Tighter conditions for U.S. consumer credit have pounded new and newer-used car sales alike but have helped some small, lower-end operators like Rite On Used Cars.”People who can’t get loans from the bank are the ones who come running to us,” said Steve Salem, owner of Rite On, which operates car lots in this blue-collar suburb of Detroit as well as one in Motown itself.

“After years of slow decline, this year is definitely better than last year,” Salem said.

Salem founded Rite On a decade ago and sells older used cars ranging from $1,500 to $35,000, though the average price is between $3,000 to $4,000.

About 20 cars sit on the lot, ranging from an old Jaguar to pickup trucks and sport-utility vehicles.

Banks have declined to underwrite loans to Salem for his inventory or to his customers since the attacks of Sept 11.

But he makes short-term loans to customers if they can make a large down payment, prove they have a steady job and home address.

In Salem’s business, this is called “buy here, pay here” and he charges up to 24 percent interest.

“This makes up 75 percent of my business,” Salem said.

A slowing U.S. economy, the worst housing crisis since the Great Depression and the recent evaporation of consumer auto loans have hurt U.S. auto sales this year.

The Big Three U.S. automakers — General Motors Corp, Ford Motor Co and Chrysler LLC, which is owned by private equity group Cerberus Capital Management — have pulled back sharply on leasing cars at low monthly rates.

If consumers want to buy a car now and don’t qualify for a bank loan, their best if not only option is a company like Rite On.

“This (older used car sales) has been one of the only really positive areas in the car business for the past couple of years,” said Jesse Toprak, executive director of industry analysis at auto tracking firm Edmunds.

OUT WITH THE NEW, IN WITH THE OLD

U.S. car sales have been bad all year, as gas prices soared to more than $4 a gallon in July.

Although gasoline prices have come down almost 30 percent since then, the credit crunch has shaken the global financial system to its core and sucked out much of the money from the U.S. consumer car loan business.

For the nine months through September, U.S. auto sales were down 13 percent. Ford was down 17 percent, GM 18 percent and Chrysler 25 percent, while their Asian and European counterparts were down 6 percent. In September, sales of domestic midsize, large and luxury SUVs were down 50 percent.

In times of economic uncertainty, some consumers “shift away from new models into newer-used vehicles” as a way to save money, said Bob Schnorbus, an economist at the U.S. auto sales tracking company J.D. Power and Associates.

But newer used cars sales have also apparently fallen victim to the credit crisis.

“People can’t get capital to buy cars,” said Patrick Farrell, vice president of corporate communications at Enterprise Rent-A-Car Co, the largest U.S. car rental agency with in-house new-used car sales. “Credit-worthiness has been put at a higher standard than in the past.”

And credit continues to tighten. Just last week lending company GMAC LLC — owned 49 percent by GM and 51 percent by Cerberus — said it would only lend to consumers with a credit score of 700 or above, cutting off an estimated 25 percent of potential customers nationwide.

In an October 20 letter to GMAC, the California New Car Dealers Association wrote that “at a time of our greatest need, our GM dealers feel completely abandoned by GMAC’s rogue actions.”

Association President and CEO Peter Welch said that so far in 2008, 82 new dealerships had closed in California, compared with 20 for the whole of 2007.

“There’s very little traffic in dealership showrooms,” he said.

This apparently favors older used cars lots, though far from all of them. According to CNW Research, 1,000 U.S. independent dealerships closed in September, the highest number since 1984.

Edmunds’ Toprak said if consumers can not afford a new car but desperately need a vehicle, they can buy a “patch” vehicle to last until they can afford a newer one.

One other option consumers had until recently was to lease a car for a relatively low payment. Chrysler said in July it was leaving the market, while GM and Ford have virtually halted leasing, thanks to falling residual car values.

After Chrysler’s July announcement, Salem said Rite On’s sales jumped from an average of 30 cars a month to more than 40 in August.

“Before they (the Big Three) cut off leasing, why would someone make a $300 monthly car payment to me for an old car when they could lease a new car for less?” Salem said. “Now that leasing is gone, they have to come to people like me.”

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