RICHMOND, Va. -- CarMax, Inc. the nation's largest retailer of used cars, reports that searches on carmax.com
for smaller, more fuel-efficient vehicles increased in June. According to
carmax.com, search frequency rankings for several vehicles with higher
estimated miles per gallon (mpg) have increased.

    — The Mazda3, with an estimated 24/32* mpg, leaped from 39th in March
to 16th in June.

    — The Toyota Corolla, with an estimated 28/37* mpg, jumped from 9th to
4th place over the same time period.

    — Outside the top 20, the Volkswagen Beetle, with an estimated 21/28*
mpg made a big leap from 71st place to 40th since March.

    “With gas prices continuing to rise, fuel efficiency has increased in
importance for many shoppers,” said Ann Yauger, director of carmax.com. “On
carmax.com, we offer a robust research section that allows consumers to
find the best car for their needs.”

    Of the three makes and models highlighted, there are a combined total
of nearly 1,000 of them, as of this release, available on carmax.com for
sale and can be transferred to the nearest CarMax store.

    The CarMax website can be used to research information on vehicles of
various makes and models. Online shoppers can search the company’s
inventory of more than 25,000 new and used cars. The website showcases
vehicles with multiple photos, the no-haggle price, and information on
features, options, fuel economy and customer reviews. Visits to carmax.com
continue to increase, and approximately 70 percent of in-store customers
visit the website before coming to the store.

As Skyway Chevrolet in South Chicago prepares to close its doors, General Manager Dan Biegel’s advice to other car dealerships is simple: Get the right inventory.

With credit availability low and gas prices high, drivers are looking to buy the cheapest cars with the best gas mileage. As a result, unlike fuel-efficient models such as Toyota Motor Corp.’s Prius, gas-guzzling trucks and sport utility vehicles have been downright unpopular with prospective buyers.

Which means, for used car dealerships heavy in bigger models such as the Chevy Tahoe, Ford Explorer and Chrysler Town & Country, the past twelve months have been, at best, rocky and, at worst, devastating.

“I’ve got a 2001 Tahoe some guy traded in for a Cobalt and I’ve had that Tahoe for 62 days,” Biegel remarked. “Normally you like to keep stuff 30 to 60 days. I’ve had nobody in even to look at it and I’ve advertised it for really low prices.”

Skyway, which is a used and new car dealership, has operated for four years under its current ownership and opened in the 1940s as Seip Chevrolet.

But after more than 60 years, Skyway will close for business on July 31. Although there have been rumors of a prospective buyer, liquidation is likely.

“It got bad when gas hit $4 a gallon,” Biegel said. “I live in Indiana and come into Chicago every day, but we saw it first in Chicago and it was definitely the driving factor. The value of trucks or fuel inefficient cars–their wholesale value–has just dropped off.”

Between January and April 2008, the number of retail used light vehicle registrations in the Chicago area totaled 127,772, a 4 percent drop from 132,877 registrations in the year-earlier period, the Chicago Automobile Trade Association reported.

Biegel points to the usual suspects to explain the downturn: the sluggish economy, soaring gas prices and tightened credit requirements.

“It’s a combination of everything,” he said. “Now it costs more to get a car. And discretionary spending isn’t what it used to be.”

With the Conference Board Consumer Confidence Index having logged its fifth lowest reading ever in June, retailers across the board are experiencing problems. July Consumer Confidence is due out next week and is expected to dip again to a reading of 50.0 from 50.4 in June, according to economists surveyed by Briefing.com.

“One of the first things to go in an economy where consumer confidence is at these levels are the discretionary things, the things you don’t have to have but are nice to have,” remarked Drew Cardonick, a partner in the bankruptcy group of Goldberg Kohn Ltd. in Chicago. “You don’t see food companies or grocery stores getting as hard hit because you have to eat. But you don’t necessarily need to have the latest and greatest cars.”

Biegel, who has been in the car business for 30 years, remembers a similarly dismal time for car dealers in the early 1980s when the prime rate hit 20 percent and, with the economy in trouble, people cut back on spending.

“When you get a car loan, your car loan is generally pegged to the prime rate,” Cardonick explained. “So when the prime rate is 20 percent, it makes it harder to buy the car at that interest rate.”

The Federal Reserve’s federal funds target rate, the rate used by banks to lend overnight reserves to one another and to set their prime lending rates, is currently at 2 percent, the lowest level since November 2004, while the prime rate is at 5 percent.

Still, Cardonick believes that the economic hardships of the early 1980s are analogous to current conditions, with low discretionary spending a hallmark of both periods.

“In the 80s, when interest rates were high, you were affecting the first cost” of buying a car, he said. “Today you’re affecting the gas cost.”

With market forces putting extreme pressure on car dealerships nationwide, it comes as no surprise that Skyway is only one of several local dealers that are suffering.

“Sales have slowed down since the economy is the way it is,” reported Robert Glowa, owner of Glowa Auto Sales in Wicker Park for 44 years. “In the last three years, sales have gradually declined.”

Glowa, like Biegel, is also closing up shop. Because his dealership specializes in cars with more than 100,000 miles that sell for $5,000 or less, no one is interested in his product right now.

“My business is for sale,” he said. “I’m at the age where, after 44 years of doing it, I’m done. I’ll just keep eight or nine cars until I sell them, but I don’t even expect to sell the property because the real estate market is off. It’s coming down to where you’re losing your savings.”

Cars with hybrid electric engines, which are expected to account for 6.5 percent of U.S. auto sales by 2012 according to a report by J.D. Power and Associates Automotive Forecasting Services, might not be available to used dealerships for some time. It typically takes two to five years for new cars to cycle through to resale points. But by that time, it might be too late for many area dealers.

“A few drivers are looking for hybrid cars, but we don’t deal with those cars because they are too expensive,” reported Syed Mateen, owner of Asia Motor Inc. for the past 14 years. “Maybe in the next five years, but they aren’t available now. The hybrid dealerships have control on those hybrid cars and they are selling at more than the market value.”

Mateen, who buys General Motor Corp.’s Chevrolet Impala and Ford Motor Co.’s Crown Victoria models from police departments and sells them to cab companies, said such vehicles are the only options for taxi services who need cars to run 24 hours a day, seven days a week.

Although Mateen has not seen a drop-off in sales, he is nevertheless unable to raise prices because clients are unwilling to pay more money for these cars with gas costing what it does.

“They don’t have a lot of options even though they are crying,” he mused about cab drivers’ need for the large, sturdy “gas-drinking machines.”

Unfortunately for cab companies and car dealers alike, options will continue to be scarce and what Mateen refers to as “crying” will be a fact of life until gas prices settle and hybrid cars become widely available for resale. But no one, not even those who have been in the car business for more than 40 years, has any idea exactly when that will be.

But for now, he added, CarMax can’t give investors any meaningful guidance for the rest of 2008.

Richmond, Va.-based CarMax does have an innovative growth proposition, and its concept has drawn a lot of attention since the company began in 1993 as a unit of Circuit City Stores Inc. before being spun off six years ago.

Contrasting with the adversarial sales tack used by most dealers, CarMax takes a “no haggle” approach that aims to develop customer loyalty and foster repeat business. Its sales people make the same commission, regardless of what vehicle they sell, so they have no incentive to badger customers to buy pricier, higher-margin models.

CarMax competitors have found that idea tough to copy.

In the current roiled auto markets, though, it may be difficult for any used-auto dealer to have a friendly transaction with customers. Wholesale prices for larger vehicles have fallen by about 25 percent this spring, or four times the typical pace of depreciation, according to CarMax’s first-quarter report.

On average, someone trading in a large SUV now is getting $3,100 less than two years ago, says Jessica Caldwell, manager of pricing and industry analysis at Edmunds.com, which tracks auto industry trends.

Making matters worse, a large number of such vehicles are bought with dealer financing. “People just can’t afford to write a multithousand-dollar check to get out of [owning] a sport utility” and switch to a hybrid, CarMax’s Folliard said in the conference call.

Still, there are many reasons to think that CarMax will weather the storm and perhaps emerge stronger.

The U.S. used-car market is highly fragmented, comprising some 21,500 franchised new-car dealerships and 43,000 independent used-car dealers.

With annual sales of more than $8 billion, CarMax still has a relatively modest share of a $340 billion used-car market, and that share has continued to grow despite the sagging market.

The company has been expanding into new markets around the country with new superstores, which total more than 90. That growth will continue, executives said.

And despite ongoing jitters in parts of the credit markets, CarMax recently found the asset-backed bond market receptive to a $742 million auto loan securitization. That makes it easier for the company to maintain its lending business.

Justin Fuller, an equity strategist at Morningstar Inc., has been watching for CarMax shares (KMX) to cheapen up, expecting swelling new-car inventories to pressure—and take demand away from—the used-car market. Such developments would make the shares a long-term buy, he said.

“CarMax is a big company. It has a lot of financial resources, and it can live through this,” Fuller said. Many smaller used-car dealerships probably won’t, he added.

Nowadays as more and more cars are introduced the around the globe, everyone has a desire to own one. Individuals even do not mind buying a used car, if they get one in a good condition. The Modern scenario is such that most of them buy cars or most expensive commodities on credit. Even while buying used cars, you can avail loans if you can make the necessary payments. However, there are numerous financial organizations, which provide used car loans. Henceforth, it is imperative that we should study the used car auto loan rate that is offered by them for making the eventual decision.

When it comes to the number of sources from where you can get such loans, you will be glad to know that there are many of them. When someone wishes to get loans for buying used cars, the most important point that should be considered is getting them on the lowest used car auto loan rate available. Most financial organizations usually offer loans at a very low interest rate. However, they have hidden costs involved, which eventually make you pay more than what you acquired.

Apart from taking care of the used car auto loan rate, there are some other points on which you should pay attention. These auto loans should have a shorter payment period. As the used car usually costs less, it is advisable to take only a part of the price as loan and pay the rest upfront. Usually when used cars are bought from any dealers, they offer lowest available used car auto loan rate. It is seen that usually finance companies lower the rate for the auto loans, if the down payment is a good percentage of the price of the car.

The best way to know which financial companies provide used car auto loans at the lowest rates is to search on the web. Apart from the information of the rates, you can also find the reputation of these companies with a single click. Again, you also have the option of comparing offers of most companies providing used car loans. By making comparative studies, one can make the eventual decision without any trouble. You will usually get an opportunity to make an application on the internet without running off to the nearest branch