During the past 4 months, Lenders have tightened so much it Cut off Circulation to the Auto Dealers!
Dealer after dealer are closing their doors all across the country because sales have Dropped off a Cliff. Many remaining are in Financial trouble. Lenders have started experiencing a ton of losses causing them to stop lending. When we asked some dealers out there, they said that in this environment they are unable to get customers approved. “The same customer we had one month ago who was approved to buy a car is no longer qualified” said Chad Atkins owner of a large used auto dealership. He said “The lenders have tightened so bad we can’t sell cars!” “Our Margins have been decreasing all summer just to push sales out the door!”
This same message is ringing all across the country, “Last July we sold 64 cars, this July we sold 15 cars!” Subprime lenders are seeing a large rise in defaults currently, so they tighten the criteria to get approved harder and harder for the consumer. We have also seen many lenders quietly go bankrupt over the past couple months. The default rate has risen and sales have slowed which is a perfect set up for a huge correction in the credit markets.
In the coming months we will see many bankruptcies of Dealers and Lenders, and when the dust settles there is going to be a huge glut of inventory pushing prices down even farther. Add this pain with the fact that Millions of vehicles are coming off least and entering into the marketplace we have a long tough road ahead.