Auto dealers turn buyers toward new credit plans
Posted on Thursday, November 13, 2008
Auto dealers are turning to different sources and ways of financing during the national economic crisis and falling sales.
Little Rock-area dealers feel that word of available credit simply isn’t getting out.
Gwatney Chevrolet in Jacksonville, for example, is increasingly using local credit unions and banks rather than GMAC, which has tightened lending standards. Arkansas Federal Credit Union has become its largest lender, said James Miller, Gwatney’s general sales manager.
Arkansas Federal has already lent 13 percent more money in auto loans this year compared with all of 2007, according to Terry Vick, the credit union’s chief lending officer.
“What’s helped us out this year is what’s been happening in the stock market,” Vick said. “Deposits have come in because [consumers ] are a little worried about leaving their funds there. So we’ve had plenty of money to lend out.”
Paul Buch of North Point Automotive Group said, “We want to make sure to tell the customers that we’re not in the housing market. It’s not the same kind of qualifications. “ You can still get money” for automobiles, he added. North Point says it has at least 16 lenders it can call on. North Point is making more use of DealerTrack, an online database to give customers several options of lenders who will work with them, Buch said.
Said Miller: “There’s a lot of places we can turn to, even for somebody that has had some credit history that may not be perfect. We’re able to do now a loan to anybody like we were three months ago, but the buying public just doesn’t realize that. They’re afraid to come in and even try, some people are.”
The auto industry nationwide is struggling.
Last month, 834, 752 new vehicles were sold in the United States, down 32 percent from a year earlier, Ward’s Automotive Group said.
GM, the largest U. S. automaker, Friday reported a $ 2. 5 billion quarterly loss, saying it may run out of money by the end of the year without government help. Ford Motor Co. is scheduling temporary shutdowns for this quarter at nine plants in North America.
The auto industry has asked the federal government to provide an immediate $ 25 billion loan to keep the companies operating. It also wants $ 25 billion for future health-care obligations for retirees and dependents.
About 72 percent of Arkansas car dealers — representing most of the state — responding to a survey by the Federal Reserve Bank of St. Louis, had decreased sales for July and the first half of August compared with a year earlier.
Dennis Jungmeyer, president of the Arkansas Automobile Dealers Association, said dealers in the state are particularly hurt by a cap on interest rates for certain nonbank lenders in Arkansas, who could otherwise finance morerisky loans.
The state is losing a dealer a week, he said, citing closures in Forrest City and Blytheville and adding that he knew of about six more that will close.
But several of the state’s dealers say they’re still moving cars.
At North Point’s dealerships in the Little Rock area, sales and profit were up from January to September compared with the year-earlier period, while October sales were flat, Buch said. Considering the type of cars sold by North Point — mostly high-end and middle-of-the-line imports — Buch said higher gasoline prices in the first part of the year actually helped sales.
Steve Landers said his Toyota dealership on Colonel Glenn Road moved 40 more vehicles in October than a year earlier.
At other Landers dealerships, “we’re just keeping afloat. With the domestics, right now, the Big Three, that’s a pretty good task — just to stay profitable.”
Other dealers said their sales were down in October less than the national trends would suggest.
New-car sales at Gwatney fell 15 to 20 percent from the usual October level, Miller said, and Tom Roy, chief financial officer, said sales slid by only single digits at Fletcher Auto Group.
Dealers maintain the idea that people can’t get car loans is more perception than reality. Lenders are changing the terms of loans, said Jeff Boyce, general sales manager at North Point Ford.
In the past, “it was fairly easy for most customers to get 72 months’ financing, even 84-month financing,” he added. “Now, you can get 72 months, but you have to have very good credit.”
Also, lenders are increasingly requiring customers to put money down when they buy new vehicles, Roy said.
“That is the secret to buying a car today for the average consumer — you need a down payment,” he said.
Zero-percent financing from companies such as Nissan and Toyota helps some buyers.
“It moves cars,” Landers said. “I know we sold about 30 Saturday at our Toyota store in Little Rock. That’s a good day.”
However, manufacturers typically offer rebates as an alternative to no interest, Roy said.
“You rarely get both,” he said, adding that many consumers take the rebate. That’s because they owe more money on their previous car loan than their old vehicle is worth.
Lenders today increasingly “don’t want to finance much more than the $ 20, 000 that you’re purchasing the new vehicle for,” Roy said. “They want you to make up the negative equity in a lot of instances.” Information for this article was provided by Ken Thomas of the Associated Press.
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