Dealer Business Journal, February 2014

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...Your Success Is Our Business

February 2014 DEALER BUSINESS JOURNAL | 1

2 | DEALER BUSINESS JOURNAL February 2014

DealerBusinessJournal.com

Contents Volume 11, Issue 2

IN EVERY ISSUE

February 2014

for ANCE LAST CHgistration Early Re . nt ou Disc Page 20 January

LEGAL & LEGISLATIVE

4 6 8 10

LER 2014 DEA

CORNER OFFICE Front Line IMPROVING PROFITS PAYMENT PROCESSING

L|1

S JOURNA

BUSINES

BUSINESS OPERATIONS ess Is Our ...Your Succ

Business

General Counsel 14 Ten Things to Know About Corporate Books You may be a small business, or even family-owned, but that does not mean you don’t have to keep your books in order. How do yours look?

Business Basics 24 2014 Business Reflections Forget resolutions. Now is the time to concentrate on self-reflection that will help you succeed this year.

ReInsurance 34 Avoiding the Searchlight Training employees and doing the right thing can keep you out of reach from federal searchlights.

Advertising Alert 28 Operation Steer Clear Drives Stricter Guidelines The FTC is out in full-force looking for dealers whose advertising doesn’t add up.

By Debra Dawn

Legal Opinion 16 If You Are a “Don’t Know,” You Better Find Out! The “I Don’t Know” defense will not hold up. If you aren’t sure, then find out.

By Tom Hudson

LEADERSHIP & TRAINING Learn to Lead 18 Fix the Roof While the Sun is Shining!

Survive your success by stretching to new levels.

By Dave Anderson

By David Wiggins

By Dani Sherrod

Skip Trace 32 Evolution of the Skip-Tracer Using today’s modern technology and Old West strategies, skip-tracers have evolved to a whole new level.

By Tim Byrd

GPS Tracking 38 The Tracking Features You Can’t Live Without Six things that dealers should consider when looking for a GPS provider.

By Alex Price

TWENTY GROUP SPOTLIGHT: 12 Joe McCloskey McCloskey Motors, Inc.

...Your Success Is Our Business

This National Quality Dealer says his Twenty Group membership has contributed greatly to his success.

February 2014 DEALER BUSINESS JOURNAL | 3

LEEDOM GROUP

Corner Office Announcing the Greatest Show on Earth . . .

W

elcome to another issue of Dealer Business Journal. I hope that by the time you read this you will be starting to see some of the early tax season sales opportunities right around the corner. The first quarter of 2014 looks very bullish for sales so make sure you are geared up to get your share. In this issue we have a host of articles to prepare you.

Speaking of preparing I hope you are getting ready to attend the Leedom Group 20th Annual BHPH WORLD Convention coming up in April. In this issue you will find a four page section that announces this event. This is the longest running trade show dedicated to the BHPH industry. I can hardly believe it is our 20th event. Since we have reached that major milestone we are planning a convention and celebration second to none. This event will be packed with the best of the best. We have not one, not two but three key note speakers this year – Dave Anderson, Chuck Bonanno and Ross Shafer. These sessions will be enjoyable and you will hear about how to serve the customer of today and tomorrow – not yesterday. We also have over 30 sessions and have added a Genius Bar this year where we will have some of the best minds in the business available for one-oneone discussion. To celebrate our 20th and this industry we will have an incredible VIP event for all attendees on Tuesday, April 15th. It will be an event like no other.

Registration info is included in the section dedicated to BHPH WORLD or you can visit www.bhphworld.com for more information.

We also have a new feature in this issue – a dealer spotlight of a Twenty Group member. Our Twenty Group program has served thousands of dealers since 1995. This month we honor a very special member – Joe McCloskey of McCloskey Motors in Colorado Springs. I have had the opportunity to personally moderate Joe’s group for nearly 18 years. He is the current NIADA National Quality Dealer of the Year and is truly a “dealer’s dealer.” We hope you take time to learn about what has made Joe successful and possibly pick up a tidbit of wisdom. Thanks Joe for the opportunity to work with you for nearly 20 years.

My challenge to you this month is pick one thing – anything – that will have a positive impact on your business.

Every business has much room for improvement. I try to look at my businesses that I own like that every day. The question is how do you get better at what you do, thereby improving the performance and likelihood of success for your business. Take time to reflect on what you could do better at and then make the commitment to change.

I hope you enjoy this issue and make sure you register for the 20th Annual BHPH WORLD Convention – I will be there and hope to say hello and see you there.

Have a great month

dealer BusinesS JOurnal

A L e e d o m G r o u p P u b l i c at i o n

Dealer Business Journal 3700 S. Tamiami Trail, Sarasota, FL 34239 Ph: 800.966.8733 | Fax: 941.371.2874 Executive Publisher

Christopher M. Leedom | chris@twentygroups.com Associate Editor Buy Here-Pay Here

Chuck Bonanno | chuck@twentygroups.com Contributing Writers

Dave Anderson | dave@learntolead.com David Brotherton | davidb@leedomgroup.com Debra Dawn | debra@leedomgroup.com Tom Hudson | thudson@hudco.com Jay Prassel | Jay@leedomGroup.com Jessica Sweeney | sweeneyj@paymaxxpro.com Guest Columnists

Jay Leedom | jon@@paymaxxpro.com Tim Byrd | DealerRE David Wiggins | CliftonLarsonAllen Dani Sherrod | Showcase Media Alex Price | alex.price@masterfiles.com

FOR QUESTIONS REGARDING SUBSCRIPTIONS CALL 800.966.8733

or subscribe online at DealerBusinessJournal.com ADVERTISING INQUIRIES CALL 941.371.7999 OR SALES@DEALERBUSINESSJOURNAL.COM

DISCLAIMER: The information included in this publication is obtained from sources believed reliable and has been produced with reasonable care in production and editing. It is not intended to be legal, accounting, tax, technical or other professional advice. Readers are advised to consult a professional for application in their particular situation. Copyright 2013 Leedom and Associates, LLC. All Rights Reserved. Content may not be photocopied, reproduced or redistributed without written permission. Dealer Business Journal is a publication of Leedom and Associates, LLC. POSTMASTER: Send change of address form to Dealer Business Journal, 3700 S Tamiami Trail, Sarasota, FL 34239

Chris Leedom

Executive Publisher 4 | DEALER BUSINESS JOURNAL February 2014

DealerBusinessJournal.com

Calendar FEBRUARY Feb. 6, 2014 LHPH Training School, Sarasota, FL

AUGUST Aug. 5, 2014 LHPH Training School, Sarasota, FL

MARCH March 11, 2014 Manager’s Boot Camp, Chicago, IL March 12, 2014 Collections Boot Camp, Chicago, IL March 13, 2014 Sales Training Boot Camp, Chicago, IL

SEPTEMBER Sept. 2, 2014 Sales Training Boot Camp, Atlanta, GA Sept. 3, 2014 Manager’s Boot Camp, Atlanta, GA Sept. 4, 2014 Collections Boot Camp, Atlanta, GA

APRIL April 14-16, 2014 20th Annual BHPH World Convention Las Vegas, NV April 23-24, 2014 BHPH Training School, Sarasota, FL

NOVEMBER Nov. 3-5, 2014

BHPH SuperGroup, Sarasota, FL

JUNE June 3, 2014 Manager’s Boot Camp, Dallas, TX June 4, 2014 Collections Boot Camp, Dallas, TX June 5, 2014 Sales Training Boot Camp, Dallas, TX

DECEMBER Dec. 1-3, 2014

Dec. 9-11, 2013

Dec. 18, 2013

Credit/Collections Conference Dallas, TX Credit & Collection Conference Dallas, TX Sales Training Academy, Sarasota, FL

JULY July 9-10, 2014 BHPH Training School, Sarasota, FL

Find out more about these events and register to attend online at www.TwentyGroups.com.

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February 2014 DEALER BUSINESS JOURNAL | 5

LEEDOM GROUP

Front Line

By Chuck Bonanno

Are You Running Your Business or is it Running You?

A

s a consultant-educatortrainer I see the people and companies who believe in educating and training themselves and their teams.

They come to our conferences, training schools, boot camps and belong to Twenty Groups.

These are the companies who spend money to have me come to their dealerships to train, educate evaluate and aid in the creation of plans that will improve team performance and the company’s bottom line. These are the companies who want to improve their lives and the lives of their employees. But these companies are few and far between. Most never call. Most are satisfied with mediocrity. They are okay with the status quo. They really enjoy being average. Okay, so maybe those statements aren’t true but somebody must take the first step to improve the business, the company and the team. I can tell you that it won’t come from the soldiers. It must come from the general; you. You must start running your company instead of it running you.

It is easy to fall into routines and even get quite good at doing the same things over and over.

That’s not the aim, however. The job at hand is to improve in a changing and dynamic market, in a competitive industry where the rules change constantly. This requires constant observation, analysis and most importantly,

action. So what is the first step? Let’s start with you, the dealer, the owner, the general. You must know your business better than anyone so that you can train your team to achieve your desired goals. But before you can do that, you must know your business, and know your goals.

The Buy Here-Pay Here business is a retail business with a twist. The retail part should be easy to measure. By a car X, sell it for Y, subtract the overhead and you have your net profit. Buy Here-Pay Here adds finance charges (income) and charge-offs/bad debt (expense).

So it’s still not that hard. There are two more very important factors you must recognize in Buy HerePay Here. It’s not your Profit and Loss Statement that measures your success, growth and prosperity, but it’s your balance sheet and cash flow statement that tell the tale. Even analysis such as delinquency trends and repossession rates only help to explain your cash flow situation and your balance sheet position.

And don’t ever fall into the trap of believing we’re doing great because we sell a lot of cars. I once sold 1,000 cars in a month and not only lost money, but had to borrow over $2 million to fund those deals.

It’s true. There are many ways to measure performance in Buy HerePay Here and certainly too many to list and explain in this article. I will, however, give you some key indicators that you should, or rather must, track if you want to improve your business, your cash position, your profitability and also increase your wealth.

The first measurements we look

6 | DEALER BUSINESS JOURNAL February 2014

at are gross profit and gross profit margin. If you make too few dollars per sale you cannot be profitable.

If you gross too many dollars you may not collect all the dollars as the cars fail to run the note. You must also realize that a good gross profit margin with no volume doesn’t work either. You can’t make a $5,000 gross profit but only sell one car per month. The total gross profit dollars are what we can pay the rent with, not the percent. The second key indicator is expenses.

You must manage your expenses each and every month or the bills won’t get paid. It’s that simple. One of the great aspects of the Twenty Group program is we can give you benchmark numbers for each and every expense so you know where you excel and where you can improve.

You must measure the finance side of the business as well. You need to know your delinquencies, both contractual and recency, you need to know your repossession and charge-off rates by month, year and on a static basis. The most important analysis of the above numbers is not just the raw numbers and percents but the trends. Are your trends improving or degrading. If delinquency goes up, then charge-offs are sure to follow. Is delinquency rate improving or did growth cover up the facts? Did you repossess your way to low delinquency? Do you play the “edit the accounts” game?

If you do, how do you each month?

Is it reasonable? Do you measure collector productivity? How many calls did he/she make today? How DealerBusinessJournal.com

Buy Here-Pay Here From page 8 digest the first one. You have to look at reports, see what is available and see the integration for yourself. This is the most critical point in the relationship where it’s time to make a commitment.

many sets were made? How many

CONFUSED ABOUT

COMPLIANCE?

the business? Paying down debt?

create awesome spreadsheets, charts and graphs but never put the data to work. If you don’t don’t know where it is or where it’s from collections is actual cash learn from your experience you Fear of Change collected.

It is what pays the bills. going. cannot get better. Don’t be afraid when considering changing Being afraid of change is a good thing Look, before you can truly lead Can you measure how much of numbers, analysis, benchmarks your DMS solution. Every single person in your organization will have your troops, you need to know the you collect?

As a percent of the and measuring tools. Get yourself to start back at zero. Everything will be different. Speed and efficiency C O M P L I A N CE AUand outstanding A/R? As a percent of answers to the above questions educated DITthen will drop in the short-run and you may have to do a lot of double-entry : you can create a to ensure that the data is maintaining its integrityand, and the new DMS is probably a whole lot more. If contractually due/amount collected plan for you and your troops. working as advertised. same, etc.the answers touptcies... per account?

TheseAccounting numbers integration are not won’t you be didthenot know ankr Knowing all of to thisthe means you should thisquestions sort of decision above, you B are not a just critical bill paying andnot makethe Chuck Bonanno is a partner .. nofs.the cavalierly: it is a big deal to change systems and you need to make sure gulatio e R inventory replacement part of the failure nor will necessarily become firm, Leedom and Associates, LLC. He . that the new features are worth the price. ...Licensing.. one. But, I can assure you that if business but they are critical factor is an executive Conference Moderator ...

Growth Plans positive or negative you understand the numbers you in measuring of Buy Here-Pay Here and..Automotive .Forms Does yourDo DMS new functionality inare mind?

Are they enhalf-way to becoming a better cash flow. youhave know how Finance 20 Groups. He is a nationally hancing reporting, integration or analysis?

Your DMS needs to be in dealer, a better manager, a better many paying accounts you need recognized speaker, author, industry a position to grow with you. Do you want an innovator and industry leader and a wealthier one.

The to pay your bills and replace your trainer and consultant. He is a leader (read more expensive here) or are you satisfied with a follower reason that learning the numbers inventory each month?

Are you at nationally recognized speaker, author, As I said before, our business runs on data. How that data is captured, interpreted, utilized and analyzed is absolutely critical to growing yourequation is that is only half of the that point yet? Does your operation industry trainer and consultant business and maintaining your competitive advantage.

This is the most there are too many dealers who throw off any cash? What are you and can be reached at chuck@ Dawn • 800.966.8733 • debra@leedomgroup.com • leedomgroup.com critical system make in your business. run the reports, pull the Debra data, doing withyou thatwill cash?

Growing twentygroups.com.

Training Taking home?

Distributing to the ofWill those setsprovider actually paid? your send people to you to install andittrain?

How support The most overlooked number shareholders? Or is it a case of I much is included?

LEEDOM CAN HELP.

...Your Success Is Our Business

February 2014 DEALER BUSINESS JOURNAL | 7 September 2013 Dealer Business Journal 19

LEEDOM GROUP

Improving Profits

By Jay Prassel

Problem or Opportunity?

O

automotive industry is the economic reasons, particularly ne of the advantages of Internet. Automotive Web sites since the recession, and because working with dealers around abound and provide information vehicles are engineered and the country is there are always and dealership inventory assembled to last longer, analysts new challenges and solutions specifics to the potential retail say. being discussed. buyer. Manufacturers and This may seem like a problem A recent Polk individual dealers alike compete for the retail auto industry, Study said the for “ownership” of the elusive but it also presents some great average age of “Internet lead.” Response time, opportunities.

If you have a all light vehicles the information provided to service center, these are potential on the road the consumer, and the ability to customers as they have to now stands at meet and exceed the consumer’s maintain and repair these older, a record high expectations, typically determine higher mileage vehicles. For the of 11.4 years. It who wins the “ownership” sales department, this is a great was 11.2 years competition. Nearly 100 percent source of prospects as at some last year and in 2002 it was 9.8 of today’s retail automotive point they will have to replace years. It has continued to rise in prospective buyers will research their vehicle as opposed to age for 11 consecutive years. their purchase using the Internet repairing it.

“These are interesting times (and most of them will do this for the automotive aftermarket,” before they ever set foot in a Prospecting Resources said Mark Seng, vice president dealership showroom).

The most prevalent of Polk’s aftermarket practice.

Automotive manufacturers prospecting resource in today’s “Customers from independent and their and chain repair finance entities shops should represent another be paying close Customers holding on to their cars valuable source attention to their of prospecting business plans longer may seem like a problem for resources. and making the retail auto industry, but it also Manufacturer concerted efforts presents some great opportunities. retail consumer to retain business leasing agreements Which will you choose? among the do-itare maintained in for-me audience, computer space, and while retailers reports of pending have a unique lease terminations and growing are a valuable opportunity prospecting tool. with potential Pending lease consumers terminations wrenching produce the on their own necessity for a vehicles.” vehicle owner to Americans make a replacement are holding onto vehicle purchase cars and light decision and thus trucks longer for

8 | DEALER BUSINESS JOURNAL February 2014

DealerBusinessJournal.com

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fro tor fro inc

they become a very viable prospect.

In today’s automotive environment, with numerous manufacturers having been closed, the number of “orphaned owners” has escalated dramatically. Automotive manufacturers and state licensing offices possess names and addresses of retail vehicle buyers who have been displaced by the closing. These are valuable prospective customer names for retail dealerships.

Current dealership service customers are also good prospects.

Successful dealerships utilize their vehicle service history records to identify customers with high mileage or recent high vehicle service expenses.

Once identified, dealership sales personnel initiate contact to determine if service customers are actually new vehicle prospects.

In addition to the potential prospective customer resources noted above, a recent vehicle buyer referral is a valuable prospecting tool.

Many sales consultants mistakenly avoid asking for referrals from a recent vehicle buyer, often because they have had limited success asking in the past. This is one area where past history will not determine future events. Each vehicle buyer should be asked if they have friends, family or neighbors who are currently considering a vehicle purchase. An existing customer is your best reference for a potential customer.

Combining effective customer prospecting tools with effective showroom floor management tools is the winning formula for increasing dealership traffic and ultimately, increasing vehicle sales.

Ask your management team: are we average, below average or above the industry average?

Jay Prassel is the Leedom and Associates Vice President, Director of Operations. Jay has 37 years of automotive experience and has worked with over 300 dealerships as a profit improvement consultant and Twenty Group moderator. jay@leedomgroup.com ...Your Success Is Our Business

Phone: 888.874.7579

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LEEDOM GROUP

Payment Processing

Jon Leedom, CPP

Why Do Business With A CPP?

H

ow many calls do you receive a day, week or month regarding your merchant payment processing?

It’s likely the answer to that question is a double digit number. Try this, next time you get one of those calls ask the person on the other line, “Are you a CPP?” Ideally their response to that question would be in the affirmative or perhaps they are close to obtaining the CPP designation. If they answer no or, even worse, do not know what it is, you should end the conversation right then and there.

The Electronic Transactions Association (ETA) is the premier trade association for the payments processing industry. The Certified Payments Professional (CPP) was created by the ETA to “recognize those professionals in the industry who demonstrate a thorough

knowledge of their profession.” After certification the CPP must then maintain their credentials by earning continuing education (CE) credits.

Why do business with a CPP? For the same reason you might go to a specialist dentist or doctor.

When a certain ailment or symptom manifests, don’t you want to have confidence that the individual you are using is committed to their profession and shows unyielding integrity so as to best assist you?

The CPP is that “specialist” when it comes to your payment processing.

As the saying goes, the devil is in the details. What may look like a great deal might not be the case upon closer review. In the realm of merchant processing, no two monthly statements are alike. Really understanding your statement and the various individual fees that make up the total amount you are paying each month is paramount. The pricing model that your processor has you on is just as important. If the model is not conducive to how

A CPP is like a specialized dentist or doctor, with the industry knowledge and related experience to diagnose your symptoms and ensure you are getting the best care for your business.

10 | DEALER BUSINESS JOURNAL February 2014

you are processing your payments you are paying more than what you need to. You may see or hear terms when discussing your card processing like qualified, midqualified and non-qualified, card present or not present, access and assessment fees, fixed or tiered, fixed acquirer fees so on and so forth. Getting down in the weeds with your payment processor is very often an out-of-body experience.

Yet this level of knowledge and detail is precisely what your goal should be. You should ask question after question until you are completely satisfied. By so doing you will not only be better off by having educated yourself on a very complex topic, but more importantly you will have taken the steps to ensure you are getting the best price point for your business. A CPP can aid you in this endeavor. They will have the industry knowledge and related experience to answer your questions and propose options that align with your business model.

Your business, and how you process payments at your business, is critically important. Avoid the “quick fix”. Simply needing the ability to “take a payment”, without understanding the particulars will, in the end, inflate and not help your bottom line. It’s your money – Be Smart!

Jon Leedom, CPP, is the director of national accounts and business development for Paymaxx Pro, the national payment processing division of the Leedom Group. jon@ paymaxxpro.com DealerBusinessJournal.com

Have a question? The answer is right at your fingertips.

The Leedom Group’s online resources can help you find it.

Visit online: TwentyGroups.com PaymaxxPro.com DealerBusinessJournal.com

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February 2014 DEALER BUSINESS JOURNAL | 11

DEALER SPOTLIGHT

Joe McCloskey McCloskey Motors, Inc. Pueblo, CO Twenty Group member since 1997

C

olorado’s Joe McCloskey is one of the top independent dealers in the country. He runs multiple locations as McCloskey Motors, Inc. including McCloskey’s Truck Town and McCloskey Imports & 4x4’s. He employs 63 people and consistently averages selling one hundred or more cars a month. McCloskey is widely respected in Colorado, being given the Colorado Quality Dealer of the Year Award twice, and nationally, winning the National Quality Dealer title last summer. That is a lot of clout for a man who started his 40-year career in the automobile industry at age 13 as a mechanic’s helper, but you would never know it. McCloskey’s humble attitude and team-player spirit make him a likeable, approachable guy who has enjoyed many successes but is man-enough to admit a few mistakes as well. That balance between risk and reward is reflected in his business philosophy.

“It’s not doing the next thing right, it’s doing the right next thing,” Joe said. “The goal is to do a job as well as you can. It’s okay if it’s not perfect.”

McCloskey says the next right thing for his dealership years ago was joining a Twenty Group. He remembers as an early entrepreneur reading about the importance of “mastermind” groups that would provide advice and guidance to young businessmen like him.

Intrigued by the idea, McCloskey sought Leedom and Associates President Chris Leedom out to personally ask for an invitation to join one of his groups. That was 17 years ago.

“I was looking for a peer group who could act as a sort-of pseudo-board of directors that I could share ideas, concepts and problems with,” McCloskey said.

12 | DEALER BUSINESS JOURNAL February 2014

Joe McCloskey is the National Quality Dealer of the Year and says participating in a Twenty Group has very much contributed to his dealership’s success.

As a Twenty Group member, McCloskey says he appreciates how members tell each other what they need to know, not just what they want to hear. Though each Twenty Group is assembled of top dealers from non-competing markets, McCloskey says the natural tendency to be competitive fuels members’ passion for performance. When performance reports are published among Twenty Group members, McCloskey says everyone wants to see themselves on the left-hand side of the book where the highest-performers are listed.

This accountability is a positive motivator to always be working toward the next level.

The Twenty Group meetings provide an atmosphere of information and ideas that can be described as priceless. McCloskey, who is a frequent winner of the “best idea” category for his Twenty Group, attributes much of the growth and success of his business to his involvement in the group.

DealerBusinessJournal.com

“In my Twenty Group, I learn so much more than what I bring to the table,” McCloskey said.

Professional development opportunities, such as joining a Twenty Group, and continuing education are vital to a dealer’s success. McCloskey says that dealers who are just starting out or even veterans who might be struggling need to make this their priority, if they want to do better.

“We’ve all been there. We’ve all started out or struggled. If you haven’t, then you will. It’s the nature of the business,” McCloskey said. “Contact your state association and go to the classes they offer. Look at joining a Twenty Group to get additional ideas. Seek out how to further your own education. Make that investment in yourself; nobody is going to do it for you.

Get the tools to do it yourself.”

McCloskey says a good team is another piece to a successful puzzle. He and his wife Ann have been married for 35 years and business partners since they started McCloskey Motors, Inc. in 1989. Ann, who has been dedicated to building the business along with raising their five kids and three grandchildren, brings balance to the workplace, McCloskey says. With his vision and her ability to help him communicate it clearly to their employees, the McCloskeys have built a great team. They believe in empowering their employees and creating a united group focused on the same goal of success. So far, it has been working.

“Often my name gets on the award or the plaque, but it is not just me and it’s not just Ann. It is our team. We have worked hard on our team and believe in working alongside of our co-workers,” McCloskey said.

The McCloskey team is committed now to living up to the standards of National Quality Dealer and taking the company to the next level. McCloskey’s goal for the next few years is to dramatically increase sales and build-up his in-house service department to a point of 100 percent absorption, which means that the service and parts departments will be able to pay all the bills of the dealership before the first car is even sold. It is an elusive target for most dealerships, but McCloskey Motors is not most dealerships. With the team they have built, the guidance of his Twenty Group and sheer will they have a plan to get there. Motivational Trainer Tony Robbins has a motto that McCloskey says he has taken to heart.

“Where focus goes, energy flows,” McCloskey quoted. “We are focused on success so I am confident we will become successful.” ...Your Success Is Our Business

“Look at joining a Twenty Group to get additional ideas. Seek out how to further your own education.

Make that investment in yourself; nobody is going to do it for you.”

—Joe McCloskey

Most all McCloskey pre-owned vehicles sold are Certified, offer a 60 day Warranty, a two day Money Back Guarantee and two years of No-Charge Oil Changes.

McCloskey Motors, Inc. operates the McCloskey Truck Town location, targeting retail sales of pre-owned trucks and SUVs, and McCloskey’s Imports & 4x4’s, focused on selling high demand pre-owned import and luxury vehicles.

February 2014 DEALER BUSINESS JOURNAL | 13

LEGAL & LEGISLATIVE

General Counsel

By Debra Dawn

Ten Things to Know About Corporate Books

I

n my compliance audits, far and away the single most neglected area is corporate books and records, or, more precisely, the lack thereof.

Due to the fact that most buy here pay here dealerships and related finance companies are either single owner entities or family businesses, many dealers feel there is no need to go to the time and expense of keeping accurate and up-to-date corporate record books. Nothing could be further from the truth.

You Must Have Bylaws or An Operating Agreement: Corporations must adopt bylaws which regulate how the activities of the business are conducted. The provisions in these documents include, but not limited to: the number of directors; the date and location of the annual meeting; how officers are elected (and what officers the company has); and how shares can be voted or transferred.

Limited liability companies must have the

same information in an operating agreement.

(e) Corporate officers must be elected or reappointed.

You Must Document An Annual Meeting of the Board of Directors: Once a year (with the time being established by the corporate Bylaws), an annual meeting of the Board of Directors must be called and minutes kept. In this meeting the following events should take place: (a) The President should read his annual report highlighting the operations of the Company for the past year, current business trends and the projections for the coming year; (b) The Company Treasurer should report on the financial statements and profit and loss for the proceeding year; (c) Any events of special significance from the past or coming year should be noted; (d) Board members must be elected; and

All Transactions Not In the Normal Course of Business Must Have Director Approval: Director approval from a corporate perspective can be through a meeting or, more typically, through a Unanimous Consent where all directors sign their approval without a meeting. Some examples of events which require director approval are: extending bank loans or lines of credit; purchasing or leasing real estate; obtaining corporate credit cards; intercompany transfers; officer or director loans; or company guarantees of debt.

14 | DEALER BUSINESS JOURNAL February 2014

You may have a single owner or family business, but that does not mean you are exempt from keeping accurate and up-todate corporate records.

You Must Document All Intercompany Transfers: Any time there is an exchange of funds between your various corporate entities, you must have agreements in place to justify the transfers. If you fail to do so, you risk losing the Company’s limited liability status and provide an opening for piercing the corporate veil.

If You Have an RFC, The RFC Must Have a Purchase Agreement With the Dealership: If your RFC is purchasing contracts from the dealership, you must have an agreement stating how much the dealership is being paid for them, when the payment is due, whether they are subject to repurchase and under what conditions repurchase DealerBusinessJournal.com

is required. Without such documentation in the corporate records of both entities, an audit of the company books could prove disastrous. Proper documentation includes not only the agreement itself, but Unanimous Consents of the Board approving this notin-the-normal-course-of-business transaction.

If You Have An RFC, You Must Have a Repurchase Agreement In Place To Claim Sales Tax Credit: Although the dealership may claim sales tax credit, an RFC may not.

Tax codes specify that the entity selling the vehicle (and, therefore, the entity responsible for collecting the taxes) is the only entity allowed to claim a credit in the event of repossession. If you have been claiming a sales tax credit without repurchasing the vehicle, you are at risk.

All Related Party Transactions Must Be Approved By the Board: Whenever the Company enters into a transaction with an officer or director or a company owned or operated by that officer or director, Board approval must be documented. These transactions may include, but are not limited to: renting or purchasing real estate from officers or directors; renting or purchasing personal property for corporate use; entering

into consulting agreements with officers or directors; and loaning money (interest free or otherwise) to officers, directors or their family members.

Any Changes in Officers, Directors or Shareholders Must be Memorialized: If your spouse was an officer or director of the corporation and you divorce and no longer want them to be active in the business, they must resign their position in writing or a special meeting of the Board must be held to insure they can no longer bind the business in any way.

All Stock Transfers Should Be Accompanied By Share Certificates: You know those pre-printed stock certificates in the back of your corporate book? They are there as a tangible representation of who owns what percentage of your business.

Use them.

Failure of Your Business to File an Annual Report With the State Will Result in Administrative Dissolution of Your Corporation: From a liability perspective, you do not want to be in the position of being sued when the corporate shell has been deemed dissolved by the state of incorporation insofar as personal liability can attach. So file those annual reports by the mandated deadline.

Debra Dawn is Leedom Group’s General Counsel and Compliance Director Debra Dawn has formed AUTOLAW Group to assist dealers in all facets of dealership compliance. debra@leedomgroup.com ...Your Success Is Our Business

Dealer Business Journal is a publication you will find in the hands of over 20,000 dealer principals, general managers and dealership executives each month.

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February 2014 DEALER BUSINESS JOURNAL | 15

LEGAL & LEGISLATIVE

Legal Opinion

By Tom Hudson

If You Are a “Don’t Know,” You Better Find Out!

T

he story goes that Babe Ruth “called a shot” in the fifth inning of Game 3 of the 1932 World Series, at Wrigley Field in Chicago. During his at-bat, Ruth pointed toward the center field bleachers, allegedly a declaration that he would hit a home run to that part of the park.

On the next pitch, Ruth hit a home run to center field.

OK, why am I talking about baseball when it’s Super Bowl time, and what does that have to do with auto finance law, anyway?

Sorry, I couldn’t help myself.

When I saw the news last week that the Justice Department has dragged a North Carolina Buy Here-Pay Here dealer into court with allegations of prohibited discrimination, I immediately thought of the DOJ’s announcement last fall that they intended to do just that.

They called their shot. Now they have delivered. And by doing so, they have upped the ante for all Buy Here-Pay Here dealers.

Federal and North Carolina authorities have sued Auto Fare Inc., Southeastern Auto Corp., and Zuhdi A. Saadeh - the owners and operators of two Buy Here-Pay Here buy here, pay here dealerships in Charlotte, N.C. – alleging that they violated the Equal Credit Opportunity Act by intentionally targeting African-American customers for the extension and servicing of installment sale

contracts on unfair and predatory terms. North Carolina also alleged violations of the state’s Unfair and Deceptive Trade Practices Act. The complaint alleges that the defendants engaged in a pattern or practice of “reverse redlining” by targeting African-Americans for installment sale contracts with inflated sales prices, down payments, and interest rates without meaningfully assessing the customers’ credit.

The complaint also alleges that Saadeh, who operates Auto Fare and United Car Sales, has used racial slurs to refer to African-Americans and made statements expressing his views that African-American customers have fewer credit options, making them more likely to accept the predatory terms of the contracts offered by the defendants.

The defendants’ practices allegedly resulted in rates of default and repossession that were higher than other subprime used car dealers. The complaint also alleged that the defendants failed to provide customers with a reasonable notice of repossession, repossessed vehicles of customers not in default, failed to give customers refunds they were due, improperly seized customers’ personal property in repossessed vehicles, and used GPS devices to locate and repossess vehicles without telling customers that the devices had been installed.

Assuming the DOJ and North Carolina allegations turn out to be true, this dealer is either woefully ignorant of what is legal and illegal in the sale and financing of cars to consumers, or knows the law

16 | DEALER BUSINESS JOURNAL February 2014

and simply doesn’t care whether he complies with it, in effect “flying under the radar.”

As we advise Buy Here-Pay Here dealers regarding compliance matters, we see many dealers from both camps – the “don’t knows” and the “don’t cares.”

Most of the Buy Here-Pay Here dealers we see who fall short on compliance fall into the “don’t know” category. Even those dealers, however, are aware that there are laws prohibiting credit discrimination against protected classes of people.

And there are some encouraging signs that the “don’t knows” are waking up to the fact that the risk of continuing ignorance of the credit laws is too great. Go to any conference dealing with the buyhere, pay-here business and you’ll see an agenda packed with legal topics. Companies that offer dealer education, training and certification have never been busier.

The Buy Here-Pay Here industry of the present has no room for the “don’t cares.” The Buy Here-Pay Here industry of the future will not have room for the “don’t knows.”

Tom Hudson, Esq. (tbhudson@ hudco.com) is the author of several compliance-related books that are available online at www. counselorlibrary.com. He is also the publisher of Spot Delivery®, a monthly legal newsletter for auto dealers, and the Editor in Chief of CARLAW®, a monthly report of legal developments in all states for the auto finance and leasing industry. Call (410) 865-5411 or visit www.counselorlibrary.com.

DealerBusinessJournal.com

...Your Success Is Our Business

February 2014 DEALER BUSINESS JOURNAL | 17

LEADERSHIP & TRAINING

Learn to Lead

By Dave Anderson

Fix the Roof While the Sun is Shining!

D

ecades ago, John F. Kennedy declared that the best time to fix the roof is when the sun is shining. His philosophy wasn’t intended for business but it fits quite well, especially after what has been a big year for most dealerships. In fact, it will be interesting to see which dealerships coming off a big 2013 will survive their success and stretch to new levels in 2014, and which will lose their hunger, become complacent, shift into neutral and start playing not to lose. There are three natural forces at work that portend many will fall into the second category: 1. Prosperity can drain urgency, intensity, work ethic and drive.

2. Just like in physics, things naturally wind down rather than up unless outside energy is applied.

3. As Jim Collins pointed

out, “the enemy of great is good: the reason so few businesses become great is because they get good and stop doing much of what made them successful in the first place.”

Since momentum is easier to steer than to restart, following are three suggested actions you can take to leverage your recent success, pull people past the natural tendency to maintain or let up, and stretch your dealership to a new level this year.

Redefine performance expectations There’s no better time to redefine performance expectations in each department and from each team member than the beginning of a new year. Effectively defining or redefining performance expectations goes beyond a monthly or yearly forecast. It includes the following: • They are in writing.

• There are daily activity objectives, not just outcome goals.

• There are consequences for failing to meet a standard.

• The team standards are introduced to the group as a whole, then gone over one-on-one as you relate each individual’s required contribution to the total team effort.

• The expectations become part of the conversation: in meetings, during private coaching sessions, and at

18 | DEALER BUSINESS JOURNAL February 2014

performance reviews.

If you’re not sure whether or not your current expectations are clear enough or high enough, they probably are not. Make a practice to present new performance expectations in a positive, rather than a high-handed or threatening manner with a script similar to this: Team, we’re in a great position to build on last year’s success, but in order for us to reach our potential I know I need to do a better job of defining exactly what I expect from each of you on a daily, weekly and monthly basis. In this meeting I want to get us on the same page and give you some clearer targets to shoot for that will get us on the same page and help you become more successful.

If we all step up we can make something very special happen here this year.

Incidentally, if your performance expectations are clear enough, it will be extremely difficult for you to hold anyone accountable, because the question becomes, “Accountable for what?” This brings us to the next suggested step to fix the roof while the sun is shining: Remove the dead weight During tough times, removing dead weight isn’t normally a problem, but the temptation during robust business periods is to learn to live with, work around, or rationalize performers operating at levels unworthy of your standards.

Departmental deadweight enabled by lack of accountability breaks momentum, lowers morale, hurts the customer experience, and can DealerBusinessJournal.com

destroy your personal credibility as a leader. If you’ve set clear expectations, have consistently invested in the development of a team member, offer honest and fast feedback to eliminate gray areas and blind spots, and still have no grounds for believing tomorrow’s performance will be any better than today you must either transfer the non-performer to a position where he or she is better suited, or remove them. Don’t wait for a bad month, bad quarter, or for the next recession to do what is right. Leadership has never been about doing what is easy, cheap, popular or convenient. It’s about putting what’s best for the team overall before your personal likes, preferences or comfort zone.

Don’t over-manage and under-lead When everything seems to be rocking and under control it’s tempting to disengage and spend

less time in the trenches and more in your office; engaging more in paperwork than in people-work, substituting rules for relationships; talking like a leader but acting like an anchor. Continue leading on a daily basis by focusing on simple disciplines like these: • Commit to daily wanderarounds where you get into the trenches with your people, give feedback, seek out feedback, catch people doing things right and quickly correcting them when they’re off track.

• Schedule one-on-one coaching sessions with team members so you formally and systematically grow them to new levels.

• Take your training program up a notch. Devise weekly training themes, assign tasks for people to work on in-between your training meetings, require action plans from attendees, and then follow up during one-on-ones to help

them implement what they committed to.

In the upcoming year, don’t wait for something bad to happen before you commit to basic disciplines like the three presented. Then execute them consistently so they become credible, high-impact components of your culture. It should encourage you that none of this is rocket science. It is, however, hard work.

But it’s harder if you don’t execute now, while business is robust, and then react and engage in damage control after your “roof ” caves in. Be proactive. Get and keep the upper hand on your business, and fix your roof while the sun still shines.

Dave Anderson is president of LearnToLead. He is an international author and speaker, giving 1,000 leadership presentations over the past decade in 14 countries. Call 818.735.9503, e-mail dave@ learntolead. com, or visit www.learntolead.com.

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February 2014 DEALER BUSINESS JOURNAL | 19

Announcing the...

An Invite from the Founder

20TH ANNUAL BHPH WORLD CONVENTION!

We are just a few months away from the biggest BHPH event of the year – the BHPH World Convention. This event will be held April 14-16th in Las Vegas.

Since 1995 this program has attracted dealers, exhibitors and key executives in the BHPH industry. This year is special though – it is our twentieth event.

Our team has been diligently planning and working for months to produce a convention like no other event out there. To host our event we have selected the Bellagio Hotel, AAA Five Diamond Award winner for ten years in a row and the crown jewel of Las Vegas. In addition to this premier venue, we have secured some of the best speakers and talent in the country; industry leaders like Dave Anderson, Chuck Bonanno, and many more. The BHPH World Convention is the only venue where you will find this roster of “Who’s Who” in the industry under one roof. When I first started this event nearly twenty years ago I had one goal in mind – to make sure we offer the best program and convention for the BHPH industry. We are pleased that our attendees consistently rate this agenda best in the industry. Many of you have been there for nearly all twenty events!

Speaking of the power of “Twenty” - we are also planning a celebration of twenty years in the industry to be held for all convention attendees on Tuesday, April 15th. This program will showcase our exhibit hall as well as provide entertainment and a great networking opportunity for all attendees. You will not want to miss this party!

Most importantly though, I am personally inviting you! This event is successful because of our participants from across the industry. Dealers, vendors, and professionals, the quality of our participants is what makes BHPH World successful year after year for the past twenty events. Please find your way to Las Vegas in April and it will be an event to remember!

Best wishes for success,

Chris Leedom, Founder Early Registration Discount Ends February 15th! Sign Up Today! Call 8885991720 or Visit BHPHWORLD.com Discount Code: DBJ2014 20 | DEALER BUSINESS JOURNAL February 2014

DealerBusinessJournal.com

APRIL 14-16 • LAS VEGAS • BELLAGIO

“An Interview with the Convention Chairman, Chuck Bonanno” Chuck, after twenty events how are you guys going to raise the bar yet again this year – everyone expects that and you always deliver?

I am truly excited about our 20th annual BHPH World Convention. The event will be bigger and better this year including our Keynote Speaker, Mr. Dave Anderson, one of the best speakers in the automotive industry. We have more workshops and educational opportunities than ever before and a special presentation on day two.

If I am a dealer that has never attended, tell me why I can’t miss the BHPH World Convention?

I know there is no other industry event that speaks to the BHPH Dealers better than this one. I'm reminded of the saying, "You don't know what you don't know." This event will expose you to the best products, services, training, and industry standards for best practices and benchmarks. No one is too small, too big, too experienced or too inexperienced to receive an educational value that far outweighs the cost of admission.

What do you have planned for this year’s agenda?

We have added more workshops, more networking opportunities and more surprises to celebrate our 20th annual event. We have added vendor spotlight sessions and will have "genius bars" where attendees can have a one on one session with product and service providers.

Your workshops are always so well attended – what’s in store for attendees this year?

We are excited about our educational workshops this year. We have a broader educational track with the industry's best trainers, educational leaders, and presenters available. We will provide purely educational sessions to help attendees improve business in areas such as sales, marketing, collections, service, audit, and legal compliance.

Early Registration Discount Ends February 15th! Sign Up Today! Call 8885991720 or Visit BHPHWORLD.com ...Your Success Is Our Business

Discount Code: DBJ2014 February 2014 DEALER BUSINESS JOURNAL | 21

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February 2014 DEALER BUSINESS JOURNAL | 23

BUSINESS OPERATIONS

Business Basics

By David Wiggins

2014 Business Reflections

T

his year I decided I am not going to look at resolutions, but instead focus on the changing forces that seem to be taking place in our industry.

In my position I am lucky to be constantly talking with dealers throughout the year. Times are generally very good for new car dealers and those of us that work in the sub-prime industry are generally happy with the increased options available to finance customers.

While times are also good for Buy Here-Pay Here dealers, I am seeing more and more financial statements that are reflecting some trends that dealers should start looking into and trying to identify how to manage.

decreasing year over year lot sales. This appears to be due to the increased number of subprime sales by new and used car dealers.

Prior to 2007, we worked with BHPH customers with credit scores less than 575. Subprime took many of the buyers that had higher credit scores. Over the past five years the subprime market virtually dried up and BHPH dealers were able to meet the demand of these customers.

We have therefore gotten used to doing business with higher credit customers and it has lead to low charge-off and a very profitable business model.

Subprime customers have re-entered the market from many directions, and some are going to other sources for financing (including the new dealership captives).

This changing landscape is the new reality, and we as dealers must adapt and determine how to increase sales. This may take many forms — from Decreasing per lot sales opening additional lots, to changing our inventory The first deals with the trend over the past few structure (lower or higher priced cars), to loosening years of decreasing per lot sales. While this is not the underwriting standards, changing our personnel, case at some dealerships, we are seeing trends towards or updating our advertising/marketing. The correct answer will vary for each dealer and each lot.

The key is to focus on how to change, not just continue doing the same thing year after Reflecting on your year.

business will help you start thinking differently, continue challenging yourself, and work to position your dealership business for the best success going forward.

24 | DEALER BUSINESS JOURNAL February 2014

A maturing BHPH marketplace

It is safe to say that the BHPH marketplace is maturing. I say this as we see more (and better) competition, and improved knowledge and experience from the dealers. For twenty-some years the market was underserved and most dealers with reasonable financing were able to enter the market and generate strong profits.

As the market matures, it will lead to more disparity among dealers, those that are strong, aggressive, and properly structured will thrive, while those that have little experience, poor capital, and little business acumen will starve. This maturity process is DealerBusinessJournal.com

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common to virtually all industries.

This reality will determine a course of action for your dealership. It is important that you reflect on your current status and determine accurately where you stand in the marketplace. If you don’t feel you are strong then resolve to improve your business or exit the market. If you are strong, figure out what made you strong and how to keep your competitive advantage into the future.

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Plan for increasing charge-off As mentioned earlier, the industry has had almost unprecedented low charge-off over the past five years.

Based on the trends mentioned above, it appears that our industry will inevitably need to start planning for the reality of higher charge-off going forward. This should lead us to refining our specific business model (inventory prices to gross profit), review our collection departments, review our reconditioning policies and procedures, and examine our expense and personnel structures.

My hope is that even if you disagree with these reflections, you pause and reflect on your business and our industry. By doing so, you will be able to start thinking differently, continue challenging yourself, and work to position your dealership business for the best success going forward.

I believe the BHPH industry is changing rapidly and that only through critical self assessment will you be certain to succeed. Many in the industry see some “shake out” coming. Let’s not let ourselves be one of the casualties. Lets continue to reposition ourselves so that 2014 and beyond continues our prosperity within one of the most rewarding and dynamic industries that exist.

Dave Wiggins is an automotive CPA with CliftonLarsonAllen and has expert knowledge of the inner-workings of both retail and Buy Here-Pay Here operations. ...Your Success Is Our Business

Subscribe to Spot Delivery and, at no additional charge, we will send you a copy of your choice of any of our legal compliance books, CARLAW, CARLAW II Street Legal or CARLAW III Reloaded.

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February 2014 DEALER BUSINESS JOURNAL | 27

BUSINESS OPERATIONS

Advertising Alert

By Dani Sherrod

FTC’s Operation Steer Clear Drives Stricter Guidelines on Dealer Advertising

T

ruth in advertising has never been for the Auto Industry, right? Starting in January 2014, Auto Dealers will need to clean up their act when it comes to all advertising. A nationwide enforcement sweep is underway and it will be focused on TV, newspaper, and online claims about sales, financing and leasing.

The fines that are being imposed are as high as $16,000 per day that each ad ran in paper, television or online, so don’t be tempted to try capturing more customers through deceptive advertising. In most cases, even when there was a disclaimer that explained the advertising, the offenders were still prosecuted.

There were 10 lawsuits as of Jan. 9,

time to clean up your advertising act.

The following examples were taken from the current cases that were prosecuted: Deceptive Pricing. Consumers complained of being lured into the lot by vehicles that were advertised at a specific low price, but either the car was already sold or the real price was $5,000 higher.

Teaser Payments. Consumers complained that while auto dealers advertised an unbelievable low monthly payment ($69 per month), when the final paperwork was drawn up the payment increased over time. The FTC said, “Dealers did not state the number of payments and how much they Operation Steer Clear would be after those first few is the FTC’s low monthly nationwide payments.”

enforcement sweep focused on TV, newspaper and online claims about sales, financing and leasing. and the FTC is promising to sweep the entire country with Operation Steer Clear. Most of the dealerships were new/used car dealers, but there were also a few independent dealers as well, so this is a great

Balloon Payments.

Consumers complained that the low monthly payments ($99), were advertised without openly disclosing that the buyer would owe a final balloon payment. FTC said, “dealers did not state the amount of that balloon, in this case, over $10,000.”

28 | DEALER BUSINESS JOURNAL February 2014

Zero Down for Lease Vehicle.

Consumers complained that dealers advertised zero down up-front to lease a car. FTC said, “not true, behind the advertising were heavy fees and other amounts that were due up-front.”

Lease Terms Not Disclosed.

Consumers complained low upfront amount and low payment in ads. FTC Said, “advertising was made without clearly explaining that the transaction was actually a lease which had many hidden fees.”

Hidden Rates. Consumers complained the dealer advertised zero percent for 60 months. FTC said, “the rate applied only if people bought a new car for up to a certain dollar amount, such as $12,000 But if the buyer chose a car for $18,000, the buyer would pay a higher rate, that was not clearly stated.”

Prize Promotion. Consumer complained of falsely claimed sweepstakes, using a mailer. FTC said, the mailer was used falsely just to get customers in the door, with no actually prize or winner.

Credit/Lease Disclosure Failure. Consumers complained ads applied to customers with certain credit scores. FTC said, “Dealers violated the Truth in Lending Act (TILA), Reg Z, the Consumer Leasing Act, and Reg M, which are long-standing laws that any dealer Continued on Page 30 DealerBusinessJournal.com

buyers,” Kovac said.

Advertiser Index ADVERTISER PAGE

A

s long as one human has had a need or desire to find another, we have had skip-tracing. It is a process of tracking someone from point A to that person’s current location for a particular reason. Some of the most famous figures (skip-tracers) from our past come from the American “Old West,” such as the Pinkertons, the Texas Rangers and Pat Garrett, who tracked down and killed William (“Billy the Kid”) Bonney, and many more.

These men and women are the true forerunners of the skip-tracers of today.

These legends traveled from town to town on horseback talking to friends, relatives, neighbors and associates of those being hunted. The skip-tracing profession you are preparing to enter closely echoes the A dealership-changing 16 hour course! exploits of these historical giants, but the tools you will Make it mandatory for all managers in study have evolved far beyond the basic implements of your organization! the Old West. However, the unique skills required to

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FTC STRICTER GUIDELINES continued from Page 28

should be familiar with. The common thread was the failure to disclose key credit-or-lease related terms in ads.”

To settle the FTC lawsuits the dealers have signed proposed orders that will change the way they had previously advertised in TV, radio, newspaper and online. The terms most discussed are: 1. Ban on ads that misrepresent the cost to buy, lease, or finance a vehicle 2. Prohibition on other deceptive claims about pricing, sale, leasing, and/or financing After charged, the defendant is ordered to abide by the TILA and the Consumer Leasing Act as well as forbidding bogus claims of prizes, or other sweepstakes or incentives.

You can view TILA or Consumer Leasing Act at the Federal Trade Commission’s website, www.ftc.gov.

Dani Sherrod is a National Marketing/Internet Account Executive for Showcase Media.

Advertising No-No’s: What Not To Do When Creating Your Ads

O

peration Steer Clear is underway, and the FTC is promising to get tough on enforcement of current auto dealer advertising of sales, financing and leasing Among the things not to do: Deceptive pricing: Advertising a vehicle at a specific price, but having a higher price on the lot.

Deceptive teaser payments: Advertised attention-grabbing low monthly payments, without explaining up front that they were temporary teaser payments that would get raised after a short period.

Undisclosed balloon payments: Advertising low monthly payments without clearly disclosing that buyers would owe a final balloon payment.

False $0 up-front leasing claims: Advertising that consumers wouldn’t have to pay anything up front to lease a car, but then requiring hefty fees and other amounts due up front.

Undisclosed lease terms: Advertising low up-front amounts and low monthly payments without clearly explaining that the transaction is actually a lease and involves substantial hidden fees.

Hidden rates. Advertising low rates without explaining they would be applied only if a new car is bought at a certain dollar amount.

Bogus prize promotions: Using direct mail or advertising to falsely claiming the consumer has won a sweepstakes prize.

Credit and leasing violations: Advertising that violates the Truth in Lending Act (TILA), Reg Z, the Consumer Leasing Act, and Reg M. A common mistake is failing to disclose key credit- or lease-related terms in ads.

30 | DEALER BUSINESS JOURNAL February 2014

Real-world examples from Operation Steer Clear. To view all of the advertisements that were found questionable, go to the FTC’s website at www.FTC.gov.

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BUSINESS OPERATIONS

Skip Trace

By Alex Price

Evolution of the Skip-Tracer

A

s long as one human has had a need or desire to find another, we have had skip-tracing. It is a process of tracking someone from point A to that person’s current location for a particular reason.

Some of the most famous figures (skip-tracers) from our past come from the American “Old West,” such as the Pinkertons, the Texas Rangers and Pat Garrett, who tracked down and killed William (“Billy the Kid”) Bonney, and many more. These men and women are the true forerunners of the skip-tracers of today.

These legends traveled from town to town on horseback talking to friends, relatives, neighbors and associates of those being hunted.

The skip-tracing profession you are

preparing to enter closely echoes the exploits of these historical giants, but the tools you will study have evolved far beyond the basic implements of the Old West. However, the unique skills required to hunt and locate your subjects demand the same cunning and expertise that Pat Garrett would have used to track his elusive prey. Having the proper equipment and tools, and being able to use them, was, and remains, a requirement for success in this profession.

Can you imagine trying to do your job today without your trusted friends Mr. BlackBerry or Mrs. iPhone by your side? In 1876, Alexander Graham Bell invented the telephone, which began to change the face not only of our profession, but of the world.

Close to a century The skip-tracing later I embarked on a profession closely career in skip-tracing and I remember vividly echoes the exploits of the primitive tools of the historical giants like the day: my car and beeper, Texas Rangers and Pat a credit application of the subject I was skipGarrett, but the tools tracing and a criss-cross you use have evolved directory. In order beyond the Old West. to access courthouse records, I had to drive there and wait in line for a clerk to make copies of the documents I needed.

Fast forward to the present day “Information Age.” More accurately, it should be called the “I Can Have It Now Age.” With the proper knowledge, and just a few computer clicks, we

32 | DEALER BUSINESS JOURNAL February 2014

can gather more information than it would have taken weeks to compile 20 years ago.

With this new era has come the highest evolution of the skip-tracer: the cyber-tracker or, as some say, the “Master Hunter.” The cybertracker is a unique professional who successfully combines the fundamental cunning and instincts of the skip-tracing heroes of the Old West with today’s modern tools and technology to track his prey. In this national certification program you will learn about the latest tools of the professional skip-tracer, where to find them and how to use them. You will have the tools and technology that will enable you to know more about your debtor (subject) than his or her own mother knows. You can find out who they owe, where they shop, their known associates, relatives, nicknames, telephone numbers, owned properties, bankruptcies, landlords, liens, judgments and much, much more.

All of this, just by a click of a mouse!

In the next post we will discuss “The Three Types of Tracers” Until next time, be blessed, be safe and happy hunting!

Alex Price is a nationally-recognized expert on the Art of Skip Tracing.

Currently he is the Executive Vice President for MasterFiles and author of Skip Tracers National Certification Program, The Florida Records Guide, The Military Installations Guide and blogger with over 25+ years of experience in skiptracing, collections and public speaking.

Contact alex.price@masterfiles.com or call (972) 735-2353 for more information.

DealerBusinessJournal.com

...Your Success Is Our Business

February 2014 DEALER BUSINESS JOURNAL | 33

BUSINESS OPERATIONS

ReInsurance

By Tim Byrd

Avoiding the Searchlight

A

ll of us have at one time or another seen a movie where some desperate person was trying to sneak around without being caught by a searchlight. In the Bible, 1 Peter 5:8, the devil is described as a lion: fierce and predatory, always on the lookout for somebody to attack and bring down.

There are lots of Buy HerePay Here dealers and lenders feeling that way today about the Consumer Financial Protection Bureau (CFPB) and the Federal Trade Commission (FTC).

It is reported almost every day that another dealer is facing huge fines for something they didn’t realize they were doing wrong.

This past fall dealers from across the country traveled to Washington DC to meet with these government officials.

The dealers I spoke with said that when they asked for best practice indicators from these officials, they received less than comforting responses. They were told things like “we are not sure what we are looking

for, but we’ll know it when we see it.” Yikes!

So, I would like to take this opportunity to put forth just a few ideas to help you avoid the searchlight. These smart practices will let you say “there’s nothing to see here,” as you wave the investigators past.

First, make sure every employee you have has taken a compliance course. The first reason to do this is so that your employees know the Do’s and Don’ts. If you have never offered training, how do you expect your employees to know what to do and what not to do? Let me give you a checklist of the things every employee needs to learn from a good compliance course: • Payment Packing

34 | DEALER BUSINESS JOURNAL February 2014

• • • • • • • • • • • • • • • • • • •

Vehicle History Disclosure New/ Used Disclosure Hidden Finance Charges Fee Disclosures What are considered Deceptive Practices Credit Applications Suspicious Activity Reports Credit Reports Adverse Action Notices Risk Based Pricing Notices Vehicle Purchase Proposals Deferred Down Payments Negative Equity Disclosure Requirements Desking & Fair Lending Policies Co-Signer Notice Privacy Notices Information safeguards OFAC Screening • Cash Reporting • Credit Records Retention • Red Flags Rule • Advertising Regulations • Used Car Buyers Guides • Warranties • FTC Used Car Rule • Email Marketing • Do Not Call Rules • Text Message Marketing • Ethics I have seen courses covering this type of training offered for as little as $95 per student. Talk about a potential ROI. Wouldn’t it Continued on Page 36 DealerBusinessJournal.com

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February 2014 DEALER BUSINESS JOURNAL | 35

AVOIDING THE SEARCHLIGHT continued from Page 34

be important to you to be able to say that all of your employees are compliance certified?

Wouldn’t it be great should you get hauled into court to have evidence of a rouge employee, because the company has compliance rules in place and each employee is certified as having passed a compliance course? Your

for nearly 30. What a great business.

It is one of the last great businesses in this country that personifies the age old philosophies of buying and selling, giving and taking, and bartering and negotiating in the sales process. You are in a business where no matter your background, with enough personal drive and dedication you can make a great living. So, if I may give some advice Train your people in compliance to you younger and warranty your vehicle, so dealers who want when the searchlight swings your to make this way you won’t be caught in it. business part of your life, it would company policy stands on its be to always do the right thing. proven training.

Things like providing a warranty on Second, remember if you are your cars, because standing behind in the Buy Here-Pay Here business the sale is the right thing to do. and payments are the life blood The problem with warranties of your dealerships. What do comes down to dollars and you think is going to happen the common sense. You can give your minute the car breaks down and customer a warranty, like a 30 day the customer can’t afford to fix it? or 1000 mile 50/50. If it falls in You don’t have to be a car business half the customer gets both pieces. expert to figure that one out. Maybe Please! You can fix problems as they you like lots of repos and side notes. arise, and Murphy’s law dictates The CFPB is going to love you. that the largest number of problems The point is if you are going to will occur on your slowest month. be a successful Buy Here-Pay Here An unknown, reoccurring expense dealer, and you want to stay out of is your favorite business planning trouble in today’s and tomorrow’s type strategy, isn’t it? You can buy BHPH market, you better take good a Vehicle Service Contract (VSC) care of your customers by taking from a third party and give it to good care of their car. There is a every customer. Wait, we are talking way to do that without costing you BHPH, so if you did that you would profit, or at the expense of your cash just be putting out more money you flow. haven’t collected yet. If you gave a I have been in business now for $600 warranty on 20 cars you would nearly 20 years and the car business be spending a total of $12,000.

Wow, that would put a dent in your lending pool. Not to mention, you would be spending $144,000 per year and have giving up control.

So, you put out all this money, it’s not covered and the customer quits making their payment. Is that sound business strategy?

These are the common approaches to this major problem.

So, the simple solution many dealers have adopted is labeling everything as is. While this is compliant, I think it paints a bullseye squarely on your back. Let me direct you to a little sanity that can provide ownership, control and profit. Consider a dealer owned reinsurance company.

These are just a couple of ideas to show that your company is going above and beyond what other dealers are doing, and that you are looking out for your customer to make sure they get fair treatment.

The bottom line is you must train your people in compliance, and warranty your vehicles. That way when the searchlight swings your way you won’t be caught in it.

Tim Byrd is Founder and President of Tim Byrd & Associates, Inc., DealerRE is a managing agency located in Gloucester, Virginia. An Auto Industry Expert on Dealer Owned Reinsurance Companies, BHPH Operations and F&I Development. A 25+ year veteran of the car business, Tim is a trusted advisor to many car dealers.

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February 2014 DEALER BUSINESS JOURNAL | 37

BUSINESS OPERATIONS

GPSTracking The Tracking Features You Can’t Live Without

N

owadays it seems that anyone can produce, market, and sell a product without needing any industry specific knowledge or skill.

All it takes is a little capital and gumption to go from the outhouse to the penthouse seemingly overnight. While successes like those are great, it doesn’t mean that all products are created equal – not by a long shot. With so many vendors to choose from, it can be difficult finding the right GPS tracking system to fulfill your businesses’ unique needs. Here are six must-have GPS tracking features that dealers should not live without.

Fully licensed product. As the market for GPS devices grows, many small providers have entered and left the marketplace quickly.

Choosing a partner that’s in it for the long haul, and that will provide quality products and services is imperative for dealers. Only a provider who has a fully licensed product certification can assure you that their devices will

function in the U.S., and that you’ll be in compliance with all of the laws governing the technology.

Map quality and functionality.

When it comes to product features, there is none more critical than the quality and functionality of the mapping system. Readability, real-time locations, and easy viewing are just a few of the aspects that businesses should pay close attention to when selecting a provider.

Ease-of-use. Since your GPS tracking systems will most likely be used every day, it’s incredibly important that they work well and are easy to use. Navigating features, running reports, managing assets, and accessing the provider’s website should all be simple, easy tasks that anyone can learn. Even better is ensuring you have the flexibility of protecting your assets using any mobile device.

Customizable reporting.

The volume of data that many systems offer would be meaningless without a proper sorting and reporting function. Customizable reports allow businesses to analyze several metrics such as mileage, payments, and vehicle locations over a specific time frame.

Data privacy and encryption policy.

There are Federal Privacy laws that licensed

38 | DEALER BUSINESS JOURNAL February 2014

GPS providers must follow when collecting your data. Dealers should ensure that their provider is housing data on secure servers in a controlled environment, and that when data is transmitted to their websites it is encrypted. Some questions that you should ask your provider before deciding on a solution include: “What data do you collect and store and what do you use it for?” and “Is my data secure and held in privacy for both my business and customers?”

Infrastructure and data centers. The back end of the providers IT network, its “infrastructure,” is a vital element for dealers to consider. The best providers usually outsource their infrastructure needs to top-tier data centers that specialize in reliability and security. When a provider claims that they do everything “inhouse,” be aware that they’re then the ones responsible for keeping your systems online. And make sure they are servicing you 24/7.

Regardless of the current size or success of your business, choosing the right GPS tracking solution could be the only thing standing in the way of long term profitability.

Spireon, Inc.’s patented array of GPS products and information platforms provide business intelligence solutions through industry brands for automotive dealers, lenders, service and delivery fleets and transportation and logistics companies. For more information, go to www.spireon.com.

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©2013 CliftonLarsonAllen LLP

DealerCentric Unveils ID Scanner Technology

DealerCentric Solutions, the consumer fi- time-to-close by hours. nance management system innovator, today “The ID thieves hitting dealerships today launched ID Drive, a patent-pending ID scan- are super-sophisticated and so is their technolner technology that gives dealerships the most ogy. But dealer ID verification processes aren’t” powerful protection against fake IDs and iden- said Pete MacInnis, CEO of DealerCentric. tity theft imaginable.

“With all that endless photocopying, barcodeID theft is now a national epidemic, and scanning and verification calling, they have remore criminals are using fake IDs to test-drive, mained in the Dark Ages, powerless against this and even buy, cars. Developed in partnership fast-growing and incredibly costly problem. ID with AssureTec Technologies, an ID authentica- Drive may be small and sit on a desk, but it’s the tion technology firm, ID Drive is the first solu- most potent anti-fraud and test-drive security tion that gives dealerships the same, state-of-the solution ever invented for dealerships.” art protection used by Homeland Security and National & Dealership Epidemic: ID theft the U.S. military. is an American epidemic. According to the FBI, With one scan at ID Drive, dozens of com- it has overtaken the drug trade as the most costplex tests for thousands of ID types are automat- ly U.S. crime. According to an Open Security ically performed, leading to instant validation or Foundation report in 2013, more than 267 milred flags going up. But the dealer benefits don’t lion consumer records were exposed, and a rePlanthere: for awith newthat generation owners under stop one swipe, of a customer’s in- cord, 60 million pieces of personal ID wound the guidance of experienced formation is put into serious action:professionals it’s extract- up in the hands of identity thieves, last year. ed, purified and enhanced, and can be pushed And more dealerships are reporting that more who understand your dealership. fraudsters are presenting impeccable-looking into a dealer’s CRM and finance systems.

Audit Tax Outsourcing Advisory (fake) IDs for test-drives, and then driving off…

The customer, the vehicle, any pre-existing lead or credit app data, the sales and F& I de- or even successfully purchasing vehicles with partments, and sales management are all elec- them.

The government requires dealers to take tronically connected and able to communicate.

So, when that test-driver returns, the right deal steps to flag identity fraud. But dealerships use CLAconnect.com/dealerships structure can already be in place, shrinking barcode scanners, which can only verify that

ENVISION THE FUTURE

data is present on a card, not that it’s valid. And dealers are forced to make time-consuming calls to organizations like the DMV to verify identities, but most cars are bought on weekends when these organizations are closed. It’s becoming an increasingly expensive, scary problem: some lenders are now requiring dealers to buy back ID-theft-related deals.

ID Drive’s Extreme Technology: ID Drive was created through an exclusive auto retailing partnership with AssureTec Technologies, which is the ID authentication solution chosen by the Department of Homeland Security, the Department of State, the NYPD and DMVs nationwide. ID Drive incorporates the world’s most powerful ID-scanning hardware and software and customizes it for auto retailers, so they have the extreme technology they need to fight back against the fake ID wave.

“At DealerCentric we’re on a mission to innovate solutions that will make the test-driveto-sales-to-financing process radically more efficient for both dealers and their customers,” MacInnis said. “ID Drive is a key component in what will ultimately be the first end-to-end dealership solution that bridges the gap between the auto sales and financing processes, at the pint of sale.”

Fast Track Your Cash Sterling Credit Corporation is your key to turning in-house sales contracts into fast cash. Our seasoned understanding of the industry will help you generate a timely return. Our professional team of finance experts can create a program designed exclusively for you and your dealership. We’ll get you the cash quickly, treat your customers with respect and free you from the hassles of collections, all with a personal touch.

BENEFITS: • Minimize risk • Purchase inventory • Accelerate your profits • Reduce collection responsibilities • Meet operating cost goals • Grow your business!

We can help get your cash flow back on track. Call today!

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Offering Point-of-Sale and Bulk Purchase Programs

Toll Free 855-222-2120 www.SterlingCreditCorporation.com ©2013 Sterling Credit Corporation

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February 2014 DEALER BUSINESS JOURNAL | 39

TAX TIME IS RIGHT AROUND THE CORNER...

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The more ways a customer can pay, the better positioned you are to get your payments

877.527.5658

www.paymaxxpro.com 40 | DEALER BUSINESS JOURNAL February 2014

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