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C A L I F O R N I A

WEST COAST DEALER A P R I L / M AY 2 0 1 4

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FEATURE STORY ON PAGE 24

Flat Fees vs. Discretionary COMPENSATION for Dealers

u inside

• MEMBERSHIP THAT PAYS YOU • CONTENT MARKETING • CARL AW YER

DON’T MISS THE TOP NOTCH EDUCATION AT THE

2014 NIADA CONVENTION & EXPO See Page 36 & 37 for more info.

iadac NEWS

SAN DIEGO AUTOMOTIVE MUSEUM TO HOST IADAC’S ANNUAL CONVENTION.

More details inside!

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INSIDE

MAGAZINECONTENTS

IADAC EXECUTIVE COMMITTEE

6 Named IADAC Quality Dealer of the Year 8 Auction Standards Help Customers 13 Credit Applications Do’s & Don’ts CA_1010.qxd:Layout 1 42nd 11/19/10 12:04 PM 14 Striking Gold: IADAC’s Annual Convention

INSIDE

06 IADAC Revisits San Diego 08 NMVTIS Compliance 10 Membership That Pays You 12 Washington Update 16 Federal Felony 20 CarLawyer 28 Advertising Game Plan 32 Content Marketing

INSIDE

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

Terry Degmetich Secretary ASSOCIAT I - Deal Cars Roseville, CA 95678 916-870- 9254 idealmaster@surewest.net Vince Cardinale

Chairman of the Board North Auto Auction GuyBay Strohmeier Fairfield, CA 94534 Vice 707 - 864President - 1040 david@nbauto.com Guy Strohmeier’s

Vice President A to Z Motors Winters, CA 95694 925-914-9199 atozmotors1@aol.com

Mark 87 Glover Soda Bay Rd Sr. Vice President CA 95453 Lakeport, Azteca Auto Sales Galt, CA 95632 209-712-1886 Beto Beas mark@countyfinancial.com

Rick Gomez Vice President RJ Auto Brokers Carmichael, CA 95608 916-425-3349 rgomez739@yahoo.com

916-991-5555 rdavis@brashers.com David Aah1 Page 4

THE CURRENT STATE OF THE AUTO INDUSTRY

Auto Center

John McElroy is host of the long-running “Autoline Detroit” television program, covering all aspects of the automotive industry. In this presentaRocco Delapa tion, McElroy provides a thorough and insightful President review of where we’ve been, where we now Fairfield Auto are, and where our industry is headed. Taped 1206 N. Texas St. at the Automotive Fleet & Leasing Association’s Fairfield, CA 94533 Annual Conference.

ION NEWS

MAGAZINECONTEN

12 Local Auto Dealers Used by Clunkers

GM Issues Ignition Switch Recall

10 10 Questions for AutoCheck 14 Auction Security 18 In the Spotlight

NEARLY 1.4 MILLION VEHICLESCERTIFIED AFFECTEDMASTER

DEALERƒ PROGRAM:

General Motors is recallingDealers nearly who demonstrate commi support the principles and ethical bu 1.4 million vehicles for a faulty dards of the CMD“ designation comp Secretary ignition switch, which can cause thethat addresses Business Ma day seminar Beas Auto Sales Merchandising, Financial Manageme car’s the Mike Casey air bags to not deploy in Larry Laskowski Stockton, CA 95202 Resources, and Business Planning. N Vice President Treasurer of a crash. Calevent West Motors The Auto Outlet University provides the instructor and 209-944-5770 San Leandro, CA 94577 CA 95678 Continuing Education units for this cour hhbeas@aol.com Gus CamachoCOMMITTEE Roseville, CMD EXECUTIVE CLASSES In the recalled models, the 510-352-9230 916-784-3408 clwest1977@aol.com autoview@surewest.net Sr. Vice President NEXT CLASS OCTOBER 28-3 Dealers who demonstrate commitment and weight on the key ring and/or road 2014 WAAC TO WEBCAST LIVE Rod Davis Terry Degmetich Camacho Auto Sales, Inc. Terry Degmetich MAGAZINECONTENTS VISIT NIADA.COM FOR MORE INFO Secretary support the principles President and ethical business Lancaster, CA Treasurer conditions, or some other jarring WATCH EVENT ONLINE MAY 9 Brasher's Auto 93534 AuctioncomI - Deal Cars standards of the CMD® designation Rio Linda, CA 95673 Roseville, Cars CA 95678 661-945-2609 I-Deal plete a four-day seminar that addresses BusiADESA BostonMAGAZINECONTENTS will host the 2014 World 12 Local Dealers Used event, mayAuto cause the ignition switch 916 - 991 - 5555 916-8709254 Mike Macaulay, Magazine gus@camachoauto.com Roseville, CACommittee 95678 Chair • Car Systems ADVERTISERS INDEX rdavis@brashers.com idealmaster@surewest.net ness Management, Merchandising, Financial Automobile Auctioneers Championship on by Clunkers Roseville, CA • 916-784-7155 • carsystems@comcast.net to move out of the run position, 6 Named IADAC Quality Dealer of the Year 916-870-9254 Vince Cardinale Management, Human Resources, and Business May 9. The event will showcase the world’s Action Auto Recovery ................................ 8 Auction Standards Help Customers Mehdi Chitgari idealmaster@surewest.net 10 10 Questions for engine. AutoCheck Planning. Northwood University provides the inturning off the ADESA ...................................................... David Aah1 best automobile auctioneers vying the 13 Credit Applications Do’s &for Don’ts Vice President structor and awards fourChairman Continuing 14 Auction Security AutoTrader.com ................................ Insid of theEducation Board Vice President Striking Gold: IADAC’s 42nd Annual Convention coveted titles14of World Champion Automobile If the key is not in the run position, North Bay Auto Auction A Is to Z Motors Classic Chariots Inc. Larry Laskowski AutoXplorer................................................ Carfax Here To Help units for this course. 18 In the Spotlight Winters, CA 95694 Auctioneer, World Champion Automobile Black Book.................................................. The next class will be1611 MarchFairfield, 10-12 atCA the94534 SuperMedia W.- 864 Vista Way Executive Director the air bags may not deploy if 707 1040 925-914-9199 Brasher’s Sacramento Auto Auction ........... Hotel and ConferenceVista, Center atCA DFW.92083 Ringman and World ChampionSTATE Team. THE CURRENT Auto Outlet david@nbauto.com atozmotors1@aol.com Dear Editor: The Carfax isvehicle always here to help, especially Cars.com .......................................... Insid the is involved in a crash, Free live broadcast of the 2014INDUSTRY championship OF THE AUTO Roseville, CA 95678 on the rare occasions that data research is DealerClick ................................................ CERTIFIED is available at www.niada.tv; www.niada.com; increasing theMASTER riskreadings, of injury. Von Arx & Associates ........................ Sam Mark Khacho 916-601-4976 John McElroy is host of the long-running “Auto-ADVERTISERSINDEX Carfax is constantly needed. Inconsistent odometer for J. L.Affected Glover Rick Gomez looking for ways to DEALERƒ PROGRAM: Lobel Financial .......................................... www.waacnet.com and www.autoconsumer.tv. Vice President autoview@surewest.net Sr. Vice President Vice the President line Detroit” television program, covering all as-Action Auto Recovery .............................................. 6 further improve exceptional service we example, can raiseare: a red 2005-07 flag but may Chevrolet be the Manheim Advantage ............................... vehicles Auto Sales RJ Auto Brokers ThreeAzteca Amigos Dealers who demonstrate commitment and ............................................ pects of the automotive industry. In this presenta-Allen L. Hawkins Insurance Services ....................... 9 provide our independent dealer customers. resultsCobalt; of simple human error. We’ve made it SmartAuction Galt, CA 95632 Carmichael, CA 95608 2007 Pontiac G5;and 2006-07 Modesto, CA 95354 Mike Macaulay principles ethical business stanInside Front Cover tion, McElroy provides a thorough and insightfulAutoTrader.com ............................ Western Funding ........................................ 209-712-1886 916-425-3349 We have a dedicated team of professionals easier for support dealers the to initiate theand process Western General / Protective...................... dards of theHHR CMD“ designation complete a fourmark@countyfinancial.com rgomez739@yahoo.com 13 209-523-5600 Magazine review of where we’ve been, where we nowBlack Book............................................................. Chevrolet and Pontiac that handles any customerEditor requests quickly. get a faster resolution. We’re helping our cus- Solstice day seminar that addresses Business Management, Brasher’s Sacramento Auto Auction ........ Back Cover skhacho@aol.com carsystems@comcast.net are, and where our industry is headed. Checktomers out vehicles; the newly ADESA, Inc........................... Inside Back CoverTaped As a result of our tireless efforts, I am proud manage a more efficient business andIon NATIONAL 2003-07 Saturn andINDEPENDENT Merchandising, Financial Management, Human at the Automotive Fleet & Leasing Association’sCars.com ......................................Inside Larry LaskowskiBack Cover Casey AUTOMOBILE DEALERS ASSOCIATION to say that weMike have streamlined our dataredesigned rekeeping their operations smoothly. Allen L. Hawkins Insurance............................31 DealerClick .............................................................. 5 Resources, andrunning Business Planning. Northwood IADAC website Treasurer Vice President WWW.NIADA.COM • WWW.NIADA.TV 2007 Saturn Sky . Annual Conference. search process.Cal West Motors Any dealer in California that has quesAlly...................................................................13 The Auto Outlet

WHAT’S NEW

INSIDE

OLARSHIPS!

INSIDE

BREAKING NEWS! BREAKING NEWS!

ADVERTISERS INDEX

University provides the instructor and awards 4

J. L. Von Arx & Associates ..................................... 12

PS! 4

at www.iadac.org. Roseville, CA 9567810, 11 Sanprocess Leandro, is CAeasily 94577 started with The research tions aboutContinuing their Carfax account Manheim Advantage....................................... 2521 BROWN BLVD. • ARLINGTON, TX 76006 AutoDataDirect..................................................9 Education unitsor forthe this data course. CMD CLASSES 916-784-3408 510-352-9230 (817) 640-3838 .......................................................... 7 just a few simple steps. Any Carfax-subscribresearch process what can call Carfax Business PHONE AutoZone.........................................................30 SmartAuction We want to know autoview@surewest.net clwest1977@aol.com FOR2010 ADVERTISING INFORMATION CONTACT: T A S S O C I A T I O N N E W S CLASSyou OCTOBER 28-30, Dealers who demonstrate commitment andWestern Funding ................................................... 16 ing dealer in California can access their CarServices atNEXT 888-695-1885. It is our pleasure (800) 682-3837 OR TROY@NIADA.COM. Black Book ........................................................7 VISIT site. NIADA.COM FOR MORE INFOMATION think of the new Let us THE WEST COAST DEALER IS PUBLISHED BI-MONTHLY BY TH Western General / Protective.................................. 3 support the principles and ethical business fax account at carfaxonline.com. Next, click to serve you. Brasher’s Sacramento AA...............Back Cover DPENDENT AUTOMOBILE DEALERS ASSOCIATION SERV standards of the CMD® designation comTION, 2521 BROWN BLVD., ARLINGTON, TX 76006-52 know by e-mailing us at the link which takes you directly to the online CARFAX..........................................................19 640-3838. PERIODICALS POSTAGE PAID AT DALLAS, TX AN plete a four-day seminar that addresses BusiOFFICES. POSTMASTER: SEND ADDRESS CHANGES TO NI Data Correction Form. After submitting the Sincerely, FOR INFORMATION ON HOW TO Committee Chair • Car Systems Mike Macaulay, Magazine Computerized ness Vehicle Registration. . ..............32 getanswers@iadac.org. INDEX CATIONS, 2521 BROWN BLVD., ARLINGTON, TX 76006-5 Management, Merchandising, FinancialBECOME Roseville, A MEMBERCA PLEASE CONTACT • carsystems@comcast.net form with the 17-digit vehicle identification • 916-784-7155 MENTS AND OPINIONS EXPRESSED HEREIN ARE THOSE O DealerMatch.................................................... Management, Human Resources, and 17 BusinessLALBRACHT@IADAC.ORG AUTHORS AND DO NOT NECESSARILY REPRESENT THE VIE number and requested research, a Carfax repKari Sloan Action Auto Recovery ..................................................8 COAST DEALER, IADAC, OR THE NATIONAL INDEPENDE DealerSocket...................................................15 315-2869 YOUR LIABILITY - BY LARRY LASKOWSKI, EXECUTIVE DIRECTOR Planning. Northwood University provides the in-(888) MINIMIZE DEALERS ASSOCIATION. LIKEWISE, THE APPEARANCE OF resentative will work with you throughout the Manager,ADESA Dealer......................................................................17 Business Unit GoldStar GPS..structor ..................................................5 THEIR IDENTIFICATION MEMBERS OF NIADA, DOES NO and awards four Continuing Education AutoTrader.com ................................ Inside ENDORSEMENT Front CoverOF THEASPRODUCTS data verification process and confirm the issue Carfax OR SERVICES FEATU Insurance Autounits Auctions. ................................29 NATIONAL INDEPENDENT AutoXplorer................................................................13 for this course. 2010 BY NIADA SERVICES, INC. ALL RIGHTS RESERVED. AUTOMOBILE DEALERS ASSOCIATION has been resolved. In most cases, the entire of current issues. Auto dealers I just finished reading about the building is just $154 million. STATE MAGAZINE MGR./SALES: Troy Graff • troy@ Black Book..................................................................19 Lobel FinancialTheCorporation.............................3 next class will be March 10-12 at the SuperMedia WWW.NIADA.COM • WWW.NIADA.TV EDITOR: Mike Harbour • mharbour@niada.com process isNews completed in justthe a few hours. is Brasher’s Sacramento Auto Auction ..............Back Cover and Conference Center at DFW. should pay attention to the the remodeling that is going CFPB Manheim.com..Hotel ................................................ 11 NIADA MGR.: Christy Haynes • christy HEADQUARTERS: Dear Editor: Carfaxfrom is always here to help, especially Cars.com .......................................... InsideART/PRODUCTION Back Cover 2521 BROWN BLVD. • ARLINGTON, TX 76006-5203 PRINTING: Nieman Printing Manheim Pennsylvania...................................21 ..................................................................5 actions of the groups that can on(817)at640-3838 the Consumer Financial always radar, on theon rareIADAC’s occasions that data as research is DealerClick PHONE D E A L E R B O N D H E L P FOR ADVERTISING INFORMATION CONTACT: TROY GRAFF Mark-One Financial.........................................25 J. L. Von Arx & Associates ..........................................9 isBureau. constantlyOriginally looking for ways tothey needed. readings, forQ3 “Westlake Releases TopSource Auctions List”and (800)Protection 682-3837Carfax OR TROY@NIADA.COM. impact their businesses areRemarketing aInconsistent force to odometer be reckoned Lobel Financial ..........................................................15 NextGear Capital. ............................................23 Since 1993, Bond Insurance When it comes to motor vehicle bonds, all Action Auto Recovery.............................................. 6The West Coast further improve thebyexceptional we example, can raise has a rednamed flag but Agency may beisthe Dealer is published bi-monthly the National Ind- service ON HOW TO Manheim Advantage ..........................................10, 11 Westlake Financial Services service. All five to topped the sale rankings. Man-FOR INFORMATION committed fast and friendly dealer principals are not alike. AtFTC, Bondtheir lives. budgeted at $45 million, the with, along with the DMV OnStar..............................................................26 Automobile Dealers Association Services Corporation, 2521 Allen L. Hawkins Insurance Services ....................... 9pendent provide our independent dealer customers. SmartAuction ..............................................................7 results ofAgency, simple human it IADAC bondmade service. members may contact Insurance we offer error. aare: com-We’ve topSource five auctions for Q3-2010. They heim Nevada ranked first overall for the secondBECOME A MEMBER PLEASE CON Blvd., Arlington, TX 76006-5203; phone (817) 640-3838. United Acceptance. .........................................27 AutoTrader.com ............................ Inside Front CoverBrownproject Western Funding ........................................................18 Nancy R. Chapman for a bond quote at IADAC’s So Cal Conference is mon sense approach to underwriting. A is currently three times and other agencies. Standard We paid have a dedicated team professionals easier for dealers to initiate the process and quarter, ranking first for sale results andLALBRACHT@IADAC.ORG Periodicals postage at Dallas, TX and at additional offices. of POSTstraight Western General / Protective........................................3 United Auto Credit...........................................33 Black Book ............................................................. 13MASTER: Send address changes to NIADA State Publications, 2521 nchapman@aec-mgmt.com. business’ net worth is the key along with the 888-855-0100 or that handles any$145 customer requests quickly. get acode faster resolution. helping coming April 11 at the San Diego budget at million. dress autoWe’re dealers isour athirdcus1. Manheim Nevada for service. Blvd., Arlington, TX 76006-5203. The statements and opinions personal character of for the business owner. Brasher’s Sacramento Auto Auction Back CoverBrownover (888) 315-2869 VAuto .................................... Inside Front........ Cover Checktomers out the newly Asarea those result our tireless efforts, I am proud expressed herein of theof individual manage a more efficient business and NATIONAL INDEPENDENT

ADVERTISERS Message from the Executive Director

Carfax Is Here To Help

BREAKING NEWS! BREAKING NEWS!

ADVERTISERSINDEX

2 Rawls Auto Auction Cars.com ......................................Inside Back Coverauthors andThe Auto Museum. You’ll find the designers for the shirt with a target on the back. do not necessarily the views of The West Coast AUTOMOBILE ASSOCIATION toorsay thatrepresent we have streamlined our dataredesigned re-Norwalk keepingAuto their operations running smoothly. 3. Auction Bill Walters, VP of DEALERS remarketing, says overDealerClick .............................................................. 5Dealer, IADAC, the National Independent Automobile Dealers AsIADAC website WWW.NIADA.COM • WWW.NIADA.TV registration and agenda renovation are Skidmore, DoAny you stay top of that hasallquesLikewise, the appearance of advertisers, or their identificasearch process. dealer California 4. Brashers Salt Lakeinon Auto Auction auction performance hasform been improving: J. L. Von Arx & Associates ..................................... 12sociation. tion as members of NIADA, does not constitute an endorsement of the at www.iadac.org. The research process is easily with tionsGolden about their or the data 2521 5. ADESA GateCarfax account “Development of these measures has Manheim Advantage....................................... 10, 11products BROWN BLVD.grading • TX 76006-5203 elsewhere inARLINGTON, this magazine. The Owens and Merrill. They’re industry regulations and new 4 or services featured. Copyright 2010 by NIADA Services, started PHONE (817) 640-3838 FOR INFORMATION ON HOW TO BECOME Inc. All rights reserved. SmartAuction .......................................................... 7 helped us recognize strengths and address shorta few simple steps. Any Carfax-subscribresearch process can callyou Carfaxto Business We Wwant to know what FOR ADVERTISING INFORMATION CONTACT: TROY GRAFF price for a dealer is just $59. thejust group who designed the Do T H E laws? EST C O A you S T D Epay A L E Rattention OCTOBER/NOVEMBER 2010 Western Funding ................................................... 16STATE MAGAZINE MGR./SALES Troy Graff • troy@niada.com A MEMBER PLEASE CONTACT LARRY@ Westlake Remarketing saw strong performance comings(800) in our currentORnetwork. The continued ing dealer in California can access their Car- Services at 888-695-1885. It is our pleasure 682-3837 TROY@NIADA.COM. Mike Harbour • mharbour@niada.com think of the new Let us these support of THE WEST COAST DEALER ISpartners PUBLISHEDfood BI-MONTHLY BY THE INWestern / Protective.................................. 3EDITOR And it includes while at the Burj Dubai, the Next, inclick change? Knowledge thepolitical recent quarter and site. is recognizing these auction is integral toNATIONAL IADAC.ORG OR (916)General 601-4976 faxKahlifa account atin carfaxonline.com. to serve you.

OFFICE

NIADA HEADQUARTERS

FOR INFORMATION ON HOW TO BECOME A MEMBER PLEASE CONTACT 4 LALBRACHT@IADAC.ORG National Independent Automobile Dealers Association 315-2869 www.niada.com •(888) www.niada.tv

2521 Brown Blvd. • Arlington, TX 76006-5203 NATIONAL INDEPENDENT phone (817) 640-3838

AUTOMOBILE DEALERS ASSOCIATION

PRODUCTION MGR. Jacob Kerns • jacob@niada.com ART/PRODUCTION MGR. Christy Haynes the link which takes• christy@niada.com you directly PRINTING Nieman Printing

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DPENDENT AUTOMOBILE DEALERS ASSOCIATION SERVICES CORPORATION, 2521 BROWN BLVD., ARLINGTON, TX 76006-5203; PHONE (817) 640-3838. PERIODICALS POSTAGE PAID AT DALLAS, TX AND AT ADDITIONAL OFFICES. POSTMASTER: SEND ADDRESS CHANGES TO NIADA STATE PUBLICATIONS, 2521 BROWN BLVD., ARLINGTON, TX 76006-5203. THE STATEMENTS AND OPINIONS EXPRESSED HEREIN ARE THOSE OF THE INDIVIDUAL AUTHORS AND DO NOT NECESSARILY REPRESENT THE VIEWS OF THE WEST COAST DEALER, IADAC, OR THE NATIONAL INDEPENDENT AUTOMOBILE THE APPEARANCE OF ADVERTISERS, OR wDEALERS w wASSOCIATION. . i a d a cLIKEWISE, .or g THEIR IDENTIFICATION AS MEMBERS OF NIADA, DOES NOT CONSTITUTE AN ENDORSEMENT OF THE PRODUCTS OR SERVICES FEATURED. COPYRIGHT 2010 BY NIADA SERVICES, INC. ALL RIGHTS RESERVED.

top auctions fore-mailing theirand superior efforts. success.” know by ushave at Rankings the online event. tallest man-made structureto in is power, you the our remarketing basedSincerely, on a combination of sale results and Correction Form. After submittingare the getanswers@iadac.org. Will you attend or will you be theData world. The CFPB doesn’t power to minimize your form with the 17-digit vehicle identification too busy waiting for a customer? even ownand the building, which as a dealer. You have number requested research, a Carfax rep-liability Kari Sloan How big is the target on your the General opportunity to keep resentative will throughout thetheManager, Dealer Business Unityour T Hbelongs E W E S T to CO A S work T D Ewith A L Eyou RServices DECEMBER 2010 data verification process confirm Carfax back? You decide. Administration. Theand value of the issuetarget small by staying abreast

For advertising information contact: • WWW.NIADA.TV WWW.NIADA.COM CA_1210_O.indd 4 Troy Graff (800) 682-3837 or troy@niada.com. NIADA HEADQUARTERS:

has been resolved. In most cases, the entire process is completed in just a few hours.

2521 BROWN BLVD. • ARLINGTON, TX 76006-5203

STATE MAGAZINE MGR./SALES: Troy Graff • troy@niada.com 11/19/10 12:11 PM EDITOR: Mike Harbour • mharbour@niada.com ART/PRODUCTION MGR.: Christy Haynes • christy@niada.com PRINTING: Nieman Printing

The West Coast Dealer is published bi-monthly by the PRODUCTS & SERVICES PHONE (817) 640-3838 D E A L E R B O N D H E L P FOR ADVERTISING INFORMATION TROY GRAFF National Indpendent Automobile Dealers CONTACT: Association (800) 682-3837 TROY@NIADA.COM. Services Corporation, 2521 OR Brown Blvd., Arlington, Since 1993, Bond Source Insurance When it comes to motor vehicle bonds, all West Coast Dealer is published bi-monthly by the National IndTX 76006-5203; The phone (817) 640-3838. Periodicals Westlake Financial are Services has named service. All five to topped the sale rankings. Man-FOR INFORMATION ON HOW TO Agency is committed fast and friendly dealer principals not alike. At Bondtheir pendent Automobile Association Services Corporation, 2521 postage paid at Dallas, TX andDealers at additional offices. service. IADACranked members contact Insurance we They offer aare: com- bondheim topSource five auctions forAgency, Q3-2010. Nevada firstmay overall for the secondBECOME A MEMBER PLEASE CONTACT Brown Blvd., Arlington, TX 76006-5203; phone (817) 640-3838. POSTMASTER: Send address changes to NIADA Nancy R. Chapman for a bond quote at mon sense approach to underwriting. A Periodicals postage paid at Dallas, TX and at additional offices. POSTstraight quarter, ranking first for sale results andLALBRACHT@IADAC.ORG State Publications, 2521 Brown Blvd., Arlington, TX business’ net worth is the key along with the 888-855-0100 or nchapman@aec-mgmt.com. MASTER: Send address changes to NIADA State Publications, 2521 76006-5203. TheBrown statements and opinionsTheexpressed 1. Manheim Nevada third for service. Blvd., Arlington, TX 76006-5203. statements and opinions personal character of the business owner. (888) 315-2869 herein are those of the individual and do expressed herein are thoseauthors of the individual 2 Rawls Auto Auction authors and dothe not necessarily represent views of The West Coast not necessarily represent views of The the West 3. Norwalk Auto Auction Bill Walters, VP of remarketing, says overDealer, IADAC, the National Independent Automobile Dealers AsCoast Dealer, IADAC, or theor National Independent sociation. Likewise, the appearance of advertisers, or their identifica4. Brashers Salt Lake Auto Auction all auction performance has been improving: Automobile Dealers Association. Likewise, the tion as members of NIADA, does not constitute an endorsement of the PLATFORM PROVIDES ANOTHER DIRECT AVENUE FOR ACQUIRING USED INVENTORY appearance of advertisers, or their 5. ADESA Golden Gate “Development of these grading measures has products or services featured.identification Copyright 2010 by NIADA Services, 4 as members of NIADA, does not constitute an Inc. All rights reserved. helped us recognize strengths and address shortof Avis Budget wGroup Avis Budget Group recently “As partin of our ongoing endorsement of the products or services featured. T H E W E S T C O A S T D E A L E R OCTOBER/NOVEMBER w w . i a fleet dac.org MAGAZINE MGR./SALES Troy Graff • troy@niada.com Westlake Remarketing saw strong performance comings2010 our current network. The continued Copyright 2014 bySTATE NIADA Services, Inc. All rights EDITOR Mike Harbour • mharbour@niada.com services. introduced Avis Direct, a new strategic priority to drive in the recent quarter and is recognizing these support of these auction partners is integral to reserved. PRODUCTION MGR. Jacob Kerns • jacob@niada.com

“Westlake Remarketing Releases Q3 Top Auctions List”

Avis Budget Launches Direct-to-Dealer Platform

ART/PRODUCTION MGR. Christy Haynes • christy@niada.com

State Magazine MGR./Sales PRINTING Nieman Printing Troy Graff • troy@niada.com

Editors 4 Andy Friedlander • andy@niada.com Jacinda Timmerman T H• Ejacinda@niada.com WEST C OAST DEALER Magazine Layout & Graphic Artist Chantae Arrington • chantae@niada.com CA_1210_O.indd 4 Art Director Christy Haynes • christy@niada.com

Printing Nieman Printing

WEST COAST DEALER

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top auctions for their superior efforts. our remarketing success.” the used-car sales program that Rankingsefficiency throughout are based a combination of sale results and provides a on dedicated website organization, it is critical and gives dealers a means to that we provide alternative purchase from a wide array distribution channels to dispose DECEMBER 2010 www.iadac.or g of late-model, off-rental units of our vehicles. After all, from the Avis, Budget, Payless maximizing the financial return and Zipcar brands. There are from our vehicle sales lowers 11/19/10 also no enrollment or purchase our fleet costs,” said Michael fees. Schmidt, senior vice president

“We’re proud to introduce Avis Direct and give dealers a direct, easy, fast and feefree way to purchase our high-quality vehicles,” he added. 12:11 PM For more information visit www.avisdirect.com or call 1-855-289-2847.

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ASSOCIATION NEWS

IADAC Revisits San Diego SOUTHERN CALIFORNIA CONFERENCE TO BE HELD AT SAN DIEGO AUTOMOTIVE MUSEUM

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Several years ago IADAC’s annual convention was unable to be held in San Diego as planned due to area wildfires. This year we have selected the San Diego Automotive Museum as the host venue for our Southern California Conference. The agenda has a great variety of special guest speakers, including Senator Ben Hueso and attorneys Michael C. Rogers and Christian J. Scali. Compliance issues will be the center of attention as the auto industry has recently been under the microscope with many enforcement agencies. Guest speakers from Kelley Blue Book will also be on hand to discuss valuation trends with our dealer attendees. Additionally, the industry’s top-rated vendors will be on hand showcasing their newest products and services to streamline your operation and boost your bottom line. This is a great opportunity for dealers to test drive the products first hand. We’ve designed this event with the busy dealer in mind. It encompasses a single day, Friday, April 11, 2014. Don’t make excuses that you’re too busy to catch up on the latest threats to the industry. Set aside this half day to become informed and reduce the burden of liability you carry as an auto dealer. Registration opens at 11 am. Please see the dealer registration form on this page.

WEST COAST DEALER

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PRODUCTS

REGULATORY

MATTERS

NMVTIS Compliance an Ongoing Educational Effort THE IMPACT OF AB 1215: COMPLIANCE EFFORTS AND EDUCATION

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With nearly 7,000 used retail automobile dealers in California, ensuring that each dealership is in compliance with the requirement to provide a current NMVTIS report on each vehicle offered for sale is no small task for the state’s DMV. The Occupational Licensing Branch, tasked with compliance reviews, reports that for the most part dealers are doing their best to comply with AB 1215. “The California DMV conducts approximately 250-300 post licensing reviews each month to ensure compliance with a list of vehicle code and code of regulation requirements that govern vehicle sales to the public,” said Mary Garcia, chief of the OLB. “We’re using a three-step approach to enforcing licensee compliance and dealers respond well to our efforts.” First the OLB focuses on education. “We’ve added NMVTIS information to our pre-license curricula and other materials that we distribute to new applicants,” said Garcia. “And recently we added NMVTIS to our pre-licensing checklist for retail dealers.” For their part, approved NMVTIS providers such as Auto Data Direct have offered compliance information since before the legislation took effect. “Whether a dealer is a customer of ours or not, they can visit our website at www.add123.com and get information on the requirements and learn about tools available that ensure their compliance with the law,” said Jim Taylor, ADD’s president. The next step is to warn dealers when they are found to be non-compliant with AB 1215. “During the 2013 calendar year, OLB inspectors completed 2,106 post licensing inspections, and found 970 (46 percent) of those businesses in compliance with all requirements including NMVTIS. Of the remaining 1,136 non-compliant businesses, 565 (27 percent of those inspected) were warned for not being able to provide a NMVTIS report for a vehicle located within the display area,” said Garcia. According to the department, most dealers fix this issue before they forward a non-compliance report for enforcement. OLB inspectors completed 851 followup inspections during 2013, which were conducted within 30 days of issuing a corrective warning notice. Of those follow-ups, only 30 reports were forwarded to investigators to follow-up on WEST COAST DEALER

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B Y BETH WILLIAMS

continued non-compliant activity. The 30 referred to investigations last year were for several violations, mainly failing to post advisory statements, transfer title or the displaying vehicles for sale outside of the established place of business. Terry Degmetich, owner of I Deal Cars in Roseville, said dealers who want to be in business for the long haul should do the right thing. “Customers want to know the history of the vehicle,” said Degmetich. “It’s obviously up to the dealer but if you don’t run the report and disclose the information to the buyer, it will come back to haunt you.” Visalia-based Extreme Motorsports owner Travis Cooper agrees, saying it’s easy and inexpensive to comply with the law. Cooper uses provider Auto Data Direct to retrieve reports through his dealer management system. “It’s really easy and doesn’t cost much,” said Cooper. “It’s helpful as a sales tool. It relaxes the customer and builds confidence. It’s reassuring to them about the purchase they are making and the report is really very informative.” While California dealers have risen to the occasion in complying with AB 1215, there’s still more education that needs to take place. Garcia said there is still some confusion about the need to pull a current report for each car. “Dealers still seem to think they can use a prior NMVTIS report obtained during a wholesale transaction. We have recommended that auctions do not forward the NMVTIS report since it is no longer valid once the vehicle transfers from one dealer to the next,” Garcia said. She points to statute 11713.26(a), which requires the dealer to obtain a NMVTIS vehicle history report directly from a NMVTIS data provider for the vehicle identification number of the vehicle offered for sale. “The only exemption to this requirement is for a recreational vehicle, motorcycle or offhighway vehicle.” California dealers who are still looking for a vehicle history provider can visit http://www.vehiclehistory.gov/nmvtis_ vehiclehistory.html, which will take them to the Department of Justice website listing all of the approved NMVTIS vendors. EDITOR’S NOTE: THIS IS THE SECOND OF A TWO-PART SERIES FOCUSED ON THE IMPACT OF AB 1215 ON DEALERS AND CONSUMERS IN CALIFORNIA. BOTH PARTS PROVIDED BY BETH WILLIAMS OF AUTO DATA DIRECT, IADAC SUPPORTER AND NMVTIS REPORT PROVIDER. FOR MORE INFORMATION, VISIT ADD123.COM.

Black Book Introduces New Mobile Application APP TO HELP SPEED PROFITABLE DECISIONS Black Book recently announced Black Book Digital, the company’s second-generation mobile application. According to Black Book, the application offers a new design with simple-to-use features to help automotive professionals make smarter decisions. Built from the ground up, Black Book Digital offers accurate and reliable vehicle data and is built to accommodate today’s speed of business. Black Book Digital offers users quick access to more data on specific vehicles than ever before. The new application delivers a 360-degree valuation perspective, with information layers that offer vehicle valuation data and additional modules that include Carfax and AutoCheck, trends, vehicle specifications, photos, Demand Index and complete market report information. Users are able to gain access to valuation data offline, ensuring more profitable decisions in split-second environments. They can also leverage Black Book Digital’s Q-List, which helps automotive professionals manage inventory and share information with others in their decision channel, no matter their location. Mike Williams, vice president of direct sales and mobile for Black Book, believes 2014 represents a turning point for mobile within the automotive industry. “Mobile usage among automotive professionals is expected to continuously grow in the coming years, and we now have devices that offer cutting-edge technology and features. Black Book Digital is designed to enable and empower these professionals so they can think faster, think smarter, and, ultimately, make more profitable decisions whether they’re in the field, at an auction or on the sales lot.” For more information and directions on downloading the application to an iOS or Android mobile device, visit www.BlackBookAuto.com/think. W W W. I A D A C . O R G

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ASSOCIATION NEWS

Santa Rosa Chapter Meeting at Cattleman’s Restaurant PRESIDENT GIVES UPDATE ON NEW LAWS AND REGULATIONS

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On a rainy Wednesday evening, Santa Rosa Chapter president Jerry Khan assembled the troops for an update on new laws and regulations for 2014. Jerry provided an overview of the FTC requirements for buyer’s guides and tips and precautions in many other areas often taken for granted. Discussion was brisk and the attendees were appreciative of the information provided. The escalation of lawsuits has alerted dealers to pay attention to the details, which will often be the focus of an unwarranted suit. Jody Ralphs with AVRS offered insight into the future as DMV is concerned with electronic titling. Many benefits are available to dealers who choose to participate in DMV’s business partner program. Gina Motto-Ros represented Zurich Insurance and Jeff Nyholm was the face for AUL Corp. Krissy Rudolph,

representing Rudolph, Inc., was also on hand. Special guest attendees were past presidents Mike Macaulay and John Hiatt. John has seen more than his share of changes in the industry, having been a dealer for over 60 years. John has served as the president for NIADA and has been a strong voice and supporter of the industry. Jerry Khan really is an exceptional individual. He dedicates personal time to share important issues with his local dealers. At one time IADAC had many active chapters. With the advent of self-serve gas stations, cell phones and big box warehouses, our lives have changed dramatically. People don’t take the time to gather face-to-face anymore. What you get from one of his meetings is his personal attention to your needs and the pleasure of meeting others just like you.

IADAC EXECUTIVE DIRECTOR LARRY LASKOWSKI AND SANTA ROSA CHAPTER PRESIDENT JERRY KHAN

PRODUCTS

NextGear Capital Partners with AuctionACCESS

ASSOCIATION NEWS

Membership That Pays You Back! MESSAGE FROM THE PRESIDENT - BY ROCCO DE LAPA, PRESIDENT IADAC is dedicated to partnering with the best automotive products and service providers in today’s marketplace. Used car dealers are always on the lookout for products and services that can add to the bottom line. “Knowledge is power” and thanks to IADAC we will be holding our spring Southern California Convention in beautiful San Diego at the San Diego Automotive Museum on April 11, 2014, which is right around the corner. Check our website (WWW.IADAC.ORG) for details and registration forms. I urge all of you to attend this event and learn about the latest WEST COAST DEALER

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compliance issues and industry updates from industry experts. Just remember, knowledge is power. Gain some power, which is priceless, at a very small price (membership in IADAC). I, along with my distinguished colleague and vice-president Mehdi Chitgari of Classic Chariots, put forth a challenge to all our fellow IADAC members to bring a fellow dealer to the convention. Just one. That’s all we’re asking for, though you may bring more if you like. I want to thank everyone for the outpouring of support you have offered me as your new president and I’m looking forward to seeing all the new faces of IADAC in Southern

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California at our convention. Let’s get to know each other and make this a memorable event. After all, that’s what IADAC is all about - helping each other. Your continued support of IADAC is crucial. What we do for the dealers happens only with support and strong membership numbers. Please bring a fellow dealer and let them see for themselves why they should be a part of IADAC and encourage them to join us to keep our industry healthy and strong. Once again I would like to thank the IADAC executive committee for all their guidance and expertise in helping me as your humble president. To all… “Semper Fi” (Always Faithful).

INTEGRATION TO IMPROVE FLOOR PLAN TRANSACTIONS NextGear Capital has announced a new floor planning integration with AuctionACCESS. The announcement comes on the heels of a credit line integration between the two companies. The newest partnership allows auctions to quickly and efficiently originate floor plan transactions for their dealer customers.
 With more than 240 auctions currently using the AuctionACCESS system, dealers will benefit with simplified and quicker access to auction lanes. In addition, auctions will have access to the dealer’s credit availability, streamlining the buying process on their end and helping dealers to floor their vehicles more quickly.

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National Independent Automobile Dealers Association

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NEW

MEMBER

PROFILE

Depaz Auto Sales

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A NEW MEMBER WHO SPECIALIZES IN DETAIL David Depav, owner of Depaz Auto Sales and Detailing, opened his business three years ago. David has had many jobs in the auto industry, mainly in detailing. He recently joined IADAC after realizing the many benefits of membership. David’s wife Melissa helps out in the office, keeping accounts, computers and payroll straight. The Depavs have four children, for which they are trying to build a future. David bought his first car 25 years ago from John Hiatt of Hiatt Auto Sales. John Hiatt is a past president of both IADAC and NIADA. David was impressed that anyone would trust a 15-year-old to take a late model car on payments. From that point on, David let this example help guide his life. He used John Hiatt’s trust as a foundation to start his dealership. When a hard decision was at hand, David considered how Mr. Hiatt would do it. David now has a thriving business in both auto sales and detailing.

AUCTION

INDUSTRY

Noteworthy Events LAURA SEEK SELECTED AS GENERAL MANAGER OF ADESA SACRAMENTO

NEWS

North Bay Auto Auction Helps Scholarship Fund in a Big Way PREMIUM PARKING AUCTIONED TO RAISE FUNDS Annually at the IADAC fall convention, money is raised to help replenish the Vic Snyder Memorial Scholarship Fund. This fund provides help for the children and grandchildren of IADAC members as they prepare to enter college. This past year, scholarship trustee and past IADAC president Don Head awarded 25 scholarships of $1000 each. One of the creative ways to help supplement the fund was the brainchild of David Aahl, general manager at North Bay Auto Auction in Fairfield. Parking is always an issue at North Bay on sale WEST COAST DEALER

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NEWS

days, so David offered premium parking spots directly in front of his facility to the highest bidders. Four spots were available and David auctioned two of them on a sale day before the convention and the other two at the convention. The premium spots brought $700 each, a total of $2800 for the fund. High bidders have their spots secured with signs displaying their names. Thank you David for your contribution to the scholarship fund!

Laura Seek has recently been selected as general manager of ADESA Sacramento Auto Auction. Laura was promoted February 10, 2014, as the permanent GM. Laura joined ADESA Sacramento in 1997 checking in cars. She moved up quickly through the ranks and became the dealer sales and service manager eight and a half years ago. She was an instant success as an interface between dealers, institutional consigners and ADESA management. Laura can always be seen at local and state level IADAC meetings. General Manager Seek plans to continue her work in customer service and employee welfare. Seek attributes ADESA Sacramento’s continuing success to its customers and employees. The new title also carries the responsibility of interacting with ADESA National to acquire more fleet and lease units. ADESA Sacramento Auto Auction plans their 17th Anniversary Sale in June 2014. According to GM Laura Seek, “It is NOT to be missed! Fun, prizes, food and (of course) cars and trucks.” W W W. I A D A C . O R G

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COMPLIANCE

MATTERS

Two Words - Federal Felony FALSIFYING CREDIT DOCUMENTS IS A FEDERAL FELONY - BY THOMAS B. HUDSON I suspect that I could write this article every month. And maybe I should. The word just doesn’t seem to get out. Here’s the short version of the article: Falsifying credit documents is a federal felony. Here’s the longer version. There is a lot of information hiding in the two words “federal felony.” First, because we are talking about a federal crime, we aren’t dealing with local law enforcement types who may be so overloaded with work or so underfunded that they cannot or will not take the time to prosecute a nonviolent financial fraud against a business. We’re talking about

various financial institutions to obtain auto financing. One of the classic ways these schemes come to light is to have an insider blow the whistle on the bad guys. That’s what happened here. A confidential informant who previously worked at the dealership came to the FBI with documents and tape recordings regarding the fraud. According to an affidavit, one recording is a discussion between the sales manager and two other employees about what information was needed in order to get a specific customer approved for auto financing. The informant also gave the FBI

the FBI. That’s the Federal Bureau of Investigation. The feds. Think Eliot Ness and his friends. And there’s that second word - felony. A felony means the real possibility of jail time. No fine. No slap on the wrist. No community service. Orange jumpsuit jail time. Ruin your life jail time. According to a recent news report, a former long-time sales manager at an Alabama dealership has been indicted by a federal grand jury for bank fraud. The investigation that resulted in the indictment was described as “related to an FBI investigation into falsifying car loan documents.” The indictment stated that the sales manager had devised a scheme to defraud Capital One Auto Finance “to obtain moneys, funds, credits, assets, securities, and other property owned by and under the custody and control of Capital One, National Association, by means of materially false and fraudulent pretenses, representations, and promises.” Cut through the legalese and the translation is, “You tried to screw over a federally chartered financial institution.” The fact that Capital One has a federal charter makes this a federal crime. The indictment evidently arose from a federal grand jury investigation involving the dealership, which had been under investigation for fraudulently falsifying customers’ financing documents and submitting fraudulent information to

documents that he claimed showed the sales manager had changed two customers’ monthly incomes in order for them to be able to obtain credit with a financial institution. So the sales manager is left fighting a federal indictment. The dealership is left with some serious reputational damage and will likely face a demand to buy back affected credit deals. The dealership, though cooperating with the investigation, probably has incurred significant legal fees in connection with the matter. That’s a bad day all around for the dealership. The report makes me wonder about what the dealership’s records will show. Do you suppose the dealership’s training materials for its sales and F&I folks cover this topic and contain a discussion of the consequences of this sort of misbehavior? Is someone at the dealership charged with auditing deals to make sure that someone isn’t writing fiction in the back room? Do the dealership’s policies and procedures encourage internal whistleblowing? Do those same policies and procedures call for careful scrutiny of people hired to handle the F&I process? And those are just the questions that occur to me this month. I’ll probably have more when I write this same article next month.

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COPYRIGHT © 2014 COUNSELORLIBRARY.COM LLC. ALL RIGHTS RESERVED. THIS ARTICLE APPEARED IN SPOT DELIVERY®. REPRINTED WITH EXPRESS PERMISSION FROM COUNSELORLIBRARY.COM.

PRODUCTS

& SERVICES

NUMBER OF SUBCOMPACTS UNDER $10K AT AUCTION EXPECTED TO GROW SEGMENT BECOMING MORE ATTRACTIVE FROM A DOLLAR STANDPOINT Tax season normally coincides with high prices at auction, and this year is no exception. According to the latest Blue Book Market Report from KBB.com, used-car values started the year 1 percent higher than at the beginning of the calendar year in 2013. That said, some of the lowest-priced models in the lanes might also be the ones getting more attention from shoppers. One- to 3-year-old vehicles started the year off with an average auction value of $17,876 in January. And overall, prices are strong, but KBB also pointed out a group of less pricy vehicles that may be getting increased attention from dealers in the lanes, as well as consumers on the lots. The report pointed out that with demand from consumers for cheaper and more fuelefficient cars, the subcompact car segment is “becoming more attractive from a dollar standpoint.” MAZDA MAZDA2

KBB offered the following example: In the 2013 model-year lineup, there are four vehicles with auction values under $10,000: the Fiat 500, Mazda Mazda2, Chevrolet Spark and the Smart Fortwo. And with model-year 2012 vehicles now two years old, the list of vehicles in the sub-$10,000 range jumped to nine vehicles, ranging from $9,700 down to $7,625, according to KBB data. “As long as there is strong demand for lower cost and value-focused vehicles, this group of 1- to 2-year-old vehicles with auction values that fall in the sub-$10,000 range will only continue to grow,” said KBB’s Alec Gutierrez. W W W. I A D A C . O R G

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INDUSTRY LEGAL

MATTERS

California’s Dirty Little Secret UNSCRUPULOUS ATTORNEYS LICENSED TO PRACTICE LAW

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I’m a licensed criminal. For years I’ve been extorting money from honest people who did nothing wrong. Because I can file a suit against you faster than you can blink I will always keep you on the defensive. And I might not file just one suit. How many suits can you handle before I make you crazy? You won’t sue me because I will wear you down. Your attorney costs will bankrupt you. I don’t have to hide because of the due process I am entitled to, and that I demand, protects me. I successfully coerce those I sue into quick settlements, and every settlement I win means I can file more suits. Will I be punished? Maybe. Possibly someday. But maybe not. Until then, I will continue to practice law in California. I am one of the few unscrupulous attorneys licensed to practice law in California. Fact: The California State Bar is not a government agency. Does that surprise you? It is a group made up of attorneys. In a perfect world, that would not be a problem because there would not be unscrupulous attorneys. But in that world we wouldn’t need law enforcement either. Because there are “bad apples” everywhere MARKET

you look, we do need protection from those who seek to harm us. If a person is accused of a crime against another, he is normally taken into custody and charges filed against him. So why is it that an attorney can be accused of a crime and the process is different? When you file a complaint with the state bar against an attorney, the matter is given consideration and investigated, at glacial speed. The state bar seems to be underfunded when it comes to investigations. Meanwhile the unscrupulous attorney continues his practice and unethical behavior. That the California State Bar is not under government regulation shouldn’t surprise anyone. Most of our legislators are attorneys themselves. So why would our legislators bring additional regulation and scrutiny upon themselves and their cronies? Maybe they are too busy protecting you by creating more regulation in the industry you work in year after year. This “holier than thou” attitude should have the people of California up in arms at the Capitol demanding for government intervention at the state bar. Maybe by making examples of the worst of the unscrupulous attorneys we can bring about change.

NEWS

TOYOTA RECALLS TRUCKS

BRAKE SYSTEMS COULD BECOME INOPERATIVE Toyota is recalling 261,114 model year 2012 and 2013 Toyota Tacoma and Lexus RX350 vehicles and certain model year 2012 Toyota Rav4 vehicles. In the affected vehicles, the brake system contains a brake actuator that adjusts the fluid pressure of each wheel cylinder. An electrical component within the actuator may experience an increased resistance resulting in the illumination of various warning lights, including those for the vehicle stability control (VSC) system, antilock brake system (ABS) and traction control system. If this occurs, these systems could become inoperative, reducing the directional control assistance, increasing the risk of a crash. Toyota will notify owners and Toyota and Lexus dealers will update the software for the Skid Control electronic control unit free of charge.

WATCH

KBB Research Shows Brand Loyalty Tied to U.S. Regions SHOPPERS MAY PREFER MANUFACTURERS WITH LOCAL TIES Why are some shoppers dead set on a particular brand, while others can be swayed by a variety of factors including price, fuel efficiency and looks? According to Kelley Blue Book, it might have something to do with where these shoppers call home. KBB announced results of research that focused on the most and least popular auto brands by U.S. region and, overall, statistics show out of all regions, southerners are the least influenced by brand when shopping for a car. “Perhaps manufacturers have the ability to conquest market share in the South since these shoppers are not as loyal to any specific automaker,” KBB officials asserted. The southern trend is illustrated by the relatively small 17 percent preference for Infiniti WEST COAST DEALER

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over other brands. This is compared to stats such as the following: • Midwest shoppers are 64 percent more likely to consider Chrysler than shoppers from other regions. • Northeast shoppers are 56 percent more likely to consider Subaru than shoppers from other regions. • Western shoppers are 85 percent more likely to consider Tesla than shoppers from other regions. For some of these more brandoriented regions, KBB.com found the top brands most shopped in specific U.S. regions are often headquartered or have assembly plants in that area, suggesting shoppers prefer manufacturers with local ties to their region. “It seems what is popular in one region is overlooked in

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another,” said Arthur Henry, analyst at Kelley Blue Book. “Westerners prefer fuelefficient brands with style, such as Tesla and Scion, but those same brands are shunned in the South and Northeast,” he added. “Those living in the South gravitate toward brands that are manufactured in the same region. Shoppers from the Midwest also have an affinity for brands headquartered or produced in their own backyard.” KBB also reported regional tendencies towards vehicle segment. Out West, KBB found that new-car shoppers are 66 percent more likely to consider a hybrid car, while Midwest car shoppers are 42 percent more likely to consider a full-size crossover. Southern shoppers are 41

percent more likely to consider a full-size sport utility, followed by the Northeast which is 20 percent more likely to shop for a compact crossover. “Based on actual shopping data on KBB.com, hybrids are synonymous with the West, as SUVs are with the South,” said Henry. “Seeing the key drivers motivating shoppers are topography, metropolitan density and government regulations, it is not surprising compact crossovers are preferred over full-size SUVs in the Northeast. “This shows when brand choice is layered on top of segment preferences, manufacturers like Subaru rise to the top with its four-wheel drive options, along with Volvo and its high safety ratings, which help both brands drive interest in this region.” W W W. I A D A C . O R G

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LEGAL

UPDATE

The CARLAWYER©

OUR MONTHLY COLLECTION OF SELECTED LEGISLATIVE AND REGULATORY HIGHLIGHTS - BY THOMAS B. HUDSON AND NICOLE FRUSH MUNRO Well, we hope you enjoyed the Olympics. We’re back with our collection of selected legislative and regulatory highlights. We also recap of some of the many auto sale and financing lawsuits we follow each month. Remember – what we report here does not capture every recent development. We select those we think might be particularly important or interesting to dealers. We include items from other states. Why? We want you to be able to see new legal developments and trends. Also, another state’s laws might be a lot like your state’s laws. If attorneys general or plaintiffs’ lawyers are pursuing particular types of claims in other states, those claims might soon appear in your state. Note that this column does not offer legal advice. Always check with your own lawyer to learn how what we report might apply to you, or if you have any questions.

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This Month’s CARLAWYER© Compliance Tip Take a quick peek at the item below dealing with “Operation Steer Clear,” and ask yourself how careful you are in reviewing your website, print, broadcast and other ads to make sure you don’t run afoul of state and federal advertising guidelines. We aren’t crying “wolf” here – the wolf has actually arrived. FEDERAL LAW Buy Here-Pay Here dealer charged with illegal discrimination: On January 14, the U.S. Department of Justice and the North Carolina Department of Justice filed a lawsuit alleging that Auto Fare Inc., Southeastern Auto Corp., and Zuhdi A. Saadeh – the owners and operators of two BHPH dealerships in Charlotte, N.C. – violated the Equal Credit Opportunity Act by intentionally targeting AfricanAmerican customers for the extension and servicing of installment sale contracts on unfair and predatory terms. North Carolina also alleged violations of the state’s Unfair and Deceptive Trade Practices Act. The complaint alleges that the defendants engaged in a pattern or practice of “reverse redlining” by targeting African-Americans WEST COAST DEALER

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for installment sale contracts with inflated sales prices, down payments and interest rates without meaningfully assessing the customers’ credit. The complaint also alleges that Saadeh, who operates Auto Fare and United Car Sales, used racial slurs to refer to AfricanAmericans and made statements expressing his views that African-American customers have fewer credit options, making them more likely to accept the predatory terms of the contracts offered by the defendants. The defendants’ practices allegedly resulted in default and repossession rates that are higher than other subprime used car dealers. In addition, the complaint alleges that the defendants failed to provide customers with a reasonable notice of repossession, repossessed vehicles of customers not in default, failed to give customers refunds they were due, improperly seized customers’ personal property in repossessed vehicles and used GPS devices to locate and repossess vehicles without telling customers that the devices had been installed. Operation Steer Clear: On January 9, the Federal Trade Commission announced that nine vehicle dealers agreed to settle deceptive advertising charges and that the agency is taking action against a tenth dealer in “Operation Steer Clear,” a nationwide enforcement sweep focusing on the sale, financing and leasing of motor vehicles. Dealers settling with the FTC are from California, Georgia, Illinois, North Carolina, Michigan and Texas. The remaining action involves a Massachusetts dealer. The FTC claimed that the dealers made misrepresentations in print, Internet and video advertisements that violated the FTC act, falsely leading consumers to believe they could buy vehicles for low prices, finance vehicles with low monthly payments and/or make no upfront payment to lease vehicles. One dealer misrepresented that consumers had won prizes they could collect at the dealership. Allegations varied by dealer, but included charges that: (1) the dealers deceptively advertised that consumers could buy vehicles at specific low prices when, in fact, the price was higher; (2) consumers could pay nothing up front to lease a vehicle when substantial charges were involved; (3) cars could be bought for low monthly payments when the advertised payments were “teasers” and later actual payment amounts were higher; (4) consumers had won sweepstakes prizes when, in fact, they had not; (5) consumers could buy cars at a specific low monthly payment when the consumers would face a large final balloon payment and (6) leases were misrepresented as sale transactions.

The advertisements also allegedly violated the Consumer Leasing Act and Regulation M by failing to disclose certain lease-related terms. One dealer’s advertisements allegedly violated the Truth in Lending Act and Regulation Z by failing to disclose certain credit-related terms. Car location privacy: In December 2013, the Government Accountability Office issued a report to the U.S. Senate subcommittee on privacy, technology and the law that examines the privacy implications of consumers accessing location-based services in their cars. The GAO selected 10 companies that provide incar location-based services – including auto manufacturers, portable navigation device companies and developers of map and navigation applications for mobile devices – and examined the companies’ collection, use and sharing of consumers’ location data. The report also addressed how these companies’ policies and reported practices align with industry-recommended privacy practices. The GAO found that all 10 selected companies have taken steps consistent with some, but not all, industryrecommended privacy practices. It also found that the companies’ privacy practices were, in certain instances, unclear, which could make it difficult for consumers to understand the privacy risks that may exist. On January 14, Senator Al Franken (D-Minn.), chairman of the subcommittee on privacy, technology and the law, sent a letter to Ford Motor Company requesting information on Ford’s consumer data collection practices in connection with its use of in-car navigation systems and devices. LITIGATION FTC’s regulations banning binding arbitration in written warranties don’t apply to breach of warranty claim against lessor: A couple entered into a rental-purchase contract for a bed and mattress. The contract contained a binding arbitration agreement. The rental company kept the manufacturer’s warranty to the bed, but provided its own warranty to repair, replace and service the bed during the lease term. After the couple learned that the bed and mattress contained bed bugs, they sued, alleging breach of warranty in violation of the Magnuson-Moss Warranty Act. The rental company moved to compel arbitration and the couple argued that their dispute could not be submitted to binding arbitration because FTC regulations prohibited the rental company from requiring binding arbitration as part of a consumer warranty. CONTINUED ON PAGE 22 W W W. I A D A C . O R G

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The trial court granted the rental company’s motion, and the U.S. Court of Appeals for the fourth circuit affirmed. The appellate court noted that the couple did not sue on the manufacturer’s warranty since the rental company never assigned it to them. Instead, the couple sued based on the rental company’s warranty. The FTC regulations limit a supplier’s ability to require binding arbitration of written warranties in sales agreements. Because the rental company’s warranty was included in a lease agreement and not a sales agreement, the appellate court concluded that the couple failed to establish the existence of a written warranty under the FTC regulations. Therefore, the arbitration agreement was enforceable. See Seney v. Rent-A-Center, Inc., 2013 U.S. App. LEXIS 24615 (4th Cir. (D. Md.) December 11, 2013). MMWA requires disclosure of arbitration agreement in warranty: Truck buyers bought an allegedly defective truck and sued the truck’s manufacturer for violating the Magnuson-Moss Warranty Act. The manufacturer moved to compel arbitration based on an arbitration agreement the buyers signed in connection with the truck purchase. The federal trial court denied the motion. The court noted that the MMWA requires disclosure of information regarding “any informal dispute settlement procedure” in the warranty itself. Interpreting that provision, the 11th Circuit has held that the “failure to disclose in the warranty a term or clause requiring the [plaintiffs] to utilize an informal dispute resolution mechanism runs afoul of the disclosure requirements of the [MMWA].” Because the arbitration agreement was not contained in the warranty, the court concluded that the arbitration agreement could not be enforced by the manufacturer. See Porter v. Chrysler Group LLC, 2013 U.S. Dist. LEXIS 178173 (M.D. Fla. December 19, 2013). Failure to transfer title to car buyer violated automatic stay: After a car buyer bought a car, the dealership refused to give him the title. When the buyer later filed for bankruptcy, he sued the dealership, alleging that it willfully violated the automatic stay by failing to give him the title. The bankruptcy court granted judgment for the buyer. The court noted that the bankruptcy code imposes an automatic stay upon almost any action by a creditor designed to collect a debt, including exercising control over the debtor’s property. The court found that because the dealership refused to give the buyer the title, the buyer was unable to title the car in his name or obtain insurance. The court concluded that by holding the title, the dealership was exercising control over the car for collection purposes, and because the dealership was aware of the bankruptcy filing, it willfully violated the automatic WEST COAST DEALER

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stay. See In re Parker (Parker v. Smith), 2014 Bankr. LEXIS 58 (Bankr. S.D. Miss. January 6, 2014). Garagekeeper’s lien on vehicle for repairs not valid against lessor absent lessor’s consent: When a hailstorm damaged a leased vehicle, the lessee’s daughter authorized repairs to the car. After the repair company completed the repairs, no one picked up the car or paid the bill. The repair company served a garagekeeper’s lien on the lessee, his daughter and the lessor. The lessor sued for a declaration that the lien was null and void. The trial court found for the lessor, and the Supreme Court of New York, appellate division, affirmed. The appellate court noted that a garage owner is entitled to a lien if, among other things, he establishes that the repairs were performed with the vehicle owner’s consent. In this case, the appellate court found that the repair company did not provide the repair services and storage with the lessor’s consent. The appellate court noted that a lessee may be considered an owner under the garagekeeper’s lien law if he or she has apparent authority, but the court found that the neither the lessee nor his daughter had apparent authority to consent to repairs on the lessor’s behalf. See Matter of Daimler Trust and Daimler Title Company v. SG Autobody LLC, 2013 N.Y. App. Div. LEXIS 8266 (N.Y. App. Div. December 12, 2013). Stand-alone arbitration agreement unenforceable under Michigan’s single-document rule: A car buyer filed a class action against the dealership where she bought her car for violating state and federal law by failing to accurately disclose the finance charge in connection with her purchase. The dealership moved to dismiss, claiming that the buyer waived her right to a jury trial and her right to participate in a class action under the terms of an arbitration agreement she entered into with the dealership. The trial court denied the motion. The court found that the stand-alone arbitration agreement violated the Michigan Motor Vehicle Sales Finance Act’s single-document rule, which requires a retail installment sales contract to contain all the agreements between the buyer and seller relating to the installment sale of a vehicle, because the buyer’s claims implicated the retail installment sales contract. See Larkin v. New Century Auto Sales Inc., 2014 U.S. Dist. LEXIS 350 (E.D. Mich. January 3, 2014). So there’s this month’s roundup! Stay legal, and we’ll see you next month. TOM (THUDSON@HUDCO.COM) AND NIKKI (NMUNRO@HUDCO. COM) ARE PARTNERS IN THE LAW FIRM OF HUDSON COOK, LLC. TOM HAS WRITTEN SEVERAL BOOKS, AVAILABLE AT WWW. COUNSELORLIBRARY.COM. TOM IS ALSO THE PUBLISHER OF SPOT DELIVERY, A MONTHLY LEGAL NEWSLETTER FOR AUTO DEALERS, AND THE EDITOR IN CHIEF OF CARLAW, A MONTHLY REPORT OF LEGAL DEVELOPMENTS FOR THE AUTO FINANCE AND LEASING INDUSTRY. NIKKI IS A CONTRIBUTING AUTHOR TO THE F&I LEGAL DESK BOOK AND FREQUENTLY WRITES FOR SPOT DELIVERY. SPOT DELIVERY, CARLAW AND THE BOOKS ARE PRODUCED BY COUNSELORLIBRARY.COM LLC. FOR INFORMATION, VISIT WWW. COUNSELORLIBRARY.COM. COPYRIGHT COUNSELORLIBRARY.COM 2014, ALL RIGHTS RESERVED. SINGLE PUBLICATION RIGHTS ONLY, TO THE ASSOCIATION. (4/14) HC# 4832-5305-2952.

LEGAL

NEWS

NHTSA Requires Labels for Recall Mailings NEW LABEL DESIGNED TO IMPROVE RECALL NOTIFICATION FOR CONSUMERS The U.S. Department of Transportation’s National Highway Traffic Safety Administration announced that starting Feb. 18, all manufacturers must use a distinctive label on required mailings that notify owners of recalled vehicles or equipment. The use of the new label is strictly limited to only the recalling manufacturers. NHTSA says this measure is designed to protect consumers from misleading sales and marketing materials that mimic, in their wording and presentation, legitimate safety recall alerts from manufacturers that can lead owners to purchase costly products and services that have no connection to a legitimate safety recall. NHTSA will monitor for inappropriate materials and will work closely with state and other federal authorities, including the FTC, to address enforcement issues. The new label on safety recall notices is one of many new tools designed to improve recall notification for consumers. NHTSA also launched an app for Android devices that will provide users free access to key safety information, including recalls and safety performance. The new Android SaferCar app, which joins the iOS app for the iPhone, iPad and iPod Touch released last year, helps consumers find recall information and up-to-date vehicle safety information, search the agency’s 5-Star safety ratings for vehicles by make and model, and subscribe to automatic notices about vehicle recalls, among other features. The app makes it simple to submit complaints to NHTSA regarding possible safety problems with a particular vehicle. App users receive news and information from NHTSA on tire and child seat recalls as well. W W W. I A D A C . O R G

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FEATURE

STORY

COMPLIANCE OVERDRIVE

Flat Fees vs. Discretionary Compensation for Dealers THE DEBATE CONTINUES BY CHIP ZYVOLOSKI

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In March 2013, the Consumer Financial Protection Bureau published guidance on compliance with fair lending requirements for indirect auto lending. Since then the issue has grown to become the industry’s most significant compliance issue in quite some time. In December, the CFPB entered into a consent order with a large lender involving millions of dollars in damages and penalties. Others could follow. Be prepared, because this issue may also result in lenders changing how they pay dealers for retail contracts. The CFPB’s focus is on how lenders compensate dealers when they buy completed retail contracts. After analyzing information about a proposed credit sale, an indirect auto lender will offer to buy the completed retail contract if it has a specified (minimum) contract interest rate. Sometimes the minimum rate is referred to as the “wholesale rate” or the “buy rate.” Some lenders pay dealers a share of the increased interest revenues if the completed contract interest rate is more than the buy rate. This practice is often referred to as “dealer rate markup,” “dealer reserve” or “dealer participation.” The CFPB’s concern is that dealer discretion to increase interest rates may result in some buyers paying more than others – which is a violation of the law if the pricing disparities affect buyers of one race, gender or other protected group more than others. To be clear, there is no debate about the evils of intentional credit discrimination. Every reputable auto dealer and lender condemns discrimination against buyers on the basis of race, ethnicity, gender and all other classes protected by the law. Intentional credit discrimination is against the law, is bad policy and has no place in this industry. Everyone agrees. The current issue is more subtle because it involves unintentional discrimination, referred to as “disparate impact.” A dealer and lender could implement what they believe to be discrimination-free business policies and practices only to find that they result in statistical anomalies showing buyers of a certain race or gender are paying more for credit. Unless the variations can be justified by legitimate business needs, they are violations of law because they have a discriminatory impact on certain protected buyers. It doesn’t require the dealer or lender to have discriminatory intent. It only WEST COAST DEALER

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matters that their actions had a disparate impact. The CFPB’s guidance last March and its actions since then have all focused on dealer discretion to increase lender’s buy rate and the risk that such discretion may lead to a disparate impact on protected buyers. If a dealer doesn’t have a set of rules for how and when it marks up the buy rate, then how can it ensure that buyers with similar credit profiles are being treated equally? For example, if a dealer’s only credit pricing rule is to charge each customer as much as he/she will bear, then it is not trying to provide the same credit pricing to buyers with similar credit profiles and it is likely violating the fair lending requirements.

u W  e heard from

many lenders who spent a good part of 2013 trying to figure out how to ensure compliance without negatively affecting their ability to purchase dealer contracts.

We heard from many lenders who spent a good part of 2013 trying to figure out how to ensure compliance without negatively affecting their ability to purchase dealer contracts. For better or worse, the CFPB’s guidance didn’t require a magic bullet solution. If it had, lenders might have all quickly adopted changes knowing that all their competitors would do the same. Instead, a lender that changes its dealer

compensation method might reduce compliance risk but then takes the risk that its new compensation method would not be attractive to dealers. A bold lender could lose business if dealers negatively react to the change. These factors may have led to some hesitation by lenders on the issue. Any hesitation probably ended in December when the CFPB entered into a consent order with a large auto lender. In the consent order, the CFPB alleges that the lender’s discretionary dealer rate markup practices resulted in a disparate impact on certain buyers in violation of the Equal Credit Opportunity Act. The CFPB’s allegations were based on its analysis of the lender’s auto loan portfolio. The CFPB ordered the lender to institute ECOA program changes, pay $80 million to certain buyers as damages and pay the CFPB $18 million in penalties. Now there is more pressure than ever for lenders and dealers to take action to address the CFPB’s concerns. The CFPB’s March 2013 guidance offered two alternative courses of action. They aren’t perfect solutions, but they provide a clear dichotomy of choice. 1. Lender uses a discretionary dealer participation compensation method. For example, a lender might continue to allow dealers the discretion to mark up the buy rate and compensate dealers based on the amount of the markup. These methods require lenders to: • Impose controls on dealer markup and compensation policies. For example, controls could include a cap on the amount of markups. Other controls could be to allow dealers to use a set rate markup allowing variation only under certain authorized circumstances. The NADA recently recommended that its member dealers implement rate caps and allow dealer discretion to decrease the markup only for certain legitimate business needs. It recommended that dealers document the business reason(s) whenever they discount the markup. • Review and analyze their loans regularly at the portfolio level and at the individual dealer level. Depending on the size of the portfolio, lenders may need to analyze it as often as quarterly. • Address any unexplained pricing disparities on prohibited bases. This would require finding and correcting the root cause of the disparities. CONTINUED ON NEXT PAGE

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If certain dealers are creating the problems, then a lender may need to restrict pricing for those dealers or stop buying their contracts. Addressing prohibited disparities also means returning money to affected buyers or providing them redress in some other way. 2. Lender compensates dealers using a formula that does not give dealer discretion. For example: • Lender could pay a flat fee so dealer is compensated the same amount for every contract sold to lender regardless of the contract interest rate. Since dealer isn’t compensated for increasing the buy rate, it has little reason to do so. Actually, the presumption is that lender would not allow dealer to change lender’s buy rate because that would involve dealer pricing discretion. (A variation might be that dealer marks up every transaction by the same amount without the discretion to increase or decrease the marked up amount.) • Lender could pay a flat fee to dealer on every transaction plus a percentage based on the amount financed. This would provide more compensation to dealer for larger credit transactions. Again, the presumption is that dealer would not be allowed to change the lender’s buy rate. Solutions 1 and 2 both require lenders to have a fair lending compliance management program in place, but the first solution requires heavy monitoring and analyzing activity. Even with heavy monitoring, lenders still run the risk that their analysis will reveal credit pricing anomalies which will then need to be addressed with affected buyers and the dealers involved. In theory, the second solution does not require those extra steps because dealers do not have discretion to change credit pricing for different buyers. Doesn’t the second solution sound like it would be much easier for lenders to implement than the first? Obviously, lenders need to analyze how they approach this compliance issue. The administrative cost and burden and increased compliance risk may be too much for them to keep discretionary dealer credit pricing. If they keep it, they may tweak their compensation formulas with limits or controls, maybe to something like the NADA’s recommendations. If they change to non-discretionary pricing models, the challenge will be for them to create new compensation formulas that are competitive and attractive to dealers. As noted in prior articles, dealers must create and maintain solid fair lending policies, procedures and practices. If you haven’t done it yet, you need to make it a priority. Be prepared to prove to your lenders and your regulators that you have a solid program in place. In addition, now you should also be prepared for changes in the compensation lenders offer when they buy your retail contracts.

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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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ARBITR ATION CORNER

ECONOMY WATCH

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Sluggish Job Rebound Could Impact Delinquencies

Piecing Together the Structural Disclosure Policy Puzzle

J OB LOSS SLOWS CONSUMERS’ MAJOR SPENDING

A FEW CLARIFYING POINTS

According to at least one respected industry observer — Manheim’s Tom Webb — the major cause of an auto loan delinquency remains a job loss. Fitch Ratings’ latest analysis of the labor market showed a rebound in nationwide employment is not proceeding quickly enough to drive a significant pick-up in U.S. economic growth. Despite a decline in the headline unemployment rate to 6.7 percent in December, Fitch stated labor productivity and participation rates have stayed weak since the recession. “We remain concerned that high levels of unemployment and under-employment will continue to dampen consumer spending and delay the start of a more robust economic recovery,” analysts said. Fitch pointed out that differences between the monthly employment reports released by ADP and the Bureau of Labor Statistics, evident in the December payrolls data, will likely be smoothed over the next quarter as monthly numbers are adjusted. “While significantly different, we believe both surveys have shown ongoing, accelerating improvements in job creation over recent months,” Fitch analysts said. “Unfortunately, the reports still indicate that U.S. employment levels are not rising fast enough to offset job losses suffered during the last recession.” Fitch explained the U.S. economy needs to generate between 185,000 and 200,000 jobs monthly to significantly reduce unemployment.

Although the revised NAAA Arbitration Policy has been effective since last September, some questions linger about structural disclosures, said Manheim Director of Arbitration Matt Arias, who serves as co-chair of the NAAA Standards Committee. “There are just a few basic points to remember that can help our members clarify which disclosures we recommend be used in what conditions,” he said. First, the Structural Damage Disclosure should be used when a component that is deemed structural has existing permanent damage with poor prior repairs that exclude refinish only, Arias stated. “This damage includes kinked metal, but not bent,” he pointed out. “This disclosure is eventually replacing frame damage and frame/unibody.” Apply the Certified Structure Repair/Replacement Disclosure to situations when the structure of the vehicle has been repaired or replaced according to OEM guidelines, Arias explained. “But it must also fall within NAAA’s Used Vehicle Measurement

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Standard, and the disclosure supersedes the Certified Frame Repaired Disclosure,” he noted. “If the structure has poor prior repairs, please continue using the Structural Damage Disclosure.” For any modifications made to the structure, use the Structural Alteration Disclosure, Arias said. “This includes but is not limited to lengthening the structure, shortening the structure, welding to the structure, brazing to the structure (excluding exhaust hangers), drilling new holes to the structure and enlarging or elongating the existing born-with (OEM) holes.” He added that the disclosure applies to all modifications made to the structure only, even if aftermarket parts are included on the vehicle. Aftermarket part examples include, but aren’t limited to, fifth wheel brackets, gooseneck brackets, receiver hitch brackets, snowplows, utility bumpers or suspension equipment. If you have questions about the Arbitration Policy, please send them to naaa@naaa.com.

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AUCTION

NEWS

Manheim Honors Local Auction CALIFORNIA AUCTION HONORED AMONG TOP TEN PERFORMERS Recognizing the importance of independent auctions to its future business growth, Manheim honored 10 independent auctions during the OVE.com Awards Ceremony on March 4. This is the fifth year that Manheim has recognized top-performing independent auction partners. California’s Norwalk Auto Auction was among those honored. “It’s truly an honor to be able to recognize the accomplishments of these independent auctions,” said Peter Lavallee, vice president of industry solutions for Manheim. “We are a sales organization dedicated to supporting non-Manheim locations by leveraging OVE.com to sell products and services.” The Industry Solutions Group (ISG) is dedicated to servicing

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independent auctions and helping take advantage of Cox’s automotive offerings to grow their business, including OVE.com and Ready Auto Transport. The awards, based on performance in 2013, were presented as follows: • Highest Overall Volume: Norwalk Auto Auction. Norwalk has won the award three consecutive years. It is the auction with the most sales, regardless of segment or mix in 2013. • Highest Commercial Mix Volume: Greensboro Auto Auction. It is the auction with the most sales based on the greatest number of commercial accounts. • Highest Dealer Volume: Akron Auto Auction. Akron has won the award three consecutive years. It is the auction that sold

the most dealer inventory. • Highest Overall Volume Growth: LynnWay Auto Auction. It is the auction that has shown the greatest yearover-year percentage in growth from 2012 to 2013. • Most innovative: Bel-Air Auto Auction. It was the auction that leveraged the OVE.com platform beyond conventional methods to grow its business online with an out-of-the-box strategy. • Online Buyer Confidence Award: Brasher’s AAs. It is the auction that had the lowest un-buy percentage. Brasher’s AA has won the award for three consecutive years. • Highest Commercial and Deal Mix Volume: Columbus Fair Auto Auction. It had the most net transactions in 2013 based on segment and mix.

• Highest Commercial Volume Growth: Lubbock Auto Auction. This auction showed the greatest year-overyear commercial sales percentage growth from 2012 to 2013. • Highest Dealer Sales Volume Growth: America’s Austin in San Antonio. America’s Austin showed the greatest yearover-year dealer sales percentage growth from 2012 to 2013. • Customer Experience: Southern Auto Auction, a threetime winner. Southern Auto Auction had the least amount of arbitrations based on volume. ABOUT MANHEIM WITH HEADQUARTERS IN ATLANTA, MANHEIM IS THE LEADING GLOBAL PROVIDER OF VEHICLE REMARKETING SERVICES, CONNECTING BUYERS AND SELLERS OF USED VEHICLES TO THE LARGEST WHOLESALE USED-VEHICLE MARKETPLACE. MANHEIM HAS MORE THAN 20,000 EMPLOYEES IN 107 WORLDWIDE SITES. FOR MORE INFORMATION, VISIT WWW.MANHEIM.COM.

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REGULATORY

MATTERS

Advertising Game Plan: No Audibles Allowed FTC PUTS DEALERS ON NOTICE

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I-formation, twins right, Z motion, halfback dive. “Omaha! Omaha!” Now, I don’t know if Peyton Manning called the isolation dive play over the course of the Denver Broncos’ playoff run, but I do know we heard “Omaha” enough times that the Chamber of Commerce in Nebraska’s largest city owes him a key to the city. In the days following the Broncos’ playoff win over the San Diego Chargers, reporters asked the quarterback to explain the significance of his screaming of “Omaha” before virtually every snap. “I’ve had a lot of people ask what ‘Omaha’ means,” Manning said with a sly smile. “Well, Omaha, it’s a run play, but it could be a pass play, or a play-action pass, depending on a couple of things: the wind, which way we’re going, the quarter and the jerseys that we’re wearing. It really varies, really, from play-to-play. So there’s your answer to that.” While changing the play is entirely acceptable when you are a Hall of Fame quarterback trying to fool a defense, it is as taboo as it gets when you are a licensed motor vehicle dealer trying to sell cars. So taboo, in fact, that the Federal Trade Commission put dealers on notice once again that “hiding the ball” or misdirection tactics will not be tolerated in automobile transactions. On Jan. 9, the FTC announced “Operation Steer Clear,” a nationwide sweep that focused on the advertisements of 10 dealerships from six states. The FTC charged those dealers made material misrepresentations in print, Internet and video advertisements that led consumers to believe they could purchase or lease vehicles for certain terms when such was not the case. What did these dealers do to “hide the ball?” • T  wo California dealers printed advertisements that prominently displayed a price for a vehicle – for example, a 2008 Chevy Tahoe LS for $17,995. However, in fine print at the bottom of the page, the dealer added this disclaimer: “Prices after $5,000 down + Tax, Lic and Doc fees on approved credit.” So while the ad led consumers to think the price of the vehicle was $17,995, it was actually $22,995. • Several of the dealers advertised leases with zero due at lease signing. Yet when the dealer advertised the specific models available for lease at a particular payment, the fine print said “first payment, acquisition fee, tax, title due at lease signing,” or that a down payment was due at signing to get the advertised payment. WEST COAST DEALER

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BY SHAUN PETERSEN According to the FTC, the impression left in consumers’ minds was they were not required to leave any money with the dealer to get the advertised monthly payment. But when it came time to close, the dealer slapped them with a bill for potentially thousands of dollars. • Multiple dealers offered vehicles for $99 a month and zero down. That offer was bold and easily recognizable. Sounds like a great deal. But if consumers were able to see the fine print that flashed across the video screen or was placed at the bottom of a print ad, they would have noticed the $99 per month offer only applied to the first few months of the loan – after which the payments increased to $534 for the balance of a 72-month loan. Lest we fall into the trap of thinking this was a one-time splash, Jessica Rich, director of the FTC’s Bureau of Consumer Protection, said, “We have many other investigations in the pipeline. This is a priority for the FTC and you will see many other cases in the auto-related area.” And remember, if the FTC is looking for cases, state attorneys general are right behind them. In order to protect yourself from an enforcement action, remember your advertisements cannot change the play on the consumer. If you make a particular offer, nothing in the fine print can alter the material terms of that offer. Moreover, all material terms of the offer must be clearly and conspicuously disclosed. For print ads, disclosures have to be large enough and readable enough for a consumer to notice, read and comprehend them. Disclosures in videos must be loud enough, slow enough and in a format sufficient for a consumer to understand them. If you use a third party vendor, do not simply rely on its statements that the advertisements are compliant. Ensure the ad has undergone a thorough compliance review. Remember, it is your dealership’s name on the ad. Wonder who the FTC will chase? As you stand in the huddle of your advertising team and the temptation to “change the play” comes, remember the FTC’s team of attorneys is roaming the landscape and will hit you harder than Ray Lewis ever did. Adopt this game plan: No audibles allowed. SHAUN PETERSEN IS A PARTNER WITH THE LAW FIRM OF MAC MURRAY, PETERSEN & SHUSTER LLP AND HEAD OF THE FIRM’S AUTOMOTIVE PRACTICE. HE SERVES AS NIADA’S REGULATORY COUNSEL.

AUCTION

NEWS

ADESA Reveals Management Changes at Four Auctions FOUR INDIVIDUALS ARE PROVEN LEADERS Management recently changed at four of ADESA’s locations. ADESA chief executive officer and president Stéphane St-Hilaire said, “All of these individuals are proven leaders who know what it takes to run a successful auction. I am excited to share their expertise with each of these locations and their customers.” Jay Hinchman, previously general manager at ADESA New Jersey, will now serve as general manager of ADESA Las Vegas. Hinchman’s career in the remarketing industry spans more than 18 years. Theo Jelks will return to ADESA Los Angeles, where he served as general manager from 2009 through 2011. In late 2011, he joined the company’s newest auction, ADESA Las Vegas, as the auction’s general manager. Craig Estep has been named general manager at ADESA New Jersey. He most recently served as general manager for Upstate Auto Auction. Estep began his career in the auction industry in 1991 at Statesville Auto Auction before joining ADESA Indianapolis in 1994. Zachary Jones, previously operations/transportation manager at ADESA Great Lakes, will now oversee operations as the auction’s general manager. Jones joined ADESA in 2006. Prior to joining the company, he worked as a fleet manager, dispatcher and driver for ASR Services/Daltons Towing/Auto Site. W W W. I A D A C . O R G

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MANAGEMENT

MATTERS

How to Select the Best Existing Building for Your Car Dealership KEY COMPONENTS TO CONSIDER DURING THE BUYING PROCESS

30

During the latest economic downturn, many auto malls became ghost towns as dealers of both new and used cars were forced to close their doors. As the economy turns around and starts to expand, 2014 is the time to take advantage of these great, vacant locations. While these existing car dealerships are in prime locations, many may not be worth the debt on the mortgage, which puts the buyer in a great position to make a deal. The trick is to choose the ideal existing building to fit your needs without having to put too much money into the building to make it your own. The following are some key components to take into account and investigate during the buying process. These points will help you avoid buying a lemon. 1. The first step is to retain the services of a commercial real estate broker with good working knowledge of your desired area and experience in automobile dealership sales.

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You may think you can negotiate the deal yourself but with an existing building there are always unforeseen issues. Having an experienced expert on your side will help you discover as many issues as possible during the buying process. Also, a broker can help you locate new buildings that are just coming on the market that you would not be able to find on your own. Finally, they can assist in finding the local zoning council, getting a fair appraisal and hiring a good company to do the inspections. 2. Secondly, you want to verify the property is zoned for the specific use of used car sales. This can be accomplished by obtaining a zoning verification letter from the jurisdiction in which the site is located. Many zoning conditions that permit automotive sales only account for the sale of new product. The sale of used vehicles could be prohibited or be a secondary use requiring a zoning variance, special use

BY SARAH ROBERTS

permits or even a rezoning. These three procedures will take time and could cause a delayed grand opening. It’s prudent to make your final sales contract contingent on obtaining final zoning approval from the jurisdiction prior to closing. This contingency will protect you if there are any issues with the local municipality. If you are required to enter into zoning proceedings, check with the local jurisdiction on the timeframe as they will have strict deadlines. Hiring a zoning attorney who is familiar with the jurisdiction will make the process run more smoothly. Your broker can assist in finding good counsel. Depending on the jurisdiction, this process may also require the review of the intended building exterior modifications. If this is required, hire an architect to produce required materials. Other zoning uses to check are fueling, washing and servicing

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automobiles. 3. As you start to investigate the building, the best advice is to hire an experienced consultant to inspect it. This is another area in which your broker can assist. The inspector can help with identifying issues in the existing building, such as hazardous materials like asbestos and lead. It is best to make sure testing is done during your due diligence process. If the test confirms hazardous materials, you may negotiate the remediation of the materials in your contract for the seller to pay the cost or have the cost of abatement reflected in the asking price. Getting rid of hazardous materials is costly in both time and money. Other issues to address in your inspection are building components such as the electrical system, HVAC system and exterior envelope. Beware the slippery slope of renovation. Bringing a structure up to current code can be very expensive. It may be better to demolish the building and build exactly what you want. For your building inspection make sure to hire an inspector that is registered and has a background in doing commercial buildings and car dealerships. A good inspector will be able to tell you the state of your system. You will need to have a geotechnical engineer do a Phase 1 Environmental. This is a test of the property to make sure no fuel, oil, antifreeze or any other contaminating liquid has leaked on site (this also can be into the site from offsite properties).

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It is possible the seller may have this report from the original or previous sale. Obtaining this report will help your engineer do a quicker and more accurate report. The remediation for these spills is costly and you could later end up in a lawsuit if you sell the building without disclosing this information. These reports will also show if there are any other potential site challenges such as wetlands, unusable land on the property or protected species. 4. Signage is another factor in verifying applicable requirements before you purchase. Every car dealer wants to make sure there are plenty of clear views to signage, whether building mounted or freestanding components. In many locations with existing buildings, signage may be “grandfathered in,” meaning you may be able to utilize the same amount of signage that the current dealership has to offer. However, this is not always the case. If you are unhappy with the amount of signage your building is allotted, you might consider picking another location to make sure you can be found by potential customers. One advantage to an existing building is that many customers may have already visited the location and be familiar with it. 5. When you do find an existing building that excites you, ask the seller to let you visit the property at night with the lights

on. Check what your store will look like as customers arrive in the evening. This will allow you to see how visible the current signage is in the dark and how your merchandise will look. Nighttime lighting is important because most customers purchase automobiles on Saturdays or after work during the evening. It is more difficult to showcase merchandise color and quality at night, so adequate outdoor lighting is critical for merchandise color. Since the location was likely operating as a dealership previously, you could have strong outdoor lighting fixtures already in place. You can also take this opportunity to check how many of the fixtures are in proper working order. Ask the seller about operating the cost of the current fixtures. Then include the cost of repairing or replacing the fixtures in your contract negotiations. There will always be unforeseeable issues that arise during the buying process, but by hiring a real estate broker with experience, obtaining a zoning verification letter, doing an inspection of the building and site as well as getting a geotechnical report you will be well on your way to knowing exactly what you’re purchasing and being happy with the result. Enjoy creating your new business location! BY SARAH ROBERTS, LEED AP SITE FEASIBILITY AND DESIGN PIEPER O’BRIEN HERR ARCHITECTS

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ONLINE

MARKETING

What is Content Marketing a u

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M  O R E T H A N A T R E N D , C O N T E N T M A R K E T I N G I S L I K E LY T O B E C E N T R A L T O A N Y B U S I N E S S G R O W T H S T R A T E G Y

Content marketing is a vital component of your business’ overall digital marketing strategy. You may have heard the term “content is king” over the past few years, but what power does this “king” actually have when it comes to driving traffic, leads and sales? At the core of your marketing should be useful information. It should attract, convert and eventually close sales. Content marketing then is your business’ ability to be the most helpful and effective teacher in the world at what you do. The old way of delivering content to customers was to simply create an ad and broadcast it to the masses. Today, instead of broadcasting a one way message that no one trusts anymore, content marketing pulls people towards

your company. Customers consume the information you provide and naturally come to trust your business. Successful content marketing aligns what you publish with your customers’ information needs. In fact, content must serve two purposes: it has to appeal to the prospective customer (more so now than ever) and it has to appeal to search engines. You might now be saying, “Ugh, another thing I have to do that takes me away from my business. I’ll wait until the trend fizzles.” Content marketing is more than a trend. It’s likely to be central to any business growth strategy, at least for the foreseeable future. Great content turns visitors into customers, even evangelists. If you don’t take time for content

marketing there could be a chance very soon that you won’t have a business to be taken away from! Content marketing may be something you’ve heard about but perhaps you’re not fully convinced of its value and that’s got you stuck. You’re not alone. I meet dealers and other business owners often who have apprehensions. Here’s how content marketing works: Attract customers with content. • Blog posts supply the information your customers need. • Keywords and phrases optimize your post for better search visibility. • Social media syndicates your content and boosts your search visibility and online influence.

SAFETY

Confused on what to write about? You already have a wealth of ideas in-house. Employees are on the front lines with your customers and they know what questions customers are asking. The goal is to be helpful. You don’t need to appear intelligent. Marcus Sheridan recommends these “big five” topics for best results: • Cost/Price questions • Problems/issues/concerns questions • Vs/comparison questions • “Best” questions • Review/opinion-based questions Convert visitors to your site or social media. • Create a compelling reason for them to take action. • Use sign-up forms to collect contact info. • Use landing pages to drive

NEWS

GM Recalls Trucks for Stalling TRANSFER PUMP MALFUNCTION CAUSE FOR CONCERN General Motors is recalling 9,733 model year 2012-2013 Chevrolet Silverado HD and GMC Sierra HD vehicles equipped with 6.6L diesel engines and dual fuel tanks. In the affected vehicles, the transfer pump which moves fuel from the rear tank to the front tank could malfunction and cause the fuel gauge to indicate an inaccurate reading. If the fuel gauge indicates an inaccurate reading it may result in the vehicle unexpectedly stalling, increasing the risk of a crash. General Motors will notify owners and dealers will inspect and replace the fuel transfer pump, as necessary, free of charge. GM’s number for this recall is 13420.

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g and Why Do I Need It? visitors further down the sales funnel. Close sales with superior internal workflows. • Listen. • Engage. • Learn to recognize leads immediately. • Nurture leads intelligently. Why do I need content marketing? Content marketing is the best way to turn strangers into customers. When you answer your prospects’ questions, they remember who answered them and come back when it’s time to buy. You need content marketing because it moves the needle: • Your business gets found in search. • Your business is seen as a “likable expert,” and you become known as a thought leader.

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• People stay on your site longer when they have quality information to absorb and enjoy. • You build trust. • People who regularly consume your content are much more likely to buy. Listen. Communicate. Teach. Content marketing has been around for ages (ancient texts have given mankind useful information since time began). Today, technology has greased the wheels of information. Every consumer has questions. When a prospect or customer asks your company a question, you need to have solid tactics in place to answer it. Creating content is time consuming and expensive. Distributing it is tricky. Unless you’ve already established your business as a trusted

At the core of your marketing should be useful information. It should attract, convert and eventually close sales. Content marketing then is your business’ ability to be the most helpful and effective teacher in the world at what you do. u

authoritative source, you may have trouble overcoming the clutter and noise of the Internet and social networks. Working with a creative marketing partner or coach can help overcome some of these challenges.

Some have come to believe that sales is a numbers game. In some respects, that’s still true. But we also have ways to develop relationships with customers during all stages of the buying cycle. Content marketing attracts and nurtures those sales relationships, digitally. Trees that are slow to grow bear the best fruit. Sales close faster and easier when the trust is evident. If you haven’t yet integrated content marketing into your business’ overall strategy, what are you waiting for?

BY KATHI KRUSE

KATHI KRUSE IS AN AUTOMOTIVE SOCIAL MEDIA MARKETING EXPERT, BLOGGER, AUTHOR, SPEAKER AND FOUNDER OF KRUSE CONTROL INC. SHE IS ALSO THE AUTHOR OF “AUTOMOTIVE SOCIAL BUSINESS – HOW TO CAPTIVATE YOUR CUSTOMERS, SELL MORE CARS & BE GENERALLY REMARKABLE ON SOCIAL MEDIA.”

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I

AM

INDEPENDENT

Legacy of Independence FOR THESE DEALERS, FAMILY DRIVES A LIFELONG PASSION FOR THE CAR BUSINESS Throughout 2014, Used Car Dealer Magazine is celebrating the independence of NIADA’s members by featuring a different segment of the independent used vehicle industry each month. In this segment, we highlight second- and third-generation dealers, who grew up around car lots watching their parents, grandparents, uncles and aunts operate dealerships – and, of course, pitching in themselves. With car sales in their blood, these dealers couldn’t imagine doing anything else, operating their independent dealerships with a passion that can only come from family.

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For many independent dealers, the car business is a family business. Independent dealers across the country tell stories about growing up sweeping the lot for their dad or selling cars during college for their grandfather, working with their mom, brothers or uncles. For them, the dealership was often a second home and selling cars was not just a job, it became a passion. And it’s one they continue to follow today – their own way. Independently. Jim Long, owner of Long’s Auto Place in St. Paul, Minn., grew up in the auto business with several relatives, including his father, Thomas, his uncles and his grandfather, owning and working at various dealerships. “I just fell in love with the car business,” he said. “I grew up in it and just loved it, even when my father tried to convince me to do something else.” Neal Coleman began working for his uncle, Steve Nosser, in 1977 at Steve Nosser Ford in Quincy, Ill., and it didn’t take long for selling cars to get into his blood. “From there, I really just took an interest in it,” Coleman said. “It was always more than a job to me.” He opened his own store, Mr. Deal’s Auto Center in Quincy, as an independent dealership in 1988. “I’m the quintessential dealer’s kid,” added Gordon Tormohlen, owner of Tormohlen’s Good People Automotive. “It’s the biggest family business there is.” Tormohlen’s father, Paul, started in the industry cleaning grease racks at a Hudson dealership and, after serving in World War II, he became the youngest Hudson dealer in the United States. As a 13-year-old in 1973, Tormohlen began working for 50 cents an hour at his dad’s Chevy dealership. Before he could even drive, he was already using money he earned at the dealership to buy and sell cars. The bug had bitten him. Tormohlen now owns two independent dealerships, one WEST COAST DEALER

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in Freeport, Ill. and one in Monroe Wis., with a third in the planning stages. His son, Barrick, and daughter, Karina, a graduate of Northwood University, are in the business with him. Starting out as a child at a family-owned car business doesn’t mean you get an easy ride, however, as many legacy independent dealers will attest. “I worked my way through every part of a dealership growing up,” Tormohlen said. “I learned early on the only way to earn respect from the other employees was to outwork them. I was the first one in and the last one out every day. I ate my lunch in 20 minutes and didn’t take breaks. “I did everything from serving as a detailer to doing lot duty to running parts and working the parts counter. I eventually made my way into sales. Other employees saw I had a good work ethic.” Long’s career history also includes working in all aspects of a dealership, in franchises as well as independent dealerships. Eventually, he said, he found his true calling in sales. “It’s really the sales I love,” he said. “I love talking to people and get an absolute high from putting together a deal. An automobile is a very emotional sale, especially a first car. There are good days and bad days, but I still love the people and love to see what we can accomplish.” Why Independent? The freedom to run a business on your own terms, rather than by a corporation’s rules, is one of the most basic reasons most dealers go independent. Mike Jones’ father, Royce, was an independent dealer who had several opportunities over the years to be a franchise owner but declined. “He liked the freedom of having his own store and not having anyone to report to,” said Jones, now the owner of Auto Expo in Dothan, Ala. “He could do as he pleased and didn’t have the pressures that came with massive payroll and overhead.” Coleman’s reasons for going independent after growing up with a franchise legacy were similar. “I didn’t want the factory telling me what I needed to sell and what I needed to have in inventory,” he said. “You spend more time in meetings than out working with the public selling cars. This way you can control your own destiny and have more one-on-one interaction with the customers. You and your employees control customer satisfaction.” The ability to sell the exact cars your customers want instead of a specific brand is also a draw.

BY LAURIE PONDER

“As an independent, we have the capability of selling everything from a $10,000 car to a $100,000 Hummer,” Long said. “We can sell a much wider range of vehicles, cars our customers want, and not deal with the politics of a franchise.” And though most independent dealers admit to working long hours, doing business as an independent means they can set their hours as needed and not necessarily worry about some of the other burdens big business can bring. “My dad wanted to have the freedom to come and go as he pleased and not have to worry about a huge payroll every month,” Jones explained. “He made a comfortable living and enjoyed what he was doing, and that is the track I have taken as well. “I may not get rich, but I have a good lifestyle and I can be home when I need to. It’s all about balance.” Independent Challenges Being independent does not come without its challenges, however. In today’s marketplace, independent dealers may be able to sell a wider range of cars, but they also have to go out and get them from auctions and other sources – and they have to know each car individually. “We have to work harder to find the inventory,” Long said. “[Franchise dealers] have the same inventory coming in at the same quality. With our cars, no two are ever alike, even in the same model with the same mileage.” Knowing how to manage people – both customers and employees – is another issue faced by independent dealers. “We have to know how to handle very demanding customers, which is an art,” Tormohlen said. “But to do that, you have to properly take care of and train employees first. This is a fundamental part of any plan. If you take care of employees, they will take care of your customers and build your reputation and business.” And because they are usually smaller than franchise dealerships and lack the corporate backing, independents more often find themselves forced to become knowledgeable in all areas of their business. “I wear a lot of hats,” Jones said. “I know a little bit about a lot of things. It can be overwhelming to try to be the lawyer, the accountant, the marketing and advertising guru and salesperson.” Developing relationships with local banks and credit unions can also be more challenging for independent dealers. “Banks don’t always favor an independent business,” Long said. “They W W W. I A D A C . O R G

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Legacy of Independence

NEAL COLEMAN

MIKE JONES

GORDON TORMOHLEN

sometimes assume we and our customers are more of a credit risk, that we might just close up shop and leave. We have had to show them our staying power.” And of course, independents have to deal with the many laws and regulations imposed on the used car business – but they have to do it on their own. While it can be difficult to keep up with ever-changing rules, many dealers believe doing so shows which dealers are reputable. “There are good state and federal regulations out there that protect the consumer and protect the reputation of reliable car dealers,” Coleman said. “Anyone who is going to survive in this business has to take care of the customer more and more and work really hard at customer satisfaction, regardless if you are a new or used car dealer.”

JIM LONG

That is where many independent dealers say they are not completely independent. They rely on their contacts with other independent dealers and on the National Independent Automobile Dealers Association (NIADA) and their state associations to help educate and advocate for them. “This is where it is important to get involved in more than just your store,” said Tormohlen, who serves as NIADA’s Region III vice president. “Get involved in your community and local politics. Get involved in your associations and 20 Groups. The more connections you have, the more you will learn, and you will be a better, stronger entrepreneur.” Jones agreed, saying the information and assistance he gets from NIADA and the Alabama IADA is invaluable. “State and national associations keep

us informed with various changes to rules and regulations,” Jones added. “When you are independent, you have to rely on those systems and checkpoints to keep up with everything because you may have limited personnel. As important as it is, it is a lot to remember and keep up with.” So with all the challenges, why do you do it? Why do you operate your own independent used car business? There might be many reasons, but often it is simply the love of the business. And often that love has been passed down through several generations of family. “The nature of this business is just fascinating,” Tormohlen said. “It has always been fun. My dad passed away this past year at age 90, and he always said if you are having fun at work, it’s a lot less like working.”

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PROOF

Certified Master Dealers™ run more profitable dealerships.

JOIN THE RANKS May 14-16 Richmond Hilton Hotel & Spa Richmond, VA For more details and to register for the next class, visit www.niada.com/certified_master_dealer.php

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