Auto sales have cooled off in recent months, but the outlook for the rest of the year remains bright.
During a recent forecasting conference call, National Automobile Dealers Association chief economist Steven Szakaly reminded listeners that record sales years don’t last forever.
Through the first six months of the year, 8,401,715 new light-vehicles were sold, down 2.2 percent compared to last year.
Still, Szakaly expects auto sales to top 17 million units again when the final numbers come in for 2017.
“Much of the doom and gloom we’re hearing is far, far overblown,” he said.
Take the talk of a subprime auto finance bubble. Szakaly said more credit-challenged consumers are getting financed, but that’s a reasonable move because unemployment remains low.
“This makes everyone a far less risky credit bet,” Szakaly said.
Then there is the issue of incentives. Szakaly said they are rising, but they’re still very targeted at certain segments and vehicles.
There will be reason to worry if incentives expand across the market.
The most pressing issue for the auto market is the ever-growing number of off-lease vehicles coming into the wholesale market.
Szakaly said the manufacturers have constrained the volumes so far, but the size will grow too large to hold back in the fall.
This will decrease the price difference between some used and new cars, especially in unpopular segments like sedans.
It might also cause an increase in incentives, as trade-in values decline.
The good news is dealers today are better prepared for negative events than they were 10 years ago, in part because of they have invested in improving their used-car operations.
Now they need to get even better, such as improving their turn so they don’t get stuck with quickly depreciating assets on their lots.