CIADA INSIDER CO LO R AD O IND E PE ND E NT AUT O M O B ILE D E ALE R S A S S O CIATI O N
CIADA’S DEALER OF THE YEAR Congratulations to McCloskey Motors, owned by Joe and Ann McCloskey
DALLAS, TEXAS Permit No. 2079
PRSRT Standard U.S. Postage
V isit us at w w w.ciada.org
4/17/13 11:33 AM
4/17/13 11:33 AM
MAGAZINE CONTENTS 04 06 10 14 16 22 26
2013 Quality Dealer ACA Roadmap Presenting Your Portfolio Washington Update On the Move: Mobile Websites Why Customers Leave Your Website Compliance Overdrive
ADVERTISERS INDEX ADESA, Inc............................................ 11 Ally........................................................17 AutoManager, Inc.................................. 13 CarMax Auctions....................................24 Chase................................................... 20 Dealix....................................................19 GoldStar GPS................. Inside Front Cover Lobel Financial Corporation......................9 Loveland Auto Auction........................... 23 Manheim Denver.......................Back Cover Manheim Pennsylvania.............................7 Manheim.com........................................15 Protective................................................5 United Acceptance.................................21 VAuto ............................ Inside Back Cover
BOARD OF DIRECTORS President Dave Cardella Mountain States Autogroup, Inc. 303-887-8977 Vice President Lloyd Donnelly King Credit Auto Sales 303-287-5511 Secretary Stan Martin Stan’s Auto Sales LLC 303-650-1011 Treasurer Ed Couch Front Range Auto 303-659-1909 Chairman of the Board Dean Strawn AutoTrek 303-934-5600
Directors Lee Yoder Herbie’s Auto Sales 970-353-9815 Dan Berkenkotter Berkenkotter Motors 303-660-8754 Rick Derr About Time Inc. 303-781-1080 Dean Gunter Mile High Car Company 719-570-7800 John Lindberg Auto Warehouse Inc. 970-490-2886 Deborah Thompson Automotive Search, Inc. 303-691-5622
CIADA OFFICE 950 Wadsworth Blvd., Suite 101 Lakewood, CO 80214 (303) 239-8000 Todd O’Connell • firstname.lastname@example.org 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 Dealer’s Edge 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 The Dealer’s Edge, the Illinois Independent Automobile Dealers Association, or the National Independent Automobile Dealers Association. Likewise, the appearance of advertisers, or their identification as members of IIADA or NIADA, does not constitute an endorsement of the products or services featured. Copyright © 2013 by NIADA Services, Inc. All rights reserved. Visit the NIADA Web site at www.niada.com. STATE MAGAZINE MGR./SALES Troy Graff • email@example.com EDITORS Jennifer Carman • firstname.lastname@example.org Andy Friedlander • email@example.com ART DIRECTOR Christy Haynes • firstname.lastname@example.org PRINTING Nieman Printing
Colorado Independent Automobile Dealers Association
Lakewood, Colorado Education & Training Center 950 Wadsworth Blvd., Suite 101 Lakewood, CO 80214
Colorado state statute requires anyone applying for a used motor vehicle dealer’s license or a used powersports dealer’s license be certified through a pre-licensing course. This seminar is also offered to salespeople to be able to pass the New Mastery Examination Test. Class is given at least once a week. Check our website for dates.
Basic Title Training Class
Join us to get updated information to learn the CORRECT way to fill out your paperwork at time of sale, other topics including title compliance, do’s and don’ts for titles and more. This class is given once a month for half a day.
Call CIADA for information on these classes, also to get your forms and/or Dealer/ Salespersons Bonds. 303-239-8000 ALL CL ASSES ARE SUBJECT TO CHANGE WITHOUT NOTICE. PLEASE CHECK OUR WEBSITE AT W W W.CIADA .ORG FOR ANY CHANGES.
www.ciada.org • phone 303.239.8000 • fax 303.237-3305
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 units, 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.
CARFAX Mobile App Reaches 200,000 Downloads 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. 3
w w w. c i a d a . o r g
4/18/13 12:15 PM
Colorado Springs Dealer Awarded CIADA’s Dealer of the Year O V E R T H E Y E A R S , J O E H A S D E M O N S T R AT E D E X C E L L E N T C U S T O M E R S E R V I C E .
Congratulations to McCloskey Motors, owned by Joe and Ann McCloskey, for being named CIADA’s 2013 Quality Dealer of the Year by Regis University. Joe McCloskey grew up in the auto industry. As a kid in Pueblo, he hung around the local gas station, where he learned his true love was cars. At the age of eight, he prided himself on being able to name every car by make, model, equipment and engine size. Joe’s official automotive career began at age 13, when he was hired as a mechanic’s helper at Bear Axle and Wheel. At 15, he became a lot boy at Dave Keefe Volkswagen; by 17, he’d been promoted to salesman. After
graduation he moved to Denver and sold cars at a Chevrolet dealership. Over the years Joe moved up to managerial positions with several different companies, winning numerous awards along the way. In 1989, Joe and Ann founded McCloskey Motors, Inc., building the business from the ground up. Joe administered all of the company’s legal and financial affairs, including expense controls, cash flow management and securing financing for auto loans and credit lines. He also developed and executed the marketing campaigns, while also handling retail sales. Shortly after forming McCloskey
Motors, Joe joined the CIADA. He’s been involved with the association ever since, even serving as director and former president. In addition, Joe has continuously promoted the industry by writing news articles on a local and national level. Joe and Ann are very involved in the Colorado Springs community, raising tens of thousands of dollars in support of the Waldo Canyon Relief effort with local organizations such as the Pikes Peak Chapter of the American Red Cross; the Humane Society of the Pikes Peak Region; Care and Share of Southern Colorado; and the City of Colorado Springs City Parks.
They also help with several Muscular Dystrophy Association projects and are a sponsor of the Pikes Peak Hill Climb. Over the years, Joe has demonstrated excellent customer service, gaining great respect in the community and creating many business relationships throughout Colorado. According to McCloskey’s website, “Our goal is not to just sell you a vehicle today, it is to save you amazing amounts of time and money and deliver a level of customer service that exceeds your expectations.” Congratulations Joe, Ann and the entire McCloskey Motors team for a job well done!
w w w. c i a d a . o r g
4/17/13 11:33 AM
4/17/13 11:33 AM
F E AT U R E S T O R Y
THE AFFORDABLE CARE ACT ROADMAP:
W H AT T O E X P E C T F O R Y O U R S M A L L B U S I N E S S
A S W I T H A N Y M A J O R C H A N G E I N P O L I C Y, T H E P R O S P E C T O F W H AT T H E A C A E N TA I L S C A N B E O V E R W H E L M I N G F O R S M A L L B U S I N E S S OWNERS WITH LIMITED RESOURCES.
The Patient Protection and Affordable Care Act (ACA), dubbed “Obamacare” by many, was signed into law on March 23, 2010, with the intent to reform the health care industry and provide affordable health coverage for more than 40 million uninsured Americans. Under the ACA, every legal resident of the United States who is not already covered by Medicare or an employerprovided health care plan will be eligible to purchase coverage through an online health insurance exchange. Today, smaller businesses are much less likely to offer health coverage to their employees than larger companies. In 2011, according to the Kaiser Family Foundation, 57 percent of small businesses with 50 or fewer workers offered health benefits to employees, compared to 92 percent of businesses with 51 to 100 workers, and 97 percent of businesses with 101 or more workers. Because of that, some provisions of the ACA will have a larger effect on small businesses, and their employees and families. Expectations of the impact on small businesses are mixed. Some anticipate employees’ hours being cut, costs being passed on to consumers or shareholders, a reduction in hiring and more out-of-pocket costs for larger businesses. Others see benefits for small businesses and their employees. For example, the ACA rewards employees at small companies by subsidizing their purchase of health insurance. According to Casey B. Mulligan, economics professor at the University of Chicago, since those employees can’t take the subsidies with them if they move to a large company, they are “in effect, subsidies to the small businesses themselves, helping them compete more cheaply in the market for employees.” Some provisions of the ACA are already in effect. Others will begin in 2014 and beyond. As with any major change in policy, the prospect of what the ACA entails can be overwhelming for small business owners
with limited resources. So what does the ACA mean for your business? PLANNING YOUR ROUTE: DETERMINE THE SIZE OF YOUR ORGANIZATION The ACA specifically exempts small businesses with fewer than 50 fulltime equivalent (FTE) employees. By some estimates, that means more than 90 percent of businesses will be not be subject to the Employer Shared Responsibility provisions of the ACA. Before you can begin to assess the impact on your business you must determine the size of your organization. Sounds simple, right? Well, not entirely. The ACA defines a full-time employee as an individual working at least 30 hours per week on average. However, for the purposes of calculating your organization’s size, you can’t simply count the number of full-time employees – part-time employees are also factored into the equation. In essence, you have to add up the hours of part-time employees. So, for example, 100 half-time employees equates to 50 FTEs. Similarly, 40 full-time and 20 half-time employees would also be considered equivalent to 50 FTEs. If you own more than one company, in most cases, that will also be taken into account. It’s a bit like an umbrella: If an entrepreneur owns five businesses and each business has 10 FTEs, together they are considered a large business with 50 FTEs, and all five businesses are subject to the Employer Shared Responsibility provisions – even though individually they would be exempt. Obviously, determining FTE counts will be more complex for some businesses than for others. Any businesses that fall close to the 50-employee threshold would be best served by working closely with their accountants to ensure counts are accurate rather than risk penalties for inadvertently being over the threshold. While the Employer Shared Responsibility provisions do not take effect until 2014, the provisions will be applied based on employee counts from 2013, so it’s important for businesses to start planning now.
OUTSIDE YOUR FRONT DOOR: WHAT’S ALREADY IN PLACE FOR 2013 Several provisions of the ACA are already in place, or will become effective in 2013. Those of most importance to small businesses include: Grandfathered group plans: Small businesses with insurance plans that were in place prior to March 23, 2010 may keep their current plan. According to the Kaiser Family Foundation, approximately 72 percent of businesses with 100 or fewer workers had at least one plan grandfathered under the ACA in 2011. Those plans are subject to fewer requirements when it comes to coverage levels and access. Under the grandfather provision, companies are even able to change insurance carriers, provided employee costs and benefits remain mostly the same. Grants for wellness programs: Certain small businesses that did not have a workplace wellness program in effect as of March 2010 are eligible for grants to start one. Additional Medicare tax: The additional medicare tax is a 0.9 percent tax increase that applies to an individual’s wages, Railroad Retirement Tax Act compensation and self-employment income above a threshold amount based on the individual’s filing status. Small businesses making less than $250,000 in taxable profit are exempt from the tax increase. Small Business Health Care Tax Credit, phase one: The Small Business Health Care Tax Credit helps certain small businesses and small tax-exempt organizations – particularly those with lowto moderate-income employees – afford the cost of covering their employees. From 2010 through 2013, if your company has fewer than 25 FTEs with average annual wages of less than $50,000 and you purchase health insurance for your employees, you might be eligible to receive a credit of up to 35 percent of your contribution toward employee health insurance premiums. Note: In March 2013, as a result of sequestration provisions, the refundable C O N T I N U E D O N PA G E 8
w w w. c i a d a . o r g
4/17/13 11:33 AM
4/17/13 11:33 AM
C O N T I N U E D F R O M PA G E 6
portion of the Small Business Health Care Tax Credit for certain organizations was decreased by 8.7 percent pending the end of the fiscal year or intervening Congressional action. Flexible spending account (FSA) limits: While most small businesses don’t provide FSAs for their employees, those that do should note the new employee contribution cap of $2,500, effective in 2013. W-2 reporting: The ACA requires employers to report the cost of coverage under an employer-sponsored group health plan on an employee’s Form W-2. Many employers are eligible for transition relief for tax year 2012 and beyond, until the IRS issues final guidance for that reporting requirement. The amount reported does not affect tax liability, as the value of the employer-excludible contribution to health coverage continues to be excludible from an employee’s income and is not taxable. The reporting is for informational purposes only, to show employees the value of their health care benefits so they can be more informed consumers.
Businesses with less than 50 FTEs are exempt from the Employer Shared Responsibility provisions of the ACA. If you have more than 50 FTEs, here’s a quick checklist for 2014. •Keep track of full-time and full-time equivalent employee counts. •Offer health coverage to at least 95 percent of full-time employees no later than 90 days after start of employment. •Ensure employee health coverage meets affordability standards. For employee-only coverage, premiums that are no more than 9.5 percent of total wages as stated on the employee’s W-2. •Ensure employee health coverage meets the minimum coverage threshold. It must cover at least 60 percent of an employee’s medical costs; the balance can be made up of deductibles, co-pays, etc. • Provide verification of health coverage.
AROUND THE CORNER: WHAT TO EXPECT IN 2014 Insurance market changes: The health insurance market will undergo several reforms in 2014. • Plans must guarantee availability and renewal of coverage regardless of health status. • Young adults may remain on their parents’ insurance until age 26.
• Premium rating based on health status will be prohibited. • Adults may not be excluded from a plan because of a pre-existing condition. • Plans with a medical loss ratio of less than 80 percent will be required to give rebates to enrollees. Open enrollment for small business health insurance exchanges: Businesses with fewer than 50 FTEs (or 100 FTEs, in select states) will be able to purchase insurance through the Small Business Health Options Program (SHOP) exchange, which is designed to provide an easier way to compare prices and purchase plans. Employers can also purchase insurance outside of the exchange. Employer Shared Responsibility: Employers with more than 50 FTEs will be required to offer health coverage to their full-time employees and are subject to the Employer Shared Responsibility provisions. Those employers will likely be liable for financial penalties if any of their fulltime employees receives a tax credit to help pay for coverage on an exchange because: • The employer doesn’t offer health coverage. • The employer offers health coverage to less than 95 percent of its full-time employees, and as such a full-time employee wasn’t offered coverage. • The health coverage offered by the employer isn’t affordable. • The health coverage offered by the employer isn’t adequate. Remember, if you’re a small business with less than 50 FTEs or an employer who offers adequate and affordable health coverage, you will not be subject to the Employer Shared Responsibility provisions. Small Business Health Care Tax Credit, phase two: Small businesses with fewer than 25 FTEs that purchase insurance through the SHOP exchange can receive a tax credit for up to 50 percent of their contribution toward insurance premiums. Tax-exempt small businesses can receive a credit of 35 percent. THE LONG HAUL: 2015 AND BEYOND Employer Shared Responsibility payments: Employer Shared Responsibility liability for 2014 will begin being assessed in 2015. The IRS will contact employers to inform them of any potential liability and provide them an opportunity to respond before liability is assessed or notice and demand for payment is made. It is important to note that while part-time employees factor into the
determination of employer size, there is no penalty for not offering coverage to part-time employees. So if an employer with 40 full-time and 20 half-time employees fails to provide health coverage and is assessed the Employer Shared Responsibility payment, the amount due would be $2,000 times 10 employees – 40 full-time employees minus the 30-employee exclusion – or $20,000. Additional ACA provisions scheduled for 2015 and beyond include: • E xpanding the parameters of employer-provided health care to include dependents. • Auto-enrollment for companies with more than 200 employees. • Implementation of antidiscrimination provisions, which would prevent employers from offering different packages to employees based on seniority, job title/classification, compensation level or race/gender. • Choice of health plans for small business employees. • Ability for all businesses with 100 or fewer FTEs to purchase insurance through the SHOP exchange (effective in 2016). • Ability for businesses with more than 100 FTEs to purchase insurance through the SHOP exchange (effective in 2017). LOST? WHEN IN DOUBT, ASK FOR DIRECTIONS The ACA represents a major change in the way many businesses operate, and there are more than a few gray areas, so small businesses might find themselves with more questions than answers. Your best bet is to maintain a healthy relationship with your advisors: bankers, accountants, lawyers and association executives and partners. They’ll help keep you in the loop on any major changes that take effect and help you adjust your course as needed to ensure you don’t encounter any hazards along the way. Auctions and dealers looking for additional information regarding the ACA can view an online presentation developed by NAAA and the National Federation for Independent Business. Visit http://www. naaa.com/pages/naaa_events/events.html for more. Through December, National Independent Automobile Dealers Association (NIADA) members can also purchase a health insurance plan and lock in the plan and rate until the end of 2014. By locking in your plan today, you could save thousands in 2014. Visit NIADAHealthPlans.com or call 888308-9340 for additional information. Not a member? Visit www.niada.com today!
BY NIADA STAFF FROM INFORMATION PROVIDED BY NAAA
w w w. c i a d a . o r g
4/17/13 12:28 PM
4/17/13 11:33 AM
Presenting Your Portfolio for the Most Floorplanning Dollars 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 .
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.
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.
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 start-up 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 C O N T I N U E D O N PA G E 1 2
w w w. c i a d a . o r g
4/17/13 11:33 AM
4/17/13 11:33 AM
C O N T I N U E D F R O M PA G E 1 0
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 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.
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.
Banks have become skeptical of real 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.
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.
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.
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 day-to-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
w w w. c i a d a . o r g
4/18/13 10:56 AM
4/17/13 11:33 AM
NIADA Government Report THE PUBLIC CAN SEE THE SPECIFIC DETAILS ABOUT WHAT CONSUMERS COMPLAINED ABOUT AND WHY, AS WELL AS HOW THE COMPANY RESPONDED
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
Indirect lending guidance: The CFPB released a guidance document to lenders engaged in indirect auto lending, or dealerassisted financing. The document provides guidance about compliance with the Equal Credit Opportunity Act (ECOA) to lenders that engage in dealer-assisted financing, in which the dealer can adjust the interest rate at which the lender buys the contract. The CFPB believes because the dealer is compensated in the form of a dealer reserve, the markup and compensation policies create significant risk that pricing disparities based on race, national origin or other factors that violate the ECOA will result. The guidance document does not contend lenders or dealers intentionally discriminate against individuals on grounds that would violate the ECOA. Rather, the CFPB believes the current scope of dealerassisted financing could create a “disparate impact” statistically between different groups in a lender’s portfolio. In other words, when examining the entirety of a lender’s portfolio and looking at interest rates given to one race as opposed to another, the statistics could show a particular race received more favorable rates than another. If that is true, the CFPB opines, that would violate the ECOA. To prevent disparate impact, the CFPB tells indirect lenders to: • Impose controls on dealer markup and compensation policies and monitor the effects of the policies and controls to address unexplained pricing disparities on prohibited bases. • Eliminate the dealer’s discretion to mark up the rate and compensate dealers in a different manner, such as a flat fee. • Develop a robust fair lending compliance management program. The guidance document can be found at www.consumerfinance.gov. Consumer complaint database: The CFPB’s consumer complaint database went live March 28. There are roughly 90,000 complaints related to mortgages, student loans, bank accounts and services, other consumer loans and credit cards.
The public can see the specific details about what consumers complained about and why, as well as how the company responded – the timeliness of the response, what was done and whether the consumer disputed the company’s response. Complaints are not included in the database until the company responds or has had the complaint for at least 15 days, whichever comes first. The CFPB will not verify allegations in complaints before including them in the database, but will substantiate that a commercial relationship between a consumer and company exists before a complaint is added. More categories will be added to database as the CFPB accepts complaints about other financial products or services, such as credit reporting. The database is available at www. consumerfinance.gov/complaintdatabase.
FEDERAL TRADE COMMISSION
Used Car Rule: The extended comment period on the FTC’s proposed changes to the Used Car Rule ended March 13. NIADA submitted comments expressing our overall acceptance of the proposed changes with some minor suggestions. The comments also provided background on vehicle sales over the Internet and NIADA’s position that because there is no evidence of a prevalence of fraud in Internet sales, the FTC should decline to specifically regulate that area. Text messaging: In March, the FTC announced a crackdown on a series of scams built on text messages. Dealers must remember the same rules of advertising apply to text messages as other media. Likewise, marketing through text messages will subject dealers to additional federal and state telemarketing laws and regulations. Mobile payments: An FTC staff report highlighted the issues facing consumers and companies in the use of mobile payment systems, which is growing significantly. In using the technology, the FTC recommends companies: • Develop clear policies on how consumers can resolve disputes arising from a fraudulent mobile payment or unauthorized charge. • Adopt industry-wide measures to protect sensitive financial information. • Incorporate strong privacy practices, consumer choice and transparency into mobile payment products from the outset of the transaction. The report can be found at www.ftc.gov/
NATIONAL HIGHWAY TRAFFIC SAFETY ADMINISTRATION
NHTSA settled with a Honda power sport dealer in Tennessee over alleged violations stemming from a 2012 investigation. NHTSA alleged the dealership was made aware of recalls but failed to make any repairs prior to selling the vehicles. NHTSA inspected 329 motorcycles sold between 2007 and 2012. While how many vehicles were sold without necessary repairs was not disclosed, the dealer will pay $125,000 in the settlement. The penalty for failing to repair known defects is a maximum of $6,000 per vehicle.
LEGISLATIVE REPORT Rental Cars
The Boxer-Schumer rental cars recall bill has still not been introduced, but that is expected soon. Reportedly, the new bill will be the same one Sen. Chuck Schumer (D-N.Y.) and Sen. Barbara Boxer (D-Calif.) drafted at the end of the last Congress. It will not address concerns raised by various stakeholders, including NIADA. Hearings are expected after introduction. Rep. Lois Capps (D-Calif.) is expected to introduce an identical bill in the House. NIADA, in conjunction with NADA, has prepared an amendment that would exempt small businesses, as defined by Small Business Administration regulations. The net effect would be that the bill – which prohibits the sale or lease of rental vehicles subject to a recall without the defect being cured – would apply only to major rental car companies such as Avis, Hertz and Enterprise. NIADA met with Rosemary Shahin of Consumers for Auto Reliability and Safety, the primary proponent of the Boxer-Schumer bill. We posed a number of questions for which she had no answers, including: • What would be the cost to independent dealers (unknown but potentially burdensome)? • What is the magnitude of the safety incidents caused by the failure to fix recall defects (other than the California incident that sparked the bill, none have been documented)? • What is the impact of the bill on small businesses (unfair to put them in the same category as entities whose primary business is leasing or selling rental cars)? • What is the political support for such a requirement?
w w w. c i a d a . o r g
4/17/13 11:33 AM
4/17/13 11:33 AM
On the Move 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
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 Associates. A study published in January C O N T I N U E D O N PA G E 1 8
w w w. c i a d a . o r g
4/17/13 11:33 AM
4/17/13 11:33 AM
On the Move
C O N T I N U E D F R O M PA G E 1 6
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. 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 thirdparty 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.
w w w. c i a d a . o r g
4/17/13 11:33 AM
4/17/13 11:33 AM
Auction Lanes to Benefit from Across-the-Board Lift in Volumes 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.
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
w w w. c i a d a . o r g
4/17/13 3:18 PM
Auction Lanes to Benefit from Across-the-Board Lift in Volumes
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 trade-in,” 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
w w w. c i a d a . o r g
4/17/13 11:33 AM
Why Are Customers Leaving Your Website? 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
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.
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 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. C O N T I N U E D O N N E X T PA G E
w w w. c i a d a . o r g
4/17/13 11:33 AM
Why Are Customers Leaving Your Website?
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.
NIADA CERTIFIED MASTER DEALER® 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. FOR MORE INFORMATION, VISIT WWW.NIADA.COM OR CONTACT GEORGIA@NIADA.COM.
w w w. c i a d a . o r g
4/17/13 11:33 AM
Membership Join Us Today! Membership Benefits
9,3&DUGZLWKPRUHWKDQLQYDOXDEOH GLVFRXQWV )XOOWLPH/REE\LVWSURWHFWV\RXU LQWHUHVWVDWWKH&DSLWRO 0HPEHUGLVFRXQWVRQIRUPV VRIWZDUHLQVXUDQFHSOXVPDQ\ PRUH /HJDOFRQVXOWDWLRQVHUYLFH ,QFOXGHV1,$'$PHPEHUVKLSZLWK DGGLWLRQDOSURJUDPVDQGGLVFRXQWV
NIADAâ€™s 2013 Convention & Expo offers the industryâ€™s biggest and most diverse educational opportunity under one roof.
With our dynamic mixed panel format, youâ€™ll hear advice and best practices from industry experts, as well as real-world perspectives from dealers who are in the trenches every day - just like you. Find out whatâ€™s happening in the regulatory landscape, explore new marketing opportunities, learn how to refocus your sales and operations, discover new avenues for dealer capital...and more. NIADAâ€™s Convention & Expo is not only the largest event of its kind in the used car industry - itâ€™s also the only one to offer live entertainment and a variety of fun networking opportunities.
Traveling can be stressful and tiring. After check-in, relax with us poolside for the Cigars & Martinis mixer. Enjoy music, mixed beverages and a light bite to eat in a lush, tropical wonderland.
KICK THINGS OFF VEGAS STYLE.
Kick things off right at Mondayâ€™s Opening Gala...where a delicious array of food and a full bar await you. You wonâ€™t be able to stay in your seat as we pay tribute to rock legends Elton John, Billy Joel and Tina Turner in true Vegas style!
WIN BIG ON THE EXPO FLOOR.
Participate in our daily Expo scavenger hunt for a chance to win $500 or even $1000! Plus, check out the car weâ€™ll be auctioning off at the end of the week.
Get Both CIADA and NIADA Memberships for only $225 Join Now Call CIADA 303-239-8000 www.ciada.org
MINGLE WITH THE BEST OF THE BEST.
Dine with us as we honor and celebrate the National Leadership and National Quality Dealer Award winners. And donâ€™t forget to tell your friends back home to tune in for the live broadcast on NIADA.tv! All this and moreâ€Ś.for a registration rate thatâ€™s lower than most other national conventions. We even offer discounted registration rates for spouses and children, plus discounts on hotel, airfare and ground transportation. For more information or to register online, visit www.niada.com and click on Events.
w w w. c i a d a . o r g
4/17/13 11:33 AM
4/18/13 12:15 PM
Is it Time to Review Your Dealership’s Compliance Practices? THE LAWS AND REGULATIONS REQUIRE DEALERS TO CREATE AND FOLLOW REASONABLE PRACTICES BASED ON THEIR UNIQUE BUSINESS CONDITIONS.
As many state legislative sessions wrap up at midyear, lenders and dealers must begin watching for legislative summaries – and maybe new legislation and requirements that will be taking effect soon. Facing a regulatory landscape that continually seems to move faster and grow in complexity, dealers must be even more vigilant in making sure laws and regulations are being embedded within their business. In some cases, the laws and regulations tell us exactly what needs to be done. For example, a disclosure using specific words in a specific type size must be given to consumers at a specific time. But in other areas, the laws and regulations require dealers to create and follow reasonable practices based on their unique business conditions. Those types of requirements can be challenging to meet because they evolve as your business and the industry changes. Certain areas, though, deserve continual focus, including regular reviews of policies, procedures and processes.
Some of the most obvious risks for dealerships are related to information and data security. Dealers must view identity theft as an accident that’s always waiting to happen because of to the various types of personal and financial information they manage for their customers. Hundreds of people can walk through dealers’ sales floors, which in many cases are open, with some sales desks located in the showroom. Is your staff diligent about making sure sensitive customer information isn’t left sitting out on a desk or up on a computer screen so anyone walking by can view it? Is anyone within earshot when a potential customer is verbally providing personal information? That includes not only dealership visitors, but also employees who should not have access to specific data. In short, your information security program needs to start on the sales lot and in the showroom. Your Red Flags program should already address potential security risks, at least as they relate to potential identify theft. The Red Flags Rule
requires each dealer to have a program designed to detect, prevent and mitigate identity theft in connection with opening or maintaining an account involving an extension of credit. Reasonable program activities will evolve as technology and business practices change and as identity theft techniques and vulnerabilities change. So compliance with the Red Flags Rule will always be an evolving standard. Make sure you have data security and ID theft programs and policies. Make sure you follow them. And make sure you regularly review and update them – even if there isn’t a law or regulation change reminding you to do so.
Along those same lines, dealers need to be mindful of processes related to employee security. It must be clearly defined which employees have access to what. In your dealership, are F&I files password-protected so only certain employees can access them? Sales team members might need limited access to information to determine a potential buyer’s creditworthiness, but does the receptionist really need access to the same information and tools? Are there clear parameters for who has access to different types of information? Are those policies communicated and understood among employees? Employee security also involves background checks and other operational issues related to hiring and firing employees. Dealerships should use background checks in their hiring process in addition to checking references and other representations a candidate provides. Be thorough. For example, instead of just doing a criminal record check for the county where the applicant lives or the dealership is located, consider expanding it to the entire state. You should also review states of prior residence for the past several years. Remember to re-run background checks (or at least the criminal background check) periodically to note any changes. If an employee is arrested after employment begins, he or she might not tell you about it. If you don’t re-run criminal background checks, how will you find out an existing employee was convicted of misdemeanor shoplifting or DWI (with suspension of driver’s license)?
Depending on the employee’s role, that might be critical employment-related information.
While the risks mentioned so far might seem somewhat obvious, other risks are more subtle, such as access to template documentation. Though blank standard documentation might not contain personal information about customers, they could present opportunities for criminals. For example, even without access to customer personal data, a thief might be able to create fraudulent transactions if he or she has access to preprinted retail sales contracts or the software that generates them. Dealers should consider restricting access to blank standard documents even though they don’t contain personal customer data.
A critical area of focus for customer personal information is protecting it at the time it’s provided by credit applicants and the points the information is transmitted to others as part of the credit analysis process. But dealers also need to focus on their retention of that information during the credit processing period and afterward. Red Flags programs should include procedures to protect personal information during and after the credit process and transaction closing. Protecting that information long after the sale requires as much vigilance as the protection you provide during the credit processing phase. All of this reminds us some compliance requirements evolve with changing business practices and technologies. It’s important to regularly review compliance efforts for these kinds of requirements even if they aren’t revised by law or regulation changes this year. The theme of this year’s NIADA Convention and Expo is “New Strategies for Tomorrow.” The world moves faster every day. Are you ready for what tomorrow brings? Knowing your dealership is continually working to mitigate business and compliance risks can bring peace of mind when considering your own preparedness.
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.
w w w. c i a d a . o r g
4/17/13 11:33 AM
4/17/13 11:33 AM
4/17/13 11:33 AM
Published on Apr 22, 2013