Record auto sales are holiday red flag

Retailers were already leery about the outlook for consumer spending this holiday season and reports Wednesday of record auto sales in August only add to the concern.

Both Walmart and Target reported disappointing second quarter sales and tempered their outlook for the full year. Conversely, car salespeople across the country were clinking champagne glasses and cashing commission checks as their employers, everyone from Mazda to Honda to Porsche and Ford, said August was a record month.

Sales at Ford increased 12.2% to 221,270 vehicles. Sales at Toyota increased 18.4% to 231,537 units. Honda set a new record with sales up 26.7% to 166,432 units. Hyundai too set an all-time sale record with 66,101 units leaving the showroom for an 8% increase. Mazda sold 28,106 vehicles, a 26.4% increase from last year and the most vehicles in 10 years.

Even luxury brands set new records. Porsche Cars North America increased sales 10% to 3,327 vehicles. For the year, Porsche sales are up 28% to 28,456 units. BMW sales in August increased a stunning 45.7% to 24,523 vehicles. Mercedes-Benz USA increased sales by 15.8% to 27,144 units.

Why this matters to retailers is because in another month or two when they are looking to pry as much money as possible from shoppers that also is when all those folks who bought new vehicles in August will be making their first or second payment. It is also worth noting that auto sales were strong all summer so many car buyers are adjusting to the new reality of having a big bite taken out of their household budget each month.

This situation is especially troubling for retailers whose product assortments lean toward the discretionary because having a new car payment has a way of altering consumer spending behavior as shoppers are likely to be more deliberate in their purchases.