Vehicle affordability to clash with increasing inventories in 2023

To keep paying top dollar, more buyers are opting for 84- and 96-month financing. The latter now makes up 10 per cent of the market, up from six per cent before the COVID-19 pandemic.

Canadians were able to afford high prices when interest rates were “stupid low,” Karwel said.

“We could handle the pricing because prices were ameliorated by low interest rates. Our concern for the new year is payment affordability will be greatly affected because automakers are still spending near-record lows on incentives.”

He said automakers are only offering about five per cent of the MSRP in incentives. In 2019, it was about 15 per cent.

“Without more incentive money to offset central bank actions to curb inflation, we might hit a payment affordability crisis,” Karwel said. “The key context is not falling off a cliff, but cooling off.

“How much pricing and payment…do you think we can keep driving upwards as we go into a recession this year?”

Shahin Alizadeh, CEO of the 11-store Downtown Auto Group, said incentives are starting to come “in dribs and drabs.”

“It’s a different market” today than even a year ago.

“The significant savings customers had, based on [low] interest rates because they were borrowing from credit lines or OEM captives, have disappeared now,” he said.

He called today’s buyers more cautious and said they’re opting for fewer bells and whistles to keep costs down.


The 1.50 million light-duty vehicle sales in 2022 were less than the 1.55 million sold in pandemic-hampered 2020. And it was the worst sales total on record since 2009, when automakers sold just 1.46 million amid the Great Recession triggered by the financial crisis.

Still, most dealers enjoyed financial success in 2022.

Without providing a figure, Karwel said dealers posted record profitability in 2022.

“Dealers are making very good money,” he said.

Alizadeh said 2022 was good for him, but not as good as 2021.

“I think the industry celebrated very surprising financial results. Margins were high, inventory was tight, the used cars were strong,” he said of 2021. “Twenty twenty-two was not the same. We held our own in 2022, we were slightly off of 2021, and that was a bit surprising because we expected to see a bit more inventory.”

Hyundai Canada CEO Don Romano agreed.

“Our dealers had a record year for profitability. I wouldn’t say it’s excessive. It’s where it should be. I don’t think there are any Hyundai dealers out there who would tell you they’re disappointed with 2022 in respect to profitability. They sold fewer cars and made more money. That’s a good combination.”


Source link

Leave a Comment

Your email address will not be published. Required fields are marked *

Shopping Cart