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SPARK PLUG MISSISSIPPI INDEPENDENT AUTO DEALERS

A S S O CIATI O N

MAY/JUNE 2013

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F E AT U R E S T O R Y

THE AFFORDABLE CARE ACT ROADMAP:

W H AT T O E X P E C T F O R Y O U R S M A L L B U S I N E S S

INSIDE u • PRESENTING YOUR PORTFOLIO • ON THE MOVE: MOBILE WEBSITES • COMPLIANCE OVERDRIVE

DALLAS, TEXAS Permit No. 2079

PAID

PRSRT Standard U.S. Postage

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MAGAZINE CONTENTS 04 08 10 12 18

ACA Roadmap Washington Update Presenting Your Portfolio On the Move: Mobile Websites Compliance Overdrive

WHAT’S NEW

Manheim recently released its 18th annual Used Car Market Report, which highlights 2012 industry trends and an outlook for 2013. A free download of the report is available for all NIADA Dealer Members at www.niada.com/dealers_edge.php

ADVERTISERS INDEX

ADESA, Inc. Inside Back Cover Ally..........................................................9 Manheim Pennsylvania.............................5 Manheim.com............... Inside Front Cover Protective................................................7 United Acceptance................................ 11 VAuto........................................Back Cover West Insurance Center.......................... 13

BOARD OF DIRECTORS Chairman of the Board Lester R. Howell 301 Clinton Blvd Clinton, MS 39056 601-924-3718

Secretary Steven Watkins 5660 I-55 South Byram, MS 39272 601-923-8600

President Jimmy Boling P.O. Box 1271 Grenada, MS 38901 662-227-5637

Treasurer Madalene Daniell 1500 Broadway Dr. Hattiesburg, MS 39402 601-264-2210

Vice President Aaron Williams 1428 Mississippi Dr. Waynesboro, MS 39367 601-735-3916

Executive Director Andrew Caldecott 601-951-7676 cell andrew@mississippiiada.com

MIADA OFFICE

ABC Baton Rouge Takes Shape

ABC BATON ROUGE WILL CONDUCT ITS FLEET/LEASE AND DEALER CONSIGNMENT SALE EVERY THURSDAY AT 10 A.M.

Auction Broadcasting Company has begun construction of its ABC Baton Rouge remarketing facility, located on the Baton Rouge International Airport property. In phase one, ABC Baton Rouge will feature six lanes on 30 acres of land. Auction Broadcasting Company CEO Mike Hockett said of the development, “Baton Rouge is a magnificent city with a greater metropolitan area serving over 1.1 million people. We certainly believe the progressive dealer base in this area deserves to have a first class operation in which to conduct their remarketing operations. We are proud to become a part of Louisiana and we are excited at the prospect of participating in the cultural, charitable, and religious life of this dynamic, growing area.” ABC Baton Rouge will conduct its fleet/lease and dealer consignment sale every Thursday at 10 a.m. The facility will be a full service auction with everything from a gourmet Cajun restaurant to mechanical and reconditioning departments. The location will be managed by industry veterans Butch Royall and Kevin Rembert. All of the auction lanes will stream Online Ringman simulcast through AuctionPipeline. ABC Baton Rouge will also post vehicles 24/7 on SmartAuction, OVE, and Openlane through Liquid Motors.

Auction Broadcasting Company LLC has auto auctions in Birmingham, Ala.; Bowling Green, Ky.; Toledo, Ohio; Lancaster, Pa.; Orlando, Fla. and St. Louis, Mo. For more information, visit www. auctionbroadcasting.com.

NATIONAL INDEPENDENT AUTOMOBILE DEALERS ASSOCIATION WWW.NIADA.COM • WWW.NIADA.TV NIADA HEADQUARTERS: 2521 BROWN BLVD. • ARLINGTON, TX 76006-5203 PHONE (817) 640-3838 FOR ADVERTISING INFORMATION CONTACT: TROY GRAFF (800) 682-3837 OR TROY@NIADA.COM.

The Spark Plug 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 Spark Plug, the Mississippi Independent Automobile Dealers Association, or the National Independent Automobile Dealers Association. Likewise, the appearance of advertisers, or their identification as members of NIADA, does not constitute an endorsement of the products or services featured. Copyright 2013 by NIADA Services, Inc. All rights reserved. STATE MAGAZINE MGR./SALES Troy Graff • troy@niada.com EDITORS Jennifer Carman • jenniferc@niada.com Andy Friedlander • andy@niada.com ART DIRECTOR Christy Haynes • christy@niada.com PRINTING Nieman Printing

CARFAX Mobile App Reaches 200,000 Downloads

THE CARFAX FOR DEALERS MOBILE APP HAS EXCEEDED 200,000 downloads by Android and iPhone users, the company announced in Feburary. Launched a year earlier, the app gives dealers mobile access to CARFAX information with a few screen taps. Dealers can scan a barcode or enter a 17-digit vehicle identification number to help quickly evaluate cars at acquisition and find ones their customers want. “When we’re buying vehicles at auction or taking trades on the lot, we always make sure to run them through the CARFAX mobile app,” said Patrick Sullivan, sales manager at Elite Auto Sales in Raleigh, N.C. “It helps us know what we’re getting and make sure there are no surprises when we retail those vehicles.” Access to CARFAX reports is a part of many dealers’ acquisition and retail process. Vehicles run through the CARFAX for Dealers app are automatically added to the dealer’s inventory manager at carfaxonline.com. CARFAX reports are saved for up to 30 days, and dealers can mark vehicles they’re most interested in as favorites within the app. “I love being able to check CARFAX right on my phone when we’re out buying cars,” said William Wessels, dealer principal at Wessels Used Cars in Dillsburg, Pa. “It’s a helpful instrument when we’re appraising cars, too. It helps us make faster, better decisions when we’re buying product.” The CARFAX for Dealers app is a free download from the App Store and Google Play. 3

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F E AT U R E S T O R Y

THE AFFORDABLE CARE ACT ROADMAP:

W H AT T O E X P E C T F O R Y O U R S M A L L B U S I N E S S

A S W I T H A N Y M A J O R C H A N G E I N P O L I C Y, T H E P R O S P E C T O F W H AT T H E A C A E N TA I L S C A N B E O V E R W H E L M I N G F O R S M A L L B U S I N E S S OWNERS WITH LIMITED RESOURCES.

The Patient Protection and Affordable Care Act (ACA), dubbed “Obamacare” by many, was signed into law on March 23, 2010, with the intent to reform the health care industry and provide affordable health coverage for more than 40 million uninsured Americans. Under the ACA, every legal resident of the United States who is not already covered by Medicare or an employerprovided health care plan will be eligible to purchase coverage through an online health insurance exchange. Today, smaller businesses are much less likely to offer health coverage to their employees than larger companies. In 2011, according to the Kaiser Family Foundation, 57 percent of small businesses with 50 or fewer workers offered health benefits to employees, compared to 92 percent of businesses with 51 to 100 workers, and 97 percent of businesses with 101 or more workers. Because of that, some provisions of the ACA will have a larger effect on small businesses, and their employees and families. Expectations of the impact on small businesses are mixed. Some anticipate employees’ hours being cut, costs being passed on to consumers or shareholders, a reduction in hiring and more out-of-pocket costs for larger businesses. Others see benefits for small businesses and their employees. For example, the ACA rewards employees at small companies by subsidizing their purchase of health insurance. According to Casey B. Mulligan, economics professor at the University of Chicago, since those employees can’t take the subsidies with them if they move to a large company, they are “in effect, subsidies to the small businesses themselves, helping them compete more cheaply in the market for employees.” Some provisions of the ACA are already in effect. Others will begin in 2014 and beyond. As with any major change in policy, the prospect of what the ACA entails can be overwhelming for small business owners

with limited resources. So what does the ACA mean for your business? PLANNING YOUR ROUTE: DETERMINE THE SIZE OF YOUR ORGANIZATION The ACA specifically exempts small businesses with fewer than 50 fulltime equivalent (FTE) employees. By some estimates, that means more than 90 percent of businesses will be not be subject to the Employer Shared Responsibility provisions of the ACA. Before you can begin to assess the impact on your business you must determine the size of your organization. Sounds simple, right? Well, not entirely. The ACA defines a full-time employee as an individual working at least 30 hours per week on average. However, for the purposes of calculating your organization’s size, you can’t simply count the number of full-time employees – part-time employees are also factored into the equation. In essence, you have to add up the hours of part-time employees. So, for example, 100 half-time employees equates to 50 FTEs. Similarly, 40 full-time and 20 half-time employees would also be considered equivalent to 50 FTEs. If you own more than one company, in most cases, that will also be taken into account. It’s a bit like an umbrella: If an entrepreneur owns five businesses and each business has 10 FTEs, together they are considered a large business with 50 FTEs, and all five businesses are subject to the Employer Shared Responsibility provisions – even though individually they would be exempt. Obviously, determining FTE counts will be more complex for some businesses than for others. Any businesses that fall close to the 50-employee threshold would be best served by working closely with their accountants to ensure counts are accurate rather than risk penalties for inadvertently being over the threshold. While the Employer Shared Responsibility provisions do not take effect until 2014, the provisions will be applied based on employee counts from 2013, so it’s important for businesses to start planning now.

OUTSIDE YOUR FRONT DOOR: WHAT’S ALREADY IN PLACE FOR 2013 Several provisions of the ACA are already in place, or will become effective in 2013. Those of most importance to small businesses include: Grandfathered group plans: Small businesses with insurance plans that were in place prior to March 23, 2010 may keep their current plan. According to the Kaiser Family Foundation, approximately 72 percent of businesses with 100 or fewer workers had at least one plan grandfathered under the ACA in 2011. Those plans are subject to fewer requirements when it comes to coverage levels and access. Under the grandfather provision, companies are even able to change insurance carriers, provided employee costs and benefits remain mostly the same. Grants for wellness programs: Certain small businesses that did not have a workplace wellness program in effect as of March 2010 are eligible for grants to start one. Additional Medicare tax: The additional medicare tax is a 0.9 percent tax increase that applies to an individual’s wages, Railroad Retirement Tax Act compensation and self-employment income above a threshold amount based on the individual’s filing status. Small businesses making less than $250,000 in taxable profit are exempt from the tax increase. Small Business Health Care Tax Credit, phase one: The Small Business Health Care Tax Credit helps certain small businesses and small tax-exempt organizations – particularly those with lowto moderate-income employees – afford the cost of covering their employees. From 2010 through 2013, if your company has fewer than 25 FTEs with average annual wages of less than $50,000 and you purchase health insurance for your employees, you might be eligible to receive a credit of up to 35 percent of your contribution toward employee health insurance premiums. Note: In March 2013, as a result of sequestration provisions, the refundable C O N T I N U E D O N PA G E 6

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FEATURE STORY

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

2014

portion of the Small Business Health Care Tax Credit for certain organizations was decreased by 8.7 percent pending the end of the fiscal year or intervening Congressional action. Flexible spending account (FSA) limits: While most small businesses don’t provide FSAs for their employees, those that do should note the new employee contribution cap of $2,500, effective in 2013. W-2 reporting: The ACA requires employers to report the cost of coverage under an employer-sponsored group health plan on an employee’s Form W-2. Many employers are eligible for transition relief for tax year 2012 and beyond, until the IRS issues final guidance for that reporting requirement. The amount reported does not affect tax liability, as the value of the employer-excludible contribution to health coverage continues to be excludible from an employee’s income and is not taxable. The reporting is for informational purposes only, to show employees the value of their health care benefits so they can be more informed consumers.

Businesses with less than 50 FTEs are exempt from the Employer Shared Responsibility provisions of the ACA. If you have more than 50 FTEs, here’s a quick checklist for 2014. •Keep track of full-time and full-time equivalent employee counts. •Offer health coverage to at least 95 percent of full-time employees no later than 90 days after start of employment. •Ensure employee health coverage meets affordability standards. For employee-only coverage, premiums that are no more than 9.5 percent of total wages as stated on the employee’s W-2. •Ensure employee health coverage meets the minimum coverage threshold. It must cover at least 60 percent of an employee’s medical costs; the balance can be made up of deductibles, co-pays, etc. •Provide verification of health coverage.

AROUND THE CORNER: WHAT TO EXPECT IN 2014 Insurance market changes: The health insurance market will undergo several reforms in 2014. • Plans must guarantee availability and renewal of coverage regardless of health status. • Young adults may remain on their parents’ insurance until age 26.

• Premium rating based on health status will be prohibited. • Adults may not be excluded from a plan because of a pre-existing condition. • Plans with a medical loss ratio of less than 80 percent will be required to give rebates to enrollees. Open enrollment for small business health insurance exchanges: Businesses with fewer than 50 FTEs (or 100 FTEs, in select states) will be able to purchase insurance through the Small Business Health Options Program (SHOP) exchange, which is designed to provide an easier way to compare prices and purchase plans. Employers can also purchase insurance outside of the exchange. Employer Shared Responsibility: Employers with more than 50 FTEs will be required to offer health coverage to their full-time employees and are subject to the Employer Shared Responsibility provisions. Those employers will likely be liable for financial penalties if any of their fulltime employees receives a tax credit to help pay for coverage on an exchange because: • The employer doesn’t offer health coverage. • The employer offers health coverage to less than 95 percent of its full-time employees, and as such a full-time employee wasn’t offered coverage. • The health coverage offered by the employer isn’t affordable. • The health coverage offered by the employer isn’t adequate. Remember, if you’re a small business with less than 50 FTEs or an employer who offers adequate and affordable health coverage, you will not be subject to the Employer Shared Responsibility provisions. Small Business Health Care Tax Credit, phase two: Small businesses with fewer than 25 FTEs that purchase insurance through the SHOP exchange can receive a tax credit for up to 50 percent of their contribution toward insurance premiums. Tax-exempt small businesses can receive a credit of 35 percent. THE LONG HAUL: 2015 AND BEYOND Employer Shared Responsibility payments: Employer Shared Responsibility liability for 2014 will begin being assessed in 2015. The IRS will contact employers to inform them of any potential liability and provide them an opportunity to respond before liability is assessed or notice and demand for payment is made. It is important to note that while part-time employees factor into the

determination of employer size, there is no penalty for not offering coverage to part-time employees. So if an employer with 40 full-time and 20 half-time employees fails to provide health coverage and is assessed the Employer Shared Responsibility payment, the amount due would be $2,000 times 10 employees – 40 full-time employees minus the 30-employee exclusion – or $20,000. Additional ACA provisions scheduled for 2015 and beyond include: • E xpanding the parameters of employer-provided health care to include dependents. • Auto-enrollment for companies with more than 200 employees. • Implementation of antidiscrimination provisions, which would prevent employers from offering different packages to employees based on seniority, job title/classification, compensation level or race/gender. • Choice of health plans for small business employees. • Ability for all businesses with 100 or fewer FTEs to purchase insurance through the SHOP exchange (effective in 2016). • Ability for businesses with more than 100 FTEs to purchase insurance through the SHOP exchange (effective in 2017). LOST? WHEN IN DOUBT, ASK FOR DIRECTIONS The ACA represents a major change in the way many businesses operate, and there are more than a few gray areas, so small businesses might find themselves with more questions than answers. Your best bet is to maintain a healthy relationship with your advisors: bankers, accountants, lawyers and association executives and partners. They’ll help keep you in the loop on any major changes that take effect and help you adjust your course as needed to ensure you don’t encounter any hazards along the way. Auctions and dealers looking for additional information regarding the ACA can view an online presentation developed by NAAA and the National Federation for Independent Business. Visit http://www. naaa.com/pages/naaa_events/events.html for more. Through December, National Independent Automobile Dealers Association (NIADA) members can also purchase a health insurance plan and lock in the plan and rate until the end of 2014. By locking in your plan today, you could save thousands in 2014. Visit NIADAHealthPlans.com or call 888308-9340 for additional information. Not a member? Visit www.niada.com today!

BY NIADA STAFF FROM INFORMATION PROVIDED BY NAAA

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WASHINGTON UPDATE

NIADA Government Report THE PUBLIC CAN SEE THE SPECIFIC DETAILS ABOUT WHAT CONSUMERS COMPLAINED ABOUT AND WHY, AS WELL AS HOW THE COMPANY RESPONDED

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

REGULATORY REPORT Consumer Financial Protection Bureau

Indirect lending guidance: The CFPB released a guidance document to lenders engaged in indirect auto lending, or dealerassisted financing. The document provides guidance about compliance with the Equal Credit Opportunity Act (ECOA) to lenders that engage in dealer-assisted financing, in which the dealer can adjust the interest rate at which the lender buys the contract. The CFPB believes because the dealer is compensated in the form of a dealer reserve, the markup and compensation policies create significant risk that pricing disparities based on race, national origin or other factors that violate the ECOA will result. The guidance document does not contend lenders or dealers intentionally discriminate against individuals on grounds that would violate the ECOA. Rather, the CFPB believes the current scope of dealerassisted financing could create a “disparate impact” statistically between different groups in a lender’s portfolio. In other words, when examining the entirety of a lender’s portfolio and looking at interest rates given to one race as opposed to another, the statistics could show a particular race received more favorable rates than another. If that is true, the CFPB opines, that would violate the ECOA. To prevent disparate impact, the CFPB tells indirect lenders to: • Impose controls on dealer markup and compensation policies and monitor the effects of the policies and controls to address unexplained pricing disparities on prohibited bases. • Eliminate the dealer’s discretion to mark up the rate and compensate dealers in a different manner, such as a flat fee. • Develop a robust fair lending compliance management program. The guidance document can be found at www.consumerfinance.gov. Consumer complaint database: The CFPB’s consumer complaint database went live March 28. There are roughly 90,000 complaints related to mortgages, student loans, bank accounts and services, other consumer loans and credit cards.

The public can see the specific details about what consumers complained about and why, as well as how the company responded – the timeliness of the response, what was done and whether the consumer disputed the company’s response. Complaints are not included in the database until the company responds or has had the complaint for at least 15 days, whichever comes first. The CFPB will not verify allegations in complaints before including them in the database, but will substantiate that a commercial relationship between a consumer and company exists before a complaint is added. More categories will be added to database as the CFPB accepts complaints about other financial products or services, such as credit reporting. The database is available at www. consumerfinance.gov/complaintdatabase.

FEDERAL TRADE COMMISSION

Used Car Rule: The extended comment period on the FTC’s proposed changes to the Used Car Rule ended March 13. NIADA submitted comments expressing our overall acceptance of the proposed changes with some minor suggestions. The comments also provided background on vehicle sales over the Internet and NIADA’s position that because there is no evidence of a prevalence of fraud in Internet sales, the FTC should decline to specifically regulate that area. Text messaging: In March, the FTC announced a crackdown on a series of scams built on text messages. Dealers must remember the same rules of advertising apply to text messages as other media. Likewise, marketing through text messages will subject dealers to additional federal and state telemarketing laws and regulations. Mobile payments: An FTC staff report highlighted the issues facing consumers and companies in the use of mobile payment systems, which is growing significantly. In using the technology, the FTC recommends companies: • Develop clear policies on how consumers can resolve disputes arising from a fraudulent mobile payment or unauthorized charge. • Adopt industry-wide measures to protect sensitive financial information. • Incorporate strong privacy practices, consumer choice and transparency into mobile payment products from the outset of the transaction. The report can be found at www.ftc.gov/

os/2013/03/130306mobilereport.pdf.

NATIONAL HIGHWAY TRAFFIC SAFETY ADMINISTRATION

NHTSA settled with a Honda power sport dealer in Tennessee over alleged violations stemming from a 2012 investigation. NHTSA alleged the dealership was made aware of recalls but failed to make any repairs prior to selling the vehicles. NHTSA inspected 329 motorcycles sold between 2007 and 2012. While how many vehicles were sold without necessary repairs was not disclosed, the dealer will pay $125,000 in the settlement. The penalty for failing to repair known defects is a maximum of $6,000 per vehicle.

LEGISLATIVE REPORT Rental Cars

The Boxer-Schumer rental cars recall bill has still not been introduced, but that is expected soon. Reportedly, the new bill will be the same one Sen. Chuck Schumer (D-N.Y.) and Sen. Barbara Boxer (D-Calif.) drafted at the end of the last Congress. It will not address concerns raised by various stakeholders, including NIADA. Hearings are expected after introduction. Rep. Lois Capps (D-Calif.) is expected to introduce an identical bill in the House. NIADA, in conjunction with NADA, has prepared an amendment that would exempt small businesses, as defined by Small Business Administration regulations. The net effect would be that the bill – which prohibits the sale or lease of rental vehicles subject to a recall without the defect being cured – would apply only to major rental car companies such as Avis, Hertz and Enterprise. NIADA met with Rosemary Shahin of Consumers for Auto Reliability and Safety, the primary proponent of the Boxer-Schumer bill. We posed a number of questions for which she had no answers, including: • What would be the cost to independent dealers (unknown but potentially burdensome)? • What is the magnitude of the safety incidents caused by the failure to fix recall defects (other than the California incident that sparked the bill, none have been documented)? • What is the impact of the bill on small businesses (unfair to put them in the same category as entities whose primary business is leasing or selling rental cars)? • What is the political support for such a requirement?

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INDUSTRY NEWS

Presenting Your Portfolio for the Most Floorplanning Dollars H AV I N G A F L O O R P L A N L I N E O F C R E D I T C A N H E L P YO U S E I Z E O P P O R T U N I T I E S A S T H E Y A R I S E .

The automotive industry is unique in that it is one of the few in which commercial loans are abundant and relatively easy to qualify for. Whether you are just starting out or looking to shift your business into the next gear, it is extremely likely you will be able to find the capital you need to stock your dealership. But while there is a good chance you will be able to acquire a floorplan line of credit, the size of that line of credit will vary depending on your business needs and your overall portfolio snapshot.

Floorplan 101: The Basics

First and foremost, to qualify for a floorplan, you need to have established credit. Specifically, you should have a history of using and repaying debt. Bad credit and “hiccups” on your credit report aren’t always deal-breakers, but they will likely reduce the amount you qualify for. Additionally, there is a good chance credit issues will have a negative impact on your pricing structure. The good news is that over time, with good performance coupled with adherence to the terms and conditions of any loan agreement, you can overcome those setbacks. It is also important that you are not overextended. If your credit cards are maxed out, that is a red flag even if you have not paid late. Handling your available credit responsibly is essential, so be sure to maintain a substantial amount of available credit.

Getting Started

Thinking about opening a dealership? You will want to set up a free consultation with the floorplan company of your choosing right away. Even if you are well capitalized out of the gate, having a floorplan line of credit is an amazing asset that can help you seize opportunities as they arise. If you aren’t well capitalized, you will probably be looking at starting with a smaller initial line of credit to get your business off the ground. As you turn inventory and build your reserves, submit a formal request for a credit line increase.

Growing Your Business

If you are looking to grow your business through the addition of a

floorplan line of credit, there are several other items that will play into the lending decision beyond your personal credit history. Trade references, business credit, equity, cash and the overall health of your business all come into the picture and become increasingly important in your effort to acquire more floorplanning dollars. The same principles apply if you are looking to increase your existing floorplan credit limit. However, there is another component that could either work in your favor or be held against you: performance. Commercial lenders have learned a lot about managing and mitigating risk, especially over the past several years. It is crucial to closely adhere to your lender’s terms and conditions. NSFs, late curtailments, slow payoffs and bad audits will inevitably prevent you from gaining the additional buying power you need to grow your business. Stay on top of managing your accounts and you will improve your chances of increasing credit limits. Also, those with substantial business equity should flaunt it. To a floorplan company, inventory that is owned outright is viewed similarly to cash and is a good indicator of the viability of your operation. Business equity exhibits an enhanced capacity to repay debt. When applying for a floorplan, take the time to validate your equity position. Your floorplan company might ask to see the titles and bills of sale for everything you currently own. Go with it. They might even ask to physically inspect your owned inventory. That will all play into your favor, as finance companies prefer lending to people that already have money. The more equity you have, the lower the perceived risk.

Heavy Hitters

• Income statement (current and prior year end). • Balance sheet (current and prior year end). As you can imagine, the larger the credit line request, the greater scrutiny you and your business will be given. Though you are welcome to provide a stack of photocopies, the best way to present your financials would be to scan them and send the digital files via email or USB thumb drive. Make sure everything is clearly labeled, and when applicable, provide more detail as opposed to less. Anything out of the ordinary should be accompanied by a letter of explanation. In addition to the basic requirements, or if you are requesting a large line of credit (more than $250,000) to stock a start-up dealership, you should be prepared to provide: • A resume for each owner/signer. • Photos of the dealership. • A business plan. • Pro forma financial statements.

Presenting Bank Statements

If you have had any NSFs, they will need to be explained in detail. Also, you want to make sure your business checking exhibits positive cash flow, meaning, in general, you have more money coming in than you have going out. Take note of your average daily balance to see if that figure is strong enough to support the line of credit you are requesting. In an ideal world, you would have at least 20 to 30 percent of your floorplan line of credit in your business checking account at all times. If you fall short of that mark, business equity via owned inventory can help bridge the gap.

Personal Financial Statement

When seeking a floorplan line of credit in excess of $250,000, both business and personal financials will typically need to be presented in addition to your standard business documents. Those financials typically include: • Personal financial statement (required for each owner/signer). • Personal tax return (two years, required for each owner/signer). • Business tax return (two years). • Business bank statements (three months).

When it comes to your personal financial statement, ideally you should have some liquid assets. Cash, 401Ks, IRAs, CDs and bonds are all desirable elements to have in your portfolio because they are accessible or you may be able to borrow against them if you need to. That is ideal because it demonstrates you have reserves in place to weather the storm should you encounter a few bad months or an unforeseen industry shift. A word of caution: Some dealer principals place an inordinate value on the shares of their dealership in their C O N T I N U E D O N N E X T PA G E

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personal financial statement. Though that might beef up your net worth, a floorplan lender probably will not take that into consideration. The real value of your business is predicated on what a buyer is willing to pay for it. Hence, the stated value on your personal financial statement is merely hypothetical. And bear in mind that if your dealership were to go into default, your shares probably wouldn’t be worth much at that point. Another item to keep in mind is that if all of your assets are in the form of equities against mortgaged real estate, you might encounter difficulties with potential lenders.

If your business isn’t building and growing, you probably shouldn’t be seeking more floorplan dollars. More flooring won’t turn around a failing business model. You would just be adding more fuel to the fire. Instead, focus on perfecting your operation.

Banks have become skeptical of real estate equities given the recent real estate crisis. High-dollar homes and commercial properties are slow to move and hard to appraise. Don’t exaggerate your real estate equity on your financial statements. Be realistic. Conversely, if your property is actually worth $500,000 and you only owe $100,000 on your mortgage, that would be an entirely different story. Having minimally leveraged or free and clear real assets should comfort a lender to some extent.

Income Statements

The income statement can be quite revealing, and often is used to help determine what the true business need is when it comes to setting a floorplan credit limit. For instance, if a dealer requested a $500,000 line of credit but only turned $500,000 in gross sales last year, that request would surely be denied unless there were some major material changes in the operation that justified the increase. Additionally, the statement shines a spotlight on the overall sophistication of the operation. If you are generating additional revenues from F&I products and repairs, for instance, that will all be

itemized on the statement.

Balance Sheet

Simply put, the less you owe and the more you own, the lower the credit risk. Again, banks like to lend when the probability of repayment is the highest. Having too few assets and too much debt can become a downward spiral towards insolvency. That ties into the overall viability of your operation. A thriving business should be building equity while reducing debt. A thriving dealer principal should be building net worth, not acquiring debt to keep his business above water. If your business isn’t building and growing, you probably shouldn’t be seeking more floorplan dollars. More flooring won’t turn around a failing business model. You would just be adding more fuel to the fire. Instead, focus on perfecting your operation. However, if your business is building equity and turning a profit, having some additional buying power can surely help you shift into the next gear.

BY GARRETT JOREWICZ

REGIONAL DIRECTOR FOR NEXTGEAR CAPITAL.

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INDUSTRY NEWS

On the Move A S CA R S HOP P ER S R AC E T O T H EI R S M A R T P H O N ES FO R I N FO R MAT I O N , A P OW ER F U L M O B I L E W EBS I T E CA N K EEP D EA LER S A H EA D O F T H E PAC K

It’s difficult to deny that power has slipped away from salespeople since car shoppers took to the Internet, but one advantage remains: Dealers are consumers, too. Virtually every dealer in America has researched and shopped for his or her own vehicle. The odds are pretty good that as you read this, you have a mobile device in your pocket – and you’ve used it to do product research online. Some say that’s the reason dealers are adapting to their customers’ use of mobile devices more quickly than they adapted to Internet use on personal computers. Jose Puente, director of mobile products for AutoTrader.com, is one of them. In the early days of the Internet, Puente said, not every car dealer had a PC. “But dealers themselves are actually users of mobile devices in their personal lives,” Puente said. “It’s easier for dealers to accept the evolution of mobile computing in the car shopping process.” In recent months, that evolution has become an explosion. The way we browse the web is changing at an astonishing pace. In the last quarter of 2012, digital marketing agency Walker Sands reported, mobile traffic accounted for 23 percent of total web traffic in the United States. What’s perhaps more telling is that less than two years earlier, the percentage had been six percent. Since January 2011, the agency reported, U.S. mobile traffic had increased a stunning 283 percent. Why the sudden explosion? As manufacturing methods improve and cell carriers continue their price wars, major carriers like Verizon and AT&T have started offering free touchscreen smartphones to new customers who sign a two-year contract. In Bessemer, Ala., a lower-income suburb of Birmingham where Roderick Underwood sells pre-owned vehicles for Anthony Underwood Automotive, some customers may have never owned a personal computer, but they’re now doing plenty of dealership research from their mobile devices. “I’ve seen customers that I’m talking with and while I’m talking to them,

they have my website on their phone,” Underwood said. This sea change in consumer behavior is having a major impact on the auto industry. For one, Puente said, mobile devices have given customers significant leverage by allowing them to virtually shop at other dealerships while they’re still physically on your lot. In 2013, he said, auto shoppers “understand more about their options than ever before.” It’s another reason why the T-word – transparency – isn’t going away. According to Florian Zettelmeyer, professor of marketing at the Northwestern University School of Management and a frequent speaker at auto marketing events, “The issue is not how to try to fight transparency. The issue is about how to figure out ways to turn transparency into a profitable endeavor.” With that in mind, here are some rules for drawing more leads to your dealership from mobile devices: Make sure your site is easily viewed and navigated from a mobile device: Some of the most impressive dealer websites you’ll ever see on a computer – you know, the “Luxury and Exotic” numbers with an Aston Martin screeching across the banner in a pulse-pounding animated introduction – are some of the most frustrating to mobile shoppers. A movie that takes a couple seconds to load on your home computer might leave your customer waiting for minutes on a phone, if it even loads at all. Customers have less patience for waiting on a mobile site than when they’re sitting in front of a computer, Puente said. That makes large media files a no-no. Furthermore, text links and small buttons that work effectively on computers are often unreadable on a mobile screen, or too small for a mobile shopper to tap accurately. Today’s best dealer website providers recognize these problems. So they redirect mobile visitors to a different version of the site, one with large, simple buttons and stripped-down graphics. Typically, those mobile websites use the same tap-and-swipe list navigation employed by iPhone or Android apps, so they’re instantly familiar to users. And though they might not have all the flashy

bells and whistles of traditional websites, some experts see that as a good thing. “Some of the best consultants in the website design space are trying to get people to adopt mobile design principles on their principal website,” Zettelmeyer explained. “I would think of mobile as a terrific opportunity to de-clutter. … It just imposes discipline on design.” Capitalize on the strengths of the mobile platform: Mobile devices have certain unique strengths, and it’s wise to use them to your advantage when building your mobile site. For example, smartphone browsers automatically convert phone numbers into links that launch a call when touched. But you can encourage more visitors to call your dealership by including large, graphical call buttons on your home page and every inventory page. Most mobile devices also have a GPS, which means customers can get directions to your dealership. But you can make it easier for them by placing code on your mobile website that launches an app for directions, rather than accessing them through a browser. Ask your mobile website provider if it does that automatically. That way is usually faster and enables useful features like voice-guided navigation and automatic recalculation of directions if the driver veers off course. Puente said text-based contact forms still have their place on a mobile website, but mobile visitors aren’t as willing to complete them if they’re lengthy. “If you go beyond two screens for [a mobile form], you’re probably not going to get a lot of conversions,” Puente said. Don’t cut any functionality on your existing website from the mobile version: As mobile use entered auto dealers’ radar during the past few years, some assumed those visitors were a different type of customer – one that was already on the road, and thus closer to buying. For that reason, many of the first mobile websites for auto dealers were strippeddown versions of the dealer’s full website, focusing mostly on available inventory. However, that view has been challenged by recent research from J.D. Power and Associates. A study published in January C O N T I N U E D O N PA G E 1 4

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NIADA Dealer 20 Groups

Do you feel like you’re constantly trying to reinvent the wheel? Does it seem like you’ve tried everything you can think of to take your dealership to the next level? Maybe it’s time for a different approach. With NIADA Dealer 20 Groups, you can share successful business ideas and best business practices with other dealers from across the country. While some Dealer 20 Groups focus on resort locations and exotic travel, NIADA 20 Groups aren’t about location. Rather, they’re a cost-effective investment in yourself and your dealership. Whether your dealership is large or small, retail or Buy Here-Pay Here, NIADA 20 Groups are committed to guiding you to serious solutions for greater dealership profitability. NIADA 20 Groups aren’t static classroom sessions. They’re not about lectures, seminars or boring power point presentations. Rather, the power of our 20 Groups comes from the dealers themselves, working together and sharing ideas and real world experience with each other. You’ll be matched with dealers of like size and sales volume from noncompeting markets; dealers, working together with one goal in mind: increase success and improve net profitability. Together, you’ll help each other improve day-to-day operations, increase sales, manage expenses, control inventory, and more. Sessions are moderated by Joe Lescota, NIADA Director of Dealer Development and former retail automotive executive with more than 25 years of frontline dealership, selling, management and training experience. NIADA Dealer 20 Groups traditionally meet on weekends, to minimize time away from the pressing day-to-day business needs of your dealership, and are held at various locations across the country. Being part of a 20 Group takes only 12 hours of your time, three times a year, and provides a rare opportunity to share ideas and evaluate your dealership’s performance with people who truly understand your business – because they’re just like you. Take the next step toward achieving, and maybe even exceeding, your business goals by signing up for an NIADA Dealer 20 Group today. For more information, visit www.niada.com or contact georgia@ niada.com.

Private Party Sales Still Down, But Expected to Come Back

ACCORDING TO ART SPINELLA, PRESIDENT OF CNW RESEARCH, February’s slight projected increase in retail used vehicles sales – about 0.3% – is a decent showing given the strength of the used-car market a year ago and the fact February had an extra day in 2012 due to the leap year. Used car sales should be near $2 million, with franchised dealers leading the marketplace. CNW also noted: Franchised Dealers Sold Approximately 714,000 Units and Independents Approximately 700,000: Private party sales continue to be weaker than dealers, down 9.6% in opening days of February. Dealers Skimming Cream of Crop, Leaving Less Desirable Units for Private Party: CNW expects private party sales to rebound in second quarter of 2013. Used Prices Continue to be Weak, with Little Sign of Rebounding: Franchised and independents were only getting 93% and 92.7% of asking prices.

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INDUSTRY NEWS

On the Move

C O N T I N U E D F R O M PA G E 1 2

revealed consumers are more likely to view automotive information on a mobile device at home (37 percent) than while they’re shopping or running errands (16 percent). The same research suggests when shoppers do use their devices from the road, they’re not simply comparing prices. Mobile shoppers outside the home are “continuing to look at the attributes of the vehicle, the auctions, the specifications – things that more typically we’ve done at home on our computers,” J.D. Power senior director of automotive media and marketing solutions Arianne Walker said. Zettelmeyer said the tendency to look at mobile shoppers as a different audience stems from a long history of retailers grouping shoppers into “channels” based on how they make contact. “But from the consumer’s point of view, [the channels] aren’t different things,” he said. “They’re the same things, just at different stages or different times.” Because it’s hard to predict what mobile visitors are looking for, Walker argued, it’s important to carry all the capabilities of your original website over to the mobile version. “Any [function] dealers have on their traditional website, if there’s a way to get it onto their mobile website, they should,” Zettelmeyer said. Direct tablet users to your full website, but make it touch-friendly: In addition to their desktop and mobile sites, some auto manufacturers have even created a third site specifically for tablets. But Walker and Puente agreed that isn’t necessary for most dealers. “You want to think about one site for the larger form factor, and one size for the smaller form factor,” Walker said. Because most tablets are large enough to display regular websites effectively, dealers might want to make sure the navigation buttons on their existing site are large enough to be used on the most popular tablets. Mini-tablets like the iPad Mini and Galaxy Note II have made the line more blurry, Walker said, but most models will automatically display the website type that will work best on their screen size. Go beyond the mobile website: While creating a touch-navigated website is a great way to reach more mobile shoppers, it’s far from the only way. For years, dealers have experimented

with using text messages to reach customers. It’s a captivating idea, since countless studies and common sense have shown people read texts much more often than they open emails. But Walker said dealers must tread carefully. “Consumers want to be reached to be communicated with on their time, not on the dealer’s time,” Walker said. “Phone calls and emails are still generally preferred.” And sending marketing messages to a private number without explicit permission can land you in a heap of legal trouble, according to Puente, who said he’s seen dealers hit with expensive lawsuits for violating consumer privacy laws. Walker recommended providing a choice for customers to opt in to text messaging on your website or in vehicle paperwork, but not to push it aggressively. Puente agreed, suggesting text messages can be used effectively to alert service customers of an upcoming appointment or when their vehicle is ready for pickup. Walker added that online chat, a technology that lets dealers communicate with people live as they browse the website, can be particularly useful as it becomes capable of reaching mobile browsers. Contact at Once!, a popular live chat service for dealers, touts studies on its website that indicate auto shoppers are less intimidated by a chat message than a phone call, and that chatting with a salesperson makes a website visitor more likely to visit the dealership. “I love online chat,” Walker said. “There aren’t a ton of people doing it yet, but I think that’s going to pick up in the future, especially as you have more millennials coming into the marketplace.” And there are more creative ideas. Puente said some dealers have added calls to action on each vehicle sticker, encouraging customers to text a number for more information on that vehicle. Underwood said his dealership provides the same opportunity with QR codes – symbols that can be scanned by certain mobile apps to launch the vehicle’s website listing. Take advantage of your employees’ mobile devices to make work more efficient: Mobile devices are great tools for consumers, but they can also be useful for your daily tasks. For example, everyone knows how critical it is to have good inventory photos on your website. It’s not hard to take

the pictures with a digital camera, but then you have to wrestle with downloading them to a computer and matching them to the right vehicle in your inventory system, provided you found the right cord and installed the right drivers. Underwood said even minor troubleshooting can trip up the process on a busy day. “The salespeople are not going to do it,” he said. Mobile apps are making those hassles obsolete, and several dealer software developers now provide them as a free sidekick to the desktop program. They can connect to your system and wirelessly upload photos taken on your mobile device. Some can even read the VIN off the vehicle, create a new inventory item and attach a series of photos to it. As mobile data speeds improve, video uploading will likely be next. VIN scanning technology also makes it much easier to evaluate vehicles at auction, improving the quality of your inventory. CARFAX and AutoCheck have developed apps for running vehicle history checks from the road, and their reports can be accessed from thirdparty apps as well. Is It Really That Important? While there’s some disagreement about how a dealer’s mobile marketing strategy should look, vehicle marketing experts agree having a mobile website is absolutely essential. “It’s more important than your full website,” Puente said. Underwood said he believes his dealership’s mobile website makes a difference, especially because some of his competitors don’t have one. “If [a shopper is] at another dealership and they know they can go to our website on the phone and pull up our inventory,” he said, “that gives us a huge advantage.” Walker agreed. “There are so many dealers out there that haven’t done it, and they’re going to get further and further behind if they don’t catch up soon,” she said. “You don’t want a consumer to have to go somewhere else to get content that you already have just because they can’t look at it easily on a smartphone.”

BY ALEX BRAUN

ALEX BRAUN IS MARKETING MANAGER FOR AUTOMANAGER, A PROVIDER OF INTEGRATED DEALER MANAGEMENT SOFTWARE, DEALER WEBSITES AND ONLINE VEHICLE MARKETING. HE CAN BE REACHED AT ALEX@ AUTOMANAGER.COM.

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A MESSAGE FROM NIADA’S CEO

The Power of Association

As an independent automobile dealer, it can be very easy to get caught up in the hectic day-to-day reality of selling vehicles and operating a business. That’s why we’re all here, right? Well, yes, but… There is a bigger picture, as well. And that’s why NIADA and your state association are here. We are the only non-profit associations in the automotive industry representing you and your business as an independent auto dealer. What does that mean? It means that in perhaps the most regulated industry in the nation, under scrutiny by everyone from the FTC to the CFPB to IRS to the state attorney general’s office and DMV, there’s someone looking out for you. NIADA has a strong presence in Washington D.C., making sure your voice is heard all the way up to the highest levels, making sure the needs of dealers are understood and considered by lawmakers and regulators. And through our affiliated state associations, we have a similar presence in state legislatures across the country. We’re constantly working to protect your interests and your business. But there’s one thing we need to continue those efforts: You! Without our members, without the support and input of our dealers, there is no NIADA, no state association, no Washington presence, no lobbying – in short, no one to represent you. As a member of NIADA, you provide the power that transforms one small voice into a formidable force that must be listened to. We’ve seen it work again and again. For example, last year NIADA turned the full force of its resources loose in California to battle legislation that targeted Buy Here-Pay Here dealers with a series of suffocating regulations. Information became our ammunition in a long, difficult war to get the word out about what the new law would really mean to dealers and the consuming public. And in the end, we prevailed. Gov. Jerry Brown vetoed California Senate Bill 956, saying he was “not yet convinced the evidence merits the regulatory oversight of this bill.” There are, of course, many other reasons to be an NIADA member. Our members receive preferred services and discounts from top industry vendors, spanning the range from financial services and insurance to auto parts to vehicle transport to office supplies and everything in between. We offer some of the industry’s most respected dealer education programs, including the acclaimed Certified Master Dealer program, our new NIADA 20 Groups and a wide array of education sessions available at our annual Convention and Expo as well as online at NIADA.TV. Your state association offers many additional member benefit opportunities as well. All of those are terrific reasons for maintaining your membership – they’re all designed to make your dealership stronger, more efficient and more profitable. But the reason we’re really here – the reason NIADA was founded in the first place, back in 1946 – is to turn an all too easily dismissed “me” into an impossible to ignore “us.” And for that, we need you! If you’re a member, we thank you for your support. If you’re not a member, the time to join is now – just visit www.niada. com. Your annual dues provide you with dual membership in both the national and state associations. Join today and become part of the power of “Association.”

BY MICHAEL LINN

MISSISSIPPI’S USED AUTO DEALER PRE-LICENSING SEMINAR Required by the Department of Revenue Seminar Location: MIADA Home Office 1705-A Old Whitfield Road Pearl, MS 39208 Office: (601) 939-9866 Fax: (601) 939-9882 Seminar dates are as follows:

q May 11, 2013, 8 a.m.-5 p.m. q June 15, 2013, 8 a.m.-5 p.m. q July 20, 2013, 8 a.m.-5 p.m. Registration Fee – $250 Please submit registrations with payment to MIADA at least seven days prior to the date of the seminar you plan to attend. Registration fee includes dealer manual. Your seat will be reserved and certificates will be received at the end of the seminar. Registration Fee does not include MIADA membership. Late Registration Fee – $25 Late registrations are accepted the week before class and walk-ins are accepted on the morning of class. However, a late fee is applied to the original registration fee. *On the day of the seminar, No checks will be accepted.* Transfer Fee – $50 If you wish to transfer your registration to another scheduled seminar date, a 72-hour notice is required and a transfer fee is applied. Cancellations – $50 All cancellations are to be made 72 hours in advance in order to receive a refund, minus the cancellation fee. *Please Note* Due to limited and reserved seating, we Can Not allow sit-ins.

Full Name_______________________________________________________________ Address________________________________________________________________ City___________________________State__________________Zip________________ Phone______________________________Fax_________________________________ Email __________________________________________________________________ Business Name__________________________________________________________ Address________________________________________________________________ City___________________________State__________________Zip________________ Phone______________________________Fax_________________________________ Email __________________________________________________________________ Payment Method ___Check Enclosed

___Money Order

___VISA

___MC

___DISC

___AMEX

Account #________________________________________________________

Exp________________

Account Name____________________________________________________

Zip_______________

Registration Fee $_________________ + C/C Proc. Fee $ 3.50 = Transaction Total $___________________ Signature of Authorization______________________________________________________________________

Aimee Smith Pruitt is MIADA’s Pre-licensing education specialist. With more than five years experience in pre-owned dealership management and more than four years in education development and instruction for MIADA, she is our greatest asset. She has made major contributions to the curriculum that was first offered in July 2007. Education class participants continually rate this class as superior.

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Business Name _______________________________________________________

M E M B E R A P P L I C AT I O N

Owner (s) _____________________________________________________________ Address_______________________________________________________________ City, State, Zip_________________________________________________________ Phone ___________________________Fax__________________________________ Email _________________________________________________________________

THE ASSOCIATION YOU CAN COUNT ON! Membership dues are $250 annually. Use your coupon book and other discounts and the membership pays for itself! There is so much more… All the help you need could be a phone call away. We look forward to serving you and helping make your dealership a SUCCESS!

JOIN NOW!

Payment Method:

q

VISA

q

MC

q

q

DISC

AMEX

q

Check Enclosed

Account #__________________________________________Exp._______________ Account Name______________________________________ Zip_______________ Signature of Authorization_____________________________________________ Can associate members contact you for services?

Yes

q or

No

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MIADA 1705-A Old Whitfield Rd. Pearl, MS. 39208 Phone 601-939-9866 Fax 601-939-9882

MIADA AUCTION MEMBERS ADESA Memphis 5400 Getwell Road Memphis, TN 38118 901-365-6300

Manheim Mississippi 7510 US Highway 49 Hattiesburg, MS 39402 601-269-7550

Dealers Auto Auction 6723 Highway 51 North Horn Lake, MS 38637 662-393-0500

Manheim New Orleans 61077 St. Tammany Slidell, LA 70460 985-643-2061

Dixie Auto Auction 15673 Highway 8 West Grenada, MS 38901 662-226-5637

Mid-South Auction 1657 Old Whitfield Road Pearl, MS 39208 601-956-2700

Insurance Auto Auction 100 Beasley Road Jackson, MS 39206 601-956-2787

Oak View Auto Auction 13451 Florida Blvd Baton Rouge, LA 70815 225-272-5139

Long Beach Auto Auction 8494 County Farm Road Long Beach, MS 39560 228-452-2030

Tupelo Auto Auction 717 Westmoreland Drive Tupelo, MS 38801 662-841-0622

Louisiana’s 1st Choice Auto Auction 18310 Woodscale Road Hammond, LA 70401 985-345-3302 17

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COMPLIANCE OVERDRIVE

Is it Time to Review Your Dealership’s Compliance Practices? THE LAWS AND REGULATIONS REQUIRE DEALERS TO CREATE AND FOLLOW REASONABLE PRACTICES BASED ON THEIR UNIQUE BUSINESS CONDITIONS.

As many state legislative sessions wrap up at midyear, lenders and dealers must begin watching for legislative summaries – and maybe new legislation and requirements that will be taking effect soon. Facing a regulatory landscape that continually seems to move faster and grow in complexity, dealers must be even more vigilant in making sure laws and regulations are being embedded within their business. In some cases, the laws and regulations tell us exactly what needs to be done. For example, a disclosure using specific words in a specific type size must be given to consumers at a specific time. But in other areas, the laws and regulations require dealers to create and follow reasonable practices based on their unique business conditions. Those types of requirements can be challenging to meet because they evolve as your business and the industry changes. Certain areas, though, deserve continual focus, including regular reviews of policies, procedures and processes.

Information/Data Security

Some of the most obvious risks for dealerships are related to information and data security. Dealers must view identity theft as an accident that’s always waiting to happen because of to the various types of personal and financial information they manage for their customers. Hundreds of people can walk through dealers’ sales floors, which in many cases are open, with some sales desks located in the showroom. Is your staff diligent about making sure sensitive customer information isn’t left sitting out on a desk or up on a computer screen so anyone walking by can view it? Is anyone within earshot when a potential customer is verbally providing personal information? That includes not only dealership visitors, but also employees who should not have access to specific data. In short, your information security program needs to start on the sales lot and in the showroom. Your Red Flags program should already address potential security risks, at least as they relate to potential identify theft. The Red Flags Rule

requires each dealer to have a program designed to detect, prevent and mitigate identity theft in connection with opening or maintaining an account involving an extension of credit. Reasonable program activities will evolve as technology and business practices change and as identity theft techniques and vulnerabilities change. So compliance with the Red Flags Rule will always be an evolving standard. Make sure you have data security and ID theft programs and policies. Make sure you follow them. And make sure you regularly review and update them – even if there isn’t a law or regulation change reminding you to do so.

Employee Security

Depending on the employee’s role, that might be critical employment-related information.

Content Security

Along those same lines, dealers need to be mindful of processes related to employee security. It must be clearly defined which employees have access to what. In your dealership, are F&I files password-protected so only certain employees can access them? Sales team members might need limited access to information to determine a potential buyer’s creditworthiness, but does the receptionist really need access to the same information and tools? Are there clear parameters for who has access to different types of information? Are those policies communicated and understood among employees? Employee security also involves background checks and other operational issues related to hiring and firing employees. Dealerships should use background checks in their hiring process in addition to checking references and other representations a candidate provides. Be thorough. For example, instead of just doing a criminal record check for the county where the applicant lives or the dealership is located, consider expanding it to the entire state. You should also review states of prior residence for the past several years. Remember to re-run background checks (or at least the criminal background check) periodically to note any changes. If an employee is arrested after employment begins, he or she might not tell you about it. If you don’t re-run criminal background checks, how will you find out an existing employee was convicted of misdemeanor shoplifting or DWI (with suspension of driver’s license)?

While the risks mentioned so far might seem somewhat obvious, other risks are more subtle, such as access to template documentation. Though blank standard documentation might not contain personal information about customers, they could present opportunities for criminals. For example, even without access to customer personal data, a thief might be able to create fraudulent transactions if he or she has access to preprinted retail sales contracts or the software that generates them. Dealers should consider restricting access to blank standard documents even though they don’t contain personal customer data.

Information Retention

A critical area of focus for customer personal information is protecting it at the time it’s provided by credit applicants and the points the information is transmitted to others as part of the credit analysis process. But dealers also need to focus on their retention of that information during the credit processing period and afterward. Red Flags programs should include procedures to protect personal information during and after the credit process and transaction closing. Protecting that information long after the sale requires as much vigilance as the protection you provide during the credit processing phase. All of this reminds us some compliance requirements evolve with changing business practices and technologies. It’s important to regularly review compliance efforts for these kinds of requirements even if they aren’t revised by law or regulation changes this year. The theme of this year’s NIADA Convention and Expo is “New Strategies for Tomorrow.” The world moves faster every day. Are you ready for what tomorrow brings? Knowing your dealership is continually working to mitigate business and compliance risks can bring peace of mind when considering your own preparedness.

BY CHIP ZYVOLOSKI

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

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