Shortages lead to increased prices for new and used vehicles across Canada
TORONTO -- The average price of a new vehicle has topped $40,000 in Canada and due to a lack of supply related to the pandemic prices are only going higher.
“Consumers are opening their wallets and Canadians have decided to come back to the market," according to Robert Karwel, automotive analyst with J.D. Power Canada.
Low inventory, high demand and a computer chip shortage are all causing price increases for both new and used cars.
Some factories had to shut down due to COVID-19 and car manufacturers are having trouble catching up.
Because there is a limited supply of some makes and models, you may find it harder to negotiate if you're buying a vehicle.
New vehicle prices are up about eight per cent over last year and inventory is down by about 25 per cent so many dealers have removed incentives, but that's not stopping consumers from car shopping.
J.D. Power found people are also choosing more expensive vehicles with higher trim levels. SUVs and pickup trucks make up about 80 per cent of all sales now.
They are also popular choices because some people have invested in trailers and boats during the pandemic and need a vehicle that can tow them.
Prices are also higher because there is a computer chip shortage and with so much new technology in vehicles the chips are needed for vehicle assembly.
“It caught a lot of vehicle manufacturers off guard and we are in catch up mode right now,” said Karwel.
Canadian Black Book said the lack of new vehicles is also putting pressure on the used vehicle market and prices for used models have been increasing steadily.
“In the last 12 weeks we have seen vehicle’s values, the wholesale value of vehicles go up each week," said David Robins with Canadian Black Book.
Some buyers have saved money during the pandemic from not taking vacations and working at home. Interest rates remain low and many buyers are also willing to finance vehicles over a period of seven to eight years.
There is also a shortage of vehicles in the U.S. and many used cars and trucks are being shipped across the border.
“We are not expecting things to get back to a more normal level until 2022," said Robins.
The good news is that if you're trading in your vehicle you should be able to get more money for it.