According to the National Automobile Dealers Association, out of the 20,700 U.S. new car dealerships, around 600 will have been forced to shut down this year, compared to 430 last year.

At least 80% of the dealerships closing will be domestics because of the large amount of sales that they have lost. And once a dealership has to close, it’s hard to reopen.

According to Grant Thornton LLP, it is estimated that at least 3,800 other dealers need to close also.

The fact is that there has been a surplus of dealers for many years. But the large cost of financing and the present credit crunch has created quite a storm. Dealers are having trouble getting the funds to finance the vehicles and don’t make the money, so they have to close their shop.

Many consumers have decided to hang onto their current cars and buy an auto warranty instead of purchasing new vehicles. Motorists are hesitant to buy because of the poor economy and instead opt to just purchase used car warranties to help them maintain their vehicles.