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

INDEPENDENT DEALER MARCH/APRIL

2014

magazine

Dealers Under Pressure

to Comply F E AT U R E S T O RY O N PA G E 1 6

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J A S O N G O S S R E C E I V E S H O N O R

OIADA Names Quality Dealer of the Year

DALLAS, TEXAS Permit No. 2079

PAID

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ASSOCIATION

ASSOCIATION NEWS

OIADA Names Quality Dealer of the Year u

J A S O N G O S S R E C E I V E S H O N O R

On December 14, 2013, OIADA named its Quality Dealer of the Year at its annual awards banquet. Dan Reel of Reel’s Auto Sales in Orwell Ohio and Jason Goss of Auto Direct in Columbus Ohio were both honored as nominees. Jason Goss earned the most votes and was chosen to represent Ohio at the NIADA national convention, June 2014, in Las Vegas.

LEGAL NEWS

AG Sues Dealers Over Missing Titles u

NEWS

OIADA 2014 Annual Charity u

OIADA RAISES FUNDS FOR RHIZOKIDS

The OIADA is supporting the RhizoKids Foundation for 2014. The primary objective of RhizoKids is to raise awareness of Rhizomelic Chondrodysplasia Punctata. RhizoKids Ohio Chapter was founded in 2008 by Mindy Lee and Jeff Cirner, the proud parents of Jake and Jordyn Cirner, who both are affected with RCDP Type 2. Jeff is an area rep for GWC Warranty Corp and a valued member of our association. Please join us in support of this wonderful organization! There are various ways to support this worthy cause. We have a donation jar set up in the OIADA office and also accept donations through the mail. Our annual poker tournament March 21, annual golf tournament in August and a charity auction at the awards banquet will also raise funds for the organization.

The funds will be presented to the organization at our annual awards banquet December 6. All donations are tax deductible and a receipt will be provided.

If you have any questions, you can call the OIADA office at 614-863-5800 or email info@ohiada.org.

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 IVE L AWS U IT S AGAI N S T N O R TH E A S T O H IO F CAR DEALERSHIPS

Ohio’s attorney general filed five lawsuits against Northeast Ohio car dealerships for failing to deliver motor vehicle titles as required by law. The attorney general is seeking more than $32,000 in total reimbursements from the dealerships for payments made to resolve consumers’ complaints. Lawsuits are against the following dealerships and/or their owners (The amount of reimbursement sought is indicated in parentheses): •  Auto Bahn, 13305 Lorain Ave., Cleveland ($15,854.25) •  The Car Shack, 355½ Arlington St., Akron ($2,048.50) •  R&M Auto Service & Sales Inc., 3559 W. 140th St., Cleveland ($3,474) •  Selective Auto Mart, 4675 Warner Road, Garfield Heights ($8,510) •  Y-Town Auto Sales, 3205 Market St., Youngstown ($2,266.50) According to the lawsuits, the dealerships violated Ohio’s Consumer Sales Practices Act by failing to obtain titles in the purchasers’ name within the required timeframe. In the lawsuits, the attorney general seeks full reimbursement to the Title Defect Rescission Fund, injunctive relief and civil penalties. w w w. o h i a d a . o r g OH_0314.indd 3

MARCH/APRIL 2014

INDEPENDENT

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INSURANCE NEWS

Inside 06 Workers’ Comp Corner 08 How to Save a Ton of Money in Legal Fees 12 2G Network Sunset 16  Flat Fees vs. Discretionary Compensation for Dealers 22 How to Select the Best Existing Building 26 What is Content Marketing and Why Do I Need It? 29 KBB Research Shows Brand Loyalty Tied to US Regions 30 Pointers to Improve Reconditioning Processes 34 Advertising Game Plan: No Audibles Allowed

Advertisers Index

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ANNUAL PREMIUM NEARLY $200 LOWER THAN NATIONAL AVERAGE

Lieutenant Governor and Department of Insurance Director Mary Taylor announced Ohio’s average auto insurance premium remained ninth lowest in the country, according to 2011 data from the National Association of Insurance Commissioners, the most recent available. Ohioans paid $620 on average for the year in which the national average premium was $797. “Having auto and homeowners insurance rates that are among the lowest in the country is a big savings for Ohio consumers,” Taylor said. “On average, Ohioans are paying a combined $500 less for their auto and homeowners insurance compared to the national average.”

Recently, the department announced that in 2011 Ohioans paid $652 on average for their homeowner’s insurance premium, ranking sixth lowest compared to other states for the second consecutive year. The national average premium was $968. Ohioans with insurance questions or concerns can call the department’s consumer hotline at 1-800-6861526 or visit www.insurance.ohio.gov for free information. You can follow the Ohio Department of Insurance on Twitter @OHInsurance and on Facebook at www.facebook.com/ OhioDepartmentofInsurance. OIADA BOARD OF DIRECTORS

BOARD OF DIRECTORS

Association, call (614) 863-5800 or email TOM ONESTI PAST JEFF RADER BOB FAHEY BOBCHAIRMAN VAUGHAN info@ohiada.org. BOARD MEMBER BOARD MEMBER BOARD MEMBER

NIADA Headquarters National Independent Automobile Dealers Association

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

For advertising information contact:

Past Chairman Jay North Jay North LLC 501 E. Columbia Street Springfield, OH 45503 JAY NORTH DAN REEL MARK MEADOWS Tel: 937-325-3748 PRESIDENT TOM SMITH VICE PRESIDENT LAURENCHAIRMAN THOMAS GEORGE RANDY SHIRK Fax:POLCE 937-398-1075 BOARD MEMBER BOARD MEMBER BOARD MEMBER BOARD MEMBER OIADA BOARDhtron435@yahoo.com OF DIRECTORS

Chairman Daniel Reel Reel’s Auto Sales LLC 547 East Main Street JEFF RADER BOB FAHEY BOB VAUGHAN GEORGE POLCE THOMAS Orwell,BOARD OH MEMBER 44076LAUREN BOARD MEMBER BOARD MEMBER BOARD MEMBER BOARD MEMBER Tel:MARK 440-437-5893 JAY NORTH DAN REEL MEADOWS TERRY REINEKE CHAIRMAN PRESIDENT PRESIDENT TREASURER Cell:VICE 440-319-1247 Fax: 440-437-5759 OIADA BOARD OF DIRECTORSdanreel@hotmail.com

DAVE ADKINS SECRETARY

TERRY REINEKE TREASURER JAMES HOWALD BOARD MEMBER

TOM ONESTI PAST CHAIRMAN

JAY NORTH CHAIRMAN

Secretary James D. Howald YES Automotive 1706 W. 4th Street Ontario, OH 44906 RADER BOB FAHEY DAVE ADKINS Tel:JEFF 419-775-7186 BOARD MEMBER BOARD MEMBER SECRETARY Fax: 419-775-5319 Cell: 419-709-0029 j_howald@yahoo.com

DAN REEL PRESIDENT

MARK MEADOWS VICE PRESIDENT

TERRY REINEKE TREASURER

BOB VAUGHAN BOARD MEMBER

GEORGE POLCE BOARD MEMBER TOM ONESTI PAST CHAIRMAN

Executive Director Wendy Rinehart 2040 Brice Road, Ste. 110 CHRISTINE WHITE JOHN REMY RANDY GRIESDORN TOM SMITH EXECUTIVE ASSNT Reynoldsburg, BOARD MEMBER BOARD MEMBER BOARD MEMBER OH 43068 614-863-5800 – Office DAVE ADKINS OIADA BOARD OF DIRECTORS SECRETARY 614-863-5801 – Fax OIADA BOARD OF DIRECTORS wendy@ohiada.org

JEFF RADER BOARD MEMBER

OIADA BOARD OF DIRECTORS

JEFF RADER BOARD MEMBER

CHRISTINE WHITE EXECUTIVE ASSNT

INDEPENDENT

JIM MITCHELL EXECUTIVE DIRECTOR

DEALER

BOB FAHEY BOARD MEMBER

BOB VAUGHAN BOARD MEMBER JIM MITCHELL EXECUTIVE DIRECTOR

Jeff Rader Rader Car Company 1429 Schrock Road Columbus, OH 43229 JIM MITCHELL EXECUTIVE DIRECTOR Tel: 614-888-3111 Fax: 614-888-3811 BOB FAHEY BOB VAUGHAN GEORGE POLCE BOARD BOARD MEMBER BOARD MEMBER Cell:MEMBER 614-582-1822 jeff@radercarco.com

GEORGE POLCE BOARD MEMBER

LAUREN THOMAS BOARD MEMBER

JOHN REMY RANDY GRIESDORN BOARD MEMBER BOARD MEMBER

TOM SMITH BOARD MEMBER

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MARCH/APRIL 2014

CHRISTINE WHITE EXECUTIVE ASSNT

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CHRISTINE WHITE EXECUTIVE ASSNT

JIM MITCHELL EXECUTIVE DIRECTOR CHRISTINE WHITE EXECUTIVE ASSNT

DAVE ADKINS SECRETARY

OIADA BOARD OF DIREC

George Polce Jenroc Auto, Inc. 101 N. Tuscarawas Ave Dover, OH 44622 Tel: 330-364-2525 LAUREN JOHN REMY RANDY GRIESDORN Fax:THOMAS 330-364-6726 BOARD MEMBER BOARD MEMBER BOARD MEMBER Cell: 330-268-4724 JAY NORTH DAN REEL Jenroc@wilkshire.net CHAIRMAN PRESIDENT

Office Manager Terry Reineke President Samantha Torres Rino’s Auto Sales Inc The Ohio Independent Dealer News is published bi-monthly CHRISTINE WHITE JIM MITCHELL Mark Meadows 2040 Brice Road, Suite #110 1610 Industrial Pkwy EXECUTIVE ASSNT EXECUTIVE DIRECTOR by the National Independent Automobile Dealers Association Miracle Motor Mart Reynoldsburg, OH 43068 Celina, OH 45822 CHRISTINE WHITE Services Corporation, 2521 Brown Blvd., Arlington, TX BOB FAHEY JEFF RADER BOB VAUGHAN GEORGE POLCE LAUREN THOMAS JOHN REMY RANDY GRIESDORN TOM SMITH 2380 Morse Road Office: 614-863-5800 Tel: 419-586-6161 EXECUTIVE ASSNT BOARD MEMBERpostage BOARD MEMBER BOARD MEMBER BOARD MEMBER BOARD MEMBER BOARD MEMBER BOARD MEMBER BOARD MEMBER 76006-5203; phone (817) 640-3838. Periodicals Columbus, OH 43229 Fax: 614-863-5801 Fax: 419-586-8700 TOM ONESTI JAY NORTH DAN REEL MARK MEADOWS TERRY REINEKE DAVE ADKINS paid at Dallas, TX and at additional offices. POSTMASTER: PAST CHAIRMAN CHAIRMAN PRESIDENT VICE PRESIDENT TREASURER TOM ONESTI JAY NORTH samantha@ohiada.org DAN REEL MARK MEADOWS TERRY REINEKECell:SECRETARY DAVE ADKINS Tel: TERRY 614-437-0037 419-305-4009 TOM ONESTI DAVE ADKINS JAY NORTH DAN REEL MARK MEADOWS TERRY REINEKE DAVE ADKINS Send address changes toTOM NIADA 2521 DAN REEL ONESTI State Publications, JAY NORTH MARK MEADOWS REINEKE PAST CHAIRMAN CHAIRMAN PRESIDENT VICE PRESIDENT TREASURER SECRETARY PAST CHAIRMAN SECRETARY CHAIRMAN PRESIDENT VICE PRESIDENT TREASURER SECRETARY CHAIRMAN CHAIRMAN VICE PRESIDENT TREASURER Fax: 614-337-1063 rinos@bright.net Brown Blvd., Arlington,PAST TX 76006-5203. The statements PRESIDENT Cell: 614-348-6503 Robert Fahey and opinions expressed herein are those of the individual BOARD OF DIRECTORS dmarkmeadows@aol.com Auto Sales Randy Shirk authors and do notOIADA necessarily represent the views of Ohio OIADA BOARDFairdale OF DIRECTORS 6209 Glenn Rd. Randy Shirk’s Northpointe Independent Dealer News, the Ohio Independent Automobile CHRISTINE WHITE JIM MITCHELL OIADA BOARD OF DIRECTORS Dealers Association, or the National Independent Automobile Vice President Cambridge, OH 43725 Auto Sales LLC EXECUTIVE DIRECTOR Dealers Association. Likewise, the appearance of advertisers, EXECUTIVE ASSNT David Adkins Tel: 740-432-4185 5505 N. Summit St JEFF RADER BOB FAHEY BOB VAUGHAN GEORGE POLCE LAUREN THOMAS JOHN REMY RANDY GRIESDORN TOM SMITH or their identification as members of OIADA or NIADA, does Wilmington Auto Sales IncMEMBER Fax: 740-435-0765 Toledo, 43613 BOARD BOARD MEMBER BOARD MEMBER BOARD MEMBER BOARD MEMBER BOARD MEMBER BOARD MEMBER BOARDOH MEMBER JEFF RADER BOB FAHEY BOB VAUGHAN GEORGE POLCE LAUREN THOMAS JOHN REMY RANDY GRIESDORN TOM SMITH not constitute an endorsement orBOB services JEFF RADERof the products BOB FAHEY VAUGHAN GEORGE POLCE LAUREN THOMAS JOHN REMY RANDY GRIESDORN TOM SMITH 1780 Rombach Avenue BOARD MEMBER BOARD MEMBER BOARD Cell:MEMBER 740-607-4011 Tel: 419-729-2688 BOARD MEMBER BOARD MEMBER BOARD MEMBER BOARD MEMBER BOARD MEMBER BOARD BOARD MEMBER BOARD rights MEMBER BOARD MEMBER BOARD MEMBER BOARD MEMBER BOARD MEMBER MEMBER JEFF RADER BOARDBOB FAHEY BOB VAUGHAN LAUREN THOMAS GEORGE POLCE TOM SMITH RANDY SHIRK JAMES HOWALD featured. Copyright 2014 by MEMBER NIADA Services, Inc. All Wilmington, OH 45177 r_fahey@yahoo.com Fax: 419-729-2588 OIADABOARD BOARD DIRECTORS BOARD MEMBER BOARD MEMBER BOARD MEMBER BOARD MEMBER BOARD MEMBER MEMBEROF BOARD MEMBER BOARD MEMBER reserved. Tel: 937-382-7714 Cell: 419-290-1993 TOM ONESTI JAY NORTH DAN REEL MARK MEADOWS TERRY REINEKE DAVE ADKINS JAY NORTH DAN REEL MARK MEADOWS TERRY REINEKE DAVE ADKINS CHAIRMAN CHAIRMAN PRESIDENT VICE PRESIDENT TREASURER SECRETARY Fax:PAST 937-383-2392 Thomas Onesti shirkshark@netscape.net CHAIRMAN PRESIDENT VICE PRESIDENT TREASURER SECRETARY State Magazine MGR./Sales Cell: 937-725-8512 Car Port Troy Graff • troy@niada.com TOM ONESTI JAY NORTH DAN REEL MARK MEADOWS TERRY REINEKE DAVE ADKINS david@wilmingtonautocenter.com PO Box 9943 Thomas C. Smith PAST CHAIRMAN CHAIRMAN PRESIDENT VICE PRESIDENT TREASURER SECRETARY Editors CHRISTINE WHITE Youngstown, OH 44513 JIM MITCHELL Smitty’s Auto Sales EXECUTIVE ASSNT WHITE EXECUTIVE DIRECTOR CHRISTINE JIM MITCHELL Andy Friedlander • andy@niada.com Treasurer Tel: 330-726-6633 668 S. 7th St CHRISTINE WHITE JIM MITCHELL EXECUTIVE ASSNT EXECUTIVE DIRECTOR Jacinda Timmerman • jacinda@niada.com EXECUTIVE ASSNT EXECUTIVE DIRECTOR Lauren Bowden Thomas Fax: 330-726-2633 Greenfield, TOM ONESTI JAY NORTH DAN REEL MARK MEADOWS TERRY REINEKEOH 45123 DAVE ADKINS PAST CHAIRMAN VICE PRESIDENT TREASURER SECRETARY Bowden Motors Cell: CHAIRMAN 330-565-6833 PRESIDENT Tel:(937)981-4317 Magazine Layout & Graphic Artist RADER Main BOB FAHEY BOB VAUGHAN GEORGE POLCE tomocarport@aol.com LAUREN THOMAS JOHN REMY RANDY GRIESDORN TOM SMITH 1426 JEFF South Street Fax: (937)981-4317 Chantae Arrington • chantae@niada.com BOB FAHEY BOB VAUGHAN GEORGE POLCE LAUREN THOMAS JOHN REMY RANDY GRIESDORN TOM SMITH BOARD MEMBER BOARD MEMBER BOARD MEMBER BOARD MEMBER BOARD MEMBER BOARD MEMBER BOARD MEMBER BOARD MEMBER Cell: (937)218-3658 BOARD MEMBER BOARD MEMBER BOARD MEMBER BOARD MEMBER BOARD MEMBER BOARD MEMBER BOARD MEMBER Bellfontaine, OH 43311 Art Director Tel: 937-593-0014 tommy4317@yahoo.com Christy Haynes • christy@niada.com JEFF RADER BOB FAHEY BOB VAUGHAN GEORGE POLCE LAUREN THOMAS Fax: JOHN937-593-0514 REMY RANDY GRIESDORN TOM SMITH BOARD MEMBER BOARD MEMBER BOARD MEMBER BOARD MEMBER BOARD MEMBER BOARD MEMBER BOARD MEMBER BOARD MEMBER bowdenmotorslauren@embarqmail.com Printing Nieman Printing Troy Graff (800) 682-3837 or troy@niada.com.

JEFF RADER BOARD MEMBER

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ADESA, Inc...................................Inside Back Cover Ally...............................................................................13 Black Book..................................................................5 CarMax Auctions.....................................................27. Columbus Fair Auto Auction...................................9. Corry Auto Dealers Exchange.............................24 Dealer Funding........................................................26 DealerSocket...........................................................17 Flint Auto Auction......................................................7 Indiana Auto Auction................................................3. Insurance Auto Auctions......................................21 Leedom Group.........................................................19OIADA BOARD OF DIRECTORS Manheim.com............................Inside Front Cover. Manheim Pennsylvania........................................23. NextGear Capital.....................................................15 OnStar........................................................................29 Preferred Warranties.............................................11. STARS GPS...............................................................31 United Acceptance.................................................25 United Auto Credit..................................................28 TOM ONESTI JAY NORTH DAN REEL MARK MEADOWS TERRY REINEKE Vantage Finance.....................................................30. PAST CHAIRMAN CHAIRMAN PRESIDENT VICE PRESIDENT OIADA BOARD OFTREASURER DIRECTORS VAuto ........................................................ Back Cover

OIADA Office To contact the Ohio Independent Auto Dealers

TOM ONESTI PAST CHAIRMAN

Ohio’s Average Auto Insurance Premium Remains Ninth Lowest

JIM MITCHELL EXECUTIVE DIRECTOR

2/14/14 1:52 PM

TOM SMITH BOARD MEMB

MARK MEAD VICE PRESID

LAUREN THOMA BOARD MEMBE

J EXEC


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PRODUCTS MANAGEMENT

MATTERS

Workers’ Comp Corner u

TI P S T O K E E P I N G Y O U R C O M P P R E M I U M T O A M I N I M U M

Pay your premium on time. Your coverage will lapse and you will be assessed with late fees if you fail to pay on time. In addition, if you have any injuries during a period of lapsed coverage, you are responsible for those costs dollar for dollar, which can add up quickly. The BWC will deliver a bill that requires you to pay any expenses related to the claim. Plus, if you do not pay BWC invoices, a lien can be filed against you by the Ohio attorney general.

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Report your claims to your Workers’ Comp partners. Don’t let time go by without consulting with your Workers’ Comp team. If you fail to report a claim quickly, it may come back to haunt you. Make sure to report the claim and have your employee seek

treatment immediately. The faster he/she receives approval for treatment, the less likely he/she will miss time from work and be paid compensation by the BWC. Lost time adds to your premium! Make accommodations for injured employees. The sooner you return an injured worker back to the job safely, the less likely you will see an impact on your premium. If you cannot accommodate an injured worker with restrictions, he/she will be awarded temporary total disability compensation — yet another black mark against your premium rates. Importantly, the federal government also expects you to accommodate restrictions through the Americans with Disabilities Act. Check group rating program eligibility annually. In many cases,

the group rating program can save you up to 53 percent. It is important that you continue to check your eligibility year after year, because your savings can increase or decrease annually. Enrollment fees can also vary significantly so, just like your other insurances, periodic “shopping” is important. Consider BWC incentive programs. The BWC has assembled a number of rebate programs to incentivize employers throughout Ohio to engage in improved safety and other known loss prevention measures. Savings can range from 1 percent up to 10 percent of your premium on top of the group rating discount.

BY MIKE BROWN BENEFITS ONE

LEGAL NEWS

Ohio Tax Changes u

A ME NDE D SUB STITUTE HOU SE BILL 59 BECOME S L AW

Hear ye, hear ye! For all of you Ohio taxpayers, have you heard about the Amended Substitute House Bill 59 that was signed into law on June 30, 2013? No? Don’t worry, you are not alone. One notable change that this bill brings is a reduction to Ohio income tax rates, which is music to our ears. The overall income tax base rates and amounts are reduced by 8.5 percent in 2013, an additional .5 percent, or 9 percent, in 2014 and then to a total of 10 percent in 2015. One of the biggest changes resulting from this bill begins in taxable years after Jan. 1, 2013. An individual filing an Ohio income tax return will be allowed a deduction amount to 50 percent of their Ohio small business income up to $250,000. INDEPENDENT OH_0314.indd 6

& SERVICES

DEALER

Income from the taxpayer’s partnership, s-corporation, rental activity or single member entity will be used to determine this deduction. Important to note is that this deduction is not for taxing school districts, only Ohio. More information will be coming from the bill on how to calculate this deduction. There is also a change related to non-resident individuals involved in a pass-through entity. If that pass-through files an Ohio composite return and pays Ohio income tax, the individual can now file an Ohio return and claim the refundable credit for taxes the entity paid on the investor’s behalf. Some other changes to come from the bill: • Means testing for $20 personal exemption credit. Note: MARCH/APRIL 2014

This will only be available to taxpayers with taxable incomes less than $30,000. • Ohio earned income tax credit may be available to those filers who were also eligible for the federal earned income credit. • Beginning in 2014 there will be an expanded definition for the deduction of military retirement pay. Any amount of $1 or less will not be refunded or owed on a tax return. There are a lot of changes coming to Ohio in the next few years, so please make sure you keep up on them and that you understand how they affect you as an Ohio taxpayer.

BY TARA WEST, CPA, CMA MANAGER AT WILLIAM VAUGHAN COMPANY WWW.WVCO.COM

ADP Dealer Services Reveals New Electronic Payment Processing Tool for Dealers u

I NTEGRATION OFFERS PAYMENT SOLUTION

ADP Dealer Services Inc. recently announced it has reached an integration agreement with CenPOS Inc. that will provide clients with an end-to-end payment solution called ADP ePayments. The agreement is part of an effort to simplify and improve dealership billing and payment processes. “CenPOS will provide ADP dealers with a multichannel payment solution that can help accelerate payment processes, increase customer enablement and reduce overall costs,” said Justin Sprague, vice president of product marketing at ADP Dealer Services. “With an enhanced, cloudbased, intelligent payment solution, customers will be able to make payments any way, anytime, anywhere.” The new tool acts as a total payment solution for dealerships and their customers, the company said. It also will help dealers cut down on paperwork, as customers can pay an invoice online or through a mobile device as part of the ADP ServiceEdge solution. Dealers can also manage accounts payable and receivable electronically in their ADP Drive Dealer Management System. w w w. o h i a d a . o r g 2/14/14 1:52 PM


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LEGAL

MATTERS

How to Save a Ton of Money in Legal Fees u

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H  ELPFUL TIPS FROM ALEX GERTSBURG

There’s a great exchange in the movie “Other People’s Money” that I always think about when I consider the business side of my profession: Kate Sullivan (played by Penelope Anne Miller): Well, for someone who has nothing nice to say about lawyers, you certainly have plenty of them around. Lawrence Garfield (played by Danny DeVito): They’re like nuclear warheads. They have theirs, so I have mine. Once you use them, they [expletive] up everything. Prior to starting my own firm, I worked for large law firms that liked to bill big. After that I went in-house and served for eight years as a general counsel for a telecom company, where I dealt with law firms that liked to bill big. Sometimes they called it “value billing.” That’s where they bill you not for the amount of time they spent on tasks in your case but on the perceived value. So if a senior attorney has researched and written about the same issue a million times before now spends only five minutes on it, he may still bill you an hour for it because that’s the value he thinks his five minutes on that issue is worth. Face it. You are going to spend money. You are getting sued. You need to sue someone. You need to do a deal. You need to stay out of trouble. Unless your attorney works for the Legal Aid Society or the public defender’s office, in which case your fees on your current matter are probably not among your greatest concerns, then your lawyer wants to get paid. Because he is an attorney, he knows how to avoid payment problems. He knows you need him more than he needs you. He knows you are going to sign his airtight engagement letter without looking at it and that if you do look at it, you probably won’t question it. INDEPENDENT

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DEALER

But you are empowered because, among other reasons, you are reading this. So here is what you are going to do: (1) Review closely, and if necessary revise, your lawyer’s engagement letter and attach a good set of outside counsel guidelines. If they tell you it’s not negotiable, or that they need to take your changes to some executive committee, put your foot down. If they tell you they can’t change the engagement letter, attach an addendum with your own outside counsel guidelines. This may be the most important factor to save money. Here are some critical parts of your engagement letter or outside counsel guidelines: They must give you a budget, even if it’s a range. Any amounts billed that are a certain percentage over budget will not be paid unless you’ve approved them in advance in writing. No billing you for overhead or overtime. Copying or scanning will be billed at no more than 3 cents per page, and then only if free scanning is unavailable as an option. All litigation must be preceded by a litigation plan, with anticipated steps in the litigation and a suggested cost. No expenses over $100 will be incurred without your approval, in writing and in advance. Only one person is authorized to direct counsel and no scope of work may be changed or increased other than by that person. You get copies of everything generated in your case – memos, research, briefs, drafts, etc. You must approve anything sent or to be sent. Prior approval is required for research or memos exceeding two hours of billable time. You approve proposed staffing and each attorney’s rate – no changing to a higher-billing attorney mid-case. Billing must be detailed and broken down by task; block billing (where 30 tasks are listed in a paragraph, separated by semi-colons with MARCH/APRIL 2014

no internal times) and vague descriptions (for example, “attention to...”) are verboten. Internal multi-attorney office conferences are highly discouraged; only one attorney billing at a time. No attorneys billing for paralegal or secretarial work. No paralegals billing for secretarial work. No secretaries billing… ever. You can Google “outside counsel guidelines” and get some good ones. Or just contact me and I’ll send you a good set I’ve used. (2) Negotiate. The reality is that the attorney you’re talking to is not the only game in town. There may be hundreds or thousands of them, and many of them are just as good as the next one. Prior to starting my own firm, I spent eight years as in-house counsel combatting and overruling abusive billing practices. Much to the chagrin of our outside counsel, I have always viewed outside counsel as a commodity (albeit a valuable one) and not as sacred relationship. In many ways, I think we attorneys are very much like basement water proofers, plumbers, electricians and any other laborer. At the end of the day, our clients want their basements dry, their toilets flushing and their lights working. They don’t want to pay for opulent conference rooms and partner retreats in Hawaii. They want their problems solved early and inexpensively. Period. There are as many different fee arrangements as there are creative lawyers and clients. Just because an attorney typically charges by the hour, and for a certain rate per hour, doesn’t mean she won’t come off of that standard. She will if you need it and she wants your business. So ask them up front to suggest an alternative fee arrangement, perhaps a successbased fee, a flat-fee, a

In many ways, I think we attorneys are very much like basement water proofers, plumbers, electricians and any other laborer. At the end of the day, our clients want their basements dry, their toilets flushing and their lights working. capped fee or a hybrid of any of the foregoing. Ask them also to confirm that they will use contract attorneys for document reviews or extensive but relatively miniscule tasks. These lawyers bill at a fraction of the cost of partners or associates at larger firms. Make sure you ask them to reduce their hourly rate. Make sure you tell them that you’re comparing different firms for your matter. All they can do is say no and they are likely to agree. The rates they give you are probably the standard firm rates. They are generally not inflexible. Any reduction is going to add up when those hours multiply to the tens or hundreds. (3) Use an RFP. When you hire a builder, do you use the first one you talk to or do you get a few different quotes? Why should lawyers be any different? Call the lawyer, discuss CONTINUED ON PAGE 10

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your case and tell them you are sending them a one page Request for Proposal. In your RFP, describe your case and ask at least three (and possibly up to five or six) firms to tell you how they will staff your matter; to give you references; to describe similar matters they have handled and when and what the result was; to give you their most aggressive fee structure, including alternative fee arrangements and to give you a proposed budget. Then attach your outside counsel guidelines to the RFP and ask for their thoughts on them up front. Give them a deadline to respond. Make yourself available for follow up questions. Then await your responses, talk to their references and compare. A caveat here: This process, and to some extent the ones before and after it, depend on leverage and need, supply and demand, basic principles of economics that apply to any business. A large matter will carry more weight over counsel than a smaller case. A lawyer in high demand who has a unique skill set will negotiate less than a lawyer who doesn’t. Flexibility will also depend on your delivery. If you come off as a pain in the butt up front, your

attorney will be inclined to believe that you are going to be a pain in the butt later too and may therefore dig in his heels up front. Choose your battles carefully and execute delicately. Strike the right balance between assertiveness and flexibility. Prioritize the issues most important to you and focus on those, and be willing to give on others. (4) Provide organized, responsive information as requested. Once the case starts, make your lawyer’s job going through your paper and emails easy. The last thing you want to pay for is your attorney combing through a disorganized file to retrieve the necessary information. If you are unsure of what information you are looking for, ask your attorney. Most attorneys will provide guidance or a worksheet of exactly what they need. (5) Do some of the work yourself. Yes, there are many tasks that you can tackle yourself. Requesting documents or public records is usually a straightforward process. There is a ton of online research you can do that your attorney is going to have a paralegal do and bill you for.

CORRECTION:

POKER TOURNAMENT COST

ASSOCIATION NEWS

u EVENT IS $100

There was an error in our January/ February magazine regarding pricing for the annual poker tournament event. The magazine inadvertently offered two different pricing options for the event, one for those participating in gaming and one for everyone else. OIADA does not have separate ticket prices. The price to attend the event is $100. This year we will be offering additional activities for those who do not wish to play in the tournament. The basement of the York Country Club will be opened up after dinner. The basement will have an open bar and all the NCAA Tournament basketball games playing. A great new feature for the same great price as previous years! We are sorry for any confusion this may have caused you. If you have any questions or want to register for the event please call the OIADA office at 615-863-5800. INDEPENDENT

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This is not an exhaustive list. Any combination of the above concepts will save you a ton of money. Use all of them and you’ll save a boatload. They are not a secret. Be careful with this one though. Make sure you communicate openly with your attorney about your proposed division of labor so he can guide you on what is appropriate and what is not. This is not an exhaustive list. Any combination of the above

concepts will save you a ton of money. Use all of them and you’ll save a boatload. They are not a secret. They are just not used enough. You don’t want a nuclear weapon for an attorney. You want a surgical strike. You want a lawyer who will accomplish your goals at the earliest point in time and for the least amount of money. From the attorney’s perspective, I view the real value in “value billing” comes in exceeding your client’s fee expectations by under-billing, not by giving yourself a ton of room up front in an engagement letter and then over-billing just because you can. Lawyers know that if we bill our clients more than our colleagues would, our clients will take their next case to them. If we address our clients’ needs quickly and inexpensively, according to fee agreements that work for them, not just us, they will be our clients forever.

BY ALEX GERTSBURG ALEX GERTSBURG IS THE FOUNDER OF THE

GERTSBURG LAW FIRM CO., L.P.A. GERTSBURG DOES NOT PRESENT OR INTEND HIS COLUMN TO BE TAKEN AS LEGAL ADVICE. READERS SEEKING LEGAL ADVICE SHOULD CONSULT WITH AN ATTORNEY. GERTSBURG MAY BE REACHED AT 36 SOUTH FRANKLIN STREET, CHAGRIN FALLS, OH 44022, 440-571-7775, AG@GERTSBURGLAW.COM OR WWW.GERTSBURGLAW.COM

UPCOMING EVENTS

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TECHNOLOGY

WATCH

2G Network Sunset u

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W  HAT IT M E AN S AN D H OW IT AFFEC T S YOU R G P S DE VI C E

If you are using a GPS device to track assets for repossession and recovery, your device likely uses cellular technology. That is, it operates in a similar way to a cell phone _ communicating over a wireless network. Consequently, changes made by wireless carriers can and will affect your GPS devices – and there are some important changes happening. Most GPS tracking systems utilize the 2G cellular network. Based on the need for more advanced 3G or 4G capacity, the 2G network’s sunset is approaching and, depending on your carrier, may have already begun. CELLULAR TECHNOLOGY In the United States, there are two primary technology standards for cellular networks: GSM and CDMA. Currently, GSM is used by AT&T and T-Mobile while CDMA is used by Verizon and Sprint. 2G was the first technology to offer data services and nearly all commercial GPS devices in the subprime automotive industry today operate on the 2G network, as well as many other machine-to-machine industries, including home alarms and electronic metering. These industries have adopted 2G technology for its broad network coverage and price point. 3G cellular technology was first launched in the United States in 2002. This successor to 2G offers faster speeds which provided additional services. While 3G offers faster speeds, the price point and smaller initial footprint made it less appealing than 2G for the GPS device industry. CDMA is a different mobile communication standard used by Sprint and Verizon. CDMA, historically, has not been used in GPS solutions due to higher price points. However, prices have come down recently for CDMA and opened an option for GPS devices. Current CDMA networks are estimated to outlast GSM 2G and exceed the 2G network footprint as well. WHY GPS DEVICES USE 2G Well, primarily because it is the least expensive and had the most expansive network for over 20 years. As with most technology industries, equipment for 2G technology has become less expensive, allowing you to purchase a GPS device these days for $100 to $150, usually including at least a year of airtime. Compare that to the cost of your 3G or 4G cell phone, which probably runs you $80 to $100 a month. INDEPENDENT

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Low costs, wide coverage footprint and adequate data speed make 2G a perfect fit for GPS tracking solutions. However, 2G’s end has already begun. 2G SUNSET As wireless carriers continue to build out their networks to support 4G/4G LTE and future technologies, 2G is getting more difficult to maintain. In a few years, cellular carriers will “sunset” their 2G networks. AT&T has already started taking down its 2G network and plans to have its 2G network completely shut down by the end of 2016. According to an AT&T press release in May 2012, networks in New York City were being reallocated for faster, more advanced networks. It is clear that 2016 is the end date for 2G and the network is already being taken down and “re-farmed” for 4G LTE. 2G Coverage will continue to diminish nationwide over the next few years. Steps to take now: Ask your device provider: • What wireless carrier is my current device using? • Do you deal directly with the major wireless carriers? • How long does the provider anticipate the current technology will work on the network? • Am I purchasing airtime that exceeds the termination date of the 2G network? • Most importantly: What is the provider’s technology roadmap and plan for the end of 2G? PassTime understands that these changes in technology can and will affect customers across the country, and is committed to educating the industry about the 2G Sunset. Subsequently, to fit the diverse needs of the industry, PassTime will be adding additional technology options early next year. In addition to PassTime’s 2G device that is expected to maintain primary network coverage through at least 2019, the company will also be adding 3G and CDMA options. Providing 2G, CDMA and 3G devices will allow PassTime’s customers the option to choose which technology is best for their business. To learn more about the 2G sunset and PassTime’s technology roadmap, contact us at 877-727-7846 or passtimeusa.com.

BY JAKE FRANK EVP/FOUNDER PASSTIME

MARCH/APRIL 2014

ASSOCIATION

NEWS

NIADA Collects Nominations for Community Service Award u

A  S SOC IATION SE E KS TO HONOR DE ALE RSHIP S THAT SE RVE

NIADA is collecting nominations for the 2014 NIADA Manheim Community Service Award. This award was created to honor independent dealerships that contribute to their communities on a regular basis yet often receive little or no recognition for their support. Their support may come through special projects, sponsorships, financial contributions or even leading innovative community improvement activities. If you are or know of a dealership — owners, staff and even their families — that sets itself apart by its service to the community, NIADA welcomes your nomination. Nominees must be members in good standing of the National Independent Automobile Dealers Association. Nominations may be made by the dealership, a community business or organization, the state independent automobile dealers association, a community member or even a loyal customer. The deadline for nominations is April 1. For more information or to download the 2014 nomination form, visit http:// www.niada.com/community_award. php.

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The OIADA is proud to have Car-Ware as a partner of our association providing our independent dealers with DMS solutions. Car-Ware Inc. was founded on the principle that good software and using up to date technology should not cost a fortune. The founders of Car-Ware have worked in the automotive DMS and banking industry for more than 15 years. Since its inception in January 2008, Car-Ware Inc. has added integrations with several strategic partners in the industry. Car-Ware Inc. provides dealer management solutions for the automobile industry. Their in-house team of .NET developers creates automotive DMS software with strong expertise in: .NET Development (C# .NET, ASP.NET, .NET 2.0-3.0-3.5-4.0), SQL Server, XML, Web Services, and Silverlight. Because their system is based on Microsoft’s .NET technology, the application is built using proven design patterns and best practices, providing an extreme level of flexibility and code reuse. This design gives Car-Ware the ability to meet the constant market changes and demands quickly and easily by simply plugging new functionality into the existing application base. This technology also enables them to customize any installation to meet the unique demands of your particular business through an easy configuration utility.

ASSOCIATION NEWS

Mark Your Calendars for NIADA Convention 2014 u

J U N E 2 3 - 2 6 AT C A E S A R S PA L A C E I N L A S V E G A S

You don’t want to miss NIADA’s 2014 Convention and Expo. The event will take place June 23-26 at Caesars Palace in Las Vegas. A must attend venue for dealer education, NIADA’s convention and expo offers a great opportunity to network with other dealers and industry leaders, meet with vendors, learn from industry experts and much more. In 2014, NIADA is focusing on what it means to be an independent dealer. Whether you’re from a “mom and pop,” Buy Here-Pay Here, large retail store or multi-location franchise, NIADA has something for you to better equip you to work smarter, more efficiently, with the best tools available to ultimately make you a solid, strong dealership for the future. Convention events include valuable training sessions, a kick-off reception, awards banquet and various breakout sessions. Learn the latest ways to improve your business, honor the best in the business, do a bit of networking and have a great time doing it. There are also great opportunities for sponsors and exhibitors, with full access to convention events. These events are strategically scheduled to not conflict with exhibit hours. Mark your calendar today and make plans to attend. Visit www.niada.com/convention.php for convention details. For more information regarding the convention or sponsorship, contact Holly Swanzy at holly@niada.com or 817.640.3838. INDEPENDENT OH_0314.indd 14

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OIADA March Partner Spotlight CA R- WA R E I N C .

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C O M M E RC I A L S O F T WA R E , I N C . (C O M S O F T )

The OIADA is proud to have ComSoft as a partner of our association providing our independent dealers with DMS solutions. Commercial Software, Inc. (ComSoft) was launched in 1971 by Barry Cooper, who at the time was working in the actuarial department at a Raleigh, NC, life insurance firm. Barry contracted with a local new car dealership in the area to program their WANG 700 desktop calculator to accurately compute and disclose interest rates, monthly payments and credit life & disability premiums, among other charges, prior to customers signing the dealership’s retail installment contract. Years passed and calculators evolved into computers incorporating alphabetic data in addition to numeric. MS-DOS became the predominant programming language in the 70s. WANG Computers continued to advance. One lone dealership mushroomed into hundreds in short order. The 90s saw the development of ComSoft’s current Microsoft based dealership management product Monymaker for Windows. The next decade brought about the incorporation of dealership websites to the product roster. Over the years, ComSoft has serviced thousands of both franchise and independent dealerships. Its staff now consists of several employees, each bringing their individual set of knowledge and experience. While much has changed in the automotive industry, ComSoft’s dedication to customer service, technological advancements, federal and state compliance issues as well as ease of use continue to be their central focus.

ADESA Boston Hosts Auctioneers Championship u

EVENT SHOWCASE S WORLD’S BE ST AUTOMOBILE AUCTIONEERS

ADESA Boston will host the 2014 World Automobile Auctioneers Championship on May 9. The event will showcase the world’s best automobile auctioneers vying for the coveted titles of World Champion Automobile Auctioneer, World Champion Automobile Ringman and World Champion Team. This year’s judges include ADESA CEO/president Tom Caruso, NAAA CEO Frank Hackett, Manheim president/CEO Sandy Schwartz and Central Auto Auction CEO/general manager Peter Saldamarco. “These are the men and women who help fuel our business, who help us get better prices, plus describe cars, help us get cars sold,” commented Schwartz. “[In 2012] I was so amazed at the intensity, at the professionalism and, most importantly, the love that all the auctioneers and ringmen have for our business.” Schwartz added, “It’s so great to watch people who love their craft and are so good at it that are really the heart and soul of the business. We love our auctioneers.” The 2014 championship will be webcast live from ADESA Boston on Friday, May 9, starting at 9 a.m. Eastern Daylight Time. Cheer on your hometown favorite auctioneers and/or ringmen and catch all of the fun and excitement of the 2014 World Automobile Auctioneers Championship. Free live broadcast is available exclusively at the following websites: www.niada.tv; www.niada. com; www.waacnet.com and www.autoconsumer.tv. For more information, visit http://www.niada.com/world_ automobile_auctioneers_championship.php. w w w. o h i a d a . o r g 2/14/14 1:53 PM


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COMPLIANCE

OVERDRIVE

Flat Fees vs. Discretionary Compensation for Dealers

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In March 2013, the Consumer Financial Protection Bureau published guidance on compliance with fair lending requirements for indirect auto lending. Since then the issue has grown to become the industry’s most significant compliance issue in quite some time. In December, the CFPB entered into a consent order with a large lender involving millions of dollars in damages and penalties. Others could follow. Be prepared, because this issue may also result in lenders changing how they pay dealers for retail contracts. The CFPB’s focus is on how lenders compensate dealers when they buy completed retail contracts. After analyzing information about a proposed credit sale, an indirect auto lender will offer to buy the completed retail contract if it has a specified (minimum) contract interest rate. Sometimes the minimum rate is referred to as the “wholesale rate” or the “buy rate.” Some lenders pay dealers a share of the increased interest revenues if the completed contract interest rate is more than the buy rate. This practice is often referred to as “dealer rate markup,” “dealer reserve” or “dealer participation.” The CFPB’s concern is that dealer discretion to increase interest rates may result in some buyers paying more than others – which is a INDEPENDENT

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violation of the law if the pricing disparities affect buyers of one race, gender or other protected group more than others. To be clear, there is no debate about the evils of intentional credit discrimination. Every reputable auto dealer and lender condemns discrimination against buyers on the basis of race, ethnicity, gender and all other classes protected by the law. Intentional credit discrimination is against the law, is bad policy and has no place in this industry. Everyone agrees. The current issue is more subtle because it involves unintentional discrimination, referred to as “disparate impact.” A dealer and lender could implement what they believe to be discrimination-free business policies and practices only to find that they result in statistical anomalies showing buyers of a certain race or gender are paying more for credit. Unless the variations can be justified by legitimate business needs, they are violations of law because they have a discriminatory impact on certain protected buyers. It doesn’t require the dealer or lender to have discriminatory intent. It only matters that their actions had a disparate impact. The CFPB’s guidance last March and its actions since then have all focused on dealer discretion to increase lender’s MARCH/APRIL 2014

buy rate and the risk that such discretion may lead to a disparate impact on protected buyers. If a dealer doesn’t have a set of rules for how and when it marks up the buy rate, then how can it ensure that buyers with similar credit profiles are being treated equally? For example, if a dealer’s only credit pricing rule is to charge each customer as much as he/she will bear, then it is not trying to provide the same credit pricing to buyers with similar credit profiles and it is likely violating the fair lending requirements. We heard from many lenders who spent a good part of 2013 trying to figure out how to ensure compliance without negatively affecting their ability to purchase dealer contracts. For better or worse, the CFPB’s guidance didn’t require a magic bullet solution. If it had, lenders might have all quickly adopted changes knowing that all their competitors would do the same. Instead, a lender that changes its dealer compensation method might reduce compliance risk but then takes the risk that its new compensation method will still be attractive to dealers. A bold lender could lose business if dealers negatively react to the change. These factors may have led to some hesitation by lenders on the issue. Any hesitation probably ended in December when the CFPB

entered into a consent order with a large auto lender. In the consent order, the CFPB alleges that the lender’s discretionary dealer rate markup practices resulted in a disparate impact on certain buyers in violation of the Equal Credit Opportunity Act. The CFPB’s allegations were based on its analysis of the lender’s auto loan portfolio. The CFPB ordered the lender to institute ECOA program changes, pay $80 million to certain buyers as damages and pay the CFPB $18 million in penalties. Now there is more pressure than ever for lenders and dealers to take action to address the CFPB’s concerns. The CFPB’s March 2013 guidance offered two alternative courses of action. They aren’t perfect solutions, but they provide a clear dichotomy of choice. 1. Lender uses a discretionary dealer participation compensation method. For example, a lender might continue to allow dealers the discretion to mark up the buy rate and compensate dealers based on the amount of the markup. These methods require lenders to: u  Impose controls on dealer markup and compensation policies. For example, controls could include a cap on the amount of markups. Other controls could be to allow dealers to use a set rate markup allowing variation only under certain authorized circumstances. CONTINUED ON PAGE 18

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The NADA recently recommended that its member dealers implement rate caps and allow dealer discretion to decrease the markup only for certain legitimate business needs. It recommended that dealers document the business reason(s) whenever they discount the markup. u  Review and analyze their loans regularly at the portfolio level and at the individual dealer level. Depending on the size of the portfolio, lenders may need

to analyze it as often as quarterly. u  Address any unexplained pricing disparities on prohibited bases. This would require finding and correcting the root cause of the disparities. If certain dealers are creating the problems, then a lender may need to restrict pricing for those dealers or stop buying their contracts. Addressing prohibited disparities also means returning money to affected buyers or providing them redress in some other way. 2. Lender compensates dealers using a formula that does not give dealer discretion. For example: u  Lender could pay a flat fee so dealer is compensated the same amount for every contract sold to lender regardless of the contract interest rate. Since dealer isn’t compensated for increasing the buy rate, it has little reason to do so. Actually, the presumption is that lender would not allow dealer to change lender’s buy rate because that would involve dealer pricing discretion. (A variation might be that dealer marks up every transaction by the same

amount without the discretion to increase or decrease the marked up amount.) u  Lender could pay a flat fee to dealer on every transaction plus a percentage based on the amount financed. This would provide more compensation to dealer for larger credit transactions. Again, the presumption is that dealer would not be allowed to change the lender’s buy rate. Solutions 1 and 2 both require lenders to have a fair lending compliance management program in place, but the first solution requires heavy monitoring and analyzing activity. Even with heavy monitoring, lenders still run the risk that their analysis will reveal credit pricing anomalies which will then need to be addressed with affected buyers and the dealers involved. In theory, the second solution does not require those extra steps because dealers do not have discretion to change credit pricing for different buyers. Doesn’t the second solution sound like it would be much easier for lenders to implement than the first? Obviously, lenders need to analyze how they approach

AASC Announces Standardized Vehicle Condition Grading Technology

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this compliance issue. The administrative cost and burden and increased compliance risk may be too much for them to keep discretionary dealer credit pricing. If they keep it, they may tweak their compensation formulas with limits or controls, maybe to something like the NADA’s recommendations. If they change to non-discretionary pricing models, the challenge will be for them to create new compensation formulas that are competitive and attractive to dealers. As noted in prior articles, dealers must create and maintain solid fair lending policies, procedures and practices. If you haven’t done it yet, you need to make it a priority. Be prepared to prove to your lenders and your regulators that you have a solid program in place. In addition, now you should also be prepared for changes in the compensation lenders offer when they buy your retail contracts.

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.

TO REGISTER FOR THE SERVICE, please contact Jay Cadigan at Manheim (jay.cadigan@manheim.com) or Mike Broe at AASC (mike.broe@autoims.com). For more information about Auto Auction Services Corporation, visit www.autoims.com.

A  U T O G R A D E E X P E C T E D T O H E L P AU C T I O N S S T R E N G T H E N V E H I C L E C O N D I T I O N P R O C E S S E S

Through joint collaboration across the wholesale automotive industry, Auto Auction Services Corporation has introduced a new industry standard for vehicle condition data reporting available to all members. This new standard will drive consistency across the entire automotive wholesale marketplace. Through an arrangement with the National Auto Auction Association, AASC will soon distribute Manheim’s AutoGrade service to all member auctions at no additional cost. ADESA, Bel Air Auto Auction, Greensboro Auto Auction and Tallahassee Auto Auction will be first to use the service once the integration project is complete. “We are very pleased to share this new technology with the industry, which was developed through our partnership with Manheim,” said Mike Broe, chief executive officer and president of AASC. “AutoGrade will help INDEPENDENT

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auctions and sellers in North America maintain a consistent vehicle grading system and allow buyers to see condition report consistency across all channels.” The AutoGrade service becomes available at a time when wholesale volumes are increasing, buyers are embracing Internet platforms and sellers are asking for consistency and transparency in their vehicle valuation processes across all venues and geographies. Whether or not auctions have a scoring methodology of their own, they will now have the option to offer an AutoGrade on every vehicle in their inventory. Positioning AASC as the distribution source for AutoGrade will allow all auctions to easily and confidently adopt the AutoGrade methodology, ultimately improving condition report quality and consistency across the industry. An analysis of vehicle MARCH/APRIL 2014

sales data shows that vehicles listed online with an AutoGrade score are three times more likely to sell than vehicles without. “The AutoGrade score is acknowledged as the gold standard in the industry – buyers can consistently compare like-forlike vehicles and have the highest confidence in their purchase decision,” said Charles Nichols, BSC America’s president. “AutoGrade utilizes vehicle information to calculate a consistent objective grade the same way, every time, across auction locations and online platforms,” said Paul Lips, executive vice president of operations and finance for ADESA. “This increases confidence for buyers and allows them to more effectively comparison shop vehicles. It also makes it easier for sellers to accurately price vehicles. Implementing AutoGrade as the standard for the industry should

considerably improve the overall customer experience.” How it Works AutoGrade will allow auctions an opportunity to input vehicle damages to generate vehicle scores while preserving confidentiality of certain vehicle data. Here is how the process will work: • Auctions collect and submit vehicle damage information to AASC via AutoIMS in much the same way they do today. • AASC will remove all vehicle data (including the VIN, year, make and model) along with the auction name and transmit the data to Manheim. • Manheim then returns an AutoGrade score back to the auction via AASC. To use AutoGrade, each auction must maintain a membership in AASC, which maintains the remarketing industry standard inventory management system _ AutoIMS. AASC continues in its 16th year serving the industry. w w w. o h i a d a . o r g 2/14/14 1:53 PM


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WHAT’S NEW ON NIADA.TV www.niada.tv

ECONOMY WATCH

Sluggish Job Rebound Could Impact Delinquencies New this month on

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NiADA.tv

If you missed the NIADA National Leadership Conference, or would like to review a session, there’s good news! Multiple videos from the conference are available online at www.niada.tv.

NIADA TELEVISION

EDUCATIONAL

PROGRAMS

Congressman Joe Barton, TX, Addresses the NIADA

Check out Congressman Joe Barton’s session during the NIADA leadership conference prior to meeting with legislators. He advises attendees to not have non-intersecting conversations with legislators, to be polite but honest.

Financial & Economic Overview - NIADA NLC, Washington, DC

Watch as Ken Shilson, CPA & NABD president, and Chris Stinebert, president & CEO of American Financial Services Association, present how the current economic environment is changing prime and sub-prime automotive finance.

UPDATE FROM THE National Motor Vehicle Title Information System (NMVTIS)

Todd Brighton, NMVTIS enforcement coordinator, and Jim Taylor, president of Auto Data Direct, provide an update. NMVTIS is designed to protect consumers from fraud and unsafe vehicles and to keep stolen vehicles from being resold. It is also a tool that assists states and law enforcement in deterring and preventing title fraud and other crimes. To view all of NIADA.TV’s monthly special program series, simply visit www.niada.tv, click on the red enter button, and then look for the “Special Programs Series” buttons on the right side of the main menu page.

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J O B L O S S S L O W S C O N S U M E R S ’ MAJOR SPENDING

According to at least one respected industry observer — Manheim’s Tom Webb — the major cause of an auto loan delinquency remains a job loss. Fitch Ratings’ latest analysis of the labor market showed a rebound in a nationwide employment is not proceeding quickly enough to drive a significant pick-up in U.S. economic growth. Despite a decline in the headline unemployment rate to 6.7 percent in December, Fitch stated labor productivity and participation rates have stayed weak since the recession. “We remain concerned that high levels of unemployment and under-employment will continue to dampen consumer spending and delay the start of a more robust economic recovery,” analysts said. Fitch pointed out that differences between the monthly employment reports released by ADP and the Bureau of Labor Statistics, evident in the December payrolls data, will likely be smoothed over the next quarter as monthly numbers are adjusted. “While significantly different, we believe both surveys have shown ongoing, accelerating improvements in job creation over recent months,” Fitch analysts said. “Unfortunately, the reports still indicate that U.S. employment levels are not rising fast enough to offset job losses suffered during the last recession.” Fitch explained the U.S. economy needs to generate between 185,000 and 200,000 jobs monthly to significantly reduce unemployment. w w w. o h i a d a . o r g 2/14/14 1:53 PM


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MANAGEMENT

MATTERS

How to Select the Best Existing Building for Your Car Dealership u

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KEY COMPONENTS TO CONSIDER DURING THE BUYING PROCESS

During the latest economic downturn, many auto malls became ghost towns as dealers of both new and used cars were forced to close their doors. As the economy turns around and starts to expand, 2014 is the time to take advantage of these great, vacant locations. While these existing car dealerships are in prime locations, many may not be worth the debt on the mortgage, which puts the buyer in a great position to make a deal. The trick is to choose the ideal existing building to fit your needs without having to put too much money into the building to make it your own. The following are some key components to take into account and investigate during the buying process. These points will help you avoid buying a lemon. 1. The first step is to retain the services of a commercial real estate broker with good working knowledge of your desired area and experience in automobile dealership sales. You may think you can negotiate the deal yourself but with an existing building there are always unforeseen issues. Having an experienced expert on your side will help you discover as many issues as possible during the buying process. Also, a broker can help you INDEPENDENT

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locate new buildings that are just coming on the market that you would not be able to find on your own. Finally, they can assist in finding the local zoning council, getting a fair appraisal and hiring a good company to do the inspections. 2. Secondly, you want to verify the property is zoned for the specific use of used car sales. This can be accomplished by obtaining a zoning verification letter from the jurisdiction in which the site is located. Many zoning conditions that permit automotive sales only account for the sale of new product. The sale of used vehicles could be prohibited or be a secondary use requiring a zoning variance, special use permits or even a rezoning. These three procedures will take time and could cause a delayed grand opening. It’s prudent to make your final sales contract contingent on obtaining final zoning approval from the jurisdiction prior to closing. This contingency will protect you if there are any issues with the local municipality. If you are required to enter into zoning proceedings, check with the local jurisdiction on the timeframe as they will have strict deadlines. Hiring a zoning attorney who is familiar with the jurisdiction will make the MARCH/APRIL 2014

process run more smoothly. Your broker can assist in finding good counsel. Depending on the jurisdiction, this process may also require the review of the intended building exterior modifications. If this is required, hire an architect to produce required materials. Other zoning uses to check are fueling, washing and servicing automobiles. 3. As you start to investigate the building, the best advice is to hire an experienced consultant to inspect it. This is another area in which your broker can assist. The inspector can help with identifying issue(s) in the existing building, such as hazardous materials like asbestos and lead. It is best to make sure testing is done during your due diligence process. If the test confirms hazardous materials, you may negotiate the remediation of the materials in your contract for the seller to pay the cost or have the cost of abatement reflected in the asking price. Getting rid of hazardous materials is costly in both time and money. Other issues to address in your inspection are building components such as the electrical system, HVAC system and exterior envelope. Beware the slippery slope of

renovation. Bringing a structure up to current code can be very expensive. It may be better to demolish the building and build exactly what you want. For your building inspection make sure to hire an inspector that is registered and has a background in doing commercial buildings and car dealerships. A good inspector will be able to tell you the state of your system. You will need to have a geotechnical engineer do a Phase 1 Environmental. This is a test of the property to make sure no fuel, oil, antifreeze or any other contaminating liquid has leaked on site (this also can be into the site from offsite properties). It is possible the seller may have this report from the original or previous sale. Obtaining this report will help your engineer do a quicker and more accurate report. The remediation for these spills is costly and you could later end up in a lawsuit if you sell the building without disclosing this information. These reports will also show if there are any other potential site challenges such as wetlands, unusable land on the property or protected species. 4. Signage is another factor in verifying applicable requirements before you purchase. CONTINUED ON PAGE 24 w w w. o h i a d a . o r g 2/14/14 1:53 PM


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SAFETY

NEWS

GM Recalls Trucks for Stalling u

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Every car dealer wants to make sure there are plenty of clear views to signage, whether building mounted or freestanding components. In many locations with existing buildings, signage may be “grandfathered in,” meaning you may be able to utilize the same amount of signage that the current dealership has to offer. However, this is not always the case. If you are unhappy with the amount of signage your building is allotted, you might consider picking another location to make sure you can be found by potential customers. One advantage to an existing building is that many customers may have already visited the location and be familiar with it. 5. When you do find an existing building that excites you, ask the seller to let you visit the property at night with the lights on. Check what your store will look like as customers arrive in the evening. This will allow you to see how visible the current signage is in the dark and how your merchandise will look. Nighttime lighting is important because most customers purchase automobiles on Saturdays or after work during the evening. It is more difficult to showcase merchandise color and quality at night, so adequate outdoor lighting is critical for merchandise color. Since the location was likely operating as a dealership previously, you could have strong outdoor lighting fixtures already in place. You can also take this opportunity to check how many of the fixtures are in proper working order. Ask the seller about operating the cost of the current fixtures. Then include the cost of repairing or replacing the fixtures in your contract negotiations. There will always be unforeseeable issues that arise during the buying process, but by hiring a real estate broker with experience, obtaining a zoning verification letter, doing an inspection of the building and site as well as getting a geotechnical report you will be well on your way to knowing exactly what you’re purchasing and being happy with the result. Enjoy creating your new business location!

T R A N S F E R P U M P M A L F U N C T I O N C A U S E F O R C O N C E R N

General Motors is recalling 9,733 model year 20122013 Chevrolet Silverado HD and GMC Sierra HD vehicles equipped with 6.6L diesel engines and dual fuel tanks. In the affected vehicles, the transfer pump which moves fuel from the rear tank to the front tank could malfunction and cause the fuel gauge to indicate an inaccurate reading. If the fuel gauge indicates an inaccurate reading it may result in the vehicle unexpectedly stalling, increasing the risk of a crash. General Motors will notify owners and dealers will inspect and replace the fuel transfer pump, as necessary, free of charge. GM’s number for this recall is 13420.

BY SARAH ROBERTS, LEED AP SITE FEASIBILITY AND DESIGN PIEPER O’BRIEN HERR ARCHITECTS

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DEALER

MARCH/APRIL 2014

w w w. o h i a d a . o r g 2/14/14 1:53 PM


REGULATORY

NEWS

FTC Cracks Down on Misleading Ads u

NATIONWIDE SWEEP RESULTS IN CHARGES AGAINST TEN DEALERS

“Operation Steer Clear” is the latest effort from the FTC to protect consumers in the auto marketplace. The Federal Trade Commission reached an agreement with nine auto dealers to settle deceptive advertising charges and is taking action against a 10th dealer in a nationwide sweep focusing on the sale, financing and leasing of motor vehicles. According to the complaints, the dealers made a variety of misrepresentations in print, Internet and video advertisements that violated the FTC Act. These dealers misled consumers to believe they could purchase vehicles for low prices, finance vehicles with low monthly payments, and/or make no upfront payment to lease vehicles. The proposed consent orders prohibit the dealerships from misrepresenting in any advertisement for the purchase, financing or leasing of motor vehicles the cost of leasing a vehicle, the cost of purchasing a vehicle with financing or any other material fact about the price, sale, financing or leasing of a vehicle. When relevant, the proposed consent orders also address the alleged TILA and CLA violations by requiring the dealerships to clearly and conspicuously disclose terms required by these credit and lease laws. The proposed order also prohibits misrepresenting material terms of any prize, sweepstakes, giveaway or other incentive.

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PRODUCTS

& SERVICES

GE Capital Fleet Services Introduces New Analytical Tools for Next Generation Strategic Consulting Services u

TOOLS HELP BENCHMARK AND OPTIMIZE FLEET PERFORMANCE

GE Capital Fleet Services recently unveiled a powerful new suite of analytical tools to help fleet managers benchmark and optimize their fleet performance. Customers can access the new tools through GE Capital Fleet Services’ strategic consulting services group, a team of dedicated fleet consultants that has helped GE customers identify more than $1.6 billion in potential cost savings over the past five years. Working with GE Capital Fleet Services’ consultants, customers are able to use the new analytical tools to capture, analyze and act on their fleet data for real-time benchmarking, optimization and fleet rightsizing via cargo rationalization. In addition to this updated suite of data and analytic-driven tools, fleet customers can access GE Capital’s team of strategists and its full spectrum of fleet support services. “Our customers have always been able to utilize the wealth of knowledge of our strategic consultants to realize their cost savings potential,” said Ken Johnson, managing director of strategic consulting and fleet management solutions at GE Capital Fleet Services. “These tools, in addition to our customized personal approach to the needs of our customers, aim to further optimize fleet productivity and cost savings.”

ABOUT GE CAPITAL FLEET SERVICES GE CAPITAL FLEET SERVICES, BASED IN EDEN PRAIRIE, MINN., IS A GLOBAL FLEET MANAGEMENT COMPANY. VISIT THE WEBSITE AT WWW.GEFLEET.COM OR FOLLOW THE COMPANY’S ECO NEWS AND UPDATES VIA TWITTER (@GEFLEETSVCS).

MARCH/APRIL 2014

INDEPENDENT

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DEALER 2/14/14 1:53 PM


ONLINE

MARKETING

What is Content Marketing a u

26

M  O R E T H A N A T R E N D , C O N T E N T M A R K E T I N G I S L I K E LY T O B E C E N T R A L T O A N Y B U S I N E S S G R O W T H S T R A T E G Y

Content marketing is a vital component of your business’ overall digital marketing strategy. You may have heard the term “content is king” over the past few years, but what power does this “king” actually have when it comes to driving traffic, leads and sales? At the core of your marketing should be useful information. It should attract, convert and eventually close sales. Content marketing then is your business’ ability to be the most helpful and effective teacher in the world at what you do. The old way of delivering content to customers was to simply create an ad and broadcast it to the masses. Today, instead of broadcasting a one way message that no one trusts anymore, content marketing pulls people towards

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DEALER

your company. Customers consume the information you provide and naturally come to trust your business. Successful content marketing aligns what you publish with your customers’ information needs. In fact, content must serve two purposes: it has to appeal to the prospective customer (more so now than ever) and it has to appeal to search engines. You might now be saying, “Ugh, another thing I have to do that takes me away from my business. I’ll wait until the trend fizzles.” Content marketing is more than a trend. It’s likely to be central to any business growth strategy, at least for the foreseeable future. Great content turns visitors into customers, even evangelists. If you don’t take time for content

MARCH/APRIL 2014

marketing there could be a chance very soon that you won’t have a business to be taken away from! Content marketing may be something you’ve heard about but perhaps you’re not fully convinced of its value and that’s got you stuck. You’re not alone. I meet dealers and other business owners often who have apprehensions. Here’s how content marketing works: Attract customers with content. • Blog posts supply the information your customers need. • Keywords and phrases optimize your post for better search visibility. • Social media syndicates your content and boosts your search visibility and online influence.

Confused on what to write about? You already have a wealth of ideas in-house. Employees are on the front lines with your customers and they know what questions customers are asking. The goal is to be helpful. You don’t need to appear intelligent. Marcus Sheridan recommends these “big five” topics for best results: • Cost/Price questions • Problems/issues/concerns questions • Vs/comparison questions • “Best” questions • Review/opinion-based questions Convert visitors to your site or social media. • Create a compelling reason for them to take action. • Use sign-up forms to collect contact info. • Use landing pages to drive

w w w. o h i a d a . o r g 2/14/14 1:53 PM


g and Why Do I Need It? visitors further down the sales funnel. Close sales with superior internal workflows. • Listen. • Engage. • Learn to recognize leads immediately. • Nurture leads intelligently. Why do I need content marketing? Content marketing is the best way to turn strangers into customers. When you answer your prospects’ questions, they remember who answered them and come back when it’s time to buy. You need content marketing because it moves the needle: • Your business gets found in search. • Your business is seen as a “likable expert,” you become known as a thought leader.

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• People stay on your site longer when they have quality information to absorb and enjoy. • You build trust. • People who regularly consume your content are much more likely to buy. Listen. Communicate. Teach. Content marketing has been around for ages (ancient texts have given mankind useful information since time began). Today, technology has greased the wheels of information. Every consumer has questions. When a prospect or customer asks your company a question, you need to have solid tactics in place to answer it. Creating content is time consuming and expensive. Distributing it is tricky. Unless you’ve already established your business as a trusted

At the core of your marketing should be useful information. It should attract, convert and eventually close sales. Content marketing then is your business’ ability to be the most helpful and effective teacher in the world at what you do. u

authoritative source, you may have trouble overcoming the clutter and noise of the Internet and social networks. Working with a creative marketing partner or coach can help overcome some of these

MARCH/APRIL 2014

challenges. Some have come to believe that sales is a numbers game. In some respects, that’s still true. But we also have ways to develop relationships with customers during all stages of the buying cycle. Content marketing attracts and nurtures those sales relationships, digitally. Trees that are slow to grow bear the best fruit. Sales close faster and easier when the trust is evident. If you haven’t yet integrated content marketing into your business’ overall strategy, what are you waiting for?

BY KATHI KRUSE

KATHI KRUSE IS AN AUTOMOTIVE SOCIAL MEDIA MARKETING EXPERT, BLOGGER, AUTHOR, SPEAKER AND FOUNDER OF KRUSE CONTROL INC. SHE IS ALSO THE AUTHOR OF “AUTOMOTIVE SOCIAL BUSINESS – HOW TO CAPTIVATE YOUR CUSTOMERS, SELL MORE CARS & BE GENERALLY REMARKABLE ON SOCIAL MEDIA.”

INDEPENDENT

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CALENDAR

M a rc h 2 0 1 4 Sun

Mon

Tue

Wed

Thu

Fri

Sat

1

AV = AUC TIO N VISITS:

CFAA - 4700 Groveport Road, Columbus OH 43232 - (614) 497-2000 Dayton Auto Auction - PO BOX 13022, Dayton OH 45413 - (937) 454-2292 OAA - 3905 Jackson Pike, Grove City, OH 43123 - 614-871-2771

2

3

9

10

16

17

23

24

30

31

11

6

AV: VAA

12

7

8

14

15

21

22

AV: Dayton

13

AV: Akron

AV: Adesa Cincy

18 25

19 AV: CFAA

26

AV: Adesa Cleveland AV: Manheim Cincy

20

Poker Tournament

27

AV: Licking County

28

29

April 2014

Akron Auto Auction - 2471 Ley Drive, Akron, OH 44319 - 330-773-8245

Adesa Cincinnati - 4400 William C. Good Blvd., Franklin, OH 45005

5

AV: CFAA

AEC MeeƟng Dallas

Adesa Cleveland - 210 E Twinsburg Rd, Northfield, OH 44067 - 330-467-8280

Licking County - 1425 E Main St, Newark, OH 43055 - 740-281-3631

4

AV: OAA

Sun

Mon

Tue AV: OAA

6

7

Value Auto Auction - 3776 St Rt 93 NE, Crooksville, OH 43731

13

14

ABC Detroit/Toledo - 9797 Freemont Pike, Perrysburg, OH 43551 - 419-872-0872

20

21

Manheim Cincy - 4969 Muhlhauser Road, Hamilton, OH 45011 - 513-874-9310

27

28

AV: Akron

AV: Adesa Cincy/Dayton

AV: OAA

Wed

1 8

Thu

2 AV: CFAA

9

15

16

22

23

29

AV: CFAA

AV: Value Auto AucƟon

AV: Manheim Cincy

Fri

3 10

AV: Dayton

AV: Licking County

17

AV: Corry Auto Dealers Exchange AV: Adesa Cleveland

24

AV: ABC Toledo

Sat

4

5

11

12

18

19

25

26

30

28

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DEALER

MARCH/APRIL 2014

w w w. o h i a d a . o r g 2/14/14 1:53 PM


MARKET

WATCH

KBB Research Shows Brand Loyalty Tied to U.S. Regions u

S H O P P E R S M AY P R E F E R M A N U FAC T U R E R S W I T H L O C A L T I E S

Why are some shoppers dead set on a particular brand, while others can be swayed by a variety of factors including price, fuel efficiency and looks? According to Kelley Blue Book, it might have something to do with where these shoppers call home. KBB announced results of research that focused on the most and least popular auto brands by U.S. region and, overall, statistics show out of all regions, southerners are the least influenced by brand when shopping for a car. “Perhaps manufacturers have the ability to conquest market share in the South since these shoppers are not as loyal to any specific automaker,” KBB officials asserted. The southern trend is illustrated by the relatively small 17 percent preference for Infiniti over other brands.

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This is compared to stats such as the following: u  Midwest shoppers are 64 percent more likely to consider Chrysler than shoppers from other regions. u  Northeast shoppers are 56 percent more likely to consider Subaru than shoppers from other regions. u  Western shoppers are 85 percent more likely to consider Tesla than shoppers from other regions. For some of these more brand-oriented regions, KBB. com found the top brands most shopped in specific U.S. regions are often headquartered or have assembly plants in that area, suggesting shoppers prefer manufacturers with local ties to their region.

“It seems what is popular in one region is overlooked in another,” said Arthur Henry, analyst at Kelley Blue Book. “Westerners prefer fuelefficient brands with style, such as Tesla and Scion, but those same brands are shunned in the South and Northeast,” he added. “Those living in the South gravitate toward brands that are manufactured in the same region. Shoppers from the Midwest also have an affinity for brands headquartered or produced in their own backyard.” KBB also reported regional tendencies towards vehicle segment. Out West, KBB found that new-car shoppers are 66 percent more likely to consider a hybrid car, while Midwest car shoppers are 42 percent more likely to consider a full-size crossover. Southern shoppers are 41

MARCH/APRIL 2014

percent more likely to consider a full-size sport utility, followed by the Northeast which is 20 percent more likely to shop for a compact crossover. “Based on actual shopping data on KBB.com, hybrids are synonymous with the West, as SUVs are with the South,” said Henry. “Seeing the key drivers motivating shoppers are topography, metropolitan density and government regulations, it is not surprising compact crossovers are preferred over full-size SUVs in the Northeast. “This shows when brand choice is layered on top of segment preferences, manufacturers like Subaru rise to the top with its four-wheel drive options, along with Volvo and its high safety ratings, which help both brands drive interest in this region.”

INDEPENDENT

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DEALER 2/14/14 1:53 PM


MANAGEMENT

MATTERS

Pointers to Improve Your Used-Vehicle R u

30

M  I N I M I Z E D E L AY S A N D M A X I M I Z E T H E P R O F I TA B I L I T Y P O T E N T I A L O F E V E RY U S E D V E H I C L E

You’ll get a range of responses when you ask dealers how much time it takes to recondition used vehicles. The best-performing dealers these days consistently get the job done in 24 hours or less. Meanwhile, other dealers report their reconditioning turnaround times run seven days or more. The disparity owes to two chief factors — the degree to which the dealer recognizes that time spent in reconditioning translates to lost front-end profit potential, and the extent to which a dealer implements and monitors processes that reflect the “time is money” reality of retailing used vehicles. The following are five best practices I’ve gleaned from dealers who have transformed their reconditioning processes to minimize delays and maximize the profitability potential of every

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DEALER

used vehicle: 1. Steer clear of problem cars at acquisition. This seems an obvious point, but some dealers and their buyers lose their acquisition discipline when they’re desperate to fill gaps in their used vehicle inventories. The result: They look past (or don’t check) AutoCheck, CARFAX and other condition reports, bringing home vehicles that require significant reconditioning work. The dynamic amounts to “throwing good money after bad” as they pony up for costly repairs that could have been avoided. 2. Determine each car’s exit strategy right away. This best practice goes hand-in-hand with the one noted above—that is, dealers should not be acquiring vehicles at auctions that lack the condition

MARCH/APRIL 2014

or market appeal (e.g., Market Days Supply) that indicate positive potential as retail units. Of course, trade-ins are a trickier prospect, especially if the dealership stepped up to acquire a unit and complete a retail deal. In these instances, dealers and their managers should collectively and quickly determine if a unit has retail potential. A best practice: Gather the appraisers and decisionmakers once a day to review trade-ins and make the retail/ wholesale determination. 3. Establish an “auto approval” for reconditioning work. This best practice helps minimize delays caused when a used vehicle manager cannot (or doesn’t) approve reconditioning work in a timely manner. Dealers who use this approach set up a baseline cost for reconditioning

($600 to $800 per car is common) and allow the service department to complete the work when estimates fall below the threshold. Some dealers resist this best practice out of a fear that their service department will “stitch up” the repair order to the maximum amount on every car. “That hasn’t been a problem at our dealership, but we monitor whether estimates match up with the final cost,” a Northeast dealer said. At dealerships where buyers consistently check vehicle condition reports before purchasing a vehicle, about 10 percent of the incoming cars will require a manager’s approval because estimates exceed the baseline. In those cases, dealers use email or text alerts to managers and expect a yea-or-nay decision in less

w w w. o h i a d a . o r g 2/14/14 1:53 PM


e Reconditioning Processes u At

dealerships where buyers consistently check vehicle condition reports before purchasing a vehicle, about 10 percent of the incoming cars will require a manager’s approval because estimates exceed the baseline.

w w w. o h i a d a . o r g OH_0314.indd 31

than two hours. 4. Make reconditioning speed a priority. For some dealers, this means giving up on the tug-of-war with service directors and managers, who often regard customer pay work as a higher priority. In these stores, dealers will create a separate team (often a manager/writer with up to five technicians, depending on volume) who focus solely on fast, yet thorough, reconditioning work. The manager’s compensation package typically emphasizes the need for efficiency and speed, with bonuses tied to meeting the store’s 24- to 72hour reconditioning benchmark. Other stores give the responsibility for managing reconditioning to the used vehicle manager. The manager then works collaboratively

with his/her counterparts in service to craft and execute the processes that enable the dealership to recondition vehicles in an efficient and timely manner. 5. Look for ways to lower costs. Beyond profit-minded decisions that guide the scope of reconditioning work on individual vehicles, a growing number of dealers are examining their internal labor and parts costs to ease pressure on their front-end profit margins. These efforts often result in decisions to charge less-than-retail rates for labor, use lower-cost, non-OEM parts (e.g., brake pads, tires, wiper blades, etc.) and tighten their oversight of outside vendors who handle small dent/ body, upholstery and window repairs.

MARCH/APRIL 2014

These five best practices are solid steps dealers can take to help speed up the time it takes to get their vehicles to the front line. However, dealers should also recognize that, in today’s market, there are really two front lines — the physical and the virtual. The speed required to get vehicles to the physical front line should be measured in hours and the virtual front line in minutes. Some dealers wait until reconditioning is complete before they address the description, photos, pricing and other elements each unit requires to stand tall on the virtual front line. This is an operational no-no in today’s time-is-money environment.

BY DALE POLLAK DALE POLLAK IS THE FOUNDER OF VAUTO. THIS ENTRY AND POLLAK’S ENTIRE BLOG CAN BE FOUND AT WWW.DALEPOLLAK.COM. ARTICLE REPRINTED WITH PERMISSION.

INDEPENDENT

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DEALER 2/14/14 1:53 PM


OIADA Annual Poker Tournament March 21, 2014 6PM to Midnight at the York County Club Registration starts at 5:30 PM Please join the OIADA at our annual Poker Tournament for a night of gaming and great food! Tickets: $100 per person Includes seat in the tournament, dinner, open bar, late night snacks and March Madness viewing in the downstairs lounge area.

$2000 in payouts donated by our sponsors.

It is sure to be a night you will remember! Please contact OIADA for tickets or more information:

32

info@ohiada.org 614-863-5800 -

Sponsors for the event : Autotrader.com Dinner -Sponsor

NextGear Capital Event Sponsor -

Corry Auto Dealers Exchange Table Sponsor -

Adesa Cincinnati/Dayton Door Prizes and Late Night

Guardian Finance Table Sponsor MacMurray, Petersen & Shuster Table Sponsor Mighty Distributing Table Sponsor Nationwide Acceptance Bar Sponsor -

Snack Sponsor Comsoft Table Sponsor PASSTIME Tournament Sponsor Rinehart, Rishel & Cuckler Event Sponsor Value Auto Auction Table Sponsor

INDEPENDENT OH_0314.indd 32

DEALER

MARCH/APRIL 2014

w w w. o h i a d a . o r g 2/14/14 1:53 PM


Preferred Partners OIADA Partners ‐ Discounts are available for members of the OIADA. Call now to join (614‐863‐5800) or email info@ohiada.org. Mention “state magazine.” A‐Team Transmissions

AFC

American Tire Distributors

AUL Corp

We offer OIADA members a professional  choice of replacement transmissions or  repairs at a discount member price and a  na�onwide warranty on all parts and labor.  Call Sean Avner at 740‐972‐8137.  

Inventory nancing available for dealer  trades & accepted at 1000+ auc�ons in USA  & Canada. Foorplan nancing programs for  retail & wholesale automobile dealers. Call  1‐888‐345‐0600. 

American Tire Distributors is the na�on's  largest �re distributor and ATD also carries  wheels, accessories and supplies to keep  your shop running smooth.   Contact Colin Gallagher at 704‐280‐2219.  

Premier Service Contract Company offers  dealers the opportunity to increase prots  and sa�sfy their customer needs for quality  vehicle protec�on. Represented in Ohio by  Innova�ve Dealer Services.   In Ohio Call: 740‐492‐4138  

Autotrader.com

AutoZone

�ene�its � Group

Cars.com

Our solu�ons give dealers the exposure to  reach the largest audience of in‐market car  shoppers with cost‐effec�ve adver�sing  solu�ons. Www.weworkforyou.com or   877‐627‐9585. 

We are offering an Auto Parts Discount  Program for NIADA/OIADA members.  Customized program to t all your needs  with discounts unsurpassed in the industry.  Call 614‐475‐2621. 

Join our group discounted pool! Members  can save up to 53% on your workers  compensa�on premiums. Call Mike Brown   at 877‐765‐4200 ext. 270. 

Cars.com is dedicated to providing  dealerships with comprehensive resources  and training that will ensure their success in  the online world. Cars.com keeps you  aware of the latest trends in the online  automo�ve world. 1‐800‐298‐1460 

Car‐Ware

Comsoft

EMS

Guardian Life Insurance

The Dealer Management So�ware (DMS)  that does everything you need to do, plus a  unique accoun�ng integra�on with   Quick Books!   Call Lynn at 855‐504‐5949 ext. 8006. 

We have been specializing in Dealership  Management & Marke�ng So�ware  Solu�ons (DMS) since 1971. Visit  www.comso�.com or call   Chip at 1‐800‐849‐3838. 

Electronic Merchant Systems (EMS)  provides the best opportunity in the state  to accept credit cards at your dealership  with the best retail dealer rate available.   Call 1‐866‐845‐6025 . 

People are at the heart of everything we  do. Individuals, families and business  owners put their trust in us to protect the  people who ma�er to them. And we make  it a point never to forget that.  (614) 516‐ 4009 or mark_mesewicz@glic.com. 

Intellinectics

Lease It Own It

Mighty Distributors

Don’t put your les in a cabinet; scan them  into the next genera�on of storage  facili�es. For informa�on   call 614‐921‐8170. 

BHPH dealers have discovered the many  advantages of a lease to own business as  compared to the standard BHPH Programs  available.   Contact Rick or Rob at 614‐395‐5363. 

Full service program with �er one OEM  quality auto parts from the world's leading  global manufacturers, a true two step  distribu�on from the manufacturers to  professional installers. Contact   Jeff at 614‐252‐6000. 

The Milby Group

NextGear Capital

PassTime

Stolly Insurance

With pioneering technology and a total  commitment to customer service, NextGear  Capital empowers dealers to oor plan  vehicles from anywhere, at any �me.    (888) 969‐3721 

PassTime has supported & enhanced the  special nance industry through the  implementa�on of high tech payment  assurance & GPS solu�ons that improve  customer payments. Call 1‐877‐727‐7846. 

Usedcars.com We are one of the leading providers of  used car leads, offering dealerships access  to more than 20 million in‐market buyers  monthly and free inventory lis�ngs on top  auto sites. 1‐877‐894‐5062 

w w w. o h i a d a . o r g OH_0314.indd 33

Special insurance program for all the needs  of the independent automobile dealer.   For garage liability   call Sarah at 614‐795‐3368.   For health insurances call   Randee at 419‐227‐2570. 

Used Tire House

Used �res are o�en an economical choice.  Whether you are replacing one or more  �res, Used Tire House has thousands of  quality, used and new �res on hand. We  inspect them to be sure they will perform.   1‐888‐964‐4656 

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Providing F&I Auto Sales & Management  Training, vehicle service contracts, Limited  Warran�es, Cer�ed Programs, Gap, BHPH  Gap, VSI and Credit Insurance. We provide  a mul�tude of services for all your dealer  needs. Call 740‐652‐9942.  

Take 5 We help in genera�ng news sales for  your  dealership. Services include direct mail,  email & data appending and crea�ve  design. Eric  at 561‐819‐5555 x117 or Alex  at 561‐819‐5555 x174. 

Vantage Finance

Turn‐key F&I solu�on for dealerships that  generates revenue without the overhead  costs & compliance headaches of  tradi�onal F&I opera�ons.   Call 402‐315‐3329 or  info@vanatagenance.com 

MARCH/APRIL 2014

INDEPENDENT

DEALER 2/14/14 1:53 PM


REGULATORY

M AT TERS

Advertising Game Plan: No Audibles Allowed u

FTC PUTS DEALERS ON NOTICE

I-formation, twins right, Z motion, halfback dive. “Omaha! Omaha!” Now, I don’t know if Peyton Manning called the isolation dive play over the course of the Denver Broncos’ playoff run, but I do know we heard “Omaha” enough times that the Chamber of Commerce in Nebraska’s largest city owes him a key to the city. In the days following the Broncos’ playoff win over the San Diego Chargers, reporters asked the quarterback to explain the significance of his screaming of “Omaha” before virtually every snap. “I’ve had a lot of people ask what ‘Omaha’ means,” Manning said with a sly smile. “Well, Omaha, it’s a run play, but it could be a pass play, or a play-action pass, depending on a couple of things: the wind, which way we’re going, the quarter and the jerseys that we’re wearing. It really varies, really, from play-toplay. So there’s your answer to that.” While changing the play is entirely acceptable when you are a Hall of Fame quarterback trying to fool a defense, it is as taboo as it gets when you are a licensed motor vehicle dealer trying to sell cars. So taboo, in fact, that the Federal Trade Commission put dealers on notice once again that “hiding the ball” or misdirection tactics will not be tolerated in automobile transactions. On Jan. 9, the FTC announced “Operation Steer Clear,” a nationwide sweep that focused on the advertisements of 10 dealerships from six states. The FTC charged those dealers made material misrepresentations in print, Internet and video advertisements that led consumers to believe they could purchase or lease vehicles for certain terms

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when such was not the case. What did these dealers do to “hide the ball?” • Two California dealers printed advertisements that prominently displayed a price for a vehicle – for example, a 2008 Chevy Tahoe LS for $17,995. However, in fine print at the bottom of the page, the dealer added this disclaimer: “Prices after $5,000 down + Tax, Lic and Doc fees on approved credit.” So while the ad led consumers to think the price of the vehicle was $17,995, it was actually $22,995. • Several of the dealers advertised leases with zero due at lease signing. Yet when the dealer advertised the specific models available for lease at a particular payment, the fine print said “first payment, acquisition fee, tax, title due at lease signing,” or that a down payment was due at signing to get the advertised payment. According to the FTC, the impression left in consumers’ minds was they were not required to leave any money with the dealer to get the advertised monthly payment. But when it came time to close, the dealer slapped them with a bill for potentially thousands of dollars. • Multiple dealers offered vehicles for $99 a month and zero down. That offer was bold and easily recognizable. Sounds like a great deal. But if consumers were able to see the fine print that flashed across the video screen or was placed at the bottom of a print ad, they would have noticed the $99 per month offer only applied to the first few months of the loan – after which the payments increased to $534 for the balance of a 72-month loan. Lest we fall into the trap

of thinking this was a onetime splash, Jessica Rich, director of the FTC’s Bureau of Consumer Protection, said, “We have many other investigations in the pipeline. This is a priority for the FTC and you will see many other cases in the auto-related area.” And remember, if the FTC is looking for cases, state attorneys general are right behind them. In order to protect yourself from an enforcement action, remember your advertisements cannot change the play on the consumer. If you make a particular offer, nothing in the fine print can alter the material terms of that offer. Moreover, all material terms of the offer must be clearly and conspicuously disclosed. For print ads, disclosures have to be large enough and readable enough for a consumer to notice, read and comprehend them. Disclosures in videos must be loud enough, slow enough and in a format sufficient for a consumer to understand them. If you use a third party vendor, do not simply rely on its statements that the advertisements are compliant. Ensure the ad has undergone a thorough compliance review. Remember, it is your dealership’s name on the ad. Wonder who the FTC will chase? As you stand in the huddle of your advertising team and the temptation to “change the play” comes, remember the FTC’s team of attorneys is roaming the landscape and will hit you harder than Ray Lewis ever did. Adopt this game plan: No audibles allowed.

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.

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