Last month, I bemoaned the automobile manufacturers' stair-step pricing programs again. It appears Ford Motor Company recently rolled out a stair-step program that offers dealers a cash bonus for reaching year-end sales targets.that there is a new player in this addictive game.
Ford’s sales analyst, Erich Merkle, wants to call it a dealer bonus program. Merkle called it a "volume-based growth program", You can put as much lipstick and perfume on that pig as you would like, Mr. Merkle. It has a snout, a curly tail and it says "oink". It is still a pig - and it stinks.
I have made my points about why these stair-step programs are bad for the factory, the dealer and the consumer here and here. NADA has made a statement against these programs. I've also pointed out that our South Dakota law supposedly prevents this kind of factory activity.
Merkle said it took “months” to develop this incentive program. That's a rather scary thought. Did it really take "months" to develop an incentive program that is a clone of other stair-step programs? Or did it take months to try to come up with a name and description for this program that might sound more palatable to dealers? Will the dealer recognize this pig if we call it a Sus scrofa domesticus?
My friend, Jack Kain, who is quoted in the Automotive News article, is right on with his comments: “It cheapens the product and it's just a doggone shame”. Well said Jack. Well said.
NADA Provides Resources Defending Franchise System
The dealer franchise system has come under attack recently as Tesla has attempted to circumvent state franchise laws. Dealers have been called "middlemen" who extract profit out of the system.
In response, NADA has assembled an arsenal of resources intended to get the dealers' story out. These resources can be found at nada.org/getthefacts .
Please take a look at these resources. Several of the videos would be great to show at a Kiwanis or Rotary meeting. They are short, easy and make the point clearly.
It is important that dealers are perceived as something other than a "middle man" and that we do add value to the system. If we don't tell our story, who will??!!
New Study of Loan Records Refutes CFPB Position on Auto Lending
You may have seen recently that new comprehensive study of more than 8.2 million loan records by Charles River Associates concludes that the method used by the Consumer Financial Protection Bureau (CFPB) to measure for discrimination in an auto lender’s portfolio is “conceptually flawed in its application and subject to significant bias and estimation error.”
The study calls into question the reliability of a testing methodology that the CFPB has used to level allegations of unintended discrimination against—and extract settlements from—auto lenders and to pressure auto lenders to change the way they compensate dealers for originating finance contracts.
While the results of this study come as no surprise, it is significant that an independent third party has found that the method CFPB uses for identifying discrimination in auto lending is flawed. They also found that this may result in significant measurement errors that overstate the extent of harm to borrowers.
We'll see if this slows the CFPB down. Any bets?
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