The ride

OLDIES modified

This week a survey found 80% of renters want to be owners. There are 2.4 million people under the age of 50 who lease their accommodations. If Altus Group is right, eight in ten lust to have a home of their own.

Of course, three in ten also want a pony. And seventy-three per cent would take a new Mercedes. Plus, taller and slimmer would be great, while you’re at it. Thanks.

Owning real estate is a societal obsession, and were it not for the lowest interest rates since Noah (I actually had to watch that flick, yuck) the people who could truly afford houses would buy them. But these times aren’t normal. People routinely buy stuff they shouldn’t, in ways that are destructive

Like cars.

The average car loan in Canada, says JD Power, is 69 months in duration, down a little from the record 72 months recorded late last year. As you know, a number of car companies advertise loans of 96 months, which is a year or so longer than the average marriage and the lifespan of most cheap rides. Dennis Desrosiers, the car guru guy, says it takes 80 months of payments on such loans before a consumer is back in the money. In other words, by the time you pay most of the loan down, your car is worth a few dollars more. If it still goes.

Why would folks be so dumb as to incur years of financing charges on an asset destined to deteriorate in value – ultimately to zero? Easy. They want cars but can’t actually afford them. Demand for car credit is rising now by almost 10% a year, with loans of six to eight years being the reason. Kinda like 5% down houses with cash-back mortgages, except that cars always devalue.

Cheap cars loans, long terms and low payments have a predictable result: people borrow more and buy bigger. So they get into trouble. The credit bureau guys say up to 15% of all their cases involve vehicle financing. The advice: if you can’t cough up 20% of the car’s price, you’re not ready to buy.

Hmm. So back to houses, where the average down payment is way less than 20%, loans are 25 years long and bankers will lend to poodles. What does the Altus survey tell us when 80% have house lust?

That’s easy. We have problems. If those renters tried to buy with 5% down, a 25-year amortization and at the posted rate for a five–year mortgage (which is the baseline requirement), then only 250,000 would actually qualify to acquire real estate. Yup, 80% want to buy. Only 10% can – with the skinniest of deposits, and rates at an all-time low.

This goes to the bleak facts this pathetic blog keeps on yapping about. Savings rates are miniscule. Most TFSAs are in cash. Growing numbers of people admit they have little or nothing put away for retirement. Most gains in net worth have come real estate froth, not because families earned more and spent less. Meanwhile debt – for cars, house and LOCs – keeps on growing, and the real estate ownership level is 70%. Just imagine what happens when rates start to inch higher.

RBC warned this week that’s bound to happen, with a ‘substantial impact’ on real estate.

Said chief economist Robert Hogue: “The higher home prices get relative to income by the time rising interest rates really start to bite, the more prices will have to adjust downward over time to keep longer-term affordability from reaching intolerable levels. This means that any price increases exceeding the rate of household income gains in the near term (2014 and 2015) likely would result in steeper price declines down the road.”

And on Wednesday the latest release from the Fed showed a growing bias toward raising US rates sooner than anticipated, now that 200,000 jobs a month are being churned out with regularity. For the record, this is how the central bank put it: “Many participants (at the Fed policy meeting) noted that if convergence toward the committee’s objectives occurred more quickly than expected, it might become appropriate to begin removing monetary policy accommodation sooner than they currently anticipated.”

By the way, “monetary accommodation” means cheapo lending rates, whether achieved through its stimulative bond-buying program (known affectionately as ‘QE’) or by keeping the Fed rate low. Either way, 2015 will be the year when the cost of money starts going up. Get ready.

It all begs the question – if people are so inept when it comes to cars, with finance-laden terms because they lack the cash, then isn’t it scary half of all real estate sales are to newbies who can’t actually afford what they’re buying? And that 80% of renters think they can be buyers? It would scare me. The last place I’d want the bulk of my net worth would be in property. Or, shudder, a Kia.

165 comments ↓

#1 jas on 08.20.14 at 5:51 pm

I used to own a KIA. It’s a POS.

#2 ILoveCharts on 08.20.14 at 5:52 pm

Renting is good today. With everyone piling into houses (and renting out the basements and second condos,) you can find a lot of nice places at an affordable price.

Presumably once [email protected] starts hitting the fan, renting will become a lot more popular.

How can I protect myself (as a renter.) My first twelve months was on a twelve month lease and then it goes month to month. Can I lock in a 36 month lease with my private landlord in BC?

#3 Derek R on 08.20.14 at 5:52 pm

Look after your needs and your wants will look after themselves.

#4 Waterloo Resident on 08.20.14 at 6:01 pm

Don’t worry about rates rising, they won’t rise for at least another 20 years. In fact I would bet that the next move the Bank of Canada makes is a RATE CUT, not a rate rise.

Just look at all of the mess that war between Ukraine and Russia is causing, it’s making bond rates crater. And that war is going to go on for decades, so don’t worry, rates are staying permanently low. I predict in 4 years the Bank of Canada will actually be having NEGATIVE rates of -0.25%.

#5 Retired Boomer - WI on 08.20.14 at 6:19 pm

Garth-

It is simple really. People with no money still aspire to live like the well-to-do.
Rather than rent the cheapest place they can stand, to pay off the car loan, student loan, or save a down payment. or drive a USED car for a decade or so, they live large ion credit.

Seen this flick before, it’s called sub-prime. Doesn’t have to be just real estate, it could be the fastest growing segment of debt in the U.S. the sub-prime auto loan!!

I am getting to the point I enjoy watching financially stupid people fail miserably, and go bankrupt.

There is no shortage of good advice, just idiots unwilling to change.
Sorry, this guy has little empathy left for fools!

Let the credit squeeze begin.

(THAT was ugly!)

#6 JacqueShellacque on 08.20.14 at 6:19 pm

Low interest rates (or other artificially cheap methods of acquiring assets) always lead to bubbles. The popping of these bubbles always devastates the market for the asset, often for decades.

The level of financial illiteracy out there is truly scary.
Match that with emotional crap like “renting is paying someone else’s mortgage”, and “it can only go up” and “this time it’s different”, and you pretty much have the formula for every bubble that’s ever existed.

The only solution to avert all the bad stuff coming from our transition to a debtor society is for the new standard for keeping up with the Joneses to be talking about TFSA, RSPs, and portfolio strategies, rather than kitchen backsplashes and trips to Cozumel. Not my holding my breath though.

#7 Commodity Trader on 08.20.14 at 6:21 pm

Garth – have you spoken about the effect of global warming and rising sea levels yet? – in 20 years Victoria and Vancouver could literally be under the sea……what will that do to the housing markets and taxes.
http://www.sierraclub.bc.ca/our-work/nature-global-warming/maps/victoria-sea-level-rise/at_download/file

#8 Shawn on 08.20.14 at 6:25 pm

The problem with Hondas…

I have owned two Hondas so far.

The problem was after just 16 years I had to replace the first one.

The second one is now 10 years old and is threatening to last just as long.

It’s a problem because by the time I need to buy a new one, I am totally out of practice.

#9 Entrepreneur on 08.20.14 at 6:25 pm

Renters want to buy but only at the right price. The prices are too high and out-of-reach for pratical living standards. Unless one wants to be tied and handcuffed to the banks. Only use banks for short-term loans as one never knows the outcome.

I have not heard from Poor Boy blog dog. The last time I heard from him/her was that he/she was in trouble with the CRA. $6000. is nothing. Maybe start a fund for Poor Boy. I am willing to donate.

How are you doing Poor Boy?

#10 Dre on 08.20.14 at 6:29 pm

Buy a Mazda – 0% financing, and they’re great cars.

#11 Ben on 08.20.14 at 6:31 pm

People want in on property for two reasons:

1. a while back a bunch of fools in power underwrote property which kicked off a bull market that has hardly stopped since
2. it’s the only access the common man has to leverage so a small uptick is multiplied

Cars I don’t mind. Let them waste their money, I don’t have to. I’ll stick with my cheap Nissan.

Houses is a problem. Thanks to the politicians supporting prices I continue to have to bid against innumerate idiots who are proven right thanks to innumerate idiots in power.

#12 Snowboid on 08.20.14 at 6:32 pm

#2 ILoveCharts on 08.20.14 at 5:52 pm…

You can negotiate any lease term that is agreed to by you and the owner.

Most standard leases state going month-to-month at the end – doesn’t stop you from a longer term lease.

#13 Shawn on 08.20.14 at 6:35 pm

Why take a long car loan?

Why would folks be so dumb as to incur years of financing charges on an asset destined to deteriorate in value – ultimately to zero? Easy. They want cars but can’t actually afford them.

******************************************
And because the financing charges are now so low.

Borrowing and lending allows people without cars or money (usually younger people) to get cars and allows people with excess money to earn a return on their money (often older people). Banks of course are the intermediaries providing this useful service. Banks are owned by people with money, usually older people.

Everyone gets what they want. Isn’t our banking system just the greatest?

Credit and lending is clearly the great grease of the economy.

Consumers borrow for consumption. They realize the cars depreciate.

The deterioration in value of cars is NOT the issue. If it were, why buy one for cash either? We buy in spite of depreciation, whether for cash or with credit.

#14 totalinvestor.com on 08.20.14 at 6:38 pm

“Why would folks be so dumb as to incur years of financing charges on an asset destined to deteriorate in value – ultimately to zero?”

Because this is the ME generation. Why not get a Harley while you’re at it?

http://postimg.org/image/hdkd3ytfh/

#15 Yogi Bear on 08.20.14 at 6:40 pm

It’s way worse in the USA. Repos up 70% from last quarter.

http://www.nbcnews.com/business/autos/more-car-buyers-are-struggling-make-payments-n184886

Recovery indeed.

#16 Spectacle on 08.20.14 at 6:41 pm

Thanks for making a fact filled story, explained with clarity Garth.

And WOW, if it is so hard for anyone these days ( stats say…) to come up with a cool $1000 cash in a few days notice, it explains ALL those newish cars driving around!

Nobody can afford to buy an affordable 3-5 year old vehicle . They are financing those disposable commuter boxes . Ouch!

There also seems to be a lot of really Expensive Toys ( cool cars, boats…) for sale Inexpensively, on the market these days.

……Didn’t Garth warn about holding “hard assets ” and “categories of commodities” that depreciate at this time in the economy?

Regards

#17 MarcFromOttawa on 08.20.14 at 6:52 pm

Car loan at .99%. Mortgage at 2.35%

Thank you BoC

#18 Ray Skunk on 08.20.14 at 7:09 pm

This is a great story… originally posted by VMD on Monday, but at the tail end of the comments before Tuesday’s entry sent Monday’s to the annals.

http://urbantoronto.ca/forum/showthread.php/10043-Centrium-Condos-(Centrust-Developement-Liberty-Development)-Real-Estate/page11

Coles notes:
-North York condo development goes tits-up

-Investors (by their own admission) rant and rave on Urbantoronto about what’s happening

-Transpires the lawyer holding the deposits in trust “accidentally” released all funds to the developer, then declares herself bankrupt

-Developer and lawyer nowhere to be seen

Oh deary me.

#19 Vancouvermill on 08.20.14 at 7:14 pm

They’re gona end QE ,the markets will tank , the fed will panic and fire the printing press back up. It’s a sea of liquidity out there and it can’t ever end.

Stimulus spending has been reduced six times, and markets have risen. So much for that theory. — Garth

#20 Lynn on 08.20.14 at 7:15 pm

amazing, people cannot afford a car but a million dollar home… It really puzzles me…

#21 Cici on 08.20.14 at 7:17 pm

Garth, who forced you to see Noah, Dorothy?

The thing I would like to know is how many homeowners wish they were renters? Why aren’t there any sexy surveys on this subject?

Judging by the growing number For Sale signs mushrooming all over my city and neighbourhood, looks like a lot of people want out…they could be move-up buyers, but they could also be foreclosures, fire sales due to divorce or other economic hardship, or retirees wanting to cash out and buy yachts or move to South America.

In any case, although I find house lust incredibly sad and idiotic, I can’t help but be pleased by the growing supply of cheap rental units. Gives me more time to grow my stash, none of which will ever be tied up in a decaying bungalow.

#22 Doug in London on 08.20.14 at 7:18 pm

In all this insanity of running up so much debt, which is a 4 letter word by the way, whatever happened to the stereotype of Canadians being thrifty savers? Is it a relic of the days of that man who moved from somewhere in Scotland to Kingston as a kid (John A MacDonald, that is) and eventually became Prime Minister?

@Shawn, post #8:
You must have got the one Honda made on a Monday that was a lemon. Myself and others I know have had better luck with Hondas, my 2002 Honda is in great shape and runs just fine.

#23 T.O. Bubble Boy on 08.20.14 at 7:19 pm

I’m assuming that those stats are car loans don’t even include people who simply put the car loan on their mortgage/HELOC!

Yes – there are many who just add the debt to their HELOC tab and barely pay the interest off each month.

#24 Cici on 08.20.14 at 7:19 pm

Oh forgot two things:

1. Love today’s photo
2. Thanks to all for the medical advice.

#25 Ray Skunk on 08.20.14 at 7:20 pm

Regarding cars…

Once upon a time people would save for their car and pay cash. Then along came financing, people would perhaps save a modest downpayment and finance the balance. Either way, the intention was that you would have your car free and clear at least for a while, before it died an inevitable death, then repeat the process.

Today certain buyers don’t see things that way. They don’t look forward to the day the payments are done, as they never will be. The car payment is a perpetual monthly expense.

These buyers are putty in the fingers of car salesmen who pull out the “four square” model and base the price solely on what can be paid off monthly, or bi-weekly, or even weekly. Accessories, warranties, crap trade-in deals – these can all be buried in the payment. How many payments are there? Who cares! It’s perpetual – you never end up being done.

The new car will be up for replacement one day, with payments still owing. No problem – roll the negative equity into the new payment for the new vehicle and keep on going…

You could charge double the invoice for the car, finance it at 37% over 120 months and these dumbasses wouldn’t care. They just see $300/mo and think “yes, I can afford that!”

Maybe it’s time to become a car salesman.

#26 Rexx Rock on 08.20.14 at 7:20 pm

The fed is a clown and pony show.Rates will stay low just like Japan.The lies they spew out are to be ignored,we all know that.The only way they’ll raise rates if there is a huge spike in inflation.So be happy and accumulate debt,its the Canadian culture.

#27 kommykim on 08.20.14 at 7:21 pm

RE:#7 Commodity Trader on 08.20.14 at 6:21 pm
Garth – have you spoken about the effect of global warming and rising sea levels yet?

A few days ago he did:
http://www.greaterfool.ca/2014/08/17/the-change-2/

#28 james on 08.20.14 at 7:22 pm

#4 Waterloo Resident

What makes you think this ‘war’ between Russia and Ukraine will last for decades?

Do you truly think that there are no implications for negative interest rates? That there aren’t effects that cause circumstances just as undesirable as a housing bubble implosion?

#29 Cici on 08.20.14 at 7:27 pm

#8 Shawn

That’s good news! I have a Honda that I bought NEW for the same price as USED (the previous year’s inventory) with 20% down and if I can get 16 years out of it I’ll be happy as a cat!

#30 Sheane Wallace on 08.20.14 at 7:34 pm

Owning houses in North America is quite expensive.
Cost of ownership here is big, 1.5-2 % of the value in yearly taxes and repairs.

It is quite a lot actually for the services we get (including limitations and measuring of the garbage in Toronto).

Big difference in Europe and the rest of the world, much cheaper to own and no credit bubbles except… the other banker’s paradise – UK.

No reason to own condos – it is a community ownership and you are paying actually rent (property taxes + maintenance fee = rent) after mortgage is paid out, so you ‘own’ nothing.

Substandard condos with class wall is the worst investment one can make. Except maybe buying overpriced piece of crap in the suburbs for renovation and flipping, a friend of mine is about to lose 200 k on such project.

#31 Sheane Wallace on 08.20.14 at 7:34 pm

glass walls

#32 dosouth on 08.20.14 at 7:36 pm

Yes want vs. need are two different birds….

The difference between want and need is self control…not taught but learned….

….but then you all know that.

#33 Sheane Wallace on 08.20.14 at 7:38 pm

#4 Waterloo Resident

we are much closer to the complete demise of currencies than you can imaging. much closer.

I myself would not touch of keep that piece of crap called bonds with a stick.

Unless it pays 10 + % interest.

#34 Sheane Wallace on 08.20.14 at 7:39 pm

imagine, darn it

#35 TurnerNation on 08.20.14 at 7:42 pm

Pic: Don’t put the cart before the horse?

#36 Sebee on 08.20.14 at 7:43 pm

I still think that Japan total mortgage vs. Canada was a better stat considering population and land size. Anyone know if something is missing from that data? Some type of lending Japanese use that’s not part of that 1.3 tril. total?

#37 High Plains Drifter on 08.20.14 at 7:43 pm

I doubt the muppets get back to the original prices on Sesame St. I think the muppet in charge of mortgage rates had a near fatal after seeing the carnage of 17 straight raises and then the Wily Coyote air time. I have fun singing the lyrics to “Peel Me A Grape” while perusing bond yields.

#38 Millenial on 08.20.14 at 7:44 pm

I know a guy with a 3 year lease on a Porsche Panamera. His monthly payment is $2800. Serious.

#39 Realties.ca » The ride on 08.20.14 at 7:51 pm

[…] Source: http://www.greaterfool.ca/2014/08/20/the-ride-3/ […]

#40 Anson on 08.20.14 at 7:52 pm

Never trust a word out of Janet Yellen’s mouth and always remember actions speak louder than words.
No one, and I mean no one, knows when rates will rise.
There are so many things that could derail this slow recovery,the whole world is very fragile and unlike 2008 rates are already rock bottom so there is little Janet Yellen or Carney or anyone could do to stimulate the economy.
Rates may rise next year or the year after or not for another 10 years no one knows. But history shows rates do NOT have to rise for real estate to correct.

#41 Smoking Man on 08.20.14 at 7:57 pm

Racism alive and well at Union station…

Two white pretend cops, got a black dude in cuffs. His crime, said he didn’t have ID.

But told his real name.. With there backs turned to me.. I Crack open a mic of JD.

Two big gulps. Look up to the sky, and thank God I’m not black..

It’s not fair how they are treated..

I should be the one get arrested.. But I have a good sales pitch..

#42 TurnerNation on 08.20.14 at 8:00 pm

Massive kando infill planned near me. It faces the GO/Via train tracks (and Cityplace aside them). If you like noise, soot.

http://urbantoronto.ca/news/2014/08/evolving-design-well-evident-new-renderings

#43 triplenet on 08.20.14 at 8:03 pm

The Altus Group.
Finally advice from a real estate consulting company that knows real estate.
GRM – not really….
ICI – not just commercial.
Franken number – ask them.
And dont be afraid to invest in us.

#44 newbie on 08.20.14 at 8:03 pm

bought a used Toyota Echo almost two years ago. It was pushing 8 years old. Runs perfectly and zero probs so far. cheap on gas. paid $4800 for it and it should go at least another 200 k… in which time I’ll save for a newer car to replace it. I have learned the hard way to stay away from big long payments..

#45 Spencer on 08.20.14 at 8:03 pm

“As you know, a number of car companies advertise loans of 96 months, which is a year or so longer than the average marriage and the lifespan of most cheap rides.”

Funny but true. Something red pill about that statement. The only marriages which tend to last are from traditional families, but to the point, if marriages are a scam to the men, then the demand for housing will drop obviously.

The femitrolls which plague these forums can brag about their overpaid government job and teaching job, if there aren’t enough taxpayers in the Ponzi scheme, they’re out of jobs

#46 omg on 08.20.14 at 8:05 pm

#4 Waterloo Resident
“Don’t worry about rates rising, they won’t rise for at least another 20 years.”
—————————-

Seriously, and I mean this, read some history. We are all consumed by the recency effect. All generations have believed they were living in the worst of times.

Things ain’t so bad these days, western economies will continue to move forward, Asian and African economies are going to rocket, and interests rates will rise, maybe not this year or even next year, but they will.

And history has shown that when rates do rise it will likely be faster and higher than most expect.

#47 the truth on 08.20.14 at 8:11 pm

So if i buy a condo and a bus pass i can budget an extra $600+ per month mortgage payment cuz i dont need a car loan insurance and gas?

#48 Kenchie on 08.20.14 at 8:14 pm

#4 Waterloo Resident on 08.20.14 at 6:01 pm

“Don’t worry about rates rising, they won’t rise for at least another 20 years. In fact I would bet that the next move the Bank of Canada makes is a RATE CUT, not a rate rise.”

That’s a good one, I’m still laughing.

Bank of England, where Carney rules, just had its first split vote on raising/holding rates in about 3 years. 2 members of the Monetary Policy Committee broke ranks and voted for a 25 bps increase by the end of the year. If it’s happening there, in the UK, which has been a basketcase since GFC, it will most certainly happen here, where Canada’s been stellar economically, relatively-speaking.

Furthermore, the RBC report Garth quotes above also said this:

“We believe that the currently historically low levels of interest rates in Canada are not sustainable and that longer term rates will begin to rise later this year in anticipation of tightening mode by the Bank of Canada in 2015.”

And you should read the next sentence after it for the numbers they expect by end of 2015. It’s a scary read.

Read the fourth paragraph down on this:

http://www.rbc.com/economics/economic-reports/pdf/canadian-housing/housingforecastAugust2014.pdf

#49 Inglorious Investor on 08.20.14 at 8:23 pm

With the financialization of the economy, and terms as long as the actual life of the product being purchased, ownership is now effectively a thing of the past. We have become, in actuality if not technically, a “rent everything” society.

It was well noted before the collapse of the auto makers, for example, that General Motors made more money from its finance arm, GMAC, than it did actually making cars.

A society in which money lending is more profitable than producing goods and services is a society that’s dying by self cannibalism.

#50 pravchaw on 08.20.14 at 8:27 pm

I blame it on lack of math skills (and bad genes).

#51 eddy on 08.20.14 at 8:29 pm

eight in ten lust to have a home of their own

I would have guessed nine in ten. Looking for a rental is depressing and the depression increases the older you get..if someone in there 50s shows up to rent your basement apt. what goes through your mind?

#52 april on 08.20.14 at 8:30 pm

Some bloggers think because there has been a small correction that real estate will start to climb up again. Apparently not. Housing prices have been unsustainable for years now which means we will continue downward for a long time. This is not the time to buy.

#53 Setting the Record Straight on 08.20.14 at 8:30 pm

“I don’t judge this good or bad. In fact I think Canada has a moral obligation to accept immigrants.”

Please explain!

#54 Mike on 08.20.14 at 8:30 pm

HEY..I like my Kia. Paid cash and it’s about 2% of my net worth. So bite me! :)

#55 april on 08.20.14 at 8:39 pm

#47 – Kenchie – I can’t help feeling a bit suspicious since this report comes from a bank. I would say the whole report [price declines and sales] is being played down.

#56 nonplused on 08.20.14 at 8:41 pm

I haven’t had a car loan since I first got out of university and that was $4000 for a used truck. I didn’t buy my first brand new vehicle until I was 44 because I didn’t like the 30% depreciation in the first year. That first year can be really expensive. I will admit that our cars got progressively newer over the years but I always paid cash. Why pay $50,000 for a brand new car when you can get a lease back for $30,000 with only 40,000k on it? But I guess people figure if they can get zero percent financing then why not?

I bought my current truck new, but also cash. It didn’t stay new for long though, it’s amazing how quick 3 years goes by. But I plan to drive it until the wheels fall off.

This kind of vehicle management doesn’t impress the ladies much though.

The best vehicle bang for the buck for those short on cash in my opinion is an older model Jeep Cherokee 4×4. They are still cool, the straight six engine is very hard to break, and you can get one in good shape for $4,000 or less. And it’ll pull a 4,000 lb trailer. Parts are cheap too. For those who want a car, everyone swears by the Civic. I personally haven’t heard good things about the Taurus or things like that.

#57 TEMPORARY® Foreign Prime Minister on 08.20.14 at 8:47 pm

“….This week a survey found 80% of renters want to be owners……”
=========================

Happy to be a 20%’er.

After I deduct:
– equivalent property taxes,
– equivalent condo fees,
– included parking for the pickup and the Hawg,
– included utilities,
– included swimming pool and gym membership
my net monthly rent for my GTA apartment is just $350, leaving a massive amount of blue collar disposable income to pay cash or save for just about anything.

We’ve become a society totally based upon marketed affordable(?) monthly payments.

Anyone can tell you their monthly mortgage payment or monthly car payment to the penny.

No one can tell you the eventual total payout of their home or automobile.

For the Big Five, like shooting fish in a barrel.

#58 wayne on 08.20.14 at 9:07 pm

Why would folks be so dumb as to incur years of financing charges on an asset destined to deteriorate in value – ultimately to zero?

Because in many cases you can get 0% for 72, 84 or even 96 months. And in those cases, you would be dumb to take 0% for anything except the longest term offered.

#59 Catalyst on 08.20.14 at 9:18 pm

I had raised this alarm many months ago, but its just one domino in the long road. Houses, cars, soon everything else will be amortized and calculated by its monthly. Let me get you all ahead of the curve.

http://www.easyhome.ca/

#60 Nemesis on 08.20.14 at 9:19 pm

#Meanwhile,BackAtDoggieHQwEST… #JoeFridayWasBeginningToWish… #He’dLeasedThatMaserati… #OnTheCompany’sDime… #WhenBudgetsWereFlusher… #AndAppearancesMatteredMore.

http://youtu.be/TcMSiqo3g7k

#61 AK on 08.20.14 at 9:21 pm

#8 Shawn on 08.20.14 at 6:25 pm
“The problem with Hondas…

I have owned two Hondas so far.

The problem was after just 16 years I had to replace the first one.

The second one is now 10 years old and is threatening to last just as long.

It’s a problem because by the time I need to buy a new one, I am totally out of practice.”
====================================
Wow. I hate to admit it, but I finally agree with you on something…

#62 AK on 08.20.14 at 9:23 pm

“Why would folks be so dumb as to incur years of financing charges on an asset destined to deteriorate in value – ultimately to zero?”
====================================
A car is not an asset. It’s a liability and a necessary evil.

#63 Kenchie on 08.20.14 at 9:28 pm

#54 april on 08.20.14 at 8:39 pm

I agree, since it is from a bank (biggest in the country) it has the twinge of bias. And I agree with it seemingly being played down, otherwise they might panic too many of their clients, etc. But who cares about the actual numbers (forecasts are never right).

What matters, in my opinion (as a 30 yo with house horny coupled-up friends), is people taking the time to do scenario analysis on their pre-approved mortgage rates before they even start looking for houses.

For example, I used my friend and his wife as test on RBC’s pre-approval calculator. Through discussion, I know their down payment size, their combined income (not exact, but ball parked it to the conservative side) and some examples of houses they’ve been bidding on. Then I used two rates – 3.09% and 4.09% – to see how much less they would be able to afford if rates rose by 100 bps.

Turns out that they would lose about $45,000 in pre-approved credit if rates rose by 100 bps. That’s about 5% of the house they were looking at in East Vancouver.

Now, my friends, as a couple, make significantly more than the average household income (as reported by StatsCan). So I don’t know how much other couples, who presumably make less, would fare in a rising interest rate environment. But it doesn’t look good for the average house price going forward (if RBC Economics is in the ball-park of being correct)…

REMINDER: That’s the absolute most that they can borrow, and it is never recommended to max out!

#64 45north on 08.20.14 at 9:29 pm

traffic accident investigation:

today at 14:30 traffic at Bank and Walkley was backed up. Completely! Bank Street north bound was closed off at Alta Vista. Totally!. All north bound traffic either had to do a U-turn or turn right onto Alta Vista.

I asked the officer why? He said that they were investigating. Here’s a video from the Ottawa Citizen that shows what they were doing:

http://ottawacitizen.com/news/local-news/pedestrian-critically-injured-in-south-end-crash

Obviously it takes time to set this up. The video shows the brakes work fine – maybe they pull just a touch to the left.

You have to listen to AugerHollingsworth before the video. Reminds me of the scene in Rainmaker where the characters played by Matt Damon and Danny Divito exit a hospital room. Danny Divito says “what do we have to lose?” Matt Damon “just a little dignity”.

#65 devore on 08.20.14 at 9:42 pm

#46 the truth

So if i buy a condo and a bus pass i can budget an extra $600+ per month mortgage payment cuz i dont need a car loan insurance and gas?

I like how you think! Here, let me move you up from our studio homes into the modest 1 bedroom estates.

#66 45north on 08.20.14 at 9:47 pm

Ray Skunk : North York condo development goes tits-up

great story. In the US, people who buy pre-construction have the option to have their money in a separate trust fund – separate from the developer. It should be an option in Canada too.

Millenial : I know a guy with a 3 year lease on a Porsche Panamera. His monthly payment is $2800. Serious.

that got my attention

Kenchie: from the pdf : We expect the cumulative increases in longer term rates to be quite meaningful by the late stages of 2015 (for example, RBC forecasts government of Canada five-year bond yields to more than double to 3.30% by year-end 2015 from the current levels hovering around
1.50%).

Quite meaningful is a polite way of saying it. Garth likes polite. Okay here’s the RBC saying that rates will double. Double! The people who say rates won’t go up are deeply in debt and cannot afford to have them go up.

#67 Shawn on 08.20.14 at 10:11 pm

Immigration and freedom

“I don’t judge this good or bad. In fact I think Canada has a moral obligation to accept immigrants.”

Please explain!

******************************************
Why should law abiding people of this world be barred from moving to whatever country they want?

If certain parts of the globe are over-crowed and we 35 million live in abundant space we are either reasonable about immigration or under natural rules of justice they storm our borders. Ask the U.S.A.

Also all of our ancestors immigrated here at some point. Fair is Fair.

#68 Spaccone on 08.20.14 at 10:11 pm

It may not say much, but reminds of the time I was approaching an ATM on King St. in the financial district just as two sharp & big-shot looking guys left it to hop back into their shiny, sexy, convertible BMW. They hadn’t retrieved their slip which showed a puny account balance (don’t remember exactly) of something like $100 (I don’t exactly keep much in my chequing account myself).

#69 Xyz on 08.20.14 at 10:17 pm

Sold my 2000 Echo to my boyfriend a couple years back, 14 years and it still ticking along… No major repairs in that time either, and I bought it used in 2003 :)

But is he still your BF? — Garth

#70 Inglorious Investor on 08.20.14 at 10:29 pm

#30 Sheane Wallace on 08.20.14 at 7:34 pm

“No reason to own condos – it is a community ownership and you are paying actually rent (property taxes + maintenance fee = rent) after mortgage is paid out, so you ‘own’ nothing.”

Agreed. And if you’ve read my comments on this blog, you’d know my opinion of condos, particularly as investments.

That said…

Single family home/land owners also have to pay property taxes, and––if they want to maintain their homes in good condition––maintenance costs. While there are obvious differences between condo fees and SFH maintenance costs, fundamentally they are the same thing.

So… is owning a SFH also like renting? I mean, what would happen if, say, you stopped paying your property taxes? Look up “fee simple.” Here’s a taste to get you started: the word “fee” in “fee simple” is derived from fief, meaning a feudal landholding.

#71 TurnerNation on 08.20.14 at 10:44 pm

Finally a car blog.
(If it flys, floats or flaunts…rent it.)

The Zipcars in my building now include a brand new, black BMW 328i Xdrive (all wheel drive) model!

Weekday rate is $17.25/hr, or $122/8 hours
Weekends dial in at $18.25/hr – $137/8hr.
This includes gas, insurance and 200km.

Amazing. A brand new 240hp Beemer at one’s disposal, for the price of a few pints.
Gas alone would be $20-40 per 8hours of hard tripping.
Here is what that model looks like. Rad.

http://wpmedia.driving.ca/2013/08/75955251.jpg?w=620&h=400&crop=1

#72 TurnerNation on 08.20.14 at 10:50 pm

Oh yeah 1-year charts of Altus, Easyhome and AutoCanada. Business must be good.

http://stockcharts.com/freecharts/candleglance.html?AIF.TO,EH.TO,ACQ.TO|D|0

#73 TurnerNation on 08.20.14 at 10:52 pm

Better link: http://tinyurl.com/omn42vw

#74 Smoking Man on 08.20.14 at 10:53 pm

We stopped for coffee
In the redwood forest
Giant dripping leaves
Spoons of powdered cream

I wanted to kiss you
But I wasn’t sure how
Like those Indians
Lost in the rain forest

Forced to drag burning wood
Wherever they went
They had all forgotten
How to start a fire

This is why people OD on pills
And jump from the
Golden Gate Bridge
Anything to feel weightless again

Those poor lost Indians
When the white man found them
Most died of TB
The rest went insane

In our motel room
You’re drinking slice and gin
Reading Moby Dick
On the other bed

Remember the first time
We slept together
You said it felt like
When you learned to float

This is why people OD on pills
And jump from the
Golden Gate Bridge
Anything to feel weightless again

#75 Carpe Diem on 08.20.14 at 11:00 pm

Never buy Chrysler/Dodge/Jeep.

My worst buy ever! Cheap to purchase but the repairs and recalls were not worth it. My wife had to fight a few times! She fought hard, won and then we received a recall for what she was fighting for!!!

Better to stick to Japanese or Ford. I’ve had Mazda, Honda and Ford and never regretted the quality and service.

Talking about service … if you service your car at Canadian Tire for “Tires” … make sure they tighten the wheels…. low quality service = Canadian Tire.

#76 Kenchie on 08.20.14 at 11:04 pm

#66 45north on 08.20.14 at 9:47 pm

“The people who say rates won’t go up are deeply in debt and cannot afford to have them go up.”

So true! Biases are a powerful mind-f$&k. It’s hard to control no matter how experienced.

I used to fist-pump in the air when inflation reports came out at well below 2%, knowing BoC wouldn’t likely raise rates (this was a while back). Now that I am selling my condo in Van (closes in 14 days!) I want rates to increase! Lol

Also, I’ve always been fond of a little schadenfreude though.

#77 maxx on 08.20.14 at 11:07 pm

Just heard (industry source) that idiots who own a place on a good lake and asking over a million, refused a cash offer of list price, minus 4.5%….they’ve since subdivided (oldest trick in the book) and are waiting……and waiting……what complete and utter fools!

The loser mentality of greedy ignorami who think they own the Taj Mahal and believe that the world must kiss their butts is mind boggling.

The best offer, as they say, is usually the first. Balcony cabin may have to wait, eh wot?

#78 Whitey on 08.20.14 at 11:12 pm

At my last job, I had a coworker who rolled her car payment into her mortgage. I asked her if she realized that she would pay off her car for 20 years? She replied “It will be 25 years and otherwise I couldn’t afford it”. I was absolutely stunned.

#79 Linda Pearson on 08.20.14 at 11:18 pm

The fellow in the pic, sitting on the rocking horse, looks for all the world like the old chap from E-Harmony. I wonder if the lady in the driver’s seat is his date for the evening.

#80 Joe2.0 on 08.20.14 at 11:20 pm

I’d like to coin a new word to capture the force feeding of manipulated data and facts by the RE industry.
-HOMEASIDE-

#81 takla on 08.20.14 at 11:24 pm

Harley bought for cash…check
06 Diesel pickup payed when house sold…check
Wifes suv…payed off ….check
No longer have a mortgage,rent …check
bi-weekly income leftovers invested monthly…check
Now bring on those Higher interest rates and we can actually make some interest income on bank deposites…ye-haaaa

#82 devore on 08.20.14 at 11:56 pm

#71 TurnerNation

Amazing. A brand new 240hp Beemer at one’s disposal, for the price of a few pints.

Amazing is right. As AK notes, a car is not an asset, unless you make a living driving it. But due to the urban sprawl in North America, it has become a necessary evil. In Europe people can walk/cycle/moped/scooter/transit/taxi everywhere they need to be on a regular basis, and a car can be rented for the odd weekend or inconvenient trip. An automobile you own or rent full time is a very expensive luxury, especially if you drive it a lot.

In most places in NA one is needed, but you can easily satisfy the need with an inexpensive and dependable vehicle without frills. These days, many of the new cars remind me of the gaudiness and excess of the late 1950s.

#83 Lobster Man on 08.20.14 at 11:57 pm

If 0% financing were really available, why can’t I get my house financed for 0%?

#84 Mister Obvious on 08.21.14 at 12:08 am

#51 eddy

“…if someone in there 50s shows up to rent your basement apt. what goes through your mind?”
————————

I know what you mean eddy… I’d see a total loser.

Someone in their fifties should have enough spinoff from their life-long portfolio of wise investments and/or the sale of their bubbly properties to put them well beyond renting basement suites from reluctant landlords.

Perhaps a two bedroom, two bath with on-suite laundry, covered balcony on the fifth floor with view, close to the park, managed by professionals and near public transit and health care services.

Now we’re talkin’.

#85 Happy Renting on 08.21.14 at 12:11 am

#38 Millenial on 08.20.14 at 7:44 pm
I know a guy with a 3 year lease on a Porsche Panamera. His monthly payment is $2800. Serious.

If it’s to impress shallow people, he’ll get similar results short-term renting the damn thing from a specialty car rental agency. Unless he’s already rich, whatever admiration and envy he’s getting cannot possibly be worth $100k over three years (plus investment gains.) *head shake*

#86 Andy on 08.21.14 at 12:27 am

Are you ever getting zero percent car loans from the bank?

No, you are not. You are being offered zero percent OR a rebate if paying cash from the car manufacturer.

If you do the math, they often come out equal. There is no zero percent financing.

#87 jordy on 08.21.14 at 12:30 am

I must be a contrarian, because I really want a Kia now :-)

#88 Tony on 08.21.14 at 1:23 am

Re: #19 Vancouvermill on 08.20.14 at 7:14 pm

Janet will tell everybody this Friday interest rates will be negative by this time next year.

#89 Tony on 08.21.14 at 1:32 am

Re: #66 45north on 08.20.14 at 9:47 pm

I’d bet heavily the 5 year Canadian bond yield will be less than one percent by the end of 2015.

#90 Mike T. on 08.21.14 at 2:04 am

Well, it is just this readers opinion, but I think all cars are pretty stupid and crappy. I mean, compared to what’s possible.

100+ years and as humans we haven’t figured out more optimal travel technologies? I don’t believe it.

#91 earthboundmisfit on 08.21.14 at 3:10 am

Cars are a depreciating commodity, not an asset.

#92 Londoner on 08.21.14 at 4:32 am

“…any price increases exceeding the rate of household income gains in the near term (2014 and 2015) likely would result in steeper price declines down the road.”

It sounds to me like one economic policy solution is to stimulate wage growth through sustained monetary accommodation.

Garth – we’ve heard a lot from you about the impact that emergency level rates in Canada have had on consumer debt, but what impact do you think they’ve had on economic growth and employment? Do you disagree with the fiscal and monetary policies implemented in Canada since the GFC? If you were the Governor of the BoC and/or Finance Minister what would you have done differently? What would you do if you had to take the reigns today?

#93 geogar on 08.21.14 at 4:54 am

Our evolutionarily innate ineptitude in regards to finance coupled with our herd mentality provide for some powerful inertia. In this case headed for some seriously troubled waters. If only our ancestors had stayed in the water we wouldn’t be faced with such a predicament. Irony is evolution vis-a-vis.

#94 DrStan on 08.21.14 at 7:06 am

My wife and I lease both our vehicles even though we could pay cash. They provide a modest tax write-off since we run a business on the side. We invest the difference. Currently paying $228 a month inclusive on a brand new Mazda3. New generation cars are much safer than older ones. Wouldn’t want to be in a crash in a cardboard 2001 Toyota Echo.

#95 Joe on 08.21.14 at 7:08 am

There’s very little reason for your average Canadian to be saving as the banks barely give any interest on deposits and the GICs are no better. To make things worse we have the govt CMHC insured loans, the home buyers plan reducing savings, record low interest rates from central banks across the world and the media is #1 real estate pumper which inevitably brought us to record levels of debt. I’m not sure if the central banks are able to increase the interest rates among the most indebted population without risking an all out financial disaster.

#96 The Man From Nantucket on 08.21.14 at 7:18 am

#85 Andy on 08.21.14 at 12:27 am
Are you ever getting zero percent car loans from the bank?

Yes, sometimes.

If you know how to deal, and if you find an alpha salesman that needs to move a car.

Last car deal featured well under the rebate-included ‘cash’ price AND zero percent.

The zero percent really costs them S.F.A. You and I can still borrow short term money around 3% or less.

Betting an institution like Toyota Canada etc. can possibly borrow it at somewhere between that and zero.

Anyway, don’t ever pay cash unless they cut really really, really deep. No use selling something that’s returning 5%, 7%, whatever to pay cash for a depreciating asset…..you’ll never win!

#97 Dude from MTL on 08.21.14 at 7:51 am

Hi Garth,

What’s the best deal these days and why ?

– 2.35 variable (5yr)
– 2.88 fix (5yr)
– 3.65 fix (10yr)

Why would you gamble for half a point? Five fixed. — Garth

#98 Retired Boomer - WI on 08.21.14 at 8:17 am

Car Talk-

I love cars. I’m on my 64th vehicle presently. Most recent acquisition is a 1993 Cadillac Fleetwood with a mere 57,000 miles on it. Everything works amazingly well, and for $2700 not a big gamble. Needed new tires they were 13 years old according to the DOT stamps. Add in new front brakes, full fluid changes and the new investment swells to about $4300 total, still an interesting & cheap ride. Gets over 20 mpg as well.

Add that to the 09 Mustang convertible, and 10 Fusion Hybrid both vultched off lease and have wheels til I get tired of them.

Earlier comments on Chrysler I agree with not overly reliable. Toyota, Honda, Mazda and Ford have been the best overall performers.

One good thing about Detroit products they lose more value in the first years over the Japanese makes, making them better buys on the used lot generally.

All cars will last a long time if properly maintained along the way. Buy them right, maintain them and you can usually resell them years later for most of the cost of a smart acquisition.

NO – I disagree with the assertion, “all cars depreciate to zero.”

NO car, except a wrecked, or rust ravaged hi-mile piece of crap has little value… and then it still has good scrap value. That is not ZERO value.

#99 SunnyBeach on 08.21.14 at 8:20 am

It’s a good thing people want to own their roof over their head ..renting IS wasting money…buuut there’s a time to own and a time to rent. I’ve owned 3 times…In 2012 I jumped out for the very reasons Garth talks about. Too much capital in one place in what “could” be a difficult thing to sell if buyers wake up and decide prices have come too far. In 1990 I owned a condo I bought at the wrong time because it just felt like I needed to own before it became unaffordable. Well it took me 10 months to sell it in 1995. Garth’s advice is spot on in my opinion. I’m now on the sidelines and have split the proceeds from my over valued house into balanced investments and the remaining cash will be used to buy again, but not now. Cheers !

#100 Londoner on 08.21.14 at 8:39 am

#48 Kenchie

Split vote? 2 of 9 members of the MPC at the BoE voted for a 25bps rise by the end of the year. That means that the BoE will not be raising rates this year and it’s highly unlikely that it will be anything more then a 25bps hike next year.

If the BoE tightens, it will not be by just 25 bps in a year. That would be a counter-intuitive move. The increases, when they begin, will come with regularity. — Garth

#101 jess on 08.21.14 at 8:47 am

6 JacqueShellacque

the whereas and the therefore
http://www.dfs.ny.gov/about/ea/ea140819.pdf

Standard Chartered pays $300m over money laundering failures (20 Aug 2014)
NYDFS ANNOUNCES STANDARD CHARTERED BANK TO SUSPEND DOLLAR CLEARING FOR HIGH-RISK CLIENTS IN HONG KONG; PAY $300 MILLION PENALTY; TAKE OTHER REMEDIAL STEPS AFTER ANTI-MONEY LAUNDERING COMPLIANCE FAILURES (20 Aug 2014)

see :
Swiss sanctions dilemma over Russia BBC
Moscow’s response to EU sanctions – a ban on fresh food imports from the EU – does not apply to Switzerland.

Swiss Private Banks: Not a Pretty Picture Wall Street Journal

US fine provisions hit Swiss private banks swissinfo

It’s not just the Swiss – banks far from Switzerland should know what institutions there disclose Corporate Counsel

#102 Hoser on 08.21.14 at 8:51 am

Posts from realites.com should not be making it through moderation. There is no comment, just a link to a spammy site.

Thanks for the notice. — Garth

#103 cola on 08.21.14 at 8:51 am

Garth, you contradict yourself. Didn’t you repeatedly say that is better to take a 0% car loan (or any other very low interest loan) and invest your money for the duration, so you can actually make some money out of it?

Read this. — Garth

#104 Cha Ching on 08.21.14 at 8:56 am

As the latest Survey of Financial Security from Stats Can clearly showed, Canadians have 9x more assets than debt and only a third of total debt was even related to their primary residence.

Get over it.

Read the post on that subject from last week. And get over yourself. — Garth

#105 crowdedelevatorfartz on 08.21.14 at 9:17 am

@#89 MikeT
“100+ years and as humans we haven’t figured out more optimal travel technologies? I don’t believe it…..”
++++++++++++++++++++++++++++++++++++

Your Right! On the planet Zardoz we fly around in these!
http://www.google.ca/url?sa=t&rct=j&q=&esrc=s&frm=1&source=web&cd=3&cad=rja&uact=8&sqi=2&ved=0CDMQtwIwAg&url=http%3A%2F%2Fwww.youtube.com%2Fwatch%3Fv%3DkbGVIdA3dx0&ei=y_D1U5zwPIa6ogTrwoKwBQ&usg=AFQjCNHCG3jgwVglO4ukz8my1RkeqW97xw.

Gives a whole new meaning to “head stone”

#106 JimH on 08.21.14 at 9:28 am

#97 Retired Boomer – WI
re: “car talk”
================================
I had a good chuckle while reading your post!

When I went back to University to finish off a graduate degree in the late 70’s, I had to quit my outside sales job that came with a company car. I had saved lots of cash but needed a car.

I bought an aging 1960 Ford from a guy who just wanted it out of his yard for the grand sum of $175; reverse was going, but I could always back up as long as I was facing uphill or at least on the level!

I got 2 years out of her and after graduation drove her to the junkie and after some bickering got $250 for her! The 352 V8 was still purring without any smoke, and I think that was what did it. A 43% basis ROI!

You’re right about the fact that they should never quite make it to zero!

#107 Londoner on 08.21.14 at 9:28 am

“If the BoE tightens, it will not be by just 25 bps in a year. That would be a counter-intuitive move. The increases, when they begin, will come with regularity. — Garth”

Yes, that’s exactly what I mean. Tightening is not likely to begin until the end of 2015 with further rises coming in 2016.

What about a response to my earlier questions?

#108 Anson on 08.21.14 at 9:39 am

Garth if interest rates rise as you have stated over and over again and the economy starts to wobble what do you think will come next?
Yup a cut in the very rates that have risen.. I am not saying rates will not rise I am saying that they will rise, when the jaw boning no longer keeps bond vigilantes in check and seeing that everyone including yourself is hanging on every word these bankers say it could be awile.

When central bankers start to raise rates they will not backtrack. Guaranteed. — Garth

#109 Ray Skunk on 08.21.14 at 9:51 am

#98 Retired Boomer

NO – I disagree with the assertion, “all cars depreciate to zero.”
———————-

Absolutely. My 1980’s car I purchased for $9k earlier this year was recently appraised by my insurance company at $16,500. There are quite a few vehicles from that era that have either hit the bottom of their depreciation curve or are appreciating – and some aren’t terribly exotic either. Mine won’t be crossing the block at Barrett-Jackson anytime soon.

I’m fortunate in that I work from home and only need a car for pleasure or to pick up too-large-to-carry-on-foot items on a nice day, thus allowing me to take on something that’s a hobby as well as a mode of transport.

In that regard I know that for 99% of drivers my approach is not an option.
However, to declare that “all cars depreciate to zero” is not a true statement.

#110 Anson on 08.21.14 at 9:55 am

Garth you of all people should know that telling the public the truth is not always in a countrys best interest
I believe your pollitical career was cut short for these very reasons.
This is why I enjoy your blog so much because you tell it like it is.
You have always been a straight shooter and unfortunately this is why you were punted out.

#111 Aaron on 08.21.14 at 9:58 am

It would be interesting to see a post dedicated to cars, it seems to have people interested (including me, having just bought a new one).

Leasing vs Buying

New vs Used

48 month financing vs 84 month

#112 jess on 08.21.14 at 10:02 am

could one become a “basement”dweller as a result of being a whistleblower?

http://www.telegraph.co.uk/health/healthnews/9869579/NHS-whistleblower-faces-ruin-after-speaking-out-about-patient-safety.html

=

… “the Swiss are considering moving away from their current scheme to a single-payer public fund run by the cantons. They’ll vote on it on September 28. ”

…”The current system was ranked second overall, behind Britain’s National Health Service (NHS), doing especially well when it came to timeliness of care (first) and access to care, equity of care and patient-centred care (second position each time).

…”An NHS spokesman said it had recently set out a “legal right” for staff to raise concerns about safety and it had been made it clear to NHS hospitals that “gagging” clauses should not be used. ”

http://www.theguardian.com/society/2013/feb/06/mid-staffs-hospital-scandal-guide

http://www.theguardian.com/society/2013/oct/27/julie-bailey-mid-staffordshire-nhs-whistleblower

#113 Mike on 08.21.14 at 10:05 am

Trashing Kia’s again, from a guy who owns a GM product.

#114 JimH on 08.21.14 at 10:24 am

On the subject of zero percent financing:

On my 2012 Toyota Tundra 5.7V8 doublecab 2X4, we were offered a $2000 dealer rebate or 0% 60 months from Toyota. The dealer’s “best price” with the heavy duty tow package, ‘heated’ adjustable tow mirrors and heavy duty step bars was over $32,700.

The negotiations took 10days. I’m pretty fair at negotiating, but my wife once actually made a sales manager cry.

We got our truck for $30,500 with several hundred dollars in additional accessories thrown in AND 60 months 0% Toyota financing.

In January 2012 I moved $30,000 into an additional brokerage account dedicated to “The Beast”. Its current balance sits at just under $36,000, and will be applied to this vehicle’s replacement after 5 years.

We live just outside the Kansas City area, and benefited from stiff dealer competition, granted. Still, we pushed the envelope about as far as it would go.

I see that today that same dealer is offering a $500 ($5 hundred) rebate or 2.9% over 72 months on a sticker price of $38,000 for a similar truck. (google midwest Toyota dealers)

Granted, a 0% 48 month financing ‘deal’ versus a $5000 rebate doesn’t work, as in Garth’s example.

1. Never, ever accept the dealer’s sticker price on any new vehicle. We have bought the last 3 new vehicles at prices well below the dealer sticker price less any offered rebates. If the dealer won’t budge, and you’re too timid to dicker, you can’t afford to deal with them.

2. I bought in December; When you buy can matter as much as what you buy.

#115 Hot Albertan Money on 08.21.14 at 10:42 am

@ TurnerNation on 08.20.14 at 10:44 pm

The Zipcars in my building now include a brand new, black BMW 328i Xdrive (all wheel drive) model!
————

Not bad, but then you have to schedule your needa round other people’s needs.

CarShare programs are great in theory, but not very convinient.

#116 Calgary Vortex on 08.21.14 at 10:58 am

It is always interesting that the majority of people when they talk state their viewpoint and not the opposite viewpoint. There is no balance. Such is the case for this post, yet again.

There are many many variables when acquiring a mortgage, not just interest rate. Rental market, job security, length of renting vs. buying, all those individual factors are applicable. This tired post about “housing lust” is total nonsense. This is a perversion of reality. The reality is that in many provinces rents are more than a mortgage and there are zero rent controls. If a person is to live, for example, in Calgary, many of the monthly rents are over $2000. That is per month, not including utilities. On the other side of the argument it could be said that when interest rates do rise, market values will quickly plummet. That may be said, coupled with the boomers selling properties. However, what is unclear is whether mortgage owners were overleveraged to begin with. Many persons, such as myself, acquired a sufficient downpayment, with a lower term, 25 years and made sure that should market values drop and interest rates rise, I can still requalify for the mortgages and still make the payments. Yes there are many that do not do this. And this is likely why housing skyrocketed in the first place. Is this reality a reality that those that should buy should not? No.

Perhaps in Ontario there are rent controls. Same as B.C. Not applicable to Alberta. Sure in 2018 or whenever interest rates will skyrocket. Does this imply that those renting should sit idle and do nothing if there is a suitable property that is affordable for less than rent and the purchaser will work for the next 40 years? Should they instead rent for the next 40 years? This has nothing to do with nonsensical “lust” which is a totally pathetic classification of those not wanting to pay a landlord.

The reality is that no one knows exactly what will happen. Make your housing decisions on facts, not speculation and how those facts apply to your individual variables. Owning a mortgage is neither better nor worse than renting, what matters is how personal variables equate with the rent to buy decision.

#117 Shawn on 08.21.14 at 11:02 am

S&P 500 back to record high…

Where it naturally belongs… Things that grow exponentially over time do that, they reach record highs repeatedly…

The much vaunted stock correction was what 4% or so? and short-lived.

I love equities and they have shown me the love as well.

#118 Assquatch on 08.21.14 at 11:07 am

#59 Catalyst on 08.20.14 at 9:18 pm
I had raised this alarm many months ago, but its just one domino in the long road. Houses, cars, soon everything else will be amortized and calculated by its monthly. Let me get you all ahead of the curve.

http://www.easyhome.ca/
……………………

I have been looking at the easyhome stock (EH.TO) for the last two weeks and it has been on a wild ride lately. Consistently up daily until two days ago when it took a nose dive. What gives? Thinking of buying if it drops more and has a lower P/E ratio.

#119 JL on 08.21.14 at 11:11 am

Garth regularly compares avg US homes to Canadian homes as evidence of the Canadian market being severely overpriced.

However the US median household income is just over $53,000: http://money.cnn.com/2014/08/20/news/economy/median-income/index.html

And the median household income in Alberta is just under $100,000 : http://www.statcan.gc.ca/tables-tableaux/sum-som/l01/cst01/famil108a-eng.htm

So by Garth’s own argument Alberta’s prices should be about double.

Hmmmm:

https://ycharts.com/indicators/sales_price_of_existing_homes

http://creastats.crea.ca/area/

Looks pretty comparable. Almost identical median income to median home price.

That was funny. You compared median single income in all of the US to family income in one minor area (by population) of Canada. US household income is $63,000, by the way, compared with $74,000 in Canada. Adjusting for currency, it’s close. Factoring in lower US taxes and deductibility of mortgage interest, Americans have more disposable income than we do. — Canada

A better comparison would be Washington DC ($90,000 US)

#120 Netwrok Admin on 08.21.14 at 11:19 am

#90 Mike T.
100+ years and as humans we haven’t figured out more optimal travel technologies? I don’t believe it.

If the automobile had followed the same development cycle as the computer, a Rolls-Royce would today cost $100, get a million miles per gallon, and explode once a year, killing everyone inside. Robert X. Cringely, InfoWorld magazine

#121 Long Time Lurker on Here on 08.21.14 at 11:23 am

I still remember back in 2005, when I was looking for my first car, no dealership would approve my finance/lease application. I went to so many different banks, finally TD agreed to provide me with a car loan at 10% LOL.

#122 Retired Boomer - WI on 08.21.14 at 11:28 am

#110 JimH

My congratulations sir on a buy well done!! You knew “when” to buy, as in when a dealership is hungry, and never EVER buy the window sticker price (called the Monroney sticker in the states, after the senator’s legislation in 1958 made auto makers display their ‘list’ price.
Their is a ‘wholesale’ list price as well to the dealer. That price does not include the factory’s holdbacks to the dealership which is more $$$. An average seller should be able to be had for less, or close to the wholesale price. A slow seller considerably less than that number.
Company 0% financing is always welcome for the usual length of term. I would try to ‘pay’ for the vehicle through earnings on existing investments, as I will bet there will be more 0% deals in the future.
If not, you have the ‘cash’ readily at hand.

As always, Caveat Emptor.

#123 Rational Optimist on 08.21.14 at 11:30 am

68 Spaccone on 08.20.14 at 10:11 pm

I was held up in line up at a grocery store the other week by a woman using her bank card to pay for an armload of groceries. Sure enough, it didn’t work, and she had to put back two items, then four. Kind of sad, but then after I paid (with the cash I had removed from my wallet while waiting- I hope everyone behind me took note for next time) quickly, I noticed her getting into a nice-looking mid-sized sedan that could not have been much more than a year old.

#124 Tony on 08.21.14 at 11:31 am

Bought back more shares of Medbox Inc. I don’t want to get too greedy by waiting for it to go to zero. Just like dope all the dopes that bought shares in this company lost big.

#125 rosie "moving forward" in the knowledge that, "this won't end well" on 08.21.14 at 12:01 pm

Herd mentality explained.

http://www.denverpost.com/opinion/ci_26373503/we-spend-way-too-much-raising-kids

#126 chapter 9 on 08.21.14 at 12:03 pm

In the market for some new wheels? Just go to you tube and check out “small overlap crash tests” for the car you are thinking about buying to see how it is rated in an accident.

#127 jess on 08.21.14 at 12:05 pm

A Good Question?
…”if one is on a two-year probation (deferred prosecution agreement) imposed by the U.S. Justice Department for committing felonies in aiding and abetting the Bernie Madoff fraud over decades. Should it be involved in writing best practices for, uh…anything?

Who are the Financial Markets Lawyers Group?
Treasury Market Practices Group?
By Pam Martens and Russ Martens: August 20, 2014

#128 None on 08.21.14 at 12:16 pm

#45 Spencer on 08.20.14 at 8:03 pm
The only marriages which tend to last are from traditional families, but to the point, if marriages are a scam to the men, then the demand for housing will drop obviously.
The femitrolls which plague these forums can brag about their overpaid government job and teaching job, if there aren’t enough taxpayers in the Ponzi scheme, they’re out of jobs

=============

I am fairly sure the vast majority of marriages out there are “traditional” (female/male) and our divorce rate is about ~40% so I’d argue that the traditional family way seems to often result in divorce. Or did you mean “traditional” in the backwards, barefoot and pregnant manner?

Also, don’t take your anger out on women here just because you live in your mom’s basement and can’t get a date.

#129 Panhead on 08.21.14 at 12:16 pm

From a guy who doesn’t mind getting his hands dirty … my wife bought a brand new Civic way back in 2000. I have done very little to it other than routine maintenavce so can’t complain. I own a Toyota. If you do have to work on them the Toyota is WAY easier to wrench. Can’t even see the oil filter on the Honda and lift the hood and the filter is right where it should be on the Toyota. Both excellent car’s though … as for the Hawg … just keep adding SAE 50 oil …

#130 Mister Obvious on 08.21.14 at 12:25 pm

#119 Rational Optimist

Call me an old fossil (I get called worse) but I avoid reward point cards, loyalty cards, air miles, and bank cards whenever possible.

My wallet is thin. Driver’s licence, health care card, one credit card for emergencies, and about a hundred bucks cash.

I use the cash to buy things. Maybe a loaf of bread or some apples on the way home. Perhaps a magazine or a package of transit tickets. It makes life simple and stress free.

Here’s one thing I never do. Hold up a line. But I’ve had to wait for other people to fumble with a handful of dubious cards dozens of times.

I’m not a luddite. Technology is great. As long as it doesn’t waste my time. (Of course, time spend posting comments on this blog is excepted).

#131 Max on 08.21.14 at 12:29 pm

Rates Hike 2015… Next Year, Next Year, Always next year!!

#132 NoName on 08.21.14 at 12:40 pm

if you cant walk to work, car is unfortunate necessity, its only debatable how much of the car you need.
we have 2 cars that at end of the month expense for the cars equals shelter and utilities. how funny or stupid is that? (keep in mind they are not fancy cars)
Unfortunate part for us is there is only 24hrs in a day, so i can chose to spend equal amount of money on transit passes (what would be car payment), and spend (according to Google) 3h55min one way, on public transit to get car and add an extra expence like insurance gas and maintenance and get my self to work in 25-30 min one way in a car. that worked nice so far, only problem is factory that i work in is closing next months… sad sigh
car for my wife shortens an hour bus drive to her work to 12-15min from door to door.
time the only thing we will never get back…
https://www.youtube.com/watch?v=d020hcWA_Wg#t=92

i do remember a time when i ran my small business from trunk of my car (i know sound bad), but i didn’t do anything illegal, trunk was my job box where i used milk crates and cereal boxes to organise tools and materials, those where a days…
https://www.youtube.com/watch?v=tr3Jp_aF1Ok

#133 Westcdn on 08.21.14 at 12:48 pm

Rainy today in Calgary – reminds me of Vancouver; makes me muse. I have never lived east of Calgary but I have met many others from that side who tell me I am a fool to stay in the west – we’ll see later.
I have a dislike for the income/wealth disparity I see these days. Sure I would like to join the 0.1% and enjoy the ‘influence’ that goes with high status. I might make the piker brigade of the 1% but so what. I tend to agree with this article that warns against not giving back to the society that nourishes you. http://www.politico.com/magazine/story/2014/06/the-pitchforks-are-coming-for-us-plutocrats-108014.html – .U_YSxLUg9bb I liked his view about risk and trying to assess future outcomes (my opinion: 3+ years out).
I also look at the past. Amazing how fast things change but yet remain the same because we forget. https://www.youtube.com/watch?v=2MyToTwag34 It is a warning about rising interest rates. Then there is a comment by our host: http://www.cbc.ca/archives/categories/economy-business/banks/canadian-financial-forecasters/garth-turner-sheer-panic.html
As for interest rates, my intuition says that if rates increase then people and businesses will reduce debts causing deflation. Bad for everyone, particularly pension plans, but a necessary evil. I just don’t see how the BoC can raise rates above 4.25% without causing a recession. It looks to me we are in for the Japanese experience although we are different from them so the experience will be different. I see a period of secular stagnation in our future. Mind you, I am not an economist – just a retired accountant who loves military and political history. (ps. I believe the Ukraine used a Mig to shoot down MH17 – why is a question). I am starting to spit when I say neocon.

#134 Rich Dad, Poor Dad on 08.21.14 at 12:57 pm

Everything you espouse I’ve read about some 20 years earlier in Robert T. Kiyosaki book “Rich Dad, Poor Dad”. Maybe you guys should cross promote each other!

FYI: his book was published 14 years ago. My volume, ‘2015’, containing these themes, came out six years earlier. — Garth

#135 natrx on 08.21.14 at 1:06 pm

People laugh at our 97 and 99 Corolla. “You need a new Car”

No I don’t. Fully paid off. Runs well. AC works. Drives straight, reliable.

#136 Holy Crap Wheres The Tylenol on 08.21.14 at 1:09 pm

#74 Smoking Man on 08.20.14 at 10:53 pm

Smoking Man you are either creative or insane. Didn’t quite get the poem but Kudos for the creativity. This is the first really creative thing Ive read from you!

#137 Luc on 08.21.14 at 1:12 pm

Why is there so much disparity between blacks and white in the U S? Is it the same in Canada? Is home ownership the problem? New study from Brandeis U paints a bleak picture? http://money.cnn.com/2014/08/21/news/economy/black-white-inequality?hpt=hp_c2

#138 Gregor Samsa on 08.21.14 at 1:21 pm

Today’s headline: “RBC economist predicts home price declines in 2016 as rates rise”

The interesting thing is that the comments almost universally disagree with the article and predict low interest rates are the new normal.

http://www.theglobeandmail.com/report-on-business/economy/housing/rbc-economist-predicts-home-price-declines-in-2016-as-rates-rise/article20142425/

The sounds of denial from the indebted. — Garth

#139 jess on 08.21.14 at 1:28 pm

http://www.measuringworth.com/uscompare/

#140 Prairieboy43 on 08.21.14 at 2:04 pm

Vehicles depreciating asset. From my business point of view they are a tool. They get me to work all around Western Canada. We charge for this transportation. This is passed onto the customer. We change them out every two years. Very little headaches. Would I buy a new vehicle as a personal vehicle. NO! Used and abused, 3-4 yrs old. I am quite mechanically inclined, I save a bundle.
However I do not mind taking the Subway and bus transit system. It is funny how many think I am crazy to take the subway or bus to downtown Calgary or Edmonton. Many refuse too. They wait years to get a parking spot @ $500.00/month. $1000.00/yr Transit pass is the best bargain for transport in the city.

#141 Cdn Flier on 08.21.14 at 2:05 pm

#136 Holy Crap Wheres The Tylenol on 08.21.14 at 1:09 pm

You are correct in one thing: this is the first creative thing to come from smoking man. Unfortunately, these arent’ his words.

http://www.metrolyrics.com/weightless-again-lyrics-handsome-family.html

#142 Doug in London on 08.21.14 at 2:10 pm

@Retired Boomer – WI, post #5:
As ugly as that comment may be, I agree with you fully. I’ve lost count of how many times I’ve heard someone say: when are you going to buy a new car? I would say: why do I need 2 cars? The reply would be to trade in the old one, but why if the old one I owned at the time worked just fine? I would then hear: if I had your money I’d buy a new car and all sorts of other stuff. That of course explains why some people (like many of us here on this blog) have accumulated wealth and others haven’t. I also found a post by a guy in Australia who thinks the way I do:
http://www.thelifestylecompound.com/whats-wrong-car/ . Good reading.

#143 Maggie the Tech Writer on 08.21.14 at 2:18 pm

#74

Thank you, Smoking Man.

Written like a lover who could start a fire any time he truly cared to. Not like a Hunter S. T. imitation.

Is that the real you or another character? Of course I don’t expect a straight answer.

#144 Bill on 08.21.14 at 2:21 pm

#4 Waterloo Resident on 08.20.14 at 6:01 pm

Someone they had on Bloomberg radio the other day was asked what he thought rates would do in Canada, after he was done giving his opinion on US rates. Gave the standard opinion that rates would rise in the US next year.

He thought that rates in Canada would lag the US as the lower rates in Canada would help weaken our dollar. We need a lower dollar to boost manufacturing & exports. Suggested we might even see a rate cut to drop our dollar. Just a small one. Wouldn’t surprise me.

Remember 1-2 years ago when Garth was saying rates would rise at the end of 2014. Guess not. Who knows when we’ll stop kicking the can down the road.

No rate cut in Canada. — Garth

#145 maxx on 08.21.14 at 3:48 pm

#130 Mister Obvious on 08.21.14 at 12:25 pm

Excellent post. You sir, are master of your domain.

#146 Holy Crap Wheres The Tylenol on 08.21.14 at 3:52 pm

#143 Maggie the Tech Writer on 08.21.14 at 2:18 pm
#74
Thank you, Smoking Man.
Written like a lover who could start a fire any time he truly cared to. Not like a Hunter S. T. imitation.
Is that the real you or another character? Of course I don’t expect a straight answer.

____________________________________________
#141 Cdn Flier on 08.21.14 at 2:05 pm

#136 Holy Crap Wheres The Tylenol on 08.21.14 at 1:09 pm

You are correct in one thing: this is the first creative thing to come from smoking man. Unfortunately, these arent’ his words.

http://www.metrolyrics.com/weightless-again-lyrics-handsome-family.html

______________________________________
Sorry Maggie, I was disappointed too, thought for a moment a spark of creativity was effervescing from his inner Smoke!
Oh what the hell once a Smoking Man always a Smoking Man!

#147 Holy Crap Wheres The Tylenol on 08.21.14 at 3:53 pm

#143 Maggie the Tech Writer on 08.21.14 at 2:18 pm
BTW I love Hunter S Thompson’s books!

#148 Debtfree on 08.21.14 at 4:18 pm

Thanks for the link in the 103 post Garth . I’ve only ever bought a new car . A ford ,Yuk . Never again . I’ve always smelled a rat when it comes to zero interest . Thanks for showing us the rat . I can’t thank you enough for you educating me on such a wide range of topics . You should have a look at my neck of the woods . The growth is getting insane . -0 vacancy rate . Running out of industrial re . Zoning having a hard time keeping up with investment . Hotels full and three more being built . People living in RVs in every campsite and RV parks packed . House building all year round . You should have a look on the bright side . It might be a pleasent break for you . And most of the bugs are gone . There is always an exception to the rule . IMHO this is one .

#149 Bill Gable on 08.21.14 at 4:18 pm

96 month car loans are the definition of insanity.

People are still trying to pretend and so they extend.

The distortion in the Market place is ridiculous. I was looking at RE ADS for vacation bungs on Bowen Island. First glance – a TON of inventory. Second note: Bring your cash. The prices; north of a million – this for a joint you are going to use how many days a year? OK, some people will move there and commute (I pity you)….but – serious cash has been laid out – and someone must be hurting.

I would love to see a graph of HELOC growth, in the past decade. I bet it’s looking like a hockey stick.

#150 Smoking Man on 08.21.14 at 4:19 pm

#143 Maggie the Tech Writer on 08.21.14 at 2:18 pmWritten like a lover who could start a fire any time he truly cared to. Not like a Hunter S. T. imitation.

Is that the real you or another character? Of course I don’t expect a straight answer.
……

Last night getting hammered in my gazebo had the ear buds of listing to the sing, handsome family. I just discovered it.

Was going to post something, but had the song in memory, I hit paste..thinking posting from above comment, . Boom it landed here..

Amazing song…

#151 devore on 08.21.14 at 4:21 pm

#78 Whitey

She replied “It will be 25 years and otherwise I couldn’t afford it”.

“Hey, I can’t afford this, should I buy it?” Pretty much sums up the world today.

#152 miketheengineer on 08.21.14 at 4:23 pm

Saw the comment on Canadian Tire Service

1) Simple oil change, they sprayed oil all over the engine….yuck…and they wouldn’t do a thing about it.
2) Flat tire….they fixed tire and broke the hub caps (clips on back side) and they wouldnlt do a thing about it.
3) Flat tire #2 – backed van into post, damaging the bumper, etc. claimed it was like that when it came in.

Now I will never ever shop there…period. Now I take my car to Mom and Pop garage, where my co-workers take their cars, and had positive experience. Not 100% perfect, but better than 3 for 3 for damage at C.T.

Fords

1994 Merc Sable – Head Gasket @ 70,000km, Tranny gone at 180,000km
1994 Merc Topaz – Main seal gone, bad oil leak 160,000k
2003 Ford Windstar – Trany gone 160,000km, ABS module gone, front wheel stud failure, wheel almost came off
2007 Ford Focus – Tranny gone at 150,000km, oil leaking from somewhere

I don’t think I am buying Ford products when I purchase my next vehicle, they don’t stand behind their vehicles.

#153 devore on 08.21.14 at 4:25 pm

#83 Lobster Man

If 0% financing were really available, why can’t I get my house financed for 0%?

It’s just a numbers trick. You can have 0% financing, but you will pay in other ways: higher purchase price, lower trade-in value, no cash-back/discounts, no freebie options, etc.

#154 let us poll the blog dogs on 08.21.14 at 4:48 pm

Sir Garth, you should ask what the dogs are driving and ask for related financing.

thx for good work

#155 devore on 08.21.14 at 4:48 pm

#109 Ray Skunk

However, to declare that “all cars depreciate to zero” is not a true statement.

All cars depreciate to scrap value. Even your “collector’s classic” will fall out of favor one day, or become too damaged to be worth repairing. And how much money are you spending keeping it in $16,000 shape anyways?

Garth has been liberally employing poetic license and hyperbole recently. Of course even a total junker is always worth scrap value. Minus transportation and disassembly/separation/toxic disposal costs. Which might well work out to less than $0 in some cases.

#156 Smoking Man on 08.21.14 at 4:59 pm

#143 Maggie the Tech Writer

You just gave me an idea, I’m going take Crack at poetry
Stay tuned to this bat channel

#157 Mister Obvious on 08.21.14 at 5:18 pm

I took a spin down 25 Ave between Oak and Cambie in Vancouver this morning. Huge land assembly is underway.

This used to be happing mostly on the southern parts of Granville, Oak & Cambie. Now it’s apparently spread northward to the grand old timers on the most beautiful part of 25th with the wide central boulevard.

The signs are promising new ‘executive’ townhomes starting at $1.2M.

So, another established, attractive streetscape turns mediocre. Ugly sameness is coming soon to a neighbourhood near you.

Many of the homes slated for demolition are, by the standards of any other Canadian city, high end. No matter. The demolition machinery will yank them down just as easily as any east side dump.

#158 Future Expatriate on 08.21.14 at 6:50 pm

I’ll settle for world peace, thanks.

#159 Kenchie on 08.21.14 at 6:55 pm

#100 Londoner on 08.21.14 at 8:39 am

Split vote in the sense that it wasn’t unanimous, which is kind of big news during the week of Jackson Hole.

But point duly noted.

#160 Daisy Mae on 08.21.14 at 7:09 pm

#58 wayne: “Why would folks be so dumb as to incur years of financing charges on an asset destined to deteriorate in value – ultimately to zero?

Because in many cases you can get 0% for 72, 84 or even 96 months. And in those cases, you would be dumb to take 0% for anything except the longest term offered.”

******************

And you don’t believe hefty finance charges aren’t factored in?

#161 Daisy Mae on 08.21.14 at 7:31 pm

#110 Anson: “You have always been a straight shooter and unfortunately this is why you were punted out.”

*****************

That’s the way it’s been thruout history. People who speak out get punted.

#162 CREIT on 08.21.14 at 9:07 pm

@41- Great post smoking man.. so true.

#163 straight six on 08.22.14 at 9:06 am

Maybe we should rid of credit, the bane of existence.. and we’ll all once again be foraging on the forest floor beating our next meal senseless..

but more realistically, forget mortgage servitude! buy a Fido approved Honda Element, the one with the humongous sunroof.
It’s a car/truck/home.. it’s a mobile kennel!
You’ll never have to leave the doghouse again.

#164 patricia on 08.22.14 at 10:07 am

The one big problem that no one seems to be talking about is OVERPOPULATION,

Canada does not have a moral obligation to accept immigrants. Haven’t you noticed that there are no morals anymore?????? And Canada is not Canada the way we knew it or the country that immigrants think they are coming to. Would anyone fight for this country anymore??? I don’t think so.

#165 liquidincalgary on 08.22.14 at 10:34 am

71 TurnerNation
“Here is what that model looks like. Rad.”

+++++++++++++++++++++++++++++++++++++++++++++++

its still a three series…what you give to the wife as a ‘grocery getter’