In a car market where consumers are extremely sensitive to prices, the addition of a 25 per cent universal export tariff could have a distorting effect, according to an auto sector analyst.

U.S. President Donald Trump has threatened to slap Canada and Mexico with such a tariff as early as Saturday.

“If that happens, expect to see some changes in the market for sure,” said Baris Akyurek, AutoTrader’s vice-president of insights and intelligence. AutoTrader is Canada’s largest online automotive marketplace for new and used cars.

“Demand will shift from new to used with the significant price increases that tariffs would likely bring. We think of the two separately, but they really go hand-in-hand.”

With new car prices expected to climb and consumers’ car-buying strategies expected to change, Akyurek said the used car market will also see rising prices as demand increases.

Though he doesn’t expect used vehicle prices will skyrocket, as they did during COVID, the principles of supply and demand remain in play.

“Right now the used inventory is healthy, but it isn’t as big as it was a year ago,” Akyurek said.

“We’re starting to see the impact of the loss of production during the pandemic. Tariffs will also push consumers to look more to the used car market when supply is becoming tighter.”

That shift in consumer focus will have a ripple effect on new car sales.

Unlike during COVID, when supply chain shortages significantly reduced the volume of new car production, it will be tariff-inflated prices that will force a reduced demand.

He said some manufacturers (OEMs) may offer incentives, much like Hyundai and General Motors did recently for Canadian electric car buyers who got caught by the sudden elimination of the $5,000 federal EV incentive.

“I think a few OEMs will do something, like incentives or interest rate reductions, in the short term,” Akyurek said.

“That won’t be a long-term solution. That won’t make sense on the balance sheet.”

Consumers may also alter their perception of what automakers they consider domestic manufacturers, or make a political point with their purchases, Akyurek added.

Toyota and Honda both have substantial assembly operations in Ontario and rank first and third in Canada in vehicle production. Ford in the nation’s No. 2 vehicle manufacturer.

Stellantis remains the largest employer of automotive workers in Canada and is expected to add a third shift later this year at its Windsor Assembly Plant.

Akyurek said Auto Traders’ research has found consumers’ brand loyalty isn’t strong and buyers are willing to look at other options.

“I think it would (be a possibility),” said Akyurek of shifting perceptions if consumers are assured of the vehicle’s domestic content and see that it results in price savings.

“Since the last few years, the auto market is a bit more amalgamated and distinctions are less obvious.”

However, the highly integrated auto industry is going to make it difficult to avoid tariffs entirely. Parts can cross the border with the U.S. or Mexico up to eight or nine times before final assembly.

More than 90 per cent of Canadian manufactured vehicles and automotive parts are shipped to the U.S.

The new 25-per-cent tax could be multiplied should a tariff be applied with each entry into the U.S., and the dollar value of the tariff will also increase as the piece gains value as part of a larger, value-added assembled product.

“It’s hard to know how long it’ll take for the tariffs to work through the system or how much prices will increase,” Akyurek said. “We think the increase will be significant.”

The timing of a tariff war couldn’t come at a worse time for the Canadian auto industry.

After dipping to a low of 1.1. million vehicles manufactured in Canada in 2021, DesRosier Automotive Consultants reported Canadian sales of 1.86 million light vehicles in 2024, about 180,000 units shy of the record high set in 2017.

“After a few tough years, things were starting to normalize,” Akyurek said. “Now, there’s a lot of uncertainty and unease about the market.”

Expect U.S. tariffs to spur demand for used cars — auto analyst | Windsor Star. (n.d.). https://windsorstar.com/news/local-news/expect-u-s-tariffs-to-spur-demand-for-used-cars-auto-analyst

 

Canadian Black Book’s recently released Used Vehicle Retention Index for December 2024 reveals a decrease to 135.7 points from November’s 136.2 points. Year-over-year, the index slipped 7.6%.

In its update CBB said the declines seen in the Canadian wholesale market last year were “mostly front ended,” as the declines slowed during the fourth quarter of 2024. “This was mainly linked to the decline of the Canadian dollar and the increase in activity of the export market,” said David Robins, Senior Manager and Head of Canadian Vehicle Valuations at Canadian Black Book, in a statement.

As a reminder, the index peaked in March of 2022 after reaching 165 Index points. Prior to that peak the index had experienced unprecedented growth in used values starting in the late summer of 2020. At that time the index was low, at 100.5 points. In comparison, the index was launched in January 2005 with a value of 100.0 for the market.

CBB calculates the index using its published Wholesale Average value on two to six-year-old used vehicles, as a percent of original typically equipped MSRP. “It is weighted based on registration volume and adjusted for seasonality, vehicle age, mileage, and condition,” they said.

 

dealer, C. auto, & dealer, C. auto. (2025, January 10). CBB used vehicle retention index marginally down in December. Canadian Auto Dealer. https://canadianautodealer.ca/2025/01/cbb-used-vehicle-retention-index-marginally-down-in-december/

Canada exports between 10 and 15% of its used vehicles to the U.S. annually. Our considerably weaker dollar has long made our used stock — especially the highly coveted luxury, SUV, and truck sector — very attractive.
But with the threat (or promise, depending on which side of the fence you’re on, I guess?) of tariffs coming from an unpredictable new administration, shockwaves would be sent through Canada’s auto industry. I spoke with Daniel Ross, senior manager at Canadian Black Book in charge of Industry Insights & Residual Value Strategy about those tariffs in a wide-ranging interview exploring what the coming year holds for Canadians from an automotive perspective.

American tariffs — Trump proposed 25% — would have a devastating impact on the Canadian auto industry at every level. Our supply chains are entwined with American ones, and parts used in the assembly of vehicles produced here often go back and forth across the border multiple times. To subject each of these transactions to tariffs would be crippling. Is there any glimpse of a silver lining for consumers?

“There’s a huge interest in our cars right now because we are sub 70 cents on the dollar,” says Ross. Proposed tariffs would wipe that out. “The luxury segment, the large SUVs, the trucks that the Americans want, that’s where we’ve seen high retained value. Is that artificially implanted by U.S. interest? Probably. If you removed it, that would be subject to some severe declines in the retained value.”

Every year, Canadian Black Book announces its best residual value awards. It gives consumers a peek at what that expensive shiny piece of machinery in their driveway will be worth in four years. With loan terms often stretching far beyond that, it’s valuable information. Proposed tariffs would throw a wrench into the works.

Could U.S. tariffs drive down used car prices for Canadian consumers? | driving. (n.d.-a). https://driving.ca/column/lorraine/u-s-tariffs-used-car-prices-canadian-consumers

For the first time in six months, prices in the Canadian wholesale vehicle market dipped.

Canadian Black Book’s Used Vehicle Retention Index dropped to 135.7 in December, down 0.4% from 136.2 the previous month — ending a string of five consecutive months of rising or steady numbers.

In July, the index broke a massive streak of 27 months without an increase.

“The declines seen in the Canadian wholesale market in 2024 were mostly front ended,” CBB senior manager and head of Canadian vehicle valuations David Robins said, “as declines slowed during the fourth quarter of the year. This was mainly linked to the decline of the Canadian dollar and the increase in activity of the export market.”

The index is down 7.6% year-over-year. It peaked at a record 165.0 in March of 2022 after used-car values skyrocketed from a low of 100.5 in June 2020.

The index is calculated using CBB’s published wholesale average value on 2-6-year-old used vehicles as a percentage of original typically equipped MSRP and weighted based on registration volume and adjusted for seasonality, vehicle age, mileage and condition.

Market decline slows as year opens

Looking at activity to start the year, Canadian used-vehicle wholesale values declined 0.14% for the week ending Jan. 4, according to Canadian Black Book’s weekly Market Insights report, as the rate of decline slowed for the third consecutive week during the holiday season.

The previous week’s decrease of 0.21% followed weekly drops of 0.33% and 0.64%.

Trucks/SUVs had a strong showing, down just 0.06% for the week with gains posted by three segments — full-size pickups (up 0.08%), full-size vans (0.07%) and sub-compact crossovers (0.03%). Compact Vans were the only truck segment to lose more than $100, falling $148 (0.76%).

Cars overall were down 0.23%, with sporty cars (down 0.43%, $112) and prestige luxury cars (0.39%, $236) losing the most value. No car segments gained value.

The 14-day moving average retail listing price was $34,950, down slightly from the previous week’s $35,000.

In the U.S., the overall market was down 0.44% for the week. CBB analysts said depreciation remained stable, with auction inventories rising and improved conversion rates following the slower Christmas week.

“Last week’s depreciation trends reflected a balance,” the report said, “with vehicles maintaining their values more steadily as auction activity picked up post-holiday.”

CBB monthly index drops for first time since June. Auto Remarketing. (n.d.). https://www.autoremarketing.com/arcanada/cbb-monthly-index-drops-for-first-time-since-june/