After enduring a decline in sales due to high gas prices, the region's struggling auto dealers are having to adjust to banks tightening their lending practices, which has eliminated most hopes for a recovery in vehicle sales this year.

The lack of credit is hurting dealerships throughout San Bernardino and Riverside counties as consumers are having a harder time getting approved for auto loans. Dealers also have been hard-pressed to secure financing for new inventories.

"It's become an issue especially when a dealership needs to obtain a new line of credit," said Jessie Toprak, senior industry analyst with Santa Monica-based Edmunds.com. "Additional approval or a new line of credit has become much more difficult to obtain these days. It's also become an issue when someone is buying a dealership and trying to get a line of credit."

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"When money is tight, customers want to purchase anything with great gas mileage," said Nicholas DePasquale, president and general manager of Fairview Ford in San Bernardino. "Overall, a lot of people are sitting on their hands waiting for what's going to happen."

A decline in auto sales has also affected the budgets of cities in both counties as sales-tax revenues decline.

"Understand on average across California automobile sales are 20 percent of retail sales," said John Husing, an economist and president of Redlands-based Economics & Politics Inc. "It's not true for every one, but $1 out of every $5 that goes into a city's discretionary budget comes from automobile sales. If you get a serious reduction in sales, then you get a serious reduction in the city's ability to direct money for extra police, fire services or whatever they want to do."

Husing said when credit is taken away and consumers can't get a car loan, the credit crunch is hurting cities in the two-county region. He estimated that on average cities in Riverside County experienced an 11 percent decline in revenue in the third quarter.

Another challenge for the local auto industry is attracting customers to dealerships looking to move their inventory of 2008 models while the new 2009 vehicles begin arriving.

"Business is really down," said Nick DePasquale, president and general manager of Fairview Ford in San Bernardino. "We have seen about a 50 percent drop in (customer) traffic. Getting people loans and getting customers to come on the lot are two different things."

Ed Chavez, owner of Coachella Valley Pontiac, Buick, GMC and Saturn of Coachella Valley, said there had been a decrease in traffic into their showrooms, but his company's service departments have been busy as customers are trying to keep their cars a little longer.

"Traditionally, we would see between 30 and 40 customers on an average Saturday; now it's around 20," Chavez said. He said his dealerships would stock current-model-year vehicles until February or March of next year, but there are fewer 2008 models currently on the lot.

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"We were more conservative this year in purchasing our inventory," he said.

The credit squeeze has been particularly severe for customers with less-than-stellar credit scores who need subprime loans at higher interest rates. DePasquale said customers who barely qualified for a loan before the Wall Street fallout are having a harder time getting a loan today. The customers with medium to good credit can still get a loan albeit with a higher interest rate, he said.

DePasquale explained that about a year ago, many subprime banks would issue auto loans to almost anyone, but with credit less available and several failures of subprime banks, lenders are tightening requirements and requiring proof of employment and income.

Chavez argued that the "news media has done a terrible job" of explaining what is going on.

"Financing is still available," he said. "It hasn't been cut off. General Motors and Toyota are even offering zero percent financing. What's most important for consumers to know when they are looking at buying a car is not to give up. Find the car you want and let the finance companies do what they do."

At Fairview Ford, demand for low-mileage trucks and SUVs has been replaced by customers seeking out vehicles that get higher gas mileage.

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Diesel repair technician Jude Santa Cruz works on a vehicle at Fairview Ford. In tight financial times, consumers often repair their older models instead of buying new ones.

"A lack of sales of our trucks and SUVs has impacted us," DePasquale said. "Customers are looking at buying the Ford Focus and Fusion, which are smaller cars that get better gas mileage."

He said if a customer wants to purchase an SUV, it's usually the Ford Escape Hybrid.

"When money is tight, customers want to purchase anything with great gas mileage," DePasquale said. "Overall, a lot of people are sitting on their hands waiting for what's going to happen."

A decline in sales has also led to layoffs at dealerships throughout the two-county region.

"We are doing what it takes to survive," DePasquale said. "We have laid off very few employees; maybe less than 5 percent of our staff of 100 have been let go. Others, especially sales people, have left through attrition."

While Fairview Ford has reduced staff, Chavez recently opened Saturn of Coachella Valley.

"We opened the dealership about 15 days ago," he said. "We decided it was the right car for the right time."

Chavez said he hasn't had to lay off any employees and with an additional dealership there were no plans to reduce staffing levels.

Toprak said that overall, "lower production, lower sales has meant lower profitability" for auto dealers. That has translated into a negative trend industrywide as many qualified, career sales professionals are being forced out of the industry because they can't make a living, he said.