Huntington Bancshares Inc., reports that auto finance continued to perform well in the second quarter.
Net charge-offs were down 16 basis points quarter-over-quarter to 0.29 percent.
The bank also reported improvement in the indirect auto portfolio compared to the prior quarter mostly due to seasonality.
KAR Auction Services Inc. announced a series of product offerings that integrate the company’s diverse capabilities with the TradeRev digital mobile marketplace.
KAR owns a 50 percent stake in TradeRev, a mobile app and desktop solution that facilitates real-time, live-bidding dealer-to-dealer vehicle auctions.
This first wave of integrated product and service offerings includes free and/or heavily discounted transportation services, special floor plan financing credits and offerings, and full integration of TradeRev’s mobile auction app with ADESA’s physical, digital and online auction marketplaces.
As part of this initiative, KAR’s CarsArrive Network business unit now offers TradeRev dealers free transport for any vehicle shipped from the state of New York, and flat $150
transportation fee for shipments from all other states. These prices represent 50 percent to 80 percent dealer savings over typical wholesale transport options and will last through 2017.
KAR’s Automotive Finance Corp. (AFC) business unit is offering, subject to various
conditions, no floor plan fees on the first five vehicles purchased on the TradeRev platform and floored with AFC on the date of purchase. Concurrently, TradeRev is offering a $150 discounted buy fee for those five units to be credited to the dealer’s AFC account.
Additional financing promotions and specials are planned for both new and existing TradeRev and AFC customers and will be released throughout the remainder of the year.
TradeRev and KAR’s ADESA business unit have also partnered to launch the “360 Advantage Program” for dealers. Beginning at the dealership, a TradeRev inspection is completed in under 10 minutes and the vehicle is launched on TradeRev to participating dealers nationwide. The ADESA Logistics Team will transport any unsold cars to an ADESA location within 24 hours where vehicles receive a full condition report and are listed on ADESA DealerBlock.
Any unsold vehicles will then run at an ADESA physical auction.
Dealers in the U.S. and Canada will also see an increased presence of TradeRev at ADESA’s physical auction locations. TradeRev sales and support staff will be there to enroll new dealers, answer dealer questions, and provide tips on how to launch and participate in TradeRev auctions.
The Consumer Finance Protection Bureau created a rule banning mandatory arbitration agreements in contracts used by the entities it oversees, which includes auto creditors and buy-here, pay-here dealers.
The move opens up these firms to class-action lawsuits. The existing agreements specified that consumers must settle disputes via arbitration and were barred from joining class-action suits.
"These clauses allow companies to avoid accountability by blocking group lawsuits and forcing people to go it alone or give up,” said CFPB Director Richard Cordray. “Our new rule will stop companies from sidestepping the courts and ensure that people who are harmed together can take action together."
Supporters of the bill consider it a blow to big banks. Some point to the recent Wells Fargo credit card scandal as reason to ban arbitration.
“We fought for this rule because it provides a valuable check against corporate misconduct and are pleased that the CFPB has adopted it to protect the public interest,” said Massachusetts Attorney General Maura Healey.
However, the rule covers all firm overseen by the CFPB, regardless of size.
"This rule will force small businesses to bear additional costs in defending class-action litigation, particularly meritless suits," said Steve Jordan, CEO of the National Independent Automobile Dealers Association. "Those costs will ultimately be borne by consumers, and in the case of those who are credit-challenged, it could prove to be too much."
Industry insiders have been waiting for this rule since Congress passed the Dodd-Frank Act that created the CFPB. The Act specifically called for a study into the impact of arbitration on consumers.
The CFPB released the findings of that study in 2015 and a rule has been expected ever since.
But many thought that might change with the election of Donald Trump and an anti-regulatory climate in Washington.
The Republicans in Congress can still squelch the rule before it takes effect in three months by invoking its Congressional Review Act authority.
This would kill the rule and bar the CFPB from creating a replacement.
Attorney Michael Benoit said dealers should start contacting their Senators and Congressmen to push for the CRA.
Benoit said affected parties could also take the CFPB to court, arguing that it lacks the authority to interfere in private contractual agreements.
Until the matter is settled one way or another, Benoit recommends continuing with business as usual.
“It’s a little early for dealers and finance companies to take any action other than exploratory actions into what they might do,” he said.
BB&T announced that its Dealer Financial Services division saw net income of $38 million for the second quarter.
That is an increase of $9 million compared to the prior quarter. Results were primarily driven by a $14 million decrease in the allocated provision for credit losses, which was largely the result of seasonally lower net charge-offs in the Regional Acceptance loan portfolio.
Dealer Financial Services average loans held for investment decreased $115 million, or 2.9 percent annualized, primarily due to the strategy to optimize the auto portfolio.
Automotive Assurance Group, a Florida based full service F&I agency, is now part of the AmTrust Financial Services, Inc. group of companies.
Automotive Assurance Group has been representing Warranty Solutions, an AmTrust company, for over 14 years and has achieved top producing agent status as well as top agency in various categories over the years. Automotive Assurance Group is able to offer its dealer clients the resources of AmTrust programs, in addition to their select group of other industry top-level providers and portfolio of products.
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.
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.
Auto leasing both gave and took away from Chase in the latest quarter.
The bank reported that noninterest revenue grew in the second quarter, due in part to higher auto lease revenue.
However. Chase also reported that noninterest expense rose, due in part to higher auto lease depreciation.
The bank’s reserve for auto loan loses was $25 million in the second quarter. Reserves for losses grew overall, driven by both loan growth and higher loss rates, predominantly in the bank’s credit card business.