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NADA Economist: New-Car Sales to Rise in July as Gas Prices Drop

June 14, 2011

McLEAN, Va. — New-car and -truck sales will increase over the second half of the year beginning in July, as inventory levels increase and gasoline prices drop, according to Paul Taylor, chief economist of the National Automobile Dealers Association (NADA).

“Gasoline prices are currently falling, and that will allow dealers to sell a full mix of new vehicles, ranging from small cars, crossovers to pickup trucks, despite the lack of inventory of many popular selling models resulting from the crisis in Japan,” Taylor said.

If gasoline prices had reached $4.50 or more, it would have created a shift in demand by consumers to hybrids and small economy cars, all currently in short supply, he continued.

“Sales of hybrid vehicles increase dramatically when gasoline prices rise to levels that consumers have not seen before, as they did in the summer of 2008,” Taylor said. “The most popular hybrid, the Toyota Prius, is in short supply at 10 days of inventory when it should be about 60 days.”

Taylor expects new-car and -truck sales in June to be restrained somewhat by a shortage of inventory, similar to what happened in May, but he says the outlook for sales in July and beyond is positive as credit availability improves and lenders look to increase their loan volume.

“Banks, credit unions and the automaker captives are all looking to finance new-vehicle purchases in the second half of the year,” Taylor said.

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