Used Car News 3/27/23

UCN Used Car News

Delinquencies Creep Up as Leasing Falls

By Jeffrey Bellant

Leasing market share continues to drop, credit union financing surged and delinquencies are creeping up, according to Experian’s State of Automotive Finance Q4 2022.

Melinda Zabritski, Experian’s senior director of automotive financing, recently offered her insights on the finance market and related issues in Experian’s new report.

Leasing as a share of the finance market continued to slide in Q4 of 2022, hitting 17.21% of the market.

This is a big change from where it was just a few years ago.

“We were in the mid 30s at one point,” Zabritski said. “But I would probably expect that we’re near the low on leasing.”

She said inventory is starting to build back up, which should end that trend. But it could take another quarter or two before we start to see

leasing recover.

Used leasing actually ticked up from just under 10% to over 11% of that market, still a small share of the market.

“When we look at the vehicles that make up used leases, they seem to be 2- to 3-year-old big trucks and SUVs, and the lessors do seem to be the captives,” Zabritski said. “It’s more likely an affordability aspect to get customers into these late model vehicles.”

Zabritski said she typically sees dealer service cars fall into this category.

“You’d see a lot of these with Mercedes and BMW where they are dealer service cars, that were low mileage and 1- to 2-years old,” she said. “But for this year, the models have 3-year-old trucks.

Credit unions continue using low interest rates to pull consumers away from banks and other lenders.

“Historically, they’ve usually had

rates that are lower than banks,” Zabritski said. “However, now the rate differences are pretty remarkable.”

Anecdotally, dealers are saying it’s tough to beat the rates credit unions are offering, she said.

Another factor is banks seem to be focusing more on the “super prime” category, leaving a little bit of the market open to credit unions.

However, Zabritski said to keep in mind that credit unions have so much volume in auto that they could begin to pull back for fear of being over-exposed.

“We saw that trend after the (2009) recession once the spigot got turned back on and lenders had funds and were out there lending,” she said. “We saw that volume pick back up again.

“Then we did see some lenders start to pull back and rebalance.”

Continued on page 4

Announcing the winners of the 2022 Auction Excellence Awards. See back cover for more details.

Auctioneering Event Begins New Era Under NAAA

By Jeffery Bellant

The World Automobile Auctioneering Championship will take over Capital City Auto Auction in St. Albans, West Virginia on May 19.

It will be the first championship since the National Auto Auction Association purchased the event last summer and the new host is stoked.

Charlotte Pyle, chairwoman of the event committee, along with her husband, Joe, own the West Virginia auction.

She said NAAA’s purchase of the event was a perfect fit.

“We love auctioneers and ringmen,” Pyle said.

The roles of these individuals are vital to the success of auctions and the industry they serve.

Pyle added that she’s fortunate to have a great event committee with her, including Chad Bailey, presi-

dent of Akron Auto Auction and Value Auto Auction; Beth Rose, an auctioneer and past president of the National Auctioneer Association; Michael Adcock, the 2022 Auctioneer of the Year; Nicole GrahamPonce of NextGear Capital; and NAAA’s Paul Lips.

Adcock is a third-generation auctioneer from Lancaster, Pennsylvania. He has shared the block with his grandfather, his father, his brothers, his uncles, and his cousins. He was inspired by the talented auctioneers in his family from a young age.

Adcock’s father, M. Scott Adcock, won the esteemed title of World Champion Automobile Auctioneer in 1991 when Michael was just 5 years old. In 2008, at the age of 22, Michael earned his own World Champion trophy, and he was the youngest contestant to ever do so. The following year, his brother, Charles Adcock, won the title, earn-

ing their family triple-crown recognition in the auction industry.

Bailey, who hosted the event in 2012, was thrilled when NAAA purchased the World Automobile Auctioneering Championship (WAAC).

“I was pushing NAAA to buy it when I served as NAAA president,”

he said. “I have an auctioneer license; I know what it’s like. I’ve judged the World Auto Auctioneering Championship and I’ve hosted the event.”

He agrees with Pyle that NAAA must support the group that makes

Continued on page 5

MICHAEL ADCOCK

Finance

Continued from page 1

It’s possible this might happen with credit unions.

There are also some trends among consumers in the different credit tiers.

Pre-pandemic there was a shift toward prime and super prime with lenders and it accelerated during COVID with the government incentives, Zabritski said.

Deep subprime, however, has reached pre-COVID levels.

For example, in 2018, deep subprime made up nearly 3.5% of the market, but in Q4 2022, it was about half that.

Average credit scores are still increasing across all credit tiers, Zabritski said, but prime represents a larger portion of the market.

Experian’s report showed that in each type of vehicle, pickups saw their share of the financing market dip, while sedans and SUVs increased their share.

“It could very well be tied toward affordability and the rate increases,” Zabritski said.

While leasing is still relatively low,

pickup trucks made up their fair share of the leasing market last year, Zabritski said.

In 2021, for the entire financing space, the top model was the F-150, which made up 3% of that entire market, Zabritski said.

Three pickups were in the top 5, making up almost 7% of the market last year.

This year only one pickup made the top five, joined by two SUVs, the Toyota Camry and the Tesla Model Y, she said.

On the independent used side of Experian’s State of Automotive Finance Q4 2022, the bank share of finance “definitely came down” from almost 19% in 2019 to 14% in Q4.

The buy-here, pay-here share of the independent market is fairly consistent at just under 40%.

“It doesn’t shift too much in that category,” Zabritski said. “Most of your BHPH is pretty steady.”

Values of used vehicles have been high the last couple of years, but that trend is changing.

The report shows that year-overyear growth in used loan amounts

are tapering off, while Q4 2022 did decrease from Q3 2022.

“That, to me, ties very much into hearing that the values are stabilizing, starting to come down a little bit,” Zabritski said. “I would expect to see this continue.

“We should be at a steady drop in those loan amounts or at least tapering off and hold steadier.”

The inflated values of used vehicles did help out at least one player in the industry.

“From a finance standpoint the positive was that – with used values being high – if there were losses and lenders were having to repossess, then the vehicle they were taking to auction was worth more,” Zabritski said.

“So that reduced any deficiency balances and mitigated any banking losses.”

BHPH dealers at a conference Zabritski attended last year gave the negative point of that trend – having used inventory on their lot that cost more than its current value.

Zabritski expects that delinquencies will increase, especially as the monthly payments continue to increase.

“Historically, as payments go up, you’re going to see delinquencies increase,” she said. “We’re not at the high peaks we had post-recession (2009).

“But we certainly expect to see delinquencies climb, since most delinquencies tend to occur 18 to 22 months into the life of the loan if they are going to go delinquent.

“Of course, when we started to see those high monthly payments was about a year, a year-and-ahalf ago. We’re starting to see that impact.”

Zabritski said there is also a lot of interest in the area of the electric vehicle market, both new and used.

She said she plans to do a spotlight on EVs for Q1.

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Editorial: Jeffrey Bellant, Managing Editor Ed Fitzgerald, Staff Writer

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MELINDA ZABRITSKI

WAAC – Continued from page 3

up the competitors of this event.

“I know how vital auctioneers and ringmen are to an auction,” he said.

The NAAA is also proving it with its wallet.

Bailey said the purses will be higher this year and all of the lanes will be livestreamed.

“You’re going to be able to watch everything and everyone,” Bailey said. “We’ve really taken it up another notch.”

Pyle said in the past, viewers could only watch snippets of the different lanes and competitors.

This year, people will be able to watch any of the four livestream lanes and see any competitor they want to follow.

Capital City Auto Auction will face an additional challenge. It isn’t just hosting this championship, but also that this event will be used to determine a framework for WAAC in the future.

“We are trying to create the template for future World Automobile Auctioneers Championships,” Pyle said.

The goal is to put together an event that will serve as the model for other auctions.

Pyle said her husband Joe knows a little bit about auctioneering.

“He’s being doing it since he was 14 years old,” she said.

Charlotte, meanwhile, went through auctioneering school in 2012, while serving as president of the National Auto Auction Association.

She joked it was important to get auctioneer training to keep up with Joe or else she’d never be able to win an argument.

Pyle said the challenge will be getting a strong audio/video team, especially since this event will be livestreamed.

Getting the best A/V team will require competitive bidding – something Pyle said is the heart and soul of the auction business.

The event helps showcase the host auction, as well.

When Bailey’s Akron Auto Auction hosted, he brought in national consignors as the judges, allowing them to see his facility and how the auctions worked.

It helped promote the auction, along with the competitors and the industry.

The event will feature up to a limit of 75 auctioneers, 20 teams and 20 ringmen. The total number of competitors will be finalized af-

ter the March 31 deadlines for en tries.

Pyle said NAAA will use this year’s event to see what works and what doesn’t work, even if the peo ple watching don’t notice it.

She joked that when she went through auctioneering school she was taught if you make a mistake, don’t stop -- just keep going fast.

Pyle praised Paul Behr, who had owned the event since 2005. Behr, who has run thousands of auctions and won numerous awards, was given the NAAA Auctioneer of the Year award in 2011.

Pyle praised Behr and what he and the event have meant to the industry.

NAAA honored Behr for his out standing leadership of the WAAC for the last 17 years.

Under his guidance, the event has become widely recognized for bringing auctioneers together ev ery year for spirited competition and fellowship.

The WAAC has helped draw at tention to the importance of the auctioneer profession, and NAAA looks forward to building on the success the event has experienced over the course of its history.

Each year, the host location pro vides an opportunity for an NAAA member auction to highlight the importance of the auctioneer profession to the automotive industry.

It also brings attention to the host location’s auction and its significance to its local community and region.

Then-NAAA President R. Charles Nichols talked about it when the acquisition was made.

“NAAA understands how important auctioneers and ring people are to our member auctions and the work they put in to ensure successful sales,” said Nichols, who was NAAA president when it bought WAAC.

“I would like to thank NAAA’s Executive Officers and Board of Directors for their support and recognition of the significance of this event to our industry.”

Each year, NAAA honors auctioneers with the Bernie Hart Memorial Award, the prize won by Adcock last year.

Named in honor of Bernie Hart, who served as NAAA’s executive director for more than 30 years before retiring in 1988, the annual award recognizes the auctioneering industry’s most visible person.

Dealer News

3/27/2023

After a four-year hiatus, the revitalized National Independent Automobile Dealers Association Certified Master Dealer program will return with a new class of 20 dealers at NIADA’s annual convention and expo in Las Vegas, June 19-22.

Registration is now open and will remain open only until March 30, with the class limited to 20 dealers. An advisory committee will review the applications and select the new cohort of 20 dealers.

The revitalized program will start at the June convention and span 12 months. The cumulation of the program is a capstone where dealers will present their business plan and take a comprehensive exam. Graduation will take place at the June 2024 convention.

CMD students will participate in two in-person courses and eight live online, instructor-led courses. The first in-person course, Auto Dealership 101, will cover a wide variety of topics at a macro level. In addition, the cohort will participate in team-building activities to develop camaraderie and get introduced to NIADA’s Business Plan template.

The subsequent eight courses will be delivered live online, and each session will last two hours (“Level II”).

“It’ll be about two hours you’ll have to dedicate out of your showroom. The rest of the time, you’re still making money and getting better,” said NIADA President-Elect Gordon Tormohlen.

Course content includes dealership accounting principles, expense control, asset management, establishing a profitable service center, digital marketing techniques, effective leadership theory, wealth management and goal setting.

The dealers will also complete a 1.5-day in-person AFIP Used Car Certification Course and must pass

the certification exam. AFIP is the leading finance and insurance certification program for F&I professionals and auto dealers.

“Being Master AFIP Certified myself, I know the ‘Ah-ha’ moments dealers and their employees will find during the AFIP certification,” said Jeremy Beck, NIADA Vice President of Dealer Development. “This adds further credibility to our program and provides knowledge and protection to our dealers.

“Understanding how to conduct their business in compliance with state and federal laws is key in understanding how to build a successful operation.

“We are proud to partner with AFIP to offer this professional designation to our Certified Master Dealer program.”

To successfully complete the CMD program, students must pass an assessment following each Level II course, the AFIP certification, the cumulative exam after the final inperson course and submit a final business plan for review. CMD graduates will leave the program with a well-thought-out business plan and a framework for success.

“The objective of the CMD program is to have you write a business plan that is customized to your dealership,” Tormohlen said.

Dealers who have attended and complete this training support ethical business standards and practices and are leaders in their communities and the industry.

“I learned so much,” said Otto Hahne, president of City of Cars in Troy, Mich., and a former NIADA Quality Dealer of the Year.

“I ended up with so many takeaways to help my business be successful. I know I’m a better leader and everybody’s going to benefit, from my team back home to myself to the customers I do business with.”

ADESA Boston

April 14, 28

508-626-7000

ADESA Charlotte

April 6, 20

704-587-7653

ADESA Chicago

April 28

847-551-2151

ADESA Cincinnati/Dayton

April 4

937-746-4000

ADESA Golden Gate

April 4

209-839-8000

ADESA Indianapolis

April 4, 18

317-838-8000

ADESA Kansas City

April 4, 18

816-525-1100

ADESA Lexington

April 13

859-263-5163

ADESA New Jersey

April 6, 20

908-725-2200

ADESA Salt Lake

April 11

801-322-1234

ADESA Tulsa

April 14

918-437-9044

ADESA Washington DC

April 26

703-996-1100

Columbus Fair AA

April 5, 12

614-497-2000

Manheim Atlanta

April 6, 19, 20

404-762-9211

Manheim Dallas

April 12, 25, 26

877-860-1651

Manheim Denver

April 26

800-822-1177

Manheim Detroit

April 6, 20

734-654-7100

Manheim Fredericksburg

April 13, 27

540-368-3400

Manheim Milwaukee

April 12, 26

262-835-4436

Manheim Minneapolis

April 19

763-425-7653

Manheim Nashville

April 5, 11

615-773-3800

Manheim Nevada

April 7

702-730-1400

Manheim New Jersey

April 12, 26

609-298-3400

Manheim New Orleans

April 12, 26

985-643- 2061

Manheim Orlando

April 4, 11, 18, 25

800-822-2886

Manheim Palm Beach

April 12, 13

561-790-1200

Manheim Pennsylvania

April 6, 7, 14, 20, 21, 28

800-822-2886

Manheim Phoenix

April 13, 27

623-907-7000

Manheim Pittsburgh

April 26

724-452-5555

Manheim Riverside

April 11, 13, 25, 27

951-689-6000

Manheim Seattle

April 5

206-762-1600

Manheim Southern California

April 6, 20

909-822-2261

Manheim Tampa

April 6, 20

800-622-7292

Manheim Texas Hobby

April 6, 20

713-649-8233

Southern AA

April 26

860-292-7500

Manheim Atlanta April 19

404-762-9211

Manheim Dallas

April 25

877-860651

Manheim Milwaukee

April 26

262-835-4436

Manheim Nashville

April 5

615-773-3800

Manheim Nevada

April 5

702-730-1400

Manheim New Jersey

April 26

609-298-3400

Manheim Orlando

April 25

800-822-2886

800-822-1177

Manheim Fredericksburg

April 27

540-368-3400

Manheim New Jersey

April 12

609-298-3400

Manheim Orlando

April 18

800-337-8491

Manheim Pennsylvania

April 7, 21

800-833-2886

Manheim Pittsburgh

April 26 724-452-5555

Manheim Seattle

April 5

206-762-1600

Manheim Southern California

April 6, 20

909-822-2261

Southern AA

April 26

860-292-7500

Manheim Atlanta

April 19

404-762-9211

Manheim Dallas

April 25

877-860-1651

Manheim Milwaukee

April 26

262-835-4436

Manheim Nashville

April 5

615-773-3800

Manheim Palm Beach

April 12

561-790-1200

Manheim Pennsylvania April 6, 20

800-833-2886

Manheim Riverside April 13, 27

951-689-6000

Manheim Seattle April 5

206-762-1600

Manheim Atlanta April 19

404-762-9211

* The tradename Jaguar Financial Group and the Jaguar logo are owned by Jaguar Land Rover North America, LLC (JLR) or its affiliates and are licensed to JPMorgan Chase Bank, N.A. (Chase). Auto finance accounts are owned by Chase.

* The tradename Land Rover Financial Group and the Land Rover logo are owned by Jaguar Land Rover North America, LLC (JLR) or its affiliates and are licensed to JPMorgan Chase Bank, N.A. (Chase). Auto finance accounts are owned by Chase.

* The tradename Subaru Motors Finance (SMF) and the Subaru logo are owned by Subaru of America, Inc. (Subaru) or its affiliates and are licensed to JPMorgan Chase Bank, N.A. (Chase).Auto finance accounts are owned by Chase.

* The tradename Maserati Capital USA and the Maserati logo are owned by Maserati North America, Inc. (Maserati) or its affiliates and are licensed to JPMorgan Chase Bank, N.A. (Chase). Auto finance accounts are owned by Chase.

* The tradename Aston Martin Financial Services and the Aston Martin logo are owned by Aston Martin Lagonda of North America Inc. (Aston Martin) or its affiliates and are licensed to JPMorgan Chase Bank, N.A. (Chase). Auto finance accounts are owned by Chase.

Neither JPMorgan Chase Bank, N.A. nor any of its affiliates are affiliated with ADESA, Inc. or Manheim, Inc. Each auction is solely responsible for their website content, sales events, promotions, fulfillment and operation of the auction.

©2023 JPMorgan Chase Bank, N.A. Member FDIC 4/23

Miller Steps Down from AutoIMS Post after 14 Years

Auto Auction Services Corp., more widely known as AutoIMS, announced that Joe Miller is stepping down from his position as executive vice president of client success, effective June 30, 2023, after 14 years.

Miller joined AutoIMS in 2009 to help redesign the RecoveryIMS product line and was quickly promoted to director of client support. AutoIMS cites his leadership as instrumental in driving AutoIMS’s growth and success.

“Joe’s contributions to the success of AutoIMS have been simply invaluable,” said AutoIMS Chief Executive Officer Venkat Krishnamoorthy. “He has invested significant time developing client and employee relationships, creatively solutioning real-world problems, uncovering value-added products, and ensuring that everyone is positioned for a win-win outcome.

“He will be greatly missed, and the AutoIMS team will be cheering him on as he navigates this next phase of his career.”

Miller plans to step down by the end of June and looks to develop his coaching skills and put them to use in his community.

“I’m incredibly thankful for all the opportunities I had at AutoIMS and I take great pride in the strong culture and foundation the company has built,” said Miller. “I’m excited for what’s next, but also recognize that I’m leaving at a high point for AutoIMS.

“The AutoIMS team is all on board with our client-focused, service-first model, and not one person takes for granted the unique and vital part the company plays in the industry. My goal is to stay connected to remarketing, and I look forward to seeing many dear friends and colleagues in the years ahead.”

Photo Courtesy of AutoIMS

TALKING SHOP: Joe Miller (left) moderates a panel at an International Automotive Remarketers Alliance event. Miller was a fixture at industry events, participating as both a moderator and panelist.

Retail Markets

IDAHO

Dennis Foltz, owner, P&R Auto Sales, Pocatello, Idaho

“In May, we’ll have been here 32 years, all in the same location. We were the state Quality Dealer of the Year in 2013.

“COVID caused us to do a lot more online and it seems like I’m buying more online than I did before.

“Here in Idaho we’re over COVID, but the car business isn’t over it.

“You go back two years and that was our best sales year ever. But I’ve gone from 45 cars on my Internet for sale to 15-20. I used to sell 25 to 30 a month, now it’s 15-20ish.

“I’m lucky (with staffing). P&R is my dad and mom, and my dad started it. I worked for him for 30 and one-half years. He’s almost 82 so he’s pretty much re-

tired. My two brothers also work here.

“I sell 99 percent trucks, which includes commercial. Ninety-five percent of my lot is white. I sell cargo vans, work trucks, that kind of stuff.

“Last Christmas, we donated a ’15 Nissan Sentra that was auctioned off for a local baseball team.

“I go to two auctions and switch back and forth between them. They’re the Manheim and ADESA auctions in Salt Lake City. That’s 160 miles away. I’ve worn out several trucks making the trip a jillion times.

“I don’t do any kind of financing at all. So, for 30 years, it’s been ‘write me a check, or cash.’

“I’ll give customers a purchase order and tell them to go to their own bank.

“I sell to several compa-

nies and they just write a check. I have a lot of repeat business. Probably 25-50 percent of my sales each month are to someone who has bought from me before. I have companies that buy five vehicles a year.

“I average $2,000 a vehicle in reconditioning.

“My one brother does the light mechanical work, shocks, tie rods, that kind of thing. The computer stuff we send out.

“I advertise online, Autotrader, and KSL News Radio, a pair of stations out of Salt Lake City. I also use Facebook and Carsforsale. com.

“We used to have a print ad, which really made us who we are, but they went out of business two years ago. It was called the Thrifty Nickel.

“The last vehicle I sold was a 2018 Chevy Silverado

3500 diesel flat bed, with 163,000 miles. I sold it for $31,500.”

NEBRASKA

Chuck Rogers, owner, Chuck Rogers Auto, Tekamah, Neb.

“I’ve been doing this for 51 years, and I’ve had this business here for 21 years. We’re 40 miles from Omaha, and 60 miles to Sioux City, Iowa.

“I worked for a Chevy dealership until he closed up, then I opened this.

“The traffic went down and the auctions went down during COVID so we started doing more online. Sales were not so bad.

“I keep around 20 cars in inventory. I probably sell 8-15 a month. It’s been all over the place recently. About half of my business is repeat.

“I sell equal amounts of cars, SUVs and trucks. Probably a few more SUVs.

Compiled by Ed Fitzgerald

“We probably sell more domestics, but I’ve been getting more into the imports recently.

“I average about $700-800 on reconditioning. I farm it out.

“We advertise online, Craigslist, and also the local newspaper.

“For any dealer just starting out it’s getting tougher, with interest rates going up. Insurance is a big cost.

“I usually go to the Manheim Omaha auction every week.

“Our customers’ down payments are pretty modest these days, no cash right up to $1,000.

“Sometimes we get a trade-in. My average term length is 63 months.

“The last car I sold was a 2020 Nissan Murano.

“It had 70,000 miles and I sold it to my bookkeeper for $19,000.”

Wholesale Markets

NEVADA

Joe LeMonds, general manager, DAA Las Vegas, Las Vegas, Nev.

“At the beginning of the year, we saw an uptick as if guys had been holding back at the end of the last year.

“Then since the first of the year, demand has been through the roof. It was interesting to see this unique dynamic in the market. Especially with high interest rates, pent up demand and still no new inventory.

“We’ve been having 70%+ conversion rates.

“In January and February, we were running 400 to 450 cars a week. Our 9th anniversary sale was on Feb. 15 and we ran 600 cars, our biggest sale that we ever had.

“Since then, rental volume is still coming in, but in our market, the de-fleeting slowed down a little bit because the rental demand

is strong here because of March Madness.

“We’ve seen a 30% to 40% increase in attendance since the beginning of the year. We’re averaging about 100 bidders in the lanes and another 120 to 130 online.

“The average price across the block has been hanging around the $13,000 to $13,500 amount. Prior to this being part of the McConkey Auction Group (MAG), it was probably in the $4,000 to $5,000 range.

“The consignment mix has changed as we added more late-model volume.

“Our volume mix is 56% dealer and 44% fleet. Of the dealer volume, it’s probably 80% franchise dealer-trades.

“Retail dealers say it’s been steady, but they still don’t have enough cars.

“What we’ve got, we’ve been selling. We’ll be keeping an eye on the supply,

especially into the late summer and early fall.

“On April 12 we’ll have our NASCAR Days sale. We’ll have our feature consignors who will also try to bring in some additional volume. We’ll have a grand prize, two pairs of tickets for the NHRA Four-Wide Nationals up here at the Las Vegas Motor Speedway for the weekend of April 14.”

OHIO

Chad Bailey, president, Akron Auto Auction, Akron, Ohio

“We’re running about 900 (vehicles). We were off for a couple of weeks in volume (early March).

“My repos have been strong. With the dealer stuff, the market has been so hot, there’s just not enough cars.

“Conversion rates have been over 70%. It’s been crazy. Typically, I will say our mix is 75% dealer and 25%

repo/fleet. But most of that 25% is repo.

“I run roughly 200 repos. I think all the people who got all the government money and used it all didn’t realize they had to keep finding it, especially on an 8-year loan.

“In Ohio, I have to offer repos to the public. In Ohio you have to offer it to the public if you want to collect on the deficiency. Most other auctions don’t have to offer those cars to the public.

“You used to be able to predict tax season, but I can’t anymore.

“Between online and inlane, we probably get 400 bidders. That’s probably split 50/50 between in-lane and online.

“A lot of the retail dealers can’t find cars and the cars they’re buying – I don’t know where the room is to make the money. Everybody’s paying retail in the

lanes.

“I think their worry is that if they don’t sell them – and the market turns – the car they paid $12,000 for will end up being worth $9,000 and how are they going to get rid of it?

“We have a GSA sale. They run once a month and the volume is picking up a little bit. At some point in time, that dam is going to break and there’s going to be a ton of cars.

“Lately, I’m running 30+ units a month, but it used to be 3 times that.

“In our regular dealer sale, the average price for our sale is probably close to $10,000. Before the pandemic it was about $7,000.

“I’m worried there aren’t enough cars going into the spring/summer market. What cars that come will sell. The question is what comes.”

Compiled by Jeffrey Bellant

Massachusetts Case: Negotiating or Discrimination

By L. Jean Noonan

Some consumers hate haggling over price, but other consumers love the challenge of negotiating a bargain.

The latest trend is for states to allege that charging different amounts, on average, to different demographic groups for non-credit products and services can constitute illegal discrimination or an unfair practice. This is what happened in a recent Massachusetts case.

The Massachusetts Case

The Massachusetts attorney general claimed that Hometown Auto Framingham Inc., a two-store dealership, gave its finance managers broad discretion to modify the prices it charged for so-called “add-on products,” such as vehicle service contracts, guaranteed asset protection products, LoJack, and appearance products. Hometown’s finance managers earned higher commissions when they sold products at a higher profit margin. The AG alleged that Hometown’s policy of allowing finance managers discretion in pricing had an adverse disparate impact on black and Latino consumers because they paid more, on average, than white customers when purchasing add-on products.

Hometown disagreed with the AG’s claims, but it settled the charges by entering into an Assurance of Discontinuance (AoD).

First, we’ll look at what Hometown must do to comply with the AoD. Next, we’ll consider whether these “remedies”’ are sensible. (Spoiler alert: I think some are not!)

Here’s what the AoD requires:

• Training of management, sales, and finance staff for seven years. The mandatory training must address both the duty not to discriminate, and also training on implicit (unintentional or unconscious) bias.

• Pricing add-on products at a standard retail price or standard profit margin for three years. Hometown cannot increase the price or profit margin, but it can lower the price or margin if it substantiates the good-faith basis for the lower price or margin on a certification form. More on this in a moment.

• Disclosure of the total price and monthly price (if financed) of each add-on product offered with a specific vehicle for three years. These disclosures will be displayed in the finance office and on the dealerships’ websites.

• Keeping electronic records for seven years of all deal jackets and maintaining an “Add-on Sales Spreadsheet” with specified information for four years.

• Compliance reporting for three years, including all certification forms and the Add-on Sales Spreadsheet for the preceding year.

• Payment of $350,000, of which the AG’s office will receive $150,000 and the remaining $200,000 will be paid to consumers as the AG directs. Any leftover restitution funds will go to the AG’s office.

The AoD says that Hometown’s policies on discretionary pricing for add-on products violate Massachusetts’s law against unfair or deceptive acts or practices. Discrimination claims usually are brought under an antidiscrimination law, such as the Equal Credit Opportunity Act for credit products or a general civil rights law for non-credit products. In this case, however, the AG is alleging that the discriminatory impact on black and Latino consumers violates its UDAP law.

The implication is that the unfair practice is the higher price charged to minority customers, on average. It is important to note that the state is not alleging that Hometown intentionally discriminated against minorities. For example, if a business intentionally charged all minorities more for the same non-credit product based on race, that practice would be easy to condemn, even if the legal theory might be murky.

In this case, the claim is that the price difference among the groups existed when looking at averages. It is possible, even likely, that some black and Latino customers paid less than white customers for the same add-on products. Were those who paid more, even if they were white, treated unfairly? Were all Black and Latino customers treated unfairly, even those who paid less than whites?

The AoD doesn’t provide a clear answer.

The AoD requires the dealerships to display clearly and conspicuously the total price for each add-on product and the corresponding monthly price, if the product is financed, as is commonly the case. While it is possible to say that a product costs $500, for instance, but the monthly price depends on the financing term. The AoD doesn’t say that Hometown can use an example, such as the monthly cost for a 60-month

term. Is the dealer expected to display the monthly cost for every possible term? And must the monthly price in a financed deal include the finance charge? One hopes not... some dealerships offer many voluntary add-on products, and the mandate to display the total and monthly costs applies to each product. The dealer will need a finance office with a really big wall for that poster!

The mandatory training appears to be an important element of the AoD. The training seems to have a couple of purposes: (1) to stress that discrimination in pricing is bad; and (2) to alert dealership staff that implicit bias can cause them to treat people unequally in ways in which they are not aware. On its face, these goals might seem sensible. But are they?

That depends, I contend, on whether we can reasonably expect this training to change behavior— and I don’t believe it will, even for open-minded staff members who would never intentionally discriminate on the basis of race or ethnicity.

If the measure of fairness (or nondiscrimination) is having all groups pay exactly the same, on average, in retail prices or profit margins for add-on products, keeping score in real time is required.

If a black person buys an add-on product with a profit margin of X, then the next white customer must pay X or more—or the dealership runs the risk of its averages by racial group falling out of line. Imagine if the next two white customers pay less than X, but the third white customer pays much more than X. Whew! The averages may have evened out. But what if the review period ends before the third white customer’s deal is complete? The averages will not be equal for that period, whether it is the end of a week, a month, a quarter, or a year.

This is craziness. Counseling clients on how to ensure “balanced” average treatment on the basis of group status is something I have struggled with. Do we tell dealers to record price, rate spreads, or profit margins by each customer’s race and require them to be equal over set periods? Clearly not.

What’s the Solution?

The simple truth is that dealers must be able to explain their reasons for charging different prices to different people for the same good or service. If they can’t explain the reasons, they run the risk of being sued if their average prices are not the same over some period of the

enforcement agency’s choosing.

Over 15 years ago, the U.S. Department of Justice provided a blueprint for how dealers can preserve discretionary or negotiated pricing of credit products and protect themselves from charges of illegal credit discrimination. More recently, the National Automobile Dealers Association formalized this blueprint in its Fair Credit Compliance Policy & Program (for credit-related pricing decisions) and its Voluntary Protection Products: A Model Dealership Policy for non-credit products.

The wisdom of the blueprint is that it covers concerns about discrimination and unfairness. Even better, no tracking of race, sex, or other customer characteristics is required. That’s because every customer pays the same “standard” price unless there is a legitimate (and documented) reason for a lower price.

Parity in average pricing across groups is not required under the blueprint. Judging fairness and nondiscrimination based on average pricing across groups has always been a flawed concept legally and unworkable in practice.

The Good News

Now it’s time to see the bright spot in Massachusetts’s AoD with Hometown. That is the explicit blessing of the certification program offered by NADA’s voluntary protection products model policy. In this program, each dealer picks a “standard” retail price or profit margin for each addon product, and it never charges more. The standard price is the ceiling.

However, sometimes a dealer needs to charge less to make the sale. This business reality can be a legitimate, non-discriminatory reason for the lower price. The NADA program requires the dealer to document the specific reason rigorously. Massachusetts, to its credit, agrees that following this program constitutes compliance with the “standard” pricing requirement of its AoD.

It is past time to judge fairness or equality solely on group averages that are exactly the same. Unless we want to say that all prices for similar goods or services must be the same— and I’m pretty sure we do not—there must be room to accept legitimate, nondiscriminatory reasons that can explain differences in outcomes.

©CounselorLibrary.com 2020, all rights reserved. Based on an article from Spot Delivery. Single print publication rights only to Used Car News.

Tony Moorby Disconnected Jottings From

We just visited a couple of our closest friends in Florida; Buzz and I worked together like brothers after we acquired his family’s business in the early eighties – he later went on to buy his own auction, with amazing success. Jenn, his wife, and my wife, Terry, have got on like a house on fire since the day they met, laughing and joking like a couple of mad fools, needing little else to entertain one another than just being together.

Their hospitality is legend and we took the opportunity to slip away from winter’s dying grip in Tennessee and enjoy the weather and the warmth of their company. It’s not asking too much in southern Florida.

“Have you ever imagined what the aftermath of Hurricane Ian looks like?” Buzz posed. So when we said we couldn’t, we took a ride to see what Mother Nature had wrought on a piece of paradise.

I’m not altogether ignorant of the power of nature –we see enough tornados in Tennessee to be well acquainted; I sold a dealer services business in which I was a partner, adjacent to the Nashville Auto Auction, later flattened by a tornado in 2020. The showroom and recon center were torn in half and 14 dealer office suites completely disappeared.

I don’t know what I was expecting in and around Ft. Myers but the power of wind and water is jaw dropping. Anyone thinking they can easily ride out a monster of a Category 4 Hurricane in place is sadly mistaken, perhaps even demented.

We drove along the beach road – the beach, multimillion-dollar houses, hotels and sea to our left and what were businesses and houses ranging from mansions to shanties, across the road to our right. The

approach showed some disparate damage to the Mangroves, torn out and turning grey, root balls like fists shaking at the sky. Then a fishing boat was on top, crazily tilted as though still riding out the storm. The debris and detritus of lives, once carefree, now strewn every which way in a mad miasma in trees, fences, telephone poles or foundation stumps with no acknowledgement as to their previous ownership or value.

What looked like a stick-built house on stilts still stood sentinel next to a massive manse laid waste in nothing but an unceremonious pile of grey rubble, rooms unidentifiable as to their previous contribution to family life. It’s truly difficult to describe how we drove mile after mile as gasps became louder and more pronounced; each of us pointing and voicing shock at every new vista of

wretched wreckage. A once pretty ice cream parlour painted an innocent pink and cream, now a grey and jagged threatening façade, as surly as a grand hotel with verandas missing or hanging akimbo and gaping holes for windows. The once welcoming sweep of the driveway to the warm and glorious reception like open arms, now a vicious reflection of unconscionable violence, firmly declaring, “Stay away.”

Among all this craziness, owners or workers were digging through rubble with everything from a bucket to a back loader; one roof tile at a time or the side of a cottage in one fell swoop. These people are amazing, doggedly claiming back what they want to return to. Only more grit existed in their surroundings than they showed themselves.

These people exhibit the American sense of optimism and possibility, seeing what

look like insurmountable barriers, as merely things to organize and get over – time being the best accomplice.

I’m convinced that in ten years’ time, Ft. Myers will be back, solidly as part of the Florida ethos of hard work, bearing fruit to enable its residents and visitors to enjoy life to the full.

We were pleased to have witnessed things for ourselves; a morbid idea turned into a confirming experience.

Santander Consumer USA and Chrysler Capital are proud to announce the winners of their 2022 Auction Excellence Awards. This annual program recognizes top performing auctions for exceptional success in the areas of operational excellence, strategic planning, customer service, value achievement and residual enhancement.

The winners of the 2022 Auction Excellence Awards are:

NATIONAL AUCTION OF THE YEAR Manheim North Carolina

REGIONAL AUCTION OF THE YEAR

CENTRAL REGION Manheim Dallas

MIDWEST REGION America’s Auto Auction West Michigan

NORTHEAST REGION Bel Air Auto Auction

SOUTHEAST REGION Manheim North Carolina

WEST REGION ADESA Boise

LEASE CATEGORY

NATIONAL AUCTION OF THE YEAR Manheim Dallas