- TOM GOHEEN/McCLATCHY-TRIBUNE

Car dealerships hit by credit crunch, tough economy

BY BILL FREEHLING

Date published: 10/11/2008

BY BILL FREEHLING

Passenger cars registered in Virginia are on average about nine years old, the highest average since World War II, according to a spokesman for the Virginia Automobile Dealers Association.

VADA spokesman Michael Allen said nationwide the average is 9.2 years. That partly reflects the struggles that dealerships are having selling new cars in the face of high gas prices, tight credit and low consumer confidence.

"It's a pretty challenging time for dealers," Allen said.

Automotive sales have been dropping for several years, but slowly, Allen said. This year's rise in fuel prices and grocery bills has further reduced sales, and tight credit has made it more challenging for some to buy. Sales of new vehicles are down 20 percent year over year so far in 2008 in Virginia, Allen said.

Eli Patrick, owner of Purvis Ford Lincoln Mercury on U.S. 1 in Spotsylvania County, said the main problem has been a lack of consumers rather than tight credit.

"We're not having any problems when we get someone in," Patrick said.

Patrick said domestic cars are tough to sell now, especially SUVs and trucks. People are instead opting for foreign-built gas sippers.

Ron Rosner, who owns all or part of the two Toyota Scion dealerships in the area, said his business was down about 9 percent in Spotsylvania and about 25 percent in Stafford County in September compared with the year before. He said that's stronger than Toyota's performance as a whole in the U.S. last month but said there's no doubt that lending has gotten tighter.

Many dealers rely on financing to buy inventory and run their businesses day to day. Some consumers with weaker credit have run into trouble getting loans.

More dealerships have closed in Virginia in the past 10 months than in the previous 10 years, Allen said. He's concerned that many more could close in the next 12 months if things don't get better.

Allen said the $700 billion rescue package and the money that the Federal Reserve is pumping into the economy should increase the funds that banks can lend to consumers looking to buy cars.

"It's going to take time, though, and the real question is just how long it will take," Allen said, adding that many dealerships are still finding creative ways to secure financing for customers.

Date published: 10/11/2008