Monday April 27, 2020
New-car sales could drop by 25 per cent this year and your vehicle’s value fall by 17 per cent in a best-case scenario due to the COVID-19 crisis, while worst-case could see sales fall by 40 per cent, and vehicles drop by a quarter of their value.
That’s the word from Canadian Black Book (CBB), which also notes that large numbers of vehicles coming off lease will further drive down value.
That’s good news if you’re planning to buy a used car, but not so great if you want to sell or trade the one you currently own.
Canadians bought 1.914 million new vehicles in 2019, a 2.6-per-cent decrease from 2018.
In its best-case forecast for 2020, which it says is “most likely,” CBB said a double-digit jump in unemployment, along with a large drop in consumer confidence, will result in a 25-per-cent fall to 1.436 million new vehicles.In its “Severe Recession Scenario,” if the COVID-19 social separation policy stretches into late summer or early fall, CBB predicts sales could drop by 40 per cent to 1.149 million vehicles for the year.
In best-case, compared to last year’s pre-COVID prices, wholesale values for used vehicles one to six years old would drop by 18 per cent for SUVs, vans, and light trucks; and 15 per cent for cars. It would take three years to return to pre-virus price levels.
In worst-case, wholesale SUVs and light trucks would fall by 26 per cent and cars by 22 per cent, and would still be down by 10 per cent three years later.
Even before the pandemic, used-vehicle prices were expected to soften. Due to the popularity of leasing a few years ago, a record number of vehicles will be turned in at the end of their leases in 2020 and 2021 and go to the used-vehicle lots. CBB expects that many buyers, squeezed by a COVID-19 recession, will choose one of these rather than a new vehicle.
In a release, industry analyst Dennis DesRosiers said that the average selling price of a new vehicle in Canada has been steadily increasing and finally broke the $40,000 barrier last year. The average price was $34,794 in 2015 but rose to $40,941 in 2019, primarily due to the popularity of light trucks.
Current dealership closures depend on the province. In Ontario, Quebec, and New Brunswick, service and parts departments can remain open but showrooms are closed, with deals done digitally or at the owner’s home. There are no restrictions in other provinces, but some dealers have voluntarily closed to protect their staff.