Texas Dealer November 2020

In This Issue:

– Michael W. Dunagan on Transitioning to BHPH – Best Practices for Reconditioning Used Cars – Crisis Averted! Thanks to the Power of Advocacy – Tips on Employee Handbook

TIADA Board of Directors PRESIDENT Robert Beck/Stop N’ Drive Motors 711 N. General McMullen Dr. San Antonio, TX 78228 PRESIDENT ELECT Mark Jones/Mike Carlson Motor Company 264 Exchange Burleson, TX 76028 CHAIRMAN OF THE BOARD Juan Sabillón/Mi Tierra Auto Sales 7935 Gulf Freeway Houston, TX 77017 SECRETARY Ryan Winkelmann/BJ’s Autohaus 5005 Telephone Road Houston, TX 77087 TREASURER Eddie Hale/Neighborhood Autos 1717 US 287 Decatur, TX 76234 ICE PRESIDENT, WEST TEXAS V (REGION 1) Brad Kalivoda/Fiesta Motors 2599 74th Street Lubbock, TX 79423 ICE PRESIDENT, FORT WORTH V (REGION 2) Chad Lancaster/Chacon Autos 11800 E. Northwest Hwy Dallas, TX 75218 ICE PRESIDENT, DALLAS V (REGION 3) Greg Reine/Auto Liquidators 39670 LBJ Freeway Dallas, TX 75237 ICE PRESIDENT, HOUSTON V (REGION 4) Vicki Davis/A-OK Auto Sales 23980 FM 1314 Porter, TX 77365 ICE PRESIDENT, CENTRAL TEXAS V (REGION 5) Greg Phea/Austin Rising Fast 8024 IH 35 North Austin, TX 78753 ICE PRESIDENT, SOUTH TEXAS V (REGION 6) Armando Villarreal/McAllen Auto Sales 4215 S. 23rd Street McAllen, TX 78503 ICE PRESIDENT AT LARGE V Robert Blankenship/Texas Auto Center 6809 N IH-35 Austin, TX 78744 ICE PRESIDENT AT LARGE V Russell Moore/Top Notch Used Cars 900 East Davis Conroe, TX 77301

TIADA EXECUTIVE DIRECTOR Jeff Martin 9951 Anderson Mill Rd., Suite 101 Austin, TX 78750 Office Hours M-F 8:30am – 4:30pm 512.244.6060 • Fax 512.244.6218 jeff.martin@txiada.org

Vo l u m e X X / I s s u e 11 / N o v e m b e r 2 0 2 0

TexasDealer contents

4 Officers’ Message

by Mark Jones, TIADA President Elect

6 Board of Directors Meeting Minutes 9 Legal Corner: Transition to BHPH Requires Planning and Education

by Michael W. Dunagan

10 Upcoming Events 14 Dealer Spotlight 15 Membership Corner 16 TIADA Member Application 17 Crisis Averted! Thanks to the Power of Advocacy

by Blake Ingram

20 On The Cover: Setting Yourself Up for Succession

by Kate Johanns

24 TIADA Auction Directory 2020 27 Tips for Businesses That Do Not Have an Employee Handbook

by Patrick Waites and Amber Hackett Crosby

31 Legislative Agenda 33 Best Practices for Reconditioning Used Cars

by VinCue

37 “ Less Searching, More Finding”: The Car-Buying Experience in 2030

by Inga Maurer

45 New Members 45 Local Chapters 46 Behind the Wheel

by Jeff Martin

Did You Know? Your TIADA Auction App coupons

expire at the end of each year! If you haven’t taken advantage of over $7,000 in discounts on auction fees for 2020, download the TIADA Auction App to start saving!

Learn more at: txiada.org/auction_app or turn to page 26.

Notice to all members concerning services and products: TIADA was established in 1944 to develop professional standards of service and conduct for the independent auto industry. Opinions expressed herein are not necessarily those of the TIADA management, the Board of Directors or the membership. Likewise, the appearance of advertisers or their indemnifications of TIADA does not constitute endorsement of the products or services featured.

Editor: Teresa Orkun

Magazine Ad Sales: Patty Huber, 512-310-9795

officers’ message

by Mark

2020 Continues to Challenge

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ithout question, 2020 has presented more obstacles for the independent dealer than any year in recent memory. The newest dilemma facing our industry seems to be that of inventory acquisition. Buying the number of units that we all need, at the price points that allow for our profit margin and/or cash flow models, has certainly become an issue.

Recent data from Edmund’s shows that used car trade-in values have increased 16.4% just since June of this year, while at the same time, the Manheim Index on wholesale prices is up 15.8% versus the same time period in 2019. These are simply the facts, and regardless of whether we like them or not, it is the current environment that we live in. It is simply not in our control.

Fellow dealer, my challenge to you this month is to focus specifically on what you can control while keeping a positive attitude for the future. Those of you who have been around the block a few times in this business know that what goes up, must come down, and there are ample reasons to believe wholesale used car prices will do just that. Like so many of the other challenges that each of you has already overcome in 2020, this one also gives you the opportunity to evolve and grow in this particular area of your business.

If you haven’t already, consider expanding your acquisition channels. Technology has certainly made our

Jones

MCMC Corporate (Burleson) TIADA PRESIDENT ELECT

world much different today than in years past. Are you utilizing the numerous online platforms available and digital sale opportunities, or are you just doing the same things and expecting different results?

Have you considered trying different markets and/ or auctions other than your “regular” spots? A wise old TIADA member told me years ago that when the fish move, it’s time to find a new lake! Take a look at your TIADA Auction App on your phone and you will find no less than 45 auctions here in Texas. How many are you truly looking at?

Have your considered adjusting your ACV model or changing the Condition Report grades that you generally look at? I have personally found that many of the lower Condition Report units (2.0-2.5) are only slightly more to recondition, but $1000-1500 cheaper.

No doubt, it takes work to find the “gems,” but nothing comes easy!

Finally, many community banks and credit unions are open to disposing of their repossessions directly rather than incurring the costs involved of auction disposal. Have you invested any energy trying to open a new door?

Hopefully, these few ideas will help to get you brainstorming. Keep a positive mindset and know for sure that we will overcome this inventory challenge soon AND that 2020 will eventually come to an end!

My challenge to you this month is to focus specifically on what you can control while keeping a positive attitude for the future.

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board of directors meeting minutes

October 19 | Courtyard by Marriott, Pflugerville, TX

compiled by Texas Dealer staff

Board Members in Attendance Robert Beck, Mark Jones, Ryan Winkelmann, Eddie Hale, Vicki Davis, Robert Blankenship, and Chad Lancaster joined in person; Greg Phea, Brad Kalivoda and Greg Reine joined via Zoom.

At its meeting on October 19, 2020, TIADA took the following actions: President Robert Beck called the meeting to order at 1:03pm

Minutes of the Last Meeting Secretary Ryan Winkelmann presented the minutes from last meeting.

A motion was made to accept the minutes.

Moved by Vicki Davis, seconded by Chad Lancaster — PASSED

Treasurer’s Report Treasurer Eddie Hale presented the Treasurer’s report.

A motion was made to accept the report.

Moved by Ryan Winkelmann, seconded by Robert Blankenship — PASSED

President’s Report Robert Beck appointed Russell Moore to fill vacant board position. He also announced Committee Appointments will remain the same as previous year.

Board Members reported on member phone calls.

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Special Projects Manager, Teresa Orkun, gave an update on required online pre-licensing and license renewal education.

The board identified legislative priorities for the 87th legislative session.

Jeff Martin presented report on 2020 Conference and gave an update on 2021 Conference.

Director of Associate Member Relations Patty Huber reported on Business Partner Program.

Treasurer Eddie Hale reported the Budget numbers for FY’20 and FY’21.

Board members discussed CPO Program requirements.

Old Business A motion was made to repay the $42,900 loan to the reserve account.

Moved by Eddie Hale, seconded by Robert Blankenship — PASSED

New Business A motion was made to accept Frazer as a business partner.

Moved by Eddie Hale, seconded by Mark Jones — PASSED A motion was made to adjourn the meeting Moved by Eddie Hale, seconded by Greg Phea — PASSED Robert Beck adjourned the meeting at 4:37 p.m.

Respectfully submitted,

Executive Director’s Report

Ryan Winkelmann, Secretary

Executive Director Jeff Martin provided an update on TIADA personnel and office dynamics during the pandemic and introduced upcoming Zoom town hall meetings.

A complete copy of any reports referenced in this document and more detailed notes from the meeting are on file at the TIADA office and available upon request.

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MAKE THIS NEXT TAX SEASON COUNT. ProblemIn the last few months we have seen the average vehicle cost increase upwards of $1,300. Unfortunately, most smaller dealers are not able to absorb this new cost and must pass it on to the customer. To help with this cost increase, dealers must either: 1. Increase the weekly payment amount to the customer (Higher weekly payment is not ideal for the current economic environment.)

2. Increase the length of the term (Increasing the length of the term will only reduce your ability to collect in the long term.)

3. Increase the required down payment (Where or how will your customers acquire addi�onal funds?)

SolutionThe Tax Max program provides our dealers access to their customers tax refund first, which allows the dealers to maintain a lower weekly payment benchmark, a reduced average term length and an increased down payment amount to help decrease your cash in deal.

Plus, we have an exclusive partnership with the Autotrader BHPH Inventory Center and Drive Now Network. The Autotrader BHPH Inventory Center allows our dealers to list their en�re inventory online to help increase their SEO and online presence, while the Drive Now Network is a lead genera�on pla�orm that provides real-�me leads from purchase ready consumers.

BuyHerePayHere.Autotrader.com 866-642-4107

TaxMax.com trs@taxrefundservices.com

813-987-2199

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legal corner

Transition to BHPH Requires Planning and Education

by Michael

Dealer Question: I’m relatively new to the car business and have so far only sold for cash or through third-party financing. I’m ready to jump into dealer financing, but need to know what some of the issues are with making the switch and what I can do to make the process smoother.

Response: There are huge differences between retail selling and dealer financing. Congratulations on taking the time to prepare for the switch. It’s not uncommon to run into dealers who just jumped in without looking ahead or acquiring the necessary knowledge to make the transition.

Licensing Issues

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ne of the first steps is making sure your state licensing status is up to date. You do not need a different dealer license from the Texas Department of Motor Vehicles (DMV), but now is a good time to make sure the license has been properly renewed and that address and contact information on file with DMV is accurate.

A seller-finance license from the Office of Consumer Credit Commissioner (OCCC) is required to initiate (or to hold and/or service installment paper). Since you have been using third-party lenders and financers, you should already have a seller-finance license. However, some dealers who sell only for cash have chosen not to get a seller-finance license. Those are going to have to obtain the OCCC license before entering into buy-here-pay-here transactions. Again, this is a good

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opportunity to make sure your existing OCCC license has been properly renewed and that address and contact information on file is current and correct.

State Sales Tax

Dunagan

W.

TIADA GENERAL COUNSEL

A dealer who expects to shift to BHPH needs to review his or her dealer management software to make sure it not only has contract and related document-generating capability, but also has the ability to coordinate accounting of payments and collection activity.

When it comes to state sales tax, you have been paying the motor vehicle sales tax on each sale at the time of title transfer. Third-party financiers typically require submission of the county tax receipt, which confirms the lien that will be placed on the title certificate, before funding the dealer.

One of the most important sales tax features for dealers who self-finance is the deferral of sales tax. To take advantage of deferred sales tax, a dealer must obtain a Seller-Finance Sales Tax Permit from the State Comptroller’s Office. With this permit, a BHPH dealer will submit sales tax on payments (including down payments) received directly to the Comptroller with a monthly or quarterly report instead of remitting to the County Tax Office.

A dealer who expects to shift to BHPH needs to review his or her dealer management software to make sure it not only has contract and related document-generating capability,

but also has the ability to coordinate accounting of payments and collection activity. In shopping for a new DMS, look for companies that are listed on the OCCC website as having submitted their programs for review.

Another consideration is the type of retail installment contract to be used. When working with third-party lenders and financers, contracts typically are set up with monthly payments and with sales tax advanced to the county 9

Upcoming Events 2020 TIADA DEALER ACADEMY Online registration available. www.txiada.org

November 11 Collect the Cash, Not the Car

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December 14 Cashflow, Budgeting,

Forecasting, Sales and Collections – Critical Topics for the Success and Continued Growth of your Business Sheraton Houston Brookhollow Hotel 3000 North Loop West Houston, TX 77092

OTHER TIADA EVENTS July 2021 25 Board of Directors Meeting

Kalahari Resorts & Conventions Round Rock, TX

25-27 TIADA

Conference and Expo Kalahari Resorts & Conventions Round Rock, TX

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tax office. BHPH contracts, on the other hand, usually offer weekly, bi-weekly, and semi-monthly payments to match debtor pay periods, and should provide for deferred sales tax. These changes will probably require using a totally different contract form.

Speaking of contract forms, I strongly encourage taking the time to read the eye-straining fine print on the form and familiarizing yourself with the terms and conditions it contains. Such things as your rights to insurance proceeds and when you can legally repossess collateral are spelled out.

Since the contract contains the agreement between creditor and debtor, knowing what’s contained on those pages can forewarn you before an actual problem crops up.

Titles and Title Monitoring

title certificates will be an added task that was not a part of your cash and retail business.

Even with a recorded lien, you will likely face attacks on your lien interest from third parties (such as mechanics, storage facilities, cash-fortitle businesses, and even police and governmental units). Constant vigilance is necessary to react promptly

A procedure needs to be in place to make sure deals are transferred as soon as possible after the sale, and that liens are properly noted on the title (transfer receipts from counties should be checked to make sure the lien hasn’t been dropped).

The lifeblood of the BHPH business is the vehicle lien. Since you have not been a lien holder before, it might be easy to underestimate the importance of promptly obtaining and protecting the lien on a vehicle sold and self-financed.

A procedure needs to be in place to make sure deals are transferred as soon as possible after the sale, and that liens are properly noted on the title (transfer receipts from counties should be checked to make sure the lien hasn’t been dropped). Prompt transfer not only ensures perfection of liens, but also prevents the loss of certain rights caused by late transfer. For instance, deferred sales tax is lost if a deal is not transferred within 60 days after the sale, and a perfected claim as a secured creditor in bankruptcy can be lost if that transfer took place more than 30 days after the sale. Safe-keeping of

to threats from those who would like to get their hands on your collateral.

Insurance

Once you sent off the transfer receipt and proof of insurance to the third-party lender, your insurance monitoring duties were, for the most part, over. Not so with BHPH, where keeping collateral insured is a major part of avoiding major losses. The growth of limited vehicle insurance policies, and the erosion of lien-holder protections in such policies has made it very difficult to ensure that every accident will be covered. For this reason, you should look into the alternative of offering T e x a s

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collateral protection insurance to your customers (vendors are listed in the member directory of the TIADA website). Another alternative is a self-administered debt-cancellation program that allows the BHPH dealer to charge the customer for waiving the insurance coverage provision of the contract. More information about debt-cancellation programs can also be found on the TIADA website.

If you stick with the traditional model of requiring your customers to obtain and maintain property damage insurance on their own, make sure the policies don’t have excluded drivers or only cover a named insured.

The OCCC has said that you can reject such policies.

Also make sure you are listed as the loss payee on the policy. Without loss-payee status, you have no claim against policy proceeds after an accident.

Repossessions

Since repossession is an integral part of the vehicle finance business it’s important to have a plan in place before the first repossession becomes necessary. Examples of the questions that arise when the process begins are: Do I have to send advance notice of repossession?

What do I do with personal effects in a repossessed

vehicle?

If you stick with the traditional model of requiring your customers to obtain and maintain proper ty damage insurance on their own, make sure the policies don’t have excluded drivers or only cover a named insured. The OCCC has said that you can reject such policies.

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F&I • Vehicle Service Contracts • GAP Insurance • Tire & Wheel Vehicle Protection Products • Property • Wreckers 2 Car Haulers • Cargo • Dealer Bonds • Personal Lines 11

What kind of notice do I send

after a repo?

How do I handle the resell of the

repossessed unit?

Can I pass on the repo charge to

the debtor?

The best source of answers to these and other questions is Texas Automobile Repossession: A Lien Holder’s Legal Guide, available from TIADA, which contains detailed explanations of the process as well as repossession forms and notices.

JULY-TLSAA Lubbock_TIADA ad.pdf

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You will need to be aware that there are limitations on the right to repossession. For instance, a bankruptcy filing by a debtor will generally prohibit repossession (and other collection steps) without permission of the bankruptcy court.

Also, the federal Servicemembers Civil Relief Act requires a court order to take possession of a vehicle being financed by someone on active duty in the military.

Something else that I would recommend for a new BHPH dealer 6/30/20

10:55 AM

would be to line up a repossession company that has a good reputation for safety and a standing in the community. Repossessions represent the biggest potential liability threat for dealers. Under Texas law, you as a lien holder will be co-liable with your repossession agent (even if the agent is an independent contractor) for any damages assessed by a court that arise from a repossession gone bad. Thus, having an agent that is properly trained, fully insured and willing and able to defend claims is worth the extra cost.

Keeping Your Collateral Functioning

As a lien holder, you will be interfacing with your customers on a potentially long-term basis. While most BHPH dealers sell vehicles without warranties (“as is” is the legal term), some dealers are giving customers limited warranties and offering service contracts for sale, adding the premiums to contract balances. It’s a given that breakdowns can interfere with car payments when a customer is already on a tight budget.

Consider how you want to handle repair and breakdown issues, both from the standpoint of marketing your products and trying to avoid an abandonment or expensive mechanic’s lien situation.

These are just a few of the topics that need to be thought about before transitioning from cash and retail sales only to dealer-financing. More information on these topics and others can be found on the TIADA website, through TIADA’s educational programs, and articles that have appeared in Texas Dealer magazine.

C

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Michael W. Dunagan is an attorney in Dallas, Texas who has represented the Texas Independent Automobile Dealers Association for over 40 years. He has written a number of books and hundreds of articles for trade journals and law reviews. His clientele includes dealers, banks, finance companies, auto auctions and credit unions.

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dealer spotlight

Name: Cal Sumrall Dealership: Cal’s Auto Sales Location: Abilene Joined TIADA: May 1988

Texas Dealer: Are you a seller finance or retail dealer?

Sumrall: Seller Finance Dealer TD: How long have you been a car dealer and how did

you get into the business?

Sumrall: I have been a dealer for 37 years, 33 years at the same location. I started buying cars and fixing them, then selling them for a profit.

I obtained a dealer’s license and did it part-time for about a year. I decided that I wanted to do it full-time and quit my job as an electrician. I have never worked for anyone else.

TD: What is the best or worst decision you have ever made in the business?

Sumrall: If they have been a good customer, when they make their last payment, we discount the note $100 to $200 or give them their last payment free. We encourage them to celebrate with a nice dinner on us. They remember that last transaction rather than calls for late payments. I have had men cry and women give me a bear hug after doing this. They always shop us for their next car.

TD: What are your thoughts on the age of the Internet?

Sumrall: The Internet is here to stay, with changes

occurring all the time. I am older and prefer one on one interactions, but the Internet is some people’s main contact source. I am concerned that our young people are spending too much time online while the outside world passes them by.

TD General thoughts on the auto industry right now?

Sumrall: The industry is in good shape now. The

old-time cheats and crooks are almost gone. Most people have a positive attitude towards used car dealers—not so many jokes anymore!

TD: If you had one piece of advice for a dealer getting into the business today what would it be?

Sumrall: My best advice for new dealers is to join TIADA, NIADA, and local business organizations to stay informed and current on laws and trends. I really like to stay posted on legislative issues; these updates help me run a successful business and avoid violations.

TD: Most memorable vehicle sold (or transaction)?

Sumrall: Bought a car from the Slim Willett estate and

sold cars to Ray Pack and Curtis Potter, country music stars. I have one customer who has done business with me for 35 years.

TD: How long have you been a TIADA member and what do you think are the primary benefits of membership for you and your dealership?

Sumrall: I’ve been a TIADA member for 30 plus years. For me, the benefits include receiving compliance and industry updates and the interaction with other dealers at the conferences.

TD: Biggest challenge facing your dealership today?

Sumrall: The cost of vehicles continues to rise, but

wages not so much. Today’s cars are more and more complicated, with computers, etc. Independent repair shops are fading because they cannot afford or access diagnostic equipment. It cost as much to replace two tire pressure sensors as it used to cost for four new tires.

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TD: What do you like to do on your spare time?

Sumrall: In my spare time, I like to restore classic

cars, go to music concerts (can’t beat some good classic country and oldies rock ‘n’ roll) and do road trips.

Want to share your story in an upcoming issue of Texas Dealer?

info@txiada.org T e x a s

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membership corner

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ber s h m i e

2020

1300 1250

p

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reat news again this month!

Since our last membership update in September, TIADA has gained another 28 members for a total of 1,270. You might recall our aim is to be 1,303 members strong by the end of 2020, meaning the association has already met 98% of its goal — only 33 more to go!

Coincidently, we are writing this membership update during TIADA’s anniversary month.

This time last year, TIADA was celebrating its 75th anniversary, a milestone that could not have been achieved without the efforts of TIADA members. So much has been accomplished over the years, including named driver insurance reform, mechanic’s lien reform, seller finance deferred sales tax among many other milestones, both big and small, thanks to each of you and your commitment to the industry.

This month, we wanted to take a moment to look beyond membership numbers and turn our attention to some of the individual members who have demonstrated a strong commitment to the association and contributed to the association’s victories along the way. For this issue, we started with one dealer, Cal Sumrall, out of Abilene, Texas who joined TIADA in 1988 — only 32 years ago!

Interestingly, Cal is one of nearly 150 members who have been with the association over 20 years. As TIADA Executive Director Jeff Martin mentioned in last month’s Behind the Wheel, getting to know the members of TIADA helps the association do a better job of representing members’ interests. We enjoyed visiting with Cal about his experiences in the industry and as a TIADA member. We invite you to do the same in this month’s Dealer Spotlight (page 14) — and thanks Cal, and each of you, for your continued involvement with the association!

Goal for2020 1303 Currently 1270

1150

1100

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Track TIADA’s Latest Progress @TXIADA #2020Goals 15

TIADA texas independent automobile dealers association

Become a TIADA Member

TIADA texas independent automobile dealers association

Business Name: ____________________________________________ Select one:

Dealer Member

Associate Member

Contact Person: ____________________________________________ Address: __________________________________________________ City: _________________________________________ State: _______ Zip: __________________ County: _____________________________ E-mail address: _____________________________________________ Business Phone: _______________________ Fax: ________________________ Cell Phone: ___________________________________________ Dealer P Number: ___________________________________________

Membership Dues: $499 New Member

Good through 12/31/2021.

Pay full amount today and receive the rest of 2020 for free.

Renewing Member

good through 12/31/2020.

Dues include NIADA and local chapter membership where applicable.

Who referred you to TIADA? __________________________________ Mailing Address (if different from above): __________________________________________________________ City: _________________________ State: _______ Zip: ___________

PLEASE INDICATE PAYMENT METHOD: Check or Money Order payable to TIADA Check # __________ Credit Card Card Number: __________________________________________________ Sec.Code: _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ Expiration Date: ____________ Monthly Payments - $41.58 per month Via Credit Card (Please enter card information above) Via Bank Draft (Authorization Agreement required - contact state office)

Mail or Fax Application To: TIADA Membership Services, 9951 Anderson Mill Rd., Suite 101, Austin, TX 78750 FAX 512.244.6218

www.txiada.org

512.244.6060

Dues are not deductible as charitable contributions for income tax purposes but may be deductible as miscellaneous itemized deductions, subject to IRS restrictions. It is estimated that 20 percent of your dues dollars is used for lobbying activities and is therefore not deductible.

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feature

Crisis Averted! Thanks to the Power of Advocacy

by Blake Ingram

I

Owner of Auto City in Dallas

recently read the following article by Allan Janssen on the website autoserviceworld.com. I found it interesting and learned something new (for starters, I had never heard of the term “scrappage” before). As I continued reading through the article, the one thing that really struck me is just how lucky we are to have a strong TIADA voice advocating for us and looking out for our industry. After you read the article, I will explain.

Vehicle Average Age Hits 11.9 Years

New research from IHS Markit shows that the average age of light vehicles in operation in the U.S. has risen to 11.9 years this year, about one month older than in 2019.

Though slight, the increase can generate new business opportunities for companies operating in the aftermarket and vehicle servicing sector.

Several factors have contributed to push U.S. average vehicle age higher. While vehicle scrappage rates have increased and would be expected to cause average age

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to drop, the growth in new-vehicle sales has plateaued.

Having fewer new vehicles added to the U.S. vehicle population has offset the potential drop in average age.

Underlying weakness in several segments of the market, combined with increased vehicle prices, provided upwards pressure on average age of vehicles, as consumers weigh their cyclical goods expenditure, opt for longer-term financing options or hold onto their vehicles for a longer period of time.

“At the start of 2020, all signs were pointing to moderate growth of the average age of vehicles through the first half of the decade, and there was certainly growing pessimism about how long the strong economic fundamentals could last,” said Todd Campau, associate director of Aftermarket Solutions at IHS Markit. “However, the COVID-19 pandemic has created the perfect storm to accelerate U.S. light vehicle average age in coming years.

This should be a positive side effect for the aftermarket, as the majority of repairs for older vehicles come through the aftermarket channel.”

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New-vehicle sales provide the pipeline for young vehicles coming into the marketplace. Prior to the pandemic, sales in the U.S. were already trending downward, representing just 6.1 percent of vehicles in operation in 2019, compared to 6.7 percent in 2016, the last record-setting sales year. Given the latest IHS Markit forecasts for the further slowdown in light of COVID-19, U.S. new-vehicle sales in 2020 are expected to account for 5 percent or less of all vehicles on the road in 2020. Declining new

vehicle share in the overall population means fewer younger vehicles to temper average age growth.

Scrappage is the measure of vehicles exiting the active population.

In 2019, scrappage rate as a percent of vehicles on the road was 5.1 percent, while in record sales year 2016, was just 4.6 percent. An interesting comparison year for 2020 would be 2009 when new vehicles sold represented 4.2 percent of vehicles in operation (VIO) and scrappage stood at 5.2 percent, resulting in a rapid

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increase in average age, increasing by 4 months throughout that year.

What does that have to do with TIADA’s legislative advocacy? All I could think about as I was reading this article was HB 1087 and SB 2240 that were filed just last session.

As proposed, these bills would have allowed a metal recycler, salvage vehicle dealer or used automotive parts recycler to purchase a vehicle without obtaining a title to the vehicle as long as the vehicle is at least 10 years old and was purchased solely for parts, dismantling or scrap. You read that correctly, WITHOUT obtaining a title to the vehicle. That also means, WITHOUT checking to see if the title has a lienholder.

TIADA got the word out, got dealers involved, and worked with the author of the bill to amend the language so that a metal recycler, salvage vehicle dealer or used automotive parts recycler could purchase a vehicle without obtaining a title to the vehicle as long as the vehicle is at least 12 years old, has not been subject to a lien in the past seven years and is purchased solely for parts, dismantling or scrap.

This bill did not end up passing.

However, if it were not for TIADA, most dealers in Texas would have never known about this bill and it most likely would have passed as it was originally introduced.

Much of my inventory is 7 or 8 years old. With terms extending to 48 months or longer, most of my collateral would be at risk before my customer completes their contract.

Would past due customers make some pocket change by selling their vehicles for “scrappage” versus having it repossessed? I don’t know, but I definitely don’t want to find out.

How much might you lose?

I hope you will take this article and share it with every used car dealer you know. It reminds me about the value of my membership and our most valuable benefit— ADVOCACY! T e x a s

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Collect the Cash, Not the Car Dealer Academy Presenter

in partnership with

This has been one of the most challenging years in the Buy Here, Pay Here industry. Dealers are finding that every collection opportunity needs to be capitalized on and that’s where this seminar can help.

Collect The Cash, Not The Car is designed Brent Carmichael,

Executive Conference Moderator, 20 Groups.

NCM Associates, Inc.

Time

9:00am - 4:00pm

Cost

to help you and your collection teams maximize your collection opportunities. Through this 1-day course you can expect to learn: • How to overcome the • How to maximize the common and not so collectability of every customer common customer objections • Effective skip tracing methods and tools • Effective phone collection techniques

$249 Members, Each Additional $199

Wednesday, November 11, 2020

$499 Non-members

DFW Airport, Texas

Sponsors

Hyatt Regency DFW International Airport 22334 North International Parkway | DFW Airport, TX 75261 972.453.1234

(must be from same dealership)

We have put together a very strong course outline that includes a wide array of role playing, classroom learning and interactive activities that will allow your collection team to soak up the information and come back to your dealership ready to collect the cash and not the car.

To register visit November 2020

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Txiada.org or by phone at 512.244.6060.

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on the cover

by Kate Johanns Freelance Writer

T

here’s a saying “the days are long, but the years are short,” and it’s as applicable to running your dealership as it is to any other facet of life. As you build your business, it’s natural to focus on building inventory, maintaining compliance, making payroll and, of course, generating a profit.

But just as important as building your business is determining how you will exit that business when the time comes — and placing yourself in the best position possible to do so. Good succession plans for dealers start years before they are ready to leave the industry.

“Dealers tend to look at their businesses through a microscope,” says Mark Burkholder, a financial

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specialist and vice president with Peachtree Planning. “You need to look through a telescope, looking out 15 to 20 years.”

That kind of future planning may seem daunting, but without it, you could be leaving money on the table, Burkholder says: “Planning is efficient. Reacting is expensive.

What I tell people is that when you head into retirement, you only have one opportunity.”

The time you invest in your succession plan today could mean the difference between liquidating your business for its assets and selling it for a profit as a going concern.

It could also mean the difference between children who no longer speak to each other and a happy set of heirs.

Of Kith and Kin

When dealers leave the industry, their dealerships typically meet one of three fates. The dealership is transferred to a trusted employee, it’s passed on to a child, or it’s sold to a third party. The first two options have the potential to keep your life’s work intact. The third potentially sells your business short. All three require more time and planning than you might initially think.

Scott Allen, owner of Auto Land in Haltom City, has been in the industry for almost 30 years. He got into the business with his father, who passed away in 2003. At the time of his death, Allen’s father owned 90% of the dealership, and that ownership went to Allen’s mother. It took three years for Allen to make sure everything was in T e x a s

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the right place for him to purchase the dealership from his mother.

“It was a lot of due diligence,” Allen says. “Even with all the trust there, we had to make sure the CPAs and the lawyers had the t’s crossed and the i’s dotted. You have to do a lot of background work to get the exact value for the portfolio and figure out the tax consequences and how all of that is going to play out.”

Daniel Gomez, owner of Cars America in Austin, acquired his dealership as a trusted employee. He met James Wood when he was 18 and working in his family’s one-stall body shop.

“I was just looking for work,” Gomez recalls. “I pestered him enough to let me work on a car, and I leveraged that into being able to come by and watch what he did. He helped me get into the wholesale business, and when Drive Time and CarMax basically made wholesale nonexistent, I came to work as a buyer for him in 2009. That day, I told him what I was doing here — that by the time I was 40, I wanted to own it. He told me he was never going anywhere.”

Wood became Gomez’s mentor and a father figure, and when he passed away, plans were already in place for Gomez to take over the business. Those plans were critical to a smooth transition.

“That’s the tricky part of navigating this — staying objective through emotions,” Gomez says. “Not everyone is born to be an entrepreneur.

Ultimately, you have to make the best decision for your legacy despite your feelings.”

And emotions can definitely enter the picture when it comes to inheritance. Burkholder knows of more than one family where the children got along great — until the parent brought a multimillion-dollar business into the equation. When it comes to heirs, Burkholder advises his clients that “fair is not equal.” If one child has worked in the business his entire life, but his brother has not, November 2020

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splitting the dealership down the middle could make for hard feelings. There could be other ways to be “fair.”

But what if your children don’t have any interest and there isn’t an employee with the financial wherewithal to purchase your dealership? The right answer might be selling your business as a going concern or selling your inventory and existing notes.

The latter is the right solution for Kathrine Tolsch, owner of CICO Auto Sales in Dallas.

Tolsch didn’t set out to join the BHPH industry — in fact, she had no interest in joining her father’s dealership and pursued her own career in accounting. But when her children were school age, her father suggested she help her mother with the bookkeeping, and a few hours a week turned into a few hours a day and then a few days a week. When her father passed away in 2003, she took over the dealership to continue supporting her mother.

“He had cleverly reeled me in,” Tolsch says. “Now I was dealing with the car end. TIADA and NIADA resources helped a lot.”

Over the past 17 years, Tolsch and her husband, who is a vice president of IT at a financial institution, have had many conversations about the future of the dealership. Would he eventually join her in the business? Would their sons, who were pursuing their own careers, join them?

The conversations became reality when her mother passed away in February of this year. Tolsch took some time at a friend’s home to clear her mind.

“I thought, what do I want to do — do I want to continue with the dealership?” Tolsch says. “Is this something I want to manage for the next 10 to 15 years? After a lot of deep reflection, I decided I wanted to retire.”

Tolsch is working to wind down

635 Fritz Dr. Ste 210 Coppell, TX 75019 469-637-0150

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her operations by the end of the year. The lease for her dealership’s location will be up, so the timing is right. She is planning to sell her inventory at the auction and has buyers in mind for some of her notes. She’ll collect out the rest from a nearby one-room office.

And then? She’s going to ramp up her volunteer work for a national nonprofit and renovate homes for lease.

A Mindset that Generates Multiples

If you haven’t found your protégé but want to set yourself up for a potential profit, you’ll need to invest time in some solid planning.

“I’m an entrepreneur; I often see others in my circle sell their businesses for multiples,” says Jim Rhoads, founder and CEO of The Octane Group. “But in this industry, there’s not a history of people getting real value, which seems like a real shame. If it’s creating revenue and cash flow, there should be a method to create and translate value.”

Based in Salt Lake City, Rhoads encounters many tech entrepreneurs, and the advice he gives his startup clients is just as applicable in the BHPH industry. “I’m asking my clients from the very beginning to structure their business in a way that they can exit or position for a smooth transition.”

When you’re building a business, it’s easy to skip the kind of infrastructure building that makes it easier to market and sell a business, the things Rhoads calls the “three Ps”: policies, procedures and philosophy. He encourages dealers

to develop a mission statement, a vision for company culture and a business plan, and he works with clients to develop a framework for policies and procedures.

“Our in-the-trenches experience helps us to know better than early-stage dealers what holes they have to plug in their business,” he says. “There are potential areas of leakage, such as theft and mismanagement, and we help them keep a lid on these things.”

A BHPH dealer, Rhoads says, has a lot of balls to keep in the air: underwriting, sales, inventory management, personnel, collection, security limits, internal controls, etc. A clear and consistent set of rules makes it possible to document a dealership’s value, thus allowing potential buyers to see how they might be able to maintain a similar level of profit from the dealership.

“BHPH dealers tend to fly by the seat of their pants,” Rhoads says. “That flexibility is a beautiful thing BHPH dealers need to retain. It’s just that sometimes too much flexibility means a dealer doesn’t have a consistent set of rules. To create any real value and make the dealership a target for acquisition, dealers need to create materials in a way that makes it easy for someone else to come in and take over that business as a going concern. Someone else needs to be able to see that they can reasonably expect similar results.”

Sometimes you don’t have to look too far to find the right person to help strengthen your business’ infrastructure. For Greg Phea, owner of Austin Rising Fast Motor Cars, that person was his daughter, Chloe, now the dealership’s human resources director. Although she has a scientific background, she began working with her father after her college graduation, and he’s thrilled with the results.

“We always had our vision and our values, but my daughter came in and reorganized everything,” Phea says. “She reorganized our buying and our selling structure. It is awesome to have your daughter sit with you every day.”

Calling in the Experts

One thing is for sure: When you start succession planning, don’t go it alone. Consult your CPA and your attorney; reach out to TIADA with your compliance questions. Transferring your business to another owner, blood relative or not, is a complicated matter and can cost you a lot of money. The right advice can help you reduce your tax consequences. A financial planning expert can also help you structure your exit deal so you can achieve your goals. For instance, you might want to stay on as a consultant to generate an income stream. It pays to have someone check your work.

“I know my gift is in selling,” Phea says. “I try to surround myself with the best people to form a more unified vision. The more eyes you have on a situation, the better off you are.”

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November 2020

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Dallas-Ft. Worth Metroplex

Austin

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NEW

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www.allianceautoauction.com 9426 Lakefield Blvd., Dallas, TX 75220 214.646.3136, Fax 469.828.8225 GM: Chris Dean Wednesday, 1:30 p.m.

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$AVE : $200 24

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C.M. COMPANY AUCTIONS, INC.

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www.americasautoauction.com 219 N. Loop 12, Irving, TX 75061 972.445.1044, Fax 972.591.2742 GM: Ruben Figueroa Tuesday, 1:00 p.m. / Thursday, 1:00 p.m.

$AVE : $200

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IAA FORT WORTH NORTH*

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$AVE : up to $200 Sell Fee

MANHEIM DALLAS**

www.manheim.com 5333 W. Kiest Blvd., Dallas, TX 75236 214.330.1800, Fax 214.339.6347 GM: Rich Curtis Wednesday, 9:00 a.m.

$AVE : $100

MANHEIM DALLAS FORT WORTH**

www.manheim.com 12101 Trinity Blvd., Fort Worth, TX 76040 817.399.4000, Fax 817.399.4251 GM: Nicole Graham-Ponce Thursday, 9:30 a.m.

$AVE : $100

METRO AUTO AUCTION DALLAS

www.metroaa.com 1836 Midway Road, Lewisville, TX 75056 972.492.0900, Fax 972.492.0944 GM: Scott Stalder Tuesday, 9:00 a.m.

$AVE : $200

TEXAS LONE STAR AUTO AUCTION www.tlsaa.com

2205 Country Club Dr., Carrollton, TX 75006 214.483.3597, Fax 214.483.3814 GM: Patrick Stevens Tuesday, 1:00 p.m. / Thursday, 2:00 p.m. $AVE : $200

El Paso EL PASO INDEPENDENT AUTO AUCTION www.epiaa.com 7930 Artcraft Rd, El Paso, TX 79932 915.587.6700, Fax 915.587.6700 GM: Luke Pidgeon Wednesday, 10:00 a.m.

$AVE : $200 T e x a s

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IAA EL PASO*

www.iaai.com 14651 Gateway Blvd. W, El Paso, TX 79927 915.852.2489, Fax 915.852.2235 GM: Jorge Resendez Friday, 10:30 a.m.

$AVE : up to $200 Sell Fee

www.iaai.com 2535 West. Mt. Houston, Houston, TX 77038 281.847.4700, Fax 281.847.4799 GM: Alvin Banks Wednesday, 9:00 a.m.

$AVE : up to $200 Sell Fee

IAA HOUSTON NORTH*

MANHEIM EL PASO

www.manheim.com 485 Coates Drive, El Paso, TX 79932 915.833.9333, Fax 915.581.9645 GM: JD Guerrero Thursday, 10:00 a.m.

$AVE : $100

www.iaai.com 16602 East Hardy Rd., Houston-North, TX 77032 281.443.1300, Fax 281.443.4433 GM: Christina Nieves Thursday, 9:00 a.m.

$AVE : up to $200 Sell Fee

MANHEIM HOUSTON

Harlingen/McAllen IAA MCALLEN*

www.iaai.com 900 N. Hutto Road, Donna, TX 78537 956.464.8393, Fax 956.464.8510 GM: Ydalia Sandoval Tuesday, 9:00 a.m.

$AVE : up to $200 Sell Fee

BIG VALLEY AUTO AUCTION**

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$AVE : $200

www.manheim.com 14450 West Road, Houston, TX 77041 281.924.5833, Fax 281.890.7953 GM: Brian Walker Tuesday, 9:00 a.m. / Thursday 6:30 p.m.

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ADESA HOUSTON

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$AVE : $200

AMERICA’S AA HOUSTON

www.americasautoauction.com 1826 Almeda Genoa Rd, Houston, TX 77047 281.819.3600, Fax 281.819.3601 GM: John Swofford Thursday, 2:00 p.m.

$AVE : $200

AMERICA’S AA NORTH HOUSTON www.americasautoauction.com 1440 FM 3083, Conroe, TX 77301 936.441.2882, Fax 936.788.2842 GM: Buddy Cheney Tuesday, 1:00 p.m.

$AVE : $200

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$AVE : $200

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$AVE : $200

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Midland Odessa IAA PERMIAN BASIN*

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San Antonio

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Longview ALLIANCE AUTO AUCTION LONGVIEW

Houston

November 2020

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www.iaai.com 5577 Highway 80 East, Longview, TX 75605 903.553.9248, Fax 903.553.0210 GM: David Cooper Thursday, 9:00 a.m.

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Lubbock IAA LUBBOCK*

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$AVE : up to $200 Sell Fee

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$AVE : $75/Quarterly

Lufkin LUFKIN DEALERS AUTO AUCTION

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$AVE : $200

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IAA SAN ANTONIO*

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$AVE : up to $200 Sell Fee

MANHEIM SAN ANTONIO**

www.manheim.com 2042 Ackerman Road San Antonio, TX 78219 210.661.4200, Fax 210.662.3113 GM: Mike Browning Wednesday, 9:00 a.m.

$AVE : $100

SAN ANTONIO AUTO AUCTION**

www.sanantonioautoauction.com 13510 Toepperwein Rd. San Antonio, TX 78233 210.298.5477 GM: Brandon Walston Tuesday, 10:00 a.m. / Thursday, 1:30 p.m.

$AVE : $200

Tyler GREATER TYLER AUTO AUCTION www.greatertyleraa.com 11654 Hwy 64W, Tyler, TX 75704 903.597.2800, Fax 903.597.3848 GM: Wayne Cook Tuesday, 5:00 p.m.

$AVE : $200

Waco ALLIANCE AUTO AUCTION WACO

www.allianceautoauction.com 15735 I-35 Frontage Road Elm Mott, TX 76640 254.829.0123, Fax 254.829.1298 GM: Carmen Robinson (Sales Manager) Friday, 10:00 a.m.

$AVE : $200

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feature

Tips for Businesses That Do Not Have an Employee Handbook

by Patrick Waites and Amber Hackett Crosby Johnson DeLuca Kurisky & Gould, P.C.

O

ne common difference between large employers and small is employee handbooks. Smaller employers such as the average independent dealer often lack the resources to devote to creating a handbook for only a few employees. Although a “handbook” may have less importance in a small-employer context, independent dealers should not miss the opportunity to establish clear expectations of the employment relationship and the liability protections that can result. We recommend, at a minimum, providing the employee a document containing the following information:

Terms of employment — Texas is an “at-will” em ployment state, meaning that unless there is an agreement to the contrary, you can terminate an employee for any reason that does not violate the law or for no reason at all. Stating in writing that employment is “at will” will make it clear that there is no contract entitling the worker to continued employment.

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Attendance — Employees who develop attendance

problems are also more likely to complain that their resulting termination was somehow improper. A clearly articulated attendance policy can afford some protection. It should advise employees that they are expected to be at work on time every day and provide information about whom an employee should call if the employee will be absent or tardy. Make it clear that three consecutive days of “no call, no show” will be considered a voluntary quit. That will enable you to make explicit reference to the policy at the time of termination.

Safety — While operating an independent dealer ship may not be particularly hazardous, do inform new employees of any relevant safety rules and set penalties for failing to follow those rules. Require mandatory and immediate reporting of any onthe-job injury, as well as any potentially hazardous

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situation. This can provide liability protection in the event of an incident.

Workplace Violence — Make it clear that the

company has zero tolerance for any actions that threaten its employees, customers or vendors. Ban all weapons in the workplace or on company premises, including the company parking lot, for obviously liability reasons. Designate a management representative to whom workplace violence threats must immediately be reported.

Electronic Devices and Privacy — You provide

employees access to computers, electronic devices, software, communication devices, and Internet service because they are necessary to your business. Whether you allow their use for personal matters by employees is a matter of security and convenience determined on a case-by-case basis, but the safer course is to reserve their use for company business. Regardless, employees need to clearly understand that they should not expect privacy while at work. This extends to their use of company devices, which is subject to monitoring or search. Reserve the right to monitor all employee use of company computers, voicemail, internet and e-mail.

In the absence of clear communication, an employee may claim that his or her privacy was violated. In addition, employees should be made aware that antiharassment and anti-discrimination policies apply to e-mail and internet use. Prohibit the illegal download or upload of copyrighted materials.

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Video or Audio Surveillance — Consistent with the

prior point, if the company will be performing video or audio surveillance in the workplace, put the employees on notice of that. Explain the reason for such surveillance and affirm that restrooms (or dressing rooms, nursing rooms, or similar spaces) will not be surveilled.

Drugs and Alcohol — Clearly state that the com

pany is committed to a drug-free workplace. State that reporting for work under the influence or in the possession of alcohol or drugs is prohibited. Reserve the right to conduct pre-employment drug testing, reasonable suspicion drug and alcohol testing, drug testing after an on-the-job accident, and random drug testing.

This policy, if enforced, can provide liability protection in the event of a drug or alcohol related incident.

Employee Rights — Although the requirement

varies by situation, all employers have some obligation to inform employees of their rights under federal and state law. This is done by placing posters in a common area at the business. The Department of Labor provides an interactive tool that can assist an employer with identifying the appropriate posters related to laws that DOL enforces. You can find it at https://www. dol.gov/general/topics/posters. The state requirements are located at https://www.twc.texas.gov/businesses/ posters-workplace.

Leave Policies — There is no general requirement

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provide paid or unpaid leave, but most employers do allow employees to accrue “PTO” (paid time off) or sick leave. If you do so pursuant to a written policy, the policy must be strictly adhered to, as it is subject to enforcement under the Texas Payday Act. While that makes it tempting to simply not have a written policy, the lack of a policy can lead to confusion, dissatisfaction, or even discrimination complaints. An exception to the lack of a leave requirement may arise if leave is a reasonable accommodation necessary in the event of a disability, pregnancy, or other protected condition.

In addition, there are statutory leave requirements that apply in some circumstances, such as military leave or the Family and Medical Leave Act (FMLA). Most independent dealers will not be subject to the FMLA based on the number of employees they have.

Non-Discrimination and Anti-Harassment

— With increased awareness of sexual discrimina-

tion and harassment in the workplace, expect to address the issue with your employees often. Expressly prohibit harassment or discrimination of any kind.

Harassment may take the form of threats, unwelcome advances, verbal abuse, physical abuse, or the display of sexually suggestive objects. Federal and state laws prohibit discrimination across a number of protected classes, including race, sex, and age. Specify that the company will not discriminate on these or any other basis protected by local, state or federal law. Require

immediate reporting of harassment or discrimination to management (or human resources if the dealer is large enough to have a dedicated HR person). State that a violation of this policy may result in corrective action up to and including termination of employment. Importantly, if a complaint is received, the company has an affirmative duty to investigate, even if the complaint is made against the principal. In that case, the company should contact its lawyer immediately to perform the investigation.

Receipt and Acknowledgement

The more of this that you can document in writing the better. Regardless, provide employees with a document that acknowledges your discussion of these and any other employment policies. The receipt document should include a statement that the employee has discussed the policies with management and understands that the employee should abide by guidelines. Have the employee sign and date this page and keep a copy of the signed acknowledgment in the employee’s file. Following these steps may help you avoid potential problems that might otherwise arise.

Mr. Waites is Senior Counsel, and he represents automotive dealerships in all aspects of their business, including commercial litigation, consumer disputes, and employment matters.

Ms. Crosby is an associate and focuses her practice on labor and employment law.

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November 2020

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TIADA Legislative Committee Report On August 11, 2020, the TIADA Legislative Committee met via conference call. The report from that committee meeting can be found below. It was presented to the board during the October board meeting and no action was taken. The current TIADA Legislative Agenda follows, and as always, it can be found on the TIADA website.

Committee Members Present

General Legislative Policies

Chair Erika Blankenship, Chris Knox, Blake Ingram, Chad Lancaster, Greg Zak, John Freeman, Christie Wienecke, Chris Elkins, Armando Villarreal, Jack Davis, Austin Hunter, Scott Allen, Phil Lathrop and Streeter Berry. TIADA staff present: Jeff Martin.

a. TIADA supports legislative changes that improve and enhance the dealer licensing process and promote honesty and fair dealing while protecting Texas dealers from unfair competition from unlicensed individuals.

The Legislative Committee met via conference call August 11, 2020.

b. TIADA opposes unnecessary regulation that creates paperwork and manpower burdens on law-abiding dealers without providing corresponding benefits to the industry and the public.

Chairwoman Blankenship called the meeting to order at 2:30 p.m.

The committee discussed various issues and prioritized them in the following order: • Eliminating Form VTR-136 • Addressing the amount of the SIT fine • Increasing the Doc Fee Safe Harbor • Increasing the safety inspection timeframe • Increasing the dealer bond

The Legislative Committee reviewed the 2020 Legislative Program and recommended the following changes: Current Legislative Issues 6(c) TIADA supports a used motor vehicle sold by a dealer must be inspected 12 months preceding the date the dealer sells the vehicle in order to be transferred.

Rationale: Having a vehicle inspected every 6 months creates unnecessary expense for the dealer and the consumer with little to no measurable safety benefit.

Meeting adjourned at 3:48 p.m.

Respectfully submitted, Erika Blankenship Texas Auto Center Committee Chair

c. T IADA supports measures that enhance government efficiency and maximize benefits to Texas citizens and the industry at the lowest cost. d. TIADA supports measures that increase enforcement efforts against those who operate in the industry illegally, unlicensed, and who defraud dealers and the public. e. TIADA opposes any measure that would impede that ability of a dealer to transfer a motor vehicle title, or that would adversely impact the integrity of the Texas motor vehicle title system. f. T IADA supports efforts to enhance and improve the temporary tag system and opposes any effort that would hinder, without due process, a dealer’s ability to issue temporary tags. g. TIADA supports efforts to enhance the industry voice of independent dealers within Texas governmental branches and maintain a consistent and open line of communication with the Texas Department of Motor Vehicles, Comptroller and Office of Consumer Credit Commissioner. h. TIADA supports working with other vehicle lienholder groups to protect first recorded vehicle liens from attempts by third parties to impose superior liens for mechanic’s claims, and storage and towing charges. i. TIADA supports an automobile environment that creates favorable protections for automobile dealers, lienholders and customers. (cont’d on next pg.)

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Current Legislative Issues 1. Dealer Education

5. Taxes and Fees

a. T IADA supports legislation that would require a minimum amount of approved education for new dealer licensing applicants before a general distinguishing number would be issued. The education would address basic issues that all dealers should know, including dealer licensing regulations, title transfer procedures, payment of sales tax, vehicle inventory tax, and general consumer law.

a. TIADA supports fair and equitable taxation policies that do not create an undue burden on the industry.

2. Automobile Liens

d. TIADA supports a restructuring of the penalties associated with delinquent vehicle inventory tax payments.

a. T IADA opposes any legislative change that would adversely impact a vehicle lien holder’s rights in a vehicle, or that would place other claimants in a superior position to that of the lien holder. b. TIADA supports legislation that would place a prior, perfected mortgage lien in a superior position to a mechanic’s lien. c. TIADA opposes any measure that would take away or impede the ability of an independent dealer to recover collateral in which the dealer has a valid security interest as a lien holder.

b. TIADA supports measures that would increase the efficiency of tax collection processes. c. TIADA supports a fiscally conservative approach to the mandatory fee structures imposed by regulatory agencies.

6. Automobile Titling a. TIADA supports an approach to streamlining and modernizing the title application and issuance process that increases efficiency and does not impede commerce. b. TIADA supports measures that would reduce unnecessary paperwork by eliminating form VTR-136 as a required document for independent dealers.

7. Surety Bond

3. Curbstoners a. TIADA supports legislation that would allow and encourage government agencies to more aggressively enforce curbstoning laws (i.e. vehicles placed for sale on the side of the road).

a. TIADA supports a reasonable surety bond that is responsive to the needs of the industry and provides adequate protection.

4. Industry Relations

a. TIADA supports the ability of dealers to charge a reasonable convenience fee on credit or debit card payments.

a. TIADA supports having a position for an independent dealer on the governing body of any agency that regulates the independent automobile dealer industry.

8. Credit Card Fees

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feature

Best Practices for Reconditioning Used Cars This article was originally published by VinCue and is shared with permission

T

o earn top dollar in the automotive industry, you have to offer top products. If you deal with used cars, you know that most of the inventory you stock will need some love before you can present it to a customer.

Auto reconditioning is what transforms banged up trade-ins into cars that customers will love.

The used car market is booming, which is pushing the price of used vehicles higher than ever. To compete with these rising prices and customer expectations, dealers need to invest in better reconditioning practices. Doing so will not only improve a dealer’s profits, but provide the long-term benefit of happy customers.

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What is Auto Reconditioning?

No used car, whether bought at auction or through a trade-in, will be immediately ready for retail. Investing a small amount of time and money to fix minor issues can significantly boost a vehicle’s retail value. This is the purpose of reconditioning.

Reconditioning includes, but is not limited to: Engine repairs

Oil and filter changes

Maintenance on the drivetrain and suspension

Equipping new brake pads or tires

Fixing dents, chipped paint, cracked windows

Buffing out scratches

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Auto reconditioning attempts to restore a vehicle to its optimal condition so it can be sold at the maximum price the market will allow.

The Benefits of Auto Reconditioning Reconditioning ensures buyers leave the lot happy and return with a smile when it’s time to purchase another vehicle. The benefits of reconditioning far outweigh the cost in time and money when done correctly:

Higher Retail Prices Reconditioned vehicles can

be sold for a higher retail price. There is usually a several thousand dollars variance between vehicles in average condition and those in clean condition.

In the image below, you will see how the same exact type of vehicle is appraised differently based on its condition:

The Cost of Reconditioning Reconditioning is an investment, but it does not have unlimited returns. The money spent on reconditioning needs to be monitored and compared to the margin you make on each vehicle. It’s essential to accurately appraise a vehicle and factor in reconditioning costs before approving the work.

A good ballpark for reconditioning costs is $1,000.

If you designated the vehicle as a retail unit, then anything higher than $1,000 should be subject to review: Is the vehicle in high demand?

Does it have high mileage?

Can you sell it quickly enough?

The goal for reconditioning is to restore a vehicle to its maximum retail price while spending the least amount possible. However, this should never come at the cost of quality.

The condition of a vehicle can have a big impact on the market retail value.

Source: VinCue

The condition of a vehicle can have a big impact on the market retail value. Source: VinCue

Faster turn rates Humans like things that look

nice, and the market for fixer-uppers is much smaller than for vehicles ready to drive off the lot. This is why reconditioned vehicles are more likely to find a buyer quickly.

Offer warranties and certifications

Reconditioning allows your dealership to issue certifications and warranties, which increase consumer trust and satisfaction.

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Best Practices for Auto Reconditioning Cost and speed are the two major considerations when reconditioning vehicles to sell. Time is money, and every day your vehicle goes unlisted while waiting reconditioning is money lost.

Remember the saying: “20% of the effort is responsible for 80% of the result.”

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Here are some reconditioning best practices to make sure you put in the right 20% in every vehicle:

1

Optimize Reconditioning Costs – Dealers

should constantly root out inefficiencies and excess costs in their reconditioning process. One way to reduce costs is by using quality, non-OEM parts. Dealers should make sure, however, that this doesn’t disqualify them from any certification programs.

2 3 4

Fast Turnaround – Complete reconditioning

within 3-4 days from acquiring the vehicle. More days in reconditioning means longer turn rates and less gross profit. The optimum period to sell the vehicle is 30 days.

Buy Better Vehicles – Sometimes the best way

to reduce reconditioning costs is to buy vehicles that need less work. Look for vehicles that are virtually ready to roll off the lot to offset the cars that need extra work.

Have a Reconditioning Team – Don’t make

your services team decide between reconditioning a vehicle and working on a customer order. Eliminate this conflict by having a dedicated reconditioning team.

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Recondition for Wholesale – Some dealers

overlook reconditioning for wholesale, but this is a mistake. Dealers are human too, and everyone is more likely to buy a vehicle that is in good shape.

Reconditioning a vehicle before auction could help you net a few hundred, even a few thousand dollars more.

Investing in Reconditioning

Can you afford the investment in reconditioning? The real question is, can you afford not to invest?

Reconditioning used vehicles is an investment that can reap huge dividends for your dealership. When done right, reconditioning can add thousands of dollars to the final selling price, netting you higher profits and happy customers. The benefit is multiplied with every extra vehicle you sell thanks to faster inventory turn rates.

Doing reconditioning the right way takes its own investment of time, education, and tools. Dealers who commit wholeheartedly to improving their reconditioning practices are setting themselves up for success for a long time.

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feature

“Less Searching, More Finding”: The Car-Buying Experience in 2030

by Inga Maurer

Partner at McKinsey & Company

An interview of Matthew Gold, former CSO of Cars.com In this interview, the former chief strategy officer of Cars.com predicts a seamless digital process for car buyers—and a necessary evolution for dealers.

F

rom 2018 to 2020, Matthew Gold was the chief strategy officer of Cars.com — one of the world’s largest digital marketplaces for automobiles, with a reported 2019 annual revenue of $606.7 million — where he was responsible for enterprise strategy, newbusiness development, corporate development, and strategic partnerships. Gold previously worked at Google as head of strategy and operations for emerging-market partnerships at YouTube, as well as at Google Consumer Surveys. He recently spoke with McKinsey’s Inga Maurer about how consumers will buy cars in the future. The following is an edited version of their remarks.

McKinsey: Let’s begin with the consumer perspective. Surveys show that people generally don’t enjoy the November 2020

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car-buying experience; they don’t trust car salespeople and they don’t like the negotiation process. What will the car-buying process look like in 2030?

Matthew Gold: There will be two major changes

to the car-buying process a decade down the road, and both already have the groundwork laid. The first involves many more options for where and how we buy cars in the US. Some could involve a dealership, some might not. That’s a huge change in how we think about auto retail in the US. And we’re already seeing some of that. In new-car sales we’re seeing Tesla go direct to consumer, and in used-car sales we’re seeing Carvana find digital ways to reach consumers directly without a traditional car-dealer experience.

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The second major change is that you will see much, much more of this process move online. This has also already started. But by 2030, you will see the full autoretail process becomes digital.

Everything from discovery — “what car is right for me?”

— all the way through the transaction itself. So you’ll be able to buy the car online all the way through delivery without setting foot in an auto showroom if you choose not to.

The days when you walk in a dealership uncertain of the exact car you want, and not 100 percent sure how you’ll pay for it, or what you’re going to pay, or whether you’ll lease or finance, who your lender will be — those days will be a thing of the past.

You’ll go into the dealer already knowing exactly what you want, what you should pay for it and how, and what add-ons you want. That will significantly decrease the amount of time you spend in the dealership. It will also decrease the opportunities for traditional sellers to [work] add-ons into the car-buying process. Today a lot of the car-buying margin comes from add-ons. Those [sales] will be a lot harder in the future when the customer already knows what they want the moment they walk in.

McKinsey: In that scenario, personalization will be

critical, right? How personalized will car buying be a decade down the road?

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Sur veys show that people generally don’t enjoy the car-buying experience; they don’t trust car salespeople and they don’t like the negotiation process.

What will the carbuying process look like in 2030?

MG: Personalization is the future of not only auto re-

tail but also retail as a whole. And the leveraging of big data — the incredible stitching together of data about customers — will be the future of the car-buying experience. That means a bunch of different things.

One is that the amount of time customers spend

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going through the car-buying funnel will dramatically decrease, which is a good thing. There’ll be a lot less searching and a lot more finding. The days of sifting through thousands of cars to figure out which one you want are over. Instead, algorithms will do the searching for you. They will integrate data that you provide and that other brokers already have.

You won’t have to enter a bunch of information into fields. It’ll know what’s right for you, and it’ll make smart choices. So instead of going onto Craigslist or a dealer’s website and scrolling through inventory, you could just say [to your virtual assistant], “Find me a used car.”

And it will do all the math and all the work behind the scenes to figure out exactly which car you need, what’s available, what you should pay for it, what you can afford to pay for it, and how to go and pick it up.

And it’ll probably even make the pickup appointment for you.

McKinsey: What are the implications for dealerships

in 2030?

MG: From the dealership perspective, this means having the tools available to cut down search time.

Otherwise, customers will go elsewhere — we’ve seen this time and time again. The quality of recommendations from search engines will dramatically increase customer November 2020

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satisfaction and their willingness to use the platform.

Dealers will need to get much smarter about understanding their customers and about offering a sales experience that makes sense for each customer. The days of the salesperson asking, “So what brought you in today?” should be over. The dealer should already know that. They should already have the cars waiting.

They should already have payment packages designed and ready. Being in a place where the entire shopping experience can be customized to the individual buyer will go from being a luxury to being the norm and the expectation.

In other words, dealers will have to adapt and change. I don’t think the dealership is obsolete. There will continue to be a role for local auto dealerships in a variety of different markets in the US and overseas.

What will be different is that dealers will have to compete with other players they are not used to competing with — including OEMs that sell direct and digital used-car players. And they’re going to have to compete with one another in new ways over longer distances.

The monopoly that the local dealer had over customers in its own geographic area is probably gone.

McKinsey: As we speak, the COVID-19 pandemic

is still very much top of mind for most of the world. Will the auto industry feel any long-term effects from this crisis in 2030?

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MG: It’s a little too early to tell. What we’re seeing is people pushing more and more of their retail experience online. And they’re pushing less and less of their purchase time into the dealership because of physicaldistancing requirements.

I saw a figure the other day: 10 percent of CarMax’s sales recently were done via delivery. The question is going to be how much of that is pushed into a postCOVID-19 world. I think you’re going to see COVID-19 accelerate a change that was already slated to happen.

People are going to get much more comfortable with many more choices; dealers are going to realize that they have no choice but to accommodate those choices. I don’t think people are going to jettison the dealer experience the moment COVID-19 ends, but I do think you’re going to see increased comfort on both sides of the transaction with a digital auto-buying experience.

McKinsey: Given the future that you’ve described, what kinds of investments should dealers make today to win in 2030?

MG: Today’s local dealers in the United States need to do two things to maintain their competitiveness and role in the car-buying process. The first is they need to invest in a series of end-to-end digital partnerships to make sure that the offering that they have is similar to, if not better than, what’s being offered by the digital-only players.

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There are two different concepts of an autonomous vehicle. One looks a lot like The Jetsons: a rideshare but without a driver — fleetbased, completely automated. You get in the car, punch in an address, off it goes.

You have no control over it; ever ything is automated.

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Building a digital-portal-type experience — that starts with targeting and discovery and ends with delivery, and that is seamless and easy and all works together — is going to be a vital requirement to stay competitive in the future.

Two, dealers need to invest in customer service. Dealers are going to need to give car shoppers a reason to choose to come into the showroom. It’s not enough to be a slightly better car salesperson. You have to look at retail brands known for their service experiences and say, “What can we learn? What can we incorporate into our service experience, beyond the bottle of water and a cup of coffee, that can make customers come into the dealership or choose our dealership instead of going to an online-only player?”

If you don’t do that, you’re going to face a world in which customers will choose not to engage.

McKinsey: Let’s talk about autonomous vehicles (AVs). McKinsey analysis suggests they’ll account for up to 13 percent of new-car sales volume. Do you agree with that estimate? Will the car-buying process differ for consumers who want AVs versus traditional cars?

MG: I think it’s important to first define what we mean by autonomous vehicles. There are two different concepts of an autonomous vehicle. One looks a lot like The Jetsons: a rideshare but without a driver — fleetbased, completely automated. You get in the car, punch November 2020

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in an address, off it goes. You have no control over it; everything is automated. All the systems work together in a way where not only is no human required but there’s also no human wanted. I would argue that’s a ways off.

I would be skeptical about significant adoption of that kind of technology over the next decade.

The other concept of AV is a feature that’s like cruise control. We already have some adaptive cruise control that maintains the distance between you and the car in front of you. It’s a fairly simple system that bounces a wave off the car in front of you, measures the distance, then adjusts your speed to keep that distance. You’re going to see these types of AV options become more standard. And they’re going to become a bigger part of the car-driving experience in some way. There may be a time when you’re on a long drive with an empty straightaway ahead, and you may be able to engage autonomous driving to take your hands off the wheel for a few minutes — which is a completely different experience than getting into a car that has no driver, no steering wheel.

When cruise control came out, the people who bought cruise control were not that different from the people who didn’t have it. And it trickled down to pretty much every car. I think over the next ten years you’re going to see features of AV trickling down into every new car and then every used car that you buy.

That, by the way, is really good for people who sell 41

cars, because in a world of truly autonomous vehicles there’s no reason to own a car. The capital investment will be managed by a fleet operator. And it doesn’t matter what kind of car you own. If all you’re going to do is rent it for five miles to get to the grocery store and back, then it doesn’t matter what brand it is. It doesn’t matter if you get the car in the color or specs you want. Most cars will be managed through the fleet, and there’ll be no or very little differentiation between them. All they’ll want to do is manage their costs and manage their service.

McKinsey: One final question: What kinds of cutting-

edge technology might we see in 2030 that will revolutionize the car-buying experience?

MG: I have two examples. One’s boring and one is

much more exciting. The boring one is dramatic improvements in cross-device stitching and mobile tracking to get better composite understandings of a particular customer. So the ability to gain and integrate large quantities of information about a customer will automate and make the car-buying experience dramatically more fluid in ten years.

The second one is AR [augmented reality] and VR [virtual reality]. As we look further into the future, EPI-TIADAhalf OCT2020.pdf 1 9/9/20 AM you’ll get comfortable with buying a car 9:35 without having

to trek to the showroom. You’ll do it all from your couch. Everything from, “Let’s see what it looks like in my garage” or “Let’s see what it looks like in my work parking lot.” We’ll be able to try colors and finishes and trim. We’ll also be able to virtually test drive. I can have that experience in the comfort of my own home, when I want it, where I want it. It’s going to be a hallmark of the process that doesn’t exist today.

This article was originally published by McKinsey & Company, www.mckinsey.com. Copyright (c) 2020 All rights reserved.

Reprinted by permission.

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resource guide The TIADA Website: www.txiada.org Members can log in with their username/password and access our Dealer Member Director y, Legislative Action Center, Compliance Consultation Ser vice and much more. Register for all upcoming TIADA events online through the Calendar of Events, access our online membership application, find contact information for all our Local Chapters, and access many additional resources through our Knowledge Base.

License Renewal Certificate TexasDealerEducation.com

Office of Consumer Credit Commissioner 800.538.1579 occc.texas.gov

Texas Comptroller 800.252.1382 www.window.state.tx.us

NIADA 800.682.3837 www.niada.com

REPOSSESSIONS American Recovery Association

FORMS

888.368.4689 www.txdmv.gov

800.252.9154 www.burrellprinting.com

T e x a s

SAN ANTONIO Jose Engler Irving Motors Corp (dates announced at www.txiada.org)

VICTORIA Dennis Schroller Victoria Autos Direct Meeting – 1st Monday (Monthly)

972.755.4755 www.repo.org or contact TIADA state office

Texas Department of Motor Vehicles

November 2020

Rudy Roudbari Sarco Enterprise Meeting – 2nd Tuesday (Monthly)

Burrell Printing

D e a l e r

45

behind the wheel Reading Between the Lines: Accept Change, Lead On

I

n February, I committed to completing two books I had been picking up and putting down for the last year or so. Thanks to the Coronavirus and the new shelter in place rules I certainly had some time on my hands. Both books are easy reads and cover topics I enjoy, but it wasn’t until March that I decided to really dig in and finish both books through my new COVID-19 eyes.

Pivot Point by Sheri Jacobs was published in August of 2018. Jacobs interviews several successful association leaders in an attempt to find the perfect business model or template for associations. Along the way, she realizes and explores the fact that there are not just three or four models that work; instead, it is more about the leaders and the culture they create at each organization. One sentence from the introduction will give you some insight to what the reader can expect. It reads, “I realized their stories were not just about designing the best business models for their associations. Rather, the stories were about cultivating nimble organizations that could continually adapt their value propositions and business models to address changes in the needs, attitudes, and behaviors of the communities they serve.”

The other book, GUTS!, was a joint effort written by Kevin and Jackie Freiberg published in 2005. Similar to Pivot Point, the authors studied various organizations and businesses they deemed successful. “Our hope is that this book will help you become more gutsy, too — more engaged, more considerate, more courageous, and most important, a better leader.” This sentence really is the

by Jeff

Martin TIADA EXECUTIVE DIRECTOR

theme of the book and can be found just before you start the first chapter.

For some odd reason I thought it would be interesting to read two books I had started pre-pandemic and reread those books three months after the pandemic had set in.

Since both these books are taking a look at other organizational cultures and structures, and both books were written pre-pandemic, the authors had no choice but to see the world before 2020. Now, I can look at these books through a different lens and determine for myself if all the things the authors claim create great businesses and associations are still applicable.

If you simply focus on the case studies in each book, they both feel outdated due to the world changing so much in the last nine months. But, reading between the lines, I think both authors have discovered a common thread — that is, that pre-pandemic or post-pandemic, good leaders build cultures that adapt well to change.

They are constantly assessing the situation and making the best decisions they can for their customers/members, their team, and ultimately for their businesses and associations. I would also argue during this time it is important to know who you are and focus on what you do well.

At TIADA, we represent the interests of our members: we work hard to grow the influence of the association in order to provide a strong voice for our members and we embrace change. Every day is different, so we don’t fret the “new norm”, we just call it Tuesday. We get out of bed and lead the association on.

Every day is different, so we don’t fret the “new norm,” we just call it Tuesday.

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D e a l e r

November 2020

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