Diesel models good sell for cost-conscious shoppers

By Auto Remarketing Canada Editor

Though diesel vehicles might not be the easiest sell these days, the latest results from Vincentric's first Canadian Diesel Analysis might give dealers some talking points when trying to convince shoppers of the benefits of these units. According to the results of the analysis released today, the company found that 12 out of 34 diesel vehicles, or 35 percent, had lower total cost-of-ownership than their closest gasoline counterparts.
The study also found that number goes up for luxury diesel vehicles. In this segment, 11 of 13, or 85 percent, were more cost-effective. The reports assume 25,000 kilometers are driven annually, and the vehicle is owned five years.
"Over the past several months we've seen the price advantage that gasoline has had over diesel fuel diminish, enhancing the fuel economy advantages of diesel vehicles," stated Vincentric president David Wurster. "However, fuel economy is only part of the story. With total cost-of-ownership savings from only one third of the diesel models analyzed, consumers need to be informed when shopping for diesels to find the models that offer savings."
Out of the 12 diesel vehicles with lower ownership costs, 11 were luxury models. These includes four vehicles each from Audi and Mercedes-Benz and three vehicles from BMW.
The Chevrolet Cruze Diesel was the only non-luxury diesel make to have lower ownership costs than its gasoline counterpart.
Breaking down the numbers, customers may have to shell out a bit more at point-of-sale as well as for maintenance costs - but the fuel cost savings make up for most of it.
According to Vincentric, the average price premium for a diesel vehicle was $5,650 with average maintenance costs $476 higher for the diesel models.
That said, diesel fuel cost savings averaged $4,005. Although fuel cost savings can add up and the luxury models stand out from the pack, when the costs to own and operate all 34 vehicles were taken into account, the average cost-of-ownership was $2,030 more for a diesel vehicle compared to its gasoline counterpart.
"There has been a lack of understanding of the benefits of clean diesel technology," Vincentric analysts said. "This report demonstrates that in addition to improved environmental benefits of diesels, a strong financial case can be made for the adoption of some of these vehicles."
In this analysis, there were 12 diesels that can be financially justified purely based on the total cost of ownership numbers, according to Vincentric:   

• 2015 Mercedes-Benz GLK250 BlueTEC  (-$9,201)
• 2015 Mercedes-Benz ML350 BlueTEC  (-$8,050)
• 2015 Mercedes-Benz E250 BlueTEC  (-$7,655)
• 2015 Mercedes-Benz GL350 BlueTEC  (-$6,991)
• 2015 BMW 535d xDrive  (-$4,650)
• 2015 BMW X5 xDrive35d  (-$4,501)
• 2015 BMW 328d xDrive  (-$4,060)
• 2015 Audi A6 TDI  (-$3,804)
• 2015 Audi Q5 TDI  (-$3,759)
• 2015 Chevrolet Cruze Diesel  (-$3,484)
• 2015 Audi A7 TDI  (-$3,139)
• 2015 Audi Q7 TDI  (-$1,783)

When looking at fuel economy, these models provide the greatest benefit over their gas only counterparts:

• ·2015 Audi A7 TDI  (-$6,826
• 2015 Audi Q7 TDI  (-$6,659)
• ·2015 Mercedes-Benz GLK250 BlueTEC  (-$6,654)
• · 2015 Audi A6 TDI  (-$6,615)
• ·2015 Mercedes-Benz E250 BlueTEC  (-$6,494)

Lastly, the diesel vehicles with the lowest overall fuel costs are:

• 2015 Volkswagen Jetta 2.0 TDI  ($10,104)
• 2015 Volkswagen Golf 2.0 TDI  ($10,313)
• 2015 BMW 328d xDrive  ($10,329)
• 2015 Volkswagen Beetle 2.0 TDI  ($10,623)
• 2015 Volkswagen Passat TDI  ($10,655)

Diesel Models Good Sell for Cost Conscious Shoppers........................ www.redlineautosales.ca/diesel-models-good-sell-for-cost-conscious-shoppers.htm

Korean brands widen quality gap between automakers

By Sarah Rubenoff

J.D. Power just released its 2015 Initial Quality Study ratings and results, and it seems Korean brands are continuing to improve while other more well-known brands may be feeling the impact of recent recalls.
With impressive year-over-year improvement, the Korean brands "continue to widen the quality gap with other automakers," J.D. Power reported, while Japanese nameplates have fallen below industry average for the first time in 29 years.

"This is a clear shift in the quality landscape," said Renee Stephens, vice president of U.S. automotive quality at J.D. Power. "For so long, Japanese brands have been viewed by many as the gold standard in vehicle quality. While the Japanese automakers continue to make improvements, we're seeing other brands, most notably Korean makes, really accelerating the rate of improvement. Leading companies are not only stepping up the pace of improvements on existing models, but are also working up front to launch vehicles with higher quality and more intuitive designs."
The study takes a look at problems experienced by vehicle owners during the first 90 days of ownership, and initial quality is determined by the number of problems experienced per 100 vehicles (PP100), with a lower score reflecting higher quality.
The industry as a whole enjoyed a 3 percent year-over-year increase in initial quality, bringing the average to 112 PP100, compared to 116 last year.
Porsche once again ranked the highest in initial quality for the third year in a row with a score of 80 PP100, which marks a 20 point improvement from last year.
Kia, one of the Korean brands cited that is improving, came next with a score of 86 PP100. J.D. Power pointed out this is the first time in the study's history that Kia came out on top for non-premium makes.
Jaguar (93 PP100), Hyundai (95 PP100) and Infiniti (97 PP100) rounded out the top five nameplates.
Infiniti is also one of the most improved brands this year, as it lowered its problem score by 33 points from 2014.
Korean Brands Gaining Steam
There were definitely a few shakeups in the study this year, namely the shift between Korean and Japanese brands.
Korean brands led the industry in quality by the widest margin even, said J.D. Power, with an average of 90 PP100. This is up 11 points from 2014.
Interestingly, as the Japanese brands experience some difficulty due to the recent Takata airbag recalls,  for the first time in the study, European brands surpassed Japanese brands in quality with a score or 113 PP100. Japanese brands were given a score of 114 PP100, equal with domestic nameplates.
"Although Japanese brands overall experience a 2 PP100 improvement from 2014, this has proven insufficient to keep pace with the industry, causing Japanese makes overall to fall below industry average for the first time in the 29-year history of the U.S. Initial Quality Study," J.D. Power reported.
In fact, only four of the 10 Japanese brands included in the study posted an improvement.
Problem Spots for Quality
According to the study, technology continues be a trouble spot for the industry in terms of quality.
For the third year in a row, entertainment and connectivity systems are the most problem-prone areas. And voice recognition and Bluetooth pairing present the most issues.
In fact, for the majority of the models in the study that have voice recognition systems, that tacks another 10 PP100 for those models related to that feature.
"Smartphones have set high consumer expectations of how well technology should work, and automakers are struggling to match that success in their new vehicles," said Stephens. "However, we are seeing some OEMs make important improvements along the way. What's clear is that they can't afford to wait for the next generation of models to launch before making important updates to these systems."
Following is the full breakdown of model awards from the 2015 J.D. Power Initial Quality Study:
General Motors
   Chevrolet Equinox (tie)
    Chevrolet Malibu
    Chevrolet Silverado 1500
    Chevrolet Spark
Hyundai Motor Co.
    Hyundai Accent
    Hyundai Tucson
    Kia Sorento
    Kia Soul
Nissan Motor Co.
    Infiniti QX70
    Infiniti QX80
    Nissan Sentra
    Nissan Quest
Volkswagen AG
    Audi Q3
    Porsche 911
    Porsche Boxster
    Porsche Macan
BMW
    BMW 2 Series
    BMW 4 Series
    BWM 5 Series
Toyota Motor Corp.
    Lexus LS
    Toyota Tacoma
    Toyota Sequoia
Fiat Chrysler Automobiles
   Chrysler 300
   Dodge Challenger
Ford Motor Co.
    Ford Escape (tie)
    Ford F-Series Super Duty
Mazda
    Mazda MX-5 Miata

Korean Brands Widen Quality Gap Between Automkers................. www.redlineautosales.ca/korean-brands--widen--quality-gap-between-automakers.htm

 20 Used Cars with Most Price Movement at Auction

The latest Blue Book Market Report breaks down the top 10 and bottom 10 performing models in May, based on Kelley Blue Book Auction Values on model-year 2012 through 2014 vehicles.
Starting at the top, the vehicle with the most positive movement during the month was the Mitsubishi Eclipse, whose values went up 3.7 percent over the four-week period. It was followed by the Ford E-350 Super Duty Passenger, with a 2.9-percent gain.
The complete top 10 performing models in KBB's data set is below, with four-week increase in parenthesis:
Mitsubishi Eclipse (3.7 percent)
Ford E-350 Super Duty Passenger (2.9 percent)
Cadillac ATS (2.8 percent)
Chevrolet Colorado Crew Cab (2.7 percent)
Mazda CX-7 (2.5 percent)
Chevrolet Silverado 1500 Extended Cab (2.2 percent)
Ford F-150 Super Cab (2.2 percent)
Toyota Tundra Double Cab 2.2 (percent)
Porsche Boxster (2.1 percent)
GMC Sierra 1500 Extended Cab (2.0 percent)
Conversely, the Nissan LEAF had the biggest drop in auction value at 8.1 percent, followed by the Kia Rio at 6.1 percent.
The full list of the 10 biggest declines are listed below, with percentage decline in parenthesis, again provided by KBB:
Nissan LEAF (8.1 percent)
Kia Rio (6.1 percent)
Chevrolet Spark (4.7 percent)
Lexus CT (4.5 percent)
Chevrolet Sonic (4.3 percent)
Mitsubishi i-MiEV (4.3 percent)
Smart fortwo (4.1 percent)
Ford Fusion (4.1 percent)
Hyundai Elantra (4.1 percent)
Hyundai Accent (4.1 percent)

20 Used Cars with Most Price Movement at Auction........................... www.redlineautosales.ca/20-used-cars-with-most-price-movement-at-auction.htm

New-Vehicle Leasing Tops 31%

By Auto Remarketing

New vehicles are leaving franchised dealership showrooms with lease contracts at a pace never previously seen by Experian Automotive.
According to the latest State of the Automotive Finance Market report, analysts reported on Monday that leasing continued to increase in popularity during the first quarter, jumping from 30.22 percent of all new vehicles financed in Q1 2014 to a record high of 31.46 percent in Q1 2015.

During the same time period, the average monthly lease payment dropped to $405, down from $412 the previous year.
Furthermore, leasing credit loosened, as the average new vehicle lessee had a credit score of 718 in Q1 2015, down from 721 the previous year.
But if the delivery isn't associated with a lease lasting 36 months or less and buyers keep their vehicles for the duration of the installment contract, dealerships and finance companies likely won't see these consumers again for another purchase until 2020 or possibly beyond - an assertion stemming from the record-setting term metrics Experian also reported on Monday.
Analysts determined longer-term loans for both new and used vehicles are on the rise. The average loan term for new and used vehicles originated during the first-quarter increased by one month, reaching new all-time highs of 67 and 62 months, respectively.
Findings from the report also showed that longer loans - those contracts with terms lasting 73 to 84 months - accounted for a record-setting 29.5 percent of all new vehicles financed, marking an 18.6-percent rise above Q1 2014 and the highest percentage on record since Experian began publically tracking this data in 2006.
Long-term used-vehicle loans also broke records, with loan terms of 73 to 84 months, reaching 16 percent in Q1 2015, rising from 12.94 percent the previous year - also the highest on record.
"Most longer-term loans help consumers keep monthly payments manageable, while allowing them to purchase the vehicles they need without having to break the bank," Zabritski said. "However, it is critical for consumers to understand that if they take a long-term loan, they need to keep the car longer or could face negative equity should they choose to trade it in after only a few years."
Experian pointed out the average amount financed and the average monthly payment for a new vehicle also increased to record heights.
The average new-vehicle loan was $28,711 in Q1 2015, compared to $27,612 in Q1 2014. The average monthly payment for new vehicles also rose, moving from $474 in Q1 2014 to $488 in Q1 2015.
After dissecting all of the leasing and installment contract data, Zabritski said, "Increases in vehicle financing are signs of a strong automotive market.
"By gaining a deeper understanding of current financing trends, lenders are able to stay competitive and better meet the needs of the marketplace, while consumers can use the data to become more educated on the different vehicle financing options and make a more informed purchasing decision," she went on to say.
Zabritski mentioned a trio of other findings from Experian's latest report, including:
- The average credit score for a new-vehicle loan dropped slightly, going from 714 in Q1 2014 to 713 in Q1 2015. The average used vehicle score moved slightly higher, from 641 in Q1 2014 to 643 in Q1 2015.
- The average used-vehicle loan was $18,213 in Q4 2015, up from $17,927 in Q4 2014.
- The average interest rate for new vehicles was 4.71 percent in Q1 2015, up from 4.54 percent in Q1 2014. Similarly, the average interest rate for used vehicles increased from 9.01 percent in Q1 2014 to 9.17 percent in Q1 2015.

New Vehicle Leasing Tops 31%..................................................................................... www.redlineautosales.ca/new-vehicle-leasing-tops-31-.htm

New President is Named for Audi Canada

By Auto Remarketing Canada

AJAX, Ontario - 

Audi Canada announced today it has a new president.
Chosen for the position is Daniel Weissland, who will start in his new role on Aug. 1.
The company explained Weisslan will be succeeding Wolfgang Hoffman as president, who has completed his three-year foreign assignment.
Weissland is currently the sales director for Southern Europe and is based in Ingolstadt, Germany. He has been in this position since 2011.

Daniel Weissland, Audi Canada

Weissland first joined the automaker in 1999 and has held increasingly progressive roles within the company since joining.
These include the areas of sales, marketing, network development and product management.
 Previous experience includes being part of the team that founded the National Sales Co. in Dubai.

New President is Named for Audi Canada........................................................... www.redlineautosales.ca/new-president-is-named-for-audi-canada.htm

84-Month Loans Focus of New Black Book Analysis

by Auto Remarketing:
Black Book Lender Solutions wanted to give the industry analysis and information so dealerships and finance companies can handle the latest origination challenge.
A potential buyer has a family budget cap for a monthly payment of roughly $400, but those stipulations demand that the vehicle installment contract term stretch to 84 months to get the unit delivered.
On Friday, Black Book made its latest white paper available that's appropriately titled, Collateral Insight Critical to 84-Month Auto Loans. Barrett Teague, Black Book's vice president of lender solutions, told SubPrime Auto Finance News that 10 years ago, a term of "84 months was really not a topic of conversation."
What Teague described as "specialty shops" handled the longest term loans that usually peaked at 75 months and were reserved for "pristine" customers.
Now with terms stretching to 84 months moving from talk at industry conference networking sessions to contracts connected to metal on the street, Teague insisted Black Book "addressed something we don't feel is being addressed very often in the marketplace today when it comes to those longer-term vehicles."
Of course, it doesn't take a seasoned finance company executive to realize the risk increases the longer the term is. Black Book outlined in the white paper four considerations when determining risk levels, including
? LTV ratio
? Rate of vehicle depreciation
? Credit profile
? Risk adjusted return on capital
"This kind of analysis will help the lender review the loan deals from a whole-lifetime-analysis perspective so they can optimize their risk and return for that portfolio while at the same time meeting their customer needs," said Anil Goyal, Black Book's vice president of automotive valuation and analytics.
Goyal and his team gathered the data and found not only a variety of vehicle depreciation trends from Black Book's own resources, but also referenced material from government outlets as well as Experian Automotive.
As elaborate as all of the data points can possibly be, Black Book boiled down one crucial component that might be one of the most important triggers of the rise of 84-month contracts. According to the U.S. Census Bureau, from 2007 through 2012, household incomes rose just 1.6 percent from an average of $48,729 to $49,486.
However, during that same time, the average price of a 2- to 6-year-old vehicle rose 24.9 percent from an average of $11,160 to $13,949, according to Black Book vehicle valuation data.
"It becomes very apparent there's not a lot more household income to spend on vehicles, yet the consumer is spending more each month on that. That's really the driving the consumer need on the longer-term loans," Teague said.
In light of consumer demand, Goyal explained that captives, banks, credit unions and even buy-here, pay-here dealerships with related finance companies might ask themselves as series of questions when deciding how far they want to stretch terms to meet consumer demand.
"How much longer are you going to keep that vehicle in a negative equity situation, which is going to increase that severity of risk?" he said. "What is the value today? How much loan do you want to lend? When is that loan going to turn around into a more positive situation? How is that collateral going to perform? What are the depreciation trends?
"Analysis of collateral values becomes very important," Goyal continued in Friday's conversation with SubPrime Auto Finance News.
Teague pointed out that some finance companies are looking to leverage the possibilities of longer terms to increase potential profitability. Because interest rates are low for consumers with strong credit background, Teague noted shorter terms aren't allowing for an extended window for the portfolio to blossom.
"Instead of just increasing the risk based on credit score alone, that there is an opportunity based on the term that's out there," Teague said.
But as Black Book also mentions in the white paper, longer terms create a potential sour consumer situation down the road depending on how long the buyers wants to keep that vehicle.
"There is always a place for longer-term loans. There is a customer out there who would really benefit," Goyal said. "If that customer is intending to keep that vehicle for seven to eight years and not looking to come back to the dealership in three to four years, this is an ideal loan for them. But if that customer is looking to come back in three years, they're going to find that they don't have much value for that trade-in, and it's going to be a difficult conversation when they come back.
"I think it's important for the industry to recognize that there is a place but it depends on how you target them ? making sure you're addressing the right segment for that customer and getting them into the right vehicle that makes sense for this longer-term loan.

84 Month Loans Focus of New Black Book Analysis................................. www.redlineautosales.ca/84-month-loans-focus-of-new-black-book-analysis.htm

Regulatory Concerns For Ontario Dealers

by: Remarketing Canada

Ontario's all-in pricing regulation is still causing trouble for dealers, and the issue is top-of-mind for Ontario Motor Vehicle Industry Council management.
In fact, the organization put out another bulletin on the issue just this spring, reminding dealers "there can be no hidden fees; no surprises."
And to get a handle on the top regulatory issues facing dealers today, Auto Remarketing Canada caught up with Michael Rothe, director of legal services at OMVIC, at the recent Auto Remarketing Canada Conference in Toronto.
Not surprisingly, perhaps, Rothe said all-in pricing should be No. 1 in dealers' minds when it comes to regulations, and issues with negative equity and subprime financing are a close second.
"All-in pricing continues to be an issue, and it really requires the industry to work with the regulator because we don't want to race toward the lowest common denominator," said Rothe.
With the exception of the harmonized sales tax (HST) and licensing cost - which can be excluded is the advertisement indicates as such - the price advertised should be the price a customer can expect to pay, without any surprises.
Examples of fees or charges that must be included in an advertised price include:

• Freight
• PDI-PDE (pre-delivery inspection/expense)
• Administration (Admin) fee(s)
• Government levies (air tax, etc.)
• OMVIC fee
• Safety and e-test (unless the ad contains a mandated "Unfit Vehicle" or "As-Is Vehicle" statement)

Dealers must also include fees they intend to charge for products or services they have pre-installed on a vehicle, including warranties, tire protection packages and more.
"If everyone is secure with the rule, it creates a more level playing field, and I think is better for the industry overall, not just consumers," Rothe said.
If dealers already have all-in pricing down, Rothe cited a few financing concerns that may cause some trouble in the future.
"The second most important issue is financing," said Rothe, "and by that I mean subprime financing, negative equity and loan duration."
Since the recession and the leasing fall-off, loan terms have been getting consistently longer. And Rothe explained the issue is not in a vacuum - and the auto industry isn't the only business on this trajectory.
"Again, it is very difficult issue and some ways a more difficult one, because it's not just an automotive sector. You also have the banks, insurance companies, and other sectors impacting it, so it's not just OMVIC coming up with a solution to that end," Rothe said.
OMVIC has reached out to various banking regulators on a provincial and national level to try and craft a "holistic" solution to the financing issue.
"But again, these things take time, and this is a fast developing issue," said Rothe, and one that the industry, and country, have to work together to solve.
In the automotive business the long duration of vehicle loans have the potential of cannibalizing future sales.
"With extremely lengthy loan terms, dealers are padding their bottom line today at the expense of their bottom line down the road," Rothe concluded.

Regulatory Concerns for Ontario Dealers........................................................ www.redlineautosales.ca/regulatory-concerns-for-ontario-dealers.htm