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Future Arrives For Buying, Selling Cars

By Ted Craig

For years, dealers have heard promises that technology will improve their operations. But now those promises seem closer to reality.

This year ’s National Automobile Dealers Association convention displayed a vast array of tools, from improved online advertising to an artificial intelligence system that handles leads.

Unlike years past when there was more hype than utility, these advancements seem well conceived and come from traditional vendors.

For example, Manheim demonstrated the latest updates to its Simulcast sales through an on-site auction.

Dealers gathered around in front of a bank of monitors and used tablet computers for a mock sale featuring an auctioneer broadcasting from Atlanta.

Manheim CEO Sandy

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Schwartz said the new approach for Manheim is taking the auction to the cars, reversing the traditional model.

This cuts costs for consignors and expands the reach for buyers.

Schwartz said the company still believes in running cars through the lanes, but it’s hard to say what the volumes at physical sales will be in the future.

However the mix winds up will depend on the customers.

“We would never let the fact we own real estate drive where the business goes,” s a i d Ja n e t B a r n a r d , Manheim’s chief operating officer. “The customer drives that.”

While this change seems rapid, this is the tenth anniversary of Manheim Simulcast.

Both the system and the users have come a long way since then.

“The technology wasn’t there then and the acceptance level wasn’t either,” said Nick Peluso, Manheim’s senior vice president of customer management.

Chip Perry, CEO of Manheim’s sister company AutoTrader.com, sees the future as evolutionary rather than revolutionary.

“What we’re not doing is seeking a big bang,” Perry said. “Big technology bangs don’t tend to work.”

AutoTrader.com is working on ways to extend dealers’ reach, instead.

One is integrating its classifieds into the KBB.com website. AutoTrader bought

Photo by Colleen Fitzgerald TOMORROW TODAY: Dealers participate in a simulated Manheim Simulcast auction at the recent NADA convention. Technology continues to become an integral part of dealer operations.

Kelley Blue Book last year.

AutoTrader.com is also working with dealers to create branded websites separate from its main listings.

“We’re all about helping dealers find new ways to get more prospects into their stores,” Perry said.

AutoTrader’s salespeople are paid on dealers’ success, rather than how many products they sell.

“Make sure the customer is doing well before asking them to do more,” Perry said.

At eBay Motors, the focus continues on dealer training.

A major issue remains con-

vincing dealers online sales go beyond specialty units, said Clayton Stanfield, the company’s director of dealer training.

“Every car is the perfect eBay car,” Stanfield said.

The company introduced a new tool recently that shows how quickly technology is moving today.

Consumers who see a car on the street they like can now use an app to capture an image of the vehicle.

The app then uses the image to find the same make and model for sale on eBay. Technology offers plenty of

opportunity for dealers, but the issue in the past has been motivation. Many dealers, especially franchise dealers, were making enough money the traditional way that they felt little need to learn new skills.

The downturn changed that. Now they need to use technology to find more inventory as well as sell more.

Stanfield said independents have actually been quicker to adapt “The biggest difference is always a belief in the system,” he said.

IN THIS ISSUE

• Used-car prices are set to rise again this year. – Page 3

• Financing continues to become more available. – Page 8

• A simple repair turned into a major headache for one dealer. – Page 6

• Non-profit group founder eyes second dealership. – Page 16

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Wholesale Prices Head up Again Wholesale prices are rising again and should continue climbing through the rest of the year as demand stays strong and inventory stays tight.

The Manheim Used Vehicle Value Index rose to 125.7 in January, the fourth consecutive month-overmonth increase. It now stands only 1.6 percent off the all-time high reached in May 2011.

Speaking at the recent National Automobile Dealers Association conference, Jonathan Banks, executive automotive analyst for the NADA Used Car Guide, predicted used-car prices will reach a peak in April. On a seasonally adjusted basis, however, they’ll continue to climb until December.

These high prices have caused some people to call used cars a bubble. Banks dismisses this idea.

Used-car prices are 12 percent above the long-term trend, he said.

The NASDAQ was 175 percent above its long-term trend during the dotcom bubble and housing prices were 80 percent higher.

NADA chief economist Paul Taylor agreed with Banks.

“I don’t understand those people saying used-car prices are going to collapse,” Taylor said.

One of the main factors pushing up prices is a lack of off-lease vehicles.

Domestic manufacturers halted leasing in the fall of 2008 when

capital dried up and that means offlease volumes will be down 22 percent this year.

Taylor said captives are working to remedy this shortage by writing a lot of two-year leases. They need those units for their certified pre-owned programs, Taylor said.

Taylor and Banks both see the increasing age of vehicles on the road as a spur for demand. That reached 10.8 years last year, according to R.L. Polk.

Vehicle quality explains some of that increase, but Tom Kontos, ADESA’s executive vice president of industry analysis, said people still like to drive a newer vehicle.

“It may not be worn out for the life of the car, but it is to them,” Kontos said.

One factor that could suppress used-car prices is new-car prices. If the gap between the two narrows, used cars would lose out.

That didn’t happen in 2011, as new cars faced their own supply constraints.

“The new-car market provided a nice ceiling for used-car prices,” Banks said.

Taylor sees the potential for increased incentives this year as the Japanese manufacturers try to regain market share.

But strong used-car prices mean the incentives can be smaller due to higher trade-in values.

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NEWS BRIEFS Survey Finds Dealers Expect Sales Increase

Nearly half of dealers surveyed by Ally Financial at the 2012 National Automobile Dealers Association convention expect their sales to increase by 10-20 percent this year, and almost another third are even more bullish in expecting sales to grow greater than 20 percent.

Nearly 75 percent of dealers surveyed expect consumer confidence to be the key in sustaining sales momentum, surpassing the availability of incentives or vehicle inventory as driving factors.

About 60 percent said the credit profiles of customers coming into their showrooms are improving.

Further, more than half (53 percent) of the dealers surveyed expect the small-car vehicle segment to experience the most growth in 2012.

Year–over-year domestic brand share rose to 31.8 percent. European share fell to 17.8 percent.

Asian share declined to 50.4 percent.

Porsche reported a new high.

IAA Teams with Chinese Firm

Insurance Auto Auctions Inc. (IAA) announced an agreement with Chen Jia, Inc. a wholly-owned subsidiary of Jiangsu Chenlong Resource Recycling Development Co. Ltd. in Zhangjiagang, Jiangsu, China.

Chenlong Recycling is one of the first companies to obtain one of only a few recycling permits from the Chinese government that allows the import of salvage vehicles for the purpose of recycling.

Until recently, Chinese government laws prohibited the import of salvage vehicles from the United States into mainland China.

Today, this recycling project is supCertified Sales See New Year ported in China by the Get off toStrong Start environmental protection body of January certified pre-owned sales the Chinese government. were 131,229, up 6 percent from January 2011, according to AutoData C R O S S WO R D

by Myles Mellor Corp.

Sales were down 16.7 percent from PAGE 26 December.

There were 24 selling days in both January 2011 and 2012 and 27 in December 2011.

NIADA Offers Health Insurance

EBay Motors Improves App

T h e Na t i o n a l I n d e p e n d e n t Automobile Dealers Association announced a program to offer health insurance benefits to its members.

This new health insurance program provides a wide selection of comprehensive coverage options, including PPO co-pay plans, health savings accounts, short term health insurance and student health insurance and can save members up to 40 percent over policies purchased individually. Plans are enrolled through JLBG Health.

EBay Motors announced new updates to the eBay Motors iPhone app, available for immediate download on iTunes, with features including taking a picture of a vehicle to instantly search for it on eBay, and streaming live, exclusive content.

The eBay Motors iPhone app already enables consumers to shop for vehicles and parts.

With the eBay Motors iPhone app’s new streaming feature, consumers can watch live broadcasts exclusive to eBay Motors from their iPhone or iPod Touch.

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, Sheila McGrath, Dave Piestrzynski Columnist: Tony Moorby Advertising: Shannon Colby, Account Manager Megan Frump, Account Manager Marie Hingst, Account Manager Circulation: Helen Thomas Production: Josie Godlewski, Media Manager Tim Montie, Graphic Designer —

Vol. 17 • No. 22 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.

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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City Makes Zoning Consistent

By Sheila McGrath

After a year of collaboration by city planners, business owners and residents, the city of Glendale, Calif., has adopted a new set of zoning rules that will make life easier for dealers on the historic Brand Boulevard of Cars.

Dealers have been setting up shop on South Brand since the 1920s, according to Glendale City Planner Wolfgang Krause.

Currently, 16 new- and used-car dealers line the 16block stretch of South Brand, along with a mix of schools, churches, houses and a hospital. Nearly all the car dealers in Glendale are located there, Krause said, and the street contains the largest concentration of auto dealerships in the BurbankGlendale-Pasadena area.

But dealers have been saying that inconsistent regulations on the boulevard hampered their ability to do business, and that’s a big issue in Glendale, where auto companies are the city’s second-biggest tax revenue source.

Krause said in the early 1990s, the city adopted the South Brand Specific Plan, a zoning tool for the area that replaced conventional zoning.

But businesses found it difficult to comply with the complicated code, which was hundreds of pages long.

“It was rather arbitrary,” Krause said.

Last month, after a year of meetings with residents and dealers, the city adopted a new zoning designation, Commercial Auto Zone, created to simplify the zoning on South Brand.

The changes go into effect Feb. 23, Krause said, although the city is still working on some parts of the plan related to parking in the area.

Johnny Harrison, general manager of Lexus of Glendale, was one of the main participants in the series of discussions.

He said the inconsistent zoning rules made it hard to know what was allowed and what wasn’t.

“If you were trying to expand your business and looking at renting the build-

ing next door, you could get different zoning there,” Harrison said.

New businesses spent a lot of time jumping through hoops and getting special permission for their plans, which curtailed their projects and made everything take longer, he said.

The new zoning allows dealers more leeway in the way they advertise their businesses with wall signs and banners, clarifies height and setback regulations, and allows dealers to use landscaping in ways that benefit them. Trees, for instance, can be clumped together instead of spread out across the property, limiting the potential for inventory damage by birds.

According to a city report, the Commercial Auto zoning was designed to ensure the success of local auto dealers while maintaining a mix of uses, maximizing street parking for residents and businesses and improving the quality of life in the South Brand Boulevard neighborhood.

Harrison, who opened his business on the boulevard in

1997, commended the city staff for their outreach efforts as the residents and businesses owners went through a give-and-take process. City planners spent time with different groups making sure they had the latest information and answers to their questions.

The eventual outcome was

a set of rules and regulations that are a lot easier to understand, Harrison said.

“The dealers didn’t get everything they wanted, (city officials) didn’t get everything they wanted and homeowners didn’t get everything they wanted,” he said. “But overall, the city as a whole won.”

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Dealer’s Zoning Woes May End

By Jan Lindsey

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All Sun Shine Cars owner Al Akhavan needed was a roof repair.

What he got was more than 10 months of woe.

For 24 years, Akhavan bought preowned cars at a nearby auction, repaired the ones that needed it and either sold them at auction or on his lot in Clearwater, Fla. A building on the property housed Akhavan’s office. He rented the other side to attorney J. Jason Bangos.

When the roof began to leak, Akhavan pulled a Pinellas County permit to get it fixed.

“That’s what opened up this Pandora’s Box,” said Bangos, who represents his landlord.

It led county inspectors to the property, which led to their discovery Akhavan was running a commercial venture on property zoned for professional use, Bangos said.

And that led the county to order Sun Shine Cars off the property.

Akhavan moved his business and began the lengthy county hearing process.

Switching locations put him further from the auction and made it hard for his customers to find him, Bangos said.

As his income fell, his costs were rising as he began handling expensive landscaping issues and site reviews, too, Bangos said.

“He’s had to resort to living off credit cards,” he said.

Then, Bangos’ caseload started to drop. He said the lack of activity around his office made it look like his practice was gone. So in December he moved it, dealing another blow to Akhavan, who lost his rental income.

“I stayed on board as long as I could,” he said.

Bangos said county planning and zoning officials were supportive but, after the county attorney opined that letting Sun Shine Cars reopen would set an undesirable precedent, they recommended county commissioners deny Akhavan’s request.

Commissioners heard the case Jan. 24.

“They were asking good questions,” Bangos said, and, in the end, they decided to let Akhaven move back to his property.

“They were sympathetic. They were understanding and they voted 8-1,” the attorney said.

Akhavan was told he has two more hearings to face before the decision is final - the second one is not until April.

County officials want to make sure that if they allow him back, the commercial designation on the property will end when Akhavan, who is in his 50s, retires or dies, Bangos said.

“He just wants to get his business back there,” he said. “He’s been beyond frustrated.”

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NAAA Warns of Criminal Activity T h e Na t i o n a l Au t o Au c t i o n Association is warning its members about recent criminal activity that could turn up at their sales.

In Michigan, 2,000 blank vehicle title documents were recently reported missing from a Secretary of State branch office.

The control numbers on the missing documents are: G72444361G72446360. All Michigan titles presented as proof of ownership should be carefully reviewed.

Titles displaying one of the above title control numbers should be considered fraudulent and the state’s Document Fraud Investigation For Cars, Trucks and Vans

Section should be contacted.

In Florida, the state Highway Patrol is asking for assistance in locating two stolen vehicles.

The vehicles are part of the theft case currently involving a number of auctions in the Florida area.

Both stolen vehicles are listed as stolen in NCIC. Vehicle one was stolen in Texas.

It’s a 2007 BMW X5 with a VIN reading 5UXFE43587L015427 Vehicle two was stolen in Atlanta.

It’s a 2009 Lexus RX350 with a VIN reading 2T2GK31U69C063582.

Auctions are being asked to check their inventories for those two VINS.

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PAGE 8 – FINANCE FOCUS Creditors Willing to Finance Deals Creditors are reaching further down into the credit tiers. They’re not at the levels of 2006-07, but there’s been a noticeable increase.

Melinda Zabritski, Experian Automotive’s director of credit, said big banks are d r i v i n g this growth.

The willingness of creditors to finance consumers, including auto purchases, Melinda reached its highest Zabritski level since the early ‘90s last year, according to Scott Anderson, chief economist for Wells Fargo.

“We’re all looking for ggrowth,” said Marc Sheinbaum, CEO of Chase Auto Finance.

“There’s not a lot of growth in other industry areas.”

Low interest rates and high used-car values are causing this loosening of credit.

A change in consumer psychology helps, too. Car payments became a higher priority during the last downturn.

“With the exception of a bass boat, they’ll make their car payment first,” said dealer Gary Reynolds, speaking at AFSA. Credit availability helps sales, but it still comes down to monthly payments for most consumers.

More creditors are offering contracts longer than 72 months.

This good news brings some risk, however.

Finance sources have made major blunders in the past due to high usedcar prices.

For example, being overly aggressive with lease residual projections.

Another concern is the effect longer finance terms have on future sales.

Bill Underriner, chairman of the National Automobile Dealers Association, called 72-month contracts “ridiculous.”

“The customer is always upside down in their car,” Underriner said.

Agency Uncertainty Creates Unease

By Ted Craig

Chain Offers System to Others A new finance company, Go Financial, allows DriveTime Automotive Group Inc. to expand its reach through other dealers in return for access to the in-house finance chain’s extensive underwriting infrastructure.

DriveTime has built itself one of the largest dealership chains, with more than 90 stores across the United States.

But some markets proved too small for the necessary investment in labor and capital, said Colin Bachinsky, Go’s president.

Go Financial provides a portal for dealers to structure sales and finance consumers.

The program requires no major investment in technology and is open to all consumers and vehicles.

“We’re sharing the same basic principles of how we handle our Fe b r u a r y 2 0 , 2 0 1 2

customers,” said Lance Spotleson, Go’s managing director of sales.

Go is signing up both franchise and independent dealers. The main requirements are that they’re outside a DriveTime market and have a good reputation.

Dealers signed up with Go pay a funding fee for each contract the company buys.

Unlike many finance company, the real benefit for dealers comes later.

Go pools their contracts and pays equity as the pools mature.

Dealers have the option to cash out early, but they give up some of that equity.

That means setting up a deal that increases the chances a consumer makes it to the end of the contract.

The average amount financed so far is $12,000 to $13,000 for 40 to 48 months.

Uncertainty remains the biggest concern about the Consumer Finance Protection Bureau more than six months after the regulator officially debuted.

Some of the concern comes from the political Michael nature of CFPB Benoit Director Richard Cordray’s introduction. At his first press conference following his recess appointment, Cordray said some creditors perform “technically legal fraud.”

“Fraud by definition is illegal,” said Bill Hempler, executive vice president of the American Financial Services Association, speaking at the group’s recent vehicle financing conference.

The CFPB’s first action to regulate an industry – payday lending – made many observers uneasy.

Attorney Frank Salinger said the hearing on new examination procedures received no notice and proved unlike any he’s ever seen. The examination procedures were released at the same time, even though the hearing was supposed to help deter-

mine their content.

“Clearly, they didn’t write those on the spot,” Salinger said.

The procedures are only 17 pages long. Most bank examination procedures run 300 pages, Salinger said.

Another way CFPB examinations may differ from traditional bank exams is bringing along lawyers to the process. The agency has done so on a few occasions already.

“It’s like a human subpoena is walking into your door,” Salinger said.

The CFPB has jurisdiction over buy-here, pay-here dealers, but probably will avoid most operators for now. Still, dealers worried about the CFPB can take a couple of steps to improve their position.

One is paying attention to a common new-car dealer metric – the customer satisfaction index.

“The unhappy customer is going to drive this to some extent,” said attorney Michael Benoit.

The CSI gives the agency something it wants, Benoit said, and that’s survey data.

The CFPB also places high value of media portrayals of industries.

“I’ve never seen an agency as press and PR driven as the CFPB,” Salinger said.

He recommends keeping a close eye on news stories for trends.

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Director Rejuvenates Group

By Jeffrey Bellant

Paula Frendel’s first year as executive director of the New York Independent Automobile Dealers Association has been busy as she also took over the reins of the New Jersey IADA. “I started in February 2011 and then (became director) of the New Jersey IADA in July,” she said.

The New York group had been in and out of affiliation with the National Independent Automobile Dealers Association over the years.

New Jersey has not had an active IADA for some time.

New York IADA President Fred Donelly, owner of Hunts Point Auto in the Bronx, said the association is happy to have Frendel at the helm.

He said the consistency of having a full-time executive director, rather than a part-time person, has made a big difference.

Frendel said the group has also hired a lobbyist in Albany which helps her to focus on serving members.

Donelly and Frendel have been traveling the state, signing up dealers for the New York IADA, which now has about 200 members.

Donelly said Frendel has been visiting two auctions a week since she took over and the pair is continuing to draw dealers from different areas of the state.

Photo Courtesy of New York IADA LEADER: Paula Frendel, executive director of the New York IADA, also heads up the New Jersey affiliate.

Since Frendel is based in New Jersey, she is able to serve both state organizations.

“We’re going to have a convention in September,” Frendel said, “with New York, New Jersey, Maryland, Delaware and Pennsylvania.”

Donelly said the association is also working closely with the New York Continued on page 14

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Kelley Names Vehicles with Lowest Cost of Owernship Kelley Blue Book announced its inaugural Total Cost of Ownership Award winners. The all-new 2012 awards honor current model-year vehicles and brands (in both the luxury and non-luxury categories) with the lowest projected ownership costs, based on Kelley Blue Book Total Cost of Ownership data for the initial five-year ownership period.

While depreciation (or loss of value) may be the greatest expense in owning a vehicle, followed by fuel costs, there are other factors that can have a significant impact on a consumer’s pocketbook.

Available on Kelley Blue Book’s kbb.com, Total Cost of Ownership information reveals depreciation, expected fuel costs, finance and insurance fees, maintenance and repair costs, and state fees for new models.

“Car shoppers should take the time to compare vehicles on their consideration lists to fully understand the financial implications involved with cost of ownership,” said Juan Flores, Kelley’s director of vehicle valuation.

“While a vehicle might be less expensive up front, the cost of fuel for that model, insurance and other expenditures could make it the less appealing choice for their wallet in the long run.”

Based on Kelley Blue Book’s analysis, Kia and Audi are among this year’s prestigious brand winners. Kia

is the top brand among all manufacturers, while Audi is the top luxury brand, for low average total ownership costs. With a number of successful redesigns, greatly improved quality, superior fuel economy and competitively priced models, Kia sets itself apart from other non-luxury brands.

Some of the key models contributing to Kia’s success are the Soul, Optima and Sportage. Audi is a stand-out luxury brand because of its low depreciation and superior fuel economy among its lineup.

Among the models driving Audi’s achievement are the A3, A4 and Q5.

Other notable wins include the Chevrolet Volt, which was neck and neck with the Nissan Leaf.

The Volt’s slightly lower maintenance and insurance costs gives it the competitive advantage, making it the 2012 Total Cost of Ownership Award winner in the Electric Car category.

The Chevrolet Volt has a five-year ownership cost expected to total $40,629, while the Nissan Leaf’s fiveyear expected total is $42,089.

In the subcompact car segment, less than $400 separates the top three models.

The 2012 Nissan Versa, Toyota Yaris and Hyundai Accent are all close with their five-year Total Cost of Ownership totals. However, the Nissan Versa comes in No. 1 with the lowest ownership cost.

2012 Kelly Blue Book Total Cost of Ownership Awards 2012 TOTAL COST OF OWNERSHIP: BRAND - KIA 2012 TOTAL COST OF OWNERSHIP: LUXURY BRAND - AUDI 2012 TOTAL COST OF OWNERSHIP: BY VEHICLE CATEGORY SUBCOMPACT CAR: Nissan Versa

COMPACT CROSSOVER: Nissan JUKE

COMPACT CAR: Kia Soul

CROSSOVER: Hyundai Santa Fe

MID-SIZE CAR: Hyundai Sonata

LUXURY CROSSOVER: Lexus RX 350

FULL-SIZE CAR: Chevrolet Impala

MID-SIZE SPORT UTILITY: Jeep Wrangler

ENTRY-LEVEL LUXURY CAR: Volvo C30

FULL-SIZE SPORT UTILITY: Ford Expedition

LUXURY CAR: Audi A5

LUXURY SPORT UTILITY: Audi Q7

HIGH-END LUXURY CAR: Lexus LS 460

HYBRID UTILITY: Ford Escape

SPORTS CAR: Mazda MX-5 Miata

MID-SIZE PICKUP TRUCK: Toyota Tacoma Regular Cab

HIGH-PERFORMANCE CAR: Lexus IS F

FULL-SIZE PICKUP TRUCK: Chevrolet Silverado 1500 Regular Cab

HYBRID CAR: Honda Insight

MINIVAN: Mazda MAZDAS

ELECTRIC CAR: Chevrolet Volt

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Association – Continued from page 10

State Department of Motor Vehicles on issues affecting dealers.

“Curbstoning is one of the big issues we’re making pretty good progress on,” he said.

The key has more to do with enforcement than legislation.

Donelly said the group is just trying to convince the state that cracking down on curbstoners will boost revenue and protect consumers.

“Illegal dealers are the problem,” he said, “not the legitimate dealers.”

In addition to scheduling a state convention, signing up members and working with DMV officials, the association is also adding bene-

fits for members.

The association offers everything from $3,500 in auction coupons, to group insurance plans, credit card services and other offers along with upcoming education programs.

Mike Linn, chief executive officer of the NIADA, is happy with the direction of the New York affiliate.

“Paula has done an excellent job in revitalizing membership in New York,” he said. “Membership is the highest since 2006 and, overall, you would need to go all the way back to 1999 to find significantly higher numbers.

NIADA has high hopes for her continued success in both states.”

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UCN_16

2/13/12

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Used Car Operation Eyes Second Location After Successful Year

By Jeffrey Bellant

The founder and president of a non-profit group that ministers to struggling men is hoping to open a second used-car lot, one year after opening the group’s first dealership.

John Barrow, founder of A Better Way Ministries, started the group after turning his own life around.

On his website, Barrow credits the experience of going through Teen Challenge, a 12-month residential service program to help people conquer life-controlling drug and alcohol programs through the application of Biblical principles.

He now offers that program through his group.

Many men who go through the program end up transitioning to jobs in businesses owned by A Better Way. The faith-based Christian group owns and operates several business out of a 100,000-square-foot building, including a cafe, thrift shop, auto repair shop, moving company and others.

One of Barrow’s other businesses is a used-car lot.

Justin McVie, general manager of A Better Way Auto Sales in Peachtree City, Ga., said the dealership is one year old and sells about 15 to 20 cars a month.

“A lot of the cars we sell are in the $4,000 to $6,000 range,” he said.

The dealership does have cars as high as $15,000, but those don’t sell as well.

“About half of our sales are buyhere, pay-here,” McVie said.

“We also have a lot of customers from Delta, so they get financing through their credit union.”

McVie said Barrow is hoping to open a second dealership in Newnan, but an effort to get a piece of property rezoned was rejected by the county board of commissioners.

He said the group already has its eye on another piece of property that doesn’t need to be rezoned.

McVie said the Peachtree City site has to jump through its own hoops to comply with location regulations.

Stiff requirements for signage and car displays keep him on his toes.

McVie said painting information on car windows is not allowed.

While cars are allowed to have flags on them, the flags cannot have any writing or information on them.

The dealership is also a bit off the beaten path, so it doesn’t get a heavy flow of drive-by traffic.

McVie said the dealership acquires most of its vehicles from off the street and others through auctions like Manheim.

UCN_17

2/9/12

3:27 PM

Page 1

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2/14/12

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USED CAR NEWS

Carfax Expands Through Partners Carfax claims that dealers who include the firm’s vehicle history reports with their online listings get more sales leads per day.

A joint study from Lemonfree.com and Carfax shows that dealers get 73 percent more daily customer leads by linking Carfax Reports to their listings.

Lemonfree.com and Carfax reviewed nearly five million vehicles listed on the lemonfree.com website for the study.

Lemonfree.com began giving online shoppers free access to Carfax Reports run by dealers directly from their Photo by Ted Craig vehicle listings Aug. 1.

NO LEMON: Lemonfree.com ‘s Breanne Kielich promotes “Consumers trust the the brand at the NADA convention. The website also Carfax name and look boosted its marketing by adding Carfax reports. for Carfax information when making their dealer choice,” program.

Since 2005, Toyota has offered said Bill Eager, vice president of Carfax. “This study is further proof Carfax reports for any Toyota or that Carfax Reports help dealers sell Scion vehicle submitted for certification. more cars.”

CarsDirect has added Carfax Carfax continues to expand its reports at carsdirect.com and sellmyreach through partnerships.

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UCN_19

2/10/12

3:21 PM

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2/13/12

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USED CAR NEWS

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

Manheim Names Woman of the Year

HERE’S TO YOU, RACHEL RICHARDS: Sonic Automotive’s Rachel Richards accepts the Barbara Cox AnthonyAutomotive Woman of the YearAward from Manheim CEO Sandy Schwartz.

Manheim presented its eighth annual Barbara Cox Anthony Automotive Woman of the Year Award to Rachel M. Richards, vice president of retail strategy and chief marketing officer for Sonic Automotive. The honor recognizes the diverse contributions Richards has made to the automotive industry and service to her Charlotte, N.C., community.

Manheim President Sandy Schwartz presented the award during Northwood University’s annual breakfast at the National Automobile Dealers Association convention in Las Vegas.

“Richards is a passionate advocate for our industry, her customers and her community,” Schwartz said.

“In addition to her many professional accomplishments, she has been instrumental in developing innovative business solutions, demonstrating a commitment to automotive education and serving as a role model to women in this industry.”

Richards joined Sonic in 2006 as the director of retail strategy and project management. In this role, she redefined the Fortune 400 company’s retail online and digital strategy.

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2/10/12

4:44 PM

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RETAIL MARKETS SOUTH CAROLINA

Luke Godwin, general manager, Godwin Motors Inc., Columbia, S.C.: “We’ve been in business for 26 years. We just moved to a new location on Jan. 3.

“When we opened up 26 years ago, we were on newcar row, where there were 10 new-car dealerships. Over the years, the new-car dealerships left, moving to other parts of town.

“But a Nissan dealership closed last March, right down the street from us. So we ended up buying twoand-a-half acres of their old property, It was originally their used-car showroom.

We bought that building, remodeled it and bought the property to go with it. We (previously had) less than an acre of land.

“So we went from a (building) that was 700 square feet and, really, no offices, to a place that’s double the size with six offices.

“In our old location, we had room for 35 cars. Now we have room for 90 cars on the lot.

“Our plans are to turn the old location into a service

center.

“I currently farm out our service, though I work closely with the mechanics that do our work.

“Right now, I’m keeping 60 to 70 vehicles on the lot.

About 70 percent of those are coming from auctions.

“The rest I get off the street or through wholesalers.

“I’m a buy-here, pay-here dealer, about 80 percent of our business. The rest is cash or outside finance.

“I also do some personal buying (special orders) in some cases.

“In January, we sold 35 or so. By (the second week of February) we already had about 35 in the bag, since this is tax time. We were probably selling 25 to 30 on average (per month) last year.

“I think we’ll average 40 to 45 a month this year.

“Our average model year is about 2007. Average mileage is probably high 80,000s to low 90,000s.

“People don’t believe me (because of the market), but I keep trying to push the mileage down and the cars newer.

•

Compiled By Jeffrey Bellant “So I think the mileage is 5,000 to 10,000 lower than this time last year.

“About 60 percent of our inventory is cars, 30 percent is SUVs and the rest is trucks.

“My inventory is about 50/50, maybe a little more domestic.

“For marketing, I have my own website, where we get a bunch of traffic.

“We also use the local car (classified) magazines.

“I used to use AutoTrader, but I got out of that. In my opinion, that’s a best-priced shopper and I’m not going to have the lowest priced car.

“My average cost of reconditioning is probably $700 to $800, about the same as last year. I almost always put new tires and brakes on everything.

“The average down payment here is $2,000.

Average note length is 36 months. If they have mileage under 70,000, I’ll even go 48 months.

“The average overall price is $10,000.

“One recent vehicle we sold was a 2008 Scion tC. It had 76,000 miles and we got $11,900.”

TEXAS

Greg Zak, owner/presid e n t , D i xo n Mo t o r s, Houston: “The dealership has been here since 1963. I’ve had it since 1998.

“I have one lot. I’m a buyhere, pay-here dealer. With tax time, we load up, so I’ll probably keep 120 units on the lot here. I also keep more vehicles stored, since I don’t have room for them on the lot.

“On an average month, non-tax time, I’ll keep about 75 units, something like that.

“I get my vehicles from ADESA, Manheim and some wholesalers.

“During this time of the year, we’ll sell 75 to 80 per month.

“The average retail price is about $17,000. We’re a little bit on the higher end. That price is about the same as last year.

“We carry slightly more cars than trucks and SUVs right now, maybe 60/40.

“We also carry 50 percent domestic and 50 percent import when it comes to cars. But our trucks tend to be mostly domestic.

“We in-house finance everything.

“I work with a couple of shops to service our vehicles.

On average, we spend about $1,000 in reconditioning.

Because we’re a higher priced car, we tend to spend more because of tires and little nicks and things. They want it to look brand new.

“We have a website, with all of our cars and pictures of them. In addition, we advertise in the local car magazines. That’s pretty much it (for outside advertising).

“Of course, we work our existing customer base for referrals. We get a lot of business that way. We get a good percentage of business from repeat buyers.

“Our average down payment is about $3,000.

Our average term is 40 months.

“We typically carry vehicles that are two to five years old. I really try to source the vehicles at 70,000 miles or less. But we’ll sell cars that are still under factory warranty.

“I feel pretty optimistic about the market, though supply will still be tight.

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UCN_22

2/13/12

4:20 PM

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USED CAR NEWS

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WHOLESALE MARKETS ARIZONA

Thomas McDermott, general manager and owner, Metro Auto Auction of Phoenix: “Sales are great. We saw the seasonal uptick after the holidays.

“We have a pretty consistent demand for buy-here, pay-here units through the year.

“We have one lane that sells mostly buy-here, payhere units. It’s hard to say if we’ve seen an increase for tax season.

“Retail sales are rising.

Once you get through the holiday season, moods always improve.

“Dealers seem a lot more optimistic about the spring market.

“I anticipate a great spring season.

“Retail buyers are out there looking for cars.

“We’ll always take more cars. We’re actually expanding the lot.

“We’re paving more acres because we’re out of space again.

“This sale will run 1,400 to 1,500 units consistently and for our promo sales we’ll run

1,800 cars.

“We average 1,000 to 1,200 dealers per sale. We get a lot of dealers from California, New Mexico and Colorado.

We have some faithful customers from the Midwest and Northwest that fly in every year, like every auction.

“Our Mexican business is all over the place.

“The laws change constantly on what can come over the border.

“They just recently banned cars that have a bad AutoCheck.

“That may change soon, though.

“Dealers are buying anything with eyeball – low mileage and eyeball.

“That’s what’s tough because those cars are far and few between in the market.

“Everybody’s paying a premium for them.

“Trade cycles have extended. With the recession, people couldn’t get financed, so they kept their cars longer.

“That just dried up the supply of trade-ins.

“This time of year, everything sells except a complete wreck.

“Something that was crushed between two freight trains may not sell.

“But even late model cars that dealers announce correctly, even if it has a bad Carfax or AutoCheck with some accident history, sells.

Those cars are really in demand because they’re cheaper.

“Dealers are finding there’s a lot of life in some of those older cars. They’re buying deeper and holding onto more trades.”

MAINE

Mark Wescott, general manager, Port City Auto Auction, Richmond, Maine: “We’ve been here since 1988.

“We have five lanes.

“It’s been kind of quiet.

Though in the last couple of weeks, we have seen a spike in sales percentage.

“We’ve been hovering around 325 or 350 units in volume (per sale).

“That’s down just slightly for this time last year. It’s just the market.

“But sales percentages at our Feb. 9 sale were 65 percent.

“Through the holidays, we

•

22

Compiled By Jeff Bellant & Ted Craig were probably at 55 percent (conversion rates). So it did rebound a little bit. I attribute it to the anticipation of income tax returns. It’s that time of the year.

“Our mix is about 95 percent dealer consignment and 5 percent repossessions.

That really hasn’t changed.

“We’re averaging about 250 dealers in the lanes on sale day. That’s about the same as this time last year.

“Our dealers come from all over northern New England.

“We are starting to see dealers from (outside that area.)

“For example, we’re getting some inquiries from the Midwest – that area – and the Canadian provinces.

“I attribute that to the shortage of cars out there.

“Dealers in the lanes are reserved.

“They’re looking for the cheaper cars.

“They’re all waiting for income tax returns to start turning around business.

“The winter has definitely been mild.

“I think it hasn’t sparked any urgency in retail traffic to buy cars.

“It’s actually caused the

market to be a bit quiet.

“I think the dealers are enjoying that they don’t have to bear the expense of snow removal.

“But on the flip side, snow also brings two other (situations). No. 1, people need to replace cars (because of accidents). “ No. 2, the people who rely on snow for their livelihoods haven’t benefited this year.

“It also affects (truck demand).

“We do reconditioning here.

“I haven’t seen a change in how dealers use recon.

“Cars that are under $5,000 are doing really well.

“Late, late model vehicles haven’t been as strong.

“The average price coming through the lanes here is $4,000 to $4,400. That’s about the same as this time last year.

“I think mileage has certainly crept out.

“Dealers are still willing to buy in the lanes.

“I think we’re at the point where the retail public, in general, is starting to look at new cars, as opposed to the used, because of the expense.”

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USED CAR NEWS

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

COMPILED BY JEFFREY BELLANT

FUNDRAISER OFFERS HELP FOR WOUNDED VETERANS

Photo by Colleen Fitzgerald EASY RIDER:: Massachusetts dealerBrian Lundgren sits on a Harley-Davidson he won during a an auction at the NADA convention. The proceeds were given to the NADA Foundation , which donated the funds toward training service dogs.

Massachusetts new-car dealer Barry Lundgren took home a 2010 Harley-Davidson Softail Deluxe FLSTN thanks to his winning bid of $18,750 during a live auction at the recent NADA convention in Las Vegas.

Lundgren, 46, who also owns a 1994 Harley-Davidson Softail Nostalgia, is co-owner with his brother of Lundgren Honda of Auburn and Lundgren Honda of Greenfield in Massachusett.

The money raised from the Harley – donated by ADESA – was given to the NADA Foundation, which immediately donated the funds to the Wounded Veterans Initiative of Canine Companions for Independence.

The money will go toward the training of two service dogs.

Brian Denney, a U.S. Navy veteran injured in April 2008, received his service dog, Stefano, more than two years ago. Denney and Bob Bunger, CCI’s national director of development services, were on hand at the NADA convention to receive the funds from the ADESA auction and an additional $10,000 donation from the NADA Foundation. Since 2002, the NADA Foundation’s Frank E. McCarthy Memorial Fund has contributed $170,000 to Canine Companion.

NEW AUCTION SET TO OPEN Auction Broadcasting Co. (ABC) announced its newest auto auction in Lancaster County, Pa., will open in March.

The ABC Lancaster Auto Auction is in East Petersburg, Pa., strategically located between Lancaster and Manheim on PA Route 72.

Partner Greg Gehman has been named general manager of the auction, which will open in March with four lanes at a pre-existing site.

Construction is underway for a brand-new eight-lane auction house at the same site with a full-service restaurant and offices, expected to open later this summer.

“Greg Gehman is a friend and a

partner to all dealers in the Northeast,” said Mike Hockett, CEO of Auction Broadcasting Co. Jason Brinkley, vice president of business development for ABC, said the auction will create 75 new jobs The project also represents a multimillion dollar redevelopment investment in the renovations and improvements of the 40-acre, former transportation terminal complex.

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

USED CAR NEWS

25

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UCN_26

2/13/12

11:44 AM

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USED CAR NEWS

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Disconnected Jottings From Tony Moorby...

I was flying back from the Barrett-Jackson auction in Phoenix a little while ago – it was a trip that I thoroughly enjoyed. It had no real purpose other than to see a

but nothing ever came of those efforts. Then the TV hook-up came along and they’ve enjoyed their welldeserved success ever since.

ADESA Auctions had a pres-

Tony Moorby • 40-year veteran of the industry • President from 1997–2000 of ADT Automotive • Served as ADESA’s executive vice president of sales and marketing • Moorby & Associates 2006–present • Awarded the Ring of Honor by NIADA • NAAA Hall of Famer

couple of friends of mine who I hadn’t seen for a while and to see the auction firsthand.

My friends own a delightful house just outside Scottsdale and it served as base for a few days of selfindulgence – eating well and raising a glass or two. Stuart shares my addiction to cars, especially the interesting cars gathered at this massive sale.

My hat’s off to the owners and organizers in pulling off this chaotic event in such an orderly way. My old company tried to buy them on three different occasions

ence, sponsoring various activities and hosting a sky box.

Bob Rauschenberg and Tom Caruso were there to extend a hospitable hand with their wives. The sky box provided a very cool perch to watch the proceedings and nosh on some snacks with a beer on the end of my elbow, a far cry from the crowd below.

But wandering through the cars and vendors’ area was really where the action was.

I loved it. It showed me how ignorant I am on car values in spite of having spent a lifetime in the industry. What

C R O S S WO R D

differentiates one Camaro or Corvette from another, to the tune of hundreds of thousands of dollars, is still beyond me. Stuart’s cousin, Doug, on the other hand, is a Corvette collector – at the last count he had nine – and knows the excruciatingly minute details of what makes one car more desirable than the next. So I had a great time and learned a thing or two.

Back to the flight – a Southwest Airlines cattle run, non-stop to Nashville – was the bumpiest flight in recent memory. I like Southwest. They’re usually on time, their people are polite and cheerful, their planes are surprisingly clean and decent but no one likes the little amount of leg room, no matter what the price of the ticket.

And that’s another thing. If you book well enough in advance, they provide good value for money. The very thought of a Delta/American merger is frightful. As you know, Southwest’s boarding process is a crap shoot, at best, but if you observe a few rules of the game, you can invariably secure an aisle

seat if that’s your preference.

After that, the gamble is who’s going to sit in the middle seat on a full flight.

In the old days, flying was a fairly sociable undertaking.

I’ve had the pleasure of sitting next to some interesting, even famous people, when I flew a lot and earned first-class up-grades. Dolly Parton was charm personified and I’ll never forget the four hours we spent together on the way to Los Angeles.

She told me she wasn’t a dumb blond – she said she wasn’t even blond!

Flying nowadays is a solitary affair, despite sharing a large tin-can with 147 other people. The fight, on this occasion, was indeed full and I was eyeing my prospective neighbors with a jaundiced glance until a sparrow of an elderly lady asked me if I could oblige her by putting her case in the overhead cub-

byhole. I did and then I got back to my crossword in that attempt to employ body language to tell the rest of the world to stay out.

This little lady next to me read a book, occasionally making a comment about the turbulence. About an hour out of Nashville she put the book away and produced some charcoal pencils and a sketch pad and drew some of the most exquisite Michelangelo-like sketches of hands, faces, torsos and animals. I was enthralled and told her so. I love to paint and we traded notes for an hour.

She was a teacher and was returning from a class she took in Phoenix, saying you can always learn.

I wish I had started the conversation when we first boarded. She was a delight and an inspiration. For a casual long weekend I certainly learned a lot.

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

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UCN_27

2/14/12

10:09 AM

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UCN_28

2/13/12

1:39 PM

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Relationship Managers, who work with you to customize business plans and maximize profitability. It’s just what you get from a financing partner with over 45 years of experience.

Part of the TD Bank Group, a Aaa-rated bank ranked as one of the safest banks in North America.

TD Auto Finance LLC, is a subsidiary of TD Bank, N.A. TD Bank Group is a trade name for The Toronto-Dominion Bank. Used with permission. For detailed credit ratings for the The Toronto-Dominion Bank and TD Bank, N.A. visit http://www.td.com/investor/credit.jsp.

Credit Ratings are not recommendations to purchase, sell, or hold a financial obligation inasmuch as they do not comment on the market price or suitability for a particular investor. Ratings are subject to revision or withdrawal at any time by the rating organization.