Today, for many North American consumers, buying a car means coming down with a hard case of sticker shock. These days, the average price of a used vehicle almost equals that of a new car in 2018.
According to Autotrader.ca, the average price of a new vehicle stood at $63,264 in the third quarter of last year, compared to $36,911 for a used vehicle. By way of comparison, Birchwood Credit estimates that in September 2018, a new vehicle sold for around $36,100 on average, and a used one for around $19,400. In seven years, in other words, vehicle prices have nearly doubled.
Tariffs, inflation and the end of the free trade era
For Iacob Koch-Weser of the Boston Consulting Group, the rise in raw material costs, widespread inflation and, above all, the return of customs tariffs explain a large part of the price surge.
Following the pandemic, the United States imposed tariffs on steel and aluminium, as well as a general 35 percent tax on products not compliant with CUSMA (USMCA). Several Canadian companies had to adapt their supply chains to meet much stricter local content requirements, which considerably added to the bill.
The semiconductor shortage: The domino effect
Daniel Ross of Canadian Black Book (CBB) recalls that the pandemic caused a brutal halt to supply chains in 2020. Semiconductors were then diverted toward consumer electronics, creating a historical scarcity of new vehicles. The result: several years of pent-up demand pushed prices upward.
Even though the situation is now largely stabilized, the impact is still being felt.
The used market even harder hit
The effect is even more brutal in the second-hand vehicle market. Previously, one could easily find a four-year-old vehicle for less than $20,000. Today, you can expect to pay between $30,000 and $35,000 for the equivalent.
Bigger, techier... and more expensive
For Dave Power of KPMG Canada, modern vehicles also cost more because they are larger, heavier and packed with complex technologies. To keep up, many consumers are financing for longer, in some cases up to eight years, which dangerously increases their debt levels.
Towards a slight respite in 2026?
CBB’s Ross believes that the slowdown in sales initiated in 2025 could lead to a slight drop in prices in 2026, especially for used vehicles. However, a lot will depend on the North American trade negotiations scheduled for that same year.