Carfinco Financial Group announced first-quarter results this Wednesday that showed growing auto loan originations as well as rises in net earnings.
The first quarter of fiscal 2014 has been a positive one for Carfinco, said company management, as the company reported a 5.5-percent increase in net earnings and $1.1 million of growth in the finance receivable portfolio over the prior quarter.
Interestingly, while the first quarter of the year in Canada tends to be a slower time for loan origination growth, Carfinco grew its portfolio by over $1 million, due to the $45.2 million of loan originations that came through in Q1.
This marks a 23.6-percent increase over the $36.6 million on loan originations secured over Q1 2013, and only a $0.8 million percent decrease from Q4 of last year.
“Certain of the company's finance programs have experienced slower growth than originally forecasted for the quarter with the addition of new competitors in those areas that are aggressively searching for entry into the market,” company officials shared, giving reason for the slight quarter-over-quarter decline.
Net earnings for the company were also on the way up in Q1, coming in at $5.4 million. This is up $0.3 million, or 5.5 percent, from Q4 2013. Revenue, on the other hand, was down slightly, coming in at $24.0 million for the first quarter and marking a decrease of $0.9 million, or 3.5 percent, from revenues of $24.8 million for the fourth quarter of 2013.
And it seems loan holders were mostly consistent with payments this quarter, as finance receivables came in at $245.3 million, an increase of 0.4 percent from $244.2 million in the fourth quarter of fiscal 2013 and an increase of 31.1 percent from $187.1 million in the first quarter of 2013.
The 31-or-more days delinquent accounts at the end of Q1 were at 4 percent, which is consistent with year-end 2013 for the company.
The Canadian finance receivables 31 or more days delinquent accounts were 3.1 percent, which is an improvement from 3.3 percent at the end of the fourth quarter of 2013.
As AutoCanada announced strong financial results for the first quarter, the company highlighted one area, in particular, that contributed to an overall dealership revenue increase of 28.2 percent: used-vehicle sales.
Q1 was an extremely strong quarter for pre-owned, as the company’s used-vehicle revenues increased by 37.2 percent year-over-year.
Driving this revenue spike was a 30.8-percent increase in used sales and an increase in the average transaction price of $1,399 per used vehicle retailed, which translates to a 6.4-percent hike.
“Acquisitions completed in 2013 contributed to the increase; however, much of the increase related to improvements in same store sales,” management said.
Used same-store sales rose by 21.3 percent in Q1.
The company attributed this success to a 14.1-percent increase in used-vehicle retail volume — a considerable rise given the tight used supply environment.
AutoCanada management has been employing a few more avenues to secure used supply over the past 18 months, which the company says has pushed the increase in volume.
The dealership group has hired a number of inventory analysts that work directly with dealerships to “address appraisal, reconditioning, merchandising (both online and traditional), and pricing issues with the goal of improvement our return on investment in used vehicle inventories.
“We believe that these efforts are beginning to materialize in the form of improved volumes and margins and we hope that the trend continues,” management shared.
In fact, the company’s used-vehicle gross margins rose by 45.9 percent in Q1.
Commenting on the Q1 results, Pat Priestner, chairman and chief executive officer of AutoCanada Inc., said, “We are very pleased with our first quarter operating results. The improved operating results in our used-vehicle departments and our parts, service and collision repair departments on a same store basis more than offset what we would consider to be a slightly weaker than expected quarter for new-vehicle sales and new-vehicle margins. We give credit to our exceptional dealership teams for consistently exceeding the market and the strong performance in all four departments.”
The company contributed part of the overall success of Q1 to the additional dealerships it has acquired over the past few years.
In its Q1 analysis, the company highlighted one investment, in particular, that has been lucrative.
“The investments the company has made in General Motors dealerships continue to perform well as the income for our investments in these dealerships increased by $0.7 million during the first quarter,” company management said. “All of our General Motors dealerships are performing very well and have continued to improve each quarter.”
And during Q1 2014, the company made a variety of moves to secure new dealerships, as well, including an investment in McNaught Cadillac Buick GMC, as well as a group dealership acquisition announced in late April.
“We are also very excited to have announced the signing of purchase agreements for a dealer group, as well as purchase agreements for additional unrelated dealerships outside of the dealer group. In total, we have signed purchase agreements for eight additional dealerships, which we expect to close by Aug. 1, 2014, subject to manufacturer approval,” Priestner said.
When is the company expected to start seeing similar returns on this year’s investments?
Management said it will likely take a minimum of two years in order to fully integrates a store and achieve its anticipated performance objectives.
Editor's Note: For more insight from AutoCanada's analysis of Q1 results, see the upcoming May/June issue of Auto Remarketing Canada Digital Magazine.
Though rental and fleet sales for automakers can be looked at in a variety of ways — as many automakers try to pass of some of their harder-to-move products in this fashion — these types of sales normally bode well for the used-car market in the near-term.
With used-car supply so low, rumors of high fleet and rental sales can be good news for dealers as this means most of these same units will flow back into the wholesale pipeline in the next three to five years.
Last year, Ford trucks and Chrysler cars were the most dependent on fleet registrations, according to the latest analysis from DesRosiers Automotive Consultants.
And overall, according to data from IHS Automotive, approximately 20 percent of new light vehicles registered in Canada in 2013 were sold to fleets.
“Fleet sales is a fascinating area of the automotive industry in Canada — a market that has the potential to be a valuable and profitable sales channel, but can also represent a loss-making dumping ground for hard-to-move products,” DesRosiers analysts stated.
At a manufacturer level last year, Chrysler has the highest fleet penetration sales, with approximately 42.6 percent of the company’s sales being fleet registrations.
DesRosiers pointed out Chrysler and Dodge cars are “common fixtures” on rental lots, and strong fleet sales have been part of the company’s recovery strategy.
It remains to be seen if this high fleet penetration rate will remain consistant, though, as Chrysler begins offering new products in its passenger car lineup.
Moving on the truck side of the business, Ford leaned on fleet sales the most, with 30.2 percent of its sales going to lease registrations last year.
The popular, high-volume F-Series pick-up is more “fleet dependent” than any of its competitors, according to DesRosiers.
These trends may contribute to the loosening in used supply predicted to begin 2016 due in part to an influx of off-rental vehicles.
“Beginning in 2016, used-car prices will decline through 2019, falling below current levels,” RVI analysts said.
According to RVI, these price drops will be due largely to “increases in the supply of used vehicles and more competition among car manufacturers,” both of which will serve to put downward pressure on used-vehicle prices.
Used-vehicle supply is expected to start increasing this year and continue rising through 2019.
According to RVI’s Used Vehicle Stock Index, supply is currently up 1.2 percent from 2013 rates, and used supply will expand 2.9 percent in 2015 versus this year.
For more on how wholesale prices are panning out this year, see the below Auto Remarketing Canada story:
Q1 Auction Price Spike to Linger
The Ford F-150 has done it again. Scoring the top spot for April, the truck has managed to swipe the No. 1 spot as the most appraised vehicle in Canada every month this year.
In fact, the top three models were all consistent with March results in the April TradeTracker Used Vehicle Market report as we edge closer toward summer.
Coming in at No. 2 in April was the Toyota Corolla, followed by the Honda Civic.
Rounding out the top five were the Mazda 3 and Dodge Grand Caravan, respectively.
These reports are provided monthly to Auto Remarketing Canada and are a result of Dealertrack Technologies' Trade Tracker solution, which is an online, trade-in evaluation tool that allows dealerships to create instant, accurate appraisals and gain insight into their used-car business.
The report also breaks down the vehicles by market, as follows:
- The top domestic vehicle appraised by domestic dealers was the F-150.
- The top import vehicle appraised by import dealers was the Corolla.
- The top domestic vehicle appraised by import dealers was the Ford Escape.
- The top import vehicle appraised by domestic dealers was the Mazda 3.
These results are also right in line with March’s showing.
The report also narrows down the top vehicles being looked at by trade-in owners.
Within this group, the top domestic vehicle looked at by domestic owners was once again the F-150.
For import owners, the top import vehicle looked at was the Corolla.
And when it comes to domestics, import owners looked at the Escape the most in April.
Lastly, the top import vehicle looked at by domestic owners was the Corolla.
The TradeTracker reports also include a Brand of the Month section, which highlights appraisal trends by an individual brand each month.
The brand highlighted in April was Hyundai.
The top three vehicles looked at by trade-in customers at Hyundai dealerships were the Elantra, Santa Fe Sport and the Tucson.
For year-to-date trends, the lineup starts with the Elantra, and is followed by the Sante Fe Sport and Sante Fe, respectively.
Canadian dealers are on a roll as new-vehicle sales continued to rise in the first quarter of 2014. New light-vehicle sales climbed 0.9 percent during the quarter, as dealers moved forward from 2013's record-breaking numbers, according to DesRosiers Automotive Consultants
And the Canadian Automobile Dealers Association highlighted some impressive results this week, sharing record annual new-vehicle retail sales at Canadian dealerships.
Total new-vehicle sales surpassed $90 billion for the first time ever in 2013, CADA reported.
At individual stores, total new retail sales grew by what CADA coined a “healthy” 5.7 percent over 2012 rates.
"Consumers are spending money at dealerships at record levels," said Michael Hatch, chief economist of the CADA. "This is great news for the economy. We're on pace for another record year in 2014."
Revenues grew ever higher, too, CADA reported, as new-vehicle sales notched a record in 2013, moved past 1.74 million units sold.
"Consumers are responding to record levels of affordability in the marketplace and strong product choice," said Hatch. "They are also releasing the last of the pent-up demand from the recession, during which many consumers delayed big purchases."
This $90 billion grossed from retail sales represents almost five present of Canada’s GDP and about $2,500 for every person in Canada last year, CADA calculated.
"This is great news for the industry but also for the economy at large," continued Hatch. "Surpassing $90 billion in total sales is a huge milestone for our members, and comes on top of an already-impressive 2013 during which we sold more new cars than ever before."
Interestingly, default ratios on automotive debt are at historically low levels, even as new-car sales continue to rise.
During the fourth quarter of last year, delinquency rates for automotive debt came in at 0.11 percent, bringing it to the fourth-lowest default rate of all forms of consumer debt, according to CADA.
"Though debt levels have been increasing for Canadian consumers, the cost to service those debts has been falling," continued Hatch. "The availability of consumer financing is an important part of our members' business, and consumers are paying back auto and other consumer loans at extremely high rates."
The results of Scotiabank’s Global Auto Report that were released today show auto industry profit margins have spiked to 10-year highs, reaching above pre-recession levels, with the highest profitability showing up in North America.
The report indicates that the five largest manufacturers are achieving net income levels of more than $50 billion.
Commenting on the news, Scotiabank senior economist and auto industry specialist Carlos Gomes said, "Profitability for the five largest auto manufacturers remains healthy, with gross margins at 10-year highs and net income consistently exceeding $50 billion per year since 2011.
"Profitability is highest in North America, but is improving in every region, including Western Europe, the only jurisdiction where the industry remains unprofitable."
The report also included a few Canada-specific statistics that bode well for the industry.
According to the report, November sales set a fifth consecutive monthly record for new-car sales, as car and light truck purchases rose 6.5 percent year-over-year.
This kept volume above an annualized 1.8 million units for the second consecutive month, and well above the January-September average of 1.74 million, Scotiabank reported.
And which manufacturers are dominating sales in Canada?
The Japanese brands lead by a large margin, taking 44.4 percent of total November sales.
The Big 3 came in a far second with 22.7 percent of the market share pie.
The remaining percentage was broken up amongst the following: Hyundai (11.3 percent), Volkswagen (6.8 percent), Kia (6.2 percent), BMW (3.3 percent), Mercedes-Benz (3.4 percent) and what Scotiabank reported as other (1.9 percent).
And though not surprising with Canadian’s tendency towards trucks and larger units, light trucks are leading automotive sales this year.
From January through September, 980,000 light trucks were sold in Canada. This is compared to 755,000 cars sold during the same period.
And the sales outlook this year is shaping up to be far above 2012 rates. In 2012, 1.68 million new cars were sold in Canada. The annual forecast for 2013 is coming in at 1.75 million, according to Scotiabank.
The new-car market is seeing record numbers in Canada, but the country has been plagued by a shortage of quality used cars since leasing fell off during the recession.
As such, used prices have been rising consistently, pushing the price of new and used cars even closer — causing many consumers to turn to the new market.
Scotiabank provided the following charts, using Canadian Black Book data, to illustrate new and used-car prices indicators:
Editor’s Note: For more information on market share and used prices, see the upcoming Auto Remarketing Canada Digital Magazine issue set to come out this month. This issue will include a special Year-End Market Intelligence Report.
The results of Scotiabank’s Global Auto Report that were released today show auto industry profit margins have spiked to 10-year highs, reaching above pre-recession levels, with the highest profitability showing up in North America.
The report indicates that the five largest manufacturers are achieving net income levels of more than $50 billion.
Commenting on the news, Scotiabank senior economist and auto industry specialist Carlos Gomes said, "Profitability for the five largest auto manufacturers remains healthy, with gross margins at 10-year highs and net income consistently exceeding $50 billion per year since 2011.
"Profitability is highest in North America, but is improving in every region, including Western Europe, the only jurisdiction where the industry remains unprofitable."
The report also included a few Canada-specific statistics that bode well for the industry.
According to the report, November sales set a fifth consecutive monthly record for new-car sales, as car and light truck purchases rose 6.5 percent year-over-year.
This kept volume above an annualized 1.8 million units for the second consecutive month, and well above the January-September average of 1.74 million, Scotiabank reported.
And which manufacturers are dominating sales in Canada?
The Japanese brands lead by a large margin, taking 44.4 percent of total November sales.
The Big 3 came in a far second with 22.7 percent of the market share pie.
The remaining percentage was broken up amongst the following: Hyundai (11.3 percent), Volkswagen (6.8 percent), Kia (6.2 percent), BMW (3.3 percent), Mercedes-Benz (3.4 percent) and what Scotiabank reported as other (1.9 percent).
And though not surprising with Canadian’s tendency towards trucks and larger units, light trucks are leading automotive sales this year.
From January through September, 980,000 light trucks were sold in Canada. This is compared to 755,000 cars sold during the same period.
And the sales outlook this year is shaping up to be far above 2012 rates. In 2012, 1.68 million new cars were sold in Canada. The annual forecast for 2013 is coming in at 1.75 million, according to Scotiabank.
The new-car market is seeing record numbers in Canada, but the country has been plagued by a shortage of quality used cars since leasing fell off during the recession.
As such, used prices have been rising consistently, pushing the price of new and used cars even closer — causing many consumers to turn to the new market.
Scotiabank provided the following charts, using Canadian Black Book data, to illustrate new and used-car prices indicators:
