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Only a few vehicles remain on the lot at Zender Ford in Spruce Grove, Alta., on July 29, 2021.Megan Albu/The Globe and Mail

Canada’s national statistical agency does not track inflation in the used-car market, missing what’s been a volatile aspect of U.S. price pressure in recent months.

The auto market has been roiled by a global shortage of computer chips that’s weighed on vehicle production, driving demand to used cars that are also in short supply.

According to the U.S. Labour Department, the price of used cars and trucks in the United States jumped 10.5 per cent in June alone, and by 45 per cent over the past year, leaving an outsized footprint on overall inflation. In some instances, lightly used vehicles are selling for more than their original purchase price, bucking the adage that a car depreciates as soon as it leaves the lot.

Dealerships say dynamics are similar in Canada, but there is no accounting of that in the consumer price index, the country’s main gauge of inflation. In a statement, Statistics Canada said it does not have “sufficiently detailed and timely data to accurately capture pure price movements for used vehicles,” focusing instead on new cars.

“If the goal of inflation is to capture the broad movement of prices, that’s one piece of the story we’re missing right now in Canada,” said Erik Johnson, an economist at Bank of Montreal.

Some used vehicles now cost more than when they were new

There’s never been a worse time than right now to buy a used car in Canada

Alternative data point to sizable increases. The average price of used vehicles listed on autotrader.ca was $28,322 in June, up 9.5 per cent from a year earlier, after a steady slide in 2020. Another online marketplace, CarGurus, says prices have rallied 14.9 per cent over the past year, short of a 32-per-cent gain in the U.S. on the same platform.

“The retail pricing has been very strong,” said Chad Zender, dealer principal of Zender Ford and Big Rock Dodge in Alberta. “Somebody that paid $60,000 for an F-150 two years ago, we can give them $55,000 for that truck today, and then turn around and sell it for maybe $60,000.”

Several factors have coalesced to support demand.

For one, the used market tends to outperform new vehicles in economic downturns, as people seek more affordable options. The pandemic may have also pulled in buyers who wanted to avoid public transit, over health concerns. And dealers are struggling to stock new vehicles.

At the same time, the supply side is under pressure. Rental companies sold off cars and cancelled orders when COVID-19 arrived, given the decimation of travel. Now, they’re trying to rebuild fleets and holding onto vehicles longer, limiting their flow into the used market.

“This decline in fleet purchases 12 to 18 months ago is just now hitting used vehicle supply,” Rebekah Young, director of fiscal and provincial economics at Bank of Nova Scotia, said in a recent report.

Normally, “we would go and buy 10 one-year-old rental vehicles and put them on our used lot,” Mr. Zender said. “Those vehicles literally do not exist in Canada right now.”

Making things tougher, it’s a challenge to rebuild fleets when auto production is stymied by the chip shortage, while dealers are grappling with weaker inventory of new cars and fewer trade-ins. Analysts also say that thousands of used vehicles are getting exported to the U.S. from Canada, helped by a favourable exchange rate.

Given those headwinds, Ms. Young said global shortages of used vehicles could last well into 2022.

As for Mr. Zender, he’s taking in vehicles he would normally pass on.

“We’re not just selling brand new F-150s,” he said. “We’re selling 16-year-old F-150s for $10,000” that might have 250,000 kilometres on them. “And the consumer is accepting it.”

Statscan does account for used vehicles when constructing its weighting of goods and services in the CPI. As part of recent changes, the purchase of all passenger vehicles now accounts for 6.2 per cent of CPI, down from 7.6 per cent, owing to weaker sales in 2020. However, Statscan only tracks price movements for new vehicles, using them as a proxy for the whole market, new and used. Those costs rose 4.1 per cent in June on a 12-month basis.

With used cars “driving meaningful contributions in month-over-month inflation in the U.S., we’d see similar patterns in Canada,” BMO’s Mr. Johnson said.

He said, however, that price pressures should wane over time, as the auto industry rebounds from supply-chain constraints that have frustrated other sectors, too. In the U.S., there are signs of easing. An index of wholesale used vehicle prices from auction company Manheim showed a 1.7-per-cent drop in July from June.

“We should get some relief on prices heading into next year and moving forward,” Mr. Johnson said.

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