Fast-paced auto sales
projected to slow
in ’05

While Hawaii has been a hot market for new cars and trucks for several years as the improved economy and financing deals have made vehicles more affordable to consumers, a new study says the market could cool next year -- dropping for the first time in four years.

The study forecasts that Hawaii car and light-truck sales are likely to increase 5.8 percent this year to 66,318, but predicts that strong sales will lead to a mild, cyclical decline. The study forecasts new registrations will drop 3.4 percent to 64,032 next year because of high gas prices, uncomfortably high personal debt levels and decreased consumer demand.

"This was an extraordinary year for the industry and it was a high-water mark in terms of auto sales for Hawaii," said Eric Fukunaga, president of Servco Pacific Inc.

Most Hawaii dealers are not going to be concerned by the study's forecasted drop since the numbers are still good from a historical perspective, Fukunaga said.

"Basically any year with more than 60,000 in retail sales is considered to be a very good year; so even if sales dip slightly, we'll still look at next year's forecast as strong," he said.

From 1989 to 1998, annual cars sales in Hawaii dropped dramatically from 57,456 to 40,673, prompting dealers to call those years "the lost decade," said David Rolf, executive director of the Hawaii Automobile Dealers' Association.

"No other United States market experienced such a decline and since that time our market has continued to climb," Rolf said.

Sales began to take off in 2002 and 2003. Through the first nine months of this year, registrations of new cars and light trucks totaled 51,315, an 8 percent increase from 47,517 in the same period last year, according to a study prepared for the dealers' association.

Despite the rise, Hawaii's auto-buying market has not reached its saturation point, Rolf said.

"Our sales were so low that we still have plenty of room to grow," he said. "If Hawaii dealers sold 65,000 new cars during the next buying cycle, that would mean they sold one new car for every 18 people, which is still below the national average of 1 car for every 17 people."

If Hawaii's economy continues to improve and manufacturers continue supporting dealers by offering zero-interest or cash-back deals, it's far more likely that sales will grow, said Mike McKenna, vice president of McKenna Motor Cars.

"I think Hawaii's auto industry will post an increase," McKenna said, adding that sales at his Windward dealership have grown by 15 percent from a year ago. "People want new cars and they will buy them if the offers are good."

The abundance of manufacturers' deals has enticed some car owners to trade up as early as 15 months after buying their last car, McKenna said.

"We had a customer -- with an 18-month-old car that was paying $450 a month -- trade to a newer model and walk out the door with a $402-per-month payment because of zero financing," McKenna said. "If those kinds of deals continue, people will keep buying."

That was true for Pearl City resident Sabrina Moran, who said a growing family and a good deal prompted her family to upgrade its 2000 Ford Windstar to a 2004 Chevy Suburban.

"We needed more space and it seemed like a good time to buy," Moran said. Four neighbors on her block also have bought cars this year.

Of all new vehicles sold in Hawaii, Toyota continued to be the best seller this year with 21.2 percent of the statewide car market, followed by Honda with 14.3 percent, Nissan 11.2 percent, Mazda 6.2 percent and Ford 5 percent.