Used car prices are skyrocketing

In the Automobiles Fréchette workshop in Laval, detailing specialist Luc Despatie puts the finishing touches on the cleaning of a white Chevrolet Bolt. With this type of vehicle, electric vehicles and small cars with low consumption, the enthusiasm is particularly great.

“I exhibited the Bolt at 7pm on a Tuesday,” says company owner Éric Fréchette in his office, overlooking a showroom adorned with bouquets of green balloons. “The next morning at 4:30 a.m. a gentleman from Sherbrooke texted me that he was interested. We sorted it all out on the phone at 7am. I buy his Tesla and he buys me my Bolt which is newer but cheaper. »

The cars drive away quickly and the prices are “crazy”, says Mr. Fréchette. The used car dealer therefore sells the cars at a higher price, but also loosens the strings of his own wallet to acquire them.

“It’s scary buying a car because I tell myself I paid $4,000 or $5,000 less for the equivalent last year. So I’m wondering if I’m going to sell it. But I’m selling it,” says the man, who has been in the business for 22 years and is following in the footsteps of his father, who has owned a mechanical maintenance shop since 1959.

According to Statistics Canada, between March 2021 and March 2022, the purchase price of used automobiles in the country increased by 24.5%, compared to 7% for new vehicles. For its part, the AutoHebdo price index for April 2022 reports a 43% increase in used car prices in Quebec in one year, displayed on its very popular online sales platform.

“I sold a Toyota CH-R more expensive than a new one. Typically, a car loses 20% to 30% of its value in the first year. At the moment, some vehicles are tending to increase in value,” notes Mr. Fréchette.

In this context, the behavior of buyers has changed, sales consultant Vincent Philipps notes. “You understand the current situation. They are better prepared, they will negotiate less and take less time. They care less about price than availability,” he says from the garage entrance as customers test drive a white Acura on the street.

The car race

The retailer thus experienced the most profitable year in its history. However, the procurement of sales vehicles is associated with considerable effort and many additional working hours. Automobiles Fréchette typically stock around forty vehicles, priced between $5,000 and $60,000. But that number dropped to a dozen vehicles this year, worrying the owner.

“The sinews of war must endure,” says the businessman, who has managed almost the entire slope.

The dealers, who otherwise delivered their customers’ used cars to him, had serious problems with the supply of new cars. Above all, the lack of certain components hampered the production of many models. In order to be able to continue selling goods, the dealers then kept the cars for themselves.

“Before, 90% of my cars came from there. I dropped to 40%,” says Mr. Fréchette.

He therefore intensified his approach to private individuals, in particular by advertising wholesalers on the front of his store: “We buy your car. He has also established a partnership with the new online platform Shopicar, where citizens can buy, sell or trade cars.

Determine the right price

In any case, the entrepreneur has to spend a good part of his days evaluating the buying and selling price of many vehicles. To make sure he’s offering the right price, Mr. Fréchette uses software that compares the value of recently sold and advertised vehicles from different dealers based on model and mileage.

“The Tesla model I just bought that has 100,000 km is being sold for $60,000 with 43,000 km. So I think I can sell it a little lower, like $53,000. I paid $49,000 for it, but I have about $1,500 in repairs to do. So maybe I have a profit margin of $2,500,” he calculates.

Getting cars is also a challenge for bigger players. At Automobile en Direct, which has more than 2,000 vehicles on display in four branches, 30 people work full-time to find them.

“We are more active than in the past,” says Chairman and CEO Sébastien Bisaillon. We go to dealers, which we haven’t done before. We get our supplies everywhere, in other provinces, at auctions, on different platforms. »

With higher demand, his company managed to acquire enough products to sell 18% more than a year ago. However, Mr. Bisaillon recognizes that current prices disturb certainties. In view of the large volume of sales, Automobile en Direct bases its price setting on the demand for its own vehicles.

Stabilization in sight

Will prices continue to rise? “We think it’s peaked. It’s still progressing slightly, but it should stop soon anyway,” said Quebec Used Car Dealers Association executive general Steeve De Marchi.

He notes that the new home market is slowly becoming accessible again as some builders have started production and deliveries again. Many traders are in the process of replenishing their stocks, which should help prices stabilize or even fall.

It’s now possible for buyers to find used vehicles, but “certainly more expensive than what you want and maybe not the color you want,” warns Mr De Marchi.

Mr. Fréchette has just left for an adventure in Italy. After two exhausting years, he is happy to finally be able to take more than a week’s vacation.

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