CarMax turns to online financing as used-car sales hit a bump

n>CarMax Inc (KMX.N), the biggest US used-car dealer, is rolling out a new online financing initiative that could help offset sluggish demand as cheaper gas prices and a stronger job market drive sales of new cars.

The company is rolling out an online financing offering this year to customers at 10 stores in the United States to help them pre-qualify for a loan before a store visit, hoping to improve customer conversion rates.

Many customers want to understand their financing options during their online research process, prior to coming into the store, CarMax Chief Marketing Officer Jim Lyski told Reuters.

Richmond, Virginia-based CarMax reported on Tuesday lower-than-expected first-quarter revenue and profit as store traffic dropped and comparable unit sales at its used-car stores slowed to a near halt.

The company has been fighting slowing growth in sales largely due to weakness in used-car pricing as new-car sales gain steam.

Being pre-qualified for financing before the store visit helps build the customers confidence …, CarMax President Bill Nash said on a post-earnings call on Tuesday.

CarMax is late to the online financing party, however.

AutoNation Inc (AN.N), the largest US new-vehicle dealer, launched an online financing offering in late December, allowing its customers to value a trade-in vehicle, determine car payments and apply for credit online.

While it may be too early to gauge if CarMax can get enough benefit from the latest offering, Wall Street analysts have broadly welcomed the initiative.

People want to be able to buy a car similar to how they buy other retail goods. Thats the kind of convenience CarMax needs to offer, MorningStar analyst David Whiston said, adding that it would lead to higher conversions for CarMax longer term.

CarMaxs shares were down 2.6 percent at $46.87 in late-afternoon trading on Wednesday. Up to Tuesdays close, the stock had fallen about 11 percent this year, compared with little change in the Dow Jones US Specialty Retailers index .DJUSRS.

(This story corrects to rolling out a new online financing initiative from is banking on a new online financing process in paragraph 1. Also removes paragraph 9, which referred to Beepi, Carvana and Vroom denting Carmaxs online traffic, as the information could not be verified)

(Reporting by Ankit Ajmera in Bengaluru; Editing by Sweta Singh and Sriraj Kalluvila)

How Investors Can Benefit From Financing Their Next Car

By Eric Jorgensen

Learn more about Eric on NerdWallet’s Ask an Advisor 

When buying a car, you have two options: take out a loan to finance the purchase or pay for it in cash. There are pros and cons for each approach, and as with any financial decision, it ultimately depends on what works best for your situation.

But one notable benefit of financing is that it frees up money for investing. So if you have good credit and plan to buy soon, while rates are low, financing your purchase could be the smarter move.

Lets look at how financing and investing could be more profitable in the long run.

How financing works

When you apply for a car loan, lenders will look at your credit score to determine how much of a risk you are as a borrower. The interest charged on the loan is driven by your credit score: The better your score, the lower the interest rate and the lower your payment. If you have an above-average credit score  — say, over 750 — it’s likely that you can get a very low interest rate; in some instances, it could be as low as 0%.

You also have to decide how long you want to make payments. Typically, the range is from three to six years, but it’s best not to go over five years. The longer you stretch out your payments, the lower the monthly payment will be — but note that longer terms can also carry higher interest rates.

Your monthly payment is also based on how much money you pay upfront as a down payment. For example, if you buy a $30,000 car with no money down, financed for five years at 3.5% interest, you can expect to pay approximately $550 a month. However, if you put $10,000 down and everything else stays the same, your payment would drop to approximately $370 a month.

So how much should you pay each month? (Note that I did not ask how much you could afford.) In reality, it’s best to keep your monthly payment below the amount you can technically afford based purely on your expenses and income. Just think of all the other costs of owning a car like maintenance, insurance, fuel and other expenses that may come up.

I recommend keeping car payments below 5% of your net income after taxes. As a financial advisor, the last thing I want to hear is that someone can’t save money because they are “car poor.”

Biggest benefit of financing: Investing

Paying cash requires disciplined saving in low-risk buckets — perhaps bond funds or high-yield savings accounts. To buy a $30,000 car, you’d need to save about $470 a month over five years, assuming a 3% rate of return, or $500 a month with a 0% interest rate. For many, that’s a pretty high amount considering other savings needs.

New cars depreciate quickly, some estimate by as much as 20% when you drive off the lot, 30% by the end of the year, and 50% within three years. It’s not a good idea to take a large amount of cash and sink it into an asset that is going to immediately lose value.

Today’s low-interest-rate environment makes financing, rather than paying cash, an attractive option.

Assume you have determined the amount you can spend each month and can purchase a car by putting down no money, or the bare minimum amount. This allows you to instead invest, or keep investing, the money you could have used as a down payment.

Using the above example: If instead of using it as a down payment, you invested $10,000 for five years at an average annual rate of 6%, your funds would grow to nearly $13,400, a potential $3,400 gain. If you used the $10,000 as a down payment on the car and then invested the $180 a month difference in your car payment ($550 $370) under the same conditions, your funds would grow to just about $12,400, a gain of $2,400 over the original down payment amount.

Note that when you invest, theres no guarantee that the market will do well and your money will grow. But the longer you keep your money invested, the better are your chances of seeing positive returns.

At the five-year mark, interest on the auto loan could cancel investment gains. However, if you withdraw $10,000 from your investment account for a down payment, youll forfeit any gains over five years and much more over your lifetime. During low interest rate environments, like the one we are currently in, it makes more sense to minimize the down payment and let your investments compound.

If you paid 100% cash, you miss out on the opportunity to invest and grow those funds and you’d have to build up new savings.

Drawbacks to financing
Interest

Besides the purchase price, the other cost to consider when you finance a car is how much money you’ll pay in interest over the years of your loan. With a five-year loan, no money down and a rate of 3.5%, you’re paying about $2,750 extra over the life of the loan, making the total cost of the car $32,750; this increases to about $6,900 at an 8.5% interest, making the total cost $36,900.

And note that if you are purchasing a new car before your old car is paid in full, in most cases you end up rolling your remaining debt into the new loan, increasing what you owe, and subsequently increasing the amount you pay each month. It also means there is the potential for a significant gap between the new car’s value (what you’ll get from insurance in the event of an accident) and what you owe. Say you buy a $30,000 car and you still owe $7,500 on your old car. This means you finance $37,500, but the best you can hope to be covered by insurance is $30,000.

Insurance costs

Also know that when you have a loan, you may be required to get complete auto insurance coverage, even for a used car that may not be worth it. When you own a car outright, you decide what amount and types of insurance to purchase. This means you don’t have an opportunity to decrease your monthly spending by purchasing insurance based on your needs rather than what the loan terms dictate.

Rate fluctuations

However, it’s also important to remember that interest rates won’t stay low forever. This means payments will be higher in the future and could make financing the more expensive option. And remember, if you don’t have a high enough credit score, you also won’t have the benefit of getting a low rate on your loan. In these cases, you will need to put more money down to drive the monthly payment down, making financing less attractive.

There are many variables to consider when deciding how to buy a car, and it ultimately depends on your situation and how much you can realistically afford. By financing your car and investing the amount you would have used as money down, you could potentially make more than if you pay part or all of it upfront. However, this only works if you actually invest the money and don’t spend it on something else.

Eric Jorgensen is a fee-only financial planner with MainStreet Financial Planning in Silver Spring, Maryland.

This article also appears on Nasdaq.

Financing Is Getting Tight, But It Depends Heavily On Which Asset Class

The real estate financing environment in New York is entering a new phase, as lenders and investors pause to take stock of a cycle many think has plateaued and new banking regulations continue to dry up traditional financing sources. To get a sense of what that means for the industry, Bisnow talked to a few panelists who’ll be speaking at our upcoming 7th Annual NYC Capital Markets Forum.

Financing is a big hurdle for many minority-owned businesses

Editors note: Last years report by 247WallSt.com listing Peoria as one of the 10 worst metropolitan areas for African-Americans in the United States raised eyebrows. The Journal Star is doing a yearlong series examining some of the disparities, including income, employment, housing, education, entrepreneurship opportunities and health care.

Todays installment examines the Small Business Administration and how it helps businesses in South Peoria.

PEORIA Melvin Murry has some advice for someone who wants to start a business: take it seriously or youll be out of business.

Be prepared to work twice as hard as you would in a 9-to-5 job. I know some people think having your own business is peaches and cream, but its not. You have to be willing to sacrifice. You have to be married to it, said the owner of Murrys Custom Autobody, 1501 SW Jefferson Ave.

Murry opened his shop in 1996, taking over from the previous owner with a Small Business Administration loan he obtained through South Side Bank. Charlie Randle of Illinois Business Financial Services helped me put together a business plan, Murry said.

That business plan is vital especially for a minority company that may not have a background in finance, said Randle.

The business plan is the road map to success. Ideally, it should read like a letter to a friend, providing the reader with an understanding of what the business goals are, he said.

But a good business plan doesnt assure success when it comes to starting a business, noted Randle. If you dont have good credit history, its highly unlikely youll get a loan, he said.

Murry added that one of the biggest problems minority businesses face is not having enough capital. Some businesses dont realize that you need money after you get started, he said.

Don Shafer, executive vice president of Heartland Bank amp; Trust Co., said not having enough capital to finance growth is a common problem for a start-up company.

They may grow too fast and not be able to support that growth. In other words, the company fails because it cant handle success, he said.

Helping all types of firms find success is what IBFS is all about, said Randle, adding that his not-for-profit organization helps firms find funding through the SBA in central Illinois. Theres a huge void in minority business in this area. Youve got a lot of disenfranchised African-American business efforts, he said.

The SBA makes every effort to target businesses owned by veterans, minorities and women but you need a minimum of $165,000 for a $5 million loan through the SBAs 504 program that offers financing for the purchase of buildings and capital equipment, said Randle.

Typically a 504 loan organized through us involves 50 percent financing by the bank, 40 percent by the SBA and 10 percent by the business, he said.

Todd Lawson, a senior vice president at South Side Trust amp; Savings Bank, said his bank, like other financial institutions in the area, also works with the SBA.

People need to invest their time in developing a business plan. Organizations like SCORE and the Bradley University Small Business Center both can offer help in that regard, he said.

Applicants need to consider market conditions along with equipment and capital needs, said Lawson.

What knocks an applicant out from the beginning (on a loan application) is a poor credit history. Youve got to be able to show you can manage your finances, he said.

Managing finances in South Peoria, where a majority of African-American residents in the area live, has become a growing problem. In an assessment report on Peoria filed by the Washington, DC-based National Resource Network earlier this year, the report noted that South Peoria lost more than 40 percent of its residents between 1970 and 2010.

The population loss appears to be ongoing with population declines of between 5 percent and 17 percent in all south side neighborhoods between the year 2000 and 2010. The social fabric of the south side deteriorated as the middle class moved away and left behind households in poverty. The population loss is also a major challenge for retail in the area and the south side now has few shops and several component neighborhoods are food deserts, the report stated.

Murry is a fervent supporter of both South Peoria and South Side Bank. I have nothing but great things to say about that bank. It got me started and assisted me with the addition I put on my business in 2005. I went from 2,000 square feet in my shop to 5,000 square feet, he said.

Murrys been loyal to the bank because he said the banks been loyal to him. I think if youre loyal and honest in business, youre probably going to make it, he said.

That loyalty extends to his suppliers, added Murry. Ive used the same paint supplier for 20 years. Thats Born Paint, a locally owned company. I also stay with the same parts suppliers. Its not just about the lowest price. Its about the relationships. If we take care of each other, well all make it, he said.

But being in a position to do business like Murry inevitably requires money, something that can be a stumbling block for a start-up company, particularly a minority start-up.

Jerry Nutt, the chief operating officer for IBFS, said his organization made the decision last year to try and help companies that didnt qualify for SBA help and were having trouble finding financing.

Youve got so many small businesses that just dont have the funds necessary to get a bank loan so we entered the alternative funding arena, he said.

That financing can be expensive, said Nutt, noting that unsecured loans can carry interest rates of 20 percent to 30 percent. A business owner has to make a decision on how quickly he or she can turn the loan money received.

Cheryll Boswell of METEC, 2605 W. Krause St., said that her Peoria-based housing counseling resource center is also trying to help those with credit problems.

We have a micro-lending program for small businesses, whether theyre minority or not. Our goal is to allow individuals to help their financial well-being. Micro-lending is a piece of it, she said.

Steve Tarter is the Peoria city reporter at the Journal Star. Tarters phone number is 686-3260, and his email address is starter@pjstar.com. Follow him on Twitter @SteveTarter

New business facts

The number of business startups in America has been declining for more than 30 years. Since 2008, the number of business closures has exceeded the number of business startups.

Companies less than one year old have created an average of 1.5 million jobs per year for the past three years.

Between 2005 and 2011, small firms produced 15 times as many patents per employee as large ones.

78 percent of thriving new businesses are more likely to have a formal business plan.

70 percent of small businesses that receive mentoring survive more than five years; this is twice the survival rate of those who dont receive mentoring.

Source: SCORE

District secures Valley Crossing financing

District 833 School Board members on Thursday authorized financing the purchase by selling certificates of participation, a state-approved financing method that allows the district to borrow without seeking voter approval and repay with its lease levy, which is assessed through property taxes.

The district secured a 2.31-percent interest rate. Jodie Zesbaugh of public finance firm Ehlers said they had hoped to get a rate under 3 percent, so that low bid by Bank of America was better than expected. The highest of six bids offered a 2.46 percent interest rate.

Blaming Financing Problems, Mayor Announces No Deal for Troubled Civic Square Project

But then, in hopes of salvaging such a high-profile project, Murray reversed course and gave them an extension. When Triad handed the project off to another developer, Touchstone, Murray offered another extension. Todays announcement indicates that despite all the extra time, the deal Murray hoped for fell through.

In short, what all of this means is that even as the city has tried to build more affordable housing, a city-owned lot in the center of downtown has remained undeveloped. And now, that will remain the case into the foreseeable future.

The city and the developers are staying tightlipped about why they couldnt find financing for the project and whats next for the hole in the ground. In an email, a representative from Touchstone directed all questions to the mayors office. Triad did not immediately return a request for comment.

In a statement, Murray said the city will assess whether the project as designed is viable or whether adjustments are needed, but offered no other details. Fred Podesta, director of the citys Finance and Administrative Services Department, said in a statement, “As the city explores its options for moving forward, we will not be publicly discussing contract issues.

When I followed up with Finance and Administrative Services spokesperson Julie Moore, she said in an email, We need time to brief elected officials before beginning to explore the full range of options. It is too early for us to speculate what options may or may not be discussed.

LNG plants: US Exim Bank interested in financing

ISLAMABAD:US Exim Bank is interested in providing financing for three LNG-based power projects, Baloki, Bhikki and Haveli Bahadar Shah, said spokesman for the Ministry of Finance on Saturday.

The official said that vice-president of US Exim Bank, Annette Maresh, had intimated this in a letter addressed to Minister for Finance Muhammad Ishaq Dar. It may be recalled that Dar had started engaging the Exim Bank during his visit to the US in September 2015, according to a statement issued by the Ministry of Finance here.

Exim Bank of US has renewed interest in Pakistan

He met senior officials and gave a detailed account of the business and investment opportunities, urging the US Exim Bank to explore financing development projects in Pakistan. Consequently, the Bank has now expressed strong interest in three LNG-based power projects.

Published in The Express Tribune, May 15th, 2016.

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Sport Endurance, Inc. Closes Financing

NEW YORK–(BUSINESS WIRE)–Sport Endurance, Inc. (OTCQB:SENZ) (the “Company”) announced it has
issued Senior Secured Convertible Notes (the Notes) to institutional
lenders (the Lenders) for an aggregate principal amount of $440,000
(including a 3.5% original issue discount) in accordance with the terms
of a Securities Purchase Agreement (the Agreement).

“This is an important step toward executing our direct to consumer
supplement marketing strategy, and I look forward to communicating more
milestones to our shareholders,” said Sport Endurance CEO, David Lelong.

The Notes bear interest at 10% per annum, can be pre-paid at a premium,
and mature six months from issuance. At the option of the Lenders, the
principal and accrued interest under the Notes are convertible into
Shares at $0.50 per share.

The Notes are secured by a first lien on all assets of the Company. The
Lenders did not receive any registration rights which means that all
Shares including those issuable upon conversion of the Notes must be
held for at least six months.

The Lenders also received 200,000 shares of restricted Common Stock of
the Company (the “Shares”).

The proceeds from the financing will be used for: (i) launching an
enhanced line of men’s health nutritional supplements; and (ii) working
capital purposes.

About Sport Endurance, Inc.

Sport Endurance, Inc. plans to market and distribute quality dietary
supplement products throughout the United States. We believe that
improved health contributes to and promotes a higher quality of life.
It’s our goal to improve health by providing quality and effective
nutritional supplements for an aging population. Our primary focus is on
three areas of health that most directly impact the lives of most
adults: Total Wellness, Energy, and Sleep.

Novimmune raises CHF 30M in second financing of 2016

Novimmune has raised money for the second time in 5 months. The latest CHF 30 million ($31 million) investment brings the total raised in 2016 up to CHF 60 million, a sum Novimmune plans to use to hustle its treatment for the immune disorder hemophagocytic lymphohistiocytosis (HLH) through a Phase II/III trial.

Geneva, Switzerland-based Novimmune last tapped its shareholders for cash in January, at which time it pocketed CHF 30 million to advance its HLH candidate NI-0501 and other pipeline prospects. Novimmune has again turned to existing investors for the fresh injection of CHF 30 million, which edges the total raised by the antibody specialist closer to $300 million. The flurry of financing comes months after Novimmune signalled its intent to find an exit for shareholders.

Late last year, Novimmune replaced long-serving CEO Jack Barbut with former Roche ($RHBBY) Chief Medical Officer Ed Holdener. Novimmune framed the change at the top as a precursor to a trade sale or IPO of some or all of the business. Novimmune is a long-mooted IPO candidate, but the ongoing reticence of investors on both sides of the Atlantic to back new listings could limit its ability to secure a value it and its existing backers deem fair.

For a trade buyer, NI-0501 represents the nearest-term opportunity. Novimmune has long viewed NI-0501 as a drug it can take through development unpartnered, a view that has led it to retain full rights to the program while striking deals with Genentech and Tiziana Life Sciences (LON:TILS) for other assets. Between the two CHF 30 million financing rounds, the FDA granted breakthrough therapy designation to NI-0501, a status that could help shorten development and regulatory timelines.

Novimmune has advanced NI-0501 to Phase II/III on the strength of evidence that it can control HLH by inhibiting interferon-gamma (IFN?), a cytokine that is found in high levels in people with the rare hematological disorder. The mortality rate for the disease is around 50%.

– read the release