Canadian vehicle buyers appear to have turned to home equity lines of credit to fund their purchases in increasing numbers in recent years, as lofty home prices and low interest rates offered a favourable alternative to traditional vehicle financing.
Dealertrack does not keep direct tabs on HELOC use, Parham said, but it has noted an uptick in buyers using their “own sources of funds” since the pandemic. Known as “cash” deals, these purchases include buyers spending available cash, as well as those using other lending sources, including HELOCs.
At the end of 2022, 23 per cent of borrowers said they used funds from their HELOC for a large purchase such as a vehicle or education. This compared with 20 and 17 per cent of HELOC borrowers in mid-2022 and the end of 2021, respectively. MPC’s dataset does not break out vehicle purchases individually.
Value retention, particularly at the high end of the luxury segment has remained “very strong,” even with higher interest rates and vehicle costs hovering at near-record levels, Ross said. Many homeowners, having seen their equity bolstered over the past several years as home prices rose, can now “fall back on a HELOC.”