Alabama by NIADA

ALABAMA

ALABAMA INDEPENDENT AUTOMOBILE DEALERS ASSOCIATION

ASSOCIATION NEWS

RANDY CRUMP NAMED 2018 NIADA NATIONAL QUALITY DEALER

ALABAMA DEALER IS AN AUTO INDUSTRY LIFER WITH SMALL-TOWN FAMILY VALUES | PAGE 08|

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• Training for new & experienced operators • Network with industry experts • Capital to fund your operation • Collections & underwriting training • Best practices that work today and in the future • The latest marketing strategies • Legal and compliance updates • Exhibit hall with all the latest products & services • New industry technology

SOCIAL MEDIA | By Kathi Kruse

COMMON BUT COSTLY FACEBOOK MISTAKES

Top Pitfalls to Avoid

If there’s one thing that's constant about Facebook, it’s change. It seems like every week there’s a new feature or advertising element, some new trick to learn, or a new way to be more visible. Many dealers unknowingly make several common Facebook mistakes, and it's hindering their success. Facebook is a valuable tool for business but there are a lot of potential pitfalls. Here’s a list of common Facebook mistakes you should avoid. Taking Off Without a “Runway” Facebook success is in the details. Before you take to the airwaves of social media, you need a plan. It's like this: if you're taking a trip and you don't know the way to your destination, you check the GPS app on your phone. You do this because it saves time, expense and a whole lot of needless suffering. Social media strategy works the same way. Begin with the end goal in mind. For most dealers, the goals are to gain more site visits, engage more customers, and generate leads. Once you've determined your goals, you'll need a social media strategy “runway” to reach them. Making It All About You Facebook marketing is successful when you've provided entertaining, useful, sharable content. Think about the Facebook pages you follow and why you follow them. It's not so you can see sales promotions. Fans and customers are no different than you! People stay engaged when the posts they see are meaningful to them. Pro tip: Avoid violating Facebook's terms of service. I can't tell you how many dealership pages I see that are broadcasting sales messages through the newsfeed. Save those messages for Facebook ads and you'll avoid the pain of having your people click the nearest exit. Failure to Engage Regularly One of the best ways to build a lively, loyal community on Facebook is by engaging regularly with your fans. Facebook is not a one-way communication tool. Create a solid engagement strategy that includes designating someone to engage with the people who comment on your posts. Respond to all page messages timely. Do not rely on the autoresponder. Respond to all reviews – both positive and negative. Every negative comment is an opportunity to turn a critic into a fan. Abandoning your customers on Facebook tells them either you're not paying attention or you don't care. No Serious Investment If you've spent any time in the dealership Facebook marketing ecosystem, you know there is a time investment. Building

relationships through trust takes time, and if Facebook is your chosen platform, be prepared to make an investment. A Facebook page should be considered a valuable company asset and, as such, there are other investments required to retain its value: • Strategy and planning. • Financial resources. • Human resources. • Attention. In fact, sometimes a dealership will need to restructure their operations to accommodate social media. If your team doesn't have the expertise, you may need to invest in training. Pro tip: It's not healthy to think that Facebook is “free.” That thinking will only allow your competitors to take all the customers. Not Completing Your “About” Section Your Facebook “about” section projects the image of your dealership. This is an incredibly important step when setting up and optimizing your page. You want to ensure your “about” is complete and sends the right message to anyone visiting your page: • Add your founding details. How did your dealership begin and when? What’s your mission and what drives your operation on a day-to-day basis? • People will quickly scan your content. Add your most important details within your first paragraph. • Add keywords, terms and phrases that anyone searching for your products would use. Keywords matter in social media as much as they do within your website and blog. Don’t overlook them! • Answer questions your community needs answered to make an educated decision. This is a place to create differentiation and separate you from your competitors. • Keep industry jargon out of your “about” section. Your customer doesn’t work in the auto industry, so don’t speak to them as if they do. Keep your language relatable and easy to read. Not Using Facebook Ads Facebook advertising can be a smart complement to your current advertising budget. Facebook ads let you grow your page and generate leads without adding a hefty expense. Part of your investment in Facebook is for Facebook ads. Simply put, you will not succeed (i.e. improve customer engagement and generate leads) without Facebook ads. Why? Ten years ago, social media was a fertile field of wildflowers, brimming with kittens and unicorns. The marketing landscape was wide open for dealers who wanted to capture attention and engage like-minded customers. Today, social media is a dense, crowded, noisy, smoggy urban jungle. Simple tactics alone are no longer effective. You must pay to promote your content and products on Facebook. The good news is that Facebook ads work! It's a mistake not to leverage this powerful tool.

FACEBOOK MARKETING IS POWERFUL, BUT O N LY I F Y O U 'R E A L L I N . THIS AWESOME POWER O N LY W O R K S T O Y O U R ADVANTAGE WHEN YOU'RE FIRING ON ALL CYLINDERS. Failing to Track, Measure and Analyze Your Results Too often dealers jump onto Facebook without a plan or clear idea of what success really means for them. Look for success markers on your Facebook marketing journey. Just like the maps app on your phone shows the best route to take to your destination, Facebook key performance indicators guide you to what success looks like for your Facebook marketing. KPIs give you a solid foundation from which to measure results. Develop a process – including the tools you'll need – to track, measure and analyze. Facebook allows you to figure out what's working and what's not in real time. Facebook mistakes don't have to happen. Facebook can help build a bridge between your dealership and your customers. Facebook marketing is powerful, but only if you're all in. This awesome power only works to your advantage when you're firing on all cylinders. Kathi Kruse is an automotive social media marketing expert, blogger, consultant, author, speaker and founder of Kruse Control Inc., which coaches, trains and delivers webinars focused on integrating social media and online reputation management into dealership operations. She can be reached at kathi@krusecontrolinc.com.

www.alabamaiada.org

August/September 2018

AIADA

INSIDE

ALABAMA

A L A BA M A INDEP ENDEN T AU T OMOBIL E DE A L ERS AS SOCI AT ION

06 .................................................................President’s Letter 07..................................................Community Service Award 08..............................................Alabama Dealer Named NQD 09....................................................................Online Channels 10................................................. NIADA Government Report 12 ..............................The Right Way to Get More Millennials 14....................................................Smart Debt Management

WHAT’S NEW

National Policy Conference The 2018 National Policy Conference will be held September 24-26 at the Ritz-Carlton Pentagon City. Make plans now to join NIADA in Washington, D.C. as we meet legislators face-to-face to make your voice heard! Learn more and register today at niadapolicyconference.com.

ADVERTISERS INDEX

AmTrust Financial................................................................IBC ARA GPS................................................................................. 4 DAA Dealers Auto Auction Group, LLC .................................5 Manheim............................................................................... 11 NextGear Capital...................................................................12 VAuto......................................................................Back Cover

OFFICE

NEW MEMBERS Welcome Eric Wallis 1803 Capital, LLC Gretna, LA

Gary Murrell Jorge Clements Dependable Auto Sales LLC Lang Motor Company Montgomery LLC Decatur Eddie Lambert Ronin Farahmand Discount Auto Mart LLC James Adams/James Auto Matrix Car Solutions Auburn Geddings Hollywood, FL MGM Auto Brokers LLC Eddie Dawson Montgomery John Buzbee E & Jay’s Automotive LLC Buzbee Auto & Service Birmingham Randall McCormack Birmingham McCormack Auto Tom Rector Service LLC David Phillips Floorplan Xpress LLC Pell City Classic Motors Mathews Pinson Scott Shirley Mike Shelda Midtown Auto Sales Brad Porch Free Land Automotive Winfield Coosa Valley Auto Birmingham Sylacauga Robert Malone Kamelliah Furlow PLM Motorsports Chuck Burns Inn-Route Automotive Wetumpka CRB Auto Sales Birmingham Birmingham Michael Green Pinnacle Auto Brokers Danny Britt Rainbow City Danny’s Wholesale Auto Inc. Pinson

PRESIDENT

Todd Oden Birmingham Dpip.ptp@aol.com

NIADA HEADQUARTERS

NATIONAL INDEPENDENT AUTOMOBILE DEALERS ASSOCIATION WWW.NIADA.COM • WWW.NIADA.TV 2521 BROWN BLVD. • ARLINGTON, TX 76006-5203 PHONE (817) 640-3838 For advertising information contact: Troy Graff (800) 682-3837 or troy@niada.com. The Alabama Independent Automobile Dealers Association is published bimonthly by the National Independent Automobile Dealers Association Services Corporation, 2521 Brown Blvd., Arlington, TX 76006-5203. Periodicals postage paid at Dallas, TX and at additional offices. POSTMASTER: Send address changes to NIADA State Publications, 2521 Brown Blvd., Arlington, TX 76006-5203. The statements and opinions expressed herein are those of the authors and do not necessarily represent the views of AIADA or NIADA. Likewise, the appearance of advertisers, or their identification as members of NIADA, does not constitute an endorsement of the products or services featured. Copyright © 2018 by NIADA Services, Inc.

PRESIDENT ELECT

Chad Tillery Jemison cktillery@hotmail.com

VICE PRESIDENT

Willie Colvin Tuscaloosa

Pokey Brimer Bryan Cooper Oxford Huntsville pbrimer6@gmail.com Tim Duke EXECUTIVE Birmingham

DIRECTOR

Randy Jones

DIRECTORS

Lee Stockton Regal Auto Sales LLC Alabaster Duke Caro River Region Auto LLC Prattville Andrew Lee Ronnie Lee’s Imports Daphne Scott Posey S & G Auto Sales Trussville Edgar Valerio Valerios Auto Sales Montgomery Brittany Jackson Valleyside Automotive Company Huntsville

Randy Little Satsuma Erek Yarbrough Pleasant Grove Chris Mundy Columbiana

Jay Saul Jasper

Chris Mullinax Hoover

Barry Searcy Muscle Shoals

Randy Crump Jasper

Ricky Young Boaz

SECRETARY/TREASURER

John Dunn Sylacauga

Kelly Steely Hoover

Patrick Graves Moody

Lance Turner Anniston

Jerry Giles Tuscaloosa

Roderick Underwood Bessemer roderickunderwood@hotmail.com

Troy Graff • troy@niada.com EDITORS

Jacinda Timmerman • jacinda@niada.com Andy Friedlander • andy@niada.com MAGAZINE LAYOUT

Christy Haynes • christy@niada.com PRINTING

Nieman Printing

August/September 2018

CHAIRMAN OF BOARD

Anthony Victor Prestige Autos LLC Decatur

Robert Case Hartselle robertsautosales1@live.com

STATE MAGAZINE MGR./SALES

AIADA

Richard Jones Jones Auto Group LLC Montgomery

Jeff Lowery/Anthon Lanthrip A & M Automotive Sylacauga

BOARD OF DIRECTORS

120 Vulcan Road Birmingham, AL 35209 Phone: (205) 942-1000 Fax: (205) 942-3565 Website: www.alabamaiada.com To become a member of AIADA, please call (800) 239-2423

Paula R. Hall Dais Used Auto Sales Talladega

www. alabamaiada.org

ASSOCIATION NEWS

SAFETY WATCH

PRESIDENT’S LETTER

KIA RECALLS 508,000 VEHICLES

From the Desk of Chad Tillery

What an exciting challenge to be the president of AIADA this coming year. I look forward to working with all the dealers as well as the association board and staff. I started in the car business in April 1995 at Ellison Auto Sales Inc. and I’m still here today. I have been on the AIADA board of directors for nine years. I have served on several committees and have also served as secretary/treasurer, vice president and president elect. Now I am serving as president of AIADA for 2018-2019. I have several goals for the coming year. One of my main goals is regarding curbstoning. I would love to see curbstoning wiped out totally across the state. Further, I want to continue to educate dealers on the importance of being a member of AIADA, and the benefits of the membership. I would like to see AIADA membership numbers go up and non-renewals go down. I will strive to do all I can to reach these goals. As you know, there are so many rules and regulations for independent dealers to stay in compliance with. As an association, we try to keep our members updated on these regulations. That is one reason, among many, why it is so important to be a member of AIADA. On a personal note, family is very

F&I MATTERS |

By Chris Miller

TOP 5 FLOOR PLANNING MISTAKES DEALERS MAKE

Avoid These Common Mistakes

Floor planning is a basic process: Open a line of credit, purchase inventory with that credit, sell inventory and pay back the loan. However, intertwined among the basics are a lot of moving parts that can cause complications. While many variables are beyond the dealer’s control, such as the economy or auction prices, it’s important to understand the five most common mistakes dealers can avoid. Mismanaging Cash Flow One of the benefits of floor planning is that it frees up cash for expenses and business investments. However, a common mistake is not taking into account that many of these bills mature at the same time. Improper cash management may cause dealers to get into a borrowing cycle that provides little wiggle room and therefore creates a shell game of constantly shifting cash from one debt to another. Over-Extending Far too often, dealers over-extend themselves when it comes to inventory. When you purchase more inventory than you can

AIADA

August/September 2018

Airbags May Not Deploy

THANKS FOR ALLOWING ME TO SERVE ON THE AIADA BOARD FOR THE LAST SEVERAL YEARS. IT HAS TAUGHT ME A LOT ABOUT THE BUSINESS AND SURROUNDED ME W I T H S O M E T R U LY G R E AT PEOPLE. important to me. I am so blessed to have been married to Kerri Tillery for 17 years. We have two children: Colin, 16, and Karley, 14. Thanks for allowing me to serve on the AIADA board for the last several years. It has taught me a lot about the business and surrounded me with some truly great people. I look forward to serving the dealers of Alabama as president of the Alabama Independent Automobile Dealers Association.

sell, you put yourself at risk if you can’t make the payments. Moral of the story: Just because you are approved for a $250,000 line of credit doesn’t mean you have to go out and spend it all at the next auction. Buy in proportion to your sales figures. Communicating Inadequately with Your Floor Plan Provider No business likes surprises, especially finance companies. Keep your floor plan provider abreast of any changes or issues regarding your business. You won’t be able to make a payment on time? Let them know ASAP. By being proactive and honest, you stand a better chance of your floor plan provider working with you to help resolve issues. Raising Red Flags There are three red flags your floor plan company is always watching for: NSFs, collateral audits and turn-times. NSFs: Insufficient funds (or NSFs) are directly correlated to the first two points above. When you can’t make your payments on time, or your checks/ACHs bounce, rest assured your floor plan provider is now watching your account closely. This is one of the biggest indicators there is an issue with how you’re managing your account, and ultimately how the creditor views their chances of being repaid. This puts the floor plan provider at risk because they have advanced funds on a certain piece of collateral.

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A faulty control unit that could prevent airbags from deploying in the event of a wreck has prompted Kia to recall 508,000 2010 through 2013 model year vehicles. Kia said the airbag control unit, which tells the airbag and the seat belt pretensioners when to activate, could be “susceptible to electrical overstress” in the event of a frontal collision. If the control unit is damaged internally, it may not relay the severity of the crash to the airbags and seat belt pretensioners. The recall covers a wide swath of Kia vehicles, including the 2010-2013 Kia Forte sedan and Forte Koupe, 2011-2013 Kia Optima sedan, 2011-2012 Kia Optima Hybrid sedan, and 2011-2012 Kia Sedona minivan. The vehicles were built through August of 2012. The recall stems from a lawsuit filed in 2014 when a 2012 Kia Forte sedan was involved in a wreck and its airbag didn’t deploy. A Forte Koup was involved in a similar wreck in which the airbag didn’t deploy in 2017. Kia, the NHTSA, and the supplier that produced the supplemental restraint system used in the Forte conducted an investigation in May to determine what was at fault and what needed to be repaired.

Collateral audits: Your floor plan company is a collateral-based lender and that collateral is the physical inventory – not the title of the vehicle. It’s important the collateral can be physically verified based on the agreed terms, usually monthly. When your floor plan provider can’t verify inventory, a red flag is raised. If you need to move inventory to another location for a big tent sale or to an auction, let your floor plan provider know. Turn times: Used inventory should be turned every 45 days, because your ability to make money on aged inventory goes down over time. While this may not fit every dealer’s business model, your floor plan company is going to get nervous if they see a vehicle on your lot for an extended period. Many times dealers hold inventory “looking for the right buyer” instead of cutting their loss and moving the unit at auction so they can acquire fresh inventory. Improperly Managing the Account When you open a floor planning account, find out when payments are due and what different resources are available, such as valuation tools or payment schedules, that can make it easier to run your business. Your floor plan representative is also a valuable resource who can provide great insight. Chris Miller is the director of strategic initiatives for NextGear Capital. He is an automotive re-marketing veteran leader with expertise in strategy, operations, sales, project management, marketing and finance.

ASSOCIATION NEWS

A&D MOTORS HONORED FOR LONGSTANDING LEGACY OF GIVING

2018 NIADA and Cox Automotive Community Service Award

A&D Motors Inc., whose philanthropy has made a difference throughout its small hometown of Arab, Ala., was presented with the 2018 NIADA and Cox Automotive Community Service Award. Dealership owner Jennifer Gant accepted the award from Patrick Brennan, senior vice president of Marketplace for Cox Automotive Inventory Solutions, during the National Leadership Awards Banquet at the NIADA Convention and Expo. “I knew the moment I started with A&D Motors 20 years ago that my job was not simply to sell someone a vehicle, but to make a positive impact in their life,” Gant said. “The legacy of giving that began with my late husband, Donald Gant, lives on through the A&D employees, who tirelessly contribute their time and efforts into every community event.” The award, which recognizes an independent dealership for outstanding contributions to its community and the innovative ways it

collaborates with community partners to help further their missions, includes a $10,000 donation from Cox Automotive and the NIADA Foundation to the Parkside Outreach Program, the dealership’s charity of choice. The program, developed by Gant, helps with emergency outreach for families affected by disasters as well as providing support for less fortunate children in the community. Gant said her vision is to grow the program into a countywide mission. Independently owned and operated since 1992, A&D Motors donates to multiple charities and organizations throughout the year. The dealership has supported the purchase of Christmas gifts for local families, sponsored Big D Scholarships for multiple area schools and helped fund the local food bank. In addition, Gant and her team raised $20,000 through a “Cruisin 4 Scotty” event

created to support a family whose sole provider fell ill, and partnered with Baileyton United Methodist Church to sponsor Backpacks for Kids, which sends weekly snacks home with underprivileged children. “Making a difference in the lives of others has long been a big part of the Cox Automotive culture,” Brennan said. “Jennifer and her team at A&D Motors have continued to support the less fortunate in their community and we applaud their efforts, their impact and their embodiment of the spirit of community service.”

www.alabamaiada.org

August/September 2018

AIADA

ASSOCIATION NEWS

Randy Crump (center) was presented with the 2018 NIADA National Quality Dealer award by NIADA CEO Steve Jordan (left) and NextGear Capital’s Randy Dohse during the 72nd NIADA Convention and Expo.

RANDY CRUMP NAMED 2018 NIADA NATIONAL QUALITY DEALER

Alabama Dealer Is an Auto Industry Lifer with Small-Town Family Values Randy Crump, president of Friendly Auto Sales in Jasper, Ala., was named the 2018 National Quality Dealer of the Year by the National Independent Automobile Dealers Association during NIADA’s 72nd annual Convention and Expo in Orlando, Fla. In a ceremony webcast live from the Rosen Shingle Creek Resort on NIADA.TV, Crump was chosen from the 13 State Quality Dealers nominated for the highest honor given among NIADA’s dealer members. He is the seventh NQD from Alabama, tying Texas for the most from any state. NIADA National Quality Dealer candidates are judged on a variety of factors, including contributions to the automotive industry, the association and community involvement. This year’s winner was chosen by a selection committee comprised of some of the most distinguished names in the used vehicle industry. The committee included AFC chief operating officer Joe Keadle, NextGear Capital senior vice president of operations Randy Dohse, NADA senior vice president and chief operating officer Mike Stanton, Black Book Automotive vice president and North American auction director Tim West, ADESA president John Hammer, NIADA Region IV

AIADA

August/September 2018

vice president and 2013 National Quality Dealer Joe McCloskey of McCloskey Motors and Elgie Bright, chairman of the Automotive Marketing Department at Northwood University. In accepting the award, Crump credited his father, John – whom he calls “Wolf” – for much of his success. “I’m a second-generation car dealer,” Randy Crump said, “and he’s given me the knowledge, the opportunity and the work ethic that’s required in today’s business. I can’t thank you enough, Wolf.” Crump, 52, is a true auto industry lifer, having begun his career at age 7, sweeping floors and keeping the store clean for 25 cents an hour at his father’s dealership, John Crump Toyota. He wound up working in the dealership’s service department until high school, detailing cars and doing oil changes, and eventually served in every one of the operation’s departments through his high school’s co-op program. At 16, he sold his first vehicle, a 1981 Toyota Tercel. After earning a degree in business management from Northwood University in 1990, Crump again went to work for his father as used car manager of a Mazda store, igniting a passion for the used vehicle business. That passion helped fuel his decision to go out on his own. In 1999, he opened Friendly Auto Sales, a Buy Here-Pay Here operation that consisted of three people – Crump, a secretary and a car washer. “I did all the buying and selling myself,” he recalled. That’s no longer the case. In 2006, he was able to add a collector and a salesman. In 2008, he replaced his original building with a

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new facility that included a detail shop, which was later joined by a repair shop. These days, Friendly Auto Sales has a staff of seven, including two certified technicians, a one-acre lot, average annual sales of more than $2.2 million and a town filled with loyal customers, many of whom said the staff treats them “like family.” Crump said that family atmosphere fits his hometown of Jasper, population 14,000. “I like being from a small town,” he said. “To me, the best thing about this community is the mom and pop-type businesses that are established here.” As the owner of one of those businesses, Crump is deeply embedded in his community through involvement in his church and organizations like the local Boy Scout council and the Salvation Army, working with area schools on various initiatives, including a job-shadowing program, volunteer work and charitable efforts such as providing rooms for the Homeless Coalition, donating vehicles to charitable organizations and contributing to help a junior high school build a baseball field. “I simply feel it is extremely important to give back to the community,” he said. “When I was in middle school, one of my reading assignments was The Diary of Anne Frank. Something she said in her diary has always stuck with me: ‘No one has ever become poor from giving.’ “I have tried to emulate that philosophy and make it one of my guiding principles to live by.” In keeping with that philosophy, NextGear Capital donated an emergency response vehicle in Crump’s name to his local chapter of the American Red Cross. Crump is a member of the Alabama IADA board of directors as well as a member of an NIADA Dealer 20 Group.

SAFETY WATCH

INDUSTRY PERSPECTIVE | By Derek Hansen

ONLINE CHANNELS CHRYSLER TELLS ALMOST 5 MILLION DRIVERS NOT TO USE CRUISE CONTROL

Bolster Your Acquisition Strategy More Profitably & Efficiently

Defect Could Prevent System from Disengaging

Chrysler is recalling 4,846,885 2014-18 Dodge Journey, Charger and Durango, RAM 2500, 3500, 3500 Cab Chassis (more than 10,000 lb.), 4500 Cab Chassis and 5500 Cab Chassis, Jeep Cherokee and Grand Cherokee and Chrysler 300, 201419 RAM 1500, 2015-18 Dodge Challenger, 2015-17 Chrysler 200, 2016-18 RAM 3500 Cab Chassis (less than 10,000 lb.), 2017-18 Chrysler Pacifica and 2018 Jeep Wrangler vehicles.

THESE VEHICLES ARE BEING RECALLED TO ADDRESS A DEFECT THAT COULD PREVENT THE CRUISE CONTROL SYSTEM FROM DISENGAGING. These vehicles are being recalled to address a defect that could prevent the cruise control system from disengaging. If, when using cruise control, there is a short circuit within the vehicle's wiring, the driver may not be able to shut off the cruise control either by depressing the brake pedal or manually turning the system off once it has been engaged, resulting in either the vehicle maintaining its current speed or possibly accelerating. Chrysler will notify owners, and dealers will inspect the software and perform a software flash on the engine or powertrain control module, free of charge. Owners are advised to stop using cruise control until the software update has been performed. In the event that cruise control cannot be disengaged while driving, owners should firmly and steadily apply the brakes and shift the transmission to neutral, placing the vehicle in park once it has stopped.

Auction cars are always available, but one of the biggest challenges dealers face is acquiring auction vehicles efficiently and with precision based on real and timely data. The days of “gut-driven guesswork” can, and should, be put to rest. Today, your best bet is to use tools to evaluate and buy vehicles that are in demand in your market. You can then look at the best inventory from a wide net of resources for quicker, more confident decisions. The most proficient dealers and buyers have expanded to online channels – simulcast and online auction sites where you can bid, buy and sell 24/7, all of which can be done from a mobile device. Currently, only one-third of dealerships attend a simulcast auction every month according to Manheim data, which presents an opportunity for savvy dealers to become “leaders of the pack” in wholesale operation innovation. These early adopters also use technology to facilitate the transfer of the purchased units back to the dealership. The end result: They are more efficient and productive buyers every time they go to an auction. Turn to Earn The time saved by acquiring inventory online can contribute to dealers’ speed to market, and as a result, faster turn, with fewer cars sitting in inventory for longer times. This increased velocity can ultimately lead to improved dealership profitability. Dealers who are not tapping into the efficiencies gained from digital acquisition channels are already falling behind the curve. Online channels cut down on trips to auctions where the cars you need may not be. Not only do these online channels save time and travel expenses, they let you expand your buying radius, giving you access to more vehicles that align with your vehicle selection strategy and inventory needs. In an effort to gain even more efficiency and speed as they acquire auction cars, some of the most progressive dealers now rely solely on online sources, a time-saving shift that improves showroom efficiency, enabling managers to be in the dealership, working deals and managing their teams. Tip: When acquiring vehicles from further distances that may take longer to reach your dealership, have a process in place to get those cars listed online before they arrive at your lot. Mobile apps are another way to speed up the buying and selling process so you can do business from anywhere. These apps let you manage purchases, check your buying activity, view your purchases, and set up and receive post-sale inspection, title and vehicle availability notifications. Mitigating Risk Granted, there is a wealth of inventory online and now multiple ways to acquire that inventory online. But, just like a consumer

buying a vehicle, most dealers like to “kick the tires” to make sure they’re not purchasing a problem vehicle. Let’s face it, all inventory acquisitions carry a measure of risk, and acquiring inventory online might seem like an even riskier proposition. However, there are solutions available to help you mitigate risk and offer peace of mind with your online purchase. Rely on condition reports to avoid problem vehicles. Buyers are three times more likely to bid and four times more likely to purchase a vehicle with a condition report, which is an important consideration for sellers. And for buyers, units with condition reports have a 37 percent decrease in arbitration, according to Manheim sales data. If arbitration is a concern that is preventing you from embracing online channels, consider wholesale vehicle purchase protection programs. Some of these programs offer automatic purchase protection applied to every vehicle you purchase. Having this type of safety net allows you to decrease recon costs, eliminate costly mistakes and expand your inventory mix. Most offer everything from a basic frame check to a full buy-back guarantee. Post-sale inspections are another smart option that don’t require you to be at the auction. Typical PSIs inspect the frame/ unibody, the engine and transmission and can come with 7- or 14-day guarantee options. The benefits of condition reports, PSIs and purchase protection are significant and provide confidence you’re making the right purchase so you can minimize unexpected repair costs. They give you peace of mind with on-the-ground information and save time because you can do everything before the vehicle even leaves the auction. As vice president of offsite solutions, Derek Hansen is responsible for Manheim’s inventory solutions in the ever-evolving digital space and works closely with teams from Manheim, RMS Automotive and vAuto to create a customerfocused digital strategy that takes advantage of the deep expertise of these brands.

www.alabamaiada.org

August/September 2018

AIADA

WASHINGTON UPDATE | By Shaun Petersen

NIADA GOVERNMENT REPORT

GRASS ROOTS

Latest Government Issues and Activity

NIADA is your voice in Washington D.C., advocating for independent dealers, the used vehicle industry and small business. Here’s a look at the latest news and NIADA efforts regarding legislative, regulatory, PAC and grass roots activities.

REGULATORY

Perseverance and Stick-To-Itiveness Remember back in January, when it became mandatory to display the revised version of the Buyers Guide in the window of all used vehicles for sale? The Federal Trade Commission remembers. And just to make sure dealers did, too, the FTC joined with 12 law enforcement agencies to visit 94 dealerships in 20 cities across the nation to check on compliance with the amended Used Car Rule. The agencies checked dealerships in California, Florida, Illinois, New York, Ohio, Texas and Washington in the three-month span from April to June, and what they found was not exactly encouraging. Only 14 of the 94 dealerships had the new Buyers Guide posted on all of their vehicles, and just 33 had it on more than half of the vehicles in inventory. While 70 percent of the 2,300-plus vehicles checked did have Buyers Guides displayed, less than half of those had the revised version as required. By law, the civil penalty for failing to display the proper Buyers Guide is $41,484 per violation. The dealerships, which were not identified, were informed of the results and of resources to help them comply with the rule. The FTC said it will conduct follow-up inspections in the coming weeks.

O N LY 14 O F T H E 9 4 DEALERSHIPS HAD THE NEW BUYERS GUIDE POSTED ON ALL OF THEIR VEHICLES, AND JUST 33 HAD IT ON MORE THAN HALF OF THE VEHICLES I N I N V E N T O R Y. W H I L E 7 0 PERCENT OF THE 2,300PLUS VEHICLES CHECKED DID HAVE BUYERS GUIDES DISPL AYED, LESS THAN HALF OF THOSE HAD THE REVISED VERSION AS REQUIRED. 10

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August/September 2018

LEGISLATIVE

The Senate is in the spotlight after President Trump nominated D.C. Circuit Court of Appeals judge Brett Kavanaugh to fill the Supreme Court seat vacated by the retirement of Justice Anthony Kennedy. The Senate vote on whether to confirm Kavanaugh’s nomination is expected to be close, breaking down along partisan lines. Senate Majority Leader Mitch McConnell (RKy.) has said he wants to have a final vote by the end of fall. In the meantime, Kavanaugh will meet with senators from both parties and appear before the Senate Judiciary Committee. In his position on the circuit court bench, Kavanaugh was part of a three-judge panel that found the structure of the Consumer Financial Protection Bureau to be unconstitutional in a 2016 ruling for which he wrote the majority opinion. He held that same position writing a dissent when the full court overruled the panel in January. The question of the bureau’s constitutionality could come before the Supreme Court after U.S. District Judge Loretta Preska resurrected the issue by ruling in a New York case that the CFPB is unconstitutionally structured, contradicting the D.C. Circuit Court’s finding.

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A new set of rules for used car dealers issued by the New York City Department of Consumer Affairs took effect June 24, requiring all licensed dealers to make additional disclosures to consumers and created a new consumer bill of rights for the used car industry. The new rules require dealers to provide a financing statement that includes “sale terms,” “financing terms,” and pricing information for any add-on products or services before the execution of any retail installment contract. The financing terms must include both the contract APR (presumably the same APR as TILA disclosures) and the “lowest APR offered to buyer by any finance company with the same term, number of payments, collateral and down payment,” intended to help consumers comparison shop. Consumers must also be given a twoweekday period to cancel the sale for a full refund. The “Used Car Consumer Bill of Rights,” which must be provided to each customer and posted conspicuously anywhere contracts are negotiated or executed, advising consumers of their rights to buy a car at the advertised price, know all the details of financing before signing and arrange financing with an entity other than the dealership. The document also informs consumers that dealers must certify the car is safe to drive at the time of sale, post the total selling price for each used car where the car is being offered for sale, and post a refund policy where sales take place, among other requirements. It also spells out various protections provided by city law, including protection from discrimination in seeking access to credit. “In New York City, where household budgets can be especially strained, the dangers of predatory lending are immense,” Department of Consumer Affairs commissioner Lorelei Salas said. “We believe consumer education, including our Consumer Bill of Rights regarding used car dealers and financing is one piece of the solution to stamping out predatory lending.”

PAC

On July 12, the NIADA Political Action Committee served as co-host for a dinner in Washington D.C., for Rep. Susan Brooks (R-Ind.), a key member of Congress with a strong history of supporting the used vehicle industry. Brooks’ district includes the city of Carmel, Ind., where the headquarters of J.D. Byrider, KAR Auction Services and NextGear Capital are located. She is a member of the House Committee on Energy and Commerce, which has jurisdiction over many of the issues important to independent dealers. She is also a member of the Congressional Automotive Caucus and the Congressional Automotive Performance and Motorsports Caucus. Shaun Petersen is NIADA’s senior vice president of legal and government affairs.

ACCELERATE |

By GWC Warranty

here’s a right way and a wrong way to go after more millennial business. Do it right and you’re capitalizing on a demographic with loads of discretionary income. Do it wrong and you could miss out on a gold mine of profit opportunity. A recent study by eBay found that despite delayed tax refunds, most millennials filed before the technology incidents that caused a delay for others. Furthermore, the research reported 37 percent of millennials planned to use their returns to buy a car and 80 percent planned on rewarding themselves with their returns. But are you ready to pounce on this limitedtime opportunity? Advertise in the Right Places Millennials won’t be able to find you unless you make the effort to get noticed where they’re looking. Social media advertising can be an affordable way to reach a highly targeted audience with a highly targeted message. You can select the age, location and other characteristics of your audience and speak directly to their needs and wants. Have the Right Cars If you often look back to see what sells well before you head off to auction, now’s the time to take it to the next level. Go back in the books to see if there are any trends in what past millennial buyers have purchased from you. If you don’t have much of a history with this group, some research from outside the car industry could help. It’s been widely reported how much millennials rely on recommendations, how much they research a purchase of this size and how image-conscious they are. Making sure you have vehicles that are reliable and competitively priced with all the right perks will go a long way.

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August/September 2018

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Communicate the Right Way Millennials, more so than most audiences, are bombarded with emails, text messages, phone calls and more on a daily basis. So before, during and after a sale, your messages need to stand out. Tools like Covideo, which embeds personalized video messages into emails, can make your messages stand out from the crowd and get noticed. Using these kinds of messages throughout the buying experience can help a millennial customer stay more engaged with your dealership. Appeal to the Right Sensibilities We mentioned earlier how 80 percent of millennials are looking to reward themselves with their tax returns. This supports the idea that millennial decision-making is driven by emotion and self-image. Playing to this personality trait while millennials are on your lot or interacting with you online is an effective practice to get them in a car from your lot. Let them know how their image will benefit from this purchase and it could pay dividends. Provide the Right Protection Perhaps more so than anything else, millennials have high expectations after pouring hours upon hours of research, negotiations and time on the lot into making a vehicle purchase. Because of this, you don’t want a repair – big or small – after the purchase to put a damper on your millennial customer’s entire experience. This makes getting a service contract on every millennial deal an absolute necessity, especially since this demographic is also more likely to leave a review online.

AUCTION SPOTLIGHT |

DEALERS AUTO AUCTION OF HUNTSVILLE

Celebrating 14 Years

Dealers Auto Auction of Huntsville is in the business of remarketing automobiles and plays a major role as a wholesale market for used vehicles in northwest Alabama. They are located on Highway 72 in the quiet little town of Athens. It is less than five miles from Interstate 65, which connects the four largest cities in Alabama: Mobile, Montgomery, Birmingham and Huntsville. The auction itself has been around for decades. Because of the ideal location, the business has remained steady over the years. However, a noticeable growth transformation began when the auction was purchased in 2004 by David Andrews and renamed Dealers Auto Auction. The Tuesday morning sale at DAA of Huntsville is a weekly ritual for hundreds of new and used dealers to meet and purchase quality used inventory, as well as use it as an outlet to sell their own aging inventory. The large metal building and acres of concrete hold tire marks and memories of thousands of vehicles that have been bought and sold at the auction everyone has grown to love. Under the industrious leadership of general manager Roger Fields, the thriving auto auction has maintained a steady growth pattern the last 14 years. Each quarterly spreadsheet shows an increase in dealer registration, vehicles sold and goals accomplished. Even though there may be larger auto auctions in the surrounding tri-state area offering more amenities and perks for their dealers, DAA of Huntsville has evolved into a gathering place bursting with pride and bustling with old friends and new faces

assembling for a (sometimes) friendly competition of bidding on cars, trucks and anything with wheels. New and used dealers from the surrounding area, as well as Tennessee and Mississippi, look forward to making the drive to 26125 Highway 72 every week to visit and check out the inventory. While the business continues to expand, Fields and his loyal team of employees make sure no one ever gets lost in the multiple lanes and fast paced minutes of slinging steel and swapping cash for sleds. “Each and every one of our customers is very important to us, whether they sell 1,000 units a year or make just one purchase,” said Fields. “This auction reminds me of the old TV sitcom Cheers. It’s a place ‘where everybody knows your name.’” A firm handshake along with a commitment to honesty and integrity still go a long way in today’s world, and this is the foundation Dealers Auto Auction of Huntsville was built upon. This auction isn’t all about the numbers. It has heart and soul for the community of auto dealers who unite each week under the bright tin roof. It is easy to see in just one visit this auction is built on traditional values that represent the interests of everyday people and small business owners, as well as the new dealerships in the surrounding area searching for a place to unload their trade-ins. The staff at DAA of Huntsville is another reason for the longevity of the business. These men and women walk through the doors every weekday morning with a commitment to provide excellent service to each and every customer. Most employees have been on the payroll 12-plus years, and have no plans on leaving until retirement. They have created a band of loyalty and friendship beneficial to everyone. “We’re not just co-workers, we are family,” said Gayla Elliott, who has been with DAA 14 years. Roger Fields has worked hard through the years to build this team of employees and the business now runs like a well-oiled machine. From the sales team to the lot crew to the office personnel, each staff member has a strong work ethic.

“But we still laugh and have fun,” Fields said. “It just makes the work load a little easier. I love my job, my co-workers, my boss. Every day I go to work, I feel like a kid getting to go the playground.” Besides being the backbone of DAA of Huntsville, Fields made the commitment four years ago to become an advocate for several charitable causes. His dedication to helping these organizations stems from his childhood. “Growing up, we never had the means or the money to help people out,” he said. “Now, as an adult, it is deeply rewarding for me to conduct these benefits.” Fields has been overjoyed that his team of employees and family of automobile dealers share his passion and have helped “move mountains,” one dollar at a time. “In addition to opening their wallets with money contributions, these men and women have donated automobiles and numerous other items for our charity auctions,” Fields said. “It has amazed me what a group of dealers will do on a Tuesday morning at 10 am.” On June 26, DAA of Huntsville celebrated their 14th anniversary. The Kentucky band Jericho Woods performed as part of the celebration. Almost 1,000 vehicles were auctioned off as well as another special fundraiser. Fields, along with DAA, dedicated their special day to raise money for the Make-A -Wish Foundation. Already in 2018, Dealers Auto Auction of Huntsville, with the help of their family of dealers, has raised $22,300 for the local YMCA and another $33,500 for the American Cancer Society (Relay for Life). In just 14 years, Dealers Auto Auction of Huntsville has made some amazing accomplishments with hard work and a commitment to excellence. They celebrated their success at the anniversary sale this year with the improvement of their property. They are paving and building to better serve their increasing family base of customers. And there is no doubt that with Roger Fields leading the way, this auto auction will keep growing and reaching their goals, and continue shouting that little four letter word we all love so much in the auction business: “SOLD!”

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August/September 2018

AIADA

BHPH PERSPECTIVE | By Scott Bates, CPA

SMART DEBT MANAGEMENT

Fill Gaps Between Inventory and Collections

In the life cycle of any auto dealership, there will be times when cash flow is tight. Buy Here-Pay Here dealers in particular face complexity in ensuring enough inventory is on hand to attract buyers – and offsetting that investment with a healthy flow through collections and debt management. This balance is never perfect. Dealers need strong banking and/or equity relationships that will extend credit to fill in the cash flow gaps. Debt Management is Proactive Even if their balance sheet is healthy, dealers on the shy side of $1 million in receivables will likely get a less favorable interest rate on credit than more established or larger dealers. This does not mean smaller dealers should accept rates of 10 to 15 percent. It pays to shop around and understand how the bank or private equity firm will consider these characteristics to justify their terms. By working with your CPA, you can provide the lender with financial statements and accounting that aligns with their expectations. As part of the terms of the loan, dealers may be required to provide reviewed or audited financial statements. Because of this additional expense, and also to get more favorable terms, it’s important for dealers to actively seek lower interest rates. It is perfectly acceptable to shop around. Contact competing banks as well as your existing lender and ask about new credit options. Talk to colleagues about the banks they are using. Request multiple offers. Strong accounting, tax and compliance practices help with this process. On the accounting side, owners need regular financial statement preparation to view trends and forecast cash flow – helping them prepare for lending conversations and extensions of credit at the right time each year. On the tax side, the number one tax planning technique for Buy Here-Pay Here dealers is the discount (or loss) on the sale of notes from the dealership to the RFC, which requires cash. Dealers may also qualify for opportunities such as bonus depreciation and deductions with regard to employee perks and compensation. Management may also consider a review of operational efficiencies or gaps in controls that can affect cash flow. Keep in mind every dealership is different when it comes to managing cash flow, so best practices must occur within your own dealership. As BHPH dealerships grow to portfolios of $4 million and above, more favorable financing opens up. But it’s not a guaranteed scenario. Dealers should weigh the benefits of obtaining more financing against the extra administrative costs of public accounting services.

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August/September 2018

Once you have the credit you need, there are various ways to reinvest in your business. Some dealers may decide to purchase their location – adding real estate holdings that support the extension of credit in the future. If the dealership also has a service department, cash flow can be set aside to cover repairs and maintenance on recently sold cars. Some dealers choose to cover repairs on cars shortly after purchase to support the customer’s ability and willingness to keep making monthly payments. For example, a repair may cost $800, but it leads to another six to 12 months of customer payments. Compensation is another area that cash flow can support. Attracting and keeping good back office personnel supports collections, which in turn supports the business. Dealers may also consider additional compensation for good salespeople. Let’s say you’ve done as much proactive management as you can. At certain points in the life of a dealership, you will still experience challenges. Some of these challenges can’t be handled alone. Whether you’re with a big bank and have secured a favorable interest rate or your dealership is still considered high risk for lenders, don’t ignore cash flow problems. Your CPA can help you formulate a plan to show numbers and communicate effectively with lenders in a way that is focused on solutions rather than the immediate problem. Lenders don’t like to call a loan for a shortterm issue, and there is usually room for negotiation on loan modifications that will support cash flow as well as repayment. However, year-over-year problems make lenders less willing to keep taking a risk on default. As soon as an issue comes to light, prepare your strategy to keep a strong lender relationship. Work through it like you and your lender are on the same side. It’s in the best interests of you and the lender to find a solution. Debt Management Supports Valuation It is also in the best interests of the dealership long-term to show a consistent history of loan financing, healthy cash flow and debt management. Owners want to show a return on investment and consistent profitability, tied to valuation of the business. There are different approaches to valuation. A key component, however, is determining equity value, which is the market value of the dealership assets minus the market value of its liabilities. Assets include such things as the

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dealership’s auto inventory and fixed assets, including real estate. They can include intangible assets such as the goodwill value of the dealership’s name and location, sales and service agreements, and also synergies such as multiple locations and strong management. Liabilities will include debt, any excess compensation, tax and rent issues, inventories and contingent liabilities such as environmental issues related to the storage and disposal of fuel, oil or batteries. The bottom line is that a well-performing portfolio, a good location and healthy foot traffic – combined with properly managed debt – will be attractive to a potential buyer. A dealership that is attractive to lenders is also attractive to buyers or outside investors, even with debt factored in. If your dealership struggles with debt management or cash flow – either intermittently or throughout the year – don’t let it hinder opportunities to grow. Speak to professionals to help you understand the proper structure of financial statements to support proactive lender conversations. Scott Bates is an assurance and business services partner for Cornwell Jackson. He supports the firm’s auto dealership practice. Contact Scott at scott.bates@cornwelljackson. com or 972-202-8000.

AIADA

August/September 2018