A modest increase in interest rates in 2016 won’t chill consumer demand for auto finance, and auto lenders are expected to keep the credit spigot open, according to the National Automobile Dealers Association, which on Tuesday predicted record U.S. auto sales forecast for next year of about 17.7 million.
“Rates are going to go up, but credit will still be widely available,” NADA Chief Economist Steven Szakaly told Auto Finance News on Tuesday. “A small 50- or 75-basis-point increase is not going to have the effect of destroying or shutting down access to credit.”
At 17.7 million units in 2016, U.S. auto sales would be up 2.3% from an expected total of about 17.3 million in 2015, Szakaly said. That would make 2016 the seventh straight year of increasing U.S. new-vehicle sales, he said.
The dealer association hiked its 2016 auto sales forecast at a press conference at the Los Angeles Auto Show on Tuesday. NADA’s prior U.S. auto sales forecast for 2016 was 17.5 million. That would still have been a record, compared with the prior record of 17.4 million in 2000.
To keep monthly payments affordable despite higher transaction prices, Szakaly said he expects consumers and auto lenders to stick with leasing and longer loan terms, the same tactics they’ve been using for the last few years, as auto sales recovered from the last recession.
“Barring some large, geopolitical event,” gas prices are also expected to remain low in the coming year, Szakaly said.
