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Thursday, 22 February 2018 12:42

Autotrader Upgrades Site to Better Compete

Competition continues to grow among digital marketers as dealers move more and more of their advertising dollars online. One of the pioneers in this field, Autotrader, is responding to this challenge by putting its site through a major upgrade. Autotrader celebrated its 20th anniversary last year. Last month, parent-company Cox Automotive announced the overhaul. The process involves new rollouts throughout the year, but some are already in place. One upgrade is a new look that is consistent across desktop, tablet and mobile screens, offering faster loading times. A modernized search experience to drive relevance and speed – up to 25 percent faster – will sort listings by shopper search criteria, previous shopping history and a combination of distance, value and merchandising. Part of the goal for the upgrades is leveraging the stable of companies owned by Cox Automotive. The first step is introducing the Kelley Blue Book Fair Market Range on all eligible vehicle inventory listings. This offering provides shoppers with increased transparency, said Jessica Stafford, senior vice president and general manager of Autotrader. “It smoothes the connection point between the shoppers and the dealers,” Stafford said. Although the rollout just started, Autotrader tested the new feature on select dealers. Stafford said the response so far has been extremely positive. “They love the look and feel, and they love the idea behind a lot of those components,” Stafford said. More importantly, they love the initial results. “This is a true transformation,” Stafford said.    
Published in Spotlight
Monday, 19 February 2018 17:28

Auto Finance Reaches Record Levels

  Auto finance origination volume reached the highest level ever observed by Federal Reserve Bank of New York last year. Auto finance debt reached $1.22 trillion in 2017, up $64 billion from 2016. Auto debt levels increased by $8 billion in the fourth quarter. Auto finance balances have risen steadily since 2011. However, originations decreased slightly in the fourth quarter. The number of finance contracts becoming 90 days or more delinquent also decreased, to 2.3 percent from 2.4 percent in the third quarter. Another measure of consumer auto credit performance provides a less positive picture. After posting two consecutive months of improvement, annualized net losses and 60-plus day delinquencies in KBRA’s Non-Prime Index rose in January. This took place in the December collection period. The Kroll Index shows 60-plus day delinquencies increased to 5.25 percent. The increase in delinquency and loss rates was driven primarily by a shift in issuer composition. Santander’s deep-subprime arm, which exhibits some of the highest delinquency and loss rates in the nonprime market, accounted for 18 percent of the index in January, compared to 16 percent the previous month and 10 percent in January 2017. Elevated severity rates also played a role in driving net losses higher, with index severities rising to 61.9 percent in January, compared to 59.6 percent in December and 57.4 percent during the sameperiod last year. Performance in KBRA’s Prime Index also deteriorated in January.  The increase in delinquency and loss rates in Kroll’s Prime Index were primarily driven by deteriorating collateral performance from CarMax and World Omni. Again, higher severities across most securitized prime auto loan pools contributed to the rise in net loss rates. The severity rate in Kroll’s Prime Index rose to 53.5 percent in January, compared to 49.1 percent the previous month and 50.4 percent one year ago. Kroll Rating Agency expects performance to improve in the spring as consumers receive their tax refunds.      
Published in Finance
Wednesday, 14 February 2018 21:40

Vehicle Dependability Reaches Best Level Ever

  The quality of three-year old vehicles took its first step forward since 2014, according to the J.D. Power 2018 U.S. Vehicle Dependability Study. Overall vehicle dependability improves 9 percent from 2017, the first time the industry score has improved since 2013. The study surveys owners of 2015 model-year vehicles. A lower score reflects higher quality, and the study covers 177 specific problems grouped into eight major vehicle categories. The overall industry average improves to 142 problems per 100 vehicles (PP100) from 156 PP100 in 2017. "For the most part, automotive manufacturers continue to meet consumers' vehicle dependability expectations," said Dave Sargent, J.D. Power’s vice president of global automotive. "A 9 percent improvement is extremely impressive, and vehicle dependability is, without question, at its best level ever." So-called infotainment systems remain a troublesome category for vehicle owners, receiving the highest frequency of complaints. The two most common problems relate to built-in voice recognition (9.3 PP100) and built-in Bluetooth connectivity (7.7 PP100).  Mass market brands continue to close the gap with luxury brands. The Mass market average of 143 PP100 is now just 7 PP100 behind the luxury average. Lexus ranks highest in overall vehicle dependability among all brands, with a score of 99 PP100. This is the seventh consecutive year Lexus has led the VDS rankings. Porsche ranks second with 100 PP100. Buick ranks highest in overall vehicle dependability among mass market brands with a score of 116 PP100. Fiat is the most improved brand, with owners indicating 106 fewer PP100 than in 2017. Infiniti has the largest improvement in rank, moving from 29th to 4th. Other brands with strong improvements include Nissan (37 fewer PP100 than in 2017) and Ford (31 fewer PP100 than in 2017). Kia's fifth-place ranking is the brand's best-ever VDS performance. Dodge and Nissan also post their best-ever rankings. Toyota models receive six of the 19 segment awards, the most for an individual corporation in the study. These awardees are Lexus CT, Lexus ES, Lexus GS, Lexus RX, Toyota Prius and Toyota Tacoma. General Motors models receive five segment awards for the Buick LaCrosse, Chevrolet Equinox, Chevrolet Malibu, Chevrolet Traverse and Chevrolet Silverado. Audi Q3 is the only model in the 2018 study to receive an award in its introduction year. Other models receiving segment awards are the Dodge Challenger, Ford Super Duty, Ford Expedition, Honda Odyssey, Hyundai Tucson, Kia Rio and Mercedes-Benz GLK-Class. J.D. Power finds that vehicle residual values can be significantly affected by better long-term quality. "Strong dependability scores not only improve demand for used vehicles, but also are a contributor to higher residual values," said Jonathan Banks, vice president of vehicle analysis and analytics at J.D. Power. "Improving dependability ultimately supports new vehicle sales and provides a better perception of the brand."    
Published in Dealers
A Colorado Senator want to exempt the state sales tax on used cars to help low-income consumers. Sen. Larry Crowder represents 16 counties in southern Colorado. Fifteen of those counties are below the federal poverty line. Crowder sees lowering the cost of used cars as critical for the residents of those counties. “I’m looking for reliability on transportation,” he said. “The intent is to help the lower and middle class.” The bill passed out of the Colorado Senate’s Finance Committee. Crowder is adding an amendment to the original bill to cap the exemption at somewhere between $17,000 and $22,000. He wants to avoid the unintended consequence of proving a tax break for classic car collectors. While the bill exempts used cars from state sales tax, Crowder said they remain subject to local taxes and fees. Crowder said the exemption will cost the state in sales tax revenue, but increases in income tax might offset some of that loss. No group promoted the idea of the exemption, Crowder said, but dealers do support it.  
Published in Dealers
Thursday, 08 February 2018 13:49

Wheels Exec Optimistic About 2018

    (Darren Aiken is the assistant vice president for Wheels Inc.)   UCN: Did 2017 meet your expectations?   Aiken: Last year was a great market for our clients. Resale values for true fleet vehicles remained strong and allowed our customers to enjoy low depreciation costs for another year.  The forecasted increase in supply did occur, but the industry was able to absorb the increase in vehicles, due to new vehicle incentives and demand for used vehicles. The last quarter of the year experienced major weather events and our hearts and prayers go out to anyone affected by the hurricanes, floods and the fires. The natural disasters also had an effect on prices of used vehicles across the country with certain segments of vehicles having price increases in the last quarter of the year.    UCN: What do you expect for 2018?   Aiken: This year looks very optimistic for Wheels and the remarketing of fleet vehicles. The supply, current economic conditions and consumer confidence will fuel the used vehicle industry for the remainder of the year. After 2018, the supply of total used vehicles for sale should start to drop from 2018 highs and we should continue to have strong resale values in the future.   UCN: What are you doing to distinguish your offerings with the growing amount of inventory entering the wholesale market?   Aiken: Our strategy continues to be building a used vehicle brand for Wheels vehicles, whether we are selling them in the lanes or online, by differentiating our vehicles from all the other used vehicles for sale. This strategy has been working, as we planned for this supply increase over the last five years. It has built a great following for Wheels vehicles. Part of our strategy is to offer certified units for sale, lane representation, vehicles that are fully maintained while in-service and one-owner vehicles. Dealers like to buy vehicles from someone they know and the integrity of the seller is critical in building a brand.   UCN: What technologies are having the biggest impact on the way you remarket vehicles? Aiken: Simulcast and online purchases by dealers have had the biggest impact on resale for fleet vehicles. As it gets more acceptable to purchase a used vehicle digitally, and condition reports, the grading system and reconditioning improvements get more fine-tuned and accepted by the buyers, we will see a drastic change in how dealers purchase vehicles now and in the future.   UCN: What ways could the auctions better meet your needs? Aiken: The auctions really do a good job and have many good employees working every day to make sure sale day happens without a hitch and on time. One area where they need to continue to focus their attention is operationally. Auctions need to continue to increase productivity of their locations and their employees. Auctions can do this a number of ways by reviewing current processes, using technology and continuing to train employees on improving processes.    UCN: What are you doing for dealers? Aiken: We continue to educate dealers about Wheels, to make sure they know our brand: that we sell certified, one-owner, corporately maintained vehicles that are represented sale events. Wheels does not use our auction lane to sell vehicles that are not owned or managed by Wheels to our dealers. Again, dealers want to purchase vehicles from whom they know and whom they trust to stand behind their vehicles.  
Published in Dealers
Monday, 05 February 2018 14:27

Independent Dealers Feel More Optimistic

The economic and retail sales growth expectations of independent auto dealers have improved substantially, according to the National Independent Automobile Dealers Association's business confidence survey for the fourth quarter of 2017.   The survey of NIADA members is conducted each quarter in partnership with Equifax to gauge their mood regarding general economic and business conditions.   Fifty percent of the dealers surveyed said they expected economic conditions to improve in the first quarter, up from 36 percent in the third quarter survey. Retail sales growth expectations improved to 67 percent from 55, and the number of dealers who expected to increase their inventory investment this quarter rose.   The big drivers of that renewed dealers’ optimism include expectations of tax relief, positive consumer sentiment due to the lowest unemployment rate in more than 30 years and confidence in the current administration's pro-growth, anti-regulation policies. That inflationary inventory situation continues to put pressure on the business expense side of the ledger, which is one reason 57 percent of dealers expected their cost of doing business to increase, up from 45 percent in the third quarter. That jump also reflects the significant investment independent auto dealers continue to make in their digital showroom – as reflected in the survey, which shows 56 percent planned to increase their digital marketing spend.  The expectation of rising expenses also showed up in dealers' perception of the single most important problem facing their business – 25 percent said it was the increased cost of doing business, by far the most popular choice. It was followed by heightened competition from franchise dealers (17 percent) lack of customer prospect traffic/leads and lack of quality retail inventory (12 percent).   Government regulations/red tape, usually one of the most popular responses, was near the bottom of the list at 6 percent.   The overall picture shows NIADA members expected business to improve heading into the new year, optimism bolstered by strong 3.9 percent holiday retail sales growth – well above the 10-year average of 2.6 percent – as well as rising wages, stock market strength, increasing employment and a generally positive economic outlook.  
Published in Dealers
Wednesday, 31 January 2018 12:43

Credit Unions Continue Growing Auto Finance

Credit unions continue to grow as players in the auto finance market. CU Direct, a software provider specializing in credit union auto finance, reports that it credit union partners, as an aggregate, became the largest auto lender in the nation in 2017. These credit unions saw 16.2 percent finance growth, the second highest loan origination growth rate among the top ten lenders in the nation according to data from AutoCount. "Credit unions continue to demonstrate their ability to compete with banks and win in the auto lending marketplace,” said Tony Boutelle, president and CEO of CU Direct. . Credit unions funded 1.8 million loans through CU Direct's Lending 360 and CUDL lending platform, generating a record $39 billion in credit union auto loans in 2017, surpassing the company's record $32 billion in loans funded in 2016.  Many credits unions have been growing their auto finance business, not just those that use CU Direct. And that trend should continue in 2018. Auto finance remains credit unions’ “bread and butter” product with vehicle loan balance growth outpacing the growth in mortgage and business loans, according to CUNA Mutual Group. During the last 12 months, vehicle finance  balances increased $38.3 billion (12.7 percent growth rate), slightly better than the $38.2 billion increase for first mortgage loans (10.8 percent growth rate). New-auto finance balances rose 1.2 percent in November, slightly below the 1.4 percent pace set in November 2016, despite November being typically one of the slower months of the year for auto finance originations Credit unions get an extra benefit from increasing auto finance – memberships are up 4.6 percent during the past year due to demand for indirect auto credit, CUNA Mutual Fund states this should be enough to keep credit union new-auto lending growing at a double-digit pace.
Published in Dealers
Otto Hahne has lived in Troy, Mich., for years. He and his wife, Jerrianne, raised three children there and built a house. But until a few years ago, he couldn’t locate his business in the city. Troy’s zoning regulations banned independent dealers. That changed with the economic downturn.   Today, Hahne’s City of Cars is one of several used-car operations located around the Troy Motor Mall, formerly an enclave only for franchise dealers. The city’s change of attitude came at the perfect time for Hahne. He operated out of a building in a suburb north of Troy and the owner of that building had just sold it to a hospital. It was much smaller than his current store, so there was an opportunity to grow. However, the cost was also larger. “It was a big choice to make,” Hahne said. “I thought I was biting off more than I could chew at the time.” Meeting with city officials convinced Hahne to take the chance. As soon as the city changed its policy, it completely changed its attitude, Hahne said, and has completely supported his operation. “They’ve been absolutely wonderful to work with,” Hahne said. The new store came with a new name. City of Cars provides better visibility online, Hahne said. Digital marketing plays a big part in Hahne’s strategy. “Every minute a car is not on the Internet is a minute of lost opportunity,” he said.   Hahne has also been on the cutting edge of technology. He started as a mechanic working on the electronic systems just coming into cars in the late ‘70s. City of Cars retails 35 to 50 units a month and wholesales about 100. Hahne retails about 15 units a month in a recently opened second location in a neighboring city. His cars go all over the country and even overseas. City of Cars recently shipped a green Mustang to Indiana and a 2007 Shelby to France. The store’s real strength, however, is repeat and referral business. “We want to sell a customer a car they want, not what we have,” Hahne said. A few years ago, Hahne saw the used-car industry was under threat and he became more active with the Michigan Independent Automobile Dealers Association. He is now in his second term as president.   His activities include being part of the NIADA’s Leadership Summit in D.C. Pretty good for a guy who left high school after two weeks. Hahne went to night school for auto mechanics after that, graduating at the top of his class. He also worked at a skating rink and started his first business, renting out skates at the local parks. In 1977, Hahne became a mechanic full time. He went to work at a dealership that sold two smaller import brands – Subarus and Triumphs. The dealership still operates as Hodges Subaru, but the Triumph brand folded in 1980. The owners gave Hahne the chance to take over one of their buildings, as well as a parts department credit to start a garage to service, restore and sell British cars. Hahne also started a motorcycle auction. In 1991, wholesaler John Cooper, one of his best clients hired him as a buyer.   This led to him starting his own used-car store in 2000 with his wife. Today, City of Cars is a true family business. Son, Evan; daughter, Lauren; and her husband, Alan Surprenant, all work there.  A third daughter, Leah Skalnek, is married to a Ford dealer and helps with social media. She also heads up City of Cars’ dog events with Detroit Dog Rescue. Jerrianne has a play space in her office for when the grandkids visit the business. Other employees are like family. Hahne is proud that he has mentored several employees who now own their own used-car stores. Despite the presence of these young people, Hahne doesn’t see himself stepping back from the day-to-day operations any time soon. “We plan on being here for years,” Hahne said.  
Published in Dealers
A recent study claiming racial discrimination in auto sales is getting plenty of national attention. The report, "Discrimination When Buying a Car: How The Color of Your Skin Can Affect Your Car-Shopping Experience,” was the basis for pieces on the national news broadcasts from CBS and NBC, among others. The report comes from the National Fair Housing Alliance (NFHA). According to its mission statement, the NFHA is “dedicated solely to ending discrimination in housing.” The NFHA said it recently conducted an investigation of eight franchise dealerships in eastern Virginia. The investigation used standard paired testing methodology. Within each paired test, one white tester and one non-white tester visited a car dealership to obtain purchase and financing information for the same car. In each case, the NFHA says the non-white tester was more creditworthy than the white tester. The investigation found that testers of all races had difficulty obtaining concrete and transparent information regarding car pricing, interest rates, and finance options for which they qualified. However, the NFHA says non-white testers often received more costly pricing options than their white counterparts for the exact same vehicle. The FHA claims dealers helped white testers by offering rebates or helping to bring down interest rates more often than they did for non-white testers. Non-white testers were presented with higher-cost financing options 62.5 percent of the time, even though they were better qualified than their white counterparts. White testers were offered more financing options 75 percent of the time. On average, non-white testers would have paid an average of $2,662.56 more over the life of the loan than less-qualified white testers the study claims.  
Published in Dealers
Thursday, 14 December 2017 00:42

Higher Rates Signal Mix of Good News, Bad News

The recent rate hike by the Federal Reserve will impact the used-car market, but when that impact comes and how strong it is remain to be seen. The Fed raised its funds rate to 1.5 percent from 1.25 percent. Many auto creditors immediately announced a change in their prime rates. For example, Huntington Bancshares Inc. announced that its prime rate is increasing to 4.5 percent from 4.25 percent, effective Dec. 14. Most car shoppers pay a higher rate than that.  The average financing interest rate in the third quarter was 5.1 percent for new vehicles and 8.7 percent for used vehicles, according to Experian. Cox Automotive senior economist Charlie Chesbrough said the rate increase will not derail the car market from its strong pace. But Chesbrough said higher rates will have a negative effect on sales in the long run. \\\\\\\\\\\\\\\"Consumers could face slightly higher costs for all their borrowing – credit card balances, student loans, financing a house or a car,\\\\\\\\\\\\\\\" he said. \\\\\\\\\\\\\\\"At the same time, higher rates drive up the cost to provide low-rate financing, which eats into profit margins and hurts the car makers as well.\\\\\\\\\\\\\\\" Cox Automotive chief economist Jonathan Smoke said the market is already seeing the impact of higher rates and tighter credit. Lease payments are higher year-over-year and there are fewer new leases. Higher average interest rate on new vehicle loans has only added $12 to the average monthly payment but the increase has been far more substantial for lower credit borrowers. \\\\\\\\\\\\\\\"The monthly payment matters,\\\\\\\\\\\\\\\" Smoke said. \\\\\\\\\\\\\\\"When rates rise, many consumers do not have an option to pay more.\\\\\\\\\\\\\\\" That might be good news for the used car market, he said, as more consumers opt for used to meet their monthly budget. In the end, the biggest factor for the market might be the reason the Fed raised rates George Hoffer, an economist at the University of Richmond, said the rate increase was a bullish call. "This is evidence that the economy is really strengthening" Hoffer said.  
Published in Finance
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Incoming NAAA President Praises Flexibility of Auction Industry

Incoming NAAA President Praises Flexibility of Auction Industry

Jerry Hinton, general manager of ADESA Portland, is the incoming president of the National Auto Auction Association. He has been married to Dawn for 33 years. They have two children,...

Copart Launches Annual Contest

Copart Launches Annual Contest

Copart Inc. announced the launch of its third annual Copart Rebuild Challenge. The Annual Copart Rebuild Challenge is a contest designed for car enthusiasts and auto rebuilders to show how...