Carvana Co. is opening a location in metropolitan Detroit.
This increases Carvana’s reach to 32 markets.
To celebrate its arrival in Detroit, Carvana is hosting an event at Hart Plaza on the Detroit Riverfront on July 22. Visitors can enjoy cool treats, music from Bluewater Kings Band and giveaways, all courtesy of Carvana.
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.
Auto leasing dropped for the first time in four years, according to new study by Edmunds.
Leasing made up 31.1 percent of retail new-vehicle sales in the first half of 2017, down from a record high of 31.9 percent set in 2016.
The number of vehicles that were leased in the first half the year fell 4.4 percent. That is twice the rate of decline for overall sales, which are down 2.2 percent year over year.
Declining residual values are also forcing automakers to inflate incentives to keep lease deals attractive. Lease incentives averaged $4,445 for the first six months of the year, up from $3,722 for the same period in 2016.
The average price of a used vehicle for model years 2012-16 decreased in value 1.3 percent in June, slightly more than the 1.2 percent change in May, Black Book reports.
Cars overall dropped 1.8 percent and trucks dropped 0.8 percent in value during June. All vehicles are averaging a 12-month depreciation of 16.7 percent.
In June, small pickups had the lowest monthly depreciation at 0.1 percent. Vehicles in this segment finished June with an average price of $21,328.
Subcompact cars saw the largest depreciation during the month at 2.8 percent. Vehicles in this segment finished June with an average price of $6,554.
GWC Warranty has released Dealer Portal 2.1, the latest batch of enhancements to GWC's online dealer resource center.
Dealer Portal 2.1 features a brand new dealership dashboard provides quick access to claims paid and sales reporting, giving dealers instant, on-demand insight into how vehicle service contracts protect their reputations and their profits.
The Elite Dealer Page is a new section of the Dealer Portal that allows dealers to easily see their Elite Dealer status, stay up to date on how to earn or maintain Elite status and learn more about exclusive benefits.
The revamped Elite Lead Generator Report now includes more useful customer information and is optimized for easy printing to help dealers capitalize on lead opportunities from expired contracts.
Online claims, an Elite-exclusive feature, has undergone a complete rebuild to now accept attached documents and upfront submission of parts and labor details. These updates will further enhance the expedited claims experience available for GWC's top-producing dealers and their customers.
Average wholesale prices in June were down versus May but up on a year-over-year basis.
According to ADESA Analytical Services’ monthly analysis of Wholesale Used Vehicle Prices by Vehicle Model Class, wholesale used vehicle prices in June averaged $11,067. That is down 0.7 percent compared to May and up 4.7 percent relative to June 2016.
Compact and full-size pick-up trucks and minivans showed significant average price gains for the month, while most other model classes registered month-over-month declines or modest increases.
Average wholesale prices for used vehicles remarketed by manufacturers were down 1 percent month-over-month and down 1.9 percent year-over-year. Prices for fleet-lease consignors were down 1.1 percent month-over-month and up 3.2 percent year-over-year.
Average prices for dealer consignors were up 0.9 percent month-over-month and up 7.7 percent year-over-year.
KAR Auction Services, Inc. announced the launch of a new website for its instaVIN business unit.
The redesigned website delivers near real-time title, salvage and insurance total loss events.
Dealer and commercial customers can now order instaVIN reports in batches up to 100 VINs. There are new filter options to deliver condensed reports, and additional HTML functionality to embed links from web ads, allowing for easier visibility for online shoppers.
InstaVIN car history reports now include an optional original factory window sticker with build data for an additional charge. The window sticker includes VIN-specific standard and factory installed options and packages, original MSRP, EPA mileage and safety ratings, warranties, code guide information, and engine and transmission specifications.
Consumers want to shop for cars in a more relaxed manner, according to a recent study by CarMax Inc.
CarMax commissioned a Google Consumer survey of U.S. online consumers who have previously bought a car to uncover preferences and attitudes as they relate to various car-buying habits. The survey was fielded on March 29 and completed by 1,015 respondents.
One of the findings was that people do most of their car shopping on their own time.
Almost half of respondents (44.2 percent) are most likely to research their next cars in the evening, while watching TV or relaxing. Ten percent of respondents actually shopped for a car while in bed.
Roughly one in five respondents are most likely to research their next car during the workday.
The study also found consumers trust experts and their own experiences more than they do the opinions of others.
Roughly a third (35.7 percent) of respondents plan to select their next cars by reading car reviews. Almost a quarter also see the value of a test drive in helping make their decision
However, only 4 percent would ask a friend about his or her opinion on a particular vehicle.
A Washington State auto dealer was ordered to pay the state $240,000 after the business’ president pled guilty to stealing retail sales tax intended for public services.
Khaled E. Saad, president of American Auto & Body, LLC, of Mount Vernon, entered a guilty plea on behalf of the corporation to first-degree theft. Saad had been accused of collecting retail sales tax and not turning it over to the state.
The court ordered the corporation to pay $240,000 to the Washington State Department of Revenue and $500 for a victim penalty assessment. The Revenue Department has received that money from the corporation.
The $240,000 judgment included assessed sales taxes the corporation did not remit, and penalties and interest.
Based on a referral from the state attorney general’s office, auditors for the Washington State Department of Revenue reviewed American Auto & Body’s records spanning March 1, 2013 through Dec. 31, 2015. During that time, records show Saad was vastly underreporting his corporation’s income and had not remitted to the state at least $145,512 in retail sales tax.
The J.D. Power Used Vehicle Price Index remained flat in June at 111.1.
That is about 7.6 percent lower than June 2016.
The index measures the price for vehicles up to 8 years in age. J.D. Power expects prices on those vehicles to fall about 2 percent in July.
J.D. Power also reports that new-car incentive spending per unit increased 11.6 percent in June.