CoVid-19 Industry Updates

CoVid-19 Industry Updates (163)

Related finance companies are not being approved for loans under the Paycheck Protection Program and that’s a mistake, according to the National Independent Automobile Dealers Association.

NIADA, through its CEO Steve Jordan, made its case this week by sending letters to leaders of the U.S. Congress, the Small Business Administration and the Senate Small Business Committee.

“As NIADA members begin to apply for PPP loans, we find that the dealership entities are being approved with little concern. However, RFCs are routinely denied with lenders stating current SBA guidance prohibits finance companies from receiving a PPP loan,” Jordan wrote.

Citing the specific sections of the CARES Act, the NIADA contends that despite Congress’ “clear intent,” the act seems to limit and exclude RFCs from participating in the program.

Jordan wrote,  “NIADA believes this limitation clearly conflicts with the intent, if not the express language of the statute.”

NIADA provides proposed language to allow the RFCs to participate in PPP.

“This change will permit our BHPH (buy-here, pay-here members’) RFCs to get much needed help to keep America’s credit-challenged essential personnel driving,” he wrote.

Jordan also discussed the important role that RFCs and buy-here, pay-here dealers play in helping unbankable customers get financed for basic transportation.


Michigan Gov. Gretchen Whitmer changed the conditions of her original stay-at-home order to include remote and electronic auto sales as essential businesses.

The April 9 revision of her previous order includes:

“Workers at motor vehicle dealerships who are necessary to facilitate remote and electronic sales or leases, or to deliver motor vehicles to customers, provided that showrooms remain closed to in-person traffic.”

Whitmer allowed car sales even as she tightened up other restrictions, including prohibiting travel between residences, meaning a resident may not visit another resident within the state.

DealerSocket Inc. is launching a free, web-based application called the Dealership Loan Navigator to help dealerships navigate the complex process of applying for financial assistance through the CARES Act. Created in partnership with DealerSocket’s sister company Quick Base, the Dealership Loan Navigator guides dealers through a series of questions and then determines eligibility for financial assistance for various CARES Act loans, including the Paycheck Protection Program (PPP). The Navigator then populates the application into a PDF form, which dealers can download and send to their banks to apply for financial assistance.


“Dealers across the automotive retail industry are trying to understand the complex process of applying for financial assistance as part of the CARES Act. We want to help simplify the process through technology,” said Sejal Pietrzak, CEO of DealerSocket.


DealerSocket also announced it was slashing its April bills by up to 50 percent for their software. It is offering several products for free for a period of time, including its digital retailing software PrecisePrice, its Test Drive Delivery Scheduler in DealerFire, SocketCredit in its CRM, and the newly launched Absolute Sourcing and New Car Pricing modules in its Inventory+ product.


An official from the Small Business Administration confirmed auto auctions are eligible for SBA loans under the CARES Act relief package signed into law this month.

National Auto Auction Association President Laura Taylor recently hosted a teleconference with SBA official R. Gregg White, in conjunction with the Independent Auction Group and she moderated a Q&A with White, the district director in Taylor’s home state of South Carolina.

White told the group that the $2 trillion relief package contains $377 billion in aid for small businesses like auctions.

Auto auctions can apply for the Paycheck Protection Program (PPP) and the Economic Injury Disaster Loan (EIDL).

PPP provides loans that will be fully forgiven when used for at least 75 percent of payroll costs, as well as interest on mortgages, rent, and utilities. EIDL advances will provide up to $10,000 of economic relief for working capital needs to businesses that are currently experiencing temporary loss of revenue and will not have to be repaid.

Other aid programs that are available are the SBA Express Bridge Loans, and the SBA Debt Relief offers a financial reprieve to small businesses during the pandemic.

The Federal Reserve on April 9 took additional actions to provide up to $2.3 trillion in loans to support the economy. This funding will assist households and employers of all sizes and bolster the ability of state and local governments to deliver critical services during the coronavirus pandemic.

“Our country’s highest priority must be to address this public health crisis, providing care for the ill and limiting the further spread of the virus,” said Federal Reserve Board Chair Jerome H. Powell. “The Fed’s role is to provide as much relief and stability as we can during this period of constrained economic activity, and our actions (April 9) will help ensure that the eventual recovery is as vigorous as possible.”

The Federal Reserve’s role is guided by its mandate from Congress to promote maximum employment and stable prices, along with its responsibilities to promote the stability of the financial system. In support of these goals, the Federal Reserve is using its full range of authorities to provide powerful support for the flow of credit in the economy.

The actions the Federal Reserve is taking to support employers of all sizes and communities across the country will:

  • Bolster the effectiveness of the Small Business Administration’s Paycheck Protection Program (PPP) by supplying liquidity to participating financial institutions through term financing backed by PPP loans to small businesses. The PPP provides loans to small businesses so that they can keep their workers on the payroll. The Paycheck Protection Program Liquidity Facility (PPPLF) will extend credit to eligible financial institutions that originate PPP loans, taking the loans as collateral at face value;
  • Ensure credit flows to small and mid-sized businesses with the purchase of up to $600 billion in loans through the Main Street Lending Program. The Department of the Treasury, using funding from the Coronavirus Aid, Relief, and Economic Security Act (CARES Act) will provide $75 billion in equity to the facility;
  • Increase the flow of credit to households and businesses through capital markets, by expanding the size and scope of the Primary and Secondary Market Corporate Credit Facilities (PMCCF and SMCCF) as well as the Term Asset-Backed Securities Loan Facility (TALF). These three programs will now support up to $850 billion in credit backed by $85 billion in credit protection provided by the Treasury; and
  • Help state and local governments manage cash flow stresses caused by the coronavirus pandemic by establishing a Municipal Liquidity Facility that will offer up to $500 billion in lending to states and municipalities. The Treasury will provide $35 billion of credit protection to the Federal Reserve for the Municipal Liquidity Facility using funds appropriated by the CARES Act.

The Main Street Lending Program will enhance support for small and mid-sized businesses that were in good financial standing before the crisis by offering 4-year loans to companies employing up to 10,000 workers or with revenues of less than $2.5 billion. Principal and interest payments will be deferred for one year. Eligible banks may originate new Main Street loans or use Main Street loans to increase the size of existing loans to businesses. Banks will retain a 5 percent share, selling the remaining 95 percent to the Main Street facility, which will purchase up to $600 billion of loans. Firms seeking Main Street loans must commit to make reasonable efforts to maintain payroll and retain workers. Borrowers must also follow compensation, stock repurchase, and dividend restrictions that apply to direct loan programs under the CARES Act. Firms that have taken advantage of the PPP may also take out Main Street loans.

The Federal Reserve and the Treasury recognize that businesses vary widely in their financing needs, particularly at this time, and, as the program is being finalized, will continue to seek input from lenders, borrowers, and other stakeholders to make sure the program supports the economy as effectively and efficiently as possible while also safeguarding taxpayer funds. Comments may be sent to the feedback form until April 16.

To support further credit flow to households and businesses, the Federal Reserve will broaden the range of assets that are eligible collateral for TALF. As detailed in an updated term sheet, TALF-eligible collateral will now include the triple-A rated tranches of both outstanding commercial mortgage-backed securities and newly issued collateralized loan obligations. The size of the facility will remain $100 billion, and TALF will continue to support the issuance of asset-backed securities that fund a wide range of lending, including student loans, auto loans, and credit card loans.


Collections and cash flow remain critical in the buy-here, pay-here business and even more so in the era of COVID-19.

Ray Lloyd, of Mike Carlson Motor Co. in Texas offered dealers collection survival tips during a webinar with Ignite Consulting on April 7.

The fundamentals of liquidating accounts do not change in this environment, Lloyd said. Dealers need to get information about why customers are behind –  even if that is because of unemployment. Confirming and validating that information will help with the collections process.

Lloyd prefers the customer provide a copy of the letter that confirms unemployment status with the weekly benefit amount.

“Typically,  what we tell customers is that we’re going to be flexible with them for payment arrangements,” Lloyd said.

That means setting payments on the day they receive the unemployment benefit, even if it’s different than the typical due date.

Collectors must keep in mind the additional $600 unemployment benefit provided by the federal CARES relief package will also help customers.

Lloyd and his account managers also educate the customer on services offered through the state’s unemployment website.

“Learn it yourself and get it into the hands of your people,” he said.

Lloyd downloads tutorials from the state site that explain to his employees the process customers will have to go through.

Show the customers the different forms of state relief they qualify for, from food programs to local rental assistance, Lloyd said.

“Let them know about that and what else is available (such as) the SNAP (Supplemental Nutrition Assistance) Program and the Family First Act,” Lloyd said. “We send the links to customers in emails  and text messages.”

Richard Hudson, managing partner of Ignite Consulting, praised the idea of helping customers find relief programs.

“What I’m seeing in the data is there are a lot of people that are having to reach out to programs that they may never have had to reach out to before,” Hudson said. “They may not even know where to begin.”

Lloyd said by helping customers with their other needs, it helps them continue making the car payment.

He added that some customers initially refuse to go on unemployment, but Lloyd tells them it’s like car insurance when you have an accident. You wouldn’t refuse car insurance to fix your car and unemployment insurance is no different, Lloyd said.

“You’re already paying into this program,” he said. “This is the time you need to take advantage of it.”

Giving account mana gers this type of information to share with customers gives them more confidence on calls, Lloyd said.

When the shelter-in-place orders started it was a shock. Ironically, when that happened, Lloyd saw an increase of payments coming in.

The dealership offered a deferral program where, if a customer made a payment, the dealership would defer a payment. Of the 399 customers who got a deferral, only six failed to make the next payment, Lloyd said.

“I think we were pretty successful with that,” he said.

Then came the “lull” period, where people thought the shutdowns would be brief.

“It hasn’t happened that way,” Lloyd said.

Customers who were off work hadn’t yet filed for unemployment, which they should have done right away, he said.

“What we need to do is get them out of the lull and into action,” Lloyd  said.

Hudson said dealers have a part to play. They can’t sit around waiting on customers to make a move. The collectors have a role in this, he said.

Lloyd even has a contest where he collects all the weekly benefit amount statements that his collectors get from their customers. He puts them into a basket and draws one out and that employee gets an additional incentive.

Lloyd also sends out texts three times a week, letting customers know they are working with them, as long as the customers share information with them.

He adds that it doesn’t mean that things will go smoothly through this downturn.

“I just had a meeting with my group,” Lloyd said. “We are going to get beat up more than we normally do.”

Collectors should give customers guidance and help them to get any other resources available to them, while making sure they understand they still have a car payment.

“Maintain the expectations,” Lloyd said, “The car is one of  the most  important things they have. It’s food, shelter and then the car. The car has to be the next in line.”

He added there is no reason to argue. This downturn is like others, just a little more hectic.

“On the other hand, in 2008 we didn’t have this $2 trillion assistance package,” Lloyd said. “We were dealing just with unemployment. It was much more difficult to deal with that.”

Ignite’s Steve Levine also urges dealers to post information on their establishments detailing the things they are doing to keep employees and customers safe.

“Make sure you have your cleaning materials out and visible,” he said. “Make a show of it,. There is a lot of fear out there.”

Showing that you’re keeping things clean is a priority and will comfort guests and employees, he said. It’s important to have cleaning supplies out and a schedule for cleaning..

Ignite Consulting also suggests posting this information on your website and documenting that you are doing this to protect the business.


The recession in the wake of COVID-19 could resemble the “curve” discussed by the Coronavirus Task Force, according to Tom Kontos, KAR Global chief economist.

Kontos, in the recent edition of his Kontos Kommentary, looked at the current economic shutdown in light of past economic downturns.

“Because the last 10 years have represented the longest expansion on record, one must go back to the Great Recession of 2008-09 and the 9/11 timeframe to find downturns and shocks to the economy that negatively affected wholesale values for a sustained period of time,” wrote Kontos, providing a chart to illustrate his point.



Kontos said the post-9/11 recession lasted between March and November but had a “short-lived effect on wholesale values.”

The continued price declines after October were “due primarily to an influx of off-lease volume and high new vehicle incentives even as the economy rebounded. The downturn in average prices after 9/11 continued for 20 months until May of 2003, which I described as an ‘inflection point’ in the wholesale market at the time,” Kontos reported.

He said the more dramatic fall in wholesale prices during the Great Recession from Dec. 2007 to June 2009  was followed by a quick recovery.

Kontos compared those downturns with the forced stoppage of economic activity in much of the country now.

“The recession that this has induced will likely follow a pattern that mirrors the ‘curve’ of the pandemic often talked about by Dr. (Anthony) Fauci in his press briefings,” Kontos stated.

Kontos said that just as the pandemic was likely to worsen before it got better, when auctions resume some semblance of pre-March level of sales and conversion rates then used vehicle prices are likely to fall by the same double-digit year-on-year levels we saw both post-9/11 and during the Great Recession.

“So, the duration of the decline will likely correspond to the length of the current recession, which again depends on the timing of resumption of social and economic interaction as the pandemic is contained,” Kontos said.

“And, it’s best to expect that upticks in used vehicle values are several months down the road, though strong demand for used vehicles in tough times, supportive government fiscal and monetary policies, and low oil prices should help limit the damage.”



Watch February 2020 Kontos Kommentary, Tom Kontos, Chief Economist at KAR Global, provides his insight and updates regarding the current used vehicle market conditions.

A new LendingTree survey of more than 1,200 small business owners found that 71 percent worry they’ll never fully recover from the downturn due to the COVID-19 coronavirus pandemic. Nearly half of small business owners have temporarily closed their businesses. They have also laid off workers or reduced hours while trying to source funding to stay afloat. LendingTree conducted an online survey of 1,221 small business owners who had previously applied for funding through LendingTree’s small business lending database. Participants were emailed a link to participate in the survey which was fielded using Qualtrics from March 24-30, 2020.

One percent of small business owners are worried their business will never recoup the losses associated with the COVID-19 pandemic. Business owners in the accommodation/food service and retail trade sectors are among the most likely to fear for their company’s future.

Nearly half — 47 percent — of small business owners surveyed have taken on debt to keep their business afloat during the pandemic. An additional 34 percent attempted to seek financing but were not approved.

Eight in 10 small business owners have “no idea” where to get emergency funding for their business right now while 69 percent of small business owners do not have enough cash on hand to sustain their business for the next 90 days.

Carvana, the e-commerce platform for buying and selling used cars, in an effort to provide customers more flexible financing options during this difficult time, is now giving customers up to 90 days to make their first payment.

Carvana provides “Touchless Delivery” and a 7-day return policy. Customers can shop more than 25,000 vehicles on with high-definition, 360-degree virtual vehicle tours, finance, purchase and select as-soon-as-next-day Touchless home delivery, all in as little as 5 minutes. Customers financing with Carvana are eligible to opt in to the payment extension option, as long as they complete their purchase by April 20, 2020.

“Carvana has always been a company intensely focused on doing the right thing for our customers, and in a time when many are feeling the strain between needing safe transportation to an essential job and personal finances, we want customers to know we’re here for them,” said Ernie Garcia, Carvana founder and CEO. “Our hope is that those who simply can’t put a vehicle purchase on hold are able to get what they need quickly and easily, so they can keep moving.”

Xtime is offering enhanced resources and multiple key features at no additional charge, helping dealers support consumers in the changing landscape while preparing them for a more digital and profitable future beyond the COVID-19 pandemic.  

“The latest numbers from our recent Cox Automotive COVID-19 Dealer Impact Study confirm that dealers anticipate service appointments to be the second most impacted area of business, despite fixed ops being deemed essential work in many states,” said David Foutz, vice president of sales at Xtime. “At Xtime, we’re in a position to help dealers not only weather the storm but come out the other side even stronger than before and that’s exactly what we intend to do by offering free services for 90 days of features that promote social distancing like service pickup and delivery, and online payment to our clients.”  

Dealerships should adopt the following best practices: offer vehicle pickup and delivery, and service pickup and delivery, powered by Clutch (offered at no cost through the end of July 2020); enable online payments; adopt a digital check-in process; and exercise social distancing among staff.