Looking for a used car? Get ready to pay more

Everyone knows when you drive a new car off the lot, its value depreciates almost immediately — except, right now, that's not universally true.

Because of a worldwide semiconductor microchip shortage in new vehicles, there's been a trickle-down effect on the pre-owned car market. This translates into inflated pre-owned vehicle prices, especially in sought-after styles like trucks and SUVs. And dealerships are going to extreme lengths to buy up used stock to keep money moving. 

According to Canadian Black Book, on average used cars are worth 34 per cent more than they were in 2021. So, a $24,000 vehicle is now going for $32,000.

The inflated pre-owned market puts people like Jodi Brady-Leger in a tough spot. 

She paid $18,000 for her Ford Flex with 30,000 klicks. She loves her vehicle but in January the SUV started acting up. So, Brady-Leger began looking for a replacement. 

So far, no luck.

"It's frustrating," Brady-Leger said. "I'm a single mom. I drive into the city a lot for appointments for my kids. I need something reliable, but I don't want to pay $30,000 for a vehicle"

Most of the cars she's been able to find have more mileage on them than she thinks is reasonable for the price. 

So, Brady-Leger is left continuing the chase, staying with her aging vehicle until things improve, or, biting the bullet and ordering a brand new vehicle. 

"I understand that there's a shortage of vehicles, but like, you've got to be kidding me," Brady-Leger said. "My fear is if I go over my budget, then what happens if there's something that comes up and like, you're in a financial strain?"

What you see on the dealership floor is what you get

The Glenmore Audi location typically has a lot of nearly 300 new cars for buyers to choose from — different colours, options, features — but right now what's on the floor is all they have to offer. Most of their sales are coming from orders.

And for used vehicles, sales manager Ian Kay says their usual inventory of 80 cars has dwindled to about 20.

"It's a challenge. We have to be creative, for sure," Kay said.

To keep used vehicles in stock, Kay said the dealership is calling up its customers. Maybe someone has a vehicle they wanted to trade in soon or a lease that's coming up. In some cases, Kay said, people are just showing up to try and sell. 

"Vehicles are going for more than they have been," Kay said. "I mean, we have had customers buy vehicles and then put them on the market immediately after, especially higher and less common ones. So it's a wild, wild world." 

Dealers combing Facebook Marketplace, Kijiji 

Dealers are going above and beyond to keep stock. Kay said some places in Calgary won't sell vehicles unless the customer comes in with a trade-in. 

Others are dedicating staff to comb Kijiji and Facebook Marketplace to scoop up any vehicles they can. 

"They're going to any extra lengths to try and find inventory," said Canadian Black Book senior analyst Daniel Ross. "That's definitely something that we've heard about."

The most sought-after models right now are trucks and SUVs. But Ross said that makes them more expensive and harder to source.

Trucks easy to flip for profit in the U.S.

And Canada is losing trucks to so-called "cross-border arbitrage." Ross said the dwindling stock of trucks is being sold to dealers in the United States, where a favourable exchange rate and the hot market makes them easy to flip for profit. 

"If no one can get any new cars, they need to sell something so they go for used cars. And when that branch dries up, they can't go anywhere except outside of their market," Ross said. "We're seeing lots of dealers going outside of the market. You're going outside of the market in the U.S. and then going cross-border in the U.S. to achieve, you know, lifted inventories and purchasing."

Ross guesses the market could take until 2023 to sort itself out if the conflict in Ukraine doesn't exacerbate the issue. 

"We haven't had any good news for a very long time," Ross said. "I don't think it's going to start with vehicle prices going down at this point."