Walk onto any new dealership lot, and most of the prices scrawled on windshields are likely to be north of $50,000. Gone are the days when consumers could buy a new vehicle for less than the cost of a university education. So, what happened? In a word, Covid.  

As governments instituted lockdowns and closed borders, snarled supply chains dramatically drove up parts and labor costs. Manufacturers took advantage of surging demand pushing against broken supply chains to raise prices, resulting in wider margins and soaring profits.  

Manufacturers also forced higher trim levels, meaning they prioritized the production of vehicles with advance and luxury features such as infotainment systems, panoramic sunroofs, heated, ventilated and even massaging seats, and adaptive cruise control over basic models. At the same time, advances in safety tech, such as cameras, blind spot detectors, sensors, and onboard computing, increased complexity and cost.  

Many manufacturers discontinued economy and small models outright, with the Big Three North American automakers abandoning the sedan segment almost entirely in favor of pricier SUVs. And while EVs should eventually be cheaper than gasoline powered cars due to their fewer parts, Western manufacturers initially launched them as premium, luxury-leaning products in an attempt to more quickly recoup development costs.  

Post-Covid, cheap financing and lease deals masked higher sticker prices. Loan terms stretched beyond the standard 36/48 months to as long as 96 months, or eight years. Monthly payments became less tenable for consumers as rising interest rates pushed up borrowing costs in 2022.  

The tide, however, is about to turn.

Manufacturers are responding to slowing sales with a new wave of sub-$35,000 models that are smaller, less 'smart', and increasingly electric, such as the recently-announced Ford Fathom. These newer models are designed to compete with the coming wave of cheaper Chinese EVs. But it will take time, with most of these models set to arrive on dealer lots in late 2027 and 2028.

If you already own a vehicle and are considering purchasing a new one, hold off for another year or two. Check your auto insurance premium in the meantime. Roughly 40% of what you pay is based on the cost to repair or replace your vehicle, and premiums climbed in lockstep with car prices over the past five years. As more affordable vehicles enter the market, expect premiums to ease as well.  

One last tip if you're shopping soon: check whether your dream car is a frequent theft target. Vehicle thefts have fallen roughly 20% over the past year but remain at historic highs, and high-theft makes and models carry surcharges that can add $500 to $1,500 to your annual insurance bill.  

Hopefully, Canadians will see some relief in new vehicle prices soon.