MSADA, One McKinley Square, Sixth Floor, Boston, MA 02109
auto M A S S A C H U S E T T S
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The official publication of the Massachusetts State Automobile Dealers Association, Inc
and Charity Gala
FIRST CLASS MAIL US POSTAGE PAID BOSTON, MA PERMIT NO. 216
January 2014 • Vol. 27 No. 1
Thank You
From the New Car Dealers of Massachusetts and the Auto Tech Scholarship Students you have helped, we thank our event sponsors: Silver Federated Insurance
Ticket Sponsor American Fidelity Assurance
Bronze ADP Dealer Services Albin, Randall & Bennett Dealer DOCX F&I Resources Performance Management Group Reflex Lighting Zurich
Break Station Sponsor
Valet Service Sponsor The Boston Globe, boston.com, and Car Gurus
Coat Check Sponsor Ethos Group
Welcome Gift Sponsor
The Boston Globe, boston.com and Car Gurus
Full Bar Sponsor O’Connor & Drew
Food Station Sponsors The Boston Herald CVR GW Marketing Services Huntington National Bank Lynnway Auto Auction (3x) Reynolds & Reynolds
Dessert Station Sponsor
Mid-State Insurance Agency
Murtha Cullina
Theme Sponsor
Friends of the Scholarship Program
Southern Auto Auction
Band Sponsor Zurich
Bank of America/Merrill Lynch Downey & Company GW Marketing Services
MA S S A C H U S E T T S
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S TA F F D I R E C T 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 Paul Fellows Administrative Assistant/ Membership Coordinator pfellows@msada.org AUTO DEALER MAGAZINE 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: pfellows@msada.org
Full Page: $1,400 Back Cover: $1,800
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 BlumShapiro, 27 Boston Herald, 36 Lynnway Auto Auction, 25 M&T Bank, 26 Nancy Phillips Associates, Inc., 27 O’Connor & Drew, P.C., 35 Schlossberg, LLC, 24 Southern Auto Auction, 28 ADVERTISING RATES Inquire for multiple-insertion discounts or full Media Kit. E-mail jfabrizio@msada.org
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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
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FROM THE PRESIDENT: Thank You for a Big Night THE ROUNDUP: An Exciting Start to 2014 TROUBLESHOOTNG: Understanding the Used Car Rule LEGISLATIVE SCORECARD AUTO OUTLOOK LEGAL: Heads Up: Discrimination, Harassment and Retaliation Are Expensive! ACCOUNTING: Are You Taking Advantage of Depreciation in 2013?
16 COVER STORY: Dealer Summit, Preview Night, Charity Gala and New England International Auto Show
Postmaster: Send address change to: One McKinley Square, Sixth Floor Boston, MA 02109 Quarter Page: $450 Half Page: $700
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NEWS From Around the Horn NADA UPDATE: New-Car Dealers Face Both Challenges and Opportunities Ahead NADA MARKET BEAT
Join us on Twitter at @MassAutoDealers www.msada.org
Massachusetts Auto Dealer JANUARY 2014
from the PRESIDENT
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by Scott Dube, MSADA President
Thank You for a Big Night
The 2014 Auto Show delivers big thrills to customers and dealers
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t always gives me a thrill to walk the floor of the New England International Auto Show. It’s our collective moment in the spotlight, and the ticket sales and public reaction always bear out that people in Massachusetts are always ready to see the latest our industry has to offer. Our industry is constantly moving forward. The Auto Show is a great time to remind the general public, lawmakers and maybe even ourselves that this industry is international, national and local down to our Main Street businesses. Whether it’s a company with headquarters in Korea or Dearborn, it’s up to us to get these exciting machines in the hands of customers. It’s a proud moment and a great reminder of how lucky we are to be the gear that keeps this industry moving forward. The Auto Show is also our time to gather together and celebrate the promise of a new year. I hope you had a great time during our casino-themed gala, which we hosted to support our Charitable Foundation. It was wonderful seeing so many of you, along with your family and friends, having a great time while supporting a great cause. I would also like to take a moment to thank our Gala sponsors. Each of them understands our commitment to helping the next generation of automotive technicians, and their support helps us further that goal. We couldn’t do the event each year without them, and it is a privilege and a pleasure that so many have worked with us for more than a decade. A full list of sponsors appears on the inside cover of this issue. If you’re a vendor in our industry and don’t see your name there you may want to get
involved! Next year promises to be an even bigger success than this year’s Gala. January ended with the NADA/ATD annual convention down in New Orleans. The city is always a great time, and it’s wonderful seeing so many of our colleagues from across the country get together. It is also our own Dick Witcher’s time in the spotlight as he completes his term as ATD Chairman. The highlight, of course, was getting to spend time with our TIME Dealer of the Year candidate, Brian Kelly. He has worked tirelessly for decades building a business that has been a dominant force in our industry. Please join me in congratulating Brian on this achievement -- one of many sure to come. Look for our cover story and more thoughts from me on Kelly in our next issue of Auto Dealer. Both events serve as a reminder to me how lucky I am to be in a position to help all of my fellow Association members. We all work long, hard hours serving as a crucial economic engine to this economy.
“It was wonderful seeing so many of you, along with your family, friends and employees, having a great time while supporting a great cause.”
JANUARY 2014
Massachusetts Auto Dealer www.msada.org
Annual Meeting Planning Begins As we head into 2014, your Association is beginning the planning process for this year’s Annual Meeting on Friday, May 2. We’ll let you know details as they develop, but please feel free to send any feedback about last year’s event my way. As always, this Association thrives on your input and our Annual Meeting is a key event. I hope to hear from you soon.
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MSADA BOARD Barnstable County Gary Beard, Dick Beard Chevrolet
Berkshire County Brian Bedard, Bedard Brothers Auto Sales
Bristol County Richard Mastria, Mastria Auto Group
Essex County William DeLuca, Woodworth Motors John Hartman, Ira Motor Group
Franklin County Jay Dillon, Dillon Chevrolet
Hampden County Jack Sarat, Jr., Sarat Ford
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
A ssociate M ember D irectory Name Contact Telephone ADESA Boston Chris Carli (508) 270-5403 ADP Dealer Services Maria Trezza (973) 404-4466 Albin, Randall & Bennett Barton D. Haag (207) 772-1981 American Fidelity Assurance Co. Tom Trudell (413) 885-5477 AutoRaptor (RAL) Howard L. Leavitt (401) 421-6533 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 (617) 929-8373 The Boston Business Advisory Group Paul Cuomo (781) 681-1501 Vincent Saccone (781) 681-1519 Burns & Levinson LLP Paul Marshall Harris (617) 345-3854 Cars.com Tawanda Falconer (312) 601-5052 Construction Management & Builders, Inc. Kate Sullivan (781) 246-9400 CVR John Alviggi (267) 419-3261 DealerDOCX Merchon Brower (585) 451-3322 Dealermine Inc. Karen Parmenter (800) 304-3341 x5179 DealerTrack Ernest Lattimer (516) 547-2242 Downey & Company James Downey (781) 849-3100 EasyCare New England Inc. Mike Douglas (770) 246-9724 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 Grant Thornton LLP Alan Oslomowski (508) 926-2200 GW Marketing Services Gordon G. Wisbach Jr. (781) 899-8509 Huntington National Bank John J. Marchand (781) 326-0823 Key Bank James Q. Moretti (781) 558-5132 Leader Auto Resources, Inc. Brendan J. Murphy (518) 878-6341 Lynnway Auto Auction Jim Lamb (781) 596-8500 M & T Bank John Federici (508) 699-3576 MetroMedia Energy Timothy Teevens (800) 828-9427 Micorp LLC Ryan Kim (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 O’Connor & Drew, P.C. Kevin Carnes (617) 471-1120 Performance Management Group, Inc. Mark Puccio (508) 393-1400 Ray-Jurgen Richard Thibadeau (860) 585-0111 R.L. Tennant Insurance Agency, Inc. Walter F. Tennant (617) 969-1300 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 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 Southern Auto Auction Tom Munson (860) 292-7500 Sovereign Bank Richard Anderson (401) 432-0749 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 Steve White (774) 392-2904 Wells Fargo Dealer Services Christopher Peck (508) 314-1283 Wicked Local Media Massachusetts Jay Pelland (508) 626-4334 Windstream Rick Caruth (978) 296-0313; (413) 977-6111 Zurich American Insurance Company Steven Megee (774) 210-0092
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The Roundup
An Exciting Start to 2014 by Robert O’Koniewski, Esq. MSADA Executive Vice President On January 17 your Association and the Massachusetts State Auto Dealers Charitable Foundation held its 17th Auto Show Charity Gala to kick off our 57th edition of the New England International Auto Show at the Boston Convention and Exhibition Center. We feted over 600 guests, including our dealers, sponsors, and other industry representatives. Partygoers were entertained by the rousing sounds of the Love Dogs, a popular area band. In a new twist this year, we added a Casino party room where attendees could roll the dice and play cards to win great prizes, all for a worthy cause – our tech scholarships. Gala attendees had access to the auto show floor, which had increased participation from the manufacturers over last year’s set up, including seven “ride and drive” offerings. This month’s magazine has a full recap of these events. Prior to the evening’s party, we held our firstever Dealer Summit where dealers and their key managers heard presentations from Grant Cardone (“10X Your Business in 2014”), Sean Bradley of Dealer Synergy (“30 in 30”), attorney Len Bellavia (“The Dealer’s Secret Weapon: Fellow Dealers – Strength in Numbers”), and Jed Davidson of Partners Benefit Group (“The Six Biggest Impacts of Obamacare on Auto Dealers”). Finally, we owe a huge debt of gratitude to our generous sponsors for these events. Many of our associate members purchased sponsorships, and we have detailed their levels of participation in this issue. As always, we ask our member dealers to keep our associates and sponsors in mind when they seek various services. Our Dealer Summit and Auto Show Charity Gala would not be the JANUARY 2014
Massachusetts Auto Dealer www.msada.org
successes they were without this outside support. Thank you to all our sponsors.
2014 Dues Invoices
Earlier this month your Association sent out 2014 dues invoices to all our dealership and associate members. Our members’ dues help fund the Association’s activities on their behalf, including our lobbying on Beacon Hill and in Washington, our member counsel services, and our education and training activities. Over the last several years we have witnessed quite a bit of economic disruption in our industry. More than ever, our dealers need a strong MSADA. MSADA will continue to lead on the various issues that threaten the viability of our dealerships. We will strive tirelessly to keep you informed of developments in our industry and how they will play out in Massachusetts. These efforts also include working closely with NADA to better serve our members. Our strength lies in our members. With your continued support and membership renewal, we can build on our current foundation and begin to enhance your Association’s core purposes of communication, advocacy, and education.
Director Elections We recently completed our latest round of director elections. The following directors were reelected to their seats for a three-year term: Brian Bedard (Berkshire County), John Hartman (Essex County), and Steve Sewell (Worcester County). In an open seat for Middlesex County, Frank Hanenberger of MetroWest Subaru was elected to serve an unexpired portion of a term that will
MSADA expire in December 2014. They will be seated at the February Board of Directors meeting.
RTR MOU As we were going to press and dealers were preparing to attend the NADA Convention in New Orleans last week, the vehicle manufacturers and the aftermarket industry unveiled a memorandum of understanding on “right to repair” that would nationalize key concepts contained in our state RTR law that was enacted last November. The 2013 law was passed here to reconcile two widely divergent RTR laws that became law months apart in 2012. The groups representing vehicle manufacturers, independent repairers, and parts manufacturers executed the national agreement in order to avoid protracted disputes in the other 49 states and DC, ensuring diagnostic and repair information is available to repairers while protecting manufacturer trade secrets and proprietary information, based on the terms of the Massachusetts RTR law. No auto dealer groups were involved in the MOU process or end-product, however. Further, the MOU does not recognize certain dealer protections that we successfully fought to have incorporated into the Massachusetts law. One potential downside to the exclusive agreement that shut out dealer input is that, as the MOU is implemented elsewhere, should dealers be adversely impacted, dealers and their dealer associations in those states may seek legislative redress, thereby creating a situation the OEMs and aftermarket are trying to avoid – different RTR laws in each of the 50 states. The parties to the MOU are the Alliance of Automobile Manufacturers, the Association of Global Automakers, the Automotive Aftermarket Industry Association (AAIA), and the Coalition for Automotive Repair Equality (CARE). This national MOU agreement ensures that the Alliance, Global, AAIA, and CARE, and their individual members, will stand down in their fight on “right to
repair” and work collectively to actively oppose individual state legislation while the groups work to implement the MOU. The parties agree that further state legislation is not needed and could serve to weaken the terms of the MOU.
DOJ-CFPB Enforcement Action Against Ally In late December the U.S. Department of Justice (DOJ) filed a complaint in federal district court against Ally alleging disparate impact discrimination against African Americans, Hispanics, and Asians and Pacific Islanders who obtained indirect auto loans. At the same time, the DOJ and the Consumer Financial Protection Bureau (CFPB) announced that Ally entered into a proposed consent order to settle the complaint. If approved by the court, the consent order will, among other things, require Ally to pay $80 million in restitution to affected consumers and $18 million in penalties; file within 60 days a dealer “Compliance Plan” that must be reviewed and approved by both the CFPB and DOJ; and strictly monitor compliance of dealer participation rates. Notably, the proposed consent order did not require Ally to adopt a flat fee compensation system. NADA issued a statement in response to the action announcement in which it reiterated the industry’s support for fair lending laws and the commitment to eliminate discrimination in the marketplace. The statement also questioned why the CFPB continues to withhold the methodology it uses to determine whether unintentional discrimination has occurred: “The public still does not know whether the CFPB takes into account legitimate factors that can affect finance rates.” Dealers can obtain more information on the CFPB and dealer-assisted financing, including a copy of the DOJ complaint and the proposed consent order, at www. nada.org/cfpb.
FTC Action Against Dealers’ Deceptive Ads On January 9 the Federal Trade Commission (FTC) announced that nine auto www.msada.org
dealers, including four from California, and one each from Georgia, Illinois, North Carolina, Michigan, and Texas, have agreed to enter into consent orders to settle deceptive advertising charges, and the agency is pursuing litigation against a tenth dealer. The complaints allege violations of the FTC Act, the Consumer Leasing Act (CLA) and the Truth in Lending Act (TILA). The dealers are alleged to have made a variety of misrepresentations in print, internet, and video advertisements that falsely lead consumers to believe they could purchase vehicles for low prices, finance vehicles with low monthly payments, and/or make no upfront payment to lease vehicles. One dealer is alleged to have misrepresented that consumers had won prizes in a sweepstakes that they could collect at the dealership. The proposed consent orders prohibit the dealerships from misrepresenting in any advertisement for the purchase, financing, or leasing of motor vehicles the cost of leasing a vehicle, the cost of purchasing a vehicle with financing, or any other material fact about the price, sale, financing, or leasing of a vehicle, and in several cases address the alleged TILA and CLA violations by requiring the dealerships to clearly and conspicuously disclose terms required by these credit and lease laws. In the case where the dealership allegedly misrepresented that consumers had won a prize, the proposed order also prohibits misrepresenting material terms of any prize, sweepstakes, giveaway, or other incentive. MSADA and NADA urge dealers to review all of their advertising, whether online, in print, or over the air, to ensure that it is not misleading, that it includes the required disclosures if applicable, and that those disclosures are clear and conspicuous. Dealers should not rely on advertising agencies or similar third parties to ensure compliance, but should consult with legal counsel to ensure compliance with local, state, and federal law. Our member dealers also should reference various writings we have provided previously on this subject matter.
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The Roundup We encourage everyone to use this link to obtain and read the full details of the FTC’s announcement to receive a proper sense of what the FTC finds violative: www.ftc.gov/news-events/pressreleases/2014/01/ftc-announces-sweepagainst-10-auto-dealers.
State Special Elections Add Up The clerks of the two legislative chambers have been busy over the last six months processing a slew of resignations, leading to an unusual number of special elections, especially when we are already in the election year. April Fool’s Day will see voters go to the polls in five legislative districts in order to fill recent vacancies as legislators have moved on to other professional positions. Firstly, and of more renown, voters in Boston’s Dorchester neighborhood will elect a state representative to replace the previous occupant of the seat, Martin Walsh, a Democrat, who was inaugurated as Boston’s 54th mayor earlier this month. Three other House seats will be filled as a result of the following moves: • Rep. Kathi-Anne Reinstein (D-Revere) resigned her seat to take a position in government affairs with a local brewery; • Rep. Eugene Flaherty (D-Chelsea) resigned his seat to take the job as Boston’s corporate counsel for Mayor Walsh; and • The state rep seat held by Don Humason (R-Westfield) became open when he was elected to the state Senate to fill the seat of state Sen. Mike Knapik, for whom Humason once worked as a legislative aide. Knapik left the Senate to take a position with Westfield State University. In the Senate, voters in southeast Middlesex County will elect a state senator to replace Katherine Clark (D-Melrose), who was elected to the U.S. Congress several weeks ago to replace Ed Markey, who filled the U.S. Senate seat that opened up when John Kerry became U.S. Secretary of State. Soon the House will see at least one, maybe two, more vacancies. Rep. Steve Walsh (D-Lynn) has announced he will JANUARY 2014
be resigning from the House to become the executive director of the Massachusetts Council of Community Hospitals on March 5. Under more notorious circumstances, state Rep. Carlos Henriquez (D-Boston) in mid-January was convicted in a criminal trial by a Middlesex County jury of two counts of assault and battery stemming from a domestic violence incident last summer involving his former girlfriend. He was found not guilty on three other charges, but he was immediately sentenced by Judge Michele Hogan to two and one-half years in jail, with six months to serve. Henriquez is serving his sentence in Middlesex County jail while he is appealing his conviction, and he recently had a hearing before the House Ethics Committee at the State House to determine whether he broke any House rules. Henriquez has refused to resign his legislative seat, and the House could take the rarely used step of voting to expel him from its chamber. Finally, as we go to press, Shawn Dooley, a Republican from the Town of Norfolk, will be sworn in by the governor to fill the seat vacated by former state Rep. Dan Winslow, also a Norfolk Republican, who resigned to take a legal job in the private sector.
CAL Ballot Proposal to Ban Dealer Markup Through the years we have seen numerous proposals emerge from the California legislature or that state’s initiative petition process and work its way to the east, leaving a path of destruction in the process. The Bear Republic’s tolerance for government overbearance may be high, but should that be foisted upon the rest of us? Now we receive news from the Left Coast that a consumer advocacy group has undertaken the initial steps to place a proposal on California’s 2014 ballot that would prohibit dealerships from adding to interest rates on consumer auto loans. Through its initiative petition, the Consumers for Auto Reliability and Safety (CARS) would prohibit the dealer re-
Massachusetts Auto Dealer www.msada.org
serve, calling such dealer markups “hidden extra charges” that harm consumers directly in the pocketbook and wallet. The CARS proposal would also prohibit “yo-yo financing” in which a consumer takes possession of a vehicle before the loan is approved then ends up agreeing to a higher interest rate when the loan falls through. The CARS proposal would piggyback on the current efforts by the federal CFPB attacking the dealer reserve. The CFPB concedes that dealerships should be compensated for negotiating auto loans on behalf of their customers, but that they should not have the discretion in setting that compensation because minority borrowers can end up paying higher amounts of interest. The CFPB has pressured lenders to replace the dealer reserve with flat fees or some other form of dealer compensation. We will keep a close eye on CARS’s latest proposed scheme. Readers may recall that we successfully have fought to kill similar proposals in our own Legislature over the past eight years.
New State Law Cuts Electricity Costs for Businesses Businesses that purchase electricity or natural gas from NSTAR or Western Massachusetts Electric Company could see the distribution portion of their bills drop by as much as 14 percent as Massachusetts ends the practice of commercial/industrial customers subsidizing the power system to the tune of tens of millions of dollars each year. While individual bills may vary, commercial/industrial electric customers in NSTAR and Western Mass Electric Company territories (both operating companies of Northeast Utilities) will collectively see reductions of more than $20 million on the distribution portion of their bills. Some customer classes will see reductions as high as 7 percent in NSTAR territories and as high as 14 percent in Western Massachusetts Electric territory. These are permanent reductions resulting from changes in the way costs are al-
MSADA located. The Massachusetts Department of Public Utilities (DPU) approved the new NSTAR and Western Massachusetts Electric rates in December effective January 1. Customers in National Grid and Unitil territories will see changes over the next few months, as will gas customers in all utility territories. The change in the law corrected a longstanding problem with the way electric and gas costs were allocated to customers. The new law required the DPU to order each utility to change the way certain costs are allocated to reflect the true cost of providing the service to customers, regardless of how much energy is used.
New RMV Registrar – Celia Blue Although in its final year the Patrick Administration is not reluctant to make some key personnel moves, one of which is important to auto dealers. On January 17 Massachusetts Department of Transportation (MassDOT) Secretary Richard Davey appointed Celia Blue as Registrar of Motor Vehicles. Blue replaces Rachel Kaprielian, who was appointed by Governor Patrick as Secretary of Labor and Workforce Development. Blue is currently the MassDOT Assistant Secretary for Performance Management and Innovation, where she worked closely with each division to develop and implement performance management systems. She previously served as Deputy Registrar for the Registry of Motor Vehicles and was responsible for oversight of the RMV’s customer service operations. Under Blue’s leadership as Deputy Registrar working with Registrar Kaprielian, customer wait times at RMV branches and the call center were reduced. Blue was also instrumental in the implementation of the RMV’s innovative partnership with AAA. Blue previously served as a Commissioner of the former Massachusetts Aeronautics Commission and worked in the private sector in leadership roles focusing on customer service, operational manage-
ment and small businesses management. Blue holds a Bachelor of Science degree from Worcester State College and a Masters in Business Administration degree from Anna Maria College. She serves on the boards of several civic and community organizations in Central and Eastern Massachusetts. Kaprielian was appointed Registrar in May 2008. She resigned her state rep seat to take the job. During Kaprielian’s tenure, the RMV implemented significant expansion of the Registry’s online branch along with an innovative customer service plan working with sister transportation agencies, municipalities and local delegations to build new branches in rent-free public spaces.
Annual Meeting – May 2, Boston Your Association will conduct this year’s Annual Meeting on Friday, May 2, at the Mandarin Oriental Hotel in Boston. We will commence with a buffet lunch at Noon, with our business meeting running from 1:00-5:00 p.m, followed by a cocktail reception. We are lining up a number of exciting industry speakers for the day. Be on the lookout for our invitation and registration materials.
New Endorsement — DealerDOCX Your Association is pleased to announce a new endorsement agreement with a business records management company – Dealer DOCX – that will help you and your employees get better control of your ever-growing piles of paper. DealerDOCX (company website: www.dealerdocx.com) will help dealers turn their deal jackets, repair orders, parts tickets, and other paper files into secure, electronic documents. Dealers will be able to safeguard customer and dealership information with DealerDOCX’s protected, permission-based system allowing dealers ultimately to sift through thousands of business documents in seconds not days. DealerDOCX will pick-up, scan, and www.msada.org
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convert dealership paper into electronic PDF files stored in its secure cloud-based document management system. Bottom-line: DealerDOCX will help you free up filing space and regain room in your dealership so you can focus on selling and servicing cars. As its slogan says: “Move Metal, Not Mountains of Paper.” Key contact for the company is Michael DeCarlo (mike@clouddocx.com; phone (585) 869-6089).
Doc Fee & Sales Tax Recently the Massachusetts Registry of Motor Vehicles issued a “reminder” to dealers that the dealer’s documentary preparation fee is a taxable item that must be taken into account when determining Massachusetts sales tax. During a vehicle sale, the RMV told dealers that they should include the “doc prep fee” as part of the Total Sale Price and the Taxable Sales Price listed in section 56A of the RMV-1. Dealers also need to be sure that when your employees are completing the Motor Vehicle Purchase Contract (the “P&S”, so called) that the “doc prep fee” is calculated with the full vehicle purchase price for sales tax purposes. We fully understand that (1) the standard purchase and sale agreement was not set up to include document preparation fees in the calculation of the sales price subject to Massachusetts sales tax, and (2) most dealers, if not all, have not been subjecting document preparation fees to Massachusetts sales tax. As a result of the RMV alert, we asked dealers to immediately be sure that their sales tax calculations include any document preparation fee in the taxable sales price. We also worked with our forms partner, Reynolds & Reynolds, to have newly revised Motor Vehicle Purchase Contracts available for purchase. We have urged every dealer to make these necessary changes at the time of the alert to avoid any prospective problems with the RMV and the Department of Revenue.
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Troubleshooting
MSADA
Understanding the Used Car Rule By Peter Brennan, Esq.
Staff Attorney, MSADA Here at your Association we frequently field questions from members that want to ensure their dealership’s compliance with the “Used Car Rule”, a federal regulation issued by the Federal Trade Commission intended to protect consumers from misinformation during transactions involving a used vehicle. The Used Car Rule, which has been in effect since 1985, applies to any dealer that “offers to sell” more than five used cars in a twelve-month period. The wording of the rule is important, as a dealer that actually sells five or fewer used cars in the twelve-month period will still be subject to the rule if they have six or more used automobiles being offered for sale during the twelve-month period. According to the FTC, a vehicle is offered for sale when a dealer displays the automobile for sale or allows a customer to inspect the vehicle, even if the car is not fully prepared for delivery. Auctions that are closed to consumers are exempt from the rule, but at public auctions dealers and the auction company must comply. Any vehicle previously driven for purposes other than moving or test driving is considered a used vehicle, including all light-duty trucks and vans, demonstrators and program cars as long as these vehicles have a gross vehicle weight rating of less than 8,500 pounds, a curb weight of less than 6,000 pounds and a frontal area of less than 46 square feet. Motorcycles, scrap vehicles JANUARY 2014
and agricultural equipment are all exempted from the Rule. In the sale of a non-exempt vehicle by a non-exempt dealer, it is a deceptive act or practice under the Used Car Rule to (i) misrepresent the mechanical condition of a used car, (ii) misrepresent the terms of any warranty offered in connection with the sale of a used car, or (iii) represent that a used car is sold with a warranty when, in fact, the vehicle is sold without any warranty. Additionally, it is an unfair act or practice for the dealer to fail to disclose, prior to the sale of the vehicle, that a vehicle is sold without any warranty or fail to provide the terms of any written warranty that is offered on the vehicle. There are practical components of the Used Car Rule that non-exempt deal-
“The FTC enforces the Used Car Rule with civil penalties of up to $16,000 per infraction. Accordingly, strict compliance with the Rule is financially crucial to any non-exempt dealer.” ers must comply with, the most recognizable of which is the Buyers Guide, commonly referred to as the “window sticker” due to its normal placement on the used vehicle’s window. The Buyers Guide can also be hung from the rear view or either side mirror, or under a windshield wiper, so long as it is conspicuous and visible from both sides of the outside of the vehicle. Under the Rule, the Buyers Guide must include the following information: (i) whether the vehicle is being sold “asis” or with a warranty, (ii) what percentage of the repair costs a dealer will pay under warranty, (iii) that oral promises are difficult to enforce, (iv) that the con-
Massachusetts Auto Dealer www.msada.org
sumer should get all promises in writing, (v) to keep the Buyers Guide for reference after the sale, (vi) a description of the major mechanical and electrical systems on the car, as well as some of the major problems that consumers should look out for, and (vii) a statement that the consumer should as to have the car inspected by an independent mechanic before they buy. The Buyers Guide must also list relevant information such as the description of the car and the dealer’s name and address. If a dealer so chooses, they may include a signature line that the consumer must sign to acknowledge receipt of the Buyers Guide. However, if a dealer includes the signature line, they also must include a disclosure near the acknowledgment that states “I hereby acknowledge receipt of the Buyers Guide at the closing of this sale.” If a used vehicle sale is conducted in Spanish, then a Spanish language Buyers Guide must be posted on the vehicle prior to the sale. The terms of any applicable warranties must also be listed on the Buyers Guide. Certain states, such as Massachusetts, do not allow the sale of “As Is” vehicles in most cases, so a statement detailing the implied warranties that are included must be expressly stated. The FTC enforces the Used Car Rule with civil penalties of up to $16,000 per infraction. Accordingly, strict compliance with the Rule is financially crucial to any non-exempt dealer. If you have any questions regarding your compliance with the Used Car Rule, or have a topic that you would like to see addressed in this column in the future, please contact Robert O’Koniewski, MSADA Executive Vice President, at rokoniewski@msada.org or Peter Brennan, MSADA Staff Attorney, at pbrennan@msada.org or by phone at (617) 451-1051.
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AUTO OUTLOOK
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Legal
MSADA
By Joseph W. Ambash
Heads Up: Discrimination, Harassment and Retaliation Are Expensive! This month, I thought it would be helpful to emphasize the importance of avoiding claims of discrimination, harassment and retaliation in your dealerships. The Equal Employment Opportunity Commission (EEOC) and the MCAD take a very dim view of these cases, which seem to be proliferating among dealerships. High on the list of these cases are allegations of harassment and discrimination based on race, sex, age, national origin and disability. Here are some recent telling examples: • Nissan dealership in Tennessee pays $85,000 to settle retaliation suit filed by EEOC. Allegation: dealer fired three salespersons because they complained as a group about sexual harassment by their sales manager. A week after the complaint, the company fired them, allegedly for poor sales. Part of settlement: provide anti-retaliation training to managers. • Chevrolet dealership in California pays $158,000 to settle religious discrimination lawsuit filed by EEOC. Allegation: failure to accommodate the religious practice of a Seventh-day Adventist salesman who could not work from sundown Friday to sundown Saturday. He was persistently scheduled to work on his Sabbath despite numerous requests from the employee and his minister to accommodate his religion. He was allegedly fired for taking leave to observe his Sabbath. Part of settlement: train the managers about religious discrimination and accommodation. • Lexus dealership in New Jersey pays $50,000 to settle religious discrimination lawsuit filed by EEOC. Allegation: dealership refused to hire a Sikh applicant whose religion required him to wear a beard, uncut hair and a turban. Part of settlement: provide anti-discrimination training to managers. • Auto dealership in Pennslyvania sued by EEOC for harassment due to national origin (Lebanon) and religion (Druze). Allegation: derogatory references (“habeebies” and JANUARY 2014
“terrorists”) regarding people from the Middle East. Status: still pending. Requested remedy in addition to money: provide antidiscrimination training to managers. • Auto dealership in Texas sued by EEOC for disability discrimination. Allegation: denying promised partnership to general manager who was diagnosed with multiple sclerosis. Manager was told: “Are you a cripple?” “You are on your last quarter, buddy, since you have MS.” Status: still pending. Requested remedy in addition to money: provide anti-discrimination training to managers. • Cadillac dealership in Illinois sued by EEOC for creating discriminatory work environment for Muslim and Arab sales staff. Allegation: managers used offensive slurs, such as “terrorist,” “sand n---r,” and “Hezbollah” and made mocking and insulting references to the Qur’an and the manner in which Muslims pray. Status: still pending. Requested remedy in addition to money: provide anti-discrimination training to managers. • Toyota dealership in Texas pays $140,000 to settle age discrimination lawsuit filed by EEOC. Allegation: denying four salespersons over age 40 opportunity to become certified to sell Scion brand, telling them they were too old to sell the brand. Part of settlement: train managers about age discrimination. • Jeep dealership in Maryland pays $50,000 to settle disability discrimination and harassment lawsuit filed by EEOC. Allegation: denying reasonable accommodation to employee shortly after she was diagnosed with bipolar disorder; calling her “pill popper” and “psycho.” Part of settlement: train managers about disability discrimination. • Honda dealership in Nevada pays $150,000 to settle race discrimination and harassment lawsuit filed by EEOC. Allegation: parts department manager made racially derogatory comments and jokes
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and imposed stricter work-related rules on black employees than non-black employees. Part of settlement: provide annual equal employment opportunity training. Do any of these examples ring true? All of these cases have a common refrain: untrained managers running amok, engaging in discrimination, harassment or retaliation, or permitting such conduct to occur on their watch. The outcomes of these cases are costly: damages, attorneys fees, oversight by the EEOC, and bad publicity. But these cases can very often be avoided. Preventive training of your managers and employees about workplace harassment and discrimination should be front and center in your human resources program. Rather than assuming that these types of discriminatory behaviors will not occur in your dealership, assume that without effective training, they may occur. Even smaller dealerships which do not have dedicated human resource departments should be alert to the need to train managers about the evils of harassment, discrimination and retaliation. One important component of your training is to remind managers loudly and clearly that, under Massachusetts law, they can be personally sued if they engage in acts of harassment, discrimination and retaliation. And remind them that if they have actually committed acts of harassment, discrimination or retaliation, you won’t pay for their defense. Those reminders will help them pay attention to the training you need to give them.
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Joe Ambash
is managing
Boston Fisher & Phil-
partner of the office of
lips, a national law firm representing
manage-
ment in labor and employment
law.
He
can
be reached at jambash@ laborlawyers.com.
Accounting
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Are You Taking Advantage of Depreciation in 2013? By Kimberly Reed, cpa
Principal, O’Connor & Drew
As we venture into 2014, you need to be aware of certain depreciation benefits that have been reduced or expired. During 2013, under Section 179 of the Internal Revenue Service Code, you were allowed to deduct up to $500,000 of certain property. In addition, bonus depreciation allowed you to deduct 50% of the cost of certain property. However, in 2014, the Section 179 deduction has been reduced to $25,000 and the bonus depreciation provision has expired. Many businesses took advantage of these rules in 2013 by purchasing property, and now they need to make sure they are getting the benefit. To qualify for Section 179, new or used property must be eligible property, used more than 50% in an active trade or business in the year placed in service, and acquired by purchase from an unrelated party. Section 179 is limited to $500,000 and for each dollar of section 179 property placed in service during the year over $2,000,000, the deduction is reduced by one dollar. Section 179 is also limited to the taxpayer’s aggregate taxable income derived for the active conduct of all trades or businesses. Eligible property includes tangible personal property, other tangible property (except buildings and their structural components) used as an integral part of manufacturing, production or extraction or furnishing transportation, communications, electricity, gas, water or sewage disposal services or a research or bulk storage facil-
ity used in connection with such activities, single purpose agricultural or horticultural structures, storage facilities (except buildings and their structural components) used in connection with distributing petroleum, off-the-shelf computer software and qualified real property. Some examples of qualifying property include airplanes, billboards (if movable), computers, gasoline storage tanks and pumps, machinery and equipment, office equipment and furniture, and signs (if movable). Some examples of property not eligible include air conditioning and heating units, billboards (if not movable), car washes, elevators, landscaping, rental property, roads, and sidewalks. Qualified real property is eligible for Section 179 up to $250,000 in 2013. Qualified real property includes qualified leasehold improvement property, qualified restaurant property, and qualified retail improvement property. Qualified leasehold improvement property includes interior improvements to a non-residential real property made pursuant to a lease by the lessee, sub lessee or lessor (must not be a related party). The improved portion must be occupied exclusively by the lessee or sub lessee and placed in service more than 3 years after the building was originally placed in service. This excludes elevators, escalators, common area improvements, internal structural framework of the building or enlargements of the building. Qualified retail improvements property are improvements to the interior portion of a non-residential building that is open to the general public and is used in the retail business of selling tangible personal property to the general public, and are placed in service more than 3 years after the date the building was first placed in service. This excludes elevators, escalators, common area improvements, internal structural framework of the building or enlargements of the building. In addition to qualifying for Section 179, in www.msada.org
2013, qualified real property is allowed a recovery period of 15 years. You are also allowed to take Section 179 on certain heavy passenger vehicles up to $25,000. Trucks and vans with a loaded gross vehicle weight rating of more than 6,000 pounds and that are rated at no more than 14,000 pounds GVW are subject to the $25,000 expense limit. Also, autos with an unloaded weight over 6,000 pounds that are rated at 14,000 pounds GVW or less are subject to the limit. The $25,000 limit is per vehicle. Other limits apply to passenger autos with unloaded gross vehicle weight and loaded gross vehicle weight of 6,000 pounds or less. In order to be eligible for 50% bonus depreciation, an asset must be a qualified new property that was acquired by purchase pursuant to a written binding contract entered into and placed in service in 2013. Qualified property includes assets with a recovery period of 20 years or less, as well as qualified leasehold improvement property. Qualified retail improvement property is not eligible for bonus depreciation unless it also qualified as qualified leasehold improvement property. Also, keep in mind that if you purchase or construct a new building or renovate an existing building, a cost segregation study could help. A cost segregation study, usually done by engineers or other specialists, will break out the cost of the building into shorter lives than the typical 39 year life assigned to buildings. This will allow an opportunity for accelerated depreciation as well as the potential to take Section 179 or bonus depreciation. It is important to understand what depreciation benefits you are eligible for and to make sure that you maximize what you are allowed to take. With the window of opportunity closing on certain depreciation rules, now is the time to make sure you take advantage.
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Preview Night Charity Gala
Shiftin g into
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Preview Night Charity Gala
CASINO NIGHT
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New England International Auto Show
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Photos by George LeVines
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New England International Auto Show
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NEWS
from Around the Horn
NORTHAMPTON
Northampton Volkswagen Receives 2013 Best of Northampton Award Northampton Volkswagen, part of the TommyCar Auto Group, has been selected for the 2013 Best of Northampton Award in the New Car Dealers category by the Northampton Award Program. The Northampton Award Program annually identifies companies that they believe have achieved exceptional marketing success in their local community and business category. These are local companies that enhance the positive image of small business through service to their customers and community. Various sources of information were gathered and analyzed to choose the winners in each category. The 2013
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Northampton Award Program focuses on quality, not quantity. Winners were determined based on the information gathered both internally by the Northampton Award Program and data provided by third parties. “We are incredibly honored that Northampton Volkswagen received this award,” states Carla Cosenzi, President of TommyCar Auto Group. “Northampton Volkswagen’s presence has been embraced by the City of Northampton, and we strongly believe that giving back to our community is important. We’re happy that we can show our appreciation and gratitude with our new facility re-opening, which will contribute to the area’s economic development and will also allow us to better serve our customers in the local community.” Northampton Volkswagen will be re-opening on King Street in early February. The $6.5 million state-of-the-art Volkswagen dealership will be just under 18,000 square feet, including 13 service bays.
NEWS from Around the Horn FRAMINGHAM
Herb Connolly Greens Acura, Chevy and Hyundai Dealerships with Solar The Herb Connolly Auto Group has undertaken a solar energy project expected to help the company trim its electric bills by more than 50 percent. The MetroWest Acura, Chevrolet and Hyundai auto dealer group has partnered with Hopkinton-based Solect Energy Development to install solar photovoltaic (PV) renewable energy systems on the roofs of its Framingham-based dealerships on Route 9 in Framingham. Solect installed a 200 kW solar photovoltaic (PV) renewable energy system on the roof of its Framingham-based Acura and Hyundai dealerships, and a 185 kW system on the roof of its Chevrolet dealership. The systems are expected to help the company reduce its elec-
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tric bills by offsetting 333 tons of CO2 annually and generate enough electricity to power the equivalent of 38 homes. Herb Connolly worked the solar project into its plans to renovate the building that houses its Acura dealership, but “going solar” has long been in the works for the company, Adam Connolly, co-owner at Herb Connolly Auto Group, told Framingham Patch. “We’d been thinking about solar for quite some time, and with the renovations to the Acura building, the time was right to look at
it more seriously,” Connolly said. “We chose Solect because their commitment to excellence matches our own. They brought a high level of experience and knowledge to every phase of the project.”
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NEWS from Around the Horn NORTH BILLERICA
Lynnway Auto Auction Launches Lunch & Learn Sessions for Car Dealers in 2014 Lynnway Auto Auction, Inc. (LWAA) announced last month it is offering Lunch & Learn sessions to create casual lunchtime meetings with new and used car dealers and their staff. These sessions last approximately one hour and will focus on best practice strategies for buying and selling vehicles at Lynnway Auto Auction. Lynnway representatives and the dealership group will discuss subjects including cost effective methods for getting your cars to auction, the importance of lane positioning, determining proper marketplace pricing for your vehicles and how to arbitrate a vehicle. You will review current market trends along with how best to prepare for peak auction cycles during the year. The outcome of your session will help define strategic and tactical plans for auctioning vehicles including increasing your buying opportunity and success. LWAA Representative Ed Laborio is director of dealer relations.
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He has more than 30 years experience in automotive remarketing and was most recently on the sales side of LWAA. Now his focus has turned to dealer assistance and strategic business planning for dealers. Laborio recognizes a dealer’s success at auction is having a clear vision and plan. His experience and guidance can enlighten your understanding of the auction along with how to apply best practices on the selling and buying side. Ed Laborio “This is an opportunity for dealers to work more closely with the auction house within a casual relaxed environment,” Laborio said. “We can more easily share ideas and craft solid solutions for the dealer’s benefit.”
MSADA PEABODY
MINI John Cooper Works Concept Revealed Before Its Detroit Debut The next-generation 2014 MINI Hardtop may have debuted at the LA Auto Show last month, but fans of the eccentric car were still left waiting for details on the performance-focused John Cooper Works trim. MINI has now released photos of the new John Cooper Works Concept ahead of its debut at the Detroit Auto Show in January, revealing a model with bolder styling and new exclusive design features. Though it is labeled as a concept car, the John Cooper Works model slated for Detroit features exterior styling that should be mirrored in the production version due next year. New additions include a unique Bright Highways Grey paintjob complemented by a contrast red roof and several red accents, redesigned 18-inch John Cooper Works light-alloy wheels and custom aerodynamic features like contoured side skirts and a rear apron with flaps and a diffuser. Up front, the new MINI John Cooper Works Concept dons a reworked black-
mesh grille with a new black grille surround, large air intakes and circular LED headlights. “The next-generation John Cooper Works Hardtop will take the wider track, longer wheelbase and lighter weight of the new MINI Hardtop and leverage them for an even sportier look and feel,” said Gary King, general manager of MINI of Peabody. “The 2014 MINI Hardtop is already more powerful, more responsive and more agile than its predecessor, but the John Cooper Works trim will turn up the wick in both style and performance.” www.msada.org
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NEWS from Around the Horn
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STONEHAM
Ford Gains Most Market Share Among Automakers in 2013 Ford recently announced that it was America’s best-selling auto brand for the fourth consecutive year in 2013, but perhaps the most telling news is that it accomplished that feat while also gaining the most market share of any automaker. Though Ford’s F-Series was again a big factor as the country’s best-selling vehicle for the 32nd year in a row, annual sales records from recently redesigned vehicles like the Ford Fusion, Fiesta, and Escape also played significant roles in the brand’s impressive growth. With its U.S. market share increasing by about a half a point in 2013, Ford more than doubled the gains of its main competitors while also being the only auto brand to surpass 2 million units sold. Boosted by their 2013-model-year redesigns, the Fusion midsize sedan and Escape compact SUV each moved more than 295,000 units, resulting in year-over-year sales increases of 22 percent and 13 percent, respectively. Meanwhile, the Ford Fiesta subcompact rode the success of an all-new 2014 model to sell 25 percent more units than last year. Despite the introduction of next-generation pickup trucks from competitors, the Ford F-
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Series saw its sales rise by 18 percent in 2013, totaling 763,402 units. “Ford’s resounding success last year came from both reliable standbys like the F-150 and progressive new designs on cars like the Fusion and Fiesta,” said John Melkonian, general manager of Stoneham Ford. “The automaker’s emphasis on fuel-efficient vehicles has been instrumental to its revival in recent years, but its refusal to sacrifice style and driving fun in the process has been equally important.”
NADA Update by Don Sudbay New-Car Dealers Face Both Challenges and Opportunities Ahead 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). I am writing this note just after the great convention that NADA had in New Orleans. It was wonderful to see so many Massachusetts dealers there, and thanks to O’Connor and Drew and our Executive Vice President Bob O’Koniewski for sponsoring and planning a truly first-class cocktail reception. Congratulations also to Brian Kelly for receiving the TIME Magazine Quality Dealer Award. During the NADA Board Meeting we were presented with what is hopefully a solution to the current CFPB issues which you have heard of so much in the past year. Please log on to NADA.org to read about all the details regarding NADA’s suggestions to dealers regarding this issue. While there is no guarantee that this will pass muster with the CFPB, we feel it is a solution that will continue to allow all of us to help our customers receive competitive finance rates. Any move toward flat compensation will result in higher rates for our customers. Please feel free to call me or NADA if you have any questions.
A Special Note from NADA Chairman David Westcott: “New-car dealers and their nearly 1 million employees across the nation worked hard last year, and we began to see our industry regain momentum. As we closed out 2013 with 15.6 million new-car and light truck sales, we can only hope to ACCELERATE from here. “While other industries struggled within the rebounding economy, ours soared. Auto sales have risen to their highest level since the recession. Last year’s sales increased 8 percent from 2012, and favorable circumstances — available credit, a wide selection of new vehicles and pent-up demand — all helped to bring customers back into our showrooms. “Despite forecasts of new-vehicle sales to surpass more than 16 million units this year, the road back still has many obstacles ahead. The National Automobile Dealers Association is working hard every day to protect and promote our businesses.
“We have a major concern with the Consumer Financial Protection Bureau, because it appears to be very uninformed on how dealer-assisted financing actually benefits car shoppers. Democrats and Republicans in the House and Senate share this concern, which is why they have called upon the CFPB to allow for greater public participation on this issue. “If the CFPB carefully considers the facts on the ground — as opposed to misinformation circulated by some agenda-driven consumer advocacy groups — it would have a greater appreciation for the fact that the dealer-assisted financing model has been enormously successful in increasing access and reducing the cost of credit for millions of Americans. “Unfortunately, the CFPB has not revealed sufficient information about its statistical methodology for measuring
“Auto sales have risen to their highest level since the recession. Last year’s sales increased 8 percent from 2012, and favorable circumstances — available credit, a wide selection of new vehicles and pent-up demand — all helped to bring customers back into our showrooms.” –NADA Chairman David Westcott whether disparate impact is present in an indirect auto lender’s portfolio to know how real or speculative its claims are. To this day, we still don’t know, among other things, what factors the CFPB holds constant to isolate a customer’s background as the sole reason for any pricing disparities that may exist among different groups of consumers. “The debate over the franchised dealer network also came to the forefront last year. I’m extremely proud to be a dealer and to help my customers get the vehicles they need and perform service work. The franchise system creates competition, and the primary beneficiary is the customer. That’s why all 50 states have enacted some form of a dealer franchise law. “The franchise system is the gold standard that, without
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NADA Update a doubt, makes the U.S. model the most competitive in the world. And that’s because dealers take on what our customers shouldn’t have to — from a complex system of titling and registration, to reams of regulatory paperwork. This is a message we will keep telling to whomever doubts it, and to whoever questions the importance of the franchise system. “We made some headway with our manufacturers last year, too. Last September, we received an invitation to meet with the 14-member board of directors from General Motors Company in Detroit. It marked the first time that NADA has met with an OEM board of directors. As dealers, we work hard every day to establish good relationships with our manufacturers. This meeting was a significant opportunity to open new dialogue and share ideas. “The good news is the economy is recovering and auto sales are helping to lead the way. Our industry and the nearly 1 million dedicated and resilient men and women working at new-car dealerships who helped us get to where we are today deserve a lot of credit. “I had the pleasure of traveling to many different places last year, both internationally and across the U.S. And although the faces changed and dealerships varied, one thing I notice that stayed the same is that our industry has passion. “It was truly an honor to serve all of you this past year. “Have a happy and successful 2014.”
NADA Releases Additional ‘Dealer Data’ Guidance NADA’s Legal and Regulatory Affairs Department has issued a sample Service Provider Dealer Data Access Addendum (“Addendum”) and cover memo for dealers to use with their third party service provider vendors. This follows a memo sent last August from NADA Legal and Regulatory Affairs to all NADA members that contained an overview of the primary regulatory issues surrounding Dealer Data, numerous practical tips for dealers to consider when protecting their data, as well as samples of the contract provisions required under federal law when a dealer wishes to allow access to Dealer Data with a third party service provider. The Addendum was drafted for dealers in an effort to clarify and simplify dealers’ obligation to ensure that their applicable vendor contracts contain certain provisions required under federal law. It’s only a sample, and should be used by dealers only after consultation with their legal counsel. Adoption of the Addendum is not the only way dealers can meet their legal obligations and it may not be right for every situation. However, dealers can choose to use the Addendum to amend their service provider legal agreements to satisfy the applicable contractual requirements. NADA is encouraging dealers to review the Addendum and cover memo with JANUARY 2014
legal counsel, and if applicable, to present the Addendum to service provider vendors for signature. NADA will continue to work with dealers, manufacturers, vendors and others toward greater understanding and compliance with all data privacy and safeguarding requirements.
FTC Announces Deceptive Advertising Enforcement Action Against Auto Dealers The Federal Trade Commission announced on January 9 that nine auto dealers, including four from California, and one each from Georgia, Illinois, North Carolina, Michigan and Texas, have agreed to enter into consent orders to settle deceptive advertising charges, and the agency is pursuing litigation against a tenth dealer. The complaints allege violations of the FTC Act, the Consumer Leasing Act (CLA) and the Truth in Lending Act (TILA). The dealers are alleged to have made a variety of misrepresentations in print, Internet and video advertisements that falsely lead consumers to believe they could purchase vehicles for low prices, finance vehicles with low monthly payments, and/or make no upfront payment to lease vehicles. One dealer is alleged to have misrepresented that consumers had won prizes in a sweepstakes that they could collect at the dealership. The proposed consent orders prohibit the dealerships from misrepresenting in any advertisement for the purchase, financing or leasing of motor vehicles the cost of leasing a vehicle, the cost of purchasing a vehicle with financing, or any other material fact about the price, sale, financing or leasing of a vehicle, and in several cases address the alleged TILA and CLA violations by requiring the dealerships to clearly and conspicuously disclose terms required by these credit and lease laws. In the case where the dealership allegedly misrepresented that consumers had won a prize, the proposed order also prohibits misrepresenting material terms of any prize, sweepstakes, giveaway or other incentive. “NADA urges dealers to review all of their advertising, whether online, in print or over the air to ensure that it is not misleading, that it includes the required disclosures if applicable, and that those disclosures are clear and conspicuous,” said Bill Fox, chairman of NADA’s Regulatory Affairs Committee. “Dealers should not rely on advertising agencies or similar third parties to ensure compliance, but should consult with legal counsel to ensure compliance with local, state and federal law.”
NLRB Judge Invalidates Dealership Handbook Provisions A recent National Labor Relations Board ruling found several dealership employee handbook provisions violated the National Labor Relations Act (NLRA). These provi-
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MSADA MSADA sions included those governing the dealership’s social media policy and dress code. The dealership agreed to voluntarily amend their social media policy to comply with the NLRA but would not change their policy on dress code. At issue was a ban on wearing insignias and other “message clothing” by employees who interact with the public. The judge agreed that the dealership could prohibit employees from wearing pins that could potentially damage machinery or cause injury, but concluded that a more general prohibition on wearing insignias and other communications was overbroad under the NLRA. The decision is on appeal. If you have any questions, contact NADA Regulatory Affairs at regulatory@nada.org or (703) 821-7040.
Bill to Reduce Auto Dealership Paperwork Passes House The U.S. House of Representatives passed legislation on January 8 by a vote of 405-0 to repeal an unnecessary paperwork burden on small business auto dealerships. The bill, H.R. 724, eliminates an outdated federal mandate requiring auto dealers to certify that new vehicles are Clean Air Act compliant. NADA strongly supports this bipartisan legislation. The U.S. Senate will take up the measure next. “All new cars and trucks are Clean Air Act compliant before they leave the factory, so requiring dealerships to complete a form essentially recertifying these vehicles is unnecessary,” said David Westcott, chairman of NADA and a Buick-GMC dealer in Burlington, N.C. Westcott added that new-car and -truck buyers can find documentation of a vehicle’s Clean Air Act compliance under the hood of the vehicle, on the Internet or in the owner’s manual and supplements, making additional government paperwork given by the dealer superfluous. The bill, introduced by Reps. Bob Latta (R-Ohio) and Gary Peters (D-Michigan), repeals an obsolete 1977 law. “NADA commends Reps. Latta and Peters for their bipartisan leadership to eliminate this redundant mandate on small business,” Westcott added.
Participation in 2014 Dealership Workforce Study Opens to NADA and ATD Members at Convention NADA and ATD members began participating in the 2014 NADA Dealership Workforce Study at the NADA Convention & Expo in New Orleans, January 24-27. The study, conducted by NADA and ESI Trends (formerly DeltaTrends), is the industry’s most comprehensive analysis of the dealership workforce. It aims to provide dealers with data to make informed recruiting and hiring decisions and meet their No. 1 challenge of attracting and retaining talented employees. Dealers may enroll as individual dealerships or dealer groups. The web-based participa-
tion process is “easy, convenient, and totally secure,” said Kenneth C. Vance, chairman of NADA’s Dealership Operations Committee and a new-car dealer in Eau Claire, Wisconsin. Dealers attending the convention were encouraged to visit the NADA Dealership Workforce Study kiosk in the NADA Pavilion or the satellite booth to sign up and learn more about the study. Dealers can also enroll at www.nadaworkforcestudy.com, send an email to WorkforceStudy@nada.org or call (800) 557-6232 with questions.
NADA Predicts 16.4 Million U.S. Light Vehicles Sales in 2014 NADA predicts 16.4 million new cars and light trucks will be purchased or leased in the U.S. this year, a 5.1 percent increase from 2013. “Consumers will be far better off in 2014 than last year,” said NADA Chief Economist Steven Szakaly. “Employment is improving. Debt has been reduced, and home prices across all regions of the country will remain stable or will rise, yielding a positive wealth effect.” Last year, 15.6 million new light vehicles were sold in the U.S. It marked the fifth straight year of a long recovery from the global financial crisis and the automotive bankruptcies. “Growth would have been stronger in 2013 without a series of contentious fiscal crises in Washington and a federal government shutdown last fall,” he said. “There is considerable upside potential in 2014 as economic activity is expected to increase as the year progresses,” he added. “Gross domestic product will grow about 2.8 percent this year, stability in housing with concurrent growth in employment and manufacturing all lead to a positive outlook for 2014.”
NADA: Used Vehicle Prices Climb for Fifth Straight Year Prices for used cars and light trucks have increased for five straight years, says the NADA Used Car Guide. December closed out 2013 with prices 0.4% higher than in 2012. “A stronger economy, pent-up demand and favorable credit conditions underpinned used vehicle price strength in 2013,” said Jonathan Banks, executive automotive analyst of the NADA Used Car Guide, in December’s edition of Guidelines, a monthly report on new and used vehicle sales trends and price movement. NADA expects used vehicle prices in January 2014 to be flat or just down from December’s levels before rising by 2.5% to 3% through March. By comparison, prices increased by 1.9% over the same period last year as demand was tempered by higher payroll taxes that went into effect at the start of 2013. Prices began 2014 at 18% higher than they were prior to the start of the recession in 2007.
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NADA Market Beat
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Produced by NADA’s Industry Analysis Group • Angela Lisulo, Economist
Review of New Light Vehicle Sales Overall
There were 1.4 million light-vehicle sales in the U.S. in December 2013 – this sales figure was up 9.2 percent from November 2013 and it marked an increase of 4 basis points over December 2012. August 2013 held the largest monthly sales volume for the year with 1.5 million light-vehicle sales. The December 2013 sales figure brings total light-vehicle sales to 15.5 million for the year, up 7.5 percent from last year’s annual sales figure of 14.4 million light-vehicle sales. The December 2013 Seasonally Adjusted Annual Rate (SAAR) for light-vehicle sales is 15.3 million. In 2013, car sales held a market share of 48.8 percent with sales up 4.7 percent from last year while corresponding figures for light trucks put the light-truck share at 51.2 percent with sales up 10.4 percent from last year. Q4 2013 had 3.8 million light-vehicle sales up 5.9 percent from Q4 2012. Q4 2013 ranked third in descending order of quarterly sales volume for the year; Q2 2013 was the quarter with the largest sales volume for 2013. See Figure 1.
growth in light-vehicle sales in 2013 over 2012 figures. Of the Detroit 3, Ford experienced the most growth in 2013 lightvehicle sales over last year at 10.4 percent followed by Chrysler (9.0 percent) and then General Motors (7.3 percent). From the group of Asia/Pacific-based companies, Isuzu experienced the most growth in 2013 light-vehicle sales, from last year, at 33.8 percent followed by Subaru at 26.2 percent. From the group
Companies/Brands
Companies with bases in North America (Detroit 3 and Tesla Motors) held the largest market share of light-vehicle sales for December 2013: 44.6 percent of the market. This was followed by companies based in the Asia/Pacific region at 44.5 percent and then companies based in Europe at 10.9 percent. For 2013, companies with bases in the Asia/Pacific region held the largest share of light-vehicle sales in the U.S. at 45.4 percent; this was a decline from a share of 45.7 percent in 2012. The corresponding share held by companies based in North America was 45.3 percent up from a share of 44.6 percent in 2012. The corresponding share for companies based in Europe was 9.4 percent down from a share of 9.6 percent in 2012. All company categories by geographic bases – North America, Asia/Pacific and Europe – experienced JANUARY 2014
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of Europe-based companies, Porsche experienced the most growth in 2013 light vehicle sales at 20.8 percent followed by Jaguar Land Rover at 20.3 percent.
33 For Q4 2013, companies based in North America held the same share of light-vehicle sales as those based in the Asia/Pacific region: 44.7 percent. However, the former had experienced a rise in quarterly share from 44.0 percent in Q4 2012 while the latter had experienced a decline in quarterly share from 44.9 percent in Q4 2012. For Q4 2013, companies based in Europe held a share of 10.5 percent of light-vehicle sales which was a decline from 11.1 percent in Q4 2012. See Figures 2, 3 and 4.
Segments
The cross utility vehicle (CUV) segment held the largest share in light-vehicle sales for 2013: 25.5 percent. This was followed by the middle car segment (20.0 percent) and then the small car segment (19.0 percent). For 2013, within the CUV segment, the middle CUV sub-segment has been the largest subsegment holding 63.1 percent of light-vehicle sales. For Q4 2013, the CUV segment held the largest share in light-vehicle sales: 26.5 percent. This was followed by the middle car segment (17.9 percent) and then the small car segment (17.1 percent). Focus: Pickups. For the period 1982-2012, the annual market share held by pickups out of total light-vehicle sales can be analyzed within distinct time categories. For 1982-1993, the share fluctuated within a band of 16.2-17.4 percent before leaping to a band of 18.0-19.0 percent for 1994-2005. After 2005, the annual share plummeted to a low of 13.3 percent in 2009 before rebounding over 2010-2011 and dipping to the lowest value of the entire period which was 13.1 percent in 2012. In 2013, pickups held a market share of 13.6 percent of light-vehicle sales and 26.6 percent of lighttruck sales; pickup sales were up 11.7 percent from 2012. The peak sales month for pickups in 2013 was in August with 198,647 units sold. The large pickup sub-segment took the dominant share of total pickup sales for the year: 88.4 percent. Although it was a dominant sub-segment in 2012 as well, the large pickup sub-segment became increasingly so in 2013 as sales in the small pickup sub-segment contracted for every month, except October and November, from correspondwww.msada.org
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NADA Market Beat ing 2012 values while sales in the large pickup sub-segment grew for every month in 2013, except December, from corresponding sales figures in 2012. For Q4 2013, pickups held 14.3 percent of total light-vehicle sales; these sales were up 5.8 percent from Q4 2012. See Figures 5 and 6.
Power source
As a power source, gasoline held the dominant market share of 93.3 percent of light-vehicle sales for 2013 – a slight decline from its corresponding share of 93.8 percent in 2012. The market share held by the diesel category rose slightly to 2.9 percent, in 2013, from its value of 2.8 percent last year. The market shares held by electrics, light vehicles powered by fuel cells, hybrids, light vehicles powered by natural gas and plug-in hybrids each grew in 2013 from 2012 values. In December 2013, for the alternative power category, the following light vehicles were sold: 4,467 electrics, 4 units powered by fuel cells, 34,730 hybrids, 118 units powered by natural gas and 4,973 plug-in hybrids amounting to 44,292 light-vehicle sales. Focus: Electric light vehicles. Amongst the 5 alternative power sources, electric light vehicles ranked 3rd in descending order of sales for 2013. Electric light vehicles held 0.3 percent of total lightvehicle sales for the year with sales rising 241.4 percent from the 2012 value. From all the electric light-vehicle models, the Nissan Leaf held the largest share for 2013 at 47.5 percent with 22,610 units sold. However, it is the Tesla Model S which exhibited the most growth, in the electric category, going from 1,739 units sold in 2012 to 18,803 units sold in 2013.
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The electric category was heavily concentrated with car models in 2013 – there were 10 brands in the entire category and only 1 brand produced the only light-truck model (Toyota RAV4) in the category. However, this category has experienced growth in the number of participating brands over the past 2 years – in 2011, there were only 2 brands producing light vehicles with this alternative power source with each producing one car model (Mitsubishi I and Nissan Leaf). For Q4 2013, electric light vehicles held 0.3 percent of total lightvehicle sales; these quarterly sales were up 81.0 percent from Q4 2012. See Figure 7.
Models
There were 2 cars and 3 pickup trucks occupying the highest 5 ranks of the best-selling light vehicles for 2013. The 2 leading cars were models from companies based in the Asia/Pacific region: Toyota Camry and Honda Accord. The 3 leading pickup trucks were models from the Detroit 3 companies: Ford F-Series, Chevrolet Silverado, and the Ram pickup. From the list of the 15 best-selling light vehicles for the year, 8 out of 15 light vehicles were Detroit 3 models while the rest were from companies based in the Asia/ Pacific region. See Figure 8.
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