Here is a thought which on the surface might appear counterintuitive, yet on further review makes perfect sense: lower pump prices mean bigger deals on new vehicles.
The simple truth is, as fuel prices drop, vehicle shoppers move to larger rides with generally fatter margins. This puts more money into the system and gives car makers and their dealers more available cash to pump into sales sweeteners, when required.
Of course dealers and carmakers do not always put every penny of their new-found riches into the deal-making side of the business. They also look to book healthier profits.
But with more money sloshing around in the system, notes auto analyst Dennis DesRosiers of DesRosiers Automotive Consultants, it is fair to expect a new wave of offers and enticements in the Canadian light vehicle marketplace. We are seeing this now.
There's more to this story, too. Lower pump prices are acting as an economic windfall for the average car owner. DesRosiers estimates that the typical Canadian uses about 1,820 litres of fuel a year. A 30-cent drop at the pump puts $546 into the pocket of every driver – and nation-wide amounts to a $13 billion economic stimulus.
What we have here is a country of enriched drivers being chased by an army of dealers and manufacturers with more money to spend on incentives.
This rosy picture is somewhat offset by the fact that as DesRosiers notes, the Bank of Canada expects lower oil prices to shave about a third of one per cent off of GDP in 2015 – an economic negative. And certainly Alberta, the heart of Canada's oil patch, is feeling the negative effects of lowered oil prices.
Overall, however, DesRosiers argues that the historical evidence suggests that lower pump prices will trigger higher vehicle sales in most parts of Canada. And a large percentage of the vehicles sold in this climate will be bigger, less fuel-efficient rides.
In fact, new vehicle sales in February were the second-highest on record for the month. Sales of more expensive light trucks were up 5.1 per cent, while car sales rose just 0.2 per cent. "Light trucks now account for a record 63.3 per cent of the Canadian market," said DesRosiers in a note to clients.
Sales of popular small cars such as the Honda Civic and Mazda3 have been hammered. Compact sales overall were down nearly nine per cent through the early part of this year, with subcompacts down about two per cent.
The outlook for the year ahead in small cars is so dismal, Mazda Canada has announced it will not launch its redesigned Mazda2 subcompact until very much later this year or in 2016. The original plan was for a summer 2015 introduction.
As usual, with the bad comes the good. To prop up sales of struggling models, car companies and their dealers will use some of their new-found riches to fund tried-and-true tactics – deals.
The savvy shopper will find some $2,400 or more in combined incentives on a typical Honda Civic compact sedan and perhaps as much as $3,700 on a hatchback Mazda3 Sport. Hyundai Canada is being aggressive with its Elantra, sensing an opportunity to unseat the Civic in 2015 which has been Canada best-selling car for 17 straight years. Combined Elantra deals right now approach $2,500 on a $20,000-something compact.
Elantra sales through early 2015 were up about 15 per cent as shoppers responded to the offers.
Indeed, Hyundai Canada has cannily revived its Dealer Invoice Pricing extravaganza, notes pricing service www.unhaggle.com. Subtract the dealer invoice price from the sticker and that's your sales sweetener – plus whatever dealer incentive is available. On top of that, Hyundai is offering zero per cent financing for 48 or 60 months, 0.99 per cent for 84 months. If you're a returning Hyundai customer, slash another 0.25 per cent from the finance or lease rate, too.
At the high end of the market, Lexus has fired up its F Sport Event. Most F-trim models now have a richer stackable sales sweetener - $3,097 in before-tax money, $3,500 after tax. Better still, dealer incentives are coming in at $4,000 or more, bringing this gift to the Lexus buyer to some $7,000 or more.
As well, in some cases the total package of cash deals can be had with 2.9 per cent financing for 48 months or a 3.9 per cent lease rate for 48 months – 2.9 per cent if you're a returning Lexus customer.
Finally, if it's a mainstream SUV (sport-utility vehicle) you want, the Chevrolet Equinox can be had with nearly $5,000 in combined incentives – plus zero per cent financing for 48 or 60 months, 0.99 per cent for 84 months.
Deals of the Week consulted with www.unhaggle.com, Car Help Canada, www.carcostcanada.com, and other sources on these offers. As usual, pricing information here is subject to change and dealer discounts vary, so consult your dealer for all the final details, including expiry dates for all offers.
2015 Lexus RX 350 F Sport
- MSRP: $58,900
- Freight, dealer prep, air conditioning tax: $2,130
- Dealer discount (estimated): $4,350
- Factory discount: $3,097 (manufacturer incentive)
- Taxable subtotal: $53,583
- Total price with 13 per cent HST: $60,548.79
- All incentives are available with 2.9 per cent financing for 48 or 60 months, or a 3.9 per cent lease rate for 84 months. A one per cent loyalty rate reduction is available for lease rates.
2015 Mazda Mazda3 Sport GT-SKY 6AT
- MSRP: $26,995
- Freight, dealer prep, fees and air conditioning tax: $1,830
- Dealer discount (estimated): $1,450
- Factory discount: $1,750 (manufacturer incentive)
- Factory discount: $500 (loyalty incentive)
- Taxable subtotal: $28,054
- Total price with 13 per cent HST: $31,701.02
- A $1,000 factory incentive is available with 0.99 per cent financing for 48 months,1.49 per cent for 60 months, 1.99 per cent for 84 months, and lease rates of 1.49 per cent for 48 months and 2.49 per cent for 60 months.
2015 Chevrolet Equinox 1LT 4WD
- MSRP: $31,870
- Freight, dealer prep, AC tax: $1,785
- Dealer discount (estimated): $1,775
- Factory discount: $3,000 (factory incentive)
- Taxable subtotal: $28,880
- Total price with 13 per cent HST: $32,634.40
- The factory incentive is not available with zero per cent financing for 48 or 60 months, 0.99 per cent for 84 months, or lease rates of 0.9 per cent for 48 months or 1.9 per cent for 60 months.
2015 Honda Civic Sedan Touring CVT
- MSRP: $25,550
- Freight, PDI, AC tax: $1,630
- Dealer discount (estimated): $900
- Factory discount: $1,500 (manufacturer incentive)
- Taxable subtotal: $24,780
- Total price with 13 per cent HST: $28,001.40
- The factory incentive is not available with 0.99 per cent financing for 48 or 60 months, 1.99 per cent for 84 months, or lease rates of 0.99 per cent for 48 months or 1.99 per cent for 60 months.
and
. Calculations based on Ontario customers. Please note that while the information above is accurate at the time of publication, incentives are given at the discretion of individual dealers, and may be changed or discontinued at any time. Where noted, "dealer discounts" are negotiated with the customer on a case-by-case basis. Unhaggle Savings are actual discounts received by Unhaggle customers.
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