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Magazine

F E AT U R E S T O RY O N PA G E 9

CURBSTONING is Bad for Our Industry THIS IS A BLACK MARKET INDUSTRY THAT NEEDS TO STOP

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• SINCERE THANKS TO RUSS OVERKAMP • CRM VS. BDC

DALLAS, TEXAS Permit No. 2079

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PRSRT Standard U.S. Postage

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INDUSTRY

NEWS

2014 NIADA Used Car Industry Report

INSIDE

06 Sincere Thanks to Russ Overkamp 08 CRM vs. BDC 09 Curbstoning 10 Form 8300 12 NIADA Convention 14 AIADA Forms

WHAT’S NEW

LEGAL NEWS

Are You Breaking the Law?

Tire Safety Week

BE TIRE SMART

Mark your calendars for the 2014 National Tire Safety Week June 1-7. The event is sponsored by the Rubber Manufacturers Association to raise consumer awareness about tire safety. Help consumers keep their tires safe and demonstrate your commitment to motorist safety. Sign up for free materials at www.rma.org/tire-safety/tire-safety-week.

BE MINDFUL OF THESE LAWS

ADESA...............................................................5 Ally.....................................................................7 Black Book............................ Inside Back Cover CarMax Auctions.............................................10 Lobel Financial..................................................3 Manheim.com....................... Inside Front Cover United Acceptance.......................................... 11 VAuto.................................................Back Cover Wolters Kluwer..................................................9

Current and new laws that will take effect July 25 make the following actions illegal and subject to action by the authorities: • A ny vehicle parked, for the purpose of sale, on any public property is subject to tow (new law). • A vehicle parked, for the purpose of sale, on any private property that has free access to the public (e.g. Walmart parking lot) is subject to tow (new law). • Listing for sale more than six vehicles over a rolling one year period, without a retail license, is against the law and is subject to significant fines (existing law is three vehicles, and increases to six vehicles July 25). • A ny licensed dealer caught offering a vehicle from their inventory for private sale may lose his or her license for two years and may lose that license for five years on the second occurrence (current law, penalty increases on July 25). • One licensee consigning a vehicle with another licensee is against the law (current law).

OFFICE

PRODUCTS

ADVERTISERS INDEX 4

Get a sneak peak of the upcoming 2014 NIADA Used Car Industry Report at this year’s NIADA Convention & Expo. You’ll be able to pick up an advance copy in the NIADA convention exhibit hall. Simply visit the NIADA Dealer Lounge located in the center of the expo hall. Look for your mailed copy the first week of July. Compare your dealership statistics with those nationwide and get the latest facts and statistics on the used vehicle industry based on proprietary research by some of the best known industry analysts. Get an overview of the independent used car dealer and used vehicle marketplace. Included this year is the entire 2014 NAAA Market Report.

AIADA 6350 E Thomas Road, Suite 135 Scottsdale, AZ 85251 www.aiada.net To learn more or become a member of AIADA, contact us at (602)246-1498 or aiada@aiada.net.

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. Arizona’s Independent Dealer is published bi-monthly by the National Independent Automobile Dealers Association Services Corporation. 2521 Brown Blvd., Arlington, TX 76006-5203; (817) 640-3838. POSTMASTER: Send address changes to NIADA State Publications, 2521 Brown Blvd., Arlington, TX 760065203. The statements and opinions expressed herein are those of the individual authors and do not necessarily represent the views of AIADA 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 © 2014 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 Andy Friedlander • andy@niada.com Jacinda Timmerman • jacinda@niada.com Magazine Layout & Graphic Artist Chantae Arrington • chantae@niada.com Art Director Christy Haynes • christy@niada.com Printing Nieman Printing

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of licensed wholesale dealers are currently listing vehicles for private sale.

& SERVICES

New ID Scanner Combats ID Fraud at Dealerships ID FRAUD IS A GROWING PROBLEM FOR DEALERS In 2013, nearly one billion identities were breached, enabling criminals using supersophisticated technology to make impeccablelooking fake IDs. More thieves are now using fake IDs to test-drive and steal – or even purchase – cars. Dealerships typically use barcode scanners that can only verify that data is present on a card, not its validity, leaving them vulnerable. A recent case study from The Benny Boyd Auto Group showed how one group is utilizing ID scanner technology to not only eliminate fraud, but to also realize some unexpected benefits, including an increase in sales. The scanner, which utilizes the same technology used by Homeland Security, helps them capture more leads and cut the average sales and finance process by 30 minutes because the scanner connects the customer’s information to sales and financing at the point of scan. The case study also reported several other benefit areas, from federal compliance laws mandating protection against employee identity theft to greater salesperson accountability, to

protecting his team from criminals using fake IDs to take test-drives then pulling guns on salespeople. With one scan, ID Drive performs dozens of complex forensic tests on IDs in seconds. It extracts all biometric and alphanumeric data in the document, and authenticates it using its forensics library and detection algorithms, scrutinizing not only visible ID properties, but also those undetectable to the eye. The result: instant validation or red flags. ID Drive also extracts, purifies and enhances the personal information on the ID, and seamlessly exports it into a dealership’s CRM/finance systems. To read the full case study, visit http:// www. elendsolutions.com/case-study/case-study-2/. ABOUT ELEND SOLUTIONS: ELEND SOLUTIONS WAS FOUNDED IN 2003 AS DEALERCENTRIC, WHOSE “GET PRE-APPROVED IN SECONDS” SOLUTION REPRESENTS THE AUTO INDUSTRY’S LEADING ONLINE CREDIT APPLICATION PRODUCT. THE COMPANY HAS SINCE EXPANDED ITS MISSION BY DEVELOPING A COMPREHENSIVE, NEXT-GENERATION CONSUMER FINANCE MANAGEMENT SYSTEM FOR DEALERS, LENDERS AND CONSUMERS.

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ASSOCIATION

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NEWS

A Sincere Thanks to Russ Overkamp OUR ASSOCIATION IS STRONGER BECAUSE OF HIS EFFORTS

After serving on the AIADA board of directors for 13 years, Russ Overkamp recently stepped down. Russ has seen the association through good and bad. This is his story. In the early 1980s, a dealership named Auto Solutions joined the AIADA, beginning our relationship with Russ Overkamp. His partner joined the association board right away. Fifteen years later, then president Steve McCoy encouraged Russ to join the board of directors. Sadly, the association was going through a major upheaval at the time. It ran out of money, lost its executive director and was on the verge of collapse. Russ recalled, “There wasn’t any money in the checking account, none of the bills from the convention that just passed had been paid. We had two choices: tail between the legs and close doors or do something about it.” Russ isn’t much of a tail between the legs kind of guy. True to form, Russ upped his commitment to the association and moved into the role of president. There was no executive director for over a year and Russ took it upon himself to run the association. After an executive director was hired, Russ INDEPENDENT DEALER

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finally saw a light at the end of the tunnel. However, the executive director lasted all of 40 days before resigning and once again Russ had to take the reins. Remember, all of Russ’s efforts were on a voluntary basis and it was largely because of those efforts that the association survived that storm. Russ delightfully recalls help he received at the time, especially that of Tracy Hunter who, as Russ puts it, “was the biggest help in keeping the association going, stepping up to do fundraising and membership and just helping me when I needed the help.” Russ ran the association for two years until finally a long term executive director, Charity Crawford, was hired. For the next 10 years, Russ took on the role of fundraiser. Russ said, “I worked my tail off to bring money into the association.” Anyone who knows Russ knows that he can be rather persistent. His ability to find golfers for the golf tournaments, players for the poker tournaments (a tradition that he started) and sponsors for all the events was unparalleled. In 2009 the association once again fell on hard times. The entire economy was rocked

by the worst recession we had seen since the Great Depression. Dollars flowing into the association dried up. Staff was cut back. The association lost its building and was moved into a leased spaced in Scottsdale. The financials were in a state of disrepair, the executive director left and the association was once again at a crossroads. The board of directors once again had two choices: Tail between the legs and close the doors, or do something about it. The results are clear. The choice was to do something about it. Once again Russ was right in the mix with the board to determine the best course of action. The books were cleaned up. During the executive director search, Russ once again stepped in to make sure the lights were kept on and the bills paid. Russ served your association well. Our industry owes a debt of gratitude to him. It is through his leadership over the last 15 years that the association survived and emerged stronger than ever. Russ epitomizes the words “leadership” and “dedication.” Our association is stronger because of his efforts. Next time you see Russ, please say thank you for a job well done! W W W. A I A D A . N E T

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BHPH

PERSPECTIVES

CRM VS BDC EITHER, NEITHER OR BOTH

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Is a CRM right for you? Maybe a BDC is what you need. Whether they realize it or not, every Buy Here-Pay Here dealer has some form of both. Or at least they better if they want to survive. Let’s start by defining each of these to clear things up a little. I wouldn’t want anyone running out and spending money on something they already have and just don’t realize it. CRM, or customer relationship management, by definition is simply a strategy for managing and nurturing a company’s interactions with customers and sales prospects. Technology is usually involved in the form of a software package that helps organize, automate and synchronize sales related activities as well as marketing and customer service activities. A CRM’s goals are to find, attract and win new customers; nurture and retain those you already have; entice former customers to not be former customers and help reduce the cost of marketing and customer service. Sounds a whole lot like a repeat and referral program, doesn’t it? Something every BHPH dealer should already have. Using some sort of a software package to help manage your CRM is a necessity. That doesn’t mean you need to go out and purchase one specifically for a CRM. The software that you currently use for your day to day BHPH operations should be able to produce reports of customers with low balances and customer paid out reports. All you need to do is make sure you have in place a process for working those low balance customers and customers that have recently paid off in addition to the potential customers given as referrals from current customers or other sources. It needs to be

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a simple follow up plan that a manager is responsible for instituting and can be as simple as a call log that the salesperson has to turn in. As your business grows, it may be necessary to seek professional help, so to speak, and invest in a software package that can better manage these tasks. Handwritten logs are fine when you’re talking about 10-20 contacts. When that number gets to 100-200, it’s time to get a little more sophisticated. A truly effective CRM will cover not only sales but a service center as well. Both need new customer development, current customer retention and previous customer renewals. And since they are an integral part of customer service, both can have an effect on collections, both positive and negative. A poorly managed CRM means poor customer service. Poor customer service from the sales or service departments to current customers can make it difficult to collect from them much less resale them. Poor customer service to previous sales or service customers means no return business from them and pretty much ensures no referral business. You know the old adage: “A satisfied customer will tell five people about their experience. A dissatisfied customer will tell 20.” But that’s another article entirely. BDC, or business development center, is exactly what the name implies – a center to develop business. This is usually a department within an organization whose sole purpose is to get prospective customers through your doors. Their goal is to set as many appointments as possible. This is done through calling referrals given by customers and Internet

be truly successful, dealers are going to have to become more efficient at maximizing repeat business and holding on to customers, and turning new leads into sales. INDEPENDENT DEALER

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BY BRENT CARMICHAEL

leads, and handling incoming calls to the dealership. Hopefully a fair amount of those appointments will show. Then it’s up to your sales staff to close the deal. A BDC can be as simple as your current sales staff or as in depth as including business development representatives, team leaders and business development managers. The level of staffing depends on the number of leads you have. As with a CRM, a BDC can be used for both sales and service. It too can have a positive and negative effect on collections for all the same reasons. A specific software package is not a necessity for an effective BDC. A simple process for routing incoming calls and Internet leads to a salesperson, along with a process for when and how to work referrals, is all you really need. As your lead volume grows, so must your ability to effectively manage them. That will be the time to call in the professionals and find good BDC software to help manage all those leads. As with a poorly managed CRM, a poorly managed BDC can not only cost you sales and service business, but can cause collections issues. By definition, every BHPH dealer has, or should have, both of these systems in some form. If they have a process for generating repeat business or have a referral program, they have a CRM. If their salespeople are taking incoming sales calls or working Internet leads, they have BDC. I shudder to think there might be a BHPH dealer out there that doesn’t have both of these. The biggest question is whether they are managing them as such. And by that I mean, do they have a process and procedure in place for these, do they have goals and expectations for each and do they have follow up and accountability in place? The successful dealers, I can assure you, do. To be truly successful, dealers are going to have to become more efficient at maximizing repeat business holding on to customers, and turning new leads into sales. Both of these can only be accomplished through a CRM and BDC in some form. With the current state of the economy, there are more customers in the BHPH arena than ever before. There is also more competition for those customers, so accomplishing the aforementioned has gotten a lot more difficult. To ensure long term survival, dealers have to manage both their CRMs and BDCs. BRENT CARMICHAEL IS ONE OF THE INDUSTRY’S MOST WELL RESPECTED BUY HERE-PAY HERE EXPERTS. HE IS EXECUTIVE CONFERENCE MODERATOR FOR NCM ASSOCIATES, INC. PRIOR TO JOINING NCM, BRENT WORKED 17-PLUS YEARS IN SUB-PRIME FINANCE AND COLLECTIONS.

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LEGAL MATTERS

Curbstoning is Bad for Our Industry and Bad for the Consumer

THIS IS A BLACK MARKET INDUSTRY THAT NEEDS TO STOP “Curbstoning” is the repeated, unlicensed and sometimes licensed “flipping” or sale of used cars for profit. It bypasses all state and federal mandates for vehicle sales to the public. In Arizona, curbstoners put consumers at risk by releasing unsafe vehicles onto the streets. They do this with no regard to the Arizona limited liability laws put in place to protect consumers – laws that a local dealer who sells from a licensed dealership must follow.

are car “flippers” – people who regularly buy cheap cars either from other individuals or auctions, fix them up to look decent and sell them for a quick profit. u Curbstoners

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What happens when a consumer buys a used car from a dealer who has no license, no permits, no liability insurance and not even a business address? Consumers are taking on a great risk when they do this and are being harmed. The term “curbstoning” comes from the practice of parking cars along the curb and putting a “for sale” sign on it as if from a private seller. Sometimes curbstoners also use vacant lots and unmonitored parking lots as temporary places of business. Curbstoners are car “flippers” – people who regularly buy cheap cars either from other individuals or auctions, fix them up to look decent and sell them for a quick profit. They will often pose as the car’s owner even though they’re not. They dodge limits on the number of vehicles an individual can sell before having to register as a dealer. Sometimes, unethical used car dealers or wholesale dealers use curbstoning as a way to either sell directly to the public and avoid taxes or get rid of vehicles they can’t sell at their lots. Some vehicles sold by curbstoners may have been written off as total losses by insurance companies due to collision, flood or other damage. Once anyone buys a curbstoned vehicle, they have nowhere to turn if the car develops problems. If the problems are serious, the car fails emissions or the buyer is unable to get insured because of undisclosed damage, he or she is stuck! Curbstoning hurts our industry. It messes up the market, creates unfair competition against legitimate dealers and harms the consumer. This is a black market industry that needs to stop. Those of us legitimately in the market can help. Report curbstoning activity to the AIADA and we will pass that information on to the authorities. W W W. A I A D A . N E T

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LEGAL

MATTERS

Form 8300 and Your Car Dealership’s Reporting Requirements FORM REQUIRED FOR TRANSACTIONS OVER $10,000

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Any car dealer that receives more than $10,000 in cash in a single transaction or related transactions must complete a Form 8300, Report of Cash Payments Over $10,000 Received in a Trade or Business. Form 8300 is a joint form issued by the Internal Revenue Service and the Financial Crimes Enforcement Network. What does cash mean? Cash is money – currency and coins of the United States or any other country. Cash also includes certain monetary instruments, e.g. cashier’s check, bank draft, traveler’s check or money order, but only if the face amount is $10,000 or less and the dealership receives it in a designated reporting transaction (sale of a vehicle or services) or any transaction in which the dealership knows the payer is trying to avoid the reporting of the transaction on Form 8300. A personal check is not cash, nor is a bank wire. A related transaction is any transaction between a buyer and a seller that occurs within a 24-hour period or if more than 24 hours apart, if the recipient of the cash, knows, or has reason to know, that each transaction is one or a series of connected transactions. As such, cash payments of less than $10,000 received over

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a several month period of time for connected transactions is reportable on Form 8300. If you are required to file a Form 8300, it must be filed with FinCen within 15 days after the date the cash was received when the total exceeds $10,000. After you file Form 8300, you must notify your customer, in writing, by January 31 of the subsequent calendar year that you filed a Form 8300. It is advisable to send the Form 8300 and notice to FinCen and the customer, respectively, by certified mail return receipt requested and regular mail. The customer must be notified of the name and address of the person completing the Form 8300, the aggregate amount of reportable cash in all related cash transactions and that the information contained in the Form 8300 is being reported to the IRS. If the dealer fails to obtain a social security number, the Form 8300 should still be filed with a statement explaining why the social security number was not included. If the customer does not have a social security number, use the IRS Individual Taxpayer Identification Number. If there is no ITIN, put “NON” on the form. Form 8300 also applies to wholesalers.

For the Buy Here-Pay Here lots, if you receive cash over $10,000 over a rolling 12 month period, a Form 8300 must be filed. If a customer asks whether you are going to file a Form 8300, inform the customer of the law requiring the filing of the Form 8300. However, be careful about aiding a customer in structuring a transaction that would avoid the filing of a Form 8300. That topic is for another article. Remember, if Form 8300 is filed because of suspicious activity, you cannot inform the customer of the filing. When in doubt, contact either the IRS or a competent professional who has expertise in this area of the law to advise you on the filing of a Form 8300. Failure to comply with the Form 8300 requirements can result in possible criminal and civil sanctions. This article is meant only as a primer and is not all inclusive. For more information, review Form 8300 and the Instructions, IRS Publication 1544 and 31 USC Section 5331.

BY JASON M. SILVER, ATTORNEY AT LAW SILVER LAW PLC 480-429-3364 JSILVER@SILVERLAWPLC.COM WWW.TAXCONTROVERSY.COM

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MARKET

WATCH

Used Cars Are Going to Keep Getting Cheaper and Cheaper ONE AFTEREFFECT OF THE GREAT RECESSION IS ON DISPLAY NOW AT CAR DEALERSHIPS, WHERE THERE ARE MORE AND MORE USED CARS FOR SALE AT INCREASINGLY LOWER PRICES. The used car market has gone a bit haywire over the last half-dozen years. During the height of the Great Recession, new auto sales of all shapes, sizes and variations tanked. As a result of relatively few new cars being purchased, there were fewer used cars on the market during the years that followed – years when the economy was still struggling, when demand for cheap vehicles was understandably high and when used car prices soared because there weren’t enough preowned vehicles for sale to keep up with demand. Signs of a softening in used car prices began appearing around 2012 and now consumers can expect better pricing and a more robust selection of most models. In particular, a trend that’s stretched for several years in

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the lease market will soon result in a “used-car flood” at auto dealerships, as Automotive News put it. Leasing, which slumped during the peak recession years, has rebounded considerably lately. In 2009, according to Edmunds. com, consumers scooped up only 1.5 million or so new cars via three-year lease, down from nearly 2 million the year before. Fast-forward three years after that low for leasing, and in 2012 there were only about 1.5 million offlease used cars hitting the market – an exceptionally small number compared to the high of 3.4 million in 2002, per the Manheim Used Car Market report. Because the pace of used-car leases has picked up each year after 2009, so too have the ranks of used cars going up for sale three years later, when the lease terms are

up. This year, roughly 2.1 million off-lease vehicles will be back on the market, up from 1.7 million in 2013. Next year, the number of off-lease used cars for sale should swell to 2.5 million, and in 2016 and for the foreseeable future, Manheim predicts that there will be more than 3 million off-lease vehicles returning to the market annually. Add in the fact that cars have increasingly longer life spans, and we’re seeing an across-the-board rise in supply of used cars – and the increasing supply is projected to translate to lower prices. Earlier this year, Edmunds.com forecast that used-car prices would slide 2 percent in 2014, and perhaps further down the road as a result of leasing trends. “Many car shoppers might not realize how much the new- and

used-car markets feed off each other,” explained Edmunds.com senior consumer advice editor Philip Reed. “The boom in new car leases, for example, is leading to a higher number of lease returns, which adds to the growing inventory of used cars, forcing their prices down.” The news isn’t all good for consumers, however. A decrease in used-car prices also means that drivers will get less for used vehicles they’re trading in or selling. That shiny new car you purchase is likely to lose its value more quickly than it would have in the recent past. Individual car buyers also tend to simultaneously be sellers of their older cars, and from the looks of things, it’ll be a buyer’s market for quite some time. TIME.COM

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