It’s not news that independent and buy-here, pay-here dealers more often will complete vehicle deliveries with consumers with softer credit than their franchised store contemporaries.
What is noteworthy is how Experian Automotive detailed the extra risk being facilitated through franchised dealerships to complete financing when looking at the lowest credit tier tracked on a quarterly basis.
According to Experian’s State of the Automotive Finance Market Report, the average amount financed during the first quarter for deep subprime customers — individuals with credit scores between 300 and 500 — making purchases at independent dealerships jumped by $654 year-over-year to $13,707.
And the term of the contract for those purchases grew by more than a month to nearly 55 months.
Breaking the independent store data even further, the average monthly payments for deep subprime customers who bought a vehicle in Q1 ticked up by $12 to $385.
When it comes to annual percentage rate on the contracts, the average APR for deep subprime buyers ticked up just 2 basis points during the first quarter to 20.55 percent.
Now let’s compare those figures to what happened at franchised dealerships that sold a used vehicle to a deep subprime customer during the first quarter.
Perhaps reflecting the network of finance companies franchised dealers can tap to get a deal with a deep subprime customer “bought,” the average amount financed for buyers in Experian’s lowest credit tier for used-vehicle transactions at new-car stores reached $16,151, up by $336 year-over-year.
Those finance providers working with franchised dealerships who will move metal with deep subprime customers also were willing to stretch terms much longer than contracts finalized at independent stores. The average term for a deep subprime buyer who took delivery of a used vehicle at a franchised dealership in Q1 came in at almost 66 months, nearly a year longer than what was booked on average at the independent lot.
And when it comes to rate and monthly payment, those deep subprime customers also finalized a little better deal on that used vehicle as the Q1 average APR dropped 9 basis points year-over-year to 18.37 percent with the monthly payment coming in $381.
After participating in this year’s National BHPH Conference hosted by the National Alliance of Buy-Here, Pay-Here Dealers, technology provider DealerSocket is continuing to hit the trade show circuit with its comprehensive independent dealer platform.
The company said its team has been hard at work rebuilding its technology solutions to ultimately produce a fully integrated, seamless platform through which independent dealers can run their entire operation. DealerSocket’s latest integrations reduce data entry, increase efficiencies and maximize profitability for dealers.
Attendees at this week’s Convention & Expo, orchestrated by the National Independent Automobile Dealers Association, in Las Vegas can drop by booth No. 300 to see demos of the following deep integrations within DealerSocket’s platform:
• Crossfire: The Crossfire integration can identify and link website visitors to customers in the CRM. Dealers can learn what customers are really looking for based on web activity, then enhance their marketing efforts with personalized, custom communication.
• Inventory Sync: When dealers make updates in their inventory management system, changes are seamlessly applied to their website to ensure reliable inventory information at all times to increase solid leads.
• Precise Price: Dealers can now invite consumers to start an accurate deal in real time from anywhere. Once the customer arrives in store, he or she has already completed some or most of the deal online, including reviewing F&I products at their leisure and locking in an exact price for the vehicle.
• iDMS: The hub of the independent dealership is fully integrated with CRM, so data only needs to be entered once. In addition, iDMS’ real-time integration with QuickBooks greatly simplifies accounting tasks.
• Service: DealerSocket’s integrated service solution can keep dealers connected with customers through intelligent resource scheduling, mobile check-in, recommended service reminders and more.
• Revenue Radar: By mining DMS data for customers who are ready to buy again, dealers can eliminate the competition before they even enter the picture. Real-time equity information, bank programs, incentives and vehicle evaluations are all analyzed, with results pushed to the CRM for tailored marketing.
DealerSocket is actively integrating outside partners into its platform for even bigger efficiencies. From CBC Credit Services to Sigma Payment Solutions, dealers can now easily access more than 70 trusted providers through the platform.
Attendees at NIADA’s Convention & Expo can catch DealerSocket’s Blaine Morgan, who will participate in “The Future of DMS” panel discussion on Thursday from 2:15 to 3 p.m. Learn more at DealerSocket.com/NIADA.
Next month at the Texas IADA Conference & Expo, DealerSocket’s sales director for the independent market, Neale O’Bannion, will lead a breakout session titled “Modern Day Business Processes” on July 25 from 1:30 to 2:20 p.m. Learn more at TIADAannualconference.com.
The company will also exhibit at the following shows this summer:
• Georgia IADA Convention & Expo: July 13-15 in Atlanta
• MARIADA (Mid-Atlantic Regional Independent Automobile Dealers Association) Conference: Aug. 6-8 in Bethlehem, Pa.
• Florida IADA Convention & Expo: Oct. 5-7 in ChampionsGate
For more details and to demo DealerSocket’s integrated platform for independent dealers, visit NIADA booth No. 300, call (866) 813-1429 or visit DealerSocket.com/ThePlatform.
J.D. Byrider announced a major change in leadership on Tuesday as the franchise network of buy-here, pay-here dealerships recently appointed Craig Peters as chief executive officer, replacing Steve Wedding, who served the company for 25 years.
The company indicated Wedding will support the transition as an advisor to the J.D. Byrider board of directors.
Most recently serving as chief operations and technology officer of Barclaycard US, a top-10 U.S. card issuer and division of Barclays, Peters was responsible for delivering a new technology platform to support the launch of a new consumer lending business while driving efficiencies and improving quality at the company.
Peters brings more than 20 years of leadership experience in consumer finance to J.D. Byrider with a broad base of global experience across operations, collections, risk management and technology. He has successfully transformed many businesses and operations during his tenure at HSBC, Capital One and Barclays.
“We are thrilled to bring someone with Craig’s experience and track record to J.D. Byrider,” J.D. Byrider executive chairman Aaron Tankersley said.
“Craig’s leadership will be instrumental in the continued development of new services and systems for our current franchisees, as well as the successful growth of additional company-owned and franchised locations,” Tankersley went on to say.
Service and technology providers are coming to this year’s annual gathering hosted by the National Alliance of Buy-Here, Pay-Here Dealers armed with products that Ken Shilson insisted are brand new and can help operators of all sizes immediately.
Shilson highlighted more than a dozen different companies are ready to launch a new solution during the 19th annual National Conference. The NABD president explained why these technology companies are coming to the Wynn/Encore in Las Vegas on May 23 to 25 with new tools ready for deployment.
“The profitability in the auto business in general is being squeezed, not just in buy-here, pay-here but in all segments,” Shilson said. “They’re having to pay more to get a better vehicle because of the competition. The cost of funds is going up. The cost of compliance is going up. Those cost increases can’t be passed on to the consumer. The consumer can’t absorb them.
“Their overhead is going up and the only way to control it is to become more efficient and implement more technology,” he continued. “Technology is the only way that they can control their operating costs going forward without having to add more operating expense.”
Shilson acknowledged that BHPH dealers are primed and ready to take back market share this year. But he added that will take additional sales volume to make that happen.
“You don’t want to increase your overhead to do it,” Shilson said. “Technology is absolutely critical going forward if they want to be successful and make money.”
During the conference’s general session, NABD is orchestrating what it’s dubbed a Technology Showcase, featuring three different participants.
First, Manheim will be presenting one of its mobile auction units to show its capability.
“They can bring the auction to you and make it more accessible and convenient to the end customer. I think it will really be something where people will have a wow factor,” Shilson said.
Next, Magnum Contact will explain the capabilities of its online chat feature; a tool NABD already leveraged for its website.
“We were getting a lot of hits but we didn’t know what people were looking for. We put in the chat feature, and I would say it’s been singularly the best thing we’ve done,” Shilson said. “The chat function has singularly accounted for more leads and business than any other marketing idea we’ve ever had. And it will do the same thing for the buy-here, pay-here industry if they get it implemented on their websites.”
Furthermore, Podium will be describing its online reputation management offerings and showing how operators can enhance their standing and reduce the impact of negative reviews as potential buyers travel the Internet.
“You want to turn negative feedback around as quickly as you possibly can. If you just have negative feedback out there, people tend to gravitate to it and then they shut you off,” Shilson said. “Podium changes the dynamics. They are able to increase the feedback, which makes the number of negative comments much smaller and less relevant.
Besides the three firms included in the Technology Showcase, Shilson mentioned 10 other companies set to deploy new technology during NABD 2017, including:
—700Credit
—Auto Master Systems
—AutoZone
—Autozoom
—DealerSocket
—Deal Pack
—FactorTrust
—PassTime
—Spireon
—Walletron
Also, Shilson mentioned special individual social media training is set to be offered by Auto Search Technologies. He indicated attendees can sit down with company experts and ask questions specific about their dealership and its social media endeavors.
Shilson emphasized that there has never been more technology discussion and offerings on tap for the National Conference than there is this year.
“It’s not the same old technology. It’s not the same stuff you’ve seen before and it’s repackaged,” Shilson said. “There’s some really cutting edge things that we’re going to show for the first time ever in the history of buy-here, pay-here.
“It’s important that dealers understand this is not just the same old song and dance. They’re really going to see some new things that will help them,” he went on to say.
And as an added bonus, operators who haven’t already finalized their plans for NABD 2017 can do so through what Shilson said is the “Suite Deal Program.” By calling NABD, attendees can secure accommodations at the Encore for a $200 discount off of the regular price without resort fees while stilling getting conference registration at the same price as previous early bird discounts.
“This is your way to attend and stay in luxury at the same time,” Shilson said.
NABD can be reached by calling (832) 767-4759.
With the deadline to file federal income tax forms passing on April 18, Cox Automotive chief economist Tom Webb reflected back on what’s known as tax season but likely isn’t the resounding retail period for buy-here, pay-here dealers it once was.
Perhaps impacting this year’s season most was the change in federal rules requiring tax refunds involving the Earned Income Tax Credit or the Additional Child Tax Credit to be held until Feb. 15. Webb mentioned that when that date arrived, “the flood gates opened,” and a record $74 billion in tax refunds was distributed during the single week ending Feb. 17.
According to the latest data from the Internal Revenue Service that Webb cited, total refunds still surpassed $200 billion by the close of March. They remained off year-over-year by only about 0.8 percent or $1.8 billion.
During his last conference call for the company, Webb said the refund activity eventually sort of shook itself out by the time the first quarter closed.
“It really had less of an impact than I would have expected. It was not delayed all that much,” Webb said about the new federal mandates. “That flow of funds over $70 billion in the one week ending Feb. 17 pretty much got us back up to where we should have been. You’re talking a delay of two weeks, maybe in terms of flows of actually funds.
“In speaking with dealers, it was a relatively modest setback,” he continued.
“Speaking to lenders, people used that money to get themselves right,” Webb went on to say. “It probably made their delinquencies look a little worse than they normally do in the first part of February. Then people get caught back up.
"I think it had more of an impact on those delinquency measures than the actual used-vehicle retail deliveries,” he added.
And speaking of those deliveries, as many BHPH operators are doing, they’re leveraging solutions from companies such as TaxMax to turn metal as the holidays arrive.
“(Tax season) certainly has been less of a boost than what we’ve seen in the past. Some of that is due to the fact that dealers have been able to smooth it out a little bit,” Webb said. “Many of them use those down-payment deferral programs and are actually buying vehicles at auction in October and selling them in November and December through those programs.
“The down payment deferral program is basically the same thing without the regulatory problems,” he continued. “It’s good for dealers to smooth out that process.”
Larry Dixon, executive analyst at J.D. Power Valuation Services, elaborated about the impact of tax season in a video available here as well as at the top of this page.
In another preview of the annual industry benchmarks compiled by the National Alliance of Buy-Here, Pay-Here Dealers, Ken Shilson touched on three more highlights from the “most comprehensive report we have ever published on subprime auto finance,” covering activity through the end of 2016 as well as forward-looking commentary and comparisons with prior years.
Shilson, the NABD president and founder, explained not only how the comprehensive report, now in its 19th consecutive year, contains 20 group operating information from both NCM Associates and the National Independent Automobile Dealers Association, but also how the timing is crucial, too.
“Our benchmarks report comes at an important time when competition for the best subprime customers from independent finance companies, franchise operators, credit unions and others who are seeking higher yields in the low-yielding environment of today has been significant,” Shilson said about the information that also includes financial results and ratios from SGC Certified Public Accountants and loss metrics prepared by Subprime Analytics.
“Although BHPH industry profitability for independent operators was depressed in 2016 by this competition, better days are ahead for independent operators who embrace the changes necessary to succeed today,” Shilson continued.
Some important highlights about the 2016 benchmarks include:
1. Bad debts increased from higher amounts financed (severity), from competitive pressures which depressed down payments and repayments, and increases in the allowance for bad debts in anticipation of a new credit loss measurement standard passed by the American Institute of CPAs last June.
2. Operations income was reduced by higher operating expenses, which were impacted by additional compliance costs and inflation, bad debts and an increased cost of vehicles.
3. Recovery income was reduced by lower yields from the liquidation of repos.
Shilson pointed out that many independent operators chose not to match aggressive underwriting competition, which included longer terms and higher cost, newer model vehicles sold and financing to deep subprime customers.
“Better days are ahead for operators who are positioned to capitalize on opportunities created by underwriting mistakes made by others,” Shilson said.
“However, operators must be proactive in order to regain their lost market share. This requires them to learn and implement new operating practices, technology and to learn from the mistakes made by competitors and not repeat them,” he continued.
All of the benchmarks will be revealed during NABD’s 19th annual conference at Wynn/Encore in Las Vegas on May 23 to 25. The conference theme is “The Changing World of BHPH,” which features more than 65 speakers/experts during this three-day event.
Shilson will discuss the entire benchmark report with NIADA 20 group director Chuck Bonanno.
“The old ways are not working like they have in the past so the BHPH industry must adjust to the new challenges caused by the increased competition,” Shilson said. “The adjustments start by understanding the market changes and by comparing your own performance with your peers.
“This benchmark report will facilitate doing both,” he added.
This year’s conference also includes 12 interactive workshops that will be covering:
—An accounting/tax update
—Capital
—Compliance hot topics
—A current developments update
—Getting your best customers back
—Reconditioning best practices
—Keeping customers paying and increasing recoveries
—Sourcing and financing the right inventory
—Technology solutions for GPS
All of the educational sessions will be at Encore this year, which was recently renovated and won the Travelers Magazine award as the finest hotel in Las Vegas. All the Encore rooms are suites and NABD secured $209 discounted room rates with no resort fees while supplies last.
Shilson emphasized the prices for accommodations “make this fabulous facility affordable to everyone.”
Attendees may register online at www.bhphinfo.com or by calling (832) 767-4759.
“Copies of the benchmarks report will be distributed to attendees of the conference and advanced copies will be made available only to those who register for this important event,” Shilson said. “Operators can’t continue to do the same things and expect better results. It’s time to adopt some new operating practices.”
Advanced Lending & Portfolio Services (ALPS), a division of Westlake Financial Services, tried to make it a simple process for a buy-here, pay-here operator to cash in on his way to departing the space.
Earlier this week, Westlake ALPS announced the acquisition of a $14.7 million bulk auto-loam portfolio, which consisted of more than 2,230 BHPH vehicle installment contracts from a company located in Savannah, Ga.
“The owner wanted to exit the buy-here, pay-here market, so we assessed his needs and quickly developed a strategy for him to accomplish this goal,” said Todd Laruffa, assistant vice president and division head of ALPS. “Our entire closing process was completed on-site within one week.”
Westlake ALPS explained it was able to close by acting fast and flying the team to Savannah to work the deal on-site in order to meet the seller’s needs.
“The purchase price on this deal generated a full pay-off for the senior lender, which proves Westlake ALPS to be a viable option for senior lenders to liquidate account receivables without the burden of a runoff scenario,” said Ian Anderson, group president of Westlake Financial Services.
Dealerships, brokers and finance companies interested in learning more about Westlake ALPS are invited to contact ALPS directly at (888) 937-2577.
Cox Automotive’s Tom Webb said earlier this year that buy-here, pay-here dealers were in a “better position.” Then a few weeks later, Ken Shilson with the National Alliance of Buy-Here, Pay-Here Dealers highlighted how “bad news could be good news for BHPH.”
More upbeat assessments arrived on Monday as the latest installment of the National Independent Automobile Dealers Association's quarterly Business Confidence Survey reflected immense optimism from independent used-vehicle dealers regarding retail sales, consumer traffic, profitability and economic conditions.
The survey, conducted in partnership with Equifax during the first quarter of this year, showed confidence in all of those areas was up substantially from the previous quarter and year-over-year.
Nearly two-thirds of respondents (63 percent) indicated they believe the economy will improve in the next quarter, a significant increase from the previous survey, in which only 34 percent expected economic improvement, and the 36 percent of Q1 2016 — that year’s highest percentage.
Just 2 percent said they expect the economy to decline, down from 22 percent in the Q4 survey.
It’s the first time since Q3 2015 that a majority of survey respondents have expressed a positive outlook on economic conditions.
That optimism is reflected throughout the survey. More than half (53 percent) of the respondents plan to invest in more retail inventory, up from 41 percent in the previous survey, and 54 percent expect to hire new sales staff (up from 32 percent), as 70 percent anticipate retail sales to grow (up from 46 percent) and 71 percent expect customer traffic to increase (up from 36 percent).
On the financial side, the percentage of dealers expecting cash flow 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.
“A degree of optimism is always expected with a new year,” Equifax vice president of dealer services John Giamalvo said, “but this level of widespread positivity is unprecedented for this survey as dealers seem primed to ramp up their businesses and position themselves to capitalize on expected opportunities in the year ahead.”
NIADA senior vice president Scott Lilja said it’s no coincidence that the rise in dealer optimism came in the first survey taken since Donald Trump took office as president.
“Certainly the ‘Trump Effect’ has helped drive this newfound enthusiasm in the market,” Lilja said. “The proposed regulatory and tax overhauls promised by the new administration have helped improve the mood of dealers who have long been inundated with federal and state regulatory measures and overly complex tax policy.
“Should some of that burden be lifted by the new administration, the cost of doing business could be substantially reduced,” Lilja added.
Lilja and Giamalvo said other factors driving anticipated retail sales and customer traffic growth include an increase in used vehicle inventory available to meet consumers' ever-shifting needs and the average price differential between new- and used-vehicle average transactions, which hit an all-time high of $11,000 in Q4 of 2016, both of which are expected to bring former new car buyers to independent used car stores to find more affordable transportation.
NIADA recently welcomed two more members of the National Independent Automobile Dealers Association's National Member Benefit program. The pair includes the Coordinating Committee for Automotive Repair and American Solutions for Business.
The Coordinating Committee for Automotive Repair (CCAR) is a nonprofit organization dedicated to providing best practice information and training resources to the automotive industry.
CCAR, whose suite of auto industry training courses have been accessed by tens of thousands of users, has been recognized as an Occupational Safety and Health Administration (OSHA) Alliance Partner within the automotive industry since 2004.
CCAR’s line of hazardous materials handling courses — known as HazmatU — was specifically created at the request of automotive OEMs.
“NIADA and its members are a perfect fit for the training resources we have to offer,” CCAR president Charles Ayers said. “We welcome the opportunity to broaden our reach and work proactively with the members of the association.”
CCAR's learning management system, autoEHS, includes courses in English and in Spanish.
“We are thrilled to have CCAR bring its renowned automotive safety-related training programs to our independent auto dealer members as an invaluable resource to ensure employee safety, meet state and federal workplace safety guidelines, improve employee productivity and much more,” NIADA senior vice president of member services Scott Lilja said.
NIADA members can sign up for courses at https://niada.hazmatu.org.
Meanwhile, American Solutions for Business has joined the National Independent Automobile Dealers Association's National Member Benefit program to provide NIADA members a one-stop shop for a wide variety of dealership needs.
ASB offers automotive forms and supplies, custom print and promotional products, branded apparel, technology solutions, retail displays, office supplies, tools, warehousing solutions and more.
“We're pleased to partner with NIADA to provide solutions that will streamline processes for automotive dealerships,” ASB automotive director Jason Gange said. “We are proud to be customer-driven, a philosophy that means we find solutions and solve problems for clients every day.”
Association members can take advantage of immediate cost savings by visiting ASB’s exclusive NIADA National Member Benefit eCommerce portal, where they’ll find stock automotive forms and supplies, toner and office supplies at some of the lowest prices in the industry.
The portal is accessible through NIADA's Member Benefits Hub or by visiting www.asbniadasolutions.com.
In addition, American Solutions for Business offers a knowledgeable national account management team to assess unique business needs and recommend the best solutions available in the areas of customer retention and growth, marketing, document management, technology, retail merchandising and more.
“ASB brings more than 30 years of small business service solutions and expertise to our independent dealer members,” Lilja said. “It has an extensive local field force to bring best-in-class service and support to our member dealers who use ASB for their numerous office, banking, retail lot and service bay supply needs.”
Think your buy-here, pay-here operation has been the only one impacted by the delayed release of tax funds to certain consumers? One of the largest BHPH players as well as a finance company that books plenty of non-prime originations discussed the situation recently.
First, a little information background from Cox Automotive chief economist Tom Webb. Because of the new federal mandate requiring tax refunds involving the Earned Income Tax Credit or the Additional Child Tax Credit to be held until Feb. 15, Webb noted that year-to-date tax refunds though Feb. 10 were down 69 percent, or $65 billion, from a year ago. “But then the flood gates opened,” according to Webb, and a record $74 billion in tax refunds was distributed during the single week ending Feb. 17.
As of Feb. 24, Webb indicated year-to-date tax refunds were down 10 percent or $15 billion.
“The unusual flow of tax refund monies this year appears to have had less of an effect on dealers than one might expect, especially since other retailers (most notably, TV and appliance stores) did notice a significant impact,” Webb said in his commentary that accompanied the release of the February Manheim Used Vehicle Value Index.
Meanwhile, the leadership at both America’s Car-Mart and Santander Consumer USA (SCUSA) discussed the impact that tax-refund delay has had on their respective businesses. Car-Mart president and chief financial officer Jeff Williams responded to questions about the topic when the company that has a network of 140 BHPH dealerships throughout the Southeast released results from the third quarter of its fiscal year on Feb. 21.
“It’s a little hard to tell,” Williams responded when asked about the percentage of customers in Q3 who typically used their tax refund to purchase a vehicle. Car-Mart reported that its Q3 retail sales softened by 1.3 percent to 10,866 units, down from 11,013 units a year earlier.
“Last year, the tax money was out basically for the last week of January. So we feel like, looking back, that we had maybe 300 sales last year that didn’t happen this year because of the timing of tax refunds. And yes, theoretically that should all roll into the fourth,” Williams said.
“But the money has been delayed a full month. We’re just now receiving it,” he continued. “So there is some risk that it may be a little lower this year, but our expectations at this point are that the initial fall in the third quarter, if we execute the way we’re planning to, should roll into the fourth quarter with the volumes.”
Over at SCUSA, the tax refund topic came up when the finance company hosted its 2017 Analyst and Investor Day in New York. An attendee asked SCUSA about the subject in light of Car-Mart discussing it, too.
“What we did see up until frankly about a week ago was what we normally expect as we get into February, to start to see application volumes start growing due to tax season impact. We had not seen that early in the month.
“We did start seeing at least what appeared to be the initial signs of some higher app volumes about a week ago. So we'll see,” SCUSA chief operating officer Rich Morrin said during the event on Feb. 23. “Obviously we'll have to see if that trend kind of continues, but it seems like, given the delays, it's definitely slowed down how quickly people have been going at least into car dealerships to spend that money.
“We have not seen anything significant in terms of modification differences as a result of the delays. So what we would expect to see if the trend continues over the last week is that maybe the backlog is starting to unwind and people are starting to receive their refunds and we’ll see if they continue to go buy cars with them,” Morrin continued.
SCUSA president and chief executive officer Jason Kulas immediately added, “The key word there is delay. The refunds are coming. They just have been delayed. So I think that's a really important factor to remember.”
