August Auto Sales Could Be the Worst in Nearly Three Decades

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Auto sales started out August on an upbeat note, with early trends showing the month could go down as the best so far this year. But as August winds down, it appears consumers were less eager to buy than first thought, despite the bevy of end-of-model-year deals.

In fact, August could go down as the slowest sales month in 28 years, Bloomberg News reported. Industry-wide, automakers are expected to report Wednesday that monthly sales totaled an annualized rate of 11.6 million vehicles, according to a composite estimate of eight analysts.

The last time auto sales were that low was August 1982, when the nation was mired in recession, according to researcher Ward's AutoInfoBank. The rate is also 18% lower than the 14.2 million pace recorded during last year's "cash for clunkers" rebate program, which boosted purchases and made August one of the best sales months in 2009.

Market Distortion From Cash for Clunkers

People aren't buying because of the economy. With recovery seemingly stalled, Americans aren't eager to take on more debt when their jobs may be at risk. Reduced home values and lower stock prices are also hampering auto sales, since households feel less wealthy.

Edmunds.com reports similar sales expectations for the month. The online car-buying guide predicts sales in August reached an annualized rate of 11.8 million, up from 11.5 million in July.

Comparisons between the current month and August 2009, are "a waste of time since 'cash for clunkers' distorted the market so badly last year," said Jessica Caldwell, director of industry analysis for Edmunds.com. "It is likely that the current slow sales pace can be partly attributed to the thousands of 'pull-ahead' sales that last year's CARS program stole from subsequent months."

Despite a 1% boost in incentives for the month compared to July -- to an average $2,864 for each vehicle sold -- retail sales likely fell 7% in August compared to the previous month, according to industry tracker TrueCar.

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Leaders and Laggers

TrueCar forecasts sales at Ford Motor (F), Toyota Motor (TM), Mercedes-Benz and Honda Motor (HMC) rose during the month compared to July, with Mercedes and Honda each recording a 10% increase, while Ford's sales climbed 5.6% and those at Toyota grew just 1%. Japanese automaker Mazda Motor may have enjoyed the best increase, with expectations that its U.S. sales jumped 21%, compared to July.

General Motors, Chrysler Group, Subaru and Hyundai Motor are expected to report flat sales, with Nissan Motors (NSANY), BMW, Kia Motors and Volkswagen each reporting fewer vehicles sold.

Honda sales appear to have benefited from increased discounts and Toyota's continuing recall woes. Honda boosted incentives by 66% from a year ago, Bloomberg reported, citing TrueCar data, while Nissan and Toyota raised discounts by less than half that amount.

Among domestic automakers, GM and Ford both increased incentives -- 18% and 25%, respectively, in August, compared to a year ago. Chrysler, however, bucked the trend, reducing discounts 22%, compared to August 2009.

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