the Front Row - May 2022

the

FRONT ROW The official publication of the Washington State Independent Auto Dealers Association

May 2022

A Defining Moment for Our Industry The Co$t of Compliance Just Went Up. Again.

NEW STUDY:

Why a Dealership’s Online Presence is so Important Forming Relationships With Video

PLUS

10 Tips to Close More Car Deals

THE FRONT ROW | WSIADA.COM MAY 2022 | 1

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CONTENTS MAY 2022

the

FRONT ROW

6 CALENDAR OF EVENTS 19 MEMBERSHIP APPLICATION

The official magazine of the

WASHINGTON STATE INDEPENDENT AUTO DEALERS ASSOCIATION WSIADA.COM

2

707 Auburn Way South | Auburn, WA 98002 T: 253-735-0267 | F: 253-804-0844 staff@wsiada.com | WSIADA.COM EXECUTIVE BOARD Wasim Azzam, Board President All Right Auto Sales | President@wsiada.com Badie Darwazeh, Board Vice-President | VPresident@wsiada.com J.T. Curry, Board Secretary Motors Northwest | Secretary@wsiada.com Emil Scarsella, Board Treasurer Town & Country Auto Sales | Treasurer@wsiada.com CHAPTER PRESIDENTS Blake Walker – North Cascade Walker Motor Works | NoCascade@wsiada.com Vacant Position – North Sound NoSound@wsiada.com David Magarrell – South Sound Auto Sales Consultants, LLC | SoSound@wsiada.com Frank Schmitt – Vancouver Brush Prairie Auto Sales |Vancouver@wsiada.com Open Position – Yakima Yakima@wsiada.com Rhonda Coffin – Tri-Cities USA Auto Sales, Inc | Tri-Cities@wsiada.com Open Position – Spokane Spokane@wsiada.com AT-LARGE BOARD Randy Fletcher, Board President (Emeritus) In-N-Out Auto Sales AJ Hamedian, Board President (Emeritus) Inline Motors Ken Williamson, Board President (Emeritus) John’s Auto Mart, LLC

PRESIDENT’S MESSAGE: THE FUTURE OF PASSENGER VEHICLE POWERTRAINS IS ELECTRIC--THE TRANSFORMATION IS ONGOING Even if consumers can’t make the switch now, the pain they feel at the gas pump will plant a seed for future decisions to cut their dependence on gas.

NEW STUDY HIGHLIGHTS WHY A DEALERSHIP’S ONLINE PRESENCE IS SO IMPORTANT

Consumers expect to access accurate information on the first page of their search results—not outdated information...

12

4

THE CO$T OF COMPLIANCE JUST WENT UP. AGAIN.

The unintended consequence of the revised Safeguards Rule is that, faced with high costs, a dealer may reasonably believe that doing nothing is an attractive option. That option is attractive, but not viable.

4

PRODUCTION EDITOR Professional Mojo

7

FORMING RELATIONSHIPS WITH VIDEO The best way to form a relationship with a new customer is to get to know them, and let them get to know you.

14

DIFFERENCES EXPLAINED: BONDS VS. INSURANCE

There are three major differences between a bond and an insurance policy.

10 TIPS TO CLOSE MORE CAR DEALS

“It’s all about real connection,” Kristen Olson, sales manager at Wheels and Deals in Boise, Idaho told us. “If we don’t provide a positive, unique experience, we don’t close deals.”

15

THE FUTURE OF THE INTERNET AND WHY IT MATTERS TO DEALERS

EXECUTIVE DIRECTOR’S MESSAGE: A DEFINING MOMENT FOR OUR INDUSTRY

Up until now, with major exceptions of course, we have been able to count on common sense prevailing in government circles.

WSIADA STAFF Brian Dansel, Executive Director Rick Olson, Education Manager Mila Froman, Membership Manager Mary Walton, Accountant

Copyright 2022 WSIADA

10

Where is the internet going in the next 3, 5 and 10 years — and is your dealership ready?

16

CHIP SHORTAGE TO DRAG INTO 2022

17

SERVICE PROVIDER DIRECTORY

18

READ & RESPOND QUIZ

THE FRONT ROW | WSIADA.COM MAY 2022 | 1

q PRESIDENT-ELECT MESSAGE

The Future of Passenger Vehicle Powertrains is Electric The Transformation is Ongoing

By Wasim Azzam, WSIADA Board President production. From 2022 to 2028, experts project that over 75 percent of the 200 new models planned to be launched in North America will be electrified, either full EVs or hybrids.

When gas prices went up to $4 per gallon, in 2008, some analysts said that it is the end of low gas economy vehicles. Turns out, the death announcement was premature.

After recovering from the 2008 financial crisis, Consumers appeared to have bigger desire for bigger vehicles which led to an increase in demand and domination of pickup trucks, SUVs, and crossover in the U.S. market.

Now with what’s going on with the war in Ukraine and the shortage of gas supplies globally, could we notice a more desire by consumers for low emission vehicles? Or perhaps EV? Some analysts believe if gas prices stay elevated for a long period of time, then this will more than ever speed up the demise of internal combustion engines. Contrary to the Great Recession in 2008-2009 which resulted in higher demand for fuel-efficient cars, now consumers have good alternatives and that is more electric and hybrid cars in the market.

By contrast, today there are around 20 EV models available in the U.S., with almost every major automaker focused heavily on battery-electric vehicles for future 2 | THE FRONT ROW | WSIADA.COM MAY 2022

Even if consumers can’t make the switch now, the pain they feel at the gas pump will plant a seed for future decisions to cut their dependence on gas.

When gas price reach $4.25 per gallon, a Ford F-150 owner who drives an average 15000 miles per year would have to pay $3400 for gas, or around $280 per month.

This high cost of gas will push consumers more towards thinking about owning an electric vehicle even though electric vehicle prices are still high.

The combination of strong consumer demand and supply chain disruptions during COVID-19 which resulted in a huge shortage of cars has sent used vehicle prices surging according to the consumer price index 40% for used cars and 26% higher sticker price for new cars between January 2021 and January 2022.

Facing empty car lots and intense competition for both new and used vehicles, consumers increasingly are concluding that, in a pinch, “any car will do.” As a result, nearly every EV model is sold out, and there is a lengthy waiting list for new-car buyers.

But with gas prices expected to stay high for many months, if not years, there is an opportunity to trigger more EV sales. Even

if consumers can’t make the switch now, the pain they feel at the gas pump will plant a seed for future decisions to cut their dependence on gas.

That, of course, becomes an added incentive for automakers to rapidly ramp up launches of electric models and push their manufacturing operations and suppliers to overcome logistical obstructions as quickly as possible. Automakers who are tooling up for EVs today will be in prime position to benefit from the pent-up demand for electric cars in the next few years.

According to some expert reports, aside from Tesla who is a leader in EV, General Motors has major investment plans to build out its EV products. It has been aggressively expanding its electric lineup, with announced plans for EVs to make up 30 percent of production by 2028. Ford Motor Co. has announced its own major EV products and is leading the way with the Mustang Mach-E and F-150 Lightning, the electric version of America’s best-selling truck. Add to that the huge potential for the new Lucid, Fisker, and Rivian.

Of course, EV production is facing its own challenges because of the supply crunch putting increasing pressure on battery raw materials and resulting in higher sticker prices.

Still, the fact that electric batteries can be enhanced and developed with different technologies and materials provides another long-term advantage for EVs over the internal combustion engine. Gasoline will always be gasoline, and continuously vulnerable to global instability, economic crises, groups like OPEC and big commodity price swings. n

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THE FRONT ROW | WSIADA.COM MAY 2022 | 3

COVER STORY

The Co$t of Compliance Just Went Up. Again.

BY JAMES GANTHER, JAMES S. GANTHER PRESIDENT OF MOSAIC COMPLIANCE SERVICES In the beginning was the Gramm-LeachBliley Act, at least when it comes to dealership awareness of consumer data security issues.

And the Gramm-Leach Bliley Act begat the Safeguards Rule, which has been the law of the land since 2003.

Officer, or “CISO.” This makes sense for American Express – they have one; his name is Fred – but for that 75-unit/month dealer in Des Moines? Not so much. A credentialed CISO can easily cost $200,000 per year, plus health benefits, 401(k) and a company car.

The original Safeguards Rule was a model of brevity, at least by the standards of government regulation. Weighing in at just 786 words, the original Rule was designed to be “flexible,” which made sense – what is reasonable for an international credit card company might not be reasonable for a dealership that moves 75 units/month in Des Moines. That reasonableness standard became a dealer’s best friend.

The final Rule omitted the express requirement that all covered entities have an actual CISO on staff (thank you, NADA), but the new version of the Rule replaces that with a requirement for a “Qualified Individual” to oversee the entity’s Written Information Security Program (“WISP”). But what constitutes the necessary qualification? As I write this, there is no clear answer.

While the flexibility of the original Rule was seen by dealers as a strength, from the regulators’ perspective it was a weakness.

In practice, it created an additional layer of proof that could be hard to meet: What, exactly, is a “reasonable” safeguard under the unique circumstances of each industry to which the Rule applied?

It was this issue, in part, that led to the revised Safeguards Rule, published on December 9, 2021, and comprised of nearly 5,000 words. What was once a subjective standard became objective; certain safeguards had to be in place whether it was reasonable in the dealership environment or not.

For example, the original draft of the revised Safeguards Rule, put out for comment in 2019, required all entities covered by the Rule to have a Chief Information Security 4 | THE FRONT ROW | WSIADA.COM MAY 2022

NADA published a study it commissioned in 2019 estimating the cost of complying with the revised Rule as it was then understood.

The one-time costs to get the ball rolling were estimated at a jaw-dropping $293,975 per franchised dealership, with ongoing costs of $276,925 per year.

Ouch.

There is some good news here, but only a little. The estimated cost of data encryption, for example, could be eliminated for dealers that use service providers that offer that function for free. In the three years since NADA commissioned its study, that became much more prevalent in the marketplace.

Dealers would be well-served to investigate that option.

In a like vein, Multi-Factor Authentication (“MFA”) has also become more common

The unintended consequence of the revised Safeguards Rule is that, faced with high costs, a dealer may reasonably believe that doing nothing is an attractive option.

That option is attractive, but not viable. as a free component of web-based services.

Biometric authentication, whether facial recognition or fingerprint reading, is now common on smart phones and many workstations. So, some costs may effectively be avoided.

Unfortunately, those areas, while significant, are not where the biggest costs reside. Here is a brief list of the new Safeguards obligations and their likely cost impact: 1.

Designation of a “Qualified Individual” to oversee the program.

While not as pricey as hiring a fulltime CISO, it is not certain that a cur-

effort at $195/hour, or $25,900.

Access controls. This is a different function than MFA, below. This entails ensuring, for example, that employees can only access the data they need for their job description, or that customers can only access their own files. This cost is difficult to tease out of other costs that touch the topic, and is not separately priced here.

3. Data/systems inventory. This is absolutely mandatory – a dealership can’t protect assets it doesn’t know it has. For purposes of this estimate, its cost is included in the risk assessment, for which it serves as a foundation.

4. Data encryption. For dealers that don’t get this function for free elsewhere, expect to pay $3,000 per year.

5. Secure development practices. To be fair, how many dealerships are developing their own software? For those that do, we’ll go with NADA’s estimate of $37,500 per year. At that cost, many smaller dealers may just elect to give up the practice and live with commercial off-the-shelf software.

6. Multi-factor authentication. Again, dealers may be able to get this feature for free from existing vendors. For those that don’t, expect to pay between $6,000 and NADA’s estimated $18,500 per year, depending on the size and complexity of your actual IT environment.

7. Systems monitoring and logging.

Dealers must implement a system to monitor the use of IT assets by authorized users and detect unauthorized users. NADA estimates that cost at $29,000 per year.

8. Secure data disposal procedures. You know that big Shred-It truck that shreds your old deal jackets? Imagine that function to scrub all your IT assets clean before destroying them at the end of their useful lives. Just throwing them in a dumpster won’t do, nor will donating them to a worthy cause. Expect to pay $3,000 - $10,000 per year.

9. Change management procedures.

Dealers must devise and document a plan for maintaining the security of their IT network, and pay someone to ensure that plan is consistently followed and documented. Expect to pay the NADA estimated cost of $2000 per year.

10. Unauthorized activity monitoring.

2.

1.

rent dealership employee will qualify as being, well, qualified. Under the final Rule, this function may be out-sourced, though responsibility for the CISO’s functions remains with the dealership.

And the Program Coordinator (already required under the old Rule) needs to be “qualified” to oversee the third-party Qualified Individual. Assume a minimum of $9,360 per year for the outside Qualified Individual (48 hours per year at $195/hour), plus training expense for the inside Program Coordinator to oversee the third-party. That training cost is accounted for below under item 13.

Requirement of a written risk assessment. This is more than a creative writing project. A satisfactory written risk assessment must roll up and analyze the findings of specific inventories and assessments, and certainly requires – dare I say it? – a qualified individual. That person does not necessarily need to be theQualified Individual, and could be an existing dealership employee. It is possible to work with an outside consultant for the initial risk assessment and then take the task in-house down the road. For this estimate, that’s the approach we’ll take. Assume a 120-hour

11.

12.

13.

14.

15.

This sounds like it heavily overlaps item 8 above, so we’ll assume it’s cost is covered there.

Intrusion detection/vulnerability testing. This is where things get pricey in a hurry. This service is typically charged per item being monitored, and that cost can easily reach $10 per monitored item. How many items does a typical dealership location have? Add workstations, firewalls, switches, routers, phones, tablets, etc. and the number can easily reach 250 per store. That adds up to $30,000 per year, and there is no easy way around this, nor should their be.

Other than human factors, this may be the most important security function a dealership undertakes.

Enhanced training for general employees and information security personnel; verifiable process of keeping information security personnel current on emerging threats. This sounds like a lot, and it is. But this function can be addressed for about $4,000 per year per rooftop, regardless of the store’s size.

Selecting, overseeing and monitoring Service Providers. This is hard to automate. Expect to pay from $6,000 to $12,000 per year, depending on the number and nature of a specific dealership’s service providers.

Written incident response plan.

NADA’s estimate of $6,625 per year seems about right.

Annual written report to Board or Senior Management. This cost can run from close to zero for a dealership that wants to do this entirely in-house (not advised, at least the first time) to NADA’s estimated $9,000. For the first year, at least, I’d go with NADA’s number.

Based on the above assumptions, a prudent dealer can expect to pay from $162,385 to NADA’s estimated $276,925 per year, or $13,532 to over $23,000 per month.

The unintended consequence of the revised Rule is that, faced with those costs, a dealer may reasonably believe that doing nothing is an attractive option. That option is attractive, but not viable. Next time, we’ll discuss how to satisfy the new Rule’s requirements without breaking the bank. n THE FRONT ROW | WSIADA.COM MAY 2022 | 5

q EXECUTIVE DIRECTOR MESSAGE

A Defining Moment for Our Industry

BY BRIAN DANSEL, EXECUTIVE DIRECTOR Recently I was interviewed by King 5 for a story they were doing on a string of recent car thefts at Washington State dealerships. I don’t have to tell you that there has been an explosion of property crime ever since the legislature rolled back pursuit laws and hampered law enforcement’s ability to respond to crimes unless the victim’s life is in jeopardy—this leaves a lot up for interpretation. The obvious remedy would have been for the legislature to fix these problems in the last legislative session, but they were too busy eliminating internal combustion vehicles by 2030.

I believe this is a defining moment for our industry. Up until now, with major exceptions, of course, we have been able to count on common sense prevailing in government circles.

This may not be the case moving forward and my fear is that if we don’t become more relevant in legislative circles, that we will die a death by a thousand paper cuts so to speak.

Why do I bring this up? In the current rounds of chapter meetings, you will notice that I am asking policy makers, incumbents and candidates for public office to speak to our members. This may mean that there will be speakers at some of our events whose opinions you don’t entirely share, and that is perfectly normal.

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TITLE WORKSHOPS (Virtual Meetings) May 18 – 9:00am-12:00pm wsiada.com/title/May2022

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April 5 – South Sound 7:30am

To be clear, WSIADA will partner with policy makers regardless of party affiliation. In some circumstances, there will be Democrats who speak at events, and at others there will be Republicans. I want to pull together a coalition of members from BOTH parties so that we actually have a chance to fix some of these issues. The greater risk is to remain disengaged and irrelevant.

I invite you to keep an eye out for events coming near you. We will keep you notified, but we have to be building toward getting a fix for these issues in the upcoming legislative session. It will be my job to bring the right combination of speakers and policy makers out, but it will be incumbent on all of us to show up at meetings and provide testimony to the folks who can help us. n

DID YOU KNOW? WSIADA publishes important and timely Dealer Alerts online. Stay up to date!

Visit wsiada.com/dealer-alerts 6 | THE FRONT ROW | WSIADA.COM MAY 2022

MONDAY, MAY 30

FEATURE

Differences Explained: Bonds vs. Insurance

BY TODD SHEPARD, FOUNDER SHEPARD & SHEPARD INSURANCE SOLUTIONS

Over the years it has been my pleasure to participate in the new dealer training classes with WSIADA both live and by video, explaining the differences between the State required dealer bond and a garage/ dealers insurance policy. “What is a bond and why is it required?” and “Why do I need insurance if I am bonded?” are two of the most common questions we field in our office when working with dealers.

There are three major differences between a bond and an insurance policy. #1 Involves the number of parties involved in the contract.

There are three parties involved in the bond contract. The first party is the entity requesting the bond (the Department of Licensing aka DOL). The second party is the dealer. And the third party is the surety (bond) company. In this type of contract, the dealer transfers the risk to the surety company guaranteeing they will follow the requirements as set out by the DOL. A surety bond is designed to protect the consumer.

In contrast, there are only two parties involved with an insurance policy: the insurance company and the dealer (also referred to as the insured). When a dealer causes bodily injury or property damage to a

third party, the insurance company pays the damages. An insurance policy is designed to protect you (the dealer). #2 Involves the financial restoration after a loss.

Losses are not expected to occur when a surety bond is issued as the dealer is in full control of their business practices.

The nature of such a loss involves the dealer’s actions in violation of required procedures such as failing to make a pay-off on a trade-in or other willful action that harms the consumer. If this occurs, the consumer contacts the DOL and is advised to file a claim against the bond. If a claim is processed the dealer is then expected to fully restore the surety company for any financial loss incurred.

In short, if a dealer suffers a bond claim the amount paid out must be repaid. In a sense a bond is more of a line of credit (up to $30,000 in Washington). Before a bond is issued, the underwriter requires proof that the dealer has the financial means to reimburse the surety company should a loss occur. Credit history and financial stability are two of several criteria the surety company will review when issuing a bond. Those with bruised credit or limited resources can expect to pay more to obtain a bond.

An insurance policy is completely different.

When an insurance claim is paid there is no requirement for the dealer to reimburse the insurance carrier. Insurance premiums are paid in exchange for the coverage provided. The dealer is responsible for any deductible owing in the event of a loss and the balance of the financial loss is transferred to the insurance company. An insurance underwriter relies on loss history, experience, number of employees, inventory limit, property value, and location when determining if they will offer a policy and the premiums required to purchase that policy. #3 Involves premiums and/or fees paid for the coverage.

When a surety bond is issued, an annual premium or service fee is paid by the dealer to the surety company. The service fee allows the dealer to use the financial backing of the surety company. If there is a loss, the surety company pays for the loss, and as mentioned earlier, the dealer is required to reimburse all funds that have been paid out. This includes the cost of defense and the amount paid to settle. Keep in mind, when purchasing, you will be required to personally indemnify the bond, which means you are personally on the hook to repay the surety company for Continued on page 8 THE FRONT ROW | WSIADA.COM MAY 2022 | 7

AUCTION LISTINGS n ADESA SEATTLE adesa.com/seattle Tuesday: Consignment, 9:30AM Alternate Tuesday: Specialty, 8:30AM Thursday Night: InOp Sale, 4:45PM n ADESA PORTLAND adesa.com/portland Thursday: Consult website n BIDBUY DEALER AUCTIONS (844) 505-1555 bidbuydealer.com Weekly Thursday Auctions 8:00AM to 3:00PM and previews Tuesday and Wednesdays 12:00PM to 3:00PM n COPART copart.com Times vary: Consult website n CTM UNLIMITED ctmunlimitedauction.com See website for auction dates and times. n DAA NORTHWEST magauctions.com/daanw Weekly auctions: Thursdays, 9:00AM Monthly promotional event auctions: Wednesday, 2:00PM & Thursday, 9:00AM

n DAA NORTHWEST (CONTINUED) Monthly MotorSports auctions: Thursdays, 11:00AM (Lane 8) Monthly RV auctions: 11:00AM (Lane 8) Heavy Metal auctions, 8:30AM as scheduled (Lane 8) NOTE: MotorSports, RV and Heavy Metal auction For dates, visit: daanwmotorsports.com

n IAA - INSURANCE AUTO AUCTIONS SPOKANE iaai.com (509) 891-2388 See website for dates and times.

n DAA SEATTLE magauctions.com/daasea Friday: Dealer and Fleet/Lease, 9:00AM Alternate Friday: Heavy Metal,* 9:00AM (Lane 8) Monthly GSA Public Auctions, 1:00PM *Mechanically-challenged/cosmetically damaged/non-running inventory

n MANHEIM PORTLAND manheim.com/locations/PAA/events Tuesday: Open Sale, 9:00AM

n EHLI AUTO AUCTIONS ehliauctions.com Last weekend of every month n IAA - INSURANCE AUTO AUCTIONS SEATTLE iaai.com See website for dates and times.

n KAMAN kamanauctions.com Thursday, Noon

n MANHEIM SEATTLE manheim.com/locations/SSAA/events Monday: OVE Event Sales; Foothills Toyota Mobile Sale, 1:00PM in Burlington, WA Wednesday: General Sale Weekly, 9:00AM All sale dates and times are subject to change. Please verify with the Auction or manheim.com.

Differences Explained: Bonds vs. Insurance Continued from page 7 this loss even if your business closes (plus interest).

On the other hand, insurance premium is paid by the dealer to the insurance carrier for an insurance policy. In return, the insurance carrier promises to protect the insured from financial loss. These include liability losses such as when a driver hits or injures another party. Other insurance losses may include loss to property such as auto theft, damage to property, bodily injury, cyber losses, and even employment practice liability (discrimination, harassment) depending upon the coverage selected. The insurance company determines the premium charged for losses that are expected to occur based on the insured’s operations, characteristics, and history.

A surety bond (dealer bond) is a required by the DOL to obtain and hold a dealer license.

It is in the dealer’s best interest to follow the rules and guidelines making every effort to avoid a bond claim. An open claim will 8 | THE FRONT ROW | WSIADA.COM MAY 2022

often trigger a non-renewal of a bond and makes it difficult, if not impossible, to secure another bond, effectively putting the license in jeopardy.

not sufficient and will not provide coverage when operating as a dealer. The type of insurance policy for dealers is called a commercial garage policy.

Washington is one of the few states that has no requirement to obtain an insurance policy to apply for a dealer license.

Insurance is, however, required to operate a vehicle on the road, and it is best practice to seek a policy that affords coverage to protect other assets of the dealership. Most dealers are smart businesspeople and realize the value in protecting their assets through insurance. Some choose to roll uninsured which creates an unfair advantage (fixed expenses are lower) and a very dangerous environment in the community when they or their customers operate vehicles without the protection of an insurance policy.

When those drivers cause an at-fault loss there is no money to cover the expenses of an injured party causing financial hardship to that party. It is also quite damaging to the reputation of all dealers. It should be noted that a personal insurance policy is

Some conversation has been had as to adding a requirement of a commercial garage liability insurance policy to apply for and hold a dealer license as it is in most other states in effort to protect the public, the reputation of the industry, and help level the financial playing field across all licensed dealers. WSIADA members that agree such a change in the Washington licensing requirements would be of benefit are encouraged to voice their opinion in writing to the association and state legislators. n Todd Shepard is the founder Shepard & Shepard Insurance Solutions and regular contributor to the Front Row. Shepard & Shepard focuses on the bond and insurance needs of the automotive industry. For more information or a competitive bond and insurance quote visit shepquote.com or call toll free 855-396-0488

IN THE NEWS

NextGear Launches New Department Focused on Independent Auctions NextGear Capital also said that chosen to lead this new group is Sandy Moon, the company’s associate vice president of auction and floor plan services. Images courtesy of the company.

funding departments to create collaborative consulting teams.

trusted resource to help both organizations drive growth,” Wick continued.

A new department several months in the making now is a part of NextGear Capital.

Executives said the goal is to build indepth relationships with auctions to better understand their unique needs and harness the collective resources of NextGear Capital to provide customized solutions.

NextGear also said that chosen to lead this new group is Sandy Moon, the company’s associate vice president of auction and floor plan services.

To strengthen its business relationships with the auction partners that support the inventory needs of its independent dealer clients, NextGear announced on Wednesday that has created an auction services department.

“Our focus for creating a dedicated Auction Services team was to broaden our support and expertise to better meet the needs of our valued auction partners,” NextGear senior vice president of lending John Wick said in the news release.

The company explained through a news release that planning for the auction services began last year. NextGear indicated that the work included reimagining and realigning the company’s flooring and

“Bringing our best-in-industry knowledge and exceptionally skilled team members to the table allowed us to take a fresh approach to how we interact with our auction partners and become a collaborative,

A 17-year member of the NextGear team, the company highlighted Moon brings experience in operations management and team building to her new position.

In addition, Moon has hired Danny McNelis as the team’s auction director.

Previously serving as a senior client solutions executive for NextGear, the company said McNelis brings strong relationship-building skills to this new role. n

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THE FRONT ROW | WSIADA.COM MAY 2022 | 9

FEATURE

New Study Highlights why a Dealership’s Online Presence is so Important

By Carina Ockedahl, Canadian Auto Dealer Digital Air Strike released its 9th Annual Automotive Customer Experience Trends study at the 2022 NADA Show in Las Vegas, Nevada, offering dealers, lenders, OEMs and providers information that they can use to improve the vehicle ownership experience.

The company said its report offers “compelling insights” on the impact of the vehicle inventory shortage, online interactions that help move the customer journey forward, and the importance of the online and digital communication experience for consumers, along with the platforms that they prefer to use.

“The vehicle researching, buying, and ownership processes have changed exponentially since the onset of the COVID pandemic,” said Alexi Venneri, Co-founder and CEO of Digital Air Strike, adding that “the data has consistently proven to be helpful for our dealers and the industry as a whole.”

The report shows that a third of consumers felt significantly impacted by the inventory shortage. Of those that were affected, 21% went to a different dealership, 8% asked the dealer to order a new build from the factory, and 21% had to wait for the vehicle they really wanted.

Of this particular group, 71% waited up to three months, while 27% waited up to a year, and 50% paid a $500 (or more) deposit. Also worth noting is that 20% of consumers said the dealer did not keep them informed about the status of their vehicle.

10 | THE FRONT ROW | WSIADA.COM MAY 2022

And again, among consumers affected by the vehicle inventory issue, 32% did not get their first-choice vehicle, and 17% bought a used vehicle instead of a new one.

The study advises dealers to present alternative options to consumers, including new and used vehicle options. Some dealers also offered important information in their communication to consumers about the vehicle delivery time, delivery process, and the car’s features.

Consumers expect to access accurate information on the first page of their search results—not outdated information...

“Dealers need to ensure their pre-order process includes a plan for ongoing communication to keep their customers updated and to retail vehicle deposits,” said Digital Air Strike in its report.

As for the online environment, some of the main reasons consumers did not contact a dealership when researching their vehicle include a lack of special offers (40%), high prices (35%), a lack of dealership photos (26%), there was no easy way to contact the dealership (11%), bad reviews (8%), and a lack of COVID-19 protocols (3%).

Consumers expect to access accurate information on the first page of their search results—not outdated information, the report notes, adding that dealerships should have an updated Google Business Profile with one place to browse reviews,

receive their frequently asked questions, see the store’s photos, and find special offers and announcements. There should also be an easy way to contact the dealer on that page.

“Online sources continue to be the most dominant resource in reaching consumers when making a purchase decision, while ads on streaming networks are close behind traditional media sources,” reads the report. “Without a solid online presence, consumers are more likely to select another dealership for their purchase or service.”

The study shows that consumers select dealerships based mainly on online searches and reviews—at record levels. It notes that 93% of consumers that purchase a vehicle (up from 88% in the previous

year’s study), and 87% of service customers said online review sites helped them select their dealership.

Based on consumer rankings of their top source for dealership research and reviews, Google slots number one with 60% (up from the last study), followed by Kelley Blue Book with 17% (down from the last study), Vehicles.com with 17% (down), VehicleGurus with 13% (down), and Autotrader.com with 13% (down).

“Because of the inventory shortage, consumers don’t have as much time to research because vehicles are being sold quickly. Eighty-six per cent of sales (down from 93% in the prior study) and 51% of service (down from 74% for the previous study), researched a few days or more

before selecting a dealership,” said Digital Air Strike in its report.

On reviews, 58% of consumers said the dealership did not ask them to write an online review about their sales experience, while that percentage jumps to 71% for service. Thirty per cent of service customers said a dealership’s response is the “most important” part of a review. For consumers overall, a four or five star rating can impact their decision when selecting a dealership.

It is also worth noting that most reviews written by consumers are positive (81% for sales and 88% for service), and that 58% of consumers find these review sites helpful.

Overall, the report lists five key takeaways for dealers to consider:

1.

2.

3.

4.

5.

Engage in online interactions that can improve the customer journey.

Communicate with effective and timely messaging.

Increase lead conversion and protect your online presence with reviews.

Turbocharge your marketing game.

Improve your online experience.

Digital Air Strike surveyed more than 2,300 vehicle buyers and more than 2,700 service consumers from transactions conducted over the last six months for its study. These consumers were between the ages of 25-54, a near-divide of male (57%) and female (43%), had no pre-qualification criteria other than those transactions, and they were not predisposed to be online shoppers. n THE FRONT ROW | WSIADA.COM MAY 2022 | 11

media feature

FORMing Relationships With Video The best way to form a relationship with a new customer is to get to know them, and let them get to know you.

BY TIM JAMES

As a salesperson, you might think your number one goal is to get shoppers on your lot and sell inventory by telling them how great the newest model is.

However, there is a better way to sell cars: form relationships, build trust and go out of your way to help customers.

Another challenge is that most car shoppers aren’t looking for a relationship.

They are looking for transparency, speed and a painless shopping experience.

Do you remember an old sales technique known as FORM? When a salesperson struggles to make a connection with a customer, use FORM as a conversation guide. F stands for family/friends, O stands for occupation, R stands for recreation and M stands for motivation.

However, that doesn’t mean they aren’t open to forming a relationship. As interested as a car shopper is in finding the right car, they are equally interested in finding a salesperson that they feel they can trust.

People buy from people they trust, and people trust people they like. People like people who share common interests. The best way to form a relationship with a new customer is to get to know them, and let them get to know you.

Real success is more than a series of transactions. Building a book of business requires years of hard work and dedication, and more than anything, it requires the ability to form relationships.

Use Video to Go Above and Beyond One challenge to forming relationships that salespeople have today is that they often don’t have the opportunity to meet a prospect until the very last part of the sales process, when the person has selected a car and may have already figured out financing. Face-to-face time is limited, especially since the pandemic.

12 | THE FRONT ROW | WSIADA.COM MAY 2022

This is why it’s so important to use video in the initial lead response. However, don’t just send a quick video response.

Set yourself apart by delivering a video experience.

Send every lead a response video on a Video Experience landing page that includes your (the salesperson’s) personal introduction video. Tell the car shopper about your FORM (family, occupational experience, what you like to do for recreation and why you are motivated to assist customers in having the best shopping experience possible). Mention sports, clubs and other organizations that you and/or family members are part of. Mention if you are a member of the military or a pet lover. Let the customer know the real “you” so they won’t label you as a salesperson just trying to sell them something.

In addition to the personal introduction video, include a couple of customer testimonial videos for yourself and your dealership. I also recommend including videos of other vehicles that you have in your inventory that might fit the customer’s requirements. Go above and beyond and you will be rewarded.

Once the customer is engaged, use livestreaming video calls for conversations and for conducting a live walkaround of the vehicles that the customer is interested in. Remember FORM again during this process. Strike up a conversation involving friends, family, occupation and interests. What is the customer’s motivation for buying a vehicle? Tip: don’t try to jam every single FORM topic into a single conversation. Get to know your customer slowly, or your efforts may seem forced or overbearing.

Once a prospect has engaged with you several times via video, they will feel like they know you and that you care about them and their needs. This gives you an instant edge over other salespeople out there.

In today’s market all this effort may not be necessary; however, you are not just trying to sell a car, but to create a customer for life! That is one of the main benefits of modern video technology; it can be combined with old-school sales approaches, like FORM, to build relationships and create a better customer experience. n

THE FRONT ROW | WSIADA.COM MAY 2022 | 13

10 TIPS TO CLOSE MORE CAR DEALS

BY DASHBOARD BY NIADA When we talk sales, we often talk about closing the deal. But when it comes to used cars, it’s about a lot more than that. It’s about the entire experience you are providing for your customer from the moment they contact the dealership until they drive away in a vehicle you sold them.

“It’s all about real connection,” Kristen Olson, sales manager at Wheels and Deals in Boise, Idaho told us. “If we don’t provide a positive, unique experience, we don’t close deals.”

How do you get from first contact to a closed deal? Here are ten of our best tips.

1

Get Personal First, get personal. Learn the customer’s name, use it in conversation, and ask appropriate questions that open the door to more meaningful conversations, should they be open to it. By the same token, don’t pry or be nosy, and share information about yourself when appropriate.

This keeps the buyer from feeling like a number or a conquest of some kind. They should feel like you are their friend when they leave. Remember, a customer doesn’t just buy one used car in their lifetime, and they could come back to you over and over whenever they need a new vehicle.

2

Be Professional While it is important to get personal, you also need to be professional. Pay attention to the way you dress, even if it’s in business casual or your dealership has a uniform. Pay attention to your personal hygiene and appearance.

Simple things like combing your hair, brushing your teeth after that hot-wing lunch, and taking care of your nails, and washing your hands, all say a lot. It also gives you confidence when you approach 14 | THE FRONT ROW | WSIADA.COM MAY 2022

someone new, and that makes a huge difference when it comes to closing the sale.

3

Stop the Upsell One of the jokes about used car salesmen is that they are always trying to sell you something you can’t really afford.

Stop the upsell. Ask the customer what they are looking for, and in what price range, and just show them those things.

“Trying to upsell a customer, especially our typical clientele, only makes them trust us less,” Mitch Alexander, sales trainer for Dave Smith Motors says. “The only person who can change their mind about what they can afford is the customer.”

Being pushy and too salesy can destroy that rapport you spend so much energy building with them from the start.

4

Use BANT When it comes to qualifying leads, there is a proven sales formula, and selling used cars is no exception. The initials are BANT and they stand for: budget, authority, need, timeline.

To qualify a lead, ask yourself these questions: Can the customer afford to purchase one of your vehicles? Are you speaking with the decision maker? What are the true needs of the customer? What is the timeframe?

“BANT is at the foundation of our sales training,” says Will Allen of Driven. “If you are not listening to your customer, there are certainly other dealers right down the street who will.”

Following these rules makes sure you’re not wasting your customer’s time, and they’re not wasting yours.

5

Know Your Stuff You should know your inventory and have information about all your vehicles as much as that is possible. If you don’t know something, go find out. Don’t bluff your way through it. If a vehicle has just arrived, get to know all you can about it. These things include: Part of being a professional is being an expert on the cars you’re selling.

6

Know Your Competition Compare your inventory with others when you are not busy with customers. If they ask about the Chevy at the dealer down the street, you can have a ready answer about why that vehicle might be cheaper, more expensive, or not as comparable.

Remember, the more knowledgeable and honest you are, the more likely you are to make the sale. If you genuinely don’t know the answer the customer is looking for, ask for a few moments to do some research. If you don’t, your competition will.

7

Never Pre-Judge Regardless of how anyone is dressed or your other perceptions of them, never prejudge someone who walks on the lot. The guy in the ripped-up jeans and old jacket could be a doctor on vacation who wants to pay cash for a vehicle you have that no one else does. On the flip side, the guy in the suit and tie could be looking for a subprime loan your dealer may offer.

Never assume. Ask the same questions, greet each customer with a smile, and treat them as if they are the only ones that matter at that moment.

8

Talk Honestly about Financing Nothing is worse than getting down to the end of the deal and not being able to close on financing. Talk money from the

start, and be honest about options, down payments, interest rates, and payment plans. It’s better to know where your buyer is coming from as soon as possible when you are looking to close a deal.

9

Go Digital People are buying everything online, including cars. Have a digital presence, website, and social media. List your vehicles on local marketplaces and respond to messages and comments in a timely manner. Make the financing application process as painless as possible.

“Dave Smith was one of the pioneers of online buying,” Alexander told us. “And it turned us from a small-town dealership into something really special.”

Customers expect convenience, and one sure way to close the sale is to have the customer ready to buy and even have their financing approved before they ever set foot on your property. Digital marketing and a great website can do that for you.

10

Follow Up Gather email addresses. Follow up with your potential customers before the sale. Follow up after the sale to ensure they are happy and will return to your dealership when they need another vehicle.

Ask for honest reviews of your business and respond positively to feedback.

Even if the potential buyer does not buy from you this time, you may be able to learn from what they liked and did not like about your business, and the reason they chose another direction. You can set yourself up to be their first choice next time.

“It’s about developing lifetime customers,” Kristen Olson told us. “It’s not like customers are only going to buy one used car and never buy another one.”

This is far from a comprehensive list, and as we all know, selling takes time, effort, and energy. These 10 points can help set you up for success by forming lasting relationships with your customers. n

The Future of the Internet and Why it Matters to Dealers Where is the internet going in the next 3, 5 and 10 years — and is your dealership ready?

By Jason Silberbergon Think back to 2004, the 3G network was just launched and everyone had a Nokia device.

There were no iPhones, no Google mobile search, no Facebook and no Android. Fast forward to 2021 and in a blink of an eye, it has all changed. The 5G network is in full swing and mobile devices are multi-dimensional personal entertainment hubs. Consumers have adapted quite easily, even the later generations became tech-savvy to connect and communicate with their children and grandchildren, a technology trickle-up effect. So where is the internet going in the next three, five and 10 years — and is your dealership ready?

Forget the idea of “mobile-first” — this is an overused cliché that has no meaning to today’s consumer experience. It is about being “beyond mobile-first”; creating experiences across devices and browsers that interact in a native application-like environment.

Google is leading the way in this development by providing developers with its own coding framework called Angular. Like a chassis of a car, this framework provides companies and developers the ability to build Google-like experiences for consumers. This is what Google wants! They want to control the user experience on the internet and are leading the way.

Today, they dictate how pages should load, look and have attribution models to help index pages better (SEO).

To get ready for the future, the first step is to look at your website and compare it to applications that you have on your phone; maybe BestBuy, Costco, Amazon, Nordstrom, Macy’s, Expedia, Priceline, etc. See the experiences they are providing their consumers and then look at your desktop and mobile — that’s right — your desktop!

The desktop browser experience is going through a renaissance period, and it is about to have a mobile-like environment. No more left-side filters, no more scrolling on product pages, no more pop-up lead forms. This is yesterday. You better be ready for tomorrow, today. n Jason Silberberg is CEO & Co-Founder of Nabthat, a technology company dedicated to building automotive-centric platforms focused on the consumer experience. A seasoned executive in various fields including entertainment, distribution, logistics, digital media, telecommunications, and software, Silberberg has over 15 years of experience developing strategy, business development, policy, and operations for fast-growing companies. He believes the key to any business is the ability to initiate, develop and take ownership of your client’s interests.

THE FRONT ROW | WSIADA.COM MAY 2022 | 15

Chip Shortage to Drag into 2022

BY DASHBOARD BY NIADA Low inventory on new car lots. Cars that go directly to consumers and never hit the lot. Higher prices and the payments that go with them.

Those are all 2021 woes, right? We’ve turned a corner on the chip shortage in 2022, haven’t we? Not necessarily.

Some of the supply chain woes continue, and while things will improve this year, those improvements won’t happen overnight.

So, what is being done about the chip shortage? When will it end and what does it mean to used car dealers right now?

What’s Being Done?

One thing you might have heard is how well Tesla has navigated the chip shortage.

Its method? Using non-automotive grade components in its vehicles.

That means the solutions for the chip shortage include: 1.

2.

3.

Making more chips of the type needed: New plants are being built and some semiconductor manufacturing that had gone overseas is returning to the United States.

Transparent supply chain management plans: Planners need to ask more “what if ” questions, knowing that the next disruption will come and it’s not a matter of if, but when.

Diversify where chips are acquired: Many automakers become dependent on one supplier, and if that supplier is crippled, so are they.

Diversification when it comes to where chips come from and who makes them is key. Over-reliance on the chip industry in China is one of the issues in the current shortage.

While that has certainly caused it some headaches (especially when it comes to giant touch screens) the move did enable Tesla to produce more cars last year. But it’s important to note Tesla’s numbers are nowhere close to the volume produced by Toyota and other top manufacturers.

There’s also talk that manufacturers need to rethink how they make cars and even where plants are located.

Relying on non-automotive grade suppliers would simply be a stopgap – not a longterm solution – for other manufacturers. So instead, many are slashing production until the supply chain can be fixed. And how will that happen?

Things like renewable power sources independent of local power grids, shipping and receiving options, the presence of a diverse workforce and even the risk of natural disasters where plants are located are all being reexamined.

Well, the real issue is similar to the toilet paper shortage at the beginning of the COVID pandemic.

When Will the Chip Shortage End? Answering that question requires a crystal ball. But if we look at the increases in manufacturing coupled with changes in demand and other factors, we can surmise things will steadily get better, with an end to the crisis coming toward the end of 2022 or the beginning of 2023.

The problem then was not a lack of paper or trees or even bamboo that could be transformed into toilet paper. It was the shift from making more industrial paper products used in the bathroom at the office to making consumer-grade paper packaged for home use – and getting that supply to retailers.

16 | THE FRONT ROW | WSIADA.COM MAY 2022

Of course, that’s barring any other major market issues that might arise this year and assumes the current labor shortage will improve.

Those things appeared to be getting better at the start of the year, so we can assume good outcomes – at least for our predictions.

The key, as always, is to hope for the best and prepare for the worst. Manufacturers are working to find solutions and manage customer expectations in the meantime.

Even if the chip shortage is resolved tomorrow, at best it would take time for things to just return to “normal.”

What Does the Chip Shortage Mean for Dealers?

This, of course, is where the rubber hits the road, so to speak. What does all this mean to dealers now?

First, new car dealers can anticipate another year beginning with empty lots. Many of them are likely to fill only slowly as the year progresses. New cars will remain hard to get and prices will remain high. That’s not great news for consumers, since the average car payment rose to $520 this year.

Second, used car dealers can fully expect higher demand. There will be fewer trades as buyers will hang on to their current vehicles if they’re waiting for replacements.

Used car inventory will typically be older and more expensive at the same time.

The demand for used vehicles will remain strong at least through the first three quarters of the year – and perhaps beyond.

That means a few things.

Maintaining a strong inventory is critical if it’s at all possible. Creative, low-cost financing might be a priority for many consumers. And focusing on cars in higher demand can lead to greater profits both in the short and long term. n

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Adesa Portland

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Insurance Auto Auction (IAA) Seattle (206) 658-6900 iaai.com

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MAG Auctions Spokane (509) 244-4500 magauctions.com/daanw

MAG Auctions Seattle (253) 737-2200 magauctions.com/daasea

Manheim Portland (503) 286-3000 manheim.com

Manheim Seattle

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Yarbro Auctioneers (509) 765-6869 yarbro.com

Benefits & Health Insurance Washington Retail Association (360) 943-9198 waretailservices.com

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Davies Pearson, P.C. (253) 620-1500 dpearson.com

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Dynamic Dealer Services, Inc (208) 818-6931 dynamicdealerservices.com Southwest Dealer Services (206) 571-3068 swds.net

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Keybank Merchant Services (800) 537-6571 key.com/small-business/services/ merchant-services

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(866) 727-5317 sc53@autozone.com Learn more on page 3

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READ & RESPOND MAY 2022 The WSIADA READ AND RESPOND quiz allows the reader to earn one hour of continuing education credit toward the dealership’s required annual renewal. Payment options are available for members of the association and non-members also for notification to the Washington State Department of Licensing. A passing grade will be granted for scores of 80% or greater. If a passing grade is not granted, the reader may retake the quiz.

SEND YOUR COMPLETED QUIZ TO WSIADA [Mail: 707 Auburn Way South, Auburn, WA 98002 or Fax: 253-804-0844 or Email: education@wsiada.com] Please be advised that the information contained in WSIADA’s the Front Row is, to the best of our knowledge, current and correct. However, we caution readers not to use the information provided to them as final authority. Its purpose is to be a guide. Any legal advice should be regarded as general information. It is strongly recommended that one contact an attorney for counsel regarding specific circumstances. Some articles may express opinions and/or suggestions for best practices. Likewise, the appearance of advertisers or their identification as members of WSIADA, does not constitute an endorsement of the products or services featured. q I have read and understand the disclaimer above.

Dealership Name

Motor Vehicle Dealer No.

Date

Quiz Taker’s Name Signature Email Position Business Phone Fax CIRCLE THE CORRECT ANSWER.

1: A surety bond is required by the Department of Licensing to obtain and hold a dealer license?

A: TRUE B: FALSE

5: The more knowledgeable and honest you are, the more likely you are to make a sale.

A: TRUE B: FALSE

2: This percentage of service customers said a dealership’s response is the “most important” part of a review.

A: 25% B: 30% C: 35% D: 40%

6: Safeguard Rule now requires the Program Coordinator to also be considered this to meet the requirements.

A: Qualified B: Independent contactor C: College-educated D: Staff member

3: The original Safeguard Rule was designed to be rigid.

A: TRUE B: FALSE

7: The three parties involved in a bond contract are the surety (bond) company, a dealer and which other?

A: Washington State Independent Auto Dealers Association B: Office of the Insurance Commissioner C: Department of Revenue D: Department of Licensing

4: Auto theft, bodily injury, cyber losses and damage to property are all examples of which coverage?

A: Insurance B: Surety C: Workers Comp D: Cyber Liabilities

18 | THE FRONT ROW | WSIADA.COM MAY 2022

8: Low inventory for used cars are currently due to chip shortages and may drag on into which year?

A: 2022 B: 2023 C: 2024 D: 2025 9: Consumers expect access to outdated information, not accurate information, on the first page of a dealerships website.

A: TRUE B: FALSE 10: NextGear has launched a new department to focus on what type of program?

A: Independent Contractors B: Independent Auto Dealers C: Independent Auctions D: Independent Sales Contracts

The Washington State Independent Auto Dealers Association was created by Independent auto dealers for Independent auto dealers in the state of Washington since 1953.

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SAVE the DATE CHELAN, WA

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Breakfast, lunch and dinner are included each day with registration. The last full day features events at local businesses for entertainment, which may include golf tournaments, horse riding, and more! Families are welcome to join. Save the date and look for more details soon!