C O L O R A D O
I N D E P E N D E N T
A U T O M O B I L E
D E A L E R S
A S S O C I A T I O N
CIADA INSIDER NOVEMBER/DECEMBER 2013
Dealers Auto Auction of the Rockies Named 2013 Auction of the Year At the NAAA Conference, the National Independent Automobile Dealers Association honored Dealers Auto Auction of the Rockies with the 2013 Auction of the Year award. The NIADA presents this
award annually to an auction that exhibits support for the used motor vehicle industry by providing resources to independent dealers to advance their business, supports the state association and
its members, promotes community involvement and demonstrates a high level of customer service. DAA of the Rockies’ motto is “our people are the difference” and it shows. “Our thanks go out to
Todd O’Connell and the rest of the CIADA board members for nominating us for this award,” said Michele Noblitt, Executive Vice President of DAA of the Rockies. “We value the relationship we have C O N T I N U E D O N PA G E 4
DALLAS, TEXAS Permit No. 2079
PRSRT Standard U.S. Postage
V I S I T
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FRONT RANGE CLASSES
Inside 0 4 08 12 14 18
Colorado Independent Automobile Dealers Association
Lakewood, Colorado Education & Training Center 950 Wadsworth Blvd., Suite 101 Lakewood, CO 80214
DAA Auction of the Year Creating Value Washington Update Dealer Practices Are You Getting Your Money’s Worth Online?
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 held at least once a week. Check our website for dates.
What’s New u
Basic Title Training Class
Join us to get updated information to learn the CORRECT way to fill out your paperwork at time of sale and other topics including title compliance, do’s and don’ts for titles and more. This class is held once a month for half a day.
M A K I N G YO U R V O I C E H E A R D
2013 National Leadership Conference & Legislative Summit Nov. 11-14 in Washington, D.C. NIADA’s Legislative Committee, Association Executives Council, State Presidents Council and state officers frame the NIADA legislative and regulatory agenda for 2014 and beyond, and meet face-to-face with legislators and federal regulators to discuss the present and future of the used vehicle industry.
Call CIADA for information on these classes, or to get your forms and/or Dealer/ Salespersons Bonds. Call 303-239-8000. ALL C L A SSES ARE SU B J ECT TO C HAN GE WITHOUT NOTIC E . PLEA SE C H EC K OU R WEBSITE W W W.C IADA .ORG FOR ANY C HAN GES.
www.ciada.org • phone 303.239.8000 • fax 303.237.3305
ADESA........................................................................11. Ally..................................................................................7. AutoManager, Inc......................................................9 DealerMatch............................................................17. Dealers AA of the Rockies......................................5. GoldStar GPS..............................Inside Front Cover GWC Warranty.........................................................15 Lobel Financial Corporation................................13 Loveland Auto Auction..........................................22 Manheim Denver................................... Back Cover Manheim Pennsylvania........................................21. Protective..................................................................19. United Acceptance.................................................23. VAuto.............................................Inside Back Cover
CIADA Office 950 Wadsworth Blvd., Suite 101
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 Dan Berkenkotter Berkenkotter Motors 303-660-8754 Jim Bode J. Bode Used Cars, Inc. 303-366-1535
Lakewood, CO 80214 (303) 239-8000 Todd O’Connell • email@example.com
NIADA Headquarters National Independent Automobile Dealers Association
www.niada.com • www.niada.tv 2521 Brown Blvd. • Arlington, TX 76006-5203 phone (817) 640-3838
For advertising information contact:
Troy Graff (800) 682-3837 or firstname.lastname@example.org. CIADA Insider is published 6 times per year by the National Independent Automobile Dealers Association Services Corporation, 2521 Brown Blvd., Arlington, TX 76006-5203; phone 817-640-3838. Periodicals postage paid at Dallas, TX and at additional offices. POSTMASTER: Send address changes to NIADA State Publications, 2521 Brown Blvd., Arlington, TX 6006-5203. The statements and opinions expressed herein are those of the individual authors and do not necessarily represent the views of CIADA Insider 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.
State Magazine MGR./Sales Troy Graff • email@example.com
Andy Friedlander • firstname.lastname@example.org Jacinda Timmerman • email@example.com
Christy Haynes • firstname.lastname@example.org
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
KBB Adds AutoCheck Reports to KARPOWER Platform u
N EW TOOL AIDS DEALERS IN MARKETING THEIR INVENTORY AND INCREASING TRANSPARENCY
Kelley Blue Book’s KARPOWER Online sales tool now offers Experian Automotive’s AutoCheck vehicle history reports, aiding dealers in marketing their inventory and increasing transparency. The tool is designed to help dealers value, manage and market vehicle inventory online. It also allows customers to access KBB values in addition to vehicle history reports. AutoCheck vehicle history reports include in-depth information that enables consumers to quickly check if a vehicle has had any reported accidents, frame damage or odometer rollback issues and other potentially negative events that can impact its value. The reports also feature the AutoCheck Score, which offers a look at a vehicle’s past and compares it with similar models. “Connecting KARPOWER Online customers with AutoCheck made sense, because understanding a vehicle’s past is pivotal when buying or selling a used car,” said Dave Nemtuda, senior vice president for Experian Automotive.
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2013 Auction of the Year
with the CIADA and fully support the association. Brad Sturgeon, and Bill Baker, owners of the auction, have always put the needs of the customer first. We have instilled this philosophy in our entire staff. Our community involvement continues to grow every year. We have a very generous group of dealers who consistently donate to our worthy causes.” DAA has continually promoted community involvement through various association and auction fundraising events. For the past three years, DAA has held an annual charity auction that benefits local Colorado charities, raising over $33,000. DAA also participates in the CIADA’s annual golf tournament and holds fundraising drives for local food banks and other charities. In addition, DAA promotes community giving by running donation vehicles in their weekly repo sale. Vehicles for Charity sells 15 to 30 donated cars a week at DAA. “DAA consistently goes above and beyond, helping Vehicles for Charity raise over a million dollars a year for Colorado charities,” said Conor McKenna, VFC Auction Rep. At the beginning of 2013, DAA of the Rockies opened its 12,000 square foot recon building to provide improved efficiency and service to its customers. The building houses a mechanical shop, full detail department and a state of the art photo booth. The vehicle images captured help provide high quality images of customer vehicles, which help increase interest during online viewing and purchasing. In April, DAA started expanding its efforts in online sales by providing condition reports and pictures on every vehicle consigned to the auction. DAA of the Rockies’ condition report writers are certified through the NAAA class for condition reports and frame damage. This online service provides the auction’s customers, whether buying online or in lane, the opportunity to preview inventory so they can make informed, profitable buying decisions. AutoNation used vehicle director Ron Stiner commented, “DAA of the CIADA
Rockies not only accommodates our needs by providing a location to stage and organize the trade walk from our 18 stores on a weekly basis, but always goes above and beyond by providing the best customer service of any auction I have been to in over 40 years of using auctions.” Dealers Auto Auction of the Rockies was founded in 1995 by industry veterans Brad Sturgeon and Bill Baker and holds a weekly sale on Thursdays at 9 a.m. on five auction lanes.
UNPRECEDENTED – TWO NATIONAL AWARD WINNERS FOR COLORADO PICTURED ARE MICHELE NOBLITT, VICE PRESIDENT OF DEALERS AUTO AUCTION OF THE ROCKIES; JOE MCCLOSKEY (LEFT) , OWNER OF MCCLOSKEY MOTORS AND DAVID CARDELLA, PRESIDENT OF CIADA. FOR THE FIRST TIME, COLORADO HAS TWO NIADA NATIONAL AWARD WINNERS IN THE SAME YEAR – MCCLOSKEY MOTORS WAS NAMED THE NATIONAL QUALITY DEALER OF THE YEAR AND DEALERS AUTO AUCTION OF THE ROCKIES RECEIVED THE AUTO AUCTION OF THE YEAR AWARD. THESE TWO BUSINESSES EXEMPLIFY THE QUALITY OF THE INDEPENDENT AUTO INDUSTRY COMPANIES FOUND THROUGHOUT THE STATE. BILL BAKER
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NAAA Honors Industry Pioneers Jack and Jacque Kesler u
RECOGNIZED FOR CONTRIBUTIONS AND COMMITMENT TO THE REMARKETING INDUSTRY
The National Auto Auction Association has named Jack and Jacque Kesler, owners of KeslerSchaefer Auto Auction, pioneers of the industry for their achievements and contributions to the remarketing profession. The honor was presented during the association’s 65th annual convention in September. As the second generation in a successful auction started in 1943 by Ken Schaefer, daughter Jacque and son-in-law Jack Kesler had some big shoes to fill following the founder’s death in 1950. They took the reins and in 1956 the Keslers moved the operation to a larger location with two-and-a-half lanes and 12 additional acres to accommodate the expansion Jack envisioned. They soon saw the sales volume double. In 1978 their son Steve joined the growing business. KSAA was ready for another move by 1990, so Jack oversaw construction of a state-of-theart, five-ring facility around the corner from PRODUCTS
their old address. His upgrades included a 25acre lot for increased parking (now expanded to 40), computerized registration, statewide car pick-up service, clean-up and repair shops and a full-service restaurant with views of the action in the lanes. Today, under the management of the family’s third generation, with Steve as president, KSAA’s annual sales volume is more than 26,000 vehicles. “Even though we’ve witnessed tremendous changes in our industry over the years, we remain committed to the basic principles of trust, integrity and exceptional customer service that were established by our founder Ken Schaefer, carried on by my parents and continue to this day,” Steve remarked. The Industry Pioneer Award, given to those who have worked in the wholesale motor vehicle industry and/or NAAA, recognizes an individual who has innovated or enhanced methods of improving services to remarketers through NAAA member auctions; has championed NAAA member auctions as providing services for motor vehicle remarketers unavailable from any other source and has consistently followed the standards of the NAAA Code of Ethics. Products & Services
Selling Your Car? Advertise Its Fuel Economy!
Fueleconomy.gov Offers MPG Label for Used Cars
Fueleconomy.gov, the official U.S. government source for fuel economy information, has added a new tool to help you advertise your vehicle’s fuel economy to potential buyers. The free tool (http://www.fueleconomy.gov/feg/UsedCarLabel.jsp) helps you create both an electronic fuel economy graphic that you can download for your online advertisement and a paper fuel economy label that you can print and affix to your vehicle’s window. The example shown is for a 2000 Honda Insight, one of the all-time fuel economy leaders among gasoline vehicles. The database supporting the tool includes most cars and light trucks sold in the United States since 1984.
Selling Your Car? Advertise Its Fuel Economy! u
F U E L E C O N O M Y. G OV O F F E R S M P G L A B E L F O R U S E D C A R S
Fueleconomy.gov, the official U.S. government source for fuel economy information, has added a new tool to help you advertise your vehicle’s fuel economy to potential buyers. The free tool (http:// www.fueleconomy.gov/feg/UsedCarLabel. jsp) helps you create both an electronic fuel economy graphic that you can download for your online advertisement and a paper fuel economy label that you can print and affix to your vehicle’s window. The example shown is for a 2000 Honda Insight, one of the all-time fuel economy leaders among gasoline vehicles. The database supporting the tool includes most cars and light trucks sold in the United States since 1984. Both the electronic graphic and the paper label show the EPA fuel economy estimate (city, highway and combined) and CO2 emissions for the vehicle when new. As indicated on the graphic and label, actual fuel economy will vary for many reasons, including driving conditions and how the car was driven, maintained or modified. Because a vehicle’s fuel economy changes CIADA CO_0113.indd 6
Both the electronic graphic and the paper label show the EPA fuel economy estimate (city, highway and combined) and CO2 emissions for the vehicle when new. As indicated on the graphic and label, actual fuel economy will vary for many reasons, including driving conditions and how the car was driven, maintained, or modified. Because a vehicle’s fuel economy changes very little over the course of a typical 15-year life, when properly maintained, the original EPA fuel economy estimate remains a good indicator of a used vehicle’s average gas mileage. However, aftermarket modifications to the vehicle can affect fuel economy, especially those that change the vehicle’s weight, aerodynamics, or wheel/tire size.
very little over the course of a typical 15-year life, when properly maintained, the original EPA fuel economy estimate remains a good indicator of a used vehicle’s average gas mileage. However, aftermarket modifications to the vehicle can affect fuel economy, especially those that change the vehicle’s weight, aerodynamics or wheel/ tire size. The graphic/label provides a photo of the vehicle and some important information about the vehicle’s configuration - such as engine size, transmission type and fuel type - to help identify it. There’s also a Smartphone QR Code that links directly to the vehicle’s information, which allows the potential buyer to verify the information on the graphic or label and look up other data such as personalized annual fuel cost, greenhouse gas emissions, petroleum use estimates based on their annual mileage, driving conditions and fuel costs. They can also view gas mileage estimates from other drivers with the same vehicle year, model and configuration.
Letter from the President Fellow Members, What a winning year Colorado is having! First McCloskey Motors, owned by Colorado natives Joe and Ann McCloskey, represented our state at the NIADA convention in Las Vegas and brought home the trophy for National Quality Dealer of the Year against very well qualified and deserving competition. Next our local independent auto auction - Dealers Auto Auction of the Rockies won Auction of the Year. Both winners have always prided themselves and have been praised for having quality customer service and doing charity work in our community. A big round of applause and thanks to our winners for representing us so well. As we enter our fourth quarter, there are a few items we all need to be aware of: 1) We are exploring the possibility of sponsoring a bill to combat unlicensed sales of vehicles to the public, also known as curbstoning, in next year’s legislation session. 2) Our legal protection fund is up and running, offering protection to fight unscrupulous lawsuits against our fellow dealers. Contact CIADA for enrollment. 3) Continuing education to keep us in legal compliance is available through CIADA. Contact CIADA for class schedules. 4) Mediation is now available to solve problems between dealers and auctions. Contact CIADA for more information. 5) In November, we will be in Washington D.C. with NIADA voicing our concerns regarding legislation as well as the Department of Consumer Financial Protection Bureau’s newly created Office of Financial Institutions and the farreaching effects its policies may have on our industry. Please contact us with any issues or concerns you would like us to address. Please contact the CIADA office for member pricing on forms, bonds, insurance and legal needs. Remember the CIADA is here to help you succeed as a dealer and we are always happy to assist you in any way possible. Let’s have a strong and profitable finish to the year as we gear up for a great 2014! Thank you, David Cardella President CIADA
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Creating Value Presenting Intangible Products u
H O W C A N YO U E N G AG E T H E C U S T O M E R ’ S S E N S E S T O E S TA B L I S H T H E VA L U E O F F & I P R O D U C T S B E F O R E TA L K I N G P R I C E ?
Traveling miles on the lot selling vehicles paves the pathway to the finance department in many dealerships. While walking those many miles, astute sales consultants learn quickly that they create value in a vehicle during the demonstration and presentation as they engage every sensory fiber of the prospective buyer. Yes, the interview is the cornerstone of the sale because it leads the sales consultant to the proper product selection. And many will say all sales is the same process. My reply to that is yes – and no. When selling a vehicle, the presenter can present value that can be seen, can be sat in, can be felt, can be smelled. The sales consultant uses every available sense the customer has to create the picture of positive ownership. But when demonstrating an intangible, the question becomes: How can the presenter engage the customer’s senses to establish value before talking price? As we all know, we cannot sit in a service contract, nor can we feel the acceleration of the claims payment. Yet the benefits are real and will be there when the customer needs them most – when they are facing an unplanned repair bill on a major CIADA
component of the vehicle. Recently I met some experienced sales business managers who claimed they do not use point of sale materials. Instead, they sell by stories. Stories, while often entertaining, do not provide the customer with anything to
The presenters of the finance suite of products must believe in the value of the products before they can build a solid presentation. Do they themselves purchase service contracts when they purchase vehicles, or computers? Have the finance professional
Have the finance professional ask the service contract company’s representative to provide copies of claims that have been paid. Telling customers about the ease of claims is one thing. Having proof – statements that show claim payments – adds weight to the story. u
hold, nor anything to look at. By telling stories, the presenter is only actively engaging one of the customer’s senses. Is that enough to create value in intangible products? For best results, customers should be engaged with the presentation. The best business practice is to use point of sale aids to get all parties engaged in the conversation. I am sure your service contract provider spends millions of dollars creating and producing brochures and other point of sale aids to assist you in your efforts to make a positive, professional impression on your customers. Are they being used or are they collecting dust?
ask the service contract company’s representative to provide copies of claims that have been paid. Telling customers about the ease of claims is one thing. Having proof – statements that show claim payments – adds weight to the story. Do you ask your customers to write reviews on your website? If not, get started. That’s a great way to showcase the value of your customer care protection products. Each time a customer says thank you for offering a service contract because he did indeed use it, ask him to go to your website and write a review about his experience. Younger
buyers especially read the reviews before coming to the dealership. Get prepared for the finance presentation. Does your finance department have a presentation manual? That’s a one-inch binder with five to eight dividers and top-loading page protectors so the presenter can easily update proof statements as needed. Here’s how the five sections break down: u Section One, Customer care products and services brochures: Group them as you would a package presentation. Note the brochures must follow your verbal interaction with the customer and they must line up with the menu used to close the payment selection. Consistency and repetition is the key to success. Mechanical protection includes service contracts, prepaid maintenance plans, tire and wheel policies, and roadside assistance. Appearance protection includes exterior paint protection, interior fiber and leather protection and windshield protection. Equity protection includes guaranteed asset protection (better known as GAP coverage) and credit life and accident and health protection (if you are properly licensed to sell that product). C O N T I N U E D O N PA G E 1 0
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u Section Two, Dealercontrolled financing: This is a place for the copies of the “truth in lending” clauses from the credit unions that steal your financing opportunities. Read the terms and highlight the items that give you a reason to think a credit union might not be the best place for a customer to finance a vehicle. You are looking for the clause that says “Pledge of Shares.” Yes, I know many credit unions finance dealer retail installment contracts. For those resources we all give thanks. But be alert, there are some credit unions that still only do direct financing with your customers. Include some proof statements from a local bank. You will need to obtain a copy of a booklet regarding the terms and conditions of deposit accounts from the bank. Read and highlight the section that identifies the “Right of Setoff.” The lender might also refer to that action as the “Right of Offset.” When discussing financing options with customers, remember when financing through a dealership the only thing required as collateral is the title to the vehicle. By
reviewing those items you can show the best place for your customers to finance is through your resources. u Section Three, Cash conversions/bi-weekly payment examples: Too many finance managers are too quick to write a receipt and fail to inquire why the customer wants to pay cash. Perhaps he or she could use a new credit start. Perhaps the customer really does need to establish a cash cushion for emergencies. In talking with the customer, the finance professional can identify and highlight the benefits of financing and use only some of the customer’s cash to make the purchase. u Section Four, Proof statement, copies of paid claims, thank you letters, reviews from the website: Have those documents filed by company reference and keep them updated. In order to comply with all customer privacy laws you will need to black out the customers’ nonpublic information. u Section Five: This section is a place for copies of all the policies you have to present, filed alphabetically so you can locate them quickly. It’s best to
have the policies’ specific items of coverage highlighted. Make it easy to review the fine details with a customer. I’m often asked, “Do you expect me to go through all this information with every customer?” The answer is no. The first section is the part that is used with each and every customer, each and every time. The grouping of brochures will assist the presenter in making a full presentation and give the customer something to hold and to look at while the presenter is sharing how the products can provide a worryfree experience. The remaining sections are available to use as objections or customer concerns arise. A professional presenter in the finance office should be able to create value in the products before price is mentioned or shown. The plan should be benefits before bucks! Create the value using the presentation manual or other point of sales materials. Bring out the menu to summarize the benefits and discuss the cost of the policies. How do we bring out the menu after the presentation? Simple.
“As you know, for accounting purposes everything must be itemized. With everything we just spoke about – mechanical protection including your service contract, pre-paid maintenance, tire and wheel coverage, protective coatings and your equity protection – your monthly payment would be $____. The next category is without ______. The next is without ______. After reviewing these options which plan best meets your needs and budget?” Many states require the retail prices of every item on the menu be in print on the menu. The menu must also contain the base monthly payment with no extra products or services in it. That process should take the presenter 15 to 20 minutes to obtain a payment commitment, then another 10 to 15 minutes to print documents and properly disclose the terms and conditions of the loan to the customer.
BY JAN KELLY
JAN KELLY, PRESIDENT OF KELLY ENTERPRISES, IS AN EDUCATOR, CONSULTANT AND CONVENTION SPEAKER WHO WRITES FREQUENTLY FOR INDUSTRY PUBLICATIONS. FOR MORE INFORMATION, INCLUDING INFORMATION ON F&I 20 GROUPS, CALL (800) 336-4275 OR VISIT WWW.JLKELLY.COM.
NIADA 20 Used Shoppers Even More Selective Group PRODUCTS
STATISTIC S SHOW USED CAR BUYERS ARE TURNING TO CPOS AND SHOWING LES S INTEREST IN REPO UNITS
The certified pre-owned industry is coming off its best sales month ever and shoppingtrend data from CNW Research is reinforcing why. During the past 16 years, the percentage of shoppers who would consider an offlease CPO unit rose from 88.9 percent to 98.2 percent. In the September edition of the firm’s Retail Automotive Summary, CNW indicated none of the respondents in its data set said they would not consider an offlease CPO unit. Autodata Corp. reported monthly CPO sales surpassed 200,000 units for the first time – August’s total came in at 200,332 CPO units, up 25 percent from the previous year and 9.6 percent more than the prior month. While the appeal and sales of CPOs are at all-time highs, a much different scenario in CIADA CO_0113.indd 10
regard to shopper consideration is unfolding for off-rental and repo units. CNW discovered the turnoff of repossessed vehicles is a trend that’s developed significantly since 1997. CNW president Art Spinella said it was “hard to believe” that back in 1997, 70 percent of used vehicle shoppers would consider buying a repossessed vehicle even though “a majority had been abused.” Fast forward 16 years and CNW’s data shows only 31.8 percent of shoppers would consider buying a repo unit. Even more telling, according to Spinella, 55 percent of shoppers would never think about buying a repo. Back in 1997, that level was just 8 percent. Off-rental units aren’t high on used vehicle shoppers’ lists, either. CNW indicated a consistent level both in 1997 and
this year when it comes to those models. In 1997, 64.6 percent of shoppers said they were unlikely to consider an off-rental unit and 24.7 percent said they would definitely not consider it. This year, those numbers were 61.4 percent and 29.3 percent. “First and foremost, consumers are becoming increasingly more selective in what they will buy used,” Spinella said. “They want a vehicle meeting exacting specifications from color to options to mileage. “In 1997 and before, a less finicky shopper might accept a blue model instead of the desired red one or abandon the desire for power seats. Not any longer. Even those looking at 10-year-old or older vehicles are quick to reject an offering that doesn’t meet an increasingly strict criteria.”
NIADA Dealer 20 Groups are about dealers learning from each other. But what’s more important is what they’re learning from each other. How to create and manage a better, more efficient dealership. How to save and make money. How to be more profitable. “I want to see how much better or worse someone else is doing than I am,” explained Craig Durrett of Houston’s Durrett Motor Company. “You look at their numbers and now you ask the questions. Why are theirs so much better? … What are they doing? And they can give you the answers.” The next 20 Group meeting, moderated by NIADA director of dealer development Joe Lescota, is scheduled for Dec. 9-10 in Dallas. For information on NIADA Dealer 20 Groups and how to join, contact Georgia Brown at 800-682-3837 or email@example.com. w w w. c i a d a . o r g 10/19/13 1:32 PM
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NIADA Government Report u
KEEPING YOU INFORMED ON THE LATES T GOVERNMENTAL ISSUES AND ACTIVIT Y IN THE USED CAR INDUS TRY
On Sept. 12, NIADA executive vice president Steve Jordan and regulatory counsel Shaun Petersen traveled to Washington and, along with D.C.-based lobbyist Sante Esposito of Federal Advocates, met with federal regulators and legislators to discuss issues affecting the used vehicle industry. This month, the Washington Update provides a report on some of those discussions.
LEGISLATIVE REPORT Legislators The NIADA contingent met with the staff of Rep. Mike Kelly, a Republican from Pennsylvania’s Third District and the congressman representing NIADA treasurer Andy Gabler. Kelly is also an auto dealer – he owns Mike Kelly Automotive, a group of new car stores in Butler, Pa. Kelly is a member of the Congressional Auto Caucus, a group of House members with an interest in the automotive industry, and is scheduled to speak at NIADA’s National Leadership Conference this month. NIADA provided a history and explanation of its mission, particularly as it relates to its role as advocate for the independent dealer in D.C. NIADA also met with Josh Finestone, legislative assistant to Sen. Dean Heller (R-Nev.). Heller is the ranking member of the Subcommittee on Consumer Protection, Product Safety and Insurance, which has jurisdiction over S. 921, the bill that would prohibit the sale or lease of rental vehicles subject to a recall without the defect being cured. After receiving NIADA’s opposition letter to the bill, Heller’s office contacted NIADA and requested a meeting to become more familiar with the association. The meeting focused almost exclusively on the rental recall bill. It is NIADA’s belief that the bill will generate little movement in the Senate and will likely have even less traction in the Republicancontrolled House. CIADA
REGULATORY REPORT Consumer Financial Protection Bureau Jordan and Petersen met with CFPB personnel to introduce themselves to Dan Smith, head of the CFPB’s new Office of Financial Institutions and Business Liaison. That office was created this year to connect the bureau with trade associations, financial institutions and businesses to enhance collaboration and communication. Eric Reusch of the CFPB’s Installment and Liquidity Lending Markets Division and bureau attorney Craig Crowie also attended. Among the topics discussed was the bureau’s guidance regarding indirect auto lending. The CFPB staffers said unequivocally it was not their intent to regulate dealers by proxy, nor was it their intent to require finance companies to pay dealers a flat fee, saying the flat fee comment was intended to be merely a passing mention. We noted our concern that the flat fee was even mentioned in the bulletin in light of a statement on the CFPB’s website directing consumers to ask what the buy rate is and to offer to pay the buy rate plus a flat fee. We also asked if the bureau has any benchmark for the industry as to what would be considered a disparate impact across a financier’s portfolio. The CFPB confirmed it does not have a specific benchmark and will consider it on a caseby-case basis, examining the facts and circumstances unique to a particular lender. We expressed concern that that does not provide regulatory certainty. Perhaps the CFPB’s biggest point of emphasis was its desire to have NIADA preach to its members the importance of having a compliance management system in place. The CFPB looks more favorably on businesses that have invested in compliance, a key element of the bulletin on responsible business conduct the bureau issued this summer.
The meeting ended with NIADA re-emphasizing its desire to partner with the CFPB on matters the association can assist with, including an offer to provide the CFPB data about the industry, particularly the Buy Here-Pay Here segment. Crowie and attorney Gerry Sachs will be the CFPB’s speakers at the National Leadership Conference.
In addition, we discussed the FTC’s concerns regarding spot delivery in cases they believe it turns into “yoyo financing.” The FTC did not provide any specific information or specific complaints, speaking instead on a theoretical level. Asked if the FTC intends to introduce formal regulation on the matter, the commission delegation declined to discuss its intentions. u
Federal Trade Commission NIADA met with James Reilly Dolan, acting associate director of the FTC’s Division of Financial of Practices, and two staff attorneys, in order to get acquainted with the new appointee. Dolan has confirmed he will speak at the NIADA National Leadership Conference.
After going over the history and mission of the association, we had a general discussion regarding some issues of concern to the FTC. The staff attorneys emphasized their recent settlement with two dealers over advertising issues and expressed concern that dealers are making offers and either not disclosing all of the terms and conditions of the offer or burying them in a manner that is not clear and conspicuous. In addition, we discussed the FTC’s concerns regarding spot delivery in cases they believe it turns into “yo-yo financing.” The FTC did not provide any specific information or specific complaints, speaking instead on a theoretical level. Asked if the FTC intends to introduce formal regulation on the matter, the commission delegation declined to discuss its intentions. Also discussed were issues related to GPS/ starter-interrupt devices. NIADA provided the FTC with some information on how we understand the technology to be used and our position that the use of such devices should be clearly disclosed to the consumer. Again, the FTC declined to discuss what, if any, future requirements could be placed on dealers’ use of such devices. Just as the CFPB, the FTC also asked us to emphasize the need for dealers to have a viable compliance management system, including the tracking of consumer complaints. The FTC said the decision to impose a fine or the amount of the fine in compliance violations will be based in part on the dealer’s compliance management system. As with the CFPB meeting, we ended by reiterating our desire to partner with the FTC on matters where we could, including updates to the guide on complying with the Used Car Rule, once the final rule is released. w w w. c i a d a . o r g 10/19/13 1:32 PM
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Round the Clock Sales Opportunities u
WE LIVE IN A WORLD OF CON SUME RS WHO HAVE BECOME ACCU STOME D TO SHOPPING 24/7
It’s really not about working longer hours. It’s about working smarter. Taking information from every customer interaction and making this business intelligence work for you by implementing small changes can improve your ability to close deals. u
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We live in a world of consumers who have become accustomed to shopping 24/7. Retailers that aren’t operating accordingly are not maximizing their potential. Dealer principals and general managers may think longer operating hours are the solution to better meeting changing consumer demands, but it is not realistic to staff a dealership around the clock. Even simply introducing longer hours may not be cost-effective due to overhead and additional operating costs. In an effort to reach more customers, many dealers market their inventory in just about every medium available, including print, web, radio and TV. The reality is once the customer knows your dealership is out there and is in the market to make a purchase, he/she is likely going straight to your web page. In fact, every day more and more consumers making major purchases start the process online. This underscores the importance of not only meeting your customers’ expectations for content, but also understanding how your website can actually make it easier to do business. Your basic web approach likely solves for content that is “sticky” and provides as much information as possible to help the customer move forward with a purchase from your dealership. Basic questions your online content strategy should address include: u Are you providing thorough information about each vehicle featured, including a full description, damage history, upgrades and mileage? u Are you providing pictures of the vehicle from a variety of angles? u Are you providing links to external sites where customers can purchase a copy of the vehicle history report? Many of these website features may seem like irrelevant added expenses but they have already become the standard expectation of most consumers. Anticipating what information the customer will look for and providing as much of that information as possible gives you a better chance of keeping the customer on your website.
Most dealers realize that every time a customer leaves their web page to go elsewhere in search of additional information about a vehicle or financing options, the more likely he/she will be to not find his/her way back to the dealer’s site. Basic features are critical components to remaining competitive, but having great pictures is the equivalent of just getting the customer in the door. How is your online content strategy making it easier for your customers to actually enter into the sales process? One of the most overlooked components of a dealer’s online strategy is the ability to get actual financing underway. Providing as much information as possible to advance the sales process should be a key online content objective. The following questions should be addressed as a way to increase your chances of ultimately selling a vehicle to visitors of your site: u Do you list available financing options for your inventory? u Do you provide access to an online credit application? Another benefit of engaged website traffic is your ability to capture information about your potential customers. Capturing the prospect’s name and contact information is an obvious primary objective, but effective tracking can tell you a lot even without getting every visitor’s specific contact information. u What makes and models of vehicles are getting the most views? u Are you getting more views on high mileage or low mileage vehicles? u What price point is getting the most hits? u Which vehicles attract the most qualified buyers? u What are the most used features of your website? With an integrated credit application on your website, you will have access to a treasure trove of information. Not only can an online credit application provide an avenue to capture customer contact information and hopefully further the sales process, it can also tell you a lot about the customers who are not purchasing vehicles from your dealership.
When a customer completes a credit application he has exhibited the willingness to purchase a vehicle from your dealership, but in some cases that application may be declined by the lender. This is where you might start asking questions. u Was the credit application declined due to the collateral not fitting the lender’s program guidelines? u Was the credit application declined due to insufficient loanto-value? u Was the credit application declined due to the customer’s poor credit history? u How can I affect the credit decision? If you ask questions like these and record the information for all loan applications, you will start to identify trends. These trends can help drive adjustments to your current business model, which will allow you to become more successful in helping your customers gain financing and thus complete more sales. Perhaps you will discover there is a need to diversify the types of vehicles in your inventory to fit current lender programs. Maybe you could benefit from adding vehicles that allow for a better loan-to-value using your lender’s valuation methods. Trends could reveal the need to add more lenders so you can better meet the credit spectrum of your potential customer base. Even though you may operate or own a small dealership, a website can provide you with access to information on potential customers that can dramatically change the way you run your store and increase your effectiveness. It’s really not about working longer hours. It’s about working smarter. Taking information from every customer interaction and making this business intelligence work for you by implementing small changes can improve your ability to close deals.
BY CHET HEUGHAN
CHET HEUGHAN IS DIRECTOR OF APP ONE RISK MITIGATION SERVICES, INDIRECT LENDING FOR WOLTERS KLUWER FINANCIAL SERVICES. FOR MORE INFORMATION, VISIT WWW.WOLTERSKLUWERFS.COM.
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The Next Generation of Successful Selling u
W W W. N I A D A. T V
FIRST AND GOAL: BECOMING A CHAMPION IN LIFE AND BUSINESS FEATURING
You might know Barry Switzer as the former football coach of the University of Oklahoma and the Dallas Cowboys. You might know him as a member of the College Football Hall of Fame. But you might not know he is a partner in an independent used car dealership – Auto Option in Edmond, Okla. He was also the keynote speaker at the 2013 NIADA Convention and Expo. Check out this game plan session on how his philosophy has made him the successful businessman he is today on NIADA.TV under “New Programs.”
NIADA.TV NEW SERIES Black Book’s “Special Program” series will be up and running Oct 1, highlighting their weekly Market Report(s) featuring Ricky Beggs. Visit www.niada.tv today!!!
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CRUCIAL TO A DEALERSHIP’S LONG-TERM SUCCESS
With the growth of the millennial generation’s buying power – an estimated $170 billion per year, according to the digital analytics firm comScore – dealers must expand their communication strategies to reach consumers when, where and how they want to shop for vehicles. And today, more than ever, that means online and on mobile. Millennials, the techsavvy, empowered generation of consumers born between 1983 and 2004, are increasingly integrating the mobile phone into their shopping process. To ensure success with millennials, dealers need to understand how they operate in the market. For instance, millennials tend to use their smartphones to research, shop for and even purchase vehicles in larger numbers than previous generations. A recent eBay Motors study looked at new vehicle shopping preferences in the increasingly online and mobile commerce environment, including how millennials approach car shopping, suggesting some ways to target this critical generation of consumers: Make sure your web presence is up to date and easy to find: Broadening your visibility online is the first step to getting on the radar of millennials. Ninety-four percent of millennials go online to gather information when shopping for a new vehicle. It is crucial to have a strong online presence to enter and remain in their consideration set. Optimize your site for mobile: If a dealership’s website doesn’t render correctly on smartphones or other mobile devices, nothing else matters. Mobile is the fastest evolving sales and marketing channel for dealers. More than onethird of millennials use a mobile device to research information while shopping for a vehicle, versus 19 percent of non-millennials. Supplement the showroom: Forty-four percent of millennials are likely to use mobile devices to compare prices or get information while they are at a dealership, compared to 27 percent of the nonmillennials surveyed. Dealerships should consider offering free in-store wi-fi to allow customers to comparison shop online. While that seems
counterproductive, the advantage is your salespeople are on hand to discuss the results with shoppers in real time, and maybe even to save a potentially lost sale. Embrace apps: Applying the adage “be where your customers are” is increasingly important for dealers, especially considering the evolution of shopping habits – 70 percent of millennials say technology is changing the way they shop. Mobile apps enable dealers to connect with car shoppers anytime, anywhere. Dealerships can leverage existing platforms or apps that already have a large reach to engage with mobile customers – a great entry point for dealers of all sizes to build a mobile presence. Social me, social you: Millennials love social media, and nearly a quarter of shoppers use social media to research consumer opinions of vehicles during their shopping process.
Mobile apps enable dealers to connect with car shoppers anytime, anywhere. u
Millennials also enjoy engaging with brands through social media and are open to providing feedback on their experience. Being actively engaged on various social media channels is beneficial, as long as you treat it as a two-way street. Use comments as an opportunity to bolster your brand perception and tailor future engagement. Given the buying power of millennials and their shopping preferences, dealerships not yet engaged with consumers via online and mobile risk losing a significant new stream of revenue. Dealerships have the opportunity to connect with millennials on a deeper level, building relationships and providing valuable content that helps them feel confident about their purchasing decisions. Attracting this generation through a blend of online, mobile and social media is crucial to a dealership’s long-term success.
BY CLAYTON STANFIELD
CLAYTON STANFIELD IS SENIOR MANAGER OF EBAY MOTORS.
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M ARKET WATCH
Are You Getting Your Money’s Worth Online? u
F I V E Q U I C K A N D E A S Y WAY S T O M E A S U R E T H E P E R F O R M A N C E O F YO U R W E B V E N D O R S
You probably know that 50 percent of new car buyers and 59 percent of pre-owned buyers find dealerships online. Your online vendors are likely bringing you reports and presentations justifying all the money they are charging to attract those buyers online. Those reports show an alphabet soup of metrics (SRPs, VDPs, etc.), but they don’t tell you if you are really getting your money’s worth. I am always impressed when I visit a dealership and see the “sales board” showing how many sales each salesperson has each day of the month, often compared against a goal or prior period. It is equally remarkable that dealers don’t do that as regularly or publicly for their web traffic, even though it’s now driving the majority of their business. If you want to start managing your traffic and getting the most out of your spend, there are five quick and easy ways to measure your web vendors just like salespeople. u Rank your spend: Rank your monthly spend for each digital marketing channel. While it sounds obvious, you’d be amazed how many dealer principals and general managers lose track of how much they are spending with each vendor and how much it can creep up if you aren’t on top of it every month. That ranking is important CIADA
because it provides the lens through which you can look at everything else. u Rank your consumer impressions: The number of times a consumer actually clicks on one of your cars to look at it, referred to as a “consumer impression” in other
impressions by your spend and you’ll be able to see where you’re getting the biggest bang for your advertising buck. Once you know what each consumer impression costs you can see if the sites you pay the most justify the extra spend. It will also reveal if a
Since shoppers are unlikely to visit your dealership to see a car they didn’t bother to click on online, this is a simple yet powerful way to compare how many eyeballs a site is producing for your dealership. u
industries, is measured through VDPs – vehicle detail pages – on most automotive sites. Since shoppers are unlikely to visit your dealership to see a car they didn’t bother to click on online, this is a simple yet powerful way to compare how many eyeballs a site is producing for your dealership. Watch the trend from month-tomonth to learn a lot about how much sites like AutoTrader.com and Cars.com are producing versus your dealer website. u Rank the cost of each consumer impression: If you really want to understand what it’s costing you to get those eyeballs on each site and see where you are getting your money’s worth, divide the number of consumer
site is producing consumer impressions at a bargain and might be worth a bigger spend. u Rank your direct leads: One of the real challenges with measuring your online vendors is they will tell you they can’t be measured because most of your in-store customers don’t email or call before showing up. One way to overcome that problem is to compare the number of direct leads (phone calls and emails) you get from each vendor. While this doesn’t give you the “invisible leads” vendors talk about, it does let you compare vendors on an “apples to apples” basis so you can see which vendors are serving up opportunities to your internet department or BDC.
u Rank the cost of each direct lead: We also encourage dealers to divide their direct leads by the spend allocated toward each vendor to compare the cost per direct lead for each vendor. This should give you a good feel for how each vendor compares to the others on direct leads to help you bring “Pay for Performance” to your leads. The Big 5 metrics may seem simple but that’s because these are the drivers of your web business. When tracking critical metrics, the key is in how you use them to manage your business and, in this case, how you manage your vendors. If you are serious about “Pay for Performance” you need to know these metrics and use them to make spend decisions every month. The real power comes in when you start benchmarking the Big 5 so you can see how you stack up against other dealers. Our MAX Digital Performance Analysis introduces benchmarking to the equation and gives dealers the insights to manage their vendors and spend so they can take performance to the next level.
BY PAT RYAN PAT RYAN JR. IS THE FOUNDER OF FIRSTLOOK AND MAX SYSTEMS. HIS BLOG CAN BE FOUND AT WWW.GETRELEVANTORDIE.COM. THIS ARTICLE IS REPRINTED WITH PERMISSION BY AUTO REMARKETING.
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Reviews Drive Dealer’s Reputation – and Sales
O N L I N E R E P U TAT I O N M A N A G E M E N T S T R AT E GY H E L P S A N I N D E P E N D E N T D E A L E R B O O S T S A L E S
Pellegrino Auto Sales of Batavia, N.Y., is a family owned and operated independent dealership established in 2005 to provide western New York with a more personalized car buying experience. Dealer principal Guy Pellegrino said having the family name on the dealership makes them feel personally responsible for its reputation and how the customers are treated. He said the dealership’s guiding principle is to “treat others the way you would want to be treated yourself.” That customer-centric approach, combined with a strong online reputation management strategy, has helped boost sales by 30-40 percent, Pellegrino said. “Used car dealers can get a bad rap, which many times can make the sale that much harder,” Pellegrino said. “Sadly, there are some shady characters in this business. But I am in the business for the long haul and treat our customers that way. “I am young and want to earn the customer’s business not only today but tomorrow as well. … Sometimes you have to take a loss today and make something right, make a customer happy. That same loss becomes a gain tomorrow, when that customer returns. The correct handling and treatment of the customer has to be what is right, is right.” Two years ago, Pellegrino was challenged by a negative online review from a person he did not know. He felt defeated by the fact there was no way to contact the reviewer and handle the situation personally, and that it placed his name and the dealership in a very bad light. He decided to start an online reputation management program and enrolled in the DealerRater® Certified Dealer program. Now the dealership has built 106 lifetime reviews with a very healthy 4.9-star rating out of 5. Pellegrino himself has 47 reviews. “We had one really negative review and I felt like it was not fair,” Pellegrino said. “It felt unjust, and I tried to get them to take it down. Finally I realized that it is what it is and you cannot appease 100 percent of people all the time, but I do want the opportunity CIADA
to at least try. By becoming a DealerRater Certified Dealer, we’ve gained the opportunity to contact the customer through a private message board and address any issues with the customer directly. “We started this program because we saw how important reviews are and did not want a reputation management program without the opportunity to make things right. The past negative review bothered me personally. I hated having someone out there dissatisfied with me. … The most important thing I want the customer to know is that I will make things right. I will try hard to make them happy.” Approximately 60 percent of Pellegrino Auto Sales’ customer base is out-of-town shoppers – mostly Internet shoppers who on average visit two dealerships before purchasing a vehicle. Pellegrino said the dealership’s online image helps the small family business give the impression of a much larger operation. “My focus is to get behind the Internet and be as transparent as we can be,” he said. “You’ll see it mentioned in some of reviews that people are surprised by our size. They think they are coming to a huge conglomerate due to our strong online presence. This has definitely contributed to a sales increase of 30-40 percent. It’s not all due to our reputation management strategy, but that’s a huge part of it.” While reputation management is an important part of the process, Pellegrino said it has to be backed up by facts, excellent customer service and a quality product. “We have to do something to give them a reason to choose us,” he said. “You can have the best price but it won’t matter. You have to have a few things coupled with that. We have the whole package – a quality reputation, plus we go the extra mile for the customer and offer a quality product they can trust. If you have that, price is not as relevant and people understand. They will pay more for a vehicle backed by a quality dealer.” Pellegrino Auto Sales’ reputation management strategy has made a big difference in the effectiveness of its online marketing and SEO. The dealership ties its reviews into
all of its marketing. Through DealerRater’s review feeds and publishing tools, Pellegrino prominently displays his reviews on the dealership’s website and throughout social media, which helps raise the dealership’s ranking on Google. Pellegrino said the dealership’s primary objectives are to spread the word online about how it conducts itself in business and to showcase its competitive advantages. “Our reputation management program has a tremendous ROI,” Pellegrino said. “When my name is googled and someone wants to check up on me, a third-party entity – DealerRater – appears under my name that shows a 4.8star rating. You can’t beat that. “Our DealerRater reviews also populate in AutoTrader. Our customers talk about how well we treat them and that really helps. People feel comfortable spending money with businesses that treat them well.” Pellegrino Auto Sales takes a very personal approach to asking customers for reviews. “We make sure we tell customers that we really appreciate their business and take their satisfaction with us very personally,” Pellegrino said. “We say, ‘We go the extra mile to ensure that you have a good car buying experience with us and would really appreciate it if you could help us build our name by writing a review.’ ” Customers are then handed a DealerRater rating reminder card with information about how to leave a review. Currently, 20 percent of their customers submit a review, and that number is growing. “Reviews help us build our business,” Pellegrino said. “Our 110 reviews from happy customers show we are not shady and we must do something right. As we have treated them right, gone the extra mile and given them those new brakes, or whatever, most want to help us in return. It’s from a standpoint of do unto others as you want done to you – it’s important.” For more information, call 800266-9455 or visit www.dealerrater. com.
Honda Announces Recall American Honda and Honda Canada announced recalls of more than 400,000 minivans and crossovers in the United States and Canada. Most of the affected units are in the U.S. The automaker indicated it will recall approximately 318,000 Honda Odyssey vehicles from the 2003 and 2004 model years and some 56,000 2003 Acura MDX vehicles. In Canada, Honda plans to recall about 23,300 Honda Odyssey vehicles from the 2003 and 2004 model years and 4,800 2003 Acura MDX vehicles. Honda said the recalls are necessary to address potential malfunctions of the supplemental restraint airbag system due to electrical interference. To prevent malfunction, an electrical noise filter will be installed adjacent to the SRS control unit, free of charge. “Honda has received a small but increasing number of complaints in recent months of inadvertent airbag deployment in these vehicles, which are equipped with SRS control units that contain computer chips similar to those used in airbag system control units installed in other manufacturers’ vehicles that were recalled in the last year,” the company said in a statement. Honda said no crashes related to the issue have been reported. Vehicle owners can visit www.recalls.honda.com or www.recalls.acura.com, or call (800) 999-1009 for Honda or (800) 382-2238 for Acura to see if their vehicle is affected.
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M ARKET WATCH
Reasons to Be Upbeat Over Paying A Little More for Older Units u
RAPID ADVANCES IN DEPENDABILITY HAVE CHANGED CONSUMER ATTITUDES TOWARDS OLDER VEHICLES
You may be looking down the lanes or staring at your tablet in shock, asking, “Am I really using this much of my floor plan for a 6-year-old car?” Analysts expect prices for 4- to 10-year-old units to be 0.5 percent higher in 2013 than likeage units were in 2012. But if used car managers are looking for late-model or possibly certified pre-owned inventory, analysts shared some possible good news in their latest report, “NADA Used Vehicle Price Report: Age-level Analysis and Forecast.” By comparison, NADA Used Car Guide predicted that prices for vehicles up to three years in age will be 1.5 percent lower than similarly aged unit prices last year. “Historically speaking, reliability and unexpected repair cost concerns meant that vehicles over five years of age took a back seat to their younger, in-warranty counterparts in terms of
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demand,” said Jonathan Banks, executive automotive analyst for the NADA Used Car Guide. “However, rapid advances in dependability over the past decade have changed consumer attitudes towards purchasing older vehicles.” The report elaborated about the depth of that reliability. Banks first noted this point can be validated through a variety of metrics, including a rise in vehicle age. According to R.L. Polk, the average age of vehicles on the road increased from 9.6 years in 2002 to 11.4 years in 2013. Banks also mentioned there has been an increase in average mileage as accumulated mileage on units at auction grew by an average of 8 percent between 2000 and 2012. However, what Banks contends is most telling are the annual improvements in J.D. Power and Associates’ Vehicle Dependability Study (VDS), which measures problems
experienced by original owners of 3-year-old vehicles during the past 12 months. From 2005 to 2013, the average number of problems experienced per 100 vehicles (PP100) fell from 237 to 126 — nearly a 50 percent improvement — while the standard deviation of brand-level scores, or brand score distance away from the overall industry average, fell from 63.9 to 28.0, indicating more similarity among brands. “Given rapid advances in dependability, consumers have shown more positive attitudes toward purchasing older used vehicles and, as a result, demand for these units has blossomed,” Banks said in the report. “In response, franchised dealers now retail more and more older units acquired via trade to retail, instead of sending them to auction as they had historically done, and are now promoting these units
Given rapid advances in dependability, consumers have shown more positive attitudes toward purchasing older used vehicles, and as a result, demand for these units has blossomed. u
as value-priced alternatives to cost-conscious consumers,” he continued. “Taking into account the ongoing improvements in quality and dependability, combined with the sales, service and parts opportunities afforded franchised dealers, NADA expects demand for oldermodel units will remain strong through the forecast term,” Banks said.
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M ARKET WATCH
How New Car Sales Jump Affects Used Cars u
INDUSTRY ANALYSTS DISCUSS THE IMPACT OF THE INCREASED SALES VOLUME FOR NEW CARS ON THE USED VEHICLE MARKET
Autodata Corp. determined the seasonally adjusted annual rate for new vehicle sales in August came in at 16.09 million units, marking the first time it has reached that level since October 2007. Since General Motors senior vice president for U.S. sales and marketing and global brand chief for Chevrolet Alan Batey recently insisted the high SAAR level is “here to stay,” Auto Remarketing questioned industry analysts to find out what kind of impact that sales volume might have on the used vehicle market. Karl Brauer, senior analyst for Kelley Blue Book, discussed the immediate implications of that trend. “If new car sales stay above 16 million it will require many current drivers to sell or trade in their existing vehicle,” Brauer said. “That will result in a constant flow of used cars entering the market, but at a relatively even rate
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versus a spike. “Given the age of the current U.S. fleet, which is more than 11 years old, many used car shoppers will be looking to step into a newer car, but not necessarily a new car. As such, there will be plenty of continued demand for used cars even as new car sales rise. Used car values may drop gradually in the coming years, but they should remain relatively stable overall.” Batey said during a conference call he first thought the new vehicle SAAR would climb above 16 million sometime during the fourth quarter. “It’s a little earlier, but not a big surprise, given what’s going on in the economy, the age of fleet, and, again, keep in mind job stability,” Batey said according to a transcript of GM’s call posted by SeekingAlpha.com. “That’s a key element in the purchase decision: Will I have
a job tomorrow? People are becoming much more secure in their jobs.” More confidence displayed by potential buyers in keeping their jobs likely makes them more apt to sign a finance contract. Experian Automotive reported 84.5 percent of buyers purchased their vehicles with loans or leases in the second quarter. It’s that availability of financing that prompted Edmunds.com senior analyst Jessica Caldwell to question whether potential buyers are opting for a new model even if a used vehicle initially was on their radar. “On average, new car buyers in August paid one of the lowest new car interest rates in history: 3.9 percent. This is truly a purchase driver,” Caldwell said. “Even though consumers are generally paying higher prices for cars due to increased content (and, in some cases, tight supply), the
There are so many new car interest subsidies that I think when you do the math for someone financing a vehicle – say, zero percent for five years – it makes new cars really favorable. So that’s going to have an effect on used cars.” u
low interest rate is generating monthly payments on par or less than what they have paid in the past. “There are so many new car interest subsidies that I think when you do the math for someone financing a vehicle – say, zero percent for five years – it makes new cars really favorable. So that’s going to have an effect on used cars.”
INSIDER 10/19/13 1:32 PM
NIADA Offers Comprehensive Dealer Compliance Solution that Fits Your Schedule u
NEW FLE XIBLE ONLINE TRAINING ADJUST S TO YOUR SCHEDULE
You have a busy schedule. You have a job to do and your family, employees and community depend on you and your business. You know compliance is crucial to the success of your business. But how do you make time for compliance management without your operations, marketing, sales and other important aspects of your life suffering? NIADA now offers Dealer Compliance Suite, a comprehensive solution that fits your schedule and budget. On demand videos allow your entire staff online access to a comprehensive suite of training that focuses on federal regulations and compliance. Its content can be tailored to match individual employee functions, such as sales or service, with interactive testing to reinforce material. These test results are stored as the program tracks employee
training participation. This tracking capability that reports participation also aids in providing proof of compliance. There are also numerous compliance related documents available to download from the site, such as compliance policies and deal agreements. The site offers federally required dealership compliance policies as well as documents and agreements designed to limit dealer liability. A lack of federal compliance training could put your business at risk. You may not be as prepared as you think. The site also provides a checklist to evaluate your compliance level. There may be regulations of which you’re unaware or unfamiliar. Did you know? • Dealers are required to adhere to numerous rules and regulations and should provide formal employee training
regarding eight regulations. • Documentation of employee compliance training should remain on file and available for government audits. • New hires should be trained immediately with appropriate documentation of training. • Dealership employees should be retrained on regulations annually. Several federal agencies, including the newly formed Consumer Financial Protection Bureau (CFPB) require and advise all motor vehicle dealers to perform employee federal compliance training regarding various regulations. Regulations include training on the Safeguards Rule, Patriot Act, OSHA, Do Not Call rules, the Federal Risk Based Pricing Rule, the Magnuson-Moss Warranty Act and the Federal Truth in Lending Act. Visit niada.com for a complete list of training regulations.
In addition, these same federal agencies require all motor vehicle dealers to have in place written Dealership Policies regarding similar regulations. Visit niada.com for a complete list of those regulations as well. In previous dealership federal audits, investigations and civil litigation, independent dealers have been required to provide documented proof of all required compliance training and to produce all written policies on demand. Failure to produce documentation of required training and/or policies has contributed to fines in the tens of thousands and even federal prison terms for the dealer. Not only does compliance help your business succeed, it prevents adverse legal action. Visit http://www.niada.com/ dealershipcompliance.php today to learn more about NIADA’s flexible comprehensive dealer compliance solution.
WHAT “THEY” DO u
“ TH E Y ” ARE TH E S U C C E S S F U L D E ALE R S , AN D H E RE ’S WHAT TH E Y S E E M T O DO A TAD B IT B E T TE R THAN TH E AVE R AG E J O E
I have the privilege and honor of traveling this great country of ours and working with Buy HerePay Here dealers of all shapes and sizes. But no matter where I am or what the dealer is like, I always get the same question. What do “they” do? The “they” they are asking about are the successful dealers. Now, the good thing about BHPH is there are a whole bunch of ways to do it. There is no one way that will work for everyone everywhere. The problem is there are just as many ways to do it wrong. But among the dealers who seem to do it a little bit better than everyone else, there are a few common denominators. A few things “they” seem to do a tad bit better than the average Joe. The first thing, and the most important, is people. Their overall people management makes them better, from hiring to training to pay plans to simply their employment environment. CIADA CO_0113.indd 24
They hire slow and fire fast. They hire who they want rather than having to hire who they need. They continually train their entire staffs. Their pay plans promote a team mentality. And they provide a professional but fun work environment. “They” do people very well. Next are processes and procedures. They have documented processes and procedures for most, if not all, of what happens in their organization. “Documented” is the key word here. They make sure those processes and procedures are implemented and adhered to on a consistent basis. They do it by continually training on them and updating them when necessary. “They” do processes and procedures well. Education is the next thing that sets them apart. They are always looking for ways to educate themselves. They belong to local, state and national dealer associations.
They subscribe to as many trade publications as they can. They attend industry conventions and conferences. And they seek advice from industry consultants and are members of 20 Groups. “They” educate themselves well. Technology is something else they take advantage of. They not only have a DMS that can handle their needs, but they know how to use all it has to offer. They not only have a wellfunctioning website, but track and make changes when necessary. And they take full advantage of the World Wide Web, from collections to car buying to pre-employment testing. “They” are technologically savvy. Lastly, they plan. They know what their cash flow needs are. They budget for expenses. They project collections and sales. They do it not only on a monthly basis, but annually as well. And they do it based on
Most dealers I know do at least one of those things, some even two or three, but only a few do all of them. And do them well. u
what they can do, not what they necessarily want to do. “They” plan effectively. That is what “they” do. I can assure you they didn’t always do those things. But they all realized at some point what it would take to be one of “them.” Most dealers I know do at least one of those things, some even two or three, but only a few do all of them. And do them well. How close are you to being one of “them”?
BY BRENT CARMICHAEL
BRENT CARMICHAEL IS EXECUTIVE CONFERENCE MODERATOR FOR NCM ASSOCIATES INC. HE CAN BE REACHED AT BCARMICHAEL@NCM20.COM.
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CIADA Benefits Here are some of the projects CIADA is working on for our members:
MEDIATION Professional mediation is now available for all members. We are handling dealer-auction issues. Soon we will be expanding to the areas of dealer-dealer and retail customer issues. The fee of $150 will be split by the parties in mediation. You can resolve your issues with the auctions in a professional, effective manner. Do not put yourself though the frustration of expressing your issues improperly. Call Todd O’Connell, executive director of CIADA, at 303-239-8000, extension 301. CIADA LANE EVERY WEDNESDAY Run lane at Denver Auto Auction for CIADA members only, every Wednesday in lane 8, beginning with run number 60. The CIADA program introduces pre-inspection and a seven- day certification for sold vehicles at no cost to the seller. There is still room for more vehicles. Take advantage of this offer! Call Charles Bryant at 303-3433443 for registration. Last week high sales percentage, with cars bringing top dollar-plus, discounted buy and sell fees for all CIADA members. LEGAL PROTECTION FUND CIADA LEGAL PROTECTION FUND All of you may have heard we have some overly aggressive, predatory attorneys starting to concentrate on Colorado dealers in a major way. Some of them are even coming from other states. CIADA is determined to bring our dealers into compliance in every possible way. We do not want to fall victim to those guys. There have been several cases brought to federal court, with costs to the defendant dealer in excess of $40,000. We need to prevent this from happening to our dealers. We will be emailing to all who have joined the legal fund a video that features all the compliant paperwork in delivering a vehicle, how to present it and how to avoid future litigation. Who has $40,000 lying around? There are many dealers not doing it correctly, which makes you susceptible to those fee-hungry predators. Do not be their next unsuspecting victim. Call Todd O’Connell NOW! 303-239-8000, extension 301. INSURANCE: COMMERCIAL , HEALTH, WORKMAN’S COMP and PERSONAL Taggart Insurance: CIADA has partnered with Taggart as its agency of choice. Taggart is a full-service agency featuring many choices of dealer garage liability policies with special discounts for CIADA members. Compare your policy. Taggart has policies that cover many of the issues the predators are looking for. Check your existing policies right away, then call Mark Harrington with any questions you might have: 303-442-1484. FREE INVENTORY LISTINGS Dodah is a FREE vehicle listing service offered though CIADA for all members, anticipated to eventually rival Craigslist. Dodah is currently in the process of building inventory and member subscriptions prior to an advertising campaign targeting retail buyers. This is a national listing service expressly for vehicles, unlike Craigslist. This service is free for CIADA members. Call CIADA at 303-239-8000 to register.
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APONTE & BUSAM LOBBYIST CIADA has contracted Aponte and Busam to monitor issues relating to our industry and to help keep us informed to protect ourselves against intended legislation that would be detrimental to us and to support legislation that would that would be in our interest. This is a big deal affecting all dealers. We are lucky to have the best people on top of this for us. CIADA VIP DISCOUNT CARD VIP CARD A VIP card is issued to your dealership with your membership. A $225 membership will give you up to $600 in benefits. Great savings – do the math. Tell other dealers. Our goal is to have 100% membership. Call CIADA today to join at 303-239-8000. QUALITY DEALER OF THE YEAR NOMINATIONS QUALITY DEALER OF THE YEAR This honor is open to all CIADA member dealers. You may nominate any dealer you choose, including yourself. The honor has monstrous benefits in FREE publicity. Use it in your ads, website and lots more for a full year. You may also be selected as the National Quality Dealer, with all the benefits that come with that title. Call CIADA today for more information: 303-239-8000. CURBSTONING There is no single simple solution to problem of illegal sales of vehicles. This activity is everexpanding, from vacant lots to the Internet. The association is attacking the curbstoning problem on several fronts: through the State Auto Industry Division, the Attorney General’s Consumer Protection Office, local zoning and law enforcement agencies, plus exploring additional legislative prosecution. Please help by calling the Curbstoning Hotline to report violators – 303239-8000, extension 301.
CIADA EDUCATION & TRAINING EDUCATION CIADA offers a full complement of educational classes – new salesperson classes and testing at our new offices, plus many other enlightening opportunities, including title, technology, F&I, pre-licensing and compliance to state standards! We also have new dealer education. For additional details, call the CIADA office at 303-239-8000. GET ALL YOUR FORMS THAT COMPLY WITH THE STATE! FORMS AND BONDS Call our office at 303-239-8000 to order forms at a discount for our members and a complete professional bonding process. ATTORNEY QUESTIONS LEGAL ASSISTANCE CIADA members enjoy FREE phone consultation for legal questions. Call 303-239-8000 for more information. Dealers, you need to take advantage of this service before you wind up in a bad situation. Make the best of the problems you have. DEALER MANAGEMENT SYSTEM CIADA partner is providing a quality Dealer Management System at highly discounted rate for CIADA members. Some of the many features: inventory, retail workbench (F&I), wholesale, CRM, sales history, commission journal, Buy Here-Pay Here, accounts payable A/P, general ledger, service department and more. Call Mike Cintron at 720-838-7400 or www.skywerks.com for more information. NOVEMBER/DECEMBER 2013
INSIDER 10/19/13 1:33 PM
Dealer Lending Practices Remain in the Spotlight. u
IT’S TIME TO TAKE ACTION
In the last Compliance Overdrive column I discussed how indirect lending practices had recently come into the regulators’ spotlight, citing the March Bulletin issued by the Consumer Financial Protection Bureau. In the months since, news headlines have continued to illustrate how dealer lending practices face heightened scrutiny by banks and other lenders as a result of pressure from regulators. Strong lender relationships are among a successful dealership’s most valuable assets. In an effort to maintain good relationships, dealers can benefit from a better understanding of the regulatory landscape within which its lenders are making day-to-day credit decisions. Lender rules and restrictions have an impact not only on approvals but also on how quickly a customer’s loan application goes from origination to completion. In July, Wolters Kluwer Financial Services conducted a survey to identify top regulatory issues facing the industry. The survey of over 400 banking professionals showed the number one issue keeping them up at night from a regulatory standpoint was fair lending and other compliance concerns. Forty-six percent of the bank and credit union executives who responded indicated they have an overall concern with regulatory reform in general. Specific concerns cited include regulatory pressures from the Dodd-Frank Act, the CFPB and the vast landscape of ongoing rules and requirements taking effect across the industry. More than a third of respondents cited evolving consumer lending regulations as a primary concern. Recent enforcement actions offer further evidence that Equal Credit Opportunity Act or other potential fair lending violations are at the forefront on most lenders’ list of concerns. In September, the U.S. Department of Justice announced that it had settled a lawsuit alleging ECOA violations by an auto dealer. The case provides some insight into where regulators and enforcement CIADA
agencies stand on enforcement of the ECOA. The suit involved an auto dealer and one of its lenders. The DOJ alleged that the dealer violated the ECOA by charging higher interest rate markups on car loans to a certain class of customers (race/national origin) than to others over a three year period. The case was settled and the dealer in question went out of business before the settlement was reached. But, in the consent decree the DOJ indicated if the dealer or its main shareholder decides to go back into business within a defined time period, it will be required to “implement clear guidelines for setting dealer markup and pricing, in compliance with ECOA, and establish appropriate fair lending training for its employees and officers.” Note that the enforcement path went through the auto dealer’s lender. The lender’s regulator, the Federal Reserve Board, noted issues as part of its examination of the lender’s indirect lending program. The FRB then referred the case to the DOJ. In 2009, the DOJ announced that the lender resolved allegations against it through a partial consent decree under which it is “prohibited from discriminating on the basis of race or national origin in any aspect of its automobile lending.” Now, four years later, the DOJ reached a settlement with the dealer involved. Recent industry publications have also reported that the CFPB and DOJ are probing the lending operations of some of the nation’s largest auto finance companies for possible lending discrimination under the ECOA. If true, it confirms regulator focus on ECOA and on auto lenders. Because any discrimination found in a lender portfolio will likely have taken place at the auto dealership, it is certain that lenders and other regulators will soon be focusing on dealer ECOA compliance. The CFPB’s March Bulletin outlines concerns over dealer discretion in setting consumer interest rates by auto lenders. The principal concern is the increased risk of dealers either
intentionally discriminating against certain groups through higher rate markups or unintentionally discriminating against certain groups by its rate markups practices. Both could be ECOA violations for which dealers are accountable and for which their lenders may also be liable. The CFPB bulletin suggests that auto lenders simply provide dealers a flat fee for contract assignment/sales or that they stop sharing rate markup revenue with dealers. A flat fee solution would probably take the form of a lender paying a flat dollar amount to the dealer for any retail sales contract it purchases, regardless of whether the rate had been marked up and regardless of the amount that it had been marked up. The flat fee would be more like a finder’s fee for the dealer rather than a participation in, or sharing of, any additional markup revenue. It’s interesting to note that the recent DOJ settlement with an auto dealer did not prohibit rate markups or suggest using flat fees. Instead, it required the dealer to “implement clear guidelines for setting dealer markup and pricing, in compliance with ECOA.” The DOJ seems to still allow rate markups if they are subject to guidelines and controls. The CFPB bulletin also suggests that lenders engage in closer supervision or review of dealer ECOA compliance. In an August webinar cosponsored by the CFPB, the Federal Reserve Board and the U.S. Department of Justice, Patrice Ficklin, fair lending director for the CFPB, indicated that lenders may be liable for discrimination that takes place at a dealership whether or not they have knowledge of a particular offence and they are expected to analyze auto loans dealer by dealer as well as on an aggregated basis across the lender’s entire portfolio. The recent CFPB bulletin, DOJ lawsuit settlement and cosponsored webinar with multiple regulators are clear indications that ECOA compliance is a priority shared by a number of agencies with enforcement
authority over lenders and dealers. Again, it is certain that lenders and other regulators will soon be focusing on dealer ECOA compliance. So what should dealerships do in response to the ECOA focus? Prioritize and focus attention on your dealership’s ECOA compliance before your lender or regulator knocks on the door. Begin by taking at least the following steps: u Review your written ECOA policies and procedures to make sure they are consistent with ECOA requirements and that they are targeted to root out and prevent discrimination. Create written policies and procedures if you don’t already have them and regularly review and update them as needed. u Conduct regular ECOA training for your entire staff, officers and board. u Review your rate markup policies. Make sure that you have caps and/or other standards and controls in place to help reduce or eliminate the risk that rate markups are intentionally or unintentionally being applied to discriminate against certain groups based on race, color, national origin, age, gender, etc. u Review your employee compensation policies to make sure that they do not unintentionally fuel possible discriminatory behavior. u Review your credit records or otherwise conduct tests for any unexplained pricing disparities for different groups of credit applicants. You should also make sure that your ECOA compliance activities are recorded so that you have evidence of your efforts. As my colleague Ed Kramer, vice president of regulatory affairs for Wolters Kluwer Financial Services puts it, “You’ve got to demonstrate you are taking steps to stay compliant. If you don’t, it’s going to be really difficult to persuade regulators, or lenders, you are interested in being compliant.
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 10/19/13 1:33 PM
10/19/13 1:33 PM
10/19/13 1:33 PM