FTC has dealers in crosshairs, F&I profits dip, Aug. auto sales surge

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Each week, I curate the top 5 automotive industry headlines based on the topics CDG readers engaged with the most on social media. Let’s get started.

1. Aug. car sales to get boost thanks to Labor Day weekend

New car sales are set to climb this August, driven by stronger consumer demand and Labor Day deals.

By the numbers: August is on track to be one of the best sales months of the year, thanks to manufacturer incentives – up nearly 60% against last year – plus recovery from June’s CDK Global outage. 

• J.D. Power projects 1.44 million new vehicle sales, a 4.2% year-over-year increase, with retail sales up 6.8% to 1.21 million.

• Meanwhile, inventory is up 4.2% month-over-month from July, and higher incentives have lowered average transaction prices by 4.1% from August 2023. 

• While incentive drives up sales, they are cutting dealership profits, which are expected to drop by 26% year-over-year.

Bottom line: As incentives rise and a potential interest rate cut nears, the car market could see a fresh surge in sales to close out the year.

(Read the full article here)

Growing incentives will be crucial to the future of EV growth as well…

2. EV market outlook dims in the near term

J.D. Power has lowered its full 2024 and 2025 EV market share forecasts to address subdued sales growth in early 2024.

Driving the news: EVs are now expected to reach 9% of the market in 2024—down from 12%—which equals 1.2 million sales. By 2030, EVs are projected to hit 36% market share, climbing to 58% by 2035.

Why it matters: After years of surging EV sales, adoption is challenged by high prices, insurance costs, and public charging anxiety.

The good news: Tax incentives and lease deals are boosting EV affordability, with 28% of shoppers "very likely" to consider an EV—the highest this year.

Bottom line: The road to mass EV adoption is still uncertain. Incentives and new deals are driving momentum, but the next few years will reveal whether the market can truly overcome its hurdles.

(Read the full article here)

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A bright spot? Car buyers are not shying away from paying more for the right vehicle...

3. Why car buyers are maxing out their budgets

Big picture: A new study from CDK Global shows that most car buyers are stretching to the top of their budgets.

• Among those surveyed, 93% set a budget for their recent purchase, and 57% bought at the upper end of that range. 

• Only 36% stayed on the lower end, while 7% went over.

Why it matters: High vehicle prices and interest rates mean even base models come with hefty monthly payments. Consumers are paying more for upgraded features, driven by growing confidence in the economy and a slight uptick in vehicle affordability.

At the end of the day, car shoppers are price-sensitive but willing to spend more for the right features. Dealers are capitalizing on this by focusing on value and matching buyers with the vehicles that meet their priorities.

(Read the full article here)

As car buyers stretch their budgets to get the vehicles they want, the spotlight is now on dealerships, with the FTC having dealers in its crosshairs…

4. FTC targets 3 Asbury dealerships over 'payment packing'

The Federal Trade Commission (FTC) has joined a lawsuit alleging “payment packing” at three Texas dealerships owned by Asbury Automotive.

The details: The suit claims that unnecessary charges to increase prices without consumer consent were found at David McDavid Ford Fort Worth, David McDavid Honda Frisco, and David McDavid Honda Irving. The FTC also accuses them of discriminatory practices against Black and Latino buyers.

Zooming in: Asbury denies the allegations, stating that no consumer complaints were submitted to the FTC and that its internal investigation found no wrongdoing. CEO David Hult defended the company’s compliance practices, claiming Asbury protects its customers.

Big picture: This lawsuit is part of the FTC’s ongoing crackdown on the auto sector, following its push for the Combating Auto Retail Scams (CARS) rule to eliminate add-ons and fees—which is currently under court review after legal challenges.

(Read the full article here)

Declining finance and insurance (F&I) profits across public dealer groups add another layer of pressure on the industry's financial practices…

5. F&I profits tumble in Q2 across public dealer groups

Per-vehicle F&I gross profits fell year-over-year for all public dealership groups in Q2 due to widespread and brand-specific challenges.

Quick facts: Normalization is pushing F&I performance back to pre-pandemic levels, with each group facing varying degrees of decline. 

• AutoNation had the highest per-unit profit at $2,563, down 9% from 2023.

• Group 1 Automotive had the smallest decrease, losing 0.7% ($14) per vehicle.

• Penske Automotive earned the least at $1,810, including non-U.S. sales.

Zooming in: The CDK Global cyberattack disrupted dealership operations, contributing to weaker F&I results for Asbury and AutoNation. Higher interest rates and affordability challenges also weighed on profits. 

Looking ahead: Despite weaker overall earnings, F&I profits remain strong compared to pre-pandemic years and could improve with better economic conditions. Lithia CEO Bryan DeBoer predicts gross profits per vehicle will stabilize between $4,200 and $4,500.

(Read the full article here)

That’s a wrap for now – make sure you’re following along on X, LinkedIn, and IG for more real-time updates.

Thanks for reading. Hit reply and let me know if you found this week-in-review valuable or have any feedback. I’ll see you next weekend.

—CDG

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