What Was the Average Purchase Price on Used Vehicles in 2018?
Shopping for a used car can be a stressful thing. While new cars cost more, you can only get them from a dealership and you pretty much know what they cost.
We explore what’s going on with used cars in Toronto, including the average price for 2018, so you can shop with up-to-date information. From there, we also analyze what factors are affecting the average price.
Finally, you learn some alternatives you might want to consider if you’re on a tight budget, as well as some potential benefits for those who have certain financial means.
Plenty of Canadians turn to used vehicles as a way to keep their car payments low each month. It’s a great method for stretching an already tight budget, without buying a new car which doesn’t really suit your needs.
Most consumers know that buying a new car means dealing with the loss of thousands of dollars in the value of that car within the first one to three years. If you plan on keeping the car for a long time, that might be something you can look past.
For many shoppers, they realize certain factors could cause them to be looking for a different car in the future. A change in family size, a sudden loss or increase in income, moving to another area of the country, and the release of a dream car can all suddenly shift your desire to stick with the same car you bought years ago. If you had purchased a new model, you might be looking at losing a fair amount of money as a result.
Wondering what the average purchase price for a used car is natural. After all, you want to have a general idea of what’s going on with the market and just how far your money will go. Instead of falling in love with an option which likely is out of reach, this valuable information can protect you from possible disappointment before you really think about what you want to get.
Of course, you also want to make sure you’re getting a good deal, relative to other options. Some used cars cost quite a bit more to purchase versus other options, even models that aren’t direct competitors but that could be enticing. Knowing how much everyone else is paying on average can be useful in calculating if you should continue looking or settle on a particular option.
If you haven’t been keeping your eye on the average cost of used cars in Toronto, it’s not too late. We’ll get you up to speed on the current market trends, so you can start shopping wisely.
There is some bad news about the average price of used cars in Toronto and across the country. That figure has been climbing, sitting at just below $20,000. You might be shocked by that amount, but there’s plenty to understand about what’s going on in the market.
Back in 2013, the average purchase price for a used vehicle was quite a bit lower at just below $17,000. That’s not exactly encouraging for anyone who’s interested in saving some money, but it’s the reality.
At the same time, the average price of a new car has risen from about $33,000 in 2013 to over $36,000 in 2018. You might be wondering if the two increases are tied together. The answer is a little complicated, but we’ll break it down, so you can easily understand what’s going on.
Factors Affecting the Trend
The car market is a pretty complicated thing, so to understand why used vehicle prices are on the rise isn’t completely straightforward. After all, there isn’t just one person or organization which determines what cars are worth and everyone else just follows that.
Taking our time, we’re going to examine the things we know are triggering the rise in prices.
Slightly Used Wave
Just a few years ago, many shoppers decided that leasing a car instead of purchasing one was the wise thing to do. There certainly are situations where leasing makes sense, like if you’re anticipating a big change in your lifestyle in the near future, want to enjoy a new car for only a few years without taking the financial loss of its value depreciation, or desire stretching your money, so it provides the nicest vehicle possible.
The effect of that trend is now there is a huge wave of cars for sales which are only two or three years old. While they lost some of their value, the sheer volume of these higher-cost options has pulled the average used car price up.
Right now, trucks and SUVs, particularly full-size models, are dominating the new vehicle market. It’s an interesting trend which is in part a cause of low fuel prices in recent years, but something else is happening with used cars.
While consumers certainly want larger used vehicles, the demand for smaller used cars is actually on the rise. Since fuel prices recently have been creeping up, some watchful shoppers are going for options which will keep them away from the pump.
This even means some people aren’t acting on their desire to get a truck or SUV. Instead, shoppers have been opting for cars, particularly small and subcompact models.
With an increase in demand, the price of these fuel-efficient used cars has actually increased. They’re also sitting on the used market for less time, so finding one that’s a good deal has become more difficult. This is another factor which is pumping up the price of the average used vehicle for 2018.
Trucks and SUVs
In a kind of a perfect storm, the value of used trucks and SUVs hasn’t dropped significantly. That might seem odd, considering rising fuel prices have been pushing small used car prices up, but sometimes these effects take time to play out.
Enough shoppers think the larger passenger space, cargo volume, superior ground clearance, and other utilitarian features on large trucks and SUVs are worth paying extra to enjoy. Until that changes, the cost of such a used vehicle will continue to be high.
Part of what might be causing this delayed reaction is the improved fuel efficiency of today’s trucks and SUVs. Thanks to increasing fuel economy and emissions standards for automakers’ fleets, innovations like transmissions with more gears, turbocharging, automatic start-stop systems, direct injection, and even engines where half the cylinders shut off while the vehicle is cruising down the road have made an impact.
Shedding some curb weight, often referred to as lightweighting in the automotive industry, has had a similar effect. Ford has gone so far as to use aluminum alloy body panels for its F Series trucks, while competitors have taken other measures to slim down their products.
All this means pretty much whatever kind of vehicle you want to buy used, the price is going to be high on average.
Naturally, if fuel prices continue to climb, big trucks and SUVs will see a price decrease in the used market. While it’s impossible to tell for sure, many market analysts think the cost to fill up your tank will keep going up, at least for a time, and that could pull the value of these used vehicles down. In that event, the average price of a used car might also decrease some. Exactly where that tipping point in used truck and SUV prices is, nobody knows for sure at this point.
Where Is the End?
For car shoppers who want some relief from this trend of high used car prices, there seems to be little relief. As noted above, no matter if you want a small or large vehicle, truck, SUV, or car, the cost of buying anything used is at an all-time high.
This isn’t great news if you have limited finances or have put yourself on a strict budget. It’s easy to feel frustrated by this news, because market forces are limiting your options, or maybe even making you think that getting a used car is just out of reach.
Off the Beaten Path
If you’re concerned about not getting in over your head on a used car loan, there are some options for good deals on used cars in Toronto. It might require you to consider some vehicles you might otherwise pass over, but the financial benefits can be worth the sacrifice.
Low Cost Options
You might want to consider lowering your standard for a used car. That can be discouraging in such a desperate market, but the last thing you want to do is get in over your head financially just because used car prices are at an all-time high.
Plenty of Canadians spend too much on things like cars, then later regret it. Not properly budgeting for big expenses can lead to extreme financial stress and possibly bankruptcy, something you don’t want to go through. The smarter plan is to stay well within your limits, instead of reaching for that dream car which is a little too pricey.
That’s not to say there still won’t be challenges if you try to get something more budget-friendly. Used cars priced under $35,000 are selling quicker than they were five years ago. That means such cars arrive at dealerships and are done within the matter of a few weeks, if even that long.
If you want to choose something even more affordable and look at used vehicles priced at $10,000 and under, the competition can be fierce. Supply for cars in this price range is lower than before. That means the quality of a vehicle $8,000 could have provided five years ago might be significantly lower in 2018.
The answer some shoppers have come up with is to just get a used car loan with a longer term. That means if you stick to the set payment schedule, you might be paying off the balance of the loan in six years or even longer.
Lenders have been more willing to extend longer financing terms for borrowers in part because vehicles have become more reliable. Still, there’s a risk to this strategy, since even the most reliable car could still require some fairly expensive repairs during that period of time. Shouldering the cost of loan payments and fixing problems might prove to be more than you can handle.
Less Popular Options
If you’re not too into your image, one way to possibly save some money when shopping for used cars is to consider options others don’t want to touch.
People often flock together, wanting to drive the same car models because they like the design, the perception that owning a certain brand or model means you’re successful, or to gain acceptance in certain social circles where having the same vehicle as other members helps.
When you’re not attached to a certain brand or look, some possibilities open up that can cut down on your purchase price at least some. Be honest with yourself about your limits and what you’re willing to compromise. After all, purchasing a car is a big commitment. You need to select something that will work for years to come, so don’t make a hasty decision.
If you can reasonably afford payments on a used vehicle that is a lease return, it can be a good way to stretch your money.
Because leases require you to keep up with maintenance, as well as keep driving within certain limits each year or face stiff financial penalties, lease returns are generally in excellent condition. You might conclude that some feel just as nice as a new car.
As you already know, once a new car has been purchased, it immediately starts losing value. After two of three years, the drop in a vehicle’s price can be significant. Snatching up one of these options translates into potential savings, when compared to buying new.
A lease return can also help you enjoy years of problem-free vehicle ownership. It’s like enjoying the best of buying a new car and a used car.
The increase in the average purchase price of used vehicles is putting Canadian shoppers in a real pinch. As you consider the best option, now more than ever you need to be honest about your limits, needs, and long-term financial goals.