Canadians are buying fewer new cars as the economic pressure from U.S. President Donald Trump’s tariffs mounts. It may leave consumers wondering: should they try their luck on the used car market?
Consumers in Canada spent less money in May, with retail sales in Canada falling 1.1 per cent in May to $69.2 billion, Statistics Canada said.
Canada’s auto industry seems to have taken the brunt of falling retail sales, with motor vehicles and parts dealers recording a drop of 3.6 per cent in retail sales in May.
The integrated nature of the North American auto supply chain means tariffs also hit car prices.
“We heard stories about people going running out to the dealer to buy a car or a part for their car before those tariffs started to kick in. We really started to see that in April. So we did expect a pullback (in auto sales) as those tariffs actually came into play starting in May,” BMO economist Shelly Kaushik said.
Specifically, new car dealerships saw sales fall by 4.6 per cent. This was the first time since February that Canada saw sales at new car dealerships decline, Statistics Canada said.
But as new car sales plummeted, some used car platforms and dealerships say they saw sales go up.
“We saw a massive spike in May. We saw — I think this was true for both of ourselves and for dealerships — significant demand for (used) cars in May,” said Dan Park, CEO of used car e-commerce platform Clutch.
“We were about 10 per cent up month over month, which was pretty substantial,” he said.
Park said his platform expects sales to go up in the months ahead, with July on track to be a “record” month.
Get breaking National news
For news impacting Canada and around the world, sign up for breaking news alerts delivered directly to you when they happen.
This comes as economists expect new car sales to continue falling as trade war pressures continue.
Park expects demand for new cars to go down with higher prices.
“That demand will likely shift over into used cars. But as demand increases for used cars, you’ll see prices go up because there’s more demand for used cars with a fixed amount of supply,” he said.
Many Canadians have been thinking about moving to used vehicles for the last four months, said Baris Akyurek, vice-president at Autotrader.ca.
In February, Autotrader conducted a survey of its customers, asking them if Trump’s trade war would affect how they buy their next car.
“(Forty-seven) per cent of them said that yes, it would, and within that 47 per cent, 38 per cent of them said that instead of buying a new vehicle, I would buy a used vehicle,” he said.
However, used car dealers are finding that they simply don’t have enough cars to satisfy customer demand.
“Since the middle of last year, the overall used car inventory has been slowly going down,” Akyurek said.
Some of these production issues go back all the way to the supply chain disruptions the industry faced during the start of the pandemic, Park said.
“From the spring of 2020 to early 2021, there was a massive production shortage. About 10 million cars in North America didn’t get produced. Roll forward a couple years, there’s just fewer used cars on the road and available for sale,” he said.
However, one segment where prices seem to be coming down is battery electric vehicles.
“EV prices are actually doing pretty well for consumers. They have been coming down both for new and used,” Akyurek said, adding that the average price for a used battery-powered EV is just over $44,000 in the current market.
There is particularly low demand for Tesla’s EVs, Park said.
“Given some of the Tesla political backlash, you can find really great Tesla prices right now. If you’re looking for an EV like a Tesla, now is a pretty good time to buy a (used) Tesla,” he said.
While buyers of cars, both used and new, could face affordability challenges, this is a really good time for anyone looking to sell their car, Akyurek said, given the low inventory.
“The market is hot,” he said.
For a two-car household, offloading that extra car might be a good way to make a few extra bucks, Park said.
“It’s a better time (to sell your car) than it was this time last year, with prices going up right now. It means that the value of your car hasn’t gone down as much. So it’s not a terrible time to come to sell your car,” he said.
© 2025 Global News, a division of Corus Entertainment Inc.
