Used cars are harder to source and costing much more when they can find them, say local independent car lots
It’s a different world for independent used car dealers nowadays.
And depending on who you ask, the trickle down effect from issues hampering the auto industry is being felt in a big way.
“When the auctions were going, you’d have thousands (of vehicles) at the auction sale,” said Brian Cox, owner of Troy’s Toys on Victoria Road South.
“Now, there’s about 500 (vehicles. And you have dealers) all across Ontario, maybe even Canada trying to buy out of the Toronto auto auction.”
It’s also a changing world when it comes to how car dealers get their hands on vehicles.
Gone, seemingly, are the days of the in-person auction. Now, those dealers from across the country are placing bids online.
Frank Lucchese, owner of York Auto Sales on York Road, said he would take one day a week and go to an in-person auction in Kitchener, Milton or Brampton, and spend the rest of his time at his lot.
“Now, I’m on the computer steady, morning till night,” he said.
There’s also a noticeable trend in the type of vehicles up for auction: more pickup trucks.
“Everybody’s dumping their pickup trucks,” Cox said, attributing it to the price of gas.
There’s also the risk factor involved with buying without seeing the vehicle in-person first, they say.
“You get it home, you open the doors and (you hope) they (don’t) reek of cigar smoke,” Cox said.
“They take photographs at an angle where you can’t see the dent, you end up buying it, getting it back and then figure out you thought it was the sun shining but it wasn’t, it was a dent,” added Tony McDonald, assistant manager and buyer at Troy’s Toys.
“It adds cost and it trickles down. Everything gets more expensive.”
“I’m old school,” Lucchese said. “I used to go touch the car, feel the car, smell the car. If there was a scratch, I could say, ‘I could buff that out or I have to send it to the body shop and it’s going to cost me $500.’ Whereas here (with the online auction), it’s hard to see (issues) just by pictures.”
So less inventory, the delay in new vehicles hitting the market due to the global microchip shortage — “we had to wait three months for a computer for a Chrysler, it was on back order,” said McDonald — combined with more buyers and more risk, and the average price of a used vehicle has reached dollar figures not before seen by those we spoke to.
In Ontario, the latest data from online automobile marketplace AutoTrader shows the average price of a vehicle has gone up 37.4 per cent between April 2021 and April of this year.
That’s a jump of just over $10,000 per vehicle, to an average of $38,013.
Nationwide, the trend is about the same, a 38 per cent year-over-year increase to an average of $37,768.
“One of my customer’s bought a brand new electric Mustang, I think it was $60,000,” said Lucchese. “Six to eight months to wait for the vehicle to come in, and then they tried to sell her one that was a year or two years old. It was the same price.”
“They’re like ‘okay I can buy this used one, it’s $60,000. But a new one, if you want to wait six to eight months, otherwise this one is available tomorrow, same price though,’ so that’s why the price of the used cars have gone up.”
As for customer habits, Lucchese feels the pandemic is also playing a big part in people buying cars online, rather than in-person.
“Mind you we don’t have much in stock, (but) you don’t see as many people around,” he said.
“They just look online, and then they go, they source it or they’ll call you and say ‘you ask for $30,000, can you take $25,000.’ Or you’re emailing rather than person-to-person.”
“We’re still surviving,” McDonald added about Troy’s. “We’re selling lots of product, lots of customers. But you’ve got to advertise a lot more.”
“The inventory is starting to become available,” said Gautam Sharma, owner of Royal City Fine Cars. “It’s mostly the new car dealers that are having more of an issue. They’re having more of a problem than the used car guys.”
The rise in interest rates is also something being watched with a close eye.
“The interest rate coming up here in the last month or so, that’s going to slow the car business down dramatically,” said Cox. “People are not going to be able to finance again cause they need to finance it at two (or) three per cent. (It could) get up (to) six, seven, eight per cent (in some cases).
“People with not so good credit are going to be up to 30 per cent.”
He adds that is a ripple effect going beyond just the automobile industry.
But as for trends moving forward with vehicles, the transition to electric is already apparent, even when it comes to used, McDonald added.
“We just sold a Highlander hybrid, 2016 (model). It sat here for a week,” he said. “I just bought another one this morning. We have customers after it already because we had a lot of customers looking for the last one.”
“It’s a guaranteed sale,” Cox added. “Everybody wants electric.”
Parts can be pricey for electric, but McDonald said most of them are covered by a 10-year warranty from the dealership, including the battery.
“The parts for electric cars are certainly coming down in price as well,” he said.
