The pandemic hangover - vehicle supply constraints continue to impact vehicle purchasers

October 21, 2022

Here`s an insider`s look at the current state of the new car market, as observed by an APA recommended dealer for the Hyundai brand. The APA is pleased to share his perspective, as it provides some insight into the adjustments that consumers and retailers are making.

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All models are in short supply. One of the dealership`s salespersons quit and has left the industry. The others are receiving temporary bonusses to partly cover their commission losses. Everything is being sold at the full Manufacturer`s Suggested Retail Price (MSRP) with no discounting. The dealer says customers are less concerned about paying too much (even though prices are significantly higher!) because selling without any discounting is a form of one-price policy. He`s hoping the days of dealer discounting and customers shopping all over the place are numbered. Even at full retail, dealer margins are modest; in this dealer`s view, discounts should come directly from the manufacturer when they have an oversupply of certain models.

Some customers will shop at several dealerships and sign with the one that promises the fastest delivery. Our dealer said that most dealers within the same brand have similar delivery wait times for each model. Knowing that customers are shopping other locations, some salespeople will promise an earlier delivery; a shopper could end up giving their business to someone based on a misrepresentation. (The APA member relationship requires delivery promises that are realistic to the extent possible, and no price gouging by the retailer at delivery.)

To ensure more equitable distribution, if a customer cancels their order a Hyundai dealer will not receive the vehicle. It will be delivered to the next person in line for the model across Canada. The policy is designed to curtail "straw man" orders where dealers try to bump up their allocations by odering vehicles in the name of customers who do not intend to take delivery. Hyundai Canada`s policy is to sell a maximum of two vehicles a year to one person, also to avoid speculation. And all vehicles must be registered and plated (which means sales tax is paid) to make them less attractive for export.


The dealer keeps four demontrators in inventory that are not for sale. There are only one or two vehicles in the dealer`s showroom; they are awaiting delivery and most are gone within two days. There is no expense to finance inventory, as almost all new vehicles are paid for and delivered within the grace period to pay the invoice from the manufacturer. At today`s much higher interest rates, a return to pre-Covid inventory levels would be costly.

Price Protection

Hyundai offers price protection and locks in the finance rate for new vehicle orders. The customer must sign a sales agreement and make a credit application. They are free not to take financing when the vehicle arrives. For some orders, this protection extends all the way to a 2023 model delivered instead of the 2022 ordered.

Used Vehicle Values Have Peaked

Currently a used Kona EV sells for more than a new one, and several used Hyundai models are more or less at parity with a new vehicle at the end of a three year lease. High used car valuations are excellent for making deals on new vehicles, because fewer customers are upside down with their financing (negative equity). However, a used vehicle purchased at today`s inflated values is more likely to run into negative equity when prices eventually stabilize.

Used car values have peaked. The supply is not better, but higher interest rates for financing and better awareness about the current situation with high prices have slowed consumer demand a little. This dealer is not keeping used vehicles in inventory -- he doesn`t want to get caught when prices drop. Anything not presold is sent to auction or sold online via a bidding service like TradeRev. (The APA has observed that many new car dealers are snagging all the used inventory they can reasonably find, and making healthy markups thanks to today`s restricted supply and high prices.)


Repair work is an easier sell. People appear more likely to invest in their current vehicle to keep it in shape, because replacing it is not so easy right now.