WEST COAST DEALER MAGAZINE
Time is Money C O V E R S T O RY PA G E 2 2
• LITTLE-KNOWN DMV COMPLIANCE ISSUES • D O I R E A L LY U N D E R S TA N D M Y L O T I N S U R A N C E ? • WA S H I N G T O N U P D AT E
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V I S I T
W W W . I A D A C . O R G
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Ravaging an Industry
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some years now. A coalition of stakeholders that includes dealers, attorneys, finance companies, insurance agents and enforcement agencies has been established with the goal of understanding all aspects of the scheme and any new variations that may be introduced. Your IADAC Executive Committee has agreed to make this issue our number one priority and act as a hub to receive information regarding these illegal activities. The work accomplished thus far has already led to an awareness of the fragile nature of the DMV’s database and changes in protocol regarding the private information of consumers. Also, complaints have been sent to the attorney general and the state bar and those matters are under investigation. We are hopeful that the illegal actions of these few attorneys will result in serious action taken by enforcement agencies. If you are a dealer who has been sued, please contact this office to share your information. Early successes of these unscrupulous attorneys were due in large part to the fact that details of the scheme were not communicated. The IADAC office number is 916-893-3306.
If you are a dealer who has been sued, please contact this office to share your information. The IADAC office number is 916-893-3306.
Very clever. You’ve tricked and deceived the consumer, leveraged actions against auto dealers to shake them down for money and, in some cases, went back to shake the dealer for repeat paydays. You’ve abused the DMV’s database by fraudulently requesting and obtaining consumers’ contact information so you could solicit them to pursue a lawsuit against a dealer with promises of piles of money and contract rescission. You’re also responsible for the creation of a third-party virtual company that solicits the customer, thinking that having an arm’s length from the initial contact will isolate you from an activity that is undeniably illegal. You exist to take from others, having contributed nothing to society. Wherever there’s a pile of money, your banal instincts draw you near to sniff out ways to slice a piece of the pie for yourself although you haven’t earned any of it. You are the small group of attorneys who have bled dealers dry with a very creative but illegal scheme. Now that California law enforcement agencies have been alerted to your actions, they will all be made aware of your every move. You are all going down. The paragraph above refers, of course, to the small number of attorneys who have been shaking down auto dealers for
A SMALL NUMBER OF ATTORNEYS HAVE BEEN SHAKING DOWN DEALERS FOR YEARS
BY LARRY LASKOWSKI IADAC EXECUTIVE DIRECTOR
OCTOBER / NOVEMBER 2013
DEALER 9/23/13 10:53 AM
12 Keep Calm and Join NIADA 18 It’s About Time 30 Washington Update
No time to train your staff on compliance? NIADA has the solution.
• Get 24/7 access to training videos and quizzes for your entire staff • Download industry-specific policy documents and agreements • Track and report on training to satisfy federal requirements Train. Document. Track. Visit www.niadadealercompliance.com to get started today!
FRUSTRATING FACTORS COMMON IN EXTENDED WARRANT Y COVERAGE
Extended car warranties and vehicle service contracts are the cause of immense frustration for drivers. Below is a list of the top five areas where extended warranty coverage frustrates drivers the most as compiled by ForeverCar.com, a new warranty service provider. • Blaming the driver: Extended warranty customers have a penchant for blaming the needed car repairs on the driver and making them feel like it’s their fault. • That’s only covered by the special package: Many companies will try to confuse customers into thinking the needed repair is only offered through a special package they didn’t pay for. • Shop labor: The differences between a part replacement and the labor it costs to replace that part, which may not be covered by the extended warranty. • Avoiding the real problem: Many times extended warranty companies will argue over the needed repairs, looking for every possible reason to avoid covering the cost. • Shady Adjuster: Adjusters are not always unbiased third parties in the car repair process. There may be an unknown relationship between the adjuster and warranty provider.
Your Scholarship Fund
Why Auto Warranties Fail
29 SCHOLARSHIPS AWARDED
In past years, the Scholarship Award has helped many IADAC dealers provide help for their children and grandchildren for their college education. Last year, 29 scholarships were awarded to help pay for books and tuition. Year after year, this fund continues to fulfill the dream of one of IADAC’s past presidents, Vic Snyder, and his wife Ethyl. Vic and Ethyl left a sizeable fund to help the children and grandchildren of IADAC dealers as they seek higher education. The auxiliary auction raises supplemental funds at our annual convention for this worthwhile cause. Attendees at last year’s convention generously donated $18,000 to the fund. The base contribution from Vic and Ethyl cannot be overstated and IADAC is proud to be a part of this great tradition. To view the video on Vic Snyder, who he was and how he became successful, please go to www. iadac.org and click the “Click here to visit our video library” link just below the membership video.
10 Do I Really Understand My Lot Insurance?
M AT TERS
06 Top 3 Little-Known DMV Compliance Issues
ADESA, Inc.........................Inside Back Cover Allen L. Hawkins Insurance Services........ 25 Alliance Inspection Mgt...............................27. Ally.................................................................19. AutoManager..................................................7 Berkshire Risk..............................................33. Black Book ...................................................24. Brasher’s Sacramento AA............Back Cover. CARFAX.........................................................17 Chase.............................................................26. GoldStar GPS................................................15. Insurance Auto Auctions..............................13. CA_1010.qxd:Layout 1 11/19/10 12:04 PM Page 4 Lobel Financial Corporation........................11 Manheim.com.................................................9 GE Capital Fleet Services has announced the Chicago, a wholesale vehicle auction operation, Manheim Pennsylvania..................................5 sale of its 100,000th customer vehicle through and the seller was the Chicago-based NextGear Capital..........................................21. its Remarketing by GE program. Launched in Turner Acceptance Corporation, a long-time Protective......................................................23. 2007, Remarketing by GE has enabled more Remarketing by GE customer. United Acceptance.........................................3 than 300 customers nationwide – including According to Paul Seger, vice president of Vantage Finance...........................................31. CA_1010.qxd:Layout 1 11/19/10 12:04 PM companies, Page credit unions, independent finance asset remarketing GE Capital Fleet Services, CA_1010.qxd:Layout 1 411/19/10 12:04 PM at Page 4 VAuto .................................Inside Front Cover banks, and corporations with owned fleets “Remarketing can be a long, complicated Wolters Kluwer............................................ 29
GE Capital Fleet Services Reaches Milestone
– to outsource the disposition of automotive assets to GE Capital Fleet Services’ team of professional automotive remarketers. The milestone vehicle was sold at Manheim
process, and in today’s business environment, it’s vital for companies to ensure they obtain the maximum return on vehicles sold at auction.”
INSIDE IADAC Executive Committee INSIDEINSIDE FOR INFORMATION ON HOW TO BECOME A MEMBER PLEASE CONTACT LARRY@IADAC.ORG • (916) 601-4976
NATIONAL INDEPENDENT AUTOMOBILE DEALERS ASSOCIATION WWW.NIADA.COM • WWW.NIADA.TV
NIADA HEADQUARTERS: 2521 BROWN BLVD. • ARLINGTON, TX 76006-5203 PHONE (817) 640-3838 FOR ADVERTISING INFORMATION CONTACT: TROY GRAFF (800) 682-3837 OR TROY@NIADA.COM.
6 Named IADAC Quality Dealer of the Year 8 Auction Standards Help Customers The West Coast Dealer is published bi-monthly by the National Indpendent Automobile 13 Dealers CreditAssociation Applications Do’s & Don’ts Rod Davis Services Corporation, 2521 Brown Blvd., Arlington, TX 14 Striking Gold:postage IADAC’s 42nd Annual Convention Rod Davis 76006-5203; phone (817) 640-3838. Periodicals President
Terry Degmetich Secretary Treasurer I - Deal Cars I-Deal Cars Roseville, CA CA95678 95678 Roseville, 916-870- 9254 916-870-9254 email@example.com firstname.lastname@example.org
Vince Cardinale EXECUTIVE COMMITTEE EXECUTIVE COMMITTEE David Aah1
President paid at Dallas, TX and at additional offices. POSTMASTER: Brasher's Auto Brasher’s AutoAuction Auction Send address changes to NIADA State Publications, 2521 Rio Linda, Brown Blvd., Arlington, TX 76006-5203. The statements Rio Linda,CA CA95673 95673 916 991 5555 and opinions expressed herein are those of the individual 916-991-5555 authors and do not necessarily represent the views of The email@example.com firstname.lastname@example.org West Coast Dealer,Quality IADAC, orDealer the National Independent Named IADAC of the Year 6 appearance Named IADAC Quality Dealer of the Year Automobile Dealers Association. Likewise, the Auction Standards Help Customers JohnasMcElroy hostStandards of the long-running “Autoof advertisers, or their identification members ofis NIADA, 8 Auction Help Customers David Aah1 does notApplications constitute an endorsement of the products or Credit Do’s &line Don’ts Detroit” television program, covering all as13Services, Credit Applications Do’s & Don’tsMike Chairman of the Board services featured. Copyright 2013 by NIADA Inc. All Gough Striking Gold: IADAC’s 42nd Annual Convention rights reserved. North Bay Auto Auction pects of the industry. this presenta14 automotive Striking Gold: IADAC’sIn42nd Annual Convention Sr. Vice President
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email@example.com Management, Human Resources, and Business
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Dealers and Auctions Partner Against Unfounded Lawsuits
A U T O A U C T I O N S P R OV I D E I D E A L S E T T I N G S F O R L AW S U I T S E M I N A R S
The IADAC office receives almost daily reports of new lawsuits against dealers and has been compiling evidence for suits in which the dealer’s customer was sought out and solicited by accessing the customer’s private information. Frustrated auto dealers who have been victimized by unscrupulous attorneys have sought answers. IADAC is seeking to unite dealers with an understanding of the scheme and providing knowledge of what can be done if sued. Dealers have voiced their appreciation at the numerous seminars IADAC has conducted in concert with auto auctions across the state. The auto auctions in California have taken this matter very seriously and gone out of their way to allow use of their venues and often even provide lunch for dealers interested in learning more about these unfounded suits. It is often difficult to get busy dealers to take even a few minutes of their valuable time to attend
meetings, but this topic has rallied the troops with brisk attendance of close to 100 dealers at some seminars. To recap, the plot used by some attorneys and National Automobile Safety Council is to send a letter to the recent purchaser of a used vehicle that implies the vehicle has a major safety issue and that the customer should call NASC immediately and not call the dealer. When the customer calls, NASC tells them it can refer an attorney who can sue the dealer and get a windfall for the customer, including rescission of the contract. The dealer soon receives a suit. It doesn’t matter whether there is an actual problem; the fact that the customer has been convinced there is a problem is all it takes for the suit to gain traction. Representation is expensive and can cost $20,000 just to defend the action. Thus, a settlement is often paid to make the suit just go away.
ATTORNEYS MICHAEL C. ROGERS AND VALERIE HORN AT MANHEIM RIVERSIDE
6 ATTORNEY ALI PARNEVEH AT MANHEIM CALIFORNIA
This scheme has enjoyed great success because early cases that have been settled have not had widespread recognition. Fortunately, the scheme shows signs of weakening as numerous instances of the scheme have been identified and shared with dealers, their attorneys and enforcement agencies. Although most dealers would consider a quick settlement to relieve the anguish and stress of the suit, attorneys representing dealers have suggested that a quick settlement only provides more cash for the unscrupulous attorneys to buy more “leads” and you could be sued again as a result. Additional good news is that Kasra Sadr, one of the few attorneys participating in this scheme, has been indicted on federal charges of conspiracy to commit insurance fraud. Also, another key player, Louis Liberty, has been handed a two-year suspension, which was changed to two years of probation. We will continue to provide key agencies with information as it becomes known and encourage dealers to provide evidence of this and similar schemes as they become apparent. If you are or were a victim of such a scheme, please contact the IADAC office by email (firstname.lastname@example.org) or at 916-893-3306.
COMPLIANCE M AT TERS
Top 3 Little-Known DMV Compliance Issues That Can Put Your Dealership at Risk M A K E S U R E YO U R P R O C E S S O R I S AWA R E O F YO U R D E A L E R S H I P ’ S P O S I T I O N AT A L L T I M E S
The Department of Motor Vehicles has been cracking down on dealership compliance. While Business Partner Automation participation and NMVTIS are the most prominent changes mandated by the AB-1215 legislation, there are several other changes you don’t want to let slip through the cracks. In an effort to keep California dealerships in compliance and operating within the requirements set forth by the DMV, this article identifies several items that can have a major impact on your dealership. Neglecting these requirements may put your BPA permit and, therefore, your dealer license at risk. 1. The electronic filing fee, found on Line J of your sales contract, must be the same value you are being charged by your First Line Service Provider. Make sure your sales contract Line J and your service provider fee are identical. Any difference can put your dealership at the risk of disciplinary action or suspension. It is the dealership’s responsibility to assure the amounts are exact and equal. Overcharging your customer is not just a DMV discrepancy,
in today’s legal climate it could lead to a class action lawsuit against the dealership. 2. An Information Security Statement (INF1128) needs to signed and kept on site for all employees allowed to access DMV printouts. In compliance with your commercial requester account, any employee that has the ability to request DMV printouts must sign an Information Security Statement form (INF1128). The original INF1128 form needs to be signed, kept on site, and made available to the Commercial Requester Department upon request. In addition, page 2 of the form must be signed and dated annually. 3. All business partners must maintain a processing error ratio below three percent. A processing error ratio in excess of three percent can result in disciplinary action from the DMV and possible termination from the BPA program. Can you answer the following questions? u Are you aware of what your error rate is? This should be readily available from your service provider at any time. u Do you have the time to make corrections
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before the DMV records the errors? Your service provider should audit your documents. u Do you receive confirmation when your documents are received by your current provider and the DMV? It is very easy in today’s fast-paced environment to overlook the basics. Make sure your processor is aware of your dealership’s position at all times. Knowing your position before it is critical allows you to stay in control and compliance. Failure to comply with the points listed above may put your dealership at an unnecessary risk of suspension or termination from the BPA program. For additional information on keeping your dealership compliant, do not hesitate to contact AVRS, Inc. at (707) 6584100. AVRS.com is a technology leader offering the most innovative and complete DMV processing solution for the vehicle registration industry.
BY STEPHANIE DELANEY
BPA COMPLIANCE AND CONTRACTS MANAGER AT AVRS
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Manheim Continues Investment to Improve Customer Experience
To reinforce its commitment to making it easier for customers to conduct business while preparing for future growth, Manheim invested more than $26 million over the past year to expand and upgrade its facilities and services in North America. The investment includes the addition of sale lanes, new and upgraded inspection, detail and body shop facilities, alternative energy projects and the addition of Digital Lanes. Digital Lanes, in place at Manheim Ohio and Manheim New Mexico, replicate the buying experience online without the need to run vehicles through physical lanes. “Over the past year, we’ve made it a priority to take a closer look at our operations to ensure they deliver on the needs of our customers today and in the future,” said Manheim executive vice president and chief operating officer Janet Barnard. “As our industry continues to change, we will invest in areas that improve the auction experience for our customers, as well as drive future business growth.” In addition to investing in major auction projects and facilities since September 2012, Manheim plans to expand its Digital Lanes from two to 12 auction locations by the end of 2014.
Some of Manheim’s largest investment projects include: • New Manheim California Service Center: A new 27.7-acre service facility in Riverside, Calif., adjacent to Manheim Riverside offers state-ofthe-art certification and inspection services to Audi Financial Services and Volkswagen Credit, Inc., as well as vehicle receiving support for the southern California market. • Lane additions and expansion at Manheim Baltimore-Washington and Manheim Ohio: Expansion at Manheim Baltimore-Washington will add two sale lanes and develop 10 acres for additional vehicle storage. The location will have 12 physical lanes upon project completion. At Manheim Ohio, a two-lane expansion brings total physical lane capacity to 12. In addition, the location expanded its vehicle entry capacity from two to six lanes, allowing greater vehicle processing efficiency. • Body Shop Expansion at Manheim Orlando and Manheim Palm Beach: A 9,600-square-foot addition was completed at Manheim Orlando’s body shop, giving the location four new paint priming booths. By doubling Manheim Palm Beach’s body shop, workload capacity increased while supporting local conservation efforts. The
Age of Cars on the Road Still Rising
The U.S. vehicle fleet is older than it has ever been, according to the latest data from automotive research firm Polk. Polk reported the average age of all light vehicles on the road has reached a record-high of 11.4 years. The data is based on a review of more than 247 million U.S. car and light truck registrations in January. Passenger cars averaged a record-high 11.4-years-old and light trucks averaged 11.3 years, also a record. The average age of light vehicles has risen every year since 2006. The average vehicle is almost two years older than the average 10 years ago, according to Polk researchers, who said they expect the aging trend to continue. Polk’s study found the number of 6-11-year-old vehicles is declining, while vehicles older than 12 years are increasing, which could create opportunities for auto repair businesses, said Mark Seng, vice president of Polk’s aftermarket practice. “Customers from independent and chain repair shops should be paying close attention to their business plans and making concerted efforts to retain business among the do-it-forme audience,” he said, “while retailers have a unique and growing opportunity with potential consumers wrenching on their own SOURCE: POLK. FIGURES ARE BASED ON A SNAPSHOT OF VEHICLE REGISTRATIONS vehicles.” TAKEN JAN. 1 EACH YEAR.
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body shop recycles materials and uses twothirds less electricity through more energyefficient lighting. • Expansion Projects at Manheim Palm Beach and Manheim Pittsburgh: Manheim Palm Beach will add one detail lane, bringing its total to three, while nearly doubling existing capacity in two lanes. Earlier this year, a 9,600-square-foot mechanic shop was completed at Manheim Pittsburgh. • Solar Project at Manheim New England: Completed earlier this year, the 3.5 megawatt ground and roof-mounted solar project at Manheim New England consists of more than 10,000 solar panels. This installation produces enough energy to power 400 homes annually and supplies 29 percent of the auction’s energy requirements. • Footprint expansion in Canada: Expanded auction footprint in Canada through a partnership with Source Auto Auction in Edmonton, Alberta.
ABOUT MANHEIM (www.manheim.com)
MANHEIM IS THE LEADING GLOBAL PROVIDER OF VEHICLE REMARKETING SERVICES, CONNECTING BUYERS AND SELLERS OF USED VEHICLES TO THE LARGEST WHOLESALE USED-VEHICLE MARKETPLACE. THE COMPANY HELPS DEALER AND COMMERCIAL CUSTOMERS ACHIEVE RESULTS BY PROVIDING PHYSICAL AND DIGITAL AUCTION CHANNELS, DATA ANALYSIS, FINANCING, TRANSPORTATION AND MOBILE PRODUCTS AND SOLUTIONS.
MaxTradeIn Lets Dealers Make Offers from Website
MaxTradeIn, a free website on which car owners can trade in or sell their used vehicle from local dealers, is expanding with a new service that lets consumers receive actual offers, rather than just estimates, directly through a participating dealership’s website. The new service, called MaxTradeIn DealerDirect™, allows consumers visiting a dealership’s website to enter their vehicle identification number and a few details about their used car to receive nearly instant offer directly from the dealer when trading in their vehicle. Dealerships pay a subscription fee to have MaxTradeIn DealerDirect integrated into their existing website. The company says dealerships benefit by capturing high quality opportunities, increasing appointments, obtaining higher quality used car inventory and improving customer satisfaction. For more information, visit http:// dealers.maxtradein.com.
C O M PA N Y E X PA N D S L O C AT I O N S & D I G I TA L P R E S E N C E
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? Do I Really Understand My Lot Insurance?
COMPLIANCE M AT TERS
ERRORS & OMISSIONS COVERAGE
It’s sometimes overlooked who needs errors and omissions (E&O) coverage and the reason(s) it should be considered by a used car dealer. Likewise, many dealers have E&O coverage in place yet do not understand what the coverage means. Dealer E&O endorsements really need to be a part of every dealer insurance program. Errors and omissions coverage is not to be confused with professional liability coverage. At one time, many understood professional liability as a term reserved for professionals or, in other words, persons having specialized skills such as lawyers and physicians who require broad coverage for their acts, errors or omissions. As professionals in the acquiring and selling of used cars, you have your own specific areas where simple errors and omission can bring legal action possibly resulting in thousands of dollars in penalties and/or legal fees. It is not how the insurer labels its policies that matters, but what the policies actually say. Rest assured, many professional liability policies are essentially errors and omissions policies covering the mistakes made in business judgment that cause harm to others. However, the reverse – where an error or omission policy is actually a professional liability policy – is seldom, if ever, true. Truth in Lending Errors and Omissions Coverage This coverage applies to the insured’s liability for damages due to error or omission resulting in failure to comply with Section 130, Civil Liability, of Title 1 (Truth In Lending Act) of the Consumer Credit Protection Act (Public Law 90-321-82 Stat. 146 seq and as may be amended), along with any similar statute. This federal law was passed in 1968 and requires that certain information be disclosed to the borrowers (e.g., auto purchasers), such as the annual percentage rate and term of the loan. Dealers can protect themselves by making sure they have a foreign language form executed for every transaction. Also, pay close attention when a co-signer is used to finance a vehicle. Make sure the cosigner agreement is executed. This insurance does not apply to any obligation for which the dealer may be held liable under Section 112, Criminal Liability, of Title 1 (Truth in Lending Act) of the Consumer Credit Protection Act (Public Law 90-321-.82 Stat. 146 et seq. and as amended). There is simply no insurance coverage for losses associated with any criminal liability. A simple copy of the 1968 law can be found at http://quiettitleaction.com/ WEST
Truth_In_Lending_Act.pdf In many vehicle transactions, the dealer estimates the DMV fees as a part of the sales and financing agreement. The dealer is responsible to return to the purchaser any amount over the actual fees charged. Failure to return the overage can result in the buyer filing suit for your failure to return the overcharge amount. This error or omission is NOT covered by your Truth in Lending E&O coverage. Federal Odometer Statute Errors and Omissions Coverage This covers the insured’s liability resulting in the failure to comply with Title 49 U.S.C. subtitle VI, Chapter 327, Odometer Requirements of the Motor Vehicle Information and Cost Savings Act or any similar state statute. Years ago, it was possible for sellers of autos to manipulate a high mileage speedometer so it would be more attractive to prospective purchasers. It is relatively unheard of today, but still possible. In addition, odometer statements and titles may have mileage misstated. A reduction from the actual mileage on a vehicle when determined after the purchase of the vehicle would reduce the value of the vehicle and thereby provide a claim against the retail dealer. Finally, dealers make errors. Simply transposing numbers of the mileage can result in a claim. The mileage of 86900 could be transposed to read 89600, creating confusion and possibly a claim. Paying close attention to all paperwork dealing in mileage is extremely important. Title Errors and Omissions Coverage Insurance This covers all sums the dealer legally must pay for damages that arise out of acts, errors or omissions of the employee from failure of such employee to properly specify on title papers the mortgagee or legal owner, whereupon the purchaser sells or transfers title that results in financial loss to the dealer. There is also a limit of coverage. The insurance will only pay for each claim or “suit” the purchase price of the vehicle specified in the contract with the dealer; however, the limit of insurance shall also include all defense expenses. Many insurance policies also have an annual aggregate limit of insurance. Such act or omission must occur during the policy period. Simply inserting a “T” instead of “P” as someone’s middle initial on a title can cause a claim. Incorrectly naming the wrong mortgage company can also require a claim to be paid. Dealers really need to ensure the loss payee is correctly processed on the title. When
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the loss payee is not listed, the title then goes to the owner, who may sell the vehicle to another party. The dealer would then be responsible to pay off the lender. The Exclusions It is important to understand what is not covered in your insurance policy. E&O policies usually exclude damages related to bodily injury, personal injury, advertising injury and property damage. There are two reasons for these exclusions. First, those types of damages are intended to be covered by the Garage Liability Policy. Second, an E&O is intended to cover damages for errors in business management or operations not resulting in property damage or bodily injury. Generally, the insurance does not apply to any obligation for which the insured may be held liable due to any dishonest, fraudulent, criminal or intentional act or acts committed by you, your partners, officers, employees, agents or any party in interest acting alone or in collaboration with others. Also, no coverage is provided to pay any civil fines or penalties levied by any governmental agency. Additionally, insurance companies usually retain the right and duty to defend any “suit” asking for damages on account of such error or omission. However, they have no duty to defend “suits” for loss not covered by the insurance. They may investigate and settle any claim or “suit” as they consider appropriate. Their duty to defend or settle ends for E&O coverage when the limit of insurance for coverage has been exhausted by payment of judgment or settlement. In our fast-paced business and personal lives, mistakes are made. Often, employee mistakes are due to a lack of understanding and training. You should clearly define the sales transactions process, including the application for financing if needed. After the sale, it is important to use a defined process to complete the paperwork and all DMV filings. There are registration services that may solicit or receive applications for the registration, renewal of registration, or transfer of registration or ownership of any vehicle subject to registration or identification in California. Registration services may also process registration documents, conduct lien sales, or process vehicle dismantler documents. These businesses are bonded and usually have a high level of experience in processing vehicle registrations. Transferring your E&O risk to a bonded business may be a good idea.
BY KARL SCHOECH
BUDGET PLUS INSURANCE – IADAC ASSOCIATE MEMBER
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Keep Calm and Join NIADA
W H E N F R E E D O M I N T H E U S E D CA R I N D U S T RY I S U N D E R AT TAC K , D E A L E R S M U S T AC T I N U N I T Y T O D E F E N D I T
In 1939, at the beginning of World War II, the British Ministry of Information produced a series of motivational posters to emphasize Britain’s resolve and keep public morale high during Germany’s blitz across Europe and its air attacks on England. The first two posters, which read “Your Courage, Your Cheerfulness, Your Resolution Will Bring Us Victory” and “Freedom Is In Peril, Defend It With All Your Might,” were widely distributed and displayed throughout Britain during the war. The third poster, which carried the phrase “Keep Calm and Carry On,” was meant to be used only in an extreme situation, such as an actual invasion of Britain. In late 1940, when the German air force failed to win air superiority over southeastern England, the invasion of Great Britain was postponed indefinitely. The “Keep Calm and Carry On” posters were never distributed and most were destroyed. When the copyright for the posters expired, the design and slogans became public domain and the “Keep Calm and Carry On” slogan became an overnight pop culture phenomenon. The catchy phrase – and its many variations – began appearing on T-shirts, coffee mugs, mobile phones, screen savers and in countless Internet memes. The lessons from WWII are many and, while I won’t delve into them here, the NIADA, our state associations and our members can draw correlations between how the British Ministry of Information responded to wartime threats against their freedoms and how our membership should respond to the pressures of expanding government oversight, regulations and over-reaching legislative activity at the state and federal levels. I’m not suggesting the posters alone were responsible for defeating the advancing German air force, but they offered distinct messages of unity, individuality and, most importantly, activism. The message inherent in the slogan “Your Courage, Your Cheerfulness, Your Resolution Will Bring Us Victory” is compelling. It implies not only that there is something the audience can do, but something it must do to contribute to the collective cause of victory. The underlying message of unity through individuality is important as well. Individual differences make each of us unique, but when we – as car dealers – speak collectively for the advancement of our shared interests and values, we give NIADA and our industry its loudest and strongest voice. In the face of war, a single message buoyed the spirits and inspired the actions of thousands of individual citizens all over WEST
Great Britain, and gave them a simple equation for success: Your courage + your cheerfulness + your resolution = victory for us all. The other key slogan of the time, “Freedom Is In Peril, Defend It With All Your Might,” also hits home on the message of activism and the importance of defending your freedom. I know many of you have defended our country in the armed services at home and abroad and for that we owe you a huge debt of gratitude. As Americans, small business owners and independent automobile dealers, we all know freedom is a fundamental foundation on which this country was built, and when it comes down to it, you would gladly “defend it with all your might.” As independent dealers, each day we wake up to face new variations on old threats to our business freedoms – curbstoning, higher taxation, title cloning, unfair consumer litigation, insurance and bonding issues, less inventory, higher wholesale prices, finance and accounting, pay plans, and slimmer margins, just to name a few.
With nearly 16,000 members in all 50 states and 46 affiliated state associations, NIADA is the country’s largest grassroots organization representing the used motor vehicle industry.
But what about federal, state and local laws and ordinances like Dodd-Frank or California’s attempt to over-legislate the Buy Here-Pay Here industry? What about tighter employment and labor laws, Obamacare, compliance adherence, open recall notices, fair debt collection practices, OFAC, Graham-Leach-Bliley and the ever-increasing oversight and enforcement from the Consumer Financial Protection Bureau? Is your head spinning yet? The constant change of scenery in the automotive industry is staggering. To be an independent dealer in this day and age is not for the faint of heart. You have to be vigilant and prepared to fight for and protect your business freedoms. When the used motor vehicle industry faces expanding or crippling legislative activity or proposed changes regarding
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how you must operate your business, what does the NIADA suggest you do? Keep Calm and Join NIADA. As our recently published history book will tell you, NIADA was originally formed as an outcry against governmental price controls. In August 1946, a committee was appointed when a group of used car dealers representing a cross section of the country met in Detroit. By the end of the next month, the founding fathers of NIADA met in Chicago and formed an alliance that has stood for 67 years and counting. On Oct. 2, 1946, following the first Used Car Dealers Association Convention in Chicago, a special bulletin made the following statement. “THE NATIONAL USED CAR DEALERS ASSOCIATION IS NOW A REALITY. At a real flesh-and-blood rally … some 600 dealers from 31 states rose to their feet and cheered themselves hoarse when the announcement was made that the association was actually organized. This is YOUR chance to do some cheering, too – by getting behind the men who are putting their shoulders to the wheel FOR YOU. Let’s all get up on our feet NOW and push this thing ahead. THIS IS A MAJOR ELEMENT. IF WE DON’T SWING INTO ACTION NOW, SOME OF US WON’T BE AROUND TO CELEBRATE OUR SUCCESS. Each state has a director in this association. He is the man who brings your thoughts and ideas to Washington. He NEEDS YOU. YOU NEED HIM. ALL DEALERS NEED ONE ANOTHER TODAY. Get in here and give us the support needed.” Since that formative time, many men and women across multicultural lines joined the cause in support of what J.B. Caldwell, the first association manager, said: “We are tremendously interested in organization because we do not believe the used car dealer can much longer exist except be organized.” The original purposes were simple: u T o accumulate and disseminate information. u T o present information to the public and to lawmakers. u To promote a close fraternity with dealers nationwide who work together in harmony for the betterment of the used car industry. Now, 67 years later, those original purposes are still the core goals of our work here at NIADA, even as our footprint in the industry has grown vastly. With nearly 16,000 members in all 50 states and 46 affiliated state associations, NIADA is the country’s largest grassroots organization representing the used motor vehicle industry. Our methods of gathering data and communicating it are altogether different today than in 1946, but let me echo the C O N T I N U E D O N PA G E 1 4
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sentiment that we must have involvement from our local dealers to support and “get behind the men who are putting their shoulders to the wheel for YOU.” From the top down, we are an association of dealers, run by dealers for the advancement and protection of our dealers. We must act together to protect our freedom to run a fair and profitable business enterprise. As Edmund Burke once said, “The only thing necessary for evil to triumph is for good men to do nothing.” Subscribing to the “Keep Calm and Join NIADA” mantra offers many opportunities to make your voice heard in the industry, to help support those who are putting their shoulders to the wheel for you and ultimately to help protect your business freedoms. Be it at the state or national level, you’ll find there is more than enough opportunity to get involved. At the national level we have numerous opportunities for involvement, including: u The NIADA executive committee and its four regional vice presidents provide specific geographical representation and channels of communication through which you can discuss dealer-specific issues. Your issues can be passed up to the executive committee through channels or taken directly to elected officials and regulators for consideration and action on your behalf. u The NIADA legislative committee and legislative subcommittee rely on your feedback and input from the state
and local level to discuss issues of concern that can be passed along to congressional officials, federal regulators, consumer advocates and others. The NIADA Political Action Committee was formed to support elected officials who work to advance and protect the interests of auto dealers in both houses of the U.S. Congress. u NIADA Services, Inc., operates all of our publications and media services, including dealer-specific content on NIADA.com, NIADA.TV and in Used Car Dealer magazine and our state publications. u The charitable and educational efforts of the association are channeled through the NIADA Foundation, a 501(c)(3) organization. Educational highlights include the vast learning, motivational and fraternal opportunities at our annual convention, the Certified Master Dealer program, the NIADA 20 Group program and its proprietary financial data composite offering, and many others. I could go on for days about the features and benefits of membership, but the real opportunity for you is to get involved in your state association. Those openings are just as vast and important as the ones available at NIADA. Each association is governed by its own board of directors and various committees deemed necessary to carry out the work at the state level – all on your behalf. Each association is as unique as the dealers in its state and is tasked
with protecting your interests at the state level. Whether you’re interested in getting involved at the state or national level, your participation and activism is greatly needed. This is your association, and how loud and effective our collective voice is depends on how many voices we have speaking in unison. That includes yours! For more information on what’s happening at NIADA and how you can join in, call 800-682-3837 or visit us online at www.niada.com. For more information about what is happening in your state association and how you can get more involved on a local level, simply reach out to your state office and talk to your director. Our state directors are some of the best folks in the industry and will show you how can be a part of the strategic plan in your state. You might be surprised at how easy it is to make your voice heard through your state association and begin giving back to the industry that has given so much to you and your family. You can find your state association’s contact information at www.niada.com/state_affiliates.php. I want to thank you in advance for your contribution to the association. Our dealers, our industry and our voice will be stronger because of it.
BY STEVE JORDAN
STEVE JORDAN IS EXECUTIVE VICE PRESIDENT OF NIADA, PRESIDENT OF NIADA SERVICES, INC., AND PUBLISHER OF USED CAR DEALER MAGAZINE. HE CAN BE REACHED AT STEVE@NIADA.COM.
DAA of the Rockies Named Auction of the Year NIADA HAS PRESENTED THE AWARD ANNUALLY TO AN OUTSTANDING NAAA AUCTION SINCE 2008
Dealers Auto Auction of the Rockies, a leader in customer service and community service, has been named the 2013 NIADA Auto Auction of the Year. The award was presented to Denver-based auction’s owners, Brad Sturgeon and Bill Baker, and executive vice president Michele Noblitt, representing the DAA of the Rockies staff, during the National Auto Auction Association’s annual convention, Sept. 3-5 in Indianapolis. In presenting the award, NIADA executive vice president Steve Jordan said DAA of the Rockies “has proven its business excellence over the years and is noted for outstanding customer service, consistently going above and beyond as the staff strives to put their clients first. The auction is also very involved in the industry and supportive of its state association, including charity efforts such as the Wounded Warrior project.” DAA of the Rockies has made numerous contributions to its community through various fundraisers and campaigns, including an annual live charity auction that has raised more than $33,000 over the past three years. That amount has fully funded a week-long
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camp for abused and neglected children in the foster system, contributed to the local Big Brother/Big Sister organization and its mentoring program – a program in which its fleet manager has actively participated in for five years as a Big Sister – and raised funds for “Help Out Not Hand Outs,” an organization that assists veterans as they prepare for a successful future. In addition, the auction held a pet drive to support local animal shelters and launched a “Quit Smoking” campaign to help promote a healthy lifestyle among its employees. It has also held multiple toy and food drives during the holidays, and helped send one of its employees to participate in the 2013 Avon Walk for Breast Cancer. NIADA has presented the award annually to an outstanding NAAA auction since 2008. The winning auction provides the highest level of customer service and resources for NIADA’s independent dealers, displays support for its state association and its dealer members and participates in dealer events and promotes the industry by showing exceptional service to its local community. w w w. i a d a c . o r g 9/23/13 1:23 PM
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Automotive Advertising That Sells
PRIORITY NO. 1 IS PUT PERSONALITY INTO YOUR ADVERTISING. STODGY, STIFF, CORPORATE MARKETING MESSAGES DON’T RESONATE – AND THEY DON’T SELL, EITHER.
Over the years, we’ve tested the results of our Gravitational Marketing formula with excruciating exactness. Here are a few things we’ve discovered. Take a position: In order for advertising to be effective and sell the number of cars you want it to sell, you must first ask yourself this very important question: Since the customer has a thousand other options, why in the world should he choose you? Is it because you specialize in getting people approved who can’t get approved anywhere else? Maybe you are a fun and family-oriented place to buy a car or you give more in trade value than any other dealer. Maybe you’re more ethical or you cater to women. Perhaps you specialize in trucks or fuel-efficient cars. Your results depend less on what is written in your commercial than on how your dealership is positioned in the minds of your prospects. Price, service and longevity don’t count and don’t sell. You must choose a GPS – a gravitational positional statement. A GPS gives your marketing direction and your customers a road map to find you. Your GPS needs to be decided before any advertising is created. It might take research. The answer could be buried in your customers. Find it. Big hooks: The second most important decision is, what can you promise a customer that will make him drop everything and come to your store? We’re not talking about a slogan or a catchy phrase or a theme. A hook is a big promise that delivers an overwhelming benefit and an irresistible offer to the prospect. The benefit should be unique to you and it should be aggressive. And you must be able to deliver on what you promise. Most advertising offers no substance or meat you can sink your teeth into. It makes no promises and offers no big reasons why customers should do business with you. Same old lame marketing doesn’t sell. Without a hook you catch no fish. Brandscending: Brand and image advertising doesn’t sell cars this weekend. Most car dealers don’t spend enough money to create truly lasting brand awareness. Cola brands require cola company budgets. Traditional branding is too big a financial hurdle even for large multi-store dealers. Create a cohesive look and feel to your marketing and advertising. You can create a small amount of residual value and market awareness. You can drive retail sales this weekend and create a small amount of brand awareness. We call it Brandscending. It transcends traditional branding by stimulating sales WEST
today and leveraging the momentum to create a small amount of residual brand awareness. Put this on steroids by becoming the brand yourself. The dealer who can inject the most personality into his marketing will end up with the lion’s share of the business. King concept: A king concept is a unifying theme or big idea for a dealership. It gives the consumer a point of reference. That gives the consumer the ability to relate to your message. Without a king concept your marketing will be flat, confused and boring. Boring ads are invisible. You need a king concept for your marketing to grab prospects by the throat, wake them up and get them to take action. A king concept is usually based on Occam’s Razor: The simplest solution is the best. King concepts are not easy to create or identify. They can come via flashes of brilliance in the shower or in midnight halfconscious visions. Often they are ignored, not taken seriously or lost in a fleeting moment. Once captured, they are a lump of coal that must be polished into a radiant diamond. King concepts are worth digging for. A good one can be worth many millions and last a lifetime. Emotions sell: People buy from other people. They make decisions based on emotions. How they feel about someone is a big factor in buying. Given a choice, they would choose to buy from a friend or family member. People don’t get emotional over companies. Priority No. 1 is put personality into your advertising. Stodgy, stiff, corporate marketing messages don’t resonate – and they don’t sell, either. WANT MORE? This information comes from tests conducted in the automotive market and several other industries. Next month, we’ll share more of what we’ve learned over the years. These findings are what we call broadstroke standard conventions we follow when we create advertising for clients. Is this everything? Not even close. Certain situations call for certain tweaks in thinking and execution. We have separate, specialized findings based on market size, number of locations, media mix and other factors. But that information is classified top secret and revealed only to clients of Gravitational Marketing.
BY JIMMY VEE AND TRAVIS MILLER
JIMMY VEE AND TRAVIS MILLER ARE THE FOUNDERS OF RICH DEALERS® AND THE AUTHORS OF GRAVITATIONAL MARKETING. VISIT WWW.TRAFFICSCALE.COM TO REQUEST A FREE TRAFFIC SCALE REPORT. USE COUPON CODE UCDM1307.
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AutoStar Solutions Joins as NMB Partner
CUTTING-EDGE DEALER MANAGEMENT SOFTWARE AVAILABLE TO NIADA MEMBERS
Dealership technology provider AutoStar Solutions has joined with NIADA as a National Member Benefit partner, offering its cuttingedge dealer management software to NIADA members in qualifying states at no upfront cost. NIADA members receive a twouser license for the software and will pay only $8 per transaction, a significant discount for a software system regularly valued at more than $1,200 per year. AutoStar’s Fusion Ignite dealer management system provides the fundamental elements needed to manage a Buy Here-Pay Here dealership, including the ability to set up deals and optimize them for maximum profitability, print forms, calculate taxes, assess late fees, print receipts, flag vehicles for repossession, create accounting transactions, view reports and more.
Fusion Ignite is designed for small dealerships seeking to maximize profits and grow to the next level. Fusion Ignite is designed for small dealerships seeking to maximize profits and grow to the next level. In addition to its functionality, the software is webbased, which means updates to the system, including documents and forms, are conducted automatically in the background and users get automatic hourly backups of their data. All documents are fully compliant with state and federal regulations. VISIT WWW.FREEBHPHSOFTWARE.INFO FOR MORE INFORMATION OR TO SIGN UP FOR THE IGNITE SOFTWARE MEMBER BENEFIT PROGRAM.
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It’s About Time
Time is a scarce commodity. Ask any auto dealer. The intense, competitive nature of the industry drives dealers to search out every possible avenue for efficiency gains in their businesses. When it comes to wholesale vehicle auctions, gone are the days when dealers visited only one location and bought only in-lane. Today, to ensure they have the inventory to match their customers’ needs and aggressively compete, dealers need to stay on top of multiple channels and visit multiple locations – and that can take time. Historically, the physical wholesale vehicle auction has been a hands-on place to kick the tires and check under the hood. And for some dealers that remains the preferred way to buy. But as the pace of change accelerates – and it will in our industry – dealers will require a variety of options to conduct business. Auction companies are responding by streamlining their weekly in-lane sales, offering 24/7, anytime and anywhere access and reducing the time needed to participate in auctions through better processes and innovative technologies. “Buying cars through the online streaming auctions is just like being at the auction,” said Billy Threadgill, president of Van’s Auto Sales in Florence, N.C., and NIADA region II vice president. “But I no longer have the travel expense and time away from the dealership caused by going to three or four auctions. I can stay in my office, still buy the cars I need and take better care of my customers.” New products and services such as mobile apps and enhanced transportation solutions are finding their way into the wholesale buying and selling process and offering even more ways to save time. And it is not just about time savings. Those modernizations give dealers greater control and allow them to be more productive. While innovations like those offer many benefits, a number of dealers remain unaware of their choices, and of the benefits and availability of those choices. To help dealers better navigate through the evolving landscape, we offer a few of the best-kept secrets to save dealers time inside and outside the wholesale vehicle auction. Reduce the time it takes to floorplan a vehicle by using online tools: Though not as bad as waiting in line to get your driver’s license renewed, floorplanning a vehicle is one area that requires an investment of time at a wholesale auction. The good news is dealers can now bypass the lines thanks to online tools accessible via smartphones, such as WEST
the tools offered by NextGear Capital. Designed as dashboards, the systems provide dealers with an easy-to-read snapshot of all important vehicle and floorplan information. Dealers can view their real-time vehicle purchase status, select a desired floorplan company, check title and postsale inspection status and track vehicle availability – all in a matter of minutes. Additional time savings come from using online tools to pay for vehicles and post-sale inspections via an electronic bank debit, eliminating the need for additional trips to the auction or overnighted checks. Dealers can also review outstanding balances and get title and arbitration status updates as soon as they are available.
That is especially beneficial for smaller dealers, as it can increase their purchasing capacity without additional costs. Access your targeted vehicles via your smartphone or tablet: Dealers can make better use of their time at an auction before ever leaving the office by using online “workbooks” to search and save vehicles that are of the most interest to their dealership. Searches can be general or specific, from make, model, year and trim to seller/consignor, inventory source, condition grade, drive train, transmission and engine type.
Apps like Simulcast on Mobile from Manheim, Ally’s SmartAuction Mobile and others enable dealers to participate in an auction from anywhere – they don’t have to be in a particular lane, at the auction or even on a computer. Try mobile apps for buying vehicles: Traditionally, bidding on and buying wholesale vehicles has occurred primarily in-lane at the auction, but mobile apps are quickly changing how and where dealers can conduct business. Apps like Simulcast on Mobile from Manheim, Ally’s SmartAuction Mobile and others enable dealers to participate in an auction from anywhere – they don’t have to be in a particular lane, at the auction or even on a computer. Dealers can bid on and buy from the full inventory of the auction, quickly view and email full condition reports, and see a run list of vehicles in a lane. That means more time can be spent buying and selling vehicles at the auction, on the dealer’s lot or anywhere in between. Mobility offers two other key benefits. First, it can shorten the entire transaction process from an hour or more to mere minutes by digitizing labor-intensive processes. Second, dealers can be more efficient with the time they do spend at an auction. For example, mobile apps allow dealers to bid in multiple auctions simultaneously.
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Dealers can then access those vehicles from an iPhone or iPad while at the auction to see seller details, sale information, photos and vehicle specifications. Having searchable, updated information at their fingertips helps dealers save time by providing instant access anywhere to the information necessary to bid and buy in any lane, even at another auction location. Sean Ball, primary buyer for Texas State Motors in Garland, Texas, still prefers to attend auctions twice weekly in person to examine cars. But he does use smartphone apps and a tablet to make his work more efficient. “I use the MMR [Manheim Market Report] app on my phone so I can scan a VIN and it gives me all the data on the car,” Ball said. He said when he first started buying at auctions, “I would do all my homework ahead of time and carry around the run sheets. Now I use a tablet, which helps me look at the data more dynamically. It is especially nice to have it at the auction C O N T I N U E D O N PA G E 2 0
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and be able to sort the cars as I need to. It is much easier.” Create listing and seller disclosures from your mobile device: From a seller’s standpoint, dealers and other consignors should look for ways to use their Apple or Android devices to input listing and disclosure information. Being able to quickly record vehicle condition information, photos and video while on the lot – without having to take handwritten notes or transfer pictures from a camera to a computer – eliminates manual work and saves valuable time. It also allows dealers to sell wholesale and retail at the same time, eliminating the either-or choice of whether to send the vehicle to auction or keep it on the lot for retail sale, and increases the chances for success. Research has shown vehicles with condition information are up to four times more likely to sell and 27 percent less likely to face a dispute than vehicles without condition information. “For me on the buying end, that is really key with the online auction,” Threadgill said. “You have to have a good condition report you know you can trust. When I do, I don’t mind not examining the car in person.”
Research has shown vehicles with condition information are up to four times more likely to sell and 27 percent less likely to face a dispute than vehicles without condition information.
Centralize your purchase and transaction information: To further save time and paperwork at the wholesale auction, dealers should centralize access to their purchase and transaction information in a single location. Systems are available that can hold up to 180 days of transactions, providing real-time access to vehicle and post-sale inspection status, condition information, payment and fee information, all of which can be made sortable for ease of search and exported to a spreadsheet or printed. Having faster, easier access to purchase information will cut down on the time it takes to manage wholesale transactions and provide dealers with better clarity into their business. Simplify your transportation management: Dealers often mention the WEST
time spent managing the transportation of their auction inventory as a burden. Fortunately, the technology driving enhancements in other areas at the auction is also improving the efficiency of transporting vehicles to the dealership. There are several options available to both high- and low-volume purchasers of vehicles. One is to turn over the entire transportation process to an established provider. Those full-service models broker all deal logistics, from sourcing to tracking to delivery, and typically include screening of multiple carriers and trucks to ensure safety, insurance standards and on-time deliveries, leaving dealers more time to spend on other aspects of their business. An alternative approach is to use selfmanaged options that work like Priceline. com and Howtire.com, where dealers can comparison shop based on price and transportation terms. While dealers still must broker the deal, they can have several carriers compete for the job, which can drive down costs and still allow dealers to work directly with the carriers of their choice. To further increase efficiency and save time, services are available that enable dealers to send vehicle purchase information electronically to the transportation provider. The bottom line to all this is there are products and services in the marketplace that can help dealers save time at an auction while enabling them to do more with the time they have available. The first step is to search out those solutions and give them a try or, at the very least, talk with other dealers who are using them to see how they can impact performance and time management. When considering the options, dealers also need to consider getting and staying up to speed on their end. “If you are going to buy online or use these tools, you have to make sure you have a fast connection, not something like dialup,” Threadgill said. “If I am bidding online at an auction, I don’t want my bid to show up 30 seconds after the vehicle drives off because of a slow Internet connection on my end.” No doubt new technologies and applications will continue to be developed and made available to the dealer market. By staying ahead and finding ways to integrate those innovations into their businesses, dealers can save time, better compete and become more productive at the wholesale auction. “Anyone who is not trying to buy online is missing a huge opportunity,” Threadgill said.
The Devil in the Details Dealers are constantly trying new products and solutions to help improve the bottom line. But did you know compliance can also boost the bottom line by helping you avoid costly fines? Consider this: you’re having a great year. You’re buying new inventory and lining vehicles up for reconditioning. You’re so busy, in fact, that you overlook a few details. That oversight ends up taking a bite out of your bottom line when you’re selected for a random audit by the Board of Equalization. At a time when state revenue is low, they are actively looking for errors. So, the auditor checks three years’ worth of deals and determines you owe $30,000 for errors on out-of-state delivery paperwork. It’s not that the deliveries weren’t legitimate – the paperwork simply had errors in the details. On one deal, for example, the transporter didn’t print his name on the bill of lading where he signed it. On another, the bill of lading shows the port where the vehicle was delivered, not the customer’s address in his home state. Also, your salesperson didn’t notice the date of sale and the date on the notarized statement of delivery form were different. So what are you supposed to do? In the case of out-of-state deliveries, it doesn’t pay to assume. The devil is in the details – paying attention to the little things will help you keep your hard earned money in your pocket. To help, you can find information and a video at www.iadac.org and on the Board of Equalization’s website.
BY JOE GEORGE
JOE GEORGE IS SENIOR VICE PRESIDENT OF PRODUCT DEVELOPMENT FOR MANHEIM AND IS RESPONSIBLE FOR THE EVOLUTION OF MANHEIM’S DIGITAL MARKETPLACE, INCLUDING MANHEIM SIMULCAST, OVE.COM, MANHEIM.COM, MOBILE SERVICES AND MULTIPLE PRODUCT SOLUTION PLATFORMS. FOR MORE INFORMATION, VISIT WWW. MANHEIM.COM.
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C O V E R S T O RY
Time is Money
COMMONLY CALLED FLOORPLAN LOANS, INVENTORY FINANCING CAN BE ONE OF THE GREATEST TOOLS TO GROW YOUR BUSINESS.
Contracts in Transit H O W M U C H A R E T H E Y R E A L LY C O S T I N G Y O U A N D H O W D O Y O U AV O I D T H E M ?
It’s a common practice for used auto match up the callback information against dealers to start out buying a few cars with what is outlined in the loan package is time their own funds or that of their investors. well spent. But as dealerships grow over time, the The third step in avoiding contracts need to finance their inventory also grows. in transit is in understanding the most Commonly called floorplan loans, common problem preventing a contract inventory financing can be one of the package from being funded: the loan greatest tools to grow your business. exception. It can help you take advantage of good Those situations are common. Perhaps auction prices and fluctuations in the you will need a slightly lower interest rate or market. It allows you to react quickly a few more months of term, or maybe the when an opportunity presents itself. proof of income doesn’t quite meet what In addition to the flexibility it offers, was stated by the customer on the credit a floorplan allows you to stock a wider application. If you have spot-delivered a range of vehicles to customer and know you need You need to more money than what was satisfy the needs of a diverse group of communicate with approved, you know you will need customers. your lender. Getting an exception. Sounds great, right? You need to stop and exceptions or changes Well, it is, but there approved before the communicate with your lender. are a few things you exceptions or changes contract arrives will Getting should know before you approved before the contract greatly improve not package arrives in the funding get started. only your relationship department will greatly improve Obviously, floorplan lenders charge interest, with the lender, but also not only your relationship with the your bottom line. lender, but also your bottom line. in most cases a daily interest rate. The sooner Once the loan package arrives you sell the vehicle and pay off your at the lender, it doesn’t usually go to the floorplan, the less interest paid to your loan officer’s desk but to the funding floorplan company and the more profit department. The loan documents will be you’ve made on the sale. verified for compliance with the program An old adage applies here: Time is guidelines and loan approval stipulations definitely money. given by the underwriter. Once you have a floorplan, “contracts in If all documentation doesn’t match, it transit” becomes a much more important might go to the bottom of the stack, back metric to be measured. Every day a to the underwriter, or simply be snailvehicle sits on your floor not paid off, it’s mailed back to you. In the meantime, while costing you money. That could be caused the loan is floating around at the lender or by a cash or financed sale. In the case in the mail, you are paying a daily interest of cash sales, it could be due to a bank charge on your floorplan. draft, a hold check or even a bounced Create a process to audit loan packages check. in your back office or accounting In the case of financed sales, contracts department. Producing a simple checklist in transit are usually caused by the failure and having your employees act as the final to secure funding from a lender for a loan quality checkpoint, matching up program package that originated in your finance guidelines and callback stipulations against office. what’s in the loan package before it leaves Those situations are completely the dealership, will save you time and avoidable if you have proper processes in money. place. If contracts are unfunded for more than a The first step in avoiding a contract few days, it’s best to have someone drilling in transit issue is having an intimate down to find the root cause. A large number knowledge of the lender’s program. All of contracts in transit usually points to flaws lenders have basic program guidelines in processes or other problems in your that outline requirements, such as finance department or, even worse, to some proof of residency, proof of income or type of customer fraud. completion of a 4506T (request for Following these easy steps, monitoring tax transcript) for every self-employed your contracts in transit and communicating customer. Creating a process within your expectations to your finance department finance office that involves collecting all and accounting office will help you save basic program guideline requirements money and identify issues before they from your customer is key. become serious problems The second step is paying attention to for your business. the loan approval or callback. What extra BY CHET HEUGHAN stipulations does your lender require? It CHET HEUGHAN IS DIRECTOR OF APP might require additional references, proof ONE RISK MITIGATION SERVICES, INDIRECT LENDING FOR WOLTERS of an open vehicle loan trade-in, additional KLUWER FINANCIAL SERVICES. FOR proof of income or specific documents, MORE INFORMATION, VISIT WWW. such as a bank statement. Taking time to WOLTERSKLUWERFS.COM.
OCTOBER / NOVEMBER 2013
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9/23/13 10:54 AM
Hot Tips for Social Media Marketing
MARKETING M AT TERS
H AV I N G A C U S T O M E R - C E N T R I C C U LT U R E H A S N E V E R B E E N M O R E I M P O R T A N T
Social media usage is increasing at a frenetic pace. It’s gone far beyond sharing photos and updating activities. It’s now a vital component to the customer experience and is a significant medium to drive leads and sales. According to a 2013 study by Pew Internet Research, 67 percent of all adult Internet users participate on social media. That’s up from 59 percent a year ago. It’s difficult for businesses to adapt and evolve to social marketing, especially when you factor in the changes that seem to happen on a daily basis. It’s hard to figure out who to trust, where to spend your budget, what training you might need and how to know if you’re moving in the right direction. Information is power. So here’s a look at the trends I see in automotive social media. I’ve included four hot tips to help you capture those leads and sales for the rest of 2013 and beyond. Customer-centric marketing: It’s not about you, it’s about them. This trend is not new – it’s just evolved in ways we haven’t seen before. In his book Youtility, Jay Baer writes, “Smart marketing is about help, not hype. Today’s consumers are staring at an invitation avalanche, with every company asking for likes, follows, clicks and attention. This is on top of all the
legacy advertising that envelops us like a straitjacket. There are only two ways for companies to break through in an environment that is unprecedented in its competitiveness and cacophony. You can be ‘amazing’ or you can be useful.” Not everyone can be amazing all the time, but everyone can be useful. When you focus your marketing on informing rather than promoting, you will drive sales but in a way that’s foreign to the car business. It’s a completely different, out-of-the-box approach, but in the future it will be the norm. If you sell something, you make a customer today. If you help someone, you make a customer for life. Radical transparency igniting customer experience: Social media is now an integral component to providing a positive customer experience. Consumers are gathering information to make their purchase decisions and 96 percent of them do that online. CMSWire puts that trend in great context, showing how social media plays a role in the consumer’s buying process. It’s called ESP, as in Explore, Share and Promote. First, consumers use the tools or channels to explore their options and find out what their friends are buying and recommending. Then they share their experiences and information to get validation and feedback. Lastly, they go beyond sharing and promote by encouraging others to make similar purchases.
Having a customer-centric culture has never been more important. Everything you say and do – including how you treat your employees – is being broadcast throughout the Internet. Make sure your culture is ready for prime time. Being able to tell the story of your business in a meaningful way using social media connects you to your prospects and customers. By communicating how you do business, you initiate the customer experience long before they walk on the lot. Facebook advertising comes into its own: When you first launch your Facebook page or when you’ve had a page for a while without much action, you need something to spark interest and help you build a larger audience. Awesome content drives engagement but you need eyeballs on that content to make your page work. Whenever I talk to potential clients, I always include a promotion strategy that involves Facebook ads. With the latest changes to the ads platform, boosting your visibility and reach with Facebook advertising has never been more valuable. • Facebook ads target your ideal customer and save you from spending on those who will never buy from you. • Facebook ads are inexpensive compared to other advertising platforms. • Facebook ads uncover new brand advocates (prospects). • Facebook ads drive leads and sales. Content is still king: A recent study from Outbrain showed 90 percent of all digital marketing professionals believe content marketing will become even more important in the next 12 months. Develop and execute a clear content strategy that encompasses the “help, not hype” credo. You need a mindset, culture and approach to delivering all your customers’ information needs, in all the places they’re looking for it, across each stage of the buying process. The top three types of content that are working best for marketers now and for the foreseeable future are social media posts and updates (83 percent), email newsletters (78 percent) and news or feature articles, such as blog posts (67 percent).
BY KATHI KRUSE AUTO REMARKETING
OCTOBER / NOVEMBER 2013
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Powell Motors Celebrates 80th Anniversary
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On September 8, 2013, Vince Powell and Powell Motors celebrated the 80th anniversary of their family-run dealership. There were approximately 200 guests in attendance, including long-time customers, dealers, associates, and past and current employees, some who have worked with Powell Motors for over 20 years. Guests enjoyed photo opportunities, a classic car cruise with over 30 cars, dinner, awards, prizes and gifts. In business since 1933, Powell Motors has weathered many storms, going back to the depression when cars sold for $4 -$8. They are proud that they have customers several generations deep. Vince Powell has dedicated so much to the industry, serving as president of OIADA from 1998 to 2000 and on the executive board from 1994 to 2001. He was also awarded the Oregon Quality Dealer of the Year in 1993 and again in 2013. In honor of their 80th anniversary, Powell Motors and the Powell family gifted OIADA $880.80 for continued education in the form of developing a scholarship program for new dealers to attend OIADA’s annual convention. They also donated a beautiful children’s peddle car to be auctioned off at this year’s convention, the proceeds of which will also fund the scholarship.
IN BUSINESS SINCE 1933
Vince Powell has dedicated so much to the industry, serving as president of OIADA from 1998 to 2000 and on the executive board from 1994 to 2001.
OCTOBER / NOVEMBER 2013
DEALER 9/23/13 10:54 AM
Phishers’ Spears Are Aimed at You
CRIMINALS ARE PERPETRATING A SERIES OF CALCULATED SPEAR-PHISHING ATTACKS ON DEALERS.
Spearfishing is as ancient as man himself. We have all seen images of man stalking a river, creek, or shallow pool waiting to thrust his sharpened weapon into his unsuspecting prey. Over the centuries, spearfishing has evolved from the use of a stick for dinner into a sport that uses air-powered guns to spear large ocean predators. At this point, many of you might be asking yourself, what does spearfishing have to do with the price of tea in China? Well, spearfishing might not have anything to do with your dealership, but spear-phishing does. No, I did not spell it wrong. Spear-phishing is an actual word, though you likely won’t find it the dictionary. Spear-phishing is a rising cyber threat that targets an individual or group of individuals that typically have something in common. Now dealers are the latest group to become victims of spear-phishing attacks. I received a telephone call from an agent with the FBI’s Cyber Crime Unit to alert me of the attacks. The FBI has been tracking an alarming increase in cyber criminal activity against dealers coming from Eastern Europe, Romania in particular. The Romanian criminals are
perpetrating a series of calculated spearphishing attacks on dealers. The scheme involves attempts by criminals to obtain dealer credentials to third-party vehicle marketplace sites such as AutoTrader.com or Cars.com, or on common marketplace sites such as Craigslist. The criminal mines those sites for dealership email addresses. The miscreant then sends to a dealer an email that has all of the markings of a legitimate email from one of the marketplace sites, asking the dealer to update credentials, verify information, etc. The email contains a link that, if clicked, either installs malware the criminal can use to mine information from your system or takes the dealer to a website that has the appearance of a legitimate marketplace site, but is actually a dummy site used for harvesting unsuspecting victims’ account credentials. Once the criminals have the dealers’ credentials, they can go into the third-party sites and in essence hijack the dealers’ pages, including the contact information and inventory-related information. Once the thugs have that, they can change the site so unsuspecting purchasers believe they are interacting with a legitimate dealer when they are really transacting business with a
OCTOBER / NOVEMBER 2013
The FBI suggests you use as many certified logos and watermarks in your websites, and particularly on your inventory photographs, as you can.
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email purporting to come from a legitimate business asking you to do so, call your representative or contact at that business to check on the authenticity of the request. I’ll almost guarantee you he will tell you it is a scam. Second, the FBI recommends you change your credentials on your own on a regular basis. Use more complicated passwords that cannot be easily deciphered. If you need a tip, my 13-year-old daughter has it figured out. I can never get into her Facebook or Instagram accounts. Finally, the FBI suggests you use as many certified logos and watermarks in your websites and particularly on your inventory photographs as you can. That will make it difficult for scammers to steal the information for mirror sites. Spear-phishers all over the world are ready to pounce on unsuspecting victims going about their business just as the hungry, ancient fisherman speared unsuspecting salmon swimming upstream. Do all you can to protect your personal and dealership information from those that would do you harm.
BY SHAUN PETERSEN
SHAUN PETERSEN IS A PARTNER WITH THE LAW FIRM OF MAC MURRAY, PETERSEN & SHUSTER LLP AND HEAD OF THE FIRM’S AUTOMOTIVE PRACTICE. HE SERVES AS NIADA’S REGULATORY COUNSEL.
Black Book’s Entire Editorial Team Becomes Certified Auto Remarketers
FIRST AUTO GUIDEBOOK TO HAVE ENTIRE EDITORIAL TEAM BECOME CAR CERTIFIED
Black Book’s entire team of vehicle value editors and data analysts has become Certified Auto Remarketers under the International Automotive Remarketers Alliance. There have been only 64 professionals in the industry to pass the 20-course module and this is the first time an entire guidebook’s editorial staff has become certified. Led by 30-year industry veteran Ricky Beggs, Black Book’s editorial staff reports the wholesale market as it happens, with a team of editors working with field survey personnel monitoring sales activity at more than 60 wholesale auctions daily throughout the country. “This significant accomplishment is just the latest example of our commitment to continuous improvement and learning,” Black Book president Tom Cross said. “The better our team of editors understands the industry, the more accurate we can report and interpret the market, ultimately helping our clients make the most profitable decisions possible.”
OCTOBER / NOVEMBER 2013
criminal enterprise. The FBI says it has seen fraudsters create pictures and listings of inventory the dealer does not own. They have also taken information from third-party sites, or even from a dealership’s own website, to create a mirror site for the dealership that is comprised entirely of false information. The criminals hope to dupe purchasers into sending money to them to purchase a vehicle that will never be delivered. The damage from spear-phishing attacks can be devastating. Obviously, if a purchaser sends money for a car that is never going to be delivered, the purchaser stands to lose a significant amount of money. The FBI informs me there have been both consumer victims and dealer victims in wholesale transactions. Likewise, the dealer stands to lose much in the form of reputation, consumer confidence and other goodwill that is difficult to fully measure. What can you as a dealer do to avoid having a Romanian cyber spear stuck in your back? The FBI suggests a couple of ideas. First, remember legitimate businesses will not send you an email asking you to update credentials, passwords, account information or the like. If you receive an
Do all you can to protect your personal and dealership information from those that would do you harm.
DEALER 9/23/13 10:54 AM
CALIFORNIANS ARE KNOWN AS EARLY TECHNOLOGY ADOPTERS AND ELECTRIC VEHICLES ARE NO EXCEPTION.
More than half of consumers who registered a new electric vehicle through June did so in five metropolitan markets, with more than 35 percent in two California regions: San Francisco and Los Angeles. Other top markets for electric vehicle registrations this year are Seattle, Atlanta and New York. While electric vehicle sales are still a fraction of U.S. auto sales, new registrations of electric vehicles to individuals topped 9,700 in California in the first half of 2013 and represented 1.1 percent of the state’s auto sales. “A lot of the manufacturers have targeted California for the launch of their electric vehicle product,” said Brian Maas, president of the California New Car Dealers Association. “Our consumers are cuttingedge and early adopters in this area.” California residents are known for being environmentally friendly. In addition, electric vehicles are allowed to use carpool lanes in the Golden State and are eligible for state incentives on top of a federal tax credit. Adding to their attraction, electric cars are good for city driving. Charging stations are also more common in regions with high sales penetration. Of the more than 6,440 public electric vehicle charging stations in the U.S., nearly 1,400 are in California. In some cases, California is the only market where some automakers sell electric vehicles. The Fiat 500e went on sale this summer only in California, where about half of electric vehicles are sold in the U.S. and which accounts for at least 20 percent of Fiat’s overall North America sales. WEST
OCTOBER / NOVEMBER 2013
General Motors Co. chose to sell its 2014 Chevrolet Spark EV only in California and Oregon in the United States. GM targeted those states for four reasons: charging infrastructure, a reputation for being early adopters, financial and carpool incentives and because a certain number of zeroemission vehicles are mandated. California’s zero-emission vehicle requirement says that 15.4 percent of automakers’ vehicles sold in the state be powered by electric, hybrid or fuel cells by 2025 or they will face penalties. Oregon follows California’s mandate. Many consumers are reluctant to buy electric vehicles because of range anxiety. But sales are up. Tesla sold more than 10,400 of its Model S through July, and Nissan sales are up 230 percent through the same period, with 11,703 Leafs sold. “We’re seeing continued growth in hybrid and electric vehicle market,” said Michael Omotoso, senior manager of global powertrain forecast for LMC Automotive. Hybrid and electric vehicle sales combined through July totaled 3.7 percent of U.S. light vehicle sales. They are projected to total nearly 4 percent this year and climb higher. Last year’s share was 3.4 percent. Price cuts on vehicles such as the Leaf are also drawing buyer interest, and further advances in lithium-ion battery technology and lower battery costs will boost sales in the future, Omotoso said. The first hybrids went on sale in the U.S. more than a decade ago. Hybrids now account for seven percent of California’s retail market, with Toyota Prius being the best-selling vehicle through the first half of 2013.
M ARKET WATCH
California Gateway to Electric Car Market
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How to Prevent Slamming APPI Energy has seen a serious issue increasing lately: unauthorized early terminations of electricity supplier contracts. Our customer service team receives notification from electricity suppliers when one of our customer’s accounts drops from service. We immediately investigate and often learn that a misleading energy broker or electricity supplier convinced one of our customer’s employees to “authorize” a change/drop of supply service. That effectively terminates the existing electricity supplier contract. Understandably, our customers are upset and feel victimized. To prevent this from happening to you: u Share this message with your employees and make them aware of misleading callers. Even employees who are not authorized to discuss your utility bills or make contract decisions can be duped by a broker or supplier. u If an energy salesperson walks into one of your locations and claims to represent the electric utility, please be on guard. Protect your energy bills, account numbers and related information as you would any confidential business information. Anyone who works for the electric utility already has digital access to all of your account information. u Our customers are overwhelmed with
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daily calls from aggressive energy salespeople, many of whom are not properly licensed or experienced. A quick, “No, thank you. I’m not interested. Please remove me from your call list,” should eliminate many calls. Advise your employees to block salespeople from engaging with other employees. u The bottom line is that before you give your bill or account information to anyone, no matter what a broker or supplier tells you, please contact APPI Energy’s customer service team at 800-520-6685 or customerservice@ appienergy.com. We’re here to help! A businessman shares his story: A few weeks ago, I handed over my electricity bill to a man who visited my office and claimed to represent my local utility company. He offered to evaluate my bill as a complimentary service. A few weeks later, my electricity supplier unexpectedly dropped my account. Without my consent or knowledge, the man had obtained my account number from my bills and canceled the electricity supply contract for my business. Fortunately, my supplier contacted my energy consultant’s customer service department at APPI Energy about dropping my account. My consultant notified me and explained I was at risk of being charged hefty termination fees for canceling my
contract before its expiration date. I had no idea the contract was canceled. My consultant worked with my supplier to re-enroll my account and reinstall my contract, saving me thousands in early termination penalties. I called my utility and determined the name of the company that canceled my electric supply without my knowledge. I reported that company to the Better Business Bureau and learned the man who misrepresented himself is no longer with that company. A manufacturer shares his story: I’ve been getting calls about lowering my electricity costs. One quoted a price of less than 6 cents per kWh, which seemed very low. Another caller guaranteed me 30 percent savings off my facility’s current supply price. When I questioned how he could make that guarantee when I’m locked into a three-year contract, he admitted he had no idea how it would be possible and was simply trying to get appointments for his salespeople. My energy consultant at APPI Energy said I shouldn’t trust callers who quote numbers over the phone without seeing my facility’s usage profile because they often exaggerate and cannot possibly provide a realistic price.
BY MICHAEL S. PAYNE, J.D., L.L.M.
MICHAEL S. PAYNE, J.D., L.L.M., IS EXECUTIVE VICE PRESIDENT AND GENERAL COUNSEL OF APPI ENERGY. FOR MORE INFORMATION, CONTACT 800-520-6685 OR CUSTOMERSERVICE@APPIENERGY.COM.
OCTOBER / NOVEMBER 2013
MANAGEMENT M AT TERS
P R O T E C T YO U R E N E R GY B I L L S , AC C O U N T N U M B E R S A N D R E L AT E D I N F O R M AT I O N A S YO U W O U L D A N Y C O N F I D E N T I A L B U S I N E S S I N F O R M AT I O N
DEALER 9/23/13 10:54 AM
NIADA Government Report
KEEPING YOU INFORMED ON THE LATES T GOVERNMENTAL ISSUES AND ACTIVIT Y IN THE USED CAR INDUS TRY
REGULATORY REPORT Consumer Financial Protection Bureau Response to House Republicans’ letter: The CFPB responded to a letter from 35 House Republicans raising concerns about the CFPB’s March guidance bulletin claiming indirect auto lending practices could lead to discrimination against minorities on car loans as evidenced by disparate impact. The response provided few substantive answers to the concerns raised by the House members. The CFPB said it did not provide an opportunity for interested parties to comment because the law does not require it for general policy statements. And the CFPB provided no substantive response to the Republicans’ request for information about how disparate impact would have to be demonstrated for a violation of the Equal Credit Opportunity Act to have occurred. The CFPB guidance in question advised bank and nonbank indirect auto financial institutions about compliance with federal fair lending requirements in connection with the practice by which auto dealers mark up the financial institution’s risk-based buy rate and receive compensation based on the increased interest revenues. The Republicans’ letter, dated June 20, questioned the manner in which the guidance was rendered and requested details concerning the process of analyzing potential fair lending violations. A similar inquiry was made by 13 Democratic members of the House Financial Services Committee in May. The Republican letter took issue with the CFPB “initiating [a] process without a public hearing, without public comment, and without releasing the data, methodology or analysis it relied upon to support such an important change in policy.” The letter noted that “allegations of disparate impact do not involve intentional conduct, but instead consist solely of statistical analysis of past transactions” and said any model assessing such impact must be reliable and accurate. In addition to taking issue with the CFPB’s statistical analysis, the Republican letter also characterized the ECOA compliance controls suggested in the CFPB bulletin as “onerous and unrealistic,” noting that “restricting consumer choice is highly problematic.” To support the controls prescribed by the guidance, the letter requested that the CFPB provide “all studies, analysis, and information it relied upon in developing its guidance document.” Both congressional letters requested information about the analysis conducted by the CFPB on the impact of its prescribed controls on the auto WEST
lending industry. The House members, like many in the auto industry, said they are concerned the guidance will hurt competition, result in higher costs for consumers, and potentially exclude lowerincome customers from the credit market entirely. In a previous response to the Democrats’ letter, CFPB director Richard Cordray reiterated the CFPB’s authority to supervise and investigate financial institutions engaged in auto finance and its concerns that pricing discretion could create a significant risk of discrimination. He also said the CFPB uses a proxy methodology to analyze disparate impact in the auto lending industry. NADA is pursuing a bipartisan Senate letter to the CFPB expressing concern for its process and conclusions.
All manufacturers must have the free tool available beginning Aug. 14, 2014. The information must be searchable by VIN number and updated weekly. The search information will also be available at safercar.gov. Indirect auto lending webinar: The CFPB, Federal Reserve Board and Department of Justice held a webinar related to fair lending in indirect automotive financing. The CFPB discussed its recent indirect auto lending bulletin and its perceptions of the indirect auto finance model, as well as its jurisdiction and enforcement authority in fair lending. Other topics discussed included the process the Federal Reserve Board uses to investigate risk in indirect auto lending as well as enforcement cases brought by DOJ. The CFPB said compliance with its March indirect auto financing bulletin, which addresses alleged discriminatory practices, is required immediately. To view the webinar, visit www. consumercomplianceoutlook.org and click the link under “Previous Topics” for the session on Indirect Auto Lending – Fair Lending Considerations.
OCTOBER / NOVEMBER 2013
National Highway Traffic Safety Administration NHTSA issued a final rule this month that will require auto and motorcycle manufacturers to provide consumers a free online search tool to check for uncompleted recall information. All manufacturers must have the free tool available beginning Aug. 14, 2014. The information must be searchable by VIN number and updated weekly. The search information will also be available at safercar.gov. The rule also requires manufacturers to provide consumers notice of a recall within 60 days of the date the manufacturer notifies NHTSA. LEGISLATIVE REPORT H.R. 1663, Promoting Automotive Repair, Trade and Sales Act of 2013 (PARTS Act) The bill, introduced April 23 by Rep. Darrell Issa (R-Calif.) on a bipartisan basis with four co-sponsors and referred to the Judiciary Subcommittee, would amend U.S. design patent law to reduce the exclusivity period car companies hold on design patents for collision repair parts from 14 years to 30 months. During that time other suppliers could test, research and develop parts on a not-for-sale basis. Sen. Sheldon Whitehouse (D-R.I.) and two co-sponsors introduced an identical bill in the Senate (S. 780), which was referred to the Judiciary Committee. NIADA reviewed the legislation and determined not to lend its name in support at this time. H.R. 2414, the Black Box Privacy Protection Act The bill was introduced June 18 by Rep. Michael Capuano (D-Mass.) and 10 co-sponsors. On July 15, it was referred to the Homeland Security Committee Subcommittee. The bill would amend the Automobile Information Disclosure Act to require auto manufacturers to disclose on an information label affixed to the car window the presence and location of an event data recorder (commonly referred to as a “black box”), the type of information recorded, how such information is recorded and that the recording can be used in a law enforcement proceeding. It also would prohibit the manufacture, sale or import of an automobile manufactured after 2015 that is equipped with an event data recorder unless the consumer can control the recording of information, and would require the black box and any data recorded to be considered the property of the vehicle’s owner. The retrieval or downloading of recorded data by any other person would be unlawful except with the owner’s consent, in response to a court order or by a dealer or automotive technician to service the vehicle. w w w. i a d a c . o r g 9/23/13 10:54 AM
Fueleconomy.gov Offers MPG Label for Used Cars
Selling Your Car? Advertise Its Fuel Economy!
Fueleconomy.gov, the official U.S. government source for fuel economy information, has added
F U E L E C O N O M Y. G OV O F F E R S M P G L A B E L F O R U S E D C A R S
Fueleconomy.gov, the official U.S. Thetographic/label provides ayour photo of on the graphic to or potential label and look up other a new tool help you advertise vehicle’s fuel economy buyers. The free tool government source for fuel economy the vehicle and some important information data such as personalized annual cost, (http://www.fueleconomy.gov/feg/UsedCarLabel.jsp) helps you create both anfuel electronic fuel information, has added a new tool to help about the vehicle’s configuration - such as greenhouse gas emissions, and petroleum economy graphic that you can download for your online advertisement and a paper fuel economy you advertise your vehicle’s fuel economy engine size, transmission type, and fuel use estimates based on their annual mileage, canidentify print and affix to your window. The example shown is for to potential buyers. The free tool (http:// label that type you - to help it. There’s also a vehicle’s driving conditions, and fuel costs. They cana 2000 www.fueleconomy.gov/feg/UsedCarLabel. QRof Code links directly to also viewamong gas mileage estimates from other HondaSmartphone Insight, one thethat all-time fuel economy leaders gasoline vehicles. The database jsp) helps you create both an electronic fuel the vehicle’s information, which allows the drivers with the same vehicle year, model, and supporting the tool includes most cars and light trucks sold in the United States since 1984. economy graphic that you can download for potential buyer to verify the information configuration. your online advertisement and a paper fuel economy label that you can print and affix to your vehicle’s window. The example shown is for a 2000 Honda Insight, one of the alltime fuel economy leaders among gasoline vehicles. The database supporting the tool includes most cars and light trucks sold in the United States since 1984. Both the electronic graphic and the paper label show the EPA fuel economy estimate (city, highway and combined) and CO2 emissions for the vehicle when new. As indicated on the graphic and label, actual fuel economy will vary for many reasons, including driving conditions and how the car was driven, maintained, or modified. Because a vehicle’s fuel economy changes very little over the course of a typical 15-year life, when properly maintained, the original EPA fuel economy estimate remains a good indicator of a used vehicle’s average gas mileage. However, aftermarket modifications to the vehicle can affect fuel economy, 31 especially those that change the vehicle’s weight, aerodynamics, or wheel/tire size.
Both the electronic graphic and the paper label show the EPA fuel economy estimate (city, highway and combined) and CO2 emissions for the vehicle when new. As indicated on the graphic and label, actual fuel economy will vary for many reasons, including driving conditions and how the car was driven, maintained, or modified. Because a vehicle’s fuel economy changes very little over the course of a typical 15-year life, when properly maintained, the original EPA fuel economy estimate remains a good indicator of a used vehicle’s average gas mileage. However, aftermarket modifications to the vehicle can affect fuel economy, especially those that change the vehicle’s weight, aerodynamics, or wheel/tire size.
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OCTOBER / NOVEMBER 2013
DEALER 9/23/13 10:54 AM
AFS Acceptance Expands
MULTIPLE SES SIONS WITH SINGLE PURPOSE OF BUILDING AUTO DEALER PROFIT CENTERS.
NIADA is proud to be the exclusive sponsor for the SEMA “Dealer Days” to be held November 5-7, in Las Vegas. The educational seminar will explore ways for dealers to dramatically increase sales and profits and take the lead in their respective markets by successfully tapping into the profitable accessories market. The Dealer Day program provides the latest trends, tools and resources to sell more cars and increase the dealership’s bottom line, offering proven strategies on how to identify pitfalls and maximize opportunities. Representatives of the Martin Automotive Group in Los Angeles commented on a previous year’s event, “Dealer Day was a great value and benefit for our dealership. The discussions provided us great insight into the different approaches and strategies for accessory integration. The ability to interact with so many other dealers was invaluable, and the range of knowledge was impressive, to say the least.” 2013 sessions include “Maximizing Dealership Profitability with Accessories,” “Dealer Focused Research” presented by Polk, “Creating the Best Possible Sales Team,” “Dealer Case Studies” and “Modifying Pre-owned Vehicles.” These sessions carry the singular purpose to build auto dealer profit centers. The SEMA Education Institute (SEI) courses provide an exceptional opportunity for auto dealers to learn first-hand what trends will affect their business. Presented by top industry experts, these courses are designed to give dealers practical tools that can be implemented as soon as they return to the dealership.
NIADA SPONSORS SEMA DEALER DAYS
M AT TERS
EXPANSION IMPROVES SUBPRIME AUTOMOBILE FINANCING PROGRAM
AFS Acceptance, LLC, has secured $20 million in subordinate debt to support expansion of its business. The injection of liquidity supports AFS’ initiatives to provide robust products and services for both franchise and independent dealers across the country. AFS is also pleased to broaden its long-standing relationship with Capital One, the agent of the credit line, and add Wells Fargo as a lender to the newly-syndicated $75 million facility. FalconBridge Capital Markets, LLC, acted as exclusive advisor to AFS regarding the new capital raise, which gives AFS the flexibility to penetrate new markets and increase market share in the states they do business in today. “We are delighted to have assisted AFS Acceptance,” said Bennett Cole, President of FalconBridge Capital Markets. “Dov Szapiro and his management team at AFS have built an outstanding financial services platform, and we look forward to working with the company as they continue to emerge as one of the country’s leading subprime auto finance companies.” The closing of the deals marks AFS’ transition from a small, local operation to a professionally managed organization. Dov Szapiro, CEO of the Ft. Lauderdale based company, noted, “This is a big day in the history of AFS Acceptance. When we started AFS, my brother Uri and I always envisioned working with companies of this caliber and we are grateful for their support and guidance.” AFS also recently acquired the assets and intellectual property of Preferred Automobile Credit Co., a Pennsylvania based auto finance company.
FOR MORE INFORMATION, VISIT WWW.SEMASHOW.COM/EDUCATION.
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Back to Basics
IN THE CURRENT REGULATORY ENVIRONMENT, IT MIGHT BE BETTER TO TAKE A MORE CONSERVATIVE APPROACH TO THE CREDIT FEATURES AND OPTIONS YOU OFFER.
Several years ago, a friend in the auto lending industry pointed out that a few aggressive indirect lenders were forcing motor vehicle lease rates down to what he thought were irresponsible lows. Instead of trying to compete with such risky rates, his employer decided to offer more reasonable rates and focus on offering unique product features and improved dealer services. That was possible because as long as the unique program features were well researched and executed, the regulatory risk was relatively low. The lender in this example wasn’t alone. Other indirect lenders also began to compete on features instead of trying to offer unreasonably low rates. A few years later when market conditions changed, the high risk-low rate lessors suffered terrible losses and many closed operations. The strategy to compete on features and service rather than price alone turned out to be the better, more stable strategy. In years past, indirect lending sales products offered features like variable interest rates, stepped rate interest (predetermined increases in the interest rate during the repayment term) and balloon features that allowed consumers to sell the vehicle back to the dealer instead of paying the balloon amount. The sheer range of programs might have been complicated to manage, but dealers saw the benefits of those creative approaches in consumer demand and sales numbers. Consumers, for their part, benefited from the competition to offer the most compelling programs and from the wide range of options available. There’s not as much demand for those features today. Lately we’ve seen a shift back to more basic features and programs. Why the simplified approach? One reason might be increased regulatory pressure – unique new credit features attract not only the interest of consumers, but also of regulators. The more complicated the program’s structure, the greater the compliance risk. The regulatory environment is definitely leaving less room for error and experimentation. A chilling reminder came when the CFPB recently announced a consent order against a major bank and one of its nonbank partners for violations in a unique military installment loan program. The CFPB determined the companies failed to properly disclose all the fees and charges to participants in their program. In the past, the analysis might have ended there, providing remedies based on Truth in Lending Act disclosure violations. But the CFPB said the program failures also violated the Dodd-Frank Wall Street Reform and Consumer Protection WEST
Act’s prohibition on deceptive acts or practices. In response, the companies must return about $6.5 million to service members. The CFPB noted the companies were proactive in addressing the problems and their positive response “was one of several factors the bureau considered when choosing not to impose a civil money penalty in this matter.” Had civil money penalties been added, the result would have cost the companies even more. In such a regulatory environment, it might be better to take a more conservative approach to the credit features and options you offer. A good starting point would be to review the market need and use of each program and program feature. For example, if you still offer a variable rate auto loan, is there a strong market for it? Is your documentation and software still up to date? Is there still a strong secondary market for them if you want to sell/assign the contracts? Do the benefits of offering variable rates justify the added costs and risks of maintaining the program? Do the same analysis for all your key
Once you have culled any unnecessary and high-risk options, focus on your core finance programs. Are you comfortable that you have defined the finance options and features of those programs? Review your programs to make sure you have the basics covered and covered well.
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program features. Now might be a good time to simplify your options, removing features that could do more harm than good. Once you have culled any unnecessary and high-risk options, focus on your core finance programs. Are you comfortable that you have defined the finance options and features of those programs? Review your programs to make sure you have the basics covered and covered well. Make sure: u The program options and features have been recently reviewed by your compliance officer. Consumer finance laws and regulations are constantly changing, so a review done three years ago could be outdated. And while last year’s approved program might still be okay, new options you added this year (without being reviewed) can create a compliance problem. Details matter, so make sure your review includes all of the options offered. u Your internal processes and execution of program options and features have been reviewed. Third-party vendor products and deliverables should be included in your review. Make sure you understand and accurately represent dealer and third-party products to potential buyers. The products might be fine, but the process of presenting and selling them can create a problem. u You review your finance program options and features with your indirect lenders to see if any fall outside their program parameters. If so, is it because they present compliance, calculation or operations issues? And are you confident you can address those issues and sell the contracts to other indirect lenders? u You have ongoing compliance monitoring in place during the program. Your program might be perfect when you launch it but fail afterward due to poor training, execution, unreported changes, compliance requirement changes, etc. Again, the monitoring needs to include third-party vendors – remember, the large bank and its nonbank partner were both included in the CFPB’s consent order. Using a third-party vendor does not necessarily absolve you of responsibility if things go wrong. One benefit of cleaning your financial product house is that you can reduce the compliance risks associated with high-risk, less popular credit features. Focusing on core products and features gives you a solid foundation from which you can confidently and cost-effectively add new features in the future.
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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