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WEST COAST DEALER J U N E / J U LY

2014

magazine

FEATURE STORY ON PAGE 8

History of IADAC LOBBYING

LOBBYING HAS PROTECTED AND BENEFITED DEALERS

u inside • WEATHERING STORMS OF REGUL ATION • INSIGHTS INTO CUSTOMER EXPERIENCE • HOW TO PRESENT TO REMOTE BUYERS

DALLAS, TEXAS Permit No. 2079

PAID

PRSRT Standard U.S. Postage

V I S I T

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FEATURE STORY ON PAGE 8

History of IADAC LOBBYING

ASSOCIATION NEWS

AUCTION NEWS

ADESA Golden Gate Names New General Manager

INSIDE

08 History of IADAC Lobbying 12 Weathering Storms of Regulation 14 DMV Targets Unlicensed Car Dealers 18 Used Cars Getting Cheaper 20 Insights into Customer Experience 22 Four Simple Rules 24 How to Present to Remote Buyers 30 Washington Update 34 Compliance Overdrive

JEFF HOYT TAKES CHARGE

WHAT’S NEW Tire Safety Week

BE TIRE SMART

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

MEHDI CHITGARI (RIGHT) PICTURED WITH SERVICEMEMBERS.

ADVERTISERS INDEX

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IADAC Dealer Honored

ADESA, Inc........................... Inside Back Cover Allen L. Hawkins Insurance............................27 Alliance Inspection MGT.................................22 Ally...................................................................15 Berkshire Risk.................................................18 Black Book.........................................................7 Brasher’s Sacramento Auto.............Back Cover Computerized Vehicle Registration................28 DealerSocket...................................................13 GoldStar GPS..................................................17 Insurance Auto Auctions.................................25 Lobel Financial Corporation.............................3 Manheim.com.................................................. 11 Manheim Pennsylvania...................................19 Mark-One Financial.........................................23 NextGear Capital.............................................21 OnStar..............................................................30 Peritus Portfolio Services...............................31 Protective...........................................................9 Sirius XM............................................................5 United Acceptance..........................................26 VAuto .................................... Inside Front Cover Wolters Kluwer................................................29

OFFICE

CLASSIC CHARIOTS NOMINEE FOR SMALL BUSINESS OF THE YEAR Annually, the city of Vista Chamber of Commerce presents a small business with the Small Business of the Year award. This year Classic Chariots, a dealership owned by Mehdi Chitgari, was one of three nominees. Mehdi is an IADAC member and vice-president. This black tie affair featured a fundraiser for the Vista Education Fund and recognition of many civic leaders. Throughout the evening, anticipation grew as the Small Business of the Year was awarded to a local restaurant and brewery. Congratulations to Mehdi for his recognition as a nominee for this award!

ADESA recently announced a change to its auction management team. Jeff Hoyt has been named general manager at ADESA Golden Gate. “Jeff has dedicated himself to making ADESA Golden Gate one of our top auctions for more than 20 years,” said ADESA president and CEO Stéphane St-Hilaire. “I am excited to have him now lead the team.” Hoyt first joined ADESA in 1992 as fleet lease manager. Prior to that he served as Ford Factory Turn Back Manager at Bay Cities Auto Auction and oversaw the fleet lease sales department. Jeff is a graduate of the Western College of Auctioneering in Billings, Mont. ADESA OFFERS A FULL RANGE OF AUCTION, RECONDITIONING, LOGISTICAL AND OTHER VEHICLERELATED SERVICES TO MEET THE REMARKETING NEEDS OF BOTH ITS INSTITUTIONAL AND DEALER CUSTOMERS. ADESA HOSTS WEEKLY SALES AT ITS 65 AUCTION LOCATIONS ACROSS THE UNITED STATES, CANADA AND MEXICO. VISIT ADESA.COM FOR DETAILS.

SAFETY

FOR INFORMATION ON HOW TO BECOME A MEMBER PLEASE CONTACT LARRY@ IADAC.ORG OR (916) 601-4976

NIADA HEADQUARTERS

IADAC EXECUTIVE COMMITTEE

CA_1010.qxd:Layout 1 11/19/10 National Independent Automobile Dealers Association www.niada.com • www.niada.tv Rocco Delapa 2521 Brown Blvd. • Arlington, TX 76006-5203 President phone (817) 640-3838

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Guy Strohmeier Vice President Guy Strohmeier’s Auto Center 87 Soda Bay Rd Lakeport, CA 95453

WATCH

Chrysler Recalls SUVs

BRAKES MAY CORRODE Chrysler Group LLC is recalling certain model year 2011-14 Jeep Fairfield Auto For advertising information contact: 1206 N. Texas St. Grand Cherokee and Dodge Durango Troy Graff (800) 682-3837 or troy@niada.com. Fairfield, CA 94533 vehicles manufactured from Jan. 5, The West Coast Dealer is published bi-monthly by the Beto Beas National Indpendent Automobile Dealers Association Secretary Gus Camacho 2010, through Sept. 8, 2013. Services Corporation, 2521 Brown Blvd., Arlington, Beas Auto Sales Sr. Vice President TX 76006-5203; phone (817) 640-3838. Periodicals The subject vehicles have a brake Stockton, CA 95202 Camacho Auto Sales, Inc. postage paid at Dallas, TX and at additional offices. booster with a center shell that may 209-944-5770 Lancaster, CA 93534 POSTMASTER: Send address changes to NIADA State Publications, 2521 Brown Blvd., Arlington, TX hhbeas@aol.com 661-945-2609 COMMITTEE corrode and allow water to get inside. EXECUTIVE 76006-5203. The statements and opinions expressed gus@camachoauto.com herein are those of the individual authors and do CA_1010.qxd:Layout 1 11/19/10 12:04 PM Page 4 Rod Davis Terry Degmetich The water inside could freeze and Terry Degmetich MAGAZINE CONTENTS President Secretary Mehdi Chitgari not necessarily represent the views of The West limit the braking ability of the vehicle, Brasher's Auto Auction I -Treasurer Deal Cars Coast Dealer, IADAC, or the National Independent Vice President Rio Linda, CA 95673 Roseville, 95678 I-DealCA Cars Automobile Dealers Association. Likewise, the 12 Local Auto Classic916Chariots increasing theDealers risk of Used a crash. - 991 - 5555Inc. 916-8709254 CA 95678 MAGAZINECONTENTS Roseville, appearance of advertisers, or their identification rdavis@brashers.com idealmaster@surewest.net 1611 W. Vista Way by Clunkers 916-870-9254 6 Named IADAC Quality Dealer Chrysler will notify owners, and as members of NIADA, does not constitute an of the Year Vince Cardinale Vista, CA 92083 8 products Auction Standards Help Customers endorsement of the or services featured. idealmaster@surewest.net 10 10 Questions for AutoCheck dealers will add a water diverter David Aah1 13NIADA Credit Applications Do’sAll & Don’ts Copyright 2014 by Services, Inc. rights 14 Auction Security Chairman of the Board Vice President Brittany Hibdon 14 Striking Gold: IADAC’s 42nd Annual Convention reserved. shield to the booster after the booster Larry Laskowski North Bay Auto Auction A to Z Motors 18 In the Spotlight Vice President Fairfield, CA 94534 Winters, CA 95694 Executive Director State Magazine MGR./Sales has been tested to confirm it can hold 707 - 864Center - 1040 925-914-9199 Hibdon Auto Troy Graff • troy@niada.com The Auto Outlet THE CURRENT STATE atozmotors1@aol.com Orland,david@nbauto.com CA 95963 an acceptable amount of vacuum Roseville, CA 95678 OF THE AUTO INDUSTRY Editors 530-865-5800 CERTIFIED MASTER 916-601-4976 pressure. If PROGRAM: the booster inspection McElroy is host of the long-running “AutoAndy Friedlander •John andy@niada.com Mark Glover Rick Gomez Brittany@HibdonAutoCenter.com DEALERƒ autoview@surewest.net EXECUTIVESr.Azteca COMMITTEE Vice President Vice President Jacinda Timmerman jacinda@niada.com line• Detroit” television program, covering all asconfirms an unacceptable loss of Auto Sales RJ Auto Brokers Dealers who demonstrate commitment and pects of the automotive industry. In this presentaRod Davis Terry Degmetich Rod Davis Galt, CA 95632 Carmichael, CA 95608 Magazine Layout & Graphic Artist MAGAZINE CONTENTS Mike Macaulay vacuum pressure, booster will be President 209-712-1886 Secretary support the principles andthe ethical business stanMcElroy provides a thorough and insightful 916-425-3349 Chairman of the Board Chantae Arringtontion, • chantae@niada.com Brasher's Automark@countyfinancial.com Auction I - Deal Cars rgomez739@yahoo.com Magazine Editor dards of the CMD“ designation complete a fourreview of where we’ve been, where we now RioBrasher’s Linda, CA 95673 Roseville, CA 95678 Auto Auction replaced. Art Director MAGAZINECONTENTS dayDealers seminar that addresses Business Management, 12 Local Auto Used 916 - 991Linda, - 5555 CA 95673 916-870- 9254 carsystems@comcast.net are, and where our industry is headed. Taped Rio Christy Haynes • christy@niada.com rdavis@brashers.com idealmaster@surewest.net Merchandising, Financial Management, Repairs will be made free Human of by Clunkers at the Automotive Fleet of & the Leasing Larry Laskowski 6 Named IADAC Quality Dealer Year Association’s 916-991-5555 Vince CardinaleMike Casey Resources, and Business Planning. Northwood Treasurer Vice President Annual Conference. Printing 8 Auction Standards Help Customers charge. Chrysler’s recall campaign rdavis@brashers.com 10 10 Questions for AutoCheck The Auto Outlet Cal West Motors University provides the instructor and awards 4 David Aah1 13 Credit Applications Do’s & Don’ts Nieman Printing 14 Auction Security Chairman ofRoseville, the Board CA 95678 Vice President San Leandro, CA 94577 Education Continuingis number P14. units for this course. CMD 14 Striking Gold: CLASSES IADAC’s 42nd Annual Convention 916-784-3408 North Bay Auto Auction A to Z Motors 510-352-9230

INSIDE

INSIDE

INSIDE

INSIDE

Dealers who demonstrate commitment and

THE CURRENT STATE and ethical business support the principles OF THE AUTOof INDUSTRY standards the CMD® designation com-

W E S T C O AJohn S T McElroy D EAL R of J U long-running N E / Jthat U LY 2 0 1 4 Busihost the “Autoplete aisEfour-day seminar addresses line Detroit” program, covering all as-Financial ness television Management, Merchandising, pects ofManagement, the automotiveHuman industry.Resources, In this presentaand Business tion, McElroy provides a thorough and insightful Planning. Northwood University provides the inreview structor of where been, we now CA_0614.indd 4 andwe’ve awards fourwhere Continuing Education are, and where our industry is headed. Taped

autoview@surewest.net Fairfield, CA 94534 707 - 864 - 1040 david@nbauto.com Mark Glover

clwest1977@aol.com Winters, CA 95694 925-914-9199 atozmotors1@aol.com

NEXT CLASS OCTOBER 28-30, 2010

VISIT NIADA.COM FOR MORE INFOMATION

Rick Gomez

CERTIFIED MASTER DEALERƒ PROGRAM:

Carmichael, CA 95608 916-425-3349 rgomez739@yahoo.com

Dealers who demonstrate commitment and Action Auto ..................................................8 support the principles andRecovery ethical business stanADESAdesignation ......................................................................17 dards of the CMD“ complete a four5/19/14 10:11 AM AutoTrader.com ................................ day seminar that addresses Business Management, Inside Front Cover

Mike Macaulay, • Car Systems Sr. Vice President Magazine Committee Chair Vice President Azteca Auto Sales RJ Auto Brokers Roseville, CA • 916-784-7155 • carsystems@comcast.net Galt, CA 95632 209-712-1886 mark@countyfinancial.com

18 In the Spotlight

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ADVERTISERSINDEX


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ASSOCIATION NEWS

Message from the Executive Director BY LARRY LASKOWSKI IADAC EXECUTIVE DIRECTOR

MANY BENEFITS OF MEMBERSHIP

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I often speak to dealers considering joining IADAC and find that they ask similar questions, such as “What is in it for me?” or comment “IADAC hasn’t done anything for my business.” Identifying a hot button is different for each dealer. Some place great value on the legislative efforts of IADAC’s lobbyist Bill Dohring as most important to them. Others are more focused on the compliance information we disseminate. Dealers with children entering college are likely interested in the Vic Snyder Scholarship Fund. Vic and his wife Ethyl left their multi-million dollar estate to be passed out to the children of IADAC members in college scholarships, which should tell you something about the importance Vic placed on the need for education. Other dealers are most concerned about the VIP auction cards. Yes, it is true that the savings from auction buy fees means your IADAC membership is free. Through the generous support of auctions such as ADESA, Manheim and several independent auctions, IADAC membership doesn’t cost, it pays. Just as IADAC represents dealers on a state level, the National Independent Automobile Dealers Association represents dealers at Washington, D.C. As a member of IADAC, a portion of your dues goes to membership

with NIADA. NIADA has numerous other benefits for dealers also. NIADA.TV has great informational seminars you can watch at your leisure at www.niada.tv.com. Add to that discounts from major service providers and you’ll realize that membership is a “no brainer.” The annual NIADA Convention in Las Vegas provides dealers with a huge variety of informational opportunities to improve their compliance and bottom lines. The upcoming NIADA event is June 23-26. More information can be found at NIADA.com. As bills are introduced and begin moving through the legislature, proponents and opponents discuss the reasons for their positions. Individuals have little or no impact, but groups with significant membership can have a loud voice. When bills are proposed, the authors and supporters do not send out notices to those who may be opposed. It is up to those concerned to identify them. IADAC has lobbyist Bill Dohring to review daily all the bills to determine if any may have a meaningful impact on dealers. Bill will meet with the author of a problem bill to try to mitigate an impact on the industry, if necessary, and then testify before legislators as it moves through hearings. Bill has been IADAC’s lobbyist

for over 30 years. The reality is that a layman wouldn’t have a clue how to do Bill’s job. Because Bill represents IADAC, he is welcomed by legislators and his credibility is recognized. In 2012, when the Buy Here-Pay Here bills were making their way through the various committees, there was just a single voice in opposition. That voice was IADAC. Although some individuals provided testimony in opposition, they were there due to the coalition created by IADAC. Without opposition, all three BHPH bills would have passed easily. As it was, we were able to get a veto from the governor on the worst of those bills. Don’t say you’re too busy or procrastinate signing up as a member of IADAC. Don’t assume we have plenty of members already. Don’t convince yourself that membership is for others. We need your support now. If you are still apprehensive about joining us, here’s a guarantee you can take to the bank: If within the first six months of membership you don’t think you’ve benefitted, just return the unused VIP auction cards for a full refund. So what are you waiting for? Let’s make this industry stronger by joining IADAC. It’s the only group that represents you, the California auto dealer.

ASSOCIATION NEWS

President’s Report THANKS TO ALL WHO CONTRIBUTED TO A SUCCESSFUL CONVENTION Here we are again. It seems like just yesterday that I wrote my last report. Time sure does fly as we get older. I want to thank all my fellow IADAC members and all the vendors who attended the Spring Southern California Conference in beautiful San Diego. The automotive museum in Balboa Park was a wonderful and memorable host venue for the conference. I would also like to thank our gracious guest speakers. My friend attorney Christian J. Scali and my dear friend attorney Michael C. Rogers gave up their precious time to travel and talk to our group about compliance issues. You all know our industry has been under attack by some very unscrupulous lawyers who have targeted the automotive industry. Our speakers addressed this issue as well as advertising issues and how important they are to us, the public and enforcement agencies. I would like to thank Kelley Blue Book for their contribution. They are always WEST COAST DEALER

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BY ROCCO DELAPA, IADAC PRESIDENT

informative and stimulate good discussion. It was a pleasure meeting the new faces and new friends of the southern part of the state. I was asked why IADAC doesn’t have a greater presence in Southern California. Certainly, events such as this will help but I must repeat this challenge: Please bring in just one new member to IADAC.

I want to thank all the industry vendors who attended the event. Your products and services allow dealers to be more profitable and effective. Many of you did bring new faces to the conference and I’m sure everyone walked away more knowledgeable than when they entered. Those new members will not only give us a stronger presence in Southern California but also at the Capitol. Your

continued support of IADAC is crucial. In turn, we as a group can stand united and provide greater benefits for our members. After all, what we do for each other helps keep our industry healthy and strong. I want to thank all the industry vendors who attended the event. Your products and services allow dealers to be more profitable and effective. Last but not least, I want to thank all our Northern California members who attended the event. Thanks to Terry Degmetich, Gus Camacho, Rod Davis, Guy Strohmeier and the man that made all the magic happen, our executive director and my mentor, Larry Laskowski. Thanks also to my dear friend and fellow marine Bill Dohring, who fights constantly for us in Sacramento at the Capitol. Keep up the good work. Hoo Rah! Until we meet again, your proud to serve and humble president, Rocco Delapa Semper Fi! Always faithful. W W W. I A D A C . O R G

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LEGISLATIVE REPORT

History of IADAC Lobbying LOBBYING HAS PROTECTED AND BENEFITED DEALERS

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IADAC History The Independent Automobile Dealers Association of California represents all the non-franchised dealers in the state of California. IADAC was started in 1957 to combat an increase in the dealer bond. It was due to the organizational efforts of a few Sacramento dealers that IADAC grew into a statewide trade association. Since then IADAC has grown significantly. In many instances, our lobbying has provided relief from harmful legislation. Our work has also involved other issues that may negatively impact the industry, such as baseless lawsuits against dealers. The ability of our lobbying efforts to reach every government agency when necessary is critical to achieving our goals. IADAC provides periodic statewide dealer education seminars to ensure that dealers are aware of old laws, new laws and other matters to keep them in compliance and avoid consumer complaints and investigations from the DMV. IADAC Member Benefits Our members receive VIP auction cards for 21 major auctions in the state. Dealers receive discounts for buy or sell fees that more than pay for membership. A portion of every member’s dues enrolls the member in our affiliate, the National Independent Automobile

BY BILL DOHRING, IADAC LOBBYIST Dealers Association, where additional benefits are available. IADAC offers annual scholarships for children and grandchildren of dealer members. The 1,000 scholarship is worth three years’ dues in itself! During the last 32 plus years IADAC has worked tirelessly on behalf of the independent dealers. Despite legislation to raise the dealer bond to $100 thousand, our lobbying efforts have kept the bond at $50,000. Our lobbying efforts also resulted in an increased doc fee to $65 when the NMVTIS requirement was mandated in 2012. Smog certificates are now good for two years for dealers as a result of IADAC sponsored legislation. For years tow companies were impounding cars and failing to notify the dealer until the lien sale. This action cost the dealer hundreds or thousands of dollars in storage fees. IADAC introduced legislation mandating that a tow company must notify the dealer within 72 hours that they have the car and failing to do so limits the tow company to a maximum of 15 days storage. Additionally the tow company must post their daily rates so that they can’t overcharge if they fail to comply with the 72 hour notice. In the event of a law enforcement impound for driving without a license or a DUI, the dealer must be notified within 48 hours and

ASSOCIATION NEWS

Editorial Comments WE NEED YOUR INPUT

BY MIKE MACAULAY, IADAC MAGAZINE EDITOR

You may notice that much of our magazine content is centered in the Northern California area even though IADAC is a statewide association. The IADAC office is based in the Sacramento area. I am also based in N. California (Santa Rosa, CA). Sacramento is the state capital, so much of what we do to defend our rights as independent auto dealers happens in the state assembly and senate. We need input from all areas of our state, not just N. California. We at IADAC have tried to solicit magazine content from other areas of the state, but have had limited success for regular input. There are times when a “hot button” is pushed in a particular area and we get dealers wanting to be heard. I, personally, have sent monthly emails to every California auto auction asking for current news or things of interest. We get little response. Things we need: 1) Content for our “Noteworthy Events” WEST COAST DEALER

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column, such as new auction employees or retiring auction and dealership employees. 2) Obituary notices for industry veterans (dealer, auction, associate members, etc.). 3) Charitable works, such as graduation parties sponsored by industry leaders, golf tournaments to sponsor non-profit organizations, etc. 4) Independent dealers interacting with their community. 5) New ideas that helped an industry member solve a problem. 6) A nything else that is of interest to our industry. All I need is an idea and a little help with the facts of the issue. Pictures that you can provide are always a big help. If you wish, an article can be authored by you. I will be happy to write all or part of it for you. Thank you all for any support that you can give. Our West Coast Dealer magazine is the best way for us all to be informed and profitable independent auto dealers!

the car must be released to the dealer prior to the mandatory 30 day hold. The dealer may not give the car back to the registered owner until the 30 days period has expired. These two small changes have saved the dealers thousands of dollars in unnecessary costs. If a dealer takes a car in on trade or buys one from an auction and it has current stickers on it or a current registration card but was obtained by the prior owner with a dishonored check, the dealer is exempt from paying for the dishonored check in order to process the registration. Something of which many dealers may not be aware is that if DMV makes an error on a title leaving the dealer off as the lien holder the DMV is liable for the mistake. (Section 805.5 of the Government Code.) You get a lot of bang for your buck by being an IADAC member.

SAFETY

WATCH

Mazda Recalls 42K Sedans WEBS MAY BLOCK HOSE Mazda North America Operations is recalling 42,000 Mazda6 vehicles from the 2010 through 2012 model years and equipped with a 2.5L engine. NHTSA explained that in the affected vehicles manufactured between Sept. 14, 2009, and May 2, 2011, spiders may weave a web in the evaporative canister vent hose, blocking it and causing the fuel tank to have an excessive amount of negative pressure. “Negative pressure could cause the fuel tank to crack resulting in a fuel leak, increasing the risk of a fire,” federal officials said. Mazda will notify owners and franchised dealers will reprogram the powertrain control module and inspect and clean the canister vent line. If a web was found in the line, the fuel tank and check valve on canister vent line will be replaced. These repairs will be done free of charge. In the meantime, owners can contact Mazda at (800) 222-5500 and reference recall campaign No. 7214C. W W W. I A D A C . O R G

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NOTEWORTHY EVENTS

Walt Lukenda Passes LONG TIME NORTHERN CALIFORNIA DEALER WILL BE MISSED BY MIKE MACAULAY, IADAC MAGAZINE EDITOR Walt Lukenda moved to California from Alberta, Canada, to attend college and find opportunity in the “Golden State.” He got his first car job in 1976, working for Toyota of Sacramento. In 1980 Walt got into the wholesale business. He opened his first dealership, Den Motors, in 1984. Walt remained in the industry until his retirement in 1998. Walt was diagnosed with MS in 1985. His health declined and by 1990 had to use a wheelchair. His declining health had no effect on his positive and friendly attitude. Even in his last years in the industry, Walt could be seen checking out vehicles at various auto auctions. The wheelchair did not hold him back. He always had a big smile and a firm handshake. Walt never acted like he was handicapped. He was a man of integrity and patience. He developed emotionally and grew stronger in spirit to face the challenges put before him, which is what made him successful as a human being. Walt never lost his interest in our industry

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INDUSTRY

AUCTION NEWS

NEWS

2014 NIADA Used Car Industry Report Get a sneak peak of the upcoming 2014 NIADA Used Car Industry Report at this year’s NIADA Convention & Expo. You’ll be able to pick up an advance copy in the NIADA convention exhibit hall. Simply visit the NIADA Dealer Lounge located in the center of the expo hall.

Look for your mailed copy the first week of July. Compare your dealership statistics with those nationwide and get the latest facts and statistics on the used vehicle industry based on proprietary research by some of the best known industry analysts. Get an overview of the independent used car dealer and used vehicle marketplace. Included this year is the entire 2014 NAAA Market Report. WEST COAST DEALER

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and enjoyed watching classic car auctions whenever possible. His wife, Marianne Lukenda, likes to tell a story about Walt watching a beautiful car go by and commenting on the car, not the gorgeous young lady driving it! On a personal note, Walt and I met back in the early 1980s as wholesaler dealers. Being physically disabled myself, Walt commented on how I was able to ignore my problems and still get the job done. I always appreciated his friendly attitude and willingness to see the whole person, not just the disability. His kind words still help me through problems. In the turn of fate, Walt then had his own mountain to climb. He did it with class, integrity and compassion for his fellow man. Walt Lukenda will be missed by anyone who had the pleasure of meeting him.

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Manheim Riverside Hosts Congressman AUCTION LAST STOP OF TAKANO’S 100 BUSINESS TOUR

(FROM LEFT) KARYN WRYE, MANHEIM SENIOR DIRECTOR OF INDUSTRY RELATIONS; SCOTT HURST, MANHEIM MARKET VICE PRESIDENT FOR SOUTHERN CALIFORNIA; CONGRESSMAN MARK TAKANO AND CHRISTOPHER BROWN, MANHEIM RIVERSIDE GENERAL MANAGER.

Manheim Riverside recently hosted U.S. Rep. Mark Takano of California for a tour of a fast-paced sale, highlighting the work done to maximize vehicle values, and the employees who bring it all together. The auction was the 100th business for Takano’s “100 Business” tour, which began last year. “The Inland Empire has been hit particularly hard during The Great Recession,” commented Takano, “with the unemployment rate peaking at 15 percent and one in every fourteen homes in the region being foreclosed on. With that said, fixing our local economy is a top priority of mine. This tour allowed me to talk directly with the business owners and their

employees and learn what Congress can do to accelerate the recovery.” During the tour, Takano visited with Manheim Riverside general manager Christopher Brown, Southern California market vice president Scott Hurst and senior director of government affairs Karyn Wrye. He also toured the auction’s reconditioning center, body shop, detail area and VCI/Audi Tech Ops Center. “Manheim Riverside was honored to host Congressman Takano,” said Christopher Brown, general manager at Manheim Riverside. “We are excited that the congressman selected Manheim Riverside as the final stop of his ‘100 business’ tour.” W W W. I A D A C . O R G

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COMPLIANCE

MATTERS

WEATHERING THE INEVITABLE STORMS OF REGULATION BUILD ON A SOLID FOUNDATION

12

I was fortunate enough to grow up with a father who was a home builder. I learned that his financial success wasn’t directly related to how well he built homes, but rather how well he navigated the political bureaucracies that existed in the markets in which he built homes. Obstacles such as endangered species, million-year-old whale skeletons and power-hungry city councilmen all stood in his way of completing projects. His ability to adapt his business to factors unrelated to home building ultimately contributed to his success. I have had the privilege of working in the automotive industry for the past 11 years. I’ve seen dealers face what seemed to be insurmountable obstacles and overcome. I’ve also seen dealers fail to adapt to increased regulations and market pressures and, as a result, close their doors. The lessons I’ve learned in the automotive space are similar to the lessons my father taught me. If we are to survive and be successful, we have to build our businesses on firm foundations with solid business processes so we can weather the

many storms on the horizon. A new obstacle that has the potential to change how many dealerships run has to do with the Dodd-Frank financial reform law, which recently created a new federal agency called the Consumer Financial Protection Bureau. Dealers now face the risk of being investigated when consumers complain to their attorney general and other public forums. Since we live in a consumer-friendly environment, it is critical for dealers to adapt to this legislation by improving their business processes to not only better handle and document customer complaints but also proactively document the many successes with customers. Creating an effective consumer complaint procedure can capture and resolve many problems before they ripen into regulatory complaints. Reducing the number of complaints made to regulators is probably the most important thing a dealer can do to reduce the risk of being targeted by the CFPB. To help dealers overcome this obstacle, DealerSocket CRM has adapted its technology to effectively manage consumer

BY PETER ORD

complaints. Consumers can submit surveys online or call the dealer directly to log a complaint. Once the complaint is logged, the dealer has the option to automatically assign the complaint to an individual or team to solve. If a certain number of days pass before a complaint is resolved, the issue can be escalated to a manager or higher authority within the dealership. As an added bonus, surveys received from happy customers automatically get directed to online/social reputation sites (Google Review, Yelp, Facebook, etc.), improving a dealer’s online reputation by increasing their positive reviews. Showing a 4+ star rating on Google has the potential to decrease a dealer’s risk of being investigated, which in turn could save thousands of dollars. Since 95 percent of consumers use at least one social media outlet, it’s more important than ever to have a complaint management process to give your customers the communication path to voice their complaints with you first. Even if the CFPB didn’t exist, these business practices have been proven to help your business. A recent study by NADA found that if dealers are able to effectively resolve a customer complaint, they are four times more likely to retain them as a repeat customer than if they never submitted a complaint in the first place. This means that complaints can actually be a blessing in disguise for your dealership. Customer complaints aren’t the most pressing issues dealers face on a day-to-day basis, but the prompt resolution of an issue sets your dealership apart from others while securing customer loyalty. It has been said that data is the new oil for the 21st century. It is critical that we use data not only to help leverage new sales opportunities, but to also protect us from costly investigations that could come our way. PETER ORD IS THE DIRECTOR OF SALES FOR THE INDEPENDENT MARKET FOR DEALERSOCKET. HE IS RESPONSIBLE FOR LAUNCHING DEALERSOCKET’S NIADA ENDORSED CRM INTO THE INDEPENDENT SPACE. HE HAS FULFILLED THE RESPONSIBILITIES OF CUSTOMER SUPPORT, CONSULTING, TRAINING, AND BUSINESS DEVELOPMENT. HE CAN BE REACHED AT PORD@DEALERSOCKET.COM.

WEST COAST DEALER

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COMPANY SPOTLIGHT

Do You Know Your Transport Company?

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NOT ALL TRANSPORT COMPANIES ARE CREATED EQUAL BY MIKE MACAULAY, IADAC MAGAZINE EDITOR Who are the folks that run around in then has to babysit the the auction arena, taking your buy slips to vehicle through the deliver to your dealership? Every wholesale process to make sure it auction has representatives from local and is ready for transport. national transport companies ready to do She then provides business with you. Usually there is a row of the dealer with real several companies vying for your business. time information for Not all transport companies are created advertising and other equal. I would like to highlight Debra Epler plans. of United Road Services. Tuesday usually finds Debra Epler Debra at Brasher’s started in the Sacramento Auction; auto industry in Wednesday maybe 1996 working for a Manheim SF Bay Sacramento based Auction; Thursday repo company. Adesa Sacramento In 2005, Debra Auction or somewhere joined United in S. California. On Road Services, a Friday, who knows? On nationwide vehicle Monday the cycle starts transport company all over again. specializing in new While accepting and secondary inventory at every DEBRA EPLER WITH UNITED ROAD TRANSPORT vehicles. This auction, Debra still has to chase previous includes ports, inventory to make sure it passed inspection. United Road Services is now going dealerships and private party vehicles. This is in addition to the dealers that call paperless for deliveries and vehicle Debra puts the “service” in United Road directly to transport some wholesale units tracking. Their trucks have GPS tracking Services. When you present the transport or have retail units that need to go back for real time information. We applaud auction receipt, the work just starts for her. East. Despite all this chasing and follow-up, Debra Epler of United Road Services for Most vehicles get checked out or have some Debra always has a smile and a kind word her dedication and personal commitment reconditioning done at the auction. Debra for everyone. to our industry.

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DMV Targets Unlicensed Car Dealers Posing As Private Sellers

DMV NEWS

PROTECT YOUSELF!

• Be suspicious of cars and vehicles suddenly parked in undesignated areas. •Monitor free advertising sites, like Craigslist, for cases in which the same contact phone number appears on various private party listings. •Compare contact information on “For Sale” signs to see if it is the same. •Verify the name on the certificate of ownership (title) matches the seller’s name. •Steer away from sellers who accept only cash and refuse checks or money orders. • A curbstoner will not let you have the vehicle independently inspected or provide maintenance records that match the car. • A curbstoner will not allow you to conduct a Carfax report because it will detail if the vehicle was sold at auction. DMV’s investigations division enhances consumer protection, including auto and identity related fraud, car dealers, driving schools, traffic violator schools and other DMV occupational licensees, as well as internal affairs investigations. Save Time, Go Online! Doing business with the DMV has never been easier. The DMV offers an array of services to customers 24 hours a day, seven days a week through its website (www.dmv.ca.gov), including online advance appointments for written and drive tests, vehicle registration and driver license renewals, selection of personalized license plates, changes of address and payment of fees via secure debit transactions. Customers can also effect transactions by calling DMV customer service at (800) 777–0133. DMV is a department under the California State Transportation Agency.

STATEWIDE UNDERCOVER STING PRODUCES DOZENS OF CITATIONS California Department of Motor Vehicles investigators fanned out across the state on Saturday, April 12, citing unlicensed car dealers who prey on disadvantaged buyers by disguising themselves as private sellers with the intent of flipping unsafe, used vehicles. Undercover officers issued 93 citations, gave 68 warnings, impounded 109 vehicles and arrested four individuals on outstanding warrants during the operation. Unlicensed car dealers, called “curbstoners,” typically purchase low end vehicles from private parties and salvage auction yards and usually do little, if any, mechanical or safety reconditioning. Curbstoners can face several thousand dollars in fines and fees for each confiscated vehicle. Curbstoners typically create “pop-up” lots by parking multiple vehicles in one location, clogging city streets, public parking lots and private property. They also lure potential buyers by advertising on websites like Craigslist, using different seller names, but the same phone number. WEST COAST DEALER

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TERMS, FACTS and TIPS:

• Curbstoning is the repeated, unlicensed “flipping” of used cars for profit. •Curbstoners are people who actively and regularly buy and sell vehicles without a license, proper permits or a legally established place of business and who, many times, represent themselves as private sellers in order to attract buyers. •Nuisance: Curbstoners often turn high traffic areas into instant parking lots, lining up cars at gas stations, supermarkets, convenience stores, on private property or even the side of the road. They deprive shoppers of places to park and the inconvenience and unsightliness drives away business. •Fraud: Consumers can easily become victims of fraud involving issues like odometer tampering, undisclosed frame damage or salvage rebuilt vehicles, faulty safety devices, mechanics or promissory liens and other problems that may not be truthfully disclosed at the time of sale. A consumer has no recourse! •Criminal: The most common crime committed by Curbstoners is tax fraud. When an unsuspecting customer buys a car, the curbstoner will leave the title blank or “open.” Without the curbstoner’s name on the document, they are able to pocket the money (usually cash) and avoid paying state sales tax, federal income tax and any other declarations that are legally required.

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THIS 2006 MERCEDES BENZ SUV IS AN EXAMPLE OF THE KIND OF CARS CURBSTONERS ARE SELLING TO UNSUSPECTING BUYERS. IT WAS INVOLVED IN AN OUT-OF-STATE ACCIDENT AND WAS SO BADLY DAMAGED IT IS NOT SAFE TO DRIVE. WHEN INVESTIGATORS INSPECTED THE COSMETICALLY REFURBISHED VEHICLE, THEY FOUND THE FRAME HAD BEEN WELDED TOGETHER, IT CONTAINED NO AIR BAGS AND THE REAR DOOR DID NOT LINE UP.

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ASSOCIATION NEWS

SAN DIEGO AUTO MUSEUM EXHIBITS.

2014 IADAC Southern California Conference EVENT WAS A GREAT SUCCESS

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The San Diego Automotive Museum proved to be a great venue for the IADAC 2014 Southern California Conference. It was scheduled for just a half day on Friday, April 11, so as not to disrupt business for the dealers. IADAC lobbyist Bill Dohring kicked off the condensed event with a legislative update. Fortunately for dealers, it appears this year will not produce significant legislation that would upend the industry. Rob Lange and Sean Foyil with Kelley Blue Book took the spotlight next with a valuation seminar and discussion. Dealers are still baffled at the disparities between KBB’s values and the much higher prices they consistently pay for prime inventory. Discussion between KBB and dealers should help the industry as dealers openly communicate these disparities. Attorney Chris Scali and IADAC treasurer Terry Degmetich teamed up for an informative session that covered topics from pre-purchase of inventory at auction to proper handling of after sale repairs. San Diego attorney Michael Rogers concluded the event by discussing lawsuits against dealers. Mike emphasized the need for dealers to understand their role in compliance. When called upon to defend a lawsuit, Mike’s task becomes more difficult if a dealer clearly violated disclosure or other regulations. Nineteen vendors attended the event. They spent the two prior days at Manheim California and ADESA San Diego with the auctions hosting vendor trade shows for our associate members. Being at the auctions is a special treat for vendors and dealers alike. Dealers were able to learn about new products and services while buying and selling cars at the auctions. Special thanks to Tom Wemhoff, general manager at Manheim California, as well as Richard Steffy and Art Norman for their support. Also a special thanks to ADESA San Diego general manager Ted Coates, CJ Lopez and Rob Singleton for all their help. This event has grown significantly due largely to a greater recognition of IADAC in Southern California. As more dealers understand the representation IADAC provides for industry issues and benefits available to members, our So Cal membership continues to grow. It should be very clear to dealers that compliance is a top priority. Our associate member attorneys caution dealers to pay attention to the details. A single, seemingly insignificant detail can and has been cause for a costly lawsuit. Prizes donated by the auctions totaling over $3,000 were given to lucky dealers during dinner. Thanks to ADESA San Diego, ADESA Los Angeles, Manheim California, Manheim Riverside, Manheim Southern California and Manheim San Diego for providing buy/sell fees for the winners. These events don’t happen without the help of sponsors. In addition to the 19 vendors in attendance, we must thank Active Auctioneers Association as well as meal sponsors AUL Corp. and The Scali Law Firm. Also, thanks to Jim Taylor with Auto Data Direct, IADAC vice president Mehdi Chitgari and delegate Ben Robledo for their tireless work for the event. WEST COAST DEALER

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VENDOR TRADE SHOW AT MANHEIM CALIFORNIA.

KELLEY BLUE BOOK SEMINAR

ROB LANGE, KELLEY BLUE BOOK INDUSTRY INSIGHTS AND EDUCATION DIRECTOR.

AFTER DINNER CONVERSATION WITH IADAC PRESIDENT ROCCO DELAPA, HIS WIFE MARJORIE, IADAC TREASURER TERRY DEGMETICH AND HIS WIFE RACHEL.

VENDOR EXPO AT THE SAN DIEGO AUTO MUSEUM.

OUR GUEST VENDORS: AUL Corp. Auto Data Direct Car Concierge Services Cash Call

Credit Acceptance DealerCenter Data Consultants Dealer Protection Group Dealer Socket

Dealertrack GM On Star Lobel Financial MVSC (DMV Desk) Nationwide

Next Gear Capital Route One Showcase Media TOP Finance Co. Veros Credit W W W. I A D A C . O R G

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M ARKET WATCH

Used Cars Are Going to Keep Getting Cheaper and Cheaper ONE AFTEREFFECT OF THE GREAT RECESSION IS ON DISPLAY NOW AT CAR DEALERSHIPS, WHERE THERE ARE MORE AND MORE USED CARS FOR SALE AT INCREASINGLY LOWER PRICES.

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The used car market has gone a bit haywire over the last half-dozen years. During the height of the Great Recession, new auto sales of all shapes, sizes and variations tanked. As a result of relatively few new cars being purchased, there were fewer used cars on the market during the years that followed – years when the economy was still struggling, when demand for cheap vehicles was understandably high and when used car prices soared because there weren’t enough pre-owned vehicles for sale to keep up with demand. Signs of a softening in used car prices began appearing around 2012 and now consumers can expect better pricing and a more robust selection of most models. In particular, a trend that’s stretched for several years in the lease market will soon result in a “used-car flood” at auto dealerships, as Automotive News put it. Leasing, which slumped during the peak recession years, has rebounded considerably lately. In 2009, according to Edmunds.com,

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consumers scooped up only 1.5 million or so new cars via three-year lease, down from nearly 2 million the year before. Fast-forward three years after that low for leasing, and in 2012 there were only about 1.5 million off-lease used cars hitting the market – an exceptionally small number compared to the high of 3.4 million in 2002, per the Manheim Used Car Market report. Because the pace of used-car leases has picked up each year after 2009, so too have the ranks of used cars going up for sale three years later, when the lease terms are up. This year, roughly 2.1 million off-lease vehicles will be back on the market, up from 1.7 million in 2013. Next year, the number of off-lease used cars for sale should swell to 2.5 million, and in 2016 and for the foreseeable future, Manheim predicts that there will be more than 3 million off-lease vehicles returning to the market annually. Add in the fact that cars have increasingly longer life spans, and we’re seeing an acrossthe-board rise in supply of used cars – and the increasing supply is projected to translate

to lower prices. Earlier this year, Edmunds. com forecast that used-car prices would slide 2 percent in 2014, and perhaps further down the road as a result of leasing trends. “Many car shoppers might not realize how much the new- and used-car markets feed off each other,” explained Edmunds. com senior consumer advice editor Philip Reed. “The boom in new car leases, for example, is leading to a higher number of lease returns, which adds to the growing inventory of used cars, forcing their prices down.” The news isn’t all good for consumers, however. A decrease in used-car prices also means that drivers will get less for used vehicles they’re trading in or selling. That shiny new car you purchase is likely to lose its value more quickly than it would have in the recent past. Individual car buyers also tend to simultaneously be sellers of their older cars, and from the looks of things, it’ll be a buyer’s market for quite some time. TIME.COM

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SALES

MATTERS

Insights Into Customer Experience IT’S A RELATIONSHIP-DRIVEN BUSINESS We are all consumers. As a consumer, what is it that you truly desire when doing business with a company? Sure, you expect to pay a fair price for whatever product or service you purchase. Moreover, you should perceive value for the money you are spending. Isn’t there a lot to be said about the overall customer experience? Your basic expectation is a successful transaction, but shouldn’t you expect more? If the answer to this question is yes, then you should take into account your overall customer experience with the individuals and companies you do business with. Everyone wants to feel like they matter, and most people seek a certain degree of satisfaction that inspires repeat business. What do you do to create a positive customer experience? Most people like it when someone genuinely cares about their best interests. However,

BY GARRETT JOREWICZ

how many people like it when someone tries to sell them something? Essentially, people love to buy, but hate to be sold. This holds true for the car buying experience, which is consistently ranked as one of the most stressful purchases someone will make. Customers don’t want to feel like they are being pressured into buying a certain vehicle or add-ons. In general, most of them know what kind of car they want and what they want to pay. If they have contacted you about a car or come to your lot, the hardest part – getting them onto your lot – is done. Now the key is to provide the experience that enables you to close the deal. Two weeks ago, I decided to get a new car. I found the dealership that had the best selection of the car I wanted. I set clear expectations with the salesperson of what they could expect from me. I told them exactly what I wanted from them

and I asked if they would like to proceed. I was assured that they would work with me under those terms. While I may be in the industry, on this day I was a consumer seeking a hassle-free experience at a fair price. In reality, they just wanted to get me in the door, upon which they then proceeded to change their initial agreement. Unable to resolve the issue, I walked out of the dealership. This experience sums up how important a good customer experience is to me as a consumer. Had they upheld their initial agreement, they would have gotten my business. Instead, not only did they lose a sale, but they also lost the potential for a loyal customer. Ultimately, I was able to get the same deal from the dealer down the street I had purchased my last four cars from. In retrospect, I should have gone to them first due to my past positive customer experience with them.

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There are some very basic principles to enhance the overall customer experience. Following these guidelines will help earn repeat business and referrals! • P  ut yourself in the shoes of your customer. • Be empathetic to the process. • E  ducate your customer and be consultative. • Care. Understand that this is a relationship-driven business and providing a good customer experience can help you stand out from your competition, leading to loyal, repeat customers. GARRETT JOREWICZ IS THE REGIONAL DIRECTOR, OF NEXTGEAR CAPITAL, INC.

AUCTION

Brasher’s Sacramento Auto Auction Celebrates 36 Years

NEWS

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TWO DAY 3,000-PLUS VEHICLE SALE FEATURING CLASSIC TRANS AM Brasher’s Auto Auction celebrated 36 years in Sacramento with a two-day mega-event that saw more than 3,000 vehicles cross the block March 2425. The auction welcomed more than 1,300 dealers to the 36th anniversary sale and gave away over $50,000 in cash and prizes, including a classic 1966 Ford Mustang and a trip for two to the Caribbean. The event kicked off on Monday with “Brasher’s Live!” The auction hosted customers for an evening event that included dinner and a comedy show featuring Tom Wilson, probably best known for his role as Biff in Back to the Future, who brought a combination of storytelling and hilarious music to the stage. “The auction arena undergoes an amazing transformation for our anniversary sale,” said Brasher. “In place of auction blocks, the sound of engines and the rush of cars moving through the lanes, our guests find a banquet room complete with flowers, candlelight, music and a catered international menu. Our theme varies, and every year people are amazed at the change from auction arena to an elegant dining venue.” While the audience is enjoying the entertainment in “Brasher’s Live!” the staff is busy at work behind the scenes getting the auction arena ready for the sale that follows the show, explained Brasher. The evening sale had 500 vehicles from Ford Motor Company, Santander, GE Capital and new car dealers. WEST COAST DEALER

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Dealers returned to the auction lanes Tuesday morning to bid on over 2,500 units at the biggest sale of the year. One of the highlights was the sale of a classic Pontiac Trans Am, which created quite a sensation when it crossed the block. According to Brasher, “It was just like the car that was in the movie Smokey and the Bandit, and it brought all the money. In fact, the seller gave away a jacket to go with the car that had been autographed by Burt Reynolds himself! “We always look forward to our anniversary celebration, but this year’s sale was one of the biggest we’ve ever had,” said Brasher. “We couldn’t have timed it better. Coinciding with a tremendously strong market, this year’s lineup of entertainment and vehicle inventory, and the opportunity to spend two days with great friends in the business, made this an event we’ll all remember for a long, long time!” Serving major markets throughout the West, Brasher’s Sacramento Auto Auction offers a full range of remarketing services including reconditioning, inspections, transportation, inventory financing and wholesale automotive, salvage, specialty, and Internet auctions. The auction encompasses 100 acres, operates 16 lanes and handles more than 1,700 vehicles at its weekly dealer consignment sale. In addition, the auction holds a monthly GSA Sale which is open to the public as well as the auction’s dealer base.

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A CLASSIC TRANS AM ATTRACTED LOTS OF ATTENTION AND BROUGHT ALL THE MONEY. 1 THE AUCTION ARENA UNDERGOES AN AMAZING TRANSFORMATION FOR THE ANNIVERSARY SALE AT BRASHER’S SACRAMENTO AUTO AUCTION, WHERE GUESTS FIND A BANQUET ROOM COMPLETE WITH FLOWERS AND CANDLELIGHT. 2

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SAM KHACHO FROM THREE AMIGOS AUTO CENTER WAS THRILLED TO WIN THE 1966 MUSTANG AT THE CONCLUSION OF THE ANNIVERSARY SALE. 3

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MANAGEMENT

MATTERS

Four Simple Rules of High-Turn BY GREG EASTERLY

INVENTORY MANAGEMENT

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Market forces are driving the used car business toward a system of high-turn inventory management. The focus is not on maximizing profit for each vehicle, but on maximizing profit by quickly and efficiently selling your entire inventory, then restocking and repeating. While adopting this style of inventory management can be challenging, it is something anyone can learn if they approach it correctly, invest in the right resources and focus on the proper aspects. Here are some simple rules to follow if you are interested in adopting the high-turn approach for your dealership. Rule 1: Look at prospective purchases through the eyes of a consumer/customer. The impetus behind high-turn inventory management is informed customers. The rise of Internet advertising and resources that give retail buyers more information about vehicles than ever before have caused used car margins to shrink – necessitating the turn toward efficiency in dealer operations. As a result, it’s critical to think about inventory in the way that customers do: the appeal of a particular unit when

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compared to the whole market. That appeal includes characteristics like trim and color, but pricing is the major factor for most consumers. They can learn almost anything about a particular model’s performance and features. The only thing they can’t do: testdrive a specific vehicle. Rule 2: The goal is not to sell vehicles cheaply, but competitively. Wholesale pricing is a useful measure for transactions between dealers, but it’s only part of the picture. Consumers are thinking of vehicles in terms of market retail pricing, so dealers must as well. Cost to market is what you want to determine for each piece of inventory. Cost to market is measured by taking the cost to acquire and prepare a vehicle for sale (purchase price, transportation, any repairs, etc.) and dividing it by the average retail asking price for that model. So let’s say it cost you $8,000 to acquire a vehicle with an average retail asking price of $10,000:

Cost to aquire vehicle Average retail asking price

= =

$8,000 $10,000 0.8 or 80%

© 2014 DEALERMATCH

This vehicle would have an 80 percent cost to market. An average range is usually 80–85 percent, but note that cars with a higher average retail asking price typically have a higher cost to market than cars that retail for lower prices. You should do anything you can to lower your cost to acquire, because this in turn will lower your cost to market. One simple way to do this is by reducing transactional costs like reconditioning and buy fees, which are connected to your method(s) for sourcing inventory. A high-turn operation not only needs inventory – it needs inventory that is in demand right now. This is not a new issue. Dealers have always had to stock cars that customers want. The difference is that external pressures are forcing this to happen more rapidly and with a lower profit per unit. If you cannot quickly obtain the cars your customers want, you risk losing those customers to your competitors. So you ultimately need a robust, reliable and responsive inventory acquisition model. Efficiency is key as you can’t take too much time away from selling cars. You CONTINUED ON NEXT PAGE

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need to be able to seamlessly transition from selling the cars you have to getting new ones, preferably without leaving your office. You need to invest in technology that makes it easy for you to evaluate the marketplace and quickly secure retail-ready cars. You need a massive pool of vehicles that are easily searchable and ready to sell. And you need a network of trusted sellers who routinely have the cars your customers demand. Rule 3: Determine what makes customers pay average, above average or below average prices. Most people understand intuitively how supply and demand determine the price for which you can sell a product. But supply and demand also determine how quickly you can sell a given product, how many of that product you should acquire to sell and how frequently you should restock that product. These concepts are absolutely critical, as your ultimate goal is 100 percent turn every month if possible. This is especially important because you’re selling a product whose value depreciates over time, a fact known all too well by any dealer who has ever been burned by aging inventory. Rule 4: High-turn management depends on your ability to successfully merchandise your inventory. When you list cars online, it takes many sets of eyes to achieve 100 percent turn. Once you’ve secured your inventory, you need to get it in front of Internet shoppers as quickly as possible. Your intake and reconditioning process needs to be seamless. Make sure you post sharp, pleasant pictures of your cars so that customers see them in the best possible light – literally and figuratively. It’s also important to describe your inventory clearly and effectively. Note that competitive pricing often puts you on the first search results page because Internet shoppers frequently sort by price low to high. If you can follow these four rules, you will have a viable opportunity to successfully implement a system of high-turn management.

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GREG EASTERLY IS PRESIDENT AND CO-FOUNDER OF DEALERMATCH. COM, A DEALER-TO-DEALER MARKETPLACE THAT HELPS MEMBERS BUY AND SELL VEHICLES FASTER, EASIER AND MORE PROFITABLY.

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MANAGEMENT

MATTERS

How to Present Products to the Remote Buyer ESTABLISHING A CONNECTION FOR RETENTION

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Business managers tell me that 50 percent of their customers are paying cash. Deals are closed over the telephone and over the Internet. While the Internet has leveled the playing field, and many of today’s customers are not interested in taking test drives prior to purchasing, I find many of the traditional steps on the pathway to a sale have been shortened or eliminated altogether. In many cases the process has been shortened to simply lowering the price and hoping that the quoted price is lower than the competitors. The sales associate or sales manager simply provides the customer with the “out the door price” and sets a delivery date and time. The file might go to the business manager; it might also stay with the sales manager until the time of delivery. When price becomes the only selling point, the customer is cheated out of learning the value of the dealership and the goods and services it provides. For instance, where are your vehicles serviced? Do they go through a 17 or greater point check? Does your shop do more than smog and safety? If you do more than the minimum reconditioning for your inventory, your sales process should tell the story about how you go the extra mile to ensure customer satisfaction. You may ask, “What does the method of payment have to do with my future business relationship with the customer?” History has shown that a dealership can build customer retention by arranging financing for the retail sales. The customer completes all the loan documents at the dealership. When the customer wants to upgrade or trade in the vehicle, he or she assumes the dealership knows the payoff. The customer purchased the vehicle from the dealership and the customer who knows you, likes you and trusts you will return to you when he or she wishes to upgrade or trade because you know the true value of the vehicle. Additionally, each time the customer writes a check or enters the payment in a register, the customer is thinking about the dealership and the buying experience. If the customer pays cash, they only think about the dealership when they make the purchase or when the vehicle suffers a mechanical breakdown and they are in the shop, most likely without a service contract. Which is the more positive memory? How many of your current remote WEST COAST DEALER

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customers purchase service contracts? My guess is not many, because they were given the “Out the Door” sales figures and came to the dealership with a cashiers check made out to the penny, because they secured financing elsewhere. Some customers still believe they can get a better deal if they pay cash to the dealership. The sales personnel think the deals are processed quicker, and they get paid faster if the customer pays cash for the purchase. My question is this: Is this truly the best way for a customer to pay for a vehicle? “Cash to you” is code that it is coming from another financing source. A customer with complete sales figures in hand is now a finance shopper. They will go to their own financial resources to inquire about financing. When they do go into a credit union they will most likely be introduced to an auto broker who will review your sales figures and trade market value. Have you ever had to renegotiate the sales figures just to hold the deal together after the customer has received sale counseling from an outside lender? What can be done to effectively deal with the “remote buyer?” Word Tracks for the Remote Customer Situation: The deal was closed either over the Internet or telephone. The customer is only coming to the dealership on the day of delivery. Challenge: How to do a “financial” presentation when the customer is not in front of the business manager. Available tools: Internet, telephone, US Postal Service, GoToMeeting The deal information should be given to the business manager as soon as possible, just as if the customer were there at the dealership. Time is of the essence. If the deal was closed over the telephone the sales person should have completed a professional handoff to the business manager. EXAMPLE: The salesperson: “Thank you Mr. Customer for your business. We truly do appreciate it. If I may have just one more minute of your time today, I would like to introduce you to our business manager, who will be instrumental in completing your documentation of the sale. I will place you on hold while I get the manager on the line.” (For those that have a three way calling system, place the customer on hold and get

BY JAN KELLY the business manager on the line. If the business manager is busy with a customer then get the assistant business manager or sales manager on the line.) Once all parties are connected, set up for success. The salesperson should introduce the business manager: “Mr. Customer I have Manager on the line with us. Manager, Mr. Customer just purchased a ________________ from us and is asking for __________________ as a delivery date. I will get the documentation to you as quickly as possible. Mr. Customer I would like you to meet Manager, one of our business managers, who will be completing the documentation of the sale. Thank you Mr. Customer again for the purchase.” The sales person should hang up and the other two should be remaining on the line. Business manager: “Mr. Customer, when I get your documentation from the sales representative I will review the documentation and will be able to see what needs to be done. I would like to send you an email with some links about some opportunities you have to protect your new vehicle. After I review the file, I will need to spend about 10 to 15 minutes on the telephone with you. What is the best method of contact for you? When can we spend those few minutes on the telephone?” (Keep in mind, the customer might be at work, they might be driving, they might say call me right back. The key is finding out when they will have 15 minutes to share with you that they will be near a computer. The business manager should send the new customer an email with links to information about your first visit products and services.) SAMPLE OF EMAIL: Dear Mr./Mrs. Customer, Thank you once again for your purchase. We are looking forward to getting your _________________ ready for delivery and the documentation completed. Please allow about one hour for the delivery process on the day that you are scheduled. At that time you will receive any remaining factory warranty information for your vehicle. As you know, factory warranties are limited to manufacturer’s defects in materials and workmanship. They do not cover everything. Based upon the current year and mileage, your vehicle qualifies for an added parts and labor agreement. I have attached a PDF file for your review. Many of our customers have asked us how they can cut down on the time it takes to CONTINUED ON PAGE 26 W W W. I A D A C . O R G

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PRODUCTS

CONTINUED FROM PAGE 24

clean their vehicles in addition to protecting it from fading and further oxidation. The solution is to have us apply our protective coatings to the exterior and interior of the vehicle prior to delivery. The protection comes with a ___ year guarantee against fading and makes clean up easier, resulting in a nicer looking vehicle that retains a high resale value. I have included the following links for you to review. (Please add the links to your website or product websites.) What time would be convenient for you to share about 10 to 15 minutes on the telephone? I look forward to talking with you soon. Thanks a lot, Business Manager Dealership Location Contact info

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The value of the professional hand off is for the customer to know from the sales department that there is a next step. The next step is our business manager, who will be in further contact with the customer prior to delivery. The value of the email is to provide information to the customer to get them thinking about how to protect their purchase. Please note: 55 percent of all communication is non-verbal, so customers need something they can see while you

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are talking with them over the telephone. Thirty-eight percent of all communication is how we hear the information, 7 percent is actual facts. “GoToMeeting” venue: If you have access to GoToMeeting, you can simply make an appointment with the customer for a web meeting with the business manager. Using this tool the business manager can invite the customer to a meeting and the visual is on both the business manager’s and customer’s computer screens. If the computers have cameras, the business manager and customer can establish a virtual line of sight between all parties. Establishing a line of sight is always a plus. You will need to use the tools that are available to establish the connection with the customer prior to the delivery date. A customer with the out the door figures prior to delivery will shop for financing and will arrive at the dealership with a check for the balance. He or she may even shop for service contracts online prior to delivery. As we all know, no one can take better care of a customer than the dealership! The F&I products and services are the tools that allow the dealership to build customer retention and customer satisfaction. BY JAN KELLY PRESIDENT OF KELLY ENTERPRISES, JAN IS AN EDUCATOR AND CONSULTANT, CONVENTION SPEAKER AND WRITES FREQUENTLY FOR INDUSTRY PUBLICATIONS. FOR INFORMATION ABOUT EDUCATIONAL VENUES, CALL 800.336.4275 OR VISIT JLKELLY.COM.

& SERVICES

GE Capital Fleet Launches Management Tool PLATFORM OFFERS INCREASED FLEXIBILITY AND FUNCTIONALITY GE Capital Fleet Services recently announced the launch of MyFleetOffice2, an online fleet management platform that gives fleet managers the ability to do more powerful analytics and complete a wide range of administrative tasks more easily and entirely online. Incorporating extensive input from GE Fleet customers, the MyFleetOffice2 platform is designed to provide fleets with increased flexibility and functionality, and the ability to access deeper and more insightful data and analytics. “Fleet managers are demanding both greater understanding of fleet performance, and insights into how that understanding can turn into greater cost efficiency, safety and compliance,” said Kristi Webb, CEO of GE Capital Fleet Services. “The MyFleetOffice2 platform will help our customers take advantage of information to drive these valuable business insights.” In addition to new functionality, MyFleetOffice2 incorporates the company’s ongoing investments in information security, providing fleet owners with access to 256-bit encryption and multi-factor authentication to ensure that fleet data is protected against unauthorized use.

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PRODUCTS

& SERVICES

BUYING A USED CAR NEW TECHNOLOGY TO AVOID CARS THAT HAVE BEEN WRECKED

Buying a used car is almost always a roll of the dice. People have said, “You are just buying someone else’s problems.” The truth is there are plenty of good used cars out there. Most cars reach the used car market because of expiring leases or simply because owners are getting something newer, but there are exceptions. Some used cars are unloaded by their owners because of a problematic past. When considering a used car, we always recommend getting it inspected by a qualified mechanic and obtaining a vehicle history report from an agency such as Carfax.com or AutoCheck.com. Unreported Damage Even taking these precautions is not guaranteed to uncover a vehicle’s every accident, however. Without taking a car apart, even an accomplished mechanic can miss signs of accident repairs. Moreover, vehicle histories only contain reported accident information. If an owner crashes his car into a tree, manages to get his car to a repair facility without alerting law enforcement and doesn’t file an insurance claim to fix the damage, the accident probably won’t show up in a vehicle history report. So, is there a foolproof method for identifying cars that have been in unreported accidents and evaluating the extent of any

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resulting damage? Yes, and it’s currently being used by accident investigators and law enforcement to aid in reconstructing accidents. Not Exactly a Black Box Since 2010, most new cars are equipped with an event data recorder. Although it has very little in common with the black box we hear so much about after a plane crash, that’s the term most people understand when talking about the EDR. An airplane’s black box continuously records data – often including sound – while the plane is in operation, but the EDR is more of a snapshot of a car’s data from a few seconds before an accident to a few seconds after. During the course of an accident investigation, investigators use the crash data retrieval tool to download EDR data to determine what the car was doing in the seconds leading up to the crash. Was it speeding, swerving or braking? Was there an airbag deployment? Were the occupants wearing seat belts? CDR is also able to access other components that store data, such as the powertrain module, rollover sensor and airbag control module. The ACM is a virtual storehouse of crash data gathered through crash-sensing systems such as seatbelt related

BY RUSS HEAPS

sensors and occupant detection systems. So, What Does It Mean? How might all of this translate into helping the typical shopper avoid damaged vehicles when buying a used car? When purchasing a used car for resale, the used car dealer can make a CDR report part of the evaluation process. By plugging the CDR tool into the vehicle’s universal data port, the user can have a printed report in three or four minutes. This can happen at the dealer’s lot before accepting a used car as a trade-in, or at auctions, where dealers acquire 80 percent of the used cars they sell. Once they’ve won the bid on a vehicle at an auction, dealers have opportunity to inspect it before any money changes hands. If the CDR report uncovers a serious event, the dealer can opt out of the deal. So far, used car dealers haven’t embraced CDR as a sales tool, but the day may come when used car shoppers demand a CDR report just as they do service history records and vehicle history reports. RUSS HEAPS BEGAN COVERING THE AUTOMOTIVE INDUSTRY IN 1986. HE HAS SERVED AS MANAGING EDITOR OF AMI AUTO WEEK AND NOPI STREET PERFORMANCE COMPACT MAGAZINES. RUSS CURRENTLY FREELANCES HIS AUTO REVIEWS AND INDUSTRY ANALYSIS TO THE WASHINGTON TIMES, HISPANIC MAGAZINE, JOURNAL-REGISTER NEWSPAPERS, BANKRATE.COM, MYCARDATA.COM, INTEREST.COM, AND OTHERS. HE RESIDES IN GREENVILLE, SC.

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AUCTION NEWS

Manheim Riverside Named Hyundai Auction of the Year

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Hyundai Motor America recently announced its 2013 Auction of the Year and recognized Manheim Riverside with the annual award. Each year, the award goes to the topperforming auction in terms of sales values, customer service, dealer satisfaction, quality and overall performance. This marks the first time a West Coast auction has won the award from Hyundai, which first began remarketing cars at Manheim Riverside in 2012. “We appreciate our partnership with Manheim Riverside and its outstanding management team,” said Gary Knapp, senior group manager, fleet & remarketing, Hyundai Motor America. “With sales volume in our Western Region continuing to increase, we felt it was time to open another auction location in order to better serve dealers on the West Coast. “The staff at Manheim Riverside has stepped up and consistently puts forth great effort while making sure our dealers always feel welcome. Riverside provides outstanding service and keeps our dealers engaged and

interested in returning month after month. Congratulations to GM Chris Brown and his team for a great year,” he continued. Brown of Manheim Riverside added: “It is truly an honor to receive this prestigious award. We are proud of our long-term partnership with Hyundai Motor America, which is very important to everyone at Manheim Riverside. We value the personal connections with the Hyundai dealer body and HMA corporate team, and are proud of the results we have achieved together. ”

u

FIRST TIME A WEST COAST AUCTION HAS WON THE AWARD

MANHEIM RIVERSIDE WAS NAMED HYUNDAI MOTOR AMERICA’S 2013 AUCTION OF THE YEAR, MARKING THE FIRST TIME A WEST COAST AUCTION HAS WON THIS HONOR.

Hyundai added that Manheim Riverside’s closed Hyundai sales include high-quality, low-mileage cars for dealers that often end up in Hyundai’s certified pre-owned program, which has earned Best Popular Program Award honors in the IntelliChoice Certified PreOwned Car Awards three years in a row.

PRODUCTS

& SERVICES

DealerSocket Partners with Finance Express

INTEGRATIONS ALLOWS DEALERS TO EASILY SCHEDULE AUTOMATED PROCESSES DealerSocket recently announced a new integration with Finance Express (FEX) DMS. Through this integration, DealerSocket now receives a nightly customer file from FEX DMS which allows dealers to easily schedule automated processes such as vehicle buy back, happy birthday and anniversary follow-up. DealerSocket will also create master customer records showing the total customer value of each customer, which will help dealers know and understand who their customers are in all stages of the follow up process. WEST COAST DEALER

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AUCTION INSIGHT

What’s it Like to be an Auctioneer? IT TAKES SKILL

Most auto dealers use wholesale auto auctions to buy new inventory, turn over old inventory and wholesale trades. There are many things that go on at an auction, but the dealer’s main interface is the auctioneer handling the sale. There are two main kinds of auctioneers: 1) The permanent auction employee. 2) The independent contractor auctioneer. The permanent auction employee usually works the auction block during their sale days. The rest of the week, that employee has other auction duties. An example of this type of auctioneer is Rod Davis of Brasher’s Sacramento Auto Auction. Rod is the general sales manager at Brasher’s. He is also a past president of IADAC. Rod can be found at his sale every day, doing what it takes to run an auction. His job also entails managing the auctioneer staff and making sure that every auctioneer has current inventory information for the upcoming sale. Rod has meetings before every sale with his auctioneers to make sure everyone is on the same page. The independent auctioneer, however, is usually at the sale for that day only. Gary Wendell is an example of such an auctioneer. Gary has been an auctioneer for over 30 years and has worked for Brasher’s Sacramento Auto Auction for over 30 years. Gary’s schedule puts him all over the state every week, working wholesale auto auctions. Wendell also shares his gift as a talented auctioneer for many charitable events. He does charitable auctions for many PGA events for folks like Billy Casper, Jack Nicklaus, Arnold Palmer, Johnny Miller and Gary Player. Other independent auctioneers work all over the western states on a weekly basis. They could auction for an equipment sale on Monday, a car auction on Tuesday, another on Wednesday and Thursday and do a livestock sale on Saturday! The skill and gift of being an auctioneer is not something everyone can do. There are national auctioneer schools that comprehensively train and refine these gifts. Others learn on their own and start as a “ringman” or “hoodman” to get a foot through the door. Please take a little time to show your appreciation for a skilled auctioneer. Not only do they help you make money, they keep you informed at what you are buying and how it is being sold. W W W. I A D A C . O R G

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AUCTIONEERS MEETING PRE-SALE AT BRASHER’S SACRAMENTO AUTO AUCTION.

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WASHINGTON

UPDATE

NIADA Government Report HERE’S A RUNDOWN OF SOME OF THE LATEST GOVERNMENTAL ISSUES AND ACTIVITY AFFECTING THE USED CAR INDUSTRY FROM NIADA REGULATORY COUNSEL SHAUN PETERSEN AND NIADA LOBBYIST SANTE ESPOSITO. National Independent Automobile Dealers Association

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LEGISLATIVE REPORT H.R. 749, Eliminate Privacy Notice Confusion Act; S. 635, Privacy Notice Modernization Act of 2013 NIADA has been monitoring these bills, which would eliminate a costly and duplicative requirement of the Gramm-Leach-Bliley Act that all financial institutions mail their customers a copy of their privacy notice each year even if there has been no change in the privacy policy. While NIADA supports both bills in concept, our preference is the alreadypassed House bill because of concerns over an addition included in the pending Senate bill. Both would remove the annual privacy notice requirement if an institution has not changed its privacy policies or procedures. The bills do not exempt any institution from an initial privacy notice, nor do they allow a loophole for an institution to avoid issuing an updated notice. The Senate bill adds a qualifying

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condition for exemption – that customers be provided “access to such most recent disclosure in electronic or other form permitted by regulations prescribed under section 504.” The Senate bill envisions financial institutions posting their privacy policy on their website or transmitting it via email. While that might work for traditional financial institutions, some small dealers do not have websites, and email transmittals can be costly, cumbersome and speculative at best. And email transmittal assumes customers have the capability to receive them, which is not always the case. In addition, the reference to “section 504” creates significant uncertainty – that section, in part, gives the Consumer Financial Protection Bureau and Federal Trade Commission broad authority to issue regulations on an ongoing basis, leaving in doubt what “other form permitted by regulations” might take.

Because of that, NIADA’s position is that subparagraph (3) not be included in the final version of S. 635. On April 23, we met with staff of the House and Senate Banking Committee to discuss the bills, expressing NIADA’s support and raising questions about the Senate’s “add-on language,” and submitted a formal comment letter. MAP-21 Reauthorization The Moving Ahead for Progress in the 21st Century Act (MAP-21), a transportation bill enacted in 2012, expires Sept. 30. While Congress and the industry realize transportation bills are rarely passed on time and short-term policy extensions are usually required, this time extending the authorizing language will not be enough because the Highway Trust Fund will not have the funds to pay for the extensions. Congress must decide not only what policy provisions to include in the next

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NIADA Washington Update National Independent Automobile Dealers Association

reauthorization bill, but how to fund it. There is strong support from the industry for a gas tax increase from stakeholders who might be expected to oppose it, such as the American Trucking Associations and the U.S. Chamber of Commerce, but Congress does not appear to have the will to take on such a politically charged issue prior to the November mid-term elections. As a result, Congress will have to pass a short-term funding bill before its August recess. It’s estimated that $10 billion is needed through the end of the year, on top of the $53 billion already transferred from the general fund over the past few years. That’s a problem because the committees charged with drafting MAP21 reauthorization bills and short-term extensions do not have authority to add revenue to the trust fund. The committees that do have not indicated how or when they will deal with the situation. Meanwhile, Transportation Secretary Anthony Foxx unveiled the President’s longterm transportation bill, the Grow America Act, a four-year surface transportation reauthorization bill that includes more than $300 billion for highway repair and construction, public transportation, railroads and a multi-modal freight program.

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REGULATORY REPORT Consumer Financial Protection Bureau BMO Harris to pay flat fee: In response to the CFPB’s scrutiny over dealer markup in indirect lending, Chicago-based BMO Harris Bank announced it will pay dealers a flat percentage of the loan as compensation and eliminate dealer markup. CFPB director Richard Cordray applauded the move. Arbitration study: The CFPB is charged with studying the impact of arbitration clauses in consumer financial transactions. The study’s director indicated the bureau is looking at the outcomes of lawsuits involving consumer financial products (including class actions) and arbitrations, the costs and benefits to consumers of class actions, the impact of class actions and arbitrations on prices for goods and services, and the relationship between private and public enforcement of consumer financial services laws. The study is scheduled to be completed

Q

by the end of the year. FEDERAL TRADE COMMISSION Review of Fuel Economy Guide: The FTC is seeking comments on potential updates to Environmental Protection Agency fuel economy labeling rules. The FTC is updating the “miles per gallon” rating system and including a measurement for alternative fuel vehicles. The FTC is asking for industry input on useful information that is helpful to consumers and helps marketers avoid unfair and deceptive claims. New FTC commissioner: On April 28, Terrell McSweeny began her term as FTC commissioner, which ends in September. McSweeny previously served as chief counsel for competition policy and intergovernmental relations for the Department of Justice. She has served as a policy advisor to President Obama and Vice President Joe Biden.

There is strong support from the industry for a gas tax increase from stakeholders who might be expected to oppose it, such as the American Trucking Associations and the U.S. Chamber of Commerce, but Congress does not appear to have the will to take on such a politically charged issue prior to the November mid-term elections. 31

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COMPLIANCE

OVERDRIVE

How a Compliance Management System Can Help Your Dealership CONFIDENTLY MANAGE AND MAINTAIN YOUR DEALERSHIP’S COMPLIANCE

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Independent automobile dealers work in a unique environment where employees often have to wear many different hats and juggle a variety of responsibilities. With all the moving pieces, it is not uncommon for dealers to be challenged with operational or compliance risk on a day-to-day basis. Many dealerships lack the size and/or staff to establish the proper checks and balances needed to uncover any compliance breakdowns. Additionally, the Consumer Financial Protection Bureau and other federal regulators now want dealers to demonstrate how they will ensure compliance with the various consumer protection requirements. With all of this intense focus on fair consumer treatment, a customer complaint could be potentially devastating to your dealership, sparking added regulatory scrutiny to an already rigorous process. Although dealers are exempt from formal CFPB oversight, any improper decisions made by dealerships do not absolve their lenders of responsibility for the resulting compliance or fair lending violations. In the interest of protecting and maintaining those relationships, it may be wise for dealers to follow the CFPB’s guidance on these matters. To offset compliance or customer service issues, a robust and effective compliance management system should be an essential part of any well-run dealership. While regulators have long considered the concept of a Compliance Management System to be the standard framework for financial institutions, it is not often part of a dealership’s compliance program. But, as the regulatory landscape becomes more and more complex, adapting CMS to meet the needs of dealerships may make all the difference when it comes to meeting the evolving demands of federal and state regulators. Implementing a compliance management system will help your dealership address compliance requirements and help organize your response to regulator inquiries. Equally important is that it will help address your lenders’ compliance needs and concerns. Adapting CMS to Your Dealership The CFPB has also adopted the CMS concept, with some modification, as part of its supervisory approach for banks and nonbanks under their jurisdiction. Additionally, the CFPB has made it clear, dating back to the first release of its examination manual, that a robust CMS must be at the core of an organization’s compliance efforts. While a full-on compliance management WEST COAST DEALER

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system may be beyond the scope of what is financially and practically feasible for a dealership, the concepts behind CMS may benefit dealers as they struggle to stay current with numerous regulations. Implementing a CMS model can help ensure that the dealership’s policies and procedures remain in compliance with all federal and state consumer protection laws. An effective CMS establishes compliance responsibilities; communicates those responsibilities to the dealer’s employees and incorporates them into internal business processes responsibilities; ensures those responsibilities are carried out and regulatory requirements are met through frequent reviews and compliance audits; and enables and implements corrective action. Using CMS, dealers should initiate a cradle-to-grave approach, meaning they must monitor compliance from their initial advertising/marketing programs through post-closing collection processes. CMS should be integrated into the dealership’s overall framework and applied to its entire operations. Ultimately, compliance management should be a part of the daily routine of management as well as employees. An effective CMS will include components that address the following: Advertising and Marketing Promotions Dealership business is driven largely by advertising and marketing promotions, so dealers must exercise particular caution to avoid potentially unfair or deceptive acts or practices. A dealer must thoroughly review all advertisements and promotional materials to ensure that they fairly and adequately describe the terms, benefits and material limitations of the product or service being offered and that the special promotions or terms described in the advertisements are either available to all customers or very carefully and specifically identify the limitations of the offer. Dealer Rate Mark Ups In March 2013, the CFPB released a bulletin outlining its intent to hold indirect auto lenders responsible for compliance with fair lending requirements of the Equal Credit Opportunity Act related to dealer interest rate mark ups, participation and reserves. Although the CFPB did not altogether ban the practice of dealer mark ups, it did recommend lenders consider fairly compensating dealers using alternative methods, such as a flat fee per transaction, that do not result in discrimination

disparities. While it is unlikely that dealer mark ups will be entirely abandoned, a sound CMS will provide for having written policies in place outlining the circumstances that warrant pricing markups and how they will be consistently applied throughout the dealership. Disclosures State and federal law requires dealers to give consumers several written disclosures. These may include disclosures for the consumer’s rights concerning state lemon laws. A Buyer’s Guide disclosing warranty and defect information must also be posted on the windows of all used vehicles and given to the buyer. Additionally, consumers must be informed at the time of purchase that they are signing a legal contract and the possible ramifications. A CMS will help ensure the dealership is providing consumers with the required state and federal disclosures. It will also help ensure that the dealership has a process for identifying and implementing changes to required disclosures and any new disclosure requirements. Credit Application Process Make sure the credit application includes a disclosure informing the signing customer his or her credit report will be accessed and the information can be used to collect debt. Additionally, dealers must tell applicants their credit information sources and give the consumer a chance to notify the sources about any data he or she considers erroneous. CMS will guide a dealership in paying strict adherence to fair lending rules and privacy laws that apply to the credit application process. With increased regulatory oversight, compliance management activities should be a priority of every dealership. Therefore, implementing a CMS approach — even on a smaller scale — will help ensure that new laws and regulations are being embedded within a dealership’s business operations, while protecting the dealership from potential violations. A more formal, written policy and process for tracking and implementing compliance requirements will help your dealership manage and maintain its compliance. It will also give you, your lenders and regulators more confidence in your compliance programs.

BY CHIP ZYVOLOSKI

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

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