INDEPENDENT AUTOMOBILE DEALERS ASSOCIATION OF CALIFORNIA
AUGUST/SEPTEMBER 2017
WEST COAST DEALER
S TAT E A F F I L I AT E
MAGAZINE
DEALER PERSPECTIVE
TEST DRIVE IN TUSCANY A Ferrari California Review page 10 DALLAS, TEXAS Permit No. 2079
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V I S I T U S AT W W W. I A DAC .O R G
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READ WHAT’S NEW
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INSIDE
06...........................................................President’s Message 08.......................................................Policy Changes at DMV 10............................................................Test Drive in Tuscany 14..................Pitfalls in Accepting Deferred Down Payments 15................................................. Rejoice in ROI from Training 16.........................................................Lucky is as Lucky Does 17................................Kelley Blue Book Values Methodology
WHAT’S NEW NIADA.TV
Once again NIADA.TV presents the NIADA Online Convention, a website that includes every session and special event of the 2017 NIADA Convention and Expo, held in June in Las Vegas. The NIADA Online Convention, available at www.niadaconvention.tv, is free for convention attendees. Dealers and others who did not attend can access the site for a one-time yearly fee of $149. In addition, the NIADA Virtual Trade Show is available free at NIADA.TV. Viewers can see videos of convention exhibitors’ product and service offerings from the vendors’ Expo Hall booths.
ADVERTISERS INDEX
ADESA .....................................................................................9 Alliance Inspection Management..........................................16 AmTrust Financial ................................................................. 13 AutoZone ...............................................................................17 AVRS.........................................................................................5 Black Book................................................................................7 BMW Group Direct.............................................................. IBC CarMax Auctions ...................................................................14 Lobel Financial..........................................................................3 Manheim ................................................................................11 NextGear Capital....................................................................12 PassTime ................................................................................15 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 The 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 The 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© 2017 by NIADA Services, Inc.
STATE MAGAZINE MGR./SALES
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
ASSOCIATION NEWS BY LARRY LASKOWSKI
EXECUTIVE DIRECTOR’S MESSAGE Benefits of Membership
Recently I called on a dealer whose membership had expired to ask for renewal. This particular member had been a member for three years, and early on IADAC had helped solve a unique legal issue he was facing. We also provided support with answers to multiple other issues in addition to the numerous benefits available to dealers. The dealer responded he didn’t think he was getting much for his membership and he wasn’t going to renew, despite the help we provided for his problem and all the other benefits members receive. I won’t lie – I was disappointed, but thought this might be a great opportunity to review some of the benefits IADAC provides for members. Here is a short list of some standard benefits: • VIP Auction Card discounts – save on buy fees at all major auctions in California. • Scholarship awards for dealers’ children/ grandchildren. • Membership with the National Independent Auto Dealers Association. • IADAC lobbying efforts, which have been responsible for the following: • Increases in the doc fee – most recently a $10 bump to $65 to run NMVTIS reports. • Dealer bond still at $50,000, despite proposal to raise amount to $100,000 (SB95). • Legislation that allows law enforcement to tow vehicles sold by curbstoners. • Amended Bill 9562 so dealers are not responsible for fees/penalties on dishonored checks. • Smog certificates good for two years for dealers.
PRESIDENT
Gus Camacho Camacho Auto Sales, Inc. Lancaster, CA 93534 661-945-2609 gus@camachoauto.com Mehdi Chitgari Classic Chariots, Inc. Vista, CA 92083
VICE PRESIDENT
Guy Strohmeier Auto Center 87 Soda Bay Rd Lakeport, CA 95453
WEST COAST DEALER August/September 2017
We are also continually working with DMV and other agencies to provide a better environment for California dealers. When dealers report to us problems or pitfalls they have encountered, we share those stories with you. Regulatory and other industry updates are sent through our e-newsletter. Your lobbyist Bill Dohring has called countless tow yards to educate them when dealers are unable to resolve problems with impounded vehicles.
EXECUTIVE COMMITTEE
SR. VICE PRESIDENT
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INDEPENDENT AUTOMOBILE DEALERS ASSOCIATION OF CALIFORNIA
VICE PRESIDENT
SECRETARY
VICE PRESIDENT
CHAIRMAN OF THE BOARD
Brenna Stansberry Park Marina Motors Redding, CA 96002 Bruce LaVergne Pacific Auto Auburn, CA
TREASURER
Beto Beas Beas Auto Sales Stockton, CA
Brittany Hibdon Hibdon Auto Center Orland, CA Rocco DeLapa Vacaville Auto Sales Vacaville, CA
MAGAZINE CHAIRMAN
Mike Macaulay Car Systems carsystems40@yahoo.com
www.iadac.org
ASSOCIATION NEWS
DMV CONNECTION
BY GUS CAMACHO
PRESIDENT’S MESSAGE Protect Against New Kind of Auto Theft
Our members often hear IADAC addressing changing trends in auto theft. When most dealers hear “auto theft” they think about lot security, key protection, lighting, chains, blockers and so forth. But the new trend among auto thieves is to have you give them the keys to a vehicle using a fraudulent identity or a bogus method of payment. You’re wrong if you think it won’t happen to you. Identity thieves may look like a 750-plus credit customer, presenting identification and answering all the questions as though they are really that person. You probably won’t figure out something is wrong until it is too late. Mandated by the FTC as of January 2011, all businesses who deal in credit transactions are required to have a Red Flags Rules policy in place. Without a policy, a business may be subject to extreme fines if found responsible for aiding an identity theft. This policy has four components: • Create a written policy to identify and mitigate potential identity theft
BY JAIME GARZA, DMV
and exposure. • Train your staff to understand and follow the guidelines as written. • Implement the program to prevent theft and protect customers’ personal information. • Periodically audit and review your policy, changing as necessary. Loss by fraudulent theft can be expensive to you and your dealership. Even with insurance, you might be faced with higher rates or cancellation if you claim an entire loss. Sophisticated thieves may even sell the vehicle they “purchased” from you. Once that happens it is likely the state will consider the purchaser as the victim and allow them to keep the vehicle. So even if you locate the vehicle, you may not be allowed to recover it. Business is tough enough as it is, so make sure your sales staff isn’t in such a hurry to roll a car they overlook obvious red flags. Does the person look like their picture ID? Are they able to answer questions about their credit correctly? Don’t miss obvious signs you’re being swindled. For more great suggestions and industry updates, sign up for the IADAC e-newsletter. It’s free and sign up takes just a few seconds. Go to www.iadac.org and click the “Sign Up For Our Free Newsletter” button on the right border.
INSPECTIONS DESIGNED TO ASSIST DEALERS Clear Understanding of Standards Leads to Happy Customers
Communication between the California Department of Motor Vehicles and vehicle dealers is important to achieve compliance of state laws. As occupational licensing inspectors routinely visit dealer locations throughout the state, dealers have the opportunity to ask questions and receive helpful information about industry standards, statutes, and regulations. When OL inspectors visit a dealer, they bring with them a Used Dealer Inspection Report (OL 23R), which is used as a checklist to make sure signage, display areas, buyer’s guides, records and forms are being used properly. They also check to see if the dealer has any outstanding administration service fees that need to be paid. A dealer has 30 days to address any non-compliant areas. Failure to make the corrections may result in the suspension or revocation of the dealer’s occupational license. The DMV believes that when licensees have a clear understanding of industry standards, they are able to focus more of their time and effort on doing what they do best, which is selling vehicles. Ultimately, the hope is that this collaborative effort leads to happy, satisfied consumers.
ASSOCIATION NEWS
CALIFORNIA QUALITY DEALER SHINES AT NIADA EVENT Sam Khacho Honored Nationally
Sam Khacho, owner of Three Amigos Auto Center in Modesto, proudly represented California as our Quality Dealer nominee at The Mirage in Las Vegas for the annual NIADA Convention and Expo. Host Michael York provided a brief biography of Sam’s success as an auto dealer. Sam started out washing cars for other dealers, eventually climbing the ladder to dealership owner. As acknowledgment to his success, Sam gives back to his community with special events. In conjunction with local law enforcement, Sam organized an event in which law enforcement officers inspect child car seats at his dealership. Seats that fail the inspection are replaced, courtesy of Sam. Also, an annual blood drive turns Sam’s showroom into a MASH unit for a short period, benefitting Stanislaus, Tuolumne, Calaveras, San Joaquin and El Dorado counties. Way to go, Sam! The National Quality Dealer of the Year award was presented to Bob Blankenship, owner of Texas Auto Center. Congratulations, Bob Blankenship!
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WEST COAST DEALER August/September 2017
Sam Khacho (center), California’s Quality Dealer of the Year, receiving award as nominee for National Quality Dealer at The Mirage in Las Vegas.
www.iadac.org
DMV NEWS
AUCTION NEWS
POLICY CHANGES AT DMV INDUSTRY BUSINESS CENTERS Access to DMV Employee
ADESA SACRAMENTO CELEBRATES DEALERS 20th Anniversary Sale
BY CALIFORNIA DMV
Work Areas
Recently, the Department of Motor Vehicles implemented new policies and procedures in its industry business centers. These changes affect dealers and registration services doing business at these locations. The most significant change is customers will no longer have direct access to DMV employee work areas. This change followed from DMV investigations reviewing business practices at the IBCs and is intended to address increasing concerns of fraud and incompatible work activities, including the acceptance of gratuities. With any change, there are challenges. The new DMV policy has resulted in customers – dealers and registration services – making multiple trips to the IBCs to complete their transactions. This has not benefited the DMV or our members. The reasons for return visits vary, but some include fewer transactions being processed, incomplete paperwork submitted, and incorrect fees being estimated or collected. Our members are encouraged to submit only completed paperwork and use the online tools provided by DMV on its website for accurately determining fees. By the time you read this, IADAC will have met with DMV representatives to hear comments and address concerns regarding changing policies. IADAC will continue to work with DMV to improve operational efficiencies, and DMV has affirmed it is committed to providing superior customer service to our members. Please send your comments and suggestions to Larry@iadac.org. Sign up for the free e-newsletter at www.iadac.org.
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ADESA Sacramento celebrated more than just 20 years in business at its anniversary sale June 22. The auction was also celebrating a company award for its focus on dealer sales. “Dealer consignment is the heart of the business at ADESA Sacramento,” said ADESA regional vice president Jay Hinchman. “Their conversion rates are second to none, as is their exceptional customer service.” General manager Laura Seek called the anniversary sale an opportunity to thank dealers for helping the auction earn the ADESA 2016 Dealer Sales Auction of the Year award. “It’s the buyers, the sellers, the auctioneers – as well as the staff – that makes this work,” said Seek. “We couldn’t sell cars without each and every one of them.” Seek’s predecessor, Pat Scott, had the vision to focus on dealer consignment inventory. Scott and Seek offered to treat franchise dealers like fleet customers. Once they landed a couple of big dealer groups, they began soliciting smaller, independent dealerships for buying, and word of mouth helped
them build the business. Seek credits the longevity of her staff, especially the managers, for the award. Operations manager Don Kester started working there in 1997. Jose Contreras-Torres, dealer sales and service manager, has been with the company 14 years. Office manager Stacey Casbeer and Joan Jumper, inside dealer sales and service representative, have both been at ADESA Sacramento for 13 years. Samantha Jones, online sales and services manager, has worked at the auction for 11 years. Israel Rojo, lot manager, and Joelyn Corrado, fleet/lease administrator, started there nearly 17 years ago. Seek started at ADESA Sacramento shortly after its opening in 1997, taking the helm as general manager three years ago. “I’ve been fortunate to stay at the same place,” said Seek. “It’s been fun to watch this place grow.”
AUCTION NEWS
ANNUAL CRABFEST AT ADESA GOLDEN GATE Another Successful Sale ADESA Golden Gate’s biggest sale of the year is their Crabfest event. For the 2017 sale, 3,400 vehicles were consigned and over 2,100 total cars were sold. ADESA Golden Gate continues to break year over year records of dealer attendance. This past year was the 14th Crabfest Sale. General manager Jeff Hoyt and his staff work hard every year to bring in a huge amount of great inventory and put up decorations around the auction. Dealer sales manager Mike Jones acknowledged special thanks to all of their customers who have supported Golden Gate over the years and every year at Crabfest.
WEST COAST DEALER August/September 2017
ADESA GOLDEN GATE’S BIGGEST SALE OF THE YEAR IS THEIR CRABFEST EVENT.
www.iadac.org
DEALER PERSPECTIVE BY MIKE MACAULAY, WEST COAST DEALER EDITOR/CHAIR
TEST DRIVE IN TUSCANY A Ferrari California Review
In my never ending dedication to bring to you the best automotive news, I visited the Ferrari manufacturing plant in Maranello, Italy. Yes, I traveled all the way there just for you, my readers! I wonder what the IRS will say when they notice the deduction of my three week stay in Italy as a business expense? Maybe I shouldn’t try that. It all started with planning a three week stay in Florence. Looking at the map of the Tuscan area of northern Italy, I noticed the home of Ferrari, and several other high performance sports cars, was just north of Florence in Maranello. So I decided on the day trip. The Ferrari website had a little icon that said “Apply for press credentials.” As editor/ chair of West Coast Dealer magazine, I am a member of the press, aren’t I? I figured the worse they could do was say “no.” Two weeks before my trip, I applied for my Ferrari press pass. They sent me a generic answer saying “we will check you out.” There was no answer from Ferrari before I left. Maybe they just did not realize the worldwide importance of West Coast Dealer. My wife Joan and I planned the day with a side trip to Parma to check out that cheese they make. After eating way too much cheese, we proceeded to Maranello. We arrived at the Ferrari plant and presented ourselves for a VIP tour. Guess what? They had never heard of me or West Coast Dealer. I asked for someone in management to clear up this obvious mistake. A very nice man greeted us in a few minutes. I had brought along a copy of our magazine and explained I wanted to do a review of the Ferrari California. The California model is sold in the United States. He believed my cobbled together story and led us in for a VIP tour. I credit this victory to my car dealer skills of telling a good yarn. First we were shown a few cars being tested before shipment. I was offered a test drive in two cars with a Ferrari tech riding along. The first was a Ferrari California for European sale. That car has a top speed of over 200 mph. The feeling of power was truly amazing. Ferrari has a test track that is an oval with a turnout road course. I stayed on the oval and got it over 150 mph. They then offered a drive in the Ferrari California for the USA market. It is powered by a 3.9 V-8 with 553 horsepower. It has a top speed of only 196 mph. It seems vehicles cannot be imported to the USA that go over 200 mph. The Ferrari tech informed me the U.S. models can be re-tuned to get back the original performance. Of course, we would never consider doing that!
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WEST COAST DEALER August/September 2017
I honestly could not tell the difference between the two cars. The California sells in the USA for about $239,766. I wonder if that includes the “gas guzzler tax”? Maybe you could buy four of them for a million? They come as a convertible hardtop with a seven speed auto transmission. A manual transmission is available in European models. I asked the tech about the fuel economy. He told me it was 10 percent higher than the previous model because of improved aerodynamics and intake/exhaust computer changes. I asked what that meant in real numbers. He again noted a few other changes but never answered the question. I guess if you ask about Ferrari fuel economy you are looking at the wrong car – go buy a Fiat. The Ferrari tech then led us out the front gate and handed me keys to a yellow Ferrari California parked nearby. I gave him a questioning look and he said, “Bring it back in a couple hours – have fun!” Joan and I drove around for only 30 minutes, mainly because I didn’t want to stray too far and not be able to find my way back. The autostrada – the Italian super highway/toll road – was backed up
for construction, but we did some good zooming around. I’m glad I didn’t have to pay for the gas! We were then given a tour of the Ferrari museum. On the first level was a display of the new cars in production. I was immediately drawn to a gorgeous blue Ferrari America. I was told there were only 10 Americas produced, priced at 2.5 million euros each! A euro was worth a little more than a dollar at the time of our trip. The 10 Americas were all pre-sold and no more production is planned. They are equipped with a V-12 and horsepower of about 730. I asked to test drive this one. The guy smiled and said, “Absolutely not.” Well, I had to ask. The museum has three floors filled with classic race cars and production models. There is a glass case that encloses Enzo Ferrari’s original desk and office. The museum was very impressive and is a must see when visiting. I cannot wait for my next road trip to report on important industry issues. Perhaps test driving a few Rolls Royces and Bentleys are in the future! www.iadac.org
MANAGEMENT MATTERS BY ZACH KLEMPF
M RE 2
ND
LOCATION
INDUSTRY EXPERTISE FOCUSED ON HELPING ME EXPAND MY BUSINESS* OTTO HAHNE CITY OF CARS, INC. TROY, MI
Smart. Simple. Fast. Learn how Otto gets MORE at nextgearcapital.com
*This testimonial was received via interview, audio and/or video submission. This testimonial is based on this dealer’s individual experiences, reflecting real life experiences of a NextGear Capital dealer. NextGear Capital does not claim they are typical results that dealers generally will achieve. This dealer’s experiences may not be indicative of future performance or success of any other dealers. Some of the testimonial has been shortened so the whole message is not displayed due to length and/or relevance.
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WEST COAST DEALER August/September 2017
CHANGES I WOULD MAKE TO YOUR DEALERSHIP TODAY Check Your Store’s Processes I started in automotive retail at the age of 19 and fell in love with the industry. That experience led me to start a software company focused on the used car market, which has given me the opportunity to travel across North America to visit various used car stores from the south side of Las Vegas to Honolulu, Hawaii. Moreover, my company has gathered valuable insights from quantitative and qualitative observations of the used car dealer segment. Typically when I ask a dealer principal or sales manger these two questions, they get stumped: • How do you track your ROI from Internet leads and which of your lead providers have the highest close rate? • If one of your salespeople left the dealership tomorrow with all of their prospect data and text exchanges with your clients, what would and could you do to recover that data? I leverage these two simple questions to identify whether a store is data driven and on top of compliance, which is key for survival in today’s competitive, litigious, fast-moving automotive industry. To assist dealers in identifying weaknesses with their processes I’ve compiled a list of seven changes I would make if I were to buy your dealership today. 1. CRM with Internet lead management: The majority of used car dealerships don’t have a CRM system to manage Internet leads and customer follow ups. If your store isn’t tracking your ROI from Internet marketing spend, you’re likely paying for lead providers that are not converting. 2. Staff: If you have anyone on the sales team who doesn’t use technology or is outdated in the way they interface with customers, it’s time to bring Millennials into your store who can manage the digital showroom and the “digital consumer” through their road to sale. They could complement or replace older staff members at your store. 3. Responsive or seamless website: If you have a legacy website that gives your dealership a dated look, you are doing a disservice to your business. A website’s cost is a fraction of what you spend to lease your brick and mortar lot and acts as your dealership’s digital showroom. The majority of consumers are starting their research online and your website will play a key role in bringing traffic to your store.
4. DMS: Get a DMS system that is rock solid and integrated with key services that run your dealership (i.e. RouteOne, Dealertrack, Credit Pulling, Desking, etc.). An integrated DMS and CRM are suggested but since many DMS systems are not integrated with CRMs, I recommend your DMS vendor integrates with the CRM product your store uses. 5. Lead providers: If your store is tracking ROI from lead providers, do an Internet lead provider audit and cut services that are underperforming and eroding your margin. If you aren’t tracking conversions then you need to start to figure out what lead providers aren’t performing. 6. Reputation management software: Whether you like it or not, there are always upset customers. If you have the proper tools in place you can mitigate the negative reviews that could harm your dealership’s reputation. This software can catch a customer issue that could turn into a negative Yelp/Google/Facebook review before it happens. 7. Compliant texting: If you plan to text a customer make sure opt-in messages are sent and you are TCPA compliant with best practices. Otherwise, your dealership could be involved in litigation or fined $500-$1,500 per non-compliant text. See transition.fcc.gov/cgb/policy/TCPA-Rules. pdf for more information. While not all of these changes may be needed at your dealership, they make you think about your store’s processes and what you may be overlooking. Ultimately, independent dealers need to leverage technology and become more data driven. Otherwise they may face extinction. Competition for used cars has become more and more aggressive with e-commerce vendors like Carvana and high volume pre-owned departments at new car dealerships. Moreover, even franchise dealerships can engage in BHPH as well as offering subprime loans to consumers. On the other side of the spectrum, consumers have become accustomed to interfacing with businesses online, and customer experience and transparency are keys for a successful business in today’s market. ZACH KLEMPF is CEO of Selly Automotive.
www.iadac.org
LEGAL MINUTE
BY JAMES S. SIFERS, MADISON LAW
PITFALLS IN ACCEPTING DEFERRED DOWN PAYMENTS Complying with ASFA An issue that repeatedly plagues dealers is that of the deferred down payment. Many consumers require the use of a deferred down payment to complete their purchases. However, that presents a host of unique issues for dealers. The most common issues are improper disclosure, collection attempts after the purchase contract has been assigned to a finance company, and what constitutes a deferred down payment. Per the Automobile Sales Finance Act, a deferred down payment must be separately itemized in the purchase contract and must appear “in the payment schedule disclosed pursuant to Regulation Z” (Cal. Civ. Code § 2982(a)(6) and (c)). The most recent 553 Retail Installment Sales Contract provides a proper breakdown of the deferred down payment. Those items must be disclosed in the payment schedule and paragraph 6(D), both of which are found
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on the front of the RISC. Often a dealer will have the customer sign a promissory note in addition to the RISC. The problem that arises with a promissory note is a consumer attorney will likely argue this is a violation of ASFA’s single document rule (Cal. Civ. Code § 2981.9). This argument is routinely made even when the promissory note mirrors what is on the RISC. To simplify this issue, there is simply no need for a promissory note as the RISC is the promissory note. In addition to improper disclosure, there also may be liability on the part of the dealer where a dealer assigns the RISC to a finance company and then attempts to collect on the deferred down payment from the customer. In those instances, once the RISC has been assigned to the finance company, the finance company has the sole right to pursue the customer for any default thereunder. Should the dealer take any action to collect on the deferred down payment, whether it be by way of contacting the customer, repossessing the vehicle, or suing on the contract, those actions could be considered violations of the various debt collection statutes (Cal. Civ. Code § 1788, et seq. and 15 USCS § 1692, et seq.). In those situations, dealers should speak with the finance company the RISC was assigned to about collecting the deferred down payment. Another common issue facing dealers with respect to deferred down payments is what constitutes a deferred down payment.
In Nichols v. Century West, LLC (2016) 2 Cal. App 5th 604, the California Court of Appeal for Second Appellate District held that a dealer’s acceptance of post-dated checks, which were not separately listed as deferred down payments, was not a violation of ASFA (Nichols at 617-618). However, if a dealer was to err on the side of caution, it would nevertheless be advisable to separately list these payments as deferred down payments as the court in Nichols noted it was “arguable that a postdated check could be categorized as a deferred down payment rather than a down payment” (Id at 617). In the end, a dealer would be better served to properly and accurately list the deferred down payments to be made on the RISC, and only on the RISC, given the RISC provides all of the necessary information to comply with ASFA.
www.iadac.org
ACCELERATE
BY GWC WARRANTY
REJOICE IN ROI FROM TRAINING A Wise Investment Think about all the investments you make in your business. Perhaps it’s new advertising. Maybe it’s new technology or signage on your building. And, of course, there are investments in people and inventory. But how much do you know about the return on investment from each of these? Sure, you know how much profit you clear on a car. But do you know how much business you gained from expensive new advertising or a new fancy piece of technology? One activity that can drive added profits and is easily trackable from an ROI perspective is dealership training. Perhaps more so than any other investment you make in your dealership, the effects of training are measurable and profitable – especially when it comes to F&I training. First, you’ll need to start with a baseline. For instance, if your training is aimed at selling more vehicle service contracts, know the percentage of deals on which you sell a VSC today. Set a target, and seek out the tools you need to get there. Next is finding the right training approach. For dealers on the run, online, interactive
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WITH F&I PRODUCTS, IT CAN EVEN BE EASIER THAN TRACKING HOW MANY MORE CARS YOU SELL BECAUSE OF A NEW APPROACH OR TRAINING STRATEGY. BY KNOWING YOUR PENETRATION RATES UPFRONT, INSERTING F&I TRAINING CAN MAKE FOR A CLEAR CAUSE AND EFFECT WITH MORE SERVICE CONTRACTS SOLD. options often work best. When you can train on your schedule as time allows, it’s easier to make your way through coursework at your own pace. Not to mention that if your service contract provider can offer a discounted or no-charge training option, it’s a major savings compared to paying full freight for a training platform or sending staff away for conferences or seminars. Finally, you’ll need to track your results. With F&I products, it can even be easier than tracking how many more cars you sell because of a new approach or training strategy. By knowing your penetration rates upfront, inserting F&I training can make for a clear cause and effect with more service contracts sold. From there, you’ll be basking in the ROI benefits from your new F&I training strategy – bottom-line bonuses like increased back-end profits, higher profits per unit and even longterm repeat and referral business.
August/September 2017
WEST COAST DEALER
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DEALER SPOTLIGHT
ASSOCIATION NEWS
BY MIKE MACAULAY, WESTCOAST DEALER EDITOR/CHAIR
BY MIKE MACAULAY, WESTCOAST DEALER EDITOR/CHAIR
EDITORIAL COMMENT Industry Updates
LUCKY IS AS LUCKY DOES Catching up with IADAC Past President Lucky Skyrme
Left to right: John Hiatt, Mike Macaulay, Bob Henry and Lucky Skyrme.
Ralph “Lucky” Skyrme started in the automobile business in 1948 as owner of Imperial Auto Sales. In the 1960s he opened World of Cars, which Lucky operated until his retirement. Lucky was one of the original IADAC members and helped found the Santa Rosa Chapter. He started on the state executive board in 1962 and was elected president in 1966. Lucky tirelessly worked to organize independent auto dealers throughout California. Over lunch with IADAC past presidents John Hiatt (1970), Bob Henry (1998-2000), and Mike Macaulay (2001), Lucky (1966-1968) reminisced about what it was like helping
build our association. Lucky tells of taking off with a list of 50 California dealers in his briefcase to sign new members. He hit the road and personally visited and signed most as members. That was some major commitment. Signing John Hiatt as a member was one of his major accomplishments, Lucky said. John went on to be IADAC president in 1970 and then the first NIADA president from California. Lucky still attends all the Santa Rosa Chapter functions and is always ready with a helping hand. Our many thanks to Ralph “Lucky” Skyrme for his lifetime of dedication to IADAC!
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Update: Dealer License Renewal Our proactive approach to the problem of dealer license renewal has been successful. It started with a motion that I made at the 2016 IADAC Convention to approach Department of Motor Vehicles about the ongoing issue of late renewals. Many dealers, myself included, turned in their renewals immediately upon receiving the form. Our expiration date came and went with no action from DMV. Conflict with auto auctions, insurance companies, and regulatory agencies became real problems. The DMV database showed expired licenses on inquiry while the dealers had applied in a timely manner. Our committee approached DMV director Jean Shiomoto. She immediately went to action to deal with our mutual problem. The rest is history – a couple meetings with the right folks and the issue got handled! This is an excellent example of what IADAC does for our membership. Thanks to all who helped. I had a friend recently tell me his
dealer license renewal arrived two weeks before his license expired. That has not happened in many years. This is real progress in our relationship with DMV. Update: Dealer Mentor Program Our executive director, Larry Laskowski, put together a pamphlet outlining our mentor program. It is now included in information packets given to dealers seeking to do business at some auto auctions, and most other auctions will get on board soon. The auction rules are on one side and IADAC information is on the other. We are still working with DMV to have them distribute the pamphlet to newly licensed dealers. Please contact me directly at carsystems40@yahoo.com with comments or questions. Personal Comment In my many years as a dealer and IADAC member, I have never seen our association run more smoothly. Our executive director and lobbyist are doing their jobs at maximum efficiency. Larry Laskowski and Billy Dohring are owed great thanks. Also, our executive board is a dedicated and hard working group. IADAC president Gus Camacho will go down as one of our best ever. My gratitude to all!
www.iadac.org
DEMYSTIFYING KELLEY BLUE BOOK VALUES BY ROB LANGE
KELLEY BLUE BOOK VALUES METHODOLOGY How Kelley Blue Book Values are Derived
Our third article exploring Kelley Blue Book values provides a deeper understanding of how we bring together data from more than 250 sources, both wholesale and retail, and how the team translates that data to create updated, market-reflective values for each of 130 regions across the country. Kelley Blue Book Values are updated weekly to help you keep your finger on the pulse of the market. A huge part of providing vehicle values is ensuring more than 400 annual new vehicle variations and equipment updates for all makes, models and optional equipment are kept current. As wholesale and retail transaction data is acquired for new vehicles, it must be properly mapped to create a complete assessment of each vehicle. This in itself is a monumental job. Vehicle equipment packages are sometimes adjusted mid-year by OEMs and often include regionally-specific packages only available in certain markets. The Kelley Blue Book Configuration Team is in close touch with OEMs and major
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data aggregators to acquire and map these variations. This helps ensure each vehicle has value assigned to each piece of equipment. To get an idea of the complexity of this effort, look at an OEM Dealer Ordering Guide or go online to www.kbb.com to configure a vehicle. You will see the multitude of configurations possible for each model and what it takes to confirm each vehicle is “built” with compatible options. If you really want to have some fun, perform the same exercise with a light-duty truck to truly understand how important the configuration team is to the valuation process. Configuring vehicles is an ongoing process, and the configuration team is steadfast in their continual effort to map vehicle make, model and equipment. This is essential in determining comprehensive vehicle values. As a member of Cox Automotive, Kelley Blue Book’s access to data is unparalleled. Tremendous amounts of data are available through sister companies Manheim, Autotrader, vAuto and a host of other industry leading resources. This provides Kelley Blue Book a full-spectrum view of the market from wholesale through retail, supply and demand, and remarketing to financing and long-term ownership. With more than 3,500 make/model configurations in place, the incoming data is ingested and properly mapped to begin the data normalization process each week. More than 250 sources of wholesale/
retail transaction data continually and electronically stream into the Kelley Blue Book data warehouse, where it is processed by statisticians with extensive industry experience. The first step is to standardize, normalize and cleanse the data by removing any incomplete or irregular data points or transaction anomalies (wide swings in transactions of comparable vehicles that are atypical of recent market activity) from consideration, so they are not included in the values forecast equation. In the Comprehensive View graph on the next page is an example of the depth and breadth of data points of wholesale to retail transactions, from many and varied sources for each type of transaction, used in combination to ensure each aspect of the market is thoroughly represented and considered. Examples of the type of data included in the valuation process: • Retail new and used car transaction data: KBB maintains relationships with large and small dealers and dealer groups providing non-customer specific transaction data on retail sales and trade appraisals. • Vehicle listings: KBB receives an average of 4 million updated new and used car retail listings (with VIN) from Autotrader each day, providing dealer listing prices for used vehicles to gauge the retail price market of specific cars in each area.
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• Wholesale auction: KBB analyzes more than 60 percent of all auction transactions occurring each week across the U.S. Our special relationship with Manheim allows KBB to secure Manheim data at an extremely detailed level. Auction transactions serve as the foundation for Kelley Blue Book’s used car valuation process as a result of the transparency, frequency and availability of data that is localized to reflect close proximity to your specific market. This significant level of data offers a wide sample size to help Kelley Blue Book validate and reflect the market going forward. Kelley Blue Book Auction Value is the value of most importance to dealers for acquisition purposes. With the exception of the Kelley Blue Book Fair Purchase Price (New Car), every value offered by Kelley Blue Book is directly or indirectly derived from auction transaction data. There is no better barometer of a vehicle value than when two educated parties exchange cash in the auction transaction. • Macroeconomic factor: KBB is supplied with macroeconomic indicators such as fuel prices, unemployment and consumer price index information that is critical to our forecasts since vehicle prices and sales are highly correlated to the health of the economy. KBB statistical models are adjusted weekly for large and small fluctuations in supply and demand caused by natural
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disasters, seasonality, regionality and other factors. • Base vehicle data: KBB maintains strong OEM relationships, providing VIN-level configuration data that assists the configuration team in matching and mapping equipment. • Consumer behavior: KBB leverages the vehicle shopping patterns of the 20 million visitors to www. kbb.com to gain insights into preferences at the year, make, model and trim levels, helping determine current and future consumer demand trends for new and used vehicles. • Vehicle registrations: KBB uses new and used vehicle registration information, confirming dealer and owner location, to assist with validating transaction data for each of 130 regions across the country. • Vehicle appraisals: KBB receives actual dealer ACV numbers complete with VIN and optional equipment from our dealer partners and third-party aggregators. • Kelley Blue Book instant cash offer: KBB received information from all of the 3.6 million Instant Cash Offers generated in 2016 to assist in wholesale vehicle valuations. A Combination of Art and Science Hard transaction data – even as much as acquired by Kelley Blue Book – only tells one side of the story. It tells what the vehicle already did as far as market prices, but not “why.” Did subcompact values change last week because gas prices recently dropped and consumers are not as cautious about gas mileage? Are there a large number of luxury rental cars coming out of service and coming to auction in a certain part of the country that might drive prices down due to larger-thannormal supply in that area? Is an OEM ready to move hundreds of lease returns through auction in a particular market? Have interest rates recently ticked up impacting the demand for higher priced vehicles? These are the types of insights that help forecast what a vehicle should or will do, and it’s important to have insight into as many market conditions as possible. The data tells you what has already occurred in the market, but it is the combination of historical data and the macroeconomic and other factors mentioned above that lead to having a complete view and understanding of what to expect going forward. To add depth to the Kelley Blue Book
valuation process, we deploy a two-pronged approach combining art, or market insights, and science, market data. To make certain that “sold” records reflect the exact equipment in a vehicle, KBB employs a team of field analysts who visit auctions throughout the country and inspect vehicles by hand. This ensures all attributes of a vehicle are accounted for and are reflected in the selling price of the vehicle. The field analysts perform extensive inspections on hundreds of thousands of vehicles each year, gaining unparalleled insight into how vehicle conditions and equipment impact vehicle values. This results in a depth of vehicle attribution data not available through standard auction reporting. Our established relationships with dealers and remarketers also help us gain insights, and assist in providing information helpful in making subtle adjustments to value forecasts to best reflect the market. Once the newly-arrived data is standardized, cleansed and normalized, statisticians then include macroeconomic factors with mathematical formulas fed with this enormous amount of data to derive forecasts for each make, model and trim vehicle. From there, the forecasts are passed to vehicle segment specific analysts, who review the forecasts and make adjustments based on their additional market information and inherent knowledge of their segment, before publishing the final value for the upcoming week. A simplified but helpful visualization of what we see compared to what we publish can be seen in the “scatterplot” of a 2011 Honda Civic LX. Red dots reflect actual auction transactions that have been normalized for equipment, condition, region and mileage. Blue dots reflect actual dealer retail listings for that same vehicle in that same market during the same time period. The black line running through the center of the red dots is the auction value forecast for the upcoming week, which is established after careful scrutiny of all data by the statisticians and final review and adjustments by the analysts. The green line running through the blue dots represents average dealer listing prices, and the orange line shows actual retail sales prices. In this case, sales are being completed at a small discount below the listing prices from the dealers. The Kelley Blue Book valuation process is a very comprehensive methodology that combines unparalleled data and human expertise to ensure all aspects of valuation are considered. Kelley Blue Book Values come from a position of neutrality, reflecting the current market based on recent transaction data and insights on current or upcoming factors that could impact transactions in a close timeframe. ROB LANGE is the industry insights and education director for Kelley Blue Book. He can be reached at Rob. Lange@kbb.com.
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