I have a five year old SUV and was thinking of trading it in next year. But with used car prices so high, should I rush to do it this spring in case they crash? I want to get as much as possible on the exchange. – Cary, Calgary
What goes up must come down. But while used car prices in Canada appear to have bottomed out, don’t expect a sudden crash, says a market analyst at Canadian Black Book, a service that tracks used car prices.
“As new car production begins to pick up, we expect used car prices to begin to fall,” said James Hancock, director of OEM strategy and analysis. ) at Markham, Ontario. Canadian Black Book.
Used car prices in Canada have risen 51% since March 2020, due to a shortage of new cars fueled by pandemic demand and supply chain issues, including a global shortage of semi-automatic chips. female drivers, Hancock said.
“There aren’t enough new cars, so consumers are looking for used cars — what used to be a $20,000 used car would now be worth $30,000,” Hancock said. “New car inventory is down 50% compared to the same period last year and used car inventory is down 20%.”
In addition, due to the current demand for used cars in the United States, more Canadian used cars are being sent there than before the pandemic, contributing to the shortage of used cars here, said Hancock.
But once automakers can get more chips and build enough new cars to meet demand, used car prices should eventually return to pre-pandemic levels, Hancock said.
So when could this happen? Estimates vary. Hancock thinks there will likely be a gradual decline in used car prices as automakers catch up over the next year.
For 2022, Hancock predicts used car prices could experience a “moderate” decline this year of a few hundred dollars.
But he expects used car prices to remain above pre-pandemic levels through 2025.
Another seller’s market
Remember when used cars used to depreciate 30 or 40% in the first year?
Right now, some new cars bought last year have barely lost value, Hancock said.
Some high-demand used 2017 models are worth nearly as much now as they were new, Hancock said, based on what buyers are willing to pay today. For example, a 2017 Honda Civic is worth 99% of its original price, a 2017 Volkswagen Beetle is worth 98% and a 2017 Toyota Tacoma is worth 97%, Hancock said.
If you bought a 2017 Porsche Cayman when it was new and sold it today, you’d make money — it’s worth 101% of its list price in 2017.
All used cars have seen their prices rise since a shortage of computer chips hit new car production this time last year, although the rise was greatest for cars four years old or older. less, Hancock said. Vehicles in high demand like pickup trucks saw the biggest price increase.
“It’s like the gold rush in the Yukon,” said Peter Hatges, national automotive industry leader at KPMG. “If you’re flipping a three- or four-year lease, you can actually get some money back when you flip the car.”
Like Hancock, Hatges also expects used car prices to gradually return to pre-pandemic levels as new car production catches up.
“If you look at used car prices in the short term, we probably have some resistance to a big drop in prices, but prices will return to normal in the next 18 to 24 months,” Hatges said.
One thing that could slow the return to normal, he said, is the current push from automakers to sell more electric vehicles.
“There could be a little cushion [to falling used car prices] because people may be inclined to buy [internal combustion engine] vehicles,” Hatges said.
Indeed, people who are wary of electric cars may keep their gas-powered car longer than they otherwise would have. Or, they may seek out a used gas-powered car instead of buying a brand new electric or hybrid vehicle, Hatges predicts.
This could temporarily keep gasoline-powered used cars in higher demand and shorter supply.
A balancing act
Whatever you decide to do, there will be compromises.
“If you are looking to maximize your [trade-in value], you might want to trade in your car sooner rather than later,” said Hancock of Canadian Black Book. “But replacing a vehicle right now is difficult – you might have to pay more for that car and you might have to wait for that car.”
If you order a car today, you’ll likely have to wait three to five months for delivery, he said.
Not only that, most manufacturers have ended cash rebates and incentives on new cars for the time being because their inventory is so low and demand is so high – and some have increased the sticker price compared. to last year, Hancock said.
“So you used to see ads where they said you would get $5,000 on the car,” Hancock said. “They don’t offer that anymore.”
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