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INDEPENDENT DEALER 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

NOVEMBER/DECEMBER 2013

magazine

C O V E R S T O RY PA G E 6

The Next Generation of Successful Selling inside u

• CREATING VALUE • ARE YOU REALLY GETTING YOUR MONEY’S WORTH ONLINE? • COMPLIANCE OVERDRIVE

DALLAS, TEXAS Permit No. 2079

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NIADA Offers Comprehensive Dealer Compliance Solution that Fits Your Schedule u

NEW FLE XIBLE ONLINE TRAINING ADJUST S TO YOUR SCHEDULE

You have a busy schedule. You have a job to do and your family, employees and community depend on you and your business. You know compliance is crucial to the success of your business. But how do you make time for compliance management without your operations, marketing, sales and other important aspects of your life suffering? NIADA now offers Dealer Compliance Suite, a comprehensive solution that fits your schedule and budget. On demand videos allow your entire staff online access to a comprehensive suite of training that focuses on federal regulations and compliance. Its content can be tailored to match individual employee functions, such as sales or service, with interactive testing to reinforce material. These test results are stored as the program tracks employee

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training participation. This tracking capability that reports participation also aids in providing proof of compliance. There are also numerous compliance related documents available to download from the site, such as compliance policies and deal agreements. The site offers federally required dealership compliance policies as well as documents and agreements designed to limit dealer liability. A lack of federal compliance training could put your business at risk. You may not be as prepared as you think. The site also provides a checklist to evaluate your compliance level. There may be regulations of which you’re unaware or unfamiliar. Did you know? • Dealers are required to adhere to numerous rules and regulations and should provide formal employee training

regarding eight regulations. • Documentation of employee compliance training should remain on file and available for government audits. • New hires should be trained immediately with appropriate documentation of training. • Dealership employees should be retrained on regulations annually. Several federal agencies and the newly formed Consumer Financial Protection Bureau (CFPB) require and advise all motor vehicle dealers to perform employee federal compliance training regarding various regulations. Regulations include training on the Safeguards Rule, Patriot Act, OSHA, Do Not Call rules, the Federal Risk Based Pricing Rule, the Magnuson-Moss Warranty Act and the Federal Truth in Lending Act. Visit niada.com for a complete list of training regulations. In addition, these same federal

agencies require all motor vehicle dealers to have in place written Dealership Policies regarding similar regulations. Visit niada.com for a complete list of those regulations as well. In previous dealership federal audits, investigations and civil litigation, independent dealers have been required to provide documented proof of all required compliance training and to produce all written policies on demand. Failure to produce documentation of required training and/or policies has contributed to fines in the tens of thousands and even federal prison terms for the dealer. Not only does compliance help your business succeed, it prevents adverse legal action. Visit http://www.niada.com/ dealershipcompliance.php today to learn more about NIADA’s flexible comprehensive dealer compliance solution.

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NEWS

KBB Adds AutoCheck Reports to KARPOWER Platform Kelley Blue Book’s KARPOWER Online sales tool now offers Experian Automotive’s AutoCheck vehicle history reports, aiding dealers in marketing their inventory and increasing transparency. The tool is designed to help dealers value, manage and market vehicle inventory online. It also allows customers to access KBB values in addition to vehicle history reports. AutoCheck vehicle history reports include in-depth information that enables consumers to quickly check if a vehicle has had any reported accidents, frame damage or odometer rollback issues and other potentially negative events that can impact its value. The reports also feature the AutoCheck Score, which offers a look at a vehicle’s past and compares it with similar models. “Connecting KARPOWER Online customers with AutoCheck made sense, because understanding a vehicle’s past is pivotal when buying or selling a used car,” said Dave Nemtuda, senior vice president for Experian Automotive. w w w. o h i a d a . o r g OH_1113.indd 3

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Inside

OIADA BOARD OF DIRECTORS

06 The Next Generation of Successful Selling 08 Creating Value 12 Washington Update 14 Dealer Practices 20 Are You Really Getting Your Money’s Worth Online? 26 Compliance Overdrive

Board of Directors OIADA BOARD OF DIRECTORS TOM ONESTI PAST CHAIRMAN

JAY NORTH CHAIRMAN

DAN REEL PRESIDENT

MARK MEADOWS VICE PRESIDENT

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OIADA BOARD OF DIRECTORS Past Chairman Jeff Rader Thomas Onesti Rader Car Company Car Port 1429 Schrock Road PO Box 9943 Columbus, OH 43229 Youngstown, OH 44513 Tel: 614-888-3111 u M A K I N G YO U R V O I C E H E A R D TOM ONESTI JAY NORTH DAN REEL MARK MEADOWS TERRY614-888-3811 REINEKE DAVE ADKINS Tel: 330-726-6633 Fax: JEFF RADER BOB FAHEY BOB VAUGHAN GEORGE POLCE LAUREN THOMAS JOHN REM 2013 National Leadership PAST CHAIRMAN CHAIRMAN PRESIDENT VICE PRESIDENT TREASURER SECRETARY Fax: 330-726-2633 Cell: 614-582-1822 BOARD MEMBER BOARD MEMBER BOARD MEMBER BOARD MEMBER BOARD MEMBER BOARD MEM Conference & Legislative Summit TOM ONESTI JAY NORTH DAN REEL MARK MEADOWS TERRY REINEKE Cell: 330-565-6833 jeff@radercarco.com Nov. 11-14 in Washington, D.C. PAST CHAIRMAN CHAIRMAN PRESIDENT VICE PRESIDENT TREASURER OIADA BOARD OF DIRECTORS tomocarport@aol.com NIADA’s Legislative Committee, Association OIADA BOARD OF DIRECTORS Robert Fahey Executives Council, State Presidents Council and Chairman Fairdale Auto Sales state officers frame the NIADA legislative and Jay North 6209 Glenn Rd. regulatory agenda for 2014 and beyond, and Jay North LLC Cambridge, OH 43725 JEFF RADER BOB FAHEY BOB VAUGHAN GEORGE POLCE LAUREN THOMAS JOHN REMY RANDYCHRISTINE GRIESDORN WHITETOM SMITH JIM MITCHELL meet face-to-face with legislators and federal 501 E. Columbia StreetBOARD MEMBER BOARD MEMBER BOARD MEMBER Tel: 740-432-4185 BOARD MEMBER BOARD MEMBER BOARD MEMBER BOARD MEMBERASSNT BOARD MEMBER EXECUTIVE EXECUTIVE DIRECTOR regulators to discuss the present and future of Springfield, OH 45503 Fax: 740-435-0765 JEFF RADER BOB FAHEY BOB VAUGHAN GEORGE POLCE LAUREN THOMAS JOHN REMY RANDY GRIESD the used vehicle industry. Tel: 937-325-3748 Cell: 740-607-4011 TOM ONESTI JAY NORTH DAN REEL MARK MEADOWS REINEKE DAVE ADKINS BOARD MEMBER BOARD MEMBER BOARD MEMBER BOARD MEM BOARD MEMBERTERRY BOARD MEMBER BOARD MEMBER PAST CHAIRMAN CHAIRMAN PRESIDENT VICE PRESIDENT TREASURER SECRETARY TOM ONESTI JAY NORTH DAN REEL MARK MEADOWS TERRY REINEKE DAVE ADKIN Fax: 937-398-1075 r_fahey@yahoo.com PAST CHAIRMAN CHAIRMAN PRESIDENT VICE PRESIDENT TREASURER SECRETARY OIADA BOARDhtron435@yahoo.com OF DIRECTORS OIADA BOARD OF DIRECTORS Robert Vaughan ADESA, Inc...................................Inside Back Cover President Vaughan Motor Car Company CHRISTINE WHITE JIM MITCHELL Ally..................................................................................9. Daniel Reel 808 Parsons Avenue EXECUTIVE ASSNT EXECUTIVE DIRECTOR AutoManager, Inc......................................................7. Reel’s Auto Sales LLC Columbus, OH 43206 AutoStar Solutions.................................................22. CHRISTINE WHITE JIM MITCHELL 547 East Main Street Tel: 614-444-7839 EXECUTIVE ASSNT EXECUTIVE DIRECTOR Columbus Fair Auto Auction................................11. JEFF RADER BOB FAHEY BOB VAUGHAN GEORGE POLCE LAUREN THOMAS JOHN REMY RANDY GRIESDORN TOM SMITH Orwell, OH 44076 Fax: 614-444-1133 BOARD MEMBER BOARD MEMBER BOARD MEMBER BOARD MEMBER JEFF BOARD MEMBER BOB BOARD MEMBERBOBBOARD MEMBERGEORGE BOARD MEMBER Corry Auto Dealers Exchange.............................21 RADER FAHEY VAUGHAN POLCE LAUREN THOMAS JOHN REMY RANDY GRIESDORN TOM SMI Tel: MARK 440-437-5893 Cell:MEMBER 614-565-5682 MEMBER BOARD MEMBER BOARD MEMBER BOARD MEMBER BOARD MEM TOM ONESTI JAY NORTH DAN REEL MEADOWS BOARDTERRY REINEKEBOARD MEMBER DAVE BOARD ADKINSMEMBER BOARD DealerMatch...............................................................5 PAST CHAIRMAN CHAIRMAN PRESIDENT VICE PRESIDENT TREASURER SECRETARY TOM ONESTI JAY NORTH DAN REEL MARK MEADOWS TERRY REINEKE DAVE ADKINS Cell:PAST 440-319-1247 sales@vaughanmotors.com Dealix.........................................................................15. CHAIRMAN CHAIRMAN PRESIDENT VICE PRESIDENT TREASURER SECRETARY Indiana Auto Auction................................................3. Fax: 440-437-5759 OIADA BOARD OF DIRECTORS Insurance Auto Auctions......................................13. danreel@hotmail.com George Polce OIADA BOARD OF DIRECTORS 4 Manheim Pennsylvania...........Inside Front Cover. Jenroc Auto, Inc. NextGear Capital.....................................................17 Vice President 101 N. Tuscarawas Ave Protective..................................................................19. CHRISTINE Mark WHITE Meadows JIM MITCHELL Dover, OH 44622 STARS GPS...............................................................20. EXECUTIVE ASSNT EXECUTIVE DIRECTOR CHRISTINE WHITE JIM MITCHELL Miracle Motor Mart Tel: 330-364-2525 EXECUTIVE ASSNT EXECUTIVE DIRECTOR United Acceptance.................................................23 JEFF RADER BOB FAHEY BOB VAUGHAN GEORGE POLCE LAUREN THOMAS JOHN REMY RANDY GRIESDORN TOM SMITH 2380 Morse RoadMEMBER Fax: 330-364-6726 VAuto ........................................................ Cover BOARD MEMBER Back BOARD MEMBER BOARD MEMBER BOARD MEMBER BOARDJEFF MEMBER MEMBER MEMBER RADER BOARD BOB FAHEY BOARD BOB VAUGHANBOARD GEORGE POLCE LAUREN THOMAS JOHN REMY RANDY GRIESDORN TOM SMITH Columbus, OH 43229 330-268-4724 BOARD MEMBER BOARD MEMBER BOARD MEMBER BOARD MEMBER Cell: BOARD MEMBER BOARD MEMBER BOARD MEMBER BOARD MEMBER TOM ONESTI JAY NORTH DAN REEL MARK MEADOWS TERRY REINEKE DAVE ADKINS Tel: 614-437-0037 Jenroc@wilkshire.net TOM ONESTI JAY NORTH DAN REEL MARK MEADOWS TERRY REINEKE DAVE ADKINS PAST CHAIRMAN CHAIRMAN PRESIDENT VICE PRESIDENT TREASURER SECRETARY OIADA BOARD OF DIRECTORS PAST CHAIRMAN CHAIRMAN PRESIDENT VICE PRESIDENT TREASURER SECRETARY Fax: 614-337-1063 Cell: 614-348-6503 Lauren Bowden Thomas To contact the Ohio Independent Auto Dealers dmarkmeadows@aol.com Bowden Motors OIADA BOARD OF DIRECTORS Association, call (614) 863-5800 or email 1426 South Main Street info@ohiada.org. CHRISTINE WHITE TreasurerJIM MITCHELL Bellfontaine, OH 43311 EXECUTIVE ASSNT EXECUTIVE DIRECTOR CHRISTINE WHITE JIM MITCHELL Terry Reineke Tel: 937-593-0014 EXECUTIVE ASSNT EXECUTIVE DIRECTOR OIADA BOARD OF DIRECTORS Rino’sBOB Auto Sales Inc TERRY REINEKE JEFF RADER FAHEY GEORGE POLCE LAUREN THOMAS Fax: JOHN 937-593-0514 REMY RANDY GRIESDORN TOM SMITH TOM ONESTI JAY NORTH DAN REEL MARK MEADOWSBOB VAUGHAN DAVE ADKINS JEFF RADER 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 1610 Industrial Pkwy bowdenmotorslauren@embarqmail.com PAST CHAIRMAN CHAIRMAN PRESIDENT VICE PRESIDENT TREASURER SECRETARY NationalBOARD Independent Automobile MEMBER BOARD MEMBER BOARD MEMBER BOARD MEMBER BOARD MEMBER BOARD MEMBER BOARD MEMBER BOARD MEMBER Celina, OH 45822 Dealers Association Tel: 419-586-6161 Thomas C. Smith TOM ONESTI www.niada.com JAY NORTH MARK MEADOWS TERRY REINEKE DAVE ADKINS • www.niada.tv DAN REEL PAST CHAIRMAN 2521 Brown CHAIRMAN PRESIDENT VICE PRESIDENT TREASURER SECRETARY Blvd. • Arlington, TX 76006-5203 Fax: 419-586-8700 Smitty’s Auto Sales phone (817) 640-3838 Cell: 419-305-4009 668 S. 7th St For advertising information contact: rinos@bright.net Greenfield, OH 45123 OIADA BOARDorOF DIRECTORS Troy Graff (800) 682-3837 troy@niada.com. Tel:(937)981-4317 CHRISTINE WHITE JIM MITCHELL The Ohio Independent Dealer News is published bi-monthly Secretary Fax: (937)981-4317 JEFF RADER WHITE BOB FAHEY BOB VAUGHAN GEORGE POLCE LAUREN THOMASEXECUTIVE JOHNASSNT REMY RANDY GRIESDORN TOM SMITH CHRISTINE JIM MITCHELL EXECUTIVE DIRECTOR by the National Independent Automobile Dealers Association BOARD MEMBERASSNT BOARD MEMBER BOARD MEMBER BOARD MEMBER BOARD MEMBER BOARD MEMBER BOARD MEMBER BOARD MEMBER EXECUTIVE DIRECTOR OIADA BOARD OF DIRECTORS David Adkins Cell: (937)218-3658 Services Corporation, 2521 Brown Blvd.,EXECUTIVE Arlington, TX TOM ONESTI JAY NORTH DAN REEL MARK MEADOWS TERRY REINEKE DAVE ADKINS 76006-5203; phone (817) 640-3838. Periodicals postage Wilmington Auto Sales Inc tommy4317@yahoo.com PAST CHAIRMAN CHAIRMAN PRESIDENT VICE PRESIDENT TREASURER SECRETARY Dallas, additional offices. POSTMASTER: JEFF RADER paid at BOB FAHEY TX and BOBatVAUGHAN GEORGE POLCE LAUREN THOMAS JOHN REMY RANDY GRIESDORN TOM SMITH 1780BOARD Rombach Avenue address changes to MEMBER NIADA State Publications, 2521MEMBER BOARD MEMBER BOARD MEMBER BOARD MEMBERSend BOARD MEMBER BOARD BOARD MEMBER BOARD MEMBER Brown Blvd., Arlington, TX 76006-5203. The statements Wilmington, OH 45177 Randy Shirk and opinions expressed herein are those of the individual Tel: 937-382-7714 Randy Shirk’s Northpointe Auto Sales LLC JAY NORTH authors andDAN REEL MARK MEADOWS TERRY REINEKE DAVE ADKINS do not necessarily represent the views of Ohio Fax: 937-383-2392 5505 N. Summit St CHAIRMAN Independent PRESIDENT VICEIndependent PRESIDENT TREASURER SECRETARY Dealer News, the Ohio Automobile Dealers Association, or the National Independent Automobile Cell: 937-725-8512 Toledo, OH 43613 CHRISTINE WHITE JIM MITCHELL Dealers Association. Likewise, the appearance of advertisers, EXECUTIVE ASSNT EXECUTIVE DIRECTOR david@wilmingtonautocenter.com Tel: 419-729-2688 or their identification as members of OIADA or NIADA, does Fax: 419-729-2588 not constitute an endorsement of the products or services featured. Copyright 2013 by NIADA Services, Inc. All rights CHRISTINE WHITE JIM MITCHELL JEFF RADER BOB FAHEY BOB VAUGHAN LAUREN THOMAS GEORGE POLCE TOM SMITH RANDY SHIRK Cell: JAMES419-290-1993 HOWALD reserved. NORTH EXECUTIVE DANBOARD REEL MEMBER BOARD MARK MEADOWSBOARD MEMBER TERRY REINEKE ADKINS EXECUTIVE TOM ASSNTONESTI DIRECTOR BOARD JAY MEMBER BOARD MEMBER MEMBER BOARD MEMBER DAVE BOARD MEMBER BOARD MEMBER shirkshark@netscape.net PAST CHAIRMAN CHAIRMAN PRESIDENT VICE PRESIDENT TREASURER SECRETARY State Magazine MGR./Sales

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James D. Howald YES Automotive 1706 W. 4th Street Ontario, OH 44906 Tel: 419-775-7186 Fax: 419-775-5319 Cell: 419-709-0029 j_howald@yahoo.com w w w. o h i a d a . o r g 10/21/13 9:37 AM


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MARKETING MATTERS

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FIRST AND GOAL: BECOMING A CHAMPION IN LIFE AND BUSINESS FEATURING

BARRY SWITZER

You might know Barry Switzer as the former football coach of the University of Oklahoma and the Dallas Cowboys. You might know him as a member of the College Football Hall of Fame. But you might not know he is a partner in an independent used car dealership – Auto Option in Edmond, Okla. He was also the keynote speaker at the 2013 NIADA Convention and Expo. Check out this game plan session on how his philosophy has made him the successful businessman he is today on NIADA.TV under “New Programs.”

NIADA.TV NEW SERIES Black Book’s “Special Program” series will be up and running Oct 1, highlighting their weekly Market Report(s) featuring Ricky Beggs. Visit www.niada.tv today!!!

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CRUCIAL TO A DEALERSHIP’S LONG-TERM SUCCESS

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

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

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

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

BY CLAYTON STANFIELD

CLAYTON STANFIELD IS SENIOR MANAGER OF EBAY MOTORS.

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MARKETING MATTERS

Creating Value Presenting Intangible Products u

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

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

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

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

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

hold, nor anything to look at. By telling stories, the presenter is only actively engaging one of the customer’s senses. Is that enough to create value in intangible products? For best results, customers should be engaged with the presentation. The best business practice is to use point of sale aids to get all parties engaged in the conversation. I am sure your service contract provider spends millions of dollars creating and producing brochures and other point of sale aids to assist you in your efforts to make a positive, professional impression on your customers. Are they being used or are they collecting dust? NOVEMBER/DECEMBER 2013

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

buyers especially read the reviews before coming to the dealership. Get prepared for the finance presentation. Does your finance department have a presentation manual? That’s a one-inch binder with five to eight dividers and top-loading page protectors so the presenter can easily update proof statements as needed. Here’s how the five sections break down: u Section One, Customer care products and services brochures: Group them as you would a package presentation. Note the brochures must follow your verbal interaction with the customer and they must line up with the menu used to close the payment selection. Consistency and repetition is the key to success. Mechanical protection includes service contracts, prepaid maintenance plans, tire and wheel policies and roadside assistance. Appearance protection includes exterior paint protection, interior fiber and leather protection and windshield protection. Equity protection includes guaranteed asset protection (better known as GAP coverage) and credit life and accident and health protection (if you are properly licensed to sell that product). C O N T I N U E D O N PA G E 1 0

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

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

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

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

BY JAN KELLY

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

Used Shoppers Even More Selective NIADA 20 Group PRODUCTS

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& SERVICES

STATISTIC S SHOW USED CAR BUYERS ARE TURNING TO CPOS AND SHOWING LES S INTEREST IN REPO UNITS

The certified pre-owned industry is coming off its best sales month ever and shoppingtrend data from CNW Research is reinforcing why. During the past 16 years, the percentage of shoppers who would consider an offlease CPO unit rose from 88.9 percent to 98.2 percent. In the September edition of the firm’s Retail Automotive Summary, CNW indicated none of the respondents in its data set said they would not consider an offlease CPO unit. Autodata Corp. reported monthly CPO sales surpassed 200,000 units for the first time – August’s total came in at 200,332 CPO units, up 25 percent from the previous year and 9.6 percent more than the prior month. While the appeal and sales of CPOs are at all-time highs, a much different scenario in INDEPENDENT OH_1113.indd 10

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regard to shopper consideration is unfolding for off-rental and repo units. CNW discovered the turnoff of repossessed vehicles is a trend that’s developed significantly since 1997. CNW president Art Spinella said it was “hard to believe” that back in 1997, 70 percent of used vehicle shoppers would consider buying a repossessed vehicle even though “a majority had been abused.” Fast forward 16 years and CNW’s data shows only 31.8 percent of shoppers would consider buying a repo unit. Even more telling, according to Spinella, 55 percent of shoppers would never think about buying a repo. Back in 1997, that level was just 8 percent. Off-rental units aren’t high on used vehicle shoppers’ lists, either. CNW indicated a consistent level both in 1997 and

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this year when it comes to those models. In 1997, 64.6 percent of shoppers said they were unlikely to consider an off-rental unit and 24.7 percent said they would definitely not consider it. This year, those numbers were 61.4 percent and 29.3 percent. “First and foremost, consumers are becoming increasingly more selective in what they will buy used,” Spinella said. “They want a vehicle meeting exacting specifications from color to options to mileage. “In 1997 and before, a less finicky shopper might accept a blue model instead of the desired red one or abandon the desire for power seats. Not any longer. Even those looking at 10-year-old or older vehicles are quick to reject an offering that doesn’t meet an increasingly strict criteria.”

NIADA Dealer 20 Groups are about dealers learning from each other. But what’s more important is what they’re learning from each other. How to create and manage a better, more efficient dealership. How to save and make money. How to be more profitable. “I want to see how much better or worse someone else is doing than I am,” explained Craig Durrett of Houston’s Durrett Motor Company. “You look at their numbers and now you ask the questions. Why are theirs so much better? … What are they doing? And they can give you the answers.” The next 20 Group meeting, moderated by NIADA director of dealer development Joe Lescota, is scheduled for Dec. 9-10 in Dallas. For information on NIADA Dealer 20 Groups and how to join, contact Georgia Brown at 800-682-3837 or georgia@niada.com. w w w. o h i a d a . o r g 10/19/13 1:12 PM


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WASHINGTON

UPDATE

NIADA Government Report u

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

On Sept. 12, NIADA executive vice president Steve Jordan and regulatory counsel Shaun Petersen traveled to Washington and, along with D.C.-based lobbyist Sante Esposito of Federal Advocates, met with federal regulators and legislators to discuss issues affecting the used vehicle industry. This month, the Washington Update provides a report on some of those discussions.

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LEGISLATIVE REPORT Legislators The NIADA contingent met with the staff of Rep. Mike Kelly, a Republican from Pennsylvania’s Third District and the congressman representing NIADA treasurer Andy Gabler. Kelly is also an auto dealer – he owns Mike Kelly Automotive, a group of new car stores in Butler, Pa. Kelly is a member of the Congressional Auto Caucus, a group of House members with an interest in the automotive industry, and is scheduled to speak at NIADA’s National Leadership Conference this month. NIADA provided a history and explanation of its mission, particularly as it relates to its role as advocate for the independent dealer in D.C. NIADA also met with Josh Finestone, legislative assistant to Sen. Dean Heller (R-Nev.). Heller is the ranking member of the Subcommittee on Consumer Protection, Product Safety and Insurance, which has jurisdiction over S. 921, the bill that would prohibit the sale or lease of rental vehicles subject to a recall without the defect being cured. After receiving NIADA’s opposition letter to the bill, Heller’s office contacted NIADA and requested a meeting to become more familiar with the association. The meeting focused almost exclusively on the rental recall bill. It is NIADA’s belief that the bill will generate little movement in the Senate and will likely have even less traction in the Republicancontrolled House. INDEPENDENT

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REGULATORY REPORT Consumer Financial Protection Bureau Jordan and Petersen met with CFPB personnel to introduce themselves to Dan Smith, head of the CFPB’s new Office of Financial Institutions and Business Liaison. That office was created this year to connect the bureau with trade associations, financial institutions and businesses to enhance collaboration and communication. Eric Reusch of the CFPB’s Installment and Liquidity Lending Markets Division and bureau attorney Craig Crowie also attended. Among the topics discussed was the bureau’s guidance regarding indirect auto lending. The CFPB staffers said unequivocally it was not their intent to regulate dealers by proxy, nor was it their intent to require finance companies to pay dealers a flat fee, saying the flat fee comment was intended to be merely a passing mention. We noted our concern that the flat fee was even mentioned in the bulletin in light of a statement on the CFPB’s website directing consumers to ask what the buy rate is and to offer to pay the buy rate plus a flat fee. We also asked if the bureau has any benchmark for the industry as to what would be considered a disparate impact across a financier’s portfolio. The CFPB confirmed it does not have a specific benchmark and will consider it on a caseby-case basis, examining the facts and circumstances unique to a particular lender. We expressed concern that that does not provide regulatory certainty. Perhaps the CFPB’s biggest point of emphasis was its desire to have NIADA preach to its members the importance of having a compliance management system in place. The CFPB looks more favorably on businesses that have invested in compliance, a key element of the bulletin on responsible business conduct the bureau issued this summer. NOVEMBER/DECEMBER 2013

The meeting ended with NIADA re-emphasizing its desire to partner with the CFPB on matters the association can assist with, including an offer to provide the CFPB data about the industry, particularly the Buy Here-Pay Here segment. Crowie and attorney Gerry Sachs will be the CFPB’s speakers at the National Leadership Conference.

In addition, we discussed the FTC’s concerns regarding spot delivery in cases they believe it turns into “yoyo financing.” The FTC did not provide any specific information or specific complaints, speaking instead on a theoretical level. Asked if the FTC intends to introduce formal regulation on the matter, the commission delegation declined to discuss its intentions. u

Federal Trade Commission NIADA met with James Reilly Dolan, acting associate director of the FTC’s Division of Financial of Practices, and two staff attorneys, in order to get acquainted with the new appointee. Dolan has confirmed he will speak at the NIADA National Leadership Conference.

After going over the history and mission of the association, we had a general discussion regarding some issues of concern to the FTC. The staff attorneys emphasized their recent settlement with two dealers over advertising issues and expressed concern that dealers are making offers and either not disclosing all of the terms and conditions of the offer or burying them in a manner that is not clear and conspicuous. In addition, we discussed the FTC’s concerns regarding spot delivery in cases they believe it turns into “yo-yo financing.” The FTC did not provide any specific information or specific complaints, speaking instead on a theoretical level. Asked if the FTC intends to introduce formal regulation on the matter, the commission delegation declined to discuss its intentions. Also discussed were issues related to GPS/ starter-interrupt devices. NIADA provided the FTC with some information on how we understand the technology to be used and our position that the use of such devices should be clearly disclosed to the consumer. Again, the FTC declined to discuss what, if any, future requirements could be placed on dealers’ use of such devices. Just as the CFPB, the FTC also asked us to emphasize the need for dealers to have a viable compliance management system, including the tracking of consumer complaints. The FTC said the decision to impose a fine or the amount of the fine in compliance violations will be based in part on the dealer’s compliance management system. As with the CFPB meeting, we ended by reiterating our desire to partner with the FTC on matters where we could, including updates to the guide on complying with the Used Car Rule, once the final rule is released. w w w. o h i a d a . o r g 10/19/13 1:12 PM


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PRACTICES

Round the Clock Sales Opportunities u

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

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

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We live in a world of consumers who have become accustomed to shopping 24/7. Retailers that aren’t operating accordingly are not maximizing their potential. Dealer principals and general managers may think longer operating hours are the solution to better meeting changing consumer demands, but it is not realistic to staff a dealership around the clock. Even simply introducing longer hours may not be cost-effective due to overhead and additional operating costs. In an effort to reach more customers, many dealers market their inventory in just about every medium available, including print, web, radio and TV. The reality is once the customer knows your dealership is out there and is in the market to make a purchase, he/she is likely going straight to your web page. In fact, every day more and more consumers making major purchases start the process online. This underscores the importance of not only meeting your customers’ expectations for content, but also understanding how your website can actually make it easier to do business. Your basic web approach likely solves for content that is “sticky” and provides as much information as possible to help the customer move forward with a purchase from your dealership. Basic questions your online content strategy should address include: u Are you providing thorough information about each vehicle featured, including a full description, damage history, upgrades and mileage? u Are you providing pictures of the vehicle from a variety of angles? u Are you providing links to external sites where customers can purchase a copy of the vehicle history report? Many of these website features may seem like irrelevant added expenses but they have already become the standard expectation of most consumers. Anticipating what information the customer will look for and providing as much of that information as possible gives you a better chance of keeping the customer on your website. NOVEMBER/DECEMBER 2013

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

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

BY CHET HEUGHAN

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

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SAVE THE DATE Saturday, December 14th, 2013 CALL NOW TO REGISTER 614-863-5800

OIADA’S ANNUAL AWARDS BANQUET AND CASINO NIGHT

  18

Cocktail Hour

Semi-Formal Plated Dinner Lifetime Achievement Award 

Presidents Award

Quality Dealer For 2014 Announced

Casino Night & Entertainment 

Price Per Person is $60

Discounted Hotel Rooms Available Annual Awards Banquet Hosted at NorthPointe Hotel & Conference Center 100 Green Meadows Drive Lewis Center, OH 43035

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M ARKET WATCH

Are You Getting Your Money’s Worth Online? u

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F I V E Q U I C K A N D E A S Y WAY S T O M E A S U R E T H E P E R F O R M A N C E O F YO U R W E B V E N D O R S

You probably know that 50 percent of new car buyers and 59 percent of preowned buyers find dealerships online. Your online vendors are likely bringing you reports and presentations justifying all the money they are charging to attract those buyers online. Those reports show an alphabet soup of metrics (SRPs, VDPs, etc.), but they don’t tell you if you are really getting your money’s worth. I am always impressed when I visit a dealership and see the “sales board” showing how many sales each salesperson has each day of the month, often compared against a goal or prior period. It is equally remarkable that dealers don’t do that as regularly or publicly for their web traffic, even though it’s now driving the majority of their business. If you want to start managing your traffic and getting the most out of your spend, there are five quick and easy ways

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to measure your web vendors just like salespeople. u Rank your spend: Rank your monthly spend for each digital marketing channel. While it sounds obvious, you’d be amazed how many dealer principals and general managers lose track of how much they are spending with each vendor and how much it can creep up if you aren’t on top of it every month. That ranking is important because it provides the lens through which you can look at everything else. u Rank your consumer impressions: The number of times a consumer actually clicks on one of your cars to look at it, referred to as a “consumer impression” in other industries, is measured through VDPs – vehicle detail pages – on most automotive sites. Since shoppers are unlikely to visit your dealership to see a car they didn’t bother to click on online, this is a simple

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yet powerful way to compare how many eyeballs a site is producing for your dealership. Watch the trend from monthto-month to learn a lot about how much sites like AutoTrader.com and Cars.com are producing versus your dealer website. u Rank the cost of each consumer impression: If you really want to understand what it’s costing you to get those eyeballs on each site and see where you are getting your money’s worth, divide the number of consumer impressions by your spend and you’ll be able to see where you’re getting the biggest bang for your advertising buck. Once you know what each consumer impression costs you can see if the sites you pay the most justify the extra spend. It will also reveal if a site is producing consumer impressions at a bargain and might be worth a bigger spend. u

C O N T I N U E D O N N E X T PA G E

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INDUSTRY NEWS

Dealer.com Launches New Tool

Since shoppers are unlikely to visit your dealership to see a car they didn’t bother to click on online, this is a simple yet powerful way to compare how many eyeballs a site is producing for your dealership. u

Dealer.com recently launched a new tool that allows dealers to identify vendors and technologies to help them run their showrooms. The Certified Provider Program, a plug-and-play system, features technology and service providers that have proven ROI for automotive dealers. “We are at the heart of digital marketing for approximately 12,000 dealers across the U.S., so we have a strong sense of what technologies and services dealers are using and how,” Dealer.com chief operating officer Mike Lane said. Companies within the Dealer.com Certified Provider Program are fully integrated into the company’s products, allowing customers to access analytics from their providers in one location via Dealer.com’s ControlCenter and review results in the context of their overall marketing performance. All of the companies under the Certified Provider Program are accessible through the UpgradeCenter in Dealer.com’s ControlCenter. The featured products include HookLogic’s Web2Show and Lead2Show, Microsoft Office 365 email services from MS Cloud Services, and Chat Connect from Contact At Once.

u Rank your direct leads: One of the real challenges with measuring your online vendors is they will tell you they can’t be measured because most of your in-store customers don’t email or call before showing up. One way to overcome that problem is to compare the number of direct leads (phone calls and emails) you get from each vendor. While this doesn’t give you the “invisible leads” vendors talk about, it does let you compare vendors on an “apples to apples” basis so you can see which vendors are serving up opportunities to your internet department or BDC. Rank the cost of each direct lead: We also encourage dealers to divide their direct leads by the spend allocated toward each vendor to compare the cost per direct lead for each vendor. This should give you a good feel for how each vendor compares to the others on direct leads to help you bring “Pay for Performance” to your leads. The Big 5 metrics may seem simple but that’s because these are the “drivers” of your web business. When tracking critical metrics, the key is in how you use them to manage your business and, in this case, how you manage your vendors. If you are serious about “Pay for Performance” you need to know these metrics and use them to make spend decisions every month. The real power comes in when you start benchmarking the Big 5 so you can see how you stack up against other dealers. Our MAX Digital Performance Analysis introduces benchmarking to the equation and gives dealers the insights to manage their vendors and spend so that they can take performance to the next level.

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BY PAT RYAN PAT RYAN JR. IS THE FOUNDER OF FIRSTLOOK AND MAX SYSTEMS. HIS BLOG CAN BE FOUND AT WWW.GETRELEVANTORDIE.COM. THIS ARTICLE IS REPRINTED WITH PERMISSION BY AUTO REMARKETING.

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OIADA Benefits

22 INDUSTRY NEWS

Honda Announces Recall

American Honda and Honda Canada announced recalls of more than 400,000 minivans and crossovers in the United States and Canada. Most of the affected units are in the U.S. The automaker indicated it will recall approximately 318,000 Honda Odyssey vehicles from the 2003 and 2004 model years and some 56,000 2003 Acura MDX vehicles. In Canada, Honda plans to recall about 23,300 Honda Odyssey vehicles from the 2003 and 2004 model years and 4,800 2003 Acura MDX vehicles. Honda said the recalls are necessary to address potential malfunctions of the supplemental restraint airbag system due to electrical interference. To prevent malfunction, an electrical noise filter will be installed adjacent to the SRS control unit, free of charge. “Honda has received a small but increasing number of complaints in recent months of inadvertent airbag deployment in these vehicles, which are equipped with SRS control units that contain computer chips similar to those used in airbag system control units installed in other manufacturers’ vehicles that were recalled in the last year,” the company said in a statement. Honda said no crashes related to the issue have been reported. Vehicle owners can visit www.recalls.honda.com or www.recalls.acura.com or call (800) 999-1009 for Honda or (800) 382-2238 for Acura to see if their vehicle is affected. INDEPENDENT OH_1113.indd 22

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Manheim Continues Investment to Improve Customer Experience u

C O M PAN Y E X PAN D S LOCATI O N S & D I G ITAL PRE S E N C E

To reinforce its commitment to making it easier for customers to conduct business while preparing for future growth, Manheim invested more than $26 million over the past year to expand and upgrade its facilities and services in North America. The investment includes the addition of sale lanes, new and upgraded inspection, detail and body shop facilities, alternative energy projects and the addition of digital lanes. Digital lanes, in place at Manheim Ohio and Manheim New Mexico, replicate the buying experience online without the need to run vehicles through physical lanes. “Over the past year, we’ve made it a priority to take a closer look at our operations to ensure they deliver on the needs of our customers today and in the future,” said Manheim EVP & COO, Janet Barnard. “As our industry continues to change, we will invest in areas that improve the auction experience for our

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customers, as well as drive future business growth.” In addition to investing in major auction projects and facilities since September 2012, Manheim plans to expand its digital lanes from two to 12 auction locations by the end of 2014. Below are some of Manheim’s largest investment projects: • New Manheim California service center: A new 27.7-acre service facility in Riverside, Calif., adjacent to Manheim Riverside. The facility offers state-of-theart certification and inspection services to Audi Financial Services and Volkswagen Credit, Inc., as well as vehicle receiving support for the Southern California market. • Lane additions and expansion at Manheim Baltimore-Washington and Manheim Ohio: Expansion at Manheim Baltimore-Washington will add two sale lanes and develop 10 acres for additional

vehicle storage. The location will have 12 physical lanes upon project completion. At Manheim Ohio, a two-lane expansion brings total physical lane capacity to 12. In addition, the location expanded its vehicle entry capacity from two to six lanes, allowing greater vehicle processing efficiency. • Body shop expansion at Manheim Orlando and Manheim Palm Beach: A 9,600-squarefoot addition was completed at Manheim Orlando’s body shop, giving the location four new paint priming booths. By doubling Manheim Palm Beach’s body shop, workload capacity increased while supporting local conservation efforts. The body shop recycles materials and uses two-thirds less electricity through more energy-efficient lighting. • Expansion projects at Manheim Palm Beach and Manheim Pittsburgh: Manheim Palm Beach will add one detail lane, bringing its total to three,

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while nearly doubling existing capacity in two lanes. Earlier this year, a 9,600-square-foot mechanic shop was completed at Manheim Pittsburgh. • Solar project at Manheim New England: Completed earlier this year, the 3.5 megawatt ground and roof-mounted solar project at Manheim New England consists of more than 10,000 solar panels. This installation produces enough energy to power 400 homes annually and supplies 29 percent of the auction’s energy requirements. • Footprint expansion in Canada: Expanded auction footprint in Canada through a partnership with Source Auto Auction in Edmonton, Alberta.

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Big Changes Coming for Workers’ Comp

DEALERSHIP OPERATIONS

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W O R K E R S ’ C O M P P R E M I U M P A Y M E N T S T O C H A N G E I N E A R LY 2 0 1 5

The switch to a prospective payment system: As part of the third element of Gov. John Kasich’s Billion Back Program, legislation is being finalized to affect a change in the BWC’s existing premium billing system. The BWC intends to begin billing employers for coverage in advance (prospectively) rather than the current practice of billing in arrears (retrospectively). How will this affect dealers if approved by the BWC board? The BWC intends to begin changing the way employers pay premiums beginning in January 2015. At that time, per the BWC’s most recent communications: • Employers will owe premiums for the entire rating year beginning July 2014 (instead of paying in February and August as is done currently). • The BWC will include a significant credit (either half or two-thirds of the annual premium) to be applied to the annual payment due by the end of February.

• In July 2015, the BWC will ask employers to provide actual payroll from July 2014 to June 2015 and additional payments or credits will result. BWC currently plans to accept payments only online or by phone – no checks. • Premiums for the rating year beginning July 2015 will be billed in June 2015, with an option to pay in multiple installments from two to eight depending on premium size. These changes could justify additional consideration of the many alternative rating programs available, especially those in which employers accept claims liability. In addition to these changes, the BWC plans to overhaul the manner in which premium rates are calculated, including adjustments in the timeframes for evaluating claims cost and enrolling in group rating and other programs. This switch from retrospective to prospective premium payments will likely cause

confusion among the Ohio employer community. As details become clearer, Benefits 1 Group will host online informational sessions for dealers to help clarify the process as the BWC releases further news on the final decision. Stay tuned at www. benefits1group.com/events. One option to ensure that you receive all updates about the BWC’s changes, as well as review all your workers’ comp options, is to request evaluation for the OIADA’s group rating program. To begin that process, please visit ac3.benefits1group. com or fill out the temporary authorization form included in this publication. Are you receiving the best premium rates for 2014? While we’re on the topic of premiums (one that seems more complex than the Bugatti Veyron W-16 engine), there are ways to make that payment a little less painful. Group rating season is underway and dealers should

seek out the best alternative rating programs available through the Ohio BWC. This can be done with a qualified third party administrator. The role of the TPA is to identify the highest discount available for your business but also provide insight on additional savings programs that can further impact your comp expenses. The BWC now allows dealers receiving the group rating discount to combine savings from the Destination Excellence program discount and rebates (up to an additional 20 percent savings). To find out how much you can save, please visit ac3. benefits1group.com or fill out the temporary authorization form included in this publication.

BY MICHAEL BROWN MICHAEL BROWN, ARM IS A SEASONED ACCOUNT EXECUTIVE REPRESENTING BENEFITS 1 GROUP, A MEMBER OF THE ADVOCARE GROUP FAMILY OF COMPANIES. BENEFITS 1 GROUP IS THE PREFERRED THIRD PARTY ADMINISTRATOR FOR THE OHIO INDEPENDENT AUTOMOBILE DEALERS ASSOCIATION (OIADA). MICHAEL CAN BE REACHED AT MIKEB@ BENEFITS1GROUP.COM OR AT (877) 765-4200 EXT. 270.

24 M ARKET WATCH

How New Car Sales Jump Affects Used Cars u

I N D U S T R Y A N A LY S T S D I S C U S S T H E I M P A C T O F T H E I N C R E A S E D S A L E S V O L U M E F O R N E W C A R S O N T H E U S E D V E H I C L E M A R K E T

Autodata Corp. determined the seasonally adjusted annual rate for new vehicle sales in August came in at 16.09 million units, marking the first time it has reached that level since October 2007. Since General Motors senior vice president for U.S. sales and marketing and global brand chief for Chevrolet Alan Batey recently insisted the high SAAR level is “here to stay,” Auto Remarketing questioned industry analysts to find out what kind of impact that sales volume might have on the used vehicle market. Karl Brauer, senior analyst for Kelley Blue Book, discussed the immediate implications of that trend. “If new car sales stay above 16 million it will require many current drivers to sell or trade in their existing vehicle,” Brauer said. “That will result in a constant flow of used cars entering the market, but at a relatively even rate INDEPENDENT OH_1113.indd 24

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versus a spike. “Given the age of the current U.S. fleet, which is more than 11 years old, many used car shoppers will be looking to step into a newer car, but not necessarily a new car. As such, there will be plenty of continued demand for used cars even as new car sales rise. Used car values may drop gradually in the coming years, but they should remain relatively stable overall.” Batey said during a conference call he first thought the new vehicle SAAR would climb above 16 million sometime during the fourth quarter. “It’s a little earlier, but not a big surprise, given what’s going on in the economy, the age of fleet, and, again, keep in mind job stability,” Batey said according to a transcript of GM’s call posted by SeekingAlpha.com. “That’s a key element in the purchase decision: Will I have NOVEMBER/DECEMBER 2013

a job tomorrow? People are becoming much more secure in their jobs.” More confidence displayed by potential buyers in keeping their jobs likely makes them more apt to sign a finance contract. Experian Automotive reported 84.5 percent of buyers purchased their vehicles with loans or leases in the second quarter. It’s that availability of financing that prompted Edmunds.com senior analyst Jessica Caldwell to question whether potential buyers are opting for a new model even if a used vehicle initially was on their radar. “On average, new car buyers in August paid one of the lowest new car interest rates in history: 3.9 percent. This is truly a purchase driver,” Caldwell said. “Even though consumers are generally paying higher prices for cars due to increased content (and, in some cases, tight supply), the

There are so many new car interest subsidies that I think when you do the math for someone financing a vehicle – say, zero percent for five years – it makes new cars really favorable. So that’s going to have an effect on used cars.” u

low interest rate is generating monthly payments on par or less than what they have paid in the past. “There are so many new car interest subsidies that I think when you do the math for someone financing a vehicle – say, zero percent for five years – it makes new cars really favorable. So that’s going to have an effect on used cars.” w w w. o h i a d a . o r g 10/19/13 1:12 PM


Please Return to: Ohio Independent Automobile Dealers Association C/O Benefits 1 Group 25001 Emery Road, Suite 340 Cleveland, OH 44128

Benefits 1 Group, LLC 001825-80

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COMPLIANCE

OVERDRIVE

Dealer Lending Practices Remain in the Spotlight. u

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IT’S TIME TO TAKE ACTION

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

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agencies stand on enforcement of the ECOA. The suit involved an auto dealer and one of its lenders. The DOJ alleged that the dealer violated the ECOA by charging higher interest rate markups on car loans to a certain class of customers (race/national origin) than to others over a three year period. The case was settled and the dealer in question went out of business before the settlement was reached. But, in the consent decree the DOJ indicated if the dealer or its main shareholder decides to go back into business within a defined time period, it will be required to “implement clear guidelines for setting dealer markup and pricing, in compliance with ECOA, and establish appropriate fair lending training for its employees and officers.” Note that the enforcement path went through the auto dealer’s lender. The lender’s regulator, the Federal Reserve Board, noted issues as part of its examination of the lender’s indirect lending program. The FRB then referred the case to the DOJ. In 2009, the DOJ announced that the lender resolved allegations against it through a partial consent decree under which it is “prohibited from discriminating on the basis of race or national origin in any aspect of its automobile lending.” Now, four years later, the DOJ reached a settlement with the dealer involved. Recent industry publications have also reported that the CFPB and DOJ are probing the lending operations of some of the nation’s largest auto finance companies for possible lending discrimination under the ECOA. If true, it confirms regulator focus on ECOA and on auto lenders. Because any discrimination found in a lender portfolio will likely have taken place at the auto dealership, it is certain that lenders and other regulators will soon be focusing on dealer ECOA compliance. The CFPB’s March Bulletin outlines concerns over dealer discretion in setting consumer interest rates by auto lenders. The principal concern is the increased risk of dealers either NOVEMBER/DECEMBER 2013

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

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

BY CHIP ZYVOLOSKI

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

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OH 1113  

Ohio Nov 2013

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