Auto sales hit one-million mark by midway point of year for first time
Expected interest rate hike could affect pace of sales later this year
Despite slumping passenger car sales, for the first time more than one million new vehicles have been sold in Canada by the midway mark of the year.
DesRosiers Automotive Reports says overall car and light truck sales increased five per cent, with 1,039,068 vehicles moving off lots from January through June compared to the same time period last year.
The market research firm says auto sales in June also set a new record, with 203,486 vehicles sold, 6.5 per cent more than during the same month a year ago.
Like in the past, sales of light trucks led the way in June, rising by 10 per cent year-over-year, and easily offsetting a 0.1 per cent decline in passenger car sales. Year-to-date, passenger car sales were down two per cent while light truck sales were up 8.8 per cent.
Annual sales record 'not a foregone conclusion'
While this is the strongest start on record for Canada, DesRosiers says a different picture has been forming in the U.S. where new vehicle sales have been down for four consecutive months as of June.
"Surpassing 2016 as an all-time record setting year may not be a foregone conclusion should Canada start to follow that trend in the latter half of the year," the firm said in a release.
Increasingly strong signals from the Bank of Canada that rock-bottom interest rates are nearing an end may also play a role in slowing down the furious pace of car sales, says Equifax Canada.
"Higher rates may actually lead to a short term blip as dealers and buyers look to take advantage of rates now," said Bill Johnston, the credit bureau's vice-president of data and analytics.
"(But) over coming months, the cumulative rate hikes will begin to slowdown auto sales as manufacturers will find it more difficult to offer the long-term promo rates."
Interest rates and car sales
Michael Hatch, chief economist at the Canadian Automobile Dealers Association, says he doesn't see a rate bump having a huge impact on prospective buyers.
"For one thing, any rate increase in the short term is likely to be very small, in the 25-basis point ballpark," he said, adding that the delinquency rate on auto loans continues to sit at historically low levels.
A TransUnion Canada report for the first quarter of 2017 showed that while average auto lending balances rose 2.75 per cent year-over-year, at the same time, serious delinquency rates remained essentially flat at 1.70 per cent.
George Iny, president of the Automobile Protection Association, said he expects car makers to continue to keep interest rates low on new vehicles because it makes long-term car loans of seven to eight years more palatable to the public.
"It's a bad loop if they get into it, if they raise rates, because it will then make the long loan unattractive," he said. "And then people won't take the vehicle at all."