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New-Car Sales to Reach 13.9 Million, NADA’s Taylor Predicts

February 07, 2012

LAS VEGAS — Paul Taylor, chief economist of the National Automobile Dealers Association, said 2012 will be another rebuilding year for the industry, and predicts sales will reach 13.945 million units this year.

Fulfillment of that forecast mark the third consecutive year of rising new-vehicle sales. In 2009, the auto industry sold 10.4 million new cars and trucks, down from 13.2 million units in 2008. In 2010, sales grew to 11.55 million and rose to 12.7 million last year. Taylor, however, said the industry is still a ways away from the 16-17 million-unit years realized between 2000 and 2007.

“Those figures were not obtained during normal sales conditions,” Taylor said during his annual press briefing at the NADA Convention and Expo in Las Vegas. “Recent sales are what we would expect from a normal growing economy coming back from recession.”

Taylor listed better credit conditions and more generous manufacturer incentives as reasons for his positive outlook for 2012. He also said the production problems caused by the Japanese earthquake and flooding in Thailand are also behind the industry, which also fueled his prediction.

“With the age of cars and trucks on the road today at an average 11.1 years, many consumers feel they can no longer delay making a purchase of a new or newer vehicle,” said Taylor, whose top five reasons for his optimism were pent-up consumer demand, a return to stabilized credit, an influx of options, gasoline prices and home prices.
New model releases, which have caught the eyes of consumers, are another reason for his optimism.

“Consumers want new cars and light trucks,” Taylor said. “We can see that in strong auto show attendance and sales numbers for January.”

The numbers also show that one- to five-year-old used vehicles are in short supply and selling at higher-than-usual prices. That has resulted in more consumers seeking out new-car purchases.

“Interest rates on new-car loans will remain historically low in 2012 and 2013, due in part to policy decisions by the Federal Reserve Board to keep rates low and the U.S. economy growing,” Taylor said. “As a result, affordable credit will be widely available in with more automaker finance companies offering low-interest and interest-free loans for up to 60 months.”
General Motors, Ford, Chrysler and Volkswagen, heartened by the boost in consumer confidence, have been quick to launch new products that compete with those offered by other automakers. The excitement over styling, fuel efficiency and other options has driven more consumers to the showrooms, Taylor pointed out.

“The interest in new cars also reflects the lack of used cars with low mileage,” Taylor said. “During the recession, five million cars didn’t come into the marketplace as trade-ins.”
Gasoline prices also could hurt or help sales in 2012. In 2011, gasoline prices averaged $3.51, up 72 cents per gallon from 2010’s average, according to industry sources. This year, analysts predict another boost in prices that could bring gasoline prices to $4.13 a gallon. Taylor, however, said better weather conditions this winter offers some hope that prices won’t rise too high this year. If they do, however, Taylor expects consumers to once again turn to fuel-efficient vehicles.

“Many consumers think if they’re going to buy SUVs or other light duty trucks, they had better do it now, with gas reasonably affordable,” said Taylor, who noted that future fuel-related regulations could also prod consumers to buy those vehicles now.

Although real estate prices and values are still falling in some states, Taylor said home prices appears to be stabilizing overall. This should help to boost consumer confidence this year, he said.

“Stabilizing home prices will support stronger car and light truck sales over this year,” Taylor said.

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