Don't Rap Dealers update from July 2009

A recent story in one of the consumer magazines asked whether the industry still needs dealers. It argued auto makers could sell cars just fine using the Internet. Haven't we been down this path before?

Prevalent throughout the article was the premise that dealers are why cars aren't selling. Specifically, the reason for the decline in sales is because customers are frustrated with the car-buying process.

It's been a common theme recently. Sales are down so it must mean dealers are bad. Auto makers also have fed that line of thinking by eliminating “poor performing” dealers while implying they need to fix their retail networks.

Even vendors and consultants who sell to dealers are getting caught up in the hype of “blame the dealer.” Just visit one of the automotive conferences and you'll hear how dealers need to fix their businesses.

The dealer is why we're only going to hit 10 million sales this year? Nothing could be further from the truth. The banks are at fault, not the dealer. The reason cars aren't selling is because of the continuing unavailability of credit. The industry was fine until the credit markets collapsed last year.

Dealers have to work harder to get deals financed. Banks say they have loosened the tough credit guidelines. That may be true, but they still are financing far fewer non-and subprime deals. Add to that, the average credit score on new-vehicle purchases continues to climb, according to Experian Automotive.

Dealers are keeping the industry afloat but it's going to take the banks to bring to the industry back to levels much less painful then they are today. I'm not saying the banks are evil. The fact is, they are between the proverbial rock and a hard place. They got hammered for making bad loans when lending money to people who were high credit risks. And now, we're hammering them for not continuing that practice.

However, the banks need to loosen up a bit, dealers tell me. Credit unions are trying to fill the gap, but there is only so much they can do because their portfolios and resources are far more limited than what large banks have.

Are there areas in which dealers can improve? Absolutely. The future represents a great opportunity for the 18,000 dealers that will still be in business next year.

Now is the time to “seize the moment,” to get the right staff and the right processes in place for when traffic returns. I have conversations daily with dealers who are doing just that.

In the next couple of weeks, the Cash-for-Clunkers program will be in full force. It's going to drive a lot of traffic to dealerships who already are marketing themselves as Cash for Clunkers businesses.

If you're not already getting your dealership ready — marketing, sales people, service advisors — get started today, otherwise you risk being marginalized in your market.

Dealers already are ramping up designing marketing and incentive programs to capitalize on the program the next few months. Dealers are going to be the ones who make the program work.

So hang on. The rest of the year could be exciting.