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Published: Thursday, 2/12/2009

Independent car dealers navigate bumpy market

BY LARRY P. VELLEQUETTE
BLADE BUSINESS WRITER
Jan Davis, sales manager at Nice Car Co. in Ottawa Lake, Mich., said used car sales are stronger than the new car market. Jan Davis, sales manager at Nice Car Co. in Ottawa Lake, Mich., said used car sales are stronger than the new car market.
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They swim in waters below the surface as the auto industry roils above them like a pounding storm at sea.

Independent auto dealers have been around almost as long as their big glitzy new-car cousins, tucked on the corners of the automotive world and making a living with a business model far different from the one employed by dealerships tied directly to major automakers.

While franchise dealerships struggle with plummeting new car sales, a vise-like credit market, and the nagging concern that the automaker they've tied their future to may go bankrupt, the mom-and-pop corner lot has its own struggles.

"Somebody's got to buy them new, or I can't have them used," said Jan Davis, sales manager of the Nice Car Co. in Ottawa Lake, an independent used car company that specializes in low-mileage, one-owner vehicles it sells from its showroom.

"It's becoming more and more challenging," Ms. Davis said, "because the used market is stronger than the new car market right now."

There are about 5,550 independent auto dealers in Ohio with licenses to sell used cars, out of about 13,550 businesses licensed to sell motor vehicles of all types, including motorcy-cles and recreational vehicles, according to the Ohio Bureau of Motor Vehicles.

Every year, about 800 independent auto dealers go out of business, and about the same number of new licenses are issued, according to Jim Mitchell, executive director of the Ohio Independent Auto Dealers Association.

"It's a revolving door," he said.

Mr. Mitchell, who's been in the auto business for 40 years, said the current climate "is certainly the most challenging of times that I have lived through."

He said tough credit conditions, declining inventory, and greater competition from new car dealerships for used car sales is making it tough for some of his members.

"The lenders, I don't know what they're thinking anymore," he said. "People that they used to finance with good credit and a good credit score, they're declining today."

Mr. Mitchell's association is convening a special summit March 2 in Columbus to hammer out a new working arrangement between lenders and auto dealers and get credit moving again, he said.

Not every independent auto dealer is struggling, however. So-called "buy-here, pay-here" lots, which specialize in marketing low-cost vehicles to buyers who are either financially struggling or who are too young to be able to qualify for credit, are booming.

"I don't know whether it's the economy or whether it's just that [our business is growing], but we've been very busy," said Mike Tawil, one of two managers at Woodville Auto Finance across from the Woodville Mall in Northwood.

With about 300 vehicles on his lot, Mr. Tawil advertises a "no credit check" business where anyone who walks in with a down payment can drive away for $200 a month "until the car is paid off."

Customers must make their payments in cash and if they fall behind, their car is repossessed.

Mr. Tawil said he sold 70 cars last week and his phone never seems to stop ringing.

"February and March are always busy," because of customers getting income tax refund checks, he explained.

But it's not all credit that's causing the problems.

Many used car dealers are having trouble finding good used cars to sell as automakers cut production and finance companies sharply curtail leasing, all of which limits the pool of available used vehicles.

"Cars are harder to get," said Jim Grodi, a veteran of the local used car market who has sold cars or managed lots for almost two decades.

The volatility of the used car wholesale market has created problems for the retail dealers.

Wholesale car prices fell 5.2 percent in December from a year earlier, but increased 2.7 percent from November, according to ADESA Analytical Services, of Carmel, Ind.

Used wholesale truck and SUV prices, meanwhile, dropped 10.1 percent in December from the same month in 2007, but shot up 4.1 percent from their levels in November.

"There's no question that this is not the greatest year for any auto dealer," explained J.D. Wilson, chief operating officer of the National Independent Automobile Dealers Association, based in Arlington, Tex.

"Anecdotally, we're pretty much aware that our guys are having an off year, but it's not a suicidal year," he said.

Michael Stengle and his brother, Mark, are the current owners of Stengle Auto Sales, on Conant Street in Maumee, a business established by their father in 1957.

"Business isn't what it was just a couple of years ago," Michael Stengle said. "It's down about 20 percent from where we were."

Yet the two brothers and the small family lot they bought from their father 17 years ago are able to absorb the hit because of what they said is their "little secret: We just do everything ourselves" - everything from cleaning the cars to selling them to making sure people qualify for a loan to buy them.

The stability of a small, established family business also can keep customers like James Sattler coming back.

Mr. Sattler recently bought a used Pontiac Grand Am for his grandson from Mr. Stengle in part, he said, because of the intimacy of the experience.

"I know that they've been in business a long time, and I knew my friends had been happy with the [vehicles] they bought there. That's why I went," Mr. Sattler said.

Contact Larry P. Vellequette at:

lvellequette@theblade.com

or 419-724-6091.



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