Dealer Business Journal July 2014

Used car dealers have seen an increase in enforcement of federal regulations and rules. Has it changed the way you do business—for better or for worse? Page 20

ALSO INSIDE: Are you a leader worth following?

PAGE 16

How a BDC can cultivate customers beyond phone and internet.

PAGE 28 ...Your Success Is Our Business

July 2014 DEALER BUSINESS JOURNAL | 1

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DealerBusinessJournal.com

Contents Volume 11, Issue 7

July 2014

IN EVERY ISSUE 4 6 8 36

and ulations 20 eral reg ge ent of fedfor worse? Pa enforcem r or rease in ess—for bette n an inc sin have see y you do bu rs ale wa de the Used car s it changed Ha rules.

ALSO Are you

:

INSIDE

r worth

a leade

? following

PAGE 16

cultivate BDC can d phone and How a ers beyon custom internet.

PAGE 24

4 DEALER

July 201

CORNER OFFICE FRONT LINE BHPH BOOT CAMP INDUSTRY NEWS

L|1

S JOURNA

BUSINES

LEGAL & LEGISLATIVE

BUSINESS OPERATIONS

BUSINESS OPERATIONS

Legal Opinion

Business Basics 18 Looking Beyond the Data Diving into the details of key management reports will help your dealership strive for continual improvement.

Cultivate Customers 28 Beyond Phone and Internet When working correctly, a BDC can pay for itself by cultivating customers you may be too busy to catch.

By

10 Compliance: 12 Steps to Get You Started Compliance doesn’t come cheap, but there are things you can do yourself to protect your dealership.

By Tom Hudson

General Counsel 14 Ten Things to Know About Service Repair Orders Creating and completing a proper Repair Order form can help prevent customer disputes.

ess ...Your Succ

ness Is Our Busi

By Robert N. Parnas

Skip Tracing 26 Go With Your Gut Fancy computer equipment and technology can save time, but it can’t replace a skiptracer’s instincts.

By Alex Price

By Debra Dawn

LEADERSHIP & TRAINING Learn to Lead 16 Are You a Leader Worth Following?

Just because you have a title, does not mean people will follow you.

By Dave Anderson

Greg Wells

ReInsurance 30 Where Do I Go From Here?

Suggestions for how BHPH dealers can over come the top three causes of repossession.

By Tim Byrd

SALES & SERVICE Female Perspective 34 Getting a Sense of Your Customers Female customers are very sensitive to the environment around them. Make sure your dealership can deliver.

...Your Success Is Our Business

By Jodi DeVere

July 2014 DEALER BUSINESS JOURNAL | 3

LEEDOM GROUP

Corner Office Celebrating Our Independence

W

e are half way through 2014 and it is that time when we celebrate summer and this month Independence Day. Hopefully you enjoyed a happy 4th of July with your families, friends and loved ones.

Our focus this issue is on how the marketplace has changed over the years and are dealers as “independent” as they once were. We have reached out to association executives, leading attorneys, regulators, and dealers to assess the landscape and answer the question – is business less difficult, more difficult or the same as 10 or 20 years ago. The feedback we got was amazing.

For starters, our Twenty Group database shows that it costs a dealer over $700 more to sell a unit today than it did 10 years ago. That is an increase of nearly thirty percent. This is attributed to a number of areas but compliance, insurance and fees are at the top of the list. We estimate the average dealer is now spending nearly $500 per unit sold on items related to compliance. Incidentally, during this same period gross profit margins have declined (not surprisingly). For those in Buy Here-Pay Here that are holding all of their own risk the average down payment is flat for the past fifteen years at about $900 per transaction. Meanwhile the average dealer cost of car sold has skyrocketed with a $3,000 increase! Add all of this up and it may not be a pretty picture for profitability.

When you leave the pure data elements it is interesting to have this discussion with all industry players. Many dealers we chatted with are focused on one item – exit strategy. From my perspective this is driven by two factors.

First, the demographic age of the average dealer is increasing.

The successful entrepreneur that opened the dealership twenty years ago is now 50 or 60 and looking to relax a bit more and enjoy life. Secondly, the barrier to entry into the business is as formidable as ever. You do not have many 20 somethings saying “oh how easy is it to open a dealership.” The answer is not easy at all and you will need at least a quarter of a million dollars or more. It is not as simple as renting a corner lot, getting a dealer license and serving the community. We have simply allowed layers of obstacles that make it much easier for that 20 something entrepreneur to think about other opportunities. Sad but true.

Our hope is you will form you own opinion – but have one! We are certainly experiencing a paradigm shift and that can be hard to see when you are focused on your business day to day. But take time to think about where your dealership is headed, how the current environment is shaping it and then weigh in as to your perspective.

Finally, enjoy the rest of your summer and until next month, make it happen!

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 Guest Columnists

Tim Byrd | www.DealerRE.com Jody DeVere | jdevere@askpatty.com Alex Price | alex.price@masterfiles.com Christy Taylor | Dealer Business Journal Robert N. Parnas | CliftonLarsonAllen Greg Wells | AllCall Automotive

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 July 2014

DealerBusinessJournal.com

Calendar AUGUST Aug. 19, 2014

Buy Here-Pay Here Leasing Academy

Sarasota, FL

Buy Here-Pay Here Sales Training Boot Camp

Atlanta, GA

For Buy Here - Pay Here Dealers, Managers and moderated by David Brotherton.

SEPTEMBER Sept. 2, 2014

Sept. 3, 2014

For Buy Here - Pay Here Dealers, General Managers, Sales and Finance Managers.

For Buy Here - Pay Here Dealers, General Managers, Sales and Finance Managers.

Buy Here-Pay Here Manager’s Boot Camp

Atlanta, GA

Sept. 4, 2014

Buy Here-Pay Here Collections Boot Camp

Atlanta, GA

Collection Managers, Collectors and Buy Here - Pay Here Dealers.

DECEMBER Dec. 8-10, 2014 Credit and Collections Conference

For Dealers Principals, General Managers, Collections Managers, Collectors, Skip Tracers

Dallas, TX

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

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LEEDOM GROUP

Front Line

By Chuck Bonanno

Superior Customer Service Pays For Itself

I

t seems that the older I get, the more I appreciate good service.

Being annoyed with bad service is one of those telltale signs that you are getting old. It makes me feel even older when I complain that service keeps getting worse all the time. I have even been known to say “it wasn’t like this in the olden days.” There is no room for poor service in our industry. We are in the transportation service business and our “accounts” are our customers. Our primary goal should be to take care of them.

There are many issues and concerns over today’s compliance directives from federal, state and local governments and agencies and

6 | DEALER BUSINESS JOURNAL July 2014

it can be difficult to comply with it all. There are of course, also costs associated with compliance. There is one thing you can provide, that doesn’t cost much and may help alleviate some of the compliance burdens, or at least prevent some of the heat you feel from customers.

If we have forgotten good manners in our personal lives and relationships, I am sad. If we have forgotten the meaning and the reasons for providing excellent customer services in our businesses, I am fearful. We must provide superior customer service to be successful in the BHPH business.

We have to “service” our customers for a minimum of 18, 24, 36 months or more. We also desperately want to sell these customers many cars, not just one. To do that successfully, we must take care of our customers.

It really is that simple. Most of us

agree that service is important, and relationships are critical but, do we really give world-class service every step of the way?

Let’s examine one aspect of customer service. While most of us are fairly adept at handling customers during the buying process and do a reasonable job in our loan closings, how many of us fail miserably when servicing the customer after the sale?

Our customers need our assistance with many post-sale issues such as insurance claims, mechanical repairs and most often payment problems. How many of us view these issues as problems and annoyances? How many of us are frustrated and even angry at our customers for wrecking their cars, breaking their cars and failing to pay us on time, every time.

The last time I looked, those ARE our customers and those ARE the reasons they are buying from us in the first place. World class service is not providing problem free cars and loans that need no service. It is exactly how you handle these inevitable situations that will set you apart from the rest.

If you look at your customers with disdain, feel you are better than them, pass judgment upon them; then you are not giving them the service they deserve. If you look at your customers with contempt, how will you treat them?

Have any of us or our collection team have ever raised our voices, yelled at, cursed at or threatened our customers? If we are honest, it has probably happened. I want us to think about the implications DealerBusinessJournal.com

ITCHING TO FIX

...Your Success Is Our Business

E

ASSUR IT Y O .E .MR. COLO H MA T C UA RANTE

E

Call us at 800.966.8733 to set up a one-on-one, onsite consultation at your dealership and start improving your net profits.

See how easy it is to restore that like-new finish in just an afternoon. Watch our online how-to videos to show you how.

AN C

ON-SITE ONE-ON-ONE’S

SCRATCH?

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Chuck Bonanno is the executive vice president and senior partner of the firm, Leedom and Associates, LLC. He is an Executive Conference Moderator of Buy Here-Pay Here and Automotive Finance Twenty Groups. He is a nationally recognized speaker, author, industry trainer and consultant. chuck@ twentygroups.com.

THAT

QU AL

of screaming at a customer. Would any of us respond well to a service provider berating, yelling, screaming, cursing or threatening us?

Why do we think we can get away with that behavior in this business? I think there are two reasons for this behavior justification. The first is that our customers let us do it. They are used to being treated this way and so don’t always know that this is unacceptable. The second reason, and far more serious, is that we feel we have the right to act this way. We are right, the customer is wrong. We are smart, the customer is dumb. We are good people, our customers are not. Does this sound familiar to you?

What I am saying here is that it costs nothing to provide world-class service. It makes customers feel better about you, their car and their loan and should make our employees feel better about what they do and why they do it. Selfishly, I want to provide world-class service because I make more money. From a human standpoint, it’s just the right the thing to do. Never let anyone in the organization forget, “Our customers are our profits, we are the overhead.”

I personally challenge every reader to investigate and review customer service levels at your dealerships and finance companies.

If need be, I challenge you to make changes to become a world-class service provider. I guarantee it will pay.

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July 2014 DEALER BUSINESS JOURNAL | 7

LEEDOM GROUP

BHPH Boot Camp

By David Brotherton

A Good Relationship Prevents Reposession

W

hat is the single most important activity performed in our organizations?

Collections. Don’t you agree.

Without collections, we can’t operate.

Repossessions are a part of collections.

I’m sure you consider your paying customers to be the most important assets you have, but when a customers stops making payments our decision making swings from the customer to the collateral. Before you panic, focus on some common mistakes that can lead to taking losses earlier than we should have.

Collectors that don’t take ownership, however, tend to view the calls as the job and not the customer. When collection teams don’t buy-in and take ownership, they keep trying to “clean up” their queue by accelerating charge off. Ultimately, they are going through the motions to get a paycheck rather than taking collections as the challenge it is and seizing the opportunity to succeed.

Managers who fail to take ownership will often try to blame outside factors like bad cars or shoddy underwriting for their own shortcomings. Now, before you go off and try to fire anyone who has ever said this, the problem is that it may well be true. While collections is a science, it isn’t an exact science.

Lack of Ownership in the Portfolio When collectors see their assigned queue as “their” accounts, they tend to take it more personally when customers begin to fail. They see this potential customer failure as an opportunity to excel and resell the customer on why they purchased a vehicle from you in the first place. Collectors that take ownership tend to be your best performers. They take resolving a customer situation as a challenge and se collection calls as a means to an end with the mindset of doing whatever is necessary to keep their book intact.

Gaps In Coverage The first basic requirement for any collection team is for management to define “working” an account. Working an account should mean that available numbers are called until contact with a live adult human being is made. Now that everyone understands what “working” is, the second requirement is that every un-promised delinquent account be worked every day.

Unfortunately, I have seen entirely too many situations where collectors pick and choose what accounts to work on and rationalize only touching an account once a week or so. The most common excuse I hear is

8 | DEALER BUSINESS JOURNAL July 2014

that “We are too busy” or “They want us to verify and close deals and that cuts into collection time.”

Numerous gaps in coverage are an indication of a management failure at least as much, if not more, than a collector failure.

Tolerating gaps in coverage lead accounts to quickly fall down the sheet and into your charge offs.

Not Adequately Defining and Enforcing Expectations Two different sets of standards should be maintained for the collections team: activities and results. You owe it to your team to tell them what you expect and performance based discipline should never be a surprise. Unfortunately, it is all too common for management to give inadequate and infrequent feedback. People need to be told how they are doing and they need to hear “good job” as much as “bad job.” I have seen management teams who are high-level masters in dishing out criticism by the bucket full, but fail to recognize good performance or even discuss what is expected. How can you expect success if you don’t first define it?

Over Analyzing and Under Coaching There are two “must-do” activities for any collection manager: review accounts and train/coach their team.

Everything else is secondary. I am much more comfortable with a good coach and teacher in this DealerBusinessJournal.com

role than I am with a number cruncher. Your DMS probably gives you the data you need so why in the world should a collection manager spend all day working with spreadsheets and ignore their team? This is not to say analysis is not important.

Analysis is where you identify trends, hopefully, early enough to address them. I am simply saying that analysis is NOT the primary job responsibility of the collection manager. It is secondary to their “must do every day” purpose. Organizations that fail to address this tend to fail when trying to meet or beat benchmarks.

Failure to Establish Ground Rules at Deal Inception Strong closings where the customer’s expectations are made very clear can resolve a lot of early collection issues before they happen. Your collectors making a “welcome call” right after the

sale to reinforce the closing performance and uncommitted and making their first post-sale team members that we start the contact a positive one will go inevitable slide into mediocrity. a long way in preventing some Successfully collecting payments misunderstandings as well. from our customers requires Unfortunately, constant diligence and effort. It too many organizations still is when we tolerate sub-standard have their sales performance and uncommitted team close the contract and, as team members that we start the good and diligent as some of these inevitable slide into mediocrity. sales people are, they are still sales people whose incentive Successful collections is always is to have the customer take about the relationship. It only delivery and send referrals, not becomes about the repossession to be the cold, harsh voice of when we fail to maintain it. reason. Our industry fills a vital role in the economy and we go into this with our eyes open.

David Brotherton is a consultant Successfully collecting payments and Twenty Group moderator with from our customers requires the Leedom Group Contact him at constant diligence and effort. It davidb@leedomgroup.com is when we tolerate sub-standard

Occasionally a new product, service or method comes across our desk that we feel may help your dealership’s bottom line. We share these idea’s with our email subscribers as well as post them on the DBJ web site for all of our readers to see. Check it out today to see how your dealership can benefit.

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July 2014 DEALER BUSINESS JOURNAL | 9

LEGAL & LEGISLATIVE

Legal Opinion

By Tom Hudson

Compliance: 12 Steps to Get You Started

I

have spoken at several BHPH dealer conferences over the years giving legal presentations on a variety of topics.

Many times the presentations I give deal with federal enforcement actions.

At the end of my presentations I usually have several dealers lined up who want to ask me essentially the same question: “Can you give me a basic playbook that will help me set up a compliance program that will keep the FTC and the Consumer Financial Protection Bureau from flogging me in the public square and throwing me in jail?” They actually seemed to have taken the compliance message to heart.

That question is usually accompanied by a warning that the compliance program needs to be one that won’t break the bank. This article outlines a few first steps you can take toward establishing a serious compliance program and takes a stab at estimating the “hard costs” that each one will involve, not including management time, implementation time, and the time your employees spend studying, training, and researching.

Here goes.

STEP Make the decision to become a squeaky-clean operation.

Without this step, none of the

1

10 | DEALER BUSINESS JOURNAL July 2014

rest of the stuff we recommend will work. The decision needs to come from the top of the organization, and, if your organization has had compliance problems, all hands need to understand that it is a real sea change and not just window dressing.

Your people need to be told that anyone who does not treat customers honestly and ethically will be fired.

Anyone who doesn’t buy into the new compliance culture should be told to hit the road. Cost: $0.

STEP Appoint a privacy officer.

While you’re at it, make that same person your compliance officer and the administrator of your Red Flags program. If your organization is large enough, this person may need help in the form of a small committee. The privacy/compliance officer should report to the highest-ranking person in the organization. Have signs made for your dealership showroom that identify that person. Cost: $5 for the signs.

2

STEP Give your privacy/ compliance officer a real budget so that he or she can actually get some stuff done.

No budget for privacy and compliance will assure that you will have a privacy/compliance program that’s not worth a hoot. Several of the tools that the privacy/compliance officer will need, such as copies of the federal Truth in Lending Act and Federal Reserve Board Regulation Z, the federal Consumer Leasing Act and FRB Regulation M, the federal

3

Equal Credit Opportunity Act and FRB Regulation B, the federal Gramm-Leach-Bliley Act, the Federal Trade Commission’s privacy regulation, the FTC’s Used Car Rule, the Red Flags Rule, and the Risk-Based Pricing Rule, can be found online, although your privacy/ compliance officer might need some training to access them. As part of that privacy/compliance budget, allocate enough money to send as many people as you can possibly afford through a compliance certification course (your mechanics are trained – your F&I people need training, too). One such program is offered by the Association of Finance and Insurance Professionals (www.afip.com).

Have your privacy/compliance officer obtain and read all the books on F&I compliance that he or she can find. Likewise, have the privacy/compliance officer subscribe to online legal compliance services. Cost: Start with at least $5,000, but you easily can spend a lot more.

STEP Train, train, train.

Dealers tend to have high turnover of sales and finance personnel, and this compliance stuff can be less than riveting. So, you need to train your revolving sales and finance force, and periodically re-train the ones who stay with you.

There are third-party trainers, Continued on Page12

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...Your Success Is Our Business

July 2014 DEALER BUSINESS JOURNAL | 11

LEGAL & LEGISLATIVE

12 STEPS TO COMPLIANCE continued from Page 10

some of whom are quite good, but if your privacy/ compliance officer turns out to be a crackerjack, he or she might well be able to handle the training. Cost: $0 in-house, $10,000 for outside training twice a year.

STEP Download and print copies of “Understanding Vehicle Finance.”

This consumer education pamphlet is free on the National Auto Dealers Association website and is available in English and Spanish. It provides an overview of how car financing at dealerships works and bears the seal of approval of the Federal Trade Commission. Everyone in your organization will benefit from reading it. Make copies to display around your dealership, and put a copy into each customer’s packet of papers as you close each deal. Cost: The download is free, plan on $1,000 for printing.

5

STEP Step 6. Download and print copies of “Keys to Vehicle Leasing.”

This is another consumer education pamphlet.

It’s from the Federal Reserve Board and is a good overview of closed-end auto leasing. It also is available in English or Spanish, and you should use it just like you use “Understanding Vehicle Finance.” Cost: The download is free, plan on $1,000 for printing.

6

STEP Require everyone in the sales and financing process to read carefully your buyers order, retail installment sales agreement \ and lease forms, privacy policy, arbitration agreement, and all other documents that you ask the customer to sign or give to the customer.

This should include credit life and accident policies and certificates, GAP addenda, service contracts, “etch” agreements, and anything else the customer sees. Make up a test to determine how much of what each employee has read he or she actually understands. Cost: $0.

7

12 | DEALER BUSINESS JOURNAL July 2014

STEP Adopt a true, transparent “menu” process for the sale of additional products through the F&I office.

Work with your lawyer to prepare the menu and the script. Dealers who use a menu say that the transparent sales process costs them some sales that they might otherwise make, but that offering every product to every customer every time through a menu results in more sales. Follow up with your employees to make sure that they’re actually using the menus you’ve adopted in the way they are supposed to be used. Cost: $0.

8

STEP Appoint a person to help customers if they have a complaint.

Sometimes referred to (using a $10 word) as an “ombudsman,” such a person helps the customer work through a complaint with the dealership. You don’t want customers resolving complaints with the dealer representatives that they originally dealt with – and who often caused the complaint and get defensive as a result. You want someone who did not take part in the sales and financing process who can look at the customer’s complaint dispassionately. Having a formalized complaint-resolution process might deter some customers from taking their gripes to a lawyer or to the Consumer Financial Protection Bureau. Cost: $0.

9

STEP Have your privacy/compliance officer periodically search the web.

He or she should check the site of your state’s attorney general so that you’ll know what the AG’s current hot buttons are. Another site to check is that of your state’s motor vehicle dealer regulatory body. Also, on a regular basis, check the CFPB and FTC’s websites, the NADA website, your state ADA’s or IADA’s website, and any other sites you’ve discovered that are useful.

Use your Microsoft Outlook program to set up a weekly or monthly reminder to do these searches (Confession—I stole the Outlook tip from Gil Van Over).

Cost: $0.

STEP If your dealership isn’t using a mandatory arbitration agreement in its sales, leasing, and financing transactions, consider doing so.

The CFPB has announced that it is studying the use of arbitration agreements in consumer transactions, and

10

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the Bureau may eventually ban their use. Until that happens, using an arbitration agreement can be an effective defense against those predatory class action lawyers. Some state associationproduced buyers orders contain arbitration language, or you can buy free-standing arbitration agreements off the shelf from vendors like Reynolds and Reynolds (but make sure your state permits the use of additional documents and doesn’t have a so-called “single document rule”).

Regardless of which way you go, have a lawyer who is really knowledgeable about consumer arbitration agreements look over the agreement you intend to use. Cost: $2,000, plus any ongoing printing costs.

STEP Have a forms and procedures review and a written compliance program.

All of your sales and F&I forms and procedures, underwriting procedures, and servicing and collections procedures should be reviewed by a lawyer who is knowledgeable about compliance law. All of these procedures should be documented and maintained in a compliance manual. You and your lawyer should periodically review your manual because laws and regulations change. Use your Microsoft Outlook program to schedule a review at least every six months. Cost: $10,000–$20,000.

12

So, there you are. If you implement those 12 steps, you’ll spend about $30,000 to $40,000. You still won’t have a first-class compliance program, but you’ll be miles ahead of where most dealers are. Once you get these measures in place, we can start talking about how to bring the program to the next level.

Not willing to invest serious money in compliance? Maybe it’s time to think about closing the dealership and opening a bait shop.

Do you ever wonder your dealership’s performance and profitability stack up against the rest of the industry?

Leedom and Associates, LLC has created an easy to use Dealership Profitability Profile to help you find out. Go online to www.twentygroups.com and click the Analyze Your Dealership button. By answering some quick questions you will receive initial feedback about your key performance indicators and identify potential opportunities for growth.

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®. Reach him by phone at (410) 865-5411 or visit www.counselorlibrary.com. ...Your Success Is Our Business

July 2014 DEALER BUSINESS JOURNAL | 13

LEGAL & LEGISLATIVE

General Counsel

By Debra Dawn

Ten Things to Know About Service Repair Orders

D

eveloping a thorough and complete Repair Order form and training your service staff in how to properly complete the document will be invaluable in the event of customer disputes.

Spending a little time now can save you a lot of time, money and heartache in the future.

1

All Repair Orders Must Be in Writing: This includes the basics such as the customer’s initial complaints and an itemized listing of all dealership (labor, parts, shop supplies, storage fees) and state (tire disposal, battery purchase) charges. Odometer readings (especially when the current mileage is close to warranty expiration) are also important to avoid claims that mechanics have taken a weekend joy ride in a customer’s vehicle.

Proposed completion dates are also crucial to avoid

creating false expectations of when a customer can expect a fully functioning vehicle to be returned.

2

All Estimates Must Be In Writing: Depending on your state, final bills which exceed somewhere between $25 and $100 must be accompanied by a written estimate. There should also be a time limitation on the estimate provided to protect the dealership from rising costs.

3

Merely Having a Written Estimate is Insufficient: For most customers, the actual amount of the repair is unknown at the time the vehicle is delivered to the repair center. In these cases, customers must be given one of three options: (a) To request a written estimate prior to the repairs (regardless of the amount of those repairs); (b) To request a written estimate if the repair costs exceed a certain dollar amount (which amount may not be exceeded without written or

You can save a lot of time, money and future heartache by developing and training your service staff how to properly comple a Repair Order form.

14 | DEALER BUSINESS JOURNAL July 2014

oral approval); or (c) To waive any written estimate. The customer must sign or initial which option they choose BEFORE any repair or assessment is commenced.

4

There Should Be Parts Disclosure Language: A statement should be included in each repair order indicating that the dealership may elect to utilize either new or remanufactured parts at its discretion. The form should also state whether the customer wishes to retain used parts. If there are certain parts (such as cores) that the dealership normally trades in for replacement, a statement can also be included in the repair order indicating the additional charges the customer will accrue if he or she wishes to keep those parts.

5

There Must Be a Specific Repair Authorization: Language such as, “I hereby authorize all reasonable and necessary materials to be purchased and the above listed repair work to be done” must be included. Additional language should be added stating that in the event the customer cancels repairs prior to their completion for any reason, there will be a tear down and reassembly fee. That amount must also be specified.

6

There Must Be Specific Usage Authorization: The customer must give permission for the repair facility to operate the vehicle for the purposes of testing, inspection, assessment and delivery. This DealerBusinessJournal.com

permission should further indicate that the usage is at the customer’s own risk. This express approval allows the use of a customer’s insurance in the event there is a loss (and the customer actually has insurance).

7

Acknowledgement of Mechanic’s Lien: In the event a customer does not pay for a repair (or pays for a repair only in part) wording must convey that an express mechanic’s lien is acknowledged by the customer on the vehicle in order to secure the repairs. In the event litigation ensues, this written acknowledgement becomes paramount.

8

Disclaimer of Warranties: The dealership should expressly disclaim all warranties, either express or implied, including any implied warranty of merchantability or fitness for a particular purpose.

9

Limitation of Liability: Language in the repair order should clearly state that the dealership will not be held responsible for any loss or damage to the vehicle in case of fire, theft, accident, act of God or any other cause beyond the dealership’s control. There should also be a statement indicating that, under no circumstances, shall the dealership be liable for loss or damage to any personal property left in the vehicle regardless of cause.

10

Collections: In the event it becomes necessary for the dealership to employ a third party collection agency or attorney to collect on an unpaid repair, the repair order should specify that the customer agrees to pay for all costs and expenses connected thereto.

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

Phone: 888.874.7579

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WWW.SECURITYAL.COM July 2014 DEALER BUSINESS JOURNAL | 15

LEADERSHIP & TRAINING

Learn to Lead

By Dave Anderson

Are You a Leader Worth Following?

L

eaders err when they believe someone should follow them simply because they’re the boss; because they have a leadership title.

Yes, people will comply with this sort of “I’m the boss” leadership to keep their paycheck and job, but they only commit to leaders worth following. If you are a positional leader who is hung up on a title, here is a humbling perspective: • A title doesn’t make you a leader; it simply buys you time to become one.

• It’s a foolish notion to believe anyone has been made more competent by virtue of a change in title.

• Leadership is performance, not position; it’s a daily choice you make, not a special place at a conference table where you sit.

•

Don’t assume you have followers, you may only have subordinates. How you act as a leader determines whether a subordinate converts to a follower; subordinates comply whereas a follower is more likely to commit.

There are a number of key traits that make a leader worth following.

In fact, you may recognize many from what you expected from your leaders as you rose through the ranks, and still expect from them to this day.

Competence Here’s a fair question: Do you know what you’re doing? Your people may like you, but if they see those who follow you closely getting routinely led into minefields and blown up, they’re not likely to line up behind you for the same abuse.

Strong work ethic Work ethic is more than an

Are you a leader worth following, or simply a pretender with a title?

energy issue, it is a character issue.

Work ethic goes beyond the hours you put in; it’s more accurately determined by what you put into the hours while you’re at work. Do you go the second mile daily, persist in the face of difficulties, and lead by personal example rather than by personal convenience? If so, you’ll inspire others to do likewise. If not, your sloth will set a sluggish pace and example for the entire team.

Teachable Do you work on yourself? How many leadership books do you read each year? How many courses do you attend? Are you open to feedback, or have you assumed a “been there, done that” attitude that’s turned you into a know-it-all?

Suffering under a leader afflicted with an “intelligence arrogance” is exhausting; while one may endure occasional arrogance from a boss, arrogant and ignorant is pushing it.

Honest Do you lie? How about the little “white” lies like instructing the receptionist to tell a caller you’re not in when you are? Do your people see that you’re honest with customers and forthright in your advertising?

Working for a liar is unsettling; people know if you lie to others you’re also probably lying to them.

Keeping commitments This is an integrity issue. Do you consistently do what you say you’ll do, when you say you’ll do it, and how you say you’ll do it? And do you do so without excuse and regardless

16 | DEALER BUSINESS JOURNAL July 2014

DealerBusinessJournal.com

of the cost?

How about keeping this commitment: do you show up to work on time? Tardiness is a character flaw; it shows an unwillingness to keep the commitment to be at work at a certain time—a promise you made when you took the job. Tardiness also demonstrates an arrogant and hypocritical double-standard: the same rules that apply to others don’t apply to you. It doesn’t matter how long you’ve worked at a company, or how high your position; no one “earns” the right to not keep a commitment. If this fact makes you uncomfortable, then good! Get your act together and be on time; early is even better!

are in the stretching business. If you’re not consistently leaving people better than you find them you’re more babysitter than leader.

Consistency Do you exhibit the seven traits listed above consistently, or only every once-in-a-while? Are you disciplined? Do you prove yourself over again each day, or only when your back is against the wall and time is running out? Even the most hapless sluggard may manage to do the right thing occasionally. But effective leaders do the right things consistently, not just when they feel like it; or when it’s easy, cheap, popular or convenient.

Acceptance of responsibility Does the buck stop with you, or when things go awry do you whip out your black belt in blame and point to other people or conditions to excuse your failures? Do you admit mistakes and share what you learned from them with your team? Little is more disheartening for a follower than to have a whiney, sniveling, victim as a boss.

There are numerous other traits that help determine whether a leader is worth following. The eight here are a good start. In fact, if your people were asked to score you from A to F in each of these categories, how would you fair? Could you be considered as a leader worth following, or simply a pretender with a title? If it’s the former, congratulations! If it’s the latter, you have work to do; starting now.

Developer of human potential Do people grow under your leadership? Are you a consistent coach, trainer and mentor? Do you provide the tools and opportunities people need to reach their potential?

Would your people say that you are more likely to stretch them or maintain them? How many of your people have been promoted in the past two, five or ten years? Leaders

Dave Anderson is President of LearnToLead which provides in-person and virtual training to many of the world’s best dealerships. Dave speaks to dealer groups over 125 times each year and has given seminars in 15 countries. He has spoken at eleven NADA Conventions and is the author of twelve books. Follow Dave on Twitter @ DaveAnderson100 and visit his website at learntolead.com for free articles and videos on sales and leadership.

...Your Success Is Our Business

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800.966.8733 DealerBusinessJournal.com July 2014 DEALER BUSINESS JOURNAL | 17

BUSINESS OPERATIONS

Business Basics

By Robert N Parnas

Looking Beyond the Data

T

he BHPH operator’s evaluation of actual data versus internal trends and various benchmarks is an integral component of operational success regardless of the underlying business model.

The degree and complexity of internal trend and key ratio analysis varies among operation, with some performed either informally or sporadically while others are very well documented.

The involvement in 20-Groups certainly helps the effort in regards to the performance and evaluation of key trends and ratios, as well as networking and sharing of ideas.

With all the demands and pressures which a BHPH operator must deal with and depending on the size and complexity of the organization, some feel that merely managing by evaluating and comparing the internal operation’s statistical trends, benchmarks and reviewing monthly financial statements and budgets vs. actual may be inadequate on its’ own. In a competitive operating environment, as there is a need to strive for continual improvement, it is necessary for the BHPH operation to consistently “review and dive into details of key management reports,” looking beyond the key statistical and benchmark data and monthly financial statements that may be reviewed traditionally at a high level. Although a high level review is desirable, it should not take the

18 | DEALER BUSINESS JOURNAL July 2014

place of detail reviews by the BHPH operator and/or the management team. The key is to obtain as much information as possible in order that ongoing business operations may be appropriately evaluated and to be incrementally improved.

Such improvements are often not hitting “home runs” but perhaps turning outs into walks. Here are some examples, not intended to be all-inclusive: •

•

At month end, perhaps your inventory ACV’s are right in-line with the target ACV’s, however certain inventory exceeds internal limits or appears unusual. Perhaps excessive reconditioning or merely a higher vehicle purchase price but nevertheless, the detail review may reveal such exceptions or unusual amounts which should be reviewed, particularly if unauthorized or if not at levels desired by the company. If not reviewed timely at a detail level, the inventory will be eventually sold, with the “problem” blended into cost of sales and possibly a recurring issue.

Parts inventories may not be a significant asset but is significant when the turnover of parts is considered. Parts management to some is a “black hole” as RO type systems are not always used and it is difficult to really determine if the parts were actually installed on the vehicles. Therefore careful review of specific parts being charged to the vehicle on

•

•

•

•

•

a select basis may be warranted.

Inventory aging as a whole may be reasonable, however there may be a few aged items that have been “sitting” on the schedule for awhile, including “project type vehicles” that may never be reconditioned or other vehicles that may be damaged which are routinely be passed over each month . Also, merely reviewing inventory aging over a given interval may not reveal inventory with excessive reconditioning “wait” time.

Wholesale transactions within the sales journal should be reviewed on a case to case basis and losses should be evaluated to determine if there are unusual patterns of losses on certain items that need to be further researched, particularly if multiple wholesalers are used.

Reviewing the detail of customer receivables for aging and recency on an ongoing basis is very important.

Perhaps the over 90 aging percent is great, but perhaps there are hidden issues to be problems in the future.

Review accounts payable detail and vendors report in the system. The overall balance may be reasonable, but potentially, older payable entries remain on the books that have not been researched and are approved vendors.

Periodically, review bank reconciliations, statements check register detail or have someone review them not associated with the process DealerBusinessJournal.com

and request back-up, etc. as considered necessary. Select certain expense general ledger accounts and have someone not associated with the process review the detail on a select basis. Possibly amounts being expended that are not authorized or being misappropriated.

The bottom line, albeit a simple concept, is that we see quite a few BHPH operators including the management team that manage on a high level perspective perhaps miss opportunities for improvements in

various areas by not looking close enough into details that make up certain benchmark information as well as line items within their financial statements. Sometimes these details are initially reviewed by the personnel in charge of that area and particularly in small businesses, it is possible that the only check is performed by the person in charge of that area of which, in some cases, their objectivity may be tainted. Some organizations empower their controller or accounting manager or another independent individual to review certain management

reports and question and review specific items on a discretionary basis for an additional check and balance. The key is to recognize the solution to problem identification or finding areas to improve is often based upon the ability to extract meaningful information from details that would be otherwise hidden or not considered.

Robert Parnas is an automotive CPA with CliftonLarsonAllen and has expert knowledge of the innerworkings of both retail and Buy Here-Pay Here operations.

Continued on Page 20. ...Your Success Is Our Business

July 2014 DEALER BUSINESS JOURNAL | 19

COVER STORY

Today’s auto dealers are under attack by a new type of business threat—over regulation. Will independents be able to fight for their right to survive in an environment of increased enforcement?

By Christy Taylor 2020| DEALER | DEALERBUSINESS BUSINESSJOURNAL JOURNALJuly July2014 2014

I

f you think the Feds are out to get you, you may not be all that paranoid. The number of claims brought up against auto dealers seems to have greatly increased over the last four years, reaching nearly 80,000 in 2013.

Small, large, independent or franchise the law does not discriminate and neither does its enforcement.

There has always been a fair amount of regulation for modern day auto dealers. The Truth in Lending Act was enacted in 1968 and The Equal Credit Opportunity Act in 1974. The Buyer’s Guide has been a permanent fixture on cars offered for sale for over 30 years and the Federal Trade Commission has been around for what seems like forever. Auto dealers have always had an established set of laws to live by, and they have had to learn how to operate their businesses within those rules DealerBusinessJournal.com

while still finding ways to be profitable. Even if a dealer was not in full-compliance of federal regulations, as long as he treated his customer right and kept his ear to the ground, for the most part he stayed out of trouble.

That strategy worked, until recently. Right up there with scarce inventory and slumping sales, increased enforcement of federal and state regulations has taken its toll on post-Great Recession auto dealers. With the signing of the Dodd-Frank Act in 2010, a whole new era of regulatory compliance was ushered in for the financial industry and those related to it. Dodd-Frank’s purpose was to promote the financial stability of the United States through improved accountability and transparency in the financial system while protecting consumers from abusive financial services practices and though its prime ...Your Success Is Our Business

target was the mortgage industry, the rippling effect of its reach and power has upswelled to engulf the auto industry as well.

“The FTC’s authority for enforcing laws has been around for some time,” explained FTC Attorney Mark Glassman. “The renewed enforcement authority granted under the Dodd-Frank Act has also renewed oversight of the auto program.”

Dealer Compliance Attorney and Hudson Cook, LLP Partner Thomas Hudson agrees. The increase of enforcement on auto dealers in the past four to five years has greatly impacted the industry, he says and resulted in significant financial impact.

“The compliance game changed in a very basic Continued on Page 22 July 2014 DEALER BUSINESS JOURNAL | 21

INCREASED REGULATION ENFORCEMENT continued from Page 21

borrowers paid higher way,” Hudson said.

“Before, dealers were doing their interest rates for auto loans “Before, dealers were best to stay compliant to keep between April 2011 and doing their best to December 2013 because of stay compliant to the plaintiff’s attorneys and state Ally’s pricing system. The keep the plaintiff ’s result was an order to pay Attorney Generals off their backs. attorneys and state $80 million in damages to Attorney Generals Now, compliance is really a matter of those who were affected off their backs. as well as $18 million in Now, compliance is life and death for the dealership.” penalties. really a matter of life — Tom Hudson, Hudson Cook, LLP How were the violations and death for the discovered? That’s a good dealership.” question. The FTC is not at liberty seem to be any indication of the Hudson also suggests that in to say how they find violators, but rules being relaxed, the best thing addition to the intensifying scrutiny it is assumed that a majority come auto dealers can do is to take extra dealers feel from the FTC, they from consumer complaints. Both good care of their customers and also have to be ready if the newly the FTC and the CFPB have userknow exactly what is expected formed Consumer Financial friendly websites that make it very of them at the federal and state Protection Bureau (CFPB) comes easy for a consumer to submit a regulatory levels. calling. The CFPB is another complaint against a business as What seems to be of primary product of the Dodd-Frank Act well as toll-free telephone numbers focus and concern for FTC and was established in 2011 as an set-up for the same thing. There is regulators is deceptive advertising independent agency of the United also the possibility of an employee and improper disclosures. This States government responsible for (or former employee) turned includes misrepresentations in consumer protection in the financial whistle-blower who contacts either print, television, radio and online sector. The CFPB has jurisdiction agency with a first-hand account of advertising. The most recent FTC over banks, credit unions, securities wrongdoing. It is also speculated crackdown, dubbed “Operation firms, pay day lenders, mortgagethat given the scope of each Steer Clear,” was a nationwide sweep servicing operations, foreclosure agency, and its resources, there is focusing on the sale, financing and relief services and debt collectors. a fair-share of media monitoring, leasing of motor vehicles. In all, The CFPB officially says it does not social network trolling and overall 10 dealers from across the country have authority over auto dealers industry inspection going on. For were caught in this January 2014 (except Buy Here-Pay Here dealers), each case that is being made, the wave of enforcement, nine of which but Hudson says that is not entirely investigating agency delves into a later settled their charges but not accurate. The complexity of the fact-finding frenzy auditing records, before they were made examples of wording for exempted entities transactions and paperwork from by the Commission for other dealers (those selling and financing cars the dealer in question. It’s usually at to learn “what not to do” when it but not holding the paper) makes it that phase when the lawyer is called. comes to advertising. confusing, but the CFPB’s reach can For some dealers that might be The CFPB has taken on the extend to independent auto dealers too late. In an ideal world, dealers cause of fighting discrimination in who operate Buy Here-Pay Here would heed the advice of attorney’s, lending practices and has issued fair businesses and to some of those who regulators, compliance officers, warning to auto dealers and indirect sell their paper. association executives, and industry auto lenders about dealer mark-up Technicalities aside, it boils experts and get their compliance and compensation policies as well as down to an awful lot of federal management system in order offering guidance on how to address muscle flexing on top of a battered, before the Feds come knocking at fair lending risk. If you don’t think under-resourced, industry that the door. A complete compliance they are serious, just take a look has seen profit margins shrink, management system is one that at what happened with Ally bank overhead expenses rise and the includes training all staff (from last December. The CFPB and the costs of keeping satisfied customers reception to sales to service, etc.) in Department of Justice determined outpacing the revenue being that more than 235,000 minority brought in. Since there does not Continued on Page 24 22 | DEALER BUSINESS JOURNAL July 2014

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July 2014 DEALER BUSINESS JOURNAL | 23

INCREASED REGULATION ENFORCEMENT continued from Page 22

proper procedures, designating a dealership compliance officer who has been given the resources to do that job including copies of federal and state rules, acts and regulations and ongoing training particularly in the area of finance, a written policy for handling consumer complaints, documentation of the dealership’s privacy policies and procedures, continuous review

compared to the protection of the consumer.

“The agency tries to create a fair marketplace and wants to ensure consumers are given accurate information in an educated way,” Glassman said. Though they are not anti-business, the FTC and the CFPB are pro-consumer and will always enforce the rules they have been mandated to uphold no matter the aftermath. For dealers, this means The fact that many dealers a plea of ignorance won’t make it because they can’t will never cut it.

“Knowledge is afford the regulatory burden not a requirement does not seem to matter to in proving liability,” Glassman said. federal regulators who view the The rules are all cost of compliance insignificant there in black and white, or LCD compared to the protection of and backlight, the consumer. depending on where you go to look for of forms and contracts being them. Important documents such used and a commitment from as the federal Truth in Lending the dealership that it will operate Act and Federal Reserve Board with total transparency in its sales, Regulation Z, the federal Consumer finance, warranty and credit-related Leasing Act and Federal Reserve transactions. It sounds intimidating Board Regulation M, the Equal and expensive, and attorneys like Credit Opportunity Act and Federal Hudson believe it is and probably Reserve Board Regulation B, the one of the biggest factors that will federal Gramm-Leach-Bliley Act contribute to the demise of more and the Federal Trade Commission’s and more dealerships in the next privacy regulation, and the Used 10 years who either can’t afford to Car Rule can all be found in stay-up with compliance or lack the various places online. There are resources to do it. also a variety of resources available “The restrictions that are in on a website the FTC has set up place today for auto dealers are so specifically for businesses at http:// great, and the amount of capital business.ftc.gov/ (find information required to open up a dealership specific to automobiles under the from this point on will make it Selected Industries tab) as well as harder for new businesses to open,” through industry specific groups Hudson said. “Many dealers won’t such as the National Independent make it because they simply can’t Automobile Dealers Association and afford the regulatory burden.” its state chapter affiliates. Making That does not seem to matter to sense of it all may take more effort the federal regulators. The cost though, such as taking specialized of compliance is insignificant training courses, subscribing to 24 | DEALER BUSINESS JOURNAL July 2014

online legal compliance services, purchasing books and guides explaining the rules and taking the time to read industry magazines and newsletters.

One other lesson to heed from all of the increased enforcement examples is that size doesn’t matter.

The pattern used to be that mostly larger dealers would find themselves in the middle of a federal complaint, but today the target is on anyone and everyone’s back. Hudson recently had a smaller dealer in Montana, who totaled around 90 deals a month, contact him in a panic with a CFPB demand to produce 2,400 deal jackets for the purpose of an investigation. The photocopy bill alone to comply with the demand would have bankrupted the dealer, even before the formal investigation started.

“That means the radar just got a heck of a lot lower,” Hudson said.

Is the increased regulation enforcement the end for entrepreneurship in America?

Probably not. You would still be hard-pressed to find another country that incubates small businesses and growing companies into maturity like the United States does. It will mean, though, that the level of involvement and commitment to compliance will have to take a top priority for anyone who wants to own their own business, specifically if that business is an independent auto dealership. Time will tell, however, if dealers new and old will still find it profitable to earn a living selling cars, given the rising costs of protecting consumers. America: the home of the free and land of the brave or nation of excessive regulatory burden and country of corporate compliance. You be the judge.

DealerBusinessJournal.com

AUGUST 19, 2014

...Your Success Is Our Business

July 2014 DEALER BUSINESS JOURNAL | 25

BUSINESS OPERATIONS

Skip Tracing

By Alex Price

Go With Your Gut

I

NTUITIVENESS: (noun) felt right and what did not, and by effective about 50 percent of the having the ability to know understanding how it performed in time, as they do not have the field or understand things without many different situations. experience, interviewing skills, or a any proof or I consider intuition to be a skipcomplete understanding of human evidence; having tracer’s greatest asset! It is what nature. They do not have the overall or characterized separates the Cyber-Tracker from life experience necessary to have by intuition. the Skip-Tracer. built that kind of gut instinct that a Last week I With today’s technology successful tracer requires! took my wife’s a cyber-tracker can be quite A cyber-tracker can be a very car into the effective, because he has the ability cost-effective asset, but lacks the shop for repairs. to compile information on any overall skill sets to be effective with She came to subject in mere minutes rather the difficult files. A true professional me and said than suffering the lengthy process skip-tracer will be successful something was not quite right. I required in the relatively recent 75 percent of the time or better, asked what the car was doing and past. The algorithms exist to remove but works at a slower pace and, what she perceived the problem duplicates and return a best guess rightfully so, is not as cost-effective. to be. Her reply was that it was on the whereabouts of a subject.

In today’s marketplace to be driving “weird.” It was all she knew The next step is usually to give truly successful and have the ability or cared about, and after 27 years the file or data to someone in the to pass the test of time, we need together I have learned that when I field in order to place boots on the to integrate the best qualities of ignore her intuition it usually ends ground and verify the provided both of these creatures. When you up costing me big bucks at some information. have a tracer who understands the point.

I can take anyone and make tried and true old-school methods, So, early Saturday morning I them an effective cyber-tracker but also understands the power took off for the mechanic, and sure within a couple of weeks. The of technology, you have a staff enough, there were some issues only issue is that they can only be member you cannot afford to lose! with the car. Because they were being taken Intuition is a skip-racer’s greatest asset.

Alex Price is a nationallycare of early, they were recognized expert on It is what separates Cyber-Trackers not expensive at all. the Art of Skip Tracing.

Currently he is the Had I dismissed those from Skip-Tracers.

Executive Vice President “feelings,” down the for MasterFiles and author road it would have of Skip Tracers National cost several thousand Certification Program, dollars and a new The Florida Records engine.

Guide, The Military Now how did my Installations Guide and lovely wife arrive at blogger with over 25+ the conclusion that years of experience in the vehicle needed skip-tracing, collections and public speaking. repairs? Well she Contact alex.price@ did so by having masterfiles.com or call experience driving this (972) 735-2353 for more car for several years, information. and knowing what

26 | DEALER BUSINESS JOURNAL July 2014

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July 2014 DEALER BUSINESS JOURNAL | 27

BUSINESS OPERATIONS

Cultivate Customers

By Greg Wells

Beyond Phone and Internet

M

any dealers you talk to think of their BDC as a way to handle phone calls and respond to internet leads. But business development is much, much more. Done correctly a BDC should develop incremental sales, drive down the advertising cost per sale and increase net profit.

Let’s talk about phone and internet first. Incoming sales calls and internet leads should go to a trained salesperson. However, many times the sales staff doesn’t have the expertise. They also may be busy enough that calls do not get answered and managed with the level of attention they require, resulting in internet leads that aren’t responded to in a timely manner.

We would all agree these are two very important actions. Customers calling and emailing the store are in a process of elimination. They are using technology to narrow their search to the one or two

28 | DEALER BUSINESS JOURNAL July 2014

dealerships they will actually visit.

You can’t afford to blow that call or burn that lead.

So in comes a BDC. But to truly have a profitable business development strategy using a BDC, you have to think beyond phone and internet. The BDC’s handling of inbound leads is loss prevention, not development.

Therefore, it’s only through incremental sales and service business can you offset the cost of loss prevention and actually see your BDC as a profit center instead of an expense.

The two most profitable processes for a BDC are showroom outcome calls and database marketing. From a high level view, this covers all your customers.

Unsold prospects and previously sold customers. (Sometimes the previously sold customer is once again a prospect in the showroom!)

Let’s look at these two processes and the potential profits they can produce.

Showroom Showroom outcome calls should be done by a third-party to get the best possible feedback from you customers. These calls go one of two ways.

First, if it’s a sold customer a brief “survey type” call will screen your new owner for their overall satisfaction, likeliness to recommend your dealership and any lingering questions or concerns the customer may have.

Furthermore, on the sold follow up call is the opportunity to

confirm or set the customer’s first service appointment, follow up on it in 60 days and finally when the appointment time is near, set a solid confirmed service appointment.

You can screen these customers for reviews. If you ask “on a scale of one to ten, how did we do?” and they say a ten, you’ve got an advocate on the line who would likely give you a glowing review online. What I always say is we need the happy people telling on us too.

Secondly, unsold showroom customers need to be called quickly and again you gain something when that call is from a third party. Be neutral in your approach and find out what prevented the delivery. It can usually be narrowed down to one thing. Sometimes you can work through it and sometimes you can’t.

The point is that without knowing, you are powerless.

We find that many customers were in the wrong car. Other times they just feel like the salesperson didn’t listen or some seemingly small interaction or experience turned them off. Look at your unsold traffic count and subtract your normal beback percentage. What would a 10 to 15 percent close on the remaining customers mean to you in gross dollars? It’s easy to see the value in showroom outcome calls and the potential revenue. Add the long-term benefit of a high first service ratio, the online reviews and the impact on CSI. All from picking up the phone and making a high value call.

Database Marketing Marketing to your database DealerBusinessJournal.com

offers limitless opportunities to employ strategies, campaigns, offers, events, service, coupons, rewards and on and on. The effectiveness lies in how individualized your message or offer is to the customer.

This represents the high end of CRM strategies and precision of execution. A BDC offers an environment that is organized and can devote much more focus on a campaign than you’ll ever create in the showroom.

Capacity is another benefit a BDC can offer your dealership. A BDC agent can make eight times as many calls in a day as a salesperson, keep the CRM updated, follow up with an email and schedule the next step with a customer.

How about crossover between sales and service? How many times a day do you hear about a salesperson setting a service appointment or a service advisor scheduling a test drive. Think about that for a second.

My first BDC was started in 1993. There was no such thing as internet leads or email marketing. We didn’t have a CRM. We used graph paper for what we track in Excel these days and we used file cards for our follow up system.

But what all that lack of technology did was cause us to be very targeted in our approach. We called closed service RO’s and set appointments. We called lease customers and set appointments. We called conquest lists, manufacturer manifests, referrals and customers who were going out of warranty or near the end of their installment loan – and set appointments. We were effective but not real efficient.

Now, with the technology that’s available from CRM providers and/or data mining software companies a BDC can be both effective and extremely efficient.

The last point is the ROI. If your BDC is an expense you’re doing it wrong. The advertising costs for incremental sales from a BDC should be negligible and the compensation should be in line with correct pay plans in place. BDC pay plans will be the subject of next month’s article so be sure and look for it.

Meanwhile, good luck and good selling.

Greg Wells is the President at AllCall Automotive Contact Center. A US based outsource BDC serving dealers in the US and Canada. Greg is a popular industry expert on BDC’s, Internet Sales and Digital Marketing. ...Your Success Is Our Business

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BUSINESS OPERATIONS

ReInsurance

By Tim Byrd

Where Do I Go From Here?

E

veryday battles. Sales waning.

Cars breaking down. Lapsed insurance. Repos. Low working capital.

Sound familiar? Every day in Buy Here-Pay Here operations across this great country, dealers are wondering, “where do I go from here?” “Is there something practical I can do to alleviate some of these day-to-day struggles?”

I am not sure if you have read any of my educational columns before, but I would like to share some best practices, from my point of view.

Let’s start with Business 101. Your business model is to provide a solution to a basic need for a particular segment of our population: the Buy Here-Pay Here customer. Who is the Buy Here-Pay Here customer? They are usually hourly employees with poor credit or limited credit, live pay check to pay check and depend heavily on their transportation. As consumers, just like the rest of us, they want to be treated honestly and fairly.

Maya Angelou said it best when she said “people will forget what you said, people will forget what you did, but people will never forget how you made them feel.”

Love your customer!

The average person in our society, should they have

30 | DEALER BUSINESS JOURNAL July 2014

a problem with their vehicle, experience an inconvenience.

However, should the Buy HerePay Here customer have a problem with their car, they face a crisis. Their car represents their lifeline. Hourly employees do not get paid if they don’t go to work.

So, any missed work means a smaller pay check. A smaller pay check means it is more difficult to make their payments to you and their insurance carrier. Now their missed work trickles down to be your problem.

What are the major causes of repossessions? Repossessions can be broken down in three major categories. Life events (such as divorce, employment separation or unexpected expenses), lapsed insurance and mechanical breakdown.

Let’s walk through these and see if we can come up with a solution.

Life events are certainly an area that you have little control over, but an opportunity to love your customer by providing a certain amount of understanding.

If your customers know that you care, and they communicate with you about their troubles, by giving them some leeway you can create a customer for life. Remember what we said earlier: “People will forget what you said, people will forget what you did, but people will never forget how you made them feel.”

The other two causes of repossessions (lapsed insurance and mechanical breakdown), as

well as your need for a marketing advantage, and even the need for an additional capital resource can be greatly alleviated with the addition of a Dealer-owned Reinsurance Company.

Lapsed insurance: Full coverage insurance should be a requirement at your store.

But, many dealers, faced with overwhelming collection difficulties, many times turn their head and hope nothing happens.

What if you made a deal with your customers? “You pay a little extra each pay period to me, in return, if you total your car or it’s stolen and not recovered, I will forgive your debt to me.”

That is the definition of Debt Cancellation Coverage (DCC). DCC alleviates the need for you to require full coverage insurance. You can collect the premium with their monthly car payment. Debt Cancellation Coverage is a solution to relieve the lapsed insurance problem and turn what once was an expensive, never-ending problem into a tremendous profit center.

By capturing the money the customer would be spending with the insurance company and ceding it to your Dealer-owned Reinsurance Company, you profit instead of the insurance company.

You profit from money that you had required the customer spend with someone else, anyway!

DCC puts you in control when there are claims. Instead of dealing with insurance adjusters, Continued on Page32 DealerBusinessJournal.com

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July 2014 DEALER BUSINESS JOURNAL | 31 June 2014 DEALER BUSINESS JOURNAL | 31

BUSINESS OPERATIONS WHERE DO I GO FROM HERE? continued from Page 30

you have a professional claims team looking out for your best interest, nationwide. DCC dealers avoid having unprotected collateral on the road and having to absorb uninsured losses.

Mechanical Breakdown: You know it’s going to happen. Why not reserve for it? Why not have a system in place that no matter where your customer drives that vehicle, should they breakdown, you have a plan and the money set aside to get them back on the road and making their payments.

The beautiful thing is that your customer can be the one reserving it for you.

What I suggest is you warranty your cars and let your customers provide you the reserve to keep the cars repaired and on the road. How? Your reinsurance company will provide premium finance for your customer’s warranty. Therefore not requiring you to pay the full price of the

warranty up front, which would deplete your lending pool.

A prorated portion of the cost of the warranty is collected from the customer’s payment and forwarded to your reinsurance trust account. This will provide a constant stream of reserve to ensure when problems arise there is a well-funded system in place to take care of those problems.

As you have heard many times, customers do not pay for cars that do not run. With a reinsurance company, your customers stay on the road because their cars are repaired when problems arise, and they continue making their payments.

Now, it is much easier to show you care when you have a well-funded plan in place to take care of what is sure to happen.

And when your customers know you care, they will tell others that you care!

A Dealer-owned Reinsurance

company will boost your profits, increase sales, alleviate problems, and provide you with much needed capital. It sounds too good to be true. However, smart dealers have answered the question “where do I go from here” with their own reinsurance company, a sound business strategy that’s been around for over 30 years.

Tim Byrd is Founder and President of DealerRE a Tim Byrd & Associates company, 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. Tim is a sought after speaker and co-author of the best-selling book “Unfair Advantage.” Tim can be reached at www.DealerRE.com or by calling 804-824-9533.

From Help Wanted to Specialized Parts, Dealer Business Journal is now offering a classified section Starting with the August 2014 issue, Dealer Business Journal will have a classified section you can use to find or sell the things your dealership needs. It’s an easy, affordable, convenient way to reach a network of over 20,000 dealers around the country.

To place a classified ad or for further information contact Meredith McNellis at 800.966.8733 or via email at info@dealerbusinessjournal.com.

32 | DEALER BUSINESS JOURNAL July 2014

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July 2014 DEALER BUSINESS JOURNAL | 33

SALES & SERVICE

Female Perspective

By Jody DeVere

Getting a Sense of Your Customers

D

ealerships are always among tough competition. How does the dealership stand out among its peers to appeal to consumers on a higher level – in particular, how do you reach the females? Women are the majority purchasers of all automotive purchases in North America today, so if you’re looking to step up your sales figures, you’re going to need to reach them. One way to stand out, and connect with your female customers, is by appealing to your customer’s senses.

We’re always told to not judge a book by its cover, but when it comes to customers, and female customers in particular, looks matter. Start with the outside. How’s your curb appeal? Does your location look clean, professional, and up-to-date?

See that your building looks warm and welcoming, or women will

A satisfied female customer will pull no punches when it comes to her buying experience, and her friends will trust her advice implicitly.

34 | DEALER BUSINESS JOURNAL July 2014

drive right by. Replace run-down signage with new, friendly displays and communicate specials clearly in clean, eye-catching designs.

Moving inside, don’t forget that the female customer takes looks into account here, too. A clean, uncluttered and well organized showroom is a good start. A comfortable waiting area is another step in the right direction, and a spotless bathroom is the icing on the cake.

Do you have a telephone answering script that you expect employees to use, or is any mumbled greeting of “ABC Dealership” good enough? Here’s a hint: It’s not good enough for the women. A proper telephone greeting has four main ingredients: Thanks for calling, the name of the business, an introduction, and an offer to help. “Good morning, thanks for calling ABC dealership, my name is Roger, how may I help you?” This simple adjustment shifts the tone of the customer’s telephone experience, you’ll find, and will make her much more likely to pursue a business relationship with you. For bonus points, learn her name and use it, even on the call. For instance: “Okay, I can help you with that – could I get your name please?” …

All right, Nancy, let me see what I can find for you. You said you are interested

in a Camry, right?” These little adjustments become like a habit once you get into the swing of using them, and the results you will see may surprise you.

Smell is a very strong sense, so taking steps to ensure your showroom, waiting area, and definitely the restroom smell clean and neutral are as important as the looks of these areas. Plus: don’t forget your customers’ cars in the service area! Using paper floor mat covers and spraying the vehicle with a neutral, natural odor eliminator will create a more pleasant afterpurchase experience.

Generally speaking, if a woman has a bad experience at a retailer, she won’t complain to the manager. She’ll complain to her friends. Bad word-of-mouth can spread like wildfire, and will most definitely impact your bottom line.

Conversely, going the extra mile to make your female customers feel comfortable, welcome, and taken care of will certainly be something she wants to talk about. A satisfied woman customer will pull no punches when it comes to her buying experience, and her friends will trust her advice implicitly.

Attending to the other items listed here will decide whether she tells her friends to avoid you at all costs, or to “Go to Roger at ABC Dealership, he really went out of his way to help me!”

Jody DeVere is the CEO & president of AskPatty.com. Contact her via email at jdevere@askpatty.com.

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INDUSTRY NEWS

Recall Notices GM Announces Six Safety Recalls

G

eneral Motors announced recently it will conduct six new safety recalls in the United States involving about 7.6 million vehicles from the 1997 to 2014 model years.

Among the recalled vehicles, GM is aware of seven crashes, eight injuries and three fatalities. The fatal crashes occurred in older model full-size sedans being recalled for

inadvertent ignition key rotation.

There is no conclusive evidence that the defect condition caused those crashes.

GM expects to take a charge of up to approximately $1.2 billion in the second quarter for the cost of recall-related repairs announced in the quarter. This amount includes a previously disclosed $700

million charge for recalls already announced during the quarter.

Until the ignition recall repairs have been performed, it is very important that customers remove all items from their key ring, leaving only the vehicle key, and always use their seat belts. The key fob, if present, should also be removed from the key ring.

American Made Ford F-150 Ranks “Most American” In Cars.com Index

C

years, there was a pretty even split is up, but parts are coming from all ars.com has released its annual between domestic and foreign over the world, making the notion American-Made Index, with automakers on the list. For the past of classifying cars as ‘American’ the Ford F-150 taking the top two years, three GM crossovers more difficult than ever.” spot for the second year in a row. made up about 30 percent of the While the top two spots on The ranking takes into account list, however they’ve dropped below the index remain the same from three factors to determine how the requisite domestic parts content previous years, the bottom of “American” cars are, including and, as a result, Toyota and Honda the list introduces four models domestic-parts content (percentage really dominate.” that are first-timers to the Index. of a vehicle’s parts considered to For full results, additional Additionally, this year’s index leans be “domestic,” meaning built in content and more information heavily towards foreign automakers, the U.S. or Canada), final assembly about the 2014 American-Made which fill seven of the top 10 spots. point, and overall vehicle sales.

Index, visit www.cars.com or blogs.

“This is a drastic shift from “We uncovered a pretty cars.com. the past,” said Olsen. “For several remarkable phenomenon when compiling this year’s list,” said Patrick Olsen, CARS.COM AMERICAN-MADE INDEX Cars.com Editor-inRank Make/Model Manufacturer U.S. Assembly Location(s) 2013 Rank Chief. “Only 10 cars 1 Ford F-150 Ford Dearborn, Mich.; Claycomo, Mo. 1 were eligible for the American-Made Index 2 Toyota Camry Toyota Georgetown, Ky.; Lafayette, Ind. 2 this year. That’s the 3 Honda Odyssey Honda Lincoln, Ala. 4 fewest in the study’s 4 Toyota Sienna Toyota Princeton, Ind. 5 nine-year history.

5 Toyota Tundra Toyota San Antonio, Texas 7 In 2013, 14 cars met the threshold, 20 in 6 Toyota Avalon Toyota Georgetown, Ky. 10 2012 and 30 cars the 7 Chevrolet Corvette General Motors Bowling Green, Ky. No ranking year before that. This 8 Honda Ridgeline Honda Lincoln, Ala. No ranking consistent decline points to global nature 9 Honda Crosstour Honda East Liberty, Ohio No ranking of cars these days.

10 Dodge SRT Viper Chrysler Detroit, Mich.

No ranking Production in the U.S.

36 | DEALER BUSINESS JOURNAL July 2014

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July 2014 DEALER BUSINESS JOURNAL | 37

INDUSTRY NEWS

Industry Honors PassTime Elite Pro Honored for Exceptional Innovation

P

assTime’s Elite Pro device has received a 2014 M2M Evolution Product of the Year Award from M2M Evolution Magazine, the leading publication covering the machine to machine movement.

PassTime’s Elite Pro offers customers the ultimate combination of GPS functionality and Automated Collection Technology, providing flexibility in managing their portfolios. Elite Pro comes completely customizable with Service Packages that provide the ability to perform manual and automatic payment management, asset tracking, and recovery functionality.

PassTime’s proprietary ACT system is unmatched in the industry for automatically helping remind consumers when their car payment is due and reducing risk for lenders.

“We are extremely proud of our Elite Pro platform and it winning the 2014 M2M Evolution Product of the Year Award. This is a device that we have worked hard on for many years and it is great to see that hard work

recognized by the industry,” said Stan Schwarz, founder and CEO of PassTime.

PassTime’s Elite Pro platform is designed to provide customers the perfect blend of Automated Collection Technology to enhance the collection process with GPS tracking for vehicle location and recovery.

“The solutions selected for the M2M Evolution Product of Year Awards reflect the diverse range of innovation driving the machine to machine market today. It is my honor to congratulate PassTime for its innovative work and superior contribution to the rapidly evolving M2M industry,” said Carl Ford, CEO of Crossfire Media, a co-publisher of M2M Evolution Magazine.

“It is my pleasure to recognize the PassTime Elite Pro product, an innovative solution that earned PassTime the 2014 M2M Evolution Product of the Year Award,” said Rich Tehnrani, CEO, TMC. “I look forward to seeing more innovation from PassTime in the future.”

Theft Prevention

July Is National Vehicle Theft Protection Month

T

he International Association of Auto Theft Investigators (IAATI) and LoJack Corporation (NASDAQ: LOJN) are partnering to promote the annual National Vehicle Theft Protection Month. Throughout July, the top month of the year for vehicle theft, IAATI and LoJack are partnering to educate vehicle owners and raise public awareness of the issues and criminal behaviors around auto theft.

During July and August – the top months for auto theft – vehicle owners must embrace their shared responsibility in protecting their vehicles. LoJack and IAATI offer the following insights into how vehicles are stolen today and what happens after a vehicle is stolen: It’s Not a Kid Joyriding Anymore: Many of today’s car thieves are seasoned criminals whose main occupation is to make a profit from stealing vehicles.

No Passport Needed: Professional car thieves are often linked to large international crime rings that are more than happy to drive or export their “new” car outside of the U.S. and sell them to unsuspecting

38 | DEALER BUSINESS JOURNAL July 2014

customers. LoJack and IAATI are seeing an increase in cars being stolen and taken to U.S. ports. Criminals are loading and hiding vehicles in containers to ship overseas.

Sum of its Parts: Many vehicles stolen by professional thieves are taken to chop shops, where they are dismantled and then sold off as parts. Stolen auto parts account for millions of dollars a year in profits for criminals.

Older Cars Get Stolen Too: Criminals also look for an older vehicle that can be stolen and stripped for its parts, which can then be sold – piece by piece – to any local salvage yard or online.

Get resources like this infographic and others at LoJack’s www. autotheftblog.com.

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