Are You “Car Poor”? Read On to Find Out.
For many Canadians, it’s often the mortgage or, more recently, the weekly grocery bill that causes financial stress. However, you might be surprised to learn that it’s not these traditional expenses that are harming our wealth the most.
It’s our car!
Surprised? Keep reading to discover how car ownership and the costs associated with operating your vehicle are steadily depleting your wealth in both the short and mid-term.
It’s in the Numbers: As of Q1 2025, auto loan debt has risen by 12% year-over-year. Simultaneously, the 60-day delinquency rate for used vehicle loans has reached 1.9%, reflecting ongoing financial struggles among consumers. This increase in auto loan debt can be attributed to higher interest rates, larger loan amounts, and stagnant wages, all of which contribute to financial pressure. These trends emphasize the growing burden of auto loans on overall consumer debt in Canada, which stood at $2.6 trillion as of Q2 2025.
Buying a Home vs. Buying a Car: Unlike a home, which may appreciate over time, a vehicle starts to lose a significant portion of its value the moment you drive it off the lot. When you combine this depreciation with rising vehicle prices, high borrowing costs, and record levels of auto loan debt, the financial realities become much clearer.
Used Cars Are Not the “Smart” Option Anymore: The perception that buying a used vehicle is smarter than purchasing a new one is becoming outdated. In June 2025, the average price of used cars peaked at $37,664, up 3.6% from the previous year.
Then there’s the small matter of auto insurance costs. The average auto insurance premium in December 2021 was $1,555. By 2023, it had increased to $1,744—an alarming 12% rise and the most significant spike recorded. This increase is attributed to inflation, vehicle shortages, and rising claims costs.
According to Statistics Canada, the average Canadian household spent $76,750 on goods and services in 2023. Here’s a breakdown of how that money was allocated:
– Housing: 32.1%
– Transportation: 15.8%
– Food: 15.7%
– Household operations/furnishing/
– Health care: 3.6%
Owning and operating a vehicle accounts for the largest share of households’ transportation expenses at $10,292, significantly surpassing other public transportation options (such as buses, subways, and streetcars), which totalled just $1,799.
For households already impacted by rising costs in housing, food, and transportation, taking on larger, longer-term auto loans complicates efforts to save and achieve long-term financial goals, such as retirement planning.
This is how the term “car poor” has come to exist—a frustrating yet accurate description of how owning and maintaining a vehicle in Canada affects our financial well-being.
How to Avoid “Car Poverty”:
– View your vehicle as a practical necessity rather than a status symbol.
– Look for ways to save on your vehicle loan’s interest rate. Consider making a larger down payment to ease your debt burden, and shop around for better rates.
– Avoid rolling over old debt into new loans, and evaluate the total cost of ownership, not just the monthly payments.
– If your insurance costs are high, use a comparison tool to shop around for different providers. You can also bundle your insurance with your home policy to save.
Remember, reducing transportation costs could be one of the most effective ways to free up money for savings and investments. Every dollar not spent on car payments, insurance, fuel, or repairs can contribute to building real wealth—wealth that grows rather than depreciates.
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