0% financing on a new car? Deals are back — on some models

Over the last three years, new and used vehicle supply in Canada dried up — and so did the deals on car sales.

But industry experts say the drought is over and Canadians can expect a better buying experience this summer and fall.

“Supply of new vehicles has improved dramatically over the past year and the shortages seen in 2021-23 are to all extents over,” wrote Andrew King, managing partner at DesRosiers Automotive Consultants in Richmond Hill, Ont., in an email.

“Prices are moderating” and consumers are seeing the “return of vehicle incentives,” he said.

Applewood Nissan in Richmond, B.C., is offering deals they haven’t had in years, such as price cuts, rebates and lower financing rates.

“We already have zero per cent [financing] on some models. They’re not at full capacity, but the deals are coming back,” said general manager Leon Cheliadin.

Subvented loans

So how can a car dealership offer financing well below the Bank of Canada’s 4.75 per cent key interest rate? It’s called a subvented loan.

If a new vehicle model isn’t selling as well as expected, manufacturers may subsidize the cost of borrowing to move more units.

“Three months ago we had a few too many Nissan Rogues,” said Cheliadin. “Then Nissan came up with a low-interest lease and we sold about 30 in one month of that particular model.”

Cheliadin says this is a huge shift from a few years ago when he desperately needed vehicles but couldn’t get them because of supply chain issues and the global microchip shortage. Once car makers could ramp up production again, Cheliadin says they “flooded” dealerships with inventory.

In 2021, when Canadians needed vehicles, interest rates were low. Now they’re high and many other goods are also more expensive, slowing down consumer demand.

“Demand is very tempestuous. We’re very sensitive to interest rates and trends and our own pocketbook issue,” said Thomas Goldsby, a professor of supply chain management at the Haslam College of Business at the University of Tennessee, Knoxville.

“These automakers have to be placing bets months and months and months in advance, and then they cross their fingers and hope that their supply matches demand.”

New cars listed between June 23 to 29 on AutoTrader were up 70.4 per cent from the same period last year, while used vehicle listings were up 26.4 per cent, according to data provided by the company.

Huw Williams, spokesperson for the Canadian Automobile Dealers Association, says that’s good news for consumers.

“What happens in this kind of environment is, to be competitive, manufacturers discount product. They discount interest rates. They find the right levers to attract consumers.”

“You have greater choice, greater selection. You have a greater ability to negotiate.”

No deals on popular models

One consumer watchdog says drivers won’t find “any kind of incentives” on new vehicles that are in high demand, such as hybrids, compact cars, hatchbacks and small SUVs built in Japan and Korea.

“Unfortunately, the vehicles that still have very limited supply and long waiting periods are also the most affordable,” said Shari Prymak, executive director of Car Help Canada, a non-profit that helps drivers find cars and negotiate prices.

When it comes to used vehicles, overall sales saw a 2.3 per cent decline in prices in April 2024 compared to the same month in 2023, according to data from Statistics Canada and DesRosiers.

However, Prymak says that hasn’t shifted prices on the “most desirable” used car models either.

“Small, reliable, fuel efficient…. These are the types of used cars where the prices are still extremely high.”

But if you’re in the market for a higher ticket used vehicle, like a large truck, Baris Akyurek says prices are dropping.

Luxury vehicle prices have had a larger decline, year-over-year, because they’re “not selling as well as their mainstream counterparts,” said Akyurek, vice-president of insights and intelligence for AutoTrader.

‘Bit more of a buyer’s market’

Layne Fyfe says the price of used, 2018 Jeep Cherokee Limited models have dropped since he purchased his in the spring of 2023. At the time, dealerships and private sellers weren’t budging on price — so he ended up spending about $6,000 more than he’d budgeted for.

“I’m, like, kicking myself now,” Fyfe said.

If he could have waited until now to buy, the Calgarian believes he would have found a better deal.

“Vehicles that are a year newer are still about the same prices, if not cheaper. And for a lot less kilometres … 20,000 km less around the same price,” Fyfe said.

“It feels like it’s becoming a bit more of a buyer’s market. There’s hope at the end of the tunnel.”

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