Looking for a bold stroke to change your finances in 2024? Try this: Rethink your vehicle purchase. Instead of making your budget fit the vehicle, buy the car, SUV or truck that fits your budget.
In a column several months back, I looked at how the average monthly vehicle payment was alarmingly close to $1,000. High interest rates are a big part of the story, but so is a huge run-up in vehicle prices.
The average new vehicle price has risen to $52,900 from just over $40,000 in 2019, according to DesRosiers Automotive Consultants. More startling than the magnitude of this increase is the level of acceptance we’ve shown. November marked the 13th straight month of year-over-year sales growth.
DesRosiers says prices have been rising due to a shortage of semiconductors that limited the number of vehicles being built, as well as broader inflationary pressures and a shift in buyer preference to more expensive SUVs and trucks. There’s also the growing market for pricey electric vehicles.
There’s still some pent-up demand for new vehicles as a result of pandemic shortages, which suggests the possibility of further price increases. However, growth in broader consumer spending is starting to fade, just as you’d expect after two years of high inflation and large mortgage payments.
You know how people are cutting back on restaurant spending, entertainment, subscriptions, home improvements and more? Apply some of that cost-cutting mentality to vehicle purchases. If buying used isn’t your thing, then figure out how much car you can comfortably afford and resist being driven higher in the showroom.
All vehicle manufacturers offer “build and price” functions on their websites. The numbers cannot be considered definitive, but they do help convert today’s prices and interest rates into monthly payments. Make the payment fit your budget.
Subscribe to Carrick on Money
Are you reading this newsletter on the web or did someone forward the e-mail version to you? If so, you can sign up for Carrick on Money here.
Rob’s personal finance reading list
When Charlie needs surgery
A review of various options for pet insurance, which has taken on more importance since the pandemic pet boom. The Stress Test personal finance podcast looked at the cost of pet ownership recently. I didn’t just make up Charlie as a pet name – it’s apparently the most popular name for male dogs.
Two takes on Pierre Poilievre’s housing video
Conservative Leader Pierre Poilievre made a 15-minute video about Canada’s expensive housing market called Housing Hell. The Globe and Mail’s Tony Keller offered his take on the video, and B.C. publication The Tyee did a fact-check.
An investing rule-breaker
A U.S. investment writer talks about the rules he’s breaking in his own portfolio. He makes an important point – aim for a good, not a perfect, portfolio.
The Manulife One experience
A Reddit discussion on one of the most unique financial accounts available in Canada, Manulife One. Think of it as a hybrid of a mortgage and a chequing account that allows highly disciplined people to reduce the amount of interest they pay on their mortgage and get out of debt sooner.
Ask Rob
Q: We are considering selling our house and renting. We are mid-70-year-olds looking for advice on where to invest our funds from selling the house to accommodate our rental costs. Our pensions will cover all other costs.
A: Dividend growth stocks are an option, if you’re comfortable with occasional extreme ups and downs in price. The benefit of dividend growth is that it can help offset rent increases from year to year. For now, while interest rates remain high, money market funds, high-interest savings account exchange-traded funds and investment savings accounts are safe options for generating income. One more possibility is a monthly income ETF or mutual fund, which pays out a mix of dividend income and bond interest. In non-registered accounts, dividends are more tax-efficient than interest income.
Do you have a question for me? Send it my way. Sorry I can't answer every one personally. Questions and answers are edited for length and clarity.
Today’s financial tool
How Canada compares with other countries on the cost of mobile data.
The money-free zone
One second from every episode of Seinfeld. You know you want to.
ICYMI
- What to look for in a variable-rate mortgage, now that rate cuts are coming
- What will the federal dental insurance plan mean to the average Canadian? Here’s what to know
- Holiday budget planning should include more than gifts
More Rob Carrick and money coverage
Subscribe to Stress Test on Apple podcasts or Spotify. For more money stories, follow me on Instagram and X and join the discussion on my Facebook page. Millennial readers, join our Gen Y Money Facebook group.
Even more coverage from Rob Carrick:
- 🎧 Catch up on Stress Test: Why millennials and Gen Z are Alberta-bound for a more affordable life • Rising interest rates brought pain for new homeowners - and opportunity for house hunters • Why more Canadians are choosing to be childfree or delay parenthood • Love in the time of inflation: How to manage rising costs when dating • You're not bad at money - you're suffering from money shame • Retirement might look different for Gen Z and millennials. Here's how to plan for it • Recession-beating tips for the job market, housing, investing and the cost of life • Is the middle class dead for millennials and Gen Z?
- ✔️ The housing file: A house isn't special. Get your head straight about the reality of home ownership • The good, the sad and the unaffordable: Saving for a home downpayment in Canada's big cities • Property taxes are popping in some cities - how worried should you be about other tax hikes? • Our other real-estate problem - people have too much wealth tied up in houses • Borrowers and savers, here's how to time the eventual rollback of interest rates
- 📈 Investing: Canada's top digital broker is TD Direct Investing, with an assist from the TD Easy Trade app • 2023 Globe and Mail ETF buyer's guide part one: Canadian equity ETFs • For the ultimate in cheap investing, check out the Freedom .08 ETF Portfolio • Yes, there is risk in Canadian bank deposits for the unwary and complacent • CDIC covers bank deposits, but who protects your investments if your broker goes bust? • Answers to your questions about the low-risk ETF paying almost 5% • Happy fifth birthday to one of the all-time best investing products for everyday people • An investing strategy that wins cleanly over the long term by outperforming in bad years like 2022
- 💰 Your money: Mortgage holders, savers and GIC investors, it’s time to change your thinking on interest rates • How much debt is each generation of Canadians carrying, and how do you compare? • For the sake of their financial futures, young people should leave Toronto and Vancouver • This practical new spin on a savings account might just peel you away from your big bank • Rental fraud grows amid rise in fake, falsified tenant applications • Are Canadians worse off financially now than in the 1980s? • From groceries to auto loans, here’s how much more it costs to live right now • When saving for retirement, should you change your asset mix over the course of your career? • Do retirement income needs always rise alongside inflation? Not necessarily • When the bank suggests you lock in your variable rate mortgage, it has an angle
