Used vehicle prices are dropping. Why you might want to hold off on your purchase

Click to play video: 'CONSUMER MATTERS: Pre-owned vehicle prices are dropping, but you should hold off on buying'
CONSUMER MATTERS: Pre-owned vehicle prices are dropping, but you should hold off on buying
High interest rates and increasing new vehicle supply are reasons why used vehicle prices are dropping. Still, some industry experts say it's best to hold off on a pre-owned vehicle until later in the year. Consumer Matters reporter Anne Drewa has more – Jan 17, 2023

If you are in the market for a used vehicle, some auto industry experts are advising to wait until later in the year to make your purchase.

“The cars that dealers have on their lots now that are used, they would have bought them when we had much higher used car prices in 2022,” said Motormouth YouTube Channel’s Zack Spencer.

“Now it’s 2023, I think the prices will be sticky for a while and then when they replenish those cars with the cheaper cars that are being sold at auction – the prices will start to come down.”

Unlike the last couple of years which saw the cost of pre-owned vehicles soar due to a lack of new car inventory, Canadian Black Book’s Daniel Ross said used cars are forecast to drop to more normal levels and estimates used vehicles are depreciating about two per cent per month.

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“It’s usually about 10 to 12 per cent overall that we see vehicles degrade in value over a typical year,” Ross told Consumer Matters.

“We are expecting around that now that we are getting back to depreciating values instead of values appreciating in the used market.”

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Consumer Matters: Battle for price protection

Driving much of the trend are rising interest rates and slowing consumer demand.

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“We hear a lot on the mortgage side that’s increased, but it’s not uncommon for financing rates to be five or six per cent when they used to be zero or one or one-and-a-half 24 months ago,” Ross said.

Vehicle stocks in general are expected to replenish, as prospective buyers take a closer look at their bottom line.

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“So the new cars we have all been waiting for, people have been putting orders in for a year, year-and-a-half, two years,” Spencer added.

“Those cars are going to start coming in now at much higher interest rates.

“So, the people that were waiting for those cars might not be able to afford them any longer.”

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Analysts also expect high fuel costs will continue to influence consumer choice when it comes to selecting a vehicle.

Right now, Ross said used pickup trucks and full-size SUVs are in less demand.

“With high gas prices and the cost of borrowing increasing, those expensive cars to own and run are now being less demanded in the marketplace,” he said.

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In contrast, Ross said used compact SUVs and smaller vehicles are retaining their value and not dropping in price as fast as larger vehicles.

He added that while the downward trend of pricing has started for used vehicles, it’s best to wait before you buy.

“This year if you can wait, it will probably benefit you. Values have started to go down. They are probably going to have relative stabilization this year so timing is key,” said Ross.

“Cost of borrowing is high right now. Whether it’s going to decrease in 12 months, 18 months — we can only speculate that, but if you must buy a vehicle in the used market for now, aim at a smaller vehicle if you can get away with it.”

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