Hawaii car sales plunged 20.3 percent through the first three quarters of the year as a result of the economic downturn that has rattled local households and consumer spending, according to the latest Hawaii Auto Outlook.

The year-over-year drop is significantly higher than the 13.7 percent decline in national car sales.

New-car sales statewide totaled 34,995 through September, compared with 43,913 in the same period last year. Maui dealerships were hit the hardest with a 28.3 percent decline in sales to 3,956. Oahu dealerships saw sales drop 16.9 percent to 25,095.

“;The auto industry has been turned upside down on many fronts,”; the report said.

The industry has been significantly affected by a surge in fuel prices, which only recently eased; demand for more fuel-efficient cars; the lack of available credit; and reduced leasing opportunities.

The Hawaii Automobile Dealers Association's report predicts new vehicle registrations will decline 24 percent year over year in the fourth quarter and 21.3 percent to 45,295 for the year.

Excessive household debt, fear and uncertainty, and a drop-off in tourism is anticipated to keep the market down next year. Local car registrations are expected to fall 3.4 percent to 43,750 in 2009 - marking the fifth consecutive annual decline - before recovering with a 5.1 percent increase to 46,000 in 2010.

“;This is the best time in the 40 years that I've been in this business to buy a car, but it's also the slowest time in my 40 years in business that I've ever seen,”; said Mike McKenna, chairman of McKenna Hawaii Ford. “;We're giving them away. If we can break even on a car, we'll sell it. We have a lot of inventory and no place to go with it.”;

McKenna said he made just $96 on the sale of a new Mustang yesterday, compared with the typical profit of $400. But it is worth the lower profit to get the car off the lot than pay out the bank, he said. The dealership pays the bank about $140 to $150 each month a $20,000 car remains unsold, according to McKenna, who expects his business to be down about 30 percent this year.

The heightened level of car sales in recent years of strong economic growth is primarily attributable to customers accumulating excessive debt rather than a healthy economy, according to the outlook.

“;This artificial recipe for growth could not be sustained,”; the report said.

It is still not difficult to get vehicle financing if customers have decent credit, as dealerships continue to offer attractive rates, some with 0 percent financing, McKenna said.

The demand for cars has changed for Toyota Motor Corp., which is selling more hybrids and smaller fuel-efficient vehicles to allay higher fuel prices.

However, Big Island Toyota, Scion and Suzuki is still down about 15 percent in total units compared with 2007. In turn, it has increased operations in its service and parts business, according to Jan Whiteside, vice president of operations.

The company is taking advantage of the fact that people are holding onto their vehicles longer, so they need more maintenance and servicing - a division that has seen a significant boost this year, she said. The dealership has increased staffing this year, hiring six additional technicians, and has added four more car lifts between its Hilo and Kona operations.

It also is adding extra safety checks and other perks for customers who bring in their cars for certain maintenance services.

“;Business is tough but it's not terrible,”; Whiteside said. “;You're coming off the strongest years the auto industry has ever seen. This is the time to retrain, retool, refocus and prepare for the next opportunity.”;