Since the beginning of August, we have observed an uptick in used car demand on a year-over-year basis, driven by two key factors: (i) the overlap with a slower market from last year, and (ii) the decline in both used car prices and interest rates. The latter appears to have stimulated demand, as estimated sales figures are up by 3.3% compared to same period last year. On the supply side, used inventory has slightly decreased on a quarter-over-quarter basis as we are overlapping pandemic-era challenges from 4+ years ago with the estimated 1.5 million fewer cars sold. While we expect a seasonal uptick in vehicle availability right up until year-end, certain makes may face supply issues due to past production difficulties.
In the new car market, prices have remained stable since the end of the first quarter, but inventory is increasing, resulting in renewed incentives as automotive loan rates are declining, improving affordability overall. Based on internal transactional data as well as third-party reports, new car sales are up on a year-over-year basis, but they have slowed down in the past few months, especially when compared to the same period in 2019.
In June 2024, the average used car price fell to $35,754, an 8.7% year-over-year drop, while new car prices averaged $66,550, down 1.9% from last year. Additionally, average interest rates (subvented loans) for new cars dropped to 4.8% in September, from their peak of 6.2%, as a result of increased levels of availability and the Bank of Canada’s recent reduction in interest rates. Looking ahead to October, we anticipate continued normalization of used car prices and stability in new car prices, though a return to pre-pandemic pricing remains unlikely in the near future.
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