Broke car dealers struggle with credit
TEXT OF STORY
Bill Radke: Members of Congress are working on legislation that would reinstate thousands of car dealerships that GM and Chrysler shut down when they went broke. Which has reporter Alisa Roth asking a question: With credit as tight as it is, where would these dealerships get the money to operate?
Alisa Roth: Car dealers rely on credit. They borrow money to buy cars from the carmakers. They sell the cars, pay back the loans and start over. But:
Wade Walker: If you can’t get financing, you’re done.
Wade Walker owns several dealerships in Vermont, including a Jeep dealership that Chrysler recently shut down. Like most dealers borrow money from the finance arms of the carmakers. Places like GMAC or Toyota Finance. But just because those lenders are part of the same carmaker family doesn’t mean they’re more likely to give you a loan.
Rick Nelson is with the investment bank Stephens Incorporated:
Rick Nelson: Lenders are looking for well-capitalized, profitable dealers that are going to make good on the financing.
And dealers that were struggling before are unlikely to make the cut.
Nelson: I don’t want to use the word impossible, but it wouldn’t be easy for under-capitalized, poorly performing dealer.
Some dealers are doing well, even though the car market is sputtering. Used cars and service departments are still making money.
I’m Alisa Roth for Marketplace.
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