Canadians working on the high cost of used vehicles should not wait for the standard bubble to burst. According to the Canadian Black Book, the high price will remain until 2026.
James Hancock, the organization’s director of OEM strategy and analysis, recently spoke with Automotive News Canada and predicted that the new-inventory crisis arising from the semiconductor shortage would continue until mid-2023. And it will have a knock-on effect.
Until then, if fewer vehicles are sold, there will be less used vehicles, they will come on the market in 2024, 2025, and 2026, be they lease returns or trade-in.
Read more: These used cars and SUVs now cost more than when they were new
“Honestly, I’ve never seen anything like it,” Hancock said. “I’ve been in the automotive world for 15 years, and it’s been an incredible time.”
Fortunately, although the price of used cars in Canada has risen, rising 4.1 percent this year, the data shows that the peak of pricing was actually in 2021, and on average, it has declined since then. This suggests that it is not a bubble that is set to burst, Hancock said. Instead, prices will gradually fall over the next four years.
The high cost of used vehicles, among other factors, means that Canadian dealers have to adapt their strategies. Brick-and-mortar dealerships are actually a problem in this market because car owners are shopping nearby, looking for the best price for a good car affordability for their trade-ins.
“Consumers are smart, well-informed, well-informed and they are looking to maximize the value of that car and their equity position in that car,” Hancock said. “So, they are also buying their cars from other dealerships to see if anyone is willing to pay more.”
This has given an advantage only to online dealers and could change the car buying landscape for next year.