Economic Uncertainty and Rising Rates Signal Cooling Auto Market
The federal government shutdown has stretched into its fifth week, delaying key economic updates such as GDP and jobless claims. Limited data shows pending home sales held steady in September, while consumer confidence slipped again in October.
The Federal Reserve cut interest rates by a quarter point and announced an end to Quantitative Tightening effective December 1. Despite this, markets reacted negatively to the Fed’s cautious tone, driving bond yields—and borrowing costs—higher.
Pending home sales remained flat nationally, with gains in the Northeast and South offset by declines in the Midwest and West. Year over year, sales were down nearly 1%, led by weakness in the West. Consumer confidence fell 1% in October and 13.7% from a year ago, as optimism about the future waned.
Auto loan rates have climbed independently of the Fed’s actions, largely due to fewer low-rate manufacturer offers. Average new vehicle loan rates hit 9.6% in late October, about 50 basis points higher than in August. Used vehicle rates also rose slightly, particularly for subprime borrowers facing tighter credit conditions.
Cox Automotive expects high loan rates and elevated vehicle prices to cool the auto market in late 2025. Some relief may come in December through year-end incentives, but used loan rates likely won’t ease until credit performance improves—potentially not before early 2026.
Quebec’s EV Market Shifts as Incentives Decline and National Sales Hold Steady
DAC’s focus on Quebec stems from the dramatic surge in ZEV sales in October 2024, when government incentives were set to drop, pushing sales to a record 43,000 units. A year later, incentives are again due to decline—though less drastically—and EV sales have cooled, despite renewed availability of the German-built Tesla Model Y, which is selling briskly. Nationally, Canada’s October 2025 market reached an estimated 159,000 units, a 1.8% dip from the Quebec-inflated total a year prior but still strong overall. DAC Managing Partner Andrew King noted the robust SAAR of 1.94 million, the best since early 2025, while cautioning that trade tensions, semiconductor concerns, and weak economic indicators may challenge sustained growth—especially with the Federal Budget announcement adding further uncertainty to the market outlook.
Summary: Canadian Used Wholesale Market – October 2025
In October, Canada’s used wholesale market saw steady week-over-week declines, with prices falling -0.15% to -0.30% overall.