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Canadian auto industry poised for another solid year: report

File photo of a car dealership in Mississauga.

j.p. moczulski The Globe and Mail

Advantageous financing terms and new vehicles boasting the latest in technological innovation helped fuel Canadian auto sales to record levels last year, says a new report.

And 2014 is shaping up to be another solid year, according to BMO Economics.

Preliminary figures indicate that Canada's auto industry saw light vehicle sales jump to 1.74 million units sold in 2013, up 4 per cent from 1.68 million in the previous year and 10 per cent from 1.59 million in 2011.

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"A solid model lineup and new offerings from manufacturers at very generous financing terms will continue to generate interest from the Canadian consumer," Alex Koustas, BMO Nesbitt Burns economist, said on Wednesday.

"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."

Sales in 2014 are expected to slip to about 1.71 million units, which would represent the third best performance on record, says the report.

The auto industry's continued investments are providing a boost to growth with technological advancements and improved fuel economy across all segments – from compact cars to full-size pickups, – says BMO Economics.

Auto loans have experienced a boom, with Canadian automotive loan balances soaring 165 per cent since 2009, versus 35 per cent for total consumer loans.

"With loans showing some of the best performance on record and rates expected to remain low, it's likely that the credit wheels should remain well-greased over the next year," according to the study.

Also helping give a lift to sales has been a rebound in the leasing market, which dropped to below 10 per cent from nearly 50 per cent of all auto sales as a result of the financial crisis. Leasing now accounts for more than 20 per cent of sales, says the report.

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And strong competition among manufacturers is making for redesigned vehicles with more amenities, increased performance and value compared with previous generations, it says.

"For example, fuel efficiency has improved by nearly 20 per cent across the board in the last five years and the evolving technology, size, safety and functionality of these vehicles have also expanded."

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