CATA News

Massachusetts voters overwhelmingly approved a ballot question on Nov. 3 to expand the state’s "Right to Repair" law, a decision with potentially far-reaching ramifications in the automotive industry about who has access to the highly proprietary data transmitted by carmakers. The measure amends a landmark 2012 "right to repair" law in the state.

Opponents of the latest Right to Repair initiative, known on ballots as Question 1, conceded defeat shortly after the polls closed. The results showed voters backing that measure by a 3-to-1 margin — 75% to 25%.

Under the newly approved Right to Repair law — which drew at least $43 million in spending, the most for a ballot question in state history — automakers will be required to provide car owners and independent mechanics with access to wireless mechanical data, known as telematics, starting with model year 2022 cars.

The Right to Repair Committee, which had raised at least $24 million to push the measure, framed it as a matter of preserving choices for car owners about where to get their car fixed, and protecting the competitive edge of independent mechanics around the state.

"Tonight is a great victory for the 1,600 independent repair shops here in Massachusetts, and the 40,000 jobs in the aftermarket," said Tommy Hickey, the committee’s director. "It’s pretty clear in the ballot what the will of the voters was."

 

The vote is likely to rumble quickly through the automotive world, which already has been roiled by the debate about who should have access to the highly proprietary data. It also remains to be seen whether lawmakers amend the ballot question’s language after federal officials raised concerns about its proposed timeline.

The Coalition for Safe and Secure Data, an automaker-backed committee that fiercely opposed the question, conceded after the vote, though it contended the data privacy concerns it had raised remain.

"Today’s vote will do nothing to enhance that right [to repair] — it will only grant real-time, two-way access to your vehicle and increase risk," the group said in a statement.

The new law builds on a measure voters passed in 2012 that first allowed independent repair shops to plug into a car and access the same digital codes that car dealers and their mechanics use to help diagnose problems.

That law, which legislators later tweaked in 2013, prompted automakers to agree to a memorandum of understanding that set similar requirements across the country.

It’s unclear if the industry could follow a similar path on telematics. That system, often found in late-model cars, monitors and remits real-time readings on the vehicle back to the manufacturer, and the type of data can vary between manufacturers.

Under the newly approved law, manufacturers will be required to equip vehicles starting with 2022 models with an open-access platform for that data. Owners could then retrieve the mechanical readings through a mobile app, and grant a local repair shop access to help in repairs.

The debate over the measure quickly evolved into an expensive, and often hyperbolic, advertising war over cybersecurity and drivers’ personal data. The Coalition for Safe and Secure Data, backed by nearly $26 million in contributions from General Motors, Toyota, and other manufacturers, ran a series of ads insinuating that the garage codes to your home could be at risk, or that "domestic violence advocates" say predators could use a car’s data to track their victim’s location.

But cybersecurity experts differed on how much risk the ballot question posed to someone’s data, and several said the claims pushed by automakers veered into exaggeration and "fear-mongering."

The newly passed measure had faced its own questions. It does not specify who will build the app or how it should operate, and the National Highway Traffic Safety Administration has said it is "effectively impossible" for automakers to design, test, and implement a secure approach within the proposal’s time frame.

 

 By Randy Henrick, Ignite Consulting Partners

 

Joe Biden’s victory likely will usher in a new era of consumer protection and compliance challenges for auto dealers.  Four of the five Federal Trade Commission commissioners will have their terms expire during the Biden administration. President Biden will have the power to replace the head of the Consumer Financial Protection Bureau. The Democrats will, for at least two years, control the House and maybe the Senate, too.

 

The Democratic Party platform stated that a Biden administration would work "to ensure equitable access to credit and banking products for all Americans, and reinvigorate the CFPB to ensure that banks, financial institutions, and lenders cannot prey on consumers." The platform also indicates Democrats will "eliminate the use of forced arbitration clauses." Strong language is also given to protecting consumers’ rights to privacy and protecting consumers from data breaches.

In short, as Democratic Sen. Chuck Schumer said with respect to the Supreme Court, everything is on the table.

That being said, it is reasonable to expect changes in the automobile world to be evolutionary not revolutionary. The Trump administration has put new staffers at senior levels in the CFPB and the FTC. While some of these people may leave or be replaced, there will not be a wholesale firing and replacement of Republican staffers on Day One.

Here are some thoughts on what to expect.

 

CFPB

It is important to remember that Sen. Elizabeth Warren, the original architect of the CFPB, will have an important voice in Biden administration policy. Warren raised concerns earlier this year about auto finance and has indicated her disdain for auto dealers in the past.

"Auto dealers got a specific exemption from CFPB oversight, and it is no coincidence that auto loans are now the most troubled consumer financial product," Warren said. "Congress should give the CFPB the authority it needs to supervise car loans — and keep that $26 billion a year in the pockets of consumers where it belongs." The $26 billion per year is Warren’s estimate of total dealer participation which Warren would like to eliminate.

Warren also is closely aligned with Richard Cordray, who headed the CFPB during the Obama administration. You may recall that the CFPB under Cordray published the agency’s bulletin on auto finance indicating that dealer participation resulted in disparate impact credit discrimination. In May 2018, Congress passed a joint resolution that was signed by President Trump disapproving the bulletin.

Disparate impact credit discrimination involves facially neutral practices that have the effect of discrimination. Actual intent to discriminate is not required. Disparate treatment credit discrimination generally requires intent to discriminate.

The U.S. Supreme Court in 2015 decided the case of Texas Department of Housing v. Inclusive Communities Project. This case appeared to make it harder to bring a disparate impact credit discrimination case under a statute like the Equal Credit Opportunity Act, although the ECOA was not at issue in the case. The ECOA prohibits "any creditor to discriminate against any applicant with respect to any aspect of a credit transaction." This picks up disparate treatment credit discrimination. But the ECOA does not prohibit acts that "otherwise make unavailable" credit to protected classes as does the Fair Housing Act, which was at issue in the case. It was this language that the Supreme Court ruled 5-4 picks up disparate impact credit discrimination. The Supreme Court has not ruled on whether the ECOA prohibits disparate impact.

 

FTC

FTC commissioners serve staggered terms. No more than three commissioners can be of the same political party. Two Republican commissioners will have their terms expire in 2023 and 2024, respectively. When replacing a commissioner, including a Democratic commissioner as will occur in 2022, it is reasonable to believe that a Biden administration will appoint someone more leftward leaning than a Republican president would appoint.  Over time, this could lead to a more activist FTC including against auto dealers and auto finance about which the FTC has held hearings.

 

FTC staff members may also turn over and it is not unreasonable to believe that more liberal replacements may be appointed. Expect the FTC to be more active during the Biden Administration although how soon and how much so will remain to be seen.

 

Department of Justice

The DOJ has brought criminal actions against auto dealers, their owners, and their employees for bank fraud, interstate wire fraud, and other federal criminal law violations. Several dealer principals as well as F&I personnel have served jail terms for defrauding federally regulated lenders by, for example, submitting falsified credit applications, power booking, and other fraudulent behavior.

 

President Biden will appoint a new head of the DOJ of Justice to replace William Barr early in his term. This person obviously will be more liberal than Barr. It is reasonable to expect that senior levels in the DOJ likewise may move to the left. This could result in more investigations, enforcement actions, and criminal proceedings against auto dealers who falsify documents and misrepresent transaction information to lenders.

State attorneys general

 

The CFPB and state attorneys general act in close concert on consumer protection matters. During the Trump administration, many enforcement actions against auto dealers have originated with State AGs.

 

An activist CFPB and aggressive AGs can be expected to pursue more claims against auto dealers. Your state AG is the most likely regulator you will encounter. It is critical that you have a policy and procedure for addressing consumer complaints. Use this procedure for every consumer complaint. Remember that even a small complaint can become a big problem if the consumer reports it to the AG.

 

What’s a dealer to do?

If you have put compliance on the back burner during the Trump administration, now is the time to get prepared, review and update your policies, and train/retrain your employees. A checkup with your legal or compliance advisor is an excellent idea.

 

The Biden administration is likely to focus on safeguards and privacy, so make those first on your list. (Review your privacy notice and make sure it states what your actual sharing practices are). Consumer protection in sales and F&I will be another area for activist agencies. If you have not already done so, adopt and implement the NADA Fair Credit Compliance Program and the NADA Voluntary Protection Products policy and program. 

 

In recent enforcement actions, the FTC has made dealer principals jointly and personally liable with the dealership for violations including broad unfair and deceptive practices violations. This trend will continue. That should be reason alone for your senior management to give priority to compliance as the Biden Administration takes over.

 

Randy Henrick is an auto dealer compliance expert who provides compliance consulting services to dealers directly at www.AutoDealerCompliance.net. 

 

Upon finishing their turkey legs, Americans each year prepare for the next American holiday: Black Friday. Advertising around that occasion can get creative, but the Better Business Bureau reminds dealers about Illinois advertising rules that prohibit dealers from touting free gifts and offers.

Despite the times, the BBB has consistently applied the Illinois Motor Vehicle Advertising Regulations to dealer practices as they become known. Dealers themselves have expressed the importance of a fair marketplace in which no dealer offers promotions that conflict with the regulations and harm the sales of other dealers.

With that in mind, the BBB wants to alert dealers to certain practices relating to Black Friday promotions. "We often see Black Friday offers that dealers would not otherwise run, involving free incentives with the sale or lease of vehicles," said Patricia Kelly, senior counsel of the BBB’s Chicago office. She reminds dealers of the language of rule 475.590 that relates to Black Friday promotions.

 

Section 475.590 Gifts and Free Offers

  a) It is an unfair or deceptive act to advertise or offer free prizes, gifts or other incentives in connection with the purchase or lease of a vehicle where the vehicle is sold or leased at a price arrived at through bargaining or negotiation, unless the dealer meets the requirements of subsection (b) of this Section.

  b) A free prize, gift or other incentive may be advertised or offered in connection with the purchase or lease of a vehicle if:

  1) the free prize, gift or other incentive is offered through a manufacturer’s program or a manufacturer’s authorized and approved dealer advertising association without any participation by the dealer, excluding dues or assessments that are required to participate in the advertising association. The program or association shall be clearly and conspicuously disclosed; and

  2) all material terms and conditions relating to the offer are clearly and conspicuously disclosed at the outset of the offer.

 

While Black Friday is a time when other general retailers with fixed prices offer free promotions, Illinois dealers are prohibited by rule 475.590 from advertising or offering free prizes, gifts or other incentives in connection with the purchase or lease of a vehicle because the price is arrived at through bargaining or negotiation.   

"This rule is very broad," Kelly said. "It covers anything a dealer advertises or offers for free or included or any other expression of that notion."

 

In past years, Kelly said the BBB has seen offers that included electronics, smart phone items and remote starters.   The list, she said, is as long as the imagination.

"We have also seen contests, such as wheel spins, that purport to be independent of sales and include ‘no purchase necessary’ language," she said. "But consumers and BBB ‘shoppers’ have reported that dealer staff told consumers at the store of a different standard.   Consumers who win a wheel spin free item, for instance, are told they must buy or lease a vehicle to obtain the prize."

The BBB seeks to assist dealers in thinking about their Black Friday promotions in line with rule 475.590. The BBB has referred dealers in the past to the office of the Illinois attorney general under the BBB/CATA advertising review program because of free promotions during Black Friday events.  "Violations of rule 475.590 are considered zero tolerance issues per the CATA Board of Directors and we take these issues very seriously," Kelly said.

Therefore, the BBB hopes that dealers consider their Black Friday promotions carefully with this rule in mind.  As always, the BBB is ready to assist CATA members by reviewing their advertising content prior to publication to ensure compliance with rule 475.590.  

"We wish dealers good sales in the coming weeks, as the holidays approach," said Kelly. "Our intent, as always, is to encourage a level playing field in usual times and in the times we are having now.  

"We hope that all dealers consider their promotions for Black Friday with these principles in mind."

 

The Federal Trade Commission made a big splash in May when it announced a whopping $1.5 million settlement with a New York dealership for alleged discrimination in financing and alleged various deceptive business practices. 

The practices included the customary deceptive advertising and bogus charges, but also included an allegation that the Chevrolet and Honda retailer offered "certified pre-owned" Hondas, which are covered by the manufacturer’s seven-year, 100,000 mile warranty, wherein the customer was told he had to pay a "certification" fee to receive the advertised price and warranty, a practice prohibited by the manufacturer. 

The dealership also assessed "prep, shop, or reconditioning" fees for some certified pre-owned Hondas. The unluckiest customers paid both fees, totaling about $3,000, according to the complaint.

 

Closer to home, the office of the Illinois attorney general recently sued a suburban Dodge dealer for allegedly violating the state’s motor vehicle advertising regulations relating to sales events, trade-in values, discount substantiation, and advertised prices, as well as using fake checks and coupons in its advertisements, failing to disclose a consumer’s potential responsibility for negative equity on a trade-in, failing to promptly pay off a lien on a trade-in, advertising financing opportunities to those facing bankruptcy, and other miscellaneous charges. 

The complaint further alleges that the dealer violated a 2016 Assurance of Voluntary Compliance entered into by and between the dealer and the AG covering similar deceptive practices.

Both of the proceedings above should serve as a major red flag for dealers in their advertising and business practices.

 

The Chicago Automobile Trade Association on Nov. 10 announced a final amount raised by this year’s Barbecue for the Troops campaign. After wrapping month-long fundraising campaigns in October, the area’s new-car dealerships delivered $53,801 to the USO of Illinois.

 

The new-car dealers' USO Barbecue for the Troops initiative traditionally is held each July and features large community festivals with patriotic ceremonies. However, this year, the CATA and the USO of Illinois made the collective decision to reschedule 2020's fundraising campaign to October due to the pandemic. Still, nearly 60 CATA dealerships rallied around the cause that directly impacts local service members. Since the program's inception in 2013, the area's new-car dealers have brought in more than $950,000 to support USO of Illinois initiatives with more than 630 unique fundraisers taking place. The funds enable the USO of Illinois to lend support to more than 350,000 service members and their families on an annual basis. 

 

"While this year is certainly unique, not even a global pandemic could stand in the way of local new-car dealers' drive to give back to those in need, right within their local communities," said CATA Chairman Kevin Keefe. "Furthermore, we found that people really rallied around the cause because it directly impacts local military who have been serving on the home front in the COVID-19 pandemic, as well as around the world."

 

USO of Illinois Executive Director Christopher Schmidt said: "We are truly grateful for the support we have received from our partners at the Chicago Automobile Trade Association, the local new-car dealerships and our hometown communities. For the eighth consecutive year, the CATA dealers have rallied to help raise funds for our local service members and their families. Our sincere thanks to everyone who stepped up to support the USO of Illinois and those that we serve, especially during these unprecedented times."   

 

Awareness was also spread through social media through the #BBQ4Troops Ultimate At-Home Barbecue contest. The CATA and USO of Illinois encouraged fans to nominate someone deserving of the grand prize, a $150 Real Urban Barbecue catered meal, at-home grilling essentials and a signed hockey puck by hometown hero Chicago Blackhawks' Patrick Kane. 

 

The social media contest winners, Joy and Dan Symonds, are a husband and wife team who founded Operation LOVE (acronym for "Love Our Veterans Elgin") Our Veterans, based out of Elgin. The mission of Operation LOVE is to honor "unclaimed" veterans at their funerals, connect volunteers with Elgin-area veterans in need and strengthen existing local veterans' service organizations by promoting their events, volunteer opportunities and fundraisers. 

 

"We are so thankful to the local dealerships and the USO of Illinois for this great recognition of Operation LOVE," said Joy Symonds. "We're blessed to have a strong community committed to serving and honoring our country's true heroes, our veterans."

 

SPRINGFIELD – The fall veto session of the Illinois General Assembly, which was scheduled to begin Nov. 17, has been canceled amid a worsening COVID-19 pandemic, Democratic leaders announced Nov. 10.

 

House Speaker Michael Madigan and Senate President Don Harmon, both Democrats, said in a joint statement that the decision to cancel the session was made out of concern for the safety of lawmakers, staff, their families and the general public, although they left open the possibility that it could be rescheduled if public health conditions improve.

 

The CATA and others had hoped to use the veto session to roll back the $10,000 limit on the tax credit available on traded-in First Division vehicles. The cap took effect this year to raise money for state infrastructure projects. Key lawmakers have indicated their support for the repeal.

 

Lawmakers typically hold a brief session in the fall to deal with any legislation from the regular session that was vetoed by the governor. This year’s session was scheduled to run Nov. 17-19 and Dec. 1-3. 

 

This year, however, there were no vetoes to deal with, largely because the regular session was severely shortened due to the pandemic, which reached its initial peak in April and early May. The House and Senate held a brief, four-day special session in late May, under strict masking and social distancing requirements, after it appeared the pandemic was subsiding.

 

The 101st General Assembly officially comes to an end on Jan. 12, the day before the next session begins and newly-elected and reelected lawmakers are sworn into office. 

 

Mike Stanton, who has served since 2018 as the National Automobile Dealers Association’s chief operating officer, will ascend to NADA president on Jan. 1.

The current president, Peter Welch, announced his retirement earlier this year and will lead the association for the remainder of 2020. Welch has held the post since 2013.

"The NADA is a great organization representing one of America’s most important industries," said Stanton, 52. "It is an honor to be chosen for this role, in this pivotal time for dealers, and I am excited to get started." 

The NADA’s 63-member board of directors on Oct. 20 also elected Paul Walser as its 2021 chairman and Michael Alford as vice chairman.

"I’m humbled by the continued confidence of my fellow dealers," said Walser, who represents Minnesota’s new-car dealers on the NADA board. "I promise to do the very, very best I can, and I will be looking for a lot of hand-raisers, because this will be a team effort all the way."

Walser, 65, who currently serves as NADA vice chairman, will succeed Rhett Ricart. Floridian Tom Castriota was elected as secretary, and Gary Gilchrist from Washington will serve as the 2021 treasurer.

Stanton currently oversees daily operations of the association. He previously served as vice president and chief operating officer of the NADA Used Car Guide, which was sold to JD Power in 2015. Stanton also had several roles with the NADA’s industry relations team advocating for dealers.

 

The latest advanced data technology and targeted marketing resources are poised to potentially make the year’s final quarter the most wonderful time of this very strange year for auto dealers.

2020 began with auto sales expected to approach the 17-million mark. Projections dipped to 8.74 million in April with the rapid and widespread shutdowns from the COVID-19 pandemic but climbed back to 15.18 million by August.

 

Holiday shopping

Auto dealers and lenders have felt the sharp back-and-forth swings of the pandemic economy and are hoping to ride upward momentum heading into the final stretch of 2020. As part of this, gearing up for year-end sales and incentive-fueled holiday shopping promotions are sure to be a big part of the game plan.

Overall, retail forecasters predict a 1% to 1.5% increase in total U.S. consumer spending from Nov. 1 through January, and a 35% bump in seasonal online sales.

Dealers are hoping to grab a piece of that by leveraging the right target-marketing data resources. With unemployment rates at an all-time high, it is important to understand a potential buyer’s household income and discretionary spending so that the right incentives are offered to the right consumers.

New target-marketing data resources help dealers better identify consumers who are likely to be ready to take on new financing for an auto loan or lease.

Those resources also can better match those consumers to vehicles that dealers have in supply, based on how many such models consumers likely will be able to afford. This is important because dealers and their marketing partners must re-evaluate their strategies in 2020 to better align with changing consumer needs and financial capacities.

The COVID-19 pandemic certainly slowed economic growth, but in a way that’s different from past recessions. This year, consumers have been impacted in different ways during the pandemic. While some have increased savings and lowered debt, others have lost their jobs or experienced salary reductions.

Financial durability has become an important way to segment the economic health of households within the same credit bands. It considers a consumer’s assets, income from dividends and interest, retirement income and the relationships between income, debt and spending.

Today’s sophisticated economic anonymized marketing data resources tap this information to help dealers make better and more precise decisions when putting an incentive-driven offer in front of a specific customer.

Median credit scores, revolving credit utilization, monthly disposable income and debt-to-income ratios all are stronger today than during the Great Recession. Also, household deposits are four times as high, according to Equifax data from June 2008 to December 2019.

 

Programmatic audience marketing strategy

Another way dealers and marketing partners can see a better response from holiday incentives is to shift their traditional media strategy to a programmatic audience approach.

Successful programmatic strategies are based on truly understanding the in-market shopping audience. However, just because a consumer is shopping for a car online doesn’t mean she can purchase it.

For example, first-time buyers may have no idea if or what they can afford, and the waters have been muddied further by the pandemic economy. They may be shopping for a vehicle online without knowing whether the payment fits into their budget or if they can get credit.

Dealers and their marketing agency partners need to identify several intent signals, as well as financial capacity to target consumers who have:

 

• Income and assets: an anonymized estimate of household wealth based on data from trusted financial institutions.

• Discretionary spending ability: a household’s spending power after accounting for the fixed expenses of life.

• Credit capacity: estimated ability to obtain credit to purchase a car.

• Propensity to buy: interest in your vehicle segment, make or model.

With these strategies in place, dealers can better leverage today’s advanced target-marketing resources to make the most of their holiday shopping incentives and offers this end-of-year season.

 

Despite the buzz that online car-buying has garnered of late, the vast majority of consumers still prefer to purchase a vehicle at a local dealership, said Langley Steinert, founder and CEO of CarGurus, an online automotive marketplace.

"I don’t subscribe to the idea that the whole (automotive) world is going online," he said during a remote CarGurus conference for its dealer clients who list and advertise their inventories on its site. "That’s not going to happen."

 

Digital auto retailing gained traction last spring when COVID-19 arrived and government mandates temporarily suspended in-dealership vehicle purchases in many states.

Consumer interest in online car buying jumped from 19% in April to 39% in June, according to a CarGurus survey Steinert cited.

Steinert predicts 20% of auto consumers will want to buy a vehicle online, but the rest "will want to buy locally."

 

That’s presumably good news for dealers who have not made digital retailing a top priority. "They don’t need to throw up their hands and say the sky is falling," Steinert said.

Still, "20% is not a small number," he contended, referring to those consumers who he said will prefer remote car buying. "That is not a small trend. It needs to be addressed."

Those online buyers, he predicted, will skew toward younger people ages 28 to 35. "They would say, ‘Yeah, I’ll do that as long as there’s a 7-day money-back guarantee.’ "

In a good year, combined new- and used-auto sales in the U.S. can exceed 56 million units. Various sources predict 2020 new-vehicle sales of about 14 million and used-vehicle sales of 36 million in the U.S, making this an automotive off-year because of COVID-19’s economic effects.

Despite that, "Consumer demand we’ve seen on our site is more robust than I expected," Steinert said, adding it’s particularly the case with used cars. But he cited shopping-level differences between higher- and lower-income groups.

"(Shopping for) higher-end used cars ($20,000 and above) is robust, but it’s quite the opposite for those below $20,000," he said. "That’s because lower-income consumers were harder hit economically by COVID. Sadly, it’s a tale of two cities."

CarGurus is among a number of third-party providers that make money by listing inventories and forwarding leads to dealer clients. (DriveChicago.com, owned and operated by the CATA, is free to association members, and non-members have no presence on the site.)

But expect budget-conscious dealers to cut back on the number of lead aggregators they use, Steinert said. 

"Dealers will consolidate their options. They will probably go to two. Three, four and five will be dropped. It doesn’t make sense to carry five inventory-listing (fee-charging) providers." 

The providers with the largest audience and which offer the best customer experience "win the war," he said.

 

Through 2020’s first three quarters, new light-vehicle sales were down 19% relative to the same time period in 2019, the National Automobile Dealers Association announced in an analysis of U.S. auto sales and the economy following the third quarter of 2020. 

Raw sales volume in September totaled 1.34 million units, an increase of 6.1% compared to September 2019; the increase in September’s volume was due, at least in part, to the inclusion of the Labor Day sales weekend and two additional selling days compared to the same month in 2019.

"While we have continued to experience a steady recovery for new-vehicle demand year since the lows of April, vehicle sales have remained depressed compared to 2019 given a variety of factors including inventory," said NADA chief economist Patrick Manzi.

September’s SAAR registered 16.3 million units, the first time sales have topped 16 million units since February 2020. However, this is a decline of 4.3% compared to September 2019."

Despite a decline for all car segments, sales of pickups, SUVs and crossovers all posted gains relative to this time last year. In the first three quarters or 2020, three out of every four vehicles sold were light trucks.

The NADA sees strong retail sales despite an environment with falling manufacturer incentives, after peaking in April at $4,981 per unit. J.D. Power estimates that average incentive spend per unit will drop to $3,964, the first time since June 2019 when incentives have fallen below $4,000 and down about $300 compared to September 2019.

Interest rates also have decreased, while average monthly payments have increased. According to J.D. Power, the average interest rate on new-vehicle financing was 4.4% in August 2020, down a little over 100 basis points compared to August 2019, but up by 80 basis points from April 2020’s low of 3.6%. The average monthly payment on a new-vehicle finance contract was $582 in August 2020 — up $18 compared to August 2019.

Inventory continues to be a concern for dealers; nationwide, franchised dealer inventory was 2.66 million units at the end of September — up 3.6% compared to August 2020 but down 26.7% compared to September 2019. Dealers now have an average 50-day supply of inventory — down one day from August 2020 and 16 days compared to September 2019.

On the production side, North American light-vehicle production is expected to be 1.36 million units, roughly flat compared to September 2019, according to Wards Intelligence. North America production for the entire year is on track to total 13.4 million units — 20.2% below 2019’s 16.8 million.

Consumers who took lease extensions in March, April and May are expected to be returning to the new-vehicle market in the next few months, which should be a positive boost for sales in the final quarter of the year. While retail demand is expected to continue to recover the remainder of the year, fleet sales will continue to be depressed relative to 2019 volumes.

However, the NADA sees possible improvement in fleet demand in the fourth quarter of 2020. At the onset of the pandemic, the NADA reduced its initial 2020 light-vehicle sales forecast of 16.8 million units to 13 million to 13.5 million units.

"Given the better than expected recovery in the new light-vehicle market, we estimate 2020 new light-vehicle sales to be higher, reaching 14.1 million units," Manzi added.

 

At the macro level, real GDP in the third quarter of 2020 was expected to increase by roughly 35% on an annualized basis following a sharp decline of 31.7% in the second quarter. In the labor market, job gains are expected to continue in the fourth quarter, albeit at a slower rate than in the months prior. According to the September jobs report from the Bureau of Labor and Statistic, employment increased by 661,000 jobs, and the unemployment rate fell to 7.9%. However, weekly jobless claims continue to be elevated compared to pre-pandemic levels with employment potentially falling in impacted sectors such as leisure and hospitality as American consumers return indoors during the winter months. Additionally, pandemic-related job losses continue to impact lower-earning workers more significantly than higher income workers.

 

At franchised new-car dealerships, employment has improved each month since bottoming out in April at 888,000; as of August 2020, franchised dealerships currently employ 1,048,800 workers.