0% financing on a new car? Deals are back — on some models

Over the last three years, new and used vehicle supply in Canada dried up — and so did the deals on car sales.

But industry experts say the drought is over and Canadians can expect a better buying experience this summer and fall.

“Supply of new vehicles has improved dramatically over the past year and the shortages seen in 2021-23 are to all extents over,” wrote Andrew King, managing partner at DesRosiers Automotive Consultants in Richmond Hill, Ont., in an email. 

“Prices are moderating” and consumers are seeing the “return of vehicle incentives,” he said. 

Applewood Nissan in Richmond, B.C., is offering deals they haven’t had in years, such as price cuts, rebates and lower financing rates.

“We already have zero per cent [financing] on some models. They’re not at full capacity, but the deals are coming back,” said general manager Leon Cheliadin.

Subvented loans

So how can a car dealership offer financing well below the Bank of Canada’s 4.75 per cent key interest rate? It’s called a subvented loan.

If a new vehicle model isn’t selling as well as expected, manufacturers may subsidize the cost of borrowing to move more units. 

“Three months ago we had a few too many Nissan Rogues,” said Cheliadin. “Then Nissan came up with a low-interest lease and we sold about 30 in one month of that particular model.”

Cheliadin says this is a huge shift from a few years ago when he desperately needed vehicles but couldn’t get them because of supply chain issues and the global microchip shortage. Once car makers could ramp up production again, Cheliadin says they “flooded” dealerships with inventory.

In 2021, when Canadians needed vehicles, interest rates were low. Now they’re high and many other goods are also more expensive, slowing down consumer demand.

“Demand is very tempestuous. We’re very sensitive to interest rates and trends and our own pocketbook issue,” said Thomas Goldsby, a professor of supply chain management at the Haslam College of Business at the University of Tennessee, Knoxville.

“These automakers have to be placing bets months and months and months in advance, and then they cross their fingers and hope that their supply matches demand.”

New cars listed between June 23 to 29 on AutoTrader were up 70.4 per cent from the same period last year, while used vehicle listings were up 26.4 per cent, according to data provided by the company.

Huw Williams, spokesperson for the Canadian Automobile Dealers Association, says that’s good news for consumers.

“What happens in this kind of environment is, to be competitive, manufacturers discount product. They discount interest rates. They find the right levers to attract consumers.”

“You have greater choice, greater selection. You have a greater ability to negotiate.”