Ford CEO says 65% of U.S. dealers agree to sell EVs under company’s investment programs

  • About 65% of Ford dealers have agreed to sell electric vehicles as the company invests billions to expand production and sales of the battery-powered cars and trucks, CEO Jim Farley said Monday.
  • Ford offered its dealers the option to become “EV-certified” under one of two programs — with investments of $500,000 or $1.2 million.
  • Ford, unlike crosstown rival General Motors, is allowing dealers to opt out of selling EVs and continue to sell the company’s cars.

DETROIT – About 65% of Ford Motor’s dealers have agreed to sell electric vehicles as the company invests billions to expand production and sales of the battery-powered cars and trucks, CEO Jim Farley said Monday.

About 1,920 of Ford’s nearly 3,000 dealers in the U.S. agreed to sell EVs, according to Farley. He said roughly 80% of those dealers opted for the higher level of investment for EVs.

Ford offered its dealers the option to become “EV-certified” under one of two programs — with expected investments of $500,000 or $1.2 million. Dealers in the higher tier, which carries upfront costs of $900,000, receive “elite” certification and be allocated more EVs.

Ford, unlike crosstown rival General Motors, is allowing dealers to opt out of selling EVs and continue to sell the company’s cars. GM has offered buyouts to Buick and Cadillac dealers that don’t want to invest to sell EVs.

Dealers who decided not to invest in EVs may do so when Ford reopens the certification process in 2027.

“We think that the EV adoption in the U.S. will take time, so we wanted to give dealers a chance to come back,” Farley said during an Automotive News conference.

Ford’s plans to sell EVs have been a point of contention since the company split off its all-electric vehicle business earlier this year into a separate division known as Model e. Farley said the automaker and its dealers needed to lower costs, increase profits and deliver better, more consistent customer sales experiences.

Farley on Monday also reiterated that a direct-sales model is estimated to be thousands of dollars cheaper for the automaker than the auto industry’s traditional franchised system.

Wall Street analysts have largely viewed direct-to-consumer sales as a benefit to optimize profit. However, there have been growing pains for Tesla, which uses the sales model, when it comes to servicing its vehicles.

Ford’s current lineup of all-electric vehicles includes the Ford F-150 Lightning pickup, Mustang Mach-E crossover and e-Transit van. The automaker is expected to release a litany of other EVs globally under a plan to invest tens of billion of dollars in the technologies by 2026.

Originally posted by CNBC.



Used car prices are down 3.3% from a year ago — but still ‘grossly inflated,’ auto expert says. Here’s where to find deals

KEY POINTS

  • The latest reading of the consumer price index showed that used cars are one of the few categories with prices that have fallen from a year earlier.
  • However, the large runup in prices before that means consumers are still paying 33% more for used cars than they would if normal depreciation had occurred, according to car-shopping app CoPilot.
  • Electric vehicle prices, which jumped earlier in the year when gas prices were climbing, are now down 20% from their peak in July.

In the latest inflation reading, used cars are one of the few categories with prices that are lower than they were a year ago.

While the consumer price index — which measures price changes for a variety of consumer goods and services — was up 7.1% in November from a year earlier, used cars and truck prices posted an annual 3.3% decline. That compares to some categories that have kept climbing far above year-ago prices, such as eggs (49.1%) and airfare (36%). New car prices are 7.2% higher.

Despite sliding prices for used vehicles, they remain 33% higher than where they’d be if normal depreciation were occurring, said Pat Ryan, founder and CEO of CoPilot, a car-shopping app.

“It’s important to remember that prices are still grossly inflated compared to all normal market conditions,” Ryan said.

“In the new year, we can expect more substantial and accelerated price drops across the board, as vehicle inventory continues to replenish,” said Ryan, adding that dealers also are responding to consumers’ growing resistance to paying record-high car prices.

Demand in the used car market skyrocketed during the pandemic as supply-chain issues hampered automakers’ ability to produce new vehicles. However, the situation is easing slowly with modest improvements in inventory on dealer lots as rising interest rates put pressure on affordability.

Price drops vary among car types and age

While used-car prices are easing from their highs, the decreases depend at least partly on their age and the type of vehicle.

Used electric vehicles have seen the largest drop: The average price of $54,314 in early December is down 20% from a record high of $75,324 in July, according to CoPilot data.

For used hybrids, the average price of $43,574 is a 12% drop from the peak of $49,809 in July. For both segments, whose demand rose earlier in the year when gas prices were headed higher, an easing in gas prices also coincided with a decrease in demand for EVs and hybrids.

Among body types, SUVs and minivans have seen the largest drop this year. List prices for used SUVs average $41,468, down 7% from a peak of $44,824 in March. Used minivans are averaging $24,992, down 8% from $27,257 in March.

By age, 1- to 3-year-old cars come with an average price of $38,987, down 8% from a peak of $42,375 in July.

Among those 4 to 7 years old, the average price is $27,137, a 13% drop from the peak of $31,265 in January. And in the 8-to-13-year-old bracket, the average price of $16,601 is also down 13% from a high of $19,215 in April.

While prices are expected to continue sliding next year, some buyers may not want to wait.

“If you can pay cash now and avoid skyrocketing interest rates [on loans], this month is the best time to buy in over a year,” Ryan said. “With prices finally down year-over-year … and dealers eager to hit year-end sales targets, it could be a good time to negotiate.”

For most buyers, however, “our advice is to wait for the used-car market to finally return closer to normal levels in 2023,” Ryan said.

Originally posted by CNBC.

Used vehicle demand and prices continue to decline from record highs

KEY POINTS

  • Wholesale prices of used vehicles reached their lowest level in more than a year last month, as retail sales decline amid interest rate hikes, rising new vehicle availability and recessionary fears.
  • The Manheim Used Vehicle Value Index, which tracks prices of used vehicles sold at its U.S. wholesale auctions, has declined about 16% from record levels in January.
  • The decline is good news for potential car buyers, however not great for companies such as Carvana that purchased vehicles at record highs and are now trying to sell them at a profit.

DETROIT – Wholesale prices of used vehicles reached their lowest level in more than a year last month, as retail sales decline amid interest rate hikes, rising new vehicle availability, and recessionary fears.

Cox Automotive said Wednesday that its Manheim Used Vehicle Value Index, which tracks prices of used vehicles sold at its U.S. wholesale auctions, has declined 15.6% from record levels in January through November. The index dropped to 199.4 last month, below 200 for the first time since August 2021, and is down 14.2% from the same month a year ago. It marks the sixth-consecutive month of declines.

The falling prices come as the availability of new vehicles steadily rises from historic lows, providing additional options for consumers and potentially better loan options from automaker’s financing arms.

“New inventory is finally starting to build, and that’s producing momentum in new retail sales, but that momentum appears to be at the expense of used retail. Especially it’s the traditional used car buyer that’s most impacted by payment affordability,” Cox chief economist Jonathan Smoke said Tuesday during an industry update.

Retail prices for consumers traditionally follow changes in wholesale prices. That’s good news for potential car buyers, however not great for companies such as embattled retailer Carvana that purchased vehicles at record highs and are now trying to sell them at a profit.

Retail pricing thus far has not declined as quickly as wholesale prices, as dealers attempt to hold steady on record-high pricing. According to the most recent data, Cox reports the average listing price of a used vehicle was $27,564 in October, down less than a half percent from the beginning of the year.

“They’re not wanting to sell at trough prices,” said Chris Frey, senior industry insights manager at Cox Automotive, told CNBC last month. “That’s why we’re not seeing the prices decline so much at retail.”

Cox estimates that used retail sales declined 1% in November from October and were down 10% from a year earlier.

Automakers for several years now have been battling through a semiconductor chip shortage that has sporadically halted production of new vehicles, causing record-low inventories of vehicles and higher prices. The circumstances pushed many new-vehicle buyers into the used-car market.

Cox last month estimated the total used market was on pace to finish the year down more than 12% from 40.6 million in 2021.

Originally posted by CNBC.

December Newsletter

On the heels of giving many thanks and taking stock on all we are thankful for over this past Thanksgiving weekend; we begin to look forward to arguably the most magical time of the year.

December is typically a robust month for our industries, and this year is setting up to deliver another strong finish. Dealers are seeing a bit more inventory, used car pricing has somewhat settled into a comfortable position, and the recent rise in interest rates hasn’t seemed to slow sales as much as some anticipated. Dealers should consider these headwinds in their 2023 planning and forecasting.

Here are a few items which seem to be picking up energy in our recent conversations with dealers across the country.

As the team at ADS looks back on 2022 and the many successes we’ve had, we are proud to have the partnerships we have with so many dealers and industry leading providers. Without the resolute support of so many, we wouldn’t be able to be so focused on exceeding our dealer’s goals and objectives.

Merry Christmas!

Link to our full newsletter.

FTC Extends Deadline by Six Months for Compliance with Some Changes to Financial Data Security Rule

Financial institutions covered by the Safeguards Rule must comply with certain provisions by June 9, 2023

The Federal Trade Commission today announced it is extending by six months the deadline for companies to comply with some of the changes the agency implemented to strengthen the data security safeguards financial institutions must put in place to protect their customers’ personal information. The deadline for complying with some of the updated requirements of the Safeguards Rule is now June 9, 2023.

The Safeguards Rule requires non-banking financial institutions, such as mortgage brokers, motor vehicle dealers, and payday lenders, to develop, implement, and maintain a comprehensive security program to keep their customers’ information safe.

The Commission is extending the deadline based on reports, including a letter from the Small Business Administration’s Office of Advocacy, that there is a shortage of qualified personnel to implement information security programs and that supply chain issues may lead to delays in obtaining necessary equipment for upgrading security systems. These difficulties were exacerbated by the COVID-19 pandemic. These issues may make it difficult for financial institutions, especially small ones, to come into compliance by the deadline.

The FTC approved changes to the Safeguards Rule in October 2021 that include more specific criteria for what safeguards financial institutions must implement as part of their information security programs. While many provisions of the rule went into effect 30 days after publication of the rule in the Federal Register, other sections of the rule were set to go into effect on December 9, 2022. The provisions of the updated rule specifically affected by the six-month extension include requirements that covered financial institutions:

  • designate a qualified individual to oversee their information security program,
  • develop a written risk assessment,
  • limit and monitor who can access sensitive customer information,
  • encrypt all sensitive information,
  • train security personnel,
  • develop an incident response plan,
  • periodically assess the security practices of service providers, and
  • implement multi-factor authentication or another method with equivalent protection for any individual accessing customer information.

The Commission vote to extend the deadline was 4-0.  Commissioner Wilson issued a separate statement.

The Federal Trade Commission works to promote competition and protect and educate consumers. Learn more about consumer topics at consumer.ftc.gov, or report fraud, scams, and bad business practices at ReportFraud.ftc.gov. Follow the FTC on social media, read consumer alerts and the business blog, and sign up to get the latest FTC news and alerts.

Originally posted by the FTC.

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.

Auto loan delinquencies rise as loan-accommodation programs end

With inflation cutting into the budgets of Americans, a growing percentage of people with auto loans are struggling to make their monthly payments.

TransUnion, which tracks more than 81 million auto loans in the U.S., said Tuesday the percentage of loans that are at least 60 days delinquent hit 1.65% in the third quarter, the highest rate for 60-day delinquencies in more than a decade

“Consumers still want to stay current as best that they can. It’s just this inflationary environment is making it challenging,” Satyan Merchant, senior vice president of TransUnion, told CNBC. “It leaves fewer dollars in their pocket to make the auto loan payment, because they’ve got to pay more for eggs and milk and other things.”

The biggest impact is being felt among among subprime borrowers who have lower credit scores and often have lower income.

In September, the average transaction price for a new vehicle was $47,138, up almost $2,600 compared with the year-earlier period, according to the auto research firm Edmunds. The average price paid for a used vehicle was $30,566, a jump of almost $2,500 from September 2021.

The rise in delinquencies also follows the end of loan-accommodation programs set up during the pandemic. Those programs were designed to help consumers who may have lost their job to avoid having a car repossessed because they couldn’t make the monthly payment. 

“There has been this effect where the delinquency that may have occurred over the last few years is really just pushed out or delayed because that consumer didn’t have to make payments or their status was on an accommodation. So now some of those are hitting,” Merchant said. 

TransUnion said approximately 200,000 auto loans that previously took advantage of the pandemic-era accommodation are now listed as 60 days delinquent. About 100,000 accounts that are more than 60 days delinquent remain in accommodation programs, the credit firm said.

Despite the rise in delinquencies, Merchant believes the auto loan market remains healthy. The average interest rate for a new-vehicle loan climbed to 5.2% in the third quarter, while the average rate for a used vehicle loan hit 9.7%, according to TransUnion. Both are up more than one percentage point compared with the year-earlier period.

Those higher interest rates are pressuring many consumers to stretch out the terms of their loans to at least seven years, Merchant said. Still, delinquency rates have been kept somewhat in check by low unemployment.

“If we get into a position where employment starts to be a challenge in the United States and unemployment increases, that is when the industry will really start to be concerned about a consumer’s ability to pay their auto loans,” he said.

— CNBC’s Meghan Reeder contributed to this report.

Original article published to CNBC. https://www.cnbc.com/2022/11/08/auto-loan-delinquencies-rise-as-loan-accommodation-programs-end-.html?__source=iosappshare%7Ccom.glip.mobile.shareExtension

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. https://www.msn.com/en-us/money/other/autonation-s-ceo-warns-of-used-car-price-drop-as-rising-rates-curb-demand/ar-AA13qSuj?cvid=d80090900b4a4c25cd9c52261cc24e40&ocid=winp2sv1plustaskbar

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. https://www.linkedin.com/pulse/solution-dealership-success-todays-depressed-economy-john-stephens/