Canada is about to enter a “mild recession,” according to Deloitte. Though this one may not be as devastating as the 2008 recession, we’re going to feel its impact everywhere — including the Canadian car market.
At the same time, Canadians are driving more, thanks to pandemic restrictions that are now lifted and companies calling workers back to the office. So you may be wondering: Should you buy a car in a recession?
Should you buy a car in 2023?
Every recession has different circumstances. But the 2023 recession is not a good time to buy a car, according to Shari Prymak, senior consultant at Car Help Canada, a non-profit that helps consumers make auto purchasing decisions.
“We recommend people wait until next year, or later, if possible,” Prymak adds.
We can blame the car shortage for this. Thanks to supply chain issues, car manufacturers are having a harder time getting integral automaking parts, like semiconductor chips and brakes. Canadians now must wait anywhere from six months to two years for a new car.
Due to high demand and low supply, dealers have been overcharging for cars, Prymak says. Dealerships can’t offer discounts and rebates anymore because of the high expense to manufacture a car, so consumers can’t get even a couple dollars off.
Used cars are just as expensive as new ones
If you think that you can get around the inflated dealership prices by buying a used car, that’s sadly not the case. Used car prices continue to surge, thanks to the long wait times for new cars.
Used cars now often cost the same as new ones, Prymak says.
“It makes zero sense to pay the same price for a used car as a new car,” he says. “But unfortunately, that’s what a lot of people are doing right now to get a car quickly.”
An EV isn’t necessarily more cost-efficient
Though electric vehicles (EVs) are often more expensive to buy initially, some experts have made the case that they save you money in the long-term because you don’t have to buy gas and upkeep is cheaper. Plus, the cost to insure an EV is similar — and occasionally less — than insuring a gas-powered car.
However, Prymak argues that EVs are impractical for most consumers. EVs prices range from $38,000 to $189,000, so they’re not exactly affordable. Even after you drive your new EV off the lot, charging the vehicle can be a hassle. And their lower driving range may not work for long commutes.
Moreover, EV technology changes rapidly.
“The batch of EVs over the next few years are going to be much better than what we have now,” Prymak says. “They’re [at a stage] where computers were in the 1990s, but they’re progressing really fast.”
Auto loans are high, insurance rates are steady
The Bank of Canada wants to curb inflation and prevent a deep recession by increasing interest rates. Unfortunately, this measure also increases auto rates, like financing and leases. With new cars costing approximately $57,000 and used ones $37,000, auto loans are the only way many Canadians can afford a car.
New and used cars’ auto loan rates rose to 6.79% in August 2022, up from 4.79% in August 2021. Prymak notes that used car financing rates can also range from 7% to 10%. These increased auto loan rates mean that you’re going to be paying much more for a car now, than before.
Luckily, insurance rates won’t bring down your wallet any more than usual, as they’re tied to personal factors rather than inflation. Insurance rates remained steady in 2023, thanks to two years of reduced driving during the pandemic, according to Prymak.
But comparing auto insurance rates is always a good way to save money!
What if I need a car for my commute?
Many companies are mandating a return-to-office policy. But what if you're one among the many people who moved away from a city? Is it worth buying a car — whether new, used, EV or gas-powered — now that your commute is longer?
“We only [advise it to] people who absolutely need a car right now and have no choice,” Prymak says.
So if public transit, ride-share, or hybrid work models aren’t available to you, then yes, buy a car. Prymak recommends taking your time and weighing several options before purchasing.
Whatever car you buy, Prymak emphasizes the importance of shopping around– especially for new car purchases. He recommends visiting several dealerships before making a decision.
Prymak also advises that you compare the dealership’s prices with the car manufacturer’s price. For instance, if you’re buying a Toyota, check their company website to see the price of the vehicle model you want and compare it to the dealership’s price. If their price is higher than the website’s, you’ll know you’re being ripped off.
And if you must buy a car, make sure you compare auto insurance rates to make sure you’re not spending more to insure your car than you should be.
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