The average price of used vehicles is finally starting to fall
For the first time in 18 months, the auto sales site AutoHebdo reports a very slight drop in the price of used vehicles.
Prices used vehicles are showing signs of a decline after two years of marked increases, caused in particular by the scarcity of new vehicles.
August data from the auto sales site AutoHebdo show, for the first time in 18 months, a very slight drop in the price of used and second-hand vehicles. x27;an increase in inventories.
Of course, the price drop is minimal, i.e. 0.4% between June and July, but it is part of a movement that began more early, according to Benoit Béland, director of brand marketing at AutoHebdo.
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 Links it to the inventory of used vehicles, again for almost all models, we see that it is stabilizing, he explains.
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, says Mr. Béland. According to him, this 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, prompting consumers to turn to used vehicles. However, here too the pressure is easing with production tending towards full capacity.
Benoit Béland warns, however, that it will take longer to ease the pressure on the price of new vehicles.
The problem is that he there were 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 by just under 20% between July 2021 and July 2022, to reach $55,469 Canada-wide and $51,122 in Quebec.
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 been discounting almost nothing, as they historically did to clear inventory, as what little stock was available was selling out. »
— Benoit Béland, Director of Brand Marketing at AutoHebdo
In other words, it's not so much the cost of the car that has increased, although there is some increase year over year, but discounts have been taken away. AutoHebdo data reflects this phenomenon because it is compiled from the price displayed by the dealer.
The dealer posts the lowest price they can offer to beat the competitor. These are prices that include discounts, explains Mr. Béland.
And as on the used vehicle side, 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 for trucks. This means that once pre-orders are filled and the resumption of production allows new vehicle inventories to increase, we can expect dealers to start selling again. offer discounts to sell new inventory.
However, Mr. Béland warns, prices will not return to pre-pandemic levels.
“Once prices rise, it is extremely rare in any area for them to return to normal. »
— Benoit Béland, Brand Marketing Director at AutoHebdo
Also, at the moment, we all see as consumers that there is a labor shortage everywhere in the world, that there is high inflation because of the price of oil and other commodities and that affects production costs, adds Mr. Béland.
In the case of used cars, whose intrinsic value has not increased, but whose prices have exploded according to demand, will we not see a return to prices before the pandemic? No, he replies, because the majority of used vehicle sales are made by dealers, the share of sales by individuals being marginal. And dealerships have operating costs, vehicle reordering costs, employee costs and all these costs are increasing.
Every time AutoHebdo publishes its data, we notice that the average price in Quebec, for both used and new vehicles, is well below the Canadian average and lower than all other Canadian provinces. , except the Atlantic provinces.
It's always been like that and it's related to the type of vehicle that one buys and that is available. We are less fond, in Quebec, of luxury vehicles and large trucks, if we compare for example to British Columbia or Alberta, which have very high sales of the famous pick-ups< /em> [vans], explains Benoit Béland.
We, in Quebec, have smaller cars 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 pick-ups which, he points out, have a very significant impact on the average price in a province given their much higher cost.