Used Car News 1/16/2023

\ By Jeffrey Bellant

The National Automobile Dealers Association is preparing for its annual convention in the wake of a strong year for the organization.

Mike Stanton, NADA president and CEO, discussed today’s business environment during a recent phone conversation from his home office in Tysons, Va. The convention is Jan. 26-29 in Dallas.

“It was a very successful year in terms of our operations,” he said. “Our Dealer Academy posted record numbers as well as our 20 Group.”

Stanton describes NADA’s Dealer Academy as a school for future dealers. Typically, these students could be a partner in a store or a dealer’s son or daughter waiting to take over the store.

In 2022, about 500 to 600 people went through the academy.

Record numbers in NADA’s 20 Group are due to the tools they provide dealers to boost their financial success.

“Also, there is so much change going on in our industry right now and our 20 Group members are learning from each other,” Stanton said. “They’re comparing notes, sharing ideas and thinking about the future.”

He added that membership numbers are up over 90% for franchise dealers.

“We’ve been fighting for dealer and consumer interests,” Stanton said.

NADA has also been engaged with manufacturers as they evolve their business model and make the journey to electrification.

One of the big fights in 2022 involved the proposed rule from the Federal Trade Commission called the Motor Vehicle Dealers Trade Regulation Rule.

“It would radically change the

way vehicles are bought and sold in the United States, requiring a crazy amount of disclosure,” Stanton said. “They just didn’t do their homework on this.”

He said regulators should work with those in the industry they are regulating because everyone wants the same thing.

“We don’t want bad actors out

there,” Stanton said. “We don’t want people using unfair, deceptive acts and practices. We’re not for any of those things.

“But there are much better ways to address the issues.”

There are already tens of thousands of comments about this proposed rule on the FTC’s site.

By Jeffrey Bellan

Justin Osburn, founder and CEO of Automotive Reinsurance Concepts, has launched Independent Dealer University, a subscriptionbased online dealer education program.

Osburn describes it as a comprehensive training program that will eventually offer a full curriculum of on-demand interactive video lessons covering all areas of dealership operations – sales, F&I, accounting, fixed ops and more.

The courses are taught by Osburn and national training director and F&I guru “3K” Cory Collins.

Osburn started Automotive Reinsurance Concepts (ARC) two years ago and it’s now a growing reinsurance and warranty company.

His background provided him with the experience and idea to start this new venture.

It was a natural progression for Osburn.

The former dealership owner is probably well known to those familiar with the National Independent Automobile Dealers Association.

Osburn served as lead instructor of NIADA’s acclaimed Certified Master Dealer course from 2017 to the end of 2019.

“It just seemed to me, doing a lot of consulting, traveling and working with the independent dealer, it seemed like there is a lot of trainiing resources for the franchise dealer to recruit and hire F&I managers,” he said.

But on the independent side, he saw many dealers who didn’t have a good foundation of how to make gross profit in F&I – How to get lenders? How to get the right mix of lenders? How to sell off a menu?

“I just saw this real big vacuum,” Osburn said. “Then when you talk

about reinsurance, only the megadealers understood it.”

Osburn said his passion for independent dealers drew him to leave NIADA and move his family to Kan-

sas City, – where his wife is from – to put together programs and resources catered to the independents dealers.

JUSTIN OSBURN

NADA Preview

Continued from page 1

“Used car dealers are impacted by this, too,” Stanton said.

Stanton said NADA is working with Congress to challenge some of these moves by the FTC, which NADA believes aren’t just bad for dealers but consumers, as well.

Dealers will get an update on all of these issues at the convention later this month.

“We haven’t been to Dallas in years, so we’re excited to be in the middle part of the country and our attendance is tracking better than it did in Las Vegas last year,” Stanton said. “We’ve also got a long list of about 50 companies on a wait list trying to get on the exhibit floor.”

Stanton said there is a strong educational lineup, as well as the traditional franchise meetings, which are very popular with dealers.

On the social side, the event kicks off at the famous Gilley’s bar in Dallas, with entertainment by Grammy Award-winning country music star Brad Paisley.

“We’ve also got some great speakers coming in as well,” Stanton said.

They include former U.S. Ambassador to the United Nations Nikki Haley, NFL Hall of Famer and newly hired coach at the University of Colorado Deon “Coach Prime” Sanders and Greg Gutfeld of Fox News.

One event NADA has had some success with is an event called “Women Driving Automotive Retail” and this year’s show will put a bigger spotlight on this session, Stanton said.

“It’s been a sellout every year, so we’re going to put more resources into that,” he added.

NADA will feature a lot of discussion on electrification, even as that segment seems to change every day.

These discussions will center on how the model has evolved and how dealers have to work more closely with car companies and vendors to make sure dealers are taking care of customers.

The 2023 NADA Show will also feature a couple of “Super Sessions.” While the event is packed with edu-

MIKE STANTON

cational sessions throughout the show, the “Super Sessions” are special stand-alone meetings.

These include “The Future of Automotive Retail Roundtable” and the “Best of the Best Ideas from 20 Groups.”

The 2023 NADA show will also address other issues dominating business today including the shortage of techs and embracing diversity.

“We’re trying some new things and it’s never enough with the tech shortage across the board,” Stanton said. “Last year, we started a diversity initiative with the National Urban League and we’re launching a pilot here soon in Louisiana to recruit new technicians.”

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Other challenges still lie ahead, especially with EVs.

“There’s a lot going on with investments that the manufacturers are requiring,” Stanton said, “and some manufacturers want to get more involved in the dealers’ business.

“We’re in a period of change and that’s never easy for anyone.”

It’s always a concern for dealers to make sure they are spending money in the right places and today’s environment “heightens’ this concern.

“Some have said that franchise dealers don’t want to sell electric vehicles, but nothing could be further from the truth,” Stanton said.

Stanton closed out the conversation with a pitch for independent dealers.

“We got a lot of independents at our show,” he said, “We love to see them and we appreciate them.

“We’re hoping for huge success in Dallas.”

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By Jeffrey Bellant

J.D. Power’s Used Car Market Outlook showed strong trends for the industry as well as a few challenges.

Both new and used car prices shot up to record highs in 2022, according to last month’s report.

Average Used Car Retail prices were $30,816 for 2022, nearly $4,000 higher than 2021 and nearly $9,000 higher than 2019.

During 2022, average used car prices actually topped $32,000 in September, before dropping in the fourth quarter.

J.D. Power provided an example of this trend by looking at a 2016 Toyota Camry. In January 2019, the price of that car was $16,351, then dropped to $13,546 in January 2021 before climbing again to a price of $17,482 in November last year.

New-car prices averaged $45,000 for 2022, more than $5,000 higher

than 2021 and nearly $12,000 higher than 2019.

But during the year, the average new-car price topped $46,000 in October and November.

Despite strong prices, cars continue to turn on both the used and new sides.

Days to turn for used cars, which averaged 51 in 2019 and 2020, fell to 43 in 2021 and 41 last year.

Days to turn for new cars, where supply continued to be an issue, were as high as 72 in 2019, fell to 28 days in 2021 and only 19 days in 2022.

J.D. Power reported the sales ratios of new-to-used vehicles among consumers and dealers have tilted to the used car side in recent years.

In 2015, the used-to-new ratio was 80% and it hit 99% in 2019. However, the ratio continued to rise to 108% in 2020, 113% in 2021 and 114% last year.

The J.D. Power Valuation Services Wholesale Price Index showed used prices are beginning to moderate.

The index and forecast data provide time-series price measurements of a fixed pool of vehicles (or the “same” vehicles), with changes based predominantly on contemporary and expected market conditions.

This process eliminates nearly all bias that could come from fluctuations in vehicle age (e.g., more younger vehicles entering the market) or vehicle mix (e.g., more expensive trucks entering the market).

The index hit a 20-year low of 83.3 around January 2009. In January 2020, right before the pandemic, the index hit 105.4. Later in 2020, it jumped above 140. In 2021, it hit a high mark of 223.7, before settling to 200.1 this month.

Challenges for dealers remain in the prices for what are typically the

most affordable segments.

In the mass market segment, the year-over-year (Y/Y) price changes (through November 2022) were highest in the small car segment (nearly 40%), compact car segment (30.8%) and midsize car segment (25.4%). This compares to the large pickup segment, which saw a Y/Y price increase of only 3.8% and the large SUV segment, which saw a price decline of 2.3%.

It was the same trend with premium compact cars rising 13.5% and premium compact SUVs rising 13.3%, while premium SUVs only saw a 2.8% rise.

J.D. Power’s Annual Valuation Services Wholesale Price Forecast shows that used vehicle prices have peaked and should soften this year and 2024. Drivers of this trend are incentives, economic growth, new production and inventory and used as a substitute for new.

He wanted to provide training, consulting, best practices, resources and pro tips for the independent space.

“It’s so the independent dealers can maximize their gross profits,” Osburn said, “which is certainly relevant today on the back side of COVID as front end profits are plummeting.”

Franchise and megadealers are already positioned to lean on their back end gross, Osburn said.

“I just saw a need there and I think we can fill it,” he said.

So, ARC was born.

On the reinsurance side, it allows independent dealers another profit center.

“Reinsurance means instead of having a third party to provide those (service contracts), the dealer owns the escrowed money for claims in a separate company,” Osburn said. “But anything that’s left over that’s not a claim, the dealer gets to keep. It’s also very tax friendly.”

Expanding into other training areas had to wait until last year, when

Osburn’s non-compete deal with NIADA that expired..

Independent Dealer University was the next step. IDU is designed to put next-level training easily within reach of independents of all sizes.

Osburn said what prompted this program was his success with consulting and training over the years.

His success has piqued the interest of smaller dealerships. Many of the dealerships are spread out, making expensive to travel across the country.

The subscription includes unlimited access for users within the dealership, as well as weekly live Zoom meetings with on sales and F&I.

“There is nothing like this available anywhere else,” Osburn said. “IDU is a comprehensive, battle-tested training program that empowers dealership owners and their staff.

“Our overriding passion for helping independents has led to a program that gives every dealership access to the absolute best education in the industry at a low cost and available anytime, anywhere.”

Retail Markets

PENNSYLVANIA

“I’ve been in business since 1977.

“Everything is online. It’s funny, the association did a survey 20 years ago and a lot of dealers weren’t online. A lot of them didn’t even have a computer. That’s all changed by now.

“We’ve got about 10 cars in inventory right now. I probably sell one a month.

“We semi-retired in 2012. Now I’ll buy some contract cars for my old customers. My wife will yell at me, ‘What are you buying cars for.’ But I’m very active in the association.

“The auctions have everyone trained to do everything on simulcast. I went to an auction about a year ago and I took a picture from lane 1 to lane 34 and there were

about 25 people there on a Friday, most of them workers. But it was also that slow time of year.

“Manheim Pennsylvania is the place to go if you’ve got a good car with low miles. And when you go online you’ll have 300 guys bidding against you.

“There is a little auction nearby, ABC Lancaster, staffed by former Manheim employees. It’s a nice, little auction. You stand in the lane and bid just like you did years ago. Even the coatcheck girl is there selling coffee. I can’t say enough about them, they’ve got eight lanes and they do a wonderful job.

“We went rafting last year and there were probably 250 vehicles in the parking lot and I said, “You know I only count about three sedans here.’ Unbelievable.

“All SUVs and trucks. There’s a dealer right down

the road from me and for whatever reason he’s still sticking with sedans. The prices of trucks are ridiculous, too. I bought a 1500 truck recently and I probably paid $2,000 over MSR and I was happy to do it, because I own it and the other guy doesn’t.

“Our claim to fame is if someone has an issue with a car you sold ‘em, take care of it. No matter what.

“The last car I sold was a 2014 Chevrolet Cruze diesel. Those are fantastic cars. The whole platform is Opel. It had 108,000 miles on it. We sold it for $13,000.”

SOUTH DAKOTA

Dirk Byers, owner, B&B Auto Sales, Brookings, S.D.

“We’ve been in business 35 years, all in the same location.

“COVID is over, but it definitely changed my business

model. It changed what I held in inventory.

“We keep about 125 vehicles, but it’s down from that now. We average about 35 sales a month.

“Cars have become a very small part of our business, about 10-15 percent. The other 90 percent would be trucks and SUVs.

“We sell about 0 percent imports, we’re very domestic.

“We do a lot of online buying. We do buy some from Black Hills Auto Auction in Rapid City.

“With the late-model stuff, our average down payment is in the $1,000 range. The length is usually 60-72 months.

“We’re looking for 5- to 10-year-old models. I hold about 70 classics, those are ‘60s,‘70s,’80s and some ‘50s.

“We’re probably higher in reconditioning costs than

some others.

“Our cars are certified with warranties so it’s about $900 per vehicle. We have our own shop.

“We do only online advertising.

“I definitely recommend that any dealer starting out become a member of the state association – even if just for the networking with the other dealers.

“There’s a lot of information to learn, like the Safeguard Rule, which was to go into effect in December and now it’s June, which will be here before we know it.

“We support our community and charities, that just goes with running a business. We donate to cancer research.

“The last car I sold was a 2016 Jeep Cherokee. It had 98,000 miles and we sold it for $17,500.”

Jeff Dreier, owner, Dreier Auto Sales, Shavertown, Pa.

Compiled by Ed Fitzgerald

Wholesale Markets

CALIFORNIA

David Aahl, vice president, North Bay Auto Auction, Fairfield, Calif.

“We’ve been doing this 29 years. We’re running four lanes currently.

“Over the last few weeks, I feel the sales have been a little bit better than I expected. The fact that the inventory has remained tight, guys came to buy. The weeks before Christmas and (during the holidays) typically are when you can ‘steal’ some cars. But I didn’t think cars were that cheap (between the two holidays).

“Another thing is dealers are talking about the tax season and feel there is going to be a good tax season. These are the subprime guys. So, there’s a little bit of a build up for that.

“What we’ve noted in the past three months, for the new-car dealers, is that the

new cars have been starting to come in – certainly, at a slower pace. But they have some inventory now. So, they are trying to cycle those cars they had or trade-ins into the wholesale lanes.

“Dealers are still watching what everyone is doing. It seems like it’s harder to get the bidding started on the floor, but once it starts, then dealers end up buying.

“A lot of guys are just waiting for the market to fall (50%) but that’s not happening. Gas is finally coming down here in California so that’s become a non-topic, as well as diesel fuel.

“I think there’s a lot of optimism that the market is going to be fairly strong and it’s not going to take a big hit. But guys are still a little nervous because the cost of parts is up.

“In recent sales we ran about 300 each. Sales per-

centages have been high in the 70 percentile.

“We run one GSA sale a month. On average we’ll run 60 to 70 units a month.

TEXAS

Wayne Cook, president, Greater Tyler Auto Auction, Tyler, Texas

“I’m good, ready for the new year.

“We’ve been in Tyler since 2001. We’re currently running three lanes but we have four.

“Our volumes were really down the week after Christmas, and the week after. But a lot of people have been off on vacation or an extended holiday. Part of it is what day the holidays fell on. Also, some people just take it off since it’s a slow time.

“Over recent months our average volume is about 250. (Sales percentages) were in the 60s up until the last

Compiled by Jeffrey Bellant

couple of (holiday) weeks. We’ve been struggling to get in the 50s.

“Since July, we’ve seen a market slowdown.

“I’m going to say our average price is somewhere between $6,000 and $7,000.

“On the retail side, I still see demand for cars, but they want cars that they perceive are ready to go. They don’t want to do a lot of projects.

“Our GSA sale is monthly. Usually, their fiscal year runs from Oct. 1 through Sept. 30.

“They’re experiencing the same thing dealerships are –they’re still waiting on cars. I think that it’s getting ready to pick up.

“I assume GSA has a lot of these cars ordered and they’re just waiting on them.

“Volumes seemed to slow down at the end of the year and now it’s because the cars are not there.

“We were getting between

40 and 50 per month, but for our upcoming sale we might have 25.

“GSA is starting to make the switch more to electric cars in the future. We’ll still be getting some gas cars, but in the future, they say they’re going to electric.

“GSA has a year/mileage (standard) for when they get rid of cars. It’s like 10 years or 60,000 miles – whichever comes first, I think. They do have a lot of low mileage vehicles that are desirable.

“But if they go to electric cars, I don’t know how much they will be accepted by the general public. I see value to electric vehicles in certain situations, like city vehicles.

“The hybrids and EVs do perform well, as long as the batteries are good.

“As far as 2023, I think it’s going to improve, though I don’t think it’s going to turn around overnight.

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ADESA Boston February 3, 17, 24 508-626-7000

ADESA Charlotte February 9, 23 704-587-7653

ADESA Chicago February 3 847-551-2151

ADESA Cincinnati/Dayton February 7 937-746-4000

ADESA Golden Gate February 7 209-839-8000

ADESA Indianapolis February 7, 21 317-838-8000

ADESA Kansas City February 7, 21 816-525-1100

ADESA Lexington February 16 859-263-5163

ADESA New Jersey February 9, 15, 23 908-725-2200

ADESA Salt Lake February 14 801-322-1234

ADESA Tulsa February 10 918-437-9044

ADESA Washington DC February 1 703-996-1100

Columbus Fair AA February 8, 15 614-497-2000

Manheim Atlanta February 9, 15, 22, 23 404-762-9211

Manheim Dallas February 1, 15 28 877-860-1651

Manheim Denver February 1 800-822-1177

Manheim Detroit February 9, 23 734-654-7100

Manheim Fredericksburg February 2, 16 540-368-3400

Manheim Milwaukee February 1, 15 262-835-4436

Manheim Minneapolis February 22 763-425-7653

Manheim Nashville February 8, 14 615-773-3800

Manheim Nevada February 10 702-730-1400

Manheim New Jersey February 1, 15 609-298-3400

Manheim New Orleans February 15 985-643- 2061

Manheim Orlando February 7, 14, 21, 28 800-822-2886

Manheim Palm Beach February 15, 16 561-790-1200

Manheim Pennsylvania February 3, 9, 10, 17, 23, 24 800-822-2886

Manheim Phoenix February 2, 16 623-907-7000

Manheim Pittsburgh February 1 724-452-5555

Manheim Riverside February 2, 14, 16, 28 951-689-6000

Manheim Seattle February 8 206-762-1600

Manheim Southern California February 9, 23 909-822-2261

Manheim Tampa February 9, 23 800-622-7292

Manheim Texas Hobby February 9, 23 713-649-8233

Southern AA February 1 860-292-7500

Manheim Atlanta February 22 404-762-9211

Manheim Dallas February 28 877-860-1651

Manheim Milwaukee February 1 262-835-4436

Manheim Nashville February 8 615-773-3800

Manheim Nevada February 10 702-730-1400

Manheim New Jersey February 1 609-298-3400

Manheim Orlando February 28 800-822-2886

Manheim Palm Beach February 15 561-790-1200

Manheim Pennsylvania February 9, 23 800-822-2886

Manheim Riverside February 2, 16 951-689-6000

Manheim Seattle February 8 206-762-1600

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Manheim Atlanta February 22 404-762-9211

Manheim Dallas February 28 877-860-1651

Manheim Milwaukee February 1 262-835-4436

Manheim Nashville February 8 615-773-3800

Manheim Palm Beach February 15 561-790-1200

Manheim Pennsylvania February 9, 23 800-833-2886

Manheim Riverside February 2, 16 951-689-6000

Manheim Seattle February 8 206-762-1600

ADESA Boston February 17 508-626-7000

ADESA Charlotte February 9 704-587-7653

ADESA Salt Lake February 14 801-322-1234

Columbus Fair AA February 8, 15 614-497-2000

Manheim Dallas February 15 877-860-1651

Manheim Denver February 1 800-822-1177

Manheim Fredericksburg February 2 540-368-3400

Manheim New Jersey February 1, 15 609-298-3400

Manheim Orlando February 21 800-337-8491

Manheim Pennsylvania February 10, 24 800-833-2886

Manheim Pittsburgh February 1 724-452-5555

Manheim Seattle February 8 206-762-1600

Manheim Southern California February 9, 23 909-822-2261

Southern AA February 1 860-292-7500

Manheim Atlanta February 15, 22 404-762-9211

The

*

The

Chase.

Neither JPMorgan Chase Bank, N.A. nor any of its affiliates are affiliated with ADESA, Inc. or Manheim, Inc. Each auction is solely responsible for their website content, sales events, promotions, fulfillment and operation of the auction.

©2023 JPMorgan Chase Bank, N.A. Member FDIC 2/23

Happy New Year! Yeah, right! It would be nice if it could be full of joyous messages and expectations. But it’s naïve to assume that the New Year will herald some new, more peaceful trends than the mordacious and vitriolic sentiments that are thrown around so easily these days.

The only industry that looks as though it’s poised for growth is the military industrial complex. That’s obviously an exaggerated and stretched remark but unrest around the world is becoming more and more unsettling. It would be nice to think that we could look forward to a more peaceful and open-minded global environment.

Things appear to be going in the other direction – the Ukraine invasion which, at first, stunned the watching world and now after nearly

a year of hitherto unthinkable atrocities, is losing the element of shock. No one has yet moved to acceptance and nor are we likely to.

In the western world, information freely flows to allow judgments and observations to be voiced with little or no condemnation. The populace in Russia is, to the greatest extent, ignorant of events; the result of broadbased manipulation of news in any of its guises.

I’ve often said that I’ve been a very lucky fellow, to have lived in an era of relative global peace. As a Brit born immediately after the Second World War, I enjoyed the rebuilding and economic boom that followed. We were never involved in the Korean War or in Vietnam and with the exception of “The Problems” in Ireland, political expediency kept things relatively

calm, ducking issues like the Cuban Missile Crisis and the like.

It’s not all gloom and doom – events have tended to bring some of us closer; the Coronavirus Pandemic (whether we chose to or not) has tended to alter the way we gather and get together.

While I still love to cook and entertain – we did a ton of it over Thanksgiving, Christmas and so on – we go out to eat more often than we used to and even order food to be delivered by various means. Meal planning is virtually a thing of the past; fancy some spicy wings or a Poke bowl? On the doorstep in 15 minutes! The Pandemic altered all kinds of assumptions and accepted practices.

We’re going to have to sort out new employer relationships and cost allocations if

the delivery world is going to persist, but imaginative minds and economic pressures will find solutions somehow. The demand has been firmly put in place and supply chains are bound to follow suit.

This year is sure to accelerate the acceptance of EVs. The manufacturers have all committed to that future. A lot has to happen to infrastructure to enable an efficient and trouble-free trip from, say, Fort Pierce to Fort Wayne or Tampa to Timbuktu. For one thing, there’s the question of who pays –not just for installation but upkeep and access, too? Who decides on the systems to be used or will there be a universal standard, yet to be agreed? Does an express recharge cost more per unit than one that takes more time?

Can you imagine if we’d al-

ready exclusively developed electric cars and someone came along with the idea of using an inflammable liquid to be pumped from a machine through a pipe into a tank that was installed in the car to slop around inside until it was used up? Probably wouldn’t fly!!

By Myles Mellor