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Dealers support modern facilities but question case for factory programs

March 16, 2012
By Mark Scarpelli, Chicago Metro NADA Director
 
While new-car dealers see value in having clean and modern facilities, many have questions and, in a significant number of cases, are not convinced that the factory upgrades they are being asked to do will result in an increased return on investment, according to a new study by Glenn Mercer. “These programs – intended to encourage dealers to invest in store expansion, modernization and standardization – can place significant financial burdens on dealers, yet there is little hard evidence on the return of investment this spending might yield,” Mercer said.
 
In response to dealer concerns, the NADA last year commissioned the “Factory Image Programs” study to provide an objective, unbiased and neutral analysis of the various factors that drive the economics of facility programs. “The NADA research project brought all the various perspectives on this issue out into the open by speaking with a wide range of industry participants,” Mercer said. “Our goal was to open up a dialog in which all parties could discuss facility requirements on a more rational, informed and fact-driven footing.”
Based on numerous interviews and discussions with automaker executives and a diverse selection of dealers, recommendations were offered to both parties, such as working together to reduce some of the tensions that exist over the issues. The executive summary and full report are at www.nada.org/facilitystudy.
 
In other news . . .
 
Wholesale prices for used vehicles up to 5 years old ticked up again in February, this time growing an average of $225 or 1.4 percent compared to January, according to AuctionNet®, which tracks 80 percent of the nation’s auction transaction data. Prices have increased by 2.3 percent since the start of the year. At a segment and model year level, compact and mid-size car appreciation averaged 1 percent for the first half of February. Price growth for mid-size vans and large pickups and SUVs came in at just under 0.5 percent. Prices for other utility segments softened a bit in early February, down a modest 0.5 percent. Luxury car prices, averaging a decline of 1.3 percent, fell more than other segments, but depreciation was in line with normal seasonal movement.
 
Looking ahead, the NADA Used Car Guide predicts that used vehicle demand in 2012 will increase, supply will decrease and more credit will be available to facilitate sales, resulting in a used-vehicle price increase of 1.8 percent by year’s end on a seasonally adjusted basis. “We’re also estimating that used prices will peak in the April-May time period, which means consumers will find the spring and early summer months a great time to go shopping for a new or previously owned vehicle because that’s when trade-in prices will be at their highest,” says Jonathan Banks, senior analyst with the NADA Used Car Guide.
 
• Sales of small cars, SUVs and other light trucks will lead the way toward what Paul Taylor, NADA chief economist, predicts is a rebuilding year for the auto industry resulting in more than 13.9 million new cars and light trucks sold and leased in 2012. A return to better credit conditions, more generous incentives from manufacturers, and low interest rates all are credited for the turnaround in this year of economic recovery. “With the age of cars and trucks on the road today an average 11.1 years,” Taylor said, “many consumers feel they can no longer delay making a purchase of a new or newer vehicle.”
 
Here are five of the top reasons for Taylor’s upbeat forecast:
 
1. Pent-up consumer demand
2. Return to stabilized credit
3. An influx of options
4. The wild card: gasoline prices
5. Stabilizing home prices
 
• All of the NADA’s legal and regulatory webinars are provided at no charge to members. NADA University is committed to providing assistance to dealers’ efforts to meet legal and regulatory compliance requirements. The live and on-demand webinars are offered free, as a member benefit, beginning this month. The presentations include all past legal/regulatory webinars whose information is current.
 
In addition, dealers may extend their no-cost member benefit to their CPAs, attorneys and other contracted professionals with whom they work on compliance matters. Dealers can add those professionals as sponsored users within the dealership’s NADA U accounts, automatically providing complimentary access to member benefits. The legal/regulatory webinars are provided in addition to other NADA U member benefits.
 
 

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