U.S. new-vehicle sales will stay above 17 million for a third straight year in 2017, Steven Szakaly, chief economist of the National Automobile Dealers Association, said as the group issued its annual forecast.
He predicted 2017 sales of 17.1 million light vehicles today at an economic briefing ahead of the Los Angeles Auto Show. He expects volume to finish out this year at 17.4 million, falling slightly short of 2015’s record of 17.47 million.
“We are headed toward a stable market for U.S. auto sales, not a growing market,” he said. “The industry has achieved record sales and pent-up demand is effectively spent.”
But Szakaly said he believes auto sales momentum will continue through 2017, supported by solid overall U.S. economic growth, gasoline prices remaining below $2 a gallon and the shaking off of political fallout from the surprise election of Donald Trump as U.S. president.
Szakaly also said he could see potential for a second half surge in 2017, perhaps driving sales to 17.3 million or 17.4 million, if deregulation benefits hit quickly. “We’ll have a better idea of how the year will shape up by late February or early March,” he said.
Szakaly sees other positive factors for 2017.
NADA forecasts that new-car dealerships will retail 15.3 million used light vehicles in 2017, up from an expected 15.1 million used sales this calendar year. By Szakaly’s reckoning, that would give franchised dealers three of every eight used-vehicle transactions next year. He expects more than 40 million U.S. used vehicles to change hands in 2017.
The overall U.S. economy is expected to grow in 2017, with a projected 2.6 percent growth in gross domestic product and job growth of 150,000 to 180,000 a month.
Szakaly expects more growth in light trucks to offset soft car sales, with rising average vehicle transaction prices. He said potential deregulation under the Trump administration could benefit the general economy and that any easing in future vehicle fuel economy standards could help the auto industry.
But he has concerns about rising interest rates, lengthening auto loan terms and higher vehicle prices adversely affecting auto sales. Rising interest rates in particular could hamper leasing, which is already hit on the car side by falling residual values and lower used-car values.
Szakaly expects auto leasing penetration to increase in 2017, “but not at the same pace we have seen over [the] past few years.”
As larger supplies of off-lease vehicles return, used vehicle prices are declining from record levels, said Jonathan Banks, vice president of vehicle analysis and analytics for J.D. Power. But the 3.7 percent decline in average used-vehicle values through the first ten months this year from the same period of 2015 is in line with historic depreciation norms, just not abnormally high, he added.
“It’s still a good year for used-vehicle values,” Banks said.