Reeling from the struggling local economy, new car and truck sales in Hawai'i are expected to drop this year to their lowest level in at least two decades, according to a new report.

In its second-quarter forecast, the Hawai'i Automobile Dealers Association said that retail sales of new vehicles will drop by 22.4 percent to 33,227 this year, down from 42,804 last year.

The latest projection is a slight downward revision from the group's first-quarter outlook, which anticipated sales of 34,308 autos this year.

"It's bad, bad, bad," said Joe Nicolai, president of JN Group Inc. "The bottom line is that people aren't coming into the dealership and buying. And when they do come in, it's difficult to get them financing."

Much of the Hawai'i Automobile Dealers Association's forecast is based on sales during the first six months this year, which fell by almost one-third.

If the forecast holds true, it would be the lowest annual sales total since at least 1989.

"It's the worst I've seen in the 30 years I've been in this business," said Nick Cutter, president of Cutter Family Auto Centers. "It's a reflection of the overall economy."

There were 16,327 new cars and light trucks registered in the state between January and June, or about 31.5 percent fewer than the 23,839 sold during the same period in 2008.

Vehicle sales fell the most on Maui, where the count was down about 46.2 percent to 1,490.

On other islands:

• Big Island sales were off 40.9 percent to 1,799.

• Kaua'i's new registrations totaled 721, or 35.1 percent down from the first six months of 2008.

• O'ahu's car business fared the best of all the counties with only a 27.2 percent decline. Dealers in Honolulu sold 12,317 vehicles compared with 16,917 a year earlier.

The Hawai'i Automobile Dealers Association said the breadth of the economic downturn has been unprecedented. The group noted that turmoil in the credit markets has hurt wholesale financing and that fuel prices "have been all over the place."

With state unemployment at 7.4 percent, consumer confidence is weak and isn't expected to rebound until next year, Cutter said.

But there are encouraging signs for a rebound next year and a projected increase in sales, according to the Hawai'i Automobile Dealers Association. Household savings rates are improving while new car purchases have been postponed in record numbers in recent years. As cars on the road age, new car sales will rebound, although at a more gradual pace.

The association is forecasting 2010 sales at 37,500, a 12.9 percent increase.

"Pent-up demand will be reaching unprecedented levels as new vehicle sales remain well below trend for perhaps as long as five years," the trade group said.

"We think this will lead the market to record-high new vehicle sales totals within the next five to 10 years."

More immediate aid will come from the Obama administration's Car Allowance Rebate System, Cutter said.

The so-called "cash for clunkers" program provides consumers with vouchers of up to $4,500 when they trade in older cars that get 18 miles per gallon or less.