2/15/10 by General Media LLC

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February 15, 2010

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New Dealers Enter Market In Face of Challenges By Ted Craig

This may seem like the worst time to open a used-car store. Any new dealer faces the same shortage of inventory, credit and shoppers that drove thousands of experienced operators out of business. But a number of brave souls are making a go of it. The used-car business is rough, but it’s still better than real estate, which is where Lisa Casteneda and Karl Spielvogel came from. The pair opened Independence Auto Solutions in Charlotte, N.C., in November. The first two months were really slow, Casteneda said, but the new year started with five sales and a lot more traffic. Independence Auto Solutions carries five cars on the lot at a time, with 15 in inventory. Joyce Moore and her husband, Toney Perry, opened Patriot Auto Sales in Lincoln, Neb., in mid-September. Moore

Rush - Dated Material

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served in the Army and the National Guard for years while her husband worked for others in the car business. Patriot is the first store Perry has owned. The economic outlook appeared bleak when they decided to open the store, but the couple viewed it as the right time. “We just felt the economy would be improving,” Moore said. Both Casteneda and Moore were surprised by the amount of paperwork required for a usedcar sale. That says much considering Lisa comes from the real estate business. One advantage for these new dealers is plenty of good commercial real estate is available. Patriot is located right on the main highway and includes a garage. That was crucial because the store details all their vehicles. Independence is located on one of the busiest roads in Charlotte. These new dealers are trying to succeed by focusing on specific markets. It’s cheap cars at Independence. Many consumers are downsizing expectations, Lisa said, just like in the housing market. “There’s a lot of people looking for low-end cars,” Lisa said. “We’ve got a little niche here that we believe will work for us.” Patriot offers one-owner vehicles and promotes that at every chance, including when they answer the phone. “It really pays off for us and the consumer,” said Moore. Patriot vehicles also come with an 18-month, 18,000-mile service contract.

Photo by Davis Turner GIVING IT A GO: Dealer Lisa Casteneda offers value cars to attract customers to Independence Auto Sales, her store in Charlotte, N.C. Casteneda and partner Karl Spielvogel moved into car sales from real estate sales.

Moore and Perry believe the cars sell themselves and take a very low-key approach. They don’t even take phone numbers when people visit the lot. “If they want a car we have, we feel they’ll come back,”

Moore said. Patriot promotes itself through good works. The Web site features a “Patriot of the Month,” where the store gives money to a community volunteer. “It’s just amazing how many great people there are in this

state and they go unrecognized,” Perry said. Casteneda learned that every customer who comes on the lot may be a potential sale. “Treat everybody the same, because you never know who has cash,” she said.

IN THIS ISSUE • Toyota sales halted at auction after massive recalls. – Page 3

• Incoming NADA chairman Ed Tonkin follows in dad’s footsteps. – Page 8

• A large dealer group faces an uncertain future. – Page 5

• Auction owners plan new sale in Dallas after success in Phoenix. – Page 12

OUR RESULTS SPEAK FOR THEMSELVES. Our dealers do too. Check out the back page to see what they have to say.

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USED CAR NEWS

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RECALL

Toyota Pulls Vehicles from Lanes By Jeffrey Bellant

The used-car industry reacted quickly to the massive recall of eight Toyota models due to a faulty accelerator pedal. Toyota was struck by more bad publicity a few days later when it announced a recall on its popular Prius hybrid due to problems with the brakes . Within days of Toyota Motor Co.’s Jan. 26 announcement that it was halting sales of the affected models, the usedcar industry took action. On Jan. 28, National Auto Auction Association President Dave Angelicchio recommended all its member auctions “immediately halt the sales” of the Toyota vehicles. “The safety of our customers and employees is our utmost priority, and in that regard the suspension should continue until the issues have been resolved,” Angelicchio said in a statement. “NAAA will work with and support the decision

of TMS as they make every effort to address the situation. At this time, we cannot provide a time frame for such a resolution.” Auction chains and groups responded in kind. Manheim quickly responded that it would comply with the NAAA recommendation, adding that it was also committed to supporting Toyota. ADESA sent out a similar release. “Toyota has been a longstanding customer, and we will work closely with Toyota’s management to resolve this issue,” said ADESA President and CEO Tom Caruso. “For the safety of our employees and our customers, we have instructed all of our auction locations throughout North America to halt the sales of the affected vehicles at this time.” Jeff Brasher, president of ServNet Auctions, also announced it would halt sales, while still offering to help and support Toyota and its dealers. ServNet CEO Pierre Pons said safety at ServNet auctions was the

primary concern. “Until the situation has been addressed, we have advised that these affected vehicles not be driven either around the lot or across the auction block,” he said. “We will certainly be sensitive to any consignor (dealer or institutional account) that has an urgency to liquidate inventory, and accommodate them as appropriate.” In addition, Toyota Financial Services halted auction sales of the affected vehicles, though the statement clarified that depending on the VIN, some Camrys and other Toyotas may not be part of the recall. To yo t a Financial Services also reminded its clients that vehicles under the Lexus and Scion brands, as well as eight other models were unaffected by the recall. GM Remarketing announced it was holding onto its 2009 and 2010 Pontiac Vibes, which may have some of the same problems. It was built on the same platform as the Toyota Matrix, which is

part of the recall. Daniel England, general manager of Danny England Motors in New Tazewell, Tenn., said the dealership had sold several of the recalled vehicles just prior to the announcement. “We contacted those customers and just let them know about the recall, though most of them already heard,” England said. He just encouraged them to get the vehicles in to get the needed repairs. England said the dealership also had five other late model cars on the lot

that he removed once the recall was announced. Despite the huge media attention given to the recall, England said customers are taking it in stride. “It doesn’t seem to affect them,” he said. England said the issue seems to have received a lot more attention than is warranted for what looks like a simple fix. He hasn’t heard of any of his customers or cars having a problem related to the recall. Dealers discussing Toyota at a Phoenix auction

o n Fe b. 2 s a i d t h e y believed Toyota reacted quickly and may only be hurt in the short term by the recall. Shea Petta, of Centennial Leasing in Phoenix, said if Toyota fixes the recall issues, it will reclaim its solid reputation for safety. England agreed and said that Toyota seemed to react much more quickly than domestic manufacturers have in past recalls. Several state independent dealer associations reported no major affects on their members.

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USED CAR NEWS

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DOUBLE MURDER Luxury Manufacturer Strikes Exclusive Deal with Manheim

BMW Group Financial Services has partnered with Manheim to distribute and remarket all company BMW and Mini vehicles originating out of BMW of North America’s Woodcliff Lake, N.J. headquarters. All vehicles will be offered for sale via a closed OVE.com BMW seller group and through Manheim Simulcast online event sales, with transactions being handled by Manheim’s distribution center in Chestnut Ridge, N.Y. BMW Group will be able to immediately sell company vehicles turned in at any Manheim location, eliminating the time and expense associated with physically transporting the vehicles to other markets. ADESA Subsidiary Enters Marketing Agreement

AutoVIN, ADESA’s information services subsidiary, has entered into a marketing agreement with Sword Apak. This marketing agreement includes AutoVIN and Sword Apak working together cooperatively to raise awareness of each other’s products and services as well as referring prospective customers.

Man Arrested for Killing Two People at Auto Auction By Jeffrey Bellant

Police arrested a suspect accused of killing a security guard and a transport driver at Manheim San Francisco Bay on Feb. 2. The Hayward Police Department announced on Feb. 4 that Karl Sanft it had arrested Karl George Sanft, 34, of Union City, Calif., for the murders of guard Angelito Erasquin, 63, and driver James Wightman, 56, a resident of Central Point, Ore. In a press release, police Capt. Darryl McAllister said six investigators had worked around the clock following the brutal crime. Both victims were found dead with multiple stab wounds on the morning of Feb. 2. Erasquin was lying in the street just outside the auction’s entrance, while Wightman was found in the cab of his truck parked on the property near the auction’s entrance. Police said Sanft confessed to the crime a day after being

NEW

detained by Sunnyvale police for being parked suspiciously in a local neighborhood the day of the murders. Sanft was eventually arrested when it was learned he was driving a car stolen from the auction. Investigators booked him for the stolen car and continued to piece together the evidence and Sanft confessed to the murders of Erasquin and Wightman, the police reported. Investigators believe the suspect broke into the auction, possibly to steal a car and encountered Erasquin, the security guard. Police said evidence suggests that after stabbing Erasquin, the perpetrator then stabbed the transport driver, who likely witnessed the incident from his truck. The police believe that Sanft then fled in the stolen car in which he was later found. Police investigators said Sanft

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likely acted alone in the crime. In addition to other evidence, detectives said they have also found the alleged murder weapon. The Hayward Police Department has been providing counselors and other coping services to the victims’ family members and coworkers. “Angelito Erasquin was a valued and dedicated worker who will be sadly missed. The Manheim San Francisco team is gathering to determine the best way we can offer our support to

Mr. Erasquin’s family,” said Manheim in a company statement. “Manheim San Francisco Bay is very grateful to the Hayward Police Department and the Sunnyvale Department of Public Safety for their investigative efforts and arrest made in response to the recent crime. “As a member of the San Francisco Bay area business community for nearly 20 years, we greatly appreciate the swift and collaborative actions of our local law enforcement agencies.”

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 Reporters: Jeffrey Bellant, Julie Dawso, David Piestrzynski Columnist: Tony Moorby Advertising Account Managers: Shannon Colby, Pam McNamara Classifieds: Marie Hingst Marketing: Megan Frump, Marketing Coordinator Circulation: Helen Thomas Production: Cliff Bennett, Production Manager Graphic Designer/Web Coordinator: Josie Godlewski Layout Design: Cassie Fennell, DesignWorks-AMG Vol. 15 • No. 22 Used Car News is published the first and third Monday of each month.

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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. OUR ADVERTISING APPROVAL POLICY 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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Dealer Group Loses Funding By David Piestrzynski

One of the largest buyhere, pay-here chains in the country faces an uncertain future after losing its main sources of capital. Last month, Carbiz Inc. received notices of default Carl from its Ritter t w o senior lenders, Dealer Services Corp. and Wells Fargo Preferred Capital Inc. According to SEC filings, Carbiz failed to make its scheduled payment to DSC in August. The deferment charge was $350,000. DSC immediately ceased funding new inventory. Representatives from DSC did not respond for comment. The Sarasota, Fla., company owns 25 buy-here, pay-here stores in nine states.

DSC purchased Carbiz’s line of credit last year after the dealership chain’s previous creditor, SWC Services LLC, declared bankruptcy. DSC and Carbiz overhauled the company’s business model to a leasehere, pay-here program. Carbiz CEO Carl Ritter said the company’s leadership was aware for a few months that DSC was canceling its line of credit. Carbiz is currently seeking another line of credit, but the task is proving difficult. “A few years ago, finding another lender would have been much easier,” he said. “But right now it’s very challenging.” In October 2007, Carbiz secured a substantial line of credit with SWC when it purchased the assets of Calcars Inc. for $36 million. At the time, Calcars was the fourth largest buyhere, pay-here chain in the country with 26 stores in Illinois, Indiana, Iowa, Kentucky, Nebraska, Ohio and Oklahoma.

In the months following the Calcars purchase, Carbiz purchased $15 million in portfolios in Houston, and began operating what it called its first superstore. Through this superstore, the chain began selling vehicles priced at $15,000, compared to under $6,000 at its other stores. This was a way for Carbiz to sell more vehicles to former subprime customers who were thrust into buy-here, payhere financing as a result of the credit crunch. At the start of 2008, while many buy-here, pay-here dealers throughout the country were finding capital increasingly difficult to obtain, Carbiz had a line of credit with SWC that exceeded $100 million. Ritter said the chain’s portfolios are performing well, but without another source of capital he said it will be difficult to continue. “With our volume levels and no line of credit, we likely can’t survive,” he said.

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USED CAR NEWS

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Dealers Want Higher Usury Rate Arkansas car dealers are supporting a 2010 ballot initiative that would raise permanently the state’s interest rate cap to 17 percent. The issue goes before voters in November. Car dealers support the measure along with other retailers who sell goods on installments. The proposal also includes changes affecting local government bonds. Fran Cavenaugh, chief financial officer of Cavenaugh Auto Group based in Walnut Ridge, Ark., said

this is the latest of several efforts to change the state’s usury limits. Cavenaugh, a member of the Arkansas Independent Automobile Dealers Association, said the measure has always failed because of consumers’ negative perceptions. “The Arkansas IADA and the Arkansas Automobile Dealers Association are working hard to communicate the benefits of this to consumers,” she said. The existing Arkansas usury law restricts rates to

5 percentage points over the discount rate. This means the current rate is 5.5 percent. The strict limit forces many lenders to reject loan applications from credit-damaged consumers because of the risk of default, Cavenaugh said. Creditors in states with higher limits charge additional interest to cover their risk. Cavenaugh said these restrictions limit competition in the buy-here, payhere industry.

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Mortgages Keep GMAC in the Red NEW YORK (AP) – Home and auto lender GMAC Financial Services said it lost $5 billion in the last three months of 2009, as losses from its mortgage operations kept the company in the red for another quarter. GMAC, which is owned by the federal government, is still working to sell its troubled home lending business. Mortgage operations overall lost more than $4 billion during the quarter, and GMAC took a $3.3 billion c h a rg e r e l a t e d t o i t s

efforts to sell the unit. GMAC’s automotive operations proved to be a bright spot. The unit has been profitable recently and made $369 million during the quarter. GMAC is the main lender for the General Motors Co. customers and dealers and recently took on the financing duties for Chrysler Group LLC. The company said its auto financing business will continue to be its main focus in the future. GMAC’s fourth-quarter loss compares with a

profit of $7.5 billion in the same quarter last year. In December, GMAC received a $3.8 billion federal bailout – the third round of aid that now totals $16.3 billion. With the additional funds, the government’s stake in GMAC stands at 56 percent, up from 35 percent. But that could go much higher if the government opts to convert more of its stake to common equity. GMAC is key to the operations of GM and Chrysler, which have also received federal money.

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PAGE 8 – FOCUS ON NADA

SECOND GENERATION

Oregon Dealer Follows in His Father’s Footsteps as NADA Chairman Used Car News: What’s your background? Tonkin: Like many dealers, I have been around the auto business my whole life. My dad was a dealer when I was a young boy. He was the youngest Chevrolet dealer in America in 1960 when I was 5 years old. It was natural for me to work in the business and I had various dealership jobs as I grew up. I learned to drive in the back lot and have had my share of “fender-benders” with our used-car inventory,

of a successful and profitable used-vehicle department has become paramount to the livelihood of a new vehicle dealership. I think most can agree that employing the “right” people with the proper training, defined responsibility and accountability, experience and communication skills are essential to the success of your used vehicle department. That is a fundamental fact that has not changed. However, times have changed. The used car department has

Ed Tonkin Incoming National Automobile Dealers Association president. Position: Vice President of Ron Tonkin Dealerships in Portland, Ore. Family ties: Father Ron served as NADA chairman in 1989.

mine being the only moving vehicle at the time. This resulted in my initiation into the spectrum of emotions that usedcar managers are able to exhibit. Let me just say that I was single handedly responsible for a lot of our used vehicle reconditioning expense. I went to school at the University of Washington, where I obtained a business degree in 1976 and a law degree in 1979. Wanting some practical experience, I practiced law for a few years in Portland before joining our family business full time in 1981. At that time, we had a Chevrolet dealership, a Ferrari dealership and had just acquired a Toyota franchise. My father, my brother Brad, and I have run the business ever since, up through today. Currently, we have 15 franchises and 16 dealership locations. I have always been involved in our metro and state associations. In fact, I chaired our Portland International Auto Show in 1983. I have served as both Metro Portland Automobile Dealer President and Oregon Automobile Dealers Association President before becoming involved on a national level as the Oregon state director for NADA in 2002. I have served as chairman of various committees during my eight years on the NADA board including my current position as vice chairman and becoming the chairman in February 2010.

moved closer to a science project with the advancements in technology and software. In today’s world we employ a usedvehicle strategy with the “right” people and marry them to technology. UCN: Are you active in certified pre-owned? Tonkin: Yes, we are active in certified pre-owned and know that this is a very important part of our business due to the newvehicle market being down. We are allocating part of our advertising dollars directly to the certified pre-owned departments of our dealerships. In today’s market, customers do not necessarily want to spend the money on a new vehicle so the trend is that more customers want to buy certified vehicles because of the warranties, low miles and value proposition. We plan to expand this business greatly in 2010 as we see it as a very powerful niche; almost as a separate franchise.

not be found locally. Also, we have experienced an increase in purchasing vehicles from the public by searching online sites such as Craigslist, eBay, Cars.com, Autotrader and other sites where the public is posting its personal vehicles for sale. UCN: How do you handle financing? Tonkin: It is an interesting question that may have not been posed just a few years ago. Granted there is a tremendous amount of concern in the rapidly changing financial arena, but we handle financing in much of the same manner as always. We manage our lending relationships from a top down philosophy that has served well in this ever changing climate. Meeting weekly with our financial partners who keep us apprised of new regulations, fluctuating rates, program amendments and other upcoming changes. This information is disseminated quickly and shared with our dealerships. Aligning our company with solid financial partners who have similar goals and direction has proven to provide a smoother ride during these turbulent times. Cultivating relationships with financial partners is more critical than ever before.

UCN: How would you describe your management style? Tonkin: My job is to create the best possible environment for our employees to succeed. Our employees work “with us” not for us. The development of people that I have worked with is very rewarding. I’ve watched them grow professionally as well as personally. If we create an environment for the employees to succeed, the dealerships’ success will come as a by-product. We have built this business and are able to expand opportunities for people and product because of our most precious human capital – that is, our dedicated, long-term employees. I love the dynamic nature of this industry, with ever changing products, UCN: Where do you get your marketplace and being able to vehicles? Has that changed? work and help develop people. Tonkin: The majority of our UCN: What do you hope to acused-vehicle inventory comes complish as NADA chairman? from customer trade-ins. Tonkin: Well, I hope to leave Traditionally, we would visit our local auctions to fill holes in both NADA and the industry a our used-vehicle department. little better off when I leave my However, as the demand for chairmanship than when I start frontline used inventory escalates it. NADA serves the dealer so and local auction prices rise, we well and that story needs to be have been actively exploring told. The last year and a half, in other sources to find inventory. this industry has left many UCN: What is your used-car Online auctions have grown in battered and bruised; dealers, strategy? popularity and provide excel- manufacturers, finance arms; Tonkin: With a declining new- lent outlets to find vehicles that you name it. Anyone connected vehicle market, the importance are available globally that might with this industry seems to have Fe b r u a r y 1 5 , 2 0 1 0

suffered to an extent. I wish to bring the message of value to dealers of just what their NADA does for them; how valuable it is and how necessary. After all, it’s our mission to serve the dealers and we do it on so many different levels. Internally I think we can create a more efficient NADA. We can create a strong agenda and action plans by employing more internal debate and by outwardly listening more closely to dealers all around the country. I plan on having NADA reach out and work through the state associations in concert with the state executives to garner dealer issues and priorities from all over the country. Our agenda should come from dealer input and that’s what I hope to build. I am hopeful that we can resolve some thorny IRS issues like UNICAP and finally put the debate over LIFO to rest; perhaps even play a role in reducing or eliminating the “death tax” altogether or at least diminishing it significant-

UCN: How can the govern ment help the auto industry in general and dealers in particular? Tonkin: We have seen over the past couple of years how the government can play such a mighty role in affecting the automobile industry both positively and negatively. The government helped tremendously when the executive branch extended bridge loans to keep GM and Chrysler from going bankrupt at the end of 2008. Congress enacted some legislation that helped dealers in 2009. In particular, the law which allowed consumers to write-off sales taxes when purchasing a vehicle and, of course, the Cash for Clunkers program which provided a much needed boost to our industry. For dealers in particular, Congress was very helpful in passing a law that allowed dealers who were either terminated in the Chrysler bankruptcy or wound down in the GM bankruptcy to arbitrate to get their franchises back.

Tonkin’s Used Car Strategy: • Adoption of a 60 days in stock or turn policy • Identify and stock vehicles that yield the highest gross • Identify and stock vehicles that sell the quickest • Stock a 45-day supply of used vehicles • Devise a plan of action prior to purchasing at the auction • Re-pricing vehicles as they age • Pricing vehicles in relationship to automotive Internet sites ly. Another major issue we hope to resolve is the CAFE mileage standards rule to ensure that we end up with a single federal mileage standard and avoid a patchwork of individual state standards that would wreak havoc in the marketplace. We must continue to stay vigilant on congressional and regulatory action that may be harmful to our industry. It takes an ongoing effort by our legislative team to stay in tune with what’s happening on Capitol Hill.

Of course, there are many ways the government affects the overall economy, which of course affects the automobile industry. Perhaps a future Cash for Clunkers program will be needed. We must wait and see how the market and overall economy develop. In order to do that, taxpayer sentiment must be gauged to see if it is viable. The American people seem to tire these days of public funding for private enterprise. Continued on next page

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Tonkin – Continued from prior page UCN: How can it harm the auto industry in general and dealers in particular? Tonkin: The government can cripple the industry by taking unreasonable and thoughtless action, specifically in the area of developing fuel economy standards. Fuel economy standards must be reasonable. It is understandable that with developing technologies in the area of hybrid vehicles, electric vehicles and fuel cells that our government wishes to push the

mileage standards higher, especially when combined with the desire for a greener world. But “reasonable” is the operative word here. You must not develop standards that are too high, unreachable and impossible that result in inhibiting commerce. The government also needs to ensure that we do not have a patchwork of mileage standards that vary from state to state. California is currently trying to establish its own mileage standards and if

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it is successful 17 states will follow. If this occurs it will be nigh impossible for a manufacturer to design, manufacture and distribute different vehicles to different state markets. This would be an example of inhibiting commerce. UCN: Anything you’d like to add? Tonkin: Even with all the business cycles, even with the turmoil we’ve faced this past two years, this is a marvelous business with great potential for those who love it.

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TIRED OF RUNNING YOUR DEALERSHIP WITH A PEN AND PAPER? Web based software by MotorLot simplifies running your store. No extra â&#x20AC;&#x153;featuresâ&#x20AC;? that you will never use and get in your way. Everything you need in one simple interface. Manage inventory, customers, deals and accounting easily in your web browser.

Title Database Lacks All Records A national database that allows consumers to view the history of used vehicles went into effect this year, but a federal official said that some states are not contributing vehicle records to the system. The National Motor Vehicle Title Information System allows potential used car buyers to check the title, odometer reading, accident history and other information for a fee of less than $5. The system was first proposed in the early 1990s, but was stalled

until consumer protection agencies took legal action forcing the federal government to enact the program. It is currently administered by the Justice Department. All states, insurance carriers and junk yards are required to submit data on vehicles to the system, and states were required to comply by Jan. 1. But the District of Columbia and four states â&#x20AC;&#x201C; Oregon, Illinois, Mississippi and Kansas â&#x20AC;&#x201C; have yet to submit records,

saying they don't have enough money for the computer upgrades and clerical work needed to take part. Justice Department officials said they are working with the states. Even without their participation, roughly 80 percent of registered vehicles in the United States are included. The National Automobile Dealers Association began calling for a national database after Hurricane Katrina. â&#x20AC;&#x201C; The Associated Press

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GROWING

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Photo by Jeffrey Bellant PHOENIX RISING: Dealers crowd the lanes during a recent sale at Metro Auto Auction of Phoenix. Its owner will open a new auction in the Dallas area later this year.

By Jeffrey Bellant

PHOENIX - As Metro Auto Auction of Phoenix celebrated its third anniversary, Tom McDermott already looked forward to opening a new auction in the Dallas area. McDermott, a partner

and general manager of the Phoenix sale, said his group acquired the former Lewisville Auto Auction near Dallas. They expect to re-open the sale in June. The six-lane facility is just north of the Dallas/Fort Worth Inter-

national Airport. “We have great relationships with dealers down there,” McDermott said. Scott Stalder, who had stints at ADESA Dallas and ADESA Los Angeles, will be the auction’s general manager. Continued on page 16

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AmeriCredit Corp. has loosened its credit standards and increased originations, but further expansion depends on the securitization market. CEO Dan Berce told analysts in the company’s latest earnings call that AmeriCredit needs a market for BBB rated bonds before originations can reach $1 billion a year. The demand exists for higher volumes, Berce said, and there is some interest in the market for BBB bonds. It is limited, though. One challenge is credit agencies continue using conservative ratings for subprime contracts. AmeriCredit has found success in recent securitizations. The company priced a $600 million ABS offering at the start of February. Berce said the company planned on executing another before the scheduled end of the government’s term asset-backed

securities loan facility (TALF). The company’s last securitization in October had no TALF investors, but Berce said this round will include lower-rated paper because of TALF. Berce expects less favorable pricing than the October securitization, but better than a July issue. The improved market allows AmeriCredit to offer more competitive rates. “We really had rates designed not to book many loans because we really didn’t have the capacity,” Berce said. The company now offers lower credit score cut-offs in some regions, as well. “We’re not afraid of going deeper into credit if we can get the pricing for it.” AmeriCredit reported a profit of $46 million for the quarter ended Dec. 31. The company reported a net loss of $35 million for the same period a year earlier.

Originations were $379 million for the quarter, compared to $321 million for the same quarter last year. Annualized net chargeoffs were 8.9 percent of average finance receivables for the quarter, compared to 9.5 percent for the same period a year ago. Finance receivables 31-to-60 days delinquent were 7.7 percent of the portfolio at Dec. 31, 2009, compared to 7.8 percent at Dec. 31, 2008. Accounts more than 60 days delinquent were 3.7 percent of the portfolio, compared to 4.2 percent a year ago. The allowance for loan losses as a percentage of finance receivables was 7.7 percent at Dec. 31, 2009, compared to 8.2 percent at Sept. 30, 2009 and 7.1 percent at Dec. 31, 2008. The company had total available liquidity of $750 million at 2009, consisting of $320 million of unrestricted cash and approximately $430 million of borrowing capacity.

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Wholesale Prices Hit Plateau Auction prices flattened out in January, but remained strong. The Manheim Used Vehicle Value Index moved up marginally in January. It was 117.6 for the month, a 15.6 percent increase from a year ago. The Index adjusts auction prices for mix, mileage and seasonality. On an unadjusted basis, prices were down $90 on average, according to Tom Kontos, ADESA’s executive vice president of industry analysis. Prices started higher at the beginning of January,

but weakened in the final two weeks, Kontos said. The volume of rental risk units sold at auction increased substantially from a year ago, while the average price and mileage remained well above yearago levels, according to Manheim chief economist Tom Webb. Program rental volumes at auction continued to decline. Their pricing was very strong, and average mileage was unchanged. Prices for midsize endof-service fleet cars eased back modestly from a strong finish at the end of

2009. Average mileage on these units moved up noticeably in January. In 2009, the early pullout of fleet units no longer needed because of workforce reductions or corporate financial issues often distorted average mileage on these units. “As confirmed by the increase in commercial fleet purchases in January (up 29 percent from a depressed year-ago level) companies are returning to a more normal replacement cycle,” Webb said. Kontos said the lower prices led to higher sales.

Auction - Continued from page 12 The Lewisville sale will be similar to the Phoenix auction in terms of offerings and operations, McDermott said. The leadership will implement the same rigorous training program it uses for employees at the Phoenix sale, he said. The course covers everything from auction terms to conflict resolution. “Every single one of our employees goes through training before starting here,” he said. “It’s a twoday program – and they

have to pass.” McDermott is hoping the new Texas sale does as well as Metro Auto Auction of Phoenix. The Phoenix auction’s recent anniversary sale ran 1,800 units and sold 1,200, McDermott said. There were 1,000 bidders at the sale. The auction also celebrated an expansion from six lanes to eight. Its staff has grown to 208 full-time and parttime employees from about 140 when it opened. The auction has taken

some hits, losing dozens of dealer customers to the economic slowdown. But the Phoenix auction added a monthly motorcycle sale about a year ago and it’s going well, McDermott said. They run 40 to 50 bikes, selling about 60 percent. The auction added some celebrity to its Feb. 2 motorcycle sale by bringing in Valerie Thompson, a motorcycle drag racer and two-time land speed record holder, to drive a few bikes through the lanes.

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RETAIL MARKETS INDIANA

E d W h i t e , o w n e r, White’s Auto Sales, Rensselaer, Ind.: “I’ve been in business for 37 years. “I keep between 80 and 100 cars on the lot. That’s about the same as last year. “We sell about 30 cars a month. “We’re up a little from this time last year. We’ve lost a couple of new-car stores in town and another General Motors (franchise) is expected to close this year. “I don’t know if that’s the reason we’re selling more, but it didn’t hurt us any. “We carry more cars than trucks. I carry mostly domestics. “Our overall retail price is between $12,000 and $14,000. “We buy inventory from new-car stores, the banks and the lease companies. We primarily get vehicles through lease sales and bank sales at auction. “I usually attend Manheim Chicago sales. “We primarily carry

two- to three-year-old cars, with 60,000 miles. “Obtaining inventory is more difficult this year because leasing and new-car inventory has been down. “We use radio and newspapers, primarily, to advertise. “We’ve been using the same (strategy) for 20 years. “About 30 percent of our business is subprime. “We’ll offer some subprime deals. Subprime was tougher last year. It’s come back a little bit this year. “We have a service shop. We’ll use it, primarily, to service what we sell. We’ll do outside work, but very little. “The last vehicle we sold was a 2009 Mitsubishi Eclipse. “It had 9,000 miles on it. The Mitsubishi sold for $16,500. “I’m optimistic. I think we’re going to have a good year. “Last year was a tough year, but things are starting to fall into place. “Business is looking pretty good for this coming year.”

MASSACHUSETTS

B i l l Va n L a a r h ove n , dealer principal, Martin Auto Sales, North Easton, Mass.: “The dealership’s been here more than 20 years. I’ve personally had the dealership for seven years. “We have about 35 cars in inventory and, at any given time, around 20 on the lot. “Last month was the worst month I’ve had since I’ve been here. We only sold four cars for the month. “Bank financing is one of the issues. For example, I had a customer looking to buy an $8,000 car, who came in with an 800 credit score with $4,000 down. She could pay cash but wanted to finance it. The local bank turned her down. “The bank’s attitude used to be, ‘Give me a reason to buy this deal.’ Now the bank’s attitude is, ‘Give me any reason not to buy this deal.’ “There’s also the fear factor, in general. I think the consumers aren’t making a buying decision

Compiled By Jeffrey Bellant

because they don’t know if they’re going to have a job. People are underwater in their homes. They can’t even get home equity loans. “But there are opportunities as well. Some people in the subprime business are doing well. “Also, the (buy-here, pay-here) industry’s changed with tracking devices and monitoring devices. It’s not as much of a risk as it once was when you didn’t have these things. “However, I sell more of a ‘need’ car than a ‘want’ car. So I can still sell cars in this market, no matter what the economy is doing because I sell a less expensive car. “The average car on this lot is in the $7,000 to $8,000 range. We’ll carry vehicles from $3,500 and up. “The average mileage is about 75,000. We’ll mix up domestics and some imports. We’ll have a little bit of everything. But we’ll stay away from the European makes. We do sell some, but as a rule we stay away from them.

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“It’s because of the service issues with the lower-end makes of that car, the life expectancy of the car and the cost of maintaining the car at the end of its life. “We’ll carry both trucks and cars; three or four pick-up trucks, three or four SUVs, three or four sedans and sports cars, a couple of convertibles – we’ll try to change it around. “I’ll try to go into the spring market with more sports cars, after buying them in the winter when they’re cheaper. “We recently (sold) a 2008 Sebring convertible, for example. “I’m carrying more inventory than I was this time last year because I haven’t sold as many. Normally, I would be going to auctions now but I’m not going now because I have the cars. “It comes and goes in waves. I might have two bad months a year where I’ll lose money. Then I’ll have several really strong months and then I’ll have average months the rest of the year.”

“I get inventory mostly from auctions, other dealers or trade-ins. “We use all the area auctions: the ADESA auctions, Manheim New England, Southern Lynnway Auto Auction, Quincy Auto Auction and Auto Auction of New England. “Obtaining inventory is easy for me because I don’t have to fill a lot of shelves. I imagine bigger dealers may have a little more trouble. “A lot of the car advertising magazines have gone out of business, like AutoTrader Magazines, AutoExtra and AutoMart. So my print advertising is now almost non-existent and I’m relying heavily on the Internet. “That was a big portion of my advertising budget two years ago, so I probably saved $12,000 in advertising. “We do have some secondary lenders and have expanded our subprime deals. It’s a lot more work to make less money, in many cases. “I just sold a 2002 Mercedes C320, with 50,000 miles. It sold for $11,000.”

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WHOLESALE MARKETS MICHIGAN

Mark Zientak, general manager, Bay Auto Auction, Bay City, Mich.: “We have three lanes. We’re running approximately 200 vehicles on a weekly basis. We’re a little bit down in volume from this time last year. “It appears as though repo inventory peaked about a year ago for most of the financial institutions. So we’re just naturally down as a result. “Our sales percentages are approximately 90 percent. They are way up from this time last year. “I attribute it to the fact that everyone is buying used product. The retail consumers are not buying new. “On average, we’ll draw in a bout 250 dealers to the lanes. That’s up just a little from this time last year. “We’ll draw our dealers from all over the state of Michigan. We’ll get a lot of dealers from other Midwestern states. We also draw in a lot of Canadian dealers coming across from Ontario.

“Some dealers are disappointed that they can’t buy enough cars because the prices are so high. “Fleet-lease consignors are the majority of our business. About 70 percent of our (offerings) are fleet-lease. Our largest fleet-lease consignor is Capital One Auto Finance. “Again, those volumes are down because of the decline in repossessions. “We are big into the sales of RV/marina/powersports up here. We run those sales twice a month. “We’ll run about 350 units for those sales. “The volumes are slightly down, compared to this time last year. “We’re selling about 95 percent of those units. That’s much better than this time in 2009. “I attribute that to the same reason for the boost in sales percentages with cars. Everybody wants to buy used. There’s a lot out there. As an example, I was going through the numbers of a recent lease-and-repo sale with my staff and there was only one no-sale out of 100 cars.

“On the RV side, in particular, the manufacturers have been on a hiatus. Some of them shut right down. Some went out of business. “So some of the buyers are a little skittish about buying some of the new product from manufacturers. Plus, there’s such a huge selection of used inventory available out there, customers can take their time to look around and find something that fits their needs. “I’ll say we’ll run about 40 percent RVs, 40 percent powersports and 20 percent marine units. “Our powersports inventory is mostly motorcycles and ATVs. Those dealers seem to be doing very well. They’re excited and buying tons of product. “We probably haven’t seen a winter market as strong as it has been this season. “Our average car price is probably about $5,000. That’s similar to what it was last year. “Trucks and SUVs are doing better than they have been in the past. In

IT’S ALWAYS HAPPENING AT MANHEIM METRO DALLAS TUESDAY, FEBRUARY 16 9 AM Early Bird Sale - Lane 4 • 9:30 AM - Consignment Sale 9:30 AM - Bank of America Lane 3 9:30 AM - Remarketing Services of America - Lane 4 followed by Lone Star Title Loans 9:30 AM - U-Haul Lane 4 • 9:30 AM - Regional Acceptance • 10 AM - Bank Repos/Lease (S) featuring: DT Credit Corp. “Exclusively at Manheim Metro”, LeasePlan, Prestige Financial, U-Haul, & Flexco 10 AM - Mitsubishi Online Event Sale Lane 2

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TUESDAY, MARCH 2 9 AM Early Bird Sale - Lane 4 • 9:30 AM - Consignment Sale 9:30 AM - Bank of America Lane 3 • 9:30 AM - Remarketing Services of America - Lane 4 followed by Lone Star Title Loans • 9:30 AM - Regional Acceptance with BB&T 10 AM - Bank Repos/Lease (S) featuring: LeasePlan, U-Haul, Westlake & Flexco MEI Financial 10 AM - Mitsubishi Online Event Sale Lane 2

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Charles Furr, general manager, Lubbock Auto Auction LTD., Lubbock, Texas: “Sales are excellent. “We’ve got three lanes, but I’ll normally run two for a sale. For an AmeriCredit sale we’ll run three lanes. “We run about 300 units per sale. Since about the third sale in January, sales have broken loose. The income tax money is coming in and the market is doing well. “I have a feeling we’re running about the same amount of units as this time last year. “We’re selling about 95 percent of our fleet-lease units and about 30 percent of our dealer consignment. “People are retailing more and income tax season is hitting, so people are needing some cars. So

they’re out here. “For our AmeriCredit sale scheduled every month, we’ll have great crowds. It drops off a little for other sales. Crowds have been about average, about 150 dealers. “We draw dealers from about a 300-mile radius. We’re in the panhandle, so we’ll get dealers from Texas, New Mexico and Oklahoma. “Plus, I’ll get some dealers who come down from Colorado and are looking for specialty units. “Right now, the mood of the dealers is good. They’re selling cars. I don’t know how long it’s going to last. “Repossessions have been steady, lease units have been off a little bit from what we had last year. But clients have said they’ve got some more coming. “Over the last six months to 12 months, franchises dealers have been more active on the used-car end of it – both in buying and selling. “Their new-car business has dropped of, so they’ve picked up more buy-here,

pay-here business. “We’ve got a lot of buyhere, pay-here dealers. “The Toyota recall has shut off the sales of (that brand). Dealers don’t know which vehicles are on recall and they don’t even want to look at one now. “I’ll still run the vehicles that aren’t under recall. “We have some bad weather over the last couple of weeks - snow and ice. That’s unusual for West Texas. But dealers are still buying. “Compared to this time last year, the cars that are $5,000 or less are doing better. “That’s because a lot of new-car dealers are out here buying used cars for their (buy-here, pay-here) lots. It’s just a good price range for those units. “We’re going to install a simulcast system for our AmeriCredit sales. We’re probably going to get that installed within the next 30 to 60 days. I’m kind of excited about that. “Some of our dealers out in El Paso have said they’re interested in those sales.”

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The Stakes Are High At Manheim San Antonio’s

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Photo Courtesy of General Motors INDIANAPOLIS WINS ONE: ADESA Indianapolis and Manheim Nashville were both named General Motors’ 2009 Auctions of the Year. Dan Kennedy (from left) and Toby Schulz of GM, present ADESA Indianapolis General Manager Dave Emerson with the award. GM’s Don Reed and Sara Kane were also present.

Selling more than 9,000 vehicles each earned ADESA Indianapolis and the Manheim Nashville Auto Auction General Motors’ 2009 Auction of the Year award. This is the second time in the 26-year history that two auctions have been recognized for this most prestigious honor awarded to GM’s auction partners. “This award emphasizes the essential role auctions play in the sale of our vehicles and servicing the dealers,” said Dan Kennedy, national sales manager for GM Remarketing “Both ADESA Indianapolis and Manheim Nashville serve as examples for providing quality products and an excellence of service to our customers. “They serve as role models to other GM Sponsored Auctions striving to improve their efforts in reconditioning and the repair of GM’s used vehicles and meeting our dealers’ expectations and needs.” Every year since 1984, GM has given this honor to the highest performing auction site among all of its auction partners. ADESA Indianapolis and Manheim Nashville outperformed a field of 40 GM-sponsored auctions across the country to secure this year’s distinction. Both Dave Emerson, ADESA Indianapolis general manager, and Sam Chaple, general manager of Manheim Nashville, were thrilled with the award and praised GM’s partnership.

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The ServNet Auction Group has named the Auto Auction of New England as its newest auction location. The move to include A.A.N.E. was announced at a recent ServNet owners’ meeting and is part of the group’s strategic plan to identify the best independent auctions in the country to reach customers in all markets. “ServNet’s owners and Board of Directors are very pleased to welcome Auto Auction of New England,” said Bob McConkey, ServNet’s chairman of the board. “The DeLuca family and general manager Dave Blake are well-regarded in the industry, and have established a reputation for offering a level of service that sets a high mark in the Northeast, and specifically in the seven-state New England region.” ServNet President Jeff Brasher said the auction is a ‘ideal’ fit for ServNet.

“The DeLuca family drew on more than 50 years of automotive and finance experience in developing a strategy for A.A.N.E.,” Blake said. “They have built a tremendously successful operation by focusing on maintaining customer loyalty and providing incomparable service in a professional environment. “Having the opportunity to meet with other ServNet auction owners to examine real auction issues and to target ongoing enhancements in procedures and practices not only improves us as a group, but raises the bar for the entire industry.” We invite news items and top-quality photos from our readers to be considered for inclusion in “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

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FEBRUARY 15, 2010 â&#x20AC;˘

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UCN_21

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UCN_22

2/9/10

•

3:42 PM

Page 1

USED CAR NEWS

Fe b r u a r y 1 5 , 2 0 1 0

Disconnected Jottings From Tony Moorby... The bigger they are, the harder they fall. It would be too easy to adopt a gloating position like this when applied to Toyota’s current problems with recalls resulting from manufacturing defects. In reality, recalls are as common as a cold. This one’s big not only because of the volume of vehicles, but also because it involves safety issues following the

tions but the footprints plod heavily through our own backyard and track mud all through the living room. In a way, I’m glad it wasn’t GM’s or Chrysler’s problem – can you imagine the furor of taxpayers seething after bailing them out? It certainly comes at a time when the industry doesn’t need any more wounds to lick.

now marketed as Bridgestone. To Toyota’s massive credit, they have grabbed this potentially runaway train by the caboose. The media, of course, is all over it like a cheap suit – some calmly and coolly reporting the facts, others histrionically raising the temperature in an effort to gain rating points. Akio Toyoda himself apologized to the world. I can’t remember any American manufacturers’ bosses taking this Tony Moorby self–deprecating step. • 40-year veteran of the industry What has resulted is a crisis management • President from 1997–2000 of ADT Automotive team, coordinated on • Served as ADESA’s executive vice president of a worldwide basis, sales and marketing from designers, tech• Moorby & Associates 2006-present nicians, makers, dis• Awarded the Ring of Honor by NIADA tributors and dealers, • NAAA Hall of Famer parts and service departments, advertisers and public relations harrowing death of a California Do you remember the Ford companies as well as customers, family. It’s also a big deal Explorer-Firestone Tire deba- the whole numbering in the b e c a u s e i t c o n c e r n s a cle? It was made excruciatingly thousands and costing around manufacturer who has hitherto worse by the finger pointing at $4 billion to put things right. been considered a paragon of one another with two PR firms Helping them is a tremendous virtue when it comes to quality. running away from each other goodwill capital investment in I think it’s fair to say that more and not addressing the prob- its existing customer base that, recalls have been announced, lem head-on. This was crisis even under these withering voluntarily or otherwise, by our management at its worst and circumstances, will take a great own manufacturers. Also, this prolonged the perceived prod- deal to erode. They have also particular gas pedal attachment uct damage unnecessarily. committed to study, and by this was made here. Now, I know it Engineering has improved both I mean build centers at every was made to Toyota’s specifica- brands, although the tires are stage of product development

from design to delivery, to ask if there are better ways to do things and to stop this kind of thing from happening again. It’s also an effort to immediately reestablish internal pride in the company and what it produces for its customers, thereby underwriting future loyalty to Toyota. They’re not just telling the world that they screwed up and admitting as much, but they are getting out the economic birch twigs for a thorough whipping. Thank goodness they stopped short of committing “Seppuku”! Whilst new Toyota sales have been put on hold, their used cars have followed suit, even at the wholesale level at the auctions, as dealers are arranging to work overtime in the service departments. I’ve even heard of some working 24/7 to keep customers happy. One supreme irony is that some of their cars can’t stop while some of the others can’t be stopped. In this case the ABS software would appear to have a glitch, in that it can’t read sharp undulations under heavy braking. Don’t you love computers! In this day and age of instant communications, word about these things doesn’t leak out slowly any more. It’s there in an Internet downpour. This new

phenomenon is called ‘viral’ communications and it can be a marketing boon or provide a calamitous bust to those who don’t know how to handle things in adversity. In this case I think Toyota has learned some valuable lessons but has also shown the world that crisis management, properly handled, can contain the worst events and even come out the other end looking pretty good. Bearing in mind the hugely loyal customer base, perhaps this is a case of ‘big is beautiful.’

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Finance Solution Adds GPS

Advanced Business Computers of America, Inc. announced an enhancement to their DMS software, Deal Pack. Deal Pack now offers a fully integrated GPS solution through Ituran. "The decision to partner with a company like Ituran was easy,” said Evelyn Hedy, Advanced Business Computers of America Inc.’s marketing executive. THE FULL STORY

Senior Group Salutes Auction Chain

For the second year in a row, Manheim has been named one of the AARP’s “Best Employers for Workers Over 50.” With 53 percent of its current work force over the age of 50, Manheim jumped up 15 spots this year to No. 21 on the list due to exceptional employee benefits, a positive workplace atmosphere and the continued recruitment of seasoned professionals – 43 percent of new hires in 2008 were over the age of 50. THE FULL STORY

Finance Company Doubles Earnings

Credit Acceptance Corp. announced consolidated net income of $40.7 million for the three months ended Sept. 30 compared to consolidated net income of $20.7 million for the same period in 2008. For the nine months ended Sept. 30, consolidated net income was $105.9 million, compared to consolidated net income of $48.6 million for the same period in 2008. THE FULL STORY

Chain Praised for Giving Back to Community

Used-car superstore chain CarMax Inc. earned a pair of honors recently. The company received the 2009 Business of Integrity Award for Marketplace Ethics by the Board of Directors and Education Foundation of the Upstate South Carolina Better Business Bureau. CarMax has a store in Greenville, S.C., located at 2800 Laurens Road. THE FULL STORY

Chain Praised for Giving Back to Community

C R O S S WO R D

by Myles Mellor

Answers from the 2/1/10 puzzle

Across 1.

Body support

Hondas

10.

Bottom line

11.

Cause of inflation?

12.

Popular Parisian car

13.

Popular Toyota

14.

Amazement

16.

Weird (var.)

18.

Gave gas to

37.

Arguing

19.

Again prefix

40.

Desired quality for a buyer

21.

Blackout

42.

Weight measure, for short

23.

Additional items

43.

Connections

25.

Buckle

45.

Not the driver

28.

Falcon film

46.

Honda model

30.

Started to do better after a downturn (3 words)

Down

33.

Galley need

34.

Canal site

35.

JD Power action

36.

Goes to the metal

Fuel mixer

Per ___ (yearly)

Last word of “America, the Beautiful”

Avanti maker

Car brand with an outlook?

27.

Planning for the future

Big gas supplier

29.

Kind of column

It’s internal, in an engine

31.

Dumfries denial

Shade of blue

32.

Ate

Floor it

38.

Model

15.

Slick

39.

17.

Relaxed

Microsoft product for autos

20.

Former partner

40.

Agent

22.

MC 12, for example

41.

Recycle ___

24.

Fuel control valves

44.

Roman 4

26.

Well over the speed limit...

Answers to this puzzle in the 3/1/10 issue. Call 1.800.794.0760 for a FREE subscription.

UCN_23

2/9/10

10:08 AM

Page 1

VISIT US

BOOTH # 2975 NADA CONVENTION & EXPO

UCN_24

2/8/10

4:26 PM

Page 1

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