A growing number of Ontario car owners are facing an uncomfortable financial reality: they owe more on their vehicles than those vehicles are currently worth. According to new data from Clutch, Canada’s largest online used vehicle dealer, nearly one in four sellers trading in their cars on the platform is grappling with negative equity.
Clutch CEO Dan Park says the trend is especially pronounced among those who purchased used vehicles during the pricing surge of 2021 and 2022, when the pandemic pushed resale values sky-high. Buyers who financed during that period — especially with added costs like warranties and accessories — are now discovering that their loans exceed the resale value of their vehicles by thousands.
The average shortfall? Around $7,700. That’s the amount the average Clutch seller with negative equity still owed after accounting for what their car could fetch on the market. For anyone looking to sell, that means cutting a cheque to make up the difference. “The financial position people have in cars has deteriorated significantly over the last couple years,” Park explained.
There are, however, some ways to manage the situation. One common option is to roll the remaining balance into the financing of a more affordable vehicle — typically a smaller model. Clutch has noted a rising interest in compact and economical vehicles like the Honda Civic and Hyundai Elantra, as budget-conscious consumers seek to downsize from SUVs and trucks.
Despite financial strain for some, the used car market continues to heat up. In May, average used car prices climbed 0.58 per cent month-over-month — the sixth consecutive rise — with the average listing on Clutch reaching $33,221, up from $31,500 last August. Sport utility vehicles remain the top sellers, making up 60 per cent of Clutch’s used vehicle sales. Meanwhile, demand is also growing for hybrids and EVs, which saw price increases of 0.3 and 1.3 per cent respectively in May.
While new tariffs on U.S. vehicle imports and parts could eventually influence Canadian prices, Park says it’s still too early to see clear impacts in the used market. Some dealers did increase inventory in April and May in anticipation, but any pricing effects may take months to fully materialize.
For now, Park offers a measured take: “It’s not a terrible time to buy. If you need a car, it probably doesn’t make sense to wait.” As prices level off and inventory stabilizes, consumers navigating negative equity may find this a manageable moment to make their next move.