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Attorney Eric Johnson and Allen Denson of Hudson Cook discuss regulatory issues at the recent National Alliance of Buy-Here, Pay-Here Dealers conference.

Carvana Partners with Credit Union

Carvana Partners with Credit Union Featured

Carvana has partnered with LGE Community Credit Union.

Through the partnership, LGE members can browse Carvana's online inventory of vehicles and purchase a car and have it delivered to them as soon as the next day, all from their homes.

LGE Community Credit Union members can visit any of the credit union's nine full-service locations in Georgia to speak with a loan officer about becoming pre-approved for a Carvana vehicle or can consult with a loan officer via phone, email or through an online application. Following approval, members can complete their vehicle search and purchasing process entirely online with Carvana.

The LGE partnership is one of 13 credit unions Carvana works with across the country.

Last modified on Monday, 19 December 2016 23:40
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  • Independent Dealers Advised to Explore Upstream Opportunities

    LAS VEGAS –Changes in the market – from vehicle supply to increased competition to credit availability – offer independent dealers both challenges and opportunities.

    Tom Kontos, chief economist for KAR Auction Services, partnered with Joe Keadle, CEO for Automotive Finance Corp., to present an analysis of the market at the recent National Independent Automobile dealers Association conference.

    “In the U.S., the retail market for used cars is about 30 million,” Kontos said. “It’s roughly split evenly between independent dealers and franchise dealers.

    Independent dealers sold 574,000 more used cars in 2016 than in 2015, a 4.3 percent increase.”

    Year-to-date, used-car sales still favor franchise dealers. New-car stores use more inventory management tools to seek out the higher grosses that come from the used-car side of the business, Kontos said.

    They benefit form the trades they take in new-car sales. About 50 percent of all new-car sales involve a trade-in.

    “They are increasingly trying to hold on to those trades,” Kontos said.

    Keadle said those are cars that independents used to buy at auction, presenting a challenge for independents to find alternate sources, like upstream wholesale channels.

    Independent dealers should explore upstream opportunities, Keadle said.

    “So much of the inventory liquidation from the manufacturers off-lease vehicles are in that upstream channel,” he said. “You do have access to upstream, but you have to make sure you can dig it out.”

    There are more off-lease vehicles coming back than franchise dealers can handle, Kontos said.

    “Prices are going to be softening,” he said.

    One threat independents face is that, despite so many cars coming into the wholesale stream, they may not be the ones in demand.

    Kontos said during the last cycle’s leasing boom, many of those vehicles were cars and smaller vehicles because of the concerns over gas prices.

    That trend will eventually reverse itself a few years from now as new-vehicles sales today are falling mainly within the truck classes.

    Repossessions are another big source of inventory for independents Kontos said.

    “Typically, the repos we get at the auctions are vehicles that were financed as used vehicles to begin with,” he said. “They were maybe sold as a three-year old vehicle, now they are four- or five-year old vehicle brought back as a repo.”

    Kontos is seeing more of those vehicles showing up in the Southeast.

    In terms of repos, he doesn’t see a steep rise in delinquency and default rates, but even that can be misleading if dealers look at supply.

    But there are over $1 trillion of outstanding auto loans and leases –the highest it’s ever been.

    “So a 1-percent default rate results in more repos (because of the larger number of outstanding loans),” Kontos said.

    Keadle said the used-car business is coming out of a period where inventory was scarce and independents had to fight for it. It caused some poor habits, he said. A dealer could keep that car for a longer time on the lot, knowing that he could always wholesale out of it and get a good price.

    “That’s about to change,” Keadle said. “That vehicle you have on the lot now? There’s about 500 more coming down the pipeline.”

    Dealers can afford to be more selective to find a car with leather, navigation and a sunroof, instead of buying one without those features.

    “We just encourage you to be dialed into the market,” Keadle said, “so that you know what you should be stocking and how long you should be keeping it.”

    The credit market also poses both threats and opportunities for independents.

    In the fourth quarter of 2016, the non-prime, subprime and deep subprime numbers dropped compared to the prior year, Kontos said.

    “That’s an indication that lenders are backing away from the subprime tiers,” Kontos said. “I think they identified that they were a little overexposed in those areas.”

    Of course, this creates an opportunity for buy-here, pay-here dealers to actually get a better buyer, Keadle said.


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