5 days ago
Time to buy a shiny new car? Used vehicle prices are rising
Canadians shopping for a brand new car may be surprised that prices have dropped compared with a year ago, while those looking for used vehicles could pay thousands of dollars more than last summer, according to a new report.
That said, prices are expected to jump for both vehicle types in the second half of the year, says the AutoTrader report released last week.
Used vehicle prices jumped 3.6 per cent year-over-year in June, hovering at an average of $37,664, the report shows. That's compared with a 12-per-cent dip in the used car market throughout 2024.
On the other hand, new vehicle prices dipped about 3.5 per cent year-over-year in June, to $64,445.
Amazon wants to sell you cars online. Here's what it could mean for shoppers and auto sellers in Canada
'It's not what we expected to see,' said Baris Akyurek, vice-president of insights and intelligence at AutoTrader, about both used and new cars. 'Usually, [used car] prices start on the higher side, and come down throughout the year,' he added, while new car prices usually go up slightly, commensurate with inflation.
But that trend reversed in March as a result of fears of American tariff igniting Canadian demand and exacerbating inventory shortages in used vehicles, though demand is catching up in the new car market as well.
The inventory of used cars has slumped 16.8 per cent year-over-year because of surging demand and a persisting supply gap created during the COVID-19 pandemic.
Between 2020 and 2023, approximately 1.5 million fewer new cars were sold in Canada owing to production disruptions, Mr. Akyurek said. The decline in new car sales meant that fewer vehicles trickled down into the used car supply, and that is now showing up as a lingering inventory shortage.
In contrast, new car inventory was high at the start of 2025, with about 87 days of supply available, significantly above the industry norm of 60, Mr. Akyurek said. This surplus was the result of production finally catching up post-COVID, combined with slightly softer demand earlier in the winter.
'Then obviously Trump comes to power, and these tariff conversations come about,' he said. 'Everybody was talking about doom and gloom scenarios, like 'Oh, within a week, there won't be any cars produced … that scared consumers off.'
In a February AutoTrader survey, 47 per cent of respondents said tariffs would impact their purchases, and 31 per cent said they would switch from new to used vehicles.
With shoppers fearing higher prices for any cars, many rushed toward the used market, where prices were generally cheaper but inventory was already constrained.
'New vehicles prices are decreasing as older inventory is being sold first in expectation that newer inventory will be impacted by tariffs,' said Daniel Ross, senior manager of industry insights and residual value strategy at Canadian Black Book.
Buying a used car is harder than it used to be and it's likely to get worse
At the same time, demand for both types of vehicles has been steadily eroding the higher inventory cushion in the new vehicle market. New vehicle inventory has now fallen 12 per cent year-over-year in June, according to AutoTrader.
Regionally, Ontario stands out as the only province where used car prices declined slightly in June.
'That might be related to the inventory composition, might be related to where the demand is and the cars that are available in Ontario,' Mr. Akyurek said.
Used vehicle prices in Canada have already risen for four consecutive months and now sit above 2024 levels, setting the stage for continued price increases through the second half of 2025 if demand continues.
AutoTrader data also showed that prices for both new and used electric vehicles have been falling across the board, with demand slumping as governments cut incentives for zero-emission vehicles. ZEV sales dipped 45 per cent in March and close to 30 per cent in April.
For car shoppers, Mr. Ross said it's a better time to buy a new vehicle, as financing incentives are attractive and certain brands are eager to reduce inventory. Average new car interest rates now hover around 5.4 per cent, down from 6.6 per cent in June, 2024, Mr. Akyurek said.
However, it's not a great time for a used car purchase, Mr. Ross said: 'Prices have already gone up, and we could see them start to fall in the last quarter of the year.'
