Detroit (AP) -- The chairwoman of the National Automobile Dealers Association says the credit crunch and economic problems are likely to cause 700 auto dealers to go under this year.
Speaking to the Automotive Press Association in Detroit, Annette Sykora on Tuesday urged fast government action on putting a $700 billion financial industry rescue plan in place.
The Lubbock, Texas-area auto dealer says quick action will thaw frozen credit, restore consumer confidence and help the auto industry.
"This credit crunch is real on Main Street,'' she said. "If the country can break the credit freeze on Wall Street, then we can help provide the economy on Main Street.''
About 94 percent of vehicle buyers in the country finance their purchases, but even those with credit scores in the 700s, previously considered good credit, cannot get financing, Sykora said.
Dealers with good credit also are having trouble getting financing for their inventories, Sykora said.
Auto financing, she said, isn't part of the mortgage default problem that spiraled into the credit crisis on Wall Street, bringing down several banks. Lenders and consumers, she said, knew autos would depreciate in value.
"Mortgages were assumed to be a non-depreciating asset. That's where this all started,'' she said.
There currently are more than 20,000 auto dealers in the country, and even in good times, some of them go out of business. About 430 dealerships closed last year and 295 closed in 2006, according to the NADA.
The estimate of 700 dealers going out of business does not include new dealers that will enter the market.
Sykora, who took her post in February, also said that automakers' finance arms have raised interest rates that they charge dealers for their inventories. As a result, dealers will either have to figure out a way to cut costs or raise prices, she said.
"Once the dealers do what they have to do to cover their expenses, then they know what that number is. It could impact consumers. They don't need that now, either,'' she said.
Industrywide U.S. auto sales last month fell below 1 million for the first time since February 1993, which nearly all automakers said was influenced by tighter credit standards knocking buyers from the market. Others likely stayed away from showrooms because gas remains expensive, or job losses and declining housing values have people curtailing their spending.
The NADA has projected this year's vehicle sales to total about 14.2 million units, down from 16.1 million units last year and 16.5 million in 2006.
Copyright 2008 Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.
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