Hawai'i auto dealers are preparing this year for the worst sales in decades.

A forecast for the Hawaii Automobile Dealers Association projects that sales will drop to 36,000 vehicles, or about 16 percent lower than 2008's anemic sales level.

"I've been in this business for more than 50 years and I've never seen anything like this," said Joe Nicolai, owner of the JN Automotive Group and a dealership selling Chevrolet and Mazda vehicles. "Business is a disaster."

Hawai'i auto sales plunged last year as the state's economy took broadsides from a downturn in tourism, financial market turmoil and the credit crunch. Registrations of new cars and light trucks fell nearly 26 percent last year and the number of vehicles sold fell to 42,804, or the lowest level since 1998.

The slide in sales also is more severe than the national average, which was off 18.1 percent.

Sales are projected to keep falling this year, given many forecasts saying the state will suffer through another down economic year. The 36,000 vehicles projected to be sold is slightly more than half the 70,268 sold in 2005.

The sales numbers only go back to 1989, when dealers changed the way they counted sales by eliminating fleet sales to car rental companies.

Dealerships have responded to the decline in sales by offering lower prices, rebates and discounts.

"It's the best value time to buy a car that they've seen in four decades," said David Rolf, executive director of the Hawaii Automobile Dealers Association, which has 77 members that in 2007 generated about $2.79 billion in sales and employed about 5,100 people.

"All the mavens will tell you it's a buyer's market."

The downturn in the economy and tight credit has cut into those numbers, with Jackson Auto Group closing a Lincoln Mercury Isuzu dealership near Honolulu Airport in August and Servco Pacific laying off 118 workers in November.

Nicolai said consumer confidence has taken a hit because of negative headlines about the economy and the Wall Street meltdown last year. He said a difficult climate remains for some buyers trying to get financing, while those who do get credit are being asked to make larger down payments.

"We don't call this place a dealership anymore; it's a morgue," Nicolai joked. "I've been through four or five of these recessions, but nothing like this one."

He said he's decreed no overtime pay for workers, asked vendors to lower costs and reduced hours of operations to cut down on electricity and other costs. His airport dealership used to close at 9:30 p.m. It now closes at 7:45 p.m.

Rolf said the dealers are hopeful that an easing of credit will help sales — along with the annual First Hawaiian International Auto Show in Honolulu, which this year starts on March 26.

"We feel there's a lot of pent-up demand now where people have held off," he said.

Nicolai has a more pessimistic view and says there's a chance more dealerships will shut down this year. He said his own business will probably survive, given repeat customers who trust his dealership and longtime employees.

"You always want to be hopeful," he said.