California 1216 by NIADA

INDEPENDENT AUTOMOBILE DEALERS ASSOCIATION OF CALIFORNIA

DECEMBER 2016

WEST COAST

S TAT E A F F I L I AT E

DEALER MAGAZINE

PAGE 14

QUALITY DEALER OF THE YEAR

CONGRATULATIONS TO SAM KHACHO FROM THREE AMIGOS

DALLAS, TEXAS Permit No. 2079

PAID

PRSRT Standard U.S. Postage

V I S I T U S AT W W W. I A DAC .O R G

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December 2016 / West Coast Dealer

WE DON’T DO BALLPARKS The vAuto way is simple: Every used car decision is made with data-driven precision. This year, the 7,500+ Provision® dealers who rely on our industry-leading insights and exclusive Live Market View will continue to soar above the national averages in inventory turns and profitability. Thriving despite ever-thinner margins and more cars on the market. Starting with your pricing, you’ll see how precision pulls shoppers into your inventory, moves it faster and makes more total gross. You’ll see how precision results in better decisions, less guesswork and fewer aged cars. And you’ll see why Provision has proven time and again to be the only way the best dealers want to work.

vAuto.com/noballparks | 888-362-5783

West Coast Dealer / December 2016

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INSIDE

06...........................................IADAC Convention Recap 08................................................ NIADA Government Report 12...................................... Millennials, Mobile and Marketing 14.................................................... Quality Dealer of the Year 15............................................................Pitfalls in Advertising 18.............................................................. Castro Motor Sales 20.........................................................Security Starts Within 22.........................................................Compliance Overdrive

WHAT’S NEW NIADA.tv

NEW CPO CHANNEL AND USED CAR WEEK

NIADA.tv just introduced a new channel devoted to CPOrelated programming, including marketing strategies and value perception of CPO. In addition, the site now offers 19 education and training sessions from the recent Used Car Week Conferences. Check out NIADA.tv for these videos and much more!

ADVERTISER’S INDEX

ADESA.................................................................................. IBC ADESA Brasher’s .................................................................. BC AutoZone ...............................................................................18 AVRS.........................................................................................9 Black Book................................................................................7 CarMax Auctions ...................................................................14 Dealership Valuation Services ..............................................21 Kirk Hawkins Insurance ........................................................ 15 Lobel Financial..........................................................................3 Manheim.......................................................................... 10, 11 Manheim Pennsylvania..........................................................13 Mark-One Financial................................................................. 5 NextGear Capital....................................................................12 Spireon ...................................................................................19 Top Finance Company ...........................................................17 VAuto.....................................................................................IFC Veros Credit............................................................................16

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 2016 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 & GRAPHIC ARTIST

Christopher Hanley • chris@niada.com

SENIOR ART DIRECTOR / PRODUCTION MANAGER

Christy Haynes • christy@niada.com PRINTING

Nieman Printing

ASSOCIATION NEWS BY LARRY LASKOWSKI

EXECUTIVE DIRECTOR’S MESSAGE Reflections on the Election Season

One of the things that caught my attention during this recent election was the phenomenal increase in candidate attacks. Mudslinging, as it has been called in the past, elevated to levels never achieved before. Historically, the final two were the most disliked candidates by voters across the board and each spent more time degrading the other than they did talking about their plans and policies. Add to the mix a media that joined the brawl with the same recklessness and the result was a disgusting display of parties vying for the top spot of the most powerful country on this planet. Lies, corruption, unfounded “facts,” and sexual and criminal allegations all served as fodder to create a media firestorm. Despite the popularity of reality TV, I don’t believe most Americans favor this behavior. In the past several decades we have observed our leaders’ parties abandon middle class, moderate citizens. It seems we

SAFETY WATCH

FORD RECALLS HATCHBACKS May Accidentally Unlatch

Ford Motor Co. is recalling 64,038 model year 2013-17 Ford Focus hatchback vehicles manufactured Feb. 14, 2012 to Aug. 26, 2016, and equipped with a manual transmission. The hatchback of the affected vehicles may be unlatched with a single press of the interior latch release button. As such, the

PRESIDENT

Gus Camacho Camacho Auto Sales, Inc. Lancaster, CA 93534 661-945-2609 gus@camachoauto.com

SR. VICE PRESIDENT

VICE PRESIDENT

Guy Strohmeier Auto Center 87 Soda Bay Rd Lakeport, CA 95453

West Coast Dealer / December 2016

vehicles fail to comply with the requirements of Federal Motor Vehicle Safety Standard (FMVSS) number 206, “Door Locks and Door Retention Components.” With only a single press needed, the driver may accidentally unlatch the hatchback, increasing the risk of injury to any unsecured passengers in the back. Ford will notify owners, and dealers will reprogram the Body Control Module with updated software, free of charge. Ford’s number for this recall is 16C13.

EXECUTIVE COMMITTEE Mehdi Chitgari Classic Chariots, Inc. Vista, CA 92083

now have very few “moderate” Democrats or Republicans representing average Americans. The parties have each moved so far away from center that their extreme beliefs do not represent the vast majority, and compromise is often unreachable. What we saw this election year were great numbers of Americans who gave enormous support to a candidate with no political experience because they believed he could halt the division between parties that has continued to grow. At the same time, representation of those Americans continues to dwindle. Think about it - when your leaders knowingly benefit by cutting deals to your detriment, do you really think they care about you? I hope you didn’t watch the spectacle without feeling some part of the foundation of our country crumbled. Our founding fathers would be saddened to see what has become of the great country they created. Please rest assured that IADAC will continue doing our best to maintain a fair environment for California dealers in the auto industry. We are strongest in numbers and welcome your support!

VICE PRESIDENT

SECRETARY

VICE PRESIDENT

CHAIRMAN OF THE BOARD

Brenna Stansberry Park Marina Motors Redding, CA 96002 Putu Blanco Paul Blanco's Good Car Company Sacramento, 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

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ASSOCIATION NEWS

BY GUS CAMACHO, CAMACHO AUTO SALES

MESSAGE FROM THE PRESIDENT Dealing with Change

Many dealers reported this was a challenging summer with sales noticeably off. Lulls in the market are not new. In fact, prior to most elections there is an uncertainty that impacts auto sales. Change is inevitable in this industry and anticipating those changes can help dealers maintain a competitive advantage and profitability. Some dealers may choose to simply wait out the cycle, and that is one approach. However, others use the slower period to evaluate new products, services or operations changes. IADAC’s annual convention is a great way to pick up pointers to add profit during slow times. If you believe your business model is operating at peak efficiency, you are kidding yourself. This industry changes too rapidly to always assume you can’t improve. At our recent convention we were exposed to many new ideas, some of which I’m considering for my own stores. Compliance education is great, but we also discussed ways to capture more market by understanding millennials and mobile or digital marketing as well as 20 group success sharing and much more. The event had a number of first time dealer attendees and their collective reviews were that the program was outstanding. Don’t miss it next year! If you’re not a member, join now to know about upcoming events, and start taking advantage of the many benefits of IADAC membership. Remember, it doesn’t cost to be a member, it pays!

Just as it is important to be aware on a large scale, it is also important to be aware of the changes within our state government. IADAC works tirelessly with state leaders to help maintain a fair balance for your businesses. I would also ask those of you who are not politically informed to begin paying attention to the news as it impacts your industry. The recent election should have made you aware how changes in the strength of the political parties can shift trends in every industry – some favorable, others not so. Just as it is important to be aware on a large scale, it is also important to be aware of the changes within our state government. IADAC works tirelessly with state leaders to help maintain a fair balance for your businesses. Please give us your support with your membership. Online application and benefit information is available at www.iadac.org.

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December 2016 / West Coast Dealer

ASSOCIATION NEWS

48TH ANNUAL IADAC CONVENTION RECAP A Very Successful Event This year’s event at Harvey’s Lake Tahoe was very successful on many levels. We were pleased to see many new faces in attendance, and comments were quite positive. Discussion topics included understanding millennials, safety recalls, temporary license plates, 20 groups and much more. Each session was punctuated by energetic discussion between attendees and our guest speakers. Our vendors are very important to a successful event and they brought their best new products and services for the dealers to evaluate. Special thanks to all vendors, in particular those who provided critical sponsorships. Those sponsors are listed here:

· AUL CORP. · AUTO DATA DIRECT · AUTOTRADER · BUDGET PLUS INSURANCE · DEALERTRACK

· DMV DESK · NATIONWIDE WEST · NEXTGEAR CAPITAL · THE SCALI LAW FIRM · VAUTO

This year 24 $1,000 scholarships were presented to qualifying applicants of the Vic and Ethyl Snyder Memorial Scholarship. Vic Snyder is a past IADAC president who, with the support of his wife Ethyl, left a portion of their estate to be used to help children and grandchildren of IADAC dealer members for further education after completion of high school. This fund has helped dealers’ children for decades and annual fundraising efforts ensure availability of such awards for many years to come. After dinner, IADAC past presidents David Aahl and Rod Davis teamed up to raise money to replenish the scholarship fund. Both outstanding auctioneers in their own right and general managers for different auctions, the duo provided an entertaining session of light ribbing while selling donated items to the highest bidders. This year approximately $19,000 was raised as a result of generous donations and bidding. Special thanks to David and Rod for their time and effort year after year, and to all who donated or purchased items at this charitable event. As the IADAC Quality Dealer Award ballots were tallied, nominees Sam Khacho, owner of Three Amigos in Modesto, and Nader Zaker and Bruce LaVergne, owners of Pacific Auto in Auburn, awaited the results. The Quality Dealer Luncheon keynote speaker was Jean Shiomoto, Director for DMV, who ceremoniously announced the winner of the IADAC Quality Dealer of the Year award. Jean announced the winner, Sam Khacho, at the conclusion of the luncheon. Sam humbly accepted the award, thanking his staff and also congratulating Nader for his nomination. Those who were not able to attend this event should plan in advance to attend next year. The venue will be the same, Harvey’s Lake Tahoe, and the dates will be October 13 and 14, 2017.

West Coast Dealer / December 2016

ANDREW CONWAY, CLIFF COSTA, DIRECTOR GOVERNMENT RELATIONS FOR THE CALIFORNIA NEW CAR DEALER ASSOCIATION

ANDREW CONWAY, DMV CHIEF OF REGISTRATION POLICY ACTIVITY AT VENDOR EXPO

ZACH KLEMPF, CEO OF SELLY AUTOMOTIVE QUALITY DEALER NOMINEES NADER ZAKER (LEFT) AND SAM KHACHO.

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WASHINGTON UPDATE

NIADA GOVERNMENT REPORT

Latest Governmental Issues and Activity Here’s a rundown of some of the latest governmental issues and activity affecting the used car industry from NIADA senior vice president of legal and government affairs Shaun Petersen and NIADA lobbyist Sante Esposito of Key Advocates.

REGULATORY REPORT By Shaun Petersen

FEDERAL TRADE COMMISSION A federal court judge approved the FTC’s $10 billion settlement agreement with Volkswagen over the company’s deliberate cheating on government emissions tests. The approval formally starts the process for owners of certain Volkswagen and Audi 2.0 liter diesel vehicles – including independent dealers with those vehicles in their inventory – to get compensation. In most cases, the owners of VW and Audi diesel cars fitted with the emissions defeat devices will receive between $12,500 and $44,000 each, depending on the model, year, mileage and trim of the car, as well as where the owner lives. A post on the FTC’s consumer blog, www. consumer.ftc.gov/blog/vw-buybacksand-lease-terminations-begin, provides additional background information on the settlement order, along with detailed instructions for affected owners about how and where to file a claim and the claimprocessing timetable. It also tells consumers how and where they can pick up buyback checks and noting those funds do not have to be used to buy a new Volkswagen.

West Coast Dealer / December 2016

CONSUMER FINANCIAL PROTECTION BUREAU Supervisory highlights: The CFPB released its latest supervisory highlights report, which showed recent supervisory actions returned more than $11 million to more than 225,000 harmed consumers. The report outlined violations found in auto loan origination and servicing, including a claim that servicers refused to return personal belongings from a borrower’s repossessed car until the borrower paid a storage fee. If borrowers did not pay the fee in the allotted time, usually 30-45 days, depending on the state, the companies would dispose of the property instead of returning it to the borrower. The CFPB said it is an illegal and unfair practice to refuse to return a consumer’s personal property until a fee is paid. Service providers bulletin: The CFPB reissued its compliance bulletin on service providers, saying the amendment was needed to clarify that entities have flexibility, allowing for appropriate risk management of service providers. The new bulletin includes the same list of expectations for managing service provider relationships, such as verifying that service providers understand and are capable of complying with federal laws; requesting and reviewing service providers’ policies, procedures and training materials; and including in contracts clear expectations about compliance. The revised bulletin gives entities some flexibility and discretion when determining the level of oversight needed, based on the circumstances of the relationship and the particular activities of the service provider, as well as the potential for harm to consumers. Comments on payday lending rule: NIADA joined with NADA and the RV Dealers Association to submit comments to the CFPB regarding its proposed payday lending rule. Our comments raised concerns that the CFPB’s proposed rule needs greater clarity to ensure retail installment contracts for the purchase of personal property, such as automobiles, are not covered by the proposal. We also told the bureau the purchase money exemption must include all components of the transaction, including the purchase of voluntary protection products such as GAP, as well as negative equity.

LEGISLATIVE REPORT By Sante Esposito

S.2663, REFORMING CFPB INDIRECT AUTO FINANCING GUIDANCE ACT Advocacy efforts heading into the lame duck session, which begins in midNovember, have been focused on urging Sens. Joe Donnelly (D-Ind.) and Heidi Heitkamp (D-N.D.) to cosponsor the bill, which rescinds the controversial auto financing guidance action taken by the

CFPB in March 2013 and provides for a more transparent and accountable process for addressing the issue of indirect auto lending. The effort is the result of a recent meeting with Sen. Richard Shelby (R-Ala.), chairman of the Senate Banking Committee, which has jurisdiction over the bill. In that meeting, Shelby committed to marking up the bill in committee during the lame duck session if two Democrats would cosponsor it. Donnelly is a small business advocate who was a featured speaker at NIADA’s 2016 National Leadership Conference and Legislative Summit. NIADA will also keep pushing its request for the Senate to convene a series of meetings with the CFPB and stakeholders to explore the possibility of an administrative solution to the issue. The CFPB’s guidance claimed dealer discretion on interest rates in indirect auto financing creates a “significant risk” of unintentional disparate impact discrimination. S.2609, MARKETPLACE AND INTERNET TAX FAIRNESS ACT This bill would allow states to charge sales tax on so-called “remote transactions,” such as Internet sales, but thanks to NIADA’s efforts it now specifically exempts vehicles, aircraft, vessels and business purchases – all cases in which states currently collect a use tax either when the vehicle is registered or because businesses pay their use tax. A summary of the text refers to the exemption as preventing “double taxation.” The Senate Judiciary Committee has received comments back from a wide range of stakeholders and is still deciding its legislative strategy. Rep. Bob Goodlatte (R-Va.), chairman of the House Judiciary Committee, and Rep. Anna Eshoo (D-Calif.) have developed a discussion draft bill on the remote sales tax issue. H.R. 6094, THE REGULATORY RELIEF FOR SMALL BUSINESSES, SCHOOLS, AND NONPROFITS ACT The bill, introduced on Sept. 21 by Rep. Tim Walberg (R-Mich.) with 76 cosponsors, would postpone the effective date of the Department of Labor’s rule revising income thresholds for determining overtime pay for executive, administrative, professional, outside sales and computer employees exempt from regular minimum wage and overtime pay requirements from Dec. 1 until June 1. The bill passed the House on Sept. 28 by a vote of 246-177. Seven Democrats, including National Leadership Conference speaker Rep. Henry Cuellar (D-Texas), voted in favor.

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MANAGEMENT MATTERS BY SCOTT BERGERON

CRM TECHNOLOGY VS. CRM MINDSET It's a Tool, Not a Crutch

Have you ever wondered how dealerships sold in volume before CRMs, before the Internet, before websites and Internet leads? I consider myself an old-school car guy who

West Coast Dealer / December 2016

knows how to use technology. I still believe there’s a place in this business for pen, paper and all the high-tech programs that make our lives easier. I started my career in the ‘80s and was lucky enough to work for a top 100 nationally-ranked dealership. We sold 500 vehicles, both new and used, per month. We did it directing our focus on advertising, ordering correctly, training, and a CRM mindset. In other words, we wanted all the information and we collected as much as we could. It wasn’t efficient compared to the tools we have now, but it worked because everyone was on the same playing field. Technology today works like a champ, when

it’s used as a tool and not a crutch. There are more ways than ever for potential customers to connect with a dealership. Online shopping is, by all estimations, the starting line for over 80 percent of all transactions. In the dealership, the CRM software is used to track, assess, notify and persuade consumers. It also lets you track the steps of the sale as well as who’s performing on your sales floor, and who needs help. We’ve all heard the phrase “garbage in, garbage out.” Technology is only as good as the information that goes in, and the process to get the information back out to reconnect with is where most dealerships lose deals. I’ve been in dealerships where their CRM reported a 100 percent closing ratio. They must have some pretty great salespeople, or they’re only entering their sales into their CRM, and forgetting about the other 80 percent of unsold prospects. And even if the leads automatically populate into the CRM, it doesn’t do any good unless someone is following up. CRM technology is limited without a common sense process within the dealership to make sure everyone gets touched, whether they’re Internet leads or face-to-face prospects. One thousand online leads and 300 visits in a month should show as 1,300 prospects, less the conversions to sales, which likely won’t show a 100 percent closing ratio. I’ll take bad news that’s accurate any day over grossly inflated closing ratios. An article on Adexchanger.com elaborates on the importance of dealership CRM as an all-encompassing relationship tool, not just technology, concept. Headlined “CRM: A Philosophy That Goes Beyond Data, Technology and Channel,” the article by digital specialist Mayur Gupta notes, “CRM software is not enough… Establishing a lifelong customer relationship and loyalty is not just a technology problem. Marketers need to bring the strategy, data and technology together to establish and operationalize a CRM capability. To do this, they must establish a customer relationship and experience strategy.” In the dealership, it’s as simple as asking, “What’s happening to my customers? Is my CRM helping me make more deals, or is our process breaking down?” So how does a dealer combine technology with a selling mindset that provides customers your undivided attention and connection before they say yes?

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How much tech is too much tech? How do you feel when someone is talking to you, but texting? How would you feel in a selling environment if your salesperson was entering data into their phone while they were showing you a vehicle? Probably not very good. But it’s reality in many dealerships that have invested fortunes in high tech, thinking it will “revolutionize their sales process.” Most customers aren’t buying it. No matter what a salesperson is doing on their phone, a vast majority of customers think they’re being ignored. In my opinion, when a salesperson is in front of a customer, their eyes need to be up and directed toward their customer. Look down at your phone and you’re likely to lose a deal. So the challenge really is how much technology do we need, and when is it best to use good old-fashioned rapport building and eyeball-to-eyeball selling? Old school or new school – It’s all good, if it’s done right. Once the sales force has learned (or relearned) the more traditional side of relationship-building and management, it’s time to show how mindset and technology together can forge a highly successful sales program. Technology can be a catalyst to help build traditional relationships to reach more people in more ways. When done right, it results in more deals. Used properly, tools such as Internet Lead Modules and CRMs can prime the pump efficiently. Using prospect and customer information, a smart CRM can store critical information about a prospect’s wants and needs, as well as timeline and budget. Technology does the heavy lifting, while customer engagement closes the deal. High Tech & High Touch High tech allows your sales team to be efficient. High touch, or client engagement, is what’s required to be effective. In other words, it doesn’t matter how efficient I am at auto responding to prospects if they don’t show up and buy. Most of us still want to do business with people we like, respect and trust – and that requires one-on-one interaction. For the best and most effective results, brainstorm about how best to use/blend the two – high tech and high touch. Then, test it in your next sales training session. Here’s one scenario using email as the springboard: Do what the others don’t. Instead of

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canned auto-responders for inbound leads, try a catchy, clever and, most importantly, personalized email that will spur a visit or at least put you higher up on the radar than the other guys. Try a subject line like, “Scott, I’ve been waiting for you to email me!” Most prospects shop online because they fear entering a dealership. They don’t want some pushy salesman. But, knowing you were low-key and fun to work with could help start a dialogue. Today’s customers don’t want the old sales gimmicks, but they also don’t want to be ignored, or feel like they’re going through a line at Walmart to buy

a car. This is a huge buying decision. They deserve your attention, your personality and the best experience you can provide. Remember, they can go anywhere in the world to buy their vehicle. Give them every reason to buy from you. Ultimately, it’s CRM technology and a selling mindset together that make customer relationship management work effectively in today’s auto sales world. Former dealer executive Scott Bergeron is the founder and principal at Daily Gameplan. com - a sales team performance company. Scott can be reached at 303.918.3169 or scott@dailygameplan.com.

December 2016 / West Coast Dealer

MARKET WATCH

MILLENNIALS, MOBILE AND MARKETING The Needs and Wants of this Young Market

One of the most well-received and discussed sessions at our annual convention was Zach Klempf’s “Understanding and Selling to Millennials.” Zach is the 25 year old CEO of software company Selly Automotive, which provides a simple to use and effective CRM (Customer Relationship Manager) product. The subject of understanding millennials has garnered curiosity from dealers but answers have not been readily available. Are millennials really capable of buying things? Do they make up a viable market share? How do you cater to their desires? Zach effectively communicated the needs and wants of this young market with a great presentation and solutions. Although we did not record the presentation, that session is accessible on YouTube at https://www.youtube.com/ watch?v=kZRaKQ_20Rs. We’ve also condensed a handout for the session which identifies several “must have” items for the new-age dealer: 1. Rock solid DMS system. The DMS system is the “central nervous system” for your store. You need to have one that is reliable and integrates with the other applications your dealership leverages. 2. Sleek and responsive dealership website. Your dealership website acts as your digital showroom and will be the first impression you make on a customer. If you have an outdated website that is not responsive for mobile you will show up lower in the search rankings on Google. 3. Mobile first CRM & ILM system. CRM and ILM will become almost as important to your store as your DMS system. To manage Internet leads and customer follow ups, this is a must have technology. Pen and paper is no longer a viable option. 4. Social media presence. Social media can help build your dealership and salesperson’s brand and is an essential part of the new digital showroom. At the very least your dealership needs a Facebook presence as this is becoming important for customer reviews during their research phase of the car buying process. 5. Digital marketing program. To bring new traffic to your showroom, your dealership needs to at least have a basic digital marketing program in place. The days when marketing was not data driven are long gone. Leverage digital marketing, track your digital analytics, and spend

West Coast Dealer / December 2016

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 fined or involved in litigation. more money on sources bringing your store the most traffic. 6. Custom dealership email. If your dealership email is @gmail, @aol, or @yahoo, you look unprofessional to the potential customer. Your email address should be at your dealership domain (i.e. john@abcmotors.com). Buying an email address at your own domain is very inexpensive and is a must for every professional business. 7. Reputation management software. If your store is going to ask a customer to review their car buying experience, make sure you have the proper reputation management software in place. This software will send a survey to the customer and let you decide whether it should be posted on other websites. For example, if a customer gives you a 3-5 Star review it will then redirect them to Google Reviews, Yelp, etc. If the customer gives your store a bad review it will be directed to your customer service team (not posted anywhere online) where you can address the issue before it is live and permanently on the Internet. 8. Compliant text messaging system. 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 fined or involved in litigation. Most CRM systems have this functionality built in. For TCPA rules, visit https://transition.fcc. gov/cgb/policy/TCPA-Rules.pdf. For more information, visit www.sellyautomotive.com or contact Zach Klempf at 404-797-9799, 415-562-7104 or zach@a1softwaregroup.com.

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ASSOCIATION NEWS

IADAC QUALITY DEALER OF THE YEAR Sam Khacho from Three Amigos

The most prestigious award presented by IADAC is the Quality Dealer of the Year. At the annual convention attendees vote on their choice from the nominees presented. This year, the two nominees were Sam Khacho with Three Amigos and Nader Zaker and Bruce LaVergne with Pacific Auto. Both nominees are long time IADAC members and supporters, IADAC delegates, and exemplary dealers who contribute significantly to their communities. A clip from Sam’s bio: The Child Safety Seat event is in partnership with the California Highway Patrol (CHP). During the winter Three Amigos happily allows CHP to take over its premises. The CHP checks hundreds of child seats and replaces any child seat that is not up to par. The officers involved make sure the seats are in good condition, they are properly installed, and the seat is the right one for the child using it. Last year, in only four hours, 80 child seats where replaced at no cost to the public. A clip from Nader and Bruce’s bio: Pacific Auto instituted a program to donate $50 for each car they sell to local charities. This past year, their best ever, they are on track to donate a record $16,000. In addition to that, for many years Pacific Auto has supported local little league teams, the Sheriff’s Department, their children’s schools, and other local causes through volunteer support, cash, and in-kind donations. Keynote speaker and DMV Director Jean Shiomoto was presented a sealed envelope for the announcement of the winner. Congratulations to Sam Khacho, IADAC Quality Dealer of the Year!

West Coast Dealer / December 2016

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LEGAL MATTERS

BY JAMES S. SIFERS, ESQ

PITFALLS IN ADVERTISING Vehicle History Report

Advertising online is one of a dealer’s most valuable tools. It allows them to connect with their customers instantly. In an era where comparison shopping can be done on a widespread scale from a single location, dealers are taking every advantage available to them to ensure their advertisements are noticed by a potential buyer. It is certainly no secret that consumers, by and large, are price driven in their search for used vehicles. It is also no secret a vehicle purchased at auction with an announcement (i.e. frame/unibody damage, true miles unknown, prior rental) likely will garner a lower price at auction, which will then be sold for a lower price at retail. This also means that the dealer who purchases these types of negative history vehicles will be able to list these vehicles at a lower purchase price, thus gaining more views for their advertisements over similar vehicles without any negative history. Herein lies the trap for the unwary. California has adopted the broad approach that advertisements by dealers

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cannot contain false or misleading statements, and even goes as far as to prohibit false or misleading statements, both intentionally made and where the dealer should have known that the advertisement was false or misleading (Cal. Veh. Code s 11614(a).). While California generally does not require an advertisement for a noncertified used vehicle disclose that vehicle’s prior accident history, the California Vehicle Code does require a dealer “clearly and conspicuously” disclose a vehicle’s history “as a demonstrator, executive vehicle, service vehicle, rental, loaner, or lease vehicle” (Cal. Veh. Code § 11614.1(b).). Disclosing this history in the text of the vehicle’s description should be sufficient. However, many dealers also choose to link vehicle history reports, such as Carfax or AutoCheck, to their advertisements. In making vehicle history reports available to potential customers by way of a link on an online advertisement, dealers are often opening themselves up to a claim of deceptive advertising, even if the goal is to provide the customer with exactly what they are demanding, a vehicle history report. Given the inaccuracies that are often present in vehicle history reports, it is fairly common for an auction announcement not to find its way to a vehicle history report, particularly a Carfax report.

When this happens, even if the negative history is later disclosed prior to the sale by way of a signed disclosure, the customer may have a claim for deceptive advertising. Generally, the customer will claim the advertising itself was deceptive and that the negative history was not disclosed until well into the process to purchase the vehicle. This then begs the question, what should a dealer do to avoid this potential liability? We have found that the most successful approach is where dealers take an all or nothing approach to disclosures in advertising. If a dealer does choose to provide a vehicle history report in its advertisements, it should also make sure to include any auction announcements that do not appear on that vehicle history report in the text of the advertisement itself. To be safe, that information should also be “clearly and conspicuously” disclosed in the advertisement. This approach avoids any claims the advertisement was deceptive in that only a “clean” vehicle history report was provided while the dealer knew of the vehicle’s negative history not indicated on the provided vehicle history report. James S. Sifers, Esq. from Madison Harbor, ALC can be reached at jsifers@ madisonharbor.com.

December 2016 / West Coast Dealer

ASSOCIATION NEWS

CARTOON CONTEST West Coast Dealer Magazine New Feature

Readers are encouraged to share their creative thoughts for a brand new feature in West Coast Dealer. Each issue will have a cartoon and our readers are encouraged to email their caption suggestions to magazine chairman Mike Macaulay at carsystems40@ yahoo.com. At our recent annual convention, West Coast Dealer magazine committee chair Mike Macaulay distributed the cartoon shown above to all attendees and asked each person to complete the cartoon with a caption. The winning caption was submitted by Cathy West with OnStar. Cathy’s caption reads: “Should have activated that OnStar!”

West Coast Dealer / December 2016

Honorable mentions include: · “We have smokin’ hot deals!” – Guy Strohmeier, Guy Strohmeier’s Auto Center. · “You said you wanted a hot car!” – Brenna Stansberry, Park Marina Motors. Here is this issue’s cartoon, ready for your caption! Please email your captions to Mike Macaulay at carsystems40@yahoo. com. The winner will be published in the following magazine! About the Artist: Debra A. Himel An art career was always in Debra’s future, and living as a starving artist was not part of her plan. Debra was artistic from a very young age. Growing up she spent her days at

her parents’ “mom and pop” glove business drawing her strange beings. In college she studied graphic design, and was hired by a division of General Electric. The company created personalized slide presentations for businesses. Debra began her career as a computer graphic artist. Promotions in the next nine years led her to positions as a designer, inside sales, and western regional corporate trainer (equipment sales). Originally, the computer system ran on tapes and eventually floppy disks for storage of artwork. At that time home computers were futuristic and were not for the common person. She worked at Kodak Corporation in customer service, retail design displays, and career placement as well. Debra, a left handed artist, obviously sees what others do not. When she begins drawing her distorted individuals she is never sure of the outcome until they are completed. Her brain and hand seem to have their own communication system. She was a domestic goddess after her children were born, helping raise her son and daughter with her wonderful husband. Debra always continued drawing her Hammerheads (Hammer was her maiden name) for her own family and friends. Her hopes were always to share her creative beings with the world. Debra works out at the gym on a daily basis. Coincidentally, another gym member mentioned they were seeking a person to create cartoons. Debra connected with Mike Macaulay (West Coast Dealer editor), and after chatting and obtaining information began drawing her one-of-a-kind characters pro bono for this publication. She can only hope for the fame and fortune to follow. Debra remembers her very first car with fond memories. Her used ‘69 black Cougar with a black vinyl roof took every penny she had to purchase, and was her pride and joy. Debra continues to be a car lover and her family pays an annual visit to the Car Show in Los Angeles. www.iadac.org

PRODUCTS & SERVICES

DMS FOR INDEPENDENT AND BHPH DEALERS GOES LIVE

Web-Based Solution Tailored for Independent Dealers

After more than a year of dedicated development and collaboration with dealers, DealerSocket officially released iDMS at the company’s User Summit, Oct. 3-5, in San Antonio, Texas. iDMS marks the first of several upcoming product launches for DealerSocket’s fullscale, integrated technology platform tailored to independent dealers. “Our independent platform’s seamless integrations will provide tremendous

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flexibility for each product suite, including iDMS,” vice president of product strategy Jennifer Lee said. “Once all our independent products have launched on the platform, users will be able to access tools based on their job role, rather than by product line.” iDMS is a highly integrated solution including flexible accounting, powerful desking, an integrated lender portal, integrated service shop management, unsurpassed workflow and queuing processes, and robust reporting analytics, the company said. “One of the most useful benefits of iDMS is its scalability for all sizes of success,” director of product and engineering Jeff McCurry said. “This platform can help small to midsized dealerships get to the next level, as well as allowing larger stores to reach maximum efficiency in their operations. iDMS will scale as your dealership grows, so you will not be faced with future software decisions.” The new solution merges the features of FEX DMS and AutoStar Solutions – along

with adding some original features. Features include: • 100 percent web-based, cross-browser, cross-platform functionality, with a special focus on mobile devices so dealers can access iDMS in the F&I office, on the dealership lot, or while running errands. • Buy Here-Pay Here decisioning and integrated lender portal, so dealers can finance a deal without leaving the platform. • Real-time accounting integration with QuickBooks, as well as flexible general ledger account creation and mapping, which gives dealers granular control of GL transaction accounting. • Comprehensive desking solution for both Buy Here-Pay Here and independent retail dealers. • Robust collections, such as stacked promise-to-pay and dynamic queuing functionality. • Multitasking capabilities through an extra communication module at the bottom of each screen.

December 2016 / West Coast Dealer

DEALER SPOTLIGHT

BY MIKE MACAULAY, WEST COAST DEALER EDITOR/CHAIR

CASTRO MOTOR SALES A Family Affair

THREE GENERATIONS OF CASTROS: MIKE, JULIAN AND JULIAN, JR.

West Coast Dealer / December 2016

Julian Castro opened his first dealership at 18th and Valencia Street in San Francisco in 1946. The war had just ended. Leaving the Army behind, Julian was anxious to start his career. Julian had previously worked in the bay area shipyards as a welder, and then was transferred back east to help the Army effort. When he was discharged Julian returned to his San Francisco home. Castro Motor Sales thrived and Julian decided to move to Santa Rosa in 1973. Julian and his wife Doris worked hand in hand to make the business profitable. They owned the dealership property and lived right next door. They soon joined IADAC, realizing the value of membership. In 1965 the Castros were blessed with the birth of their son Mike. Julian advertised a “New Baby Sellabration” for his car lot in the San Francisco

Examiner to celebrate Mike’s birth. The “deal of the week” was a 1954 Ford two door stick shift for $95 and a 1959 Chevy Hardtop for $195! Mike started to work on the lot at 9 years old and was full time by age of 12 (before and after school). After college Mike went on to work for a new car dealership. He was successful in sales and various management positions until it was time to take over the family business. In 2015 he took over the re-named Castro Car Company from his father, who was then 92. Julian, at 93 years old, still stops by to give sage wisdom and help out where needed. Doris is present almost daily to keep the paperwork straight and watch the store when Mike is out buying. Castro Motor Sales has been a true family business for over 50 years! We wish them many more successful years to come.

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ASSOCIATION NEWS

BY MIKE MACAULAY, WEST COAST DEALER CHAIR/EDITOR

EDITORIAL COMMENT Mentor Program In 1992 IADAC proposed adding a mentor program for the benefit of new independent dealers. The proposal didn’t get past a magazine article. While looking over the old magazine issues, I found this interesting article – “Dealer Mentor Program.” The article is over 20 years old and still a great idea today! A dealer completes the process to get their license, and most know little of how the industry really works. The dealer education program gives basic information but not much in practical application. Every dealer develops their own process on how to merchandise and sell a vehicle. Some are good, most need help. There is always a different and mostly better way to do things. Does your advertising fairly represent the vehicle? Are your employees knowledgeable and friendly? Is your website user friendly? Is your compliance in order (legal postings, paperwork, or correct signage)? These are just some of the possible issues. Sometimes, someone with another

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opinion of your sales procedure will come up with fresh and better ideas. This is something even established dealers can take advantage of. I stopped by a dealer’s lot a few years ago I had met at an IADAC convention and introduced myself as a friend of the owner. There were several things I noticed that were disturbing about my friend’s business. The receptionist was rude, the sales folks were not attentive, the advertising looked awkward, and several other things needed improvement. I asked my dealer friend if he would like my “take” on his business. He thought for a minute and agreed. I did not want to give unsolicited advice. We are all experts in our own business – what works for you might not work for others. He was a little shocked on what I had observed and suggestions I made. A few months later, my dealer friend thanked me for the wonderful advice I gave that made a real difference in his bottom line. At our recent IADAC 2016 Convention, we heard a presentation on Dealer 20 Groups. This is much the same idea, but on a larger scale – more heads put together to help your business be better. I suggest a one-on-one program to help out new or struggling dealers. Moving up to a Dealer 20 Group is a great move for any dealer. We all can use a helping hand from time

to time. I think IADAC should create a mentor program as a member benefit. Perhaps we could get a few old timer volunteers to spend a few hours a month helping out our industry. Please contact me directly at carsystems40@yahoo.com to volunteer, ask a question, or give advice on how such a program would work.

December 2016 / West Coast Dealer

TECHNICALLY SPEAKING BY DAN DOMAN

SECURITY STARTS WITHIN Six Steps to Protect Your Dealership’s Data

According to data security firm Virtru, even as hackers become more and more sophisticated, much of the threat to your business actually comes from inside. The company notes that up to 28 percent of enterprise data security incidents come from inside an organization. They’re not saying any of your employees has malicious intent – though that is possible. What they are saying is your staff could be inadequately trained or your data security policies might be incomplete or not enforced. So here are six training and enforcement policies to help protect your dealership from possible threats: Strong passwords: While you’ve heard it before and it might seem obvious, enforcing strict password requirements – such as requiring a minimum of eight alphanumeric characters with symbols – and prompting users to change their passwords regularly are easy ways to protect against unauthorized access. A 2015 survey by TeleSign found 47 percent of people use passwords that are at least

five years old. Don’t let your dealership’s employees be among them. Authentication: Require multi-factor authentication on every device that accesses your dealership’s data. The process requires users to register their devices to a particular user ID and password. Registering a device requires employees to select and answer a series of “security” questions not easily guessed by anyone but the employee. In the event a user name and password was compromised, a hacker would still be unable to access your dealership’s systems unless that device was authenticated to those credentials, adding another layer of security.

IP blocking: Use IP blocking to limit user access from only dealership-approved IP addresses. That helps prevent unauthorized access from remote or mobile locations. Implementing IP blocking is a great opportunity to review and audit your dealership’s policies regarding remote access to integrated dealer systems and appropriate purposes and use. Now that you have secured the devices that are coming into your system, focus on your dealership’s employees’ day-to-day use. Check your user permissions: Not every employee needs access to all of your dealership’s data. Assign employee permissions and access to specific dealership systems that suit your business processes and

the employees’ respective responsibilities. That will help control their ability to access personal and confidential customer data. Use your systems’ notification or activity alert tools: They can be configured to alert you of potentially suspicious employee activity, such as changes to a user’s “setup” or “preferences.” Run a report: Regularly run a user report to ensure all who have access truly need it. The reports should provide detailed information on users including dealer ID and dealer name (for dealer groups), user name, last successful login date, no user activity for more than 60 days, and admin. It is a sound security practice to check your user reports against your active employee list. You should never have an ex-employee authorized to access your systems. Secure dealerships are successful dealerships, and maintaining a secure dealership begins with fundamental security practices. By implementing the six practices explained here, your dealership will be well on its way to helping ensure the security of your customers’ information – and a successful future. Dan Doman is chief legal and privacy officer of RouteOne LLC (www.routeone.com), a joint venture created by Ally Financial, Ford Motor Credit Company, TD Auto Finance and Toyota Financial Services. He is responsible for managing the legal, governmental, privacy, and security affairs of RouteOne LLC.

MANAGEMENT MATTERS BY KENNY ATCHESON

PLANNING FOR 2017 Make Necessary Adjustments “If you always do what you’ve always done, you’ll always get what you’ve always got,” said Henry Ford. Albert Einstein said, “The definition of insanity is doing the same thing over again and expecting a different result.” Now is the time to plan what you will do differently next year to succeed. I’ve had conversations with dealers who spend from $5,000 to $120,000 per month in advertising. I have discovered that regardless of the budget, there are some people who are so afraid of change they choose to continue getting mediocre results in lieu of making

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any adjustments. The resistance to change is not budget specific, but it is success specific. In other words, most successful dealers are ready to make a change at a moment’s notice as long as there is evidence there is a need for it. An interviewer asked Lee Iacocca what order he used to make changes when saving Chrysler. Iacocca said, “Order? We did everything at the same time.” Iacocca made lots of changes at the same time. It’s a good practice when necessary. In his book, Power to Change, Jim Jackson explains how some people only make changes after a crisis. According to Jackson, “You are right where you have chosen to be.” If you sell 40 cars or 240 cars per month, you have chosen how many cars you are going to sell. You may “desire” to sell 15 percent more cars, but that requires the decision to make changes. I’m not saying you should chase every shiny object you hear about from media agencies, a Twenty Group meeting or an article. Invest in consultations with an expert who will give you the bold truth. Don’t approach someone at an ad agency and ask what they have for sale. Carl Sewell, author of Customers for Life and owner of Sewell Automotive with dealerships located throughout the country, wrote about how important consultants have been to him. He doesn’t always take their advice, but at least he knows he is getting the

opinion of an expert rather than a sales pitch for services. Another advantage to professional consultation before investing in new strategies and media is you get “outside eyes” diagnosing and analyzing your strategies and tactics. Outside eyes are typically free from bias. They are not emotionally tied to anything in particular. Let me explain what I mean by “emotionally tied.” I’ve consulted for dealers who have done something one way for up to 88 years. They are emotionally invested in a particular method. It is what got them where they are. It may be something that lifted them from poverty to riches. That creates an emotional attachment. It took an outside set of eyes, a different angle and explanation of a new strategy, to get them to realize it was time for some tweaks. Your existing strategy and plans may be good, and only require minor tweaks to be great. Find out. Kenny Atcheson is the president of Dealer Profit Pros and author of Marketing Battleground: How to Deploy an Army to Battle for Your Business. Kenny teaches workshops, speaks at conventions and 20 Groups, and his company offers several marketing and advertising programs. His website is www.DealerProfitPros.com.

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DEALER SPOTLIGHT

BY MIKE MACAULAY, WEST COAST DEALER CHAIR/EDITOR

CATCHING UP WITH RICK AND JUDY IADAC Icons

Rick and Judy Gomez are IADAC icons. They were chosen in 1999 as “Quality Dealer of the Year.” It was the first time a husband and wife were chosen as a team. They have attended most meetings and conventions over the last 40 years. Rick and Judy became dealers in 1975. They saw the value of IADAC and immediately joined. They opened a retail store, Sacramento Sportscar Center, and successfully ran it until 1989. They then ran a successful wholesale operation as RJ Auto Brokers until recently. In the late 70s, Rick was asked to revitalize the IADAC Sacramento Chapter. He took up the reins and made the chapter one of the strongest in the state. Rick acted as local chapter president for many years. He occasionally passed on the torch to young upstarts to stand in as local president. Rick badgered a few future IADAC state presidents (myself included) to attend meetings and get involved. Rick offered to pay for my lunch if I attended the meeting.

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Judy stood steadfast with Rick and acted as secretary/treasurer for all those years, a true selfless act. Under Rick and Judy’s leadership, the IADAC Sacramento Chapter thrived. Around 1996 Rick and Judy organized a trade fair/Christmas party that had over 250 California dealers in attendance! It was an overwhelming success and raised thousands of dollars for local charities. Rick was later elected to the IADAC Executive Board. He served proudly and was always outspoken regarding dealer advocacy. Rick really wanted what was best for his fellow dealer and spoke with passion at every meeting. Now, Rick is working with Winter Chevrolet in Colfax and Judy is playing with her delightful grandchildren. They are both blessed with a fulfilling life. We dealers owe a dept of gratitude to Rick and Judy Gomez. Few, if any, have helped the cause of the independent dealer more than Rick and Judy Gomez. Our many thanks to them!

MAGAZINE COVER FROM 1999, WHEN RICK AND JUDY GOMEZ WERE AWARDED QUALITY DEALER OF THE YEAR.

December 2016 / West Coast Dealer

COMPLIANCE OVERDRIVE BY CHIP ZYVOLOSKI

AVOID THE “ONE SIZE FITS ALL” RETAIL SALES CONTRACT MINDSET Address Your Specific Terms Avoid compliance violations and potential fines by setting aside time to review your retail sales contracts. Wait, aren’t all forms “one size fits all?” Your credit documents need to address the specific terms of credit you offer – matched with state and federal disclosures and provisions. Mismatching your credit terms and contract provisions could cost you thousands of dollars in fines, damages and legal fees as well as harm your business reputation. Here are a few features you should review to make sure your retail sales contracts match the credit terms you offer. Type of Property Sold Motorcycles, autocycles, off-road vehicles, RV’s and other motorized vehicles may not be “motor vehicles” under your state’s retail sales laws. Required contract and disclosure terms can vary depending on whether you are selling a “motor vehicle” as defined in your state’s retail sales laws. With the variety of motorized vehicle types available, make sure the contract you are using is designed for the type of personal property you sell. The same is true of your license to sell motor vehicles. Make sure your dealer’s license covers the property you sell. Cash Down Payments Usually, the cash down payment is received at closing, but dealers sometimes allow buyers to make one or more down payments after closing. Under the Truthin-Lending Act and Regulation Z of the act, these “deferred down payments” or “pickup payments” must be made no later than the due date of the second regularly scheduled payment. They also cannot be subject to a finance charge. It’s helpful to have a contract provision with buyer’s promise to make deferred down payments. It must also be a line item in the Itemization of Amount Financed, which treats it as a credit even though it hasn’t been received yet. Although it’s not required, dealers should include the date and amount of a deferred down payment in the Fed Box Payment Schedule. If you allow deferred down payments, be sure your contracts support them or are flexible enough to handle them. Note: some states do not allow deferred down payments or require them to be paid sooner than under Reg. Z.

West Coast Dealer / December 2016

Negative Equity Trade-Ins Under Reg. Z, a down payment in the itemization can never be less than zero. As a result, negative equity trade-ins require special handling. Reg. Z allows two methods of calculating the down payment. One way is to net all the cash and other credits against the negative equity in the trade-in (“netting”). Another way is to add all credits but not subtract any negative equity in the trade-in (“nonnetting”). The method used will affect the calculated down payment and the amount of a separate line financing the balance owed on the negative equity trade-in. You may not have much choice in selecting a contract with your preferred netting or non-netting method, but it’s important to understand which method your contract uses so you can explain it to buyers. Equal Installments. Balloon Payments. Equal monthly payments are a common payment frequency. Changing to more or less frequent equal payments can sometimes require changes to contract terminology and disclosures. Be sure to review your documentation and completion tools carefully if you require equal periodic payments other than monthly. Balloon payments are generally structured as a final payment that is more than twice as large as the average periodic payment. A balloon payment schedule can lower periodic payments, but the buyer might have problems paying the balloon. Dealers and lenders sometimes provide options for buyers who can’t pay the balloon amount. Those options may be included in the contract, especially if they are required by law. For example, one option is to allow a buyer to pay the balloon amount plus interest in installments, usually in an amount no greater than the prior installments. States sometimes require additional disclosures to warn the consumer of the final payment amount. Be sure to review your documentation if you offer balloon payment features. Arbitration Not all contracts include an arbitration provision. You should review your contract to confirm it has one if you want it. The CFPB has proposed a regulation that would preserve the buyer’s ability to join a class action lawsuit even if the dealer/ creditor has a contract right to require arbitration. If the CFPB’s proposal becomes final, you will want to review your decision to include an arbitration provision and either update or remove it. Conditional Delivery – Spot Delivery Is your retail sales contract conditioned on your ability to sell the completed contract to an assignee? If so, your retail sales contract should include a provision telling the buyer about it. If you do conditional deliveries, it can be risky to use a retail contract that doesn’t include a spot delivery provision

or specifically cross-reference a separate spot delivery agreement. In that case, someone reading the retail contract alone will not know it’s subject to another agreement. (The same concept also applies to arbitration provisions.) If spot delivery is an important element of your credit programs, make sure your contract addresses it in some way. Note: some states do not allow conditional delivery provisions. Fees and Charges Your retail sales contract probably has blank lines in the itemization and in other places. That does not mean you can put anything you want in the blank lines, especially fees. In many states, only specific fees with specific names are allowed. You should review your retail contracts to determine if they have any required disclosures or contract provisions for the specific fees you charge. What if there isn’t a contract provision or disclosure for your fee and it only appears on a blank line in the itemization? That may be okay for some fees in some states. The point is that you should research your state to determine what fee information is required and to confirm your retail contract has it. Like the seasons, your credit programs and terms can change over time. Now is a good time to review your credit documentation to make sure it is up to date. Chip Zyvoloski is a senior attorney for Indirect Lending at Wolters Kluwer. For more information, please visit www. wolterskluwerfs.com/indirect.