The Ontario Dealer - Volume 11 Issue 3

YOUR CONNECTION TO ONTARIO’S USED CAR INDUSTRY

THE ONTARIO UCDA

VOLUME 11, ISSUE 3

THE OFFICIAL MAGAZINE OF THE USED CAR DEALERS ASSOCIATION OF ONTARIO

> INSIDE: THE BUSINESS OF THE BUSINESS /10

PLUS DEALER PROFILE: Lafreniere Auto Sales and Service /18

STARTING AND BUILDING A SERVICE DEPARTMENT /28

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VOLUME 11, ISSUE 3

USED CAR DEALERS ASSOCIATION OF ONTARIO 230 Norseman Street, Toronto, ON M8Z 2R4 Tel: 416.231.2600 Toll Free: 1.800.268.2598 web@ucda.org

Summer 2023

FEATURED STORIES The Business Of The Business

By Ronda Payne

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ONTARIO DEALER is published by Laservision Graphics Ltd. four times a year.

Update on EVs & Their Impact on the Used Car Industry

By Angela West

130 Industry Street, Unit 36, North York, ON M6M 5G3

EDITOR Gina Monaco Tel: 1.647.344.9300 or 1.289.456.4617 gina@ontariodealer.com

ADVERTISING SALES Direct: 416.360.0797 Office: 647.344.9300 Advertising Inquiries Shannon Coleman slk.coleman@yahoo.ca 647.269.4191

PHOTOGRAPHY photosbypierce.com

DESIGN thrillhousestudios.com

CONTRIBUTORS Chris Chase, Ronda Payne, Bill Sherk, Angela West If you are interested in having your personal opinion heard, contact the editor at gina@ontariodealer.com

11 Starting And Building A Service Department

05 07 16 18 20 24 27

The Driver’s Seat Jim Hamilton

The Law Matters Jim Hamilton

Tech Talk Angela West

Dealer Profile Ronda Payne

Trends Chris Chase

The Common Lawyer Justin M. Jakublak

Old Car Detective Bill Sherk

By Angela West

13 Internet Dealerships

By Ronda Payne

29 The publisher of The Ontario Dealer reserves the right to turn down any advertising or content submitted to it. The Used Car Dealers Association of Ontario and the publisher accept no responsibility for claims or statements made by advertisers in this publication or by the independent authors of articles appearing in this publication. All statements and opinions appearing in this publication are those of the writers themselves and are not to be construed as reflecting the position or endorsement of the Used Car Dealers Association of Ontario or the publisher.

PUBLISHER’S NOTE We have resolved our supply chain issues and we're back to our regular publishing schedule of four times a year.

Thank you for your continued readership and support.

VOLUME 11, ISSUE 3 | 3

Dealers must comply with all-in price advertising Motor vehicle dealers are required to adhere to the regulations regarding all-in price advertising when selling vehicles in Ontario, or they may be subject to enforcement action. However, in 2022 OMVIC mystery shopped 183 dealers across the province and found that 36 per cent of registrants were still unsuccessful in passing. What’s more, the majority of failures were related to the addition of fees to the advertised price of a vehicle.

Detail all fees in a purchase or lease agreement

The law is clear. All fees and charges must be included in the advertised price of both new and used vehicles and this has been in place since January 1st, 2010. The only exceptions are HST and licensing fees, but you must indicate that these are not included in the price, if applicable, in a clear, comprehensible, and prominent manner. This ensures that consumers are fully aware of the total cost of a vehicle before they decide to purchase it.

Safeguarding the rights of customers

As a responsible dealer, you must provide customers with an itemized list detailing all fees and charges included in the purchase or lease agreement. This should encompass expenses such as freight, pre-delivery inspection, administrative fees, government levies, OMVIC fees, safety costs, and any preinstalled dealer options.

By offering consumers a transparent and all-inclusive price, dealers effectively fulfill their duty to protect the rights of buyers.

During the purchasing process, consumers have the right to seek an explanation for each fee and charge itemized on the contract.

Furthermore, it’s crucial to ensure that the total price does not exceed the advertised amount.

If a dealer attempts to charge more than the advertised price, customers are fully within their rights to walk away from the deal and promptly contact OMVIC to report the incident.

Establish trust with consumers Compliance with all-in price not only ensures transparency, it also establishes trust with consumers while protecting their rights.

By providing a comprehensive breakdown of all fees and charges and adhering strictly to the advertised price, dealers demonstrate their unwavering commitment to conducting fair and ethical business operations within the automotive industry.

Contact OMVIC Stay up to date on the latest guidelines for dealership sales operations at omvic.ca. Contact our dealer support team at dealers@omvic.on.ca or call 1-800-943-6002 Ext. 4 if you have any questions about the Motor Vehicle Dealers Act (MVDA) or compliance.

OMVIC’s resources will help you remain compliant with the MVDA in an ever-evolving vehicle sales landscape.

OMVIC also offers free education services and webinars for dealers upon request, email education@omvic.on.ca.

Follow OMVIC on social media to stay up to date on the latest news.

Instagram: @OMVIC_Official Twitter: @OMVIC_Official Facebook: Ontario Motor Vehicle Industry Council (OMVIC) LinkedIn: Ontario Motor Vehicle Industry Council (OMVIC)

THE DRIVER’S SEAT New Tech

By James Hamilton, Interim Manager and Legal Services Director, UCDA AT THE RISK OF AGING MYSELF, WHEN I STARTED LAW SCHOOL back in the

late 80’s, my assignments were prepared on a typewriter, which I typed on with two fingers. If I made a mistake, I tore the sheet out of my Smith Corona or I used a product called “white out” to cover the error and type over it. You had to blow on the white out to dry it because if you typed on it when it was wet, the key got gummed up and the next time you tried to type, that letter would go missing for a while! All my assignments were on paper!

Innovations followed of course, starting with the very earliest forms of word processers, soon to be replaced by more sophisticated word processors, that made the days of the typewriter seem quaint ... and all of this seemingly overnight. This is just my small experience of the changes brought by technology, but it was informative.

Of course, there were hiccups along the way, detours that led nowhere. One I recall in

the 90’s was the emergence of voice to type tech in offices. In theory, it was to be a game changer. Imagine not needing to type with two fingers, but just talk and expect the type to appear on your glowing green screen. The problem was it did not work very well, tone, dialect, vocabulary, all held the tech back. In fact, even by the early 2000’s that tech was still only at 80% accuracy. The irony is that some of these innovations ended up costing us more time than it saved.

Similar light-speed advances can be seen in our industry of course. The emergence of high technology in automobiles is ubiquitous now, but it wasn’t always. We can all remember when Bluetooth became a feature, AWD, ABS, all fairly standard now, but not at first. Now we are looking at electric vehicles, self-driving vehicles, new methods of propulsion, and who knows what else, flying cars maybe, like we were promised by the Jetsons when I was a kid!

What is for sure is that there will be detours as we travel down this path. Will electric cars (EVs) be the panacea all the talking heads say they will be? There are strong arguments and serious money being invested on the yes side of that equation, but we’ve seen that before too with Beta v.

VHS, CD’s, laser discs, and all of them have gone the way of the Dodo, either completely gone or viewed as a nostalgic reminder of yesteryear.

Climate change is driving the need for transportation solutions, and no one can argue with that. But the problems we seek to solve are complex, and it is too simple to say EVs are the only solution, if they prove to create more problems than they solve. They will still consume the earth’s resources to make the batteries, to create the electricity needed, to create the infrastructure, to dispose of at end of life. These problems might be overcome, or new options will emerge, we simply do not know, but we have to keep an open mind.

If we all had a crystal ball, we’d all be rich.

We simply don’t know if the breakthroughs of today will look like solutions 10 years from now. The flavour of the moment is Artificial Intelligence, if you believe what you read on that subject, it could change the world for good or ill ... or ... it could not.

Who knows, but maybe soon this article will be written better by a bot than me, let the reader decide.

One thing is certain, dealers cannot and should not avoid the changes that technology brings. This is not just because dealers need to stay competitive by understanding these new trends, but also because, in many cases, the advancements offered are simply too hard to ignore. Take DMS systems for example, electronic record keeping, inventory management, accounting and the cascading syndication of vehicle listings have taken the industry by storm and it’s hard to imagine any dealer turning their back on that once they have adopted it and found its value.

So don’t be intimidated by the brave new worlds on offer, just keep your eye on the trends and maintain a healthy skepticism that what might look like the next best thing today, might not be at some point down the road. There will be winners and losers in all this for sure. Take some comfort from the fact that we are all in the same boat, even if one day that boat is electrically powered!

In addition to our regular articles, such as The Law Matters, Tech Talk, The Common Lawyer and The Old Car Detective, our theme this issue, in case you didn’t guess, is New Technology, so please enjoy the following articles in this issue of The Ontario Dealer: • Starting and Building a Service Department • New Tech Round-Up • Update on EVs You can reach me anytime at j.hamilton@ ucda.org with any comments or suggestions for the magazine! ■

VOLUME 11, ISSUE 3 | 5

CHECK

Used Car Dealers Association Of Ontario

IT OUT

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ACCID EN

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$8.00!!! $8.00 !!!

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Auto Check™ has searched 19 databases to prepare the following report VIN XXXXXXXXXXXXXXXXX Accident / Incident Claims Branded Out of Province USA Reported Stolen CAMVAP

Description 2014 Mazda MAZDA6 i

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Report date 2021-01-21

YES There are insurance claims reported against this vehicle for over $3000 YES Vehicle has been branded by an insurance company as SALVAGE YES This vehicle has been registered in 2 jurisdictions YES This vehicle has been imported from the USA NO This vehicle is not currently reported as stolen YES Manufacturer Buyback Vehicle

DETAILS

Accident / Incident Claims History

Auto Check™ has searched for the following insurance claims records: Collision * Damage to vehicle possible total loss * Other damage to vehicle * Theft of vehicle * Fire * Vandalism * Hail * Windstorm * Glass / windshield damage * Theft of contents and Other Claims

Date

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2017-10-23 Collision

$11656.00

2017-10-23 Other Property Damage to insured vehicle

$5916.00

Canada-Wide Vehicle Registration Status All Provinces and Territories in Canada have been searched

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Ontario Quebec USA

Salvage Rebuilt Registered

US Import Auto Check™ has searched the Registrar of Imported Motor Vehicles database

This vehicle has been imported from the USA Canadian Police Information Centre The RCMP database of stolen vehicles

This vehicle is not currently reported as STOLEN

Canadian Motor Vehicle Arbitration Plan The CAMVAP database of Vehicles bought back by the Manufacturer The Manufacturer was ordered to buyback this vehicle. If you are considering purchasing this vehicle you may want to confirm that the applicable repairs have been made.

COMPLAINT: Computer/Electrical - Ordinateur/Électricit&eacute, Accessories/Accessoires Used Car Dealers Association of Ontario | Phone 1.800.268.2598 or 416.231.2600 Information contained in this report is intended for reference purposes only.

UCDA assumes no liability for errors and ommissions in the data made available through Auto Check™.

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Insurance Data

Auto Check™ contains claims data from the insurance industry.

Visit: www.ucdasearches.com Tel: 1-800-668-8265 Fax: 416-232-0775 230 Norseman Street, Toronto, Ontario M8Z 6A2, Tel: 416.231.2600 or 1.800.268.2598 Fax: 416.232.0775 www.ucda.org

THE LAW MATTERS Reading the Tea Leaves According to BloombergNEF, Marklines and Jato, the global market for internal combustion vehicles peaked in 2017 and is now in decline. At that high water mark, 86 million internal combustion passenger vehicles were sold (including traditional hybrids like the Toyota Prius).

Battery-electric and plug-in hybrid models represented a very small part of the picture at that time, with only slightly over 1 million vehicles in sales.

By James Hamilton, Interim Manager and Legal Services Director, UCDA THERE IS AN ART TO PREDICTING THE FUTURE. It’s not an art I’ve mastered, the

proof of which is that I’m not as rich as say, Elon Musk! Most of us mere mortals simply keep our ear to the ground, read the news and watch the forecasts before we try to make educated guesses about where the automotive industry is heading in five, 10 even 20 years.

So, what does that exercise do for us about the future of the good ‘ole internal combustion engine, hybrids and fully electric vehicles?

Well, in the short term it seems fair to say we are emerging from the worst knock-on effects of the last three years of COVID hell. Sales should continue their comeback from chip shortages and other supply chain snafus. As the recovery progresses, some are predicting that internal combustion vehicles sales have already peaked (and that was before COVID even hit).

By 2022, the landscape had changed considerably. Sales of gas-powered units were down almost 20 per cent from 2017, to 69 million, and plug-in vehicles jumped to 10.4 million.

Even with the addition of plug-in hybrids to these numbers, the trend is clear. The market for gas powered vehicles peaked in 2017, and global sales in 2022 would be 72 million, 16% off the high point.

Internationally, the numbers are even more striking. In China, plug-in vehicles represented 26% of vehicle sales in 2022.

Internal combustion vehicles were 28% off the 2017 peak. Bloomberg predicts plug-in models to be around 1/3 of all passenger vehicles sold in China in 2023!

The pattern carries over to Europe.

Gas powered vehicle sales are down significantly from the peak. In the United States, electric vehicle sales are positioned to benefit from changing consumer sentiment and legislative supports.

Even emerging economies are adapting, albeit slower than in the other nations

highlighted earlier. Southeast Asia is a market on the move, but it seems much of the growth could be occupied up by electric rather than gasoline vehicles.

Meanwhile, some nations in that part of the world, like Thailand and Indonesia, are pushing production infrastructure for things like batteries and electric vehicles.

India is another such contender in this space, and the government there appears intent to build and promote a domestic industry for electric. Sales are following the trend, from 15,000 in 2021 to around 50,000 in 2022. Bloomberg predicts this trend will continue on pace.

Outliers like Brazil and Mexico are still quite fond of gas-powered vehicles, and Africa appears slow to move towards electric any time soon. It is fair to say we may see sales increase for gas powered vehicles in those markets, but even there it would be unexpected to see sales come close to the 2017 peaks mentioned earlier.

If Bloomberg is correct about the tipping point generally, we could expect gas powered vehicle sales to hold for the next few years, and then start to noticeably decline sometime after 2026.

If this tea leaf reading is correct, once the trend kicks in for real, the rock will start to roll faster and faster.

While automakers like GM, Ford and Volkswagen are going all in on electric, and Tesla already there, others are sure to follow and someday soon, when we start to see the big truck fleets start to convert, this will have real impacts on oil and gas production, not to mention emissions. Bloomberg again predicts demands on fossil fuels for transportation to peak around 2027.

One thing is for certain, we are living in interesting times, and change will become the norm for the rest of this decade. ■

VOLUME 11, ISSUE 3 | 7

THE BUSINESS OF THE BUSINESS

By Ronda Payne

APPRECIATING KEY NUMBERS, BUYING RIGHT AND TWEAKING SALE ADD-ONS MAKES THE DIFFERENCE BETWEEN SUCCESS AND FAILURE.

8 | THE ONTARIO DEALER

WONDERING WHERE THE MONEY WILL COME FROM to purchase cars

to fill the lot is a place no used car dealer ever wants to be. Yet, as Peter Heasty, chartered accountant, partner at Baker Tilly Canada, president of WM Dealer Acquisitions with the firm and self-described car guy will say, it’s a common issue and one that might signal the beginning of the end.

“I’ve been in the business for 40 years,” he says. “I’ve been a used car dealer in

the past without a new car dealership attached to it. Now, my main business is to assist [new car] dealers to sell and buy their stores.”

He says that in the accounting world, used car businesses are one area that is often ignored and there aren’t many accountants involved in it. The transactions he facilitates may include a used car component, but it’s just one component of a larger dealership.

However, he does understand the

THE BUSINESS OF BUSINESS | ANGELA WEST business of used car sales and the importance of knowing the numbers and details that lead to success.

Heasty’s three main tips for success sound simple enough, but they aren’t always applied. One – have timely accurate information on your financials using a good system; two – be a smart and savvy buyer; and three – take advantage of training to keep tweaking the sale add-ons like warranties and after-market gear.

One – accurate information highlights cashflow “If you want to sell 40 to 50 cars a month, you need a hundred in stock,” he says. “If your average cost is $30,000 a car, that’s a $3 million inventory.

Therefore, on the cashflow side, you need millions to have a proper sized inventory.”

Few dealers are in the fortunate position to have a couple of million in their pocket when they start their business. But here’s the rub, financial institutions are less enthused about funding used car dealers than they are new car dealers. New car dealers rarely go bankrupt, Heasty says, and they have multiple sources of income. Many used car dealers only sell used cars, which represents a higher risk for the funder.

“The banks have a lot more assurances on a new car store which also includes a manufacturer’s buyback,” he explains.

“More likely than not, the bank will give you a line of credit, but they won’t finance the whole inventory. They might finance 80 per cent of your cost, which means you’ve got to come up with the rest.”

Easier said than done. But essential.

That 20 per cent is a big deal as cars start to sell and more need to be purchased. More cash than forecast and projections indicate allows for the ease of buying when cars are

available. Empty pockets mean losing sleep, losing hair and losing customers because there’s no ability to jump on the good deals.

“There’s a rule of thumb, especially in the used car business. If you think you need $700,000 of your own cash because you’re going to run $4 million in inventory, you better double that,” he says. “You’ll need well north of a million or you will run into cash crunches.”

There are seasonal gaps between buying and selling and how these are managed financially make a big difference. Dealers can learn a lot from those nattering squirrels running around collecting nuts it seems.

“Every dealer knows… in February, you better start buying. You better get out your cheque book,” he says, noting these vehicles sell in March and April.

“You’ve had a huge October. You started the month with 130 cars in stock, you get into mid-November and you’ve got only 50 cars on the ground and you’ve just picked up a whole bunch of cash.

Better do like the squirrels do and stash that cash in your cheeks for February.”

Warning signs of poor cashflow include a dwindling inventory and not enough cash to refill the lot. It’s also a sense of stress around the business’s current position.

“You’re eating into your cash flow.

That’s the kiss of death, that’s when it’s over. When you can’t freely buy,” he says. “You’re robbing Peter to pay Paul.

When that happens, either go get more money somehow, someway, or think about winding down because it won’t get better.”

He describes this as a very, very scary moment. Dealers will likely be harassing their controllers to see if funding for contracts has come through yet.

“Those dealers that know what they’re

doing are going to make profits and those profits generate more cash,” he says. “You generate revenue, you’ve got a gross profit on your vehicles. You’ve got your expenses then you’ve got a net profit.”

This is why knowing the financial picture at all times is so important.

Knowing what happened two months ago doesn’t indicate if there is money to buy cars today. If all that’s known is the bank account is bust and the lot is too, there’s a problem and it began with not knowing the complete picture.

Two – appreciating who buys best Of course, part of that picture could be that someone is buying the wrong cars.

And if Santa didn’t explain it: the right cars are truly the key to this business.

“You make your money when you buy the car,” Heasty says. “Herein lies profitability in the used car business and it hasn’t changed in 50 years.”

"YOU’RE EATING INTO YOUR CASH FLOW. THAT’S THE KISS OF DEATH, THAT’S WHEN IT’S OVER.."

The best buyers spot a good car better than a hawk sees grandma’s little purse dog. They know how to bid, they know how to get the deals and they fit every cliché: the early bird gets the worm, they know when someone’s asleep at the wheel, a day late and a dollar short, etc. They have a knack for it that others don’t.

“Some of them are on their game, so they make a lot of money,” he notes. “A

VOLUME 11, ISSUE 3 | 9

THE BUSINESS OF BUSINESS | ANGELA WEST lot of them are incredibly bad used car buyers and their used car operations lose money. You better be on your game.”

norm, question how to get to the higher amount. Find the money, Heasty says.

This may be fine in a new car operation where there are plenty of other income streams, but for a used car dealer, there better be someone with a major skill in buying the right used cars.

Finally, he notes that reconditioning needs to be left to someone dedicated to the task to keep profitability up.

Reconditioning is someone else’s job

“Everybody faces the challenge of reconditioning the car at the right price,” he says. “If you’re spending $1,300 a car, you could be spending $900 a car. Get somebody who is the reconditioning expert. Dealers themselves get too involved in the reconditioning process. They get bogged down in phoning the shop and negotiating and hammering down the cost. They are more distanced from the selling and the buying and they’re wasting their time.”

Three – profitability through add-ons Heasty describes the elements that happen in the business office as the golden goose of both the new and used world. Warranties, insurance, aftermarket accessories and other elements make up a significant part of gross profit for many clever business people.

“A lot of dealers are only making $1,000 on the front end of their used car, but they’re making $3,000 gross profit in the business office for an aggregate of $4,000,” he says. “Have one or two really good business managers. Sharp, honest, trustworthy business managers. There’s a lot of them out there.”

He says no one should be leaving money on the table and used car dealers can easily average $2,500 per car minimum. This continues to increase when business managers ensure education from an outside business is on the agenda.

“Supporting your business manager to keep on top of all the ways to sell insurance and extended warranties and keep tweaking that profit and keep up to date and keep trained,” he says. “A little tweak here and a little tweak there, $2,500 a car turns into $2,800 a car, turns into $3,200 a car. You’re selling 600 cars a year, and wow, $400,000 in extra gravy, icing on the cake, for that year because you kept on your game.”

He advises looking at comparatives when available. If another dealer is making $3,000 a car but $2,000 is the

Thrill different. thrillhousestudios.com

10 | THE ONTARIO DEALER

Someone who is responsible for getting the cars on and off the lot as quickly as possible is dedicated to that task. They are all about “turn and earn” and watch the clock.

By staying focused on the numbers – prompt, accurate numbers – getting the right cars and ensure educate up-sells are happening, used car dealers have a much better chance of creating a more profitable business. Maintaining cashflow is an essential part of the act, but it’s one of many pieces to getting it right in this business. ■

UPDATE ON EVS & THEIR IMPACT ON THE USED CAR INDUSTRY

By Angela West

CANADA HAS TAKEN AN AGGRESSIVE STANCE ON ELECTRIC VEHICLES (EVS) -

by 2035, the government wants all cars, SUVs and light trucks sold in the country to be EVs and is investing billions of dollars into making that transition.

But there’s a long way to go to hit that goal. Demand has so far remained flat as drivers remain unconvinced. Concerns about the environmental impact of EV battery production, worries over pricing, and lack of infrastructure have stalled sales. Just 6.5% of new vehicles registered in Ontario last year were EVs. As Canada progresses towards its ambitious EV targets, the federal government is hoping to spur demand by ramping up EV production and luring in drivers with financial incentives.

Whether it meets its target or not, the EV trend isn’t going anywhere and will have significant repercussions for the used car industry, so dealers need to start preparing now or risk getting left behind.

The latest on Canada’s EV progress In a spring 2023 update, the government announced it would invest nearly $25m in expanding the network of EV

chargers across the country. These new charging stations will be placed at convenient spots including multi-use buildings, public places, fleets, and workplaces.

This recent round of funding follows previously announced plans to construct a coast to coast charging network with a goal of installing 84,500 EV chargers and 45 hydrogen refueling stations by March 2029.

Other active initiatives include federal rebates to help spur demand, disbursed via the Incentives for Zero-Emission Vehicles Program. This offers Canadians a maximum of $5,000 to reduce upfront costs. The scheme was recently extended to March 2025.

The government is also encouraging drivers to use its online fuel consumption ratings search tool so they can shop around for the right EV and compare the different makes and models to see which are most fuelefficient.

The private sector is also getting the message, and production is ramping up to meet demand for EVs and their parts. Volkswagen is expected to begin

production at its new EV battery plant in St. Thomas, Ontario in 2027 while General Motors is moving ahead with plans to become Canada’s first EV manufacturer, hoping to roll 50,000 EVs off the production line annually by 2025.

What the march towards EVs means for auto dealers If the government goes ahead with its ambitious mandate, the only cars allowed on the lot in 2035 will be electric ones. Dealerships have a lot of work to do before that happens, getting every department ready for the shift.

Prepare your staff A study released in June by J.D. Power shows most Canadians have doubts about investing in an EV. Of those drivers surveyed, 66% said they were unlikely to go electric when purchasing their next vehicle. In Ontario, a mere 34% of drivers are interested in EV ownership.

According to the study, the top roadblocks are affordability, limited driving distance per charge, and lack of charging station availability. If your salespeople are going to sell EVs, they’re going to need to know how to overcome those objections.

VOLUME 11, ISSUE 3 | 11

UPDATE ON EVS | ANGELA WEST That means training your staff so they know their EVs inside and out. Not just the latest makes, models, and prices, but also the more technical aspects of these vehicles. Drivers will want to know the details on fuel consumption, how many charging stations are in their area, how to prolong battery life, how to properly store and maintain their vehicles, and more. These vehicles will be a hard sell so your team will need to project confidence and authority, becoming EV experts to close the deal.

Test drives will also become very important in these sales. 55% of Canadian vehicle shoppers have never been in an EV but among those who have, 43% say they are likely to purchase one. That presents a window of opportunity for your sales staff - get your customers in an EV and your chances of selling it to them just went up.

Prepare your service department EVs are highly complex, specialized vehicles. Your technicians will need targeted training to be able to service them to a high standard, starting with knowing their way around the software and diagnostics involved.

This training should start now, and be delivered in a way that’s accessible to everyone in your service department - whether that’s online, in-person instruction, written materials or a combination of all three. Don’t leave any technicians behind as they’ll all need to know what to expect when they peer under the hood of an EV.

life is also shorter with the average EV battery lasting around 10 years.

Prepare your dealership Having EV cars on the lot means having enough charging stations to keep them primed and ready for a test drive at a moment’s notice. By using your own charging infrastructure, you won’t just have a convenient way to fuel your EV inventory, you’ll also be able to address one of the major customer concerns demonstrating to them on the spot how charging works. It also gives your team the ability to give your customers their cars back fully charged after any maintenance, building loyalty and boosting your service department’s reputation.

You may want to work with a consultant to install and implement your chargers, finding a partner experienced in electrification so they can help you decide how many you’ll need, where they should be located, how to maintain your stations, and provide staff training on how to use them. Some suppliers will also offer branding so you can add your dealership’s name and logo to your chargers.

Aside from charging stations, dealerships should also be thinking about storing and housing their EVs. Proper storage - keeping cars out of extreme temperatures - can help prolong the life of the battery.

Prepare your marketing strategy

You may also want to get a jump on planning your new inventory, ordering specialized parts well in advance to allow for supply chain disruptions and price increases.

Given that EVs are a tough sell, your marketing is going to be key in moving these vehicles off the lot.

That means putting in the work to develop a comprehensive marketing plan addressing top customer concerns, unique selling points, target demographics, and which channels you’ll use to reach them.

And be prepared for a shift in workflows. The maintenance schedules for these cars will be different from the norm. Your staff should be aware of any special requirements such as more regular tire checks - EV tires wear out faster as the vehicles are heavier. Battery

Studies show that Gen Z drivers are the most likely to embrace EVs so be sure to make room for them in your strategy, marketing to them online via social selling. You'll need to work harder to reach the baby boomers who may have the funds to purchase, but

12 | THE ONTARIO DEALER

aren’t as interested as their younger counterparts.

All audiences want to buy from knowledgeable experts with authority on the subject so start by positioning your brand as an EV expert. Stay up to date with the latest news, including customer trends, vehicle production, federal regulations, and sales statistics.

Make a clear case for EVs and what to expect when driving one. These customers don’t want to be wowed, they want to be reassured.

Getting ahead of the competition 2035 will come around faster than you think and with the federal government ramping up its EV adoption strategy, dealerships can’t afford to wait and see.

EV inventory is currently low. According to a report commissioned by Transport Canada, there are just 1,758 zeroemission vehicles available at Canadian dealerships and wait times for those without any available are up to six months. This is a chance for savvy dealers to get ahead of the competition, making sure they have vehicles available as demand for EVs increases.

This is a market that’s evolving quickly. It’s early days but the best way to anticipate the coming shift is to start by educating your team, preparing your dealership, and identifying high-priority action areas so you have a clearly defined roadmap for electrifying your operations. ■

STARTING AND BUILDING A SERVICE DEPARTMENT

By Angela West SUCCESSFUL DEALERSHIPS DON’T JUST RELY ON MOVING CARS OFF THE LOT.

They provide a full-service offering, using an in-house service department to keep customers coming back. In this way, service departments play a central role in dealerships, providing additional revenue, generating customer loyalty, and enhancing their brand.

But getting it right is critical. A repair job gone wrong, a customer who feels they’ve been over-charged, missed appointments and delays - slip-ups like these can ruin a dealership’s reputation almost overnight and send customers straight to their competitors.

It takes time, patience, and attention to detail to build a successful service department but any investment is more than worth it for the resulting boost to your revenue long-term.

Ready to launch - getting your service department started

Step 1: Define your service What does customer service mean to your business? What services does it include? How many staff will be needed to provide those services, and what qualifications should they have?

There’s a lot to think about with any new business venture so don’t just jump in. Take the time to plan every single aspect of your new department, getting input from all relevant stakeholders and thoroughly mapping out every step.

It’s helpful at this stage to take a look at what your competitors are doing, and what you might do differently.

You’ll also want to consider your budget and operating costs, as well as your projected timeline. When do you intend to open your service department? What infrastructure will it need? Who will staff it? How will you announce the launch?

Leave some room in your strategy to scale up. You may want to start small

initially, but think big long-term and give yourself space to grow when customers start flooding in.

Step 2: Find and train your talent Quality of service often boils down to staffing. Your customers are looking for friendly, knowledgeable and experienced professionals, and it’s up to you to find and hire them.

Consider whether you want to promote in-house or look for new employees.

The former is quicker and means you can hit the ground running with a team that already knows your business and your customers. But don’t skip over gaps in their resume just to get your doors open earlier. Your service employees have to have the skills. If not, you’ll have to either invest in an internal training program or opt for external hires.

Once hired, it’s important to keep up the training as technology moves quickly. John Dart, Service Manager

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SERVICE DEPARTMENT | ANGELA WEST at Peel Chrysler Fiat, runs quarterly training sessions as well as special training for new products or services and says: “I’m constantly looking at training opportunities, whether for the counter staff or the technicians themselves. Seeing what technology is coming out, and getting them up to speed. I always get my staff fully trained with every available course, whether that’s web-based training, a video, or live action courses with an instructor.”

Step 3: Promote your service department Once your team is in place, and they have all the resources they need, it’s time to lure in some customers.

Word of mouth is a powerful tool.

Leverage your existing market to spread the word, letting your customers know when you’re opening, what you’ll offer, and how to access your new services.

You may also want to entice customers with early bird promotions and discounts. Use your social media channels to promote these, working with your sales and marketing departments to plan out a long-term campaign as the service department grows.

“Being online is huge, you have to get that attention,” says Dart. “A lot of our marketing is around building social media campaigns. We also send customers gentle reminders when their vehicle needs new tires and things like that. You have to anticipate what the customers' needs are going to be and market your service department that way.”

Step 4: Evaluate Don’t leave it too long before evaluating the performance of your newly established service department.

There will likely be some unforeseen challenges or roadblocks and these will need to be addressed quickly before they damage your brand.

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JOHN DART SERVICE MANAGER AT PEEL CHRYSLER FIAT

An initial strategy meeting should be scheduled for within a few weeks of your opening, followed by regular performance reviews to monitor whether you’re on track. You’ll need to set performance targets and benchmarks before hosting these meetings to have some way of measuring your progress.

And don’t forget to ask your customers!

Feedback can help you spot any issues you may have missed, it also ensures clients feel engaged and respected as they have a chance to weigh in on what matters to them.

Building your department Your service department is established, it’s got some attention, and customers are coming. What now? Now you grow it.

It’ll be easier to scale up if you’ve digitized your department, replacing time-consuming paper trails with a CRM platform that can handle large volumes of requests and easily process orders. This will also help you maintain a high standard of customer service, making it easier to communicate and follow-up with clients.

Make sure you’re ramping up your marketing as your service department takes off. Consider building a campaign around not just your services but also your team with staff profiles, behindthe-scenes videos, and technician tips.

YouTube is one of the most popular channels for interested car buyers and this format provides an ideal

opportunity for crafting ‘how to’ style videos that educate drivers on basic techniques used in your service department. A short video on winter car care, a tutorial on changing a tire, reviews of car gadgets - these are great ways to show off your expertise in all things automotive.

Look for seasonal tie-ins to drive traffic, such as a Thanksgiving giveaway, promotions around prepping for summer road trips, couple’s discounts on Valentines etc. You can also reward your long standing customers with loyalty programs that encourage previous buyers to come back when they need repairs or general maintenance.

While building your brand, don’t forget to keep an eye on your competitors.

Regularly check out what the local market is offering and offer more.

Common pitfalls Any new venture is exciting and you’ll naturally want to get your service department operating as soon as possible but don’t fall into the trap of opening before you’re ready. And plan carefully so that you’re not investing too much, too soon. Dart recommends taking a realistic approach - purchasing for your current needs instead of your future goals. “One of the biggest mistakes is overspending on special tools. It’s not necessarily worth spending that money if you’re only going to use them once or twice a year.”

Once you’ve got your equipment and you’ve opened your doors, don’t be in a hurry to expand - growing a department that’s still working through its implementation or hasn’t hit its benchmarks will cost you business in the long run as quality will drop.

It’s not worth the risk. Customers remember negative experiences, and they tell their friends. If those friends happen to be on social media, they pose a serious risk to your revenue. A few

SERVICE DEPARTMENT | ANGELA WEST bad Google reviews might not seem like a big deal but when they’re the first thing a potential customer sees, they have a lasting negative impact.

Customers will also be quick to complain if they feel short-changed. Don’t be tempted to oversell, under deliver, and overcharge. Make sure customers know exactly what they’re paying, and why they’re paying it rather than ambushing them with hidden fees or pushing them into add-ons they don’t need. The last thing you want is to become a dealership with a reputation for cheating customers.

Transparency is a major focus for Dart’s team, who keep their customers informed of their vehicle’s recommended maintenance schedule well in advance so they can budget for future expenses and won’t be surprised when the bills come in. This emphasis on clear communication is vital. Dart explains: “You have to be knowledgeable and accountable to the customer. Communication is key. The customer, the department, and the technicians - there has to be a good line of communication between all three.”

Whether it’s your business to sell New cars or Used cars... it’s our business to keep all your insurance needs covered

Another hurdle, according to Dart, is capacity - especially given the lingering supply chain issues and current talent shortage. He says: “A lot of dealerships are struggling to find technicians so a big challenge now is managing your workflow. With a shortage of technicians, you need to see what you can manage based on your customers’ expectations.”

The long term benefits of a well run service department Aside from the obvious revenue boost, a service department adds immense value to dealerships.

Businesses that don’t grow, die. Expanding into services is the obvious move for dealerships looking to move up a level. Having the ability to perform repairs and maintenance in-house builds your brand, adding credibility and authority.

It also creates opportunities for partnerships. Being able to service vehicles as well as sell them opens up new, diversified revenue streams as you’ll be able to target fleet businesses, form collaborations with manufacturers, and get referrals from other dealerships who can’t match your offerings.

With used vehicle sales in decline, the industry is facing a myriad of challenges from supply disruption to climbing inflation. A service department won’t turn your dealership around overnight, but it will help you withstand short-term economic turbulence and position your business for a more profitable future. ■

Baird MacGregor Insurance Brokers LP Partnering with the UCDA and Pitcher & Doyle to Bring you Quality Insurance and Excellent Customer Service at Competitive Rates.

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www.bairdmacgregor.com

VOLUME 11, ISSUE 3 | 15

TECH TALK

HERE’S THE LATEST ON WHAT’S HAPPENING IN AUTOMOTIVE GADGETS AND APPS.

By Angela West

This summer will be sizzling, according to the Farmer’s Almanac which is predicting warmer weather than usual this year. With the temperature expected to soar to 37C in some areas, it’s going to be tough to keep your cool on the road.

Hot vehicles aren’t just sweaty, uncomfortable, and stuffy. They’re also a health hazard to you, your passengers, your kids, and your pets. Drive in safety and comfort this summer season with the following cool gadgets.

Ventilate Your Vehicle Use the sun to beat the sun - the Koolatron solar-powered fan is an energy-efficient way to keep your car from overheating.

Powered by a solar panel, the windowmounted fan attaches neatly to the top of your window with the panel facing outward to catch the sun’s rays and the fan facing inside to move air around your vehicle.

Hot air goes out, fresh air goes in, providing great ventilation, relieving humidity and neutralizing stale odours. The fan is best used when your car

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is parked in a sunny spot for extended periods, circulating the air so you don’t get hit by a muggy blast of steamy air when you open the door.

For more information on the Koolatron Solar Fan Car Window Ventilation System, visit koolatron.ca Cool Your Caboose Anyone who’s ever driven in the summer knows the pain of sliding into a scorching hot seat, wincing as you wait for the terrible burning to stop.

Say goodbye to burned butts with the Zone Tech Cooling Car Seat Cushion. The seat plugs into your vehicle’s 12V charger and uses that power to drive the internal fan that circulates air to your back and thighs via a microfibre mesh surface.

The cushion straps on easily, fitting most seat types, and has its own temperature control with a dial that you can set to low, medium, or high.

The Cooling Car Seat Cushion’s breathable layer, reinforced with constant air flow, means you’ll never have to sit directly on burning-hot leather seats again.

Find out more about the Zone Tech Cooling Car Seat Cushion at zonetechauto.com

Keep Cold Snacks Cold If you’re planning a summer roadtrip, you’ll need a way to keep not just yourself cold, but your snacks too.

The Chefman Mini Portable Fridge is a great option for drivers-on-the-go. It’s not just great at keeping your stuff chilled, it’s also super cute with a funky retro design that’s available in pink, blue, white, or black.

The fridge is also incredibly compact with a lightweight model that still holds up to 4L (the equivalent of six regular-sized soda cans). There’s also a removable shelf so you can easily pack smaller items.

Plug the mini-fridge into your car’s 12V charger and it’ll keep your nibbles at a cool 44F for hours. Pro tip - make sure your items are cold before putting them in the fridge rather than expecting the Chefman to do all the work. It won’t cool down lukewarm items, but it will keep cold things cold.

For more information on the Chefman Mini Portable Fridge, visit chefman.com

TECH TALK | ANGELA WEST Throwing Shade

Get Rid of Glare

Portable A/C

Window shades are a must if you don’t have a sheltered spot to park your car. All that sun flooding directly into your vehicle is turning it into an oven, using shades can significantly reduce the amount of heat that builds up inside.

The Glare Guard sun visor is another piece of low-tech ingenuity - a polarized screen that clips onto your visor, blocking the sun’s harsh UV rays.

Digging out your dusty RV for the summer season? Cool it down and freshen the air with Evapolar’s evaCHILL portable A/C. This small-but-mighty device cools, dehumidifies, and cleans dust particles from the air - with a run time of up to 8 hours.

Don’t waste your time with ordinary window coverings that are a pain to install and need unsticking from the window in winter. The Roller Window Sunshade from EcoNour attaches to your window with a simple but effective suction cup so you can easily move it from one window to another.

Pull it out, and when you want to enjoy the view just push a side button to neatly roll it up.

The easy installation and compact size make this a great option for parents - it’s ideal for side windows to keep the sun’s glare off little ones in the backseat.

Find out more about the EcoNour Roller Window Sunshade at econour.com Noggle n’ Chill It might sound like a kids’ TV character or a dance move, but the Noggle is actually a handy device for controlling the air temperature around your vehicle.

It’s a long tube that attaches to your air conditioning vent to siphon off the cool air and redistribute it where you want - simple but genius!

The Noggle comes in several different sizes so it can reach wherever it’s needed.

Choose the 6ft Noggle to blast it directly onto the passenger seat, the 8ft to target rear-facing baby seats, or 10ft to extend all the way to the backseat and keep pets and/ or bigger kids cool.

This isn’t exactly sophisticated tech, but it’s effective, easy to install and a fuss-free way to keep your kids cool on hot, summer road trips.

For more information on the Noggle, visit nogglenation.com

The visor is designed to help drivers stay safe, increasing visibility in blinding sunlight so they don’t have to squint to see the road. The screen helps cut brightness during the day, and eliminate headlight glare at night.

The Glare Guard comes in three colours yellow for night driving, or grey and copper for day use. Each screen comes with clips and straps so you can easily attach it to your visor and adjust the height to ensure it’s comfortable at eye level. All screens block 99.9% of UVA and UVB rays.

To find out more about the Glare Guard, visit glareguard.com Cooling Clutter Space in your vehicle is limited. Especially when you’ve got kids, pets, and all the gear that goes with them. Maximize your space, keep your car clutter-free, and cool down your snacks with just one item - the four-inone CarHop Seat Organizer.

This compact backseat organizer is a storage unit, a cooler, a cup holder, and a play tray all in one. The insulated vinyl lined cooler compartment is large enough to fit your road trip snacks and has a divider panel to separate your drinks from your food. Store cups and picnic accessories in the side mesh pockets or front cup holders to say goodbye to messy spills.

Attach straps to carry it from the car to the beach, or secure it to the seatbelt to hold it in place, the CarHop organizer is built for busy families on the go - it even folds away when not in use so you can get your space back.

To find out more about the CarHop Seat Organizer and Cooler, visit highroadorganizers.com

It’s lightweight and comes with a sturdy handle so it’s easy to move around from the car to the trailer. There’s no installation required and it turns on and off via a single button for easy operation.

The evaCHILL is ideal for anyone who suffers from allergies or asthma in the summer months. It doesn’t contain freon or other chemicals, relying instead on biodegradable evaporative pads that are easily removed and replaced as needed.

For more information on the evaCHILL portable A/C, visit evapolar.com Solar Power Anything can happen on long summer road trips so you need to make sure your phone is charged at all times. The axGear Solar AC Charge External Power Bank is a powerful solar charger with a dual USB port so you can charge your phone on the go with minimal effort.

Just leave the power bank in a sunny spot and let it do the work. The powerful battery will be fully charged within 6 to 10 hours. Thin, light, waterproof, and easy to carry, the charger is designed for rugged road trips, hikes, camping and other summer outdoor pursuits.

Get more information about the axGear Portable Solar Charger Dual USB Battery Power Bank at axgear.ca

VOLUME 11, ISSUE 3 | 17

DEALER PROFILE For decades, Lafreniere Auto Sales and Service has relied on what really matters.

By Ronda Payne IT ’S A BUSY DAY AT LAFRENIERE AUTO SALES AND SERVICE. Contractors are finishing up the latest

additions to the site in Stayner and it’s a little noisy, so owner Andy Lafreniere finds a quite space to talk.

“We just put on a four-bay expansion on our service department,” he says. “The three-bays for detailing are all new and now we have a drive-through car wash.”

Since it was established by the Brockwell family in 1958 as Brockwell Motors, the dealership has seen a lot of growth. These new additions certainly were never imagined by the original owner but Andy’s dad, Marcel, always had the vision and the drive to get the business to where it is today with Andy by his side.

“In 1974, Merv Brockwell built the building and the business,” Andy says. “The words from his mouth

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VOLUME 11, ISSUE 3 | 19

Lafreniere Auto Sales & Service are that he can not believe what we’ve done with this business. It’s pretty crazy what we’ve done here. My dad was always thinking on how to improve and grow the business.”

In the 70s, Marcel was driving a taxi when he saw a local job as a car salesperson and took it. The work fit him, so he then made the move to join Brockwell Motors in 1980, then Andy came on board to sweep and clean up in 1986.

“I’m still doing that to this day,” he jokes – well, only partly. Every used car dealership owner knows that they are responsible for every job in the business.

In 1989, Marcel purchased the business from Brockwell, but the name change took a few years. In time, they renamed the business Lafreniere Auto Sales and Service.

In those days, having 15 or 20 cars on the lot would have been significant. Now, (at least pre-COVID) there could be 80 to 100 cars on a regular basis.

The journey to today’s business wasn’t easy and Andy reflects that the early years were fun, but came with a lot of blood, sweat and tears as he and his dad created the business Andy runs now. He recalled a time his dad went out to buy cars in the early years with just $1,600 in his pocket.

Marcel dreamed of building on those lean times and getting the dealership to its current level; he is still very much involved in the operation. It’s a source of pride for both Andy and Marcel that all three of Andy’s boys and his wife Shelley make up key aspects of the team.

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Son Kyle came on board after spending time in new car dealership service and sales departments.

Getting to know what his dad did everyday was third son, Cody’s position in the family from a young age.

“I was excited when he made the choice to join the family business,” Andy says. “He has become my whiz kid behind buying cars and knows when to back off.”

“He has always been a natural for the car business,” Andy says. “When he was little, he always asked, ‘what did you buy today and what did you sell?’ I always knew Cody would work for the family business and was thrilled when he was old enough to join the team full-time.”

Kyle also does an amazing job with the business’s marketing, relying mainly on the organization’s website, Instagram and Facebook. That’s all the advertising they do at Lafreniere Auto Sales and Service. Andy says there’s no need for anything more.

“At one point, we were doing the dinosaur newspaper stuff,” he says. “As of right now, Kyle, he looks after the social media stuff because his dad walks around with a chisel and slate. When I’m not around, Kyle steps in to fill my role to make sure that all other business needs are being dealt with.”

Cody’s role in the sales department is one filled with heart and understanding. He listens in order to ensure people get the right vehicle for their needs. This also makes him valuable in suggesting what might be needed on the lot.

“We couldn’t be more proud of the way the three boys are helping grow the business today and we look forward to seeing what they will do in the future,” Andy notes.

Clearly a guy who embraces humour, Andy likes to see all the team have fun on the job.

He says the best days are when the music is playing in the service bays or the detailing bays and the team is singing, having a great time, loving their jobs. In an attempt to be truthful about it, but trying not to be trite, he says the business is like a family. The business isn’t “his” or “Marcel’s” baby, it’s “Without Luke’s help and commitment, the expansion would not have gone as smoothly. something the team of 17 (including Marcel, Before committing to the business full-time, Andy and Shelley and their boys) shares.

The team even has special T-shirts that say Luke was apprenticing for an industrial “crew” on them. It’s part of the casual, fun millwright,” Andy says. “We couldn’t have atmosphere Marcel and Andy created. been happier when he came on board fulltime.”

Second son, Luke’s mind is wired to understanding how things work. Now, a member of the service team as an apprentice, he has been a key part of navigating the latest expansion to the building by bringing his “expertise, ideas and passion.”

DEALER PROFILE | RONDA PAYNE

The word of mouth that has carried the business for more than 65 years persists in a small town. Not only does it ensure a nobullshit policy at the dealership, given that word travels fast, it also works just as well in terms of recruiting new team members.

“One of my team once told me ‘Everyone who works here, they know what we’re about’,” Andy says. “They know our reputation. They came to us looking for jobs, that’s huge. An absolutely incredible bunch of people work here.”

Andy, Shelley and their family were able to take a vacation this year without worry because the team kept everything running perfectly.

“We rely heavily on our staff,” he says. “Our staff is amazing. We appreciate all of them daily.”

And why wouldn’t customers stay loyal to a local business like this? Not only do Andy and the team sell used cars, service them and offer detailing, they also offer a rental car service and tire storage on site. It’s an all-in-one for customer cars so they never have to drive out of their region for what they need.

That same word of mouth that brings great, “Back in 2019, we finished a tire building,” he says. “There’s about 600 sets of customer loyal staff to the business and ensures tires that are stored on site. It’s pretty big. they all work to maintain the dealership’s It’s a pretty impressive building set off to outstanding reputation also sees the one side of the lot.” business’s record of honesty and integrity filters through the community. It allows Pre-COVID, the car rental business, known the dealership to attract, retain and build customers. They might be a repeat customer, as South Georgian Bay Car and Truck Rentals was a little stronger, but it’s still their kids, or a new nieghbour looking a going concern with about seven cars for another car. Andy says there are new running regularly. The changes to service residential zones behind the dealership and loaner vehicle insurance made the rental customers have already come from that business that much more important, but area saying someone told them to go to Andy says if a customer doesn’t need to rent Lafreniere Auto Sales and Service for their a car, they will still be taken care of. next car.

“A big part of our service business is picking up and delivering,” he says. “If somebody can’t get here, we will go to your home, to your business, whatever.”

Helping people with their service needs isn’t the whole of it. Andy sees it as a point of pride to be able to help those who continue to support the business.

“We donate every year to the local hospital,” he says. “That’s been a big thing of ours over the years. Then there’s regular stuff like supporting the Kinsmen and Lions club, minor hockey. We have to help out. We’re fortunate enough to be able to do it.”

They also assist with the food bank, public school breakfast programs and more.

They celebrate as a team too with monthly staff BBQs. “Our reputation brings people far and wide,” he says. “Because we’ve been here for so long and in a small town where you know bloody everybody, you can’t screw around.

We’ve built a good business where what we say is what we’re going to do.”

Andy claims the used auto business is in his blood, just like it is in his dad’s.

“The early years of Dad and I here from seven in the morning to ten at night literally six days a week to build the business up, to get things going. I love it,” he says. “The buying part has changed, but I still love the business, I love the people.” ■

VOLUME 11, ISSUE 3 | 21

TRENDS

By Chris Chase

THE HITS JUST KEEP COMING FOR THE CANADIAN AUTO INDUSTRY, which, as

we write this, is feeling the effects of a July 1 strike by more than 7,400 workers at ports in British Columbia.

According to the CBC, the strike has disrupted about $500 million worth of trade every day and is estimated to be costing the Canadian economy up to $250 million per week in terms of moving goods in and out of Canada. Those goods include new vehicles and auto parts being shipped here from Japan and Korea. This threatens to exacerbate the supply-chain shortages already plaguing the industry. (www.cbc.ca/ news/business/bc-port-strike-economicimpact-1.6907182) In a statement, Brian Kingston, President and CEO of the Canadian Vehicle Manufacturers Association (CMVA), said the strike “. . . hurt workers in the automotive industry on both sides of the border. The auto industry depends on the efficient delivery of parts and components with delays threatening the recovery of the North American auto sector.”

After multiple rounds of negotiations and plenty of tough talk from both sides in the dispute -- the International Longshore and Warehouse Union and the BC Maritime Employers Association – the two groups announced on July 31 that

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they had reached a tentative agreement that union members were to vote on by Friday, August 4. (This article went to print before that date.)

As a result of the strike, there were more than 60,000 shipping containers waiting to be unloaded at B.C.’s ports by mid-July.

The Railway Association of Canada said that for each day port workers were off the job, it could take three to five days for supply chains to recover.

According to Huw Williams of the Canadian Automobile Dealers Association (CADA). the strike “could keep supply and demand out of balance much longer than anticipated.”

Williams said CADA has been predicting the supply of new vehicles would be nearly caught up with demand by the end of 2023, but “this port strike will likely destroy that prediction.”

Used-vehicle values declining more rapidly When we last evaluated the wholesale used-vehicle marketplace, Canadian Black Book (CBB) values were showing week-over-week declines of less than 0.1 per cent. However, since the arrival of summer, values have fallen by a weekly average of a little more than 0.3 per cent.

Despite that more rapid downward pace, CBB says the average used-vehicle listing

price has increased about $1,000 over the same period, reaching $37,000 in mid-July.

As of June 2023, CBB’s used-vehicle value retention index was at 158.5, up slightly from our last update, but down 1.8 per cent compared to a year ago, when the index had just fallen off its all-time peak.

According to Adesa Analytical Services’ most recently available data (from May 2023), the average U.S. wholesale usedvehicle price was $16,116, down about $400 compared to Adesa’s March update.

During the week of July 17, the Canadian dollar was trading at US$0.76, a $0.02 bump compared to our spring market update but still low enough to encourage an inflow of American dealers to Canadian auctions.

Inflation is down, but interest rates are up In the spring of 2022, the Bank of Canada began raising its key overnight interest rate in a bid to slow inflation, which peaked at 8.1 per cent in early summer of last year. Since then, inflation has fallen to just over 3 per cent, but the Bank of Canada’s interest rate has risen from 0.25 per cent to 5 per cent. That’s driving up the cost of financing the purchase of a used vehicle.

TRENDS | CHRIS CHASE According to a July 3 article in The Globe and Mail, the average used-vehicle loan in Canada carries a 10 per cent interest rate, up from 7.5 per cent about two years ago. That drove the average monthly payment on a used-vehicle loan to $625 a month in early 2023, an increase of about $150 compared to the beginning of 2020. One result is that used-car buyers are financing their purchases over longer terms to keep their payments as low as possible: In early 2023, the average used-vehicle loan term in Canada was 73 months, up from a pre-pandemic average of 69 months. (www.theglobeandmail.com/investing/ personal-finance/household-finances/ article-car-shopping-this-summerbrace-for-a-double-whammy-of-highprices-and/) “There isn’t really a deal to be had in the new-car market,” Daniel Ross, senior manager of residual value strategy at Canadian Black Book told The Globe and Mail. “And as more demand flocks to the used-car market, prices there also remain elevated.”

Rebecca Oakes of Equifax Canada told The Globe and Mail that the combination of higher prices and interest rates and longer loan terms could add up to more economic disruption when auto industry supply and demand finally do stabilize.

She said consumers could end up stuck

There’s better news to report from the semiconductor industry, whose global chip production shortfall has shrunk significantly over the past year.

with loans worth more than the vehicle if used-car prices fall. And if those vehicles are repossessed because someone can no longer afford the payment, banks and other lenders won’t be able to recoup the outstanding amount when they unload the vehicle.

According to a June 2023 article by Auto Remarketing Canada, non-prime loans catering to buyers with poor or no credit is the fastest-growing lending segment in Canada as a result of the financial impact of the pandemic – both in terms of income levels and vehicle prices.

However, in some cases, while subprime buyers with poor credit may still be approved for loans, they won’t be able to find vehicles they can afford to buy with the amount they’re able to borrow. (www. autoremarketing.com/arcanada/dealerinterest-in-subprime-finance-grows-incanada/) Good news from the semiconductor industry

A report issued by S&P Global Mobility says the ongoing shortage impacted the production of 524,000 light-duty vehicles globally in the first half of 2023.

That’s down from 3 million units in all of 2022 and 9.5 million in 2021. (www. autoremarketing.com/ar/sp-globalmobility-on-short-long-term-impactfrom-chip-shortage/) But semiconductor manufacturers will have to maintain that momentum if they are to keep pace with the auto industry’s insatiable appetite for microchips.

According to the S&P report, the average car built in 2020 used $500 worth of semiconductor chips, but that figure is predicted to reach $1,400 five years from now.

S&P had been predicting global newvehicle production would reach 100 million units per year by this year, but pandemic-related setbacks have pushed that milestone out past 2030.

According to S&P, “. . . lessons learned from the pandemic shortages are critical.

The industry may have survived the COVID semiconductor crisis, but that does not mean it is out of the woods.” ■

Let us help your dealership with:

VOLUME 11, ISSUE 3 | 23

THE COMMON LAWYER AI and the Auto Industry: Why the Wait-and-See Approach May Be Best for Your Dealership

By Justin Jakubiak & Laheen Dhanidina TURN ON THE NEWS, SCROLL YOUR SOCIAL MEDIA FEEDS, speak

to almost anyone and it seems that the topic of artificial intelligence is seemingly everywhere and on everyone's mind. Is it good? Is it the solution to everything? Or is it evil and will it result in the mass elimination of all sorts of employment across a variety of industries (including law, accounting, advertising, design and more).

Without question, no one, and no industry, can afford to ignore the pros and cons of AI today and into the future.

In our own office, we have recently drafted and put into effect an internal policy that is very conservative and essentially prohibits the use of many of

24 | THE ONTARIO DEALER

the current AI products and programs for legal research and drafting. As will be explained below, the currently available AI products are still very much in the early development stages and are not reliable enough for us to be confident that they will provide the results and quality that our clients expect and require.

language (and do not include other language), are detailed enough, are not misleading and contain various required disclosures. I note that we regularly assist large dealerships and dealer groups who have many stores and much experience, and despite same still struggle with ensuring all advertising is fully compliant.

While AI and its various forms are very exciting and should likely begin to be implemented in some form in most Canadian businesses, there are reasons to be cautious about its implementation.

Given how highly regulated the automotive industry is in Ontario, and how nuanced so many of your day-to-day obligations are as a dealer, we strongly encourage all dealerships and their management to proceed carefully, and not before the implementation of carefully considered policies and guardrails.

On its face, AI, especially programs like ChatGPT, seem like the obvious answer to ensuring the creation of effective and compliant advertisements. Not so fast….

AI and Advertising

ChatGPT is a program that provides detailed responses to questions asked of it – but, among other things, requires you to ask it the right questions.

Notwithstanding some well reported issues and mistakes as a result of ChatGPT, it is one of the fastest growing programs and is being implemented in all sorts of industries.

Advertising is just one example of a dealership's business that is highly regulated. Get it right and you will drive consumers to your store and increase sales. Get it wrong, and OMVIC may be at your door and the dealership, as well as its owners/dealer principals, may be charged for failing to advertise in accordance with the law.

You can ask ChatGPT to conduct a search and determine what a dealership's regulatory obligations are with respect to advertising and to create a compliant advertisement.

While this appears to be a quick way to help your dealership become more efficient and, in turn, more successful, there is undoubtedly an issue with the technology (as it currently is) and using it in this way.

Dealerships must ensure that their advertisements include certain

The main concern is whether the information that the technology is

Just like advertisements, AI can present problems when drafting important legal documents, including contracts and policies.

using to develop the advertisement is comprehensive and accurate.

ChatGPT, for example, may not capture all regulatory obligations with respect to advertising. While it does scan various sources of information to provide an up-to-date picture on the current obligations, it may not catch all key words or legislation that is not directly related, but is still relevant, to dealership advertising.

Along the same line, if ChatGPT has not confined its search parameters to the relevant jurisdiction, that answer (and subsequent advertisement) may inadvertently be based on regulations from British Columbia, and not Ontario.

As the rules and regulations pertaining to automotive sales vary from province to province, the advertisement may not be compliant with your obligations as a result.

Inaccuracies and information which is simply false are another cause of concern. ChatGPT's ability to provide accurate information has been under scrutiny further to a New York lawyer who relied on the program to research case law and draft his brief for a personal injury case. It is unclear why, but ChatGPT included six non-existent cases in the brief! Yes, it simply made up some law.

The above is just one example of the pitfalls of relying on AI to provide you with comprehensive and accurate information. If ChatGPT can actively

create and include non-existent cases, it can create and include non-existent regulations.

In the circumstance that AI gets everything right – the information relied on is comprehensive, relevant, accurate, and from the correct jurisdiction – there is still one more concern. That is, whether ChatGPT is correctly describing the regulation and your obligations. A clear issue with the technology is that it may misrepresent the regulation, for example, by changing a "must" to a "can."

While this may seem like a minor change, it can drastically impact whether your advertisement is compliant.

As a result, it is clear that today there remain serious risks to using ChatGPT, and other AI, in your day-to-day operations without adequate oversight and policies being first put into place.

OMVIC prosecutions, legal fees, and general costs for removing the advertisements are just some of the consequences that a dealership may experience. OMVIC has been clear that dealers and their principals, are responsible for all of a dealer's legal obligations at law – a defence of "ChatGPT made me do it" is unlikely to be accepted as an excuse, or to win the day in court.

Drafting Legal Documents and Policies with AI

Language use is important for being able to convey the correct meaning and to ensure that parties are properly bound by the terms of the contract.

ChatGPT, as discussed above, may be seen as a great tool in drafting contracts as it can eliminate the need to do it yourself, or have a lawyer draft one on your behalf. It has the potential to save time, money, and resources that can be deployed elsewhere.

If the language of the contract is unclear or imprecise, it could lead to the contract not being legally binding or enforceable. Imprecise or unclear language can lead to loopholes in clauses that may be exploited, or clauses being held by a Court as too unclear to have meant what the drafter intended.

For dealerships, this could impact clauses regarding representations of the quality of the vehicle, warranties, financing terms, and other essential terms.

The fact is that today, AI programs may not be able to foresee loopholes or may create loopholes inadvertently.

If the language proposed by AI is excessive or overly restrictive, the relevant term may also be unenforceable. Courts do not look favourably on larger, more powerful organizations unreasonably restricting employees and their rights post employment, or of contract provisions which may appear to be taking advantage of consumers and the unequal bargaining position that they are typically in when purchasing a vehicle. What may be a clause drafted to protect the business, may be seen by the Courts as an overly restrictive clause that creates a problematic power imbalance. The use of language in this way is, again, not something that AI, at this stage, can foresee and understand when drafting contracts and policies.

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This is not just important for larger dealerships, but also smaller ones as well as it may impact the following agreements and policies: • In-house financing, leasing and warranty agreements; • Employee agreements; • Sales agreements; and • Policies which a dealership may be required to have at law.

Using Machine Learning to Predict Buyer Behaviour Another AI derivative, machine learning, which can be used to predict buyer behaviour, must also be used with caution and oversight.

Machine learning programs review data sets and draw inferences from that data to come to conclusions. This form of AI is particularly useful in being able to predict future behaviours based on previous trends. For example, by providing the program with data sets on the time of year and car colour most often leased, the program may be able to draw a conclusion about what car colour is most likely to be leased in the upcoming summer which may assist with inventory purchasing.

As time goes on, we expect that machine learning will assist dealerships with their strategy and can provide clarity on some of the following:

Machine learning, like other AI programs, is not impervious to mistakes as the program may make improper associations between two pieces of data. The program may incorrectly conclude that more blue cars were sold during the summer season. Rather than the colour, it could be that the make of the vehicle was the reason for the increased number of cars sold, or that the dealership had more blue SUV's available. This is just one example of improper associations that may provide misinformation to the dealership.

There is also the risk that the program has not considered an important factor or has drawn an incorrect inference where multiple characteristics are linked. Consider certain external factors such as whether the consumer is concerned about climate change, recessionary and other economic factors, or availability of public transit. These factors can influence the decisions of the consumer but may not be included in machine learning programs because they may not have access to this information.

Machine learning programs, like other AI, have the potential to help businesses become more successful. But there are risks in relying on the conclusions drawn from these programs to the exclusion of your industry experience learned from years of experience.

Conclusion • Best-selling or most often leased We're definitely not saying ChatGPT, vehicles; or any AI for that matter, is entirely • What protections or warranties are most often purchased; • Whether certain protections or warranties are most often bought with other products; • Whether certain protections or warranties are most often bought with specific vehicles; • What is the most popular colour, make, and model; and • Whether certain protections, warranties, colours, makes, and models of vehicles are more common during certain seasons.

26 | THE ONTARIO DEALER

unhelpful or untrustworthy. But rather, the concern is that the technology is still developing. Solely relying on AI to ensure compliance with regulatory standards, draft legally binding documents (or other policies), or predict buyer behaviour can lead to significant errors, regulatory infractions and a headache. It's best to approach AI with caution, and adopting a wait-and-see mindset to AI may be better for your business in the long run.

We hope that this article has provided you with some important information so that you can make an informed decision about how, if at all, you’d like to incorporate AI in your business. Moving forward, the question will no longer be whether we should use AI, but when and how we can use it to our advantage.

Whatever you do, and as with every new frontier in business - take your time, create policies, invest in employee training, listen to guidance from the UCDA - and - call your lawyer!

Justin is a Partner with Fogler, Rubinoff LLP and is recognized by the Law Society of Ontario as a Specialist in Civil Litigation.

This article was written with Laheen Dhanidina, a summer student with Fogler, Rubinoff LLP. This article is intended for general information purposes only, and should not be relied upon as legal advice. Views and opinions are Justin's alone and do not necessarily represent the views and opinions of the UCDA or Fogler, Rubinoff LLP. ■

THE OLD CAR DETECTIVE

1952 METEOR REUNION

By Bill Sherk

BEN KOOP OF LEAMINGTON, ONTARIO, WAS 18 IN 1953 when he bought a black

1952 Meteor Customline 2-door sedan from a used car lot in nearby Windsor, Ontario, operated by Noble Duff, the local Mercury-Lincoln-Meteor dealer.

After buying it, Ben went to Detroit and bought Firestone whitewalls for his car. He knew that Firestones made the loudest squeal and he wanted to squeal his tires all over town.

Ben drove the Meteor to Florida with Marg, his new bride, on their honeymoon in 1957. They stopped

at a Florida bank to convert their Canadian money into U.S. funds. While Marg waited in the car, a gentleman approached their car and said: “It looks like a Ford but it isn’t a Ford. What is it?” Marg explained that this was a Meteor, the Canadian version of a Ford.

Ben returned with bad news: “The bank won’t convert our money.” The man looking at their car said: “I have some influence at this bank. You come with me.” Ben and the man entered the bank and Ben returned with American money, which proves it pays to drive a Meteor to Florida!

VOLUME 11, ISSUE 3 | 27

In 1960, Ben sold the car to buy a truck, but the memories of that ’52 Meteor lived on. In the spring of 2023, I wrote the story of Ben’s ’52 Meteor for my column in Old Autos newspaper. A few days later, a reader of my column contacted Ben to say a friend of his owns a restored 1952 Meteor Customline two-door sedan “worth seeing.” Later that week, Ben and his son Dave drove five hours across Ontario to see the car.

It had a Mercury radio with square push buttons, identical to the radio Ben had installed in his car in the ‘50s. The car also had dual exhausts, identical to what Ben had installed on his car over 65 years ago. Then Ben got down on the ground and crawled part way under the rear of the car, where he saw the two-inch lowering blocks between the leaf springs and rear axle that he had installed just after buying his car in 1953!

The only modification that Ben made to his car that he did not see were the ’53 Meteor chrome strips he had added to the top of his front fenders to dress up his car. These were not available on 1952 Meteors.

The owner of the car told Ben those chrome strips were on the Meteor front fenders when he bought the car ten years ago but he removed them because they were not original equipment.

PHOTO #2

This was all the proof that Ben needed to declare: “This car is the same car I bought for $1550 from Noble Duff ’s used car lot in Windsor in October of 1953!”

The current owner of the car then let Ben slide behind the wheel for the first time since trading off the car in 1960 and said: “Ben! Take us for a drive!”

The owner of the Meteor lived on a country road and they headed off with no other cars in sight with Ben driving his Meteor for the first time in sixty-three years! What a thrill!

PHOTO #3

Photo #1: Ben and son Dave with 1952 Meteor they found this year.

Photo #2: Ben Koop as a teenager in his 1952 Meteor.

Photo #3: Ben could not resist sliding behind the wheel!

Photo #4: Ben and owner went for a drive with Ben behind the wheel! ■

PHOTO #4

28 | THE ONTARIO DEALER

SUPPORT BETTER THAN DISRUPTION

By Ronda Payne

HOW INTERNET CAR DEALERSHIPS ARE FARING IN A POST-COVID WORLD A FEW YEARS AGO, IN THE HEAT OF A PANDEMIC, with uncertainty at every

angle, a new kind of car dealership was born. One that skipped all of the inperson aspects of car-buying, adhered to COVID distancing regulations and allowed people to do all the research they wanted online to find the right car.

It seemed like the right idea at the right time and that it couldn’t fail.

But it’s been a mixed bag of results.

Perhaps some of those operations didn’t consider how the end of COVID restrictions would play out. They may not have thought about the realities of carrying millions and millions of dollars of vehicle inventory. Or, maybe, they just didn’t have a plan. Some have thrived, some have dived and there are those that are hanging on by the skin of their teeth.

The difference? It seems, it’s about the model.

All is not the same in internet auto dealerships. While some believe in profits at any cost and may have put some dealerships out of business in their prime time, others look to be support systems that allow everyone to get ahead as the old system gradually moves into a new way of doing things.

Matt McKenzie, founder and CEO of CarDoor (currently only in Ontario, but on the launch pad to other provinces) says while unfortunately, some traditional dealerships didn’t make it through the challenges of COVID and post-COVID, he’s proud that his model isn’t designed to put dealers out of business, but rather to support them.

“All of the vehicles that are on our platform are from dealer partners,” he explains. “No different from a Car Trader, Kijiji, Auto Trader.”

He should know, he ran Kijiji for five years and got to know the auto side of that business. He saw that there was a way to support both existing dealers and eliminate the pain points of consumers. He launched CarDoor in July 2020.

The CarDoor model “There was just another, a better, way to bring a digital retailing solution to the market, but support the dealers,” he says. “Our model is quite unique.”

Unlike other internet retailers, CarDoor doesn’t hold the inventory. They represent the inventory of dealers to consumers and consumer to dealers through online platforms, but don’t actually purchase the vehicle until a confirmed offer is in place. This may be the reason why CarDoor is still in the market, while others are not; or are struggling. Not only does this type of model help dealers gain inventory, it helps sell the vehicles they want, when they want.

Through CarDoor, dealers sell vehicles to consumers; bid on and buy consumer vehicles; bid on and buy repossessed vehicles; and receive referrals for service on vehicles purchased through CarDoor. It’s free to use the CarDoor model, but not every dealer qualifies. McKenzie and

VOLUME 11, ISSUE 3 | 29

INTERNET DEALERSHIPS | RONDA PAYNE his team want dealers that believe in transparency and honesty as they do.

They’ve had to refuse some dealerships on that basis.

dealerships. “Let’s say we have 1,300 cars on our site, give or take. That’s 30 million tied up. That’s the difficulty they faced.”

The entire transaction is managed through CarDoor and the buyer never knows who the dealership is.

It put those types of dealerships in direct competition for vehicles with traditional dealerships. In the CarDoor model, because all vehicles are dealerprovided, there is no competition.

The internet buyer CarDoor services is unlikely to be the same buyer that would walk on the traditional lot. In this way, CarDoor is able to complement the traditional dealership, rather than compete.

“We just pick up the vehicle from the dealer, buy the vehicle from the dealer and then sell it to the consumer,” he says.

The income for dealers is in a savings on sales commissions as they get the full list price on the CarDoor platform.

Vehicles are covered by CarDoor’s 14day money-back guarantee as well as the 60 and 90-day warrantees.

Where internet dealers fell apart Other internet dealers have exited the market. Canada Drives, may have held on to their “the easiest way to buy or sell a car” tagline online, but as Scott Brown, VP of operations with CarDoor explains, they have left the retail space and have reverted to generating leads.

“For years, they have been the largest player in selling leads to dealers for finance companies,” he says. “We saw Canada Drives drop the whole retail side altogether.”

With that type of model, where the company wants control of the entire process from end-to-end in order to generate the most income, there is not option but to carry inventory and bring all of the tasks associated with car sale in-house. CarDoor has taken a different path that allows them to keep overhead low, ensure ongoing relationships with dealers and earn a smaller amount per vehicle sold.

Brown says that there is no choice but to carry millions of dollars of inventory when control and higher per-car profits are the objective.

“You need a lot more cars than a typical dealer does,” he says of some internet

30 | THE ONTARIO DEALER

“We’re happy making our money,” he says. “We don’t need to capture another two or three-thousand dollars on the sale of a vehicle. We are specifically targeting the customers that are buying online.”

Considering the numbers The need to increase the profit per vehicle has hurt players that made a big splash initially, like Carvana.

Reporting yet another decrease in units sold (76,530 a decrease of 35 per cent), for 2023 Q2 results, a revenue decrease of 24 per cent isn’t surprising, but the gross profit increase of 26 per cent ($499 million) is. It’s an increase of $3,152 profit per unit ($6,520 per unit total) and it’s only a matter of time

before customers recognize and don’t want to pay that amount.

Chances are, many have already figured it out. While some don’t care and some don’t have alternative options, others will revert to local dealerships. But, the desire to purchase online, without hassles is real for consumers.

“We pride ourselves on a white glove, very transparent process for our customers and the same for our dealers,” says McKenzie.

He says that pre-COVID about 50 per cent of consumers were open to the idea of purchasing a vehicle online.

Now, post-COVID, more than 80 per cent are both open to and willing to buy a vehicle online.

“There’s a comfort level,” he says.

“We’re talking about gen Ys and gen Zs. They don’t negotiate. They want easy.”

He ads that while many players in the space have led to bad press about internet buying, this hasn’t resulted in a reluctance to buy from CarDoor.

“We’ve seen none of that,” says Brown.

“I think it speaks to the acceptance [of internet buying].”

He and McKenzie both see the traditional dealership existing well into the future.

“I don’t think they need to be too worried about a completely digital dealer coming out,” he says. “What traditional dealers are doing to do and continue to do is evolving to figure out how to satisfy their customers.”

New buyers will want a less hands-on approach and dealerships need to find ways to accommodate this, whether with a partner like CarDoor or another way. It will require planning and a consideration of those who want to be on-the-lot and who don’t. While this change is coming, there is time to think, plan and partner. ■

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