Canadian used car forecast: Four more years of high prices

Hancock said since the start of 2022, used-vehicle prices have risen 4.1 per cent. However, he said the data suggests the peak of pricing was in 2021 and it has been tapering off, on average, since.

Hancock doesn’t see the surge in used-vehicle prices as a bubble that’s about to burst. He said he’s forecasting a gradual tapering off through to 2026.


Russia’s invasion of Ukraine in February caused gasoline prices to surge across Canada, and Hancock said that’s reflected in the data on used-vehicle purchasing. While demand for full-size pickups and utility vehicles has fallen, it’s up for smaller vehicles.

Wholesale prices of pickups remain strong, but whether dealers will continue to pay those prices is uncertain, he said.

“While we’ve seen prices decline by 1.7 per cent in the wholesale market [since the start of 2022], I’m sure the price that some dealers are willing to pay is a lot less than in [the fourth quarter of 2020].” Demand has shifted toward smaller, more fuel-efficient vehicles, and has helped slow the slide in sales of compact cars.

“With gas prices significantly increasing in [the first quarter], we have seen smaller, more fuel-efficient vehicles perform better than their counterparts … with [prices of] subcompact cars leading the way up 10.1 per cent in the quarter.

“We also start to see them [consumers] kick the tires of electric vehicles.”

All this means dealers need to shift their strategies from pre-pandemic times, Hancock said.

“Dealers have to be getting creative on how they’re acquiring cars, and also, paying a bit more.”

Scott Greer, director of used-vehicle services at Winnipeg-based Birchwood Automotive Group, which operates 21 dealerships in Manitoba, Saskatchewan and North Dakota, said the inventory crunch has shifted how franchised dealerships stock their lots.


Greer said dealers need to focus heavily on securing strong trade-ins, as auctions and private sales aren’t providing enough vehicles to support profitability.

“So, the digital-only formats [Canada Drives, Clutch] will have acquisition advantages there, thus leaving the OEM bricks-and-mortar stores to manage the trade win as a percentage of retail volume,” he said.

Those digital format operators buy cars directly from consumers, offering an online portal where owners can enter the VINs and receive a binding offer to buy the vehicle.

Cody Green, founder and co-CEO of Canada Drives, which operates in British Columbia, Alberta, Saskatchewan and Ontario, said he believes the online model is the eventual future of the used-car industry.

“Demand [for online transactions] is increasing month over month,” he said. “I do think it’s something that’s going to influence the industry at large.”

Hancock said the premium on used-vehicle pricing is also causing a change in how consumers sell their vehicles to maximize their return.

“Consumers are smart, wellaware, well-informed and they’re looking to maximize the value for that car and their equity position on that car,” he said. “So, they’re also shopping their cars around to other dealerships to see if somebody is willing to pay more.”

Hancock said the high prices on some used vehicles are even enough to drive sales of premium cars. “It gives them that opportunity to reach up to the next level and buy a bigger car or a more luxurious car.”