July 2011 Independent Dealer by FIADA

SINCE 1940

July 2011

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A Publication of the Florida Independent Automobile Dealers Association

Information and Insight for Florida Used Car Dealers

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Contents July 2011

MAILING ADDRESS 1840 Fiddler Court Tallahassee, FL 32308 TELEPHONE (850) 385-2712 (800) 237-0448 FAX (850) 385-3251

For members of the Florida Independent Automobile Dealers Association

WEBSITE www.FIADA.com EXECUTIVE COMMITTEE Brandi Noegel President Jim Kagiliery Chairman of the Board

C O LU M N S & F E AT U R E S

Dino Mercurio Secretary

Jim Kagiliery Regional Vice President Frank Fuzy Regional Vice President

Chris Leedom Regional Vice President FIADA STAFF Steve Jordan CEO Lisette Mariner Executive Director Terry Myers Educational Instructor Sarah Langley Administrative Director Alex Romans Education Director Christy Taylor Editorial/Advertising

POSTMASTER:

Send address changes to: FIADA • 1840 Fiddler Court Tallahassee, FL 32308 (850) 385-2712 • Toll Free: (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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Executive Director’s Message Lisette Mariner

George Hickey Regional Vice President Steve Marbais, CMD Regional Vice President

President’s Message Brandi Noegel

John Cousins Treasurer

Texas BHPH Dealer Wins NIADA’s Top Honor Scott Allen was named the National Quality Dealer at NIADA’s Annual Convention in Las Vegas.

Legal Corner Thomas B. Hudson, Esq

You Never Stop Learning Chuck Bonanno shares why successful dealers should always be looking for ways to continue their education.

Tow Woes A year after FIADA’s ground-breaking curbstoning legislation and there seems to be some confusion on the best way to enforce it.

Are Gas Prices Too High? A primer in the way crude oil prices are set and how it can affect what you pay to fill your tank.

FIADA Annual Convention Your first preview, and chance to register, for the 2011 FIADA Annual Convention and Trade Show.

Legislative Update The Honorable John Grant and Jennifer Lux, FIADA Legislative Advocates

Industry News

UPCOMING EVENTS October 13-15, 2011 FIADA Annual Convention & Trade Show Gaylord Palms Resort Orlando, FL

Scan this code with your smart phone or mobile device to register now for the FIADA Annual Convention. July 2011 — Independent Dealer — 3

FROM THE PRESIDENT

Come to Convention; Leave with Knowledge BY BRANDI NOEGEL

Who would have thought all that would be possible back a few years ago? My, how things have changed. You need to go to the convention to keep up with what is going on in this changing world. It is so important! Regulations and laws change daily.

As computers and software developed, so did the FIADA and NIADA conventions. Soon, the conventions were about building the best websites and learning what you need to have for an online presence. Next came the sessions on eBay, Auto Trader, Cars.com and help listing and selling our cars online. When auctions joined the mix, we learned about buying vehicles online. I have to admit that it can be hard to keep up. As technology changes sometimes I feel it is getting a little ahead of me now.

A big business item that was brought up during NIADA Convention was a meeting with the state presidents and state executive directors concerning issues with CARFAX. Yes, a lot of us use them and they do have a lot of great information in their program, but they have made some questionable decisions lately, such as pricing vehicles through their price calculator. Scott Fredericks, VP Marketing for CARFAX and Lance Vickery, Director of Client Services tried to explain why they do this, but it did not go well and many dealers claimed they will not use it until the price calculator stops. CARFAX mentioned they get there pricing from CarBiz which brought many questions since that company has been out of business for the past few years. The CARFAX reps said the pricing will not stop and they plan to continue it. Even though, we are their customers, we are not happy about it. Even with the promise to try to minimize errors, most everyone at the meeting did not leave happy!

just attended the NIADA Convention in Las Vegas, and as always, I came back richer with knowledge from the educational seminars.

Years ago, I remember buying an IBM computer and software that was slow, operated on a 5-1/4” floppy disk and had a green monitor. My employees were not sure what to think of it then, but we ran our first late list they fell in love with it. Over the years, of course, the software and the equipment continued to improve and more vendors with more choices entered the market. Technology started moving at a rapid pace and there was no stopping it.

This past NIADA convention there was quite a focus on social media. Over 50 percent of the world’s population is under 30 and 96 percent is on the social net. What is social media? It is Twitter, Facebook and who knows what else will be included next. You will soon, if not already, need an iPhone and the iPad to keep up. Some days it seems you almost need to hire a kid to learn how to set up and operate these new devices. These modern advances have made it possible to just sit in your office, buy a vehicle, check the history, sell it, transport it, and do the title work. 4 — Independent Dealer — July 2011

The FIADA Convention is coming to Orlando in September and I want to encourage all dealers to come and learn about what is going on. We are all just dealers trying to make a living in a very bad economy. Educating yourself is the only way you can help yourself right now in this ever-changing world. Working together will only make us better and stronger. Sincerely, Brandi Noegel, FIADA President

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EXECUTIVE DIREC TOR’S MESSAGE

Working Together BY LISE T TE MA RI NER, F I ADA EXEC UTI VE DI REC TOR

s I officially settle into the driver’s seat for FIADA, I most recently attended the NIADA convention in Las Vegas. I had the wonderful experience of witnessing the installation of our own, Frank Fuzy, owner of Century Motors of South Florida to the NIADA board. I enjoyed the sessions, visiting the exhibition hall and networking with state executives, as well as the vendors and independent dealers. There is so much on the horizon. Did you know that included in your FIADA membership is a membership with the National Independent Automobile Dealers Association? What an amazing deal! Not only do you have FIADA fighting for you, you have the benefit of national protecting you too. Together we are working for you. Your FIADA committees and board are hard at work. We met in Palm Beach, FL where the committees and board discussed the future of FIADA. We are looking at membership, legislation, and putting the final touches on convention. What an amazing group. I would encourage you to be an active participant and get involved. If you’re interested in being part of a committee, please contact me at lisette@fiada.com. I am excited to meet you. Save the date and join me at the FIADA convention October 13-15 at the Gaylord Palms Resort in Kissimmee. Look for more details in next month’s magazine.

2011 NIADA ANNUAL CONVENTION Florida delegates at the NIADA Convention. FrankF uzy (center) sits on the NIADA Board.

NIADA CEO Mike Linn addresses convention attendees. The exhibit hall was full of vendors with helpful products and services. 6 — Independent Dealer — — July 2011

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Exhibit spaces and sponsorship opportunities are now available for the Florida independent dealer event of the year. If you are interested in participating, contact the FIADA office at (800) 237-0448 or PAID ADVERTISING

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Texas BHPH Dealer Wins NIADA’s Top Honor BY PETER A. SALINAS

t was Sept. 17, 1987, when then stockbroker Scott Allen decided that another occupation might better suit his talents as an entrepreneur. Most will remember that date as Black Monday when the stock market took a huge plunge and sparked a recession. It was a bad day for the financial marketplace, but a good day for Allen and, as it turns out auto dealers in his hometown of Haltom, Texas, near Fort Worth, and eventually dealers throughout the state. Last month at the NIADA National Convention in Las Vegas, Allen, owner of Autoland a buy here-pay here operation, was named the 2011 National Quality Dealer of the Year. He opened the business in 1991 as a joint venture with his father, who had recently retired.

the zoning commission had past local ordinances, which basically made it impossible for new dealerships to move into the community and for existing dealerships to expand or relocate. These new zoning laws put every dealer in his city in jeopardy of losing their conforming status and their ability to continue doing business as an auto facility. Allen formed the Haltom Urban Business Association and was elected its president. The association began having weekly meetings to discuss and formulate plans to fight the proposed changes and suggest possible solutions. Membership in the business association grew quickly and within six weeks had more than 100 business owners as members. Allen wrote letters and made appearances that initiated workshops and City Council meetings. Within nine months, the association had convinced the city council to establish a stand-alone zoning for Auto Dealerships with a new set of standards that pleased dealers, the City Council and the residents of the city. Shortly thereafter, he was asked to serve on the Haltom’s Planning and Zoning Commission as a commissioner. He served six years, the last two as Chairman of the Commission.

They rented a small location, NIADA’s Quality Dealer of the put out a shingle and began Year, Scott Allen. Allen owns buying vehicles to sell on the small lot. As the business grew, Autoland, a buy here-pay here they purchased their own loca- dealership in Haltom, Texas. He has been a member of the Texas IADA for 17 tion. They started the business years, where he is president-elect. He also has served on the with about $500,000 of our own capital and did that beTIADA executive committee since 2007. Allen is presifore the company became a subchapter S corporation and dent of the Fort Worth IADA, a post he’s held for the last before they could have a related finance company. Today, five years. This month Allen will become the Texas IADA Autoland employs six people including Allen, sells about president for 2011-2012. 35 units a month, has 300 active accounts and has a $1.8 million principal-only portfolio. Allen said he’s been very fortunate to be a dealer and feels it is important to give back to both the industry and his “We have stayed with the older model unit, 7-12 years old community. with an ACV of about $3,300,” Allen said. “Our recon costs average about $500 a unit. I’m not going to tell you “We’ve been fortunate,” he said. “We’ve been successful at where we get our inventory, but they are out there. You this business and profitable because honesty and integrity just have to go to more places, more often to find what you have been our core values.” need.” After a couple of years of having their own dealership, the Allens wanted to expand their operation by demolishing their existing facility and building a new facility on adjacent property. The problem was the city council and 8 — Independent Dealer — July 2011

Peter A. Salinas is a career journalist who has been covering the used-vehicle industry for more than 11 years. He is the managing editor of Dealer Business Journal. www.fiada.com

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LEGAL CORNER

Amended Risk-Based Pricing Regulations and Reg B Notices B Y T H O M A S B. H U D S O N , E S Q

he Federal Reserve Board and the Federal Trade Commission (the “Agencies”) have issued final rules to implement the credit score disclosure requirements of the Dodd-Frank Wall Street Reform and Consumer Protection Act (“DoddFrank Act”). Risk-Based Pricing Regulations The Agencies jointly released amendments to the Risk-Based Pricing Rules to require disclosure of credit scores and related information in risk-based pricing notices if the creditor uses the consumer’s credit score to set the material terms of credit. The final rule implements the provision added to Section 615(h) of the Fair Credit Reporting Act (“FCRA”) made by Section 1100F of the Dodd-Frank Act. The final rule requires creditors to disclose certain information to consumers when creditors use a credit score to set or adjust the terms of credit, including: (1) the credit score used by the person in making the credit decision; (2) the range of possible credit scores under the model used to generate the credit score; (3) all of the key factors that adversely affected the credit score, which must not exceed four key factors. However, if one of the key factors is the number of inquiries made, the number of key factors must not exceed five; (4) the date on which the credit score was created; and (5) the name of the consumer reporting agency or other person that provided the score. The final rule also requires a statement that a credit score is a number that takes into account information in a consumer report, that the consumer’s credit score was used to set the terms of credit offered, and that a credit score can change over time to reflect changes in the consumer’s credit history. The final rule includes model forms. 10 — Independent Dealer — July 2011

The credit score disclosure requirement is mandatory as of July 21, 2011. Adverse Action Notices Section 701 of the Equal Credit Opportunity Act requires a creditor to notify a credit applicant when it takes adverse action. Section 615(a) of the FCRA requires a person to provide a notice when the person takes an adverse action against a consumer based in whole or in part on information in a consumer report. The Federal Reserve Board also released the final rule for the revised model notices to reflect the new content requirement in Section 615(a) of the FCRA made by Section 1100F of the Dodd-Frank Act. The revised content of the model forms can be found at www.FIADA.com. The disclosures must appear primarily in narrative format, after the information related to the reasons for why adverse action was taken and the statement that the creditor obtained information from a consumer reporting agency. Use of the revised model forms is mandatory as of July 21, 2011. Thomas B. Hudson, Esq. (tbhudson@hudco.com) is the Publisher of Spot Delivery®, a monthly legal newsletter for auto dealers, and the Editor in Chief of CARLAW®, a monthly report of legal developments in all states for the auto finance and leasing industry. He is also a partner in the Maryland office of Hudson Cook, LLP. Spot Delivery and CARLAW are produced by CounselorLibrary.com LLC, 7250 Parkway Drive, 5th Floor, Hanover, MD 21076-1343. For information, call 410-865-5411 or visit www.counselorlibrary.com.

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You Never Stop

LEARNING

If you think you know everything about running your business, maybe it is time to think again. BY CHUCK BONANNO

f there is one constant in our universe, it is change. We need to recognize change and search for the opportunities that lie within change. We can choose to fight change, but it is inevitable and actually necessary. We must adapt to changes every day and provide an environment where change is not feared but accepted and embraced in our dealership. I am certain there were horse buggy lots around the turn of the last century whose dealers said “the automobile will never replace the horse and buggy.” They went bankrupt. Other horse buggy dealers saw the changes coming and took action to prepare for the new era and changed from selling buggies to selling automobiles. Still other individuals foresaw the market changes and entered the automobile market for the first time. What was the difference between the dealers who did not see change coming or refused to act upon change and those who saw it coming, made changes and survived? Resisting change and questioning the reality of the situation played a role in their demise, but what they really lacked was knowledge. They failed to see, understand, plan and act based on events in an ever-changing world. They were not stupid, but they were ignorant. They failed to continue their education. So that begs the question; are you continuing your education? Education comes in many forms and from

12 — Independent Dealer — July 2011

many places. Don’t believe that you must experience everything to learn everything. You don’t need to burn your fingers on the stove to understand that you shouldn’t touch hot things. Learn from books, tapes, videos, CD’s, DVD’s, trade publications, professional publications, family, friends, mentors, partners, seminars, workshops, conferences, conventions, trade associations, professional associations, accountants, attorneys, consultants and other dealers through a Dealer Twenty Group program.

moderator of Buy Here-Pay Here and Automotive Finance Twenty Groups. I have yet to moderate one where I didn’t learn something new from a meeting participant. I laugh (really cry) when I think back to 1996 when, my now partner, Chris Leedom called me to join a Twenty Group and I said, “Thanks but we don’t need that program.” We thought we knew everything about Buy Here-Pay Here. I can assure you, we did not. The lesson is that we are never too experienced, too large, or too smart to continue our education. If you think you know it all, you have made a serious miscalculation. Chuck Bonanno is a partner of the firm, Leedom and Associates, LLC. He is an executive Conference Moderator of Buy Here-Pay Here and Automotive Finance 20 Groups. He is a nationally recognized speaker, author, industry trainer and consultant.

The written word is always a good place to start. Trade publications such as the one you are now reading are excellent sources of information and knowledge and also provide products and services to assist you as a dealer. Industry events and associations are another great source for continuing your education. Events such as the upcoming FIADA Annual Convention or the Leedom Group Buy Here-Pay Here National Convention can be invaluable sources for education and training. I work with over 180 dealers and finance companies across North America as a www.fiada.com

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February 2011 — — Independent Independent Dealer Dealer — — 15 15 July 2011

Are Frustrations Over Curbstoning Enforcement Over? Not Quite. FIADA’s Curbstoning Legislation passed to crack down on curbstoners, but enforcement issues still plague the industry.

t has been a year since FIADA’s curbstoning legislation was unanimously passed by both the Florida House and Senate (HB 631/ SB 1182), signed by the Governor and recorded into law. The bill, which gave new teeth to curbstoning legislation by making it easier to have vehicles found in violation to be towed, was the knock-out punch FIADA members had been waiting for in the fight against illegally parked cars for sale by unlicensed dealers. The new law eliminated previous language that required a 24-hour notice be given to the vehicle’s owner and provided that instead it could now be towed immediately, at the owner’s expense. It also created a new $100 fine for anyone found in violation of the law. Adding even more muscle was a provision that expanded the dragnet of enforcement to not just the Division of Motor Vehicles, but any law enforcement officer or local government code enforcement officer. So, with the ability to tow the car immediately, more agents authorized

16 16 — — Independent Independent Dealer Dealer — — July July 2011 2011

to make it happen and heavier penalties and fees placed on the individuals at fault there has to have been an increase on the number of vehicles removed from a place where they were unlawfully parked for sale, right? Maybe not. According to data supplied by the DMV, a total of 40 cars were towed in fiscal year 2010-2011. Not quite the “ka-pow” that was expected; in fact some may say that number is downright disappointing. What happened? Are there not as many cars out there as we thought? No, a quick trip around the block confirms there are plenty of curbstoned cars still on the streets in plain view. Was it a poorly-written law? Not a chance, HB 631/SB 1182 is very clear about what kind of vehicle can be towed, the procedure, the penalties and those who are authorized to enforce it. What is the problem then? For starters, limited budgets and less manpower have caused the DMV to

BY C HRIS T Y TAYLO R put the issue of curbstoning on the back burner. While the Department is certainly concerned with consumer protection and unlicensed dealer activity, they simply are not able to make curbstoning a priority focus. After losing key positions after the budget-cut war, DMV is not able to place officers on the road in search of violations like they used to. Instead, curbstoning enforcement has had to become an incidental part of their current workload. Maybe the confusion lies in how dealers and DMV interpret the new law. From a dealer’s perspective, DMV has historically been the go-to agency on all things related to dealer licensing and regulation. It stands to reason that most dealers would assume the new curbstoning law was written for the Department in an attempt to make it easier to enforce. The Department, however, understands that curbstoning is a serious issue and is illegal, but at the same time they have had to confine their responsibilities and priorities www.fiada.com www.fiada.com

into whatever post-financial meltdown budget they have been given. The public outcry for less government, less spending leaves agencies such as the Division of Motor Vehicles with fewer resources and less money. The main idea behind HB 631/SB 1182, in their minds, is that law enforcement and code enforcement agents can now help with the enforcement, and utilizing their help is the most efficient way to take care of the problem. Shortly after the bill passed, the Department sent a letter to all law enforcement agencies and code enforcement offices explaining the new law and how it could be a potential revenue-generator, through collection of the $100 fine from each violation. There have also been announcements placed in law enforcement newsletters, including the Sheriff ’s Star Magazine distributed to all members of the Florida Sheriff ’s Association. The Department has also recently taken on the campaign of building relationships on a local level with code enforcement officers around the state. The hope is that each of these groups will see the need and discover the benefit of enforcement and will assemble their own curbstoning army that will seek out violations and have vehicles towed. As these extra eyes, and tow hooks, join the hunt there is still a need for dealers to be proactive in the situation. Not only does curbstoning give an unfair competitive advantage to the person illegally parking the car for sale, but it also has the potential to hurt the reputation of dealers everywhere. The numbers of licensed dealers who have been served with curbstoning violations are very low, as are private individuals who park their cars not realizing they were breaking the law. Reading between the lines, it can be assumed that unlicensed dealers are www.fiada.com

the main curbstoning culprits. That being the case, the danger of the situation is all the more serious. “We of course are concerned about compliance with the law and want to make sure that dealers are selling from a licensed location. A non-dealer who is curbstoning is participating in unlicensed activity and that greatly concerns us,” Ed Broyles, chief, Motor Vehicle Field Operations said. “In both cases there is risk for consumer harm.” While the DMV recognizes curbstoning to be a problem, they still are not willing or able to commit the resources to enforcing it that would make everyone happy. That is where dealers who are particularly affected by the problem can become part of the solution. First, when there is a known curbstoning problem, alert one of the DMV Regional Offices. Once the complaint is received, the DMV’s Bureau of Field Operations will assign a compliance officer to investigate the situation. If the car is found in violation, the appropriate action will immediately be taken. Also, seeing as dealers play a large role within their local communities, developing a relationship with both local law enforcement and code enforcement would be another way to bring the problem of curbstoning under control. Once aware of the issue, how it affects the community and the added incentive of extra revenue, chances are they will be interested in joining forces. Teamwork will be the final blow that takes out the curbstoning threat. As dealers, DMV and local law enforcement work together HB 631/SB 1182 will have the effect it was designed to have. Woe to the curbstoner who has made a habit of breaking the law: if you continue to park your cars illegally, operate without a license and bring dishonor to the industry, you will be towed.

GOT A CURBSTONING PROBLEM IN YOUR AREA? TAKE IT TO YOUR DMV REGIONAL OFFICE: The DMV’s Bureau of Field Operations are open to accept complaints from licensed dealers about curbstoned vehicles. Call or email your regional office if you want to report a problem. Region 1, Margate (954) 969-4216 • dmvregion1@flhsmv.gov Region 2, Ocala (352) 732-1267 • dmvregion2@flhsmv.gov Region 3, Jacksonville (904) 924-1524 • dmvregion3@flhsmv.gov Region 4, Deland (386) 736-5108 • dmvregion4@flhsmv.gov Region 5, Orlando (407) 445-7400 • dmvregion5@flhsmv.gov Region 6, Tampa (813) 612-7110 • dmvregion6@flhsmv.gov Region 7, Tallahassee (Dixie, Franklin, Gadsden, Hamilton, Jefferson, Lafayette, Leon, Liberty, Madison, Suwanee, Taylor and Wakulla) (850) 617-2999 • dmvregion7@flhsmv.gov (Bay, Calhoun, Gulf, Jackson and Washington) 850 872-4158 • dmvregion7@flhsmv.gov (Escambia, Holmes, Okaloosa, Santa Rosa and Walton) 850 475-5415 • dmvregion7@flhsmv.gov Region 8, Palmetto (941) 723-4551 • dmvregion8@flhsmv.gov Region 9, West Palm Beach (561) 640-6820 • dmvregion9@flhsmv.gov Region 10, Miami (305) 265-3003 • dmvregion10@flhsmv.gov

July 2011 — Independent Dealer — 17

Understanding the nature of how prices are set for crude oil and petroleum products might help put things into perspective the next time you go to the pump. BY CH R I S T Y TAYLO R

Oil--few commodities are as powerful, or as temperamental. Oil is powerful because it has an effect on nearly every other product or service available on the global market. Oil is needed to run machines in factories; as a material for manufacturing anything from fishing line to golf balls; a fuel source for trucks, trains, ships and planes that carry those products to the shelves and over the oceans and ultimately to get people to the store to buy it. Oil is the blood that makes our modern civilization work, and without it things would literally come to a screeching halt. Because oil and petroleum products are so crucial to our society, and our businesses, it makes sense to analyze and anticipate how the process works-not its scientific properties but the economic factors that surround it. What drives crude oil prices? How does it affect the price at the pump? Does that make it harder to sell cars? Knowing the answers to these questions may help you overcome your customers’ fears about fuel efficiency and gas prices or at the very least help you anticipate what will appeal to them. Crude Oil 101 Let’s start with the basics; what drives crude oil prices? As with most things in a free market, the price of oil fluctuates as a result of supply and demand, though for crude oil it is a little more complicated. According to the U.S.

18 18 — — Independent Independent Dealer Dealer — — July July2011 2011

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Energy Information Administration, there are seven factors that affect crude oil prices: supply from nonOPEC producers, supply from OPEC producers, balance of inventory, spot prices, activity from financial markets, demand from countries in the Organization of Economic Cooperation and Development (OECD) and demand from countries that are not members of OECD. That is a lot of factors and acronyms, so let’s break them down a little better. When talking about supply, there are two major groups to become familiar with. An organization called OPEC (Organization of the Petroleum Exporting Countries), is an intergovernmental organization of 12 oil producing and exporting countries that seeks to actively manage oil production in its member countries by setting production targets. (The OPEC alliance of countries includes Algeria, Angola, Ecuador, Iran, Iraq, Kuwait, Libya, Nigeria, Qatar, Saudi Arabia, United Arab Emirates and Venezuela). OPEC members produce about 40 percent of the world’s crude oil, and represent about 60 percent of the total petroleum traded internationally, making OPEC actions a large influence on international oil prices. When the amount of oil OPEC keeps in its reserves fluctuates, whether intentionally or unintentionally, the market moves with it. Low amounts of spare reserves will usually mean higher prices. The oil producers from countries not affiliated with OPEC represent 60 percent of the world’s oil production. The key players in this group include North America, regions of the former Soviet Union and the North Sea. By and large, these producers are international or investor-owned oil companies, whose primary motivation is shareholder value. Most nonOPEC producers operate at full capacity and have little reserve. If their production is reduced, such as www.fiada.com

by a hurricane in the Gulf of Mexico that halts drilling for several days, the world’s reliance on OPEC producers is higher, and prices will increase. Demand for oil splits the world again into two groups: Members of what is known as the OECD (Organisation for Economic Co-operation and Development) and those who are not. The United States, most of Europe, Japan and other advanced countries make up the 38-member OECD which tries to create a global network of governments fostering prosperity and fighting poverty through economic growth and financial stability. Non-OECD members are developing countries such as China, India and Saudi Arabia. The difference between the two groups, as it relates to oil consumption, has a lot to do with their current and future needs. The OECD member countries consume more oil, 53 percent of the world’s consumption last year, but have less consumption growth. If anything, because the main consumption in these countries is in personal and commercial transportation costs, demand for oil can decrease as gas prices increase and people look for more fuel-efficient or alternative fuel. On the contrast, developing countries have economies that are dependent on manufacturing which means that as their economic activity rises so does their demand for oil. In the decade between 2000 and 2010, while oil consumption declined in the OECD countries, it increased more than 40 percent in non-OECD countries. Oil pricing is more about what will happen next than what is happening now. Futures contracts play a large role in setting the current cost per barrel. There are a variety of groups who are interested in oil futures. Those who deal directly in the physical trading of oil, such as oil producers and commercial airlines, have a significant stake in the changes in price of oil and petroleum-based fuels. An airline, for example, may commit to buy a set

amount of oil at what they consider to be a safe price in order to avoid paying a higher price down the road. An oil producer may want to secure a sale of future oil in order to lock in a desired price before producing it. In recent years there has been interest from banks, money-managers and other investors to add oil and related commodities in an attempt to diversify their portfolios. This group, unlike the first, is not at all concerned with securing the physical trade of oil but seeks to profit from its change in price. For this reason, there is concern that these non-commercial commodity traders and investors can amplify price movements in either direction. The futures that these groups analyze include the amount of inventory currently held by the world’s oil producers, their projected production and anticipated levels of demand. Whenever there is a kink in this system, such as the Deepwater Horizon spill in April 2010 that poured crude straight into the Gulf of Mexico and halted offshore drilling or a geopolitical event like the recent civil war in Libya where speculators feared unrest spreading to nearby countries who are also oil producers, the uncertainty over future supply results in a higher price. A Thirst for Oil Since nearly the dawn of time, man has found immeasurable uses for oil and petroleum products. Asphalt can be traced back more than 4,000 years ago when it was used in Babylon to construct walls and towers. Through the years more discoveries were made from kerosene to the internal combustion engine and with each invention society grew more dependent on oil and the things it could provide. Energy crisis are nothing new, either. From the 1970s forward, each decade has seen its share of shortage in oil production and supply that put ripples into the economic pool. None seem July 2011 — Independent Dealer — 19

quite as impacting, however, as the most recent events that have occurred within the past three years. In July 2008 crude oil prices reached a record high of over $145 a barrel, according to the U.S. Energy Information Administration. There were a lot of factors that led to the spike, and many of them had to do with a global dependency on oil such as reports that the United States Department of Energy showed a decline in petroleum reserves, a worldwide discussion of peak oil, increasing tensions in the Middle East and the rising trend of oil speculation and futures trading. Consider also the significant political events and natural disasters that occurred in the first eight years of the new millennium such as the North Korean missile tests, 2006 worries over Iranian nuclear plants and the devastation that lay in the aftermath of Hurricane Katrina. This was also the time American car shoppers seemed to have an unquenchable thirst for large, gasguzzling heavy-duty trucks and SUVs. The Ford F-Series and the Chevy Silverado dominated auto sales in the first decade of 2000, and neither could crawl out of the teens when it came to miles per gallon. During the summer of 2008, Americans found themselves paying more than four dollars a gallon at the pump, according to the pricecomparing and record-keeping website GasBuddy.com. Economists like University of California, San Diego Economics Professor James D. Hamilton and leading Canadian economist Jeff Rubin, a former Chief Economist of the investment bank CIBC World Markets, believe that the staggering, rapid change in the price of oil had a larger influence on the “Great Recession” then most people think. Fuel costs ate into the discretionary spending accounts of many Americans, and households from coast to coast saw an impact on their 20 — Independent Dealer — July 2011

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Car shoppers expect their next car to deliver an average of 29 miles per gallon, while some groups will seek even greater fuel efficiency. "

Consumer Reports National Research Center survey

monthly budgets. You cannot live without food, clothing or shelter but, you also cannot live without gasoline to get you to work and back so you can afford to pay for those life essentials. Americans, who struggled between filling up their tanks and paying their mortgages, consequently adjusted their driving habits and vehicle purchasing decisions. Among other factors, the tightening of the belt seemed to help put a dent in gas prices. As the world’s largest oil consumer, a change in the United State’s demand for oil helped to create an imbalance in the supply inventory, sending prices falling almost as quickly as they had climbed, as 2008 ended with gas prices back down to $1.64.

five percent anticipate their next car will have worse fuel economy, likely because of their changing driving needs such as a growing family driving a minivan or a small business owner who needs a pickup truck.

Of those surveyed, most expect their next car to deliver an average of 29 miles per gallon, while some groups such as older drivers, women and lower-income households will seek even greater fuel efficiency. Another point to consider, more than half of the survey respondents said they were willing to pay extra for a more efficient vehicle but will not compromise safety. Compared to their current cars, shoppers seem to be moving away from new and used sedans, even though sedans generally provide an ideal Focus on Fuel Efficiency balance of fuel economy and safety. The Fears of high-oil sticker shock, like number of those surveyed who expect that in 2008, brought about changes to buy a new sedan is five percentage in philosophy for both consumers points lower than the number who and manufacturers. Fuel efficiency has become a growing concern for car currently own a sedan, and the number shoppers and carmakers have answered who expect to buy used is eight points with new models like the Chevy Cruze lower. According to Consumer Reports, shoppers are gravitating toward new and the reintroduced Ford Fiesta. small and midsized SUVs which may Recent sales data supports that notion point to the desire to have both fuel that consumers are moving away from efficiency and safety in a larger vehicle. large trucks and SUVs and into more Anticipating the needs of customers fuel-efficient choices. According to has always been a strength of successful an article from automotive industry independent dealers. Fuel efficiency analysis magazine Edmunds Auto and MPG are buzzwords right now Observer, five years ago, 65 percent that do not seem to be going away of Ford’s sales volume was in trucks anytime soon. A hurting economy has and truck-based products. Today, had an affect on car sales, but also high 60 percent of its sales are in cars and on the list is concern for gas prices. car-based crossover utility vehicles. Customers may not be calling as often A recent Consumer Reports survey as you hope, but when they do, be found that 62 percent of respondents planning to purchase a car will choose prepared to give them the fuel-efficient vehicle they are looking for. a model with better gas mileage, 32 percent expect to stay the same and www.fiada.com

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Experience Old Florida at the Gaylord Palms Resort & Convention Center in Orlando, the site of FIADA’s 2011 Annual Convention and Trade Show. This year’s convention will include top-level education sessions, an energetic exhibit hall and plenty of opportunities for family fun and entertainment. Make plans now to attend the industry’s top event. Log on to www.FIADA.com/convention.cfm for more details. FIADA’s special room rate at the Gaylord Palms Resort is $144 a night, including resort fees. Hotel amenities include: wired and wireless internet connection, fitness center, complimentary in-room beverages, daily newspaper and local shuttle service. Space is limited. Reserve your room by calling (407) 586-2000. Ask for the FIADA group rate.

CHOOSE YOUR REGISTRATION PACKAGE:

Dealer Express Registration $99

For all seminars and training events. No meals.

HOTEL INFO:

Corporate Registration $249

Family Registration $349

FIADA Group Room Rate $144

and then $195 for each additional employee.

Includes dealer, spouse and kiddos.

Per night, including resort fee.

The FIADA Golf Tournament is back! Hosted at the Celebration Golf Club, the FIADA Golf Tournament will be fun for all skill levels. The best ball scramble format with shotgun start will include prizes for the winning team, closest to the pin, longest drive and a chance to win a hole-in-one grand prize!

TOURNAMENT REGISTRATION:

Transportation is provided to the golf course from the hotel. Lunch begins at 12:00 noon. Net Proceeds benefit the FIADA PAC Fund. Contributions to the FIADA PAC are voluntary and not tax deductible.

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