DEALER T E N N E S S E E
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The Next Generation of Successful Selling inside u
• CREATING VALUE • ROUND THE CLOCK • COMPLIANCE OVERDRIVE
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Wanted: Dealerships that Make a Difference
MANHEIM NIADA NATIONAL COMMUNITY SERVICE AWARD
Manheim & NIADA proudly announce the fourth annual National Community Service award. The winner, which will be recognized at the 2014 NIADA Conference, will receive $5,000 for the dealer’s local charity of choice. For more information or to nominate a dealer, contact Georgia Brown at firstname.lastname@example.org or (800) 682-3837.
ADESA...........................................Inside Back Cover Ally..................................................................................7. AutoManager...........................................................11 DealerMatch...............................................................5 Hamilton State Bank.............................................17 Manheim Nashville...................Inside Front Cover Manheim Pennsylvania...........................................9. NextGear Capital.....................................................15. Protective..................................................................13. United Acceptance.................................................16. VAuto......................................................... Back Cover
TNIADA Board Members J.T. Livezey Chairman of the Board Mid-State Auto, Inc. email@example.com
Alan McFadden President Al’s Auto Mart firstname.lastname@example.org Scott Wright Treasurer Bargain Lot Motors email@example.com Phyllis Sartin Secretary Creative Marketing Creativemktg1@yahoo.com
Stephanie Baker Auction Member Representative DAA Murfreesboro firstname.lastname@example.org Marcus Davis Member Marcka Auto Auction email@example.com
David Stancil Member D & B Auto Sales firstname.lastname@example.org
NIADA Headquarters National Independent Automobile Dealers Association
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Troy Graff (800) 682-3837 or email@example.com. The Tennessee Dealer Connect is published bi-monthly by the National Independent Automobile Dealers Association Services Corporation, 2521 Brown Blvd., Arlington, TX 76006-5203; phone 817-640-3838. Periodicals postage paid at Dallas, TX and at additional offices. POSTMASTER: Send address changes to NIADA State Publications, 2521 Brown Blvd., Arlington, TX 76006-5203. The statements and opinions expressed herein are those of the individual authors and do not necessarily represent the views of TNIADA or the National Independent Automobile Dealers Association. Likewise, the appearance of advertisers, or their identification as members of NIADA, does not constitute an endorsement of the products or services featured. Copyright © 2013 by NIADA Services, Inc. All rights reserved.
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Selling Your Car? Advertise Its Fuel Economy!
Fueleconomy.gov Offers MPG Label for Used Cars
Fueleconomy.gov, the official U.S. government source for fuel economy information, has added a new tool to help you advertise your vehicle’s fuel economy to potential buyers. The free tool (http://www.fueleconomy.gov/feg/UsedCarLabel.jsp) helps you create both an electronic fuel economy graphic that you can download for your online advertisement and a paper fuel economy label that you can print and affix to your vehicle’s window. The example shown is for a 2000 Honda Insight, one of the all-time fuel economy leaders among gasoline vehicles. The database u F the U Etool LE C O Nmost O Mcars Y. and G Olight V O F F sold E RinS the TO O L States T O since C R E1984. AT E M P G supporting includes trucks United
LABELS FOR USED CARS
Using a database that includes most cars and light trucks sold in the U.S. since 1984, the tool creates a graphic and paper label showing the EPA fuel economy estimate (city, highway and combined) and CO2 emissions of the selected vehicle when it was new. As indicated on the graphic and label, actual fuel economy will vary for many reasons, including driving conditions and how the car was driven, maintained or modified. Still, because most vehicles’ fuel Both the electronic the paper label have show the EPA fuel economy estimate (city, Newgraphic carsandfor sale window stickers economy changes very little during highway and combined) and CO emissions for the vehicle when new. As indicated on the graphic and label, actualtheir fuel economy vary for many reasons, including showing fuelwilleconomy rating todriving conditions a typical 15-year life – provided it is and how the car was driven, maintained, or modified. Because a vehicle’s fuel economy changes potential so why used very little over the coursebuyers, of a typical 15-year life, whenshouldn’t properly maintained, the original EPA properly maintained – the original EPA fuel economy estimate remains a good indicator of a used vehicle’s average gas cars? mileage. However, aftermarket modifications to the vehicle can affect fuel economy, especially fuel economy estimate remains a good those that change vehicle’scan, weight, aerodynamics, or wheel/tire size.new Nowthethey thanks to a free indicator of a used vehicle’s average gas tool on fueleconomy.gov, the official U.S. mileage. government source for fuel economy The graphic and label include a photo information. The tool, available at www. of the vehicle and information, such fueleconomy.gov/feg/UsedCarLabel.jsp, as engine size, transmission type and allows dealers to create an electronic fuel fuel type, to help identify it. There’s economy graphic that can be downloaded Walso a scannable QR code with a free for use in online advertisements and a downloadable app that links directly to the paper fuel economy label that can be vehicle’s information on the fueleconomy. printed and affixed to the vehicle’s window. gov mobile site. 2
New App Puts Dealer Inventory in Front of Tablet Shoppers u
PRODUCTS & SERVICES
Creating Value Routes to Big Improvements Washington Report Dealer Practices Compliance Overdrive
A UTOTRADER.COM OFFERS DEALERS AN OPPORTUNIT Y TO POSITION THEIR I NVE NT O RI E S I N F RO NT O F T H E G ROWI N G N U M B E R O F TAB LE T U S E R S
AutoTrader research shows a large increase in consumers’ use of mobile devices as part of the car shopping process. A new app offers dealers an opportunity to position their inventories in front of the growing number of people who use their tablets to shop for vehicles. The AutoTrader.com iPad app also offers car shoppers a way to find their perfect vehicle quickly, even if they’re undecided on brand. According to company officials, the app addresses a demonstrated consumer need: 67 percent of AutoTrader.com visitors, its research shows, haven’t identified a specific model and 58 percent haven’t identified a specific brand of car they’re interested in buying. “We designed this app around the concept of discovery. We wanted to make it as easy as possible for car shoppers to find and learn about vehicles they have not even considered,” said Jose Puente, AutoTrader’s director of mobile products and strategy. “With this new experience, you can start out with a very vague idea of what you want and the app does the work for you.” Users can begin their search based on
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Selling Your Car? Advertise Its Fuel Economy!
price, style or location, in addition to make and model, then narrow results with dozens of additional filters such as color, features and options, fuel economy or mileage. Once a shopper is ready to visit the dealership, the iPad app pinpoints a dealer’s location and provides contact information and directions via integrated mapping features. Shoppers can also communicate directly with dealers via email from the app.
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CONNECT 11/15/13 3:20 PM
WHAT’S NEW ON NIADA.TV
New this month on
NiADA.tv NIADA TELEVISION
Rent a Wreck’s “Rev up your Revenue” Special Program Series Tune into NIADA’TV’s latest Special Program Series “Rev Up Your Revenue” and learn how to make a profit center out of used car rental and leasing.
Beggs on the Used Car Market (5th Year Anniversary) Tune in weekly throughout December for Ricky Begg’s weekly Used Car Market Report, Black Book is celebrating its 5th year anniversary of its weekly “Used Car Market Report” video series, hosted every week by Black Book’s editorial director and senior vice president Ricky Beggs. These reports showcase valuation changes for ten car segments and fourteen truck segments, as well as additional insight into clean and average condition vehicles and national fuel prices. 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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The Next Generation of Successful Selling u
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
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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Creating Value Presenting Intangible Products u
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 TENNESSEE
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?
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 8
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C O N T I N U E D F R O M PA G E 6
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.
Hubbell Lighting Launches create change Program for Dealerships
R E DU C I N G E N E RGY C O S T S WITH LE D LI G HTI N G I S EQ U IVALE NT TO S E LLI N G M O RE CAR S – IT MEANS MORE ON THE BOTTOM LINE
Fewer businesses have a greater appreciation for lighting than automotive dealerships – or at least those who have to pay their energy bills. According to Energy Star, auto dealerships use, on average, more energy per square foot than a typical office building. For independent dealers, especially those operating on a smaller scale, running an efficient operation is the key to profitability. While some expenses are unavoidable, energy consumption is one area where smaller dealerships can shrink costs and increase profits. According to the National Automobile Dealers Association, lighting can represent up to 45 percent of a car dealership’s energy costs. Reducing energy costs is equivalent to selling TENNESSEE
more cars – it means more on the bottom line. Replacing just one 1,000watt site lighting fixture with an efficient LED can save $326 dollars per year, based on an electric rate of 11 cents per kilowatt-hour with 12 hours per night of operation and a $38 annual maintenance cost. But the benefits of a lighting upgrade don’t stop at energy reduction. By upgrading lights from legacy incandescent, fluorescent or metal halide to LED, fixtures need to be re-lamped less often. That reduces maintenance costs and minimizes inconvenience. Some LEDs can last up to three times longer than metal halide or fluorescent sources and up to 60 times longer than incandescent sources. A longer
life means less maintenance and more money in your pocket. LED luminaires can be specified for interior and exterior spaces in a number of correlated color temperatures with higher color rendering index values, which can enhance the visual appeal of merchandising on the showroom and sales lot. The specialized optical systems used by LED luminaires have the ability to increase light levels on cars, but reduce light pollution (sky glow) and glare. And LED luminaires are control-friendly, which allows for increased savings through dimming light levels where and when 100 percent output is not required. According to CNW Research, the 37,892 independent dealerships in the U.S. averaged
a net profit (before taxes) of a mere 2.16 percent in 2012. Dealership survival depends on finding ways to decrease costs in an increasingly competitive market. LED lighting is not only a smart solution for increasing savings, but a valuable investment for improving the experience at your dealership and highlighting the quality of your inventory.
BY CHRIS BAILEY
CHRIS BAILEY IS DIRECTOR OF HUBBELL LIGHTING SOLUTIONS CENTER.
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F&I M AT TERS
Routes to Big Improvements in Collections, Recoveries u
E X P E R T S O F F E R P R AC T I C A L A DV I C E
When talking among themselves, dealers and finance company executives who specialize in working with customers with checkered credit pasts often say they’re not in the car business – they’re in the collections business. “If you have a weak leg in collections, you’re dead. I don’t care if your ACV is $1,000,” said Michelle Groover, chief executive officer of Members Choice Auto, which helps credit union members in Georgia find a vehicle that fits their budget while assisting a half-dozen institutions with collecting on those contracts after the sale. “The reality is some people are going to have bad credit for the rest of their life because they don’t care.” While those customers might not be concerned about the contract, dealers and finance companies sure are, especially now as contract terms are lengthening, down payments are shrinking and the wholesale cost of inventory isn’t softening much. As if those factors don’t already make collections vitally important, regulators are intensifying their look at collection practices, making the vetting of thirdparty service providers all the more vital. “If you think about it in collections, it includes outside third-party collectors, collection attorneys, repossessors and forwarding companies – anybody who is involved in the process on the collection side in communicating with the customer,” said Mark Edelman of the Cleveland office of McGlinchey Stafford, a law firm that services the auto industry from offices in six states. “There is a much greater emphasis on entities that are subject to the supervision or oversight of the Consumer Financial Protection Bureau and by extension its analogous agency, the Federal Trade Commission, to be very mindful of the vendors they’re doing business with.” u Due Diligence of Service Providers Edelman said heightened investigation of third-party vendors started about 12 years ago. That’s when the Office of the Comptroller of the Currency issued guidance to commercial banks about third-party vendors and third-party outsourced providers and the level of diligence. “I think what the CFPB did was kind of leverage off of that,” Edelman said. “It was always out there, but obviously the OCC didn’t have any supervisory or precedential guidance over any nonfederally chartered depository institution. “If you were an independent finance TENNESSEE
company, it’s certainly something that wasn’t on your radar.” Now that collections compliance is very much a point dealers and lenders must consider when evaluating their providers, Edelman shared a recommendation he’s been giving to clients for years. “The best standard to take is looking at it from the perspective of if you were buying the company you were about to do business with,” Edelman said. “What level of diligence would you do on that company if it wasn’t just going to be a business partner that you’re outsourcing, but actually a company you were going to acquire, and in doing so acquire all of their warts, faults or anything that was hanging out there? You would obviously have a high level of scrutiny if you were looking to buy them. “To a certain extent, this is obviously unprecedented because it’s creating a greater emphasis on knowing the people you’re doing business with beyond just, are they performing as you’ve contracted with them? It’s certainly a different perspective.” u Tools to Boost Collections Groover pointed to two elements that have helped her company’s collections and losses improve. First, starter-interrupt/GPS devices are installed on all vehicles that have a contract facilitated through Members Choice Auto. Groover said she received discounted repossession rates because of the technology and said customers respond much quicker when a 45-second alarm is triggered because a delinquency arises. “I tell them, ‘If you communicate with us and tell us what’s going on, we’re human beings, too, and we’re going to be helpful. If you run, you’re not going to have to worry about the payment anymore because we’re going to come pick the car up from you,’” she said. Groover said the combination of a lengthy underwriting process that includes an in-depth interview and the opportunity to have the APR reduced after a year of consecutive payments, no lapses in insurance coverage and the completion of credit education courses, along with the payment devices has resulted in the need for only about 25 repossessions since the Fresh Start Program for subprime customers started in October 2009. Since the launch, Members Choice Auto has facilitated more than 1,000 contracts for financing worth more than $12 million. DECEMBER 2013
“It’s all about communication,” Groover said. u Collection Best Practices Teresa Fransen is a consultant and trainer for Houston-based RecoveryMaxx. Fransen began as director of collections for a law firm in Grand Rapids, Mich., collecting medical, credit card, commercial and subprime accounts. After five years, Fransen transitioned from a third-party collection environment to a Buy Here-Pay Here finance company and specialized in developing a successful in-house recovery department. When talking to clients, she said the primary question remains the same. “The number one thing people always ask is, ‘How do I find this person? What’s the one button I can hit and magically their current address, phone number and job location appear?’” Fransen said. “My response is I wish it were that easy. Typically, there are a number of sites you have to hit and it may take hours to find that exact address. “It’s a timing issue, and how much you’re willing to invest in the right collectors and skip-tracers, the right systems to be able to efficiently work through your recovery portfolio.” Fransen offered a recommendation that might help any size dealer or finance company. “My No. 1 advice is to put the right systems in place to where your computer system is generating the documents for you and you’re not spending your time doing the administrative part of it,” she said. “If you want to maximize your recoveries, you’ve got to be banging on the phone. Collections is all about phones. A letter series works if you can’t get them on the phone. It’s important to develop a first step, second step, third step in a letter series. But most of it is spending as much of your time on the phones as possible. Free up all of the administrative and clerical duties to get back on the phones.”
BY NICK ZULOVICH
NICK ZULOVICH IS EDITOR OF SUBPRIME AUTO FINANCE NEWS AND CAN BE REACHED AT NZULOVICH@SUBPRIMENEWS.COM. ARTICLE REPRINTED WITH PERMISSION FROM SUBPRIME AUTO FINANCE NEWS.
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NIADA Government Report
KEEPING YOU INFORMED ON THE LATES T GOVERNMENTAL ISSUES AND ACTIVIT Y IN THE USED CAR INDUS TRY
Here’s a rundown of some of the latest governmental issues and activity affecting the used car industry from NIADA regulatory counsel Shaun Petersen and NIADA lobbyist Sante Esposito.
REGULATORY REPORT Consumer Financial Protection Bureau Internet tool: The CFPB built an Internet tool, called eRegulations, designed to help the public understand the regulations created and enforced by the bureau. The site is designed to provide official interpretations of the various rules and regulations, and to provide background information about each regulation as it appeared in the Federal Register notice. The tool has a search function to easily find particular regulations. The CFPB will be continually updating the tool based on its own findings and input from users. Suggestions on the tool’s use or improvements can be sent to CFPB_eRegs_Team@cfpb.gov. Federal Trade Commission Aaron’s settlement: The FTC recently settled claims against Aaron’s Inc., a rent-to-own chain from which consumers can rent consumer goods, including personal computers. The FTC alleged Aaron’s and its franchisees used software on rental computers that monitored and tracked customers’ activity without notice or consent from the consumer. The software allegedly captured the customer’s keystrokes, including sensitive information like logins and passwords, and took video of customers. The computers also used location tracking mechanisms without consumers’ notice or consent. As part of the settlement agreement, Aaron’s is prohibited from monitoring keystrokes, capturing screenshots and activating computers webcams to video the customers. Aaron’s is also required to provide clear and separate notice to consumers that location tracking mechanisms are used, how they are used and how information is used and must obtain the consumers’ express consent to use the tracking mechanisms. Internal Revenue Service Tax filing season to be delayed: As a result of the government shutdown, the IRS announced it will delay the start of the 2014 tax season. The start date will be announced this month. The IRS estimates a one- to twoweek delay from Jan. 21, the day the IRS originally was set to begin accepting and processing individual tax returns. The new start date will be no earlier TENNESSEE
than Jan. 28 and possibly as late as Feb. 4. Federal Communications Commission Changes to telemarketing rules: Effective Oct. 16, no telemarketing calls may be made to a consumer’s cell phone using an automated telephone dialing system (including a predictive dialer) or prerecorded message unless the consumer provided “prior express written consent.” Written consent was not previously required.
The CFPB built an Internet tool, called eRegulations, designed to help the public understand the regulations created and enforced by the bureau. u
In addition, prerecorded telemarketing messages may no longer be sent to residential numbers without the call recipient’s prior express written consent. The amendment to the Telephone Consumer Protection Act also eliminated the EBR exemption for prerecorded messages sent to residential numbers. However, the requirements for informational and other non-sales calls made to residential numbers have not changed. Consent is not required for such calls. State Law/Regulatory Updates Kentucky: A proposed rule would allow the Motor Vehicle Commission to deny an application for a license if the name or proposed trade name of the licensee is the same or so similar to the trade name of an existing licensee that the proposed name would confuse or otherwise mislead the public into believing the entities are the same or related. If no other grounds are cited for denial of the application, the applicant may reapply with a new trade name within 10 days of denial without remitting an additional application fee. Another proposed rule adds “electronic” media in the definition DECEMBER 2013
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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
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.
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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WHAT “THEY” DO u
“ TH E Y ” ARE TH E S U C C E S S F U L D E ALE R S , AN D H E RE ’S WHAT TH E Y S E E M TO DO A TAD B IT B E T TE R THAN TH E AVE R AG E J O E
I have the privilege and honor of traveling this great country of ours and working with Buy HerePay Here dealers of all shapes and sizes. But no matter where I am or what the dealer is like, I always get the same question. What do “they” do? The “they” they are asking about are the successful dealers. Now, the good thing about BHPH is there are a whole bunch of ways to do it. There is no one way that will work for everyone everywhere. The problem is there are just as many ways to do it wrong. But among the dealers who seem to do it a little bit better than everyone else, there are a few common denominators. A few things “they” seem to do a tad bit better than the average Joe. The first thing, and the most important, is people. Their overall people management makes them better, from hiring to training to pay plans to simply their employment environment.
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They hire slow and fire fast. They hire who they want rather than having to hire who they need. They continually train their entire staffs. Their pay plans promote a team mentality. And they provide a professional but fun work environment. “They” do people very well. Next are processes and procedures. They have documented processes and procedures for most, if not all, of what happens in their organization. “Documented” is the key word here. They make sure those processes and procedures are implemented and adhered to on a consistent basis. They do it by continually training on them and updating them when necessary. “They” do processes and procedures well. Education is the next thing that sets them apart. They are always looking for ways to educate themselves. They belong to local, state and national dealer associations.
They subscribe to as many trade publications as they can. They attend industry conventions and conferences. And they seek advice from industry consultants and are members of 20 Groups. “They” educate themselves well. Technology is something else they take advantage of. They not only have a DMS that can handle their needs, but they know how to use all it has to offer. They not only have a wellfunctioning website, but track and make changes when necessary. And they take full advantage of the World Wide Web, from collections to car buying to pre-employment testing. “They” are technologically savvy. Lastly, they plan. They know what their cash flow needs are. They budget for expenses. They project collections and sales. They do it not only on a monthly basis, but annually as well. And they do it based on
Most dealers I know do at least one of those things, some even two or three, but only a few do all of them. And do them well. u
what they can do, not what they necessarily want to do. “They” plan effectively. That is what “they” do. I can assure you they didn’t always do those things. But they all realized at some point what it would take to be one of “them.” Most dealers I know do at least one of those things, some even two or three, but only a few do all of them. And do them well. How close are you to being one of “them”?
BY BRENT CARMICHAEL
BRENT CARMICHAEL IS EXECUTIVE CONFERENCE MODERATOR FOR NCM ASSOCIATES INC. HE CAN BE REACHED AT BCARMICHAEL@NCM20.COM.
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Dealer Lending Practices Remain in the Spotlight u
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 TENNESSEE
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
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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