NADA’s Optimistic Sales Forecast: Will Millennials Help Out?

New numbers from NADA have predicted that nearly 17 million new cars will be “purchased or leased in the United States” in 2015. NADA’s Chief Economist, Steven Szakaly, released the predictions in a press briefing, which occurred before the 2014 Western Automotive Conference in Los Angeles, Monday. Speaking about the optimistic figures, Szakaly said, “Rising employment and wages, continued low interest rates and lower gasoline prices all signal an increase in new light-vehicle sales in 2015.” The prediction of 16.94 million new vehicle sales and/or leases would be an increase of 3.3% from NADA’s 2014 prediction. Optimism in the economy is one of the reasons that Szakaly cited for the higher sales target. “The economy will continue to build on the solid growth established in 2014, and we also expect the fundamental conditions to improve in the year ahead,” Szakaly noted. “Gross domestic product will grow at 3.1 percent in 2015, with the potential for growth to exceed our forecast.”

Szakaly also explained that in order for the higher sales prediction to be achieved, there will need to be more sales activity by Millennials than has occurred in 2013 and 2014. That could be a tall order. According to a CNN Report in early November, there are approximately 78 million Millennials in the United States. They have a reputation as a group, which doesn’t buy vehicles as much as their parents did. An article by The Atlantic’s Derek Thompson notes that Millennials have steered away from two very important purchases. “Since the end of World War II, new cars and suburban houses have powered the world’s largest economy and propelled our most impressive recoveries. Millennials may have lost interest in both,” Thompson wrote. Despite Thompson’s feeling that Millennials aren’t and possibly will not be warming up to new car acquisitions, there is hope. A CNN report by Jeff Yang suggests that Millennials will eventually make larger purchases, such as homes and new cars; they are simply burdened down by student loan debt and a shaky job market. If the economy continues to improve as Steven Szakaly feels that it will, there could be a resurgence of Millenial car buyers. “This improvement in the labor market should also benefit wages and incomes. This growth will be moderate, with disposable income rising by 2.5 percent in 2015.” Szakaly said.

The NADA predictions for 2015 also mentioned the expectation that “long term rates on auto loans will rise,” but not enough of a rise to impact the optimistic sales forecast. This comes during a season time when car loans as long as 84 or 97 months are becoming more and more popular. An article by the Wall Street Journal explained that 17% of all new car loans for the second quarter of 2013 were between 73 and 84 months long. However, in 2014, CNBC reported that 24.8% of buyers in Q2 of 2014 took out loans of the same 6 to 7 year time frame. This clearly shows a trend towards long term loans, the question being how much higher (if slightly) rates in 2015 could influence car shoppers.

Another aspect of the NADA report is the commentary of lower gas prices and their potential impact on the vehicle sales and lease numbers. “If oil and gasoline prices remain low through 2015, we could easily see consumers return in even greater numbers to the light-vehicle market during the second half of 2015.” Gas prices are a current part of this report and commentary as most vehicles are at least partially gas powered. In the next few years, if electric vehicles become more and more popular, what factor could replace gas prices as a reason for a consumer to buy an electric vehicle? Are you confident that the economy will continue to improve? What do you think of Millennial shoppers? Are they going to buy cars as soon as they get better jobs? Finally, are you seeing a rise in the number of consumers taking out loans of 6 years or more?