According to the October newsletter from the Bandon, Oregon-based market research firm, California, Florida, Michigan and New York are among the states most affected by dealer closings.

Dealer Struggles Continue

Here at Auto Credit Express, we are well aware of the market challenges facing our dealers, as everyone in the automobile business is facing similar challenges.

After studying the information contained in data from automakers, franchised dealer groups and financial sources, CNW Research estimates between 1,000 and 2,500 franchised dealerships are on the brink of closing. Independent dealers are no better off.

"The wide variance is traceable directly to the insurance and capital markets. If the bailout funds are put back into the market quickly rather than being hoarded by banks, fewer dealerships will close," wrote CNW Research in its October newsletter.

"The automakers, especially Detroit, have long bemoaned the inability to shed dealerships under franchise laws. But those same laws don't require dealerships that close of their own volition to be replaced," CNW said. "However, the benefit for the Detroit Three is the opportunity to watch their dealer body shrink, and leave behind the strong dealerships that will easily fill any sales gaps left by closed points."

Independents hardest hit

According to the article, in September, 970 independent dealerships either closed or had sales volumes so low they were close to shutting down. "The credit crunch, destructively low consumer confidence and shrinking home-equity lines of credit can all take blame for the blood bath," CNW said.

In terms of states, California led the nation with 250 independent dealers leaving the market. Florida, Michigan and New York State followed California as all three lost over 75 independents. According to CNW, 2008 year-to-date independent dealer closings of 2,065 have already eclipsed last year’s total of 1,530.

According to CNW, the reason independents are struggling more than franchised dealers is their traditional difficulty in securing lending sources that has been exacerbated by the current financial crisis: "While franchised dealerships' used-car operations are likely to be down nearly as much, they are somewhat better prepared for such slow downs and continue to have financial institutions willing to carry used-auto paper, something independents have been struggling with for most of 2008.”