Used Car News 4/17/17

Large Recalls Continue to Plague Industry

By Ted Craig

DETROIT – Recall volumes hit a new high in 2016 with 927 separate recalls afecting 53.2 million vehicles.

This was the third year recalls reached a new milestone.

Neil Steinkamp, managing director at SSR, presented an overview of recalls in 2016 and what to expect going forward during an event hosted by the Society of Automotive Analysts.

The Takata air bag recalls drove much of the volume of recalls, but there were other major issues as well. General Motors had the larg-

est non-Takata recalls, with 3.6 million units afected.

“The large recall is still an important player,” Steinkamp said.

Nothing comes close to the Takata recall, however. By 2020, between 64 million and 69 million inlators will be recalled.

“Obviously, this is an extraordinary recall,” Steinkamp said.

Eighty percent of recalls cover fewer than 100,000 vehicles, with half covering fewer than 10,000 vehicles. The smallest recall last year was Mercedes’ recall of one CLG.

The other 20 percent, though, make up 90 percent of all vehicles recalled.

Airbag recalls overall are growing. There were 45 non-Takata air bag recalls in 2016.

Part of this comes from the manufacturers playing it safe by issuing recalls rather than just technical service bulletins.

It’s not just the inlators that are being recalled, either. Many of these air bag recalls are software recalls.

These large recalls often cover vehicles going back several model years. This hurts the completion rates for their repairs.

Vehicles that are ive years old and older have completion rates below 50 percent, even after two years.

The good news is manufactur-

ers now have an example of how to boost those rates – the GM ignition switch campaign.

GM made a major efort, doing everything from setting up a special call center to reaching out to drivers via social media. As a result, the company achieved a completion rate in the 70 percent to 80 percent range.

“This is what’s going to lift these old vehicle completion rates,” Steinkamp said.

The manufacturers will need to learn from that experience, as the amount of recalls is likely to grow as vehicles become more complicated and sales continue to rise.

Higher Delinquences, Lower Prices Create Stress

By Ted Craig

Concerns are mounting about the state of auto retail and inance as both wholesale volumes and delinquencies grow while new-car sales plateau.

But most industry observers remain fairly conident about prospects for prices and inance, at least for now.

Ally Financial Inc. did recentlyloweritsproitexpectations to 5 percent growth from 15 percent growth at the start of the year.

But Chris Halmy, Ally’s chief inancial oicer, said the company has adjusted its auto inance focus to risk from growth.

Halmy also calls the decline in wholesale prices manageable.

Melinda Zabritski, of Experian Automotive, said many inance companies are takingthesameapproachon inancing as Ally and tightening.

The situation looks bad right now because delinquencies tend to grow 18 monthsafteroriginationand

creditwaslooserin2015and early 2016, Zabritski said.

It’s not all of auto inance that’s struggling, either.

Subprime auto inance, however, is showing more signs of trouble.

Zabritiski said deep subprime delinquencies recently saw a larger year-overyear increase than they had in prior years.

Amy Crews Cutts, Equifax’s chief economist, said not all subprime is the same, either.Cuttssaidbanks,captive and credit unions are performing fairly well.

It’s the pure auto inance irms and larger buy-here, pay-here operations that are seeing more problems.

The rise in delinquencies becomesaproblemifitleads to more defaults.

And that becomes a problem if creditors lack adequatereservestocoverthose defaults.

Those reserves last longer if the creditors can get back more money at auction.

A decline in wholesale prices has many inancing providers predicting higher

loses going forward.

The latest readings for wholesale prices show a fairly resilient market.

Manheim reports that wholesale prices declined 0.5 percent in March, when adjusted for mix, mileage and seasonality.

The Manheim Used Vehicle Value now stands at 124.1, which represented a 1.3 percent increase from a year ago.

“Although used vehicle values have declined in ive of the last six months, it has not been the collapse that many analysts have warned of for more than a year due to increasing wholesale supplies,” said Manheim chief economist Tom Webb.

Muchhasbeenmadeofthe unusualdeclineinwholesale prices in February, which some warned was a sign of a more rapid decline.

ButDavidVonParis,senior automotive analyst for J.D. Power Valuation Services, said a rebound in March put prices in line with traditional movements.

Still, even if prices don’t collapse, a decline is inevitable as volumes grow, said Tom Kontos, chief economist for KAR Auction Services Inc.

“It’s best to brace for more softening,” he said.

NEWS BRIEFS

Carvana Files for IPO

Carvana has iled a registration statement with the U.S. Securities and Exchange Commission relating to a proposed initial public ofering of shares of its Class A common stock.

Thenumberofsharestobeofered andthepricerangefortheproposed ofering have not yet been determined. Carvana intends to list its Class A common stock on the New YorkStockExchangeundertheticker symbol “CVNA.”

Wells Fargo Securities, LLC; BofA Merrill Lynch; Citigroup Global Markets, Inc. and Deutsche Bank Securities, Inc. are acting as joint book-running managers for the proposed ofering.

Robert W. Baird & Co. Incorporated, William Blair & Company, LLC, BMO Capital Markets Corp. and JMP Securities, LLC are acting as co-managers.

The proposed ofering will be madeonlybymeansofaprospectus.

Copies of the preliminary prospectus,whenavailable,maybeobtained from Wells Fargo Securities LLC and BofA Merrill Lynch.

A registration statement relating to these securities has been iled with the SEC, but has not yet becomeefective.Thesesecuritiesmay

not be sold, nor may ofers to buy be accepted,priortothetimetheregistration statement becomes efective.

FTC Approves Certiied Settlement

Following a public comment period, the Federal Trade Commission has approved inal consent orders with CarMax, Asbury Automotive Group and West-Herr Automotive Group, settling charges that they touted how rigorously they inspect their used cars, yet failed to adequately disclose that some of the cars were subject to unrepaired safety recalls.

The inal orders prohibit CarMax, Asbury and West-Herr from claiming that their used vehicles are safe, have been repaired for safety issues, orhavebeensubjecttoarigorousinspection,unlesstheyarefreeofopen recalls,orthecompaniesclearlyand conspicuouslydisclosethattheirvehicles may be subject to unrepaired recalls for safety issues and explain how consumers can determine a vehicle’s recall status.

The orders also prohibit the companies from misrepresenting material facts about the safety or recall status of the used cars they advertise.

In addition, the orders require the

companies to inform recent customers, by mail, that vehicles they bought as far back as July 1, 2013, may be subject to open recalls.

The commission vote approving the inal orders against CarMax, Asbury and West-Herr GM, and letters to commenters was 2-0.

Independent Dealers Grow More Optimistic

The latest installment of the National Independent Automobile Dealers Association’s quarterly Business Conidence Survey relects immense optimism from independent used vehicle dealers regarding retail sales, consumer traic, proitability and economic conditions.

The survey, conducted in partnership with Equifax during the irst quarter of 2017, showed conidence in all of those areas was up substantially from the previous quarter and year over year.

Nearly two-thirds of respondents indicated they believe the economy will improve in the next quarter, a signiicant increase from the previoussurvey,inwhichonly34percent expected economic improvement, and the 36 percent of the irst quarter 2016 – that year’s highest percentage. Just 2 percent said they ex-

pect the economy to decline, down from 22 percent in the fourth quarter survey.

It’s the irst time since the third quarter of 2015 that a majority of survey respondents have expressed a positive outlook on economic conditions.

That optimism is relected throughout the survey. More than half (53 percent) of the respondents plan to invest in more retail inventory,upfrom41percentintheprevious survey, and 54 percent expect to hire new sales staf (up from 32 percent), as 70 percent anticipate retail sales to grow (up from 46 percent) and71percentexpectcustomertrafic to increase (up from 36 percent).

On the inancial side, the percentage of dealers expecting cash low to improve (57 percent, up from 34 percent) and credit availability to expand (32 percent, up from 23 percent) over the next quarter was also sharply higher.

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Editorial: Ted Craig, Managing Editor Jeffrey Bellant, Staff Writer

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Cars.com, Kelley Score High

The recently published J.D. Power 2017 U.S. Automotive Website Evaluation Study Cross-Device inds that, in general, third-party auto websiteshaveavarietyofindividual strengths and weaknesses in terms of content delivery.

The study examines websites that vary as to speciic function, but that deliver information to prospective automotive vehicle customers. The study examines which current site functions and designs are most effective in helping shoppers narrow their consideration set and increase their likelihood to recommend and return to that website.

and the importance of various site features to online shoppers.

Kelley Blue Book, the study shows, provides comprehensive vehicle viewing information, including 360-degree interior/exterior views, as well as intuitive dealer locator and inventory search tools. The latter are especially important to shoppers who are immediately involved in the vehicle selection process.

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“Over the past ive years, we’ve seen an explosion of innovation that has been employed by third-party automotive sites, among others, to guide automotive shoppers through the process,” said Thomas King, vice president of PIN OEM operations, media & marketing at J.D. Power. “However, in the end, it always comes back to content and we have found that the top-performing sites are better at delivering key information on diferent devices.”

The study ranks satisfaction with desktop and mobile rankings platforms separately. Both rankings are based on the combined index scores of the four measures that comprise the overall website experience: navigation; appearance; information/ content; and speed. The study bases satisfaction on a 1,000-point scale.

Among the four main measures, website satisfaction is lowest for navigation.

The redesigned study concurrently evaluates automotive third-party websites from two perspectives, acrossboththedesktopandthemobile platform: overall site function,

Cars.com ranks highest in overall satisfaction with automotive third-party desktop websites (798), followed by Edmunds.com (797) and Carfax (785). Kelley Blue Book ranks highest in overall satisfaction with automotive third-party mobile websites (794), followed by CarGurus (790), The Car Connection (782), and U.S. News Best Cars (782).

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Dealers Face Challenges

Benchmarks for the buy-here, pay-here business are the worst in two decades, and could get even worse, according to Ken Shilson, founder of the National Alliance of Buy-Here, Pay-Here Dealers.

Buy-here, pay-here dealers today face an array of challenges, including increased regulations, changes in accounting practices, higher inventory costs and increased competition.

“You just need to be a better operator these days,” Shilson said.

The NABD benchmarks show

that gross proit has declined to 29 percent of vehicle sales from 31 percent last year.

Bad debts as a percentage of sales have grown to 27 percent from 25 percent last year.

Shilson said the answer isn’t to try growing out of the situation.

Too many dealers have already taken on extra debt, with total debt growing to 62 percent of total assets from 56 percent last year. he said.

The better solution is to make operations more eicient.

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GSA SALES

GOVERNMENT SALES OFFER STRONG BENEFITS FOR AUCTIONS

By Jeffrey Bellant

During the past three years, the U.S. Government Services Administration (GSA) has sold an average of 36,000 vehicles annually through wholesale auto auctions, according to Bill Toth, who oversees GSA’s fleet vehicle and lease acquisitions.

The average selling price of GSA vehicles in recent years is $10,602.

“The GSA buys new vehicles from the manufacturers and leases them to other federal agencies,”

Toth said in an email.

“When a vehicle’s leasing period ends, it is sold to the public through auction. Vehicles sold at auction have been used by government agencies for ordinary transportation purposes.”

Mid-State Auto Auction in New York Mills, Minn., and Missouri Auto Auction in Columbia, Mo., regularly run GSA sales.

“The positive side is you can get a lot of cars with good miles on them, in good condition that you can sell to customers,” said Rob Thompson, president and general manager of Mid-State Auto Auction.

Thompson has been running GSA sales for five or six years.

Kevin Brown, owner/ general manager of Missouri Auto Auction, has had a GSA sale for about six or seven years.

Brown first bid on a GSA sale to bring in solid vehicles and new buyers.

Participating GSA Fleet Vehicle Sales auction locations are selected through an open solicitation / competitive contracting process, Toth said.

The factors that impact the award of a contract are: the vendor’s ability to meet the contract requirements; the auction location; and the price of the services.

“Maximizing the sales proceeds from the disposal

of vehicles plays an important role in our operation, as GSA Fleet does not receive appropriated funds,” Toth said.

“The money raised from the sales is used to buy new vehicles for the fleets.”

Toth said GSA originally held its own auctions and later migrated to working with commercial auctions.

“A national auction contract was established to streamline the process and improve consistency,” stated Toth. The age and mileage of vehicles are determined by federal regulations.

Most new government vehicles for are delivered in spring and summer, which is why many GSA sales are held between spring and fall.

“Our first GSA sale this year is going to be April 21,” Thompson said. That’s pretty much in line with years past. They will go out until November.”

In a typical year, MidState Auto Auction will run between 500 and 600 GSA units.

Thompson said the schedule of the GSA selling season depends on when the new cars come in.

“We do the marshaling, too,” Thompson said. “If we run the cars when we get them, then a lot more depends on the manufacturers than it does anything else.”

Along with extra cars

and customers, the GSA contract does bring some extra work.

“New cars will get dropped off here,” Thompson said. “We’ll get the cars prepped and get them ready to go. Then we’ll do a swap-out with the GSA customer.”

The auctions will work with individual GSA employees who bring in the old car and pick up their new one.

“There’s always going to be a little extra challenge with something like this,” Thompson said.

“You’re coordinating with an individual for each car. With dealer consignment, you might go to a dealer and pick up 20 cars for the auction. If you have 20 GSA units, that’s 20 different swaps.”

Thompson said there is some prep work to do once a new car is taken off a semi-truck.

“You have to put antennas on and license plates –some minor stuff like that,” he said.

Sometimes the auction will deliver the new car to the GSA customer - which the auction receives payment for - and sometimes the customer will pick it up from the auction.

Brown said the extra work isn’t a big problem.

Despite the added work that comes with swapping out 350 vehicles and putting them up for sale, it

doesn’t require additional staff, Brown said.

“We have it dialed in,” he said. “We’re just able to mix it in with the rest of our fleet. I’m sure with some of the larger sales, they may have to do something different.”

Brown has a process during the vehicle exchange with GSA employees.

“We’ll have a meet-andgreet with their clients,” Brown said. “We’ll walk around the car that they’re turning in.

“We’ll exchange the license plates. It’s a really pleasant experience.”

Both Brown and Thompson said GSA is a good client.

The staff of GSA makes the experience go well, Thompson said.

“They are very good people to work with,” he said. “They really look at it like they are partners with you. They work with you to have success. I like that about them.

“They’re excellent to work with, in my opinion.”

GSA is also attentive to the process.

“They come in quite a bit to walk around the cars and check how we’re doing,” Brown said. “It’s a pretty good account.”

Auctions have to keep up their end of the deal, if they want to hang on to the account.

Brown said the multiyear contract with GSA is not an automatic renewal.

“You always have to bid it out,” he said.

The benefit of winning a GSA bid is that it gives the auction a better handle on how much they want to bid when the contract is up the next time if they want to keep the account.

What else makes the GSA account attractive to auctions?

“More than anything what GSA does is bring you a buying crowd,” Thompson said. “It’s good because you learn what people want.”

Later, when the auction is holding its regular sale, auction staffers can get a sense of what certain buyers will want based on what sold at GSA, he said.

“It introduces some buyers that you might never see without the GSA sale,” Thompson said. “Very seldom would these be less than 100-percent sales.

“They are very motivated. They are here to sell. They are here to sell everything.”

Brown said it’s always beneficial to offer good quality vehicles to his customers.

“GSA is a good account,” he said. “They are great to work with. They draw a lot of buyers in and they help the rest of our sales.”

Toth said over the past five years, GSA Fleet vehicle sales have on average sold for 111.5 percent of Black Book.

Yoursourceforquality, selectionandvalue: Chase.

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Santander Settles with States

Santander Consumer USA Holdings Inc. has agreed to pay almost $25 million in ines and restitution to consumers in two states.

The investigation, handled jointly by the fraud divisions of the Delaware and Massachusetts attorney general’s oices, revealed that Santander allegedly funded auto loans without having a reasonable basis to believe that the borrowers could aford them. In fact, Santander predicted that a large portion of the loans would default, and allegedly knew that the reported incomes, which were used to support the loan applications submitted to the company by car dealers, were incorrect and often inlated.

“After years of combatting abuses from subprime mortgage lenders, these practices are unfortunately familiar,” said Massachusetts Attorney General Maura Healey.

TheinvestigationbyDelawareand Massachusetts also revealed that Santander was allegedly aware that certain dealerships had high default rates due, in part, to the regular submission of inaccurate data on loan applications – most often involving inlated income – but Santander continued to purchase loans from those dealers anyway and, in some cases, sell them to third parties.

The AG’s oices found that

Santander’s own internal audit concluded that the company’s oversight of auto dealer conduct when making subprime loans was inadequate. Despite identifying a group of dealers that had extremely high default and delinquency rates and other problems, the company continued to fund loans through these dealers.

Santander also allegedly identiied a group of dealers it called the “fraud dealers,” but continued to fund loans through them.

The Massachusetts settlement includes $16 million in relief to more than 2,000 afected consumers and a $6 million payment to the state. Santander has also agreed to implement new oversight policies.

Santander will provide consumer relief in Delaware by paying $2.875 million into a trust for the beneit of harmed Delaware consumers. A trustee will be appointed to locate and pay restitution to hundreds of eligible harmed Delawareans who inanced vehicle purchases through Santander.

Santander will also pay just over $1 million to the Delaware Consumer Protection Fund, which pays for work on consumer fraud and deceptive trade practice matters and other consumer-oriented investigations and legal actions.

Continued on next page

Santander – Continued from prior page

The agreement also requires business reforms by Santander, including: procedures to screen loans originated by Delaware dealers to ensure that they are in compliance with Delaware law and that minimum documentation requirements are met; not waiving those screens or documentation requirements with respect to Delaware dealers identiied as “high risk”; and not sellingtoathirdpartyanyloanspurchased from Delaware “high risk” dealers that have failed a screen or the documentation requirements.

Santander has also agreed, on a prospective basis, to identify and repurchase subprime loans sold to third parties that it later determines do not comply with Delaware law.

This is the second settlement between Healy’s oice and Santander relating to its role in subprime auto lending in Massachusetts. In November2015,theAG’soicebrought an action relating to Santander’s funding of loans that allegedly included expensive insurance coverages, which caused the inance cost to exceed the state usury limit.

Economist Sets Retirement

Cox Automotive announced that chief economist Tom Webb will retire on June 30.

Webb has spent four decades in the automotive industry, working on both the retail and wholesale sides.

“Tom has been an invaluable resource in the automotive industry for years, and his contributions are countless,” said Sandy Schwartz, president of Cox Automotive. “While Tom will be missed by us and many in the industry, everyone at Cox Automotive wishes him all the best in his well-deserved retirement and next chapter. He will always be a big part of the Cox Automotive family.”

Webb joined Manheim as chief economistin2000.Heauthoredthe annual Manheim Used Car Market Report as well as developed and implemented the Manheim Used Vehicle Value Index.

he’s done for Manheim, our clients and our industry.”

Prior to joining Manheim and Cox Automotive, Webb spent 26 years with the National Automobile Dealers Association as a spokesman and analyst for the nation’s franchised new-car dealers.

In 1999, Webb left NADA to become a senior manager in PricewaterhouseCoopers’ automotive practice.

“Like many others, I consider Tom one of the leading authorities and most credible voices in vehicle remarketing today,” said Janet Barnard, president of Inventory Solutions for Cox Automotive. “Our industry has relied on Tom’s insights into economic and remarketing trends to guide business decisions and help evolve the marketplace. We can’t thank Tom enough for all

“Sooner or later most people arrive at this point, but I can say with total conviction that I’ve had nothing less than a fascinating, hugely satisfyingcareer,”Webbsaid.“Ihad the privilege of serving some of the best dealers in the country during my time at NADA, but my fondest memories involve the many ManheimclientsI’vecometoknowduring the last 17 years.

“Above all else, I’m forever grateful for all the relationships I forged over the years.”

PEOPLE IN THE NEWS

KAR Hires Execs KARAuctionsServices Inc. has illed a pair of executive positions.

Thomas “Tom” Fisher has joined the company as executive vice president and chief information oficer.

Fisher will be a member of the company’s senior leadership team reporting to Jim Hallett, chairman and CEO of KAR.

Working across KAR’s remarketing platform, Fisher will design and implement an enterprise strategy that leverages KAR’s technology assets to deploy the company’s customer insights and product solutions.

Prior to joining KAR, Fisher served as senior vice president of cloud operations and general manager at Genesys. He previously served as chief services oicer for Interactive Intelligence, a publicly traded, Indianapolis-based software and cloud developer recently acquired by Genesys. Fisher graduated from Ohio University with degrees in biology and communications systems management before beginning his career as an IT analyst with Andersen

Fisher will be responsible for oversight of KAR’s information technology strategy, operations and activities.

Consulting and applications consultant at Cisco Systems.

Sriram “Srisu” Subrahmanyamm has joined KAR as senior vice president of business transformation.

Subrahmanyam brings more than 20 years of executive operations and consulting experience to the role, including leadership positions across multiple companies and industries such as aviation, technology, logistics and education.

Subrahmanyam will report to Don Gottwald, chief operating oicer for KAR.

Prior to joining KAR, Subrahmanyam served as global vice president of engineering for Ingram Micro, the world’s largest wholesaletechnologydistributor.

He previously served as executive vice president and chief opera-

tions oicer for BrightPoint Americas and in executive leadership positions at Career Education Corp. and United Airlines.

Subrahmanyam holds a doctorate in chemical engineering from Purdue University and a bachelor’s degree in chemical engineering from Birla Institute of Technology and Science in Pilani, India.

Richard Howse has joined the company as chief commercial oficer.

Howse brings more than 30 years of automotive industry leadership to the role, which will focus on developing customer solutions that integrate KAR’s capabilities and businesses. Howse will report to Don Gottwald, chief operating oicer for KAR.

Prior to joining KAR, Howse served as senior vice president of mar-

keting and business development at Volkswagen Credit, where he was previously the director of remarketing. He has also served in senior inance roles at GMAC and GE Capital and leadership positions with JD Power, Audi of America, Honda and General Motors.

NextGear Capital Taps Sales VP

NextGear Capital named Lisa Mackie to its newly created position of vice president of sales, efective immediately.

She is responsible for strategic leadership, vision and execution of the company’s sales efforts.

Mackie joins NextGearCapitalwithmore than20yearsofautoinance and commercial sales leadership experience. Most recently, she was responsible for

driving loor plan sales growth across multiple states as director

of commercial dealer services at Capital One. Earlier roles included director of commercial acquisitions for Hyundai Capital and vice president for Chase dealer commercial services.

AgraduateofUniversity of North Carolina at Fayetteville, Mackie began her career in the Ford Motor Credit Manager Training Program.

RETAIL MARKETS

ARIZONA

Jared Halsted, owner, Double H Auto Exchange, QueenCreek,Ariz.:

“We’ve been in business three years. But I’ve been a licensed wholesaler since 2000. I was also the minority partner in a larger dealership for years before this.

“I’maboardmemberwith the Arizona Independent Automobile Dealers Association. I irmly believe that every dealer in the state should be a member.

“Inormallykeepaninventory of 50 to 55, with about 40 available for sale.

“Being as small as we are, we sell about 15 a month.

“Most of the inventory comes from auctions and some of it comes from wholesalers. ADESA PhoenixinChandler,Ariz.,isone of the main auctions I use.

I also use Metro Auto Auction of Phoenix and Manheim Greater Phoenix

“I do 60 percent buy-here, pay-here, 20 percent cash and 20 percent outside inancing. On buy-here, pay-

here, the average down payment is right around $1,000. Term length is 24 months, only two years. I’m not a traditional buy-here, pay-here, since I have lenders that help me do the buyhere, pay-here funding.

“I use Goldstar by Spireon starter-interrupts/GPS. I don’t typically have to use the starter interrupt, since wehaveagoodrapportwith our customers.

“Average price is $7,500.

“Average model year is 2003to2008.Averagemileage is 130,000, but most of them are less.

“I’ve got 50 percent trucks/SUVsand50percent are cars. Trucks are my best payers because they need their trucks to work.

“I’m a big ‘Buy American’ type guy, but I still sell a lot of Hyundais, Kias and Hondas. So it’s about 50/50 imports to domestics.

“The average cost of my recon is probably higher than most buy-here, payhere guys. I’m putting in around $750 on average. I

need to know these cars are good when I send them out.

“Advertising is on a ton of websites. My main ones are CarGurus, Carsforsale, Autotrader and Craigslist.

“We recently sold a 2001 Ford F-150 4x4, four-door. It had 140,000 miles and sold for $7,900.”

COLORADO

Mark Weida, president, Street Smart Auto Brokers, Colorado Springs, Colo.:

“We opened our retail lot about six years ago. Before that I was a wholesaler for four years and before that I had over 20 years in bigstore retail working for franchises.

“We keep about 60 to 70 in stock for retail. Our target range is to retail about 40 to 50 a month. In April, we should do in the 40s.

“The majority of our vehiclesareacquiredatthedealershiplevel.Wedobusiness with most of the franchise stores in town and some stores out of town. We do

source some vehicles from auctions, probably less than 10 percent of our inventory.

“We do some subprime but we don’t carry the note on anything.

“Our average retail price on the lot for all of last year was $17,200. That has evolved somewhat over the years and big part of that was economics. When I started out, we didn’t have much money so everything was $10,000 and under.

“The average model year is 2012. I haven’t run an analysis on average mileage, butifIhadtoguessitwould be in the 60,000 to 70,000 range.

“About 40 percent of our business is cars. Then it’s probably 30 percent SUVs, 20 percent truck and the rest would be minivans or specialties.

“We probably have an even mix of imports and domestics for cars. On pickups, we’re probably 80 percent domestic. We do a lot of diesels. On SUVs, we’re mainly domestics, just be-

Compiled by Jeffrey Bellant

cause of the availability out there.

“We opened our own (service) shop about a year ago. It was taking up to four diferent outside shops to keep up with our work. We weren’t turning them as quickly as we wanted to and, obviously, we weren’t always top priority at the other shops.

“Weopeneditprimarilyto do our own work, but we’ve actually picked up other independent stores in town that don’t have their own shops.

“Average reconditioning cost is about $850 last time I looked.

“Everything we do in advertising is on the Internet. Rightnow,wedoCarGurus, Cars.com, TrueCar and we do Craigslist. We monitor our advertising and try to keep our advertising costs down to under $200 a car.

“One recent car we sold was a 2002 Buick Lesabre. We normally wouldn’t keep an’02,butitonlyhad77,000 miles.Wesolditfor$5,500.”

WHOLESALE MARKETS

MINNESOTA

Rob Thompson, presidentandgeneralmanager, Mid-State Auto Auction, NewYorkMills,Minn.:

“We’ve been in business 33years.Wehavefourlanes.

“We’ve been in the low 400s for volume. Actually, I think we’re a little bit better than this time last year because our ‘sold’ numbers are up.

“In March, conversion rates were pretty strong. Theyranbetween60and65 percent. Normally, I would say we’d be at 50 to 55 percent.

“You don’t see a spike in prices during tax season like you used to, but the spike in buying is there. I’ve seen people buying in bigger numbers.

“I anticipate that March – when we look at how the inal numbers shake out –is going to be the biggest monthwe’veeverhadinthe history of our place. We got some new accounts. Some of our regular accounts had bigger numbers than nor-

mal. We had the cars here and things fell into place.

“Consistently, we draw 180 to 220 dealers in the lanes. Predominantly they come from Minnesota, but we also draw a lot from Fargo, N.D., and some from South Dakota.

“As the weather’s gotten warmer and business has picked up the mood of the dealers has gotten better.

January was kind of a tough month and then February got a little better. The attitude of the dealers over the last month or two has been really good.

“We’re probably 80 percent to 85 percent dealer consignment. On the nondealer side, we get repos, police coniscations and we’ve gotten into some cooperatives. In those cases, businesses join a co-op for like school districts and things like that, so we’ll get some cars that way.

“Non-dealer consignment seems to be growing for us. We also have national accounts.

“The average price in the lanes is running about $5,000. That might be up a little bit from this time last year. It’s not dramatically up, but we’ve been selling a lot more late model vehicles. We’ve been moving a lot more $20,000 and $30,000 pieces than we had last year.

“We sell a lot of cars online. We use Edge Pipeline. It’s working very well for us. We have about 60 to 65 people online every week. We’re selling cars online.

“SUVs and trucks have been doing super. Vans have been good if you can get newer ones.”

OHIO

Robert Fahey, Value Auto Auction, Crooksville,Ohio:

“We’ve been in business 13 years. We have six lanes. Our(April6)sale,weransix lanes.

“We’ll run between 550 and 700 units. That’s probably up about 140 units year-to-date. That’s over

the three months. I just (attribute) it to hard work.

“Conversion rates are up. They’re always up this time of year, but they’re up even higher from last year. This time of the year they are typically 61 percent to 62 percent.

“Tax season is starting to wane.Butitwasverystrong recently, which surprised me. I thought we were over the hump.

“Over the irst three months of 2017, we had 684 buyers representing 437 customers. One recent sale there was 262 bidders.

“They all seem to be in pretty good moods. The franchise dealers seemed to havesloweddownatad,but not a lot.

“Non-dealer consignment is right at 15 percent of our total volume. Basically that’s bank repos. We’ve seen an increase in those.

“Average price in the lane is $4,297.

“Twice a year we have whatwecallaspecialtysale. This includes powersports,

Compiled by Jeffrey Bellant

collector cars, boats and motorcycles. Sometimes there are even a few tractors thrown in. That’s cominguponMay4.Weusually run around 150.

“We also run a tow lane at the beginning of the sale. Anything that doesn’t run is in that lane, whether it’s a repo or a dealer consignment vehicle. That’s about nine or 10 units.

“For our regular sale, we simulcast all six lanes. It’s really picked up. It’s on the rise. We had a buyer last week that bought 11 online.

“I read stuf all the time about overall trends, but do I see anything that’s new? Not really.

“I think the year is going to be good. There are some positives, like there are going to be more cars in the market. In a supply-and-demand economy, it’s going to drive the prices down, but that is good for buyers. At the same time, it might not begoodforleasecompanies or banks - people who need to sell inventory.”

The spring here in the Mid-South is nearly always a roller-coaster ride going from hot to cold and dry to soaking wet.

nately, no one was hurt, a stark reminder of Mother Nature’stemperleftatrailof downed trees, including one in our backyard, along with

Tony Moorby

• 50-year veteran of the industry

• President from 1997–2000 of ADT Automotive

• Served as ADESA’s executive vice president of sales and marketing

• Moorby & Associates 2006–present

• Awarded the Ring of Honor by NIADA

• NAAA Hall of Famer

Warm fronts from the Gulf of Mexico battle it out with cold Canadian fronts still trying to make their presence felt, gradually diminishing to allow the cloying onslaught of muggy summers.

The lines between the two deine a constant joust of squall lines and thunderstorms with the inevitable damage to life and limb.

An EF1 tornado passed within a half mile of our house and though, fortu-

damaged roofs and buildings.Thiswasjustaglancing blow – others have had lifetimes of belongings stripped away within seconds and sadly, lives, too have been lost.

This year’s winter was almost non-existent. I always think that a day over 32 degrees is a day stolen from winter and so we’ve had one of the warmest ones on record.

That’s the good news. The bad news is that early-

blooming trees like magnolias, forsythia and the like were charmed into blossoming early, only to be caught in cold snap that turned purple-pink cups and gaudy yellow whispers into ugly brown ists shaking at the weather.

Now it seems a little more settled, though the threat of frost persists, and our cherry trees have been pink puballs that are now covering the driveway in a snow like carpet. Redbuds ranging from lilac to puce are as showy as I’ve ever seen them.

Wildlife has been tempted out early. On the trip to and from school we navigate a hilly vale which hosts a turkey trot and the toms have been strutting around with everything sticking out everywhere, showing of to the hens.

Skunks have been all over the place, heralding their sometimes-unseen appearance in the form of their stink.

An unfortunate slow gait

often results in smelly road kill attracting those ugly turkey vultures.

How, in the world, do they eat that stuf?

Red-tailed hawks have been wheeling and soaring, looking for love or lunch, both as eagerly, it seems. They look almost haunting when hovering above their domain and then turn away with a surly slap of their wings when disappointed with no reward.

Surprisingly close to town, coyotes have been courting. Theirnighttime,spine-chilling howls and screeching disturb the quiet of the golf course next door.

Amusingly, they echo the sirens of police cruisers, which start them of in a frenzyofacontestwithacar and not a canine as nature turns to nurture.

The birds’ dawn chorus now starts at around ive

ifteen as irst light glimpses over the horizon. The “chiew, chiew, chiew” of cardinals,duelingforthetop spot, outstrip the eforts of any other birds vying for attention.

Even blue jays, the ruians of the avian world, are outdone. Cofee is the only antidote, as sleep is no longer allowed. A nightingale thought it was being clever at two o’clock in the morning last week. All that pretty song deserved was an old shoe hoisted in its direction. I love the spring – it’s truly my favorite time of year despitetheriskandrewardnature of its awakening. It feels a bit like the new politics. But that’s another subject. I haven’t touched thatforawhile–perhapsfor good reason.

EvenMotherNature’sroller coaster looks like a quiet cruise in comparison!

To see past columns from Tony Moorby, visit www.usedcarnews.com/columnists/tony-moorby

Across

1. MX-5 or CX-3

4. Hyundai model

7. Old Saturn

9. ___ Paese cheese

10. Take backs

11. Energy eicient type of light

13. Kia crossovers

14. Time just before

15. No vote

16. Engine part

18. Word in some VW ads

20. Made in the ____

21. Transport

22. Big name in brake technology

24. Provider of electronics systems

27. Auto part ID

28. Away from home

30. Honda model

31. Eco-friendly

33. Rental car time period

35. ___ of the road

36. ___ in class

38. Swedish car

40. Auction listing

41. Ford SUV

43. Drivers’ IDs

46. Boston locale, abbr.

47. Horsepower booster

48. Overhauled Down

1. Nissan SUV

2. Very quick

3. Brake system, abbr. 4. Austin family cars, from the UK

5. Terminated

6. hey can be seen on billboards

7. Trooper brand

8. Maxima maker

12. Electric vehicle, for short

16. Chevy muscle car

17. Heavenly sphere

19. Transmission and ignition

21. French for this

23. Ferrari SF16-H or Williams-Mercedes FW38, for example, 2 words

24. Veyron maker

25. hey make an Element

26. Unwelcome drivers?

29. Frisbee, e.g.

32. Number on a bus. card

34. Up to the task

37. Like some renewable energy

39. Per __ (yearly)

42. Old timer

44. Honda SUV

45. Unfortunate

CHART YOUR COURSE

POWER THROUGH LEARNING: Learn how the best performing independent dealers achieve success from acclaimed sales and leadership trainer Dave Anderson of LearnToLead.

BUY HERE-PAY HERE: NIADA national director of 20 Groups Chuck Bonanno and the BHPH world’s best and brightest guide you through best practices in underwriting, collections and more, as well as the latest payment assurance technology.

Keynote speaker sponsored by:

When Christopher Columbus set out on his voyage in 1492, he didn’t have a map. And while he landed in the history books, the fact is Columbus never reached his intended destination. So what can we learn from this? To get where you’re going, it’s vital to know where you’re headed and what lies between you and your goal, and to have a map to guide you. Which brings us to our theme for the 2017 NIADA Convention & Expo:

NIADA provides the maps and knowledge – through the unmatched educational content of the NIADA Convention – to help independent vehicle dealers get to their ultimate destination: success. So let’s get started and set sail toward your goals!

OPERATIONAL STANDARDS: NIADA senior vice president of legal and government affairs Shaun Petersen is among the legal and industry experts who will get you up to date on the ever-changing regulatory and legislative issues that affect your business, and offer strategies to stay on the good side of regulators.

CERTIFIED PRE-OWNED: Learn why CPO is the hottest item in the used vehicle industry and how you can get your share of the record-setting certiied market from 2016 NIADA CPO Dealer of the Year Todd Hoagey and other top CPO dealers.

KEYNOTE SPEAKER: CAPTAIN RICHARD PHILLIPS

The inspiration for the hit movie Captain Phillips and author of ACaptain’s Duty: Somali Pirates, Navy SEALS, and Dangerous Days at Sea, Captain Richard Phillips was at the center of a dangerous drama in 2009 when his merchant vessel, the MV MaerskAlabama, was seized by Somali pirates in the irst hijacking of a U.S. ship in more than 200 years. Having risked his own life to protect his crew, Phillips was taken by the pirates as a hostage and held in a small lifeboat. After a ive-day ordeal, he was rescued by members of the famed Navy Seal Team 6. He’ll offer his perspective on the power of leadership, teamwork, training, belief in self and an unyielding, never-give-up attitude.

AROUND THE BLOCK

COMPANY UPGRADES FACILITIES

Manheim is on track to complete its five-year, $17 million investment in its four Southern California auction locations in 2018. Enhancements are being made to its physical and digital properties at Manheim California, Manheim Riverside, Manheim San Diego and Manheim Southern Califor-

nia. Collectively, these operations cover 400-plus acres and register more than 577,000 vehicles annually.

“We now offer more efficiencies and innovative end-to-end solutions to our clients, improving their ability to source and sell inventory faster and better,” said

Manheim Southern California is streamlining the vehicle entry experience for clients and to accommodate more volume. The Fontana-based location has added charging stations for electric vehicles and Xeriscaping to save water. Planned investments include a new Manheim retail advantage recon facility with 14 lifts, as well as a remodeled building to provide an indoor sale for heavy truck, boat, RV and salvage specialty units.

Manheim Riverside has added enhanced vehicle imaging booths and vehicle remarketing, and Xeriscaping was installed to conserve water. Manheim San Diego in Oceanside, Calf., renovated the front office and dealer services center and upgraded equipment in the mechanic and reconditioning shops.

Compiled by Jeffrey Bellant

Anniversary Sale Draws Hundreds

Charleston Auto Auction’s 16th anniversary celebration on March 17 featured some 1,300 vehicles crossing the block with more than 700 dealers attending.

The celebratory event kicked of with live music from The Vistas and a full southern breakfast was provided to all in attendance. MorganWillis,aringmanattheauction, sang a rendition of the Star-Spangled Banner to a full house.

Activities continued throughout the day with vehicles of all types selling in all lanes. Festivities concluded with drawings of $50,000 in cash and prizes.

“We are honored to be part of our dealers’ successes over the last 16 years,” said Laura Taylor, general manager of Charleston Auto Auction.

“We look forward to continuing to provide premier auction services for many more years to come.”

We invite news items and top-quality photos from our readers to be considered for “Around the Block.” Please include the name of a contact person and a telephone number. Send items and photos to: Jeffrey Bellant. Mail: Used Car News, 24114 Harper Ave., St. Clair Shores, MI 48080. Fax: (586) 772-9400 e-mail: jeff@usedcarnews.com