Tom Webb is calling it a career after spending five decades watching the car business. He has worked at the National Automobile Dealers Association, PricewaterhouseCoopers (PwC) and, since 2001, as the chief economist at Manheim.
Webb started as an analyst after graduating from the University of Wyoming. He took the job with the intention of attending Georgetown University full-time to work on his doctorate. Webb soon found he preferred the financial freedom of working, so he switched to night school at Georgetown.
I started in October of 1973, one week before the Arab oil embargo. Back then, new-vehicle sales were reported every 10 days. Part of my jobs at NADA was following those sales. They were down 6 percent or 7 percent in the first 10 days, then down 15 percent and then 40 percent by the end of the month. It was a horrible time for the industry. I started thinking, ‘I’m not going to be here much longer.’ But 26 years later, I was still there.
NADA had just started its Twenty Group program and we were getting those financial statements. As a result, we had better financial information than anybody out there. These days, everybody is sweeping dealers’ databases. I primarily focused on analyzing dealership financials. I never worked for NADA Used Car Guide, but I interacted with them quit a bit.
It wasn’t long after I started that Lynn Weaver came on board as the direct of the Used Car Guide. I always enjoyed his insights. He always sought out my opinions, but every time I left his office, I knew more than when I entered it.
At that time, there was a big push for cost-benefit analysis of regulation. I did a lot of work on that. That was rather frustrating because they didn’t really consider it that important. So focused more on dealership financials. We really were the source for the state of dealership performance at that time.Today, with publicly traded companies and other sources, there is plenty of information today on how dealerships are doing. When I started, it was a lot of small dealerships with direct dealer-principal involvement. My first NADA convention was 1976. The attendees were primarily dealers. Some of the largest stores might bring their general managers, but it was usually just the dealer. They were single-point dealer-operators. Today, it’s primarily managers. That’s how I learned about the business. Dealers are very open about their business and they enjoy talking about it. They’ll tell you a lot of stuff.
I would attend NADA board of directors meetings and soak up what they were talking about. There were all kinds of operators. Some were what you would call ‘car guys,’ but others were finance people. They all had a different attitude, but they were all sharp operators. I learned a lot from them.
Webb stayed with NADA until 1999, when he took a job at PwC. That turned out to be the shortest tenure of his career.
It wasn’t a mistake, but I did leave for the wrong reasons. It was a more lucrative offer for a position I didn’t fully understand.
It was fun, because it was more of an academic position. PwC has a lot of very sharp economists and they recruit the cream of the crop for interns. It was fun to work with young people who were totally focused on economics and analytics.
I was there for just over a year.
After leaving PwC, Webb sold everything that he had in Northern Virginia and moved to Kitty Hawk, N.C. He went to work as a greenskeeper at a local golf course. Then one day, out of the blue, he received a phone call from Manheim’s chief operating officer. Manheim was buying ADT Automotive, but plans to incorporate their economic insights hit a snag.
Eventually, I was going to seek employment, since I wasn’t financially ready for retirement. But it did come out of the blue. It resulted from Manheim’s purchase of ADT. Darryl Ceccolli sought me out. He called NADA and the people there said I had retired down to North Carolina. So he contacted me there. It was one of those great, fortunate things that happen in your life.
(ADESA chief economist) Tom Kontos, just like everybody at ADT, was offered to stay on, but when he decided to go another way, they decided they wanted that functionality. They didn’t have that kind of outreach. I joined Manheim in October and that January we had our first press conference at the NADA convention. I think it was the first press conference Manheim ever had.
It was different for Darryl, but he went along with it. My biggest experience at joining Manheim was getting to know Darryl. We knew each other well enough that he sought me out for the job. When we met, he just started to talk about the industry. And any question I asked, he could talk about it. It was another tremendous learning experience.
I came in without a job description and filled it out with the things that I like to do and what the industry needed. For example, I had a lot of contact with the financial community and I knew the Index was something they would gran right onto. It was really a relatively little project, but it was a way to increase our profile.
We had a lot of analysts on individual client accounts. But Manheim Consulting separated the analytics from sales.
One of Webb’s most notable contributions at Manheim was the creation of the Used Vehicle Value Index. The monthly Index takes wholesale prices and adjusts them for mix, mileage and seasonality.
Manheim Used Vehicle Value Index
I sort of have this love-hate relationship with the Index. I love that the financial community adopted it so readily. At the same time, I hate that it had too much influence based on any particular movement. They would upgrade or downgrade a stock based on those movements and that’s not what the Index is all about.
Originally, we just published the Index on a semi-regular basis. I was at a conference and it was during a time when AmeriCredit (now GM Financial) was under some pressure. It was near the end of the month and I indicated what the Index would do for the month. I don’t know it, but there was an analyst in the audience and he wrote a research report that mentioned the Index. I got a call from AmeriCredit’s investor relations and was read the riot act that the Index was material information for publicly trade companies and it needs to be released to everybody at the same time. That’s why it now comes out on the fifth business day of every month.
That was eye-opening because I didn’t know people were following that closely. We also had issues where analysts were basically hacking our website by changing the date and getting the Index early.
Now there’s a lot of information about used-vehicle price trends.
I knew the Consumer Price Index reading on used cars was a bad indicator. I also knew the straight AuctionNet numbers were misleading. It was frustrating to see those numbers picked up and analyzed.
I certainly hope the Index isn’t my lasting legacy. I would hope my legacy would be the broader perspective that I’ve given to some of Manheim’s clients, that there are factors beyond their own portfolios that affect them and how those interact. I really enjoyed working with Manheim’s clients on the remarketing process. There are a lot of great people out there trying to understand how to best preserve their residual values.
With all the questions surrounding auto finance and the wholesale market, CarMax Inc. executives reassured analysts they’re prepared to meet any challenges that arise.
The used-car superstore chain recently announced results for the quarter ended Feb. 28 that beat many expectations.
“We realize there’s a lot of noise in the market,” said CarMax CEO Bill Nash. “We’re confident about the track that we’re on.”
Total used vehicle unit sales grew 13.4 percent and comparable store used unit sales rose 8.7 percent versus the prior year’s same quarter. The comparable store sales performance resulted from a strong increase in conversion, together with a modest increase in store traffic.
Wholesale vehicle unit sales declined 1.2 percent versus the same period a year ago, as contributions from the growth in CarMax store base and an improved appraisal buy rate were more than offset by a reduction in appraisal traffic. In particular, age 7-to 9-year old wholesale vehicles continued to be in shorter supply.
Nash said some of that decline came from the delay in tax refunds.
Other sales and revenues increased 19.2 percent, primarily reflecting improvements in extended protection plan (EPP) revenues and net third-party finance fees. EPP revenues increased 19.3 percent, largely due to the growth in used unit sales and favorable adjustments to the reserve for cancellations. Net third-party finance fees improved by 44.4 percent as a result of more sales to consumers with higher credit scores.
Total gross profit increased 14.9 percent to $562.2 million. Used vehicle gross profit rose 14.7 percent, driven by the 13.4 percent increase in total used unit sales.
Used vehicle gross profit per unit was largely consistent at $2,134 versus $2,109 in the prior year period. Wholesale vehicle gross profit declined 7.8 percent versus the prior year’s quarter, reflecting the 1.2 percent decline in wholesale unit sales and a decrease in wholesale vehicle gross profit per unit to $938 from $1,005.
Other gross profit increased 46.1 percent, primarily reflecting the improvement in EPP revenues and net third-party finance fees, as well as some favorable payroll-related cost experience in CarMax’s service operations.
One of the biggest concerns going forward is the Increasing supply of used vehicles. Nash said this is a good situation for CarMax’s business.
“We believe lower prices will be beneficial to sales as cars become affordable for our customers,” Nash said.
He said the company has managed periods of sudden declines in wholesale values and high off-lease volumes in the past.
Like many small business owners, used-car dealers feel they can’t take a vacation.
But they should change that thinking.
Two-thirds of small business owners think taking a personal vacation benefits their business, including improved focus, creativity and motivation, according to a survey by Marriott Rewards Premier Business Credit Card. Despite knowing the importance and benefits of completely unplugging from work, only 25 percent of small business owners are able to do so, and nearly three-quarters worry about the work and responsibilities they are missing during their time off.
“While small business owners enjoy making their own schedule and being their own boss, they often miss out on perks such as guaranteed paid time off,” said Vibhat Nair, general manager of Chase Card Services.
Some dealers do manage to take time off to visit far off destinations such as Spain and Italy. But those are more of the exception.
While there are some real reasons why dealers can’t take time off, many times it comes down to a concern that the store can’t run without them. That’s a problem that’s often just in their heads, said Joe Lescota, director of dealer development for the National Independent Automobile Dealers Association.
“If a dealer says he can’t go on vacation, then I question that dealer’s ability to lead,” Lescota said.
Lescota said the real test of any business is how well it runs when the boss is absent.
Brent Carmichael, a Twenty Group moderator with NCM Associates Inc., said all of his members take some time off.
“I don’t know anybody who will take two weeks of vacation,” Carmichael said. “But I don’t know anybody who doesn’t take some time off.”
In addition, more and more dealerships are requiring that their staffs take time off to avoid burn out.
Most take their vacations in June or July, since those are slower months for car sales.
About a quarter of Carmichael’s members use their summer Twenty Group meeting for a vacation.
That’s why these events take place in locales such as Jackson Hole, Wyo., and Key West, Fla., rather than an airport hotel like the winter meetings.
That’s a fairly common practice. The Marriott Rewards study found 85 percent of small business owners intentionally carve out time for personal activities during a business trip.
Luke Godwin, owner of Godwin Motors in Columbia, S.C., is planning a trip to the wine country when he visits Freeman Motors in Oregon this summer with his Twenty Group.
Anthony Underwood, the owner of Anthony Underwood Automotive in Bessemer, Ala., and former NIADA president, said he liked to combine travel with his greatest interest – the car business.
“I’d take advantage of the (NIADA) convention and make it a vacation,” Underwood said.
This allows dealers to feel productive while giving them and their families some needed time away from the routine.
That’s part of the reason these events often take place at high-end locations.
For example, this year’s National Alliance of Buy-Here, Pay-Here Dealers conference takes place May 23-25 at the Wynn/Encore in Las Vegas.
Encore was recently renovated and won the Travelers Magazine award as one of the finest hotels in Las Vegas. All the Encore rooms are suites.
The NIADA convention also takes place in Las Vegas, June 12-15 at the Mirage.
So dealers can spend time learning how to better run their businesses during the day while their families play with dolphins and then enjoy a nice meal in the evening.
NABD offers an early registration discount through April 21. For NIADA, the discount runs through May 11.
It might not be everybody’s idea of an ideal vacation, but hundreds of dealers will take it.
Ally Financial delivered a fairly positive outlook about the auto finance market going forward, but did lower profit expectations.
Ally now expects earning to increase by 5 percent this year, down from a projection of close to 15 percent at the start of the year.
Many on Wall Street are concerned about the health of auto finance as delinquencies rise and wholesale volumes increase. Ally, which started its corporate life as General Motors’ captive finance arm, retains a significant focus on this segment.
“We’re one of the few banks lenders that really focuses on the full spectrum of loans and leases in the marketplace,” said Chris Halmy, Ally’s chief financial officer.
The bank had a $66 billion portfolio of consumer auto credit and a $39 billion portfolio of commercial loans to the auto business.
In addition, Ally’s SmartAuction online platform sold 364,000 vehicles last year.
The bank also recently launched Blue Yield, a digital hub for online auto financing.
Ally has worked to transform itself from the independent equivalent of a capitive lender.
“We’re becoming much less exposed to lease residuals and OEM behavior,” Halmy said.
Used-car finance now makes up more than 40 percent of its business as Ally has grown and diversified its dealership base.
Ally has moved its focus on profitability rather than volume in the past year as risk increases for auto finance.
Halmy said consumner loses have been drifting higher, most noticeably on the low-end of the credit spectrum.
There was extra deterioration in the low-end portfolio in the first quarter, Halmy said, which might be a result of the delay in tax refunds.
The long-expected decline in wholesale used vehicle prices also continues, although Halmy called it “a manageable rate.”
The good news for Ally is a decrease in competition as big banks either tighten their lending standards or leave the market entirely.
“While we’re a bit more cautious on the credit side, we’re still very constructive on the market as a whole,” Halmy said.
For the first time,seeing less competition.
Ally’s main peers have also said they are optimistic about auto finance, he said.
Dave Shevsky, Ally’s chief risk officer, said he expects loses to increase in the near tern, but less than the rate of yield expansion.
“We realize people get pretty focused on the loss numnberss, but you can’t really look at the credit side without looking at the yield and profitability and we feel pretty good about the overall portfolio dynamics,” Shevsky said.
There are plenty of ways to succeed in the used-car business. But a close look at some of the best operators shows they share several habits.
One of these is coming up with a plan.
“All successful dealers have a business plan for the year,” said Joe Lescota, with the National Independent Automobile Dealers Association.
This plan must be realistic, which means including a projection of net profit along with gross and revenue.
Successful dealers review that plan on a weekly basis.
Dealers must know how each employee fits in this plan.
That means having a job description for everybody and training them on how to do those jobs.
One of the most important habits is consistency, said Anthony Underwood, the owner of Underwood Mo- tors in Bessemer, Ala.
Underwood said people often want to change the script just to maintain their own interest, regardless of how well a business operates.
“Success is boring,” he said.
Dealers need to remember to do what is best for all rather than themselves.
Consistency is different than not changing. In fact, another habit of successful dealers is accepting change, especially when it comes to technology.
Ken Shilson, founder of the National Alliance of Buy-
Here, Pay-Here Dealers, said it was enough a few years ago for a dealer to have a website and maybe use AutoTrader to attract customers.
It was a question of putting himself out there and having the customers come to him.
“What works today is proactively connecting with the customer before they go somewhere else,” Shilson said. “You have to take their hand and being them to your lot.”
Successful dealers embrace other technologies to solve their problems.
For example, the kind of inventory typical of buy-here, pay-here lots proves hard to find these days. Successful dealers use technology to broaden their search for the right units with which to stock their lots.
They also use tools such as GPS devices to control their costs and make their operations more efficient.
Another habit that helps dealers on several fronts is making their customers happy.
“Do whatever you can to keep the customer happy and that goes a long way,” said William Denius, an attorney who specializes in auto finance.
Denius said many disputes between dealers and their finance companies arise when a customer starts griping and as a result stops paying.
“Of course, there will be times when you do all you can and it’s not enough,” De- nius said.
“But trying is crucial.”
So successful dealers are in the habit of keeping their customers happy, keeping up with change, having a plan and being consistent.
Central Auto Auction celebrated its 11-year anniversary March 7.
Founder and President Peter Saldamarco began the sale with his annual State of the Auction and State of the Industry address.
“2017 will be a year of many exciting changes for the auction,” Saldamarco said. “Central Auto Auction will be opening a brand new vehicle evaluation center, a service department with specialization in both new and used tires, along with a much-anticipated 4th lane in our facility.”
With over 400 vehicles and 250 dealers in attendance, the sale featured new-car trades, fleet-lease, units repossessions, and donations in the lanes. Central Auto Auction completed the anniversary event with an 83 percent conversion rate.
To thank their valued customers, the auction treated everyone to gourmet Italian pizza from the Big Green Pizza Truck, served straight from the back of a 1947 former International Fire Truck.
Since commencing operations in 2006, Central Auto Auction has expanded to nine acres. Most recently, Central Auto Auction purchased Chet’s Auto Parts – an adjacent automotive scrap processing facility.
“This addition benefits our INOP sales and donation vehicle processing, as it allows us to pay our consignors considerably more for scrap,” Saldamarco said..
Central also just established a partnership with the Credit Union League of Connecticut. The League now endorses the auction to its 80 members.
“Hopefully, that will kick up our repo volumes,” Saldamarco said.
Central also signed with Tom Stewart of AMS, so Saldamarco also expects to draw more fleet business.
The year started slow, in part because of weather that included a snowstorm that dropped 15 inches on the auction.
The feds delaying tax season also took a toll. But the end of February “just boomed,” Saldamarco said.
Overall, volumes have been down 20 to 30 percent, but sales percentages have been pretty strong.
“We’ve been running 300 and on a good week 370 to 380,” Saldamarco said. “But during the slow time, it was down to 270 to 290.”
Each sale draws about 300 bidders in the line with another 30 or so participating via simulcast.
In addition to its regular sale, Central runs a GSA sale once a month, seven to eight months out of the year.
“New cars just started arriving, which we also marshal for GSA,” Saldamarco said. “The used cars should come in by April.”
A typical sale is 100 units.They are all reconditioned and the sale is open to the public.
The bulk is passenger vehicles, but Central also gets light trucks and mid-size trucks.
“Amtrak is one of GSA’s biggest customers, and Amtrak is our next-door neighbor,” Saldamarco said. “So a lot of pickup truck and light truck volumes come from them specifically.”
For used-car dealers who have been in business for a while, the past was both good and bad.
South Carolina dealer Billy Threadgill, president of the National Independent Auto- mobile Dealers Association, said starting out was much easier when he became a dealer 40 years ago.
Back in the 1970s, a dealer didn’t even need a bond. They could start with a deal- er license, a lot and some insurance.
“That’s probably the extent of it,” he said. “Today you will work harder for less money and most dealerships today start out under-capitalized.”
He said a low-end car lot — without floor-planner backing — would probably re- quire a minimum $100,000 in capital.
Back in the 1970s, Thread- gill’s father started the business with a $15,000 mort- gage.
Acquiring inventory in the past had both advantages and disadvantages.
Jerry Smith, co-owner with his dad of H.L. Smith Automobiles in Hurst, Tex-as, started in 1971.
When Smith started, he could easily get dealer trades by visiting franchise stores late in the evening or first thing in the morning. Smith would ask about any trades and the used-car manager would have several cars in the back and throw him the keys.
“Now, they either take them to the auction or they’d have a wholesale entity handle it,” Smith said. “Back in the 1970s or ‘80s, I could actually test-drive the car and do an appraisal and condition report myself. Now when you buy and can’t test-drive them, you’re going to get some surprises.”
But for Threadgill, acquiring inventory meant living on the road.
“I stayed on the road continually to buy cars,” he said. “I’d leave my house on Sun- day and head to South Florida. I wouldn’t come home until Thursday night.
“I was also the truck driver. I brought them home. I’d go from Florence to Miami twice a week and be back on Friday to work.”
But life was cheaper then, too. Threadgill said he could take $100 to pay for all his fuel and most of his motel expense.
Once it came to writing up a car deal, there was paperwork – lots of paperwork.
“I used to have to type or handwrite (the deal),” Threadgill said. “Minimum, it was an hour to do it, if you had all the docs available to type up. Today, it may take you five minutes to enter the information and five min- utes to run your docs.”
Most dealers would use handwritten cards to track payments and delinquencies.
Threadgill used account cards set up by due date in a file system. When a customer came in and paid, he’d write it down. If they didn’t, you put them in an unpaid account file. Handwriting was important to make sure the information was clear and correct.
Smith said he used payment cards as long as he could until Texas passed an e-tag law so the dealership had to have a computer to generate it.
“But I still use payment cards,” Smith said. “I write conversations in red and payments in black or blue.”
Before the internet, print was king and was the main source of advertising for 78-year-old Ed Bass. Bass re- tired five years ago from the buy-here, pay-here business, Car Credit Center based in the Chicago area.
“I was in the Chicago Tribune, I was in the Chicago Sun-Times, I was in the Herald-American,” Bass said.
He later moved into radio, television and, eventually, the internet.
Smith said advertising was much cheaper in the past.
“Back then, you could do shopper’s guides or the local newspaper ads and they were cheap,” Smith said. “We did things like the Fort Worth Star-Telegram and you’re talking $2 to $3 for a small ad.
“In the 1980s, we even did a full-page ad in a little shop- per newspaper and it was $500 a week.”
Smith prefers the old way of advertising to the inter- net. For example, he had a vehicle advertised online that generated numerous hits, but sat on his lot for over a year.
“If there’s that many people looking at it, why in the hell ain’t somebody buying it?” he said.
Recovering cars without starter interrupt or GPS de- vices made parts of the job more tedious.
Without GPS, Threadgill and Smith worked the customer application and con- tact sheet to find the car through references, etc.
“Or you call them and tell them they won a free pizza, and get the address,” Smith said.
However, when Smith was forced to get a computer for e-tags, he also made the move to GPS units and realized how much easier it is.
“I’m telling you, I would never go back,” he said.
Regulations were not a problem decades ago
“I wasn’t worried when I came in to work that the CFPB (Consumer Financial Protection Bureau), the FTC (Federal Trade Commission) – and on and on – would come up to my door over stuff I never thought would be relative to our industry,” Threadgill said. “In 1975, when you did a deal, you had four documents if it was financed. Today, if you don’t have a file that’s two inches thick, you’re probably haven’t done something right.
“I think it’s much harder today than it was back then.”
Thirty-day delinquencies inched up slightly to 2.44 percent in the fourth quarter from 2.42 percent in the fourth quarter of 2015, Experian reports. Sixty-day delinquencies increased to 0.78 percent from 0.71 percent.
“Delinquencies are always an important indicator of the overall health of the automotive lending market, but it’s equally important to watch how lenders react when they see a rise,” said Melinda Zabritski, senior product director of automotive finance for Experian Automotive.
In this case, creditors are shifting more loans toward customers with better credit.
The average credit score rose to 714 from 712 for new vehicles and to 654 from 649 for used.
Financing for deep-subprime and subprime customers decreased to 20.82 percent of the total lending market from 22.05 percent in the fourth quarter of 2015. Lending to prime and super prime customers jumped to 59.41 percent from 57.86 percent.
“The shift to a higher percentage of prime and subprime customers is a natural consequence of the slight growth in delinquencies,” Zabritski said. “Overall, we are still looking at a very healthy lending market.”
The concern for the general public is a dramatic rise in auto delinquencies and repossessions will harm the credit situation for already vulnerable consumers. The concern for Wall Street is harm to the asset-backed securities backed by these auto finance contracts.
Two of the major ABS ranking firms see little need to worry.
Kroll Bond Rating Agency stated in a recent report that while auto finance originations are at their highest level, the growth since 2010 is still below the decrease seen during the Great Recession and is not disproportionate to any risk category.
KBRA expects slightly lower originations for 2017 due to lower vehicle sales and tighter credit from lenders.
KBRA has seen more aggressive risk tolerance in terms of longer tenor loans, higher loan-to-value ratios and lower purchase discounts from dealers since 2010. However, underwriting remains tight.
Delinquency and charge-off rates for 2015 and 2016 originations to borrowers with subprime scores are above peak levels while rates for near prime and prime borrowers are in line with the best performing vintages and are performing within a narrow range. But KBRA sees subprime creditors tightening credit standards.
Fitch Ratings places a Stable outlook on the subprime auto sector, although the firm sees some downside risk.
Subprime auto ABS performance is pressured in 2017 due to softer performance in the 2013-2015 vintage securitizations, which have weaker credit quality pools., Fitch reports.
Subprime annualized net loss index are predicted to range between 10 percent and 12 during 2017, and could rise to peak levels recorded back in 2008-2009 of approximately 13 percent were the pace of losses to pick up beyond expectations, said Hylton Heard, senior director of Fitch Ratings.
Through January, Fitch’s ANL index stood at 10.30 percent.
Fitch continues to have a positive rating outlook for prime auto loan asset-backed securities (ABS) in 2017, despite higher losses expected this year.
More than a dozen dealers stood on a sidewalk in New Orleans in January bidding on BMWs.
The setting was unusual, but the event was designed to show effectiveness of Manheim’s mobile auctions to attendees of the National Automobile Dealers Association.
Manheim sees a big opportunity in the cars dealers don’t bring to auction. And they’re meeting this opportunity by bring the auctions to them.
The Cox Automotive subsidiary has been growing its mobile auction service the past few years. It now serves more than 70 locations.
Many of these are dealer’s own lots, but sales have been run at all kinds of locations, including a baseball park and that side street in New Orleans.
Brandon Steven, the owner of a several new- and used-car dealerships in Wichita, Kansas, was already sold on the process before attending the NADA event. He’s been using mobile auctions to move at his stores for six months.
“I love the concept,” Steven said.
Manheim brings a truck loaded with equipment and staff to run a sale that replicates what bidders experience at a traditional auction.
“We can bring the truck literally anywhere,” said Grace Huang, Manheim’s senior vice president of inventory services.
The trucks spend their off-time parked at Manheim auctions around the country.
It’s these auctions that provide the staff for the trucks. They can serve dealers up to 200 miles away.
Janet Barnard, president of Cox Automotive Inventory Solutions, said Manheim could set up a sale for a dealer the next day, but local regulations usually require a longer lead time.
Dealers have been running their own auctions for years. The mobile auctions take this process up a step, adding floor planning and Manheim Simulcast bidders.
The mobile auction sales bring plenty of motivated buyers, with retention rates above 70 percent.
Scott Cahill, used-car manager at East Coast Honda Volkswagen in Myrtle Beach, S.C., has been using the Manheim mobile auctions several years. The dealership runs sales of 175 to 250 units every 60 days.
The inventory consists of aged units and trades that don’t fit into the store’s used-car model.
Prior to Manheim, the dealership used a smaller auction company to run sales at its store.
Cahill said the other company offered far fewer services.
The most important feature for Cahill is Manheim Simulcast. The East Coast sales usually draw 50 to 60 online bidders from as far as Michigan.
This helps bring higher prices.
“It’s not how many cars you sell online,” Cahill said. “It’s how many bids you get online.”
Another advantage for East Coast is that since the vehicles stay on their lot until sale time, they can retail them up until the day of the auction.
The cars in New Orleans were sold by BMW Financial Services instead of a dealer. And all but two of the BMWs were off-site, so the whole effect was a little lacking.
But Steven still feels it worked,
“It was a great way to display what they’re doing,” he said.
Teshome Tesfaye, 59, came to the United States as a 21-year-old Ethiopian immigrant with just a few dollars in his pocket.
Today he owns Norfolk Motors outside Denver, with more than 100 vehicles on his website.
It was a long journey and a big change from his native country.
“When I left the country, it was under a Communist regime,” Tesfaye said. “It was getting worse and worse.”
He came to America to get an education and attended Cheyney State College, which later became Cheyney University of Pennsylvania, a historically black college founded in 1837.
He then traveled to Metropolitan State University of Denver and studied chemistry.
While driving a taxi to earn money, he went to pharmacy school.
Tesfaye said one of his early jobs as a pharmacy tech was working at the hospital preparing I.V. bags, but it didn’t last.
“I worked a couple of months and quit because I didn’t like it,” he said. “The smell (of the medications) was making me sick.”
So he went back to driving, working for a shuttle company.
“It was good money at the time,” he said. “I had a family.”
Tesfaye was married to his high school sweetheart, who had previously studied in Germany on a scholarship.
Eventually, Tesfaye got a dealer license. It was about 1996 or 1997, he said.
“I love cars,” he said. “I was a wholesaler when I started.”
At that time, his brother was an independent retail car dealer.
“He was giving me advice and everything,” Tesfaye said. “He’s my little brother, but he had been doing it for a while.”
Tesfaye wanted to make more money than he was making as a wholesaler and decided to start a retail business.
“I opened up my own store and started with three cars,” he said. “That’s how I started.”
His dealership – Norfolk Motors in Aurora – was named after a street he used to live on. It has grown a bit since then.
“Right now, I have a place that takes up the whole block,” he said.
Norfolk Motors sells almost all retail, with no subprime and maybe one or two buy-here, pay-here deals. Tesfaye also does wholesaling.
“I sell 60-plus a month in retail,” he said
He has 100 units in stock and more than that in storage. Tesfaye caters to a more upscale market.
“I carry luxury cars like Range Rovers, Mercedes, BMWs, Audis – most of them are luxury,” he said.
The average retail price is in the $14,000 to $15,000 range. The average model year is 2008 or 2009 and mileage is less than 120,000.
Tesfaye said this niche is not common among the independents he knows.
“A lot of dealers don’t carry luxury cars because the maintenance is very high,” he said.
While there are some used luxury dealers around, Tesfaye said his vehicles are targeted toward middle-class people.
“It’s not too much money to ask,” he said. “You can drive a Range Rover for $14,000.”
Tesfaye is settled here in the U.S. with his wife and two daughters. Many of his other family members live in America as well.
He was fortunate to come here in the mid-1990s, he said, when the waiting period to become a citizen wasn’t so long. Within five years of applying, he was an American citizen.
Last June, he had a chance to go back to Ethiopia for the first time in 23 years.
“It was completely different,” he said. “When I left the country it had 45 million people. Now the country has, like, 98 million people.
“I had to show my kids, because they were born here. They’ve never been there.”
Tesfaye’s oldest daughter is away at college in North Carolina, studying marketing and business. His youngest is in high school.
When Tesfaye first left his homeland, he hadn’t planned on going back.
It still lacks the freedoms that the U.S. offers.
“It’s just controlled by a few people,” Tesfaye said. “But when I left, it was completely Communist.”
“They’re still killing people.”
For Tesfaye, America is a land of opportunity.
The differences between the two countries stood out last summer when Tesfaye attended the National Independent Automobile Dealers Association’s Day on the Hill in Washington, D.C.
“I didn’t expect that this guy from Ethiopia would be meeting with U.S. Senator Cory Gardner,” he said. “This is just a dream come true.
“It was very exciting. It was the time of my life.”
Tesfaye said one of the reasons why so many Ethiopians come to America is because of the lack of freedom in his native land.
“When I left Ethiopia, the government let us take $50 only. That was a scary thing.
“But this is a dream land. If you work hard, you can make money. You can do anything you want.”
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