Why the Bailout Bill is Stalling Car Sales


Congress may seem like a long way from your car dealership, but the two are linked closer now more than ever.

And while the Congressional bailout debate continues, the business of dealing cars, and making car loans, is stuttering and stalling.

Now the Alliance of Automobile manufacturers is urging Congress to pass the $700 billion bill, saying prolonged inaction will further hardship for the automakers industry and consumers on Main Street.

Bad Credit? That Could Be a Big Problem
The number of auto loan applications approved for subprime mortgage holders declined since last year, from one in three (67.01%) to around one in five (22.71%), according to CNW Marketing research of Bandon, Ore. Meanwhile, the average subprime buyer went to around eight banking institutions before being accepted for a loan, almost double from a year ago.

And the criteria for obtaining a loan is a result of the struggle millions of Americans are facing in gaining credit, says Charles Territo, spokesperson for the Alliance of Automobile Manufacturers, headquartered in Washington, D.C.

A struggle to gain credit translates to a decrease in sales. Ford (STOCK QUOTE: F), for example, announced October 1 that total vehicle sales fell 33.8% last month to 116,734 units. Declines took shape as well for Ford’s cross-town rivals, Chrysler and General Motors (STOCK QUOTE: GM), which reported declines of 33% and 16%, respectively. And it’s not limited to the Detroit three. Japanese automakers like Toyota (STOCK QUOTE: TM) reported a sales decline of 32%, and Honda (STOCK QUOTE:HMC), also Japanese, reported a decline of 24%.

Territo says that the plunge in sales is also a result of the credit crisis Americans are facing and he believes the market can only recover with a speedy passage of a financial stabilization package like the proposed bailout bill.

“The industry is pretty much united on this stance,” Territo says.  "If the bill passes, it should be easier to get a loan, and if it fails, we can expect to see more of the same.”

Territo adds, “We’re hopeful that a bailout would stabilize the markets and reopen the lines of credit for consumers. Hopefully it will send a strong signal to banks and other lending institutions that it’s safe to lend money and that money’s available.”

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