Exploring the buying habits of Canadians | The star

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It has been said that one of the most important purchases a person will make in their life – after buying a house – is a car. And while the reasons behind it vary, the one common denominator among Canadian consumers is price, especially affordability.

A report released last year by AutoTrader – Canada’s largest online auto marketplace for new and used vehicles – in conjunction with the Angus Reid Group, surveyed more than 1,000 Canadians who had purchased a car over the the last two years or who were planning to buy one in the next two years. year. The purpose of the study was to better understand consumer perceptions and priorities throughout the car buying process.

One thing he found was that 77% of respondents cited price as an important factor in their decision. It’s a notion that dates back to a person’s first car purchase.

“In Canada, buying your first vehicle probably has a lot to do with price, more than anything else, depending on age and income,” said JD Ney, automotive practice manager at JD Power Canada, a market research firm that surveys people. about their car purchases and ownership experiences.

“You see a lot of first-time car buyers buying used vehicles.”

Ney said used vehicles have an inflated value in today’s market due to the global shortage of semiconductors, which has limited new car manufacturing.

Vito De Filippis, vice president of account management at Environics Analytics Research Group, which works with multiple automakers, said the current climate of limited new and used vehicles has changed consumer mindsets toward buying cars.

“If there’s something available, they buy it,” De Filippis said. “It’s a bit like the story of the last few months. This is the big challenge we have with many of our clients. We help them with the marketing, but the truth is what they’ll tell us over and over again is that marketing is great in normal times, but today it’s, ‘Did I even the car? Or do I have to make them wait a year to buy it? »

Robert Stein, president of Plaza Auto Group, which has eight branches in Ontario, said affordability for consumers changes after that first car purchase when they earn a higher annual income.

“A lot of them will buy what they can afford at first and then they’ll buy a logo after that – a BMW, a Mercedes-Benz. That’s a sign of success,” he said.

Rent versus buy

Ney said financing and leasing make up the “lion’s share” of buying, and only a very small portion of consumers walk into a dealership and purchase their vehicles directly. Stein said that typically only five to eight percent of consumers would.

“I think it’s more brand-based,” Stein said. “A Hyundai is a high percentage of leases, and a Subaru is a high percentage of leases and a very high percentage of cash buyers.”

Ney said that for the consumer, the first purchase of a new vehicle often has a lot to do with monthly payment and price. “I don’t think many Canadians see their vehicle (costing an average price of) $40,000,” he said. “They really consider it to be $500 a month.” He said long-term financing “keeps the monthly payment in an area where people are more comfortable.”

Vehicle financing has been around for a long time in Canada, but what has changed is the term, Ney said. Before the end of the recession in 2008 and 2009, the average financing term for a new vehicle was 48 months, maybe 60 months. After that, Ney said, there was an “absolute explosion” in the percentage of Canadians financing their cars over 84 to 96 months, something no one in the industry had seen before.

Stein said the trend toward long-term financing happened when many manufacturers stopped leasing due to a financial crisis between 2009 and 2011 that rocked the industry.

“I believe it moved to 72 and 84 month financing to compensate for the lack of leasing and to reduce payments for customers,” he said.

Some people prefer to have the car financed because they want to own it right after the payments end, Stein said, while others prefer leasing because they want a new car every four years.

Ney said that over the past few years, Canadians have shifted from the traditional small sedan segment to the sport utility vehicle (SUV) and cross utility vehicle (CUV) segment.

“These are more expensive vehicles, and in order to keep the monthly payment the same or something more palatable, the option of extending that financial term proved compelling,” Ney said.

John Shmuel, director of content and strategy at Ratesdotca, Canada’s largest digital insurance and money platform, said that when individuals are looking for insurance on their newly purchased vehicle, the broker wants to know if the customer finance the vehicle, lease it or buy it directly. .

“We find that financing is the most popular option for people,” he said. “The very long funding model is absolutely becoming more popular.”

He said that when you take into account regional and demographic data, it corresponds to affordability.

“In Ontario, the Honda Civic and Toyota Corolla are the top-rated (insurance) cars for all generations,” Shmuel said. “Once you get into the older generations (60+) you start to see more (expensive) cars being quoted because they have a bigger budget. But if you go to Alberta, across the board , with the exception of the very young generation – Generation Z – you see a preference for large vehicles and pickup trucks.The Ford F-150 is almost unanimously the most popular vehicle in this segment and we don’t see any Honda Civic in the top five, but we see the Honda CR-V and the SUV.

LATERAL BAR : Pay full sticker price – even for used cars

As JD Ney, Director of Automotive Practice at JD Power Canada, mentioned, many first-time buyers buy used vehicles. With a shortage of new vehicles due to a global shortage of semiconductors, there’s a premium on used vehicles – and that drives up the value.

Canadian Black Book, which rates new and used vehicles, said the price of used vehicles has risen for 20 straight weeks due to lower inventories. “For first-time car buyers, the buying experience has changed, the days of negotiations with the seller are over (for now),” said James Hancock, director of strategy and analysis. OEM at Canadian Black Book. “As the shortage of new cars continues, buyers must be prepared to accept that certain options may not be available, and they must be prepared to pay full list price for a vehicle that they will have to wait one to four months for. the delivery.”

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