The credit crisis — which has made lenders reluctant to finance dealerships' vehicle inventories — is helping force hundreds of dealers out of business.
The National Automobile Dealers Association projects that as many as 700 dealerships could close this year, out of 21,461 as of Jan. 1. The last decline of this magnitude occurred during the recession of the early 1990s.
Dealers have fallen prey to poor sales, high gasoline prices and ruinous price wars. But a lack of credit is a big factor in this year's shakeout, says NADA chief economist Paul Taylor. "Credit conditions need to be improved somehow, and quickly," he says.
In recent weeks, each of the Detroit 3's captives — GMAC Financial Services, Ford Credit and Chrysler Financial — has raised the interest rates it charges dealers for inventory financing by about half a percentage point.