More Canadians Considering Vehicle Purchase as Prices Drop, Supply Increases

Used vehicles for sale are displayed at an automotive dealership in Ottawa on Aug. 11, 2023. (The Canadian Press/Sean Kilpatrick)

The cost of buying a vehicle has been dropping, leading to more Canadians considering a purchase, a recent report says.

Used cars in particular have seen an eight percent drop in price over the last 12 months, according to AutoTrader, an online marketplace for buying and selling vehicles.

“Starting in the third quarter of last year, used car demand softened slightly on a year-over-year basis,” the June 2024 report said. “This trend, coupled with increased used car supply, resulting from strong new car sales and subsequent trade-ins, as well as a pivot in demand to new cars due to a ramp up in production and availability, has brought about declining used car prices.”

In May, 26 percent of Canadians indicated they were considering a vehicle purchase, according to the report. That’s up slightly from 24 percent in February.

Prices for new vehicles have remained steady, AutoTrader said. It added that the cost for cars and minivans “grew significantly” while prices for SUVs and trucks remained stable in June.

“New car prices averaged $66,807, a 0.8 percent increase from the same period last year,” the report said.

All types of vehicles saw a boost in supply in the second quarter of 2024, AutoTrader said, adding there are no changes to availability expected in the next few years.

Monthly Payments

Auto loans saw interest rates drop from 6.2 percent in November 2023 to 5.3 percent in June 2024, according to the report. The Bank of Canada dropped its key interest rate by 0.25 percent in June and dropped rates another 0.25 percent on July 24.

The AutoTrader report said car buyers are still facing “historically high” monthly payments, with Canadians paying an average of 34 percent more each month than before the COVID-19 pandemic.

“However, the good news is that the figure has been falling in the first half of the year, and with these interest rate drops, looks set to continue dropping in the second half of the year,” AutoTrader said.

Average monthly payments for used vehicle purchases is $624, the report said.

“We believe vehicle prices for both new and used cars likely peaked in 2023, at least in the short term, however, a return to pre-pandemic prices is not anticipated any time soon,” AutoTrader said in its report.

Among used vehicles, the prices for trucks dropped by five percent, cars saw a six percent decrease, and the cost of buying a second-hand SUV went down 10 percent in June.

Other vehicles, like used minivans, did not drop as much, declining by about 0.8 percent compared with June 2023.

“In June 2024, the average used car price dipped 1.1 percent to $36,342 compared to the previous month, marking an 8.3 percent year-over-year decline,” the report said.