Certified pre-owned sales booming, says Edmunds

By : Todd Phillips

More shoppers looking to buy a used car are opting for certified pre-owned (CPO) vehicles, with sales hitting an all-time high, according to analysts at Edmunds.com, a popular online destination for car shoppers.

In the company’s latest Used Vehicle Market Report, analysts found that in 2014, CPO sales hit an all-time high of 2.3 million, which is noteworthy because it wasn’t even a record year for used car sales.

That means more buyers are being swayed by the benefits of buying a vehicle that has gone through the rigorous testing and reconditioning programs that are part of a dealership’s CPO program. OEMs have been marketing these programs heavily and it appears to be paying off.

According to Edmunds, CPO sales were 20.8 per cent of total used car sales at franchised dealerships in 2014 — the highest percentage since CPO programs were introduced.

“We fully expect CPO popularity to continue throughout 2015 because many leased cars are being returned to the dealership in excellent shape and lightly used cars are being traded in at faster rates than in previous years,” says Edmunds.com Senior Analyst Jessica Caldwell. “This allows dealers to maintain a large CPO inventory. Car shoppers are finding a great selection to choose from, and, in the current economy, many are comfortable spending a bit more for that extra peace of mind that a CPO car brings.”

Prices are also rising, which is even more good news for dealerships, with the average price for a used vehicle sold at a dealership reaching $16,800 last year compared to $15,900 in 2013.

“Lightly used cars are very appealing to car shoppers since they are equipped with modern technology and have already taken their biggest depreciation hit,” says Caldwell.

Edmunds says dropping gas prices also fueled an increase in purchases of larger vehicles, and low interest rates and longer loan repayments allowed shoppers to buy more expensive vehicles.

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Certified pre-owned sales booming, says Edmunds

Certified pre-owned sales booming, says Edmunds

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NADA: Leasing Driving New-Vehicle Deliveries

MCLEAN, Va. — Leasing is leading the charge when it comes to new-vehicle deliveries, according to the National Automobile Dealers Association’s February installment of its Used Car Guide Perspective report.

According to the publication, which relies on data from IHS Automotive, the recovery in new deliveries has been spearheaded by exceptional growth in consumer leases — with personal lease registrations improving by an annual average of about 18% since 2011, while personal loans grew by 8%. And in 2013, leases soared by 31%.

Additionally, leasing comprised approximately 25% of new vehicle deliveries to consumers in 2014 — just a few points shy of 1997’s all-time high share of 27.6%, according to the NADA.

“We estimate that personal lease volume improved by approximately 9% to 3.14 million units in 2014 (commercial leases added another 500,000-plus units), which is the highest figure recorded since 1999’s record high of 3.3 million units,” read the Used Car Guide, in part. “Given the growing appetite for leasing, it’s a safe bet that the number of personal leases booked in 2015 will surpass this figure by landing somewhere in the 3.3 to 3.4 million range.”

Due to the recovery in new vehicle sales, more used vehicles will become available. And the rapid rise in leasing combined with the program’s shorter holding cycle means that volume growth for younger models will rise more dramatically than it will for older vehicles.

The trend has the NADA estimating late-model supply will grow by more than 900,000 units to 11.97 million in 2015 ? an increase of more than 8%. Meanwhile, off-lease volume is expected to increase by 20% to 2.35 million, while retail supply is forecast to jump by 7%, reaching 6.94 million units.

The association believes late model supply will rise by an additional 1 million-plus units per year in both 2016 and 2017, to reach 14.1 million units by the end of the period. This would place supply within striking distance of 2007’s 14.6 million units.

“Viewed another way, it will have taken more than 10 years for late model supply to approach pre-recession levels,” the association continued.

“Overall, we estimate that late model retail supply will grow 25% ? about 1.6 million units ? from 2014 to 2017. Off-lease supply will be up more than 67%, which is equivalent to about 1.3 million vehicles. Totals for each are forecast to reach 8.1 and 3.3 million, respectively.”

As for older model supply, the NADA expects that the Great Recession’s legacy will continue to push volume lower on a like-age basis for a few more years. Supply for the group is unlikely to rise until 2019, and it will be even longer before the volume returns to pre-recession levels, according to the association.

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NADA: Leasing Driving New-Vehicle Deliveries
NADA: Leasing Driving New-Vehicle Deliveries

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Why Mexican auto dealers are moving north

by Doron Levin

Nissan is helping Mexican auto dealers make inroads in the U.S.

Mexico isn’t just breaking monthly records for automotive production and vehicle exports. Latin America’s second biggest economy after Brazil is showing it can market and sell cars, not just build and ship them to other countries.

Nissan Motor Co., the leading seller of cars in Mexico, said it is helping large Mexican dealer groups to buy Nissan stores in Houston, Los Angeles and in the San Francisco bay area. The strategy is using the expertise of Nissan dealers in Mexico to court more Hispanic consumers to the brand in the U.S. Nissan is Mexico’s retail market leader.

Among the first Mexican retailers to make inroads in the U.S. is Grupo Autofin Mexico, which has bought Nissan dealerships in San Juan Capistrano, Garden Grove and Irvine in Orange County, south of Los Angeles. Grupo Autofin’s sales totaled $1.4 billion from its 60 Mexican dealerships last year. Nissan is the country’s market leader.

Last month, Mexican auto production grew 6.8% to 266,424 cars and light trucks, as exports rose 15.2% to 204,907 vehicles, according to the industry’s trade group. Last year, production in the country topped three million for the first time.

Mexico’s status as the hemisphere’s rising automotive powerhouse, driven by lower costs and favorable trade agreements, has caused tremors in Canada and even in the U.S., two countries that haven’t seen the opening of a new assembly plant for five years. Many automotive parts suppliers are increasing investments in Mexico, while shutting down or trimming production in the north.

Factories in Mexico “can serve the southern U.S. market just as easily as we can service the northern U.S. market,” Paul Boothe, a professor at the University of Western Ontario told The Globe and Mail.

As the U.S. population migrates toward the Sunbelt, U.S. motorists and the new Mexican factories are moving closer to one another. Last year, automotive manufacturers announced $7 billion of new investment in the country, including $3.6 billion for three assembly plants, according to the Center for Automotive Research in Ann Arbor, Mich. Mexico accounted for 19% of North America’s production, compared with 14% for Canada, with the remainder in the U.S.

The latest announcement came in August from Kia, the South Korean affiliate of Hyundai, which said it will erect a $1 billion assembly plant near Monterrey that can produce 300,000 vehicles annually. By the end of the decade, Mexico will have the capacity to make four million vehicles annually.

Brazil, whose auto industry has been surpassed by Mexico’s, has ambitions of its own—despite the current economic recession—to add capacity and is in the midst of planning or finishing several new automotive manufacturing complexes. Fiat Chrysler’s new assembly plant in Pernambuco is expected to open this year.

Mexico’s flourishing automobile industry has been a feather in the cap of its president, Enrique Peña Nieto, who has unfurled the welcome mat to foreign automakers. The results have confirmed the confidence of companies from Audi to Toyota in the country’s industrial competitiveness.

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Why Mexican auto dealers are moving north

Why Mexican auto dealers are moving north

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Auto dealers say Kasich tax plans are bad for business

By Dan Gearino

Auto dealers are ready to oppose Gov. John Kasich’s plan to change the way sales taxes work on vehicle trade-ins, a move they say would make new-car transactions more expensive.

“We have some serious concerns about this proposal as we understand it at this point,” said Tim Doran, president of the Ohio Automobile Dealers Association.

His comments were based on a summary of the plan provided by the governor’s office this week, not on the legislation itself, which has not yet been released.

Under current law, customers can trade in a car or a watercraft and use the value of the item to reduce the sales-tax bill for the new item being purchased. For example, if the new vehicle costs $20,000 and the trade-in is valued at $5,000, the customer pays sales tax on the difference, which is $15,000.

Kasich’s plan would eliminate half the tax benefit of the trade-in. In this example, the customer would pay sales taxes on $17,500. The benefit to the state would be an estimated $216 million in additional sales-tax revenue per year, according to his office.

Based on the current sales tax in Franklin County, 7.5 percent, the proposed change would increase the cost of this transaction by $187.50.

“That would be distressing,” said Keith Dennis, owner of the Dennis Hyundai and Kia dealerships in central Ohio. “It would a significant negative for the consumer.”

The Kasich administration is proposing the tax changes as part of a larger plan that would reduce the state income tax.

“New-car buyers are most likely the same people who are benefiting from the across-the-board income tax cut of 23 percent,” Ohio Tax Commissioner Joe Testa said in an email. “Small-business people are also getting tax cuts they can use to help buy a new car or truck for their business."

Doran said anything that increases the cost of new-car transactions will contribute to a decrease in sales, making customers choose less-expensive vehicles and sending reverberations through the market.

He said he thinks the change would prompt more consumers to sell their used vehicles on their own, as opposed to through a trade-in. If this happens, he predicts the state would lose out on taxes because some private sellers “fail to declare the full amount of the transaction price.”

Dealers also have concerns about the governor’s proposal to increase the state sales tax by a half-cent, which would also add to the cost of buying a vehicle, Doran said.

The half-cent increase would add $87.50 to the transaction cost in the example.

Doran’s group plans to work closely with the legislature and governor’s office as the budget moves forward, he said.

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Auto dealers say Kasich tax plans are bad for business
Auto dealers say Kasich tax plans are bad for business

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Grey Dominates Car Colors, Swapalease.com Reports

CINCINNATI —Eighty percent of the cars and trucks in the Swapalease.com auto lease marketplace are in the gray family, including white and black. Swapalease.com analyzed colors of its entire online ecosystem and discovered that the grayscale dominates the automotive landscape.

Specifically, the colors black (31.4%), white (19.6%), silver (13.1%), dark grey (9.1%) and grey (6.5%) are the top five colors and make up 79.9% of the Swapalease.com marketplace. Two additional colors in the grayscale, off-white (0.8%) and light grey (0.7%) also add to the overall universe.

Red is the first color not in the grayscale, sixth most popular overall, and represents 5.2% of total cars. Blue and dark blue are right behind in the seventh and eighth spots at 3.6% and 2.6%, respectively. Purple is last on the list — in the twenty-third position — at 0.1%.

It’s not like grey was the color of 2014 either, officials said. Last year at this time the grayscale represented 76.5% of the marketplace, again showing its dominance. According to Scot Hall, the company’s executive vice president, grey has been popular since before the recession.

“Red and blue were much more prominent in the Swapalease.com marketplace in the early and mid-2000s, but since around 2005 the popularity of grayscale cars and trucks began to emerge,” said Hall. “If anything, silver led the grayscale renaissance, but since the recession varying forms of exotic greys have become popular with drivers and car shoppers.”

Since the inception of Swapalease.com in the late 1990s, though, black has always been the most popular shade in the car lease marketplace.

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Grey Dominates Car Colors, Swapalease.com Reports
Grey Dominates Car Colors, Swapalease.com Reports

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NADA Issues Compliance Guide on Federal Advertising Rules

By: Auto Dealer Monthly

SAN FRANCISCO — The National Automobile Dealers Association (NADA) issued a new publication last week — the first day of its annual convention — designed to assist new-car dealers in complying with federal advertising requirements on the sale, financing and leasing of automotive products and services.

“A Dealer Guide to Federal Advertising Requirements” was released about a month after the Federal Trade Commission took action against an auto dealer in suburban Dallas. It was the third dealer targeted in December and occurred less than year after the agency completed an enforcement sweep that netted 10 dealers in seven states for violating the FTC Act’s prohibition on deceptive advertising.

According to the association’s press release, the guide provides examples of “bad” ads and “good” ads, as well as chapters on 41 different federal advertising topics, such as the use of discount claims, e-mail advertising, green marketing claims, Internet advertising, satisfaction guarantees and trigger terms. Readers can access the content quickly by clicking here.

“The guide is user friendly and is a valuable resource for the entire auto industry,” said NADA Chairman Forrest McConnell. “We are encouraging dealers to provide the publication to their advertising agencies, manufacturers, finance companies and others involved in advertising operations.”

On Dec. 23, 2014, Dallas-based Trophy Nissan settled FTC charges that it used deceptive ads to promote the sale and lease of its vehicles, including an ad that claimed consumers could get out of their current loan or lease for $1. In its complaint, the FTC claimed the ads, which appeared on the dealership’s website, social media pages and in print and TV ads, violated the FTC Act, the Consumer Leasing Act, Regulation M and Z, and the Truth In Lending Act (TILA).

The settlement was announced 11 days after Billion Auto, a 20-store retail chain with stores in Iowa, Montana and South Dakota, and Ramey Motors, a chain with stores in Virginia and West Virginia, were charged by the agency with deceptive advertising — the second time in two years.

The organizations were among five dealer groups that settled with the FTC in March 2012 over ads that promised to pay a consumer’s trade-in no matter what the consumer owed on the vehicle. Both groups agreed to settle the FTC’s latest charges that they violated the its 2012 administrative order prohibiting them from misrepresenting costs and terms of vehicle finance and lease offers.

Since 2012, the FTC has initiated five separate rounds of advertising enforcement actions against 18 dealers in 12 states for multiple types of advertising violations. 

“The guide does not address additional advertising requirements that may be imposed at the state or local level, which vary considerably and need to be fully addressed when dealer ads are reviewed for legal compliance,” said Paul Metrey, NADA chief regulatory counsel. “It’s essential that dealers consult with their legal counsel to determine – and to ensure that their advertisements are consistent with – the full scope of their advertising responsibilities.”

The guide is part of NADA’s Management Series, Driven. It is available at www.nada.org and will be included in the suite of compliance products at NADA University Online at www.nadauniversity.com.

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NADA Issues Compliance Guide on Federal Advertising Rules
NADA Issues Compliance Guide on Federal Advertising Rules

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