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Car Dealers Reeling

By Dennis Romero

Opinions expressed by Entrepreneur contributors are their own.

Several reports this week warn that car dealerships are closing from coast to coast as a result of the financial crisis. Retailers of American makes in particular have been hit by a triple whammy: Shrinking loan and lease programs, decreased demand for SUVs and a decline in consumer spending.

Earlier this month, National Automobile Dealers Association chairwoman Annette Sykora warned that 700 dealerships could go belly up by the end of the year. "Some of these [closings] stem from the challenges faced by the Detroit Three," she said. While that trio of General Moters, Ford and Chrysler is pressuring dealers to unload low-demand SUVs, trucks and light trucks--even lease turn-ins that are being peddled at a loss--the biggest challenge for dealers has been the credit drought. As much as 94 percent of new and used car buyers rely on bank loans and other forms of credit to take home a set of wheels.

"Credit is the lifeblood of our industry," Sykora said. "Dealerships need it to finance inventory from the manufacturers. Consumers need it to buy cars."

"Auto sales account for 20 percent of all retail sales in this country," she said. "And dealerships are typically the cornerstone of their communities. ... We help our customers get financing, and we keep the vehicles running. We're the ones who talk cars at Friday night football games. We're the ones who share our customers' concerns and worries. We're the face of the auto industry. These may be dark times, but we're keeping the lights on in communities across the nation."

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