TORONTO -- Vehicle prices in Canada have hit an all-time high with the average vehicle selling for more than $40,000.

If you're looking to buy a new or used vehicle you may have thought prices would be lower due to the COVID-19 pandemic but there are several factors that are making them cost more.

It’s due to a lack of supply, incentives being held back and because Canadians want to drive more expensive vehicles.

“Vehicle pricing is rising in Canada. We have actually hit record pricing this year,” Robert Karwel, automotive senior manger with J.D. Power, said.

There has been an ongoing trend with Canadians trading in their passenger cars to buy SUVs, crossovers and pick-up trucks, which are generally more expensive.

As vehicles cost more Canadians are taking out longer loans to pay for them. According to J.D. Power the most popular loan term in Canada is now 84 months.

That’s 7 years to pay off a car loan.

“The rate over which people take the 84-month financing has accelerated under the pandemic situation right now,” Karwel said.

J.D. Power found that in Canada last year 80 per cent of vehicles purchased were SUVs, crossovers and pick-up trucks while only 20 per cent were passenger cars.

This year the number of cars sold is expected to shrink to just 16 per cent.

Brian Murphy with Canadian Black Book said “there is actually a shortage of cars right now on the new side and the used side."

Murphy said the supply of vehicles has been impacted by the pandemic as some factories had to shut down or wait for parts and it may not be until later this year that supply catches up with demand.

“All around the world there are different interruptions with factories being closed either for short or long periods of time. So they are just not making as many vehicles right now,” Murphy said.

Prices are also higher because with fewer vehicles on lots for sale manufacturers have scaled back cash incentives and financing offers.

There may still be deals to be found, but you might have to search harder to find them.