(Montréal) The prices of used vehicles are showing signs of dipping after two years of marked increases caused, in particular, by the scarcity of new vehicles.
Posted yesterday at 2:14 p.m.
August data from the auto sales site AutoTrader report for the first time in 18 months a very slight drop in the price of used vehicles, which also follows an increase in inventories.
Admittedly, the drop is minimal, 0.4% between June and July, but it is part of a movement that began earlier, according to Benoit Béland, director of brand marketing at AutoTrader.
“It seems to be a trend because, when you look at the last three months, there has been a slowdown in the rise and there, we have a stabilization. We agree that a drop of 0.4% is rather neutral.
“But it’s a trend because if we link it to the inventory of used vehicles, again for almost all models, we see there too that it is stabilizing,” he explains.
Sudden increases
He adds that, although the figures for the month of August have not yet been compiled, the drop in the average price of used vehicles and the increase in inventory have been maintained and even strengthened from week to week last month, which tends to confirm that the downward trend is well established.
It must be said that the increases of the last few months have been brutal. Across Canada, the average price of a used vehicle was $37,928, up 32% from last year. In Quebec, the increase is even worse over the last 12 months, reaching 39.2%, but for an average price that is still below the Canadian average, at $35,186.
Most of these increases are attributable to the drop in new vehicle inventories during the pandemic. Breaks in supply chains, particularly on the microchip side, have caused supply to plummet, causing consumers to turn to used vehicles. However, here too the pressure is easing with production tending towards full capacity.
Lots of pre-orders to go
Benoit Béland warns, however, 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 were buying anyway and were willing to wait. It’s going to be a few months before all this demand is exhausted. »
The average price of a new vehicle has also increased, but less than that of a used one, i.e. slightly less than 20% between July 2021 and July 2022 to reach $55,469 Canada-wide and $51,122 $ in Quebec.
Discounts set aside
Mr. Béland’s explanation of the reasons for the increase in the price of new vehicles is very revealing of market practices.
“Prices have gone up because manufacturers have made almost no discounts, as they historically did to clear inventory, as what little stock was available sold out. »
In other words, it’s not so much the cost of the car that has gone up, although there is some increase year over year, but the discounts that have been taken away. The data ofAutoTrader reflect this phenomenon because they are compiled from the price displayed by the dealer.
“The dealer shows the lowest price he can offer to beat the competitor. These are prices that include discounts,” explains Mr. Béland.
And as with used vehicles, we see that the inventory of new vehicles, which has been in constant decline since the first quarter of 2021, is stabilizing although it has not yet started to rise, except in the case of trucks. This means that once the pre-orders are filled and the resumption of production will make it possible to increase the inventories of new vehicles, we can expect dealers to start offering discounts again to sell off the new inventories.
Inflation will persist
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. Also, at the moment, we all see as consumers that there is a shortage of labor everywhere in the world, that there is high inflation because of the price of oil and other foodstuffs and that affects costs of production. »
But in the case of used cars, whose intrinsic value has not increased, but whose price has exploded according to demand, will we not see a return to pre-pandemic prices? No, he replies, “because the majority of used car sales are made by dealers, the share of sales by individuals being marginal. And dealerships have operating costs, vehicle repair costs, employee costs, and all these costs are increasing. »
The Quebec difference
Every timeAutoTrader publishes its data, we note that the average price in Quebec of both used and new vehicles is well below the Canadian average and is lower than that of all the other Canadian provinces, except the Atlantic provinces.
“It’s always been like that and it’s linked to the type of vehicle you buy and which is available. We are less fond of luxury vehicles and large trucks in Quebec, if we compare, for example, to British Columbia or Alberta, which have very high sales of the famous “pickups“(vans)”, explains Benoit Béland.
“We, in Quebec, have a smaller car and less luxury. Yes, we are as much 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, have a very significant impact on the average price in a province given their much higher cost.