Pandemic-induced border restrictions aren’t preventing U.S. dealers from buying used vehicles at Canadian auctions, further exacerbating tight supply in this country.
"The U.S. market exchange rate remains favourable for exportation. Buyers exporting vehicles to the U.S. continue to place pressure on Canadian vehicles, and supply is struggling to keep up with overall demand at auctions,” Canadian Black Book analysts said in an April 20 note. “The Canadian dollar remained constant [the] week [of April 12]; however, this will have little effect on demand, with rising prices on both sides of the border.”
The Canadian dollar, which closed at US 80.57 cents on Tuesday, is helping U.S. dealers chip away at a supply of used vehicles in Canada already under pressure by a global microchip shortage that’s decimating new-vehicle inventories.
“This high demand at auctions is expected to continue … as the lack of new vehicle supply continues to increase demand for used vehicles,” Canadian Black Book said.
The exchange rate offers an opportunity for U.S. dealers to essentially buy vehicles at a discount north of the border. Throughout March and April, the loonie was trading at US 79 to 80 cents. While that’s the highest the Canadian dollar has traded relative to the greenback since 2018, U.S. buyers are still heading north.
The dollar difference can provide additional profit as used-vehicle prices surge in that market. According to KAR Global Analytical Services, wholesale used-vehicle prices averaged US $12,551 ($15,992) in the United States in January, up 5.6 per cent from December and 13.1 per cent from a year earlier.
The inventory crunch is worse in Canada, said John Hairabedian, CEO of Quebecbased HGregoire, a dealership group with stores in both countries.
“In the U.S., we’re not as concerned about the supply shortage.”