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Inside this issue
House Democrats Seek Details on Consumer Bureau Auto Loan Rules
Fiat Said to Ready $10 Billion in Financing for Chrysler
Ford Grinning as Global Utility Sales Boom
Attorneys Say CODA Bankruptcy Issues Resolved
[Mich.] Legislation Would Give Vehicle Buyers a Tax Break for Trade-In of Car, Boat
Study: Boomer Buyers Still Key to Auto Industry Success
Click here for more auto industry news at NADAFrontPage.com. .
Top Stories
House Democrats Seek Details on Consumer Bureau Auto Loan Rules

Thirteen Democrats in the U.S. Congress have asked the Consumer Financial Protection Bureau for details on how it plans to enforce new rules on discrimination in auto lending. In a May 28 letter to the agency, the Democrats, all members of the House Financial Services Committee, demanded “any and all background information” about its investigation into alleged discrimination in the business, according to a copy of the letter. The group, five of whom are members of the Congressional Black Caucus, also asked for details on the methodology the agency is using to assess the presence of discrimination. And it asked for additional information on how lenders will have to comply with the rules. The CFPB rules take aim at a practice the agency refers to as “dealer markup” and auto dealers call “dealer participation” or “dealer-assisted finance.” In this system, banks function as indirect lenders and allow dealers to add to the interest rate the banks charge and pocket the difference. Consumer groups charge the practice gives dealers an incentive to move buyers into more-expensive loans, and that minorities are at greater risk of this treatment. Dealers say the markup is a reasonable price for their services, including bringing in customers and handling paperwork. They've also criticized the agency for targeting the auto-lending market without being clear on the basis for its decision.
Source: Bloomberg

Editor's note: To view the letter, click here.
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Fiat Said to Ready $10 Billion in Financing for Chrysler

Fiat SpA is in talks for as much as $10 billion in financing from a pool of banks to buy the Chrysler Group LLC stake it doesn't own and refinance the two automakers' debt, people familiar with the matter said. The banks, which include Bank of America Corp., Deutsche Bank AG, Goldman Sachs Group Inc. and BNP Paribas SA, are discussing loaning Fiat the money to purchase the 41.5 percent of the American carmaker held by the United Auto Workers' retiree health-care trust, said the people, who asked not to be identified because the discussions are private. Other banks could also take part in the financing, one of the people said. Chief Executive Officer Sergio Marchionne, who runs both Fiat and Chrysler, has spent the last four years remaking the two regional automakers into one global carmaker that can better compete with Toyota Motor Corp., General Motors Co. and Volkswagen AG. A full combination of the two would create a group with the mass-market Fiat, Chrysler, Jeep and Dodge brands, along with the Maserati and Ferrari high-end marques.
Source: Bloomberg
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Ford Grinning as Global Utility Sales Boom

Ford Motor Co., the company that helped to birth the sport-utility era with the Explorer, now is in position to spread the phenomenon around the world. Ford's catalogue of small, medium and large “utility vehicles” gives it a strong offering in every size category, says Jim Farley, Ford's chief marketing and sales officer, and it's a market that is set to grow significantly over the next several years, particularly in Asia. “You might say that Ford has developed a core competency in utilities,” Farley said. The Ford brand has seven utility models and Lincoln has two, with a third likely to come later this year. The market for these vehicles grew 35% from 2005 to 2012 globally, to make up about 18% of industry sales. Through 2017, the share is expected to grow to 19.4%, even as the total market increases in size through that period.
Source: The Wall Street Journal

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Attorneys Say CODA Bankruptcy Issues Resolved

The Chapter 11 case of failed electric car maker CODA Holdings continued on the fast track Wednesday after attorneys resolved several objections to the company's bankruptcy financing and sale plans. After meeting behind closed doors for several hours, attorneys for the company and its official creditors committee told a Delaware bankruptcy judge they had reached agreements on several disputed issues. The agreements will not be formally submitted to the court for approval until Monday, but Judge Christopher Sontchi nevertheless granted a request by the parties to sign final orders approving CODA's debtor financing and sale plans.
Source: Associated Press
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[Mich.] Legislation Would Give Vehicle Buyers a Tax Break for Trade-In of Car, Boat

It's a decades-old issue for car and boat buyers in Michigan: You want to buy something new and use your older model as a trade-in. However, when the final bill is tallied, you end up paying sales tax on the full amount of the new purchase with no credit for the trade-in. So, someone who uses a $5,000 trade-in vehicle to buy a $15,000 car pays 6% sales tax on the full $15,000, despite the fact they only pay the dealer $10,000. That is seemingly about to change, thanks to legislation nearing final passage at the state Capitol. Under a bill that passed the House Tax Policy Committee on Wednesday, the buyer would only pay sales tax on the adjusted $10,000 price, saving $300 in sales taxes. The savings are even greater when pricey boats or recreational vehicles are involved. The change would apply to new or used vehicle purchases.
Source: Detroit Free Press
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Study: Boomer Buyers Still Key to Auto Industry Success

Study finds number of consumers 35 to 44 with driver's license fell 6.6% from 2007 to 2011

Middle-age car buyers are more important to the auto industry than ever, according to a new study by the University of Michigan Transportation Research Institute. Adults in the 55-to-64-year-old age group were 15 times more likely to buy new vehicles than 18-to-24-year-olds in 2011, the study found. In a separate study released in 2012, the institute found that the percentage of 19-year-olds with a driver's license had fallen below 70%, its lowest point in nearly 30 years. Collectively, the results show the industry's success is still predicated on its ability to connect with older buyers. "The probability of buying a vehicle per driver is highest for people between 55 and 64 years of age," said Michael Sivak, who led the study, which relied on data from R.L. Polk. "That is probably surprising to many people because they think of much younger people being the target audience."
Source: Detroit Free Press
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Quotable
"The CFPB is refusing to share how they came to the conclusion that dealerships have unintentionally discriminated or why. The CFPB is fundamentally changing the multi-billion dollar automobile marketplace and yet the bureau is not clear on how their actions will impact auto lending, consumers or the economy."

      ---  Damon Lester, president of the National Association of Minority Auto Dealers, commenting on a letter sent by 13 House Democrats to the CFPB seeking details on how it plans to enforce new rules on discrimination in auto lending, Bloomberg, May 30

Chairman's Column
CFPB Guidance Lacks Transparency and Research
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