Monday, February 9, 2009

Auto Dealers Get In on Bailout Fever

Auto dealers want a piece of the bailout. And they know they won’t be getting any money from the government, so they’re using the bailout as a marketing gimmick. The Automotive Bailout Auction promoted in some recent direct-mail pieces is just one example of dealers doing what they do anyway but trying to tie it in to the bailout.

It’s a tough time for dealers to decide what levels of inventory to keep. There are two scenarios dealers have to consider right now:

  • The bankruptcy of General Motors and/or Chrysler a few weeks from now could shut down most of the factories across the industry, making it hard to get cars for two or three months. This would suggest keeping a larger inventory.
  • The threat of bankruptcy could scare potential buyers away from dealers, even for makes that aren’t in any financial peril. This would suggest keeping the smallest inventory possible.

Dealers looking at the latter scenario really are desperate to thin out their inventory, but most can’t afford to lose any money in the process. This means the deals they offer can’t be as tempting as the deals they might have had five years ago when they had to make room for new inventory. So their challenge is to persuade buyers that this is the “last chance to get these amazing deals” when the deals aren’t actually so amazing.