Daily Auto News Car Dealers Struggle With Credit, Slow Government Payments
Daily Auto News
Your local car dealership may have had its best sales month ever in August, but it may still be struggling. Many dealers are facing a cash shortage, awaiting government reimbursement for thousands of dollars in rebates they provided to customers under the Cash for Clunkers trade-in program. They’re also finding credit increasingly hard to come by.
CNN Money reports, “Most small businesses are having trouble finding loans and credit lines these days, but auto dealers are in their own special financing hell.”
Autoblog explains, “A car dealership’s inventory is much more expensive than other small businesses (like, say, The Yarn Depot). Additionally, the economy as a whole is still fairly south of the border so despite Cash for Clunkers, millions of people aren’t buying expensive things. Then, of course, the banks that lend the money are themselves going belly up, almost 80 so far in 2009 alone.”
Dealers began facing credit struggles, CNN reports, “a year ago, as banks tightened their credit standards for small businesses in response to the deepening recession. But a bigger problem came when industry-specific lenders like Chrysler Financial, General Motor Acceptance Corp. and Ford Credit began to pull back.”
Most dealers effectively lent out thousands of dollars last month under the Cash for Clunkers trade-in scheme. Program rules required dealers to complete transactions on the assumption that a government rebate of up to $4,500 would be sent to dealers within 10 days, then apply for reimbursement. But most dealers are still waiting.
The Detroit Free Press reports, “The Obama administration has approved about $500 million of the $2.877 billion claimed in vehicle rebates under the cash for clunkers plan, approving some 120,000 of the 690,114 deals submitted.” The government plans to “boost the number of workers reviewing submissions from 3,000 to 5,000 by the end of the week” in an attempt to speed up the process, and “plans to finish payments by the end of the month,” the Free Press reports.
Still, Motor Trend notes, the reimbursements are “not…happening in the 10 days as required by law,” leaving many dealers short of cash for much longer than they had planned.
Dealers’ struggles, however, have an upside for car shoppers. Industry experts expect a slow sales month in September, as a “hangover effect” from the busy August. Shoppers who are interested in buying may find it easy to negotiate a good deal, as troubled dealers are anxious to hold onto the few customers they see this month.
If you’re in the market for a new car, check out the U.S. News rankings of this year’s best cars as well as this month’s best car deals.
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