Banks' Auto Lending Pullback Shakes Dealerships

In recent years, banks have been major players in the auto industry, providing loans to car dealerships and consumers to finance the purchase of new and used vehicles. However, the threat of a looming recession has caused banks to pull back from the auto industry, which is now causing havoc across the sector and sending many small mom-and-pop dealerships into a tailspin.

Traditionally, it has been the banks that own the cars on dealership lots, but with financiers now pulling out, dealerships are being forced to put up the cash themselves. This is especially challenging for small dealerships, which are finding it difficult to compete with larger dealerships and online retailers that have more resources to weather the economic storm.

The pullback in lending by banks has left many auto dealerships scrambling for funding to purchase inventory, and some have already been forced to close their doors. The situation is particularly dire for dealerships that specialize in rebuilt title cars. These cars have been salvaged or rebuilt after an accident, and they are often sold at a discount compared to new or used vehicles. However, because these cars are considered a higher risk, banks are now less willing to lend money to dealerships that specialize in rebuilt title cars, further exacerbating the crisis.

For example, Jesse Torres, the manager at Butera Motors in Elgin, Illinois, said that dealerships on the West Coast and Nevada are particularly having a hard time with the credit crunch right now. He added that smaller dealerships, like his own, are planning to be as strategic as possible during this time to stay afloat.

Car experts suggest that it is still too early to determine how these bank pullouts will affect car prices in the long run. However, they advise consumers to shop at dealerships with large inventories and wait until the end of the month to make a purchase to get the most bang for their buck.

In summary, the pullback in lending by banks is hurting the auto industry, especially small mom-and-pop dealerships and those specializing in rebuilt title cars. It remains to be seen how the situation will evolve, but dealerships that are able to weather the storm may be better positioned to succeed in the long run.

Source: "Banks pull back on auto lending, threatening dealerships"
by Kelsey Kernstine, originally published on newsnationnow.com on Apr 25, 2023 / 11:57 AM CDT.