Dealer Business Journal May/June 2015

It’s All About the Car

Dynamic Duo

With most of your focus on customers and collections it’s easy to forget how important the vehicle is to the process.

You will be amazed at the results when you start using your superhero powers of forecasting and budgeting.

MAY/JUNE 2015

DealerBusinessJournal.com

Summer time means one thing...

Grow, Grow, Grow. We’ll give you the tools to get it done.

Page 4.

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DEALER BUSINESS JOURNAL | MAY/JUNE 2015 | 1

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VOLUME 12, ISSUE 5 MAY/JUNE 2015

CONTENTS

LEEDOM GROUP FEATURES

LEGAL

LEADERSHIP

4 Summer Time is Here and the Market Opportunity is Ripe!

It’s the time of year to grow, grow, grow! Are you taking

18 The AntiRepossession Machine Do lawmakers prefer

27 Leading by Personal Example If you are looking for

advantage of all the right tools to do it?

By Chris Leedom

10 It Starts and Ends With the Car Even though the sales process is about building a

relationship with your customer, it all begins with the right vehicle.

By David Brotherton

14 Become a Benchmark Dealer There are three steps to becoming a benchmark dealer

and gaining the success you desire. If followed, your dealership’s performance will more than measure up.

By Paxton Wright

16 BHPH World 2015 Back from The Big Easy and armed with the tools you

20 Mind the Gap A new South Carolina

IN EVERY ISSUE

www.DealerBusinessJournal.com

35 Ad Index 37 Classifieds 39 Twenty Group Application

law opening up GAP coverage may lead the way for other states.

By Catherine M. Brennan

24 Consumer Apocalypse Recent CFPB comments

need to take on the wo rld.

5 Calendar 6 Industry News 7 News Briefs

repossessions over starter interrupt devices?

By Tom Hudson

have all the makings of a doomsday movie that could lead to the end of the world for auto dealers.

By Eric L. Johnson

the secret of how to inspire employees then make sure you execute these nine principles.

By Dave Anderson

OPERATIONS 31 The Dynamic Duo They don’t sound

super-special, but when used correctly the pair of forecasting and budgeting can print superhero results.

By David J. Wiggins

34 Smart Practices Smart is as smart does.

A common-sense approach to running your dealership is the best advice of all.

By Tim Byrd

DEALER BUSINESS JOURNAL | MAY/JUNE 2015 | 3

CHRIS LEEDOM EXECUTIVE PUBLISHER

CORNER OFFICE

Summer Time is Here and the Market Opportunity is Ripe!

I

n many parts of the country summer is when you grow, grow, grow! It struck me that as I have mingled with countless dealers over the past couple of months it is clearly a time for dealers to grow their business as well. I recently was thinking about what enables some dealers to simply outperform their market – even in good times!

Everywhere you look there is generally positive data on auto sales right now. New car sales volume is projected back at 16.5 million units. This drives quality trades. Used vehicle sales are strong. Subprime finance both third party and BHPH are in ample supply. To me all this sounds like a confluence of growth opportunity. So the question is, how will you outperform your competition?

I recently prepared for a Twenty Group meeting and nearly 70 percent of the dealers were having a better 2015 versus 2014. These dealers deserve a lot of credit for their efforts.

I would also say this is indicative of the present market landscape. You should be enjoying stronger sales volume and this should translate into higher profits.

So, what if that is not the case for you? Well, quite frankly, it starts by looking in the mirror. Chances are someone in your market is having a great year. The question becomes why aren’t you? As I work with Twenty Group members I find that the ones that consistently show strong performance are the ones that simply forecast it, plan for it and then execute. In my opinion the number one thing you can do is develop a well thought out forecast that you fully believe you can achieve in your market. Then, measure against it and produce results.

I believe the second half of this year should be a strong six months for retail used vehicles sales. The question is will you get your share? Make your plan now, put the right initiatives in place and plan to succeed. Those dealers that take the time to forecast every facet of their business are quite often the ones that notch the best results and outperform their competitors.

I firmly believe one of the best ways to accomplish this is through participation in a Twenty Group. Here at the Leedom Group we have a group to fit just about any dealer’s size or business focus. By networking on a regular basis with successful dealers you identify best practices and enable the growth of your business. So what are you waiting for? It is summer and time to grow!!

Until next time, have a great month and make it happen.

“In my opinion the number one thing you can do is develop a well thought out forecast that you fully believe you can achieve in your market.”

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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 Contributing Writers Dave Anderson dave@learntolead.com David Brotherton davidb@leedomgroup.com Tom Hudson thudson@hudco.com Christy Taylor info@dealerbusinessjournal.com Paxton Wright paxton@leedomgroup.com FOR QUESTIONS REGARDING SUBSCRIPTIONS CALL 800.966.8733 or subscribe online at DealerBusinessJournal.com ADVERTISING INQUIRIES call 941.371.7999 or email 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 2015 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

www.DealerBusinessJournal.com

LEEDOM GROUP UPCOMING EVENTS

CALENDAR SEPTEMBER 2015 September 1 | Buy Here Pay Here Sales Training Boot Camp

Dealer’s competition has really heated up and you are fighting with conventional lenders as well as with each other for that BHPH customer. This is not an advertising course. Instead, this Camp will give your sales managers and reps real-world techniques and strategies for developing your business the way it should be developed.

This Camp emphasizes lead management, prospecting, and the day-to-day activities and accountability that have proven to be successful. We will instruct on techniques of BHPH and telephone sales, facts about the BHPH business and the customers, developing consistent repeat and referral business, as well as the sales person’s role in application and underwriting procedures.

Who Attends: Buy Here Pay Here Dealers and Sales Staff Location: Dallas, TX Details: Call Meredith McNellis at 800.966.8733 for more information or go to www.twentygroups.com to register.

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September 2 | Buy Here Pay Here Manager’s Boot Camp

Knowing how the different pieces of the business come together is very important when trying to move the needle on one of more of the key drivers.

This Camp will identify key drivers with an emphasis on how they impact – and are impacted by – the others. You will also receive information on industry benchmarks and what they mean for your business. We will discuss inventory management, expense allocation, pricing, management and hiring practices. There will be a lot of information here that you don’t want to miss.

Who Attends: New and seasoned managers Location: Dallas, TX Details: Call Meredith McNellis at 800.966.8733 for more information or go to www.twentygroups.com to register.

September 3 | Buy Here Pay Here Collections Boot Camp

Ensure you are collecting every dollar possible by attending the Collections Boot Camp. There have been many developments on the regulatory and legal fronts recently that directly impact the acceptable and compliant collection techniques you use every day.

This Camp will identify changes and opportunities present in today’s landscape. We will discuss customer retention, alternative communication methods, relationship building, objection handling and providing a road map to your day. We will also discuss collections expectations in your model as well as industry benchmarks.

Who Attends: Collection Managers, Collectors, and Buy Here - Pay Here Dealers Location: Dallas, TX Details: Call Meredith McNellis at 800.966.8733 for more information or go to www.twentygroups.com to register

Keep up to Date:

Stay up with all of the Leedom Group’s upcoming seminars, trainings and sepcial events. Visit LeedomGroup.com and click on Training.

DEALER BUSINESS JOURNAL | MAY/JUNE 2015 | 5

DBJ INDUSTRY NEWS SEND YOUR HEADLINES TO INFO@DEALERBUSINESSJOURNAL.COM

CONSUMER TRENDS

Consumers Want a Connected Car Without the Price Consumer ability to access the internet and connected services while in the car remains strong, making driving or parking tasks easier. While interest is especially high for services which provide traffic updates, weather updates, open parking spaces, and navigation instructions, interest in social media functionality remains low.

A new report from Automotive Consumer Insights group (ACI) at Strategy Analytics (www.strategyanalytics.com), surveyed consumers in the US, Western Europe, and China regarding their interest in and preferred payment models for in-vehicle connectivity and connected services. Consumers remained interested in services which provided drive-relevant information; with access to in-vehicle connectivity playing an increasingly important role in the purchase decision of a vehicle, across all demographics. However, interest in some popular payment models for connectivity has fallen over the past year.

Derek Viita, report author commented, “As we observed last year, a high level of consumer interest does not always translate to a willingness to pay for it. Most consumers

remain unwilling to pay for in-vehicle connectivity using the monthly payment models that OEMs have tended to favor. Free models for connectivity remain highly desirable across all regions and age groups. Interest in connectivity supported by in-vehicle advertising rose over the past year.”

Continued Viita, “Interest in paying extra at purchase to make the car a WiFi hotspot remains high, especially among 18-24 year olds. Including the car as a device in a shared mobile data plan remains popular as well,

though consumer interest in the mobile-share model has fallen in the US and Europe. Most interestingly, consumer preference for the “lump sum” payment model has fallen since 2014 across

all regions. This particular finding indicates that among consumers who are open to the idea of paying for connectivity, most are cooling to the idea of paying a large amount up-front for it.”

VENDORS

DealerSocket Announces Enhancements to Service Dashboard DealerSocket recently announced a complete revamp to their Online Service Scheduler within their Service Dashboard. The Online Service Scheduler allows the dealer’s customers to schedule a service appointment on their website.

“We are excited to introduce the redesign for Online Service Scheduler,” said Brad Perry, CTO of DealerSocket.

“Our new responsive design

6 | MAY/JUNE 2015 | DEALER BUSINESS JOURNAL

is more intuitive which, in turn, helps dealers increase the amount of service appointments scheduled by their customers.”

New enhancements include an easy-to-use, responsive user interface, reduction of duplicates logged into the system, Facebook login integration, and more. Also coming in Summer 2015 is the ability to upload video content to explain dealership

service offerings. Dealerships that provide their customers with an online portal to schedule appointments saw at least a 35 percent increase in appointments scheduled.

To learn more about DealerSocket’s Service Scheduler, call 775-473-6619 to speak with a DealerSocket Specialist or visit http:// dealersocket.com/dealersocketannounces-enhancements-toservice-dashboard/. www.DealerBusinessJournal.com

NEWS

BRIEFS Cars.com Hits 1 Million Consumer Reviews

Texas Flooding Damages Up To 10,000 Vehicles The recent flooding in Texas means the end of the road for an estimated 7,000 to 10,000 insured vehicles that suffered water damage.

That’s the current estimate from Copart, a company that works on behalf of insurers to handle the vehicles damaged in catastrophes. About 2,500 cars, trucks, motorcycles, RVs and other vehicles have already been towed to one of Copart’s locations, a

200-acre processing facility in Houston.

After a disaster, the National Insurance Crime Bureau (NICB) works with its member companies, law enforcement and companies like Copart to identify the vehicles that have had an insurance claim filed and to process them for sale. All of the cars will be retitled with the Department of Motor Vehicles and the new title will indicate the fact

that the vehicle has been flood damaged. Most of the vehicles are sold to parts companies who will dismantle them and re-sell usable parts that were not damaged by the flooding.

The Vehicle Identification Number (VIN) is also entered into the NICB’s VINCheckSM and the National Motor Vehicle Title Information System (NMVTIS) database.

Equifax Reports Ten-Year Low in Severe Delinquencies According to the latest Equifax Inc. National Consumer Credit Trends Report, new auto loan originations have reached record highs, while severe delinquency rates are the lowest they have been in nearly a decade. At the same time, auto leasing has surged as consumer demand for new www.DealerBusinessJournal.com

vehicles remains strong.

The severe delinquency rate (the percentage of outstanding loans that are 60 or more days past due) for auto loans and leases in April 2015 was 0.81 percent, the lowest level since September 2005.

This uptick in performance coincides with continued

growth in the auto loan market – the number of new auto loan originations in 2015 through February reached 4.1 million, a 5.2 percent increase over the same time period last year and the highest number since Equifax began tracking this data in 2005.

Cars.com announced in May it has received more than 1 million consumer-generated online reviews since the site feature first launched just four years ago.

Once viewed as a foreign concept within the automotive category, online reviews are now an integral component of the modern car shopping and vehicle maintenance processes, as is evident by the 91 percent of consumers who reference them to help select a dealership. (Digital Air Strike Survey) A consumer expectation that extends beyond the showroom floor, 40 percent of all new dealer reviews on Cars.com are based on a service experience.

“A few years ago, online reviews were limited to restaurants and entertainment, but now they’re essential to nearly all consumer transactions,” said Cars.com Vice President of Product Barbara Mousigian.

Send us your news:

Send press releases and news announcements by email to info@dealerbusinessjournal. com. Subject line: News Briefs.

DEALER BUSINESS JOURNAL | MAY/JUNE 2015 | 7

LEEDOM GROUP NEWS

BHPH WORLD CONVENTION

BHPH World 2016 Headed to Orlando Beautiful downtown Orlando and Lake Eola park are the backdrop for the next BHPH World Convention, coming April 18-20, 2016.

The Leedom Group has announced the dates for the 22nd Annual BHPH WORLD Convention. The BHPH WORLD Convention will be held in Orlando, Florida from April 18-20, 2016.

“We had an incredible response to our recent 21st Annual BHPH WORLD Convention in New Orleans.

Several attendees suggested we survey the market to determine where to go in 2016.

We asked, you answered, and we are delivering. Based on a recent survey of several hundred Dealer Principals, Sponsors and Exhibitors, Orlando was recommended as

the number one destination choice for the 2016 show” said Chris Leedom, Conference Founder.

The BHPH WORLD Convention was founded over two decades ago and has been the most attended industry event for dealers serving the BHPH and nonprime finance segment of the auto industry. As a dealer-attendee this year stated, “If you are a Buy Here- Pay Here Dealer, this is an event you want to write on your calendar with ink every year. You will gain the knowledge to way more than pay for the cost of the trip. Every single BHPH dealer should

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attend this event.”

The 2016 event will feature three keynote speakers, over 40 workshops, nine vendor spotlight sessions, and an expo hall with over 100 booths. The firm is also bringing back the “Special Finance” third-party lending track for 2016. This is the premier industry event that attracts the best and the brightest in the industry.

“We are excited to respond to our attendees request to host the 22nd Annual BHPH WORLD Convention in Orlando! Now that we have the destination we are going to begin the process

of gathering the best knowledge and educational offering that this event has become known for, and we are going to host an incredible event in Orlando.” said Chris Leedom, Conference Founder.

Sponsorships and exhibit space are now being reserved and early registration is available by visiting online at www.bhphworld.com or calling 800-966-8733. Don’t delay; reserve your exhibit space now!

The Leedom Group is a collection of companies offering best-in-class products for automobile dealers and finance companies. The product offering includes Dealer Twenty Groups, Consulting, Training, Merchant Services, DMS Integrations and Secure Web-Payment Page Hosting. Leedom and Associates founded the BHPH WORLD Convention and today it is the longest running trade show dedicated to the BHPH industry. www.DealerBusinessJournal.com

Save the Date!

April 18-20, 2016 stay up-to-date at BHPHWorld.com www.DealerBusinessJournal.com

We asked attendees of the 2015 BHPH World Convention where to go next and more the vote was to move to Orlando, Florida. O-Town here we come!

Mark your calendar and join us in The City Beautiful next April for the industry’s leading BHPH event.

Get BHPH World updates on Facebook. Find us under Leedom Group’s Buy Here Pay Here World Convention.

DEALER BUSINESS JOURNAL | MAY/JUNE 2015 | 9

DAVID BROTHERTON BHPH BOOT CAMP

IT STARTS T AND ENDS WITH THE

CAR When navigating the maze of sales, customer satisfaction and collections, make sure you remember just how important the vehicle is in the process.

10 | MAY/JUNE 2015 | DEALER BUSINESS JOURNAL

oday’s poor-credit customer has more financing options available to them than just Buy Here-Pay Here. Recent market conditions have reached a point where smart dealers are focusing as much on customer retention as they are on sales generation and that increased focus on retention is highlighting just how important the vehicle is to the model.

Buying Acquiring quality inventory is the most difficult thing we do in Buy Here-Pay Here. Finding quality units that have enough life left in them to stand up rough treatment and high mileage for the right price is hard.

Very often the auction environment becomes a feeding frenzy with too many dealers bidding on too few cars. This always seems to happen on the ones I’m trying to buy but never on the ones I’m trying to sell.

Funny how that works, isn’t it?

Buying takes a tremendous amount of skill, experience, relationship building, and luck. This is where we spend the money and here is where bad buys keep coming back to haunt www.DealerBusinessJournal.com

LEEDOM GROUP

START

END

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DEALER DEALER BUSINESS BUSINESS JOURNAL JOURNAL | MAY/JUNE | APRIL 2015 | 11

DAVID BROTHERTON BHPH BOOT CAMP

us over and over. To be successful in today’s market, buyers must be casting their net wider than ever. Not only does this mean going to more auctions farther away, it also means trying to buy cars directly from sellers or wholesalers.

Just as importantly, ownership needs to be intimately involved in the process because, as we well know, these vehicles today are expensive and I’d want to make sure I’m getting my money’s worth. I learned to buy cars with an involved owner and I’ll never forget what he told me: “You can’t pay too much for a good used car but you will always overpay for a bad one. The hard part about buying isn’t being the last man standing.

Any idiot can do that. The hard part is figuring out the ones worth being that last man for.”

Reconditioning The vast majority of dealers do not buy “lot-ready” inventory. While there are some exceptions to this, it’s safe to assume that this isn’t the case. A quality reconditioning effort doesn’t fix everything nor should it attempt to. Quality reconditioning efforts back up quality buying efforts to maximize ROI by producing quality units consistently, in sufficient quantity, to maintain a steady flow of

units for the sales effort.

I strongly urge you to not cut corners in reconditioning. Putting a quality unit on the front line is essential in today’s marketplace. We all know that our customers will toss you the keys with little or no provocation today.

Minimizing early service returns is critical to building the relationships needed to keep our customers paying. Solid buying and reconditioning efforts help collections, they help sales and they retain customers.

Post-Sale Repairs Maintaining an adequate ROI in our model means keeping a strong percentage of our customers in their cars and paying. Any collector will tell you how important access to timely and affordable repairs are to keeping customers paying. Helping facilitate repairs for your customers is essential. Like it or not, the “AS IS” days are long gone and helping with repairs is simply part of our business.

Notice that I use words like “affordable,” “facilitate” or “helping.” None of these are meant to imply that all work should be done free of charge. Static pool analysis has shown that customers who participate financially in the repair process end up being better customers than the ones you just fix

12 | MAY/JUNE 2015 | DEALER BUSINESS JOURNAL

everything for.

Now, what does participate financially mean? It means charging and collecting deductibles on your limited warranties/ service agreements. It means getting the customer to pay in some degree for needed non-covered repairs. It means being accessible and helpful with repair needs. It particularly means training the people handling the service writing to take a consistent approach to negotiating that participation. It also requires that everyone in the operation be on the same page.

My recommendation is to provide a limited warranty or offer a service agreement that will cover the most common necessary repairs for roughly twothirds of the expected note term regardless of mileage.

Before you want to burn this magazine in frustration over my “regardless of mileage” comment, think about what tends to happen when you refuse a needed repair: you get the car back. Now think about the first thing you do after repossessing a unit needing a repair: you fix the repair. Mileage restrictions are there to prevent claims. Warranties and service agreements are there to protect future cash flow. Period. You shouldn’t be doing a major warranty

repair in the last third of the contract term; you should be trading them into another vehicle and refreshing the payment stream.

Building Relationships A strong, well-managed repair program can pay huge dividends for a portfolio.

Now consider the impact of taking it one step further and actually reminding your customers about scheduled maintenance. It’s not hard to do with today’s technology. With the appropriate authorizations at closing, you can send oil change reminders, annual state inspection reminders, etc. via text with a few mouse clicks. Being proactive on repairs is great but the real value is in the constant contact approach.

Driving more contact and follow up means we are more than just another bill to that customer and it’s possible that a few more of them will actually talk to us first before getting a different car elsewhere. Just maybe.

David Brotherton is a consultant and Twenty Group moderator with the Leedom Group Contact him at davidb@ leedomgroup.com

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Š2015 CliftonLarsonAllen LLP

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PAXTON WRIGHT DEALER OPERATIONS

BECOME A BENCHMARK DEALER What does it take to reach top success? Follow these steps and you will soon find out for yourself.

H

ow does your dealership’s performance measure up against industry benchmarks?

Well, if you’re not currently a Twenty Group member, you can’t possibly answer that question. Why is this so important? Our industry benchmarks represent the results of the best performing dealers in

the industry. The ultimate goal of every dealer should be achieving benchmark results, knowing your business is “Best in Class!” The good news is, it only takes three steps. If you have the desire to become a benchmark dealer, follow the steps below; they’re your road map to success.

Step One: The first step to becoming a

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benchmark dealer is to join a Twenty Group. There is no other way to get accurate industry benchmarks of performance than through joining this program. You can’t ask your friends at the auction. You can’t ask your contacts in the associations you belong to and you can’t rely on your gut feeling.

There is only one place to get real numbers, real results and real benchmarks to measure

your dealership. So, how hard is it to join a group?

The first part is very easy; just give us a call and we will extend you an invitation to an upcoming meeting.

We will gather information about your business and make sure we place you in a group that aligns with your size, scope, and goals. The toughest part of step one is actually taking that first step! Making the initial www.DealerBusinessJournal.com

LEEDOM GROUP business in ways you have never looked at it before. And it absolutely requires that you give correct information. It does you no good to submit bogus numbers. The group can’t help you get better if we can’t identify what’s hurting your business. The compilation and submission of these monthly results takes time and effort. You must be committed to this process. This the only way to maximize the Twenty Group experience and become a benchmark dealer.

commitment, carving out time in your schedule, getting on an airplane, traveling to a meeting destination, and spending a few days away from your business. I completely understand how hard it can be to get away and you can always find a reason not to go. However, to begin the process of becoming a benchmark dealer, you must get away from the day to day trenches. You must take this www.DealerBusinessJournal.com

Step Three: The final step is where many new Twenty Group members fall short, taking action. You must be willing to adapt and make the changes necessary to become a benchmark dealer.

You will have the answers regarding your existing business condition (your results versus benchmark results), and you will know how to improve your situation (advice from your group meetings), and you will have the support of your fellow members (our Twenty time to work on your business Group member pledge to one another). People have and not in your business. a natural tendency to resist change. Change is tough, Step Two: change is scary. You must The second step is to overcome this inclination, accurately submit your trust the process and take monthly operating results action! so that a composite (book I can assure you, so of comparative statistics) many dealers thank me can be created. This sounds and their fellow Twenty easy, but it may not be if Group members when they you don’t create monthly take action, make dramatic financial statements. It also requires that you look at your changes, and improve their

business. It’s humbling to witness the effect that our groups can have on a new member. To think you’re a part of helping a dealer improve their business, their income, and ultimately their quality of life is an honor.

However, at the end of the day, the credit is all yours.

You trusted the process, took action, and saw the changes through. My job is to show the members our benchmark results and provide them with a road map to get there. Your job is to take that first step and begin your journey towards becoming a benchmark dealer. Give us a call, accept our Twenty Group invitation, and take that first step! We look forward to helping you.

Paxton Wright is a professional Twenty Group Moderator and consultant with over 10 years of experience in lending, finance and BHPH operations. Paxton has worked with numerous lenders and understands BHPH financing and how to fund BHPH dealerships. He has deep operational knowledge and consults on an array of topics including credit facilities, asset sales, portfolio performance as well as general dealership operations. He is a recognized industry leader and has been featured at numerous national conventions as a speaker.

Contact him at paxton@ leedomgroup.com

DEALER BUSINESS JOURNAL | MAY/JUNE 2015 | 15

LEEDOM GROUP BHPH WORLD CONVENTION • NEW ORLEANS | HYATT REGENCY

BHPH WORLD 2015

16 | MAY/JUNE 2015 | DEALER BUSINESS JOURNAL

www.DealerBusinessJournal.com

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DEALER BUSINESS JOURNAL | MAY/JUNE 2015 | 17

TOM HUDSON LEGAL OPINION

THE ANTIREPOSSESSION MACHINE Starter interrupt devices make collections easier and safer for dealers and consumers, but recent lawmaker’s actions make it seem like they would prefer a repo instead.

L

egislators and Regulators Favor the Repossession of Consumers’ Vehicles!

That’s an odd headline, isn’t it. It couldn’t possibly be right. Except it is.

As a double handful of states around the country reacted to an article about starter interrupt devices in The New York Times by proposing limitations or outright bans on the devices, each seemed to be trying to outdo the others by pointing out the supposed evils of

the devices. Their bills, and their rhetoric, work a disservice to the very consumers they say they are trying to protect. In fact, the devices are “repossession prevention machines.”

“How’s that?” you ask?

Here’s the response.

The alternative to the devices is not a car that the consumer can use but not pay for. The alternative to the use of the devices is the physical repossession of the consumer’s vehicle. That physical repossession comes with a lot of unpleasant

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consequences.

Consider those consequences for a moment: • The repossession may be seen by others, and the consumer will suffer the resulting humiliation

and damage to their reputation; • The repossession creates an opportunity for a breach of the peace; • The consumer’s car is towed to an impound www.DealerBusinessJournal.com

LEGAL & LEGISLATIVE

lot, possibly suffering damage and exposing any of the consumer’s property left in the vehicle to loss; • The consumer must arrange the release of the vehicle with the creditor, if that’s possible; • The consumer must go to the impound lot, likely losing time from work, and pay for the towing and storage; and • The repossession may damage the consumer’s credit rating.

If the consumer’s creditor uses a starter interrupt device, after several warnings, the vehicle’s starter (not its engine) will be rendered inoperable, so the vehicle cannot be started. If that happens and there’s an emergency, most systems permit the consumer to phone for a code that will permit the vehicle to start or for a signal from the creditor to the device that will permit the vehicle to be started. After the consumer brings the account current or otherwise satisfies the creditor, the vehicle, which has never left the driveway, can be started again.

The latter scenario is so much more favorable to the consumer that I cannot imagine a pro-consumer legislator or regulator arguing that the devices should www.DealerBusinessJournal.com

be banned or restricted (one pending bill requires creditors using the devices to charge 10 percent less than they charge for vehicles financed without the device – a “practical” ban because no dealer or creditor will use the devices under those conditions, instead reverting to repossession of the vehicles of delinquent consumers).

But argue against the devices they do, often citing the same anecdotal “evidence” of the evils of the devices. They claim that the devices are unsafe, because they can stop a moving car, despite the fact that the devices simply disconnect the vehicle’s starter, and despite the fact that there has been no proven case of that ever occurring. And don’t forget that mother rushing from her house at midnight to take a sick child to the hospital, only to find that her car won’t start. How much better off will that mother be when she sees the tow truck’s taillights rounding the next corner with her car on the tow truck’s hook?

Is it asking too much for the legislators to actually learn something about these devices and how they are used before banning (or limiting them to the extent that they might as

well be banned) instead of relying on anecdotes from newspaper articles?

There is a trade association for the makers and users of these devices, called the Payment Assurance Technology Association (full disclosure – our firm represents PATA). PATA espouses “best practices” regarding the devices and their use. A legislator or regulator could do a lot worse than working with PATA to come up with legislation or regulations that foster the responsible use of these repossession prevention machines.

Tom Hudson, Esq. 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 by email at tbhudson@hudco.com.

Is it asking too much for the legislators to actually learn something about these devices and how they are being used before banning (or limiting them to the extent that they might as well be banned) instead of relying on anecdotes from newspaper articles?

DEALER BUSINESS JOURNAL | MAY/JUNE 2015 | 19

CATHERINE M. BRENNAN COMPLIANCE UPDATE

MIND THE GAP A new South Carolina law clears up confusion on GAP coverage for consumers, and the rules dealers must follow. What does it mean for South Carolinians and everyone else?

G

uaranteed asset protection waivers, often called GAP waivers, are one of the most common F&I products offered by motor vehicle dealerships in connection with the cars they sell and finance. A GAP waiver allows a consumer to simply walk away from the total car payment in the event of a total loss without worrying that the insurance payout is less than what’s owed on the car.

For dealers in many states, the authority to offer GAP wasn’t always clear. Now, at least five states have adopted a so-called “Guaranteed Asset Protection Act,” (“Act”) including Georgia, Nebraska, Montana, Tennessee and Washington State. South Carolina is the

most recent state to adopt this legislation, and for car dealers, a deeper dive into the changes brought about by the new law is warranted.

The law took effect June 1 when Governor Nikki Haley signed it, but has a builtin ramp up period until December 1.

Senate Bill 441 provides a framework within which dealers can sell GAP waivers, defined as a contractual agreement in which a creditor agrees for a separate charge to cancel or waive all or part of amounts due on a borrower’s finance agreement in the event of a total physical damage loss or unrecovered theft of the motor vehicle, which agreement must be part of, or a separate addendum to, the finance

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LEGAL & LEGISLATIVE

agreement. The Act does not apply to insurance or to debt cancellation or debt suspension contract offered by any national or statechartered bank or federal or statechartered credit union in compliance with federal law. In a provision relevant for installment lenders in the state, the Act makes clear that GAP waivers only may be offered in conjunction with a loan that is unrelated to the purchase of a motor vehicle if the consumer loan has an original repayment term of more than twelve months and the principal loan amount exceeds $4,000.

GAP waivers, at the option of the creditor, may be sold for a single payment or may be offered with a monthly or periodic payment option. Any cost to the borrower for a GAP waiver subject to the Truth in Lending Act or the South Carolina Consumer Protection Code (“Code”) is a “permissible additional charge” under the Code that must be separately stated and is not to be considered a finance or credit service charge or interest. To our knowledge, this is the first time that South Carolina has identified a “permissible additional charge” under the Code. Additionally, the GAP waiver must remain a part of the finance agreement upon its assignment, sale, or transfer by a creditor. www.DealerBusinessJournal.com

The creditor that offers a GAP waiver must report the sale of and forward funds received on all waivers to the designated party, if any, as prescribed in an applicable administrative services agreement, contractual liability policy, other insurance policy, or other specified program documents.

The Act also requires some due diligence by the dealer. A creditor cannot sell a GAP waiver unless the creditor reasonably believes that the borrower will be eligible for a benefit under the GAP waiver in the event of a covered total loss. In other words, the creditor must have a reasonable belief that the consumer would benefit from the GAP waiver.

In addition, a creditor cannot sell a GAP waiver if: (a) the consumer, the credit terms including, but not limited to, cash price, automobile value, or amount financed, or the automobile used as collateral for the credit transaction do not qualify for or conflict with any restrictions or limitations of the GAP waiver conditions; or (b) the amount financed, less the cost of a GAP waiver, the cost of credit insurance, and the cost of service contracts is less than

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CATHERINE M. BRENNAN COMPLIANCE UPDATE

A creditor cannot sell a GAP waiver unless the creditor reasonably believes that the borrower will be eligible for a benefit under the GAP waiver in the event of a covered total loss.

In other words, the creditor must have a reasonable belief that the consumer would benefit from the GAP waiver.

80 percent of the manufacturer suggested retail price for a new vehicle or the National Automobile Dealers Association average retail value for a used vehicle.

A bona fide error resulting in a violation of this requirement on the dealer to ensure the product has value to the consumer results in the GAP waiver being void and the borrower receiving a full refund of the purchase price of the waiver.

The Act also prescribes various disclosure requirements, including: (1) the name and address of the initial creditor and the borrower at the time of sale and the identity of any manager if different from the creditor;

(2) the purchase price and the terms of the GAP waiver including, without limitation, the requirements for protection, conditions, or exclusions associated with the GAP waiver;

(3) the length of the free-look period and the procedure by which a borrower may exercise the borrower’s rights during that period; (4) the terms required

by Section 3730150;

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(5) the procedure the borrower must follow, if any, to obtain GAP waiver benefits under the terms and conditions of the waiver, including a telephone number and address where the borrower may apply for waiver benefits; (6) the methodology for calculating any refund of the unearned purchase price of the GAP waiver due in the event of cancellation of the GAP waiver or early termination of the finance agreement; (7) a statement that the purchase of the GAP waiver is optional and the statement must be in all caps, underlined, or disclosed in another prominent manner and must be substantially similar to the following: ‘THIS GAP WAIVER IS NOT REQUIRED TO OBTAIN CREDIT, NOR TO OBTAIN CERTAIN TERMS OF CREDIT OR TO PURCHASE THE RELATED MOTOR VEHICLE. THIS GAP WAIVER WILL NOT BE PROVIDED UNLESS YOU SIGN AND AGREE TO PAY THE ADDITIONAL COST’; and

insurance and does not take the place of collision, comprehensive, or any other form of insurance on the motor vehicle.

A GAP waiver that is included within the body of the finance agreement must provide these required disclosures in a separate document that the consumer must sign before the purchase of a GAP waiver. A GAP waiver that is a separate addendum to the finance agreement may include these disclosures within the terms of the GAP waiver, which also must be signed by the consumer. Finally, the Act provides for certain rights to cancel within a “free-look” period as well as refund obligations.

Given the heightened pressure from the Consumer Financial Protection Bureau and the Federal Trade Commission on motor vehicle dealers to offer products to consumers free from deception or unfairness, we would expect to see this legislation continue to roll out in other states.

Catherine M. Brennan is a Partner with the law firm of Hudson Cook, LLP. She can be reached at cbrennan@hudco.com

(8) a statement that the GAP waiver is not www.DealerBusinessJournal.com

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ERIC L. JOHNSON CFPB COMMENTARY

CONSUMER

Is it the plot of the next big summer movie?

Comments from the Consumer Financial Protection Bureau’s top officials spell out the four “D’s” of a dealer’s potential doom.

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B

iological plagues, nuclear war, people dying/vanishing from the Earth, natural disasters, zombies, technology failing, sentient killer robot uprising, monsters/ aliens and snow. What do all of these things have in common? Besides being great TV and movie disaster themes, they are all different types of apocalypses. After all of the statements I’m hearing from the Consumer Financial Protection Bureau’s

Director Richard Corday and Deputy Director Steven L. Antonakes lately, I’m now starting to wonder if we should add “consumer” to that list, as in the coming Consumer Apocalypse™?

Like a good movie director appearing at the Sundance Film Festival, Director Cordray laid out his vision for this year-round Consumer Apocalypse blockbuster at the winter meeting of the National Association of Attorneys General (NAAG). Director www.DealerBusinessJournal.com

LEGAL & LEGISLATIVE

APOCALYPSE

Cordray spoke about the obstacles for consumers in the financial services marketplace that interfere with justice and dignity for consumers – deceptive marketing, debt traps, dead ends, and discrimination, the “Four Ds.” Here’s a snippet of the four acts: Deceptive Marketing The first act of this blockbuster, or obstacle, Director Cordray addressed was deceptive marketing - when key information is www.DealerBusinessJournal.com

deliberately withheld from a consumer, or when the information that is provided to him/her is misleading.

This could lead a consumer to have a difficult time making sound financial choices. The CFPB’s view is that consumer financial contracts have grown too long and complicated. Their view is contracts that are too long create consumer confusion by their density and sheer length. In addition, they view the contracts as often difficult for

a consumer to read.

Debt Traps The second act, or obstacle, is debt traps that cause people to get stuck in a downward spiral which can ruin consumer’s personal finances and devastate their lives. “People who do not have access to more traditional credit products and who find themselves in a tough situation with nowhere to turn” may turn to these types of products and get sucked into the

debt trap. Director Cordray touted the CFPB’s enforcement actions against payday lenders and loan servicers and, the CFPB’s recently announced payday lending proposal.

Dead ends The third act, or obstacle, is dead ends. This can happen when consumers have limited clout because they can’t choose the business they are dealing with and lack the control to sever their ties and take their business elsewhere.

DEALER BUSINESS JOURNAL | MAY/JUNE 2015 | 25

ERIC L. JOHNSON CFPB COMMENTARY

Director Corday touted their consumer complaint response tool as a way for consumers to “amplify their voice” whenever they feel they’re getting the runaround. Now that the CFPB will be publishing consumer narratives, this voice may get even louder.

Director Cordray also discussed the key market area where they find many dead ends and which needs an “overhaul”: debt collection.

He said the CFPB is “hard at work analyzing and preparing the details of proposed policy measures, which could lead to the most significant changes in federal law in this area in almost 40 years.” Applying the Fair Debt Collection Practices Act to first-party debt collectors certainly qualifies as a significant change. He also confirmed that the CFPB has been seeking input from directors of other similar blockbusters: state Attorney Generals and the Federal Trade Commission.

We’ve all seen how active the FTC has been recently with their “Operation Steer Clear” and “Operation Ruse Control.”

Discrimination Finally, the fourth act, or obstacle, is discrimination.

Director Cordray indicated that the CFPB is working

To prepare for this apocalypse, you need to take a look at your documents, ancillary products you offer, procedures and processes through the lens of the Four D’s. to secure the “right to equal treatment in the financial marketplace based on individual merit and responsibility.” He stated the CFPB is keeping a watchful eye on the auto “lending” market and has “focused significant resources on rooting out discrimination in indirect auto lending.” He touted that settlements have resulted in supervised institutions “paying out approximately $136 million to provide redress for up to 425,000 consumers who were discriminated against on the basis of race.”

Deputy Director Antonakes also promoted the Consumer Apocalypse blockbuster at the recent CBA conference in Orlando.

He stated that subprime auto lending was now one of the “emerging risks”

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that the CFPB is closely watching. The trend of the average term of a subprime auto loan increasing each year and credit losses for recent loan vintages over the past two years rising give the CFPB worry that “subprime borrowers are being extended credit that they are unable to pay back.” Might this suggest a new act to their Consumer Apocalypse blockbuster: including a consumer’s ability to repay? He further stated that the CFPB will be keeping a “close eye on these trends to address potentially unfair, deceptive, and abusive practices” in the auto lending space.

Winter and summer apocalyptic blockbusters come and go. TV shows with apocalyptic themes rise and fall. However, I can assure you that this

Consumer Apocalypse, at least in the CFPB’s eyes, is very real. It’s here to stay until those poor helpless consumers, like those running from the zombies, robots, earthquakes, monsters, aliens, etc. are all saved.

In this case, it is the Government that is playing the action hero role and trying to do the saving. To prepare for this apocalypse, you need to take a look at your documents, ancillary products you offer, procedures and processes through the lens of the Four D’s. Trust me, you don’t want to walk down that red carpet for the premier of a Consumer Apocalypse blockbuster at your dealership.

Eric L. Johnson is a partner in the Oklahoma City, OK office of Hudson Cook, LLP. He is a frequent speaker and writer on a variety of consumer credit topics.

Eric can be reached at (405) 602-3812 or ejohnson@hudco. com. This article is provided for informational purposes and is not intended nor should it be taken as legal advice.

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LEADERSHIP

DAVE ANDERSON LEARN TO LEAD

HOW TO LEAD BY

PERSONAL EXAMPLE

Nine ways you can inspire your employees and get greater buy-in from them.

A

quick way to lose credibility is with a leadership style that says “don’t do as I do, do as I say.” If you’ve ever wondered why your people haven’t bought into you like you think they should, or how to earn even greater buy-in, I suggest that doing a better job of leading by example is a great place to begin.

Following are nine places to focus on in this regard: Be truthful.

If “integrity” is one of your core values, but you instruct

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a receptionist to tell a caller you’re not in when you are, you’re a liar. You’ve also asked another to stoop to your level and lie. The next time you lecture your team on “doing the right thing” don’t let the rolled eyes, snickers or snorts surprise you.

Keep commitments.

Integrity is doing what you said you’d do, when you said you’d do it, and how you said you’d do it. When you fail to keep commitments most people don’t just forget and get over it. Rather, they

doubt, distrust, or resent you; indefinitely.

Remain teachable.

This covers everything from reading books, to attending courses, to seeking out and listening to other’s feedback on how you and your business can improve. Becoming a “been there, done that” knowit-all is evidence of your complacency and a first step towards decline. Besides, you have no credibility to admonish your people to improve their skills, habits and attitude when you’ve

DEALER BUSINESS JOURNAL | MAY/JUNE 2015 | 27

DAVE ANDERSON LEARN TO LEAD

stopped working on your own.

Pitch in.

This doesn’t mean you micromanage, or leave your strength zone often or for long; it does include jumping in the trenches when the team needs help and getting your hands “dirty”: washing a car, sweeping a floor, shoveling snow or waiting on a customer. If you’ve gotten to a point where you believe certain jobs are beneath you, you’re an arrogant, entitled sloth, and I’d like to extend my sympathies to those suffering under your narcissistic reign of terror.

Don’t whine.

Whine is defined as “to snivel or complain in a self-pitying manner.” No one wants to hear what a

tough job their leader has, or about his or her bad breaks. In fact, whining is a repellant; no one wants to listen to you or be around you. Whining makes you ordinary, boring and despicable; it makes those around you want to wrap your head in crime scene tape. Perhaps it’ll help to realize that everyone you’re whining to has their own problems, and ninety percent of them don’t care about your problems, while the other ten percent are happy you have them.

Accept responsibility.

You don’t deserve credit for all that goes well in your area of leadership, nor do you deserve the blame for all that goes wrong. But you’re still responsible for the results of your position.

When your people see you

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taking responsibility they’re more likely to do likewise.

When they see you fingerpoint and hear you blame, you teach them to do the same. If you’re not willing to own your results then get out of leadership, because it comes with the territory.

Be tough-minded.

Tough-mindedness doesn’t mean you’re a bully, disrespectful or harsh. It does mean you stand for something; that you’re strong willed, vigorous and not easily swayed. Toughmindedness shows your team you won’t compromise your values and look the other way when a top performer violates them. They see you hiring slow, even when you’re desperate for coverage, because you know it’s better to be strategically shortstaffed than foolishly filled

up. On the other hand, followers consider a “leader” who doesn’t hold people accountable, or make the tough calls, as nothing more than a pretender with a title. They mock your tough talk when it’s followed by a wimp’s walk. You confuse the team because one day you stand for something and the next day you compromise with what’s right.

Serve people.

You serve others by setting clear expectations for them, giving them honest feedback, training and coaching them, empowering them with increased latitude and discretion, and by caring enough to confront them when they’re off track so they can right their course.

Serving is about adding value to people, not waiting

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LEADERSHIP

for them to add value to you. Serving requires strength because you subordinate your own ego and comfort to promote the welfare of others; you make it about the team, rather than about yourself. Frankly, serving requires you to get over yourself, and to realize that if you’re “lonely at the top” it’s because you’ve put yourself on a pedestal.

Demonstrate consistency.

You should start increasing consistency with the prior eight areas. When your team knows what to expect from you, and is clear about where you stand they initiate more confidently, make decisions faster and are empowered by their own sense of assurance that what they’re doing is correct and effective. This can only happen if your values and behaviors are consistent. Inconsistency in the prior eight areas confuses followers, stifles initiative, curtails creativity and demotes potentially committed stakeholders to compliant, driven stakes.

Consistent is defined as “constantly adhering to the same principles”. Thus, consistency can actually work against you if your principles are corrupt or ineffective. By constantly adhering to the right principles you earn a reputation as being a leader www.DealerBusinessJournal.com

with a level of competence and character that’s worth following. The bottom line is that inconsistency in vital disciplines is a sign of weakness, lack of focus, little heart and anemic drive. If you’re a sloppy leader you’ll attract and produce sloppy followers, create a sloppy culture, and produce sloppy results. And no one with a lick of sense wants to entrust their future into the hands of a leadership slob.

By following points like the preceding nine you’ll effectively lead by personal example. Compromising in these areas because you think you’re above them, or because it’s easier for you is leading by personal convenience; a surefire recipe to reap compliance, but never to earn commitment.

It’s time to change your approach to F&I compliance

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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.

Dave’s 13th book: “It’s Not Rocket Science” will be available in the fall of 2015. For daily leadership tips follow Dave on Twitter @DaveAnderson100.

To order, visit us at www.counselorlibrary.com/offer/spot or call us at 877-464-8326.

Also follow us on: DEALER BUSINESS JOURNAL | MAY/JUNE 2015 | 29

DAVID J. WIGGINS ACCOUNTING PRINCIPLES

THE DYNAMIC DUO Forecasting and budgeting may not sound very exciting on their own, but when used correctly in your dealership they will help you get superhero results.

30 | MAY/JUNE 2015 | DEALER BUSINESS JOURNAL

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BUSINESS OPERATIONS

W

hen most people think of the dynamic duo, Batman and Robin come to mind.

But the dynamic duo I am referring to are those of business — forecasting and budgeting. While they are not as entertaining as superheroes, when used together, their might is just as powerful for BHPH dealers.

I came to this conclusion when working with a BHPH operation a while back. The bank and dealer were puzzled as to why the dealership was not doing better. The dealer knew that sales had slowed and had a feeling that charge-off had ticked up a notch, but he did not realize that his expenses had crept up too. This became evident when we began comparing monthly and annual numbers to past years.

A bit of forecasting and budgeting could have circumvented this scenario, but I see few people in this industry doing forecast or budgets. I think for most dealers it’s due to limited

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accounting resources and the complexity surrounding it.

While they are separate processes, they are most effective when completed together. Forecasting is more difficult within the Buy Here-Pay Here industry, while budgeting is much easier.

If you have an RFC or other related companies, you should prepare a forecast and budgets for each company. This will allow you to monitor each company. If you get good at these processes, you may want to break out each company and then also analyze results in a combined format.

Forecasting This is the first of the two processes that should be undertaken. Financial forecasting (projections) can be done for periods up to five years in advance, however, conditions in this industry change so quickly that I find that three (or more likely) one year at a time is more useful.

Generally spreadsheets are most helpful in

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DAVID J. WIGGINS ACCOUNTING PRINCIPLES preparing forecasts. I would suggest that you forecast cash flows and income statements. I normally begin by setting up revenue and expense accounts in a format similar to your financial income statements.

Your forecast should be done on either an annual or monthly basis. No matter which format you use, break out the numbers by monthly amounts. This will give you elasticity to fine tune monthly amounts for variations that occur due to high volume sales months (i.e. tax season) or other seasonal adjustments.

The most difficult part in making BHPH projections is determining

revenue and cash flow around car deals and related collections. This will generally be made based on expected sales and the associated payments that are collected. It will require you to determine expected cash collections, break down the interest income, and estimate related charge-offs each month.

Once revenue is determined, the other side of projecting expenses is much easier. Information for expected expenses can generally be obtained from your past years income statements. Many of these expenses will be your normal monthly operating expenses.

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Budgeting Budgeting involves using the numbers you created from your forecast and setting up monthly budgets that can be compared to actual monthly results. Again spreadsheets work well for this process.

Some more complex accounting systems allow for monthly budget amounts to be included in the accounting software. This can be helpful as it will allow you to print and compare “actual” results to “budget” results easily and quickly.

Comparing actual to monthly budgeted balances after month-end will tell you whether you established a correct budget and enable you to monitor your company’s ability to function within budget and meet your forecasted expectations.

If done properly, most of your management decisions each month should be made in conjunction with your set budgets. This will be an invaluable way to control expenses and keep you and your management team focused on maximizing profitability.

Don’t try to be too much of a perfectionist in preparing your projections or budget. The important thing is to just get these processes started. You can fine tune each month’s

forecast, or change the format at any time in the future. You will find the process of making a forecast and setting monthly budgets very useful because it will force you to work “on” your business, rather than just focusing on the day to day issues that arise.

This industry has gotten more mature, more competitive, and more challenging due to compliance requirements and the influx of sub-prime auto loans. But when you engage in forecasting and budgeting, you won’t need to call on Batman and Robin for a heroic rescue.

You will be able to plan for competitive forces and model your business for success.

Dave Wiggins, CPA is a principal with CliftonLarsonAllen’s dealership and Buy-Here, Pay-Here group team. He has extensive knowledge of the inner workings of dealership and finance company operations, including new developments regarding regulatory compliance issues.

Dave specializes in federal and state taxation with the unique perspective of those specific strategies that apply to dealership, finance companies and their owners. He can be reached at david.wiggins@ CLAconnect.com.

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TIM BYRD DEALER REINSURANCE

SMART PRACTICES

Why are some dealers more successful then others? They run their businesses with common sense, always leaning toward the right thing to do. It helps you stay out of trouble and serve your customers better, too.

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 whom he my devoir. There are lots of BHPH dealers and lenders feeling that way today about the CFPB and the FTC. It is reported almost every day of another dealer facing huge fines for something they didn’t realize they were doing wrong.

Recently dealers from across the country traveled to Washington DC to meet with these government officials. The dealers I spoke with, when asking for best practice indicators from these officials, received less than comforting responses, such as “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 two vital ideas to help you avoid the searchlight!

To wave them past, saying “nothing to see here”. Call them Smart Practices.

First, make sure every

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employee you have has taken a compliance course. This way 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?

Courses covering all the necessary compliance issues are offered very inexpensively. Talk about a large potential ROI. Wouldn’t it be important to you to be able to say “All of our employees are Compliance Certified?”

Wouldn’t it be reassuring, should you get hauled into court due to the actions of a rouge employee, to

have documentation that substantiates your policies to the contrary? Your compliance rules are in place and each employee is certified as having passed a compliance course. Your company stands on its proven training!

Second, you are in the Buy Here-Pay Here business.

Payments are the lifeblood of Buy Here-Pay Here.

What do you think is going to happen the minute the car breaks down and the customer can’t afford to fix it? You don’t have to be a car business expert to figure that one out.

If you are going to be a successful Buy Here-Pay Here dealer, and you want to stay out of trouble in today’s and tomorrow’s BHPH market, you better take good care of your customers by taking good care of their car.

There is a way to do that without costing you profit, or at the expense of your cash flow.

I have succeeded in my independent business now for over 20 years and the car business for nearly 30. What a great business.

It is one of the last great businesses in this country that personifies the age old buy/sell, give and take, barter and negotiate sales process. A business where www.DealerBusinessJournal.com

BUSINESS OPERATIONS

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TIM BYRD DEALER REINSURANCE

no matter your background, with enough personal drive and dedication you can make a great living. So, if I may give some advice to you younger dealers who want to make this business part of your life: Always do the right thing. That means things like providing a warranty on your cars, because standing behind the sale is the right thing to do.

The problem with warranties comes down to dollars and commonsense: 1. You could give your customer a warranty, like a 30 day or 1000 mile 50/50. If it falls in half the customer gets both pieces. Please!

2. You could fix problems as they arise, and Murphy’s law dictates that the largest number of problems will occur on your slowest month.

This is an unknown, reoccuring expense.

Your business planning strategy should avoid the word “unknown.”

3. You could buy a Vehicle Service Contract (VSC) from a third party and give it to every customer.

Wait, we are talking BHPH. You would just be putting out more money you haven’t collected yet.

These are the common approaches to this major problem. So, the “solution” many dealers have reverted to is labeling everything AS

IS, which I think paints a bulls eye squarely on your back.

Let me direct you to a little sanity that gives you ownership, control, and profit. Over the last 30 years, reinsurance has evolved to provide warranty features that address each of these issues. So, the real solution is to have a simple, safe, and secure dealer-owned reinsurance company.

These are just a couple of ideas to show that your company is going above and

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beyond what other dealers are doing, and that you are looking out for your customers to make sure they get fair treatment.

Bottom line: train your people in compliance and warranty your vehicles.

If you follow those smart practices then if the searchlight swings your way you have nothing to worry about.

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 and can be reached at www.

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Tim Byrd is Founder and President of DealerRE a Tim Byrd & Associates company, a managing agency located www.DealerBusinessJournal.com

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DEALER BUSINESS JOURNAL | MAY/JUNE 2015 | 37

IT TAKES A TEAM! IT’S YOUR DEALERSHIP- ISN’T IT WORTH HAVING EXPERIENCED SUPPORT? Seven of the last ten NIADA Quality Dealers of the Year have been or still are members of the nationally recognized Leedom Twenty Group Program.

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40 | MAY/JUNE 2015 | DEALER BUSINESS JOURNAL

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