Used Car News 10/1/12

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October 1, 2012

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National Chain DriveTime Sells Out to PE Firm

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One of the nation’s largest buy-here, pay-here chains is selling itself to a private equity group. DriveTime Automotive Group, Inc., and DriveTime Acceptance Corp and DriveTime Credit Co., entered an agreement on Sept. 14 to sell DriveTime in separate transactions. According to a filing with the Security and Exchange Commission, a new entity owned by third-party investors will purchase all of the outstanding stock of DT Acceptance Corp. and DriveTime Automotive Group. This entity will acquire the companies’ used-vehicle dealership operations, including 91 owned and leased stores and 16 reconditioning and other facilities. Phoenix-based DriveTime will sell its finance receivable portfolio, consisting of vehicle-related installment sales contracts, certificates

representing its residual interests in securitizations of finance receivables, and certain other assets to Santander Consumer USA Inc. Santander has purchased a number of other subprime auto portfolios in the past few years, including CitiFinancial Auto. Shareholders of DriveTime Automotive Group and DriveTime Acceptance Corp., will receive “aggregate proceeds of approximately $700 million, while the purchasers will assume, refinance or repay certain items of existing indebtedness of DriveTime,” according to the filing. The transactions are subjected to closing conditions “including the receipt of required regulatory approvals and, with respect to the obligations of the purchasers to consummate (the deal), the successful completion of an offer to repurchase DriveTime’s $200 million publicly traded senior notes.” For several years, DriveTime was a publicly traded company. The chain was called Ugly Duckling for part of that time. The company’s founders took the chain private in 2002. DriveTime is one of the large participants in the buy-here, pay-here business being looked at by the Consumer Financial Protection Bureau as the regulator evaluates the industry.

Photo by Jeff Kowalsky BLOOMING: Outgoing NAAA President Charlotte Pyle, right, prepares to hand off the reins of the association to incoming president Paul Lips.

Auction Staff Attend Disney Institute

The National Auto Auction Association meets for its annual convention this month in Orlando. For outgoing president Charlotte Pyle, there will always be an extra connection with this city. Pyle worked with The Disney Institute to create a training program for auction staff. “We were able to reach people at auctions who don’t get a chance to come to the conventions,” she said. “They’re the ones who help us with the day-to-day work. “They’re extremely critical to our business. This gave them leadership skills. On the first day, they were really nervous spending time with auction general managers and owners. They grew so much in that two-day span.” Interviews with the incoming and outgoing presidents on page 8

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CFPB Looks into Buy-Here, Pay-Here By Ted Craig

Buy-here, pay-here dealers continue to feel like a targeted group, and for good reason. The largest car market in the nation stands poised to add new regulations on in-house financing. Meanwhile, the Consumer Financial Protection Bureau has started looking into the industry’s largest players, such as DriveTime. “Big Brother is going to be looking under your hood,” said Ken Shilson, founder of the National Alliance of Buy-Here, Pay-Here Dealers. Shilson was speaking at the recent Innovate Autostar Users conference. This is the first year the DMS provider put a compliance track in its conference. And those sessions were very well attended. One of those sessions featured attorney Michael Benoit, outlining the latest developments with the CFPB. Much remains unknown about how the bureau will approach the industry. The CFPB is directed to oversee the “large participants” in each sector it covers. That wound up being 96 percent of the companies in the credit reporting business, Benoit said. A standard for buy-here, pay-here

is undetermined. Benoit said $29 million in total annual receipts probably crossed the threshold. That includes all related companies.

made with the direct contact. The question is how much of an impact this has on the CFPB’s overall culture. Benoit was optimistic a year ago

“We don’t unwrite rules in this country.” Michael Benoit If a dealer falls under the CFPB’s jurisdiction and gets examined, that process is challenging. Unlike other regulators, the bureau brings attorneys to its exams. This creates a more adversarial relationship, Benoit said. Benoit said in one of his dealings with the CFPB, the Bureau’s young attorney was very bright and very aggressive. Benoit said they have made some progress in educating this attorney about the buy-here, pay-here business. He said attorneys for most financial sectors are doing the same. Unfortunately, they’re doing it on their customers’ dimes. Benoit is happy with the progress

based on some of the hiring the bureau made. He said at the time these people were experienced regulators with a history of fairness. Many of these people are leaving now. Benoit said he knew of one regulator who took a pay cut to return to the Federal Trade Commission. The CFPB has plenty of money to hire replacements. The bureau gets a percentage of the Federal Reserve’s budget, about half a billion dollars, and can ask for money from Congress. Also, the CFPB collects money through settlements. Benoit said major finance companies are putting hundreds of millions away in reserve to pay off settlements.

This massive budget means the bureau doesn’t have to pick its battles, Benoit said. Some dealers continue hoping a change, such as a new administration, will ease this burden. Benoit doubts there is any going back. “We don’t unwrite rules in this country,” he said. The CFPB touches dealers in many indirect ways. For example, collateral protection insurance remains a state regulated business. But Chris Kirwan, president of CPI provider Berkshire Risk Services, said the bureau coordinates with those regulators. Even non-automotive cases still affect the industry. For example, Capital One settled with the bureau on a credit card matter concerning ancillary products sold by a third-party vendor. That creates a precedent for all credit providers. Benoit said the main concern of the CFPB is creditors having compliance systems in place. Brent Carmichael, a consultant with NCM, said federal inspectors in other fields have told him no business ever meets all requirements. “You’ll never be 100 percent compliant,” Carmichael said. But dealers need to work on being as close to perfect as possible.

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NEWS BRIEFS CPS Closes Securitization

Consumer Portfolio Services Inc. announced the closing of its third term securitization in 2012. The transaction is CPS’s sixth senior subordinate securitization since 2011. In the transaction, qualified institutional buyers purchased $147 million of asset-backed notes secured by automobile receivables purchased by CPS. The sold notes, issued by CPS Auto Receivables Trust 2012-C, consist of five classes. Ratings of the notes were provided by Standard & Poor’s and Moody’s. The weighted average effective coupon on the notes is approximately 2.44 percent. The 2012-C transaction has initial credit enhancement consisting of a cash deposit equal to 1 percent of the original receivable pool balance. The final enhancement level requires accelerated payment of principal on the notes to reach overcollateralization of 11 percent of the then-outstanding receivable pool balance. GETTING IT STRAIGHT An article in the Sept. 17 issue on California’s Senate Bill 956 should have stated that buy-here, pay-here dealers would need an additional $25,000 bond for the California Finance Lenders License.

The transaction utilizes a prefunding structure, in which CPS sold approximately $105.3 million of receivables today and plans to sell approximately $41.7 million of additional receivables during October 2012. This further sale is intended to provide CPS with long-term financing for receivables purchased primarily in the month of September. The transaction also included $10.3 million of receivables originally originated by CPS in 2006 and 2007 that were recently repurchased from a securitization transaction, which closed in 2007.. Spireon Teams with Verizon

Spireon, Inc has entered into a strategic relationship with Verizon to deliver its FleetLocate fleet management solutions. Now, small, medium and large businesses with fleet operations can better manage their mobile business by combining Spireon’s GPS business intelligence platform and the Verizon wireless network. Spireon will certify and combine its capabilities with the Verizon C R O S S WO R D by Myles Mellor

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wireless network to deliver new solutions. Together, Verizon and Spireon sales teams will work sideby-side to package FleetLocate and Verizon offerings for any size business that operates a fleet of vehicles. Mazda Enhances Certified Pre-Owned Program

Mazda North American Operations announced the renewal of its agreement with Experian Automotive, designating AutoCheck as the exclusive vehicle history report in its certified pre-owned vehicle program. In addition to the renewal, Mazda is bolstering its CPO business by

offering a three-year AutoCheck Buyback Protection program. The new AutoCheck Buyback Protection program offers Mazda customers a reassuring peace of mind when they buy a CPO vehicle from Mazda. AutoCheck Buyback Protection is available at no extra cost on AutoCheck vehicle history reports if a certain title brand is found after the vehicle is reported to be free of the brand. The AutoCheck Buyback Protection program covers what the customer paid for the vehicle (up to 110 percent of the NADAguides.com published retail value) plus coverage of up to $500 in aftermarket accessories.

Published By General Media LLC USED CAR NEWS (ISSN 1555-7413) is published at 24114 Harper, St. Clair Shores, MI 48080 Phone: 586-772-5200 or 800-794-0760 Fax: 586-772-9400 www.usedcarnews.com Charles M. Thomas Founder (1947-2002) Lynda R. Thomas, Publisher Colleen Fitzgerald, General Manager Editorial: Ted Craig, Managing Editor Jeffrey Bellant, Staff Writer Contributing Writers: Emily Caswell, Jenny King, Sheila McGrath Columnist: Tony Moorby Advertising: Shannon Colby, Account Manager Megan Frump, Account Manager Marie Hingst, Account Manager Circulation: Helen Thomas

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Production: Josie Godlewski, Media Manager Tim Montie, Graphic Designer ———

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Used Car News is published the first and third Monday of each month. Subscribers: We print advertisements as sent to us by auctions and other advertisers. It is not possible to verify the correctness of listed vehicles in auction ads. Most lists are partial and all lists are subject to last minute changes by auto auctions, so before travelling a long distance for a particular auto auction event, contact the auction by telephone for a fax of vehicles in the sale. Used Car News assumes no guarantees or liabilities concerning the accuracy of any advertisements. All Rights Reserved. Reproduction in any form is prohibited without the written consent of the publisher. É&#x; É&#x; É&#x; Please submit clear, legible copy. Payments from first time advertisers must accompany the insertion order. Distribution is guaranteed by U.S. Postal Carriers. The advertising reservation deadline is 5:00 p.m. Friday, 10 days prior to the issue date. Camera ready ads must be received by noon on Monday prior to the issue date.

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Industry Summit Names Winners

Photo by Jeffrey Bellant AMERICAN IDOL: Dina Wilson, finance director of Timbrook Automotive in Cumberland, Md., took one of the top awards at the Industry Summit in Las Vegas. By Jeffrey Bellant

LAS VEGAS Dick Hannah Dealerships, in Vancouver, Wash., won the 2012 F&I Dealer of the Year award during the recent Industry Summit here. The convention also gave out the F&Idol Award, which was won by Dina Wilson, finance director of Timbrook Automotive in Cumberland, Md. The dealer group launched a new marketing campaign around the tagline, “Believe in Nice,” promoting its employees and the work they do in the community, according to Greg Arroyo, who presented the award. For example, the dealership hosted telethons for the Children’s Cancer Society and adoption drives for the state’s Humane Society. The dealership also supports the Arbor Day Foundation by planting a tree for every sale it makes. To date, the company has planted 70,000 trees. On the business side, the dealership has seen its F&I profit perretail-unit rise $300 since 2007. The finalists for the F&I Dealer of the Year award, called F& I Pacesetters, included six dealerships. Besides Dick Hannah Dealerships, the finalists included: Hoy Fox Toyota Lexus, El Paso, Texas, which closed 2011 with a 63 percent improvement year-over-year in F&I products; Landers ToyotaScion, Little Rock, Ark., a store that has raised its F&I revenue from $260,000 per month to more than

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$1 million since 2006; Nyle Maxwell Dealerships, Austin-Round Rock, Texas, which maintains a 7.5 percent charge-back rate, while averaging two-products per deal; Robbins Auto Mall, Humble, Texas, which has the No. 1 Nissan store in the region, while vying for the top spot in the nation; and Southwest Kia, Dallas, with an F&I department that takes in about $18.1 million annually. The F&Idol award was sponsored by AIS. Bob Corbin, CEO of AIS, said a lot of good ideas come out of the contest which is in its second year. The F&Idol Award seeks out the best F&I presentation for the following categories: vehicle service contract, gap, tire & wheel, key replacement and other (theft, appearance packages, windshield repair/replacement, etc.). Candidates had to send in a video clip limited to five minutes showing their F&I product presentation skills, with a panel of F&I training experts as judges. Wilson was also the category winner in vehicle service contracts. Other category winners included: Raymond Borg of SuburbanScion Toyota, Troy, Mich., for GAP; Joe Lawrence of Metro Imports, Kalamazoo, Mich., for Key Replacement; Chris Bell of Freehold Buick GMC, in Freehold, N.J., for Tire & Wheel; and Jeremy Johnston of Suburban Ford, of Sterling Heights, Mich., for Other (prepaid maintenance).

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Leasing, Finance Show Comeback By Jeffrey Bellant

LAS VEGAS – Pent-up demand, the return of leasing and expanding finance options could make the coming months strong ones for franchise dealers, according to one speaker at the recent Industry Summit. Jim Kurcharski, vice president of alliance sales for Ally Financial Inc., said there is good reason for optimism in the market. Current numbers suggest a robust car market, he said. But statistics also show volatility in the market, like a jump in the truck market in 2011, which Kurcharski attributes to high demand following a drop in gas prices, gridlock in Congress and the freezing up of capital markets for about 90 days. However, in January 2012, for the opposite reason – increased gas prices – cars jumped far ahead of trucks in sales, he said. “Don’t let that fool you, ladies and gentlemen,� Kurcharski said. “There is a tremendous amount of pent-up demand, particularly in the truck space and commercial (market).� In 2008, the meltdown was “quick, dirty and hard,� but the good news was that the market bounced back fairly fast, Kurcharski said. As a result of the change in the

overall industry, franchise dealers have between 35 and 38 percent of the used car market. “The good news is that a lot of franchise dealerships that had an imbalance in their business really learned how to sell used cars,� Kurcharski said. “We experienced that in our segment of the business very clearly. “They took that business from the independents and, more importantly, they took it from the casual market.� The study also shows that the vehicle supply is running lower than the historical average. Kurcharski said it’s good news, from a financial services perspective, since franchise dealers have a more balanced supply and demand. “The OEMs are being much more self-disciplined,� Kurcharski said In terms of consumer credit, there is more availability. Also, Ally’s delinquency numbers show that consumers will pay for a car before they pay other bills, even a mortgage. The result is that there are a lot more financial service businesses moving into the market. “We still have a strong and growing industry,� Kurcharski said. “From a lender’s perspective, we need to continuously improve (to serve) your business.� There are still some areas of con-

Photo by Jeffrey Bellant DEALER’S ALLY: Ally Financial’s Jim Kurcharski said there is pent-up demand and available financing in the auto industry during his remarks at a recent conference.

cern. Loan terms have extended out to 84 months. “We hear whisperings of credit unions that are (offering) 96 months,� Kurcharski said. To get a payment where a consumer can better afford a car, Ally Financial has created Ally Buyer’s Choice, which allows a customer to

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sell a vehicle back to Ally at a specific time and at a pre-determined dollar amount, during the contract. “So it gives the customer an opportunity to get out (of the deal),� Kurcharski said. Even the financing of electric vehicles has become a cottage industry, he said.

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WHO SAYS NICE GUYS FINISH LAST?

© 2012 ADESA, INC.

Congratulations to the new NAAA leader. 2013 President, Paul Lips.

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PAGE 8 - NAAA CONVENTION

Chain Exec Takes Charge (Paul Lips is the incoming president of the National Auto Auction Association. He is ADESA’s executive vice president of operations and finance.)

UCN: Tell us about yourself. Lips: I was born and raised in South Bend, Ind. I went to school at Ball State. After college, I moved to Indianapolis and did public accounting for about six years. I knew that wasn’t for me. I wanted to be somewhere that had a lot of variety and I could meet a lot of different people. The auction industry fit both those criteria. UCN: Did you know anything about the auction industry before you started at ADESA? Lips: Not a darn thing. It was really an eye opener to see this industry that most people don’t know exists. I started in the finance department when we were about a third of the size we are now, about 15 years ago. ADESA is always changing and evolving. We went public in ’04 for

the second time. I wasn’t there the first time. Then I moved into operations. Then we went private again and then public again.

UCN: What made you want to be NAAA president? Lips: The first couple of conventions I went to, I wasn’t too involved. But then I went to the banquets and saw the presidents up there and thought, “I’d like to do that someday.� But I never thought I’d have the chance because I’ve been at corporate the whole time and not out at an auction. But (ADESA CEO and former NAAA president) Tom Caruso suggested I throw my hat in the ring. UCN: What perspective do you bring to the role never having been a dayto-day auction manager? Lips: We’re not the ones who make it happen every day. That’s the people running the auctions. I have the utmost respect for them. When I visit some of the bigger auctions around the country, I see that would be a daunting task. To have hundreds of employees and

making sure everything is coordinated for all your customers and making sure that every lane is ready to run with 3,000 cars on sale day, and then to have to dismantle it all and rebuild it the next week – I have a lot of respect for them.

UCN: So what are you going to do for them as NAAA president? Lips: I’m going to continue Charlotte’s two big initiatives – the Leadership Institute and the lobbying efforts. I want to focus on getting more people involved and the Disney Institute can help with that. Somebody is going to have to run the association in another five years. We always need to find the talented people at the auctions and get them involved. Frank and I talk a lot about the power of membership. When we all work together, we can really help out the wholesale environment. UCN: What do you see as your biggest challenge? Lips: Being realistic about what I can accomplish, because it is only a year. I want to get out there and meet

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a lot of people and engage with as many of our members as I can. UCN: Did Tom Caruso

give you any advice on being president? Lips: Don’t be long winded. Say what you’re going to say and move on.

NAAA President Reaches Out to U.K. (Charlotte Pyle is the outgoing president of the National Auto Auction Association. She and her husband Joe own Capital City Auto Auction in St. Albans, W. Va., and Mountain State Auto Auction in Shinnston, W.Va.) UCN: How have you enjoyed your year as NAAA president? Pyle: It’s been outstanding. I’ve loved every minute of it. The best part was when we traveled to England and met with the auction folks over there. It was a wonderful experience. The way they run their auctions is totally different. They run an auction every day. We visited a Manheim auction and a BCA auction. We really leaned a lot. We were able to share ideas back and forth. We spent three full days there. We hope we set up future meeting for the NADA conven8 b 1, "/ 8H 9A89

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tion, because they all come over for that. At one time, they used to be part of our association, but it’s so expensive to come back and forth for our convention. It didn’t make sense for them to do that. I wanted those channels to be open. When you get into the everyday grind of a business, you do things the same old way. You pull somebody different in and you get fresh new ideas. For example, their auctioneers work full time for them. UCN: Do you feel you accomplished your goals as president? Pyle: I felt we accomplished some good things. For example, the educational program with The Disney Institute. My goal was to get that started. I’d love to see that expand, maybe fine tune it for title staff or con-

dition report writers. Another accomplishment is that we’ve established a political action committee. We’ve spent time on Capitol Hill. We were able to fight some bills that would have been very detrimental to our industry. UCN: Any parting thoughts? Pyle: Thanks to the consistency of Frank Hackett’s leadership, the walls between Manheim, ADESA and the independents are gone now. Naturally, we’re all going to go after clients, but as an association we’re going to do what’s best for all. If you’re not involved and paying attention, you cannot make a difference. Members need to realize they have to take the initiative. We can’t pull them along.

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There are signs the buy-here, payhere sector is facing increased challenges. Meanwhile, Ken Shilson, founder of the National Alliance of BuyHere, Pay-Here Dealers, said the average loss for buy-here, pay-here dealers on recoveries increased in the first half of the year. Shilson was speaking at the Innovate Autostar Users conference. The average gross dollar loss per recovery increased to $7,621 from $7,245. The average net dollar loss increased to $5,183 from $4,950. At the same time, unit sales declined by 5 percent.

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Shilson said the reason for this decline is increased competition from both other dealers and more aggressive subprime finance companies. The increased competition has helped drive up the cost of inventory at the same time its holding down the average down payment. Dealers are making up for the lower initial payment by getting a higher monthly payment, Shilson said. The average weekly payment is now $90, although the average term is starting to approach 48 months. “You’ll never get that money if you don’t ask for it,� Shilson said.

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A Dallas resident bought a van with a wheelchair lift from a local Ford dealer. He needed it for his daughter, who was temporarily disabled. Unfortunately, the lift didn’t function properly and the dealership failed to address the problem. The man’s response to the situation caught Levine’s attention. He placed a large yellow lemon on top of the van and spent hours driving around the store. The dealership countered by offering cash to customers when they spotted the lemon van. The staff responded on their own by taunting the man when he drove past. That proved a major mistake, because the man’s wife was videotaping the entire demonstration.

He also recorded the nasty collection calls. Levine took the case and turned it into a class action lawsuit. The Ford store closed down before the case went to court. This case featured many of the elements that cause dealers to lose lawsuits. It had a sympathetic plaintiff and an aggressively rude response from staff. Levine now works as senior legal office for Autostar. He warned dealers at the Innovate Autostar Users conference that any customer could hire a lawyer. “There are a lot of hungry lawyers out there,� Levine said. Attorneys with knowledge of automotive sales law were harder to find in the past. Today, Levine said, any general lawyer can spend a few hours online and become familiar enough with the law to handle a case. Many dealers believe their clients cannot afford representation. What they fail to realize is they’re the ones who will foot the bills. Plaintiff’s lawyers will always seek a way to sue under a law that requires the respondent to pay all attorneys’ fees if he loses the case. More than money often motivates these lawyers, however. Continued on page 16

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Towns Vary on Virtual Dealers By Sheila McGrath

The town of Shrewsbury, Mass. could take a few tips from a neighbor to the north on the best way to deal with online auto dealers. Shrewsbury and several of its selectmen were sued last month for attorney fees and costs after losing a long court battle to keep a dealer from opening in town. The plaintiff, Matthew Grenier, had been trying to start his business selling luxury used cars over the Internet since 2007. Meanwhile, in Derry, N.H., a town roughly the same size about 60 miles away, the Zoning Board of Adjustment has been approving at least six requests for online auto sales businesses every year and getting no complaints from the town’s residents. For years, Shrewsbury capped the number of used-car dealers it allowed in town to 20. But last September, Grenier prevailed in his lawsuit when the state appeals court struck down Shrewsbury’s policy as being too vague and subject to “capricious application.� Grenier recently filed suit in U.S. District Court in Worcester to recover $53,422.63 in damages, attorney fees and costs. Derry’s Zoning Enforcement Officer, Bob Mackey, said requests for

online auto sales businesses started coming in about five years ago. He said the business owners aren’t looking to have vehicles stored at their homes, and aren’t offering them for sale on the premises. “Typically, they’re just for someone to have a home office and computer,� Mackey said. “They normally buy vehicles at auctions and they get moved to another auction.� In August, Derry granted an approval allowing Bradley Ross to use a home office to run an automobile wholesale business. Ross told the board he wouldn’t be conducting any public sales from his home office. He originally planned to store a couple vehicles there, but later agreed to store them off-site. The main reason Mackey requires dealers to go through a zoning hearing, he said, is to set down guidelines for the businesses. But once approved, they don’t cause any trouble in the neighborhood, he said. “Generally it hasn’t been an issue as far as people getting an approval and then abusing it,� he said. Mackey said the online sales method seems to be catching on. He’s seen an uptick in the number of requests in recent years.

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USED CAR NEWS

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Lawyers

– continued from page 12

Levine said many consumer lawyers are driven by a sense of social justice, which makes them even more challenging. Attorney’s fees often prove greater than the actual settlement. That’s one reason not to take case to trial. “When you decide to litigate, you are gambling,” Levine said. Dealers end up paying for both attorneys and damages. They also lose money because dealership staff spends huge amounts of time gathering material for discovery. Dealers who take their case to court often find an unsympathetic audience. Not only do juries often favor the plaintiffs, so do elected officials such as judges and justices of the peace.

“Your customers vote,” Levine said. The best defense is preparation. Dealers need to appoint a compliance officer for the store, along with a separate privacy officer. These people need to become experts in the relevant laws. Levine recommends the book series for plaintiffs’ lawyers published by the National Consumer Law Center. They also need to monitor the dealership’s reputation on sites like Ripoff Report and the Better Business Bureau. Finally, the entire staff needs to prove outstanding customer service. That will keep away both lawyers and people with giant lemons on their vans.

GM Recalls Malibus

General Motors is recalling 426,240 model year 2007-2010 Saturn Aura and model year 2008-2010 Chevrolet Malibu and Pontiac G6 vehicles equipped with a 4-speed automatic transmission. On these vehicles, the tabs on the transmission shift cable end may fracture and separate. If the tabs were to fracture and separate, the shift lever and the actual position of the transmission gear may not match. The driver

would be able to move the shifter to ‘PARK’ and remove the ignition key, but the transmission gear may not be in ‘PARK.’ The vehicle may not be able to be restarted and the vehicle could roll away after the driver has exited the vehicle, resulting in a possible crash without prior warning. GM will notify owners, and dealers will install a retainer over the cable end or replace the shift cable as necessary.

9/24/12 4:26 PM

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USED CAR NEWS

CarMax Reports Flat Earnings Despite Higher Retail Sales

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CarMax Inc. reported results for the quarter ended Aug. 31. Net sales and operating revenues increased to $2.76 billion from $2.59 billion in the same period last year. Net earnings were $111.6 million, compared with $111.2 million. “We are pleased with our improved retail sales in the quarter, as used unit comps strengthened and we continued to open new stores,� said CarMax CEO Tom Folliard. “Net earnings were flat, as the contributions from the growth in retail sales and CarMax Auto Finance income were offset by higher SG&A costs, which were pressured by the ramp in our store growth rate, and the tough comparisons in our wholesale operations.� Used vehicle sales improved, with total used units climbing 8 percent and comparable store used units up 5 percent. The comparable store used unit growth was driven by improved conversion, which was supported by better credit offers and continued strong in-store execution, Folliard said. The used vehicle average selling price was similar to the prior year’s quarter. Wholesale vehicle unit sales declined 2 percent compared with last year’s quarter, following increases

of 23 percent and 20 percent in the same quarters of the two previous fiscal years. Appraisal traffic in the current quarter was higher than in the prior year period; however, the appraisal buy rate was lower, which reflected the effect of moderating wholesale vehicle valuations. Other sales and revenues declined 1 percent compared with the prior year’s same quarter, as an increase in extended service plan revenues was more than offset by a reduction in net third-party finance fees. Third-party subprime providers, originated 14 percent of used vehicle unit sales in the current quarter compared with 7 percent in the prior year quarter. ESP revenues climbed 18 percent largely due to the growth in retail vehicle sales and an increase in ESP penetration. CarMax Auto Finance income increased to $75.7 million from $63.8 million in the prior year quarter. The improvement in CAF income was primarily due to the 14 percent increase in average managed receivables, which grew to $5.25 billion from $4.6 billion in last year’s same quarter. The allowance for loan losses increased modestly, to 0.9 percent of managed receivables as of Aug. 31.

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USED CAR NEWS

Dealer Loses Lemon Law Case

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The American Arbitration Association rendered a decision awarding a full refund of the purchase price of an automobile to a consumer where the car dealer allegedly deceived the consumer during the sales transaction. The hearing on whether the dealer violated the Merchandising Practices Act was held on Aug. 9 at the St. Charles County Courthouse in Missouri. The consumer, Bronson Bush, purchased a 2005 Ford F-150 from Geoff Rogers Motor Company in St. Charles, Mo. Multiple unsuccessful repair at-

tempts immediately after purchase forced Bush to seek a more reliable vehicle. Upon attempting to trade the vehicle, another dealership informed Bush that the truck was a “lemon law buyback,� and offered him less than half of what he paid. Bush called the law firm Krohn & Moss Ltd., who agreed to represent him free of charge. The arbitrator ruled that the company “should have known about the Lemon Law buy-back status of this vehicle, or discovered this fact through reasonable due diligence.�

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USED CAR NEWS

NHSTA Starts Crash Tests

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The U.S. Department of Transportation’s National Highway Traffic Safety Administration (NHTSA) announced the lineup of model year 2013 passenger vehicles that will be tested as part of the agency’s 5-star safety ratings program. Every year, NHTSA tests vehicles with the highest sales volumes and compares them, using star ratings, to highlight which vehicles go above and beyond what is federally required. Under the updated ratings program – More Stars. Safer Cars. – one star represents the lowest score and five stars represents the highest. Starting with model year 2011, the agency updated its program, adding an overall rating, a new pole test for side crashes and improved crash test dummies including small-stat-

ured female crash test dummies. The program encourages automakers to improve crash protection and develop even safer vehicles in order to achieve a coveted government 5-star safety rating. NHTSA will rate 54 vehicles for the 2013 model year, including 33 passenger cars, 16 sport utility vehicles, one van, and four pickups. The program’s crash tests will provide consumer safety information on approximately 85 percent of model year 2013 vehicles sold in the United States, while rollover tests will provide information on 92 percent of the 2013 fleet. As the vehicles are tested, the results will be posted online. In addition, a number of model year 2013 vehicles had carry-over designs from the previous model year or have already been tested.

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USED CAR NEWS

GM Trys to Lure Volt Buyers With Generous Financing

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DETROIT (AP) – General Motors rolled out the Chevrolet Volt two years ago with lofty sales goals and the promise of a new technology that someday would help end America’s dependence on oil. So it seemed like a good thing in August when sales of the $40,000 car set a monthly record of 2,800. But a closer look shows that things aren’t what they seem for the cutting-edge car. Sales rose mostly because of discounts of almost $10,000, or 25 percent of the Volt’s sticker price, according to figures from TrueCar.

com, an auto pricing website. Other pricing services gave similar numbers, and dealers confirmed that steeply discounted Volts are selling better than a few months ago. GM’s discounts on the Volt are more than four times the industry’s per-vehicle average, according to TrueCar estimates. Edmunds.com and J.D. Power and Associates say they’re about three times the average. Discounts include low-interest financing, cash discounts to buyers, sales bonuses to dealers, and subsidized leases. Continued on page 28

9/24/12 4:19 PM

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USED CAR NEWS

Classic Auto Operation Expands to Fourth Site

OPEN FOR BUSINESS: -" & )16 )"0 ) 00& 0 4") ,*"0 1%" -2 )& 1, &10 #,2/1% )&#,/+& ), 1&,+F -,("0* + ,%++6 2"+ 0 0 &! ) 00& /0 /" ,+" ,# 1%" "01 &+3"01*"+10 1%"0" ! 60F By Jenny King

With one large building closely packed with a variety of cars for sale, and facilities in Benicia and Fairfield, Calif., Specialty Sales Classics added a fourth location in Redwood City the end of September. The consignment business reports sales of between 275 and 350 vehicles a year, or three out of five cars, said Specialty spokesman Johnny Duenas. “Sales are up in 2012,” Duenas said. “And due to the grand opening of our Redwood City Showroom (Sept. 29), we expect to have an even better 2013.” Aside from the obvious sales tool of featuring inventories online, Specialty Sales has a presence at places where car enthusiasts gather: cruises, shows, events. Duenas said the company, which currently employs 28, has been doing off-site work since 1978, but has made a greater effort in the last two years to be at well-attended events. “We have participated in the Good-Guys car shows, Euro Sunday, Hot Danville Nights, the Function, Altamont Cruisers, Benicia Car and Concours d’Elegance,” Duenas said. “We also enjoy hosting events at our locations.” Specialty keeps track of the number of transactions generated (new consignments and sales) versus attendance. “But you can’t put a value on being out there in front of the collector car community,” he said. In mid-August, the Pleasanton facility housed vehicles including a 2007 Maserati Quattro Porte with an asking price of $39,995; a 2007 Noble M400 at $99,990; a 1966 MG MGB for $15,990, and a 1965 Pontiac GTO convertible “clone” priced at $19,995.

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They shared inside space with a handsome 1957 Chevrolet Nomad wagon with a silver-and-black interior (asking $51,990); a 1940 Ford Deluxe Coupe ($32,990) and a 1953 GMC Sedan Delivery ($49,990). Duenas said that while the average price of cars sold is likely in the $30,000 to $45,000 range, it’s hard to be exact. “We literally sell cars from $10,000 to $200,000 or more,” Duenas said. In mid-September Specialty had 215 cars on consignment. “Our growth is a result of a few things,” Duenas said. “From a seller’s point of view we offer a tremendous service to those who are trying to sell their collector car by providing the venue and resources necessary to most effectively sell.” The consignment process is “painless and easy” for the seller, who can continue everyday life while Specialty Sales handles the transaction. Specialty Sales assists with vehicle transport both for U.S. and overseas deliveries. “For the buyer, working with a dealer gives a sense of security,” Duenas said. “There are great investment opportunities out there in classic cars.” California residents do pay a sales tax on purchases, based on area of residency, Duenas said. Demand, often fueled by nostalgia, coupled with a diminishing supply leads to potential increase in value, he said. “Plus California cars in general are in high demand,” he said. “I have seen clients double their investment in time spans shorter than five years. “That’s hard to do in the stock market these days.”

9/24/12 4:17 PM

AuctionAcademy-9x13_UCN.pdf

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USED CAR NEWS

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tion of two power systems – electric and gasoline. With a sticker price of $40,000, minus the $10,000 the company pays in incentives, GM gets roughly $30,000 for every Volt. So it could be losing at least $30,000 per car. GM confirmed there are incentives on the Volt and that the company loses money on the car. But the automaker declined to give figures for the discounts or the losses. The figures exclude a federal tax credit that goes to buyers. The automaker says Munro’s estimate is high because it doesn’t spread the Volt’s costs far enough into the future, when more Volts will be sold. Automakers typically spend $1 billion or more to develop a car, and sometimes don’t recoup the investment and start making money until late in its life. Also, Volt technology will be used in future cars and trucks, eventually leading to profits, the company says. GM spokesman Jim Cain says most of the Volt discounts come in the form of lease deals, which account for about two-thirds of sales. In some markets, Volts can be leased for $249 per month with $2,400 down. “We’re trying to create a market for a brand-new technology,’’ Cain says.

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Americans have been slow to embrace electric cars. But the Volt’s August sales show they’re willing to buy if prices are low enough. Even so, electrics have a long way to go before they enter the mainstream and make money for car companies. Electrics and gas-electric hybrids account for just 3.5 percent of U.S. auto sales this year. GM is losing thousands of dollars on every Volt, raising the question of how long it can keep eating the steep losses. For the foreseeable future, carmakers will have to cut prices to move electric vehicles off dealer lots. The nonpartisan Congressional Budget Office says the cost of electric cars must drop to be competitive with gasoline-powered ones. GM executives have conceded from the start that they were losing money on the Volt, and that was before the big discounts. Now the losses could be even higher. It costs $60,000 to $75,000 to build a Volt, including development, manufacturing and raw materials, estimates Sandy Munro, president of Munro & Associates, a Troy, Mich., a company that analyzes vehicle production expenses for automakers. Much of the cost comes from an expensive combina-

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USED CAR NEWS

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Dealer Adds Second Location; Serves Array of Customers

Over 40,000 Ways to Save! The U.S. Government offers a wide variety of select cars, trucks and vans equipped with popular options at substantial savings. 2 '0 &( %+ . "% % 2 (* ( ) ! .*(% , 2 %% & "', "' ' %(/ &"% 2 ()-% * (%(*+ ' ,-* + 2 ( -0 * + + Photo by Kristin Craig SEEING RED: Dealer John Mihelich, center, and the staff at Woodward Auto in Pontiac, Mich., greet a diverse mix of customers. By Ted Craig

John Mihelich sees a wide array of customers at his Woodward Auto in Pontiac, Mich. One minute he’s talking to a woman from a nearby upscale suburb that is in for some service work. The two reminisce about the BMW she drove when her children were young. A few minutes later he’s congratulating a young man for paying off his buy-here, pay-here contract. Mihelich asks about a recent trip to the Carolinas. “My philosophy is something for everyone,� Mihelich said. That means stocking the lot with cars ranging in price from $500 to $50,000. Mihelich opened his Pontiac store in 2000 after several decades in the car business. He just opened a second store in Highland Township, Mich., also called Woodward Auto. The second store gives Mihelich a chance to spend more time closer to home and to have a presence in a growing area for auto sales. The location is prime for getting drive-by traffic, Mihelich said. There’s an easement out front and a gas station next door. The decision to buy the property was driven as much by the real estate value as the opportunity to expand. Some condemned buildings sat on the site for three years before Mihelich bought it. Now there’s a sparkling used-car store, accented in a Ferrari red that reflects Malevich’s background as a specialist in fixing German cars. He started working for high-end dealerships in Detroit’s swankiest suburbs after graduating at the top of his class for auto mechanics. But Mihelich came from an entre-

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preneurial background. His parents were in the restaurant business. So when he had a chance to open his own store, he took it. He started Bloomfield Eurotech with a former used-car manager handling sales while he oversaw service. Mihelich eventually took over the entire operation, moved further up Woodward Avenue and called the new store Woodward Auto. The name reflects more than its place on the map. It brings up images of Detroit’s automotive heritage that are on display every year during the Woodward Dream Cruise. Mihelich has been involved with that annual event for years. His stores display several classic cars and he is in the restoration business. The main focus is on the here and now, however. That means providing for his customers’ financial needs as well as their driving needs. Mihelich offers in-house financing along with financing from other sources such as Credit Acceptance Corp. There’s even a small separate cash lot next to the main Pontiac location. The cars vary in price, but are consistent in quality. Mihelich tries to buy units that would get a 3.5 to 5 grade on OVE.com. Mihelich may display a classic red Chevelle in his lobby, but he keeps his advertising up to date. Woodward Auto recently launched an app customers can download by scanning a QR code. Woodward Auto experienced some challenges in the past few years like most dealers, but the store’s steady stream of repair work keeps it stable. Mihelich expects to grow his new store with that same combination of sales and service.

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Dealer Group Targets Compliance By Jeffrey Bellant

LAS VEGAS – A Group 1 Automotive executive said a focus on compliance has improved F&I and strengthened the company’s core values. Pete DeLongchamps, vice president of financial services and manufacturer relations, gave a keynote address during the Industry Summit by citing the ever-lengthening list of laws and regulations affecting the business. DeLongchamps said many of these laws and regulations didn’t even exist until recently. But people in the industry are charged with being experts on these requirements. “We can turn those words and regulations into an opportunity to improve our processes people and performance,� he said. DeLongchamps said compliance and regulation have made Group 1’s F&I department even better. “Stunningly, we have leveraged our audit process,� DeLongchamps said, “to make us more professional by doing (these things) the right way.� Group 1 owns and operates 122 dealerships, with 159 franchises and 28 collision centers, in 15 states and in the United Kingdom. Last year, the company sold more than 180,000 new and used units

and this year the company plans on selling more than 200,000. The sale of new and used cars, however, only generates 85 percent of the company’s revenue and 36 percent of the gross profit. “That’s why, at the end of the day, what we do in the parts-and-service business and F&I arena, are the key drivers in profitability,� DeLongchamps said. Success in this area is dependent on a set of strong core values. “We hold our people to a higher standard,� DeLongchamps said. “We have to do that. The core values are integrity, transparency, professionalism and teamwork.� The company does not rationalize bad behavior. “If an employee, regardless of stature, success or profit, violates any of these core values, they are most likely terminated,� DeLongchamps said. “Since we’ve adopted and rigorously enforced these beliefs, it’s incredible how our quality of people have improved and how incidents surrounding our ethical and moral behavior have declined precipitously.� The company has several safeguards to remain compliant ranging from non-negotiable policies and procedures to F&I ethical and legal certification programs.

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Group 1 has also tripled the staff of its audit department. “We took an approach that auditing would be our friend,� DeLongchamps said. “That’s a vast departure from most businesses. “We have folks traveling every week and every day to visit our dealerships making sure that all 122 of them are being in as close to

(complete) compliance as possible.� He said the numbers show this formula has been a success. The past quarter, Group 1 generated nearly $285 million in gross profit, about $1,200 per unit in F&I and adjusted net income approaching $30 million. “All these results are the best in the company’s history,� he said.

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USED CAR NEWS

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Hispanic Buyers Use Phones To Shop for Automobiles

Mobile marketer RedMas surveyed a sampling of the 33 million Hispanic mobile subscribers in the United States about their preferences when purchasing a vehicle. The survey, “Quiero mi carro nuevo: U.S. Hispanics Automobile Preferences 2012”, conducted through RedMas’ vast network of mobile sites, found that 40 percent of Hispanic mobile users selected safety as the determining factor when buying a car, while 35 percent chose gas economy as being the most important consideration prior to signing a new vehicle contract. Hispanic consumers rely upon

their mobile devices to search for information and compare prices before making a vehicle purchase. 36 percent of respondents use their mobile phones for price comparisons, while 22 percent use them to seek information and reviews. According to the study, 32 percent of Hispanic mobile users are planning to purchase a pickup truck as their next vehicle. As for other popular models, 17 percent preferred sport cars, 12 percent would rather have medium size sedans, and 11 percent went for SUVs. Only 2 percent planned to make large sedans their next purchase. U.S. Hispanics are loyal customers and it’s no different when it comes to the brand of their vehicles: 38 percent of Hispanic mobile consumers are planning to buy the same brand of automobile they currently own. The U.S. Hispanic mobile buyer leans towards cars made in Japan or United States with Toyota leading all automakers with 24 percent followed by Chevrolet (22 percent) and Ford (20 percent). As for luxury car preferences, BMW is the first option with 27 percent of the picks, with Mercedes Benz a close second with 24 percent.

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9/21/12 4:25 PM

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USED CAR NEWS

PEOPLE IN THE NEWS Manheim Names Auction General Managers Manheim has announced the selection of two new general managers. Tina Novoa was named general manager of Manheim San Francisco Bay and Jay Waterman was named general manager of Manheim A l b a n y. B o t h &+ will assume ,3, their new roles by the end of this month. Novoa joins Manheim from her most recent position at Nissan North America as dealer operations manager. Prior to Nissan, she held positions of increasing responsibility with Wells Fargo Bank, Volkswagen Credit Inc., and GE Capital Fleet Services. Novoa is a graduate of the University of La Verne in Athens, Greece, and she also holds a Master of Business Administration degree from California State University in Hayward, Calif. Jay Waterman has been named general manager of Manheim Albany. He was promoted from assistant general manager at this location and will assume full Jay r e s p o n s i b il 1"/* + ity for all business operations at Manheim Albany. Waterman began his career at Manheim in 1989 at Manheim Albany, where he held positions of increasing responsibility. Since 1999, he served as assistant general manager, where he implemented new processes and procedures throughout the organization and created a strong, profitable internal operations infrastructure at that location. Waterman has worked in the auction and automotive industries for more than 23 years. CFPB Names Board

The Consumer Financial Protection Bureau has named the members of its Consumer Advisory Board. The newly appointed board members include experts in consumer protection, financial services, community development, fair lending, civil rights, and consumer financial products or services. They also represent depository institutions that primarily serve underserved communities, and

UCN_32.indd 1

they represent communities that have been significantly impacted by higher-priced mortgage loans. Members will have staggered three-year terms. The Consumer Advisory Board members are: Chairman: Jose Quinonez, executive director, Mission Asset Fund, San Francisco, Calif. Vice chairman: Bill Bynum, CEO, Hope Enterprise Corp., Jackson, Miss. Gary Acosta, executive chairman, New Vista Asset Management, San Diego, Calif. Jo Ann Barefoot, co-chair, Treliant Risk Advisors, Washington, D.C. Don Baylor, senior policy analyst for economic opportunity, Center for Public Policy Priorities, Austin, Texas. Maeve Brown, executive director, Housing and Economic Rights Advocates, Oakland, Calif. Steve Carlson, head of marketing, Mint.com, Mountainview, Calif. Laura Castro de Cortes, vice president of alternative financial services, Centris Federal Credit Union, Omaha, Neb. Elizabeth Costle, director of consumer and state affairs, AARP Public Policy Institute, Washington, D.C. Prentiss Cox, associate professor of law, University of Minnesota, Minneapolis. Patricia Duarte, director, Neighborood Housing Services of Phoenix, Phoenix. Patricia Hasson, president, Clarifi, Philadelphia. Adam Levitin, professor of law, Georgetown Law School, Washington, D.C. James McCarthy, CEO, Miami Valley Fair Housing Center, Dayton, Ohio Jennifer Mishory, deputy director, Young Invincibles, Washington, D.C. William Nelson, executive director, USA Cares, Radcliffe, Ky. Michelle Peluso, global consumer chief marketing and Internet officer, Citigroup, New York, N.Y. Dory Rand, president, Woodstock Institute, Chicago, Ill. Annette Rizzo, judge, First Judicial District of Pennsylvania, Philadelphia. Ellen Seidman, chair, Board of Directors of the Center for Financial Services Innovation, Washington, D.C. Josh Silverman, president for U.S. consumer services, American Express, New York City. Robert Stoll, founder, Stoll Berne LLC, Portland, Ore. Donna Tanoue, vice chairman, Bank of Hawaii, Honolulu, Hawaii Jane Thompson, CEO and founder, Jane J. Thompson LLC, Lake Forest, Ill. Jonathan Zinman, associate professor, Dartmouth College, Hanover, N.H.

9/24/12 4:36 PM

USED CAR NEWS

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RETAIL MARKETS FLORIDA

Brandi Noegel, president, Noegel’s Auto Sales, Starke, Fla.: “We’ve been in business 65 years. We’re in the Northeast part of Florida. “We’re keeping maybe 60 to 65 units on the lot. That’s about the same as last year. “We usually buy our vehicles from the auctions and from a few wholesalers. The way we acquire cars hasn’t changed. “Right now, we’re selling between 20 and 25 vehicles a month. That’s not enough. I need to sell more. “It’s about the same as this time last year. It hasn’t improved. “One problem is some of the major businesses in our area have been closing. “The dealership is only buy-here, pay-here. “Our average terms go out three years. “The average down payment would be about $800 to $1,000. “I sell almost all domestic units. In the area we’re in, the people just don’t buy imports. “I carry 70 percent cars,

compared to (30 percent) trucks and SUVs. It used to be the percentage of SUVs (I stocked) was a lot higher. But the SUVs aren’t moving like they used to do. “Our average retail price is about $8,995. That’s up from this time last year. In terms of marketing and advertising, I use our local newspaper, a local car-buying guide and the Web. “I’m cutting down on the newspaper and radio and doing more with the Internet. “On the Internet, we use Wayne Reeves software, plus we’re on Facebook with our cars. We’re in the beginning process of using Twitter. We’ve just got to get into the (social media) more. “We’ve also used Craigslist and we might get one or two deals occasionally from that. “My reconditioning costs are between $500 and $800 per car. Our recon has gone down a little. I think it was higher in 2011. “One of the reasons it’s gone down is we’re looking for (better) vehicles. We’ve

Compiled by Jeffrey Bellant also cut costs. It’s tough, though, because with most vehicles you have to replace the tires right away when you buy them. That’s at least $400 right there. “We have a full service center. It has nine bays. We not only service our own customers’ cars, but we also do outside service. “We’re in an area that doesn’t have many service centers. A lot of our customers say they wouldn’t know what to do if we weren’t here. “But I think people aren’t servicing vehicles like they should.” INDIANA

Tyler Trent, president, Trent Auto Sales, Vincennes, Ind.: “We’ve been here since 1971. “We keep about 15 to 20 units on the lot for retail. We don’t keep nearly as many retail units as we used to. We focus on our repeat business. “We also wholesale, which is a big focus. “On average, we’re selling 15 - 20 units a month.

“We’re probably selling a few more than we did last year. Maybe some of our regular customers were waiting to buy. “We get our vehicles from several auctions. We go to Mt. Vernon I-64 Auto Auction in Illinois. We also go to ADESA Indianapolis. “We sometimes go to Manheim Indianapolis. We also go to Wolfe’s Evansville and Wolfe’s Terre Haute auctions. We go to Indianapolis Car Exchange. We don’t do online buying. “We do no subprime and no buy-here, pay-here. “Most of the people we deal with write us a check. “Most of our inventory is domestic. “We carry a lot of Ford and GM vehicles. We just carry a few Hondas and Toyotas. “Our average model years range from 2005 to 2009, mostly. “Mileage has gone up, like everyone else. We like to keep them at 100,000 or less. “But I don’t care how many miles they have if they’re nice. We can still

sell them. “Right now, we’ve probably got five cars on the lot and 15 to 20 trucks/SUVs. At one point, we didn’t have many cars. But we still don’t carry a lot of them. “We warranty the cars ourselves. If people have a problem after the warranty is up, we work with them. That’s why we’ve been able to be here so long. “When we get vehicles in, they all need tires and brakes, generally. We check them over pretty closely. “I’d say recon costs are between $800 and $1,200. “Although we don’t do any of the body work here, we’ll do most of the minor stuff and light mechanical work. “We’ll send them out to get detailed and if they need any paint/body work. “We only service the vehicles we sell. We don’t service any outside customers. “Really, we don’t use any advertising. It’s word-ofmouth. “Our average retail price is between $10,000 and $15,000. Prices came up from last year.”

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UCN_33.indd 1

9/24/12 11:04 AM

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USED CAR NEWS

WHOLESALE MARKETS MICHIGAN

Nathan Simonson, general manager, Grand Rapids Auto Auction, Jenison, Mich.: “Our volumes have been around 700 cars per week. “That’s up a little bit from last year. “Our dealer sales have taken a huge jump. “Our main niche has always been the commercial accounts, like GM Financial. “We just signed a contract with Credit Acceptance Corp. “But our dealer (consignment) has picked up a lot for us this year. “Sales percentages are around 65 to 70 percent. That’s about the same as 2011. “We pull about 400 to 500 bidder badges every week. “We’re pulling in dealers from Chicago, Indiana, Ohio and, obviously, Michigan. “We don’t have a lot of wholesalers here. “It’s mostly independent dealers and new-car (dealers).

“We also have a strong Internet base. “The money has been strong in the lanes. “I attribute it to a smaller quantity of cars. “About 35 percent of our volume is from national accounts. “A higher percentage of our volume is coming from dealers. “Our GM Financial units run the first and third Tuesdays of the month. “Those sales are great. We run between 150 to 200 cars every other week. “The sales percentage for that is about 95 percent. “We also have won the Auction of Excellence award from GM Financial for the first and second quarters. “We use Auction Pipeline and have had a lot of success through that. “In the summertime we’ll run RVs, heavy duty units and highline units, but (that trails off ) as we head to the fall. “All of the Chevy products seem to do well in the GM Financial sale.

“Dealers know we stand by our cars.” NEVADA

Jeff Brasher, general manager, Brasher’s Reno Auto Auction, Reno, Nev.: “We’ve been in business for 12 years. “We have four lanes and we’re running all four. “On average, we’re running between 325 to 350 (vehicles per sale). We just went over the numbers and we’re pretty close to last year for (total) consignment. “Our sales percentage, year-to-date, is about 65 percent. That’s about the same as last year. Reno is typically a pretty high percentage sale. “It’s probably just because it’s a smaller market compared to (other Brasher’s sales). “Our fleet-lease and repo consignors are smaller regional companies. “At a recent sale, we had about 215 bidder badges in the lanes. That’s pretty close to last year’s numbers. “You know, we’re seeing

Compiled by Jeffrey Bellant newer faces a little more one of the top three hardCompiled Jeff Bellant often now and, certainly, est hitby markets in the counwe’re seeing more online try (during the recession). participation, simply be- There were a number of cause of the lack of cars local and regional banks at (across the market). How- the time that were buying ever, I think the market is heavily into the car market. getting a little stronger. “However, they were also “Dealers are coming here tied up in the real estate from Nevada, Northern market. A lot of those guys California and down into just backed right out of the the central part of Califor- business. nia, and southern Oregon. “As a general mood, peoWe also have a pretty strong ple attribute some of the Idaho dealer base, along lack of business to the genwith some Utah dealers. eral public’s (apprehen“New-car sales have been sion) to spend money right a lot more steady during the now. But I don’t think that’s last 60 days. affecting what the dealers “Inventory still is tough are doing in the lanes. for guys to find. There are “Our online platform is a lot of higher-mileage cars Auction Pipeline. I can say out there. we’re seeing more and more “Ironically, through July, impact bids on the line. it was the cheaper car that “An impact bid is the runwas tough to sell ner-up bid, second to the “Historically, we’ve been (winning amount). a 30 to 35 percent fleet“What’s changed is that lease and repo sale, but those bids are not just on a that’s more like 20 percent repo with a full condition now. report. They’re also bidding “The repo business and on a $2,000 car. the repo portfolios have just “During our regular sale, shrunk. we’ll also run trailers, boats “Our Northern Nevada and motor homes, which market, specifically, was are repossessions.”

4th Quarter Auction Contest

Step Out of the Lane and onto the Green! Win a trip to Pebble Beach!

CONSUMER

Four grand-prize winners and their guests will receive a trip to the AT&T Pebble Beach National Pro-Am, Feb. 8-10, 2013, in Pebble Beach, CA. Each winning dealer receives two full-access passes to the AT&T Pebble Beach Pro-Am: Contest runs Oct. 1 through Dec. 31. On the first business day of each month (Nov., Dec. and Jan.), five finalist names will be selected at random from each auction.

Your in-lane purchases* enter you into the contest. Buyers receive one entry for every car purchase more than $5,000 and boat/RV purchase more than $15,000.

On Jan. 7, 2013, a prize drawing will be held with all finalists. Three lucky auto winners and one specialty winner and their guests will win a trip to Pebble Beach! **

Contact your Santander Remarketing Representative for additional details and questions. *Vehicle must be drivable, no salvage units. Any online purchase will be entered twice. ** Trip includes airfare, hotel stay, and tournament passes. Winners may elect to recieve a cash value of the prize in lieu of attending.

UCN_34.indd 1

9/24/12 11:06 AM

TRUE COST OF INCENTIVES (TCI) TMV does not include options

TCI 1 2 3 4 TCI 1 2 3 4 TCI 1 2 3 4 TCI 1 2 3 4 TCI 1 2 3 4 TCI 1 2 3 4 TCI 1 2 3 4 TCI 1 2 3 4 TCI 1 2 3 4 TCI 1 2 3 4 TCI 1 2 3 4

August 2011

August 2012

% Change ‘11-’12

TMV does not include options

August 2011

$1,316

52.31%

TCI

$2,622

$13,097 $13,509 $12,125 $11,709 $10,313 $10,727 $8,076 $8,340 Subcompact Car $520 $531

3.15% -3.43% 4.01% 3.27%

1 2 3 4

$19,150 $16,138 $14,535 $10,651

2.12%

TCI

$1,430

$11,377 $10,293 $9,607 $7,404 Midsize Car $2,474

$11,915 $9,509 $9,623 $7,510

4.73% -7.62% 0.17% 1.43%

1 2 3 4

$2,308

-6.71%

TCI

$16,031 $14,714 $13,081 $10,386 Large Car $3,609

$16,115 $14,064 $13,165 $9,902

0.52% -4.42% 0.64% -4.66%

1 2 3 4

$4,393

21.72%

TCI

$16,624 $15,128 $14,083 $15,062 $12,228 $12,042 $10,307 $10,454 Compact Crossover SUV $1,819 $1,599

-9.00% 6.95% -1.52% 1.43%

1 2 3 4

-12.09%

TCI

$17,672 $16,987 $15,425 $15,503 $13,366 $13,535 $11,473 $11,084 Midsize Crossover SUV $2,107 $2,156

-3.88% 0.51% 1.26% -3.39%

1 2 3 4

2.33%

TCI

$20,929 $21,054 $17,893 $18,857 $17,019 $15,759 $12,748 $13,531 Midsize Traditional SUV $2,081 $1,578

0.60% 5.39% -7.40% 6.14%

1 2 3 4

-24.17%

TCI

7.47% 6.08% -3.27% -1.53%

1 2 3 4

42.88%

TCI

2.96% 1.84% -3.17% 12.52%

1 2 3 4

-27.79%

TCI

Compact Car $864

$22,574 $24,261 $19,428 $20,610 $17,257 $16,693 $14,958 $14,729 Large Crossover SUV $3,060 $4,372 $23,664 $24,365 $19,654 $20,016 $17,996 $17,425 $14,006 $15,759 Large Traditional SUV $3,984 $2,877 $32,858 $24,773 $21,340 $17,996 Compact Truck $2,575

$29,625 $28,313 $22,268 $17,865

-9.84% 14.29% 4.35% -0.73%

1 2 3 4

$1,585

-38.45%

TCI

$18,998 $15,600 $13,539 $12,410 Large Truck $4,086

$18,612 $16,436 $14,171 $11,766

-2.03% 5.36% 4.67% -5.19%

1 2 3 4

$4,077

-0.22%

TCI

$24,006 $19,661 $18,178 $14,653

$25,468 $21,819 $18,446 $17,109

6.09% 10.98% 1.47% 16.76%

1 2 3 4

August 2012

% Change ‘11-’12

$2,692

2.67%

$20,957 $16,435 $14,242 $10,942

9.44% 1.84% -2.02% 2.73%

$1,647

15.17%

$16,167 $14,774 $12,206 $9,458

-5.25% -0.40% 5.71% -1.90%

$1,618

18.88%

$23,175 $22,821 $19,919 $21,769 $15,984 $17,099 $13,448 $14,078 Midrange Sport Car $2,389 $1,818

-1.53% 9.29% 6.98% 4.68%

Minivan

Van

$17,062 $14,833 $11,547 $9,641 Entry Sport Car $1,361

-23.90%

$37,968 $43,096 $36,716 $32,162 $28,056 $29,421 $27,051 $24,538 Premium Sport Car $4,233 $3,048

13.51% -12.40% 4.87% -9.29%

$77,292 $88,213 $66,401 $62,421 $46,180 $50,248 $42,215 $42,541 Entry Luxury Car $3,111 $3,494

14.13% -5.99% 8.81% 0.77%

$28,414 $27,102 $23,197 $22,649 $21,072 $20,713 $17,353 $17,587 Entry Luxury SUV $2,113 $2,135

-4.62% -2.36% -1.70% 1.35%

$31,135 $30,125 $26,993 $26,452 $21,904 $21,669 $17,998 $17,856 Midrange Luxury Car $4,228 $2,616

-3.24% -2.00% -1.07% -0.79%

$34,986 $34,221 $30,650 $31,411 $24,383 $25,078 $19,994 $21,064 Midrange Luxury SUV $2,582 $2,170

-27.99%

12.31%

1.04%

-38.13% -2.19% 2.48% 2.85% 5.35% -15.96%

$42,844 $41,731 $37,865 $36,573 $32,805 $33,169 $26,544 $26,641 Premium Luxury Car $3,367 $3,678

-2.60% -3.41% 1.11% 0.37%

$69,571 $68,594 $55,124 $59,112 $41,064 $43,242 $34,655 $33,826 Premium Luxury SUV $4,212 $4,203

-1.40% 7.23% 5.30% -2.39%

$49,078 $51,117 $33,386 $29,170

12.29% -15.33% 17.00% 0.91%

$55,109 $43,281 $39,061 $29,435

9.24%

-0.21%

Edmunds.com’s monthly True Cost of Incentives (TCI) report takes into account all of the manufacturers’ various United States incentives programs, including subvented interest rates and lease programs as well as cash rebates to consumers and dealers. To ensure the greatest possible accuracy, Edmunds.com bases its calculations on sales volume, including the mix of vehicle makes and models for each month, as well as on the proportion of vehicles for which each type of incentive was used. TCI data (and other Edmunds.com data products) can be viewed industrywide, import vs. domestic, by country of origin, by make, by model and by segment. True Market Value (TMV) is the transaction price for vehicles.

UCN_35.indd 1

9/24/12 9:48 AM

36 b 1, "/ 8H 9A89

USED CAR NEWS

COMPILED BY JEFFREY BELLANT

AUCTION CELEBRATES 20TH ANNIVERSARY

Photo Courtesy of ADESA Buffalo CHEERS!: 2## ), &))0 %""/)" !"/ ',&+0 2## ), * /("1&+$ 0-" & )&01 & ,)" ,3"6 !2/&+$ 1%" 2 1&,+T0 9A1% ++&3"/0 /6 0 )"F "3"/ ) !" )"/0 4,+ -/&7"0H &+ )2!&+$ 1& ("10 1, &))0 $ *"H + & ! +! ;>K&+ % : 1")"3&0&,+F

ADESA Buffalo marked its 20th anniversary with a fun-filled customer appreciation sale in September. Dealers were welcomed to the event with a hot breakfast buffet and a “swag” bag filled with gifts. The day continued with a number of entertaining games and contests. Customers showed off their passing skills for a chance to win tickets to a Buffalo Bills game. A special appearance by one of the team’s cheerleaders helped give the game an authentic touch. In the end, two dealers each walked away with a pair of tickets to see the Bills. Several customers also took away prizes like an iPod Touch, an iPad and a 47-inch flat screen 3D television from an end-of-sale drawing. “This is truly a special day for our auction, but we wanted to make it all about our customers,” said Warren Clauss, ADESA Buffalo general manager. The auction also took the opportunity to support the Juvenile Diabetes Research Foundation during the sale. A drawing for a signed Buffalo Bills jersey brought in $270 for the organization.

Fall Sale Keeps on Truckin’ Sponsored by the National Alliance of Buy Here, Pay Here Dealers in Partnership with the National Independent Automobile Dealers Assoc.

2012 ATL UCN HPV 1000R #2.indd 1

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Flint Auto Auction ran more than 2,000 vehicles at the auction’s fall truck sale. The annual tradition at Flint Auto Auction, which has highlighted the autumn season for more than 20 years, included more than 400 trucks in total, with 200 running bumper to bumper in a single lane. Joining dealers on the floor were buyers from around the country who participated in the sale via simulcast. Bill Williams, president of Flint Auto Auction, was happy with the results of the Sept. 12 sale. “We had a great turnout,” Williams said. “The weather was beautiful, we had an excellent selection

of vehicles, and the dealers were enthusiastic. “We’re seeing signs that the economy in this region is turning the corner, perhaps even faster than in other areas of the country, and the optimism shared by the dealers in our area shows in the lanes.” Edward Colosimo Auto Sales and Cole Ford Lincoln LLC., won Craftsman tool packages during the sale. We invite news items and top-quality photos from our readers to be considered for “Around the Block.” Please include the name of a contact person and a telephone number. Send items and photos to: Jeffrey Bellant Mail: Used Car News, 24114 Harper Ave., St. Clair Shores, MI 48080. Fax: (586) 772-9400 e-mail: jeff@usedcarnews.com

9/24/2012 2:18:47 PM

9/24/12 3:35 PM

USED CAR NEWS

1, "/ 8H 9A89 b 37

Disconnected Jottings From Tony Moorby... “It’s the second-oldest business in the world!� That’s what David Wickins, the chairman of British Car Auctions, told me when I first

a dollar bill today. Auctions have stood the test of time ever since. The fact that auto auctions followed as a natural devel-

Tony Moorby Ć€É&#x; Ć€É&#x; É&#x; Ć€É&#x; É&#x; Ć€É&#x; Ć€É&#x; É&#x; Ć€É&#x;

Ĺ´Ĺ°Ć?3 ,É&#x;0 . , (É&#x;) É&#x;." É&#x;#( /-.,3 , -# (.É&#x; ,)'É&#x;ŹŚŚšĆ‘ŲŰŰŰÉ&#x;) É&#x; É&#x;É&#x; /.)').#0 ,0 É&#x; -É&#x; Ɖ-É&#x; 2 /.#0 É&#x;0# É&#x;É&#x; *, -# (.É&#x;) É&#x;- & -É&#x; ( É&#x;' ,% .#(! )), 3É&#x;Ć É&#x; --) # . -É&#x;ŲŰŰŜĆ‘*, - (. 1 , É&#x;." É&#x; #(!É&#x;) É&#x; )(),É&#x; 3É&#x;É&#x; É&#x; &&É&#x;) É&#x; ' ,

joined the company back in the ‘70s. He was referring, of course, to the existence of auctions as a way of buying and selling for a price that was established for that day and place. Back in Roman times, salt was used as a currency as the military, the main source of middle-class employment in Rome, was paid in blocks of ‘salt’. It’s where the word salary is derived. Being a universally needed and available commodity it became fungible or easily traded at a standard value. Bartering was the normal trading activity but auctions needed something that could trade evenly, just like

opment of horse-trading is not really surprising. People brought things to market for a reason – everyone gathered in the town square on market day so farmers brought their produce and animals to sell to a willing audience of buyers. As Henry Ford made enough vehicles to reach the masses, a ready market had to be found to establish values for ‘horseless carriages’ instead of horses. Indeed, Rawls Auto Auction, the oldest auto auction in the U.S., started out as a cattle and livestock auction in North Carolina. The growth of the industry over the years has ensured that cars and trucks were

freely available anywhere in the country, at prices that reflected the local economies’ appetites for transportation. For instance, four-wheel drive vehicles bring more in Minnesota in October than they do in Florida. I know that’s obvious but auctions really do reflect the tiniest nuance of change in a marketplace. Immediate sentiment is felt in the lanes – there’s an air, a feel of the market. Many assumed that the advent of on-line auctions would herald the death knell for standard auto auctions. Quite the contrary. The earliest adopters of the new technology were the auctions, themselves. The initial attempts at reaching out to customers were through intranet connections – with a software disk that would allow another computer to talk to ours. The Internet followed quickly and the rest is history. I do remember ADT Automotive’s vice president of strategic planning, Don Reig, coming to our board with a design to sell anything to anyone, anywhere. We turned it down on the basis that it was too broad – eBay followed soon after!!

C R O S S WO R D

Now the industry association is officially 64 years old and the annual convention is being held in Orlando. The meeting used to be an excuse for a social boondoggle – in itself, not a bad thing. Customers got invited and the social round grew to test the expense accounts of the best-heeled spenders in the business. But little business was done and listening to customers and inviting them to take part in the meetings was a scarcity. Now it’s the other way round. There’s comparatively little time to prop up a bar and kibitz – we don’t even play golf anymore. Business is considered in earnest and the agenda is all about improving the industry’s environment, up to and including developing a bigger presence in Washington (see my last article), in cahoots with our sister association, the NIADA. Things have been tough, these last three or four years. I

know we were dealing with a monster recession, but “Cash for Clunkers� proved to be an outrageous case of government meddling where they don’t belong. The auction industry was quite capable – more so than anyone else – of redistributing the industry’s product. We do it every day as a normal course of business, from a virtually new car - I remember selling GM cars to their franchised dealers with only 300 miles on them back in 1991. The vehicles were on three-month short-term leases to daily rental companies and had never turned a wheel in that pursuit. From this to handling junk ready for the crusher. I love this business and the people in it. Add cars to the mix – what could possibly be better. Our auction industry will survive and unlike the oldest business in the world, we don’t have to operate in the shadows.

To see past columns from Tony Moorby, log on to www.usedcarnews.com/ columnists/tony-moorby

Sponsored by INSURANCE AUTO AUCTIONS

By Miles Mellor

Down

Across 1. _____ C-X16 6. Civic competitor 10. Posting at JFK 11. One of a couple 13. Electric sports car 14. Pro driver for a closed course? 15. Gets gas 17. ___ Vegas 19. Bentley ____ 20. Car pronoun 21. Luxury SUV (goes with 31 across) 24. CX-9 27. Golf target 29. See 23 across 31. Made in the ____

32. Speedometer item 33. Keep in existence 34. Naval abbreviation 35. It’s sounded on the roads 37. Tax expert 39. Popular connection 43. Another name intro 44. Schwartzenegger’s new Mercedes U1300 45. Goes like a Mazda? 46. Have an account balance 48. Kia minivan 49. Purchase condition 50. Quiet!

1. Compact VW 2. Had lunch 3. Hummer, for one (2 words) 4. Wow 5. Luxury car symbol 7. Vectra maker 8. Surprise at a blunder 9. Lights 12. It was a Volvo rival 16. GMC ____ 2500 HD Denali 18. ___ Arbor, MI 22. Puts up a “SALE� sign 23. Mentor 24. Little BMW 25. Audi A4 ___road 26. Press guy 27. Buys 28. “Hurry!� 30. Double-reed woodwind 35. Wheel center

Answers to the 9/17 /12 puzzle

36. Word a salesman does not want to hear 38. Fiat 500 _____ 39. Tan 40. Smells 41. VWs 42. Discover 47. OR neighbor

Answers to this puzzle in the 10/15/12 issue. Call 1.800.794.0760 for a FREE subscription.

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USED CAR NEWS

CLASSIFIEDS

Advertisers are solely responsible for content of classified advertisements. To place and ad, or for more information, call the Classified Department: 800-794-0760 ext.107

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JOB OPPORTUNITIES AUTO AUCTION Operations/Lot Mgr- Auto Auction Mobile 3-5 years exp. Must be organized, customer oriented, problem solver, and possess excellent people skills. Background Screening and MVR required. Email Resumes to: jobs@cityenterprises.biz

TRANSPORTATION SERVICES

BUSINESS OPPORTUNITIES

Upcoming Issues October 15 - Auction Update Deadline Wed., October 3

November 5 - BHPH Spotlight (Advertorial) CLASSIFIEDS

USED CAR BUYER - Let me do all the work and you mind the store. 40 years exp. Atlanta based. Refs. Let’s talk. Warren, 770-652-1089

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4/23/10

12:17 PM

Page 1

AUCTION SCHOOL

FACILITIES FOR SALE/LEASE

P.O. Box 7344 High Point, NC 27264 “America’s Top quality Auction School�

USED CAR LOT FOR LEASE With bay and office located in Ft. Lauderdale, Fl for lease, established in 1994. Rent under $2,500 per month.

December 3 - Dealers Who Give Back Deadline Wed., November 21

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Write or call for free catalog

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December 17 - A Year in Review

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Deadline Wed., December 5

2013 January 7 - Forecast Deadline Wed., December 19

January 21 - Tax Season Kick Off Deadline Wed., January 9

TO ADVERTISE PLEASE CALL 1-800-794-0760 EXT. 107

Every issue of UCN will now be available to read online from our home page. Just click “Read The Latest Edition�

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