As interest rates on SBA and traditional term loans continue to rise, non-bank lenders are becoming an increasingly attractive option for small businesses. Although the cost of capital offered by big banks is still slightly cheaper, shorter funding timelines and higher approval rates are driving more small businesses to consider funding from alternative lenders. A recent report from Biz2Credit indicated that the small business loan approval percentages of alternative lenders increased to 27.8% through the first month of 2023, nearly double the 14.4% reported for big banks. While approval rates at small banks rose to 21.4% in the same period, they remain below non-bank lenders. As the Federal … [Read more...]

Following a streak of acquisitions over the last few years, Lithia Motors has become the largest dealership group, outperforming AutoNation in new vehicle sales. While AutoNation has held the spot as the largest group in the United States since 1997, Lithia has been more acquisitive than the group in recent years. Lithia's strategic goal is to reach $50 billion in annual revenue by the end of 2025, signaling that they will continue acquiring dealerships over the next two years. Before 1999, Lithia was not large enough to make the top 10 list of dealerships based on new vehicle sales. In 2022, Lithia retailed just over 270,000 new vehicles for an increase of 4.2% annually. During the same … [Read more...]

In 2022 Q4, net charge-offs exceeded 1.6% for the first time since 2017 Q4. Ally expects annualized net charge-offs will further increase to 2.2% by 2023 Q4. Covid era stimulus and the surge in used car prices in 2021 caused Ally and the automotive industry as a whole to experience historically low charge-offs. As used car prices have begun to fall in the second half of 2022, charge-offs have increased. The increase in charge-offs will likely continue into 2023 as vehicles purchased in 2021/2022 experience accelerated depreciation due to falling used vehicle prices. Source: Ally Earnings Presentations … [Read more...]

Source: Cox Automotive Car Buyer Journey … [Read more...]

Despite signs that the US economy is regaining steady footing, a rising number of Americans have fallen behind on their car payments, according to a recent report by Moody’s Analytics. The stress in the auto loan market is primarily driven by borrowers with credit scores below 660, with those at the bottom of the credit spectrum experiencing the most difficulty keeping up with payments. The delinquency rate for consumers with credit scores between 300-529 was nearly 22.2%, and the 530-579 range approached 14.6%. Increased personal savings throughout the pandemic combined with soaring car prices in recent years caused many consumers to take out large auto loans, leaving little flexibility … [Read more...]

According to the Wall Street Journal, vehicle affordability is becoming a problem for both dealerships and buyers.  Dealers reported that increasing prices and a lack of affordable models were keeping prospective buyers away.  Now coupled with the rising interest rates, dealers believe that buying a car is out of reach for many consumers. Dealers are also experiencing an influx of cancelled orders as a result of the rising interest rates. In order to improve affordability, the availability of lower-priced vehicles must increase. Auto inventories continue to improve but remain at about half of their pre-pandemic levels, and automakers expect this trend to continue through … [Read more...]

Wholesale used-vehicle pricing unexpectedly rose month-over-month in January as a result of increased demand.  According to Cox Automotive’s Manheim Used Vehicle Value Index, used vehicle prices rose 2.5% when adjusted for mix, mileage, and season. This increase was the largest month-over-month wholesale increase since November 2021. Cox also said that consumers’ views on vehicle-buying conditions has improved to its highest level since July 2021. Prices for used vehicles have been rising since the pandemic constrained new-vehicle inventories due to supply chain issues. The average listed used-vehicle price in December 2022 was $27,143. … [Read more...]

According to Cox Automotive’s Market Report for February 6th, fleet sales are leading increases in light new vehicle sales.  Light new-vehicle sales pace increased to 15.7 million in January.  Additionally, new vehicle prices declined slightly while incentives increased.  Historically, automotive light vehicle sales have seen a 25-30% decline in January compared to an increase of 17.7% this year.  Most sales in January came from fleet sales, as combined sales into large rental, commercial, and government fleets rose 58% from January 2022. Total vehicle sales rose 4.2% from January 2022. Cox believes that job growth and unemployment declines will keep the automotive … [Read more...]

Following years of supply chain challenges, the average transaction price for a new vehicle reached over $47,000 at the end of 2022 due to continued low inventory levels. Dealerships anticipate the need for more inventory will continue to pressure new vehicle buyers. With interest rates on the rise, many consumers have canceled orders of new vehicles due to the uncertainty of where interest rates will be when the car is delivered. Despite low sale volume, manufacturers are posting record profits in 2022 caused by elevated vehicle prices.   According to Cox Automotive, new vehicle inventory rose at the end of the year, signaling that consumer demand may be falling. … [Read more...]

Up 4.9% from prior year levels, the average transaction price of a new vehicle in the U.S. registered a record high of $49,507 in December of 2022. This elevated price level is supported by recent trends in luxury vehicle sales, which accounted for a record high 18.6% of total sales in December of 2022. … [Read more...]

Upstart, a digital consumer lending marketplace, announced plans to expand its AI-powered auto lending platform to dealerships nationwide in the second quarter of 2023. Upstart originally launched its auto lending platform in 2020, and expanded to additional dealers in 2021 and 2022. In Q2 2023, its offerings will become available to all dealers nationwide. Dealers and lenders turn to AI platforms like Upstart to automate the financing and contracting process, hoping to shorten funding timelines and increase profitability. These technology providers, in part, use automation to decrease the amount of manual effort required to review deal jackets and corresponding ancillary product … [Read more...]

Following over 6 decades of consecutive growth, U.S. M2 money supply fell 1.3% from $21.5 trillion in December 2021 to $21.2 trillion in December 2022 on a seasonally adjusted basis. This contraction in M2 coincides with the Fed’s aggressive rate hikes over the course of 2022. Additionally, the Fed’s recent reduction of treasury and mortgage bond holdings has further reduced the financial liquidity of the U.S. economy. … [Read more...]

California’s update to the Song-Beverly Warranty Act has a significant change to limited warranties. The update requires the warranty period on products to start no sooner than the time of delivery. Traditionally, warranties have started at the time of sale to make the coverage time easier to track. However, beginning coverage at the time of sale can lead to a significant amount of coverage time lapsing before the product is delivered. Shipping delays caused by supply chain issues have exacerbated this delay over the last few years. The new policy will effectively extend coverage time, which will likely lead to additional claims. Warranty companies have until July 1, 2023 to update their … [Read more...]

CarFax recently stated that odometer rollbacks rose 7% year-over-year in 2022.  CarFax claims that digital odometers are equally as vulnerable to fraud as the older mechanical ones were and estimates that consumers lose an average of $4,000 in value if they purchase a vehicle with a rolled-back odometer.  That figure does not include maintenance costs. CarFax Public Relations Director Emilie Voss said, “It takes con artists a matter of minutes to wipe thousands and thousands of miles off a vehicle’s odometer, and unfortunately these swindlers likely see this unprecedented used car market as a way to make a quick buck.” The 10 states with the largest number of rollback fraud … [Read more...]

According to Edmunds, Americans are making record high payments on new vehicles, at an average of $717 in Q4 2022, 50% higher than 2010.  Edmunds also reported that the number of consumers who financed a new car in the fourth quarter with a monthly payment of $1,000 or more rose to 16%, compared to 10.5% in 2021. Rate increases have caused consumers to rethink their new vehicle purchase plans as the average annual rate for new vehicles rose to 6.5% in Q4 2022. … [Read more...]

Global private equity fund launches declined by 67.1% from 1,464 in 2021 to just 481 in 2022. Interestingly, even 2019 and 2020 fund launch volumes exceeded those observed in 2022. According to S&P Global, this reduction in volume is justified by institutional investors trimming their private market allocations due to 2022’s turbulent public market conditions. … [Read more...]

According to Kelley Blue Book, the average transaction price for a new vehicle in the U.S. hit a record high in December. Average prices hit $49,507, a 4.9% year-over-year increase and a 1.9% month-over-month increase. These high prices come at a time when new-vehicle inventory levels have continued to increase from historically low levels in early 2022. Kelley Blue Book also stated that new-vehicle average transaction prices have been above the manufacturer’s suggested sticker price for more than a year. Higher prices and increasing loan rates continue to put downward pressure on sales. Rebecca Rydzewski, Research Manager of Economic and Industry Insights for Cox Automotive, said, “The … [Read more...]

Aggregate private equity exit value declined 32.1% from $576.4 billion in 2021 to $391.4 billion in 2022. Within the same period, the total value of private equity IPO exits dropped 68.2% while aggregate trade sale exit value exhibited a relatively modest year-over-year decline of 3.8%. … [Read more...]

Cox Automotive expects 2022 automotive sales to finish the year at the lowest level since 2011, down 8% compared to 2021. The decline in sales is attributed to a supply shortage in the first half of the year and decreased demand due to high prices and rising interest rates in the second half of the year. The average new car payment increased to $700 in 2022, up from $565 in 2020. 2023 will likely continue the trend of decreased demand for vehicles, as the Fed continues to raise interest rates. The used vehicle market in particular is expected to be disproportionately affected as prices continue to fall to correct historic growth during the new vehicle shortage of 2020 and 2021. The decline … [Read more...]

Stimulus and higher savings rates during the covid lockdowns contributed to a 22% increase in bank deposits in 2020, significantly decreasing banks’ cost of funds. However, deposits began declining in the second half of 2022, ending the year down 2% from their peak in May 2022.  Concurrently, loans and leases by banks increased 7%.  Bank cost of funds will also be marginally impacted by the FDIC’s decision to raise deposit insurance assessment rates for banks by two basis points starting in 2023.  The FDIC raised rates because the increase in deposits drove the Deposit Insurance Fund reserve ratio below the statutory minimum of 1.35%. … [Read more...]

The recent Household Debt and Credit report by the New York Fed shows that the student loan pause is positively impacting total consumer loan delinquencies.  Prior to the pause, approximately 10% of student loans would become 30+ days delinquent each quarter. Other types of consumer loans have returned to their pre-Covid delinquency levels, but student loans remain at a fraction of their historical levels.  The lower rate of student loan delinquency has caused overall consumer loan delinquency to remain at historic lows of around 3%, down from over 4%-5% prior to Covid. … [Read more...]

According to a recent report by VicOne, automotive dealerships accounted for nearly 20% of those affected by cyberattacks in the automotive industry in 2022.   Cyberattacks typically come in two forms: Ransomware, which locks a user’s system until a ransom is paid, and data breaches, when information is stolen from a system.  Automotive dealerships are targets for data breaches because of the consumer information they retain. … [Read more...]

The United States Federal Election Committee (FDEC) has approved that DataVault Holdings may use NFTs for campaign fundraising efforts. DataVault sought regulatory approval to offer NFTs to individuals following contributions to political committees. The tokens will be able to be redeemed to promote a campaign without compensation, and any fees generated will be reported as fundraising expenditures. Similar approvals came in 2019 when blockchain tokens were permissible and used by several candidates as incentives to engage volunteers. … [Read more...]

Wholesale prices of used vehicles have now declined 15.6% year-to-date amid decreasing retail sales, according to Cox Automotive’s Manheim Used Vehicle Value Index. The index dropped to 199.4 in November 2022, representing a 14.2% year-over-year decline, and its lowest level since August 2021. Although new retail sales have seen momentum recently, rising interest rates, improved new vehicle availability, and recessionary fears have driven down used retail car sales. Cox estimates that November 2022 used retail sales were down 10% from a year earlier, and 1% below October 2022. Dealers, however, have been somewhat reluctant to pass these decreases along to consumers thus far, with Cox … [Read more...]

B2B marketing has become a successful commercial use case for AI, with ~85% of respondents to a recent Botco.ai study who conduct demand generation campaigns utilizing AI chatbots. The findings of this study credit AI with significantly increasing the volume of leads while also increasing the conversion rates. Volume  ~83% of the marketers claim they are seeing greater than a 5% increase in lead generation volume, and ~32% are seeing an increase of 20% or more. Conversion 99% of marketers using AI chatbots say they increase lead conversion rates. 56% say they increase conversion rates by at least 10%, 17% say chatbots increase conversion rates by 20% or more, and 14% say … [Read more...]

B2B marketing teams are increasingly leveraging chatbots in their lead generation campaigns in order to improve lead capture, lead nurture, and pipeline acceleration. According to Botco.ai’s new study titled “The State of Chatbots in B2B Demand Generation,” over 85% of B2B companies running demand generation campaigns report the use of chatbots or conversational marketing agents in these campaigns, with 83% saying that chatbots have increased their company’s lead generation volume by at least 5%. Another 32% of respondents say that chatbots have helped grow leads by more than 20%, with an additional 15% reporting an increase of at least 30%. The survey was conducted among more than 1,000 … [Read more...]

The automotive repair industry continues to see a deceleration of price increases as the overall effects of inflation have lessened in the 2nd half of 2022. In November, the CPI-U hit a low for the year at 7.1%. In the auto repair segment, the cost of hard goods (both Parts and Equipment and Tires) also registered low rates for 2022. Inflation for the costs of services (Body Work and Maintenance and Servicing) remains high when compared to the past few months, likely a result of permanent wage increases. However, Body Work remains well below the high point of 14.6% from July. Colonnade continues to monitor the trends in the auto repair industry and the widespread impact for our clients. … [Read more...]

A federal reserve report showed that U.S. household wealth fell by $400 billion in the third quarter as a drop in stock prices outpaced gains in real estate values.  Household net worth declined to $143.3 trillion at the end of September from $143.7 trillion at the end of June.  Stock prices fell as a result of inflation worries and interest rate increases. Additionally, the pace of home price growth has slowed as a result of the interest-rate sensitive housing sector getting hit by the U.S. central bank’s moves. The report also showed that household cash stockpiles, the sum of the balances in checking accounts, savings, time deposits, and money market funds, were effectively … [Read more...]

Earlier in 2022, the IRS announced that users of payment exchange platforms such as Venmo, PayPal, and Zelle would need to file a 1099-K if their annual aggregate transactions exceeded $600. With immense concern leading into the 2022 tax filing season by the tax community and lawmakers, the IRS has elected to maintain the existing threshold for reporting. Existing guidelines require those receiving business payments through mobile platforms will only need to file the 1099-K if they exceed 200+ transactions with an aggregate value of at least $20,000. When the proposed updated regulation goes into effect, it will not change the tax liability for individuals and small businesses as they must … [Read more...]

What do you expect the market for vehicles in your area to look like 3 months from now? Automotive dealers’ market expectations fell below levels at the start of the pandemic according to Cox Automotive’s Dealer Sentiment Index.  Dealers are primarily concerned about the impact the state of the economy and interest rates will have on their business. As inventory levels and prices normalize, dealerships will likely no longer be able to charge the mark-ups that have driven increased profitability over the last year.  F&I products, which have historically accounted for about 25% of gross profit, are likely to become an increasing important source of revenue as dealerships focus … [Read more...]