TORONTO, ONTARIO--(Marketwired - Jan. 29, 2014) - Canadian auto sales had another banner year, with light vehicle sales growing for the third consecutive time, with the industry on track for another solid year, according to a new report by BMO Economics.
Preliminary numbers indicate the industry saw continued growth with light vehicle sales - which comprise all passenger grade vehicles and exclude trucks larger than the standard pickup - jumping to 1.74 million units sold in 2013, an increase of 4 per cent since the previous year (1.68 million units sold) and a 10 per cent increase since 2011 (1.59 million units sold).
"A solid model lineup and new offerings from manufacturers at very generous financing terms will continue to generate interest from the Canadian consumer," said Alex Koustas, Economist, BMO Capital Markets. "Sales activity will remain brisk, but will likely drop off last year's pace given rising ownership rates and more elevated debt levels. Nevertheless an overheating is unlikely as long as financing terms remain balanced."
Mr. Koustas predicts that auto sales will slide marginally from 1.78 million units in 2013 to 1.71 million units in 2014. Despite this drop in projected volumes in 2014, projected auto sales for the year are still expected to mark the third best performance on record.
Factors Fueling Auto Sales
Mr. Koustas notes that continued investments in the auto industry are helping to fuel growth. Factors such as technological advancements and improved fuel economy in every segment, from compact cars to full-sized pickups, have helped with the continued growth. For example:
- Boom in Auto Loans: Since 2009, Canadian automotive loan balances have increased by a staggering 165 per cent, compared to a mere 35 per cent in total consumer loans. With loans showing some of the best performance on record and rates expected to remain low, it's likely that the credit wheels should remain well-greased over the next year.
- Leasing Rebounds: Before the 2007 financial crisis, the leasing market accounted for nearly half of all auto sales but, by 2009, the number sunk to below 10 per cent. Since then, however, lease activity has made a nice comeback, climbing back to more than 20 per cent of sales.
- Competition Continues to Heighten: Automakers are feeling the heat, with their competition causing a stir with redesigned vehicles that boast greater amenities, performance and value than those of previous generations. For example, fuel efficiency has improved by nearly 20 per cent across the board in the last five years and the evolving technology, size, safety and functionality of these vehicles have also expanded.
"As manufacturers look to strengthen their brand and attract new customers, prospective buyers can really benefit from attractive finance offers and the competitive nature of the industry," said Robert Sadokierski, Head of Automotive Finance, BMO Financial Group. "Additionally, BMO recently consolidated its Automotive Finance Group which is designed to provide an enhanced customer experience more closely aligned with the evolving Canada-U.S. marketplace.
"This new structure allows us to provide dealerships with a full spectrum of customized financial solutions to support clients' businesses more effectively."
About BMO Financial Group
Established in 1817 as Bank of Montreal, BMO Financial Group is a highly diversified North American financial services organization. With total assets of $537 billion as at October 31, 2013, and more than 45,000 employees, BMO Financial Group provides a broad range of personal and commercial banking, wealth management and investment banking products and solutions.