Low-overhead auto brokers are changing the game for traditional dealerships

Green and white balloons float above Jeep Wranglers and Dodge Challengers inside the Manhattan Jeep Chrysler Dodge Ram dealership on 11th Avenue near West 48th Street. In an adjacent outdoor lot, red-white-and-blue streamers flutter above used models.

Court papers, however, tell a less cheerful story: In March the franchisees filed for Chapter 11 bankruptcy protection, citing a debt of more than $22 million to their chief lender. The filing included a related Alfa Romeo Fiat dealership a few blocks away.

The bankruptcy was the second to hit Manhattan’s auto row in less than a year. A nearby Jaguar Land Rover dealership that included Maserati and Ford franchises went bust in July with debts of more than $60 million. It sold at auction in September.

Industry experts said the two bankruptcies point to the growing pressures of a changing automotive retail landscape.

On the one hand are escalating rents in an expensive Manhattan neighborhood. On the other is increasingly intense competition from a little known but rapidly growing part of the industry: automotive leasing brokers, who market themselves on the web and base their operations in modest quarters rather than inside a sleek 11th Avenue showroom.

Numbering in the hundreds and concentrated in the outer boroughs, the brokers are part of a shift to digital car-shopping that includes the growth of CarMax, Carvana and Vroom. And there are signs that Amazon could start selling cars.

“I don’t want to sound like an alarmist, but I think within 10 years, half of these franchised dealerships will be gone, and not just in Manhattan,” said Max Zanan, a Midtown-based automotive-retail consultant. “Companies like Amazon have trained customers to expect complete transparency. They expect that transparency when they’re shopping for a car, and they’re not getting it” from dealerships.

For New York dealers, leasing brokers represent the most immediate threat. Dealers frequently complain that brokers operate outside the law, but the two sectors share a complicated, symbiotic relationship.

Brokers need dealers: Under state law, only franchisees can sell cars straight from the manufacturer. But dealers also need brokers, whose purchases help dealers hit their sales targets.

The concern is the long-term toll that broker sales could have on automobile retailing…