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Inside this issue
BB&T Switches to Flat Fees
Riding High: Auto Sales Set for Big Second Half
NADA: Rising Used Supply, Lower Prices By 2017
Two Las Vegas Dealerships Settle Deceptive Advertising Charges
Register Now for NADA's 'Using Technology to Sell the Way Consumers Want to be Sold' Webinar
Lawsuit Dismissed Against GM Board Over Ignition Switch
How Mexico Could Color UAW Talks
Hyundai Snags NFL Sponsorship, Replacing GM
Click here for more auto industry news at NADAFrontPage.com. .
Top Stories
BB&T Switches to Flat Fees

BB&T Dealer Financial Services is the first Top 20 auto lender so far to switch to flat fees from dealer markup, apparently to head off potential problems with regulators over dealer discretion in setting consumer interest rates. “We’ve been testing and evaluating flat-fee products for the last two years so we believe this is a good long-term business decision for both consumers and our dealer partners,” BB&T spokesman Brian Davis told Auto Finance News. The new BB&T flat fee, which takes effect July 1, is 3% of the amount financed, up to a maximum fee of $2,500, a dealership source said. BB&T, based in Winston-Salem, N.C., wouldn’t confirm the amount.

BB&T makes mostly prime-risk auto loans in Mid-Atlantic and Southeast states, plus Texas. The new flat fee does not apply to Regional Acceptance Corp., a BB&T unit which offers subprime auto loans nationwide. The bank didn’t attribute the move to pressure from regulators, but in a written statement the bank cited “fair and equal treatment of all consumers,” and said it was launching a “nondiscretionary dealer compensation program.” The latter is a buzzword of the Consumer Financial Protection Bureau, which has been trying to get auto lenders to stop compensating dealerships using dealer reserve, also called dealer markup, since March 2013.

Critics of the CFPB downplayed the BB&T change. “One company’s change won’t move the market,” said Karen Klugh, a spokeswoman for the American Financial Services Association, a lender group. “Consumers benefit greatly from the existing model, which is the best reason the market hasn’t moved away from the existing model to flats,” she said. Jared Allen, a spokesman for the National Automobile Dealers Association said NADA wouldn’t comment on a specific company, but the association was “concerned” in general, about “any governmental pressure or requirement that a particular compensation model be adopted.” The dealer association recommends that dealers follow a policy of setting a fixed ceiling on dealer reserve, and document specific “business reasons” for discounts, such as matching a competing offer.
Source: Auto Finance News

Editor’s Note: Dealers as well as finance sources are responsible for complying with fair credit laws and this applies regardless of the type of compensation program that has been adopted by the finance sources to which a dealer assigns its credit contracts. Flat fee compensation programs are no exception. While they may constitute a “nondiscretionary dealer compensation program” to a finance source that employs them, they do not eliminate the pricing discretion of dealers who must determine to which of several competing finance sources they will assign their credit contracts. Dealers must manage the exercise of this discretion with finance sources that offer flat fees in a way that avoids a fair credit or steering violation just as the optional NADA Fair Credit Compliance Policy & Program – which is modeled on the fair credit compliance program contained in former DOJ consent orders with dealers – manages the exercise of dealer discretion in contracts involving dealer participation. This topic is discussed in greater detail in the NADA article entitled The Fallacy of Flats. Dealers should consult with counsel concerning the legal sufficiency of the pricing policy that they adopt.
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Riding High: Auto Sales Set for Big Second Half

After much better than expected sales in the first half of 2015, US automakers are poised to enjoy a very strong second half of the year. So strong, in fact, that analysts are starting to raise their estimates for full-year sales. "A couple of months ago we thought sales would start to level off and maybe pull back, but now we've changed our forecast," said Jeff Schuster, Senior Vice President of Forecasting for the consulting firm LMC Automotive. What's behind the higher forecast? The relatively strong economy, low unemployment rate and still lingering pent-up demand because the average vehicle in the U.S. is over eleven years old.

The National Auto Dealers Association agrees. Its new forecast for 2015 auto sales is 17.17 million, an increase of 230,000 vehicles over its previous target. "Purchases and leases of new cars and light trucks will continue as a stronger overall economy continues to drive demand," said NADA Chief Economist Steven Szakaly. NADA believes the strong second half of the year will continue in 2016. It's targeting annual sales next year of 17.62 million vehicles.
Source: CNBC
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NADA: Rising Used Supply, Lower Prices By 2017

Dealers should expect a sharp increase in late-model used-vehicle supplies along with significant decreases in used-vehicle values over the next couple of years. That’s according to the National Automobile Dealers Association, which hosted its Economic Quarterly press briefing on Monday to recap the first half of the year and set its gaze forward. The NADA’s current forecast estimates that the supply of late-model vehicles, which it specifies as zero- to 5-year-old vehicles, will be 28 percent higher by 2017 than at the end of 2014. The association’s projection, based on the expectation of increased used-vehicle supply and pressure from new-vehicle sales, would result in a 4.5-percent decrease in used-vehicle prices per year in 2016 and 2017.
Source: Auto Remarketing
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Two Las Vegas Dealerships Settle Deceptive Advertising Charges

Two Las Vegas car dealerships have agreed to settle Federal Trade Commission charges that they used deceptive advertising. The dealerships, Planet Hyundai and Planet Nissan, ran ads that misrepresented the purchase price or leasing offers of their vehicles and the amount due at signing, the FTC said in a statement [Monday]. The ads also violated the Consumer Leasing Act and the Truth in Lending Act by failing to disclose required lease terms and other credit information, the FTC said. The National Automobile Dealers Association said it recently issued A Dealer Guide to Federal Advertising Requirements, which is supposed to help new-car dealers comply with federal advertising requirements. "The guide provides examples of 'bad' and 'good' ads and includes chapters on 41 different federal advertising topics, including 'sweepstakes/lotteries,' as well others such as the use of discount claims, e-mail advertising, green marketing claims, Internet advertising, satisfaction guarantees and trigger terms," the NADA said in a statement.
Source: Automotive News
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Register Now for NADA's 'Using Technology to Sell the Way Consumers Want to be Sold' Webinar

NADA University Online will host the webinar "Using Technology to Sell the Way Consumers Want to be Sold" on Wednesday, July 1 at 1 p.m. ET. The free webinar, presented by Ali Mendiola from Dealertrack Technologies, will discuss how consumers are using technology to shop for cars. Attendees will learn how to implement a sales workflow that capitalizes on technology while engaging, building trust and saving time for the consumer. Click here to register.
Source: NADA University Online
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Lawsuit Dismissed Against GM Board Over Ignition Switch

A court has dismissed a lawsuit against General Motors that alleged the board of directors did not perform its duty in preventing the mounting losses from the sale of vehicles with faulty and deadly ignition switches. The shareholder suit sought to recover losses due to expenses, fines, lawsuits and damages to the company as a result of the 119 deaths and 234 injuries associated with faulty parts and a huge and costly recall. GM had filed a motion to dismiss the action and the Delaware Chancery Court made its decision Friday to do so. The decision was not made public until late Monday night.
Source: Detroit Free Press
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How Mexico Could Color UAW Talks

Low-cost labor a key concern of union and Detroit 3

When the UAW and the Detroit 3 open contract talks next month, a third party will hover over the discussions and almost surely influence the outcome: Mexico. The union will seek an agreement that keeps as much Detroit 3 production as possible in U.S. plants, while rival automakers increasingly seek to take advantage of lower labor costs in Mexico. At the same time, the Detroit manufacturers will use the prospect of shifting work to Mexico as a bargaining chip to blunt union demands for higher wages.
Source: Automotive News
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Hyundai Snags NFL Sponsorship, Replacing GM

A year ago, Hyundai Motor Co. sponsored the 2014 FIFA World Cup with the motto “Because Fútbol.” Now, the Korean automaker is going after a different type of football fan as the automotive sponsor of the National Football League. Hyundai and the NFL jointly announced a four-year sponsorship deal [Monday].
Source: Automotive News
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Quotable
"Purchases and leases of new cars and light trucks will continue as a stronger overall economy continues to drive demand."

    -- NADA Chief Economist Steven Szakaly, commenting on raising NADA's 2015 sales forecast to 17.17 million, CNBC, June 30

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