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The good times, at least in terms of new car sales, will continue to roll in 2015 with nearly 17 million vehicles expected to pass through dealer lots, according to the National Auto Dealers Association.
The organization expects the industry will sell 16.94 million new vehicles next year – which would be up from the expected 16.4 million this year – due to rising employment and wages, continued low interest rates and lower gasoline prices.
“The economy will continue to build on the solid growth established in 2014, and we also expect the fundamental conditions to improve in the year ahead,” said NADA Chief Economist Steven Szakaly during a speech yesterday. “Gross domestic product will grow at 3.1% in 2015, with the potential for growth to exceed our forecast.”
The strong sales forecast is reliant on interest rates remaining low, although Szakaly is predicting a small rate increase this year.
“The Federal Reserve is expected to raise interest rates in 2015, but the rate rise will be small,” he said. “The Fed policy rate will move to 1 percent by October 2015, with further movements in rates expected during the second half of 2016.”
In addition, NADA expects long-term rates on auto loans to rise in 2015, though not sufficiently to dampen its sales outlook. NADA expects rates on auto loans to rise by about 125 to 150 basis points by Dec. 31, 2015. This rise will be steady over the course of the year, he said.
Szakaly said that it’s possible for the sales figure to hit 17 million in 2015, but added that in order for that to happen, automakers would need to ramp up in incentives and millennials would need go on a car buying spree that hasn’t been seen in the past couple of years.
Many have enjoyed the return of booming sales similar to those in the early part of the century, and a welcome respite from the 10.4 million vehicles sold in 2009, just five years ago. The country hasn’t bought 17 million new vehicles since 2000 when it purchased a record 17.4 million units. If sales hit the predicted total of 16.4 million units this year, it would be an increase of 5.1% from 2013 and make the fifth consecutive year of rising demand.
Szakaly said he expected sales in 2016-2018 to plateau in the mid-16-million-unit range. Conversely, a few other analysts are slightly more bullish about next year and beyond. Adam Jonas of Morgan Stanley predicted sales to hit 17 million next year and John Murphy of Bank of America Merrill Lynch Global Research said sales could hit 18 million by 2018.