It may not be deserved, but Paul Taylor expects tougher subprime credit conditions for car loans. The chief economist for the National Automobile Dealers Association (NADA) also lowered projections for auto sales, providing a range of 16.1 and 16.4 million units sold in 2007.

Given the lack of pricing concessions being exhibited by automakers and the interruption of financing markets in the U.S. marketplace and in other parts of the world, Taylor said the lower part of his range may very well come into play by year’s end. The only way the industry will see the higher part of the range is if the Detroit 3 decide to fight recent losses in market share, which Taylor put at nearly two percentage points.

“The lower bound of 16.1 million is lower than previously reported because the Detroit 3 continue to price unrealistically high given consumers’ new concerns about the housing market and the availability of credit,” he said. “We expect tougher subprime credit conditions for loans — although it is not deserved — for both new and used cars for the rest of the year.”

Taylor’s predictions come despite the economy showing a 4-percent real rate of growth in the second quarter of this year. However, he said the biggest hold back for consumers is the decrease in home values.

“Continued real-estate difficulties means that full-size pickup and van sales will remain sluggish into 2008,” he said. “The Mortgage Bankers Association now puts recovery for real estate in the third quarter of 2008.”

As for August sales figures — which are expected out today — Taylor said he expects a reasonable sales month. Much of his prediction is based on increased competition on pricing for new vehicles, as well as lower gas prices -- which should help out with SUV and bigger truck sales.

Taylor’s lowered projections come after Ford Motor Co., General Motor Corp. and Toyota Motor Corp. lowered projections in mid-August. Ford and GM project 16.5 million vehicles sold this year, a drop of almost one million from last year. Light-vehicle sales were projected at 16.1 million, the lowest since 1998. Toyota expects light-vehicle sales to reach 16.3 million, only slightly higher than the other companies’ projections.

Still, many believe that August sales reports will set the tone for the rest of the year. Many also believe that result could put pressure on carmakers to cut production further, as well as incentive spending.

The Bandon, Ore.-based CNW Research called August a “mixed bag of good and bad news.” Average MSRP for vehicles sold in August were up, increasing from $31,149 to $31,168 —- the first month-to-month increase since June. However, because of bigger incentives, average transaction prices also slipped.

Dealerships also realized a drop in floor traffic, with CNW reporting that its Floor Traffic Index fell to 111 from 114 last month, and from 122 last August. Closing ratios held steady at 21.72 percent vs. 21.44 percent in July. However, closing ratios were still lower than a year ago by slightly more than 10 percent.

CNW’s Jitter Index remained flat after a few months of increases. The market research company also reported that independent lease companies are also losing ground to captive finance companies, resulting in total lease share being flat even though captives showed increases. Incentives were also added to 62 percent of vehicles sold in August vs. 61 percent in July.

The Conference Board also reported that the Consumer Confidence Index fell to 105 in its latest survey of 5,000 households. This was the biggest month-to-month drop since September 2005. Industry insiders speculate that current concerns could mean that the industry will see lower auto sales in the United State until 2009, and two years of nearly a million fewer car and trucks sold annually.

Analysts for research firm Global Insight are predicting that light-vehicle sales will be between about 16.1 million and 16.2 million next year, with no real recovery until 2009. Market insiders say the key will be how automakers approach the market moving forward.

“In past years, there was an extraordinary effort by the Detroit 3 to boost sales by an extra 300,000 units over four months with the use of incentives,” said NADA’s Taylor. “This year, they appear to want to sit tight and release press releases that say our plan is working. That approach resulted in sales down by nearly 200,000 units in July compared with July 2006. I expect that even with a wake-up effort, the industry will be hard pressed to do much better than finish the year at the 16.1-million-unit pace that existed at the end of July.”