Car Dealers Look To Keep Momentum Going in 2016
Published January 12, 2015
2015 was a record year for new car sales. In the United States, there were 17,470,659 sales of light vehicles. This was a 5.7% increase over 2014 and it eclipsed the previous record of 17,402,486 set in the year 2000. Back then, the events of 9/11 and the subsequent economic crash prevented the continued growth of sales in the following year.
Will the Momentum Continue?
Now that the dealerships have gotten a taste of these incredible sales figures, they want to keep the momentum going and set a new record this year. The only way that they will be able to increase sales even further is to be willing to make deals to move inventory. No matter how motivated they are, there will be factors beyond their control.
CarBuyingTips.com 2016 Sales Forecast
NADA is forecasting 17.71 million sales in 2016 which would be about a 1.4% increase over 2015. Others are predicting even higher sales. We believe that these forecasts of growth will not come to fruition.
Stock Market Off to Worst Yearly Start Ever
Similar to the situation in 2001, there are external factors that we believe will weigh down sales. The stock market is off to a horrific start in 2016. In fact, it has had the worst start to a year in history. People aren't normally motivated to make large purchases when their investment account values are dropping like a rock.
Even though oil prices are currently at 12 year lows (which is leading to low gas prices), we don't believe that this will have a significant effect on improving sales. Since gas prices have been relatively low for the past year, the additional savings will not be enough to motivate consumers to buy new cars in large numbers.
In order for sales to continue increasing from the record sales in 2015, dealerships will have to move inventory throughout the year. We expect that they will face headwinds for the early part of 2016 that will cause them to fall behind the 2015 sales pace. Once they fall behind by a few percentage points, it will be very difficult to make up the shortfall later in the year.
If there is a rebound in oil prices, the stock market and the Chinese economy early enough in 2016, it may help car sales going forward. However, with oil setting a new 12 year low this morning, we are not optimistic.
Unlike most analysts, we believe that U.S. auto sales reached a short term peak in 2015 and will decline slightly this year. Therefore, we are forecasting U.S. sales of light vehicles in 2016 to be slightly below the 17.47 million that was achieved in 2015.
Will Manufacturers Step Up and Offer Larger Rebates?
There is a possibility that the manufacturers will set out to prove us wrong. One of the biggest wild cards in the equation is that the manufacturers can decide to offer larger rebates in order to drive higher sales.
The manufacturers don't want the negative press of a decrease in sales. They know that the headlines will be negative even if the sales are close to the record from the previous year. If they decide that it will significantly help their stock prices to get the 2016 sales to exceed 2015, they will do whatever it takes to move inventory.
It is hard to say what they will decide to do in the second half of the year. If they just need a little boost to end up above 2015's numbers, then they will likely put out some great incentives and rebates. If they are too far behind the pace, they will probably decide to keep up the profit margins on the sales that are being generated.
How To Capitalize on 2015 Sales
As a consumer, you are in the drivers seat. You may think that since dealerships are coming off of a record year, you won't be able to get a good deal right now. In reality, they are motivated to try and get ahead of the pace that was set in 2015.
Our industry intelligence is turning up reports of huge incentives on leftover 2015 vehicles. With incentives at a very high level at the end of 2015 and continuing into 2016, there are some especially good deals to be had on these leftovers. If you are willing to buy a new car from the prior model year, you can get a great deal. Check out Edmunds and TrueCar to see what incentives and rebates are available on the model you are interested in.
If you want to stick with the 2016 model year, the dealers are still going to be motivated to make deals because they want a strong start to the year. Follow the advice in our new car buying guide and know that if you negotiate well, you'll end up very happy. Always remember to pay attention to every part of the deal. The price is only one piece of the puzzle and you can lose out in other parts of the deal.
About The Author: Lyle Romer is a consumer advocate, Founding Contributor and Vice President of CarBuyingTips.com. A 20 years veteran of the auto industry with a high level of expertise, Lyle has been researching all aspects of the automotive sales industry.
Lyle's expertise and research played a vital role during the creation of CarBuyingTips.com in 1999 after years of industry research. He carefully observed every aspect of his own car buying experience as the internet began to take a foothold in the process. He also designed the site to make sure that consumers had easy access to the best consumer advocate education.
Lyle has been an auto industry insider since 1999. He also has worked with other automotive websites to help improve their offerings based upon feedback from CarBuyingTips.com users. He covers important industry events and gathers off the record sources while attending industry conventions.
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