The ongoing financial insanity has hit home in the car industry, and the worry is that the hits will keep coming. The perspective from inside the Used Car Dealer sector is eye popping with concern. As an industry insider, the author (me) has seen the decline in Used Car spending first hand. I used to go to the two main auto auctions here in the Seattle area every week and purchase about 60 used cars per month, between what I sold here in Seattle and what I exported to Surrey BC, a Southern suburb of Vancouver proper.

The interesting facts in and around my personal experience go back to before August, 2008. These experiences are relegated geographically to the Pacific Northwest, so they can not stand as a harbinger of things to come. The same and worse has already been the case around the country at large, and that should have acted as a warning flag to dealers in the Northwest. Seattle though, has an economy that seems to whether the cyclical financial storms whose visitations come and go upon our systems, and the same has been true of this one so far. Most other States have experienced much worse effects than we have here in Washington State.

During the early part of 2008, my Business Partner had necessity to spend a few months in Arizona on business unrelated to the Auto Industry. He continued to go to a Dealer Auction once per week regardless, simply because it gets in your blood. His reports were sobering. Prices at auction plummeted, dealer attendance fell, and the inventory moved at the auction house fell dramatically on a week to week basis. In a belated ripple, as I spoke with my partner on the phone, I begin to see the same trends, on a comparatively diminished scale, begin to manifest themselves here in Seattle.

At South Seattle Auto Auction in Kent, Washington, anywhere from 1,900 to 2,600 cars were being run in ten lanes back in April – May of 2008. Of these cars, about 48% to 52% were being sold every week. As of August – September, the inventory at the auction had dropped to 1,600 to 1,800 and cars moved reduced to under 35%. That statistical reality alone constitutes a screeching halt in the sector, and that screech has been echoing and reverberating out on the dealers lots with their retail interface. People are just not buying cars.

It makes sense when we consider that big ticket items are absolutely not moving right now, and this phenomenon is global. The construction industry is on its lips. We all know about the housing sector. Should we have expected the auto industry to escape the ravages unnoticed. Of course not, but as us usually the case, a lot of dealers simply stuck their heads in the sand with the hope that the pounding would somehow miss their store. I guess its human nature to hope for the best, as well as to resist change. Many dealers now wish that they had adjusted their business plans in advance to soften the impact when the storm finally hit. They are boarding up their windows now though, and it hurts.

Up in Canada, the dollar was weak against the Loonie (The goofy name the Canadians gave their money). For a while back in early to mid 2007, Canadian dealers were flocking into the States to buy cars that would sell retail for five or ten thousand dollars more in Canada than they would in the US. Canadian retail buyers who lived close to the border would mob UD border area dealers on the weekends and pay cash for US cars. It was a feeding frenzy, and very profitable for industry professionals, both in Canada and in the US.

As the population in Canada is only one tenth the size as the US population, it didn’t take long for the market to flood out up North. A lot of Canadian dealers began to sit behind lots full of American car inventory that was no longer flying off the shelves. By early in 2008, the fun was over and dark clouds of uncertainty had begun to gather on the future’s horizon. The Canadian dealers that I supplied continued to buy volume because of a certain niche that worked for them, but this was an anomaly and it too has evaporated into the smoke. We sent four cars North in September compared to August when sixty went across.

My most active Canadian dealer told me a month ago that he never listens to the news. It just doesn’t interest him and he can do without the negativity that seems to be the expense that comes with gaining a wider perspective. His position on news watching has changed recently. Historically, this dealer, who has been in business at the same location for more than 15 years, has always moved more than 50 cars per month. Usually it has been closer to 70. In the last two months he has seen his sales go down to two or three cars every weekend. He says that now he listens to the news four times per day.

What the future will bring is not visible in the old crystal ball. We are in uncharted waters here, and the economic system has been fundamentally changed. For car dealers right now its hard to find optimism. One thing seems likely however. Those dealers that are able to hang on will be riding higher than ever once the storm blows itself out. They will have fewer competitors to dilute their markets.

Source by Jeff William Rogers