The Used Car Market in 2024 has seen some changes, as the supply chains of new cars recovered from the disruptions in semiconductor supplies and other reasons for delays in production. According to AutoTrader, the prices of vehicles, both new and used, dropped from their highs back in 2023. During the peak of the shortages, many consumers turned to the used car market due to the lack of availability in new vehicles. But as production got back on track, demand started to gradually shift back towards new cars, meaning that as buyers traded in their old vehicles, supplies of used cars started rising in Canada.
With improved supply, AutoTrader now alerts sellers that prices for both new and used cars are unlikely to return anytime soon to their pre-pandemic levels. The automotive market should see “steady” pricing for the remainder of the year, with no huge declines in price. This is because, while supply chain issues have been met, the dynamics of demand remain high.
Still, affordability is improving in the new car segment. Declining interest rates have started to make both new and used cars more affordable for consumers. AutoTrader did note that average lending rates offered by automakers recently fell to 5.3% from 6.2% in late 2023. Lower borrowing costs are taking pressure off of buyers by making car purchases more manageable.
These falling interest rates are anticipated to benefit the used car market even more in 2025, particularly when the Bank of Canada continues to cut its benchmark rate. Besides a 25-basis-point cut in June, economists forecast further cuts to the rate for the rest of 2024 and into 2025-a factor that will make financing cheaper, especially among lower-income consumers, who are more susceptible to rate changes. Therefore, second-hand cars’ demand could rebound in the year 2025, driven by increased affordability and consistent supply.
All in all, the used car market in 2024 has almost stabilized, with the automotive industry getting accustomed to post-pandemic conditions. By 2025, it is expected to see more activity in the market because of favorable interest rates and a better balance between supply and demand. While prices remain high from their pre-pandemic levels, the improving financial conditions are set to stimulate both new and used car sales in Canada.
