CarCostCanada® receives ongoing feedback from thousands of members and hundreds of dealer partners. We wanted to share our thoughts about the current automotive landscape in Canada and how we can help.
Sales are up. So are back orders.
2020 was a bad year for new vehicle sales vs previous years. But the rebound this year has caused more challenges. The latest StatsCan data shows Canadian light vehicle sales are up roughly 19% over same period in 2020. From a planning and delivery standpoint, unfortunately most manufacturers were unable to respond quickly to this increased demand, precisely when Canadians were excited to get back outside, on the road, and buy new vehicles.
To make matters worse, as business ramps up again, competition from big corporate (and government) “fleets” to restock their supply is at an all the time high, precisely when supply is at an all time low. Dealers are telling us there are thousands of corporate “back-orders”. Coupled with supply and materials delays at “up-fitters” (companies who modify vehicles – think of the cable van with the ladders on the roof), many fleet orders are backlogged all the way out to spring 2022.
The Covid-19 pandemic and resulting supply shortfall has created a lack of inventory for many popular new car and light trucks. Car dealers are experiencing unprecedented low inventory levels. One large Toronto area dealer we spoke with has less then 10 days supply on ground. Where they would normally have up to 400 cars and trucks in stock, they currently have less than 50, and most “in demand” models are unavailable.
Another important piece to this puzzle is the increased supply of money in our system, along with persistent and consistent low interest rates from the Bank of Canada. Canadians have more cash in the bank than any other time in history and borrowing rates are as low as 0%.
Maybe I should buy a used car?
Partly due to limited new car inventory, and also because certain sectors of the Canadian workforce have seen reduced income due to Covid-19 work disruption, there’s been a surge in used car sales this year and an overall spike in prices.
In some cases, certain “in demand” vehicles, for example 2020 Ford F150 and Toyota RAV4, are commanding prices equal to the price people paid when they were sold new in 2019!
CarCostCanada has been surveying our members buying habits and opinions for over 10 years and we learn many things from all this customer feedback. One thing people mention is that if they decide they must have a certain model and they can’t find it new, they are sometimes willing to pay a premium for a lightly used version.
Our advice is to find a balance between your current identified need and the time frame required for a quality new car dealer to supply a new vehicle (ordered from the factory at a discounted price). In some cases the timetables won’t work and a used car or different model of new vehicle may be the only option. If you are thinking new is an alternative, before you make your final decision, speak to Member Support at CarCostCanada to receive the latest information about the models you are considering.
Canadians are ready to buy, but there’s no supply.
From some buyers point of view, dealers have become less cooperative and are expressing resistance to discounting. Since dealers have fewer vehicles to sell and they still want to stay profitable, they are tending to hold the line on discounting. It’s becoming increasingly difficult for the average consumer to see large savings off M.S.R.P. at dealerships. In conjunction with that, some manufacturers have reduced their discounts and incentives because once again they have less vehicles to sell and less money to give away as a result.
So, we have a supply disruption, an increase in demand and the response from most automotive dealers from the country has been to hold dearly to their profit margins.
We get it – times are tough. If you need to buy/lease a new car right now, Canadian consumers may be forced to pay more then they would like. However, historically, CarCostCanada members have shown themselves to be thoughtful, forward-thinking planners who generally don’t rush right out and purchase the next bright shiny object! We encourage our members and all Canadians to consider their circumstances and plan accordingly for the eventual supply increases. If you can hold off a while, then hold off.
Will this affect my lease?
There’s always discussion about how market conditions affect leases that are about to expiry. The manufacturers and leasing companies are being very flexible with lease extensions. This is one way to defer the final decision and continue to keep your existing vehicle a little bit longer on your current payment plan. Of course when you do so, if you do eventually buy out the vehicle, those payments have been helping pay down the principal as well.
In other cases, buying out the lease is an excellent choice to keep your very good vehicle. We recommend if you do buyout that you plan to sell or trade-in at some point in the next couple of years. The incidence of repair costs increases after 5 or 6 years and more importantly it is quite possible you will be very impressed at how much the dealer will pay for your 5 or 6 year old vehicle. For many years now we have seen cases where someone buys out their lease, drives it for a while and then trades it in for close to or equal of what they paid for the buyout!
But what if I need a new vehicle now (or soon)?
CarCostCanada can help and connect you with dealers who will still work with you, even in these difficult times. CarCostCanada offers several valuable tools and resources to understand and identify where the best deals are, right now and has been doing so since 1999.
With hundreds of combined years of industry insider experience, we have deep awareness of which vehicles in which market places are still readily available and how our members can enjoy savings on their leases and purchases.
Our team is in touch dealer by dealer and brand by brand looking for the best deals and identifying dealers who recognize that satisfying customer needs and promoting long term goodwill is their first priority.
Our popular (and free to new users) Price Report service includes a “comparable vehicle” function that shows you vehicles we think may interest you that offer similar quality and features at a potentially better value/price proposition.
In addition, we offer a paid service where you can leverage our Concierge Experts to help you find the vehicle you are looking for and achieve a deal that you are happy with!
All of this and more is available with a call 1.866.453.6995, live chat or email to our Customer Service Team.
CarCostCanada is here with all the available data and information, not only the price, but also the hidden rebates and incentives, loyalty programs, special inducements and interest rates available to you in the marketplace. Visit carcostcanada.com to learn more.