A lacklustre job market isn’t stopping Canadians from splashing out on new cars, SUVs and trucks this spring.
Statistics Canada said Wednesday auto sales were up 5.7 per cent in May compared to May 2013, while dealerships are on pace for their best year on record, experts say.
The surge comes as the jobless rate remains stuck around seven per cent and a slowdown in new full-time positions has hit the majority of provinces.
“Canadians are confident enough to spend their dollars at car lots even if the economy isn’t creating many jobs to drive to,” Nick Exarhos, an economist at CIBC, said.
READ MORE: June jobs numbers point workers in one direction — West
Nearly 198,000 vehicles were sold in May for a total of $8.73 billion, according Statscan, a rate experts say will smash last year’s record pace.
For the year, Scotiabank predicted in June 1.76 million vehicles will be sold versus the 1.745 million sold in 2013.
Lengthy loans
If a strong jobs picture isn’t driving higher vehicle sales, what is? Longer term loans are certainly contributing to the cause.
The average length of a car loan in Canada now stands at 71 months, or 5.9 years, while the average amount financed is $34,540, according to J.D. Power & Associates.
That’s about eight months longer and $4,000 more than a standard car loan in 2010.
And Canadians are still shelling out a decent amount of coin each month.
The average payment on a car loan now stands at $549, according to J.D. Power, a post-recession high.
READ MORE: Rise of the 8-year car loan
Can’t last, can it?
Booming auto sales drove overall retail spending higher in May, and well above where experts had been expecting. Still, spending was lower in other areas such as food sales and electronics, Statscan said.
With consumer debt levels still trending uncomfortably high and the jobs picture still murky, experts said Tuesday they expect vehicle sales to ease off the pedal.
“This breakneck pace of consumer spending growth is unlikely to be sustained,” Jonathan Bendiner of TD Economics said.
“I’m not assuming June will be able to maintain this pace of growth,” added Paul Ferley, RBC’s assistant chief economist.
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