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

If you’ve been watching used car prices over the past year, you’re probably wondering if they’ll keep accelerating. Before you make a plan to trade in your vehicle or decide how much of a down payment to make, take a moment to anticipate what’s going on in the used car market this year.

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. 

What you can do before buying a used car

We asked Park for effective strategies that can make it easier to buy and finance a used car. He says that buyers are more prepared than they have been in the past, but it’s still worth doing the following:

• Define a budget. You’ll have a much easier time shopping if you know how much you’d like to spend a month on your car payment. Don’t forget to include maintenance costs, your insurance premium, and potential repair costs (especially if you want a car with luxury features or technology).
• Price shop and learn a vehicle’s value. No one wants to pay more for a car than it’s actually worth. As you start shopping, use Clutch’s Car Value Calculator to find the value of a car based on its condition and whether you buy it online, from a dealership, or from an individual.
• Shop for car insurance after you’ve narrowed down options. Once you have a few cars you’re considering, use their unique VINs to request car insurance quotes. This is the best way to see how much you’ll actually pay for car insurance every month, which can be a significant part of your transportation budget. And, if you’re struggling to choose between a few cars, a cheaper insurance payment might be your deciding factor.
• Ask for a vehicle’s Carfax report. Park says, “It’s super critical to know the history of the vehicle you want to buy.” No one wants to take out a hefty loan only to find their vehicle make/model is notorious for costly repairs, or that you’re driving a car with a rebuilt car title.
• Shop around for an auto loan. You might start by asking about auto loans with your current bank or credit union. Try to request at least three or four quotes from different lenders so you can compare options, but pay close attention to hidden fees. You should also learn what’s covered and what’s not, especially if you’re buying a warranty from the dealership.

While it’s not as much fun to shop for insurance or auto loans as it is to look for your next ride, being prepared can make the whole purchasing process easier—and save you money. 

Read more about cars and auto insurance:

• Buying a car in Canada: 7 tips for newcomers
• What is a deductible in auto insurance?
• EV rebates in Canada

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