The cost of owning a vehicle in Canada has reached unprecedented levels, leaving many Canadians grappling with the financial strain of car ownership.
According to the latest Price Index Report of New Vehicles by AutoTrader, the average price of a new car in June 2023 skyrocketed to $66,288 CAD – a staggering 21.3% increase from June 2022.
This sharp rise in car prices, coupled with inflation and soaring interest rates, is making it increasingly difficult for the average Canadian to afford a new vehicle.
Supply Chain Woes and Demand Surge still a problem?
The surge in car prices can be traced back to the height of the COVID-19 pandemic, when supply chain disruptions and microchip shortages forced factories to shut down. As a result, car dealerships were left with empty lots and long waiting lists for customers eager to purchase new vehicles.
Now, as the world recovers from the pandemic, the demand for cars has rebounded faster than the supply, driving prices to new heights.
This surge in demand, coupled with ongoing inventory shortages, has made both new and used vehicles more expensive. The average used car price in Canada climbed to $39,645 CAD in June 2023, marking a 4.1% increase over the previous year. With new car prices out of reach for many, a significant portion of Canadian car buyers are turning to the used car market—often because they cannot find the new vehicles they want.
The Rising Cost of Financing
Compounding the issue is the rising cost of car loans. As interest rates have climbed, the average monthly payments for used vehicles have surged from $466 in 2019 to $639 in 2023.
Loan terms have also lengthened, with the average term increasing from 68 months in June 2019 to 72 months in 2023. This means Canadians are not only paying more for their cars, but they are also taking longer to pay them off.
For those leasing vehicles, the situation is equally dire. Interest rates for leases have reached as high as 8% or 9% on a 48-month lease, making the overall cost of leasing a car substantially higher than in previous years.
Struggling to Keep Up
The impact of these rising costs is being felt across the country, as Canadians find themselves increasingly stretched thin by the financial burden of car ownership. Many are being forced to make difficult choices—either delaying the purchase of a new car, settling for a used vehicle, or extending the lifespan of their current vehicle through repairs and maintenance.
Even with these measures, the reality is that many Canadians are struggling to keep up with the mounting costs. The increased financial strain is particularly hard on middle- and lower-income families, who may already be dealing with the pressures of rising living costs, including housing, food, and utilities.
The Road Ahead
As car prices continue to rise, it remains to be seen how the average Canadian will adapt to these challenges. The automotive industry faces a complex web of issues that are unlikely to be resolved overnight. For now, consumers may need to prepare for a future where car ownership becomes an even more significant financial commitment.
In the meantime, financial experts recommend that Canadians carefully consider their options before making a car purchase. This might involve comparing different financing options, exploring the used car market, or even rethinking the necessity of owning a vehicle in favor of alternative transportation methods.
For many, the dream of owning a new car may be increasingly out of reach—a sobering reflection of the broader economic challenges facing Canadians today
