TRA - Turners Automotive Group [previously TNR - Turners Limited]

[Beagle]

Buy Right Cars Ltd profit margin of only 4.8% shows the vulnerability of this business to changing economic conditions. If sales slow and stock turn decreases and holding costs increase it doesn't take much of a change to wipe that margin out and remember this company is trading in benign trading conditions with good economic growth, a higher than average currency, generation low interest rates and record ever immigration level's. I've done more than a few sets of car dealers books over my 35 years of bean counting and can't recall off the top of my head seeing margins that slim before, (mind you these are privately owned companies with very statute owners). Its a VERY tough and competitive industry with multiple failures on a regular basis. To put this 4.8% margin in context this is considerably less than the margin AIR New Zealand operate on and we all know airlines are cyclical business's vulnerable to changing economic conditions which is why we stick with a PE of 10, (cyclical).

[winner69]

Buy Right Cars Ltd profit margin of only 4.8% shows the vulnerability of this business to changing economic conditions. If sales slow and stock turn decreases and holding costs increase it doesn't take much of a change to wipe that margin out and remember this company is trading in benign trading conditions with good economic growth, a higher than average currency, generation low interest rates and record ever immigration level's. I've done more than a few sets of car dealers books over my 35 years of bean counting and can't recall off the top of my head seeing margins that slim before, (mind you these are privately owned companies with very statute owners). Its a VERY tough and competitive industry with multiple failures on a regular basis. To put this 4.8% margin in context this is considerably less than the margin AIR New Zealand operate on and we all know airlines are cyclical business's vulnerable to changing economic conditions which is why we stick with a PE of 10, (cyclical).

Commentary on car loans / leases quickly becoming the next sub-prime in the US and UK along with words like securitisation sends shivers up my spine.

At least Turners aren't into new cars - maybe new car dealers and leasing companies are in the firing line.

[Beagle]

Commentary on car loans / leases quickly becoming the next sub-prime in the US and UK along with words like securitisation sends shivers up my spine.

At least Turners aren't into new cars - maybe new car dealers and leasing companies are in the firing line.

Worries me a bit that Heartland are financing various brands of new cars like new Holden's at the moment on 0% deposit 0% interest. Sure customers pay full retail and HBL get their kick out of it but the moment that brand new car is driven off the dealers yard it has depreciated by ~ 25% and the loan in underwater by a commensurate amount right from the outset. Guess one simply has to have faith in HBL's credit assessment processes and people's reluctance to have their shiny new car repossessed. Cheap and easy credit...always a concern...risk everywhere isn't there mate !

[percy]

My experience is very different,[no surprises there.!],good second hand car dealers enjoy fat profits,and those who joined together to form MTF,or started financing their own deals,went on to enjoy even fatter profits.
New car sales were a little different, as they were franchises,covered by the likes of Toyota and Ford, who were forever looking for market share.Meant slim profits on new cars,and dealers left trying to make money out of second hand car sales and parts.None ever seemed to make money in their service departments.Tractor sales also meant a lot of money tied up when farmers hid their wallets,which they often did.Being part of a franchise group, also meant opportunities for rolling out their business to other centres was limited.
The Turners model is the best I have ever seen,and easily scaled up.Property development,vehicle and equipment sales,finance and insurance.Total package.However I would not be surprised to see Turners try new cars too.They certainly have the channels to sell them.

[percy]

Worries me a bit that Heartland are financing various brands of new cars like new Holden's at the moment on 0% deposit 0% interest. Sure customers pay full retail and HBL get their kick out of it but the moment that brand new car is driven off the dealers yard it has depreciated by ~ 25% and the loan in underwater by a commensurate amount right from the outset. Guess one simply has to have faith in HBL's credit assessment processes and people's reluctance to have their shiny new car repossessed. Cheap and easy credit...always a concern...risk everywhere isn't there mate !

You went on about this two years ago on HBL thread and never took a bit of notice of my replies.
Do your research as I did.Contact HBL and find out the facts.,which show both BHL and TRA have very low bad debts on cars.Something under 1% of defaults.Safer than house mortgages.

ps.HBL divie coming just in time to be recycled via TRA's SPP.

[Beagle]

You went on about this two years ago on HBL thread and never took a bit of notice of my replies.
Do your research as I did.Contact HBL and find out the facts.,which show both BHL and TRA have very low bad debts on cars.Something under 1% of defaults.Safer than house mortgages.

ps.HBL divie coming just in time to be recycled via TRA's SPP.

Incorrect Percy I do recall your replies and you mentioning that very few cars are actually sold on no deposit. Happy to bring this up as a discussion point at the annual meeting to check and see how business performance is tracking now in regard to this sort of lending as well as bringing up the donation to National, (should make for a more interesting annual meeting)

[percy]

Incorrect Percy I do recall your replies and you mentioning that very few cars are actually sold on no deposit. Happy to bring this up as a discussion point at the annual meeting to check and see how business performance is tracking now in regard to this sort of lending as well as bringing up the donation to National, (should make for a more interesting annual meeting)

I look forward to the agm telecast...lol..
I know the answer to one question, and could not careless about the other....
If you are going to question directors over a matter,in this case a donation,under $100,000 ,in this case under $60,000 you really should question yourself whether you should be invested in the business or not.?
I like to question directors to get meaningful answers,ie how are their open for......products being received in Australia.? Will they open an Australian office, or keep running these open for.......products from NZ?.Are they receiving many applications for their higher rate mortgages?.Have they developed products for medical expenses loans via doctors or private hospitals.?
So don't waste your time on meaningless diversions,find out something useful, you can capitalise on.Unless you are like me and go to HBL presentations,and phone the CFO'CEO, you only get one chance to question directors,or speak to them a year at their agm.Don't waste it.

[Marilyn Munroe]

Worries me a bit that Heartland are financing various brands of new cars like new Holden's at the moment on 0% deposit 0% interest. Sure customers pay full retail and HBL get their kick out of it but the moment that brand new car is driven off the dealers yard it has depreciated by ~ 25% and the loan in underwater by a commensurate amount right from the outset. Guess one simply has to have faith in HBL's credit assessment processes and people's reluctance to have their shiny new car repossessed. Cheap and easy credit...always a concern...risk everywhere isn't there mate !

One of the things about life on the planet that puzzles me; Why do vehicle manufacturers and dealers cut their throats to do crazy financing deals rather than discount the sticker price for cash buyers?

One assumes that Heartland has recourse against Holden if a deal goes sour or are these deals are securitised with a discount to face value to compensate the bond holder for default risk?

Boop boop de do
Marilyn

PS. 0% down and 0% interest should attract ruthless defaulters like jackals to carrion.

[percy]

One of the things about life on the planet that puzzles me; Why do vehicle manufacturers and dealers cut their throats to do crazy financing deals rather than discount the sticker price for cash buyers?

One assumes that Heartland has recourse against Holden if a deal goes sour or are these deals are securitised with a discount to face value to compensate the bond holder for default risk?

Boop boop de do
Marilyn

PS. 0% down and 0% interest should attract ruthless defaulters like jackals to carrion.

No recourse.
Try going into a Holden dealer and walking out with a new car with no deposit.!
Then you will quickly learn the facts of life.
Good luck.!...lol.

ps.TRA do non recourse loans for MTF clients.
HBL do non recourse loans.
Problems? No.Why?Find this out and you can invest with confidence.
Both have under 1% debt problems.Most probably a lot lower than your old beloved CSB had.

[Snoopy]

Buy Right Cars Ltd profit margin of only 4.8% shows the vulnerability of this business to changing economic conditions.

That 4.8% margin I calculated is for the four months April to July Inclusive. It very likely includes cars paid for in Japan in July, to be shipped out to NZ for the peak September/October car buying season. Thus lots of stock on the books but the cars are not yet available for sale, with June and July being low sales months. That scenario would certainly depress the profit margin for a time. I am guessing that probably over 6 months and almost certainly over 12 months the net profit margin at 'Buy Right Cars' is significantly greater than 4.8%.

SNOOPY