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INDIANA

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OFFICIAL VOICE OF THE INDEPENDENT CAR DEALER IN INDIANA

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• CASH IS KING IN BHPH • THE CARLAWYER • COMPLIANCE OVERDRIVE

DALLAS, TEXAS Permit No. 2079

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Executive Director’s Message This month gives us an opportunity to look back and remember those who have fought to preserve our freedom and to look forward as we work toward a promising future for our industry. Many of us continue to work through challenging economic times and we often find ourselves caught up in negativity, criticism and even fear of the disappearance of the American dream and the American lifestyle we have become accustomed to. Over the years, the meaning of Memorial Day has faded. Memorial Day began as a memorial for Civil War veterans. Originally, Memorial Day was known as Decoration Day because it was a time set aside to honor the nation’s Civil War dead by decorating their graves. It was first widely observed on May 30, 1868. By the late 1800s, many communities across the country had begun to celebrate Memorial Day, and after World War I observances also began to honor those who died in all of America’s wars. In 1971, Congress declared Memorial Day a national holiday to be celebrated the last Monday in May. It has become both a national Decoration Day of family graves and the holiday that opens the summer season. Take time this Memorial Day to honor those who made the ultimate sacrifice in defense of our nation.

BY IIADA STAFF

Indiana Legislative Update

Session Review This year’s short session concluded a few days before the official Sine Die (adjournment) deadline. The major issue this session was HEA 1001 (Right to work), which passed both chambers and was signed into law before the first half of the session ended. In addition, the Legislature was able to address a few of Gov. Daniel’s final legislative initiatives. Those included strengthening local government rules on nepotism and conflict of interest, a statewide smoking ban and increasing the liability fund for victims of last August’s State Fair tragedy. House Bill 1222 (Dealer services division of the Secretary of State) The Dealer Services division reintroduced a bill from last year that would have recodified existing auto dealer regulation law into one chapter of Indiana Code. Since the Secretary of State’s office took over the jurisdiction of auto dealers from the BMV, their regulations are found in many different chapters and sections of Indiana Code. Our association was able to provide the office with some guidance over statues we felt were outdated with current business practices. Those changes were accepted and addressed. The bill made its way easily through the House and Senate, but was held up during the conference committee process by issues not related to auto dealers. HB 1222 ultimately died during the last few minutes of the session. New Secretary of State State Sen. Connie Lawson (R-Danville) was named by Gov. Daniels to fill the Secretary of State vacancy. She has served in the Senate since 1996 and was the Majority Floor Leader and chair of the Local Government Committee. Before joining the Senate, Connie was the Hendricks County Clerk. She becomes the second woman to hold the Secretary of State position in Indiana.

BY MIKE SOLARI

APPLICATION DEADLINE: JULY 1, 2012

NOMINATE A DEALER FOR IIADA’S 2012 QUALITY DEALER OF THE YEAR APPLICATIONS ARE NOW BEING ACCEPTED FOR INDIANA’S 2012 QUALITY DEALER OF THE YEAR. The winner will represent Indiana at the 2013 NIADA Convention & Expo in Las Vegas and compete for the coveted NIADA Quality Dealer of the Year Award. The public recognition and prestige associated with the award can produce many benefits for your dealership. Our 2012 Indiana Quality Dealer of the Year will be named and recognized at our 25th Anniversary Golf Tournament and Awards Day on Sept. 9. Eligibility: Dealers must be nominated by an IIADA member or sponsor.

TO REQUEST AN APPLICATION, EMAIL IIADA@COMCAST.NET OR CALL 800.310.3112 3

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MAGAZINECONTENTS 03 06 08 10 16 22

Indiana Legislative Update Deceptive Car Ads Cash is King in BHPH The CarLawyer Provisioning: Used Car Science Compliance Overdrive

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 N  ATIONAL TIRE SAFETY WEEK: June 3-9 National Tire Safety Week is a nationwide event sponsored by the Rubber Manufacturers Association to raise consumer awareness about tire safety, help consumers keep their tires safe and demonstrate the industry’s commitment to motorist safety. Visit www.betiresmart.org and fill out the form to receive your free National Tire Safety Week kit that includes brochures and other materials.

ADVERTISERSINDEX ADVERTISERSINDEX

ADESA............................................... Inside Front Cover Ally............................................................................11 AutoTrader.com........................................... Back Cover Chase .......................................................................12 Dyer Auto Auction......................................................18 Indiana Auto Auction................................................... 8 Kesler-Schaefer Auto Auction...................................... 9 Manheim.com................................... Inside Back Cover Manheim Indianapolis...............................................14 NIADA Certified.......................................................... 17 Nowcom...................................................................... 5 Protective.................................................................... 7 United Acceptance ...................................................13 Voisys .......................................................................22

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 © 2012 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

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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 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

Harold Drees H.T.D., Inc. 200 E Main Street Thorntown, IN 46071 Phone: (317) 402-2312 Fax: (765) 436-7222 htdinc@msn.com

Kim Graham Kim Graham, Inc. 1648 A US 31 S Greenwood, IN 46143 Phone: (317) 888-0100 Fax: (317) 888-8900 vehicles@kimgraham.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

Ed White White’s Auto Sales 1105 McKinley Avenue Rensselaer, IN 47978 Phone: (219) 866-7553 Fax: (219) 866-7256 edwhite123@att.net

John Stumpf Greater Kalamazoo Auto Auction P O Box 697 Schoolcraft, MI  49087 Phone:  (574)876.6145

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

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 Travis Huber The Auto Store 5474 US Hwy 6, Suite A Portage, IN 46368 Phone: 219-712.2944 travis@travishuber.com Mark Hockett Indianapolis Car Exchange 5161 S. Indianapolis Rd. Whitestown, IN  46075 317.769.7777 markh@icefriday.com

Question of the Month

Does your advertising comply with the Truth in Lending Act and Regulation Z? Regulation regarding advertising in Indiana falls under the Indiana Consumer Sales Article of the Indiana Code and the federal Truth in Lending Act and Regulation Z. If your advertisement states credit terms, it can state only those terms you will actually arrange or offer. If your advertisement states a rate of finance charge, it has to state the rate as an annual percentage rate, using that term or APR. You are not permitted to use other methods of calculating the APR appearing in your advertisements. TILA and Regulation Z use the concept of “triggering terms.” If certain specified terms appear in your advertisements, they “trigger” further disclosure requirements. The triggering terms are: •. The amount or percentage of any down payment. • The number of payments or period of repayments. • The amount of any payment. • The amount of any finance charge. If a “triggering term” is used, your ad must contain the amount or percentage of the down payment, the terms of repayment and the annual percentage rate, using that term or APR.

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FTC Stops Deceptive Car Dealership Ads

Five car dealers around the country have agreed to Federal Trade Commission settlement orders that require them to stop running ads in which they promise to pay off a consumer’s trade-in no matter what the consumer owes on the vehicle. The FTC charged that the ads, which ran on the dealers’ websites and on sites such as YouTube.com, deceived consumers into thinking they would no longer be responsible for paying off the loan balance on their tradein, even if it exceeded the trade-in’s value (the trade-in had “negative equity”). Instead, the dealers rolled the negative equity into the consumer’s new vehicle loan or, in the case of one dealer, required consumers to pay it out of pocket. The proposed settlements, reached as part of the FTC’s ongoing efforts to protect consumers in financial distress, bar the dealers from making similar deceptive representations in the future. The cases are the first of their kind brought by the FTC. The commission also issued a new consumer education publication titled “Negative Equity Ads and Auto-Trade-ins” to help consumers understand these types of ads. “Buying a new car or truck is a major financial commitment, and the last thing consumers need is to be tricked into thinking that a dealer will ‘pay off’ what they owe on their current vehicle, when they really won’t,” said David Vladeck, director of the FTC’s Bureau of Consumer Protection. “The Federal Trade Commission is constantly on the lookout for potentially deceptive ads, and brings actions to stop them when appropriate.” The dealers named in the FTC’s complaints are: • B  illion Auto, Inc., in Sioux Falls, South Dakota • Frank Myers Auto Maxx, LLC, in WinstonSalem, North Carolina

• K  ey Hyundai of Manchester, LLC and Hyundai of Milford LLC, in Vernon and Milford, Connecticut, respectively, which advertise jointly • Ramey Motors, Inc., in Princeton, West Virginia. The FTC’s complaints allege that despite the dealers’ claims, consumers still end up responsible for paying the difference between the trade-in loan balance and the vehicle’s value. The complaints charge that the dealers’ representations that they will “pay off” what the consumers owe are false and misleading, and violate the FTC Act.

Examples of the allegedly deceptive advertisements include: • “Credit upside down? Need a new car? Go to Billionpayoff.com. We want to pay off your car.” The advertisement depicts a car moving, inverts the video to depict it upside down, and then turns it right-side up again. (Billion Auto) • “Uncle Frank wants to pay [your trade] off in full, no matter how much you owe.” (Frank Myers Auto Maxx) • “I want your trade no matter how much you owe or what you’re driving. In fact I’ll pay off your trade when you upgrade to a nicer, newer vehicle.” (Key Hyundai and Hyundai of Milford) • “Ramey will pay off your trade no matter what you owe ... even if you’re upside down, Ramey will pay off your trade.” (Ramey Motors) In addition, the complaints against Billion Auto, Ramey Motors and the Hyundai dealerships allege violations of the Truth in Lending Act (TILA) and its implementing Regulation Z for failing to disclose certain credit-related terms, and the complaints against Billion and the Hyundai stores allege violations of the Consumer Leasing Act (CLA) and its implementing Regulation M for failing to disclose certain lease-related terms.

The orders settling the FTC’s charges against the dealers are designed to prevent the dealers from engaging in similar deceptive advertising practices in the future. Each order prohibits the dealer from misrepresenting that it will pay the remaining loan balance on a consumer’s trade-in, so the consumer will have no further obligation for any amount of that loan. It also prohibits the dealer from misrepresenting any other facts related to leasing or financing a vehicle. The proposed orders against Billion Auto, Key Hyundai, Hyundai of Milford, and Ramey Motors require those dealers to comply with TILA and Regulation Z, and to make clear and conspicuous disclosures when advertising certain terms related to issuing consumer credit. It also requires that if any finance charge is advertised, the rate must be stated as an “annual percentage rate” or as the “APR.” In addition, the proposed orders against Billion Auto, Key Hyundai, and Hyundai of Milford require those dealers to clearly and conspicuously make all lease-related disclosures required by the CLA and Regulation M, including the monthly lease payment. The proposed orders also require each of the dealers to keep copies of relevant advertisements and materials substantiating claims made in their advertisements, and to provide copies of the order to certain employees. The dealers are required to file compliance reports with the FTC to show they are meeting the terms of the orders, which will expire in 20 years. The misrepresentation alleged in these cases was one of the topics raised at the FTC’s 2011 public roundtables regarding consumer protection issues that may arise in the sale, financing or lease of motor vehicles. The FTC acknowledged the valuable assistance of the Iowa Attorney General’s Office in the investigation of this matter.

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Cash Is King in Buy HerePay Here The two keys to Buy Here-Pay Here are risk management and cash management. Both, as always, are hot topics. More so now with everything that is going on in the automotive industry and the economy in general. But cash – and the availability or the management thereof – seems to be on everyone’s mind, and in some cases closing their doors. Cash is not as available as it was this time last year. The good news is it is still available, which isn’t true in some other unfortunate industries. It’s just not as easy to find or secure, not to mention afford, since the rates we enjoyed a year ago are no longer there. Local banks and credit unions appear

to be the best sources for lines of credit. The large regional and national banks still seem to be staying out of the car business. Local banks and credit unions have smaller organizational charts and usually less turnover, leading to a more stable decision-making future. The three necessities to securing a line with those sources are patience, persistence and preparation. The days of simply walking into a bank and securing a line of credit on a handshake and a promise to pay are long gone. Local banks and credit unions have learned from the mistakes of the regional and national banks and have become smarter and more sophisticated in their approval process. Patience is needed because local banks and credit unions need a complete education on our industry. Not everyone is familiar with what we do and how we do it. In some cases, it can be hard to convince a bank to loan money to a business that will in turn extend credit to someone who has shown little ability to repay it. They need a K-through-12 to make their decision and continuing education after the line is secured. Persistence is needed because the

Polk Provides Internet Reporting to Autobytel

Automotive marketing intelligence firm Polk has announced it is providing Internet lead conversion reporting to Autobytel, provider of third-party auto lead generation, for its dealer and OEM customers. Autobytel and Polk worked together to create a solution that defines vehicle sales conversion rates for Autobytel auto leads. It includes conversion reporting at a variety of levels, including OEM, vehicle segment type and those leads that are dealer-assigned. The partnership allows Autobytel to provide transparency in lead quality to its customers and establishes quantifiable metrics for return on investment. It also enables dealers to better understand lost opportunity revenue and identify Internet lead competitors, helping them align their follow-up strategies with customers. It also provides key lead treatment metrics, including time-to-purchase data and competitive cross-shopping and associated purchase behavior. “We are very excited about our relationship with a trusted partner like Polk and the power of their independent conversion reporting that has validated the high performance levels of our auto leads,” Autobytel president and CEO Jeffrey H. Coats said. For more information, visit www.polk.com or www.autobytel.com. 8

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days of lending institutions seeking out beneficiaries of their generosity have just about ended, especially to those dealing with subprime clientele. BHPH dealers have to be willing to go door-to-door and sell our business to lenders. In most cases, it will take knocking on more than one door. And once in the door, it will take more than one cast to reel them in. Preparation is the determining factor to success, initially and in the future. Because banks and credit unions have become more sophisticated in their decision-making, BHPH dealers have to provide more sophisticated information to them. Performas, financial statements and cash-flow analysis are a few examples of data that needs to be provided up front to obtain a line and on an ongoing basis once a line is secured. The key to maintaining a good relationship with a capital source is providing as much information in the beginning as possible and to keep doing so on a regular basis so they never have to ask for anything. Full and accurate disclosure is paramount. Put yourself on the other side of the desk. What would like to know if it was your money? In this instance, there really is no such thing as too much information.

Having all the access in the world to capital will be worthless unless you know how to manage it. In today’s tight credit market, BHPH dealers have to manage not only their credit lines, but cash in general. Not understanding how to manage available cash has closed more BHPH dealers’ doors than any other cause. It is that important. The best tool to effectively manage cash is common sense. Don’t spend what you don’t have. Too many dealers feel the need to live the lifestyle. Success can breed contentment and contentment can breed laziness, which usually leads to failure. A cash-flow model helps keep common sense at the forefront. The model can be very detailed or simplified to cover the basic cash-in, cash-out categories. Either way, it should show a one-, three- and possibly five-year analysis, and should be updated at least annually or when there has been a change to the overall business model. Adding a location, an increase or decrease in ACV, or even a change in underwriting standards can impact cash needs. The model should be realistic. Pie in the sky and wishful thinking serve no purpose. Having the model is only the first step. Having the discipline to manage to it is the challenge. Without it, a dealer

might as well have the “sell some cars, collect some money” business plan and hold on for dear life – a plan that is not used by successful BHPH dealers. The model should be looked at on a monthly basis and compared to actual performance. That way, adjustments can be made immediately to either the model or the personnel in charge of managing to it. Cash is king in our business. Not only the availability of it, but the effective management of it as well. There are BHPH dealers who operate without the need of a credit line because they understand how to manage cash. There are BHPH dealers who operate within credit lines effectively because they understand how to manage cash. But there are too many dealers experiencing capital reductions and, in some cases, all-out line calls because they don’t understand how to manage cash. Having the patience, persistence and preparation to obtain and secure cash, then the discipline to manage it, will take a load off your mind and help keep your doors open.

BY BRENT CARMICHAEL

EXECUTIVE CONFERENCE MODERATOR NCM ASSOCIATES INC. BCARMICHAEL@NCM20.COM

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The CARLAWYER

Here’s our latest collection of selected legislative and regulatory highlights, and a recap of some of the many auto sale and financing lawsuits we follow each month. Remember, what we report here is not every recent development. We select those we think are 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

Once again, all the federal news deals with the new Consumer Financial Protection Bureau and the “old” Federal Trade Commission. Want some advice? On Feb. 23, the CFPB announced the establishment of the Consumer Advisory Board, which will advise and consult with the bureau in the exercise of the bureau’s functions under federal consumer financial protection laws and will provide information concerning emerging trends and practices in the financial services and financial products industries. The CFPB published a Federal Register notice seeking nominations for the Consumer Advisory Board – nominations closed March 30. Something to say? Drop us a line: On Feb. 21, the FTC announced that as part of its ongoing project to gather information on consumers’ experiences related to the sale, financing and leasing of vehicles at dealerships, the agency would continue to seek public comments until April 1. The FTC held three roundtables around the country in 2011 to gather information about practices related to motor vehicle sales, financing and leasing. In seeking comments, the FTC editorialized, “Financing obtained at a dealership may provide benefits for many consumers, such as convenience, special manufacturer-sponsored programs, access to a variety of banks and financial entities or access to credit otherwise unavailable to a buyer. Dealer-arranged financing, however, can be a complicated, opaque process and

could potentially involve unfair or deceptive practices.” Streamlining regulations: On Feb. 16, the CFPB launched its regulation streamlining feedback web tool, which accepts public input on ways to streamline the regulations the CFPB inherited under the Dodd-Frank Act. The CFPB is requesting feedback on what parts of these regulations it should make the highest priority for updating, modifying or eliminating. In addition to comment boxes, the new web tool has drop-down menus that list each regulation and its sections while also linking directly to the text of the regulation.

ENFORCEMENT ACTIONS

Maine Attorney General William Schneider recently settled claims alleging unfair and deceptive practices by a dealer who made implied warranty and remedy disclaimers to new car buyers. Maine’s implied warranty law protects consumers for up to four years after the purchase of all household or personal goods except used cars. The dealer allegedly told consumers that only the manufacturer, and not the dealer, was responsible if the new car had a serious defect. In addition to a $5,000 civil penalty, the dealer will inform past customers that implied warranty and remedy disclaimers are retracted and customers who were improperly turned down can seek reimbursement for repairs of serious defects.

LITIGATION

Arbitration provision in buyer’s order not enforceable where RISC, which included integration clause, did not contain arbitration provision: A customer bought a car and signed a buyer’s order, a retail installment sales contract and a disclosure agreement. The buyer’s order and disclosure agreement contained arbitration provisions but the RISC did not. When the customer sued the dealership where she bought her car, the dealership moved to compel arbitration. The trial court denied the motion, and the Court of Appeals of Texas affirmed. The appellate court noted that the RISC included an integration clause stating, “This contract contains the entire agreement between you and us relating to the sale and financing of the vehicle. If any part of this contract is not valid, all other parts stay valid.” The appellate court found that because the RISC contained an integration clause and did not incorporate any provisions from the

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buyer’s order or the disclosure agreement, including the arbitration provisions, the buyer’s order and the disclosure agreement did not govern the sale or financing of the vehicle. See Fazeli Imports, Ltd. v. Davis, 2012 Tex. App. LEXIS 546 (Tex. App. January 25, 2012). Note that Texas law defines a buyer’s order as a nonbinding, preliminary written computation relating to the purchase in a retail installment transaction of a motor vehicle that describes specifically the motor vehicle being purchased and each motor vehicle being traded in. Dealers in Texas should think twice before relying on a buyer’s order for an enforceable agreement when they are selling a motor vehicle in an installment sale transaction, even absent an integration clause. Vehicle-secured debt not dischargeable where debtor applied for and received credit in her name but intended her father to make the payments: An individual bought a pickup truck on credit for her father, who could not get his own financing because of poor credit, titled the truck in her name, and expected her father to make the payments. However, the credit application she signed stated she was applying for individual credit and was relying on her income or assets for repayment of the credit. When the individual filed a Chapter 7 bankruptcy petition, the creditor repossessed the truck, leaving a $10,793 deficiency. The creditor sued to have the deficiency declared nondischargeable, and the U.S. Bankruptcy Court for the Western District of Michigan found the debt should be excepted from discharge. Though the court found the dealership where the individual bought the car was complicit in the deception, it nevertheless found the individual “played a significant and causative role in perpetrating a fraud against [the creditor] by inducing it to make a loan that it would not otherwise have made.” See In re Russell (Astera Credit Union v. Russell), 2012 Bankr. LEXIS 233 (Bankr. W.D. Mich. January 25, 2012). California law could not be applied to nationwide class alleging misleading advertising in connection with collision avoidance technology: An individual and his wife bought a vehicle from a dealer that included a collision mitigation braking system. The manufacturer promoted the system in various ways. The couple filed a class action complaint against the manufacturer, claiming the manufacturer violated California’s Unfair Competition Law, False Advertising Law and Consumer Legal Remedies Act because it CONTINUED ON PAGE 12

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did not warn consumers that the system’s three-step warning process might overlap, the system might not warn the driver in time to avoid an accident and the system shuts off in bad weather. The couple moved to certify a nationwide class of all consumers who purchased or leased vehicles with the system during a three-year period. The trial court certified the class, but the U.S. Court of Appeals for the Ninth Circuit reversed, holding that because the laws of multiple jurisdictions would apply, variances in those state laws would overwhelm common issues and preclude predominance for a nationwide class. See Mazza v. American Honda Motor Company, Inc., 2012 U.S. App. LEXIS 626 (9th Cir. (C.D. Cal.) January 12, 2012). California law requires creditor to state monthly payments, late fees and enforcement fee in notice of intent to sell for reinstatement purposes: After an individual defaulted on his vehicle retail installment contract, the assignee of the contract repossessed and sold the vehicle. The individual sued the assignee in the U.S. District Court for the Southern District of

California, alleging that it violated, among other things, California’s Unfair Competition Law. Specifically, the individual claimed the notice of intent to sell the vehicle did not include all of the conditions precedent to reinstatement of the contract, as required under California’s Automobile Sales Finance Act. The court found the monthly payments and late fees were conditions precedent to reinstatement and the assignee should have known those amounts and should have included them in the notice. The court further found that payment of the law enforcement fee was necessary for the individual to regain possession of his vehicle because, even though the fee was not a fee payable to the assignee, the individual would not have reinstated the contract without also wanting possession of his vehicle. Therefore, the court determined payment of the law enforcement fee was a condition precedent to reinstatement as well. See Aho v. Americredit Financial Services, Inc., 2012 U.S. Dist LEXIS 11000 (S.D. Cal. January 31, 2012). Assignee not identified as lien holder on title had the right to repossess vehicle: An individual bought a car with a loan from a bank.

The car title documents identified the bank as the lien holder. The bank sold the loan under a master loan purchase and sale agreement. Under that agreement, all of the bank’s interest in the loan and the vehicle collateral passed to the loan buyer when the buyer paid the bank the purchase price for the loan. When the individual defaulted on the loan, the loan buyer repossessed the car. The individual sued for return of the vehicle and also alleged the loan buyer violated the Ohio Consumer Sales Practices Act. The trial court dismissed the case, and the Court of Appeals of Ohio affirmed. The individual argued Ohio’s vehicle title law required a secured party to note its lien on the title documents, and because the loan buyer never changed the title documents to identify itself as the lien holder, it did not have a right to repossess the car. The appellate court disagreed, noting that because the bank transferred its security interest to the loan buyer pursuant to the Uniform Commercial Code, the buyer owned the security interest and had the right to repossess the car. See Gati v. Americredit Financial, 2012 Ohio App. LEXIS 309 (Ohio App. February 2, 2012).

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.

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NIADA to Launch New 20 Group Program After repeated requests from its members, the National Independent Automobile Dealers Association has announced it is entering the 20 Group business. NIADA CEO Michael Linn announced the NIADA 20 Group program, which will organize and moderate groups of independent auto dealers from around the country to meet and share new ideas and best practices. Linn said the move is being made after repeated requests from within the group’s membership of nearly 20,000. Dealers have voiced a strong desire to share best practices and operational data between the various member sets. “NIADA members have historically been a tight-knit group of dealers. Developing a 20 Group platform for them to facilitate ideas and compare operational practices is a natural extension of their close relationships,” Linn said. “Additionally, we have mounting feedback from dealers participating in existing 20 Group models who feel their best interests are being underserved or even ignored. One dealer told me she felt the escalating cost to participate in her current 20 Group was not

worth the combative discussions she endures or the pressure she gets to conform to their benchmarks. “For 66 years as a nonprofit trade association, NIADA has represented the voice of independent auto dealers and has found ways to help them improve their businesses. I can assure you NIADA and our 20 Group program will always put the needs of our dealers first. We will never sacrifice the quality or service we provide our dealers.”

THE NIADA 20 GROUP PROGRAM WILL BE UNDER THE DIRECTION OF JOE LESCOTA, WHO

JOE LESCOTA

WAS RECENTLY INTRODUCED AS NIADA’S NEW DIRECTOR OF DEALER DEVELOPMENT, EFFECTIVE JUNE 1.

The NIADA 20 Group program will be under the direction of Joe Lescota, who was recently

introduced as NIADA’s new Director of Dealer Development, effective June 1. “Even the most successful independent dealers are constantly seeking new ways to improve their businesses,” Lescota said. “They know the slightest change in sales, financing, service or operational policy can have a major impact on their profitability. Our 20 Groups will be a great way for NIADA dealers to stay on track because colleagues will be there to prod, poke and encourage improved performance. The new platform will match dealers of like size, sales volume and revenue mix for maximized compatibility. They will share ideas and best practices and learn from one another regardless of size or geographical region. “No independent dealer is too large or too small to contribute, learn and benefit from the collaborative dialogue of a 20 Group discussion. Every one of our members is encouraged to participate.” The first phase of NIADA’s 20 Group format will focus on independent auto retail operations. More information will be available at the NIADA Convention & Expo in June at Caesars Palace in Las Vegas.

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IIADA Recognizes the Following Members The following members have joined* or renewed their membership since our last issue of Car Lines. Thank you for your membership in Indiana’s trade association for independent dealers!

Andrews Auto Sales Dan Francis Evansville

Greg’s Auto Sales Greg Morris Evansville

American Imports Jeff Cork Speedway

Indy Auto Source Craig Miller Carmel

Best Deal Auto Sales David Baldwin Auburn

Johnson Car Company Clint Johnson Rensselaer

Best Deal Auto Sales Dave Baldwin II Auburn

K & J Auto Sales Ken Brophey Indianapolis

Best Deal Auto Sales Dave Baldwin Warsaw

Pay Less Auto Sales Group* Aimen Zayyad Hammond

Best Deal Auto Sales David Baldwin Fort Wayne

Payless Autos* Wajid Safdar Indianapolis

Blue’s Auto Sales* Thomas O’Gara Indianapolis

Schultz Auto Sales Bob Schultz DeMotte

Briggs Insurance Agency Tim Briggs Merrillville

Smart Auction Jeff Kubicki Indianapolis

Computerized Vehicle Regis- Ultimate Auto Sales tration* Kip Helsel John Roeder Crown Point St. Charles Vine Street Motors Diamond Warranty Carl Muncy James Limongelli Shelbyville Pittston Affordable Computer Systems Gebhardt Motor Sales Ivan Dale Tim Gebhardt Jeffersonville Osceloa

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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 AFC Ryan Lewis 317.453.1172 ryan.lewis@autofinance.com 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 Auto Zone Kevin Kravig 317.681.4273 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

Donn Wray Attorney at Law Stewart & Irwin, P.C. 251 E. Ohio St., Suite 100 Indianapolis, IN 46204 dwray@silegal.com 317-639-5454

Reliable Auto Finance Brian Chisholm 954 28th St. SW Grand Rapids, MI 49509 brian@reliableautofinanace.com www.reliableautofinance.com

Drive1USA Bruce Norton 1512 W. 96th Ave., Suite C Crown Point, IN 46307 bnorton@drive1usa.com 219-661-1000

Russel Kobel Insurance 100 Tower Drive Suite 120 Burr Ridge, IL 60527 708.935.6509 rkobel@ais-ins.com

Envirotest Systems Jennifer Kharchaf 1171 Breuckman Drive, Suite B Crown Point, IN 46307 indiana@esph.com 888.240.1684 Frazer Computing, Inc. Michael Frazer www.frazercomputing.com 888-963-5369 GoldStar GPS Mark Behne 2035 Lakeside Centre Knoxville, TN 1-866-655-8825 markb@procongps.com GWC Warranty Carmie Fruits, Indiana Representative cfruits@guardian-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

Chase Custom Finance Don Williams and Mike Smith 317-523-4273

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

Clear Choice Merchant Services Reno, NV Laurie Gruen, Corporate Analyst, ext. 6881 laurene.g@myclearchoice.com

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

Lorraine Onesian, VP Business Development, ext. 6880 lorraine.o@myclearchoice.com www.myclearchoice.com 866-779-4787

Keystone Insurers Group For All Your Insurance Needs Lori Simpson lsimpson@keystoneisgrp.com 888-826-0079

Consolidated Automotive Services of Indiana Chris Walsh 59 East Main Street, Suite N Nashville, IN 47448 (812) 988-8300 cwalsh@concolidatedautoservices.com

Kincaid Insurance Dan Kincaid 321 Main Street Rockport, IN 47635 812.649.5739 rwood@kincaidins.com

Consumers Insurance Mike Hogan 7830 Edge Manor Ct. Indianapolis, IN 46239 317.450.9946 mhogan@ciusa.com

Lincolnway Insurance Services Dealer Bonds & Garage Keepers Gregg St. Germain 336 E. Lincoln Hwy. Schererville, IN 46375 gregg@lincolnwayinsurance.com 219.865.2227

CVR Computerized Vehicle Registration John Roeder 636.447.8351 jroeder@cvrreg.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

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

SEAL FINANCE Judy Terrell 3830 E. Southport Road # 200 Indianapolis, IN 46237 judyt.cnac@gmail.com 317-497-0473 Security Auto Loans Joe Ruhland 4900 Hwy 169 N., Suite 205 New Hope, MN (763) 559-5892 Joe Ruhland 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 Surety Bonds.com Mike Patzius 1200 Rogers St., Suite C Columbia, MO 65202 mike@suretybonds.com Triumph Consulting Jack Haworth 1606 N. Delaware St. Indianapolis, IN 46202 800-875-3137 www.triumphconsulting.net Tri Vin Inc. Mike Audette 115 Pohesanut Drive Suite 201 Groton, CT 06340 maudette@trivininc.com 860.448.3177 Vehicle Acceptance Corp. Joyce Butler 12800 N. Meridan St., Ste. 400 Carmel, IN 46032 317.844.2599 jbutler@vacorp.com VideoTirekicker.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

NIADA ANNUAL CONVENTION & EXPO SET FOR JUNE 11-14, 2012

The NIADA announced its 66th Annual Convention & Expo will be held June 1114, 2012 – a week earlier than previously scheduled – at Caesars Palace Hotel and Casino in Las Vegas. NIADA’s showcase event will offer an expanded dealer education program for 2012, including more sessions covering more topics than ever before, as well as an enhanced Expo featuring more companies representing all facets of the automotive industry. Expo exhibit dates are June 12, 13 and 14. The Convention, to be held for the third consecutive year at spectacular Caesars Palace, will kick off with activities beginning on Monday afternoon, June 11. Online registration is now open at www.niada. com. Rooms at Caesars Palace will be available at the discounted rate of $154 per night. NIADA’s Annual Convention & Expo provides its members with an opportunity to network with their peers, participate in quality education sessions and gather valuable information they can take back and apply toward their dealerships’ success. Educational offerings will cover topics for both retail and Buy Here-Pay Here dealers. The event is also a gateway for vendors to build and foster relationships with dealers through the Expo, an industry marketplace of top-notch vendors showcasing their products and services and the benefits they can provide to dealers. NIADA has held its Annual Convention & Expo since 1947 and has continued to flourish as the most sought-after and reputable used motor vehicle industry event for automobile dealers.

Zurich Insurance Co. 800-728-6049

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PROVISIONING BY DALE POLLAK AND CHAD GOODSON

The New Science of Used Vehicle Sourcing & Sales

These days, dealers are looking for every edge to find quality inventory for their lots. Americans are holding onto their cars longer than ever, causing higher prices at auction and a smaller crop of quality vehicles on which dealers can bid. According to a new study by R.L. Polk, length of vehicle ownership recently hit an all-time high: 71 months for new vehicles and 50 months for used cars and trucks. The study also noted that people holding onto their cars longer has resulted in decreased used-vehicle supply. In this crowded marketplace, you need to assess your strategy for long-term success if you want to outperform your goals and beat the competition. To help, consider this new method dealers are using to better evaluate and acquire in-demand units others might pass up. It’s called provisioning.

What Is Provisioning? Provisioning is defined as the efficient allocation of resources to achieve a successful mission. To be clear, the mission for dealers is to operate a financially successful used car operation. Put simply, for your business to thrive, you need to know what cars to buy, what to pay for them and where to find the right units for your inventory. Provisioning is a new way for dealers to set their used vehicle

strategy (size of inventory investment, ROI/ turn expectations) and efficiently pursue the vehicles necessary to execute their plan successfully. Provisioning is like a science because it provides a methodical approach to buying used vehicles. It helps evaluate certain types of information vital to the success of your used car business. What types of information? Demand: The number of people in your area searching online for a specific vehicle. Interest: The average conversion rate from search results pages to vehicle details pages for a vehicle in your area. Volume: The number of units recently sold in your area. Market days supply: The current available supply of similarly configured vehicles and the rate at which such vehicles have been sold over the past 45 days. Profitability: The spread between average asking price and wholesale price – the auction price vs. list price in your market. Availability: The number of units currently available at auction. Experience: The success of your recent sales for a specific make/model. Analyzing that information on your own isn’t easy. But technology and tools can help you determine the types of vehicles that will deliver the best return on investment every month, giving you a huge advantage on your competition.

What to Pay and Where to Find It Once you determine the cars that sell fast in your market, you’ll want to make sure you pay the right price for them. At auction, there aren’t too many obvious deals these days, but you can still find gems with a little guidance. Many dealers rely on professional buyer solutions like those by vAuto, for example. Those services use in-market data to help determine which units are worth your investment. They can even help you identify the price point at which a vehicle will get the most attention, get you the profit you need and cover your reconditioning costs so you

still hold gross. If you’re a dealer in the Northeast in the winter, you might have difficulty finding enough SUVs to keep your inventory fully stocked. Similarly, a dealer in the South probably can’t find enough convertibles in the summer months. Wherever you are, there’s inevitably a shortage of certain cars in demand. So it can pay to look outside your immediate area for quality inventory. Use online auctions to help keep your lot full of vehicles you know will sell. Online auctions can be some of the best places to find cars at good prices without the hassle of waking up early, checking pages of run lists and elbowing past other dealers to find your spot in the lane. Instead, sit back with your coffee and bid from the comfort of your home or the office.

How to Reduce Acquisition Risk Of course, if you bid online, you won’t be able to “kick the tires” and inspect the vehicles in person, so you’ll especially need to consider the condition and history of those vehicles. Otherwise you might end up paying too much for a car that seems perfect but has reported damage or another incident that could affect its retail value. The key is knowing the cars with good service histories that merit your bids, since those vehicles often sell for better prices. Many successful dealers run a vehicle history report on every car they consider buying as part of their standard procedure to assess a vehicle’s condition and spot any related acquisition risks. Whether through online auctions or in-person trades, this triage ensures the dealer and his buyers feel more confident that the inventory placed on the lot will turn fast and make top dollar. With declining supply and increasing demand for quality vehicles, there is little room to make acquisition mistakes on vehicles you “had a feeling about” but didn’t take the time to carefully vet. Provisioning helps you avoid these mistakes and turns your ability to efficiently and effectively evaluate and acquire used vehicles into a competitive advantage.

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Warrantech to Administer New NIADA CPO Program NIADA has selected Warrantech, an AmTrust Financial Services company, to administer its all-new NIADA Certified Pre-Owned Vehicle Program. The NIADA CPO Program is the premier certification option for independent automobile dealerships seeking to effectively compete in the certified pre-owned vehicle market. Warrantech, a leading provider of extended service contracts for the automotive industry, will administer the plan, address all post-sale customer needs, and customize dealer and consumer marketing materials. The company will work closely with NIADA’s state affiliates to launch the program nationwide in May 2012. “Our research is telling us that 65 percent of consumers begin their vehicle search looking for a certified pre-owned vehicle, and that number is growing,” NIADA CEO Mike Linn said. “NIADA is committed to helping our members give customers what they are looking for and offer a top-notch buying experience for car buyers in their communities. We see the NIADA CPO Vehicle Program as a primary way for NIADA members to further separate themselves from their competitors and give customers a better vehicle with additional peace of mind after the sale.”

With three unique plans under the NIADA CPO program, dealers will be able to select the option that is right for their market and their customer base. These options include: • A three-month/3,000-mile limited warranty that includes 36 months/36,000 miles of engine and air conditioning component coverage. • A six-month/6,000-mile limited warranty that includes 36 months/36,000 miles of engine and AC component coverage. • A 12-month/12,000-mile limited warranty. The NIADA CPO limited warranty options include coverage of engine, air conditioning, turbocharger or supercharger, automatic and manual transmission, transfer case, drive axle, steering components, select electrical components and seals and gaskets. For more consumer choice and confidence, the NIADA CPO limited warranty options above can be supplemented by adding the extended NIADA Total Care or the NIADA Total Care Plus coverage, which includes front and rear suspension, brakes, fuel system, cooling system and additional electrical components. “In re-tooling the NIADA CPO Program, we recognized independent dealer business models vary widely and that we had to offer additional CPO options to specifically meet the operational

demands of our dealers,” NIADA Chief Operating Officer Steve Jordan said. “Warrantech’s successful track record with independent auto dealers, varying product offerings, world-class claims operation, nationwide sales footprint and long term commitment to support the success of our dealer members made the partnership decision easy to make.” In addition to the coverage, NIADA and Warrantech will provide dealers with comprehensive sales training on how to use the CPO program to sell more vehicles and extended service contracts, as well as marketing support that includes in-store signage and promotional materials. “Warrantech is honored to have been selected by the 66-year old NIADA as its CPO program administrator,” Warrantech CEO Sean Stapleton said. “We applaud the time-honored tradition of excellence NIADA member dealers observe, including their adherence to a strict code of ethics. We feel that commitment mirrors Warrantech’s dedication to excellence and drive to provide superior products and continued quality customer service.” For additional information regarding the NIADA CPO program please call (877) 310-0288 or email automotivesales@amtrustgroup.com

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Joe Lescota Joins NIADA as Director of Dealer Development Community Service Award Nominees

Congratulations to the following independent dealerships for being nominated for this year’s NIADA/Manheim National Community Service Award. Independent dealerships across the nation contribute to their communities every day but often go unrecognized for their community support. Many participate through special projects while others provide sponsorships or financial contributions, or lead innovative community improvement activities. The winning dealership will be named June 13 at the Leadership Awards Banquet during the National Independent Automobile Dealers Association Convention and Expo in Las Vegas. Manheim representatives will present the award along with a $5,000 check payable to the dealership’s chosen charity.

THE 2012 NOMINEES ARE:

Ertle Brothers Discount Auto, Sterling, Colo. Noegel’s Auto Sales, Starke, Fla. Southeast Car Agency, Inc., Gainesville, Fla. Matthews Motors, Clayton, N.C. A-1 Auto Sales of Dulles, Sterling, Va. Reel’s Auto Sales, Orwell, Ohio Bourne’s Auto Center, South Easton, Mass.

Fran Morelli Sales & Service, Brockway, Pa. Ed Holewiak’s Auto Sales, Somerset, Mass. Premier Motors-Leasing, Inc., Hardin, Ky. Ron’s Auto Sales, Inc., Lawrenceville, Ga. M&F Auto Sales, Albuquerque, N.M. Alamo Valley Auto Sales, Kalamazoo, Mich. South Tacoma Auto Sales, Inc., Tacoma, Wash. Fairly Reliable Bob’s, Inc., Boise, Idaho

Former Northwood University Automotive Department chairman Joe Lescota has been named director of dealer development for the National Independent Automobile Dealers Association, NIADA CEO Michael Linn announced. He will begin his new duties June 1 after Northwood completes its spring semester. Lescota, who resigned as chairman of Northwood’s Automotive Marketing Department in February after 15 years at the university, will work closely with NIADA director of education Georgia Brown on the association’s dealer education initiatives as well as evaluating analytical data. Lescota will continue to serve as lead instructor for NIADA’s Certified Master Dealer course, a position he has held since 2003. The CMD program will continue to be presented in conjunction with and accredited by Northwood University, as it has since it was created in 2001. “I am very excited about my new role as director of dealer development for NIADA,” Lescota said. “I have had the privilege of working with independent dealers for several years as the Certified Master Dealer instructor and at NIADA conventions. Now I will be able to expand and help develop a wider range of educational programs offered by NIADA. It’s an awesome opportunity for me to work even closer and more frequently with NIADA members.” Lescota is a former retail automotive executive with more than 25 years of frontline dealership, sales, management and training experience. He has served as a dealer operator and is credited with developing innovative management techniques leading to reduced employee turnover and increased customer retention and satisfaction. He has conducted workshops and seminars to help used car dealers increase their profitability and helped introduce college credit courses in dealerships nationwide via distance learning. In 2011, Lescota was inducted into NIADA’s Ring of Honor for outstanding performance and leadership that has contributed to the professionalism and growth of the automobile industry, one of only 21 honored in the association’s 66-year history. He was named Man of the Year by the Association of Finance and Insurance Professionals in 2006 and is a five-time winner of Northwood’s Faculty Excellence awards. “I’m looking forward to having Joe as a senior staff member on our educational team at NIADA,” Linn said. “Joe’s industry knowledge and professionalism will be a great addition for us.”

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The The IIADA IIADA Has Has the the Independent Independent Auto Auto Dealer Dealer Covered! Covered!

Indiana Independent Automobile Dealers Associations

For an annual membership investment of only $275,

which includes an NIADA membership, you get a $2,300 Auto Auction Coupon Book and a whole lot more!

IIADA • PO Box 1393 • Crown Point, IN 46308 Phone: (800)310-3112 • Fax: (219)663-5294 iiada@comcast.net

This is our personal invitation to you to join the State and National Independent Automobile Dealers Professional Associations

It is important to me to be recognized as a professional! Enclosed are my annual dues of $275 to make sure that my business has all the advantages IIADA/NIADA Inc., provides to put me at the forefront of my profession. By completing this form, I agree to abide by the Code of Ethics. Also, I am consenting to and giving IIADA/ NIADA Inc., its affiliates and subsidiaries, my permission to (until I give written notice to discontinue) contact me and provide information to me at the mailing and email addresses, telephone and fax number(s) I have provided. Dealership Name ____________________________________ Dealer Lic#________________________________________ Mail Address ____________________________________________________________________________________________ County ____________________________________________City/State/Zip_______________________________________ Phone _____________________________________________Fax __________________________________________________ E-mail____________________________________________________________________________________________________ Website__________________________________________________________________________________________________ Owners (Please Print) ___________________________________________________________________________________ Recommended By _______________________________________________________________________________________ Payment by: Check Visa MasterCard Credit Card Number: ______________________________Expiration Date: __________________________________ Signature: _______________________________________________________________________________________________ Please include your email address, phone and fax numbers so that we can easily communicate with you. Membership dues are $275.00 for 12 months from the date you join, and your NationallADA dues are included. Please send application and check or credit card information to: IIADA, PO Box 1393,Crown Point, IN 46308 Note: 25% of dues are non-deductible 20

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For $275 You Get Membership In Both IIADA and NIADA

Plus All Of The Following Benefits And Even More That Are Not Listed!

Programs for Extra Profit

• Dealer Bond at Member Rates • Dealer Insurance • Health Insurance • Forms • Financing • Software • IIADA Help Desk • National Dealer Network Skip Tracing Contacts • College Scholarships • Prescription Drug Card • National Dealer Network

Publications

• Car Lines Publication • Used Car Dealer Magazine • Federally Required Safeguards Policy Document • Federally Required Red Flags Rules Policy Documents • IRS Audit Technique Guide For the Independent Used Car Dealer • Current Industry Information • Legislative Alerts • NIADA Annual Market Analysis

Professional Development

• Certified Master Dealer Program • Free Access to NIADA.tv Training at Your Business • Access to IndependentDealer.com where dealers go for answers • NIADA Membership and Window Decal • IIADA “Symbol of Integrity” Logo and Window Decal • NIADA Annual Convention and Trade Show • Code of Ethics

Representation

• State Lobby and Consultant Services • State Legislative and Regulatory Tracking and Reporting • Federal Lobby and Consulting Services • Federal Legal, Legislative and Regulatory Tracking and Reporting • Indiana Department of Revenue Liaison • Indiana Dealer Services Liaison • Indiana Bureau of Motor Vehicles Liaison

2012 IIADA MEMBER auction coupons For A Total Savings Of $2,300! abc Detroit/Toledo

Indiana Auto Auction, Inc.

ADE of Indianapolis

Indianapolis Car Exchange

ADESA Cincinnati/Dayton

Kesler-Schaefer Wholesale Auto Auction

ADESA Indianapolis

Manheim Arena Illinois

ADESA Lansing

Manheim Chicago

ADESA Northern Ohio

Manheim Cincinnati

ADESA Queen City

Manheim Indianapolis

Clark County Auto Auction

Manheim Louisville

Dyer Auto Auction

Manheim Ohio

Elkhart Public Auto Auction

OPENLANE

Greater Kalamazoo Auto Auction

Wolfe’s Auto Auctions, Evansville/Terre Haute/

Greater Rockford Auto Auction

South Bend

SAVE $100 at each of the above auctions! – 4 Buy or Sell Fee Coupons @ $25 each – 21

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ComplianceOverdrive

Watch 24/7

Reducing the Impact of Consumer Complaints

CHECK OUT WHAT’S NEW ON

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Who Is Your Customer? Paul Webb explains how knowing your customer better can help you sell, sell, sell. Tamara Darvish’s Outraged video from the CAR Conference: Find out why the “taking out” of America’s hometown car dealers impacts not only dealers, but also automotive remarketers.

The concept or image of the “complaint department” isn’t anything new, and has provided fodder for jokes and comic strips over the years. But the decision by the Consumer Financial Protection Bureau (CFPB) to expand its consumer complaint system to include complaints regarding vehicle and consumer loans is no laughing matter. If you haven’t been to the site yet, consider taking a look. The site, www.consumerfinance.gov/ complaint, makes it very easy for anyone to register a complaint. It asks for a description of what happened, the desired resolution and the parties and products involved. The CFPB’s decision to start accepting and reviewing complaints related to vehicle loans should get your attention for a few reasons. First and foremost, it signals that the CFPB is gaining momentum and is ready to try to identify and resolve current problems in the industry – and to prevent future ones. Second, the complaint process opens a whole litany of questions about how the CFPB will respond to complaints and how dealers will be involved. We don’t know much about the process yet, but hope the CFPB will provide more detail soon. For now, the question all dealers should be asking themselves is, “How do I avoid complaints in the first place?” It seems consumer finance complaints can originate in at least three ways: • You did something wrong and the customer complains about it. • The customer didn’t understand the agreement and thinks you did something wrong as a result. • You did everything right, but the customer has unreasonable expectations and complains. You can take steps to avoid or reduce the impact of all three scenarios, particularly when it comes to finance and insurance (F&I) processes. You did something wrong Customers should complain if you misrepresent, overstate or lie about the products and services you provide or the nature, reason and amount of charges. If you are running your business that way – or you have a renegade employee who is committing such acts – you should expect whatever consumer complaints, lawsuits and/or criminal charges come your way. The complaints and the liability they bring can be avoided if you run an honest and high-integrity business. You also need internal oversight, management and audit processes to help discover and eliminate any employee misconduct. Customer didn’t understand Some reported court cases I’ve read seem to be based on a lack of consumer understanding that spun out of control. The dealer didn’t necessarily do anything wrong, but the consumer seemed surprised at having to pay for cover insurance, or the gap amount, or having a vehicle repossessed, or any of a number of other predictable outcomes. The financing documents generally cover the fees, responsibilities and consequences, but the consumer didn’t read or understand them until long after the documents were signed. In one recent case, the consumer asserted he hadn’t read the retail sales contract or been given time to read it. He said he simply signed and initialed where he was told to. He later complained and sued regarding a number of obligations he hadn’t understood, and the lawsuit didn’t turn out well for the dealer. One strategy to avoid this would be to take the time at closing to educate the consumer. You could point out key provisions of the documents, such as late payment provisions, failure to insure, and conditions of and consequences of default. You could emphasize the importance of reading the documents and asking questions before signing, and back it up with a willingness to give consumers time to read and ask basic questions. The idea is, if you tell the consumer what happens on default, he or she is not surprised – and is less likely to complain – if the car is repossessed. Customer is unreasonable There will always be unreasonable customers whose expectations far exceed the terms of your sales agreements, warranties and commercial reasonableness. With those folks, you might not be able to avoid complaints. However, a regulator is more likely to conclude that a complaint is unreasonable if its investigation shows you run an honest, high-integrity business, have compliant processes and documentation in place, work hard to educate customers and set appropriate expectations. While you can’t always please everyone, running a high-integrity business and educating your customers will undoubtedly help prevent customer complaints. The more positive view is that you won’t just be avoiding complaints and mitigating reputational risk, you will be building customer satisfaction and retention. Either way, it’s an investment well worth making.

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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