Sales of new vehicles will continue to inch upwards through 2016, but could ultimately be limited by the diminished purchasing power of the younger “Millenial Generation,” according to economists from the National Association of Auto Dealers.
Sales of new cars and light trucks will continue their post-recession climb, reaching an all-time high of 17.46 million vehicles in 2016, said Steven Szakaly, chief economist of the National Automobile Dealers Association, predicted during a panel discussion at the Center for Automotive Research’s annual conference near Traverse City, Michigan.
Szakaly predicts new-vehicle sales of 16.65 million units in 2017, which represents a fairly steep decline year over. On the plus side, employment is doing very well, which is critical to new- and used-car sales, and we expect gasoline prices to continue to remain low,” Szakaly said.
He outlined some of the long-term car buying challenges facing new-car dealerships and offered insight into the generational shift in car buying demographics, which he said “could present challenges to long-term growth in auto retailing.”
“It will take four Millennials to replace the spending power of one Baby Boomer in the automotive-retailing marketplace,” Szakaly explained. “There’s also a wage gap between Baby Boomers and Millennials, and stagnating wages for Millennials, along with increasing vehicle-transaction prices, will pose challenges in the long run.”
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Forrest McConnell, who served NADA chairman in 2014, warned the rising cost of regulations is having a major impact on car prices. A more “realistic balance” between government regulations and consumer choice has to be achieved, he said.
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“There’s no doubt that we all want cars to be more efficient … get the most miles per gallon … preserve our environment and reduce emissions,” said McConnell, president of McConnell Honda/Acura in Montgomery, Alabama.
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“But improved fuel economy comes at a cost. The government estimates it will cost us an increase of $3,200 to the average price of a car. That’s an increase that new-car buyers will have to pay up-front. This will dissuade many from purchasing, thereby delaying their use of more environmentally friendly and safer vehicles,” he said.