Features
2 Nov 17

Car leases up, car loans down in Canada

Car sales in Canada continue to break records, but it's car leases that are booming, while car loans are actually falling.

A new report by Scotiabank Economics details the curious circumstances of Canada's vehicle lease boom (and loan bust). Four years ago, leasing accounted for just 19% of the retail new-vehicle market in Canada. At present, that figure has gone up to around 33%. In contrast, leases represented just 9% of the Canadian retail new-vehicle market in 2009, at the height of the global financial crisis.

Market dominance

As leasing has increased in popularity with Canada's new-vehicle buyers, the market dominance of vehicle loans has been dented substantially. Back in 2010, car loans represented 68% of the new-vehicle market. Just about now, they're at less than 60%, their lowest level over the past decade.

The Scotiabank report, cited by Automotive News, affirms that “leasing has improved vehicle affordability by reducing the monthly payments required to drive a new car or light truck”.

Absolute figures

The trend is also noticeable in absolute figures; more leasing means slower vehicle loan growth, with lending for new vehicles in Canada up only 4.6% year-on-year in Q2 2017. That's a full percentage point lower than overall household credit growth, and most of all, it's in stark contrast to the 15% year-on-year peak of growth experienced by vehicle loans in H1 2015.

The slowdown in vehicle lending in Canada is taking place especially at the lower end of the credit range, with customers turning to cheaper leasing payments instead. At the higher end, vehicle loan volumes are actually increasing – with loans to customers with low credit delinquency history being granted at nearly triple the pace of just a year ago.

Authored by: Frank Jacobs