Canadian Used Car Market: Trends, Insurance and Ownership Costs

If you’ve been tracking used car prices over the last year, you’re likely wondering whether they will keep rising. Before you decide to trade in your vehicle or set a down payment, take a moment to understand what’s shaping the used car market this year and what buyers can expect.

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 explored how Canadians are coping with higher used car prices while insurance costs continue to climb. The key question: can shoppers adjust their plans to avoid surprises and make a smarter purchase?

What to expect with used car prices in 2026

As reported earlier this year, the average price of a used car topped $33,000 in 2025, marking a 3.5% increase over the prior year. While prices started to ease late in the year—helped by lower fuel prices and a growing selection of used EVs—other trends suggest upward pressure will persist in 2026.

Many buyers are opting for larger, newer and more feature-rich vehicles, which pushes average transaction prices higher across the market. Tariffs and broader economic factors are also keeping competition tight and adding to the cost of both new and used cars.

Park explains that the used car market is somewhat insulated from broader inflationary pressures compared with the new-car market, but affordability remains a major concern for households. Even with improved supply in some segments, overall prices are likely to remain elevated as buyers trade up or seek specific models.

Related: Should you buy a new or used car?

The effect of high insurance prices on car buying

Rising vehicle prices are only part of the story. Since the pandemic, auto insurance premiums have increased significantly, and pricier cars mean costlier repairs and higher insurance bills.

According to the January 2026 Consumer Price Index, Canadians are paying about 5.5% more for auto insurance than a year earlier. Regional differences are substantial: Alberta drivers saw increases near 17% year-over-year, while drivers in British Columbia experienced a much smaller uptick—around 0.3%.

These higher premiums can influence buying decisions. Park notes that higher insurance rates often deter buyers or derail purchase plans entirely. Families adding young or new drivers typically face the largest increases, making it important to shop for both the right vehicle and the most competitive insurance rate.

It’s also worth checking a vehicle’s theft risk: insurers commonly charge more for models that are frequently stolen, and that often means you’ll want comprehensive coverage. Park identified popular models such as the Honda CR-V, Honda Civic, Toyota Highlander and Toyota RAV4 as being at higher risk of theft.

Related: The biggest car insurance myths, according to experts

How Canadian buyers are responding

Faced with higher vehicle prices and rising insurance premiums, many Canadians are adjusting how they buy and finance cars. Park reports seeing smaller down payments, larger financed amounts, and a growing number of drivers who are underwater on their existing loans.

Down payments have shrunk notably. Two years ago buyers were able to put down roughly $1,600 more on average than they can today. That squeeze on household budgets is pushing buyers to finance a greater share of the purchase price.

Purchase year	Average down payment
2024	$3,600
2025	$2,700
2026	$2,000

As a result, the average financed amount has risen to roughly $31,000, compared with about $28,000 a few years ago. Lenders are responding by offering longer loan terms—sometimes up to 96 months—to lower monthly payments, though that increases the total interest paid over the life of the loan.

Trade-in difficulties

Many drivers who plan to trade in their vehicle discover they owe more than the car is worth. Park says negative equity has jumped sharply: while rates of negative equity were near 7% in 2024, roughly 18% of car owners are now underwater.

The average amount owed when underwater has also grown. Where a struggling owner might have had about $5,000 in negative equity in 2024, that average has risen to about $8,000 today. To cope, buyers are putting down smaller upfront amounts, exploring trade-in options cautiously, or simply holding on to their current vehicles longer and repairing them rather than replacing them.

What you can do before buying a used car

Park offered practical steps buyers can take to make purchasing and financing a used car more manageable. Even though buyers generally come better prepared than in the past, these actions can reduce risk and unexpected costs:

Define a realistic budget. Determine how much you can afford to spend each month, and include insurance, routine maintenance and potential repairs—especially if you’re considering a vehicle with advanced technology or luxury features.
Compare prices and verify value. Use available pricing tools to determine a fair market value before you buy, and compare offers across online sellers, dealerships and private sellers to avoid overpaying.
Get insurance quotes early. Once you have a few models in mind, use their VINs to get insurance quotes. Monthly insurance costs can be a major part of your total transportation budget and may influence which car you ultimately choose.
Request a vehicle history report. Park stresses the importance of knowing a car’s history. A Carfax or similar report can reveal accidents, rebuilt titles or other issues that affect value and future repair costs.
Shop multiple lenders. Compare at least three or four loan offers from banks, credit unions and other lenders. Watch for hidden fees, understand what is covered by any dealer warranty, and choose the loan that best balances monthly payment and total cost.

Shopping for insurance and financing may not be as exciting as picking out a car, but preparation will make the buying process smoother and help you avoid costly surprises.

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