Money123: The latest on the used and new car markets

Shopping for a car?

The market for both new and used cars is showing signs of normalizing after automotive supply chains were upended during the COVID-19 pandemic.

Heading to a dealership today, you might find more vehicles in stock than you did a few years ago. And the prices for used cars, while still elevated above their pre-pandemic levels, are starting to come down compared with their recent highs, experts tell Global News.

But the situation is not the same across all makes and models.

Some overseas automakers are still running tight inventories, and high-demand models like compact SUVs are moving quickly.

But for buyers who are willing to move down the price chain or look outside their preferred brands, there are opportunities for deals and incentives in the market today, according to Shari Prymak, executive director of Car Help Canada.

“In that case, there could be more incentives, more room to negotiate with the dealership and get yourself a better deal,” Prymak told Global News

Read more on which models dealers are most likely to offer discounts on this summer.

Home inspections are back in the cards

Another industry that faced significant disruption during the COVID-19 pandemic was real estate, and specifically home inspections.

Bidding war scenarios became the norm for many markets, with homeowners unable to attach inspection conditions to their offers if they wanted to compete with other desperate buyers in the frenzy.

But with the housing correction over the past two years, inspectors and real estate agents who spoke to Global News for this month’s Home School instalment say home inspections are back on the table.

Inspection clauses might not fly in every situation, however, and experts say it’s important to be aware of the dynamics at play. An inspection-based offer could require a higher price tag to offset the risk for the seller, for example.

But experts like Peter Weeks, president of the national home inspectors association, also warn that anyone forgoing an inspection might be in for some “real shockers” – something he saw first-hand during the height of the pandemic.

Read more about the ins and outs of home inspections.

Fuelling up this long weekend?

Canadians hitting the road this May long weekend should be relieved to see little movement in prices at the pumps.

Patrick De Haan, head of petroleum analysis at GasBuddy.ca, told Global News that the increased petroleum production during the summer season should have a dampening effect on prices going forward.

“I will say there could be some minor fluctuations, but at least for now, it looks like there should be broad relief,” De Haan said.

The number of Americans hitting the road for the Memorial Day holiday next weekend could impact global prices for gasoline, he said.

“That is likely to be very bullish for gas prices by this time next week.”

Read more on what to expect at the pumps in the weeks ahead and tips on how to save on gas.

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– THE QUESTION –

“I am a recent university grad with a part-time job. I am keen to start investing some of my money, but should I wait until I have full-time employment? I currently live at home and my only debt is my student loan. I will likely have to buy a car soon too.”

— A Money123 reader 

“The assumption made here is that if you were recently in school that there are student loans with relatively high interest. The need for a new car will also mean more funds required to be spent soon.

The key to the investing question is: Will I earn a higher rate of return paying off debt or generating income? Student loan debt and potentially car loan debt interest rates are assumed to be in the neighbourhood of eight per cent after taxes. The phrase “after taxes” means that even if your income level is at the lowest tax bracket of 20 per cent, you would need to earn an equivalent of 10 per cent return on your money to equal eight per cent after taxes. If you can earn this rate of return consistently over the next five to 10 years, then investing would be a good choice.

If this is not the case or you are not sure, then the best scenario is to pay down the student debt or put money aside in a short-term cash account that is accessible in order to purchase the car. Even if you don’t pay for the entire car purchase in cash, you can reduce the financing or lease payments by paying more money upfront. This is in effect paying off future debt, which is assumed to be as expensive as debt incurred today.

Note that full employment is not necessary to invest: It is more a question of ‘How I can keep more of my money given my current situation?'”

–  Joe Barbieri, financial consultant, Joe the Investor

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