auto dealers

There are local car dealers upset about a dealer from Dunkirk setting up a temporary sales lot in Batavia this weekend, not because they fear the competition, but because the Dunkirk dealer is taking advantage of a loophole in state law to unfairly compete with their established businesses.

The law isn't just about protecting existing dealers, they say, it's also meant to protect consumers from fly-by-night used car salesmen who don't stick around to service what they sell.

"They move into a small market where they can clobber people over the head and then they leave," said Steve Castilone, co-owner of Castilone Chrysler Dodge Jeep Ram on West Main Street, Batavia. "That’s what they do. They ram them into a car and then they leave."

Just a few years ago, tent-sale dealers would come to town with their temporary lots, blanket the community with mailers, make a few sales and leave, but the law was changed to require a fixed and physical location before the dealer could receive a license. The Dunkirk dealer, Larry Spacc, has leased office space at 4152 W. Main Street Road, in the Valu Plaza.

Castilone thinks the operation is a sham. He's complained to the Niagara Frontier Automobile Dealers Association, supplying a video taken shortly after Spacc's last sale five months ago. It shows a lot once filled with used cars, by then filled with only potholes, and shots through the windows of Spacc's strip mall office space filled with nothing but promotional posters on the wall and a lone motorcycle. There wasn't a single desk or phone line anywhere in sight.

Greg Strauss, Castilone's business partner, calls these operations, "ghost dealers." He'd like to see them shut down.

When The Batavian attempted to contact the local dealership Tuesday afternoon for comment, a man named Nick answered the phone. We identified ourselves and said we were writing a story about the dealership. There was muffled talk over the earpiece and then Nick came back on the line and said his two managers had just left to get a bite to eat and one of them would return the reporter's call when they returned. No call was returned.

Pending legislation wouldn't close up such temporary dealerships completely, but it would make it harder for them to operate. It would require temporary lots to be set up only within 20 miles of the main dealership. In Spacc's case, Dunkirk is 87 miles from Batavia.

"We do these sales," said Castilone pointing to Spacc's latest mailer, "but I’m not trying to whack you over the head. I’m not trying to sell you a bill of goods. I’m trying to sell you a car. It costs us millions of dollars to be here every year, millions in overhead, and then you have some fly-by-night come in with an $800 storefront and sells you a car and you buy because you think it’s cheaper. It’s not cheaper. It’s more money and the interest rate is going to be higher. I wouldn’t mind if they were doing this sale and they were still down at the end of the street next week."

Guy Pellegrino, Pellegrino Auto Sales of Batavia, shares the concerns of Castillone and Strauss. He's put a lot of money into his business, pays property taxes, employs a local staff and is concerned that a "fly-by-night" operation isn't there to provide support after the sale.

"Competition is a good thing and we all get along well (in town)," Pellegrino said. "We all survive together. But when somebody comes in and sets up a tent, tries to push cars, I don’t agree with that. I don’t like it and I don’t agree with it."

Pellegrino employs 12 people, all local residents, and he recently completed a $300,000 expansion of his facility. That's an investment Spacc hasn't made in our community, he said, nor is Spacc out donating to local charities, sponsoring youth sport teams or showing up at community events.

"We’re here making an investment in the community and doing the best we can for our people and they’re going to sell you an overpriced car with all the gimmicks, and you will likely have issues and where are you going to go?" Pellegrino said. "There’s nothing there.” 

The sales people at these temporary lots are rarely local residents. The temporary lots most often hire experienced used car sales reps from all over the country, people with experience in the hard sell, both Pellegrino and Castilone noted.

The flier you get in the mail may say "sale," and proclaim limited availability, but don't be fooled, the local dealers say, the temporary dealer is out to maximize profits. Putting the right deal together for the customer is the furthest thing from the sales rep's mind.

“You spend all that money and do you really want to deal with a guy who is going to be gone? Here today, gone tomorrow?" Castilone said. "But not everyone understands that when they get one of these fliers in the mail.”

If you walk onto the lot, Pellegrino said, expect the hard sell. Yeah, the local dealers, like any small business, are out to make a buck, but Pellegrino said that at the end of the day, he knows if he sells you a car, he might see you at the next community event he attends. He wants to be able to look you in the eye and be proud of the business he conducted with you.

"(The tent sale) is a circus show," Pellegrino said. "They take the slickest, sharpest sales people and they’re going to make the most money they can on you and they will never see you again and you’ll never see them again. For us, we’re here, we’re in your community, we’re at all of your community events, we sponsor you and support you. Support us and forget the circus show, because that’s all this is is a circus show. "

Castilone employs more than 35 people and Castilone and Strauss have invested more than $2.5 million in remodeling and expanding their business, with another expansion just starting that will raise the total investment to more than $3 million. They pay local taxes on all that property.

Asked about the support Castilone provides to local charity, Steve said they don't normally seek publicity for their contributions, but they support local youth sports teams, sponsor four local charity golf tournaments and recently made a $5,000 contribution to the YMCA for the Y's youth camp. That donation will probably send 20 kids to camp this summer, Strauss said.

"When we did it, my sales manager said we should call the media, get some publicity for it," Castilone said. "I told him, 'no, we know we did it, that's all we need.' We didn't do it for the publicity. We did it because we care about our community."

Yes, Spacc is a fellow auto dealer and yes, Castilone said, his quotes in the media about his practices might upset him, but he said he wasn't worried about that.

“I want him to know that he’s in my backyard and this is our area, so go to Dunkirk and sell your cars to your own community, or open up a legitimate business and stay open 365 days a year where people can call you and come back to you again, and open a shop so you can fix these people’s cars," Castilone said. "Then you know what, it’s all fair competition.” 

Over the next few days, we will take a closer look at the credit market here in Genesee County. Much has been made in the mainstream national media about the "credit freeze" now faced from businesses across the board. Banks aren't lending to other banks, which, in turn, aren't lending to the clients, be they consumers or producers. Everyone, we're told, is feeling the pinch, and lending is rare, if and when it's happening at all. We hope to find out how true that is here in our own region by chatting with those in the know, the sources and go-betweens of those supposedly hard-to-get loans: the auto dealers, the bankers, real estate agents and restaurateurs.

In today's contribution, we will hear from a pair of auto dealers on the availability—and unavailability—of loans in the county...

Harry Zigrossi owns the Zigrossi auto dealership on East Main Street in Batavia. We spoke with him by phone last week.

"It was a very weak November," he said. "There has been a dramatic slowdown in the percentage of approvals... Banks are very tight. Less people are seeking out vehicles."

Zigrossi attributes the slowdown to two factors: Doubt that a consumer would even be approved for a loan, and, if they are approved, worry that the interest rate will be high, if not excessive.

Yes, there are alternatives to financing through the dealership, Zigrossi admits. There are credit unions, local banks. "We have lending institutions," he said. "There are places to apply, but the likelihood of approvals at desirable rates has diminished."

As an example of the tightening credit lines, Zigrossi cites GMAC Financial Services, the financing arm of the GMC dealers. Zigrossi deals in Pontiac, Buick and GMC autos, and acquires much of the funding for his customers through GMAC.

"Their minimum score for approval is 700," he said. "That's pretty selective in my opinion. A couple months ago, approval was based on credit worthiness. There was no set number in the past. ... GMAC's position is: 'We lost several hundred million (dollars) last year. We have very limited funds.'"

You could call it the trickle down economics of the credit crisis. GMAC has a tough time getting its loans—"their ability to borrow is limited," as Zigrossi puts it—so anyone seeking loans from GMAC will have a tough time, as well. It's simple math: you've got so many people seeking loans via so many lines of credit. If the lines of credit are diminished, as Zigrossi indicates, but the same number of people are seeking loans... there's just not enough to go around.

Ken Barrett cites such logic as a reason why some folks may not even bother applying for a loan. Barrett owns Ken Barrett Chevrolet-Cadillac on West Main Street in Batavia.

"We haven't, at this point, had much difficulty, if any, arranging financing for our customers," said Barrett by phone last week. "What I can't really qualify is if there are a cadre of customers that are self-excluding themselves. In other words, based on what they hear in the news media, they're not even going through the process. But I don't have any empirical evidence to say if that's the case. It's more of a gut feel."

In a recent article that ran in the Daily News on the possibility of an auto industry bailout, Barrett was quoted: "I don't think business conditions in Genesee County reflect what we're hearing in the national media. Of all the business people I've talked to, not one has said their business is really bad."

Barrett said that the people of Western New York are the reason business is doing well, as he sees it. We've got smart, responsible consumers.

"In Genesee County, people pay their bills," he said. "Maybe because of the way we're brought up, we dont live excessively beyond our means as other parts of the country may be experiencing. As a community, we pay our bills."

But consumers are only one half of the equation in Barret's estimate. He's also quick to talk up his business practices as one good reason why his dealership is not "having much difficulty" in the midst of this recession.

"We've never aggresively targeted sub-prime activities," said Barrett. "Some dealers really developed that business. Now they're seeing a precipitous slide in their business."

However optimistic a note Barrett might ring for the local auto dealers, the situation doesn't look so rosy elsewhere in the country. From a New York Times article, by Clifford Krauss:

In October alone, 20,000 employees of auto dealerships lost their jobs nationwide, more than half of those who were newly unemployed in the retail trade, according to the Labor Department... And now the credit market—the lifeblood of any car dealership—is frozen.

More than merely a question of credit, however, Krauss hones in on the cultural value of the "small town" dealership, and the further consequences hinted at by the loss of jobs and the tightening of credit. Barrett is right to tout best business practices as a key to remaining financially solvent. But it's not all business...

The auto dealers are not just businesses, of course. Most of them are deeply rooted in their communities, and each is a slice of Americana—their big flags flying, their radio advertisements compelling attention and their Little League sponsorships and other charity helping to improve the lives of local people.

What about you? Have you tried to purchase a car recently and been declined? Approved? Has the ostensible credit freeze iced your chances at getting a loan? How would you feel about the loss of a longtime local dealership: Just another business that couldn't make it? Or much more than that?

After all, no one ever sings: "Drove a Hyundai to the levy..."