The changing car buying experience
Car dealerships are closing in record numbers. The Wall Street Journal reports that sales of new cars are at a 25-year low, and experts say that 700 new car dealerships could close this year in the United States.
While this might not seem like a big deal since there are so many car dealerships around, consider the fact that 430 already closed last year, and this year's closures will mean the loss of over 37,000 jobs. It may seem like there have been too many dealerships, but they were around because consumers wanted them, and they employ lots of people.
Car makers have no choice but to tighten the reins on their dealers. It costs a lot of money to have a new car sitting on a lot, and auto makers and dealers share those costs. Auto makers typically offer lines of credit to the dealers, but the drying up of the credit market has impacted this.
New car buying will likely be changing for consumers. They may be more likely to search for vehicles online, and then order one from a dealer. Dealers will be decreasing the inventory they have on the lots, in favor of having a few models for buyers to try out, and then ordering the actual vehicle for the customer. Ordering new cars isn't new, it just isn't done all that often. Today's buyers are more likely to purchase a car that is already on the lot.
But it makes sense to have fewer cars on the lots. They take up space and they're expensive to finance. Virtual car showrooms seem to be the perfect answer to save money. And this type of dealership might actually be more convenient for customers.
No more driving from lot to lot, looking for the color and options you want. You'll instead decide what you want, and order the vehicle from the manufacturer. Sure, you won't be able to drive your new car home today. But you'll be able to get exactly what you want while the car makers and dealers create a more financially sound business model for our current economy.
Tracy L. Coenen, CPA, MBA, CFE performs fraud examinations and financial investigations for her company Sequence Inc. Forensic Accounting, and is the author of Essentials of Corporate Fraud.