WEST COAST DEALER
THE OFFICIAL MAGAZINE OF INDEPENDENT AUTOMOBILE DEALERS ASSOCIATION OF CALIFORNIA APRIL/MAY 2018
BILL DOHRING IADAC LOBBYIST FOR 35 YEARS
DALLAS, TEXAS Permit No. 2079
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ASSOCIATION NEWS
INSIDE
| BY BRENNA STANSBERRY
PRESIDENT’S MESSAGE
06........................................Executive Director’s Message 08.............................................Dealer Profile: Greg Wilson 10............................................ NIADA Government Report 12.... Why it’s Time Your Store Invested in a CRM System 14.......................... 11Sight’s All-In-One Live Chat Solution 18..................... Does Your RFC Pass the IRS Validity Test?
WHAT’S NEW
CONVENTION ROOM BLOCK FILLING FAST RESERVE YOUR ROOM NOW
The NIADA room block at Rosen Shingle Creek is quickly filling up. Make sure you secure your spot at the special NIADA rate. Also, a preliminary agenda for the 2018 NIADA/NABD Convention and Expo is now online! Review the agenda and reserve your room today at www.niadaconvention.com.
ADVERTISERS INDEX
ADESA............................................................................. 15 AmTrust Financial.............................................................. 7 Automotive Finance Corporation...................................... 5 AutoZone......................................................................... 13 AVRS..............................................................................IBC Lobel Financial................................................................... 3 Manheim......................................................................... 11 NextGear Capital............................................................. 12 Protective.......................................................................... 9 STARS GPS........................................................Back Cover VAuto.............................................................................. IFC
OFFICE
For information on how to become a member please contact larry@IADAC.ORG or (916) 601-4976
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. West Coast Dealer 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 West Coast Dealer 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.
Helping You Stay Informed
One of the things sorely lacking in our industry is a pipeline for information. To be fully aware of changes in our industry dealers must subscribe to numerous publications. Having sources you can trust is key so no important items are overlooked as you sift through material. Short of subscribing to every print and online publication available, there is something you can do to stay abreast of industry changes. Subscribe to IADAC’s e-newsletter. Go to www.iadac.org and click the link “Sign Up Free Newsletter.” While you’re at it, like us on Facebook and follow us on Instagram also. We do the grunt work for you, scouring all those publications for the important items you really need. For example, DMV recently raised license fees. IADAC reported that in our newsletter. Sales of GAP to active duty military or their dependents changed with the new interpretation of the language within the Military Lending Act by the Department of Defense. IADAC reported that as well. As a subscriber, you’ll receive emails notifying you of breaking industry news in terms you can easily understand. This information is not just compliance related but can also put money in your pocket. Being prepared for changes such as license fee increases means you won’t come out of pocket to pay for your customers’ fees. That’s a savings you should really appreciate! Sincerely, Brenna Stansberry IADAC President
PAST PRESIDENTS LIST Gus Camacho, 2015-2017 Rocco DeLapa, 2013-2015 Rod Davis, 2010-2013 David Aahl, 2009-2010 Terry Degmetich, 2007-2009 Luis Estrada, 2006-2007, 2001-2002, 1989-1990 Roger Hanke, 2004-2006 Peanut Renfrow, 2003-2004, 1996-1997 Frank Gromak, 2002-2003 Mike Macaulay, 2000-2001 Bob Henry, 1998-2000 Ray Forest, 1997-1998 Rex Roden, 1995-1996 Doug Roberts, 1994-1995 Ed Dohnt, 1993-1994 Opie Hendricks, 1992-1993 Manny Padilla, 1991-1992 Greg Hodges, 1990-1991
Troy Graff • troy@niada.com EDITORS
Jacinda Timmerman • jacinda@niada.com Andy Friedlander • andy@niada.com MAGAZINE LAYOUT
CHAIRMAN OF THE BOARD
VICE PRESIDENT
Gus Camacho Camacho Auto Sales, Inc. Lancaster, CA
Guy Strohmeier Auto Center 87 Soda Bay Rd Lakeport, CA
PRESIDENT
VICE-PRESIDENT
SR. VICE PRESIDENT
VICE-PRESIDENT
Brenna Stansberry Park Marina Motors Redding, CA
Christopher Hanley • chris@niada.com PRINTING
Nieman Printing
Mehdi Chitgari Classic Chariots, Inc. Vista, CA
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Doug Alman, 1969-1970 Bob Scordino, 1968-1969 Lucky Skyrme, 1966-1968 Leonard Cravens, 1964-1966, 1960-1961 Walt Howey, 1962-1964 Travis Godbold, 1961-1962 Wendall Anderson, 1959-1960 Dick Rafferty, 1957-1959
Honorary Presidents Frank Murray Rick Gomez
EXECUTIVE COMMITTEE
STATE MAGAZINE MGR./SALES
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Jerry Cowgill, 1988-1989 Don Head, 1987-1988 John Braun, 1986-1987 Ray Glover, 1984-1986 Pat Matlach, 1983-1984 Larry Brasher, 1982-1983 Tom Field, 1981-1982 Jim McCabe, 1980-1981 Roy Wilhite, 1979-1980 Leonard Boyd, 1978-1979 Jordan Sugarman, 1977-1978 Bob Dutton, 1976-1977 Tom Kent, 1975-1976 Jim Mitchell, 1974-1975 Vic Snyder, 1973-1974 Frank Hammer, 1972-1973 Manuel Rogers, 1971-1972 John Hiatt, 1970-1971
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Brittany Hibdon Hibdon Auto Center Orland, CA Bruce LaVergne
TREASURER
Beto Beas Beas Auto Sales Stockton, CA
SECRETARY
Christina Hinkle ADESA Brasher’s, Rio Linda, CA
MAGAZINE CHAIRMAN
Mike Macaulay Car Systems carsystems40@yahoo.com
ASSOCIATION NEWS | BY LARRY LASKOWSKI
EXECUTIVE DIRECTOR’S MESSAGE Be Proactive The auto industry is in the middle of a revolution. As a dealer you may be part of it or a bystander. Consumer needs are changing and technology is providing solutions. The question is, are you aware this is going on? We witnessed the explosion of the Internet and the resulting global impact. Now, we take the Internet for granted and most of us probably couldn’t live without it. How much impact will technology and changing consumer demands have on the way you sell cars? Numerous sources cite rising demand from consumers for a better way to buy a car. Many consumers rate their in-dealership experience akin to a visit to the dentist. They want faster deals, online financing options and some even want the vehicle delivered to their driveway without a trip to your dealership. Fortunately for independent dealers, used cars can be as different as night and day. Comparing similar autos on paper often proves futile because condition is of critical importance and cannot be factored accurately. For those of you content to “follow the
leader” with regard to your business practices and policies, I wish you luck. For others who would like to take a proactive approach, I urge you to help yourself by becoming an IADAC member if you are not already. We provide reviews of fresh ideas and our biannual vendor trade shows bring you the industry’s top rated vendors at major auto auctions. IADAC membership provides a consistent flow of information and access to industry updates, which creates awareness to this ever-changing industry. Successful dealers are always looking for a competitive edge to attract
customers and improve the bottom line. Will this be the year you incorporate CRM into your business model? Will you step up your game with a makeover of your website? How about having your sales staff follow up with every customer with a brief text? Those things you do that set you apart from your competition can make a customer want to do business with you. Just because you’re not hearing complaints from potential customers doesn’t mean they are not rating you.
INDUSTRY SPOTLIGHT |
MARK GLOVER Executive Vice President of Southern Hills Acceptance
Many California dealers recognize Mark Glover as an upstanding source for financing auto sales contracts. He has been approving their finance deals for two decades. However, many don’t know Mark’s history in the auto industry goes back to childhood, starting with his father’s dealership in Stockton, California. The late Ray Glover, Mark’s father, founded G & G Motors, where Mark and his brother Mike got their first exposure to the auto industry. Mark and Mike became the youngest licensed auto salesmen in California at the ages of 12 and 10 years old! Mark’s time spent with G & G Motors provided him a great understanding of the industry and set up his departure from auto sales to the auto finance sector. As an adult, Mark worked with County Financial and California Auto Finance for 17 years. Next, he served two years with the Premier Auto Credit team. Most recently, Dean Morrow at Southern Hills Acceptance offered Mark a percentage partnership in the company. Mark said it has been a “blessing for me after all these years in this industry.” Mark knew it was a great fit as the company’s motto parallels his own
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Mark and Mary Glover
Mark Glover, Executive Vice President of Southern Hills Acceptance
values: “We treat you like family.” Mark handles day-to-day operations in California and Nevada while Dean takes care of Arizona and New Mexico. Together they can customize a program to fit each dealer’s needs. As a dealer and a vendor, Mark has always maintained IADAC membership. Growing up, his father taught him the compliance information IADAC provides is critical to
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keeping liability low for today’s dealers. Ray Glover served terms as president and national vice president, and helped grow the association to record numbers. He received the prestigious Eagle Award for membership growth in 1983 and 1985. Continuing the family tradition, Mark has served on several IADAC committees, including the executive committee as vice president and senior vice president, and currently on the membership committee and as a delegate for the association. Like his father, Mark earned the prestigious Eagle Award in the 20112012 year. Mark’s wife Mary excelled as chairman of the Auxiliary Auction for IADAC scholarships. She was honored with the President’s Award from Rod Davis in the 2012-2013 year for her achievements, and set the standard for current and future Auxiliary Auction chairpersons. Mark encourages all auto industry associates to join the IADAC family to gain the invaluable wisdom and support the association provides. If you’re interested in working with Southern Hills Acceptance or becoming an IADAC member, reach out to Mark at MGlover@southernhillsacceptance.com or (209) 712-1886 to tap into his lifetime of experience and wealth of knowledge.
DEALER PROFILE |
GREG WILSON
Luxury Motorcars in Sacramento Greg Wilson spent many years employed by new car dealers. He worked as a used car manager for various dealerships in his career but found he was not fulfilled. In 2015 Greg satisfied a yearning to open his own dealership. His vision to provide high-end specialty vehicles to discriminating customers was in his head and just couldn’t be suppressed. Greg’s special appreciation for precision-crafted performance vehicles led to a venture that embodies the spirit of entrepreneurism combined with his passion for some of the finest luxury vehicles in the world. When the opportunity became a real possibility, Greg exited a secure position in a new car dealership and purchased Luxury Motorcars in Sacramento. But it wasn’t quite that easy. A case of “cold feet” hit Greg and he consulted his father, a longtime dealer who established Great American Auto Sales in Stockton. His father asked what his reservations were and Greg confessed he feared failure. His father replied if that was his only concern he should move forward. And so it happened. Luxury Motorcars existed primarily as a specialty car consignment sales operation. Greg purchased the business and changed the model to divert from consignment sales to actually owning the inventory so the best selection of Ferraris and other exotics would
be made available. Yes, Wilson has some stunning exotics but many enthusiasts salivate over the American-made Fords Luxury Motorcars distributes exclusively on the West Coast. Those Fords, more specifically brand new Shelby Mustang recreations, have stirred real excitement with diehard muscle car fanatics and the late Carroll Shelby himself, who approved a licensing agreement with Classic Recreations.
Built from the ground up at the factory in Oklahoma, these low production vehicles are new in every aspect with many modern features that blend nostalgia and high tech to create an incomparable driving machine. Cars like this have created a museum-like atmosphere at Luxury Motorcars for the steady flow of customers who appreciate specialty machines. Check out www.luxmotorcars.com to view the incredible selection of inventory. Best wishes to Greg for continued success!
ASSOCIATION NEWS | BY MIKE MACAULAY – WEST COAST DEALER EDITOR/CHAIR
EDITORIAL COMMENT In This Issue Cover We decided to honor Mr. Bill Dohring by featuring him on the cover for this issue. Dohring is IADAC’s lobbyist and unsung hero. He works behind the scenes to keep us aware of the many legislative pitfalls that try to undermine our industry. Most toxic legislative bills are cut off by Bill’s intensive work long before they become front page news. Not all Bill’s efforts are defensive. Through the years, he has been responsible for so many victories to improve our industry. The two-year smog, charging a doc fee, and charging for the smog and certificate are just a few examples of Mr. Dohring’s fine work. Our applause and thanks go out to Billy for his tireless work and dedication to IADAC. New Column Please view the first “New Products” column in this issue. We want to showcase new, useful, and interesting products relating to our industry. Please contact me
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at carsystems40@yahoo.com with ideas for this column. Mentor Program This program is now available for any member dealer in need of advice and/or guidance with industry issues. Please contact me directly at carsystems40@yahoo.com to enroll in the program. This program is of no
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cost to members as we have seasoned dealers volunteering to help. Story Ideas We are always looking for stories concerning independent dealers interacting positively with their community. Forward the information and we will publish the good deeds.
WASHINGTON UPDATE | BY SHAUN PETERSEN
NIADA GOVERNMENT UPDATE
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 Department of Labor: DOL has proposed a new rule that would permit small businesses and selfemployed individuals to join together in an association health plan. The proposed rule, issued in response to an executive order by President Trump, would allow those associations to purchase cheaper health insurance that’s not subject to some of the current limitations in federal law. The rule would expand the types of groups that can form an AHP and allow for membership across state lines. It would also allow self-employed individuals to take part in a large-group AHP. The proposed rule has the support of many in Congress, including Sen. Lamar Alexander (R-Tenn.), chairman of the Senate Health Committee. “If made final, this rule should help up to 11 million hard-working Americans who don’t have access to employersponsored coverage,” he said, “and in addition, provide new, more affordable options to Americans in the individual market who are getting hammered by skyrocketing premiums.” NIADA submitted comments supporting the proposal with some changes designed to provide small businesses greater access to less expensive health care. CFPB: The retooling of the Consumer Financial Protection Bureau continues under acting director Mick Mulvaney. The CFPB has now issued seven requests
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for information, seeking public comment on enforcement, supervision, external engagements, reporting on consumer complaints and rulemaking in addition to the original two – civil investigative demands and administrative adjudication. The requests are aimed at assessing those processes and identifying changes that need to be made. The bureau also announced it has formulated a five-year strategic plan that includes three primary goals: • Ensure all consumers have access to markets for consumer financial products and services. • Implement and enforce the law consistently to make sure markets for consumer financial products and services are fair, transparent and competitive. • Foster operational excellence through efficient and effective processes, governance and security of resources and information. Mulvaney said the CFPB will focus on equally protecting the legal rights of all – including the businesses regulated by the bureau – and will use its rulemaking authority rather than “regulation by enforcement.” “We have committed to fulfill the bureau’s statutory responsibilities, but go no further,” Mulvaney said, adding that doing so will help guard against “the misuse of our unparalleled powers.”
April/May 2018
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GRASS ROOTS RAGA meeting: Republican state attorneys general from across the country gathered in Washington, D.C. in February for meetings of the Republican Attorneys General Association. NIADA had a front row seat as a panel of AGs Utah, South Carolina, Nebraska and Arizona discussed their office’s role in consumer protection – particularly in light of the recent changes at the CFPB. They engaged a representative of the White House to discuss how the President’s regulatory reform initiatives are impacting the states in the private and public sectors. Republican candidates for attorney general from several states were also present, giving NIADA the opportunity to discuss the virtues of our industry and the good independent dealers do in their communities. Of course, the campaigning was not limited to potential future AGs. Many of the current AGs attending the meeting are running for higher offices, including governor and the U.S. Senate. The relationship NIADA has developed with them as attorneys general can certainly benefit the industry as they move on to new positions. Colorado: Over the past several legislative sessions, the Colorado IADA has been working with the state legislature and Gov. John Hickenlooper to strengthen and revamp
laws aimed at preventing curbstoning, including increasing penalties and permitting additional law enforcement authorities to enforce the statute. This session, CIADA won the unanimous support of the legislature for an amendment allowing the DMV to share penalty revenues with the agency that initiates the enforcement proceedings. The governor is expected to sign that bill. LEGISLATIVE CFPB funding: The President’s proposed budget for fiscal year 2019 calls for reduced funding for the CFPB over the next two years as the administration seeks to restrict the bureau’s enforcement authority to prevent burdening the financial industry and consumer choice. The budget would cap agency’s budget at $485 million for FY 2019 and $610 million for 2020. For comparison, the CFPB’s FY 2018 budget request under Obama-appointed director Richard Cordray was $630.4 million. The White House said the two-year “restructuring period” will create an “efficient transition” as the CFPB imposes “financial discipline” and reduces “wasteful spending.” The administration is hoping the bureau undergoes legislative overhaul that would bring its budget under Congressional oversight. Currently, the CFPB is funded from the Federal Reserve. Interim CFPB director Mick Mulvaney requested a $0 budget for the first quarter of 2018, saying the CFPB will draw from
reserves. Recall issues: The Trump Administration released its plan for a massive infrastructure bill Feb. 12, and Congress is expected to take up the issue soon. The infrastructure bill is likely to be the platform for Sen. Richard Blumenthal to try once again to introduce an amendment that would prohibit the sale or lease of a motor vehicle subject to a recall until the recall defect has been remedied. The Connecticut Democrat has attempted unsuccessfully to attach the so-called Blumenthal Amendment to a number of bills over the past three years. NIADA has worked with Congressional leaders to help block the amendment in the past and will continue to monitor any action on the recall issue. Shaun Petersen is NIADA’s senior vice president of legal and government affairs.
MANAGEMENT MATTERS | BY ZACH KLEMPF
WHY IT’S TIME YOUR STORE INVESTED IN A CRM SYSTEM Help Your Dealership Succeed Over the past several years I have had the opportunity to travel across the United States as well as Canada speaking with independent and BHPH dealerships of all sizes. The most evident observation I have had is most of these dealerships operate without a CRM system. In the franchise dealer world, customer relationship management is a de facto mandatory system critical for managing a dealership’s sales pipeline. Typically, used car dealerships believe they are too small or CRM is too expensive for their store. In fact, these dealerships need CRM/ILM technology the most. Historically, most industry-focused CRMs were built for new car stores and large independents operations. The complexities of these tools were barriers to entry for independents. In recent years, that has dramatically changed with more costefficient options entering the marketplace. When I talk with an independent dealer manager I often ask the following three questions: • What is your customer acquisition cost across your different marketing channels? • What lead provider is performing the best and what is its close rate? • What is your cost per sale across the different lead providers you work with? The majority of the time the manager cannot give a concrete answer to these questions, which points to a deficiency in their business. Many used car dealerships spend the majority of their marketing budget on Internet lead providers like TrueCar, Car Gurus, and Autotrader. However, they don’t invest in tracking these data sources, which could save thousands of dollars per month as well as provide key performance indicators for their business. With fierce competition from franchise dealer pre-owned departments and automotive e-commerce players like Carvana, used car dealers need to be more data driven in their day-to-day operations. A decrease in front/back margin means all of the “fat” of the business must be trimmed, and making an investment into tools that provide analytics is key. If your dealership is making the marketing investment into multiple lead providers there is a real need to track how many deals close rather than how many overall leads you are receiving. Often I hear a dealer say they get the most leads from “X” lead provider but when further reviewing the data many of those
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leads are not closing as high and it may not be the best overall performing lead provider. When looking at the performance of a lead provider it cannot solely be based on the number of leads, which is a vanity metric. It should be attributed to deal conversion, and unless there is a CRM or other system in place this is very difficult for an independent dealership to track. One of the most fundamental components of effectively implementing any CRM, especially in a smaller independent store, is the “garbage in, garbage out” philosophy. Paradoxically, this tends to be a cause of churn in independent dealerships fully leveraging the capabilities of a CRM. Let me run through the three most common CRM implementation and usage issues I have observed with independent dealerships’ adoption of a CRM program. Onboard training: This is one of the most crucial components of the CRM setup process. Often dealerships do not take this call as seriously as they should. During the onboard call everyone who plans on using the CRM should be present, attentive, and listening carefully. This is where the nuances of the system will be explained and important features like lead reassignment rules will be set up. Missing out on this call or not paying attention will hinder a dealership from reaching the true potential of the CRM. Hold your team accountable: Often dealerships will get set up on a CRM, excited about the “idea” of implementing a CRM, and let the system primarily be used only by the salespeople. Management should also be involved in using the platform and oversee whether salespeople are completing follow ups and are on task. While a CRM adds some automation to this, it is up to management to enforce usage. Always greener on the other side: Some independent dealers make a decision on an impulse and terminate a vendor on a whim. It’s important to realize each CRM system will have its own quirks. Constantly changing vendors “to find the right fit” can lose momentum and unnecessarily take employee bandwidth with setup. Be sure to vet and research your new CRM provider before signing up. Then allow 3-6 months for your store to adapt to the new system. Implementing a CRM is sometimes a painful process, especially if technology has not been previously embraced in the dealership. Nonetheless it’s important to understand that being more data driven and putting the proper systems in place will ultimately help your dealership succeed in today’s competitive marketplace.
Zach Klempf is founder and CEO of Selly Automotive. He can be reached at zach@a1softwaregroup.com.
AUCTION NEWS | BY AUTO REMARKETING STAFF
UNITED AUTO CREDIT HONORS 5 AUCTIONS North Bay Auto Auction Wins Regional Award
United Auto Credit recently honored its 2017 Auction of the Year, along with handing out four other regional winners. Receiving the award as the consignor’s Auction of the Year was Dealers Auto Auction of the Southwest. “We have been doing business with DAASW for several years, and they have consistently done a great job for us. We are so proud of them for taking the top honor,” United Auto Credit director of remarketing Scott Mousaw said. “Each year, we aim to honor the auctions with the best retention, highest conversion rate and operational efficiencies,” said Mousaw, who recently collected honors as 2017 National Remarketer of the Year. DAASW is located in Phoenix, operating six auction lanes on more than 20 acres. The operation offers more than 600 vehicles weekly
AUCTION NEWS | BY AUTO REMARKETING STAFF
for commercial consignors, franchise and independent dealers. “We have an amazing team here at DAASW, and we continue to strive to provide the best service to our customers,” DAASW general manager Jim Mumford said. “We are very proud to have this honor and look forward to 2018.” United Auto Credit utilizes approximately 32 auction locations throughout the U.S. United Auto Credit also recognized the following auctions as regional winners: • Lone Star Auto Auction • Carolina Auto Auction • North Bay Auto Auction • Missouri Auto Auction “We work with the best auctions in the markets where our vehicles are located, and based on the list of winners, we are happy to be working with independent auctions,” Mousaw said.
NOMINATIONS OPEN FOR COMMUNITY SERVICE AWARD Deadline for Nominations Is May 1
Nominations are open for the 2018 NIADA & Cox Automotive Community Service Award presented by Manheim, the used car industry’s most prestigious award honoring community service by independent dealers. The deadline for nominations is May 1. Nominations of NIADA member dealerships can be submitted at www.coxautoinc.com/communityservice-award. The national award recognizes a dealership that goes above and beyond to give back to its community through its donations of time, money and leadership to charitable efforts, and works to find innovative and meaningful ways to collaborate with community partners to help further its mission. The award includes a $10,000 donation to the charity of the winning dealership’s choice from Manheim. The winner will be announced during the 2018 NIADA Convention and Expo, June 18-21 at the Rosen Shingle Creek Resort in Orlando, Fla. Last year the award was presented to
Matthews Motors in Clayton, N.C., owned by Steve and Dale Matthews, with Clayton Area Ministries receiving the $10,000 donation. Cox Automotive’s Janet Barnard said Matthews Motors “embodies the principles of helping shape a better world through individual actions and demonstrating how every person, every organization, every day can make a difference when it comes to serving your community.” If you know of a dealership that makes an extra effort in community service and charitable work, let us know. Nominations are accepted from individuals, dealerships, community organizations, agencies or vendors. For more information or to nominate a dealer, visit www.coxautoinc.com/ community-service-award or www.niada.com.
MARKET WATCH | BY SUBPRIME AUTO FINANCE NEWS STAFF
BLACK BOOK OFFERS SUBPRIME SUCCESS STRATEGIES White Paper Provides New Analysis
While some auto finance companies are backing off their originations in the subprime space, Black Book is arming managers and underwriting departments with new analysis for institutions still looking to add paper developing in lower credit tiers. Black Book recently released a new educational white paper focused on subprime and deep subprime auto finance companies. The paper is titled, “Subprime & Deep Subprime: How to Remain Competitive and Profitable Despite Growing Risk.” How Subprime and Deep Subprime Spaces Have Grown Following the recession, and as the economy has improved, Black Book recognized an increasing number of finance companies began to offer subprime and deep subprime contracts, and more independent financial institutions saw their way into the market as well.
At the same time, editors noticed larger banks became full spectrum financing providers that opened up space for subprime paper opportunities. While subprime and deep subprime originations have remained in check, Black Book insisted institutions have had to grapple with ways to remain competitive and profitable in spite of any growing risks. As origination volumes increased, Black Book recapped that financial institutions began relaxing their underwriting criteria for credit and collateral to remain highly competitive for subprime and deep subprime, resulting in higher loan-to-value ratios using inflated values up front, placing even more importance on building the contract off the most accurate collateral value possible. As these LTVs rose, Black Book pointed out banks took on more risk, exposing themselves to more negative equity in their portfolio combined with longer loan terms. Various Scenarios Faced By Subprime and Deep Subprime Finance Companies The new Black Book white paper offers specific examples showing finance companies where and how collateral data can pinpoint profitable opportunities in subprime and deep subprime, while minimizing exposure to risk. These data examples include high-term scenarios even with decent credit profiles;
higher LTV scenarios; and higher LTV, higher term, higher APR and higher depreciation scenarios. When a finance company is looking to evaluate the amount of risk tolerance in a longterm loan, Black Book emphasized there are four elements to consider: • How much initial loan-to-value they want to establish. • The rate of annual depreciation of the collateral. • Credit profile of customer, whether subprime or prime. • Determine if the risk-adjusted return on capital is sufficient. “Subprime and deep subprime loans have remained a profitable opportunity for lenders, particularly following the recession since the economy is stable, yet there’s still a lack of understanding of layered risks associated with these credit profiles,” said Black Book executive vice president of operations Anil Goyal. “This white paper takes an in-depth look at different scenarios lenders face in trying to grow their portfolios profitably to remain competitive while quantifying their associated risks.” To view Black Book’s white paper “Subprime & Deep Subprime: How to Remain Competitive and Profitable Despite Growing Risk,” go to www.blackbook.com/subprime-and-deepsubprime-white-paper.
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NEW PRODUCTS
| BY MIKE MACAULAY – WEST COAST DEALER EDITOR/CHAIR
11 SIGHT’S ALL-IN-ONE LIVE CHAT SOLUTION Real Time Customer Communication
West Coast Dealer is starting this exciting new column. There are many new products relating to our industry and we would like to highlight a few in each issue. The following article is from new company 11Sight that offers “real time” customer communication through your website. These folks presented their product at our convention and all attendees were impressed. 11Sight’s All-In-One Live Chat Solution for Dealerships According to Autotrader’s 2016 Car Buyer Journey report, car buyers spend 59 percent of their time researching online. For most, however, the first point of contact with a dealership is through an in-person walk-in. There’s a lot that can go wrong between buyers landing on your website and actually visiting your dealership. What if you could start establishing a relationship earlier in the process – from the moment they enter your website, visit your social DMV NEWS
media page, or see your brochure or flyer – instead of letting them move on to a competitor? We created 11Sight for this very purpose. 11Sight’s video chat solution lets you connect with online shoppers face to face with just the click of a button. We chose to start with video chat, because online shoppers want to see their salesperson and establish trust before making such a large purchase. Video chat also allows car buyers to check out the condition of a vehicle and see it up close before making the drive down to the dealership to hammer out the details. Alfredo from Hilltop Motor Group said, “A lot of our customers are coming to our dealership from far away. With our great new service, 11Sight, we are able to establish a face to face video connection with them easily!” But we didn’t stop at just video chat. Dealerships told us they want an all-in-one chat solution – including video chat, text chat, and audio calls. So that’s exactly what we provided in our next major update. Today, 11Sight is a comprehensive chat solution and continues to evolve according to our customers’ needs. What makes 11Sight stand out from all the other live chat solutions? One great advantage of 11Sight is how simple and easy it is to use – both for car dealers and car buyers. Car buyers don’t need to
send you a friend invite or download any software to connect with you. All calls take place right in the customer’s web browser, with just the click of a button. You can answer from any smartphone or tablet using the 11Sight app or on a computer using the Chrome web browser. Calls can even be set to ring on multiple devices, so that whichever salesperson is free at the time can answer. It’s that easy! 11Sight also has tons of features to help better facilitate the conversation between you and the customer. These include HD video, an on-screen pointer, the option to take photos (not just screenshots) and record video, call analytics, voicemail, and more. We recently added an enterprise management feature, which allows an administrator to add/remove users as salespeople come and go. This administrator can also monitor the activities of individual users. Autrotrader’s report also said 46 percent of car buyers use multiple devices while shopping online. That’s why we made sure 11Sight works seamlessly across devices and platforms. In fact, along with your website, you can also place your 11Sight call button in your mobile app, on your social media pages, and inside emails. No programming necessary! You can even place it in print materials like brochures, flyers, and banners. Imagine the possibilities!
| BY JAIME GARZA, DMV
GET CLEARED FOR TAKEOFF REAL ID Driver License or ID Card If you want to continue to use your driver license or identification card at airport checkpoints or to enter military bases and secure federal facilities, you may want to consider applying for a REAL ID driver license or ID card. The federal government will require a REAL ID card beginning October 1, 2020. The California Department of Motor Vehicles is now accepting applications. REAL ID cards are being issued because the 9/11 Commission recommended in 2005 the federal government set uniform standards for state-issued identification cards. If you are interested in applying for a REAL ID, you are required to visit a DMV field office and present specific documentation that includes proof of identity, California residency, your Social Security number and, if applicable, a name change document. An interactive REAL ID document checklist can be found at REALID.dmv.ca.gov. The DMV encourages you to wait until your driver license or ID card is up for renewal, if possible, and recommends you make an appointment. The federal compliant REAL ID card
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is optional. You can choose to keep your current driver license or ID card and renew online or by mail – no additional documentation or a DMV field office visit is needed. Remember these noncompliant cards will not be accepted as identification to board domestic flights, enter military bases or secure federal facilities starting October 1, 2020. You will need to show a federally approved document, such as a valid passport, passport card or military ID when the new mandate goes into effect. Check the Transpiration Security Administration (TSA) website at www.tsa.gov for a complete list of approved documentation. Distinguishing the difference between the newly designed federal compliant REAL ID and federal non-compliant
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cards is simple. A federal compliant REAL ID driver license and ID card issued in California will display a Grizzly bear and star in the upper right hand corner, while federal non-compliant cards will display the phrase Federal Limits Apply. Either card still allows you to drive, apply for or receive federal benefits, enter federal facilities like post offices, visit hospitals and receive life-saving services. Again, it is your choice. It is important to remember that if you do not apply in person for a REAL ID driver license or ID card, you will receive the federal non-compliant card when you renew or apply for a driver license or ID card. Get all the facts about REAL ID at REALID.dmv.ca.gov.
AUCTION NEWS |
DEAN FUMASI RECEIVES 2017 AUCTIONEER OF THE YEAR AWARD Veteran Auctioneer Says He Hasn’t “Worked” a Day in 31 Years
Dean Fumasi, recipient of the 2017 Bernie Hart Memorial Auctioneer of the Year Award, says he hasn’t “worked” a day in the past 31 years. Fumasi, who has served as an auctioneer for the Brasher’s Auto Auctions in California and Oregon for the past three decades, said he never considers being an auctioneer “work.” “I really love what I’m doing,” said Fumasi, who recently celebrated his 60th birthday. “I have always told my kids, if you can find something you love to do, it’s never work. There’s nothing better than having a job you love and being able to be paid well for it.” Fumasi was presented with the Bernie Hart Memorial Auctioneer of the Year Award during the National Auto Auction Association/National Remarketing Conference, held November 15–17 in La Quinta, Calif. The award, which honors “the most visible person in the auction industry,” was named after long-time NAAA executive director Bernie Hart of Lincoln, Neb., who served the association for more than 30 years before retiring in 1988. Fumasi grew up on a farm growing rice and corn in Williams, Calif., but his father died when he was just 15. His family lost the farm, and he went to work for Gary Jewett, one of his father’s best friends. Jewett Farms grew rice, corn, wheat, alfalfa and hay and also raised livestock. “I was a farming cowboy, I never knew if I would be on a horse or a tractor,” Fumasi said. “We raised cattle and we shipped them to auction, so I was familiar with auctioneering from a distance.” It wasn’t until lifelong friend Jim Pennington, whose father owned Williams Livestock Yard, went to and returned from auction school, that Fumasi’s interest in auctioneering was piqued. “Jim told me all about it,” Fumasi said. “I was scared to death of public speaking, and I was always shy in large groups. I thought this might help me be more comfortable around people.” Fumasi attended the Billings Western College of Auctioneering in Billings, Mont., in 1982 and then began working cattle auctions in California full time, traveling with Jim and their mentor Gary Pennington. “One day after a cattle auction, I saw a van with a Brasher’s Auction sign on the side, so I followed it to the auction,” he said. At that point, Fumasi said, he had heard about auto auctions, but had never seen one. “I walked in, and asked to speak with the owner. Larry Brasher came out, and I
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(L to R) 2017 NAAA President Jerry Hinton presents Auctioneer of the Year Award to Dean Fumasi.
introduced myself and asked if he had any openings. Turned out Larry had a spot open, as his manager Rex Roden had just returned from auction school and another auctioneer had taken an extended leave.” Because of his lack of auto auction experience, Brasher said he couldn’t give him full pay. “His offer was three times more than I would make at the next cattle auction, so I quickly accepted,” Fumasi said with a laugh. “So, despite me wearing a cowboy hat and smelling like corral number nine, Larry hired me.” Fumasi began with Brasher’s Auto Auction in Sacramento, Calif., in 1986 and continued working at three cattle auctions. In 1996 he accepted auctioneer positions with Brasher’s Northwest Auto Auction in Eugene, Ore., and Cascade Auto Auction in Troutdale, Ore., near Portland. ADESA, the wholesale auction business unit of KAR Auction Services, Inc., acquired the eight-auction Brasher’s Group in 2016. Fumasi remains a contract employee of ADESA. “The Brasher family has been very good to me,” he said. “Larry, his son John, and the managers really appreciate you as a person. I’ve learned a lot being around them. Not just about the auction business and cars, but about
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life as well.” Fumasi’s love of farming has always been strong. While in high school, he was active in the Future Farmers of America, and while attending Chico State University in 1976, he received the FFA’s highest degree—American Farmer. Fumasi also always loved to hunt and shoot and has been involved in shooting sports. He shot a qualifying score at the United States Shooting Championships in 1986, and was invited to try out for the 1988 Olympic Team. “It was going to be a miracle to do as I was working five days a week, and in December of 1987 I married my wife, Michele,” he said. “I shot every day that I could. After work, I would come home and shoot for at least an hour. Sometimes up to three hours. My chance came, I did the best that I could but came up short. It’s hard to compete with those in the military and those living at the Olympic Training Center in Colorado Springs.” His love of shooting carried into competitive shooting in sporting clays. He and Michele traveled all over the United States competing in weekend tournaments. He won many local events, state event championships,
zone and U.S. Open Championships and two national championships. Fumasi said he loves the action and excitement at the auctions, and has seen the industry go through many changes in the past three decades. From paperwork to computers and then to the Internet. “I think the biggest change is the type of person or the mindset of the people bidding on the cars,” he said. “It used to be that there were car guys who would look at a car not for what it was, but for what it could be. They would look at a car, and you could see them determining what it would cost to detail, repair and market the vehicle. They loved the metal. Today, the vehicle is more a commodity. There doesn’t seem to be that true love of the automobile that there once was.” He said that isn’t a negative, it’s just an observation. Rick Lamb, owner of Rick’s Auto Sales in Sacramento, has had Fumasi auction his inventory at Brasher’s Sacramento for the past 25 years. “What Rick loves the most about the business is when a dealer comes up to him a couple weeks after buying a car from him and tells him how much money they made off the vehicle,” Fumasi said. “Some guys might feel that they didn’t get enough for the vehicle, but Rick feels ‘If my customers don’t make money off of the car I sell them, they won’t come back.’ He represents the cars accurately, treats people fairly and has the best warranty I’ve seen. That’s what keeps people coming back and prices high.” Jerry Hinton, NAAA’s 2017 president and general manager of ADESA Portland, said Fumasi has worked for him for more than 20 years. “He’s a great auctioneer,” Hinton said. “It’s in his blood. It doesn’t matter if it’s cattle or cars. He’s always worked our premier lanes, fleet-lease, institutional sales.” Hinton nominated Fumasi for the Bernie Hart award. “He’s excellent at intuitively reading the dealers,” Hinton said. “He pushes the market and can get as much money as anyone, anywhere in the country. He’s very deserving of this award. Dean has the best reputation for honesty, integrity and fairness.” Fumasi said he was humbled to earn the Bernie Hart award and wished to thank all the dealers and co-workers at the auctions that make his job something he loves to do. “There’s so many people I owe a thank you to for this award,” he said. “They are the best.” “I will never forget what my father told me as a youngster—when it comes to work, if you want to get paid more, do more than you get paid for.” This article originally appeared in NAAA’s On The Block.
AUCTION NEWS |
LARRY BRASHER HONORED AS A PIONEER OF THE INDUSTRY
During his several decades in the wholesale vehicle remarketing industry, Larry F. Brasher oversaw many advancements in his family auction business. These included developing the Auction Viewmaster System in 1995, which expanded video sales. The system allowed all vehicles—regardless of size or location—to go on the block, including boats and RVs. It displayed still video images of the vehicles and sale data on monitors throughout the facility. Another innovation introduced a year later was a new double-block configuration in the auction arena to run two groups of cars in a single lane, allowing them to be seen by a larger number of buyers. The speed of the sale was regulated with traffic lights to maintain an optimum rate. He was also one of the founders in 1987 of the ServNet Auction Group, which created a network of independent auto auctions strategically located across the country, working together to provide customers with the latest in services and technologies. For those enrichments to vehicle remarketing, along with other contributions to the profession, the National Auto Auction Association presented the former owner and chief executive officer of West Coast Auto Auctions with the Industry Pioneer Award at the association’s 69th annual convention last November in La Quinta, California. This Industry Pioneer Award, given to those who have worked in the wholesale motor vehicle industry and/or NAAA, recognizes an individual who has innovated or enhanced methods of improving services to remarketers through NAAA member auctions, championed NAAA member auctions as providing services for motor vehicle remarketers unavailable from any other source, and consistently followed the standards of the NAAA Code of Ethics. The NAAA represents more than 340 auction members and 100 associate members in North America. Brasher grew up amidst the family business, Salt Lake Auto Auction, which his father founded in their hometown in 1949. He began working there while still in school, earning a
business management degree from the University of Utah in 1972. Following graduation from the university’s law school in 1975, he decided to join his father and older brother, Jay, full time. In 1978 they acquired the Sacramento Auto Auction, which had been in operation since 1956, and Brasher with his wife Anne relocated to California. Nine years later he became sole owner of that auction, and Jay became the sole owner of the Salt Lake Auto Auction. Subsequently, the family bought auto auctions in Oregon, Nevada, and Idaho, forming West Coast Auto Auctions. Brasher served as CEO of the parent organization until 2003, and then sat on its board of directors until 2005, when he sold his interest to his sons. In April 2016, ADESA, a unit of KAR Auction Services, completed acquisition of the eight auctions owned by the Brasher family. Brasher has the distinction of being the first son of a former NAAA president and Hall of Fame member to hold the same office and be included in that illustrious group. Elected president in 1989 and inducted into the Hall of Fame in 2005, Larry followed in the footsteps of his father Frank, who served in the top executive post from 1973 to 1974 and entered the Hall of Fame in 1987. The younger Brasher served as NAAA secretary from 1994 to 1996 and is a former president of the Western Auto Auction Association. In addition to his contributions to NAAA and the industry, Brasher gives his time to volunteer work, including as a missionary for his church. Beginning in the fourth grade and continuing throughout his school years, he studied Russian, serving in the 142nd Military Intelligence Linguist Company of the Utah National Guard while in college. Brasher put those language skills to good use when he and his wife performed missions together in Kiev, Ukraine, and Vladivostok, Russia, providing humanitarian aid and community service. They recently returned to their Lincoln, California, home after spending 18 months on a missionary trip to Finland. This article originally appeared in NAAA’s On The Block.
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F&I MATTERS
| BY SCOTT BATES & MIKE RIZKAL
DOES YOUR RFC PASS THE IRS VALIDITY TEST? Don’t Let Your RFC Become a Liability
WE FIND MANY RFCS AND DE ALERS
DO NO T REGUL A RLY RE V IE W T HEIR OP ER AT ING AGREEMEN T S OR OP ER AT IONS T O COMP LY W I T H VA L IDI T Y FAC T ORS FOR T HE RFC A ND I T S T R A NSAC T IONS.
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Related finance companies were not designed to be a tax-planning vehicle to reduce or defer auto dealership income. If the IRS validity test discovers noncompliance that cannot be explained in the RFC’s or dealership’s documentation, additional taxes and penalties can be severe. We find many RFCs and dealers do not regularly review their operating agreements or operations to comply with validity factors for the RFC and its transactions. The process is understandably time consuming and complex. You can rest assured, however, that if the RFC receives an IRS query, a dealership query often follows. RFCs are usually set up as S Corporations. The RFC acts as the lender in the dealer’s financing of used vehicles. The notes are sold to the RFC at a discount due to the higher risk the RFC incurs in the transaction. The RFC accrues the income as it is earned from the car buyer’s weekly or bi-weekly payments. The dealership collects cash up front then books a current and deducted loss for the difference between the full contract and the discounted contract. According to the IRS, a valid RFC must have the following characteristics. • When the finance contract is sold to the RFC, title has been transferred to the RFC in accordance with title and lien holder laws. • The discounting of the car dealer’s receivables is sold to the RFC at their fair market value. • There is a written arms-length contract between the dealership and the RFC. • The finance contracts are normally sold without recourse between the two related parties. • The RFC is responsible for repossessions. • The RFC is operated as a separate entity from the dealership and has the following characteristics: •A dequate capital to pay for the contracts. •M eets all state and local licensing requirements. • Maintains its own bank accounts. •H as its own address and phone number and operates as a separate entity from the dealership. •M aintains its own books. •H as its own employees who are compensated directly by the RFC. •P ays its own expenses. •C ustomers make payments to the
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RFC, not to the dealership. The IRS Audit Technique Guide cites two common issues that put the validity of the RFC into question. Either the dealership and RFC do not treat and record the sale and financing properly or the RFC is operating like a shell company rather than a legitimate separate entity: • At the time of each transaction, the RFC must show actual cash reserves in its own bank accounts to pay the dealer. The dealer in turn must record receipt of payment for the note. Each entity must have separate journal entries for the transaction. If journal entries don’t match up, the IRS may disallow the transaction. • As for its validity as a separate entity, if the RFC doesn’t have a separate address and does not advertise itself as a separate company, it factors into the validity test. It must also be proven the RFC is directly collecting payments and paying actual employees.
T H E R F C M AY B E C O M P L E T E LY VA L ID, A ND T HE L EG A L FOR M A BL E TO BE PROVEN, BUT DEALERS AND MANAGERS MUST BE CONFIDENT IN THEIR ABILIT Y TO SHOW P R O O F A N D D O C U M E N TAT I O N IN THE EVENT OF AN IRS QUERY O R A U D I T. S H A R I N G S TA F F O R RUNNING RFC BOOKKEEPING AND A D M I N I S T R AT I O N T H R O U G H T H E DE A L ER SHIP T O S AV E NOW C A N P R O V E C O S T LY I N TA X E S A N D P E N A LT I E S L AT E R O N . If the IRS does not view the RFC as a separate entity by these tests of validity, it will not allow the dealership to claim a deduction for losses on the sale of discounted vehicles to the RFC. It will defer to related party rules under IRS code 267 that do not allow loss deductions in transactions made between related persons. Without proper structuring as a separate operation, an RFC can become a liability. The RFC may be completely valid, and the legal form able to be proven, but dealers and managers must be confident in their ability to show proof and documentation in the event of an IRS query or audit. Sharing staff or running RFC bookkeeping and administration through the dealership to save now can prove costly in taxes and penalties later on. The IRS may determine the RFC is not a valid separate entity. This finding, in effect, invalidates the cash method of accounting for the sale of notes to the RFC. Interested in more details about RFCs and auto dealership accounting? Download our whitepaper at http://info.cornwelljackson. com/rfc-irs-target. Scott Bates, CPA, is a partner in the audit practice and leads Cornwell Jackson’s Business Services Department. Contact him at scott. bates@cornwelljackson.com or 972-202-8000. Mike Rizkal, CPA, is a partner in Cornwell Jackson’s Audit and Attest Service Group. Contact him at Mike.Rizkal@cornwelljackson.com or 972-202-8000.