how can the car company's close down dealership that sell the cars?

Chris Coggins: I thought the dealers paid for the cars and then sell them to the public with there own monies

Abel Adger: Assuming you are talking about GM & Chrysler. First of all the only dealers that GM is closing are under performing dealerships. The locations that aren't selling enough cars to validate staying in business. They are also closing dealerships who sell cars that they will no longer be manufacturing. Saturn, Pontiac, Hummer and SAAB dealerships will be closing because GM will no longer own these brands. They may end up selling these properties to whoever buys these brands but if they don't they will close them down. In Chrysler's case they are only closing stores that are not selling enough cars to warrant keeping them in business. It is no longer feasible to subsidize these locations if they aren't selling enough cars....Show more

Ha Wolski: True, the issue is GM and Chrysler are not renewing these dealers franchise agreements in October 2! 010.

Madlyn Fallis: You are correct, the dealers are independent businesses. However, they are franchisees of their respective manufacturers, and the manufacturers can terminate the franchise agreements. In other words, GM and Chrysler will take away the dealers authority to sell their products. With no manufacturer behind them, most of the dealerships will close.

Tereasa Sorensen: yes, dealers pay for the cars then sell them to the public. WHen you hear about a manufacturer closing a dealership, thats not entirely the case.A dealership has to buy a franchise of Chevrolet, Chrysler, Jeep, etc. The manufacturers are 'pulling the franchise' - meaning they will no longer make new cars available to those stores. So, when Bob Smith Chrysler Jeep can no longer BUY Chryslers and Jeeps, they are put into a position of having to close, or re-brand the store (convert to another line of cars).Think of it like this. If there is a McDonalds that is just not up to compan! y standards, then McDonalds can tell the restaurant owner "You! can't be a McDonalds any more" - they stop sending them cups, burgers, etc. That restaurant owner can convert the place to a jiffy lube or a taco hut - its his building. He just cannot be a McDonalds any more....Show more

Octavio Roylance: GM and Chrysler are closing dealerships that aren't selling enough cars to make them viable. GM is also shutting down dealerships where there are too many in a concentrated area. For instance, if in a 10 mile diameter, if there are 3 Chevy dealers, that's 2 too many. Those dealers cannibalize each other for sales. Having just 1 dealer, the best performing one, serve "the point" makes the best business sense. GM is also shutting down dealers that do not meet their standards for customer service. They send questionnaires out to people who have recently bought a new car, or had their car serviced, at their network of dealerships. If they get too many "not satisfied" responses from the customers, GM will not renew that dealer's franc! hise agreement. And in the situation is dire, they can close it down immediately.Regarding new car inventory, all dealers get their cars and trucks on credit from the manufacturer. Nobody buys them outright. The captive lender of the manufacturer, such as GMAC is to GM, will then charge each dealer "flooring" on the new cars until they are sold. Once the sale is completed, the dealer must pay back the manufacturer for that new car. (Flooring is very similar to interest)...Show more