700 U.S. dealerships could close this year

The nation’s economic crisis is hurting automotive dealers across the country and could contribute to an estimated 700 dealerships closing this year, National Automobile Dealers Association Chairwoman Annette Sykora said today.

The NADA says the United States has more than 43,000 dealerships, so about 2% could close this year.

Sykora, whose organization lobbied for the passage of the $700-billion Wall Street bailout, praised Congress for passing the bill but said relief has yet to trickle down to dealers.

“The rescue plan is designed to free up credit markets," she said in a Detroit speech sponsored by the Automotive Press Association. “But it’s too early to know whether the fix will work."

Without consumer financing, an automotive dealership’s business can come to a halt because 94% of car buyers finance their vehicles, Sykora said.

Dealers have told the NADA that they have been unable to obtain financing even for buyers with credit scores above 700. In the eyes of most lenders, FICO (Fair Isaac Corp.) credit scores above 700 are very good, according to Consumer Federation of America.

“Dealers who have been in business for decades say they have never seen anything like this before," Sykora said.

The result: Consumer confidence has been shaken because credit, the lifeblood of auto dealerships, is frozen. Detroit Free Press