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DEALER NEWS OCTOBER/NOVEMBER 2013

MAGAZINE

Time is Money

C O V E R S T O RY PA G E 4

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• S E RV I N G Y O U R I N D E P E N D E N C E • IT’S ABOUT TIME • WA S H I N G T O N U P D AT E

DALLAS, TEXAS Permit No. 2079

PAID

PRSRT Standard U.S. Postage

V I S I T

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Serving Your Independence

INSIDE 04 08 12 18

Contracts in Transit Keep Calm and Join NIADA Washington Update Compliance Overdrive

WHAT’S NEW

No time to train your staff on compliance? NIADA has the solution.

• Get 24/7 access to training videos and quizzes for your entire staff • Download industry-specific policy documents and agreements • Track and report on training to satisfy federal requirements Train. Document. Track. Visit www.niadadealercompliance.com to get started today!

ADVERTISERS INDEX

ADESA................................Inside Back Cover Ally...................................................................7 AutoManager................................................11 Lobel Financial................................................9 Manheim.com ...................Inside Front Cover Protective........................................................5 United Acceptance.......................................13. VAuto ............................................ Back Cover

OFFICE

FOR INFORMATION ON HOW TO BECOME A MEMBER PLEASE CONTACT CINDY SIRKEL. CINDY@NIADA.COM • 800-756-4232 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 Nevada Dealer News 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 Nevada Dealer News 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

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

ART DIRECTOR

Christy Haynes • christy@niada.com

PRINTING

Nieman Printing

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Independent car dealers exemplify the entrepreneurial spirit that makes this country special, but they also have a distinct set of marketing, operational and product needs. Along with managing operational budgets without a manufacturer’s oversight, marketing a more diverse inventory of used vehicles and handling in-house financing, independents, like franchise dealers, must also manage financial risk and guarantee the best possible customer experience. Selecting a vehicle service contract provider that meets your unique needs can help accomplish both goals. Look for Levels u Each customer has unique ownership and driving patterns, so why minimize their purchasing power and your dealership’s earning opportunity by offering coverage levels that aren’t the best fit? Look for a vehicle service contract that offers several levels of coverage and terms. Providing at least three layers of protection is an industry best practice. “Stated-component coverage” lists exactly which parts are included. At its most basic, it can be limited to the engine, transmission and drive assembly, but it can be expanded to include other critical components and their parts, including brakes, suspension, steering, electrical and more. “Exclusionary coverage” would be the top-of-the-line offering, covering all vehicle parts not specifically listed in the contract as excluded. Pinpoint the Product u While the foundation of the service contract industry is offering extended coverage that can last for several years of ownership, you might find shorter is better – especially for buyers who are payment-conscious. A service contract provider should offer a series of short-term options, from three to 12 months and from 3,000 to 12,000 miles. That could be combined with long-term plans that offer coverage up to 125,000 miles. That will not only make it easier and more efficient for your F&I manager, it will also increase the probability of finding an option a customer wants to purchase. Ratings Game u A web-based rating tool to determine the cost of a customer’s contract can be an F&I manager’s best friend. Static rate charts do not provide the necessary flexibility when comparing rates. The right service contract provider will have hundreds of term and deductible options available. Those options need to be displayed at the click of a button, not by shuffling papers. Sizing Up the Sales Material u Independent dealers should select a service contract company that can provide accurate, informational and vibrant pointof-sale material. It should be easy to display on or inside a vehicle or throughout the dealership. Quality sales collateral saves valuable time for both your sales and F&I

personnel, as the key messages in the materials often provide a starting point in customer communications, especially for those new to the product. The Case for Claims u After the “honeymoon” phase of selling a vehicle is over, dealers quickly get to know the true value of their service contract provider. If you have your own repair shop, a smooth experience during the claims administration process is important to your operation and to customer satisfaction. The service manager’s claims experience should begin with the pickup of his call in 10 seconds or less. To make the process more efficient, all claims adjusters should have experience as an employee at a car dealership – preferably in the service department – and not just at a generic call center. The less time your service manager is on hold or explaining repair issues, the more can be dedicated to processing orders to increase your bottom line. Time is money. People Power u The people behind your service contract should not be faceless names or corporate suits tucked in an office on the other side of the country. To satisfy your needs – both planned and unplanned – you should have access to someone in your area. The representative should have the ability to assist with the installation and administration of the service contract, and to train your team on techniques to increase sales and customer satisfaction. Regularly scheduled visits allow them to get a feel for the distinct needs of your dealership and give you the opportunity to discuss any questions you have about the service contract program. Strength in Numbers u The vendor’s financial strength is a must for a successful partnership, especially in the current economic climate. Research and track its financial history to ensure a high level of stability. That’s especially important for products such as extended service contracts, which can obligate your dealership for several years. A service contract company should be supported by billions of dollars in corporate assets and have an A-rating by A.M. Best Company. That financial strength gives you and your customers peace of mind that the contract will always be a benefit to your dealership, not a liability. Independent dealers have individual goals and specific issues that need to be respected and addressed. These best practices for selecting a service contract provider can direct you toward a destination that can directly benefit your entire dealership.

F&I M AT TERS

HOW TO IDENTIFY A SERVICE CONTRACT THAT MEET S THE UNIQUE NEEDS OF YOUR DEALERSHIP

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BY ALAN MILLER

ALAN MILLER, SENIOR VICE PRESIDENT OF SALES FOR CNA NATIONAL WARRANTY CORPORATION (WWW.CNANATIONAL.COM), HAS 25 YEARS OF AUTOMOTIVE INDUSTRY EXPERIENCE IN SALES AND F&I OPERATIONS. HE CAN BE REACHED AT 1-800-345-0191, EXT. 705, OR ALAN.MILLER@CNANATIONAL.COM.

OCTOBER / NOVEMBER 2013

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Time is Money

COVER STORY

COMMONLY CALLED FLOORPLAN LOANS, INVENTORY FINANCING CAN BE ONE OF THE GREATEST TOOLS TO GROW YOUR BUSINESS.

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Contracts in Transit H O W M U C H A R E T H E Y R E A L LY C O S T I N G Y O U A N D H O W D O Y O U AV O I D T H E M ?

such as a bank statement. Taking time to It’s a common practice for used auto match up the callback information against dealers to start out buying a few cars what is outlined in the loan package is time with their own funds or that of their well spent. investors. But as dealerships grow over The third step in avoiding contracts in time, the need to finance their inventory transit is understanding the most common also grows. problem preventing a contract package from Commonly called floorplan loans, being funded: the loan exception. inventory financing can be one of the Those situations are common. Perhaps greatest tools to grow your business. you will need a slightly lower interest rate or It can help you take advantage of good a few more months of term, or maybe the auction prices and fluctuations in the proof of income doesn’t quite meet what market. It allows you to react quickly was stated by the customer on the credit when an opportunity presents itself. application. If you have spot-delivered a In addition to the flexibility it offers, customer and know you need a floorplan allows you You need to more money than what was to stock a wider range of vehicles to satisfy communicate with approved, you know you will need the needs of a diverse your lender. Getting an exception. You need to stop and group of customers. exceptions or changes Sounds great, right? approved before the communicate with your lender. exceptions or changes Well, it is, but there contract arrives will Getting approved before the contract are a few things you greatly improve not package arrives in the funding should know before you only your relationship department will greatly improve get started. Obviously, floorplan with the lender, but also not only your relationship with the your bottom line. lender, but also your bottom line. lenders charge Once the loan package arrives interest, in most cases at the lender, it doesn’t usually go to the a daily interest rate. The sooner you sell loan officer’s desk but to the funding the vehicle and pay off your floorplan, department. The loan documents will be the less interest paid to your floorplan verified for compliance with the program company and the more profit you’ve guidelines and loan approval stipulations made on the sale. given by the underwriter. An old adage applies here: Time is If all documentation doesn’t match, it definitely money. might go to the bottom of the stack, back Once you have a floorplan, “contracts to the underwriter, or simply be snailin transit” becomes a much more mailed back to you. In the meantime, while important metric to be measured. Every the loan is floating around at the lender or day a vehicle sits on your floor not paid in the mail, you are paying a daily interest off, it’s costing you money. That could charge on your floorplan. be caused by a cash or financed sale. In Create a process to audit loan packages the case of cash sales, it could be due in your back office or accounting to a bank draft, a hold check or even a department. Producing a simple checklist bounced check. and having your employees act as the final In the case of financed sales, quality checkpoint, matching up program contracts in transit are usually caused guidelines and callback stipulations against by the failure to secure funding from what’s in the loan package before it leaves a lender for a loan package that the dealership, will save you time and originated in your finance office. money. Those situations are completely If contracts are unfunded for more than a avoidable if you have proper processes few days, it’s best to have someone drilling in place. down to find the root cause. A large number The first step in avoiding a contract of contracts in transit usually points to flaws in transit issue is having an intimate in processes or other problems in your knowledge of the lender’s program. All finance department, or even worse, to some lenders have basic program guidelines type of customer fraud. that outline requirements, such as Following these easy steps, monitoring proof of residency, proof of income or your contracts in transit and communicating completion of a 4506T (request for expectations to your finance department tax transcript) for every self-employed and accounting office will help you save customer. Creating a process within money and identify issues before they your finance office that involves become serious problems collecting all basic program guideline for your business. requirements from your customer is key. The second step is paying attention to BY CHET HEUGHAN the loan approval or callback. What extra CHET HEUGHAN IS DIRECTOR OF APP stipulations does your lender require? It ONE RISK MITIGATION SERVICES, INDIRECT LENDING FOR WOLTERS might require additional references, proof KLUWER FINANCIAL SERVICES. FOR of an open vehicle loan trade-in, additional MORE INFORMATION, VISIT WWW. proof of income or specific documents, WOLTERSKLUWERFS.COM.

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Phishers’ Spears Are Aimed at You

FINANCE M AT TERS

CRIMINALS ARE PERPETRATING A SERIES OF CALCULATED SPEAR-PHISHING ATTACKS ON DEALERS

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Spearfishing is as ancient as man himself. We have all seen images of man stalking a river, creek, or shallow pool waiting to thrust his sharpened weapon into his unsuspecting prey. Over the centuries, spearfishing has evolved from the use of a stick for dinner into a sport that uses air-powered guns to spear large ocean predators. At this point, many of you might be asking yourself, what does spearfishing have to do with the price of tea in China? Well, spearfishing might not have anything to do with your dealership, but spear-phishing does. No, I did not spell it wrong. Spear-phishing is an actual word, though you likely won’t find it the dictionary. Spear-phishing is a rising cyber threat that targets an individual or group of individuals that typically have something in common. Now dealers are the latest group to become victims of spearphishing attacks. I received a telephone call from an agent with the FBI’s Cyber Crime Unit to alert me of the attacks. The FBI has been tracking an alarming increase in cyber criminal activity against dealers coming from Eastern Europe, Romania in particular. The Romanian criminals are perpetrating a series of calculated spearphishing attacks on dealers. The scheme involves attempts by criminals to obtain dealer credentials to third-party vehicle marketplace sites such as AutoTrader.com or Cars.com, or on common marketplace sites such as Craigslist. The criminal mines those sites for dealership email addresses. The miscreant then sends to a dealer an email that has all of the markings of a legitimate email from one of the marketplace sites, asking the dealer to update credentials, verify information, etc. The email contains a link that, if clicked, either installs malware the criminal can use to mine information from your system or takes the dealer to a website that has the appearance of a legitimate marketplace site, but is actually a dummy site used for harvesting unsuspecting victims’ account credentials. Once the criminals have the dealers’ credentials, they can go into the thirdparty sites and in essence hijack the dealers’ pages, including the contact information and inventory-related information. Once the thugs have that, they can change the site so unsuspecting purchasers believe they are interacting with a legitimate dealer when they are DEALER

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really transacting business with a criminal enterprise. The FBI says it has seen fraudsters create pictures and listings of inventory the dealer does not own. They have also taken information from third-party sites, or even from a dealership’s own website, to create a mirror site for the dealership that is comprised entirely of false information. The criminals hope to dupe purchasers into sending money to them to purchase a vehicle that will never be delivered. The damage from spear-phishing attacks can be devastating. Obviously, if a purchaser sends money for a car that is never going to be delivered, the purchaser stands to lose a significant amount of money. The FBI informs me there have been both consumer victims and dealer victims in wholesale transactions. Likewise, the dealer stands to lose much in the form of reputation, consumer confidence and other goodwill that is difficult to fully measure. What can you as a dealer do to avoid having a Romanian cyber spear stuck in your back? The FBI suggests a couple of ideas. First, remember legitimate businesses will not send you an email asking you to update credentials, passwords, account information or the like. If you receive an email purporting to come from a legitimate business asking you to do so, call your representative or contact at that business to check on the authenticity of the request. I’ll almost guarantee you he will tell you it is a scam. Second, the FBI recommends you change your credentials on your own on a regular basis. Use more complicated passwords that cannot be easily deciphered. If you need a tip, my 13-yearold daughter has it figured out. I can never get into her Facebook or Instagram accounts. Finally, the FBI suggests you use as many certified logos and watermarks in your websites and particularly on your inventory photographs as you can. That will make it difficult for scammers to steal the information for mirror sites. Spear-phishers all over the world are ready to pounce on unsuspecting victims going about their business just as the hungry, ancient fisherman speared unsuspecting salmon swimming upstream. Do all you can to protect your personal and dealership information from those that would do you harm.

BY SHAUN PETERSEN

SHAUN PETERSEN IS A PARTNER WITH THE LAW FIRM OF MAC MURRAY, PETERSEN & SHUSTER LLP AND HEAD OF THE FIRM’S AUTOMOTIVE PRACTICE. HE SERVES AS NIADA’S REGULATORY COUNSEL.

OCTOBER / NOVEMBER 2013

WA R R A N T Y M A T T E R S

Why Auto Warranties Fail

FRUSTRATING FACTORS COMMON IN EXTENDED WARRANT Y COVERAGE

Extended car warranties and vehicle service contracts are the cause of immense frustration for drivers. Below is a list of the top five areas where extended warranty coverage frustrates drivers the most as compiled by ForeverCar.com, a new warranty service provider. • Blaming the driver: Extended warranty customers have a penchant for blaming the needed car repairs on the driver and making them feel like it’s their fault. • That’s only covered by the special package: Many companies will try to confuse customers into thinking the needed repair is only offered through a special package they didn’t pay for. • Shop labor: The differences between a part replacement and the labor it costs to replace that part, which may not be covered by the extended warranty. • Avoiding the real problem: Many times extended warranty companies will argue over the needed repairs, looking for every possible reason to avoid covering the cost. • Shady Adjuster: Adjusters are not always unbiased third parties in the car repair process. There may be an unknown relationship between the adjuster and warranty provider. INDUSTRY

EVENTS

GE Capital Fleet Services Reaches Milestone

100,000TH SALE MADE BY REMARKETING PROGRAM

GE Capital Fleet Services has announced the sale of its 100,000th customer vehicle through its Remarketing by GE program. Launched in 2007, Remarketing by GE has enabled more than 300 customers nationwide – including credit unions, independent finance companies, banks, and corporations with owned fleets – to outsource the disposition of automotive assets to GE Capital Fleet Services’ team of professional automotive remarketers. The milestone vehicle was sold at Manheim Chicago, a wholesale vehicle auction operation, and the seller was the Chicagobased Turner Acceptance Corporation, a longtime Remarketing by GE customer. According to Paul Seger, vice president of asset remarketing at GE Capital Fleet Services, “Remarketing can be a long, complicated process, and in today’s business environment, it’s vital for companies to ensure they obtain the maximum return on vehicles sold at auction.” TO LEARN MORE, VISIT GEFLEET.COM.

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Keep Calm and Join NIADA

ASSOCIATION NEWS

W H E N F R E E D O M I N T H E U S E D CA R I N D U S T RY I S U N D E R AT TAC K , D E A L E R S M U S T AC T I N U N I T Y T O D E F E N D I T

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In 1939, at the beginning of World War II, the British Ministry of Information produced a series of motivational posters to emphasize Britain’s resolve and keep public morale high during Germany’s blitz across Europe and its air attacks on England. The first two posters, which read “Your Courage, Your Cheerfulness, Your Resolution Will Bring Us Victory” and “Freedom Is In Peril, Defend It With All Your Might,” were widely distributed and displayed throughout Britain during the war. The third poster, which carried the phrase “Keep Calm and Carry On,” was meant to be used only in an extreme situation, such as an actual invasion of Britain. In late 1940, when the German air force failed to win air superiority over southeastern England, the invasion of Great Britain was postponed indefinitely. The “Keep Calm and Carry On” posters were never distributed and most were destroyed. When the copyright for the posters expired, the design and slogans became public domain and the “Keep Calm and Carry On” slogan became an overnight pop culture phenomenon. The catchy phrase – and its many variations – began appearing on T-shirts, coffee mugs, mobile phones, screen savers and in countless Internet memes. The lessons from WWII are many and, while I won’t delve into them here, the NIADA, our state associations and our members can draw correlations between how the British Ministry of Information responded to wartime threats against their freedoms and how our membership should respond to the pressures of expanding government oversight, regulations and over-reaching legislative activity at the state and federal levels. I’m not suggesting the posters alone were responsible for defeating the advancing German air force, but they offered distinct messages of unity, individuality and, most importantly, activism. The message inherent in the slogan “Your Courage, Your Cheerfulness, Your Resolution Will Bring Us Victory” is compelling. It implies not only that there is something the audience can do, but something it must do to contribute to the collective cause of victory. The underlying message of unity through individuality is important as well. Individual differences make each of us unique, but when we – as car dealers – speak collectively for the advancement of our shared interests and values, we give NIADA and our industry its loudest and strongest voice. In the face of war, a single message buoyed the spirits and inspired the actions of thousands of individual citizens all over DEALER

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Great Britain, and gave them a simple equation for success: Your courage + your cheerfulness + your resolution = victory for us all. The other key slogan of the time, “Freedom Is In Peril, Defend It With All Your Might,” also hits home on the message of activism and the importance of defending your freedom. I know many of you have defended our country in the armed services at home and abroad and for that we owe you a huge debt of gratitude. As Americans, small business owners and independent automobile dealers, we all know freedom is a fundamental foundation on which this country was built, and when it comes down to it, you would gladly “defend it with all your might.” As independent dealers, each day we wake up to face new variations on old threats to our business freedoms – curbstoning, higher taxation, title cloning, unfair consumer litigation, insurance and bonding issues, less inventory, higher wholesale prices, finance and accounting, pay plans, and slimmer margins, just to name a few.

With nearly 16,000 members in all 50 states and 46 affiliated state associations, NIADA is the country’s largest grassroots organization representing the used motor vehicle industry.

But what about federal, state and local laws and ordinances like Dodd-Frank or California’s attempt to over-legislate the Buy Here-Pay Here industry? What about tighter employment and labor laws, Obamacare, compliance adherence, open recall notices, fair debt collection practices, OFAC, Graham-Leach-Bliley and the ever-increasing oversight and enforcement from the Consumer Financial Protection Bureau? Is your head spinning yet? The constant change of scenery in the automotive industry is staggering. To be an independent dealer in this day and age is not for the faint of heart. You have to be vigilant and prepared to fight for and protect your business freedoms. When the used motor vehicle industry faces expanding or crippling legislative activity or proposed changes regarding

OCTOBER / NOVEMBER 2013

how you must operate your business, what does the NIADA suggest you do? Keep Calm and Join NIADA. As our recently published history book will tell you, NIADA was originally formed as an outcry against governmental price controls. In August 1946, a committee was appointed when a group of used car dealers representing a cross section of the country met in Detroit. By the end of the next month, the founding fathers of NIADA met in Chicago and formed an alliance that has stood for 67 years and counting. On Oct. 2, 1946, following the first Used Car Dealers Association Convention in Chicago, a special bulletin made the following statement. “THE NATIONAL USED CAR DEALERS ASSOCIATION IS NOW A REALITY. At a real flesh-and-blood rally … some 600 dealers from 31 states rose to their feet and cheered themselves hoarse when the announcement was made that the association was actually organized. This is YOUR chance to do some cheering, too – by getting behind the men who are putting their shoulders to the wheel FOR YOU. Let’s all get up on our feet NOW and push this thing ahead. THIS IS A MAJOR ELEMENT. IF WE DON’T SWING INTO ACTION NOW, SOME OF US WON’T BE AROUND TO CELEBRATE OUR SUCCESS. Each state has a director in this association. He is the man who brings your thoughts and ideas to Washington. He NEEDS YOU. YOU NEED HIM. ALL DEALERS NEED ONE ANOTHER TODAY. Get in here and give us the support needed.” Since that formative time, many men and women across multicultural lines joined the cause in support of what J.B. Caldwell, the first association manager, said: “We are tremendously interested in organization because we do not believe the used car dealer can much longer exist except be organized.” The original purposes were simple: u T  o accumulate and disseminate information. u T  o present information to the public and to lawmakers. u To promote a close fraternity with dealers nationwide who work together in harmony for the betterment of the used car industry. Now, 67 years later, those original purposes are still the core goals of our work here at NIADA, even as our footprint in the industry has grown vastly. With nearly 16,000 members in all 50 states and 46 affiliated state associations, NIADA is the country’s largest grassroots organization representing the used motor vehicle industry. Our methods of gathering data and communicating it are altogether different today than in 1946, but let me echo the C O N T I N U E D O N PA G E 1 0

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sentiment that we must have involvement from our local dealers to support and “get behind the men who are putting their shoulders to the wheel for YOU.” From the top down, we are an association of dealers, run by dealers for the advancement and protection of our dealers. We must act together to protect our freedom to run a fair and profitable business enterprise. As Edmund Burke once said, “The only thing necessary for evil to triumph is for good men to do nothing.” Subscribing to the “Keep Calm and Join NIADA” mantra offers many opportunities to make your voice heard in the industry, to help support those who are putting their shoulders to the wheel for you and ultimately to help protect your business freedoms. Be it at the state or national level, you’ll find there is more than enough opportunity to get involved. At the national level we have numerous opportunities for involvement, including: u  The NIADA executive committee and its four regional vice presidents provide specific geographical representation and channels of communication through which you can discuss dealer-specific issues. Your issues can be passed up to the executive committee through channels or taken directly to elected officials and regulators for consideration and action on your behalf. u  The NIADA legislative committee and legislative subcommittee rely on your feedback and input from the state

and local level to discuss issues of concern that can be passed along to congressional officials, federal regulators, consumer advocates and others. The NIADA Political Action Committee was formed to support elected officials who work to advance and protect the interests of auto dealers in both houses of the U.S. Congress. u  NIADA Services, Inc., operates all of our publications and media services, including dealer-specific content on NIADA.com, NIADA.TV and in Used Car Dealer magazine and our state publications. u  The charitable and educational efforts of the association are channeled through the NIADA Foundation, a 501(c)(3) organization. Educational highlights include the vast learning, motivational and fraternal opportunities at our annual convention, the Certified Master Dealer program, the NIADA 20 Group program and its proprietary financial data composite offering, and many others. I could go on for days about the features and benefits of membership, but the real opportunity for you is to get involved in your state association. Those openings are just as vast and important as the ones available at NIADA. Each association is governed by its own board of directors and various committees deemed necessary to carry out the work at the state level – all on your behalf. Each association is as unique as the dealers in its state and is tasked

New Models & Increasing Wholesale Inventory Make Price Waves in the Lanes

Though overall auction values remain relatively flat, showing small decreases here and there, increasing inventory and new models hitting the market are making waves, said Black Book’s Ricky Beggs. The midsize pickup segment saw 64 percent of its models change in price, with 59 percent of those being downward changes. Entry-level cars were also active in necessary adjustments at 54 percent, Beggs reported in “Beggs on the Used Car Market.” On the more stable side, full-size pickups had less vehicles adjusted, with only 20 percent being altered. Why so many changes? Beggs touched on a few factors that may be contributing to price adjustments. “With the level of increasing wholesale inventory from the new car sales level and trades, and the many new models and major refreshed models coming into the market – especially the later model vehicles – pricing must adjust to allow for another model year of vehicles to enter the used market,” Beggs said. Beggs said both cars and trucks did seem to be declining by smaller amounts than previously. Overall, car segments saw an average drop of $37 the second week in July, while trucks saw an average decline of $40. Full-size vans (both cargo and passenger versions) and the full-size crossovers, on the other hand, all saw large declines, dropping by $80 or more. Compact SUVs were the only segment to increase at a substantial rate for the first two weeks in July, rising by an average of $61, or 0.51 percent. DEALER NV_1013.indd 10

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with protecting your interests at the state level. Whether you’re interested in getting involved at the state or national level, your participation and activism is greatly needed. This is your association, and how loud and effective our collective voice is depends on how many voices we have speaking in unison. That includes yours! For more information on what’s happening at NIADA and how you can join in, call 800-682-3837 or visit us online at www.niada.com. For more information about what is happening in your state association and how you can get more involved on a local level, simply reach out to your state office and talk to your director. Our state directors are some of the best folks in the industry and will show you how can be a part of the strategic plan in your state. You might be surprised at how easy it is to make your voice heard through your state association and begin giving back to the industry that has given so much to you and your family. You can find your state association’s contact information at www.niada.com/state_affiliates.php. I want to thank you in advance for your contribution to the association. Our dealers, our industry and our voice will be stronger because of it.

BY STEVE JORDAN

STEVE JORDAN IS EXECUTIVE VICE PRESIDENT OF NIADA, PRESIDENT OF NIADA SERVICES, INC., AND PUBLISHER OF USED CAR DEALER MAGAZINE. HE CAN BE REACHED AT STEVE@NIADA.COM.

MaxTradeIn Lets Dealers Make Offers from Website

MaxTradeIn, a free website on which car owners can trade in or sell their used vehicle from local dealers, is expanding with a new service that lets consumers receive actual offers, rather than just estimates, directly through a participating dealership’s website. The new service, called MaxTradeIn DealerDirect™, allows consumers visiting a dealership’s website to enter their vehicle identification number and a few details about their used car to receive nearly instant offer directly from the dealer when trading in their vehicle. Dealerships pay a subscription fee to have MaxTradeIn DealerDirect integrated into their existing website. The company says dealerships benefit by capturing high quality opportunities, increasing appointments, obtaining higher quality used car inventory and improving customer satisfaction. For more information, visit http:// dealers.maxtradein.com.

INDUSTRY NEWS

ASSOCIATION NEWS

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NIADA Government Report

WASHINGTON UPDATE

KEEPING YOU INFORMED ON THE LATES T GOVERNMENTAL ISSUES AND ACTIVIT Y IN THE USED CAR INDUS TRY

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REGULATORY REPORT Consumer Financial Protection Bureau Response to House Republicans’ letter: The CFPB responded to a letter from 35 House Republicans raising concerns about the CFPB’s March guidance bulletin claiming indirect auto lending practices could lead to discrimination against minorities on car loans as evidenced by disparate impact. The response provided few substantive answers to the concerns raised by the House members. The CFPB said it did not provide an opportunity for interested parties to comment because the law does not require it for general policy statements. And the CFPB provided no substantive response to the Republicans’ request for information about how disparate impact would have to be demonstrated for a violation of the Equal Credit Opportunity Act to have occurred. The CFPB guidance in question advised bank and nonbank indirect auto financial institutions about compliance with federal fair lending requirements in connection with the practice by which auto dealers mark up the financial institution’s risk-based buy rate and receive compensation based on the increased interest revenues. The Republicans’ letter, dated June 20, questioned the manner in which the guidance was rendered and requested details concerning the process of analyzing potential fair lending violations. A similar inquiry was made by 13 Democratic members of the House Financial Services Committee in May. The Republican letter took issue with the CFPB “initiating [a] process without a public hearing, without public comment, and without releasing the data, methodology or analysis it relied upon to support such an important change in policy.” The letter noted that “allegations of disparate impact do not involve intentional conduct, but instead consist solely of statistical analysis of past transactions” and said any model assessing such impact must be reliable and accurate. In addition to taking issue with the CFPB’s statistical analysis, the Republican letter also characterized the ECOA compliance controls suggested in the CFPB bulletin as “onerous and unrealistic,” noting that “restricting consumer choice is highly problematic.” To support the controls prescribed by the guidance, the letter requested that the CFPB provide “all studies, analysis, and information it relied upon in developing its guidance document.” Both congressional letters requested information about the analysis conducted by the CFPB on the impact of its prescribed controls on the auto DEALER

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lending industry. The House members, like many in the auto industry, said they are concerned the guidance will hurt competition, result in higher costs for consumers, and potentially exclude lowerincome customers from the credit market entirely. In a previous response to the Democrats’ letter, CFPB director Richard Cordray reiterated the CFPB’s authority to supervise and investigate financial institutions engaged in auto finance and its concerns that pricing discretion could create a significant risk of discrimination. He also said the CFPB uses a proxy methodology to analyze disparate impact in the auto lending industry. NADA is pursuing a bipartisan Senate letter to the CFPB expressing concern for its process and conclusions.

All manufacturers must have the free tool available beginning Aug. 14, 2014. The information must be searchable by VIN number and updated weekly. The search information will also be available at safercar.gov. Indirect auto lending webinar: The CFPB, Federal Reserve Board and Department of Justice held a webinar related to fair lending in indirect automotive financing. The CFPB discussed its recent indirect auto lending bulletin and its perceptions of the indirect auto finance model, as well as its jurisdiction and enforcement authority in fair lending. Other topics discussed included the process the Federal Reserve Board uses to investigate risk in indirect auto lending as well as enforcement cases brought by DOJ. The CFPB said compliance with its March indirect auto financing bulletin, which addresses alleged discriminatory practices, is required immediately. To view the webinar, visit www. consumercomplianceoutlook.org and click the link under “Previous Topics” for the session on Indirect Auto Lending – Fair Lending Considerations.

OCTOBER / NOVEMBER 2013

National Highway Traffic Safety Administration NHTSA issued a final rule this month that will require auto and motorcycle manufacturers to provide consumers a free online search tool to check for uncompleted recall information. All manufacturers must have the free tool available beginning Aug. 14, 2014. The information must be searchable by VIN number and updated weekly. The search information will also be available at safercar.gov. The rule also requires manufacturers to provide consumers notice of a recall within 60 days of the date the manufacturer notifies NHTSA. LEGISLATIVE REPORT H.R. 1663, Promoting Automotive Repair, Trade and Sales Act of 2013 (PARTS Act) The bill, introduced April 23 by Rep. Darrell Issa (R-Calif.) on a bipartisan basis with four co-sponsors and referred to the Judiciary Subcommittee, would amend U.S. design patent law to reduce the exclusivity period car companies hold on design patents for collision repair parts from 14 years to 30 months. During that time other suppliers could test, research and develop parts on a not-for-sale basis. Sen. Sheldon Whitehouse (D-R.I.) and two co-sponsors introduced an identical bill in the Senate (S. 780), which was referred to the Judiciary Committee. NIADA reviewed the legislation and determined not to lend its name in support at this time. H.R. 2414, the Black Box Privacy Protection Act The bill was introduced June 18 by Rep. Michael Capuano (D-Mass.) and 10 co-sponsors. On July 15, it was referred to the Homeland Security Committee Subcommittee. The bill would amend the Automobile Information Disclosure Act to require auto manufacturers to disclose on an information label affixed to the car window the presence and location of an event data recorder (commonly referred to as a “black box”), the type of information recorded, how such information is recorded and that the recording can be used in a law enforcement proceeding. It also would prohibit the manufacture, sale or import of an automobile manufactured after 2015 that is equipped with an event data recorder unless the consumer can control the recording of information, and would require the black box and any data recorded to be considered the property of the vehicle’s owner. The retrieval or downloading of recorded data by any other person would be unlawful except with the owner’s consent, in response to a court order or by a dealer or automotive technician to service the vehicle. w w w. n i a d a . c o m 9/23/13 3:41 PM


How to Prevent Slamming APPI Energy has seen a serious issue increasing lately: unauthorized early terminations of electricity supplier contracts. Our customer service team receives notification from electricity suppliers when one of our customer’s accounts drops from service. We immediately investigate and often learn that a misleading energy broker or electricity supplier convinced one of our customer’s employees to “authorize” a change/drop of supply service. That effectively terminates the existing electricity supplier contract. Understandably, our customers are upset and feel victimized. To prevent this from happening to you: u Share this message with your employees and make them aware of misleading callers. Even employees who are not authorized to discuss your utility bills or make contract decisions can be duped by a broker or supplier. u If an energy salesperson walks into one of your locations and claims to represent the electric utility, please be on guard. Protect your energy bills, account numbers and related information as you would any confidential business information. Anyone who works for the electric utility already has digital access to all of your account information. u Our customers are overwhelmed with

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daily calls from aggressive energy salespeople, many of whom are not properly licensed or experienced. A quick, “No, thank you. I’m not interested. Please remove me from your call list,” should eliminate many calls. Advise your employees to block salespeople from engaging with other employees. u The bottom line is that before you give your bill or account information to anyone, no matter what a broker or supplier tells you, please contact APPI Energy’s customer service team at 800-520-6685 or customerservice@ appienergy.com. We’re here to help! A businessman shares his story: A few weeks ago, I handed over my electricity bill to a man who visited my office and claimed to represent my local utility company. He offered to evaluate my bill as a complimentary service. A few weeks later, my electricity supplier unexpectedly dropped my account. Without my consent or knowledge, the man had obtained my account number from my bills and canceled the electricity supply contract for my business. Fortunately, my supplier contacted my energy consultant’s customer service department at APPI Energy about dropping my account. My consultant notified me and explained I was at risk of being charged hefty termination fees for canceling my

contract before its expiration date. I had no idea the contract was canceled. My consultant worked with my supplier to re-enroll my account and re-install my contract, saving me thousands in early termination penalties. I called my utility and determined the name of the company that canceled my electric supply without my knowledge. I reported that company to the Better Business Bureau and learned the man who misrepresented himself is no longer with that company. A manufacturer shares his story: I’ve been getting calls about lowering my electricity costs. One quoted a price of less than 6 cents per kWh, which seemed very low. Another caller guaranteed me 30 percent savings off my facility’s current supply price. When I questioned how he could make that guarantee when I’m locked into a three-year contract, he admitted he had no idea how it would be possible and was simply trying to get appointments for his salespeople. My energy consultant at APPI Energy said I shouldn’t trust callers who quote numbers over the phone without seeing my facility’s usage profile because they often exaggerate and cannot possibly provide a realistic price.

BY MICHAEL S. PAYNE, J.D., L.L.M.

MICHAEL S. PAYNE, J.D., L.L.M., IS EXECUTIVE VICE PRESIDENT AND GENERAL COUNSEL OF APPI ENERGY. FOR MORE INFORMATION, CONTACT 800-520-6685 OR CUSTOMERSERVICE@APPIENERGY.COM .

OCTOBER / NOVEMBER 2013

DEALER

MANAGEMENT M AT TERS

P R O T E C T YO U R E N E R GY B I L L S , AC C O U N T N U M B E R S A N D R E L AT E D I N F O R M AT I O N A S YO U W O U L D A N Y C O N F I D E N T I A L B U S I N E S S I N F O R M AT I O N

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AUCTION

ISSUES



It’s About Time

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Time is a scarce commodity. Ask any auto dealer. The intense, competitive nature of the industry drives dealers to search out every possible avenue for efficiency gains in their businesses. When it comes to wholesale vehicle auctions, gone are the days when dealers visited only one location and bought only in-lane. Today, to ensure they have the inventory to match their customers’ needs and aggressively compete, dealers need to stay on top of multiple channels and visit multiple locations – and that can take time. Historically, the physical wholesale vehicle auction has been a hands-on place to kick the tires and check under the hood. And for some dealers that remains the preferred way to buy. But as the pace of change accelerates – and it will in our industry – dealers will require a variety of options to conduct business. Auction companies are responding by streamlining their weekly in-lane sales, offering 24/7, anytime and anywhere access and reducing the time needed to participate in auctions through better processes and innovative technologies. “Buying cars through the online streaming auctions is just like being at the auction,” said Billy Threadgill, president of Van’s Auto Sales in Florence, N.C., and NIADA region II vice president. “But I no longer have the travel expense and time away from the dealership caused by going to three or four auctions. I can stay in my office, still buy the cars I need and take better care of my customers.” New products and services such as mobile apps and enhanced transportation solutions are finding their way into the wholesale buying and selling process and offering even more ways to save time. And it is not just about time savings. Those modernizations give dealers greater control and allow them to be more productive. While innovations like those offer many benefits, a number of dealers remain unaware of their choices, and of the benefits and availability of those choices. To help dealers better navigate through the evolving landscape, we offer a few of the best-kept secrets to save dealers time inside and outside the wholesale vehicle auction. Reduce the time it takes to floorplan a vehicle by using online tools: Though not as bad as waiting in line to get your driver’s license renewed, floorplanning a vehicle is one area that requires an investment of time at a wholesale auction. The good news is dealers can now bypass the lines thanks to online tools accessible via smartphones, such as DEALER

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the tools offered by NextGear Capital. Designed as dashboards, the systems provide dealers with an easy-to-read snapshot of all important vehicle and floorplan information. Dealers can view their real-time vehicle purchase status, select a desired floorplan company, check title and postsale inspection status and track vehicle availability – all in a matter of minutes. Additional time savings come from using online tools to pay for vehicles and post-sale inspections via an electronic bank debit, eliminating the need for additional trips to the auction or overnighted checks. Dealers can also review outstanding balances and get title and arbitration status updates as soon as they are available.

That is especially beneficial for smaller dealers, as it can increase their purchasing capacity without additional costs. Access your targeted vehicles via your smartphone or tablet: Dealers can make better use of their time at an auction before ever leaving the office by using online “workbooks” to search and save vehicles that are of the most interest to their dealership. Searches can be general or specific, from make, model, year and trim to seller/consignor, inventory source, condition grade, drive train, transmission and engine type.

Apps like Simulcast on Mobile from Manheim, Ally’s SmartAuction Mobile and others enable dealers to participate in an auction from anywhere – they don’t have to be in a particular lane, at the auction or even on a computer. Try mobile apps for buying vehicles: Traditionally, bidding on and buying wholesale vehicles has occurred primarily in-lane at the auction, but mobile apps are quickly changing how and where dealers can conduct business. Apps like Simulcast on Mobile from Manheim, Ally’s SmartAuction Mobile and others enable dealers to participate in an auction from anywhere – they don’t have to be in a particular lane, at the auction or even on a computer. Dealers can bid on and buy from the full inventory of the auction, quickly view and email full condition reports, and see a run list of vehicles in a lane. That means more time can be spent buying and selling vehicles at the auction, on the dealer’s lot or anywhere in between. Mobility offers two other key benefits. First, it can shorten the entire transaction process from an hour or more to mere minutes by digitizing labor-intensive processes. Second, dealers can be more efficient with the time they do spend at an auction. For example, mobile apps allow dealers to bid in multiple auctions simultaneously.

OCTOBER / NOVEMBER 2013

Dealers can then access those vehicles from an iPhone or iPad while at the auction to see seller details, sale information, photos and vehicle specifications. Having searchable, updated information at their fingertips helps dealers save time by providing instant access anywhere to the information necessary to bid and buy in any lane, even at another auction location. Sean Ball, primary buyer for Texas State Motors in Garland, Texas, still prefers to attend auctions twice weekly in person to examine cars. But he does use smartphone apps and a tablet to make his work more efficient. “I use the MMR [Manheim Market Report] app on my phone so I can scan a VIN and it gives me all the data on the car,” Ball said. He said when he first started buying at auctions, “I would do all my homework ahead of time and carry around the run sheets. Now I use a tablet, which helps me look at the data more dynamically. It is especially nice to have it at the auction C O N T I N U E D O N N E X T PA G E

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It’s About Time

Research has shown vehicles with condition information are up to four times more likely to sell and 27 percent less likely to face a dispute than vehicles without condition information.

27%

Centralize your purchase and transaction information: To further save time and paperwork at the wholesale auction, dealers should centralize access to their purchase and transaction information in a single location. Systems are available that can hold up to 180 days of transactions, providing real-time access to vehicle and post-sale inspection status, condition information, payment and fee information, all of which can be made sortable for ease of search and exported to a spreadsheet or printed. Having faster, easier access to purchase information will cut down on the time it takes to manage wholesale transactions and provide dealers with better clarity into their business. Simplify your transportation management: Dealers often mention the w w w. n i a d a . c o m NV_1013.indd 15

BY JOE GEORGE

JOE GEORGE IS SENIOR VICE PRESIDENT OF PRODUCT DEVELOPMENT FOR MANHEIM AND IS RESPONSIBLE FOR THE EVOLUTION OF MANHEIM’S DIGITAL MARKETPLACE, INCLUDING MANHEIM SIMULCAST, OVE.COM, MANHEIM.COM, MOBILE SERVICES AND MULTIPLE PRODUCT SOLUTION PLATFORMS. FOR MORE INFORMATION, VISIT WWW. MANHEIM.COM.

DAA of the Rockies Named Auction of the Year

NEWS

time spent managing the transportation of their auction inventory as a burden. Fortunately, the technology driving enhancements in other areas at the auction is also improving the efficiency of transporting vehicles to the dealership. There are several options available to both high- and low-volume purchasers of vehicles. One is to turn over the entire transportation process to an established provider. Those full-service models broker all deal logistics, from sourcing to tracking to delivery, and typically include screening of multiple carriers and trucks to ensure safety, insurance standards and on-time deliveries, leaving dealers more time to spend on other aspects of their business. An alternative approach is to use selfmanaged options that work like Priceline. com and Howtire.com, where dealers can comparison shop based on price and transportation terms. While dealers still must broker the deal, they can have several carriers compete for the job, which can drive down costs and still allow dealers to work directly with the carriers of their choice. To further increase efficiency and save time, services are available that enable dealers to send vehicle purchase information electronically to the transportation provider. The bottom line to all this is there are products and services in the marketplace that can help dealers save time at an auction while enabling them to do more with the time they have available. The first step is to search out those solutions and give them a try or, at the very least, talk with other dealers who are using them to see how they can impact performance and time management. When considering the options, dealers also need to consider getting and staying up to speed on their end. “If you are going to buy online or use these tools, you have to make sure you have a fast connection, not something like dialup,” Threadgill said. “If I am bidding online at an auction, I don’t want my bid to show up 30 seconds after the vehicle drives off because of a slow Internet connection on my end.” No doubt new technologies and applications will continue to be developed and made available to the dealer market. By staying ahead and finding ways to integrate those innovations into their businesses, dealers can save time, better compete and become more productive at the wholesale auction. “Anyone who is not trying to buy online is missing a huge opportunity,” Threadgill said.

BILL BAKER

AUCTION

and be able to sort the cars as I need to. It is much easier.” Create listing and seller disclosures from your mobile device: From a seller’s standpoint, dealers and other consignors should look for ways to use their Apple or Android devices to input listing and disclosure information. Being able to quickly record vehicle condition information, photos and video while on the lot – without having to take handwritten notes or transfer pictures from a camera to a computer – eliminates manual work and saves valuable time. It also allows dealers to sell wholesale and retail at the same time, eliminating the either-or choice of whether to send the vehicle to auction or keep it on the lot for retail sale, and increases the chances for success. Research has shown vehicles with condition information are up to four times more likely to sell and 27 percent less likely to face a dispute than vehicles without condition information. “For me on the buying end, that is really key with the online auction,” Threadgill said. “You have to have a good condition report you know you can trust. When I do, I don’t mind not examining the car in person.”

BRAD STURGEON

Dealers Auto Auction of the Rockies, a leader in customer service and community service, has been named the 2013 NIADA Auto Auction of the Year. The award was presented to Denverbased auction’s owners, Brad Sturgeon and Bill Baker, and executive vice president Michele Noblitt, representing the DAA of the Rockies staff, during the National Auto Auction Association’s annual convention, Sept. 3-5 in Indianapolis. In presenting the award, NIADA executive vice president Steve Jordan said DAA of the Rockies “has proven its business excellence over the years and is noted for outstanding customer service, consistently going above and beyond as the staff strives to put their clients first. The auction is also very involved in the industry and supportive of its state association, including charity efforts such as the Wounded Warrior project.” DAA of the Rockies has made numerous contributions to its community through various fundraisers and campaigns, including an annual live charity auction that has raised more than $33,000 over the past three years. That amount has fully funded a week-long camp for abused and neglected children in the foster system, contributed to the local Big Brother/Big Sister organization and its mentoring program – a program in which its fleet manager has actively participated in for five years as a Big Sister – and raised funds for “Help Out Not Hand Outs,” an organization that assists veterans as they prepare for a successful future. In addition, the auction held a pet drive to support local animal shelters and launched a “Quit Smoking” campaign to help promote a healthy lifestyle among its employees. It has also held multiple toy and food drives during the holidays, and helped send one of its employees to participate in the 2013 Avon Walk for Breast Cancer. NIADA has presented the award annually to an outstanding NAAA auction since 2008. The winning auction provides the highest level of customer service and resources for NIADA’s independent dealers, displays support for its state association and its dealer members and participates in dealer events and promotes the industry by showing exceptional service to its local community.

OCTOBER / NOVEMBER 2013

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PART 1

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Automotive Advertising That Sells

DRIVING TRAFFIC

PRIORITY NO. 1 IS PUT PERSONALITY INTO YOUR ADVERTISING. STODGY, STIFF, CORPORATE MARKETING MESSAGES DON’T RESONATE – AND THEY DON’T SELL, EITHER.

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Over the years, we’ve tested the results of our Gravitational Marketing formula with excruciating exactness. Here are a few things we’ve discovered. Take a position: In order for advertising to be effective and sell the number of cars you want it to sell, you must first ask yourself this very important question: Since the customer has a thousand other options, why in the world should he choose you? Is it because you specialize in getting people approved who can’t get approved anywhere else? Maybe you are a fun and family-oriented place to buy a car or you give more in trade value than any other dealer. Maybe you’re more ethical or you cater to women. Perhaps you specialize in trucks or fuel-efficient cars. Your results depend less on what is written in your commercial than on how your dealership is positioned in the minds of your prospects. Price, service and longevity don’t count and don’t sell. You must choose a GPS – a gravitational positional statement. A GPS gives your marketing direction and your customers a road map to find you. Your GPS needs to be decided before any advertising is created. It might take research. The answer could be buried in your customers. Find it. Big hooks: The second most important decision is, what can you promise a customer that will make him drop everything and come to your store? We’re not talking about a slogan or a catchy phrase or a theme. A hook is a big promise that delivers an overwhelming benefit and an irresistible offer to the prospect. The benefit should be unique to you and it should be aggressive. And you must be able to deliver on what you promise. Most advertising offers no substance or meat you can sink your teeth into. It makes no promises and offers no big reasons why customers should do business with you. Same old lame marketing doesn’t sell. Without a hook you catch no fish. Brandscending: Brand and image advertising doesn’t sell cars this weekend. Most car dealers don’t spend enough money to create truly lasting brand awareness. Cola brands require cola company budgets. Traditional branding is too big a financial hurdle even for large multi-store dealers. Create a cohesive look and feel to your marketing and advertising. You can create a small amount of residual value and market awareness. You can drive retail sales this weekend and create a small amount of brand awareness. We call it Brandscending. It transcends traditional branding by stimulating sales DEALER

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today and leveraging the momentum to create a small amount of residual brand awareness. Put this on steroids by becoming the brand yourself. The dealer who can inject the most personality into his marketing will end up with the lion’s share of the business. King concept: A king concept is a unifying theme or big idea for a dealership. It gives the consumer a point of reference. That gives the consumer the ability to relate to your message. Without a king concept your marketing will be flat, confused and boring. Boring ads are invisible. You need a king concept for your marketing to grab prospects by the throat, wake them up and get them to take action. A king concept is usually based on Occam’s Razor: The simplest solution is the best. King concepts are not easy to create or identify. They can come via flashes of brilliance in the shower or in midnight halfconscious visions. Often they are ignored, not taken seriously or lost in a fleeting moment. Once captured, they are a lump of coal that must be polished into a radiant diamond. King concepts are worth digging for. A good one can be worth many millions and last a lifetime. Emotions sell: People buy from other people. They make decisions based on emotions. How they feel about someone is a big factor in buying. Given a choice, they would choose to buy from a friend or family member. People don’t get emotional over companies. Priority No. 1 is put personality into your advertising. Stodgy, stiff, corporate marketing messages don’t resonate – and they don’t sell, either. WANT MORE? This information comes from tests conducted in the automotive market and several other industries. Next month, we’ll share more of what we’ve learned over the years. These findings are what we call broadstroke standard conventions we follow when we create advertising for clients. Is this everything? Not even close. Certain situations call for certain tweaks in thinking and execution. We have separate, specialized findings based on market size, number of locations, media mix and other factors. But that information is classified top secret and revealed only to clients of Gravitational Marketing.

BY JIMMY VEE AND TRAVIS MILLER

JIMMY VEE AND TRAVIS MILLER ARE THE FOUNDERS OF RICH DEALERS® AND THE AUTHORS OF GRAVITATIONAL MARKETING. VISIT WWW.TRAFFICSCALE.COM TO REQUEST A FREE TRAFFIC SCALE REPORT. USE COUPON CODE UCDM1307.

OCTOBER / NOVEMBER 2013

ASSOCIATION NEWS

AutoStar Solutions Joins as NMB Partner

CUTTING-EDGE DEALER MANAGEMENT SOFTWARE AVAILABLE TO NIADA MEMBERS

Dealership technology provider AutoStar Solutions has joined with NIADA as a National Member Benefit partner, offering its cuttingedge dealer management software to NIADA members in qualifying states at no upfront cost. NIADA members receive a twouser license for the software and will pay only $8 per transaction, a significant discount for a software system regularly valued at more than $1,200 per year. AutoStar’s Fusion Ignite dealer management system provides the fundamental elements needed to manage a Buy Here-Pay Here dealership, including the ability to set up deals and optimize them for maximum profitability, print forms, calculate taxes, assess late fees, print receipts, flag vehicles for repossession, create accounting transactions, view reports and more.

Fusion Ignite is designed for small dealerships seeking to maximize profits and grow to the next level. Fusion Ignite is designed for small dealerships seeking to maximize profits and grow to the next level. In addition to its functionality, the software is webbased, which means updates to the system, including documents and forms, are conducted automatically in the background and users get automatic hourly backups of their data. All documents are fully compliant with state and federal regulations. VISIT WWW.FREEBHPHSOFTWARE.INFO FOR MORE INFORMATION OR TO SIGN UP FOR THE IGNITE SOFTWARE MEMBER BENEFIT PROGRAM.

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INDUSTRY

AFS Acceptance Expands

EVENTS

INDUSTRY

EVENTS

MULTIPLE SES SIONS WITH SINGLE PURPOSE OF BUILDING AUTO DEALER PROFIT CENTERS.

NIADA is proud to be the exclusive sponsor for the SEMA “Dealer Days” to be held November 5-7, in Las Vegas. The educational seminar will explore ways for dealers to dramatically increase sales and profits and take the lead in their respective markets by successfully tapping into the profitable accessories market. The Dealer Day program provides the latest trends, tools and resources to sell more cars and increase the dealership’s bottom line, offering proven strategies on how to identify pitfalls and maximize opportunities. Representatives of the Martin Automotive Group in Los Angeles commented on a previous year’s event, “Dealer Day was a great value and benefit for our dealership. The discussions provided us great insight into the different approaches and strategies for accessory integration. The ability to interact with so many other dealers was invaluable, and the range of knowledge was impressive, to say the least.” 2013 sessions include “Maximizing Dealership Profitability with Accessories,” “Dealer Focused Research” presented by Polk, “Creating the Best Possible Sales Team,” “Dealer Case Studies” and “Modifying Pre-owned Vehicles.” These sessions carry the singular purpose to build auto dealer profit centers. The SEMA Education Institute (SEI) courses provide an exceptional opportunity for auto dealers to learn first-hand what trends will affect their business. Presented by top industry experts, these courses are designed to give dealers practical tools that can be implemented as soon as they return to the dealership.

FINANCE

NIADA SPONSORS SEMA DEALER DAYS

M AT TERS

EXPANSION IMPROVES SUBPRIME AUTOMOBILE FINANCING PROGRAM

AFS Acceptance, LLC, has secured $20 million in subordinate debt to support expansion of its business. The injection of liquidity supports AFS’ initiatives to provide robust products and services for both franchise and independent dealers across the country. AFS is also pleased to broaden its long-standing relationship with Capital One, the agent of the credit line, and add Wells Fargo as a lender to the newly-syndicated $75 million facility. FalconBridge Capital Markets, LLC, acted as exclusive advisor to AFS regarding the new capital raise, which gives AFS the flexibility to penetrate new markets and increase market share in the states they do business in today. “We are delighted to have assisted AFS Acceptance,” said Bennett Cole, President of FalconBridge Capital Markets. “Dov Szapiro and his management team at AFS have built an outstanding financial services platform, and we look forward to working with the company as they continue to emerge as one of the country’s leading subprime auto finance companies.” The closing of the deals marks AFS’ transition from a small, local operation to a professionally managed organization. Dov Szapiro, CEO of the Ft. Lauderdale based company, noted, “This is a big day in the history of AFS Acceptance. When we started AFS, my brother Uri and I always envisioned working with companies of this caliber and we are grateful for their support and guidance.” AFS also recently acquired the assets and intellectual property of Preferred Automobile Credit Co., a Pennsylvania based auto finance company.

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FOR MORE INFORMATION, VISIT WWW.SEMASHOW.COM/EDUCATION.

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Back to Basics



COMPLIANCE

OVERDRIVE

IN THE CURRENT REGULATORY ENVIRONMENT, IT MIGHT BE BETTER TO TAKE A MORE CONSERVATIVE APPROACH TO THE CREDIT FEATURES AND OPTIONS YOU OFFER.

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Several years ago, a friend in the auto lending industry pointed out that a few aggressive indirect lenders were forcing motor vehicle lease rates down to what he thought were irresponsible lows. Instead of trying to compete with such risky rates, his employer decided to offer more reasonable rates and focus on offering unique product features and improved dealer services. That was possible because as long as the unique program features were well researched and executed, the regulatory risk was relatively low. The lender in this example wasn’t alone. Other indirect lenders also began to compete on features instead of trying to offer unreasonably low rates. A few years later when market conditions changed, the high risk-low rate lessors suffered terrible losses and many closed operations. The strategy to compete on features and service rather than price alone turned out to be the better, more stable strategy. In years past, indirect lending sales products offered features like variable interest rates, stepped rate interest (predetermined increases in the interest rate during the repayment term) and balloon features that allowed consumers to sell the vehicle back to the dealer instead of paying the balloon amount. The sheer range of programs might have been complicated to manage, but dealers saw the benefits of those creative approaches in consumer demand and sales numbers. Consumers, for their part, benefited from the competition to offer the most compelling programs and from the wide range of options available. There’s not as much demand for those features today. Lately we’ve seen a shift back to more basic features and programs. Why the simplified approach? One reason might be increased regulatory pressure – unique new credit features attract not only the interest of consumers, but also of regulators. The more complicated the program’s structure, the greater the compliance risk. The regulatory environment is definitely leaving less room for error and experimentation. A chilling reminder came when the CFPB recently announced a consent order against a major bank and one of its nonbank partners for violations in a unique military installment loan program. The CFPB determined the companies failed to properly disclose all the fees and charges to participants in their program. In the past, the analysis might have ended there, providing remedies based on Truth in Lending Act disclosure violations. But the CFPB said the program failures also violated the Dodd-Frank Wall Street Reform and Consumer Protection DEALER

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NEWS

Act’s prohibition on deceptive acts or practices. In response, the companies must return about $6.5 million to service members. The CFPB noted the companies were proactive in addressing the problems and their positive response “was one of several factors the bureau considered when choosing not to impose a civil money penalty in this matter.” Had civil money penalties been added, the result would have cost the companies even more. In such a regulatory environment, it might be better to take a more conservative approach to the credit features and options you offer. A good starting point would be to review the market need and use of each program and program feature. For example, if you still offer a variable rate auto loan, is there a strong market for it? Is your documentation and software still up to date? Is there still a strong secondary market for them if you want to sell/assign the contracts? Do the benefits of offering variable rates justify the added costs and risks of maintaining the program? Do the same analysis for all your key

Once you have culled any unnecessary and high-risk options, focus on your core finance programs. Are you comfortable that you have defined the finance options and features of those programs? Review your programs to make sure you have the basics covered and covered well.

OCTOBER / NOVEMBER 2013

program features. Now might be a good time to simplify your options, removing features that could do more harm than good. Once you have culled any unnecessary and high-risk options, focus on your core finance programs. Are you comfortable that you have defined the finance options and features of those programs? Review your programs to make sure you have the basics covered and covered well. Make sure: u  The program options and features have been recently reviewed by your compliance officer. Consumer finance laws and regulations are constantly changing, so a review done three years ago could be outdated. And while last year’s approved program might still be okay, new options you added this year (without being reviewed) can create a compliance problem. Details matter, so make sure your review includes all of the options offered. u  Your internal processes and execution of program options and features have been reviewed. Third-party vendor products and deliverables should be included in your review. Make sure you understand and accurately represent dealer and third-party products to potential buyers. The products might be fine, but the process of presenting and selling them can create a problem. u  You review your finance program options and features with your indirect lenders to see if any fall outside their program parameters. If so, is it because they present compliance, calculation or operations issues? And are you confident you can address those issues and sell the contracts to other indirect lenders? u  You have ongoing compliance monitoring in place during the program. Your program might be perfect when you launch it but fail afterward due to poor training, execution, unreported changes, compliance requirement changes, etc. Again, the monitoring needs to include third-party vendors – remember, the large bank and its nonbank partner were both included in the CFPB’s consent order. Using a third-party vendor does not necessarily absolve you of responsibility if things go wrong. One benefit of cleaning your financial product house is that you can reduce the compliance risks associated with high-risk, less popular credit features. Focusing on core products and features gives you a solid foundation from which you can confidently and cost-effectively add new features in the future.

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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Nevada October 2013

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