Winnipeg Free Press - PRINT EDITION

Tough to get used set of wheels

Dealers forced to pay more for trade-ins

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Steve Chipman, CEO of the Birchwood Auto Group, says it's going to be a record-setting year for new-car sales and he thinks that will extend to used cars, too.

JESSICA BURTNICK / WINNIPEG FREE PRESS Enlarge Image

Steve Chipman, CEO of the Birchwood Auto Group, says it's going to be a record-setting year for new-car sales and he thinks that will extend to used cars, too. Photo Store

What do Winnipeg auto dealers have to do to convince you to part with your ride?

An acute shortage of used vehicles has created an owners' market and now dealers are eagerly stocking up on cars and trucks between one and five years old.

That includes paying a premium on trade-ins. One south end dealership was paying 25 per cent more on trade-ins last week than it was a few years ago when used vehicles were plentiful.

But the economic slowdown of 2008-09 convinced many drivers to hold on to their cars and trucks a little longer than they might have otherwise. That precipitated the collapse and government bailout of several manufacturers in the U.S.

At the same time, the number of leased vehicles in North America was in steep decline and rental-car companies were holding on to their vehicles longer, eliminating two sources of used vehicles.

'A good, clean local car with no accidents, you're going to get a premium for'

-- Steve Chipman, president and CEO of Birchwood Automotive Group

"We're paying premium dollars for used cars," said Steve Chipman, president and CEO of the Birchwood Automotive Group, which owns 11 dealerships in Winnipeg.

The strong demand is pushing up prices dealerships and private sellers can charge for used vehicles.

And if you're on the fence whether to buy new or used, the smaller the price discrepancy between the two, the more likely you are to want to breathe in that new-car smell.

But dealers aren't looking for just any old beater. They're cautious when kicking the tires of a used vehicle for a number of reasons, including wanting to avoid the thousands of vehicles that were damaged in Calgary's flood in June.

"A good, clean local car with no accidents, you're going to get a premium for," Chipman said.

Michael Hatch, chief economist for the Canadian Automobile Dealers Association, said leasing, which represented nearly half of the new-vehicle market in 2007, fell to less than 10 per cent just two years later. That caused a "real tightening" of the supply of used cars in the two- to four-year-old range, which is the bread and butter of new-car dealers' used operations.

The used-car market has started to rebound in recent months as leases have grown to become about one-quarter of all new sales.

"It's like a meal working its way through a snake," Hatch said.

Dealerships are keen to replenish their used-car stock because they have higher margins than new cars, he said.

"Some dealers might have gotten used to having an easy supply of used vehicles when leasing was strong," he said.

If current trends continue, there could be more written-off vehicles -- another source for the used market -- back on the road this year, too. Brian Smiley, spokesman for Manitoba Public Insurance, said 16,021 vehicles were written off during the first six months of 2013. If that continues at the same pace until the end of December, it will mark the most vehicles written off in the last five years. Even when MPI writes off a car, it can be sold to another driver.

"We'll put it in salvage, sell it and if it is repaired to safety standards and passes the safety, it could return to the road," he said.

The only instances where vehicles that have been written off can't be repaired is in cases of flood damage, fires and fatalities.

Chipman said industry analysts are predicting a record year for new-vehicle sales this year in Canada and he thinks that will extend to the used market, too.

"There's a pent-up demand for cars," he said.

geoff.kirbyson@freepress.mb.ca

 

Republished from the Winnipeg Free Press print edition August 1, 2013 B7

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Updated on Thursday, August 1, 2013 at 5:50 AM CDT: Replaces photo

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