J A N U A R Y / F E B R U A R Y
CIADA Insider C O L O R A D O I N D E P E N D E N T D E A L E R S A S S O C I AT I O N
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Inside:
Dealers’ Open Lot Coverage / 06 Charity Board Spreads Goodwill / 08 Evolution of Automotive Retail / 12 Compliance Potholes / 22
ENROLL IN THE CIADA LEGAL PROTECTION FUND NOW! page 4
A U T O M O B I L E
Contingent Attends NIADA National CIADA REPRESENTS CIADA Leadership Conference and Legislative YOU AT THE CAPITOL Summit In Washington D.C. Page 10
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Inside J A N U A R Y / F E B R U A R Y
F RON T R A NGE CL ASSES
Colorado Independent Automobile Dealers Association
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What’s New
NIADA.tv NAAA EDUCATION SESSIONS ONLINE
Lakewood, Colorado Education & Training Center 950 Wadsworth Blvd., Suite 101 Lakewood, CO 80214
PRE-LICENSING CERTIFICATION
Go to NIADA.tv’s Remarketing channel to view the education sessions from the recent NAAA convention! While you’re there, check out all the resources NIADA.tv has to offer!
Colorado state statute requires anyone applying for a used motor vehicle dealer’s license or a used powersports dealer’s license be certified through a pre-licensing course. This seminar is also offered to salespeople to be able to pass the New Mastery Examination Test. Class is held at least once a week. Check our website for dates.
Inside
Join us to get updated information to learn the CORRECT way to fill out your paperwork at time of sale and other topics including title compliance, do’s and don’ts for titles and more. This class is held once a month for half a day.
BASIC TITLE TRAINING CLASS
06 Dealers’ Open Lot Coverage 08 Charity Board Spreads Goodwill 10 CIADA Goes to Washington 12 Evolution of Automotive Retail 14 Letter from the Chairman of the Board 18 Protect Your Online Reputation 22 Compliance Potholes
Call CIADA for information on these classes, or to get your forms and/or Dealer/Salespersons Bonds. Call 303-239-8000. All classes are subject to change without notice. Please check our website www.ciada.org for any changes.
www.ciada.org • phone 303.239.8000 fax 303.237.3305
Advertiser’s Index
Is your dealership
ADESA .................................................................................................. 11 Autotrader ............................................................................................7 AutoZone ...........................................................................................17 Black Book ........................................................................................... 5 CarMax Auctions .........................................................................19 Dealers AA of the Rockies ...................................................IFC Lobel Financial ................................................................................. 3 Loveland Auto Auction ........................................................... 16 Manheim Denver................................................... Back Cover Manheim Littleton CO ............................................................. 14 Manheim Pennsylvania ......................................................... 13 NextGear Capital ......................................................................... 15 TrueCar................................................................................................... 9 VAuto....................................................................................................IBC Veros Credit ....................................................................................... 6
PROTECTED? CALL 303-239-8000 WITH QUESTIONS.
ENROLL IN THE CIADA LEGAL PROTECTION FUND NOW! MORE THAN 65 OF YOUR FELLOW DEALERS HAVE JOINED.
Office
For information on how to become a member of CIADA, please contact Todd O’Connell 950 Wadsworth Blvd., Suite 101 • Lakewood, CO 80214 303.239.8000 toddo@ciada.org
BOARD OF DIRECTORS
NIADA Headquarters
National Independent Automobile Dealers Association www.niada.com www.niada.tv 2521 Brown Blvd. Arlington, TX 76006-5203 phone (817) 640-3838 For advertising information contact: Troy Graff at (800) 682-3837 or troy@niada.com. CIADA Insider is published 6 times per year by the National Independent Automobile Dealers Association Services Corporation, 2521 Brown Blvd., Arlington, TX 76006-5203; phone 817-640-3838. Periodicals postage paid at Dallas, TX and at additional offices. POSTMASTER: Send address changes to NIADA State Publications, 2521 Brown Blvd., Arlington, TX 6006-5203. The statements and opinions expressed herein are those of the individual authors and do not necessarily represent the views of CIADA Insider or the National Independent Automobile Dealers Association. Likewise, the appearance of advertisers, or their identification as members of NIADA, does not constitute an endorsement of the products or services featured. Copyright © 2016 by NIADA Services, Inc. STATE MAGAZINE MGR./SALES Troy Graff • troy@niada.com EDITORS Jacinda Timmerman • jacinda@niada.com Andy Friedlander • andy@niada.com MAGAZINE LAYOUT & GRAPHIC ARTIST Chantae Arrington • chantae@niada.com ART DIRECTOR Christy Haynes • christy@niada.com PRINTING Nieman Printing
OFFICERS PRESIDENT Stan Martin Stan’s Auto Sales LLC 303-650-1011 VICE-PRESIDENT Dan Berkenkotter Berkenkotter Motors 303-650-8754
DIRECTORS Jim Bode J. Bode Used Cars, Inc. 303-366-1535
Tim Gaylord Gaylord Leasing Company Inc. 303-667-6188
SECRETARY Dean Gunter Mile High Car Company 719-570-7800
Mark Weida Street Smart Auto Brokers 719-434-8443
TREASURER John Lindberg Auto Warehouse 970-490-2886
Teshome Tesfaye Norfolk Motors 303-523-5814
CHAIRMAN Dave Cardella Mountain States Auto Group 303-887-8977
Mike Whistance Country Truck and Auto 303-857-1281 Lucas Jozefkowicz Denver Autos, Inc. 303-573-1333
PAST PRESIDENT / DIRECTORS Jim Bahne Bahne, Inc 720-934-9806
Mike Bonicelli Nevada Auto Sales 719-635-2533 Peppe DeMarco Highline Motors 970-206-9963
Roger Kirlin Roger Kirlin Auto Sales 303-526-7805 Joe McCloskey McCloskey Motors 719-594-9400
Wally Smith 303-659-0004 Smith Motors Dean Strawn AutoTrek 303-934-5600
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M A N AGEMEN T M AT T ERS
Dealers’ Open Lot Coverage
to establish the value for this type of coverage: 1. Monthly reporting requires the dealer to send the insurance carrier a monthly report with the exact dollar value of the vehicle inventory. 2. Non-reporting requires the dealer to state the maximum value of the inventory on the date the policy starts. For this option, it is important to pick the value of the inventory at its highest peak to avoid a coinsurance penalty. What is the Coinsurance Clause? Insurance companies generally require dealers insure 100 percent of the value of their inventories. If you insure less than this, they will only pay a corresponding percentage of your claim. For example, if the value of your inventory is $200,000 and you insure it at $100,000, the insurance company is only required to pay for 50 percent of your claim. To be sure this doesn’t happen to you, check your limit each month. It is tempting to think that when you have a certain amount of inventory insurance, and when a claim arises that is less than the amount of insurance you carry, you will collect the amount of the claim less the deductible. Instead, the most that will be paid for a loss to any single auto is the lesser of the actual cash value of the damaged or stolen property, the wholesale value of the
WHAT IT IS AND WHAT IT COVERS BY TOM LUBERSKI Dealers’ Open Lot, also known as auto physical damage coverage, provides physical damage coverage for vehicles held for sale. It can be part of a garage insurance package or be purchased as a separate policy, or even included as part of a floor plan. Garage insurance is different from general liability or business property insurance. Auto dealerships are unique types of businesses, and Dealers’ Open Lot policies are tailored for the specific risks involved. Each insurance company’s interpretation will vary, so work with your insurance agent to be clear on all the provisions of your policy and to coordinate with other available coverage. Vehicles covered generally include private passenger vehicles (autos, pickups, minivans, SUVs), RV units and other autos that are in a dealer’s inventory and are held for sale. Coverage is usually provided for used, new, demonstrators or service vehicles. Most insurance companies require dealers insure 100 percent of the value of the inventory. There are two options
property, the cost of repairing or replacing the damaged or stolen property or the limit indicated as the most that will be paid for any single auto. Limit per Unit, in Transit and Other Locations It is important to ensure the limit per vehicle – which is the maximum amount the insurance company will pay for each vehicle in the event of a loss – is high enough to avoid excessive loss in the event of a claim. The standard per-vehicle limit on the policy may be much lower than the value of each of your vehicles, so be sure to examine this value to ensure it is appropriate. Similarly, the in-transit limit may be too low if you have a portion of your inventory off site. Even when 100 percent of the value of the inventory is covered, the limit per vehicle applies. What is Covered? Coverage is generally divided into two parts: 1. Collision coverage pays for damage to a covered auto’s collision with another object or its overturn. 2. Losses other than collision that are covered depend on the policy, and may include one of the following sets of inclusions. Be sure to read your policy to clarify specifics. • Comprehensive provides coverage to a covered vehicle from any cause of loss except collision with another object or overturn. • Specified Causes provides coverage to a covered vehicle or its equipment caused by fire, lightning, explosion, theft, windstorm, hail, earthquake, flood, mischief, vandalism or the sinking, burning or derailments of any conveyance transporting the covered vehicles. • Fire and Theft provides coverage to a covered vehicle or its equipment caused by lightning, explosion or theft. • False Pretense provides coverage to a covered vehicle caused by someone who causes the dealer to voluntarily part with a covered auto by trick, scheme or under false pretense. It also covers the dealer acquiring a vehicle from a seller who did not have clear and legal title. An example of a false pretense claim is a test drive where the driver does not come back. Most policies exclude false pretense, although it can be bought back. Dealers’ Open Lot provides only physical coverage. A comprehensive Garage Liability policy will protect your dealership against liability exposure. Tom Luberski has been a member of CIADA since 2002, is president of Security Financial Insurance, and is a member of The Landmark Insurance Group in Englewood Colorado. For more information call 720-922-7376 or visit www. securityfinancialinsurance.com.
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Charity Board Spreads Goodwill
10 ORGANIZATIONS RECEIVE DONATIONS BY JOHN CHAPIN
CIA DA’S CH A RI T Y BOA RD H AS BEEN A BL E TO SPREAD THE GOODWILL OF THE INDEPENDENT USED CAR DEALER T HROUGHOU T COLOR A DO.
CIADA’s Charity Board has been able to spread the goodwill of the independent used car dealer throughout Colorado. This is due to the tremendous support received from you and many auto industry associates as well as the terrific effort of the allvolunteer Charity Board. This year the charity has contributed to 10 outstanding organizations that provide aid for Colorado communities with healthcare, housing, child abuse programs, help for domestic violence victims, service dogs and food to more than 4,000 of our neighbors. In addition, seven $2,500 scholarships were awarded to students attending Colorado universities and colleges in Denver, Fort Collins, Boulder, Golden and Durango. These scholars will be very busy as their majors consist of premed, engineering, computer science, veterinary medicine, psychology, biology and chemistry. Thanks to all of the volunteers pictured who helped distribute donations to the following charities: • Care & Share Food Bank for Southern Colorado • Freedom Service Dogs of America • Food Bank of the Rockies • The Barbara Davis Center for Childhood Diabetes • The Family Tree • The Genesis Project of Northern Colorado • The Home Front Cares of Colorado Springs • The House in Grand Junction • The Treasure House • Tessa in Colorado Springs. We are “used car dealers changing lives.”
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CIADA Contingent Attends NIADA National Leadership Conference and Legislative Summit In Washington D.C. REPRESENTING YOU AT THE CAPITOL
Stan Martin, David Cardella, Mike and Sharon Bonicelli, Joe and Ann McCloskey and Todd O’Connell attended a threeday legislative conference that included visits to the offices of Colorado senator Cory Gardner and Colorado representative Ed Perlmutter. In addition, this Colorado group joined about 145 other independent dealers and
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auto industry leaders to meet with 63 members of the House and Senate or their legislative staff during the event’s “Day on the Hill.” The discussions focused on vehicle recall and Consumer Financial Protection Bureau legislation. This was the third year for the event. Efforts are beginning to produce results as noted in the
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excerpt of a NIADA press release below: NIADA-Supported CFPB Bill Passes House Overwhelmingly Huge Bipartisan Majority Votes to Rescind Bureau’s Auto Finance Guidance, an Issue Emphasized at NIADA’s National Leadership Conference Arlington, Texas (Nov. 20, 2015) -- Independent used vehicle dealers from around the nation spoke to legislators on Capitol Hill last month, thanks to the National Independent Automobile Dealers Association. And Congress listened. The U.S. House of Representatives on Wednesday passed H.R. 1737, the Reforming Consumer Financial Protection Bureau Indirect Auto Financing Guidance Act, by an overwhelming 332-96 margin, with 88 Democrats joining the Republican majority in voting for its passage. The bill would rescind the CFPB’s
flawed and controversial 2013 auto financing guidance that claimed dealer discretion on interest rates creates a risk of discrimination and would force the bureau to be more transparent and seek stakeholder input before issuing future guidance. Legislative presence at both the state and national levels is more critical than ever with the ever-expanding auto/finance industry rules and regulations. This is where CIADA’s and NIADA’s “strength in numbers” play a significant role in the health of the auto industry. CIADA is the only nonprofit association whose main purpose is to look out for the independent car dealer in Colorado. Your support and membership enables the industry to remain viable, allowing you to provide for the transportation needs for all Colorado communities!
INDUS T RY WATCH
Evolution of Auto Retail THE FUTURE OF DIGITAL RETAIL BY TODD MASON, ROUTEONE
B
ob is in his mid-fifties. He is a “roll up your sleeves, get it done” kind of guy. Mary is 30-something. When she is not at work, she spends much of her time as a taxi driver for her kids, carting them between activities. Andy is almost 30 and lives in the city. He and his fiancée are planning their wedding. They’ve created a blog to share every picture and moment along the way. What do they have in common? They all want and need a new car. Of course, Bob, Mary and Andy are make-believe people. They are personas to help tell a story and make a point – but you know them. People like them walk in your dealership’s door every day. They each have their own journey and a preferred way of financing and buying a car. Increasingly, they are also the ones driving the sales process: where it happens, how it happens, and even the order and timing of the steps. The bottom line is that consumers are behind the evolution of auto retail and each has his or her own unique needs that need to be addressed: • Bob’s preferred mode of buying a new car is to start with Consumer Reports and Sunday classifieds. He figures out what sedans have the best reliability and gets a range of prices. Bob does everything face-to-face, and he’s willing to do a little more to save a little more. • Mary values her time, because she has so little of it. She does her research on Yahoo! Autos for both vehicle options and pricing. She also asks for advice from her friends on Facebook. Mary chooses the dealership she does because she can set an appointment and start the financing online to make the indealership process faster. • Andy is about the experience. He is looking at all the typical auto research sites you would expect. He is also checking Yelp for reviews of local dealerships,
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and how they respond to both the positive and negative comments. Depending on where he is, Andy shifts between his phone, tablet and laptop. As he makes those shifts, he expects the experience to be similar and seamless. He, of course, starts the financing process online, but also checks out aftermarket products and the services available at the dealership, such as free car washes and shuttle service. When you break down these scenarios into channels, Bob represents single, traditional, in store point of sale. Mary represents the growing crosschannel trend to use digital tools for more and more, but not quite all of the transaction. Andy represents the omnichannel with expectations of mobile capabilities and “all of the above” working seamlessly and transparently. While you could consider what he wants as something of the future, it is beginning to happen now. Single-channel. Cross-channel. Omni-channel. It sounds like you are running a cable station, not a dealership. You almost need a TV guide to keep them all straight! If the evolution toward digital becomes reality (and at least directionally it almost certainly will), think about how it will continue to impact your dealership’s sales approach and customer interactions. Today’s Reality A cross-channel approach assumes that a consumer, like Mary, will largely stick to one or two channels throughout the sales process. Information can be shared between channels, but they are managed separately and the flow of information is probably neither real-time nor complete. This is largely the reality of today. Enter the online credit application. The online credit application allows dealers to give their customers the first part of an online shopping experience. A good online credit application is designed with the customer in mind, and breaks down the process into easily digestible sections, such as personal, residential, income, vehicle and summary. Once Mary completes a section, her data should flow right into your credit application system, or other readily accessible system, for follow up and next steps. If you do not have an online
credit application yet, it is a great place to start for you and your customers. It works for the Marys of the world and will continue to work for some time. Let’s face it, Bob’s single channel approach is not going anywhere for a while either. Both Mary and Bob are comfortable with the processes they have chosen, respectively. To capture their business you have to be where they are. But while those processes work, they could go further and be better for you, for Bob and Mary, and for your other customers – especially for Andy. The Future Starts Today At RouteOne we like to say the future is any time, any place, and on any device. And that future is omni-channel. An omni-channel approach assumes a consumer, like Andy for instance, wants complete flexibility to seamlessly move across and in and out of channels at will. Andys want to be channel surfers and see multiple ones at the same time – they want to map out their own customer journeys. As they make those moves along their journeys, they expect the data they provide to be saved and instantly available wherever they go. Increasingly those moves will be digital and mobile. Remember how Andy started his process? He began on his laptop researching third-party sites. He then moved to a smartphone for dealer and vehicle selection, and finally transitioned to his tablet for finance. Now imagine him at the dealership. The sales process picks back up on the salesperson’s tablet for desking, and is routed to F&I for financing. Stips might come after and be loaded to a secure area on the dealer’s site by Andy once he gets home. The deal could close with remote delivery and final document signing back on a tablet or the story could play out in hundreds of other ways. Your strategy and discipline are what matter in an omni-channel approach. The strategy is to see and embrace the evolving needs of your customers in a world increasingly driven by them. The discipline is to make the channels they choose work in harmony for them. Todd Mason is chief product and marketing officer for RouteOne, a joint venture created by Ally Financial, Ford Motor Credit, TD Auto Finance, and Toyota Financial Services. He is responsible for managing product conception, development and strategy as well as implementation of all marketing-related strategy and tactics for RouteOne.
P RODUC T S & SERV ICES
ASSOCI AT ION NE W S
What Do We Know? LETTER FROM THE CHAIRMAN
What do we know? I ask this question following CIADA’s participation in the NIADA’s latest leadership conference and legislative summit held in Washington, D.C. We already know we are a highly regulated industry with new rules and regulations being implemented frequently, and after spending three days in meetings and talking with senators and congressmen I can sadly say it is not changing any time soon! Fortunately, we have made an impact by making our presence known as we voiced our concerns over issues that could be devastating to us and our ability to earn a living as we create jobs in our communities. Let me touch on a couple of issues currently on the table: 1) Grounding all vehicles with an open recall until fixed. The biggest problem here is the
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attempt to classify all recalls the same, whether it’s a safety issue or a misprint in the owner’s manual. There are over 200 million cars that have recalls and 30 percent have no available fix. We understand the effect grounding vehicles until fixed would have on our consumers – the value for their trades would plummet as prices skyrocketed for our inventory as we competed for vehicles without recalls. Currently this bill has been stopped in committee, although there is an effort to bring it up again. 2) Consumer Financial Protection Bureau, also known as the CFPB, and its Indirect Auto Financing Guidance Act. This was enacted without any industry input or studying the impact of the cost of credit to consumers. Congress has sent 11 letters to the CFPB inquiring how they arrived at their reasoning for the implementation of this act. As of this date they have received no response, so a bill has been sponsored by Congressman Ed
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Perlmutter (D) of Colorado to nullify this act. 3) Department of Labor and their interpretation of independent contractors. While they never give a clear definition on how they determine this classification process, always saying it’s a grey area, if you are the one determining how they operate and what work they do along with being their only compensation, more likely than not they will call them an employee. Please seek advice if you have any questions on this issue as it can be costly to your business. The bottom line is to stay involved. Rulings change and ignorance is not a defense. Look for upcoming compliance classes and stay educated because we have all worked too long and hard to have what we earned taken away. Happy New Year and let’s all make 2016 the best year ever! Thanks, David Cardella Chairman of the Board
Kelley Offers VIN Tool PART OF BUSINESS TO BUSINESS SOLUTIONS
BY USED CAR NEWS
Kelley Blue Book is offering customers a new self-service interface for access to new and used car Kelley values and configuration data by vehicle identification number within its suite of business-to-business solutions. Customers can obtain current vehicle valuations in real time by inputting the desired batch VIN information using a web-based interface. All VIN-related information is obtained from factory data. Kelley Blue Book also provides all associated VIN trims, if more than one is identified from the decoding process.
ASSOCI AT ION NE W S
Highlighting CIADA Ambassadors STRENGTHENING THE ASSOCIATION FOR EVERYONE’S BENEFIT
Anson Damosso Cross Country Motors
Jeff Long Midwest Fleet & Lease
Anson Damosso, Cross Country Motors; Jeff Long, Midwest Fleet & Lease; Bud Brown, H.M. Brown & Associates; Norman Aslamy, United Automotive and Brandon Fox, Dealers Auto Auction of the Rockies are members of the Ambassador Action Group helping get the word out to members and non-members alike about legislative, legal and compliance issues facing the industry. In
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Bud Brown H.M. Brown & Associates
addition, they are well versed in explaining the benefits of being a member of CIADA, the largest statewide association representing the automotive industry. CIADA membership is a good business decision. This group has proven to be very beneficial to the association by growing general membership and adding dealerships to the Legal Protection Fund. They are also
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Norman Aslamy United Automotive
helping the industry stay viable by generously contributing their talent, time and expertise. Working together, the ambassadors are a potent force strengthening the association for everyone’s benefit. A strong trade association is mandatory to be more proactive when addressing the many factors influencing today’s business climate, which become more evident every day. Strength
Brandon Fox Dealers Auto Auction of the Rockies and quick response time is also necessary when fighting matters that could negatively affect your dealership. With the ambassadors’ involvement and participation, these issues are addressed more effectively. This action group is helping CIADA spread the word when needed. Thanks to all of the ambassadors who are working on behalf of all in the used car business.
ASSOCI AT ION NE W S
Discount for NIADA Career Center LIMITED TIME OFFER
Let us help you find your next great employee! With its focus on auto industry companies, the NIADA Career Center offers its members – and the auto industry at large – an easy-to-use and highly targeted resource for online employment connections. “We know how critical it is for employers in the auto industry to attract first-rate talent with a minimum expenditure of time and resources,” said Scott Lilja, Senior Vice President of Member Services. “And it’s important for us to help enable smooth career transitions for those seeking industry jobs.” Look no further than NIADA’s interactive job board for all your hiring needs. Our membership is comprised of the highest qualified professionals in the automotive dealer industry. Plus, for a limited time, take 25 percent off all multi-posting packages with the code 25OFF2016 at checkout. This discount is only good through April 30, so visit careers.niada. com today to learn more and create your employer profile!
M A RK E T WATCH
Car Shoppers Rely More on Social Media AUTOMOTIVE SOCIAL MEDIA TRENDS STUDY
Digital Air Strike recently released the findings of its fifth annual Automotive Social Media Trends Study. The study highlighted consumer behaviors on social networks, review sites and mobile devices related to the car shopping, buying and service experiences, and signals consumer expectations of auto dealerships and their sales and service staffs relative to dealership social presence, online reputation and mobile and digital engagement. The study includes findings from 2,000 car buyers and 2,000 service customers who either purchased or serviced a vehicle within the previous six months. The study – with data collected in the
past 45 days – covers all major U.S. geographic regions and represents domestic and foreign automotive brands, with even distribution across age and gender groups. Three-quarters of car buyers and 68 percent of service customers say Internet research, including social media and review sites, was the most helpful medium when selecting a car dealership – surpassing all other media, including dealership websites which ranked highest with only 16 percent of car buyers (down from 19 percent in 2014 and 24 percent in 2013). This is the third consecutive study where car buyers have ranked social networks as more important than dealership websites in
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their dealership selection process. Half of the respondents ranked review sites as the most influential dealership selection tool (up from 45 percent the previous year), while 18 percent ranked review sites and a dealership’s website as equally influential and 16 percent ranked a dealership’s website as most influential (down from 19 percent over prior year). Almost all car buyers feel a dealership needs to have at least a four-star rating or higher on review sites to have a “good rating.” Facebook ads continue to gain use and awareness: 66 percent of car buyers/ shoppers or owners who have seen a Facebook ad say they have clicked on it, up from 33 percent in 2014.
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10 Tips to Control Social Media Attacks and Protect Your Online Reputation STRATEGIES AND TACTICS TO MITIGATE ATTACK BY KATHI KRUSE, FOUNDER/CEO KRUSE CONTROL INC.
Getting off the sidelines and into the game of social media marketing is no easy task. I see some dealers embrace social media and online reputation management, but there are many
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more who sit on the sidelines. My experience in the last seven years has shown me that one of the reasons dealers and managers steer clear of social media is they just don’t want to leave themselves open to online attacks. They reason, “Hey, if we’re not participating, then no one can say anything bad about us.” Not so fast, folks. Contrary to what you may believe there will come a day (if it hasn’t already) when your store is talked about online, and it’s always better to be participating in the conversations and communicating your value. Why let misinformation tell your story? Why let your competitors do all the talking for you? If apprehension is keeping you and your store off of social media, you’ve come to the right place. The anxiety caused by all the doomsday scenarios (both real and imagined) can make even social media veterans want to think twice about opening their business up to scrutiny. Social media levels the playing field for brands and consumers. Your brand is no longer what you tell consumers it is – it’s what consumers tell each other it is. If fear of a social media attack weighs heavily upon you, rest assured, there are strategies and tactics you can take to mitigate attacks… and even turn critics into fans. 10 TIPS FOR DEALING WITH SOCIAL MEDIA AND ONLINE REPUTATION ATTACKS Implement an internal policy. Every person on your team needs to know and understand your policy for managing criticism online. A good social media policy instituted at hiring is a best practice. For current employees, it’s best to gather groups together to discuss your policy, answer questions, distribute copies and have everyone sign an acknowledgment they received it. We offer our clients at
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Kruse Control a social media policy template. If you’d like a copy, visit http://bit.ly/ KruseControlSocialMediaPolicy. Get to the bottom of the initial complaint. Many times people are just looking for ways to vent their frustrations. The use of empathy here cannot be overstated. Consider the source. I’ve seen many complaints via social media and online reviews from people who are not, and never will be, your customers. Some people are just out to create trouble because it gets them attention. Picking on you is their “gripe du jour” and often the crowd will come to your defense. Sometimes the source is a former employee or a competitor. There are legal remedies for dealing with them and the online platforms are getting better at assisting businesses in this arena. Certainly report suspect reviews to Yelp and Google. They do take action. Have a written external policy. A written policy for responding to any engagement helps you moderate conversations in a professional yet open manner. Your policy should describe when to delete comments and when to ban users, and outline the ways that discourse should be handled. It should set the overall tone of the conversation on your page or your profile. Assume the best. We’ve all been guilty of jumping on the negativity bandwagon when we’re criticized. When you’re defensive, you sell yourself short because you’ve thrown the gauntlet down, closing the door to speedy resolution. Instead, be helpful, pleasant and non-defensive in every situation. It defuses things and allows you more time to figure out what real issue may be at hand. Never assume malicious intent, because most of the time it turns out to be a problem you can rectify. Buy Here-Pay Here dealers have an added layer of difficulty. Your customers can and do take to social media because they need somebody to dump their pain on. Very often, through no fault of your own, it’s you. Each situation is unique and tricky. If you need help, reach out to a trusted resource for guidance
(you can email me at kathi@ krusecontrolinc.com). Listen and respond quickly. Social media is a 24/7 medium and a lot of dealers have realized they need to limit their response time. In the case of a customer having issues, we know listening and responding quickly can save it from gaining traction and becoming bigger than it needs to be. Own your mistakes. Sometimes, your critics tell you the truth and that’s not easy to hear. Humility, even in the most painful moments, can scatter animosity. Owning your mistakes reassures future customers you take feedback seriously and they won’t have to worry should something like this happen to them. Be human. When you’re transparent about your blemishes, an amazing thing happens: your community comes to your defense. Refrain from deleting posts. There’s a natural knee-jerk reaction to delete a troublefilled post, but remember – the Internet is forever. You may remove the damage temporarily but depending on how long the post was out there, if people see you’re deleting posts, the word gets out and they’ll take you to task for doing so. Do nothing. Sometimes, it’s best to stay quiet. There are a few good cases for ignoring a critic. Some people just want to cause trouble and strife – they are called trolls. You may even know who yours are. Responding to trolls can only add fuel to the fire, which is what trolls feed on. Ignore them and don’t waste a moment of your energy on them because that’s what they live for. No matter how great you are, there will always be someone criticizing you. Don’t miss out on the advantages of social media marketing to build your online reputation. Arm yourself with strategies and tactics to mitigate critics and defuse attacks. Open yourself and your business up to new possibilities. Kathi Kruse is an automotive social media marketing expert, blogger, consultant, author, speaker and founder of Kruse Control Inc. Kruse Control coaches, trains & delivers webinars focused on integrating social media and online reputation management into dealership operations.
COOKING WITH EDDIE
FRONT RANGE AUTO’S EDDIE COUCH SHARES HIS FAVORITE “COOKING WITH NONNA” RECIPES
PUERTO VALLARTA SHRIMP
Ingredients: • 2 tablespoons olive oil • 1 pound (18-22) medium shrimp, peeled and deveined • 1 medium garlic clove, finely chopped • 1/2 teaspoon salt • 1/4 cup of cider vinegar • 2 ancho chiles, cut open , seeds and stems removed (dried chile) • 1 teaspoon dried oregano (Mexican variety preferred), crumbled • 1/2 cup coarsely chopped onion • 1 teaspoon brown sugar • 2 tablespoons hot tap water • 1 tablespoon finely chopped fresh cilantro
Directions: 1. In a medium skillet, heat the oil over medium heat, and cook the shrimp, garlic, and 1/4 teaspoon of the salt, stirring, until the shrimp are pink, 3 to 4 minutes. Remove the shrimp to a bowl, cover and refrigerate. Reserve the skillet for the sauce. 2. In a small skillet, heat the vinegar until warm. Cut or tear the ancho chiles into pieces and soak in the vinegar until soft, about 20 minutes. Remove the anchos then put them in a blender with the oregano, onion, sugar, and hot tap water. Discard the vinegar. Blend to a smooth puree. Heat the same skillet used for cooking the shrimp, and cook the pureed chile mixture, stirring, until thickened, about 5 minutes. Transfer to a bowl and cool. To serve, pool the sauce on a serving plate. Arrange the shrimp in an overlapping pattern on the sauce. Scatter cilantro on top, Serve as an appetizer with toothpicks. extra virgin olive oil and add the garlic and parsley.
INDUS T RY NE W S
PESTO-CRUSTED PORK CHOPS WITH SWEET AND SOUR COLLARDS
Makes 5 servings* Hands on time 30 minutes* Total time 42 minutes* Ingredients: • 1/2 cup golden raisins • 1 Cup hot water • 6 (1 inch thick) boneless pork • chops (about 2 lb.) • 1 (7oz.) container reduced fat • pesto, divided • 1 cup panko bread crumbs • 6 Tbsp. olive oil, divided • 1 garlic clove, minced
• 1 ( 16-oz ) package frozen chopped
collard greens • 1/4 cup balsamic vinegar • 1 Tbsp, brown sugar • 1 tsp. salt • 1/2 tsp. dried crushed red pepper • 1/3 cup pine nuts toasted • 1/2 cup chopped sweet onion
Directions: 1. Stir together raisins and hot water. Let stand 12 to 15 minutes; drain. 2. Coat pork shops with half of pesto; dredge in panko, pressing gently to adhere. Cook in 1/4 cup hot oil in a large nonstick skillet over medium heat 6 to 7 minutes on each side or to desired degree of doneness. 3. Heat remaining 2 Tbsp. olive oil
EDDIE’S CHALLENGE: So You Think You Can Cook?! Submit your favorite recipe to CIADA for a taste test and chance to compete with Eddie’s culinary skills.
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in skillet; add onion and garlic, and sauté 3 to 4 minutes or until tender. Add collards, and cook 3-4 minutes or until tender. Stir together vinegar and next 3 ingredients; add to collards, and cook 2 minutes. Remove from heat. Stir in raisins and pine nuts. 4. Serve pork chops with collards and remaining pesto.
SPECIAL THANKS TO THIS MONTH’S “CHALLENGER” – VIVIAN MARTIN.
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INDUS T RY WATCH
Auto Dealers Becoming a Hot Commodity A LOOK AT THE UPWARD CYCLE BY MIKE GRANDE, SDR VENTURES
Mergers and acquisition activity in the auto dealership market has been growing steadily over the past several years and is likely to continue to grow for at least the next few years. Both valuations and the number of transactions have been on an upward cycle since early 2013. Here are the top five factors contributing to this increased trend of M&A activity. 1. The overall automotive market is currently very strong, as car sales have finally picked up significantly from their lows after the financial crisis. The result has been a sharp increase in revenue and earnings for dealers. According to data compiled by The Presidio Group, earnings growth has been up approximately 28 percent per year since 2008. Stronger financial performance has resulted in higher valuations and more of an incentive for owners to sell. Stronger earnings also create an incentive for buyers to acquire an increased earnings stream. 2. It is often more viable for dealerships to acquire companies as opposed to building new locations. Manufacturers are still restricting the number of new dealerships they will allow to be opened. Additionally, development costs associated with building new dealerships have increased significantly as a result of the economic recovery. 3. Overarching financial conditions, such as the cost of money, financing availability and willingness of financial institutions to lend, are all creating favorable acquisition conditions. Valuation multiples, while high, are still within a
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reasonable historic range, and they are nowhere near the inflated multiples that buyers were paying from 2006 to 2008. 4. There are currently more buyers in the market than sellers, which applies upward pressure to valuations as a result of supply and demand. Nevertheless, there is still a good supply of dealerships for sale, which is fueling transaction activity. Many baby boomers have held onto their stores past their target retirement age due to the unfavorable economic conditions of five years ago, and they are now looking to capitalize on the current M&A upswing to monetize their investment in their company. 5. Since many dealerships were forced to close stores or downsize their operations considerably to survive the downturn, these dealerships are now operating more efficiently, have cash reserves and are looking to gain back a portion of the market share they may have lost. Large national dealership chains, such as AutoNation, Asbury, Group 1, Lithia, Penske and Sonic, generally look to acquire dealerships in large metro areas in the Sun Belt region from Florida west to California. Local and regional dealers are acquiring to gain market share and efficiency. A larger size often allows dealers to gain more attention from the manufacturer as well as spread shared overhead costs across multiple stores. However, despite the ripe market conditions, dealerships will usually still need to possess certain characteristics to be attractive to acquirers. Acquirers are mainly looking for dealerships with a track record of strong profitability and growth potential. They want to know the dealerships they acquire will be able to generate enough profit to recoup their initial investment within a reasonable period, typically three to five years. Dealerships tend to trade on a multiple of “Earnings Before Interest, Taxes, Depreciation & Amortization” (or EBITDA), not including floorplan interest. This multiple is often adjusted for the size of the dealership, growth potential, efficiency and the fairmarket value of net assets, as well as working capital included in the transaction. While there
WHILE THERE ARE MANY ITEMS TO FOCUS ON WHEN ATTEMPTING TO MAXIMIZE THE VALUE OF A DEALERSHIP, EARNINGS WILL ALWAYS HAVE THE BIGGEST OVERALL IMPACT ON VALUATION.
are many items to focus on when attempting to maximize the value of a dealership, earnings will always have the biggest overall impact on valuation. Dealers with high levels of earnings typically focus on their entire dealership. A wellrun service department will contribute significantly to gross profit while increasing store traffic even more than the best advertising campaign. Financing and maintenance contracts should also be a substantial source of gross profit, and they are an integral part of any wellrun dealership. A good portion of the strength in today’s auto market is clearly the result of making up for lost sales during the economic downturn. According to the Center for Automotive Research, auto sales growth is projected to slow down by roughly 3 percent as the auto market returns to more normal sales levels. These conditions help explain why some dealerships are exploring the possibility of a sale or acquisition in the current environment. Mike Grande is a director at SDR Ventures, a Denver-based investment banking firm. Mike specializes in executing mergers and acquisitions for small and medium-sized businesses. Prior to his M&A experience, Mike purchased, operated and sold a number of businesses including a major marine dealership and RV storage and service business. Mike can be reached at 720.221.9220 or mgrande@ sdrventures.com.
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Membership Dues Are $225.00 annually, which includes $60 for NIADA. ty:____________________________ State:_________ Zip:_______ County:____________________________ For income tax purposes, member dues paid to CIADA are deductible as a business expense. CIADA estimates that 16.7% of all dues paid to CIADA are utilized for nondeductible lobbying expenditures. All members are advised that this percentage of dues paid to CIADA in the tax year 2015 is non-deductible for income tax purposes. Consult your tax advisor. By completing this form, I am consenting to and giving CIADA, its affiliates and subsidiaries, my permission to contact me and provide information to me at the mailing and e-mail address, telephone and fax number(s) I have provided.
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ncome tax purposes, member dues paid to CIADA are deductible as a business expense. CIADA estimates that 16.7% of all dues paid to CIADA are utilized for non ble lobbying expenditures. members are advisedaddress that thisbelow) percentage of dues paid to CIADA in the tax year 2015 is non-deductible for income tax purposes. Con CheckAll (payable to CIADA-see your tax advisor. Credit Card: this form, I am consenting to and giving CIADA, its affiliates and subsidiaries, my permission to contact me and By completing provide information to me at the mailing and e-mail address, telephone and fax number(s) I have provided. NAME ON CARD: ________________________________________________________________________________________
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COMP L I A NCE OV ERDRI V E
Compliance Potholes to Avoid in 2016 COMPLIANCE DOCUMENTS CAN ONLY DO SO MUCH BY CHIP ZYVOLOSKI, SENIOR ATTORNEY, WOLTERS KLUWER FINANCIAL SERVICES
Let’s start the new year with an essential truth. Your compliance documentation can only do so much. It includes necessary disclosures and warnings, financial terms, repayment terms, and the key rights and responsibilities for all the parties involved in the transaction. But your compliance needs and risks extend beyond the language in your documentation. Here are some of the compliance potholes regulators, lenders and litigators will be focused on in 2016. Data privacy: Federal and state laws require dealers to protect personal information about your customers and potential customers. In 2015, a number of
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states passed legislation detailing when and how creditors need to notify debtors when their personal information has been breached. High profile data breaches at large retailers gained national attention in 2015 – and protection of consumer data became a hot issue for regulators. Those incidents also showed that breaches create a significant reputational risk to businesses. The obligation to protect customer information exists apart from any contracts and disclosures. It cannot be waived or removed by a contract provision. Dealers of every size need to have a robust information security program in 2016. Credit discrimination – disparate impact: Intentionally or unintentionally discriminating against buyers based on race, national origin, gender or other protected factors is illegal under federal and state laws. Since March 2013, the Consumer Financial Protection Bureau has been laser-focused on unintentional pricing discrimination (disparate impact) due to discretionary dealer rate markups. In the last three years, the CFPB has entered into consent orders with a number of lenders for fines and required reimbursements of more than $100 million. Disparate impact has been the subject of many NIADA articles and conference presentations. The issue is not that suspect transactions are usurious or are charging rates and fees that are in and of themselves illegal. Instead, otherwise legal contracts become illegal if a group of buyers in a portfolio are charged more than everyone else and those buyers are in a group protected under the law. The obligation to set rates and charges consistently for all equally qualified buyers cannot be waived or removed by a contract provision. The CFPB is not the only party concerned about disparate impact. Lenders are also very concerned. Dealers need to have, and follow, policies and practices to ensure credit and credit pricing is made in accordance with the Equal Credit Opportunity Act and its Regulation B.
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Debt collection practices: Retail sales contracts generally outline remedies on default, but they cannot (and should not try to) cover all possible details of the remedies described. For example, retail sales contracts generally would not describe the daytime hours in which the creditor may call a buyer to discuss a delinquent account, even though laws restrict the hours for collection calls. In short, debt collection practices are highly regulated, but you might not know it by looking just at the high level terms in the credit agreement. The CFPB was very active in policing debt collection practices in 2015. In its fall 2015 Semi-Annual Report, the CFPB noted several actions against debt collectors totaling more than $100 million in relief to consumers and more than $60 million in civil money penalties. In many of the actions, the CFPB joined with state attorneys general or other regulators. One of the actions was against a Buy Here-Pay Here auto dealer with civil money penalties of $8 million. Debt collection practices are a clear focus of regulators. Retail sales contract terms will cover the essential collection remedies, but there are a legion of legal and compliance details that apply when implementing them. The obligation to follow debt collection laws cannot be waived or removed by a contract provision. Dealers need to thoroughly understand and implement collection requirements and conduct extensive due diligence on any third-party collection agencies they use. Arbitration: Your retail sales contracts may include a predispute arbitration provision, giving either party the option to require the other to resolve disputes through arbitration rather than in court. It may also include a provision that prohibits the buyer from joining a class action lawsuit if the dealer requests resolution using arbitration. In October 2015, the CFPB announced it is considering proposing rules that would prohibit arbitration provisions that limit consumers’ rights to participate in class action lawsuits. The CFPB has referred to such
prohibitions as a “free pass” for dealers to engage in wrongful practices then avoid class action liability risk by requiring individual arbitration. To be clear, such provisions cannot and do not absolve dealers of any legal or compliance liability for wrongful conduct. Buyers can still seek redress for creditor’s wrongful practices through arbitration. They can also complain to state attorneys general and state and federal regulators, including the Federal Trade Commission and the CFPB. For example, in May 2015, the CFPB announced settlements with two large mobile phone companies for the unauthorized addition of charges to customer invoices. The regulatory action occurred regardless of whether the mobile phone companies’ customer agreements included arbitration provisions. No matter what happens with any regulations proposed, there is no “free pass” in your agreements. An arbitration provision in your sales contracts will not waive or remove liability for dealer’s unlawful conduct or compliance violations. The best approach is to have strong ethical standards, supporting documentation for all fees and charges, and procedures for handling complaints to help address problems before they escalate to more formal and expensive disputes. As you review your compliance programs for 2016, remember to look beyond your compliance documentation. Working with experienced F&I staff, attorneys and quality vendors is essential to making sure you have the necessary compliance documentation. But remember that your credit documentation can’t do it all. Avoid the potholes. Data privacy, disparate impact (credit pricing), and debt collection practices go beyond compliance documentation and will require additional review and preparation to maintain compliance. A business best practice for dealers is to have strong compliance documentation, and solid business policies and practices to address compliance requirements beyond your documentation. Chip Zyvoloski is a senior attorney for Indirect Lending at Wolters Kluwer Financial Services. For more information, please visit www. wolterskluwerfs.com/indirect.