Categories
Compliance

The Current Climate for Regulatory Compliance

The retail automotive market has found itself in an interesting situation. On one hand, retail sales are rebounding nicely, with strong price pressure coupled with continued low interest rates. On the other hand, all signs are pointing to an increased environment for regulatory scrutiny from an  hyper-focused Consumer Finance Protection Bureau (CFPB), Federal Trade Commission (FTC), and various local officials.

New leadership within the CFPB has signaled through their rulemaking agenda that automotive lending practices will garner increased scrutiny. New legislative bodies within state and local governments in many areas have followed suit to respond to discriminatory lending practices and perceived predatory consumer behavior.

Couple this renewed regulatory interest and sales environment, with a host of new fraud and cybersecurity schemes that can trip up any company, no matter how big, and the situation gets even more convoluted.

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Categories
EFG Companies

Subscription Training Boosts PRU

Market indicators are certainly trending up these days for retail automotive dealers. According to J.D. Power and LMC Automotive, new-vehicle retail sales for May 2021 are expected to be the highest ever recorded for the month of May. Total new-vehicle sales for May 2021, including retail and non-retail transactions, are projected to reach 1,555,600 units, a 39.6% increase from May 2020. The seasonally adjusted annualized rate (SAAR) for total new-vehicle sales is expected to be 16.7 million units, up 4.7 million units from 2020.

Rising costs do not seem to be impacting consumers yet. While labor and inflationary concerns are capturing headlines and many people are just beginning to emerge from their pandemic bunkers, consumers are on track to spend $53.1 billion on new vehicles in May, the highest on record for any month. Total retailer profit per unit, inclusive of grosses and finance & insurance income, are on pace to reach an all-time high of $3,245, an increase of $1,678 from a year ago and the first time above $3,000 on record. Coupled with the strong retail sales pace, total aggregate retailer profits from new-vehicle sales will be $4.5 billion, the highest ever for the month of May and up an astounding 162% from May 2019.

The used vehicle market is also showing record numbers, with average trade-in values rising to $6,201, an increase of $3,229 (up 108.7 percent) from a year ago. According to the Manheim Used Vehicle Value Index, April delivered three straight months of records as wholesale car prices came in at 194.0, which beat year-ago figures by 54.3 percent and was nearly a 15-point jump from the prior record set a month before (179.2). The value for pick-up trucks alone jumped 77.9 percent!

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Categories
Industry Trends

Chances Are You Need Inventory?

These days, retail automotive dealers are getting a refresher on supply and demand economics.

On the supply side, the pandemic-induced slow down put a crimp on the volume of new vehicles as factories shut down and parts suppliers faced significant shipping challenges. In April 2020, a record low 103,000 new vehicles were manufactured. By contrast, a little over 2 million vehicles were built in January 2021 and Edmunds forecasts that 15.5 million new cars will be sold in 2021, a 6.5 percent lift compared to last year. New vehicle manufacturing is clearly back on line, yet some glitches will remain as the supply of certain semiconductor chips and electronic components are still scarce.

On the demand side, new car prices are skyrocketing. In December 2020, the average transaction price for a new vehicle hit an all-time record high of $40,573. These rising prices are driving many people out of the new car market, forcing people to look elsewhere for a vehicle. The used vehicle market is also experiencing pricing challenges. According to the Manheim Used Car Index, Wholesale used vehicle prices (on a mix-, mileage-, and seasonally adjusted basis) increased 3.79 percent month-over-month in February. This brought the Manheim Used Vehicle Value Index to 169.2, a 17.9 percent increase from a year ago and a record high for the Index. For high-demand vehicles such as SUVs and pickup trucks, the price jump is even higher.

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