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New and used vehicle sales to hit Cdn record

TORONTO - Canadian purchases of new and used vehicles are on track to set a record this year, indicating a sharp rebound from the dismal sales of 2009, according to the latest global auto report by Scotia Economics.

TORONTO - Canadian purchases of new and used vehicles are on track to set a record this year, indicating a sharp rebound from the dismal sales of 2009, according to the latest global auto report by Scotia Economics.

The bank said Wednesday it expected overall vehicle sales in Canada this year to edge out the current record, set three years ago before the recession and the bankruptcy filings of General Motors and Chrysler took their toll on the industry.

If the rebound in new vehicle purchases by Canadian consumers continues at its current pace, it could drive overall car and light truck sales to a record 4.4 million units — 2.9 million used vehicles and 1.57 million new models, the report said.

That's up from the current record of 4.3 million in 2007, and is expected to climb even higher in 2011.

"The rebound in household (sales) is really being driven by the fact that the employment market is fairly healthy in Canada," said Scotiabank economist Carlos Gomes, the bank's auto specialist.

"We have recouped all the jobs that we lost during the recession," Gomes added. "That is not the case in the United States, where they have only been able to recover about 10 per cent of the job losses since early 2008. I think that goes a long way in explaining the big differences in purchasing decisions between households in Canada and in the United States."

New vehicle purchases by Canadian households are up eight per cent so far this year, almost completely reversing the nine per cent slide seen in 2009, when the recession prompted Canadians to put off buying a new car, or turn to the cheaper used market instead.

The improvement in sales is being driven by a stronger economy and incentives being offered by the major auto companies to attract buyers into their showrooms.

In the last several months, Canadian consumers have also been buying larger vehicles like SUVs, crossovers and pickup trucks, in part because of sizable incentives on those vehicles.

Unlike Canadians, who are returning to the new vehicle market in droves, Americans are still replacing their aging vehicles with less-expensive pre-owned models, Gomes said.

Although Americans have always bought more used cars than Canadians — possibly because the harshness of our winters means vehicles wear out faster — this trend has been exaggerated by the recession and the subsequent weak recovery south of the border, Gomes said.

"The ratio of new to used is at a record high," he said.

A recent report by consumer ratings site Edmunds.com found that the average price paid in the U.S. for a used, three-year-old vehicle in July was US$19,248, up 10.3 per cent from a year earlier. By contrast, Canadian used car prices are up 5.5 per cent so far this year.

"A lack of confidence in the economy is driving more people to used cars, putting upward pricing pressure on a limited supply of vehicles," said Joe Spina, senior analyst for Edmunds.com.

On the other side of the coin, rental car agencies, corporations and governments restocking their fleets are boosting sales in that segment of the U.S. market by more than 30 per cent.

However, Gomes said U.S. fleet sales are still 20 per cent below the average pace of the past decade, while Canadian fleet sales are 30 per cent below average.

"As corporate profitability improves, that will tend to lift fleet activity as well," he said.

Global vehicle sales fell year-over-year in August due to sharp declines in the United States and Western Europe. However, outside of these markets, sales were up 20 per cent — the strongest gain since April.

"Most of the growth that is going to be happening in the industry is going to be coming from outside the mature markets of Western Europe and the United States," Gomes said. "That is going to be the driver going forward."

 
 
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