Tag Archive | "used-vehicle sales"

Business Leaders Cautiously Optimistic About Trump, Economic, Auto Sales

ALPHARETTA, Ga. — Twenty senior industry leaders expressed cautious optimism about the economy and the automotive retail industry in White Clarke Group’s annual U.S. Auto and Equipment Survey.

The chief executive officers, directors, chairmen and president surveyed by the technology firm were optimistic about new-vehicle sales, which are on the decline but should remain among the highest on record in 2017. What has them cautious is President Donald Trump, whose communication style has them wondering if his administration can deliver on its pro-business campaign promises.

“As a result, business is falling back into cautious and hesitant state,” said Pacific Rim Capital CEO David Mirsky, noting the economic outlook was favorable following the November election. “The coarseness of our President’s communication style hasn’t helped. Even though most businesses agree with a lot of what Mr. Trump wants to do, we don’t like the way he has operated so far.”

According to the National Automobile Dealers Association, new-vehicle sales should end the year at 17.1 million units. During the first six months of 2017, the report noted, 8.4 million new cars and light trucks were sold. That’s down 2.2% from the year-ago period. Despite the decline in vehicle purchases, economic experts remain optimistic about the market.

One of the reasons is the $1.1 trillion auto finance market, which has fueled the industry’s rebound from the financial crash and recession of 2008-2009. Since then, U.S. light vehicle sales have delivered seven consecutive annual gains — the longest upward streak in decades, with sales peaking at 17.55 million new-vehicle registrations in 2016.

The concern, however, is affordability. According to Experian, the average finance amount for a new vehicle reached a record $30,621 in 2016, while the average finance amount for used also achieved new peaks at $19,329 per car. And in order to lower monthly payments, consumers are extending loan terms. In the fourth quarter of 2016, for instance, the 73- to 84-month term band rose 29% from the prior-year period.

“With the average loan amount for new and used vehicles hitting all-time highs, we are seeing the need for affordability drive consumer purchasing behavior,” said Melinda Zabritski, senior director of automotive finance for Experian Automotive. “Our latest research shows an $11,000 gap between the average loan amount on a new and used vehicle — the widest we have ever seen.”

Then there are hurricanes Harvey and Irma, which market analysts are still assessing but are believed to have damaged up to 1 million vehicles — 300,000 to 500,000 in the Houston area alone. This, analysts said in the report, could lead to a substantial increase in demand for new vehicles. It may also help with the oversupply problem in the used-vehicle space, which remains robust.

As for the U.S. economy, the report noted it grew at an annualized rate of 2.6% during the second quarter, with some financial institutions, such as Goldman Sachs, estimating it grew 3%. On the global stage, the International Monetary Fund and the Organization for Economic Cooperation and Development predicted that the global economy will expand by 3.5% this year.

The report also looked at regulatory threats, specifically those posed by the Consumer Financial Protection Bureau. Since opening its doors in 2011, the regulator, which oversees banks, credit card companies, and lenders, has returned about $12 billion in restitution to almost 30 million Americans. If Trump delivers on his promise of less regulation, however, the bureau faces a reduced role in 2018, the report noted.

The report touched on several other topics, including the impact of mobility on ownership models, the equipment finance market, new technology, and the impact of rising interest rates. However, most economic outlooks seemed to rest on the ability of a Republican White House and Republican Congress to deliver on their pro-business promises.

“It’s becoming clearer now that there is dysfunction in the White House and the Republican Party is fractured, so all early attempts to pass meaningful economic legislation have failed,” said Adam Warner, president of Key Equipment Finance. “Business confidence has eroded and will likely continue to be challenged in 2018.”

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Black Book: Vehicle Depreciation Shows Pockets of Strength at Midway Point of 2017

LAWRENCEVILLE, Ga. — The average price of a used vehicle for model years 2012-2016 decreased in value 1.3%, slightly more than the 1.2% decrease in May, according to Black Book. The price of cars overall dropped 1.8% (unchanged from last month), while trucks decreased 0.8% in value in June. All vehicles are averaging a 12-month depreciation of 16.7%.

In June, small pickups registered the lowest monthly depreciation of 0.1%. Vehicles in this segment include the Toyota Tacoma, Chevrolet Colorado, GMC Canyon, Nissan Frontier and the Honda Ridgeline. They collectively finished June with an average price of $21,328, a 7.3% decrease from a year ago.

Subcompact cars recorded the largest depreciation during the month at 2.8%. Vehicles in this segment include the Chevrolet Sonic, Ford Fiesta, Honda Fit, Toyota Yaris, Nissan Versa, Kia Soul and the Hyundai Accent. They collectively finished June with an average price of $6,554, a 22% decrease from a year ago.

The segment with the largest 12-month depreciation is prestige luxury cars (25.4%). Vehicles in this segment include the BMW 7-Series, Lexus LS 460, Porsche Panamera, Jaguar XJ, Mercedes Benz S-Class and the Audi A8. They collectively finished June with an average price of $34,894, down from $46,781 one year ago.

Over the past three months, the values of two segments have remained relatively unchanged: full-size pickups and small pickups, which have inched up 0.2% in value, according to Black Book.

Subcompact luxury CUVs registered the largest monthly depreciation in June of 1.8%. Vehicles in the sub-compact luxury crossover segment include the Audi Q3, BMW X1, Mercedes Benz GLA Class, and the Mini Cooper Countryman. Vehicles in this segment finished the month with an average value of $16,388, an 18.9% decrease from a year ago.

“Falling gas prices in the month of June resulted in pockets of strength in used-vehicle valuations,” said Anil Goyal, senior vice president of automotive valuation and analytics for Black Book. “Pickup trucks and large utilities have been strong so far this year while small cars have continued to drop, but the remainder of 2017 is expected to show differing trends in terms of vehicle retention strength.”

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Rapid Recon Salutes 100 Years of NADA and Vehicle Reconditioning

PALO ALTO — In 2017, the National Automobile Dealers Association (NADA) celebrates 100 years serving franchised automobile dealers. Next year also marks the centennial of the first evidence of vehicle reconditioning, according to a provider of reconditioning workflow time-to-market software solutions.

Rapid Recon issued a press release today saluting the NADA for 100 years of faithful service to the automobile industry. It also offered a brief look into the history of the industy, the association and the reconditioning.

The NADA story began in 1917 when 30 auto dealers traveled to the nation’s capital to convince Congress not to impose a luxury tax on the automobile. They successfully argued that the automobile is a necessity of American life, not a luxury. From that experience, the NADA was born.

“We’re excited to be an exhibitor at NADA in New Orleans for its 100th anniversary, a proud organization for a great industry,” said Dennis McGinn, founder and CEO of Rapid Recon. “It is remarkable how many people today make their living working in and supporting the American automobile dealership, nearly five million men and women.”

The company will be exhibiting in Booth No. 5417 at the NADA Convention & Expo, which will be held at the New Orleans Ernest N. Morial Convention Center on Jan. 26-29.

Some industry milestones, sourced from The American Car Dealership, show how quickly the franchised auto dealer network developed:

  • 1896: The first franchised new-car dealership opened in Reading, Pa. It sold Winton automobiles, one of the earliest successes of the emerging automobile manufacturing business
  • 1899: First automotive showroom opened in New York City, displaying Winton cars
  • 1905: Cars first sold on an installment plan. Two dealer groups formed from which would become the National Automobile Dealers Association
  • 1917: NADA officially organized with 15,000 dealers, representing 600 brands, many of which never produced a working vehicle or sold vehicles
  • 1933: First NADA Used Car Guide
  • 1934: NADA membership reaches 30,000
  • 2017: NADA membership totals 16,000 new car and truck dealers, with 32,500 franchises, both domestic and international members, representing 38 brands.

Recon Recognized

As for recon, there was no need for reconditioning at first, at least not as it exists today. What trade-ins there were in the industry’s beginning were animal-drawn wagons and similar conveyances, according to information collected by Rapid Recon. Undoubtedly, some of America’s first automobile dealers spiffed up those vehicles, replacing a wooden wheel or two, repairing a broken seat or strengthening a weak axle spring to give a worn-out buggy “like-new” appeal for buyers.

By the time the NADA was founded in 1917, the sufficiency of units in operation meant a growing opportunity for used-vehicle sales. According to motor vehicle registrations in 1917, as compiled by the U.S. Bureau of Public Roads, nearly five million cars and trucks were registered. While difficult to calculate how many of the 7,653 million vehicles registered from 1914 until then would have still be in operation, it’s likely many of them flowed back to dealers as trades.

By late 1916, creative rebuilders were putting old cars, now “reconditioned,” back on the road.

Motor Age magazines from the 1920s discuss reconditioning in he role of used-car sales success. The May 11, 1922, edition presented two ideas: “The used-car company will sell its car at cost, plus reconditioning, plus sales expense, plus a normal profit.” In a separate article, “The National Used Car Company Plan,” the publication floated the idea of centralized used-car operations and reconditioning by zone — the thought then being used-car sales were a distraction to new-car salespeople.

Most reconditioning in those early days was cosmetic, though there was a growing recognition of the need to make those cars both safe and somewhat “reliable,” according to Rapid Recon’s research. During the Great Depression, reconditioned vehicles supplemented dealers’ new-car opportunities.

The beginning of World War II is recognized as the birth of intentional reconditioning, which morphed into the operation that’s now integral to new-car dealership used-car departments. With new-car manufacturing curtailed by the U.S. government from 1942 to late 1945, new-car supply was virtually nonexistent. Used cars were in demand, and dealers survived by sourcing and refurbishing those vehicles. Service, parts, tires and other related opportunities became dealers’ bread-and-butter, not unlike today.

Throughout the ‘50s and ‘60s, most dealers viewed reconditioning as a necessary evil and as a means of disposing used cars taken in trade during that era of the two-to-three-year trade cycle.

Today, reconditioning continues as a discipline for cosmetically and mechanically upgrading used vehicles so they’re safer and more reliable and can command higher sales grosses. Recognizing the faster they can get used cars from acquisition to the front line to sell them, many dealers today are adopting time-to-market workflow software to reduce this cycle to three to five days, not the average and costly eight to 15 or so days, McGinn noted.

This need has expanded considerably in recent years with the flow of off-lease vehicles, which OEMs ask their dealers to market as pre-owned certified models. Certified pre-owned worked its way into the automotive vocabulary when Lexus launched the first CPO program in November 1993. Toyota’s program started in 1996. Most manufacturers and their dealers today offer certified pre-owned vehicles to buyers.

A Dealer’s Recall

One expert industry veteran, still in the business today, spent his earlier career working for Garber Buick in Saginaw, Mich., which was Buick’s first store. Its owner Gary Garber was one of General Motors’ first 13 distributors. Working in that historic environment gave this industry veteran opportunity to review and study old dealership and industry records, from which he shared recently, including perspectives on attitudes about vehicle reconditioning through the years and how over time recon practices changed.

“In the ‘50s and ‘60s, recon was patching vehicles up — making them look good cosmetically, but just good enough to pass off to somebody else and make some money on them,” he recalled.

It was not until the late ‘70s and early ‘80s that dealers began to take a serious interest in reconditioning used cars. That work, however, was predominately sublet. It was the advice of industry consultants, Garber said, that began to convince dealers they needed to bring reconditioning into their own operations to keep that profit internally.

About this time too, he added, dealers, seeing the growth in third-party service contract sales, formed their own off-shore service contract companies to retain those profits themselves. As service contract professionalism grew, those companies’ management teams, in order protect their risks, pushed for higher reconditioning standards. Better reconditioned vehicles, in turn, helped attract more used-car buyers, making used-car departments integral to dealership profitability.

As we move toward a new decade, industry changes will continue to keep manufacturers, dealers, and solution providers watchful. The huge volume of vehicle open safety recalls in recent years is one concern. Fortunately, use of recall management software woven into the reconditioning process helps identify affected models so their recall issues can be addressed before those vehicles reach the frontline and the consumer, whenever the recall is announced in the recon cycle.

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CNW: Online Ads Motivating More Used Sales Than Print

Looking at December used-vehicle sales, CNW Research noted that a growing percentage of shoppers are searching for vehicles outside of their local market. The research firm also noted that shoppers motivated by online advertising outpaced print newspapers for the first time.

Compared to November, 23% more buyers in December went to neighboring areas to make their vehicle acquisition, CNW noted in its monthly newsletter. The firm also reported that about 55.08% of buyers, or 4.44 million consumers, said they were motivated to visit a dealership based on a print newspaper advertisement, an 18.7% decline from December 2013. Conversely, buyers who said a dealer visit was motivated by something they saw on the Internet grew by 37.13% to 4.495 million buyers.

“This is the first time Internet motivation exceeded print newspapers,” CNW’s Art Spinella noted. “The power of the Internet finally knocked newspapers out of the catbird seat as a cause of dealership visits.”

For December, approximately 3.32 million used vehicles were sold, up about 1% from a year ago and 6.6% vs. November. Of that total, franchised new-car dealers sold 1.2 million used units, down slightly from the 1.3 million units the segment sold one year ago. Independent dealers also experienced a near 3% decline vs. a year ago.

“Private party sales, on the other hand, rose nearly 16% vs. the same month of 2013 and nearly 28% vs. November,” Spinella reported. He noted, however, that despite the slight drop in pre-owned sales, franchised dealers realized a 3% increase in transaction prices vs. November.

“Total value of vehicles sold by franchised dealers approached $20 billion, up 18.6% vs. a year ago and 3.5% vs. the previous month,” Spinella wrote. “For independent dealers, the total value of vehicles sold rose 7.5% to $8.5 billion, while casual value skyrocketed by 22% to $7.3 billion vs. a year ago.”

For the year, used-vehicle sales inched up to slightly from a year ago to more than 42.05 million units

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Kontos: Wholesale Used-Vehicle Prices Soften Again in September

CARMEL, Ind. — Wholesale used-vehicle prices softened again in September, the fifth monthly decrease in a row, ADESA’s Chief Economist Tom Konto reported this week.

The firm found that wholesale used-vehicle prices averaged $9,557 in September, down 0.4% from August but up 0.8% from one year ago. The slight year-over-year gain reflected a higher percentage of institutional sales of late-model vehicles this year vs. last year, which Kontos said masked the softness in prices if the data is viewed on a disaggregated basis.

“Improved retail sales of used vehicle after a tough summer cushioned the blow to wholesale prices from growing supply,” Kontos added.

According to CNW Research, used-vehicle sales in September were up 4.1% on a month-over-month basis and p 4.6% on a year-over-year basis. And according to Autodata, sales of certified pre-owned vehicles were down 15.4% vs. August, which had three fewer selling days this year.

“A better reflection of certified used-vehicle demand is that September CPO sales were up 19.7% from the prior year,” Kontos added.

By category, average prices for minivans were up slightly; Kontos attributing the increase to an increase in the percentage of current and one-year-old models sold in factory sales in September. Trucks and cars moved in opposite directions, with prices for trucks rising significantly on a month-over-month and year-over-year basis, while cars show major sequential and annual prices declines. Crossovers also showed price declines.

Prices for used vehicles remarketed by manufacturers were down 4.2% on a month-over-month basis and down 3.3% on a year-over-year basis, as manufacturers sold of elevated program vehicle inventories, according to Kontos. Prices for fleet/lease consignors were down 2% sequentially and down 1.1% annually.

“Prices for off-rental “risk” units within this segment were again down significantly,” Kontos noted. “Dealer consignors realized a 1.9% average price decrease versus August, although prices were up a modest 0.3% relative to September 2013.”

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Asbury Records Best Q1 Performance in Group History

DULUTH – Asbury Automotive Group Inc. achieved an all-time high for first-quarter operating profits, the dealer group reported today, with all of the group’s business lines reporting gains.

Income from continuing operations for the quarter came in at $18 million vs. $11.4 million from a year ago. Net income stood at $17.6 million vs. $19.9 million from a year ago, according to F&I and Showroom magazine.

Total revenues increased 6 percent to $1.1 billion, while new-vehicle retail revenues and gross profit rose 5 and 16 percent, respectively.

F&I revenues increased 21 percent to $39 million, while F&I revenue per vehicle sold increased 14 percent to $1,157. Parts-and-service gross profit rose 7 percent. Total gross profit for the company increased 11 percent.

“Asbury is pleased to announce the strongest first quarter results in our history,” said Craig T. Monaghan, Asbury’s president and CEO. “Our first quarter performance was made possible by the solid operational and financial foundation we have put in place, and these results reflect continued progress towards our goal of becoming a best-in-class automotive retailer.”

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