The big question on nearly everyone’s mind these days is if economic activity has declined, and we have or will move into a recession. It’s an important one for the automotive industry overall – especially for car dealerships – in judging consumer vehicle purchase intentions in light of the economic uncertainty.
The findings from our latest study, conducted near the end of the third quarter of 2022, looked at purchase behaviours and consumer attitudes toward the market, for Canadian car shoppers intending to purchase a vehicle in the next 6 months if the economic situation were to improve.
While car shoppers are divided on whether they think Canada is in a recession, (47% believe that we are and 34% claim that we aren’t), overall intentions to purchase a vehicle in the next six months have actually increased compared to March of this year. Those who intend to purchase won’t change the amount they’re likely to spend if the economy stays the same or even if it declines. Most of those surveyed still rate their current financial situation as positive, with 60% calling their perception of their household finances as “Good” or “Very Good,” with only 10% reporting “Poor” or “Very Poor”.
The study found that 24% intend to buy a vehicle in the next six months, which is up from the 18% reported in March of this year. Although respondents are in agreement that either a recession is looming or that we are currently in a period of general decrease in overall economic activities, they have a positive view of their personal and household finances, thus intent to purchase a car remains stable and strong.
Economic situations are still an important reality, and much will depend on how the current market affects buyers. When respondents were asked the likelihood to purchase a vehicle if the economic situation improves, intentions to buy a vehicle increased by nearly a third. However, if times get worse, it comes as no surprise that intentions to purchase are likely to decline by a similar proportion.
Somewhat surprisingly, the economic situation hasn’t significantly changed whether car shoppers intend to buy new or used vehicles. Whether the market improves, declines, or stays the same, the majority of buyers will still opt for a new vehicle – 62% if the market improves, 58% if it stays the same, and 60% will buy new even if it declines. Results for those that are likely to purchase a used vehicle are not far off, as 38% say they are likely to purchase if the market improves, 42% if it stays the same, and 40% if it declines – a good news story overall.
The findings from this study also uncovered that car shopper budgets likely won’t change even if the market does. Roughly half of all consumers looking at new vehicles will spend what they intended to pay whether the market improves, declines, or remains steady, while those considering their budgets for used vehicles are steady at an average $26,000 across all three economic scenarios.
The bottom line is that while no one’s quite sure where the market is headed, and intentions will change depending on the Canadian economic outlook, even in difficult times, consumers still want and need to buy cars. From a dealership standpoint, it’s crucial to continue to invest in replenishing stock as well as marketing and promotion of both your dealership and inventory during this time, as car shopper purchase intentions remain steady. Continue to take the time to understand your customer’s concerns and work toward the price and terms that keep them feeling confident with their decisions, regardless of the economic uncertainties that are both outside of yours and their control.