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Used car prices continue to decline in the Canadian auto market due to increased availability of used vehicles and stable new vehicle prices, according to an analysis by AutoTrader.
The Canadian auto market saw notable changes in both the used and new vehicle segments as used vehicle prices continued to soften and new vehicle prices also moderated their upward trend over the past few months.
According to Autotrader's June price index, used vehicle demand began to soften year-on-year starting in the third quarter of 2023. In addition to the decline in demand, strong new car sales and trade-ins led to an increase in used vehicle supply, which led to a decline in used vehicle prices. In June 2024, the average price of a used vehicle fell 1.1% month-on-month and settled at $36,342, down 8.3% year-on-year.
This is a larger decrease than a report by Desrosiers Automotive Consultants, which reported a 4.5% decline in passenger vehicle purchase prices in June 2024 compared to June 2023.
Meanwhile, new vehicle prices have been stable since the beginning of the second quarter of 2024. The average price of a new vehicle in June was $66,807, up 0.8% from a year ago.
Autotrader noted that the stabilisation in new car prices was thanks to manufacturers bringing back incentives such as more competitive interest rates, making new cars more affordable. In June, Autotrader reported that interest rates on new car loans fell to 5.3% from 6.2% in November 2023.
Cuts in interest rates are also helping, with Autotrader predicting sales will pick up in the second half of 2024, as two or three more cuts are expected by the end of the year.
Autotrader predicts that demand for new cars should be met by ample supply, with the group noting that continued demand due to the pandemic will lead to an increase in the coming months.
Autotrader's Car Affordability Index, which measures affordability relative to the average weekly wage, has seen improvements in both the new and used car segments. As of June 2024, it would take 29 weeks of the average salary to buy a used car and 54 weeks to buy a new one. These figures are higher than pre-pandemic levels, and down from 34 weeks for a used car and 56 weeks for a new car, the company noted.
BEV Update
Prices for battery electric vehicles (BEVs) continued to fall, with new BEVs down 14.7% year-over-year and used BEVs down 13.7%.
This is due to increased BEV inventory, with AutoTrader's website reporting a 109.4% increase in new and used BEV inventory compared to last year, but demand is declining, with consideration of purchasing an EV dropping from 68% in 2022 to 46% in 2024.
Going forward, Autotrader reported that used car prices are expected to continue to normalize, while new car prices are likely to remain stable. The group believes that vehicle prices, both new and used, will peak in 2023 and are not expected to return to pre-pandemic levels in the near future, due to a variety of factors.
