Consumer Car Buying Advice Blog

Announcements by Chrysler and General Motors that more than two thousand dealerships will close within the next 18 months could lead to lower transaction prices on new vehicles.

2,300 dealerships to close

Here at Auto Credit Express, we were listening to the Chrysler press conference when the company announced it was planning on terminating a quarter of its dealer base, 789 of them, on June 9th. Two days later, General Motors Vice President Mark LaNeve announced that his company would not renew the franchise agreements of 1,124 dealers that are up for renewal in October of next year. All told, both companies plan to close more than 2,300 dealerships in the next year and a half. So what does this mean for consumers?

As Bob Barker would say, “come on down!”

Even though the economy is still very weak and consumers are putting off buying new cars, pundits from sources as diverse as the automotive industry and consumer organizations are telling buyers that the current circumstances that the retail automotive sector finds itself in present a unique opportunity to buy a new car at discounts never seen before.

In a recent interview, Mike Jackson, CEO of AutoNation, the largest dealer group in the U.S. was quoted as saying that the pressure to unload current dealer inventory in the next 18 months will represent “an exceptional time for consumers.”

How is this possible?

A case in point is Chrysler. While the affected dealers, themselves, have yet to present their case in bankruptcy court, the bottom line seems to be that, barring a decision in their favor, these dealers have until June 9th to unload something like 44,000 cars currently sitting on their lots.

After that date, the now non-franchised dealers will lose the ability to collect Chrysler incentives – currently about $4,000 per vehicle – on any sold vehicles. And while Chrysler officials outlined a plan for the remaining dealers to buy back as many as 40,000 of those vehicles in an arrangement with GMAC, the plan, at least as it was explained in the press conference, is entirely voluntary and doesn’t cover the 4,000 or so 2008 models still in inventory at the affected dealers.

The upshot of all of this is that most Chrysler, Dodge and Jeep (CDJ) dealers are already wallowing in excess inventory, despite the current shutdown, and are, at the very least, wary of buying up additional vehicles to add to their overflowing lots.

The time is now

So there you have it. The bankruptcy court is currently hearing the objections of those CDJ dealers scheduled to be terminated. You can also bet that GM dealers on that company’s closing list will also be paying close attention to the court’s decision.

In any case, there’s a good chance that many Chrysler, Jeep and Dodge dealers are not waiting for any type of resolution by the court before they begin trying to sell off their inventories as quickly as possible. In addition to the June deadline, these dealers are already losing thousands of dollars every month in interest payments for vehicles in inventory.

With new car incentives of up to $6,000 and low-rate financing ending for the affected dealers on June 9th, there is no time like the present to walk into one of their showrooms (the list is published and available on the internet) and strike up a deal.

Tags: auto loan

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