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JANUARY 2012

INDIANA

CAR LINES OFFICIAL VOICE OF THE INDEPENDENT CAR DEALER IN INDIANA

INDIANA GENERAL ASSEMBLY PREVIEW ALSO Sales Tax for BHPH Dealers PLUS The CARLAWYER

Shaver Preferred Motors Named Quality Dealer of the Year

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LocalNews

2012 Indiana General Assembly Preview THE 2012 INDIANA GENERAL ASSEMBLY will convene Jan. 4

for what is expected to be another contentious session. This year’s session is a short one, meaning it’s a non-budgetary year. At press time, a date for Sine Die had not yet been announced. Sine Die should occur around the middle of March.

Legislative Issues

Right to Work: Both House and Senate Republican leadership announced their intention to make Right to Work (RTW) the top legislative priority for the upcoming session. Last year, RTW led to a fiveweek walkout by House Democrats, stalling much of the 2011 Legislative Session. Senate Republicans added an amendment in last year’s budget that levies fines for unexcused absences at $1,000 per day. At press time, the House Democrats were trying to decide what their next move would be. RTW will consume the majority of the 2012 legislative session.

Other items to be considered include sentencing reform, local government reform, education reform and Barnes vs. State.

Auto Dealer-Specific Legislation

From all indications, the Dealer Services Division within the Secretary of State’s office is planning to re-file the language from last year’s HB 1543, which attempted to reorganize all sections dealing with the division’s regulatory authority. There were some new provisions that would have increased existing fines and penalties. Our association is opposed to any increase in fines and penalties, and we will continue to work with members of the Dealer Services Division. As always, please feel free to contact myself or Frank with any questions, concerns or comments about the 2012 Legislative Session. We look forward to another great year with the IIADA!

BY MICHAEL SOLARI, IIADA LOBBYIST SHORT STRATEGY GROUP, INC. PHONE: 317.917.0800 EMAIL: MICHAEL@SHORTSTRATEGY.COM

Important Notice for BHPH Dealers THE INDIANA DEPARTMENT of Revenue has made an administrative change regarding claims for refunds related to sales tax collected and remitted on abandoned or repossessed vehicles. Effective October 2011, sales tax that has been collected and remitted by the retail merchant will not be refunded, in whole or in part, to either the purchaser of the vehicle or the retail merchant. In the case of a repossessed or abandoned vehicle, the dealer or other legally entitled party may claim any available bad debt deduction on his or her tax return.

FOR FURTHER INFORMATION, SEE SALES TAX BULLETIN 28S, DATED OCTOBER 2011, AT WWW.IN.GOV/DOR/ REFERENCE/FILES/SIB28S.PDF, OR CALL THE IIADA OFFICE AT 1-800-310-3112.

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INSIDE MAGAZINECONTENTS MAGAZINECONTENTS 03 03 09 14

2012 Indiana General Assembly Preview Sales Tax for BHPH Dealers IN Title & Registration Record Retention for Auto Dealers

SCHOLARSHIPS College scholarships awarded by the National Independent Automobile Dealers Association Foundation are available for current high school seniors who will be attending college in fall 2012. To be eligible a student must:

•B  e classified as a high school senior during the 2011-2012 school year and legally residing in one of the four NIADA regions.

WHAT’SNEW

R A2Z EDUCATION SERIES - AutoZone Educating the independent dealer to deliver the highest quality service levels to your customers, manage your shop efficiently, train your technicians and maximize profits. niada.tv R TURBO TIPS – Cars.com Provides Independent Dealers with practicable and actionable tips to help you sell more cars now! niada.tv R World Automobile Auctioneers Championship Live online coverage of the event begins at 11 am ET on Friday, March 3O, 2012 and is free for all online viewers. visit www.niada.com and click on the “EVENTS” tab or call (303) 807-1108.

ADVERTISERSINDEX ADVERTISERSINDEX ADESA...........................................Inside Front Cover Auto Auction of New England.........Inside Back Cover AutoTrader.com ..................................... Back Cover Dyer Auto Auction..................................................11 Indiana Auto Auction ..............................................3 Kesler-Schaefer Auto Auction..................................9 Manheim Indianapolis ............................................7 SmartAuction .........................................................5 United Acceptence................................................13

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.

CAR LINES IS PUBLISHED 10 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 CAR LINES 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 © 2011 BY NIADA SERVICES, INC.

STATE MAGAZINE MGR./SALES Troy Graff • troy@niada.com EDITOR Andy Friedlander • andy@niada.com ART/PRODUCTION MGR. Christy Haynes • christy@niada.com PRINTING Nieman Printing

•H  ave maintained an outstanding academic achievement record as reflected by an official high school transcript; and • Demonstrate an aptitude for college work as measured by SAT or ACT scores.  Scholarship applications are available at www.niadafoundation.org or by calling the IIADA office at 1-800-310-3112  Applications must be postmarked no later than February 1, 2012 and received by February 10, 2012.

Board of Directors IIADA EXECUTIVE DIRECTOR Debbie Andersen P.O. Box 1393 Crown Point, IN 46308 Phone: (800) 310-3112 Fax: (219) 663-5294 iiada@comcast.net BOARD OF DIRECTORS CHAIRMAN OF THE BOARD Dave Allen (Crockett) VICE PRESIDENT Fritz Kreutzinger Fritz Associates P.O. Box 168 Fishers, IN 46038 Phone: (317) 842-2228 Fax: (317) 842-7903 fritzauto@aol.com SECRETARY Tricia Trent Trent Auto Sales 1327 N 6th Street Vincennes, IN 47591 Phone: (812) 882-3772 Fax: (812) 882-1986 ttrent01@yahoo.com TREASURER Bruce Norton Drive1USA 1512 W 96th Avenue, Suite C Crown Point, IN 46307 Phone: (219) 661-1000 Fax: (219) 661-2950 bnorton@drive1usa.com Jennifer Cotton Dyer Auto Auction P.O. Box 115 Dyer, IN 46113-0115 Phone: (219) 865-2361 Fax: (219) 322-1761 jencotton@comcast.net

Kim Graham Kim Graham, Inc. 1648 A US 31 S Greenwood, IN 46143 Phone: (317) 888-0100 Fax: (317) 888-8900 vehicles@kimgraham.com Ed White White’s Auto Sales 1105 McKinley Avenue Rensselaer, IN 47978 Phone: (219) 866-7553 Fax: (219) 866-7256 edwhite123@att.net Tony Houk Kesler-Schaefer Auto Auction, Inc. 5333 W. 46h Street Indianapolis, IN 46253 Phone: (317) 297-2300 (800) 959-5722 skesler@ksaa1.com Tyler Trent Trent Auto Sales 1327 N 6th Street Vincennes, IN 47591 Phone: (812) 882-3772 Fax: (812) 882-1986 ttrent01@yahoo.com Harold Drees H.T.D., Inc. 200 E Main Street Thorntown, IN 46071 Phone: (317) 402-2312 Fax: (765) 436-7222 htdinc@msn.com Tony Del Real Del Real Auto Sales 3857 State Road 38 E Lafayette, IN 47905 Phone: (765) 446-9204 Fax: (765) 446-9143 tdelreal@delrealauto.com

John Stumpf Elkhart Public Auto Auction 1201 N. Nappanee Elkhart, IN 46514 Phone: ­­(574)264-0148 Doug Alvey First Class Auto Sales, Inc 695 W 900S Hebron, IN 46341 Phone: (219) 996-2600 Fax: (219) 531-4628 talvey65@yahoo.com Sharon Brennan Fritz in Fishers 8599 E 116th Street Fishers, IN 46038 Phone: (317) 842-2228 Fax: (317) 842-7903 sharonb@fritzinfishers.com Andrew J. Inabnitt Approval Auto Credit Inc. 9825 Huggin Hollow Rd. Martinsville, IN 46151 Phone: (317) 422-8001 Fax: (317) 422-8020 David D. Baldwin II Best Deal Auto Sales, Inc. 1875 SR 8 Auburn, IN 46706 Phone: (260) 357-0099 dbthesecond@yahoo.com Andy Zay Zay Leasing & Rentals 4957 N. Broadway Huntington, IN 46750 (260) 356-1588 azay@sbcglobal.net Mark Hockett Indianapolis Car Exchange 5161 S. Indianapolis Rd. Whitestown, IN 46075 (317) 769-7777 markh@icefriday.com

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IndustryNews

Shaver Preferred Motors Earns Top Dealer Award

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THE INDIANA INDEPENDENT AUTOMOBILE Dealers

Association is proud to announce Shaver Preferred Motors of Merrillville as our 2011 Joe Krier Quality Dealer of the Year. The award was presented to Michael Shaver Sr. at the association’s annual golf outing and awards day, held Sept. 11 at Ironwood Golf Club in Fishers. The Quality Dealer of the Year award is based on several attributes: The dealership must be consumer-oriented, the dealer must have a record of good business decisions based on honesty and integrity, and the dealership must present itself as a civic leader within the community. Shaver Preferred Motors represents all of these attributes. In 1913, E. L. Shaver started in the automobile business as a Hudson-Essex distributor in Lake County, Ind. The Shaver family has had second, third and now fourth generations in the new and used car business, stretching from Indiana to California. Shaver Preferred Motors, Inc., opened its doors as a small independent dealership in 1994. Since then, it has grown from selling 15 units per month to more than 700 units per year. It specializes in prime and nonprime clientele and has a superior reputation in Northwest Indiana. In 1999, Shaver Preferred Motors opened a seven-bay repair center to recondition their units before they are offered for sale. It also acts as a regional repair center for service contract customers, walk-ins and dealer referrals, and is a state authorized emission center. Seven ASE certified technicians are on staff to serve customers’ needs. Michael Shaver Sr. has served on the Board of Directors of the Indiana Independent Automobile Dealers Association for eight years, four as its Treasurer. Mr. Shaver has been a director at his alma mater, Regis University in Denver, Colo., a member of the local and state chambers of commerce, a member of an elite dealer panel for subprime dealers conferences, and a member of Leedom & Associates’ First Dealer Twenty Group for Secondary Independent Dealers. Shaver Preferred Motors will represent Indiana at the National Independent Automobile Dealers Association Convention in Las Vegas in June, competing with Quality Dealers from other states in the National Quality Dealer Award Program. The primary purpose of the Indiana Independent Automobile Dealers Association is to address legal and legislative issues that confront the used car industry and to promote the businesses of its members while serving the public interest. The Indiana Independent Automobile Dealers Association has supported independent used car dealers in Indiana for more than 24 years. The association is proud to have Shaver Preferred Motors as this year’s Quality Dealer of the Year.

CONGRATULATIONS TO SHAVER PREFERRED MOTORS! 7

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LocalGov.

The CARLAWYER

©

HERE’S OUR MONTHLY collection of

selected legislative and enforcement highlights, and a recap of some of the many auto sales and financing lawsuits we follow each month. Remember – what we report here is not every recent development. We just review the ones we think should be important to car dealers. Note that this column does not offer legal advice. You should consult your dealership lawyer with any legal questions. We include items from other states. Why? We want you to be able to see new legal developments and trends. Also, another state’s laws might be a lot like your own state’s laws – if AGs or plaintiffs’ lawyers are pursuing particular types of claims, those laws and claims might soon appear in your state. As always, though, there is no substitute for checking with your own lawyer before you rely on anything we report or if you have any questions.

Federal Law

The Federal Trade Commission recently held its third roundtable on November 17 in Washington, D.C., to gather information on consumers’ experiences in leasing motor vehicles at dealerships. The roundtable also reviewed what has been learned about vehicle sales, financing, and leasing at all the prior roundtables, consumer and business initiatives that would be useful, and any practices that may harm consumers significantly or that are widespread. Webcasts of all of the roundtables are available at www.ftc.gov/bcp/workshops/ motorvehicles. The FTC is accepting comments on roundtable topics or on motor vehicle sales, financing, and leasing issues in general until at least January 31. On October 6, the Senate Banking Committee voted to approve the nomination of former Ohio Attorney General Richard Cordray as the first director of the Consumer Financial Protection Bureau. The Senate Banking Committee approved Cordray’s nomination in a 12-10 straight party-line vote. Cordray’s nomination now goes to the full Senate. In case some bright soul at your dealership comes up with the idea to blast-text potential customers, you might want to read this before hitting the “send” button. On September 29, the Federal Trade Commission announced it obtained a settlement against a marketer who allegedly sent millions of unsolicited commercial text messages to consumers offering mortgage modification services, in violation of the FTC Act and the CANSPAM Act. The FTC alleged the marketer

misrepresented that he was affiliated with a government agency. In addition, the FTC alleged many consumers had to pay fees to their mobile phone carriers to receive the unsolicited text messages. The marketer also advertised his text message blasting services by sending consumers illegal spam. Under the settlement, the marketer is prohibited from sending unsolicited commercial text messages in the future and from making false or misleading claims. The settlement will cost the marketer approximately $60,000.

State Enforcement Actions

Is your Buy here-Pay Here dealership installing GPS devices on cars to permit you to find them more easily in the event of default and not bothering to disclose to the customers that you’re doing so? The Florida Attorney General has alleged that such a practice, and several others, are unfair and deceptive under Florida law.

Litigation

Class certification denied in case alleging lender’s discretionary loan pricing policies had discriminatory impact on minority borrowers: Borrowers brought a class action suit against a bank, alleging that its discretionary loan pricing policies had a discriminatory impact on minority applicants for mortgage loans in violation of the Fair Housing Act and the Equal Credit Opportunity Act. The plaintiffs moved for class certification. The U.S. District Court for the Northern District of California concluded the plaintiffs did not satisfy the element of commonality and thus denied the motion. The plaintiffs alleged the loan officers and mortgage brokers were given the discretion to add, with respect to any given mortgage loan, subjective markups and points and fees. However, the court found that the plaintiffs failed to offer any evidence to show a “common mode of exercising [such] discretion” and noted such discretion could have been exercised differently in each of the bank’s loan transactions. Dealers should be interested in this decision because the discriminatory pricing description has parallels to the car business. See In re Wells Fargo Residential Mortgage Lending Discrimination Litigation, 2011 U.S. Dist. LEXIS 99830 (N.D. Cal. September 6, 2011). Vendor’s single interest insurance premium deemed a finance charge where disclosures were inadequate: A used car buyer whose car broke down after she left the dealership sued the dealership for violating the Truth in Lending Act by failing to disclose the vendor’s

single interest insurance premium she was required to pay as a finance charge. The U.S. District Court for the District of Connecticut found that the dealership under-disclosed the finance charge in its TILA disclosures. Although the dealership required the buyer to purchase vendor’s single interest insurance, it did not disclose to her that she could choose the party from whom she wished to purchase the insurance. As a result, the court concluded that the premium was a finance charge and awarded the buyer statutory damages of $1,000. See Velasquez v. Natalino Motors, LLC, 2011 U.S. Dist. LEXIS 112407 (D. Conn. September 30, 2011). Manufacturer’s closing of all dealerships in buyer’s area not deemed breach of warranty: After an individual bought a car from a Suzuki dealership that came with two different manufacturer’s warranties, all three local Suzuki dealerships in his area closed. The individual sued his car’s manufacturer for breach of warranty, arguing that the closure of the local dealerships was a constructive breach of warranty because it would cause him to drive an extended distance to other areas in the state in order to receive warranty repairs. The trial court denied the manufacturer’s motion to dismiss, but the Alabama Supreme Court reversed, finding that Alabama has never recognized constructive breach of warranty as a cognizable legal theory. The state high court determined that a valid breach of warranty claim is based on a manufacturer’s failure or refusal to perform its obligations to repair the goods or render services under the warranty and noted that the individual never claimed that he needed or sought warranty services or that such services were denied. See American Suzuki Motor Corporation v. Burns, 2011 Ala. LEXIS 159 (Ala. September 23, 2011).

BY THOMAS B. HUDSON AND NICOLE FRUSH MUNRO TOM (THUDSON@HUDCO.COM) AND NIKKI (NMUNRO@HUDCO. COM) ARE PARTNERS IN THE LAW FIRM OF HUDSON COOK, LLC TOM IS THE AUTHOR OF SEVERAL BOOKS, AVAILABLE AT WWW. COUNSELORLIBRARY.COM TOM IS ALSO THE PUBLISHER OF SPOT DELIVERY®, A MONTHLY LEGAL NEWSLETTER FOR AUTO DEALERS, AND THE EDITOR IN CHIEF OF CARLAW®, A MONTHLY REPORT OF LEGAL DEVELOPMENTS IN ALL STATES FOR THE AUTO FINANCE AND LEASING INDUSTRY NIKKI IS A CONTRIBUTING AUTHOR TO THE F&I LEGAL DESK BOOK AND FREQUENTLY WRITES FOR SPOT DELIVERY SPOT DELIVERY, CARLAW AND THE BOOKS ARE PRODUCED BY COUNSELORLIBRARY.COM LLC FOR INFORMATION, CALL 410-865-5411 OR VISIT WWW. COUNSELORLIBRARY.COM COPYRIGHT COUNSELORLIBRARY. COM 2011, ALL RIGHTS RESERVED SINGLE PUBLICATION RIGHTS ONLY, TO THE ASSOCIATION. (11/11) HC# 4817-5473-5629.

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RegistrationNews

Drive Savings with Titling and Registration NOW THAT THE HOLIDAYS HAVE PASSED,

it’s time to get back to business. It’s important to start the new year strong and analyze strategies that will increase productivity. One way to increase the effectiveness of your employees is to decrease the amount of paperwork and errands your dealership must complete to remain in compliance with the BMV. That’s where Envirotest Titling and Registration comes in. Envirotest Titling and Registration has operated the Clean Air Car Check emission testing facilities in Lake and Porter counties since 1997. In 2008, the company became a certified partner of the Indiana Bureau of Motor Vehicles. This enables it to operate a partial service license branch in its office and expedite the processing of titles and registrations. In addition to performing BMV transactions, Envirotest also offers a courier service for dealerships in Northwest Indiana. It will send a clerk to your office for pick-up and drop-off. If your business is located in another area of the state, overnight shipping of documents can be arranged. By eliminating the need for a member of your staff to make regular visits to a local branch, this service will save your business time and money, and will allow your

employees to focus on improving operations. Envirotest services many large dealerships in Northwest Indiana, including Mike Anderson Chevrolet in Merrillville and Barile Ford in Valparaiso. “It was not uncommon for me to spend 5-8 hours every two weeks at the BMV,” Barile fleet manager Brian Tarpo said. “Now all I need to do is call [Envirotest] and the clerk picks up my paperwork and returns it when it is finished. It has given me more time to focus on other things.” In addition to processing title work for dealerships, Envirotest completes registration renewals for companies with fleets of vehicles. With the annual deadline looming, it is important to keep your fleet in compliance without worrying about incurring penalties. Registration renewals can be processed within 24 hours and delivered directly to your business or company driver. As an incentive to all IIADA members, Envirotest Titling and Registration is offering a two-week free trial of its title and registration services. To set up your trial, contact program manager Kim Dulin at (888) 240-1684. And visit its website at www.etrindiana.com sites like YouTube and Vimeo just waiting to be tapped.

Take a look at some of these quick and simple ways your dealership can get started with video marketing: Testimonials: These are a great way to promote your dealership – real people from the community expressing a positive opinion about their experiences. Think of it as online word of mouth, which is always the best advertising. A simple 20-40 second video of various interviews placed on your website, blog, social media and video distribution sites will give potential customers another reason to trust your services. People want real-life examples. Testimonials give them that. When the new owner drives away singing your praises, ask if he’d like a picture on his phone to share with his Facebook friends. How-to videos: Interested consumers are searching online for videos to help them solve their problems. Think vehicle safety or enhanced performance tips, maybe a short clip on installing child safety and booster seats or the importance of proper tire pressure. Short videos like these are great ways to give your dealership the reputation of wanting to help people without asking for anything in return. Like the old adage says: Give in order to receive.

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BHPHNews

THE DEALERS WHO ARE TRYING TO THE BEST OF THEIR ABILITY TO DO THE RIGHT THINGS WILL SURVIVE, WHILE THOSE WHO OPERATE IN THE GRAY AREAS WILL FALL BY THE WAYSIDE.

What’s in Store for 2012 WHAT’S IN STORE FOR YOUR STORE IN 2012? If it’s anything like 2011, it should be

another good year to be in the Buy Here-Pay Here industry. The coming year will not be without its challenges, though. In fact, there are certain areas of the industry that could be more challenging than ever. To get an idea of what to look forward to in 2012, we first need to review how 2011 treated the BHPH world. It was probably the weirdest year I can remember in the 15-plus years I’ve been in the business. Tax season was sporadic at best, which pretty much set the tone for all facets of the business for the rest of the year. From a profitability standpoint, the dealers I have the distinct privilege of working with enjoyed an 11 percent overall increase in 2011 versus 2010. This increase was due mostly to the rightsizing of operations. Dealers focused on their entire operations, from top to bottom, on cutting the fat and running their operations based on the cash they were generating instead of relying on lines of credit. I expect this focus to continue in 2012. Though funding sources have become more readily available, most dealers will be focusing again on generating the capital necessary to run their businesses from their businesses. As always, there will be dealers looking to grow aggressively through borrowing, and rates will continue to make this a very viable option. I don’t see rates rising drastically in the coming year, so it will still be a good time to borrow. Having said that, I still see it being more difficult to secure new lines of credit in 2012. It’s going to take some patience and the willingness to educate some institutions about our industry. Our dealer clients saw sales volume increase by almost 6 percent in 2011 despite

a sporadic tax season. Not a record-setting year by any means, but this was driven more by cash management. Dealers seemed to want to sell what their cash flow dictated rather than sell as much as possible. We all know we can sell as many vehicles as we want or have the financial resources to in this industry. There doesn’t seem to be a lack of customers needing or wanting what we have to offer. The same will hold true for 2012. We should have the customers in the market to sell as much as we want. The biggest question will be inventory availability. Now, I’m normally a glass-half-full kind of guy, but when it comes to this, I think the glass may be half empty. Even though the prices somewhat leveled off the last half of last year, the numbers seem to be dwindling even more than usual. Portfolio performance in 2011 included some stabilization from a dollar-loss standpoint, but from a number-loss standpoint, there was a slight increase or worsening in 2010. This was driven by a couple of factors, beginning with the need for inventory. Some dealers accelerated their repo times when a desirable unit was involved. This also helped stabilize the dollar losses, as vehicles were repossessed earlier and in better condition and thus earned higher recovery amounts. The other factor was a renewed focus on underwriting and the overall collection process. Dealers remained more disciplined in both areas, seeking quality over quantity. There will be more of the same this year. Dealers have seen the error of their past ways and are enjoying the spoils of their more disciplined labor. I expect the average charge-off to remain essentially the same and the number as a percent of sold to remain higher than in past years,

and collections dollars to improve as well as overall collection effectiveness. The biggest thing to affect our industry in 2012 will come from the compliance front. The Consumer Finance Protection Act was signed in July 2010, establishing the Consumer Finance Protection Bureau. The rules of the Act were to have been drafted by August 2011, so we were hoping to know what kind of field we will be playing on. But, as with most things in our government, the rules are behind schedule. In the interim, I have already heard from a few dealers who have received a letter from the FTC – the Bureau’s governing body – informing them of pending audits. That has dealers debating whether to remain in the industry, and is causing some who are looking at getting into the industry to delay their entry until the rules are set. This act and bureau are going to separate the men from the boys, so to speak. The dealers who are trying to the best of their ability to do the right things will survive, while those who operate in the gray areas will fall by the wayside. And the waysiders are going to cause the cost of doing business to increase for everyone else. So here is the best advice I can give to dealers, as well as those wanting to get into the business in the coming year: Don’t wait. Don’t wait to get compliant. Don’t wait to spend a little money to do so. Don’t wait to review all processes and procedures. Don’t wait to review all expenses. Don’t wait to review all of your employees. Don’t wait to train. And definitely don’t wait to sell cars, collect money, and make money.

BY BRENT CARMICHAEL EXECUTIVE CONFERENCE MODERATOR NCM ASSOCIATES INC. BCARMICHAEL@NCM20.COM

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IndustryNews

CAFE Standards Update

You Demanded and CARFAX Listened:

IN NOVEMBER, THE NATIONAL HIGHWAY TRAFFIC SAFETY ADMINISTRATION (NHTSA)

and the Environmental Protection Agency (EPA) issued a joint proposal regarding new fuel economy and greenhouse gas emission standards for passenger cars and light trucks for model years 2017 through 2025. The proposed Corporate Average Fuel Economy (CAFE) standards range from 40.1 mpg in model year 2021 to 49.6 mph in model year 2025. Detailing the costs and benefits of the program, the proposal states, “The agencies estimate that fuel savings will far outweigh higher vehicle costs.” The report estimates the technologies required to achieve the fuel economy standards will add, on average, $2,000 to the cost of MY 2025 vehicles, while fuel savings are forecast to range from $5,200 to $6,600 over the life of the vehicles. Based on those costs and savings, the proposal calculates it will take four years for a consumer purchasing a MY 2025 vehicle with cash to realize savings. Consumers financing a MY 2025 vehicle on a five-year loan are projected to realize a cash flow savings of about $12 per month during the loan period. The proposed standards for MY 20172025 include new options for manufacturers to achieve compliance. Beginning with MY 2017, manufacturers will be able to generate fuel consumption improvement values for improvements in air conditioning system efficiency to comply with the CAFE standards. They will also be able to apply savings from “off-cycle” technologies such as solar panels on hybrids, adaptive cruise control or active aerodynamics. In addition, the proposal includes manufacturer incentives encouraging hybridization of full-size pickup trucks. The agencies’ joint proposal was published in mid-November, and public comments will be accepted through mid-January. For more information, the rule and related documents can be accessed on the NHTSA’s CAFE website at www.nhtsa.gov/fuel-economy.

Ad Campaign Changed

THE LATEST CHANGES TO THE CAMPAIGN WERE MADE IN AUGUST AND HAVE BEEN RUNNING THROUGHOUT THE FALL AND WINTER. AFTER PERSISTENT REQUESTS DURING the past year from NIADA, our state executive

offices and dealer members across the country, CARFAX recently revised its television commercial campaigns. The latest changes to the campaign were made in August and have been running throughout the fall and winter. Of the notable changes, CARFAX removed the word “Free” from the commercial voiceover, and also removed the phrase “from a reputable dealer.” The revised commercials can be viewed at http://www.youtube.com/user/Carfax CARFAX is also in the process of testing an entirely new commercial campaign, with a tentative release date of April 2012. NIADA and its dealer members will be active participants in the critical commercial testing phase. CARFAX also created a new NIADA liaison and client manager position to better assist NIADA, the state association executive offices and individual dealer members. Kathy Collins, the association’s point person with CARFAX, is already hard at work reaching out to several of our state affiliates on some new and exciting partnership initiatives for 2012. Kathy has set up a new network of CARFAX regional contacts to handle dealer complaints about particular CARFAX VHR discrepancies. If you have questions or issues with any CARFAX reports, please call your state executive office, which will have the new regional and state contact information readily available.

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World Automobile Auctioneers Championship

M PIO NS H

THE WORLD AUTOMOBILE AUCTIONEERS CHAMPIONSHIP will be webcast live this year

for the first time, courtesy of NIADA.TV. The live webcast of the 2012 WAAC can be viewed in its entirety on the home pages of www.niada.tv, www. niada.com and www.waacnet.net . Coverage begins at 11 a.m. Eastern time on Mar. 30 and is free for all online viewers. Cheer on your hometown favorite auctioneers and ringmen, and catch all the fun and excitement of the 2012 World Automobile Auctioneers Championship at your leisure, exclusively on all three websites. For more detailed information please visit www.niada.com and click on the “Events” tab, or call (303) 807-1108.

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Follow up! Two Very Important Words:

EconomicOutlook

The U.S. economy appears to be at an economic crossroad: to the right lies recovery and prosperity and to the left awaits a second recession, a plummeting stock market and rising unemployment. With current economic data that points in the direction of each of these paths, it becomes difficult to predict which outcome is more likely for the United States in the coming months. In its most recent release, the Bureau of Economic Analysis announced an advance estimate of 2.5 percent for the third quarter U.S. gross domestic product. This follows an even weaker second quarter GDP, which settled at a lowly 1.3 percent. Inflation increased in September to 3.9 percent. This is combined with gold and silver prices that are again on the rise after sliding directly following the United States’ credit downgrade. Together these metrics suggest higher inflation in the U.S.’s future.

Key September/October Data Positive Signs

U.S. productivity remains among the highest in the world, while U.S. non-financial corporations’ cash reserves remain at nearly $2 trillion. The October Conference Board Global Leading Economic Indicators Report shows the U.S. and China increased by 0.2 percent and 0.5 percent, while Europe decreased by 0.6 percent. Though automobile, SUV and light truck sales were down 1.7 percent in September relative to August 2011, they were up 9.9 percent relative to September 2010. Monthly total light vehicle sales have exceeded one million units for the past seven months. Personal disposable income is up 3.2 percent relative to September 2010 and now sits at $968.3 billion. Construction spending increased further in September and is now 48 percent higher than January 2011.

Negative Signs

The unemployment rate remained unchanged at 9.1 percent in September as nonfarm payroll employment increased by 103,000 and private sector employment increased by 91,000. Oil prices climbed in October, surpassing $90 a barrel. Housing starts slid for the second straight month. Consumer confidence dropped considerably in October, reaching its lowest level since March 2009.

Current Issues

In all my years in the retail auto industry and of all the things I’ve experienced in selling vehicles, I’ve found the most impactful way to generate more sales is to follow up with guests who do not purchase the first time they visit your dealership. That’s right. Study after study (I do a lot of them) clearly has shown that a typical retail dealership, whether franchised or independent, only effectively manages to achieve a 25 percent “be-back” rate of guests who leave without making a purchase on their first visit. That says 75 percent of the guests are not returning to that dealership to make a purchase. Yet studies clearly show that guests who do return to gather more information or to reevaluate their first visit are closed 50 percent of the time versus a 19 percent rate on initial visits. So the real question is, why are these high-percentage closing rate types of potential customers not returning? The answer is … they were never asked to return. No one ever followed up with them. Over the years, I have been able to track many of these guests with a follow-up call regarding their initial visit. In more than 80 percent of the cases, when I ask, “Has anyone contacted you since your visit to the dealership?” the answer is an emphatic “NO.” I wanted to put some teeth into my research in an attempt to determine the financial impact should a dealership develop and implement a

consistent (consistency is essential) follow-up procedure for guests who do not make an initial purchase. I selected a dealership averaging 49 retail used vehicle sales per month and turning its used vehicle inventory a minimum of four times per year. With a clear focus on getting more guests back into the dealership for a “second shot,” the management team agreed to practice a very rigid and dedicated system of having managers follow up with the guests rather than the sales team – just for a controlled benchmark; the sales staff got the deal if the returning customer made a purchase. Here are the results: Management involvement improved the return rate of guests from 25 percent to 34 percent within seven days, leading to a 31.5 percent increase in the effective closing rate. That led to a 30 percent increase in the used vehicle inventory turn rate. By getting management involved in the follow-up process, monthly used vehicle sales went from 49 retail units to 64 by month’s end, generating an additional $31,105 in gross and reducing operating expenses by approximately $2,795. All because management got more involved in the follow-up process of guests who visited the dealership but did not make a purchase on that initial visit. What would happen if your management team and sales team followed up, followed up, followed up and followed up? BY DR. TIMOTHY NASH AND JOE LESCOTA

Students interested in studying the automotive industry can contact Dr. Timothy Nash at tgnash@northwood.edu for information about Northwood’s programs Dr. Timothy Nash, an associate professor in Economics, Business and Public Policy, heads specialty programs, including Automotive Aftermarket and Automotive Marketing, for Northwood University. Joe Lescota is chairman of the Automotive Marketing Department at Northwood University and the instructor for the NIADA Certified Master Dealer program.

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New vAuto Tool Blends AutoTrader, Manheim Tools VAUTO HAS INCORPORATED THE DATA TOOLS of AutoTrader.com and

Manheim in Provision, its new used car inventory management tool, designed to give dealers a comprehensive way to find used cars to stock at the right price. The company’s first major product introduction since it was bought by AutoTrader last year, Provision blends the resources of AutoTrader and Manheim to help dealers tackle the three “W’s” of inventory management: What cars to stock, what to pay and where the car can be found. “This is a business intelligence breakthrough for the automotive industry, made possible through our alliance with AutoTrader.com and Manheim,” vAuto founder Dale Pollak said. “Provision brings game-changing insights and tools to help dealers efficiently and effectively know what vehicles to stock, what to pay and where to find them—all with a real-time, precision approach.” Provision allows dealerships to set targets for used inventory value, age, turn rates and gross profits. The tool then conducts a seven-point diagnostic test for all available used units, basing the test on supply and demand in the market. It also offers recommendations on pricing based on market response, reconditioning costs and the dealer’s profit goal and can check auction run lists. Pollak said automatic transport scheduling with vendors will be offered in the future. “Provision goes a long way to eliminating the ongoing pain of used vehicle sourcing and management challenges at dealerships,” Pollak said. “We’ve built a bridge between the top retail and wholesale marketplaces and made it easy to cross.” “It’s a perfect blend of our people and respective market intelligence, technologies and resources to create a win-win for everyone,” Manheim president Sandy Schwartz said. “Provision will be a transformative force for the industry.” For more information, visit www.vauto.com/provision.

Security Is Key as SafePak Adds New Product for Dealers SAFEPAK CORPORATION, MAKER OF ELECTRONICALLY monitored deposit stations and ATM

security products for banks, is entering the car business with a new line of electronic key control products aimed at dealerships. SafePak’s Electronic Key Control Systems, priced from $1,995 up, can handle from five to 500 keys. The KeyStations range from from simple wall-mount and countertop varieties to vault-like free-standing kiosks for maximum key security. SafePak featured its systems at the the recent International Autobody Congress and Exposition and the SEMA show, and the response led the company to add more key control products, SafePak president Buzz Siler said. “We looked at all the competition’s products in this key management field and saw a huge gap,” he said. “We decided that, with the right investment in the latest technology, we could offer every feature that they did, but at much lower prices.” Siler previously created the first remote access key dispenser for Cendant/Avis/Budget, a rental kiosk and lock dispenser for the self-storage industry and specialized key dispensers for the aviation and hotel industry. For more information, visit http://safepakcorp.com/ key-control.

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RECORD RETENTION FOR AUTO DEALERS

YourRecords

The following information is a guideline for auto dealers to use. Your attorney and accountant should also be consulted regarding your individual records. The IRS website at www.irs.gov is also a useful resource.

ACCOUNTING RECORDS

Audit Reports Permanently Accounts Receivable and Payable Ledgers 8 years Bank Statements & Reconciliations 5 years Cancelled Checks 5 years Capital Stock Book Permanently Cash Disbursement and Cash Receipts Journals 8 years Expense Reports 6 years Financial Statements Permanently General Ledger and Journal Permanently Inventory Records 8 years Notes Receivable Ledger 8 years Parts and Services Sales Journal 8 years Payroll Earnings Records 5 years Payroll Journal 5 years Payroll Time Cards 3 years Petty Cash Vouchers 3 years Petty Cash Summary 3 years Prepaid and Accrued Expenses Journal 3 years Subsidiary Ledger 8 years Trial Balances 8 years Vouchers – Vendors or Employees 8 years

CORPORATE RECORDS

Articles, By-Laws, Minutes and other Corporate Records

Permanently

CORRESPONDENCE

General 10 years Legal and Tax Permanently

OPERATIONS

Accident Reports 6 years Bills of Lading 10 years Credit Applications – denied 25 months Credit Card Slip 1 year Customer Files 10 years Damage Disclosure Statements 5 years Employment Applications-Terminated 3 years Employment Applications-Hired 3 years past termination Insurance policies – expired Permanently Internal Repair Orders 3 years Junking Certificate 3 years Odometer Statements 5 years OSHA Records 6 years Purchase Orders 6 years Repair Estimates 9 months Repair Order Check Sheet 2 years Repair Order 6 years Retail Installment Contract, assigned 10 years Retail Installment Contract, not assigned 10 years past expiration Sales Invoices 6 years Service Contracts/Extended Warranties 10 years past expiration Shipping and Receiving Reports 6 years Vehicle Invoices 6 years Vehicle Purchase Orders 10 years Vendor Invoices 6 years

TAX DOCUMENTS

Form 8300 – $10,000 Cash Reporting Form 5 years Income Tax Returns (federal and state) Permanently IRS Audit Results Permanently Unemployment Tax Returns (federal and state) 5 years Withholding Tax Returns (federal and state) 5 years Withholding Tax Statements 5 years

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IIADA ASSOCIATE MEMBERS IIADA Associate Membership is available to automotive related businesses. Please call 800-310-3112 for more information on Associate Memberships or see our Associate Membership Application in this issue.

Affordable Computer Systems Ivan Dale www.acsds.com acsi@digicove.com 800-488-9992 Auction Access Robinson Adams Insurance Dealer Bonds Tom Adams Debbie Thompson 800-239-1327 Automotive Credit Corp. Tony Stallworth 26261 Evergreen Road, Ste. 300 Southfield, MI 48076 tony@automotivecredit.com 888-268-1400 Auto Services Co., Inc. Susan Williams Clayton Morgan 800-442-7116 Bowden & Wood Certified Public Accountants Mark A. Schaeffer, CPA mschaeffer@bowdenandwood.com 502-583-0262 Briggs Insurance Agency Tim Briggs 4000 W. Lincoln Hwy. Merrillville, IN 46410 tbriggs@briggsagency.com 219-769-4840 Cars.com 175 W. Jackson Blvd., 8th Floor Chicago, IL 60604 dealers.cars.com 800-298-1460 CAR Financial Services, Inc. Thomas Lloyd www.carfinancial.com thomas.lloyd@carfinancial.com 859-630-2606 Chase Custom Finance Don Williams and Mike Smith 317-523-4273 Clear Choice Merchant Services Reno, NV Laurie Gruen, Corporate Analyst, ext. 6881 laurene.g@myclearchoice.com Lorraine Onesian, VP Business Development, ext. 6880 lorraine.o@myclearchoice.com www.myclearchoice.com 866-779-4787 Consolidated Automotive Services of Indiana Chris Walsh 59 East Main Street, Suite N Nashville, IN 47448 (812) 988-8300 cwalsh@concolidatedautoservices.com Diamond Warranty Corp. Jim Limongelli 9 N Main Street Pittston, PA 18640 800.384.5023 Diversified Marketing Strategies, Inc. Andrea Pearman 1330 Arrowhead Ct. Crown Point, IN 46307 (219) 226-0300 chrischelle@3dms.com Donn Wray Attorney at Law Stewart & Irwin, P.C. 251 E. Ohio St., Suite 100 Indianapolis, IN 46204 dwray@silegal.com 317-639-5454 Drive1USA Bruce Norton 1512 W. 96th Ave., Suite C Crown Point, IN 46307 bnorton@drive1usa.com 219-661-1000

Envirotest Systems Jennifer Kharchaf 1171 Breuckman Drive, Suite B Crown Point, IN 46307 indiana@esph.com 888.240.1684

SEAL FINANCE Judy Terrell 3830 E. Southport Road # 200 Indianapolis, IN 46237 judyt.cnac@gmail.com 317-497-0473

Frazer Computing, Inc. Michael Frazer www.frazercomputing.com 888-963-5369

Security Auto Loans Joe Ruhland 4900 Hwy 169 N., Suite 205 New Hope, MN (763) 559-5892 Joe Ruhland

GoldStar GPS Mark Behne 2035 Lakeside Centre Knoxville, TN 1-866-655-8825 markb@procongps.com Guardian Warranty Co. Carmie Fruits, Indiana Representative cfruits@gu ardian-warranty.com 317-374-6271 Sales Support P. O. Box 68 Avoca, PA 18641-0068 800-482-7357, ext. 767 Heritage-Crystal Clean Jim Skelton 2250 Point Blvd. Ste. 250 Elgin, IL 60123 (847) 836-5670 jim.skelton@crystal-clean.com

Sentry Insurance Randy Dombrowski randy.dombrowski@sentry.com 715-346-7272 Mike Donovan mike.donovan@sentry.com 615-210-6344 Shirer Insurance Services Auto Owners-Dealer Bonds 400 N. Main St. Crown Point, IN 46307 Troy and Mari Shirer shirer@ameritech.net 219-663-7274 Smart Auction Jeff Kubicki www.smartauction.biz jeffrey.kubicki@smartauction.biz 812-455-7967

Heritage Financial Acceptance Corp. Curt Holmes 121 S. Main Street Elkhart, IN 46516 pperdue@hfgnet.com www.heritageacceptance.net

Triumph Consulting Jack Haworth 1606 N. Delaware St. Indianapolis, IN 46202 800-875-3137 www.triumphconsulting.net

Insurance Professionals Mike Lee 317-432-1092 teamallen21@comcast.net

Tri Vin Inc. Mike Audette 115 Pohesanut Drive Suite 201 Groton, CT 06340 maudette@trivininc.com 860.448.3177

Keystone Insurers Group For All Your Insurance Needs Melanie Carr mcarr@keystoneinsgrp.com 888-892-5860 Lincolnway Insurance Services Dealer Bonds & Garage Keepers Gregg St. Germain 336 E. Lincoln Hwy. Schererville, IN 46375 gregg@lincolnwayinsurance.com 219-865-2225 Nationwide Acceptance Sub-Prime Financing www.nac-loans.com Bonnie Herden 773-777-7600, ext. 1295 Penn Warranty Corp. Jude Tuma Michael Roe 1081 Hanover St. Wilkes Barre, PA 18706 www.pennwarranty.com michael.roe@pennwarrantycorp.com 800-356-9441 Preferred Warranties, Inc. Gregg Reidenbach 260-341-6675 Guy Loeffler 313-283-0114 info@warrantys.com 800-548-1121 Reliable Auto Finance Brian Chisholm 954 28th St. SW Grand Rapids, MI 49509 brian@reliableautofinanace.com www.reliableautofinance.com Russel Kobel Insurance 100 Tower Drive Suite 120 Burr Ridge, IL 60527 708.935.6509 rkobel@ais-ins.com

Vehicle Acceptance Corp. Ted Martin 317-844-2599 VideoTirekickers.com John Commorato 2413 N. Meridan Indianapolis, IN 46208 (317) 466-0321 john@cmcmediagroup.com Wingham & Associates Gary Wingham P.O. Box 1723 Richmond, IN 47375 (765) 977-3902 gwingham@gmail.com WORKS24 Mark Hersch 3508 French Park Drive, Suite 1 Edmond, OK 73034 mhersch@work24.com 440.832.0445 Zurich Insurance Co. 800-728-6049

NEW & RENEWING M EMBERS THE FOLLOWING MEMBERS HAVE JOINED* OR RENEWED THEIR MEMBERSHIP SINCE OUR LAST ISSUE OF CAR LINES. Classic Auto Sales* Richard Feldman Greensburg Consolidated Automotive Services of Indiana* Chris Walsh Nashville Diversified Marketing Strategies Inc.* Andrea Pearman Crown Point GoldStar GPS* Mark Behne Knoxville Heritage Crystal Clean* Jim Skelton Elgin Security Auto Loans* Joe Ruhland New Hope Sentry Insurance* Randy Dombrowski Stevens Point Wingham & Associates* Gary Wingham Richmond IndyKarz* Esperanza Duque Indianapolis Rosnett Enterprises* Brian Rosnett Terre Haute ADESA Auto Auction Dave Emerson Plainfield Druley Investments Thomas Druley Laotto RV Transport Pro Joseph Braun Wakarusa Zurich Insurance Bill Chitwood Omaha Arthur Inc. Auto Sales Ava & Lloyd Arthur Solsberry Circle City Enterprises Ron Povinelli Indianapolis Dyer Auto Auction Buzz Cotton Dyer GWC Warranty Carmie Fruits Indianapolis Heritage Acceptance Corp. Curt Holmes Elkhart Indiana Auto Auction Andrew Schaefer Ft. Wayne Joe’s Auto Sales George Krier Indianapolis Leeps Highway Auto Sales Gerald Leep Schererville Reliable Auto Finance Brian Chisholm Grand Rapids Valley Motors Enterprise Rick Jones Mooresville What A Deal Motors Scott Eakins Kokomo THANK YOU FOR YOUR MEMBERSHIP IN INDIANA’S TRADE ASSOCIATION FOR INDEPENDENT DEALERS

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ComplianceOverdrive

What is Your Agreement? WHEN IT COMES TO THE AGREED-ON SALES finance terms between a dealer

and a buyer, a lot of questions need to be addressed to avoid misunderstandings and, consequently, compliance and legal troubles for a dealership. What is the “agreement?” Is it in the credit application, buyer’s order, conditional delivery agreement, trade-in summary, manufacturer’s warranty, retail contract, other documents, or in some combination of them? If the terms are found in many documents, how do you know which ones? In short, if you can’t easily determine which documents comprise your complete sales financing agreement then you are going to have challenges enforcing it. If the terms of those documents don’t all agree with each other, you are also going to have challenges enforcing them. A strategy to avoid confusion is to say one document comprises the entire agreement between the parties. For example, a retail installment sales contract (RISC) may include a provision (usually near the signatures) that the entire sales financing agreement between the parties is in the RISC. This makes the RISC the one and only document containing the entire and final terms of the transaction. This is a “merger” or “integration” clause because it merges or integrates all terms into one agreement. The advantage is that if there is litigation, the one and only document needed to interpret the rights and responsibilities of the parties is the RISC. But a recent court decision highlights how the advantage of a merger clause can turn into a disadvantage. In Duval Ford v. Rogers (District Court of Appeals, Florida, 2011), the court held that a dealer could not enforce its arbitration provision in the buyer’s order. Why? Because the RISC included a merger clause, saying that it contained the entire agreement between the dealer and buyer. Since the arbitration provision wasn’t in the RISC (and wasn’t included by reference), it fell outside the terms of the agreement. This was a case in which the merger clause kept out terms the dealer wanted to be a part of the final agreement. That disadvantage of a merger clause can be overcome with an adjustment to the clause. A variation of the single document approach is including in the RISC specific references to other documents saying they are also a part of the merged terms. Together, the RISC and the referenced documents describe the entire agreement between the parties. For example, the RISC could say the parties signed a separate conditional delivery agreement, which is incorporated into and made a part of the RISC by reference. The RISC could also note that

warranty documents are provided separately, including the Federal Trade Commission’s used car window form. Incorporating other documents by reference allows the parties to agree that a specific set of documents comprise the entire agreement. If you use this approach, you need to make sure the RISC includes cross-references to all the separate documents you want included in your final agreement. It may sound like you should incorporate everything by reference into the RISC – that way you have it all covered. Not so. Another recent Florida decision points out the potential danger of including other documents. In Cuello v. Maroone Honda of Miami (Cir. Court, 11th Judicial Cir., Florida, 2011), the court found it was inconsistent to have RISC terms that purported to be final but then have a separate conditional delivery agreement saying the terms might not be final. The court held that the inconsistency created a Truth in Lending violation and corresponding state statute violations. One lesson from that case is that the documents you choose to represent the entire sales financing agreement need to be consistent with each other (though whether the RISC and conditional delivery agreement are truly inconsistent is controversial and a topic unto itself). The RISC should include a cross-reference and maybe even a brief explanation about the other specifically included documents so all parties understand that they work together and why. Perhaps another lesson from the Cuello case is that dealers should carefully choose the documents they want to be enforced as part of the final sales financing agreement between the parties. For example, preclosing documents may reflect incomplete terms or terms in flux due to information not yet available or in negotiation. They might not include additional warranty protection or service products a buyer decides to purchase at closing. Merging those documents and terms would potentially create confusion about the actual agreed-on final terms. The market’s response to recent Florida cases is still being determined. For now, it is clear that in Florida, or any other state, the best course of action is to review and determine which documents are intended to be a part of your final sales financing agreement with a buyer and then confirm that your RISC and other documents make it clear.

BY CHIP ZYVOLOSKI Chip Zyvoloski is a senior attorney for indirect lending at Wolters Kluwer Financial Services. For more information, visit www.wolterskluwerfs. com/indirect.

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