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  • Friday, October 15, 2021 4:36 PM | Anonymous
    When Alex Hook leaves the hospital for his home in southeast Wisconsin, he will travel in style — in a vehicle donated to his family by Ray Chevrolet in Fox Lake.
    The 6-year-old suffered a severe brain injury on Sept. 10 when an object projected from a lawnmower hit him in the back of the head while he was at school recess.
    Hook suffered a fractured skull and bleeding in his brain. A piece of bone was removed from his brain, according to a GoFundMe page established to help his family cover unforeseen medical costs.
    Anticipating his return home, his family signaled their need for a vehicle larger than their Jeep Cherokee to accommodate the boy’s wheelchair and ease his entry and exit.
    Ray Scarpelli Jr., owner of Ray Chevrolet, was on it. "The family has been a customer of ours and when we (heard their story), we said, ‘Let’s help somebody who can really use it right now,’ " Scarpelli said.
    Scarpelli followed updates on Hook’s condition and began working with the family to find a larger vehicle for the family.
    The dealership found a 2018 Chevrolet Traverse that would fit the bill. "The advantage (of this model) is that the back seats fold down and there’s room for his wheelchair," Scarpelli said. "Plus, all-wheel drive makes it safe."
    Michelle Koertgen, Alex’s aunt, said the family assumed they would get some sort of deal on a used vehicle, but on Oct. 9 they found out it was a gift. She exclaimed, "It was a $42,000 gift!"
    Since the accident, other social media and community event fundraising campaigns have come to the aid of the family to help with unexpected expenses. "It’s been non-stop, wonderful and overwhelming," Koertgen said.
    A local motorcycle group is organizing a fundraising event on Oct. 23 to help the Hook family. "Just bring people together and show support for the family," said nearby resident Justin Guerrero.
     


  • Friday, October 15, 2021 4:36 PM | Anonymous
    By Woodward & Associates, Inc., Certified Public Accountants
     
    Our office has been receiving numerous inquiries regarding dealer’s LIFO reserves, especially in light of the significant reduction of new inventory. Generally, our answer has been that it makes economic sense to remain on LIFO. This message is to briefly outline our position.
     
    Some important facts:
    1. For dealerships that are taxed as S-Corporations or partnerships, the current (tax year 2021) effective tax rate is 29.6%. It is currently being speculated that the future tax rate will be 39.6% (tax year 2022 and forward). This is a roughly 33% increase. For purposes of this message, we will round to 30% tax rate for 2021 and 40% for tax years 2022 and forward.
     
    2. If a corporation elects off LIFO, it takes five years before they can elect back on to LIFO.
     
    3. Generally, LIFO deduction is 2% inflation factor multiplied by the prior year new-car inventory (unless inventory goes down like it has in 2021).
     
    4. The decision to elect off LIFO does not need to be made until you file your corporate income tax return. Please take time and consider all the facts before making a decision.
     
    The pros for staying on LIFO:
    1. LIFO essentially is an interest-free loan from the government. By removing the LIFO reserve, there will be less cash in the dealership because of the associated tax liability related to the income from taking the LIFO reserve to income. 
     
    Right now, the industry is as strong as it ever has been. Who is to say that this trend continues and/or that you wouldn’t need this cash later? By keeping a LIFO reserve, the tax liability is reduced for the dealership annually, and as a result the cash stays in the business (vs paying the government) and is accumulative over time. This, in turn, allows the dealership to pay off floorplan or other debts (which increases profits) OR use this money to acquire other businesses or business assets.  
     
    a. We have heard from many who said they want to take LIFO to income to remove the future liability. This is very shortsighted, as you can use this cash in your business to make money by paying down debt or acquiring other stores/businesses.
     
    2. The tax rates are likely going to go up 10% in 2022. If you elect off LIFO, you cannot elect back on for several years. Therefore, your future tax liability will not receive the benefit of a LIFO deduction.
     
    The pro for electing off LIFO:
    1. If the business intends to sell sometime in the next few years, then it might make sense to take advantage of the low tax rates now and pay the income tax on the LIFO reserve.
     
    A comprehensive example:
    For purposes of this message, let’s assume a dealership generally has $10 million of new inventory and has a $1 million LIFO reserve. Let’s also assume that at the end of 2021 this dealership will have $4 million of inventory and $400,000 of LIFO reserve. This would result in a $600,000 LIFO reserve pickup in 2021, or $180,000 of tax (600,000 x 30%). This example does not consider any time value of money or other possible savings.
     
    Option 1 – Remain on LIFO:
    The dealership maintains LIFO after a large pickup in 2021. The 2021 tax liability will remain at $180,000 ($600,000 x 30%). By 2022, let’s assume the new inventory gets back to $10 million and remains at that value for the next 4 years. The 2022 LIFO deduction likely is $80,000 with the tax savings of roughly $32,000 (80,000 x 40%). In years 2023-2025, the annual deduction would be $200,000 annually; tax savings of $80,000 annually ($200,000 x 40%); the cumulative deduction for those three years would be $600,000 with savings of $240,000. The cumulative savings after five years would be $92,000 ($180,000 tax pickup for 2021, minus $32,000 savings in year 2, minus $80,000 a year for years 3 through 5).  
     
    Option 2 – Elect off LIFO and spread over four years: 
    The dealership will pick up ¼ of the LIFO reserve into  income each year from 2021 to 2024. The first year would cause a tax liability of $75,000 ($250,000 x 30%) and the subsequent three years of $100,000 per year ($250,000 x 40% per year). This would cause a cumulative $375,000 tax liability over four years.
     
    Option 3 – Have large LIFO pickup in 2021 and then elect off LIFO and spread over the following four years: 
    The dealership would pick up $600,000 in the first year, which would cause $180,000 of tax ($600,000 x 30%). Then spread the $400,000 over four years, which will cause $100,000 of income a year or $40,000 of tax a year ($100,000 x 40%). This would cause a cumulative $300,000 tax liability over four years.
     
    **There is an option to pick up the entirety of the LIFO reserve into income in 2021 if the LIFO reserve is small enough.
     
    Summary: There are pros and cons for each option. But as you can see, in this specific fact pattern, there are ways to mitigate tax liability if you choose to elect off LIFO. However, the best option to limit the tax liability is to remain on LIFO
     


  • Friday, October 01, 2021 4:45 PM | Anonymous
    Date: Monday, Oct. 18
    Where: Rich Harvest Farms, a private golf course and country club near Sugar Grove
    Host: Dynatron Software 
     
    MEETING PURPOSE 
    Review of new revenue opportunities stemming from OEM warranty legislation effective Jan 1. As you may be aware, House Bill 3940 was signed and takes effect Jan 1, 2022. This groundbreaking legislation requires your IMMEDIATE ATTENTION to capitalize on significant short-term net profit impact.
     
    AGENDA
    • 11:00-11:45 a.m.: CATA introduction and business meeting to review financial opportunity associated with new legislation, to be held in the private auto collection and museum of Jerome "Jerry" Rich, the estate’s owner and president. 
    • 11:45 a.m.-12:30 p.m.: Lunch and tours of the Auto Collection and Museum
    • 12:30 p.m.: Practice and warmup
    • 1:00 p.m.: Shotgun start (Dealers only)
     
    HOW TO REGISTER 
    RSVP is required. To RSVP, please visit www.dynatronsoftware.com/golf. Please indicate if you will be joining for just lunch and meeting or if you will be joining for lunch, meeting and golf. Limited golf spots are available, so please be certain of your availability before RSVPing. 
     


  • Friday, October 01, 2021 4:45 PM | Anonymous
    The Families First Coronavirus Response Act (FFCRA) established a mandatory obligation to provide employees with paid emergency sick and family medical leave until Dec. 31, 2020. Since then, dealerships have had access to tax credits to offset the cost of any such leave provided to their employees voluntarily. Unless extended by Congress (which appears unlikely) those tax credits were available for FFCRA leave provided on or before Sept. 30, 2021
     
    With the end of these tax credits, dealerships should: 
     
    1. Determine if they will provide voluntary paid leave for any (or all) of the permissible FFCRA purposes through Sept. 30, 2021;
    2. Take advantage of the tax credits available for any such paid leave; and
    3. Review existing leave policies and applicable family and medical leave mandates, for their potential application to leave requests for FFCRA-type purposes. Important: State and local law may impose leave mandates over and above those imposed by federal law. 
    Questions can be submitted to regulatoryaffairs@nada.org.
     


  • Friday, October 01, 2021 4:45 PM | Anonymous
    The American International Automobile Dealers Association on Sept. 27 launched an awareness campaign to highlight the employment and environmental consequences that would result from the severe limitations of a proposed new tax credit for electric vehicles.
    "There are more than 50 EV models sold in the U.S., but Congress’s proposed new $4,500 tax credit will apply only to five union-made cars," said Cody Lusk, president and CEO of the AIADA. 
    "This rule undermines consumer choice and competition, it treats non-union autoworkers and international dealers unfairly, and it absolutely runs counter to the goal of an EV tax credit, which is reducing carbon emissions by getting as many green vehicles on the road as possible."
    The AIADA’s campaign is attempting to bring attention to the consequences of what it calls an unfair tax credit proposal, including:
    • Fewer EVs will be sold because of the severe restrictions of the EV tax credit. This, in turn, will mean slower progress toward reducing America’s carbon emissions.
    • The proposed tax credit threatens the livelihoods of American workers. The U.S. ecosystem of international autos — including dozens of non-union plants and thousands of dealerships — supports nearly 700,000 American jobs. The tax credit would lower sales of non-union international brand EVs, jeopardizing the jobs of Americans who work in that innovative and competitive sector.
    • The proposed tax credit would benefit some regions of the country, such as the Midwest, at the expense of others, including southeastern states such as Alabama and Georgia. The tax credit would reduce payroll and economic activity in states and communities that provide a home for non-union auto plants.
    "The solution is simple," Lusk said. "Congress should ensure the tax credit proposal applies to both union and non-union made EVs. It’s wrong for lawmakers to pick winners and losers among American workers."
    Established in 1970, the AIADA is the national trade association representing America’s 9,400 international nameplate franchised automobile dealers.
     


  • Friday, October 01, 2021 4:45 PM | Anonymous
    The wholesale rush of car buying online has jangled traditional auto dealers, forced them to rethink their business models and nudged many into exiting the business altogether. But for those dealers who stick around, the takeover by e-commerce during the pandemic ironically may provide a big benefit.
    Young consumers are more likely to trust the auto sales process the more that it moves online. "For younger Americans," the rise of automotive e-commerce "has elevated trust," said Joanna Piacenza, head of industry intelligence for Morning Consult. Her insight is based in part on a new survey conducted by the Washington, D.C.-based market-research firm of 4,400 adults to gauge their trust in the auto industry and how it’s built — and hurt.
    "It’s meeting them where they are. They’re used to conducting sales on their phone. Don’t make them get up and go to a car dealership. They’re used to the online platform. And if they’re suspicious about anything, they know exactly how to go on the web site where they can gut-check something. They’re used to this interface. It’s going to increase their trust in the industry."
    On the other hand, Piacenza said, the U.S. automakers’ growing problem with microchip shortages is eroding trust by consumers in the entire industry and in specific brands. As the shortages continue to whack the output of the companies’ factories — depleting inventories, strapping selection, delaying deliveries and inflating prices — would-be car buyers are getting increasingly frustrated, she said.
    "There’s a growing risk not necessarily of distrust but of consumer dissatisfaction with not getting the product they’ve saved up for and want to buy," Piacenza said. "It’s not available because of the supply chain." She predicted the car shortage "will get worse before it gets better" and that if consumers "didn’t buy a car during the pandemic surge, you should probably wait until after the chip shortage is over."
     


  • Friday, October 01, 2021 4:45 PM | Anonymous
    U.S. light-vehicle sales volume in September was projected to fall to its lowest September level since 2009, according to a forecast by Cox Automotive.
     
    Cox predicted that sales would drop to 1 million units in the just-concluded month, down 26% from a year ago. There have been only three months of below 1 million volume in the past decade, according to Cox.
     
    Many U.S. automakers planned to report September and third-quarter light-vehicle sales on Oct. 1, as they continued to idle plants intermittently to redirect scarce semiconductor microchips. AutoForecast Solutions estimated the global auto industry has lost 8.9 million vehicles from production plans because of the chip crisis, including 2.9 million in North America.
     
    Cox expected the September sales pace, or the seasonally adjusted annual rate (SAAR), to fall to about 12.1 million vehicles, the slowest pace since May 2020, when much of the country was shut down in the early months of the coronavirus pandemic. That pace is down about 1 million vehicles from August and about 4 million units from the sales rate set in September 2020.
     
    September would mark the fifth straight month of U.S. light-vehicle SAAR declines. In each of those months, the sales pace has declined by more than a million units. Stock on dealership lots has sunk 58% since 12 months ago, down by nearly 1.4 million units, Cox said.
     
    "After a strong spring selling season, the supply situation has worsened precipitously and is dragging sales down with it," Charlie Chesbrough, Cox Automotive senior economist, said in a statement.
     
    No vehicle segments bolstered sales in September, Cox said. The largest year-over-year decreases were in the midsize car segment at 41% and the compact crossover segment at 33.7%
     
    With the September sales drop, Cox expected third-quarter volume to drop 14% from a year ago and 22% from the third quarter of 2019.
     
    Consumer demand is strong, but inventory on dealers’ lots has remained sparse. The lack of choices may be pushing would-be buyers out of the market, according to an August survey by Cox’s Kelley Blue Book team.
     
    Cox expects the chip supply constraints to improve, resulting in a better fourth-quarter selling rate. "But that doesn’t mean good selling rates," said Chesbrough. Still, some automakers have managed the shortage better in recent months, he added.
     
    "Automakers are improving their ability to redirect existing chips to the most important vehicles in their portfolios," Chesbrough said. "This strategy should support better sales in the fourth quarter compared to the third quarter."
     


  • Friday, October 01, 2021 4:44 PM | Anonymous
    Global automakers could lose $210 billion in revenue this year because of supply chain disruptions, nearly double a forecast earlier this year, consulting firm Alixpartners said Sept. 23.
    A shortage of semiconductors is just part of the problem, Alixpartners said in its new forecast. High prices and tight supplies of commodities such as steel and plastic resin are driving up costs and forcing automakers to curtail production.
    Automakers are on track to lose production of 7.7 million vehicles in 2021, according to the new forecast. Alixpartners advises automakers on supply chain and other issues.
    In May, the firm predicted automakers would lose $110 billion in revenue and fall 3.9 million vehicles short of production plans for the year.
    The dour new forecast comes amid warnings from automakers and commercial truck manufacturers that semiconductor shortages and commodity price spikes are not easing as 2021 heads into its final months, as industry executives had hoped they would. 
    IHS Markit in September slashed its global auto industry production outlook for 2021 and 2022.
    In the U.S. market, vehicle sales have begun to slow because inventories on dealer lots are about 20 days’ supply, less than half the normal levels, said Dan Hearsch, a managing director in Alixpartners’ auto practice.
    "We had originally assumed we would get back to normal and claw back volume" in the fourth quarter, Hearsch told Reuters. "That is not going to happen." Instead, he said automakers could have tight inventories until late 2022 or early 2023.
    Supplies of semiconductors have been hit in the past few months by a COVID surge in Malaysia, which has hobbled production at important suppliers. 
    Backlogs at major U.S. ports are hampering efforts by auto manufacturers to import more plastic resins and steel, he said. In response, automakers are committing to longer contracts to lock in supplies, buying as much as 40-50 weeks in advance, Hearsch said.
    "They are signing up for things they would never have done a year ago," he said.
     


  • Friday, October 01, 2021 4:44 PM | Anonymous
    Nearly half of car shoppers are exiting the market and delaying their purchase for the next several months due to the impacts of the global microchip shortage on the automotive industry, according to consumer research reported Sept. 21 by Kelley Blue Book. 
     
    The survey, taken in late August, also reveals further details about car shoppers’ current perspectives and intentions given the state of an automotive marketplace plagued by inventory shortages and record-high vehicle prices.
    "The latest research indicates that most consumers anticipate negative impacts on the automotive market due to the chip shortage, from increased prices to inventory shortages and longer delivery times," said Vanessa Ton of Kelley Blue Book. "With a large portion of the in-market population now saying they plan to delay their purchase given the current market conditions, it will be interesting to see how that could impact the ongoing delicate balance of supply, demand and pricing across the industry. Long term, OEMs are likely experimenting with made-to-order deliveries for consumers."
    Among in-market shoppers, 48% say they are likely to postpone their purchase due to the chip shortage. Of those likely to postpone, most plan to wait at least several months: 40% said three-to-six months, and 12% said one-to-two months. Shoppers who do not plan to postpone understand that they may need to make some changes to their plans to be able to purchase a vehicle sooner rather than later. Among shoppers who said they would not postpone their purchase, 25% said they would consider switching brands, 19% said they would consider changing vehicle categories, and 18% said they would consider shifting from purchasing new to used.
    Slightly more than a third (35%) of all surveyed in-market shoppers said they are willing to pay above MSRP, further indicating they would pay up to a 13% premium, or roughly $5,600 more based on Kelley Blue Book’s latest average transaction prices. In addition, three-quarters of consumers are willing to drive outside their local area for a vehicle, with most shoppers willing to drive 50-200 miles; however, fewer than 20% would drive more than 200 miles.
    In addition, many shoppers said they are willing to make some changes to their vehicle purchase plans due to the chip shortage. Among all in-market shoppers surveyed, 35% said they would shift from an import to a domestic brand, 32% said they would switch brands they are considering, and 31% said they would shift vehicle categories. Further, 38% said they would shift from buying a new vehicle to a used vehicle, but only 18% said they would consider shifting from buying used to new.
    In general, overall awareness of the chip shortage among car shoppers is high. More than half of shoppers (58%) are aware of the cause of the shortage, and 71% are familiar with the effects of the shortage on the automotive market. Other findings:
     
    • An overwhelming majority (90%) of shoppers are aware of the new-vehicle inventory shortage problem at dealerships, and they understand there are significant impacts to their car-buying experience; 
    • 84% think the vehicle with their desired options/specs will take longer;
    • 83% think the vehicle of their desired category will take longer;
    • 69% think prices will increase; and
    • 61% think there will be less favorable deals/incentives available.
    Shoppers also seem to understand that the issue mostly is industry-wide: 79% said the shortage impacts both domestic and import vehicle brands, 76% said all brands will be impacted, and 71% said all vehicle brands are impacted.
     


  • Friday, October 01, 2021 4:44 PM | Anonymous
    A new Illinois task force battling retail theft charged five men and a woman on Sept. 28 with running a multistate car theft ring.
    Anthony Brown (who, as a rapper, goes by Tony Sosa), 40, of Lansing; and Sierra Wells, 27, of Orland Park allegedly obtained high-value vehicles by defrauding dealerships and financial institutions of about $100,000 by using stolen and fraudulent identities. The pair face up to 30 years in prison.
    Illinois Attorney General Kwame Raoul said his office worked with police from Barrington and West Chicago to investigate a pattern of seemingly isolated retail automobile thefts. The investigation spanned years and involved thefts in Illinois and other states. Entities in the banking, insurance and automotive industries helped identify organizers of the crimes.
    Accomplices Kevin Bandy, 48; DeAngelo Hackney, 30; James Krout, 47; and Zebedee Moore, 48, were charged with identity theft, aggravated possession of a stolen motor vehicle, theft by deception, financial institution fraud, and forgery, charges which could bring up to 15 years in prison.
    "These indictments allege that the defendants orchestrated and executed a complex fraud operation that crossed county and even state lines to steal expensive luxury vehicles and defraud car dealerships and financial institutions in the process," Raoul said. "I appreciate the critical support from our federal and local law enforcement partners as well as our retail partners. Today’s charges demonstrate the importance of partnerships and collaborations in order to better protect communities and hold individuals accountable for these complex criminal operations."
    Raoul’s office was supported during the investigation and prosecution by the state’s attorney offices of Robert Berlin in DuPage County and Kimberly Foxx in Cook County. The Attorney General’s Organized Retail Crime Task Force is the first statewide, public-private collaboration of its kind in Illinois and is designed to foster cooperation among retailers, online marketplaces, law enforcement agencies and state’s attorneys dedicated to targeting organized retail crime enterprises.
     


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