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AUTO DEALER NEWS CAR O LINA S IND E PE ND E NT AUT O M O B ILE D E ALE R S A S S O CIATI O N

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F E AT U R E S T O R Y

PRESENTING YOUR PORTFOLIO FOR THE MOST FLOORPLANNING DOLLARS insideu

• EXPANDING YOUR HORIZONS • ON THE MOVE: MOBILE WEBSITES • COMPLIANCE OVERDRIVE

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MAGAZINE CONTENTS 04 06 10 12 18 20 30 34

Executive Director’s Message Presenting Your Portfolio Washington Update Expanding Your Horizons Auction Volumes to Rise On the Move: Mobile Websites Legal Musings Compliance Overdrive

WHAT’S NEW Manheim recently released its 18th annual Used Car Market Report, which highlights 2012 industry trends and an outlook for 2013. A free download of the report is available for all NIADA Dealer Members at www.niada.com/ dealers_edge.php

ADVERTISERS INDEX

Industry Award SEVERAL INDUSTRY AWARDS WERE HANDED OUT THURSDAY AT THE NAAA/CAR EVENT IN LAS VEGAS, including the Consignor of the Year, Remarketer of the Year, and more. During the Industry Awards Ceremony, the Consignor of the Year award went to Bob Graham, The Carolinas Independent Automobile Dealers Association wasYear organized vice president of vehicle remarketing at ARI. Meanwhile, Remarketer of the honorsinwent to 1955 to assist in enhancing theirIndiana reputation the marketplace, gain Henry Stanley, president of members Carolina Auto Auction and AutoinAuction.

political influence and provide opportunities to interact with and meet other dealersAutomobile for the purpose of sharing business and marketing The Carolinas Independent Dealers Association was organized in ideas. BY JOE OVERBY 1955 toAUTO assist members in enhancing their reputation in the marketplace, gain REMARKETING EDITOR political influence and opportunities to interact with and we meet As provide a mature and long-standing Association, areother proud to maintain the idedealers for the sharing business marketing ideas. als of and principles set and by the founders. But today, offer more…far more. Thepurpose Carolinas Independent Automobile Dealers Association waswe organized in With a fulltime inprofessional staff,reputation modern in technology and world 1955 to assist members enhancing their the marketplace, gain class educaAs a maturepolitical and long-standing Association, we become are proud maintain idetional programs, we have a to strong, effective and organizainfluence and provide opportunities to interact withthe and meetinfluential other The Carolinas Independent Automobile Dealers als and principles by the founders. today, weand offer more…far more.the independent, dealersset for thethat purpose of sharing marketing ideas. tion exists for But onebusiness reason only: To represent nonAssociation was organized With a fulltime professional staff, modern technology and world class educafranchised automobile dealer! The Carolinas Independent Automobile Dealers Association was organized in in 1955 to assist tional programs, we haveand become a strong, effective and influential As amembers mature long-standing proud organizatoDIRECTOR maintain ide- in enhancing PRESIDENT EXECUTIVE 1955 to assist in enhancing theirAssociation, reputation inwe theare marketplace, gain themembers als and principles set by the founders. But today, we offer more…far more. tion that exists for one reason only: To represent the independent, nontheir reputation in the MALCOLM SHEALOR JOHN BROWN political influence and provide opportunities to interact with and meet other ASHLEY PREFERRED AUTO staff, modern technology EXT 105 marketplace, gain political With a fulltime franchised dealer! dealers forautomobile the purpose of professional sharing business and marketing ideas. and world class educaINC. influence and provide tionalGROUP programs, we MT. PLEASANT, SChave become a strong, effective and influential organizaopportunities to interact tion that exists for one reason only: To represent the independent, non-and meet other with As a mature andPRESIDENT long-standing Association, we are proud to maintain the ideELECT dealer! ANGEL LONG franchised automobile dealers for the purpose als and principles set by the founders. But today, we offer more…far more.

ADESA, Inc............................................ 11 Ally........................................................21 Auto Auction of New England......Inside Front Cover Auto Use............................................... 22 AutoManager, Inc.................................. 13 CarMax Auctions....................................25 Charleston Auto Auction ...........Back Cover DealerCenter.........................................24 GoldStar GPS...........................................9 Manheim.com........................................17 NextGear Capital....................................15 NIADA Ultimate Vendor Guide...................7 Protective................................................5 STARS GPS........................................... 26 Sterling Credit Corporation.....................19 United Acceptance.................................27 VAuto ............................ Inside Back Cover Vehicle Acceptance Corporation............ 23

OFFICE P.O. BOX 1088 • HARRISBURG, NC 28075 PHONE: 704-455-2117 OR 1-800-432-4232 FAX: 704-455-6810 • WWW.THECIADA.COM CIADA is a non-profit 501(c)6

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.

The Carolinas Independent Automobile Dealers Association is published bi-monthly by the National Independent Automobile Dealers Association Services Corporation, 2521 Brown Blvd., Arlington, TX 760065203; phone (817) 640-3838. Periodicals postage paid at Dallas, TX and at additional offices. POSTMASTER: Send address changes to NIADA State Publications, 2521 Brown Blvd., Arlington, TX 76006-5203. The statements and opinions expressed herein are those of the individual authors and do not necessarily represent the views of CIADA or the National Independent Automobile Dealers Association. Likewise, the appearance of advertisers, or their identification as members of NIADA, does not constitute an endorsement of the products or services featured. Copyright © 2013 by NIADA Services, Inc. All rights reserved. STATE MAGAZINE MGR./SALES Troy Graff • troy@niada.com

EDITORS Jennifer Carman • jenniferc@niada.com Andy Friedlander • andy@niada.com ART DIRECTOR Christy Haynes • christy@niada.com PRINTING Nieman Printing

CIADA STAFF

EXECUTIVE COMMITTEE

Meet Our Professional Staff

DRIS ASSISTANT Meet Our Professional Staff

MICHAEL DARROW

of sharing business and marketing ideas.

Meet Our Professional Staff WILL DAVIS

As a mature and longstanding Association, we are proud to maintain the ideals and principles set by the founders. But today, we offer more… far more. With a fulltime professional staff, modern technology and world class educational programs, we have become a strong, effective and influential organization that exists for one reason only: To represent the independent, non-franchised automobile dealer!

THE AUTO EXT 109 With a fulltime professional staff, modern technology and world class educaINC. tional programs,FINDERS we have become a strong, effective and influential organizaDURHAM, NC tion that exists for one reason only: To represent the independent, nonNC VICE PRESIDENT franchised automobile dealer! CATHERINE NEELY G & B AUTO SALES OF LOUISBURG INC.

ADMINISTRATIVE

DIRECTOR John Brown Executive EXT Director 102 Ext 105

Carl Mischinski Ext 109

Meet Our Professional Staff SC VICE PRESIDENT LISA KLUTTZ LUKE GODWIN Carl Mischinski Ext 109

John Brown Executive Director Ext 105

GODWIN MOTORS INC. COLUMBIA, SCCarl Mischinski

John Brown Executive Director Ext 105

Ext 109

TREASURER DARLA BOOHER DEAL DEPOT, INC. GREER, SC Carl Mischinski

Krista Simmons Ext 109 Ext 103

Catherine Neely Ext 102

Krista Simmons Ext 103

John Brown Jayne Harris Lisa Kluttz Executive Director Ext 111 Ext 107 Ext 105

SECRETARY Krista Simmons KIM BRADSHAW Ext 103 1ST NATIONS AUTO SALES BURLINGTON, N.C.

Lisa Kluttz Ext 107

Lisa Kluttz Ext 107 Catherine Neely Leslie Waslo Ext Ext102 110 Jayne Harris Ext 111

Catherine Neely Ext 102

CUSTOMER SERVICE EXT 103

Catherine Neely Ext 102

Jayne Harris

Leslie Waslo

Ext 111 JAYNE HARRIS Ext 110 CUSTOMER SERVICE EXT 110

Leslie Waslo

Ext 110WASLO LESLIE DRIS ACCOUNTS MANAGER EXT 108

CHAIRMAN OF Jayne Harris Leslie Waslo Krista Simmons THE BOARD Lisa Kluttz Ext 111 Ext 110P.O. Box 1088 Ext 103 Ext 107 JULIA ROGERS TRACY MYERS Harrisburg, NC 28075 FRANK MYERS AUTO MAXX INC. Phone: 704-455-2117ACCOUNTING or 1-800-432-4232 EXT 101 WINSTON SALEM, NC P.O. Box 1088 Fax: 704-455-6810

CIADA is the only not for profit association that represents the independent automobile dealer in the Carolinas with a National affiliation.

Harrisburg, NC 28075 www.theciada.com Phone: 704-455-2117 or 1-800-432-4232 1088 Fax: 704-455-6810P.O. Box CIADA is a non-profit 501(c)6 Harrisburg, NC 28075 www.theciada.com Phone: 704-455-2117 or 1-800-432-4232 704-455-6810 CIADA is a non-profitFax: 501(c)6 www.theciada.com CIADA P.O. Box 1088 is a non-profit 501(c)6 Harrisburg, NC 28075 Phone: 704-455-2117 or 1-800-432-4232 Fax: 704-455-6810 www.theciada.com CIADA is a non-profit 501(c)6

In addition to on-site classes, CIADA offers CETV on DVD and CE On-Line. Call 1-800-432-4232 for additional information or visit us at www.theciada.com. 3

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Letter from the Executive Director YOU MAY ALREADY KNOW THE CIADA 2013 ANNUAL CONVENTION AND EXPO is taking place August 1-4 at The Homestead in Hot Springs, but did you know you can get up to 30 percent off your room rate* this year? Whether you’re a dealer or a vendor, getting the special discount is easy: simply bring along a new, first-time attendee** and you’ll both receive the specially discounted room rate at The Homestead. This legendary hotel offers something for everyone. Golfers can play a round at the Old Course, which is distinguished by having the country’s oldest first tee in continuous use; driving enthusiasts can test their skills negotiating two log bridges at the Homestead’s Back Country Driving School; and outdoor sports enthusiasts can enjoy fly fishing, skeet shooting or trail

riding. If luxury relaxation is more your style, treat yourself to the Canyon Ranch Spa or rejuvenating hot springs. There’s even something for the kids, who are sure to enjoy the new water slides and lazy river ride. The Convention and Expo offers plenty of opportunities for you to learn from the best in the business. In addition to CIADA experts like Tracy Myers, Chris Martin and Michael Darrow, industry experts this year include Chris Leedom from the Leedom Group, automotive digital marketing guru Ralph Paglia, Craig Lockard from AutoMax recruiting, Jim Radgona from Dealer Compliance, Jim Bernardi from AutoPro Training, “Turbo” Troy Spring from DealerWorld and Chris Costner from Phone Ninjas. Did I mention a possible casino night?

What are you waiting for? Make plans today to join your fellow Carolinas Independent Automobile Dealers for worldclass education, relaxation and family fun. The promotional room rate offer expires May 31, so call CIADA at 704-455-2117 to get you and your first-time guest registered today. Keeping you informed, John Brown *Discount applies to the standard CIADA room rate of $180 and requires a minimum of two paid convention registrations and two three-night reservations at The Homestead. Discount applies only to the room rate – taxes and the mandatory resort fee are not discounted. **Additional first-time attendee must be a dealer.

NIADA’s Commitment to the Military ON JULY 27, 2012, NIADA CEO MICHAEL LINN and president Chris Martin submitted a statement to the U.S. House Armed Services Committee and Veterans Affairs Committee, which were holding joint hearings on assisting military service members in their return to civilian life. In the statement, NIADA pledged its support to the effort and laid out several ways the association can help the military. One of them – a video to help military personnel with the car-buying process – is now complete. The video, “Car Buying Tips for Military Service Members,” is available for viewing at www.autoconsumer.tv. Here’s the text of NIADA’s statement: Mr. Chairmen and members of both committees, we are Chris Martin, president of the National Independent Automobile Dealers Association (NIADA) and owner of E-Z Auto near Fort Bragg, North Carolina, and Michael R. Linn, NIADA chief executive officer and Vietnam veteran. On behalf of the association, we appreciate the opportunity to submit this statement for the record. The National Independent Automobile Dealers Association represents more than 17,000 members who are connected to the automobile industry in some form or fashion, but primarily independent dealers who own dealerships across America that are not affiliated with a manufacturer. They are businessmen and women who subscribe to a Code of Ethics that emphasizes honor, integrity and fair dealing.

More than 40 percent of these dealers have been in business for more than 20 years, and almost 50 percent have five or fewer employees. They are the small car store that survives in the best of times and the worst of times, because they are a part of their communities as fathers, mothers, Better Business Bureau members, Chamber of Commerce members, city councilmen, school board members, churchgoers, youth organization sponsors and coaches, and task force members who look for ways to make our cities and our towns better places to live. If they are fortunate enough to have a military installation near their business, they strive to reach out and include the active personnel and the veterans who call our communities home. The military residents in turn volunteer for Special Olympics, literacy councils that provide free tutoring, school field days and Relay for Life, to name just a few. NIADA’s leadership is committed to these service members and the citizens within the communities they represent. Our mission states that as a not-for-profit organization we will “anticipate, recognize and respond to current and future issues and needs of the independent motor vehicle industry and the consumer.” The NIADA Foundation’s goal goes further, pledging “to improve the used motor vehicle industry by informing consumers, educating dealers and training individuals and companies associated with the industry.”

The National Independent Automobile Dealers Association stands ready to use our current resources, including our education and training staff, state association directors – many of whom are veterans – and our Automotive Consumer Television Network, which is available to anyone via the Internet at http://niadatv.com/autoconsumer/, to address the needs of car-buying military personnel – active or retired.

PLANS INCLUDE:

1. Production of a simple to understand

video that explains the car-buying process for active service members or those returning to civilian life. It will be similar to the one NIADA produced several years ago targeting the teenager buying his/her first car. That video is currently available at the ACT website. 2. Coordinate a speakers bureau with our state associations, tapping local dealers who will serve as resources to conduct safe car-buying seminars for local military installations. 3. Provide NIADA education and training staff who will work with state associations in addressing proper military protocol at military installations. In closing, NIADA stands ready to assist all service members, including those returning to civilian life, the House Armed Services Committee and the House Veterans Affairs Committee any way we possibly can. Thank you.

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FEATURE STORY H AV I N G A F L O O R P L A N L I N E O F C R E D I T C A N H E L P YO U S E I Z E O P P O R T U N I T I E S A S T H E Y A R I S E .

Presenting Your Portfolio for the Most Floorplanning Dollars The automotive industry is unique in that it is one of the few in which commercial loans are abundant and relatively easy to qualify for. Whether you are just starting out or looking to shift your business into the next gear, it is extremely likely you will be able to find the capital you need to stock your dealership. But while there is a good chance you will be able to acquire a floorplan line of credit, the size of that line of credit will vary depending on your business needs and your overall portfolio snapshot.

Floorplan 101: The Basics

First and foremost, to qualify for a floorplan, you need to have established credit. Specifically, you should have a history of using and repaying debt. Bad credit and “hiccups” on your credit report aren’t always deal-breakers, but they will likely reduce the amount you qualify for. Additionally, there is a good chance credit issues will have a negative impact on your pricing structure. The good news is that over time, with good performance coupled with adherence to the terms and conditions of any loan agreement, you can overcome those setbacks. It is also important that you are not overextended. If your credit cards are maxed out, that is a red flag even if you have not paid late. Handling your available credit responsibly is essential, so be sure to maintain a substantial amount of available credit.

Getting Started

Thinking about opening a dealership? You will want to set up a free consultation with the floorplan company of your choosing right away. Even if you are well capitalized out of the gate, having a floorplan line of credit is an amazing asset that can help you seize opportunities as they arise. If you aren’t well capitalized, you will probably be looking at starting with a smaller initial line of credit to get your business off the ground. As you turn inventory and build your reserves, submit a formal request for a credit line increase.

Growing Your Business

If you are looking to grow your business through the addition of a floorplan line of credit, there are several other items

that will play into the lending decision beyond your personal credit history. Trade references, business credit, equity, cash and the overall health of your business all come into the picture and become increasingly important in your effort to acquire more floorplanning dollars. The same principles apply if you are looking to increase your existing floorplan credit limit. However, there is another component that could either work in your favor or be held against you: performance. Commercial lenders have learned a lot about managing and mitigating risk, especially over the past several years. It is crucial to closely adhere to your lender’s terms and conditions. NSFs, late curtailments, slow payoffs and bad audits will inevitably prevent you from gaining the additional buying power you need to grow your business. Stay on top of managing your accounts and you will improve your chances of increasing credit limits. Also, those with substantial business equity should flaunt it. To a floorplan company, inventory that is owned outright is viewed similarly to cash and is a good indicator of the viability of your operation. Business equity exhibits an enhanced capacity to repay debt. When applying for a floorplan, take the time to validate your equity position. Your floorplan company might ask to see the titles and bills of sale for everything you currently own. Go with it. They might even ask to physically inspect your owned inventory. That will all play into your favor, as finance companies prefer lending to people that already have money. The more equity you have, the lower the perceived risk.

Heavy Hitters

When seeking a floorplan line of credit in excess of $250,000, both business and personal financials will typically need to be presented in addition to your standard business documents. Those financials typically include: • Personal financial statement (required for each owner/signer). • Personal tax return (two years, required for each owner/signer). • Business tax return (two years). • Business bank statements (three months). • Income statement (current and prior year end). • Balance sheet (current and prior year end). As you can imagine, the larger the credit

line request, the greater scrutiny you and your business will be given. Though you are welcome to provide a stack of photocopies, the best way to present your financials would be to scan them and send the digital files via email or USB thumb drive. Make sure everything is clearly labeled, and when applicable, provide more detail as opposed to less. Anything out of the ordinary should be accompanied by a letter of explanation. In addition to the basic requirements, or if you are requesting a large line of credit (more than $250,000) to stock a startup dealership, you should be prepared to provide: • A resume for each owner/signer. • Photos of the dealership. • A business plan. • Pro forma financial statements.

Presenting Bank Statements

If you have had any NSFs, they will need to be explained in detail. Also, you want to make sure your business checking exhibits positive cash flow, meaning, in general, you have more money coming in than you have going out. Take note of your average daily balance to see if that figure is strong enough to support the line of credit you are requesting. In an ideal world, you would have at least 20 to 30 percent of your floorplan line of credit in your business checking account at all times. If you fall short of that mark, business equity via owned inventory can help bridge the gap.

Personal Financial Statement

When it comes to your personal financial statement, ideally you should have some liquid assets. Cash, 401Ks, IRAs, CDs and bonds are all desirable elements to have in your portfolio because they are accessible or you may be able to borrow against them if you need to. That is ideal because it demonstrates you have reserves in place to weather the storm should you encounter a few bad months or an unforeseen industry shift. A word of caution: Some dealer principals place an inordinate value on the shares of their dealership in their personal financial statement. Though that might beef up your net worth, a floorplan lender probably will not take that into consideration. The real value of your business is predicated on what a buyer is willing to pay C O N T I N U E D O N PA G E 8

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C O N T I N U E D F R O M PA G E 6

for it. Hence, the stated value on your personal financial statement is merely hypothetical. And bear in mind that if your dealership were to go into default, your shares probably wouldn’t be worth much at that point. Another item to keep in mind is that if all of your assets are in the form of equities against mortgaged real estate, you might encounter difficulties with potential lenders. Banks have become skeptical of real

If your business isn’t building and growing, you probably shouldn’t be seeking more floorplan dollars. More flooring won’t turn around a failing business model. You would just be adding more fuel to the fire. Instead, focus on perfecting your operation.

NIADA CERTIFIED MASTER DEALER®

F O R M O R E I N F O R M AT I O N , V I S I T W W W. N I A D A . C O M O R C O N TA C T G E O R G I A @ N I A D A . C O M .

CERTIFIED MASTER DEALER® (CMD) training positions you to take your success to the next level. The CMD designation serves as recognition of your dedication to the industry, and of your proven record for stability, reliability, and ethical business practices. THE CERTIFIED MASTER DEALER® program was developed in 2001, in collaboration with Northwood University, to help dealers manage and grow their businesses. Since then, it has grown into one of the industry’s most respected training programs. Dealers who attend this training are committed to the industry, support ethical business standards and practices, and are leaders in their communities. They bring a wide range of experience to each class, and leave with new strategies for analyzing their business practices and increasing their bottom line. Instruction is provided by Joe Lescota, NIADA Director of Dealer Development and former retail automotive executive with more than 25 years of frontline dealership, selling management and training experience.

estate equities given the recent real estate crisis. High-dollar homes and commercial properties are slow to move and hard to appraise. Don’t exaggerate your real estate equity on your financial statements. Be realistic. Conversely, if your property is actually worth $500,000 and you only owe $100,000 on your mortgage, that would be an entirely different story. Having minimally leveraged or free and clear real assets should comfort a lender to some extent.

Income Statements

The income statement can be quite revealing, and often is used to help determine what the true business need is when it comes to setting a floorplan credit limit. For instance, if a dealer requested a $500,000 line of credit but only turned $500,000 in gross sales last year, that request would surely be denied unless there were some major material changes in the operation that justified the increase. Additionally, the statement shines a spotlight on the overall sophistication of the operation. If you are generating additional revenues from F&I products and repairs, for instance, that will all be itemized on the statement.

Balance Sheet

Simply put, the less you owe and the more you own, the lower the credit risk. Again, banks like to lend when the probability of repayment is the highest. Having too few assets and too much debt can become a downward spiral towards insolvency. That ties into the overall viability of your operation. A thriving business should be building equity while reducing debt. A thriving dealer principal should be building net worth, not acquiring debt to keep his business above water. If your business isn’t building and growing, you probably shouldn’t be seeking more floorplan dollars. More flooring won’t turn around a failing business model. You would just be adding more fuel to the fire. Instead, focus on perfecting your operation. However, if your business is building equity and turning a profit, having some additional buying power can surely help you shift into the next gear.

BY GARRETT JOREWICZ

REGIONAL DIRECTOR FOR NEXTGEAR CAPITAL.

NIADA DEALER 20 GROUPS DO YOU FEEL LIKE YOU’RE CONSTANTLY TRYING TO REINVENT THE WHEEL? Does it seem like you’ve tried everything you can think of to take your dealership to the next level? Maybe it’s time for a different approach. With NIADA Dealer 20 Groups, you can share successful business ideas and best business practices with other dealers from across the country. While some Dealer 20 Groups focus on resort locations and exotic travel, NIADA 20 Groups aren’t about location. Rather, they’re a cost-effective investment in yourself and your dealership. Whether your dealership is large or small, retail or Buy Here-Pay Here, NIADA 20 Groups are committed to guiding you to serious solutions for greater dealership profitability. NIADA 20 Groups aren’t static classroom sessions. They’re not about lectures, seminars or boring power point presentations. Rather, the power of our 20 Groups comes from the dealers themselves, working together and sharing ideas and real world experience with each other. You’ll be matched with dealers of like size and sales volume from non-competing markets; dealers, working together with one goal in mind: increase success and improve net profitability. Together, you’ll help each other improve day-to-day operations, increase sales, manage expenses, control inventory, and more. Sessions are moderated by Joe Lescota, NIADA Director of Dealer Development and former retail automotive executive with more than 25 years of frontline dealership, selling, management and training experience. NIADA Dealer 20 Groups traditionally meet on weekends, to minimize time away from the pressing day-to-day business needs of your dealership, and are held at various locations across the country. Being part of a 20 Group takes only 12 hours of your time, three times a year, and provides a rare opportunity to share ideas and evaluate your dealership’s performance with people who truly understand your business – because they’re just like you. Take the next step toward achieving, and maybe even exceeding, your business goals by signing up for an NIADA Dealer 20 Group today. For more information, visit www.niada.com or contact georgia@niada.com.

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WASHINGTON UPDATE T H E I R S H A S E X T E N D E D TA X D E A D L I N E S F O R P E O P L E A F F E C T E D B Y H U R R I C A N E S A N DY.

NIADA Government Report Last year, the CFPB indicated it would consider a legal theory known as “disparate impact” in assessing consumer financial products. In essence, the theory states a lender can be liable under the Equal Credit Opportunity Act for actions that have a discriminatory effect even if they didn’t mean to discriminate. The CFPB has claimed fees collected by dealers can adversely impact minorities more than white customers. Federal Trade Commission Top 10 list: The FTC released its top 10 consumer complaint categories, and auto-related complaints ranked eighth with 78,062 complaints – four percent of the total received by the FTC in 2012. In 2011, auto-related complaints were the seventhlargest category with 77,435 complaints. New chairman: President Obama announced FTC commissioner Edith Ramirez was named chairman of the FTC effective March 4. Ramirez, who has been a commissioner since April 2010, replaced Jon Leibowitz, who resigned in February to enter private business.

Here’s a rundown of some of the latest governmental issues and activity affecting the used car industry from NIADA regulatory counsel Shaun Petersen and NIADA lobbyist Sante Esposito. REGULATORY REPORT Consumer Financial Protection Bureau In its first foray into the auto finance market, the CFPB recently sent letters to four banks informing them they might be sued over loans and interest-rate markups by dealers that the CFPB claims are discriminatory. The banks were given 15 days to respond to the letters with an explanation of the alleged practices. Auto dealers are not directly under the CFPB’s supervision, but banks with $10 billion or more in assets are. Many dealers offer indirect loans, backed by banks and other lenders, to car buyers.

Department of Transportation/Department of Justice With the help of the Department of Justice, the Office of Odometer Fraud Investigation, a unit of DOT, was able to indict two auto wholesalers on charges of odometer fraud in Philadelphia. The individuals are accused of making false odometer statements, securities fraud and conspiracy to commit those offenses. The individuals allegedly falsified the odometer readings on 247 vehicles over more than six years. The vehicles were purchased predominately in Florida and California and then sold, with lower mileage, at an auction in Pennsylvania. At press time, the defendants had not yet stood trial or entered a plea agreement. Internal Revenue Service The IRS has extended tax deadlines for people affected by Hurricane Sandy. Those living in FEMA-designated counties, along with individuals and businesses whose bookkeepers or tax professionals live in FEMA counties, can qualify for the tax extension. The extension covers fourth quarter individual tax payments, payroll and excise taxes. To determine if you or your business qualify for the extension, contact the IRS at 866-562-5227.

LEGISLATIVE REPORT Rental Cars Recall Last month, NIADA met with the senior staff of Sen. Barbara Boxer (D-Calif.) to discuss her plan to introduce legislation to ban rentals of motor vehicles with open recalls. After the meeting, Boxer’s staff provided background material on the issue as well as the text of the proposed bill, which has not yet been introduced. NIADA reviewed the material and sent letters to Boxer and bill proponent Sen. Chuck Schumer (D-N.Y.) expressing two concerns with the proposed approach: that the proposed definition of “rental company” is too restrictive and that the bill does not account for the inherent flaws of the NHTSA recall notice process and the inconsistent and unreliable dissemination fo recall information. At press time, neither senator had yet responded to those concerns. In addition, discussions are ongoing with NADA because the associations share mutual concerns about the issue. H.R. 749, Eliminate Privacy Notice Confusion Act This was previously known as H.R. 5817, which was introduced by Rep. Blaine Luetkemeyer (R-Mo.) during the last Congress and passed the House. It was reintroduced in the new Congress on Feb. 15 with 18 cosponsors. The bill amends the Gramm-LeachBliley Act to exempt from its annual privacy policy notice requirement any financial institution that provides nonpublic personal information only in accordance with specified requirements, and has not changed its policies and practices with regard to disclosing nonpublic personal information from those noted in the most recent disclosure sent to consumers. Car Guys in Congress II Last month we noted the six members of the new House – all Republicans – who own or have owned automobile dealerships: Scott Rigell of Virginia, Mike Kelly and Bill Shuster of Pennsylvania, John Campbell of California, Vern Buchanan of Florida and Jim Renaci of Ohio. Given the shared interest in cars and understanding that cultivating a relationship with the congressmen could help NIADA in terms of support, a letter of introduction explaining the association’s history, mission and goals was sent to each.

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INDUSTRY NEWS I N T E R N E T P L AT F O R M S C A N T U R N YO U R L O C A L D E A L E R S H I P I N T O A N AT I O N W I D E – A N D W O R L D W I D E – S A L E S P R E S E N C E

Expanding Your Horizons Stop avoiding the Internet, experts say. Any dealer not currently expanding online should be worried he’s missing out on potential customers who could have been visiting the dealership from their smartphones in a coffee shop, at work or at home in their pajamas. “The blow-up monkeys on the car lot are not driving in customers,” said Clayton Stanfield, manager of dealer training for eBay Motors. Instead, Stanfield challenges his dealer customers to answer a few questions. How is your website? How is your Internet presence? How do you build a complete sales process with online customers? How do you get them to fill out a credit application online? An estimated 80 percent of customers start their car research online. That percentage increases to 90 percent for the millennial generation, the youngest of eligible car buyers, Stanfield said. “These customers aren’t going to spend two months on their iPhone researching vehicles and your business, and then spend a couple of hours in a finance office haggling over a deal,” Stanfield said. “When they come into the dealership it’s really just for the delivery of the vehicle. They want to feel confident they’ve got the right credit for the car they want.” Developing a stronger online presence is not as difficult as it might seem, Stanfield said. Any dealer still in business likely already has a strong customer service record. He’s accustomed to delivering a Mercedes S-class every two years to the home of a loyal elderly customer or to giving certain customers a phone call when his inventory changes. Adding the online component just requires transporting those traditional shopping conveniences to the Internet, Stanfield said. Another insight he shares about online shoppers is they typically are faithful to their brands. Someone who loves Honda Accords knows what they drive like at 30,000 miles and 50,000 miles. No test drive is needed. They’re now online simply looking for the right price and color. Stanfield teaches two classes a week to help dealers get the most use out of eBay’s platform. Each year, the eBay Motors website is used by an average of 50,000 licensed dealers, who were largely responsible for the site’s $1.7 billion vehicle volume during last year’s

fourth quarter. During that same quarter, 76 percent of the vehicles sold were interstate transactions, according to eBay’s records.

Dealer Experiences

Frank Fuzy, owner of Century Motors in Pompano Beach, Fla., and one of eBay’s prized success stories, is quite familiar with interstate – and intercontinental – transactions. He started selling cars online 12 years ago with his father-in-law and the help of a vendor. They put five cars up online and sold all five in the first week. Fuzy still remembers his first sale. “It was a red Mitsubishi 3000 GT to a customer in Tokyo, Japan,” he said. When Hurricane Wilma, a Category 5 storm, barged through Florida in October 2005, it kept would-be car shoppers trapped in their homes or shelters for weeks. Brick and mortar businesses suffered, especially dealerships. Despite the storm, Fuzy still sold 11 vehicles to online shoppers. There are drawbacks, however. His advice for dealers is to be prepared for hard work. “You really have to be hands-on,” Fuzy said. “It’s a 24/7 business. Actually, I joke that my wife and I work 9 to 9, nine days a week.” At 4 a.m. one morning, while he was heading to the bathroom, the phone rang from his business line. It was a customer from the Netherlands ready to buy a car. EuroCar Inc., a Costa Mesa, Calif., dealership selling imported brands such as Aston Martin, Audi, Bentley, Ferrari and Lamborghini, adopted Internet sales into its marketing plan in 2007 after recognizing the shift in consumer purchasing behavior. EuroCar was once known as a local dealership, but owner Tilo Steurer said the company is now an industry leader, with more than 70 percent of sales – 75 vehicles per month with an average sale price of $150,000 – made to customers across the country or on other continents. Still, there are glitches to consider, Steurer said. “It is entirely possible to have a customer walk into the dealership and proceed to begin negotiations to purchase a specific vehicle, while another customer sees the vehicle on eBay Motors and calls the dealership to begin the same negotiation process with a salesman,” he said. “It can, and does, happen.” Steurer said when such conflicts arise “traditional customer service really

becomes key to keeping both parties happy.” A typical online sales process for EuroCar begins with either a bid on a listed vehicle from an email or a phone call from the customer. At that point, EuroCar’s sales team gives the customer more detailed information about the vehicle that caught his attention. Sometimes additional photos are sent to the customer or he will schedule a live viewing of the vehicle in real time. Afterward, financing and leasing options are discussed. “Most deals do not actually close online, but about 10 percent do,” Steurer said. “Due to the intricacies of high-line vehicles, most customers like to speak one-on-one with the dealership because that type of buyer is typically relationship-driven.”

Online Selling Strategies

AutoTrader.com has an online marketing handbook available free to auto dealers. It discusses how to integrate online listings into the culture of the sales staff. It includes specific techniques the sales staff needs to know to craft strong online classified listings, including tips on how to create quality images and sales copy that entices customers into the showroom. It also outlines how to measure a dealership’s website traffic against its advertising spending to ensure a dealer is getting the most for his investment. “The goal of automotive Internet marketing is not to sell cars online – it’s to get potential customers to see your car, come into your dealership, and ultimately purchase a vehicle,” the handbook’s opening line reads. “To get consumers to move forward through this process, your online presentation must create value in the minds of shoppers. Essentially, you’re telling potential customers why they should choose you.” Creating a good presentation starts with taking great photos of cars. The handbook notes, “Great photos can motivate customers to stop, look and ultimately buy your vehicles. Use multiple photos to give a virtual ‘walk-around’ of the vehicle and help sell the features to potential shoppers. In fact, listings with photos perform significantly better than listings without photos.” AutoTrader’s research has shown having a single photo will more than double a dealer’s click-through rate. Each additional photo will increases click-through rate by approximately 5 percent. Visitors to EuroCar’s website – C O N T I N U E D O N PA G E 1 4

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Expanding Your Horizons

C O N T I N U E D F R O M PA G E 1 2

www.EurocarOC.com – can view up to 70 photos per vehicle, and even request a live showing of any vehicle in the system. “Here’s a tip about your photos: Show a variety of interior and exterior shots and angles within the first nine photos to ensure that shoppers get a virtual walk-around in the photo thumbnails as soon as they arrive,” AutoTrader’s handbook says. Al Amersdorfer, president and CEO of Automotive Internet Technologies, said Internet salespeople need to do a better job of giving pricing information to prospective car buyers. Amersdorfer said dealers often have a hard time understanding why it’s important for their salespeople to put forth extra effort to get accurate pricing information to customers making online inquiries. “Many old-school types still preach selling techniques that are based on ideas that worked before the Internet changed the way people shop for and buy cars,” Amersdorfer said. “Whatever the reason, the fact is that you almost always will get better results if you embrace an Internet sales process that includes giving prices.” Amersdorfer said dealers need to pay attention to customers’ online shopping habits. “We’ve known for a long time that they

contact multiple dealerships, and we know they typically initiate further contact with those dealerships that provide a high level of service and answer their questions,” Amersdorfer said. “Trying to bring an Internet prospect into the dealership without providing sufficient information is like having an answering machine take your sales calls.”

“Trying to bring an Internet prospect into the dealership without providing sufficient information is like having an answering machine take your sales calls.” His company conducted an analysis last year of Internet leads worked by some of his client dealerships, comparing key results broken down into “gave-pricing” and “didn’tgive-pricing” categories. “It turned out that twice as many of the sold prospects, 67 percent, had been given pricing information,” Amersdorfer said. “We weren’t surprised. Internet prospects need to have their questions answered, and they

will look elsewhere if a dealership doesn’t provide the information they want.” Choosing a dealership occurs during the shopping phase, not the buying phase, and shopping involves information gathering, Amersdorfer said. Many Internet prospects contact dealerships long before they are ready to buy, sometimes months before, he said. Internet prospects typically are in one of three categories: Those who are going to buy in the next five days, in the next 20 days or who won’t be buying for at least 20 days, Amersdorfer said. “Some dealerships are more willing to build a relationship with the longerterm shoppers,” he said. “Those stores provide information, follow up and generally work with the prospect to ultimately bring them into the dealership for the buying phase.” Amersdorfer said being able to interact with prospects on the phone or by email is the first step in getting them into the dealership. “Engaging the prospect is the next step,” he said. “If you can’t engage the prospects, they aren’t going to select you.”

BY JASON ROBERSON

A MESSAGE FROM NIADA’S CEO

The Power of Association W E ’ R E C O N S TA N T LY W O R K I N G T O P R O T E C T YO U R I N T E R E S T S A N D YO U R B U S I N E S S .

As an independent automobile dealer, it can be very easy to get caught up in the hectic dayto-day reality of selling vehicles and operating a business. That’s why we’re all here, right? Well, yes, but… There is a bigger picture, as well. And that’s why NIADA and your state association are here. We are the only non-profit associations in the automotive industry representing you and your business as an independent auto dealer. What does that mean? It means that in perhaps the most regulated industry in the nation, under scrutiny by everyone from the FTC to the CFPB to IRS to the state attorney general’s office and DMV, there’s someone looking out for you. NIADA has a strong presence in Washington D.C., making sure your voice is heard all the way up to the highest levels, making sure the needs of dealers are understood and considered by lawmakers and regulators. And through our affiliated state associations, we have a similar presence in state legislatures across the country. We’re constantly working to protect your interests and your business. But there’s one thing we need to continue

those efforts: You! Without our members, without the support and input of our dealers, there is no NIADA, no state association, no Washington presence, no lobbying – in short, no one to represent you. As a member of NIADA, you provide the power that transforms one small voice into a formidable force that must be listened to. We’ve seen it work again and again. For example, last year NIADA turned the full force of its resources loose in California to battle legislation that targeted Buy Here-Pay Here dealers with a series of suffocating regulations. Information became our ammunition in a long, difficult war to get the word out about what the new law would really mean to dealers and the consuming public. And in the end, we prevailed. Gov. Jerry Brown vetoed California Senate Bill 956, saying he was “not yet convinced the evidence merits the regulatory oversight of this bill.” There are, of course, many other reasons to be an NIADA member. Our members receive preferred services and discounts from top industry vendors, spanning the range from financial services and insurance to auto parts to vehicle transport to office

supplies and everything in between. We offer some of the industry’s most respected dealer education programs, including the acclaimed Certified Master Dealer program, our new NIADA 20 Groups and a wide array of education sessions available at our annual Convention and Expo as well as online at NIADA.TV. Your state association offers many additional member benefit opportunities as well. All of those are terrific reasons for maintaining your membership – they’re all designed to make your dealership stronger, more efficient and more profitable. But the reason we’re really here – the reason NIADA was founded in the first place, back in 1946 – is to turn an all too easily dismissed “me” into an impossible to ignore “us.” And for that, we need you! If you’re a member, we thank you for your support. If you’re not a member, the time to join is now – just visit www.niada.com. Your annual dues provide you with dual membership in both the national and state associations. Join today and become part of the power of “Association.”

BY MICHAEL LINN

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AUCTION NEWS

Uncertainty Ahead, But Growth, Too MANHEIM’S 18TH ANNUAL USED CAR MARKET REPORT was released recently, and in one sense, it has a very familiar look to it. The theme of uncertainty has dominated the review and outlook section for years. Either we are fixated on it, or it truly has been omnipresent. Trust me – it’s the latter. For example, we wrote that growth in 2011 “was achieved even as businesses, financial markets and consumers wrestled with the uncertainty created by the European sovereign debt issue and the inability of U.S. policymakers to provide an environment conducive to long- term planning or investing.” Couldn’t the same be said for 2012? And now in 2013, another debt ceiling deadline looms, a budget sequester remains on the books and a “continuing resolution” (much less a budget) still hasn’t been passed. As Yogi Berra would say, “It’s déjà vu all over again.” But, as we wrote last year, “Despite the self-imposed headwinds, the recovery became more self-reinforcing and more balanced in 2011.” That, too, can be said of 2012. And, barring outside risks, 2013 looks to be another year of sustainable growth. You can find a more complete picture of what has been and what is coming in the full report, which, as part of Manheim’s Dealer’s Edge partnership with NIADA, can be downloaded free by NIADA Dealer Members at www.niada. com/dealers_edge.php. In the meantime, we’re happy to hit some of the highlights. A Big Year for Dealers Overcoming economic uncertainty and the lingering effects of the Great Recession, the U.S. automotive industry in 2012 produced accelerated growth and profitability for dealers and other key industry players. New car sales exceeded expectations by 1 million units, rising to 14.5 million. Used car sales, meanwhile, rose to 40.5 million units, a 5 percent increase from the previous year, and finished the year with a 17 percent increase in December. Wholesale prices remained at historically high levels, and the rental industry earned record profits. Sales of

certified pre-owned units rose almost 6 percent to a record 1.84 million. While dealers faced margin pressure throughout the year, faster inventory turns, operating efficiencies and strong F&I income kept used vehicle operations very profitable. And with wholesale supplies increasing in 2013 and credit availability likely to remain good, used vehicle dealers should see increased sales again in 2013. At the heart of many of those positive developments was the smart use of technology, including digital tools that allowed retail customers to make more informed choices, wholesale sellers to remarket their inventory in multiple forums simultaneously and wholesale buyers to make inventory management decisions anytime, anywhere from the palm of their hands. Credit Spurs Sales No industry has benefited more from the unfreezing of the credit markets than new and used vehicles. Although the immediate goal of Federal Reserve actions was to lower long-term rates and support the mortgage market, it was the auto financing markets that enjoyed the first boosts. The search for yield – with safety – drew investors into the asset-backed securitization market for auto loans and leases. And it also created new capital flows to dealers involved in the selffinancing market. Lenders, whether prime or subprime, enjoyed a record-low cost of funds. They passed those savings on to dealers, who did likewise for their retail customers. Subprime customers who would have been rejected a year before received approvals in 2012 – and at a lower APR. Buyers found they could borrow more, for longer terms, and that is exactly what they did. Wholesale Market We have long suggested that wholesale used vehicle prices have entered a new era in which markets are comfortable with relatively higher valuations. That’s because the bad practices of the past that destroyed residual values, like excessive lease subvention, heavy incentives, short rental cycles, and high

dealer inventories, have been stopped. Remarketing processes have also entered a new era. Gone is the bright-line distinction between in-lane and online. Simple multiple-platform selling is quickly becoming simultaneous multiple-platform selling. Even the distinction between retail and wholesale has blurred. New entrants into an old industry are now expected, and sometimes even welcomed, even as they bypass what used to be considered “the rules.” Certain truths remain, however. Open and transparent competitive bidding with equally knowledgeable players remains the truest form of price discovery. And buyers and sellers need a trusted marketplace built on efficiency that effectively transfers vehicles to their optimal owners. Disciplined new vehicle inventory management in 2012 explains much of the strength in wholesale used vehicle pricing during the year. As such, it is a welcome fact that the consensus forecast for sales in 2013 points to around 15.5 million, since that is a sales rate that was almost achieved in the fourth quarter of last year. The 2013 UCMR, a comprehensive analysis of the tends that shape the automotive industry, includes much more valuable information for independent dealers as well as sections on rentals, leasing, repossessions, fleets and salvage. I encourage NIADA members to download their free copy.

BY TOM WEBB

TOM WEBB IS CHIEF ECONOMIST FOR MANHEIM CONSULTING. CONTACT HIM AT THOMAS.WEBB@MANHEIM.COM, FOLLOW HIM ON TWITTER AT WWW.TWITTER.COM/TOMWEBB_MANHEIM AND READ HIS BLOG AT WWW.MANHEIMCONSULTING.TYPEPAD.COM.

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AUCTION NEWS A U T O R E M A R K E T I N G S P O K E W I T H C O N S I G N O R S AT T H E 2 0 1 3 N A D A C O N V E N T I O N & E X P O I N F E B R U A R Y T O G E T T H E I R P O I N T O F V I E W.

Auction Lanes to Benefit from Across-the-Board Lift in Volumes THE NUMBER OF UNITS FLOWING into the auction lanes this year is expected to jump to about 7.9 million, according to the 2013 Used Car Market Report from Manheim – a 5 percent increase over 2012. While still down significantly from the 10 million unit mark reached in 2003, this growth is founded on “solid business practices,” Manheim suggested, in contrast to some of the factors that pushed auction volumes higher 10 years ago. Meanwhile, in its Auction Industry Report following the fourth quarter of 2012, the National Auto Auction Association (NAAA) predicted that the increase in overall auction volume would accelerate this year due to an increase in fleet/lease volume, as well continued improvements for dealer consignment and OEM/factory consignment. The report — which was prepared by NAAA economist Ira Silver — found that full-year auction volume for the industry was up 0.5 percent year-over-year in 2012. “This year we expect to see continued auction volume gains in dealer consignment and manufacturing/factory and a turnaround in fleet/lease, giving the industry an up year with a significant total volume increase,” the report noted. Auto Remarketing spoke with consignors at the 2013 NADA Convention & Expo in February to get their point of view. At GM Financial, vice president of asset remarketing Dan Heinrich is expecting a slow, steady climb in volume. “In 2008, as capital markets started tightening up, we pulled back from an originations standpoint, like most other lenders. That took some time before it really came into our world, in the remarketing industry,” Heinrich said. “So, we’ve gotten down to some of our lower volume numbers, compared to where we’ve ever seen before. We’ve hit the bottom, and we’re starting to go back up as our originations increased a couple years ago. “So, we’re starting to see some of that volume return, but it’s going to be a small, steady increase, especially in our retail portfolio,” Heinrich said. “But I think with that we’re going to see that volume start growing at other lenders, as well.” Auto Remarketing also sat down with

Brent Sergot, president of DataScan Holdings LLC and its subsidiaries, DataScan Technologies and DataScan Field Services. Sergot, who is also the vice president and general manager of CenterOne Financial Services, said he believes 2012 marked a “trough” in terms of wholesale volume. “Wholesale volumes are largely driven by off-lease vehicles,” he said. “In 2012, you were dealing with cars that retailed in 2008 and 2009. And everyone knows what happened in 2008 and 2009 – everyone headed for the hills.”

But with the improvements of 2010 and 2011, “I think it’s only up from here,” he said. In fact, during his conversation with Auto Remarketing at NADA, Sergot pointed to an audience poll at the Vehicle Finance Conference & Exposition earlier that week. According to Sergot, when polled about the reach of lease penetration in the new vehicle market, the majority of respondents indicated a range of 26 percent to 29 percent. “That bodes well for wholesale volumes,” Sergot said. “A certain segment of those customers will buy their cars and never be seen from again, but a large segment of those customers are going turn the keys back to the lessors and go buy another new one. “And that generates wholesale volumes for auctions.”

Overall Used Car Volume Beyond the auctions and looking at the broader picture of overall used car volume in the marketplace, NADA Used Car Guide is projecting the number of units aged one to eight years will fall 3 percent this year, to 16.5 million units, while late model volumes are projected to climb 8 percent. Unfortunately, late model volume “will still be approximately 25 percent below where it was in the three years leading up to 2009, even after this year’s increase is factored in,” NADA Used Car Guide’s Jonathan Banks wrote in the February Guidelines report. “So while the growth in late model supply will apply some downward pressure to younger used vehicle prices, the continued slide in early model supply will benefit prices of older models.” Specifically, NADA is projecting 6.9 million late model units in the used-car market, up from 6.4 million in 2012. This uptick is due mainly to a 14 percent gain in off-lease volume, Banks said. Used supply for vehicles up to eight years of age will come in at 16.5 million, down from 17.1 million in 2012. Beggs on Used Supply Offering another vantage point, Black Book’s Ricky Beggs talked with Auto Remarketing about used supply, and pointed to the 14.5 million new cars sold in 2012 – an increase of 1.8 million from the year before. “Nearly 60 percent of those had a tradein,” Beggs said. “That alone is going to be the biggest driving piece of it.” Earlier in the interview, Beggs mentioned that used volumes going up will have an impact on pricing in the auction lanes, as well. For example, between Feb. 1 and May 1, 2012, 12 of the 24 wholesale vehicles segments tracked by Black Book climbed in price; during that same period in 2011, 14 segments increased. “My feeling is, we’ll have a good market,” said Beggs. But Beggs doesn’t expect we’ll see 12 markets increase in price, noting the possibility of only eight to 10 segments climbing in price during the February-May time frame in 2013, which is still positive on the whole. Beggs is optimistic, however. “Now, wait ‘til 2014,” he said.

BY JOE OVERBY AUTO REMARKETING EDITOR

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INDUSTRY NEWS A S CA R S HOP P ER S R AC E T O T H EI R S M A R T P H O N ES FO R I N FO R MAT I O N , A P OW ER F U L M O B I L E W EBS I T E CA N K EEP D EA LER S A H EA D O F T H E PAC K

On the Move IT’S DIFFICULT TO DENY THAT POWER HAS SLIPPED AWAY FROM SALESPEOPLE SINCE CAR SHOPPERS TOOK TO THE INTERNET, BUT ONE ADVANTAGE REMAINS: Dealers are consumers, too. Virtually every dealer in America has researched and shopped for his or her own vehicle. The odds are pretty good that as you read this, you have a mobile device in your pocket – and you’ve used it to do product research online. Some say that’s the reason dealers are adapting to their customers’ use of mobile devices more quickly than they adapted to Internet use on personal computers. Jose Puente, director of mobile products for AutoTrader.com, is one of them. In the early days of the Internet, Puente said, not every car dealer had a PC. “But dealers themselves are actually users of mobile devices in their personal lives,” Puente said. “It’s easier for dealers to accept the evolution of mobile computing in the car shopping process.” In recent months, that evolution has become an explosion. The way we browse the web is changing at an astonishing pace. In the last quarter of 2012, digital marketing agency Walker Sands reported, mobile traffic accounted for 23 percent of total web traffic in the United States. What’s perhaps more telling is that less than two years earlier, the percentage had been six percent. Since January 2011, the agency reported, U.S. mobile traffic had increased a stunning 283 percent. Why the sudden explosion? As manufacturing methods improve and cell carriers continue their price wars, major carriers like Verizon and AT&T have started offering free touchscreen smartphones to new customers who sign a two-year contract. In Bessemer, Ala., a lower-income suburb of Birmingham where Roderick Underwood sells pre-owned vehicles for Anthony Underwood Automotive, some customers may have never owned a personal computer, but they’re now doing plenty of dealership research from their mobile devices. “I’ve seen customers that I’m talking

with and while I’m talking to them, they have my website on their phone,” Underwood said. This sea change in consumer behavior is having a major impact on the auto industry. For one, Puente said, mobile devices have given customers significant leverage by allowing them to virtually shop at other dealerships while they’re still physically on your lot. In 2013, he said, auto shoppers “understand more about their options than ever before.” It’s another reason why the T-word – transparency – isn’t going away. According to Florian Zettelmeyer, professor of marketing at the Northwestern University School of Management and a frequent speaker at auto marketing events, “The issue is not how to try to fight transparency. The issue is about how to figure out ways to turn transparency into a profitable endeavor.” With that in mind, here are some rules for drawing more leads to your dealership from mobile devices: Make sure your site is easily viewed and navigated from a mobile device: Some of the most impressive dealer websites you’ll ever see on a computer – you know, the “Luxury and Exotic” numbers with an Aston Martin screeching across the banner in a pulse-pounding animated introduction – are some of the most frustrating to mobile shoppers. A movie that takes a couple seconds to load on your home computer might leave your customer waiting for minutes on a phone, if it even loads at all. Customers have less patience for waiting on a mobile site than when they’re sitting in front of a computer, Puente said. That makes large media files a no-no. Furthermore, text links and small buttons that work effectively on computers are often unreadable on a mobile screen, or too small for a mobile shopper to tap accurately. Today’s best dealer website providers recognize these problems. So they redirect mobile visitors to a different version of the site, one with large, simple buttons and stripped-down graphics. Typically, those mobile websites use the same tap-and-swipe list navigation employed by iPhone or Android apps, so they’re instantly familiar to users. And

though they might not have all the flashy bells and whistles of traditional websites, some experts see that as a good thing. “Some of the best consultants in the website design space are trying to get people to adopt mobile design principles on their principal website,” Zettelmeyer explained. “I would think of mobile as a terrific opportunity to de-clutter. … It just imposes discipline on design.” Capitalize on the strengths of the mobile platform: Mobile devices have certain unique strengths, and it’s wise to use them to your advantage when building your mobile site. For example, smartphone browsers automatically convert phone numbers into links that launch a call when touched. But you can encourage more visitors to call your dealership by including large, graphical call buttons on your home page and every inventory page. Most mobile devices also have a GPS, which means customers can get directions to your dealership. But you can make it easier for them by placing code on your mobile website that launches an app for directions, rather than accessing them through a browser. Ask your mobile website provider if it does that automatically. That way is usually faster and enables useful features like voice-guided navigation and automatic recalculation of directions if the driver veers off course. Puente said text-based contact forms still have their place on a mobile website, but mobile visitors aren’t as willing to complete them if they’re lengthy. “If you go beyond two screens for [a mobile form], you’re probably not going to get a lot of conversions,” Puente said. Don’t cut any functionality on your existing website from the mobile version: As mobile use entered auto dealers’ radar during the past few years, some assumed those visitors were a different type of customer – one that was already on the road, and thus closer to buying. For that reason, many of the first mobile websites for auto dealers were strippeddown versions of the dealer’s full website, focusing mostly on available inventory. However, that view has been challenged by recent research from J.D. Power and C O N T I N U E D O N PA G E 2 2

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On the Move

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

Associates. A study published in January revealed consumers are more likely to view automotive information on a mobile device at home (37 percent) than while they’re shopping or running errands (16 percent). The same research suggests when shoppers do use their devices from the road, they’re not simply comparing prices. Mobile shoppers outside the home are “continuing to look at the attributes of the vehicle, the auctions, the specifications – things that more typically we’ve done at home on our computers,” J.D. Power senior director of automotive media and marketing solutions Arianne Walker said. Zettelmeyer said the tendency to look at mobile shoppers as a different audience stems from a long history of retailers grouping shoppers into “channels” based on how they make contact. “But from the consumer’s point of view, [the channels] aren’t different things,” he said. “They’re the same things, just at different stages or different times.” Because it’s hard to predict what mobile visitors are looking for, Walker argued, it’s important to carry all the capabilities of your original website over to the mobile version. “Any [function] dealers have on their

traditional website, if there’s a way to get it onto their mobile website, they should,” Zettelmeyer said. Direct tablet users to your full website, but make it touch-friendly: In addition to their desktop and mobile sites, some auto manufacturers have even created a third site specifically for tablets. But Walker and Puente agreed that isn’t necessary for most dealers. “You want to think about one site for the larger form factor, and one size for the smaller form factor,” Walker said. Because most tablets are large enough to display regular websites effectively, dealers might want to make sure the navigation buttons on their existing site are large enough to be used on the most popular tablets. Mini-tablets like the iPad Mini and Galaxy Note II have made the line more blurry, Walker said, but most models will automatically display the website type that will work best on their screen size. Go beyond the mobile website: While creating a touch-navigated website is a great way to reach more mobile shoppers, it’s far from the only way. For years, dealers have experimented with using text messages to reach customers. It’s a captivating idea, since

countless studies and common sense have shown people read texts much more often than they open emails. But Walker said dealers must tread carefully. “Consumers want to be reached to be communicated with on their time, not on the dealer’s time,” Walker said. “Phone calls and emails are still generally preferred.” And sending marketing messages to a private number without explicit permission can land you in a heap of legal trouble, according to Puente, who said he’s seen dealers hit with expensive lawsuits for violating consumer privacy laws. Walker recommended providing a choice for customers to opt in to text messaging on your website or in vehicle paperwork, but not to push it aggressively. Puente agreed, suggesting text messages can be used effectively to alert service customers of an upcoming appointment or when their vehicle is ready for pickup. Walker added that online chat, a technology that lets dealers communicate with people live as they browse the website, can be particularly useful as it becomes capable of reaching mobile browsers.

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Contact at Once!, a popular live chat service for dealers, touts studies on its website that indicate auto shoppers are less intimidated by a chat message than a phone call, and that chatting with a salesperson makes a website visitor more likely to visit the dealership. “I love online chat,” Walker said. “There aren’t a ton of people doing it yet, but I think that’s going to pick up in the future, especially as you have more millennials coming into the marketplace.” And there are more creative ideas. Puente said some dealers have added calls to action on each vehicle sticker, encouraging customers to text a number for more information on that vehicle. Underwood said his dealership provides the same opportunity with QR codes – symbols that can be scanned by certain mobile apps to launch the vehicle’s website listing. Take advantage of your employees’ mobile devices to make work more efficient: Mobile devices are great tools for consumers, but they can also be useful for your daily tasks. For example, everyone knows how critical it is to have good inventory photos on your website. It’s not hard to take the pictures with a digital camera, but then you have

to wrestle with downloading them to a computer and matching them to the right vehicle in your inventory system, provided you found the right cord and installed the right drivers. Underwood said even minor troubleshooting can trip up the process on a busy day. “The salespeople are not going to do it,” he said. Mobile apps are making those hassles obsolete, and several dealer software developers now provide them as a free sidekick to the desktop program. They can connect to your system and wirelessly upload photos taken on your mobile device. Some can even read the VIN off the vehicle, create a new inventory item and attach a series of photos to it. As mobile data speeds improve, video uploading will likely be next. VIN scanning technology also makes it much easier to evaluate vehicles at auction, improving the quality of your inventory. CARFAX and AutoCheck have developed apps for running vehicle history checks from the road, and their reports can be accessed from third-party apps as well. Is It Really That Important? While there’s some disagreement about how a dealer’s mobile marketing strategy

should look, vehicle marketing experts agree having a mobile website is absolutely essential. “It’s more important than your full website,” Puente said. Underwood said he believes his dealership’s mobile website makes a difference, especially because some of his competitors don’t have one. “If [a shopper is] at another dealership and they know they can go to our website on the phone and pull up our inventory,” he said, “that gives us a huge advantage.” Walker agreed. “There are so many dealers out there that haven’t done it, and they’re going to get further and further behind if they don’t catch up soon,” she said. “You don’t want a consumer to have to go somewhere else to get content that you already have just because they can’t look at it easily on a smartphone.”

BY ALEX BRAUN

ALEX BRAUN IS MARKETING MANAGER FOR AUTOMANAGER, A PROVIDER OF INTEGRATED DEALER MANAGEMENT SOFTWARE, DEALER WEBSITES AND ONLINE VEHICLE MARKETING. HE CAN BE REACHED AT ALEX@ AUTOMANAGER.COM.

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Private Party Sales Still Down, but Expected to Come Back

ACCORDING TO ART SPINELLA, PRESIDENT OF CNW RESEARCH, February’s slight projected increase in retail used vehicles sales – about 0.3% – is a decent showing given the strength of the used-car market a year ago and the fact February had an extra day in 2012 due to the leap year. Used car sales should be near $2 million, with franchised dealers leading the marketplace. CNW also noted: Franchised Dealers Sold Approximately 714,000 Units and Independents Approximately 700,000: Private party sales continue to be weaker than dealers, down 9.6% in opening days of February. Dealers Skimming Cream of Crop, Leaving Less Desirable Units for Private Party: CNW expects private party sales to rebound in second quarter of 2013. Used Prices Continue to be Weak, with Little Sign of Rebounding: Franchised and independents were only getting 93% and 92.7% of asking prices.

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

2013 Carolinas Quality Dealer: Norman Stuckey NORMAN STUCKEY, PRESIDENT OF CENTRAL MOTORS IN COLUMBIA, S.C., will represent the Carolinas at the upcoming NIADA Convention as the state’s 2013 Quality Dealer of the Year. Stuckey has his brother to thank for his long career in the car business. In 1983, Stuckey was a student at the University of South Carolina looking for direction. His brother, a salesman for a Toyota dealership in Florence, not only suggested he try auto sales but introduced him to Columbia Toyota dealer Willie Rish. Stuckey had immediate success and was hooked. He later went into business with a partner before splitting off in 1996 to start his own dealership, Central Motors, near the State House and the university. He’s been at that location ever since. Stuckey said he stays in business by having loyal employees and loyal customers.

“I believe my sales are an extension of my personal values

“I believe my sales are an extension of my personal values,” he said. Stuckey has been a member of CIADA for 15 years and was part of the group that pushed for a mandatory dealer education law in South Carolina. He is currently on the S.C. legislative committee and has served as association president. He earned the 2008 Chi Psi National Alumni Recognition Award for his service to the fraternity. He is also a Cub Scout leader as well as a volunteer for the Salvation Army and his church, helping provide food for the homeless. Stuckey will represent the Carolinas as a nominee for the National Quality Dealer Award, which will be presented at the NIADA Convention and Expo in June in Las Vegas. Congratulations to Carolinas Quality Dealer of the Year Norman Stuckey! 24

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y

B E C O M E A R E S O U R C E A N D A D E S T I N AT I O N F O R W E B V I S I T O R S , A N D S A L E S W I L L F O L L O W

Why Are Customers Leaving Your Website? DEALERS OFTEN ASK, “WHERE CAN I GET MORE LEADS?” Rarely, however, do they ask, “How can I increase the conversion of my website?” The answer to the first question is: You can get more leads from your own website. That is the place to start. Of course, then the response is, “But people are not staying on my website.” The majority of marketers and business owners often search outside sources to increase leads and opportunities. They go to third party lead providers – direct mail, radio, TV, newspaper, email blast providers and billboards – to drive more traffic or leads. I understand why marketers and business owners still follow that practice. They have not relearned or reprogrammed their marketing and sales strategy thinking. Think about it this way: You have a brick-and-mortar business and you do your very best to ensure you have the best salespeople possible to close every sales opportunity with shoppers visiting your

store. Now that you have achieved a 23-25 percent closing percentage, you feel your sales strategy is working to its maximum. Now you must advertise in order to drive more traffic, in turn feeding your salespeople. For the past 75-plus years, that has always been the responsibility of radio, TV, newspaper, direct mail, billboards and tents and events. Times Have Changed for the Better It’s time to look for more traffic, leads and opportunities … inside. By that I mean inside your own business, inside your own website. Today in marketing, a properly developed website will fill the role of marketing tools like radio, TV, newspaper and billboards. A well-designed website will fill the role of a friendly and always available customer support representative. A website built on the sales funnel-flow process will fill the role of the salesperson you have always dreamed of, one who is willing to do anything at any time,

24/7/365, to close a sale. A salesperson who has a sales funnel packed so full that no 50, 100 or 500 salespeople could ever match him. It is exciting to think your website can be that great of a tool, and you are probably wondering where to start and what it will cost. I will warn you now, it is difficult to find a website that fits this concept, and, yes, it will be expensive on the surface. But when you compare the cost of payroll, taxes, insurance, sales support staff and bad salesperson tactics to a website developed for today’s shoppers, you will be ready to commit to this new way of thinking. C O N T I N U E D O N PA G E 2 6

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Why Are Customers Leaving Your Website? C O N T I N U E D F R O M PA G E 2 5 And that’s not to mention the inability to measure return on investment for radio, TV, newspaper and billboard, or that you have to keep paying to receive the ads and when you stop you have nothing to show for it. Coffee is For Closers and Conversion is for Today’s Marketers So let’s get started building the ultimate marketing and sales website. Question swipe file: Create a list of 50 questions shoppers have asked you on more than three occasions. The questions can be about anything – pricing, financing, product, service, warranty or business practices. Those questions will allow you to start your resource or FAQ pages. Add to the list with a minimum of 10 questions every month. I strongly encourage you to ask customers, friends and strangers to pose questions they might have with regard to your business. You can ask people to present questions by email blast; on social sites such as Facebook, Twitter and LinkedIn; in person and on your website with a simple form. Encourage interaction about the questions so you can find objections, interest, concerns and selling signals. The very step of creating a “question swipe file” provides the opportunity to understand

what is important to customers and future customers and allows you to start developing your website into a resource where shoppers hang out – and just happen to buy things. The questions will also help you and your sales team to develop a compelling sales approach focused on customers’ needs and wants instead of what you need and want to sell. Resource scripts: Shoppers of all ages visit an average of 23 websites to gather research for a purchase, and that number is increasing by 31 percent every 30 days. So with your questions in hand, it’s time to start developing your scripts or bullet points answering each question. The scripts should be resource and educational scripts, not “Sunday! Sunday! Sunday!” scripts. The length of each script should represent what you would do in a face-to-face explanation or demo. If it takes you 15 minutes to demo a product in your brick-and-mortar store, you will do the same in the video you will produce in the next step. Make sure you have a consistent opening and closing for the videos. It is well worth the extra money to get a professional video and audio intro/ outro done to provide consistency and a professional look. It will help brand you.

Movie time: I know what you’re thinking: “Oh, no, I can’t be on camera. I have a face for radio,” or whatever other excuses you can come up with. Believe me, I know. I have been there. But I overcame those issues two years ago when I recorded my first Think Tank Tuesday video and now I have more than 111,000 subscribers and zero traditional sales people. I have never once asked anyone to do business with me or tried to sell in my video series, and people appreciate that. The same goes for your videos. Become a resource to people and they will return the favor by asking you to work with them and sell them. I can’t begin to tell you how important it is to do video – it is what will separate you from everyone else. Producing videos is simple these days. Purchase a $300 video camera that has an external mic input, a wireless or wired mic and two or three daylight-balanced compact fluorescent bulbs in a work light fixture. The software costs less than $150, and don’t overthink it – just pick something or hire someone to do the production for you. Again, make sure you have a professional intro and outro that has your contact information so viewers can reach

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you for a sale. Starting with Question 1, it’s time to start recording. It is easier than you think, because it is your business and you know it better than anyone. The lines will flow. Don’t be overcritical of yourself. Your first videos will be rough, but by the time you get to the 25th question you will be getting the hang of it all. The instant resource: As you continue recording videos and having someone produce your information segments, it’s time for your webmaster to develop that “FAQ” or “Resource” page. It is important to think about how the videos will be categorized: for example, Finance FAQs, Sales FAQs, etc. It is important to have fewer tabs so the site does not become a mess, but at the same time it has to be easy for visitors to your site to find these helpful videos. While you shouldn’t sell in the videos, you must sell on the page the video is embedded on. If you have a video talking about how to get the best interest rate on a loan, you need to have a form on the page for the visitor to apply for a loan, or a way to call or email you to discuss their current status and interest. People don’t like to be sold to, but they love to buy.

To clarify, have a master page that lists all the videos and descriptions. The visitor clicks on the video description and is redirected to a single page that shows the video and also includes some text explaining what the viewer will learn from the video. Don’t forget to have a call to action form on that page that is related to the topic you are covering. That video now becomes a traffic-driving resource to your website, because you will post a link to the video on Facebook, Twitter and LinkedIn. You can also use it in your emails, and your staff can direct shoppers to it when they have questions. Chances are those videos will never get old – they will be yours forever to drive leads, unlike radio, TV, newspaper, direct mail or a salesperson who changes jobs like he changes clothes? Repeat and cash the checks: This is the both easiest and hardest part. You will get the feeling that, “OK, my work is done. On to the next thing.” But this work is never done. Every week new questions will pop up, new inventory will roll in and new ideas will come. That’s why it’s critical that you develop a calendar and stick to it. You need to add to your resource swipe file every week and record video every

week. Have fun with it and even consider bringing your customers in on your videos for discussions about a product or service. Now repeat after me: “I will commit to my success by becoming a resource. And when I am a resource, shoppers will visit my website, see value, and stay on my website. Shoppers will, in return, do business with me and not my competitors.” I took the long way around to tell you how to keep shoppers from leaving your website, which leaves the question: Why are they leaving your website? It’s because your website is not a resource of information that helps a shopper make a decision in the purchase. Yes, your website has prices, but so does everyone else’s. Price is at the end of the shopping funnel, but what gets a person to finding price is much more important. Make your website a giving website, a resource tool, and visitors will stay and do business with you. Keep your website as a taking website, and you are just one of many websites they just happen to land on.

BY PAUL POTRATZ

PAUL POTRATZ IS A SPECIALIST IN DIGITAL, BEHAVIORAL AND SOCIAL MEDIA MARKETING FOR THE AUTOMOTIVE INDUSTRY AND STAR OF THINK TANK TUESDAY, AVAILABLE ON NIADA.TV AND ITUNES. HE CAN BE REACHED AT (518) 631-5505 OR PAUL@ PPADV.COM, OR BY VISITING HTTP://EXCLUSIVELYAUTOMOTIVE. COM OR WWW.FACEBOOK.COM/POTRATZADVERTISING.

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Why Join CIADA?

CIADA is the only non-profit organization in the Carolinas representing independent used car dealers. Have you been thinking about joining CIADA? Take a look at just some of the benefits we have to offer our members and we think you’ll agree the $285 annual fee may be the smartest investment you can make for your business: Representation: CIADA meets regularly with DMV representatives from North and South Carolina to discuss issues that directly impact dealers. We monitor the General Assembly in both states, and act as an ongoing advocate for used car dealers, fighting on your behalf against potential legislation that could negatively impact our dealers or the used car industry as a whole. We make sure your voice is heard by government officials and regulators. Compliance and Education: CIADA is dedicated to helping you achieve your Continuing Education requirements. In addition to educational opportunities, we also provide workshops, seminars and compliance updates. Industry Information: In addition to 24/7 access to our continuously updated website, we also distribute a bi-monthly magazine with the latest industry news, regulatory updates and other key information from a variety of experts and guest columnists. And don’t forget to join us at our Annual Convention and Expo the first weekend of August; it’s a great opportunity to stay informed and talk with other dealers. Savings: CIADA provides members with a wide variety of forms at a discounted price and our VIP Card provides more than $1,500 in direct savings from many auctions. Additionally, CIADA can potentially help you save on dealer bond and insurance costs; just ask us for a quote. We can also put you in touch with a variety of business partners, from attorneys and accountants to warranty and financial services providers. Individual Help: CIADA knows it’s not easy to run a dealership successfully, but you don’t have to go it alone or suffer in silence. Our qualified and experienced staff can help find answers to your questions. Looking for some mentoring, or real-world tips for success? We can connect you to some of the best dealers in the industry, including more than 15 Certified Master Dealers in the Carolinas. Remember, CIADA serves vendors, as well. As a vendor member, you help support an association that keeps dealers educated, motivated and compliant – all of which helps them maintain a profitable business. Benefits of being a vendor member include: • Solid business referrals and sponsorship opportunities • Website link listing on the CIADA website • Trade show exposure • Advertising opportunities in the CIADA magazine • Exposure to new “first time” dealers • Networking opportunities In this ever-changing and challenging industry, you need someone on your side. You really can’t afford not to belong! For more about the association and its benefits, visit www. theciada.com. If you have additional questions or need more information about membership, simply take a moment to speak with our executive director and friendly staff at 704-455-2117.

Education Update

2013 PRE-LICENSING EDUCATION CLASS SCHEDULE NORTH CAROLINA 2013 Date Location January 10-11 Harrisburg February 7-8 Raleigh March 14-15 Raleigh April 18-19 Harrisburg May 9-10 Raleigh June 13-14 Raleigh July 11-12 Harrisburg August 15-16 Raleigh September 12-13 Harrisburg October 7-8 Harrisburg November 14-15 Raleigh December 12-13 Harrisburg

SOUTH CAROLINA 2013 Date Location January 17 Lexington February 21 Lexington February 27 Florence March 12 Lexington April 16 Lexington May 14 Lexington June 20 Lexington July 18 Lexington August 20 Lexington September 10 Lexington October 17 Lexington November 19 Lexington December 17 Lexington

2013 CONTINUING EDUCATION CLASS SCHEDULE APRIL MAY JUNE JULY

AUGUST SEPTEMBER OCTOBER NOVEMBER DECEMBER

10 Wednesday CIADA Headquarters 11 Thursday Manheim Statesville 17 Wednesday Manheim NC

Harrisburg Statesville Kenly

8 Wednesday CIADA Headquarters 15 Wednesday Manheim NC 29 Wednesday CIADA Headquarters

Harrisburg Kenly Harrisburg

12 Wednesday CIADA Headquarters Harrisburg 18 Tuesday Greensboro Auto Auction Greensboro 19 Wednesday Manheim NC Kenly 10 Wednesday CIADA Headquarters 17 Wednesday Manheim NC

Harrisburg Kenly

2** 13 14 21 22 28

Friday Tuesday Wednesday Wednesday Thursday Wednesday

NC Continuing Education Hot Springs, VA Greensboro Auto Auction Greensboro CIADA Headquarters Harrisburg Manheim NC Kenly Manheim Statesville Statesville CIADA Headquarters Harrisburg

11 17 18 19

Wednesday Tuesday Wednesday Thursday

CIADA Headquarters Hampton Inn Manheim NC Capital Auto Auction

9 15 16 22 24

Wednesday Tuesday Wednesday Tuesday Thursday

CIADA Headquarters Harrisburg Greenville Auto Auction Greenville Manheim NC Kenly Greensboro Auto Auction Greensboro CIADA Headquarters Harrisburg

13 Wednesday CIADA Headquarters 20 Wednesday Manheim NC 21 Thursday Manheim Statesville

Harrisburg Hendersonville Kenly Youngsville

Harrisburg Kenly Statesville

10 Tuesday Greensboro Auto Auction Greensboro 11 Wednesday CIADA Headquarters Harrisburg 18 Wednesday Manheim NC Kenly

SCHEDULE IS SUBJECT TO CHANGE. CLASSES ARE TAUGHT BY PROFESSIONAL INDUSTRY TRAINER MARTY COATES. CIADA IS NOT AFFILIATED WITH ANY OTHER DEALER TRAINING ORGANIZATION IN THE CAROLINAS. ** SUBJECT TO CONVENTION RATES. CALL FOR DETAILS.

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FRONT OF CARD

VIP CIADA MEMBER EACH BLOCK IS GOOD FOR ONE BUY OR SELL FEE UP TO $100.00

BACK OF CARD

CAROLINA AUTO AUCTION CHARLESTON AUTO AUCTION

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LEGAL MUSINGS I T I S I M P O R TA N T T O K N O W W H AT R E G U L AT I O N S A P P LY A N D T H E S P E C I F I C P R O C E D U R E S A S S O C I AT E D W I T H S W E E P S TA K E S .

Sweepstakes Promotions Dos and Don’ts

SOME OF MY FONDEST MEMORIES of my grandfather are being able to stay up late with him to watch the Tonight Show with Johnny Carson and re-runs of M*A*S*H. It took me awhile to piece together that Johnny’s sidekick was the same guy who told me countless times that I might win a million dollars. You’ll never know how excited I was when the letter came in the mail that told me I had won. Unfortunately, my winnings were limited to a nickel taped to a stack of address labels with my parents’ names and address on them. Ever since then, sweepstakes have intrigued me. Little did I know as a 10year-old that I would grow up to at one point regulate that industry and later represent it. Sweepstakes can be an effective tool in generating interest in a dealer’s inventory and helping drive sales. If your dealership uses that tool or has interest in adding it to your toolbox, it is important to know what regulations apply and the specific procedures associated with sweepstakes. States have their own sweepstakes laws that have some variances between them, and the Federal Trade Commission has specific regulations to govern sweepstakes that are universal across the states. To be a compliant sweepstakes, the prize promotion must be structured to ensure it is not a lottery. A lottery generally includes three elements: a prize, awarded on the basis of chance, to someone who was required to pay consideration. To avoid a sweepstakes being considered an illegal lottery, one of those three elements must be eliminated. Typically, it’s consideration. Consideration is a legal term meaning something of value given or done in exchange for something of value given or done by another. It is important to note that consideration need not necessarily be money, though that is the typical form. The reason we see the phrases “No purchase necessary” and “Purchase does not increase odds of winning” as part of any sweepstakes disclosure is the elimination of consideration. All sweepstakes require “official rules.” The official rules are the contract agreed to between you and your sweepstakes entrants on their entry. Therefore, it is very important that the rules be drafted with care and in

compliance with the law – especially if you expect to promote the game heavily and/ or get many entries. Some states have specific requirements identifying the “sponsor” of the sweepstakes and a bonding requirement. So with that basic understanding, here are some dos and don’ts for successful sweepstakes.

Recently, state attorneys general have begun aggressively enforcing their consumer protection laws against both mailhouses and dealers for mail pieces that are noncompliant. Mistakes in the sweepstakes language can quickly catch the AG’s eyes.

DO • Disclose that no purchase is

necessary and that a purchase will not improve a person’s chances of winning. • Disclose terms and conditions of the promotion, including the name of

the sponsor, descriptions of the prizes offered, the approximate retail value of each prize and the estimated odds of winning each prize. • Consider the laws of each state into which you plan to mail materials. • State the start and end dates of the sweeps and when entries must be received by to be eligible. • E xplain how and when winners will be chosen, how they will be notified and how they can claim their prizes. State whether unclaimed prizes will be awarded. Disclose any restrictions on eligibility or on receiving a prize. • E xplain the procedures for entering the sweepstakes or contest.

DO NOT • Represent that a person’s chances of

winning will be improved by purchasing a product. • Claim that a person is a winner, a finalist, has been specially selected or is otherwise among a limited group of persons with an enhanced likelihood of winning, unless that is true. • Imply that a solicitation is urgent or time-sensitive, unless that is true. Over the course of my career, I have reviewed countless direct mail pieces containing a sweepstakes. Many such mail pieces come to dealers from a mailhouse in a template that merely requires a change to the dealer’s name and address, and information on a few cars currently in inventory. I’ve seen too many dealers rely on representations from the vendor that the piece is compliant when the piece has not been reviewed by counsel. Recently, state attorneys general have begun aggressively enforcing their consumer protection laws against both mailhouses and dealers for mail pieces that are noncompliant. Mistakes in the sweepstakes language can quickly catch the AG’s eyes. Before you send out any mail piece, have it reviewed by counsel or make sure the vendor you use has it reviewed. Otherwise, you might end up like the 10-year-old boy who won nothing but a few address labels – which the attorney general or FTC will want you to use to send them a settlement check.

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.

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THE CARFAX FOR DEALERS MOBILE APP HAS EXCEEDED 200,000 downloads by Android and iPhone users, the company announced in Feburary. Launched a year earlier, the app gives dealers mobile access to CARFAX information with a few screen taps. Dealers can scan a barcode or enter a 17-digit vehicle identification number to help quickly evaluate cars at acquisition and find ones their customers want. “When we’re buying vehicles at auction or taking trades on the lot, we always make sure to run them through the CARFAX mobile app,” said Patrick Sullivan, sales manager at Elite Auto Sales in Raleigh, N.C. “It helps us know what we’re getting and make sure there are no surprises when we retail those vehicles.” Access to CARFAX reports is a part of many dealers’ acquisition and retail process. Vehicles run through the CARFAX for Dealers app are automatically added to the dealer’s inventory manager at carfaxonline.com. CARFAX reports are saved for up to 30 days, and dealers can mark vehicles they’re most interested in as favorites within the app. “I love being able to check CARFAX right on my phone when we’re out buying cars,” said William Wessels, dealer principal at Wessels Used Cars in Dillsburg, Pa. “It’s a helpful instrument when we’re appraising cars, too. It helps us make faster, better decisions when we’re buying product.” The CARFAX for Dealers app is a free download from the App Store and Google Play.

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Visit www.thehomestead.com for additional information on this property!

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Make Your Plans an Water Slides Outside Pool Outside Pool Group Outside Pool Keep watching for m Make MakeYour YourPlans Plansand andMark MarkYour YourCalendars Calendars Rate: $180 Group Rate: $180 Make Your Group Plans and Mark Your Calendars Outside Pool Visit www.thehomestead.c Outs Keep details Keepwatching watchingfor formore more details fromCIADA! CIADA! Group Rate: $180from on this

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CIADA 58th ANNUAL CONVENTION AND EXPO The Homestead, Hot Springs, Virginia August 1-4, 2013

REGISTRATION FORM

ˆ FIRST TIMER

ˆ DEALER

COMPANY INFORMATION:

ˆ VENDOR

ˆ OTHER

DEALER NO.

Company

Mailing Address

Telephone

City/State/Zip

Fax

Lot Address

Email

City/State/Zip

Website

REGISTRATION INFORMATION:

n All Events

‰$250 each

Quantity

Item Total $

______

_________

Badge Name(s):_____________________________________, _____________________________________

o All Events except Educational Sessions

‰$210 each ‰Child $85 each (7-14 yr)

______ ______

_________ _________

Badge Name(s):_____________________________________, _____________________________________ Badge Name(s): Child ‰______________________________, Child ‰_______________________________

p Friday Only (Educational Sessions & Expo)

‰$210 each

______

_________

q Friday Night Expo Only

‰$115 each ‰Child $50 each (7-14 yr)

______ ______

_________ _________

Badge Name(s):_____________________________________, _____________________________________ Badge Name(s): Child ‰_______________________________, Child ‰______________________________

r Saturday Night Banquet Only

‰$115 each

______

_________

Badge Name(s):_____________________________________, _____________________________________

s Kid’s Only Party

Name(s):____________________________Age______, _________________________Age______ (Age 2-12, Saturday, August 4th, 6:30-9:30pm)

PAYMENT INFORMATION:

FULL

PAYMENT MUST ACCOMPANY REGISTRATION FORMS

TOTAL $ AMOUNT

‰ Check Enclosed (Please make payable to CIADA)

Credit Card #

‰ VISA

‰ Mastercard

Expires ____________________ V-Code __________________

Credit Card Billing Street Address _______________ ________________________ City,State,Zip_______________________ ___________________ Name on card_________________________________________________ Email (for receipt)_____________________________________________ Signature_____________________________________________________ IN THE EVENT OF CANCELLATION, NOTICE MUST BE POSTMARKED BY JUNE 30TH FOR A REFUND MINUS A $25.00 CANCELLATION FEE PER PERSON. NO REFUND WILL BE GIVEN FOR CANCELLATIONS POSTMARKED AFTER JUNE 30, 2013.

MAIL

OR

FAX

THIS FORM TO:

CIADA P.O. Box 1088 Harrisburg, NC 28075 Fax: 800-992-4232

HOTEL INFORMATION:

RATES:

Reservations: The Homestead Hot Springs, VA (540) 839-1766

Group: CIADA Room rate: $180 per night Rate cut-off June 30, 2013

APP CODE

LAST 4

AMOUNT

DATE

FOR ADMIN USE ONLY

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COMPLIANCE OVERDRIVE M A N Y C O M M O N P R O B L E M A R E A S C A N B E T R A C E D B A C K T O F I N A N C I N G D O C U M E N TAT I O N .

Common Mistakes Can Wreck Lender Relationships ONE OF THE MOST IMPORTANT KEYS to a successful dealership is strong relationships with lenders. You may regularly get advice on what you can do to build and improve these relationships, but as a dealer, what shouldn’t you be doing? Many common problem areas can be traced back to financing documentation. First and foremost, dealers cannot forget they are responsible for retail sales contracts as the original creditor – even if they plan to subsequently assign the contracts to a lender. In fact, dealers may sometimes hear the term “assignee” instead of “lender,” highlighting the fact they are assigning a contract for which they are originally responsible. If a dealership manages the loan documentation process poorly, it may not be able to assign the contract to anyone. Or, if the contract is assigned, it might have to be bought back later because of documentation defects. Remember, when financing a sale, the dealer – as the original creditor – needs to be as careful, accurate and complete as possible. That attention to detail will help the dealership if it intends to hold the paper, and will also improve relationships with lenders to whom the contracts are assigned. But how do you avoid creating contracts your lender (assignee) refuses to buy? The simplest answer is just to avoid some of the most common mistakes cited by lenders, including: Charging incorrect fees, such as fees paid to public officials and documentation fees: States often authorize dealers to charge fees with specific names and in specific amounts for processing documents or other activities. You need to be aware of the fees allowed in your state, the amounts allowed for those fees and when they can be charged. Charging fees that aren’t specifically authorized can create problems for you (the original creditor) and also cause a lender to refuse to buy your completed contracts. You also need to stay current on the fees required for submitting title applications and other official fees. Usually, it’s fairly easy to confirm and use up-to-date fee information so you stay in your lender’s good graces. Contracting with outdated form versions or noncompliant forms: Most lenders conduct a legal review of popular base forms used for retail motor vehicle sales transactions. Lenders then require use of a retail sales form that has been reviewed and approved so they only need to review the financial terms and completion fields when an executed contract is assigned. Retail sales forms are revised with some regularity in response to state and federal law changes as well as changes in market

requirements. As a result, lenders regularly cull their lists of pre-approved forms to remove outdated or noncompliant versions. If you use an outdated/noncompliant form, your lender will not buy the executed contract. Your lender may also refuse to buy an executed contract on a base form it hasn’t already reviewed and approved. As a result, you should always use the current, lender-approved versions of forms. Improperly listing collateral: When you finance the sale of a motor vehicle, you take a secured interest in the vehicle sold. If a buyer defaults on the terms of the retail sales agreement, one remedy available to you (or the assignee/lender) is to repossess the vehicle. The right to repossess the vehicle is a huge risk mitigation tool for a creditor and a huge factor motivating the buyer to avoid default. However, it might be difficult or impossible to repossess a vehicle if the retail sales contract doesn’t include enough information about the vehicle, such as the VIN or other key identifying information. Lenders’ funding decisions are also affected by whether a vehicle is a “Limited Edition,” has automatic or manual transmission, alloy wheels, etc. An accurate and complete description of the vehicle and its extra features is critically important for the lender to analyze the transaction. With such high stakes, it’s understandable that lenders require the vehicle description to be accurate and complete. Remember, lenders may also do post-sale audits with buyers to make sure the vehicle’s features are accurately described in the retail sales contract. If the vehicle’s features and condition were exaggerated, the lender may require you to buy back the transaction. Improperly disclosing trade value or cash down payments on contracts: A critical promise dealers make to lenders/ assignees is that the retail sales contract is an accurate report of all financial terms of the sale. The lender/assignee isn’t in the dealership to oversee the transaction, so it relies on the dealer to fully and accurately describe it. If that trust is violated on just one transaction, it can affect the entire business relationship between the dealer and lender/ assignee. As a result, it is critically important you understand and accurately report all the fees and charges, especially in the “Itemization of Amount Financed” section of a retail sales contract. An obvious deal killer for a lender is if the dealer fails to report all cash received from the buyer or manipulates the agreed-on value of a trade-in vehicle. For example, if a lender discovers a buyer paid additional cash not reported by the dealer, it will result in a rejection of that transaction and also call

into question the dealership’s integrity on all other transactions. Failing to provide signed disclosure forms in the finance package: In addition to federal notices and disclosures, every state has its own requirements for consumer retail sales transactions. Some disclosures and provisions require separate buyer or dealer initials or signatures. It’s easy to forget or overlook acknowledgement provisions during the signing process. If any required acknowledgments are not initialed or signed, the retail sales contract has a compliance problem. A lender will not buy – and will return to you – any contract missing required initials or signatures. Before the buyer drives away, double-check to ensure you have collected all required initials and signatures on all finance package documents. Problems can also result from general data entry errors within loan packages, so be sure your sales transaction documents don’t have any typos. Technology can greatly improve manual data entry errors, but if you’re using a software system to generate and print your forms, always check to ensure the system is computing everything correctly. You may even want to consider a loan documentation audit and review process for each deal. Although we are focusing on common mistakes made by dealers, it’s important to remember lenders aren’t perfect either. In fact, as you work with your lender partners, there are areas in which you can seek their help to make the process easier. For example, have they made their program guidelines clear and accessible, and do they readily provide instructions for dealers regarding the completion of contracts? If so, do their instructions include information regarding calculation methods and how payments should be disclosed? One of lenders’ biggest concerns is whether or not dealers represent consumer information and transactions accurately and honestly. So dealers who make an effort to avoid documentation mistakes will find it easier to gain the trust of lenders. Remember: lenders want to help make the process smoother, too. Consider monthly or quarterly meetings with your lending partners to discuss how portfolios are doing, address any concerns that might hinder the relationship, and determine what both parties should – and should not – be doing to make sure the relationship remains a positive and profitable one.

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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CIADA Auto Dealer News April 13