Longer-lasting vehicles result in smaller sales increase in past decade

The Globe and Mail

Cars make their way up and down Hurontario Street in Mississauga Friday Feb. 17, 2012. (Tim Fraser for The Globe and Mail/Tim Fraser for The Globe and Mail)

It turns out that all those advertisements in the 2000s trumpeting that it was a great time to buy a new car were correct.

New-vehicle prices rose just 1.1 per cent a year during the decade, according to new data from DesRosiers Automotive Consultants Inc., less than half the rate of increase in the consumer price index between 2000 and 2010 and much slower than the increases in vehicle prices in the previous two decades.

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“Today’s new vehicles represent a much better value-for-money compromise than a decade ago,” Dennis DesRosiers, the consulting firm’s president, said in a note to clients Thursday.

Vehicle prices jumped 7.4 per cent on average annually during the 1980s and further 5 per cent in the 1990s, Mr. DesRosiers said.

The average transaction price of all vehicles hit $33,399 last year, up 1.2 per cent from 2010, although he noted that that number is skewed by the inclusion medium and heavy duty trucks.

The price of the average passenger car fell slightly to $26,637.

“If you factor in quality and technology improvements, the average real price of a vehicle has actually gone down quite a bit this past decade,” Mr. DesRosiers noted.

The key factor in this bonanza for consumers is the fierce competition in the market, which includes virtually every auto maker offering a model in every segment and heavy incentives to help move the metal. In addition, auto makers have slashed massive amounts of costs out of the value chain.

“Canadians have also benefitted from a stronger Canadian dollar, especially since we import most vehicles bought in this country from either the U.S., Mexico or overseas,” he said.

The lower prices, not surprisingly, sparked a buying binge. Canadians bought more vehicles in the decade than any other decade on record.

The sales spree means vehicle ownership has expanded. About 79 per cent of Canadians old enough to drive now own a vehicle, compared with 70 per cent in 2000.

“Because they are so well built, vehicles over the last two decades are lasting longer than ever,” Mr. DesRosiers said. “This is making available a record number of older light vehicles for used vehicle buyers.”

The increased durability means many consumers who previously could not afford vehicles now can.

Follow on Twitter: @gregkeenanglobe

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