Looking to buy a car? Expect to pay more and spend months, even years waiting
Calgary father Stefan Takacs put down a deposit for a Toyota Sienna a year and a half ago. He and his wife need a bigger
vehicle to accommodate their three children, including a son with cerebral palsy.
“He’s small enough now, I can still pick him up, but eventually we’ll need one of those Siennas with the adapted accessibility ramps,” Takacs told Global News.
But he has no idea if or when the minivan will arrive. Takacs has tried calling other Toyota dealerships across Alberta, but they’re out of stock as well.
“I found another dealership in Calgary, and they actually said the wait for a new Sienna is now four to five years,” Takacs said. “Sure, we can buy something that’s definitely less efficient, but nowadays everything is so expensive.”
Jenni Alton lives in Carrot River, Sask., three hours northeast of Saskatoon, and is also in the market for a vehicle.
“You can’t even test drive these days. There’s nothing on the lots,” Alton said.
She has spent eight months searching for something basic in her budget.
“I’m not looking to spend $45,000 on a car that I’m going to put 30,000 kilometres on to go back and forth to work with,” Alton said. “I need something to haul my lunch bag.”
Across the country, Canadians are dealing with historically high prices and frustratingly long wait times.
“Prices for new vehicles are about 60 per cent higher at the retail level relative to pre-pandemic,” according to Scotiabank Economist Rebekah Young, who closely watches the auto industry.
According to
data from Auto Trader, the average price of a new vehicle in Canada has topped $60,000.
“At a very simple level, it’s been an inventory shortage,” Young told Global News. “We just haven’t had enough new or used vehicles over the last three and a half years relative to a very strong demand.”
A shortage of semiconductors is contributing to low inventories. Semiconductors are needed to power electronically controlled systems in vehicles.
Given persistent supply chain issues, some automakers are prioritizing making higher-end vehicles, where profit margins are bigger.
“I don’t believe we’ll go back to 2019 prices. The reason why is that cars are more expensive to make overall,” said Charles Bernard, lead economist with the Canadian Automobile Dealers Association.
Electric vehicles are particularly expensive. “Those vehicles for manufacturers require more electrical components, software elements.”
Canada has mandated 20 per cent of all vehicles sold will need to run on electricity by 2026.
Peter O’Leary manages a Donnelly Ford Lincoln dealership in Ottawa and has seen prices and demand surge for used vehicles.
“The cost of a used Civic has probably never been higher,” O’Leary said. “We’re seeing the same on a lot of our popular models like [Ford] Escapes.”
O’Leary doubts he will ever return to his pre-pandemic inventory levels and acknowledges some customers are becoming increasingly desperate.
“The wait is frustrating, especially for those who are in situations where they’re coming out of leases or have had an accident.”
From tight supply to high prices, some would-be vehicle buyers in Canada are growing increasingly frustrated. A look at why finding a new vehicle in Canada seems so difficult.
globalnews.ca
Other side of the border.
Inflation and the auto industry: When will car prices drop?
Car prices rose dramatically in 2022 as a result of
global supply chain issues, with a persistent
chip shortage holding up production in the auto industry. While semiconductor supply is expected to improve in 2023, new car prices will likely remain elevated due to inflationary input costs.
U.S. consumers forked out an average of $46,437 for a new vehicle in January 2023, marking a year-over-year increase of 4.2%, according to data from J.D. Power. This is an all-time high for the month of January and indicates no real relief from 2022’s record prices.
“We estimate that half of the increase in new vehicle prices relates to the passing along of higher input costs,” said Ryan Brinkman, Lead Automotive Equity Research Analyst at J.P. Morgan. “There’s still a lot of inflation bubbling up in the new vehicle supply chain. Even though raw material costs are falling, suppliers have a lot of other higher non-commodity costs — diesel, freight, shipping, logistics, labor, electricity — to pass on to automakers.”
The shortage of new cars has fueled demand for used cars, causing prices for the latter to surge. Inflationary pressures have also trickled down to the used car market, where average prices continue to track at around 30% above pre-pandemic levels.
“Used vehicle prices and new vehicle prices exist in a sort of feedback loop,” said Brinkman. Fewer new vehicles on the road mean there are fewer second-hand vehicles to trade in, straining used car inventories. And like new vehicles, used vehicles are sensitive to changes in commodity prices too, as these affect their scrap value.
While new car prices reached an all-time high in December 2022 and are likely to remain above pre-pandemic levels, prices will ease slightly this year.
J.P. Morgan Research explores the factors driving up vehicle prices and when inflationary pressures will abate.
www.jpmorgan.com
www.epi.org
That’s perverse. I’m flabbergasted. That’s like rule #1. Else people yearly get effectively a pay decrease. tf?
