New-Vehicle Incentives Make a Comeback in July

J.D. Power reports incentives rose to 3.9% of the vehicle’s sticker price in July.

New-vehicle incentives have made a comeback, with a noticeable spike in July.

According to J.D. Power data, incentives rose to 3.9% of the vehicle’s sticker price, up from 2% in July 2022.

Automakers offered incentives of about $2,151 per vehicle, up from $1,174 in July 2022, according to Motor Intelligence data. J.D. Power put incentives at $1,830 per vehicle in July, a significant year-over-year increase from $908.

J.D. Power analysts note that the increase in incentives is driven by:

  • Electric vehicle offers
  • Luxury car lease deals
  • Growing inventory levels

The higher days’ supply of EVs compared to combustion vehicles has increased the industry’s spending on incentives. In fact, EV incentives average $3,986, Tyson Jominy, vice president of data and analytics at J.D. Power, told Automotive News.

J.D. Power and Motor Intelligence data also noted that the return of leasing, which decreased significantly when vehicles were in short supply, also boosted incentive spending, particularly in the luxury segment. Overall lease spending increased to more than $6,000 per vehicle from $3,500 in July 2022, according to Jominy. For premium brands, lease spending reached $8,815 in July.

Greater inventories also drive the incentives increase as automakers strive to move more cars. As of August, GlobalData reported inventories of light-duty vehicles totaled 1.9 million, up 14% year-over-year. Although days’ supply of vehicles remains low at 36 days, it has increased from 28 days in 2022.

Originally published by Auto Dealer Today. https://www.autodealertodaymagazine.com/371600/new-vehicle-incentives-make-a-comeback-in-july?utm_source=newsletter&utm_medium=email&utm_campaign=20230807_1690:64d13f60fe84667ba809eed3:ot_NL-ADT-Enews-Monday-20230807&omid=1141009562&cid=6351a3105ab698cb750194d1

August Newsletter

It is hard to believe that summer is heading into its final weeks! It feels like yesterday when we announced our Summer Tune-Up Series for F&I, Sales, and Fixed Ops Training Classes in conjunction with The Greater Cleveland Auto Dealers Association and the Great Lakes RV Association.

To date we have hosted eight classes which all received incredibly high praise from the attendees and have even heard of some record setting performances taking place upon returning to their stores. We are looking forward to hosting more classes for the dealer community, and going more in depth on our sales and training philosophies. Make sure you follow our LinkedIn page to see updates and testimonials from attendees.

Now that we have surpassed the halfway point of the year and all signs are pointing to a strong finish to the year (2023 U.S. Light Vehicle Forecast raised to 15.4 million from 15.1 million) we want to make sure dealers can take advantage of every opportunity presented to them. Whether it’s reviewing your digital marketing strategy and comparing it to the awesome power of Client Command or looking to establish a Why Buy Here to compete in your market, or if you are looking to maximize your in-store F&I results and reinsurance performance, we at ADS are ready to help you and your teams get to the next level! Reach out to us at [email protected] to learn more about how we are helping dealers exceed their goals.

Some shareworthy news items…

Ford loses billions on EV’s, shifts focus to hybrids

Car repair costs are up almost 20% over the past year. Here are 6 reasons why

Proposed IRS Rules on Microcaptives Defy Precedent and Logic

Used car prices expected to stabilize following major decline in June

New Car Market: Prices Are About To Plummet Due to Oversupply

RV industry steers through post-pandemic US slump Events we will be attending:

Live2Lead – https://www.eventbrite.com/e/live2lead-cleveland-tickets-630417905927
RVDA – http://www.rvda.org/convention
F&I Product Conference – http://www.fandi-conference.com

Sincerely, 
Bob and Ryan

Full Newsletter

July Newsletter

And poof, there goes the first half of the year! Not sure about anyone else, but we are amazed at how fast the calendar continues to turn.

There are so many different metrics to track in our industry (check out the comprehensive report from Colonnade Advisors below), both on the micro and macro levels, and certainly no shortage of prognosticators willing to opine on a wide variety of items.

In the last 3-years, we have heard about a ‘digital transformation’, industry ‘electrification’, and the thought of ‘brick and mortar’ dealerships going by the wayside. Having read countless blogs, watched numerous videos, and participated in several conversations about these topics, we can assure you of two things; our industry is evolving, and the more things change, the more they stay the same.

Yes, our industry is evolving, what industries aren’t? At the end of the day the retail transaction so many of us are fortunate to participate in remains largely unchanged. Sure, there is a digital component to it these days. ‘Fresh ups’ on the lot don’t happen as often as they once did, but the process of qualifying, selecting, demonstrating, negotiating, and delivering are largely still intact, and that makes us happy.

At ADS we have a saying, ‘the process is the shortcut’. Over the last several years, many in retail have forgotten to follow the process while presenting and selling a vehicle, offering protection products in the business office, or recommending maintenance in the service drive.

In collaboration with the Greater Cleveland Auto Dealers Association, we are putting on a Summer Tune-Up Series for F&I, Sales, and Service. A ‘back to the basics’ if you will. We hope to see many of you, as you look to sharpen your skills, as we head into prime selling season. Registration for the classes are below.

Some shareworthy news items…

Colonnade Auto Dealerships Industry Report Spring 2023

ERC Tops The IRS’ Dirty Dozen List

New Vehicle Sales up 11% YoY

Events we will be attending:

Live2Lead – https://www.eventbrite.com/e/live2lead-cleveland-tickets-630417905927
RVDA – http://www.rvda.org/convention
F&I Product Conference – http://www.fandi-conference.com

Hope You All Had A Happy Independence Day

Sincerely, 
Bob and Ryan

Full Newsletter

F&I Training Tune Up

With demand outpacing supply, many sales professionals acted as clerks. In an ever-changing market, this is a perfect time to focus on the basics and Fully commit to treating our craft as an art. The Summer Tune Up Series will consist of three one-day classes focused on getting back to the basics of sales, F&I, and service.

Finance and Insurance (F&I):” Frustration and Indigestion” or “Fun and Income”
Understanding the role of a Finance Manager, today’s customer, and having a non-confrontational process will provide a better performance in the Finance Department. This course will provide immediate measurable results using the tips, techniques, and processes taught. Taking the “Frustration and Indigestion” out of F&I and turning it into ” Fun and Income”.

Learn from a 30-year industry veteran who has trained thousands of high performers. Our Director of Training and Development Eddie Rains will be facilitating the course in our Corporate Training Center in Richfield, OH. This course will be free to GCADA and ADS members/clients.

Follow the link to sign up! https://advanceddealersolutions.com/about-us/class-registration/

June Newsletter

We hope everyone had a tremendous Memorial Day weekend and was able to take some time to thank a soldier or veteran for their sacrifice to this great country!

Now that we have cruised past the ‘Unofficial Start to Summer’, we are nearing, or already in the prime selling season. This is the time of year in our industries when we should be at our best. Websites are being clicked, texts inquiries are being sent, and deals are getting closed. Based upon some recent data (see article below), we should see a fairly strong summer selling season; let’s make sure we are in a position to make the most of our opportunities.

As we travel across the country working with dealers, we have been hearing a common theme; ‘business was great the last couple years, but it seems like we got lazy.’ This has been in reference to lackadaisical sales processes, poor F&I presentations, and a clerk mentality in the service drive. In order to assist dealers with helping their teams ‘get back to the basics’, we teamed up with the Greater Cleveland Auto Dealers Association to provide a Summer Tune Up Series. These one-day sessions will cover the basics of F&I, sales and service. There is no charge if you are a GCADA member, or an ADS customer. Please click the link below to register for these value packed sessions.  

Here’s to making hay while the sun is shining!

Some shareworthy news items…

High Demand Creates High Sales Volume

Ditching the EV???

$5.5 Billion Invested to Handle EV Sales and Service

Good luck and Good Selling!

Sincerely, 
Bob and Ryan

Link to our full newsletter

IRS has issued confusing guidelines on Captive Insurance; some taxpayers now in limbo

When members of Congress travel to Oklahoma this week, we hope they hear one message loud and clear: The IRS needs to stop targeting honest small-business owners and farmers who use the 831(b) tax code, also known as Captive Insurance.

Small businesses around the country successfully protect themselves through this tax code, helping them through events and financial losses that traditional insurance does not cover. But now, those small businesses are being forced to hire lawyers to defend themselves from the IRS, which has unfairly singled them out.

This issue directly affects the Modoc Nation, where some providers of 831(b) captives are domiciled. Fees paid to those plans help benefit the Modoc Nation’s wide range of social assistance for our members, such as child care assistance, scholarships for higher education, and improved housing. With our commitment to conservation, we’ve also reintroduced a herd of 200 bison to the Modoc range.

We’re proud to help facilitate 831(b) captives and know organizations need to mitigate unforeseen risks. This was no more apparent than during the COVID-19 pandemic when organizations faced unprecedented financial challenges.

Unfortunately for many, traditional insurance plans did not cover the wide range of business disruptions and expenses the pandemic brought.

This is where the 831(b) tax code comes in. Congress showed foresight nearly four decades ago when it created 831(b), a special section of the tax code that allows individuals and small businesses to set aside tax-deferred funds for unforeseen or catastrophic events.

This tax code can provide risk coverage not normally available in the traditional insurance market. For instance, an 831(b) captive can help when unpredictable events hit — such as the avian flu, which recently devastated the poultry and egg industries, or prolonged downturns in the oil and gas markets.

Similar to 401K individual retirement accounts, an 831(b) captive allows business owners to put aside pre-tax dollars that can be used to cover unforeseen business disruptions in the future.

This form of self-insurance enables small- to mid-sized businesses to sustain cash flow, generate investment income, and alleviate the burden from losses. During the COVID-19 pandemic, 831(b) captives helped small businesses navigate widespread business and supply chain interruptions.

Unfortunately, the IRS has recently taken a different view of 831(b) captives. This has been especially true since 2016 when the agency began a systematic campaign of audits relating to the 831(b) tax code.

Since then, the IRS issued confusing guidance on how 831(b) is treated for tax purposes, leaving some honest taxpayers in limbo or facing unreasonable audits and penalties. Alternatively, many small businesses are afraid to participate and use this great risk mitigation tool because of the IRS’s confusion on guidance.

Aside from its wide-ranging audit program, the IRS also imposed burdensome new reporting requirements.

The IRS has not been fair to small businesses with 831(b) captives and has made it impossible for us to follow the rules when they won’t even explain the rules they’re expected to follow.

We hope the committee will urge the IRS to end its un-American campaign against small businesses and farmers.

Original posting by The Oklahoman. https://www.oklahoman.com/story/opinion/columns/2023/03/06/guest-irss-guidelines-on-captive-insurance-leave-some-in-limbo/69971204007/

Why there may be no return to ‘normal’ for the U.S. used vehicle market

All new vehicles become used cars and trucks once they’re sold.

It’s an obvious statement, but one that needs to be laid out to explain the root cause for ongoing inventory and pricing issues in the U.S. used vehicle market, which has been a barometer for the country’s inflation levels.

During the onset of the coronavirus pandemic in early 2020, automakers shuttered factories for weeks to stop the spread of Covid-19. It was an unprecedented action that eventually led to additional supply chain problems, such as an ongoing semiconductor chip shortage, causing factories to cease production again for weeks, if not months, at a time in recent years.

The lack of production meant fewer new vehicles would become used models for consumers to purchase, leading to inventory constraints in both the new and used vehicle markets, as well as record prices due to resilient demand.

It’s been three years since those initial plant closures, but American consumers — as well as the Biden administration — hoping for the used vehicle market to return to “normal” pre-pandemic levels shouldn’t hold their breath.

A notable decline in used vehicle prices toward the end of last year has been roughly cut in half in 2023, as inventories remain significantly down following vehicle-production disruptions. There’s also been an uncharacteristically large number of consumers buying out leases to avoid sky-high car prices and increasing interest rates.

“It looks like it will persist for some time,” said Chris Frey, senior industry insights manager at Cox Automotive. “It’s really a function of this hole in new production, creating a dynamic where wholesale or general used values are higher because there are millions of fewer new vehicles that would eventually turn into used.”

Cox Automotive reports wholesale used vehicle prices are up by 8.8% this year through mid-March, according to the Manheim Used Vehicle Value Index, which tracks vehicles sold to dealers at auction. The prices are trending higher, and the index is heading back toward a record of 257.7 basis points set at the start of 2022. It was 238.6 as of mid-March.

Used vehicle inventory is down 21% from a year ago and off a whopping 26% from pre-pandemic levels of 2.8 million available vehicles in 2019. Cox Automotive doesn’t expect the total number of used sales to return to pre-pandemic levels of about 38.2 million units until at least 2026, Frey said.

Adding to the production hole is a change in leasing. Cox reports a 20% increase in consumers who leased their vehicles buying them out instead of trading them in from 2019 to 2022. The increase occurred as residual values of the vehicles in some cases were far above expectations, making it significantly cheaper to buy the vehicle than lease another amid inflated prices and rising interest rates.

“It’s still under a lot of pressure, just like it was last year,” said Benjamin Preston, an autos reporter for Consumer Reports. “Prices came down a little bit … but the bottom line is they’re just way higher than they were before the pandemic.”

Cox Automotive previously forecast wholesale prices on the Manheim Used Vehicle Value Index to end 2023 down 4.3% from December 2022. The company has not revised that forecast but may need to do so amid the increasing wholesale prices.

Cox reports the average listed price of a used vehicle was $26,068 in February, the most recent data available, down from records last year of more than $28,000 but significantly higher than the roughly $22,000 average it reported two years ago. Retail prices for consumers traditionally follow changes in wholesale prices.

So, what’s the solution? There’s no other course but an increase in new vehicles being produced in order to boost the number of future used models. Automakers are expected to lift production this year, but they’ve also pledged to not overbuild like they have in the past.

“We’re unlikely to go back to pre-pandemic levels. Vehicles cost way more now,” Frey said regarding used car pricing. “The landscape has changed. [Automakers] are not manufacturing as many as they have because they got the taste of gold — huge profits from not having so many vehicles in manufacturing.”

Originally on CNBC. https://www.cnbc.com/2023/03/25/why-there-may-be-no-return-to-normal-for-the-used-vehicle-market.html?__source=iosappshare%7Ccom.glip.mobile.shareExtension

Number of US Dealerships Rises in 2022

Automotive News’ annual dealership census shows the number of U.S. dealerships increased 0.4% last year, though new-vehicle sales per franchise fell 8.8% because of new-vehicle inventory challenges and other factors.

The census ranks 42 brands for throughput, a measure of dealership network health. The new census is the first to include Polestar, which had 29 franchises as of Jan. 1.

The research shows Ford Motor Co. shed 35 dealerships last year—a 1% decline. The brand had 2,967 franchises as of Jan. 1. It gained 19 exclusive stores last year but shed 31 franchises. Its Lincoln brand lost 54 franchises and four exclusives to land at 637 franchises on Jan. 1.

Overall, the number of exclusive dealerships across the industry rose 1.6% to 12,151. Import-badged exclusive dealerships also grew by 2%.

Hyundai added 80 stores, Mazda 21, and Kia and Mitsubishi each more than 10. Jeep more than doubled its exclusive store count, and Cadillac’s dealer network grew by two to 564 franchises, according to Automotive News.

Throughput was a mixed bag, falling for 30 franchised brands and increasing for 11.

Toyota ranked No. 1 for throughput, with 1,494 vehicles sold per franchise. However, inventory constraints tempered its throughput by 8.8%.  

Lexus captured the No. 2 spot with throughput of 1,060 vehicles. That represents a 15% decline as dealers struggled with record low inventories for most of the year.  

Though BMW’s throughput declined 1.6% to 947 vehicles, it still climbed one spot to third place. The third place finisher in 2021, Honda, dropped five spots to No. 8, with throughput falling 33% to 826 vehicles. Acura throughput fell 35% to 378 vehicles.

Automotive News reported Mercedes-Benz was the only brand in the top 10 whose throughput rose. The brand jumped four spots to No. 4 as its throughput jumped 6.4% to 916 vehicles. Kia moved from the sixth spot in 2021 to the fifth spot, despite a 2.2% decline in throughput to 892 vehicles.

The research found Cadillac dealers sold 240 new vehicles per franchise, up 45% for the industry’s largest percentage gain.

Article originally written by ADT. https://www.autodealertodaymagazine.com/370399/number-of-u-s-dealerships-rises-in-2022#:~:text=Overall%2C%20the%20number%20of%20exclusive,1.6%25%20to%2012%2C151%20in%202022

ADS March Newsletter

The month of March brings with it many changes. As the weather changes and we cruise into Spring, we shift from football to baseball, college basketball morphs into an all-consuming month long, can’t miss event, and of course, selling season! The hope of warmer weather for riding and RV’ing combined with tax return season generally means an uptick in traffic for new auto’s, RV’s and powersports!

This month also marks some significant changes for us at ADS.

We are thrilled to announce our newest partnership with Zurich. We were honored to be selected as one of their ‘elite’ agencies to represent this globally recognized brands market leading F&I products to auto and powersports dealers. “We are pleased to welcome Bob, Ryan, and the entire ADS team to the Zurich network of F&I agencies; and expanding our reach to their auto and powersports dealers,” said Todd Kaminski, Head of Business Development for Direct Markets, Zurich North America. “Their sound business processes, solid dealership relationships and tremendous client satisfaction are key characteristics we look for to help bring Zurich F&I products, training and participation program to new markets.”

This month we will be hosting an AFIP certification course in our new training center. Be sure to check out the link below and register to be part of this invaluable certification.

As many of us are knee deep in tax season, I am reminded how the profit participation landscape has changed over the years. With some of the recent changes in structures, investment options, access to unearned reserves, etc. it may be a good time to evaluate your capital and tax strategy to make sure you are in the best possible position. Please reach out to us to set up a time to for a no obligation review of your current structure to ensure you are in the best position to accomplish your goals.

A few recent headlines for you to peruse…  

Upcoming Events ADS will be attending:

Cleveland Auto Show, OH – www.clevelandautoshow.com
Agent Summit 2023, Las Vegas, NV – https://www.agentsummit.com/register/

We would love the opportunity to connect with you, please let us know if you will be attending.

Link to the full newsletter https://mailchi.mp/advdealer.com/march-newsletter

Advanced Dealer Solutions joins Zurich North America’s network of select F&I Agencies

Advanced Dealer Solutions (ADS), has announced it has signed on to represent the Zurich suite of protection products to its current and future auto and powersports dealers. 

Zurich North America is a leading provider of Finance and Insurance (F&I) solutions for auto dealers offering a full suite of vehicle protection products for gas-combustion, hybrid, and electric vehicles.

“We are excited to add Zurich products and programs to our current offering”, says Bob Mancuso, President of ADS. Mancuso went on to say, “Zurich’s size, strength, and stability will add to our overall value proposition, and it furthers our goal of being an independent voice when it comes to a dealer’s F&I products and programs.”

“We are pleased to welcome Bob, Ryan, and the entire ADS team to the Zurich network of F&I agencies; and expand our reach to their auto and powersports dealers,” said Todd Kaminski, Head of Business Development for Direct Markets, Zurich North America. “Their sound business processes, solid dealership relationships, and tremendous client satisfaction are key characteristics we look for to help bring Zurich F&I products, training, and participation program to new markets.”

“Advanced Dealer Solutions prides itself on its unbiased approach of offering dealers a true choice in the products and programs that best fit their needs. We feel Zurich’s market presence and customer awareness will add value to the products and programs we currently provide our dealers.” says Ryan Nelson, EVP of Advanced Dealer Solutions.

Advanced Dealer Solutions is a premier dealer development agency based in Richfield, Ohio with specialties in F&I training and development, product structure, and reinsurance management for auto, RV and powersports dealers across the country.

Zurich can trace its roots in the automotive industry to 1922. Over the last 101 years, Zurich has evolved alongside its auto dealer customers, listening to their needs and challenges, and developing solutions that help accelerate their growth and protect their legacy.