NADA Chief Economist Forecasts Slight Drop in Annual New Vehicle Sales


ORLANDO, Fla. (Feb. 11, 2006) - Sales of new cars and light trucks will edge down slightly in 2006, but remain healthy on the strength of sustained automaker incentives, high-quality and increasingly fuel-efficient new products, and a steadily growing economy, according to an economic forecast from the National Automobile Dealers Association (NADA).

Speaking at the association's 89th Annual Convention & Exposition in Orlando, NADA Chief Economist Paul Taylor projected that new car and light truck sales will total 16.8 million in 2006, down slightly from 2005.

"Most signs in the economy and market point to another strong year for sales of new cars and light trucks," said Taylor.  "However, it is likely that interest rates will go up, raising borrowing costs and reducing home mortgage refinancing, which have assisted cash flow for home buying in previous years.  Therefore, new light vehicle sales will moderate slightly in 2006."

Taylor's forecasts have consistently been among the most accurate of the leading analysts.  At last year's NADA convention, Taylor projected sales of over 16.9 million units of new light vehicles sold in 2005, which hit the mark with a total of 16.94 million sold for the year.

In 2005, light trucks made up 55 percent of total light vehicle sales, an increase of almost one percentage point over the truck rate in 2004, Taylor noted.

Crossover utility vehicles (CUVs) remain a key source of continued growth in the light truck segment, with sales rising 14 percent in 2005.  Taylor expects that CUV sales will rise by another 15 percent in 2006.  Purchases of new full size sedans, up 31 percent in 2005, resulted from a strong consumer demand for new sedan designs and the appeal of the relatively higher mileage that these new full sized sedans provide.

Taylor projected used car sales by franchised new car dealerships will top 12 million in 2006.  “Used vehicle sales will receive increased attention by new car dealerships,” he said.

"Unemployment - as low as 4.7 percent recently - and an average of 200,000 people per month returning to work creates many used car customers and a few additional new car customers," Taylor said.  "Dealers will look for ways to increase used car sales, and at least 100,000 additional used light vehicles will sell in the first quarter to replace vehicles lost in the tragic hurricanes in the Southeast. Used car sales and parts and service revenue will be a focus of dealers this year."

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