Consumers currently pay an average of around $50,000 for a new car.Illustration by Rey Gagnon
Canadians are used to hearing about pricey housing. But another expense has quietly grown to mortgage-sized proportions for many: their car.
With consumers now paying around an average of $50,000 for a new ride, nearly 30 per cent of auto loans in the new-vehicle market come with a monthly payment of $1,000 or more, according to analytics firm J.D. Power. It’s a similar story in the lease market, where the average payment is just under $800 a month.
For comparison, the average price of a new vehicle was $12,000 in 1985, according to Statistics Canada, equivalent to just over $31,000 in 2025, adjusted for inflation. That’s below what the average second-hand car costs today.
Meanwhile across both the new- and used-vehicle markets, the most popular auto loan term length has grown to seven years, the J.D. Power data show, as Canadians stretch out amortizations to keep monthly payments manageable.
Ever more sophisticated technology, government regulations, the push toward electric vehicles, pandemic disruptions and, lately, auto tariffs all help explain why cars have become so expensive.
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But the end result for consumers is the same: Car payments are increasingly like mortgages. That’s not just because of their size in dollar terms, but also because, just as housing costs, they take up a massive portion of household budgets.
The after-tax income of a typical Canadian household 40 years ago was around $62,000 in inflation-adjusted terms, according to Statscan. In 2023, the latest available data, it stood at $74,200, or around $77,000 in 2025 dollars. That’s a 24-per-cent rise in real terms.
That may seem a healthy increase (although much of that growth comes from government transfers, rather than wage gains). But it pales compared with the trajectory of car prices, which jumped by around 70 per cent over the same period.
Buying a second-hand vehicle is an obvious way to keep car payments in check. But even that is hardly a bargain. For the past four years, average prices have been firmly above $35,000, according to J.D. Power.
In smaller cities where housing remains affordable, the gap between mortgage and auto loan payments has become alarmingly small. In Saguenay, Que., for example, the average mortgage instalment is $886 a month, only around $340 more than the typical monthly auto loan charge of $547, according to data from Equifax and the Canada Mortgage and Housing Corp.
In pricier housing markets, on the other hand, managing mortgage and car payments has become a delicate balancing act. It’s telling, for example, that mortgage brokers often recount stories of would-be homebuyers who failed to qualify for a mortgage primarily because of the hefty size of their auto loan.
In part, vehicles are significantly pricier than they used to be simply because they’re better and safer products. From rear-view cameras and heated seats, to navigation and streaming technology, there’s much more to a car than there was in 1985.
But the coup de grâce for consumers came in the pandemic. Snarled supply chains created a prolonged shortage of new vehicles that sent prices soaring and soon spilled into the used market, with buyers turning to preowned vehicles and watching car values spike there, too.
The average price of a new car, including incentives offered to consumers, went from $33,000 in 2017 to more than $50,000 in 2023, the peak of the pandemic-drive price climb. The average used car price, meanwhile, reached a high of more than $38,000 in 2022, according to J.D. Power.
In today’s weak labour market and slow economy, inflation has slowed down markedly for both new and used vehicles, but prices remain near record highs.
So far, it’s only some of the most vulnerable consumers who are struggling to keep up with their car payments. While non-mortgage delinquency rates have climbed past prepandemic highs, it is mostly lower-income and younger consumers who are struggling to keep up with their auto payments, according to data from Equifax Canada.
Robert Karwel, director of customer success at J.D. Power in Canada, sees little reason to worry. Canadians, for example, rushed to buy new vehicles earlier this year when the start of the trade war sparked concerns that car prices would shoot up.
Another reassuring sign, according to Mr. Karwel: After growing for years, the average length of auto loans seems to have stabilized at seven years.
Falling interest rates are also helping to ease the cost of auto loans.
But just because Canadians are mostly managing to keep up with their payments, doesn’t mean all is well.
The risk isn’t so much defaults, at least for now, but households budgets that are increasingly squeezed by routine monthly expenses, leaving little space for anything else, from savings to one-off spending.
