New vehicle sales

In 2026, new vehicle sales will soften by 0.9%, falling to 1.94 million, as higher borrowing costs and waning stimulus collide with stretched affordability, reversing part of the strong recovery recorded through 2023-2025. Banks keep lending standards tight and average monthly payments elevated, which cools showroom traffic even as supply bottlenecks and inventory shortages ease, leaving sales slightly below the prior year despite still-solid employment and population growth.

The car market traces a classic boom-and-cool pattern. In 2021, pent-up demand from delayed purchases during the pandemic, along with a reopening labour market and rising household incomes, pushed new vehicle registrations sharply higher, particularly for light trucks and SUVs. That momentum faltered in 2022 as semiconductor shortages, shipping bottlenecks and limited dealer inventories constrained availability and drove transaction prices to record highs, forcing many buyers to delay or downsize purchases despite underlying demand. By 2023, production constraints eased and inventory rebuilt, allowing sales to "snap back" even as the Bank of Canada's rate hikes made financing more expensive, illustrating how improved selection and shorter wait times helped offset higher borrowing costs.

In 2025, sales settled into a slower growth rhythm. Volumes climbed back toward pre-pandemic norms, but year-end data showed momentum fading as comparisons grew tougher and interest rates stayed elevated. Policy volatility added to the churn, with the federal iZEV rebate and several provincial incentives either paused or scaled back in 2025, triggering a rush of advance EV purchases followed by softer electric model sales once subsidies lapsed. Against this backdrop, EVs still increased their share of new registrations, supported by automaker price cuts and an expanding model lineup, partially cushioning the decline in traditional internal-combustion vehicles and keeping total sales on a modest upward path.