Stay Competitive in the Canadian Used Car Market: Embrace Agility, Personalization, and AI

The Canadian used car market has undergone a significant transformation in Q2 2025. Buyer sentiment and demand are on the rise, even as private vehicle sourcing tightens and prices increase. According to AutoTrader’s Q2 2025 report, used car prices have surged by 3.6% year-over-year due to demand influenced by US tariffs.

Shifting Consumer Preferences

Consumer preferences are shifting from new to used vehicles. A recent AutoTrader survey revealed that 47% of respondents would alter their buying habits due to the inflated prices of new cars. This trend indicates a growing preference for used vehicles. There is also a “pull-forward” effect, creating a sense of urgency to purchase ahead of anticipated market changes.

Given this shift, how can used car dealerships stay competitive despite a tight inventory pool and rising prices? By leveraging agility, personalization, and a data-driven focus, dealers can use their advantages to navigate market uncertainties.

The Advantages of Agility

Having smaller teams allows dealerships to quickly adjust pricing, sourcing, or inventory in real time. When auction fees cut into margins and dealer trades become less appealing due to inflated pricing, it’s crucial to stay agile. This means adjusting strategies to meet market demands.

Private Acquisition

More dealerships are turning to private vehicle acquisition to avoid extra fees and recon costs, which can range from $1,000 to $3,000 per vehicle. This approach helps maintain profitability.

Specialized Inventory Turnover Rates

With gross margins in Q2 at only 5.4% compared to 7.3% in 2019, competition in the used car market is fiercer than ever. Focusing on a smaller inventory size with quick turnover, even if it means lower profit margins per vehicle, can minimize the risk of holding stock that doesn’t sell quickly.

The Power of Personalization

In a competitive industry, dealerships that prioritize personalization see higher customer satisfaction and repeat business. While larger dealers may rely on automated responses, smaller dealers can build genuine relationships with customers through individualized touches:

• Offering Buy-Back programs that guarantee value and create tailored offers to foster loyalty.

• Providing flexible delivery and at-home test drive options to enhance convenience for customers.

• Hosting local community-building initiatives to strengthen brand identity and build customer trust.

  
  

Leveraging AI for Success

In today’s digital age, those who use tools and data intelligently come out on top. Over 35% of auto dealerships have adopted some form of artificial intelligence (AI) in 2025. These tools help dealers shift from manual inventory management to smarter acquisition, pricing, marketing, and selling strategies.

AI Tools Redefining Dealership Agility

Here are four AI tools that are redefining dealership agility and enhancing customer experiences:

• For Smarter Decisions: Carketa is a profit predictor tool that advises dealers on the highest-margin vehicles to source before purchase.

• For Agility: Lotlinx’s VIN Manager uses AI to predict which cars are at risk of aging out, employing targeted ad spend to move them quickly.

• For Personalized Selling: Fullpath is a Customer Data Platform that deploys campaigns matching slow-moving inventory with likely buyers.

• For Intelligent Inventory Sourcing: Kaihive Co-Pilot simplifies private inventory sourcing by actively scanning the market and filtering out junk listings.

  
  

With the rapid growth and availability of new automation tools, consider integrating AI into your workflow. This can optimize stock, reduce holding costs, and ultimately protect your margins.

The Takeaway: Stay Competitive Through Agility, Personalization, and AI

While large retailers may have the advantage of volume, small dealers can excel in speed, trust, and agility. By combining business agility, personalization efforts, and intelligent tools that inform data-driven decisions, you can scale your dealership and safeguard your margins against market fluctuations.

To thrive in the Canadian used car market, small dealerships should start integrating AI-powered insights and building stronger customer touchpoints today for a future-proof tomorrow.

Looking for a smart inventory sourcing tool? Book a demo with Kaihive Co-Pilot today!