The Toronto automotive market has experienced significant shifts over the past few years, influenced by global supply chain disruptions, changing consumer preferences, and economic factors. At AutoPick Toronto, we closely monitor market trends to provide our clients with the most current insights when making vehicle purchasing decisions. This analysis examines the current state of the Toronto car market and offers predictions for the remainder of 2023.

Current Market Overview: Stabilization After Turbulence

The Toronto car market is finally showing signs of stabilization after two years of unprecedented volatility. The pandemic-induced supply chain disruptions that caused severe inventory shortages and price spikes are gradually easing, though we haven't yet returned to pre-pandemic conditions.

Supply and Inventory Trends

Dealer inventories across the Greater Toronto Area are slowly improving compared to 2021-2022 levels. However, they remain below historical averages:

• New vehicle inventory has increased approximately 25% since this time last year but remains about 30% below pre-pandemic levels.
• Used vehicle availability has improved more significantly, with inventory levels now just 15% below 2019 figures.
• Certain vehicle categories, particularly hybrid and electric vehicles, continue to have extended wait times due to high demand and component shortages.
• North American and European manufacturers have recovered faster than some Asian brands that are still dealing with microchip shortages.

Pricing Dynamics

The pricing landscape is beginning to normalize, though with notable differences across vehicle segments:

• New vehicle prices are 12-18% higher than pre-pandemic levels, with less aggressive dealer markups than seen in 2022.
• Used vehicle values have declined from their 2022 peak but remain elevated by historical standards—approximately 20% higher than 2019 for vehicles under 5 years old.
• The unusual phenomenon of nearly-new used vehicles selling for more than their original MSRP has largely disappeared, though certain in-demand models still command premium prices.
• Incentives and manufacturer rebates are gradually returning to the market, though they remain less generous than pre-pandemic levels.

"The Toronto automotive market is experiencing a return to more normal conditions, but it's a 'new normal' with higher price points and continued emphasis on advance ordering for specific configurations."

Popular Vehicle Segments in Toronto

Toronto's unique urban environment, climate, and consumer preferences have created distinct patterns in vehicle popularity. Here's what we're seeing in 2023:

SUVs and Crossovers: Continued Dominance

SUVs and crossovers continue to dominate the Toronto market, accounting for approximately 58% of new vehicle sales. Within this segment:

• Compact Crossovers: The Toyota RAV4, Honda CR-V, and Mazda CX-5 remain the most popular choices, with the RAV4 Hybrid experiencing particularly high demand.
• Subcompact Crossovers: The Hyundai Kona, Mazda CX-30, and Subaru Crosstrek are gaining market share as urban dwellers seek maneuverability with SUV versatility.
• Mid-Size SUVs: The Toyota Highlander, Honda Pilot, and Hyundai Santa Fe lead this segment, with hybrid options showing strong growth.

Electric and Hybrid Vehicles: Accelerating Adoption

The EV and hybrid market in Toronto is experiencing rapid growth, driven by fuel prices, environmental concerns, and improved infrastructure:

• EVs and plug-in hybrids now represent approximately 9.5% of new vehicle sales in Toronto, up from 5.7% in 2022.
• The Tesla Model 3 and Model Y continue to lead the pure EV segment, though traditional manufacturers are gaining ground with models like the Mustang Mach-E, Hyundai IONIQ 5, and Volkswagen ID.4.
• Hybrid models from Toyota (RAV4 Hybrid, Camry Hybrid) and Honda (CR-V Hybrid, Accord Hybrid) are often sold before they reach dealer lots.
• EV charging infrastructure in Toronto has expanded by 35% in the past year, reducing "range anxiety" concerns for urban drivers.

Sedans and Hatchbacks: Resilient Despite SUV Trend

While declining nationally, compact and mid-size cars maintain a significant market share in Toronto due to urban practicality:

• The Honda Civic, Toyota Corolla, and Mazda3 remain popular choices for city dwellers and first-time buyers.
• Premium compact sedans like the BMW 3-Series and Mercedes-Benz C-Class continue to attract urban professionals.
• Hatchback variants are particularly popular in Toronto, offering cargo flexibility while maintaining a smaller footprint than SUVs.

Price Trends by Vehicle Segment

Understanding current price trends can help buyers set realistic expectations. Here's what we're seeing in the Greater Toronto Area:

Vehicle Segment	Avg. New Price (2023)	Change vs. 2019	Used Price (3-yr old)	Retention Rate
Compact Sedan	$28,750	+14%	$22,400	78%
Mid-Size Sedan	$36,200	+12%	$27,500	76%
Compact SUV	$38,500	+18%	$31,200	81%
Mid-Size SUV	$48,700	+16%	$38,900	80%
Luxury Compact	$52,300	+15%	$39,800	76%
Electric Vehicles	$58,400	+8%	$42,100	72%
Hybrid SUVs	$45,600	+20%	$38,200	84%

Note: Data based on AutoPick Toronto's market analysis and industry reports. Prices reflect average transaction prices in the Greater Toronto Area as of March 2023.

Key Market Factors Influencing Toronto's Car Market

1. Interest Rates and Financing

The current interest rate environment is significantly impacting purchasing decisions:

• Higher interest rates have increased monthly payments by an average of $85-125 per month on a typical car loan compared to early 2022.
• This has pushed some buyers toward less expensive models or longer loan terms.
• We're seeing increased interest in manufacturer-subsidized financing programs where available.
• Cash purchases have increased among affluent buyers looking to avoid higher interest costs.

2. Fuel Prices and Efficiency Considerations

Fluctuating fuel prices continue to influence vehicle choices:

• Toronto's high gas prices (currently averaging $1.65/L) have accelerated interest in fuel-efficient vehicles.
• Hybrid models command a premium but typically sell faster than their conventional counterparts.
• Large SUVs and pickup trucks have seen slightly softening demand among urban commuters, though they remain strong in suburban markets.

3. Urban Infrastructure and Parking

Toronto's urban characteristics create unique market considerations:

• Limited parking and high parking costs in downtown areas continue to favor compact vehicles.
• Expanding bike lanes and transit options have prompted some urban households to downsize from two vehicles to one.
• Condo developments with limited parking are influencing vehicle ownership patterns in the downtown core.

Toronto's Used Car Market: A Buyer's Guide

The used car market offers particular opportunities and challenges in the current environment:

Best Value Segments in Today's Market

Based on our analysis, these segments currently offer the best value for used car shoppers in Toronto:

• Off-lease luxury sedans: 3-year-old luxury sedans like the BMW 3-Series and Audi A4 have seen stronger depreciation than SUVs, creating value opportunities.
• Mid-size sedans: The declining popularity of sedans nationally has created more favorable pricing in the used market, with models like the Honda Accord and Toyota Camry offering excellent value.
• Last-generation models: Vehicles that have recently been redesigned often see their previous generation models depreciate more quickly, creating value opportunities for buyers who don't need the latest styling.

Segments with Inflated Values

These vehicle types continue to command premium prices in the used market:

• Toyota and Honda SUVs: Models like the RAV4, Highlander, CR-V, and Pilot continue to hold value exceptionally well.
• Pickup trucks: The Ford F-150, Toyota Tacoma, and other popular trucks depreciate slowly and remain priced at near-new levels for several years.
• Specialized vehicles: Off-road capable SUVs, limited production models, and vehicles with specific enthusiast appeal continue to command premium prices.

Predictions for the Remainder of 2023

Based on current trends and economic indicators, here are our forecasts for Toronto's car market through the end of 2023:

1. Continued inventory recovery: New vehicle availability should approach 85-90% of pre-pandemic levels by Q4 2023, with fewer order backlogs and wait times.
2. Moderate price stabilization: New vehicle prices will likely plateau rather than decrease, with manufacturers maintaining higher margins while gradually increasing incentives on select models.
3. Used car value normalization: Used vehicle prices should continue to gradually decrease, approaching historical depreciation patterns by year-end, though still remaining above pre-pandemic trends.
4. Electric vehicle expansion: We predict EV market share will reach 12-15% by year-end in Toronto as more affordable models enter the market and infrastructure continues to improve.
5. Increase in lease returns: A wave of vehicles leased in 2020 (when residual values were set at pre-pandemic levels) will be returning to the market, potentially creating buying opportunities in the lease return segment.

Navigating Today's Market: Tips for Toronto Car Buyers

For those looking to purchase a vehicle in Toronto during 2023, we offer these strategic recommendations:

For New Car Buyers:

• Consider ordering vs. inventory purchases: Factory orders often provide better configuration options and can help avoid dealer markups on in-demand models.
• Be flexible on colors and options: Willingness to compromise on non-essential features can significantly reduce wait times.
• Watch for end-of-quarter incentives: Manufacturers are gradually reintroducing promotional offers, particularly at the end of financial quarters.
• Cross-shop similar models: Consider equivalent models from different manufacturers, as inventory availability and pricing can vary significantly.

For Used Car Buyers:

• Consider 4-5 year old vehicles: These often represent better value than nearly-new used cars in the current market.
• Prioritize pre-purchase inspections: The competitive used market has led some sellers to defer maintenance; independent inspections are more important than ever.
• Look for corporate fleet vehicles: Former company cars often offer good value and have documented maintenance histories.
• Be prepared to act quickly: Well-priced used vehicles still move very quickly in Toronto; have financing pre-approved and be ready to make decisions promptly.

Conclusion: Opportunity Amid Transition

The Toronto car market in 2023 represents a period of transition—moving from the extreme seller's market of 2021-2022 toward more balanced conditions. While challenges remain, particularly around pricing and specific model availability, buyers have more options than at any point in the past two years.

At AutoPick Toronto, we continue to leverage our market knowledge, dealer relationships, and negotiation expertise to help our clients navigate this evolving landscape. Whether you're looking for a practical commuter vehicle, a family SUV, or a premium driving experience, our team can help you identify the right opportunities in today's market.

For personalized advice on your specific car buying situation, contact our consultants for a one-on-one assessment of your needs and current market opportunities.