Used Car News 10/3/22

UCN Used Car News

By Jeffrey Bellant

DETROIT – The 2022 Detroit Auto Show returned to the Motor City after a two-year pandemic hia tus and offered a new indoor/out door experience.

The show moved from a tradition al January event to September to take advantage of the city’s water front and other attractions.

The new-look show had plenty of internal combustion muscle along with state-of-the-art electric ve hicles.

The indoor show offered chanc es to drive on the Camp Jeep test track. The experience took drivers – slowly – through a course where they drove through various off-road features such as sideways up an embankment, then over a couple of other obstacles and then up and down a roller coaster-steep hill at a 45 degree angle.

“Bronco Mountain,” was a Ford ride ‘n’ drive experience which al lowed attendees to drive either a Bronco, Mach-E or Lightning, de pending on where they stood in the queue.

There was also a separate Ford F-150 Lightning ride offering.

In another part of the exhibit, an off-road display featured T-Rex, velociraptor and stegosaurus di nosaurs. More than 80 dinosaurs, some more than 28 feet tall, helped draw attention at the event.

That exhibit also offered a chance to see the car featured in “The Flint stones” movie, based on the classic cartoon. The car was built by the legendary George Barris – who also was the designer behind the Batmo bile from the 1960s Batman TV se ries. The so-called Flintmobile was on loan from LeMay – America’s Car Museum in Tacoma, Wash.

The show also featured a massive drone show for its charity preview

event, with more than 300 drones flying hundreds of feet in the sky.

Inside, visitors saw the Sigma-6 eVTOL, an aircraft combining “au tomotive innovation and aircraft technology.”

Maybe “The Jetsons” have finally arrived.

Displays featuring EV charging equipment and mock-ups of future charging stations put the spotlight on today’s push for EVs.

Other highlights from the out door portion of the event were sev eral monster trucks, including the iconic Bigfoot, the famous monster truck from the 1980s.

But this time, there was also Big

foot #20, an EV version on display. The “Air Mobility Experience” featured flight demonstrations by a half dozen mobility companies from five countries.

Jeep displayed what it billed as the world’s largest rubber duck, a nod to Jeep owners’ habit of placing much smaller ducks on top of other people’s Jeeps.

President Joe Biden visited the show during the media preview and the added security caused mas sive lineups to enter the show. Show Returns to the Motor City

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Used Car News

Agent Tips to Tension in Workplace

By Jeffrey Bellant

DALLAS – An agent with the Na tional Insurance Crime Bureau said simple verbal de-escalation tech niques can prevent miscommunica tion, discontent or violence in the workplace.

Gus Hitz, who spoke at the Nation al Auto Auction Association Con vention & Expo here, spent 26 years in law enforcement before joining the NICB.

As a supervisory special agent, Hitz’s territory includes Nebraska, Iowa and South Dakota. He works auto theft and insurance fraud cases with law enforcement. Hitz has also taught classes to law enforcement.

“One of the classes I taught to law enforcement was how to overcome verbal non-compliance and how to de-escalate a situation when things are getting ramped up,” Hitz said.

At the end of the day, a business

owner’s job “should be no different than that of a law enforcement offi cer,” in that the goal is to go home at the end of the night and enjoy family and friends, Hitz said.

“But we’re living in a world now where you just never know what could happen,” Hitz said. “Disgrun tled employees, angry people that you deal with can come back and cause you unimaginable grief.”

The key is how to communicate with someone, even if they’re really upset, and get them to a place where they can accept it and move on.

“What you don’t want is to be caught off guard,” he said. “It’s about listening to your instincts”

It’s important not to be caught completely and totally unaware.

“Most of the times when we de brief a victim of a violent crime, they will say, ‘You know, I kind of had a feeling.’

“Well, they stamped down those

feelings.”

Hitz said it’s important for busi ness owners, managers and employ ees to recognize those signs.

There are unhappy employees or workers you’ve fired that are dis

pleased.

“We’re finding more and more vio lence in this country,” he said.

People should always “look, listen and smell.”

Photo by Jeffrey Bellant

PEACE OFFICER: NICB Supervisory Agent Gus Hitz, a former law enforcement officer, presents tips on how to de-escalate situations at work and prevent potential violence. The session took place during the NAAA Convention & Expo in Dallas.

By Jeffrey Bellant

DALLAS – Adam Crowell, presi dent and general counsel for Com plyNet, led a session on data secu rity during the recent National Auto Auction Association Convention & Expo here.

ComplyNet focuses on different compliance issues, from privacy, safeguards, information security and environmental health/safety and advertising compliance, among other areas.

Geoff Parker, ADESA vice presi dent for dealer sales/enterprise ac counts, introduced Crowell for the session by explaining how critical this topic is to the industry.

“We’re all aware that regulators have imposed some pretty strin gent cyber security safeguard re quirements on banks, credit unions regulators and dealers,” Parker said. “these regulators are getting aggres sive about compliance.”

A deadline for the new Federal Trade Commission Safeguards Rule is Dec. 9. Industry groups have pushed to delay the start date of the

new rule to no avail.

The new rule applies to financial institutions.

“When I say, ‘financial institution,’ it’s someone that provides financial services, such as lending,” Crowell said. “It also applies to anyone who regularly helps consumers obtain credit and financing. So, it also ap plies to dealerships.”

But it also applies to auctions.

In the case of a data security audit, auctions have to make sure they’re checking all the boxes.

“You also have to make sure – that when they do come around – it wasn’t just fluff and that you’re ac tually doing the things that you said that you’re doing,” Crowell said.

But the elephant in the room is the Safeguards Rule, which originally went into effect in 2003.

Any information a business has on a consumer, the business needs to protect.

“The fines (for violating the rule) are very significant that could be up to $46,517 per customer record,” he added.

The FTC also has a section 5 rule,

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which can apply to anyone who has consumer information, so the FTC has gone after those businesses. Crowell pointed out it went after an advertising company for covering up a data breach.

Crowell and ComplyNet has iden tified 10 steps businesses need to comply with the Safeguards Rule.

No.1, the business has to have a designated individual to oversee and enforce this regulation. The rule also requires there is a qualified information security personnel but doesn’t need to be an IT expert.

No. 2 is to have a written risk as sessment. Crowell suggests map ping where the consumer data re sides, whether physically or from a technology standpoint.

Companies should also know who has access to the data.

No. 3 is a written information se curity program focusing on admin istrative, technical and physical controls.

No. 4 is mandatory documented information security awareness training for employees.

No. 5 is phishing penetration test ing, to see who might fall for a fake email.

“What we’ve found almost 90% of all hacking starts with phishing,” Crowell said.

No. 6 is a risk assessment process with all a business’s vendors. It means selecting vendors that are do ing all of the requirements that the business is doing.

There needs to be access controls. Who has access to certain controls? When is access taken away? Crowell said some employees who left one dealership went to another. That person was able to access the old dealer’s CRM about 400 times.

No. 7 is that there be encryption for any systems that have customer information.

No. 8 is a requirement for con tinuous monitoring of information systems, for any system that has cus tomer information.

Another option would be annual penetration testing and vulnerabil ity assessments. Crowell said con tinuous monitoring is less expensive and a better option.

No. 9 is to have a written response plan. What is the course of action if there’s a breach?

How are you going to make it bet ter after you have one.

No. 10 is the requirement for a written report – at least annually –to the company’s board of directors.

“The FTC wants to make sure that it’s not just (the responsibility) of the individuals in charge of the pro gram, but the board of directors are informed as well.”

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Ed Fitzgerald, Staff Writer

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IAG Celebrates Strong Year Auction Update

By Jeffrey Bellant

DALLAS – The Independent Auc tion Group offered a positive update on the state of independents during its meeting here at the National Auto Auction Association’s Convention & Expo.

IAG Executive Director Lynn Weaver said coming out of the pan demic has been a boost for members.

“Out independent community is strong and getting stronger,” Weav er said. “Our independent vendors are doing everything they can do to help.”

Weaver added that IAG is strength ened by its members’ involvement in NAAA leadership.

“We’re in a unique position at this time,” he said, “We’ve had three in dependents in a row as NAAA presi dent.”

Charlotte Pyle offered up the IAG Chairman report. She gave an up date on the NAAA board of direc tors’ retreat this past January and its accomplishments.

It was the NAAA’s first conference in conjunction with the National Au tomobile Dealers Association.

“It really worked out, especially with our new-car dealers and usedcar dealers who attended -- that showed a great camaraderie,” Pyle said.

“We had a wonderful couple of days,” Pyle said. “A strategic plan was put in place and it was one of the best times we’ve ever had as far as collaboration.”

The group revised the mission statement, the ethics statement and the anti-trust policy, she said.

Pyle said the NAAA board success fully launched its workforce initia tive, which includes a job board.

“We formed the Tommy Caruso Scholarship Fund, acquired the World Automobile Auctioneers Championship – we’re very excited about that – and we launched Priva cy Pam, a new security training pro gram for our members,” Pyle said.

Other initiatives include the in dustry advocacy program, including regular webinars to keep members informed, and “The Gold Standard” branding for NAAA, Pyle said.

Auction Data Solutions was also brought into NAAA internally.

“(BSC America’s) Ray Nichols has been extremely involved in that from its inception,” Pyle said. “He’s done a wonderful job in get ting our data and help us reach a new level.”

Weaver said getting all this accom plished before Charles Nichols’ term as NAAA president – which ended at the convention – was impressive.

The finance report is in a strong position, Weaver said. The budget balance was over $320,000, before convention expenses.

Weaver praised IAG Education Committee Chairman David Blake.

At the start of the convention, IAG held a half-day educational work shop on emotional intelligence pre sented by keynote speaker Bill Ben jamin.

Members said it was well received.

“We take pride in putting the con tent together,” Blake said.

He said it’s essential to provide industry information and educa tion that leaders can take home to their business, whether it be de veloping the culture or personal development for the leaders them selves.

Tommy Rogers offered an update from the Standards Committee, who is chairman of both the IAG and NAAA Standards Committees.

He cited concerns from members about whether they have to disclose vehicles that were previously used by Uber, Lyft or other ride-sharing services.

“After a lot of spirted discus sions within the committee itself, we made the recommendation that it would not be a disclosure that is going to be required at the auction level,” Rogers said.

“(But) if you live in a state where that is a requirement, you must dis close that. Also, that policy does not apply to vehicles that are used for taxis or livery services.”

Rogers said there are now subcom mittees working on several topics, including: creating clearly defined consistent standard announce ments; clarifying gray areas in auc tion policy; and tackling the issue of biohazards.

IAG will work with the NAAA Safety committee to clearly define biohazard vehicles.

Rogers also wants more visibil ity for the standards committee to draw feedback and suggestions from members.

Steve Krupa, chairman of IAGs technology committee, gave a pre sentation on Auction EDGE.

“So, all in all, the health of our in dependents and independent com munity is fantastic right now,” Weav er said.

By Jeffrey Bellant

DALLAS – Two political pundits offered their takes on the upcoming midterms and discussed other issues at the National Auto Auction Asso ciation Convention & Expo here in September.

Michael Steele, MSNBC analyst and former chairman of the Repub lican National Committee, joined Donna Brazile, a former chairwom an of the Democratic National Com mittee who also ran Al Gore’s presi dential campaign in 2000.

Right at the start, Brazile set the table for November.

“Probably one of the most con sequential mid-term elections that we’ve seen in the past 40 years,” she said. “It’s a big election season.” Brazile said she can’t predict what will happen.

“Five months ago, the Democrats were forecast to lose as many as 45 to 60 seats,” she said. “Today it’s down to possibly losing 15 to 20 seats,” de pending on who you talk to.

The Senate, while divided 50-50, favors the Democrats since ties are broken by Vice President Kamala Harris.

“The forecast is that Democrats are likely to regain control of the Senate,” Brazile said.

This is in addition to many guber natorial races, and ballot issues like abortion and marijuana legalization.

“There are so many interesting candidates across the country,” Bra zile said.

These include Heisman Trophy winner Herschel Walker running for Senate in Georgia to TV personality and medical doctor Mehmet Oz run ning for Senate in Pennsylvania.

Steele, who also served as Lt. Gov ernor of Maryland from 2003 to 2007, offered his insights as well. Steele referred to himself as a

“skunk at the party,” as a Republican who opposed Trump and endorsed Joe Biden in the 2020 election.

He claims the Republican Party changed after the Tea Party Move ment in 2012, following Mitt Rom ney’s loss to President Barack Obama.

“A lot changed inside the GOP, it became more aggressive and per sonal,” Steele said, though he also blamed former House Speaker Newt Gingrich for bringing a “form of gue rilla politics to the House.”

He suggested the tenor of today’s politics has a history going back de cades.

“Part of our opportunity and chal lenge, irrespective of the politi cal sides that we’re on and looking at this holistically as Americans,” Steele said, “is how do we re-engage our fellow citizens to try and trust each other?”

He said political differences have made Thanksgiving dinners more uncomfortable as families argue over issues.

“A lot of different folks are feeling that these institutions – the Demo crat and Republican parties and the (governmental) institutions or De partment of fill-in-the-blank – don’t give a damn about them and have stopped listening to them,” Steele said.

The pair talked about cars during their discussion.

Steele said he had a Honda, a Gen esis G90 and a Lexus.

Bazile said in Washington D.C. she drives a Volvo because it feels like I’m in an armored vehicle.

“You need it in D.C. ya’ll,” she add ed

She also drives a 2005 Ford Thun derbird Deluxe because she wanted a convertible.

“I named her Goldilocks,” she said.

Looking for non-verbal behavior showing tension is important.

“We’re also listening for the change in the verbal tone, we’re listening for non-verbal cues that they’re upset, angry or disappointed in what they are hearing,” Hitz said.

“We can also be smelling – alcohol, other drugs. That’s something to be aware of, also.”

He said it’s about having a goal in mind; getting someone to comply with rules and regulations of your business.

“We have to be able to commu nicate in a way to get that willing cooperation from that individual,” Hitz said.

“Remember, our goal is willing co operation and the Golden Rule, treat others the way you want to be treat ed,” Hitz said.

Non-verbal communication makes up about 75% to 80% of what we

pick up, Hitz said.

One non-verbal problem is armcrossing, something Hitz has tried to avoid. He explained when a po lice officer has that stance, it seems as if he is blocking or not listening to what a person is saying.

“That’s the perception,” he said.

Finger pointing – unless you are directing a person to leave – is an other no-no.

‘Nobody likes being pointed at, es pecially in this country,” he said.

Pay attention to facial expressions, so that you can anticipate when someone is getting angry and you can provide information that might defuse it.

Hitz also talked about personal faces and professional faces.

It’s important to show a profes sional face when someone is noseto-nose with you arguing about something. Your personal face may want to roll your eyes, but that’s not

the way to de-escalate.

Keeping that professional face in the heat of the moment is critical to defusing situations.

Hitz said no one can cause you to lose that professional face – unless you let them.

“Active listening is also important. Nodding, repeating what a person said, showing by expression you un derstand what they are saying are just a few examples.

Hitz uses the acronym R.E.A.C.T. to help people solve verbal noncompliance.

The “R” stands for “Request coop eration.”

“Nine times out of 10, that’s all you have to do,” Hitz said.

If that doesn’t work, go down the line.

The “E” stands for, “Explain the reason” for what you are requesting, like you would for a difficult person.

Usually, these steps stop the prob

lem, but if they don’t the next step “A” is to “Allow them a choice.”

In a workplace scenario, if a per son doesn’t follow the auction rules, then maybe they don’t get to buy the vehicle that day.

The “C” stands for “Check the de cision,” asking them if they are sure they still will not comply.

If they still won’t, then it goes to “T,” for “Take action.”

People who might be under the in fluence or mentally ill just need to be taken off the premises.

“Call law enforcement if you have to, or get help from others in the building,” he said.

When entering a potentially emo tional or difficult situation, Hitz rec ommends pre-intervention preven tion.

“Calm yourself down,” Hitz said. “Center yourself and get focused and develop a quick strategy for in tervention.”

Used Car News

Neither owns an EV, though Steele said he liked the Ford F-150 Light ning.

Brazile said she looks forward to visiting Bel Air Auto Auction and promised Charles Nichols she would visit the auction.

Although Steele told the crowd that he opposes Trump, he credited him for doing something that politi cians weren’t doing.

“For about 14 or 15 years, Donald Trump was having a conversation with a lot of Americans that no one was paying attention to,” Steele said. “They watched him every night on television. They watched him fire people, hire people and watched him around beautiful young women in beauty pageants that he ran.

“They watched him build these skyscrapers to himself.”

So, when the Access Hollywood tape came out with Trump saying something offensive about women, a

lot of women thought it was just guy talk, Steele said.

“Then 52% of women would go on to vote for him that November (2016),” he said.

Steele said the problem today is we’re not having policy fights any more. Politicians are not arguing policy anymore.

“At least in 2010, I could make a coherent case for why Obamacare should not be the law of the land,” Steele said. “I could go around the country and I could engage Demo cratic opponents about whether a government should control access to healthcare or not.

“This is not the situation today.”

Steele said the framing of discus sion is important and the underlying elements are equally important.

“We tend to lean into the reaction because we’re not listening,” Steele said. “Our electoral process is all about winning and not about gov

erning. It’s all about what I get and what you lose.

“And we have to change that.”

Brazile added that for the last 30 years, the mood of the country has been off.

“If you ask the vast majority of American people, are they happy with their lives, are they happy with politics and the government, (they say) they’re unhappy,” she said. “They’ve been in foul moods for a long time.

“It doesn’t matter whether they’re Republican, Democrat or Indepen dent.”

Brazile said the only recent time people felt good about their country was after 9/11.

Brazile went through some politi cal surveys and data pulled by her students at Georgetown.

The data suggested that people are less concerned about gas prices and inflation and more concerned with

cultural issues and personal free dom.

“My party is in the midst of a tran sition,” Brazile said. “We don’t know if that transition is going to occur this season or during the next presi dential season, but it’s happening.”

Steele doesn’t see a red wave hap pening.

“I think the House is a lot more competitive than people think,” he said. “This is not a referendum on Joe Biden.”

Brazile agreed that it doesn’t seem like 1994 or 2010 when Democrats lost large numbers of seats in Con gress. But the election is still weeks away, she added.

She believes independent and swing voters will have the biggest effect on the mid-term elections.

Brazile’s data showed that Repub lican voters are “highly motivated” to vote, while the Democrats are “fi nally catching up.”

Retail Markets

CALIFORNIA

Ronald Browns, owner, Larry’s Auto Sales, Fresno, Calif.

“I’ve been in business 40 years, all in the same loca tion.

“COVID is pretty much over for us. We might have one in 100 customers wear ing a mask. We were already doing a lot of stuff online. We’d rather have the cus tomers come in.

“We usually keep about 60 cars. That’s down. We’ve been having problems get ting cars for the last two years. We probably average 20-23 sales a month.

“We do about 90 percent buy-here, pay-here.

“The average down pay ment used to be $1,000. Now it’s $1,500 to $2,000. The average length is 24-28 months.

“We do all our recondi tioning in house. We’ve had

the same mechanic for 27 years, he’s just like family.

“For advertising, we’ve been on the radio for the last nine months – and word of mouth.

“We’re just looking for a car that the customer won’t have any problems with for two or three years. We rule out some cars like Range Rovers. We like Hondas. The mileage can be 150,000 to 200,000. We rarely ever get a car under 100,000 miles.

“Forty years ago, I started this business with $120,000 cash and I was out of money in nine months. Right now, it would cost you about $900,000 (in California) to open up something like this.

“We had a DMV inspection a couple months ago. These two ladies walked around for about 45 seconds and walked off. We do what we can, you can’t be perfect, just be honest with people.

“The last car I sold was a 2005 Toyota Corolla with just over 150,000 miles. We sold it for $4,995.”

TENNESSEE

Guy Thorpe, owner, Thorpe Automotive, Knoxville, Tenn.

“I’ve been in business for 25 years and I’ve had my own dealership for five years.

“I was pretty aggressive online (before COVID). I think the customers are more comfortable online.

“I usually keep about 50 cars in stock with the aver age mileage around 70,000 miles. We sell about 30-35 per month.

“My sales are about even between cars, trucks and SUVs. I even sell some com mercial vehicles. I buy what ever’s a good sale that week.

“I buy a lot of cars online, but I go to the auction once a week as well. My favorite

is Dealers Auto Auction of East Tennessee. I’m a big fan of buying from Manheim as well. I bought 20 this week online from them. I like Manheim Express because when you buy from there, the fees are lower.

“Buy-here, pay-here makes up a small percentage of my business, but I wish it was 100 percent. I’ve got about 50 accounts now, but I’m trying to build that portfo lio. It’s gotten harder since COVID because the prices of cars went up.

“The average down pay ment is around $2,000 across the board. That might be creeping up to $2,500. For regular financing, 60 months would be the average (term length).

“I figure I spend about $1,200 on average recondi tioning. Tires, brakes, rotors, before you know it, you’re there. We farm out the work,

Compiled by Ed Fitzgerald

we’ve got about four differ ent places we use.

“The small repairs we do in-house, and I’m looking to hire a mechanic to do more. That’s also because I’m try ing to get more aggressive with buy-here, pay-here. I do DealShield which gives me 17 days to return the car for no reason. I try to buy stuff with good condition re ports.

“I’d say 95 percent of my advertising is online.

“When you first come into this business it’s hard to get lenders. That eases up with time. I’m at the five-year mark right now and I’m just getting to where the bigger banks will sign me up. Make sure you know what you’re doing and put your head down and plow through it.

“The last car I sold was a 2019 Ford Escape with 61,000 miles. We sold it for $20,000.”

Wholesale Markets

CALIFORNIA

David Aahl, vice presi dent, North Bay Auto Auc tion, Fairfield, Calif.:

“I’ve been here 30 years.

“We used to run sales on Tuesday and Thursday but stopped doing the Tuesday sale over a month ago. What we found is it allows us to put two ‘okay’ sales into one really good sale. We’ve been averaging more dealers in the lanes and more cars in the lanes.

“Franchise dealers are now keeping stuff – like that 70,000-to 100,000-mile car that they normally wouldn’t keep, because of the short age of cars.

“The volume here is up for dealer cars, and reposses sions are coming in at a little better clip right now. Also, some of the lease returns are starting to turn over and we’re getting some of those.

“Overall, we’ve been run

ning 200 fleet/lease cars a week and maybe like 450 cars a sale.

“The fleet/lease side has kind of compensated for us not seeing as many franchise dealer trade-ins.

“For example, it used to be 60% of every sale was a dealer consignment car or trade-in. Now it’s maybe 50% dealer consignment and 50% fleet/lease.

“Conversion rates have been pretty good. We’re av eraging about 60% of every car we touch is sold. The conversion rate for the bank cars has been really high. We feel that if we do a good job for them, provide good CRs and do good merchandising, we’re going to see the effects in the lane.

“Six months ago, we weren’t open for dealers in the lanes so it was 100% on line. The last three or four months we’ve been open for

dealers and we’re getting 150 to 175 guys in the lane and 200 more online.

“We could have opened earlier, but we had restric tions on the number of peo ple from the county. So, we didn’t feel like it would be fair if we could only have 75 people in the lanes and (ex clude) some dealers. Now we don’t have restrictions.

“We have a heavy-duty truck sale, commercial vehi cles, once a month. We call it our ‘white metal,’ sale since they are usually white in col or, like a cargo van or flatbed. We also have a separate GSA sale at least once a month.”

MONTANA

Jake Gertsch, sales man ager, Auto Auction of Montana, Billings, Mont.

“We’re going on 20 years here. We have pretty much a full-service business. We have a transport company

with seven transport trucks. We have a state-of-the-art recon facility that’s 30,000 square feet with a body shop and mechanical shop.

“Our volumes have been between 400 and 500 cars consistently.

“It’s not what inventory was two or three years ago, but it might not go back to those levels again.

“We’ve seen a bit of a drop in the conversion rate since the time we were selling 70% and higher.

“The past couple of sales we’ve been between 55% and 60%, which is still good.

“I would say we’d get 100+ registered bidders in the lanes. Our total bidders – be tween in-lane and online –250 and 300.

“There’s a bit of an adjust ment where dealers are see ing a little bit of newer cars, so prices on that late model stuff have settled a little bit.

Earlier, everything was sell ing over MSRP, but that’s slowed a bit.

“Most of the new inven tory for franchise dealers is sold once it hits the lot. Used inventory is back up a little bit more than it was before. Dealers have a little more in stock.

“Most of our inventory is dealer cars. But both fleet and bank repos have start ed to pick up in the past 30 days, for sure. In a healthy economy and a healthy mar ket there is some of that.

“Our average price in the lanes at a recent sale was $28,600.

“We have a GSA sale once a month, selling 100%. It’s bringing pretty strong mon ey.

“I think the fall market is a little softer because of the price of cars and the inter est rates. It’s the finance side which is a little tougher.”

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Auto Finance

Topsy-Turvy Finance Market Draws Consumers to Used

By Jeffrey Bellant

Experian’s State of the Automotive Finance Market Q2 showed some interesting trends, ranging from used loan values and terms to shift ing patterns by consumers trying to find financing for the right vehicle.

Melinda Zabritski, Experian’s di rector of product management, said the report showed that consumers are shifting back to finance used cars at increasing rates. In other words, they are moving from new to used.

Zabritski said leading up to the pandemic, Experian saw a definite shift in Prime and Super Prime con sumers who were increasingly pur chasing used vehicles and moving away from new vehicles.

However, that changed after large incentives hit the new car market in Q2 2020.

“That really lured a lot of those consumers back into the new-car space,” Zabritski said.

In was only in the last quarter – Q2 this year – Experian saw a return to used cars from Prime and Super Prime consumers.

“A lot of that is due to inventory availability, and the cost of markups on the new car dealer side,” Zabrits ki said. “The high sticker prices have moved that back to used.”

Sometimes, those purchases also could be adding a vehicle to the fam ily or buying a car for a child who’s going away to school.

“Most of the used vehicles in this space tend to be more of the late models,” Zabritski said.

But she also saw shifts in the credit categories.

“We do have score migration oc curring,” Zabritski said. “In the en tire credit population, we are seeing subprime represent a lower percent age of all outstanding credit.

“But we also are seeing that, spe cifically in Deep Subprime, we are not originating at the same volume in Deep Subprime as we had been pre-COVID. Deep Subprime has still not recovered.”

Zabritski said that means we are just not seeing the deep subprime consumer out shopping for cars.

“They could just be priced out of the market right now with the rap id increase in values,” she said. “It could be an affordability issue.”

In the other credit risk tiers, vol ume retuned quickly when stores opened back up again.

“Volume returned quickly for Su per Prime, Prime and even Near Prime,” she said. “Even in the 500 to 600 score band (Subprime), we’re still seeing decent originations there, though they are still a little lower than pre-COVID.”

Only the Deep Subprime consum er has lagged behind, The Deep Subprime category in cludes people who have financing and have a credit score, though the category could include buy-here, pay-here.

Rising values of used cars have caused the used loan amounts to surge drastically year over year.

“These increases are something we’ve seen for the last several quar ters, Zabritski said. “We’ve seen this little bit on new but the bigger im pact was on the used side.

“It all boils down (an increase) auction values and a very high de mand for late model used vehicles.

Not only has the market driven up used car values, but it’s also led the loan amounts to grow 22% year over year.

Experian shows the average used loan amount ranges from $20,311 in the Deep Subprime category up to more than $30,000 in the Prime cat egory, the used loan average.

“In another quarter or two, we’re not going to see the very large year over year increase,” Zabritski said.

She added that consumers in the used-car space have “more levers to pull” in terms of financing the right car.

They have the opportunity to look across franchise and independent stores to find the right vehicle. Also, they can go for a slightly older vehi cle to make it more affordable.

“The advantage of these high val ues is that if you have a trade-in, your trade-in is also worth more,”

Zabritski said.

A few years ago, the concern was so many consumers were upside down on their used-car loans.

Now that has flipped.

“What makes it especially interest ing is that’s the case on the new ve hicle side,” Zabritski said. “Because, with a lot of the additional markups and market adjustments, it’s had a bigger impact on the new-vehicle side. Now we’re seeing new vehicles more upside down, because the val ue is not the same as the sales price anymore, so the loans are now over inflated to the value of the vehicle.”

It’s the exact opposite of used, she said.

“Now your current vehicle that you’re about to trade in could be worth more than the MSRP,” Zabritski said.

Zabritski recently looked at the 10 most common purchased used ve hicle by make and model, and then looked at the used value.

“In many situations, the current value is higher than the original MSRP,” Zabritski said.

Of course, it also means that the car you’re trading for has also in creased in value.

Zabritski said this will level out as inventory balances, but it’s going to take time.

High values and creeping interest rates have led to longer loan terms.

“It’s a little bit more significant in the used car space, in part because of the higher values,” Zabritski said. “So, term can be a consideration of course. If you’re looking for an old er model year, the longer term loan might not be available to you.”

One eye-popping chart in the Ex perian report falls under the sub ject of loan terms. While terms have crept up to as high as 84 months, the bar graph in Experian’s report

shows a sliver of gray marked 85+. Zabritski laughed and said that usually involves a Prime consumer with a loan to value that’s a lot lower than a typical loan.

“There are a few lenders that spe cialize in that,” she said. “They do that as a focus. But that’s going to be for a very late model, premium ve hicle.”

On the repossession side, Zabritski has not seen a big increase in vol umes, though it’s not about delin quencies. She’s heard, anecdotally, that lenders are having trouble hir ing the bodies to do the actual repos sessions.

“It’s more of a human resource is sue,” she said.

Zabritski also noticed another trend.

“One thing that did strike me was the very large increase in the credit union share of used vehicle loan side,” she said.

The Experian report shows credit unions have made up more than 28% of the used market, just under banks which are at 29.19%.

“I’ve spoken with several credit unions and they say in the last cou ple of months, they’ve had origina tion volumes at unprecedented lev els,” Zabritski said.

While banks and other lenders are already raising their rates from the early rate hikes, Experian hadn’t, in Q2, seen credit unions raise their rates.

“However, more recently they have raised rates, but the credit unions are still originating at rates lower than other lenders,” Zabritski said.

She expects credit unions’ share of the used market will continue to grow.

Melinda Zabritski

Tony Moorby Moorby

I know that media cover age of the British royal fam ily has been extensive since the passing of the Queen, but as an ex-pat Brit you’d probably be surprised if I didn’t opine on the subject.

I distinctly remember be ing hoisted onto my dad’s shoulders as the Queen was driven past the end of our road on her way from Wind sor to Westminster Abbey for her coronation in 1953.

People were crowded on the sidewalks as deep as the width would allow, all wav ing miniature Union Jacks.

It was an event that sig naled a new era and drove post-war enthusiasm to build out of the ruins, eight years after the secession of hostilities.

The young Queen had to take on a myriad of re sponsibilities but it was her youth that caught the imag ination of a populace that

was poised to do new and better things. That embrace, as warm as it was then, fol lowed her for seventy years with one period of cooler questioning after the de mise of Diana, Princess of Wales, when the Queen projected an aloof and un caring role while the nation mourned so openly.

It has never been the practice of the monarchy to show much emotion, even under duress. It was con sidered proper to show that ‘stiff upper lip’ and a ‘we’ll see this through’ mentality.

Even the royal family’s British accent, known as ‘received English’ or ‘re ceived pronunciation’ was regarded as stilted and sep arate; the ‘rorl fairmileh’ said ‘crine’ for crown and ‘dine’ for down. The BBC was renowned worldwide for using the accent un til the sixties when almost

everything changed. Now newscasts, even on the BBC’s World Service, reflect every accent used in the British Isles as well as other countries around the world. English pronunciation, like American, is deserving of an article all to itself. Even London used to have about ten different accents (I’ve written before about Cock ney Rhyming Slang) and now it’s made even richer by the worldwide melting pot of people who now call London home.

It’s becoming obvious that support for the mon archy was vested more in the Queen than the estab lishment, itself. The PR machinery they employ has done a remarkable job in the past in dodging all kinds of personal and political bul lets. Prince Andrew, Prince Harry and even the new King have made beds (par

don the pun) they now have to lay on. The new Queen Consort (the name so aptly applies) is gaining a popu larity that, a few years ago, she would’ve never enjoyed.

Being the same age as King Charles III, it’s hard to imagine him as anything other than the Prince of Wales as he comes across as stiff and starchy and remote.

He’s actually very intui tive in many subjects and interests. One worthy of mention is that he is an ac complished watercolorist. I doubt he’ll have much time for that, going forward.

The shape of the monar chy will change dramatical ly; slimmer with less ‘hang ers-on’, prior colonies and dependencies will probably desire independence going forward. References to the Empire carry different con notations these days – not all of them bad, in my view.

• 50-year

• President from 1997–of

• Served as ADESA’s executive vice of

• Moorby &

• NAAA Hall of

• IARA Circle of Tony

Plans for the funeral were made thirty years ago be tween the Queen and the Earl Marshall, the Duke of Norfolk; they did a remark able job and I was glued to the telly for the duration.

The Brits do rather well when it comes to pomp and ceremony!