The ADESA Canada Used Vehicle Price Index showed significant movement and volatility over the period August to November 2005. The Index fell 0.9% over July, dropped 2.5% over August, was flat over September and rose 1.6% over October.

Oil prices rose significantly in July and August, eventually reaching their peak at around $70US per barrel at the end of August. Higher oil prices created higher prices at the pump which, in turn, prompted a significant drop in used vehicle values, particularly larger vehicles such as SUV’s and pick-up trucks.

Earlier in the year, some manufacturers had responded to the decline in new vehicle sales by introducing heavy incentives. The incentives were successful in stabilizing new vehicle sales and destabilizing used vehicle sales as potential used vehicle buyers were lured into the new vehicle market by the incentives. As gas prices retreated to “new normal” levels in October and November, retail confidence and modest market growth returned.

The strength in the Canadian economy has lead to interest rates increases with the promise of more to come. The higher interest rates have pushed many of the retail transactions from new to used. Also, the summer new vehicle incentives pulled many new vehicle buyers into the market early and by fall dealers were able to confidently purchase vehicles for sale into the used market.