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MARCH/APRIL 2011

INDEPENDENT DEALER

O F FI C IA L P U B LI CATI O N O F T H E O H I O IN D E P E N D E N T AU T O M O B I L E D E A L E RS A S S O C IATI O N

ADAPTING LEASE-HERE PAY-HERE PROGRAMS ALSO New Leadership and Familiar Faces PLUS Curtlander Auto & Truck Celebrates 35 Years

DALLAS, TEXAS Permit No. 2079

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PRSRT Standard U.S. Postage

V isit us at w w w.ohiada.org

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Past Chairman Thomas Smith Smittys’ Auto Sales 668 S. 7th Street Greenfield, OH 45123 Tel: 937-981-4317 Fax: 937-481-9317 Cell: 937-218-3658 Email: tommy4317@yahoo.com

INSIDE

MAGAZINECONTENTS

Chairman Thomas Onesti Car Port PO Box 9943 Youngstown, OH 44513 Tel: 330-726-6633 Fax: 330-726-2633 Cell: 330-565-6833 Email: tomocarport@aol.com

6 New Leadership and Familiar Faces 12 Adapting Lease-Here Pay-Here Programs 16 Curtlander Auto and Truck Celebrates 35 Years

NIADA/Manheim Community Service Award

Ty Whittenburg CarMax Auto Superstores President 2700 Farmers Dr. Jay North Columbus, OH 43235 Jay North LLC Tel: 614-799-8077 501 E. Columbia Street Fax: 614-799-6547 Springfield, OH 45503 Cell: 614-493-8294 Tel: 937-325-3748 Email: Manager_7176- SAW_Location_ Fax: 937-398-1075 General@carmax.com Cell: 937-206-0575 Email: htron435@yahoo.com Terry Reineke Rino’s Auto Sales Inc Vice President 1610 Industrial Pkwy Daniel Reel Celina, OH 45822 Reel’s Auto Sales LLC Tel: 419-586-6161 547 East Main Street Fax: 419-586-8700 Orwell, OH 44076 Cell: 419-305-4009 Tel: 440-437-5893 Email: rinos@bright.net Fax: 440-437-5758 Cell: 440-319-1247 Robert Fahey Email: danreel@hotmail.com Fairdale Auto Sales 6209 Glenn Rd. Secretary Cambridge, OH 43725 Terry Reineke Tel: 740-432-4185 Rino’s Auto Sales Inc Fax: 740-435-0765 1610 Industrial Pkwy Cell: 740-607-4011 Celina, OH 45822 Email: r_fahey@yahoo.com Tel: 419-586-6161 Fax: 419-586-8700 George Polce Cell: 419-305-4009 Jenroc Auto, Inc. Email: rinos@bright.net 101 N. Tuscarawas Ave Dover, OH 44622 Treasurer Tel: 330-364-2525 Mark Meadows Fax: 330-364-6726 Miracle Motor Mart Cell: 330-268-4724 2380 Morse Road Email: Jenroc@wilkshire.net Columbus, OH 43229 Tel: 614-437-0037 Shawn R. Payne Fax: 614-337-1063 Autos Direct Online, Inc Cell: 614-348-6503 Email: dmarkmeadows@aol.com 5212 Mills Industrial Parkway North Ridgeville, OH 44039 Tel: 440-327-9780 ADMIN ASSISTANT Fax: 440-815-2100 Christine White Cell: 216-219-5926 OIADA Email: autosdirectonline@gmail.com 2040 Brice Road Reynoldsburg, OH 43068 Lauren Bowden Thomas Office: 614-863-5800 Bowden Motors Fax: 614-863-5801 1426 South Main Street Email: cwhite91@att.net Bellfontaine, OH 43311 Tel: 937-593-0014 Executive Director Fax: 937-593-0514 James R. Mitchell, Cell: 914-216-4994 OIADA Email: bowdenmotorslauren@ PO Box 216 embarqmail.com Brice, OH 43109 Tel: 614-436-3393 Randy Griesdorn Fax: 614-916-3023 Complete Automotive Email: jrmitch49@aol.com Repair & Sales, Inc. 123 East Main Street Jeff Rader Coldwater, OH 45828 Rader Car Company Tel: 419-678-3969 1429 Schrock Road Fax: 419-678-3575 Columbus, OH 43229 Cell: 419-852-331 Tel: 614-888-3111 Email: cars@hometowncable.net Fax: 614-888-3811 Cell: 614-582-1822 David Adkins Email: jeff@radercarco.com Wilmington Auto Sales Inc 1780 Rombach Avenue John Remy Wilmington, OH 45177 Remy’s Auto Group Tel: 937-382-7714 58905 US 50 Fax: 937-383-2392 McArthur, OH 45651 Cell: Tel: 740-596-4694 Email: david@wilmingtonautocenter.com Fax: 740-740-596-5526 Cell: 740-395-4214 Email: jremy@remysauto.com

Manheim, the world’s largest provider of vehicle remarketing services, cares about its employees, the environment and the communities it serves. From fundraising drives and tutoring kids after school to supporting long-term conservation efforts, Manheim and its employees are dedicated to giving back to their communities and know independent vehicle dealerships across the country share in this commitment. For the first time this year, Manheim is recognizing and honoring those dealerships by awarding the 2011 National Manheim Community Service Award at the 65th NIADA Annual Convention and Expo. For more information, contact Georgia Brown, NIADA director of education, at 817-640-3838 or download the nomination form at niada.com (click on the Manheim Dealers Edge link under the Services tab).

ADVERTISERSINDEX ADESA............................................................. 7 AutoTrader.com ................................. Back Cover Auto Use ...........................................................9 Chase.............................................................. 11 Columbus Fair Auto Auction .............................. 5 Corry Auto Dealers Exchange ..........................15 Manheim.com ......................... Inside Front Cover Smart Auction .......................... Inside Back Cover United Acceptance ..........................................13 Western General / Protective ............................3

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 OHIO INDEPENDENT DEALER NEWS IS PUBLISHED BIMONTHLY BY THE NATIONAL INDEPENDENT AUTOMOBILE DEALERSASSOCIATION 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 OHIO INDEPENDENT DEALER NEWS, THE OHIO INDEPENDENT AUTOMOBILE DEALERS ASSOCIATION, OR THE NATIONAL INDEPENDENT AUTOMOBILE DEALERS ASSOCIATION. LIKEWISE, THE APPEARANCE OF ADVERTISERS, OR THEIR IDENTIFICATION AS MEMBERS OF OIADA OR NIADA, DOES NOT CONSTITUTE AN ENDORSEMENT OF THE PRODUCTS OR SERVICES FEATURED. COPYRIGHT 2011 BY NIADA SERVICES, INC. ALL RIGHTS RESERVED. STATE MAGAZINE MGR./SALES Troy Graff • troy@niada.com EDITOR Mike Harbour • mharbour@niada.com PRODUCTION MGR. Jacob Kerns • jacob@niada.com ART/PRODUCTION MGR. Christy Haynes • christy@niada.com PRINTING Nieman Printing

FOR INFORMATION ON HOW TO BECOME A MEMBER CONTACT JAMES R. MITCHELL EXECUTIVE DIRECTOR

DON’T FORGET TO VISIT OUR WEBSITE FOR IMPORTANT INFO: WWW.OHIADA.ORG

OIADA • 2040 Brice Road • Suite #110 Reynoldsburg, OH 43068 PO Box 216 • Brice, OH 43109-0216 Office: 614-863-5800 • Cell: 614-436-3393 • Fax: 614-863-5801 jrmitch49@aol.com • www.ohiada.org

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Robert Vaughan Vaughan Motor Car Company 808 Parsons Avenue Columbus, OH 43206 Tel: 614-444-7839 Fax: 614-444-1133 Cell: 614-565-5682 Email: sales@vaughanmotors.com

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NAE AWARDS THE MILBY GROUP National Automotive Experts of Cleveland, Ohio, an administrator for automotive F&I aftermarket products, recently held an agent meeting for the grand opening of its new facilities.

The company’s tremendous growth across the U.S. has required a major expansion of its staff as well as a new, much larger training and office facility. The meeting was held over a period of three days and offered information, training and fun for all the agencies invited to attend. One of the many highlights was a trip to the Rock ‘N Roll Hall of Fame. NAE President Kelly Price and Bob, the association’s executive vice president, reserved the facility for the evening. A wonderful, catered dinner was provided during an NAE award presentation. NAE’s slogan is “People, Products, Performance. The Way It Should Be.”

The company presented beautifully engraved glass awards highlighting the three areas. The “People” award was presented to Mike Milby on behalf of The Milby Group. “We are so honored to have received this award,” he said. The award was for the best all-around partner for 2010. The engraving on the award states “True Stars Rise to The Top, Not by Chance But Through Purpose and Passion.” To be selected for this award from all the companies in the country with which NAE does business attests to the characteristics of The Milby Group’s staff. We truly believe we’re here to serve our clients with grace and virtue. Our growth during the past three years is witness of the integrity and character of each employee. The Milby Group says “Thank you, NAE, for the gift of this award.”

vAuto Helps Dealers Find Manheim Inventory vAuto’s proprietary stocking module can now allow its customers to quickly and efficiently source used vehicles at Manheim auctions as well as access Manheim run lists.

“Partnering with Manheim is the first of many exciting integrations with our new AutoTrader.com relationship,” said Keith Jezek, vAuto president, in an early February announcement. “Combining vAuto’s stocking tool with Manheim’s comprehensive list of vehicles is a huge win for our customers. Manheim is a key player in facilitating the buying and selling of used vehicles for automotive dealers, providing vAuto’s customers the best resources to stock vehicles.” vAuto’s stocking module allows dealers to make their decisions for purchasing vehicles based on what the customers are actually buying in their own marketplace at that exact time, down to the level of year, make, model, trim and equipment configuration. In the past, dealers had to rely on historical data, not current trends, when making stocking decisions.

New Leadership and Familiar Faces in Key Government Positions The 2010 elections brought about significant change and the return of some familiar faces to government positions that will affect Ohio dealers. Former

U.S. Sen. Mike DeWine was elected as the new attorney general for the state. DeWine brings to the office a long history of public service. He started his career as county prosecutor, served in the Ohio legislature, as well as lieutenant governor and also was a member of Congress both in the House and Senate. DeWine has built a legacy of being tough on crime and will bring that attitude with him in his role as attorney general. Consumer protection issues also will be a high priority for the new attorney general. Notwithstanding his intent to protect consumer rights, DeWine understands the need to revitalize Ohio’s economy. He has pledged to work with business owners to ensure they know the law and they’ll comply with the law. His intent is to create an environment for business and consumers that is safe, corruption-free, and business friendly. As he has said, “Jobs don’t come to a state where there is high crime, government misconduct and an eagerness to sue and regulate.”

Assisting him in his duties to protect consumers is new Consumer Protection Chief Sandy Lynskey. She brings to the position a strong background in consumer protection issues. Lynskey served as an assistant attorney general in the Consumer Protection Section from 1997-2005 under the administrations of former attorneys general Betty Montgomery and Jim Petro. During her service in the Consumer Protection Section, Lynskey handled many issues that affected the automobile industry. She served as the lead attorney for Ohio in the Ford Motor Co./Bridgestone Tire multi-state litigation on behalf of consumers who purchased faulty tires. Lynskey also was the legal advisor and manager of the Title Defect Rescission Fund. Her responsibilities included regulating auto sales and advertising. DeWine and Lynskey have not yet identified specific priorities in the industry. However, Lynskey has stated auto-related issues will be an area of emphasis for the attorney general. Auto-related complaints continue to be the largest generator of consumer complaints at the Attorney General’s office. At the Bureau of Motor Vehicles, it’s back to the future. Following a stint at the Secre-

BY SHAU N K. PETE RSE N

tary of State’s office, former Registrar Mike Rankin was reappointed by Gov. Kasich to be the registrar of the bureau. Rankin served as the registrar from 2007-2009 in the administration of former Gov. Ted Strickland. He has significant experience in auto-related issues as well as the workings of state government. Moving forward, dealers may expect some policy or procedural change in office administration. Nevertheless, the fundamental legal obligations placed on dealers remain the same. Compliance will remain the key to staying below the radar of these regulators. S H AU N P E T E R S E N I S A PA R T N E R W I T H T H E L AW FI R M O F M AC M U RR AY, P E T E R S E N & S H U S T E R L L P. S H AU N I S T H E PA R T N E R I N C H A R G E OF THE FIR M’S AUTOMOTIVE PR ACTICE. HE SERVES AS COUNSEL TO TH E O IADA AN D ADVISES DEALERS AND THEIR VENDORS ON REGULAT O RY C O M P L I A N C E R E L AT E D I S S U E S . P R I O R T O E N T E R I N G P R I VA T E P R A C T I C E , H E WA S A S E N I O R D E P U T Y ATTORNEY GENER AL AND CHIEF OF THE CONSUMER PROTECTION SECT I O N FO R FO R M E R O H I O AT T O R N E Y GENER AL JIM PETRO. SHAUN CAN BE R E A C H E D A T 614 - 9 3 9 - 9 9 5 5 O R A T S P E T E R S E N @ M PS L AW Y E R S .C O M .

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Q&A With NIADA President Anthony Underwood:

2011

Used Car Market Report

National Independent Automobile Dealers Association (NIADA)

Anthony Underwood was named president of NIADA in 2010. He started selling cars in Alabama in 1977, and he opened his first dealership in 1994 with five vehicles. Anthony’s two stores sell a combined total of 800 vehicles each year. He has been an active member of the NIADA and Alabama IADA for many years. Anthony has served on the boards of both NIADA and AIADA. He was named NIADA National Quality Dealer of the Year in 2003 and, that same year, earned his Certified Master Dealer certification. How have independent dealers adjusted their businesses in the last three years? Independent dealers have faced unprecedented challenges in the last three years. Even though the overall economy is improving, dealers are still struggling with limits on inventory and consumer credit. But dealers are resilient and have adjusted by stocking fewer vehicles and focusing on the types of vehicles that turn quickly. Solid inventory management underpins the successful dealer. Many dealers have retrained employees to ensure that everyone is contributing to the success of the business. Employee productivity has improved as staffs have been reduced to the current level of sales. In the process, we have learned to run our stores more efficiently. We have also seen a shift to the Buy-Here, Pay-Here model by dealers who have access to capital. In our store, we have cut in half both our staff and our inventory. We have also expanded the number of lenders we rely on to finance our customers. We are now sourcing some inventory online, buying vehicles that will sell quickly, and generating more sales based on specific customer orders.

How are independent dealers coping with the shortage of used vehicles? Independent dealers are confronting two challenges: higher prices and fewer pre-owned cars in the marketplace. Independent dealers are spending more time and effort to find the right inventory. Everyone is going to more auctions, both online and in person, as well as tapping local wholesale sources. Some dealers have been very successful in buying inventory directly from private owners. Three or four years ago, dealers were able to find plenty of vehicles under 70,000 miles and three or four years old at acceptable prices. But independent dealers have modified the age and condition guidelines to reflect what their customers can afford. As a result, dealers are doing more reconditioning to get vehicles frontline ready.

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You are quoted as saying “We will never go back to business as it was in the past.” Can you explain what you meant by that? Our business model has changed. New car dealers are getting more into the pre-owned business, so we have to meet that challenge. Franchised dealers offer service departments, larger facilities, and access to newer inventory. NIADA members know that they have to continue to improve their business skills and adapt to this new competition. NIADA can teach dealers to run more efficient operations, but the business of selling cars is still about knowing your market and your customers and being responsive to their needs. Independent dealers need access to information to enable them to make quick decisions. NIADA helps independent dealers stay abreast of the national and local economic, regulatory, and business issues facing our industry and each dealer.

How is NIADA monitoring the potential rules under the new Consumer Financial Protection Bureau? We have encouraged members to stay connected with one another by attending local and national meetings and by contacting their legislators on issues that could impact our business, in particular Buy-Here, Pay-Here. The NIADA website includes a blog where dealers can find information on local and national issues and answers to their specific questions.

You are a strong advocate for dealer education. What resources does NIADA provide dealers? NIADA is serious about education, and we recognize that it is one of the strongest things we have to offer our members. Knowledge is power, and what you don’t know can hurt you. Our three-day Certified Master Dealer Program gives dealers the critical skills and information they need to meet the challenges of operating successfully in a challenging environment. NIADA and its industry partners provide dealers with online and in-person training that covers the full range of inventory and dealership management topics. For example, the NIADA/Manheim partnership teaches dealers how to buy and sell vehicles online through The Wholesale Institute training on NIADA TV.

2011 Used Car Market Report

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BY BI LL MO K RY

THE ART AND SCIENCE OF USED AUTO INVENTORY Building a profitable used auto inventory requires having the right information and the talent to know how to use it. Over the years, I’ve been blessed with tremendous mentors who have provided me with valuable insights, one of which is managing a used vehicle department is both a science and an art.

While there are no cookie-cutter solutions applicable to every scenario, there are tried and true blocking and tackling strategies that can help any department maximize results. When it comes to proper inventory mix, there are several ways a dealership

USED CAR MANAGERS SHOULD BE AWARE, AT THE VERY LEAST, OF THE TOP-SELLING VEHICLES IN THEIR MARKET BY MAKE, MODEL, AND YEAR AS WELL AS THE TOP-SELLING VEHICLES AT THEIR STORE can study information to improve volume, gross and ROI. However, before the information can be broken down, the store must have the information. While this may seem obvious to some, I am routinely presented with departments that fail to accomplish this seemingly simple task. Used car managers should be aware, at the very least, of the top-selling vehicles in their market by make, model, and year as well as the top-selling vehicles at their store. All too often when I ask used auto managers to name the three top-selling used vehicles in their markets, they look at me like a deer in headlights. Or, they automatically respond “Honda Accord” or “Toyota Camry.” That’s great! What year? What trim level? What mileage band? How

many of these have been sold at your store in the last 90 days? What was the average age when it was sold? There are several tools available to help managers accumulate this data, such as Auto Exchange for internal data and Cross Sell for external data. Once this data is collected, it is imperative management consistently identify which vehicles sell in their market (internal and external). That’s the science part of the equation; it’s not especially difficult to identify commodity type vehicles and, if you’re willing to travel or pay, to procure them. Further breakdown of historical internal and external trends is, however, necessary. Specifically, it would be beneficial to track sales volume, aging, and gross profit for specific COS bands. These could be broken down as follows:

$0 – $5000 $5,001 – $10,000 $10,001 – $12,500 $12,501 – $15,000 $15,000-plus The used auto dealer should be aware of and actively track each of the above categories for each price band in used cars, trucks, SUVs, and vans, comparing the current stocking mix to what has yielded the greatest success. The categories can be broken down further into import/domestic categories as well, if needed. This information, coupled with knowledge from external tools, is used to direct buying specific inventory at specific price points to generate specific results. The art of used vehicle inventory comes from identifying and procuring vehicles that put your store ahead of the curve. For example, a few years back fuel prices spiked and, as a result, highly economic, smaller pre-owned vehicles were suddenly at a premium, while large pickups and SUVs could be bought for a dime a dozen. The market was quickly flooded with these gas guzzlers, but few people had the vision or foresight to accumulate them. Those who did were those who had the knowledge and experience to understand the ebb and flow of the used car market, so

they loaded up on these vehicles at very cheap prices. It’s not difficult to guess what happened to their profits when the price of fuel went back down. Recognition of these opportunities is not always easy; often it comes from experience. I believe we are involved in one as I type this column. Thanks to the Cash for Clunkers program, new car inventories are generally low; there are fewer trades in most used inventories and the price of vehicles at auction has gotten higher. While this could mean several different things depending on your market, I would think the potential for increased gross profit, even on vehicles more traditionally thought of as commodity cars, is greater than ever. Hopefully, you’re tracking the trade capture rate. A normal benchmark for capturing trades is 55 percent of appraisals. Because of today’s market conditions, I would encourage all managers to aggressively get involved with customers and inquire about their desire to trade their vehicle, as well as ensure your store is appraising every vehicle possible. Further, I believe it’s imperative to improve the appraisal capture rate by 10 percent or more. Used autos are at a premium and the extra money put into a trade has never been a better investment. This type of forward thinking involves risk some dealers simply may not be willing to accept. Those who do so are more frequently ahead of the used vehicle game. The science of used inventory can be resolved by accumulating information, breaking it down (all the way to COS bands, if you really want to be detailed) and buying and trading aggressively according to trends. The art requires experience and guts. BILL MOKRY IS A SALES AND F&I S P E C I A L I S T F O R S E R V I C E G R O U P, A N INSUR ANCE AND FINANCIAL SERV I C ES COM PANY THAT PROVI D ES I N COME DEVELOPMENT TR AINING AND SERVICING SOLUTIONS TO AUTO DEALERSHIPS. HIS MANY YEARS OF DEALERSHIP EXPERIENCE INCLUDE SEVERAL AS GENERAL MANAGER OF A SUCCESSFUL USED CAR OPER ATION. H E CAN BE REAC H ED AT BMOKRY@SGIFS.COM .

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Going Mobile in Your Dealership One of the new keys to the success of your business is your smart phone. You can

operate your dealership on-the-go, making fast, informed decisions that will ultimately improve your bottom line. More than 440,000 mobile sites and over 500,000 mobile apps exist today, including a growing number of auto-industry related apps. It may seem daunting to integrate this emerging technology into your business, but these tools are a must-have for both acquisition and retail. What are ‘mobile apps’ and how do they help dealers? An app is a software application that helps people accomplish tasks faster. Among other things, an app can use the hard drive of the mobile device to store data for faster recall and operation, perform calculations, access hardware features such as camera and GPS – and all without an Internet connection. At its core, the Internet revolution was about how technology harnessed the power of information to generate efficiencies, and this is exactly the opportunity mobile apps offer to dealerships today – providing information onthe-go and tying it all together to take action. How can mobile apps streamline your business?

Mobile browser-based tools provide dealerships with more on-the-go visibility but lack a built-in ability to act in real-time on information organically across the dealership. But, just as a mobile app enables on-the-go stock trading, for example, an app such as eCarList’s ‘True Target Mobile’ allows dealerships to take a massive dataset and a complex, multi-step, -vendor and -personnel process and make it all work from a single handheld device. The ‘True Target Mobile’ app gives dealerships mobile access to pricing data from multiple books, current data from top online marketplaces and the ability to filter, organize and view the data geographically for territory (including vehicle pricing from competitive dealerships). Other functions include VIN scans, taking/adding/removing photos, integrating Carfax Vehicle History Reports and sharing appraisals and pricing with other mobile devices. Are there other benefits to going mobile? On the acquisition side, smart phones provide access to information you need to stock your lot with cars that customers want. It’s no secret that the used car supply is decreasing due to rising demand, so the competition for quality units is getting tighter.

Think about the top concerns your customers have when shopping for a used car: previous damage, maintenance, ownership history, and of course, price. Tools like Carfax Vehicle History Reports are readilyavailable through various mobile devices to verify this important information and bid with confidence. Having your mobile device handy helps you tie it all together quickly and successfully acquire the right cars for your lot. Today’s mobile devices provide access to information that brings transparency and process effi ciency to dealers. The possibilities mobile is opening up for our industry are truly extraordinary – and in the current economic climate, leveraging new and user-friendly technology is key to moving more cars and saving money in the process. BY LEN CRITCHER AND LANCE VICKERY Len Critcher is CEO of eCarList, provider of award-winning inventory management and online marketing solutions that make it easy for dealerships to fully own and control the vehicle merchandising process through one unified platform. Lance Vickery is director of dealer business at Carfax and has spent more than 25 years in the auto industry.

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ADAPTING LEASE-HERE PAY-HERE PROGRAMS TO OHIO SALES TAX REQUIREMENTS Because of high default rates, the key to a successful BHPH program is getting upfront cash to cover the transaction costs and initial depreciation of the vehicle. However, there are two big cash flow

problems in BHPH programs: the markup on the vehicle creates a large dealer federal and state income tax liability (even after sale of the transaction to a related finance company (RFC) at a discount) and most of the customer’s upfront cash payment goes to state sales tax. So, after paying the upfront sales tax and income tax, the dealer starts most BHPH sales in a negative cash position even if $1,000 or more is collected from the customer. Lease Here-Pay Here (LHPH) programs solve the first problem in every state because there is no sale, thus no recognition of markup income on sale. LHPH programs also solve the second problem in the majority of states where sales tax is collected only on the lease payments as they are made, not upfront, but this isn’t the case in Ohio. Ohio law accelerates the sales tax for all lease payments over the entire term. Thus, the customer may owe even more sales tax in a LHPH contract than a traditional BHPH. Is there a solution for Ohio that allows a dealer to achieve BOTH benefits of a LHPH program?

Rent-To-Own: The solution?

The immediate potential solution that comes to mind is Rent-to-Own (RTO). However, RTO programs are fraught with problems for a variety of reasons. There is widespread hostility among state attorneys general who believe these programs are inherently deceptive and unfair to consumers. Thus, they are ripe for attack under the Unfair and Deceptive Practices Acts. There’s also no federal safe harbor for compliance (as there is in leasing) that preempts state laws. Many RTO forms are drafted in a manner that creates a disguised installment sale without making the required Regulation Z and state motor vehicle retail installment sale act disclosures. For example, I have seen RTO forms that create a purchase option price of one monthly lease payment, which creates a retail installment sale under IRS Regulation 55-540, or state the lessee must make all required lease payments or state the total cost is all payments and all other charges necessary to acquire ownership of the property. Even if the RTO form is well-drafted, many dealers structure their deals in a manner that creates a disguised installment sale without making the required Regulation Z and state disclosures. If the so-called RTO transaction is really an installment sale, the sales tax is due up front and the dealer could face substantial penalties for failing to make the required Regulation Z disclosures.

A better solution

A periodic payment lease is a better solution. This structure is basically a hybrid between a standard Regulation M lease and an RTO contract. While a Periodic Renewable Lease (PRL) does not create a fixed term that brings it within the Regulation M requirements and pre-emption of state laws, a well-drafted PRL provides the consumer with many of the same disclosures and protections of Regulation M while avoiding the structural problems and attorney general hostility of RTO programs.

PLEASE NOTE THE INCLUSION OF AN EARLY TERMINATION PENALTY WILL CAUSE THE SALES TAX TO BE APPLIED TO THE MAXIMUM NUMBER OF RENTAL PERIODS SO THE PRL MUST BE CAREFULLY DRAFTED TO AVOID THIS PROBLEM. How does a PRL work?

A PRL program has a term equal to the rental period, i.e., a week, two weeks or a month. The term is renewed when each additional payment is made. Since there’s no obligation to extend the lease beyond the initial period, sales tax is only due on each payment as the lease is renewed. In effect, the customer renews his lease payment by payment. Unlike a conventional lease, there is no early termination charge! If the customer cannot make his payment, he simply returns the car and is not obligated for any future payments (except for excess wear and tear or mileage). Like a conventional lease, the customer has three options after the maximum number of renewals: purchase the car for the residual value, trade it in or return it. Please note the inclusion of an early termination penalty will cause the sales tax to be applied to the maximum number of rental periods so the PRL must be carefully drafted to avoid this problem. Because of the absence of an early termination charge, it is important to charge a lease acquisition fee and capitalized cost reduction that covers the dealer’s initial costs and vehicle depreciation. Thus, the initial cash that would be paid to the state in sales tax can be used to cover the dealer’s costs and reduce the customer’s initial lease balance and periodic payments. The result can be lower payments (to attract better customers), higher rent charges (for more profits) and/ or a shorter term (e.g., 24 months – to keep more customers in the car).

Disregarding the added income tax liability in BHPH transactions, the following example illustrates the cash flow difference from the sales tax alone between a BHPH, LHPH and PRL transaction with the same $1,000 upfront customer cash. INITIAL SALES TAX BHPH LHPH PRL Sale Price/Lease Value 9,000.00 9,000.00 9,000.00 Customer Cash 1,000.00 1,000.00 1,000.00 Security Deposit 500.00 500.00 Tax Rate 7% 7% 7% Upfront Taxable Payments - 467.29 467.29 Taxable Periodic Payments 9,600.00 9,600.00 Initial Sales Tax on: Purchase Price 630.00 Upfront Lease Payments 32.71 32.71 Periodic Payments 672.00 Total Initial Sales Tax 630.00 704.71 32.71 Dealer Cashflow $370.00 $295.29 $967.29

Compared to a LHPH program, a PRL program has a whopping $672 upfront sales tax savings, even larger than the $597 savings compared to a BHPH sale. Lease It-Own It (LIOI) is a successful dealer program in Columbus that has used this structure very profitably for several years. “Our periodic lease program offers us the best features of BHPH and RTO,” said Rob Seymour, LIOI business development manager (614-395-5363). “Other dealers are always asking us for our ‘secret sauce.’ I tell them any good BHPH dealer can be successful with a PRL if they get the right guidance and follow the basic steps.” BY R AN DALL MCC ATH R E N R a n d a l l M c C a t h r e n i s a n a t t o r n ey a n d consultant with more than 25 years o f ex p e r i e n c e i n c o n s u m e r ve h i c l e leasing including Lease Here-Pay Here programs for independent and franchise dealers. He represented industr y members in the formulation o f t h e 19 98 R e g u l a t i o n M a n d h a s c o n s u l t e d w i t h t h e F e d e r a l R e s e r ve Board on leasing regulator y issues. He i s t h e c o - a u t h o r o f t wo b o o k s o n ve h i c l e leasing: The Automobile Lending and Leasing Manual and Essentials of C o n s u m e r Ve h i c l e L e a s i n g . H e c a n b e reached at rmccathren@blcassociates. c o m o r 615 - 6 9 2 - 0176 .

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Independents Remain Profitable in Challenging Environment BY TO M WEB B

Our team at Manheim Consulting had the pleasure of interviewing NIADA President Anthony Underwood for a question and answer session discussing the state of the used vehicle market from the perspective of independent dealers as we compiled the recently released, 16th annual Used Car Market Report (UCMR).

Underwood framed the challenges facing independent dealers in a way that confirmed what our data was telling us: independents are encountering higher prices for inventory at the wholesale level and finding fewer pre-owned vehicles in the marketplace. In response, these dealers are focusing on sound inventory management practices, and using all available sales channels – including online – to source just the right inventory to meet their customers’ needs. We examined these and other trends in the UCMR, which is Manheim’s annual

analysis of the forces shaping the used auto industry. As part of the ManheimNIADA Dealer’s Edge partnership, I’m happy to let you know you can download the entire report free of charge by taking a very brief survey at www.surveymonkey. com/s/manheim. As a comprehensive analysis of the trends shaping the automotive industry, the 2011 UCMR contains much more valuable information pertaining to independent dealers, as well as chapters on other aspects of the industry, including rental, leasing, fleets, repossessions and salvage. I encourage NIADA members to download their free copy of the UCMR, and as always, please e-mail me any time with your questions. Tom Webb is chief economist for Manheim Consulting. Contact him at Thomas.webb@manheim.com, follow him via Twitter at www.twitter. com/TomWebb_Manheim and read his blog at www.manheimconsulting.typepad.com.

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Craigslist 101:

BEST PRACTICES If eBay were free, would you advertise your inventory on it? This should be

a no brainer! Craigslist and Ebay had equal amounts of unique visitors in the U.S. for the first time ever in May 2010, according to comScore data. Dealers who think Craigslist is not for them are missing the boat. It doesn’t matter if you’re selling dollar-cars or the high lines; customers of all ranges are going to the Craigslist marketplace to search for vehicles! A free site offers very little to no technical support, which is why I believe a lot of dealers are missing out on huge opportunities because they’re not educated on Craigslist and don’t have the right process in place to realize potential. Those who have discovered the power of Craigslist advertising will agree it’s a constant battle to keep up with the terms of service as well as

keep their posts young, live and searchable to generate leads. The first thing I want to point out is Craigslist is the best ROI for lead generation out there. It is free to post, but to get maximum results requires knowledge of Craigslist terms, time and a dedicated process. With the amount of vehicles posted in the Denver Craigslist market, for example, you must have a daily presence on the site. For the longest time, we used to think that as long as your vehicle is live on Craigslist, it didn’t matter how recently you posted it. This could not be more wrong; the proof is in the pudding. Every time dealers list a new ad on Craigslist, they get most of the calls the day they post and the day after. After an ad has been on the site more than three days, it gets a lot less calls. Craigslist searches are

driven by date. For example, if a customer was to search for a Honda Accord in Denver, there’d be more than 1,000 results spread across 10 or more pages! If you posted your 2008 Honda Accord three days ago, it is most likely already on the fifth results page. Our recommendation is to delete each ad after 48 hours, then repost it to maintain its effectiveness and stay at the top of the list. Remember, the Craigslist consumer will look at the first search page results on craigslist, but they’ll usually find what they’re looking for there and never make it to the next page. A pair of actions you should be aware of is flagging and ghosting. Ghosting is when your ad appears to be live but can’t be found anywhere on Craigslist. It’s an action done by Craigslist administration that’s definitely the worst of the two because you have no idea it’s happened because the ad looks normal. Flagging is done by the Craigslist community. One thing to keep in mind is Craigslist is a community-based classified site. The majority rules and decides whether an ad is worthy enough to stay live. This is where the flagging system comes into play. Each Craigslist consumer has the right to flag your vehicle. One Craigslist visitor cannot take down your vehicle ad, but he can contribute towards it. That means it takes more than one person to flag and remove it from the site. So how many flags does it take? Well, it depends. Nobody really knows the exact figures except Craigslist; in metro Craigslist markets, it may take up to 20 flags to take down an ad. In smaller markets, where, for example, only 100 vehicle ads get posted per day, only two flags might take down an ad! Most importantly, flagging will result in ghosting and will eventually blow up your Craigslist account so none of your ads will stick. You’ll have to go through the Craigslist community forums and blogs to get back to good standing. That process will take a lot of time and reading; most dealers will be overwhelmed doing such a thing. So why do people flag? I believe 80 percent of it occurs because posters aren’t following the terms of service.

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BY DUSTI N JANSSO N

For example, maybe you posted a 2008 Honda Accord ad on Monday and posted it again on Tuesday without deleting the earlier ad. The Craigslist community frowns upon this and is very click happy when it comes to flagging. If you have experienced this, you might want to consider automated postings that post ads more frequently with a fraction of your present efforts. The other 20 percent of flags, in my opinion, are your competition. Not fair? Perhaps not, but Craigslist is a free service (to post cars and trucks), so who can you complain to? The fact is Craigslist at some point really frustrates every car dealer, but we all have to deal with it. The good news is there are posting tools to take on this challenge as well as automated tools to post your entire inventory

CRAIGSLIST IS IDEAL FOR THE DEALER BUDGET AND MANY RELY SOLELY ON THE SITE FOR ONLINE LEADS. ARE YOU GETTING YOUR PIECE OF THE PIE? every day. If your competition is flagging your ads, they’ll eventually tire from doing so. Just don’t make it easy by attempting to post your entire inventory every day on your own as that effort will result in a high flag and ghosting rate. Craigslist is ideal for the dealer budget and many rely solely on the site for online leads. Are you getting your piece of the pie? Dustin Jansson provides consulting, Craigslist posting tools and automated Craigslist posting services, as well as other dealership products. Contact him at 303-232-3435 or dj@dealernetsolutions. com. For more information, visit www. dealernetsolutions.com.

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CURTLANDER AUTO AND TRUCK CELEBRATES 35 YEARS AS AN INDEPENDENT USED CAR DEALER BY: James R. Mitchell, Executive Director

Joe was born with little cars & trucks falling out of his brain. He has loved buying, selling, and anything involving vehicles since he was a youngster. After working and managing gas stations in the fifties, he became an electrician. Still, after working 40 or more hours at that job, he would go home to the garage behind his house and “work” at what he really loved. Finally, after years of saving, he was able to invest his savings of $30,000 into his real love. He received his auto dealer license approval March of 1975. The property and building he had purchased was renovated from an Arco gas station and he was ready to “rock and roll”. Curtlander Auto Sales was originally a sole proprietorship and at that time he was selling used cars and had an average inventory of 6-8 cars. Joe was also doing body work, detailing, and minor mechanical repairs. In 1976, the body and paint work made it necessary to add a paint booth to the already existing 2 bay garage and office building. This addition led to even more insurance work and that led to the creation of Curtlander Rental so that he could rent cars to the insurance customers. There was only one salesman employed when the business first opened. Joe would work the road buying inventory and doing some wholesale sales and when he returned to the dealership later in the day he would relieve their salesman in the evenings. Those were the days when they would be open every Monday and Thursday till 9:00PM. By September 1977, after “Black Monday”, so many of the steel mills closed and sales dropped drastically. The inventory that Joe carried was too expensive for the local market and Joe was concerned that the end of Curtlander Auto Sales was near but, as if Divine Intervention had taken place, a very dear friend took Joe under his wing and became his advisor. This “angel” advised Joe to take some of the higher priced units to Columbus Auto Auction and SELL. The idea was to take the proceeds from those units and purchase lower priced inventory. To do this involved shopping new car dealers and buying their entire back rows of used cars. With this new lower priced inventory, sales took off immediately. This saved the business and allowed Joe to continue to explore other avenues of inventory. He began to “cherry pick” repossessed cars. He continued to attend three auctions a week during the 70’s and 80’s, Manheim in Butler PA and Columbus Fair on alternate Wednesdays, Adesa Cleveland on Thursdays, Mercer Auto Auction on Fridays

and a repo auction on Saturdays. Over the years Joe developed an uncanny ability to buy good used cars. By the early 80’s he had added another mechanic and a lot/detail person and desperately needed more space. In 1985, he purchased more property next to the original corner and this allowed him to add a 40’X120” service center with 3 lifts and an office. He also remodeled and added a second floor to the existing sales office. By completing this expansion he was also able to keep all of the employees during the slower winter months by letting them do a lot of the finish work on the buildings. In 1987, the business moved its location and hired a full time office manager to handle titles bookkeeping, accounts payable and receivables. This position was filled by Joe’s wife Karen and one of the perks of having their own business was the fact that they could bring their dogs to work with them and stayed upstairs in the office with Karen. They also adopted a little office cat who rapidly became the dealership mascot and she actually helped to sell a few vehicles! As retail sales increased Joe was getting more and more requests from customers and people off the street, for mechanical repairs such as tune ups, brakes, exhaust, oil changes, etc. This created a need to hire another mechanic in the early 90’s. EPA rules and regulations made bodywork and paint a hardship which resulted in Curtlander dropping that part of the business. Now they sublet that work to outside companies. With the loss of the bodywork, they were forced to also close the rental side of the business. By the end of the 80’s and into the 90’s, it was harder to buy from the dealers. Auctions were getting stronger and bigger and the dealers were taking their used inventory to these venues. Joe did less and less with dealers and more and more with the auctions. It was at this time in the early 90s that Joe noticed a change in the type of vehicle that his customer base wanted. He began to see that he was selling more pickups. It was at this time, Joe discovered Central PA Auto Auction. They had a utility truck sale once a

month. Within a year, he had bought over 80 Chevrolet Astro cargo vans, bucket trucks and utility trucks. These became his biggest sellers through the 1990’s. Joe learned that the reason for this demand was because it was cheaper for companies to let their employees become subcontractors so Joe dropped out of the retail car market, majored in cargo vans, utility trucks and pickups and hired 2 wholesale buyers to help work the road and buy cars for the wholesale side of his business. Meanwhile, back at the office Joe was growing again! There were now 10 employees plus Joe and Karen. This included the 2 wholesalers, 1 inside salesman, 1 secretary, 1 service manager, 2 mechanics, 1 detail man and 2 lot/detail people. After much prodding from their accountant, Joe changed from a sole proprietorship to a Sub Chapter S Corporation in 1996. It was then that the business name was officially changed to Curtlander Truck & Auto Sales, Inc. They also entered the computer age with some trepidation on Karen’s part however, as it turned out, it was the best thing that they could have done in the office. Instead of ledger sheets, they had QuickBooks; instead of index cards for the inventory, they had the entire inventory on the computer. They were now doing a total of $5,000,000 plus in retail and wholesale sales and service work and the computer age enabled Joe to maintain his records in better detail and the internet is contributing in their yearly growth. Needless to say, in 36 years, they have seen MANY changes in the auto industry. Selling vehicles is so much more involved now with so many forms and so many different compliance issues which must be adhered to in the automobile business. More and more paperwork is needed every year. The market has changed so much and it has become more difficult for Joe to buy vehicles because there is a shortage of product in the market place today. They have seen many used car dealers close as well as four banks that Curtlander dealt with who have either disappeared, or merged with larger banks. In these new times, however, Joe does not doubt that he will find a new niche for Curtlander Truck and Auto Sales, Inc. in the years to come and he welcomes the opportunity. If you are a member of the OIADA and have a success story to tell that is more than 25 years old please contact us so that we can include you in a future issue of our publication. Call 614-863-5800.

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REMEMBER: EXPERIENCE DOESN’T MEAN THAT YOU KNOW A P P R O X I M AT E L Y, 9 O U T O F 1 0 D E A L E R S V I O L AT E T H E F O L L O W I N G

LAWS & COMPLIANCE REQUIREMENTS MONTHLY: (1)Adverse Action Compliance (2)Privacy Laws (3)OFAC Compliance

(4)Risk Based Pricing (5)Red Flag Rule (6)Safeguard Rule (7)Gramm Leach Bliley Act (8)Selling Out Of Trust (9)Power of Attorney Compliance (10)Truth In Lending

(11)Temp Tag Compliance (12)

Consignment Compliance (13)IRS Form 8300 Compliance (14)FTC Buyers Guides (15)Spot Delivery (16)Ohio Deposit Rule (17)Written Limited Warranty (18)Repossession Violation (19)GPS Disclosure (20)Illegal Fees (21)Odometer Disclosures (22)UDAP Statutes (23) TDR Compliance (24) Payroll Violations (25)Paying Bird Dog Fees (26)Title Compliance (27)Temp Tag Compliance (28) Doc Fees (29) Forms Compliance (30) IRS Rules

Independent Used Car Dealers violate all or most of the aforementioned laws on a regular basis for one of two reasons; they either didn’t know or they didn’t care. Every year more than 850 used car dealers go out of business in the state of Ohio and the majority of these dealers violated one or more of the listed laws and didn’t know that they did anything wrong. The Ohio Independent Automobile Dealers Association (OIADA) has decided to do something about this starting in January 2011. We have met with individuals from the Department of Dealer Licensing at the BMV and informed them that we were going to offer a monthly class for all dealers to learn how to be a dealer. There are no classes available in this state for a dealer to learn the legal, compliant and proper way to do business as a used car dealer and that is going to change in 2011. In 2011 the OIADA will offer a Dealer Workshop in our offices located at 2040 Brice Road in Reynoldsburg, Ohio 43068 wheWWre all dealers, new and seasoned veterans alike can go to learn the right way to be a dealer. The seminar will be eight hours in length and lunch will be included for all attendees. The price for this workshop will be $98.00 and at his price the classes fill up quick so register today. Everything listed above will be addressed at this workshop and much more. Now the decision is up to you but if you violate the law now……………… what excuse will you use?

TO CHECK THE DATES THAT THIS IS BEING OFFERED GO TO WWW.OHIADA.ORG AND CHECK THE EVENT CALENDAR, TO REGISTER SIMPLY CALL THE OFFICES OF THE OIADA, 614-863-5800 AND GET REGISTERED TODAY.

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M O B I L E C O M M E R C E takes center stage with consumers looking for

This past holiday season, surveys and statistics showed what many analysts and industry observers were thinking: mobile commerce is growing by leaps and bounds, and every industry is in on the trend, including automotive.

In 2011, smartphones are forecasted to account for half of the mobile phone market, according to The Nielsen Co. On top of that, an ABI Research  report says mobile online shopping will generate $119 billion in sales by 2015, accounting for 8 percent of the e-commerce market. When car dealers make it easy for their business to be found through a mobile web browser, loyalty campaigns, marketing initiatives, text promotions and sales can attract and retain customers. What are consumers browsing with their smart phones? The same types of items they started browsing on computers: researching purchase decisions, cost comparisons and finding the location of physical items. Recently, eBay reported a substantial increase in mobile traffic, where sales more than tripled in 2010 to near $2 billion in gross merchandise volume. Last year, vehicle purchases led all categories on eBay mobile applications in terms of GMV, while parts and accessories were number two in terms of the total number of items purchased. Dealers know when they have a physical lot, customers still come to kick the tires when the sales office is closed. Now, today’s consumer might still come to the lot, but he or she will also pull out a smart phone, check the hours of the dealership and research the same make and model for competitive pricing. The same thing is happening even if the consumer doesn’t drive to a physical lot. A consumer may be in his garage working on

a car and need to find a part or accessory. Instead of going inside and turning on the computer, he’s browsing his smart phone to find the part, price and local availability. Just as e-commerce has completely changed the way we do business, wireless devices and smartphones are again altering what we know about consumers’ purchasing behaviors. Seeing similarities in mobile commerce and e-commerce, auto dealers ask themselves a familiar question: would anyone really buy a car from their smart phone? In 2010, more than $118 million in car and truck purchases were made via the eBay mobile application – more than 12,600 vehicles were sold. Parts were the second biggest category in mobile last year, with more than 911,722 parts purchased, and more than $60 million in sales. For independent dealers, mobile applications and mobile commerce are the must-have digital tools of 2011. With smartphones capable of surfing, downloading apps and connecting with coworkers and friends in an instant, researching and shopping for vehicles, parts and services is a natural extension. For example, a business traveler waiting at an airport may use that downtime to look for a needed part for his car or browse available vehicles for a new truck. If an independent dealer’s inventory is not readily available on a mobile app, chances are there’s an entire customer segment that may not see what’s for sale. A recent ForeSee Results survey found 30 percent of consumers used a mobile phone to research products on the Internet, compared with 11 percent in 2009. Those making a purchase through a mobile phone increased from 2 percent in 2009 to 11 percent in 2010. For example, Tilo Steurer, founder and owner of Eurocar, the West Coast’s largest

independent dealership of its kind, sells and buys vehicles and regularly uses eBay’s mobile app to buy cars, parts and accessories. “I purchase anywhere from five to 10 cars every month, most of the time through the eBay mobile app,” Steurer said. He also uses the eBay mobile app to keep track of his business while not in the office. With any form of sales – online, mobile or in-store – customers consider the credibility of the seller and business before making a purchase. Building that credibility takes consistent communication, which is made easier when dealers can keep in touch through mobile and online sources. “Communication is very important,

FOR DEALERS, HAVING PARTS, ACCESSORIES AND VEHICLES AT A CONSUMER’S FINGERTIPS IS AN IDEAL WAY TO EXTEND MARKETING AND SALES WITHOUT A LOT OF DEVELOPMENT AND TECHNICAL EFFORT.

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especially when making an expensive online purchase such as a luxury car,” Steurer said. “With the eBay mobile app, I can respond more quickly to customer questions, which builds credibility and increases the opportunity for a sale.” To accommodate this growing trend, eBay Motors is launching a mobile app that will provide a customizable buying experience optimized for vehicles, parts and accessories, as well as unique social and community features for the enthusiast.  Features include VIN scanning and a virtual garage to give enthusiasts personalized information. After searching for a vehicle, users can share it with friends and social networks or ask the seller a question. Users can create “car cards” for their vehicles which display photos and stats about the vehicle and can be used in searches for parts and accessories. On the garage tab, consumers can input and store the vehicles they own or scan the VIN barcode with the iPhone’s camera to populate information. In the garage, car owners can create to-do list for vehicle projects, store custom parts searches and share the garage with their social network. For dealers, having parts, accessories and vehicles at a consumer’s fingertips is an ideal way to extend marketing and sales without a lot of development and technical effort. Mobile commerce is still in its infancy but is growing at a faster pace than e-commerce. With the Internet available wherever consumers are with their smart phones, it’s only a matter of time before mobile commerce becomes a dominant form of purchasing. Because of the similarities to e-commerce, consumers are quickly adopting m-commerce and expecting businesses to be on board.

Automotive Internet marketing specialist, Michael D. Jackson, CEO, AutoSearch Technologies, shares strategies you can use right now to boost your dealership’s online clout. RUNNING TIME: 50 MINUTES

LOG ON NOW 24 / 7 KEEP YOUR EYES OUT FOR THE NEW “AUCTION TIPS” SERIES COMING EARLY MARCH. OVER 400 HOURS OF DEALER EDUCATION CAN BE SEEN ON WWW.NIADA.TV

ONLINE ADVERTISING

OPTIMISING YOUR ONLINE PRESENCE WITH SEO, SOCIAL NETWORKING, AND THE LATEST TECHNOLOGIES

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FEDER AL ADVOCATES JANUARY 2011 LOBBYING REPORT Office of Service Member Affairs

NIADA and Federal Advocates is pursuing a meeting in February with the Consumer Financial Protection Bureau’s Holly Petraeus, Office of Service Member Affairs director. She is the wife of U.S. Army Gen. David H. Petraeus, the top U.S. commander in Afghanistan. The purposes of the meeting are for NIADA General Counsel Keith Whann to introduce the association and himself; to brief Petraeus on the various efforts and programs of the association to ensure service members are treated fairly by the used auto industry, and to offer his experience and knowledge in furtherance of her new office. Department of Defense

NIADA and Federal Advocates also is pursuing a follow-up meeting in February with the Office of the Deputy Undersecretary of Defense (Military, Community and Family Policy) to discuss NIADA’s experiences and areas of possible assistance to the Deevnse Department regarding service member automobile issues. White House Reform Request

NIADA is continuing to pursue a February meeting with the White House in response to the letter sent last year by NIADA to President Obama requesting “the opportunity to work with your administration to reform our industry in common-sense ways that achieve real safeguards for consumers, that promote accountability and transparency, and that really work.” NADA On February 2, Federal Advocates will be meeting with the governmental affairs staff of NADA to discuss issues and strategies for the 112th Congress. Dodd-Frank Wall Street Reform and Consumer Protection Act

Congress ended with the Federal Trade

Commission beginning in earnest to review the auto industry in the light of the above consumer-enacted law. To review, on November 17, Whann and Federal Advocates met with senior staff of the FTC as follow-up to the Sept. 21 meeting. A series of questions had been provided to NIADA for discussion at the Nov. 17 session. At the meeting, Whann walked them through the process of buying a car and provided samples of purchasing documents. The FTC is in the process of formulating questions for public comment regarding various aspects of the auto industry as it relates to consumers. FTC staff was not forthcoming as to the timing of that effort, its scope and its intended purpose. The results of the Nov. 17 meeting were reported to NIADA’s Legislative Committee by conference call on Nov. 23. Also, on Sept. 21, Whann and Federal Advocates met with staff of the FTC regarding implementation of the above bill and its impact on the auto industry. Following discussion of various issues, with Whann leading the discussion and answering various questions as to how the auto industry works, including the auction practice itself, it was decided to schedule a half-day session to allow for a more detailed discussion of issues (i.e., the Nov. 17 session). All of this is a result of the so-called Wall Street Reform Bill. The law does grant increased powers to the FTC regarding dealer oversight. Also, it requires coordination with the Defense Department to ensure service members and their families are treated fairly by automobile dealers. Senate Motor Vehicle Safety Act of 2010

The Congress ended with no formal action on the above bill. To review, on June 9, 2010, the Senate Committee on Commerce, Science and Transportation marked up and order reported S.3302, the so-called Toyota Bill. In earlier drafts

of the bill and just prior to markup, language was included (section 310) which would have specified a dealer may not sell or lease a used passenger motor vehicle (both wholesale and retail sales) until the dealer first notifies the purchaser or lessee in writing of any recall notices. Working primarily with Sen. John Thune, R-S.D., his staff (Brenden Plack), and committee staff (Alex Hoehn-Saric and Chris Herndon), and as a result of concern raised by Whann and his proposed suggestion, section 310 has been dropped from the bill. This provision would have seriously hurt used car commerce by imposing tremendous compliance costs and liability exposure for dealers while increasing the safety risk for consumers by pushing unremedied vehicles into the unregulated private sale used car market. While an initial victory, we will continue to advocate on behalf of NIADA’s interest pending further action on the Senate bill as well as a possible House companion bill. Small Business Jobs and Credit Act of 2010

The administration has delayed implementation of the above bill until March. On Sept. 23, the House passed the Senate-passed bill, which includes an increase in the amount the Small Business Administration’s Dealer Floor Plan Financing program can guarantee. This permits the SBA to guarantee bank and finance company loans up to $5 million, which should help, the committee believes, expand dealer access to floorplan lines of credit. We worked with Louisiana Democrat Sen. Mary Landrieu’s committee and personal staff, in conjunction with others, on this. The bill may be the subject of subsequent meetings with the Hill and the SBA on how the program really works.

FEDERAL ADVOCATES IS NIADA’S GOVERNMENTAL ADVOCACY PARTNER. To read past lobbying reports, visit http://www.niada.com/legislative_and_legal.php

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OIADA MEMBER BENEFIT VENDOR GUIDE OIADA MEMBER BENEFIT & VENDOR GUIDE A U CAUCTION T I O N - F– EFEE E - -D DISCOUNTS I S C O U N T S

MEMBERS RECEIVE (2) V.I.P AUCTION CARDS THAT ENABLE YOU TO RECEIVE A NUMBER OF FREE BUY AND/OR SELL FEES FROM 11 DIFFERENT AUTO AUCTIONS (Value up to a maximum of $200.00 each)

DOCUMENT MANAGEMENT INSURANCE __________________________________________________________________________ Intellinetics Dealership Liability Insurance __________________________________________________________________________ Jim Perry Grafmiller & Davis Insurance 2190 Dividend Drive Sarah Mendenhall Columbus,CARD OH 43228-3806 103-A Commerce Park Drive CREDIT PROCESSING INSURANCE Tel: 614-921-8170 Westerville, OH 43082 jperry@intellinetics.com Tel: 614-818-9467 Dealership Liability Insurance   ELECTRONIC MERCHANT SYSTEMS sarah@grafins.com Grafmiller & Davis Insurance 5005 Rockside Road VEHICLE LOCATOR SERVICE Sarah Mendenhall Penthouse 100 Ebuy Auto.com Medical Insurance 103-A Commerce Park Drive Independence, Ohio 44131  Frank Wertenbach Westerville, 43082Insurance WellsOH Fargo Tel: 888.558.4367  Tel: 614-818-9467 160 Clifton Dr Suite C Services, USA, Inc http://www.emscorporate.com sarah@grafins.com Warren OH 44484 Jamie Zelewicz Tel: 330-974-0109 580 N. Fourth Street INTERNET, WEBSITE, COMPANIES Medical Insurance fwertenbach@ebuyauto.com Columbus, OH 43215 Wells Fargo Insurance Services, USA, Inc Tel: 614-324-2821 AUTOTRADER.COM Jamie jamie_zelewicz@wellsfargois.com Zelewicz AUTOMOTIVE PARTS Columbus, Ohio 580 N. Fourth Street Tony Phillips PROGRAM Columbus, OH 43215 614-989-0467 Auto Zone Workers Comp Group Tel: 614-324-2821 Tony.Phillips@AutoTrader.com Tom Edgerton Insurance jamie_zelewicz@wellsfargois.com 463 Waterbury Ct Ste B CompManagement Inc. H IGHER TURNOVER , LLC Gahanna, OH 43230 Genny Hart Workers Comp Group Insurance  Robert "Jake" Jacobson Tel: 614-475-2621 6377 Emerald Pkwy CompManagement Inc. 22 Brook Lane tom.edgerton@autozone.com OH 43017 GennyDublin, Hart Shelburne VT 05482 Tel: 800-825-6755 6377 Emerald Pkwy Tel: 800-430-2119 Dublin,genny.hart@sedgwickcms.com OH 43017 SERVICE CONTRACTS info@higherturnover.com Tel: 800-825-6755 A U L Corporation genny.hart@sedgwickcms.com Kevin Cullop Life – Disability – 1250 Main St, Ste 300 Retirement Insurance Life – Disability – Retirement Insurance  Napa, CA 94559 Mutual of Omaha Insurance Co. Mutual8800 of Omaha Insurance Co. Tel: 800-826-3207 Ext - 215 Lyra Drive, Suite 530 8800 Lyra Drive, Suite 530 kcullop@aulcorp.com Columbus, OH 43240 Columbus, OH 43240 Tel: (614)785-1122 Tel: (614)785-1122 Diamond Warranty Corporation christian.foote@mutualofomaha.com christian.foote@mutualofomaha.com Samuel McArthur/Jim Limongelli 9 N Main St CREDIT CARD PROCESSING Pittston, PA 18640 Electronic Merchant Systems Tel: 570-602-2820 5005 Rockside Road
Penthouse 100
 rosiebisky@aol.com Independence, Ohio 44131 Tel: 888.558.4367 The Milby Group www.emscorporate.com Mike Milby 210 Pershing Dr. Suite A INTERNET, WEBSITE, Lancaster, OH 43130 COMPANIES Tel: 740-652-9942 AutoTrader.com mikemilby@milbygroup.com Columbus, Ohio Tony Phillips National Auto Care 614-989-0467 Christina Schrank Tony.Phillips@AutoTrader.com 575 Westar Xing Westerville, OH 43082 Higher Turnover, LLC Tel: 800-548-1825 Robert “Jake” Jacobson cschrank@nacsolution.com 22 Brook Lane Shelburne VT 05482 DEALER SUPPLIES Tel: 800-430-2119 & DISPLAYS info@higherturnover.com Displayability.Com Tom Williams 
 FORMS – DEALER P.O. Box 100 
 Automotive Dealer Resources Excelsior Springs, MO 64024 
 Nancy Chapman Tel: 816.630.5550 55 E. Long Lake Road tom@displayability.com Troy, MI 48085 Tel: 800-364-8833 INTERNET SECURITY nchapman@miada.com Nuspire Michael Vaughn GPS – STARTER INTERRUPT 3155 Dellavo Ct. PASSTIME Commerce, MI 483920 J R Jones Tel: 248-295-9190 861 Southpark Dr., Suite #200 mike.vaughan@nuspire.com Littleton, CO 80120 Tel: 877-PASS-TIME jjones@passtimeusa.com 21

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Carfax Debuts Mobile App for iPhone Carfax launched the first mobile app dedicated to providing on-the-go dealers with access to Carfax Vehicle History Reports. The ‘Carfax for Dealers’ app is available for free download to all dealers on the App Store. With an iPhone or other Apple mobile device, dealers can run Carfax Reports using their existing Carfax account to better evaluate used cars anytime, anywhere. “The free ‘Carfax for Dealers’ iPhone app is just what our business needed,” said Justin Villa, pre-owned sales manager with David McDavid Automotive in Irving, Tex. “We downloaded it the day it came out and already we’re saving a ton of time evaluating cars. It’s helping us win at auction and evaluate a customer’s trade faster. After all, time is money.” Running Carfax Reports is a key component to a dealer’s acquisition process. Users start by entering the 17-digit vehicle identification number (VIN) or scanning the vehicle barcode to run the Carfax Report. Any vehicle run through the ‘Carfax for Dealers’ app is automatically added to the dealer’s inventory manager at carfaxonline.com. The reports are saved for up to 30 days and dealers can mark vehicles they’re most interested in as favorites within the app. “We’ve always been quick to embrace new technology to help maintain our competitive edge,” said Michael Townsend, used sales manager at Townsend Honda in Tuscaloosa, Ala. “When we heard about the new ‘Carfax for Dealers’ app, we went and got it immediately. The app is fast and makes appraising cars easy. It’s my new favorite tool on my phone.”Free access to Carfax Reports also is available through apps from several wireless technology providers. Dealers looking for additional pricing and product integration functionality can visit:

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AutoRevo www.autorevo.com eCarList TrueTarget www.ecarlist.com VIN Viper www.vinviper.com vAuto www.vauto.com

Sorting Through Exceptions to the Risk-Based Pricing Notice Curbstoned cars are often cheap, but state and local governments pay a high price. The FTC’s risk-based pricing notice requirements became effective Jan. 1. To

comply with these requirements, dealers must alert consumers when they are getting different credit terms than others based on credit information. The good news is the requirements give options for how and when you provide the notice. That’s also the bad news because the options and exceptions can make it difficult to figure out if you’re in compliance. To help you sort through the maze, here are some of the important exceptions and how they apply to you. Your dealership doesn’t need to provide a notice if: l

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You don’t use credit reports in any way to make a credit decision. If your dealership directly contacts employers and other references and is not otherwise using any third party information, then the risk-based pricing notice is not required (it sounds rare, but there are dealers who qualify for this exception).

A notice isn’t required for a specific transaction if: l

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“Our customers tell us how important immediate access to Carfax Reports is to their success, especially at acquisition,” said Larry Gamache, Carfax communications director. “The ‘Carfax for Dealers’ app now puts the power of this information in the palm of your hand. And, you can run as many reports as you need through the app if you’re on the Unlimited Carfax Reports Program for dealers.” Dealers not attending the convention may contact their Carfax account manager or call 800-274-2277. To download the app for iPhone, visit http://itunes.com/apps/ CARFAXInc/CARFAXforDealers. An Android version of the ‘Carfax for Dealers’ app is coming soon.

You don’t do risk-based pricing of credit terms. This applies if every consumer whose application is approved is offered credit on the same terms.

The credit requested is not for a consumer purpose (personal, family or household use). The transaction is a consumer lease. Th  e consumer applies for a specific credit product and is approved for those terms. Y  ou offer specific terms to a pre-screened group and extend credit on the offered terms to one of them. Th  e consumer is a co-signer (which is different from a coborrower), guarantor, surety or endorser in the transaction. Th  e consumer’s application is denied and you provide an adverse action notice. Y  ou provide the consumer with the credit score disclosure instead of the risk-based pricing notice. The disclosure is an alternative form authorized by the regulations. If you use it, you must provide it to all consumer applicants instead of providing a risk-based pricing notice only to the portion of applicants who are not receiving your most favorable credit terms.

It is likely some of these exceptions apply to your dealership and its transactions. Before relying on an exception, review the regulation or discuss it with your legal counsel to be sure you implement it correctly. The regulation can be found at 16 CFR §§ 640.1-.6. BY C H I P Z Y VO LOSK I Chip Zyvoloski is senior attorney for indirect lending at Wolters Kluwer Financial Services. For more information, visit www.wolterskluwerfs.com/indirect.

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