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As expected, August 2010 auto sales lower than August 2009

November 12, 2010

By Ray Scarpelli Sr., Metro Chicago NADA Director

Paul Taylor, the NADA’s chief economist, said it was no surprise that August’s new-vehicle sales were below those of the same month last year, when "cash for clunkers" was in full swing.

All of the major automakers posted sales below last year’s levels except Chrysler, which reported an increase of 7.4 percent.

"Toyota’s 31 percent August sales decline is understandable, considering last year’s results were driven largely by clunker incentives for small cars and hybrids," Taylor said. "GM’s 21 percent decline against last year’s bankruptcy period is telling of the slow overall sales period the industry has entered, as economic growth slows."

Most Americans who remain employed believe that they are going to stay employed, said Taylor, but homeowners in some states continue to wonder if their home equity will return to the levels of five years ago. As a result, they are reluctant to purchase a new car or truck.

Ten states— Alaska, Arkansas, California, Iowa, Kansas, Louisiana, North Dakota, Oklahoma, Texas, and Virginia—buck the drift down in housing values and have shown 12-month gains for home prices in the moderate range. The Southeast and Mid-Atlantic states are generally down by 2 percent or less, but Florida is down 6 percent. Massachusetts, New York, Pennsylvania, West Virginia, Kentucky, Nebraska and Colorado are down by less than a percent in the second quarter on a 12-month basis.

"It appears the bottom is starting to be found in many states, if the steady stream of foreclosures and short-sales slow in coming months," said Taylor. "Car sales, state by state, will come back when average home prices make modest improvements."

In other legislative and regulatory news . . .

The Internal Revenue Service is extending the current suspension period on new UNICAP audits, which ensures dealers will have the opportunity to review any forthcoming UNICAP guidance from the IRS before having to decide whether and how to change their inventory methods of accounting.

This announcement followed several recent meetings between the NADA and senior IRS and Treasury officials in which the NADA urged the IRS to reconsider its application of the complex UNICAP rules to franchised car and truck dealers.

The IRS field directive states: (i) the IRS Office of Chief Counsel is currently considering publishing additional guidance on dealership uniform capitalization (UNICAP) issues, and (ii) the IRS will extend the current audit suspension period on new UNICAP audits (which was scheduled to expire on December 31, 2010) until the date the pending guidance is published in the Internal Revenue Bulletin. The NADA will disseminate any additional IRS UNICAP guidance when it is finalized and released.

Alert: New Healthcare Legislation Includes Long-Term Care Provisions

The Community Living Assistance Services and Supports Act (CLASS) created under the umbrella of healthcare reform requires every employee in the country to make a choice about buying long-term care insurance. Employers must decide whether they prefer to offer the baseline public program, a private LTC plan or neither. 

In addition, they will have to alert employees that this is an opt-out program and that money will automatically be deducted from their paychecks unless they indicate otherwise. The NADA offers long-term care products through an arrangement with COOL-LTC. Find out more by contacting David Schaeffer at (415) 343-5824 or 

Timely Legal Webinars Coming This Fall

Dealer obligations under the new Model Privacy Notice and Risk-Based Pricing Rule will be examined by NADA attorneys together with representatives from federal agencies in two NADA University Learning Hub Webinars in October and November.

In "Transitioning to the New Model Privacy Notice," guest presenter Loretta Garrison, an attorney with the FTC Division of Privacy and Identity Protection, will explain and answer questions about the new model privacy notice issued in late 2009 by the FTC and the federal banking agencies. The webinar will be held 12-2 p.m. CDT Oct. 27. Moderating the discussion will be NADA attorneys Paul Metrey, chief regulatory counsel for Financial Services, Privacy, and Tax; and Brad Miller, counsel and assistant director, Legal and Regulatory Affairs. To register, click here.

 In "The New Risk-Based Pricing Rule," attorneys from the Federal Reserve and the FTC will explain what dealers must do beginning Jan. 1 to comply with the new rule, which generally requires creditors who pull credit reports to issue a new notice to customers who receive credit from them but on terms that are less favorable than the terms received by most of their other credit customers. This Webinar will be held 12-2 p.m. Nov. 3. The Fed’s Mandie Aubrey will be guest presenter, along with a representative from the Federal Trade Commission. The NADA’s Metrey will moderate the discussion. To register, click here.