Record auto sales in 2013, strong year ahead

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, shows a 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% since 2012 (1.68 million units sold) and a 10% increase since 2011 (1.59 million units sold).

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“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,” said Alex Koustas, economist, BMO Capital Markets.

Auto sales will slide marginally from 1.78 million units in 2013 to 1.71 million units in 2014, Koustas predicts. 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.

Read: Auto sales to accelerate in 2014

Key factors

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:

• Auto loans boom: Since 2009, Canadian automotive loan balances have increased by a staggering 165%, compared to 35% in total consumer loans. With loans showing some of the best performance on record and rates expected to remain low, it’s the credit wheels should remain well-greased.

• Leasing rebounds: Before the 2007 financial crisis, the leasing market accounted for nearly half of all auto sales but, by 2009, the number sunk below 10%. Since then, however, lease activity has made a nice comeback, climbing back to more than 20% of sales.

• Heightened competition: Automakers are feeling the heat, with competition pushing redesigned vehicles that boast greater amenities, performance and value than those of previous generations. For example, fuel efficiency has improved by nearly 20% across the board in the last five years and the evolving technology, size, safety and functionality of these vehicles have also expanded.

Read: No surprises in 2014

Staff

The staff of Advisor.ca have been covering news for financial advisors since 1998.