July sales up just 0.7%, but NADA still sees record sales year

July sales up just 0.7%, but NADA still sees record sales year

July auto sales rose just 0.7 percent, but NADA still predicts a record year of 17.7 million.

–Weêve had six straight years of steadily rising sales, which has been a fantastic period of growth, and vehicles per household have returned to the same level prior to the Great Recession,” said NADA Chief Economist Steven Szakaly. Saying that most pent-up demand has been satisfied, Szakaly forecasts much lower sales of 17.1 million in 2017 and 16.5 million in 2019.

Rising employment and leasing will continue to grow and drive sales. Low gasoline and diesel prices will allow consumers to spend more money on new vehicles and continue the trend of buying more trucks and SUVs than cars. Szakaly said light trucks will make up 59 percent of new vehicle sales this year. Leasing now accounts for 34 percent of the market and will increase.

Interest rates are expected to rise modestly. But, Szakaly said, –consumers will not feel the pinch of rising interest rates because automakers will roll out additional financial incentives.”

The NADA economist pointed out some warning signs for future sales: loan terms that have risen to 68 months, and a continuing rise in new-vehicle transaction prices, up 3 percent this year, as wages remain stagnant. Auto sales could stall until millennials start to form new households and have children.

Several industry analysts see sales starting to fall this year, with year-end sales matching 2015ês record 17.47 million. Some are concerned by the increased incentives and rise in leasing, two trends that have gotten the industry in trouble before. (Remember the problem of upside down buyers?) As transaction prices increase, more shoppers may decide to buy certified, pre-owned vehicles instead of new, said Kelley Blue Book analyst Tim Fleming. The average transaction price for July was $34,264, up 2.5 percent from July 2015.