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Drop in prices for used vehicles in Canada

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Drop in price for used vehicles in Canada

 

According to Carpages.ca, used vehicle prices are on the decline across Canada, dropping more than six per cent after peaking during the first half of this year.

The data suggests some types of vehicles are seeing steeper drops than others — sedans the most, minivans the least.

However, according to Tim Dimopolos (CityNews Automotive Specialist) the change is minimum.

“I’ve seen various studies that show a downward trend, but that downward trend is pretty minute,” he said. “The market is still very high comparative to pre-pandemic levels.”

The decline is being attributed to drivers putting off purchases due to large interest rates and the global chips shortage being resolved. The production of new vehicles has increased and people that are interested in a new vehicle are placing orders even if they have to wait for their arrival.

In the other hand, customers in need of a vehicle preferred to go to used car dealers to expedite the process. This is one of the reasons why the change on prices for used car dealers are not that significant.

“Pre-owned sedans have experienced the largest drop in average price point. Between June and July, the average Carpages.ca listing price for a used sedan dipped 6% from the first two quarters of the year, from $30,475 to $28,553,” reads the report from Carpages.ca

“Meanwhile, the average cost of a used pickup truck and SUV both dropped by only about 2% in the same time frame. The average price of a used pickup truck decreased from $42,684 to $42,042, and the average price of a used SUV dipped from $35,159 to $34,303. Minivans, however, declined the least in price at the turn of the third quarter, seeing only a 1% drop in average price ($36,850 from $37,266).”

But these changes are not as impressive as the increase in used cars prices since 2020. The report finds pickup trucks still cost 35 per cent more than they did in the first two quarters of 2020, SUVs cost 43 per cent more, sedans cost 51 per cent more, and those family-toting minivans cost a whopping 93 per cent more.

“And the most expensive category, from the research is older stock. Cars five years and older have seen the greatest appreciation through the pandemic. So that $5,000 or $8,000 car, you’ve seen very sharp increases in prices there. They are very expensive and they are hard to find.” Dimopolos commented 

 

 

 

Lloyd, M. (n.d.). Canadian used car prices beginning to drop: report. CityNews. Retrieved October 14, 2022, from https://vancouver.citynews.ca/2022/09/15/used-car-prices-dropping-report/

 

Used vehicle prices peaked in June

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AutoTrader’s August sales figures are in, and while the new vehicle market prices are still on the increase, due to continued low supply and high demand, it appears that used vehicles supply is finally increasing, leading to a slight drop in prices that is predicted to continue into 2023, says the new report.

Canadian auto dealer spoke with Baris Akyurek, Director of Marketing Intelligence at TRADER, who says the market indicators are generally positive for dealers.

“New car prices are up by 18.3% in August, a 1.1% month over month increase,” he said. “So the average price of a new car in Canada in August was just over $56,000. On the used side of things, our July report saw the first decline in 17 months. The August data shows prices saw another 0.4% decline. We believe that the used prices have peaked in June.”

These numbers are based on the sales on Autotrader.com, so don’t include pre-ordered vehicles, but he said the demand for new vehicles is still high, and supply seems to be improving. “The consensus in the new market for 2022 is that there’s going to be some improvement in inventory availability for the second half of the year.”

The used car market is undergoing a shift away from the very constrained supply, slowly improving throughout the first half of the year and now levelling off. “Used car availability has been going up,” he said. “Inventory has been going up pretty much since around February and it went up consistently. And in the last couple of months, it’s kind of plateaued. So on a year over year basis, when we look at our marketplace, there are more cars available compared to last year.

Consumer trends are evolving along with the market as new cars become available. “The last research we did found that 36 per cent of  consumers are willing to switch from new to used, but even with those buyers moving to the used side of things there’s quite a few new consumers. They are still waiting for the availability. So we believe the demand on the new car side has been pretty strong, and it’s gonna stay strong for quite a while, until the production levels come back to somewhat normal levels.”

The surge in supply of used cars, leading to lower prices has been seen across Canada, with the exception of BC.  “But when we looked at the prices by province we don’t see these declines in BC yet. Looking at our marketplace data, the demand seems to be still pretty strong in BC. Therefore we haven’t seen the the decline in prices just yet.”

 

 

 

 

 

 

 

Resource:

dealer, C. auto, Moskowitz, B., McAlister, Z., Ockedahl, C., & dealer, C. auto. (2022, September 21). Used vehicle prices peaked in June, new cars still hot: Autotrader interview. Canadian Auto Dealer. Retrieved September 26, 2022, from https://canadianautodealer.ca/2022/09/used-vehicle-prices-peaked-in-june-new-cars-still-hot-autotrader-interview/ 

 

Sales Decline Slightly as Vehicle Shortages and High Prices Persist

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Working once again with our friends and colleagues at the Used Car Dealers Association, DesRosiers Automotive Consultants reached out to the used car dealer community. Close to 500 UCDA members responded to our survey with both independent dealers and the used vehicle arms of franchised new vehicle dealers offering their perspectives on the used vehicle market in the first half of the year.

According to the surveyed members, the first half of 2022 presented both challenges and opportunities for the used vehicle market. “The used vehicle market has been hugely disrupted by the various impacts of new vehicle shortages” commented Andrew King, Managing Partner of DAC. He continued, “For the first half of 2022, sales decreased as sourcing became even more difficult, and prices remained at stratospheric levels.”
 
According to dealers, used vehicle sales have—on average—fallen in the first half of 2022 when compared to the first half of 2021. While used vehicle dealers have seen a minor increase in average sales, up from 65 to 67 units sold, new vehicle dealers have seen their used vehicle sales drop from 165 to 148 units on average.
 
When asked what sales volumes they expect throughout 2022, used vehicle dealers cited an average of 146 units with new vehicle dealers expecting used sales at 286 units on average. When asked this question in our previous survey in January 2022, used vehicle dealers expected sales to reach 214 units on average with new vehicle dealers expecting 313. Overall, combined sales expectation dropped from 256 to 189 units.
 
One of the persistent issues impacting both the new and used vehicle markets has been vehicle supply, with new vehicle shortages leading to large shortages in used vehicles as well. When asked about the change in their supply situations, the majority of both new and used vehicle dealers cited a worsening situation, at roughly sixty percent of responses. A further 30.7% of both dealer types noted no change from the already difficult situation in 2021, with just 9.9% citing an improvement.
 
As soon as demand shifted from the new vehicle market to the used, prices began to shoot up for used vehicles. When asked how prices shifted for particular used vehicle types in the first half of 2022, results largely pointed towards increases. For passenger cars, a combined 78.0% of responses pointed towards price increases with just 5.0% noting price drops and 17.1% noting no change. For the comparatively more popular SUVs, results were similar with 76.4% of responses pointing towards price increases. For both passenger cars and SUVs, the largest portion or responses pointed towards increases of between 11 and 20 percent. For pickup trucks, 68.3% of responses pointed towards price increases—spread somewhat more evenly in terms of percentage—with 18.6% of responses noting no change and 13.0% citing a decrease in price for the first half of 2022.

 

 

 

 

 

Reference:

Desrosiers Automotive Consultants. DesRosiers Automotive Consultants. (n.d.). Retrieved August 11, 2022, from https://www.desrosiers.ca/

Sales Decline Slightly as Vehicle Shortages and High Prices Persist

Posted on by Admin
Working once again with our friends and colleagues at the Used Car Dealers Association, DesRosiers Automotive Consultants reached out to the used car dealer community. Close to 500 UCDA members responded to our survey with both independent dealers and the used vehicle arms of franchised new vehicle dealers offering their perspectives on the used vehicle market in the first half of the year.

According to the surveyed members, the first half of 2022 presented both challenges and opportunities for the used vehicle market. “The used vehicle market has been hugely disrupted by the various impacts of new vehicle shortages” commented Andrew King, Managing Partner of DAC. He continued, “For the first half of 2022, sales decreased as sourcing became even more difficult, and prices remained at stratospheric levels.”
 
According to dealers, used vehicle sales have—on average—fallen in the first half of 2022 when compared to the first half of 2021. While used vehicle dealers have seen a minor increase in average sales, up from 65 to 67 units sold, new vehicle dealers have seen their used vehicle sales drop from 165 to 148 units on average.
 
When asked what sales volumes they expect throughout 2022, used vehicle dealers cited an average of 146 units with new vehicle dealers expecting used sales at 286 units on average. When asked this question in our previous survey in January 2022, used vehicle dealers expected sales to reach 214 units on average with new vehicle dealers expecting 313. Overall, combined sales expectation dropped from 256 to 189 units.
 
One of the persistent issues impacting both the new and used vehicle markets has been vehicle supply, with new vehicle shortages leading to large shortages in used vehicles as well. When asked about the change in their supply situations, the majority of both new and used vehicle dealers cited a worsening situation, at roughly sixty percent of responses. A further 30.7% of both dealer types noted no change from the already difficult situation in 2021, with just 9.9% citing an improvement.
 
As soon as demand shifted from the new vehicle market to the used, prices began to shoot up for used vehicles. When asked how prices shifted for particular used vehicle types in the first half of 2022, results largely pointed towards increases. For passenger cars, a combined 78.0% of responses pointed towards price increases with just 5.0% noting price drops and 17.1% noting no change. For the comparatively more popular SUVs, results were similar with 76.4% of responses pointing towards price increases. For both passenger cars and SUVs, the largest portion or responses pointed towards increases of between 11 and 20 percent. For pickup trucks, 68.3% of responses pointed towards price increases—spread somewhat more evenly in terms of percentage—with 18.6% of responses noting no change and 13.0% citing a decrease in price for the first half of 2022.

 

 

 

 

 

Reference:

Desrosiers Automotive Consultants. DesRosiers Automotive Consultants. (n.d.). Retrieved August 11, 2022, from https://www.desrosiers.ca/

Used car and truck market continues gradual decline

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The wholesale market as a whole continues to slightly decline, down -0.26%, more than the 2017-2019 average, which was -0.21%, according to Canadian Black Book. The Canadian wholesale market for used cars was down -0.40%, compared to being down -0.22% last week. The truck/SUV market improved, but continued on a downhill path of -0.12% for the week, compared to the previous -0.22%, compared to the 2017-2019 average of -0.21%.

The US market exchange rate remains favourable for exportation, Arbitrage opportunities have continued to bring US buyers, causing a steady flow of vehicles south across the border. Gas prices are dipping slightly, but are still an influence on buyer behaviour, says the report. “Supply remains low while demand is high on both sides of the border. Upstream channels continue to tap supply before it can be made available at physical auctions.”

Only two segments of the car market made modest gains, with sub-compact cars up 0.27%, and prestige luxury cars up 0.04%. Mid-size cars were down the most, at -1.07%, with full-size cars down -1.02%.

For trucks/SUVs, there were only three slight price increases, with full size vans up just 0.45%, minivans up 0.34% and sub-compact crossovers up 0.16%. Compact vans declined the most, down a full -1.61%, followed by sub-compact luxury crossovers which were down -0.71% for the week.

The average listing price for used vehicles increased slightly week over week, as the 14-day moving average is just above $37,000. Analysis is based on approximately 120,000 vehicles listed for sale on Canadian dealer lots.

In other news, The Bank of Canada expects inflation to go “a little over” eight per cent for the month of June and stay in that range for a few more months, Governor Tiff Macklem told a business group in a webcast transcript released late Friday.

Bank of Canada increases policy interest rate by 100 basis points, continues quantitative tightening, and the Canadian dollar strengthened against the greenback on Monday, and the yield on benchmark government debt climbed. The loonie was trading 0.5% higher at C$1.2965 to the greenback, or 77.13 U.S. cents, after trading in a range of 1.2899 to 1.3029.

 

 

 

 

Source:

dealer, C. auto, Ockedahl, C., dealer, C. auto, & McAlister, Z. (2022, July 21). Used car and truck market continues gradual decline. Canadian Auto Dealer. Retrieved July 25, 2022, from https://canadianautodealer.ca/2022/07/used-car-and-truck-market-continues-gradual-decline/

Impact of Current Economic Issues on Vehicle Purchase Intention

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With inflation and interest rates both up sharply, and gas prices at record levels, DAC reached out to consumers to get their input about how the economic situation may impact their intention to purchase a vehicle this year. Unsurprisingly, nearly half of respondents suggested that they are less likely to take the plunge into the vehicle market given the current economic concerns. Looking across the country, consumers from the Atlantic region and Alberta were the most hesitant, citing ‘less likely’ at 57.0% and 56.9% respectively.

While consumers seem to be echoing Elon Musk and his “super bad feeling” about the economy it should be noted that current consumer actions are showing a completely different perspective. Across the wide range of economic variables tracked by DAC, consumer spending is at record levels – often well above the previous highs of 2019. OpenTable reports restaurant reservations in Canada 15% above pre-pandemic levels, RBC cardholder spending data is tracking 30% higher than 2019, Statistics Canada retail sales data jumped yet again in the most recent month. One variable after another, shows consumers are (currently at least) spending at a torrid pace.

“When it comes to the outlook for vehicle purchases, future consumer behaviour is far from clear” commented Andrew King, Managing Partner at DAC. He continued, “while such concerns are in some way moot until vehicle supply issues are resolved, they are critical for the future outlook of the industry.” As such, DAC continues to track a broad range of economic variables closely and each quarter publishes a vehicle sales forecast by segment, province, and powertrain type for the coming 5 years.

 

 

 

 

 

 

 

 

 

 

 

More information on these numbers can be found in the DesRosiers Automotive Reports published by DesRosiers Automotive Consultants Inc.

Copyright © 2022 DesRosiers Automotive Consultants Inc., All rights reserved.

 

 

AutoTrader Reports Record High Prices In Canadian Auto Market

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In a report released by AutoTrader.ca this week, it was revealed that auto prices are at record highs across the country. Used auto prices continued to gradually increase throughout the first part of 2022, which is “the opposite of the pricing trends observed in previous years before the pandemic. This trend is similar for new vehicle prices, which also continued to rise.”

Well-publicized inventory shortages due to global events, the pandemic, and material scarcity, which has pushed the demand for new vehicles into the used vehicle market, causing upward price pressure on both segments. Quebec’s prices are not as high as the rest of the country, but have been increasing more rapidly to catch up.

SUVs, minivans and trucks are experiencing the strongest  increases as a result of “growing consumer demand for larger vehicles, with minivan prices increasing at the fastest rate given shortages in the segment.”

According to the study, the price of used North American vehicles has been stabilizing with increased levels of used inventory. AutoTrader predicts that, as vehicle production returns to capacity, it will ‘relieve pressure from car buyers switching to used, which will have a calming effect on price inflation for both new and used vehicles.”

Anecdotal evidence suggests that the Quebec used car low inventory situation may have arisen from dealers outside the province purchasing inventory from Quebec, but the situation is slowly improving.

The top 10 most-searched vehicles over the study period were:

  1. Honda Civic
  2. Ford Mustang (up from #5)
  3. Ford F-150 (down from #2)
  4. BMW 3 Series
  5. Porsche 911 (up from #6)
  6. Toyota RAV4 (down from #3)
  7. Mercedes-Benz C-Class
  8. Chevrolet Corvette (up from #14)
  9. Mercedes-Benz E-Class (down from #8)
  10. Jeep Wrangler (up from #11)

In general, prices have increased substantially year-over-year across the board, from Alberta, with the lowest increase at 32.9%, to Quebec, with the highest, at 43 per cent.

 

 

 

 

 

dealer, C. auto, MacDonald, S., Phillips, T., dealer, C. auto, & McAlister, Z. (2022, June 15). Autotrader reports record high prices in Canadian Auto Market. Canadian Auto Dealer. Retrieved June 16, 2022, from https://canadianautodealer.ca/2022/06/autotrader-reports-record-high-prices-in-canadian-auto-market/

Canadians Increasing Budget Or Delaying Car Purchases Amid High Prices: Survey

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Used car prices have shot to record highs and wait times for new vehicles can now take months as chip shortages have slowed down production. All of that has Canadians rethinking their car buying plans, according to a new survey. 

The latestBNN Bloomberg RATESDOTCA survey, conducted by Leger, found that four-in-10 Canadians said they have made changes to their purchasing plans, with 13 per cent saying they were delaying their purchase as a result of high prices. The online survey of 1,538 Canadians was conducted between April 8 and 10.

The price of cars has been an issue in Canada since last year. The COVID-19 pandemic has led to a trend of more Canadiansopting to drive over taking public transit, which has increased demand and prices for vehicles. Supply chain shortages have also contributed to long wait times for new vehicles to be shipped to consumers.

The survey shows that Canadians are aware the current auto market requires making concessions. About 12 per cent of respondents said they changed or are expecting to change their choice of vehicle as a result of cost, while another nine per cent said they will change their choice because of availability. Another 25 per cent of respondents said they were planning to delay their purchase entirely due to cost or availability. 

On the other hand, according to the survey, Canadian consumers are researching the vehicles they buy extensively before getting into the driver’s seat.

Two-thirds (68 per cent) of respondents said they factor in the cost of replacing and repairing a vehicle when they buy it, and how that impacts the insurance premium they pay on the car. The make and model of a vehicle can have a large impact on your monthly insurance costs — that’s because insurers look at how expensive a car will be to fix if it gets into a collision, as well as how often certain models tend to be involved in accidents. So, if your car is favoured by young people who love to speed, you’ll be paying higher insurance premiums.

Six-in-10 (61 per cent) respondents said that they consider a vehicle’s safety record or crash rating when they purchase a car, while half of respondents said they also consider the likelihood of accidents or theft.

While the majority of respondents were well informed about how the vehicle they buy impacts their car insurance rate, two-in-10 said they were not aware that factors like the cost of repairing a vehicle and its likelihood of getting stolen affected their insurance rate. 

 

 

 

 

 

 

 

Reference: 

Shmuel, J. (2022, April 29). Canadians increasing budget or delaying car purchases amid high prices: Survey – BNN Bloomberg. BNN. Retrieved May 2, 2022, from https://www.bnnbloomberg.ca/canadians-increasing-budget-or-delaying-car-purchases-amid-high-prices-survey-1.1759003

Today’s Car Buyer: Online vs. In-store

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The pandemic has been a global event with unprecedented impact on our industry. We learned that in these times, our customers demand convenience, efficiency, and speed in the buying process. Online transactions have become an expected part of the purchasing experience. Through it all, dealers have embraced digital tools to create a smooth car buying experience. 

The latest studies showed that nearly all the car buyers in the market start their research online, regardless of how they ultimately complete their purchase.

Fewer and fewer respondents completed each subsequent phase of the research process online. After submitting a lead form, the shopper either continues the process online or moves in-store.

The results showed that even though some purchasers end up buying online, the majority of them visited the store to complete their transaction. 

 

Did you complete your entire vehicle purchase online? 

How you can apply this your dealership:

 

Online research is one of the most important parts of the car buying process. A potential buyer needs to find the right vehicle, calculate payment estimates, and even start the credit application which is an important phase while they’re shopping for cars. There’s a higher chance to complete the sale when the applicants submit an application rather than just visiting your website or calling you for further information without filling out your online application.

This only can happen if you provide them with the right amount of information and convenience as they’re engaging with your website or your online inventory.

 

During the “research” phase, when consumers find a car on your website that they’re interested in, calculate payment estimates, and a credit application can play an important role until they finalize their purchase with you– whether online or in-store.

UNDERSTANDING THE ONLINE BUYER 

 

“11.63% of respondents said they completed their last vehicle purchase online. This subset of customers was asked again if they visited the dealership for any reason at all, and 77.59% still had to visit the dealership for one reason or another. Meaning of the total survey respondents, a mere 2.56% purchased 100% online. When asked about their online purchase experience, their satisfaction level was above average, with a score of 7.97 on a 10-point scale. 39% said convenience was the driving factor.”

 

The good news is consumers are willing to pay more for their vehicle if the dealership offers the following portions of the deal online:

As the studies show, the customer needs to be able to structure their deal on your website. 

Therefore, Ontario Underwriters are introducing an exciting new product to help you sell cars. We are offering our dealer partners an opportunity to add a link from their website (on other online presences such as Facebook, Kijiji, etc.)to a customized credit application. To Learn more about the product:

 

 

 

 

Reference:

REYNOLDS&REYNOLDS. (n.d.). Car buying unfolded. Reyrey.com. Retrieved April 21, 2022, from https://www.reyrey.ca/en/cp/retail-anywhere-report?utm_campaign=RR-CAN-ENG-RetailAnywhere_SY22_Q1&utm_source=RA_Car_Buying_Stats&utm_medium=CAD_Mar22 

 

Decoding The Subprime Lending Market For 2022

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Time to raise the red flag about what’s coming up, and how to manage the inevitable.

As a general principle, the non-prime market did somewhat well over the course of the pandemic, due to government aid.

The help consumers received during the COVID-19 crisis led to increased purchases for vehicles and even power sports. There was an increase in value for many reasons, and the price for used vehicles actually jumped about one per cent month-over-month—for power sports as well.

With government aid, many consumers were able to save more and spend more on things like more expensive vehicles. Some of these consumers are subprime, and specifically subprime consumers buying vehicles that are more expensive today.

The problem with this, that will inevitably present itself before us in the near future, is that consumers that buy into these more expensive vehicles will have a much higher negative equity when they want to resell or repurchase a new vehicle and trade-in that vehicle.

What Is Equity in a Car? How to Trade it | CASH 1 Blog - News

The problem we have today is not related to consumers getting approved at credit, because the credit approval and the default rates have been great. There is no issue with the markets as it is today.

But every lender knows that what is coming soon are rising (general) inflation rates—and higher interest rates mean consumers that are in non-prime will be the first to be impacted due to having purchased a vehicle over market value.

The whole non-prime market will see this potential issue coming fairly soon, where people will want to get out of those very expensive payments. And when they return those vehicles to a store or to try to sell them, they will be losing quite a lot, because their interest rates are higher and the vehicle price is higher. Therefore, their negative equity will be much higher.

This is a problem we are creating right now—that we created as of around last November, December, and into January. These consumers are buying high with high interest rates, and we are creating an impact that—in a few months from now, or years, or maybe a year or two—will have a lot of people buying vehicles with huge negative equities.

So for now, dealers are happy to sell vehicles during what may otherwise be a difficult period, with the vehicle inventory issue and other pandemic-related challenges. The problem is that we are shoveling negative equities, and we are not going to see such a nice scenario in a few months from now.

There is something coming—there is a wave coming, or it is already here. And what I can say is that I’m certain about that.

If you become more selective on prime,  then the non-prime segment will just grow by itself.

There will be more non-prime in the coming months and years because the interest rates will be higher. Therefore, consumers will be stuck with payments and it will be complicated and challenging for dealers that are not decoding non-prime, to cater to that segment. And the reason being is that the files will get more complex.

Dealers in the market will be choosing their consumers much more wisely, because they will not be able to afford issues with clients delaying payments since their interest rate will be high. They will become more narrow in terms of the actual prime consumers they want, which will raise the non-prime segment.

That’s the effect. If you become more selective on prime, then the non-prime segment will just grow by itself. There will be more non-prime consumers in the future, and with higher negative equities.

The challenge with that is that dealers need to secure the right inventory and the right employees to deal with the more complicated files that will result from this situation.

It’s not a simple prime approval—it will require expertise. Some dealers have that expertise, but I expect artificial intelligence technology to become a key or important player in this overall situation.

These types of tools, like predictive AI, are being adopted by some dealers to help with loan-matching and customer credit management, so that more consumers are approved, and dealers don’t leave money on the table.

And this year, dealers must investigate and implement this new technology, as well as prepare their non-prime processes for the coming months. Unprepared dealers will struggle with non-prime, they will pay a high price for experienced non-prime business managers, and their sales volumes will suffer as a result.

 

 

 

 

dealer, C. auto, & Hobbs, A.-M. (2022, February 22). Decoding the subprime lending market for 2022. Canadian Auto Dealer. Retrieved April 11, 2022, from https://canadianautodealer.ca/2022/02/decoding-the-subprime-lending-market-for-2022/