Flaherty announces $12-billion plan to boost auto purchase financing

In an effort to bolster the ailing auto sector, the federal government announced on Friday it is rolling out a $12-billion program to support financing to buy or lease vehicles and equipment.

"A serious shortfall in Canada has been the lack of financing of vehicles and equipment for consumers and businesses, and this has led to increased borrowing costs for some and limited credit availability for others," Finance Minister Jim Flaherty said in a speech to the Canadian Club of Hamilton.

"It’s a situation that can’t be allowed to continue if we want to restore confidence and get our economy growing again."

Flaherty announced the rollout of the Canadian Secured Credit Facility, a program under which the government will purchase asset-backed securities backed by loans and leases on vehicles and equipment. The program had been announced in the budget.

Flaherty said the Business Development Bank of Canada has allocated $10 billion of the $12 billion to 15 Canadian lenders.

The group includes the financing arms of major auto and equipment manufacturers in Canada and covers loans, leases and dealer floor plans, Flaherty said.

To limit risk to taxpayers, the assets must be rated AAA by two nationally recognized credit rating agencies and "structured so that they will be able to withstand current market conditions or worse." 

"The auto sector isn’t just assemblers, as you know. There are many people in the auto sector who are employed and rely on the success of the sector," Flaherty said.