Canadian Car Market 2025: Trends, Vehicle Values & Forecasts
Canadian Car Market 2025: Trends, Vehicle Values & Forecasts
The Canadian car market in 2025 is undergoing a defining transition, shaped by rising prices, shrinking inventories, and accelerating interest in electrified vehicles. Among the key new car market trends in Canada, inventories have mostly recovered since the pandemic, yet vehicle prices surged over 30%, fueled by inflation and record-high interest rates.
To combat affordability concerns, the Bank of Canada cut interest rates by 175 basis points in 2024. However, strong U.S. demand and a weak Canadian dollar led to outbound inventory pressure, affecting availability and reshaping the Canadian automotive economic forecast for 2025.
Used Car Market in 2025: Prices & Retention
The used car prices in Canada in 2025 are showing signs of stability following an 8% drop in 2024. Strong U.S. appetite for Canadian SUVs and pickups helped support values, particularly among late-model used car values.
Meanwhile, the plug-in hybrid popularity in Canada is growing as more buyers seek alternatives that balance price, range, and fuel efficiency. This shift is reframing the hybrid vs electric cars Canada conversation, with hybrids offering a compelling bridge toward electrification.
Industry Outlook & Economic Drivers
The Canadian auto industry outlook remains cautious. Factors such as global market strain, EV rollout delays, and proposed U.S. tariffs are significant. The auto tariffs impact in Canada could reshape supply chain economics and pricing.
At the same time, the vehicle affordability crisis in Canada has become a critical concern. Flexible strategies and faster adaptation to new trends are vital to surviving a volatile economic environment.
Used Vehicle Retention Index (2022–2025)
| Year | Index Value | Year-over-Year Change |
|---|---|---|
| March 2022 | ~173.0 | — |
| End of 2023 | ~147.0 | -15% |
| End of 2024 | 135.7 | -7.8% |
| Forecast 2025 | 123.1 | -9.3% (expected) |
The used vehicle retention index in Canada continues to decline, forecasted at 123.1 for 2025.
Depreciation Forecast
| Year | Depreciation Rate |
| 2023 | 15% |
| 2024 | ~12% |
| Forecast 2025 | 12% |
The car depreciation forecast for 2025 remains steady, buoyed by a tighter supply of recent models.
Average Retained Value of 4-Year-Old Vehicles
Metric | Value |
Average Retained Value (2025) | 63% |
Trend | Declining |
MSRP Trend (2022–2025) | +20–30% |
Though retention rates are falling, higher MSRPs have kept average resale values relatively strong.
Fleet Sales & Electrification Shifts
The Canadian fleet sales trends are on the rise, especially as businesses and government fleets refresh aging stock. Notably, fleets are pivoting from full electrification toward hybrid and plug-in hybrid options, reflecting evolving EV adoption in Canada 2025 strategies.
Manufacturer Incentives and Leasing Trends
Year | Incentive % of MSRP |
2023 | 4.3% |
2024 | 6.8% |
Forecast 2025 | 9.0% |
Higher car incentives in Canada 2025 are helping to counter affordability gaps, particularly as leasing becomes more attractive for monthly budget-focused consumers.
Leasing Trends: A Rebound in Progress
Year | Lease Penetration |
Pre-2020 | ~30%+ |
2020–2023 | ~18% |
Forecast 2025 | 29% |
Lease penetration in Canada 2025 is climbing, fueled by improved rates and flexible incentives.
Used Vehicle Supply Forecast (0–8 Years Old)
Year | Supply (units) | Change |
2024 | ~1.62M | — |
2025 | 1.57M | -3.2% |
The Canadian used car supply trends continue to reflect lower availability due to pandemic-era sales declines.
Sales Forecast for New Vehicles
Year | Sales Volume (Units) |
2023 | ~1.75M |
2024 | 1.85M |
Forecast 2025 | 1.85M |
The Canadian auto sales forecast holds steady at 1.85 million vehicles for 2025.
Zero-Emission Vehicle Trends and Key Risks in the Canadian Car Market 2025
Zero-Emission & Hybrid Vehicle Trends
| Vehicle Type | 2024 Share | 2025 Forecast |
| Fully Electric | 12% | 16% |
| Plug-in Hybrid | Growing | Growing |
| Traditional Hybrid | Increasing | Increasing |
The zero-emission vehicle market share in Canada is expanding as hybrid models gain more mainstream acceptance
Key Risks to Watch in 2025
| Risk Factor | Impact |
| Tariffs | 25% U.S. tariffs could disrupt supply |
| Incentive Withdrawal | iZEV rebate phase-outs may reduce demand |
| OEM Volatility | Consolidation could reshape availability |
| Electrification Delays | Slower rollout due to cost and logistics |
Conclusion
Despite economic headwinds, the Canadian car market in 2025 is evolving with opportunity. From flexible fleet strategies to advancing electrification and improving consumer insights, this is a pivotal year for innovation. Strong Canadian vehicle values, coupled with improved tools and data, position the industry for adaptive growth.
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