New-vehicle gross sales in 2022 fell 8.8 per cent in contrast with 2021, however the place the market heads this 12 months is anybody’s guess amid record-high transaction costs, stock woes and a looming recession.

“The massive query that lies forward would be the stability between improved automobile stock, pent-up demand and deteriorating financial circumstances,” stated Andrew King, managing accomplice at DesRosiers Automotive Consultants. “It may nicely be that automobile gross sales in Canada climb even because the nation enters a recession.”

Gross sales of 1.50 million light-duty autos in 2022 have been reported by the Automotive Information Analysis & Knowledge Heart in Detroit. Few forecasters are going out on a limb for 2023, however U.S.-based AutoForecast Options predicts gross sales of 1.6 million. And Scotiabank Economics on Jan. 18 stated in its International Auto Report it expects Canadian gross sales to succeed in 1.65 million.

New-vehicle pricing continues to rise, even within the face of interest-rate hikes.

Numerous automakers have practically doubled their charges to wherever between 4.99 and 6.99 per cent, relying on the size of the mortgage, because the Financial institution of Canada started elevating its in a single day price.

These will increase current a possible affordability drawback, warned Robert Karwel, senior supervisor, automotive follow Canada, at J.D. Energy.

The common transaction worth by November 2022 stood at $45,000, up six per cent from 2021’s document excessive of $42,500. It crept up once more in December, coming in at $49,900. The annual common isn’t but accessible.

LONGER LOAN TERMS

The common month-to-month automotive cost now stands at $700, and that features financing, and mortgage and lease funds on all new autos offered in Canada.

“How a lot elasticity is in that quantity? Nobody is aware of,” Karwel stated.

The common month-to-month cost for full-size vehicles alone is almost $1,000.

“We’ve obtained plenty of high-end vehicles on the market.”

To maintain paying high greenback, extra consumers are choosing 84- and 96-month financing. The latter now makes up 10 per cent of the market, up from six per cent earlier than the COVID-19 pandemic.

Canadians have been capable of afford excessive costs when rates of interest have been “silly low,” Karwel stated.

“We may deal with the pricing as a result of costs have been ameliorated by low rates of interest. Our concern for the brand new 12 months is cost affordability might be drastically affected as a result of automakers are nonetheless spending near-record lows on incentives.”

He stated automakers are solely providing about 5 per cent of the MSRP in incentives. In 2019, it was about 15 per cent.

“With out extra incentive cash to offset central financial institution actions to curb inflation, we’d hit a cost affordability disaster,” Karwel stated. “The important thing context isn’t falling off a cliff, however cooling off.

“How a lot pricing and cost…do you assume we will maintain driving upwards as we go right into a recession this 12 months?”

Shahin Alizadeh, CEO of the 11-store Downtown Auto Group, stated incentives are beginning to come “in dribs and drabs.”

“It’s a unique market” right this moment than even a 12 months in the past.

“The numerous financial savings clients had, based mostly on [low] rates of interest as a result of they have been borrowing from credit score traces or OEM captives, have disappeared now,” he stated.

He referred to as right this moment’s consumers extra cautious and stated they’re choosing fewer bells and whistles to maintain prices down.

WORST SALES YEAR SINCE 2009

The 1.50 million light-duty automobile gross sales in 2022 have been lower than the 1.55 million offered in pandemic-hampered 2020. And it was the worst gross sales complete on document since 2009, when automakers offered simply 1.46 million amid the Nice Recession triggered by the monetary disaster.

Nonetheless, most sellers loved monetary success in 2022.

With out offering a determine, Karwel stated sellers posted document profitability in 2022.

“Sellers are making excellent cash,” he stated.

Alizadeh stated 2022 was good for him, however not so good as 2021.

“I feel the trade celebrated very stunning monetary outcomes. Margins have been excessive, stock was tight, the used vehicles have been robust,” he stated of 2021. “Twenty twenty-two was not the identical. We held our personal in 2022, we have been barely off of 2021, and that was a bit stunning as a result of we anticipated to see a bit extra stock.”

Hyundai Canada CEO Don Romano agreed.

“Our sellers had a document 12 months for profitability. I wouldn’t say it’s extreme. It’s the place it ought to be. I don’t assume there are any Hyundai sellers on the market who would let you know they’re upset with 2022 in respect to profitability. They offered fewer vehicles and made more cash. That’s mixture.”

STELLANTIS, GM CANADA POST 2022 GAINS

Hyundai offered 112,559 new autos, down 11.1 per cent.

“That stated, I want to have extra quantity, much more quantity,” Romano stated, “However I wish to see quantity develop at an affordable tempo. Six months in the past, [our dealers] have been screaming for extra. However now they’re asking for extra.”

That’s as a result of greater rates of interest imply it’s costlier for sellers to hold extra stock, though it’s nonetheless wanted.

“Excessive supplier gross and low incentives is telling you there’s nonetheless a good quantity of demand on the market,” Karwel stated.

“The stock state of affairs is normalizing and enhancing for some manufacturers and there’s a continuation of very dismal stock and provide points with one other model,” stated Alizadeh, who declined to elaborate. He stated Detroit Three stock “is far much less of a difficulty.”

Stellantis’ 2022 gross sales have been up 4.8 per cent to 169,799, whereas fourth-quarter gross sales have been down two per cent to 38,568. Ford’s 2022 gross sales of 240,325 autos outpaced all automakers, however that was down 1.3 per cent from 2021. Its This autumn gross sales fell 9.7 per cent to 54,841.

Basic Motors had the best share improve for 2022: 4.8 per cent to 228,003 autos. The fourth quarter was up a whopping 41.6 per cent to 55,724 autos.

“Bettering stock ranges, together with excessive buyer demand for our product lineup, have been key contributors to our success,” Sandor Piszar, vice-president, gross sales, service and advertising for GM Canada, instructed Automotive Information Canada in an e-mail.