The third quarter of 2024 is now behind us, and it brought both encouraging and not-so-great news for dealers, as well as for consumers. The Bank of Canada cut its overnight rate by 25 basis points three times, the last in September that brought the rate to 4.25%, which helps to get buyers considering purchases. Some forecasters are expecting additional cuts totaling 50 basis points by the end of the year, and more again in 2025.
However, the pace of job gains slowed over three months through to the end of August, while the unemployment rate rose to 6.6%. On the brighter side, the average hourly wage for permanent employees continues to be ahead of inflation.
It appears most dealers have recovered from the CDK Global cyberattack, and the industry is working to help prevent security issues in future. But on the production side, the U.S. dock workers’ strike will undoubtedly affect parts supply to auto factories.
Looking at Canadian sales
Industry analyst DesRosiers reports that September’s sales were an estimated 157,000 vehicles, down 3.6% from September 2023. As the company said, “A month ago, we warned that it would be difficult for the market to continue its string of year-over-year gains during the final four months of 2024. Well, unfortunately we were proven correct…”
The company offers two reasons to partly explain the decline. First, September 2023 was one of the first months with improved vehicle availability, and so September 2024 was up against a “fairly strong comparable.” Secondly, September 2024 had three fewer selling days than in 2023, due to timing of the Labour Day holiday.
Still, on a year-to-date basis at the end of the 2024 third quarter, “the market is now at 1.41 million units,” DesRosiers reported, “still up a very respectable 8.1% from the first nine months of 2023.” The SAAR (seasonally adjusted annualized rate) for September 2024 was 1.78 million, “broadly in line with what we saw in July and August.”
Some standouts among automaker sales
Among automakers reporting sales, DesRosier noted some standouts in year-to-date sales to the end of September. Volkswagen led in percentage gain among higher-volume brands, up 55.8%. Subaru was up 31.7% and Mazda was up 26.0%, with both exceeding sales of 50,000 vehicles so far. On a volume basis, General Motors was leading the market with 216,000 units, up 9.7% over the same period in 2023.
Metrics at the dealer level
J.D. Power released its Canadian auto market metrics for the end of September 2024, covering a number of important factors for dealers. Over the last 12 months, 50% of new-vehicle buyers financed their purchases, while the other half split evenly between paying cash or leasing. For used vehicles, 53% financed, 45% paid cash, and 2% took a lease.
The average monthly payment on a new loan in September 2024 was approximately $870, down from the year’s peak of $910 in June 2024.
Lease payments over the last year fell as low as $740 in March 2024; went up to $800 in May; and stayed close to that before dropping to about $780 in September 2024.
That same month, 53% of new-vehicle loans were 84 months or longer, and that was the lowest percentage it had been in the past 12 months. It peaked in February and March 2024, with nearly 60% of loans that length, but has been on a slow decline since then.
Days-to-turn on new vehicles was around 55 days in September 2024, and that’s held fairly steady since March 2024. In September 2023, vehicles sat for an average of just 35 days. For used vehicles, the average in September was just over 80 days, up from about 78 days in July 2024, but down from 85 days at the beginning of the year.
New-vehicle prices in September 2024 averaged $48,000, while the average transaction price was about $45,000, and that was pretty much the case for both since June 2024. A year ago, in September 2023, the average vehicle price was just over $50,000, and the average transaction price was $47,000. In September 2024, 20% of vehicles traded in had negative equity. A year prior, only about 17% of trade-ins were underwater.
Plugging into plug-ins
Zero-emission vehicles (ZEV), which includes battery-electric (BEV) and plug-in hybrids (PHEV), rose to 65,700 units in Canada in the second quarter of 2024, according to Scotiabank’s Global Auto Report. While third-quarter results weren’t yet available, the report noted it was a 38% increase over the second quarter of 2023 and the highest quarterly ZEV sales to date.
Quebec was the major driver, with more than half of all ZEV new registrations during the period. However, the report also noted this could be a short-term surge, as the province plans to reduce the amount of its “green” rebates in 2025 and 2026, and eliminate the program entirely in 2027.
Forecasters are also watching the federal government’s plan to implement a 100% tariff on all EVs built in China, which has the potential to affect supply and affordability.
The takeaway
- There was a sales slowdown at the end of the third quarter, but it wasn’t unexpected and, so far, sales overall are on target for approximately 1.78 million vehicles in 2024.
- The Bank of Canada cut its rate to 4.25% and forecasters are anticipating more reduction by the end of the year, which should help to stimulate vehicle purchases.
- Following some upheaval at the beginning of the year, metrics such as days-to-turn, vehicle and transaction prices, and monthly payments generally stayed steady during the third quarter.
- Dealers who work with their customers to find the right financing for their budgets and their borrowing “comfort zones” should have higher success with both new and used vehicles.