Dealer Business Journal April

Business Blueprint

Lease Here-Pay Here

You can’t always just trust your gut on the tough calls. It helps to have filters in place that can guide your decisions.

There are advantages to leasing over selling, but there are downsides to consider too.

APRIL 2015

DealerBusinessJournal.com

Benchamarking is an important part of measuring success. See where your dealership exceeds or needs to improve by comparing it with others in your area and the industry. Know your Key Performance Indicators and how to set your goals using them.

Page 10.

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VOLUME 12, ISSUE 4 APRIL 2015

CONTENTS

LEEDOM GROUP FEATURES

LEGAL

OPERATIONS

4 The Greatest Show on Earth!

BHPH World is finally here, and there are plenty of

14 Spacemen Abduct Regulators Government employees

24 Lease Here-Pay Here: Is it Right for You? It’s a question that gets

exciting and informative events on the schedule.

By Chris Leedom

8 Our Best Convention Yet Take advantage of your time at BHPH World by

attending these specialized seminars and meeting and greeting with the Leedom team.

By David Brotherton

10 Keep Your Business on Track Using industry benchmarks and Key Performance

Indicators can help you decide if what your doing is working, or you need to make adjustments.

By Paxton Wright

IN EVERY ISSUE 5 Calendar 6 Industry News 7 News Briefs

18 A Road Map to Compliance Take heed of a recent

dealer settlement for instruction on how to stay out of trouble.

By Catherine M. Brennan

LEADERSHIP 36 Ad Index 37 Classifieds 39 Twenty Group Application

21 A Blueprint For Making Tough Calls Big decision ahead?

www.DealerBusinessJournal.com

giving out-of-this-world testimonies about dealer regulation signs of an alien invasion?

By Tom Hudson

Use these filters to help evaluate and act.

By Dave Anderson

asked a lot, what are the pros and cons to a leasing business?

By David J. Wiggins

28 Reflecting on an Industry Hero Honoring the skip

tracing legend Harvey Altes.

By Alex Price

30 Email is Still in the Game Email marketing is alive

and well, and the best way to reach customers.

By Dani Sherrod

34 Solving Insurance Dilemmas Advice on how to

handle lapsed insurance.

By Tim Byrd

DEALER BUSINESS JOURNAL | APRIL 2015 | 3

CHRIS LEEDOM EXECUTIVE PUBLISHER

CORNER OFFICE I

hope you are reading this special issue at the Leedom Group 21st Annual BHPH WORLD Convention in New Orleans. If not you are sure missing out on the greatest show on earth–in the Big Easy no less. Seriously though, I want to welcome many of our readers to the BHPH WORLD Convention. I have the opportunity of serving as Convention Chairperson for this event so I thought I would share some thoughts and observations.

As I prepared for my keynote address, and having produced this event for 20 years, I pondered how much the industry has changed over the past three decades–and how much it continues to change, but at a much faster pace. I have had the privilege of having a front row seat for much of this evolution. Not that long ago there were almost no DMS providers, starter interrupt devices, GPS units or national capital providers serving our industry. Today, as featured in the Grand Expo Hall at the Convention there are several great options in these, as well as other areas.

The business continues to evolve and the only way to stay ahead of the curve is to attend these types of events to keep up–or otherwise get left behind!

Our Special Market Report and Benchmark will be available at the BHPH World Convention in New Orleans. You can also request a copy after April 14, 2015. The report will contain some basic, but key information we felt compelled to share with the intent of helping you the dealer run a better business. We have one dedicated workshop at the convention to help you understand how to use this data. These key performance indicators can be applied to virtually any dealership. I hope you find this information useful and informative.

Additional, at the BHPH WORLD Convention there will be 40 or so other sessions and workshops to help you assess your business. Our goal is to help you take an introspective approach to your business, make some adjustments, and become more successful at what you do. If you are in the business, we want to simply help you be the best at what you do. It is really that simple. It has worked for the past 20 years, so I always tell the staff “keep making the main thing the main thing.” Thanks for the chance to serve you and your dealership.

We are also making some monumental changes to Dealer Business Journal. Our staff has been busy compiling a list of as many BHPH and Retail used vehicle dealers as possible.

Starting with our next issue we will be expanding our distribution by eight to ten thousand additional recipients – all dealer owners. This publication will remain free to any licensed dealer. For vendors or others that serve or want to watch the industry we will have a nominal subscription price. This will help us continue to serve the dealer community at no charge. If you are not a dealer owner but would like to continue receiving this publication you may subscribe online through our website at www. dealerbusinessjournal.com/subscribe.php.

I hope to meet many of you at the BHPH World Convention. You will see me hanging around the Leedom Group booth–stop by and say hello. I look forward to seeing you at the greatest show on earth!

“Our goal is to help you take an introspective approach to your business, make some adjustments and become more successful at what you do.”

4 | APRIL 2015 | DEALER BUSINESS JOURNAL

Dealer Business Journal 3700 S. Tamiami Trail, Sarasota, FL 34239 Ph: 800.966.8733 Fax: 941.371.2874 Executive Publisher Christopher M. Leedom chris@twentygroups.com Contributing Writers Dave Anderson dave@learntolead.com David Brotherton davidb@leedomgroup.com Tom Hudson thudson@hudco.com Christy Taylor info@dealerbusinessjournal.com Paxton Wright paxton@leedomgroup.com FOR QUESTIONS REGARDING SUBSCRIPTIONS CALL 800.966.8733 or subscribe online at DealerBusinessJournal.com ADVERTISING INQUIRIES call 941.371.7999 or email Sales@DealerBusinessJournal.com DISCLAIMER: The information included in this publication is obtained from sources believed reliable and has been produced with reasonable care in production and editing. It is not intended to be legal, accounting, tax, technical or other professional advice.

Readers are advised to consult a professional for application in their particular situation. Copyright 2015 Leedom and Associates, LLC. All Rights Reserved. Content may not be photocopied, reproduced or redistributed without written permission. Dealer Business Journal is a publication of Leedom and Associates, LLC. POSTMASTER: Send change of address form to Dealer Business Journal, 3700 S Tamiami Trail, Sarasota, FL 34239

www.DealerBusinessJournal.com

LEEDOM GROUP UPCOMING EVENTS

CALENDAR June 2 | Buy Here Pay Here Sales Training Boot Camp

This Camp provides your sales managers and reps real-world techniques and strategies for developing your business the way it should be developed, emphasizing accountability, prospecting and not relying on advertising! We will instruct on techniques of BHPH and telephone sales, facts about the BHPH business and the customers, referrals for dealers, as well as application and underwriting procedures.

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

June 3 | Buy Here Pay Here Manager’s Boot Camp

This Camp discusses the BHPH business model and the role that managers play in it, focusing on how to run the business at peak performance. Attendees will be provided with the www.DealerBusinessJournal.com

benchmark performance numbers and an emphasis on a better underlying understanding of how the key drivers of our business work together to form the bottom line.

Who Attends: New and seasoned managers Location: Embassy Suites Philadelphia Airport, Philadelphia, PA Details: Call Meredith McNellis at 800.966.8733 for more information or go to www.twentygroups.com to register.

machines.

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

Keep up to Date:

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

©2015 CliftonLarsonAllen LLP

JUNE 2015

June 4 | Buy Here Pay Here Collections Boot Camp

Leedom and Associates, The Industry Leader in Independent Dealer Training, invites you to enlist in our Collections “Boot Camp” to ensure you are collecting every dollar possible. This Camp educates on the basics of the BHPH business, the collection institution, and tips for after the sale.

Collectors, underwriters, and sales personnel, new and experienced, are sure to benefit from this course.

Collections metrics are the ultimate key driver for the BHPH business model.

Boot Camp Graduates will be lean, mean collecting

ROCK SOLID FINANCIALS Generate confidence in your financials with the help of experienced numbers people.

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CLAconnect.com/dealerships DEALER BUSINESS JOURNAL | APRIL 2015 | 5

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

ONLINE REPUTATION

Online Dealer Reviews Uncover Customer Trends Online reviews continue to grow in importance within the automotive industry, with seven of 10 car shoppers stating that reviews of dealerships are a ‘very’ or ‘extremely’ important part of the research process. To better understand this trend, Cars. com conducted a text analysis using the nearly one million consumer-submitted reviews on its site and uncovered several unique shopper behaviors, as well as opportunities for retailers and manufacturers.

“Online reviews are more than social proof; they’re equity for dealerships,” said Simon Tiffen, senior manager, advertiser insights at Cars. com. “Now that reading and writing online reviews is normal behavior for consumers, we’re able to aggregate and analyze real-life experiences to make tangible improvements to the shopping process – not to mention find out some fun stuff along the way.”

Consumers Share Reviews During Office Hours More than half (52%) of all dealer reviews on Cars. com are left between 10 am and 4 pm ET, with Tuesday, Wednesday and Thursday being the days shoppers most frequently write reviews.

Only 7 percent of all reviews are left on Sunday, and virtually no reviews are left between 3am and 5am ET. “Since consumers are most likely to leave a review during mid-day, it makes sense for manufacturers and dealerships to capitalize on that behavior,” shared Tiffen.

“If you’re asking customers to submit a review, time your communication for when they’re most open to sharing, which often means during typical working hours.”

Bad Experiences Lead to Longer, More Immediate Reviews The analysis shows that the average length of a dealer review on Cars.com is 62 words; however, reviews that do not recommend a dealership are 142 percent longer than those that do, on average.

Though they account for just a small fraction (4%) of all reviews, negative reviews are 19 percent more likely to be written on a Saturday, Sunday or Monday, presumably after a poor weekend experience at the dealership.

“When a consumer has a bad experience, they want their voice heard,” added Tiffen. “Businesses mess up

6 | APRIL 2015 | DEALER BUSINESS JOURNAL

sometimes – that’s a given.

But now retailers have an opportunity to resolve individual issues as well as identify larger problems connected to dealership process through direct customer feedback.”

Given the added strain on dealership staff during peak shopping periods, Tiffen also suggests retailers take notice of the consequences of providing a poor customer experience.

“Retailers need to pay extra attention during high-traffic hours to make sure their customer service doesn’t slip,” added Tiffen. “This includes monitoring online review and social media channels, where consumers are likely to vent after a negative experience.”

Dealerships Ignore Op-

portunity to Respond.

Though simple tools are provided to dealerships to reply to both positive and negative reviews, less than one-third of all dealer reviews on Cars.com are answered.

A missed opportunity, the analysis shows that dealer review response rate positively correlates to a higher average star rating.

At a state level, this same trend holds true. Delaware, the highest rated state (4.7/5), has an average response rate of greater than 60 percent.

Conversely, the state with the lowest average dealership rating, South Dakota (3.9/5), is home to dealerships with an average response rate of less than 10 percent. www.DealerBusinessJournal.com

NEWS

BRIEFS Ford Motor Company Recalls More Vehicles

Boost Sales With a Service Center Tune-Up Dealers wanting to increase their vehicle sales should focus on the back of their store, as sales are directly affected by customer experiences in the service department, according to the March 2015 PowerRater Consumer Pulse, a monthly analysis developed jointly by J.D. Power and DealerRater.

An alliance between J.D. Power and DealerRater integrates each company’s capabilities to gather comprehensive vehicle shopper feedback based on J.D. Power’s customer satisfaction research and DealerRater’s consumer ratings and reviews of car dealerships.

Key Findings • A dealer’s ability to satisfy its service customers boosts its reputation for good service, which may ultimately lead to increased vehicle sales. www.DealerBusinessJournal.com

•

•

Highly satisfied service customers (overall satisfaction scores of 9011,000 on a 1,000-point scale) are more likely to write a review about their experience, compared with those who are merely satisfied or indifferent (scores of 750900), according to J.D. Power. Among the 37 percent of highly satisfied customers, 4.3 percent indicate that they posted an online review of their experience. In contrast, less than 3 percent of service customers who are either merely satisfied or indifferent posted an online review.

Among highly satisfied customers who posted an online review of their last service experience, 91 percent of the reviews were positive; among merely satisfied or indifferent customers who posted a review, only 71 percent of the comments

•

were positive.

According to data collected by DealerRater, 40 percent of car buyers indicate that the service department’s reputation was significantly important in choosing the dealer they purchased from.

As shown in data collected by DealerRater, improving its service reputation via positive reviews not only increases a dealership’s likelihood of new service business, but it also positively impacts its ability to sell vehicles.

“Considering how competitive the market is, and the tight profit margins that dealers are fighting, strengthening online reputation to maximize sales opportunities is becoming a critical business objective for new-vehicle dealers,” said Gary Tucker, chief executive officer of DealerRater.

Ford Motor Company is recalling 212,911 Ford Explorer SUVs and Ford Police Interceptor utility vehicles from the 2011-13 model years because a spring that controls the interior door handle may become loose and cause the door to become unlatched in a side-impact crash, increasing the risk of injury.

Ford said it is recalling 1,725 Lincoln MKT limo and hearse vehicles from the 201315 model years for a vacuum pump relay issue that could result in an underhood fire.

Ford also is recalling 6,472 F-series Super Duty ambulance vehicles from the 2011-13 model years, and similar vehicles with 6.7-liter diesel engines from the 2014-15 model years because an exhaust gas temperature sensor issue may fail to incorrectly identify a high temperature condition in the vehicle.

Send us your news:

We want to share your news.

Dealers and vendors can send press releases and news announcements by email to info@dealerbusinessjournal. com. Subject line: News Briefs.

DEALER BUSINESS JOURNAL | APRIL 2015 | 7

DAVID BROTHERTON BHPH BOOT CAMP

OUR BEST CONVENTION YET Keeping your best customers and setting portfolio objectives are a few of the highlights in store at BHPH World.

I

am looking forward to BHPH World 2015 in New Orleans and I am hoping to see many of you while there. To see so many new and familiar faces in the BHPH industry is simply fantastic. Best of all is that this year I have the opportunity to bring you two workshops on topics that I believe have become extremely relevant to the industry.

First off, we will be exploring customer care as we try to explore ways to Keep Your Best Customers YOUR Best Customers.

Today’s marketplace presents our customers with a variety of choice that many have not seen before and nothing is more frustrating than

coming in on Monday morning to see cars dropped off by people who haven’t even been on your radar.

Then we open the mail and find two payoff checks. If we could only find a way to pick and choose who we would get a payoff from it wouldn’t be so bad but these payoffs tend to be on our best customers as well.

We will be looking at ways we can better engage our customer base and hopefully keep them happy (and paying) in our portfolios rather than with someone else.

Every department’s role in playing solid defense will be examined.

Later in the program, I will be addressing setting

8 | APRIL 2015 | DEALER BUSINESS JOURNAL

portfolio objectives and expectations with an eye on the true health of the portfolio. So many people become focused on delinquency or recency or charge off or cash collections and they are all correct yet, at the same time, they are all wrong. A portfolio is a living, breathing entity that needs attention to all areas, not just one or two.

So often decisions are made with customers because of

a focus on delinquency or charge off when it really isn’t in the best interests of all involved. Accounting for our business is simple; it is doing it that presents a challenge.

In addition to the workshops, I will also be in the Leedom Group booth in the exhibit hall meeting with existing friends and hoping to make new ones.

If you are interested in joining a Twenty Group, have questions about your business or the industry, or just want to say “hi,” make sure you stop by and see the Leedom team.

The Leedom convention www.DealerBusinessJournal.com

LEEDOM GROUP

has a different vibe and energy than other industry events held throughout the year. Make sure you take advantage of it and come and see us in New Orleans!

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

www.DealerBusinessJournal.com

DEALER BUSINESS JOURNAL | APRIL 2015 | 9

PAXTON WRIGHT DEALER OPERATIONS

KEEP YOUR

BUSINESS ON TRACK How reviewing industry benchmarks and Key Performance Indicators can guide your dealership into unstoppable success.

C

an you believe that the first quarter of 2015 is already in the books? Tax season is coming to a close soon and for many dealers, this means a shift in focus! Oftentimes in Q1, dealers place such an emphasis on maintaining inventory levels and increasing sales that other operational components tend to get overshadowed.

So, how do you get back on track and return the balance to your dealership’s priorities?

Better yet, what can you do now to avoid this shift from

ever happening again?

Part of the answer may be adjusting the way you evaluate your dealership’s performance. Is tracking and reviewing data an important component of managing your business? Do you use this data to gauge your team’s performance? Does this information help guide your future decisions and impact how you compensate your employees? The answer to each of these questions should be yes!

Allow me to share two different tools (or types of data) that you should be

10 | APRIL 2015 | DEALER BUSINESS JOURNAL

utilizing in your business consistently. The first is the Leedom and Associates Industry Market Report and Benchmarks. This report is the most comprehensive collection of market and performance data collected exclusively from independent BHPH dealers around the country. In conjunction with this publication, Leedom and Associates collects and compiles industry data through numerous outlets, including Leedom’s Independent Dealer Twenty Group program. I personally have the honor of moderating

a number of these groups, and I can assure you, this compilation represents industry data that is specific to our independent dealer community. For more than 20 years Leedom has been collecting extensive data about the used vehicle market. With countless hours of collection, input and analysis the result is a complete set of industry guidelines that can be invaluable to an independent dealer if utilized correctly.

A complete and updated, Industry Market Report and Benchmarks, will be www.DealerBusinessJournal.com

LEEDOM GROUP

www.DealerBusinessJournal.com

DEALER BUSINESS JOURNAL | APRIL 2015 | 11

PAXTON WRIGHT DEALER OPERATIONS released in April at the BHPH World Convention taking place in New Orleans. The true value in accessing this information is simple, it allows you to instantly measure your dealership’s performance against your top peers and competitors in the industry!

In fact, the goal of every member I have in a Dealer Twenty Group is to achieve better results by equaling or even surpassing these benchmarks.

I would encourage everyone reading this article to share their passion for better results and join a Twenty Group. It’s the only way to gain constant, real-time and accurate benchmarks of performance from a room full of dealers that are similar in size and scope to your dealership.

The second tool you must be sure to evaluate every day is a custom assortment of

Key Performance Indicators, otherwise known as KPIs. What’s the definition of a KPI? KPIs are a type of performance measurement.

They evaluate the success of an organization or of a particular activity in which it engages Bottom line, KPIs measure predefined success! Use our industry benchmarks as a road map. By doing so, you can easily develop clear objectives and performance measurements designed to reach your strategic goals. These goals should articulate exactly what your dealership is trying to accomplish. Align your goals with the appropriate benchmarks for all segments of the business. The Industry Market Report establishes benchmarks for sales, profits, inventory, collections and even expenses. Take advantage of the data, it’s all there! Once you have defined the goals, now

12 | APRIL 2015 | DEALER BUSINESS JOURNAL

you can establish the KPIs to help you obtain these results. Each measurement should have a clear baseline, threshold and target. Make sure the data points you are using are verifiable, this ensures accuracy and helps provide statistical clarity to evaluate if a strategy is working. I understand if this begins to sound overwhelming, but KPIs can be as simple as measuring your daily delinquency or cash collections. Examples of more advanced KPIs are metrics that a lender may use to evaluate a portfolio, such as, loss to liquidation percentages or collateral recovery ratios.

In summary, take advantage of the industry tools that are at your disposal.

Set goals that exceed the benchmarks established by the nation’s top performers. Be bold and drive your team to deliver results. Measure these results daily by creating key performance indicators that clearly define how well your business is progressing. And lastly, do yourself a favor, join a Dealer Twenty Group, you’ll thank me later!

Align your goals with the appropriate benchmarks for all segments of the business.

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

Contact him at paxton@ leedomgroup.com

www.DealerBusinessJournal.com

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TOM HUDSON LEGAL OPINION

SPACEMEN ABDUCT REGULATORS After the unexplainable testimony of two Oregon state employees on a Department bill, the only conclusion that can be drawn is something from out of this world.

T

he two aliens brought their spaceship down slowly above the California highway, matching their speed to the cars below. Opening the ship’s cargo bay, they positioned themselves over a car traveling below.

Activating their magnetic loader, they sucked the car and its two passengers into the cargo bay.

Their mission was a simple one. They had come to Earth for the purpose of capturing a couple of the humans who inhabited

this strange planet in order to determine how humans think, and how they transmit thoughts from one to another.

They quickly put the two humans into a sleep state and did brain scans, reading and recording the contents of their minds. When the aliens were finished, they returned the humans, completely unaware of what had been done to them, to the highway below, and sped back to their mother ship.

A month later, the aliens repeated the mission, but this time, over a highway in Oregon. And on this second

14 | APRIL 2015 | DEALER BUSINESS JOURNAL

mission, the objective was to see whether they could transfer the contents of the two California humans’ brains to two humans captured in Oregon. That test, too, turned out to be successful.

Little did they know that the two Californians they had captured were wild-eyed consumer advocates and activists who spent all of their time and energy trying to advance as many radical laws and regulations as possible to curb a wide array of evils that only they could identify. www.DealerBusinessJournal.com

LEGAL & LEGISLATIVE

And the Oregonians?

They turned out to be two Oregon state employees, working for the Oregon Department of Consumer and Business Services, Division of Finance and Corporate Securities.

Now, I can’t say for sure that that’s what happened, but that is the only plausible explanation for the appearance of David Tatman, the Administrator of DCBS, and his sidekick Rick Blackwell, identified as a Senior Analyst, before the Oregon Senate Committee on Business and Transportation, to testify on SB 276, a Department bill. Testifying in support of the bill, the first thing Mr. Tatman said was that buyhere, pay-here dealers are “unregulated.”

That’s when I knew the aliens had struck. Surely a state official coming to testify before a Senate Committee would know that all dealers, including BHPH dealers, are under the jurisdiction of the federal Consumer Financial Protection Bureau. And he would know, wouldn’t he, that they also are subject to the federal Truth in Lending Act and Regulation Z, the federal Equal Credit Opportunity Act and Regulation B, the federal Fair Credit Reporting Act, the federal Gramm-Leach-Bliley www.DealerBusinessJournal.com

Privacy law and FTC privacy regulations, the MagnusonMoss Warranty Act, the USA Patriot Act, rules of the Office of Financial Assets Control (“OFAC”), several Federal Trade Commission Trade Regulation Rules, the FTC’s advertising rules, the Servicemembers Civil Relief Act and several other federal laws?

OK, all of those are federal laws. Maybe he thinks that for some reason they don’t apply in Oregon.

But isn’t it true that BHPH dealers are subject to the Oregon Motor Vehicle Retail Installment Sales Act, Articles 2 and 9 of the Oregon Uniform Commercial Code, Oregon’s Unfair and Deceptive Acts and Practices law, advertising laws and several other consumer protection statutes?

Unregulated? Only to a radical consumer advocate.

And that was just the start. SB 276 started life as mostly a regulatory housekeeping bill, imposing licensing, examination and other burdens on BHPH dealers. But the DCBS has proposed several amendments to the bill that were lifted directly from the playbook of the consumer advocates.

Among other things, the amendments would: • Treat a contract as a buyhere-pay-here transaction

DEALER BUSINESS JOURNAL | APRIL 2015 | 15

TOM HUDSON LEGAL OPINION

•

•

•

•

•

•

if the dealer holds onto a finance contract for 14 days, instead of 45 days.

Require the interest rate on a loan to decrease with higher down payments.

Impose an “ability to repay” requirement under rules to be promulgated by the state director.

Require that the price of the car must be disclosed before any credit checks occur.

Remove disclosure language that directs the buyer back to the dealer to resolve problems.

Prohibit repossession of a vehicle for 30 days after the consumer fails to make a scheduled payment.

Prohibit the installation of devices that remotely monitor or disable a vehicle’s vital systems.

OK, if these two regulators are proposing such a draconian level of regulation, their action certainly was prompted by an extensive study of the business practices of buyhere, pay-here dealers that produced hard data about BHPH business practices, right? The Department surely determined what dealers were actually doing in their businesses – what BHPH “best practices” are – things like rates and prices charged, how many months of repayment were required by a typical BHPH retail

That’s when I knew the aliens had struck.

Surely a state official coming to testify before a Senate Committee would know that dealers, including BHPH dealers, are under the jurisdiction of the federal Consumer Financial Protection Bureau... installment contract, whether credit was being extended to people who were unable to pay and whether dealers were engaging in other sharp practices, right?

Wrong on both counts.

If the Department had any actual data about the BHPH business, it was not evident from the testimony of Tatman and Blackwell.

It was also evident from their constant use of “loan,” instead of “retail installment sale” that they did not understand one of the most basic elements of the credit sales of vehicles.

Three other witnesses

16 | APRIL 2015 | DEALER BUSINESS JOURNAL

appeared before the Committee after Tatmun and Blackwell testified.

Two plaintiffs lawyers testified, painting BHPH dealers as “payday lenders who use cars as bait,” in an effort to link BHPH with payday lending—guilt by association. They then offered the sort of anecdotal stories that consumer advocates always put forth as data – including a baseball-bat wielding BHPH dealer repossessing a car from a woman who was trying to make her delinquent payment. As always with the plaintiffs’

lawyer witnesses, they didn’t indicate whether their horror stories were typical of the BHPH business or were outlier examples of the sorts of business people who will cheerfully violate any consumer protection laws. Nor did they bother to mention that most, if not all, of the dealer actions they were complaining of violated some existing law.

I’ve had a couple of words with the aliens. I’ve suggested that the next time they go looking for brains to read, they scour the planet looking for the sorts of regulators who actually go to the trouble of learning about the businesses they regulate, and learning the best practices of those businesses, before they propose new regulations.

They said they’d try, but were not optimistic. They report that such regulators are an endangered species.

Tom Hudson, Esq. is the author of several compliance-related books that are available online at www.counselorlibrary.com.

He is also the publisher of Spot Delivery®, a monthly legal newsletter for auto dealers, and the Editor in Chief of CARLAW®. Reach him by phone at (410) 865-5411 or by email at tbhudson@hudco. com.

www.DealerBusinessJournal.com

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CATHERINE M. BRENNAN COMPLIANCE UPDATE

A ROAD MAP TO COMPLIANCE Dealers who want to stay out of trouble with government regulators can use a recent settlement for directions on what to do.

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LEGAL & LEGISLATIVE

R

ecently, the United States Justice Department and the North Carolina Attorney General entered into a consent decree with two Buy Here-Pay Here dealers in February 2015. The consent decree offers insight into the BHPH industry and its alleged targeting of AfricanAmerican consumers in violation of federal law banning discrimination in credit.

Auto Fare Inc. and Southeastern Auto Corporation are two Buy Here-Pay Here dealerships owned and operated in Charlotte, North Carolina

by Zuhdi A. Saadeh. The government regulators alleged that from 2006 to 2011, the defendants intentionally targeted African-American customers for credit and servicing on allegedly unfair and predatory terms without meaningfully assessing their creditworthiness. Such practice, known as “reverse redlining,” violates a raft of federal and state laws, including the Equal Credit Opportunity Act. Rather than litigating the lawsuit, the defendants settled the complaint. In the consent decree announced by the U.S. Department of Justice, the defendants agreed to cease all practices that intentionally target AfricanAmerican consumers for

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credit on unfair or predatory terms. The consent decree directs the defendants to develop and implement written policies and procedures for collecting applications and current financial documents for all applicants. The policies must specifically explain how the defendants will “assess meaningfully” the applicants’ income and their ability to meet the credit payments on a purchased vehicle. In other words, the regulators obtained a settlement where the defendants agreed to adopt an “ability to repay” requirement in connection with a motor vehicle loan.

Such “ability to repay” requirements are generally associated with mortgage credit, but since the Great Recession, more and more attention has been brought to bear on the importance of ensuring that all consumers will not be financially devastated by their consumer credit obligations.

In connection with assessing the “ability to repay,” the defendants agree to not enter into a retail installment sales contract or other credit transaction for the purchase of a motor vehicle where the consumer’s monthly payments would exceed 25 percent of their total documented net monthly income. The consent decree further specifies that “total monthly payments” does not

include periodic payments of deferred down payments (“pick up payments”), taxes, tag or title fees (collectively called “deferred payments”), provided that the period of deferred payments does not exceed four months and the total amount of the deferred payments does not exceed $800.

Pick up payments are not uncommon among BHPH dealerships, as they serve as a way to help consumers who do not have a full down payment assembled at the time they enter into the credit transaction. The consent decree also imposes requirements for specific disclosures the defendants must give in connection with its sales, including GPS disclosures.

Interestingly, the defendants agreed to charge an annual percentage rate not in excess of the amount allowed by North Carolina law minus five percentage points. For vehicles five years or older, this limits the rate to 24 percent per year. The defendants agreed to further interest rate reductions if the consumer makes a down payment that exceeds the posted down payment amount by 50 percent, the consumer documents average net monthly income in excess of $2,499, the consumer previously financed a vehicle through the defendants with no defaults, or the consumer

provides a current credit score of 550 or greater.

The defendants are also prohibited from charging dealer doc fees.

With regard to servicing and repossessions, the consent decree lays out in great detail the default and repossession procedures the defendants must follow. The consent decree prohibits repossession until the consumer has missed two consecutive payments. In addition to extensive training on fair lending requirements for all its employees, the defendants agreed to pay $225,000 to compensate consumers for damages they may have ensured for violations of federal and state law. Consumers can make a claim against the settlement fund in exchange for a release of all potential claims against the defendants.

Settlements like those entered into by Auto Fare and Southeastern can serve as a useful road map for other BHPH dealers looking to avoid potential run-ins with government regulators.

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

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DAVE ANDERSON LEARN TO LEAD

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LEADERSHIP

A BLUEPRINT FOR MAKING TOUGH CALLS When it’s time to make important decisions about personnel or policy, you may find this three filters helpful.

I

n visiting with thousands of leaders in dozens of industries over the past two decades one thing is clear: the people who are expected to make fast, tough decisions are rarely trained how to do so. As a result, costly “gut” decisions are wrongly made, or indecision prevails in areas that end up costing the company plenty.

While there is not a one-size-fits-all mechanism for making tough decisions, attendees to my workshops have found it useful when I present a series of filters to help them assess tough situations realistically, and make the tough call necessary for the organization to move forward.

While there’s not space for all the scenarios I provide in a seminar setting, the following three filters have wide applicability and should help you to immediately reassess and act on areas you’ve been pondering. Some of these filters apply strictly to personnel assessment, and others address strategies, policies, and more.

The hope vs. wish filter

Are you hoping or wishing for improvement?

You can become immobilized wondering just how much longer to work with an under-performing person, strategy, www.DealerBusinessJournal.com

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DAVE ANDERSON LEARN TO LEAD

While there is not a one-size-fits-all mechanism for making tough decisions, having a series of filters to help assess tough situations realistically and make the tough call necessary for the organization to move forward is most helpful.

policy, vendor and more.

This filter may clear it up for you.

Hope is defined as grounds for believing something in the future will occur. In other words, you could take the case to court and win based on evidence things are headed in the right direction:

hope vs. wish filter to assess marketing messages and mediums, hiring and training strategies and more. Consider a decision you’ve been stuck on: Other than the fact you want it to work out, what grounds for believing do you have that tomorrow will be any different than today?

Ladies and gentlemen of the jury, here are my grounds for believing this underperformer is on the right track and will become a success with our company: he has developed this productive habit; broken this unproductive habit; made the following positive attitude adjustment; developed this new skill, improved these two current skills, and his performance of the past three months, while only marginally better, is headed in the right direction.

The advocate, apathetic, or saboteur filter

Without “grounds for believing”—specific evidence like that presented— you’re not hoping, you’re wishing, and wishing is an unacceptable strategy for growing your organization.

So you can appreciate the contrast between genuine hope and foolish wishes, consider the definition of wish: a strong desire for something to occur that probably will not.

Obviously, the key difference between hoping and wishing is “grounds for believing.”

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When you present a change to your team—a new goal, policy, strategy, pay plan and the like—not everyone will respond the same way. It’s important to have a filter to discern the four primary groups of people and devise a strategy for each.

Advocates. This group favors the change, and will speak well of it and you.

It’s essential that you do all you can to make sure key influencers are in this group before you announce anything major to the group overall. If they are, you’ll have momentum and instant traction. If they’re not, the change is dead on arrival.

Apathetics. This group isn’t as bad as it sounds.

These folks won’t do anything to derail or stall the change, but they won’t do anything to help it either.

True to their name they are apathetic, and sometimes they have reason to be: they’ve seen so many flavors

of the month come and go in the past they’re going to sit on the sideline to see if this one is for real before getting emotionally invested.

Do your job, follow through and these people will come on board.

Saboteurs. These people are trouble and will try to overtly or covertly skew your efforts. Sometimes they do it in obvious ways by challenging you publicly, and other times they do it with more stealth by planting seeds of doubt and resistance in the “meeting after the meeting” you can expect them to conduct.

Saboteurs are cancers and must be addressed quickly, privately and firmly.

If you can’t gain agreement they’re on board you may have to let them go; especially if this is a major change. Otherwise, they’ll manifest as cultural cancers that will undermine team morale, momentum, efforts and your personal credibility.

Honest skeptics.

These folks have legitimate questions, differences or concerns they want cleared up before buying in and moving forward. This does not mean they’re saboteurs.

If you address their concerns effectively and show what you’re doing is effective and beneficial you will win them over. If not, they can descend into the saboteur ranks.

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LEADERSHIP

groups you can devise a strategy for each and decide how to best move change forward in your organization.

The “Three T’s” filter

An exercise I’ve taught for decades is rooted in zerobased thinking; determining if you were starting over from zero would you do what you’re doing now. This works well when evaluating the performance of people on your team. Here’s how: Go through each name on your team and ask,

“Knowing what I now know about “Fred,” if he applied for the job today would I hire him?” If the answer is “yes,” great; go to the next name. If the answer is some version of, “are you kidding me?” you can apply the Three T’s filter: Train. This is the first and best option. If you don’t believe they’ve had the training or coaching to succeed, do your job.

Transfer. This is not an option for someone with unsatisfactory character, attitude, drive, or energy as it’s more likely they

need a change of self than a change of scene. It is an option for someone who is mis-employed because he lacks the talent for a given position and would be a better fit elsewhere.

Terminate. If the first two options don’t work, and you’ve renounced the pervasive and costly “fourth T”—tolerate—it’s time to move on.

each year and has given seminars in 15 countries. He has spoken at eleven NADA Conventions and is the author of twelve books. Follow Dave on Twitter @DaveAnderson100 and visit his website at learntolead.com for free articles and videos on sales and leadership. Dave’s 13th book, “It’s Not Rocket Science: Four Simple Strategies for Mastering the Art of Execution” will be released fall of 2015.

Dave Anderson is President of LearnToLead which provides in-person and virtual training to many of the world’s best dealerships. Dave speaks to dealer groups over 125 times

M EE T T H E EX P ERT S B O OT H 2 2 3 AT T H E BH P H WO RLD CO NV ENT I O N

Chris Leedom

David Brotherton

Paxton Wright

Scheduled as follows: Sunday, April 12 th 6:00 to 7:00 PM Monday, April 13 th 5:30 to 6:30 PM

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DAVID J. WIGGINS ACCOUNTING PRINCIPLES

LEASE HERE-PAY HERE: It’s a question that gets asked a lot. Should your dealership sell cars or lease them?

W

e get a lot of questions regarding Lease HerePay Here (LHPH) programs and their comparison to Buy Here-Pay Here (BHPH) programs. I have been hesitant to tackle this question in the context of this publication due to the complexity involved in making comparisons and the number of issues that should be considered in evaluating which structure is correct for your business. At the request of many readers, I will highlight some of the key considerations to help you make an evaluation for yourself.

I am often asked if one approach is inherently better than the other; the quick answer is “no.” Both LHPH and BHPH have pros and cons. Either structure can be better or worse depending on your specific situation.

The General Advantages of Leasing:

Lower overall sales tax for leasing transactions. In most states the tax rate and tax for LHPH are similar to BHPH. • Some states allow LHPH transactions to avoid upfront sales tax, but instead pay it on the full monthly payments

made by the customer.

• Some states allow the dealership the option of paying the sales tax on the lease cap cost or the monthly payments.

The cap cost is generally very similar to vehicle purchase price in a BHPH transaction.

• Some states allow a LHPH transaction to pay the tax on a lower price than the equivalent vehicle sale price. States following this practice will generally provide a sales tax benefit to the dealership for leasing versus buying.

Easier repossession and “curing” laws. In many states it is much easier to repossess a vehicle in a

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BUSINESS OPERATIONS

IS IT RIGHT FOR YOU? LHPH transaction. This is because the vehicle in a LHPH transaction is owned by the dealership rather than the customer.

Many state’s sales tax may be able to be paid each month based on the monthly payment. This may benefit cash strapped dealerships. In general the overall sales tax will be similar for LHPH transactions since you are paying on the full amount of all monthly payments being received, but you do not have to pay sales tax on uncollected amounts.

Often the sales tax is paid up front in BHPH, so you are not paying sales tax on the interest collected each month. Unfortunately when a charge-off occurs, most states do not allow

for a refund of the sales tax that you paid up front.

The overall sales tax cost of LHPH versus BHPH transactions is generally about equal.

Generally lease transactions are subject to less regulation. Most regulations in the industry are focused on the sale and financing of vehicles.

Leasing, being less used, has not received the same amount of regulation as BHPH transactions.

Leased vehicles, since still owned by the dealership, may be able to be depreciated at an accelerated rate. This could generate significant income tax deductions up front. This

is generally a timing issue; the overall tax is not less, but a dealership may get larger depreciation deductions in the first few years of starting a LHPH program.

Leasing may not require the use of a “related finance company” (RFC).

Generally due to the income tax treatment of BHPH transactions, it is necessary to setup an RFC to produce taxable income that is reasonable and follows the cash receipts of a particular transaction. Since most lease transactions are structured as “operating leases,” income is only reported as it is received each month. An operating lease is a structure that

doesn’t essentially convey ownership to the lessee, but instead charges a lease payment to the lessee for use of the vehicle for a period of time.

The General Disadvantages of Leasing:

Bank financing can be much more difficult. Most banks that serve the LHPH or BHPH industry are structured to better analyze a BHPH dealer. Banks understand the concept of a note receivable and can determine how much in these assets are held by a dealership. Similar LHPH structures are generally much more difficult to understand.

Therefore banks are more

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DAVID J. WIGGINS ACCOUNTING PRINCIPLES reluctant to lend to LHPH operators.

In addition, banks know that third party purchasers exist that will buy BHPH note receivable portfolios.

This liquidity provides a benefit to a bank in the fact that if a BHPH dealer operation cannot make its bank debt payments that the bank can sell the notes to a third party and get money to pay down its loans with the bank.

The accounting for lease transactions is generally more complex.

This results in many LHPH organizations not being able to determine their actual profitability and cash flow. This can be a very significant issue, as it is difficult to manage and make informed financial decisions if the accounting for such a business does not provide useful information.

Frequently we find this is due to the inherent limitations of reporting lease transactions, but as often, it is due to difficulties in handling the day-today accounting for such transactions and the related residual values.

It can complicate the sale of your dealership. It may be more difficult to analyze a LHPH operation, therefore the sale of such a dealership is often more difficult.

Few software vendors provide comprehensive lease, collection, and accounting programs

Just because a vehicle is leased, does not change the economics of the transaction. You should analyze a lease and be certain that payment structures, length of contract and cash in deal are similar to those used in BHPH.

for LHPH operations.

Currently there are only a couple of packages available to properly track and collect lease transactions. Often such LHPH programs are an “add on” to a BHPH system and therefore are not as robust and complete as the systems available for BHPH operations.

Lease transaction accounting reporting is currently under review to determine if current GAAP(Generally Accepted Accounting Principles) is useful to financial statement readers. As such, it is likely the proper reporting for leases may change in the future. While the ultimate resolution may be good for the industry, it leaves uncertainty regarding its effect on a LHPH business and its related financing sources.

It may be more difficult to raise equity. Since the accounting is more complex and the financial statements are more difficult

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to understand, it will likely be more difficult to attract equity investors.

What decision should you make?

There are many factors that must be considered in evaluating LHPH versus BHPH, but the issues that affect most people in determining the correct structure will relate to these four areas: • The accounting and understanding of financial statements.

• Raising capital or borrowing money.

• The sales tax laws relative to the specific state you operate in.

• The potential collection or marketing benefits of leasing transactions versus purchase transactions.

Dealers will point out that in leasing transactions it is possible to do multiple leases of the same vehicle, lease higher value vehicles,

offer leases with less down payment, and have shorter lease terms in comparison to BPHP transactions.

Just because a vehicle is leased, does not change the economics of the transaction. You should analyze a lease and be certain that payment structures, length of contract, and cash in deal are similar to those utilized in BHPH transactions.

We have just scratched the surface on addressing issues and differences between BHPH and LHPH. You should address such issues in more detail with your advisors before determining the best direction for your business.

Dave Wiggins, CPA is a principal with CliftonLarsonAllen’s dealership and Buy-Here, Pay-Here group team. He has extensive knowledge of the inner workings of dealership and finance company operations, including new developments regarding regulatory compliance issues. Dave specializes in federal and state taxation with the unique perspective of those specific strategies that apply to dealership, finance companies and their owners.

He can be reached at david. wiggins@CLAconnect. com.

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Call 800-966-8733 ext 3 or email Meredith@leedomgroup.com for a copy of the 2015 Media Kit. DEALER BUSINESS JOURNAL | APRIL 2015 | 27

ALEX PRICE SKIP TRACE

REFLECTING ON AN INDUSTRY HERO What a “grown-up kid” learned from a long-time friendship with legendary skip-tracer Harvey Altes.

I

found out this morning that my friend, mentor and Godfather of the Recovery Industry, Harvey Altes, has passed away. I know there has never been anyone who has done more in our beloved industry than Harvey, but it is not just the industry

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that owes this man a debt.

There are hundreds, if not thousands, of those who have been individually graced by the influence of Harvey. They all have their own stories to tell. This one is mine.

It starts almost 30 years ago. I was still working for World Omni in Deerfield Beach, Florida when my phone rang and it was Rusty Ansel on the other end of the line. He said that Harvey had

heard of me and wanted to know if I would come to Orlando for the upcoming TFA Convention and speak.

At the time I was very full of myself. (Yeah, I know hard to believe!) I agreed to go thinking that I could teach people a few things. I later learned what an honor it was to be invited, since clients weren’t welcome at TFA meetings, which were generally for members only.

After speaking for about an hour at the event Harvey walked up to me and said, “Good job, Kid.” I was invited to sit at

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DEALER OPERATIONS

his table for lunch where he began to educate me on the business and on life in general. At the moment I may have failed to fully appreciate what was about to become a turning point in my life.

A couple days later I was sitting pool-side in the evening at the Embassy Suites in Orlando with Ron Brown, Millard Land, Rusty Ansel, and of course, Harvey. He looked at me and said “Kid, you will never make any money finding skips while working for someone else.” He then proffered the idea that I should own my own Skip-Tracing company. For various cold, hard facts at the time this seemed like an unreachable dream to me, so I listed what I considered to be impossible hurdles. But Harvey was a dream-maker who saw the big picture, so with the wisdom and patience needed to deal with a kid in need of some guidance, he stopped me there, and said, “Oh, we can help you with that. And how about we set you up as the first skip-tracer in history to ever be in one of the trade associations?” Following Harvey’s lead, each one of those men present that night spoke up and

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offered help with clients, money and everything in between. They all became my mentors and helped to shape my life and career going forward. Later that evening I spoke to my wife at length in our hotel room and left World Omni the following Monday to see where this new path would lead.

Over the next several months and years I received a call every day from one of the men in that initial meeting. And Harvey himself called each Friday afternoon, wanting to know how much money came in, how many clients I solicited that week, how many skips I found, what I was charging.

Perhaps most importantly, he asked how much I put in savings for when business slowed down, because as he warned me, “It always slows down Kid!” One day I was asked to speak before a group that I did not really know much about, so I called and asked Harvey’s advice. His reply became one of my favorite Harvey-isms: “Kid, just make sure they spell your name right on the check.”

Those lessons never stopped.

A couple months ago for what would turn out to be our last conversation we spoke at great length about the industry and where it was heading his mind still sharp as ever. Obviously I was well beyond anyone’s

perception of a child, and yet he still called me ‘Kid’. I was, and will always be, his “kid.”

Harvey’s foresight and determination to grow this industry caused him to influence many who needed and benefited from his guidance. As I said at the beginning there are hundreds of stories, and this is mine. I can see him in heaven now, organizing a group of people and holding court with a cigar in his hand. Lord, take care of The Godfather until we meet again. R.I.P. Harvey Altes I hope I made you proud!

The Altes family is my family and they will forever be in my prayers.

I have no words to describe my feelings today, so I went to my Bible as I do in times of sorrow and happiness. It always has an answer for me.

Corinthians 5:6-8: So we are always of good courage.

We know that while we are at home in the body we are away from the Lord, for we walk by faith, not by sight. Yes, we are of good courage, and we would rather be away from the body and at home with the Lord.

Alex Price is a nationallyrecognized expert on the Art of Skip Tracing with more than years of experience in skip-tracing, collections and public speaking. He has become a highly soughtafter speaker in the auto

It’s not just the industry that owes this man a debt.

There are hundreds, if not thousands, who have been influenced by Harvey. recovery, bail enforcement and finance industries.

He combines old school skip-tracing methods with new age cyber-tracking technology to equip attendees with tools that he gained through invaluable experience. You can locate him via e-mail at alex. price@masterfiles.com.

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DANI SHERROD SALES AND MARKETING

EMAIL IS W STILL IN THE GAME For the money, there’s not a more effective, easier way to connect with customers than through email marketing.

ith so many technological gadgets and goodies available in todays marketplace, there are hundreds of thousands of ways to interact with customers but one of the best ways is still the old tried and true method of email marketing.

Email marketing is most definitely still in the game with statistics like open rates among customers in the 10 to 25 percent range (and even non customers up to four percent) compared to direct mail sell rates just at one percent. Here are five reasons why email is still one of the most effective modes of communicating with customers.

Email is an easy way to reach mobile customers.

One reason email marketing has value for business owners is that it’s an easy way to start reaching consumers on mobile without investing a lot in new technology or software. According to an April report from Pew Research Center, 52 percent of US cellphone owners access their emails from their phones. Email marketing also works with other mobile devices. In July, Forrester Research released a study that found 42 percent of retailers’ email messages were opened by consumers on their smartphones and 17 percent were opened on tablets. This means that nearly three out of every five email marketing messages doubles as a mobile marketing message. Using email is better for mobile marketing than SMS because: 1. It works on mobile devices other than phones 2. Emails are free for the consumer, whereas texting may incur a charge

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3. Emails have far more space for content than text messages, allowing for better marketing pieces.

It’s an effective way to keep customers informed.

Email marketing isn’t something marketers do just because they can and it’s easy.

The tactic is very effective at helping business owners and consumers stay connected.

In fact, consumers often seek out email marketing campaigns from their favorite brands and local stores. This goes beyond coupons (which we’ll discuss next). Nielsen reported that 28 percent of US online shoppers subscribe to store or product emails in order to stay informed. A study from Loyalty 360 stated that 59 percent of US moms would sign up for email updates from brands if rewards were offered. And email marketing can be used as a way to deliver content to consumers.

A 2013 study by the Relevancy Group noted that marketers who add video to their email campaigns see an average rise in revenue of 40 percent. There is a real value to staying connected to customers and email marketing makes that easy to do.

Email coupons drive online and in-store sales.

The Nielsen study mentioned above also found www.DealerBusinessJournal.com

that 27 percent of US online shoppers subscribe to store or product emails in order to save money. This conclusion is backed up by recent data from Deloitte that found 65 percent of consumers say email coupons are important when grocery shopping online. Similarly, Shop.org reported 64 percent of US Internet users have printed a coupon from an email.

Though consumers are looking to save money, it can turn into increased revenue for the retailer. E-coupons are big business, and email marketing is at its heart. The number of mobile coupons used is estimated to double over the next five years to reach 1 billion people. Email marketing is a good way to start reaching the growing number of online bargain hunters. The big brands are already using this tactic for that purpose. BIA/Kelsey reports that 36.6 percent of national businesses use email marketing for local promotions.

It’s easy to customize and integrate into other marketing tactics.

The versatility of email marketing is another reason marketers should keep the tactic in their marketing toolbox. Depending on the depth of the email database and the skill of the crafter, email marketing messages can range from simple to very complex. Emails can

be personalized to include the name of the user and even more. A small study of 139 marketers from Retention Science found that websites use several kinds of personalization tactics that can easily be applied to email. Nearly half of US online retailers used personalized product recommendations (44.9%), about a third added the customer’s name and/or a unique welcome message (31.5%), and a quarter of the respondents reported adding shopping cart reminders (27.6%) to cover all of their personalization bases. Email marketing can also be utilized with just about any other marketing tactic, which makes email an important part of any integrated marketing campaign.

Email marketing is inexpensive.

To sum up the best reason to use email marketing: it’s easy, effective, and inexpensive.

Email marketing allows business owners to reach a large number of consumers at a rate of pennies per message. For small-business owners on a budget, this makes it a better choice than traditional marketing channels like TV, radio, or direct mail. You don’t have to take my word for it. A joint study from Shop.org and Forrester Research found that 85

percent of US retailers consider email marketing one of the most effective customer acquisition tactics.

The point of all this is that email may be an old tactic, but it remains a vital one. It’s relatively easy to get started with email marketing, so there’s no excuse for business owners to not be taking advantage of it. Email marketing can have a do-it-yourself approach, or for business owners who may be too busy to handle it on their own, hire a web marketing professional to help.

The most effective email marketing is wellplanned and organized, not impulsive or haphazard.

The first step is to identify what you want your email campaign to accomplish.

From there, you can decide how to execute it.

Just like any other marketing strategy, always start your campaign on paper, with a clear and concise view of your plan and expected results.

There are two types of email marketing, loyalty and conquest. Both yield different results, and require different action steps but, both are just as important, in keeping your sales wheel moving in the right direction.

Loyalty. This strategy utilizes bi-monthly emails to current customers, to attempt to keep them

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DANI SHERROD SALES AND MARKETING loyal to your products as well as up-sell them into bigger and better products than they have currently purchased.

These types of campaigns can be “variable” or “static.” Variable means, your emails are customized to the products each customer has bought, with suggestions for adding more products similar to the one previously purchased. Static means that all previous customers get the same email. Depending on the quality of your database, you will have to decide which one is best for your company.

In loyalty campaigns, always remember to drill home the name, address, and website, and emphasize your logo into each header. A large part of this is branding, on average only 25 percent of your customers will read the entire message, so make it three-fourths informational, and onefourth sales targeting.

For example if you had an outdoor furniture business, deliver relevant informational articles about outdoor ideas, outdoor hobby’s, safety tips, and then a coupon for your product, at the bottom of the article.

If the customer is able to reply directly to your email, make sure you spell that out in your email. Use phrases like, “We would love to hear from you, please reply to this email to give us your

thoughts.”

Conquest. The definition of conquest is the act or process of conquering, so conquest emails are basically trying to acquire more customers, or take your competitors customers and making them yours!

Figure out who your target audience is, such as; for an athletic store, who buys at your store? Men or women? What age bracket?

How far do they drive to your store from their house?

Then you will need to find a data provider, that sells this information, give them your target audience and a certain mile radius around your store, they will run a query and then you decide how many thousands of customers you want to target.

In these emails, you should push not only your business name, address, logo and website, but also the reason why they should visit you. Answer for them what problem you are going to solve in their life. Back to our example for an outdoor furniture store, you would say, “Our outdoor furniture has a lifetime guarantee, and is available today!” Give price ranges, not actual price, “you can have your complete outdoor furniture set for as little as $169.99 up to $359.99. Lots of staff to help, no waiting, no credit check!” The last thing is a special coupon, “25% off this weekend only,” used to

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create a feeling of urgency, and encourage customers to bring a printed copy of the email with them. You are hitting a wide email audience, with specific needs, so you need to have something for everyone in your message.

If you decide you need the services of an email marketing partner, price is not the only thing to look at. You want to make sure that the company is Can Spam Compliant, which will ensure that the emails are delivered in a timing that is approved. Remember spamming the general public is not legal; it could cost your business thousands of dollars and hurt any future campaigns that you may want to send.

The marketing partner you choose should be able to deliver you results in real time as the campaign proceeds. You would expect to receive reports that look like this: Email Blast on 3-06-15: Email Name: Roses are better than Violets Sent: 1621 Opened: 131 (8.08%) Unsubscribed: 7 (0.43%) Total Failed Delivery: 319 out of 1,621 (19.68%) Complaints of SPAM Reported: 6 (0.37%) Average cost of this campaign: $65.64 Keeping track of each email and the results will

help you know which ones to run again in the future.

Poor performing emails should not be used again.

Use the emails that draw your best stats only.

Most of your stats for conquest should have a three to four percent open rate, with one percent of them visiting your store.

So the moral of this story is to send a very large list, and you should see some decent revenue off of that campaign. For example, if you send 10,000 emails you could expect 400 people to open it and four customers visit your store.

Email campaigns are not expensive and generally an easy thing to do. Industry standards suggest you can run the same address list multiple times in a six month period, but then it is recommended to get a “fresh” list, in order to hit your target better.

Dani has been in the retail automotive industry for over 16 years, serving as a Marketing Director, and Sales Manager for Automotive dealerships and Technology Marketing Companies. She displays a blend of creativity and analytical skills, as well as consistently generating excellent ROI and frequently cutting marketing spend while increasing sales.

She has pioneered a track record of leading high-risk initiatives to outstanding financial success. Reach her at dani@daniwebadvertising. com.

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TIM BYRD DEALER REINSURANCE

34 | APRIL 2015 | DEALER BUSINESS JOURNAL

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BUSINESS OPERATIONS

SOLVING

INSURANCE

DILEMMAS

Instead of spending your time and resources to track down someone else’s premium, consider collecting it for yourself.

T

here’s another one to add to the stack of lapsed insurance notifications. Another customer has decided that having insurance is not a priority.

Some you can’t blame. The premium is higher than their car payment. You’ve hired a full-time person just to make those calls every day…and why? To cover yourself, that’s why. Because, if they total the car, they can’t afford to pay for a car they no longer have, that’s why.

And then, you’ll lose them as a customer, not to mention the loss of the car itself. So, you call them up, “You agreed that you would keep insurance on this car. If you don’t have your insurance reinstated right away we are going to have to repossess your vehicle.”

But wait. If they are paying you like clockwork, do you just overlook the fact that their insurance has lapsed? After all, payments are the lifeblood of your Buy Here-Pay Here business. Dilemma: you need them to keep paying, but your collateral is unprotected. So, (this is logical) you pay someone to call them and threaten to repo them if they don’t go spend money on insurance with someone else. Or you take a chance. You let them ride, unprotected. You, by the way, are the unprotected one.

The problem begins when the customer allows their coverage to lapse, therefore putting into jeopardy the dealer or finance company’s collateral. Industry research indicates that 50 percent of most BHPH books of business, are uninsured. Customers put an average of $300 into www.DealerBusinessJournal.com

DEALER BUSINESS JOURNAL | APRIL 2015 | 35

TIM BYRD DEALER REINSURANCE insurance policies that they let lapse within 90 days, essentially throwing away that money. Many dealers have personnel on their own payroll exclusively for the purpose of making collection calls for the financial benefit of insurance companies!

Seriously?

What if you made a deal with your customers?

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

That is the definition of Debt Cancellation Coverage (DCC). You collect the premium with each car payment. You can make it a part of their monthly payment to you or as a side note. Debt Cancellation Coverage is a solution to relieve the lapsed insurance problem and turn what once was an expensive, never-ending problem into a tremendous profit center.

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

So you profit from money that you had required

You require that your collateral be covered.

Since you require it, and you make collections calls on it, doesn’t it make sense that you profit from it? the customer spend with someone else. DCC alleviates the need for you to require full coverage insurance.

DCC puts you in control when there are claims.

Instead of dealing with the insurance adjusters, you have a professional claims team looking out for your best interest, nationwide.

DCC dealers avoid having unprotected collateral on the road and having to absorb uninsured losses.

Plus, DCC makes it simple for you to enroll your current customer base right away as well as your new customers, at time of sale.

You require that your collateral be covered. Since you require it, and you make collection calls on it, doesn’t it make sense that you profit from it? This is not liability insurance. The State requires they get liability, but that is no longer your burden.

Another very important benefit to owning a Dealer-owned reinsurance

company is tax benefits. I am not a CPA, but I know some good ones. They tell me in layman terms, reinsurance companies are small property and causality companies. “Small property and casualty insurance companies with less than $1,200,000 in annual net premiums may elect to be taxed only on investment income under Internal Revenue Code 831 (b).” Distributions are taxed at the dividend rate.

These corporations, unlike “S corporations” or Limited Liability Corporations (LLC) where income flows through to the shareholders annually, are “C corporations.”

831(b) C corporations allow the shareholder a more long-term approach.

If a distribution is not desirable, you can retain the money in your reinsurance company, or you or your other business entities may borrow money from your reinsurance company.

831(b) Corporations make great retirement programs.

Earned reserve can be invested in stocks, bonds or other securities within the trust account. 831(b) corporations make a great estate planning tool.

By the way, your vehicle service contracts and warranty reserves can be ceded into the same Dealer Reinsurance Trust Account.

Collecting premium, contingent liability, taxes, accounting, claims, training and know how.

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

DealerRE.com or by calling 804-824-9533.

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