CPO Sales Reach Record High in 2014

BY: Auto Dealer Monthly

SANTA MONICA, Calif. — Sales of certified pre-owned vehicles hit an all-time high of 2.3 million units sold in 2014, making up 20.8% of total used-car sales at franchised dealerships, according to the latest Used Vehicle Market Report from Edmunds.com.

Edmunds said it expects this trend to continue through 2015, with lease vehicles expected to return to dealerships at a faster rate than in previous years.

“This allows dealers to maintain a large CPO inventory," said Jessica Caldwell, senior analyst at Edmunds.com. “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.”

Used cars that are lightly used are appealing to car shoppers because they are more often equipped with modern technology and have already taken the biggest hit in depreciation, added Caldwell. In 2014, 19% of used vehicles sold were one to two years old, up from 14% in 2013.

The average transaction price of a used car also increased from $15,900 in 2013 to $16,800 in 2014. One-year-old vehicles sold at an average of $30,000, increasing 5.7% over 2013. Edmunds attributed the increase to several factors, including low interest rates, longer loan repayment terms and declining gas prices. Customers also sought out larger, more expensive vehicles, bu they were able to pay less monthly for them, Edmunds noted.

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CPO Sales Reach Record High in 2014

CPO Sales Reach Record High in 2014

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Free-Market Lawmakers Take Aim at Utah’s Restrictive Car Dealer Laws

BY ERICA PALMER The Salt Lake Tribune

For the first time in years, Utah lawmakers are making a serious push to dismantle — or at least chip away at — state laws protecting car dealerships.

The assault on longstanding rules by free-market Republicans who view them as protectionist and anti-competitive has taken the form of several bills up for consideration in the current legislative session.

One would amend a 1991 law that prohibits establishment of a new-car dealership within 15 miles of an existing one, unless it is OK'd by a board whose members include several representing current dealers.

Another would scrap the state mandate that a dealership must close on one weekend day — effectively a Sunday-closing law the late car dealer and Utah Jazz owner Larry H. Miller successfully requested in 2000.

A third measure would open the door for manufacturers to sell directly online, and another would change the formula for distribution of local tax revenue from auto sales.

Freshman Rep. Kim Coleman, R-West Jordan, said the bills take baby steps toward where she would like to end up.

She describes the raft of proposals as the "initial opening of this set of laws that we're going to try to repeal and or modify in the years to come. This is 25 years of protections in the making — very embedded in the industry — so it's going to take a while to peel some of these back."

Craig Bickmore, director of the New Car Dealers of Utah association, said the industry is concerned about attempts to shake up the current system that he said works "marvelously well."

Dealerships operate under unique protection laws because it is a unique industry, he said. The manufacturers set all the terms of the franchise agreements and franchisees have to take risks and make huge investments to open a new dealership.

"The reason for franchise laws is to keep that critical balance between the very, very large manufacturer and a comparatively small entity like a dealership," Bickmore said in an interview.

Although many people have labeled the laws as "anti-competition," he said that is not the case. "They are valuable because in any free-enterprise system, there has to be a set of rules and regulations for free enterprise to flourish. …[Car dealers] are the most competitive people on the planet. But there is one group they can't compete against: the manufacturers."

Danger zone • The bill that appears to have the most juice in this legislative session is one sponsored by Rep. Mike McKell, R-Spanish Fork, that would ease restrictions on opening new car dealerships anywhere near existing ones.

McKell said his main motive in pushing HB290 is to get more car dealerships in his city, one of the fastest-growing in the state.

"Car dealerships are great citizens of their community and they add tremendous value to a community," he said during a public hearing.

HB290 easily cleared committee and last weekpassed the House on a 70-0 vote and won unanimous approval Monday in a Senate committee.

A big attraction car dealerships hold for local governments is the lucrative slice of sales tax revenue — ten of millions of dollars —­ which now goes to the city where a dealership is located.

"That is only enjoyed by a handful of cities," Coleman said in an interview. "The state, through its regulation, through its sanctioning of protections, has picked winners and losers among cities."

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Free-Market Lawmakers Take Aim at Utah’s Restrictive Car Dealer Laws
Free-Market Lawmakers Take Aim at Utah’s Restrictive Car Dealer Laws

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JPMorgan, DOJ Engaged in Discussions About 'Potent Statistical Disparities'

By Brittany-Marie Swanson

NEW YORK — In a regulatory filing Tuesday, JPMorgan Chase revealed that it is engaged in discussions with the U.S. Department of Justice about “potential statistical disparities” in the markups on auto loans charged to car buyers of different ethnicities.

JPMorgan said it is having the discussion about rate markups on loans originated by car dealers and purchased by the firm, but did not disclose whether it was the target of an investigation by the regulator.

Several other finance sources have been subpoenaed by the DOJ in recent months related to their subprime lending practices, including Santander Consumer USA, GM Financial, Credit Acceptance Corporation, Ally Financial and Consumer Portfolio Services. The regulator has also paired with the Consumer Financial Protection Bureau (CFPB) on possible enforcement actions against captive finance companies Toyota Motor Credit Corp. and American Honda Finance Corp. The regulators have alleged that both of the captives have allegedly engaged in practices that resulted in minorities paying more for auto loans.

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JPMorgan, DOJ Engaged in Discussions About 'Potent Statistical Disparities'
JPMorgan, DOJ Engaged in Discussions About 'Potent Statistical Disparities'

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Santander Agrees to $9.35 Million DOJ Settlement

WASHINGTON, D.C. — Santander Consumer USA Inc. has agreed to pay at least $9.35 million to resolve a lawsuit filed by the U.S. Department of Justice (DOJ), which charged the auto finance source of violating the Servicemembers Civil Relief Act (SCRA). The complaint and the settlement, which is subject to court approval, were filed on Wednesday in the U.S. District Court for the Northern District of Texas.

The settlement covers repossessions of 1,112 motor vehicles between January 2008 and February 2013. According to the DOJ, the proposed consent order represents the largest settlement involving vehicle repossessions ever obtained by the United States under the SCRA.

“This is a just resolution that will provide service members with financial relief and help repair their bad credit caused by Santander’s improper repossessions and fee collections with respect to more than 1,100 cars,” read a statement from Acting Associate Attorney General Stuart Delery. “The Department of Justice will continue devoting time and resources to protect our service members and their families from such unjust actions and hold bad actors accountable."

The SCRA protects service members against certain civil proceedings that could affect their legal rights while they are in military service. It requires a court to review and approve any repossession if the service member took out the loan and made a payment before entering military service. The court may delay the repossession or require the lender to refund prior payments before repossessing. It can also appoint an attorney to represent the service member, require the lender to post a bond with the court and issue any other orders it deems necessary to protect the service member.

The DOJ charged Santander with failing to obtain court orders before repossessing motor vehicles owned by protected service members, preventing them from obtaining a court’s review on whether their repossessions should be delayed or adjusted in light of their military service.

The lawsuit alleges that Santander initiated and completed 760 repossessions without court orders. The agreement requires Santander to pay $10,000 plus compensation for any lost equity (with interest) to each of these service members. The lawsuit also alleges that Santander sought to collect fees arising from an additional 352 repossessions that unrelated finance sourced had conducted in violation of the SCRA before Santander acquired the loans. The agreement requires Santander to pay $5,000 to each of these service members. Santander is also required to repair the credit of all affected service members.

“The SCRA is an important protection for the men and women serving our country in the armed forces, and this settlement not only will rectify the past improper repossessions of service members’ vehicles, but will work to prevent such improper repossessions in the future,” said Acting U.S. Attorney John Parker of the Northern District of Texas.

For future repossessions, the settlement requires Santander to check the Defense Department’s automated database to see if a car’s owner is in military service prior to conducting a repossession.

The Department of Justice first learned of Santander’s repossession practices through a referral from the U.S. Army’s Legal Assistance Program. The referral involved a claim that Santander illegally repossessed the car of a service member, U.S. Army Specialist Joshua Davis, in the middle of the night, after having been informed that he was at basic training. The department also opened its investigation after learning that Santander used an arbitration clause included in its loan documents to prevent a second service member from pursuing systematic relief through a class action lawsuit he filed. It alleged that Santander had repossessed service members’ vehicles in violation of the SCRA.

As part of its investigation, the United States has already identified Santander’s illegal repossessions and efforts to collect unlawful repossession fees between January 2008 and February 2013. Service members identified based on that investigation will be contacted by an independent settlement administrator later this year. And according to the settlement, Santander must conduct a review and provide compensation for any additional unlawful repossessions that may have occurred since February 2013.

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Santander Agrees to $9.35 Million DOJ Settlement
Santander Agrees to $9.35 Million DOJ Settlement

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Dodge dealers called out for 'unscrupulous' Hellcat sales practices by FCA exec

BY :Larry P. Vellequette

DETROIT -- Fiat Chrysler has taken the unusual step of warning some of its most enthusiastic customers -- about some of its dealers.

At issue is outsized consumer demand for the 2015 Dodge Charger and Challenger SRT Hellcats and dealer practices that the company says are “unscrupulous” and perhaps illegal.

Gualberto Ranieri, FCA’s senior vice president for communications, says that a “handful of dealers” have accepted large numbers of orders for the 707-hp Dodges “without regard to available supply and without advising their customers that orders may not be filled, if at all, for many months or longer. We believe such a practice may constitute a breach of the Dealer’s Sales and Service Agreement with FCA US LLC and a violation of other applicable laws.”

“Accordingly, we wanted our customers to hear directly from us how we are allocating Hellcat vehicles and we hope that you will bear with us as we, in conjunction with our supply base, continue to balance the supply and overwhelming demand,” Ranieri wrote late Friday on Fiat Chrysler's Objects in the Mirror blog. Ranieri's piece describes the unique way that Dodge is allocating Hellcat Challengers and Chargers to its dealers.

As Automotive News first reported, the allocation method is based on total Dodge sales and how long previous Hellcats have remained in inventory. The effect is to indirectly penalize dealers who might hold the wildly popular cars for themselves or place a large market adjustment on the sticker, slowing their sales to consumers.

Ranieri says that the allocation system “can be an even greater opportunity for unscrupulous businesses or individuals to take advantage of customers.” He urges consumers to ask pointed questions of their dealer before placing a Hellcat order, including whether a deposit is required and whether the deposit is refundable, and to “consult your state law governing the vehicle orders and return of deposits.”

Jim Arrigo, the current chairman of the National FCA Dealer Council, said that “any time you try to allocate through a shortage, it’s going to be difficult.” However, Arrigo said that an automaker’s allocation system is what it is, and dealers have to learn to live within it.

Arrigo said he has heard of some dealers taking deposits on Hellcats “just so that customer can’t go down the road and order the car from a competitor. I think that’s wrong. For somebody today to take 200 deposits or even 30 orders for that car, when they know that they’re not going to get that many, that’s just wrong.”

Arrigo, who owns five FCA dealerships in south Florida, said both the automaker and the dealers have to act with integrity through this process.

“This one car’s not going to make or break a dealer,” Arrigo said. “And to treat this vehicle without some kind of integrity, you have to ask yourself as a dealer if you want to go down that road.”

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Dodge dealers called out for 'unscrupulous' Hellcat sales practices by FCA exec

Dodge dealers called out for 'unscrupulous' Hellcat sales practices by FCA exec

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