Is now the right time to buy a vehicle, or is it wiser to wait until the auto market finishes cooling down?
After the pandemic, the market experienced new vehicle shortages and a surge in prices for used vehicles.
Today, it appears that prices for both new and used vehicles are stabilizing. Moving into 2024, prospective vehicle buyers could see a more favourable market, with increased inventory options to choose from and reduced prices for both new and used vehicles.
Whether you’re eyeing a brand-new model or looking to buy a pre-owned vehicle, I’ll explain the current state of Canada’s auto market and what could lie ahead.
How the pandemic affected the auto market
The pandemic severely disrupted the auto industry’s supply chains, leading to production slowdowns and inventory shortages, which was exacerbated by the ensuing chip shortage.
As we emerged from the pandemic, there was a notable improvement in these supply chains, setting the stage for a gradual recovery of the North American auto sector, including Canadian production.
In early 2023, we saw a rise in Canadian vehicle sales, indicating signs of recovery. However, the market could still face resistance, with sales volumes expected to lag behind pre-pandemic levels until at least 2024, according to TD Bank.
Will car prices fall?
That being said, some consumers are reporting lower prices and higher inventory from their local dealerships. While this could indicate the gradual cooling of the car market, it’s also just as likely to be the result of end-of-the-year deals.
Entering the New Year, dealerships are incentivized to offer more deals on vehicles to clear out their stock and make way for newer models. This is why it’s so common to see holiday vehicle ads this time of year.
Planning your next vehicle purchase
Are you considering buying a new vehicle or trading in your current one? If so, here are some helpful tips to keep in mind to ensure that you get the best deal.
When to buy
With the auto market showing signs of stabilization and production ramping up, waiting a bit longer might be wise.
Moving into next year, consumers may have a wider inventory to select from and could benefit from lower prices as supply chains continue to recover.
On the flip side, if your current vehicle is on its last legs or if you’ve found some great deals, especially on a used vehicle, now could be a good time to buy, as you’ll be able to take advantage of end-of-the-year inventory clearing deals.
Interest rates and financing
One reason why some prospective buyers have held off on buying a new vehicle is that interest rates are still high. Currently, the Bank of Canada’s overnight interest rate remains at 5 per cent.
As a result, financing a new vehicle in this market is costlier than it was several years ago when interest rates were low post-pandemic.
Unfortunately, it looks like interest rates will likely remain high moving into 2024 as the Bank of Canada attempts to bring inflation down further.
In these conditions, it’s best to reduce your financing amount. Some options include:
- Making a higher down payment
- Looking for a dealer that will give you more for your trade-in
- Opting for a lower-cost used vehicle
EVs and PHEVs
If you’ve been considering making the switch to a zero or low-emission vehicle, now could be the right time, especially with today’s high fuel prices.
In an effort to reduce carbon emissions, the Canadian government is incentivizing the purchase of new zero-emission vehicles (ZEVs) and plug-in hybrid electric vehicles (PHEVs).
A Chevy Bolt Transport Canada test subject vehicle is seen at an event promoting the Greening Government Fund, which provides funding to federal departments and agencies to reduce greenhouse gas emissions in their operations, in Ottawa, on Tuesday, June 27, 2023. THE CANADIAN PRESS/Justin Tang
The iZEV Program offers up to $5,000 at the point of sale for purchasing or leasing light-duty ZEVs, such as cars, SUVs, and light trucks.
Aside from federal initiatives, some provinces and territories are also offering additional incentives. These may include rebates for buying new or used ZEVs, installing residential chargers, and even covering shipping costs for used ZEVs.
Is now the right time to buy?
If you’re looking for a specific type of vehicle, it could be worth waiting until 2024 to start shopping for a new vehicle. With the expected widening of inventory, vehicle buyers could see better prices and have more choices.
However, if you’re in urgent need of a new set of wheels, the end of the year is often one of the best times to buy, thanks to clearance sales offered by dealerships.
Christopher Liew is a CFA Charterholder and former financial advisor. He writes personal finance tips for thousands of daily Canadian readers on his Wealth Awesome website.
Do you have a question, tip or story idea about personal finance? Please email us at [email protected].