How many cars will Canadians buy in 2014? How forecasters predict sales

Last year, Canadians bought a record 1.74 million vehicles, an increase of four per cent over what they purchased in 2012. And with 2014 well under way, analysts are already looking at how many cars and trucks will end up in new homes this year.

“We expect purchases to climb to a record 1.76 million units in 2014,” says Carlos Gomes, senior economist and auto industry specialist for Scotiabank. “New-vehicle affordability in Canada is at the best level in two decades.”

These forecasts are an important tool for many companies involved in the auto industry, including the car manufacturers themselves, their dealers, lending facilities and service suppliers.

The forecasts also give insight into what will happen in the coming years, as dealers and auto auctions estimate how many used vehicles will eventually end up in the market, or tire dealers determine how many replacement or winter tires they should stock.

Forecasters look at such things as the strength of the global economy and the Canadian dollar, employment figures and car prices. It’s a complicated puzzle, with factors that can connect in unusual ways. For example, the U.S. recession brought a sharp drop in new houses being built, which in turn dried up the export market for Canadian lumber. Those industries, and others like them, bought fewer new trucks. Not only did that affect the auto market at the time, but a few years later, the resulting supply-and-demand of these smaller numbers sent the price of used trucks soaring.

To come up with his forecasts for 2014, Gomes considered such things as an upcoming shipbuilding contract in Nova Scotia and increased natural gas drilling in British Columbia, which will ultimately increase jobs and raise car sales, along with downward trends such as a delayed aerospace project in Quebec.

He also looks at vehicle pricing. “Affordability has improved so dramatically,” he says. “We look at the average vehicle price and compare it with the level of the typical household income, and divide prices by income. We do it as the number of weeks that a household has to work to buy a new vehicle. That number has been coming down significantly.”

Currently, a household must work 23.5 weeks to earn enough to buy a car, Gomes says. The average since 1990 has been 27 weeks, although there was a spike in 1999, when vehicles were least affordable and it took 32 weeks of work to purchase one.

“The automakers have done a good job of limiting price increases,” Gomes says. “Since the downturn of 2000/2001, annual price gains have been only about 1 per cent per year, while we’re seeing household incomes increasing by roughly triple that. Stable car prices and rising incomes have led to the improvement of affordability.”

To note

• Truck-mad Alberta. Albertans buy 30 per cent of all the pickup trucks sold in Canada. Within the province, 75 per cent of all vehicle sales are trucks, SUVs, or vans.

• Ontario stats. There were 646,000 vehicles sold in Ontario in 2013, the second-highest number on record. Most went to households, but fleet sales are forecast to climb in 2014.

• Potential knock-on effect. Since many vehicles sold in the U.S. are made in Canada, a stronger U.S. economy will drive increased production at Canadian plants.

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