New vs. used cars in Canada: Which option makes more sense in 2026?

In 2026, while used vehicles are still significantly cheaper upfront—by nearly $20,000 on average—the gap in overall value has narrowed. New cars appear now as a more competitive option than in previous years.  

After years of supply shortages, tariff concerns and record-high vehicle prices, the Canadian auto market appears to begin to normalize. Vehicles are easier to find than a few years ago, but affordable options—particularly those under $20,000—remain limited.  

According to data from DesRosiers Automotive Consultants (DAC), the average price of a new vehicle in Canada reached $53,400 in 2025, a 16.6% increase from 2024. Meanwhile, Clutch.ca reported that the national average selling price for a used vehicle was $33,718 in 2025, up 4.6% year-over-year. At first glance, that $19,682 gap between new and used vehicle prices makes the latter seem like the obvious value choice. However, the sticker price is only one part of the ownership equation.

Financing rates, manufacturer incentives, insurance costs, maintenance expenses, and EV rebates can all influence whether new or used cars ultimately deliver the best value. 

Why are used cars still unusually expensive?

Used vehicles are still the preferred choice for value-conscious Canadians, but they’re often not the 'bargain' they once were.  

Today's elevated prices can largely be traced back to COVID-19 lockdowns, when factory shutdowns and a global microchip shortage stalled new vehicle production. That meant fewer cars eventually flowed into the used market as trade-ins, lease returns, and certified pre-owned inventory, creating a supply shortage that continues to affect prices today.  

More recently, tariffs have added more pressure to car prices. When the U.S. and Canada butted heads over auto tariffs in March–April 2025, many consumers rushed to buy cars ahead of expected price increases. That surge in demand added pressure to vehicle inventory, further tightening supply, and helping keep prices elevated.

“Vehicles cross the border all the time, and if there’s a tariff on them, it may no longer make sense for some manufacturers to import them into Canada,” says Ian Nethercott, host of The Auto Hub Show and a 20-year veteran of Canada’s automotive industry.  

Some of those vehicles that Canadians have traditionally had access to may no longer be available. If you have fewer new vehicles coming into the market, particularly in popular gas-powered segments, those prices are expected to go up, he explains.  

That’s where the used market comes in.

“Used vehicle prices probably aren’t going down. I think they’ll continue to rise because new vehicle inventory is going to be tight.”

Are used cars better value due to vehicle depreciation?

Depreciation remains one of the strongest arguments for buying a used car. While it varies by vehicle, many new cars lose roughly 20% of their value in the first year alone. By year three, depreciation losses of 40% to 45% are common.

Using those estimates, a car purchased for $40,000 could be worth just $22,000 to $24,000 three years later, despite having plenty of useful life left.

For many buyers, that’s the value sweet spot—but the traditional used-car equation has been disrupted. Inventory remains tighter than it was before the Covid-19 years, so deep discounts that existed a decade ago aren’t guaranteed, and buyers may need to be more flexible on brand, body style, or features.

When can buying a new car make financial sense?

Paying a premium for a new vehicle comes with several built-in advantages. These include:  

• Latest safety and driver-assist features
• Full manufacturer warranty coverage
• More predictable maintenance costs in early years
• Reassurance of being the first owner
• Access to more favourable financing options
• Potential to offset depreciation over long-term ownership

Few Canadian households have $60,000 in cash to buy a new car outright. As a result, manufacturers and dealerships often offer financing deals, including low-interest or zero-percent loan rates, to help Canadians access the new car market and advantages listed above.  

For buyers planning to keep a vehicle for 10 years or longer, depreciation becomes less important. The longer a vehicle stays on the road, the more opportunity owners have to spread that initial value loss over years of use.

Related: Does car insurance cost more if you lease your vehicle? 

Has affordability changed how Canadians finance vehicles?

Leasing and financing are now the norm for many Canadian car buyers. According to J.D. Power Canada, the average monthly payment on a new-vehicle loan reached $806 in March 2026, up $40 from a year earlier.  

Nearly one in five finance customers (18.4%) now have monthly payments exceeding $1,000, driven largely by purchases of premium vehicles and pickup trucks.  

“If I’m a consumer in Canada making $70,000 a year, I’m probably not bringing home enough to comfortably afford a $1,000 monthly car payment,” says Nethercott. “So, my options are to lease a vehicle or finance a used car and extend the term longer.”

Roughly 54.7% of new vehicle loans now extend to 84 months/7 years or longer, according to J.D. Power, as buyers try to keep their monthly payments manageable.

A 2026 Honda Civic priced at $33,110 would require financing $26,488 after a 20% down payment ($6,622). With the average new car loan rate at 6.72% in February 2026, borrowing costs remain much higher than they were a few years ago.  

Here’s how that loan compares over 60 and 84 months for a buyer with strong credit score (760). Borrowers with lower credit scores typically face higher rates. 

The lower monthly payment on the longer loan comes at a cost. With a two percentage-point higher interest rate for the 7-year loan, a buyer pays almost twice as much in interest and remains committed to the vehicle for an additional two years. Longer-term loans can also create other challenges down the road, such as the risk of owing money on a vehicle long after its value has declined.  

“The problem is that some consumers end up owing more than the vehicle is worth, especially if they trade it in before the loan is paid off,” says Nethercott. “That negative equity can then get rolled into the next vehicle, creating a cycle where the amount they owe keeps growing.”

For example, a driver who owes $10,000 on a vehicle worth $8,000 may choose to carry that $2,000 difference into their next loan rather than pay it upfront. Over time, this can make it harder to build equity in a vehicle and increases the cost of future purchases.

Learn more: Which vehicles are cheapest to insure by fuel type in Canada in 2026? 

What other charges should you factor into total cost of owning a car?

The purchase price is only one part of vehicle ownership. Car insurance, fuel, maintenance, and repairs all contribute to what drivers actually spend over time.

Despite popular belief, used vehicles aren’t always dramatically cheaper to insure than new ones. Newer vehicles can cost more to repair or replace, but that’s only part of an insurance premium. Mandatory coverage like liability protection makes up a large share of costs and doesn’t decrease just because a vehicle is older.

Drivers who see meaningful savings on older vehicles often achieve this by reducing optional coverage, rather than benefiting from a dramatically lower base premium.

Read more: 15 ways to get cheaper car insurance 

How are EVs changing the new-vs-used car equation?

If there’s one category where the new-versus-used calculation is changing fastest, it’s electric vehicles. Used EV sales in Canada jumped 62% in 2025, according to Ridez data, while prices have fallen as more off-lease vehicles enter the market.

At the same time, new government rebates are rewarding new EV purchases. The federal Electric Vehicle Affordability Program (EVAP), launched in February 2026, offers up to $5,000 for eligible battery-electric vehicles and up to $2,500 for eligible plug-in hybrids. Increased competition and a growing supply of EVs—thanks partly to Ottawa opening the door to a limited number of Chinese-made EVs—could also put pressure on new EV prices over time.

For value-focused shoppers, that could make the used EV market an attractive option. However, EVs come with unique considerations that don’t apply to traditional gas-powered vehicles. Beyond mileage and maintenance history, buyers need to understand battery health, charging history, remaining warranty coverage, and potential replacement costs.

“When you buy a used EV, you don’t always know what you’re getting,” says Nethercott. “You don’t know the health of the battery, how it’s been charged, or how much warranty coverage is left. The most expensive component is the battery. It’s very much a buyer-beware situation.”

For consumers who have reliable access to EV charging and are comfortable with the technology, falling used EV prices could create an opportunity. But buyers should do their homework before purchasing to ensure the vehicle fits their needs and budget.

Read more: Survey: 30% of Canadians interested in EVs, but cost remains a barrier in 2026 

New vs. used cars in Canada: which one has better value?

The advice to buy used and save money still holds true in many situations—but as above factors show, it’s no longer the whole story: 

There’s no single answer to whether a new or used vehicle is the better deal. The right choice depends on your budget, driving habits, and priorities. Before shopping, Nethercott recommends starting with a simple question: What do you actually need from a vehicle?

What features do you have to have? How are you driving the car? How many people are in it on a common day? How important is fuel economy? What’s your maximum budget?

Before buying, consider:

• Set your true budget: Look beyond the purchase price and focus on what monthly payment you can comfortably afford, whether you’re leasing or financing.  
• Choose the vehicle type that fits your priorities: If fuel savings are important, a used EV or hybrid may help reduce long-term costs. If affordability is the priority, a reliable used vehicle may offer the best value.  
• Don’t overlook nearly-new vehicles: Vehicles often experience their steepest depreciation in the first few years. A three- to five-year-old vehicle with reasonable mileage, a strong maintenance history, and remaining warranty coverage can offer a good balance of value and reliability.  
• Research reliability before buying used: Check common issues with the specific make, model, and year before making an offer. Resources such as Consumer Reports’ annual used vehicle guides can help identify models with stronger reliability records.  
• Avoid vehicles with a questionable history: Always check accident history and service records. Be cautious with rebuilt or salvaged vehicles, and avoid private sellers who cannot provide clear ownership and maintenance information.  
• Compare financing, incentives, and lease options: For new vehicles, look at the full deal, including interest rates, manufacturer incentives, and lease terms. A lower interest rate or incentive can sometimes offset a higher purchase price.  
• Watch for extra fees: Ask questions about additional charges added during the purchase process, including documentation, service, or finance-related fees.  
• Consider long-term ownership costs: Extended warranties and prepaid maintenance plans may be worth considering, especially if they help protect against unexpected expenses and lock in future service costs.  
• Maintain the vehicle: Regular servicing, keeping records, and addressing issues early can help protect the vehicle’s value and reduce repair costs over time.

For many Canadians, a vehicle two- to three-years-old still represents the best balance of value and cost. But with promotional financing, manufacturer incentives, and EV rebates narrowing the gap, buyers should compare the full cost of ownership before signing on the dotted line.

Read next: How much does it cost to own a car in Canada?