Used car dealers, both franchised and independent, are smiling again.

Analysts, dealers and retailers consulted are unanimous: the sector is back in colour, and the future looks bright. They spoke to Autosphere.ca about major trends, popular used products, how they value them and how they are developing their inventories.

“We have seen a year-on-year increase in used vehicle sales in February 2024. The demand and the vehicles are there, and prices are coming down, which is excellent news for the sector as a whole,” says Baris Akyurek, Vice President of Strategy and Intelligence at AutoTrader.

Encouraging trends

According to Akyurek, used vehicle transactions have slowed down since August 2023, given the context and high interest rates. Inventories have risen, driven by the very sharp increase in new car sales over the last year and a half and the resulting trade. According to the expert, “the interest rate cuts expected around June should help to stimulate demand for used vehicles” in the second half of 2024.

Yves Varin, National Director of Data Feeds at Canadian Black Book, reports that values rose by around 60% at the worst of the pandemic, from November 2021 to March 2022, but have fallen since the end of 2023, although they remain higher than before the pandemic.

“We’re in a soft landing phase,” he says. “The last quarter of 2023 showed us a lot of corrections.” Canadian Black Book, a vehicle valuation tool, also offers weekly publications on market trends and best retained values on its canadianblackbook.com website.

“We have seen profit margins shrink,” continues Varin. As a result, net profit on sedans is very low, averaging $756 over the last quarter of 2023. For SUVs, the profit margin remains attractive, at an average of $7,600, though still below last year’s figure of $11,000.

“After an overheated market, with a crash in the autumn of 2022, we’re back to where we were before the pandemic. The improvement has been felt since 2023, which is a relief for retailers and consumers alike,” says Annie Laliberté, General Manager and Partner of Beauport Hyundai and Genesis in Quebec City. The inventories of second-hand products had become outdated and the dealerships were forced to liquidate their assets in the meantime, for less profit.

“For 2024, we see the light at the end of the tunnel”, she admits.

Used inventories up and values down?

“From February 2023 to February 2024, inventories among our members—independent dealers—increased by around 15% in Quebec. The average price has fallen by around 20%,” says Steeve De Marchi, General Manager of the Association des marchands de véhicules d’occasion (AMVOQ), who has 25 years’ experience in the industry. However, he urges caution, because “the drop in the average price may be due to a fluctuation in the type of inventory”, whether top-of-the-range or low-cost, SUV or electric.

Valuation of used vehicles

“We work with everyone in the industry: 90% of merchants, dealers, insurers, all the banks, 95% of alternative lenders in Canada,” says Varin. Black Book provides a price range for a used vehicle from 2000 to 2024, across Canada, based on a wide range of criteria, including geography.

While it remains free to provide the trade-in value, a paying subscription for professionals gives access to a large number of additional and indicative figures. These include wholesale value, retail value, recommended display values, industry data, fair market value for insurance purposes, loan value, etc.

Black Book digitizes nine million used vehicle listings per day in Canada, from multiple sources. “This enables us to give an accurate picture of the situation, particularly in terms of retail values,” explains Varin. “It’s possible to narrow it down to a local market and get the number of units in stock, the number of days it takes to sell them (days-to-turn), the volume of sales, or to look at its main competitors, up to six months back”.

All sellers use advanced platforms such as Canadian Black Book, VAuto or Autopropulsion for AMVOQ members. “This software uses algorithms and linear regressions,” says De Marchi.

Popular occasions

AutoTrader notes that cars priced under $40,000 are selling at a much faster rate. “Luxury brands are still attracting interest, but consumers are probably waiting for the right time to buy them”, believes Akyurek. Average prices for luxury brands are falling at a much faster rate, down 10.3% between January and December 2023, compared with 5.2% for mainstream brands.

“The best-selling used vehicles are the certified ones,” says Laliberté. With high interest rates, buyers would be more attentive to the advantages: subsidized interest rate, a full tank of petrol, etc. In terms of operations, for Hyundai and Genesis, other than SUVs, she noted that “low-cost or more fuel-efficient vehicles are also popular, while saloon sales are doing very well”.

De Marchi notes the recovery in peripheral markets, including SUVs, vans and luxury vehicles. “These used products were rare and very expensive. This segment is starting up again and consumers in Quebec now have a choice. As for compacts, sub-compacts and small saloons, with the drop in inventory, these segments are starting to do quite well again.”

Sources of supply for opportunities

To develop their inventories, several sources are favoured: auction platforms open only to professionals (TradeHelper, acquired by Eblock, Adesa Canada, etc.), private individuals during a direct sale or after publishing an ad (Marketplace or Kijiji), buyers of new vehicles in the case of trade-ins, rental and leasing companies, the use of a database of financed and leased vehicles for dealerships, and so on.

Online sales a must

The distance-selling process now goes a long way, “from gathering information to specifying requirements, evaluating the trade-in vehicle, making a quotation and even demonstrating the vehicle by video conference,” explains Laliberté. At its Beauport Hyundai dealership, three out of eleven sales staff sell online, and a perfect command of French is required.

To buy vehicles, professionals therefore access virtual auction sites that are not accessible to private individuals, such as TradeHelper or Adesa Canada. Laliberté uses them for her concessions, having “very close links with wholesalers over the last 30 years”.

De Marchi confirms that its members, independent merchants, “have been sourcing almost exclusively from there for a long time”.

Sales of used versus new vehicles

“If a used car is going to be reconditioned before being put up for sale, it will still have imperfections. “The laws and rules are different, and advisers must be familiar with them and remain 100% transparent. Selling a used car badly is more damaging,” insists Laliberté.

An interested customer will expect the same quality of service, a good bargain and a trusted trader. Prospects often come looking for a vehicle they’ve seen on the internet, so some of the sales work has already been done. One advantage for the advisor is that he will need to have less specialist knowledge of the range of the brand represented, but a broader knowledge of the automotive world.

“We have an advisor who started out in new vehicles,” recalls Laliberté. “But she wanted to develop the web within the second-hand sector. So I transferred her there. Since then, she’s been the best advisor I know, with 300 vehicles sold in her best year, and an exemplary sales record.”

Mike Kilinski, Vice President of Product, Data and Analysis at AutoTrader, believes it is important for a dealership to have an expert dedicated to used car sales.. “Let’s not forget that consumers cross-purchase, between new and second-hand, and that around 30% of them who start by buying new or second-hand end up doing the opposite,” he concludes.