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Thursday, August 27, 2009

Car Dealer Closings Revisited

Remember a few weeks (months?) ago when the US Government took over GM and GM announced that they were closing a whole bunch of small dealerships? I remember there was a big fuss in the media about it, but I never heard any kind of sound business reason why they were doing it. This was last straw as far as mass media is concerned: I have quit reading the local paper.

Then today the answer just popped into my head: financing. None of those cars sitting on those dealers lots have been paid for, they have all been shipped to the dealers on credit. A thousand cars at ten grand a piece is ten million dollars. Interest on that is roughly a million dollars a year. If you have 500 dealers sitting on a dozen cars each that can mount up to serious money. Admittedly, it's not billions of dollars, but when times are tight, you've got to watch every million.

I heard at lunch today that one of our local GM dealers, Carr Chevrolet, actually uses their own money to pay for the cars they get from GM. They are a fairly large dealership I imagine they sell a fair number of cars, and since they are paying cash they probably get a pretty good deal from GM.

Disclaimer: All the information in this post is based on rumor and innuendo and should be taken with a large grain of salt, along with a large margarita.

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