Michael McGhee is the Senior Vice President and Head of TD Auto Finance. We asked him where vehicle prices are heading, how tariffs are impacting the sector, why EV demand is starting to recover, and more.
How would you describe the state of the Canadian auto market right now? We went through a period of limited supply and price hikes – has that changed at all?
The Canadian auto market is much more stable today than it was a few years ago. Inventory levels have largely recovered, and we're seeing a return to more predictable sales patterns.
The bigger challenge facing the industry now isn't availability, it's affordability. While vehicle inflation has eased, higher technology and manufacturing costs continue to put pressure on pricing. Ongoing uncertainty around tariffs and trade discussions also adds another layer of complexity.
What we're seeing is a shift from a supply-driven market to one where affordability and value are top of mind for consumers.
In this environment, success in the industry depends on understanding evolving consumer needs and responding with practical solutions that help make vehicle ownership more accessible. For my team, we're doing so by continuing to support clients and dealers with flexible financing solutions designed to help make vehicle ownership more attainable in a changing market.
How is the uncertainty from CUSMA negotiations (or lack thereof) and tariffs impacting the auto market right now?
The North American auto industry is highly integrated, so ongoing uncertainty around trade and tariffs affects planning across the entire supply chain.
For manufacturers and suppliers, uncertainty can influence investment decisions, production planning, and costs. For Canadian operations, it can affect everything from parts sourcing to future allocation.
Above all, an uncertain economic environment can increase caution. When manufacturers and suppliers don’t know what the rules will look like tomorrow, investment decisions become harder, costs can increase, and planning becomes more complex.
Throughout this time, it's important to stay flexible. As markets evolve, our focus at TD Auto Finance remains on helping dealers and clients with financing solutions that support their specific needs.
How is affordability pressure changing the way Canadians finance their vehicles – from loan terms to down payments to the choice between new and used?
Affordability is driving more vehicle-buying decisions than ever before. Most consumers are starting with one question: what can I comfortably afford each month?
To manage payments, we're seeing longer loan terms, and increased interest in manufacturer-supported financing offers.
The choice between new and used vehicles has also become more nuanced. In some cases, incentives on new vehicles can narrow the monthly payment gap considerably. Ultimately, the right solution depends on an individual's budget, driving habits, and long-term goals.
The most important thing is helping clients make informed decisions. When people understand the full picture, they're better positioned to choose a vehicle that fits both their lifestyle and financial goals. That's where TD Auto Finance continues to focus our efforts.
Have elevated auto prices changed the types of vehicles Canadians are purchasing? For example, opting for smaller, cheaper models over the larger SUVs and trucks that have been so popular?
Not as much as many expected.
Consumer demand remains strongest for SUVs and light trucks, while the used vehicle market has largely normalized. Canadians continue to favour SUVs, crossovers, vans, and pickup trucks, with light trucks accounting for nearly 90% of new vehicle sales to date this year. Rather than changing vehicle categories, many consumers are adjusting within them by choosing smaller models, lower trim levels, or older model years. Operating costs have also risen significantly over the past year, which can impact consumer affordability. This is primarily driven by the cost of fuel (which has increased roughly 30%).
Canadians still want vehicles that fit their lifestyle. The difference is they're placing greater emphasis on value and affordability when making those decisions.
Do you expect to see a lot of demand for Chinese vehicles beginning to arrive under the new quota system?
I think there will be strong consumer interest, but adoption is likely to happen gradually.
It's important to differentiate between Chinese built vehicles and Chinese brands. Chinese built vehicles aren't new to the Canadian market. For example, some brands in Canada have sourced vehicles from China between 2022 and 2024, and have begun doing so again under the new quota system, albeit well below the annual quota.
Chinese brands have built a reputation for offering advanced technology, strong feature packages, and competitive pricing, which naturally gets people's attention. But in the Canadian market, buying a vehicle is about more than the sticker price.
Consumers also want confidence in areas like warranty coverage, service support, parts availability, financing options, and resale value. The brands that succeed will be the ones that build trust and demonstrate consistent value over time.
We saw EV sales rebound a bit to start the year. What's behind that, and do you expect it to continue or was it a blip?
I see it as more of a recovery than a blip.
Affordability has always been one of the biggest drivers of EV adoption, and we've seen demand improve alongside lower financing rates, the return of federal incentives, and the arrival of more accessible models.
In the future, continued growth in this segment will likely depend on affordability, charging infrastructure, and consumer choice. As fuel prices increase, so has consumer interest in EV and Hybrid vehicle options. The more options Canadians have at different price points, the more comfortable they'll be making the switch. As a whole, I think we'll continue to see growth in EV and Hybrid vehicles over the long term.
What's the resale market like for EVs compared to gas-powered vehicles, and how do differences there impact how buyers should think about financing them?
The EV resale market is still maturing, which means future values can be harder to predict than they are for gas-powered vehicles.
Technology is evolving quickly, particularly around batteries, range, and charging performance, and that can affect depreciation for some models.
That said, confidence in EVs continues to improve. Consumers are becoming more familiar with the technology, charging infrastructure is expanding, and manufacturers are building a stronger track record over time. When it comes to financing, the best choice depends on how long you plan to keep the vehicle and how important flexibility is to you.
Where do you see vehicle prices heading in the next 12-24 months?
I don't expect vehicle prices to come down significantly over the next 12 to 24 months.
Inventory levels have improved, but manufacturers are still managing pressure from technology investments, production costs, currency fluctuations, and ongoing trade uncertainty.
What I think we'll see is a more competitive market rather than a dramatically cheaper one. Consumers will have more choice and more opportunities to shop around, but affordability will remain a key consideration.
As consumers navigate these changes, transparency around total ownership costs and available financing options will become increasingly important. For my team, this means recognizing the importance of consistency and clarity in an evolving industry like ours and keeping relationships at the heart of everything we do. This allows us to support dealers and clients with all their auto lending needs, with flexible payment terms for almost every circumstance to help clients get into the right vehicle for them.
When buying a car today, what's a quick rule of thumb for people to figure out what they can afford?
My advice is simple: focus on your total monthly cost, not just the vehicle payment.
A vehicle comes with other expenses, including insurance, fuel or charging, maintenance, and parking. Looking at the full picture helps avoid surprises down the road. The right vehicle for you is the one that fits comfortably within your overall financial plan.
Ultimately, it's an interesting time for the everchanging Canadian auto market. Consistency and clarity are more important than ever.
This interview has been lightly edited for clarity and length.
