Connect with us

Business

Long-term loans: The fuel that’s powering Canadian car sales

Editor

Published

on

[ad_1]

This story is part of a series we’re calling Debt Nation looking at the state of consumer debt in Canada. Look for more coverage in the coming days, including on mortgages and credit card debt.

Canadians are buying more cars than almost ever before, but a closer look reveals they’re taking longer and longer to pay them off, too.

More than half of all new car loans are currently financed for  84 months — seven years — or longer. Industry standard used to be to amortize car loans over 60 months — five years — but as low interest rates settled in, payment periods began to stretch longer and longer to make monthly payments as low as possible.

We want to hear your debt confessions. Post a short clip, maximum 15 seconds, to your Instagram Stories and be sure to tag @CBCNews and use the hastag #DebtNation. We’re looking to feature the most compelling on CBC News Instagram and CBC News throughout the week. Learn more here.

Longer terms allow the lender make more money in interest payments off each car loan.

Interest rates on car loans can range from zero per cent to the high single digits, depending on the make and model, time of year and the duration of the loan.

Market research firm J.D. Power Inc. collects sales data from more than 1,200 Canadian car dealerships across the country, and has noticed a troubling trend.

In a nutshell, “long-term financing has exploded in Canada,” the company’s automotive expert Robert Karwel said. At one point earlier this year, 55 per cent of all new car loans were for at least 84 months.

That can be than seven years to pay off a steadily depreciating asset, and it’s a growing piece of Canada’s debt puzzle.

The figure has since inched down a little to 51 per cent as of September, Karwel says, but for comparison purposes less than 10 per cent of American car loans are stretched out over that long a period.

Most are fixed-rate loans, but even so, if Canadians are five times more likely than Americans are to have a long-term car loan, they’re five times more vulnerable down the line as the cost of all their other forms of debt creeps higher.

“People are buying more expensive cars, and that’s been facilitated by [this type of] financing, because you can spread the payment over long enough of a time,” Karwel says.

Canadians are on track to buy two million vehicles this year, but more and more people are taking seven years or more to pay them off. (Eduard Korniyenko/Reuters)

The appeal for a car buyer is obvious.

The average price of a new car in Canada last year was just over $33,000 last year. If you pay cash up front, you’d likely get to knock off quite a bit of that total in terms of dealer incentives and instant rebates.

But if you finance it over seven years or more, it’s not hard to get the monthly payment to well under $500 a month, and even a modest down payment up front would result in much lower payments down the line.

Read more stories in our Debt Nation series:

COMING UP:

  • WEDNESDAY | Full news coverage of Bank of Canada announcement on interest rates
  • THURSDAY | CBC business reporter Peter Armstrong takes a look at the current state of household debt in Canada; Don Pittis analyzes what the Bank of Canada news means for Canadians’ finances
  • FRIDAY | CBC business columnist Don Pittis explains why credit card debt can be a dangerous trap

Squeezing that same car into shorter-term loan saves money in the end but can add hundreds of dollars to the monthly payment.

Which is a big reason why B.C. resident Jakky McDonald jumped at the chance to get an 84-month loan when she bought a new Kia Forte earlier this year.

Jakky McDonald is more than satisfied with her seven-year car loan because the terms allowed her to pay off her student loan. (Glen Kugelstadt/CBC)

The 24-year-old wasn’t in a position to pay cash up front, so she knew she’d finance.

Based on what the dealer offered, she went with a seven-year payment plan, but the salesman pitched her on one extra enticement she couldn’t refuse. While checking her credit history, the salesman noticed that she had about $4,500 in student loans on her file. He suggested she roll those debt into her new zero per cent interest car loan.

“He said you might want to consider taking any other debt you might have that does have interest on it, you know, to this because it will save you money in the long run,” she recalls him saying.

She checked the fine print, and ended up doing exactly that. Six months later, she says she’d make the same call in a heartbeat. In McDonald’s case, the plan hinged on getting zero per cent on the loan.

True, she may have missed out on a few other incentives had she paid cash up front, but refinancing almost $5,000 worth of student loan debt in one fell swoop worked for her.

Albertans tend to have the biggest amount of car-related debt, partly because of the province’s penchant for expensive pickup trucks, TransUnion’s Matt Fabian says. (CBC)

“I opted for $4,500 cash back and then they wrote me a check for that,” she said. “And I just went and put it right on my loan.”

Her case clearly illustrates the selling point for consumers of some of these loans — but it’s not hard to come up with the down side.

Experts say that one of the biggest risks of such loans is that as the loan terms stretch into seven eight or even nine years, it’s not uncommon for the borrower to still owe more against the car than it’s worth, when they come to need another car in a few years time.

In financial parlance, that’s known as having negative equity, but in layman’s terms it feels a bit like having your finances turned upside down and underwater.

Dealers lure in buyers with incentives like zero per cent financing, but those enticements often come with incredibly long term payment periods and no rebates up front. (Daniel Acker/Bloomberg)

J.D. Power numbers suggest that more than 30 per cent of Canadians who trade in a car owe more on the car than it’s worth.

More often than not, that gap gets rolled into the new car loan in the form of new debt, which extends the payment plan even further and puts borrowers even more in debt when they need to do it again in a few years time. And the cycle goes on. And on. The longer the loan, the more likely it is to present a problem down the line.

“You’re just spreading that same risk over a … longer period of time,” says Matt Fabian, research director at credit reporting firm TransUnion.

While Fabian notes that delinquency rates for car loans are still low, long-term car loans are a growing piece of Canada’s debt picture — especially as Canadians are buying bigger, more expensive cars.

Most car loans come at a fixed rate, a fact that makes them somewhat insured from rate hikes to come. But that hides  the reality that hikes elsewhere can make even those car payments even hard to come up with every month.

Almost half of new car buyers trade in an old car to help finance the purchase of a new one, but almost a third of them are upside down on their old car anyway. (CBC)

“That car loan payment doesn’t increase, but if you have a variable rate mortgage and a line of credit, those do,” Fabian says.

Economist Benjamin Tal at CIBC agrees that car loans are really a matter for concern in as much as they fit into Canadians’ overall debt loads.

But he’s especially worried about people with negative equity — who owe more than their car is worth, even after years of paying it off.

Because consistently doing that means “you’re becoming more vulnerable to the risk of higher interest rates,” as he puts it.

That may sound bleak, but fortunately, J.D. Power’s Karwel says there’s an easy solution to the problem.

“For consumers at least, there’s a safety valve for all this … and the safety valve is … just keep your car. If you’re financing for 84 months, keep your car for 84 months and this problem goes away.”

[ad_2]

Source link

قالب وردپرس

Business

NY Online Sports Betting Bill Calls For Up To 14 Sportsbook Apps

Editor

Published

on

By

Gov. Andrew Cuomo‘s proposed New York sports betting model lacks support from two lawmakers who have pushed for online gambling in the state.

Sen. Joe Addabbo Jr. and Assemblyman Gary Pretlow released their 2021 NY online sports betting bill Thursday evening, though it looks a lot like their previous attempt.

The biggest difference is the bill calls for two skins per licensee instead of one each. There are four commercial casinos and three tribes that run casinos in New York that could offer online sports betting.

That would likely create a much more robust market in terms of handle but tax revenue could fall well short of what Cuomo expects from a lottery-style monopoly.

New York sports betting bill details

Many of the details in the jointly-filed S 1183 and A 1257 are similar to the 2019-20 version of Addabbo and Pretlow’s bill:

  • A one-time, $12 million fee is required for anyone operating a mobile sportsbook in the state.
  • Mobile sports betting revenue will be taxed at 12%. The state will set aside 5% of that tax revenue for problem gambling.
  • Official league data is still required for all in-play bets. The bill also calls for a royalty fee of 0.2% of handle to be paid to sports leagues. Assuming sportsbooks hold about 5% of bets, that means about 4% of sports betting revenue to the leagues.
  • Professional sports stadiums and arenas as well as off-track betting facilities can partner with a casino to have betting kiosks on-site.

The bill summary suggests $79 million in annual revenue to the state based on “conservative market estimates.” That might not be good enough for Cuomo, though.

Cuomo expects how much?

Gov. Cuomo has much higher expectations for what the state should make from sports betting.

The US sports betting industry was surprised to wake up Wednesday to find Cuomo had changed his stance on mobile sports betting. The excitement felt throughout the industry quickly turned to jokes, though, when the governor described his plan during the Q&A portion of his coronavirus press conference:

“We want to do sports betting the way the state runs the lottery where the state gets the revenues. Many states have done sports betting but they basically allow casinos to run their own gambling operations. That makes a lot of money for casinos but it makes minimal money for the state, and I’m not here to make casinos a lot of money. I’m here to raise funds for the state.”

Budget Director Robert Mujica explained that the standard sports betting model would net New York about $50 million a year in tax revenue. But a single-operator monopoly could bring in $500 million annually, Mujica said. We won’t know any other details of the proposal until Cuomo releases his budget.

Assuming a 50-50 revenue split and a 5% hold, New York’s sports betting market would have to take $20 billion in bets annually to make the state $500 million. That’s not impossible for any of the “crown jewel” states like California, Florida, New York and Texas.

It won’t happen in year one, though, and could take significantly longer to reach those heights under a monopoly.

Continue Reading

Business

Global Online Gambling Market (2020 to 2027) – Size, Share & Trends Analysis Report

Editor

Published

on

By

Dublin, April 22, 2020 (GLOBE NEWSWIRE) — The “Online Gambling Market Size, Share & Trends Analysis Report by Type (Sports Betting, Casinos, Poker, Bingo), by Device (Desktop, Mobile), by Region (North America, Europe, APAC, Latin America, MEA), and Segment Forecasts, 2020 – 2027” report has been added to ResearchAndMarkets.com’s offering.

The global online gambling market size is expected to reach USD 127.3 billion by 2027, registering a CAGR of 11.5% from 2020 to 2027. The market is expected to gain traction over the forecast period. The growing popularity of betting across the globe and freemium model in online gambling are among the potential opportunities likely to unfold in the next few years.

Increasing adoption of smartphones and easy access to casino gaming platforms is currently driving the market. Factors such as increasing internet penetration and the availability of cost-effective mobile applications for betting are also expected to contribute to market growth over the forecast period. According to the American Gaming Association (AGA), as of 2018, approximately 2,800 sites are active online and offer activities including bingo, poker, and lottery.

Electronic Gambling Devices (EGDs) are inexpensive to run and easily available. These devices have an in-built software that mimics the experience of a local casino. For instance, a Video Lottery Terminal (VLT) uses advancing technology and can also be customized to electronic slot machines, spinning reel slot machines, video slot machines, and electronic poker games.

The spread of COVID19 has accelerated the demand for online gambling. Moreover, increasing digitalization coupled with secure digital payment options are also some factors contributing to online gambling market growth. The market is further expected to gain momentum over the forecast period attributed to the rising use of digital currency and websites provided by companies for betting and gambling.

Further key findings from the report suggest:

  • Ease of sports betting using a computer or smartphone coupled with the proliferation of sports betting ads across the globe is expected to propel segment growth over the forecast period
  • Online gambling service providers/operators are allowed to enter into agreements with individual players or customers to provide betting services for real money, in turn attracting more gamers
  • A large number of customers are using desktops for betting as downloading and installing casino software proves to be easier on desktops. This, in turn, is expected to propel the growth of the desktop segment
  • Online agencies, networks and exchanges, and third-party ad servers are used for advertising gambling websites of various companies
  • Europe is expected to continue its dominance over the forecast period. In the U.K., online gambling is legalized owing to safe practices and stringent regulations laid down by the government
  • Asia Pacific is anticipated to register the highest growth rate owing to the increased adoption of smartphones, a larger proportion of younger population, and legalization of online gambling in the region. The market size is largely influenced by the size of betting and pertinent outcome
  • Key companies in the online gambling market include William Hill PLC and Paddy Power Betfair PLC.

Key Topics Covered:

1. Methodology and Scope

2. Executive Summary
2.1 Online Gambling Market – Industry Snapshot & Key Buying Criteria, 2016 – 2027
2.2 Global Online Gambling Market, 2016 – 2027
2.2.1 Global online gambling market, by region, 2016 – 2027
2.2.2 Global online gambling market, by type, 2016 – 2027
2.2.3 Global online gambling market, by device, 2016 – 2027

3. Online Gambling Industry Outlook
3.1 Market Segmentation & Scope
3.2 Market Size and Growth Prospects
3.3 Online Gambling – Value Chain Analysis
3.3.1 Vendor landscape
3.4 Online Gambling Market Dynamics
3.4.1 Market driver analysis
3.4.1.1 Increasing investment in online gambling
3.4.1.2 Growing number of live casinos across the globe
3.4.2 Market restraint analysis
3.4.2.1 Increasing rate of cybercrimes
3.5 Penetration and Growth Prospect Mapping
3.6 Online Gambling Market – Porter’s Five Forces Analysis
3.7 Online Gambling Market – Key Company Market Share Analysis, 2019
3.8 Online Gambling Market – PESTEL Analysis
3.9 Impact of COVID 19 on the Online Gambling Market

4. Online Gambling Type Outlook
4.1 Online Gambling Market Share By Type, 2019
4.2 Sports Betting
4.2.1 Sports betting online gambling market, 2016 – 2027
4.3 Casinos
4.3.1 Casinos online gambling market, 2016 – 2027
4.4 Poker
4.4.1 Poker online gambling market, 2016 – 2027
4.5 Bingo
4.5.1 Bingo online gambling market, 2016 – 2027
4.6 Others
4.6.1 Other online gambling market, 2016 – 2027

5. Online Gambling Device Outlook
5.1 Online Gambling Market Share By Device, 2019
5.2 Desktop
5.2.1 Desktop online gambling market, 2016 – 2027
5.3 Mobile
5.3.1 Online mobile gambling market, 2016 – 2027
5.4 Others
5.4.1 Other device for online gambling market, 2016 – 2027

6. Online Gambling Regional Outlook
6.1 Online Gambling Market Share by Region, 2019
6.2 North America
6.2.1 North America online gambling market, 2016 – 2027
6.2.2 North America online gambling market, by type, 2016 – 2027
6.2.3 North America online gambling market, by device, 2016 – 2027
6.2.4 U.S.
6.2.4.1 U.S. online gambling market, 2016 – 2027
6.2.4.2 U.S. online gambling market, by type, 2016 – 2027
6.2.4.3 U.S. online gambling market, by device, 2016 – 2027
6.2.5 Canada
6.2.5.1 Canada online gambling market, 2016 – 2027
6.2.5.2 Canada online gambling market, by type, 2016 – 2027
6.2.5.3 Canada online gambling market, by device, 2016 – 2027
6.3 Europe
6.3.1 Europe online gambling market, 2016 – 2027
6.3.2 Europe online gambling market, by type, 2016 – 2027
6.3.3 Europe online gambling market, by device, 2016 – 2027
6.3.4 U.K.
6.3.4.1 U.K. online gambling market, 2016 – 2027
6.3.4.2 U.K. online gambling market, by type, 2016 – 2027
6.3.4.3 U.K. online gambling market, by device, 2016 – 2027
6.3.5 Germany
6.3.5.1 Germany online gambling market, 2016 – 2027
6.3.5.2 Germany online gambling market, by type, 2016 – 2027
6.3.5.3 Germany online gambling market, by device, 2016 – 2027
6.4 Asia Pacific
6.4.1 Asia Pacific online gambling market, 2016 – 2027
6.4.2 Asia Pacific online gambling market, by type, 2016 – 2027
6.4.3 Asia Pacific online gambling market, by device, 2016 – 2027
6.4.4 China
6.4.4.1 China online gambling market, 2016 – 2027
6.4.4.2 China online gambling market, by type, 2016 – 2027
6.4.4.3 China online gambling market, by device, 2016 – 2027
6.4.5 India
6.4.5.1 India online gambling market, 2016 – 2027
6.4.5.2 India online gambling market, by type, 2016 – 2027
6.4.5.3 India online gambling market, by device, 2016 – 2027
6.4.6 Japan
6.4.6.1 Japan online gambling market, 2016 – 2027
6.4.6.2 Japan online gambling market, by type, 2016 – 2027
6.4.6.3 Japan online gambling market, by device, 2016 – 2027
6.5 Latin America
6.5.1 Latin America online gambling market, 2016 – 2027
6.5.2 Latin America online gambling market, by type, 2016 – 2027
6.5.3 Latin America online gambling market, by device, 2016 – 2027
6.5.4 Brazil
6.5.4.1 Brazil online gambling market, 2016 – 2027
6.5.4.2 Brazil online gambling market, by type, 2016 – 2027
6.5.4.3 Brazil online gambling market, by device, 2016 – 2027
6.6 MEA
6.6.1 MEA online gambling market, 2016 – 2027
6.6.2 MEA online gambling market, by type, 2016 – 2027
6.6.3 MEA online gambling market, by device, 2016 – 2027

7. Competitive Landscape

7.1 William Hill PLC
7.1.1 Company overview
7.1.2 Financial performance
7.1.3 Product benchmarking
7.1.4 Strategic initiatives
7.2 Bet365 Group Ltd.
7.3 Paddy Power Betfair PLC
7.4 Betsson AB
7.5 Ladbrokes Coral Group PLC
7.6 The Stars Group Inc.
7.7 888 Holdings PLC
7.8 Sky Betting & Gaming
7.9 Kindred Group PLC
7.10 GVC Holdings PLC

Continue Reading

Business

CT Governor throws support behind legal betting and igaming

Editor

Published

on

By

Giving his State of the State address yesterday (6 January), Lamont said 2020 had been one of the “most challenging and humbling” years of his life, due to the novel coronavirus (Covid-19) pandemic. 

This, he said, had prompted the state to work closely with neighbours such as Rhode Island, Massachusetts, New Jersey and New York to coordinate their response to the crisis. 

Lamont pledged to continue to leverage these relationships as part of Connecticut’s recovery from the pandemic.

He said Connecticut would work with its neighboring states and tribal partners on a path forward to “modernize gaming”, as well as working in the legislature to legalize marijuana. 

“Sports betting, internet gaming, and legalized marijuana are happening all around us,” Lamont added. “Let’s not surrender these opportunities to out-of-state markets or even worse, underground markets.”

His pledge to expand the state’s gambling market comes amid reports that Governor Andrew Cuomo is preparing to relax his stance against mobile wagering in neighbouring New York. 

Continue Reading

Chat

Trending