I believe that consumer confidence (or lack thereof) has more of a direct impact in low unit sales numbers than anything else. If a customer is worried about their ability to maintain their current employment (potential layoff coming their way?) and not cross thru the dealerships doorway in the first place, their beacon score has nothing to do with it. One thing I'm sure of is that alot of dealers are going to go out of business in the next year from the weak demand, when we see Toyota numbers down over 30% it's pretty bad out there no matter what the beacon scores are that come into the showroom

Dude -- you're one funny-looking dude!

Thanks John Quinn - and this is exactly why I encourage Websense amongst our dealers. HA!

If consumers are told enough times that the sky is falling (they can't get home loans, they can't get auto loans, etc.), they are going to start believing the sky is falling. We are just seeing the manifestation of consumer irrationality.

Great article. I think Mike Jackson is looking for a permanent spot next to Becky Quick on Squawk Box (btw, I love it when he's on there!).

Let's face it: in any shakeout period, the strong get stronger and the weak go away. Fewer car dealers mean more car sales per rooftop. 11 million car sales is still a massive opportunity. Keep the faith!

At our dealership, we're not really seeing credit problems so much as people aren't coming through the doors in the first place. It's possible that many of the people who aren't coming in wouldn't have gotten credit but it's so hard to say given all the other variables. We're just seeing way less traffic. The people who I haven't been able to get approved recently had such bad credit that it wasn't a matter of what the economy was doing. A 500 is a 500.

Sure it's gotten a little bit harder on financing and some of the banks that were buying the sub 600 Beacons have gone away or are not buying that clientele any more, but we are still getting these customers bought, they just qualify for 35% loans instead of the 20% they would have got a year ago.

Given the current climate, this is a really good time to start rebulding relationships with some of the lenders you have let go to the wayside, the banks we considered our go to lenders a year ago are different than the banks we are using today.

I think if a dealer makes the effort to work on building and rebuilding their relationships with their lenders they will not only make it through this slow time, but thrive while their competitors drop around them. A great example of this is Nick's comment treating a 500 as a negative, with a great lender relationship, the right structure, and a little ass kissing, this deal is completely doable. I think dealers that survive this market will be working smarter, with a little more thinking outside the box than they have in the past.

Just imagine what a dealer that gets all these things dialed in and working while it's slow could do once the market rebounds.

I have to throw in my 2 cents on this.

I speak with dealerships everyday and have asked a few the question:

Is it the economy?
Is it the inability to get the consumer financed?

The answer is: No it is not the economy & No it is not that they cannot get them financed.

"The consumer is afraid to spend the money"

The one dealer explained he would see 28 to 32 sets of people come into the dealership on a daily basis. Since last Monday only 5 to 8 sets of people. OUCH!!

But keep in mind! When times are tough the Internet business does increase with more traffic.

"The consumer is afraid to spend the money"

Bingo.

Thanks Nick!

Jon, Can I send my 500's your way?

Thanks Nick!

Everyone will always have their own opinions on the state of the industry...causes of problems, whether problems even exist, etc. I agree that consumer panic is a large part of the problem, if not the biggest part. I still believe there are a lot more signs than that though which point to validity in the crisis claim. Not sure if it's going to be anything long term or not, but I just heard from an inside source that Autotrader.com laid off 100+ outside reps yesterday. I know a lot of people are going to speculate on other (internal) reasons for the layoffs, especially given the small number, but I think the fact that a large auto industry company like Autotrader who has never had layoffs just laid off part of its B2B driving force speaks volumes.

I just recently heard of the autotrader layoff, from what I've heard it was mostly Sales Service Reps (SSR's) throughout the country as well as some reductions in inside sales positions throughout the country also. I spoke w/my Rep last week who expressed his concern in possibly seeing alot of dealer cancellations between now and the end of the year as many dealerships are reducing ad spends across the board.

Not only are the consumers afraid to spend the money, so are the banks. Last week all of the Used car managers in the area that sell GM products had a meeting to announce that GMAC can't get the capital to make their loans. What does this mean for us? A customer must have a 700 to even be considered, and even then they are only financing Black Book values... Are they trying to sell less than they already are? Speak of the devil, I just told my new AutoTrader rep that I couldn't justify $8k a month just to break even...we are probably going to cancel...

I was in the middle of an instore meeting when the owner got that emailed to him regarding the GMAC 700 Beacon store deal last week Tuesday. All of us had the "Deer in the headlights look". But we did all have a great discussion regarding that. Justifying the spending in the dealership from newspaper ( the low ROI advertising ) I am not saying that spending money in the newspaper is bad but as mentioned the ROI is low and the cost is HUGE! Allocating those cost to any dealership online presence will surely pay off. There still are shoppers out there, you may be asking where in the world are they? They are not coming into the dealership! Things have changed the way the consumer is spending their money: The Smart way and its online!

Buyer Confidence and Fear is the problem.

Great article today in the New York Times featuring Valencia Acura an AskPatty.com customer on this topic.

http://www.nytimes.com/2008/10/30/automobiles/autospecial2/30loan.html

Excerpt:

At Valencia Acura in Valencia, Calif., Cheri Fleming, the owner, has witnessed something she has never seen before because of that fear. Customers come in, negotiate a price and even get so far as to allow the dealer to help procure a loan, and then “a lot of times, they just get up and leave.”

“Consumer confidence is crushed,” Ms. Fleming said.

Jody DeVere
CEO/President - Ask Patty, Inc.
www.askpatty.com
www.carblabber.com