Car Deal Canada

Are Used Car Prices Going Down?

Are Used Car Prices Going Down?

Used car prices skyrocketed to unprecedented levels during the pandemic as supply chain issues led to low inventory. However, recent data shows that prices have started to decline and may continue falling throughout 2024. This is welcome news for car buyers who have been struggling with affordability.


While prices are down from their peak, the used car market is still well above pre-pandemic levels and unlikely to normalize for a few more years. In this comprehensive guide, we’ll examine the factors causing prices to moderate and how low they could go by the end of 2024. We’ll also explore the best timing for buyers to maximize savings as well as advice for those looking to sell or trade-in.


From an in-depth price history and regional differences to how dealers set prices and negotiation strategies, we’ll cover everything you need to navigate the gradually improving used car market in 2024.

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When Will Used Car Prices Start to Drop Significantly?

Used car prices have come down from their peak in early 2022, but the declines so far have been gradual. According to industry data, prices are down around 13.8% from their record highs hit during the pandemic. However, prices still remain well above pre-pandemic levels as of early 2024.

Experts caution that buyers should not expect a sudden dramatic drop in used car prices. The market is more likely to see a steady, gradual decline over the next couple years. This is because the supply chain issues that constrained new car inventory and pushed up used car demand have been slow to improve. Chip shortages and other factors are still limiting production.

Most analysts do not anticipate the used car market fully returning to normal pricing until 2025 or 2026. The supply-demand imbalance has been significant enough that it will take a few more years to work through the backlog as production increases. So while used car prices are moving in the right direction for buyers, significant relief is still likely a year or more away.

 

What’s Driving the Price Decline?

There are several key factors coming together to drive down used car prices from their historic highs over the last couple years:

 

Improving New Car Inventory

As supply chain issues ease and production ramps back up, new car inventories are steadily improving. This means more people are able to purchase the new vehicles they want, leading to increased trade-ins flooding the used market. Dealerships are replenishing their used inventories, taking pressure off prices.

 

Rising Interest Rates

The Federal Reserve has aggressively raised interest rates to combat inflation. This has made auto loans more expensive. With financing more costly, fewer buyers can afford the monthly payments on overpriced used cars. Demand is cooling as interest rates price some people out of the market.

 

Inflation Reduction

High inflation strained household budgets, cutting into discretionary spending on big ticket items like used cars. As inflation shows signs of peaking and beginning to moderate, more consumers may be able to afford upgrading their vehicles again. This should stimulate demand, allowing prices to inch down.

 

How Low Could Prices Go By the End of 2024?

Industry experts are predicting that used car prices could decline 10-15% from their 2022 peak by the end of 2024. While this would represent a significant drop, prices are still expected to remain 10-20% above 2019 levels in many areas. Luxury vehicles in particular are likely to see the steepest declines.

Kelley Blue Book projects that overall used vehicle prices will be down 12-15% in late 2024 compared to the market peak in early 2022. However, they note that prices are not likely to return to pre-pandemic levels for a few more years beyond that. Used car pricing analysis by Cox Automotive predicts a similar 10-14% decrease in average used car prices from 2022 to 2024.

Even with these double-digit drops, analysts say prices will remain elevated compared to 2019. For example, ALG estimates used car prices will still be up 15% versus three years ago. J.D. Power sees a smaller but still significant gap of around 10% higher prices by end of 2024 relative to 2019. This means buyers shouldn’t expect 2019-level pricing for at least another couple years.

One vehicle segment projected to experience larger than average declines is luxury cars. Due to extremely high demand and low inventory over the past two years, prices escalated rapidly for used luxury vehicles. Kelley Blue Book expects previously owned luxury car prices to fall 15-20% in 2024 as supply improves and economic uncertainty causes some high-end buyers to pull back. So consumers looking for a deal on a used BMW, Mercedes, or Lexus may find late 2023 and 2024 to be opportune timing.

 

Best Time for Consumers to Buy Used Cars

Timing your used car purchase right can help maximize savings. Based on market conditions, the best window to buy will likely be late 2023 into 2024. Here’s why this period presents an optimal opportunity:

 

Prices Moderating but Inventory Still Low

By late 2023, used car prices should have come down from their pandemic highs. However, dealer inventory is expected to remain tight for a few more years as production slowly catches up. Buying in this sweet spot means benefiting from lower prices before supply normalizes and competition among buyers returns.

 

Increased Flexibility on Features

With more used car options available, buyers will be able to be more flexible on colors, trim packages, and other non-essential features. This maximizes the potential for savings compared to the last two years when specific vehicles were hard to find.

 

Leverage Through Financing Pre-Approvals

Getting pre-approved financing also helps strengthen a buyer’s negotiating position. Dealers make a good chunk of profits from financing, so a pre-approval locks in attractive interest rates. The buyer gains leverage to focus negotiations on the purchase price rather than monthly payments.

 

What to Do If You Need to Sell or Trade In Your Used Car?

If you currently have a used car you are looking to sell or trade in, it’s important to be strategic with your timing to maximize the value you can get:

 

  • Act sooner rather than later to sell or trade in your used car. The used car market is expected to gradually decline over 2023 and 2024 as inventory levels improve. Selling or trading in sooner maximizes the current elevated value you can get.
  • It’s still largely a seller’s market for clean, well-maintained used cars. Dealers are still facing tight inventory, so you have leverage to negotiate a strong trade-in value or sales price for your vehicle.
  • Avoid selling your car through wholesale auctions. Auction prices have plummeted 50% or more from the peak and represent the rock bottom wholesale value. You’ll maximize your return by selling privately or trading into a dealer.

 

By acting quickly and understanding you still have negotiating power as a seller, you can minimize depreciation and get top dollar for your used car during the gradual market cooldown over the next year or two.

 

Used Car Price History

The used car market saw unprecedented price increases during the COVID-19 pandemic. As new car production slowed due to supply chain disruptions and shortages, demand shifted to used vehicles. Prices for used cars skyrocketed, with some models appreciating over 30% in 2020 alone. This pricing bubble continued into 2021 and the first half of 2022.

By mid-2022, used car prices hit their peak. The average used vehicle was priced around 40% higher than pre-pandemic levels. Since then, prices have been gradually declining as supply chain issues improve and inventory rises. However, as of late 2022, used car prices remained about 15-20% above where they stood before the pandemic.

The rate of price decline has varied by vehicle segment. Used pickup trucks held their inflated pandemic values the longest but have dropped sharply in recent months. Compact and midsize sedans have seen a more gradual descent. Luxury brands like Mercedes and BMW depreciated faster than mainstream counterparts. Still, even in segments with steeper declines, used car prices remain well above 2019 averages.

 

Factors That Impact Used Car Prices

Several key economic factors influence used car prices and determine if they will rise or fall in a given period:

 

New Car Inventory

When new car inventory is low due to supply chain issues or high demand, it drives more buyers to the used market. This increased demand allows dealers to charge higher prices for used models. As the new car supply improves, buyers have more options and used prices tend to moderate.

 

Interest Rates

Higher interest rates make monthly car payments more expensive. This deters some buyers, especially those with lower credit scores who pay higher loan rates. As a result, consumer demand cools and used car prices soften.

 

Gas Prices

When gas prices rise, drivers tend to shift toward more fuel efficient vehicles. This increases demand and prices for used economy cars and hybrids, while lowering demand for used trucks and SUVs.

 

Unemployment

High unemployment reduces consumer buying power and discretionary income available for major purchases like used cars. As unemployment falls, more buyers can afford to purchase used vehicles, boosting demand and prices.

 

Consumer Spending

Strong consumer spending and confidence supports a robust used car market. When consumers are hesitant to spend due to recession fears or other concerns, used car sales decline and dealers lower prices to attract buyers.

 

Regional Used Car Price Differences

Used car prices can vary significantly depending on the region of the country. Certain parts of the U.S. consistently see higher used car prices while other areas tend to have lower prices.

In general, used car prices tend to be higher on the West Coast and Northeast. Large coastal cities like Los Angeles, San Francisco, Seattle, New York and Boston routinely top the lists for most expensive used car prices. The combination of high demand and wealthier populations drives up pricing in these regions.

Conversely, the Midwest and Rust Belt regions have traditionally had some of the lowest used car prices. Cities like Cleveland, Detroit and St. Louis don’t command the same premiums as the coasts. This region has lagged behind economically, keeping demand and prices lower.

There are also differences between urban and rural areas. Major metropolitan cities have elevated used car prices compared to small towns and rural communities. The increased competition in densely populated cities is a key factor in the pricing gap.

Regional used car prices are impacted by a variety of economic and demographic factors. Understanding these regional differences can help buyers find deals and maximize their budgets. Being flexible on location is one way to potentially save thousands on a used car purchase.

 

Price Changes by Vehicle Type

Used vehicle prices have not declined uniformly across all vehicle types. Certain segments have seen steeper drops while others remain resilient.

Full-size trucks and SUVs continue to command a premium in the used market. Average prices for used full-size pickups like the Ford F-150 and Chevy Silverado are down just 8-12% from 2022 peaks. Midsize trucks and SUVs have seen slightly larger declines around 10-15%.

In contrast, prices for mainstream sedans and hatchbacks are down 15-20% on average. Compact cars tend to depreciate faster and have felt the cooling market more sharply.

Hybrid and electric vehicles are a mixed bag. Used EV prices have held up better than gas counterparts, with Tesla models dropping only 5-10%. The limited inventory is keeping prices elevated. However, used hybrids like the Toyota Prius have fallen similarly to gas compacts.

Luxury vehicles have been impacted most significantly. Premium brands like BMW and Mercedes have fallen 20-25% from their peak. Limited-edition performance models are being hit even harder. This creates opportunities for buyers willing to consider a higher-mileage luxury model.

Looking ahead, trucks and SUVs may start to see larger declines if fuel prices rise again. Sedans and hybrids are likely to remain affordable in the used market through 2024. Luxury cars still have room to fall further as inventory opens up.

 

How Dealers Price Used Cars

Car dealers use several key factors to determine pricing for the used vehicles they sell on their lots. These include:

 

Auction Prices

Dealers frequently buy inventory at wholesale used car auctions. The prices paid at recent auctions for similar vehicles provides a baseline for their retail asking price. If auction prices have been declining due to high supply, the dealer has more flexibility to reduce their retail price.

 

Market Analysis

By analyzing current local market data on pricing trends and demand for specific used models, dealers can adjust their prices accordingly. If market prices have softened for SUVs, the dealer will lower prices to remain competitive.

 

Condition Assessments

Dealers thoroughly inspect trade-ins and auction vehicles to assess condition and identify any reconditioning needed. Higher-condition used cars warrant higher pricing than rough vehicles requiring significant repairs and detailing.

 

Negotiating a Fair Used Car Price

Getting the best possible deal on a used car involves arming yourself with information and being willing to walk away if you can’t reach an agreement. Here are some key tips for negotiating a fair price in today’s market:

 

Research prices – Use resources like KBB and Edmunds to find the typical listing price, as well as the fair purchase price range, for the specific make, model, year and trim you want. This gives you a solid baseline for comparison.

Be flexible on features – Opting for a car without navigation or leather seats can provide big savings. Focus on the must-haves like mileage, condition, and reliability.

Check interest rates – Secure pre-approved financing so you know the rate you qualify for. Use that as leverage if the dealer offers a higher rate.

Wait for better market – If you can delay your purchase 6-12 months, you may get much lower prices as supply improves. But act fast once you see declines.

By arming yourself with pricing knowledge, having financing ready, and being willing to compromise on features, you can negotiate the very best used car price even in today’s overheated market.

 

Maintenance Costs of Used Cars

Maintenance is a key factor to consider when buying a used vehicle. Older and higher mileage cars will typically have more frequent and costly repairs.

Age and mileage are major determinants of maintenance costs. As a general rule of thumb:

 

  • Under 5 years old – Expect minimal repairs if vehicle was well maintained
  • 5-10 years old – Maintenance costs start to rise, check belts, hoses, fluids
  • Over 10 years old – Higher likelihood of repairs needed, budget extra
  • Under 50,000 miles – Low maintenance costs anticipated
  • 50,000-100,000 miles – Monitor oil consumption, shocks, brake pads
  • Over 100,000 miles – Increased repairs likely, inspect transmission, gaskets

 

Brand reliability also impacts maintenance costs. According to Consumer Reports, Toyota, Lexus, Mazda consistently rank as most reliable brands needing fewer repairs. Luxury European brands like Mercedes-Benz, BMW typically have higher than average maintenance bills.

DIY maintenance can save significantly versus paying a professional mechanic. Basic services like oil changes, brake pads, battery replacement can easily be done yourself with minimal tools and experience. However, major issues like transmission rebuild or engine repair often require a certified technician.

 

Alternatives to Buying Used

For some buyers, purchasing a used vehicle may not make the most sense. Here are a few alternatives to explore:

 

Certified Pre-Owned (CPO)

CPO vehicles provide some of the benefits of buying new with the lower cost of used. CPO cars are typically off-lease returns that are less than 5 years old with low mileage. They undergo extensive reconditioning and inspection by dealers and come with extended factory warranties.

Pros of CPO: Still have new car warranty, rigorous inspections, often feel/drive like new. Cons: More expensive than regular used cars, limits selection to certain brands.

 

Leasing

Leasing allows you to essentially “rent” a new vehicle long-term for a monthly payment, usually 2-4 years. At the end of the lease, you return the car instead of owning it. Leasing advantages include always driving newer vehicles with warranty coverage and lower monthly payments than financing.

Downsides of leases include mileage limits, wear-and-tear charges, and lack of equity. Leasing best for those wanting new cars every few years.

 

Rental and Car Sharing

Renting a car as-needed through services like ZipCar or Turo can be cost effective if your driving needs are infrequent. Hourly and daily rentals give you access to vehicles without ownership. Drawbacks are limited availability for spur of the moment trips.

 

Public Transportation

Buses, subways, trains and other public transit remove the need to own a vehicle. This can drastically reduce transportation costs for city dwellers. However, it does limit spontaneity and travel radius. Public transportation works best for commuting and in dense metro areas.

 

Conclusion

In summary, used car prices are finally starting to moderate after reaching unprecedented highs during the pandemic. However, the market is not likely to return completely to normal 2019 levels for at least another year or two. Buyers stand to benefit from significant savings by timing their purchase in late 2023 into 2024 as inventory improves and prices decline 10-20% from the 2022 peak.

Sellers still have some pricing power if they act quickly, before values fall further in 2024 and beyond. Overall, the used car market is moving in a positive direction for consumers, although some patience will be required to find the best possible deals.

For buyers, be flexible on color and trim options to maximize savings. Have your financing pre-approved for maximum negotiating leverage. For sellers, move quickly to private party or trade-in channels to get top dollar before wholesale auctions drop further. With the right timing and preparation, both buyers and sellers can still succeed in today’s used car market.

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Questions About If Used Car Prices Are Going Down

Yes, used car prices in Canada have been slowly declining for the past few months after reaching record highs during the pandemic. Prices are down around 5-10% on average from their peak, but still remain above pre-pandemic levels by around 15-20%. There is still high demand and tight inventory in the Canadian used car market.

Experts predict it could take a few years for used car prices in Canada to return to pre-pandemic levels. Prices are expected to gradually decline through 2024 and 2025 before stabilizing. Factors like supply chain issues, high inflation, interest rates, and economic uncertainty continue to put upward pressure on prices.

The biggest factors causing used car prices to slowly drop in Canada are improving new vehicle inventories, reduced demand as high prices deter buyers, rising interest rates making financing more expensive, and inflation easing from its peak. This is gradually easing the intense supply-demand imbalance in the market.

Yes, pickup trucks, SUVs, and luxury vehicles are seeing faster price declines than other segments in Canada’s used vehicle market. These categories surged the most in pricing during the pandemic and had the farthest to correct. More affordable compact cars and hatchbacks are holding value better as demand remains strong.

Tips for finding the best used car deals in Canada include being flexible on vehicle color and options, increasing your budget range slightly, considering older models with lower mileage, shopping at high-volume dealers with greater inventory, and looking at less popular models that may have better offers.

The best places in Canada to find affordable used car deals include auto classified sites like AutoTrader.ca and Kijiji Autos, dealer websites, used car retailers such as Car Nation Canada, auctions through sites like ICBC Auctions, police auctions, and from private sellers. Shopping locally also provides opportunity.

Most experts recommend waiting at least 6-12 months for the used car market prices to decline further in Canada if your current vehicle remains operable. However, the best timing ultimately depends on your budget, needs, and the rate of depreciation for the particular make/model you want.

Currently, used car prices tend to be most affordable in Alberta and Atlantic Canada. High availability and slower recovery from economic impacts of the pandemic have kept prices lower than other major markets like Ontario, British Columbia and Quebec on average.

Trucks, SUVs, crossovers and minivans typically hold value the best in the Canadian used car market. Especially full-size truck models like the Ford F-150, Ram 1500 and models from GM. Small cars and sedans depreciate faster on average, along with luxury brands.

Yes, the federal government offers Canada Greener Homes Grants of up to $5,000 for purchasing used electric or hybrid vehicles. Certain provinces like Quebec also have additional used EV rebates, while others like British Columbia target new EV purchases.



Tips for negotiating used car deals in Canada include researching prices for the specific make, model and year vehicle online for comparison. Get quotes from multiple dealers, know the average asking price, inspect vehicle thoroughly before final offer, avoid discussing monthly payments early, and be ready to walk away if you can’t reach an acceptable total price.

The most reliable brands for used cars in Canada are typically Toyota, Honda, Mazda, Subaru and Hyundai/Kia based on lower ownership costs and longevity. Recommended models include the Toyota Corolla, Honda Civic, Mazda3, Toyota RAV4, Honda CR-V and Subaru Legacy.

Buying a CPO used vehicle from an authorized dealer in Canada can be worth the extra cost. They undergo extensive inspection/reconditioning and include additional warranty coverage. However, non-certified used vehicles also can represent good value if properly inspected.

Tips for ensuring reliability of private used car purchases in Canada include taking the vehicle for inspection by an independent mechanic, requesting all records/maintenance history, verifying details like accidents through Carfax, reviewing technical service bulletins for known issues, and extensively test driving the vehicle.

Used car financing options in Canada include secured car loans from banks, unsecured personal loans also offered by financial institutions, dealership financing from places like TD Auto Finance and Scotiabank Car Loans, private lending companies like Rifco National Auto Finance, and secured lines of credit against home equity.

Insurance costs for used vehicles in Canada range quite broadly based on driver profile and location, but typically average approximately $1400 per year. Sport cars and vehicles in major metro areas tend to pay higher premiums on average when insuring used vehicles.




The best websites for locating upcoming used vehicle auctions in Canada include Auto Auctions Canada, which provides listings by province, along with Repokar Auctions, Auction Canada, and Manheim Auctions. Police departments and towing companies also conduct auctions.



 

Important things to address right after purchasing a used car in Canada include transferring registration, obtaining license plates if required, updating your driver’s license, reviewing all included warranties/coverage, purchasing insurance slip from broker if not done already, completing safety certification if needed, and addressing any required maintenance.

When test driving used cars in Canada, you’ll want to assess overall handling/acceleration, listen for odd noises from engine/transmission/brakes, check all functions like heat and A/C, screens, lights, signals, inspect fit and finish, bring an OBD scanner to check for error codes, have a mechanic verify mechanical condition, and test various road conditions.

Finding the best used EV deals and incentives in Canada is possible through sites like ElectricVehicleDiscoveryCentre.com which compiles offers by region. Provincial governments like British Columbia also offer rebates up to $3,000 for used electric cars, while dealers sometimes discount used EVs significantly as demand fluctuates.

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