Challenges and Opportunities in the Canadian Used Car Market for 2025

The used car market in 2025 faces several challenges and opportunities shaped by supply dynamics, consumer preferences, and technological shifts.

Challenges:

• Supply Constraints and Price Volatility: The supply of used vehicles up to eight years old is expected to decline by about 3.2%, influenced by lower new vehicle sales and lease originations from recent years. This tightening supply contributes to price volatility and affordability concerns, especially as new vehicle prices remain high due to increased MSRPs and elevated interest rates.

• Affordability and Financing Pressure: Despite some price stabilization, average used car prices remain relatively high (around $33,600 to $36,300), with urban areas typically seeing higher prices. Consumers face "payment shock" from rising financing costs, leading to longer loan terms and down-market shifts in vehicle choice.

• Incentive and Rebate Uncertainty: Changes and pauses in government incentives for electric vehicles (EVs), such as reduced provincial rebates and federal program holds, create regional pricing volatility and uncertainty for buyers interested in eco-friendly vehicles.

• Shift in Consumer Behaviour: The ongoing preference for online purchasing requires dealerships to adapt rapidly to digital platforms and AI-driven tools, which can be a barrier for traditional sellers.

Opportunities:

• Increasing Inventory and Stabilizing Prices: Used car inventory has increased by about 28%, leading to more choices and gradual price stabilization after previous inflation spikes. This trend benefits buyers seeking better deals and variety.

• Growing Demand for Electric and Hybrid Vehicles: There is a strong market shift toward eco-friendly vehicles driven by environmental concerns, high fuel prices, and government incentives. Dealers who stock certified pre-owned EVs and educate customers on battery life and charging infrastructure can capitalize on this trend.

• Dominance of SUVs and Trucks: SUVs now account for over 61% of used vehicle transactions, with trucks like the Ford F-150, Chevrolet Silverado, and GMC Sierra commanding higher prices and strong demand. This segment growth offers opportunities for sellers specializing in these popular models.

• Digital Transformation: The rise of online platforms and AI tools enhances transparency and convenience for buyers, creating new avenues for dealerships to engage customers and streamline sales processes.

In summary, the 2025 used car market is balancing supply challenges and affordability pressures with opportunities in electrification, popular vehicle segments, and digital innovation. Stakeholders who adapt to these evolving trends and regional market nuances are positioned to succeed.