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ON THE WEB: Demand Increases for Floor Plan ABS
City Puts Freeze on Store Expansion By Ed Fitzgerald
Solid asset performance and higher auto sales will likely increase demand for wholesale dealer lending and drive issuance of new U.S. dealer floor plan ABS, though the sector is not without potential potholes, according to Fitch Ratings in a new report. U.S. auto dealerships are in solid shape through the first quarter. Fitch’s outlook for asset and ratings performance remains stable in 2013. The agency rates 26 outstanding dealer floor plan ABS transactions
Creditor Expands into Nineteen States
Global Lending Services is actively purchasing automobile finance contracts in 19 states. Since the purchase of the assets and platform of Resurgent Auto Finance in August 2012, GLS has been focused on expanding its purchasing ability and geographic reach. When GLS purchased Resurgent assets, it was operating in four states.
A Detroit suburb is reworking an ordinance to stop the proliferation of used-car stores and at least one local dealer feels the city is also targeting existing lots. Warren Planning Director Ron Wuerth said the city has been swamped with requests for used car lots – receiving up to three requests weekly. “We had to issue a moratorium on the lots,” Wuerth said. “Each week the planning commission would get a couple requests, then the building division might get a request and then the zoning inspector would get a request.” Wuerth said the moratorium – originally six months long – expired April 16, but the city won’t be approving any new applications until scheduled hearings are held. He said the city currently has about 50 to 60 used-car stores. In 2008, the city had only eight lots. “And there’s another 20 people standing in line waiting to add to that number,” Wuerth said. The city’s current zoning ordinance prohibits a used car lot from operating within 700 feet of an-
TOO MUCH?: A dealership in Warren, Mich., attempts to draw shoppers. City officials claim too many used-car stores have moved into the area in the past few years.
other one, but he said that is often violated. Jeremy Smythe, who handles marketing for All American Auto Sales in Warren, feels his store is feeling the pinch unnecessarily. “The owner, David Kaczor, has been here almost 10 years and wants to expand,” he said. “But the city is not looking at it as an expansion. They want
us to rezone everything as one parcel.” He said the city wants All American to at least temporarily shut down, but is cutting them “some slack.” “Right now we are not supposed to look like we’re open for business,” Smythe said. “We can’t have a front line - our cars can’t be facing the road.” Smythe is somewhat sym-
pathetic to the city’s stance. “There are some lots on 8 Mile and Van Dyke that look like junkyards,” he said. “But we care about presentation and have done landscaping.” Smythe lays part of the blame on Warren Mayor James Fouts. “It’s really a case of one politician sticking to his guns,” Smythe said.
Rush - Dated Material
Chrysler Recalls Sport Utilities for Crash Risk Chrysler Group LLC is recalling 295,345 model year 2005-2010 Jeep Grand Cherokee vehicles manufactured Feb. 11, 2004, through March 9, 2010; and 2006-2010 Jeep Commander vehicles manufactured Jan. 31, 2005, through March 10, 2010. A transfer case electrical failure may result in an unintentional shifting of the transfer case into the neutral position. If the vehicle shifts into neutral, it may roll away increasing the risk of a crash or personal injury. The recall is expected to begin in June. Chrysler’s recall campaign number is N23.
Chrysler is also recalling 5,440 model year 2008-2012 Jeep Wrangler right-hand drive vehicles manufactured Feb. 1, 2007, through Oct. 10, 2011. The affected vehicles have airbag clockspring assemblies that could experience broken airbag circuits. In the event of a crash necessitating airbag deployment, a broken electrical circuit in the airbag clockspring wiring assembly can lead to non-deployment of the driver-side front airbag and will not be able to properly protect the driver, increasing the risk of injuries. The recall is expected to begin this month.
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May 20, 2013ÛÛÝÛÛ
USED CAR NEWS
CarMax Dedicates Store to Company’s Founder Nearly 20 years after CarMax Inc. opened its doors at the first store in Richmond, Va., the company honored its founder and retired board chairman, Rick Sharp, in a store dedication ceremony May 7. The company also announced the establishment of a $250,000 endowment to the Community Foundation to fund the CarMax-Rick Sharp Entrepreneur Scholarship. The Richmond TimsDispatch recently profiled Sharp and his struggle with Alzheimer’s disease. While serving as president and CEO of Circuit City Stores, Sharp led a team that created the concept of CarMax. Sharp’s vision became reality when the first CarMax store opened on West Broad Street in 1993. Sharp served as a volunteer and board member to many local non-profit and for-profit community groups including The Boys and Girls Clubs of Metro Richmond, Johns Hopkins Medicine Board of Advisors, University of Virginia Health Foundation and the VCU School of Engineering Foundation. Sharp and his family are currently involved in the Stay Sharp Fund, established two years ago by Sharp’s daughters, Donna Suro
and April Garnett. Stay Sharp Fund was created to promote awareness and support research for Alzheimer’s disease (www. staysharpfund.org). The Community Foundation is selected to receive the endowment to fund the CarMax-Rick Sharp Entrepreneur Scholarship. The scholarship is expected to be awarded annually through a competitive process based on academic performance and financial need to graduating high school seniors in the greater Richmond area. During the ceremony, the company unveiled a bronze plaque featuring Sharp to be mounted at the entrance of the store. A permanent plaque in the waiting area will also share the leader’s contributions and CarMax history. Menwhile, the company Sharo helpd found continued its tradition of giving back to the communities in which its stores are located. Associates from CarMax teamed up with The CarMax Foundation to form a lasting relationship with the Second Harvest Food Bank of Orange County, Calif. The organization received a $25,000 grant on behalf of the company’s Regional Giving Program after Los Angeles Region associates
nominated the charity. Thirty-seven associates of The CarMax Foundation joined together at the food bank for a volunteer teambuilder. Associates packed boxes of food for local families in need. Each box is designed to feed an average sized family for one week and contains items such as pasta, cereal, beef stew, peanut butter and canned pears. After only two hours of work, the associates packed 1,762 boxes, enough food to feed 5,637 people. The Foundation grant went to the nonprofit’s “Farm to Family” program. Farm to Family is a fresh produce program that connects local California farmers to families in need by distributing surplus fruits and vegetables that would otherwise be destroyed. The food bank provides 1.4 million pounds of food to approximately 230,000 people per month. In addition to the grant, the Second Harvest Food Bank of Orange County will receive a $500 donation from The Foundation in honor of the associates’ donated time. Associates from the Costa Mesa and Buena Park CarMax locations have continued the community service by participating in the food bank’s “Meals 4 Minds” program.
LOOKING BACK: CarMax founder Richard Sharp and CEO Tom Folliard look over a display the superstore chain’s milestones. Sharp was an executive at Circuit City Inc. when he oversaw the move into used-car sales.
The team helps distribute produce in a mobile pantry to students and their families in Santa Ana. With
each delivery the food truck transports at least 5,000 pounds of fruit, vegetables and dry goods.
Lease-Here, Pay-Here Requires Commitment By Jeffrey Bellant
LAS VEGAS – Lease-here, payhere remains a tempting market for dealers, but it requires a total commitment, experts said. Dealers and industry experts discussed the leasing market during a recent conference. “If you’re in a state where the sales tax is onerous, it’s a pretty good deal,” said Jeff McCurry of Finance Express. “But you really need to research it to see if it fits your (situation). We think it’s going to be a growing part of our business that we’re continuing to invest heavily in.” Eric Hurst of NextGear Capital warned that dealers should commit to either leasing or traditional buy-here, pay-here, but not try to jump back and forth. David Keller, a partner with CliftonLarsonAllen, a certified public accounting firm, said the challenge of lease-here, pay-here is that,
because of different laws, “it’s very state specific.” Dealers should understand their rate of repossessions, actual losses, etc., over a period of years to determine whether leasing would help them come out ahead or not. The other challenge, panelists said, is that there really isn’t a secondary market for lease paper. “That’s a very big factor,” Keller said. The good news for dealers is the ability to acquire inventory with floor planning. On the floor planning side, Eric Hurst, of NextGear Capital, said capital is still fairly cheap and it’s a “very robust environment.” Tom Hudson, partner at Hudson Cook, recommends obtaining a guide on vehicle leasing from the Federal Reserve Board. Even though it’s directed at consumers, it may help dealers better understand the process. He also said dealers should look at an actual leasing document to understand
Photo by Jeffrey Bellant LAW MAN: Attorney Tom Hudson (left) offers tips and warnings to dealers who consider entering the lease-here, pay-here market.
what the transaction is about. Lastly, Hudson suggested dealers contact the
National Vehicle Leasing Association for more information.
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USED CAR NEWS
NEWS BRIEFS GM Financial Sees Lower Profit
General Motors Financial Company Inc. reported net income of $106 million for the quarter ended March 31, compared to $112 million for the quarter ended March 31, 2012. Consumer loan originations were $1.4 billion for the quarter ended March 31, compared to $1.2 billion for the quarter ended Dec. 31, 2012, and $1.4 billion for the quarter ended March 31, 2012. The outstanding balance of consumer finance receivables totaled $11.2 billion at March 31. Lease originations of General Motors Co. vehicles were $620 million for the quarter ended March 31, compared to $265 million for the quarter ended Dec.31, 2012 and
$384 million for the quarter ended March 31, 2012. Leased vehicles, net, totaled $2.1 billion at March 31. Consumer finance receivables 31-to-60 days delinquent were 4.3 percent of the portfolio at March 31, compared to 3.2 percent at March 31, 2012. Accounts more than 60 days delinquent were 1.5 percent of the portfolio at March 31, compared to 1.2 percent a year ago. Annualized net credit losses were 2.6 percent of average consumer finance receivables for the quarter ended March 31, 2013, compared to 2.5 percent for the quarter ended March 31, 2012. The company had total available liquidity of $3.3 billion at March 31, consisting of $2.9 billion of unre-
'-É&#x;,,3É&#x; 1,(, a member of the National Auto Auction Association Hall of Fame, died May 2. He was 90. Lawrence served in the U.S. Army Air Corps during World War II. He then attended the Johns Hopkins University, graduating in 1951 with a degree in political economy. Lawrence joined the National Automobile Dealers Association Used Car Guide as an editor in 1956 and was promoted to publisher in 1966, a position he held until his retirement in 1988.
He was the recipient of numerous industry awards, including induction into the NAAA Hall of Fame. Lawrence is survived by his son, Eric (Karin) Lawrence of Black Book and several grandchildren. C R O S S WO R D by Myles Mellor
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