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A tough business gets tougher

Tight credit and reluctant buyers pinch used-car dealers, and some fail

It’s a difficult winter for used-car dealers.

Banks, credit unions and finance companies are scrutinizing dealers’ balance sheets before offering additional credit to owners trying to buy more cars or trucks for their lots. And buyers are holding tight to their pocketbooks, hoping the stock market improves or the national economy gains steam before they spend cash on used vehicles, some dealers say.

“This is a tough business anytime,” said Jennifer Johnson, who operates Jennifer’s Auto Sales and Service in Spokane Valley. “If you throw in the gas price increases we had earlier and now the poor economy, it’s a tough time.”

At least nine of Spokane County’s approximately 225 used-car dealers shut down in recent weeks, according to data from the Spokane dealer license office maintained by Washington’s Department of Motor Vehicles. At least two of those dealerships closed for non-financial reasons.

Closures typically happen in the slower winter period. But “even so, that’s an unusually high number for this time of year,” said Lewis Dennie, the Spokane DMV dealer licensing office manager.

Depending on the type of dealership, the past four months have been horrible or just so-so, dealers across Spokane County say. Many agree this downturn is more severe than others they’ve weathered in the past 20 years.

Johnson said her sales are fair, though slightly below normal. Others, such as John Anzivino, who operates Globe Motors in Spokane Valley, have had a hard time.

His lot, which sells vehicles in the $4,000 to $6,000 range, has had a tough past three months, he said.

Anzivino said he knows many area dealers in the same boat. “We’re not really scared, but we’re in dire straits,” he said.

The nine dealerships that closed, according to DMV records, are: Heads Up Auto Sales, B&B Automotive Group, Esco & Esco Car and Truck Sales, Town and Country Auto, Cherry Lane Auto, Stewart Motors, Strudevant Auto Sales, Amos and Andy Cars, and Spokane Auto Sales.

Esco & Esco closed down after owner John Esco decided to retire. Spokane Auto Sales shut down when the state pulled its dealer license over a number of title frauds; owner Theodore Saroff eventually pleaded guilty to several felonies in Spokane County Superior Court.

Dennie said Cherry Lane and Town and Country had become entangled in title disputes, were already facing financial problems and might have shut down anyway.

Greg Mahugh, general manager for Dealers Auto Auction Northwest, a used-car auction business on the West Plains, said his company’s sales are down 30 percent from a year ago. DAA Northwest runs auctions where dealers find cars to buy and sell.

Mahugh said DAA has seen more repossessed cars going through its auction lanes. Those are vehicles repossessed by banks or credit unions after customers fail to pay their loans.

Area dealers say the real problem is no one is buying new cars and trading in their vehicles. Without that supply, used inventory is shrinking.

With economic conditions so murky, “the shoppers are being more targeted in what they buy,” Mahugh said.

John Burke, co-owner of Three Fat Guys Auto and Truck Sales, said careful buying is the best practice now for used-vehicle dealers.

“We’re focusing on our customers and we’re certainly not selling any vehicles at $30,000. Most of what we’re carrying is under $15,000,” Burke said.

While government officials put together a $700 billion fund to help major banks survive the current economic crisis, dealers said they’re not seeing any benefit.

Banks and financing entities are exercising care before lending more money to car dealerships, said Jim Burke, a vice president with Spokane-based Riverbank (and not related to John Burke at Three Fat Guys).

“This is a hard time, but used-car dealers have already learned to ride out the down cycle,” Jim Burke said.

Donald Hess said his Town & Country dealership had to finally close last month after 18 years in business.

“Basically, it comes down to the economy,” said Hess, 80. “This is the worst time since the Great Depression.”

Another dealer, Bill Head, said he would still be in business if it weren’t for his bank’s tougher stance on credit. Head ran Heads Up Auto for eight years and closed its doors recently when he could not obtain a credit extension, he said.

A dealer still in business, Dave Belcourt at BJ Motors, said the banks are acting reasonably, considering the overall health of the economy.

“The lenders are scared. They look at the big (car manufacturing) companies in trouble and they decide they want to get out before the problems get to us (used-car dealers),” Belcourt said.

Reach staff writer Tom Sowa at toms@spokesman.com or by calling (509) 459-5492.


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