Good news for Canadian car shoppers: prices are slowly coming down. Despite ongoing obstacles from tariffs, trade negotiations and shifting fuel prices because of the war in Iran, the cost of driving off the lot is easing.
In Canada, the average price of a new vehicle in June dropped 2.2 per cent year-over-year to $63,016, according to AutoTrader’s latest Price Index report. Used vehicles followed a similar trend, slipping 2.6 per cent to an average of $36,690.
“On the supply side, inventory is more available on a year-over-year basis. And demand on a year-over-year basis is slower,” said Baris Akyurek, AutoTrader’s vice-president of insights and intelligence. “With these things together, prices have come down.”
Barring further market shifts, he anticipates prices will continue to decline. However, Akyurek warns buyers to manage their expectations. “Don’t expect to see $25,000 average car prices,” he said. “Those days are gone.”
At online used car retailer Clutch, 39 of Canada’s 50 best-selling used models are cheaper than they were last June. Comparable used vehicles – same model and age – cost 1.3 per cent less than they did a year ago, according to Clutch’s June 2026 Used Car Pricing Report.
Since September 2025, used vehicle prices have remained flat despite ongoing market volatility, said Dan Park, Clutch’s chief executive officer. “This is [the] first time in a while we’ve enjoyed this kind of price stability for a six-month stretch so that’s encouraging. It’s a good news story for consumers.”
New and used vehicle sales outperformed expectations in the first half of this year, experiencing only a minor dip. New vehicle sales declined 2.6 per cent year-over-year during the first six months of 2026 while used vehicle sales fell just 1 per cent, according to DesRosiers Automotive Consultants (DAC). These figures indicate that Canada’s auto market is far more resilient than anticipated and caught many industry experts by surprise.
“I thought it would have been much worse. It’s not as bad as we thought. Cars are still selling and they’re a little bit cheaper,” said Akyurek. “The market is fine. It’s a bit softer on a year-over-year basis, but I don’t think we’re comparing a normal year over a normal year.”
Despite the dips in pricing, affordability remains top of mind for Canadians. According to AutoTrader, 87 per cent of prospective buyers identify value and affordability as their top considerations when purchasing a vehicle.
Inflation and rising gas prices sparked by the war in Iran are making matters worse for Canadians and Americans alike.
“The price of gasoline nationwide in the United States was about $3 a gallon at the end of February before the Middle East conflict began. At its high it was $4.50 and it stayed there for quite a while,” said Jeremy Robb, chief economist at U.S.-based Cox Automotive. “That was costing the U.S. consumer an additional $564-million per day. It’s an extra expense that could have gone to pay for food and clothing or pay off debt.
“[Gas] prices are more elevated. Consumers have got to plan for more tariffs and higher costs. And [manufacturers] and dealers are making less money because they can’t pass along all of these extra costs to consumers,” he said.
In Canada, more shoppers are shifting their buying patterns, opting for used cars over new, and mainstream brands instead of luxury models.
“We’ve had two consecutive quarters of negative GDP growth, so with this economic softness we’re seeing more folks looking for more affordable options and used vehicles,” said Park.
According to Clutch, new-vehicle sales dropped 5.1 per cent in the first four months of 2026 while used-vehicle retail sales rose 5.8 per cent year-over-year.
Canadians are also buying fewer luxury vehicles. Data from DAC reveals that the luxury vehicle market share shrank to 12.5 per cent in the first half of 2026, down from 14.4 per cent in 2024.
Canadians are also buying more electric vehicles.
Statistics Canada reported that new EV sales climbed 15.8 per cent in the first half of this year, a surge largely driven by the return of federal EV incentives and rising gas prices. Interestingly, prices for battery electric vehicles (BEV) are moving in opposite directions. The average price of a new BEV dropped 10 per cent year-over-year to $64,309, according to AutoTrader, while the average price of a used BEV increased 2.1 per cent to $49,178.
“Used BEV trends are going against the overall market trends,” said Akyurek. “There’s a lot of demand and used BEVs are selling. There’s not a whole lot of used BEVs available on the market, so [with] higher demand and lower supply, prices ticked up.”
“On the EV side, we’ve seen significant demand despite the increasing prices. Our EV sales almost doubled as gas prices started increasing in late February,” said Park.
Akyurek expects BEV sales will have a “strong year moving forward as long as incentives are here … but having said that, every year there’s going to be $1,000 less incentive so that demand is slowly going to diminish. It is going to be a natural decline over time.”
Looking ahead, Park anticipates a supply shortage on the EV side, especially if Middle East tensions continue and gas prices stay elevated. “I think you’ll see people wanting more EVs and demand for EVs going up and the supply not being there,” said Park.
Still, he is optimistic that the outlook will continue to improve for the overall economy. “At least for now, it’s a very stable time to be buying or selling a car. It could be fleeting, but the data for the last several months has shown that prices have largely levelled out. The less we see prices increase, the better it is for affordability for Canadians.”