The state of the Canadian used car market: Trends, insurance, and the true cost of ownership

We spoke with Dan Park, CEO of Clutch, Canada’s largest online used car retailer, about the company’s latest annual used car pricing report. We also wanted to learn about how Canadians are handling higher used car prices at a time when car insurance costs are climbing. Could you benefit from any of these changes or do you need to adjust your approach to buying a vehicle? 

What to expect with used car prices in 2026

As we reported this winter, the price of used cars (even end-of-year deals) reached over $33,000 in 2025—a 3.5% increase in used car costs over the previous year. 

There was a silver lining, though: used car prices were starting to fall by the end of the year due to lower gas prices and more EVs available across all used car segments. 

Unfortunately, the trend toward purchasing larger, newer, and more luxurious models means that Canadians will see higher used car prices through 2026. Buyers will also continue to contend with tariffs that increase competition for used cars, while driving up the cost of new vehicles.

Park says that the used car market is more insulated from inflationary pressures than the new car market; however, “Affordability places additional pressure on household budgets,” so we can expect to see higher prices for vehicles even though supply has normalized.

Related: Should you buy a new or used car?

The effect of high insurance prices on car buying

Higher car prices are just one of the key issues driving up transportation costs for Canadians. Since the pandemic, drivers have been paying more for insurance coverage. Part of this is due to the higher cost of vehicles—the more expensive the car, the more costly the repairs, and the more you’ll pay for insurance coverage.

According to the January 2026 Consumer Price Index, Canadians are paying 5.5% more for auto insurance than they did the year before. But there are regional differences. Drivers in Alberta can expect to pay closer to 17% more for auto insurance year-over-year, compared to drivers in B.C., who are only paying 0.3% more over the previous year.

In many cases, these higher costs are impacting the decision to buy a car. “Higher premiums can deter buyers or stop deals altogether.” Park went on to say that families with new or young drivers often see the largest increase in insurance costs. This means shopping around for coverage and the right used vehicle are crucial.

It can be worth it to find out if a car has a high theft risk because insurers will typically charge more, and you’ll likely want comprehensive car insurance. Park shared that popular models like the Honda CRV, Honda Civic, Toyota Highlander, and Toyota Rav-4 are all at higher risk of theft.

Related: The biggest car insurance myths, according to experts

How Canadian buyers are responding

Between higher vehicle costs and increased insurance premiums, Canadians are feeling the pinch. Park says he’s seeing lower down payments, higher financed amounts, and more drivers underwater on their existing loans. 

Consider the changes to downpayment amounts over the last few years. Just two years ago, buyers were able to put down an additional $1,600 compared to now. This suggests that drivers don’t have room in their budgets to make a more sizable contribution.

Smaller down payments mean buyers are financing more of their car purchases. Canadians are now financing cars to the tune of about $31,000 (up from $28,000 a couple of years ago). Lenders are also getting creative with the loans they’re offering. It’s becoming more common to see loans with terms of up to 96 months (8 years). This allows them to reduce monthly payments even though the overall cost of the loan is higher for the buyer.

Trade-in difficulties

Drivers who plan on trading in a car are often unpleasantly surprised to learn that they’re underwater on their loan. This happens when you owe more on the car than it’s currently worth. Park notes he’s seen a huge uptick in negative equity. While negative equity rates hovered around 7% in 2024, around 18% of car owners are now underwater on their loans.

Unfortunately, the amount owed has also shot up. A struggling car owner in 2024 had around $5,000 in negative equity, but today, that amount has climbed to $8,000. 

Putting down less for a down payment or exploring trade-in options are just a few of the ways buyers are adapting to affordability issues. They’re also holding on to vehicles longer—choosing to repair and make do before finally replacing them.