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Autos

    • Used car prices in Canada up 12.8 per cent from last year as microchip shortage continues

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    The average price of a used car has continued to rise, with no end in sight to the ongoing pandemic-induced shortage of microchips.

    Data from AutoTrader.ca, an online used car marketplace with over 460,000 listings, shows that the average used car in July 2021 listed on its platform was $28,736.

    That's up 12.8 per cent compared to the average price from the same time last year, which was $25,470.

    "We obviously have a lot of data but we have our own price index, and we've been looking at prices to understand what's happening in the market," said Baris Akyurek, AutoTrader.ca's director of marketing intelligence, in a phone interview with CTVNews.ca on Thursday.

    The shortage of microchips has led to fewer new cars being manufactured. Fewer new cars forces more consumers to buy used, which in turn, drives up the prices of used cars.

    It's a trend that hasn't showed any signs of slowing since the beginning of the year. In January, used cars prices were up 1.1 per cent compared to January of last year.

    A surge in pickup truck popularity has also led to skyrocketing prices for used pickups. Akyurek says that the average price of a used pickup truck is up 27 per cent in July 2021 compared to the same time last year.

    HOW THE CHIP SHORTAGE AFFECTS CAR PRICES

    In the early months of the pandemic, car sales declined as people were beginning to work from home and holding off on big purchases, given the economic uncertainty.

    Akyurek says demand for cars soon rebounded as pandemic-related fears pushed people away from using public transportation or ride-hailing services.

    Many Canadians also had more money in their savings accounts thanks to the pandemic. Statistics Canada found that in the second quarter of 2020, Canadian households were saving 28.2 per cent of their disposable income. In the fourth quarter of 2019, the household savings rate was 3.6 per cent.

    "We believe, the fact that there's a decline in interest in public transportation and ride sharing services, as well as the fact that now Canadians have more savings in their accounts… this all created this pent-up demand," said Akyurek.

    But microchip manufacturers have been unable to respond to the surge in demand. Peter Frise, who is the executive director of the Centre for Automotive Research and Education at the University of Windsor, says that modern automobiles can have hundreds of microchips that control everything from the air conditioning to the power steering system.

    "There's a constant need for revision and updating, and so on. And that means that the supply of chips, has to be steady and constant, and constantly updated," Frise told CTVNews.ca in a phone interview on Tuesday.

    "If supply is interrupted, it basically messes up the supply of the car. You can't sell a car to a customer where, let's say, the air conditioning doesn't work because it doesn't have a certain chip."

    ​It's unclear how long these shortages could last. The CEO of Taiwan Semiconductor Manufacturing Corporation, which is the world's largest chipmaker, told investors in April that the chip shortage may not ease until 2023.

    "I would say that it will make a big impact on the entire 2021 and 2022 production," said Frise. "Most auto plants are shifting over to next year production. So, the cars they're building right now are, for the most part, 2022 models."

    If you're shopping for a car now and can't wait for the prices to come down, Akyurek says it's still possible to find a good deal with extensive comparison shopping. This may mean driving to another city in order to score a deal.

    "There's still tons and tons of vehicles with great deals to be had," he said.

    SHORTAGE ALSO IMPACTING CAR RENTAL AGENCIES

    Rental car agencies have also had a tough time getting their hands on vehicles, at a time when eased COVID-19 restrictions across the country have led to more Canadians planning getaway journeys.

    Many rental car locations across Canada have been completely sold out for weeks in advance. And at locations where cars are available, prices can start at upwards of $120 a day for the smallest class of car.

    Craig Hirota, who is the Associated Canadian Car Rental Operators' vice-president of government relations and member services, estimates that the car rental industry has around 15 to 20 per cent fewer cars in the fleet compared to the summer of 2019.

    "We can't get cars at the volumes we would need, so there's right now a temporary supply issue in terms of rental cars, compared to the available demand," Hirota told CTVNews.ca over the phone on Tuesday.

    Car rental operators have had to get creative in order to find enough vehicles. Hirota says some have been scouring wholesale auctions for used cars with low mileages. Others are keeping their cars in service for longer than normal.

    "They're basically trying to get cars any way they can, because it doesn't really do our industry any good to turn away customers. So, we definitely want to try and satisfy customer demand."

    If you're looking to book a rental car, Hirota suggests planning as far ahead as possible and comparing prices between different locations and companies.

    "Call as many different rental car locations as you can find. Not everybody is going to have the same vehicle availability so you may be able to find a vehicle from a car rental operator that you're not as familiar with, but you just have to do a little bit of searching."

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