Car dealerships to go belly up faster

U.S. new-vehicle dealership closures may rise as much as 40 percent this year as slumping sales and surging borrowing costs cut into profits, the National Automobile Dealers Association said today.

As many as 600 may shut down or consolidate with other dealers, equal to about 3 percent of the total, said Paul Taylor, an economist at the McLean, Virginia-based group. That compares with 430 a year ago.

Dealers that sell cars from General Motors Corp., Ford Motor Co. and Chrysler LLC probably will account for the bulk of the closings, Taylor said. Americans have tightened spending as gasoline prices hover at record levels. At the same time, dealers are paying higher interest rates to get cars on their lots, shrinking profit margins.

“There are more dealerships out there than there are cars to sell,'' Taylor said in a telephone interview.