February 4, 2016 3:53 pm
Updated: February 4, 2016 3:56 pm

Canadians still love that new car smell, despite economic ‘doom and gloom’

High priced vehicle sales surged 22 per cent in January.

Paul Morris/Bloomberg via Getty Images
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Maybe it’s all those homes now tipping into seven-figure territory in Vancouver and Toronto, but January saw a surge of luxury vehicle sales in Canada.

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The surprise jump occurred despite a raft of economic signals that were flashing red – oil falling below $30, the loonie sliding south of 70 cents U.S. and a stock market rout to name a few.

Yet imported vehicle sales shot 22 per cent higher last month (year over year) in tandem with an equally surprising jump in overall auto sales, which climbed 9.6 per cent.

Paying attention?

“For all the doom and gloom surrounding Canada at the moment, Canadian car buyers don’t seem to be paying attention,” Benjamin Reitzes, an economist with BMO Capital Markets said after the release of the sales data.

After seeing record sales month after month in 2015, it seemed unlikely that this year would be able to keep up that trend, Reitzes said. “But that’s exactly what happened in January.”

Several automakers reported a record number of units sold in the month – putting this year on pace to break last year’s all-time record for annual sales, Scotiabank auto economist Carlos Gomes said.

Canadians snapped up a record 1.9 million new vehicles in 2015, while the current clip established in January would see the year-end total hit 1.97 million.

Crossover vehicles – smaller, compact SUVs for example — continue to be the most popular sellers with Canadians, with fully nine carmakers reporting a jump in sales “in excess” of 25 per cent.

MORE: Debt binge has left more Canadians ‘vulnerable’ to economic shock, report warns

Prone to deterioration

Yet January’s jump may stoke concerns about Canadian households biting off more debt than they can handle should a weak economy deteriorate further, risking a rise in unemployment and drop in household incomes.

Last week, credit ratings agency Moody’s cut its rating on Scotiabank on concerns about the bank’s exposure to auto loans, which Scotia – one of Canada’s biggest financial institutions – has move aggressively into in recent years.

“Over the last two years, in accordance with its strategic initiatives, Scotiabank has accelerated the growth in its credit card and auto finance portfolios – both of which are particularly prone to deterioration during an economic downturn,” the agency said.

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