Car sales slow, but still flow

Loans are still being made, but if your credit score is low, expect to pay a higher interest rate or make a larger down payment

Auto dealers in the Triangle are seeing sales slide. They're working harder to lure customers and cutting costs.

But unlike other areas of the country hurt by the worst auto industry downturn in years, this region has not seen massive dealership closings, layoffs or credit issues.

That doesn't mean area dealers are safe.

Nationally, September was the industry's worst sales month since 1993. The National Automobile Dealers Association predicts that as many as 700 dealerships -- out of the nation's 43,000 -- could close this year.

No dealerships in the state's larger metro areas have gone out of business as a result of the economic events of the past few weeks, said Robert Glaser, president of the N.C. Automobile Dealers Association.

But since July 2007, 19 dealerships have closed, mostly in more rural areas. There are others that have consolidated operations into fewer showrooms and more that have laid off nonessential staff. Glaser thinks other dealerships could fold before the picture improves.

"That's not outside the realm of possibility in the future, especially as credit tightens, but as of right now we haven't seen it," he said.

Fred Anderson, owner of Fred Anderson Toyota in Raleigh and six other dealerships, has been in the car business for 38 years. Sales have been declining steadily all year, he said. September was the worst month he can remember. Sales were down 30 percent from a typical September.

In response to declining sales, Anderson has been promoting Toyota's zero percent financing and holding off on hiring. His number of employees has dropped from 200 to 180 in the past year.

He is negotiating with vendors for better prices and encouraging employees to share their ideas on how to make the company's operations more efficient and cost-effective.

So far, October is faring a little better, Anderson said.

"It just can't stay at that level," he said. "[September] was sort of supernatural."

Money matters

Area dealers say the biggest problem is that people are just staying away from their showrooms, partly because they are scared that they won't be approved for an auto loan.

But shoppers also are reluctant to buy big-ticket items with the stock market declining, prices for lots of products rising and employers cutting jobs. And cars last longer now, with 100,000-mile warranties, better engineering and an emphasis on fuel efficiency.

Despite national reports that lenders are now requiring excellent credit and a down payment, many area car dealers said they are still financing loans with no money down.

"The Triangle is more impervious to [economic conditions] than probably any other place in the nation," said Chris Leith, whose family owns almost 40 car dealerships throughout the state. "It's not a matter of people are on the lot and we can't get them approved."

People with lower credit scores should expect to have higher interest rates than people with high credit scores, Leith said. But, at least locally, even those with lower credit scores are still getting loans.

One customer who bought a car last weekend had a low credit score of 390, a $1,500 down payment and no trade-in, but his loan was approved with an 18 percent interest rate.

"You can still get it done," Leith said.

Eventually, if the economic slump is prolonged, even shoppers in the historically buoyant Triangle may need a down payment for any loan, said Jessica Caldwell, an auto industry analyst for Edmunds.com.

"The down payment thing is no joke," she said. In September, Edmunds reported the average down payment nationally was $3,100, the highest in five years.