As we look back at the second quarter of 2024, a lot has been going on. The Bank of Canada reduced its rate to 4.75% from 5% in June, and with further cuts expected. That did get some customers to loosen their purse strings, but outside forces managed to put a bit of a damper on sales.
According to DesRosiers, the Canadian new-vehicle market had enjoyed 19 consecutive months of year-over-year increases coming into the end of the second quarter. Canadians bought 169,000 vehicles in May 2024, marking a 9,000-unit increase from May 2023.
But then June stayed virtually the same at 169,000, and while that’s upbeat considering we’re still overcoming the last of the pandemic issues, no one wants to see the market lose its momentum.
Much of that appears tied to one of the biggest stories in the industry: the cyberattacks on dealer software provider CDK Global, which crippled some 15,000 stores in Canada and the U.S.
Canadian Black Book reported a decline in wholesale vehicle prices in early June, with truck prices falling by 37% more than car segments. Demand for auction inventory increased both in Canada and the U.S., especially since many vehicles were selling through other channels before they reached the auction block. Even though used-vehicle prices are expected to fall a bit more throughout the rest of the year, they are still above pre-pandemic levels, and are expected to remain that way possibly into 2026.
Sales trends and prices
Depending on the source, forecasts for 2024 new-vehicle sales are between 1.77 and 1.9 million units. Sales were 1.7 million in 2023, the highest in four years although still 7% lower than the pre-pandemic average.
Among automakers reporting numbers, General Motors led by volume during the first six months of 2024, with almost 141,000 new vehicles sold. Volkswagen had the sharpest gain year-to-date, up 53.9% on sales of more than 40,000 units; while Subaru was next at 43.4% increase on sales of some 36,000 vehicles.
The average new vehicle price is around $66,400. That’s about a 7% increase from last year, and likely includes the fact that premium SUVs have become a hot category for shoppers and could reach their highest levels in years.
As mentioned, used-vehicle retail prices have softened, and in mid-June 2024 the average listing price was $33,900, according to Canadian Black Book. Full-size pickups and full-size SUV prices took a considerable hit during June, while subcompact crossovers/SUVs were among those retaining most of their value. Compact commercial van prices rose – vehicles like the Ford Transit Connect and Mercedes-Benz Metris – possibly because all have been discontinued and businesses may be “stocking up” on them.
What’s driving the Canadian market?
While the Bank of Canada rate cut wasn’t huge, it was enough to prompt buyers who were ready to strike as soon as the cost of lending went down. According to AutoTrader, lower interest rates and increased availability had many shoppers switching to buying new cars rather than used. An increasing number of trade-ins increased the supply of used vehicles and subsequently lowered their prices overall.
Who is buying, and what are they choosing?
New Canadians are a robust source of sales, and many dealers reach out proactively to them. An estimated 32% purchase a vehicle within the first month of their arrival.
Among age groups, slightly more than half of millennials (ages 25-34) are less likely to purchase a vehicle, due to a combination of borrowing costs plus their overall cost of living. When they do, then along with the younger Gen Z, vehicle technology and connectivity are important considerations, as is the way they purchase them. Virtually all age groups use online research to some degree, but younger shoppers are far more dependent on it and prefer to do as much as possible online, including their financing.
Ford’s F-150 remains the best-selling model in Canada, but some six out of every ten vehicles sold is an SUV, which is slightly higher than pickups. Quebec had the highest number of zero emission vehicle (ZEV) registrations in the first quarter of 2024, with a slight decline in battery electric vehicles (BEVs) but a rise in plug-in hybrids (PHEVs). As more automakers offer new vehicles with plugs, and with 80% of Canadians living in urban areas, ZEV registrations are still a small slice of the market but are expected to increase.
The Takeaway
- Lower interest rates, increased vehicle inventory, incentives, and some remaining pent-up demand are helping to move the Canadian vehicle market forward.
- Prices for new vehicles are generally higher than last year. Those for used vehicles have softened but are still above pre-pandemic levels and should stay there for at least one or two more years. As new-vehicle prices rise, the used market becomes more attractive to many buyers.
- The CDK cyberattack weakened sales at the end of the second quarter, but they should rebound in the third quarter.
- Dealers who prioritize online research and shopping, and who reach out proactively to new Canadians, should enjoy a higher level of success with both new and used vehicles.