The average price of used cars is finally starting to fall

Data for August from auto sales site AutoHebdo shows, for the first time in 18 months, a very small drop in the price of used vehicles and an increase in inventories.

The price drop is admittedly minimal, at 0.4% between June and July, but it’s part of a movement that began earlier, according to Benoit Béland, director of brand marketing at AutoHebdo.

%, c’est plutôt neutre.”,”text”:”Ça semble être une tendance parce que, quand on regarde les trois derniers mois, il y a eu un ralentissement de la hausse et là, on a une stabilisation. On s’entend qu’une baisse de 0,4%, c’est plutôt neutre.”}}”>It seems to be a trend, because when you look at the last three months, there has been a slowdown in the increase, and there we have a stabilization. We agree that a 0.4% decline is fairly neutral.

But it is a trend, because if we connect it with the stock of used vehicles, again for almost all models, we see that it stabilizeshe explains.

Sudden increases

Although the figures for the month of August have not yet been compiled, the decline in the average price of used vehicles and the increase in inventory have been maintained and even strengthened from week to week last month, Mr. Béland shows. According to him, this tends to confirm that the downward trend is well established.

It must be said that the recent months’ increases have been brutal. Across Canada, the average price for a used vehicle was $37,928, up 32% from last year. In Quebec, the increase is even worse over the past 12 months, reaching 39.2%, but at an average price still below the Canadian average of $35,186.

Most of these increases can be attributed to the decline in inventories of new vehicles during the pandemic. Supply chain disruptions, particularly on the microchip side, have caused supply to plummet, prompting consumers to turn to used vehicles. But here, too, the pressure eases as production approaches full capacity.

Lots of pre-orders left

However, Benoit Béland warns that it will take longer to bring down the pressure on the price of new vehicles.

The problem is that there have been a lot of pre-orders. There was no inventory, but people bought anyway and were willing to wait. It will be a few months before all this demand is used up.

The average price of a new vehicle has also increased by just under 20% between July 2021 and July 2022 to reach $55,469 in Canada and $51,122 in Quebec.

Discounts set aside

Sir. Béland’s explanation of the reasons for the increase in the price of new vehicles is very revealing of market practice.

Prices have risen because manufacturers have not given nearly as much discounting as they historically did to clear inventory when what little inventory was available was sold out. »

A quote from Benoit Béland, brand marketing director at AutoHebdo

In other words, it is not so much the price of the car that has increased, although there is some increase year on year, but the discounts that have been removed. AutoHebdo data reflects this phenomenon because it is compiled from the price displayed by the dealer.

The retailer posts the lowest price they can offer to beat the competition. These are prices that include discountsexplains Mr. Béland.

And as on the used car side, we see that new vehicle inventory, which has been in steady decline since the first quarter of 2021, is stabilizing, although it has not yet started to rise, except for trucks. This means that once the pre-orders are filled and the resumption of production will make it possible to increase the stocks of new vehicles, we can expect dealers to start offering discounts again to sell off the new inventories.

Inflation will continue

On the other hand, warns Mr Béland, prices will not return to pre-pandemic levels.

Once prices rise, it is extremely rare in any area for them to return to normal. »

A quote from Benoit Béland, brand marketing director at AutoHebdo

Also at the moment we all see as consumers that there is a shortage of labor all over the world, that there is high inflation due to the price of oil and other food and it affects the cost of production, adds Mr Béland.

In the case of used cars, whose intrinsic value has not increased but whose prices have exploded in line with demand, won’t we see a return to pre-pandemic prices? No, he replies, because the majority of sales of used cars are made by dealers, and the share of sales from individuals is marginal. And dealers have operating costs, repair costs, personnel costs, and all of these costs are increasing.

The difference in Quebec

Every time AutoHebdo publishes its data, we note that the average price in Quebec, for both used vehicles and new vehicles, is well below the Canadian average and lower than all the other Canadian provinces except the Atlantic provinces.

It’s always been that way and it’s tied to the type of vehicle you’re buying and what’s available. We are less happy with luxury cars and big trucks in Quebec, if we compare for example with British Columbia or Alberta, which have very high sales of the famous ”pickups” [camionnettes]explains Benoit Béland.

We in Quebec have a smaller car and less luxury. Yes, we are as many SUVs as the rest of Canada, but for the rest, our tastes and our type of vehicle consumption are different. We buy fewer BMWs, Volvos and above all the famous ”pickups” which, he points out, has a very significant impact on the average price in a province given their much higher cost.

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