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Car dealers gear up for hard times

Posted November 12, 2008
Updated November 13, 2008

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— The topsy-turvy economy has some federal lawmakers calling for a government bailout of the nation's Big Three automakers. Auto dealerships in the Triangle aren't immune to the tough times, and they are struggling to keep cars moving off the lot.

While the region hasn't seen massive car dealership closings like other parts of the United States, Triangle dealerships are offering incentives and cutting costs to attract customers.

“The last couple of months have been very challenging,” said Craig Madsen, with Madsen Motor Company.

Madsen runs a Cary car dealership with his brother. They specialize in European cars and have been in business for 17 years.

He said that in the past – on a good day – maybe 10 or 12 people would at least come into the dealership to browse. In the last two months, however, he says it has changed to about one or two people.

“There's been a 50 percent drop-off in business during a time of the year we expect to be busy,” Madsen said.

Dealerships rely on the fall months to generate revenue ahead of the usually lackluster winter months, Madsen said.  But that is not the case this year as consumers watch their spending and a tight credit market makes it harder to get a loan.

“People need to have better credit scores, a better financial situation. The car dealers and other people selling big-ticket items, they're really behind the 8-ball here. They've got a lot going against them,” North Carolina State University economist Mike Walden said.

Walden said when it comes to big-ticket items like cars, people tend to put those purchases on hold during an uncertain economy. However, Madsen said he has seen a surprising uptick in traffic on the lot recently.

“We've got the eternal American optimism that things will turn around, that we're only a few days away from the next turn upward. We're hopeful that will be the case,” he said.

Madsen said his dealership will survive thanks to a regular clientele that keeps coming back. However, that may not be the case for other dealerships around the state. The North Carolina Automobile Dealers Association reports 19 dealerships have closed since July 2007.

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  • freddie cadetti 72 Nov 13, 2008

    Dealerships were fine when gas was $2.00. It went up to $4.00 and it hurt suv sales. Now it's back down, but all sales slow. It's not the dealerships. It's the Democrat's in congress forcing banks to lend mortgage money to people who could not afford to pay it back. The banks are stuck with homes valued less than the loan. Now all credit has tightened, job losses, etc. You're not going car shopping when you fear being laid off or have marginal credit. Nothing with wheels is selling. I sell for a large dealership, and average 20 vehicle sales a month for the last 17 years, now it's maybe 5.

  • ihateliberals Nov 13, 2008

    bnice1984 - you MUST be referring to a used vehicle - not a new one. 2 totally different scenarios.

    Also, to those who think just because the sticker is high priced, the dealer makes all the money does not have all the facts. I am not a dealer or an employee of a dealer. I just love cars. ALL cars. However, if you have not driven an American car lately, you should. Many ideas about their quality and content are outdated. I have 3 American makes in my driveway now, and they have all had outstanding comfort/ride and quality histories. Give them another chance.

  • smalldogsrule Nov 13, 2008

    bnice1984, i've been selling cars since 1990, I have to call BS on a 3k commission. And YES, I have sold Toyotas, as well as mercedes, volvo, nissan, and all 3 of the domestics.

  • bnice1984 Nov 13, 2008

    smalldogsrule: you're crazy about the mark-up on vehicles. I worked for a Toyota dealership and the commission that I would take home on some sales was almost 3K on each vehicle. imagine what THE DEALERSHIP made

    LaLa-Land: darn right we would.

  • LaLa-Land Nov 13, 2008

    We are buying an F150 this weekend. Hubby loves those Ford trucks but were always out of our budget. Not now. Looking to get a really good deal or we'll go to the Nissan dealer down the street.

    As far as bailout, the consumer should receive the bailout money. We'd get the economy moving in no time at all.

  • Deb1003 Nov 13, 2008

    The auto unions have killed the business. When other companies are cutting costs, they continue to demand more. Unions have out-lived their effectiveness.

  • michelle.s Nov 13, 2008

    Dealerships only shaft you if you have poor credit or you don't know what you are doing. As far as dealerships not coming off the price of hybrid cars..they don't have to. It's called supply and demand. They are selling before they even hit the lots. And most of htese small hybrid cars have very little markup. For example, the Honda Fit only has 700 markup from invoice to sticker.

  • superman Nov 13, 2008

    The big bubble has burst. People buying homes and cars they couldnt afford and banks extending credit for crazy people who did not have the ability to pay. Consumers have brought this on themselves! Throwing money isnt going to help. Thousands of people just cannot afford the expensive homes and the expensive cars. The only way they will survive is to sell to consumers who have the ability to pay and to sell at a price they can afford. Cars which sell for 50,000 isnt going to fly. Tax Man hit it squarely on the head.

  • RonnieR Nov 13, 2008

    All three are big defense contractors, so with the GWOT and all,
    it would not be good to loose them.

  • Gatsby Nov 13, 2008

    ------------------------------------------------------------
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    A recession is when your neighbor losses his job, a depression is when you lose your job. I hope all you people hoping for the big three to fail realize that this would be the tipping point for our already fragile economy. Be careful what you wish for!
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    We are not scared...Times change so its either adapt or go under.

    The problem with car dealers is they are spoiled from decades on the gravy train...the biscuit wheels have fell off so get use to the new reality.

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