI-generated statistic placing the average new car price in Canada at $66,000, a figure few can afford without a loan. A weak Canadian dollar, which dropped from 83 to 68 cents U.S., is shown to add over $10,000 to the cost of a $50,000 U.S. vehicle. The average used car price is noted as $36,000, influenced by demand when new cars are unaffordable. Interest rates from major banks are over 7%, while other lenders range from 4% to 35%. An eight-year (96-month) loan term is presented as a reality, dramatically increasing total interest paid. For a $50,000 loan at 14% over eight years, total payments reach $83,000. The hosts reference their "Joe Debtor" study, revealing a shift to negative equity for car owners in 2024, with average debt exceeding vehicle value by thousands. Data from TransUnion shows auto loan delinquencies had not yet spiked in late 2024, as car payments are often prioritized. A key insight is the legal difference between provinces: in Alberta and B.C., repossession ends the lender's claim, but in Ontario, they can "seize and sue" for any shortfall. Lenders are becoming more selective, requiring larger down payments and limiting financed amounts due to perceived risk. The episode advises using a once-a-year payment deferral option, if available in the loan contract, *before* missing a payment. For buyers, they stress negotiating not just the car price but also the trade-in value and financing separately. Leasing is now deemed generally more expensive than financing for individuals, as companies have raised rates to cover past losses. Doug Hoyes champions driving an older, paid-off car as a liberating financial strategy, using his 14-year-old Honda Accord as an example. If you can't afford payments, the first step is to contact the lender to negotiate a modified payment plan or term extension. Selling the car privately before repossession is recommended, as you'll likely get more than auction value, though you must settle the lien. If you have multiple debts, a consumer proposal or bankruptcy can include the car loan shortfall after voluntarily returning the vehicle. The tone is conversational and educational, blending data with candid, sometimes humorous, commentary. Listeners will appreciate the direct, actionable advice and the hosts' relatable dynamic. This episode is ideal for anyone considering a car loan in 2025 or struggling with an existing one, but less relevant for those uninterested in personal finance or debt management.

As heard by us

A clear look at car-finance risk when loan balances, repossession, and provincial rules all pull in different directions.

Doug Hoyes and Ted turn car financing in 2025 into a plain, useful walk-through of a problem that can bite hard. They move from tariffs, inflation, and recessions to liens, repossession, and the mess that follows when a car is worth less than the loan.

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Before you sign a car loan, this shows where the trapdoor is.

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