Current economic conditions and consumer buying habits make it a challenging year for Canada’s car dealers.
Canadian buying habits are closely tied to the economic conditions of the day.
When the economy is thriving and people are confidently employed, spending on “big-ticket” items like cars increases.
Today, however, Canada is in a state of inconsistency and unpredictability, created by a number of economic and political factors. So what does this mean for the average Canadian auto dealer? Let’s explore.
Demand and consumer behaviour have shifted. People are increasingly prioritizing affordability over luxury vehicles. Practicality is top of mind. Gone are the days when average Canadians seek lavishness over a modest lifestyle.
Moreover, fears of price increases stemming from new tariffs are leading many consumers to delay purchases and hold on to their vehicles longer.
Used vehicle pricing and inventory levels are all over the map. On one hand, prices are declining as new-vehicle supply chains normalize. On the other, tariffs have driven new-vehicle pricing upward, shifting buyer propensity toward the pre-owned market.
Off-lease supply is expected to be at an all-time low in 2026, which will have a dramatic impact on the certified pre-owned market. Finding balance will be a challenge for dealers in the year ahead.
The Bank of Canada has essentially held rates steady for some time, and I don’t see this changing materially in 2026. Average percentage rates (APRs) will remain elevated for the foreseeable future, constraining leasing and financing affordability. Zero per cent rates are officially dead in the Canadian automotive market.
Tariffs on vehicles and parts have significantly influenced prices and demand—particularly for domestic brands—while a soft job market continues to weigh heavily on consumer confidence.
The shift to EVs in Canada also appears to be faltering, despite government efforts to introduce lower-cost Chinese imports. This market remains unproven, and ongoing constraints related to cost and availability are pushing buyers back toward traditional internal combustion engine vehicles. I believe this trend will continue.
Dealers must continue investing in technology, including digital retail experiences and ease of shopping, to attract and retain buyers.
The average Canadian today faces a real choice: buy a vehicle amid ongoing uncertainty, or turn to alternatives such as ride-sharing to meet transportation needs. Time will tell.
Government has a role to play. Resolving tariff issues, restoring stability to the business community, and putting more money in consumers’ pockets would help stimulate the economy.
This—and only this—is the solution Canadian automotive dealers are looking for. The rest, they can solve. They’ve been doing it for more than a century.
