TORONTO, Nov. 8, 2012 /CNW/ - Used car prices continue to move higher across Canada, despite a stronger-than-expected performance in the new vehicle market in 2012, according to the Scotiabank Global Auto Report released today. The improvement reflects a 4% increase in purchases of pre-owned models so far this year, as well as the dwindling supply of vehicles coming off-lease.
"Canadian used car prices have consistently gained momentum since bottoming in early 2009, just before the start of the global economic recovery," said Carlos Gomes, Scotiabank's Senior Economist and Auto Industry Specialist. "In contrast, new vehicle prices in Canada have been flat since 2010, as automakers have enhanced incentives over the past two years to spur sales."
According to the report, the net result of these diverging trends is that Canadian used car prices are at record highs relative to the price of new models. The Scotiabank Used Car Price Index advanced 4% year over year (y/y) in October, alongside strengthening demand and a sharp reduction in the number of vehicles coming onto the resale market. The supply shortfall is the direct result of a plunge in fleet and leasing volumes since 2008.
"The number of vehicles coming off-lease in Canada will drop to less than 400,000 units in 2013 - the lowest level in more than a decade, and roughly 35% below the average of the past five years," said Mr. Gomes. "The net result is that the appreciation in Canadian used car prices will likely gain momentum in 2013."
Looking at the new vehicle market, sales in Canada accelerated to an 8% y/y increase last month, climbing to a record high for the month of October. Purchases jumped back above an annualized 1.7 million units for the first time since May. The improvement reflects a further increase in incentives to clear out the 2012 models, as well as the introduction of popular new fuel-efficient vehicles. In particular, car sales advanced 16% y/y last month, while truck purchases were largely flat.
In the United States new passenger vehicle sales remained healthy last month despite the impact of Hurricane Sandy, which reduced overall volumes by an annualized 300,000 units. U.S. purchases totalled an annualized 14.2 million units in October, in line with the year-to-date average. However, a sales acceleration is likely in coming months as U.S. consumer confidence is currently at the highest level since February 2008.
Globally, growth in new car sales stalled in September, with volumes unchanged from a year ago. The slowdown reflects a sharp fall-off in sales of Japanese models in China due to a territorial dispute between Beijing and Tokyo over two uninhabited islands in the East China Sea, and further deterioration in Western Europe - especially Spain.
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