Used car demand is high and business is business.
The ongoing semiconductor chip shortage is making it exceedingly difficult to build new vehicles. Automakers are being forced to idle plants everywhere and, sooner or later, dealerships will begin running low on inventory. For now, the post-pandemic buying surge is bringing in record profits for dealers as demand for both new and used vehicles remains high. And therein lies another problem: a used vehicle shortage.
Automotive News Canada reports that US car dealers have found a new source of vehicles to sell: Canada. Pandemic-induced border restrictions are not stopping US dealers from making big purchases at Canadian auctions and a favorable US dollar exchange rate makes the business case for exporting even stronger.
The Canadian dollar is worth about 80.57 cents to the US dollar right now, essentially allowing US dealers to buy used vehicles at a discount. This is actually the highest the Canadian dollar has traded against the dollar since 2018. Some of the most popular used cars in America are also the most popular to buy new, such as the Ford F-150, Chevrolet Silverado, Nissan Rogue, and Toyota Camry. Ever so conveniently, they're all sold in the Great White North.
There's very little Canadian car dealers can do about this not only because of the unfavorable exchange rate but also because their US counterparts simply have more money to spend.
Demand for used vehicles in America is not expected to slow down anytime soon which, in turn, is causing prices to skyrocket. Just in the past three months, used car prices have increased by over 6 percent. The average new car price is now $23,816. Those considering selling their cars should also be aware the average trade-in price is also on the rise, now averaging $17,000. Last year at this time it was $14,000.
As we previously reported, nationwide used car franchises like Carvana claims it's selling one vehicle every 2.2 minutes and is buying a vehicle from a customer at a rate of every 2.5 minutes. Additional used vehicles gotta come from somewhere and Canada is proving to be a bargain shopping ground for dealers.