U.S. retail auto sales are expected to decline 19 percent in July from a year ago, marking an improvement over declines of more than 30 percent in the first half of 2009, an influential industry tracking service said on Friday.

J.D.Power & Associates said new vehicle retail sales are projected to total 780,500 units in July, down from 967,500 units a year earlier.

Combined with sales to fleet customers such as corporations, government agencies and car rental companies, U.S. July auto sales are estimated at 10 million units on the annualized basis, the agency said.

That compares to 9.7 million units in June and would represent the best selling rate yet for 2009.

In order to spur demand, the U.S. government is launching a cash for clunkers program this week, which provides incentives to consumers who turn in vehicles that are less fuel-efficient and buy new ones.

But the program is expected to have only incremental impact on July auto sales since many consumers do not understand the specifics of the program or don't qualify for the incentive, said Gary Dilts, senior vice president of global automotive operations at J.D.Power.

The vehicle being turned in must have been made after 1984 and have a fuel economy rating of less than 18 miles per gallon.

J.D.Power said it is holding its forecasts for 2009 auto sales steady at 10 million units.

(Reporting by Soyoung Kim; Editing by Derek Caney)