Dealers can expect similar demand for new and used vehicles in the months ahead.
As we near the end of the year, it is clear that used vehicles remain the go-to option for many consumers. And yet, new vehicle inventory is expected to continue to move forward in the new year as demand remains, giving dealers a ray of hope for 2024.
In an interview with Canadian auto dealer, Daniel Ross, Canadian Black Books’ Senior Manager of Industry Insights & Residual Value Strategy, said he expects new vehicle inventory and new sales volume to be higher in 2024. On the flip side, he does not see used vehicle supply as sufficient enough to support the demand coming its way.
“We’re probably seeing more of a stagnant or maybe a leveling off of MSRP increases on the new car side. So that might be a better story for new cars as they come back to the market. But used cars, we’ve already had three-plus years of less-than-perfect new car sales and that’s going to infiltrate on the returning vehicles to today’s market — or tomorrow’s market if you will,” said Ross.
He expects this issue will hamper supplies even more, while the used vehicle supply is anticipated to be a smaller portion of the overall volume in the market than it is today. This, in turn, should result in better retention on value and, possibly, still high residual values — particularly in the short term.
“That’s kind of going to illustrate what happens next year in terms of new cars moving forward in sales volume, but still incremental versus used cars being even more hampered on inventory, keeping those prices relatively high,” said Ross.
He suggested that dealers keep an eye on wholesale prices and how used vehicle volume will play out next year. Used vehicle supply is anticipated to worsen before it improves.
Ross also noted that new vehicle sales, lease trade-ins or lease maturities are not coming back to the market nearly in the fashion they used to.
“If a dealer is looking for good used vehicles to fill their lot, it’s going to be tough to do that next year as well. They can rely a little bit more on the new car side of things, but lots of consumers are looking for used vehicles. Two-to-six-year-old vehicles are predominantly what they’re looking for,” he said, adding that the result may create a tougher opportunity to buy, especially in open auctions.
A slow decline is also expected in 2024, though nothing extreme; it will be segment-specific due to changing consumer trends in favour of cars and smaller SUVs. “That’s kind of what I would incentivize dealers to sort of look at more carefully, in terms of their inventory levels and where they want to focus.”
As for electric vehicles, the demand appears to be weakening — slightly. But as EVs remain in the early stages of adoption, Ross said it will be interesting to see how the market fares in 2024, knowing that some key players will be introducing vehicles in certain segments of the Canadian market that are expected to sell well. “So that’ll be good,” said Ross.