U.S. automobile dealers have struggled to maintain inventory levels to attract car buyers to their lots for purchases after their vehicle selections were depleted during the Covid-19 pandemic.
New car inventories fell as production halted during the pandemic, which also led to a drop in used car inventories as buyers turned to preowned vehicles as an alternative to a lack of new cars.
Many new and used car dealers still have thin inventories on their lots years after the pandemic ended, which can impact their sales numbers.
August auto sales increased
The U.S. automotive industry, however, finished August with strong sales figures, as new car sales rose 2.3%, led by an increase in electric vehicle purchases ahead of the end of subsidies in September, MarkLines reported.
The industry, however, is bracing itself for a possible setback in September after the end of EV subsidies.
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Used car sales fared better than new car sales in August 2025, as estimated used car retail sales increased 9.2% compared to July 2025 and were 9% higher year-over-year, Cox Automotive reported.
August 2025 new and used car sales:
- August 2025 new car sales: 2.3% increase year over year.
- August 2025 used car sales: 9% increase year over year
While new car retailers might be having strong sales lately, certain used car dealers, such as Tricolor Auto Group, have struggled with their businesses.
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Tricolor Holdings files for Chapter 7 liquidation
The used automobile dealer and subprime lender’s parent Tricolor Holdings has filed for Chapter 7 bankruptcy protection, seeking to liquidate its assets, after its own lender, Fifth Third Bank, reported alleged fraudulent activity related to a $200 million loan it provided the debtor, Reuters reported.
The Dallas-based company, which operated 65 locations in Texas, Arizona, California, New Mexico, Nevada, and Florida, filed its petition on Sept. 10 in the U.S. Bankruptcy Court for the Northern District of Texas.
Tricolor Auto Group state locations:
- Arizona
- California
- Florida
- Nevada
- New Mexico
- Texas
The debtor listed $1 billion to $10 billion in assets and liabilities in its petition.
Fifth Third was not the only bank facing millions in loan losses. JPMorgan Chase reportedly faces about $200 million in losses from Tricolor debt.
Barclays Plc was also expected to face losses on loans to Tricolor, Bloomberg reported.
The U.S. Justice Department is investigating fraud allegations at Tricolor, Financial Times reported.
Tricolor sold used cars, provided subprime loans
Tricolor reportedly sold used cars and provided subprime loans to low-income Hispanic communities in the Southwest, including many people who did not have Social Security numbers and were undocumented.
The company in June said it had provided more than $5 billion to Hispanic car buyers who had been disregarded by conventional automobile lenders.
Tricolor closed all operations and furloughed most of its workers on Sept. 5 after a bank reportedly took control of the company, Car Dealership Guy reported.
Commercial bankruptcy data:
- August Chapter 11 filings, 616, 0.5% decrease year-over-year.
- August Chapter 11 Subchapter V filings, 200, 17% increase year-over-year.
U.S. bankruptcy filings showed some alarming numbers in August 2025 as Chapter 11 Subchapter V small business filings increased by 17% to 200 compared to 171 in August 2024, according to Epiq AACER data, the American Bankruptcy Institute reported on Sept. 3.
All commercial Chapter 11 filings were almost flat year-over-year in August with 616 filings compared to 619 in August 2024, for a 0.5% decrease.
Chapter 11 filings skyrocketed in July
Overall Chapter 11 filings skyrocketed in July 2025 by about 78% to 913 filings compared to 512 filings in July 2024, according to Epiq AACER.
Commercial Chapter 7 statistics were not included in Epiq AACER’s data, but it reported that consumer Chapter 7 filings increased by 10% year-over-year in August.
More bankruptcy:
- Unusual bar and restaurant chain files Chapter 7 bankruptcy
- Major healthcare company files Chapter 11 bankruptcy, seeks sale
- Home improvement retail supplier files for Chapter 11 bankruptcy
“As anticipated, bankruptcy filing volumes continue to climb, even as GDP shows growth and unemployment remains relatively stable,” said Michael Hunter, vice president of Epiq AACER said in a statement.
“Notably, we are witnessing the longest sustained increase in total open case inventory since 2008 — a clear indicator of shifting financial pressures,” Hunter said.
“Looking ahead, we expect this upward trend to persist into 2026, as bankruptcy protection filings return to pre-pandemic levels. Key factors contributing to future uncertainty include the impact of tariffs, the resumption of student loan obligations, and interest rates,” he added.
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