More changes in connection with America’s Group came to light this week.
A few days after the company announced Chuck Tapp would become CEO, another news release indicated XL Funding and Auction Credit Enterprises — two floorplan financing companies affiliated with America’s — have joined forces to operate as Axle Funding.
The updated name follows the strategic combination of the two companies first announced in March.
Leadership said this move will unify Axle Funding’s 29 markets across the United States, centralizing service, expanding offerings and increasing benefits for the dealerships leveraging this financing service.
Axle Funding president Chris Burton said, “Consolidating ACE and XLF to operate under one new unified brand just made sense. The integrated Axle brand will bolster the synergies of our associates and the combination of our territories as we continue to grow.”
“Having a robust footprint allows us to deliver enhanced services to our dealer experience,” Burton continued, adding that Axle Funding will prioritize solidifying the infrastructure of this merger to ensure improved digital experiences for auction services and the continued advancement of its physical presence to meet the demands of an evolving industry.
Auction Credit Enterprises was established in 2006 and XL Funding was created by XLerate Group (now America’s Auto Auction) in 2017.
Automotive Finance Corp. is celebrating its 35th anniversary this year by encouraging its branches to complete 35 acts of kindness before the end of 2022.
AFC president Jim Money and chief operating officer Will Mitchell join the show to talk about how the AFC team is getting involved in these acts of kindness, how the business has evolved in 35 years and much more.
To listen to the conversation, click on the link available below, or visit the Auto Remarketing Podcast page.
Download and subscribe to the Auto Remarketing Podcast on iTunes or on Google Play.
In another episode originating from this year’s NAAA annual convention, Cherokee Media Group senior editor Joe Overby caught up with Sandy Moon and Danny McNelis of NextGear Capital.
They delved into more detail about the auction services group that NextGear Capital launched earlier this year as well as other subjects connected with dealerships and their floorplans.
To listen to the conversation, click on the link available below, or visit the Auto Remarketing Podcast page.
Download and subscribe to the Auto Remarketing Podcast on iTunes or on Google Play.
Coinciding with Wisconsin-based First Business Bank making headway in the South with its floorplanning, digital auto auction marketplace EBlock announced a key partnership with Kinetic Advantage, a provider of floorplan technology.
With soft wholesale volume and high prices in the lanes, EBlock and Kinetic Advantage said this week through a news release that their partnership will help dealers to search for new sources to replenish their inventory. Their agreement integrates Kinetic Advantage into the EBlock checkout.
“This partnership is a win for our customers in the U.S. Kinetic is a strong floorplan and capital funding source which increases the capabilities of our customers to source the much-needed inventory they seek,” said Jason McClenahan, president and chief executive officer of EBlock parent company E Inc., which operates in both the U.S. and Canada.
EBlock’s online auction is geared to empower dealers, wholesalers and independent auctions to buy and sell inventory in less time and in a real-time virtual auction that creates the sense of urgency and energy found in a live auction.
Kinetic Advantage said its core focus is helping its independent dealer partners and team members succeed while providing them with an exceptional and engaging user experience. Kinetic added that it’s committed to forging strong partnerships through transparent communication and simple, innovative solutions.
“Kinetic is very pleased to partner with EBlock as a source for inventory to our independent dealers in the U.S.,” Kinetic Advantage president and CEO Marty McFarland said in the news release.
“EBlock has a proven track record in Canada and is experiencing exceptionally strong growth in the U.S. Coupled with Kinetic’s fast growth and best-in-class service I expect our dealers will greatly benefit from this new partnership,” McFarland went on to say.
First Business Bank lands dealer client in Mississippi
Before 2021 finished, First Business Bank announced the closing of a $4 million inventory floorplan line of credit for Direct Auto, an independent dealer in Mississippi, through First Business Bank’s Floorplan Financing group.
First Business Bank’s Floorplan Financing team offers independent dealers the flexibility to finance their inventory purchases, preserving cash flow and allowing them to buy preferred inventory. Floorplanning programs are available from $500,000 to $10 million for larger, well-established independent dealers.
According to a news release, Direct Auto owners Art Hadler Jr. and Michael West were especially pleased with the unique combination of responsive, reliable service and competitive floorplan programs available through First Business Bank.
“We were very impressed with First Business Bank’s Floorplan Financing team, their knowledge, and the bank’s commitment to the industry,” West said. “They’ve made it as easy as possible to work with them with quick loan decisions and competitive interest rates. We’re very pleased.”
With a reputation for valuing long-term partnerships, First Business Bank’s Floorplan Finance team strives to provide purchasing flexibility and opportunity to drive growth.
“We’re excited to work with Direct Auto,” said John Goodyear, who is vice president of floorplan financing at First Business Specialty Finance, a subsidiary of First Business Bank. “They have a great, successful dealership and are really energized about our partnership and what we offer in the industry. We are pleased to help them grow their dealership in the years to come.”
Shift has lined up a new $100 million floorplan facility with Ally Financial, the automotive ecommerce provider said Monday.
The deal expands the companies’ existing relationship. The two-year term on the facility expires Dec. 9, 2023.
“Our business is rapidly scaling, with 2021 sales expected to more than triple compared to 2020. As a result, our financing needs have grown as well,” Shift chief financial officer Oded Shein said in a news release.
“This new facility improves Shift’s capital position, doubling the availability of our previous floor plan, and increases our financial flexibility as we look to accelerate future growth. We are grateful to Ally for their support and confidence in Shift and look forward to a successful relationship,” Shein said.
Doug Timmerman, who is Ally’s president of dealer financial services, added: “Since 2014, the Ally team has provided a broad range of services to Shift including indirect retail financing, vehicle protection products and digital remarketing services. We’re excited to deepen our relationship with inventory financing, support Shift’s growth, and expand our shared opportunities in the used vehicle market.”
Fitch Ratings spotted more ramifications associated with dealerships in connection with the inventory pinch of both new and used vehicles.
With rising sales and soft volume at auction and OEM factories, Fitch Ratings said on Monday that accelerated dealer auto inventory turnover has resulted in insufficient collateral available for dealer floorplan (DFP) asset-backed securities (ABS) master trusts in 2021.
Fitch Ratings indicated this development is indirectly accounted for by deal structures, for the most part, through the use of the excess funding accounts (EFAs). Analysts explained EFAs are meant to protect trusts against inventory volatility and help mitigate lower cash flows but can introduce negative carry risk if cash in EFAs increases to high levels and is relied on to make note payments.
The firm pointed out that EFA caps provide some protection against negative carry risk and vary by trust but most are limited to 30%. If exceeded, Fitch Ratings said there is usually a three-month cure period before an early amortization event is triggered and the trust would pay down the notes.
Fitch Ratings recapped that sponsors routinely add to or remove cash from EFAs to protect against changes in inventory volume by providing liquidity if there is not enough trust collateral for sufficient hard credit enhancement. Recently, analysts determined trust asset balances started to decline to historically low levels, and sponsors needed to address this by adding more cash to EFAs to cover for missing collateral and ensure adequate enhancement levels to support the notes.
Most of the time EFA account levels are close to 0% across the eight DFP ABS trusts rated by Fitch but ranged up to approximately 24% as of the May reporting date.
“However, relying on cash in the EFAs to pay note interest may itself result in negative carry and leave auto finance companies responsible for paying note interest,” analysts said.
“Fitch does not assume dealer lenders will make interest payments in its analysis but believes most lenders will be able to given their financial strength as reflected in the ratings,” they continued. “In the very remote event lenders do not make interest payments, this would cause an event of default, which may result in the notes becoming immediately due and payable.”
Fitch Ratings also mentioned the structural protections of robust credit enhancement, liquidity/credit enhancement triggers and backing from sponsors are supportive of current DFP ABS ratings.
“We expect issuers will have no difficulties paying down outstanding transactions when they mature, but we believe there will be lower new issuance volume until inventory levels return to pre-pandemic levels,” analysts said.
“Uncertainty remains as to how long these inventory shortages will last, although Fitch believes they will persist at least into 4Q21. Due to the relatively long lead-times needed to ramp up chip production, it could be a year or more before vehicle production and supply normalize,” they continued.
Fitch Ratings closed its update by noting that higher inventory turnover also is leading to “extraordinarily” high trust monthly payment rates, some at more than 100%.
“Continued robust retail sales, record-high new- and used-vehicle prices and low-interest rate costs are all boosting dealer net profits and margins despite the supply shortage, although this will dent sales volumes in 2021,” the firm said.
Fitch currently rates 21 series comprising of 44 tranches issued from six auto-DFP ABS trusts totaling $15.4 billion outstanding as of the April reporting date.
While not divulging the specific operator, First Business Bank on Monday announced the closing of a $6 million inventory floorplan line of credit for an independent dealer through its floorplan financing group.
However, along with acknowledging the store is in Illinois Jeff Widholm, managing director of floorplan financing at First Business Specialty Finance, a subsidiary of First Business Bank, did say in a press release that “working with this dealership has been our pleasure.”
Widholm continued, “They are doing a brisk business and we’re glad to help them continue to focus on what they’re doing best: car sales. It’s our goal that our clients are never encumbered by the financing process and we facilitate their success as much as possible.”
First Business Bank reiterated that its floorplan financing team offers independent dealers the flexibility to finance their used car purchases, preserving cash flow and allowing them to buy preferred inventory.
Floorplanning programs are available from $500,000 to $10 million for larger, well-established independent dealers.
“This limited focus, a hallmark of First Business Bank’s business model, facilitates a smaller clientele than large competitors, empowering personalized concierge service,” the company said.
For additional information, visit firstbusiness.bank.
In December, First Business Bank announced a new agreement to offer floorplan financing to independent dealerships through ACV Auctions.
On Tuesday, the bank made a similar move; this time unveiling a new arrangement allowing First Business Bank’s floorplan financing clients to finance their vehicle inventory purchases from SmartAuction.
First Business Bank is enthused about this latest development, since approximately 40,000 vehicles — representing all major makes and models — are available for wholesale purchase each day on the SmartAuction website.
Dealers have purchased more than 6 million vehicles via SmartAuction since 2000, according to a bank news release.
“We’re excited about this new relationship with SmartAuction because it allows our independent car dealer clients across the country even more options and flexibility to purchase inventory,” said Jeff Widholm, managing director of floorplan financing at First Business Specialty Finance, a subsidiary of First Business Bank.
First Business Bank’s floorplan financing team offers independent dealers the flexibility to finance their inventory purchases, preserving cash flow and allowing them to buy preferred units.
Floorplanning programs are available from $500,000 to $10 million for larger, well-established independent dealers.
“This limited focus, a hallmark of First Business Bank’s business model, facilitates a smaller clientele than large competitors, empowering personalized concierge service,” the bank said.
Fitch Ratings cited multiple data points from the National Automobile Dealers Association in explaining its reasons to state that dealer floorplan asset-backed securities (ABS) performance is expected to be stable in 2021.
Along with the strong profit metrics noted by NADA, Fitch said its dealer floorplan ABS asset performance and rating outlooks are stable for this year due to solid ABS trust dealer metrics. Those metrics include strong monthly payment rates driven by healthy vehicle demand and low inventories along with the ability of dealers to adapt to ongoing challenges.
Fitch pointed out that NADA said the average U.S. dealer net pretax profit was $1.79 million per dealership, as of November. Analysts noted that’s the highest level since 2009.
Fitch went on to mention other NADA information that showed the average total operating profit through the first 11 months of 2020 was more than $520,000, which is four times higher than the same period in 2019.
Even as sales dropped 14% year-over-year in 2020, Fitch recapped that NADA said the average dealership’s retail gross profit per new vehicle was up 18% to $2,376 and climbed 12% to $2,672 per used vehicle, compared with 2019.
“Regardless of the issues related to the pandemic, 2020 turned out to be the most profitable year in history for most networks supporting DFP ABS, in part supported by lender interest curtailment and/or deferral programs along with federal payroll loans,” Fitch said in a news release distributed this week. “Dealers have cut costs and profit margins remain robust.”
Fitch acknowledged there are some headwinds when considering floorplans, especially when considering low GDP growth for the entire U.S. economy, elevated unemployment and vehicle inflationary pressures that all could slow consumer demand and dealer sales from current levels.
Analysts also mentioned that floorplans also might be impacted because of interruptions in the production of new vehicles at factories around the world due to the pandemic and the global semiconductor microchip shortage.
Fitch estimated that total new-model inventory stood at 2.8 million units as of Feb. 1, down from 3.3 million units a year earlier.
“Production issues and resulting low inventories are not expected to significantly affect dealer floorplan ABS performance metrics, and ratings are expected to be stable due to robust credit enhancement levels along with structural features that insulate ratings from performance pressures,” Fitch said.
“Furthermore, ABS net default levels are conservatively set at typically 10 times to 20 times or higher than actual losses,” the firm added.
Independent dealers who use ACV Auctions to acquire inventory now have another option for their floor planning.
On Tuesday, First Business — which just launched its floorplan service in June — announced a new agreement to offer floorplan financing through ACV.
The company highlighted that the partnership can allow independent dealers who have earned competitive pricing and upscale service to purchase inventory through ACV with their First Business floorplan.
First Business’s Floorplan Financing offers independent dealers the flexibility to finance their inventory purchases, preserving cash flow and allowing them to buy preferred inventory.
According to a news release, floorplan programs are available from $500,000 to $10 million for larger, well-established independent dealers.
The company explained this limited focus, a hallmark of First Business’s business model, facilitates a smaller clientele than large competitors, empowering personalized concierge service.
“Our team is thrilled that First Business clients can now floorplan their auction purchases directly through ACV Auctions, one of the largest and most popular digital wholesale car auctions in the world,” says Jeff Widholm, managing director of First Business Floorplan Financing.
“ACV Auctions also believes in a quick, efficient client experience, aligning with our team’s goals,” Widholm continued.
Floorplan Financing is offered through First Business Equipment Finance, a subsidiary of First Business Bank.
For more information, call (844) 418-2493.
