Car Dealers Leaving Business In Droves

The biggest “news makers” when it comes to the auto industry are the car companies in that as their fortunes rise and fall, the press eagerly relays what is going on with them. But, there are plenty of collateral companies involved in the industry from suppliers, aftermarket parts providers, public relations personnel and car dealers.

Most dealers, no matter what brand of vehicles they sell, are finding it hard to come up with financing for their customers. But, even before they can arrange customer financing, dealers need to finance the cars that they themselves purchase from manufacturers – a difficult job when credit has tightened.

881 Dealers Close Shop In 2008

Reuters recently reported that 881 car dealers in the US closed their doors last year, which equals just over four percent of the total. Particularly hard hit were dealers selling the traditional American brands including Ford, General Motors and Chrysler. Nearly eighty percent of the total is for dealers selling vehicles for the Big Three.

Not helping matters is that the Big Three have been urging dealers to consolidate in a bid to ensure that they can be more profitable for the reason that the three companies have long been at a disadvantage when competing with most European and Asian brands, whose stores are much larger and sales volume much greater. Many of the domestic car dealerships which dot the American landscape have been around for decades and include downtown and small town dealerships which aren’t very profitable.

Financial Devastation In Communities Across America

The result of closed dealerships has been devastating to some communities. Dealers employ quite a few people including sales help, service personnel and managers. In some towns car dealers comprise the largest businesses, meaning a closure can have devastating consequences across the board.

Car dealers pay local, state and federal taxes while employees contribute to the community through payroll taxes, local spending and involvement in the community. Lost jobs aren’t easily replaced as the entire industry is contracting, suggesting that it could be several years before sales reach numbers not seen since earlier this decade.

Chrysler, Ford and General Motors have been working for years to bring their respective dealer counts down, but are finding it difficult to consolidate operations that they don’t actually own. However, with several brands on the chopping block, the closure of additional retail stores seems to be a sure thing, possibly pushing more dealers to out of business in the months ahead.