I’m noticing a few more new cars on dealer lots than before, although they’re still not anywhere close to full. Does that mean no more waits and lower prices than we’ve been seeing? – Tim, Winnipeg
While most dealer lots are less barren than a year ago, we’re not quite back to normal, dealers said in a survey.
That means you should expect high prices and long waits for a while yet.
“[The recovery] is uneven and unequal. Some models have recovered in inventory while others have not,” said Andrew King, managing partner of DesRosiers Automotive Consultants, an automotive market research firm based in Richmond Hill, Ont. “Transaction prices have certainly increased.”
For more than two years, a global shortage of semiconductor chips, worsened by material shortages, increased demand for electronics during lockdowns and supply chain disruptions owing to the pandemic, has slowed new car production.
In the first quarter of 2023, dealer inventories, nationally, were at about 42 per cent of their 2019 levels, according to a survey of dealers by DesRosiers and the Canadian Automobile Dealers Association (CADA).
However, that’s more than twice as many cars on dealer lots as this time last year – at the time, it was 19.4 per cent of normal, King said. There’s still a shortage of some high-demand models, including certain trucks and SUVs.
The supply also varies by region, with more populated regions getting more cars. In the first quarter of 2023, Manitoba and Saskatchewan had about 30 per cent of the new vehicle inventory they had in 2019 – with an average of 43 new vehicles per dealer lot compared to 141 per lot in 2019.
Nearly half of dealers said they don’t expect the supply of new vehicles to significantly improve until next year.
Prices keep climbing
Average new vehicle prices have been steadily increasing because of inventory shortages, inflation and growing consumer preference for SUVs over less expensive sedans, King said.
SUVs and trucks – which accounted for nearly 84 per cent of all new vehicles sold in Canada last year – have seen the biggest price increase. Last year, the average price of SUVs and trucks was nearly $52,000 – almost $5,000 more than the year before.
Also, as more buyers looked for used cars because new cars weren’t immediately available, used car prices rose by 40 per cent, on average. While used car prices have dropped somewhat because of slowing demand, they’re still higher than normal, an industry analyst said.
“For six to eight months of time now, the [used] market has slowed down, but we’re still 20 per cent over [2019] prices,” said Daniel Ross, senior manager for industry insights with Canadian Black Book (CBB), a Markham, Ont.-based company that tracks and forecasts used-vehicle prices. “[Still], in some cases, used cars are more expensive than new cars.”
In an Ipsos survey conducted for CBB in March, six in 10 Canadians surveyed said they’ll hold off on purchasing a car because prices are so high now.
While customer demand for new and used vehicles has slowed as rising interest rates have made it more expensive to finance a car purchase, Ross said he doesn’t expect a significant drop in prices any time soon.
“This is a typical time of the year for people to start shopping for cars,” Ross said. “So prices are stabilizing [instead of dropping further].”
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Jason Tchir