Used vehicle market conditions reconsidered: should buyers capitalize on decreased new sales, or is it a better time to offload a used car? Insights provided.
In the Canadian automotive market, used car sales have seen a significant surge, bucking the trend of a slight decline in new car sales. This increase in used car sales, despite some easing in new car sales prices, is largely due to high demand coupled with low inventory levels of used vehicles.
Impact and Current Situation
Used vehicle sales in Canada rose by about 1.8% in Q2 2025 compared to the same period in 2024, with year-to-date sales up 2% as well. The average used car price increased by 3.6% year-over-year to around $37,664 in June 2025. Conversely, average new vehicle prices decreased by 3.6% to roughly $64,445, but this downward trend for new cars is expected to reverse soon.
The high demand for used vehicles outpaces supply due to several factors. The pandemic has resulted in roughly 1.5 million fewer vehicle sales in Canada from 2020 to 2023, limiting vehicle trade-ins and lease returns that typically bolster used car inventory. Additionally, the scarcity of nearly-new vehicles (late-model used cars) persists because fewer leases were originated during the pandemic, keeping used inventory thin.
Used car prices have been rising for seven consecutive months into mid-2025, with Canadians shifting preferences towards SUVs, hybrids, and EVs in the used market, pushing prices higher.
Reasons for These Trends
The significant drop in new vehicle sales during the pandemic reduced the flow of used vehicles entering the market. Furthermore, tariffs and political uncertainty have contributed to consumer hesitancy and supply constraints in new vehicle markets, indirectly increasing demand for used cars.
Incentives like Quebec’s changes in the EV rebate program have shifted buyers toward nearly-new used EVs, increasing used car prices there significantly.
Future Predictions
The decline in new vehicle prices may soon end, with a possible price increase coming if tariffs are imposed or trade conflicts escalate. With used car inventories still low, the upward pressure on used vehicle prices is expected to continue in the short term. Scotiabank projects some downside risk for overall Canadian new vehicle sales in 2025 and 2026 due to tariff-related costs and economic uncertainty, potentially sustaining or further stimulating the used car market.
The trend toward higher-priced vehicle segments in the used market (SUVs, hybrids, EVs) will likely keep average used prices elevated.
In summary, the increase in used car sales and rising used car prices in Canada stem from pandemic-related inventory shortages, cautious consumer behavior partly influenced by tariff uncertainties, and shifting preferences toward more expensive vehicle categories. The new car market is stabilizing but may face upward price pressure if tariffs materialize, keeping used cars in strong demand.
Some used car platforms and dealerships reported an increase in sales in May. Many Canadians have been considering moving to used vehicles for the last four months, according to Baris Akyurek, vice-president at Autotrader.ca. The decrease in used car inventory started around the middle of last year and is linked to supply chain disruptions during the pandemic. There is a particular shortage of used cars on the road and available for sale. As demand increases for used cars, prices are expected to rise due to a fixed amount of supply.
- The surge in used car sales in Canada seems to have a ripple effect, with some Canadians shifting their focus to sports-betting market, predicting the trends of used car prices and making profitable bets in the finance industry.
- Despite the slight decline in new car sales prices, the finance sector has witnessed an increase in loans and leases for purchasing used vehicles in sports-betting industry, as the high demand for used cars outpaces supply, resulting in a battle for low inventory levels.
