Average used vehicle prices have fallen noticeably from a year ago, new car prices have stabilized, and further price relief could be on the way still. However, predicting whether you should get into the vehicle market now or wait for an even better deal is a difficult game to play. “We don’t want to speculate because the market is the market,” said Baris Akyurek, vice-president of insights and intelligence at .
But he points out there could be more good news for price-conscious car buyers in the near term. According to the AutoTrader , used car prices dropped 1.1 per cent on a month-over-month basis and 8.
3 per cent on a year-over-year basis to an average of $36,342, while new car prices increased by 0.8 per cent on a year-over-year basis to $66,807. Akyurek noted there were further price decreases in July, which are not mentioned in the quarterly price index report, with average used car prices dropping 0.
7 per cent month-over-month and virtually no change in the average new car prices. “In the short term, we believe these trends (will) continue, but on the other hand, because interest rates have started to come down, we expect to see an uptick in demand,” he said, adding that the second half of the year may see hotter demand for vehicles. “How will that play into prices? We don’t want to speculate but we believe this might continue for a little further and then it’s normalized.
” One thing is certain, prices aren’t expected to return to pre-pandemic levels to when the average used car price was $26,042 in June 2019. “Those days are gone, and I don’t think we’ll have an average $26,000 price anymore,” he said. Average prices have grown for a variety of reasons since the pre-pandemic days, including because of inflation, because there are more SUVs being sold and these cost more than traditional cars, and because vehicles are equipped with more features than before.
“Prices aren’t falling off a cliff,” said Charles Bernard, lead economist with the While overall demand for vehicles is down and supply is up, leading to some price decreases, this is not consistent in the entire automotive sector, he said. The small SUV segment, for example, is really hot, making up nearly half of all automotive sales, so don’t expect to see price reductions there. “That market is really attracting consumers, so the OEMs (original equipment manufacturers) are putting their resources into that.
Those cars are usually more expensive than your normal passenger vehicle,” Bernard said. He also added that the average car prices don’t paint a complete picture as those are based on an aggregate. As consumer demand shifts from more expensive models to mainstream models, the average prices go down, but if you were to look at the price of a highly sought-after model, such as a small SUV from a mainstream Asian manufacturer, you’ll notice no price drop.
Bernard said consumer demand for domestic and European brands is down, but the most significant drop in demand has been in electric vehicles, including the luxury and the mainstream EV segment. Akyurek agrees, saying the EV supply has gone up while the demand has gone down. EV inventories on are up more than 200 per cent from a year ago, and new EV prices were down 14.
7 per cent on a year-over-year basis in June, and used EV prices were down 13.7 per cent for the same period. “They’re coming down at a faster pace because of the supply and demand mismatch,” Akyurek said.
If someone is shopping for an EV, this is the time to do it, he said. But if someone is shopping for a vehicle from a mainstream Asian brand, where the supply has not caught up to demand, then don’t expect price decreases. “If you look at the overall new car universe, supply is not a problem anymore.
We’re almost at 2019 levels,” Akyurek said. “But if you look at say Asian brands, they still don’t have as much inventory.” What may be helpful to buyers is that average interest rates on new car loans — on an aggregate basis — have fallen.
Interest rates peaked in November 2023 at an average of 7.38 per cent, and at the end of June 2024, interest rates came down to an average of 6.64 per cent.
But, just as the vehicle prices decreases are not consistent segment to segment, neither are interest rates. Bernard expects average car prices to decrease in the near term, because dealers — who have growing vehicle inventories — are fighting for sales, but by how much is unclear. However, there are a few issues to be aware of that could impact prices significantly in the next few years.
The first is the question of Chinese EVs and do we let them into the Canadian market? Their sales here would help drive prices down. The other question mark is Canada’s zero-emission vehicle (ZEV) sales targets. Even before 2035 when all new cars sold will have to be ZEVs, automakers will face strict thresholds.
By 2026, 20 per cent of all new vehicle sales will have to be ZEVs. If consumer demand for ZEVs remains low or if automakers can’t produce enough of them to meet the 20 per cent threshold, they’ll simply reduce the number of internal combustion engine vehicles they’re selling in Canada to ensure they meet the thresholds — which would result in fewer vehicles overall being available. “When the inventory is getting shrunk by multiple companies at the same time, prices will once again rise.
People won’t be able to get into the car market, won’t be able to buy a car, incentives will be gone,” Bernard said. “That’s my worry over the next three, four yours, that our aggressive approach to EVs will put pressure on pricing.” Bernard recommends people don’t rush into buying a car immediately, but start speaking with dealers to tell them what they are looking for and what they can afford so that dealers can be in touch with them when a competitive offer becomes available.
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