Skip to main content
opinion

Baris Akyurek is the vice-president of insights and intelligence at AutoTrader.

Earlier this year, I celebrated my 10-year anniversary at AutoTrader, Canada’s leading online automotive marketplace. During the first half of my tenure, until the pandemic, we didn’t experience many “macro” changes in the automotive market. Prices went up or down by a few percentage points here and there, vehicle availability didn’t change materially, there were no government mandates on electric vehicles and demand remained relatively steady – boring stuff.

But the changes have come fast and furious in the years since.

Near the start of the pandemic, supply chain disruptions and microchip shortages reduced the number of vehicles available in the market. At the same time, interest in vehicle ownership surged as some people became less comfortable using public transit and ride-sharing services, causing a spike in prices for both for new and used vehicles. This trend lasted for a few years, creating an unprecedented dynamic of high prices and low availability for consumers, and a heightened awareness of the automotive landscape in Canada. Today, the market continues to stabilize, with increased vehicle availability and decreasing prices, and consumer behaviour has been shifting accordingly. Based on our research and analyses, here are the changes I’ve seen – and the ones I see coming.

Despite all the ups and downs in the market, Canadians have found a way to keep buying vehicles, whether by adjusting their budgets, choosing more affordable models, or by expanding their search radius or parameters when availability was scarce. Sales fell slightly compared to before the pandemic, but were steady and healthy on the used side. New cars sales were affected to a greater extent because of the lack of availability, but pent-up demand pushed both used and new car prices higher as some new car shoppers were forced to settle for a used vehicle.

Starting with what consumers look for in the market, one trend reflected in the AutoTrader marketplace data is reduced interest in luxury brands, especially since the second half of 2023. That’s when the impact of high interest rates started to curb spending on luxury items. After a few years of a hot luxury market, thanks to the money Canadians saved during the pandemic – less travel, strong wage growth and solid returns on the stock market – the market is normalizing, with demand reverting to mainstream brands.

When it comes to used vehicles, our data show that cars priced below $40,000 now sell at a much faster rate compared with their more expensive counterparts, which indicates an increased level of demand for cheaper vehicles. The result has been larger price reductions for luxury brands.

This isn’t surprising when you consider the price difference between used mainstream and luxury vehicles. In September 2024, the average price of a used luxury vehicle on AutoTrader.ca had fallen 10.7 per cent (with an average price of $56,173) on a year-over-year basis, while the average price of a mainstream model dipped 8.5 per cent to an average of $29,584. If you’ve been waiting to dip your toes in the market, now might be the time.

Cash payments have become more common, especially as interest rates peaked before the Bank of Canada began lowering rates in June. Based on a number of consumer surveys we’ve conducted over the years, we know that price is the highest priority when looking to buy a vehicle. As such, buyers would rather use their lines of credit or home equity lines of credit as a “cash” payment than accept the higher interest rates charged by manufacturer’s financial arms and banks.

Additionally, consumers lengthened loan terms to keep a lid on their monthly payments. Before the pandemic, the average monthly payment for a used vehicle was $466; now it sits at $629. To adjust to these increases, used car loan terms grew to an average of almost 72 months in 2023 from 67 months. (It’s currently sitting at 70.7 months as of August 2024.)

Declining vehicle prices coupled with softening interest rates have meant the average monthly payment and loan terms have been declining since the beginning of the year; we expect to see that continue, given the anticipation that interest rates will continue to drop in the next couple of years.

That said, we don’t expect to see vehicle prices drop to where they were before the pandemic. Several trends underlie our reasoning:

Inflation. While car prices have come down from their peak, high inflation over the past few years has kept prices elevated.

Vehicle preferences. Canadians continue to prefer larger vehicles, such as SUVs and trucks, over less expensive sedans.

EV transition. Based on our analysis, electric vehicles are priced about 20 per cent higher compared with their internal combustion engine counterparts.

Both the automotive market over all and consumer preferences have shifted since the pandemic. That said, car ownership remains a priority for Canadians. Based on our survey of 324 people conducted by Dig Insights in August, 27 per cent of the Canadians we surveyed said they plan to buy a vehicle in the next six months. Despite the proliferation of different transportation options and alternatives over the past few years, having access to a vehicle remains important for Canadians.

With increased vehicle availability, prices are decreasing, and both new and used cars are selling well. Canadians have a deep-rooted affection for cars and, based on recent trends, it appears to be a long-term commitment.

We anticipate further growth in the market over the next couple of years and expect sales will return to prepandemic levels by 2026.

Shopping for a new car? Check out the new Globe Drive Build and Price Tool to see the latest discounts, rebates and rates on new cars, trucks and SUVs. Click here to get your price.

Follow related authors and topics

Authors and topics you follow will be added to your personal news feed in Following.

Interact with The Globe