Used car prices in Canada are coming down from last year’s peaks thanks to a surge in inventory and buyers shifting back to the new vehicle market, according to a new report.
AutoTrader released its second quarter Price Index report on Tuesday showing that Canada’s average used car price dropped eight per cent year-over-year to $36,342. That comes as stock for used vehicles jumped 28 per cent over the same period.
Luxury used vehicles are particularly seeing prices ease, declining 10 per cent from last year’s levels.
Prices are holding steady for new vehicles at an average of $66,807, up less than a percentage point year-over-year. But the available stock of new vehicles surged in that time, jumping up 70 per cent annually.
AutoTrader said car prices in both the new and used markets have receded from their peaks in 2023 now that semiconductor shortages and other supply chain snarls that delayed vehicle production are in the rear view mirror.
While motorists were relying on the used car market to purchase vehicles in a timely manner, that demand is now shifting back towards new cars, AutoTrader noted. Drivers are now trading in their old vehicles as they purchase new, helping to build up the stock of used cars in Canada.
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AutoTrader warned that new and used vehicle prices are “unlikely” to return to pre-pandemic levels anytime soon, though the automotive marketplace forecast “steady” pricing for the rest of the year.
Even if new car prices aren’t shifting into reverse, AutoTrader notes that affordability is improving in the segment thanks to declining interest rates.
Average lending rates offered directly from automakers dropped to 5.3 per cent last month, down from 6.2 per cent in November of last year, AutoTrader said.
“As new car supply returns to normal, prices flatten, and interest rates drop, affordability improves,” the report said.
The Bank of Canada delivered an initial 25-basis-point interest rate cut in June with many economists expecting the central bank to deliver more rate relief at its next decision on Wednesday.
AutoTrader expects that with additional rate cuts in the cards for the rest of 2024 and 2025, activity in the used car market in particular should pick up, as lower-income consumers are particularly sensitive to changes in borrowing costs.
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