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Used-car prices skyrocketed after the pandemic upended supply chains for new cars and pushed more people to buy used. But finally, analysts say demand is easing and used-car prices are coming back to earth.
At the same time, the average price of new cars continues to climb. And with a combination of higher theft rates and more expensive parts pushing up the insurance costs for new models, used cars are looking like a better deal for the first time in years.
The changing trend in pricing was noted in two separate studies this month. Autotrader found that the average price of used cars on its site dropped to $36,342 in June, an 8-per-cent year-over-year decrease. At the same time, new-car prices rose by 0.8 per cent year-over year to $66,807.
DesRosiers Automotive Consultants found a similar diverging trend in a study with Statistics Canada, which found the consumer price index for used cars dropped by 4.5 per cent in June, while it rose by 1.8 per cent for new cars.
It’s a departure from the early pandemic years when more consumers looked to used cars as an option because of lengthy delays on new models caused by microchip shortages. Roughly 1.5 million fewer new cars were sold between 2020 and 2023, said Baris Akyurek, vice-president of insights and intelligence at Autotrader, and many of those would-be buyers moved to the used market.
The situation led to used-car prices increasing by around 30 per cent in that period, said Andrew King, a managing partner at Desrosiers Automotive Consultants.
“Now that the new-vehicle shortage has been resolved consumers have returned to the new market and demand for used has dropped – leading to lower prices,” said Mr. King. “Prices will not return to 2020 levels but there will be some modest relief this year.”
For consumers looking for the best overall value, a data study by Ratesdotca also found the insurance costs for new models is increasing faster than for used cars, especially for some of the most commonly stolen cars in Canada, as vehicle theft jumps to historic highs.
For example, the cheapest comprehensive insurance premium that Ratesdotca could find for a 35-year-old male with a clean driving record in Toronto driving a 2024 Honda CR-V (one of the most commonly stolen cars in Canada) was $4,187. That compares to just $2,984 for the 2018 model of the same car.
There were noticeable increases in premiums for cars that aren’t on the list of commonly stolen cars either. The cost of insuring a 2024 Mazda CX-5 was $3,137, compared to $2,826 for the 2016 model.
“The gap does seem to be widening for sure. If you go back into the 90s, 2000s and even the 2010s, models didn’t really evolve as much in terms of technology, more just in structure and design,” said Daniel Ivans, an insurance expert at Ratesdotca.
“But these really large improvements are presenting, in some ways, challenges in cost.”
Those challenges were highlighted in a recent study by Ratesdotca that found car parts such as a front bumper could cost three times more to repair in the 2023 model of the BMW X3 compared to a 2013 model because of extra sensors and technology in the newer vehicle.
In the long term, Autotrader’s Mr. Akyurek said there are more positive signs for consumers looking to buy used. He said that when a consumer buys a new car, they’re trading in a used one 48 per cent of the time. That means the supply of used cars is increasing.
At the same time, new cars that are sold today are increasingly either large SUVs, pickup trucks or electric vehicles – classes that are expensive and expected to continue increasing the average cost of new vehicles.
