Ford postpones deadline for dealers to decide on EV investment

Dealers will get an extra month to decide whether to spend up to $1.2M on chargers and other upgrades the automaker is requiring for certification to sell EVs after 2023.

DETROIT — Ford Motor Co. is giving its dealers an extra month to decide whether they will agree to invest up to $1.2 million and follow other new standards the automaker is imposing so they can sell electric vehicles after next year.

The Oct. 31 deadline has been pushed back to Dec. 2 after some retailers asked for more time to make a decision, according to Ford spokesman Marty Gunsberg.

“We value our relationship with our dealers and have decided to provide additional time for dealers who have not yet decided or asked for more time,” Gunsberg said in a statement.

He declined to say how many dealers have already opted in, saying Ford will provide figures after the enrollment period ends.

The new deadline more closely aligns with the Dec. 15 deadline Lincoln dealers face for a similar program requiring up to $900 million in investment. Dealers who sell both brands would have to invest in each program.

The Ford standards are divided into two tiers with different investment levels in fast chargers and staff training. Dealers who choose the lower dollar amount will be limited in the number of EVs they can sell.

Dealers who don’t make the upgrades will be limited to selling internal-combustion vehicles and hybrids from the Ford brand.

The EV sales cap has rankled some state dealer associations, who argue that it violates state laws. The Virginia Automobile Dealers Association earlier this month sent a letter to Ford CEO Jim Farley and other executives asking them to reconsider the program and revise the rules.

Separately, a group of automotive trade association executives, representing associations in Virginia and 11 other southern states, this week asked Ford to “reconsider the Ford Model e program as it is currently described,” saying it “includes unreasonable restrictions on dealer autonomy.” Model e is the name of the EV division that Farley created this year and oversees as its president.

The new sales standards require dealers to set nonnegotiable prices for EVs. Those who choose the lower-priced certification tier won’t be allowed to carry any EVs in inventory, with their customers having to order exactly what they want for later delivery.

Ford has said each of its roughly 3,000 U.S. dealers can choose whether to opt in to the standards, and it will not force any to do so.

Dealers who opt in will be certified to sell EVs from Jan. 1, 2024, until the end of 2026. Those who don’t will have another opportunity to be certified for EV sales starting in 2027, but again, won’t be required to do so to retain their franchise, officials have said.

Originally posted by Automotive News.

AutoNation’s CEO Warns of Used-Car Price Drop as Rising Rates Curb Demand

(Bloomberg) — AutoNation Inc., the biggest US chain of car dealerships, warned that used-vehicle prices are softening as rising interest rates curb demand from more price-sensitive buyers.

The company said Thursday that third-quarter earnings rose to $6 a share excluding some items. That was below the $6.29 a share average of analysts’ estimates. Revenue increased 4% to $6.67 billion, roughly in line with the average of Wall Street projections.

Mike Manley, who took over as chief executive officer of AutoNation a year ago, said he’s been aggressively turning over his portfolio of used cars to make sure he doesn’t get stuck selling them for less than he paid.

“We’re beginning to see used-car prices mitigate with faster depreciation” among mainstream and budget cars, Manley said in an interview. “We benefit from the mix of our portfolio being premium luxury.”

Shares of the company, which also said its board approved a stock buyback of up to $1 billion, pared an early gain of as much as 6.7% to trade up 3.2% to $105.64 as of 9:57 a.m. in New York.

Separately, Hertz Global Holdings Inc. said Thursday that its depreciation costs jumped in the third quarter, reflecting the decline in prices its used cars fetch at auction. Still, the rental-car company narrowly beat Wall Street’s estimates for profit in the period.

Pent-Up Demand

AutoNation’s CEO said new-vehicle inventory is still tight, despite the chip shortage beginning to ease, and there is strong, pent-up demand for vehicles priced above $30,000.

“It’s easing rather than becoming a glut,” he said.

New-car inventory will remain below pre-pandemic levels next year as automakers try to preserve margins to pay for electrification, Manley said on an earnings call Thursday.

In the used-car market, it’s just a matter of time before weaker prices at car auctions filter through to the retail market, pressuring margins for dealers, he said.

Last month, used-car retailer CarMax Inc. said profit from wholesale vehicles dropped 30% in its second quarter as buyers encountered “affordability challenges” and its bank of used cars depreciated.

The article was originally posted by Bloomberg.

The Solution to Dealership Success In Today’s Depressed Economy

In the post-pandemic climate of inventory shortages and heightened consumer demand, industry analysts predicted automakers would sell as many vehicles as they could build. But now, just as supply chains and inventories are starting to flow again, there are new pressures on the horizon. Inflation, and the interest rate hikes meant to ease it, are leading to higher auto financing costs and cooling demand for new cars, according to Agent Entrepreneur. 

Last month, the average interest rate on a new vehicle purchase hit 5.7%, an increase from about 4% in 2021. “It seems likely that much of the pent-up demand from limited supply will dissipate quickly as high interest rates erode car buyers’ willingness and ability to buy,” said Cox Automotive Senior Economist Charlie Chesbrough. Adding to the equation, the average price for new vehicles reached $45,971 in Q3 2022, up 10% from a year earlier and the highest of any quarter on record, according to J.D. Power.

The irony for dealerships is that just when new vehicles are finally becoming more available, most car buyers can no longer afford them. AutoPayPlus offers dealerships a solution to this challenge. 

AutoPayPlus is an F&I service that uses automated biweekly payments to help car buyers better afford their loan payment, purchase additional products, shorten their trade cycle and return to the dealership with less negative equity. A 10-year analysis has shown that dealerships sell approximately 57% more F&I products on AutoPayPlus deals versus standard retail deals. In addition, results from our company’s top dealer groups reveal a 63% increase in per-vehicle financed income on AutoPayPlus customers.

How does it work? Standard auto loans require one payment every month. Biweekly loan payments divide the monthly amount in half and pay it every two weeks. Because there are 52 weeks in a year, the borrower makes 13 payments over the course of a year (instead of 12) with the extra payment applied to the principal. 

These smaller biweekly payments are scheduled to coincide with when the borrower gets paid to make it easier to plan for and ensure timely repayment. On a monthly basis though, the payment amount is the same. Simply put, this biweekly strategy gives dealerships a solution to present affordable payments in challenging times.

A lot has also been written in recent months about the wisdom of generating more revenue from the service department as a way to improve a dealership’s bottom line and, in turn, create customers who return to the dealership to buy their next vehicle. AutoPayPlus can help here, as well.

The company offers dealerships an industry-first fintech solution for increasing profits from customer-pay service and boosting customer retention. AutoPay+PERKS combines the company’s biweekly loan payment service with the added advantage of a Mastercard debit card at no additional cost to the customer or dealer. 

Once a customer’s AutoPayPlus account has been active for six months and it’s time for their first service, AutoPayPlus sends them a debit Mastercard co-branded with the dealership’s logo and preloaded with $100 that can only be used at the selling dealership’s service department. A dealer boost program allows dealers to load additional funds to the card, further incentivizing their customers’ return to the dealership. It’s a guaranteed way for dealerships to drive new customers to the service department that doesn’t interfere with any other existing retention program such as pre-paid maintenance and, best of all, it’s easy and can be cost-free for dealerships to implement.

As interest rates increase, car buyers are facing significantly higher auto loan payments. And, with no notable inventory improvements forecasted for the fourth quarter combined with waning new-vehicle demand, Cox Automotive is projecting sales in 2022 will be down more than 9% versus 2021 and at the lowest level in a decade. 

Yet, in the face of continued market volatility, supply chain and inventory concerns, and questionable consumer financial strength, opportunity still exists. “The key to a dealership’s success today is to maximize its two primary profit sources,” AutoPayPlus CEO Robert M. Steenbergh explains. “Our programs give agents something to offer their dealerships that no other biweekly program can deliver and a solution to continually build customer loyalty.” 

Originally published on Linkedin by John Stephens, CSO of AutoPayPlus.

November Newsletter

November ushers in the official holiday season for many; that comes with a packed schedule full of to-do lists, dinners, trips, etc. Amid all the usual holiday chaos, many of you are expected to wrap-up the current year of business as well as lay out budgets, strategies, and forecasts for the coming year.

This November also brings national and local elections to us. One of the greatest gifts we have as Americans is the ability to get out and vote. Sadly, for a myriad of reasons, many Americans (about half of eligible voters) choose not to vote in mid-term elections. A lot of people only think about voting every four-years when the presidency is on the ballot. Fact is, there is a tremendous amount being done at the state, county, and local level. State representatives, judges, city council, etc. are most likely on ballots in your area. Please get out and vote this November.

As we evaluate 2022 and the successes or opportunities we have had, we must turn our attention to 2023 and what lies ahead. As with 2021, and 2022, there is much uncertainty in the economy, supply-chain, monetary policy, etc.

Here are a few questions being asked…

Although nobody knows for certain what the future holds, we do know there will always be consumers looking to purchase vehicles. The number of consumers and the prices they are willing to pay may vary, but the founding principles of our industry will remain strong and the dealers who provide the best experience will create the greatest value.

Happy Thanksgiving!

Here’s to another great month for everyone!

To view, our entire newsletter follow the link

Auto Market Summary

Financial markets had a roller coaster ride last week, ending the week lower due to stronger-than-expected inflation data and consumer sentiment data indicating rising inflation expectations. Both suggest the Fed will raise rates as much as planned in November and December and possibly more.

The September Consumer Price Index (CPI) inflation report indicated headline inflation did not come down in September, and core inflation rose to a new 40-year high.

Retail sales in September were flat with August and were weaker than expected. Adjusted for inflation, spending declined in September from August but was unchanged year over year.

Consumer credit growth grew in August with heavier credit card usage. Auto loan performance has deteriorated further as both severe delinquency rates and default rates increased in September. While delinquency rates are very high, default rates remain relatively low. Auto loan credit loosened in September across all channels and lender types.

Sentiment increased slightly in the first half of October, according to the University of Michigan. However, inflation expectations are increasing, and the measure of future expectations declined.

September CPI Report Indicates Higher-Than-Expected Inflation, Core at 40-Year High

Inflation increased in September more than expected, according to the CPI. Headline year-over-year inflation was unchanged but remained lower than the peak in June.

The headline aggregate measure increased by 0.4% when a 0.2% increase was expected on a seasonally adjusted basis. The increase was an acceleration from the 0.1% increase in August.

The core CPI, which excludes Food and Energy, increased by 0.6% just as it did in August. A slowing to 0.4% had been expected. Energy declined again in September but at a smaller pace. Food and all other items saw similar aggregate gains.

Drilling down further, medical care and transportation saw the largest gains. Fuel oil, motor fuel, apparel, and used cars saw large declines. Rents saw another 0.8% increase, likely misleading and not reflecting current trends as the CPI methodology produces a severely lagged measure relative to real market activity.

Vehicle prices again moved in different directions in the CPI, finally reflecting what we have been seeing in the auto market, as new vehicles saw a 0.7% increase in September. Still, used vehicles saw a 1.1% decline.

The core CPI accelerated to a 6.7% increase on a year-over-year basis, a new 40-year high. The overall CPI year over year was unchanged at 8.2% but down from a peak of 9.0% in June.

The categories with the largest year-over-year increases in September were airline fares (43%), fuel oil (40%), piped gas utility (33%), butter (32%), and eggs (31%).

September Retail Sales Were Flat and Weaker than Expected

Retail sales in September were unchanged and weaker than expected, but August’s sales were revised higher. The initial estimate for September showed spending unchanged when an increase of 0.2% was expected.

The auto sector underperformed as sales excluding motor vehicles and parts increased by 0.1%, while sales of motor vehicles and parts declined by 0.4%. As gas prices declined for most of the month, spending at gas stations declined by 1.4%.

Categories saw mixed performance in September. Miscellaneous stores (-2.5%), furniture, home furnishing, electronics, and appliance stores (-0.7%), sporting goods, hobby, book, and music stores (-0.7%), and building material stores (- 0.4%) were also down. Clothing and accessories, non-store (e-commerce) retailers, and food services and drinking places were the largest gainers, each with growth of 0.5%.

Retail sales were up 8.2% year over year on a nominal basis. Only furniture, home furnishing, and electronics (-2.9%) were down compared to last year. The biggest year-over-year gainers were gas stations (+21%), non-store (+12%), and food services and drinking places (+11%).

Adjusted for inflation using the CPI, retail sales declined 0.4% for the month and were unchanged from a year ago.

Consumer Credit Card Growth Increases

The Federal Reserve reported that Consumer Credit, excluding housing-related debt, increased by $32.24 billion in August, accelerating from July’s $26.10 billion. Credit cards drove the acceleration in growth.

Auto loan performance in September deteriorated. Delinquencies of 60-plus days increased by 2.6% and were up 30.8% from a year ago. In September, 1.72% of auto loans were severely delinquent, rising from 1.65% in August and the highest rate since January 2010. Compared to a year ago, the severe delinquency rate was 44 basis points higher.

In September, 6.66% of subprime loans were severely delinquent, increasing from 6.38% in August. The subprime severe delinquency rate was 184 basis points higher than a year ago, and the September rate was the highest in the data series back to 2006.

Even though severe delinquencies are high and defaults increased in September, delinquencies are still not leading to pre-pandemic levels of defaults. Loan defaults increased 19.6% in September from August and were up 22.1% from a year ago. The annualized auto loan default rate in September was 2.24%, which remains below the 2.87% rate in September 2019. Auto credit access loosened in September.

Our Dealertrack Auto Credit Total Loan Index increased by 1.1%. Credit loosened across all loan channels and lender types in September, with new-vehicle loans loosening the most. Credit unions loosened the most across lenders.

Initial Consumer Sentiment Reading Mixed for October

The initial October reading on Consumer Sentiment from the University of Michigan increased by 2% to 59.8 from improving views of current conditions. However, inflation expectations are increasing, and the measure of future expectations declined. Consumers’ views of buying conditions for vehicles improved and were tied with March for the second-best reading this year. June was the all-time low in the reading.

Originally posted by Cox Automotive


Global economic activity is experiencing a broad-based and sharper-than-expected slowdown, with inflation higher than seen in several decades. The cost-of-living crisis, tightening financial conditions in most regions, Russia’s invasion of Ukraine, and the lingering COVID-19 pandemic all weigh heavily on the outlook. Global growth is forecast to slow from 6.0 percent in 2021 to 3.2 percent in 2022 and 2.7 percent in 2023. This is the weakest growth profile since 2001 except for the global financial crisis and the acute phase of the COVID-19 pandemic.

Global inflation is forecast to rise from 4.7 percent in 2021 to 8.8 percent in 2022 but to decline to 6.5 percent in 2023 and to 4.1 percent by 2024. Monetary policy should stay the course to restore price stability, and fiscal policy should aim to alleviate the cost-of-living pressures while maintaining a sufficiently tight stance aligned with monetary policy. Structural reforms can further support the fight against inflation by improving productivity and easing supply constraints, while multilateral cooperation is necessary for fast-tracking the green energy transition and preventing fragmentation.

This article was originally published by International Monetary Fund

U.S. vehicle inventories at highest point since June 2021

Slowing sales helped inventory levels recover further to 1.32 million vehicles in September, a significant jump over where they were a year earlier but still historically low, according to Cox Automotive and the Automotive News Research & Data Center.

Cox said the figure — the highest since June 2021 — represented a 42-day supply, based on its practice of using the selling rate from the last 30 days.

It was nearly a half million vehicles higher than where inventory stood at the same point last year and about 90,000 higher than where it stood a month earlier.

But inventory remained more than 2 million vehicles down from the same month in 2019, before the pandemic.

Mass-market and luxury brand inventories collectively rose from the previous month, Cox said. Within individual segments, stocks of compact and midsize cars remained tight, along with minivans and electrified vehicles, while selections were best among full-size pickups and high-end luxury cars.

Among automakers still reporting monthly sales and inventory figures, five saw their days’ supply increase, with Ford Motor Co.’s climbing the most. Volvo’s figure stayed flat, and Toyota Motor North America declined slightly, according to the Automotive News Research & Data Center.

This article was originally published by Automotive News.

October Newsletter

Fall has arrived and October typically brings us ghouls, goblins, and ghosts. This year our industry is dealing with more tricks and treats than normal…

A few of the “Tricks” dealers are facing:

There are still a few “Treats” to be found:

  • Dealers for the most part are still experiencing record, or near-record profits on the vehicles they are selling.
  • The American consumer is proving resilient despite key metrics signaling reason for concern.
  • Fixed Ops continue to be a bright spot in most dealerships, with many stores and dealer groups posting record results.
  • The NADA Mid-Year analysis shows a healthy and vibrant dealer body that continues to feed a significant portion of our overall economy.

Additionally, ADS has a few “Treats” for our dealers to take advantage of:

  • We are hosting an AFIP Certification Course October 4th and 5th in Strongsville, OH. Be sure to check out the information below and register early to secure your seat.
  • This year, ADS is a proud sponsor of Live2Lead in conjunction with one of our favorite charities, Changing Lives Foundation. This is a tremendous opportunity to take leadership lessons from some of the most recognizable names in leadership, coaching, and mentoring. Be sure to check out the information below and reach out to your ADS representative to secure either heavily discounted, or free admission.

Here’s to another great month for everyone!

View the full newsletter

CarMax says inflation taking toll on car demand

Used-car retailer CarMax Inc said on Thursday that an uncertain economic environment was starting to take a toll on vehicle demand, sending ripples through the auto sector, which has largely dodged a significant hit from inflation this year.

CarMax shares tumbled 22% to $66.63 to hit a more than two-year low, after the company reported second-quarter results below analysts’ estimates and underscored the impact of inflation and rising interest rates on car sales.

“Obviously, consumers are having to make decisions … I just think they are prioritizing their spend a little differently,” Chief Executive Officer William Nash told analysts, adding that softness in used-car sales continued in September.

Strong demand for personal transport amid inventory shortages has allowed automakers and retailers to pass on higher costs to customers, largely protecting profitability this year.

But analysts have been warning that the industry will soon feel the pinch of rising interest rates and weakening consumer confidence as inventory shortages send car prices to record highs.

Auto research firm Cox Automotive, which tracks U.S. vehicle market trends, cut its forecast for new and used vehicle sales on Wednesday, citing worsening consumer sentiment, while Moody’s changed its outlook for the global Automotive industry to “negative” from “stable” earlier in the day.

The outlook change is driven by a weakening macroeconomic environment and concerns over affordability, Moody’s analysts wrote in a note.

CarMax’s dour comments and disappointing results heaped more pain on the auto sector, which has been reeling from a broader market selloff.

Shares of General Motors Co and Ford Motor Co were down about 5% in morning trade, while those of auto dealers AutoNation Inc, Lithia & Driveway and Group 1 Automotive fell between 7% and 10%.

(Reporting by Priyamvada C in Bengaluru and additional reporting by Joseph White in Detroit; Editing by Anil D’Silva)

This article was originally shared by Yahoo Finance.

FTC vs. Dealers: New Rules, New Costs

The FTC has been increasingly focused on dealership sales practices, likely emphasized by the record profits many dealers are realizing in the current economic environment. The agency’s most recent efforts have centered around protecting consumers against undisclosed fees and charges, embodied in a proposed rule promulgated under the Dodd-Frank act.

The rule is meant to drive truth and transparency in the car-buying process and end hidden add-on charges when consumers are shopping for a vehicle.

While on their face these requirements seem like basic standards of doing good business, requirements around implementation and proof of compliance may lead to significant changes in the sales process.

Disclosures and Consent

The proposed rule directly addresses add-on products (meaning any product or service sold to the consumer, which was not installed by the manufacturer, including F&I products) in several ways.

  • Before selling an add-on product, the dealer must disclose the offering price of the vehicle without the product and have the customer decline the purchase in writing, including the time, date, and customer’s signature.
  • If the sale is being financed, the dealer must go through the same process again, disclosing the cash price of the vehicle and the separate finance charges excluding the add-on product.
  • To sell an add-on product, the dealer must obtain the customer’s express informed consent in a written and oral disclosure.
  • Finally, the dealer cannot sell an add-on product that would have no benefit to the consumer, such as a GAP contract where the consumer’s loan does not qualify for coverage.

The rule is very specific about how disclosures must be made, how written consent is obtained, and how long the dealer must retain records of compliance (24 months). A dealer that cannot prove the required disclosures were made and consents were obtained faces stiff repercussions.

The Cost of Compliance

These requirements would compel dealers to maintain several new categories of documents beyond what is typically required today. In practice, a dealer attempting to strictly comply with the rule will likely need to implement a robust software solution into the sales process to track and preserve proof of compliance that would be required.

Sourcing and implementing a solution for compliance may require a large investment for dealers, particularly having legal counsel vet the technology, subscribing to the service, issuing handheld devices to dealership staff, and paying for data storage for years.

Dealers should begin doing their diligence on these issues now in order to be ahead of the game in the likely event that the rule is enacted later in the year.

Andrew Seger is the chief legal officer for Portfolio, a leading provider of reinsurance and F&I programs and products.

This article was originally published on Auto Dealer Today.