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  • Friday, May 15, 2020 7:00 PM | Anonymous
    By Jason Courter, 2020 AIADA Chairman
    Lately, the automotive industry is breaking records in all the wrong directions. April had the lowest recorded SAAR of any April, ever. The market was down about 50 percent from 2019. The results might have been worse had it not been for a slight upturn at the end of the month, likely spurred by zero percent finance offers. It’s hard to predict what the rest of the year will hold for dealers, but the general consensus seems to be: Buckle-up, it’s going to be a bumpy ride.
    In times like these, small business owners are looking for relief anywhere they can get it. Many dealers, including myself, received Paycheck Protection Program loans from the government with the understanding that the loan would be forgiven if the funds were spent on mortgage, rent, utilities, and payroll. The loans were designed to be temporary life rafts to keep as many Americans as possible on small business payrolls. Thanks in part to a PPP loan, we will be able to do just that. That might be small potatoes in the scheme of things, but it means the world to us and our community.
    As expected whenever a giant government relief program appears practically overnight, there has been pushback. Every newspaper and 24-hour news channel has ‘experts’ opining on who truly needs, and deserves, PPP relief. Recent SBA guidance has suggested that the government review all loans in excess of $2 million, in addition to other loans as appropriate, following the lender’s submission of the business’ loan forgiveness application. The SBA added that businesses who feel they do not meet the certification could have returned the funds by May 14 without consequences.
    Simply put, the Congress doesn’t want any more embarrassing headlines about giant corporations, with healthy reserves, receiving bailouts. That’s understandable, and most dealers shouldn’t have any problem showing that when their stores were ordered all or partly closed, and when their customers were instructed to shelter in place, they truly needed help.
    Dealers who have received PPP loans don’t need to be worried about defending their choices, but they should be prepared to concisely lay out their reasoning for applying for the loan. Be ready to show why you meet the standard laid out in the application that stated, "Current economic uncertainty makes this loan request necessary to support the ongoing operations of the Applicant." Get organized and have supporting documents, such as financial statements, payroll records, termination/layoff notices, and return to work notices to assist in answering any inquiry or applying for forgiveness of their PPP loan.
    In the Small Business Administration’s  PPP FAQs, Question 46 establishes a new safe harbor for borrowers who received PPP loans of less than $2 million (and effectively removes the prior May 14, 2020, repayment deadline).
    When it comes to both auto sales and government relief, we are in uncharted territory. By being organized and proactive, dealers can set themselves up for success. It’s also a good idea to have a response prepared for anyone asking questions about your PPP loan. Mine is simple: I am confident that better days are ahead for my stores and my employees, and I am grateful for the PPP loans that will help us get there, together.

  • Friday, May 15, 2020 7:00 PM | Anonymous
    The COVID-19 crisis could change why people buy cars, how they buy them and even who thinks they need to own a vehicle, according to a global survey conducted by consultant Capgemini.
    The survey quizzed more than 11,000 potential buyers in 11 countries that account for 62% of global vehicle sales.
    "We’re going to see individual vehicle usage rise as people more concerned with hygiene choose personal transportation," said Daniel Davenport of Capgemini’s North America auto sector. "There’s also more interest in car ownership from customers under 35 years old," a sentiment contrary to recent indications younger consumers put a low value on owning a vehicle.
    While 35% of all people surveyed globally were considering getting a car this year, 45% of those under 35 were considering doing so and a majority of the latter group have never owned a car.
    "It’s potentially a seismic shift," Davenport said.
    The survey included people in China, France, Germany, India, Italy, Spain, Sweden, the Netherlands, Norway, the United Kingdom and the U.S. Capgemini surveyed about 1,000 people in each country.
    The survey was taken in April, meaning the countries surveyed all had extensive experience with COVID-19’s effects.
    Among the results:
    1. 35% of buyers worldwide are considering buying a car in 2020.
    Buyers in China, where the pandemic struck first and may have been controlled best by strict social distancing and a near total quarantine in affected areas, were most optimistic, with 61% saying they were strongly considering or considering buying a new vehicle.
    Italy, also hammered by the disease and subject to strict isolation rules, came in third with 43%.
    The U.S. came in at 34%, almost dead on the global average, just behind Spain’s 36% and more optimistic than France, the U.K., Norway and Germany at 32%, 27% and 25%, respectively.
    2. Public transportation and ride-hailing may suffer.
    Globally, 46% said they’d be less likely to use public transportation in the future, compared with 33% who disagreed with the statement, "I will use public transport less often and take my own car more often."
    Ride-hailing services like Lyft and Uber got hit nearly as badly as buses and subways, with 43% agreeing with, "I will prefer to use fewer ride hailing services (in the future) owing to health and safety concerns." At least 35% disagreed.
    3. Public transport is even less popular in U.S.
    Even more Americans, 51%, said they’d be less likely to use public transportation this year, rising to 53% in the future.
    Ride-hailing services fared nearly as badly: 49% said they were less likely to use them this year and in the future.
    4. Private vehicles are considered safer.
    An overwhelming 75% of people said "greater control of hygiene in a vehicle I own" was one of the reason to buy a car. That placed it second only to needing a personal vehicle for their requirements, a sentiment about as inarguable as saying most people buy umbrellas to stay dry when it rains.
    5. Visiting a dealership is as unpopular as an Uber driver with a cough.
    In China and India, 71% and 70% of consumers wanted to compare financing and deals without gong to a dealership. The U.S. came in third at 49%.
    "The ability to offer online purchasing will become the baseline expectation," Davenport said, suggesting a contactless customer experience.
    "We’ve been making a slow transition to digital buying, now it’s going to be front and center."
    Regardless of changes in sales techniques and customer preference, the survey doesn’t change the fact that the rest of 2020 will be challenging for auto sales. Globally, 49% of respondents said they are "not considering" or "strongly not considering" buying a car this year.
    To respond, Capgemini recommends:
    • Short-term subsidized leases and personalized social-media marketing for younger buyers
    • Multiple payment models, including subscription, short-term leases and pay per use
    • Emphasizing lower-priced options and health features
    • Fewer models and options to simplify the supply chain
    • Publicize dealerships’ health-related practices
    • New features like HEPA filters, ionic air purifiers and air quality indicators
    Globally, the median income of potential buyers — those considering or strongly considering a purchase — was about $60,000. They were above the national average in all countries surveyed except Italy, Spain and France.

  • Friday, May 15, 2020 7:00 PM | Anonymous
    Those "well-qualified buyers" certainly appeared to take advantage of the generous financing terms captives offered in April based on the information shared by Edmunds this month.
    Edmunds reported that zero-percent finance deals surged to a record level in April as automakers "pulled out all the stops" to encourage new-vehicle purchases during the coronavirus crisis.
    Meanwhile, Edmunds noticed that the average rate for used-vehicle financing actually edged a tick higher year-over-year.
    According to an Edmunds news release, zero-percent finance deals accounted for 25.8% of financed new-vehicle purchases in April, compared to 4.7% in March and 3.6% in February. This is the highest level of zero-percent finance deals that Edmunds has on record dating back to 2004.
    Edmunds analysts pointed to the abundance of zero-percent finance deals as the driving force behind a significant drop in interest rates. The annual percentage rate on new financed vehicles averaged 4.3% in April, compared to 5.8% in March and 6.3% a year ago. This marks the lowest average APR since August 2015.
    "It’s a buyer's market," said Jessica Caldwell, Edmunds’ executive director of insights. "And while there aren't a lot of buyers right now, those in a position to purchase a new vehicle are taking advantage of the most generous financing programs we've seen this century."
    Edmunds experts warn that some consumers might be making riskier purchasing decisions due to the greater availability of zero-percent, 84-month term contracts.
    According to Edmunds data, the average term length hit a record high of 73 months in April, and 81% of vehicle buyers who financed their vehicle agreed to a loan term between 67 and 84 months.
    Edmunds data also reveals that consumers are stretching their budgets for more expensive vehicle purchases — the average amount financed for a new vehicle climbed to a record high of $37,681 in April, while the average down payment dropped to $3,159 in April, a 21% decline compared to March and the lowest on record since July 2011.
    "For the fiscally responsible buyer, this is a great deal, but for others, this could spell trouble," Caldwell said. "Although longer loan terms help make financing larger purchases more palatable, consumers who opt into these deals put themselves at higher risk for negative equity further down the road."
    Similar new-model pricing trends arrived from ALG and Kelley Blue Book, too.

  • Friday, May 15, 2020 6:59 PM | Anonymous
    Thieves this month stole wheels from multiple new-car dealerships in the northwest suburbs, the CATA has learned.
    One dealer said May 14 that he has hired a guard to patrol his lot and a neighboring dealer’s lot from midnight to 5 a.m.
    As anti-theft technologies such as engine immobilizer systems make cars harder to steal, thieves have resorted to plundering parts and accessories.
    "They want whatever sells, from the mandated labeled parts to those that aren’t," the National Highway Traffic Safety Administration explained.
    Because wheels are not marked, it is easy for thieves to dispose of the stolen property and for criminal middlemen to fence the high-priced items.
    "The hardest part is tracking these wheels and you really can’t," said the general manager of one of the dealerships. "Just because police find the wheels, it’s hard to track them back to the dealership."
    Among 15 security tips recommended for dealerships to follow, maintaining proper lighting and using security cameras top the list. A victimized dealer said his vehicles had wheel locking nuts, but the thieves used bricks to smash the vehicle windows to get the keys to the locks in the glove compartments.
    "The best defense is to make your vehicle less of a target, but if someone really wants your wheels, they’re going to do whatever it takes," said Frank Scafidi, spokesman for the National Insurance Crime Bureau.
    The affected dealerships ranged from Elgin to Arlington Heights.
    A description of any suspects was not immediately available.
    Anyone with information on the thefts is asked to call Area North detectives at (312) 744-8263.

  • Friday, May 15, 2020 6:59 PM | Anonymous
    As automakers prepare to restart U.S. manufacturing, potential parts shortages south of the border appear to have been diverted.
    Some Mexican auto factories are due to open as soon as May 18, in line with large U.S. assembly plants for the Detroit automakers. Mexican President Andres Manuel Lopez Obrador on May 13 laid out a road map for the country to reopen its economy, with a focus on the automotive sector, according to Reuters.
    Despite President Donald Trump’s "America First" policies, the U.S. auto industry heavily relies on Mexico for parts and vehicle production.
    Mexico, unlike many U.S. states, had not given direction on when auto manufacturing would be allowed to restart as the county’s coronavirus cases have continued to rise. It’s something auto industry executives have been closely watching as they reopen American factories.
    Prior to the reopening report, Fred Hubacker, a managing partner of consulting firm Conway MacKenzie, called Mexico a "wild card" in the restart of the U.S. auto industry.
    At $93 billion, vehicles were the top import to the U.S. from Mexico in 2018, according to federal data. The Center for Automotive Research reports $60.8 billion, or 39% of auto parts used in the U.S., were imported from Mexico in 2019.
    "Mexican content is a significant issue [automakers] must resolve to restart vehicle production," said Kristin Dziczek, vice president of industry, labor and economics at the Center for Automotive Research. "Synchronization of the automotive restart cadence with Mexico is critical."
    Important vehicles imported to the U.S. from Mexico include pickup trucks by General Motors, Fiat Chrysler and Toyota Motor as well as luxury vehicles from Mercedes-Benz and Audi.
    GM CEO Mary Barra told investors this month that the automaker has been having "regular dialogue" with national leaders in Mexico and the U.S., where it plans to begin producing vehicles May 18. She called the discussions "very constructive," citing extensive safety measures the company outlined to officials for restarting production.
    "We think with those protocols and communicating and sharing our plans, we’re in a good position as we talk to country leaders and state leaders," she said. "Obviously, we’ll continue to have dialogue with our unions as well as with the government leaders to do the right thing."
    GM’s large SUVs for the 2020 model year, which are produced in Texas, have some of the highest percentages of parts coming from Mexico among U.S. built vehicles, according to the American Automobile Labeling Act report.
    Ahead of Mexico’s plans to reopen its auto sector, a parts shortage due to the coronavirus pandemic was likely deja vu for GM and other automakers. North American automakers had to scramble earlier this year to find and ship parts after factories in China, where the virus originated, shut down in January and created a parts shortage there.
    "It feels like a lifetime ago, but when shutdowns were happening in Wuhan (China), there was panic across manufacturing in anticipation of shutdowns in 40-50 days," said Ambrose Conroy, CEO of auto consulting firm Seraph, which has been assisting companies with reopening plants. "Stoppage in Mexico [would] cause problems within a week."

  • Friday, May 01, 2020 7:03 PM | Anonymous
    An NADA webinar which debuted in April, "Managing Service Operations: Making it Through the COVID-19 Pandemic," examined some of the changes that have occurred in service departments under the current conditions
    Pick-up and delivery services are important to protect the health of dealership staff as well as customers, NADA Academy instructors Bob Atwood and Larry Hourcle said. "We all want to get out of the house, but the dealership is nowhere to be for your entertainment," Hourcle said.
    "Use this opportunity to step up and wow your customers by expanding operation hours with multiple shifts," Atwood added. Multiple shifts also helps provide spacing among technicians. Also, state law permits service to be performed seven days a week.
    Use email to send repair orders to customers. If a signature cannot be applied to the RO, ask them to indicate permission to proceed with repairs in another way.
    The speakers advised spending time in the current situation devoting marketing messages to a dealership’s service department, emphasizing that they are open to help customers.
    "For years," Atwood said, "we have been preaching to the manufacturers to do a one-minute commercial about dealership service. And every time you turned on the TV, what do you see? A one-minute commercial about a brand-new car that they wanted the customer to buy.
    "Well now, all of a sudden, what do you see? There’re no new-car ads. Everything is about ‘Oh, our service departments are open, they’re essential businesses, we’ll come and pick up and deliver your car.’
    "Why did it take getting to this point for the manufacturers to realize that this is what they need to be doing? And I hope when this is over that they occasionally run these ads, to keep the service department in front of the dealerships.
    " ’Cause remember, sales sells the first vehicle; service sells the second and third vehicles."

  • Friday, May 01, 2020 7:03 PM | Anonymous
    Dealers across the country have been making strides to implement digital retailing at their dealerships for years, concurrently catering to customers who favor a traditional sales experience. While the coronavirus pandemic accelerated the implementation of digital retailing tools, dealers are focused on aligning with their customers’ wants and needs.
    "Technology is not what disrupts industries; not being customer-centric disrupts industries," said NADA Academy instructor Michael Lucki, who led an NADA webinar in April with fellow Academy instructors Georgia Munson and Matthew Vollmers.
    The webinar, "Digital Retailing Disruption: The Dealer Perspective," provided an overview of the results from the NADA’s digital retailing dealer survey and examples of shifts in the sales process to digital that put customers and employees first. The NADA defines digital retailing as the flexibility for customers to select a vehicle, get an accurate trade appraisal and secure bank financing approval with a precise payment information — all without having an in-person interaction with a dealership employee.
    The survey, completed April 10-17 by NADA Academy students, alumni, 20 Group members and Professional Series graduates, found that 91% of respondents will use or continue to use digital retailing as part of their retailing solutions after COVID-19.
    "The dealers who have already adopted and implemented a completely virtual, digital retail sales process pre-COVID-19 are reaping the rewards during this pandemic," said Munson. "For dealers who aren’t adopting digital sales, why wait?"
    The webinar presenters underscored that now is the time to offer customers a digital sales process with all of the tools available; but not at the expense of maintaining conventional sales tactics to meet the demand of customers who prefer the traditional sales process.
    The webinar also provided best practices for sales in a completely virtual environment, including the write-up, trade evaluation, demonstration, test drive and time in the business office. There are a number of ways to offer customers test drives in an online sales environment, such as pre-recorded virtual 360 degree tours posted online, live webcam, or FaceTime vehicle walkarounds and test drives at customers’ home with proper sanitation.
    From a communications standpoint, "invest in the technology for your sales people and managers to communicate and interact virtually so no sales opportunity gets missed," said Munson. In particular, she highlighted the use of text messaging as a communications channel with a strong likelihood for consumers to read and respond in a timely manner.
    "Going digital is not as complicated or time consuming as you may think," Munson added. "But, it will take manpower to create virtual test drive videos, galleries of pictures, create new processes, and train sales people to the new processes, etc."
    "Dealers have a long history of overcoming and adapting. Early adopters and dealers that are fully committed to digital retail are the ones who will thrive, not just survive," added Vollmer. "Which one will you be?"

  • Friday, May 01, 2020 7:02 PM | Anonymous
    The wholesale vehicle market effectively shut down from the economic effects of the COVID-19 virus and is only beginning to recover, said Jonathan Banks, J.D. Power’s vice president and general manager-vehicle valuations.
    Used-vehicle wholesale auction volumes were down 80% for the week ending April 12.
    One reason? Dealers are selling down their used-vehicle retail inventory, much of which was purchased before March 15. "They are reluctant to add replacement vehicles to their inventory," Banks said during a J.D. Power webinar.
    Wholesale prices fell 16% for the week ending April 12. Physical auction facilities are closed. The only wholesale dealer auction action is online because of public-health restrictions.
    Wholesale auction activity likely "has reached an inflection point" and will begin to recover, Banks said. But of late, "there have been quite a few no-sales."
    Used-vehicle sales at franchised dealerships declined 61% vs. the pre-virus forecast. That’s 7 percentage points worse than new-vehicle sales. However, pre-owned vehicle retail prices remain relatively strong for now. Prices consumers are paying resemble pre-virus levels. But cashflow issues may drive prices down as dealerships look to maintain liquidity, Banks said.
    "Dealers control that retail price," notes Patrick Janes, director-wholesale management solutions at vAuto an inventory-management software provider. It’s a matter of when and if dealers lower prices under slow-sales circumstances.
    "As (vAuto founder) Dale Pollak says, "Dealers will take a haircut, but we want to prevent them from getting a buzzcut," Janes said. 
    A de-escalation in used prices will put profit pressures on retailers, drive OEM losses on lease returns and decrease consumers’ purchasing power as trade-in equity drops, Banks added.
    Used retail sales at franchise dealerships are down, but not to the same extent as wholesale auction sales. Retail sales totaled just under 400,000 units in four weeks, while wholesale auction sales reached just 93,000 units.
    Pre-virus, there were roughly two used retail sales at franchise dealers for every auction sale. At the end of March, the ratio averaged more than four used retail sales per auction sale.
    Banks foresees wholesale prices declining 8%-16% through June "before improving dramatically as the country opens up." Until then, "we’ll have a rough couple of months."
    He expects an ultimate increased demand for used vehicles, in part because many consumers who availed themselves of ride- and car-sharing services pre-virus are expected to opt instead to buy their own vehicles because of health concerns.

  • Friday, May 01, 2020 7:02 PM | Anonymous
    Credit Acceptance Corporation, the lender to car buyers with subprime credit scores, warned in April that it is seeing a sharp drop-off in payments as people shift their financial priorities to get through the coronavirus pandemic.
    As unemployment soars, borrowers are putting off payments or "reallocating resources," Credit Acceptance said April 20 in a regulatory filing, explaining that it needs more time to publish a quarterly report. New lending also is slowing as dealerships in 26 states are forced to shutter their lots, the company said.
    "A continued disruption in our workforce, decrease in collections from our consumers or decline in consumer loan assignments could cause a material adverse effect on our financial position, liquidity and results of operations," Credit Acceptance wrote.
    The firm is among the first to report an uptick in delinquencies as some lenders offer forbearance, hoping that what consumers need is time to get through the pandemic so they can resume payments. Ally Financial Inc. said April 20 that about 25% of its auto-loan customers have taken advantage of its payment-deferral program.
    Offering forbearance can make it harder for shareholders and analysts to gauge the degree to which borrowers are unable to pay. The filing by Credit Acceptance shows some consumers already can’t keep up — evidence of more trouble ahead for auto lenders. Its shares fell 9% to $268 in late trading April 20 in New York.

  • Friday, May 01, 2020 7:02 PM | Anonymous
    The annual Barbecue for the Troops, a CATA fundraiser normally held each July for the USO of Illinois, will be delayed this year because of the coronavirus pandemic.
    Over the last seven years, CATA dealers have raised nearly $900,000 for the USO, a nonprofit, non-political organization. The funds raised by the barbecues enable the USO of Illinois to lend support to more than 326,000 service members and their families annually.
    The CATA board of directors said an October dateline with a tailgating theme could be attempted for this year’s Barbecue for the Troops.

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