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'02 sales on track as fourth best year ever

November 24, 2010

Strong light-vehicle sales in August, energized by wide customer incentives, still-strong net household assets and relatively low unemployment, gives the industry a shot at reaching 17 million sales this year, said the chief economist of the National Automobile Dealers Association. Paul Taylor said net household income has continued to grow, albeit slowly, for the typical household, where earnings are key to understanding big ticket purchases.

"And we think there is a little peer pressure at work in households," Taylor said. "When there are at least six new cars in the driveways of a cul-dusac of 15 houses, there are some subtle pressures at work for the other nine households. "Consumers remain relatively confident, with confidence remaining in the 90s as an index measure. Compare that to the same confidence measure under 60 when Iraq invaded Kuwait or a low of 47 in the 1990-92 recession. "For all they have been through in the last two years, consumers remain relatively confident."

The makers of other big-ticket consumer goods have instituted incentives, with zero percent financing available for appliances. However, most new-car buyers are buoyed by declining interest rates, not special incentives for which only select buyers qualify. For dealers, sales volume and falling interest rates led to robust before-tax net profits, though new-car sales were not at the level of 2000, the all-time record sales year. Net profit before tax for franchised new-car dealers is 2.4 percent through June, compared to 2.1 percent for the first six months of 2001, and 1.6 percent for all of 2000.