JULY 2018
Information and Insight for Florida Used Car Dealers
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FIADA AND NIADA TEAM UP FOR THE ANNUAL CONVENTION See the highlight reel starting on page 16
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MAILING ADDRESS 1840 Fiddler Court Tallahassee, FL 32308 TELEPHONE (850) 385-2712 (800) 237-0448 FAX (850) 385-3251 WEBSITE www.FIADA.com EXECUTIVE COMMITTEE Scott Lanier, CMD President Brad Joel Senior Vice President Lisa Compagno Chairman of the Board Jenay Rhoads Secretary Phil Risley Treasurer Frank Fuzy Regional Vice President George Hickey Regional Vice President Steve Marbais, CMD Regional Vice President Brandi Noegel Regional Vice President Jim Winterick, Sr Regional Vice President FIADA STAFF Lisette Mariner, CAE Executive Director Terry Myers Educational Instructor Jason Berthiaume Education and Events Manager Victoria Sams Membership Manager Christy Taylor Editorial/Advertising
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FIADA • 1840 Fiddler Court Tallahassee, FL 32308 (850) 385-2712 • Call/Text: (800) 237-0448 Fax (850) 385-3251 • www.FIADA.com The Independent Dealer is a publication of: Florida Independent Automobile Dealers Association, 1840 Fiddler Court, Tallahassee, FL 32308 The magazine is published every month in Tallahassee and distributed to Florida new, used, wholesale and lease/retail car dealers. Advertising rates are available upon request. The statements and opinions expressed herein are those of the individual authors and do not necessarily represent the views of Independent Dealer or the Association. Likewise, the appearance of advertisers, or their identification as members of FIADA, does not constitute an endorsement of the products or services featured.
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Contents July 2018
For members of the Florida Independent Automobile Dealers Association
C O L U M N S & F E AT U R E S 4
President’s Message Scott Lanier, CMD
6
Executive Director’s Message Lisette Mariner, CAE
8
Membership News
10
Back to Basics Independence ain't free. That's true for dealers as much as it is for America.
12 Industry News News and headlines of interest to the Florida Used Car Industry and beyond. 14 Are You Ready to Collect Sales Tax Nationwide? There is some buzz about a recent Supreme Court ruling and the potential effects it may have on sales tax between states. Attorney James Sutton explains. 16
What a Team!: Rewriting the Playbook 2018 Take a peek at what happened during the NIADA Annual Convention at the Rosen Shingle Creek Resort in Orlando in June.
20
Make Market-Smart Used Vehicle Pricing Decisions A solid pricing strategy is deliberate, not reactionary. Use these three tips to make sure you are making the right decisions.
22
Auto Lending and the Servicemen Civil Relief Act (SCRA) Two articles aimed to help you review your responsibilities as a lender to men and women in the armed forces as well as thoughts about repossession liability.
28
A Look at Current Legal Issues Attorneys Tom Hudson and Nicole Munro recap recent federal and legal developments of interest to dealers.
July 2018 — Independent Dealer — 3
FROM THE PRESIDENT
Florida – What a Great State! BY SCOT T LANIER, CMD, FIADA PRESIDENT
H
ave you stopped and looked around lately, Florida is booming and it seems we are only in the beginning stages.
Florida’s population is over 21 million, and the higher end of the projections, according to the Florida Chamber of Commerce in an article by Melissa Roberts, have us growing to 26 million by 2030. Do you realize that Florida’s population will be larger than the current population of Australia! It is projected that South Florida, Miami-Dade, will see the most growth in the next 12 years. Here in Orlando we are busting at the seams, as I travel through town there are cranes everywhere building homes, commercial buildings, markets, condos, and roads. The road construction is unbelievable. Since Orlando is in the middle of a six-year major road project, it is difficult at best, to find roads that are not under construction.
Cranes and equipment seem to be the norm in most of Florida's metro areas. Miami-Dade is projected to see the moth growth over the next decade.
It is estimated that between 135,000 to 300,000 Puerto Ricans have migrated to Central Florida since the devastation of Hurricane Maria. Florida is home to over 800,000 Puerto Ricans and is only second behind New York. My guess is that we will soon over take New York. Speaking of New York, Florida has become the 3rd most populous State in the Union overtaking New York. Only California and Texas are larger than Florida. There seems to be a trend of people leaving higher tax states looking for a lower cost of living, more business friendly, and with less regulation. Florida fits the bill! 4 — Independent Dealer — July 2018
Why do I share this information? It is because of the opportunities I see in these numbers. With a current population of 21 million, and growth over the next 12 years of 4-5 million more people and figuring at least
half of them will need transportation, that gives an opportunity to sell vehicles to 11-13 million folks. Can’t get around Florida without a vehicle. With so much growth comes so many opportunities, what strategy will you employ to increase your share of the growth, and prosper more? Scott Lanier FIADA President www.fiada.com
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EXECUTIVE DIREC TOR’S MESSAGE
How to Spread the Word and Earn $5,000 BY LISET TE MARINER, CAE, EXECUTIVE DIRECTOR
W
e need you! Did you know that there are over 10,000 licensed dealers in Florida and only 800 are members? Granted only about 3,500 sell 10 or more cars a month, but that’s still a whole lot of dealers that don’t know about the best kept secret…the FIADA. Here's another little secret, you are the best public relations resource FIADA has! But, when someone asks you to describe what FIADA is or what FIADA does, do you find it difficult to answer quickly and simply? If so, you need an “elevator speech,” a brief prepared statement that simply and concisely explains FIADA and highlights our accomplishments through advocacy and education. Keep your speech short — no more than 30-60 seconds — and focus on specific FIADA projects and achievements. Give some general information about FIADA, and explain the benefits you have received from being a member. Be as specific as possible, and avoid generalities like “FIADA changed my life” and “FIADA has changed the world.”
Legislatively, FIADA has accomplished … stopped a Florida Lemon Law, enacted curbstoning laws to make it more difficult to curbstone, and year after year defeat legislation that impacts your business. So that … (benefit to community, world, and you) you can rest easy and stay in compliance with the numerous resources and services they provide. We are committed to… serving the industry and providing the best resources for dealers. These are of course just some talking points to help get you started. Use them to put together your own speech and then test and refine it until you have a simple, clear message that works for you.
Hello! My name is ___________ and I’m a member of the FIADA (Florida Independent Automobile Dealers Association).
You could be the one to earn $5,000! The person that recruits the most members between now and September 30 will earn $5,000. You can make the difference. Talk to dealers at the auction, at church, at the rotary, or wherever you happen to bump into them. Remember to also talk to your vendors, make sure they are members of the association. They count in your membership goal too.
FIADA is… the nonprofit association for independent dealers. We represent your business interests in the Florida Legislature and also have discounts on the products and services you need to succeed. We also have an attorney available to answer your questions which is a huge savings.
Good luck, I can’t wait to report in October who rose to the occasion and became the best spokesperson for the association and helped the Association expose the mystery of what we do and how we protect the industry. Without the FIADA, there certainly would be more regulations and continued burden on the industry.
What we do in our community is… support organizations like “Cars for Kids” to help Florida Sheriff ’s Youth Ranches build their dealership to provide funding for the kids in need.
If you have an idea or success story, please share. Email me at lmariner@fiada.com or text me at 800-237-0448.
Here are some ideas to help you hone your message:
6 — Independent Dealer — July 2018
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MEMBERSHIP NEWS
New Members
JUNE 2018
BAYWAY AUTO SALES Pensacola, TX Michael Stevens Sponsor: FIADA.com
EQUITY AUTO FINANCE Ft. Lauderdale, FL Henry Silvia Sponsor: Motorcars of Stuart
DRIVE NATION USA Bradenton, FL Cynthia Stillings Sponsor: Joe Kearsy/NIADA
EXQUISITE AUTO Sarasota, FL Joseph Stern Sponsor: FIADA
Renewing Members
JUNE 2018
30+ Year Members Edison Bridge Auto Sales Florida Auto Exchange Co. Mike Hill Used Cars, Inc. Mike Kashtan's Superior A/S Southeast Car Agency, Inc. 20+ Year Members Lash Auto Sales
Ft. Myers, FL Dunedin, FL Panama City, FL Pinellas Park, FL Gainesville, FL Lakeland, FL
10+ Year Members Apex Auto, Inc. Checkered Flag Auto Sales Hometown Auto Mart, Inc. Trinity Motors Vans Cars & Trucks VEMO Auto Auctions Warren's Auto Sales
Altamonte Springs, FL Lakeland, FL Dunnellon, FL Sarasota, FL Brooksville, FL Gainesville, FL Avon Park, FL
Under 10 Year Members ABCOA/Deal Pack Software American Classic Car Sales Assured Motors
Jacksonville, FL Sarasota, FL Gibsonton, FL
GARY GREENE Sarasota, FL Sponsor: Terry Myers MONMARS AUTO CLUB Tampa, FL Ning Ao Sponsor: FIADA
Car Spot of Central Florida Cars Unlimited Cliff Shuler Auctioneers Coastal Cars & Carts Genuine Motorcars, Inc. Greenway Auto Sales JXT Automotive, LLC Luxury Auto Mall INC Myhree Motors LLC Nationwide Southeast LLC Onyx Automotive, LLC Orange County Motors, Inc. PaymentVision Premier Motor Cars Recovery Center & Management Seth Lee Corp Thaney & Associates PA Title Technologies, Inc. Wing Motors Automobile Corp Woodall Auto Wholesale, Inc.
MSKMOTORS Bradenton, FL Matthew Keefer Sponsor: David Allion VIN AUTO SALES LLC Ocala, FL Frederico Valencia Sponsor: VEMO Auctions
Melbourne, FL Tampa, FL Titusville, FL Panama City Beach, FL Saint Petersburg, FL Jacksonville, FL Plant City, FL Homestead, FL Williston, FL Rosemont, IL Largo, FL Orlando, FL Jacksonville, FL Bonita Springs, FL Ft. Lauderdale, FL Tavares, FL Orlando, FL South Jordan, UT Miami, FL Ocoee, FL
Rejoining Members JUNE 2018
STEPANEK'S AUTO SALES & SERVICE, INC Vero Beach, FL John Stepanek Sponsor: FIADA
Download the FIADA app now to get access to all of your FIADA benefits whenever you need them: COUPONS | Tap of the app you can access your coupons and discounts whenever and wherever you like. CALENDAR OF EVENTS | Access the calendar and register for upcoming events all in one place. SOCIAL MEDIA | Connect with FIADA via Facebook. TECHNICAL ASSISTANCE | Use the FIADA app to help find answers with our technical assistance line.
8 — Independent Dealer — July 2018
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July 2018 — Independent Dealer — 9
BACK TO BASICS
Independence/Freedom Ain’t Free BY TERRY MYERS
The freedom to be an independent auto dealer, just like your patriotic freedom, does not come without commitment. Unite with your fellow dealers and ensure liberty for all.
I
Education is one of the most valuable tools available to your current and long-term success. Think conventions, town hall meetings, sharing ideas over coffee at the auction, etc. This is one my favorite bumper It is equally important, if not more stickers and it is so true. You, the so, that legislators and others that Independent Dealer, are the backbone regulate your industry are well of this industry and contribute greatly informed (educated) about the to the state and national economy. positive and/or negative consequences The vehicles you provide are one of of language contained within rules, the many reasons so many families laws or statutes they are influencing. can enjoy the freedom to choose what The FIADA and NIADA lobbyists they do to make a living and live watch what is about to be written where they want, while pursuing and and how legal language may have living a better life. This helps allow a positive or negative effect upon them to pass these options along to One element that can hinder or your ability to make a living. They their children. enhance your independence/freedom report their findings so that actions How many people do may be taken to If you want to remain independent, you need you know that walk support the positives to work? Everybody to join others with like desires that maintain and eliminate the needs wheels and your independence/freedom. negatives. that is what you provide. Any set of Often it is necessary wheels will satisfy to try and educate the legislative that (need). However, they don’t is legislation. Legislative intentions sponsors about the unintended want just any set of wheels. They look are usually well meaning. However, consequences of the proposed bill’s around at the many choices you are unintended consequences may language. It is important that the able to provide and then focus on the rear their ugly head if the internal independent dealer’s (your) voice one set of wheels that sets their heart language is not well thought out. be heard with suggested language (emotions) pumping. Out comes the Some language creates a positive to support the intended results wallet and when it gets close enough atmosphere while some a negative. while eliminating or minimizing the (finances), you have a sale! As they Sitting back, not getting involved unintended consequences. drive off the lot, the radio is blasting, and thinking, “Because I am an the A/C is on cold and the windows independent, small dealership, all will If I think my voice by itself will have are down—so they can be seen, (pride work out for the best,” is professional an impact with my legislator, I am in the ride). suicide. f you can read this, thank a teacher. If you can read this in English, thank a soldier.
10 — Independent Dealer — July 2018
As long as the ride continues to perform, the chance they will return for their next ride increases dramatically. They too have independence/freedom to choose. Providing inventory that meets the needs and wants of your customer is extremely important to the current and future success of your business. Repeat business and positive referrals are what separates the successful from the unsuccessful. The more business you have, the greater choices/ independence you have.
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gravely mistaken, and I am not taking my future, my family’s future and my customer’s future seriously. If I want to stay independent, I need to join my voice with other professionals inside my industry. I need to care enough about my and my family’s future to take an active role. I know the FIADA wants to hear what I have to say. They gather my comments along with the comments of other professional independent dealers and bring that to the Board or Directors meetings, as well as specialcalled meetings. Often, many member dealers will band together and drive, fly to Tallahassee or Washington D.C. and meet directly with the legislators and/ or their staff to educate and provide input that affects the proposed language. Often, member dealers from other states join these active educational visits. If you truly want to be an independent dealer, you need to accept the fact that independence/freedom ain’t free. If want to remain independent, you need to join others with like desires that maintain your independence/ freedom. You are not too small or too big to JOIN THE FIADA, today! Call the office at (800) 237-0448 and ask for Victoria, Jason or Lisette and claim your rights to Independence/ Freedom. Call me, (727) 804-7375. Call somebody!
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Will you remain a ‘voice’ in the wilderness, or, are you a “VOICE” that gets heard? Articles are the opinion of the author and are not intended to be legal or accounting advice. The intent is to share thoughts and concepts that help the business owner(s) find new and perhaps revisit, ways to be as successful as they are capable of being. Terry can be reached at (727) 804-7375. Email: tmyers@floridaautodealerschool.com. Feedback is appreciated and encouraged. Terry LB Myers, author, lecturer, FIADA instructor, FADS owner/instructor.
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July 2018 — Independent Dealer — 11
INDUSTRY NEWS
News and headlines of interest to the Florida Used Car Industry and beyond
NIADA Rolls out New Florida Sheriffs Youth Ranch Certified Master Dealer Class Get a Bus! NIADA is re-launching its Certified Master Dealer program this summer. NIADA's Retail 20 Groups moderator and dealer consultant Justin Osburn, the course's new instructor, announced the reboot during the Certified Master Dealer Discovery Forum during this year’s NIADA convention. The session, attended by both CMDs and dealers interested in earning that designation, offered dealers a sneak peek at the updated curriculum. Osburn's first session of the new CMD will be held Aug. 15 - 17 in Tampa, Fla. Dealers can register for courses at www. niadacmd.com
Put off Hope, Until October The nation's first private school voucher program for bullied students was passed by the Florida Legislature this year. The Hope Scholarship Program will provide the parent of a public school student who was subjected to battery, harassment, hazing, bullying, kidnapping, physical attack, robbery, sexual offenses, threat or intimidation, or fighting at school the opportunity to transfer that student to another public school or to request a scholarship for the student to enroll in and attend an eligible private school. The Hope Scholarship Program technically became law on July 1, however the date for dealers to implement it is not until October 1. On that start date, purchasers will be able to make a designation to Step Up For Students to fund scholarships through the Hope Scholarship Program. The Florida Department of Revenue is still drafting the Contribution Election Form that will be provided to purchasers by the dealer or tax collector. As the details are worked out, FIADA will be communicating compliance information. For now, however, feel free to get some initial answers at https://www.stepupforstudents.org/for-donors/ how-to-support-the-hope-scholarship/#faq 12 — Independent Dealer — July 2018
A partnership of Ocala-area businesses including UF Health, Ringpower and The Parts House recently donated a bus to FIADA member's Florida Sheriffs Youth Ranch. Thanks to FIADA member John Cousins for capturing this photo at the bus donation event.
Long-time FIADA Member 3445 Car Store Retires After 41 years of business, and FIADA membership, Henry A (Tony) Bond has decided to retire. 3445 Car Store was a landmark at 3445 34th Street in St. Petersburg and a toprated dealer in the St. Petersburg area. "Thanks for everything you have done, and are continuing to do," Bond wrote in a letter to FIADA. "Keep up the good work." We'll miss you, Tony! Enjoy retirement. www.fiada.com
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July 2018 — Independent Dealer — 13
L E G A L U P D AT E
Are You Ready to Collect Sales Tax Nationwide? BY JAMES SUT TON, CPA
A Supreme Court ruling has the potential to change the way sales tax is collected across state lines. Rules may be changing, and so might your remittance responsibilities.
I
n the landmark ruling on SD v Wayfair issued on June 21, 2018, the United States Supreme Court threw out a 50-year-old requirement for a company to have physical presence in a state before the company can be required to collect and remit sales tax in that state. The Court instead allowed an economic presence threshold without a physical presence. Economic presence is essentially a certain amount of sales into a state by dollar amount or volume. While the Wayfair case was not directed at car dealers, the holding has a dramatic impact on FIADA members that sell cars across state lines.
wager that state legislatures are scrambling to implement lower threshold requirements across the nation. Along with collecting and remitting responsibilities, taxpayers will be subject to sales tax audits by every state where they are required to register and it is unclear whether a dealer would be required to get a dealer’s license in those states as well. Both the FIADA and the NIADA have this issue on their radar. There are a lot of industries up in arms about this ruling and we have a chance for federal legislation to at least help provide clear rules for companies that sell across state lines. Personally, I believe all registered vehicle dealers should be exempt from collecting sales tax
There are many industries reeling from the decision and a lot of the answers are unknown at this point. What we do know is that a little over a dozen states have laws that already require registration without physical presence, but were limited until the While not directed at car dealers, the holding Wayfair decision came out. However, the has a dramatic impact on FIADA members amount of economic presence required before that sell cars across state lines. a company must register and collect is different from state to state. South Dakota requires $100,000 of sales or 200 transactions in a year across state lines. Car purchases are one of the few items as the threshold for registering, at the moment. Alabama that the customers actually remit the proper taxes when currently has threshold of $250,000 in sales before registering vehicles. There is really no reason for used car registration is required. Georgia has a new law going into dealers to be subjected to the mayhem of collecting sales effect on Jan. 1, 2019 with a threshold of $250,000 of sales tax across the country. Either way, the sales tax arena has or 200 transactions before registration is required. Other substantially changed for car dealers and more change is states already have laws that require you to notify the state likely to be coming soon in the states and, hopefully, by of sales by customer, type of product, and dollar amount so federal legislation. the state can go after your customers for the tax. You can James Sutton is a CPA and attorney at Moffa, Sutton, and Donnini, P.A. www.FloridaSalesTax.com He focuses his practice on Florida sales and use tax controversy. James can be contacted by email at JamesSutton@FloridaSalesTax.com or via telephone at 813-775-2131.
14 — Independent Dealer — July 2018
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W
hat makes a good team? Partnership? Support? Mutual goals? All of the above! And, it was clear at the recent NIADA Annual Convention in Orlando that FIADA and NIADA make a powerful pair. With a stellar line-up of education sessions, nationally-recognized speakers, big name entertainment and celebratory events the NIADA convention rolled into the Sunshine State on June 18. FIADA welcomed it's national teammate with open arms and a cheering crowd of members and officers. An exclusive members-only event allowed FIADA to recognize some special members and achievements. The Florida event welcomed Rep. Gayle Harrell, Rep. Ed Hooper and Senator Dennis Baxley into the fold, and presented them with FIADA PAC checks. The coveted FIADA Quality Dealer of the Year was presented to Jeffrey Rhoads and ADESA Ocala's Calvin Frazier was awarded the FIADA Auction Person of the Year. A new slate of FIADA officers were also elected, and will be officially inducted at a ceremony during the FIADA Town Hall Meeting in October at the Hard Rock Hotel in Daytona Beach (see page 31 for details). Florida members were also given some time in the national spotlight when FIADA's John Cousins was named the new NIADA Secretary and Jim Taylor of Auto Data Direct won the NIADA Ring of Honor award. In case you missed it, here is a photographic play-by-play of all the action. 16 — Independent Dealer — July 2018
2018-19 FIADA Officers elected at the FIADA Member Meeting. From L to R: Luis Giraldo, Jenay Rhoads, Frank Fuzy, Brad Joel, Steve Maribais, Brandi Noegel, Trevor Varney, Jim Winterick, Sr. Not pictured: Lisa Compagno.
Auction Person of the Year Calvin Frazier
FIADA Quality Dealer of the Year Jeffrey Rhoads
The Florida Sheriff Youth Ranches annual ring toss booth is always a crowd-pleaser. This year FIADA raised $1,415 to support this cause.
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FIADA President Scott Lanier, Legislative Chair Dino Mercurio, Lobbyist Sandra Mortham and Executive Director Lisette Mariner present PAC checks to Sen. Baxley, Rep. Hooper and Rep. Harrell. The FIADA PAC collected $6,450.
FIADA's Jim Taylor receives the Ring of Honor award from Steve Jordan.
Brandi Noegel, Frank and Gina Fuzy welcome US Rep. Stephanie Murphy.
NIADA's new secretary John Cousins.
Front and center for Dick Vitale.
Country group Big and Rich perform for attendees. www.fiada.com
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18 — Independent Dealer — July 2018
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D E A L E R O P E R AT I O N S
Make Market-Smart Used Vehicle Pricing Decisions BY DALE POLLAK
Three tips on how to make deliberate decisions on pricing rather than reactionary ones.
A
t a recent dealer group presentation, someone asked me an astute question: “how can you tell when a used vehicle may need a price change?” In answering the question, I shared the following three indicators that, when used together give dealers the best guidance to make used vehicle pricing decisions and retail every used vehicle for maximum profitability in the shortest amount of time:
Vehicle Details Page (VDP) Performance
By now, most dealers can accurately define a VDP as the “look” a vehicle gets when a potential buyer clicks on an inventory listing to learn more about a specific car. Too few dealers, however, recognize the VDP as the “money metric” — the more VDPs a car gets, the better its chances to sell quickly and deliver the highest level of profitability. If we assume a used vehicle is “right” for a dealer’s market, and it’s merchandised correctly and fully online, the vehicle’s daily VDP tally is an important indicator whether its price is resonating with potential buyers and the broader market. If the VDP views meet the minimum daily targets they expect to see, they may leave the price as-is; if the VDP exceed the targets, and they appear to be increasing, the dealers may adjust the price to reflect increased demand. Both of these decisions, however, are contingent on a vehicle’s time in inventory. 22 — Independent Dealer — July 2018
Price To Market
This metric measures each vehicle’s price against identical, competing vehicles and their prices in a dealer’s market. Some dealers consider this their primary data point to craft their used vehicle pricing strategies and make subsequent pricing decisions on individual cars. For example, it’s not uncommon for dealers to set Price to Market parameters for inventory age “buckets” (98 percent to 100 percent, 0-7 days; 94-97 percent, 7-15 days; 90-93 percent, 15-22 days; < 90 percent, 22-29 days). This approach recognizes two important fundamentals — fresh cars deliver the best gross profits, and time is often a used vehicle retailer’s worst enemy . The key to success here, of course, is the degree of diligence a dealer applies to executing the Price To Market-guided strategy. Those who only price and re-price vehicles as they enter/leave an inventory age segment will inevitably leave gross profit on the table as vehicles don’t sell as quickly as they could. The most proficient dealers review used vehicle prices on a near daily basis to keep pace with the current market.
instant, the Market Days Supply tells them how much competition a specific used vehicle will face in their market. The Market Days Supply also informs pricing decisions once dealers have acquired a vehicle. For example, vehicles with a high Market Days Supply (e.g., a greater level of competition) may see price adjustments that reflect the lower rungs of the inventory age “buckets” noted above. By definition, these vehicles aren’t as appealing and unique, hence the more aggressive pricing position. Conversely, vehicles with a low Market Days Supply often deserve a higher Price to Market position. These are the in-demand cars that warrant more wishful asking prices. I closed the pricing discussion by reiterating that these indicators work best when you’ve got the “right” cars for your market and they’re merchandised online correctly. I also noted that when dealers have the “right” cars, and they diligently use these indicators to make used vehicle pricing decisions, good things start happening. First, your used vehicles start to sell more quickly and, typically, generate better front-end gross profits. Second, you now have a market-based rationale to justify your asking prices with customers. In many cases, your ‘on the money’ pricing means your sales team doesn’t have to justify anything — the buyer landed on your car because you priced it right. Lastly, you’ve got a market-informed, scalable approach to pricing that can drive a “turn and earn” used vehicle inventory management strategy that yields improved performance and profitability in every dealership department.
Market Days Supply
This metric, which measures the sales rate and supply of identical used vehicles in a specific market, is most beneficial to dealers as they make the decision to acquire a vehicle. In an
Dale Pollak serves as executive vice president for Cox Automotive, a position he’s held since the company he founded, vAuto, became part of the Cox family in 2010. www.fiada.com
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F E D E R A L R E G U L AT I O N S
Auto Lending and the Servicemen Civil Relief Act (SCRA) BY ROY L. KAUFMANN
As July is "Military Consumer Month" across some federal departments and consumer protection groups, it might be a good time to review SCRA provisions as they relate to auto sales.
F
ederal regulators have placed an increasing focus on compliance with the Servicemembers Civil Relief Act. This act provides protections for servicemembers with active military status. Many SCRA compliance violations involve mortgages and student loans, but a number of recent events point to regulators expanding their actions to other consumer-facing industries. One of those is the automotive industry. The SCRA provides protection for those with active military status in five primary areas. Those who work in the auto finance industry should be aware of: Interest rates – The SCRA provision that interest rates may not exceed 6 percent also applies to auto loans. Interest rates on auto loans taken out before the servicemember was upgraded to active military status often must be adjusted. Servicemembers are required to take some steps before they can receive the lower rate. This includes submitting a written notice and a copy of the military orders calling them to action. Repossession for breach of auto loan – Without a court order, a 24 — Independent Dealer — July 2018
servicemember’s property cannot be repossessed for nonpayment while they are on active-duty status. Lenders must verify that the servicemember has active military status and then pursue the repossession in court. The court may grant the repossession, or it may opt to do one or more of the following: • Make the creditor return the payments made on the loan before granting the repossession. • Stay the car repossession proceedings. • Require that the creditor pay the servicemember the difference between the car’s value and the debt balance. This is called an equity payment. Repossession for breach of auto lease – The SCRA prevents contract termination due to nonpayment or breach without a court order. If servicemembers can demonstrate their active military status compliance with the terms of the
contract is impossible, the court may order a stay. Repossession for breach of storage lien – Without a court order, you can’t put a lien on a servicemember’s property until 90 days after their service ends. But a court can grant a stay or an adjustment. Lease termination rights – A servicemember who signed a lease before going on active duty may cancel that lease without penalty. An active-duty servicemember who signs an auto lease is generally required to abide by that lease. But not if he or she gets PCS orders outside of the continental U.S. or orders to deploy.
Thoughts on Starter Interrupt Devices and the SCRA While the issue appears not to have been challenged in court yet, there
are concerns that starter interrupt devices may pose a compliance issue regarding the Servicemembers Civil Relief Act, according to Law360. One element of the act in particular – Section 532 – could pose serious issues in the right situation. Continued on page 26. www.fiada.com
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SCRA Review continued from Page 24.
The section's full name is "50 US Code App 532: Protection under installment contracts for purchase or lease." It dictates that a contract by a party protected under the SCRA for the purchase or lease of real or personal property – including that of a motor vehicle – may not be rescinded or terminated for breach of terms while the party is on active duty status. Repossession for a breach cannot be carried out without a court order. Those who fail to comply with the act can be fined according to the provisions of title 18, USC, or imprisoned for up to one year. Past cases have demonstrated that prosecutors are not afraid to pursue the latter option in some cases. While there is no specific language in the section that applies to remote starter interrupter devices, Law360 noted that it is possible their use would be considered repossession. There are good arguments on both sides of the issue, but barring further clarification, creditors should be extremely wary of using these devices in SCRA cases. Those that use starter interrupters broadly, especially those that activate automatically, should avoid litigation by regularly performing a military records search. The Servicemembers Civil Relief Act Centralized Verification Service can help. Attorney Roy Kaufmann serves as the Director of the Servicemembers Civil Relief Act Centralized Verification Service, located in Washington, D.C. As a recognized authority on the Servicemembers Civil Relief Act, Mr. Kaufmann has published hundreds of articles and hosted many webinars. His teachings help law firms and businesses to remain compliant with the SCRA rules and regulations so as to avoid costly fines. 26 — Independent Dealer — July 2018
Repossession Pitfalls Under the SCRA BY L. JEAN NOONAN
When it comes to repossession and SCRA, it's best to not take any chances.
T
he Servicemembers Civil Relief Act provides no shortage of tough questions. As everyone knows by now, the SCRA prohibits a creditor from repossessing property, including a car, without a court order if the servicemember entered the military after financing the car.
servicemember challenged the creditor's action, a court would hold that the creditor repossessed the car without a court order. And if the threat of a Justice Department action isn't enough to ruin your day, know that a wrongful repossession under the SCRA is also a crime, carrying a possible jail term of up to a year.
But, what about creditor actions that don't seem like a repossession? I got a call from a creditor that said it received notice that a car it financed had been impounded. To protect the collateral, the creditor claimed the car from the storage facility. The creditor risked losing the car if the impound authority sold it to pay the borrower's fines and storage fees.
Second, to get a title that allows the sale of the car, the creditor usually must complete an "affidavit of repossession." If the court had any doubts about whether bailing the car out of the impound lot was a repossession, the creditor's signature on this affidavit would surely resolve those doubts.
Somewhere along the line, the creditor learned that the car belonged to a servicemember who was covered by the SCRA. This wasn't really a repossession, the creditor reasoned. Could it now sell the car? First, just because the creditor didn't send a tow truck to the servicemember's driveway doesn't mean there was no repossession. The creditor took possession of the car and was prepared to sell it because the servicemember breached the financing contract when the car was impounded. Servicemembers can waive their rights under the SCRA, as they should do in a voluntary repossession, but this person had not signed a written SCRA waiver. So the odds were good that if the
My client, quite understandably, was not happy with this advice. He protested that if the creditor had not rescued the car from the impound lot, both the creditor and the servicemember would have lost it. Can the creditor reduce the risk of having its actions viewed as an SCRA violation if retrieving the car was in the mutual interest of the servicemember and the creditor? At this point, I conferred with my very smart partner Tom Buiteweg, who has wrestled with repossession dilemmas for a long time. Assuming it makes economic sense for the creditor to pay the fees to release the car, how can the creditor do so without tripping over the SCRA repossession ban? Continued on page 29. www.fiada.com
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July 2018 — Independent Dealer — 27
LEGAL ROUND-UP
A Look At Current Legal Issues BY THOMAS B. HUDSON AND NICOLE FRUSH MUNRO, HUDSON COOK, LLC
A monthly collection of selected legislative and regulatory highlights, and a recap of some of the many auto sale and financing lawsuits followed each month. COMPLIANCE TIP Are you completing your credit contracts and other deal documents correctly? Have your completion instructions been approved in writing by knowledgeable counsel? If not, take a gander at our Case of the Month for an example of the sort of mischief an erroneously-completed form can create. FEDERAL DEVELOPMENTS FTC Doesn’t Want to Join Lending Club On April 25, the FTC filed a complaint against Lending Club Corporation for making deceptive claims in its online and mail advertisements for unsecured consumer loans that the loans contained “no hidden fees.” According to the FTC’s complaint, when loan funds arrived in consumers’ bank accounts, they were short of the amount expected by consumers because of a hidden up-front fee the company deducted from consumers’ loan proceeds. The FTC also alleged that Lending Club falsely represented that consumers’ applications had been approved by telling consumers, for example, that “Investors Have Backed Your Loan,” while knowing that many applicants would not qualify for a loan. In addition, Lending Club allegedly withdrew double payments from consumers’ bank accounts and continued to charge those who cancelled automatic payments or paid off their loans. Finally, the FTC alleged that the company failed to 28 — Independent Dealer — July 2018
obtain consumers’ acknowledgements of its information-sharing policy. Here Come the Rules! On May 10, the Bureau released its Spring 2018 rulemaking agenda, announcing a goal of proposing a debt collection rule by the first quarter of 2019. The Bureau has already engaged in some early-stage debt collection rulemaking activities under its Dodd-Frank Act authority to issue rules interpreting the Fair Debt Collection Practices Act. The Bureau indicated that the proposed rule may address communication practices and consumer disclosures. The Bureau did not mention a schedule for when it might address "right consumer, right amount" rules. Under Cordray, the Bureau had decided to split up the rulemaking, moving forward with rules related to collection practices and consumer disclosures and delaying "right consumer, right amount" rules to get more input from all market participants, but the status of these rules is unclear. Although this is the first formal, public action the Bureau has taken regarding debt collection rulemaking since Mulvaney began leading the Bureau, debt collection has been a focus for Mulvaney since he took control of the agency. He has previously highlighted the high volume of consumer complaints about debt collection, and, just last month, the Bureau filed an amicus brief in a Fair Debt Collections Practices Act case before the U.S. Court of Appeals
for the Seventh Circuit. Attention! On May 11, the OCC issued the “Military Lending Act” booklet of the Comptroller’s Handbook for use by its examiners when assessing compliance with the MLA. The booklet reflects the Department of Defense’s July 2015 amendments and its interpretive rules published in August 2016 and December 2017. The booklet includes, among other things: (1) the expansion of MLA protections to a broader range of consumer credit products; (2) rules for determining the fees and charges included in the calculation of the military annual percentage rate and for calculating the MAPR; (3) the optional safe harbor methods for identifying covered service members and dependents; (4) disclosures that creditors are required to provide to covered borrowers; and (5) limitations on consumer credit extended to covered borrowers. Will Somebody Answer That? On May 14, following the recent decision of the U.S. Court of Appeals for the D.C. Circuit in ACA International v. FCC, the FCC is seeking public comment on several significant issues related to the interpretation and implementation of the Telephone Consumer Protection Act. CASE OF THE MONTH Dealers complain that some legal violations are merely “technical.” www.fiada.com
That’s true – the federal Truth in Lending Act is a rat’s nest of technical requirements, and some of them are easy to violate. Here’s an example. Susana Mendoza bought a vehicle from Sidney Auto Sales, Inc., and financed the purchase by signing a retail installment contract. The RIC contained disclosures required by the Truth in Lending Act. The disclosures included a payment schedule providing for 29 monthly payments of $351.58 beginning on January 20, 2017, and “one final payment” due on June 20, 2019. The payment schedule did not identify the amount due for the final payment. Mendoza sued Sidney Auto, alleging that the failure to include the amount of the final payment violated TILA and Regulation Z. The federal trial court granted Mendoza’s motion for summary judgment. The court concluded that by not including the amount due for the final payment, Sidney Auto violated Section 1638(a) of TILA, which requires a payment schedule to include “the number, amount, and due dates or period of payments scheduled to repay the total payments.” The court awarded Mendoza $2,000 in statutory damages. If you haven’t gotten specific advice on the technical requirements for completing your retail installment sales contracts, this would be a good time to do so. This sort of violation is perfect for class action treatment. Mendoza v. Sidney Auto Sales, Inc. 2018 U.S. Dist. LEXIS 76908 (C.D. Cal. May 7, 2018)
REPOSESSION PITFALLS continued from Page 26.
Of course, one way would be to obtain a court order. But that is easier said than done. The SCRA gives courts lots of options to protect a servicemember's interests in a repossession. The court can order the creditor to return all or any part of the payments the servicemember made under the contract. The court can put the repossession on hold for as long as it believes is fair. Or the court can take any other action that fairly preserves the interests of the servicemember and the creditor. In short, the creditor does not necessarily waltz out of the courthouse with a quick order. Another option might be to return the car to the servicemember without requiring the servicemember to reimburse the creditor's costs as a condition of the return. The creditor could still add these costs to
the servicemember's balance if the contract and state law permit. If the creditor were to condition the return on the payment of the fees it paid to the storage facility or other past due amounts, a court or regulator would be more likely to conclude that the offer to return the car was really a post-repossession offer to reinstate the account. And that definitely would not solve the creditor's SCRA problem. In the end, it will often not make economic sense for the creditor to bail the car out of the impound lot. Abandoning the collateral may be less expensive than the costs in money and reputation of an SCRA enforcement action. L. Jean Noonan is a partner in the Washington, D.C., office of Hudson Cook, LLP.
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2017-2018 FIADA EXECUTIVE COMMITTEE:
SCOTT LANIER, CMD
BRAD JOEL
LISA COMPAGNO
JENAY RHOADS
PHIL RISLEY
President Credit Cars Orlando, FL 32808 (407) 295-6211
Senior Vice President Splish Splash Auto Sales Princeton, FL 33032 (305) 258-1191
Chairman of the Board Palm Tree Auto Sales Stuart, FL (772) 288-2099
Secretary Florida Auto Exchange Co., Inc Dunedin, FL (727)-796-2886
Treasurer Cars & Credit of Jacksonville Jacksonville, FL (904) 616-4074
FRANK FUZY
GEORGE HICKEY
STEVE MARBAIS, CMD
BRANDI NOEGEL
JIM WINTERICK, SR.
Regional Vice President Century Motors of S. Fla., Inc. Pompano Beach, FL 33064 (954) 785-0369
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Regional Vice President Bond Auto Sales, Inc. Tampa, FL 33604 (813) 238-7478
Regional Vice President Marbais Enterprises, Inc. Ocoee, FL (407) 877-7422
Regional Vice President Noegel’s Auto Sales Starke, FL (904) 964-6461
Chairman of the Board Gulfstream Motor Credit Miami, FL (305) 253-2335
July 2018 — Independent Dealer — 31
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