Chicago Automobile Trade Association
Return to List | pdf Download PDF

CATA Bulletin
July 7, 2014


How much profit do customers believe dealers make on a sale?

July 3, 2014

Consumers believe car dealers make about five times more profit on the sale of a new car than they actually do, based on a survey commissioned by TrueCar, Inc., a negotiation-free car buying and selling platform. 
The finding comes as a portion of the results of the inaugural TrueCar Buyer Study, which examines the "trust gap" between consumers and dealers. While buyers fear they will overpay on their new-car purchases and believe dealers make about 20 percent profit on the sale of a $30,000 new car, dealer profit margins actually are shrinking, down from 5.5 percent in 2003 to 3.8 percent in 2013, according to the National Automobile Dealers Association.
TrueCar’s survey also showed that consumers believe that a "fair" profit margin on a new-car sale would range from 10 percent to 12 percent. In addition, if told that dealers theoretically made no profit on new-car transactions, consumers surveyed responded that they would be willing to "tip" them 8 percent on a sale.
"The TrueCar Buyer Study results show that fear and mistrust have a cost in the car-buying process," said Scott Painter, TrueCar founder and CEO. "If consumers believed that they were getting information that they could trust as part of a more transparent process, they would be willing to pay dealers more. 
"These survey results are consistent with the idea that increased transparency in the car-buying process can result in higher margins for dealers and greater consumer satisfaction. With upfront and transparent information, everyone wins."
The TrueCar Buyer Study was conducted in February 2014 and surveyed more than 3,000 consumers across the U.S. The objective of the survey was to identify consumers’ perspectives regarding perceived profits made by car dealers with questions aimed at determining what consumers believe a fair profit would be. 
The survey showed that roughly one-quarter of car buyers feel that they overpaid for their purchase and that 32 percent of car buyers stated that they would not return to the same dealership due to low customer satisfaction with the purchase process. The survey was executed by Strategic Vision.

House bill would bring more transparency to CFPB guidance

July 3, 2014

A new bill in the U.S. House would force the Consumer Financial Protection Bureau to seek public comment and share its analyses before issuing guidance on what the CFPB purports to be discriminatory auto lending by dealers.
Dealers are urged to call their congressional representatives at (202) 224-3121 and ask them to cosponsor the Bureau Guidance Transparency Act (House Resolution 4811).
The bill passed the House’s Financial Services Committee on June 19, on a vote of 32-27.
The CFPB has issued guidance that threatens to eliminate dealers’ flexibility to discount the interest rate offered to consumers to finance vehicle purchases. The CFPB attempt would fundamentally change the $783 billion auto loan market without prior public comment or hearing, answering specific bipartisan questions by Congress to justify this policy change, or analyzing the impact of its guidance on consumers.  
The effect of the CFPB’s actions likely would raise the cost of credit for car buyers.
The CFPB promised to provide Congress with a white paper later this summer that will explain in more detail how it detects discrimination in auto loans, in response to criticism from Congress, lenders and dealers that auto lenders don’t have enough specifics on the CFPB’s standards to police themselves.
"It’s been a source of, I think, some frustration to the Committee and to me, and to the Bureau, that we’ve been back on forth on different kinds of information about this, and we think we’re providing a lot of information, but people identify other information that they want," CFPB Director Richard Cordray said at a House Financial Services Committee hearing in mid-June.
"Partly as a result of that, we are going to put out a white paper on the proxy methodology to try to address that very directly later this summer. We’ll continue to try to be responsive on this."
Meanwhile, the National Automobile Dealers Association said in a written statement that even if the CFPB white paper answers all questions about proxy methods, it almost certainly won’t be enough to solve the problem of what the NADA calls a lack of transparency by the CFPB.
The proxy methodology Cordray referred to is the way lenders and the CFPB decide whether consumers belong to legally protected groups, such as minorities or women. Auto lenders aren’t allowed to collect race or ethnic data on borrowers. Instead, they use substitutes or proxies, such as the census tract where a borrower lives or first or last name.
The CFPB uses those results to determine whether protected groups on average pay higher rates for financing than other borrowers. Specifically, the CFPB says it believes lenders allow dealerships to discriminate against legally protected borrowers by allowing dealerships to set their own rate for dealer reserve, or dealer markup. The CFPB calls higher rates for protected groups a disparate impact.
However, there’s a wide margin of statistical error for identifying protected classes by proxy. For instance, some common first names can belong to a man or a woman. Or a woman could have a married name that’s identified with a protected minority when she’s not a member of a protected group, or the opposite could be true.
The CFPB acknowledges it uses proxies, but it hasn’t said much beyond that despite increasingly pointed questions from Congress.
Lenders also don’t like the fact that the CFPB has avoided saying whether there’s even a tiny acceptable level for disparate impact or whether zero is the only acceptable statistical result. With a margin of error, a zero result could mean protected groups actually paid less than everyone else.
The NADA said there are many additional questions, such as how the CFPB determines it is comparing rates for "similarly situated" borrowers. That is, borrowers who are similarly situated in terms of credit history or other factors that could affect the rate, and different only in terms of whether they belong to a protected class.

The dealer franchise network: A good deal for everyone

July 3, 2014

By Mark Scarpelli, Metro Chicago NADA Director
Price Competition. Public Safety. Greater Convenience for American Consumers. We’ve said this before but now we’re showing everyone why new-car dealers are vital to the economy and to their local communities.
The National Automobile Dealers Association has launched a major "Get The Facts" initiative. Aimed at the media, opinion leaders and policymakers, the campaign promotes the benefits of franchised auto dealers and provides key facts about our businesses. The NADA has rolled out a variety of multimedia resources and an informative new webpage,
The centerpiece is a must-see animated video, "A Good Deal for Everyone," that details the value of franchised dealers in the car buying process — including the significance of performing warranty and safety recall work.
We’re also highlighting the economic engine that is the dealer franchise network. There are 17,700 new-car dealerships with nearly 32,000 domestic and international franchises across every state in the country which employ more than 1 million people.
At a time when some automakers, notably Tesla, are attempting to sell their vehicles directly to consumers, there have been many misconceptions about the dealer business. The NADA’s "Get The Facts" initiative sets the record straight about who we are and what we do.
And despite some misinformation that has surfaced over the last several months, franchised new-car dealers provide the best, most efficient and most cost-effective way to sell and distribute new cars in America, and we’re proud of our businesses and business model.
The NADA’s efforts will set the record straight about the benefits of the dealer franchise network for consumers, manufacturers and local communities everywhere. Franchised new-car dealers benefit consumers through price competition, accountability on warranty and safety recall issues, and provide enormous economic benefits to local communities across the country.
Indeed, the dealer franchise network is supported by automakers as the best and most efficient way to buy, sell and service cars in the marketplace.
The "Get The Facts" initiative highlights four central benefits of franchised auto dealers, which include:
Price Competition New-car dealers compete fiercely for business and drive consumer prices down;
Consumer Safety New-car dealers take the side of consumers in warranty and safety recall situations;
Local Economic Benefits New-car dealers create well-paying local jobs and generate significant tax revenue that have a huge impact on local economies; and
Added Value New-car dealers simplify an otherwise complex car-buying experience.
We’re making sure that the car-buying public — along with everyone else — understands that what we do is A Good Deal for Everyone.

10 must-have technologies for new cars

July 3, 2014

A list of the high-tech features that new-car buyers say they must have includes four features that could be categorized as infotainment and two that clearly are safety features. 
While some of the features are not as new as one might think, considering that the average car these days is more than 10 years old, there are plenty of drivers for whom the high-tech features are, indeed, brand new.
The editors at Kelley Blue Book compiled a list of 10 "must-have" features from a survey of consumers conducted in the fourth quarter of 2013. The most desired feature, by 43 percent of respondents, was availability of USB/auxiliary ports. That’s hardly cutting edge technology, but it is basic, allowing drivers and passengers to at least charge their mobile devices while they are riding. It also is standard equipment on most compact and larger cars.
Vehicle diagnostics ranked second in the survey, at 40 percent, and back-up/blind spot cameras tied with Bluetooth for third in the rankings at 39 percent. Bluetooth supports hands-free calling, and texting and is available as standard equipment on most compact and larger cars. Blind-spot and back-up cameras rarely are standard equipment but are available as options. 
Many automakers already incorporate some of the safety technologies into their new cars, but at relatively steep prices.
A list of the 10 most sought-after high-tech features:
Deemed "essential"
USB/auxiliary port 43%
Vehicle diagnostics 40%
Back-up/blind-spot camera 39%
Bluetooth 39%
Premium sound system 33%
Recall advisor 33%
Driving directions 28%
Stolen car recovery/immobilization system 26%
Collision sensor 25%
Satellite radio 21%

Canada enacts new 'anti-spam' bill

July 3, 2014

New Canadian "anti-spam" legislation (CASL) enacted July 1 prohibits a commercial email, text or other electronic message to a Canadian recipient without prior express permission. In addition, the Canadian law requires any such messages to prominently identify the sender and include contact information, along with a way to unsubscribe. 
What is deemed to be a "commercial" email is broadly defined and the potential penalties are very large (up to $10 million). The requirements under the CASL are different and broader than those under the U.S. "CAN SPAM" law. In addition, the CASL applies not only to email, but also to text messages, and certain other electronic messages sent to Canadian email addresses, including those sent via social media, blogs, or other electronic communications platforms.
There are a number of exceptions as well as questions about the applicability of the new law to entities outside of Canada. However, U.S. dealers, especially dealers near Canada or with a large number of Canadian customers, are encouraged to review the CASL and discuss it with their legal counsel. 
The Canadian Auto Dealers Association prepared a detailed review of the CASL here.

Congratulations! (July 7, 2014)

July 3, 2014

Five area Ford dealerships provided outstanding customer service in 2013, earning them a President’s Award from Ford Motor Co. Arlington Heights Ford won the award for a record 25th straight year. Other winners include Bull Valley Ford (Woodstock), Buss Ford (McHenry), Fair Oaks Ford (Naperville), and Wickstrom Ford (Barrington). Two area Lincoln franchises also won a President’s Award: Buss Lincoln (McHenry), and Wickstrom Lincoln (Barrington).
Seven area dealerships won the 2014 Stellar Care Award, the highest honor for Subaru retailers: Evanston Subaru, Skokie; Gerald Subaru of North Aurora; Grand Subaru, Bensenville; Gary Lang Subaru, McHenry; Liberty Subaru, Libertyville; Napleton’s Schaumburg Subaru; and Roto Subaru, Arlington Heights.

Marketplace, July 7, 2014

July 3, 2014

Finance Director Solid track record in increasing product sales while securing customer loyalty, forging strong relationships with external business partners. Exceptional mentor and coach; combine business acumen with innate leadership abilities to recruit, build, retain top-performing lending institutions. Daniel Martino, (630) 917-1410.
Return to Top | Return to List


Copyright © 2010 Chicago Automobile Trade Association. All Rights Reserved.