SALES OF NEW CARS ARE ZOOMING; FLAT AUTO PRICES LURE BUYERS WITH MORE SPENDING POWER.

Byline: Gregory J. Wilcox Staff Writer

Peace of mind drove Alex Salazar to buy a new 1999 Dodge Intrepid.

With 138,000 miles on his 1990 car, it had begun to show a little gray around the manifold.

``We needed a car we could have more confidence in. And we didn't have a lot of confidence in the old car,'' said Salazar, a Winnetka resident.

Of course, the fact that the $19,400 purchase coincided with Mother's Day didn't hurt either. ``I love it; that was my Mother's Day present,'' his wife, Maria, said of the burgundy four-door sedan.

This year, consumers like the Salazars are the rule rather than the exception, much to the delight of automakers and dealers.

Analysts and industry executives say that the stampede through showrooms this year will likely push sales of cars and light trucks to record levels. During the first half of this year, dealers nationwide sold 8.5 million units, and little drop-off, if any, is expected during the remaining six months.

That means the total should top 16.5 million units by the time the last deal is closed on Dec. 31.

That would eclipse the record of 16.03 million cars and light trucks sold in 1986, says a forecast from National Automobile Dealers Association.

Credit the booming market to a strong economy, low interest rates and consumers brimming with the kind of confidence that comes from increased purchasing power. Wealth being amassed in the stock market is contributing, too.

Tweak the numbers enough, and buying a new car starts to look like a good deal.

For example, for almost three years, new vehicle prices have remained relatively flat while personal income has grown.

``That represents a de facto price reduction, and usually a price reduction is followed by higher demand,'' said George Pipas, manager for sales analysis at Ford Motor Co. ``There is no doubt that this is going to be the best year ever for new cars and light trucks in the United States.''

Paul Ballew, General Motors Corp.'s general director of marketing and industry analysis, said the current economic convergence benefits almost everyone, although it makes for keen competition among manufacturers and dealers.

``It's pretty hard to find an economic climate that gets much better. And the improvement in affordability has been astounding in the last five years. The average monthly payment in relation to monthly income is at its lowest point in almost five years,'' Ballew said.

Still, with so many buyers prowling the nation's showrooms, manufacturers and dealers are feeling the pressure to set their products apart from scores of models in the marketplace.

``It's a real challenge to improve margins in this market despite the fact we're delivering about 17 million units,'' said Ballew. ``From a laboratory standpoint, it's fascinating to look at, but when you are on the ground engaged in the hand-to-hand combat, it loses some of its luster. But we'll take 17 million units.''

The competition is keen because this is a broad-based splurge. Consider that:

During July, sales of Rolls-Royce and Bentley automobiles - which cost several hundred thousand dollars apiece - rose 15 percent in North America vs. the year-ago period. The strong U.S. market helped drive up the company's sales worldwide by 13.2 percent on an annual basis, the company said.

Daewoo Motor America, a unit of the financially troubled South Korean company, has recorded seven consecutive months of sales increases. The company has been aggressively expanding its U.S. retail network.

Nissan's North American sales total for July was the highest since March 1997. The company has had eight straight months of annualized sales gains.

Hyundai Motor America said its July sales soared 104 percent, to 17,958 units, from the year-ago period. So far this year, sales are 64 percent ahead of the 1998 level.

Volkswagen of America Inc. recorded its best July in 19 years, with sales up 19.5 percent. Year-to-date, the German automaker's U.S. sales have reached 179,240 units, up 39.9 percent from 1998.

Ford sold more cars in June than any month in its 96-year history.

And even when an automaker's sales slide, the news is not all bad. Porsche Cars North America said sales in the United States during July fell 24 percent on an annual basis. But this is due to the fact the stock is low because of an accelerated sales pace earlier this year.

So far during 1999, sales of Porsche models are running 16 percent ahead of the 1998 level.

This kind of across-the-board strength is helping David Ellis, owner of David Ellis Chrysler-Plymouth Inc. in Canoga Park, enjoy the last year of the millennium. Sales at his midsize store are up 20 percent on an annual basis.

He attributes the jump to the strong economy and product churn as customers turn over leased vehicles. The trend is to keep a car for three years rather than five or six years.

``There is a shorter cycle of how long people are keeping their automobiles, and that helps sales,'' Ellis said.

About 50 percent of his business is leasing. A leased vehicle counts as being sold on the balance sheet.

Jon Ashton, senior research director at the Dohring Co., a Glendale-based automotive market research firm, said that to be successful dealers have to focus on service as well as price.

``Consumers will be more information-savvy and price-savvy, and the dealer is going to be concentrating on more than just price,'' Ashton said. ``The greatest dynamic right now is how to best use the Internet as a new source of awareness for customers.''

Ellis concurs.

``We're paying more attention to the customer satisfaction index - more so than ever. Midsize dealers like ourselves really have to take care of the customer and keep them so they don't venture off and buy cars online because they perceive it to be less cumbersome and less of a hassle.''

While there are challenges ahead, there is also good news.

Industry forecasters see the buying boom extending into the next century.

``Frankly, it would take a real monkey wrench in the spokes to derail this economy,'' Ford's Pipas said. ``It could happen, but I think most economists place a very low probability on that happening for the foreseeable future.''

CAPTION(S):

2 Photos, Chart

Photo: (1--Color) Families such as the Salazars, with their recently acquired '99 Dodge Intrepid, are contributing to record-setting car sales this year.

Joe Binoya/Special to the Daily News

(2) David Ellis, owner of David Ellis Chrysler-Plymouth Inc. in Canoga Park, reports sales at his dealership are up 20 percent this year.

Gus Ruelas/Staff Photographer

Chart: REVVING UP

Sales of new cars and small trucks are expected to top $16.5 million in the U.S. this year, breaking last year's record by more than 6 percent.

SOURCE: NADA Industry

Analysis Division

Bradford Mar/Staff Artist