'Take the time to listen to customer complaints'

Jim Henry
Automotive News -- December 21, 2011 - 7:47 am ET
Heckler: "Deal with problems now. Don't let them fester."

Scandals at a few companies that sold extended-service contracts directly to consumers potentially reflect badly on the whole industry, including dealerships that sell the contracts.

Larry Hecker, an industry certification specialist, is campaigning to repair whatever damage may have been done to the reputation of the service contract industry.

Hecker is executive director of the Vehicle Protection Association, a trade group in Selbyville, Del. The group was founded in 2008 specifically to introduce industry standards of conduct and a certification program for companies that sell extended-service contracts, especially those that sell directly to the public.

Hecker says his group's efforts are paying off. Consumer complaints related to extended-service contracts are down, at least in the state of Missouri, he says. The 2010 bankruptcy case of a Missouri company, U.S. Fidelis, brought notoriety to extended-service contracts and direct-to-consumer marketing. The Vehicle Protection Association has said it supports criminal charges against the founders of U.S. Fidelis. The founders were indicted earlier this year.

Before his involvement with the VPA, Hecker was president of the Motorist Assurance Program, a group that advocated a certification approach for independent auto-repair shops.

Special Correspondent Jim Henry spoke with Hecker by phone last week.

The Vehicle Protection Association's Web site, vpanet.org, says consumer complaints about service contracts are down. On what do you base that?

That's based on Missouri figures. Service contracts were the No. 1 complaint category, but now they no longer are. [The Missouri attorney general reported extended-service contracts were the No. 1 complaint category in 2009. Last year they dropped to No. 10. The top complaint category in 2010 was debt collectors.]

What specifically do people complain about?

A lot of complaints are over the methods of marketing. Sometimes they say, "We're getting more calls after we asked them not to call us anymore" or "Why are they calling me?" It's frustrating for consumers not to have a response.

That has started to change, as more companies have gotten certified and adopted the standards of conduct.

Do people call your organization?

We get inquiries from individuals asking how they can buy service contracts. Those have grown. People see the name of the organization and they figure that's who they should call.

You get complaints, too, right?

Questions come up concerning claims. "Should this be covered? Shouldn't this be covered?"

Do you tell them to call their administrator?

Usually I ask if they have contacted their administrator. A lot of people have never read their contract and don't know who their administrator is.

Are you set up to handle consumer complaints?

When I get a complaint, usually I will contact the company. I tell them their customer contacted me and would they please contact their customer and follow up with me. That's what I do for companies that are members.

How many calls do you get?

There's probably five to eight per week. Most people find us through our Web site.

How did you get started at this?

That's what I do. I start and run organizations whose industry needs certification. Previously, I was with Motorist Assurance Program. They have a Web site, Motorist.org. You could check it out. It's pretty substantial; there have been almost 8,000 stores involved.

Managers can learn a lot if they take the time to listen to customer complaints.

When it comes to customer mediation, I have always kept telling the stores to deal with problems now. Don't let them fester.

You can reach Jim Henry at autonews@crain.com. Readers are solely responsible for the content of the comments they post here. Comments are subject to the site's terms and conditions of use and do not necessarily reflect the opinion or approval of Automotive News. Readers whose comments violate the terms of use may have their comments removed or all of their content blocked from viewing by other users without notification.

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Well-traveled used cars merit lower-priced products

Jamie LaReau covers auto dealers for Automotive News

In today's economic slump many practical folks see value in high-mileage used vehicles. Vehicles with 80,000 miles or more account for about a fifth of franchised dealers' monthly used-vehicle sales. Some dealers expect that pace to continue in 2012.

That's why finance and insurance providers need to keep up with the changing mix of dealers' used inventory by offering lower priced aftermarket products for those who buy well-traveled used vehicles.

If insurance providers "have taken a wait-and-see attitude thinking that the mix will return to the old normal, then it's time to be proactive and sit down with their data and redesign some of their offerings to fit the new normal," says Tom Wilson, managing director of Front Range Dealer Services in Castle Rock, Colo.

"Most buyers of inexpensive high-mileage vehicles expect that they're not going to get a prime piece devoid of any issues," Wilson says. "If there are reasonably priced protection options available, then F&I will have a running shot at sharing in the profits."

But what's reasonable?

F&I managers say the retail prices of tire-and-wheel plans range from $400 to $800, windshield treatments cost $300 to $400, and paint and fabric protection is $300 to $800.

Some finance managers say such prices are reasonable to protect a high-mileage used car when a person is spending several thousand for it.

You can reach Jamie LaReau at jlareau@crain.com.
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Subprime rivalry bodes well for dealers

Jim Henry
Automotive News -- January 18, 2012 - 12:01 am ET
Experian Automotive's Zabritski: "We're approaching where we were in the 2008 prerecession time period."

Photo credit: EXPERIAN AUTOMOTIVE

Subprime auto lending should continue to grow in 2012. But the big percentage gains that several major subprime lenders saw in 2011 aren't likely to be repeated, and that suggests competition will heat up in the segment.

It could be good news for dealers if lenders are competing harder for their business. Dealers have fretted as the comeback in subprime has lagged the comeback in auto sales overall.

"We're approaching where we were in the 2008 prerecession time period," said Melinda Zabritski, director of automotive credit for Experian Automotive, in an interview this week. "We are certainly seeing expansion, but we're not repeating back to where it was."

In the third quarter of 2011, the last period for which detailed statistics are available, subprime auto loans made up 39.9 percent of originations, according to Experian Automotive. That was about 3.2 percentage points higher than a year earlier and just about even with the third quarter of 2008, when subprime was at 40.2 percent.

Subprime accounted for 43.4 percent of originations in the third quarter of 2007. That fell to only 34 percent in the third quarter of 2009, Experian Automotive says.

Rebounding from those lows has helped drive big percentage increases in subprime.

Used-car originations almost doubled for Ally Financial in the United States in the third quarter to $2.3 billion, up from $1.2 billion a year earlier. Those include prime and subprime borrowers.

Birch: "The cost of funds is good. Access to capital is good and expanding. Most people expect our space to be expanding."

Photo credit:
GM FINANCIAL

At GM Financial, third-quarter loan originations were up 41.6 percent from the year-ago quarter, to about $1.4 billion. GM bought the former AmeriCredit in 2010 to create an in-house source that specialized in subprime loans and a leasing source for both prime and subprime customers.

With close to 12,000 new- and used-car dealerships as of Sept. 30, 2011, GM Financial had almost 2,700 more dealerships than it did a year ago and three times as many dealerships as it had in June 2009.

Kyle Birch, executive vice president of dealer services for GM Financial, said this week that GM Financial probably won't add many dealerships in 2012.

"We're pretty set," he said. Birch said the outlook for 2012 is positive. "The cost of funds is good. Access to capital is good and expanding. Most people expect our space to be expanding," he said.

Growth already has flattened out for subprime specialist Santander Consumer USA, which more than doubled in size from 2009 to 2010, largely though acquisitions.

Santander had $14.8 billion in loans outstanding at the end of 2010. That was up from $6.9 billion a year earlier. As of Sept. 30, 2011, however, it still had $14.8 billion outstanding. That was down from $15.4 billion a year earlier, according to a company report.

Experian's Zabritski said subprime lenders can expect a more competitive environment in 2012. According to Experian Automotive, interest rates already have ticked downward in all risk categories to an average of 8.6 percent for used cars in the third quarter, down from 8.8 percent a year earlier, and to about 4.6 percent for new cars, down from 5 percent.

Said Zabritski: "It's going to be more competitive."

You can reach Jim Henry at autonews@crain.com. Readers are solely responsible for the content of the comments they post here. Comments are subject to the site's terms and conditions of use and do not necessarily reflect the opinion or approval of Automotive News. Readers whose comments violate the terms of use may have their comments removed or all of their content blocked from viewing by other users without notification.

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Kia Recalls Certain Optima & Rondo Models

While brand officials highlighted their upcoming Super Bowl commercial, the National Highway Traffic Administration revealed a recall Kia Motors America is orchestrating.

NHTSA indicated Kia is recalling the Optima from the 2006 through 2008 model years and the Rondo from the 2007 and 2008 model years for a problem associated with the front air bags.

Federal officials indicated a total of 145,755 vehicles contain a clock spring contact assembly for the driver’s air bag supplemental restraint system that may become damaged through usage over time.

NHTSA fears if the clock spring assembly becomes damaged, the driver’s air bag electrical circuit will experience a high resistance condition potentially causing the driver’s air bag to not deploy.

If the clock spring develops high resistance, officials indicated that in the event of a crash the driver’s air bag will not deploy and will not be able to properly protect the driver, increasing the risk of injuries.

Kia told NHTSA it will begin to notify owners and commence a repair campaign at franchised dealers beginning in March. Dealer service departments have been told to replace the vehicle’s air bag clock spring assembly as necessary for free.

Brand officials noted the Optimas originally were manufactured between Sept. 25, 2005 and Jan. 29, 2009. The Rondos were made between Sept. 13, 2006 and March 21, 2008.

Potentially effected owners also can contact Kia at (800) 333-4542.

Kia Discusses Super Bowl Commercial

In other brand news, Kia believes it is tapping into the idea of dreams revealing true desires in a new 60-second commercial set to air during the fourth quarter of Super Bowl XLVI. 

In the spot, titled “Drive the Dream,” officials highlighted the new 2012 Optima Limited races through a Gen X couple’s wildest thoughts as they sleep, including Victoria's Secret Angel Adriana Lima waving the checkered flag at a speedway, an in-your-face Motley Crue concert, mixed martial arts legend Chuck Liddell battling in the ring, a heroine and hunk on horseback in a romance novel setting champion bull rider Judd Leffew taming a bucking rhinoceros and a fairy tale ending.

Kia is returning to the big game for the third straight year with a fully integrated marketing campaign incorporating TV, cinema, digital, print, social media and in-dealership components.

In a Super Bowl advertising first, Kia pointed out the complete “Drive the Dream” ad will premiere on Feb. 2 on more than 18,000 movie screens nationwide in National CineMedia’s FirstLook pre-show program before airing in the game.

Kia said it also will run 15-second teaser ads featuring Adriana Lima on TV and in cinema beginning today while also leveraging the Twitter and Facebook channels of the spot’s celebrity cast.

A special expanded version of the ad will be available at YouTube.com/Kia beginning on Feb. 2.

Furthermore as part of the “Drive the Dream” campaign, consumers can download a $25 pre-paid test drive voucher at Kia.com beginning on Feb. 2 that is redeemable after eligible consumers visit a Kia dealership and complete a test drive of any Optima model.

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Women-Drivers.com Releases List of Top Automakers for Service

Auto Remarketing | Women-Drivers.com Releases List of Top Automakers for Service

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January 26, 2012 | PITTSBURGH By Auto Remarketing Staff

For dealers, service visits serve as a way to interact and check in with current customers — a convenient way to foster customer loyalty. And Women-drivers.com has just released a list that shows which dealers are succeeding in providing superior service after purchase, according to female customers' ratings.

Topping the list of highest ranked servicing car brands by women are two luxury nameplates, Mercedes-Benz (4.71) and Acura (4.67).

Moreover, Mercedes-Benz also recently topped a list released by the site that showed the overall top car brands as rated by women. 

After tracking thousands of consumer reviews with regards to womens' purchasing and browsing experiences at dealerships, the site found that the luxury nameplate took the highest score in both categories.

Mercedes-Benz scored a 4.89 for purchasing experience and a 4.59 for browsing at a dealership experience.

On the site, dealerships’ scores range from 1.0 to 5.0 on the its Women Satisfaction Index (WSI).

Honda and BMW followed the two leaders closely behind in the servicing department with scores of 4.62 and 4.57, respectively.

Why are these numbers so important? The site stressed that with “women accounting for about two-thirds of all dealership service visits,” it is important for dealers to research what practices best suit their female customers.

Further explaining this logic, Anne Fleming, president of the site, noted, “The average customer buys a new car every 40 months, according to NADA (National Automobile Dealers Association). However, during the same time duration, those customers make an estimated ten visits to a dealer's service lane. These interactions are crucial to a dealership for several reasons.

“There is a higher rate of net income that is derived from the service department, for starters; and if a she has a good experience, there is a much higher probability she will be returning to this dealership to buy, especially if she is staying with that brand,” she continued.  “Brands that maintain very strong WSI servicing scores are continuously meeting women’s expectations.

“It's all about trust and treatment,” she concluded.

And just what were these brands’ dealers scored on? Site officials cited the following:

—Ease of scheduling service appointment.

—Receiving an estimate prior to work being completed.

—Being kept informed of the progress or any changes and the financial implications of those changes.

—Being treated respectfully.

—Work being completed to satisfaction.

—Car being cleaned.

—Plans to have service work done there in the future.

And with the average rating for all brands coming in at a 4.04, a few brands on the list hit below the desired mark.

Volkswagen and Chevrolet sat at the bottom of the list of the rated 15, with scores of 3.87 and 3.85 respectively.

Here is the complete list of the 15 brands with the highest servicing WSI scores at new car dealerships, according to Women-drivers.com: 

1. Mercedes-Benz: 4.71

2. Acura: 4.67

3. Honda: 4.62

4. BMW: 4.57

5. Lexus: 4.42

6. Buick: 4.23

7. Toyota: 4.18

8. GMC: 4.16

9. Jeep: 4.12

10. Subaru: 4.03

11. Chrysler: 3.97

12. Dodge and Nissan: 3.93

13. Hyundai: 3.91

14. Volkswagen: 3.87

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J.D. Power: 'Pre-Conceived Notions' Highly Influential in Brand Avoidance

When a shopper avoids a model because of quality or reliability concerns, it may not always stem from tangible proof or some specific experience. 

"Pre-conceived notions” can often be heavy influencers when shoppers form a certain perception about a brand’s quality/reliability,  according to J.D. Power and Associates. As such, the firm urged automakers who have improved their quality to get the word out and emphasize these changes to consumers.

Consider what J.D. Power found during its 2012 Avoider Study, where it surveyed consumers about why they avoid certain models.

More than two-fifths (43 percent) of consumers who cited quality/reliability concerns as the reason for steering clear of a model said their rationale was that “the brand’s vehicles, in general, are known to have poor quality/reliability.”

Comparatively, 38 percent cited ratings and reviews as the reason for having quality/reliability concerns about a vehicle. Meanwhile, just 14 percent said prior ownership led them to their viewpoint.

“The fact that so many new-vehicle buyers may be basing their opinions about quality and reliability on pre-conceived notions, rather than concrete information or data, demonstrates how important it is for automakers to promote the quality and reliability of their models,” said Jon Osborn, research director at J.D. Power.

“For some brands, namely those that have created marked improvements in their quality and reliability in recent years, it’s even more vital to tell their improvement story, rather than just waiting for perceptions to change over time,” he added.

Looking at some other reasons cited for brand avoidance, 14 percent of those staying away from import models said it was the brand’s origin that led them to the decision. That proportion is the highest it has ever been during the 10 years of the study, officials noted.

As for buyers who steered clear of domestic vehicles, only 6 percent did so because of them being U.S. cars. This marks an all-time low.

“The decline in avoidance of U.S. models due to their origin reflects a buy-American sentiment that surfaced as the economic recession led to domestic job losses and adversely affected major U.S. institutions such as the Detroit Big 3,” Osborn stated.

“In addition, the quality, dependability and appeal of domestic models has improved during the past several years, as well, and this may also be a cause for declining avoidance,” he added.

Moving to the reason for buying a specific model, the most frequently cited cause was gas mileage. This has leaped over last year’s most popular reasons: reliability, the deal and exterior styling.

In light of this trend, there was a good bit of consumer gravitation toward the Chevrolet Volt, Nissan Leaf and Toyota Prius models.

Each of these vehicles had both gas mileage and environmental impact within the top two reasons consumers gave for buying the respective model.

Interestingly enough, though, the third most popular reason was different for each of these models.

Citing the “image the model portrays” was quite popular for Volt buyers. Leaf buyers were swayed by low maintenance costs. The reliability factor was influential for the Prius.

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NADAguides Says Second Half Saw Continued Spike in Traffic

NADAguides.com said the second half of 2011 showed continued growth for the site, as the unique visitor count climbed 12 percent.

August, in particular, was the most heavily trafficked month the online research portal indicated it has ever had.

As for the automotive section, it showed a 9-percent traffic hike versus calendar-year 2010.

Officials said this section “peaked in August, recording the highest number of unique visitors on NADAguides.com.”

Offering some overall commentary on the site’s growth, NADAguides director of product development Troy Snyder had this to say: “As the largest publisher of vehicle data online we are a leading resource for in-market vehicle shoppers and by analyzing their traffic search patterns we are able to gauge consumer interest and trends.

“NADAguides.com site traffic has had significant increases year over year, especially in 2011, indicating more and more consumers are researching before they buy and are increasingly more knowledgeable before they make their purchase,” he added.

Sharing some trends from other sections, the motorcycle, ATVs and utility vehicle section climbed 18 percent year-over-year, with the second half up 21 percent. The first half showed 14-percent growth.

The classic cars section jumped 13 percent from 2010, with the fourth quarter showing month-over-month increases of 24 percent, 25 percent and 26 percent in October, November and December.

The boats and personal watercraft section was up 10 percent compared to 2010. July was the strongest month ever for boats and personal watercraft.

Meanwhile, RV traffic during the second half climbed 10 percent.

Additionally, the second half showed  a 30-percent rise in unique visitors for the NADAguides.com mobile site. Officials contend that 8 percent of all NADAguides.com traffic is through mobile site visitors.

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Domestics Lead Consumer Guide Automotive Honors

This week, Consumer Guide Automotive revealed the recipients of its 2012 Best Buy and Recommended Awards, showcasing a total of 106 vehicles.

Two domestic nameplates led the way with the most models honored as Chevrolet and Ford each had nine award winners. Toyota was right behind with eight lauded units while Honda had seven vehicles praised.

Since 1967, the editorial team at Consumer Guide Automotive has used a rigorous and comprehensive evaluation process to identify the vehicles that it deems worthy of serious consideration by a consumer, the publication noted.

In assessing each vehicles, the editors utilize such criteria as price, features, performance, accommodations, fuel economy, reliability records and resale value.

The winners are divided into two categories: The Consumer Guide Automotive Best Buy and Recommended winners.

Officials explained that a Best Buy rating signifies that a vehicle is ranked at the top of its class and is strongly recommended by the editors. Best Buy vehicles are said to represent the best balance of attributes and price within their classes, and they are said to be the most ideal choices for most consumers.

This year’s models earning the Best Buy award include the Nissan Versa, Ford Expedition, Kia Optima, Buick LaCrosse, Dodge Charger and the Mazda MX-5 Miata.

Consumer Guide Automotive indicated that its Recommended list features vehicles that, though not ranked at the very top of their category, are still worth strong consideration by the consumer for their unique combination of attributes and value.

This year’s Recommended awards include the Toyota RAV4, Subaru Impreza, Honda Accord, Audi A7 and the Nissan Frontier.

“The key to Consumer Guide Automotive’s annual Best Buy and Recommended Awards is the careful evaluation of every aspect of each vehicle as it relates to consumers’ real-world driving experience,” editors explained.

“It is this thoroughness which is driving increasing numbers of consumers to check Consumer Guide Automotive reviews before buying a new vehicle,” they continued.

Consumer Guide's editorial team drives nearly 200,000 miles per year evaluating what these vehicles do well, and what they don't.

The publication said multiple editors evaluate each vehicle, a process that assure that recommendations are based on experiences that best reflect the settings and conditions that  buyers encounters every day.

“Whether it is driving through the city, highways, rural areas, long trips, or simply picking up the kids at school, the vehicles are tested in the same way that typical car buyers would use their vehicle,” editors concluded.

The following is a breakdown of the award winners:

Subcompact Car Best Buys
Ford Fiesta
Honda Fit
Hyundai Accent
Mazda 2
Nissan Cube

Subcompact Car Recommended
Chevrolet Sonic

Compact Car Best Buys
Ford Focus
Honda Civic
Mazda3
Nissan Versa
Volkswagen Golf
Volkswagen Jetta Sportwagen

Compact Car Recommendeds
Chevrolet Cruze
Hyundai Elantra
Scion Xb
Subaru Impreza

Premium Compact Car Best Buys
BMW 3-Series
Mercedes-Benz C-Class

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CNW: Days’ Supply of Used Models Softening Even Further

CNW Research’s latest used-vehicle supply findings concur with several other assertions from wholesale analysts — it’s not going to be easy for managers to keep their used inventories stocked.

Even with trade-ins climbing because of greater new-vehicle sales, CNW revealed on Tuesday that the industry remains at a 45-days’ supply of used vehicles.

Highlighting just how significant the supply dearth is, president Art Spinella noted that January is running at a 44.3 days’ supply, lower than any month of 2011. For comparison, the level stood at 50.7 days in January of last year.

CNW recollected that having a 70 to 80 days’ supply in the early 2000s was not uncommon. In fact, used supply hit 86 days’ in November of ’08.

“Dealers continue to struggle finding the right vehicles for their inventory,” Spinella acknowledged.

“It was once thought that having a 45 days’ supply was ‘ideal,’ but that figure is now considered far too low for most dealerships. The likely ideal level is in the low 50 days,” he explained.

CNW determined that small-car supply — just like on the new-vehicle side — continued to shrink as a share of total sales while full-size pickup inventories rose to its highest level of the year in December.

“Estimated sales for January shows small cars again declining to about 16 percent of sales while pickups should take more than 13 percent,” Spinella projected.

Early January Sales Trends

Looking at how used sales are shaping so far this month, CNW indicated that private-party sales continue to increase as a share of total sales, running more than 26 percent ahead of January of last year.

Spinella pointed out that franchised dealer used sales are up about 4 percent in the opening half of the month while independent dealers saw a near 3-percent decline.

As demand increases, CNW said dealers are beginning to see prices firming.

“For example, franchised dealers' average used-car asking price in January is about $11,516, and they are getting more than 94 percent of that asking price for vehicles bringing average transaction price to $10,855, up 2.9 percent versus year ago,” Spinella highlighted.

“It also is a gain of nearly 3 percent versus December 2011,” he added.

“If the rest of this month reflects historic first-half of January trends, the industry will sell in the 2.17 million unit neighborhood this month, or 8.2 percent ahead of last year’s 2.01 million,” Spinella went on to estimate.

In terms of age, CNW noted the hot products are still the one- to six-year-old rides, but the supply is tight.

Older models — more than 10 years old — are lagging somewhat based on CNW’s monthly segment tracking surveys.

“There is a return of younger consumers to the used-car market which should perk up the over-10 year old sales numbers in the coming months,” Spinella surmised.

“Pickups are gaining in market share while small cars are diminishing,” he continued. “This could change if gasoline prices rise dramatically, but for many of the 20-somethings, a move to anything newer than what they currently drive will improve fuel economy and offset all but massive fuel price increases.

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GM Dealers to Give Away Oil Changes to Help Boost Blood Drive

A pair of Chicago-area General Motors dealerships is hoping to lend a helping hand to a local blood center through a rather unique promotion this weekend. Bill Jacobs Cadillac and Bill Jacobs Joliet (a Chevrolet store) are providing free oil changes to shoppers who stop in Saturday and donate a pint of blood.

In addition to the oil/lube/filter change, donators will be given an $11 gift certified to Oberweis Dairy/Ice Cream.

The “Give us a pint and we’ll give you five Quarts” event runs from 8 a.m. (CT) until 2 p.m. at the dealerships, both of which are located at 2001 W. Jefferson Street in Joliet, Ill.

The donations will be given to the Heartland Blood Center.

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Lawsuits Associated with Various Credit Acts Hit New Highs

Lawsuits associated with the Fair Credit Reporting Act, Telephone Consumer Protect Act and Truth-in-Lending Act all set new records last year, according to federal data compiled by WebRecon.

Analysts determined that FCRA litigation had a big jump after several years of relatively flat numbers, while TCPA litigation more than doubled and TILA nearly tripled over the previous year.

WebRecon also found that Fair Debt Collection Practices Act litigation set a record as well, but fell just short of the company’s projection of 12,000 cases with 11,811 cases filed in 2011.

“The growth rate of FDCPA litigation has plummeted over the last two years, though it is important to note that the number of FDCPA lawsuits filed does continue to grow each year, just on a shrinking trajectory,” analysts explained, adding that FDCPA litigation hit its peak growth in 2009 when it rose 52 percent over the previous year’s numbers.

Breaking down the data geographically, WebRecon discovered the Denver District Court saw the most suits filed in it, totaling 658. Philadelphia was second with 634 suits. Los Angeles was third with 623, followed by Chicago with 592 and Newark, N.J., with 486.

By state, California led the nation with 1,654 lawsuits in 2011. Florida was next with 1,146 lawsuits, followed by New York (1,128), Pennsylvania (940) and New Jersey (711).

WebRecon offered annual comparisons of FDCPA, FCRA, TCPA and TILA litigation. These statistics are for cases filed in federal U.S. District Courts only.

—2011: 11,811 FDCPA cases, 1,838 FCRA cases, 660 TCPA cases, 1462 TILA cases.

—2010: 10,859 FDCPA cases, 1,295 FCRA cases, 272 TCPA cases, 529 TILA cases.

—2009: 9,135 FDCPA cases, 1,174 FCRA cases.

—2008: 6,025 FDCPA cases, 1,164 FCRA cases

—2007: 4,372 FDCPA cases, 1,347 FCRA cases.

—2006: 3,710 FDCPA cases, 955 FCRA cases.

—2005: 3,215 FDCPA cases.

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Polk: Vehicle Population Hits Record Average Age

The U.S. vehicle population has reached a record-high age after showing rapid gains in recent years, according to Polk, which said this aging fleet and longer ownership periods present dealership service departments — along with other auto repair and aftermarket businesses — with “significant business growth opportunity.”

More specifically, the average age of vehicles currently in operation as of July 1 of 2011 is 10.8 years, compared to 10.6 years on the same date in 2010.

This continues what Polk called a rapid increase over the last five years, climbing all the way up from an average age of 9.7 back in 2006.

“The increasing age of the vehicle fleet, together with the increasing length of ownership, offers significant business growth opportunity for the automotive aftermarket,” stated Mark Seng, global aftermarket practice leader at Polk. “Dealer service departments and independent repair facilities, as well as aftermarket parts suppliers, will see increased business opportunity with customers in need of vehicle service.”

Breaking the data down further, the age of passenger cars climbed only slightly to 11.1, compared to an age of 11 the prior year. Meanwhile, the increase for trucks (10.1 to 10.4) was more dramatic.

Polk explained that this deceleration for passenger car aging reflects the sluggish sales and the car-versus-truck sales mix during 2008 and 2009. During this period, there were a greater number of truck registrations than car registrations.

Officials pointed out, however, that that even though truck sales were stronger during this period, their aging rate was quicker.

That said, the market is likely to see this trend go in reverse in the near future, given the increases in the CUV and small SUV populations over the last two years. What’s more, with new-vehicle sales climbing last year and expectations for those gains to continue, Polk believes the market’s aging rate will probably soften compared to what’s been seen in the last three years.

Moving along, Polk also delved into U.S. vehicle population data. After two years of decreases in vehicle count, 2011 showed an uptick.

Specifically, there were 240.5 million units in operation as of July 1.

After reaching an all-time high of 242.1 million in 2008, the population dropped to 241.5 million in 2009 and 240.0 million in 2010.

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Beggs: Wholesale Market Is ‘Busting Loose’

The new year already has generated a new record for Black Book’s editors as last week they established a new mark for the most daily adjustments.

Black Book’s staff made a daily average of 3,280 adjustments last week, almost 400 more per day than the previous high set during the week ending Aug. 12.

Thanks to the bevy of activity, managing editor Ricky Beggs acknowledged the conversation within Black Book’s office has changed significantly.

“The water cooler talk that has been often focused on college football for the past four to five months is now over until August or September, and once again, a team from the SEC has been crowned the champion,” Beggs began during his latest video blog, “Beggs on the Used Car Market," referring to college football's Southeastern Conference.

“The champion of the used-car market this week was the fact that 53-percent of the changes the editors made were increases,” he continued. “We haven’t had this level of positive changes since the week ending last May 20.”

While the amount of daily adjustments set a new precedent, Black Book discovered that last week’s overall movement settled at a decline of slightly less than $5.

For comparison, Beggs mentioned that when Black Book previously established its daily adjustments record last August, the overall movement was a decline of $119.

Beggs explained that last week’s overall dip “was definitely supported by the various dealer and auctioneer comments we heard such as ‘expecting an upturn’ and a more enthusiastic ‘on the verge of busting loose within the next two to three weeks.’”

“With slightly more 'average' condition values adjusted than 'clean,' and more of them being increases, this is a reflection of the interest and demand due to the tax season type cars and trucks,” Beggs continued.

Breaking it down by segment, Beggs noted: "For the first time in at least the past 12 weeks we not only have one car segment, but two that increased in price week over week."

Editors found that entry midsize cars ticked up by $1, while the entry level cars increased by $12.

Black Book noticed that three other car segments declined by $22 or less for the week: full-size cars (down $22), compact cars (down $15) and upper midsize cars (down $11).

Turning over to truck segments, Black Book determined that the overall change settled at a decline of $15, a level Beggs said was similar to the past three weeks.

Editors mentioned that compact pickups have increased five of the past six weeks and were also joined a week ago by full-size SUVs, which increased by $9.

Showing the overall stability of the trucks, Black Book indicated that there were six of the 14 segment types that declined by just $7 or less.

Beggs closed his commentary by elaborating how why the wholesale market appears to be heating up.

“As we gathered and analyzed all the market data this week, another sign of the increasingly active market was an increased level of data on quite a few more late model vehicles, those from model years 2010 through 2012,” Beggs shared.

“From this analysis we included market driven data values on an additional 68 vehicle listings. These were a mixture of highline cars, full-size trucks, entry midsize cars as well as compact and midsize crossovers,” he continued.

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Dealer's Auto Auction Wins Another GE Remarketing Award

David Andrews, Dealer's Auto Auction of the South

Dealer's Auto Auction of the South announced recently that it took home Remarketing by GE Imagination Award honors for the second straight year.

Auction owner David Andrews, general manager Phillip Butler and GE account manager Mark Hopkins accepted the award from Paul Seger — who is the vice president of GE Remarketing — last month in South Barrington, Ill.

The auction is located in Horn Lake, Miss.

"Last year I gave this award to this auction and said they were a diamond in the rough,” Seger said when giving the award. “This year, I can say they are a shining star.”

GE declined to provide the full list of winners to Auto Remarketing.

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U.S. News Releases 2012 Best Cars for the Money Awards

Covering models in 23 different vehicle segments, U.S. News Best Cars recently highlighted its 2012 Best Cars for the Money Awards.

Ford took home the most awards with five of its models selected as winners: Taurus, Fusion, Fiesta, Edge and Fusion Hybrid.

For 2012, officials determined three brands emerged as winners for the first time: Subaru for its Outback, Audi for its Q5 and Jeep for its Wrangler.

Published by U.S. News & World Report, the magazine indicated 14 of the winners were introduced or significantly redesigned in the past three years, showing that newer models can offer good value while also providing the latest features that consumers want.

“You don’t have to choose between a great car and a great value,” explained Jamie Page Deaton, managing editor of U.S. News Best Cars.

“The award-winning vehicles are both easy to live with and easy to afford,” Page Deaton continued. “With 12 brands winning at least one award, it’s clear that a wide range of automakers are in tune with Americans’ desire for a solid value.

“Additionally, 14 of the winners have been introduced or significantly redesigned in the last three years, demonstrating that newer models can offer good long-term value. And with the freshest technology and styling, they’re more fun to own,” Page Deaton went on to say.

The 23 award winners include:

—Affordable Compact SUVs 2 row: 2012 Chevrolet Equinox
—Affordable Compact SUVs 3 row: 2012 Toyota RAV4
—Affordable Large Cars: 2012 Ford Taurus
—Affordable Large SUVs: 2012 Chevrolet Suburban
—Affordable Midsize Cars: 2012 Ford Fusion
—Affordable Midsize SUVs 2 row: 2012 Ford Edge
—Affordable Midsize SUVs 3 row: 2012 Mazda CX-9
—Affordable Small Cars Compact: 2012 Chevrolet Cruze
—Affordable Small Cars Subcompact: 2012 Ford Fiesta
—Affordable Sports Cars: 2012 Mazda MX-5 Miata
—Compact Pickup Trucks: 2012 Toyota Tacoma
—Full-size Pickup Trucks: 2012 Ram 1500
—Hatchbacks: 2012 Ford Fiesta
—Hybrid Cars: 2012 Ford Fusion Hybrid
—Hybrid SUVs: 2012 Lexus RX Hybrid
—Luxury Compact SUVs: 2012 Audi Q5
—Luxury Large SUVs: 2012 Cadillac Escalade
—Luxury Midsize SUVs: 2012 Lexus RX 350
—Minivans: 2012 Mazda Mazda5
—Off-Road SUVs: 2012 Jeep Wrangler
—Upscale Midsize Cars: 2012 Buick Regal
—Upscale Small Cars: 2012 Volkswagen GTI
—Wagons: 2012 Subaru Outback

The magazine reiterated the Best Cars for the Money Awards are geared toward helping everyday buyers navigate what could be a confusing market.

The awards methodology combines quality and value data into a composite score. Within each of 23 model categories, the vehicle with the highest score is named the Best Car for the Money in that category on the basis of safety, reliability and a consensus of industry experts’ opinions.

Officials added value is measured by a combination of a vehicle’s five-year total cost of ownership and the average price paid for the unit at the time the awards are published as calculated by TrueCar.com.

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ALG: No Change in Used-Vehicle Supply Outlook

When revealing its first Industry Report for the year, ALG did not make any significant adjustments to the current used-vehicle supply outlook.

Analysts acknowledged the last major adjustment was made for their July/August 2011 edition.

Looking ahead to when they next roll out a report for the March/April edition, ALG analysts projected to see a positive seasonal pattern.

“Expected declines (depreciation and seasonal pattern) will be within 0.5 points to 1 point on average due to a positive seasonal pattern than what was seen in the January/February edition with varying degrees for particular segments due to differing depreciation rates,” ALG explained.

“Based on the latest economic data, including housing and labor market figures, as well as overall economic growth rates, ALG may make further adjustments in the March/April edition to reflect the current and anticipated economic situation,” analysts emphasized.

ALG contends the general consensus on the outlook of the economy still remains a view of slow growth even with the improvement in labor markets.

“There are still many potential problem areas that need to be worked out including the European debt issues and slow growth in housing prices, among other things,” ALG acknowledged.

“ALG is paying close attention to these metrics, which affect the wealth of consumers, thereby having an impact on current and future big ticket item purchases such as automobiles,” the firm pointed out.

More Economic Commentary

ALG delved deeper into U.S. economic data, beginning with a mention that GDP grew at a 2-percent seasonally adjusted annual rate in the second estimate for the third quarter.

Relative to the 0.4-percent and 1.3-percent growth rates for the two prior quarters, analysts declared this third-quarter number is a welcomed improvement and has dampened thoughts of another U.S. recession.

ALG highlighted consumer confidence also saw a huge bump in November, going from its lowest level in more than two years (40.9 in October) to 56 in November.

“Though this is still far lower than what was seen prior to the recession, and not even close to the post-recession peak, the increase is a good sign as the economy moves further into its recovery,” analysts explained.

“There are clearly still many issues that need to be dealt with, including the prospect of a European recession, which some say has already begun, and the difficulties with the U.S. deficit,” they continued. “However, at present, the recent numbers have at least given some cause for optimism.”

Next, ALG turned its focus on fuel markets, noting there was little change made to the gas price outlook for its January/February edition relative to the November/December 2011 edition.

Analysts indicated oil prices for the last three months through October have been hovering near $86 per barrel while gas prices sat at $3.45 per gallon in October. This is down significantly from the $3.91 that was observed earlier in the year.

“Recent months have seen fairly stable oil and gas prices, though they often fluctuate a great deal from one period to another,” ALG stated.

“With this in mind, ALG expects that gas prices will average about $3.90 per gallon in the 36-month term, and continue to show steady growth in the foreseeable future,” the firm added.

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KBB: High Gas Prices Likely to Stay, but Automakers More Prepared Than 2008 Hike

Alec Gutierrez, Kelley Blue Book

It appears like the U.S. won’t see any relief at the gas pump any time soon and considering some of the volatile concerns overseas, fuel prices may climb even higher, according to Kelley Blue Book.

That said, automakers’ vehicle lineups have never been better-suited for gas-price hikes than they are now, KBB noted. What’s more, with Corporate Average Fuel Economy deadlines on the horizon, the market should see even more fuel-friendly rides in the future.

As for the time being, the Energy Information Administration expects national fuel costs to average $3.48 per gallon this year. That compares to an average of $3.53/gallon in 2011.

"Although initial estimates from the EIA do not suggest fuel prices to hit record highs this year, there are significant risks overseas that have the potential to send gas prices soaring,” explained KBB senior market analyst Alec Gutierrez, who went on to express a few concerns regarding America’s relationship with Iran and its impact of fuel costs down the road.

Oil costs might be steady now, however that could change dramatically in the event of an Iranian oil embargo, Iran following through on its threat to cut off the Strait of Hormuz oil pipeline or if the U.S. and Iran go to war, Gutierrez suggested.

Any of those events could push fuel costs significantly higher and possibly cause another U.S. recession, he added.

“In any scenario, consumers should be prepared to face gas prices of $3.50 per gallon or more for the foreseeable future,” he added. “Increased market share for compact cars and crossovers is likely in 2012 as consumers continue to emphasize fuel-efficiency when making their purchases.”

However, Gutierrez said it’s fortunate that the market has more fuel-friendly these days and stressed that fuel efficiency is stronger “than ever before.” He touted several vehicles unveiled at the North American International Auto Show in Detroit as examples of fuel-friendly rides that may attract consumer attention, including the Toyota Prius C (50 miles per gallon, $19,000 entry-level cost) and 2013 Ford Fusion (37 mpg).

In fact, Gutierrez listed five new vehicles achieving an average of 18.5 percent better fuel economy than their 2008 model-year editions, as the following list indicates.

—2013 Ford Fusion: 37 mpg, 27.6 percent higher than 2008 model-year.
—2012 Toyota Prius: 48 mpg, 6.7 percent higher.
—2012 Chevrolet Sonic: 40 mpg, 17.6 percent higher than 2008 Aveo.
—2012 Hyundai Elantra: 40 mpg, 21.2 percent higher.
—2012 Honda CR-V: 31 mpg, 19.2 percent higher.

“With so many vehicles available that offer excellent fuel economy, the market is better prepared today than at any time in the past to deal with spikes in energy prices,” Gutierrez noted. “Vehicles will only improve their fuel-efficiency ratings in the coming years as Corporate Average Fuel Economy standards continue to put pressure on manufacturers to increase the efficiency of their fleets.”

Of course, some argue the pressure from CAFE standards will hurt the industry in other areas.

In a recent interview with Auto Remarketing, incoming National Automobile Dealers Association chair Bill Underriner – a dealer from Billings, Mont. — voiced his concerns with CAFE, pointing out that hitting the fuel efficiency standard will come with quite a price.

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RVI: Trucks At Top of Wholesale Gains

Amid a modest uptick in used-vehicle prices from the previous month, December’s wholesale increases were led by gains in the larger vehicle categories, as these segments were ahead of the market curve in the year’s final month thanks largely to more moderate gas prices, according to the RVI Group.

More specifically, the RVI Used Car Price Index was 1.45 in December, up 0.6 percent from November and a 12.5-percent hike from December 2010.

“The primary reason for wholesale values increase continues to be the low supply. Even with new car prices seeing declines, the low supply continues to drive wholesale values higher,” RVI vice president Rene Abdalah told Auto Remarketing on Friday.

Breaking the month down, truck segments accounted for the top five sequential increases and six of the top eight.

The segment showing the heftiest increase from November was the full-size van category, which was up 2.6 percent. It was followed by small pickups (up 1.4 percent) and small SUVs (up 1.4 percent), with full-size pickups (up 1.2 percent) and full-size SUVs (up 1.1 percent) not far behind.

“Larger segments were market leaders in month-over-month increases mainly due to the continued decline of gas prices,” Abdalah explained. “Consumers have found low- to mid-$3/gallon prices the norm and have turned to purchasing larger vehicles.”

On the opposite end of the spectrum, sports cars (down 5.4 percent) showed the heftiest decline with luxury coupes (down 2.9 percent) having the second-highest drop.

On a year-over-year basis, all segments were up in price. The most dramatic increase was for subcompacts, which climbed 25.7 percent. Next up were small pickups (up 19.3 percent) and compacts (up 19.2 percent), respectively. Showing the lightest year-over-year gain was the luxury coupe segment, climbing 1.8 percent.

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What leasing boom?

December 21, 2011 - 12:01 am ET

Jim Henry is a special correspondent for Automotive News

The leasing boom that wasn't gets my vote for "F&I Flop of the Year" for 2011. With used-car values and predicted residual values as strong as they are, lease penetration could have taken off this year.

To be sure, leasing has improved. Lease penetration for 2011 will probably be up about one percentage point for the year to an average of about 20 percent of new retail volume, based on data from J.D. Power's Power Information Network. And yes, that's a slightly bigger share of a bigger number, based on higher volumes overall. But those numbers don't say "boom."

That illustrates several things:

• Leasing wasn't that high even before the recession. Lease penetration was only 22 percent in the first quarter of 2008.

• If there was a leasing boom, it happened in 2010. Leasing plunged to about 10 percent of retail deliveries in the third quarter of 2009, then returned to normal levels in 2010.

• Automakers are trying to cut back on incentives, and that includes lease incentives.

Finally, with the economy still slow people are hanging onto their cars longer. That's the opposite of the lease concept in which you never pay off your car and get a new one every three years, whether you need it or not. For most people, the times are still too tough for that.

You can reach Jim Henry at autonews@crain.com.

Readers are solely responsible for the content of the comments they post here. Comments are subject to the site's terms and conditions of use and do not necessarily reflect the opinion or approval of Automotive News. Readers whose comments violate the terms of use may have their comments removed or all of their content blocked from viewing by other users without notification.

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FandI paperwork at 'ridiculous' levels, Group 1's Hesterberg says

Jim Henry
Automotive News -- January 11, 2012 - 10:46 am ET
Hesterberg: “The recent financial reform legislation the Dodd-Frank Act has created additional work and expense for dealers."

Photo credit: PHILIP NUSSEL

State and federal regulations that mandate extra paperwork on F&I transactions have reached "ridiculous" proportions, said Earl Hesterberg, CEO of the Group 1 Automotive dealership group.

For instance, because of tougher rules for so-called "adverse action" notices that took effect in 2011, he said, Group 1 is sending out more than 9,000 letters per month.

Customers who applied for credit and were turned down, or who had a "stipulation" added to their contract other than the terms originally requested, are entitled to an adverse-action notice. Examples of stipulations could be if a co-signer were required, or a bigger down payment.

The kicker is that the lenders on those same transactions have to send out letters as well, Hesterberg told the Automotive News World Congress today.

"Our company alone is sending out over 9,000 of these letters per month. The absurd fact is that the lenders are required to send out the same letter," Hesterberg said. Group 1 was the fourth-largest U.S. dealership group by new-vehicle unit sales in 2010, according to the Automotive News ranking of the top 125 dealership groups.

Starting July 21, 2011, under Federal Trade Commission rules, if the customer's credit score was used in the adverse decision, the adverse action notice must provide a credit score disclosure with specific details, including which credit bureau was used and the high and low range of scores.

"So what happens is a customer who receives a stipulation on a loan application, or is rejected, gets two letters reminding them of their credit quality. Good for the post office, bad for us from an expense and customer satisfaction perspective," Hesterberg said.

Texas paperwork

Hesterberg said state governments add to the paperwork burden, too.

"Did you know that when a husband and wife buy a car in Texas (with a trade), they are required to sign up to 56 times and 9 initials?" Hesterberg said.

He said requirements are similar in several other states. He said, "It is ridiculous what we are putting our clients through to purchase their vehicles!"

You can reach Jim Henry at autonews@crain.com. Readers are solely responsible for the content of the comments they post here. Comments are subject to the site's terms and conditions of use and do not necessarily reflect the opinion or approval of Automotive News. Readers whose comments violate the terms of use may have their comments removed or all of their content blocked from viewing by other users without notification.

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Dealers weigh giving customers great loans upfront or tapping refi market

Brian Benstock of Paragon Honda and Paragon Acura in New York says his stores keep customers happy by giving them competitive rates upfront.

If auto loan refinancing isn't on your dealership's radar, it may be time to put it there.

The gathering elements of historically low interest rates, auto owners searching out lower monthly payments and lenders scrambling for business could converge to bury unprepared dealerships under a pile of reserve chargebacks.

Although dealerships aren't seeing a lot of vehicle refinancing yet, a number are standing guard. They're also taking more measures to make sure they retain these customers, including partnering with an auto refinancing company.

There are no readily available industry data that track refinancing volume. Nevertheless, "you know it happens and you know it's out there," says Melinda Zabritski, director of Automotive Credit for Experian Automotive. "There are big pockets of customers who can move down to lower rates," she says, referring to near-prime customers who could only get subprime financing in 2009-10.

Online lender OpenRoad Lending, which gets roughly half its business from auto loan refinancing, saw about a 15 percent rise in refinancing applications and overall loan volume last year, says CEO Chris Goodman.

Although credit is improving, he says, people "don't want to buy new vehicles and gobble up more" money. The average model year his company is funding is 2009, he says.

Since customers rarely give warning that they're refinancing, dealers tend to learn about it through finance reserve chargebacks. Ouch.

Dealerships trying to save these customer relationships seem to be divided into two camps: beat 'em or join 'em. Either they're making customers attractive offers they won't want to give up or they're getting in on the refinancing action.

At Langdale Ford in Valdosta, Ga., Finance Director Marvin Eleazer's goal is to see no refinancing at all. "If we see one a month, I get rather irritated," he says.

That's because in addition to losing credibility with customers, Eleazer says, you typically lose their F&I products business, too, since they often opt for cheaper -- though often inferior -- coverage offered through their new lending source. Getting hit with a $700 to $800 reserve chargeback and having to refund $600 on a service contract and $400 on a GAP policy gets kind of pricey, Eleazer says.

Although Langdale Ford has not seen an uptick in refinancing lately, he says, "It's always on the horizon." Several years ago, the mid-sized single-point dealership was seeing two to three refinancings each month. "We spent time finding out the root cause, took control and made serious decisions with rate administration," Eleazer says. His department now tries to hover within 100 basis points of the assigned rate and focus more on products and solutions than rate reserve.

Haddad Motor Group of Pittsfield, Mass., uses a couple of strategies to keep finance reserve chargebacks to a minimum, says F&I Director Chris Cochran. The dealership's pay plan encourages finance people to make money on products, not reserve. The group also keeps its finance rates lower than the local credit union, which, Cochran says, has been advertising at 2.99 percent for at least a year.

Brian Benstock, general manager of Paragon Honda and Paragon Acura in the New York borough of Queens, says he observed an uptick in refinancing options in the market last year but says refunding finance reserve isn't something Paragon encounters often. He credits giving customers very competitive rates upfront and then continuing to educate them about their options.

Paragon lays out for customers, side by side, the costs of refinancing their existing car, purchasing a new car with similar features and buying a pre-owned car with similar features.

Although refinancing's low rates may look very attractive, the store explains to customers that an older car typically depreciates much quicker than its loan will be paid off, which could keep them in the vehicle longer than they'd like or put them in a negative-equity position.

"The customer then has a clear picture of what every scenario is and the benefits of each, and we are happy to help them with any of the three options," Benstock says.

Paragon, which has a team dedicated to analyzing the portfolio of each customer, reaches out to them when they enter an equity position on their current vehicle. More often than not, customers opt for a new model for a lower monthly payment and with no money out of pocket.

"In the grand scheme of things, it is a win-win situation for both the customer and Paragon," Benstock says.

"We desperately need qualified pre-owned cars, and they are happy to drive a newer car for the same or less a month."

Antonino Automotive Group of Connecticut is taking a different approach to refinancing. Through its affiliation with Auto Refi Now, a loan matching service for dealers and auto consumers, it's able to legally process refinance applications.

On average, the group helps 10 customers per month refinance at each of its nine dealerships says Justin Hoopman, general manager of the Girard Ford store in Norwich. That's not counting new vehicles purchased by customers who come into the dealership through Auto Refi Now.

"It's a growth machine for us," says Hoopman, who says Auto Refi Now makes it easy to farm leads and bring customers back to the dealership to re-evaluate their needs.

Auto Refi Now enables a loan refinancing to be processed at the dealership through software menu systems that tie into dealership management systems.

Dealers must use Auto Refi Now's preferred lenders, says President Spencer Walters, a former dealership finance manager. Greenwood Credit Union of Warwick, R.I., has been its main funding source over the past nine months, he says.

Walters says average dealer profit on a refinancing is about $1,000, with a sizable amount coming from the sale of GAP policies.

It is a benefit being able to mention refinancing in the dealership's newspaper ads, says Hoopman. "It's an advantage to us and an advantage to the customer."

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Dealership tripped up by preprinted sales contracts with illegible due date

A Connecticut dealership is waiting to learn whether it will have to pay damages in a class-action lawsuit stemming from illegible sales contracts.

A federal judge in Bridgeport ruled last month that the dealership and its lender violated the Truth in Lending Act by using preprinted sales contracts that obscured the due date of borrowers' first payments. The suit involved 104 contracts.

U.S. District Judge Warren Eginton rejected the argument of defendants Key Hyundai of Manchester in Vernon, Conn., and Citizens Automobile Finance Inc. that they had acted in good faith and that any truth-in-lending technical violations resulted from a "bona fide error."

The suit was filed by Gail LeFoll, who bought a 2009 Sonata from Key in June 2009. The due date of LeFoll's first payment was printed over a preprinted section of the retail installment sales contract form that Citizens supplied to the dealership.

The suit sought damages on behalf of LeFoll and 103 other customers whose contracts showed the same problem in a one-year period.

The judge said no trial is needed to determine the defendants' liability.

"The payment due date is not clear or conspicuous on any of the 104 contracts," he said in his decision. "The printed due dates range from indistinct to indiscernible, but an average, reasonable person could not find any of the disclosures to be clear and conspicuous."

As for lender Citizens, found liable for accepting the contracts, "the violations on the contracts are apparent on the face of the disclosure statements," the judge said.

Defense lawyer Kevin Greene of Hartford said the problem was not caused by the lender's preprinted forms "but was more the function of an occasional anomaly with the computer system used by the dealership." He said there will be no appeal.

The judge has not set a hearing date to determine the amount of damages and attorney fees.

The plaintiff has requested $1,000 in statutory damages for each class member for a total of $104,000. Her lawyer, David Blinn of Rocky Hill, Conn., said the maximum potential damage award in such a class-action suit under the Truth in Lending Act is $500,000.

Blinn said LeFoll suffered "some amount of trepidation" from not knowing when she needed to make her first loan payment. He added: "It's difficult to prove the value of any of these disclosures."

Key and Citizens are looking for the judge to award no damages or only a token $25 per plaintiff, arguing there is no evidence that any class member was confused or suffered any economic harm. Said Greene, their lawyer: "This case is a further example of how dealerships are unfairly penalized under the Truth in Lending Act."

Still unresolved is LeFoll's individual claim that Key violated the state's unfair trade practices law in its handling of the Sonata's $1,500 manufacturer's rebate. She alleges that Key deposited the $1,500 manufacturer's rebate into a bank account instead of crediting the rebate against the purchase as promised.

Key disputes the allegation.

You can reach Eric Freedman at freedma5@msu.edu. Readers are solely responsible for the content of the comments they post here. Comments are subject to the site's terms and conditions of use and do not necessarily reflect the opinion or approval of Automotive News. Readers whose comments violate the terms of use may have their comments removed or all of their content blocked from viewing by other users without notification.

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Investor group buys 25% of Santander unit

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Wrangler tops residual value forecast

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Florida Toyota dealership avoids backup-financing requirement in spot-delivery ruling

Eric Freedman
Automotive News -- December 28, 2011 - 12:01 am ET

A Florida dealership is not contractually required to provide financing to a customer who failed to qualify for a third-party loan, a federal judge has ruled in a spot-delivery case.

U.S. District Judge Robert Hinkle also ordered Janice Mack to return the used 2005 Avalon that she bought from Bobbin Trace Automotive LLC, which does business as Legacy Toyota in Tallahassee. She had made no payments beyond a $300 down payment in the nearly three years since the transaction.

Legacy now is seeking damages for the reduced value of the car, plus "substantial" attorney fees, said dealership lawyer Michael Coppins of Tallahassee.

Mack bought the car through a conditional sales contract. In finance and insurance, spot delivery refers to the practice of dealerships delivering cars to customers before a lender approves a loan.

When the prospective lender declined the retail installment sales contract, Legacy asked her to return the Avalon as the contract required and suggested that she pick a less expensive car, the decision said.

"Mack refused to return the vehicle and refused to consider alternative financing," Coppins said.

She didn't make the first two monthly installments after taking possession in February 2009. Afterward, she tendered monthly payments to Legacy, which returned them on the grounds that it wasn't financing the transaction.

She sued for breach of contract and violation of federal equal credit opportunity and Florida finance and consumer protection laws. Legacy filed a counterclaim to recover the Avalon.

In throwing out all of Mack's claims, Hickle said that the transaction was clearly conditional, and that "the deal was off" if financing couldn't be arranged.

"The documents include not a hint that if financing could not be arranged, Mack could keep the car, paying Legacy only in the installments that would have been due a third-party lender," he said.

Hinkle also ruled that Legacy properly exercised its right to cancel the deal and rejected allegations by Mack that "Legacy's real goal was to provide financing on worse terms."

Mack's lawyer, David Abrams of Tallahassee said the decision "is not an affirmation that the court is necessarily condoning spot deliveries." Spot deliveries are a "risky business practice," legally and fiscally, Abrams said.

It will be up to Mack to decide whether to appeal, he said.

You can reach Eric Freedman at freedma5@msu.edu. Readers are solely responsible for the content of the comments they post here. Comments are subject to the site's terms and conditions of use and do not necessarily reflect the opinion or approval of Automotive News. Readers whose comments violate the terms of use may have their comments removed or all of their content blocked from viewing by other users without notification.

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'Fictitious down payment' snags dealership

Eric Freedman
Automotive News -- December 21, 2011 - 12:01 am ET

A Connecticut dealership that listed a fictional down payment on a customer's sales contract owes her damages, a federal district judge in Hartford has ruled.

Don Mallon Chevrolet Inc. in Norwich, Conn., must pay plaintiff Agdaliz Negron $1,000 plus attorney fees for violating the Truth in Lending Act, U.S. Magistrate Judge Thomas Smith said.

After a nonjury trial, Smith rejected the store's argument that it had merely made an inadvertent, "bona fide error" during a "super sale" when it hired five temporary salespeople and three temporary F&I managers on a part-time basis.

However, Smith ruled in favor of the dealership on Negron's claimed violation of the state unfair trade practices law.

'Sloppy' procedures

The case stems from the May 2007 purchase of a 2004 Chevrolet Impala, including a service contract, VIN etching and a GAP policy. With financing, the total sale price was $27,580.

Documents listed a $250 down payment. In his decision, Smith said the $250 "fictitious down payment" resulted in assessing sales tax on that amount, making the extra sales tax "in reality part of the finance charge."

The dealership's procedures to avoid such an error were "casual and sloppy," Smith said. He noted that the store could not even identify the temporary sales and finance personnel who participated in the transaction.

The $1,000 statutory award is the maximum allowed for such a Truth in Lending Act violation. Smith has not yet ruled on the amount of attorney fees, but dealership lawyer Kevin Greene of Hartford said Negron requested $25,000, which, Greene said, is unreasonable and unsupportable.

At the same time, Smith found insufficient evidence to support the unfair trade practices claim that the dealership deliberately falsified Negron's credit application to defraud her and the lender. The application misstated her employment history, including job title and length of service.

The salesman who handled the sale denied supplying false information or telling Negron and her father to lie to the bank if asked about the down payment.

Smith emphasized that Negron signed the application, which had a provision stating that she had read and understood it.

'Credibility contest'

Smith said the unfair trade practices allegation "boils down to a credibility contest" between the plaintiff and two men: one a used-car salesman and the other a used-car sales manager. "To argue that none of these three witnesses has a motive to lie is absurd," he said. "All three have a motive or motives to lie."

Smith gave no weight to "scant and sketchy testimony" by Negron's father, who attended only part of the transaction, and to testimony by another employee, which, Smith said, "does not ring true."

Defense lawyer Greene said the dealership hasn't decided whether to appeal the judgment. He added: "The financial discrepancy claimed by the plaintiff actually inured to her benefit because the disclosure of the financial terms was inaccurate."

Negron's lawyer did not respond to requests for comment.

You can reach Eric Freedman at freedma5@msu.edu. Readers are solely responsible for the content of the comments they post here. Comments are subject to the site's terms and conditions of use and do not necessarily reflect the opinion or approval of Automotive News. Readers whose comments violate the terms of use may have their comments removed or all of their content blocked from viewing by other users without notification.

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Default rate for auto loans continues to fall

Jim Henry
Automotive News -- December 28, 2011 - 10:23 am ET

Auto loans outperformed other major categories of consumer debt in November, part of an ongoing pattern in consumer behavior, according to figures released last week by Standard & Poor's and Experian.

The default rate for auto loans fell to 1.17 percent in November, down from 1.22 percent in October and 1.77 percent in November 2010, according to the S&P/Experian Consumer Credit Default Index.

Meantime, the default rate for bank credit cards was 4.91 percent in November. That was an increase from 4.85 percent in October but down from 6.85 percent a year earlier.

The average default rate for first mortgages rose in November from the previous month to 2.17 percent. It was the third consecutive month that first mortgage default rates rose, though the November 2011 figure was lower than the level a year ago -- 3.06 percent.

"In the last recession, there was definitely a shift in consumer behavior," said David Blitzer, an S&P managing director.

"Traditionally -- in previous recessions -- people would do anything to hang on to their house; to make their mortgage payment. They might have six credit cards, all in arrears," he said. "This past recession people didn't always take that attitude. Defaults in mortgages happened much faster and bigger than autos."

Blitzer said that in the 2008-09 recession, consumers in many cases apparently decided that keeping up their car payments was more important than making their mortgage payments because they needed cars to get to work or to look for work.

"It could also be there was no point," in making the house payment, he said. "Some people were so far underwater on their mortgage there was no hope of catching up."

You can reach Jim Henry at autonews@crain.com. Readers are solely responsible for the content of the comments they post here. Comments are subject to the site's terms and conditions of use and do not necessarily reflect the opinion or approval of Automotive News. Readers whose comments violate the terms of use may have their comments removed or all of their content blocked from viewing by other users without notification.

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Sales could hit 14 million in '12

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Longer loans return to help boost sales

Donna Harris
Automotive News -- December 7, 2011 - 12:01 am ET
Faunda: People want lower payments.

The long loans that were used to goose car sales a few years ago are back.

Finance managers say auto lenders are promoting loan terms of 72 months and even 84 months, as they did just before the credit markets crashed in late 2008.

"Customers have no aversion to signing longer-term notes these days," says Marv Eleazer, finance director for Langdale Ford in Valdosta, Ga. "I'm seeing 72-month loans at 120 percent [loan-to-value] and greater. I've even papered a few at 84 months."

In 2011, loans of 73 months and longer account for 9 percent of new-vehicle loans. That's up from 6 percent in 2009 and 2010 and close to the peak of 10 percent in 2008, reports consulting firm J.D. Power and Associates.

Loans of 61 to 72 months make up 40 percent of the loans written, J.D. Power data show.

The longer term lowers monthly payments, which appeals to many shoppers.

While unemployment remains high, consumers "just want their monthly payments cheaper," says Greg Faunda, business manager of Greenwood Chevrolet in Austintown, Ohio.

At a recent finance and insurance conference in Las Vegas, keynote speaker Kevin Borgmann, president of Capital One Auto Finance, said he feared looser credit terms and extended loan terms could short-circuit the auto sales recovery.

His concern: The longer maturities will keep people out of the car market for six or more years, stalling sales.

But in recent years, that hasn't been the case. Several factors take the edge off long loan terms:

-- Car buyers are making bigger down payments after the credit crisis, finance managers say. Used-vehicle values also are strong. Both help people build equity in their vehicles quickly.

-- Consumers often trade in vehicles before the loan expires, says Paul Taylor, chief economist for the National Automobile Dealers Association. So they'll be back for another car sooner than you think, he says.

-- Healthy lease volume will bring people back for another car sooner, says Tom Kontos, chief economist for the ADESA auto auction group. Currently, more than one in five new vehicles is leased, and leases are typically three years, he notes.

Since 2007, Toyota Financial Services has offered its most creditworthy customers 84-month loans. The seven-year loans represent just 2 to 4 percent of its loan portfolio and most are paid off early.

Brock Bayles, Toyota Financial's national manager of pricing analysis, says the extended term is one of several strategies the lender uses to stimulate sales. The long loans "support the automotive recovery," he says.

Recent history suggests long loans could become the new normal. Auto loan maturities have been increasing as new-vehicle prices rise.

From 1971 to 1983, three-year car loans were the norm, reports the Federal Reserve in its data from finance companies.

In June 1984, the average maturity exceeded 48 months for the first time. In 2003, the average maturity exceeded 60 months for the first time.

Since then, the average term has zigzagged upward peaking at 67 months in July 2008 and never dipping below 59 months. In January, the latest figure available, the average maturity was just over 62 months.

"Customers gravitate toward lower payments, and extended terms provide more affordable options," says Gary Allgeier, finance director for the Suburban Collection dealership group near Detroit.

"Since many lenders have relaxed terms to 2008 levels, it should be no surprise that customers are choosing them."

Steadily rising retail selling prices have led to correspondingly larger loans with longer repayment terms.Average loan maturity (months)Source: Federal Reserve, National Automobile Dealers Association

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