You hear the stories today about how bad the auto industry is and how car dealerships are struggling.
Here are some of the things you hear today. CEO Mike Jackson of Auto Nation tells the story of a good customer at one of his 317 auto dealerships, who is a regular customer with a healthy credit score of 680 who likes to lease his cars. Only this time, the bank said no.
The guy says to the bank, I will write you a check right now for the whole four years of the lease, but the bank still said no, says a frustrated Jackson.
CNN had an article about how neighborhood car dealers are facing extinction. The sub-headline to the article reads, The small, independent dealership is struggling to compete in an increasingly cutthroat auto market.
The first example takes place in the Tampa Bay market area were sales are weak and the second article takes place in Westfield, New Jersey were small dealerships are struggling.
It's true that a combination of a soft economy, fluctuation in gas prices and reduced sales have forced dealers who have been in business for decades to shut their doors.
The auto industry is going through a major transition right now. The business model of carrying huge inventories that are depreciating every month, has taken its toll on dealers. The cost of these inventories can be staggering when sales are down. If a car dealer has to inventory lets say 30 vehicles that has an average cost of $15,000 each, they have $450,000 tied up in cash. These vehicles are not going up in value every month! When the new NADA or Kelly Blue Book comes out these vehicles have depreciated in value.
In the future you may see smaller inventories on the used car lots.
CNN's article addressed the biggest challenges for dealers as the following
But in late 2008 gas prices rocketed up, leaving dealers stuck with lots of big trucks nobody wanted. Then, in the fall, the banking system went into a skid. New Norris's customers couldn't get car loans and GMAC, which financed his own inventory as well as his customers' purchases, started demanding big payments on all those unsold trucks and SUVs.
Good News
The auto industry is not all gloom and doom. The problem is you can't hear the good news because of the negative.
For instances, GMAC has announced to help their dealers with financing plans to ease cash flow problems and they have 5 billion dollars for car loans over the next 60 days. We are seeing other manufactures and financial institutions coming up with their own plans to help out through this time.
So, yes the auto industry is going through major changes right now.
But, it is not the end of the world. The wheels are not falling off!
It will be interesting to see how things shake out in the market place and what new products the manufactures come out with through this transition. There are dealers doing well in today's market despite of what you may hear or believe.
This is an exciting time as we watch the industry and see how creative people get when things get tough.
I'm betting on the belief, determination and passion that people have when things get tough! We will come out of this time of change stronger and more committed to a better way of providing you with the transportation that you want and need for the future and beyond.
Disclaimer: All information on this site is provided for informational purposes only! By no means is any
information presented herein intended to substitute for the advice provided to you by any health care or other professional
or organization.
tweet this!