Planning to buy a car in 2023? Expectations will have to ‘change’, experts caution – National | 24CA News
Finding inexpensive and high quality automobiles has been tough for the final couple of years — be it because of semi-conductor shortages or provide chain points — and in accordance with some trade consultants, the Canadian auto market will proceed to mirror previous traits for many of 2023 earlier than issues ease up a bit for shoppers.
“We’re in probably year two of a semiconductor shortage that is causing automakers to make fewer cars than they can. And because of that, there’s a squeeze in supply and it’s been pushing prices up,” Flavio Volpe, president of the Automotive Parts Manufacturers Association, advised Global News.
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The car provide shortages started at the beginning of the COVID-19 pandemic when demand was forecast to dwindle considerably.
Gerry Duffy, who teaches provide chain administration and logistics on the Southern Alberta Institute of Technology, advised Global News final 12 months that when demand picked up for automobiles, provide simply couldn’t sustain.
“A lot of the automotive industry is still struggling to get their hands on enough semiconductor material in order to make all of the components that they require to put their cars together,” mentioned Duffy on the time.
The tiny semiconductor chips which have been briefly provide are extraordinarily important — they account for security capabilities in automobiles like airbags and brakes, in addition to bonus options like GPS or touchscreen leisure programs.
The scarcity of latest automobiles additionally led to a hike in value for those that had been available on tons. Duffy mentioned a fast turnaround time meant a big uptick from the producer’s prompt retail value (MSRP).
There was an “unprecedented demand for used cars,” mentioned Volpe.
The common value of a used automotive in Canada now’s greater than $35,000 — an almost 50-per cent enhance over a 12 months’s time, in accordance with a December report by the Canadian Black Book.
“For the first time in history, the value of used cars has gone up…when usually it’s the most depreciating asset that a consumer can buy,” Volpe mentioned.
Mark McMullenn, the final supervisor of Mark Wilson’s Better Used Cars in Guelph, Ont., advised Global News in April that after his 2019 Ram 2500 was offered to a shopper for $41,900, McMullen purchased it again months later for $2,000 extra, regardless of the shopper including 80,000 km to the odometer.
He was then approached by one other Onatrio supplier who supplied to buy the Ram at a price of $50,000.
“This is historical. This has never happened,” mentioned McMullen, who manages a business that dates again to 1961. “Never could you buy a vehicle and drive it, and it actually appreciates.”
What to count on from the market?
According to the newest December report by Statistics Canada, gross sales of motor automobiles fell 3.2 per cent to $3.4 billion in October from final month as lack of supplies and microchip shortages continued to plague a number of auto producers.
“Most experts are predicting that used car prices are going to drop 10 to 20 per cent in 2023. So, if I was advising someone who is buying a car right now, if you have a used car, a newish used car, this is the peak value you’re ever going to get for it on a trade end,” mentioned Volpe.
Contrary to what Volpe suggests, Shari Prymak, senior marketing consultant at Car Help Canada, doesn’t suppose it’s time to be promoting used automobiles.
“A lot of dealerships were struggling for inventory for a long time because of the car shortage. And now we’re seeing a slowdown in terms of used car sales,” mentioned Prymak.
He says dealerships are actually possible going to be caught with automobiles that they might have overpaid for, and so they might need to scale back pricing with a purpose to transfer them off their tons.
“I think it is going to be a hard time to sell used cars and even sell new cars to some degree because we’re seeing interest rates going up and because interest rates for new car loans and used car loans have gone up by at least a few percentage points, a lot of buyers who intended to buy a few months ago or ordered a car a few months ago may no longer be able to do so because they can’t afford the payments anymore,” mentioned Prymak.
As a consequence, he thinks there are going to be cancellations of orders within the coming months, which is able to result in dealerships seeing slower gross sales.
Valope is optimistic and expects costs of latest automobiles to plateau and are available down a bit within the coming months.
“I think what consumers can look forward to in 2023 is that we’re going to solve the semiconductor shortage globally, probably in the third and fourth quarter,” mentioned Valope.
“So that means new cars are going to be made at the capacity of the carmakers actually have. There will be a lot more choice, a lot more inventories,” he added.
Prymak, then again, doesn’t count on any vital modifications for the market in 2023.
“The environment that we have right now for car buyers, it’s going to continue this way for most of the new year,” mentioned Prymak.
Expectations should ‘change’
Prymak explains that identical to in 2022, individuals can count on not to have the ability to purchase a brand new automotive proper off the lot from a dealership.
“More often than not, you have to order a car and wait anywhere from a few months to several months for that car to arrive,” Prymak mentioned.
He additionally says that there’s now not going to be a finest time of the 12 months or month when shoppers can get higher offers or rebates as a result of, with the most important scarcity the automotive markets are experiencing, “these things no longer exist.”
“You can no longer save money by purchasing a car that’s a lightly used one,” mentioned Prymak. “More often than not, lightly used cars cost almost as much as a brand-new car.”
And, that’s as a result of there’s no wait time and shoppers can get it straight away, he defined.
“The car market has completely changed, and your expectations have to change as well. And you have to understand these things before you shop (or) go to a dealership,” mentioned Prymak.
Cara Clairman, president and CEO of Plug’n Drive, a non-profit encouraging electrical car use, advised The Canadian Press final week that the hardest a part of selling the change from gas-powered automobiles is availability.
“Long waiting lists are definitely discouraging consumers that are ready to make the switch,” she mentioned. “And if we all agree that we’re in a climate emergency, we need to help consumers make the switch as soon as possible.”
Prymak says that the transition to electrical automobiles is “going to be very slow for sure.”
“Electric cars are next to impossible to buy. Most of them have a minimum waiting period of, I would say, eight to 12 months if not longer. Secondly, they’re extremely expensive,” he mentioned.
Prymak explains that almost all electrical automobiles (EV) value way over a standard gasoline automotive or perhaps a hybrid automotive.
“Even though we do see new electric cars that are going to be coming onto the market in the next few years, chances are it’s going to take several years before we see some truly affordable options that average consumers can buy,” he mentioned.
The infrastructure for charging stations can even want to enhance, and they might should be unfold throughout a number of areas and main cities throughout Canada, he added.
According to a Statistics Canada report, within the first six months of 2022, gross sales of fully-electric and plug-in hybrid automobiles made up simply 7.2 per cent of latest automotive registrations. For all of 2021, the proportion was 5.2 per cent.
According to Volpe, electrical automobiles are additionally essentially the most affected merchandise within the present market due to semiconductor chip scarcity.
“For obvious reasons, you need more semiconductors for vehicles that are electrified,” mentioned Volpe.
But he believes that three years from now, each single lot in each metropolis throughout Canada can have an electrical car possibility for shoppers, however proper now “a lot of people are despairing” as a result of EVs aren’t obtainable in every single place.
“We are going to see a dramatic shift in what’s available for people who want an electric vehicle in two or three years, and it’ll never go backward,” mentioned Volpe.
Last week, Minister Steven Guilbeault proposed that one-fifth of all passenger automobiles, SUVs and vehicles offered in Canada in 2026 might want to run on electrical energy below new laws.
By 2030, the mandate will hit 60 per cent of all gross sales and by 2035, each passenger car offered in Canada will should be electrical.
Prymak’s recommendation for shoppers when shopping for a automotive is time funding. Plan forward, order automotive properly upfront in the event you’re trying to purchase new, he mentioned.
“I would encourage consumers to order a car from the factory. That is the best way to get a fair price and not overpay with a heavy markup or… expensive add-ons,” mentioned Prymak.
Another technique is to get a number of quotes from totally different dealerships, he mentioned. This will assist give an thought of how a lot a automotive really prices.
“Don’t just go to the closest dealership… assuming they’re going to give you a fair deal, because the dealership closest to you might, in fact, be the one that’s charging a lot of extra fees, charging a very large markup, or forcing you to pay for expensive extras,” he mentioned.
“Take the deal from whichever one you feel is offering the (fairest) price, is the most professional and transparent with you, and shop that way,” Prymak mentioned.
Buying a used automotive? May need to ‘wait’
Shawn Vording, vice-president of product and gross sales at Carfax Canada, advised The Canadian Press in September that it’s necessary for shoppers who’re trying on the used automotive market to do their analysis and know the car that they’re contemplating.
“Make sure you know the car that you’re buying and so know the history hasn’t had an accident, has it been maintained, know the current condition, is it going to need tires and brakes in the next three months or has this car been reconditioned to a like-new status,” he mentioned.
“If the price doesn’t make sense, there’s probably a reason why and so have an independent third party inspect the vehicle,” Vording added.
If a client is trying to finance a used automotive, Prymak expects {that a} increased rate of interest on automotive loans goes to make it more durable for shoppers to afford the funds.
“That’s going to deter some buyers from the market,” he mentioned.
Volpe’s recommendation then again, is to attend.
“If you can wait until the second half of 2023, the same car you want will be less expensive than if you wait until the second half of next year. Instead of buying a used car, you’re back in the new car market. Be the first owner and then get the options that you want,” he added.
— with recordsdata from The Canadian Press, Global’s Jasmine Pazzano, Mike Drolet and Brett Bundale
