Three Reasons to be Optimistic about 2012 Sales

COMMENTARY

Stephen W. Wade
2011 NADA Chairman
Stephen Wade — January, 2012

Last month I read a story that made me even more optimistic about this year. It was about a young woman in Bakersfield, Calif., who recently got a job as a cashier and receptionist at a Mazda/Mitsubishi dealership. Within a few months Jade Tolentino was promoted to an accounts payable position and – after putting it off for quite some time – bought a new SUV using her employee discount and today’s incredibly low finance rates. When asked why she did it, the 24-year-old said “it was a step I felt I needed to take.” Translation: this is one example of pent-up demand – and it’s pent-up demand that’s expected to drive up sales this year.

Thankfully, stories like hers are becoming more common these days, as dealerships begin hiring again and consumer spending picks up. Both trends are good news for our industry, and enough reason for NADA Chief Economist Paul Taylor to forecast that we will sell about 1 million more cars and trucks in 2012 than we sold in 2011. Paul is predicting sales of more than 13.9 million units this year, driven by three factors: aging vehicles, affordable credit and aggressive incentives.

Altogether, these three “A’s” have the potential to make 2012 a much better year, Dr. Taylor says. As we know, more consumers are shopping out of necessity to replace their old cars and trucks. Interest rates on new car loans are at historic lows. And both domestic and international auto manufacturers are preparing to wage an aggressive battle to capture U.S. market share by rebuilding their inventories and offering competitive sales incentives. A decline in gasoline prices could also push car buyers to consider a wider range of vehicles in different segments.

If Paul’s forecast is correct—and he has a very good track record for accuracy—dealers and consumers could be in for a very good year, with stories like Jade’s being repeated all over the country—a reminder to us all that the American dream of owning a car, one of the most important factors in sustaining employment, is still alive and well.

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