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Used car prices surge as supply shrinks
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CBC News-
Anyone looking to buy a used car in Canada can expect to pay a lot more than last year, especially if you're looking for a three- or four-year-old model, according to a national survey of the used car market.
Scotiabank said its used car price index showed that average prices in September were up 7.4 per cent over a year earlier. That's the strongest gain since April 2010.
"The increase is being driven by double-digit increases for three- and four-year-old models," said Carlos Gomes, Scotia Economics auto industry specialist.
Gomes says the strength in the prices of three- and four-year-old cars is due to a big drop in the number of vehicles available for resale. "This shortfall is the direct result of the plunge in fleet and leasing volumes since 2008."
Scotia Economics figures show that the number of new vehicles leased in Canada in the past two years is down 60 per cent from its 10-year average. Similarly, fleet purchases of new cars and light trucks have also plunged in half.
That's led to a sharp drop in the number of pre-owned vehicles coming back onto the market. Scotia Economics also says that supply shortage is likely to continue, supporting higher used car prices in Canada "for an extended period."
New car incentives undercut market for year-old models
"In contrast to solid price gains for vehicles that are at least three years old, price increases for one-year-old models have moderated in recent months, undercut by enhanced incentives for new models," Gomes said. "We estimate that increased incentives on new cars and light trucks have trimmed new car prices by roughly two per cent since the spring."
"In fact, this year's enhanced incentives have led to the steepest decline in Canadian new car prices since the global economic downturn in 2008," he said.
The resale market in the U.S. shows some similarities to Canada's, in that prices for used cars have been rising for more than two years. But price increases in the U.S. have slowed in recent months, something that hasn't been seen in Canada.
Figures from DesRosiers Automotive Consultants show that Canadian new vehicle sales in the first 10 months of this year are up 1.5 per cent over the same period last year, with sales of light trucks particularly strong.
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