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Embrace the Green Revolution

BECOMING ENVIRONMENTALLY CONSCIOUS CAN BE COST-EFFECTIVE – AND FINANCIALLY REWARDING

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• CALIFORNIA’S LATEST THREAT TO BUSINESS • TURNING PHONE CALLS INTO SALES • PROPOSED USED CAR RULE CHANGES: HAVE YOU WEIGHED IN?

DALLAS, TEXAS Permit No. 2079

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A S S O C I AT I O N N E W S

EXECUTIVE DIRECTOR’S MESSAGE

As I begin my third term as IADAC President, I reflect on the trust placed in me to represent the independent dealers in this state. I am honored to serve you again, but I must also take a moment to acknowledge the volunteers, your brethren who have joined the Board of Directors because they too believe their efforts can make a difference. New to the Executive Committee this year are Vice Presidents Beto Beas, Gus Camacho and Sam Khacho, as well as Secretary Mena Gendi. Mike Gough is now our Senior Vice President, while Terry Degmetich remains as our Treasurer, and David Aahl as our Chairman of the Board. We have new faces as delegates also: Bill Ek, Skye Haulman, Doug Albee, Frank Blair, Ed Sumner, Glenn Thurston and Gary Campbell. It’s important to note these changes, because our Board of Directors now represents more of this state than in the past, and will provide more opportunities to grow the association in the future. For example, we are excited to announce a Southern California Convention, April 17 – 19 of this year. Last year provided some of the most intense legislation targeting independent auto dealers in many years. Your lobbyist, Bill Dohring, represented you at the Capitol every step of the way. When the smoke cleared, we were pleased to have claimed a victory with the veto of SB956; but two other bills targeting Buy Here-Pay Here dealers were signed into law. We realize these bills may significantly change your businesses, but know that as resilient business owners you will find a way to survive. When you are dealt a hand like this, you will find a way to make it work. Know that you can turn to this association to learn the possible options available to mitigate the impact of these new bills, and for solutions to help you become – and stay – compliant. If the past year has taught us anything, it is that we must be prepared to change in order to continue being successful. As individuals, we may struggle to find answers to our problems, but as a group we have access to many solutions that can help us maintain a solvent bottom line. I hope that you will consider becoming a part of the solution as an IADAC member. Otherwise, you may be part of the problem.

Here we are…2013 is well underway, and the implementation of AB 1447 and AB 1534 has begun. Hopefully, the solutions presented by this association have mitigated the impact of those bills on your businesses. IADAC’s associate members have solutions that may help. Please contact us to find out more about them. Dealers have shared their thoughts about this legislation, and the main concern we’ve heard is that the bills are discriminatory against Buy Here-Pay Here dealers. Since these bills treat some equally licensed, equally qualified dealers differently, there is the feeling that equal protection – a Constitutional right – has been violated. Dealers have asked why we didn’t pursue an action against the state to get these bills rejected on the grounds that they are unconstitutional. You should know that this was indeed the subject of many discussions by the IADAC Board of Directors, but the process isn’t as simple as you may think. To start, cost estimates to pursue such an action ranged from $70,000 to upwards of $250,000 dollars – with no guarantee of success. Knowing that many elected representatives are trial lawyers, we knew we would have a difficult time making the case; they love to argue law, especially the Constitution. Our limited resources wouldn’t have gotten us very far. Although we knew it was possible to try to raise additional funds, using the resources required to solicit dealers and industry stakeholders would have ultimately reduced our ability to provide education and other solutions to the dealers. But, assume we did win a legal battle – then what? It is pretty easy to predict that the next step would be for legislators to present a bill calling for a special endorsement to the license of a BHPH dealer, which would then enable them to pass any law they wanted, without violating equal protection right. So, we would still be right where we are now. The most recent election in California created what is known as a “super majority” at the Capitol. Democrats now have enough seats to pass any bill without needing any Republican votes. Conversely, Republicans have no hope of passing a bill if Democrats do not want it. The founders of this country created a two-party system, which has served us for nearly 250 years. California is about to find out what happens when the “democracy” has just one party making decisions. How did this happen? Ask yourself: are you aware of your political landscape? In the recent past, it wasn’t absolutely critical to be politically aware. Generally, the two-party system created a balance of power that caused the pendulum to swing slightly one way or the other. Now, the pendulum has shifted fully to one side. It doesn’t matter which party you feel represents you best, you should be very concerned about righting this ship. Checks and balances are gone, and every citizen should realize that something needs to be done. Get involved now and become aware, because the fox is guarding the hen house.

BY ROD DAVIS

BY LARRY LASKOWSKI, EXECUTIVE DIRECTOR

PRESIDENT’S MESSAGE

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INSIDE inside INSIDE INSIDE

EXECUTIVE COMMITTEE Rod Davis President Brasher's Auto Auction Rio Linda, CA 95673 916 - 991 - 5555 rdavis@brashers.com

Executive Committee EXECUTIVE COMMITTEE EXECUTIVE COMMITTEE

MAGAZINECONTENTS

6 8 13 14

Named IADAC Quality Dealer of the Year Auction Standards Help Customers Credit Applications Do’s & Don’ts Rod Davis Striking Gold: IADAC’s 42nd Annual Convention Rod Davis President

President Brasher's Auto Brasher’s AutoAuction Auction Rio Linda, Rio Linda,CA CA95673 95673 916 991 5555 916-991-5555 rdavis@brashers.com rdavis@brashers.com

MAGAZINE THE CONTENTS CURRENT STATE MAGAZINECONTENTS MAGAZINECONTENTS 03 President’s ReportOF THE AUTO INDUSTRY

6 8 13 14

Terry Degmetich

Named Quality Dealer Year 08 IADAC California’s Latest Threatoftothe Business 6 Named IADAC Quality Dealer of the Year Auction Help Customers John McElroy is hostStandards of the long-running “Auto10 Standards Letters to the Editor 8 Auction Help Customers Aah1 Credit12 Applications Do’s &line Don’ts Turning Phone Calls intoDetroit” Sales television program, covering David all as13 Credit Applications Do’s & Don’tsMike Chairman of the Board Gough 14 Gold: Proposed Used Car Rule Changes Striking IADAC’s 42nd Annual Convention North Bay Auto Auction pects of the industry. this presenta14 automotive Striking Gold: IADAC’sIn42nd Annual Convention Sr. Vice President 16 Washington Update MG Auto CA Wholesale Fairfield, 94534 tion, McElroy provides a thorough and insightful 18 The Environmentally Conscious Dealer Vacaville, 95687 707 - 864 CA - 1040 22 The Franchise review of where we’ve been, where we707-481-6646 now david@nbauto.com 28 BHPH Perspectives are, and where our industry is headed. Taped 34 Compliance Overdrive

THE CURRENT STATE THE CURRENT STATE OF THE AUTO INDUSTRYOF THE AUTO INDUSTRY

David Aah1 Terry Chairman of the BoardDegmetich Rod Gus Davis Camacho Secretary North Bay Auto Auction Vice President President I - Deal Cars Fairfield,Brasher's CA 94534 Camacho AutoAuction Sales, Inc. Auto Roseville, CA 95678 707 - 864 - 1040 Lancaster, CA95673 93534 Rio Linda,916-870CA 9254 david@nbauto.com 661-945-2609 916 - 991 5555 idealmaster@surewest.net gus@camachoauto.com rdavis@brashers.com Vince Cardinale Mark Glover Sr. Vice President David Aah1 Vice President DavidSales Aahl Azteca Auto Chairman theMotors Board A of to Chairman of Zthe Board Bay Auto Galt, CANorth 95632 North Bay Auto Auction Auction Winters, CA 95694 Fairfield, CA 94534 209-712-1886 Fairfield,925-914-9199 CA 94534 707 - 864 - 1040 mark@countyfinancial.com 707-864-1040 atozmotors1@aol.com david@nbauto.com david@nbauto.com

Terry Degmetich Secretary Treasurer I - Deal Cars I-Deal Cars Roseville, CA CA95678 95678 Roseville, 916-870- 9254 916-870-9254 idealmaster@surewest.net idealmaster@surewest.net

INSI

Vince Cardinale

MAGAZINE

Sam Vice Khacho President Terry Degmetich Vice A to President ZSecretary Motors Three Amigos Winters, CA 95694 I - Deal Modesto, CA Cars 95354 925-914-9199 Roseville, CA 95678 209-523-5600 12 Local atozmotors1@aol.com 916-8709254 skhacho@aol.com

Auto D

by Clunkers idealmaster@surewest.net Vince Cardinale

Rick Gomez

10 10 Questions for

Larry Laskowski Vice President 14 Auction Security Executive Director RJ Auto Brokers Vice President The Auto 18 In the Spotlight A toOutlet Z Motors Carmichael, CA 95608 Roseville, CA 95678 Winters, CA 95694 916-425-3349 916-601-4967 925-914-9199 rgomez739@yahoo.com autoview@surewest.net atozmotors1@aol.com

CERTIFIED M

John McElroy is host of the at long-running the Automotive Fleet & Leasing Association’s Larry Laskowski Rick Gomez Mike Casey Mark Glover John “AutoMcElroy is host of the long-running “AutoRick Gomez DEALERƒ PRO Beto Beas TreasurerMark Glover Vice Macaulay, President Mike Sr. Vice President Vice President line Detroit” televisionNEW program, all asAnnualcovering Conference. WHAT’S Sr. Vice President ViceEditor President IADAC Vice Mena Gendi line Detroit” television program, covering allPresident asMagazine The Auto Outlet Cal West Motors Azteca Auto Sales RJ Auto Brokers Dealers who de pects ofwww.niada.tv the automotive industry. In thispects presentaAuto Sales CA 95608 RJ Auto Brokers Auto Sales Secretary - Free Dealer Education 24/7 carsystems@comcast.net Roseville,Azteca CA 95678 San Leandro, CA 94577 Galt, CA 95632 Carmichael, of the automotive industry. InBeas this presentaStockton, CA 95202 M.K. CA Auto, Inc. Galt, 95632 Carmichael, CA 95608the principle support CMDand CLASSES tion, McElroy provides a thorough insightful 209-712-1886 916-425-3349 916-784-3408 510-352-9230 tion, McElroy provides a thorough209-944-5770 and insightful Sacramento, CA 95825 209-712-1886 916-425-3349 dards of the CMD“ mark@countyfinancial.com rgomez739@yahoo.com autoview@surewest.net clwest1977@aol.com review of where we’ve been, where we now hhbeas@aol.com 916-924-7255 mark@countyfinancial.com rgomez739@yahoo.com reviewdemonstrate of where we’ve been, where Dealers who commitment andwe now day seminar that add mena@mkauto.net are, and where our industry is headed. Taped are, principles and where and our industry headed. Taped support Association’s the ethical isbusiness Merchandising, Fina at the Automotive Fleet & Leasing Laskowski Mike Casey atofthethe Automotive Fleet & LeasingLarry Association’s Larry Laskowski Mike Casey Resources, and Bus standards CMD® designation comTreasurer Vice President Annual Conference. Treasurer Vice President Annual Conference. Auto Outlet Cal West Motors University provides plete a four-day seminar that addressesTheBusiThe AutoSan Outlet Cal West Motors Mike Macaulay, Magazine Committee Chair • Car Systems Roseville, CA 95678 Leandro, CA 94577 Master Dealerness Program - Feb. & April 2013 Continuing Roseville, CA 95678 San Leandro, CA 94577 Educatio CMDCertified CLASSES Management, Merchandising, Financial 916-784-3408 510-352-9230 CMD Roseville, CA • 916-784-7155 • carsystems@comcast.net Educates dealers on how to manage and grow CLASSES 916-784-3408 510-352-9230 autoview@surewest.net clwest1977@aol.com Management, a profitable business “Effective ManagementHuman Resources, and Business NEXT CLASS O autoview@surewest.net clwest1977@aol.com DealersPractices”, who demonstrate commitment andwho demonstrate commitment and “Business Planning”, “Human Resources”, Dealers Planning. University provides the inVISIT NIADA.COM support“Merchandising”. the principles and ethicalNorthwood business “Financial Management” Call support thefour principles andEducation ethical business structor and awards Continuing (800)756-4232 sign up. standards of the toCMD® designation comBY DALE POLLAK standards of the CMD® designation comthis course. plete a four-day seminar units that for addresses BusiAbout a year ago,Magazine I introduced the idea of Chair • Car provisioning manager position at Cisco Systems plete a four-day seminar that addresses BusiMike Macaulay, Committee Systems The next class will be March 10-12 at the SuperMedia ADVERTISERS INDEX Financial Mike Magazine Chair • Car Systems ness Management, Merchandising, “provisioning” as a replacement forMacaulay, the struck me asCommittee an effective framework for the Roseville, CAinventory • Financial 916-784-7155 •Roseville, carsystems@comcast.net ness Management, Merchandising, Hotel and Conference Center at DFW. CA • leadership 916-784-7155 • to carsystems@comcast.net ADESA.........................................Inside Back Cover Management, Human Resources, and Business Dear Editor: Carfax is always to help,.. long-held practice of dealers “stocking cars” to feed required develop a provisioning Action here Auto Recovery Management, Human Resources, and Business Allen L. Hawkins Insurance.................................31 their used vehicle operations. mindset at dealerships for three Planning. Northwood University provides the in-Northwood onreasons: the rare occasions that data ADESA ........................ Ally.....................................................................25 Planning. 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TAKE US WITH YOU

S! PS!

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ADVERTISE

BREAKING NEWS! BREAKING Carfax Is Here To Help Is HereNEWS! Carfax To Help BREAKING BREAKING NEWS! NEWS! ADVERTISERSINDEXADVERTISERSINDEX BREAKING BREAKING NEWS! Check out the newly NEWS! redesigned IADAC website ADVERTISERSINDEX

needs of retailing used vehicles to achieve maximum

and processes to achieve it. It also empowers the

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Dear Carfax is always here the to he We cars, have a Editor: dedicated team ofis professionals easier for dealers to initiate p Dealer Center.....................................................32 If you’re still out13 there stocking you’ll get That the scope the role GMs, GSMs .................. on the rareexactly occasions thatofdata research is DealerClick Black Book ............................................................. GoldStar GPS......................................................11 theinitiate rare occasions that da that handles anyuse customer requests quickly. getas aon faster resolution. We’re helpi crushed. You’re competing against dealers who and used-vehicle managers play they J. L. Von Arx & Associat Carfax is constantly for ways to needed. Inconsistent odometer readings, for Brasher’s Sacramento Auto Auction ........ Back Cover Insurance Auto Auctions.....................................29 market-specific supply andlooking demand data toofknow provisioning atways their dealerships. TheyInconsistent often Carfax isthe constantly looking totomers needed. odometer Lobel Financial ............ As a result our tireless efforts, Iefforts amfor proud manage a more efficient bu LobelRecovery Financial............................................... ..................................................... Action Auto 6 9 Cars.com ......................................Inside Back Cover further improve the exceptional service we example, can raise a red flag but may be the right cars, the right price to 6 pay and the right retail ask,exceptional “Where can we go fromwe here?”example, and, “Howcan doManheim we Action Auto Recovery.............................................. further improve the service raise aAdvantage red flag sb.. Manheim.com.....................................................15 to say that we have streamlined our data rekeeping their operations running Allen L. Mark-One Hawkins Insurance Services ....................... 9 DealerClickAllen .............................................................. asking price sell5cars quickly and achieve their get there?” to craft a broad strategy andmade guide it the provide our to....................... independent customers. SmartAuction .............. results of simple error. We’ve Financial............................................... 7 Insurance L. Hawkins Services 9 dealer provide dealerofhuman customers. results of simple human error. search process. our independent Any dealer in California thatW AutoTrader.com ............................ Inside Front Cover profit goals, again and Cover again. implementation day-to-day details. Western Funding .......... J. L. Von Arx & Associates 12 NEXTGEAR Capital........................................ 17, 21..................................... We have a Inside dedicated team of professionals easier for dealers to initiate the process and AutoTrader.com ............................ Front We have a dedicated team of professionals easier for dealers to initiate th Protective...........................................................13 Beyond the laser-like focus on each used vehicle’s The degree of collaboration: It’s pretty fair to Western General / Prote Black Book ............................................................. 13 The research process isa faster easilyresolution. started with tions about their Carfax account Manheim Advantage....................................... 10, Black Book ............................................................. 13 those that any11customer requests quickly. getcustomer We’re helping our cusUnited Acceptance. .............................................27 ROIhandles and profitability potential, dealers have any envision therequests provisioning manager as someone who that handles quickly. get a faster resolution. We’re he Brasher’s Sacramento Auto Auction ........ Back Cover SmartAuction .......................................................... 7 just a few simple Any Carfax-subscribresearch process can call Carfa Brasher’s Auto Auctionof ........ VAuto.......................................... Inside Front Sacramento Cover As a result ourBack efforts, I mindset am proud tomers manage a more efficient business and NATIONAL also adopted what Itireless callCover a provisioning forsteps. knows how to get and motivate other people. Cars.com ......................................Inside Back Cover As ainresult of our tireless efforts, Ibuy-in am proud tomers manage a moreINDEPEND efficien Western Funding ................................................... 16 Westlake Financial..............................................19 AUTOMOBILE DEALERS Cars.com ......................................Inside Backstreamlined Covering dealer California can access their CarServices at 888-695-1885. It is o their entire dealerships. The job requires the person to actively engage to say that we have our data rekeeping their operations running smoothly. DealerClick .............................................................. 5 Wolters Kluwer....................................................28 to say that we have streamlined our data re- keeping theirWWW.NIADA.COM operations runnin • Western General / Protective .................................. 3

at www.iadac.org. want to what you Check out the newly We Check outknow the newly redesigned IADAC website think ofserve the you. new site. website Let us DealerClick .............................................................. 5fax It’s aprocess. mindset that starts in usedaccount vehicles at and, multiple departments and get everyone on the same redesigned IADAC carfaxonline.com. Next, click to search Any dealer in California that has quesJ. L. Von Arx & Associates ..................................... 12 search Any dealer in California th given early successes and12 roadblocks there,process. extends page. J. L. Von Arx & Associates ..................................... at www.iadac.org. know bywhere e-mailing usCarfax at BLVD. linkstarted which takes you directly to theCarfax online process is the easily with about their account or theabout data 2521 Manheim Advantage....................................... 10, 11 • AR IIADAC OFFICE at www.iadac.org. toThe eachresearch dealership department. thisresearch intra- tions The same is true in dealerships provisioning The process is easily started with tions theirBROWN accou Manheim Advantage....................................... 10, 11 I address PHONE (817) 640-3838 SmartAuction .......................................................... 7 FOR INFORMATION ON HOW TO BECOME A MEMBER Data Correction Form. After submitting the Sincerely, just a few simple steps. Any Carfax-subscribresearch process can call Carfax Business dealership dynamic in greater detail in my soon-tois standard operating procedure. When a used car FOR INFORMATION ON HOW TO We want to know what you SmartAuction .......................................................... 7 getanswers@iadac.org. just a few simple steps. Any Carfax-subscribresearch process can call Ca FOR ADVERTISING INFOR CONTACT LARRY@IADAC.ORG • (916) 601-4976 We want toservice, know what you WesternPLEASE Funding ................................................... 16 be-published Velocity Overdrive: The Road To Services hits the at lot, the managers in used BECOMEWestern A MEMBER CONTACT ing dealer in book, California can access their Car888-695-1885. It is vehicles, our pleasure form with the 17-digit vehicle identification (800) 682-3837 OR TROY FundingPLEASE ................................................... 16 ing dealer in California can access their CarServices at 888-695-1885. It is think of the new site. Let us Reinvention. parts, detailing and sales know the of nextthe steps. THE WEST COAST DEALER IS PUB WesternNATIONAL General / INDEPENDENT Protective.................................. 3 LALBRACHT@IADAC.ORG think new site. Let us fax account at carfaxonline.com. Next, click at carfaxonline.com. toresearch, serve you. andaccount requested a Carfax rep- requires Kari Sloan Western General / Protective .................................. 3numberfax Next, to you.DPENDENT AUTOMOBILE DEAL At each provisioning-minded dealership, there are The backstops: Ciscoclick theserve provisioning AUTOMOBILE DEALERS ASSOCIATION (888) 315-2869 TION, 2521 BROWN BLVD., AR know by e-mailing us“second-level at the link which takes you directly to online resentative will worktakes with you throughout the Manager, Dealer640-3838. Business UnitPOSTAG WWW.NIADA.COM • WWW.NIADA.TV at least one or two people who effectively become manager to provide incident know by e-mailing us at thethe link which you directly to the online PERIODICALS NIADA HEADQUARTERS: OFFICES. POSTMASTER: SEND A Data Correction Form. After submitting the Sincerely, the provisioning managers for the dealerships. management support, and ensure incidents are data verification process and confirm the issue FOR INFORMATION ON HOWTXTO Carfax getanswers@iadac.org. NATIONAL INDEPENDENT Data Correction Form. After submitting the Sincerely, 2521 BROWN BLVD. • ARLINGTON, 76006-5203 FOR INFORMATION ONare HOW They oftenTO general managers, general sales minimized through design,getanswers@iadac.org. tools and processes.”CATIONS, 2521 BROWN BLVD.

BECOME A MEMBER PLEASE CONTACT form with theCONTACT 17-digit vehicle identification PHONE (817) 640-3838 MENTS AND OPINIONS EXPRES AUTOMOBILE DEALERS ASSOCIATION has been resolved. most cases, theidentification entire BECOME A MEMBER PLEASE withthetheIn17-digit vehicle FOR ADVERTISING INFORMATION CONTACT: TROY GRAFF managers or used vehicle managersform who lead This strikes me as a fancy way of saying “anticipate AUTHORS AND DO NOT NECES LALBRACHT@IADAC.ORG WWW.NIADA.COM • WWW.NIADA.TV number and requested research, a Carfax repKari Sloan LALBRACHT@IADAC.ORG (800) 682-3837 OR TROY@NIADA.COM. process is completed in just a few hours. and requested research, a Carfax rep-in place KaritoSloan reinvention of people and processesnumber to achieve problems and have a process preventCOAST DEALER, IADAC, OR TH (888) 315-2869 (888) 315-2869 DEALERS ASSOCIATION. LIKEW The West Coast Dealer NIADA is published bi-monthly by the HEADQUARTERS: resentative will work with you throughout the Manager, Dealer Business Unit a significant change in the dealership’s culture. will work them, andyou usethroughout technology whenever possible.”Dealer resentative with the Manager, BusinessASUnit National Indpendent Automobile Dealers THEIR IDENTIFICATION MEMB 2521 BROWN BLVD.Association • ARLINGTON, TX 76006-5203 ServicesINDEPENDENT Corporation, 2521 Brown Blvd., Arlington, TX data verification process and confirm the issue Over time, everyone becomes focused on ROI and Carfax For dealers, the potential problems in used ENDORSEMENT OF THE PRODU NATIONAL PHONE (817) 640-3838 data verification process and confirm the issue Carfax 76006-5203; phone (817) 640-3838. Periodicals postage NATIONAL INDEPENDENT 2010 BY NIADA SERVICES, INC. D E A L E R B O N D H E L P profitability, department “silos” disappear and the vehicles are legion – auction purchases, appraisals, FOR ADVERTISING INFORMATION CONTACT: TROY GRAFF AUTOMOBILE DEALERS ASSOCIATION has beenASSOCIATION resolved. In most cases, thebeen entire paid at Dallas, TX and at additional offices. POSTMASTER: MAGAZINE MGR./S In most cases, thereconditioning, entire 682-3837 OR TROY@NIADA.COM. dealership’s bottom line looks better has than ever. resolved.online merchandising, pricing andSTATE Send address changes•to(800) NIADA State AUTOMOBILE Publications, 2521 DEALERS WWW.NIADA.COM WWW.NIADA.TV Mike Harbour • mha Since 1993, BondEDITOR: Source Insuranc When it comes to motor vehicle bonds, all process is completed in just a few hours. WWW.NIADA.COM • WWW.NIADA.TV Brown Blvd., Arlington, TX 76006-5203. The statements All of that got me thinking: I haven’t yet seen sales processes can all be profitability trouble spots. process is completed in just a few hours. The West Coast Dealer is published bi-monthly by the National IndART/PRODUCTION MGR. NIADA HEADQUARTERS: and opinions expressed herein are those of the individual Westlake Financial are Services has named service. All five to topped the sale ran Agency is committed fast and friendl dealer principals not alike. At Bondtheir

“Westlake Remarketing Releases Q3 Top Auction

NIADA HEADQUARTERS: a provisioning job description for a car That’s why provisioning-minded dealers change PRINTING: Nieman Printing authors and•do not necessarily represent theDealers views of The pendent Automobile Association Services Corporation,manager 2521 2521 BROWN BLVD. ARLINGTON, TX 76006-5203 bond service. IADACand members contafo Insurance weand offer aare: com- and 2521 BROWN BLVD. TX 76006-5203 West640-3838 Coast Dealer, IADAC, or theBlvd., National Independent Au- • ARLINGTON, topSource five auctions forAgency, Q3-2010. They heim Nevada ranked firstmay overall PHONE (817) Brown Arlington, TX 640-3838 76006-5203; phone (817) 640-3838. dealership. people processes, adopt technology PHONE (817) tomobile Dealers Association. Likewise, the GRAFF appearance of FOR ADVERTISING INFORMATION CONTACT: TROY Nancydrives R. Chapman for a bond quote a mon sense approach to underwriting. A decision Periodicals postage paid at Dallas, TX and at additional offices. POSTI wondered what one might look like from a tools, to ensure every the maximum FOR ADVERTISING INFORMATION CONTACT: TROY GRAFF straight quarter, ranking first for sa advertisers, or their identification as members of NIADA, (800) 682-3837 OR TROY@NIADA.COM. nchapman@aec-mgmt.com business’ net is the key along the MASTER: Send address changes to TROY@NIADA.COM. NIADA StateWhen Publications, 2521 (800) 682-3837 OR does not constitute an endorsement of the products or ser1993, Bond Source Insurance it comes to motor vehicle bonds, allworthSince different industry. How do other businesses define profitability ofwith each used 888-855-0100 vehicle at eachor stage ofBond its Since 1993, Source Insur When it comes to motor vehicle bonds, all 1. Manheim Nevada third for service. vices Dealer featured. Copyright 2013 Blvd., byby NIADA Services, Inc. All The West Coast is published bi-monthly the National Brown Arlington, TXInd76006-5203. The statements and opinions personal character ofservice. the owner. Westlake Financial Services has Westlake named their All five topped the sale rankings. ManAgency isbusiness committed fast and friendly are not alike. Atnascent Bond a dealer role thatprincipals is, for the moment, a life cycle. The West Coast Dealer is published bi-monthly by the National Ind- largely rights reserved. Financial Services hasto named service. All five to topped the sale Agency is committed fast and frie dealer principals are not alike. At Bondtheir pendent Automobile Dealers Association Services herein Corporation, 2521 expressed are those of the individual 2 They Rawls Auto Auction bond service. IADAC members may contact STATE MAGAZINE MGR./SALES Troy Graffpendent • troy@niada.com Source Insurance Agency, offer aare: comAutomobile Dealerstop Association Services Corporation, 2521 we collaboration between select, like-minded souls I’m not necessarily advocating that dealers need to five auctions for Q3-2010. heim Nevada ranked first overall for the second Brown Blvd., Arlington, TX 76006-5203; phone (817) 640-3838. service. IADAC members may co Source Insurance Agency, we They offer aare: com- bondheim authors and doBrown not necessarily represent the76006-5203; views of Thephone West Coast EDITOR Andy Friedlander • andy@niada.com top five auctions for Q3-2010. Nevada ranked first overa Blvd., Arlington, TX within (817) 640-3838. NancyAuction R. Chapman for a bond quote atWalters, sense approach to underwriting. A Auto dealerships? create a fide provisioning manager at for 3. Norwalk Bill VP of remarketing PeriodicalsART/PRODUCTION postage paid at Dallas, TX and at additional offices. POST- Independentmon MGR. Christy Haynes • christy@niada.com Dealer, IADAC, or the National Automobile Dealers AsNancy R. position Chapman a bond quot mon sense approach tobona underwriting. A for straight quarter, ranking first sale results and Periodicals postage paid at Dallas, TX and atGoogle additional offices. POSTstraight quarter, ranking first for 888-855-0100 or nchapman@aec-mgmt.com. business’ net worth is the key along with the A quick search for “provisioning manager their dealerships. But I do believe dealers who pursue PRINTING Nieman Printing MASTER: Send address changes to NIADA State Publications, 2521 sociation. Likewise, the appearance advertisers, or their identificaor nchapman@aec-mgmt. business’Salt net worth isfor theservice. keyAuction along with the 888-855-0100 Lake Auto all auction performance has been MASTER: Send addressofchanges toManheim NIADA State Publications, 2521 4. Brashers 1. Nevada third Brown Blvd., Arlington, TX 76006-5203. and opinions personal character the business owner. job description” yielded some extremely relevant and a provisioning will outpace other tionThe as statements members of NIADA, does not constitute an endorsement of theandof 1. Manheim Nevada third for service. Brown Blvd., Arlington, TX 76006-5203. The statements opinions personal character ofperfect the business owner. mindset expressed herein are those of the individual 5. ADESA Golden Gate “Development of these grading m 2 Rawls Auto Auction results. For example, the responsibilities for the dealers who are still stocking cars. products or services featured. Copyright 2010 by NIADA Services, expressed herein are those of the individual 2 Rawls Auto Auction authors and do not necessarily represent The West Coast Inc.the Allviews rightsofreserved. authors and do not necessarily3. represent the views of Auto The West Coast helped us recognize strengths and a Norwalk Auction Bill Walters, VP of remarketing, says over4 or the National Independent Automobile Dealers AsDealer, IADAC, Bill2010 Walters, VP of remarket Dealer, IADAC, or the National Independent Automobile Dealers As- T H E W 3. E S TNorwalk C O A S T Auto D E A Auction LER OCTOBER/NOVEMBER sociation. Likewise, the appearance ofSTATE advertisers, or their identificaMAGAZINE MGR./SALES Troy Graff troy@niada.com Salt LakeWestlake Remarketing saw strong performance in our current network. 4.•Brashers auction performance has comings beenallimproving: sociation. Likewise, the appearance of advertisers, or their identifica- Auto Auction 4. Brashers all Salt Lake Auto Auction auction performance has Tb tion as members of NIADA, T Hdoes E not Wconstitute E S T anMike Cendorsement Otion AasSmembers Tof D of E NIADA, A L E does R notFEBRUARY/MARCH 2013 EDITOR Harbour • the mharbour@niada.com ww w . grading i a d support a c measures . o r of g these constitute anGolden endorsement of the in the recent quarter and 5. ADESA Gate “Development of these has is recognizing these auction partners products or services featured. Copyright 2010 by NIADA Services, PRODUCTION MGR. Jacob Kerns • jacob@niada.com 5. ADESA Golden Gate “Development of these gradin products or services featured. Copyright 2010 by NIADA Services, Inc. All rights reserved. helped us recognize strengths and top auctions for their superior efforts. Rankings our address remarketing success.” ART/PRODUCTION MGR. Christy Haynes • christy@niada.com Inc. All rights reserved. helped shortus recognize strengths an T H E W E S T C O A S T D E A L E R OCTOBER/NOVEMBER 2010 PRINTING Nieman Printing STATE MAGAZINE MGR./SALES Troy Graff • troy@niada.com Westlake Remarketing saw strong performance comings in our current network. The continued T H E W E S T C O A S T D E A L E R OCTOBER/NOVEMBER 2010 are based on a combination of sale results and STATE MAGAZINE MGR./SALES Troy Graff • troy@niada.com Westlake Remarketing saw strong performance comings in our current network CA_0213.indd 4 • mharbour@niada.com 1/22/13 2:53 PM EDITOR Mike Harbour in the recent quarter and is recognizing these support of these auction partners is integral to EDITOR Mike Harbour • mharbour@niada.com

D E A L E R B ODNE DA L HE ER L PB O N D HList” E L P “Westlake Remarketing Releases Q3 Top Auctions “Westlake Remarketing Releases Q3 Top Auctio

FOR INFORMATIO BECOME A MEMBE LALBRACHT@IAD (888) 315-2869

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SANTA ROSA CHAPTER ANNUAL HOLIDAY PARTY

Local IADAC Chapter President Jerry Kahn put together another successful Santa Rosa Chapter meeting on Nov. 28, 2012. More than 30 gathered to meet and soak in the information provided by guest speaker Rick Garrett. Most in attendance were local Santa Rosa dealers concerned over recent legislation and possible litigation. Rick is a former used car dealer who now works as a consultant for several attorneys who have gained fame for their aggressive actions against auto dealers. Rick told the story of how his auto dealership collapsed during the years when the housing market imploded, and shared some key points that can help dealers stay out of the crosshairs of the likes of attorneys Louis Liberty, Parviz Darabi and others. Rick emphasized the importance of ensuring that customers sign disclosures if there was any knowledge of previous frame damage. He stated that even if a vehicle has no frame damage, but is sold at auction with a “no frame warranty,” “frame damage,” or “unibody” disclosure, the customer should be made aware – even if the dealer has it checked out and finds no evidence of damage. It is a known fact that auction consignors may sell a vehicle with a “no frame warranty” simply to avoid arbitration after the sale as a result of a scratch or equally insignificant blemish on a unibody. So, according to Rick, a dealer should disclose all known information, even if a physical inspection proves that there is no flaw. IADAC appreciates Rick taking the time to enlighten the group to help avoid legal battles in the future. IADAC lobbyist Bill Dohring also provided a review of the two Buy Here-Pay Here bills that were signed into law. AB1447 requires a mandatory warranty 30-day, 1,000-mile warranty on all vehicles sold by BHPH dealers; AB1534 requires all vehicles offered for sale by BHPH dealers to include a valuation posted in the window. These new laws took effect on Jan. 1, 2013. At the meeting close, there was the usual raffle for great prizes and an announcement for the Annual Chapter Holiday Party.

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Adverse action notices, risk-based pricing…what does it all mean? On December 14, 2012 the Sacramento Chapter hosted a Compliance Seminar sponsored by DealerTrack and AUL Corp where guest speaker Ed Behl outlined some key regulations that dealers should be aware of this coming year, and that federal agencies will be targeting. The Consumer Financial Protection Bureau and the Federal Trade Commission will be closely scrutinizing auto dealers because dealers take and evaluate credit applications – even in cases where contracts are assigned. One takeaway from the discussion was that in every case where a dealer takes a credit application but doesn’t deliver a vehicle – for whatever reason – he must provide the customer with an “adverse action notice” within 30 days of the application. These notices, which can be tailored by each dealer, state the reason the purchase wasn’t made. In addition, each dealer must create and maintain a comparison/average of credit scores from his dealership. This comparison is designed to show customers where they stand and why they received the interest rate they did relative to credit score. Also, don’t forget that the agencies will also be looking for your Red Flags Rule policy. Identity theft is very important to the CFPB and the FTC, so make sure you are compliant. It is easy to put together the necessary policy with the forms available from IADAC. These forms are free to members. Be aware that the funding for some federal agencies is not sufficient, so it’s in their best interest to issue fines for noncompliance. This means it’s in your best interest to be compliant.

SANTA ROSA CHAPTER MEETING

A S S O C I AT I O N N E W S

A S S O C I AT I O N N E W S

SACRAMENTO CHAPTER COMPLIANCE SEMINAR

FROM LEFT: LARRY LASKOWSKI, IADAC EXECUTIVE DIRECTOR; RICK GARRETT; JERRY KHAN, SANTA ROSA CHAPTER PRESIDENT

A S S O C I AT I O N N E W S

The Santa Rosa Chapter annual Christmas/holiday party had a turnout of more than 100 dealers, associate members, and friends. Past IADAC Presidents John Hiatt and Mike Macaulay were also in attendance. The event included a dance contest that featured a break-dance show, which everybody enjoyed. Jordyn (age 10) and Chase (age 7) Khan entertained us all with their dancing skills; these young men have natural talent, and really put on a show. The raffle featured tons of prizes, including a big screen TV. The Rudolph family donated the TV along with many other prizes. IADAC Chapter President Jerry Khan and Crissy Rudolph of Rudolph Inc. put in many hours to make this party a huge success, and fun was had by all until late in the evening. It will be hard to beat the success of this year’s party, but Jerry and Crissy are already working on next year. 6

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A S S O C I AT I O N N E W S

INDUSTRY NEWS

JUMP-START YOUR COMPLIANCE TRAINING

OSHA requirements, workplace diversity, GrammLeach-Bliley, Red Flags Rules…Keeping up with all of the compliance demands can be overwhelming for any dealer. And now, with the FTC and the CFPB starting to more closely scrutinize the auto industry, it’s even more vital than ever for your entire staff to help keep your dealership compliant. NIADA wants to help ease the burden. Starting in February 2013, dealers can jump-start their compliance training with NIADA’s online suite of dealer compliance training materials. Subscribers will have access to videos, checklists, key forms, documents, and more…all at their fingertips, on demand. Don’t worry – for dealers who prefer, content is also available on disc. You’ll even be notified when new training is added, so you can stay ahead of the curve. FOR ADDITIONAL INFORMATION VISIT WWW.NIADA . COM OR CONTACT GEORGIA@NIADA .COM.

INDUSTRY NEWS

MANHEIM NAMES REGIONAL CHIEF

Manheim has named Bill Harbourne as general sales manager for its Northeast market, while Nicole Graham-Ponce will take over as general manager at Manheim’s Dallas-Fort Worth auction. Harbourne will lead Manheim’s Northeast field sales team, focusing on building on its relationships with dealers. He has 14 years of remarketing experience, serving most recently as an account manager for the company’s major dealer team, working with some of Manheim’s largest dealers nationwide. “Bill is helping to lead change in an evolving marketplace, while growing sales through teamwork, strategy and business development,” said Scott Michaels, Manheim’s Eastern regional vice president of field sales. Graham-Ponce, who began her career in the car business running an independent dealership with her father and has worked in auctions since 1998, will be responsible for all business, employee and customer operations at Manheim DFW. 7

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C A L L T O A C T I O N : M A K E YO U R V O I C E H E A R D

CALIFORNIA’S LATEST THREAT TO BUSINESS

The task force was armed and powerful. Systematically, they entered each establishment, separating the workers from the management so there could be no communication while each individual was interrogated. Answers to specific questions were demanded while each waited their turn under the spotlight. The task force continued the assault, looking for any reason to unleash their painful delivery. As target after target was identified and punished, the battered businesses of Santa Rosa, Calif., picked themselves up and began to triage their wounds. A five thousand dollar fine was dropped on one business, a small auto dealer who uses a third party to process payroll. Even though the calculations for the pay were correct, because the hourly rate was not on the pay stub the task force levied a fine of $250 per incident. The total fine, which resulted from a review of two months’ pay stubs, was $5,000. The task force said they have the ability to go back two years if they deem it necessary. (So the business should be thankful?) A tire shop was also penalized $47,000 in fines for the same reason. Did they cheat the employees? Did an employee file a complaint? The answer to both questions is no; they just happened to be in the line of fire as a California Department of Labor task force swept through Santa Rosa, looking for any reason to assess fines and punish the business owners who are the backbone of this nation’s economy. IADAC wrote to the Secretary of the Department of Labor, Marty Morgenstern, and received a call from his office asking for details on the events. The information was provided as it was relayed by the businesses that were targeted. A follow up was promised and, a month later, a response was received. At right are copies of IADAC’s initial letter and the response received from the Department of Labor. Granted, business owners should know the law. But to compare knowing all the laws to what a person goes through for a driver’s license is absurd. A test must be passed before a driver’s license can be issued, and the information needed to pass the test is free and easy to obtain. Also, the penalty for forgetting to turn on your turn signal isn’t $5,000! Imagine what the penalty would be if an unintentional monetary error was made on a paycheck! What would that be – imprisonment, or death? So what can, or should, you do? Make your legislators aware that this crippling practice doesn’t help California’s fragile economy. Go to www.asm.ca.gov and click the link to look up the legislators in your district. Tell them about this problem and the negative effects it is having on the economic recovery. If you don’t tell them, no one will.

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Q&A QUESTIONS & ANSWER

LETTERS TO THE EDITOR Dealer Question: I joined IADAC about a year ago and want information concerning scholarships available for my two children approaching college age. What is available and how do I apply? West Coast Dealer: Thank you for joining our group of quality dealers. There are two scholarships available to IADAC members. The Vic and Ethyl Snider Memorial Scholarship is available to children and grandchildren of the dealer principal. You must retain your membership for at least two years to qualify. For more information or a copy of the applications, please visit www.iadac.org. This program is always looking for funds to replace scholarships given. Please help keep this wonderful gift going. Our parent association, NIADA, has a yearly scholarship available for first year students. For more information or a copy of the application, please visit www.niadafoundation.org. Dealer Question: My dealership joined IADAC two months ago. We received a packet containing cards to be used at auto auctions for complimentary buy or sell fees. How does this work and is this a onetime offer? West Coast Dealer: The Auction Card Program is currently available to all new and renewing IADAC members. On your annual renewal date, new cards will be provided with a paid membership. The participating auctions have generously continued their support

to IADAC by making this a part of our Membership Benefits. The auctions give this support in hopes to attract new dealer members in the hopes that they see the advantages of buying and selling inventory through the auction facility. Most auctions in California participate in this program. There are even benefits available in Nevada, Oregon, and Idaho. For more information, please visit www.iadac.org.

Dealer Question: Very close to my dealership is a shopping center curbstoners use to sell cars. There are usually 10 or more vehicles for sale at any one time. Many have the same telephone number. What can I do about this unfair competition? West Coast Dealer: These “sellers” are breaking the law. AB2042 helped IADAC make anticurbstoning enforceable. We promoted legislation, with the help of Assemblyman Felipe Fuentes, to put teeth in the law. The DMV will act on tips provided by dealers. They can have the vehicles towed and make the “sellers” provide registration and insurance in their name to reclaim them. There are even arrests possible. IADAC has a form available on our website to help with reporting these lawbreakers. You may also contact our office to help in this matter. Bill Dohring, IADAC Chief Lobbyist, will assist you personally with any issue. I have handled this matter in a little different way. I called the owner of property that was used by many curbstoners. I asked the property owner

for his insurance information, stating that I was injured while inspecting vehicles on “his car lot.” He said “What car lot?” I mentioned the 15 or more vehicles offered for sale on his property. This owner, like many others, was not aware of the situation. He immediately towed all the vehicles and kept an eye on it thereafter. Problem solved!

Dealer Question: How do I keep current with all the new laws and regulations imposed by DMV? West Coast Dealer: The Department of Motor Vehicles is not responsible for creating these new laws and regulations. The job of the DMV is to implement what is handed down to them by legislative action. IADAC is working hand-in-hand with the DMV to make this as seamless as possible. Look for notices from the DMV and emails from the IADAC office. We keep our members aware of all new issues as they happen, so make sure that we have a current email address for your company. The DMV also offers a free service to keep current with regulations and laws: Occupational Licensing Industry News (OLIN). IADAC has a link available to sign up for the emailed notices. To sign up, visit www.iadac.org or the DMV website. Please submit your letters to the editor at any time to IADAC magazine chairman/editor Mike Macaulay at carsystems@comcast. net, or mail questions to CARSYSTEMS, 701 Riverside Ave., Roseville, CA 95678. We will endeavor to answer any and all questions using our team of experts. We will answer your question personally if you do not want it published. IADAC stands for integrity and honesty in our industry.

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D O YO U R S A L E S R E P S M A K E T H E M O S T O F E V E R Y C O N TA C T ?

SOME THOUGHTS ON TURNING PHONE CALLS INTO SALES

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In working to help my customers get the best possible results from their advertising efforts, I’ve listened to thousands of recorded phone calls from prospects to automobile dealerships. And while I don’t want to seem rude, doing so has raised a question in my mind: Alexander Graham Bell patented the telephone in 1876. Henry Ford produced his first Model T on December first, 1913. The telephone has been around for 37 years longer than automobiles, so when are sales guys at dealerships going to learn to use one? Here are some examples of conversations that I heard while monitoring these calls: “Oh, that 2011 Honda Accord? It’s sold…. Sorry.” “The mileage? 97 thousand. GPS? Yes, it has that. Leather? Yep, got it. Ok, thanks for calling.” “The price? It’s $12,900. Ok, thanks.” I’m sure that many of you reading this will agree: there is always room for improvement when it comes to training a sales staff. With that in mind, I’d like to share some simple, but important, concepts related to this issue. Please pass them along to your sales teams. The first lesson is this: the law of supply and demand works with leads, just as it does with everything else. Every email, phone call, and walk-in to your dealership has a dollar value attached to it. I’m sure that each dealer principal is painfully aware of this fact, but I wonder if the sales team has any idea at all about it. If leads are plentiful, sales folks tend to value them less. If they are scarce, they will value them more. This creates a dilemma: run on a scarce flow of leads and your sales will suffer. Your best sales people may even leave for greener pastures. The key here is to demand accountability for each lead produced, and ensure that sales reps are exercising each lead until it is a sale, or until you declare it dead. Your sales team needs to understand that you expect them to work every lead as if it will be their last. The second lesson is the concept of the sales funnel:

People in your market who have no interest whatsoever in purchasing a vehicle now or in the near future are not prospects. They may be suspects, but they are not in the “sales funnel.” Once someone becomes a prospect, they are definitely in the sales funnel. Once there, prospects go through the “AIDA” process: 1. They become AWARE that they are no longer satisfied with what they have now. 2. They become INTERESTED in doing something about it, or become interested in a specific make-model of vehicle. 3. They begin to DESIRE a change, or a specific make-model of vehicle. 4. They take ACTION and purchase a vehicle. This is a funnel, rather than a tube, because there are a diminishing number of folks at each level. Not everyone who becomes aware of a problem becomes interested if fixing it. I’ve gone through all of this for a specific reason. I’m sure that you are all familiar with the “sales funnel.” And I’m also sure that many if not most of your sales folks do not understand a very powerful concept: Every person who calls you, emails you, or walks on your lot is in the sales funnel. Let me prove this bold statement. When was the last time someone drove onto your lot, got out of their car, and walked into your office and said “Hi, great lot you have here… wonderful cars. I just wanted to stop by to let you know that I’m really not interested in getting a new car right now. But, thanks!” Neither does anyone phone you to say that, or send you emails to that effect. What this means is this: every person who contacts your business is in the sales funnel. The job of your sales team is to diligently work to guide them gently through the funnel. I’ve had occasion to speak with some of the salespeople that I’ve listened to on these calls, and I’ve frequently heard comments like, “Awww, those calls aren’t any good.” “They just asked a bunch of stupid questions.” “They weren’t qualified.” (Remember, I listened to the calls – no qualification took place.) When I ask, “Why do you think they called if they aren’t in the sales funnel?” I get a blank stare, often followed by “I don’t know.” There have been a few times when I’ve had to restrain an owner principal or a general manager, and remind them that this situation calls for training rather than firing. The reps aren’t bad guys, and may even be really good with customers face-to-face. Management just needs to make sure to give them the concepts and tools to help them be more successful. Steven Covey says that we should “start with the end in mind.” When that phone rings, what should the sales rep’s goal be? Well, to sell a car, of course. But, can he do that over the phone? Under some rare circumstances,

maybe…but not usually. So, here are some “goal steps” on the way to the ultimate goal of selling a car: Get the caller’s name and phone number. Now you have a lead! What is the secret for this? Ask! Control the conversation. The caller will likely start asking questions. Remember, “Curiosity killed the cat, but satisfaction brought it back.” If you answer all their questions, they will come to a point where they think they have enough information with which to make a decision, but that decision might be to look elsewhere. Instead, learn to lead the conversations by asking the questions yourself. Remember: the best time to answer their questions is when they are at your lot!

WHEN I ASK, “WHY DO YOU THINK THEY CALLED IF THEY AREN’T IN THE SALES FUNNEL?” I GET A BLANK STARE, OFTEN FOLLOWED BY “I DON’T KNOW.

Get an appointment. Give the caller a good reason to come down. Remember, they are in the funnel! You just need to help guide them through it. “Are you looking at a picture of the car? Great! You’ve heard the saying a picture is worth a thousand words? Well, an experience is worth a thousand pictures! If you like that car, you owe it to yourself to come experience it. Is this afternoon or early this evening better for you?” Be sure that your sales team fully understands these simple concepts. Hold them accountable for applying them to every contact made. Then, watch your sales and profits grow!

BY ED SUMNER

ED SUMNER IS GROUP GENERAL MANAGER OF BAY CLASSIFIEDS/THE CLASSIFIED FLEA MARKET/AUTO WEEKLY.

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U S E D C A R D E A L E R S , C O N S U M E R G R O U P S , I N D U S T R Y A S S O C I AT I O N S A N D G O V E R N M E N T A G E N C I E S F I L E D C O M M E N T S A B O U T H O W T H E USED CAR RULE IS WORKING.

USED CAR RULE CHANGES: HAVE YOU WEIGHED IN? Dealers are familiar with what it takes to comply with the FTC’s Used Car Rule, but are you aware of the key role you play in drafting the regulations that apply to your industry? Officially known as the Used Motor Vehicle Trade Regulation Rule (though only its mother calls it that), the rule requires dealers to display a Buyers Guide on used cars offered for sale. But FTC regulations aren’t written in stone. To ensure that rules keep up with the times, every 10 years or so the FTC revisits what’s on the books. Is there a continuing need for the rule? Have there been changes to the technological or regulatory landscape that need to be addressed? As part of that ongoing review, the FTC asked for feedback about the future of the Used Car Rule – and boy, did we get an earful. Used car dealers, consumer groups, industry associations and government agencies filed comments about how the Used Car Rule is working. From what we heard, a lot has changed in how people shop for used cars and how you do business. Based on what we heard, the FTC has proposed modifications to the Buyers Guide and is again asking you to weigh in on suggested revisions. What’s under consideration? You’ll want to read the complete document on the Automobiles page of www.business. ftc.gov, but as the FTC explained in a Dec. 4 announcement, it’s proposing four primary changes to the Buyers Guide. Adding a reference to how consumers can get information about a vehicle’s history: There’s more information available these days about a vehicle’s history and the FTC wants to help empower consumers without burdening businesses. Therefore, the agency is proposing to add a statement

to the Buyers Guide encouraging consumers to seek vehicle history information and directing them to a new FTC website for more information. As the FTC notice makes clear, “Dealers would not be required to obtain vehicle histories or to display specific vehicle history information on the proposed revised Buyers Guide. The Buyers Guide would continue to recommend to consumers that they protect themselves by obtaining an independent inspection before making a purchase.” Revising the list of systems on the back of the Buyers Guide: Dealers are familiar with the list of systems included on the Buyers Guide, and the FTC thinks it’s a good idea to keep it. It helps consumers compare warranties on different cars or from different dealers – and it’s a handy checklist for the mechanical and safety systems prospective buyers might want to have inspected. But the FTC wants to revise the list to include catalytic converters and airbags. Adding a reference to the Spanish-language Buyers Guide: The Used Car Rule already requires dealers to display Spanish-language Buyers Guides when they conduct sales in Spanish. But to ensure the Spanish guide reaches its intended audience, the FTC is proposing to add a sentence in Spanish on the face of the English-language Buyers Guide, alerting Spanish-speaking consumers that they can ask for a copy in Spanish. Adding more information about warranties: The FTC is proposing to place boxes on the back of the Buyers Guide where dealers will have the option to say whether the manufacturer’s warranty still applies, the manufacturer’s used vehicle warranty – such as a certified

pre-owned warranty – applies, or some other used vehicle warranty applies. The FTC would like your feedback on those suggested revisions, including your thoughts about the kind of information that should be available on any new FTC site dealing with vehicle histories. But that’s not all the agency is asking for this time around. The FTC also would like to hear what you have to say about Internet sales of used vehicles. Have you spotted deceptive practices? If deceptive practices are prevalent, are there regulatory steps the FTC should consider taking? The deadline for comments is Feb. 11. By the way, the days of submitting documents in triplicate are over. It’s easy to file a comment online. In addition, the FTC announced a final rule that makes some technical corrections to the Spanish translation of the Buyers Guide. That portion of the rule takes effect Feb. 11, so you’ll want to make sure your dealership is using the new version of the Spanish-language Buyers Guide, available on the Automobiles page of www.business.ftc.gov. Editor’s note: NIADA met with the FTC attorneys responsible for oversight of the Used Car Rule in December to discuss the proposed changes, and after soliciting input from its members, the association is preparing comments to submit to the FTC. If you have any additional comments or ideas about the rule, please contact NIADA’s Georgia Brown at 1-800-682-3837 or georgia@niada.com.

BY LESLEY FAIR

LESLEY FAIR IS A SENIOR ATTORNEY WITH THE FEDERAL TRADE COMMISSION’S BUREAU OF CONSUMER PROTECTION AND HAS REPRESENTED THE FTC IN DECEPTIVE ADVERTISING INVESTIGATIONS. SHE NOW SPECIALIZES IN BUSINESS EDUCATION AND COMPLIANCE.

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WA S H I N G T O N U P D AT E

NIADA GOVERNMENT REPORT

Here’s a rundown of some of the latest governmental issues and activity affecting the used car industry from NIADA lobbyist Sante Esposito and NIADA regulatory counsel Shaun Petersen.

LEGISLATIVE REPORT Congress rang in the new year by passing the American Taxpayer Relief Act of 2012, which was signed by the President on Jan. 2. The bill contains a series of tax rate cuts that restored marginal tax rates for certain income thresholds to their 2012 levels as set by Congress in 2001 and 2003 and extended in 2010 (the so-called Bush tax cuts). The marginal tax rate for individuals with taxable income of $400,000 per year, or $450,000 if married filing a joint return, is 39.6 percent. The capital gains tax rate for taxpayers in that bracket rose from 15 percent to 20 percent. Perhaps the most noticeable impact of the legislation is that the new law did not renew the Social Security payroll tax cut that has been in place for the past two years. During 2011 and 2012, the employee portion of the Social Security tax was reduced from 6.2 percent to 4.2 percent, and the selfemployment tax was reduced from 12.4 percent to 10.4 percent. Because those rates expired on Jan. 1, workers’ Social Security withholding increased by 2 percent beginning with the first paycheck of 2013. The new law contains several tax benefits for small businesses, such as a provision that allows small businesses to recover the costs of qualified new equipment faster than the ordinary schedule by permitting the depreciation of 50 percent of the cost in the first year. It also extends through 2013 tax credits for employers who hire military veterans or individuals from underserved communities. Other extended tax credits include a credit for two- or three-wheeled plug-in electric vehicles. 2012 RECAP Here’s a reminder of a few of the issues considered by Congress in the past year and some of the proposals made during the previous session. It is worth noting that any bills proposed by the previous Congress “died” at the end of the session. Any subsequent action on them requires the new Congress to begin anew – that is, bills must be introduced again to start the legislative process.

H.R.527, THE REGULATORY FLEXIBILITY IMPROVEMENTS ACT OF 2011 The bill passed the House in December 2011 and was referred to the Senate Homeland Security and Governmental Affairs Committee. H.R. 527 would ensure that federal agencies comply with the 1980 Regulatory Flexibility Act and close loopholes used by agencies to avoid compliance with the RFA. It would also require a better assessment of the impact regulations have on small businesses, forcing agencies to perform better periodic review of rules, and granting the Chief Counsel for Advocacy at the Small Business Administration greater powers for enforcement of the RFA. And it would mandate stricter analysis of the economic impact any proposed rules would have on small entities, including businesses, organizations and governmental jurisdictions. A similar bill, S.474, the Small Business Regulatory Freedom Act of 2011, was introduced in the Senate in March 2011. It sets forth criteria for review of a rule, including the continued need for the rule, the complexity of the rule, and the impact of the rule on small entities. It terminates any rule if the issuing agency has failed to complete a required periodic review. It would also allow small entities to seek judicial review of initial regulatory flexibility analyses and to obtain an injunction of a proposed rule that is noncompliant with RFA requirements. S. 3468, THE INDEPENDENT AGENCY REGULATORY ANALYSIS ACT OF 2012 Under the bill, the White House would receive explicit authority to influence the rulemaking process of regulatory agencies, including the Federal Trade Commission and the Consumer Financial Protection Bureau. The President, through an executive order, would be allowed to mandate at the minimum a 13-point test for rulemaking, including finding “available alternatives to direct regulation,” evaluating costs and benefits, and periodically reviewing existing rules to make agencies “more effective or less burdensome.” For rules with an annual effect of $100 million or more on the economy, agencies would submit their proposals to the White House’s Office of Information and Regulatory Affairs. A negative review from the office would delay a rule for up to three months and force the agency to explain its approach.

H.R.1449, THE MOTOR VEHICLE OWNERS RIGHT TO REPAIR ACT OF 2011 The bill would require car manufacturers to provide to the vehicle owner and service provider all information necessary to diagnose, service, maintain or repair the vehicle; to offer for sale any related tool or equipment; and to provide the information that enables tool companies to manufacture tools with the same functional characteristics. The legislation provides car companies with protection for trade secrets, only requiring them to make available the same nonproprietary diagnostic and repair information they provide their franchised dealers. H.R.229, THE MICHAEL JON NEWKIRK TRANSPORTATION SAFETY ENHANCEMENT ACT OF 2011 The bill would withhold a percentage of federal-aid highway funds to states that do not enact or enforce a law that requires annual vehicle inspections, including seat belts and speedometers. H.R.164, THE DAMAGED VEHICLE INFORMATION ACT The bill would require greater disclosure of information relating to the market value and safety of damaged motor vehicles, requiring anyone who terminates a motor vehicle contract due to flood or water damage, collision, fire damage, theft and recovery, or any other circumstance that adversely affects the fair market value to disclose to the public the VIN, the date of contract termination, the odometer reading, whether the vehicle’s airbags deployed in the incident that led to the termination, and the cause of termination. REGULATORY REPORT Consumer Financial Protection Bureau The CFPB announced plans to share consumer complaint data with various state regulatory bodies. The current plan will only allow states to access information from the CFPB, while the CFPB will not have access to state information. The long-term goal of the information sharing is to give the CFPB and state agencies access to each other’s consumer complaints, as well as access to local agencies, congressional offices and other appropriate agencies.

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COVER STORY N O T O N LY I S I T C O S T - E F F E C T I V E , I T C A N B E F I N A N C I A L LY R E WA R D I N G T O E M B R A C E T H E G R E E N R E V O L U T I O N .

THE ENVIRONMENTALLY CONSCIOUS DEALER Each day, consumers and businesses grow more environmentally conscious. Yet we are a long way from where we need to be. Make no mistake. This is a call for action. For all of us in the auto industry, each car deal is part of a gigantic revenue machine. Our focus is on retail market value vs. wholesale cost. Subtract recon expenses, advertising expenses, commissions, etc., and we’re left with net profit. The question many of us fail to ask: What is the impact on the environment? Fact: The second-leading cause of global warming is carbon dioxide emissions from burning gasoline. Our industry is married to the internal combustion engine. Our success is predicated on profits from selling large volumes of gas-guzzling, oil-burning hunks of metal to consumers. Often we gauge our performance on volume. The more, the better. Given the nature of our industry, it’s vital that we all embrace, with open arms, the need for a heightened level of environmental responsibility. There are countless ideas each of us can implement today that will make a difference to the environment while feeding our bottom lines. Green Solutions Recycle: In my travels and visits to dealerships, I’m constantly surprised – and disappointed – by the lack of recycling bins at dealerships. That is the easiest way imaginable to have a positive impact on the environment. Electronic fax: There are several companies that provide the service. Using an e-fax service drastically cuts down on paper and ink, and is super easy to implement. Forget traditional mailers: Typical response rate on mail advertising is a mere

2 percent. Save the paper, ink, fuel and money. Allocate those resources elsewhere. Turn off the printer: We print so many things that just don’t need to be printed. Credit reports, for example. Instead try saving them on your computer along with the customer’s email address. Turn off excess lighting. Use a green demo: Take the Prius for a spin instead of the Yukon. Most of us drive without passengers a large majority of the time. Driving a smaller, more efficient vehicle will save you gas money while reducing toxic greenhouse emissions. Walk or cycle: Go by foot or bike to work or to your favorite lunch or coffee spot. Smartphone apps: Use the extremely broad selection of apps to replace paper whenever possible. Do business with green businesses: Ask your body shop how it disposes of waste. Choose companies and vendors that act in an environmentally responsible manner. Eliminate bottled water: Bottled water is extremely inefficient. Instead, install and use a water filtration system. Hit the switch: Turn off and/or unplug unused appliances and computers when they’re not in use. Lot lights: Be diligent about adjusting the timer that controls your lot lights. Every one of these items can be easily implemented today with little or no negative impact on your business. In most cases, you will experience a significant cost savings, especially when that savings accumulates over the course of one or more years. Simply put, we can no longer ignore the fact we are depleting the world’s natural resources. We are driving at a very fast pace toward a hotter and hotter future. Why ignore the facts when you can benefit

in numerous ways by making some positive changes? In addition, the consumer climate has changed to the point that it is not only costeffective, but it can be financially rewarding to embrace the green revolution. Be green and make sure the world knows! You will attract better talent along with more customers as a result.

Electric Vehicles and Hybrids A major industry shift is staring all of us in the face like a hungry bear fresh out of hibernation, and the electric/hybrid market segment is growing rapidly. Nearly every major manufacturer is getting into the space, and new competitors are emerging with cutting-edge products that use state-of-theart technology to meet consumer demand. The products currently on the market are extremely compelling, and the future of the segment is exciting. Here’s a lineup with some information about several of the products available now: Tesla Model S: The first full electric vehicle to (mostly) overcome consumers’ No. 1 concern – range anxiety. There are different battery options designed to go up to 160, 230 or even 300 miles per charge at 55 mph. Consumer interest in the product is phenomenal. The fast, sporty and beautiful sedan is expensive for the average consumer, but will be attractive to the masses on the remarketing side. Tesla Roadster: Similar to the Model S, but not as practical. This is a pure sports car. Fisker Karma: Electric/hybrid with extended range. It can go up to 50 miles on 100 percent electric power, then the internal combustion engine engages for another 250 miles. It averages about 58 mpg. BMW ActiveE: BMW’s first full electric vehicle is only available in select markets on a two-year lease.

C O N T I N U E D O N PA G E 2 0

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THE ENVIRONMENTALLY CONSCIOUS DEALER

C O N T I N U E D F R O M PA G E 1 8

Toyota Prius: Arguably the most costeffective solution on the market. Though not a full electric vehicle, it deserves a spot in the lineup based on its massive success in the U.S., coupled with its extreme efficiency at 50 mpg. Chevrolet Volt: The Volt can go up to 50 miles on full electric power before engaging the gasoline engine for up to another 350 miles. Range anxiety is a thing of the past with this electric/hybrid vehicle. Ford Focus Electric: The Focus can go up to 100 miles on a charge and is more affordable than any of its luxury counterparts. Super-fast charging, and 100 percent electric. Nissan Leaf: The Leaf was the first mainstream pure electric car offered for sale in the U.S. It is an excellent urban commuter vehicle but falls short when it comes to the range anxiety concern. Consumers are more informed and environmentally conscious today than ever. They are actively seeking out and going out of their way to find green solutions that meet their needs. Additionally, gasoline prices are still historically high, so the financial and environmental need for alternative fuel

solutions is growing by the minute. As more products emerge that meet the demands of the modern “eco-sumer,” those products will inevitably gain more traction. When it comes to pricing, most of those vehicles are at the top end or just outside the reach of the average consumer. But as they flow into the remarketing space, a majority of them will fall right into the sweet spot. Unfortunately, a large portion of our electric power comes from coal-burning sources. According to the Energy Information Administration, the most predominant sources of electricity in the U.S. come from coal (48.7 percent), natural gas (21.5 percent) and nuclear power (19.4 percent). Because so much of our energy is created by coal-burning power plants, it is arguable that electric vehicles consume similar amounts of energy and as a result produce nearly as much greenhouse emissions as gas-powered vehicles. Until we create more clean and renewable energy sources, electric vehicles will remain an imperfect solution, But they represent a big step in the right direction. In the end, innovation without

capitalization will die. But if enough of us buy in and support the movement, the sky is the limit. The question remains: Where do you stand on the matter? Are you going to be one of the dealers with your hand raised when an electric vehicle crosses the block? Or are you going to stand on the sidelines and watch your competitors lead the charge? Technology and the environment are two major items that influence and change how our industry looks and feels. DSC remains committed to providing you not only with the best financing options, but also cutting edge technological solutions to enhance and take your business to the next level. We are also committed to shifting with your business as environmental needs and consumer demand dictates. We are confident we have the most flexible floorplan finance solutions in the industry, designed to empower you and your business to embrace change and grow green.

BY GARRETT JOREWICZ

NORTHWEST REGIONAL DIRECTOR OF DEALER SERVICES CORPORATION.

EDUCATION

Annual Scholarship Program The National Independent Automobile Dealers Association Foundation was founded in 2006 by the National Independent Automobile Dealers Association, a 66-year-old trade association, to “improve the independent motor vehicle industry by informing and educating consumers of the general public and training individuals associated with our industry.” Historically, the association’s scholarship program was the responsibility of the NIADA’s auxiliary. Now, however, as an IRS-approved 501(c)(3) nonprofit organization, the foundation has assumed the oversight of that scholarship program’s functions. Submit the completed application form with the required attachments in a 10 inch-by-13 inch envelope with adequate postage to:

SCHOLARSHIP SELECTION COMMITTEE NIADA FOUNDATION 2521 BROWN BLVD ARLINGTON, TX 76006 All information MUST be included with the original application. No additional information will be accepted at a later date. Staff will review the applications for completeness and will forward them to the Scholarship Selection Committee within NIADA and at Northwood University in Midland, Mich. They will be reviewed by region. One applicant will be selected from each of the four NIADA regions based on the merit of his or her scholarship application and will be notified by the foundation office no later than mid-May 2013. FIND THE SCHOLARSHIP APPLICATION AT WWW.NIADAFOUNDATION.ORG

FOUR REGIONAL SCHOLARSHIPS ARE AWARDED ANNUALLY AT THE ANNUAL NIADA CONVENTION IN JUNE. REGION I: MAINE, VERMONT, NEW HAMPSHIRE, MASSACHUSETTS, CONNECTICUT, RHODE ISLAND, NEW YORK, PENNSYLVANIA, NEW JERSEY, DELAWARE, MARYLAND, VIRGINIA, WEST VIRGINIA, INDIANA, OHIO AND MICHIGAN. REGION II: KENTUCKY, TENNESSEE, NORTH CAROLINA, SOUTH CAROLINA, GEORGIA, FLORIDA AND ALABAMA. REGION III: NORTH DAKOTA, SOUTH DAKOTA, MINNESOTA, WISCONSIN, ILLINOIS, IOWA, MISSOURI, KANSAS, NEBRASKA, OKLAHOMA, ARKANSAS, LOUISIANA, MISSISSIPPI AND TEXAS. REGION IV: WASHINGTON, OREGON, CALIFORNIA, NEVADA, IDAHO, MONTANA, WYOMING, UTAH, COLORADO, ARIZONA, NEW MEXICO, ALASKA AND HAWAII. The foundation invites you as an eligible student to complete this application in pursuit of scholarship funds to be paid to the college of your choice in the fall of 2013. Applications must be POSTMARKED NO LATER THAN MARCH 1, 2013 AND RECEIVED NO LATER THAN MARCH 11, 2013.

Looking to improve your bottom line, manage more effectively, improve employee retention, and leverage the newest and most effective marketing techniques? NIADA can help!

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February: Dallas April: Atlanta July: Arizona September: Atlantic City

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January: Atlanta April: Dallas August: Atlanta December: Dallas

F O R M O R E I N F O R M AT I O N , V I S I T : W W W. N I A D A . C O M / E D U C AT I O N . P H P

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A L I G N I N G W I T H A N AT I O N A L O P E R AT I O N O F F E R S S E C U R I T Y B U T L I M I T S C O N T R O L

THE FRANCHISE When it comes to small business, used car dealers are the last cowboys – proud, independent business people who like being their own bosses, running a business the way they want to. Which is why it seems strange to many that there are companies that operate nationwide and offer franchise opportunities to people who want to sell used cars. But for the right person, franchise used car dealerships can be the way to go. KNOW WHAT IS EXPECTED Brion Bethel owns Thrifty Car Sales of Mountain Home in Mountain Home, Idaho. He has been in the car business for 15 years. He started in the finance department right out of college. “I got a degree in finance,” Bethel said. “So when I saw that ad for a finance graduate, I thought it meant one thing, when it meant something else.” But Bethel found he liked working in auto finance, and in 2001, he and his wife Melanie decided to open their own used car dealership. They decided to go the franchise route because they liked what the franchisor brought to the table. “We wanted to have the benefits of a national brand without owning an OEM franchise,” Bethel said. “I have to say that owning a franchise has met many of our expectations, but not met expectations in other ways.” Bethel said he would recommend owning a franchise, as long as the dealer truly understands what he or she is getting into and what the rules are. “We were under the impression that we would have access to more vehicles at a better price through Thrifty,” Bethel said. “I want to emphasize that no one promised us that.”

So, Bethel said, when investigating a franchise opportunity, make sure you know exactly what your rights – and your responsibilities – are. It’s important to have a thorough understanding of the franchise’s entry requirements, and don’t forget to research the exit requirements as well. “To fully understand any business opportunity, you need to consider what it takes to get in, but you also need to understand how you can get out of the business as well,” said NIADA chief operating officer Steve Jordan, a former managing partner with a J.D. Byrider franchise group. “Before you enter into any agreement, you need to fully understand what the exit strategy is. You may not ever need to execute it, but things can change unexpectedly and knowing how to exit the business is just as important as knowing how to enter.” Overall, Bethel said, the advantages of having the Thrifty name have paid off. “When people hear Thrifty, they think rental cars, so we get people coming in all the time looking for rental cars,” said Bethel, whose operation also rents cars. “People who need rental cars often need one because their car is in the shop or has been damaged in an accident. So the franchise constantly brings people to us. If you’ve wrecked your car, we get a chance to sell you a new one.”

FRANCHISE RESOURCES Mike Pearce, vice president of franchise development for J.D. Byrider, said owning a franchise means being part of a larger system and all the extras that come with that. “In our system, that includes legal protection,” Pearce said. “We are able to hire multiple lawyers to advise people on changes in the law. We help franchisees avoid mistakes, and in our business mistakes can

BY JIM STICKFORD

be very costly.” Additionally, Pearce said, J.D. Byrider – the only Buy Here-Pay Here used car franchise operation – has spent a lot of time developing standards to help guide dealers in their operations. “We can help up front with training and help people live in the standards of the system,” Pearce said. “If you’re an independent dealer moving into the franchise side of things, it can be a very big surprise learning about the standards and controls you must maintain to protect the brand.” In addition to legal assistance and training, big companies can provide all sorts of resources, from marketing assistance, warranties and help with acquiring inventory to discounts on items ranging from tires to oil filters. That kind of support can be very enticing to an independent dealer struggling for survival. “It’s a structure,” said Lee Goldey, general manager and director of operations for Thrifty Car Sales. “There’s a website that’s structured. There are partner relationships with AutoTrader, Cars.com, CARFAX, things of that sort, to give them discounted deals. We spent almost a billion dollars just on tires last year, and that allows our franchisees to get tires really inexpensively. “As an independent, they don’t get those types of deals because they don’t have the mass and volume behind them.’’ There are financial advantages, as well. Goldey said Thrifty’s relationships with Santander and TD Bank give its franchisees a leg up in securing financing, and they also have access to the top programs from floorplan providers AFC and DSC. C O N T I N U E D O N PA G E 2 4

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C O N T I N U E D F R O M PA G E 2 2

THE FRANCHISE

“Santander doesn’t sign up independent stores,” he said. “That gives our dealers a finance source they couldn’t normally get. Our relationship with TD Bank has opened that up to our franchisees, and a majority of them have been picked up because TD Bank knows we’re good people who sell good cars.” BRAND PROTECTION Joe Lescota, NIADA’s director of dealer development, said the No. 1 benefit and the main reason dealers join a used car franchise operation is name recognition. With a franchise, Lescota said, a dealer doesn’t have to spend all his money building his “brand.” For an independent dealer, creating a reputation and recognition in the community through marketing can take time and money – a lot of money. Items such as ads in various media and agencies to develop campaigns and logos don’t come cheap. By buying a franchise, the dealer is, in effect, buying the good name of, say, Payless Car Sales. A lot of the hard work has already been done, and there are people at the corporate level who can help the dealer with marketing and advertising. “Used car dealers don’t always have the best reputation,” Lescota said. “That’s the cross they have to bear. Having a franchise is a way to make headway against that.” There can, however, be a flip side to that. While having a solid brand identity is good, Lescota said, it also puts a dealer at the mercy of all of his fellow franchisees. If someone who has the same franchise in the next town over does something bad, it can spill over to your franchise. That, Pearce said, is why protecting the brand must be among a franchisee’s top priorities. “It’s really protecting your own business,” he said. “That’s just a fact of life. Anyone who wants to operate a franchise has to realize that. “When you really come down to it, all a franchise is is a set of standards and operations systems and brand awareness. Hence the need to protect the brand. It’s important to realize that when you decide to buy a franchise, you need to be a team player. You have to trust the franchisor is maintaining the brand.” That’s why J.D. Byrider has what Pearce calls a compliance team – which, he was quick to add, is not something that should be considered punitive. “The compliance team is there to make sure franchisees are compliant with all the federal and state rules and regulations,” Pearce said. “Following the law is important. We also provide a franchise consultant

to ensure our dealers operate at full profitability. We can provide dealers with a business coach, which is something an independent dealer doesn’t have.” That said, Pearce acknowledged owning a franchise used car operation is not for everyone. “When you consider being part of a franchise system, you absolutely have to consider the input you will receive from the corporate headquarters,” he said. “But input works both ways. A good franchisor listens to the franchisees.” Control from headquarters can be a tricky thing, Pearce said. Too much control can be as bad too little control. He noted that McDonald’s, perhaps the king of franchise operations, was known in the past for keeping tight control over the company’s franchisees. But in the end, they revolted. Pearce said J.D. Byrider was created because company founder Jim DeVoe, a General Motors dealer in the 1970s, was frustrated by some of the directives forced on GM’s franchise dealers by the manufacturer. So when he began his company, DeVoe made it a point to listen to his dealers. “If you are considering joining a franchise operation, ask what kind of say you as a franchisee will have in the business,” Pearce said. “[DeVoe] set up our structure to take input from dealers. “Our advertising is a separate entity from the company. It’s managed and run by a board of dealers. So even with a franchise, you can still have a say in how the business is run.” TAKE ONE FOR THE TEAM But having a say in how a franchise is run doesn’t mean being able to do whatever you want. “Sometimes there are things that are done for the greater good of the system,” Pearce said. “These things can be limiting to franchisees. “We tried things like GAP insurance and found it was too hard to run for a larger system. There are times things are done for the benefit of the system that prevent people from making money. You have to be a team player and sometimes you have to take one for the team.” J.D. Byrider, Pearce said, has a specific niche in which it operates. That means franchisees must stock a certain type of car. “There are three tiers in the Buy HerePay Here business,” Pearce said. “We play in the middle tier and don’t allow franchisees to deviate from that tier. We control franchisees in that way because our business model has worked best that way

and that, honestly, has frustrated some franchisees.” But the system, Pearce contends, ultimately gives franchisees almost a two-to-one advantage over independent dealers. And the company has statistical data across the dealer system that can help dealers. As a Thrifty franchisee, Bethel has access to the company’s Business Development Center (BDC), and he said that kind of help from the home office is extremely useful. “Their marketing people help us with ads, whether it’s print, TV or the Internet,” Bethel said. “As an example, just recently we wanted to send out a mailer. We called up and asked for help. In a matter of days they emailed back to us three ads for things like oil changes and other service department services. These were ads that worked for other dealers in the past. “Their BDC is something their franchisees can sign up to use. For a dealer like me – I only have the one dealership – it is very useful.” The BDC can help control costs and follow up on every email sent to the dealership, Bethel said. “That way no customers fall through the cracks,” he said. But, Lescota said, it’s a simple fact that large corporations aren’t as nimble as a small businesses. It might take a large company more time to react to new situations , and a franchise dealer can be frustrated by that pace. The bottom line, Lescota said, is that anyone interested in buying a franchise used car operation has to weigh the pros and cons carefully. Franchisors can help with finance, legal advice, business development and bookkeeping software as well as advertising, parts, websites and warranties. Brand recognition goes a long way toward establishing a dealer with the public. But the very nature of a franchise means the dealer will give up some independence. Being a franchisee doesn’t mean having no power over one’s business, but it does mean there are limits and guidelines that must be followed. Dealers who remember that, Lescota said, can do very well for themselves. “Franchises can work for dealers,” Lescota said. “You do not have to reinvent the wheel. For someone with no experience, that is great. For someone with fears about going off on your own, that is very comforting. “But there is a tradeoff. You give up some of the profits to do so. If you understand that, franchises can work for you.”

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C O N S U M E R P R O T E C T I O N U P D AT E

S A F E T Y U P D AT E

NHTSA WANTS ‘BLACK BOXES’ IN ALL CARS The National Highway Traffic Safety Administration has proposed a new rule that would require event data recorders – so-called “black boxes” – to be installed in all light passenger vehicles beginning Sept. 1, 2014. EDRs track vehicle information – specifically, when it is in an accident, capturing speed, forces at impact, air bag timing, whether seat belts were in use and whether the brakes were applied. The majority of vehicles produced today already have such devices on board, and they have aided in recent investigations into safety issues, such as the so-called Toyota unintended acceleration scare, when they revealed the real problem was often driver error. But the use of the technology has also raised some concerns with privacy advocates. EDRs are expected to be installed in 96 percent of 2013 model year vehicles. Congress failed to pass legislation that would have required EDRs in 2010, prompting the NHTSA to consider its own mandate. NHTSA has listed the use of black boxes as a “priority,” and a spokesperson insisted the devices are critical to “continued improvements in vehicle safety.” The proposed rule is available for public comment for 60 days from date of publication.

CFPB to Share Complaint Data

Buy-Here, Pay-Here dealers or auto finance companies who have had complaints filed against them with the Consumer Financial Protection Bureau (CFPB) can soon expect state regulatory agencies to be informed of those complaints, as well. At the end of 2012, CFPB announced that it was intensifying its efforts to coordinate with state-level departments and share complaint data. “Our goal in sharing consumer complaints with state agencies is to enhance efficient, transparent, and effective government to better protect American consumers,” Scott Pluta, assistant director for the Office of Consumer Response, noted on the CFPB website. Complaints will be shared over a secure channel, with identifying consumer information removed. While the data will initially only flow from the CFPB to state agencies, in time the agency also plans to accept complaints and information from state agencies, and make that data available to other federal agencies as appropriate.

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Jump-Start Your Compliance Training

OSHA requirements, workplace diversity, Gramm-Leach-Bliley, Red Flags Rules… Keeping up with all of the compliance demands can be overwhelming for any dealer. And now, with the FTC and the CFPB starting to more closely scrutinize the auto industry, it’s even more vital than ever for your entire staff to help keep your dealership compliant. NIADA wants to help ease the burden. Starting in February 2013, dealers can jump-start their compliance training with NIADA’s online suite of dealer compliance training materials. Subscribers will have access to videos, checklists, key forms, documents, and more…all at their fingertips, on demand. Don’t worry – for dealers who prefer, content is also available on disc. You’ll even be notified when new training is added, so you can stay ahead of the curve. FOR A DDI T I O NA L I N FO R M AT I O N V I S I T W W W. NI A DA . C O M O R C O N TAC T G EO RGI A @ N I A DA . C O M .

A S S O C I AT I O N N E W S

United Acceptance Joins as a Bronze Partner United Acceptance, Inc., a financial organization founded in 1991 that provides capital and servicing solutions to Buy Here-Pay Here vehicle dealerships, captive finance companies and independent finance companies, has joined NIADA as a Bronze level National Corporate Partner. UAI’s strong long-term relationships with auto dealers and its employees have contributed to its growth from a local company in Atlanta to an organization that purchases receivables nationwide. UAI’s mission is to be a strong financial partner to used car dealerships, allowing them to accelerate their profits though the sale of their receivables – its slogan is “Profits Through Partnership.” In a time in which it is becoming increasingly difficult to secure credit facilities, selling contracts can be a viable source of raising capital. United Acceptance purchases automobile installment sales contracts (bulk receivables) from BHPH dealers, franchise dealers, finance companies and banks. Its bulk purchase program is simple, and quick funding is available to assist with immediate cash flow needs. UAI can turn uncollected receivables into liquid cash, reduce risk and repossession costs, improve yield, improve profit versus point-of-sale financing and reduce stress by allowing dealers to sell vehicles instead of collecting debts. FO R MO R E I N FO R MAT I O N , V I SI T W W W. UA I D I R EC T. C O M O R CA LL 877 - 2 81 - 2 3 6 0 .

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NEW PRODUCTS

Test Drive Generator Does All the Work One of the great things about the Internet invading the dealership business is the innovative new ways it helps sell cars. Certainly the availability of information about every vehicle on your lot has complicated the business – but sometimes it’s for the better. An example is the simple idea that customers visiting your website should be able to make an appointment to test drive the car they like without any effort on the part of the dealer. That’s a good thing, because every day there are thousands of leads in your market, and it is pretty tough to engage them all. Test Drive Generator, a company based in Mukilteo, Wash., has perfected software that allows any dealer, on any type of automotive website platform, to allow customers to schedule their own test drives without any human intervention. Customers just click the button next to the car they like and schedule the test drive on their own. Why is that a good thing? Think about it. If the customer is scheduling his or her

own test drive, and Test Drive Generator appointments show up 90 to 95 percent of the time, why, oh why, would you want a salesperson to stick his nose in and screw that up? Once the customer has scheduled a test drive, the folks at Test Drive Generator say, “Leave them alone!” Nothing good will come of an email or phone call from a salesperson. At best, the customer will still show up. At worst, something the salesperson says or writes will give the customer second thoughts about coming. Now, you might say your salespeople CA_0213_O are tremendous, but why mess with a good thing? Customers are coming for a test drive. Leave them alone and let them arrive. Have you ever seen a salesperson talk a person out of a sale by talking too much? It’s not a pretty sight. Test Drive Generator takes care of scheduling the test drive appointment. It sends email confirmations and reminders and text reminders. The Test Drive Generator system has a 90 to 95 percent

VISIT WWW.TESTDRIVEGENERATOR.COM

show ratio and a 60 to 70 percent sold ratio. Perhaps the best thing about Test Drive Generator is the price: $250 per month for a dealership, billed month-tomonth, with no long-term contract and no setup fees. Seems like a pretty good deal to me, whether you get 10 test drives per month or 100. If you want to hear more, call Test Drive Generator at 877-696-0415, email info@TestDriveGenerator.com or visit www.TestDriveGenerator.com to book a demo.

BY BRETT STEVENSON DEALER MARKETING MAGAZINE

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MARKET NEWS

INCREASED LEASE RETURNS BENEFIT USED VEHICLE DEALERS

According to the “Auto Industry Trends for 2013” commentary on Edmunds.com, lease returns for 2013 are expected to increase by nearly 500,000 units compared to 2012. This increase should lead to growth in the new car market, but is also expected to benefit the used car industry as well. As more off-lease cars and older trade-ins become available, dealers should see used car inventories increase. Edmunds also predicted that the increased inventory would also decrease the average price of a used car by $200 - $300. As prices on used cars drop, more on-the-fence buyers may also choose to purchase used cars instead of new vehicles.

W E B C H AT

SURVEY STUDIES CUSTOMER MOBILE APP USE

Almost half of all auto service customers are using mobile apps on their smart phones, but only one-tenth of them are using dealer or service provider apps, according to a survey released last month by DMEautomotive. The national survey of more than 2,000 U.S. vehicle owners studied how – and how much – auto service customers are interacting with mobile apps and quick response (QR) codes. The study found that 44 percent of customers are using mobile apps, but only 10 percent use an app offered by their dealer or service provider. It also showed customers are far more likely to use mobile apps than QR codes, which were used by 18 percent of respondents. Those who used QR codes did so looking for product information or links to a web page – typically static, non-actionable destinations, the study concluded. Customers who responded said they would most like to have auto service providers’ QR codes offer them coupons and the ability to schedule online appointments. “Our survey reveals that businesses that adopt cutting-edge technologies and then feed people irrelevant sales messages or generic product/business info are wasting the customer’s time and money,” DMEautomotive vice president of strategy and analytics Doug Van Sach said. “People demand real, tangible value, like coupons and discounts, and functionality that will make their lives easier, like instant online appointment scheduling and timely service reminders.” 29

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WHAT’S NEW

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R U L E S A N D L AW S

KEEPING UP WITH COMPLIANCE

Have you kept up to date with the rules and laws that could affect your dealership? The start of the New Year is the perfect time for a quick compliance refresher, and the Bureau of Consumer Protection’s Automobiles site is a quick and comprehensive reference source. Designed with dealers in mind, the site has compiled a variety of resources discussing things like the Used Car Rule, labeling guidelines for alternative fueled vehicles, and how the Privacy Rule applies to auto dealers. Examples of dealer resources available on the site include: • A Dealer’s Guide to the Used Car Rule, which provides valuable compliance tips • Copies of the required Buyers Guide, in English and Spanish • Fillable versions of the English and Spanish Buyers Guides. V I S I T H T T P : / / B U S I N ES S .F T C .GOV / S EL EC T ED- I ND U S T R I ES / AU T O M O B I L ES FOR M ORE I NFO R M AT I O N .

CAR COMMUNIT Y

CARFAX PROMOTES CAR DONATIONS TO FIGHT KIDNEY DISEASE CARFAX announced it is supporting the National Kidney Foundation by promoting the donation of used cars. For vehicles donated to the Kidney Cars program, CARFAX will make the donation part of the vehicle’s history by adding a record to its CARFAX Vehicle History Report. The record will include links to the National Kidney Foundation and the Kidney Cars program websites. “This is a great way to support the efforts of the National Kidney Foundation while providing buyers and sellers with another valuable piece of information about a used car’s past,” CARFAX spokesman Larry Gamache said. “Kidney Cars is one of the country’s largest vehicle donation programs and we encourage people to consider donating their cars to help this important cause.” For nearly 30 years, Kidney Cars has accepted vehicle donations to benefit the National Kidney Foundation. More than 100 vehicles are donated to the program every day. “We are so glad to have the support of CARFAX as we work to ease the burden of kidney disease through the patient programs and prevention initiatives our donated cars help fund,” Kidney Cars director Chad Iseman said. FO R M O RE I NFO RM ATI O N O N D O NATI NG A CAR TO TH E NATI O NAL K I D NEY FO UNDATI O N , VI SI T W W W. K I D NEYCARS. O RG .

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BRASHER’S SACRAMENTO STARTS YEAR OFF WITH A ‘BANG’

It seems the new year bodes well for the lanes, as John Brasher reported a “very, very strong” sale from Brasher’s Sacramento Auto Auction. Brasher said, “We started the year off with a bang. The sale was strong; the strongest it has been (in) probably six months.” It seems dealer demand may be pushing strong sales, as Brasher noted “dealers came out, and they needed inventory. “New-car dealers reported record sales through the end of the year, and they needed to replace their inventory. Used-car sales and new-car sales, both, were excellent through the end of the year,” Brasher said.

BY STAFF WRITER SARAH RUBENOFF

AUTO REMARKETING

2,000 DEALERS AFFECTED B Y N E W B H P H L AW S

CALIFORNIA LEGISLATIVE REPORT

The used car industry faced a tough year in 2012. The legislature introduced three bills targeting Buy Here-Pay Here dealers, based on fallacious articles in the Los Angeles Times. IADAC executive director Larry Laskowski and I spent months opposing the bills and attempting to educate legislators, with no positive results. For the first time in 36 years we couldn’t get one Democrat to vote no. Gov. Jerry Brown vetoed the worst of the three bills, which would have capped interest rates at 17.25 percent and required a dealer to also have a finance license. But two of the three bills did pass. Those two bills – AB1447 and AB 1534 – became effective Jan. 1 and will be enforced by the DMV. The DMV will be asking every dealer to sign a document stating “under penalty of perjury” whether or not he or she is a BHPH dealer. Together, AB1447 and AB1534 only affect approximately 2,000 dealers – the other 9,000 licensed dealers won’t be affected. If you are one of the affected dealers, please do your best to be in compliance so the DMV won’t take action against you. Remember, noncompliance could result in revocation of your dealer’s license. Absent any regulations, the DMV will enforce the laws as written. That means if you keep 10 percent or more of your conditional sales contracts in-house, you will have to offer a 30day, 1,000-mile warranty on every car – even for cash deals or those assigned to a lender. And because the Buyer’s Guides must show you are providing a warranty, you will have to offer the warranty with every car. To comply with AB 1534, you will have to post the current, suggested retail price on every car. It doesn’t matter if the valuation reflects the price that you’re asking – you still have to post it in the window of each of your vehicles. The DMV did accommodate our request for a meeting, in which we expressed our concerns about enforcing the bills and offered suggestions. IADAC will continue to work with the DMV to try to establish a level playing field for all dealers. In better news, of the first 50 legislative bills introduced in 2013, none affect the used car industry. Rest assured IADAC and I will continue to stand watch over each and every bill, and will notify you if there is anything that impacts the industry.

BY BILL DOHRING IADAC LOBBYIST

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COMPLIANCE OVERDRIVE

Unintended Express Warranties: What Sales Staff Says Matters There’s no question that what a dealer says to a customer as part of the sales process matters. But it’s not just about what is said by the F&I department and what’s documented on a sales contract to finalize a deal. It’s also about what is being communicated outside, on the car lot. No matter how accurate and compliant your finance documentation is, if it disconnects from promises made during the sales process, you could be facing a problem. Though the law is different in every state, most have passed some version of the model Uniform Commercial Code (UCC) § 2-313. It provides that an express warranty is created by the seller when it makes a statement of fact or promise to the buyer relating to the goods, which becomes part of the basis of the bargain. The elements are pretty broad and cover a wide range of common statements a salesperson might make when discussing a vehicle with a potential buyer. For example, if a salesperson says to a potential buyer, “This car comes with a new spare tire,” as part of the sales discussion, the promise is probably an express warranty. What happens if the customer picks up his or her car after the sales contract is signed and a used spare tire is in the trunk? Contrary to what some might think, express warranties generally can’t be waived or disclaimed. UCC § 2-316 provides that words or conduct creating an express warranty and words or conduct disclaiming or limiting the warranty must be interpreted in a way that makes them consistent with each other. If that’s not possible, then the disclaimers or limitations will not be enforced. In short, you can’t give with one hand and take away with the other. If a salesperson promises the car comes with a new spare tire and a used one is delivered, a written warranty disclaimer will not help. Note that the express warranty doesn’t have to be in writing and it doesn’t require using the word “warranty.” As a result, what

the salesperson says can affect a transaction just as much as the documents produced by the F&I department. That’s why it’s important to know what your sales team is communicating and, more important, promising to customers. Sometimes the situation involves a simple mistake on the sales lot. A car could be presented as a six-cylinder when it’s actually an eight-cylinder. Or maybe the customer is told the car had two prior owners but there were really three. An uninformed or mistaken salesperson might also tell a customer the car has never been in an accident when in fact he or she doesn’t really know if it has or not. The new spare tire example may sound farfetched, but a dispute about whether new or used tires were delivered was just one of numerous inconsistencies between promises and documentation by the seller and what was delivered to the buyer in the California case of Sanchez v. Valencia ( 201 Cal. App. 4th 74 (2011)). The case is known for its decision on arbitration clauses and wasn’t about warranties. Still, it is a good example of how discussions on the lot can have a big effect on the dealer’s liability. Those kinds of express warrantycreating mistakes can be avoided by simply being careful about representations about vehicle features and facts. While services like CARFAX and certain branding of vehicle titles can help prevent some of those mistakes, or at least bring them to light before an agreement is finalized, dealers are still facing situations in which customers are unhappy because an expectation that played a key factor in their decision to buy has not been met. So what can you do to help prevent this from happening? Tell your sales staff that what they say matters and why: A salesperson is a liability risk if he or she thinks all promises are wiped out by a disclaimer in the sales contract. Train your staff on proper sales techniques: That includes arming them

with facts about the inventory available for sale. Encourage potential buyers to take a test drive: Also encourage them to take the vehicle to a mechanic or get a vehicle history report and other information about the car so they have the best opportunity to know the features, functionality and condition of the vehicle without relying on information from you. Some dealerships have installed Internet kiosks for customers to conduct on-thespot research. This is a complex area of law, littered with exceptions and replete with court decisions that are very fact-specific and findings that are not always consistent. For example, in some situations, disclaimers or waivers can be enforced if the sales contract includes a provision saying it is the all-inclusive and exclusive agreement covering the sale. Whether a given statement is a statement of fact or promise (creating an express warranty) or merely sales puffery (not an express warranty) is regularly litigated. Many case decisions exist and entire books have been written on the subject. The key point is that what your sales team says on the lot is important. If there is conflict between what was promised during the sale and what was delivered, the dealer has a problem. The problem could be characterized as the breach of an express warranty, but it could also be a fraudulent misrepresentation, unfair or deceptive act, etc. – keep in mind that 15 causes of action were alleged in the Sanchez case based on the tires and other inconsistencies. Creating consistency throughout the entire sales process and making sure the lines of communication between the sales staff and F&I team are open can help mitigate risk for your dealership, ultimately saving time and money.

BY CHIP ZYVOLOSKI

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

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West Coast Dealer Feb/Mar 13  

IADAC's West Coast Dealer magazine for February and March 2013

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