05.23.2023
Inflationary Economy Is Influencing Car Buyers, Says Latest CBB Poll
Price Increases Making Buyers Explore Options
Markham, ON, May 23, 2023 – Canadian Black Book, the country’s leading data and analytics source for the auto sector, has completed its latest Ipsos poll to dissect car buying trends. Among other findings, inflation and other economic factors are certainly influencing the attitudes and actions of car buyers in Canada.
The survey found that 44% of Canadian consumers said purchase price is the most important consideration when buying a vehicle, in contrast to only 12% who claim brand preference as most important. Given that the average vehicle price has increased by around 20% over the past 12 months, this makes total sense. Only 15% of Canadians knew the correct answer to just how much prices have increased during that time. That said, 34% of respondents did answer that they believe prices have increased from 15% to 25%, and 16% feel they have increased from 30% to 50%. So, it is safe to say that consumers are aware of price increases. It should be noted, however, that 12% of respondents said that they believed prices have not increased at all.
“Our business is to monitor and communicate the prices of vehicles to the industry and the nation. Inflation has not left the auto industry alone as prices have seen unprecedented increases in the last year, and consumers are taking note,” says Daniel Ross, Senior Manager, Industry Insights & Residual Value Strategy at Canadian Black Book.
Currently, only 28% of Canadians are likely to purchase a vehicle in the next 12 months according to the survey results, compared to 47% who are unlikely. Males are more likely to buy (34%) versus females (22%). Four in ten Canadians say that vehicles are too expensive. Age matters regarding intent to purchase within the year, whereby 40% of those 18-34 do intend to do so versus only 19% of those 55+. Regionally, respondents in Saskatchewan and Manitoba are most likely at 38%, where only 26% will in Ontario and Quebec.
Six in ten (59%) say that increased prices will delay the purchase of a vehicle. Of those, 44% say they will delay at least a year, while 28% say 2 years. Families with kids are by far the group most likely to delay a car purchase, where 72% of those respondents indicated that they would.
Perhaps due to lower residual values two or three years ago, the survey found that 52% of lease holders are likely to buy out their vehicle at lease maturity. This is double compared to those who want to lease for a longer term. The highest potion of Canadian consumers who intend to buy out leases are males at 59% and residents of BC at 60%.
“Now is the time to capitalize on low lease residuals and buy out that vehicle at maturity. Car buyers stand to either save considerable money or even make money if they resell that vehicle,” says Ross.
Surprisingly, 43% say that price increases will have no impact on buyers purchase decision to buy a new versus used vehicle. The survey suggests that 40% intend to buy used cars due to price hikes, while only 17% will vie to buy a new vehicle since prices have gone up. Almost half (47%) of the youngest car buyers (18-34) are likely to buy used, and the Albertans are most likely to buy used (58%) given the increased car prices. Younger people are generally the most likely to buy used, however, this trend has been growing since last year where 38% were likely to in 2022.
Regarding attitudes towards buying luxury vehicles in an inflationary environment, only 8% of Canadian car buyers suggest they would be likely to elect to buy one. Conversely, over half (52%) of the consumers surveyed indicated that they would be likely to buy a non-luxury model with prices rising. Six in ten of those 55+ are likely to buy non-luxury and 2 in 3 (66%) residents of Atlantic Canada feel the same way.
Given the current economic outlook, only 22% of Canadians are likely to reduce the number of vehicles per household; however, 36% of families with kids would consider it. 40% are likely to investigate smaller, more fuel-efficient options, which is slightly up from 2022 where 37% agreed. University grads (47%) and young buyers (45%) are the most likely to buy fuel conscious cars.
Given that subscription services are becoming more mainstream in automotive, CBB asked about car buyers’ desire to buy them. 37% said they were likely to buy subscription-based performance upgrades, 28% would buy styling upgrades, 29% infotainment upgrades, 23% luxury amenities, and 45% said they would be likely to invest in subscription-based efficiency improvements.
About Canadian Black Book
For over 60 years, Canadian Black Book has been the trusted and unbiased Canadian automotive industry source for vehicle values. Today the company has grown into a leading data provider of vehicle valuations, residual value forecast solutions and VIN decoding. Canadian Black Book tools and information are considered ‘The Authority’ for vehicle values not only by car dealers and manufacturers, but also the leasing, finance, insurance and wholesale sectors.
Posted in: Dealers