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CIADA INSIDER SEPTEMBER/OCTOBER 2014

magazine

CONSUMERS NOT JUST CHOOSING

VEHICLES ONLINE, BUT

TOO

The Increasing Demand to Pay Online and Possible Solutions FEATURE STORY page 20

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inside page 33

Dean Gunter performs his magic at the CIADA charity auction, held during this year’s golf tournament. The funds raised went toward CIADA’s newly formed charity and to Mark Chalfant’s family.

THANKS TO ALL WHO BID AND DONATED!

DALLAS, TEXAS Permit No. 2079

PAID

PRSRT Standard U.S. Postage

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FRONT RANGE CLASSES

COLORADO INDEPENDENT AUTOMOBILE DEALERS ASSOCIATION

INSIDE

06 Letter from the President 10 10 Cars You Shouldn’t Buy 12 Avoid Learning Lessons the Hard Way 14 Organic SEO & Social Media 20 Consumers Not Just Choosing Vehicles Online 24 Joe’s Garage 30 Washington Update 31 Golf Tournament

WHAT’S NEW

Mark Your Calendar for the National Leadership Conference

NOVEMBER 11-14, 2014

The 2013 NIADA National Leadership Conference and Legislative Summit was a huge success. You don’t want to miss this year’s event! You’ll hear the latest legislative and regulatory updates in the industry and have the opportunity to voice your concerns to your U.S. congressmen. Make plans now to attend Nov. 11-14 at the Omni Shoreham Hotel in Washington, D.C.

ADVERTISERS INDEX

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AC Auto Pay.....................................................27 ADESA..............................................................13 Alliance Inspection Mgt....................................25.

Ally....................................................................15 Black Book..........................................................7 DAA of the Rockies............... Inside Front Cover.

Dealer Funding.................................................28 DealerMatch.....................................................17 GoldStar GPS.....................................................5 Lobel Financial Corporation..............................3.

Loveland Auto Auction.....................................23.

Manheim.com.....................................................9.

Manheim Denver.............................. Back Cover Manheim Littleton CO......................................26.

Manheim Pennsylvania....................................19 Mark One Holdings......................................... 29 Phoenix Systems............................................. 22 Protective..........................................................21 TrueCar.............................................................11.

United Acceptance...........................................24.

VAuto...................................... Inside Back Cover

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

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 (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 © 2014 by NIADA Services, Inc. State Magazine MGR./Sales Troy Graff • troy@niada.com Editors Andy Friedlander • andy@niada.com Jacinda Timmerman • jacinda@niada.com Magazine Layout & Graphic Artist Chantae Arrington • chantae@niada.com Art Director Christy Haynes • christy@niada.com

Lakewood, Colorado Education & Training Center 950 Wadsworth Blvd., Suite 101 Lakewood, CO 80214

IS YOUR DEALERSHIP PROTECTED?

MORE THAN 65 OF YOUR FELLOW DEALERS HAVE JOINED. ENROLL IN THE CIADA LEGAL PROTECTION FUND NOW!!!

CALL 303-289-8000 WITH QUESTIONS.

Pre-Licensing Certification

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.

Basic Title Training Class

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.

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

BOARD OF DIRECTORS President Dave Cardella Mountain States Auto Group 303-887-8977

Vice-President Stan Martin Stan’s Auto Sales LLC 303-650-1011 Treasurer Dean Gunter Mile High Car Company 719-570-7800

Jim Bode J. Bode Used Cars, Inc. 303-366-1535

Tim Gaylord Gaylord Leasing Co. 303-667-6188

Roger Kirlin Roger Kirlin Auto Sales 303-526-7805

Joe McCloskey McCloskey Motors 719-594-9400

Jim Bahne Bahne, Inc

Wally Smith 303-659-0004 Smith Motors

Chairman of the Board Dean Strawn AutoTrek 303-934-5600

Mike Bonicelli Nevada Auto Sales 719-635-2533

Teshome Tesfaye Norfolk Motors 303-523-5814

Secretary Dan Berkenkotter Berkenkotter Motors 303-660-8754

John Lindberg Auto Warehouse 970-490-2886

Mark Weida Street Smart Auto Brokers 719-434-8443

Deborah Thompson Automotive Search, Inc. 303-691-5622

Peppe DeMarco Highline Motors 970-206-9963

Printing Nieman Printing

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ASSOCIATION

ASSOCIATION

NEWS

Letter from the President INDUSTRY ISSUES

As I write this letter I can’t seem to stay focused on just items pertaining to our industry. This summer has been busy. Our golf tournament was a huge success with 152 participants and many vendors enjoying a beautiful day.

The convention in Las Vegas was once again very informative with many workshops and guest speakers. If you’ve never attended one, do yourself and your business a favor by planning for next year’s convention. Many people attend year after year. The knowledge they gain is invaluable to success as new committees and regulations continue to pop up concerning our industry.

This year we had a representative from the Consumer Financial Protection Bureau talk to us. While NIADA attorney Shaun Petersen posed outstanding questions, I don’t believe we received one straight answer – shameful but enlightening as that was their stance in Washington D.C. last November. As dealers we need to be aware there is no set rule that governs this bureau and we are responsible for staying compliant.

A couple issues that seem to have come forth again are the 30-day window in perfecting the lien on a title and material damage disclosure. I can’t stress enough how important these issues are to your business as both can have a huge impact on your bottom line.

If your lien is not perfected within 30 days and your customer files bankruptcy within 90 days, you may lose the vehicle to the bankruptcy trustee. If the buyer defaults

at any time you might have to purchase that contract back per your lender agreement. It’s an expensive oversight!

Non-disclosure of material damage is a violation of our laws in Colorado and the board will address all complaints. Hopefully you opened our email outlining how they base their decisions. If not, look for it again as we will be re-sending it.

As sales increase sometimes we let the little things slip by, but in today’s business environment with unscrupulous lawyers waiting for an opening, please don’t fall asleep. We all work too hard and put in too many hours away from our families to let a little mistake turn into a costly mistake.

As I said in the beginning of this letter, sometimes it’s hard to stay focused on our industry when so much is happening in our lives every day. This summer a friend of mine, Mark Chalfant of Manheim Denver, suffered a real tragedy when his son was murdered, a senseless tragedy that will affect many families for a long time. If you know Mark, you know he’s strong and will pull his family through this tragedy but please say a prayer for them. I know they will appreciate it.

Thanks, David Cardella CIADA President

NEWS

Nominate a Quality Dealer!

CIADA ACCEPTING NOMINATIONS The State Quality Dealer of the Year is CIADA’s most prestigious award.

Nomination and selection brings high honor to the individual and to the dealership. The winning dealer serves as an inspiration and model for other independent automotive dealers to be the very best in their home communities.

Selection is based on dealers’ service to the industry, how they operate their dealership and their support of the community. The selected dealer goes on to represent Colorado and compete for the coveted NIADA Quality Dealer of the Year award.

CIADA is currently accepting nominations for Quality Dealer of the Year. To learn more, or to nominate a dealer, visit www.ciada.org and click on Quality Dealer under the About Us tab.

6 ASSOCIATION

PRODUCT

NEWS

State Fines TAKE TIME TO AVOID FINES

BY TODD O’CONNELL, CIADA EXECUTIVE DIRECTOR

Since the beginning of the year, several emails addressing the necessity of keeping your salesperson licenses current have been sent. Unfortunately, not everyone has received the message. Every month there continue to be dealers fined for having unlicensed salespeople simply due to not sending in the license renewal.

The expression “time is money” is usually credited to Benjamin Franklin from a 1748 essay titled Advice to a Young Tradesman. Take Benjamin’s advice and implement your own “license renewal” program – a couple of minutes a month can potentially save a substantial fine.

Typically when a dealer is found using an unlicensed salesperson, the agreed to stipulation is a fine of $20,000, $7,500 payable with the remaining $12,500 held in abeyance for one year. Save this money by regularly checking all of the renewal dates on your salesperson license board.

In addition, please be aware that when you hire an individual who is transferring his or her license to your dealership, there may only be a month or so left before the license expires. Transferring a license does not extend the expiration date. Now is the time to put in a “safeguard” system and keep your hard earned profit.

Another time issue is the salesperson application process. If you are involved with your prospective salesperson’s application, make sure they disclose everything about their background. Every month CIADA INSIDER

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applicants are denied licenses and required to go before the Motor Vehicle Dealer Board because something showed up on the background check not disclosed on the application. Having to go through this process will normally delay the license a minimum of 30 days.

The instructions are very clear what information the Auto Industry Division requires. The applicant must disclose: • Any felony conviction.

• Any misdemeanor conviction in the last 10 years.

• All serious traffic offenses including DUI, DWAI, reckless driving, leaving the scene of an accident and driving under denial, suspension or revocation of license.

• If one is currently charged with any criminal offense.

• Any delinquency in the filing or payment of any taxes or judgments owed to a governmental agency.

The applicants need to know truthful disclosures will not necessarily be cause for denial but not disclosing will usually result in a rejection. The moral to the story is to have your prospective salespeople disclose everything with an explanation and not have to defend misrepresentation on an appeal in front of the board.

Thank you and please contact me with any questions: Todd O’Connell (303) 239-8000 toddo@ciada.org

AND SERVICES

Carfax Expands Accident Data

REPORTS AVAILABLE ONLINE Carfax announced that automobile accident reports from police departments across the U.S. now are accessible through its accident reports service, Crashdocs.org. Insurers, lawyers and other interested parties can order accident reports from all 50 states and the District of Columbia through an online site. In addition, Carfax does not add convenience fees to accident reports ordered through Crashdocs.org, in many cases making them the same price that’s charged at the police station.

People who need information about a specific crash can order the police accident report online through Crashdocs.org instead of taking time to visit the police station. There is no cost to create a Crashdocs.org account and no added fees from Carfax to order the accident reports online.

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AUCTION

NEWS

Manheim Study Reveals Presence of Physical Title at Sale Greatly Increases Vehicle Conversion Rate STUDY FOCUSES ON DEALER VEHICLES

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While a variety of factors can affect vehicle conversion rates at auction, Manheim revealed in a recent study that the presence of a physical title at the time of sale can potentially double vehicle conversion rates. The research also revealed that vehicles with same-day titles contribute to slightly higher online sales via Simulcast and OVE.com.

“Roughly 35 percent of all vehicles at auction are sold without the presence of a physical title and this can negatively affect customer profitability,” shared Ally Pomeroy, customer consultant. “While we observed significant differences between commercial and dealer sellers when it comes to having physical titles at auction, this study focused on dealers because the majority of vehicles with delayed titles are sold by dealers.”

Conversion Rates: Manheim’s study also showed that while typical dealer conversion rates range between 50 and 55 percent, the average conversion rate for dealer vehicles with a title present is 86.2 percent, as opposed to 42 percent for delayed vehicle titles. Also revealed was that newer, lower-mileage vehicles have the lowest conversion rates without a title present, while title delay is less of a factor in the conversion of older, higher-mileage vehicles.

“These findings may be due to a dealer’s

E XC LUS I V E LY

ON

tendency to have reconditioning work done on older vehicles to get them ready to retail,” Pomeroy said. “Because they are already expecting delays and extra holding costs due to reconditioning time, the title delay is less of a concern.”

Online and Manheim Market Report: Having title-ready vehicles can also influence positive online buyer activity.

For example, 18.5 percent of vehicles with physical titles present sold online via Simulcast or OVE.com in 2014, compared to 17.7 percent of vehicles with delayed titles.

For online transactions, buyer confidence is crucial, and the risk of a delayed title can discourage dealers from making the purchase. And, when it comes to MMR, the study showed that MMR value by dealer groups is the same whether the title is present or not.

The data used for the study included Manheim’s total wholesale vehicle transactions in the U.S. from January 31 through May 31, 2014. In addition, the study captured only “whole car” data and excluded specialty and total resource auctions.

To review the results of this study, access the white paper at: http://www.manheim.com/ content_pdfs/products/Impact-of-DelayedTitles-at-Auction.pdf.

ROUGHLY 35 PERCENT OF ALL VEHICLES AT AUCTION ARE SOLD WITHOUT THE PRESENCE OF A PHYSICAL TITLE AND THIS CAN NEGATIVELY AFFECT CUSTOMER PROFITABILITY

ABOUT MANHEIM (WWW.MANHEIM.COM) A SUBSIDIARY OF COX ENTERPRISES, MANHEIM REGISTERS NEARLY 8 MILLION USED VEHICLES ANNUALLY, FACILITATING TRANSACTIONS REPRESENTING MORE THAN $50 BILLION IN VALUE. MANHEIM’S RESEARCH AND CONSULTING ARM, MANHEIM CONSULTING, PROVIDES MARKET INTELLIGENCE AND PUBLISHES THE ANNUAL USED CAR MARKET REPORT.

NIADA.T V

Missed an Education Session while at Convention?

WE’VE GOT YOU COVERED!! SIMPLY CLICK ON THE “NEW PROGRAMS” CHANNEL TAB ON THE LEFT SIDE OF THE MENU PAGE OF WWW.NIADA.TV.

Life, Liberty, and the Pursuit of and Rumon Lasker, Product Management, you on the phone, send you an email, and Accounts Receivable Manheim. walk through your door, until you shake Collections can be a touchy situation, Are All Men Created Equal in hands and give them the keys, you must and can even result in legal battles. This Financing? think legal, legal, legal. Make sure you’re session provides tips that will help keep Why should you worry about revisions not leaving anything out! you out of hot water. Hear how to make in the Truth in Lending Act and the Fair Presented by Rob Sickles, Attorney, risk assessments on operations, handle Credit Reporting Act? What is Regulation Hinshaw & Culbertson. complaints and disputes, and implement Z and the Credit Card Accountability Future Forward - Prepare for effective documenting policies and Responsibility and Disclosure Act of 2009?

Tomorrow’s Market procedures.

How do the Dodd-Frank Act amendments Will buying used vehicles be like buying Presented by Robert L. Föehl, Vice requiring disclosure of credit scores and music on iTunes? Will auction barns go the President and General counsel, ACA related information when a credit score is way of record stores? Is the need to touch International. used, affect the way I do business? What every car already a competitive advantage?

Buying FOR Your Customer is adverse action or in risk-based pricing?

Discover four pillars of used vehicle An Interactive Summit This session will help you to understand the acquisitions success you can apply today Having the inventory your customers are language and put the rules into practice at to ensure your dealership competes more looking for is critical to a well-run operation. your dealership. effectively in a fast changing market.

While software can help identify the right Presented by Randy Henrick, Presented by: Randy Kobat, VP & General pieces to stock, there still can be obstacles Dealertrack; and Jeff Ingram, Attorney, Manager, vAuto Genius Labs; and Greg to overcome through the wholesale sourcing Galese & Ingram.

Easterly, Co-founder, DealerMatch. process. This session showcases acquisition When in the Course of Selling PLUS: The re-broadcast of both the 2014 technology and best practices, highlighting Events - What Should I Do To NIADA Leadership Awards Banquet and ways to acquire the right vehicles nationwide Comply? the 2014 NIADA National Quality Dealer of at competitive costs.

A successful sale is more than closing the Year Awards are up on the site free to all Presented by Doug Turner, Director of the deal at a price that spells profit. It’s for viewing. Simply click on the “Industry Asset Management, JD Byrider; Chris Hill, making sure the transaction is carried out Events” channel tab on the left side of the Manager, Customer Education, Manheim; properly. From the moment customers call menu page of www.niada.tv.

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MARKET

WATCH

10 Cars TrueCar Data Suggests You Not Buy STUDY REVEALS TOP CARS AMERICANS DON’T WANT TO BUY

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During the recession, the American auto industry nearly collapsed. Car sales plummeted and companies struggled to stay afloat. Since then, U.S. car and light truck sales have steadily increased, reaching 1.6 million in May, up 11 percent from the year before.

Despite the general recovery, demand for some vehicles continues to underwhelm. According to figures from TrueCar, an auto industry information and technology platform, 15 models spent an average of at least 90 days on dealers’ lots before being sold.

Based on figures provided by TrueCar, 24/7 Wall St. reviewed the car models with the highest number of days to turn, a metric for gauging inventory levels. TrueCar turnover and sales data for each model reference a particular model year – figures for 2013 apply to cars in their 2013 model year, while figures for 2014 count data for 2014 model year vehicles.

TrueCar also provided sales data for each of these models. Manufacturer’s suggested retail price data is from manufacturer’s website, and refer to the newest model year.

The study also used information from J.D. Power and Consumer Reports surveys, the American Customer Satisfaction Index, National Highway Traffic Safety Administration and the Insurance Institute for Highway Safety.

From 24/7 Wall St., here are the 10 cars Americans don’t want to buy: 10. Scion tC Days to turn: 90.2 Jan.-May unit sales: 1,571 MSRP: $19,965 While tC sales for the first five months of 2014 are up roughly 10 percent over the same period last year, demand remains cool. Through May, a tC hatchback took dealers an average of 90 days to turn, up from just under 63 days last year. This is despite tC’s MSRP of less than $20,000.

Scion cars are typically targeted at younger buyers, a strategy that has so far had mixed results for parent company Toyota. Last year, the company considered repositioning the brand as an entry-level luxury car.

According to J.D. Power’s 2013 Initial Quality Study, Scion vehicles were the worst rated cars nationwide, with 161 problems per 100 vehicles reported by owners within the first 90 days of ownership.

9. Dodge Avenger Days to turn: 96.5 Jan.-May unit sales: 7,024 MSRP: $20,595 It took Dodge dealers an average of over 96 days to sell an Avenger between January and May, up from just under 51 days during the first five months of last year. As turnover slowed, so did sales, down 34 percent during January through May versus last year’s period. According to J.D. Power’s 2014 Vehicle Dependability Study, Dodge ranked as one of the least dependable car brands, with 180 problems per 100 cars sold. Customers were also less satisfied with the Dodge brand than nearly any other make, according to ACSI. While Dodge’s parent company, Chrysler, has invested considerably in the similarly built Chrysler 200, the company has announced plans to discontinue the Dodge Avenger.

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8. Lincoln MKS Days to turn: 97.0 Jan.-May unit sales: 817 MSRP: $40,690 The Lincoln MKS is hardly a top seller, with just 817 vehicles sold this year through May. Ford, which owns Lincoln, has worked for years to revive the Lincoln brand. Often regarded as outdated, the brand has struggled to find a niche among luxury buyers.

A Lincoln MKS starts at an MSRP of $40,690, although prices for a fully stocked and customized MKS can exceed $55,000.

For drivers who prioritize safety, however, the MKS may be a good option. The model earned a five-star safety rating from the NHTSA. 7. Chevrolet Tahoe Days to turn: 101.5 Jan.-May unit sales: 6,938 MSRP: $44,895 The Tahoe was named Chevrolet’s most dependable model by Consumer Reports last year. Chevrolet itself was among the top car brands in J.D. Power’s 2013 Initial Quality Study, and it received an average rank in the 2014 Vehicle Dependability Study. Despite these positive reviews consumers were not as satisfied with Chevrolet. The brand was tied for the worst in customer satisfaction, according to ACSI. Sales of the Tahoe have been unspectacular so far this year, down slightly from the first five months of 2013. And the number of days required to turn over a Tahoe rose from 73.4 to 101.5. This slowdown is likely caused to some extent by the recent release of an overhauled 2015 model year Toyota Tacoma.

6. Chrysler 200 Days to turn: 102.5 Jan.-May unit sales: 7,567 MSRP: $21,700 The Chrysler 200 took dealers an average of 102 days to sell so far this year as sales dropped by 40 percent, from 12,531 in the first five months of 2013 to 7,567 in the first five months of 2014. At least part of this decline may be due to the introduction of a new 200 model last month. Chrysler’s newest model represents a complete redesign of the 200 and a renewed effort to gain a toehold in the highly lucrative midsize sedan market. The 200 competes in a crowded segment against the likes of the Honda Accord and Toyota Camry – the nation’s two best-selling cars. Currently, a Chrysler 200 has a starting price of just $21,700, although fully loaded with optional features a 200 can run well above $30,000, up to over $35,000.

5. Jaguar XK Days to turn: 102.7 Jan.-May unit sales: 626 MSRP: $84,500 Jaguar has turned around in recent years following the 2008 acquisition by Tata Motors, and it has been an integral part of a rebounding United Kingdom automotive industry. Through May, U.S. Jaguar sales this year increased roughly 14.5 percent from last year. Sales of the XK, however, have barely changed over the past year. On average, it took dealers 102.7 days to turn a Jaguar XK, up from just 39.4 days in the first five months of 2013. A Jaguar XK carries a higher starting price tag of any car among the longest to turn, with an MSRP of $84,500. A convertible version of the XK starts at $90,500.

4. GMC Yukon Days to turn: 112.0 Jan.-May unit sales: 2,932 MSRP: $46,335 GMC ranked behind only Porsche in J.D. Power’s 2013 Initial Quality Survey. Consumers were also highly satisfied with GMC, awarding it a higher ACSI score than all but a handful of other brands. Last year, Consumer Reports ranked the Yukon as GMC’s most reliable car. Interestingly, while sales of the Yukon rose 42 percent year-over-year in the five months through May, the number of days to turn a Yukon rose from 62.4 in last year’s period to 112 this year. The Yukon is one of several General Motors’ full-size SUVs, alongside the Chevy Tahoe and Cadillac Escalade. Both the Tahoe and Escalade had among the longest turnover times in the in the U.S. through the first five months of 2014. Like some of its counterparts, figures for the Yukon may be impacted by the recent introduction of a newer model year.

3. Cadillac Escalade Days to turn: 115.5 Jan.-May unit sales: 1,498 MSRP: $71,695 The Cadillac Escalade is one of three full-size General Motors SUVs among the 10 cars with the longest days to turn, alongside Chevrolet’s Tahoe and GMC’s Yukon. It is also the slowest selling American manufactured car, taking an average of 115.5 days to turn in the first five months of 2014. This is up from 61.2 days to turn between January and May 2013, as sales have dropped 14.7 percent year-over-year. However, this may not necessarily be an issue of quality. General Motors recently released a new Escalade, which may affect sales and turnover for the 2014 model year. In fact, Cadillac was one of the top-ranked makes in J.D. Power’s 2014 Vehicle Dependability Study, behind only Lexus and Mercedes-Benz. Consumers were also happy with the brand, awarding it one of the industry’s highest ACSI scores.

2. Mitsubishi Outlander Days to turn: 117.1 Jan.-May unit sales: 3,788 MSRP: $22,995 The Mitsubishi Outlander took dealers an average of 117.1 days to turn so far this year. This was actually an improvement from last year, when it took dealers nearly 128 days to turn an Outlander.

Sales of the Outlander have also been strong this year, up 37 percent in the first five months of 2014 versus the year before.

Overall, sales of Mitsubishi cars rose nearly 34 percent in that time. However, the car maker still holds just a 0.5 percent share of the U.S. car market. Mitsubishi’s model competes in a crowded field against some of the nation’s best selling cars, such as Toyota’s RAV4, Honda’s CR-V and Ford’s Escape.

1. Volvo S60 Days to turn: 155.5 Jan.-May unit sales: 1,777 MSRP: $33,300 Volvo’s S60 had the longest average days to turn of any car model sold in the U.S., taking an average of 155.5 days to turn in the first five months of 2014. This was more than twice as long as it took to turn an S60 last year. Sales of the S60 have slid as well, with just 1,777 sold this year through May, down 13 percent from the same period in 2013. So far this year, total Volvo sales are down roughly 10 percent nationwide. As a brand, Volvo has long been considered a car maker in need of a turnaround. Ford sold it to Chinese car maker Geely in 2010. The brand still maintains a reputation for safety, and the S60 earned a five star safety rating from the NHTSA and was an IIHS Top Safety Pick+ last year.

Read more about the cars Americans don’t want to buy at 247wallst.com.

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COMPLIANCE

OVERDRIVE

Avoid Learning Lessons the Hard Way TAKE A COMPREHENSIVE APPROACH TO YOUR COMPLIANCE HEALTH

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In one of my recent Compliance Overdrive columns (How a Compliance Management System Can Help Your Dealership), I discussed increasing pressures on independent auto dealers as the Consumer Financial Protection Bureau and other federal regulators move to require them to demonstrate how they will ensure compliance with various consumer protection requirements. These mounting pressures are in addition to already challenging day-today requirements for managing operational and compliance risk by a staff of individuals wearing many hats and juggling a variety of responsibilities.

This month we look at a good example of how state regulators can sometimes enforce not only state but also federal requirements.

This reinforces the need to address both state and federal compliance issues to avoid some potentially painful lessons in compliance management.

A case in point: Condor Capital. Condor Capital Corporation is a New York-based sales finance company that acquires and services subprime automobile retail sales contracts.

Condor’s 2013 loan portfolio reportedly contained outstanding loans of more than $300 million nationwide.

AN OBVIOUS TAKEAWAY FROM THIS LAWSUIT IS THE IMPORTANCE OF HAVING BUSINESS CULTURES AND PRACTICES THAT PLACE THE HIGHEST VALUE ON HONESTY AND INTEGRITY.

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Last month New York’s superintendent of financial services filed suit against Condor Capital Corporation, alleging, among other things, it has “systematically hidden from its customers the fact that they have refundable positive credit balances and then failed to refund those balances unless specifically requested.”

The complaint provides a laundry list of compliance violations beyond the handling of positive balances, all of which seem to suggest the lack of a culture of compliance within the organization. The suit seeks restitution for consumers and disgorgement of profits.

The complaint charges that Condor’s activity is an unfair, deceptive or abusive act or practice pursuant to Sections 1031 and 1036(a) (1) of Dodd-Frank. This marks a significant entry into state prosecution under federal Dodd-Frank laws.

The authority comes from a provision in the federal Dodd-Frank Act that allows state regulators to enforce the provisions of the act against entities that are statechartered, incorporated, licensed or otherwise authorized to do business under state law.

Condor Capital is a state-licensed sales finance company, so the New York regulator chose to bring a claim against it under the federal Dodd-Frank Act as well as other state laws.

What are some of the other abuses cited in the Condor case? The complaint details instances of information security and privacy problems.

For example, the department examiners found “stacks of hundreds of hard-copy customer loan files lying around the common areas of Condor’s offices,” noting the files were replete with sensitive personal and financial information. Condor even “fails to adhere to the most basic information security policy, known as a ‘clean desk’ policy, which all businesses handling sensitive customer data must follow.”

It also did not have adequate policies or practices for handling electronic files. The complaint alleged “Condor has failed – despite repeated directives from the department – to adopt basic policies, procedures, and controls to ensure that its information technology systems – and the customer

BY CHIP ZYVOLOSKI data they contain – are secure.”

Although dealers are exempt from direct CFPB oversight, state regulators are obviously examining these types of compliance issues. And the compliance violations at issue clearly carry over to dealers. The focus on violations also clearly adds to lenders’ compliance concerns about the dealers they work with.

An obvious takeaway from this lawsuit is the importance of having business cultures and practices that place the highest value on honesty and integrity.

Other directly compliance-related issues include having policies and practices for organizing, managing and storing consumer information. Files cannot just be boxed up and stored on site on open shelves or in spare, unsecured rooms within the premises.

But the larger issue is to ensure your dealership has policies and procedures to address all of the important federal and state consumer protection requirements.

Establish clear, documented compliance responsibilities and communicate those responsibilities to your employees with proper training. Incorporate these into internal business process responsibilities, ensure those responsibilities are carried out and regulatory requirements are met through frequent reviews and compliance audits and enable and implement corrective action.

Be sure to take a comprehensive approach to the compliance health of your dealership. Monitor compliance from your initial advertising/marketing programs through post-closing collection processes.

Compliance should be integrated into the dealership’s overall framework and applied to its entire operations. Ultimately, compliance management should be a part of the daily routine for management as well as employees.

What is the overarching message here? If you haven’t done so already, it is time to take action to make sure you have enough focus on compliance and compliance management.

Your programs will help expose any intentional wrongdoing at your dealership as well as any unintentional violations.

Showing that you have solid compliance programs in place will also help your lender relationships.

It is easy to take a chance and adopt a “wait and see” attitude with respect to enforcement actions, but these recent headlines may prompt dealers to consider simple actions to help avoid having to learn lessons the hard way. Moreover, it is simply the right thing to do for your business and your customers.

CHIP ZYVOLOSKI IS A SENIOR ATTORNEY FOR INDIRECT LENDING AT WOLTERS KLUWER FINANCIAL SERVICES. FOR MORE INFORMATION, VISIT WWW.WOLTERSKLUWERFS.COM/INDIRECT.

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SOCIAL

MEDIA

Organic SEO & Social Media: Marketing’s Magic Combo THEY GO TOGETHER LIKE PEANUT BUTTER AND JELLY

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Until recently, organic SEO and social media were considered two very separate, distinct things. Organic SEO is the art of getting search engines to show your website content in search results without paying for ads. Social media marketing is the art of publishing content on social networks to reach consumers along each stage of the buying process, develop relationships and, ultimately, generate leads and sales.

Today, organic SEO and social media go together like peanut butter and jelly.

While social media is a strong branding and engagement platform, Facebook, Twitter, Google+ and others give you the ability to create real conversions in multiple ways. It’s often said that your marketing must “touch” the prospect seven times before they’ll buy. Organic SEO and social media now provide those touch points in very valuable ways.

The term organic marketing is new.

However, its components are not. Word-ofmouth has always been the most effective form of marketing and now, with the new social web, we identify our marketing efforts under three categories: owned, earned and paid media.

Owned Media Owned media is a channel your company promotes and controls. Some examples of owned media are: • Websites • Blogs • Facebook page • Twitter account • Newsletters • Ebooks Earned Media Earned media is essentially word-ofmouth… digitized. It’s your business being mentioned by others on the channels they prefer to use. Examples of earned media are: • Mentions • Shares • ReTweets • Online Reviews • “Viral” content The driving force of earned media is the combined result of strong organic search rankings and highly relevant content distributed by your business on social networks.

Paid Media Paid media is something with which you’re likely more familiar, although it comes with a twist. There’s a real pushback I see with car dealers to revert back to the old ways of advertising. The term “paid media” is definitely not those tactics. It’s CIADA INSIDER

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the practice of promoting useful content to generate more earned media, which then drives traffic directly to your owned media properties (i.e. your website).

Facebook ads are a form of paid media, which also generate traffic, leads and sales.

The ad platform has become one of the most valuable tools available to dealership marketers. Even with a small budget, you can laser-target ideal buyers and guide them further down the sales funnel.

Within the context of organic SEO marketing, social media is your primary engine for promoting new content.

Effectively organizing your social campaigns and tying them together with new content on your site, optimized for search, can take you from zero visibility to a strong performing position very quickly.

This is unprecedented. We used to blanket the land with advertising messages and cross our fingers that prospects would appear. By leveraging your useful, relevant, search-optimized content to attract buyers, your business reaches those searching for what you offer and they’re the ones most likely to buy from you.

Customers attracted via organic SEO content are warmer leads and therefore are much more valuable customers over the long run. Your content presents your business as a trusted resource. No hard sell – just quality information and cleverly positioned questions to help turn visitors into buyers.

If you really want to be brilliant, start mixing paid and organic. The combined lift is overwhelmingly better than paid channels alone.

It all starts with great content. Here are three ways to implement organic SEO content marketing: 1. D ive deep into why people buy from you.

Consult with an expert to perform a “brand discovery” with you so you have a foundation from which to build your content strategy. They should design a strategy that outlines what your customers will engage with and include best practices.

Also consider a site audit report for SEO. It will show what’s preventing your site from ranking higher and give you options of how to remedy that.

2. Start a company blog.

Search engines require fresh, relevant content to move your site up in rank. Blogs deliver optimized content to search engines while also informing your prospects and customers about the things they have

BY KATHI KRUSE

SEO & SOCIAL MEDIA

BY LEVERAGING YOUR USEFUL, RELEVANT, SEARCH-OPTIMIZED CONTENT TO ATTRACT BUYERS, YOUR BUSINESS REACHES THOSE SEARCHING FOR WHAT YOU OFFER AND THEY’RE THE ONES MOST LIKELY TO BUY FROM YOU. questions about. Blog once per week to start and you’ll most likely need guidance from a content expert (or the option of outsourcing your blog posts).

3. Create initiatives for employees to participate in content creation.

Each employee possesses his or her own expertise. Capture that in the medium they feel most comfortable. Video, written word, audio, photographs – everyone has their favorite. Let your employees be teachers for your business.

Visitors from organic search have some of the highest conversion rates across any channel in digital marketing. When you combine well-orchestrated social campaigns with ongoing search optimization, you’re creating leverage and a long-term competitive advantage.

Organic SEO and social media are here now.

This is not something to consider in the future. All purchases are researched online before people decide to buy. Will your business be the one they choose?

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.

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LEGAL

NEWS

Important Notice for Businesses with Consumer Clauses RULES FOR THE ARBITRATION OF DISPUTES ARISING FROM CONSUMER AGREEMENTS The American Arbitration Association has announced the upcoming launch of the Consumer Arbitration Rules (“Consumer Rules”). Effective September 1, 2014, it is the AAA’s first stand-alone set of rules developed specifically for the arbitration of disputes arising from consumer agreements. The Consumer Rules will apply to all applicable cases filed on or after September 1, 2014, and as of that date will replace the ConsumerRelated Disputes Supplementary Procedures.

This advance notice is to alert you to one of the important provisions of the rules: A business currently providing for or intending to provide for the AAA to administer its consumer arbitrations under the Consumer Rules or another set of AAA rules in a consumer contract must register its consumer arbitration clause with the newly-created AAA Consumer Clause Registry.

The procedure is simple: The business submits the clause, accompanied by the

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consumer review and registry fee. The AAA reviews the clause for compliance with the Due Process Protocol. If the clause is compliant with the protocol, the AAA will administer disputes arising out of that clause, and the business will be included on the publiclyaccessible Consumer Clause Registry, which contains the name and address of the business, the consumer arbitration clause and additional documents that may be related to the clause. The AAA may decline to administer a case if a business does not comply with the Due Process Protocol and/ or registration requirement as per this notification.

Notes about Fees: • The consumer review and registry fee represents the cost of reviewing the clause and maintaining the clause on the registry.

This fee is non-refundable.

• For clauses submitted to the AAA within the 2014 calendar year: The fee is $650 per clause, which covers the cost of appearing

MATTERS

Four Simple Rules of High-Turn Inventory Management PRACTICAL GUIDELINES

BY GREG EASTERLY

Market forces are driving the used car business toward a system of high-turn inventory management. The focus is not on maximizing profit for each vehicle, but on maximizing overall profit by quickly selling your entire inventory, restocking and repeating.

While implementing this style of inventory management can be challenging, it is something anyone can learn. Here are some simple rules to follow if you are interested in adopting this approach for your dealership.

Rule #1: Look at prospective purchases through the eyes of a customer.

The rise of Internet advertising and resources that gave retail buyers more information about vehicles than ever before has also caused used car margins to shrink. As a result, it’s critical to think about inventory in the way customers do. This means focusing on the appeal of a particular unit when compared to the whole market. In short, price is the most important factor.

Rule #2: The goal is to sell vehicles competitively, but not cheaply.

Wholesale pricing is a useful measure for transactions between dealers, but it’s only part of the picture. Cost to market must also be considered, which is measured by taking the cost to acquire and prepare a vehicle for sale CIADA INSIDER

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on the registry through 2015. A yearly fee of $500* will be charged to maintain each individual clause on the registry for each calendar year thereafter.

• For clauses submitted within the 2015 calendar year: The fee is $500. A yearly fee of $500* will be charged to maintain each clause on the registry for each calendar year thereafter.

• For a demand for consumer arbitration received by the AAA pursuant to an arbitration clause not previously submitted to the AAA for review and placement on the registry: The fee is $250, in addition to the review and registry fees described above, for an expedited review of the clause. *Future registry fees are subject to change.

To register a consumer clause or view more information about the AAA’s Consumer Clause Registry, go to www.adr.org/ consumerclauseregistry.

For questions, please contact the AAA at consumerreview@adr.org.

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(purchase price, transportation, repairs, etc.) and dividing it by the average retail asking price for that model.

So let’s say it cost you $8,000 to acquire a vehicle with an average retail asking price of $10,000:

Cost to aquire vehicle $8,000 = Average retail asking price $10,000 = 0.8 or 80%

This vehicle would have an 80 percent cost to market. An average range is 80–85 percent, but note that cars with a higher average retail asking price typically have a higher cost to market than cars that retail for lower prices.

To lower your cost to market, you should lower your cost to acquire. One simple way to do so is reducing transactional costs like reconditioning fees, which are connected to how you source inventory.

You ultimately need a robust, reliable and responsive inventory acquisition model that allows you to seamlessly transition from selling the cars you have to getting new ones, preferably without leaving your office. You should invest in technology that helps you evaluate the marketplace and quickly secure retail-ready cars. You need a massive pool of vehicles that are easily searchable and ready to sell, as well as

a network of trusted sellers who routinely have the cars your customers demand.

Rule #3: Determine what makes customers pay above or below average prices.

Most people understand how supply and demand determine the price for which you can sell a product. But supply and demand also determine how quickly you can sell that product, how many units you should acquire to sell and how frequently you should restock.

Supply is easier to determine than demand thanks to auction data from sites like AutoTrader.com. Demand is more challenging, since you have to track every vehicle of a specific model that passes through an auction or website, and then see whether it was wholesaled or retailed.

Rule #4: High-turn management depends on your ability to successfully merchandise your inventory.

Once you’ve secured your inventory, you need to get it in front of Internet shoppers as quickly as possible. Make sure you post sharp, pleasant pictures of your cars so that customers see them in the best possible light. It’s also important to describe your inventory clearly and effectively.

Competitive pricing often puts you on the first page of search results because Internet shoppers frequently sort items by price.

If you follow these four rules, you will have a viable opportunity to successfully implement a system of high-turn management.

GREG EASTERLY IS PRESIDENT AND CO-FOUNDER OF DEALERMATCH. COM, A DEALER-TO-DEALER MARKETPLACE THAT HELPS MEMBERS BUY AND SELL VEHICLES FASTER, EASIER AND MORE PROFITABLY. W W W. C I A D A . O R G

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SALES

MATTERS

A 3-Step Plan to Prepare for the Sales Model of the Future DON’T RUSH ADOPTION OF THIS NEW APPROACH

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I’ve been getting more inquiries lately from dealers asking about the merits of a one-price sales environment at their dealerships.

The dealers have seen reports in automotive trade press about groups like Sonic Automotive adopting this nontraditional approach to provide a more efficient, cost-effective and customer-friendly process for selling new and used vehicles.

In some cases, the dealers are simply curious; in others, the dealers are looking to differentiate their dealerships from the competition, and they wonder if a “hagglefree” environment might be better than the traditional negotiation-based sales process they currently employ.

I’m quick to tell these dealers that while I believe one-price sales environments will become the industry norm over time, I will not encourage them to rush to adopt this more efficient, customer-friendly way of selling vehicles.

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My reasoning: It takes an absolute commitment from management, 100 percent buy-in from sales teams and a complete change of culture and compensation to make the one-price process really work. The first exception, whether it occurs with the price of a vehicle or trade-in offer, always leads to the failure of the entire system. For many dealers, the learning curve is too steep and the risks too great for me to recommend they implement a one-price model.

But I will strongly recommend that dealers explore limiting negotiations to lay the foundation for the day when a one-price sales environment will become a necessary way of doing business. I outline three steps that many dealers have already undertaken: Step 1: Market-based pricing.

In most markets, dealers have come to understand that consumers can easily spot, and ignore, used vehicles that are priced “out of the market.” As a result, many dealers now apply more market-rational pricing decisions as a matter of necessity. These dealers may still negotiate when customers come to the dealership, but their used vehicle asking prices are a lot more transactionrealistic than they used to be.

This same dynamic is more nascent in new vehicles, but it’s a growing trend as dealers embrace technology and tools that allow them to view competing pricing data and combine incentives into their pricing and promotion strategies.

Step 2: Documentation as negotiation.

This step often closely follows the adoption of marketbased pricing in used vehicles.

The idea: Sales associates explain the dealership’s marketbased pricing strategy with each customer then offer comparative prices of competing cars to validate why the asking price represents a fair price for a vehicle. In addition, the discussion highlights how the dealership uses the vehicle’s unique attributes – color, condition, equipment, mileage and ownership history – to determine its asking price.

BY DALE POLLAK Step 3: Tracking discounts.

Sonic’s effort to adopt a group-wide, one-price sales process follows the launch of its True Price model last year. Under the model, Sonic dealers would determine the lowest acceptable transaction price for each new and used vehicle, and set an asking price with $300 of “wiggle room” to negotiate with customers.

This approach is similar to efforts by other dealers who track the variance between the asking and transaction prices of used vehicles in an effort to minimize discounts and “hold gross.” The thinking: With market-based pricing, there’s even less margin available on a vehicle so why give it away if you don’t have to?

When dealers employ this level of accountability, their average discount will drop from $400 or $500 or $250 or less.

(Note: These dealers also incorporate the discount data into the volume-based pay plans they offer sales associates, providing greater rewards for those who give up the least amount of gross margin.)

As I explain these steps to dealers, some begin to understand the decision by Sonic and other dealers to fully adopt a oneprice model and eliminate negotiations altogether represents the next logical step to give customers the level of transaction transparency that they’ve always wanted.

A smaller number of dealers will start doing the math and recognize the bottomline benefits a one-price model can create through lower variable expenses and fewer “closers” on the showroom floor.

Most dealers, however, aren’t quite ready to embrace the trend toward limiting or eliminating negotiations on the price of a vehicle. It’s an understandable reaction given the level of investment and past success they’ve achieved with traditional negotiation-based sales models.

But I believe the handwriting’s on the wall when it comes to one-price selling.

In the not-too-distant future, customers will increasingly expect dealers to deliver the kind of experience they can get from other retailers – where the price you see is the price you pay and you don’t have to spend an entire afternoon in a dealership to purchase the vehicle you want.

FOUNDER OF VAUTO, DALE POLLAK HAS PUBLISHED SEVERAL BOOKS ON HIS VELOCITY METHOD OF MANAGEMENT. POLLAK GUIDES STRATEGIC PRODUCT DEVELOPMENT AND INTEGRATION FOR VAUTO AS WELL AS OTHER AUTOTRADER GROUP COMPANIES. ARTICLE IS REPRINTED WITH PERMISSION.

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F&I

MATTERS

CONSUMERS NOT JUST CHOOSING

VEHICLES ONLINE, BUT PAYING ONLINE TOO The Increasing Demand to Pay Online and Possible Solutions B Y M A R YA L A N G , B H P H R E P O R T

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According to the most recent study from the Federal Reserve, the average newvehicle loan in the U.S. stands at more than $26,700 with a loan to value ratio of a huge 80 percent. So the volume of payments there to be collected is vast.

Auto finance companies from huge captives down to smaller Buy Here-Pay Here dealers in the subprime market are facing this challenge with consumers increasingly using multiple payment methods in other areas of their consumer life and, therefore, bringing the same expectations to auto finance.

Across all other industries, multiple payment options are available to consumers – whether that’s paying your cell phone bill online, scanning a QR code on your most recent electricity bill or paying your healthcare bill over the phone.

Statistics from Fiserv’s sixth annual Billing Household Survey 2013 show that 83 percent of consumers use more than one bill payment method monthly – covering e-billing, mobile, check, walk-in and phone.

And while the number of auto finance bills paid via the traditional method of mail has reduced by around 50 percent according to the Aite Group, there has only been a slight increase in the number of bills being paid online. However, in mobile payments, although the overall volume is still significantly lower than other channels, there was more than a doubling in the number of bills paid via this channel in 2013.

But perhaps the biggest opportunity for the auto finance industry lies in paperless electronic bills. Currently, according to the Fiserv survey, auto loan e-bill penetration CIADA INSIDER

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stands at just 19 percent, compared to 58 percent of cell phone bills viewed online.

So why the hold-up of using multiple payment channels in the auto finance industry? In the BHPH market or the subprime auto market, a lot of consumers pay by actually going to the dealer, often more than once a month. But they are increasingly demanding and using the convenience of paying online or via a mobile device.

Personalization vs. Productivity Many consumers already perform price comparisons on their phones while visiting a car lot, and dealerships are in fact operating in a true omni-channel environment, whether they like it or not.

But there’s a huge dichotomy the smaller BHPH dealerships in particular are now facing between taking a personalized approach of making payments in store, and becoming more efficient in taking payments via the alternative channels suggested above.

In the case where dealers have a large number of subprime borrowers, there can be a resistance to changing payment methods. Many of these dealers actually like to see the borrowers come in to make a payment, and see the car that is the collateral for the loan. But concerns over risk can be countered by the fact that the technology of more advanced payment channels can assist with PCI compliance and other risk management.

Possible Solutions Improving efficiency in the auto finance industry is all about relieving pressure in collecting loan payments, as well as making the process more convenient for customers.

FEATURE STORY BHPH dealers don’t have to jump straight to the latest technology – such as mobile payments – but need to focus on using tried and tested technology that is relatively new to the auto finance market.

For example, interactive voice response solutions are very popular in other markets in offering an interactive, personalized experience over the telephone, and are easy to implement for auto financiers.

IVR allows the caller to interact with an automated telephone-payment system to make ACH, debit and credit card payments 24/7. This can be a great option for customers who want to control their finances through efficient self-service, offering them the opportunity to review balances and receive immediate payment verification at any time, day or night.

A customer-facing payment ecosystem has evolved, particularly within auto finance, and while we may be seeing greater adoption of this payment technology in the larger independent dealers, the smaller sub-prime and BHPH markets are still lagging behind other consumer markets.

There are of course concerns of compliance issues and understanding the regulation around using different payment channels, but these new channels are tried and tested in terms of compliance. It’s essential that these smaller dealerships recognize the potential of using multiple payment channels to grow their businesses and to attract new customers who want to pay through different channels, and to pay at a time convenient for them.

MARYA LANG IS THE GENERAL MANAGER OF AUTO FINANCE AT BILLINGTREE.

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MARKET

WATCH

Used Cars to Recommend to Parents LIST HELPS FIND RIGHT VEHICLES FOR NEW DRIVERS

• YOUNG DRIVERS SHOULD STAY AWAY FROM HIGH HORSEPOWER. • BIGGER, HEAVIER VEHICLES PROTECT BETTER IN A CRASH. • E SC IS A MUST. • V EHICLES SHOULD HAVE THE BEST SAFETY RATINGS POSSIBLE.

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When parents step onto the used car lot to help their teen pick out a first car, many have two top concerns: affordability and safety.

And many parents struggle with how to satisfy both those needs in the same used vehicle.

In response to this need, the Insurance Institute for Highway Safety recently released a few lists helpful for both parents and dealers trying the find the right vehicles for those new to the driver seat.

One list IIHS released was of the safest used vehicles for teens. Research showed “many aren’t driving the safest ones,” the organization stated.

This marks the organization’s first-ever list of recommended used vehicles for teens.

“A teenager’s first car is more than just a financial decision,” said IIHS president Adrian Lund. “These lists of recommended used vehicles can help consumers factor in safety, in addition to affordability.”

There are two tiers of recommended vehicles with options at various price points, ranging from less than $5,000 to nearly $20,000, “so parents can buy the most safety for their money, whatever their budget,” said IIHS. The list compiles recommended used

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s

ASSOCIATION

Buying for Teens

BY AUTO REMARKETING STAFF

vehicles for teens starting under $20,000, as well as a separate list for those searching for a vehicle under $10,000. The lists break the vehicles up by segment and provide modelyear suggestions.

The more expensive list includes vehicles such as the 2009 model year and later Lincoln MKS, as well as the Toyota Prius v in the midsize cars segment, for example.

In the $10,000 and under list, dealers will find older models, such as the 2005 and later Acura RL and the 2009 Ford Taurus.

IIHS also offered a little more insight into why lists like these can save parents time, money, and the potential injury of their teens.

The organization fielded a series of studies, one which showed mini-cars or small cars were the most commonly purchased type of vehicle for teens, among the 500 parents surveyed. A little over 28 percent of the responders were buying for their teens from this category, which tends to not hold up as well as larger models during a crash.

Furthermore, a little more than half of newly purchased vehicles for teens, according to the survey, were from the 2006 model-year or earlier.

IIHS pointed out this can be a problem

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because older vehicles are much less likely to have safety features such as electronic stability control and side airbags.

IIHS also offered a list of four factors to consider when selecting vehicles for teens: • Young drivers should stay away from high horsepower.

•B igger, heavier vehicles protect better in a crash.

• ESC is a must.

• Vehicles should have the best safety ratings possible.

And though this may be difficult for some families, IIHS said parents may want to consider shelling out a bit more for vehicles bought for their teens.

In the parent survey, the mean purchase price for a teen’s vehicle was about $9,800, while the median was just $5,300.

“Unfortunately, it’s very difficult to get a safe vehicle for a teenager at the prices most people are paying,” says Anne McCartt, IIHS senior vice president for research. “Our advice to parents would be to remember the risks teens take and consider paying a little more.”

To view the complete lists of recommended vehicles for teens from IIHS, visit www.iihs. org/iihs/news.

NEWS

DEALER 20 GROUP THE POWER COMES FROM THE DEALERS THEMSELVES The power of NIADA’s Dealer 20 Group comes from the dealers themselves – working and sharing their ideas and real world experiences with each other.

If you’re tired of constantly reinventing the wheel and enjoy the sharing of ideas and best business practices with dealers like yourself, the NIADA Dealer 20 Group is for you.

Dealers are matched with other dealers of like size and sales volume (outside of the other dealers’ selling area) all with one goal in mind – to be more successful and to learn how to improve day to day operations, increase sales and make more profit.

While the NIADA Dealer 20 Group traditionally meets three times a year, dealers have access to their financial performance each and every month of the year.

These unique groups are designed for NIADA’s independent dealers as they do business today: retail, BHPH – or a little bit of both. Sessions are moderated by Joe Lescota, NIADA Director of Dealer Development.

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MANAGEMENT

MATTERS

Beware the Rest of the Iceberg TURN, TURN, TURN

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I have been teaching and preaching the message of turn, turn, turn.

Dealers have no option in today’s efficient marketplace but to turn their inventory very quickly. An acceptable rate of inventory turn is no less than nine times per year.

Just so we are clear about what I mean by turn: Turn is a measure of the number of times inventory is sold within a year. A simple way to calculate that is to divide the cost of vehicles sold by the average units in inventory: Cost

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BY JOE LESCOTA

SEPTEMBER/OCTOBER 2014

of cars sold ÷ Average inventory in stock = Inventory turn rate.

The turn rate reveals how efficiently a dealer manages his inventory. When I tell dealers nine is the minimum number of times their used vehicle inventory should turn per year, I often get sort of a deer-in-the-headlights look, as though I had spoken an unknown language.

The look is followed by, “Are you telling me dealers actually turn their inventory that many times?”

Yes, as a matter of fact, there are numerous dealers turning their inventories anywhere from 12 to 15 times per year – and making a great deal of net profit.

Inventory turn can be quite the balancing act. Dealerships that turn inventory less than nine times per year risk poor cash flow and high inventory holding costs. Dealerships that turn inventory at a very high rate (greater than 18 times per year) risk missing out on sales because they might run out of inventory or fail to be aggressive in the marketplace.

Normally, a dealership that turns its inventory nine or more times is on track to make a net profit.

Let’s look at an example where a dealership is turning its inventory on average nine times per year but the net profit picture is not

positive. That could be a symptom of what I describe as “iceberg selling,” when a dealer sells fresh inventory (the tip of the inventory iceberg) at a very rapid rate – let’s say 13 times per year – but has a supply of existing inventory that is aging (the part below the waterline) and sells at an approximate rate of three times per year.

In that scenario, if the dealership simply took a snapshot of its overall sales and inventory, the illusion would be that the dealer is turning his inventory an acceptable rate of nine times.

Another example of iceberg selling is a dealership that sells cars and trucks, with a combined inventory turn of nine times per year. On closer examination, the dealership’s sales might reveal trucks are selling at a rate of 13 times but the car inventory is only on track to turn four times.

On more than one occasion I’ve had dealers tell me, “Listen, I don’t totally agree with your philosophy of turning inventory so quickly. I have cars in my inventory that are aged and some are even older than 200 days, and I still make money.”

Is that possible? Of course it is … maybe.

At the tip of the iceberg those dealers see the opportunity to sell vehicles without regard

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ASSOCIATION

to age and recognize some degree of gross profit with those sales, and without a doubt some inventory is turning. But let’s take a look at the rest of the iceberg, the part that is hidden under the waterline and poses the most danger.

Ice below the waterline is composed of aged inventory or frozen assets, lack of additional operating capital or non-working capital, depreciation of the aging inventory, lack of use of capital in the market, higher insurance premiums being paid on overinflated inventory values, the possibility of paying higher taxes on inflated inventory, and higher holding costs, including the possibility of the aged inventory being damaged while held in inventory contributing to higher costs.

So as your profit ship sails smoothly along the waters of apparent success, beware the iceberg of disaster.

Ask yourself, “Did I really make a profit by holding my inventory until it eventually sold?”

Probably not. Another way to measure the profit picture is to measure your dealership’s net profit against its total assets. To be sure you’re steering clear of an iceberg disaster, take the time to calculate your dealership’s net profit on assets (net profit after taxes divided by average total assets). This ROA calculation shows how well a dealership controls its costs and uses its resources.

To learn how to earn the most net profit possible from your inventory and maximize your return on assets, become a Certified Master Dealer or join an NIADA Dealer 20 Group today.

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NEWS

Certified Master Dealer Program HELPING DEALERS MANAGE AND GROW BUSINESSES The CERTIFIED MASTER DEALER® program was developed in 2001, in collaboration with Northwood University, to help dealers manage and grow their businesses. Since then, it has grown into one of the industry’s most respected training programs.

Dealers who attend this training are committed to the industry, support ethical business standards and practices, and are leaders in their communities. They bring a wide range of experience to each class, and leave with new strategies for analyzing their business practices and increasing their bottom line.

Instruction is provided by Joe Lescota, NIADA Director of Dealer Development and former retail automotive executive with more than 25 years of frontline dealership, selling management and training experience. For more information, please contact Georgia Brown at (800) 472-8101.

ASSOCIATION

NEWS

SPECIAL THANKS from NIADA to Todd O’Connell and Colorado IADA YOUR HOSPITALITY IS GREATLY APPRECIATED The Certified Master Dealer class, held July 28-30 at the Colorado IADA offices in Lakewood, could not have been better! Obviously, conducting and hosting training is one of the services CIADA knows how to do and do well.

The 14 participants and NIADA staff received a warm welcome and were treated royally throughout the three days of training. Whether it was food, snacks, copies or treats, Todd was there taking care of it before we even asked.

On behalf of NIADA, Joe Lescota and Georgia Brown thank you for making our trip to Colorado a special one!

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INDUSTRY

PERSPECTIVE

The Value of Auction Relationships

FLOOR PLAN COMPANIES CAN BE A VALUABLE ASSET FOR AUCTIONS, DEALERS ALSO BENEFIT

BY NEXTGEAR CAPITAL

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Auctions and floor plan companies have a mutually beneficial relationship. Creating and maintaining these relationships in the floor plan industry is essential for success, especially for auctions, which face numerous challenges in their day-to-day business, including but not limited to: • Dealers lacking funding.

• Slow payment.

• Difficulties in flooring.

• No assistance available.

• No marketing.

• Fewer dealers at sales.

Floor plan companies help auctions negate some of these challenges, as they provide a valuable service of fast, timely guaranteed payments for sold units, which allows auctions to focus on what they do best: sell cars. But there are other advantages to auctions having a solid relationship with floor plan companies: Guaranteed funds in the lane: It is in an auction’s best interest to have buying power in the lanes. This is common knowledge, but it is the basis and most important aspect to an auction’s business.

As their business is predicated on one thing –

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selling more cars – having a relationship with a floor plan company provides the auction with a customer who has funds to spend. This leads to more units in the lane, which has a more positive effect on the auction’s available working cash.

Higher conversion rates: Generally, more money in the lanes equals more cars sold, resulting in higher conversion rates.

Furthermore, with wholesale prices continuing to be volatile, sellers like to sell cars at auctions where dealers have open and available funds.

Therefore, they want to go where there is money in the lanes.

Stronger ongoing relationships: As with any business, auctions want dealers to be recurring customers who purchase vehicles from them again and again. If an auction has a solid relationship with a floor plan company that many dealers use, those dealers will be more likely to become recurring customers.

What’s more, it will provide auctions with word-of-mouth advertising, as those dealers will be more likely to tell other dealers about the auction, attracting even more customers.

To make the most of these advantages,

it’s important that auctions leverage their relationships with floor plan companies and equally important to think about the future as well as the present when it comes to these relationships. Transparency and trust are vital to the relationship-building process, making it important that both parties set clear concise goals from the beginning of the relationship. This will allow both auction and floor plan company to work together through a relationship that is built on mutual trust and respect.

Where this relationship truly adds value can be measured on many levels in addition to what has been mentioned here. Flexibility, clear and concise goals, ease of use, and mutually beneficial relationships are all equally important for the dealer that is looking for a positive buying experience.

Providing all of these tangibles can set businesses apart and promote success.

Simply put, when both auctions and floor plan companies come together and act as partners to create an atmosphere that benefits the dealer, all parties can win.

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INDUSTRY

NEWS

Western U.S. AFC Branches Relocate to Expand Service and Convenience to Independent Dealers AFC DENVER MOVES CLOSER TO AUCTIONS

Automotive Finance Corporation, a business unit of KAR Auction Services, recently announced moves by several of its western U.S. branch offices into larger, more conveniently located spaces to accommodate the company’s growth and to better service its dealer customers.

AFC Denver moved from a downtown location to a larger, more accessible space closer to sister organization Insurance Auto Auctions and independently owned Dealers Auto Auction of the Rockies.

“Our new location in the Denver market makes it very convenient for our dealers to stop by on their way to and from the auction,” said Joe Keadle, vice president of operations for AFC’s Western division. “We are also in a much larger space; one that is more accommodating to our growth.”

Further west, AFC Albuquerque moved to a larger space adjacent to the New Mexico Independent Automobile Dealers Association. “We work very closely with the association,” remarked Kelly Evans, AFC Albuquerque branch manager. “With

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so many joint customers, our new location makes it even more convenient for dealers to combine visits to the association and AFC in one easy stop.”

In San Diego, renovations at ADESA recently concluded, providing AFC San Diego more than double its original office space.

“Relocating our office to the check-in and check-out gate enables us to be even closer to our customers and provide a higher level of service on sale day at ADESA,” stated Keadle.

“Our San Jose branch is yet another location where our growth has exceeded our space,” comments Keadle. “The new location is close to auctions, easy to get to and nearly double the size of our existing branch. Our customers will enjoy a nice seating area and office environment when the new, expanded branch office opens on August 1.”

For nearly 30 years, AFC has been delivering inventory finance solutions that help independent vehicle dealers grow their business. AFC’s hybrid service model offers dealers local service and 24/7 online access.

AFC Albuquerque 608 Chama Street NE Albuquerque, NM 87108 (505) 244-3828 AFC Denver 7100 North Broadway, Building #8 Suite 8B Denver, CO 80221 (303) 832-4757 AFC San Diego 2175 Cactus Road San Diego, CA 92154 (619) 205-1349 AFC San Jose 1475 South Bascom Ave. - Suite 205 Campbell, CA 95008 (408) 260-2761 AFC IS ONE OF THE LARGEST PROVIDERS OF INDEPENDENT DEALER INVENTORY FINANCING IN NORTH AMERICA. AFC, AS PART OF KAR AUCTION SERVICES, INC., PROVIDES INVENTORY FINANCING PROGRAMS FOR RETAIL AND WHOLESALE AUTOMOBILE DEALERS, COMMERCIAL TRUCK DEALERS, RV DEALERS, MOTORCYCLE DEALERS, SALVAGE AND DAILY RENTAL OPERATORS. FOR MORE INFORMATION ABOUT AFC, PLEASE PHONE TOLL FREE 888-3356675 OR VISIT US ONLINE AT AFCDEALER.COM.

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SALES

MATTERS

How to Generate More Leads With Classifieds in the Next 30 Days PRACTICAL STEPS TO INCREASE LEADS BY NEHAL KAZIM, AMPLIFII AUTO

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As a dealer, you need an ecosystem of lead sources to consistently and predictably have high quality buyers walking through your doors. Here is how to generate more leads with classified ads.

Step 1: Choose your classified website(s).

There are a variety of classified websites to choose from (nationally and statewide).

Here is the breakdown of major classified websites based on listing costs and traffic: Craigslist: Cost of listing: $5/car Traffic Rank*: 10th eBay Classifieds: Cost of listing: $9.95+/car Traffic Rank*: 9th Backpage: Cost of listing: FREE/car Traffic Rank*: 186th eBay Motors: Cost of listing: $50-$125/car Traffic Rank*: 9th *Ranking of most visited websites in the United States.

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The one thing most dealers will not invest time in is testing which platforms generate the most call volume and sales.

Testing volume alone is not good enough because 100 leads for one car from platform 1 may lead to zero sales, but six leads from platform 2 may lead to two sales. If you are not currently testing this, I will outline how to do this below.

Step 2: Create appealing ads.

Posting one picture of the car and a phone number is not going to be very effective overall. Understand the limitations of each platform and max it out depending on the package you choose. For example, if Craigslist allows you to post a total of eight images, show the real value of your car by taking high quality pictures showcasing the car.

Add a border around the image or a bar at the bottom of each image of the car. In this area, you can emphasize your dealer name and phone number.

Make sure the first image of the car is the

best of the batch. Review your competitors’ ads and you will see most don’t do this.

Common sense isn’t common practice, unfortunately.

Step 2.1: Create YouTube videos for each car.

Videos are tremendously powerful. Video walkthroughs of your inventory increase interest in the car. The buyer spends more time looking at your ad or on your website and is increasingly more likely to reach out to your dealership if you have video.

Here’s what you need to have to create a high quality video that sells more cars: • Professional photos of your vehicles from a variety of angles.

• A pleasant voiceover or music fitting to the car.

• A relevant title with year, model and phone number.

• A detailed description outlining the details of the car.

• Tags that will help boost visibility in YouTube and Google searches.

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TESTING VOLUME ALONE IS NOT GOOD ENOUGH BECAUSE 100 LEADS FOR ONE CAR FROM PLATFORM 1 MAY LEAD TO ZERO SALES, BUT SIX LEADS FROM PLATFORM 2 MAY LEAD TO TWO SALES.

Creating videos is one of the fastest ways to build credibility and trust with your buyers. This level of trust and credibility leads to more calls and ups.

Step 3: Create landing pages.

Landing pages are individual pages for

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each car in your inventory. The reason you need a landing page is the focus is completely on that car. If a buyer is on the site looking at that specific car, he will take the time to review the pictures, specs and details of the car.

Beyond that, there should be numerous calls to actions on the landing page.

Calls to actions are parts of the pages that eventually lead to a sale. The bottom line is you want them to submit a form, call you or visit the dealership in person.

Elements to consider for your landing pages include: • Visible phone number.

• Information request form.

• Trade-in appraisal form.

• Credit application.

• Schedule a test drive form.

Here’s a quick checklist when it comes to assessing your landing pages: • Is my inventory easily accessible online?

• Is there landing page for each car?

• Is it simple for a prospect to reach out to you? A phone number? A form?

• Is there a high quality video that engages the prospect?

Step 4: Promote your listing.

There are many ways to promote your inventory. Here are some of the best ways to get started with promoting your inventory: Internal ad networks: Each classified platform has an internal ad

network to promote your listings to other viewers on the website. Test ad networks inside of classified platforms to gauge the return.

Social network – Facebook: One of the easiest ways to drive traffic to your listings is through existing sites on which you are active. Promote your new listing on Facebook by linking your landing page (ideally) or your ad listing. Add a small but intriguing description to get your fans to visit the link. You can also use the Facebook ad platform to increase visibility of the post.

Social network – Twitter: Share links on your Twitter page consistently spread across your other content to increase visitors to view your inventory.

Step 5: Tracking.

There are a variety of solutions to track and record calls for your dealership. At the very basic level, you can use numbers from www.twilio.com to track call volume and listen to recordings. Using Twilio does require an additional platform to view and listen to recordings.

Next Steps.

To start lead generation for your dealership, there is a quick start checklist to generate more leads with classifieds in the next 30 days at www.amplifiiauto. com/quickstart.

For more information visit www. amplifiiauto.com or contact Nehal at 416722-9553 or nehal@amplifiiauto.com.

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WASHINGTON

UPDATE

National Independent Automobile Dealers Association

NIADA GOVERNMENT REPORT

HERE’S A RUNDOWN OF SOME OF THE L ATEST GOVERNMENTAL ISSUES AND ACTIVIT Y AFFECTING THE USED CAR INDUSTRY FROM NIADA REGUL ATORY COUNSEL SHAUN PETERSEN AND NIADA LOBBYIST SANTE ESPOSITO.

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LEGISLATIVE REPORT Rental Cars/Used Cars Recall Three pieces of legislation are at issue: S.921, the Raechel and Jacqueline Houck Safe Rental Car Act of 2013; S. 2559, the Motor Vehicle Safety Act of 2014; and the GROW AMERICA Act. While there has been no action for some time on S.921, that could soon change. The Senate Commerce Committee will soon release its title of the MAP-21 reauthorization bill, and its jurisdiction includes motor vehicle safety issues.

We’re told the committee’s title will include something on the rental car recall issue – probably much of S.921. Subcommittee chair Sen. Claire McCaskill (D-Mo.) is a cosponsor of S.921 and a close ally of that bill’s leading proponent, Sen. Barbara Boxer (D-Calif.).

S. 921 is opposed by both NIADA and NADA because it is overly broad and premature, which also applies to S.2559 and the GROW AMERICA bill. Basically, the bill prohibits the rental, sale or lease of a motor vehicle that is subject to a recall. While the intent is to rein in big rental car companies, the text defines a rental car company as having as few as five vehicles available for rent, which affects many NIADA members.

These bills beg the question of “remedying the defect” because they don’t recognize the realities of the auto parts business – timing, cost, liability, etc. In addition, the GROW AMERICA Act makes no distinction between safety related recall notices and non-safety related ones.

NIADA is on record raising its objections to the bills. In doing so, NIADA requested they exempt small business used car dealers, as defined by SBA regulations.

H.R. 4811, the Bureau Guidance Transparency Act Introduced by Rep. Stutzman, the bill would require the CFPB to provide a public notice and comment period before issuing any guidance in final form, and must make public any studies, data and other analysis used to prepare the guidance.

The bill is not supported by Democrats, who feel it’s unnecessary because only two of the CFPB’s have raised concerns – one of those was a March 2013 guidance claiming indirect auto lending leads to discrimination. But because providing for a more transparent and accountable process is something Democrats could support, NIADA and NADA are working with both parties in the House to try to marry the Democrats’ position with the Republican bill to advance the auto industry’s cause on this issue.

MAP-21 Reauthorization Late on the night of July 31, Congress passed the House version of the Highway and Transportation Funding Act of 2014, which will transfer $10.8 billion from the general fund into the highway trust fund to keep the HTF solvent and provide funding for highway and transit programs at current levels through May 31.

The cost to the general fund would be offset by various “pay-fors,” all of which are unrelated to transportation and most of which extend over 10 years.

REGULATORY REPORT Consumer Financial Protection Bureau Privacy Rule changes: The CFPB proposed a rule change that would allow companies that limit their consumer datasharing and meet other requirements to post their annual privacy notices online rather than delivering them individually.

If a company qualified for and wants to rely on the online disclosure method, it would have to inform consumers annually via an insert in regular consumer communication such as a monthly billing statement that the privacy notice was available online and in paper, by request at a toll-free telephone number.

NIADA submitted comments to the CFPB applauding its efforts to ease the regulatory burden on companies but noting the proposal did not ease the burden on small business because it trades one written notice for another.

We also raised concerns about the expense and usefulness of a dedicated toll free number and encouraged the bureau to support pending legislation in the Senate that does not include those requirements.

CFPB Ombudsman: Executive vice president Steve Jordan and regulatory counsel Shaun Petersen met with the CFPB ombudsman’s staff about NIADA’s interaction with the bureau. The ombudsman is an independent, impartial and confidential resource to help resolve process issues arising from CFPB activities.

We expressed our appreciation for the CFPB’s willingness to include NIADA in discussion on many topics and willingness to gather information from us as it pertains to the industry. We did express our concerns with the bureau’s unwillingness at times to be open with the industry on certain initiatives, such as disparate impact.

Consumer Complaint Detail: The CFPB has proposed to make the narrative information consumers provide with their complaints available to the public – with the consumer’s consent – through its complaint database. Currently, available information is limited to the company’s name, the date the complaint was submitted to the bureau and the company, the consumer’s zip code, the product type, the issue on the complaint by category and whether or not the company provided relief.

The proposal would allow companies to submit a narrative response that would appear next to the consumer’s narrative. Comments will be accepted until Sept. 22.

NIADA SUBMITTED COMMENTS TO THE CFPB APPLAUDING ITS EFFORTS TO EASE THE REGULATORY BURDEN ON COMPANIES BUT NOTING THE PROPOSAL DID NOT EASE THE BURDEN ON SMALL BUSINESS BECAUSE IT TRADES ONE WRITTEN NOTICE FOR ANOTHER. CIADA INSIDER

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2014 GOLF TOURNAMENT

ASSOCIATION

NEWS

2014 GOLF TOURNAMENT Thanks to all who participated in this year’s golf tournament at beautiful Fox Hollow Golf Course in Lakewood. One hundred and fifty-two golfers enjoyed the perfect weather, great food, wonderful camaraderie and low scores!

Last year CIADA had the privilege of having Representative Brian DelGrosso play in the tournament. This year he was joined by the following distinguished guests: senate president pro temp Lucia Guzman; transportation committee chair Sen. Nancy Todd and her husband Terry; house minority caucus whip Rep. Polly Lawrence; business, labor committee vice-chair Rep. Tracy Kraft-Tharp; finance, legislative and veterans committee member Rep. Jovan Melton; minority chief of staff Bill Skews and Charles Ashby with the Grand Junction Sentinel.

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National Independent Automobile Dealers Association

OUR 2014 GOLF TOURNAMENT WAS SUCCESSFUL THANKS TO OUR WONDERFUL SPONSORS: ADESA Auto Auction Accelerated Auto Transport AFC - Automotive Finance Corporation Alliance Auto Auction Auction Genius from vAuto Genius Labs W W W. C I A D A . O R G

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AutoZone CarMax Copart Auto Auction Credit Acceptance Corporation Dealers Auto Auction of the Rockies Diamond Lot Colorado Dodah Floorplan Express

High Tech Locksmiths Inilex Insurance Auto Auction Loveland Auto Auction Manheim Denver Mile High Consulting NextGear Capital Skywerks

Taggart & Associates TransFirst TrueCar Welsh Insurance Agency xQuuz - Customer Bankruptcy Documents

THANK YOU!

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2014 GOLF TOURNAMENT qOnce again Dean Gunter, CIADA

Treasurer and owner of Mile High Car Company; Scott Reed, owner of Loveland Auto Auction; and Sean Allen, sales manager at Alliance Auto Auction, were marvelous in performing their magic during the fundraisers at this year’s golf tournament. The funds raised during this live auction went toward CIADA’s newly formed charity and to Mark Chalfant’s family. Thanks to all who bid and donated!

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Dean Gunter

Scott Reed

Sean Allen

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NOW MORE IMPORTANT THAN EVER NOW MORE IMPORTANT THAN EVER BHPH

PERSPECTIVES

HITTING THE MOVING TARGET OF COMPLIANCE BY BRENT CARMICHAEL

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Ever get the feeling that compliance is like trying to hit a moving target? Well you are not alone. In light of recent events, the target might have just become even harder to hit.

The hottest topic with all Buy Here-Pay Here dealers has to be the new Consumer Financial Protection Act that recently passed. It has replaced inventory acquisition to give you an idea of how hot the topic is. Not a day goes by I’m not answering multiple emails and phone calls from dealers asking what the bill means for BHPH dealers.

Let me start by saying that I am not an attorney, nor do I play one on TV, but I have recently stayed at a Holiday Inn Express. Having said that, I don’t think my understanding of the bill is any more insightful than anyone else’s. I have read parts of the bill (2,000 pages – great insomnia cure) and can’t make heads or tails of what the full impact will be for BHPH. At this time, I don’t think anyone honestly can.

A few things we do know for sure.

We BHPH dealers are smack dab in the middle of it. Automobile dealers were exempted, but sorry to say those engaging in BHPH weren’t so lucky. This is true whether the dealer has a related finance company or not. I get this belief from industry attorneys and industry insiders whose pay grades are at least two levels above mine. At one time we in the BHPH industry welcomed the affiliation with the alternative finance industry. I’m afraid that affiliation has cost us our exemption since it is one of the main targets of the bureau.

There are a couple areas of our industry that could be affected that concern me the most, at least initially. One is arbitration agreements. They may be a casualty of the regulation suggested by the bureau. The other is pricing. It’s not clear whether this will be credit pricing via interest rates or retail pricing of the vehicles. It could very realistically be both. Either way, it’s a loselose from a profitability standpoint.

Another thing we know is the government has committed some pretty substantial financial resources to its enforcement.

Figures in the $500 to $700 million range are not out of the realm of possibility. For that price tag, I think enforcement will be a fairly high priority. There is even talk some 3,500 attorneys have been added to the new agency to aid not only in defining the new regulations but enforcing it. Insert your own lawyer joke here.

Will the CFPB end BHPH as we know it? I don’t believe so. I think it has the potential to significantly change some of CIADA INSIDER

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I HOPE THE NEW CFPB REGULATIONS, WHEN THEY ARE FINALLY HAMMERED OUT, WILL BE FAIR AND I BELIEVE THEY WILL HAVE EVERYONE’S BEST INTEREST IN MIND. the landscape. I think the dealers trying to do things the right way will be just fine.

Those dealers pushing the envelope and playing in the gray areas will be weeded out, which is not necessarily a bad thing. As we have seen from some other industries, a purging is sometimes needed and quite often overdue.

CFPB is just one compliance landmine we face in our industry. Uniform Commercial Code, Fair Credit Reporting Act, Risk Based Pricing, 1099-C, and Red Flag are just a few others. And don’t get me started on HIPAA, Privacy or The Patriot Act. You certainly don’t have to look far to find some sort of regulation in our industry.

Now more than ever compliance needs to be a priority.

The key to compliance in today’s environment is effort. At one of our recent BHPH 20 Group meetings, our guest speaker was a former OSHA inspector now working for an insurance provider. The speaker candidly commented no business can be 100 percent compliant in all aspects.

There are simply too many changing rules and regulations, and other variables such as personnel turnover, to be able to stay in complete compliance at all times. It’s the effort and attempt to play by the rules that will be the difference between being fined or just given a warning.

Effort is defined by having a written policies and procedures manual. It doesn’t have to be a professionally done manual. It can be a simple handbook provided to all employees outlining the basic policies and procedures for each aspect of your business. The manual should cover things such as collections and underwriting practices, sales process and general company policies.

You must make effort to continually update and train on the manual. Simply creating and having one is not good enough. All businesses change over time.

Therefore policies and procedures will change.

Effort should also be made in seeking out professional help. Document reviews on a regular basis are a must, not necessarily every year but at minimum every other year.

Not every document you use in the normal course of business would need to be reviewed. An example would be a retail installment contract provided or purchased from Banker’s Systems. They have insured its compliance and will notify you of any changes necessary.

Regular review is needed for any self generated internal documents used. An example of this would be a warranty form. A letter stating that your documents are in compliance from an accredited attorney can literally be a get out of jail free card.

If you are looking for a regulation friendly industry, BHPH is certainly not it. But even with the moving targets of industry regulation, it is still a very lucrative one for those who try to do it the right way.

I hope the new CFPB regulations, when they are finally hammered out, will be fair and I believe they will have everyone’s best interest in mind.

I think it’s too early for the Chicken Little mentality. No doubt the cost of compliance will go up. As always, the burden is on us to not only know the rules, but play by them to the best of our ability.

In today’s electronic age, the availability of information it is almost endless so ignorance is definitely no excuse. Here’s hoping that on your next compliance review you receive an “E” for effort and not an “O” for out of business.

BRENT CARMICHAEL IS ONE OF THE INDUSTRY’S MOST WELL RESPECTED BUY HERE-PAY HERE EXPERTS. HE IS EXECUTIVE CONFERENCE MODERATOR FOR NCM ASSOCIATES, INC. PRIOR TO JOINING NCM, BRENT WORKED 17-PLUS YEARS IN SUBPRIME FINANCE AND COLLECTIONS.

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