Canada: Growing vehicle sales attributed to increased leasing and fewer auto loans

While vehicle sales across Canada continue to grow strongly, according to a report from Scotiabank Economics, this growth is being driven by increased leasing as opposed to auto loans. The rising levels of leasing has decreased the share and growth of auto loans across the market, with lending for new vehicles increasing only 4.6% year-on-year in the second quarter of 2017, compared to a 10-year peak of 15% in the early part of 2015.

This slowdown is particularly evident among subprime customers, who are turning to leasing as a cheaper alternative to loans. According to the report, “leasing has improved vehicle affordability, by reducing the monthly payments required to drive a new car or light truck”.

"Lending for new vehicles increased only 4.6 percent year-on-year in the second quarter of 2017, compared to a 10-year peak of 15 percent in the early part of 2015."

The shift towards leasing among subprime borrowers has improved the credit profile of the auto market overall, with the report estimating that only 12% of the Canadian auto market is comprised of subprime loans, compared to 21% in the US.

 

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