Detroit, MI — Restoring consumers' access to credit will help restore their confidence, and that's exactly what part of the $700 billion rescue plan is set to do, says Annette Sykora, chairman-National Automotive Dealers Assn.
“The Rescue Package is designed to free up credit markets,” says Sykora, at a recent American Press Association event here. “Credit remains frozen. And consumer buying is frozen.”
Dealers are having trouble obtaining much-needed capital, and consumers are facing tougher times with accessing credit.
Sykora says the U.S. will lose up to 700 dealerships this year, out of approximately 21,000 in the country.
There's a light at the end of the tunnel, Sykora says, although she's just not sure how long the tunnel is.
Dealer members in NADA were urged to call their members of Congress if they were having issues with access to credit, for themselves or their customers.
“This helped members of Congress understand that small businesses and consumers all over America are really hurting,” Skyora says.
She believes dealers helped Congress become more comfortable voting in support of the rescue plan.
“Credit is the lifeblood of our industry. Dealerships need to finance inventory from the manufacturers,” says Sykora, who adds that auto sales account for 20% of all retail sales in the U.S. “Consumers need it to buy cars.”
According to NADA, nearly 95% of vehicle buyers finance their purchase.
She says that dealers “who have been in this business for decades say they've never seen anything like this before.”
Some of the dealership closings, she says, stem from challenges faced by the Detroit Three.
Even prior to the current financial crisis, though, some profitable dealers had to close their doors because the value of their land was so high.
“Many other closings are being driven by the real-estate meltdown,” Sykora says. “ Dealers can't move product, and they're facing higher rates themselves.
“The products they can't move are costing them more money in floor plan.”