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April 18, 2016

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Growing Supply Pushes Down Resale Values

Photo by Ted Craig KEEP MOVING FORWARD: Dealers enjoy a racing challenge at the ADESA booth at the National Automobile Dealers Association convention in Las Vegas. Auction executives hope the dealers remain this competitive in the lanes as the supply of off-lease vehicles continues to increase. By Ted Craig

Rush - Dated Material

The long-anticipated decline in wholesale values is gaining steam. The Manheim Used Vehicle Value Index declined to 122.5 in March. The Index has declined every month this year. The pace of used-vehicle value decline is expected to accelerate. NADA Used Car Guide expects a price decline of 5 percent by the end of the year. The main driver of this decline is supply. Demand remains strong, with 3.6 million used–car sales in March, according to Edmunds.com.

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The sheer number of used vehicles coming into the market is greater than the demand, however. Jonathan Banks, NADA Used Car Guide’s senior automotive analyst, said 800,000 more units are coming off-lease this year than last, driving the total number to over 3 million. That increase accounts for more than 80 percent of the decline in wholesale prices, Banks said. The good news is the industry is better equipped to handle the increase in units than it was the last time large volumes came off-lease in the early 2000s. “If we had the remarketing pro-

cesses of the past, I’d be worried,� said Manheim chief economist Tom Webb. The manufacturers are taking steps on the retail side in an attempt to prop up residuals, such as General Motor’s Factory Pre-Owned Collection and Toyota’s certified pre-owned leasing program. “There’s an acknowledgment in the industry that a lot of vehicles are coming off-lease,� said Steven Szakaly, chief economist for the National Automobile Dealers Association. Tom Kontos, ADESA’s executive vice president of industry analy-

sis, said values would have fallen earlier if certified pre-owned programs weren’t there to absorb some of the volume. But Szakaly cautioned that “CPO is not a savior.� All the manufacturers can do is lessen the blow. The question now becomes how fast will prices decline and for how long. Speaking at the American Financial Services Association vehicle conference, John Hyatt, head of the indirect lending group for U.S. Bank, said he expects the slide to continue for years.

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USED CAR NEWS

April 18, 2016 • 3

Leasing Pressures Both Wholesale, Retail Sales By Ted Craig

Increased leasing creates pressure for dealers on both the retail and wholesale side of used-car sales. The wholesale issues are well known, with more than 3 million off-lease units entering the market this year. The numbers will climb for the indefinite future. Leasing now makes up 30 percent of all new-car sales, up from 25 percent just a few years ago. The increased supply of off-lease vehicles offers good news for dealers as it lowers prices and provides inventory for any business model. “The supply coming in is across the board,” said Jonathan Banks, automotive analyst for NADA Used Car Guide. But there is a lot more of some units, especially compact and mid-size cars, which is bad news for consignors. Finance executives are pushing leasing as an alternative to long-term financing.

There are numerous problems with finance terms that are starting to exceed six years. These include higher risk, brand burnout and negative equity for the consumer. The last is a growing problem for new-car sales. Banks said 30 percent of new-car buyers now have negative equity for the trade-ins, up from 25 percent in 2013. The advantage of leasing is that it keeps monthly payments low. It’s the main reason newvehicle prices rose 7 percent last year, but payment rose only 2 percent. Monthly lease payments are so low they compete more with used cars than new cars that are financed. The average monthly payment on a new car is $493, according to Experian. That is $134 more than the average monthly payment for a used car, which is $359. However, the average monthly lease payment for a new car was $412 in 2015, only $53 more than a used car.

% Off-Lease

% Leased Today

16% 14% 12%

56%

10%

-28%

8%

-50% 79%

6% 4% 2% 0% CUV ENTRY

MID MID UPSCALE CUV - SMALL RANGE- RANGE - - NEAR PREMIUM CAR STD LWR LUX ECNMY

CUV SUV - PICKUP MID UPSCALE MID LWR MID FULL RANGE - - LUX RANGE RANGE SIZED PREM

VAN - ALT PWR SUV SUV MINI - HYBRID ENTRY PREMIUM CAR LEVEL LARGE Source: Experian Automotive

Also, new-car payments are rising at a faster rate than used-car payments, going up by $11 on average last year versus a $4 increase on the used side. But lease payments are rising at the same rate as used-car payments. Manufacturers prefer lease incentives to retail incentives, Banks said, because they are less visible.

For example, a manufacturer might offer a car for sale at $35,000, but the captive will write the lease as if the car were priced at $25,000. The residual reflects the $35,000 price. Banks said while lessors prefer to take the hit upfront, “you pay the piper one way or another.” Leasing’s growing appeal

to consumers and the desire of manufacturers to maintain market share might place even more pressure on used-car sales. Most lessees remain prime consumers. But Melinda Zabritski, Experian’s senior director of automotive credit, said leasing to subprime consumers is a small but growing segment.

Auto Finance Industry Shows Some Signs of Strain By Ted Craig

Executives in the auto finance industry said the past year saw newer levels of competitive pressure and continued regulatory challenges Yet, those same executives still see plenty of room for growth.

institutions worldwide to keep more reserves. This means buying lots of high quality sovereign debt, such as U.S. treasuries. That keeps down yields, which really determines most finance rates.

money more as other investors exit the market. Murphy said private equity firms invested a lot of money in auto finance a few years ago and they are reaching the normal timeline for cashing out their stakes. Still, there could be some prob-

“The biggest factor in rates is new regulations that require financial institutions worldwide to keep more reserves.” Amy Crews Cutt An informal poll of attendees at the American Financial Services Association vehicle conference found they both expect delinquencies to rise this year and originations to increase. Matt Carroll, senior director for Standard & Poor’s, said there would be more delinquencies and losses this year, but they remain low by historic standards. Interest rates rank high among the reasons some predict a downturn in auto finance. But Amy Crews Cutt, Equifax’s chief economist, said the biggest factor in rates is new regulations that require financial

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The other effect of low rates is a demand for return in fixed income and this helps auto finance assetbacked securities. There remains plenty of demand for auto finance ABS said Carroll. His firm expects $75 billion worth of securitizations this year. Those securitizations might come with less favorable terms, however. Ian Anderson, group president of Westlake Financial Services, said the collapse in the oil industry put some fear into debt investors, who now want more protections for their money. The industry might need that ABS

lems this year. Cutt expects to see “some shakiness” in the more aggressive players. “Many business models have adjusted to a false sense of security on delinquencies and charge-offs,” said Tom Murphy, executive vice president of Wells Fargo Bank. Joe Castle, dealer-principal of Castle Auto Group in Chicago, said he sees some creditors that waive stipulation requirements even for consumers with 550 FICO scores. What defines an aggressive firm is a matter of debate, however. Crew-Cutt said one of the biggest causes of concern, the increase in

subprime lending, is overblown. She said that while subprime financing is growing, it isn’t rising as a share of overall originations. Also, subprime creditors have new technology, such as payment assurance devices and instant verification of applications. That said, Cutt warned that the industry couldn’t become complacent. One area of concern is ever lengthening terms for finance contracts. “It’s very dangerous for the dealer because the cycle is so long and consumers come in upside down,” said John Hyatt, head of indirect lending for U.S. Bank. David Paul, senior vice president of financial services for American Honda Finance Corp., points out that concerns about terms have been a topic of conversation at industry events for decades. And while terms are passing seven years, they still fall short of the 96-month contracts seen in Canada. Still, he joined his fellow executives in saying the growth should be stunted, with leasing as an alternative. Cutt said the biggest danger from any downturn in auto finance won’t be economic. It will be that a large increase in repossessions will bring in more regulation.

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4 • April 18, 2016

USED CAR NEWS

NEWS BRIEFS NIADA Names AutoRaptor as Corporate Partner

their auto dealership clients. Powered by data from Black Book, Bullseye Prospecting is designed to reduce and consolidate the many different touch points involved in the development and execution of a customer campaign. Bullseye Prospecting leverages data coming from DMS, consumer, incentives, and vehicle equity and valuation sources. The program also leverages partnerships with photo and printer vendors. Black Book also announced a distribution agreement with ProMax to market the Bullseye Prospecting platform to its network of auto dealers throughout the U.S.

AutoRaptor has teamed with the National Independent Automobile Dealers Association to become its latest bronze-level national corporate partner. AutoRaptor provides a web-based CRM application built for independent and buy-here, pay-here dealerships. Through its partnership with NIADA, the company is offering special setup and integration pricing for its full suite of CRM capabilities, including lead assignment and sales workflow, texting, push and pull integration with many dealer management systems, inventory and Ebay Replaces Dealer Center Ebay has acquired Cargigi Inc., a website integration, mobile apps provider of online advertising and and email marketing. marketing services. Financial terms were not Black Book Debuts Marketing Tool Black Book announced the debut disclosed. Cargigi will replace eBay’s of Bullseye Prospecting, a solution Dealer Center. Cargigi was founded in in 2009 designed to help marketing agencies automate customer campaigns for by Tony Hoang. Prior to Cargigi,

Hoang founded CDMdata Inc., a company that was acquired by Kelley Blue Book. Hoang and his team of more than 30 employees will join the eBay Motors business unit.

TrueCar Overhauls Platform

TrueCar Inc. is overhauling its platform as part of a “Dealer Pledge” initiative announced to the TrueCar Certified Dealer network to address concerns they have expressed over the past few years. A number of changes to the TrueCar platform have already been implemented, with many more to come throughout 2016. They result from a three-month assessment led by CEO Chip Perry, who joined the company late last year. The company is hiring over 100 additional field service consultants to help dealers make better use of TrueCar’s data tools.

Santander Avoids Delisting

Santander Consumer USA Holdings Inc. filed its Annual Report on Form 10-K for the fiscal year ended Dec. 31, 2015. Santander had faced delisting should have said Neil Steinkamp from the New York Stock Exchange spoke at the Society of Automotive for failing to file this report Analysts’ recall/warranty summit. As Santander previously dis-

GETTING IT STRAIGHT The article “Industry Faces Challenge in Recall Response” in the April 4 issue of Used Car News

closed in its Form 8-K filed with the Securities and Exchange Commission on March 15, the company revised its methodology for estimating credit loss allowance on individually acquired retail installment contracts and has restated prior periods. Santander says that the restatements are not materially different than its reported results on an annual basis.

Chase Partners with Maserati

Maserati North America Inc. and Chase announced a new auto finance agreement naming Chase the exclusive private label financial provider to more than 100 Maserati dealerships in the U.S. The newly created financial brand, Maserati Capital USA, will provide retail financing and leasing for consumers, as well as commercial lending and treasury services for Maserati dealers. C R O S S WO R D by Myles Mellor

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Vol. 22 • No. 2 Used Car News is published the first and third Monday of each month. Subscribers: We print advertisements as sent to us by auctions and other advertisers. It is not possible to verify the correctness of listed vehicles in auction ads. Most lists are partial and all lists are subject to last minute changes by auto auctions, so before travelling a long distance for a particular auto auction event, contact the auction by telephone for a fax of vehicles in the sale. Used Car News assumes no guarantees or liabilities concerning the accuracy of any advertisements. All Rights Reserved.

Reproduction in any form is prohibited without the written consent of the publisher. OUR ADVERTISING APPROVAL POLICY Payments from first time advertisers must accompany the insertion order. Distribution is guaranteed by the USPS. The advertising reservation deadline is 12:00 noon Thursday, 11 days prior to the issue cover date. Ad materials are due by 5 pm Friday, 10 days prior to issue cover date. For advertising specifications please email colleen@usedcarnews.com.

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USED CAR NEWS

April 18, 2016 • 5

Remarketing Conference Honors Industry’s Best

By Jeffrey Bellant

LAS VEGAS – Three industry veterans received top honors at the Conference of Automotive Remarketing here last month. The announcements kicked off with Lynn Weaver, general manager, America’s Auto Auction Harrisburg, receiving the Remarketer of the Year award. Consignor of the Year honors went to Levi McCoy, director of remarketing for LeasePlan USA. Bob Graham, who retired last year from ARI, received the 2016 Industry Leadership award. Weaver was praised for his best practices in the industry, embracing innovation and actively sharing his expertise and skills to advance the industry, said presenter Mike Antich. Weaver serves as a “mentor and role model” and helped establish the CAR event with his involvement as head of the Independent Auction Group, Antich said “This was a surprise,” said Weaver. “I really do appreciate this. I’ve been in this industry for 40ish years and I’ve seen a lot. It’s all about the people that you meet, the people that you work with.” He praised his staff, his family and other industry friends.

McCoy was also grateful for being recognized at CAR on behalf of LeasePlan, which remarkets about 34,000 vehicles per year. “This is a very special moment for me and my company LeasePlan, back in Atlanta, Ga.,” he said. “I do get the honor of accepting this award. But there are a lot of hardworking people at LeasePlan in Atlanta and Chicago that I’m going to share this award with when I get back. McCoy is past president of the International Automotive Remarketers Alliance. “I’m very thankful for this award,” McCoy said. “I want to thank everyone in the room – and the ones who couldn’t be in this room – for the all the acceptance and help I’ve received along the way.” The CAR Industry Leadership award is special because it’s not given every year, Antich said. “It’s given based on recognition of special achievements within our industry and the contributions the individual has made to the industry,” he said, while citing Graham as a pioneer of online remarketing. Graham said he was surprised, then humbled, to receive the award because the two other winners of the award have been Frank Hackett of the National Auto Auction As-

Photo by Jeffrey Bellant HARDWARE: Lynn Weaver (left), general manager of America’s Auto Auction - Harrisburg, accepts the Remarketer of the Year award from Mike Antich during the Conference of Automotive Remarketing.

sociation and Ricky Beggs, who is retired from Black Book. “If you get put in the same category as those two guys, you can’t be anything but humble,” Graham said. He said he was glad to have the chance to come to CAR without have to work the conference. Graham, a former president of IARA and long-time officer, reflect-

ed on that experience. “I want to give a shout-out and a ‘thank-you’ to the IARA,” Graham said, “for allowing me to be a part of the leadership team for the past eight years. “As part of that, I had a voice and a platform to be involved in a lot of cool industry things and help move things forward.”

America’s Auto Auction awarded Auction Group of the Year from

Santander Consumer, USA

America’s Auto Auction Visit us online at www.AmericasAutoAuction.com

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6 • April 18, 2016

USED CAR NEWS

Regulators Hold Skewed View By Ted Craig

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LAS VEGAS – The challenges dealers and finance companies face with regulation comes down to a matter of perception. That was the message delivered by several speakers at the recent American Financial Services Association vehicle conference. “The regulators don’t understand what we do,� said Jeff Carlson, chairman of the National Automobile Dealers Association. Chip Zyvoloski, senior attorney at Wolters Klower, said this shows in the Consumer Financial Protection Bureau’s large participate rule for auto finance companies. It covers topics such as advertising and real estate, as if the companies market directly to consumers. Part of the challenge for the industry stems from consumer perceptions. Pollster Frank Luntz said his surveys showed 40 percent of consumers dread the car-buying process. However, 90 percent say they are very satisfied at the end. The problem is regulators are only paying attention to the concerns going in and not the reaction at the end. Luntz said the industry needs to present itself as providing options

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to consumers and to make consumers aware that new regulations will take away those options. “Options are about freedom,� Luntz said. “Options are about control.� John Hyatt, head of the indirect lending group at US Bank, called the current situation “an uncomfortable norm.� Zyvolski said finance companies must strike a balance between ensuring dealers follow the rules and creating liability risk by being too involved in their business. More challenges loom on the horizon. Zyvoloski said to expect an arbitration rule from the CFPB this month. Ancillary products, such as service contracts, will probably be the next big topic. Chris Stinbert, AFSA’s president, said he spoke with CFPB Director Richard Cordray at a recent event. Cordray asked why the industry isn’t taking steps to change before the regulators dictate these changes. “The industry does not believe it has done anything wrong,� Stinbert said he told Cordray. That difference of perception between how the regulators see the industry and how the industry sees itself remains the biggest challenge.

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8 • April 18, 2016

USED CAR NEWS

SPORTS CARS AGING BUYER BASE CREATES SALES CHALLENGE By Jenny King

Are sports cars on their way out? In late 2014 a story in Fortune Magazine said the outlook for sports cars sales was “not so rosy.” The 2008 recession knocked the wind out of sales that already were weakening. The Fortune piece had a traditional description of sports cars as lightweight two-seaters with little storage room and lots of pep and maneuverability. For example, think Mazda MX-5 Miata, and maybe Audi TT and BMW Z4. (The latter are heavier and pricier.) A more inclusive view of sports cars would include traditional, mostly-affordable favorites like Corvette, Mustang, Camaro, Challenger plus Viper, Genesis Coupe, Nissan 370Z, Scion FR-S and Subaru Impreza WRX. Porsche, Jaguar and Mercedes-Benz have their offerings as well, though their price tags and those of Audi and BMW lean toward expensive.

Sports cars represent a thin slice of the new-car market. One industry publication suggested global sales in 2014 were fewer than a half-million, though the definition of sports car was not clear. What is the state of the market for pre-owned sporty vehicles? The classics/collectibles market could be a bellwether. A summary from appraiser-insurer Hagerty of the annual January classics auctions in Arizona, which certainly include sports cars of all stripes, was ambivalent. The report said the Scotts-

dale events can set the sales tone for the year and, Hagerty said, there was tension in the air. Would prices drop? If so, how would that impact the 2016 market? Hagerty said that in spite of more cars and more sales overall figures were down 15 percent from 2015, and “the average sale price slipped by 13 percent.” Bidding was “generally slower, dollars were harder to come by and buyers seemed cautious.” Black Book senior analyst Anil Goyal had a slightly different take. The market for

used cars has been soft lately, he said, and depreciation rates for car segments were up in 2015, though “sports cars generally have better retention trends as these cars are typically maintained well.” Even so, he said, the depreciation rate for sporty cars was 11.9 percent in 2014 and 15.3 percent last year. Depreciation for the compact crossover/SUV segment dropped to 11.9 percent from 12.8 percent. “The share of new sales of sporty cars has dropped from 3.6 percent in 2006 to 2.9 percent in 2015,” Goyal said. The sales trends in sporty cars indicate a lower level of interest from consumers who possibly are attracted to the growing numbers and popularity of crossovers. Autotrader data supports the loss of interest in the sports car market and suggests it portends a plateauing of the robust new-car sales pace of 2015. Autotrader reports declining consumer interest in sports cars ranging from a 12.4 percent drop for CPO sports cars, to 16.29 percent for early used sports cars to an 8.12 percent decline in late-model used sports cars March to March. Michelle Krebs, senior analyst at Autotrader, said sports car sales are an indicator of the direction of the overall economy. “They are discretionary purchases so they are the

first to go with any sign of economic weakness or softness in the automotive market,” Krebs said. Demographics are not on the side of sports cars, she said, as most buyers are older men who likely are aging out of sports cars. “Younger buyers don’t have the discretionary income to buy sports cars and may not have the interest,” Krebs said. Millennials were hard hit by the 20082009 recession; many found themselves underemployed and carrying college debt. If they now are in the newcar market, they are buying practical vehicles – mostly small and midsize sport utilities, she said. It’s spring somewhere On a morning in early April when temperatures in the upper Midwest were well below freezing, it was 50 degrees in Marietta, Ga., and business was good at Marietta Sportscar and Cycle. Owner Wade Patrick, a veteran of 37 years in sports car sales, said he has had inquiries from buyers in Maryland and Michigan. This is “absolutely” a good selling season, Patrick said, as spring makes its way north. Among the dealership’s 60-plus inventory was a 1971 Triumph, a 1994 Jaguar XJ8 XJS, a couple of BMW Z-cars and a Miata. Patrick said he does see the market for traditional sports cars shrinking as buyers age Continued on page 13

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10 • April 18, 2016 IAG_halfV-UCNapr18.pdf

USED CAR NEWS 1

4/1/16

3:11 PM

CarMax Sales, Revenue Up

C

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CarMax Inc. reported results for the quarter and fiscal year ended Feb. 29. Net sales and operating revenues increased 5.5 percent to $3.71 billion in the fourth quarter. For the fiscal year, net sales and operating revenues increased 6.2 percent to $15.15 billion. Used unit sales in comparable stores increased 0.7 percent in the fourth quarter and 2.4 percent in the fiscal year. Total used unit sales rose 4 percent in the fourth quarter and 6.5 percent in the fiscal year. Total wholesale unit sales increased 2.3 percent in the fourth quarter and 4.9 percent in the fiscal year. Total gross profit increased 2.8 percent versus last year’s same quarter, to $489.3 million. Used vehicle gross profit rose 2.1 percent, driven by the 4 percent increase in total used unit sales. Used vehicle gross profit per unit declined to $2,109 compared with $2,148 in the corresponding prior year period. Wholesale vehicle gross profit declined 0.7 percent versus the prior year’s quarter. The 2.3 percent increase in wholesale vehicle unit sales was offset by a decrease in wholesale vehicle

gross profit per unit to $1,005 from $1,036. Other gross profit rose 11.9 percent, primarily reflecting the improvements in extended protection plan revenues and net third-party finance fees. CarMax Auto Finance (CAF) income increased 2.2 percent to $92.3 million in the quarter. This was driven by an increase in average managed receivables, which was largely offset by a lower total interest margin percentage and an increase in the provision for loan losses. In January 2014, CAF launched a test originating loans for customers who typically would be financed by subprime finance providers. As of Feb. 29, a total of $96.5 million in receivables were outstanding related to this program. In related news, CarMax is currently hiring associates for the company’s new store in Bristol, Tenn. The store is scheduled to open in August. This location is CarMax’s eighth store in Tennessee, and is more than 35,000 square feet. CarMax opened five stores in the quarter ended Feb. 29, including three stores in new markets. This is a record number of quarterly store openings.

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12 • April 18, 2016

USED CAR NEWS

FTC Sues VW for Clean Claims

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The Federal Trade Commission has charged that Volkswagen Group of America Inc. deceived consumers with the advertising campaign it used to promote its supposedly “clean diesel” VWs and Audis, which Volkswagen fitted with illegal emission defeat devices designed to mask high emissions during government tests. The FTC is seeking a court order requiring Volkswagen to compensate American consumers who bought or leased an affected vehicle between late 2008 and late 2015, as well as an injunction to prevent Volkswagen from engaging in this type of conduct again. In a complaint filed in federal court, the FTC alleges that during this seven-year period Volkswagen

deceived consumers by selling or leasing more than 550,000 diesel cars based on false claims that the cars were low-emission, environmentally friendly, met emissions standards and would maintain a high resale value. In related news, the scandal is taking a toll on the residuals of Volkswagen’s diesel vehicles. Jonathan Banks, executive analyst for NADA Used Car Guide, said values are down 20 percent for the diesel versions of the company’s Passat and Jetta vehicles. The biggest factor driving down prices is the uncertainty of how Volkswagen will fix the issue. “Who wants to buy a car when they might have cut a hole in it?” Banks said.

4/11/16 3:44 PM


USED CAR NEWS

April 18, 2016 • 13

Sports Cars - from page 8

and younger consumers are not Tempting the market showing the same interest. North of Detroit, Flint Auto The dealer, who likes to maintain Auction staged its annual two-day 60 percent of his stock in convert- spring sale with some 350 classics, ibles, buys year-round but does specialties and Corvettes set to run well at the end of the season when the lanes on April 13. The event, there is less competition from other which dates from 1998, includes stores. some 3,000 vehicles. An auction shopper, Patrick does “We will be giving away a burgunhis homework online but prefers dy 2005 Corvette Z8 SSi,” said marto check out cars of interest at the keting manager Bri Connors. physical sale. Anyone who bought or sold at Reports aren’t always accurate, he Flint between March 2 and April 13 said, and one can get a better sense was eligible to win, she said. of a car – its “nuance” – buying in The auction also purchased a person rather than online. 1992 Richard Petty Grand Prix with Autotrader statistics bear out Pat- 25,000 miles to be auctioned off rick’s observation. April 13. Connors said the proceeds Close to one half of sports car will go to the Boys and Girls Clubs owners are between 45 and 64 years in Flint, a city which continues to old; 70 percent are male. struggle to correct its tainted, unusAutotrader said one-third of sports able water system. car owners are in the $50,000Flint Auto Auction’s biggest sale of $99,000 income range. the year will include another “first,” Black Book’s Anil Goyal weighed Connors said: the sale of an airplane. in on the charms and drawbacks of Collectibles and exotics older sports cars, describing them Goyal sees the collectible market as “quite primitive” beside new as doing well, “especially the vinvehicles and lacking in comforts to- tage exotics like Ferrari, Lamboday’s buyers take for granted. rghini, Maserati and so forth. “That is actually a large part of “Most of these have been priced their charm,” he said. out of the reach of typical enthuWhile short on performance, siasts, so many (buyers) are drop“they do impart a visceral feel that ping down to the next best thing, 1 2/3/16vintage 11:36 AM it lackingUCN-QuarterPage-Feb.pdf in more recent offerings.” sports cars,” Goyal said.

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14 • April 18, 2016

USED CAR NEWS

RETAIL MARKETS being a local dealer to being ARKANSAS Wilt Leak, general man- more of a regional dealer. “We’re trying to reach ager, Magnolia Motor Co., more into the areas of TexMagnolia, Ark.: arkana, Monticello, Crossett “We’ve been in business 27 years. We have one loca- and especially the Shreveport (La.) dealer market tion. “We’re down (in inven- area (DMA). That seems tory). Out of a total of 70, to be one of our strongest I’ve got 62 on display for DMAs. “Ninety percent of our sale. We try to keep 70 units on the yard, but we’re just inventory is coming from Manheim – physical aucdown right now. “Our president, Lamar tions. We’ve been utilizing (Murphy), went down with (an out-of-state) Manheim knee surgery, so the bulk auction, because (closer of the buying power is not auctions) like Dallas and there. So we’re slim. If not, Houston are strong wholeI’d have 20 more units on sale markets. “Our profit margin is betthe yard. “We sold 43 in March. ter. We actually saw our We’re doing roughly 39 to profits increase 10.4 percent, without fighting 40 a month on average. “The local economy is everyone in Dallas. “We like to buy a lot of offdown. Oil and timber are down. In south Arkansas, lease units for lower-recon costs and lower mileage. that’s what we depend on. “This year, our average “Even though that’s down, our numbers are still up retail price is $17,602. “We carry 60 percent 22 percent from last year. That’s surprisingly pleas- trucks and SUVs and 40 cars.We probant. I attribute a lot of it percent Carolina_Golf-UCN Apr18.pdf 4/1/16 50/50 3:13 PMbetween ably1 carry to changing our business format. We changed from domestics and imports.

“Average model year is about 2013. Mileage is typically going to be around 30,000 to 35,000. “The market is continuing to consolidate. We’re not competing against usedcar dealers anymore. We’re competing against franchise stores. Every year is harder than the previous one. “Franchise dealers have a plethora of finance sources. But we recently got on board with Ally. It’s a lot of paperwork and you’ve got to have all your ducks in a row, so we were fortunate to get that (source). “What’s also helped in inventory management is being able to sell on SmartAuction. I think we’ve already sold five or six alone just on SmartAuction. It’s helping sell that aged inventory. “Average reconditioning is probably $525. “We’ve got our own shop. We actually moved into an old franchise store. So we’ve got an 11,000-square-foot shop and a 2,000-square-

Compiled by Jeffrey Bellant foot showroom. We’re selling on a blacktop now and that makes it easier. “About 55 percent of our marketing/advertising is digital. About 30 percent is traditional print, which works well in our small market. We use about 7 percent of our advertising budget on radio. The rest is sponsoring local organizations. “Last car I sold was a 2012 Nissan Sentra with 12,000 miles. It sold for $13,500.”

IDAHO

Tim Sexton, president, Sexton’s Car Collection, Idaho Falls, Idaho: “We’re in our 15th year. We have one location. “I keep about 45 (vehicles) on the lot. That’s typical for this time of year. “We’re selling about 30 to 33 per month. That’s the same as last year. We duplicate year after year after year. I can have year-end grosses within $2,000 of the previous year. T:4.437” “I probably get 50 percent

from auctions and 50 percent from other dealers. I can’t get (my entire) inventory with just my local dealers. They found out there’s a profit center with used cars, so they’re keeping more. “We do not sell buy-here, pay-here. “Subprime has gotten to be so much more of our business. It’s about 50 percent now. We’ve got a couple of lenders in town that really have done good for us. “Our average retail price is $5,800. “I have 95 percent cars. We’re 50/50 (between imports and domestics). “My average year is about 2003. Average mileage is about 90,000. Mileage has increased greatly. “Average reconditioning is about $500 per car. Most of it is farmed out. “Marketing and advertising is very minimal. We use cars.com and we use a local (trader-type) paper. “We just sold a 2010 Chevy Impala. It had 126,000 miles. We got $6,600.”

SALES GOALS

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USED CAR NEWS

WHOLESALE MARKETS NORTH DAKOTA

Loren Hallwachs, general manager/owner, Central City Auto Auction, Carrington, N.D.: “We’re coming up on our second anniversary in mid-June. We just became a member of the National Auto Auction Association. You have to be in business for a year before you qualify. “We saw a need for a place on the western region of the state. This was a greenfield location. We have three lanes and eight acres. “We call our auction Central City because we’re in the middle of the four major cities: Minot, Bismarck, Grand Fork and Fargo. Anybody can travel to Carrington within two hours of those major cities. We also offer full arbitration and detailing. “When we started, we ran 50 to 70 cars a week. Then we built it up to 125 to 150 for several months. With the oil boom in a lull, we’re down to about 75 cars during a normal sale. Our

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conversion rates are about 40 percent. “We run a sale every Tuesday and run a public sale on the first Saturday of every month. “We draw about 30 dealers on average. We actually have more online than in person. We do a really good job with customer contacts and showing a walk-around. They don’t need to leave their desk if they don’t want to. “We use Xcira, which used to be OnLine Ringman. We’ve got a huge trust factor with our dealers. “Our volume is 90-percent dealer consignment. “Our average price overall is a little over $10,000. What brings that up is we’ve sold a lot of $40,000 to $50,000 units. Those are pick-ups. We sell probably 60 percent trucks. The rest of them are (less expensive) cars, really. “We run power sports every week at the end of the sale. We sell four-wheelers, side-by-sides and motorcycles. We’ve sold a ton of

Harley-Davidson motorcycles. We have a large Harley dealership just south of us. “We’ll also do a classic auto auction in the spring and fall. We’re working on one scheduled for May 21 with more than 50 classic cars consigned. “The future looks fantastic.”

OHIO

Jay Wilson, general manager, ABC Detroit/ Toledo, Perrysburg, Ohio: “This month, we’re celebrating our 16th anniversary. It’s kind of an anniversary month, but we’ll be having an actual anniversary sale on April 22. “We have six lanes run an average of 1,000 to 1,200 a week. That’s up certainly from last year. For the month of March, our conversion rate was 67 percent. The conversion rate is comparable to last year, but our volumes are up from last year. That’s kudos to my staff. “Including our simulcast

bidders, we have 675 to 750 bidder badges per week. “Our fleet-lease and repo business is probably 35 percent of our business. So 60 to 65 percent of our business is dealer consignment. “Dealer business is our bread and butter. But we’ve really ramped up the fleetlease volume over the year. “It’s the fleet-lease repos that have grown. We have Chrysler Capital (off-lease units). That entity helps bring in others. “Typically, it’s the gripes and moans that you hear (on the retail side). But there are a lot of guys that had some great Februarys and Marches. “(In the past), you used to have a true tax season. Now, dealers are buying those cars back in October, November and December and get floor planners to float them. So you don’t see the spike. “We are open to the public for our repossessions only. I see a little bit of a spike in the number of public buy-

April 18, 2016 • 15

Compiled by Jeffrey Bellant ers in the months of February and March and then it goes back to normal after that. “We do simulcast (through Auction Edge). The Detroit market is the biggest concentration of the Chrysler Capital product. Our numbers are doing as good or better than the other sales (selling that product). “You have to reach out to simulcast people well out of this area to keep that product moving. “Last year at this time, we were probably selling five to 10 cars on simulcast. Now we’re selling more than 50 cars. “Producing a good condition report makes a big difference. Our condition report writers do a very good job. “Our average sale price is about $7,500. “I think it’s going to stay steady or we’ll see some increases the rest of the year. So we just have to keep our strong performance with our dealers.”

4/11/16 10:24 AM


16 • April 18, 2016

DISCONNECTED JOTTINGS FROM I was 33 years old and a mere 152 pounds, sporting a 38 long suit when I arrived here in 1982. In spite of smoking a pack of Pall Malls

TONY MOORBY

during the day then ate and drank like fools in the evening. Mike liked cooking as much as I did and we replicated English “Sunday

Tony Moorby

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

a day, I was as fit as a flea and slim enough to have to run around in the shower just to get wet. I exercised regularly at a local gym and could crack walnuts with my butt. Weekends were always full of activities at the lake, where Mike Richardson, my boss and mentor, rented a house on nine acres with a houseboat and a speedboat. Along with another couple of colleagues from England, we cruised and water-skied

USED CAR NEWS

lunches” with roasts and wine and finished with port and cheese. Evening exercise was taken up with darts and drinks in equal measure. I travelled extensively in those days, literally crossing several time zones in one week, rustling up business and spending time with customers to build our growing auctions. Two-martini lunches were still common in the eighties (slipping from three-martini ones in the sixties), as were dinners that

lasted for at least a couple of hours. As time went by, pants got a little snugger, shirt buttons started to protest their task and a trip to the store to buy clothes replaced a trip to the gym. New, bad habits overtook old, good ones. Let’s cut to the chase – now 34 years later, age and gravity have had their way, along with a lack of prandial discipline. I stopped smoking 16 years ago, to which I attribute my slowing metabolism. My cardiologist says, “Nonsense!” He also tells me I now qualify as obese, by today’s standards. In fairness I’m genetically disposed to produce cholesterol like lard and have suffered the consequences of arterial sclerosis and produce kidney stones faster than a rock quarry – 63 to date. I can attest to their pain rating as a 15 on a scale from 1 to 10, something akin to passing a peeled habanero pepper – the front way. My heart doctor is a wonderful human being

C R O S S WO R D

and spends all the time in the world with me at my appointments, sharing views on everything from politics to medicine and economics to cars. The trouble is, he does the same for everyone, and so I’ve learned to choose the first morning appointment, sometimes getting there before him lest he meet someone on the way. Either that or pack a lunch. He has now prescribed sufficient tablets, capsules and caplets that I should sound like a pair of maracas walking down the road. The pharmacist rubs his hands like Fagan on my approach. Other things are starting to slip – with no other measure of the passage of time for a retiree, I check the day of the week by looking at my medicine container and if I attend a convention, my urgent wish is that name

badges are printed large to accommodate both failing memory and eyesight. Some things are easier to do with advancing age – I can grow nose and ear hair faster than Jack’s beanstalk. It resembles sisal hemp and can blunt the most expensive tonsorial scissors in no time flat. I have no need to tan these days as age spots are lending a rather craggy nuance to leathern skin. Mind you, I wouldn’t subject anyone to the sight of my body in beach shorts. I have enough surgical scars to be mistaken for a map of the London Underground System. My cardiologist would have me lead the life of a hair shirt clothed monk. I’ve made many recent adjustments with exercise and a better diet but ironically the TV is tuned to the Food Network as I write.

To see past columns from Tony Moorby, visit www.usedcarnews.com/columnists/tony-moorby Digital version available at usedcarnews.com

By Miles Mellor 1

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1. Subaru sports car 6. Accessories that make a car more desirable 10. It’s where luggage can be carried, 2 words 11. 3 and 6 for example 12. Conflict 13. 70s and 80s Austin model 15. 3000 mile change 16. Performed as expected 18. Spacious 20. Sub-compact electric brand, 2 words

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Solution to this puzzle in the 5/2/16 issue. Call 1.800.794.0760 for a FREE subscription.

16_UCN.indd 1

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USED CAR NEWS

April 18, 2016 • 17 Advertisers are solely responsible for content of classified advertisements. To place an ad, or for more information, call the Classified Department: 800-794-0760 ext.107

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CLASSIFIEDS 4/8/16 10:57 AM


18 • April 18, 2016

USED CAR NEWS

AROUND THE BLOCK

Compiled by Ted Craig

ADESA AUCTIONS BIKE AT NADA

GOING TO THE DOGS: NADA chairman Jeff Carlson, far left, joins the winning bidders and ADESA executives to present funds raised to the NADA Foundation.

An ADESA auction at the NADA Convention & Expo in Las Vegas raised a record $128,000 to train service dogs for wounded veterans. One winning bidder after another donated back a 2014 HarleyDavidson Dyna Street Bob FXDB motorcycle to be re-auctioned.

Mike Dullea placed the winning bid of $25,000. Dullea is CEO of AutoAlert, with locations in Irvine, Calif., and Raytown, Mo. Joe Verde, president of Joe Verde Group in San Juan Capistrano, Calif., matched the bid with $25,000. But then Dullea surprised every-

one by donating the motorcycle back to ADESA to be re-auctioned. Lewie Card was the top bidder at $20,000. Card is director of Carlister.co in Bonita Springs, Fla. Verde decided to also match that bid with another $20,000. Then Card donated the motorcycle to be re-auctioned. Justin Becker placed the third winning bid of $12,000. Becker is director of logistics for Wholesale Express in Mt. Juliet, Tenn. But Dullea, the first winning bidder, announced he would match Becker’s bid of $12,000. The final surprise was that when it came time to write the check to ADESA, Dullea kicked in another $13,000. Another $1,000 was raised in cash donations, to bring the final contribution to $128,000. This was the fifth year ADESA has auctioned a motorcycle at the NADA convention.

Manheim Expands Retail Solutions Manheim is expanding its Retail Solutions operations. The company is investing $5 million to add five more locations, including Manheim Orlando, Manheim Houston, Manheim St. Louis, Manheim Detroit and Manheim Darlington, S.C. Joining the Manheim Denver and Manheim Chicago sites that launched in 2015, the new locations will serve larger geographical markets. Retail Solutions currently supports 18 clients, representing manufacturers and dealers. By the end of 2016, its services will be available in a total of seven markets across the country. “Clients know they can count on Manheim to support their inventory needs – every step of the way – from the auction lane to the retail lot,” said Grace Huang, Manheim’s senior vice president of inventory services.

We invite news items and top-quality photos from our readers to be considered for “Around the Block.” Please include the name of a contact person and a telephone number. Send items and photos to: Jeffrey Bellant. Mail: Used Car News, 24114 Harper Ave., St. Clair Shores, MI 48080. Fax: (586) 772-9400 e-mail: jeff@usedcarnews.com

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4/11/16 3:43 PM


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