We spoke with Dan Park, CEO of Clutch, Canada’s largest on-line used automobile retailer, in regards to the firm’s newest annual used car pricing report. We additionally wished to find out about how Canadians are dealing with greater used automobile costs at a time when automobile insurance coverage prices are climbing. May you profit from any of those modifications or do it’s essential to modify your strategy to purchasing a car?
What to anticipate with used automobile costs in 2026
As we reported this winter, the worth of used automobiles (even end-of-year offers) reached over $33,000 in 2025—a 3.5% enhance in used automobile prices over the earlier 12 months.
There was a silver lining, although: used automobile costs had been beginning to fall by the tip of the 12 months because of decrease gasoline costs and extra EVs accessible throughout all used automobile segments.
Sadly, the pattern towards buying bigger, newer, and extra luxurious fashions implies that Canadians will see greater used automobile costs by way of 2026. Consumers may also proceed to deal with tariffs that enhance competitors for used automobiles, whereas driving up the price of new automobiles.
Park says that the used automobile market is extra insulated from inflationary pressures than the brand new automobile market; nevertheless, “Affordability locations extra stress on family budgets,” so we will count on to see greater costs for automobiles despite the fact that provide has normalized.
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The impact of excessive insurance coverage costs on automobile shopping for
Greater automobile costs are simply one of many key points driving up transportation prices for Canadians. For the reason that pandemic, drivers have been paying extra for insurance coverage protection. A part of that is because of the greater price of automobiles—the dearer the automobile, the extra pricey the repairs, and the extra you’ll pay for insurance coverage protection.
In accordance with the January 2026 Client Value Index, Canadians are paying 5.5% extra for auto insurance coverage than they did the 12 months earlier than. However there are regional variations. Drivers in Alberta can count on to pay nearer to 17% extra for auto insurance coverage year-over-year, in comparison with drivers in B.C., who’re solely paying 0.3% extra over the earlier 12 months.
In lots of circumstances, these greater prices are impacting the choice to purchase a automobile. “Greater premiums can deter consumers or cease offers altogether.” Park went on to say that households with new or younger drivers typically see the most important enhance in insurance coverage prices. This implies purchasing round for protection and the proper used car are essential.
It may be price it to search out out if a automobile has a excessive theft threat as a result of insurers will usually cost extra, and also you’ll possible need complete automobile insurance coverage. Park shared that common fashions just like the Honda CRV, Honda Civic, Toyota Highlander, and Toyota Rav-4 are all at greater threat of theft.
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How Canadian consumers are responding
Between greater car prices and elevated insurance coverage premiums, Canadians are feeling the pinch. Park says he’s seeing decrease down funds, greater financed quantities, and extra drivers underwater on their present loans.
Think about the modifications to downpayment quantities over the previous few years. Simply two years in the past, consumers had been capable of put down an extra $1,600 in comparison with now. This means that drivers don’t have room of their budgets to make a extra sizable contribution.
Smaller down funds imply consumers are financing extra of their automobile purchases. Canadians at the moment are financing automobiles to the tune of about $31,000 (up from $28,000 a few years in the past). Lenders are additionally getting inventive with the loans they’re providing. It’s turning into extra widespread to see loans with phrases of as much as 96 months (8 years). This permits them to scale back month-to-month funds despite the fact that the general price of the mortgage is greater for the customer.
Commerce-in difficulties
Drivers who plan on buying and selling in a automobile are sometimes unpleasantly stunned to study that they’re underwater on their mortgage. This occurs whenever you owe extra on the automobile than it’s at present price. Park notes he’s seen an enormous uptick in unfavorable fairness. Whereas unfavorable fairness charges hovered round 7% in 2024, round 18% of automobile homeowners at the moment are underwater on their loans.
Sadly, the quantity owed has additionally shot up. A struggling automobile proprietor in 2024 had round $5,000 in unfavorable fairness, however at this time, that quantity has climbed to $8,000.
Placing down much less for a down cost or exploring trade-in choices are just some of the methods consumers are adapting to affordability points. They’re additionally holding on to automobiles longer—selecting to restore and make do earlier than lastly changing them.
