Auto sales are expected to rise in the second half of this year as conditions in the lending market thaw out, a Scotiabank economist said Thursday.

In the bank's latest global auto report, senior economist Carlos Gomes said the key to the shift is a rise in the loan-to-value ratio for new U.S. auto loans. It has risen to 89.1 per cent — the highest it has been since August 2008 — from 86.4 per cent in February.

"The increase in the loan-to-value ratio indicates buyers need a smaller down payment to purchase a new vehicle, and points to an easing in credit conditions," said Gomes.

Scotiabank also said that auto loan approvals have reached their highest point since April of this year.

"Asset-backed security issuance had virtually disappeared through April, while the withdrawal of some major lenders from the auto-loan business over the past year had dampened credit availability," Gomes said.

"However, the Bank of Canada indicates that auto loans at chartered banks in Canada have remained readily available, providing some offset."

Another sign of a turnaround in the auto sector is in the prices of used cars, said the bank. In Canada, used car prices — while still below year-ago levels — saw a two per cent drop in May, which was the smallest decrease since mid-2006.

In the United States, used car prices went up for the fifth month in a row in May. Scotiabank said that year-over-year prices last month were up for the first time since October 2007.