Manufacturers have been increasing incentives all year and next Friday could see them sweetening their deals even more to move vehicles off their dealers’ lots.
And consumers seem ready to respond.
Black Friday is one of the biggest car shopping holidays of the year, accounting for 15 percent of total November car sales, according to Edmunds.
According to a new Cars.com study, 18 percent of car shoppers said they're more inclined to visit a dealership on Black Friday because they have free time and they consider a fun way to spend the day. But 74 percent of those shoppers said they're more inclined to visit a dealership on Black Friday specifically as a result of special deals and promotions.
“With deals aplenty, shoppers have good reason to go car shopping," said Jennifer Newman, Cars.com's editor-in-chief.
"We're seeing solid incentives from a number of different manufacturers. If you are already in the market for a new car, you might want to consider hitting your local dealership lots this Black Friday instead of waiting in long lines at your nearest big-box store. “
Edmunds research shows that Black Friday is one of the biggest car shopping holidays of the year, accounting for 15 percent of total November car sales.
"Incentives reached near-record levels in October, so we expect automakers to continue to sweeten savings as the year winds down," said Jessica Caldwell, director of industry analysis at Edmunds. "With slower sales of 2017 model year vehicles, automakers and dealers are more likely to leverage fully the Black Friday holiday as an opportunity to thin bloated inventories to make room for 2018 models."
Kia is offering some of the biggest incentives, according to Cars.com.
Kia is offering shoppers $1,500 off the 2018 Optima and $3,000 off the 2017 model. Kia is also offering a $3,000 to $4,000 discount on the 2018s.
Hyundai offers $3,000 off its 2018 Elantra sedans and $1,000 off on the hatchback model, the Elantra GT.
Shoppers can expect to save between $2,150 and $5,000 on certain 2017 Ford vehicles.
Additional incentives are being offered for buyers who finance their purchases through these manufacturers’ captive finance arm.
ORLANDO, Fla. – Changes to the timing of tax refunds caught many dealers by surprise last year. They need to know this is the new normal.
The Path Act of 2015 went into affect for the 2016 tax year, affecting returns in 2017. In addition to extending or making permanent several tax provisions and addressing other issues, the law also changed the timing of some tax returns as a way of preventing identity fraud.
The change meant that the Internal Revenue Service waited until Feb. 15 to start processing returns that claim the Earned Income Tax Credit or Additional Child Tax Credit.
Bill Neylan, president and CEO of Tax Refund Services Tax Max, said that delay was devastating to some dealers who expected earlier returns. Dealers who bought cars in October or November on 60- or 90-day floor plans waited in vain for tax money.
“A lot of dealers who were not aware of the Path Act violated their floor plans and a lot went out of business,” Neylan said.
In the upcoming refund season, he predicts the IRS will hold these types of refunds until Feb. 26 or Feb. 27 and then send them out all at once.
“Ninety percent of all refunds (this year) were released in two days,” Neylan said. “You can’t sell two months worth of cars in two days. It’s impossible.”
He discussed the tax season and the problems of the Path Act during the National Alliance of Buy-Here, Pay-Here Dealers fall conference.
He said because of the changes in the law and the challenges of the market, dealers need to find a tax partner to find out how to succeed in this area.
“If they don’t, then they need to come to trade shows like this,” he said. “They need to go to NABD, NIADA (National Independent Automobile Dealers Association) and sit in these sessions and meetings.”
Neylan also speaks at state IADA events about the changes.
Ingram Walters, of Griffin’s Credit Quick in Monroe, N.C., pushes a promotion to boost sales during income tax season – which has already begun for him.
“Fortunately, we have the money to start stockpiling,” he said. “So we start stockpiling in October, November and December.”
This helps increase profits because cars become pricier after the first of the year.
“We think a $5,000 car is going to jump at least 10-12 percent,” Walters said. “So if you wait until February, that $5,000 car is going to cost you $5,500 or $5,800.”
Historically, February is Walter’s best selling month, but the earlier dealers can start making tax season sales, the better.
Once a customer gets their check, they can take it anywhere, Walters said. He said statistics show that most of his customers will spend their entire refund in 24 to 48 hours.
The key is to close a deal before they get the refund.
“The creative dealers are starting in November,” he said.
Walters starts working customers in October and November, asking them about their previous year’s tax return amount. Knowing that, he can estimate what their refund will be this year and base the deal on that.
Walters uses the TRS Tax Max program that sets up tax return service right in the dealership, securing the deal before the government even sends the checks out.
“We prepare the returns,” he said. “We’re also advertising, ‘Buy a car now, pay us when you get your taxes done here and we’ll wait on the down payment.
“It works for us.”
By getting the deal done early, it takes the customer out of the market before they check out another dealer.
“Your customers will love it, but your competition will hate it,” Walters said.
The key is to get customers to commit as early as possible, Neylan said.
The refunds of buy-here, pay-here customers are substantial.
“Last year, 40 percent of the refunds we processed were over $6,000. Ten percent were over $9,000,” Neylan. “If you’re not active during tax season, your customer is going to spend it somewhere else.”
A typical buy-here, pay-here customer is a single parent, making about $20,000, with one or two children with no taxes withheld.
“How much do you think their refund is?” Neylan asked the conference attendees. “It’s $8,388. That’s crazy money.”
Even with the new rules, taxpayers can still file returns as early as Jan. 2. Neylan said his firm’s tax preparation program allows their dealer clients to provide an advance on their refund starting Jan. 10, up to $2,500, “in two to four hours on their printer.”
The other option is the dealer can still handle the customer’s return and close the car deal. Then the dealer can wait until the refund comes in late February. In that case, the money goes directly from the IRS to the dealer.
Another option is “irregular payments” in which the dealer builds the tax return into the payment plan. A customer pays $300 a month, for example, until February, the month of their tax return, and that payment could be $1,200, then back to $300 the next month.
Whatever dealers decide, they have to change to make tax season successful.
“If you do nothing, you’re going to have another crappy January and February, I promise you that,” Neylan said.
The common complaint from dealers has been that tax season isn’t the same anymore.
“It’s not the same,” Neylan said. “They’re thinking of tax season in the ’90s. People got money in January and February and started flooding into the dealership for two months.
“Those days are gone.”
The Indiana Independent Automobile Dealers Association named Grote Automotive as its 2017 Joe Krier Quality Dealer of the Year.
The award was presented to Fred Grote at the association’s 30th Anniversary Golf Tournament and Awards Day held at Ironwood Golf Club in Fishers, Ind.
The Quality Dealer of the Year is chosen based on several criteria.
The dealership and dealer must be consumer oriented, and the dealer must have a record of good business decisions based on honesty and integrity. Also, the dealership and dealer must represent themselves as a civic leader in their community.
Grote Automotive is located in Fort Wayne. It was started by Fred and his wife Jackie in 2007.
Fred Grote had successfully managed several dealerships for other dealers throughout his career and finally decided he wanted to create a different experience for the customer. He wanted a dealership that specialized in special financing that helped those people that may have slipped through the cracks.
In addition to the Quality Dealer of the Year award, Grote Automotive was also named one of Indiana’s Top 100 Best Places to Work for 2017 and No.1 in Fort Wayne. The dealership was also named to the Inc. Magazine’s list of the Nation’s Top 5,000 Fastest-Growing Private Companies.
The dealership and the Grote family give generously to the community. Fred and Jackie Grote’s generosity began early when they decided to become foster parents, fostering over 30 children and adopting four of them as their own, with two of them involved in the business.
Grote Automotive sold 2,000 vehicles last year and Grote attributes the success of his dealership to his team of dedicated staff and the loyal customers.
Grote Automotive will represent Indiana at the National Independent Automobile Association Convention in Orlando, Fla. in June 2018 and compete with Quality Dealers from other states for the National Quality Dealer of the Year title.
New-car prices reached an all-time high in October, despite incentives also reaching an all-time high as franchise dealers struggle to clear their lots of 2017-model-year vehicles.
The average transaction price of a new vehicle hit a record $35,428 in October, according to the analysts at Edmunds.
This is a 2 percent increase compared to October of 2016 and a 12 percent increase compared to October of 2012.
The average down payment on a new car also reached record territory in October, hitting $3,966. This is up $374 compared to October of 2016 and $454 from five years ago.
"The shift away from passenger cars in favor of trucks and SUVs is impacting all facets of the auto market," said Jessica Caldwell, executive director of industry analysis for Edmunds. "Interest rates are rising and bigger vehicles have higher price tags, but so far car shoppers don't seem to be shying away from putting more money down or having a higher monthly payment to drive the vehicle they want."
At the same time, average incentive spending per unit to date in October was $3,901 per unit, surpassing the previous high for the month of $3,835 set in October 2016.
Manufacturers aren’t just spending to entice people to buy cars, either.
Incentive spending on trucks and SUVs was $3,842, up $73 from last year. While the average incentive on cars was higher, $4,015, it only increased by $69.
Despite the extra spending, many 2017s remain on the lots even as the manufacturers start to roll out the 2018-model-year vehicles.
Edmunds reports that 72 percent of new vehicles sold were 2017 model year, while last October, 60 percent of new vehicles sold were 2016 model year. Five years ago, only 46 percent of the new vehicles sold in October were from the 2012 model year.
"Clearing out old inventory is expensive, especially when automakers are forced to deeply discount passenger cars, which already have thin profit margins," Caldwell said. "With two months left in the year and this much inventory remaining, we expect to see some very creative year-end sales events to entice car shoppers."
STERLING HEIGHTS, Mich. – Terry Wolfgang of Wolfgang Performance Motors in Holland, Mich., won the 2017 Michigan Independent Automobile Dealers Association Quality Dealer of the Year award.
“I humbly thank you tonight for this award,” Wolfgang said at the group’s annual event. “I’d also like to thank each of you (dealers) because you are role models, mentors, encouragers, good businessmen and friends.”
Association Treasurer Joe Kuhta of GWC Warranty presented the award during the event at the GM Heritage Museum, a private venue that houses historic General Motors vehicles.
Kuhta said Wolfgang’s career started cleaning cars at 10 years old in his father’s Mobile gas station in Grand Blanc, Mich.
“”(Now it’s) 41 years later and 8,400 cars later,” Kuhta said.
Wolfgang said the business remains “challenging, competitive and ever-changing.”
He said dealers should reflect on the jobs they do and service they provide.
“Whether it’s (someone’s) first car, a truck for business or a van for an expanding family, we sell transportation,” Wolfgang said. “We help people’s dreams and lives happen.
“Ultimately, our success in this business is based on our integrity and reputation. They keep bringing customers back year after year and keep our businesses growing.”
Wolfgang said dealers do more than sell cars. They support communities, charities, families and employees.
“You have to like cars and love people,” he said. “That will never change.”
He urged each dealer in the room to dedicate themselves to recruiting two new members for the association in the coming year.
Wolfgang was a graduate of the GMI Institute (now Kettering University) and later Baker College, “where he fine-tuned his entrepreneurial skills,” Kuhta said.
He left work at GM Fisher Body and Paint plant in Flint, Mich. in 1976 to start selling cars at a dealership and rose to second in sales in two months.
“He opened his current location in Holland, Mich., in 2015 and remodeled the store,” Kuhta said. “He currently sells 20 to 35 cars a month. All of them are sold as certified vehicles.
“His business philosophy is to treat each business customer as a friend and neighbor.”
Wolfgang also serves as manager of the Holland Rescue Mission and is an ordained chaplain.
The keynote speaker at the awards dinner was Michigan Secretary of State Ruth Johnson.
She praised longtime dealers who stayed in Michigan during the rough economic patch when state unemployment jumped past 14 percent and 75 percent of residents were underwater on their home loans.
“I think auto dealers are true partners with the Michigan Secretary of State office,” Johnson said. “You are the economic engine of our state of Michigan. You’re ones that stayed during the bad times and continued to be job providers.
“You’re the ones that brought Michigan back.”
Two other speakers at the event were industry pioneers – Maurice Van Collie, cited as the oldest active used-car dealer, and Sam Lafata, retired former auction owner.
The association also presented scholarships to two students. Lindsey Foy from Law Auto Sales in Wayne, Mich., received $1,000 from the Daryl DeVries Scholarship and Katlyn Koetsier from K2 Autos, LLC., received $1,000 from the Ray Ketelhut Scholarship.
On the morning of May 26, 1990, Marlene Warren opened her door to a very unusual guest.
It would be the last time the dealer’s wife would open her door to anybody.
A woman stood there, dressed as a clown in full make-up, holding flowers in one hand and a gun in the other.
The clown shot Marlene Warren in the face. She died two days later.
The murder would be unusual anywhere, but especially in Wellington, Fla., a Palm Beach suburb so high end that the Warrens’ neighborhood was built around an airstrip for the locals’ private planes.
As is usually the case, police started looking at the victim’s husband, Michael Warren. There were rumors he was having an affair with Sheila Keen, the woman who handled repossessions for his store, Bargain Motors.
Authorities were unable to link the pair conclusively to the murder, even after featuring the case on television’s “Unsolved Mysteries.” But many of those involved never gave up seeking justice for Marlene Warren.
In 2014, the Palm Beach County Sheriff’s Office Cold Case Unit reopened the homicide investigation. Witnesses were re-contacted and additional DNA analysis was conducted.
Authorities finally felt they had enough evidence to take to a grand jury. The jury indicted Keen and a warrant was issued for her arrest.
She was taken into custody on Sept. 26 in Washington County, Va., where she was living with her husband – Michael Warren.
The pair married in 2002 and had been running a local restaurant since a few years after he was released from prison after serving two years of an eight-year sentence following his wife’s murder.
He had been convicted of odometer tampering and insurance fraud, but not murder.
Those charges arose from some very atypical business practices investigators found at Michael Warren’s store and rental car operation.
For example, at almost all buy-here, pay-here dealerships, the more payments customers make on their installment contracts, the lower the amount outstanding becomes.
At Bargain Motors, the amount customers owed actually increased with each payment.
Then there was the matter of a car from Michael Warren’s rental operation – a white Chrysler LeBaron that was reported stolen the day of the murder. The same car was reported leaving the Warren’s home after the shooting.
It turned up in a nearby parking lot. The last driver left behind a clown wig.
The Florida attorney general’s office eventually moved to seize Michael Warren’s businesses. Unfortunately, the decision took so long that he managed to get rid of his inventory.
But the state still had the more than 200 finance contracts to collect on.
Terry O’Loughlin was working in the attorney general’s organized crime division, handling lots of high-end foreclosures from the heyday of the Florida drug scene.
His bosses tapped him to oversee the finance end of the case and that’s how he found himself in the car business.
O’Loughlin knew nothing about running a buy-here, pay-here operation, but he quickly learned to respect those who did.
The first lesson that he learned was customers often don’t want to pay. O’Loughlin had one advantage over the average dealer – the Florida Highway Patrol served as his repo agents.
O’Loughlin would watch the junkyards for the cars. And he would search the classifieds for cars being sold without titles.
Other customers wanted to make payments and improve their credit. O’Loughlin was happy to help them out.
Then there were some unusual encounters, such as the woman who had a special non-monetary payment relationship with Warren.
O’Loughlin had to tell her it was now a cash-only business.
The state wound down the operation after two years. O’Loughlin came away from the experience with a new interest in the car business.
“It was an awful lot of fun,” he said.
He became the lead automotive specialist for the attorney general’s office. After several years, O’Loughlin decided he preferred the other side of the table and now serves as director of compliance at Reynolds and Reynolds, appearing as a regular speaker at numerous dealer events.
The state of Florida is seeking the death penalty for Keen.
O’Loughlin said he was glad when he heard about Keen’s arrest. He hopes Michael Warren follows her to prison.
“He’s a devious fellow,” O’Loughlin said. “From beginning to end, a real slime ball.”
DETROIT – Stair-step incentive programs damage brands by eroding customer trust.
That was the message delivered by National Automobile Dealers Association Chairman Mark Scarpelli during a recent presentation to the Automotive Press Association.
"Any dealer who's had to deal with these programs can tell you that they are not only trust killers, but they're brand killers, too," Scarpelli. "Not being able to offer two customers the same price on the exact same equipped vehicle, just because they came into the dealership on different days of the month, destroys consumer confidence."
Stair-step incentives vary between dealerships, creating confusing about pricing.
"In a world where customers rightfully expect fairness and transparency in price, why do so many manufactures still deploy unfair marketing strategies that produce huge discrepancies in price between various customers – discrepancies that aren't transparent, that can't be explained rationally, and that run afoul of everything our customers really care about?" Scarpelli said.
"Shoppers of brands that use stair-step incentive programs see large discrepancies in price for the same or similar vehicles across different dealers. Or, worse, at the same dealer, but at different points in time. Or, even worse still, a discount applied to a vehicle they don't want, but that can't be applied to a vehicle they do want."
Scarpelli said the lack of consistency, transparency, and explanation is leading directly to a lack of trust in both the individual dealer and the industry as a whole.
"Over time, the consumer's lack of loyalty to the brand will lead to less consumer demand for that brand,” he said.
The 2017 NADA Chairman added that he hopes to continue having constructive conversations with manufacturers about this issue.
"America's dealers and manufacturers have the same exact goal – selling our inventory in large volume and at competitive prices. But we believe that goal should be achieved in the right way: Meaning in a way that enhances customer experience, and that maintains the integrity of the brand," Scarpelli said.
"Ours is a symbiotic relationship that has stood the test of time, and that is ready to take on the next 100 years of making and selling cars and trucks – if we let it. And so to our manufacturer partners, I say: Let us be entrepreneurs. We're pretty good at it."
Hurricane Harvey has finally passed out of the Houston area, but the extent of its effect will take some time to determine.
Houston is one of the 10 largest car markets in the nation. Cox Automotive estimates that Harvey severely damaged or destroyed between 300,000 and 500,000 vehicles in the Houston market alone were.
The impact in terms of vehicle value is estimated to fall between $2.7 billion and $4.9 billion. By measure of vehicle damage, Hurricane Harvey is likely the worst natural disaster in our country’s history.
The storm naturally halted most vehicle sales in the area, both retail and wholesale.
Cox announced that no sales would be held at Manheim Houston, Manheim Texas Hobby and Manheim South Houston during the week of Sept. 4.
Harvey also struck the west side of Louisiana.
Lake Charles Auto Auction, located just north of where Harvey made landfall, postposed its weekly sale to Sept. 1 from Aug. 30.
“We have experienced tremendous volumes of rain and experienced some flooding,” said Lake Charles owner Matt Pedersen, “but nothing like our neighbors in Texas.”
While there are few sales taking place, some Texans are scheduled to come into possession of new vehicles soon, thanks to Toyota and Lexus Financial Services.
The two captives announced they will donate pre-owned Toyota and Lexus cars, SUVs, and trucks to organizations involved in helping move people and property in the recovery efforts.
“Access to reliable means of transportation is a critical element to any disaster relief and recovery effort," said Mike Groff, president and CEO of Toyota Financial Services. "We hope that our donated vehicles will help meet the needs of those affected by Hurricane Harvey."
The finance firms are also offering a payment relief program for its customers affected by Hurricane Harvey, as are most finance providers.
The question now becomes how dealers and their customers recover from this massive natural disaster.
The Houston market already faced many challenges before the hurricane struck.
Key theft already comes at a high price for car dealers, but one city wants to add to that cost by making dealers legally responsible if they fail to take steps to secure their keys.
Chicago Aldermen Pat O’Connor and Harry Osterman have proposed an ordinance that would require the city’s car dealerships to secure all of their vehicles’ keys in a lockbox when the store is closed.
The goal of the ordinance is to prevent stolen cars from being used in other crimes.
Osterman told a local newspaper that police had contacted him about a growing problem of key theft at dealerships.
The City Council’s public safety committee is considering the ordinance. Neither alderman responded for requests for comment.
Key theft has become a major problem in Chicago, and across the nation. Thieves break in at night and, in some cases, run scams during the day to steal a dealership’s collection of keys.
Jamye Tabuchi’s store was recently the target of late-night thieves.
The co-owner of Fall Creek Motors in Branson, Mo., received a call at around 2 a.m. on July 2, informing her that the motion detector at the dealership had been activated.
When she arrived at the dealership, Tabuchi found Fall Motors had been broken into and all of the store’s car keys were stolen.
Security camera footage showed an unidentified individual cutting a hole in the back of the building, going through the garage and into the dealership.
The thief then went into the office, snatching all of the keys present.
“From what I can see as far as on the security footage, it’s only one person but I don’t know if there were more people outside or not,” Tabuchi said. “They seemed to have a pretty good understanding of where our security cameras were and so I only saw one person come across the camera in the back and one from the side of the building.”
Police are still looking for the thief. Fall Creek Motors is offering a $500 reward for information that leads to an arrest.
Sometimes thieves use distractions rather than brute force. This was the case at Golden Motors in Cutoff, La.
Police said that four individuals came into the store during regular business hours on July 7.
One of the four created a diversion, while another stole three keys from behind a desk and left the store.
They then fled from the store, leaving the other two members of the group behind, who were arrested at the scene.
The other two were arrested a few days later on a phone tip. Police believe they were going to use the keys to steal cars from the store.
The epidemic of key thefts is leaving dealerships looking for better security measures.
Tabuchi said that Fall Creek Motors would look into several options – from better security cameras to hiring security personnel.
Cheryl Ryan of Security Key Systems said that the most effective way to prevent key theft is creating a key control system.
A good key control system promotes accountability, just what the Chicago ordinance aims for.
“Unless you have a lock box but even that in itself, you don’t know who has the keys, who took the keys,” Ryan said. “This way if the keys are taken out of the system, you know who took the keys. So I would say that this is probably your best bet in regards to key control.”
Once keys are entered into the system, they can be tracked, letting the dealership know who had the keys. That person is then held responsible.
Ryan said the system guarantees someone cannot break into a dealership and steal the keys.
KAR Auction Services Inc. CEO Jim Hallett said he could sum up the company’s second quarter performance in one word – fantastic.
Revenue increased 9 percent overall, with salvage arm Insurance Auto Auctions leading the way with an increase of 13 percent on 11 percent volume growth.
The strong results for IAA are expected to continue as insurance companies declare more claims as a total loss, the cost for collision repairs, as well as miles driven, continues to increase.
Revenue from ADESA, the company’s auction arm, grew by 9 percent.
ADESA sold 11 percent more vehicles than a year ago, driven primarily driven by increases in the online-only volumes. Same-store volumes at physical auctions grew by only 1 percent.
The same-store decline came mostly from lower dealer-consignment volumes, which were down 5 percent. Same-store commercial volumes were up 14 percent.
This change in mix drove the overall convertion rate at ADESA’s auctions to 61 percent.
“I believe that our consigners continue to be price- sensitive as we see used-car prices decline,” Hallett said. “The good news is, this is a key factor in how much money a commercial consigner will put into a car in order to maximize the value of the used vehicle. “
Hallett said the mix shift to more commercial and less dealer consignment cars will continue as lease returns and repossessions increase over the next three years.
Floor planner Automotive Finance Corp., the third major compenent of KAR, continues to operate “very conservatively,” Hallett said.
The number of loan transactions was relatively flat and revenue declined. The provision for credit losses was 2.6 percent of average loan balances for the quarter.
Hallett said the goods news for AFC was that while the loss provision was high in April and May as the comapny ran off its defaulted loans, June provision’s for credit losses was below the expected loss rates of 1.75 percent to 2.25 percent of average receivables.
“This is a very good indicator for what we expect to see in the second half of 2017,” he said.
The shift to more commercial consignment also helps AFC, Hallett said, as the average loan value per vehicle increases, which will lead to higher revenue per loan transaction.
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