Chrysler Dealers Bank On Used-Car Sales, Leasing Providers
Chrysler LLC’s product slowdown coupled with its financial arm’s leasing exit is crippling dealers’ sales. Chrysler reported that its August U.S. sales figure of 110,235 units was 34% down from the same period last year. To try to stay afloat, dealers are looking to other lenders for leasing offerings, relying on incentives or banking on used car sales. Others have given up hope, believing Chrysler will continue to tank, bringing them down with it.
“There are huge sales that we’re not having [since Chrysler Financial’s exit from leasing],” said Jack McInerney, finance manager at Oak Park, Mich.-based Northland Chrysler Jeep Dodge, an auto dealership in which leasing accounts for 95% of the business. He is “not optimistic at all” about business getting better but does expect a rise in the number of consumers purchasing used cars.
When Chrysler Financial exited the leasing arena, the Oak Park dealership’s sales suffered, a problem further compounded by the slowdown of Chrysler products. McInerney said the product slowdown “goes downhill with everything else.”
Chrysler is trying to counteract the product slowdown, with executives talking about a 2010 product renaissance that could launch as many as nine new products, according to the Detroit Free Press.
Michael Mack, general sales manager at Jackson, Wyo.-based Wolf’s Jackson Dodge/Chrysler, said that Chrysler has done a terrible job of informing the public about its new products.
“You will see a major increase in product awareness in the next few years,” Mack said. “It is literally mind-blowing what Chrysler has done for our future.”
Chrysler also issued several incentives in September to offset any ill effects from the leasing pullback, including such allures as the “Shop til You Drive Sales Event,” which offers up to 40% off the manufacturer’s suggested retail price on select vehicles, and 0% APR for 72-months on the 2008 Dodge Ram, Dodge Durango, Chrysler Aspen, Jeep Grand Cherokee and Jeep Commander.
The initiatives are not yet showing signs of helping Northland Chrysler Jeep Dodge. “We can only go as far as Chrysler does,” McInerney said. “Whatever rebates they have, we have. It’s just difficult with the market out there.”
Some dealers are turning to additional financial lenders to keep leasing options available, with an aim to make the market less difficult.
Although the majority of South Point Chrysler Dodge’s customers purchase automobiles, the Austin, Texas-based dealership turned to U.S. Bank to be its leasing lender after Chrysler Financial stepped out, said the dealership’s financial manager, Adan Arredondo.
Dan Fetsco, business manager at Rochester Hills Chrysler Jeep, said that it’s important for customers to realize that leasing is still available and that, within the last month, the dealership trended to balloon payments. “We are working with what we can,” Fetsco said. Retail sales have increased at the Michigan-based dealership since Chrysler Financial stepped out of the leasing market.
Sales are not booming at South Point Chrysler Dodge. Arredondo doesn’t expect sales to pick up for at least another six months. In the meantime, Arredondo said, incentives are helping sales. “Without them, half of the deals we do wouldn’t happen,” he said.
Like South Point, Lansing, Kan.-based Speedway Chrysler Dodge Jeep is also betting on incentives to keep sales going. Incentives have “helped us put people into more cars with reduced prices,” said Tim James, the dealership’s financial manager.
Speedway looked to other lenders for leasing options when Chrysler’s financial arm stepped out, but couldn’t find any.
Many finance leasers stepped out of the niche when Chrysler Financial did, James said. As a result, more people are buying used cars. For every new car the dealership sells, it sells three used ones. However, he expects the market to improve.
“Nothing stays the same forever,” he said. “I think we have seen the worst of the worse.”
—Mary Wisniewski
