Daily Auto News Report: More Chrysler Dealers Could be Forced to Close
Daily Auto News
To help its return to profitability, Chrysler trimmed its dealership network by a third earlier this year. It may soon begin to lose more dealerships – this time without advance planning.
Bloomberg reports, “Chrysler Group LLC may lose as many as 145 more U.S. dealers unless the retailers can find lenders to finance their new-vehicle inventory.”
Dealerships generally don’t own the cars they sell. Instead, they finance new cars through a special financing vehicle known as a “floorplan loan,” which allows dealerships to borrow money to purchase vehicles from the factory, then make small payments on them that grow over time as the vehicles sit unsold. The loan on each car is paid off when the vehicle is purchased, with the dealership pocketing any profit leftover from the sale.
But, Autoblog notes, 145 Chrysler dealerships “haven’t been able to finalize floorplan financing” since Chrysler emerged from bankruptcy. Chrysler’s own financing arm has closed, and Chrysler dealers are instead trying to obtain floorplan loans through GMAC. “85 have been turned down flat, another 60 or so are still working on it.”
“Chrysler is optimistic it can resolve most if not all the issues,” spokeswoman Kathy Graham told Bloomberg. But dealers who can’t get the financing from GMAC or another lender, she adds, “may face difficult decision.”
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