TORONTO - Bank of Montreal expects Canadian auto sales to remain strong into 2014, following last year's record levels.
BMO economist Alex Koustas says consumers are responding well to technological advancements and improved fuel economy in every vehicle segment.
A solid lineup of models and "very generous" financing terms will also continue to generate interest from the Canadian consumer," Koustas said.
"Sales activity will remain brisk, but will likely drop off last year's pace given rising ownership rates and more elevated debt levels."
BMO said auto loans balances have risen 165 per cent since 2009, when the North American auto industry was in a deep recession, compared to a 35 per cent overall increase in consumer loans.
"Nevertheless an overheating is unlikely as long as financing terms remain balanced," Koustas wrote.
He predicts Canadian auto sales will slide marginally to 1.71 million units this year from 1.78 million in 2013, but still mark the third-best performance on record in 2014.
The bank said the leasing market is also beginning to rebound after taking a hit following the 2008 financial crisis.
"With loans showing some of the best performance on record and rates expected to remain low, it's likely that the credit wheels should remain well-greased over the next year," the bank said.