Dealers will need to tighten their belts and become more efficient this year, says NADA chief economist Paul Taylor.
Taylor expects light-vehicle sales to decline, mostly in the first quarter of the year as war with Iraq seems imminent and a conflict would throw financial markets into uncertainty.
He expects the historically low interest rates that yielded record profits for dealers in 2001 and, most likely 2002, to end in the second half of 2003.
"When rates finally go up, dealers will have to find ways to maximize their revenue," Taylor said.
He expects light-vehicle sales in the United States to drop to 16.5 million or 16.6 million units from 16.8 million in 2002. J.D. Power and Associates' sales forecast for 2003 predicts 16.4 million sales for this year and assumes a war will occur.
The prospective war is expected to be short, and it would increase government spending, causing the economy to pick up. So Taylor expects an uptick in vehicle sales later in the year.
Taylor points out that consumer confidence is much higher than it was during the Persian Gulf War and consumers have more spending power than they did then. Many consumers have put more money in their pockets by refinancing their homes.
Says Taylor: "What you wind up with is an economy that has less growth, almost zero growth in the first quarter, but higher growth in the remaining three quarters."