Canadian car buyers hoping to purchase a used vehicle before a summer trip can expect two things: fewer options and higher prices.
A global shortage of semiconductors, a small but crucial computer chip used in new vehicles, slashed production for months.
The situation sent shock waves through the North American auto industry, causing long wait times for new vehicles and increasing the demand and cost of used vehicles.
The problem is expected to worsen in Canada in the coming weeks as the economy reopens and pent-up demand from repeated lockdowns hits the market, experts say.
“The impact of the shortage has been slightly mitigated in Canada so far this year, mainly due to lockdown restrictions from COVID-19,” said James Hancock, director of business development for Canadian Black Book, a company in automotive data analysis.
The stock of new cars is currently down about 20 percent in Canada, he said. But that shortage is expected to worsen as the country gets back on its feet.
In the United States, for example, where the status quo has largely been the status quo in recent months, the stock of new cars is down 50%, Hancock said.
This shortage has driven up the cost of used cars in the United States, with some high-demand used vehicles now more expensive than the price of the original sticker.
For example, the price of the window sticker on a 2019 Toyota Tacoma SR double cab pickup truck was just under US $ 29,000 when it was new. Two years later, American dealers are paying almost $ 1,000 more to buy the same vehicle, even if it is used.
“We’ve been kind of immune if you compare us to the United States,” Hancock said. “Their used car prices are extremely high, about 150% above what they were at the start of the year. Canada is just beginning to feel the brunt of the semiconductor shortage. “
The situation in Canada is exacerbated by the export of used vehicles to the United States
Canadian dealers are increasingly bidding up on US dealerships willing to pay a premium on used cars because of a favorable exchange rate and higher prices, said Warren Barnard, executive director of Used Car Dealers Association of Ontario.
“I hear stories from our members about the ridiculously high prices for used vehicles at auction, which of course ultimately trickle down to the retail buyer,” he said.
Used vehicle exports are up 55% from 2020 and 27% from 2019, according to figures from the Canadian Black Book.
In addition to the shortage of vehicles, there is a sudden influx of new car buyers.
Industry experts say many new car buyers previously relied on public transport and carpooling, but due to concerns over COVID-19 and the desire to take road trips amid international travel bans, they choose to buy a car.
Meanwhile, many people at the end of a lease now choose to buy back their vehicle, which further tightens the offer, experts say.
“More and more people are buying back their leases and keeping the vehicle,” Barnard said. “They do the math and decide to keep it. “
As the cost of buying a lease is increasingly lower than the current value of the vehicle, he said they can turn around and trade it in for more or sell it privately.
The mix of low supply, high demand and soaring prices is “a perfect storm,” Barnard said.
“I haven’t heard of any two-year-old vehicles really gaining in value here yet, but it wouldn’t surprise me if that happened,” he said.
According to Autotrader.ca, an online auto marketplace that tracks price changes based on its listings, the average price of a used vehicle in June rose 9.4% to $ 28,305.
“This is the highest average price recorded for a used vehicle,” said Baris Akyurek, director of marketing intelligence at AutoTrader.ca.
But across the country, figures from the Canadian Black Book show used car prices to move closer by more than 20%, and prices are expected to continue to climb as the supply of new cars declines and consumers continue to climb. are turning to used vehicles, Hancock said.
Problems in the auto sector may hamper Canada’s economic recovery, as many companies depend on service vehicles to operate, experts say.
“We ordered 15 vehicles last fall which were due to arrive in January and we are just starting to see some of them arriving now,” said Bill Dowd, Founder, President and CEO of Skedaddle Humane Wildlife Control.
The company operates a fleet of service vehicles across the country, including models such as the Ram ProMaster Cargo Van and the Ford Transit Connect Cargo Van, but had to consider other options, he said.
“We were looking to hire people, but because we couldn’t get vehicles, we had to postpone hiring,” he said. “Spring is our busy time and we were losing so much business that we finally decided to bite the bullet and went to a local dealership. “
But a truck with a typical price of around $ 30,000 was marked up by over $ 10,000, Dowd said.
“They were definitely inflating prices because of demand. But we took what we could get.
For car buyers who need a new vehicle but are hoping to wait until the storm is over, it could take some time, experts say.
GM Canada said semiconductor sourcing remains a global issue affecting many industries, including the automotive industry.