Data insights on financing and leasing: what to expect?

Exploring some of the key findings from CADA’s first-ever Data Report.

A few months ago, CADA published its first annual Data Report for the year of 2022. The goal of this report was to gather — in one place — some of the most important economic insights we have on auto dealerships in Canada.

With the current economic situation, there is a building interest behind the market and the financial mechanics driving the entire automotive industry in Canada and in North America.

While some of you might have read this report, I thought it would be interesting to go back over some of the more insightful and interesting tidbits that CADA uncovered and analyzed. We will also come back next year and compare these results to see if there are any trends that auto dealers and consumers should be aware of.

I want to touch on the financing and leasing side of dealership activities. The reason why is simple: by far the piece of information from the CADA report that generated the most media interest was the dichotomy between the general decrease of leasing percentage over the years with the steady increase of the average interest rate.

Indeed, consumer leasing of new vehicles has moved from almost 32 per cent in 2018 to less than 23 per cent in 2022 while the average interest rate has doubled over that time.

Many consumers, much like dealerships, are feeling the pressure from multiple sides and have had to make decisions negatively affecting other areas of their debt portfolios.

For a lot of journalists involved in the auto sector, high interest rates should drive leasing percentage as consumers get weary about purchasing vehicles in this increasingly difficult economic context.

In fairness, next year’s data could align with this assumption but it is also evident that the late 2022 and early 2023 market has been warped and distorted by a cumulation of many variables such as: a higher saving rate than pre-pandemic, uncertainty about where interest rates are going, consumer impatience after a severe supply shortage, low inventories for used vehicles, etc. This unique combination of factors had led consumers to act in a way that might very well be, to some, counterintuitive.

On the other hand, there is also a lot of data on financing and leasing for 2022 that corroborates a more common and widely shared understanding of the market: vehicles have become more expensive since the pandemic and interest rates hikes are starting to have an effect on many consumers.

The average loan term in months has grown since the pandemic by almost four more months and, during the same timeframe, the average amount financed went from $42,359 to $53,023.

The costs of producing these new, often electric and high-tech vehicles have for sure played a significant role in the growth of the amounts being financed, but there is no doubt that the average Canadian is being affected by the widespread rise of overall cost of living.

In fact, real world information confirmed this trend when BMO announced recently that they are officially shutting down their indirect retail auto finance business division.

As for the rationale behind this decision, BMO has indicated that the rise in delinquency rates were now higher than in the pre-pandemic economic environment. Many consumers, much like dealerships, are feeling the pressure from multiple sides and have had to make decisions negatively affecting other areas of their debt portfolios.

This evolving market dynamic is of interest for dealers because it could very well be one of the first “dominos“ to fall — for the automotive industry — and confirm that we are indeed entering a period of economic hardship.

For many months now, the worrying things and predictions that were said about the Canadian economy didn’t seem to fully translate to the dealers with overall retail sales number being positive compared to 2022 (10.5 per cent rise in parts sales and 9.1 per cent increase in new vehicle sales1).

This economic momentum very well could be maintained in the second half of 2023, a tested, proven and steady level of consumer resilience being the main reason why it could happen. Only the next few months, however, will allow us to determine if this story of resilience and positive sales remains a thing during what appears to be a looming economic recession.

Over the next six months, keep a close eye on the movements of the financing and leasing activities of your auto dealership. It could quickly become one of the most reliable indicators of what is to come and how to prepare for it.

REFERENCE: Desrosiers Automotive Consultants, Retail Sales Continue to Climb in the First Half, September 1st 2023.

About Charles Bernard

Charles Bernard is the Lead Economist for the Canadian Automobile Dealers Association. Charles aims to bridge the information gap that might exist between dealers’ interests and the economic policy being deployed in Ottawa. You can reach him at:

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