While the sales figures released by AutoTrader in December recorded a slight decrease in new vehicle prices, in January that trend reversed, according to Baris Akyurek, AutoTrader Vice President in an interview with Canadian auto dealer. This bodes well for the coming year, or at least the next few months.
“So far in 2023, we are seeing a very strong market, both for new and used,” said Akyurek. “Our view of November, December, was that the market had been slowing down, especially for used vehicles, from July to the end of the year. But starting off 2023, it’s been very, very strong,” he said.
While manufacturing isn’t 100 per cent back to pre-pandemic levels, the conditions are slowly improving, and the pent-up demand from the past year will continue to push up sales on the new side. “Inventory’s been going up pretty steadily. The more cars there are, the more sales that happen,” he said. “Which indicates that there’s still quite a bit of pent up demand in the market. Yes, the inventory levels have been going up, but compared to where they used to be pre-Covid, they’re still on the lower side. So there’s a way to go. But we are seeing positive signs on the new side of things.”
On the used side, the average listing price of a used car in Canada at the end of January was $39,725. Average used car prices had been coming down since July of 2022, until the end of December, when the average price was $36,240. So why this increase all of a sudden? “There are two high level drivers for this,” said Akyurek. “One is seasonality. So we have been crunching our price index data going back to the beginning of 2018. And every single January we see this eight- to 10 per cent increase in average vehicle prices.”
The second driver is that when there’s a hot market, obviously, prices go up accordingly. Higher prices for new vehicles serve to push a segment of the buyers into the used market, and high demand translates to higher overall prices for the used market. “So these are the two main reasons as to what we believe is going on in terms of used car prices,” said Akyurek.
AutoTrader predicts that in the next couple of months the price increases will begin to plateau, but according to Akyurek, “We do not expect the prices to go back to pre-pandemic levels anytime soon.”
