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Inside this issue
CFPB Opposition Grows
How Car Dealerships Really Make Their Money
FCA Hacking Risk Kept From Regulators for 18 Months
Lexus Leans on Leases as U.S. Luxury Race Tightens
Many Used EVs Going for Less Than Gas Counterparts
Honda’s Hit: $16,000 Coupe Sells Out After First Production Run
NADA Foundation Ambassador Spotlight: Wade Walker
Top Stories
CFPB Opposition Grows

There is growing opposition to the Consumer Financial Protection Bureau’s (CFPB’s) plans for regulation of the auto lending sector, with a bipartisan bill designed to remove the agency’s making progress in gaining support for an eventual change in legislation to block its current approach. The US House Financial Services Committee has approved a bill to revoke the CFPS’s auto lending guidance bulletin, which the agency issued in 2013. This suggests auto lenders impose controls on dealer interest rate mark-ups or eliminate dealers’ discretion to mark-up loans and instead use another reward mechanism, such as a flat fee per transaction.

The bill was passed at the committee by 47 votes to 10. As well as withdrawing the guidance, it says the CFPB should be required to give notice and have a public consultation before issuing guidance and make a full study of the costs and impacts of any guidance on consumers and other recognised groups, such as small businesses. In addition, the bill’s proponents wants the agency to make public the data and methodologies it uses to assess whether its guidance is being met, in areas such as possible discrimination in lending. “We want to ensure that the CFPB’s auto finance policy is based on accurate analysis and is based on the best interest of consumers,” noted Representative. Ed Perlmutter, a Democrat, who introduced the bill with Republican Representative Frank Guinta.

The CFPB’s use of a particular methodology to assess whether dealers and lenders are discriminating against ethnic minority groups and others has been strongly criticised by the National Automobile Dealers Association (NADA), among others.
Source: Asset Finance International
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How Car Dealerships Really Make Their Money

Last year was another good year for auto dealers, according to the 2014 financial profile of franchised new-car dealerships from the National Automobile Dealers Association (NADA). Auto sales have grown for five straight years at an average 9% growth rate. Dealerships across the nation employ more than 1.1 million workers, and wages have increased 3.3% on average since 2011 to the current annual average salary of $55,000. Yet the net profit margins are a thin 2.2% of total sales and have been for three years in a row, while gross margins as a percent of total sales continued its five-year slide to reach 13.1%.

While NADA is correct in saying it is a good year, the definition of a good year in auto dealerships is a bit more generous than in other industries. According to Steven Szakaly, Chief Economist at NADA, the 2.2% margin is at least a full percentage point less than that of many other retailers. The intense competition among dealers and the large choice of models make auto dealerships a perpetual low margin business. Even so, people are still willing to enter the business. The NADA report claims there were 16,396 new-car dealerships in the US as of the end of 2014 — an increase from 2013 of over 200 outlets (or “rooftops” as they are known in the industry).
Source: Moneytips.com
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FCA Hacking Risk Kept From Regulators for 18 Months

Fiat Chrysler Automobiles NV waited 18 months to tell federal safety regulators about a security flaw in radios being installed in more than a million vehicles that hackers exploited in July to seize control of a Jeep. The automaker says it was working on a fix, and didn’t consider the problem a safety defect. The National Highway Traffic Safety Administration saw otherwise. Eight days after being notified by the company, the agency pushed Fiat Chrysler to recall 1.4 million cars and trucks -- the first auto recall prompted by cybersecurity concerns. The episode came just days before Fiat Chrysler agreed to a record $105 million penalty to settle complaints about its recall performance on other issues, including malfunctioning air-bags. NHTSA faces its own criticism for failing to promptly get unsafe vehicles off the streets.
Source: Bloomberg

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Lexus Leans on Leases as U.S. Luxury Race Tightens

Toyota Motor Corp.'s Lexus is relying more on leasing than BMW and Mercedes-Benz as it challenges the German brands for the lead in U.S. sales of luxury vehicles. The Toyota division started getting more aggressive with 24- and 36-month lease offers about four years ago, said Jeff Bracken, Lexus's group vice president. "It brings customers back to us from a retention standpoint pretty frequently," Bracken said in an interview Wednesday at an industry conference in Acme, Michigan. "That will be a strategy we'll continue to embrace. It seems to work well for us." Lexus is off to a strong start in what has been a big year for luxury vehicles in the U.S.
Source: Bloomberg
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Many Used EVs Going for Less Than Gas Counterparts

If it’s not on your radar already, one industry trend will be soon as the stats become increasingly hard to ignore. That is, electric vehicles’ alarming depreciation rates. According to new data and insight from Black Book, EVs continue to face much heavier depreciation rates than their gas counterparts. In some instances, consumers can shell out up to $20,000 more for a new electric version of a vehicle than they would for the sister gas model. That said, three years down the road, Black Book pointed out, EVs could easily be priced $900 below their gas counterparts, showing rapid declines in price.
Source: Auto Remarketing
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Honda’s Hit: $16,000 Coupe Sells Out After First Production Run

Honda Motor Co. has sold out all 8,600 of its new roadsters slated for production this year and is fully booked through June. The only problem: four in five buyers of the $16,000 sports car are over 40. That is a much older demographic than other models in the lineup and many of these older customers are repeat customers buying the coupe as a second car, according to Misato Fukushima, a company spokeswoman. It’s also a contrast to the last sports car Honda introduced in 1999, the S2000. Back then, only one in five buyers were over 40 years of age. While the older repeat buyers show Honda has a strong following of longtime fans, a failure to attract younger customers will hurt the prospects for the carmaker in its home market.
Source: Bloomberg
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NADA Foundation Ambassador Spotlight: Wade Walker


NADA Foundation Trustee Wade Walker (left) presents a grant to Camp Ta-Kum-Ta executive director Hattie Johnson.

NADA Foundation Trustee Wade Walker and his sister, Megan Picard, recently presented a $4,000 grant to Camp Ta-Kum-Ta through the Ambassador's program. Camp Ta-Kum-Ta, located in South Hero, Vt., provides services for children between the ages of 7-17 who have or have had cancer and their families at no cost. Since 2002, the Walker family has presented more than $24,000 to organizations in Vermont.

Are you interesting in joining the NADA Foundation's Ambassadors program to support local organizations in your community? Click here to learn more.
Source: NADA Foundation
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Quotable
"We want to ensure that the CFPB’s auto finance policy is based on accurate analysis and is based on the best interest of consumers."

   
-- Congressmen Ed Perlmutter (D-Colo.), commenting on  H.R. 1737, a bipartisan bill to repeal the CFPB's flawed 2013 guidance, Asset Finance International, Aug. 6

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