2015 nov auto dealer final (web) by Massachusetts State Automobile Dealers Association, Inc

MSADA, One McKinley Square, Sixth Floor, Boston, MA 02109

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November 2015 • Vol. 27 No. 11

The official publication of the Massachusetts State Automobile Dealers Association, Inc

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St a f f D ir e ct o r y Robert O’Koniewski, Esq. Executive Vice President rokoniewski@msada.org Jean Fabrizio Director of Administration jfabrizio@msada.org Peter Brennan, Esq. Staff Attorney pbrennan@msada.org Marta Argueta-Guerra Administrative Assistant/ Membership Coordinator mguerra@msada.org Aut o D e a l e r M A g a z i n e Robert O’Koniewski, Esq. Executive Editor Catherine MacDonald Editorial Coordinator macdonaldcs8@gmail.com Subscriptions provided annually to Massachusetts member dealers. All address changes should be submitted to: MSADA by e-mail: mguerra@msada.org Postmaster: Send address change to: One McKinley Square, Sixth Floor Boston, MA 02109 Auto Dealer is published by the Massachusetts State Automobile Dealers Association, Inc. to provide information about the Bay State auto retail industry and news of MSADA and its membership.

Ad Directory Blum Shapiro, 22 Boston Herald, 32 Ethos Group, 2 G&M New England, 23 Leader Auto Resources, 25 Lynnway Auto Auction, 22 Nancy Phillips, 23 O’Connor & Drew, P.C., 31 Reflex Lighting, 21 Reynolds & Reynolds, 14 Southern Auto Auction, 20

The official publication of the Massachusetts State Automobile Dealers Association, Inc

Ta b l e o f C o n t e n t s

4 6 9 10 11

From the President: Pulling Up the Curtain THE ROUNDUP: U.S. House Passes CFPB Reform Bill LEGISLATIVE SCORECARD TROUBLESHOOTNG: Dealers Beware - $3.6M Award in Doc Fee Lawsuit LEGAL: ‘Tis the Season to Reduce Risk at Dealership Holiday Parties

12 AUTO OUTLOOK 15 Dealer Services: The Extraordinary Experience 16 Cover Story: 2016 New England International Auto Show Preview

20 26 29

NEWS From Around the Horn nada Market Beat nada update: Taking Every Opportunity

ADVERTISING RATES Inquire for multiple-insertion discounts or full Media Kit. E-mail jfabrizio@msada.org Quarter Page: $450 Half Page: $700 Full Page: $1,400

Back Cover: $1,800 Inside Front: $1,700 Inside Back: $1,600

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Massachusetts Auto Dealer NOVEMBER 2015

from the President

MSADA

Pulling Up the Curtain

The Auto Show is a reminder that this is a people-driven business.

By Scott Dube MSADA President

our Massachusetts State Auto Dealers Association has been fighting the good fight to keep our franchise laws both intact and respected when it comes to manufacturers who don’t want to play by the same rulebook. And while we’ve faced setbacks here and there alongside our many victories, we are confident that the marketplace will remain the place where our business model prevails. Nowhere is that more clear than when we pack the Boston Convention and Exhibition Center in mid-January for our auto show. Here are just a few facts you should keep in mind about how important the New England International Auto Show is for representing our businesses: • 57 percent of attendees say they are in the market to buy a car or truck in the 12 months after the show. • 53 percent said they planned to visit a dealer showroom. • 51 percent of attendees who purchased new vehicles post show said the show influenced their decision. None of these numbers are going to change because one manufacturer decides to not follow the laws we have in our Commonwealth. While we will aggressively defend and protect our dealers from any kind of encroachment, we know that in the end the customers will vote with their money and we will win. As you’ll see from our cover story that previews just a few of the hundreds of new vehicle models that will appear at the BCEC, we continue to offer better products every year. The ingenuity of automotive technology has been in overdrive since the days of first inventing the internal combustion engine, but every year it seems our products are safer, more efficient, and more fun. We dealers are going to have our own favorites at the Auto Show. Of course, we dedicate our livelihoods to certain manufacturers, and we’d damned well better expect they be the best on the floor. But the bigger message is that with all these new models rolled out for the public, we dealers are here to help get them in the vehicle of their dreams. It’s a critical message: The automotive business is a people-driven business. We are here for our customers. We’re here for their convenience and, more importantly, their safety. That’s why the laws are the way they are, and why we’re always striving to protect and improve them. The Auto Show delivers that message softly, but it can’t be missed. So I hope you will make plans to join me at our Auto Show Charity Gala on January 15, which will kick off right after our Dealer Summit held that afternoon. We’ll have a hotel block ready for you to enjoy a night at the BCEC and then hit the town. I encourage you to contact us with any ticket orders and questions. Executive Vice President Robert O’Koniewski can be reached at (617) 451-1051 or rokoniewski@ msada.org. We’re planning a great night, and I’m excited to see you there. t

NOVEMBER 2015

Massachusetts Auto Dealer www.msada.org

Msada Board Barnstable County

Brad Tracy, Tracy Volkswagen

Berkshire County

Brian Bedard, Bedard Brothers Auto Sales

Bristol County

Richard Mastria, Mastria Auto Group

Essex County

William DeLuca III, Woodworth Motors John Hartman, Ira Motor Group

Franklin County

Jay Dillon, Dillon Chevrolet

Hampden County

Jeb Balise, Balise Auto Group

Hampshire County

Bryan Burke, Burke Chevrolet

Middlesex County

Chris Connolly, Jr., Herb Connolly Motors Scott Dube, Bill Dube Hyundai Frank Hanenberger, MetroWest Subaru

Norfolk County

Jack Madden, Jr., Jack Madden Ford Charles Tufankjian, Toyota Scion of Braintree

Plymouth County

Christine Alicandro, Marty’s Buick GMC Isuzu

Suffolk County

Robert Boch, Expressway Toyota

Worcester County

Steven Sewell, Westboro Mitsubishi Steve Salvadore, Salvadore Auto

Medium/Heavy-Duty Truck Dealer Director-at-Large [Open]

Immediate Past President James G. Boyle, Tuck’s Trucks

NADA Director

Don Sudbay, Jr., Sudbay Motors

Officers

President, Scott Dube Vice President, Chris Connolly, Jr. Treasurer, Jack Madden, Jr. Clerk, Charles Tufankjian

Associate Members

MSADA A ssociate M ember D irectory Albin, Randall & Bennett Barton D. Haag (207) 772-1981 American Fidelity Assurance Co. Dan Clements (616) 450-1871 American Tire Distributors Pamela LaFleur (774) 307-0707 AutoAlert Don Corinna (505) 304-3040 Auto/Mate Dealership Systems Troy Potter (877) 340-2677 Bank of America Merrill Lynch Dan Duda and Nancy Price (781) 534-8543 Bellavia Blatt Andron & Crossett, PC Leonard A. Bellavia, Esq (516) 873-3000 Blum Shapiro John D. Spatcher (860) 561-4000 Boston Globe Mary Kelly, Tom Drislane (617) 929-8373 Burns & Levinson LLP Paul Marshall Harris (617) 345-3854 Cars.com Heidi Allen (312) 601-5376 CDK Global Chris Wong (847) 407-3187 Construction Management & Builders, Inc. Sarah Macomber (781) 246-9400 CVR John Alviggi (267) 419-3261 Dealerdocx Brad Bass (978) 766-9000 Dealermine Inc. Karen Parmenter (800) 304-3341 x5179 DealerTrack Ernest Lattimer (516) 547-2242 Downey & Company Paul McGovern (781) 849-3100 EasyCare New England Inc. David DeCredico (800) 458-7070 Ethos Group, Inc. Drew Spring (617) 694-9761 F & I Resources Jason Bayko (508) 624-4344 Federated Insurance John Ballard (859) 312-9896 First Citizens Federal Credit Union Joe Ender (508) 979-4728 Fisher & Phillips LLP John Donovan (404) 240-4236 Joe Ambash (617) 532-9320

Gulf State Financial Services Cliff Lang (713) 580-3143 GW Marketing Services Gordon Wisbach (781) 899-8509 Hireology Kevin Baumgart (773) 220-6035 Huntington National Bank John J. Marchand (781) 326-0823 John W. Furrh Associates Inc. Kristin Perkins (508) 824-4939 KEEPS Corporation Darcy Silver (718) 309-6133 Key Bank Mark Flibotte (617) 385-6232 KPA Michael Hurd (207) 400-6535 Leader Auto Resources, Inc. Chuck August (518) 364-8723 Lynnway Auto Auction Jim Lamb (781) 596-8500 M & T Bank John Federici (508) 699-3576 Management Developers, Inc. Dale Boch (617) 312-2100 Micorp Dealer Services Frank Salkovitz (508) 832-9816 Mid-State Insurance Agency James Pietro (508) 791-5566 Mintz Levin Kurt Steinkrauss (617) 542-6000 Murtha Cullina Thomas Vangel (617) 457-4000 Nancy Phillips Associates, Inc. Nancy Phillips (603) 658-0004 Northeast Dealer Services Jim Schaffer (781) 255-6399 O’Connor & Drew, P.C. Kevin Carnes (617) 471-1120 Performance Management Group, Inc. Mark Puccio (508) 393-1400 PreOwned Auto Logistics Anthony Parente (877) 542-1955 ProActive Leadership Group Bill Napolitano (774) 254-0383 Quik Video Jack Gardner (617) 221-5502 R.L. Tennant Insurance Agency, Inc. Walter F. Tennant (617) 969-1300

Reflex Lighting Ping Weiner (617) 269-4510 Resources Management Group J. Gregory Hoffman (800) 761-4546 Reynolds & Reynolds Marc Appel (413) 537-1336 Robinson Donovan Madden & Barry, P.C. James F. Martin, Esq. (413) 732-2301 Samet & Company John J. Czyzewski (617) 731-1222 Santander Richard Anderson (401) 432-0749 Schlossberg, LLC Michael O’Neil, Esq. (781) 848-5028 Sentry Insurance Company Eric Stiles (715) 346-7096 Shepherd & Goldstein Ron Masiello (508) 757-3311 Silverman Advisors, PC Scott Silverman (781) 591-2886 Solect Energy Development Kristen Brandt (781) 733-0223 Southern Auto Auction Tom Munson (860) 292-7500 Sprague Timothy Teevens (800) 828-9427 SunTrust Bank Michael Walsh (617) 345-6567 Taino Consulting Group Herby Duverné (617) 797-9316 Target Dealer Services Andrew Boli (508) 564-5050 TD Auto Finance BethAnn Durepo (603) 490-9615 TD Bank Michael M. Lefebvre (413) 748-8272 TrueCar Pat Watson (803) 360-6094 US Bank Vincent Gaglia (716) 649-0581 Wells Fargo Dealer Services Christopher Peck (508) 314-1283 Wicked Local Media Massachusetts Jay Pelland (508) 626-4334 Zurich American Insurance Company Steven Megee (774) 210-0092

www.msada.org Massachusetts Auto Dealer NOVEMBER 2015

The Roundup

U.S. House Passes CFPB Reform Bill – Battle Moves to Senate By Robert O’Koniewski, Esq. MSADA Executive Vice President Follow us on Twitter - @MassAutoDealers As we can attest based on considerable experience, the legislative process usually moves at a glacial pace. Although we have seen instances where, if the body and spirit are willing, legislatures have acted with roadrunner alacrity, the norm really is speed measured with a multi-year calendar. Our efforts to strike back at regulatory overreach in Washington is no exception. Dealers may recall that in 2013 the Consumer Financial Protection Bureau (CFPB), which was created in 2010 by the overwhelmingly Democratcontrolled Congress in the Dodd-Frank Wall Street reform act and answers to no legislative oversight, issued guidance that threatens to eliminate a dealer’s flexibility to discount auto loans in the showroom. The CFPB took this action without any public comment, hearings, or transparency. The guidance pressures lenders to change the manner in which dealers are compensated in a way that would eliminate dealers’ ability to discount credit for their customers. As soon as the guidance was issued, NADA in partnership with state dealer associations from around the country, including your own MSADA, took up arms and have lobbied Congress to rein in this rogue agency. H.R. 1737, “The Reforming CFPB Indirect Auto Financing Guidance Act”, filed with considerable bipartisan support led by Congressmen Frank Guinta (R-NH) and Ed Perlmutter (D-Colorado), would strike down the CFPB’s guidance and require it to engage in a transparent process that includes public hearings and other public input. Dealers support H.R. 1737 because: • The CFPB is attempting to eliminate dealer reserve and a dealer’s ability to discount interest rates for consumers. NOVEMBER 2015

Massachusetts Auto Dealer www.msada.org

• The CFPB issued its auto finance guidance behind closed doors without public input or comment. CFPB admitted that it never studied what impact eliminating dealer discounts would have on consumers. • H.R. 1737 would rescind the CFPB’s flawed auto finance guidance and make the CFPB more transparent and accountable when issuing future auto finance guidance. Over the last three years your MSADA leadership and staff have had numerous meetings with our Congressional delegation to point out the CFPB’s erroneous policies and actions. Whether at the annual NADA Washington Conference, the AIADA Washington Summit, or in our delegatiopn’s congressional districts, we have, in a forthright manner, attempted to educate our federal legislators on the CFPB’s overreach and the potentially adverse results for consumers. Simultaneous with the congressional lobbying, NADA attorneys have been battering the CFPB in efforts to expose the faulty data and premises which the agency used to attack dealers’ consumer financial assistance efforts. After years of effort, we have finally breached the CFPB’s initial line of defense. On November 18 the U.S. House of Representatives overwhelmingly passed H.R. 1737 by a vote of 332-96. It was a considerable bipartisan effort: 244 Republicans and 88 Democrats voted for the bill. No Republicans and 96 Democrats voted against the bill. As for the nine House members of the Massachusetts delegation, all Democrats, Rep William Keating (D-Bourne) and Rep Niki Tsongas (DLowell) voted “yes”. They sided with us despite

MSADA continued unfounded media attacks and significant pressure from the Obama Administration. Prior to the vote we reached out to our dealers and asked them to contact their Members of Congress on this bill. Thank you to all our member dealers, especially those who answered our Dealer Call to Action before the vote, who made phone calls, sent emails, or had meetings with our delegation members over the last two years to make today’s vote a successful one. For those in Rep. Keating or Rep. Tsongas’s districts, please be sure to call to express your thanks and appreciation. Each can be reached at (202) 225-3121. This strong bipartisan vote in the House sets the stage for Senate consideration of H.R. 1737. MSADA has its work cut out for it in the Senate. The agency is the brainchild of Sen. Elizabeth Warren, and Sen. Ed Markey seems content to follow her lead on this issue. We have had several meetings with Sen. Warren’s chief legal counsel, but our educational efforts regarding the CFPB’s wayward activities fall on deaf ears. Unfortunately we will need to depend on the other 98 senators to do the right thing and pass H.R. 1737.

MSADA Advertising Compliance Seminar To assist member dealers in better understanding the federal and state advertising rules, your Association conducted a seminar dedicated to this subject matter on November 10, at the Framingham Sheraton Hotel. Paul Metrey, NADA’s chief regulatory counsel for financial services, privacy, and tax, presented on the federal compliance and enforcement issues. He provided a thorough review of the FTC’s recent dealer advertising enforcement actions, such as Operation Ruse Control, and the specific types of advertising that have drawn the attention of the FTC’s lawyers. For a comprehensive review of federal guidelines, dealers can access NADA’s A Dealer Guide to Federal Advertising Requirements, which is available at www.nada.org. Massachusetts attorney Scott Silverman

covered the Massachusetts rules as articulated in the Attorney General’s regulations, which have been the basis of enforcement actions against franchise dealers over the last several years.

South Carolina Supreme Court Decision on Doc Fees Every so often an eye-opening judicial decision comes across our desk that causes one to take pause. On November 4 the South Carolina Supreme Court upheld a $3.6 million trial court award against a franchise dealership in a class action lawsuit regarding the dealership’s $299 “procurement fee” (aka doc prep fee). The Court found that, although the dealership can charge the fee as a means of reimbursing the dealer for overhead costs such as document preparation and retrieval incurred during the transaction, the dealership could not justify the $299 fee amount that it charged consumers. While this case is not binding in Massachusetts, the allegations and award should be enough to get the attention of Massachusetts dealers as well as dealers in other states that do not have a fee set in statute or regulation. Massachusetts, like South Carolina, does not cap the documentary preparation fee that dealers charge, but in both states the fee must be related to the actual costs incurred by the dealership during a transaction. Out-of-state court cases like Hendrick can be used as valuable reminders concerning our own situation here. As part of our compliance program, we periodically issue bulletins and other similar writings as a reminder as to what the documentary preparation fee is all about. Legislation has been filed here in Massachusetts for this year’s session that would cap doc fees at $100. We strongly oppose that legislation. (A similar bill was filed in 2013, with a cap of $75; after considerable MSADA lobbying against that bill, it saw no action in the last legislative session.) In addition to the scrutiny the doc prep fee receives from legislators, regulators, and the media, consumers and your own sales people generate confusion and queswww.msada.org

tions about the fee. For example, over the course of the year how often have your salespeople heard the following: “Why are you charging me a documentary preparation fee, and why is it $(fill in the blank)?” More importantly, what does your sales team tell your customers? That can be the really scary part of the story. Dealers need to practice restraint and discretion when setting the fee so as to avoid prosecution or lawsuits under the Massachusetts Consumer Protection Act (MGL Chapter 93A). The fee is allowed for cost recovery; it is not intended to be a “profitmaking” component of the vehicle purchase. Dealers can reference our numerous articles and bulletins on this subject matter. This month’s Troubleshooting column by staff attorney Peter Brennan is dedicated to the South Carolina case. Finally, in order to assist you in explaining the need for the “doc prep” fee to your customers, your Association has developed a brochure you can provide to them. A sample brochure can be obtained at the MSADA website [www.msada.org] with your member log-in. If you want to use this as a template and print these for yourself, customized for your dealership, DO NOT CHANGE the content.

OSHA Fines to Rise for First Time Since 1990 Federal penalties for workplace-safety violations were increased recently for the first time since 1990, thanks to a littlenoticed provision of the budget bill signed into law by President Barack Obama. The move would bring the fines in line with inflation over the past 25 years. In the future, fines from the U.S. Occupational Safety and Health Administration and state workplace-safety agencies would continue to rise with inflation. Still, even after an expected increase of as much as roughly 80%, OSHA fines will remain tiny compared to those issued by many other regulatory agencies, such as the Environmental Protection Agency. Since 1990, OSHA has been one of only three federal agencies that were specifically exempted from a law that required federal

Massachusetts Auto Dealer NOVEMBER 2015

The Roundup agencies to raise their fines to keep pace with inflation. The new law now requires an initial penalty “catch-up adjustment,” which must be in place by August 1, 2016. The budget directs that the penalty increases be issued as an interim final rule.

Sen. O’Connor Ives Visits Bill DeLuca’s Dealerships Your Association values the relationships that dealers have with the elected officials in the communities they are located. We try to take advantage of legislators’ down time away from Beacon Hill or Capitol Hill to schedule visits at our members’ dealerships in order to build upon those relationships. Recently our MSADA Essex County Director Bill DeLuca III and his son Bill DeLuca IV hosted State Sen. Kathleen O’Connor Ives (D-Newburyport) at their Haverhill stores to discuss the state of the industry in Massachusetts and nationally, as well as the various issues that crop up periodically within the manufacturer-dealer franchise relationship. Sen. O’Connor Ives sits on the Joint Committee on Consumer Protection and Professional Licensure, which has jurisdiction over many issues affecting dealership operations. MSADA President Scott Dube also attended the meeting. We have several other dealer-legislator meetings coming up over the next few weeks. If you are interested in hosting a legislative visit, please contact me and we can get that meeting scheduled.

NADA 2015 Dealership Workforce Study Results Available Employee compensation and productivity at new-car dealerships increased across all job positions in 2014, a key finding of the just-released NADA Dealership Workforce Study 2015 report, Automotive Retail: National & Regional Trends in Compensation, Benefits & Retention. New to the report this year is a samestore compensation analysis for car dealerships that participated in both 2014 and 2015 studies, and modified volume ranges to address the needs of small as well as large dealerships. NOVEMBER 2015

Among other key findings from the fourth annual study, which examined 2014 data: Dealership turnover, with the exception of the sales consultant position, was still below that of the private sector; midsize dealer groups (10-40 dealerships) outpaced the larger groups in weekly earnings; and women comprised 18.5 percent of new-car dealership employees while millennials comprised 31 percent. The study analyzed national and regional compensation, retention and turnover, and dealership demographics based on data from 290,000 payroll records. In addition, each dealership completed a questionnaire that identified franchises and supplied information on sales volume, weekend work schedules, and employee benefits. The NADA Dealership Workforce Study aims to help dealers make databased decisions on recruiting, hiring, and retaining the best employees. All participants in the 2015 study receive a complimentary “Trends Report” as well as a custom report comparing their own dealerships to the nation, the region, the state, and the franchise. Non-participants can purchase the “Trends Report” for $399 by signing in to www.nadauniversity.com and searching 2015trends, or by calling NADA Customer Service at (800) 557-6232. To participate in the upcoming 2016 Workforce Study, go to www.nadaworkforcestudy.com beginning December 16.

2016 Fuel Economy Guide Now Available The U.S. Department of Energy and the Environmental Protection Agency recently released the 2016 Fuel Economy Guide. The Guide provides detailed fuel economy numbers for MY 2016 light-duty vehicles, along with estimated annual fuel costs and other information for prospective purchasers. Dealers must prominently display a paper copy of the Guide where new vehicles are offered for sale and must provide copies to customers upon request. Dealers are encouraged to download and print copies of the Fuel Economy Guide for their customers. There are a number of options available

Massachusetts Auto Dealer www.msada.org

for dealers to comply: • Dealers can download the Guide at http:// www.fueleconomy.gov/feg/pdfs/guides/ FEG2016.pdf and print it as necessary. • Dealers can order paper copies of the Guide by calling DOE’s Clean Cities Technical Response Service at (800) 254-6735 between 9 a.m. and 7 p.m. EDT, or by clicking on http://www.fueleconomy.gov/feg/printGuides.shtml.

MSADA-AutoMax Partnership Your Association is sponsoring another round of salespeople recruitment and training for our member dealers. Dealers will be receiving materials from AutoMax branded with the MSADA tag that describe the program, including employment marketing, interviewing and screening, scoring all candidates, and training of potential hires. Dealerships that participate will be charged the MSADAsubsidized rate of $1,150, which includes a week of training at no additional charge. Dealers can go to “http://msadastaffing.com/” to enroll. Upon enrolment, AutoMax will contact you to obtain the details for the positions to hire. Should you have any questions, do not hesitate to contact me.

2016 Auto Show, Dealer Summit & Charity Gala Circle the dates now – MSADA’s 59th edition of the New England International Auto Show will run January 14-18, 2016, at the Boston Convention and Exposition Center in South Boston. In order to celebrate our Auto Show, dealers, their families, and key employees are invited to attend on Friday, January 15, our Nineteenth Annual Auto Show Charity Gala at the BCEC, from 5:00 p.m. to 10:00 p.m. The Gala benefits our Charitable Foundation’s Automotive Technician Scholarship Program. Prior to the Charity Gala we will conduct the Dealer Summit at the BCEC from 2:00 p.m. to 5:00 p.m., at which we will have several speakers discuss on-going events in our industry. Don’t delay — register today! .t

MSADA

www.msada.org

Massachusetts Auto Dealer NOVEMBER 2015

Troubleshooting

MSADA MSADA

Dealers Beware - $3.6M Award in Doc Fee Lawsuit By Peter Brennan, Esq.

MSADA Staff Attorney Documentary preparation fees are frequently addressed by your Association through legal bulletins, articles, and seminars. Like a broken record, we advise our dealer members that, if they charge a documentary preparation fee, they need to practice restraint and discretion when setting the fee so as to avoid prosecution or lawsuits under the Massachusetts Consumer Protection Act (MGL Chapter 93A). As a reminder - the doc fee is allowed for cost recovery; it is not intended to be a “profit-making” component of the vehicle purchase. A recent case out of South Carolina exemplifies the danger that dealerships court when they cannot justify their fee. The South Carolina Supreme Court recently upheld a jury award of $3.6 million against a franchise dealership, Hendrick Honda of Easley, in a class action lawsuit regarding the dealership’s $299.00 “Procurement Fee”. A “procurement”, “closing”, or “document preparation” fee is allowed under the South Carolina Consumer Protection Code, which states in relevant part: “Every motor vehicle dealer charging closing fees on a motor vehicle sales contract shall pay a one-time registration fee of ten dollars during each state fiscal year to the Department of Consumer Affairs. The closing fee must be included in the advertised price of the motor vehicle, disclosed on the sales contract, and displayed in a conspicuous location in the motor vehicle dealership.” Hendrick had registered its closing fee NOVEMBER 2015

with the state as required under the law and had complied with all other terms of the statute. The notice that Hendrick posted in the dealership stated that: “This Dealership Charges a $299.00 Closing Fee as a Means of Reimbursing It For Certain Overhead Costs Such As Document Retrieval and Document Preparation. It Is A Charge That Is Permitted But Not Required By Law.” The term “closing fee” was not defined in the statute, which permitted the trial judge to define the term as “a predetermined set fee for the reimbursement of closing costs, such as document retrieval and document preparation, but only those actually incurred by the dealer and necessary to the closing transaction”. Hendrick was asked to justify its fee using this definition and could not. The general manager of the dealership testified that he “didn’t sit there and do the math.” He admitted that he did not know how the original fee was calculated or what justified the subsequent increases in the fee. An expert hired by the defendant attempted to justify the fee by using employee salaries, utilities, real estate, and other overhead costs as part of the calculation, but the court ruled that these items were general operating expenses not directly related to the closing of a vehicle sale and, therefore, not reimbursable through the fee. The $1,445,786 initial jury award represented the amount that was collected by Hendrick in closing fees from 5,314 customers during the four year period relevant to the case. This amount was doubled by the judge under the South Carolina Consumer Protection Code and increased by the plaintiff’s attorneys’ fees and costs. While the Hendrick case is NOT binding in Massachusetts, the allegations and award should be enough to get the attention of Massachusetts dealers as well as dealers in other states that do not have a fee set in statute or regulation. Massachusetts, like South Carolina, does not

Massachusetts Auto Dealer www.msada.org

cap the dollar amount of a documentary preparation fee that dealers charge, but in both states the fee must be related to the actual costs incurred by the dealership during a transaction. In Massachusetts the “Documentary Preparation Fee” can be passed on to the consumer but only if it is (1) part of the total purchase price advertised to the customer, and (2) a fee associated with legitimate costs that the dealership incurs. Cost recovery consists of passing on to the customer the costs incurred in doing the following, for example: preparing a P&S, an appraisal document, odometer statements, insurance verifications, etc.; storing or archiving documents; and personnel and computer costs associated with these tasks. Three items that may never be included in the “doc prep” fee: (1) preparation of the Retail Installment Sales Contract; (2) the title preparation fee; and (3) the EVR fee. The doc fee must be uniformly charged to every consumer. Negotiating on the fee amount or waiving it for a customer could subject the dealership to claims of arbitrariness. Additionally, dealers must also NEVER represent to customers that any portion of the fee is required by or remitted to the RMV or any other state agency. MSADA has prepared a documentary preparation fee brochure that dealers can use with salespeople or give to customers to help explain what the fee is all about. The brochure is available at msada.org or by contacting the below-listed attorneys. .t If you require any additional information on documentary preparation fees, please contact Robert O’Koniewski, MSADA Executive Vice President, rokoniewski@msada.org or Peter Brennan, MSADA Staff Attorney, pbrennan@ msada.org or by phone at (617) 4511051.

MSADA

Legal

By Joseph W. Ambash and Jeffrey A. Fritz

‘Tis the Season to Reduce Risk at Dealership Holiday Parties It’s that time of year again—the festive holiday season and all that accompanies it, including celebratory gatherings with family and friends, traditional home-cooked meals, imbibing fine wine and spirits, and the giving of gifts. The holiday season also likely brings with it your dealership’s holiday party, which, in turn, brings an increased risk of liability—especially where alcohol is served at the event. This article focuses on some of risks associated with serving alcohol at your holiday party, and offers some suggestions for minimizing those risks. When employees are working, they typically are performing the tasks associated with their jobs and are not (one hopes and expects) drinking alcohol. And, in their sober states, employees generally (although, perhaps, not always) understand that rules exist governing their work environment— including those concerning bad behavior and sexual harassment—and conduct themselves accordingly. Work-related holiday parties are different, at least in some respects. Unlike the normal work day, employees typically are not performing the tasks associated with their jobs and while drinking alcohol. Sometimes the party even takes place outside the workplace. The environment feels different, and it is different. Unfortunately, some employers do not appreciate that the same workplace rules that apply during the typical work day also apply to the company holiday party. That a recent study reports 36 percent of employers reported behavioral problems at last year’s holiday party comes as no surprise. Indeed, the more alcohol employees drink, the more likely they are to be looser with their language, conduct, or behavior. They are more likely to have difficulty navigating the sometimes very fine line between good-natured ribbing and off-color or offensive remarks. They may be more likely to make a joke about a coworker’s

race, gender, sexual orientation, age, religion, national origin, or some other protected status, which could form the basis of a discrimination and/or harassment claim. They may be more likely to engage in conduct constituting sexual harassment or contributing to a sexually hostile work environment. (If not obvious at this point, you should avoid hanging any mistletoe.) The fact that the discriminatory and/or harassing language, conduct, or behavior occurred at the holiday party is no defense. Potential liability, of course, extends well beyond discrimination and harassment claims. The more alcohol employees drink at the holiday party, the more likely they are to injure themselves, and the more likely they are to injure, or even kill, others on the ride home—which could result in workers’ compensation or negligence (or worse) claims against the employer. So what are you, as an employer, to do? On the one hand, you want your employees to enjoy the party. On the other hand, you want to reduce the risk of liability for your business. Of course, the most conservative suggestion is not to serve alcohol at your holiday party. If that option is not attractive, you should consider: • serving many non-alcoholic options and only beer and wine, leaving the hard stuff off the drink menu. • hiring a professional bartender. Designating supervisors or employees to act as bartenders or, even worse, just leaving the booze out on a table or in a cooler for people to help themselves has a much greater likelihood of increased consumption and increased liability. Best to leave the serving of alcohol to the professionals. • holding the event offsite, such as at a restaurant or banquet hall. Such venues typically have their own bartenders and servers, as well as their own liability insurance. www.msada.org

• nixing the open bar (even for a limited time, which tends to encourage early binge drinking) and, instead, giving your employees a couple of “free drink” tickets, and offering a cash bar thereafter. • holding your holiday party during the workday (i.e., holiday lunch) and/or during the work week (rather than on a Friday or Saturday night), when people are less likely to drink to excess. • offering high-protein and starchy foods that tend to soak up and slow the effects of alcohol. • designating certain managers to monitor employee behavior, ready to address any inappropriate conduct as it occurs. • opening the invitation to employees’ spouses and/or family members: people whose presence would tend to temper inappropriate conduct. An employee is less likely to sexually harass another employee, for example, in the presence of his or her spouse. Finally, and perhaps most importantly, if you are offering alcohol at your holiday party, you should have a plan in place to ensure that all employees get home safely. Consider having a taxi service at the ready to transport home any employees who should not be driving. Happy holidays. t

Joe Ambash is the Managing Partner and Jeff Fritz is counsel at Fisher & Phillips, LLP, a national labor and employment firm representing hundreds of dealerships in Massachusetts and nationally. They may be reached at (617) 722-0044.

Massachusetts Auto Dealer NOVEMBER 2015

AUTO OUTLOOK

NOVEMBER 2015

Massachusetts Auto Dealer www.msada.org

MSADA

www.msada.org

Massachusetts Auto Dealer NOVEMBER 2015

MSADA

By Joseph W. Ambash and Jeffrey A. Fritz

‘Be Respectful Of Others and the Company’ And Other Unlawful Workplace Rules

OCTOBER 2015

Massachusetts Auto Dealer www.msada.org

Dealer Services

MSADA

The Extraordinary Experience Why not embrace the concept of the new way as the old way?

By Rob Sneed Rob Sneed is a development rep and motivator for Ethos Group Consulting Services and the author of various articles in the automotive industry.

Ethos Group

provides franchised

automotive dealerships with an integrated program

results-driven

income-develop-

ment services, comprehensive training, robust recruiting and industry-leading products.

The most elementary of all concepts unlocks a dealership’s profitability: It is the extra that makes the ordinary extraordinary. Dealers commit incredible resources each year to products, programming, and training that go under-utilized. Countless amounts of energy and effort are spent chasing the latest, greatest thing when they could be invested in the one thing that always pays dividends: customer service. Creating an extraordinary experience for your customers during their ownership has a powerful impact on your business profitability, customer loyalty, and retention. Hundreds of millions of dollars are spent every year in an attempt to capture new business. An equal amount, if not greater, is spent providing resources to retain existing business. While the necessity of investing in your dealership’s future cannot be overstated, you must not outspend your team’s ability to properly utilize their re-

sources. Rather than try to out-resource and outsmart our way through the sale and servicing of automobiles, what if we embraced the concept that this new way is the old way?

Energize the Experience Customers still want what they have always wanted: A fair deal on a product that was presented in an enthusiastic and compelling way by a person they can trust will be there for them in the future. Delivering on this is every bit as simple as it seems, but many in the auto industry continue to try and dress-up a lack-luster experience, committing countless dollars in expense instead of insisting that their people make an unyielding commitment to the complete and total satisfaction of the customer.

that your organization can be proud of, and do it unapologetically.

Evaluate Your Values Establish organizational values by prioritizing what matters most over what matters now. This can be difficult, because, at times, it will feel as if the urgent is competing with the important. Encourage your people to be fully invested in whatever they are involved in – whether at work or in their off time. By creating an uncompromising culture for your employees, they’ll deliver an uncompromising experience to your customers. By allowing your employees to value their time away from work, you motivate them to be present and value the experience they have with each and every customer.

Act on Accountability Your dealership’s leaders must be held accountable for implementing and exemplifying your vision for the business and your organization’s values. You, as a leader, must inspire others to do more and go further for your customers, because it is your customer’s satisfaction that drives the business. The auto industry is buzzing with words like experience, loyalty, longevity, and retention. Dealers across the nation are asking their leadership teams to use their resources in pursuit of concepts that can quickly feel very ambiguous. Making a commitment to your customers, and acting out that commitment one deal and one repair order at a time, will pay dividends that far exceed any other! t

“Customers still want a fair deal on a product presented in an enthusiastic way by a person they can trust will be there for them in the future.” When we completely satisfy our customer’s wants and needs during their vehicle ownership, and do it with an expectant and appreciative attitude, profits increase and retention is automatic.

Bring the Vision into Focus Clearly communicate your vision for the business. Define your expectations for the experience your customers have during the sale and servicing of their vehicle while at your dealership. Set a standard of service www.msada.org

Massachusetts Auto Dealer NOVEMBER 2015

2016 New England International Auto Show

Rev ved Up Hyundai Sonata PHEV

The Hyundai Sonata Plug-in Hybrid Electric Vehicle (PHEV) is expected to travel up to 22 miles on electric power and can recharge in as little as two and one-half hours with a Level 2 charger.

Faster, smarter and better vehicles appearing at the New England International Auto Show

Ford F-150

The new F-150â&#x20AC;&#x2122;s Trailer Backup Assist adds a new feature that allows the driver to control the power steering system more easily.

NOVEMBER 2015

Massachusetts Auto Dealer www.msada.org

Mazda CX-3

Stylish, nimble, and well-equipped, the 2016 Mazda CX-3 is a standout among subcompact crossover SUVs.

PREVIEW

2016

f or

Lamborghini Aventador

The Superveloce was developed as the Lamborghini with the sportiest DNA, thanks to an enhanced V12 aspirated engine.

Volkswagen Passat

The new Passat comes standard with VW’s new MIB II infotainment system, which includes USB connectivity for the first time.

Audi Q7

The new model redesign delivers a comprehensive makeover. It’s lighter, roomier, and just as luxurious as ever.

Honda Civic Coupe

The two-door body will be offered with Honda’s new turbocharged 1.5-liter engine that delivers 174hp.

Subaru Forester

The new model features six trim levels, two engine choices, five doors, all-wheel drive, and a family-friendly interior.

www.msada.org

Massachusetts Auto Dealer november 2015

2016 New England International Auto Show BMW I8

Given that the BMW i8 is capable of sports car performance with great fuel economy and quick charge times, prepare to rethink your idea of what a hybrid can be.

Among the thousands who pour into the Boston Convention and Exhibition Center each year, nearly half say they plan on buying a new vehicle within the next 12 months. Here are more examples of what theyâ&#x20AC;&#x2122;ll find in 2016. Cadillac ATS-V

Urging customers to think beyond the Escalade, the ATS-V gets a 3.6-liter twin-turbocharged V6 rated at 464 horsepower.

Chevrolet Camaro

The new model trades in its old platform for the lighter, stronger, slightly smaller Alpha structure, which debuted three years ago in the Cadillac ATS.

NOVEMBER 2015

Massachusetts Auto Dealer www.msada.org

PREVIEW Alfa Romeo 4C

With Italian style, racecar-influenced manufacturing processes, and stunning performance, the new Alfa Romeo 4C joins the ranks of exclusive exotics.

Toyota RAV4

The updated RAV4 features more aggressive looks and delivers up to 176 hp with 172 pounds of torque.

Dodge Charger Hellcat

Bold, muscular, and loaded with heritage, the 2016 Dodge Charger is a great choice for a distinctive and spacious full-size sedan.

Rolls Royce Dawn

The new convertible is inspired by a limited-edition model sold from 1950-â&#x20AC;&#x2122;54.

Nissan Altima

Along with a heavily redesigned exterior, the new model features optional Zero Gravity seats -- a design that is supposed to make the drivers feel zero driving stress.

www.msada.org Massachusetts Auto Dealer NOVEMBER 2015

NEWS from Around the Horn from Around

NEWS the Horn

WESTFIELD

In Memoriam: Bob Pion Bob Pion, a stalwart presence in the Western Massachusetts dealership world for half a century, died November 11 at age 88. A graduate of Cathedral High School, Pion opened what is now known as Bob Pion Buick GMC in Chicopee in 1977. His son Don, who now runs the dealership, recalled his father’s story to The Springfield Republican as “the American Dream.” “He always told me that you need to treat your customers like your friends,” Pion said. “It is about relationships and how you treat people.” Bob Pion’s grandsons, Rob and Tom, also work at the dealership. Bob Pion’s earliest job out of high school came at Petluck’s Clothing Store in Chicopee. According to Don, a customer who managed a Chevrolet dealership told Bob he’d be great at selling

NOVEMBER 2015

cars, and he went to work selling Chevys. He worked for the Chevrolet dealership until joining with a partner in 1970 to open an MG, Renault, and Subaru dealership in Springfield. The partners owned Hampden Dodge from 1972 to 1977. Pion bought the former Chrapek Pontiac in Chicopee in 1977 on his own, later adding the Springfield Truck GMC and the former Mathis Buick franchise. The family also ran the former Suburban Chevrolet in Southwick from 1985 to 1992. Pion sold Pontiacs until General Motors discontinued the brand in 2009. The Buick GMC store famously fought its way back from the brink of losing its franchises during the GM restructuring of 2009. When the dealership finally emerged with its franchises intact, Bob Pion told The Republican: “Now all we have to do is get some inventory in here so we can sell cars.”

Massachusetts Auto Dealer www.msada.org

MSADA NORWOOD

Land Rover Dealer Purchases NH Subaru Store Nancy Phillips Associates announced in November the sale of Subaru of Milford, New Hampshire, owned by Regina Carusi, to Sheree Kaplan, who owns a JaguarLand Rover store in Norwood and in Warwick, Rhode Island. “Kaplan’s historical performance as a luxury dealer ranks her among the top dealers in the country,” Phillips said. “We are particularly proud to note that in our 27 years of selling auto dealerships, this is our first transaction in which the purchaser, seller, and broker are all women.” Regina Carusi’s top priority in the sale of her dealership was the continuance of employment for her staff. In a press release, Carusi said she is pleased to be able to turn over the dealership to Kaplan and gratified that the reputation of the dealership built upon the efforts of her husband, Vincent Carusi, will be continued.

From left: Sheree Kaplan, owner of Jake Kaplan’s Ltd. and new owner of Subaru of Milford, Nancy Phillips, and Regina Carusi.

www.msada.org

Massachusetts Auto Dealer NOVEMBER 2015

NEWS from Around the Horn WEST SPRINGFIELD

Balise Toyota Marks 25 Years Balise Toyota celebrated 25 years of sales and service in November. George Brenner, Toyota General Manager for the Boston Region, traveled to the dealership to present an award to company CEO Jeb Balise recognizing the accomplishment. Balise Toyota opened for business in 1990 on Riverdale Street. Five years ago, they started building their present 43,000 square foot dealership on that same site. “It is an honor to be recognized for 25 years of Toyota service,” Balise said in a statement sent to 22News. “I share this award with all of our Balise associates and those who have worked to get Balise Toyota to where it is today.” In addition to their West Springfield dealership, Balise also operates a Toyota dealership in Warwick, Rhode Island. Balise owns a total of 18 new car dealerships in Western Massachusetts, Rhode Island, Cape Cod, and Connecticut.

NOVEMBER 2015

Massachusetts Auto Dealer www.msada.org

MSADA QUINCY

Quirk Ford Featured on NBC News The Quirk Ford program that employs local high school students as tech ambassadors in the showroom was a recent subject of a report from NBC Nightly News with Lester Holt. The nationally-broadcast program spoke with studentemployees about their role helping customers navigate the

ins and outs of vehicle systems, and it included an interview with a satisfied customer. “They’re so tech-savvy,” the customer told the network. “And I think it’s a wonderful thing that these kids are here to help.” NORWOOD

Trump Refunds Most of Ernie Boch Jr. Donation Ernie Boch Jr.’s August rally for Republican presidential candidate Donald Trump may have been a little overboard, funding records show. The Massachusetts dealer gave $86,936.80 to Trump’s campaign through both cash and in-kind contributions, according to the R e p u b l i c a n ’s presidential candidate’s fundraising filing in m i d - O c t o b e r. The limit on individual campaign contributions is $2,700, so Trump had to give back $84,236.80. According to the filing, Trump’s campaign raised $3.9 million from the beginning of July to the end of September. www.msada.org

Massachusetts Auto Dealer NOVEMBER 2015

NEWS from Around the Horn

MSADA

SEEKONK

Southern Massachusetts and Rhode Island Honda Dealers Team for Holiday Food Drive The Rhode Island and Southern Massachusetts Honda Dealers announced they will sponsor their second Annual Food & Fund Drive. Six Honda dealers from the two states will participate in the event, which will take place from November 9 to December 11. A large number of people throughout Rhode Island and the southern region of Massachusetts suffer from hunger, which has a particularly devastating effect on children. The Honda dealers organization hopes this event encourages people in the dealerships’ communities to get involved and help make a difference. “The food drive last year was a resounding success, and we were able to donate a lot of much-needed food to people who greatly need it,” said Scott Birtles, General Manager

of Herb Chambers Honda of Seekonk. “The holiday season is just around the corner, so in this season of giving we are greatly looking forward to once again collecting non-perishable food items and working to fight hunger in our neighborhoods.” The Rhode Island and Southern Massachusetts Honda Dealers group is working alongside the Rhode Island Community Food Bank to organize the drive. The food bank depends on events like this and other charitable donations from local individuals and businesses to make sure hungry people at risk of hunger get the food they need. People who would like to participate in the food drive can bring any non-perishable food items to their local Honda dealer between November 9 and December 11.

HINGHAM

Herb Chambers Donates LoJack Unit to Local Police The Hingham Police Department now has an improved ability to track stolen cars, thanks to a LoJack donation from the newly opened Herb Chambers Lexus. Police Sgt. Steven Dearth said the dealership is paying for a third LoJack radio unit for one of the force’s patrol cruisers. The cruiser fleet already has two of the units, which link Hingham police to a national crime information center. Herb Chambers appeared at the dealership in November with LoJack president and CEO Randy Ortiz and Police Chief Glenn Olsson to present the new unit. While auto theft has plunged nationally and in Massachusetts since the 1990s due to the now-standard use of anti-theft technology, Dearth said the third LoJack unit will add better reporting and tracking coverage for the area as well as Hingham. NOVEMBER 2015

“Stolen cars will travel through here from other places,” Dearth told Wicked Local Hingham. “And our officers may drive in and out of Weymouth, Rockland, and Hull, so there are overlapping signals (for reported thefts).” The National Insurance Crime Bureau said that, in 2013, the Boston-Eastern Massachusetts region had 5,858 car thefts. Dearth said one of those was in Hingham — a vehicle stolen in the town was tracked to a garage in Rhode Island. The LoJack cruiser units are designed to track LoJack-equipped vehicles. When the owner reports a theft, that report is sent to the national crime center, which triggers a silent LoJack signal in the stolen vehicle. If a patrol officer gets within range of the stolen vehicle, the cruiser’s unit flashes a theft alert. But Dearth said the LoJack alert can be broadcast more widely, since the alert can also be sent to other LoJack-equipped motorists as well as police departments. t

Massachusetts Auto Dealer www.msada.org

MSADA

www.msada.org

Massachusetts Auto Dealer SEPTEMBER 2015

NADA Market Beat

M M M M

M Sales above 18.1 million this month are hard to lament, since we seem headed toward a record-breaking year. Despite mixed signals on economic activity, light-duty vehicle sales continue to set new highs. Light trucks outpaced cars 10.4 million to 7.8 million, and the average transaction price rose to $33,201. But incentivesâ&#x20AC;&#x201D;at $3,100-plusâ&#x20AC;&#x201D;also were up, compared to last October and effectively unchanged compared to September. Still, there are plenty of reasons to be happy, so our outlook for 2015 is revised up slightly to 17.3 million, based on rising incentives and continued strong demand.

NOVEMBER 2015

Massachusetts Auto Dealer www.msada.org

MSADA

www.msada.org

Massachusetts Auto Dealer NOVEMBER 2015

NADA Update

By Don Sudbay

Taking Every Opportunity Don Sudbay, President of Sudbay Automotive Group, represents MSADA members on the NADA Board of Directors. He welcomes your

questions

and

concerns

(donsudbayjr@sudbay.com). Every November, as we sit down to Thanksving dinner, we should remember that there are those of us who have a whole lot more time off than we do around this time of year. Of course, I’m talking about Congress, which takes an extra-long break for Thanksgiving and a clear two weeks off at the end of the year. The lucky among us can grab that kind of time every now and again, but I’m guessing most of us will be busy in our stores. As NADA Chairman Bill Fox points out in his column this month, this is the perfect time to invite your congressional representative to your showroom. As outlined below, we as an industry continue to try to beat back onerous regulations even as the holidays approach. I encourage you to take advantage of the extra time off our represenatives will have on their hands by having them meet and greet your staff at your dealerships.

Grassroots Advocacy: Getting Involved Makes a Difference By Bill Fox “The National Automobile Dealers Association was formed in 1917 when a small group of auto dealers came to Washington, D.C., and successfully lobbied Congress against a proposed luxury tax on automobiles. For nearly 100 years, NADA has been advocating fiercely for new-car dealers on Capitol Hill. “However, the work of NADA’s legislative and lobbying staff cannot be done alone. The nation’s 16,500 dealerships – which provided and supported more than 2.2 million private-sector jobs totaling $144 billion in employee compensation last year – need to engage and support NADA’s grassroots efforts back home in congressional districts across the country by building long-term relationships with elected officials. “There are many members of Congress who do not understand how an auto dealership operates, despite purchasing vehicles for their families and their campaigns. When elected officials learn and understand the retail-auto industry, they become better informed about how their decisions in

Washington affect the ability of dealers to invest and grow their businesses. And when future public policy issues arise, they can rely on those relationships to consult with local dealers. “One of the most effective ways to build a relationship is to invite a member of Congress to the dealership and meet with employees and discuss NADA’s legislative priorities, such as the NADA-backed legislation, H.R. 1737, which preserves the financing option for car buyers to receive discounted financing rates on auto loans from the dealership. On November 18 the U.S. House of Representatives, by a 332-96 biparisan vote, approved H.R. 1737 and sent it to the Senate. “To better inform elected officials and opinion leaders about the true economic value of dealer-assisted financing for consumers, NADA has produced a new video with stories of real car buyers who saved money by financing their new-vehicle purchases through local dealerships. To view the video with your elected officials, visit www.nada.org/ autofinance. “Further, to assist dealers in building these important relationships, NADA published the brochure, “3 Easy Steps to Making the Grassroots Connection,” which provides quick and easy instructions on how to get started. Back in August, I hosted Congressman John Katko (R-New York.) at my Toyota dealership in Auburn, New York, for a one-hour tour and meeting with my employees, and I plan to regularly engage with Congressman Katko in the following months. “One of the best times to schedule a dealership visit is during congressional recess breaks when members of Congress are working in their home districts and meeting with constituents. For the remainder of 2015, there are two more recesses scheduled, with additional recess breaks planned in 2016: November 23-27 and December 21-31. “For more information about inviting a member of Congress to your dealership, contact Patrick Calpin, NADA director of grassroots advocacy, at (202) 547-5500 or pcalpin@nada.org or visitwww.nada.org/grassroots. Patrick can personally assist and connect you with your legislators along with scheduling and coordinating the visit. He can also help ensure that you are prepared with talking points and copies of NADA issue sheets to share with the legislator during the visit. “As the retail-auto industry continues to grow, our grassroots dealer network continues to evolve and our level of involvement needs to be strengthened. By building these relationships with the lawmakers we elect to represent us in Congress, we can take the first step to protect and grow our businesses, much like those dealers did nearly 100 years ago.”

www.msada.org

Massachusetts Auto Dealer NOVEMBER 2015

29 27

NADA Update An Overview of H.R. 1737 Today alone, tens of thousands of American consumers will purchase a new car or truck, and the overwhelming majority of consumers who finance their purchase will take advantage of optional financing offered through a dealership. Consumers benefit when they finance through dealerships. An individual consumer might be able to track down four or five interest rate quotes in a day by going to local banks or credit unions. But dealers can shop a customer’s credit application to dozens of lenders instantly — and this usually results in dealerships offering customers lower rates than they can obtain on their own. Dealers can also discount rates for their customers. Because dealers are compensated by lenders for arranging credit, dealers can cut their own compensation to reduce a customer’s rate to meet or beat a competing offer. Dealer discounts are a good deal for everyone — consumers get great rates, and dealers are able to earn their business. But the Consumer Financial Protection Bureau (CFPB) has been trying to eliminate dealer discounts, because it alleges that discounts create a fair credit risk. The CFPB has sought, through “guidance,” to make it

The CFPB has sought, through “guidance,” to make it impossible for dealers to discount interest rates for their customers, even for customers facing serious budget constraints. impossible for dealers to discount interest rates for their customers, even for customers facing serious budget constraints. The main problem with the CFPB’s policy is that, while well intentioned, it will reduce competition and raise credit costs, thereby hurting the very consumers it is trying to help. Equally troubling is that the CFPB initiated this policy behind closed doors, without any transparency or input from the public. For more than a year, the CFPB would not even release the methodology backing up its policy despite repeated bipartisan requests from members of Congress. And, once disclosed, its methodology was thoroughly discredited in a major peer review study. This month the House approved a bill (H.R. 1737) that would rescind the CFPB’s flawed auto finance “guidance” and require transparency and public participation before issuing new guidance. The bill also directs the CFPB to study the consumer impact of eliminating a car buyer’s ability to NOVEMBER 2015

MSADA get a discount in the showroom. The CFPB has admitted to Congress that it failed to undertake this fundamental analysis before issuing the flawed guidance. The bill nows moves to the Senate for its consideration. Most importantly, there’s a better way to ensure fair credit while keeping credit affordable and accessible. NADA, the National Association of Minority Automobile Dealers and the American International Automobile Dealers Association issued a compliance program for their members, based on a fair credit program that the Department of Justice developed for dealers in 2007. The compliance program ensures that when dealers discount rates, it is for legitimate business reasons that have nothing to do with the buyer’s background. Many dealerships have adopted this program, and numerous well-respected compliance attorneys who have reviewed this optional approach are very supportive of it. Unfortunately, the CFPB won’t accept this commonsense solution. Discrimination is wrong, period. And fair credit is critical for consumers everywhere. But so is their ability to get the most competitive rates out there for their cars and trucks. H.R. 1737 and the automobile compliance program would ensure fair access to credit for everyone, while preserving a consumer’s ability to get discounted interest rates and competitive credit.

NADA Forecasts 17.7 Million New Vehicle Sales in 2016 Moderate wage growth, declining gasoline prices and continued low interest rates on auto loans will drive new car and light truck sales higher in 2016, Steven Szakaly, chief economist of the National Automobile Dealers Association, said today on the sidelines of the Los Angeles Auto Show. “New light-vehicle sales will rise to 17.7 million units in 2016, a 2.3% increase from our forecast of 17.3 million sales in 2015,” Szakaly said. “This would mark the seventh straight year of increasing U.S. new-vehicle sales.” Szakaly cautioned that without heavy automaker incentives, new-vehicle sales will likely peak in 2016. “We expect rising incentives and for automakers to use their increased manufacturing capacity to chase market share and volume in 2016,” he said. “In the long run, new-vehicle sales cannot be sustained above 17 million units because of rising interest rates, increasing regulatory compliance costs and wage and income pressure. While we expect 2016 to be an excellent sales year, we forecast new-vehicle sales falling to 17.2 million units in 2017.” He added that wages will grow only about 2 percent over the next 12 months, and interest rates are likely to rise by 50 to 75 basis points by year end 2016.

Massachusetts Auto Dealer www.msada.org

MSADA

TRUCK CORNER American Truck Dealers Move the Industry Forward

By Eric K. Jorgensen

www.msada.org

Massachusetts Auto Dealer JUNE 2015