US Auto Abruptly Shuts Down Its Dealerships

US Auto Sales, a used car dealer that markets to subprime borrowers, has “temporarily” and suddenly shuttered a majority of its operations, according to CarDealershipGuy on Twitter on Monday evening. This was confirmed by a note on the company’s website.

CarDealershipGuy shared a screenshot of what is reported to be an email from Bob Anderson, the chief executive of the company, who said that the company will, effective immediately, close all of its dealership locations, paused all its retail operations, including BDC, underwriting and reconditioning for 48 hours.

Anderson instructed employees working in the areas that will shuttered to finish what they’re doing, clock out, and leave the facility. The CEO also told the employees that the company is working with internal and external stakeholders to “arrive at a solution that allows us to re-open our dealership locations.”

The letter also said that the company’s loan servicing operations will remain open, and its managers will continue to report to work, while its corporate staff will still be operating at a limited capacity.

US Auto, which has 39 dealerships across the southeastern US, isn’t the first sizable car dealer to abruptly close its doors. In February, the Memphis, Tennessee-based American Car Center fired all 288 of its headquarter-based employees and closed its offices and 40 dealerships across ten US states.

The closures reflect the diminishing affordability of used cars — both for dealers and buyers. As the Fed continues to hike interest rates and push the cost of borrowing. CarSalesGuy points out that used car dealers like US Auto are “struggling to access inventory that books out well enough to make profit AND get deals bought without INSANE down payments.”

Loan delinquencies for subprime borrowers continue to go up. Subprime loans — just like in the 2008 crisis — are loans given to borrowers that generally have low credit ratings or those who are likely to default on a loan. These loans have higher interest rates than the prime rate.

In today’s economic climate, it’s not surprising to see low-income households fall behind on their bills. Data from S&P Global as reported by Axios show that the delinquency rate for payments that are at least 60 days late went up to 6.05% in December, higher than it was during the 2008 recession.

Via Axios

Information for this story was found via Twitter, Axios, and the sources and companies mentioned. The author has no securities or affiliations related to the organizations discussed. Not a recommendation to buy or sell. Always do additional research and consult a professional before purchasing a security. The author holds no licenses.

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