How is the credit crisis affecting sales? Its a great time to buy a vehicle!

″How is the credit crisis affecting sales?″

″Its a great time to buy a vehicle!″

″Beyond their own borrowing costs, many car dealers say they are concerned about the ability of their customers, many of whom are shaken by steep losses in the values of their homes, to get credit to buy new cars,″ The Washington Post reported in an October 1 article entitled ″Crisis Felt Unevenly on Main Street.″ The Post interviewed a wide range of businesses impacted by the current financial crisis, including dealers and association executives.

″Our biggest concern right now is how much credit is going to tighten for our customers as this shakes out,″ WANADA CEO Gerard Murphy told The Post. ″We have gone from a situation where a lot of people could get financed to one where it is much more difficult to get financing,″ said Murphy.

Both Murphy and Peter Kitzmiller, president of the Maryland Automobile Dealers Association, agreed that consumer credit was a bigger obstacle for automobile dealers than their own financing, but overall its still a great time to buy a car. ″Most dealerships have long-term relationships with lenders, and they are probably going to have options, even if some sources of credit dry up,″ said Kitzmiller.

The article pointed out that, ″auto dealerships are facing rising interest rates because they heavily relied on…big Wall Street institutions to borrow money to refresh their inventories of vehiclesThe rates these banks charge are set on the international financial market and driven by LIBOR, or the London Interbank Offered Rate, which is the rate that banks worldwide are charging each other for short-term loans. That rate has spiraled with the financial crisis,″ said The Post.

″My rates are floating rates for floor financing,″ said Jack Fitzgerald of Fitzgerald Auto Malls. ″As LIBOR goes up, those rates go up.″ Fitzgerald also said he is able to absorb the higher borrowing costs on a well established credit line, but others with less solid lines could be obliged to readjust credit arrangements as some lenders leave the market.

″There is some question about availability,″ he said. ″There are some institutions that are pulling back, from what I′ve heard from my friends.″

Incoming chairman of NADA John McEleney, who runs two dealerships in Iowa, said, ″Our concern is with what would happen without the rescue plan, if capital does tighten up and continues to be hard to come by.″ NADA reports 600 dealerships nationwide have closed this year. ″The auto financing model could struggle, whether it′s customers financing the vehicle or dealers financing their inventory,″ said McEleney.