LOS ANGELES — While 2016 has seen tremendous and consistent growth in new-vehicle sales, moderate wage growth, declining gasoline prices, and continued low interest rates on auto loans are expected to drive new-car and light-truck sales even higher in 2016, the National Automobile Dealers Association's Chief Economist Steven Szakaly said on Tuesday.

“New light-vehicle sales will rise to 17.71 million units in 2016, a 2.3% increase from our forecast of 17.3 million sales in 2015,” he said during a press conference preceding the Los Angeles Auto Show. “This would mark the seventh straight year of increasing U.S. new-vehicle sales.”

Szakaly did offer one warning: Unless automakers start providing heavy incentives, new-vehicle sales are likely to decline to 17.2 million in 2017. “In the long run, new-vehicle sales cannot be sustained above 17 million units because of rising interest rates, increasing regulatory compliance costs, and wage and income pressure,” he explained.

The NADA’s chief economist said wages are expected to inch up by 2% over the next 12 months, while interest rates are likely to rise 50 to 75 basis points by the end of 2016.

As for the rest of 2015, the NADA has increased its sales forecast to 17.3 million units. Including medium- and heavy-duty commercial truck sales, sales should total 17.8 million units.

“At this point, the auto industry remains healthy and continues to grow … The formation of new households is rising, which is resulting in increasing auto sales and strengthening the overall economic recovery,” Szakaly said, noting that 2015 would represent the sixth year of overall U.S. sales growth since 2009. “There is nothing better for the housing market and car sales than people getting married and having children.”

The NADA’s chief economist was joined by Jonathan Banks, vice president of valuation and analytics for J.D. Power’s Used Car Guide division. He reported that 2015 was an “incredible year” for used-car sales. The supply of zero to eight-year-old used cars is up by 1.9% this year, reaching somewhere around the 17 million-unit mark. Banks stated that within the next two years, supply numbers are likely to reach 3.4% in 2016, and 4.5% in 2017.

When asked how Volkswagen’s recent “dieselgate” scandal would affect the value of its vehicles at auctions, he stated that there has been a 12% to 14% decline in diesel model prices compared to pre-violation prices, while gas variants have seen a 2 to 5% decline.

Originally posted on F&I and Showroom