Canadians re-stocked their garages at a record clip in August, boosting new light vehicle sales by 6.5 per cent to 159,004 units. The best-ever August eclipsed the last peak of 158,394 units set way back in the pre-financial calamity days of August 2007.
Canadians also stretching themselves to afford a new ride. J.D. Power and Associates reports that nearly two-thirds (63 per cent) of those who financed did so for 72 months or longer. Here's why: the average price of a new vehicle has jumped nearly $1,000 in the past year – to about $31,500, according to Power Information Network data.
Canadians are dragging out payments for six, seven, even eight years in order to make the monthly payments manageable for the car or light truck they want. As J.D. Power and Associates reports, in pre-recession 2008, only about 33 per cent of Canadians were opting for loans of 72 months or longer. The popularity of long-term car loans, then, has spiked over the past five years.
This not just a Canadian phenomenon, either. As Automotive New reports, despite historically low interest rates, today's new vehicle buyer is being dragged down by more debt than ever. This at a time when wages in both Canada and the U.S. have been stagnating for years.
What's driving up prices, and therefore affecting affordability? As Peter Welch tells Automotive News, new vehicle prices are shooting up mainly because tough government-mandated fuel economy standards are forcing auto makers to add expensive power train technology. Yes, Welch, president of the U.S. National Automobile Dealers Association, may have a small bias in all this. But new the technology governments want car makers to sell has a very real cost. In that Welch has a point.
Still, car shoppers will find plenty of deals to soften the blow of regulatory demands. For now, at least. Deals of the Week continues to be amazed at the rich incentives and cheap interest rates auto makers have designed to drive down the cost of buying something new and shiny.
A 2013 made-in-Canada Chevrolet Equinox, for instance, has a $3,500 factory deal. That BMW 3-Series coupe with all-wheel drive – the one many of you might have been dreaming about – has a $6,000 incentive. Mazda is blowing out the last of its 2013 Mazda3 compacts with a $3,250 sales sweetener that is generous on a sub-$20,000 car. And even Volkswagen has $3,000 on a Tiguan crossover utility.
The deals will keep new car sales percolating towards what will surely be a record year in 2013. But at some point, the cost of government regulations will see many buyers hitting the affordability wall. That will likely be about the time interest rates start to rise, I think.
In the meantime, hundreds of thousands of Canadians are going to keep snapping up the deals and stretching out their payments.
Deals of the Week consulted with www.unhaggle.com, 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.
2013 Chevrolet Equinox LS AWD
- MSRP: $28,885
- Freight, dealer prep, air conditioning tax: $1,650
- Dealer discount (estimated): $1,200
- Factory discount: $3,500 (Factory-to-dealer incentive)
- Taxable subtotal: $25,835
- Total price with 13% HST: $29,193.55
- 2.99% financing can be combined with a $500 cash incentive
2013 BMW 328i xDrive AWD coupe
- MSRP: $46,800
- Freight, dealer prep and air conditioning tax: $2,130
- Dealer discount (estimated): $1,900
- Factory discount: $6,000 (Factory-to-dealer rebate)
- Taxable subtotal: $41,030
- Total price with 13% HST: $46,363.90
- A $2,000 incentive can be combined with 3.90% financing for five years
2013 Mazda3 GX automatic, w/AC
- MSRP: $17,538
- Freight, dealer prep, AC tax: $1,795
- Dealer discount (estimated): $500
- Factory discount: $3,250 (Factory-to-dealer rebate)
- Taxable subtotal: $15,583
- Total price with 13% HST: $17,608.79
- 0.0% financing for 84 months can be combined with a $750 cash incentive
2013 Volkswagen Tiguan Comfortline 4Motion, automatic
- MSRP: $33,640
- Freight, PDI, AC tax: $1,745
- Dealer discount (estimated): $1,100
- Factory discount: $3,000 (Factory-to-dealer rebate)
- Taxable subtotal: $31,285
- Total price with 13% HST: $35,352.05
- 2.9% financing can be combined with a $1,000 incentive
Pricing information source: www.unhaggle.com and www.carcostcanada.com. 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.