Many auto dealers selling new cars have expanded their used-car offerings over the past year, bidding up prices at used-car auctions that then get passed along to consumers.
And the bidding may be about to intensify.
With Chrysler and General Motors last week notifying some individual dealers that they will sever ties, the news will cause some affected dealerships to devote all their efforts to used cars.
"It creates a tight market for used cars at auctions, so auctions have less good inventory, and it's causing the price of used cars to go up," said Joe Bradley, owner of Bradley Motors in Hudson.
New-car sales plunged 27 percent in New Hampshire for the first three months of 2009, meaning fewer used cars are becoming available through trade-ins.
Dealers who sell new cars "may be focusing more on the used-car end of it than they ever have before," said Peter McNamara, head of the New Hampshire Automobile Dealers Association.
Some franchise dealers have told McNamara that they are close to selling as many used cars as new ones.
Last week, Chrysler notified six Granite State dealerships it would terminate their franchise agreements early next month. And General Motors announced an 18 percent cut in the number of dealerships nationwide, with another 10 percent to be sliced later.
McNamara said three New Hampshire GM dealers -- one more than Friday's count -- have notified him that they have received franchise termination notices effective next year, including AutoServ Buick Pontiac GMC in Belmont.
Poulin Auto Country in Rochester also confirmed that GM sent it a notice but said the decision wasn't final, owner Ron Poulin said last night.
On Thursday, Poulin -- who sells Chevrolet, Chrysler and Jeep -- received a "thumb's up" from Chrysler saying it would keep receiving Chrysler vehicles.
But on Friday, Poulin heard from General Motors saying its franchise agreement would be terminated next year -- a "huge rollercoaster" for the family-run business, he said.
Poulin, who's received strong community support for keeping its GM ties, said he will appeal the GM decision and plans to remain open even if the final decision goes against him.
"What's critical here is it's not Poulin Auto Country that is going away," Poulin said.
McNamara estimates about 20 Granite State dealerships -- down from his previous estimate of 25 -- could be shuttered or deeply affected by auto manufacturers axing showrooms.
That would involve six Chrysler dealers, eight GM dealers (through two rounds of cuts) and six others if Saturn, Hummer and Saab don't find new buyers.
At Cupples Car Co. in Laconia, owner Ross Cupples said used-car sales are becoming a bigger chunk of revenues for dealerships that also sell new cars.
"New-car sales are down, so it seems you see new-car dealers at used-car auctions with a fervor," Cupples said. "I definitely see an influx of new-car dealers at auction bidding against each other."
At Route 101A Auto Sales in Amherst, owner Gerald Scannell doesn't think the competition will increase greatly if a handful of dealers shift exclusively to selling used cars. He sells 20 to 30 cars a month for between $4,000 and $10,000 each, and his sales are up 25 to 30 percent over the past year, he said.
And, he added, new-car dealers have been expanding their used-car inventory to include high-mileage vehicles, including cars with 70,000-90,000 miles.
Also working against used-car dealers, many say, is customers' difficulty in securing a loan.
"It's harder to get people financed. Even with a higher credit score, they're looking more at their debt-to-income ratio," Bradley said.
At Wally's Auto World in Plaistow, manager Lisa Fernandes said she's not worried about increased competition.
"We're not afraid one bit," she said. "I think the used-car market is the market to be in."
At Auto Wholesalers in Hooksett, sales manager Kevin Lajoie said 80 percent of his business is from repeat customers or referrals.
"I'm sure that's going to affect everybody," Lajoie said of new-car dealerships' transition to used cars. "You have a lot of used-car dealers that have gone under themselves in the last 12 months."
