LAS VEGAS – Despite an expected drop in light-vehicle sales, auto dealers are feeling fine as the National Automobile Dealers Assn. kicks off its 3-day annual convention here.
NADA predicts sales of 16.7 million units this year compared with 17.1 million last year, says the trade group’s senior economist, Patrick Manzi. “Ask any dealer here, and they’ll say 16.7 million is a good year.”
Among economic indicators that affect auto sales, NADA particularly tracks wage growth. The greater a consumer’s earnings, the more likely that person is to buy a vehicle.
But wage growth hasn’t kept pace with robust job growth. (The unemployment rate is down to 4.1% and expected to stay there throughout the year, Manzi says).
“Because of low unemployment, you would expect wage growth to accelerate,” he says at a NADA press conference. “We’d like to see 3% growth for several months. That would show wage growth accelerating.”
He predicts interest rates will rise three or four times this year with the federal funds rate above 2%. Those increases stand to add pressure to already increasing vehicle-transaction prices and auto-loan terms – and consequently could affect buying behavior.
“If you have good credit and a high income, it isn’t going to affect you,” Manzi says of interest rate increases. “If you are a marginal consumer with less-than-stellar credit, you might want to walk over to the used-car lot.”
But there’s plenty to find there, he adds, noting 3.9 million vehicles are coming off lease this year and entering the used-car market. That’s an 8% increase from 2017.
The average U.S. dealer saw $59.7 million in total sales last year, according to NADA data. That’s about $100,000 more than last year. “It’s relatively flat,” Manzi says.
Dealer sales collectively reached $1 trillion. “That’s a great feat,” he says.