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SINCE 1940

April 2011

www.FIADA.com

A Publication of the Florida Independent Automobile Dealers Association

Information and Insight for Florida Used Car Dealers

Find the answer to this question that consumers and dealers are asking on page 17.

FTC HOSTS INDUSTRY ROUNDTABLES Page 7

FIADA 2011 ANNUAL CONVENTION Page 16

PERMIT NO. 38 FULTON, MO

PA I D PRST STD U.S. POSTAGE

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April 2011 — Independent Dealer — 1


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Contents April 2011

MAILING ADDRESS 1840 Fiddler Court Tallahassee, FL 32308 TELEPHONE (850) 385-2712 (800) 237-0448

FAX (850) 385-3251

For members of the Florida Independent Automobile Dealers Association

WEBSITE www.FIADA.com

EXECUTIVE COMMITTEE Jeff Gann President Greg Edwards Chairman of the Board John Cousins Senior Vice President Dino Mercurio Secretary Brandi Noegel Treasurer Jim Kagiliery Regional Vice President Frank Fuzy Regional Vice President George Hickey Regional Vice President Steve Marbais, CMD Regional Vice President Chris Leedom Regional Vice President FIADA STAFF Steve Jordan Executive Director Terry Myers Educational Instructor Sarah Langley Membership Coordinator Alex Romans Education Coordinator Christy Taylor Editorial/Advertising

POSTMASTER:

Send address changes to: FIADA • 1840 Fiddler Court Tallahassee, FL 32308 (850) 385-2712 • Toll Free: (800) 237-0448 Fax: (850) 385-3251 • www.FIADA.com The Independent Dealer is a publication of: Florida Independent Automobile Dealers Association, 1840 Fiddler Court, Tallahassee, FL 32308. The magazine is published every month in Tallahassee and distributed to Florida new, used, wholesale and lease/retail car dealers. Advertising rates are available upon request. The statements and opinions expressed herein are those of the individual authors and do not necessarily represent the views of Independent Dealer or the Association. Likewise, the appearance of advertisers, or their identification as members of FIADA, does not constitute an endorsement of the products or services featured.

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C O LU M N S & F E AT U R E S 4

Jeff Gann

7

FTC Hosts Roundtable Discussion on Dealer Issues

8

President’s Message

Are You Using the Right Kind of Bait? Auto Search Technologies CEO Michael Jackson gives advice on ow to get your website “caught” by the search engines.

10

A closer look at who we are, and who we aren’t.

12

FIADA General Counsel Rob Sickles examins indemnity agreements.

14

NIADA News and Notes

16 17 18

What is the FIADA? Whose Fault is it Anyway?

FIADA Annual Convention Save the Date for FIADA’s 2011 Annual Convention at the Gaylord Palms Resort in Orlando, FL.

What Happens When CARFAX Gets it Wrong? Industry giant Carfax’s humorous mistakes have dealers questioning the company’s acuracy and ultimate intentions.

Legislative Update Hon. John Grant, FIADA Lobbyist

22

2011 Record Retention Rules for Auto Dealers Jorge Martinez, CPA

26

Cousins Family; Southeast Car Agency Win Ethics Award

25

Industry News

26

Jim Kagiliery, JD Byrider

Member Testimonial

UPCOMING EVENTS July 15-16, 2011 FIADA Board of Directors Meeting Ritz-Carlton Palm Beach Manalapan, FL

October 14-16, 2011 FIADA Annual Convention Gaylord Palms Resort & Convention Center Orlando, FL April 2011 — Independent Dealer — 3


FROM THE PRESIDENT

What We Have Done For You Lately BY JEFF GA NN

O

ne of the comments we sometimes hear from those being asked to join or renew their membership in the FIADA is “what have you done for me?” This is a natural human response and for several reasons we are not offended by it in any way. Once one moves beyond true charitable activities, it is natural to expect something in return for something given. This is the very foundation of the capitalistic system. In fact, a business strives to maximize its return on investment. If you are a business that can deliver great value to your customers while at the same time maximizing return, you will be very successful. I believe you should expect the same from your association membership. Your board works very hard to maximize the value you receive for your membership dues. Although this value is apparent and tangible when you receive your membership coupon book with thousands of dollars of potential savings for a mere $300, it is the intangible and unexpected value you receive through the work we do while you are running your business. One example we are particularly proud of is the negotiated settlement with the Palm Beach County Tax Collector over the proposed elimination of some dealer services. Although we initially had to file a lawsuit, a team consisting of myself, Executive Director Steve Jordan, Board Director Dino Mercurio, and outside counsel Rob Sickles successfully negotiated a meaningful resolution with Palm Beach County Tax Collector Ann Gannon. The potential annual savings for the average dealer in this arrangement will be thousands of dollars individually, and hundreds of thousands of dollars for the industry as a whole. I would like to thank Tax Collector Gannon for ultimately giving us the opportunity to represent the industry and be part of the solution to a problem she is struggling with: How to do more with less.

4 — Independent Dealer — April 2011

Your association leadership was also at the forefront of a potential crisis in the dealer bond industry. Although the crisis never materialized fully, diligent members of your association saw it coming early and worked feverishly with industry colleagues to be prepared for action if necessary. There were too many involved for me to thank them all here, but be assured of one thing: They are currently keeping our powder dry should we need to spring into action on your behalf. A group of us, including myself, recently attended the NIADA meeting in Texas where we energetically represented your interests. We are pleased to return with much good news, some of which I will cover in a subsequent article. However I must recommend that you look at the new Certified Vehicle Program being offered through NIADA. Several of our members are successfully using it to increase sales, profits and customer satisfaction. I cannot understate the competitive power this program will bring to your dealership. With the ever increasing number of buyers searching the Internet for pre-owned vehicles, this program will help you level the playing field with the “big guys” and dramatically elevate your marketing power. As you will see from Senator Grant’s article in this issue, he has been extremely active representing your interests in the legislative arena. Working with someone as effective and diligent as him is a pleasure. There is much more to be excited and optimistic about and I hope to share some of it with you at the next meeting. So there you go: A little bit of what we have done FOR YOU lately! Sincerely, Jeff Gann, FIADA President www.fiada.com


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February 2011 — — Independent Independent Dealer Dealer — — 55 April 2011


The FIADA Board of Directors recognizes that in this recovering economy, renewing your continuing education credits is just one more expense you are required to spend. To make it easier, for a limited time FIADA Members can now get their continuing education credits online for free.

NON-MEMBERS

$19.

95

*for a limited time

For Groups:

Now is the perfect time to let your whole office brush up on their skills. As a member, you can allow an unlimited amount of students to participate in the online CE course. Title Clerks, Finance Managers and other office leaders would benefit from this course. Go online to www.FIADA.com and sign up your group.

OnSite:

Getting credit for your Continuing Education has never been easier, or faster. DMV representatives will be on hand at the FIADA on site CE classes to accept and process your license renewal applications. Check FIADA.com for dates and locations.

FIADA Online Continuing Education is:

Convenient - You have up to 90 days to complete the course. Immediate - Print your continuing education certificate after completion. Accurate - Jointly developed by FIADA and the DMV.

Go Online to www.FIADA.com, or call FIADA at (888) 587-0004. — Independent Independent Dealer Dealer — — April April 2011 2011 66 —

www.fiada.com www.fiada.com


FTC Hosts Roundtable Discussion on Dealer Issues

B

y now, most dealers are familiar with the Dodd-Frank Wall Street Reform and Consumer Protection Act and have been watching the development of the Consumer Financial Protection Bureau. On April 12 the Federal Trade Commission held a roundtable discussion with industry leaders to better understand the world of automotive sales and finance. With nearly 100 people in attendance, “The Road Ahead” roundtable featured six different panels: Understand the Motor Vehicle Sale, and Credit Transaction, From Both Prime and Subprime Perspectives; Interest Rates, Dealer Reserves and Markups; Payment and Locator Devices and Consumer Privacy; Spot Delivery; Contract Add-Ons; and Vehicle Title Problems and Dealer Bankruptcies. A line-up of stand-out

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panelists participated in the program including NIADA’s General Counsel Keith Whann and FIADA Board Member and car dealer Chris Leedom. Whann, who for the past few months has had multiple meetings with the FTC, CFPB and The White House about dealer issues and the basics of how used vehicles are bought and sold, was the only panelist to participate in two panels. Whann, who attended as the lead representative of independent dealers, says the invitation to participate on multiple panels says a lot about NIADA’s rapport with the new agency and also about the representation of independent dealers in these beginning stages of a new rule-making authority. According to Whann, the FTC was genuine in its attempt to understand more about the industry and to

identify its problems and issues. Still in the infant stages of the process, it is unclear as to what rules and regulations will lay ahead for dealers. Even so, there is already a good indication of what direction things are heading and clues for dealers as to what they can do now to prepare for what is ahead. Both the Florida Independent Automobile Dealers Association and the NIADA will be following FTC developments closely and will be looking out for members at every turn. The best advice for dealers is to stay involved with the Association and plan on attending the upcoming convention in October, which will include handson educational sessions dealing with this issue and offering practical, proactive advice for dealers on what to do next.

April 2011 — Independent Dealer — 7


If you are looking for more customers, make sure your online copy is enough to get them on the hook. BY MI C HAEL D. JAC K S ON

E

verything in life can be broken back down to simple mathematics and numbers. Automotive sales have traditionally been a numbers game, so let’s start by looking at the facts: Florida has the fourth largest population in the US only behind Texas, California and New York. Did you know that 1,000 people move to Florida every day, and according to the April 1, 2011 report from the US census Florida has a whopping population of 18,537,969? With that many potential customers, the question becomes where and who do we market too? You don’t want to go fishing in a dry pond; you have to fish where the fish are. Just because the pond where you are fishing is dry does not mean that the fish aren’t biting, but maybe you are using the wrong kind of bait. According to JD Power & Associates, 72% of Americans are shopping for vehicles online. Florida definitely has the numbers to start with and in this day and age, who wouldn’t prefer a larger target to aim for, or a larger audience to expose your business too? Being that the internet is the number one way to purchase a vehicle, it would make sense to fish where the fish are. With the market share of online shopping starting in the search engines, it only makes sense to start advertising here, where your customers begin to look.

88 — — Independent Independent Dealer Dealer — — April April2011 2011

These days, auto dealers need to reach the largest audience possible in the most cost effective ways, and when it comes to the search engines there are only two ways to be seen. You can either pay to be found in the search engines, or qualify to be there for free applying SEO (Search Engine Optimization) to your website. Because used cars can vary with features, accessories, and mileage unlike new vehicles, used car searches make up the market share for all automobile searches conducted online which is lucky for the independent dealer. When a consumer conducts a search in a search engine, they are traditionally showcased a list of results that are displayed “Results 1 -10.” These results are displayed according to a particular formula developed by each search engine that selects the “best qualified” websites to list based upon the criteria that the consumer searched for. If a consumer is typing in a combination of words, what do you think that your website needs to have to be included in the results? You guessed it, WORDS! Search engines like words, and lots of them. You can use as many words found within your website as long as you are using proper grammar when doing so. The words found on your website act as bait to the search engines. As any good fisherman knows, the right bait is essential. Much the same way, Knowing what to write and where to write it on your website could make the difference in potential customers finding you online.

Business Location Information You should always include the location of your dealership or other surrounding areas in which you want to have visibility. If you do not tell a search engine what city, county or surrounding cities that you cater too, they will not know how to connect you to people from that area looking for your products or services. This will allow search engines to supply your listing in a local search and will increase your ranking in your areas (and make your traffic more targeted). Who doesn’t want to hunt in their own backyard? Always make sure that your address information is located on your website in text, and not a graphic. Search engines can only read words, not addresses that are imbedded in images or flash animation (for now). Clearly Written Web Page Content Make sure that the content on your web page is written clearly so that the search engines can match what your site is about with the type of business you are in. When writing content for your webpage, you want to make sure that you include information that pertains to what you are telling the search engines that you have on your website. If you are telling them that you sell “used cars in Florida” on your website, then you have the ability to be included within the search results that are displayed when a consumer conducts a search. The more content that you have on your webpage that matches the desired search terms, the better your website will rank and compete for those keyword searches. www.fiada.com


Michael D. Jackson is the CEO/Co -Founder of Auto Search Technologies, Inc. He may be reached at (949) 608-0809 or email at mjacksonautosearchtech.com.

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Key Word Density The content on your site must be written with the proper keywords that are being searched most often. If you want to be found under a specific term for your city, then hiding these terms multiple times throughout your page content is important. The more that the search engines can match the terms to your site, the search engines will know that your content is about a particular topic. You do not want to abuse this method, as if the search engines feel you are they will remove you from the listing results for “spamming” and automatically pull your site from the results listings. Most search engines have the ability to scan text to determine if the text on the website follows rules that apply to the English language. You can hide these terms frequently in the text, as long as you are using correct grammatical structure.

PAID ADVERTISING April 2011 — Independent Dealer — 9


FIADA is an organization run for dealers, by dealers. For more information on what we can offer, visit our website at www.FIADA.com. If you have suggestions on how we can serve you better, please call us at (800) 237-0448 or email us at info@fiada.com.

What We Are:

What We Aren’t:

An association for auto dealers, governed by auto dealers

Another regulatory agency

Your advocate to the State Legislature, the Cabinet and regulatory agencies A watchdog for your best interests for over 70 years

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A key business secret of veteran dealers for 10, 20, 30, 40 even 50 years

10 10— —Independent IndependentDealer Dealer— —April April2011 2011

Inspectors or examiners An extension of the Department of Motor Vehicles Consultants who answer technical questions with hopes of signing you to a consulting contract

Join FIADA and get access to member benefits like free continuing education, legal consultations and more. Turn the page for an application or go online to www.fiada.com. www.fiada.com www.fiada.com


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April 2011 — Independent Dealer — 11


BY R OB S I C KL ES

O

When the fingers start pointing, a strong indemnity agreement can keep you out of the way of a third parties mistake.

n a pretty regular basis, the dealers that I represent send me copies of the contracts that their vendors are asking them to sign. In reviewing these agreements I always discuss with my clients the importance of having a strong indemnity clause within the agreement and having a comfort level with the financial security of the vendor, especially if the vendor is going to be providing goods or services that expose the dealership to risks. The importance of these provisions and of the integrity and reliability of a dealership’s vendors is only increasing. More and more often, I am seeing auto dealers defending cases that are being brought, not based upon the dealership’s actions, but rather based upon the actions of third parties that were providing services for the dealership. In the past 12 months I have been involved with the defense of dealers in all kinds of strange situations where the dealership’s employees did nothing wrong. Among these cases is a situation where a cleaning company left the door to the dealership unlocked, someone entered the dealership, stole a vehicle and then subsequently wrecked that vehicle into another vehicle and the injured

12 — — Independent April 2011 2010 10 Independent Dealer Dealer — — December

driver of the other vehicle sued the dealership. Similarly, I have a dealer facing claims where a non-employee bookkeeper, doing an after hours inventory, improperly removed a vehicle from the lot and was involved in an accident. I have also defended dealers where third parties have furnished repairs to components of vehicles, such as rims, and then those components have failed. Most recently, I have seen a dramatic increase in suits against dealers and finance companies relating to the collection and recovery activities of repossession and collection companies.

contractors or other third parties, when those agents are acting within the scope of their duties to the business or person that hired them. While there are certain exceptions and defenses to a claim against a person or entity based upon the actions of their agents, all of them are factually specific and require proof in order to establish them before the court. As a result, a plaintiff alleging such an action will generally be able to avoid a motion to dismiss and the dealership is then forced to litigate these issues and defenses.

In virtually every one of these instances, the true party at fault, the cleaning company, the bookkeeper, the repair shop and the repossession or collections company is not named as a defendant or they are simply included as a co-defendant. It is often the dealership that is the target defendant because plaintiff ’s lawyers assume that dealers have deep pockets.

Having a solid indemnity agreement with your service providers becomes a key to the dealer avoiding the attorney’s fees and costs of defending a claim under an agency theory and also to shift the risk of loss in the event of a bad decision. I use the term “solid” to define the type of indemnity agreement needed because not all indemnity agreements are equal and some may not even protect the dealer.

As a preliminary matter, there is virtually no way for a dealer that is using a third party vendor to eliminate potential liability for the actions of the vendors. Under Florida law, businesses are generally responsible for the actions of their agents, including independent

In a recent suit for a finance company relating to claims arising out of a repossession, the finance company was sued based upon the alleged actions of the repo agent. My client was confident that it had an indemnity agreement with the recovery agency because there was an indemnity clause www.fiada.com


in the contract. When I reviewed the contract there was in fact an indemnity provision in it, however, it was the finance company that was agreeing to indemnify the repossession company for any losses resulting from the finance company wrongfully instructing the repossession company to repossess a vehicle. There was no provision within the agreement that required the repossession company to indemnify the finance company for anything. Being listed as a named insured or obtaining an certificate of insurance from the vendor may not be enough protection either. While such insurance may offer some protection from the vendor’s negligence, most insurance policies contain an intentional acts exclusion that states that there is no coverage for any intentional act that results in damages to a third party.

Hopefully, you will never find yourself in a position where the acts of someone unrelated to your dealership subjects you to a lawsuit, but, if you are, an indemnity provision will soften the blow by requiring the vendor that caused the problem to defend you in court and cover any damages that may be awarded.

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In order to insure that you are adequately protected, make sure that any vendor that is providing services to you agrees to indemnify you for any and all losses relating to the services that it is providing. Keep in mind that the indemnity agreement is only as viable as the entity offering the indemnity and if the vendor goes out of business or does not have the financial backing to pay for your defense, then having the agreement will not matter.

Rob Sickles is FIADA’s outside general counsel and can answer legal and technical assistance questions for members. Contact him through the FIADA office at (800) 237-0448. www.fiada.com

April 2011 — Independent Dealer — 13


NIADA GENERAL CO UNSEL KEITH WHA NN TO PARTICIPATE IN FT C ROUNDTABLE DIS CUSSIONS The National In

NIADA’s 65th Anniversary Convention & Expo is scheduled for June 19-23, 201 at Caesars Palace in Las Vegas. Registrations are being accepted now, online at www.niada.com. A promotional rate, starting at $144/night has been extended through April 30, 2011 for your stay during the convention. Reserve your space online at www.niada.com, or call Caesar’s Palace directly at (866) 227-5944. Use the group code “SCNIA1” to receive the special convention rate.

dependent Automob ile Dealers Association is please d to announce that N IADA General Counsel Ke ith W hann has been asked to attend the first Federa l Trade Commission roundtable on the Dodd-Frank Wall Street Reform an d Consumer Protection Act. The meeting will be held at the Wayne State University School of Keith Whann Law in Detroit, Mich ig an on April 12 and will expl ore consumer protec tion issues about vehicle sales an d leasing. The FTC has said “the roundtables will provide an opportuni for regulators, consum ty er advocates, industr y participants and ot interested parties to her discuss consumer prot ection issues in conn with vehicle sales and ection leasing.” Keith will be parti cipating in both the “S pot Delivery ” and “Vehicle Title Problem s and Dealer Bankru ptcies” Roundtables. This is just part of NIADA and Keith’s efforts to continue th Association’s involvm e ent on these issues an d others going forward. His meeting just last month with W hite H ouse officials and department heads of the new Consumer Fi nancial Protection Bu has enabled NIADA reau to remain on the fore front of these issues.

CALLING ALL CIVIC-MINDED DEALERS:

Independent dealerships across the nation contribute everyday to their communities, but often go unrecognized for their community support. This award was created to honor those independent dealerships. Five finalists will be selected and the winning dealership will be named on June 22 at the Leadership Awards Banquet during the National Independent Automobile Dealers Association Convention and Expo in Las Vegas. Manheim representatives will present the award along with a $5000 check made payable to the dealership’s chosen charity, which must be classified as a charitable organization under section 501(c)(3) of the Internal Revenue Code. For more information and a nomination form, go to niada.com or contact Georgia Brown at 800-649-3837. NOMINATION DEADLINE: APRIL 30, 2011! 14 — Independent Dealer — April 2011

Get more news at www.NIADA.com Watch over 12 sessions from the recent CAR Conference now on NIADA.TV. Check out the “Remarketing” and “New Programs” channels at www.NIADATV.com throughout April and May.

www.fiada.com


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The FIADA Annual Convention is back! Join us this year at the Gaylord Palms Resort in Orlando!

FIADA has secured a special room rate of $144 a night, including resort fees. To make a reservation, call (407) 586-2000 and ask for the FIADA group rate.

16 — Independent Dealer — April 2011 www.fiada.com

www.fiada.com


E D I T O R I A L F E AT U R E

National TV commercials negatively portraying car dealers that don’t use CARFAX amid mounting questions about the Price Calculator formula are causing many dealers to say, “Just show me the alternatives…to CARFAX.”

T

hanks to a nationwide television campaign targeted at car buyers, consumers are now being conditioned to say, “Just show me the CARFAX” when they walk onto your lot. Consumers are also being told to believe – in the same commercials – that only reputable dealers will offer a CARFAX vehicle history report when asked. Are customers to believe that quality dealers who offer viable vehicle history report alternatives like the Experian AutoCheck or a report from the National Motor Vehicle Title Information System (NMVTIS) are not reputable? The Board of Directors of the Florida Independent Automobile Dealers Association (FIADA) answers that www.fiada.com

question with a resounding, “No! Consumers are not to believe that.” One FIADA board member says that his dealership is now using other vehicle history reports and only giving a CARFAX as a last resort when pressed by the customer. In part, this decision was made because of how dealers are portrayed in their TV ads, but also because the information isn’t always accurate. This board member asks, “What happens when a customer comes to the lot and is given a CARFAX with erroneous or conflicting vehicle history data? CARFAX isn’t the one selling the car or answering the questions face-to-face. It’s my reputation on the line at that point, not CARFAX’s.” So what happens when

*

a reputable dealer is cajoled into giving out CARFAX vehicle history data that isn’t reputable? They seek other solutions. In one particular example, this dealer was selling a 2009 Mercedes-Benz SL550 with one owner, 16,760 miles and seven service records that showed two complete sets of new tires. In reality, only one tire had been replaced each time due to small road hazard reasons. Without calling the previous owner for clarifying the erroneous information, a customer could believe there was something wrong with the suspension or alignment. Examples like this are springing up all over and it makes selling cars with a CARFAX harder. April 2011 — Independent Dealer — 17


[

]

So now dealers and consumers are to believe that CARFAX is now in the business of pricing cars they have never seen or inspected, based on potentially flawed or unconfirmed data?

FIADA Executive Director Steve Jordan has been fielding calls from dealers around the state who are losing patience with the CARFAX position in the marketplace. He said, “FIADA dealers are committed to excellence, integrity and a strict Code of Ethics and are growing more concerned with how they are being portrayed by CARFAX in the media. It would be like Coca-Cola launching TV ads saying that Coke products are only served in restaurants with clean kitchens. Restaurant owners would be furious. They would have customers coming in asking if they served Coke and if not, they’d leave. I’m sure there would be onslaughts of complaints from café owners that serve Pepsi that also have clean kitchens and good food. It’s ridiculous, and our dealers are taking note.” In a recent article in the Used Car News, Jeffrey Bellant gives an account of a spirited debate that took place at the recent International Automotive Remarketers Alliance conference in Las Vegas where CARFAX was put on the hot-seat. Participants in a breakout session voiced concerns over CARFAX’s usage of phrases like “possible frame damage” or “possible odometer rollback.” Many participants said the word “possible” should be avoided since the problem either exists or it doesn’t. Gerry Bayer, vice president of data for CARFAX, Inc. said he’ll take the feedback from the meeting and 18 — Independent Dealer — April 2011

“seriously consider” suggestions about matters…like possible odometer roll-backs. “We are there to give you information to help you make better decisions,” Bayer said, “and to help you sell cars faster.” Feedback the FIADA is getting from its dealers would suggest otherwise. However, Bayer also said the company is ultimately creating the product for consumers. Here we go. CARFAX is now positioning itself as the ultimate consumer advocate? This idea further frustrates dealers who are not only facing erroneous or misleading vehicle history data, but are now having to contend with the CARFAX Price Calculator. In April 2010, CARFAX introduced a new feature to their vehicle history report called the CARFAX Price Calculator and the CARFAX History Impact. According to their press release, the History Impact works “by analyzing market pricing and millions of used car transactions” to suggest an adjusted retail book value “based on the information in the CARFAX vehicle history reports.” It is common knowledge that the CARFAX vehicle history reports do not always contain accurate or empirical data. So now dealers and consumers are to believe that CARFAX is now in the business of pricing cars they have never seen or

inspected, based on potentially flawed or unconfirmed data? There now seems to be as many questions about why CARFAX is in the vehicle pricing game as to how their formula works to determine the adjusted retail book value of a car their company has never seen. CARFAX receives data from more than 34,000 different sources, including motor vehicle agencies in the U.S. and Canada, auto auctions, service facilities, insurance companies and more. CARFAX is dependent upon the accuracy of the data supplied to them by these agencies and sources, and for them to draw conclusions based on these multiple data streams, the entire system would have to work seamlessly and without error. “How the CARFAX formula works to determine an adjusted book value is a complete mystery,” Jordan says. “According to dealers we are talking to, CARFAX either can’t or won’t disclose how their algorithm works. If they could effectively manage these data sources accurately that would be one thing, but why they are pricing cars in the first place is an even bigger mystery.” One example of how CARFAX is managing data through the History Impact formula came to us from an FIADA member and Florida dealer. This dealer sent in a CARFAX vehicle history report that showed a 2006 Ford F-150 Crew Cab pickup registered as a personal vehicle with one owner, no accident damage and a Title History guaranteed “No Problem” on actual mileage or brands. The last reported odometer reading was 815,293 miles with estimated miles driven per year of 197,860. There are seven vehicle service entries and no issues noted under Additional History. www.fiada.com


According to CARFAX the net affect of the vehicle history report for this ’06 F-150 is an adjusted retail book value of +$240. No kidding. If a consumer is to believe CARFAX is their advocate, then they are also to believe they should pay an additional $240 above retail book for a truck with 815,293 miles. With incidents like this the CARFAX History Impact is frustrating dealers and consumers alike and many are asking, “How is that consumer protection?” One could say this is an isolated mistake and it’s just an error. But isn’t that the point? If the data used in this formula is not inherently accurate or the formula somehow doesn’t consider excessive mileage of 815,000 miles plus, then how can you suggest a price for a car at all, especially when you’ve never seen it or inspected it? Under Florida Statute 501.976, the section of state law that defines unfair and deceptive trade practices for Florida’s motor vehicle dealers, a motor vehicle dealer would not be permitted to: represent previous usage or status of a vehicle unless the dealer had correct information regarding the history of the vehicle; represent the quality of care, regularity of servicing, or general condition of a vehicle, unless known to be true and supportable by material fact; or represent orally or in writing that a vehicle has not sustained structural or substantial skin damage unless the statement was made in good faith and the vehicle has been inspected by the dealer or his or her agent to make sure the vehicle has incurred such damage. So, how is it right that CARFAX can make material representations about the condition of a vehicle, suggest an adjusted retail book value without ever having inspected the vehicle and not be subject to the same unfair and deceptive trade practices applied to www.fiada.com

the dealer that is selling the car? The FIADA Board of Directors and a growing group of Florida’s dealers argue it is not right.

into the Price Calculator and they are not going to back down from it now.”

For a dealer to make the same representation as CARFAX on any car without having inspected it and confirmed the condition would be a violation of the State’s unfair and deceptive trade practices and this may need to be a focus of our legislative agenda moving forward with the FIADA legislative committee. Additionally and more to the point, this is not an isolated incident. Over recent weeks, the FIADA has been sent dozens and dozens of real-time CARFAX vehicle history reports that show multiple and conflicting data and dealers are asking for answers. One dealer who did not want to be named was told by his local CARFAX representative that, “CARFAX has invested too much time and money

Repeated attempts to contact CARFAX in response to the questions raised in this article have gone unanswered at the time of this printing. So what can we do? The dissemination of information and knowledge within any association provides power. Knowledge is power. But the real power comes from an organized and systematic call to action to express our concerns as reputable dealers committed to excellence who have been cornered into using vehicle history reports that contain unconfirmed data and having to lower prices simply because CARFAX says so. If you are fired up about this issue, and want to help, here are a few things you can do:

THE CALL TO ACTION

Express your concerns with CARFAX business practices by doing the following three things:

1

Contact CARFAX directly and tell them you do not like the way they are portraying car dealers in their national TV and media campaigns. Ask them to stop this and run different commercials.

Dick Raines, President (703) 934-2664

Larry Gamache, Communications Director (703) 934-2664, ext. 4108

2

Contact CARFAX and ask them to remove the CARFAX Pricing Calculator and the History Impact Sections from their vehicle history report. It is our position that CARFAX does not need to engage in sight unseen price adjustments.

Gerry Bayer, VP of Data (703) 934-2664 ext. 4452

Dave Sutton, Nat’l Director of Data Acquisition (703) 934-2664 ext. 4250

3

Contact the CARFAX Dealer Hotline to resolve any problems that you have with vehicle history report data accuracy or any questions you may have. Call the CARFAX customer service line at (888) 695-1885.

April 2011 — Independent Dealer — 19


L E G I S L AT I V E U P D AT E

The Final Stretch BY HO NO RABL E JOHN GRANT, F I A DA LOBBYI S T

W

riting a legislative column during the legislative session is a difficult task because as I write this report, we are exactly half way through the legislative session and by the time this publication reaches your mailbox, we will be in the final week. Much will happen between now and then, but you can be assured that FIADA’s on site legislative team of Steve Jordan, Jennifer Lux and John Grant will be there looking out for your interests every step of the way. Unlike last year, when we were playing offense and our top priority was the passing of the curb-stoning legislation, this year we are playing defense to make sure nothing is done to undo the legislation we passed and so far, no one has made a move in that direction. We did identify four bills working through the system that we targeted for either defeat or amendment. Two of them dealing with towing and the sale of tires are no longer in play. However, there remain two bills of concern. One deals with debt buyers and if we cannot stop it all together, we will be working to carve out an exception for the sale of motor vehicles, as the bill is more for buyers of credit card debt. The other is an omnibus bill that would deregulate automotive repair shops and could affect lien rights of dealers who hold paper on vehicles taken to third parties for repair. We believe this legislation in its present form will be defeated. 20 — Independent Dealer — April 2011

This legislative session is different from any I have seen and is primarily driven by a significant shortfall of revenues coupled with a blood oath to not raise taxes. The answer is to cut government and there are many bills that would cut services, eliminate regulation and consolidate agencies. Deregulation is this year’s “buzz” word. Both the House and Senate have released their respective budgets and they are three billion dollars apart. The elephant in the room is Medicaid, a federal/ state program for the medically poor that is eating the biggest hole in state revenues. The cost of providing medical services is going up with inflation and as the economy continues in recession the number of Floridians qualifying for Medicaid has increased dramatically. Unemployment in Florida remains at nearly three percent above the national average and it affects our economy accordingly. The House and Senate Medicaid bills are significantly different, with one relying totally on managed care and the other not. Once the respective budgets are voted off the floor, something that is happening two weeks earlier than usual, then the process goes to a conference committee consisting of a few leaders from each house who will hammer out the final budget, as well as the implementing and conforming bills, each of which promise to have a larger than usual volume of substantive legislation in them this year. This is where it gets scary, because something that has never been to the floor can be dropped in one of these bills and it is done and passed almost before the ink is www.fiada.com


dry and even if discovered, once in, it is almost impossible to get something changed or out. We need only remember the legislative session of two years ago when drastic fee increases were inserted at this point in the process. And, speaking of fees, there is a slight glimmer of hope that we might get a little release on those fees this year, but it is looking less likely than it was at the beginning of the session because now revenue estimates are down by another $135 million.

Use this form to make your contribution, and mail to the FIADA office at the address below. You can also contribute online at www.FIADA.com.

CONTRIBUTOR’S NAME: DEALERSHIP: ADDRESS: Make your check out to FIADA-PAC and mail your contribution to: FIADA • 1840 Fiddler Court • Tallahassee, FL 32808 Enclosed is my check for:  $1,000

 $500

 $250

 $100

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 Monthly Contribution _________

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The legislature is still on track to adjourn on time, provided the House and Senate can agree on how to bridge the wide difference between their budgets and Medicaid bills, but while this session not likely to go into extra innings, it’s a safe bet that we will be seeing the legislature back in Tallahassee for one or more special sessions before the 2012 regular session.

PAC CONTRIBUTIONS

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April 2011 — Independent Dealer — 21


BRILLIANT DEDUCTIONS

2011 Record Retention Rules for Automobile Dealers BY JO R GE L. MA R T I NEZ, C .P.A.

A

s it comes time for most of you to put together your year-end records, you are probably asking yourselves: Once I give all of this to my accountant and finish my financial statements and tax return, do I need to keep it any more? I’ve been keeping everything for years. Do I still need it? Why do I still need it? How much of this can I throw away (without getting into trouble later)? These are good questions. Proper record retention and record management will make it easier for you to keep track of important information without losing it in the clutter of the “Pack Rat Syndrome”. How Long Should You Retain Tax Records These records may have to be produced if the Internal Revenue Service (or a state or local taxing authority) were to audit your return or seek to assess or collect a tax. In addition, lenders, co-op boards, or other private parties may require that you produce copies of your tax returns as a condition to lending money, approving a purchase, or otherwise doing business with you. Keep Tax Returns Indefinitely and the Supporting Records Usually for Six Years In general, except in cases of fraud or substantial understatements of income, the Internal Revenue Service can only assess tax with respect to a year within three years after the return was filed for such year. For example, if you filed your 2009 individual income tax return on or before its unextended due date of April 15, 2010, IRS could assess tax until April 15, 2013. If you filed your return late, IRS has three years from the date you filed. The problem with the three-year rule is that the assessment period is extended to six years if more than 25% of gross income is omitted from a return. Neither period begins to run until a return is filed. Therefore, if the Service claims that you never filed a return for a particular year, it can assess tax for that year at any time (even beyond three or six years), unless you can prove that you did file. While it is therefore impossible to be completely sure that the Service will not at some point seek to assess tax, 22 — Independent Dealer — April 2011

retaining tax returns indefinitely and important records for six years after the return is filed should, as a practical matter, be adequate. Records Relating to Property May Have to be Kept Longer Than Other Records Keep in mind that the tax consequences of a transaction that occurs in one year may depend on things that happened in earlier years-and that the period for which you should retain records must be measured from the year in which the tax consequences actually occur. This may be significant, for example, where you sell property that you bought years earlier. For example, suppose you bought your home in 1985 for $200,000 and made an additional $20,000 of capital improvements in 1988. You then sold your home in January 2010. In order to determine the tax consequences of the sale, it’s necessary to know your basis, which depends on the earlier transactions. If your 2010 return is audited, you may have to produce records relating to the purchase in 1985 and the capital improvements in 1988 in order to substantiate your basis. In effect, therefore, such records should be kept until six years after the 2010 return has been filed-even though they relate to years long past. When new property takes the basis of old property, records relating to the old property should be kept until six years after the sale of the new property is reported. For example, suppose you purchased a car for business use in 2000 and you traded it in on a new car for business use in 2003. You sell the new car in 2010. Your basis in the new car will determine whether you have a tax gain or a tax loss on the sale. And your basis in the new car is determined, at least in part, by your basis in your old (2000) car. So records relating to your old car should be kept until 2017 (i.e., for six years after the 2010 return is filed). Similar considerations apply to other property which is likely to be purchased and sold-for example, stock, other securities such as mutual funds, etc. And, because the calculation of the casualty and theft loss deduction is affected by your basis in the property, you will need to have records to support that basis, until six www.fiada.com


years after you file the return containing the loss deduction. Certain records are required to be maintained as a result of regulatory agency rules (e.g., IRS and DOR); as a result of insurance rules (e.g., appraisals of specially insured property); as a result of future need (e.g., permanent corporate records like stock certificates, minutes, etc., fixed asset records); and as a result of common sense (e.g., insurance policies, on-going contracts and agreements). All of these records have different purposes and, logically, must be kept for different periods of time. Below are listed some of the common records that all businesses have and their recommended (or required, in some cases) retention periods. Records to be stored permanently • Bills of sale • Titles • Bonds and stock certificates • Corporate documents including articles of incorporation, stock certificates and records of transfer, annual Board of Director and Shareholder meeting minutes • Copies of tax returns; corporate income, pension plan, estate and gift • All pension plan documents including annual participant information • Year-end financial statements Records to be kept for a period after applicability • Employment records including employee applications, payroll records, correspondence and contracts – keep for seven years after employee is terminated • Leases for equipment and real property – keep for seven years after expiration • Mortgages – keep for seven years after payoff • Fixed asset records including purchase invoices, records of improvements to real property, depreciation schedules – keep for seven years after disposal of asset • Insurance policies – keep for three years after expiration Records to be kept for a specific period • Bank statements, canceled checks, deposit slips, bank reconciliations – keep for seven years • Accounting records including ledgers and journals, payroll, sales and property tax returns – generally keep for 10 years • Records of temporary tags issued – keep for one year • Dealer power of attorney/odometer disclosure – keep for five years • Records of all purchases of inventory and parts – keep for seven years Some of the above records may be on your computer systems. If this is the case, you should keep not only a copy of the printed report for the period recommended above, but also a copy of the backup disk that contains the file from your computer. In addition, auto dealers have some special records that are not mentioned above. Each vehicle sold will have a www.fiada.com

folder (deal jacket) in a file in your office. It contains all the information about the sale, purchase, improvement, financing and possible repossession of the vehicle. You must keep this file for at least five years after the year-end in which the receivable is paid off, the sale (if the vehicle was paid for in cash) or the vehicle was repossessed, whichever is applicable. In Case of Separation or Divorce If separation or divorce become a possibility, be sure you have access to any tax records affecting you that are kept by your spouse. Or better still, make copies of the tax records, since in such situations, relations may become strained and access to the records difficult. Your records should include a copy of the divorce degree or agreement of separate maintenance, which may be needed to substantiate alimony payments and distinguish them from child support or a property settlement. Copies of all joint returns filed and supporting records are important, since the liability for tax on a joint return are joint and several. Therefore, a deficiency may be asserted against either spouse. Your records should also include agreements or decrees over custody of children and any agreements of who should claim an exemption for them. Retain records of the cost of all jointly-owned property. And get from your spouse or former spouse records on the cost or other basis of all property transferred to you by him or her during your marriage or as a result of the divorce, because your basis in this property is the same as your spouse’s or former spouse’s was. Loss or Destruction of Records To safeguard your records against loss from theft, fire, or other disaster, you might wish to consider keeping your most important records in a safe deposit box or other safe place outside your home or business. In addition, you may want to keep copies of the most important records in a single, easily accessible location so that you can grab them if you have to leave in an emergency. These guidelines are necessarily brief and in summary form. Before removing and/or destroying any of your records, you should consult with your tax and legal advisors for any specific record retention guidelines they have for your records. Caution: This publication is prepared by Martinez & Associates, CPAs for our clients and friends. Please note that any tax advice contained in this publication is not intended or written to be used by, and cannot be used by, the recipient for the purpose of (i) avoiding penalties under the Internal Revenue Code, or applicable state or local tax law provisions, or (ii) promoting, marketing or recommending to another party any transaction or matter addressed herein. The information included is general in nature and abbreviated and is not intended to be considered tax advice. Anyone reading this information is advised to seek advice from our office or from his or her own tax professional regarding applicability of this information to his or her own circumstance. Contact the author at (800) 299-0777. April 2011 — Independent Dealer — 23


PANHANDLE

FIADA Office 1840 Fiddler Court Tallahassee

Comfort Inn 1013 East 23rd St. Panama City, 32405

NORTHEAST FLORIDA Adesa Jacksonville Auto Auction 11700 New Kings Rd. Jacksonville, 32219

WEST COAST

Insurance A/A of Clearwater 5152 126th Ave N. Clearwater, 33760

Ramada Inn Tampa 11714 Morris Bridge Rd. 1-75 Exit 265 Tampa

SOUTH FLORIDA

CENTRAL FLORIDA Manheim’s Imperial Auto Auction 3300 County Line Rd. Lakeland, 33811

Ocala Driver’s License Office 110 SE 25th Avenue Ocala, 34471

Manheim Central Florida Auto Auction 9800 Bachman Rd. Orlando, 32824

Manheim Remarketing Site Orlando/Ocoee 1275 E. Story Road Winter Garden, 34787

Manheim Ft. Lauderdale 5353 State Road 7 Davie, 33314 Adesa Miami/Insurance Auto Auction of Miami 12700 NW 42nd Ave Opa Locka, 33054

APRIL 2011

JUNE JULY 2011 2010

MAY 2011 JUNE 2010

Mar. 31- Apr. 1 Orlando/Winter Garden

May 5-6

April 2-3 Tampa

May 7-8 Tampa

June 4-5 Tampa

April 4-5

Ocala

May 9-10 Ocala

June 6-7

Ocala

April 6-7

Miami/Opa Locka

May 11-12 Miami/Opa Locka

June 8-9

Miami/Opa Locka

April 9-10 Orlando

May 14-15 Orlando

June 11-12 Orlando

April 11-12 Clearwater

May 16-17 Clearwater

June 13-14 Clearwater

April 13-14 Lakeland

May 18-19 Lakeland

June 15-16 Lakeland

April 16-17 Ft. Lauderdale

May 21-22 Ft. Lauderdale

June 18-19 Ft. Lauderdale

April 18-19 Jacksonville

May 23-24 Jacksonville

June 20-21 Jacksonville

April 20-21 Tallahassee

May 25-26 Tallahassee

June 22-23 Tallahassee

Orlando/Winter Garden

June 2-3

Orlando/Winter Garden

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April 2011 — Independent Dealer — 25


Cousins Family; Southeast Car Agency Receive Ethics in Business Award

U

sed car dealers are sometimes overlooked by others when they do things the right way, but recently one FIADA member was honored for the way they run their business. Southeast Car Agency in Gainesville was given a special Ethics in Business award from their Rotary Club earlier this month. The Rotary Club of Gainseville teamed up with the University of Florida Poe Center for Business Ethics to present the first Ethics in Business Awards this April. The student committee involved in the awards presentation told business leaders they walked away with “a lot of hope for business in the future” as

a result of reviewing the nominees stories. The judging team reviewed the best business practicies from a field of 17 nominations and chose Southeast Car Agency for the business award citing their “contributions to business excellence and the highest standards of ethical conduct.”

Gator athletics “while leading their lives in a quiet, humble manner.” When asked about the award, Bob credited his father, John, for teaching them the Golden Rule and the values of Rotary. “It is the nicest award you can get as a son for our father and our business,” Bob Cousins said.

The Cousins family—­John, Judy, Bob and Tom—were noted for their strong faith, John Cousins is a current John Cousins family values, ethics and Regional Vice President on integrity, running an outstanding the FIADA Executive Committee business that pays a living wage, and and was the 2009 Quality Dealer of contributing thousands of hours the Year. providing ground and air travel for

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2010-2011 Executive Committee Are you looking for advice or suggestions? As the Association’s leadership, these men and women have volunteered to make themselves available to all members for advice, discussion and assistance.

SENIOR VICE PRESIDENT Brandi Noegel Noegel’s Auto Sales Starke, FL 904.964.6461 brandi@noegels.com

TREASURER John Cousins Southeast Car Agency Gainesville, FL 352.377.7787 cousj1@aol.com

REGIONAL VICE PRESIDENT REGIONAL VICE PRESIDENT REGIONAL VICE PRESIDENT REGIONAL VICE PRESIDENT George Hickey Steve Marbais Jim Kagiliery Frank Fuzy Bond Auto Sales, Inc. Marbais Enterprises, Inc. Brightstar Financial Group, Inc. Century Motors of South FL Tampa, FL 34761 Ocoee, FL 34761 Jacksonville, FL Pompano Beach, FL 813.238.7478 407.877.7422 904.400.6190 954.785.0369 bondauto@gte.net centurymotorscar@aol.com jzk@drive100.com marbais@cfl.rr.com

SECRETARY Dino Mercurio Independent Credit, Inc. West Palm Beach, FL 561.686.8673 primeauh@bellsouth.net

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Chairman of the Board President Greg Edwards Jeff Gann Greg Edwards Enterprises Lakeshore Motors Daytona Beach, FL East Lake Weir, FL 386.323.1888 352.288.4512 lakeshoresales@embarqmail.com gregedwards@bellsouth.net

REGIONAL VICE PRESIDENT Chris Leedom AutoMaxx Sarasota, FL 941.309.1111 jon@goautomaxx.com

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INDUSTRY NEWS NIADA Certified Pre-Owned Vehicles Now Available on eBay Motors Michael Linn, CEO of the National Independent Automobile Dealers Association. “Our dealers’ certified inventory will receive tremendous visibility on the eBay Motors platform. As consumers are searching Do You know FINAL31JAN2011V2.pdf 1 1/31/2011 for certified vehicles, the NIADA

NIADA certified vehicles will now be listed on eBay Motors, the world’s number one automotive site. Local NIADA certified vehicle listings within 100 miles of the shopper’s zip code will appear on eBay Motors in general and local classified searches, as well as in the eBay Motors Certified Pre-owned Showroom. All current NIADA Certified vehicles will be immediately listed on eBay Motors, with more vehicles listed daily as dealers certify inventory.

brand awareness increases with the additional exposure.” To sign up for NIADA Certified, or to find more information, log on to www.NIADACertified.com.

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Charleston AA Celebrates 10 Years On Friday, March 18th Charleston Auto Auction celebrated its 10th Anniversary with a record breaking crowd of over 700 dealers in the lanes and another 77 dealers signed on for the simulcast sale. Jason Ghioto from MarkOne Financial named Charleston Auto Auction the 2010 MarkOne Financial Auction of the Year. Following this presentation, over 1,300 vehicles were made available for sale. “High consignment, record breaking turnout and an extremely high conversion rate is just the way we wanted to celebrate our 10th Anniversary. We had dealers in attendance who have been doing business with us since the beginning of the auction 10 years ago to dealers who were attending our auction for the very first time. It is a great feeling to see how much the auction has grown and to wonder what’s in store for the future!” stated Laura Taylor, General Manager. www.fiada.com

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MEMBER TESTIMONIAL

My FIADA Story: NAME: Jim Kagiliery, J.D. Byrider YEARS IN BUSINESS: 12 KIND OF BUSINESS: Retail sales, BHPH MEMBER SINCE: 2000 ACCOMPLISHMENTS: FIADA President (2008), Quality Dealer of the Year (2010) CURRENT STATUS: FIADA Regional Vice President With his business partner Jim Thompson, Jim Kagiliery has built a very successful business as a J.D. Byrider franchisee. Seven locations around the state, 155 employees and a $50 million loan portfolio are the impressive current stats for this determined duo. The story of how they got to where they are today can not be told without mentioning the Florida Independent Automobile Dealers Association. Since joining shortly after graduating from Dealer Training School, Kagiliery in particular has been an active FIADA member and served as the Association’s president as well as the current Quality Dealer of the Year. Through his involvement with FIADA, Kagiliery was appointed to and became chairman of the Auto Industry Task Force, which drew upon the ideas and knowledge of industry leaders to solve some of the biggest problems facing dealers and lenders today. Kagiliery is proud of his involvement with this group and says as a result of the Task Force’s efforts, it is much easier for dealers to recover collateral, recoup tag fees and keep costs in line for their customers. His business, along with many more buy here-pay here dealers, have saved thousands and thousands of dollars thanks to this group. Kagiliery also spends his time at FIADA meetings and conventions “shopping” for new vendors and suppliers. While attending a FIADA Annual Convention and Trade Show, he was able to identify and interview a selection of EFS (Electronic Filing System) vendors, select the right one and begin issuing tags straight from his dealerships. Streamlining the tag process has saved him both time and money. Every year, Kagiliery combs the convention hall looking for new vendors who will provide additional savings or added benefits for his customers. On a personal note, Kagiliery says the networking opportunities FIADA provides are priceless. He regularly goes to FIADA veteran dealers who have “been there and done that”for advice and consultation when he is considering a new idea or looking to solve a problem. It would be impossible to put a price on that kind of access to knowledge, which is included in FIADA membership dues.

Want to tell your FIADA Story? Email us at info@fiada.com 30 30— —Independent Independent Dealer Dealer— —April April2011 2011

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April 2011 — Independent Dealer — 31


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April 2011 issue  

April 2011 Independent Dealer Magazine

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