Are we really in an Auto Credit Crisis?

[Jeff Kershner]

You have to just about be walking on water to get financed but even with our prime customers, banks are looking for a reason to say no." -- AutoNation CEO Michael Jackson, The Wall Street Journal, October 2008

Are we really in an Auto Credit Crisis?

Why does everyone use AutoNation as the benchmark to what is happening in our industry?

A recent article in BusinessWeek online compared several AutoNation dealers to others. Example: Bankston Chevrolet (AutoNation dealer), 10 miles from Classic Chevrolet. Bankston Chevrolet delivered 85 new Chevy's last month. Both Classic and Bankston Chevrolet use GMAC to finance their vehicles AND share the same demographic customer, yet AutoNation's store came up 354 sales behind Classic's.

Does this example along with a few others suggest that maybe it's not as bad as reporters suggest?

An interesting article from BusinessWeek dives into 6 TRUTHS why there really might not be an auto credit crises.

 

[Fran]

I believe that consumer confidence (or lack thereof) has more of a direct impact in low unit sales numbers than anything else. If a customer is worried about their ability to maintain their current employment (potential layoff coming their way?) and not cross thru the dealerships doorway in the first place, their beacon score has nothing to do with it. One thing I'm sure of is that alot of dealers are going to go out of business in the next year from the weak demand, when we see Toyota numbers down over 30% it's pretty bad out there no matter what the beacon scores are that come into the showroom

 

[JQ]

Dude -- you're one funny-looking dude!

 

[Jeff Kershner]

Thanks John Quinn - and this is exactly why I encourage Websense amongst our dealers. HA!

 

[Mike@Carfeine]

If consumers are told enough times that the sky is falling (they can't get home loans, they can't get auto loans, etc.), they are going to start believing the sky is falling. We are just seeing the manifestation of consumer irrationality.

 

[Bill_Playford]

Great article. I think Mike Jackson is looking for a permanent spot next to Becky Quick on Squawk Box (btw, I love it when he's on there!).

Let's face it: in any shakeout period, the strong get stronger and the weak go away. Fewer car dealers mean more car sales per rooftop. 11 million car sales is still a massive opportunity. Keep the faith!

 

[Nick]

At our dealership, we're not really seeing credit problems so much as people aren't coming through the doors in the first place. It's possible that many of the people who aren't coming in wouldn't have gotten credit but it's so hard to say given all the other variables. We're just seeing way less traffic. The people who I haven't been able to get approved recently had such bad credit that it wasn't a matter of what the economy was doing. A 500 is a 500.

 

[Jon Groenig]

Sure it's gotten a little bit harder on financing and some of the banks that were buying the sub 600 Beacons have gone away or are not buying that clientele any more, but we are still getting these customers bought, they just qualify for 35% loans instead of the 20% they would have got a year ago.

Given the current climate, this is a really good time to start rebulding relationships with some of the lenders you have let go to the wayside, the banks we considered our go to lenders a year ago are different than the banks we are using today.

I think if a dealer makes the effort to work on building and rebuilding their relationships with their lenders they will not only make it through this slow time, but thrive while their competitors drop around them. A great example of this is Nick's comment treating a 500 as a negative, with a great lender relationship, the right structure, and a little ass kissing, this deal is completely doable. I think dealers that survive this market will be working smarter, with a little more thinking outside the box than they have in the past.

Just imagine what a dealer that gets all these things dialed in and working while it's slow could do once the market rebounds.

 

[Jennifer Schrader (blog)]

I have to throw in my 2 cents on this.

I speak with dealerships everyday and have asked a few the question:

Is it the economy?
Is it the inability to get the consumer financed?

The answer is: No it is not the economy & No it is not that they cannot get them financed.

"The consumer is afraid to spend the money"

The one dealer explained he would see 28 to 32 sets of people come into the dealership on a daily basis. Since last Monday only 5 to 8 sets of people. OUCH!!

But keep in mind! When times are tough the Internet business does increase with more traffic.

 

[Nick]

"The consumer is afraid to spend the money"

Bingo.