Ah, the good ol’ days — 1982.

Back then, the average price of a new vehicle — cars and trucks combined — was $10,668. You’d get only a third of a new vehicle for that money today; the average new-vehicle transaction in 2008 was $30,877.

Or is that really true?

Inflation, of course, has taken its toll on currencies around the world since ‘82. And global currencies, since going off the gold standard way back during the Nixon administration in the early 1970s, have become nothing more than commodities to be bought and sold like wheat and oil.

So it might be that the good old days of ‘82 were not actually so good. And that’s what the numbers say.

According to the latest data from Statistics Canada, it took 18.2 weeks of average before-tax family income for a Canadian household to buy a new car in 2008. In 1982, it took 17.1 weeks.

While in dollar terms, car prices have nearly tripled in less than three decades, in reality, they’ve remained relatively flat.

And over the last decade, car prices, in terms of how much work it takes for a Canadian to buy a new car, have steadily dropped — from a high of 24.1 weeks in 1997. Even in dollar terms, car prices are down over the last two years.

“The average price in 2008 was $30,877, a decline of 2.6 per cent from 2007,” says Dennis DesRosiers of DesRosiers Automotive Consultants. “This puts us back to 2002 price levels.

“The price dropped due to lower MSRPs [manufacturer's suggested retail prices] on selected vehicles, more incentive money available from the OEMs [original equipment manufacturers] and a move to a leaner mix of vehicles.”

Ah, the leaner mix. A surge in attractive and attractively priced smaller cars — compacts and subcompacts — has helped to change dramatically the car-buying habits of Canadians.

In 2008, 51.5 per cent of all light vehicles sold in Canada were entry-level — mostly small — cars. In 1996, entry-level vehicles accounted for less than a third of all Canadian sales, 30.4 per cent.

Over the last decade, says DesRosiers, Canadians have completely turned around their buying habits, and that is a critical factor in the drop of transaction prices since the late 1990s. The SUV and pickup boom of the 1990s saw Canadians moving into bigger, more expensive vehicles year after year. For the last decade, though, Canadian car buying habits have gone primarily in the other direction.

“In the 1990s, when prices were increasing year in and year out in the 7- to 9-per-cent range, consumers were moving to light trucks,” DesRosiers says.

“The move back to passenger cars, and especially entry-level passenger cars, has kept prices down and allowed many Canadians entry into the new-vehicle market.”

The Statscan numbers are even a bit misleading in that they highlight “average” transaction prices. The reality is that much more expensive trucks, especially heavy-duty ones, skew the pricing numbers higher than is reasonable or fair.

“The average transaction price for a passenger car declined 0.7 per cent in 2008 to $25,107 and the average transaction price for a truck (including much pricier heavy-duty or HD trucks) declined 2.1 per cent to $37,480 per vehicle,” DesRosiers says.

“If you were to take HD trucks out of these numbers, which we can’t do, my estimate is that the average transaction price would be a couple of thousand dollars lower.”

We Canadians also love to compare ourselves to Americans and, on that score, we’re far better off when it comes to buying a new ride.

In terms of the average before-tax income calculated in terms of weeks, Canadians need more than three fewer weeks of labour to pay for a new vehicle. In 2008, the affordability of a new car in the United States, DesRosiers says, is estimated at 21.5 weeks of family income, versus 18.2 in Canada.

“On a relative basis, it is now 15.5-per-cent more affordable to buy a new passenger car in Canada versus the U.S.,” says DesRosiers, who has used U.S. Department of Commerce data to determine affordability down south. In his data comparisons, DesRosiers calculates affordability for passenger cars only.

DesRosiers argues that strong new-vehicle sales in Canada over the last decade, running in the 1.55 million to 1.65 million sales range per year, is at least partially explained by the improvement in affordability of new vehicles.

“Affordability is near an all-time low at only 18.2 weeks of family earnings to buy a new passenger car in 2008. This is the lowest level since 1985,” he says, adding that manufacturers and their dealers usually use a very simple formula to goose sales: “Offer spectacular, fuel-efficient vehicles at affordable prices and consumers buy a lot of them. And thus sales have been north of 1.6 million vehicles most of this decade.”

What lies ahead? DesRosiers, like other economists, analysts and forecasters, is not sure.

The current global recession, which in the Canadian car business is being reflected in monthly sales declines of about 25 per cent so far this year, is certainly having an impact on sales.

As well, the decline in the value of the Canadian dollar from a high of about $1.10 to today’s 80-cent range, is having an impact on prices. Higher or even static pricing will often turn off buyers, or at least delay a purchase.

DesRosiers believes that some portion of the lower prices Canadians have been enjoying stemmed from the strong Canadian dollar, which gave the OEMs latitude to lower prices. The days of a strong dollar also appear at an end — at least for the time being.

“The exchange rate has moved against the consumer in Canada and we suspect and indeed are already seeing MSRP increases sneaking into the market and certainly less incentive money. We also expect incomes to fall slightly with the recession,” he says.

Together, a weak dollar and higher real prices will help conspire to cut sales of new vehicles dramatically.

In a nutshell, the affordability index will get worse for Canadians, while worries about job losses will trigger buyers to take a cautious approach to making any large purchase.

“Our current forecast is for 1.5 million new light vehicles (in 2009), but this is based on a 90-cent dollar; that appears optimistic at this point,” DesRosiers says.

“Our sensitivity analysis shows about 12,000 fewer sales for each penny of Canada versus U.S. exchange below 90 cents. At the current low-80-cents level, this would translate into a market closer to 1.4 million units.”

So we’re going back to the future in terms of sales — back to 1982 levels or less. Unfortunately, no matter what happens, sticker prices in dollar terms are never going back to 1982, when Pierre Trudeau was prime minister and Ronald Reagan was U.S. president.

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Many customers are looking for car financing when it comes time to buy their new or used cars. Through our experience, we’ve developed a list of some of the things that we encourage our customers to look for when looking for car financing. Here’s that list for you:

A dealer That Will Interact with You.

We’ve heard horror stories from our customers about situations in which they’ve gone to other dealers and been, basically, told which car they should get and how much of a loan they can take out. Our customers are often horrified by the “pushiness” of some of these dealers. That’s one of the many reasons that we are so focused on providing customer service that actually helps our customers find car financing solutions they can afford.

Multiple Loan Options

Every buyer should have multiple loan options presented to them. We will begin our relationship with you by reviewing your credit application, which you can fill out online from the comfort of your own home. We will then discuss a variety of different loan options, which include different monthly payments which may work well with your budget. After we talk together about what sort of payments you would like to make, we’ll present you with vehicle options. These options will be cars that you can actually afford based on your credit history and current financial situation.

Financing Variety

Not all dealers can afford to offer a wide variety of financing options. However, because we are an established dealership with years of experience offering loans, we are proud to say that we have developed a wide variety of financing options for our customers.

so have a trade-in program through which we will purchase a customer’s car for a reduction off of the price of their new or used car that they buy from us. We also have a specials program in which we offer special rates, discounts, and features to our customers. This specials program rotates throughout the year, so you’ll need to call to find out what our current or future specials are.

Refinancing Options

We recognize that many people have credit and financial situations that may change in several years. That’s why we think it’s important to provide our customers with a loan refinancing option that will help them to afford their car even more if they are able to refinance.

Contact us today at www.scottkia.com  for more information about our financing options that help to make us a dealership that provides exceptional service and solutions to each of our customers.

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