Friday, January 27, 2012

January 2012 SDADA Column

You may have seen NADA in the news recently at a public hearing on proposed fuel economy rules for model year 2017-2025 passenger cars and light-duty trucks. NADA urged federal agencies (EPA and NHTSA) to properly consider the rising consumer cost of new vehicles.
According to EPA and NHTSA, the cumulative cost of all of their fuel economy rules will raise the average price of a vehicle by $3,200. Initial analysis from new research, conducted by NADA, indicates the federal government’s estimate of $3,200 may be substantially underestimated and the actual cost to consumers may be as high as $5,000. NADA’s study will be released in several weeks.
I think most dealers agree that we just want to sell the vehicles that our customers want to drive at the best possible prices. The vehicles that will conform to these proposed new rules WILL NOT be the vehicles that our South Dakota farmers and ranchers want to drive and certainly the prices will be much higher.

We all want fuel efficient vehicles but our customers have to be able to afford them. If they can’t, they won’t buy them and will continue to drive the vehicles they have. Stay tuned. There will be much more to come on this topic.
IT Committee Highlights Important eContracting Information for 2012
As you probably know if you visit this column on a regular basis, I have had the privilege of chairing the NADA IT Committee for the past two years. It has been a very interesting and educational two years for me. Our final IT project as a committee was to compile a summary of common features and frequently asked questions about eContracting that dealers can review as they evaluate the services available from third party vendors and lenders.
eContracting is the electronic exchanging of documents between a dealer and lender. It provides an opportunity to enhance the customer sales experience while reducing the time and effort of completing the sales contract. More and more lenders are initiating efforts to offer dealers eContracting alternatives and soon it will be the standard by which dealers complete the sales process.
Questions included in the summary are: "What additional equipment and computer applications would be needed for the F&I office?" and "How long will it take for the dealership F&I team to become proficient with the eContracting process?" You can access these resources at I encourage you to check it out!
Three Reasons to be Optimistic about 2012 Sales
Last month I read a story that made me even more optimistic about this year. It was about a young woman in Bakersfield, Calif., who recently got a job as a cashier and receptionist at a Mazda/Mitsubishi dealership. Within a few months Jade Tolentino was promoted to an accounts payable position and – after putting it off for quite some time – bought a new SUV using her employee discount and today’s incredibly low finance rates. When asked why she did it, the 24-year-old said “it was a step I felt I needed to take.” Translation: this is one example of pent-up demand – and it’s pent-up demand that’s expected to drive up sales this year.
Thankfully, stories like hers are becoming more common these days, as dealerships begin hiring again and consumer spending picks up. Both trends are good news for our industry, and enough reason for NADA Chief Economist Paul Taylor to forecast that we will sell about 1 million more cars and trucks in 2012 than we sold in 2011. Paul is predicting sales of more than 13.9 million units this year, driven by three factors: aging vehicles, affordable credit and aggressive incentives.
Altogether, these three “A’s” have the potential to make 2012 a much better year, Dr. Taylor says. As we know, more consumers are shopping out of necessity to replace their old cars and trucks. Interest rates on new car loans are at historic lows. And both domestic and international auto manufacturers are preparing to wage an aggressive battle to capture U.S. market share by rebuilding their inventories and offering competitive sales incentives. A decline in gasoline prices could also push car buyers to consider a wider range of vehicles in different segments.
If Paul’s forecast is correct—and he has a very good track record for accuracy—dealers and consumers could be in for a very good year, with stories like Jade’s being repeated all over the country—a reminder to us all that the American dream of owning a car, one of the most important factors in sustaining employment, is still alive and well.