According to a Huffington Post Canada report on April 29, 2016, titled “Canadian Consumer Insolvencies are Soaring, and Not Just in Alberta,” individual bankruptcies are up 6.3 per cent year over year across Canada in 2016. \nAnd, as Rob Carrick of The Globe and Mail recently pointed out, it is not just McMansions causing Canadians to go further into debt. It is also that Canadians are buying more new cars than ever before. To make matters worse, he tweeted on May 12, the average car loan is now 74 months in duration.\nYup — the average car loan takes over six years to pay off, which means there are some loans shorter, but, alarmingly, some loans longer than six years. And unlike homes, autos have a relatively short life.\nLet me toss in one more anecdote. A local car dealership had a special financing deal of 0 per cent (yes, zero per cent) on new cars and trucks. It was getting no takers and called a sample of customers who had bought from it but did not finance through it.\nThe dealership asked if the customers had financed the deal through their bank. All of them had done so. It asked if the customers had secured an interest rate of 0 per cent. They had not. It asked the customers why they had chosen bank financing. The answer was, “You want us to pay off the principal. The bank just wants us to pay the interest.”\nSo, there you have it. Many individual Canadians are using credit lines to purchase vehicles and pay the interest only. This means that five years after the purchase, most people want to replace their old car but yet still owe the original principal on the $X0,000 automobile, and since most people buy the most expensive auto they can afford, it means they have to incur additional debt to buy a replacement vehicle. Such credit lines are most often floating rates so these Canadians are exposing themselves to interest rate risk on top of the additional debt.\nThe only spot of good news in the Huffington Post article was that the number of accepted “consumer proposals,” whereby the consumer presents an acceptable payment plan to their creditor to avoid bankruptcy, rose by 13.2 per cent. This means that these people caught themselves before going over the edge into the abyss. \nBut only just.\nKeep the conversation going\nWhat are your concerns about rising Canadian consumer debt? Post a comment below.\nDisclaimer\nThe views and opinions expressed in this article are those of the author and do not necessarily reflect that of CPA Canada.