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New vs. used vehicles? The economy will decide

New vs. used vehicles? The economy will decide

Posted on: 5/14/2018 | Author: ATB Financial's Economics + Research Team

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We know that the recession cut into vehicle sales in Alberta. With nearly one in 10 people out of work, motorists were forced to curb spending. But it didn’t stop us from buying cars and trucks altogether—we just altered what kind of vehicles we bought.

Sales of new vehicles plunged 18 per cent between 2014 and 2016. At the same time, sales of used vehicles rose by 10 per cent. And because the volume of used vehicle sales is almost double that of new, the effect was that total sales (i.e., new and used combined) barely fell at all.

This switch from new to used vehicles also happened in the recession of 2008-09. In fact, new vehicle purchases were hit even harder. After hitting a record high in 2007, new vehicle sales dropped 27 per cent by 2009, while used vehicles continued to rise.

The graph below shows sales of new and used motor vehicles. While both lines generally trend higher over time, mostly the result of population growth, there is a noticeable widening between the lines during recessions as new vehicle sales dip and used vehicle sales pick up. During strong economic times, sales of used vehicles are typically flat or declining.

The substitution from new to used cars and trucks is not surprising during an economic downturn (that fresh new car smell comes at a price). But as Alberta’s economy gradually claws its way back, new vehicle sales are rising once again. They rose 11 per cent in 2017.

New vs, used vehicle sales, graph​​​​

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