While the Big Three automakers struggle to turn things around, and move away from looming bankruptcy, the domestic car dealers are also facing similar problems. With car dealers closing their doors repeatedly, many dealers that enjoyed relative sales successes just a couple years ago are now simply trying to survive.
The Big Three are looking to Washington to help them remain alive and competitive in a dismal auto market. Even with a potential federal bailout however, many dealers believe the benefits of such as bailout will arrive too late as sales continue to evaporate across the country. In addition to fewer sales opportunities and increased cost of commercial equipment leasing, credit is also evaporating, which is an essential component to the any dealership’s success.
To put the problem into perspective, the National Automobile Dealers Association estimates that about 900 of the 20,700 new car dealers in the US will go out of business by the end of the year, which is slightly higher than their original estimates. Next year, they predict that number could reach into the thousands.
Some analysts believe that some dealerships closing their doors are simply inevitable. There has simply been an overabundance of domestic dealerships in the market. With so many dealers going out of business, it’s estimated that 20,000 employees have lost their jobs in the month of October alone.
Many dealerships are also actively involved in their communities. From Little League sponsorships to philanthropy, dealerships are often prominent fixtures in their local communities. Many dealerships such as a dealer specializing in Pittsburgh 2009 Ford F-150 models has also invested heavily in their businesses in recent years, improving lounges, service bays, and other facilities to encourage customers to return.
Car dealers have faced plenty of hardships within the past two years. Both Los Angeles Ford dealers and Richmond Lincoln Dealers saw skyrocketing gas prices in particular as having a crippling effect on sales of the once-popular sport utility and pickup truck segments, which is precisely where domestic auto sales were strongest. But as the price of gas decreases, the economy continues to falter and credit has become increasingly scarce. Home prices and Wall Street have both tumbled steeply in recent months as well which does not bode well for car sales.
Finance companies such as GMAC, the financial arm of General Motors, have had to tighten their belts as well. In fact, GMAC will no longer be able to finance car buyers with a credit score below 700. This has contributed to fewer customers in dealer showrooms. It also has prevented some dealers from taking on new inventory. Dealers have also been slashing medical benefits for employees and are offering fewer complimentary services to customers in order to curb costs.
Despite the more recent effects of the economic downturn, it has been in the making for quite a while, and doesn’t just affect domestic brands either. With sales continuing to slip, many dealers have bolstered their used car inventory and service facilities in order to make up for new car losses. For example, Denver used cars dealers have seen a resurgence in pre-owned sales thanks to more frugal car buyers. Additionally, the profitability of profit centers has changed at many dealers, causing used cars Reading PA dealers to concentrate on promoting their service facilities as car sales become unstable.
Dealers are not entirely innocent. They could have persuaded Detroit hard to produce cars that offered more efficiency and were built with higher quality. But while sales of trucks and SUVs were strong at dealers such as Lubbock Chevrolet, there simply was no reason to put any pressure on Detroit. While a bailout could be just around the corner, dealers remain skeptical if such help will trickle down in time to save their businesses. Saturn Denver also considers what the bailout will mean for each individual brand under the GM umbrella. Continue reading ‘Domestic Car Dealers in Peril’
