Used Car News 6/17/24

Auction Academy Goes to Motor City

By Jeffrey Bellant

ROMULUS, Mich. – The Auction Academy’s Class 8 traveled to the Detroit area for workshops, a trip to an auction and an evening at the historic River Rouge Ford Factory Tour in nearby Dearborn, Mich.

The three-day event included classes addressing leadership, titling, Canadian imports, OSHA regulations along with presentations from Montway Auto Transport, Auction Edge, Sirius XM and Cox Automotive.

The program started 12 years ago as a “sons and daughters” program for longtime auction owners. It has since expanded to include leaders from across the auction industry.

Pierre Pons, founder and CEO of Auction Academy, discussed his insights from the book “Leadership Secrets of Attila the Hun” and gave the class a history of the Auction Academy.

Pons talked about how failure is a part of learning how to succeed.

“You’re not going to learn anything without failure,” he said.

Being willing to change is also critical.

Pons pointed out that a person has to be ready – and willing to lead. It has to be a desire. If not, hand over the reins to someone else.

“If you don’t want it, move over and let someone else in,” Pons said.

Pons also said betrayal by those you trust will be a part of a leader’s journey.

“I’ve had it happen to me,” he said. “It hurts.”

Leaders, or “chieftains” as the author describes, need to value morale and discipline.

Dressing for the part as a leader is

critical, Pons added.

Other speakers included Joe Miller, a longtime executive with AutoIMS, who is now a professional coach.

Miller urged academy members to take a “coach approach” to leadership.

Through his business, Awareness to Action Coaching, Miller

Miller provided other tools for academy members, including a “Wheel of Change” chart to help people learn and improve through introspection. For example, it provides questions such as: “What level of satisfaction do you have with your current life?” “What’s a valuable thing you do that gets little recognition?” “What are you pow-

describes his goal is to help “create awareness that inspires better action.”

Training is important when leading others.

“It takes us to a whole other level,” Miller said.

Leaders who take a coach approach must be good listeners and Miller provided nine tools, or keys, to help become a better listener.

His advice is to level up your listening.

“Coaching is 75% listening,” Miller said.

erless to – and yet most loathe to –accept?”

He urged academy members to stay curious longer, meaning to better understand the person you are coaching.

Miller also warned members about the “advice monster.” Be quicker to listen and understand.

He took academy members through several interactive sessions to better understand his concepts.

Miller was followed by Doug Holland of Direct Auction Services who took the class through various

OSHA nightmare scenarios via photos and videos, starting with a car that got away from a driver in the auction during a live sale.

Other photos showed dangerous situations that occur when tools, chemicals and equipment are not properly used or stored.

Typical violations included paint booths that are left open or improperly labeled containers.

Holland was followed by Tonya Price of Fastlane Auto Exchange, which is owned by EBlock, who discussed titling and Canadian imports.

On the last day of the academy, Mark Phillips discussed Auction Edge, followed by Dave Sutton of Montway Auto Transport, followed by Steve Solomon a remarketing consultant and lastly, Cox Automotive’s Jeremy Robb, business intelligence, who also discussed the Cox Automotive family tree.

Compliance News

6/17/2024

Everything Counts in a Contract, Even the Boring Parts

By Eric D. Mulligan

We lawyers have a term for language that shows up again and again in contracts or other legal documents: boilerplate. For example, if you’re a car dealer, you probably have a standard clause in your retail installment sale contract that allows you to assign the contract to someone else, and there are probably other contracts with identical or very similar language relating to assignment.

You probably don’t spend much time thinking about boilerplate because you know what it does, and it does not usually change. Everything in a contract is there for a reason, though, and just because something is standardized doesn’t mean it’s not important. If you don’t pay attention to the boilerplate clauses, you may get unexpected results, as did two dealerships that wanted to enforce arbitration agreements but couldn’t do so.

In one case, Dana Jennings and Joseph Furlong bought used vehicles from a Pennsylvania dealership. In connection with the purchases, Jennings and Furlong each signed a retail purchase agreement, a RISC, and an arbitration agreement. Jennings and Furlong then brought a class action lawsuit against the dealership, alleging that it failed to register their vehicles properly, in violation of the Pennsylvania Unfair Trade Practices and Consumer Protection Law and in breach of their contracts. The dealership moved to compel arbitration or, in the alternative, to dismiss the claims. The trial court denied both motions. The dealership appealed.

The U.S. Court of Appeals for the Third Circuit affirmed the trial court’s decision denying the motion to compel arbitration and remanded the matter to the trial court. The appellate court looked to Pennsylvania law to determine whether the arbitration agreements signed by the plaintiffs were enforceable. Under the Pennsylvania Motor Vehicle Sales Finance Act, a contract governing an installment sale must: (1) be in writing; (2) contain all of the agreements between the buyer and the seller relating to the installment sale of the vehicle (“one-document rule”); and (3) be signed by the buyer and the seller. The appellate court clarified that this one-document rule in the MVSFA requires

all agreements between the parties to an installment sale to be incorporated into the RISC. In this case, because the arbitration agreement existed independently of the RISC, it was unenforceable. In addition, the RISC itself stated that it represented the complete and exclusive agreement between the parties.

The appellate court rejected the dealership’s argument that, because

dealership, claiming that it violated New Mexico consumer protection laws by charging more than the advertised price for her car. The dealership moved to compel arbitration, and Martinez opposed the motion, claiming that the arbitration provisions in the two documents she signed “contained materially contradictory terms regarding the arbitration of any dispute between her and

Jennings and Furlong signed the buyer’s order, RISC, and arbitration agreement on the same day and as part of the same transaction, the three documents should be considered one contract under Pennsylvania contract law. The appellate court found that all three documents could not be considered one contract because they did not reference or incorporate one another. The RISC unequivocally stated that it constituted the entire agreement between the parties.

The dealership also argued that, even if the MVSFA imposes a onedocument rule, it does not apply to the arbitration agreement because the MVSFA is only concerned with financing terms. The appellate court disagreed, finding that the MVSFA requires that certain financing terms be included in a RISC, but it also dictates that all agreements be contained within the RISC.

In the other case, Esperanza Martinez bought a car from a New Mexico dealership. Martinez signed, among other things, two documents that contained arbitration provisions: a New/Demo Vehicle Buyer’s Order Agreement and a RISC. Martinez filed a class action against the

(the dealership).” The dealership countered that the RISC contained a merger or integration clause that reflected the parties’ intent that the RISC replace and supersede the Buyer’s Order. The trial court denied the dealership’s motion to compel arbitration, and the Court of Appeals of New Mexico affirmed.

As the appellate court noted, the dealership agreed that the arbitration provisions in the Buyer’s Order and the RISC conflicted. Therefore, according to the appellate court, the only issue to be decided was whether the parties intended for the RISC to serve as the “stand-alone integrated contract” between them. The dealership relied on one clause in the RISC to support its argument that the RISC superseded the Buyer’s Order:

HOW THIS CONTRACT CAN BE CHANGED.

This contract contains the entire agreement between you and us relating to this contract. Any change to this contract must be in writing and we must sign it. No oral changes are binding.

The appellate court found that this clause merely related to changes to the RISC. The appellate court re-

jected the dealership’s claim that the “entire agreement” language was an integration clause, finding that the “entire agreement” language only applied to the RISC and not other documents the parties signed and that “there (was) no language in the clause that provided that the RISC supersedes, discharges, replaces, or substitutes for other contemporaneous agreements, or that it controls or prevails in the event of a conflict with other prior or contemporaneous agreements.”

These two dealerships faced different problems that led to the same result—no right to arbitrate. The Pennsylvania dealership argued that the RISC incorporated the other documents, including the arbitration agreement. However, because state law contained a one-document rule, yet nothing in the RISC referred to the other documents, it could not incorporate those documents by reference, and the arbitration agreement did not apply to disputes under the RISC. The New Mexico dealership argued that the (purported) integration clause in its RISC prevented the contradictory arbitration terms in the Buyer’s Order from nullifying the RISC’s arbitration terms. The court disagreed, finding that the clause did not preclude incorporation of other contemporaneous agree-ments, including agreements that contradicted the RISC.

The lesson here is that everything in a contract counts, including the parts that you may not bother reading because you think you know what’s there. Just because you didn’t read something carefully doesn’t mean that a lawyer or judge won’t read it carefully. For that reason, you should have a knowledgeable lawyer read your contracts carefully, and you should have them do so regularly.

Getting regular legal advice about your contracts, including all the boilerplate, is the best way to ensure that those contracts are enforceable.

Jennings v. Carvana LLC, 2024 U.S. App. LEXIS 6705 (3d Cir. (E.D. Pa.) March 21, 2024).

Martinez v. Galles Chevrolet Company, 2024 N.M. App. LEXIS 17 (N.M. App. March 20, 2024).

Eric D. Mulligan is a senior associate in the Maryland office of Hudson Cook, LLP.

© CounselorLibrary. Based on an article from Spot Delivery. Single print publication rights only to “Used Car News.”

Dealer Trends

6/17/2024

Economy, Inventory Remain Big Concerns

By Jeffrey Bellant

DETROIT – Economic factors, affordability and high gas prices are the top concerns of franchise auto dealers, according to the 2024 Dealer Transformation Index by Urban Science/The Harris Poll.

The DTI, the third survey period since 2019, was released during a presentation last month to the Automotive Press Association in Detroit.

Simon Bradley, global practice director of network for Urban Science, said 31% of dealers faced challenges in maintaining a stable inventory, which might change this year.

“A quarter of them were complaining about excess EV inventory,” Bradley said. “This survey was taken at the beginning of the year, so maybe the appetite for EVs has been tapering off slightly.”

Bradley said it’s not surprising that consumers surveyed are focusing on economic factors. It showed that

buyers’ biggest purchasing/leasing concerns today are affordability and high gas prices.

“About 55% of automotive buyers said they were likely to change their purchase plans as a result of the economy,” Bradley said.

But dealers were more pessimistic, with 86% believing that consumers would change their purchasing based on the economy.

Economic factors are affecting how consumers are shopping, but not as much as dealers expected.

The survey showed consumers are looking at more budget-friendly vehicle options (e.g., pre-owned vehicles, smaller cars), financial strategy changes (e.g., exploring alternative financing/leasing options, negotiating lower interest rates), and exploring alternative vehicle technologies (e.g., fully electric, hybrid).

A third of consumers surveyed said they were completely open to buying a vehicle “fully online” –

meaning the entire purchase would be made online, Bradley said.

However, the dominant desire of consumers is to interact at some point at the physical dealership, he said.

“Eighty-seven percent of Gen Z auto buyers would consider the traditional automotive dealership in person when they’re going to buy their next vehicle,” Bradley said.

The boomer generation is the group that most wants to use the traditional dealership to buy a car.

The survey looked at what is important in terms of going to a physical dealership.

“What we found, and it makes complete sense, is that the No.1 activity that consumers want to do at a dealership is test-drive a vehicle and set up and orient the vehicle itself,” Bradley said.

The survey showed 90% of those surveyed wanted to test drive the vehicle, across the board in all countries, even in China where there are a lot of online options.

But shoppers are open to doing other parts of the shopping online.

“So what we see here is that it’s about providing options, to the consumers, so that depending on where they are in their shopping journey, they have the ability to engage online or offline,” Bradley said. “It’s up to them.”

Bradley said the survey showed that consumer preferences are changing because of technology.

“Consumers value convenience,” he said. “They always have and they always will.

Auto buyers responded positively when asked about the impact of cash incentives on motivating them to visit a dealership for specific reasons. A $35 incentive offer prompted the following levels of motivation (somewhat motivated or extremely motivated):

• Act on a recall their vehicle was subject to (84%)

• Take a test drive (83%)

• Bring their vehicle in for maintenance (81%)

• Test drive an EV (71%)

Buyers reported they were willing to pay a 28% premium for an EV over an internal combustion engine.

Gen Z and Millennials were willing to pay the highest premium, at 41% and 47%, respectively.

Still, the survey showed the automotive buying public, overall, is twice as skeptical about EV technology than dealers.

Finance News

6/17/2024

Delinquencies Rise, Used Loan Amounts Decrease

By Jeffrey Bellant

Experian’s State of Automotive Finance Q1 2024 showed some interesting trends among new and used car financing.

Melinda Zabritski, Experian’s head of automotive financial insights, discussed the current market earlier this month.

One of the new sections in the Experian report looks at Used Loan Monthly Payment Distribution.

It shows that 33.6% of all used monthly payments are under $400 for both franchise and independent customers. For independent customers alone, there are nearly 38% of consumer loans with less than $400 payments.

“I pinpoint $400 because when you talk to F&I guys that’s always the number people are looking for -- just a few years ago,” Zabritski said. “Also, I picked $400 because

consumers who are coming into the market right now have essentially been out of the market for about five years. Five years ago, the average used payment was about $383.”

So, while there is still a percentage of payments under $400, even among franchise used customers, the distribution shows there’s even a percentage of payments on the used side (2.33%) for payments exceeding $1,000 per month.

It’s not in the report, but Zabritski said she looked at a distribution chart comparing 2019 to today and – across all payments – it was close to 50% that were under $400.

The report showed independent dealers saw a dip in marketshare with less than 45% of used car purchases sold by independents, compared to 55% by franchise dealers.

In terms of loans, more than 34% of used car loans were from buyhere, pay-here or “other” lenders.

Nearly 22% were from credit unions, nearly 28% from finance companies and about 16% were from banks. Used car loans on the Super Prime category to 21.53% in Q1, a jump of more than 3% from 2023. Zabritski said the change may be a result of what’s happening on the new car side.

“With the inventories balancing out a bit on the new vehicle side, there’s been more pent up demand for the new,” she said. “So we have seen consumers across all the risk tiers gravitate a little closer to new

Continued on page 13

Used Car News

Carvana CEO; ‘The Best Period in Our Company

By Jeffrey Bellant

NOVI, Mich. -- One week after Carvana announced its first quarter revenues topped $3 billion, CEO and Co-Founder Ernie Garcia met with members of the Automotive Press Association to discuss the past and future of the used-car ecommerce juggernaut.

The May 14 event included a tour of one of Carvana’s distinctive car vending machines in Novi, Mich., including a demonstration.

Garcia kicked off the discussion with a look at the company’s 2012 start.

“The goal of Carvana from the beginning was to try to build a different retail model that we felt would give customers a different kind of

experience,” Garcia said. “They would be more in control of the whole thing; going through the online checkout process, get their financing, pick their car and schedule their delivery.”

Carvana built its own logistic network, aiming to create more centralized inventory, give customers more selection while having more fixed costs and less variable costs which works out well at scale.

Garcia said Phoenix “wasn’t the standard place” to launch an e-commerce car business.

“We struggled to raise capital in the private markets; we were told ‘no’ by everyone up and down Sand Hill Road in Silicon Valley,” Garcia said.

The company got initial funding from used-car chain DriveTime and things moved fast.

“We ended up going public in 2017, which is very early in the life of a company,” Garcia said. “But then we were lucky enough to get a decent amount of momentum. At that point, I think customers really liked our offering, at least a lot of customers liked to go online, without pressure and buy a car with a very broad selection.

“We became one of the four fastest companies to reach the Fortune 500. That was something we were extremely proud of because (of the difficulty) of trying to build out a totally different automotive supply chain with these big inspection

centers where we recondition every car with $1,000 labor and parts for each one, ship to the customer’s door and build an entire transaction platform.”

Garcia described this process as very capital-inten-

sive relative to many other business models.

Like all businesses, the 2020 pandemic was a “very scary moment” for Carvana. “Transactions basically stopped and there were Continued on page 14

Ernie Garcia

Electric Vehicle News

6/17/2024

Cox Automotive Focuses on EV Battery Health, Education

By Jeffrey Bellant

DETROIT – Cox Automotive

experts held a panel discussion, “Ready for an EV Future,” during a visit to the Motor City last month

Moderated by Michelle Krebs, executive analyst emeritus, the conversation kicked off with Stephanie Valdez Streaty, director of industry insights, acknowledging that EVs may be the future, but it won’t be a smooth transition.

“We’re going to have acceleration, we’re going to have slowdowns, we’re going to have challenges, bumps in the road – but we’re going to get there,” Valdez Streaty said.

She described the EV journey as one of “transformation, incredible innovation and environmental promise.”

Last year, 1.2 million EVs were sold

in the U.S. and Cox expects a year of more EVs and more sales, though not the growth of the last few years. Dozens of new EV models are expected to enter the market with more options, more range and more price points, Valdez Streaty said.

However, with inventory growing on new-car lots, expect more incentives, discounts and lower prices.

Cox sees leasing as a bigger option for EVs, with a forecast of 25% of the EV market being leases. There is also the promise of 500,000 more charging stations, but so far, that has been more promise than reality. Only five states have federally funded charging stations, Valdez Streaty said.

Lea Malloy, assistant vice president, battery solutions, talked about Cox’s focus on EV Battery Solutions, with a focus on EV battery lifecycle management.

“We are going to market, supporting OEMs with key activities around first life extension with the diagnostics, repair, remanufacturing and repurposing of EV batteries,” she said.

Cox is also working on EV battery “pre-treatment recycling, Challenges, affecting everyone

Continued on page 10

Photo by Jeffrey Bellant

ELECTRIC CONVERSATION : Cox Automotive’s Michelle Krebs, (from left) moderates a discussion on EVs with Stephen Smith, Lea Malloy and Stephanie Valdez Streaty in Detroit last month.

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Used Car News

from dealers to suppliers, carriers and lenders, with a goal toward “curbing climate change,” providing innovation and transportation to consumers and companies.

But with it comes differentiation in the type of battery and battery packs.

“We’re all learning together,” Malloy said. “We are building muscle, we’re maturing along with our clients.”

In support of these goals, Cox Automotive is building out the “industry’s first networked EV battery service centers across the U.S.”

The company started with a site in Oklahoma City, then added locations in Las Vegas, Detroit and its newest location in Atlanta.

“Putting it all together, we have 1 million square feet of warehouse and production space dedicated to EV battery caretaking,” Malloy said.

“Then you combine what we have with Manheim’s wholesale auctions which bring 5,000 acres of real estate and 75 locations across the U.S., and we are leading a charge in innovating on how you create new solutions, short-term EV battery storage and last mile logistics.”

Krebs then brought in Cox’s Stephen Smith, vice president, product and engineering, to discuss educating consumers on battery health and residual values.

“I think there are some misconceptions around the degradation of EV batteries,” Smith said.

A consumer’s fear is that he will buy an EV for the first time and worry that the battery is going to degrade such that they will lose money on the vehicle or it won’t perform.

“Actually, what we’re seeing in the data for the EVs that we test is that the batteries are holding up really well in their first few years of existence, in particular,” Smith said. “The OEMs are putting out quality product overall.”

Smith added there is a gap in knowledge about warranties, such as the federally mandated warranty for EVs that is eight years or 100,000 miles.

“In some cases, consumers are not aware of that protection,” he said. “It goes back to the responsibility that we have as industry stakeholders to do more education to make consumers feel comfortable with, ‘What is this product I’m buying? How has the technology evolved? What do I need to know in order to have confidence to buy an EV?”

Smith said there’s really not a one-size-fits all for understanding or assessing EV battery health.

With used cars, this is a big issue, especially if you’re a dealership or repair shop trying to make a decision regarding repairing or replacing it or if you’re a lender trying to determine the residual value of the EV vehicle, he said.

The thousands of vehicles that have been tested through Manheim auctions show that the biggest indicator of the battery health is the remaining capacity of the battery, which is commonly known as the “state of health” of the battery.

“It’s simply a measure of what was the capacity, the energy the battery could hold when it was new and what is it now, and how to convey that,” Smith said.

He said the “State of Health” metric will become the industry norm and it’s what Cox is centered on in terms of evaluations.

The other point is that having a VIN specific understanding of the battery’s health is critical to being able to understand and convey the value of that vehicle.

“Just predicting what the battery health would be for this particular vehicle, based on an assessment of other vehicles or similar patterns is not really sufficient,” Smith said.

“We have a big responsibility as the reference point in the marketplace for wholesale and retail evaluations to be able to confidently project what the value of that vehicle is based on touching that vehicle or at least being able to capture the data off that vehicle.

“That’s what we’re doing at our Manheim locations.”

ADESA OVE IN-LANE

In Memoriam

6/17/2024

Former Kelley Blue Book Publisher Bob Kelley Dies at 96

Bob Kelley, former publisher of the Kelley Blue Book, died on May 28th at his home in Indian Wells, California. He was 96 years old.

Bob’s uncle Les Kelley (1897-1990) founded the Los Angeles auto dealership Kelley Kar Company and Kelley Blue Book. Bob’s father “Buster” Kelley (1908-2001) managed the business for many years. The Kelley family played an important role in the growth and development of the automotive industry in Los Angeles and eventually the entire nation.

Recognized by the U.S. government as an “official guide,” Kelley Blue Book was relied upon to establish pricing for used cars during WWII when new cars were not manufactured. Kelley started working at the dealership as a lot boy doing various odd jobs. Ultimately, he managed and published the Kelley Blue Book, building it from a wellknown auto value guidebook into a

pioneering internet resource.

Born Robert Sidney Kelley in 1927 in Los Angeles, he graduated from Los Angeles High School class of 1945. During WWII, he attended the University of New Mexico’s naval aviator training program. At the end of the war, he left the Navy and rejoined Kelley Kar Company. At the dealership, he was responsible for appraising, reconditioning, pricing and selling hundreds of used cars a month. Based on his expertise, Kelley would help determine the values published in the Kelley Blue Book.

The dealership was sold in the ’60s and Bob became publisher of the Blue Book. He extended the coverage from used cars to include imports, trucks, motorcycles, RVs, mobile homes, new, and classic/collector cars. Kelley supported developing innovative ways to distribute information. He oversaw expansion to computer-based products

and the internet, resulting in Kelley Blue Book becoming the premier resource for automotive value information to both the industry and consumers.

Kelley Blue Book, also known as

kbb.com, was sold in 2010 to Cox Automotive.

Kelley’s life is celebrated by Wanda, his wife of over 50 years, his sister, his 5 children, 12 grandchildren, and 10 great-grandchildren.

Bob Kelley

Used Car News Experian

vehicles. Used has always had a much broader risk distribution. But we’ve seen a steady increase overall in consumer credit scores. They’re scoring higher today than they have in the past.

“There’s also this combination on financing in this sector, as well as more Prime and Super Prime.”

The report also showed that while used vehicle loan amounts have decreased, payments have increased slightly due to the higher interest rates.

“It ties very closely to used values,” Zabritski said. “But we also did see a decrease in LTV (loan to value) at the same time. So there’s a little bit more equity coming into the purchase or it could be more value for the trade-in. That would cause that to happen.”

The average used loan rate rose from 11.4% to nearly 12%, the Experian report showed.

The other factor is the length of term, which went up just a tick at 67.37 months.

“Overall, it’s just a minor increase in average monthly payment (to $523 from $521),” Zabritski said. “What’s nice to see is that we’re not seeing the big jump like 2021 to 2022. It’s just some modest increases.”

She said there was a time when the loan terms were much lower.

“The jump we saw in term went hand in hand when the used values climbed so dramatically,” Zabritski said. “Having a 40% increase in the loan amount caused consumers to increasingly take out longer term loans in the used market.

“You focused on 60-month terms but then 72-month terms started to grow and even the 84-month terms on late-model used started to grow, as well.”

Zabritski said it used to be Deep Subprime had an average term of 36

to 40 months and now it’s 60.

“Yeah, it’s kind of grown across the board,” she said.

Today as values fall, the loan amounts on used vehicles fall yearover-year, as well as quarter-overquarter.

On the LTV numbers, the Experian update shows that LTVs dropped for all segments. This helps consumers who bring in a trade-in have more equity, which helps them get more for their vehicle.

“Even though the cars cost more, they are in a much better equity position as they return to market,” Zabritski said.

Experian showed over 72% of used vehicle loan terms are 72+ months with scores increasing across all terms.

Zabritski said terms really haven’t changed much year over year.

“But if you compare it to a few years ago, then yes, we are seeing

more of the 72s, more of the 84s,” Zabritski said.

Comparing 2021 to 2024, the growth is in the 48-month category.

In the 48-month category, there is more subprime because there are older vehicles with shorter terms, Zabritski said.

The long-term loans are typically bigger amounts, more late-model vehicles from more prime borrowers.

Experian’s report also showed 30-day delinquencies are up 0.48%, while 60-day delinquencies are up 0.14%.

“Of course, loan amounts are so much higher today, we would naturally see an increase (in delinquencies).”

Zabritski said this goes hand in hand with the fact that there has been such an increase in monthly payments, seeing them go up 3040%.

Used Car News

6/17/2024

Carvana – Continued from page 6

questions whether or not people were going to buy cars for a while,” Garcia said.

But within three months, people started “buying everything,” he said.

Carvana’s e-commerce model put it in perfect position in the midst of a shutdown of in-person business.

Carvana had built a great reputation and saw strong growth in the stock market; the company was cruising.

“But I think as it often happens, when things go too well for a little bit, things started to cut against us,” Garcia said.

Rates were going up in 2021 and 2022, and car prices jumped during those years.

Also, in February 2022, Carvana acquired ADESA’s physical wholesale auto auction business –including 56 sites – for $2.2 billion in cash.

“We financed that with debt and then the capital markets turned to where they were focused on profitability almost solely,” Garcia said.

“It was really tough for a company that’s trying to grow at 100% and is capital-intensive.”

Media stories on Carvana during this period “were not super favorable, and it became a very difficult time for a lot of people inside the company,” he said.

People that were used to hearing positive things about their company were now hearing more critical comments.

“But we fought through that,” Garcia said.

In 2022, it was hard to see a turnaround but by 2023, things started looking better and in early 2024 the strong trends have continued, he said.

“It has probably been the best period in our company life,” Garcia

said. “I do think that doing anything worthwhile is very hard. The bigger of a swing you take – the more complicated the businesses you try to build – the more struggles you’re going to go through and the lower

the odds are that you make it all the way through.

“When you face that brutal pressure it’s no fun when you’re in it. But I do think it makes you better. “It did make us a lot better.”

Photo by Jeffrey Bellant

SITDOWN: Carvana CEO and Co-Founder Ernie Garcia (right) chats with Michael Wayland, president of the Automotive Press Association, about his company’s history and its rollercoaster ride during recent years.

Retail Markets

6/17/2024

INDIANA

Troy White, owner, Ed White’s Auto Sales, Rensselaer, Ind.

“For over 50 years, we have flourished and we are now the largest family operated pre-owned vehicle dealership in the area. My father, Ed, died last December.

“COVID did change the way we do business, or maybe it changed the way our customers do business. Not many people are coming in to kick the tires. Just the other day we had a gentleman, he didn’t call, he didn’t send an email, but he had two cars picked out that he’d seen on our website and he came in to look at them. So, he picked one of the two, did the paperwork, and was gone in about an hour, from the time he got here to the time he left.

“Ready for sale, on the front lot, we usually have

about 25 cars. We probably sell an average of 20 a month.

“Backward from the rest of the world, we sell about 80% cars, and 20% vans and SUVs.

“There are probably more American made cars driven in our town, but I don’t really see much of a difference from my customers wanting imports or domestics.

“I still go to auctions in person. I do not do any buyhere, pay-here.

“Our average down payment is $1,000-$1,500.

“At this point our advertising is online, but we also use a local radio station.

“We spend about $1,200 on reconditioning. We try to stay seven years or newer on our cars and around 80,00090,000 miles.

“My advice to anyone starting out is to be diversified, have some income be-

sides just sales – rental or service or something. We have our own shop. Sending out the work is expensive and you have to wait in line with everyone else.

“The last car we sold was a 2016 Jeep Wrangler Unlimited. It had 70,000 miles and we sold it for $22,000.”

VIRGINIA

Sammy Wright, owner, Church Street Auto, Martinsville, Va.

“I’ve been in business since 1996, all in the same location.

“We keep about 40 vehicles on the lot. We sell four or five a month.

“We sell mostly commercial trucks, a lot of mediumduty.

“Our reconditioning costs are pretty high because we do a lot of retail salvage. It’s not just cleaning and detailing, it’s rebuilding. It gets

expensive and sometimes it gets to a certain point that we just won’t do ’em. We have our own shop.

“The only advertising we do is online.

“We try to stay within 15 years for the age of cars. We do make some exceptions, but that’s what we look for. We try to find low mileage.

“I recommend that new dealers join their association. I’ve been a member since 2000.

“Dealers everywhere are having trouble with catalytic converter theft. I’ve probably lost $100,000 in four years. I’ve only had one insurance claim, because they took nine at once. Otherwise, I’ve been eating them. They take them right off our lot and from a storage area. We had the thieves on camera. They’ll come in with masks on. They’re in and out in three or four minutes.

Compiled by Ed Fitzgerald

“Our commercial vehicles are higher off the ground so the thieves don’t have to jack them up. An eight-cylinder engine’s converter has more of the valuable metals than a four-cylinder.

“For those nine vehicles the insurance company paid $20,000. When I replace them, I don’t use OEM parts because the thieves know what they’re doing, they don’t want the aftermarket ones. The automakers should use the aftermarket ones in the first place since they are approved. It’s slowed down a bit because a lot of states have put laws into place. The guy who took mine was caught in a neighboring county and they still haven’t charged him.

“The last car I sold was a 2018 Chevrolet 3500 cutaway van. It had 96,000 miles and we sold it for $26,000.”

Wholesale Markets

6/17/2024

GEORGIA

Corey Sanford, general manager, America’s Auto Auction – Atlanta, Cartersville, Ga.

“We started Redtop Auto Auction in 2003, then we were owned by ABC, then America’s bought us in 2012 and then XLerate bought us in 2023, but we still go by America’s. We have four lanes.

“Things are going well, although the summer wall is coming in. Volumes are still high, though I’ve noticed the sales percentages are coming down by a couple percent.

“We’re still running over 1,000 a week. That has stayed steady. We picked up some new business. Our sales percentages are down a little at 54%.

“We run 85% dealer consignment and 15% commercial.

“I don’t have a lot of repossessions. I focus on the newcar trades.

“We draw an average of 500 dealers in the lanes and then another 400 online.

“The average price across the block has gone down since January. I’d say it’s $10,500. In January we were around $12,400.

“Dealers are telling me the basic auto trim levels aren’t selling as much. Anything specific, like – I’ll give an example – the Lexus GX 550, new SUV, you still have to wait a year to get one. They are in demand. The Z06 Corvettes are still hot. They’re still bringing over MSRP.

“We use EDGE Pipeline for online sales.

“New-car dealers are telling me that their sales are down on the basics – and they cannot give away the electric cars. It’s funny. I’m shopping for a new car now

and, man, all these new-car lots are filled with electric vehicles.

“Looking ahead, this being an election year, those are always tough for auctions.”

TEXAS

Lisa Franz, general manager, Big Valley Auto Auction, Donna, Texas

“We first opened in September 2008, so this is our 16th year. We are located right on the border, between McAllen and Brownsville. We have four lanes.

“We typically run between 500 and 600 vehicles. Now it’s starting to dip with summer.

“(Conversion rates) are about 67% today.

“I think dealers are still struggling a little bit. It’s harder to come by inventory and it’s a lot more expensive. I don’t think everyone is going crazy making the money

they did a couple of years ago. Lately, I’m hearing that’s a little slower, prices are up and it’s hard to get the cars they need.

“We run about 70% dealer and 30% commercial.

“We are seeing a lot more repos.

“The average price we’re seeing across the block is $14,000. It’s Texas, so we run a lot of those big trucks.

“We use EDGE for online.

“We usually have 250 dealers in the lanes and about 150 (bidders) online.

“In 2018, we did a joint sale with Manheim Mobile and did that once a month. It was billed as a Manheim Mobile Auction in partnership with Big Valley. It was a great sale and we thought it was wonderful. It gave us so much exposure to online buyers. It ended in February 2020, right before COVID. But we built some great re-

Compiled by Jeffrey Bellant

lationships with Manheim people and we kept a lot of the online buyers even after that partnership ended.

“We recently joined ServNet Auction group. To me those auctions have always been sort of the pinnacle in the industry. We’ve been fortunate to work through Auction Academy and with TPC Management. I was in Class 5, and we’ve had people in Class 6, 7 and 8. They’ve introduced us to a lot of the ServNet owners and every one of them has been so kind.

“We’re just a little, tiny auction in south Texas and they have given us some of the best information and advice while visiting their auctions. They’ve given so much help with compliance and commercial accounts, how to do it. It was just a no-brainer for me to join ServNet.”

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FRIDAY, JUNE 28th FRIDAY, JUNE 28th 12th

TUESDAY, JUNE 18th TUESDAY, JUNE 18th

6/17/2024

2020

ADESA Boston

July 5, 19

508-626-7000

ADESA Charlotte July 11, 25

704-587-7653

ADESA Chicago July 19

847-551-2151

ADESA Cincinnati/Dayton July 23

937-746-4000

ADESA Golden Gate July 9, 23

209-839-8000

ADESA Indianapolis July 9, 23

317-838-8000

ADESA Kansas City July 9, 23

816-525-1100

ADESA Lexington July 4

859-263-5163

ADESA New Jersey July 11, 25

908-725-2200

ADESA Salt Lake July 16

801-322-1234

ADESA Tulsa July 12

918-437-9044

ADESA Washington DC July 17

703-996-1100

Columbus Fair July 3, 24, 31

614-497-2000

Manheim Atlanta July 10, 11, 17, 25

404-762-9211

Manheim Dallas July 3, 16, 17, 31

877-860-1651

Manheim Denver July 17

800-822-1177

Manheim Detroit July 11, 25

734-654-7100

Manheim Fredericksburg July 18

540-368-3400

Manheim Milwaukee

July 3, 17, 31

262-835-4436

Manheim Minneapolis July 10

763-425-7653

Manheim Nashville July 2, 3, 30, 31

615-773-3800

Manheim Nevada July 26

702-730-1400

Manheim New England July 23

508-823-6600

Manheim New Jersey July 3 17, 31

609-298-3400

Manheim Atlanta

July 10

404-762-9211

Manheim Dallas July 16

877-860-1651

Manheim Milwaukee July 17

262-835-4436

Manheim Nashville July 3, 31

615-773-3800

Manheim Nevada July 26

702-730-1400

Manheim Palm Beach July 10, 31

561-790-1200

Manheim New Orleans July 3, 17, 31

985-643-2061

Manheim Orlando July 2, 9, 16, 23, 30

800-822-2886

Manheim Palm Beach July 10, 11, 31

561-790-1200

Manheim Pennsylvania July 5, 11, 12, 19, 25, 26

800-822-2886

Manheim Phoenix July 4, 18

623-907-7000

Manheim Pittsburgh July 17

724-452-5555

Manheim Riverside July 2, 4, 16, 18, 30

951-689-6000

Manheim Seattle July 24

206-762-1600

Manheim Southern California July 11, 25

909-822-2261

Manheim Tampa July 11, 25

800-622-7292

Manheim Texas Hobby July 11, 25

713-649-8233

Southern AA July 17

860-292-7500

Manheim Atlanta July 10

404-762-9211

Columbus Fair

July 3, 31

614-497-2000

Manheim Dallas

July 16

877-860-1651

Manheim Milwaukee July 17

262-835-4436

Manheim Nashville July 3, 31

615-773-3800

Manheim Nevada

July 26

702-730-1400

Manheim Orlando July 16

800-822-2886

Manheim Palm Beach July 10, 31

561-790-1200

Manheim Pennsylvania July 11, 25

800-822-2886

Manheim Phoenix July 18

623-907-7000

Manheim Riverside July 4, 18

951-689-6000

Manheim Seattle July 24

206-762-1600

ADESA Boston July 5 19

508-626-7000

ADESA Charlotte July 11, 25

704-587-7653

ADESA Golden Gate July 23

209-839-8000

ADESA Salt Lake July 16

801-322-1234

Columbus Fair

July 24

614-497-2000

Manheim Dallas July 3, 17, 31

877-860-1651

Manheim Pennsylvania

July 11, 25

800-822-2886

Manheim Riverside July 4, 18

951-689-6000

Manheim Seattle July 24

206-762-1600

Financial Services*

Manheim Fredericksburg July 18

540-368-3400

Manheim Milwaukee July 3, 31 262-835-4436

Manheim New England July 23

508-823-6600

Manheim New Jersey July 3, 31

609-298-3400

Manheim Orlando July 9, 23

800-822-2886

Manheim Pennsylvania July 12, 26

800-822-2886

Manheim Pittsburgh July 17

724-452-5555

Manheim Seattle July 24

206-762-1600

Manheim Southern California July 11, 25

909-822-2261

Southern AA July 17

860-292-7500

Manheim Atlanta July 17

404-762-9211

Manheim Dallas July 16

877-860-1651

Manheim Milwaukee July 17

262-835-4436

Manheim Palm Beach July 10, 31

561-790-1200

Manheim Pennsylvania July 11, 25

800-822-2886

Manheim Riverside July 4, 18

951-689-6000

Tony Moorby

I’ve spent a lifetime of travel. They say it broadens the mind and I must say I agree. The value of travel is in the journey, rather than the destination – another truism in my judgment.

My twin brother and I weren’t born into a travelling family – after the war we were happy to stay put and dad saw most of Europe from twenty thousand feet but as the ’60s rolled around and new-found prosperity was more common, we participated in what were known as Package Tours. All-inclusive from the air fare, travel to the hotel, full board accommodation and tips, they took all the worries away about languages, customs and so on – all you had to do was turn up.

The quality of hotels and their surroundings were a bit of a crapshoot; many bore no resemblance to the

photos in the catalogues. “A view for miles…” might have involved sticking your head out of the window and looking up! Or they forgot to mention that the hotel was next to the local railway –heralding the dawn with prolonged horn blasts – not the greatest cure for the ever-present hangover.

Everything was cheap; our first two-week package to the Costa Brava on the coast of northwest Spain near Barcelona cost us sixty-six pounds each (about $100 back then). A Bacardi and Coke was about 25 cents – 5 cents for the Bacardi and 20 cents for the Coke!

Things soon improved and we got more adventurous. From resorts in the South of France or the Portuguese Algarve to art appreciation in Paris, a great time was had by all. My first honeymoon was on Cyprus

By Myles Mellor

– we left one day before our hotel was strafed by Turkish MIGS at the beginning of the 1974 war that separated the island and still does today.

I’ve seen the length and breadth of Great Britain and I still love it all, except I would rather serve a sentence in the Tower of London than deal with its traffic. I’ve noted before that the English countryside is singular and unmatched.

Eventually, work dictated where I went; even to the point of coming to America – and moving here in 1982. Sales development was my major responsibility then, on behalf of a fast growing auto auction network, touching every important city for vehicle distribution.

We had to develop buyers and sellers so we joined many industry associations.

National and state dealer associations, both new and independents, took me to almost every corner of the US, as did national bodies like NAAFA, AFLA and other sell-side representatives for fleet and rental companies.

No one wants to meet in Minot, North Dakota (with apologies) so I enjoyed destinations from Maui to Minneapolis and San Diego to St. Pete.

It may be cold in Minnesota in winter but the warmth of the people makes up for that.

That’s really the point; all this travel has introduced me to so many different people. Their customs and practices and what makes them tick, have enriched my experiences and vocabulary. And the food. Boundless hospitality from a crawfish boil, family get-together in New Iberia, Louisiana, to

picking crabs on the Eastern Shore of Maryland or BBQ in Austin, Texas gave me the inquisitiveness to become a reasonably accomplished family cook. I broadened my mind as well as my girth; I used to sport a 38” Long suit – a tent might now be more appropriate!