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NIADA has launched a new website especially for the Buy Here-Pay Here industry. It offers various resources for both BHPH dealers and consumers. Check it out at www.niadabhph.com.
ADVERTISERS INDEX
LOBEL FINANCIAL …..…..…..…..…..…. IFC MANHEIM.COM …..…..…..…..…..…..…..5 NEXTGEAR CAPITAL…..…. BACK COVER VAUTO …..…..…..…..…..…..…..…..…..….IBC
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608 Chama NE Albuquerque, NM 87108 Phone: 505.232.0809 Fax: 505.232.0810 email: james@nmiada.com website: www.nmiada.com
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. NM Dealer Insight is published bi-monthly by the National Independent Automobile Dealers Association Services Corporation. 2521 Brown Blvd., Arlington, TX 76006-5203; (817) 6403838. POSTMASTER: Send address changes to NIADA State Publications, 2521 Brown Blvd., Arlington, TX 76006-5203. The statements and opinions expressed herein are those of the individual authors and do not necessarily represent the views of NMIADA or the NIADA. Likewise, the appearance of advertisers, or their identification as members of NIADA, does not constitute an endorsement of the products or services featured. Copyright © 2015 by NIADA Services, Inc. All rights reserved. Visit the NIADA website at www.niada.com. STATE MAGAZINE MGR./SALES Troy Graff • troy@niada.com EDITORS Jacinda Timmerman • jacinda@niada.com Andy Friedlander • andy@niada.com MAGAZINE LAYOUT & GRAPHIC ARTIST Chantae Arrington • chantae@niada.com ART DIRECTOR Christy Haynes • christy@niada.com PRINTING Nieman Printing
Dear NMIADA members and friends: Last time I wrote you, my message was to be ready for change in 2015. Change is what drives innovation, and at the same time is the great equalizer for those who can adapt and make the most of the change around them. This newsletter, I want to take the time to highlight some of our new programs the NMIADA staff and I have been working hard to bring to you so we can continue to show our value as an association by saving you time and money. NIADA CPO Program: Do you know the fastest growing segment of used car sales are CPO units? Over 21 million CPO units were sold in the U.S. last year and experts believe that number will only grow as consumers become more educated and use all the tools at their disposal in the buying process. Do you know NMIADA endorses the NIADA CPO program? It is backed by one of the largest warranty companies in the world, and all managed with simple procedures to certify and market your units as CPO. Parts Plus NM: NMIADA recently introduced to our membership a great buying program that provides a 55 percent discount from list price on all of your parts and helps support another local N.M. business. Parts Plus NM is locally owned and operated. NMIADA is proud to have them partner with our association. NMIADA Forms Program: Do you know that NMIADA stocks and prints all of the forms you will ever need to stay compliant in your business? NMIADA is proud to offer our dealers these forms in several different formats to meet your needs. Additionally, if you are a current association member, the forms program
saves you up to 30 percent in the nonmember versus member pricing. If you buy only 15 packages a year in any of our forms, that pays for your membership in savings! Renew or join NMIADA today and take advantage of our great forms program. NIADA Industry Convention: How do you educate yourself on industry trends? How do you find out about new finance options for your business? How do you look for and test all of the newest DMS systems? You can do it all in one place June 22-25 at Caesars Palace in Las Vegas. I am going to be there, are you? Sincerely, James D. Zanios Executive Director
Board of Directors CHAIRMAN Mike Scioli PRESIDENT Pat Martinez VICE PRESIDENT Jack Jason TREASURER Aaron Flores SECRETARY Felicia Richesin
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Director’s Letter
BOARD MEMBERS Adriana Lara James Santisteven Thomas Hawkins James Zanios Dax Kastrin Mike Godin Shannon Koons Alan Rumm Steve Goodman
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Honda Recalls Vehicles from Three Different Model Years AIRBAG RECALL EXPANDS
American Honda Motor Company Inc. is recalling 104,871 model year 2001 Accord, 2004 Civic, and 2008 Pilot vehicles. Upon deployment of the driver side frontal airbag, excessive internal pressure may cause the inflator to rupture. In the event of a crash necessitating deployment of the driver side frontal airbag, the inflator could rupture with metal fragments striking and potentially seriously injuring the vehicle occupants. Honda will notify owners, and dealers will replace the driver side frontal airbag inflator in all affected vehicles, free of charge. This recall is an expansion of recall 14V-351.
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Tap into More Inventory Options with Floor Planning
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IS YOUR INVENTORY FINANCE COMPANY YOUR ROCK?
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Wholesale estimates continue to be good for used car dealers. In February, the average wholesale price remained steady around $10,000. This was due to a rich mixture of off-lease volume and dealer trade-ins. Strong volumes in these two areas should transfer to greater inventory options, resulting in more retail sales. While the impact on the market remains to be seen, the numbers look very healthy. NIADA predicts a rise of 20 percent in off-lease volumes for 2015, which equates to 2.3 million units for the wholesale market. Additionally, analysts are predicting a 67 percent increase through 2017. The tax season push in the market hit a little later than normal this year but is now producing a positive trend in the lanes. This aligns with analysts’ predictions that auction volumes will continue to increase over the next few years. As a result, there should be
plenty of inventory to supply your demand, no matter your target market or business model. With this surplus of inventory for dealers, even with minimal price decline, it’s important you take advantage of the different tools and resources available to help you find the freshest and best inventory. In today’s world, that means having the ability to be in multiple places at once. Whether you’re looking to stock your lot through an online avenue like OVE.com or by attending a physical auction, the one consistent piece to your puzzle should be your inventory finance provider. While the avenue in which you source your vehicles may change, your inventory finance company should be your rock. Not only should your inventory finance provider understand the nature of your business and the flexibility you need, but it should mirror that flexibility in its relationship with you.
BY NEXTGEAR CAPITAL
This includes providing insight on potential market opportunities for your business, improving income opportunities and counseling you on the latest and greatest industry tools. Purchasing the right inventory for your target market is paramount to your success. Whether you’re taking advantage of the influx of off-lease units or increasing trends of dealer trade-ins, purchasing inventory that you can sell and sell quickly is key to maximizing the current economic climate. More and more used car dealers understand the need to be flexible in their operations, and your inventory finance provider should assist in bringing solutions to the table. To fully maximize your options in the market, you need to ask yourself the following question: “Do I have a financial partner that completes the final piece of my business model?”
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Best Practices for Buy Here-Pay Here
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AS WITH ANY BUSINESS, IT IS IMPORTANT TO SURROUND YOURSELF WITH THE RIGHT RESOURCES. ALIGNING YOURSELF WITH A TRUSTED PARTNER WHO CAN HELP YOU AVOID THE PITFALLS AND CREATE A SOLID FOUNDATION FOR YOUR BUSINESS WILL UNDOUBTEDLY PAY DIVIDENDS.
To some consumers, the words “buy here pay here” conjure images of less than favorable credit terms and vehicles in subpar condition. To many other consumers, “buy here pay here” can be a godsend when less than favorable credit prevents them from obtaining traditional financing from a bank or credit union. Whatever your opinion of Buy Here-Pay Here, the fact is it’s a growing part of the auto sales and finance process and many Americans depend on it to obtain basic transportation. Buy Here-Pay Here is not new to the auto industry. Many dealers have offered BHPH services for years. Other dealers entered the BHPH market out of necessity during the recent downturn in the economy when many dealers were left without retail financing or adequate vehicle financing options. Dealers understood their local markets and their microeconomy, and that understanding gave them the unique ability to determine the credit risk of buyers who lived and worked locally. What many dealers discovered through this act of selfpreservation is that originating and servicing a portfolio of auto loans is actually a very realistic endeavor and it can offer the ability to extend profits past the initial auto sale. As with any fast-growing sector of consumer lending, it has gained the attention of regulators, and not without warrant. Stories abound from consumers receiving downright predatory loans and dealers servicing loans more like gangsters than lenders. A BHPH portfolio can be viewed as a large liability if managed poorly. But if managed properly, a large pool of performing loans can be an asset. While a pool of performing loans can be used as collateral
when obtaining commercial loans to expand your business, fund new ventures or be sold for profit, it all starts with your origination process. To create a loan portfolio that will pass muster with regulators and potential buyers, you must start thinking like a lender. It may be time to take a deeper look at your BHPH business – chances are someone else will be in the near future. You should look at your BHPH portfolio as you do any investment – what are the risks? Underwriting Guidelines Documenting your basic guidelines for approving a BHPH finance contract, however liberal or minimal they may be, is a good idea. You’ll be able to explain why you made the loans you did and why you did not make the loans you passed on, which is key to maintaining a fair lending program. Having underwriting guidelines will help you answer tough questions from armchair quarterbacks who will secondguess your decisions and intentions at some later date. Unfortunately, the reality is not everyone will be approved for a loan and not every loan will be priced the same. You need to ensure that you can intelligently and effectively explain why. Your guidelines should address different factors that make up each lending decision: a customer’s credit quality, minimum down payment, maximum terms and the types of collateral you will finance. Keep in mind that your collateral will play a large role in the performance of your loans. Pricing Structuring a rate at the maximum amount allowed by law or the maximum amount your customer is willing to pay should not be a strategy. Even though a customer may be willing to sign a contract at such a high rate and payment, the likelihood they will continue to pay through the entire term of the loan may be diminished. Before you can establish a pricing structure, you first must
BY CHET HEUGHAN
understand a few factors that will influence the rates and fees necessary to create a portfolio of profitable loans. First, you need to understand your cost of funds. How much does the money you’re lending cost you? Understanding the interest rates, fees and expense that goes into maintaining a relationship with the institution who is supplying you with capital should all be factored in. Second, you need to understand the cost of servicing. Do you constantly have to contact customers, send letters or involve outside contractors? What is your delinquency and charge-off rate? All of these factors go into helping you establish your expenses and will provide you with the information needed to price loans appropriately to reach your target net yield. This will also give you the ability to explain your pricing model to others if needed. Loan Documentation Loan documentation should not be taken for granted. Many BHPH dealers simply model their loan packages after a lender they may have done business with in the past. Unfortunately, the rate of change in the compliance landscape is growing exponentially and the loan documents you were using a year ago may not be what you should use today. Keeping up with changes in forms and the accurate completion of those forms is paramount. The last thing you want to do is build a large portfolio of well-structured, well performing loans that are all documented on the wrong forms or completed with a fatal flaw. You will have taken your largest asset and transformed it into your largest liability. This will also limit the portability of your portfolio and make it unattractive to potential buyers should you need to sell your portfolio to generate capital. Servicing Depending on the size and performance of your portfolio, CONTINUED ON PAGE 8
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servicing may be as simple as taking payments from walkin customers and making the occasional reminder call to past due customers, or it could be
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as complex as forecasting loan performance. In either case, you should invest in some type of loan accounting and servicing system that will allow you to track your loans, record payments, generate statements, calculate amortization schedules and generate financial and compliancerelated reports. Your system should also give you the ability to quote loan payoffs and print servicing/collection documents as well as manage and document any interactions with your customers. Third-Party Audit Originating and servicing loans is definitely one part of your business where you want to invest in expert advice. Being an active member of a BHPH
association, attending workshops and simply being an active part of a peer group can help you draw from the experience of others and keep you abreast of issues impacting your business. Hiring an independent auditor or consultant to evaluate your program and portfolio is money well spent. They can help you identify potential compliance concerns and recommend corrective action before they are uncovered by your regulators. Many of these consultants use the same tools and processes as state and federal regulators, so they can give you a true picture of what an actual audit may reveal. Many times, problems are uncovered during the due diligence that precedes a loan sale. The companies that purchase loan pools conduct their own due diligence and may find other potential problems that could diminish the value of your loan portfolio. Periodically
selling small portions of your loan portfolio can give you access to feedback from industry professionals and also help you develop a historical performance record with a potential buyer should you ever want to sell a large portion of your portfolio. As with any business, it is important to surround yourself with the right resources. Aligning yourself with a trusted partner who can help you avoid the pitfalls and create a solid foundation for your business will undoubtedly pay dividends. As regulatory focus continues to grow on auto lending, it is up to you to understand and control the associated risk. Once you do this, you may find yourself with a business that runs more smoothly and produces a more predictable profit. CHET HEUGHAN IS DIRECTOR OF APP ONE RISK MITIGATION SERVICES, INDIRECT LENDING FOR WOLTERS KLUWER FINANCIAL SERVICES. FOR MORE INFORMATION, VISIT WWW. WOLTERSKLUWERFS.COM.
M A RK E T ING
40 Percent or More of Your Website Traffic Comes from Mobile
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ARE YOU READY? BY ALI MENDIOLA
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You build a website thinking customers will take the time to go to a computer and do their research. After all, they’re going to spend thousands of dollars on a vehicle, so you want the experience they have on your website to be scalable, colorful and rich in content and tools. And you’d be right. Your website must offer a lot of brilliant content in a design that makes your cars shine, and with digital retailing tools to connect the online world with your in-store shopping experience. Your website must be a digital conversion machine. There’s only one catch: That picture is changing, and fast. Today, according to comScore and Mobile Metrix, around 80 percent of people in the U.S. own smartphones. So when it comes to car shoppers, it makes sense that many are using a smartphone or tablet to visit your site, search inventory and conduct those all-important first purchase steps. In fact, according to traffic on the
Dealer.com network, more than 40 percent of visits to dealership websites come from mobile devices. That’s four out of 10 potential buyers looking at your inventory on a screen that could be as small as a business card. That’s not a trend. It’s a fact. Mobile shopping behavior will continue to gain momentum, to the point that your sales and marketing solution must accommodate the differences. The Dealer.com article Responsive, Adaptive, and Seamless: Mobile Strategy and the Technologies Guiding It Forward discusses important differences between the types of mobile design. Part of that design approach must also include retail tools that help ease the process of conversion from shopper to buyer. It’s not enough to have a search-and-user friendly mobile experience. The same digital steps that dealers count on to help speed car buyers through the initial purchase steps of a website
should do the same on the mobile equivalent. From searching inventory to calculating payment and checking realistic finance offers and tradein values, these types of efficient digital tools – when designed correctly – are more valuable because they’re available when and how consumers want to shop, and when they want to buy. That sort of on-demand and mobilefirst approach to digital retail is a significant difference maker. It’s critical that dealers provide consistency across their sites and apps, no matter what device is being used to access the information. That’s not only about the look, feel and information displayed on a site, but also the overall online shopping environment. Too often talk of a mobile experience ends at the research phase when what dealers need is a complete package that includes mobile and tablet-ready digital retailing tools. From trade-in to
finance, those tools empower shoppers to find the perfect vehicle, serve up pricing and payment solutions in line with your dealership criteria, and even provide trade-in offers based on your inventory needs. The reason? Convenience amidst the hustle and bustle of daily life. The reality is people want to complete more of the shopping transaction wherever and whenever they can – sitting in the carpool line before the school bell rings, between meetings or waiting at the doctor’s office. Those spare 10 minutes are valuable opportunities to get shopping and research done via whichever type of device consumers wish to use. Dealers and their staff have to be ready. Those who are ready will improve sales and the overall buyer’s experience. THIS ARTICLE ORIGINALLY APPEARED ON NCM’S UP TO SPEED BLOG (HTTP://BLOG.NCMINSTITUTE.COM) AND IS REPRINTED WITH PERMISSION.
consumers to use in case one of the aforementioned fraud alerts needs to be temporarily lifted. It is also where customers can go to get a copy of their consumer report. Remember, dealers are not credit reporting agencies and should not be providing consumers copies of their reports. Personal Information: This section includes the information you need to verify you have the correct financial profile for your customer. Along with the basics, such as name, birthdate, Social Security Number, addresses and past and current employers, this section offers extra details on existing fraud alerts as well as a summary of the individual’s recent credit history. Be sure to pay particular attention to the listed addresses. A report that calls out several places of residence should raise questions about whether the person lives where they say they do and where they are planning to keep the vehicle. This uncertainty may cause lenders to hesitate, or add additional stipulations to deals, since they need to know where to send monthly account statements, or in the event of default where to find the vehicle. Summary of File Items: This line in the report provides a snapshot of all of the information available in the consumer’s file. Here are some things you can determine from the consumer’s file: • The oldest open and newest reported dates of trade. • The presence of public records or other information. • The number of tradelines. • The range of high credit amounts for open trades. For an Equifax Credit Report,
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potential financial risks more effectively. For example, imagine the consequences if you moved ahead or spot-delivered a deal without seeing that crucial line of information about an individual’s recent bankruptcy filing – an action that may not have affected the credit score yet. Conversely, a person could have a low credit score despite having turned a corner and sustained a timely payment history, which demonstrates that he or she may be able to effectively manage an auto loan. Dismissing this potential sale based solely on that credit score means you’ve opened the door for a competitor who is able to recognize that this person is becoming financially stable. So, what nuggets of information can you expect to find in a report, and how do you correctly interpret them? Let’s have a look at both the basics and other valuable pieces of content. Alerts: A variety of alerts or indicators may be found on a credit file. Flags that indicate name, address or Social Security Number discrepancies are returned when a difference is found between the information provided in the inquiry and what is in the consumer’s file. Consumers may also place alerts or narratives on their file. Alerts include indicators of potential fraud or active military status, and may also include consumer contact information for verification. It’s important to note these alerts as they signal when you should proceed with caution. Consumer Referral Message: This brief line states the name of the credit bureau that ran the report along with contact information for
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Consumer credit reports may rarely win a prize for their memorable prose, but they should be at the top of your reading list if you want real insight into a vehicle shopper’s credit history. To get the essential facts when talking to vehicle buyers and lenders, you also need to make sure you read more than just the headline – or in a credit report’s case, the corresponding credit score number. Like headlines, numbers may not always tell the full story. When sales and F&I managers first glance at a consumer credit report, all those lines of text, numbers, abbreviations and acronyms may seem as foreign as an owner’s manual is to most car buyers. But, don’t fret – reading a credit report isn’t nearly as frustrating. By taking just a few minutes to learn what it all means, you can ultimately save time, money and improve your credibility. For starters, the information you see on a report may vary depending on the credit bureau that your dealership works with, but the general layout is usually the same. Along the top, the first thing you typically see is the one piece of information that almost everyone understands – the consumer’s three-digit credit score. It’s followed by a brief narrative with items that impacted the particular score – great talking points when speaking with vehicle shoppers. Now that you’ve read the headline, it’s time to get the full story. Learning how to read and interpret the entire report can help avert potential missteps. Viewed in a vacuum, a solid credit score may well signal “all systems go,” but important additional data in the report can ensure that you evaluate
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GET A MORE COMPLETE CONSUMER STORY FROM THE CREDIT REPORT
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the spelled-out numbers following these abbreviations refer to the number of accounts that fall under specific rate codes, which indicate the current status of a consumer’s account: • ZERO: Account is too new to rate, or approved but not used. • ONE: Consumer pays as agreed. • TWO: Consumer pays 30-59 days past due and is not more than two payments past due. • THREE: Consumer pays 60-89 days past due and is not more than three payments past due. • FOUR: Consumer pays 90-119 days past due and is not more than four payments past due. • FIVE: Consumer pays 120 or more days past due and is more than four payments past due. • SEVEN: Account included in Chapter 13. • EIGHT: Repossession. • NINE: Charged off. • OTHER: No rate reported. Public Records: Here’s where you’ll see any information about declared bankruptcies, collection items, judgments and tax liens. Details for these items include dates, case numbers, collection agency names and outstanding balances. Inquiries: Inquiries provide insight into a customer’s request for an extension of credit. Up to two years of inquiries, which includes the requestor and the request date, may be displayed on a credit report. Pay special attention to previous inquiries. If you notice that multiple inquiries were made by other dealerships, you should consider asking your customer about it to ensure there aren’t any underlying problems that prevented previous transactions that you can account for when obtaining financing. Tradelines: The tradeline section of the credit report is the detailed view of a consumer’s payment history. Each line details the name of the lender reporting the information, report and open dates for the account, credit limits, term lengths or monthly repayment amounts, balances owed as of reported date and past due amount as of reported date. Each tradeline is classified with one of the rate codes detailed above in addition to a letter designating whether it is a revolving, open or an installment account. Digesting all the valuable information in a credit report isn’t just good for you and your dealership – it’s a great tool for ensuring transparent communications with your lending partners as well as your customers. Reading is indeed fundamental – especially when it’s a credit report.
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Put Your People Back To Work
THERE’S A SIMPLE WAY TO GET PEOPLE WHO LEFT WITHOUT BUYING BACK INTO THE DEALERSHIP. IT’S CALLED FOLLOW-UP.
We all realize there isn’t a sales consultant on the planet who can successfully sell to all the people all the time. In fact, nationally, sales consultants say they only successfully close a sale with one of every five customers. So what happens to the other four who left without buying? Should we just write them off? We’ve already given them our best shot and it didn’t work, right? Wrong. Nationally, the closing ratio for customers who have already been to the dealership at least once without buying skyrockets from 20 percent for “normal walk-ins” to 76 percent. There is a simple way to get those people back into the dealership. It’s easy and it’s free. It’s called follow-up. The fact that those customers came back to your dealership in the
first place tells you that they want to do business with your dealership. If they didn’t, they wouldn’t have come back. But it’s also important to respect the fine line between making the sale and annoying customers to the point they never want to come back. There are always customers who will never buy a vehicle during their first visit, no matter what you do or say. So when it’s clear that a deal won’t be made today, you need to take a step back and let customers move at a pace they’re comfortable with. Sometimes that means they’ll leave without buying. Instead of quitting on them, give them another opportunity to say “yes” by following up with them four to 48 hours later. It starts just before they walk out the door.
Never ask a customer whether it’s OK for you to call him or even the best time to call. It gives him a chance to say, “No thanks,” or that he’ll call you. Be direct and give customers a reason to return to the dealership. If you didn’t have a vehicle they wanted, make sure you know what they want and tell them new inventory arrives every day. Let customers know you are looking for the vehicle that will make them happy and will call them when you’ve got it. Maybe a customer liked a vehicle at your dealership but you couldn’t come to terms. Tell him you’ll work on his situation and call him within the next two days, when you’re sure a deal can be worked out. Often, all it takes to turn a “be-back” into a sold customer is giving him a little time to think about it and another $100 or so to sweeten the deal.
Effective Follow-Up When following up with customers, remember, timing is everything – and the phone is your friend. The most effective customer follow-up telephone calls happen within four to 48 hours of the dealership visit. Making that call can be difficult, but you’ve talked to them before, so don’t be shy about talking to them again. Here are a few tips: •Use the telephone to follow up. Letters don’t have the same kind of immediate response and are not as personal. •Practice making follow-up calls with your manager to gain more confidence. •Be polite and respectful on the phone by thanking your customer for initially coming to the dealership. •Always let your customers know why you’re calling. Getting to the
M A RK E T WATCH
3 Factors Pushing Used Prices Down
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EXPECTED TO FALL 10 PERCENT BY 2018
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Used vehicle prices were down this past February, and the trend isn’t expected to stop anytime soon. According to the latest RVI Risk Outlook report, greater incentive activity and a more competitive new vehicle market – as well as increasing used supply – will combine to put even more downward pressure on pre-owned prices. “The upturn in the U.S economy and the increase in new vehicle sales are expected to contribute to an increase in the supply of used vehicles over the next few years. Competition among manufacturers and incentives activity is also expected to increase,” the report said. “Due to these factors, used vehicle prices in the U.S. are expected to fall 10 percent (relative to current levels)
by 2018.” The industry is expecting a surge of off-lease vehicles to hit the auctions this year, and it seems the trend will continue into coming years as well judging by 2014 statistics. According to the report, 2014 was a strong year for leasing. In the fourth quarter, the lease penetration rate was 19.5 percent, and in 2014 as a whole leasing accounted for 19.6 percent of U.S. new auto sales. “We expect a higher lease penetration to continue for 2015 and 2016 model year vehicles,” RVI analysts predicted. In February used vehicle prices were already on the way down. According to the report, used prices, seasonally adjusted for vehicles 2 years to 5 years old, had fallen off 1.1 percent from
January, according to RVI data. Taking a look at recent residual movement by segment, full-size pickup prices were one of the best performing groups. This segment saw a slight decline of 0.3 percent, much lower than the average for February. That said, RVI analysts said the used supply of full-size pickups is expected to ramp up in coming months, putting downward pressure on used prices for this segment. In February, used supply of full-size pickups was already up by 4.5 percent year-over-year. RVI expects this segment to see a price drop of 14.5 percent by 2018, caused in part to excess used supply as well as an expected rise in long-term gas prices. On the other end of the retention spectrum last month, the luxury
BY AUTO REMARKETING STAFF
full-size sedan saw the largest drop in price, falling by 4.1 percent from January. The luxury SUV (up 0.9 percent) and the full-size van segment (up 0.2 percent) were the only segments to see prices rise at all in February, according to the RVI report.
SA F E T Y WATCH
THE FACT THAT THOSE CUSTOMERS CAME BACK TO YOUR DEALERSHIP IN THE FIRST PLACE TELLS YOU THAT THEY WANT TO DO BUSINESS WITH YOUR DEALERSHIP. IF THEY DIDN’T, THEY WOULDN’T HAVE COME BACK. PAUL H. WEBB IS FOUNDER OF WEBBVT ONLINE TRAINING-STREET SMART/I.T.S. INC. AND PAUL WEBB WHOLESALE PROMOTIONS. HE HAS PRESENTED SALES AND MANAGEMENT TRAINING AND CONSULTING TO AUTO DEALERS NATIONWIDE SINCE 1988. FOR MORE INFORMATION, VISIT WWW. PAULWEBBTRAINING.COM, CALL (425) 518-8833 OR EMAIL SCOTT@WEBBVT.COM OR PAUL@WEBBVT.COM.
FUEL PUMP RELAY MAY FAIL
Chrysler is recalling 338,216 model year 2012-13 Jeep Grand Cherokee vehicles manufactured Sept. 17, 2010, to Aug. 19, 2013, and equipped with a 3.6, 5.7 or 6.4 liter engine, and 2012-13 Dodge Durango vehicles manufactured Jan. 18, 2011, to Aug. 19, 2013, and equipped with a 3.6 or 5.7 liter engine. In the affected vehicles, the fuel pump relay inside the Totally Integrated Power Module (TIPM-7) may fail, causing the vehicle to stall without warning.
INDUS T RY NE W S
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Manheim Forms Alliance with AiM AIM FOR GREATER CONSISTENCY IN INSPECTION PROCESS
Manheim and AiM have formed a strategic alliance that includes an investment in developing inspection technologies. The alliance aims to “create greater consistency in the inspection process,” the companies said, as well as “provide products, services and best practices that will effectively and efficiently support both wholesale and retail activities.” “I’m excited that Manheim will be a part of expanding our capabilities and reach,” said Jim Yates, AiM president and chief executive officer. “We look forward to taking advantage of Manheim’s leadership and expertise in this area to address the industry’s vehicle information challenges. “Our goals are to work toward a more flexible and consistent inspection process that will result in a common condition report, which we hope will become the gold standard of quality.” Shane O’Dell, senior vice president of Manheim Wholesale Services, added, “Manheim is committed to investing in areas that improve the buying and selling
Chrysler will notify owners, and dealers will replace the fuel pump relay with one external to the TIPM. Chrysler’s number for this recall is R09. This recall is an expansion of recall 14V530.
BY AUTO REMARKETING STAFF
experience for customers, and based on their feedback, improving the quality and consistency of vehicle inspections standards is at the top of our list. “Working with AiM, we believe we can accelerate this effort and deliver more effective products, services and solutions to customers and the industry.” The companies called the alliance a “natural fit,” given the respective projects each are doing independently in the vehicle information arena. An increasingly online wholesale marketplace underscores the importance of accurate and consistent vehicle information to both buyers who aim to get the most value and sellers who want a quick turn time. “With Manheim’s help, and the support of others in the industry, we can get a better understanding of the cradleto-grave lifetime brand value of cars,” Yates said. “We can better assess normal brand and model depreciation, condition and damage, as well as the impact of multiple transactions on a vehicle’s value, and we want to empower customers with that information.”
ting Celebra
GWC Warranty 20 Years in Business COMPANY THANKS DEALERS AND CUSTOMERS FOR LOYALTY BY SUBPRIME AUTO FINANCE NEWS STAFF
GWC Warranty, a national provider of vehicle service contracts and related finance and insurance products sold through dealers, is celebrating its 20th year in business. Since opening in 1995, GWC Warranty has partnered with more than 20,000 dealers and helped protect more than 1.5 million drivers by providing what the company calls a “No Worries, Just Drive” experience. GWC is owned by Stone Point Capital, a Connecticut-based investment firm with more than $13 billion in committed capital. “All the accolades and accomplishments of the last 20 years are further proof that GWC is fulfilling our promise to dealers and their customers of delivering outstanding service and exceptional claims administration,” said GWC Warranty chief executive officer and president Rob Glander. “We thank all our dealers and customers for their loyalty these past 20 years, and we look forward to being on board with you for many more to come.
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point quickly lets your customers know you value their time. Your objective is to generate two appointments per day from those customer follow-up calls. If you do that, you’ll book 40 appointments a month, assuming you work five days a week, four weeks a month. Statistics show only about half of those appointments will actually be kept, but using the 76 percent closing ratio because every one of those customers has been to the dealership before, that means you would net 15 sales a month just from customers you’ve talked to before. That’s not bad considering the average salesperson sells 10 vehicles per month. Remember, your customers appreciate professional follow-up telephone calls. Investing the time to reach out to them a second or third time can be a very profitable use of your time.
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BY PAUL WEBB
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Chrysler Recalls SUVs for Stalling
DEALER INSIGHT
– Follow Up
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L EG A L MUSINGS
NIADA BHPH Commission Scores a Big Win in Oregon
DEALER INSIGHT
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A BILL TO PUT SEVERE RESTRICTIONS ON BUY HERE-PAY HERE DEALERS IS DEFEATED THANKS TO YOUR ASSOCIATION AND ITS COMMITMENT TO THE BHPH INDUSTRY BY SHAUN PETERSEN
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For the past five years, the Buy Here-Pay Here industry has been put under the microscope and dissected like no other. The CFPB, FTC, Department of Justice and state attorneys general have ramped up the number of enforcement actions against BHPH dealers. Likewise, media scrutiny of the industry has been intense, from the Los Angeles Times to the New York Times and many in between. Now many state legislatures are considering laws geared toward increased oversight of BHPH dealers. But none of the bills we have seen rival the complete overhaul of the industry proposed by recent legislation in Oregon. Oregon’s Department of Consumer and Business Services (DCBS) introduced Senate Bill 276 with the goal of “stemming abusive financial practices in BHPH transactions.” Under this bill, a BHPH dealer would be required to: • Obtain the same type of license from DCBS that a payday or auto title lender must get. • Cap interest rates at no more than 20 percent or the federal funds rate plus 17 percent, whichever is lower. • Reduce interest rates to account for the amount of the consumer’s down payment. • Form a good faith belief that the consumer has the ability to perform on the contract by using underwriting standards passed by DCBS. • Disclose the purchase price of the motor vehicle before determining creditworthiness. • Remove certain clauses from contracts that waive consumer rights to assert claims or defenses, etc. • Cease accruing interest once a vehicle has been repossessed. • Enter into only one contract secured by one motor vehicle title at a time. • Provide a specific disclosure in the language used to negotiate the transaction. • Wait to repossess a vehicle until after 30 days from when
nonpayment has occurred. • Cease any practice of refusing to accept a scheduled installment payment or refusing to accept a late fee or repossession fee if the consumer offers to pay the full amount. • Charge consumers no more than 7.5 percent of the purchase price for repossession fees. • Cease the use of GPS or starter-interrupt devices. As you can see, the bill is as comprehensive a regulatory framework as would exist in the country – and it’s wholly unworkable for the industry. With that legislative challenge in front of us, the newly created NIADA Buy Here-Pay Here Commission jumped at the opportunity to use its influence not only to lobby against the bill but to educate the Oregon legislature and DCBS about the Buy Here-Pay Here industry. Working with the Oregon IADA, the NIADA BHPH Commission contacted BHPH dealers in the state to explain the adverse impact the bill would have on the industry. The commission also reached out to other BHPH dealers across the country to inform them about the Oregon bill and the potential for similar legislation to pop up in other states if efforts to defeat it in Oregon were not successful (of course, it’s still possible similar legislation might rear its ugly head anywhere at any time). NIADA hired Shawn Miller, a lobbyist in Oregon with years of experience advocating against legislation detrimental to business. He immediately met with key legislators and encouraged them not to let the bill become law. In addition, Shawn and I met with the legislative and policy staff of DCBS. Armed with tools now found on the NIADA BHPH website (www.niadabhph.com), we had a productive discussion educating the agency about the association, the industry and the impact the bill would have on consumers, dealers and the Oregon economy.
I ENCOURAGE YOU TO RALLY BEHIND THE NIADA FLAG It was clear from that meeting they did not understand our business. Through our team effort, I am happy to report the Oregon bill has officially been killed for this session. That is a major accomplishment in which we should take great pride. However, the fact we won that battle does not mean we have won the war. Both legislators and DCBS – in addition to numerous other agencies and legislatures across the country – have expressed concern that the industry might need additional oversight. Other legislation and enforcement actions could arise. So what does all that mean for you, the dealer? Your membership in NIADA and its state affiliates is critical. Your support of the association allows us to fight these battles and to advocate on your behalf. If you are not a member or think it is not important, think again. But mere membership is not enough. We need leaders to stand with us and fight the good fight. Saying or believing someone else will do it only leads to negative consequences. If we all think that way, we are destined to fail. I encourage you to rally behind the NIADA flag and help us ensure detrimental legislation such as the bill introduced in Oregon does not see the light of day. Become an active and engaged participant by contacting your state association today to find out how you can make a difference in this crucial effort to protect your business. SHAUN PETERSEN IS A PARTNER WITH THE LAW FIRM OF MAC MURRAY, PETERSEN & SHUSTER LLP AND HEAD OF THE FIRM’S AUTOMOTIVE PRACTICE. HE SERVES AS NIADA’S REGULATORY COUNSEL.
BECOME AN ACTIVE AND ENGAGED PARTICIPANT BY CONTACTING YOUR STATE ASSOCIATION TODAY TO FIND OUT HOW YOU CAN MAKE A DIFFERENCE IN THIS CRUCIAL EFFORT TO PROTECT YOUR BUSINESS.
AUC T ION NE W S
Manheim Honors 19 Top-Performing Independent Auctions
OVE.COM AWARDS PRESENTED AT CONFERENCE OF AUTOMOTIVE REMARKETING
Recognizing the importance of independent auctions to its future business growth, Manheim honored 19 independent auctions during the OVE.com Awards Ceremony March 17 during the Conference of Automotive Remarketing in Las Vegas. This is the sixth year that Manheim has recognized top-performing independent auction partners. “Manheim wants to thank all these independent auctions for setting a great example for the industry,” said Jenifer Eggert, vice president of digital services for Manheim. “Congratulations to all of the winners.” The digital sales team is dedicated to servicing independent auctions and helping them take advantage of Cox’s automotive offerings to grow their business, including OVE.com and Ready Auto Transport. “It’s a pleasure to recognize the accomplishments of these
INDUS T RY
independent auctions,” said Peter Lavallee, senior director of sales, independent auctions at Manheim. “We are a sales organization dedicated to supporting nonManheim locations by leveraging OVE.com to sell products and services.” The awards were presented as follows, based on performance in 2014: • Highest Overall Volume (most sales, regardless of segment or mix): Southern Auto Auction (East Windsor, Conn.). Norwalk Auto Auction, which won the award the previous three years, received honorable mention. • Highest Commercial Mix Volume (most sales based on the greatest number of commercial accounts): Southern Auto Auction. Greensboro Auto Auction in North Carolina received honorable mention. • Highest Dealer Volume (auction that sold the most dealer
inventory): Columbus Fair Auto Auction in Ohio. Akron Auto Auction in Ohio, which won the award the previous three years, received honorable mention. • Highest Overall Volume Growth (greatest year-over-year percentage in growth from 2013 to 2014): Bell-Air Auto Auction in Maryland. Charleston Auto Auction in South Carolina received honorable mention. • Most Innovative (auction that leveraged the OVE.com platform beyond conventional methods to grow its business online with an out-of-the-box strategy): Tallahassee Auto Auction in Florida. Receiving honorable mention was 166 Auto Auction of Springfield, Mo. • Online Buyer Confidence Award (lowest un-buy percentage): 166 Auto Auction. Jacksonville Auto Auction of Florida received honorable mention.
• Highest Commercial and Deal Mix Volume (most net transactions in 2014 based on segment and mix): Columbus Fair Auto Auction. It was the second consecutive year Columbus Fair won the award. Bell-Air received honorable mention. • Highest Commercial Volume Growth (greatest year-over-year commercial sales percentage growth from 2013 to 2014): Southern Auto Auction. Bell-Air received honorable mention. • Highest Dealer Sales Volume Growth (greatest year-over-year dealer sales percentage growth from 2013 to 2014): Columbus Fair. ABC Lancaster of East Petersburg, Pa., received honorable mention. • Customer Experience: Akron Auto Auction had the least amount of arbitrations based on volume. To learn more about Manheim visit www.manheim.com.
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Autotrader Debuts New Logo and Brand Identity W W W. N M I A D A . C O M
THE NEW LOGO CAN BE INTERPRETED IN DIFFERENT WAYS, THE COMPANY SAID, SUCH AS THE FOLLOWING: THE ROAD AHEAD, AN ARROW POINTING FORWARD AND A SUBTLE “AT.”
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shopping process — Autotrader is the guiding force that leads consumers to the vehicle that’s a perfect match through an experience that’s personal, immersive and surprisingly enjoyable,” said John Kovac, senior vice president of marketing for Cox Automotive, the parent company of Autotrader. “We’ve come a long way since our brand was born 16 years ago, and this new identity perfectly captures that journey by giving a subtle nod to our history while literally pointing forward toward our future.” “The new identity evokes a fresh optimism and confidence that speak to the company’s passion for cars,” said Michelle Matthews, partner, Lippincott. “As important, the design also represents the journey — the possibilities that propel a car buyer along the exciting road to finding the right car.”
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will now be treated as a single name with a lower-case “t”. The company explained this move was made to reinforce the brand’s existing position in the minds of consumers, since the term Autotrader is commonly used and recognized as a single term. The new logo can be interpreted in different ways, the company said, such as the following: the road ahead, an arrow pointing forward and a subtle “AT.” The design drew inspiration from vehicle badges and translates well to mobile, web and print applications. The company wanted to reflect the growth of multi-device usage in car shopping. And, of course, Autotrader’s signature orange still has a place in the company’s new look. “This new logo visually represents our role in the car
BY AUTO REMARKETING STAFF
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Almost 16 years ago, Autotrader launched its online automotive marketplace. Now, the company is recognizing its evolution into a digital solutions company offering a suite of tools that make car buying and selling easier for consumers, dealers and manufacturers with the launch of a new logo and brand identity. “This new brand identity reinforces the transformation underway in our business,” said Autotrader president Jared Rowe. “We’re building on our legacy as the most comprehensive online automotive marketplace by expanding on our strengths, stretching into new territory that aligns with our mission and creating an emotionally engaging experience for both buyers and sellers.” First things first, in written communications, Autotrader
DEALER INSIGHT
COMPANY CONTINUES TO EVOLVE
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COMP L I A NCE OV ERDRI V E
Leading Edge Ideas to Attract New Consumer Credit Business
DEALER INSIGHT
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PRACTICAL ADVICE FOR BHPH DEALERS
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I first started working in consumer finance compliance 25 years ago. Although consumer finance compliance is constantly evolving, in those days dealers and creditors offered a variety of credit features to better serve consumers. Because interest rates were high, dealers offered variable interest rates and stepped rates, which allowed consumers to begin the repayment term at a lower interest rate. Balloon payment terms were also popular with dealers offering creative options when the payment came due at the end of the term. Each new feature or option required compliance analysis as we wove our way through state and federal requirements. I remember those days as exciting, creative and very consumerfocused. Today, interest rates are low so the demand for some of those features has gone away. But dealers continue to look for unique ways to attract consumer credit business. However, in today’s regulatory environment, it can be risky to try something new or to be too different. So how can you stay on the “leading edge” without being on the “bleeding edge?”
Do the basics very well. On occasion, I hear from dealers who have been criticized by a regulator for what seem like minor or very technical issues. Digging a little deeper, I often find out the issue was just one of a long list of more significant issues. If a regulator finds a few significant issues or a sloppy compliance program, it becomes much easier to criticize everything. Before getting too creative, make sure you have a solid compliance program covering the features you already offer. Adding a new feature or program will not work well if it is built on a weak compliance foundation. Be sure your application-to-closing process is well defined, is well-run by trained personnel, uses vetted third-party providers, and includes quality documentation and recordkeeping. Unless you have these pieces in place, adding a new feature will likely just add to your compliance burden and business risk. The Department of Justice and the North Carolina Attorney General recently reached a major settlement involving Buy Here-Pay Here dealerships. The Consumer Financial Protection Bureau recently took enforcement action against the nation’s largest BHPH dealer. Both cases received considerable attention because they were against BHPH dealers. However, an equally important aspect of these stories is that they did not involve new credit features or novel legal theories. They involved alleged violations of Equal Credit Opportunity Act laws and credit reporting and collections requirements. In the CFPB action, the mistake
will cost the dealer $8 million in civil money penalties. These recent cases are good examples of why it pays to have a solid compliance program in place before considering new features or special programs. Understand the compliance implications of your changes. The tentacles of compliance requirements touch almost every feature and aspect of the consumer credit process. Virtually any feature change will have some compliance implication. For example, to add a new fee you need to know: (a) if it is allowed under state and federal law; (b) if it will be a finance charge under the Truth-in-Lending Act affecting the finance charge and annual percentage rate calculations; (c) if charging the fee will require an additional disclosure or warning to the consumer; (d) if the fee can be financed, and more. Compliance research should be one of the first steps when you consider adding a new fee or a new credit feature. Implement a strong process to address and resolve customer complaints. Having a process to address and resolve customer complaints should be an important part of your compliance program – everyone in your organization should be trained on it. It’s better to resolve a customer complaint personally and privately than it is to receive a letter from a customer’s lawyer or from a regulator. The CFPB, other state and federal regulators, and even social media make it easy for customers to escalate their complaints, making it a much bigger issue than it would have been had you had a protocol in place to immediately address it. Before getting creative, make sure your complaint process is well established. An added benefit is that if your new feature creates confusion or problems with customers, you will hear about it through your complaint process, which is a good way to gauge the success or failure of any new initiative. In response, you can modify the feature or discontinue it, as needed.
BY CHIP ZYVOLOSKI
MAKE SURE THAT YOU HAVE A WELLDEFINED, WELLRUN COMPLIANCE PROGRAM FOR YOUR COLLECTION AND REPOSSESSION ACTIVITIES. For dealers selling to nonprime credit consumers, you may be thinking about new features expanding your collection rights. If so, the same considerations apply. Make sure that you have a well-defined, well-run compliance program for your collection and repossession activities. Adding new collection rights can create a Wild West-type atmosphere if you don’t have a strong and disciplined foundation. Remember that compliance tentacles reach every aspect of a transaction, even if there aren’t specific compliance requirements on your new feature. For example, if you want to require that a starter interrupt device is installed at the consumer’s expense, you need to consider whether the cost is a finance charge under the Truth-in-Lending Act affecting the APR. You also need to consider if the state allows such charges or if the charges will push credit charges over state usury limits. Other legal and compliance issues should be considered before adding such a requirement – or before adding any feature that expands your collection rights. And finally, be sure that the dealership is prepared for, and addresses, any consumer complaints about the new feature. It is important to remember that there are consequences to your actions. With the recent enforcement action by the CFPB, others are likely to follow. So, in your pursuit of new ways to attract consumer credit business, make sure you keep your business practices more “leading edge” than “bleeding edge.” CHIP ZYVOLOSKI IS A SENIOR ATTORNEY FOR INDIRECT LENDING AT WOLTERS KLUWER FINANCIAL SERVICES. FOR MORE INFORMATION, VISIT WWW.WOLTERSKLUWERFS.COM/INDIRECT.