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Inside this issue
H.R. 1737 Will Create Transparency at the CFPB and Maintain Affordable Auto Credit
NADA Forecasts 17.7 Million New Vehicle Sales in 2016
Fitzgerald Auto Mallsí Owner Has a Formula for Success: Hustle
Ford Says SUVs to Become 40% of the U.S. Auto Market by 2020
Trans-Pacific Pact Clears Way for Auto-Sector Growth
Chevrolet Colorado, Camaro Awarded Motor Trend Car and Truck of the Year
Top Stories
H.R. 1737 Will Create Transparency at the CFPB and Maintain Affordable Auto Credit
NADA President Peter Welch

Today alone, tens of thousands of American consumers will purchase a new car or truck, and the overwhelming majority of consumers who finance their purchase will take advantage of optional financing offered through a dealership.

Consumers benefit when they finance through dealerships. An individual consumer might be able to track down four or five interest rate quotes in a day by going to local banks or credit unions. But dealers can shop a customer’s credit application to dozens of lenders instantly — and this usually results in dealerships offering customers lower rates than they can obtain on their own.

Dealers can also discount rates for their customers. Because dealers are compensated by lenders for arranging credit, dealers can cut their own compensation to reduce a customer’s rate to meet or beat a competing offer.

Dealer discounts are a good deal for everyone — consumers get great rates, and dealers are able to earn their business.

But the Consumer Financial Protection Bureau (CFPB) has been trying to eliminate dealer discounts, because it alleges that discounts create a fair credit risk.

The CFPB has sought, through “guidance,” to make it impossible for dealers to discount interest rates for their customers, even for customers facing serious budget constraints.

The main problem with the CFPB’s policy is that, while well intentioned, it will reduce competition and raise credit costs, thereby hurting the very consumers it is trying to help. According to a Wall Street Journal analysis, a recent CFPB settlement could cost some customers $586 in higher credit costs. By eliminating discounts, everyone would be put at risk of paying more by eliminating this competitive force from the marketplace.

Equally troubling is that the CFPB initiated this policy behind closed doors, without any transparency or input from the public. For more than a year, the CFPB would not even release the methodology backing up its policy despite repeated bipartisan requests from members of Congress. And, once disclosed, its methodology was thoroughly discredited in a major peer review study.

This week the House will consider a bill (H.R. 1737), that would rescind the CFPB’s flawed auto finance “guidance,” and require transparency and public participation before issuing new guidance. The bill also directs the CFPB to study the consumer impact of eliminating a car buyer’s ability to get a discount in the showroom. The CFPB has admitted to Congress that it failed to undertake this fundamental analysis before issuing the flawed guidance.

Most importantly, there’s a better way to ensure fair credit while keeping credit affordable and accessible.

The National Automobile Dealers Association (NADA), the National Association of Minority Automobile Dealers and the American International Automobile Dealers Association issued a compliance program for their members, based on a fair credit program that the Department of Justice developed for dealers in 2007. The compliance program ensures that when dealers discount rates, it is for legitimate business reasons that have nothing to do with the buyer’s background. Many dealerships have adopted this program, and numerous well-respected compliance attorneys who have reviewed this optional approach are very supportive of it.

Unfortunately, the CFPB won’t accept this common-sense solution.

Discrimination is wrong, period. And fair credit is critical for consumers everywhere. But so is their ability to get the most competitive rates out there for their cars and trucks. H.R. 1737 and the automobile compliance program would ensure fair access to credit for everyone, while preserving a consumer’s ability to get discounted interest rates and competitive credit.

NADA urges members of Congress to vote yes on H.R. 1737.

Welch is president of the National Automobile Dealers Association.
Source: The Hill
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NADA Forecasts 17.7 Million New Vehicle Sales in 2016

Moderate wage growth, declining gasoline prices and continued low interest rates on auto loans will drive new car and light truck sales higher in 2016, Steven Szakaly, chief economist of the National Automobile Dealers Association, said today on the sidelines of the Los Angeles Auto Show. “New light-vehicle sales will rise to 17.71 million units in 2016, a 2.3% increase from our forecast of 17.3 million sales in 2015,” Szakaly said. “This would mark the seventh straight year of increasing U.S. new-vehicle sales.” Szakaly cautioned that without heavy automaker incentives, new-vehicle sales will likely peak in 2016. “We expect rising incentives and for automakers to use their increased manufacturing capacity to chase market share and volume in 2016,” he said. “In the long run, new-vehicle sales cannot be sustained above 17 million units because of rising interest rates, increasing regulatory compliance costs and wage and income pressure. While we expect 2016 to be an excellent sales year, we forecast new-vehicle sales falling to 17.2 million units in 2017.” He added that wages will grow only about 2% over the next 12 months, and interest rates are likely to rise by 50 to 75 basis points by year end 2016.
Source: NADA
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Fitzgerald Auto Mallsí Owner Has a Formula for Success: Hustle

Selling cars is like journalism. You put in the time, talk to enough people, and you get results. Ask Jack Fitzgerald, founder and owner of Fitzgerald Auto Malls, which did $740 million in business and performed 159,000 repairs across 16 locations in Maryland, Pennsylvania and Florida last year. “I worked hard, and I learned to listen to the customers and get them what they wanted,” the gravelly voiced veteran car dealer said. Fitzgerald is a character. “Nobody outworks me,” he said. “Pete Rose was known as Charlie Hustle. I try to be the Charlie Hustle of the car business. That’s my formula.”
Source: The Washington Post
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Ford Says SUVs to Become 40% of the U.S. Auto Market by 2020

Baby boomers emptying the nest and their adult offspring starting families are driving demand for sport utility vehicles, which will account for two in five new auto sales in the U.S. by 2020, according to Ford Motor Co. Americans will buy a record 5 million SUVs in 2015, fueled by low gasoline prices, cheap car loans and a desire for high-riding big rigs that can haul plenty of people and possessions, according to Kevin Schad, brand manager for the Ford Escape. Sales of SUVs and sport wagons are up 16 percent this year, according to researcher Autodata Corp. And they account for almost a third of auto sales in the U.S., Schad said.
Source: Bloomberg
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Trans-Pacific Pact Clears Way for Auto-Sector Growth

Cuts to tariffs and liberalized origin rules attached to automotive products and parts traded between signatory countries of the Trans-Pacific Partnership should help exporters identify new market openings. Manufacturers also will be able to pinpoint their vulnerability to new competition. The agreement’s text has been published by the 12 signatory countries: the U.S., Japan, Canada, Australia, New Zealand, Mexico, Vietnam, Malaysia, Chile, Brunei, Singapore and Peru. It also has been released online by the individual governments. The ultimate aim of the TPP is to make most of these trades duty-free. Once ratified by all parties, the pact could take effect as early as next year.
Source: WardsAuto
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Chevrolet Colorado, Camaro Awarded Motor Trend Car and Truck of the Year

General Motors snapped up the two top honors from Motor Trend magazine for new vehicles, providing a key vindication for the company's renewed product sensibility amid exceedingly competitive times in the auto industry. Motor Trend named the Chevrolet Colorado as its Truck of the Year and picked the Chevrolet Camaro as its Car of the Year. The magazine named the Volvo XC90 as its SUV of the Year. The Colorado's victory is particularly sweet for GM, which zigged while the industry zagged by embracing mid-size pickup trucks. While Ford stuck with the full-size F-series pickup and Fiat Chrysler bet on the full-size Ram pickup, GM revived the temporarily defunct Colorado, giving the vehicle a complete overhaul. Other Motor Trend Truck of the Year finalists were the Chevrolet Silverado 1500, GMC Canyon, GMC Sierra 1500, Nissan Titan XD and Toyota Tacoma.
Source: USA Today
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Quotable
"Discrimination is wrong, period. And fair credit is critical for consumers everywhere. But so is their ability to get the most competitive rates out there for their cars and trucks."

    -- NADA President Peter Welch on why Congress should vote yes on H.R. 1737 in a commentary in The Hill, Nov. 17

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