Revisiting Our 2016 Auto Sales Forecast
Published January 27, 2016
A few weeks ago, we released our forecast for 2016 U.S. auto sales. We predicted that sales would end up slightly below the 17.47 million that was achieved in 2015. In an effort to give our readers the most accurate information possible we wanted to re-evaluate our industry intelligence to see if any adjustment to our forecast is required.
It seems like every day the Dow Jones Industrial Average drops another couple hundred points. Although the daily fluctuation doesn't typically have a direct impact on people's budget, there is a large negative emotional component. People tend to be reluctant to make large value purchases when the value of their investment portfolio and 401k has seen significant declines.
We still feel that the weakness in the stock market will continue to apply strong negative pressure on the auto sales environment. A turnaround in stock prices is possible and would reverse this effect but we feel that it is unlikely to occur early enough in the year to have a significant impact.
Effect of Low Gas Prices
We can't ignore the impact of gas prices on auto sales. Analysis shows that lower gas prices typically lead to an increase in auto sales. Our data shows a clear correlation between lower gas prices and a shift to larger, less efficient vehicles like full size SUVs.
Although current fuel prices are hitting levels not seen in over a decade, the price of gas has been relatively low for a while. The national average has been below $2.50 per gallon for 5 months and hasn't been over $3 in 15 months. Because consumers are used to lower prices, the current prices don't have as much of a psychological impact.
Additionally, we feel that the negative effect the stock market decline has on sales is larger than the positive impact of lower gas prices. The best case is that they offset each other, but most likely the overall economic factors will win out and hold sales volumes down.
Industry Experts Now Aligning With CarBuyingTips.com Prediction
When we released our forecast on January, 12th, most industry analysts had a much more positive view about the sales environment than we did. On January 8th Steven Szakaly, chief economist of the National Automobile Dealers Association, said, "More than 17.7 million new light vehicles will be purchased or leased this year, about a 2-percent increase from 2015, and setting back-to-back records. It will be the seventh consecutive year of auto sales growth."
After our forecast was released, his comments became less positive. In an email sent on January 22, he said, "This year, we'll start to see sales struggle a bit, and we'll see incentives come up." In our original forecast, we felt that the manufacturers would need to offer generous incentives to help sales volume. Mr. Szakaly now appears to agree with that assessment.
Why Are Incentives on 2016 Models So Low?
We aren't currently seeing that many large incentives offered on 2016 vehicles. We are, however, seeing some huge incentives being offered on leftover 2015 models. An industry insider told us that you could get a 2015 Ford F-150 for around $5,000 less than a similarly equipped 2016 model.
Even though the manufacturers should be motivated to offer more incentives, they need to tread carefully when it comes to 2016 models. This is the time of the year when dealers need to move their leftover 2015 models. If the incentives were too good on the 2016 models, it would hurt the dealers ability to move the remaining vehicles from the last model year.
If you are looking to buy now, a 2015 model will give you the best opportunity to save. You'll be able to combine the manufacturer's incentives with the strong desire of the dealership to sell the remaining inventory of prior model year vehicles. If you are waiting for incentives on 2016 models you will have to be patient. Logic says that they will be coming eventually because the manufactures need to keep their factories running at efficient rates.
Before you go shopping, read our new car buying guide to become an educated consumer. A key part of our advice is to make sure to use competition to your advantage and get multiple quotes. Begin your search with TrueCar. Then, get additional quotes from CarClearanceDeals and Edmunds.
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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