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OPEN ROAD L O U I S I A N A

I N D E P E N D E N T

A U T O M O B I L E

D E A L E R S

A S S O C I A T I O N

DECEMBER 2013

magazine

F E AT U R E S T O RY PA G E 4

The Next Generation of Successful Selling inside u

• CREATING VALUE • WASHINGTON UPDATE • DEALER PRACTICES

DALLAS, TEXAS Permit No. 2079

PAID

PRSRT Standard U.S. Postage

V I S I T

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BOARD OF DIRECTORS PRESIDENT Eric Stroderd MyDealerSupply.com 850 Kaliste Saloom Rd Lafayette, LA 70508 ericstroderd@ mydealersupply.com 337-288-7842 cell 877-427-1238 office

04 Next Generation 06 Creating Value 10 Dealer Practices 12 Washington Update 14 Pass It On 18 Compliance Overdrive

What’s New u

Wanted: Dealerships that Make a Difference

MANHEIM NIADA NATIONAL COMMUNITY SERVICE AWARD

Manheim & NIADA proudly announce the fourth annual National Community Service award. The winner, which will be recognized at the 2014 NIADA Conference, will receive $5,000 for the dealer’s local charity of choice. For more information or to nominate a dealer, contact Georgia Brown at georgia@niada.com or (800) 682-3837.

Advertisers Index

abc Baton Rouge.......................Inside Back Cover ADESA...........................................................................9. Ally..................................................................................5. AutoManager...........................................................13 Chase.........................................................................16 DealerMatch...............................................................7. LA’s 1st Choice AA....................Inside Front Cover Manheim Pennsylvania........................................11 Protective..................................................................15. United Acceptance................................................. 17. VAuto......................................................... Back Cover

Office

For information on how to become a member please contact CindySirkel. cindy@niada.com • 800-756-4232

NIADA Headquarters National Independent Automobile Dealers Association

www.niada.com • www.niada.tv 2521 Brown Blvd. • Arlington, TX 76006-5203 phone (817) 640-3838

For advertising information contact:

Troy Graff (800) 682-3837 or troy@niada.com. The Open Road is published bi-monthly 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 76006-5203. The statements and opinions expressed herein are those of the individual authors and do not necessarily represent the views of the Open Road or the National Independent Automobile Dealers Association. Likewise, the appearance of advertisers, or their identification as members of NIADA, does not constitute anendorsement of the products or services featured. Copyright © 2013 by NIADA Services, Inc. All rights reserved.

State Magazine MGR./Sales Troy Graff • troy@niada.com

Editors

Andy Friedlander • andy@niada.com Jacinda Timmerman • jacinda@niada.com

Magazine Layout & Graphic Artist Chantae Arrington • chantae@niada.com

Art Director

Christy Haynes • christy@niada.com

Printing

Nieman Printing

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VICE PRESIDENT Dwayne Tambling Dwayne Tambling Auto Brokers 46001 HWY 22 St. Amant, LA 70774 dwaynetambling@gmail.com 225-675-3675 phone SECRETARY Kevin Rembert 15481 Airline Hwy Baton Rouge, LA 70817 kevinprembert@yahoo.com 225-806-9090 cell 225-275-8088 phone 225-275-6889 fax TREASURER Dino Taylor Car Town of Monroe, Inc. 319 North Third Street Monroe, LA 71201 dino@cartown.biz 318-323-6385 phone 318-340-9489 fax PRESIDENT EMERITUS J.L. Richard P O Box 481 Carencro, LA 70520 jlrichard@carencro.org 337-258-2272 phone 337-896-6278 fax

Junior Gonzalez Pan-Am LLC 201 Chalet Drve Lafayette, LA 70508 juniorgon@aol.com 337-233-1807 phone 337-278-7682 cell

Scott Ledet Ledet’s Auto Sales P.O. Box 1505 Gonzales, LA 70707 scottledet@ledetsautos.com 225-644-2886 phone 225-644-2419 fax

Matt Pedersen Mike Pedersen’s Lake Charles Auto Auction 235 E. Broad Street Lake Charles, LA 70601 Matt@mpcaa.com 337-433-8664 phone 337-436-7197 fax

Steve Taylor Car Town of Monroe, Inc. 319 North 3rd Street Monroe, LA 71201 sltaylor53@yahoo.com 318-323-6385 phone 318-324-1075 fax

Michael McCain Magic Motors 7960 Florida Blvd Baton Rouge, LA 70806 magicmotorsbrla@yahoo.com 225-588-3404 phone 225-456-2134 fax

Jason Hawthorne Sam’s Used Trucks & Cars 378 Front Street Winnboro, LA 71295 samscars@bellsouth.net 318-435-1146 phone 318-201-6660 cell

Danny Moore D Moore Auctioneers 15481 Airline Hwy Baton Rouge, LA 70817 dannymoore@yahoo.com 225-752-8630 phone 225-752-8907 fax

John Poteet Louisiana 1st Choice Auto Auction 18310 Woodscale Road Hammond, LA 70401 johnpoteet@msn.com 985-345-3302 phone 985-343-5735 fax

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New App Puts Dealer Inventory in Front of Tablet Shoppers u

A  UTOTRADER.COM OFFERS DEALERS AN OPPORTUNIT Y TO POSITION THEIR I NVE NT O RI E S I N F RO NT O F T H E G ROWI N G N U M B E R O F TAB LE T U S E R S

AutoTrader research shows a large increase in consumers’ use of mobile devices as part of the car shopping process. A new app offers dealers an opportunity to position their inventories in front of the growing number of people who use their tablets to shop for vehicles. The AutoTrader.com iPad app also offers car shoppers a way to find their perfect vehicle quickly, even if they’re undecided on brand. According to company officials, the app addresses a demonstrated consumer need: 67 percent of AutoTrader.com visitors, its research shows, haven’t identified a specific model and 58 percent haven’t identified a specific brand of car they’re interested in buying. “We designed this app around the concept of discovery. We wanted to make it as easy as possible for car shoppers to find and learn about vehicles they have not even considered,” said Jose Puente, AutoTrader’s director of mobile products and strategy. “With this new experience, you can start out with a very vague idea of what you want and the app does the work for you.”

NEW APP

Inside

BOARD MEMBERS 2013-2014 Doug Perry Doug Perry Wholesale Cars 734 Bayou Shores Drive Monroe, LA 71203 morgwaller@hotmail.com 318-372-7322 phone 318-343-8611 fax

Users can begin their search based on price, style or location, in addition to make and model, then narrow results with dozens of additional filters such as color, features and options, fuel economy or mileage. Once a shopper is ready to visit the dealership, the iPad app pinpoints a dealer’s location and provides contact information and directions via integrated mapping features. Shoppers can also communicate directly with dealers via email from the app. DECEMBER 2013

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MARKETING MATTERS

AUCTION

ISSUES

WHAT’S NEW ON NIADA.TV

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New this month on

NiADA.tv NIADA TELEVISION

EDUCATIONAL

PROGRAMS

Rent a Wreck’s “Rev up your Revenue” Special Program Series Tune into NIADA’TV’s latest Special Program Series “Rev Up Your Revenue” and learn how to make a profit center out of used car rental and leasing.

Beggs on the Used Car Market (5th Year Anniversary) There is a new program on NIADA.tv called Greenhouse Gas and CAFE Standards: Gas Sipping Etiquette for Vehicles. You can learn about the car of the future and how new technologies will change the automobile industry. The program also dispels myths that future hybrid and electric vehicles will be exorbitantly priced as a result of new CAFE standards. The feature is presented by Margo Oge, former director of the Office of Transportation To view all of NIADA.TV’s monthly special program series, simply visit WWW.NIADA.TV, click on the red enter button, and then look for the “Special Programs Series” buttons on the right side of the main menu page.

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The Next Generation of Successful Selling u

CRUCIAL TO A DEALERSHIP’S LONG-TERM SUCCESS

With the growth of the millennial generation’s buying power – an estimated $170 billion per year, according to the digital analytics firm comScore – dealers must expand their communication strategies to reach consumers when, where and how they want to shop for vehicles. And today, more than ever, that means online and on mobile. Millennials, the techsavvy, empowered generation of consumers born between 1983 and 2004, are increasingly integrating the mobile phone into their shopping process. To ensure success with millennials, dealers need to understand how they operate in the market. For instance, millennials tend to use their smartphones to research, shop for and even purchase vehicles in larger numbers than previous generations. A recent eBay Motors study looked at new vehicle shopping preferences in the increasingly online and mobile commerce environment, including how millennials approach car shopping, suggesting some ways to target this critical generation of consumers: Make sure your web presence is up to date and easy to find: Broadening your visibility online is the first step to getting on the radar of millennials. Ninety-four percent of millennials go online to gather information when shopping for a new vehicle. It is crucial to have a strong online presence to enter and remain in their consideration set. Optimize your site for mobile: If a dealership’s website doesn’t render correctly on smartphones or other mobile devices, nothing else matters. Mobile is the fastest evolving sales and marketing channel for dealers. More than onethird of millennials use a mobile device to research information while shopping for a vehicle, versus 19 percent of non-millennials. Supplement the showroom: Forty-four percent of millennials are likely to use mobile devices to compare prices or get information while they are at a dealership, compared to 27 percent of the nonmillennials surveyed. Dealerships should consider offering free in-store wi-fi to allow customers to comparison shop online. While that seems

counterproductive, the advantage is your salespeople are on hand to discuss the results with shoppers in real time, and maybe even to save a potentially lost sale. Embrace apps: Applying the adage “be where your customers are” is increasingly important for dealers, especially considering the evolution of shopping habits – 70 percent of millennials say technology is changing the way they shop. Mobile apps enable dealers to connect with car shoppers anytime, anywhere. Dealerships can leverage existing platforms or apps that already have a large reach to engage with mobile customers – a great entry point for dealers of all sizes to build a mobile presence. Social me, social you: Millennials love social media, and nearly a quarter of shoppers use social media to research consumer opinions of vehicles during their shopping process.

Mobile apps enable dealers to connect with car shoppers anytime, anywhere. u

Millennials also enjoy engaging with brands through social media and are open to providing feedback on their experience. Being actively engaged on various social media channels is beneficial, as long as you treat it as a two-way street. Use comments as an opportunity to bolster your brand perception and tailor future engagement. Given the buying power of millennials and their shopping preferences, dealerships not yet engaged with consumers via online and mobile risk losing a significant new stream of revenue. Dealerships have the opportunity to connect with millennials on a deeper level, building relationships and providing valuable content that helps them feel confident about their purchasing decisions. Attracting this generation through a blend of online, mobile and social media is crucial to a dealership’s long-term success.

BY CLAYTON STANFIELD

CLAYTON STANFIELD IS SENIOR MANAGER OF EBAY MOTORS.

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MARKETING MATTERS

Creating Value Presenting Intangible Products u

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H O W C A N YO U E N G AG E T H E C U S T O M E R ’ S S E N S E S T O E S TA B L I S H T H E VA L U E O F F & I P R O D U C T S B E F O R E TA L K I N G P R I C E ?

Traveling miles on the lot selling vehicles paves the pathway to the finance department in many dealerships. While walking those many miles, astute sales consultants learn quickly that they create value in a vehicle during the demonstration and presentation as they engage every sensory fiber of the prospective buyer. Yes, the interview is the cornerstone of the sale because it leads the sales consultant to the proper product selection. And many will say all sales is the same process. My reply to that is yes – and no. When selling a vehicle, the presenter can present value that can be seen, can be sat in, can be felt, can be smelled. The sales consultant uses every available sense the customer has to create the picture of positive ownership. But when demonstrating an intangible, the question becomes: How can the presenter engage the customer’s senses to establish value before talking price? As we all know, we cannot sit in a service contract, nor can we feel the acceleration of the claims payment. Yet the benefits are real and will be there when the customer needs them most – when they are facing an unplanned repair bill on a major THE

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component of the vehicle. Recently I met some experienced sales business managers who claimed they do not use point of sale materials. Instead, they sell by stories. Stories, while often entertaining, do not provide the customer with anything to

The presenters of the finance suite of products must believe in the value of the products before they can build a solid presentation. Do they themselves purchase service contracts when they purchase vehicles, or computers? Have the finance professional

Have the finance professional ask the service contract company’s representative to provide copies of claims that have been paid. Telling customers about the ease of claims is one thing. Having proof – statements that show claim payments – adds weight to the story. u

hold, nor anything to look at. By telling stories, the presenter is only actively engaging one of the customer’s senses. Is that enough to create value in intangible products? For best results, customers should be engaged with the presentation. The best business practice is to use point of sale aids to get all parties engaged in the conversation. I am sure your service contract provider spends millions of dollars creating and producing brochures and other point of sale aids to assist you in your efforts to make a positive, professional impression on your customers. Are they being used or are they collecting dust?

DECEMBER 2013

ask the service contract company’s representative to provide copies of claims that have been paid. Telling customers about the ease of claims is one thing. Having proof – statements that show claim payments – adds weight to the story. Do you ask your customers to write reviews on your website? If not, get started. That’s a great way to showcase the value of your customer care protection products. Each time a customer says thank you for offering a service contract because he did indeed use it, ask him to go to your website and write a review about his experience. Younger

buyers especially read the reviews before coming to the dealership. Get prepared for the finance presentation. Does your finance department have a presentation manual? That’s a one-inch binder with five to eight dividers and top-loading page protectors so the presenter can easily update proof statements as needed. Here’s how the five sections break down: u Section One, Customer care products and services brochures: Group them as you would a package presentation. Note the brochures must follow your verbal interaction with the customer and they must line up with the menu used to close the payment selection. Consistency and repetition is the key to success. Mechanical protection includes service contracts, prepaid maintenance plans, tire and wheel policies, and roadside assistance. Appearance protection includes exterior paint protection, interior fiber and leather protection and windshield protection. Equity protection includes guaranteed asset protection (better known as GAP coverage) and credit life and accident and health protection (if you are properly licensed to sell that product). C O N T I N U E D O N PA G E 8

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

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u Section Two, Dealercontrolled financing: This is a place for the copies of the “truth in lending” clauses from the credit unions that steal your financing opportunities. Read the terms and highlight the items that give you a reason to think a credit union might not be the best place for a customer to finance a vehicle. You are looking for the clause that says “Pledge of Shares.” Yes, I know many credit unions finance dealer retail installment contracts. For those resources we all give thanks. But be alert, there are some credit unions that still only do direct financing with your customers. Include some proof statements from a local bank. You will need to obtain a copy of a booklet regarding the terms and conditions of deposit accounts from the bank. Read and highlight the section that identifies the “Right of Setoff.” The lender might also refer to that action as the “Right of Offset.” When discussing financing options with customers, remember when financing through a dealership the only thing required as collateral is the title to the vehicle. By

reviewing those items you can show the best place for your customers to finance is through your resources. u Section Three, Cash conversions/bi-weekly payment examples: Too many finance managers are too quick to write a receipt and fail to inquire why the customer wants to pay cash. Perhaps he or she could use a new credit start. Perhaps the customer really does need to establish a cash cushion for emergencies. In talking with the customer, the finance professional can identify and highlight the benefits of financing and use only some of the customer’s cash to make the purchase. u Section Four, Proof statement, copies of paid claims, thank you letters, reviews from the website: Have those documents filed by company reference and keep them updated. In order to comply with all customer privacy laws you will need to black out the customers’ nonpublic information. u Section Five: This section is a place for copies of all the policies you have to present, filed alphabetically so you can locate them quickly. It’s best to

have the policies’ specific items of coverage highlighted. Make it easy to review the fine details with a customer. I’m often asked, “Do you expect me to go through all this information with every customer?” The answer is no. The first section is the part that is used with each and every customer, each and every time. The grouping of brochures will assist the presenter in making a full presentation and give the customer something to hold and to look at while the presenter is sharing how the products can provide a worryfree experience. The remaining sections are available to use as objections or customer concerns arise. A professional presenter in the finance office should be able to create value in the products before price is mentioned or shown. The plan should be benefits before bucks! Create the value using the presentation manual or other point of sales materials. Bring out the menu to summarize the benefits and discuss the cost of the policies. How do we bring out the menu after the presentation? Simple.

“As you know, for accounting purposes everything must be itemized. With everything we just spoke about – mechanical protection including your service contract, pre-paid maintenance, tire and wheel coverage, protective coatings and your equity protection – your monthly payment would be $____. The next category is without ______. The next is without ______. After reviewing these options which plan best meets your needs and budget?” Many states require the retail prices of every item on the menu be in print on the menu. The menu must also contain the base monthly payment with no extra products or services in it. That process should take the presenter 15 to 20 minutes to obtain a payment commitment, then another 10 to 15 minutes to print documents and properly disclose the terms and conditions of the loan to the customer.

BY JAN KELLY

JAN KELLY, PRESIDENT OF KELLY ENTERPRISES, IS AN EDUCATOR, CONSULTANT AND CONVENTION SPEAKER WHO WRITES FREQUENTLY FOR INDUSTRY PUBLICATIONS. FOR MORE INFORMATION, INCLUDING INFORMATION ON F&I 20 GROUPS, CALL (800) 336-4275 OR VISIT WWW.JLKELLY.COM.

AUCTION NEWS

LAFCAA Raises Money for Cancer Center u

B  RE AST CANCE R AWARE NE S S E FFORT S RAI SE MONE Y FOR LOCAL CANCE R CE NTE R

Louisiana’s 1st Choice Auto Auction continued their tradition of community outreach by raising $2,672 during Breast Cancer Awareness month for the Mary Bird Perkins Cancer Center in Hammond, La. Auction personnel presented the idea to management and everyone jumped on board to support the effort. Staff members held bake sales and sold bracelets and pins. Dealers who donated earned John Dough (auction “money” that dealers use to bid on gifts at the Anniversary and Christmas sale). Employees wore special “I wear pink for the cure” t-shirts on sale days throughout the month. One dealer generously donated a signed Drew Brees jersey to raffle. Randy Haddad, director of development community relations at Mary Bird Perkins, THE LA_1213.indd 8

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gave the Poteets a tour of the state-of-theart center in Hammond. “100 percent of the dollars raised goes right back in to the community through free screenings, education and other patient services,” said Haddad. “Early detection is the key to saving lives and having treatment close to home means so much to our patients.” Marketing Manager Georgianne Poteet commented, “I am humbled by the ongoing generosity of our staff, customers and vendors every time we support a charitable cause.” Louisiana’s 1st Choice Auto Auction has donated or raised over $200,000 in cash and goods to a variety of organizations since opening in May 2002. For more information, visit www.lafcaa.com/ community.

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u

A  UCTION EMPLOYEES KATIE ALOMBRO, SHIRLEY SPEARMAN AND NORA BENNETT SELLING BAKED GOODS.

R  ANDY HADDAD, DIRECTOR OF DEVELOPMENT COMMUNITY RELATIONS AT MARY BIRD PERKINS CANCER CENTER, RECEIVING THE CHECK FROM JOHN AND GEORGIANNE POTEET.

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DEALER

PRACTICES

Round the Clock Sales Opportunities u

WE LIVE IN A WORLD OF CON SUME RS WHO HAVE BECOME ACCU STOME D TO SHOPPING 24/7

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It’s really not about working longer hours. It’s about working smarter. Taking information from every customer interaction and making this business intelligence work for you by implementing small changes can improve your ability to close deals. u

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We live in a world of consumers who have become accustomed to shopping 24/7. Retailers that aren’t operating accordingly are not maximizing their potential. Dealer principals and general managers may think longer operating hours are the solution to better meeting changing consumer demands, but it is not realistic to staff a dealership around the clock. Even simply introducing longer hours may not be cost-effective due to overhead and additional operating costs. In an effort to reach more customers, many dealers market their inventory in just about every medium available, including print, web, radio and TV. The reality is once the customer knows your dealership is out there and is in the market to make a purchase, he/she is likely going straight to your web page. In fact, every day more and more consumers making major purchases start the process online. This underscores the importance of not only meeting your customers’ expectations for content, but also understanding how your website can actually make it easier to do business. Your basic web approach likely solves for content that is “sticky” and provides as much information as possible to help the customer move forward with a purchase from your dealership. Basic questions your online content strategy should address include: u Are you providing thorough information about each vehicle featured, including a full description, damage history, upgrades and mileage? u Are you providing pictures of the vehicle from a variety of angles? u Are you providing links to external sites where customers can purchase a copy of the vehicle history report? Many of these website features may seem like irrelevant added expenses but they have already become the standard expectation of most consumers. Anticipating what information the customer will look for and providing as much of that information as possible gives you a better chance of keeping the customer on your website.

DECEMBER 2013

Most dealers realize that every time a customer leaves their web page to go elsewhere in search of additional information about a vehicle or financing options, the more likely he/she will be to not find his/her way back to the dealer’s site. Basic features are critical components to remaining competitive, but having great pictures is the equivalent of just getting the customer in the door. How is your online content strategy making it easier for your customers to actually enter into the sales process? One of the most overlooked components of a dealer’s online strategy is the ability to get actual financing underway. Providing as much information as possible to advance the sales process should be a key online content objective. The following questions should be addressed as a way to increase your chances of ultimately selling a vehicle to visitors of your site: u Do you list available financing options for your inventory? u Do you provide access to an online credit application? Another benefit of engaged website traffic is your ability to capture information about your potential customers. Capturing the prospect’s name and contact information is an obvious primary objective, but effective tracking can tell you a lot even without getting every visitor’s specific contact information. u What makes and models of vehicles are getting the most views? u Are you getting more views on high mileage or low mileage vehicles? u What price point is getting the most hits? u Which vehicles attract the most qualified buyers? u What are the most used features of your website? With an integrated credit application on your website, you will have access to a treasure trove of information. Not only can an online credit application provide an avenue to capture customer contact information and hopefully further the sales process, it can also tell you a lot about the customers who are not purchasing vehicles from your dealership.

When a customer completes a credit application he has exhibited the willingness to purchase a vehicle from your dealership, but in some cases that application may be declined by the lender. This is where you might start asking questions. u Was the credit application declined due to the collateral not fitting the lender’s program guidelines? u Was the credit application declined due to insufficient loanto-value? u Was the credit application declined due to the customer’s poor credit history? u How can I affect the credit decision? If you ask questions like these and record the information for all loan applications, you will start to identify trends. These trends can help drive adjustments to your current business model, which will allow you to become more successful in helping your customers gain financing and thus complete more sales. Perhaps you will discover there is a need to diversify the types of vehicles in your inventory to fit current lender programs. Maybe you could benefit from adding vehicles that allow for a better loan-to-value using your lender’s valuation methods. Trends could reveal the need to add more lenders so you can better meet the credit spectrum of your potential customer base. Even though you may operate or own a small dealership, a website can provide you with access to information on potential customers that can dramatically change the way you run your store and increase your effectiveness. It’s really not about working longer hours. It’s about working smarter. Taking information from every customer interaction and making this business intelligence work for you by implementing small changes can improve your ability to close deals.

BY CHET HEUGHAN

CHET HEUGHAN IS DIRECTOR OF APP ONE RISK MITIGATION SERVICES, INDIRECT LENDING FOR WOLTERS KLUWER FINANCIAL SERVICES. FOR MORE INFORMATION, VISIT WWW.WOLTERSKLUWERFS.COM.

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WASHINGTON

UPDATE

NIADA Government Report u

K E E PI N G YO U I N FO RM E D WIT H T H E L AT E S T G OVE RN M E NTAL I S S U E S AN D AC T IVIT Y AF F E C T I N G T H E U S E D CAR I N D U S T RY

Here’s a rundown of some of the latest governmental issues and activity affecting the used car industry from NIADA regulatory counsel Shaun Petersen and NIADA lobbyist Sante Esposito.

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REGULATORY REPORT Consumer Financial Protection Bureau Internet tool: The CFPB built an Internet tool, called eRegulations, designed to help the public understand the regulations created and enforced by the bureau. The site is designed to provide official interpretations of the various rules and regulations, and to provide background information about each regulation as it appeared in the Federal Register notice. The tool has a search function to easily find particular regulations. The CFPB will be continually updating the tool based on its own findings and input from users. Suggestions on the tool’s use or improvements can be sent to CFPB_eRegs_Team@ cfpb.gov. Federal Trade Commission Aaron’s settlement: The FTC recently settled claims against Aaron’s Inc., a rent-to-own chain from which consumers can rent consumer goods, including personal computers. The FTC alleged Aaron’s and its franchisees used software on rental computers that monitored and tracked customers’ activity without notice or consent from the consumer. The software allegedly captured the customer’s keystrokes, including sensitive information like logins and passwords, and took video of customers. The computers also used location tracking mechanisms without consumers’ notice or consent. As part of the settlement agreement, Aaron’s is prohibited from monitoring keystrokes, capturing screenshots and activating computers webcams to video the customers. Aaron’s is also required to provide clear and separate notice to consumers that location tracking mechanisms are used, how they THE

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are used and how information is used and must obtain the consumers’ express consent to use the tracking mechanisms. Internal Revenue Service Tax filing season to be delayed: As a result of the government shutdown, the IRS announced it will delay the start of the 2014 tax season. The start date will be announced this month. The IRS estimates a one- to two-week delay from Jan. 21, the day the IRS originally was set to begin accepting and processing individual tax returns. The new start date will be no earlier than Jan. 28 and possibly as late as Feb. 4. Federal Communications Commission Changes to telemarketing rules: Effective Oct. 16, no telemarketing calls may be made to a consumer’s cell phone using an automated telephone dialing system (including a predictive dialer) or prerecorded message unless the consumer provided “prior express written consent.” Written consent was not previously required. In addition, prerecorded telemarketing messages may no longer be sent to residential numbers without the call recipient’s prior express written consent. The amendment to the Telephone Consumer Protection Act also eliminated the EBR exemption for prerecorded messages sent to residential numbers. However, the requirements for informational and other non-sales calls made to residential numbers have not changed. Consent is not required for such calls. State Law/Regulatory Updates Kentucky: A proposed rule would allow the Motor Vehicle Commission to deny an application for a license if the name or proposed trade name of the licensee is the same or so similar to the trade name of an existing licensee that the proposed name would confuse or otherwise mislead the public into believing the entities are the same or related. If no other grounds are cited for denial of the application, the

DECEMBER 2013

applicant may reapply with a new trade name within 10 days of denial without remitting an additional application fee.

u Effective Oct. 16, no telemarketing calls may be made to a consumer’s cell phone using an automated telephone dialing system (including a predictive dialer) or prerecorded message unless the consumer provided “prior express written consent.” Written consent was not previously required. Another proposed rule adds “electronic” media in the definition of advertising in its rules on motor vehicle advertising, which will apply the current advertising standards to Internet advertising. New Jersey: Assembly Bill 3610 would require dealers to disclose all storm- or flooddamaged vehicles that require repairs prior to sales. The disclosure can be made on the certificate of title. Senate Bill 3007 would make it an unlawful practice under the Consumer Fraud Act for a dealer to sell a used motor vehicle without giving the consumer a consumer information brochure written in

a simple, clear, understandable and easily readable way that informs the consumer of certain rights under the Used Car Lemon Law. The bill would also provide monetary penalties for violations and authorize the assessment of punitive damages and treble damages and costs to the injured party. LEGISLATIVE REPORT H.R. 749, Eliminate Privacy Notice Confusion Act This bill, known as H.R. 5817 when it was introduced by Rep. Blaine Luetkemeyer (R-Mo.) during the last Congress, was passed by the House without amendment on March 12 and referred to the Senate Committee on Banking, Housing and Urban Affairs shortly afterward. The bill amends the GrammLeach-Bliley Act to exempt from its annual privacy policy notice requirement any financial institution that provides nonpublic personal information only in accordance with specified requirements, and has not changed its policies and practices with regard to disclosing nonpublic personal information from those noted in the most recent disclosure sent to consumers. On March 21, Sen. Sherrod Brown (D-Ohio) introduced companion bill S.635, the Privacy Notice Modernization Act of 2013. That bill, which now has 35 cosponsors, was also referred to the Committee on Banking, Housing, and Urban Affairs. S.1029, the Regulatory Accountability Act of 2013 The bill, introduced May 23 by Sen. Rob Portman (R-Ohio) with eight bipartisan cosponsors, amends the federal regulatory process by specifying issues agencies must consider in a rulemaking, notice requirements, public comments, hearing procedures, judicial review and final rulemaking. It has been referred to the Committee on Homeland Security and Governmental Affairs. Sen. Portman introduced a similar bill during the last Congress.

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Pass SERVICE

u

INSIGHTS

CUSTOMER REVIEWS AND WORD OF MOUTH

It On

ARE CRUCIAL TO MARKETING YOUR

SERVICE DEPARTMENT – AND YOU CAN HELP THEM ALONG

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It’s a new era for many independent auto dealers. Unlike their franchise dealer counterparts, who have been in the vehicle service space for years, many independents are just now getting into the service and repair part of the industry – or are at least considering it. For those dealers, the most challenging aspect of the service business is getting customers through the door, and, once they come through the service department door, keeping them. There is a tremendous amount of competition for service customers, not only among auto dealers but with independent service centers and service centers affiliated with retail outlets such as Walmart and Sears. Even so, with the average age of a vehicle in the U.S. now at well over 11 years, it’s obvious consumers are trading less frequently and holding onto their well-built vehicles. And that makes service a tremendous potential profit center. When I say profit center, I’m not just referring to the obvious dollars earned on each service sale. The fact is, satisfied service customers have proven to be far more loyal to their selling dealership and are twice as likely to purchase their next vehicle from that dealership based on a high level of service after the sale. As the saying goes, “Sales gets to sell the first vehicle but it’s the service department that sells them thereafter.” Like many consumers, I receive numerous solicitations from various service departments and service centers in my mailbox very frequently, all offering me special pricing for oil changes, THE

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brake work and so on. Like many individuals, I toss them directly into the trash. Why? Because like many of today’s consumers, I’m not motivated by savings coupons for service. Coupons and discounts don’t drive consumers to service centers. Word of mouth does. A Harvard University study found the “grapevine” – that is, word of mouth – to be extremely effective in disseminating information rapidly and credibly as a means of communicating a message. More recently, a study conducted by Strathcom Marketing showed approximately 68 percent of consumers were influenced by peer reviews of auto-related products and services. From a personal standpoint, I make a great many purchases through the online buying service Amazon. com and I know I am greatly influenced by product reviews posted by current and past owners of the products I consider purchasing. But how do you get new customers in the door? That’s a great question, and peer reviews is the answer. You have to put yourself in a position where people want to say good things about the service you offer and, especially, about outstanding service they received that they were not expecting. Let’s be realistic. Good service is expected today, so reading on the front page, “ABC Dealer changed my oil today, did a nice job and did it fast” is not headline-making news. On the other hand, “ABC Dealer changed my oil today in less than 15 minutes and had me on my way so I was able to pick up my daughter from

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school without being late,” gets attention. It’s stories like this that can make a huge difference: “My car broke down one evening. I called my local dealership for help only to find they were closed for the evening. But I remembered the business card the service manager handed me with the promise that if there was ever anything he could do for me, give him a call, and he gave me his 24-hour cellphone number. Well, he meant what he said. I called the number, explained my plight and he came down to the dealership. Within just a few hours, he had me up and running.” That’s headline news in the land of WOM (that’s word of mouth for you laypeople). WOM marketing isn’t about mailers offering discounts and incentives – you can go broke that way. WOM is about satisfied customers telling others by any and all means available about how wonderful your service is. No one – and I mean, no one – remembers what kind of deal they got when they purchased their vehicle from you. But I promise you everyone remembers what kind of service they received. I hear from many dealers about “some customers that you can never make happy and who are just going to bad-mouth you no matter how hard you try to please them.” I say, yes, you’re right. Now get over it. That is why you must learn to manage your reputation. Yes, you can manage your reputation just like you manage your money – very carefully and regularly. You have got to have more people say good things about you in order to compensate for those individuals who will

inevitably say not-so-nice things about you. Managing your dealership’s service department reputation, quite frankly, can be a full-time position. Not only is it important to make sure you are aware of unhappy customer events, but someone has to address those unhappy events and circumstances head-on and fast. That individual must also find ways to make sure customers who are happy with your service are encouraged to write that in positive reviews about you. Common sense would suggest, “If I do nice things for my customers and go out of my way to make them happy, they’ll say nice things about me.” You know what? That’s not their job. Your customers have plenty of things to do other than sit around just waiting for the opportunity to tell people about you. You have to work at it. You must encourage them to spread the word. It’s not that your customers don’t want to say nice things about you. It’s just that no one ever told them they should. While consumers are quick to pull the trigger on you and spread the word about how bad an experience with your service department might have been, they are much, much slower to pull the trigger on the goodnews gun. That is where an effective blog comes in to play. Set up a forum for your customers to communicate with each other. Certainly everyone is aware of the power of the Internet so I’m not going to beat that horse to death at the moment (we’ll save that for another time). And take a closer look at your dealership to see how you can get people to talk about you. C O N T I N U E D O N PA G E 1 6

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You have to put yourself in a position where people want to say good things about the service you offer and, especially, about outstanding service they received that they were not expecting.

Pass It On

C O N T I N U E D F R O M PA G E 1 4

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Maybe you changed your hours of operation and now you are open later and/or earlier than anyone else in the market. Prove you are pricecompetitive and give specific examples. Get your sales team involved. That’s not an option – salespeople set the tempo for future service by encouraging the new vehicle owners to use your service department. Your salespeople must be told of the success stories you have enjoyed so they can pass those stories on to prospective buyers. So ask yourself: What have you taught your salespeople about your service department? What do they know about giving good service? In order to improve WOM

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marketing, start by making a conscientious effort – indeed, go out of your way – to make things happen. Stop talking about that one “accidental success.” Start talking about what you are actively doing to be sure you help people get back on the road. How are you helping the families of our military people manage their vehicles when their loved one is away from home for months at a time? If you have a program for military families, police and fire personnel, nurses, teachers, etc., did you create a press release and send it out to newspapers and other media? Stop with the humility. WOM is a business practice. When you do good, let

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everyone know about it. Are you holding special events in your service area teaching young people how to take care of their vehicle to get the best gas mileage and lowest operating and ownership costs? Are you being honest with service customers by no longer telling them they should get their oil changed every 3,000 miles? It’s not honest, and when your customers finally get around to reading their owner’s manuals, they’ll figure out that you misled them. After that, they won’t trust anything else you say. If you’re going to offer oil changes for $13, stop trying to upsell. Give your customers the oil change at the advertised price. Get them to trust you. When they come to your

dealership for a $13 oil change and end up leaving your dealership with a $76 service bill, they’ll stop trusting you. And one final note: Remember the most dangerous customer you will have is the dissatisfied customer who never complains about bad service. While you might think you got away with something, don’t forget that while the customer might not have complained about the negative service experience, that doesn’t mean he didn’t notice. He just will never come back.

BY JOE LESCOTA

JOE LESCOTA IS DIRECTOR OF DEALER DEVELOPMENT FOR THE NATIONAL INDEPENDENT AUTOMOBILE DEALERS ASSOCIATION AND INSTRUCTOR FOR NIADA’S CERTIFIED MASTER DEALER PROGRAM. HE CAN BE REACHED AT JOE@NIADA.COM.

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WHAT “THEY” DO u

BHPH PERSPECTIVES

“ TH E Y ” ARE TH E S U C C E S S F U L D E ALE R S , AN D H E RE ’S WHAT TH E Y S E E M T O DO A TAD B IT B E T TE R THAN TH E AVE R AG E J O E

I have the privilege and honor of traveling this great country of ours and working with Buy HerePay Here dealers of all shapes and sizes. But no matter where I am or what the dealer is like, I always get the same question. What do “they” do? The “they” they are asking about are the successful dealers. Now, the good thing about BHPH is there are a whole bunch of ways to do it. There is no one way that will work for everyone everywhere. The problem is there are just as many ways to do it wrong. But among the dealers who seem to do it a little bit better than everyone else, there are a few common denominators. A few things “they” seem to do a tad bit better than the average Joe. The first thing, and the most important, is people. Their overall people management makes them better, from hiring to training to pay plans to simply their employment environment.

They hire slow and fire fast. They hire who they want rather than having to hire who they need. They continually train their entire staffs. Their pay plans promote a team mentality. And they provide a professional but fun work environment. “They” do people very well. Next are processes and procedures. They have documented processes and procedures for most, if not all, of what happens in their organization. “Documented” is the key word here. They make sure those processes and procedures are implemented and adhered to on a consistent basis. They do it by continually training on them and updating them when necessary. “They” do processes and procedures well. Education is the next thing that sets them apart. They are always looking for ways to educate themselves. They belong to local, state and national dealer associations.

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They subscribe to as many trade publications as they can. They attend industry conventions and conferences. And they seek advice from industry consultants and are members of 20 Groups. “They” educate themselves well. Technology is something else they take advantage of. They not only have a DMS that can handle their needs, but they know how to use all it has to offer. They not only have a wellfunctioning website, but track and make changes when necessary. And they take full advantage of the World Wide Web, from collections to car buying to pre-employment testing. “They” are technologically savvy. Lastly, they plan. They know what their cash flow needs are. They budget for expenses. They project collections and sales. They do it not only on a monthly basis, but annually as well. And they do it based on

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Most dealers I know do at least one of those things, some even two or three, but only a few do all of them. And do them well. u

what they can do, not what they necessarily want to do. “They” plan effectively. That is what “they” do. I can assure you they didn’t always do those things. But they all realized at some point what it would take to be one of “them.” Most dealers I know do at least one of those things, some even two or three, but only a few do all of them. And do them well. How close are you to being one of “them”?

BY BRENT CARMICHAEL

BRENT CARMICHAEL IS EXECUTIVE CONFERENCE MODERATOR FOR NCM ASSOCIATES INC. HE CAN BE REACHED AT BCARMICHAEL@NCM20.COM.

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COMPLIANCE

OVERDRIVE

Dealer Lending Practices Remain in the Spotlight u

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IT’S TIME TO TAKE ACTION

In the last Compliance Overdrive column I discussed how indirect lending practices had recently come into the regulators’ spotlight, citing the March Bulletin issued by the Consumer Financial Protection Bureau. In the months since, news headlines have continued to illustrate how dealer lending practices face heightened scrutiny by banks and other lenders as a result of pressure from regulators. Strong lender relationships are among a successful dealership’s most valuable assets. In an effort to maintain good relationships, dealers can benefit from a better understanding of the regulatory landscape within which its lenders are making day-to-day credit decisions. Lender rules and restrictions have an impact not only on approvals but also on how quickly a customer’s loan application goes from origination to completion. In July, Wolters Kluwer Financial Services conducted a survey to identify top regulatory issues facing the industry. The survey of over 400 banking professionals showed the number one issue keeping them up at night from a regulatory standpoint was fair lending and other compliance concerns. Forty-six percent of the bank and credit union executives who responded indicated they have an overall concern with regulatory reform in general. Specific concerns cited include regulatory pressures from the Dodd-Frank Act, the CFPB and the vast landscape of ongoing rules and requirements taking effect across the industry. More than a third of respondents cited evolving consumer lending regulations as a primary concern. Recent enforcement actions offer further evidence that Equal Credit Opportunity Act or other potential fair lending violations are at the forefront on most lenders’ list of concerns. In September, the U.S. Department of Justice announced that it had settled a lawsuit alleging ECOA violations by an auto dealer. The case provides some insight into where regulators and enforcement THE

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agencies stand on enforcement of the ECOA. The suit involved an auto dealer and one of its lenders. The DOJ alleged that the dealer violated the ECOA by charging higher interest rate markups on car loans to a certain class of customers (race/national origin) than to others over a three year period. The case was settled and the dealer in question went out of business before the settlement was reached. But, in the consent decree the DOJ indicated if the dealer or its main shareholder decides to go back into business within a defined time period, it will be required to “implement clear guidelines for setting dealer markup and pricing, in compliance with ECOA, and establish appropriate fair lending training for its employees and officers.” Note that the enforcement path went through the auto dealer’s lender. The lender’s regulator, the Federal Reserve Board, noted issues as part of its examination of the lender’s indirect lending program. The FRB then referred the case to the DOJ. In 2009, the DOJ announced that the lender resolved allegations against it through a partial consent decree under which it is “prohibited from discriminating on the basis of race or national origin in any aspect of its automobile lending.” Now, four years later, the DOJ reached a settlement with the dealer involved. Recent industry publications have also reported that the CFPB and DOJ are probing the lending operations of some of the nation’s largest auto finance companies for possible lending discrimination under the ECOA. If true, it confirms regulator focus on ECOA and on auto lenders. Because any discrimination found in a lender portfolio will likely have taken place at the auto dealership, it is certain that lenders and other regulators will soon be focusing on dealer ECOA compliance. The CFPB’s March Bulletin outlines concerns over dealer discretion in setting consumer interest rates by auto lenders. The principal concern is the increased risk of dealers either

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intentionally discriminating against certain groups through higher rate markups or unintentionally discriminating against certain groups by its rate markups practices. Both could be ECOA violations for which dealers are accountable and for which their lenders may also be liable. The CFPB bulletin suggests that auto lenders simply provide dealers a flat fee for contract assignment/sales or that they stop sharing rate markup revenue with dealers. A flat fee solution would probably take the form of a lender paying a flat dollar amount to the dealer for any retail sales contract it purchases, regardless of whether the rate had been marked up and regardless of the amount that it had been marked up. The flat fee would be more like a finder’s fee for the dealer rather than a participation in, or sharing of, any additional markup revenue. It’s interesting to note that the recent DOJ settlement with an auto dealer did not prohibit rate markups or suggest using flat fees. Instead, it required the dealer to “implement clear guidelines for setting dealer markup and pricing, in compliance with ECOA.” The DOJ seems to still allow rate markups if they are subject to guidelines and controls. The CFPB bulletin also suggests that lenders engage in closer supervision or review of dealer ECOA compliance. In an August webinar cosponsored by the CFPB, the Federal Reserve Board and the U.S. Department of Justice, Patrice Ficklin, fair lending director for the CFPB, indicated that lenders may be liable for discrimination that takes place at a dealership whether or not they have knowledge of a particular offence and they are expected to analyze auto loans dealer by dealer as well as on an aggregated basis across the lender’s entire portfolio. The recent CFPB bulletin, DOJ lawsuit settlement and cosponsored webinar with multiple regulators are clear indications that ECOA compliance is a priority shared by a number of agencies with enforcement

authority over lenders and dealers. Again, it is certain that lenders and other regulators will soon be focusing on dealer ECOA compliance. So what should dealerships do in response to the ECOA focus? Prioritize and focus attention on your dealership’s ECOA compliance before your lender or regulator knocks on the door. Begin by taking at least the following steps: u Review your written ECOA policies and procedures to make sure they are consistent with ECOA requirements and that they are targeted to root out and prevent discrimination. Create written policies and procedures if you don’t already have them and regularly review and update them as needed. u Conduct regular ECOA training for your entire staff, officers and board. u Review your rate markup policies. Make sure that you have caps and/or other standards and controls in place to help reduce or eliminate the risk that rate markups are intentionally or unintentionally being applied to discriminate against certain groups based on race, color, national origin, age, gender, etc. u Review your employee compensation policies to make sure that they do not unintentionally fuel possible discriminatory behavior. u Review your credit records or otherwise conduct tests for any unexplained pricing disparities for different groups of credit applicants. You should also make sure that your ECOA compliance activities are recorded so that you have evidence of your efforts. As my colleague Ed Kramer, vice president of regulatory affairs for Wolters Kluwer Financial Services puts it, “You’ve got to demonstrate you are taking steps to stay compliant. If you don’t, it’s going to be really difficult to persuade regulators, or lenders, you are interested in being compliant.

BY CHIP ZYVOLOSKI

CHIP ZYVOLOSKI IS A SENIOR ATTORNEY FOR INDIRECT LENDING AT WOLTERS KLUWER FINANCIAL SERVICES. FOR MORE INFORMATION, VISIT WWW.WOLTERSKLUWERFS. COM/INDIRECT.

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