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KBB Announces 2017 Best Buy Awards


IRVINE, Calif. — Kelley Blue Book today announced the winners of its 2017 Kelley Blue Book Best Buy Awards. The 2017 Honda Civic was named the Overall Best Buy of 2017, however, 11 other vehicles also took top honors for their respective categories.

“Kelley Blue Book editors went to the unprecedented choice of honoring the Honda Civic as the Overall Best Buy for the second year in a row because of the Civic’s unsurpassed all-around value,” said Jack R. Nerad, executive editorial director and executive market analyst for KBB.com. “It turns in very high marks in objective measures like resale value and cost to own, yet it also is a supremely satisfying car to drive and live with every day.”

Overall, the Honda brand took home four awards, with its new Civic also winning in the small car category. The Honda Accord and Pilot also won in the mid-size car and mid-size SUV/crossover categories, respectively.

The Chevrolet brand received the second-most Best Buy awards, with its Impala winning in the full-size car category and the automaker’s Tahoe winning in the full-size SUV/crossover category.

The 2017 Audi A4 was named the Best Buy in the luxury car segment, while the 2017 Porsche 718 Boxster took top honors in the sports/performance car segment. The best electric/hybrid was the 2017 Toyota Prius Prime.

In the small SUV/ crossover category, the 2017 Kia Sportage emerged as KBB’s Best Buy. In the luxury SUV/ crossover category, the 2017 Mercedes-Benz GLC was honored with the top award. And for the third year in a row, Ford’s F-150 received KBB’s Best Buy award.

Lastly, the 2017 Chrysler Pacifica received the best buy award for the minivan category.

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VW Will Cut Spending By $1 Billion, Launch All-Electric Phaeton in EV push


MUNICH — Volkswagen Group said it will reduce investment spending at the VW brand by 1 billion euros ($1.1 billion) a year, as well as switch to a different diesel emissions treatment technology and launch an all-electric Phaeton sedan as the flagship for a new focus on electrification, reports Automotive News.

VW will increase its focus on long range plug-in hybrids and high-volume electric vehicles with a range of up to 300 km (186 miles), the company said in a statement today. The automaker also said it will speed up cost cuts and will overhaul the VW brand model strategy.

“The Volkswagen brand is repositioning itself for the future. We are becoming more efficient. We are giving our product range and our core technologies a new focus,” VW brand chief Herbert Diess said in the statement.

Diess said the brand will create room for forward-looking technologies by speeding up an efficiency program that targeted 5 billion euros in savings and operational improvements by 2017.

VW will cut spending on models, technology and production facilities at the VW brand by 1 billion euros a year through 2019 from its previous plans, a spokesman said. He declined to say what those investment plans had been.

Audi, Porsche to seek savings

In November, VW announced 85.6 billion euros of investments across the group between 2015 and 2019, with half earmarked for modernizing and expanding the model range.

Other brands in the group, which includes Audi, Porsche, Seat and Skoda, are working on similar efficiency-boosting programs, the spokesman said, without giving details.

Audi, the biggest earnings contributor at VW Group, is continuing an efficiency program that started before the diesel scandal hit, spokesman Juergen de Graeve said. The luxury-car unit planned last year to rein in annual costs by about 2 billion euros to offset spending on new technology, according to people familiar with the matter.

Pushed by Diess, who joined in July from BMW, VW will adopt diesel technology it previously eschewed for smaller models. The brand is now moving to the “best environmental technology” for its diesel cars, the statement said.

VW said it has decided to switch over to installing only diesel drivetrains with selective catalytic reduction (SCR) and AdBlue technology in Europe and North America “as soon as possible.”

VW engines affected by the diesel emissions rigging scandal used lean NOx traps to reduce nitrogen oxides emissions rather than the more expensive urea-based SCR and AdBlue systems. The tanks make diesel models heavier and more expensive, and they also must be refilled, making the cars less convenient to own.

Electric architecture

With diesel technology under pressure, VW plans to develop standardized components for electric vehicles with ranges as far as 500 km (310 miles).

VW said it will develop a new modular electric architecture dubbed MEB for compact vehicles for all group brands. The architecture will be designed for all body structures and vehicle types. It would allow the development of “particularly emotional vehicle concepts” and an all-electric range of 250 km to 500 km, the statement said.

At the Frankfurt auto show last month, VW said it would launch 20 battery-powered and plug-in hybrid vehicles by the end of the decade, including the first all-electric Porsche based on the Mission E concept and a production version of Audi’s e-tron Quattro concept.

The shift includes redesigning the Phaeton as an all-electric model. The current model’s gasoline and diesel versions will be axed. The next-generation Phaeton is due to hit showrooms by about 2019-2020.

“There is a real chance for VW to even extract something positive from the diesel fiasco,” said Stefan Bratzel, head of the Center of Automotive Management near Cologne. “Funneling more resources into electric mobility gives them a credible future perspective to try to overcome this crisis.”

The VW brand is likely to slump to a loss this year as it will shoulder the bulk of costs from the diesel emissions cheating that also affected the Audi, Skoda, Seat and light commercial vehicle brands, Reuters reported on Friday.

Supplier cuts

VW wants to extract 3 billion euros ($3.41 billion) in price cuts from its suppliers to help mitigate the costs of the emissions scandal, German newspaper Handelsblatt reported.

The measure would be part of a broader cost-cutting program including pay, marketing and sponsoring activities to help VW bear an estimated 40 billion euros in costs of the scandal, the paper reported, citing company sources.

The cuts come amid renewed criticism for Volkswagen’s handling of the scandal, which affects some 11 million cars worldwide. The company was far too slow to disclose its use of software to enable its diesel cars to pass U.S. laboratory emissions tests despite far higher on-road pollution, said Stephan Weil, prime minister of the German state of Lower Saxony and a VW board member.

“This admission should clearly have come much sooner — a further serious mistake,” Weil told the Lower Saxony parliament today. “Who decided this course of action and when is also something that’s being investigated.”

A VW supervisory board committee charged with overseeing the external investigation into the emissions cheating was meeting today in Wolfsburg.

VW presented German authorities with a plan last week for fixing affected cars in its home market. Regulators are still reviewing the proposals, which range from a software update to new parts for diesel engines.

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Leases Entice Drivers to Upgrade Cars as Often as IPhones


When Adam Gilgis leased a Volkswagen GTI this month, he had one goal: a low monthly payment, reported Bloomberg.

“We pay $320, which is perfect,” said the 35-year-old Chicago attorney. “If we finance the car, we’re paying thousands of dollars more over the course of several years.”

Auto leasing is back in a big way as automakers including Volkswagen AG and General Motors Co. pull back on discounts and rebates and entice Americans with ads promising cheap leases instead. So far this year, leases have accounted for about 27.7 percent of new-auto sales, according to Edmunds.com, the highest rate in years. Buyers like Gilgis shun long-term loans associated with outright purchases because increasingly they see cars as smartphone-like gadgets to be upgraded every few years.

“Like an iPhone, one can get a new vehicle with all the new technology and have a similar payment as before,” said Jessica Caldwell, an analyst for auto researcher Edmunds.com.

The recent surge in leasing is helping power U.S. auto sales, which are headed for the biggest year since 2007, when 16.15 million vehicles were sold. In June, five of the top six automakers beat analysts’ sales estimates. Lenders’ willingness to offer loans that stretch as long as eight years also is boosting sales. Terms of 73 to 84 months accounted for 24.9 percent of all sales in the first quarter, according to data from data services group Experian Automotive.

Once Tacky

Leasing was once considered tacky and financially frivolous, letting posers drive cars they could ill afford.

“Thirty years ago, if you rolled up next to someone riding in a BMW or a Porsche and you said ‘that car is leased,’ it was one of the biggest insults you could throw at someone,” said Mark Wakefield, a managing director at AlixPartners LLP. “Now, you’d say, ‘Yeah? So, what?’”

Attitudes began changing in the late-1990s, when mainstream buyers began leasing family sedans from Honda Motor Co. and Toyota Motor Corp. Now, with the economy improving and the financial crisis receding in the rear-view mirror, leasing is gaining traction once again. Automakers and banks are piling in because they’re betting that a robust used-car market means leased vehicles will hold their value after they’re returned. The higher the “residual value,” the less the car depreciates during the lease and the less consumers pay per month.

Drivers often weigh the cost of leasing versus taking out a loan and buying a car. With a 20-percent down payment on a Toyota Camry SE priced at $23,740, a 60-month loan costs an average of $341 per month compared with $207 for a 36-month lease, according to a TrueCar analysis.

Kia Sorento

Non-luxury buyers are leasing at a pace not seen since the late 1990s. Advertising consultant Drew Ament and his wife leased a Kia Sorento for $450 a month for 36 months in February.

“It’s good for me knowing that the lease gives her peace of mind,” said Ament, who lives in Phoenix. “I’m a guy who will get a car and then drive it until it’s dead. I have a Chevy Silverado right now that I’ll probably have until it’s done. My wife can’t do that. So, I pretty much give her a budget each month, and if it’s under that budget, then go for it. And she gets the most for her money.”

He’d rather not have a monthly payment, but considers it worthwhile to ensure his wife and children have a new vehicle that’s safe to drive.

“It’ll be nice maybe a couple leases from now to not have to lease a three-row SUV once the kids move out,” Ament said.

Auto leasing is a hotly debated topic. Consumer Reports has long said buyers are better off paying cash for a new car or taking out a short-term loan.

Hidden Fees

While leasing offers lower monthly payments and repair costs than buying new or used, Edmunds warns on its website that leasing vehicles is more expensive over the long run than buying a car and keeping it. The research firm also says lease contracts can be hard to understand and include hidden fees, including maintenance and damage charges. Simply exceeding the lease’s mileage limits, typically 12,000 miles per year, can cost a driver thousands of dollars.

Leasing also “puts you on a treadmill to buy a new car over and over every few years with no end in sight,” said Anthony Giorgianni, an associate editor at Consumer Reports. “Leasing is just a bad way to purchase a new car unless you’re a really wealthy individual and you just don’t care about costs. Otherwise, it’s smoke and mirrors.”

Jessica Caswell, communications manager at VSP Vision Care in Sacramento, California, said that when she leased a new Honda Civic she didn’t realize insurers often charge higher premiums and fees for leased vehicles.

Significant Sum

“It’s a significant amount of money, and you don’t really know about it when you sign the lease,” Caswell said.

She said she may buy the car once the lease is up.

Kevin Tynan, a Bloomberg Industries auto analyst, calls leases “the new incentive.” The question, he said, is how long can U.S. automakers rely on them to fuel sales.

Tynan said that when millions of previously leased vehicles end up on used car lots at cheap prices, it might make less sense for consumers to buy or lease a new vehicle.

“I think we’re about 36 months out from a period where pre-owned makes more economic sense for the average buyer,” he said. “New vehicle demand could flatten for a period beginning in 2017-18 as we work through all these off-lease autos.”

Long-term loans also could crimp sales because people don’t buy new cars when they are paying off the one they own. To ensure that doesn’t happen, dealers will have to get creative with their come-ons, said Larry Dominique, the president of TrueCar Inc., an online auto-buying service.

“It’s a bit easier with lessees since they tend to be customers who like new cars every couple of years, so you’d hope they’d be back,” he said. “But how can you build loyalty with those who buy their cars so that they’ll come back seven, eight years later? It’s challenging.”

One way to build loyalty is through giveaways and promotions, including free car washes, Dominique said.

“I’ve even gotten an offer to attend a free wine and hors d’oeuvres tasting at a dealership,” he said. “It’s coming up with things like that to engage customers that’s important.”

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Dealership Buy/Sell Activity Jumps 60% in Q1


Irvine, CA — Kerrigan Advisors, a firm specializing in serving dealership sellers, released its quarterly report on dealership buy/sell activity in the U.S. Market. It found that such activity increased dramatically in the first quarter.

Laying out the high, average and low multiples for each franchise in the luxury and non-luxury segments for the quarter, the Kerrigan Quarterly Blue Sky Report offers a detailed view of public and private company dealership acquisition activity. In addition to the sharp spike in selling, the report found that that blue sky pricing remains high for most franchises and that the market has established a pricing floor.

“As anticipated, an increase in the number of sellers coming to market has led to a major uptick in buy/sell activity,” said Erin Kerrigan, founder and managing director of Kerrigan Advisors. “We attribute this to high blue sky prices, buyer demand for dealerships and a slowdown in dealership profit growth, meaning sellers are concerned about missing the market and want to ensure they exit on top.

“Private companies continued to dominate the market in quarter one, although public company activity rose slightly during the quarter and will likely continue to pick up after the announcement of Lithia’s acquisition of DCH,” she added. “The publics, however, are being very disciplined with their capital allocation. If they believe the better investment is their own stock, they are choosing a stock buyback over an acquisition. In the first quarter, collectively, they chose to spend 70% more on their own stock than on U.S. acquisitions.”

The firm found that buy/sell activity increased 60% in the first quarter and that more sellers are coming to market to capitalize on high blue sky values that may fade as earning growth slows. Blue sky values remain at elevated levels as dealership earnings continue to grow, albeit more slowly; and multiples remain high or reach higher levels.

The multiples for Honda, Toyota, BMW, Mercedes, Lexus and Porsche have increased since 2013, the report noted. As competition for auto retail market share heats up, buyers are placing an even higher premium on these franchises. And with the average dealership earning an annual 28% return on equity, few dealers are willing to sell their franchises for less than a 3x blue sky multiple in today’s market.

“While the future continues to look rosy for dealership acquisitions, we will likely start to see some negative shifts as increasing competition for car sales brings blue sky winners and losers,” Kerrigan concluded.

To read the full report, click here.

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VW Quarterly Profit Beats Estimates on Porsche Deliveries


Via Bloomberg

Volkswagen AG, Europe’s largest automaker, said first-quarter operating profit rose 22 percent, helped by record sales at the luxury Porsche and Audi brands.

Earnings before interest and taxes increased to 2.86 billion euros ($3.97 billion) from 2.34 billion euros a year earlier, the Wolfsburg, Germany-based manufacturer said in a statement today. Profit beat the 2.74 billion-euro average of nine analyst estimates compiled by Bloomberg. Revenue gained 2.7 percent to 47.8 billion euros.

VW said last month that its annual sales may exceed 10 million vehicles for the first time in 2014, four years earlier than planned. That includes deliveries by MAN SE and Scania AB, the truck divisions in which VW is seeking full ownership. Those takeovers, and plans to introduce 100 new or revamped cars through next year, are part of a strategy to overtake Toyota Motor Corp. as the global leader in auto sales by 2018.

“From a strategic point of view, the product and brand position of Volkswagen AG is the envy of the industry,” said Roman Mathyssek, a Munich-based analyst at consulting company Strategy Engineers GmbH. “They still have potential to improve further in terms of products, costs and market presence in the years to come.”

Still Counting

The German carmaker said it’s still tallying the shares that investors have pledged in the company’s 6.7 billion-euro tender for full ownership of Scania. The offer expired April 25. Volkswagen said it plans to publish the results soon.

VW already controls 62.6 percent of Scania’s capital via direct and indirect holdings, and it’s offering 200 kronor a share for the rest of the Soedertaelje, Sweden-based company. That’s 36 percent more than the truckmaker’s closing price before the bid was announced in February.

Volkswagen fell as much as 1.3 percent and was trading down 0.2 percent at 194.15 euros at 3:04 p.m. in Frankfurt. The shares have dropped 4.8 percent this year, valuing VW at 89.6 billion euros.

“The situation with Scania causes some uncertainty,” said Frank Schwope, a Hanover, Germany-based analyst at NordLB.

First-quarter operating profit at Porsche jumped 22 percent to 698 million euros, while earnings at the Audi premium division, the biggest contributor to group profit, increased 0.5 percent to 1.31 billion euros, Volkswagen said.

Models that Volkswagen is bringing out by the end of 2015 include new versions of the midsize VW Passat sedan and Audi A4. Among the fresh sport-utility vehicles are Audi’s Q7 and a new plug-in hybrid version of Porsche’s Cayenne.

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Ford, Chevy and Toyota Lead the Way in Edmunds.com’s Inaugural Most Popular Vehicle Awards


Santa Monica, Calif. – Ford, Chevrolet and Toyota are the most decorated brands among a diverse selection of new cars and trucks that earned the 2014 Most Popular on Edmunds.com Awards. The inaugural awards were presented by the car shopping Web site at the 2014 New York International Auto Show.

Ford has the strongest representation of any brand recognized by the Most Popular on Edmunds.com awards, with 10 winning vehicles. Highlights include the Ford F-150, which was named one of the 2014 Most Popular on Large Trucks; and Ford Mustang, which was named one of the 2014 Most Popular on Entry Sport Cars.

Chevy and Toyota each earned seven awards. Highlights include the Chevy Colorado, which was named one of the 2014 Most Popular on Compact Trucks; and the Toyota Camry, which was named one of the 2014 Most Popular on Midsize Sedans.

Acura, Audi, BMW, Cadillac, Dodge, GMC, Honda, Infiniti, Jaguar, Jeep, Kia, Lamborghini, Land Rover, Lexus, Mazda, Mercedes-Benz, MINI, Nissan, Porsche and Tesla also were honored in a range of categories.

“Edmunds.com is in a unique position not only to offer independent and trusted reviews of every vehicle on the market, but also to see firsthand which cars and trucks most pique the interest of shoppers on our site,” said Seth Berkowitz, president, Edmunds.com. “By naming these award-winning vehicles, we hope that car shoppers have an easier time evaluating some of the excellent choices available on the market today.”

The 2014 Most Popular on Edmunds.com awards were determined by finding the three models in each of 23 vehicle segments with the highest total monthly car-shopper consideration in calendar year 2013. “Consideration” means the number of unique visitors during a calendar month to the research and inventory pages on Edmunds.com desktop site for each new model.

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