Both a car-rental and a car-sales company encountered problems in the third quarter, showing just how deeply the auto sector is being hurt by the slowing economy and the credit crunch.

AutoNation’s (AN) profits unexpectedly tumbled in the third quarter, as the auto dealer was sacked by the credit crunch.

The nation’s biggest publicly traded auto retailer says it swung to a loss of $1.4 billion, or $7.99 per share, during the quarter as compared with $72.1 million, or 37 cents a share, in the same quarter last year. Analysts polled by Thomson Reuters were expecting earnings of 29 cents per share.

Revenues also slipped during the quarter, falling to $3.5 billion from $4.5 billion in the same period last year.  The decline was led by a $660 million slide in new vehicle revenue, but revenues were also off on used vehicles, parts and service and financing. 

Sales of domestic vehicles fell 30% during the quarter, and import and premium luxury sales were also off significantly.

AutoNation Chairman and CEO Mike Jackson said the company’s bottom line was severely impacted by the credit crunch.

“The third quarter was negatively impacted by the credit crisis that escalated in September into a full blown credit panic,” he said in a release.

“This created a credit freeze that broke consumer confidence and, along with a continued housing depression, accelerated the decline in the U.S. economy and auto retail market.”

Jackson also said, “We expect the rest of 2008 will continue to be challenging."

Avis Budget (CAR) reported weaker than expected third quarter earnings and slashed its full year outlook Thursday as increasing economic woes hit the leisure travel industry.

The car rental company reported a net loss of $1 billion, or $9.91 a share, compared with net income of $103 million, or 99 cents a share, in the same period a year earlier. It said accelerating weakness in the global economy and leisure travel industry were leading causes for the softness; there was a $1.3 billion write-down on investments and intangible assets. 

If so-called unusual charges are included, which were almost entirely due to a $1.3 billion write-down on investments and intangible assets, the company actually lost $1 billion, or $9.91 per share in the third quarter. These charges are generally excluded from analysts’ expectations.

Analysts polled by Thomson Reuters expected the company to earn 59 cents during the third quarter, but charges are not generally included in analyst expectations.

The company’s international car rental business showed a gain in profits of 18% in the third quarter, but its other units didn't fare as well.  Indeed, profits in its domestic car rentals division, Avis Budget’s biggest segment, were off 36% for the quarter.

Avis Budget’s revenues were $1.7 billion in the third quarter, which is essentially comparable to revenues from the same quarter last year. 

In a bid to reduce operating costs, which cut into the renter’s bottom-line; the company says it cut more than 700 jobs and “streamlined infrastructure at its headquarters.”  The company says this reduction will save $50 million annually. 

However, even with cost cutting measures in place, Avis Budget expects its full-year profits to be “significantly lower” than previously estimated.