Gone In 60 Seconds – When Dealerships Go Bad, What’s Their Lender To Do?

Thousands of car dealerships across the country have closed their doors in the past year as the recession deepens and the very survival of the nation’s automobile industry is in doubt. General Motor’s high-profile bankruptcy will result in the eventual closing of 2,300 dealerships. Chrysler, too, will close nearly 800 dealerships in the wake of its bankruptcy. According to The Wall Street Journal, as of July 1st, 2,483,627 cars had been sold in the United States so far this year, a 35.4 percent decrease from last year at this time. Additionally, sales of lightduty trucks and SUVs have decreased 34.8 percent and 45 percent respectively. While this economic crisis constitutes an enormous challenge for all participants in the automobile industry, from the steel companies that provide the raw material to the dealerships that sell the finished products, this crises also raises a myriad of challenges for the banks and other financial institutions that finance individual dealerships. As the economy struggles and car sales decrease precipitously as a result, these lenders have reason to worry about dealerships selling inventory and pocketing the proceeds, an increasing problem known in the trade as “sales out of trust” or “SOT.” A sale out of… Read full this story

Gone In 60 Seconds – When Dealerships Go Bad, What’s Their Lender To Do? have 294 words, post on www.natlawreview.com at August 24, 2009. This is cached page on Law Breaking News. If you want remove this page, please contact us.