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2018 NIADA/NABD Convention Recap

Posted 6:00 PM by

Note: This article originally appeared in The Showroom.

This past June, a record number of attendees descended upon Orlando’s Rosen Shingle Creek Resort for the combined National Independent Automobile Dealers Association (NIADA) / National Alliance of Buy Here, Pay Here Dealers (NABD) Convention & Expo. Consistent with prior conventions, the NIADA set out to fuse best practice counseling with emerging topic coverage for the used car industry, including the BHPH sector. Below are some key takeaways from the event.

Tax Cuts and Jobs Act

Tax reform resulting from the passage of the Tax Cuts and Jobs Act was at the forefront of conversation throughout the convention. Tax professionals, including KSM’s Kevin Sullivan, discussed the impact of tax reform specific to the auto dealer industry. Although the new tax law contains many changes and new concepts compared to previous tax law, there are still numerous questions that the law itself does not clearly address. Relevant issues for dealers to consider include choice of entity (S corporation vs. C corporation), the 20 percent qualified business income (QBI) deduction, bonus depreciation, and the impact on Lease Here - Pay Here businesses.

Generally Accepted Accounting Principles Changes

There are two new accounting standards changes on the horizon which will impact a dealer’s financial statements prepared in accordance with Generally Accepted Accounting Principles (GAAP). These new standards relate to accounting for leases and credit losses. For fiscal years beginning after Dec. 15, 2019, private company dealers will be required to put nearly all leases on their books, regardless of whether they have been treated as operating leases to date. Then, in 2021, dealers will be required to estimate the entire amount of current expected credit losses in their loan portfolio and book a corresponding provision for those expected losses. The effective dates of these new standards are quickly approaching, and the underlying impact could completely change financial statements and the way lenders view them. No matter what a dealer’s operation looks like, large or small, tax reform and accounting rule changes will impact the business. Owner-operators should consult a professional now to form a game plan.


A panel of well-known lenders to the used car and Buy Here - Pay Here (BHPH) space also spoke at the June convention to discuss the state of lending as well as to debunk some common misconceptions about a dealer’s credit line. The industry has undoubtedly witnessed a pull-back of available credit since 2013, especially to BHPH dealers. Lenders insist they are still originating new deals and emphasized that everyone with success or an achievable business plan can find lending, however, some credit may take the form of a nontraditional deal for some time. The panel also addressed the concern with advance rates. Advance rates are set not only for a banker’s risk appetite, but also to help an owner-operator manage growth carefully. More funds advanced potentially mean a tendency toward higher customer acceptance rate (lower quality), charge-off pressure down the road, and riskier bankability. Dealers should work with their lenders to understand their advance rates and ensure they align with healthy growth.

Economic Outlook

The convention also featured a panel of economists, ranging from large auto dealers to credit reporting agencies, who provided their assessment of the state of the economy and five-year outlook. The group discussed the increasing consumer demand for small SUVs and crossovers, which will impact pricing and availability of used vehicles. Oil was another anticipated topic, which received varying outlooks. Generally, most economists predict a moderate, but manageable, rise in oil prices over the next several years with the U.S. production ramp-up creating more worldwide production, which should mitigate some price setting. Each panelist also predicted when we will experience the next downturn, with predictions ranging from two to three years. Their forecasts of early indicators include 50-year low unemployment rates, the Department of the Treasury yield curve flattening, and consumers re-leveraging beginning to show. Subprime and deep subprime defaults have also been increasing year-over-year, which could result in a contraction by traditional competitive lending sources that have expanded into these areas in recent years. BHPH dealers have been waiting for the subprime pendulum to swing back to the more normal playing field. It appears that process may finally be underway.

About the Author
JP Bryan is a director in KSM’s Audit and Assurance Services Group. JP works with clients to help ensure accurate financial reporting and verify that strong and efficient control structures are in place across their financial processes. Connect with him on LinkedIn.

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