Average new car price in Canada now tops $66K

At the height of the pandemic, many car dealerships had empty lots and customers waiting for orders as factories had to shut down due to supply chain issues and a shortage of microchips.

Now, due to low inventory levels and a surge in demand, new and used car prices continue to rise.

The Price Index Report of New Vehicles by AutoTrader found the average new vehicle price in June 2023 was $66,288, a 21.3 per cent increase over June 2022.

The average used vehicle price was $39,645, a 4.1 per cent increase over the same time last year.

AutoTrader said that not only do both new and used vehicles cost more, but consumers also need more time to pay for them.

"Loan terms have increased over the past four years. Going back to June of 2019, it was 68 months, and now it is 72 months. Consumers are paying more for vehicles and taking longer to pay for them," said Baris Akyurek, Vice President of Insights and Intelligence with AutoTrader.

It's not just price; many car buyers choose to buy used vehicles because the new ones they want are unavailable.

"Thirty-one per cent of people who bought a used car last year bought one because they couldn't find a new car they were looking for," said Akyurek.

Inflation and rising interest rates also make new and used car purchases more expensive. Average monthly payments for used cars have ballooned from $466 in 2019 to $639 in 2023.

Canadian Blackbook, which analyzes the value of new and used vehicles in the market, said rising interest rates make car loans much more expensive.

"They are affecting the car business in a massive way right now, on the new car side especially. When you are leasing a vehicle, it's not uncommon to see an eight or nine per cent interest rate on a 48-month lease," said Daniel Ross, Senior Manager, Industry Insights and Residual Value Strategy at Canadian Blackbook.

Many people are also spending more repairing and maintaining their cars to try and make them last longer.

If you're looking to buy a new or used vehicle, you may have to settle with what is available.

"You might not be able to find the colour trim, the make and model in the marketplace, and that's a real cause for concern for many buyers," said Ross.

New car inventory levels have increased over the past year and continue to rise, which may lead to lower prices in the future.

"Things have been improving, but the pent-up demand is pretty big, so it's probably going to take a while to absorb all these cars, and when that happens, we are probably going to see some softening in the prices," said Akyurek. "When that is going to happen, I think that is the million-dollar question."