Dealer Business Journal, October 2013 by Dealer Business Journal

Understanding Static Pool Analysis Page 6

Create More Traffic Page 10

BDCs Make a Comeback Page 28

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IN EVERY ISSUE

Contents By Tom Hudson

General Counsel 16 Creating an Electronic Communications Policy Set clear standards for employees on how their professional, and personal, communications will be monitored at work.

By Debra Dawn

Legal Compliance 17 Too Easy Boys, Too Easy Preparing a Compliance Management System to meet CFPB requirements.

By Eric L. Johnson

ke a BDC’s Ma

Page Pag

ck Comebae 28 Pag

October

LEADERSHIP & TRAINING ess Is Our ...Your Succ

By Dave Anderson

Stop Loss 20 Prepare Yourself for Insurance Quotes An ounce of preparation is worth a pound of good business sense when it comes to insurance quotes. By John Krivacsy

Health Insurance 24 How Will Health Reform Affect Your Dealership? Plan your strategy for compliance with the new Affordable Care Act.

Online Strategy 30 Social Media Presence is Huge in Today’s Market Focus on developing a conversation with your customers.

By Cesar Yepez

Tax Time 32 Tax Max Delivers Early Tax Season in the Fall The new, early tax season is known as the 4th Quarter Tax Season. By Chip Wiley

Customer Service 34 Stop Spinning Your Wheels, Start Wowing Women Tips for catering to women when selling a car.

L|1

BUSINESS OPERATIONS

SALES & SERVICE

CORNER OFFICE FRONT LINE BHPH BOOT CAMP IMPROVING PROFITS PAYMENT PROCESSING Industry News

S JOURNA

BUSINES

Business

Learn to Lead 18 Thirty-One Cultural Tips, Tenets and Tests Building a high performance work culture based on five key pillars.

...Your Success Is Our Business

LER 2013 DEA

PRST STDGE U.S. POSTA

14 Understanding Hidden Finance Charges Be sure your advertisements meet TILA standards.

Analysis6

ffic More Tra e 10

N, FULTO NO. 38 PERMIT

LEGAL & LEGISLATIVE

Create

October 2013

Legal Opinion

ol Static Po

PA I D MO

Volume 10, Issue 10

anding

Underst

4 6 8 10 12 36

By Dave Wiggins

Market Watch 26 Leaves are Falling, but Cars and Trucks Improve Watching trends coming from the auctions.

By Ricky Beggs

Business Ideas 28 Three Reasons BDCs Are Making a Comeback Today’s modern Business Development Center is outperforming most of its predecessors.

By Greg Wells

By Jody DeVere October 2013 DEALER BUSINESS JOURNAL | 3

LEEDOM GROUP

Corner Office Mining for Ideas

his month’s issue is dedicated to ideas that impact the profitability of your business. For those of you that are long time readers this is not something new for us here at Dealer Business Journal. Our publication is entirely dedicated to helping dealers run a better business and make a profit. This issue highlights some great ideas that are timely and that are proven to work in dealerships just like yours. As we head into the fourth quarter it is a great time of the year to assess what is and isn’t working in your dealership. I just wrapped up two Twenty Group meetings and my sense is the market is heating up from a competitive standpoint. Third party lenders are very aggressive; there is increased competition for the customer and this is a good thing. But it also means you have to be on top of your game as you try to earn the customer’s business. This is also a perfect time for you to make a commitment to change the things that are holding your business back. Think through what your targets are for 2014. How are you going to achieve improved performance? Is your team fully equipped and trained to perform at a high level? Are you prepared to do what it takes to improve business? I find many clients thinking about these types of questions during the fourth quarter of the year. You should do the same. If nothing else do a quick forecast by month so you know what your key objectives are for next year. Or if you are more sophisticated, plan out a budget and forecast for the entire year. This will become your road map and is the best way to manage your business in a competitive environment. While we are talking about ideas I would be remiss if I did not mention the incredible impact a Twenty Group can have on your business. I just had a chance to speak at the MARIADA Convention in Atlantic City and during his gracious introduction, Mr. Mike Brill passionately told the audience how a Twenty Group was one of the two best things that happened to his business. We hear this from many dealers and it truly speaks to the quality of the membership. If you have been considering joining or re-joining a Twenty Group don’t delay – do it today!! Request an invitation by emai at invitation@twentygroups.com. Finally, I want to thank our long time editor, Peter Salinas for his years of service. Peter has moved on to some bigger and better things and we wish him all the best. Thanks Peter for your service to our industry. So now I invite you to read on, enjoy this issue and I hope it is packed with ideas for you to improve your business. Have a great month!

dealer BusinesS JOurnal

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

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

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

Chuck Bonanno | chuck@twentygroups.com Contributing Writers

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

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Executive Publisher

4 | DEALER BUSINESS JOURNAL October 2013

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October 2013 DEALER BUSINESS JOURNAL | 5

LEEDOM GROUP

Front Line

By Chuck Bonanno

Static Pool Analysis: Mystery Solved!

ou’ve all heard the terms “Static Pool” and the “Static Pool Analysis” many times. Many buy here-pay here dealers have the impression that this is some new and exotic way to analyze their loan portfolios. It strikes fear in some dealers and others just “pretend” to understand. Let’s unravel the mystery of this elementary method of portfolio analysis and make the effort to understand its value, its strengths and its weaknesses. Today, most any bank or other financial institution willing to provide capital to help you grow your business will require this important loan portfolio analysis. First, let’s decipher the words “static pool.” The definition of static in this case means “unchanging.” The definition of pool in this case means, “group.” It’s that simple. We are going to analyze “unchanging groups” of loans. Pools can be ANY group of loans. The pool could be comprised of loans made on red cars, loans made to married couples, loans made with no money down or loans approved at the end of the month because you need deals. The industry standard is to use individual months as pools. An example of that would be the loans the dealer originated in October 2009. To analyze a static pool such as “October 2009” the dealer will track losses on ONLY those loans originated in October 2009. Loss

tracking will be complete only when the same way. You need to develop the last of those loans either pays out a spreadsheet that tracks many or is charged off. pools over time and add new ones Not too difficult so far, right? every month. When you “spread” You must now define losses to take these pools and review, you can see the analysis another step forward. There are In this case, the definition of two components that static means “unchanging” and make up loss-events pool means “group.” It’s that (charge-offs). The first is the total number of simple; analyzing “unchanging charge-off events or groups” of loans. “frequency of chargeoff ” and the second is the total net loss on the loans in the trends in newer pools that may be pool or the “severity of charge-off.” performing differently than typical Both numbers are important to you pools in the past. The example although most industry standards might be that those June 2010 loans revolve around the “severity” are now 6 months old and have number. experienced a 15% loss frequency As time passes our original pool and a 7% loss severity and you have liquidates, either by cash payments historically seen 6-month losses or repossession/charge-off until the at 10% frequency and 5% severity. point where none of the original You can deduce that the pool will loans remain on the books. This is not perform as well as your other considered a “mature” pool. From pools have over time. So you ask the this pool you can now calculate questions: “Why? Has there been frequency of charge off (sometimes deterioration in your collection called repossession frequency) by effort? Has your underwriting dividing the total number of chargeand investigation process been off accounts in this pool by the total compromised? Is the product life number of accounts originated an issue? Are there external forces in that pool. This is a piece of in the marketplace we need to cake, right? You can also calculate address?” the severity of loss on this pool You can see that this is a simple (sometimes referred to as charge-off analysis of loan performance. It is rate) by dividing the net loss dollar the only TRUE loss-tracking method amount from all charge offs in the and the only one you can use to pool by the total dollar amount of predict future losses with any degree original “amount financed” that of certainty. This is why most banks made up this pool. That wasn’t so and lending institutions want to hard! know your historical loss experience Okay, that was easy. Now expressed as static pools before they what? You must take this pool and lend money. So it’s simple, everyone every other pool and track them Continued on Page 9

6 | DEALER BUSINESS JOURNAL October 2013

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October 2013 DEALER BUSINESS JOURNAL | 7

LEEDOM GROUP

BHPH Boot Camp

By David Brotherton

That’s How We’ve Always Done It

“T

hat’s how we’ve always done it” is one of the most dangerous phrases in any business setting. It implies that minds are now closed, innovation is now stifled and that some are content to rest on their laurels until a hungry, forward-thinking competitor comes in and knocks them off their perch. Doing something simply because it’s how it has always been done means that our team members are now doing their tasks by rote instead of by reason. No one is thinking about “why” we do what we do and, instead, we focus on doing it the same way enough times to validate our existence. In our industry, technology and the competitive landscape both change at a breakneck pace. When an organization starts spending its time looking backward instead of forward, you will lose your place in line to the competition that focuses on looking ahead. This is not to say that processes and procedures aren’t important. Nor does it imply that some tasks must be executed the same way each time. It does mean, however, that we must ruthlessly evaluate these processes, procedures and personnel on a consistent basis to ensure that we aren’t being left behind. Is our vision still valid? Are we still approaching the business according to our core values? Do we still have a consistent message? Are we developing our bench-strength

be? Are we as good as we should be? or are we settling for good enough? Applying these questions to the If you think about it, “good problem of where our next deal is enough” is just another way of coming from is critical to staying saying the same thing. Now, don’t ahead. None of us have unlimited get me wrong, I don’t expect any budgets and we must prioritize our organization to have the best marketing efforts. A multi-level possible players at every level. I approach to touching your target do, however, expect you to try to— market is still the best approach but particularly with your key positions. it is how you go about defining and Evaluating your team regularly is touching that market that makes the a big part of avoiding this “good difference. Be serious and ruthless enough” or “that’s the way we’ve in your evaluation of your people always done it” mentality. and processes. Allow no sacred A question I ask is “where is cows in your thinking. This is an your next deal coming from?” I area where an outside influence like to see if the sales person is that is not emotionally attached thinking about their business and to your business can really benefit taking ownership in their process you – such as your favorite, friendly and results. The answer, by the way, neighborhood consultant. shouldn’t be from the next lot-up but, that is In our industry, technology and the the subject of a different competitive landscape both change article. In at a breakneck pace. a broader When an organization sense, where our business starts spending is going to its time looking come from backward instead of must be forward, you will lose evaluated ruthlessly. It your place in line to the is a moving competition that focuses target and we on looking ahead. are having to fight competition, the auctions, other David Brotherton lenders and the customers is a consultant themselves. What makes us and Twenty attractive? Why is a customer going Group moderator to drive past the competition to with the Leedom come and buy from us? What is our Group Contact reputation in the marketplace? How him at do we interact with our customer davidb@ base? Are we as good as we used to leedomgroup.com

8 | DEALER BUSINESS JOURNAL October 2013

DBJWeb.com

Au For

from tory from inc

STATIC POOLS continued from Page 6

should do static pool analysis. There are, however, some drawbacks, limitations, and general issues involved in doing this type of tracking and analysis. The first is that it takes a very long time to create meaningful numbers. Imagine you are going into business today and you want to start tracking your loan pools. It may be as many as 30 to 36 months until your very first pool matures. If you have underwriting and collecting problems now, you probably won’t be around to judge your pools three years from now. A second is that if at any time you purposely and materially change variables such as the customer that you service, the vehicle you sell, the underwriting criteria or the collection process, typically you will not get the same loss results. Thirdly, if you are one of those dealers whom continually “re-write” notes or roll customers out of one vehicle and into another vehicle, the analysis waters become very muddy. Despite the issues listed above, I urge all dealers to begin static pool analysis and continue throughout their lives of their dealerships. The analysis provided is invaluable and will help you develop a better performing loan portfolio by adjusting to changes in performance and reacting to underwriting and collections mistakes. There are software systems that provide some form of static pool loss tracking and a few of those provide true analysis and future loss prediction. If your system provides these reports, use them. If your system doesn’t, call your software provider and ask for these reports. If you require an outside service to accomplish this, do so. 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.

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September Dealer Journal OctoberBusiness 2013 DEALER BUSINESS JOURNAL 2013 |9

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LEEDOM GROUP

Improving Profits

By Jay Prassel

If I Had More Traffic, I Could Sell More Cars

ound familiar? I’ve heard this several times during my travels the last few weeks and it didn’t matter what part of the country or what franchises. I was at a longtime Ford client last week who I first started working with in September of 1997. They are coming off of another great profit year, but January had started off a little slow. I noticed the sales staff was a little down and in conversations the main topic was that there was very little traffic and that the dealer needed to step up the advertising. This dealer has always been aggressive and innovative in his advertising and marketing to the

up, but to give them a few ideas on “opportunities to do business.” I pulled up our Salesperson Training Manual that was originally developed in 1995 and that has evolved over the years. One module focused on the salespersons’ responsibilities to generate their book of business. As we started the meeting, I walked up to the easel and across the top I wrote “25 percent” in big bold print. I looked at the room of 10 guys and asked, “We get paid 25 percent of the profit when we sell a vehicle, right?” “Right,” was the quick response followed by, “it can go up to 32 percent if we hit volume bonuses.” I told them that I’ve been in the business for 36 years now, both the retail environment and then into training and consulting. I’m sure there are other occupations, but the

What would happen if we were to get on the phone and start reaching out to our friends and associates to let them know that this is a great time to buy a vehicle and share the incentives with them? point that it is above benchmark in expense. It’s a smaller dealership surrounded by many formidable competitors. When discussing the agenda with the dealer and his general sales manager, I requested that I hold a sales meeting with the staff to attempt to not only pump them

car business offers an interesting and unique opportunity. I asked a few questions of the staff: • •

How much of an investment do we have in the inventory? We work in a real nice facility

10 | DEALER BUSINESS JOURNAL October 2013

• • •

with a nice desk. Do we pay any rent? Telephone Expense? Business cards? How much do we pay for advertising? OK, what out-of-pocket expenses do we have to work at ABC Ford?

Everyone was now very attentive and I think my point was made; they had no financial investment, but participated (received) 25 percent of the profit when they sold a vehicle. Our Salesperson Training Manual suggests (just my opinion) that 50 percent of your business will have to come from other than walk-in traffic. I stated this back in 1995, pre-Internet, and it’s even more relevant today. I told them that I personally believe that a salesperson has an obligation to prospect and follow up in return for the opportunity that the dealer has given us. In our manual, we listed 101 Sources of Prospects back in 1995. Instead of handing that out, even with the updates over the years, I walked back to the easel and asked a few more questions. Let’s make a list of businesses and people that we do business with and have a relationship with. Several salespeople shouted out some suggestions: 1. Dry-cleaners 2. Restaurants 3. Bars (of course) 4. Accountants 5. Doctor / Dentist 6. Neighbors 7. Relatives DealerBusinessJournal.com

8. Soccer / Basketball / Gymnastic / Dance Parents 9. Pharmacist 10. Church 11. And more …………. Let’s talk about small local businesses (fleetail) that need vehicles: 1. Cable Company 2. Plumbers 3. Heating & AC Contractors 4. Handyman Repair 5. Construction Contractors 6. Auto Part Stores 7. Electricians Now we were on a good roll! What would happen if we were to get on the phone and start reaching out to our friends and associates to let them know that this is a great time to buy a vehicle and share the incentives with them? How much money would it cost us to make 10 calls a day? How much time would it take? At this point the dealer made the comment, “You’ll still have time to read the newspaper, play fantasy football, update your Facebook and download music.” I then offered to sit with them, one-on-one, and help make the calls. It doesn’t have to be anything elaborate, just a 30- 45 second script. “Hello, this is Jay Prassel at ABC Ford, I just wanted to let you know that we have some great deals and incentives right now. 0% financing for 72 months, rebates of $9,000 and end of the year discounts. We also have over 50 quality pre-owned vehicles priced for immediate sale. If you or anyone you know needs a vehicle, give me a call. Mr. Customer, if you could do me one favor? Text everyone you know and ...Your Success Is Our Business

tell them that I have great deals at ABC Ford!” One last question to the group: “Who has a Facebook page that Mr. Dealer sarcastically referred to earlier?”Most everyone raised his or her hand. Would it make good business sense to post the information from our phone scripts on our Facebook page every other week or so? A hand goes up in the back of the room…… “And you know what, Jay? It doesn’t cost me anything!” As we walked out, three or four salespeople asked me to sit with them to make the first few calls. That is what makes my day! A few closing thoughts and ideas: •

•

The management team now needs to hold the sales staff accountable. My recommendation is to review with each salesperson their daily activity list and do this 30 to 60 minutes before they leave each day. Make it fun, not a beat them up session. Maybe a contest for the first vehicle sold off their call list?

Dealer Business Journal is a publication you will find in the hands of over 20,000 dealer principals, general managers and dealership executives each month. It is a magazine read by the decision makers of the industry. Don’t miss out on an opportunity to connect with this educated, experienced group of professionals in one of our many media outlets:

Print Advertising

Online Newsletters

Web Presence

Social Networking

Email Marketing

OK, I know none of this is revolutionary, proprietary or is going to change the car business as we know it, but is it better than waiting for the door to swing open or throwing money at a sale event? Jay Prassel is the Leedom and Associates Vice President, Director of Operations. Jay has 37 years of automotive experience and has worked with over 300 dealerships as a profit improvement consultant and Twenty Group moderator. jay@leedomgroup.com

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October 2013 DEALER BUSINESS JOURNAL | 11

LEEDOM GROUP

Payment Processing

By Jessica Sweeney, ETA, CPP

A Few Bad Apples Spoil the Bunch

t seems as though merchant services sales reps have been given a bad name with accusations of false promises, forceful sales tactics and just flat out lying. While many articles have been written to alert dealers of the deceptive practices used by these payment processors, none have yet to educate the dealer. What questions to ask, what information to look for in the savings analysis, and what costs are negotiable as opposed to which ones are not? Every processor out there is not a bad apple, and while some have proven these accusations correct, there is a way to find the good ones in the bunch. For instance, what do you do with calls from representatives saying they are associated with MasterCard and Visa? “Technically” if you are selling merchant services you are associated with these brands, after all you are offering the ability for the merchant to accept these cards. However using a big name to try and help your cause is just a sales tactic and it shouldn’t intimidate or impress. Some may say that they are associated with your bank, and that could hold some truth. Many banks,

mainly large ones, have a merchant services arm as a separate business. Nevertheless the bank is likely still going through a processor, and you are not cutting out one of the middle men by choosing them. Also note this service is not the banks main product and therefore may not have as many resources in pricing, customer service or education. The call to watch out for is one where the sales rep says they are with your current processor and want to upgrade your service or lower your costs. Unless the sales person that signed you up initially or the customer service representative that you speak with when you have an issue, calls to upgrade your service or lower your cost, don’t bite. Probe the caller, ask them what company they are with and see if they say your current processor. Let them know you’re going to contact your initial representative to verify and you’ll give them a call back. Don’t just assume that they are with your current processor as this is a scam used by the bad apples. Savings analysis or cost comparisons are effective tools in making decisions to move your

12 | DEALER BUSINESS JOURNAL October 2013

processing for better rates. It is no different than getting a better rate on your mortgage. As I have mentioned before, Interchange Cost Plus is the best pricing model for BHPH Dealerships. When looking at a savings analysis you should note that it should at least includes the following: Interchange Breakdown, Association Fees, and Discount Percentages. An interchange breakdown should be an estimate of MasterCard and Visa transactions processed in a month as well as which of those are credit and debit; fees for those transactions and volumes should then be calculated with estimated interchange percentages. For example, consumer research shows that about 80% of BHPH Dealership’s transactions are debit cards which have an average interchange rate of 1.80%; of that 80% about 75% are Durbin Regulated and should only be charged a rate of 0.05%. This can sound confusing so keep in mind two very important things about interchange; the interchange table has about 360 different card types and even lots of ways to process those cards that all affect the

DealerBusinessJournal.com

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

interchange percentage. Secondly

CONFUSED ABOUT

COMPLIANCE?

be on these analyses and that is

important to educate yourself and ask questions. If a sales person is honestly trying to sell you their no control over these fees and they lower rates. ISOs, like Paymaxx product they will be happy to answer Fear willof beChange the same no matter where Pro, group all of their merchants any questions you have and if they afraid change is abusiness. good thing wheninto considering changingand use that to youBeing choose to of place your one portfolio cannot answer them, they will be your DMS solution. Every single person in your organization will have If you currently have a fixed rate negotiate lower costs with the banks. willing to research it for you. Don’t to start back at zero. Everything will be different. Speed and efficiency C O M P L I model, these fees are factored into A single merchant that processes A be N Cafraid E AUto DIdo T:a little research will drop in the short-run and you may have to do a lot of double-entry that rate. Also, look for association 50 transactions a month totaling yourself; do a quick search on the to ensure that the data is maintaining its integrity and the new DMS is . . . s e working advertised. integration won’t be the same,not etc.have as much uptci internet for complaints against the fees onasyour savingsAccounting analysis, Visa $15,000 would ankr Knowing all of this charge means you should not makeleverage this sort to of negotiate decision lower Bpricing and MasterCard 11 basis processor or ask the sales .. ns.for tiorep ula cavalierly: is avolume big deal to change systems and you to make sure gare e R points onit all and $0.0195 as aneed group of merchants processing references. There still good . . . g n nsi that the new features are worth the price. ...Liceapples on all transactions. These fees go 6,000 transaction per month totaling out there, you just have to . to VisaPlans and MasterCard and again $1.8 million, and that is why ISOs know how to pick them....Forms.. Growth Does your DMS have mind? your processor, bank or new ISO functionality have no insay thatAre theythey canenlower your costs. hancing integration to that be inthere are many controlreporting, over them. There or areanalysis? also Your DMS Weneeds know Jessica Sweeney, ETA CPP, is the a miscellaneous position to growfees withcharged you. Doby you want an innovator and industry Visa schemes and tactics to get you to relationship manager for Paymaxx leader (read more expensive here) or are you satisfied with a follower and MasterCard that your sales rep spend money and it is prevalent Pro, the national payment processing As I said before, our business runs on data. How that data is captured, should note in your comparison. in all areas of business, not just division of the Leedom Group. interpreted, utilized and analyzed is absolutely critical to growing your business andpercentages maintaining your competitive This is theprocessors. most Discount should also advantage. with payment It is sweeneyj@paymaxxpro.com Training interchange fees go the issuing bank, what the processor or ISO have Will your provider send people to you to install and train? How yoursupport processor, bank or ISO have control over to, in turn, offer you much is included?

LEEDOM CAN HELP.

critical system you will make in your business.

...Your Success Is Our Business

Debra Dawn • 800.966.8733 • debra@leedomgroup.com • leedomgroup.com

October 2013 DEALER BUSINESS JOURNAL | 13 September 2013 Dealer Business Journal

LEGAL & LEGISLATIVE

Legal Opinion

By Tom Hudson

Understanding Hidden Finance Charges

ould you lease a billboard at the edge of town and plaster a sign on it that identifies your dealership and says WE VIOLATE THE TRUTH IN LENDING ACT. How stupid would that be? Some dealers are doing the equivalent of that on the Internet, however. A friend of ours from South Carolina sent us this Internet ad posted by a local dealer: 2004 Toyota Camry Solara SLE, 149,672 OMG!!! THIS IS ONE SHARP RIDE!!! JUST $7995 AND ONLY $2500 DOWN AND $250 A MONTH..... NO INTEREST!!!! WOW!!! WOW!!!! WOW!!!! WOW!!!!!!!!!!!! OR IT CAN BE YOURS FOR JUST $5800 CASH.....OUR SPECIAL WHOLESALE PRICE.....AND HAVE NO PAYMENTS!!! EVEN BETTER WOW!!!!!!!!!!!!!!!

Not one, not two, but three Truth in Lending violations in one ad! Failure to state the cash price, claiming no interest and failing to comply with federal advertising rules. A trifecta. Having two different figures for the cash price of the vehicle doesn’t work. It’s clear that the car can be bought for cash for $5,800. That,

then, is the “cash price” for TILA Trade Commission, the Department purposes. The price of $7,995 for an of Justice, state Attorneys General installment purchase clearly contains offices and other enforcement a hidden finance charge – the difference between TILA advertising provisions $5,800 and $7,995, only say that if an ad contains a in this case, it isn’t exactly “triggering term” additional “hidden,” since the dealer has been kind enough to disclosures are required. leave the equivalent of a signed confession by saying the cash agencies have computers. They can price is $5,800. sit at their desks in the home office The dealer might be under the and, when they aren’t playing Angry mistaken impression that the soBirds, cruise the web, looking for called “no interest” transaction is not advertising violations like this one. subject to the Truth in Lending Act. The radar keeps getting lower. That would be wrong, first because And the discussion above deals it is clear as a bell that the difference only with the federal law problems between $5,800 and $7,995 is with this ad. Any plaintiff ’s lawyer a finance charge, and, second worth his tasseled loafers could gin because TILA applies to any credit up some state law violations, as well. transaction repayable in more than Maybe the dealer who put this four installments whether interest is ad together should contemplate charged or not. other ways to make money. I know! If TILA applies, those provisions Maybe he could sell exclamation of TILA that regulate advertising points! apply. Those advertising provisions say that if an ad contains a Tom Hudson, Esq. (tbhudson@hudco. “triggering term,” as the above ad com) is the author of CARLAW®, does, additional disclosures are CARLAW® II, Street Legal and required that are not in this ad. CARLAW® III, Reloaded. He is also Dealers, and especially dealers the Editor/author of the CARLAW® away from the large metropolitan F&I Legal Desk Book. The books are areas where the federal enforcement available at www.counselorlibrary. agencies often have offices, were com. He is also the publisher of Spot once able to fly under the radar Delivery®, a monthly legal newsletter when it came to strict compliance for auto dealers, and the Editor in with federal consumer protection Chief of CARLAW®, a monthly report laws. That’s a lot more difficult now. of legal developments in all states for All those young, idealistic the auto finance and leasing industry. enforcement lawyers who work For information, call (410) 865-5411 for the Consumer Financial or visit www.counselorlibrary.com. Protection Bureau, the Federal

14 | DEALER BUSINESS JOURNAL October 2013

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October 2013 DEALER BUSINESS JOURNAL | 15

LEGAL & LEGISLATIVE

General Counsel

By Debra Dawn

Creating an Electronic Communications Policy

n today’s high technology environment, every dealership should have a written electronic systems communications policy which covers not only social networking but also includes e-mails, faxes, cell phone calls, instant/text and voice mail messages and internet usage. Companies should monitor electronic communications sent, received, or stored by dealership’s electronic communications systems and equipment, which includes dealership provided cell phones, smart phones, and laptops. A current electronic systems communications policy should contain the right for the dealership to disclose the content of electronic communications, even after they have been deleted, when, in the dealership’s sole discretion, there is a need to do so. All electronic communications should be used only for business purposes. To the extent employees use electronic communications for non-business purposes, the dealership should reserve the right to monitor personal use to the same extent that it monitors business use. This may include the use of automated software. The dealership should reserve the right to log, record and store all out-going and in-coming electronic communications as well as the right to access the contents of all electronic communications stored in an employee’s e-mail, voice mailbox or other electronic medium at any time. Employees should be prohibited from using the dealership’s

electronic communication systems to set up or run a personal business, transmit or download offensive materials or engage in any other acts not in the dealership’s best interest. Employees should not access the internet or any social networking sites during work hours unless such access is directly related to their job duties. Employees should also be warned about accessing personal e-mail accounts on dealership computers or on personal devices during work hours. Employees should not expect that electronic communications, even those marked as personal or accessed by a personal I.D., are private or confidential. As such, employees have no expectation of privacy in the electronic communications sent, received or stored by the dealership’s electronic communications systems. An agreement should be signed between the dealership and the employee stating that the use of any electronic

16 | DEALER BUSINESS JOURNAL October 2013

communications system or equipment constitutes consent to monitoring and recording and that failure to adhere to this policy may result in discipline or dismissal. As a final step in implementation, the policy must be evenhandedly applied at all levels of the dealership. Employees who violate any of the terms and conditions of the policy should be subject to progressive discipline. Unless properly enforced, the use of social media will infiltrate the work day and result in a significant loss of productivity and employee morale. 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

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LEGAL & LEGISLATIVE

Legal Compliance

By Eric L. Johnson

Too Easy Boys, Too Easy

’ve been doing quite a bit of talking lately to my BHPH dealer friends about the Consumer Financial Protection Bureau (CFPB or Bureau) and how they need to get ready for the CFPB now. Of particular focus in my discussion is the requirement to prepare a robust Compliance Management System (CMS). I’ve also been walking quite a few dealer lots lately as part of the onsite audits we’ll often perform for our clients. Now, I’ve been walking dealer lots since I was a kid so I know what a lot is supposed to look like, how the cars should be displayed and what’s supposed to be on the car itself. On the way back home the other day from a recent audit, I realized how dealers may be making it too easy for the CFPB. As you might have heard, at the end of October last year, the CFPB released a report titled “Supervisory Highlights: Fall 2012” that described the problems its examiners discovered through the Bureau’s supervision process. In its report, the CFPB stated that a “critical component of a well-run financial institution is a robust and effective compliance management system (CMS), designed to ensure that the financial institution’s policies and practices are in full compliance with the requirements of Federal consumer financial law.” The CFPB has also stated in its Supervision and Examination Manual that it “expects every regulated entity under its supervision and enforcement authority to have an effective compliance management system adapted to its business strategy and operations.” As a

...Your Success Is Our Business

BHPH dealer, you’re not under the CFPB’s supervisory authority yet, and won’t be until it issues a “larger participant” determination for BHPH dealers or catches you engaging in bad conduct; however, you are under the CFPB’s enforcement authority for any alleged violations of Federal consumer financial laws. Think of those complaints you may get from a consumer after you’ve repossessed their car; get too many of those complaints reported to the CFPB and it may exercise its supervisory and enforcement authority over you. The CFPB considers an effective CMS program as including four interdependent control components: Board and management oversight; a compliance program; a consumer complaint response; and a compliance audit. The CFPB believes that when all of these control components are strong and well-coordinated, an entity should be successful at managing its compliance responsibilities and risks. In its Supervision and Examination Manual, the CFPB has stated that its examination will include a review and testing of components of the supervised entity’s CMS and an initial review will help them determine the scope and intensity of its examination. Think about that—the CFPB will conduct an initial review of your CMS, provided you have one, and that review will help determine what other violations they may look for, and how hard they’re going to come at you. But, if you don’t have a CMS in place, where does that leave you? I think I can help answer that question by telling you about my walks on the lot as part of our onsite

audits. When I first arrive at a dealership to conduct an onsite audit, I’ll walk the lot. I do so to see if I can find any easy compliance violations, such as a Buyer’s Guide not being displayed on a vehicle out for sale, or one that is displayed but has incorrect statements, such as stating a service contract was available for purchase from the dealer when the dealer doesn’t actually offer one. Not having a Buyer’s Guide on the windshield makes it very easy for me to spot compliance violations. If a dealer messes up even those simple requirements, it makes me dig a bit deeper in my audit on the more complicated requirements. I know that the scope of my review will be rather broad and that I’m going to be at the dealership for a long time that day. Now, equate that to the failure to have a robust CMS at your dealership. If the CFPB does come knocking at your dealership, and you don’t have a CMS ready for them to initially review, you’d better get prepared for a deep and powerful review of all your operations. You’ve made it too easy for them to broaden the scope of their review and to intensify that review. Compliance is hard enough, but don’t make it too easy for them by not having a robust CMS in place. Eric L. Johnson is a partner with Hudson Cook, LLP in Oklahoma City. He practices automotive finance law, banking and consumer financial services law. This article is provided for informational purposes and is not intended nor should it be taken as legal advice.

October 2013 DEALER BUSINESS JOURNAL | 17

LEADERSHIP & TRAINING

Learn to Lead

By Dave Anderson

Thirty-One Cultural Tips, Tenets and Tests

ver the past three years my most-highly requested keynote or seminar topic has concerned how to build high performance cultures. I’ve written a lot about this topic, as well as produced several DVDs on the matter. Leaders are right to seek strategies for improving their cultures because of this important principle: culture dictates behaviors and behaviors ultimately determine results. Thus, when you seek to improve an operation you must return to strengthening its foundation; the culture. After all of my teaching and speaking experiences, I also have come to believe that many people learn better when material is presented in bite-sized segments, making the strategies more memorable, digestible,

and applicable. The pointers I’m presenting in this article will address one or more of culture’s five key pillars: core values, mission, performance standards, core competencies and people. Following are thirty-one cultural tips and tenets to test your culture, and evaluate how you can improve it; even if it’s outstanding at the moment. In fact, that possibility brings us to the first point:

because they’re strong. Leverage them instead to make them greater.

Measure people by two standards: performance outcomes and behaviors. But first you must define expectations for both.

Evaluate your performance standards: are they high and clear enough? If not, redefine them. Under-performers love gray areas.

Culture is never done. It’s like a garden that requires constant attention. Ignore it for long and the weeds and bugs will take it over. Embrace the mess; growth is rarely neat and orderly. Pervasive organizational equilibrium precedes death. The wider the gap between top and bottom performer, the weaker your culture.

Avoid the temptation to ignore corporate strengths simply

18 | DEALER BUSINESS JOURNAL October 2013

Protect your culture by interviewing rigorously and hiring slowly. Just one bad hire can severely infect your culture.

Improve accountability with written performance standards; otherwise your “standards” are simply suggestions.

Your culture is your organization’s foundation. Failing to address its cracks and flaws puts the entire entity at risk.

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Multiple cultures under the same rooftop weaken an organization. Each department must do their part to strengthen their own culture.

You can’t not have a culture. The questions are: What is it, and who or what is shaping it?

If team members don’t share the same mission, they’ll pursue their own agendas, unknowingly working against one another.

Changing your vision won’t create sustainable changes in employee behavior; changing your culture will.

Essential competencies of high performing organizations: hiring great people and creating outstanding customer experiences.

Evaluate a leader based on the culture he or she has created in their department; it’s their report card.

Some people have a vested interest in being destructive and divisive to distract from their shortcomings; cultural infections.

Lack of accountability rolls out the red carpet for entitlement to infect your culture.

constant attention. Ignore either for long and people start to notice.

Building a culture has no finish line. Just about the time you think you’re done, YOU’RE DONE.

Great companies don’t talk about hundreds of things. They hammer the same themes repeatedly: values, mission and standards.

Strong cultures stretch people to reach their bar; they don’t lower their bar to accommodate one’s competence or comfort zone.

Close the gap between where you’re at and where you aspire to be by getting people better or getting better people.

Toxic cultures are evidence of toxic leadership. A fish rots at the head: it starts to stink at the top first.

Like a sculptor shaping a masterpiece, great cultures are built by hands-on leaders; not by memo, voicemail or email.

A leader who daily lives an organization’s core values communicates them better than one hundred speeches on the matter.

Mission is part of your culture, vision is not. Your missiondriven culture must align with and support your vision to be successful. Much like basic hygiene, strong cultures require

...Your Success Is Our Business

Low expectations presume incompetence. They say, in effect, “We believe you’re only this good.” When the performance bar is too low, people tend to live down to it. Leaders should be in the stretching business.

Daily walk your talk; your people would rather see a sermon than hear one.

It’s difficult to improve your culture without first improving your leadership. The best step to growth is to get in front of a mirror.

Leaders of robust cultures act more as pace-setters than scorekeepers; catalysts versus administrators. Step up! There’s much more to learn and apply concerning culture, but the points here provide a framework for tuning yours up. Incidentally, if you follow me on Twitter, you have already had the opportunity to benefit from these points as I continually add cultural tips there, as well as other strategies. To get continued daily education and inspiration for your business, my Twitter handle is @ DaveAnderson100. Dave Anderson is president of LearnToLead. He is an international author and speaker, giving 1,000 leadership presentations over the past decade in 14 countries. Dave has been a car salesman, general manager and director of some of America’s most successful dealerships. He is the author of 12 books, including “Up Your Business,” and “How to Lead by THE BOOK.” Dave spoke at the NADA Convention for ten consecutive years. Call 818.735.9503, e-mail dave@ learntolead.com, or visit www.learntolead.com. Follow Dave on Twitter @DaveAnderson100.

October 2013 DEALER BUSINESS JOURNAL | 19

BUSINESS OPERATIONS

Stop Loss

By John Krivacsy

Prepare Yourself for Insurance Quotes

hen you purchase new or are renewing your existing insurance, it’s imperative to collect the right amount of information to allow your insurance agent to assess the potential risks confronting your business, home or life. Although the initial task of putting all this information together may be daunting and a little challenging, it will provide both you and your insurance agent with a helpful checklist for subsequent years to come; allowing to update as needed; thus always providing you with the best, most accurate information for quoting your insurance needs. SUGGESTED MATERIALS AND INFORMATION TO PROVIDE TO YOUR INSURANCE AGENT The following documents give your insurance agent enough information to adequately understand your business situation and its limits to create the right coverage and best protection: 1. Current financial records for each of your companies including, tax returns 2. Corporate and partnership documents and business licenses 3. Franchise agreements 4. Lease agreements 5. Service agreements 6. Vehicle inventory records for owned, service and those held for sale 7. Personnel and payroll information for owners, company officers and employees 8. Current insurance policies and employee benefit plans CREATE A LIST OF ALL YOUR COMPANIES Compile your list with complete legal names, tax id numbers, addresses, email addresses, phone and fax numbers; your list should also include any subsidiaries. This information should be available to you through items 1 and 2 from the list above. Describe each of your companies’ type of business and the year each company was created. Double check everything. Do not have your 20 | DEALER BUSINESS JOURNAL October 2013

company incorrectly named in your insurance policy or fail to describe your business correctly in your insurance application. These types of errors can jeopardize coverage under your insurance policies. CREATE A LIST OF YOUR BUILDINGS OWNED OR LEASED BY YOUR BUSINESSES Items to include are: your list of owned buildings: the square footage; building use, types of construction; types of installed security systems and the age of building. Don’t forget the buildings or spaces you may lease to others. You should have recent appraisals of your owned buildings, prepared by a qualified appraiser. This appraisal includes: photos of your property and the inside and outside of your buildings. For buildings leased to you; your lease agreement should be available for your agent to determine what coverage you need and if your policy will need any special endorsements providing any coverage to your landlord. Your list should include the same information, plus itemization of any betterment or improvements you may have made to the leased property to adapt it to your specific use. GATHER AND REVIEW ALL OF YOUR CONTRACTUAL OBLIGATIONS AND AGREEMENTS Your agreements should outline each party’s responsibilities: specifically their obligations to provide certain insurance coverages’. Items to include: any franchise, building, equipment, signs and billboards, employment and service agreements. If you lease any property, whether it is a building or equipment; designate which party will provide property or liability coverage. If your lease states you are to provide coverage, obtain additional details regarding the building or equipment; that way your agent can accurately price this coverage. You may also need to provide liability coverage for the leaser requiring specifically endorsing your policies to cover what the lease agreement requires. Review the franchise agreements and/or financial agreements for vehicle inventory to determine what, if any coverage the manufacturer or lender are providing for the vehicle inventory and what coverage, if any, needs to be provided by the upcoming policy. Many car dealers and auto service shops provide service, under a written agreement, to auto clubs, car rental agencies and DealerBusinessJournal.com

looking for a

various government agencies. These agreements should be included in your gathering of contractual obligations to assure that you are meeting your insurance and other obligations. FINANCIAL AND PERSONNEL RECORDS All your relevant data is needed to provide information concerning your annual sales: break these records down by various indexing categories: such as; car sales, service, parts, etc. Helpful, itemized information is used to properly price your insurance and assist in chased a vehicle. getting the right amount of insurance coverage and their In addition to ramping up its marketing, TrueCar is now looking atlimits. a related though as yet relatively untapped market — independent Execute a financial and physical review.to provide dealers. Potter said TrueCarrecords has always had the ability this service atodescriptive independentsummary dealers, but nowvalues the company is gearing Develop with of all your up. It purchased a newpersonal booth forproperty: the independent dealer trade show owned and leased examples would circuit and was a sponsor at the June National Independent Automobe; office equipment and supplies, furnishings and shop bile Dealer Association Convention and Exposition. tools, would includewe property others “Thethis total loss product have fitsowned in veryby well with used vethat you may be responsible for, or decide to provide hicles since the average total loss unit runs between $8,000 and $12,000,” Potter noted. for; “Independents typically have the lower-cost insurance coverage like employee tools. Your units that fitto well with replacement vehicles.” decision provide any coverage for property owned Because TrueCar can easily work with franchise dealerships’ by others may require adding special endorsements or DMS systems, the pay-per-deal model works best in the states coverage parts toFragmentation your insurance policy andsystems may beamong inwhere it’s allowed. among DMS influenced by any lease aorsubscription-based employment agreements. dependent dealers requires model. Pricing can range $299financial to $2,500records a monthshould depending on the volume from Monthly be reviewed to of inventory at thethe dealership. determine value of vehicle inventory. Providing “At the NIADA show our booth was literally overcrowded,” information reflecting the inventory values for new Potter said. “Dealers know about us, and were excited to learn we vehicles, used vehicles, vehicles and demo had a product available forservice them. We will continue to roll out our vehicles monthly allows the company to for country.” peak product line to independents at various events adjust across the The company is also testing and getting ready to roll values and normal variances in the inventory and willout nationally to private-party and private-party to dealer result ainprivate-party more accurate pricing.

vehicle purchase program. The idea came about from the military members in their affinity portfolio who often have to move from PAYROLL base to base orINFORMATION get deployed overseas. They very much like the idea Payroll figures in the pricingeasily of being able toand put employee their vehicle on theare siteused and sell it quickly, and getunderwriting a fair price, Potter said. and review process. Be prepared to provide “Would-be concerning sellers are asked answer about 50 and questions reinformation yourtocompany officers garding the vehicle,” he said. “Was the vehicle smoked in? Are the employees that reflect payroll figures, employee position, headlamps fogged? We ask for a Carfax or AutoCheck and dealers number of fullindividuals time employees, number part time and other private can purchase the of vehicle.” employees, subcontractors and consultants. It’s done in an online auction-like setting andLeased another member ofemployees their creditshould union or other affinity partner can purchase the vealso be included and your agreement hicle or a used car manager can buy it.” with them or an employment agency should be reviewed program has run for three months in a beta test and several to The determine your responsibilities to these employees and hundred vehicles were sold. Potter said the program will roll out naany outside agencies. tionally soon. “We Have your policies and employeeabout don’t likecurrent to eveninsurance use the phrase ‘lead-generation’ our service,” Potter said. “We prefer term ‘introduction.’ benefit plans available. This will the allow you and your It does more accurately reflect what we do.insurance We introduce the buyer agent to compare your current products to to the seller and detail the parameters of the price of the vehicle they are those proposed for your upcoming policy year. Review interest in. It’s worked well for hundreds of thousands of sales and now we’re getting ready to expand.”

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Continued on Page 22

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Journal | 21 25 September 2013 October 2013Dealer DEALERBusiness BUSINESS JOURNAL

BUSINESS OPERATIONS INSURANCE QUOTES continued from Page 21

the deductible structure in your current coverage. Many times, deductibles have an impact on the pricing of your account and usually result in an increase in the deductible. If the deductible is increased, the carrier not only provides a credit for the higher deductible, but the variance in the deductible can also be used to adjust the value of the losses. RETAIN CLAIM INFORMATION FOR THE PAST FIVE YEARS Claim Losses are a very important piece of information that is needed to price your insurance. It allows for comparison of your loss information to the insurance companyâ&#x20AC;&#x2122;s loss By gathering and data. The loss analyzing this information information you will provided by the carrier for the better define your past five years insurance needs should be reviewed by tailoring your thoroughly. In fact, a full review policy to cover what of carrier loss data is actually needed periodically is a and not pay for good idea. Ask unnecessary things your carrier to resulting in managed provide you with loss runsâ&#x20AC;&#x2122; each costs of your quarter or biinsurance. annually and plan a management review with appropriate department managers. Some key items to look for, fact check and correct in a timely manner include: 1. Are all the losses reflected on the loss runs for your operation? Not surprisingly, errors do happen on carrier loss runs. A thorough review will enable you

to get any such error corrected before it impacts on your policy premium. 2. Are there multiple losses of a similar nature such as theft or auto accidents? Or are there any type of losses for which a corrective action could have been made to prevent future losses? If so, have you made any adjustments in your procedures or security to prevent future losses of the same type? For example, if you had several vehicle thefts, did you enhance your lot protection or add a security guard? Did you paint the curbs after a customer tripped and fell in that area? This information may be crucial in allowing the carrier to look at the losses in a more favorable light. 3. Are there any large losses? Most carriers consider a single loss for which a payment is made in excess of $25,000 to $50,000 to be a large loss. The carrier will want as much detail as possible about a large loss. Here again, be sure to include any information for adjustments in your procedures that resulted from the loss. Preparation is the key when submitting an insurance quote. Start by collecting all of your documents, materials, obligations and agreements. Create the necessary lists of all your companies, buildings, employee info, financial and personal records. By gathering and analyzing this information you will better define your insurance needs by tailoring your policy to cover what is actually needed and not pay for unnecessary things resulting in managed costs of your insurance. John Krivacsy is a senior vice president and Claims and Loss Control Manager with Automotive Risk Management and Insurance Services, Inc., (ARM) based in Stockton, Calif. To reach Mr. Krivacsy, send an e-mail to jkrivacsy@ armonline.com.

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Advertiser Index DealerCentric Unveils ID Scanner Technology

ADVERTISER PAGE DealerCentric Solutions, the consumer fi- time-to-close by hours. data is present on a card, not that it’s valid. And nance management system innovator, today “The ID thieves hitting dealerships today dealers are forced to make time-consuming calls launched ID Drive, a patent-pending ID scan- are super-sophisticated and so is their technol- to organizations like the DMV to verify idenAdvantage Funding 27 ner technology that gives dealerships the most ogy. But dealer ID verification processes aren’t” tities, but most cars are bought on weekends powerful protection CEO of DealerCentric. when these organizations are closed. It’s beA.R.A. GPS against fake IDs and iden- said Pete MacInnis, 13 tity theft imaginable. “With all that endless photocopying, barcode- coming an increasingly expensive, scary probAUTO LAW GROUP ID theft is now a national epidemic, and scanning and35 verification calling, they have re- lem: some lenders are now requiring dealers to more criminals are using fake IDs to test-drive, mained in the Autoraptor.com 33Dark Ages, powerless against this buy back ID-theft-related deals. and even buy, cars. Developed in partnership fast-growing and incredibly costly problem. ID ID Drive’s Extreme Technology: ID Drive withCAR AssureTec Technologies, an ID authentica- Drive may be23 small and sit on a desk, but it’s the was created through an exclusive auto retailFinancial tion technology firm, ID Drive is the first solu- most potent anti-fraud and test-drive security ing partnership with AssureTec Technologies, tionCLIFTONLARSONALLEN 21 that gives dealerships the same, state-of-the solution ever invented for dealerships.” which is the ID authentication solution choart Dave protection used by Homeland Security and National & Dealership Epidemic: ID theft sen by the Department of Homeland Security, Anderson 27 the U.S. military. is an American epidemic. According to the FBI, the Department of State, the NYPD and DMVs DealerRE 27 With one scan at ID Drive, dozens of com- it has overtaken the drug trade as the most cost- nationwide. ID Drive incorporates the world’s plex tests for thousands of ID types are automat- ly U.S. crime. According to an Open Security most powerful ID-scanning hardware and softSECURITY LOAN 9 in 2013, more than 267 mil- ware and customizes it for auto retailers, so they ically performed, AUTO leading to instant validation or Foundation report redSPARTAN flags going up. But the dealer benefits don’t lion consumer5records were exposed, and a re- have the extreme technology they need to fight FINANCIAL for a ID new generation owners under stop there: with that one swipe, a customer’s in- cord, 60 million pieces ofPlan personal wound back of against the fake ID wave. thethieves, guidance experienced Sterling Credit 23 of identity formation is put into seriousCorporation action: it’s extract- up in the hands lastofyear. “Atprofessionals DealerCentric we’re on a mission to ed, purified and enhanced, and can be pushed And more dealerships arewho reporting that more solutions that will make the test-driveunderstand your innovate dealership. TAX REFUND SERVICES 7 into a dealer’s CRM and finance systems. fraudsters are presenting impeccable-looking to-sales-to-financing process radically more efAudit Tax off… Outsourcing The customer, the vehicle, any pre-existing (fake) IDs for test-drives, and then driving ficient for Advisory both dealers and their customers,” Westlake 25 lead or credit app data, the sales and F& I de- or even successfully purchasing vehicles with MacInnis said. “ID Drive is a key component in partments, and sales management are all elec- them. what will ultimately be the first end-to-end dealADVERTISING INQUIRIES CALL 941.371.7999 tronically connected and able to communicate. The government requires dealers to take ership solution that bridges the gap between the So, that test-driver returns, the right deal steps to flag identity fraud. But dealerships use auto sales and financing processes, at the pint ORwhen SALES@DEALERBUSINESSJOURNAL.COM CLAconnect.com/dealerships structure can already be in place, shrinking barcode scanners, which can only verify that of sale.”

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October 2013 DEALER BUSINESS JOURNAL | 23

BUSINESS OPERATIONS

Health Insurance

By Dave Wiggins

How Will Health Reform Affect Your Dealership?

elieve it or not, the Affordable Care Act (ACA), was signed into law over three years ago. This landmark legislation promises to change the delivery and cost of health care within the U.S. for years to come. Considering all of the press, newscasts, and articles written on the subject, many dealers are not sure if the reform laws will affect them, and if so, how. There are many facets of health reform and it will likely affect everyone either through your business or through individual coverage. Unfortunately, trying to understand the impact to your business can be confusing and difficult. In this article I hope to lay some of the ground work in determining if these laws will apply to your dealership, and if so, share some of the planning considerations. For many dealers the decision to not provide health insurance in the future may cost you more. Although the employer mandate and penalty provisions were delayed one year to January 1, 2015, here’s what you should prepare for now. Determining whether you “pay” or “play” First you must determine if your business is a “large employer,” which is defined as a business that has 50 or more full time equivalent (FTE) employees. To determine if you have 50 FTEs, you must go through a calculation. You must count your full time employees for each month plus the hours of your part time employees, divided by 120, to determine how many FTEs you have

for the month. If you average more than 50 FTEs for the prior year, you are a “large employer” and subject to the employer mandate and penalty provisions. If your dealership has less than fifty FTEs, you will not be subject to the employer mandate and penalties. Pay If you are a “large employer”, you must offer a minimum value, affordable health plan to your employees or be subject to a penalty of $2,000 per employee per year. However this penalty only applies to full-time employees in excess of the first 30 full time employees. Therefore, if you have 51 FTEs and 50 full time employees you will have to pay a penalty of $40,000 per year (20 full time employees times $2,000). This is considered a penalty for tax purposes, therefore it is not deductible by the dealership. The non-deductable portion of this penalty equates to a tax deductible amount that may be up to 40 percent higher than paying deductible health insurance premiums (depending on your tax bracket). Thus the $40,000 penalty mentioned above would equate to a deductible health insurance payment of about $70,000. Play If you offer health insurance, and have 50 or more FTEs you are not out of the woods yet. Any of your employees that make less than 400 percent of the federal poverty level for their families — and who do not purchase your health insurance, but instead enroll in the state or federal health insurance marketplace — may

24 | DEALER BUSINESS JOURNAL October 2013

cause you to pay a penalty of $3,000 per employee if they are eligible for and receive a premium tax credit. They are only eligible for the tax credit if you do not offer minimum value, affordable health insurance. Thus it is difficult to know if you will have penalties even though you are providing health insurance, until you determine whether you are offering a minimum value, affordable coverage to all full time employees and their dependents. These penalties are also non-deductible. Four-hundred percent of federal poverty level is about $22,000 for an individual, and $88,000 for a family of four. As you can see, this may encompass many of our dealership employees and their families. Alternative options Setting up a company Many dealers with more than 50 employees have wondered if they can set up several companies to avoid the 50 FTE count. However, there are provisions based on tax law statutes that tie related businesses together and will treat them as one employer. The related party provisions are complex, but let’s just say they will treat commonly owned dealership entities as one business. Having said this, you may be able to change the ownership of your businesses to include unrelated parties or non-direct family members. We recommend that you contact your CPA to discuss this option. Beware that you will need to count your dealership and related finance company as one employer for purposes of determining whether or not you are a “large employer.” Continued on Page 26 DealerBusinessJournal.com

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BUSINESS OPERATIONS HEALTH INSURANCE continued from Page 24

Leasing employees Another alternative that may be particularly helpful for dealers that are just over the fifty FTE limit, is to consider reducing the number of full time employees by using “leased” employees. These are people that work at your site, but are leased to you by another employer. Such employees must meet certain rules to be considered leased employees, but if properly structured, they will not be treated as your common law employees, rather they will be employees of the leasing employer . Part-time employees Another way to minimize the penalties is to employ more part-time employees. Although such employees are still considered in determining whether or not you are a “large employer,” the penalty is only calculated using employees that are full time. “Full time” for this purpose is someone who works 30 hours or more per week or 130 hours per month. For example, if you have 51 FTEs, but only 40 of your employees are allowed to work in excess of 30 hours per

Market Watch

week, your penalty would only be $20,000 per year, since there is no penalty for part-time employees. Some very large companies, including restaurants and convenience stores, have been severely reducing the hours of full time employee in 2013 to avoid having to offer them coverage under the ACA. One way to determine how much health reform will cost your dealership, is to get specific, concrete information to help answer that question. CliftonLarsonAllen’s Health Insurance and Penalty (HIP) calculator will help you weigh your options. Although we have barely scratched the surface of the many provisions that continue to be enacted with regard to health reform, hopefully this gives you some basic understanding of the penalty provisions that may affect your dealership and some of the planning ideas you should consider. Dave Wiggins is an automotive CPA with CliftonLarsonAllen and has expert knowledge of the innerworkings of both retail and buy here-pay here operations.

By Ricky Beggs

Leaves are Falling, but Cars and Trucks Improve

here is no question that there is a hint of fall weather in the air and a few leaves scattered around the yard. As the old saying goes, when the leaves fall, prices will also fall. Notice I said a “few leaves.” This means it is still a relatively solid market. Most of the comments included within the Black Book survey personnel reports from the past week indicated an overall softness with a few describing the market as leveling off. The average segment change this past week dropped to -$73, which is lower than the most recent three week average of -$78. Gas prices continued to decline this past week by -$.05 for gas and -$.025 with the diesel pumps, with this being the third straight week for gas and diesel declining prices. In traditional times one would think the more fuel efficient vehicles would be in less demand, thus bringing softer values within the wholesale market channels. When looking at the four car segments with the smaller declining levels, they are all from the more fuel efficient vehicles. The Entry Mid-size Cars at -$29 and the Upper Mid-size Cars at -$30 were followed closely by the Entry Level Cars at -$31 and the Compact Cars at -$35. The

26 | DEALER BUSINESS JOURNAL October 2013

next level of change was the -$50 for the Full-size Cars. Of the best four, all of them had dollar declines of less than half that of the segment average. The trucks at a -$54 average segment change amount had change levels as little as -$14 for the Compact Pickups to as much as -$123 for the Luxury SUVs. When looking at the past three weeks of average change the Fullsize Pickups and the Compact Pickups lead the pact. A couple of weeks ago we were looking at the level of change of the Compact Crossovers and how this segment had the largest percentage change of any segment - car or truck. Over the past three weeks the average weekly change for the Compact Crossovers is identical to the total truck segment change at -$53, and right in the middle of the pack for the percentage level of change of all twenty-four segments. Ricky Beggs is the Editorial Director at Black Book, a provider of accurate pricing insight, mobile solutions and online vehicle trade-in valuation for the automotive industry. www.BlackBookAuto.com DealerBusinessJournal.com

ditional regulations and cover your business before it becomes an issue.

buyers,” Kovac said.

When it Comes to GPS: Disclose, Disclose, Disclose!

By Jeff Karg Passtime USA In today’s technology driven world, using GPS to track assets and Collection technology to help customers make their payments and assist in vehicle recovery is common practice in the subprime finance and BHPH space. While improvements in the technology, lower prices, and additional features have made utilizing technology for asset management and tracking mainstream, it has also increased the need to fully disclose these systems to the consumer. Informing the consumer of the device, how it operates, and how it will be used by the lender, is essential to maintaining a good customer experience for the consumer and addressing compliance and liability concerns for the lender. And if you are not disclosing, your argument against it is likely: either the customer will object to the device and you will lose a sale or the customer will tamper with the device if they know it is in vehicle. Even that being said, there are two distinct reasons that you should be fully disclosing these devices to your customers: 1. It’s a good business practice, andcourse! A dealership-changing 16 hour 2. It’s the best way to lower your liability as a lender against potential legalitaction regardingfor theall device Make mandatory managers in disclosing the use of a GPS tracking and/or Collection First off, your organization! Technology device is a good business practice. One of the single best ways to succeed utilizing these devices is to disclose the Call device818-735-9503 to the customer. Disclosing the device in a positive way can help get “buy-in” from the customer, which can reduce the likeinformation! lihoodfor theyenrollment will become delinquent. Many technology providers offer Dave Anderson written disclosure forms for lenders to have customers sign at the time

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of installation. These documents provide information about the devices, how they operate and what responsibilities the customer has in relation to the devices. Additionally, a benefit of disclosure is the psychological aspect that affects a customer who knows a device is installed on their vehicle. This is a powerful tool. When a customer knows their vehicle has a GPS device that can determine their location and/or prevent them from driving if they do not stay current on their loan, they have good incentive to make payments. If you don’t disclose the device, this psychological tool disap™ pears. The method of disclosing is also important. Many device providers offer written disclosure forms that can be used. A signed consent from the consumer is the best way to ensure that the customer understands and agrees with the use of a device. A recent, independent survey study -addressed the issue of disclosure. Ninety-four percent of the asurvey respondents indicated that they use written disclosure forms from device providers. The use of disclosures improves the customer experience and leads to referrals and repeat business. Not “leaving your customers in the dark” can create a better, long-term customer if they are treated with respect and fully informed of their obligations and the consequences if those obligations are not met. I know what you are thinking: you will lose customers if you tell them about the device. However, the study has found that customers rarely object to the installation of the device whatsoever. Specifically, when responders to the survey were asked if customers object to the installation of a device as a condition of their financing/leasing, 99 percent answered no or infrequently. Only 1 percent answered that their customers object to a device as a condition of financing. So, disclosing is a good business practice, and customers rarely Turn to page 27

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BUSINESS OPERATIONS

Business Ideas

By Greg Wells

Three Reasons BDCs Are Making a Comeback

oday’s modern Business Development Center is outperforming most of its predecessors. Great BDC dealers have moved beyond phone and Internet. Outbound campaigns like equity mining, showroom and service lane follow up, event marketing, service marketing and email marketing drive incremental sales and more profit. But why now? What has changed? I know many dealers who have failed with their BDC in the past but have come back to the BDC model. Back and in the black! The first contributing factor is we are in the middle of a changing generation of car people. Analog desk managers of old are being replaced by the digital manager of today. In addition, the second, third or fourth generation owner has taken over the reigns in thousands of dealerships. These new owners, principals and GMs grew up with the Internet. It is as natural to them as electricity to my generation. No longer are these dealerships at odds with their customer on the process. The new generation of car people would absolutely buy a car the same way and have aligned their selling system with car buyers to create chemistry rather than conflict in the customer’s experience. This makes customers like them and want to do business with them. The second factor is technology drives traffic to your website and

online inventory prior to your showroom or service lane. Even if it’s just to grab your phone number, your website is the portal to your showroom. Customers using your website communicate differently. They may want to call, send you an email, a text or just chat. The quality of that interaction may very well be the determining factor in whether or not they decide to visit your showroom or service department. A BDC can deliver an exceptional experience across all these channels and drive more traffic to the showroom. Some visit by appointment but not all. There are plenty of stealth shoppers who will just show up in your showroom. Let’s take a closer look at the oldest technology in the dealership; the telephone. Did you know that on average, 70% of all customer interaction happens on the phone? That’s right. Add up your total inbound rings and outbound calls and compare that to your total internet leads, showroom ups and closed service RO’s. Hopefully you will have that “aha” moment and realize you have to be great on the phone. Think what your business would be like if every time a customer hung up the phone with someone at your store they thought, “wow!” A BDC can deliver the highest QOI level (quality of interaction). Smooth call flow, permission based handling and good old-fashioned telephone etiquette gives customers the feeling they are being served. This QOI transcends the phone. Timely and relevant responses to emails, value added tactics like video

28 | DEALER BUSINESS JOURNAL October 2013

and chat skills, dynamic meaningful voicemails and someone to just make it easy for customers to do business with you all flow from the QOI mindset. It’s really obvious that this QOI is much easier to achieve with a small group of people in a positive environment than through front line employees spread out all over the dealership with little supervision at the interaction level. The third reason BDCs are making a comeback is because incremental sales are easier now with the development of new technologies. CRM capabilities, equity tools, landing pages and microsites all create new business. If your BDC is just handling phone ups and Internet leads then it’s capturing potential lost sales but outbound campaigns and personalized, targeted marketing truly develops sales, and we are talking about business development! Education has played a big role in the modern BDCs success. Correct staffing, skillsets, accurate benchmarks, performance standards, better buy in from the showroom and meaningful financial metrics are all lessons learned from past failures. Ronald Reagan said, “Each generation stands on the shoulders of the generation before it”. Todays BDC is a good example of learning from the past and picking up where others left off in the evolution of an effective and profitable business development center in the digital age. Greg Wells began BDC Masters, Inc. in July, 2009 to help dealers set up and maintain highly effective and profitable business development centers. DealerBusinessJournal.com

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SALES & SERVICE

Online Strategy

By Cesar Yepez

Social Media Presence is Huge in Today’s Market

eing connected any time, any place is a crucial part of business today as businesses are able to interact with their mobile assets, workforces and customers instantly. In fact, according to PR Newswire nearly 97% of all consumers use online media to shop locally. The Wall Street Journal reports that over 80% of consumers looking to purchase a car, spend over 18 hours online researching models and prices. For auto dealers to stay competitive, online presence is essential. You need to have a clear goal to stay ahead of your competition and drive as much traffic to your website. Here is how you can. Social Brands Compete 24/7 For auto dealers today, managing their brand includes managing their online reputation, as well as their internal reputation (dealer’s employee’s view of the brand). Positive customer experiences can be a competitive advantage as the use of user-generated online ratings and reviews have become more and more critical in the automotive sector. In fact, users opinions are becoming among the most influential type of review, compared with the oncedominant professional critiques. A recent Capgemini Survey reports that over 61% of consumers purchasing a car reference social media tools to research vehicles. Thus having a positive online brand image that reflects your focus on providing the best customer service, is essential. Social Brands Are Dynamic and Personal In the current 24/7 world of social media, your brand is never stagnant. It changes day-to-day. As

a dealership, keeping a consistent brand voice, while taking advantage of social media’s dynamic conversations, becomes an integral part to a successful social media strategy. Your values should always be consistent while your interactions need to always be fresh. Dealerships are all the same, right? Wrong. There are many different approaches to working with customers. Some that are engaging and involving dialogues, rather than simply selling cars. You have to modify your strategies based on clientele, location, and shared values. Build Credibility and Relationships Participating in local community activities can make a huge impact. It will help you build your dealership’s image by showing care for your community and at the same time offer the opportunity to build relationships with key influencers. As mentioned previously, many consumers are now going online to shop locally. Every opportunity you have to display your name and build sentiment through user-generated content and word-ofmouth is yet another touch point and way to engage with the consumer in your local area. Simple Steps for Implementing Successful Social Media The development of a successful social media program requires a careful, step-by-step process. Following are some of the top suggestions to get you started and become social media savvy. 1. Build a Quality Website. The most important item is one’s website. A strong website (built

30 | DEALER BUSINESS JOURNAL October 2013

on best practices) is the central communications hub, without it there is no social media plan. After launching a site then tie it into social media channels i.e. Facebook, Twitter, LinkedIn, YouTube. 2. Design a Simple Communications Strategy. A successful social media plan can’t be achieve without a clear communications strategy. Social media is about open dialogue—a two way conversation— for sharing relevant information and having conversations. Ultimately, you want to gain advocates for your brand. You need to fully understand what you want to communicate to your current and future clients. The topics you want to cover must be relevant to your audience and should be open for them to add their opinions and share ideas. Then you need to clearly define what channels you will be communicating with. Depending on your audience these might change, but a good start is to use the most common social media sites like Facebook, Twitter, and YouTube (if you planning on doing video ads). Don’t bite off more than you can do. Remember, social media is about fresh, current events. You need to post regularly to it. You may want to consider adding a blog area on your site where consumers and users can post comments. This opens up the door for conversation with them. Blogging can also feed all of your other social media channels and generate customer interaction, Continued on Page 33 DealerBusinessJournal.com

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SALES & SERVICE

Tax Time

By Chip Wiley

Tax Max Delivers Early Tax Season in the Fall

s autumn begins, buy here pay are put off to catch up with last here dealers around the country month. Three or four months down are preparing for the early tax season. the road, after the cachet of the new Starting in October, peaking during car has worn off, it is your turn to the holidays, and continuing into the get shortchanged to pay the overdue New Year, thousands of customers cell phone and pay back mom for the are committing a portion of their down payment loan. upcoming February tax refund for a When children are involved, car that they need before the money the average tax refund is a single eventually arrives. This is the new, check totaling over $5,200. With early tax season, known as the 4th this ‘Monopoly Money’, that $500 Quarter Tax Season. pickup payment can easily become This is NOT a zero down $1,000 or more. Use the ‘Monopoly promotion or some other dangerous Money Effect’ to help customers make gimmick, but an opportunity to put decisions that benefit them in the long the customer into a vehicle they can run. afford without breaking the bank In February, once you have ahead of the holidays. It gives you the customer’s tax refund check in the ability to help your customer hand, you have the chance to sell as opposed to exposing yourself to them again: a 2nd down payment, unnecessary risk. Plus, the beauty insurance, or warranty. “After the of this promotion is that many deferred down payment is deducted, dealers who only use outside finance your agreed refund check is $4,700. companies do not have the flexibility But if we are to make this work. Buy here pay here able to dealers are often the only game in town. The process includes getting a normal down payment, starting the sp weekly or bi-weekly payments, and using the future tax refund to fill the gap between what you need and what the customer can afford. This is technically the same as a pickup payment, except instead of hoping the customer can come up with the $500 that they owe you, there is an actual, imminent cash source to get the payment from. The early 4th Quarter Tax Season is the solution to this ‘money juggling’ scenario. Other obligations were delayed and money was borrowed to come up with your initial down payment. Next month, other bills

32 | DEALER BUSINESS JOURNAL October 2013

write you a check for $4,200, look at how your payments drop. Wouldn’t your life be easier with $60 per week payments instead of $80?” Play with the numbers. Show the benefits of a higher, second down. Another benefit to dealers, especially buy here pay here, is that instead of extending the life of a loan from 24 to 30 months (for example) to compensate for a customer’s low down payment, savvy dealers are banking on tax time, deferring a portion of the down payment, and cashing in come January and February. The fall season can be slow, your salespeople can be aggressive and want you to write deals, but you do not have to go overboard and gamble on an uncomfortable contract. With the 4th Quarter, you are not expecting to make loans that you traditionally pass up. The early tax season is an opportunity to fund the gap between what you want down and what the customer has to put down. Make good customers better. Do not expect to make a bad customer good. So if you want $1,500 up front and the customer only has $1,000 to put down, you can take that smaller down and get the remaining $500 when the tax refund arrives. This can help keep your risk in check while helping the customer during their most expensive time of year…the holidays. Chip Wiley is a Corporate Trainer at TRS Tax Max. Find out more at TaxMax.com | 866-642-4107 | trs@taxrefundservices.com DealerBusinessJournal.com

SALES & SERVICE SOCIAL MEDIA continued from Page 30

which will greatly improve your search engine rankings, along with positive review on different rating sites like DealerRater. 3. Find Contributors – Inside and Outside Your Dealership. Most businesses implementing social media marketing programs may find the volume of the daily status updates, written content, online conversations and monitoring activities to be daunting. Focus on the items that provide greater relevancy to your customers and your site and optimize your workforce. Start with employees who are more social-media savvy (they tend to enjoy working on social media) and don’t force those who are uncomfortable to get involved.

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4. Create Original Content. This is so important and often overlooked! A successful social media is all about unique content. Sure it is great to repost relevant content generated by others, but remember social media is much more than having a Facebook ‘Like’ button. You want to provide useful information, insights for your customers, be seen as a thought leader in your space. 5. Develop a Solid Following in Your Community. “Engagement” is a buzzword that has gained prominence with the rise of social media. Engagement essentially means the pursuit of relevant connections. You want people from your area that can

contribute to conversations and help your dealership connect to your local customers. Use social media to find evangelists for your brand that will provide reviews, ratings and user-generated content that has a strong weight for most consumers. You want people who can spread the word about your dealership in a positive light. Remember to always focus on building relationships and trust through online dialogue so that when it comes time to purchase a vehicle, your dealership will be first in the customer’s mind. Cesar Yepez is the Integrated Marketing Manager for Spireon, Inc.

October 2013 DEALER BUSINESS JOURNAL | 33

SALES & SERVICE

Customer Service

By Jody DeVere

Stop Spinning Your Wheels, Start Wowing Women

ow great is your customer service? How is your customer satisfaction? These are fairly common questions when it comes to marketing folks, and I’m going to be honest. I really don’t like them. “Customer Service” reduces the customer to a task list, and “Customer Satisfaction” doesn’t go far enough. I don’t want customers to be merely “satisfied,” and in the auto industry, you shouldn’t either! No woman in history has ever gone out of her way to tell her friends and family about a “satisfactory” experience she had at an automotive retailer. In my world at AskPatty. com, our nation of automotive professionals go beyond customer satisfaction when it comes to their women customers: we WOW women. We settle for nothing less. We make sure they’re showered with kindness, praise, and helpfulness that they get simply blown away by the experience. If you want to stop shortchanging your customers on their “wow” experience, read on and let me teach you how AskPatty.com Certified Female Friendly locations wow women customers. The First Impression This is your one, singular chance to win a loyal woman customer! The first experience any woman has when walking into your shop is the one image that will stick with her, and it will forever color her opinion. This means that not only should your customer care be stellar when it comes to greeting and consulting

new customers, but also that your follow it with “but...” and a possible facility should be clean, warm, solution. To continue the tire shop welcoming, and inviting. Take example, if the woman asks if you down those old outdated No woman in history has car ads and put up some nice art. Get rid of the Hot ever gone out of her way to Rod magazines from the tell her friends and family 80’s, and put out copies of about a “satisfactory” Good Housekeeping. To keep things topical, consider experience she had at an using Vehicle MD. It’s a automotive retailer. publication just for auto professionals, and contains article have an exact match of a tire brand content that is well written and you don’t carry, you would say “No, appealing to the everyday customer, but I can show you some very good including lots of content aimed at comparable brands, and review women. the specifications with you, or if you’re sold on the brand you have, Always Stop to Listen I will check on ordering one for When it comes to wowing you.” Anytime you have to tell your women, the first thing you should women customers “no,” follow it do is stop talking altogether, after immediately with some additional greeting her, and listen. Women options, so she knows you’re doing often come into an auto shop with all you can to help her. a story to tell. Listen patiently, and identify the problem she has that Keep in Touch needs correcting. Learn her name The key to retaining women as early as you can, tell her yours, customers is making the experience and use it in conversation. Once more personal to her. After she’s she’s finished her story, recount the made her purchase or picked up her problem back to her. “Okay, so you vehicle, give her a follow-up call a had a blowout, and now you need a few days later to make sure she’s still new tire but you’re not sure of the satisfied with the product or work. size? All right, I can help you with Ask if she has any further questions, that right now.” and make sure you tell her she’s always welcome to contact you Stop Saying “No” and Start personally if she needs anything else. Saying “No, but...” Follow these easy steps and the It’s inevitable that your result won’t just be a satisfied customers will have requests that customer – she’ll be WOWed! you can’t fill, or questions you can’t answer. Never answer a question Jody DeVere is the CEO & president with a simple “No.” Instead, always of AskPatty.com. Contact her via offer solutions. If you must say no, email at jdevere@askpatty.com.

34 | DEALER BUSINESS JOURNAL October 2013

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October 2013 DEALER BUSINESS JOURNAL | 35

INDUSTRY NEWS

Trend Spotting Delinquencies on the Decline

espite carrying higher auto loan balances, Americans are staying on top of their loan payments. According to a recent article, average auto loan balances have increased, rising to $13,435 in the second quarter, up 4.5 percent year over year and a 1.3 percent up-kick from the first quarter. “It’s encouraging to see consumers take on more auto debt while delinquencies remain low,” said Peter Turek, TransUnion’s vice president of automotive via an article on Desert News. “Consumers clearly are more confident in managing additional debt.” According to TransUnion, the rate of U.S. auto-loan payments, late by 60 days or more, was flat in the AprilJune quarter, only creeping up to 0.80 percent from 0.79 percent in the second quarter of last year. The auto industry as a whole is experiencing continued sales growth – United States auto sales jumped 14 percent to 1.3 million is July – due to more readily available credit for new and used car buyers, as well as an increase in subprime lending. With more drivers looking to purchase a vehicle,

subprime lenders are making loans, which often tend to have higher balances, available to borrowers with less than impressive credit. Although, the late-payment rate among subprime borrowers slightly increased to 5.02 percent from 4.94 percent a year. This may be attributed to the fact that subprime borrowers are carrying balances that are more than 7 percent higher than the same quarter last year, according to TransUnion. Moreover, subprime borrowers accounted for 14.9 percent of all auto loans in the second quarter. Even though auto delinquencies are on the decline, taking on customers with less than impressive credit is still high risk. That being said, there’s no better time to invest in a GPS vehicle tracking solution than now. Not only does a GPS tracking solution help protect your bottom line, manage and mitigate risk. To learn more about choosing a GPS tracking solution designed specifically for the automotive finance industry, visit http://www.GoldStarCMS.com/dbj-email-relationship

Automakers Brace for September Sales Slide

re the cool days of autumn coming faster than anticipated? Preliminary numbers suggest that the automotive sales boom, at least, is cooling down after a torrid summer that took almost everyone by surprise. Though the industry won’t release final numbers until next week, the sales pace has clearly slowed during September, according to reports from both manufacturers and analysts alike. The seasonally adjusted annual rate of sales, or SAAR, is projected to fall from a hot 16.1 million units in August to something closer to 15.2 million this month. “September 2013 new-vehicle sales represent the first year-over-year drop since May 2011, due to slower retail sales, two fewer sales days in the month, and this year’s Labor Day sales included in August 2013 totals,” said Alec Gutierrez, senior analyst at Kelley Blue Book. On the positive side, the summer surge means that 2013 is still likely to be the industry’s best year since before the nation’s economy collapsed – and sales seem on track to surpass the forecasts most experts made early in 2013 which called for volume to slide somewhere between 15.0 36 | DEALER BUSINESS JOURNAL October 2013

and 15.5 million. “Despite the cool down this month,” forecast Gutierrez, “sales will remain on track to exceed 15.6 million units in 2013 because of strong product introductions from automakers.” That’s in line with projections by both J.D. Power and Associates and LMC Automotive, their joint forecast data indicating September slowed slightly from the industry’s sprint of recent months. Even so, the industry won’t go into the red on a retail level. Excluding fleet numbers, Power and LMC projected a 2% increase over September 2012. Total light-vehicle sales in September are expected to rise 4%. “Although the year-over-year sales gain in September is smaller than has been observed in recent months, it’s important to recognize that September sales are being heavily influenced by a quirk on the industry sales calendar,” said John Humphrey, senior vice president of the global automotive practice at J.D. Power. —Source, The Detroit Bureau DealerBusinessJournal.com

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October 2013 DEALER BUSINESS JOURNAL | 37

TaxMax BHPH INDUSTRY Launches NEWS Lead Generation Program

Vendor Update

Buy here-pay here and deep subprime automotive dealers have long sought a lead-generation service specifically for their customer base and have often been disappointed, but a new service will offer up unique, Internet-generated leads targeted specifically for their location and not offered up to anyone else. DriveNowNetwork.com was tested in Little Rock, Ark. and Tulsa, Okla., during last year’s tax season, and is a new endeavor by Bill Neylan, CEO of TRS TaxMax, the popular tax refund for use as a vehicle downpayment and tax preparation firm based in Tampa, Fla. In fact, TaxMax is often credited with pulling the automotive taxExpress, the leading provider of web-based buying inance season into the fourth quarter of the current year. Such major playersfinancial in the buyservices here-payand heretechnology marketplacefor asindependent America’s CarMart andauto J.D. dealerships, Byrider as well as several thousand dealers the program announced today that theiruse integration to estimate a consumer’s tax refund based on the customer’s with RouteOne LLC will now allow Finance Express’ last check stubs. Dealers are then able to secure larger down payments usunique pool of independent dealers to submit ing the refund when it arrives, usually by mid-to-late January. applications RouteOne lenders with whom they Neylan said to theall idea spontaneously generated from the number have anwho existing saving dealers time and for a of people visitedrelationship, the TRSTaxMax.com Web site looking means to put theirduplicate future or entry currentinto tax refund to work as a downpayeliminating multiple systems. ment a vehicle. is a complimentary web-based credit onRouteOne “We were looking at all these leads and decided the mix was perapplication management system that provides dealers fect to provide to dealers using our refund program services,” Neylan and finance sources the ability to manage their full said. book of creditisapplication business. Finance The program simple and dealers should highlyExpress’ value both the pricing and the guarantee that no in their market will independent dealer base willlead be generated able to submit be sold to anyone else, Neylan said. applications from Consumers using popular search engines like Google or Bing Finance Express or Yahoo! using keys words like “tax refund” “W-2” and “downpaydirectly to ment” will find the DriveNowNetwork. Consumers aretheir asked a fill affiliated out a few basic contact information questions. Once thelenders form isin sent, the TaxMax dealer in that area is sent the lead within five minutes. RouteOne. the leads at 10 miles, 30 “Dealerships can select their radius for “We are proud miles and 70 miles,” Neylan said. “In stead of paying per lead, dealto integrate with ers pay a flat fee of $999 for the full year and they get the TaxMax RouteOne! program at their dealership for free, which costs $300.” We a great dealDriveof TaxMax uses a Web portal that dealers have sign into online. NowNetwork.com leads into that portal, and they can respect for what theywill dopopulate in the industry. Independent thendealers use thealways portal like a CRM tool,sources, all within theRouteOne TaxMax system. need finance and “The conversion rate for these leads was very strong,” Neylan offers a wide variety,” says David Huber, President of said. “Fifteen to 20 percent of the leads were closed the same day. Finance David goes on to say, “we excited Because our Express. leads arrive so quickly, consumers areare often still online to they be able provide our dealers with additional finance when get to a call.” Neylan was quick point outtheir whiledeal the process demographics sources, along withtomaking more of those searching for” tax refunds for auto purchases tend to the lower end of efficient. the economic spectrum, it by no means is only a service for buy here “Through this unique integration with Finance pay here and subprime dealers. Express, is able offer independent “Today, RouteOne most consumers aretostrapped for cash and with tax redealers access to$4,600, the wide variety sources funds averaging near people fromofallfinance walks of life look to put the available program tothrough work forour them.” platform,” said RouteOne CEO Neylan said many dealers still confuse the old wayasofthe dealer tax Mike Jurecki. “Duplicate entry is eliminated, preparation and tax refund estimating services with the new program applications may now be entered through a single TaxMax has brought to the marketplace. “Dealers are not required point, saving dealers and simplifying to fiapplication ll out any complicated forms or taxtime information or estimate taximproving theproprietary credit application process. ” es,”and Neylan said. “Our system asks three basic questions, which are entered into fields on our Web portal. Our system then generates an estimate within seconds, along with the paperwork necessary to secure the dealers portion when the refund is sent to the consumer. Share your news with us. Send press releases, story “Most dealers believe tax season begins in January or February and tips the to @dealerbusinessjournal.com. butideas we have pulled season into October and November.” Reach TaxMax at (866) 642-4107 or via email at trs@taxrefundservices.com or visit its Web site at www.taxmax.com.

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