Automotive News reports that ... GMAC has one set of rules for Chrysler dealers, another for GM’s. “Chrysler dealers must make monthly payments totaling 10 percent of the original outstanding balance on new vehicles that have been sitting on the dealership lot at least a year. [Plus a $25 "surcharge" per year-or-older car.] By contrast, GM dealers make monthly payments totaling 10 percent of the original balance on new vehicles that have sat on dealership lots at least 18 months. [Plus a $15 "surcharge" per year-or-older car.] Hey! Not fair! “And GMAC will finance just 80 percent of the purchase price when Chrysler dealers buy used vehicles at auction, compared with 100 percent for GM dealers.” Double not fair! GMAC’s reasoning (or lack thereof) after the jump.
Extra credit: in the long run, will more Chrysler or GM dealers survive?
Looking solely at this information and attempting to disregard everything else, more Chrysler dealers will survive. Here's hoping I don't retroactively lose my A- in MGMT722.
ReplyDeleteThe more rigid repayment and used car financing rules in place for Chrysler from GMAC are a proxy for discipline, and will force Chrysler dealers to move inventory faster (even at low or negative GP) while allowing GM to hold onto the car longer in the hope of maximizing GP. GM dealers will be encouraged to carry more used car inventory with 100% financing than will Chrysler with 80% financing and will likely overbuy.
Therefore fewer Chrysler dealers financed by GMAC will fail, since they have two incentives to maintain lower inventory and low inventory is a marker for success.
sam, your grade is in peril.
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