An expert has spoken about the effects of the credit crunch on the car dealership industry and warned that maintaining a healthy credit rating is the key to dealers retaining valued business relationships.
Kirk Fletcher, managing director of Experian’s automotive division, is the man giving the advice – he also thinks that keeping a low risk profile can help used car dealers hold on to their lines of credit.
Experian, the global information services company, has just completed research which showed that the number of automotive companies going bust rose by 30.9 per cent during the second quarter of 2008, compared to the second quarter of 2007.
A total of 72 automotive businesses went under during April, May and June, adding up to the biggest increase in quarter two automotive failures since 2001.
Mr Fletcher said: "With fears of a recession on its way, most companies are now monitoring the profiles of the businesses they are dealing with and dealers may find that they are under more scrutiny than before."
Highlighting his belief that dealers need to continue to keep an eye on their financial and commercial profile, he added: "In the automotive industry, stock value is high and traditional lines of credit are vital."
Recent figures released by leading vehicle auction company British Car Auctions (BCA) has shown that the average used car value fell to £5,332 in the second quarter of 2008 – a fall of £390 compared to the previous quarter.