They’re baaaaaack…
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We’ve spent much of the past four years watching auto manufacturers face shortages—and use the excuse of shortages—to establish eye-watering high costs for new and, subsequently, used vehicles. Prices in both sectors have started to settle, but the return of incentives truly heralds a return to business as usual. Sort of.
If the lack of inventory spurred historically high prices, surpluses are now driving the year-end push to unload vehicles to make room for new models. A recent report from CarScoops in the U.S. is touting a 60% increase in incentives over the same time last year. If you’re in the car-buying market, here’s a comprehensive look at much of what is on offer in Canada, courtesy of the Automobile Protection Association (APA).
Car-buying incentives in Canada
Daniel Ross is the senior manager of industry insights for Canadian Black Book. He says the U.S. numbers are definitely a reflection of what is taking place in Canada, too. “The last quarter of the year is traditionally quieter than the summer, but now dealers are trying to hit annual sales targets,” he explains.
After years of consumers facing full manufacturer-suggested retail pricing (MSRP), it’s a little jarring to see something like the 2024 Ram 1500 sporting a pre-tax discount of 15% plus a $2,500 pre-tax discount (excluding leases), and the 2024 Ram 1500 Classic (ending sales in Canada) offering back $10,000, according to current stats from the APA.
Stellantis is struggling, according to Ross. “Dealers want a cheaper product line, and the company is just not where it needs to be,” he says. “The products are too big and too expensive. They’re putting a lot of cash on the hood to move inventory that has been, in some cases, on the lot for 90 to 100 days.” The 2024 models of the Compass, Wrangler, Wrangler Unlimited, Gladiator and Grand Cherokee are all currently offering 10% off MSRP and additional cash incentives on top of reduced interest rates, says the APA.
A new report from CNN points to Stellantis not only stalling on new sales, but turning off many of its traditional fans. The headline says a lot: “Jeep prices have gone through the roof. Buyers are bailing and dealers are furious.” The article touts the same mismatch that Ross speaks of, with the company not supplying the middle ground: prices and products that reflect who it built its base from. The turmoil with the company has long tentacles, with angry dealers, shuttered lines, and laid-off workers.
Maybe it’s not surprising then, that Stellantis is leading the incentive pack. “A problem for Stellantis dealers is that many current Jeep and Ram customers are locked into very long loans with high negative equity and they will be giving up a lower interest rate negotiated before or during COVID to come back into the market early,” says George Iny, executive director of the Automobile Protection Association. While there are better interest rates to be had across a wide spectrum of the market, it’s the big vehicles throwing around the cash. Is the 2024 GMC Sierra on your list? Up to $8,500 cash purchase discount, depending on the model, paired with a 1.9% interest rate.
Are there cash incentives for the vehicles you want?
Cash incentives are noisy and appealing — if it’s the vehicle you want. Ross warns that big cash incentives like these are the worst thing to happen to future value — and that retained value is always a number consumers should be considering. It’s why from Toyotaland — a perennial retained value leader — there are only crickets. They’re selling nearly everything at full pop. Iny adds Hyundai and Subaru to the list of manufacturers who are moving product with little or no incentives.
Honda is putting up more modest cash ($1,500 to $3,000) and attractive interest rates on its biggest rides: 2025 models of the CR-V, Ridgeline, Odyssey, Pilot and Passport. A word of caution to those chasing lower interest rates: read the fine print and see how long the term is for. Getting 1.99% financing for 24 months means steep payments until you have to refinance at dramatically higher rates. Iny also notes a little bait-and-switch going on that consumers should be wary of: a slide back to advertising 48 or 60-month loan terms. Before COVID, far longer advertised terms were the norm, with some, like Kia, Jeep and Ram proudly strutting their 84-month terms. Nissan has lots on offer at 0.99% financing — for a 24-month term.
Lexus is offering decent interest rates and cash discounts ranging from $2,000 to $4,000 on the 2024 ES, LC and LS – cars showing weaker demand than some of its SUVs, though there are similar incentives offered on the NX 250 and 350. Hybrids remain untouched.
Incentives with an additional purchase
Sometimes you have to make sure a great deal isn’t manacled to something you may not want. Tesla Canada will currently give you 0% financing up to 48 months on a new Model 3 or Model Y. Sounds great, but it’s only if you also take the Full Self-Driving option. Which adds $11,000 to the tab. I dunno about you, but $11K takes some of the sweetness off that financing rate.
End-of-year incentives
Daniel Ross sees the return of incentives, and what they’re on, as an indication of where the industry is headed. “Hybrids and plug-in hybrids are moving. Consumers are offsetting the total cost of ownership now. We’ve lost cheap money when interest rates were low and are now tying that to residual rates that have soured,” he says. Is there desperation in the air for those sitting on dated inventory? “Absolutely,” says Ross.
He agrees the huge cash incentives can leave a bad taste in the mouths of previous buyers. That huge pickup truck you bought a few months ago is now worth thousands and thousands less. It’s hardly the first time something has gone on sale after you can’t do anything about it, but like Tesla owners who suffered a kick when that company dropped its prices over the past two years, the best thing to do is ride it out in the same way you wait out negative equity.
Final tips from Ross: take the cash if it’s the vehicle you want. Conversely, he also says to buy the car you need for 90% of your life. He says that the third row is often unused, and consumers need to find their way back to vehicles that are a better fit. Manufacturers blame consumers for the gigantic rigs on our roads, but I also credit really good marketing departments and ad campaigns that convinced them for decades that’s what they needed.
The electric vehicle market is still sorting itself out, with some jurisdictions set to let government subsidies run out at year-end. Some of us have been saying for a couple of years now that hybrids and plug-in hybrids would be the bridge between technologies, and that appears to be the case.
Incentives are terrific if they show up where you want to be. If they’re pulling you too far off course, hesitate.