More Car Dealerships Shutting Down
Domestic branded car dealerships continue to throw in the towel at breakneck speed. Today’s Wall Street Journal reports on the rolling blackouts. As new vehicle sales have fallen to a “25-year low, car dealerships from New Jersey to California are going out of business at an accelerating pace, threatening greater economic pain for communities around the country.” Love ’em or hate ’em, car dealerships are a significant source of jobs and sales tax collections. “The country’s 20,700 dealerships accounted for $693 billion in sales last year, or 18% of all retail sales, according to NADA. Dealership wages and salaries make up 13% of the nation’s retail payroll.” Said NADA forecasts 5,000 fewer US new car dealerships by the end of 2008 than there were in 1990. The death knell blows are coming from bankers slamming the door in long time customer’s faces. Stories like this abound: “Joseph Pfeffer, owner of Bigelow Motors, a Chrysler and Jeep dealer in Belleville, N.J., closed shop Oct. 4 after his bank decided to exit automotive financing and cut him off from $5 million in inventory financing. He had been in business since 1942, getting his start selling DeSotos and Plymouths. ‘I always survived,’ said Mr. Pfeffer, 92 years old, ‘but nobody ever cut off my line of credit before.'” Bigelow sold forty units in August, but only seven in September. No buyers, no bankers, no business. Its ugly out there.
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so here's a question then... how are cars sold in other countries... like the UK, France, Germany? I figured the schmoovy-doovy car salesman was a constant in the universe.
The retail automotive business (franchised dealers) requires vast sums of money just to stay in business and pay the ongoing monthly bills. When a dealer has all his eggs in one basket and business slows down, and credit tightens up, the dealer becomes very vulnerable. Dealer groups have more flexibility since a strong franchise, can support a weaker franchise. Dealer groups are constantly shifting money around to support the various franchises.
"I figured the schmoovy-doovy car salesman was a constant in the universe." LOL That´s the main reason I only buy used cars sold by their owners. There is some differences that I can see in the way new cars are sold in the US and Germany. Nearly all cars are made to order, a system that has improved over the years due to the technological improvements, like being able to check the order status over the internet, being able to make changes to the vehicle even a few days before it is produced etc. Most German customers would be very reluctant to buy a car out of the showroom, which might be due to the fact that there are more choices for most models (body styles, several petrol/diesel engines, manual/auto gearbox etc.). This is a big negative for the imports as well - most of them have to sell inventory as long as their factories are not in the EU. Also, most spec like aircon or alloy wheels has to be paid for extra if you want to have it on your car, this is what the dealer and producer earn the money on over here (not on the financing as many cars are still paid for in cash), so no point in offering a "product ready to take away from the showroom". More than 65% of all new cars sold are actually sold to businesses not to private individuals, this is due to taxation rules that allow businesses to provide their employees with company cars instead of higher salaries and thereby saving taxes. (A different way to support your nations auto industry.) However, this means that many buying decisions are made by accountants, not private customers and less inventory for the impulse buying is needed. Another thing is that we never had a housing bubble and the HELOC has never been invented over here so many people get along buying used cars all through their lives. One trend that is the same over here is the demise of the small dealer with only one forecourt. Most dealers / dealer groups now have several businesses within a region of 50 - 100 km.