MCLEAN, Va. -- New vehicle sales should gain strength in the second half of 2004, said the National Automobile Dealer Association's chief economist, Paul Taylor. He projects that year-end sales will reach 16.8 million vehicles.

Increased incentives and the introduction of quality new vehicles will help boost sales for the rest of this year, accodring to Taylor. The growing economy, a restrained increase of interest rates and improved CSI at franchised dealerships will also contribute.

"Consumer confidence is growing as the economy strengthens, and interest rate hikes are moderate considering the multi-decade low in rates currently enjoyed," said Taylor.

"While inflation is expected to stay in check, any persistent signs of accelerating price pressure would be met with a faster pace of interest rate increases by the Fed, which could moderate the sales pace in 2005," he added.

Dealers' efforts to lure and keep customers through remodeling and adding luxuries such as children's play areas and coffee bars will pay off later this year.

Taylor also predicts that crossover utility vehicles will keep growing in popularity, as well as hybrids.