Due to supply constraints and high demand, prices for vehicles skyrocketed during the pandemic. Now, they’re starting to come down
Unsold 2024 Mustang Mach-E electric vehicles sit at a Ford dealership, Jan. 21, 2024, in Broomfield, Colo. As vehicle inventory and manufacturing catches up to consumer to demand, vehicle prices are beginning to drop. PHOTO BY DAVID ZALUBOWSKI /THE ASSOCIATED PRESS
The COVID-19 pandemic hit many industries with supply issues, including the car industry. The pandemic, combined with an increased demand for personal vehicles due to concerns with public transit and an increased desire to travel locally, triggered a large spike in prices for new and used cars across Canada. While car prices are still significantly higher now than pre-pandemic, they are expected to continue dropping.
“With supply chain disruptions easing up, we’re started to see new car manufacturing improving and new cars starting to come into the market,” said Baris Akyurek, vice president of insights and intelligence at AutoTrader.ca. “We estimated that between 2020 and 2023, 1.5 million fewer new cars were sold. Now that new cars are coming back, they’re selling really well. Last year saw an 11.8 per cent year-over-year increase (in car sales). The first two months of 2024 have been pretty strong as well.”
The high-cost of new vehicles raised the cost of vehicles on the used market as well, as people were holding onto their old cars for much longer. However, according to Akyurek the influx of new vehicles has significantly impacted the used car market. According to AutoTrader.ca data, 50 per cent of people buying new cars will trade in their old vehicle. So, as new car sales rise, the used-car market sees a steady stream of cars, driving those prices down too.
“In February 2024, the average price of a used car is now $38,451,” Akyurek said. “On a year-over-year basis, that’s down 2.1 per cent.”
This graph from AutoTrader.ca shows the increase in car inventory from February 2020-February 2024. According to the Canadian online car marketplace, the increase in inventory has brought the price of vehicles down. (Graph courtesy of AutoTrader.ca) PHOTO BY AUTOTRADER.CA /AutoTrader.ca
Despite the drop in prices for both new and used vehicles, they are still significantly higher than in 2019. Akyurek said that in February 2019 the average price for a new car was $45,255 while used was $26,331. In February 2024, the average cost for a new car is almost 50 per cent higher at $66,979 with used cars also much costlier at $38,451.
“The prices are still coming down, but having said that, one of the questions I receive pretty frequently is ‘What’s going to happen to car prices?’” Akyurek said. “I don’t want to speculate, but given the increase in overall demand since the beginning of the pandemic… We don’t expect to see prices to go back to pre-COVID levels anytime soon.”
According to Adam Tietz, a sales consultant at Don Valley Volkswagen in Toronto, his dealership did not have as much of a shortage of vehicles compared to other brands. Still, the overall lack of inventory meant consumers had less room to negotiate prices with dealers, especially for cars in high demand.
“Basically, you were going to pay what the car is priced at, the sticker price,” said Tietz. “Now, since a lot of dealers have (more inventory), there’s more discounts and negotiations.”
Tietz said that some vehicles could have wait times of up to two years, with the Toyota Sienna being an example. The Sienna has forum pages dedicated to it online, where Canadians share how long they had to wait to receive their vehicle, many of them waiting 11 months or longer.
“When you need a car, you need a car,” said Tietz, “You’re sort of at the mercy of the market. If you can wait it out, that’s great… Even me, I needed a car in the summer and the market was its peak. Sometimes you just need one.”
For those looking to pick up a new vehicle, Akyurek said that, on a micro level, different brands of vehicles can have significantly different prices depending on the market.
“The most important thing is doing your research and understanding the market,” Akyurek said. “Going back to inventory availability, for example, we talked about (how) new cars are coming back to the market, but if you segmented that data, European brands and domestic brands’ availability are much better compared to Asian brands.
“Once you find the vehicle you need, I suggest you pull the trigger right away,” Akyurek said. “Because, depending on what you’re looking for, the next time you want to inquire about that vehicle, it might not be there.”
Casemore, J. (2024, March 8). Vehicle prices continue to drop following influx of car inventory, … National Post. https://nationalpost.com/news/canada/car-market-price-drop