Cash Cars

With the credit market at a virtual standstill, automakers, dealers, and customers are all suffering the consequences. Easy to obtain credit has allowed the industry to stay afloat for years, but with the Wall Street meltdown, credit has turned from easy to get to almost impossible to receive.

Consumers, even those with good credit histories, are finding it extremely difficult to obtain financing. As a result, the number of all-cash deals, and the size of down payments are increasing. Down payments have increased by nearly $1,000, or 20 percent, since July. All-cash payments are at their highest point in three years. Typically, around 90 percent of consumers finance their vehicle purchases.

"Consumers were already staying away from the showrooms, and when you add in the credit crisis it's like a one-two punch," said Tom Libby, chief market analyst for JD Power & Associates.

Despite that, auto sales fell to their lowest point in over a decade. U.S. auto sales fell below one million for the first time in 15 years. In Sept. sales fell an astounding 26.6 percent. Over the last three weeks, leasing deals have fallen by over 7 percent.

Dealerships are also feeling the pain of the credit squeeze. Loss of sales are hurting their bottom lines, and already this year 600 dealerships have closed their doors for good. In addition, many dealers are struggling to find financing for their inventories. The finance companies of The Big Three have all recently raised interest rates charged to their dealers.

"Credit is the lifeblood of our industry," said the chairwoman of the National Auto Dealers Association, Annette Sykora. "Dealerships need it to finance inventory from manufacturers. Consumers need it to buy cars."

Source International Herald Tribune:

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