Used car prices are skyrocketing

At Frechette’s car workshop in Laval, detail specialist Luc Despaty puts the finishing touches to the cleaning of his white Chevrolet Bolt. For this type of vehicle, electric, as well as for small cars with low fuel consumption, the insanity is especially strong.

“I showed Bolt on Tuesday at 7 p.m.,” says company owner Eric Frechette, in his office overlooking a showroom decorated with bouquets of green balloons. “The next morning at 4:30 a.m., a gentleman from Sherbrooke wrote to tell me he was interested. We sorted everything out at 7 a.m., over the phone. I bought a Tesla and bought me a Bolt, which is newer but cheaper.”

Cars are leaving quickly, and prices are “insane,” says Mr. Frechette. Thus, the used car dealer sells the cars at a higher price, but is also untangling his wallet to get them.

“It’s scary to buy a car, because I tell myself I paid $4,000 or $5,000 less last year for the equivalent. So I wonder if I’d sell it,” says the man, who’s been in the business for 22 years, following in the footsteps of his father, owner Mechanical maintenance garage since 1959.

According to Statistics Canada, the purchase price of used cars jumped 24.5% between March 2021 and March 2022 in the country, compared to 7% for new vehicles. For its part, the AutoHebdo Price Index for April 2022, in Quebec, indicates a 43% increase in one year in the prices of used cars offered on the popular online selling platform.

“Toyota sold the CH-R with more than one new one. Typically, the car loses between 20% to 30% of its value in the first year. At the moment, the value of some vehicles increases somewhat,” notes Mr. Fréchette.

In this context, the behavior of buyers has changed, as sales consultant Vincent Phillips points out. They understand the current situation. They are better prepared, they will negotiate less and take up less of their time. He says at the garage entrance, while customers are on the road experiencing a white Acura.

Car racing

Thus, the trader has had his most profitable year since he started the business. But getting cars for sale comes at the cost of great effort and many overtime hours. Fritchett Motors typically has approximately forty cars in stock, with prices ranging from $5,000 to $60,000. But this number has fallen to a dozen vehicles this year, which worries the owner.

“The nerves of war have a stock,” says the businessman, who successfully climbed almost the entire slope.

Dealers, who usually supplied him with used cars to their customers, had serious problems with the supply of new cars. The shortage of some components in particular has hampered the manufacture of many models. To continue to have inventory for sale, dealers kept the cars to themselves.

“Before that, 90% of my cars came from there. It went down to 40%,” Mr. Frechette said.

So he ramped up his approach to people, particularly by offering wholesale at the forefront of his business: “We buy your car. He also created a partnership with the new online platform Shopicar, where citizens can buy, sell or exchange cars.”

Select the right price

In any case, an entrepreneur must spend a large part of his days evaluating the purchase and sale price of several vehicles. To make sure he’s offering the right price, Mr. Fréchette uses software that compares the value of the latest cars sold and sold by different dealers, depending on the model and mileage on the odometer.

“The Tesla model I just picked, which is 100,000 kilometers long, sells for $60,000 with 43,000 kilometers. So I think I can sell it for a little bit less, about $53,000. I paid $49,000 for it, but I have about $1,500 worth of repairs to be had.” Do them. So I would probably have a profit margin of $2,500.”

Getting the cars is also a challenge for the big players. At Automobile en Direct, which displays more than 2,000 vehicles in four branches, 30 people work full time to find them.

“We are more active than we have been in the past,” says Chairman and CEO Sebastian Besilon. We go to proxies, which we haven’t done before. We get our supplies everywhere, in other counties, at auctions, on different platforms. »

In the face of increasing demand, his company was able to get enough products to sell 18% more than the previous year. However, Mr. Besillon is aware that current prices are volatile uncertainties. To determine prices, Automobile en Direct relies on the demand for its vehicles, due to its large sales volume.

stability in sight

Will prices continue to rise? “We think it has reached its peak. It is continuing to progress a little bit, but it should stop soon,” said Steve de Marchi, General Manager of the Association of Used Car Dealers of Quebec.

He notes that the new domestic market is slowly becoming available again, with some builders starting production and delivery again. Many dealers replenish inventory, which helps prices stabilize or even decline.

In the meantime, buyers can find used cars, but “definitely more expensive than you want and maybe not the color you want,” warns Mr. de Marchi.

Mr. Fréchette has just left on an adventure in Italy. After two years of trying, he’s finally happy to be able to take more than a week off.

Let’s see in the video

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