TORONTO -

There were quite a few high points in ALG’s latest Industry Report for the Canadian market, including reports of last month’s new-car sales notching the second-highest April rate on record as well as predictions for increased used-market supply.

Specifically, new-car sales in Canada during April grew by 8.9 percent year-over-year, coming in as the second highest April on record, ALG reported.

What sparked this rise?

“The result of aggressive incentive programs, low interest rates and strong demand for the new generation of compact utility vehicles (Ford Escape, Honda CR-V, Hyundai Santa Fe Sport, Subaru Forester, Toyota RAV4),” said Geoff Helby, Canada regional director of partner devlopment for ALG.

But the good news isn’t specific to the new-car industry; ALG analysts are predicting used market supply to increase minimally as 2013 continues — perhaps welcome news to pre-owned dealers struggling to find inventory.

“On average this leads to a -.1 percentage-point impact on residuals; the impact varies between -.2 and .3 percent,” ALG reported.

How will this increase in used supply affect residuals on a segment level?

The compact utility, premium executive, and premium fullsize utility segments display the largest negative impacts of -.2 percent, officials said.

Conversely,  the premium roadster, sporty and fullsize commercial segments show a positive impact of .2 to .3 percent, ALG reported.

But the firm cautioned that used supply growth will be a very slow process.

“The current growth in new-vehicle sales along with higher lease penetrations will eventually solve the used-vehicle inventory constraints — though it will occur gradually with full recovery not forecasted until 2017,” Helby told Auto Remarketing Canada.

And though lease penetrations rates are increasing, ALG explained the number of vehicles coming off-lease will drop to less than 400,000 units this year — the lowest level in more than a decade.

Overall, ALG expects residuals to decline by .7 percent over the course of May and June.

Why?

Analysts also took a look at how consumer confidence and current economic recovery in Canada are affecting residuals.

First, the landscape.

Though Canadian economic growth has accelerated to a 1.7 percent pace, consumer confidence declined 4.8 point in April to 75.6, “amid concerns about the unstable global economy.”

ALG continued: “This marks the continuation of a disconcerting trend that has seen the index decline in six of the last seven months.”

Commenting on economic recovery in Canada, Helby noted: “Economic growth will progress at a moderate pace over the summer months, sustained by an inflation rate well below 2 percent and the stabilization of household debt.”

As for the housing market, home prices continue to rise, leading to a .1 positive impact on 48-month residuals.

And though consumers may doubt economic stability, they continue to make more money. Wages are up from March/April, bringing residuals up .1 percent, ALG said.

“Overall macro (economic) impacts for May/June 2013 have brought residuals up by .2 percent on average,” ALG concluded.

Sarah Rubenoff can be reached at srubenoff@autoremarketing.com. Continue the conversation with Auto Remarketing Canada on LinkedIn and Twitter.