TORONTO and CHICAGO—Automakers are on pace to sell more than 18 million light vehicles in Canada and the United States for the first time since before the recession, according to a new report from BMO Economics.
The financial forecaster said the North American auto market is set to move more than 18 million passenger vehicles and light trucks for the first time since 2007, as pent up demand in the U.S. and attractive finance rates in Canada have customers signing on the dotted line for new vehicles in droves.
“As we pass the halfway point this year, it’s clear that the upside potential we saw in the auto market is being fully realized, and then some,” BMO Capital Markets economist Alex Koustas said in a statement accompanying the report.
“While a pick-up in American demand was fully expected, a continuation of last year’s record-setting selling pace in the Canadian market points to a deeper shift in consumer preferences. The pace of sales in the overall North American market will keep both dealers and manufacturers very happy.”
After weather-related issues early in the year stalled auto sales in the U.S., American consumers are accelerating new vehicle purchases through the summer.
Positive labour movement in recent months will continue to boost those numbers south of the border as Americans look to replace their aging vehicles.
According to BMO, the average vehicle age in the U.S. has hit more than 11 years.
Koustas said the U.S. market is on pace to sell 16.6 million units through the second quarter.
“The pace of U.S. auto sales was very strong in the second quarter, and the momentum looks to continue,” said Ghram Debes, managing director and head of dealer finance with BMO Harris Bank.
“An optimal combination of improved consumer confidence, low interest rates and aging automobiles on the road has created significant demand in the market, and our dealer customers are expressing great confidence in their prospects for continued growth.”
In Canada, sales have exceeded expectations and are on pace to match last year’s record high despite slipping consumer spending.
But according to Koustas, affordability and low interest rates alone aren’t to thank.
“While one cannot totally discount the fact that affordability has improved greatly on the back of lower prices and very enticing financing rates, the steady rise of cars per household points to a deeper underlying trend—one of shifting preferences,” he said.
Koustas said sales in Canada will surpass 1.7 million units this year—and stay in a holding pattern above that threshold in the coming years—if a shift to multi-vehicle homes continues.
A recent BMO survey found Canadians plan to buy new vehicles every five years, spending an average of $26,000.
Last year Canada set an auto sales record, with 1.74 million light vehicles sold.