Big year-over-year price hikes for new vehicles — rather than personal household debt — are more likely to end the country’s four-year record sales run, warns Scotiabank senior economist Carlos Gomes.
Despite record sales in Canada since 2013, Gomes believes the record run is likely coming to an end.
One of the main reasons is that vehicle prices are increasing “fairly significantly.”
Over the past 15 years, the industry did “a great job” of limiting price hikes to 1.5–2 per cent per year, well below the average against household income, Gomes said. “Now we’re seeing increases in the order of six per cent year over-year ... leading to some deterioration in vehicle affordability.
“The Canadian dollar was very weak last year, and the automakers have started to pass on the impact of that low currency.”
Dennis DesRosiers, president of DesRosiers Automotive Consultants, said fundamentals affecting the industry will also affect how much longer high sales last.