CAROLINAS INDEPENDENT A U T O M O B I L E D E A L E R S A S S O C I AT I O N
AUTO DEALER NEWS
S TAT E A F F I L I AT E
AU G U S T/ S E P T E M B E R 2 016
CIADA BRINGS HOME NINE OF 16 CRYSTAL EAGLE AWARDS PA G E 12
The Crystal Eagle is awarded in recognition of their outstanding effort in generating new members for NIADA.
DALLAS, TEXAS Permit No. 2079
PAID
PRSRT Standard U.S. Postage
V I S I T U S A T W W W .T H E C I A D A . C O M
INSIDE 06 TECH ENABLED DEALERSHIPS NEED TECH-SAVVY EMPLOYEES 10 RETAINING WOMEN IN SALES
INDUSTRY PERSPECTIVE / BY DALE POLLAK
14 NIADA CONVENTION 20 L OST ART OF THE SWITCH 26 C AROLINAS’ BILLY THREADGILL BECOMES NIADA PRESIDENT
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30 C OMPETING WITH FRANCHISE DEALERS 34 C FPB’S PROPOSED CONSUMER ARBITRATION RULES
ADVERTISER’S INDEX Ace Motor Acceptance......................................... 23
ADESA ............................................................... 17 Alliance Inspection Mgt. .....................................20 Auto Use............................................................. 19 Autotrader........................................................... 5 Black Book............................................................3 CARFAX ...............................................................7 CarMax Auctions ..................................................8 Carolina Auto Auction....................................... IFC Charleston Auto Auction......................... Back Cover High Tech Locksmiths......................................... 18 Manheim .......................................................10, 11 Manheim Pennsylvania........................................13 NextGear Capital.............................................12, 15 PassTime............................................................ 21 Protective ............................................................9 Spireon............................................................. 22 STARS GPS.......................................................... 16 Team Velocity Marketing .......................................6 VAuto............................................................... IBC
OFFICE
5643 Harrisburg Industrial Park Dr. Harrisburg, NC 28075 Phone: 704-455-2117 or 1-800-432-4232 Fax: 704-454-5567 www.theciada.com CIADA is a non-profit 501(c)6
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 Carolinas Independent Automobile Dealers Association is published bi-monthly by the National Independent Automobile Dealers Association Services Corporation, 2521 Brown Blvd., Arlington, TX 76006-5203; phone (817) 640-3838. 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 individual authors and do not necessarily represent the views of CIADA or the National Independent Automobile Dealers Association. 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. All rights reserved. State Magazine MGR./Sales Troy Graff • troy@niada.com Editors Jacinda Timmerman • jacinda@niada.com Andy Friedlander • andy@niada.com Magazine Layout & Graphic Artist Chantae Arrington • chantae@niada.com Art Director Christy Haynes • christy@niada.com Printing Nieman Printing
4 AUTO DEALER NEWS / AUGUST/SEPTEMBER 2016
REFLECTIONS ON MY FIRST NIADA CONVENTION >> Pleasantly Surprised
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12 CAROLINAS LEAD THE WAY IN MEMBERSHIP DRIVE
I HAD THE PRIVILEGE of attending my first National Independent Automobile Dealers Association convention [in June] in Las Vegas. Quite honestly, I wasn’t sure what to expect, but I was pleased to discover many similarities with my experiences at 47 National Automobile Dealers Association conventions for franchise dealers. First, many of the dealers I met are as astute and keen about their business as many franchise dealers. They understand the wholesale and retail marketplaces are changing fast, and they are wisely seeking new ideas, tools and ways to make their businesses more profitable and successful. Second, like many franchise dealers, the independent dealers are deeply committed to
their businesses. It’s their money on the line every day. They are hands-on, pragmatic operators, some of whom are likely to pick up a wrench or a chamois cloth to get a car ready for retail. Third, I was struck by the family nature of the event itself. I met dealers, their wives and their children on the NIADA floor – a reminder that many, if not most, dealers of all types are by their nature a family affair. Finally, I was pleased to be a part of Cox Automotive’s impressive presence on the NIADA floor – a testimony to our commitment to serve independent dealers as we collectively transform the way the world buys and sells cars. My hat’s off to NIADA’s Steve Jordan, CEO, and Joe Lescota, director of dealer development, for hosting an enlightening, productive and well-run event. This year’s NIADA convention may have been my first, but it most definitely won’t be my last. Dale Pollak is the founder of vAuto and an executive with Cox Automotive. This column was published on his website, www.dalepollak. com, on June 18.
EXECUTIVE COMMITTEE IMMEDIATE PAST CHAIRMAN MICHAEL DARROW THE AUTO FINDERS INC. DURHAM, NC
SC VICE PRESIDENT DARRYL JACKSON CROWN AUTOMOTIVE SALES AND FINANCE ROCK HILL, SC
CHAIRMAN LUKE GODWIN GODWIN MOTORS INC. COLUMBIA, SC
NC VICE PRESIDENT KIM BRADSHAW 1ST NATIONS AUTO SALES BURLINGTON, N.C.
PRESIDENT WILL DAVIS G & B AUTO LOUISBURG, NC
TREASURER STEVE MATTHEWS MATTHEWS MOTORS INC. CLAYTON, NC
PRESIDENT-ELECT DARLA BOOHER DEAL DEPOT, INC. GREER, SC
SECRETARY KEVIN PENDERGRASS CAROLINA AUTO SALES OF MYRTLE BEACH MYRTLE BEACH, SC
CIADA STAFF EXECUTIVE DIRECTOR JOHN BROWN 5643 HARRISBURG INDUSTRIAL HARRISBURG, NC
STAFF
DEBBIE BRASWELL CONTROLLER JENNY MYRICK EDUCATION & MEMBERSHIP SERVICES
JAYNE HARRIS EDUCATION & MEMBERSHIP SERVICES MARTHA BROWN DRIS INSURANCE
MISSION STATEMENT
The Carolinas Independent Automobile Dealers Association was organized in 1955 to assist members in enhancing their reputation in the marketplace, gain political influence and provide opportunities to interact with and meet other dealers for the purpose of sharing business and marketing ideas. As a mature and long-standing Association, we are proud to maintain the ideals and principles set by the founders. But today, we offer more… far more. With a fulltime professional staff, modern technology and world class educational programs, we have become a strong, effective and influential organization that exists for one reason only: To represent the independent, non-franchised automobile dealer!
CIADA is the only not for profit association that represents the independent automobile dealer in the Carolinas with a National affiliation.
THE CIADA EXECUTIVE COMMITTEE
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MANAGEMENT MATTERS / BY KEVIN BAUMGART
TECH ENABLED DEALERSHIPS NEED TECH-SAVVY EMPLOYEES
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>> Remain Competitive in Today’s Industry
WHAT DO MILLENNIALS and technology mean for the future of your auto dealership? The truth of the matter is you’re going to need both if you want to remain competitive in today’s industry. The Impact of Technology on Auto Dealerships One of the biggest changes forcing dealerships to shift the way they sell cars is customer behavior. According to an article from Fortune magazine, customers now make fewer than two visits (1.9 to be exact) to a dealership before making a purchase. Online shopping is the main culprit. Because of the free flow of information on the web, car buyers are more inclined to research their auto purchases at home or on the go using their computers and mobile devices. They’re no longer so dependent on salespeople for information about specific cars. As a result, some auto dealerships are equipping their sales team with greater technology, like tablets, to facilitate customer interactions and close deals in the showroom. Unfortunately, you can’t just arm your sales team with tablets and expect them to be effective at selling in a new way. This is a significant shift, and your employee base has to be comfortable with approaching the customer and engaging them with a piece of technology. Most dealers are targeting Millennials to work on the sales floor for this reason alone. There are many benefits to having technology on the floor accompanied by tech-savvy employees: • It gives the sales team instant access to information when customers have questions to which they may not know the immediate answer. • It initiates the sale on the floor instead of having to wait until customers are in the back office. • It helps build early credibility and trust if your customer sees the employee as a reliable source.
• It will improve the level of professionalism and drive positive impressions of the store. Providing a mix of access to this type of technology and tech-savvy employees is one way auto dealerships can remain competitive. Millennials are a Perfect Fit for Technology Enabled Dealerships While the common stereotype you see of Millennials is a group of people who constantly have their smartphones at the ready or are scrolling through their preferred social media feeds, this generation is exceptionally adept at technology. They were born into an era of innovation that made digital technology one of the primary ways people experience the world. As a result, the generation has been groomed to reach for technology – mobile devices in particular – when searching for the answers to questions. According to the Society of Human Resource Management, Millennials are highly collaborative and make research-driven decisions. What’s more, according to a recent study from PricewaterhouseCoopers, 78 percent of Millennials believe access to technology makes them more effective in their roles at work. Thus, the technology your auto dealership implements is a major contributing factor when Millennials are considering employers. In fact, six in 10 Millennials say the quality of technology a business has was important during recruitment. However, it’s increasingly likely Millennials will utilize their personal technology if the tools they have in the workplace limit them. Meanwhile, employers are also creating or updating their IT policies to adapt to Millennials’ technology needs – for instance, providing smartphones as an employee benefit. Technology and Millennials go hand in hand, especially at your dealership. Whether it’s informed consumers arriving at your dealership with buying research saved on their smart devices or techsavvy employees who understand your customers, technology surrounds this generation and is paramount to delivering a positive buying experience. Kevin Baumgart is VP of Business Development at Hireology. He has spent his entire 15-year career in sales and sales management for entrepreneurial and start-up companies. This article originally appeared on NCM’s Up to Speed blog (blog.ncminstitute.com) and is reprinted with permission.
SAFETY WATCH /
BRIDGESTONE RECALLS TIRES FOR TREADS BRIDGESTONE/FIRESTONE
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>> Tread May Separate
North America Tire (Bridgestone) is recalling 32 Firestone FR710 tires, size 205/65R16, and Champion Fuel Fighter tires, sizes 205/65R15 and 205/70R15, manufactured March 27 to April 9. These replacement passenger car tires may have been manufactured with inconsistent rubber coverage over the steel plies. As a result, the tread may separate. A tread separation increases the risk of a crash. Bridgestone will notify the owners who purchased the tires, and dealers will replace the tires, free of charge. The manufacturer has not yet provided a notification schedule.
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AUGUST/SEPTEMBER 2016 / AUTO DEALER NEWS 7
AUCTION NEWS /
CHARLESTON RAISES $15,000 FOR HOMELESS STUDENTS
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>> Vows to Continue Their Support CHARLESTON AUTO AUCTION , an XLerate Group Auction, partnered
with dealers to raise $15,000 for the Stall High School H.O.M.E. project, making a donation for every vehicle bought and sold May 6-27. Stall High School, located in North Charleston, S.C., currently has 21 students with no home or idea where their next meal will come from. The Stall High School H.O.M.E. project grew from a need to find housing for these students who want to finish school and earn a diploma. “Charleston Auto Auction and their customers are dedicated to helping those in need in the local area. The employees at Charleston Auto Auction and participating dealers truly care about our students who are homeless,” said Stall High School Principal Kim Wilson. “They have embraced the Warrior HOME and as a result it will soon be a reality.” “While we are excited to present this deserving project with a $15,000 check, we know they will need continued help even after purchasing a home,” said Laura Taylor, general manager of Charleston Auto Auction. “We plan to continue to raise funds and provide manpower throughout the year.” To donate to the Stall High School H.O.M.E., contact the auction directly at (843) 719-1900 or mail donations to the Charleston Auto Auction, Attn: Stall H.S. H.O.M.E Project, 651, Precast Lane, Moncks Corner SC 29461. For more information, contact: Jason Moritz at (843) 719-6924 or jmoritz@charlestonautoauction.com or Principal Kim Wilson at (843) 764-2200 or kim_wilson@charleston.k12.sc.us.
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Charleston Auto Auction’s General Manager, Laura Tayler (with microphone) presents a $15,000 donation to the Stall High School Home Project.
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NOW IT IS A MUST >> How Can We Do A Better
Job Retaining Women In Sales?
DEALERSHIPS CURRENTLY REPORT that women represent just 25 percent of face to-face positions. But that small number is powerful: Within four months of reaching that percentage, dealerships typically experience as much as 35 percent gain in overall vehicle sales, new and used, and a substantially increased used car turnover. Less numbers-driven, but just as important, those dealerships also see
an increase in desirable employee statements regarding company loyalty and goals toward longevity. How did they do it? Simple: They brought women into their sales, service and management positions and found ways of retaining them. It’s simple: Attracting women yields high results. Considering 85 percent of all automotive purchases are either directly made by women buyers or directly influenced by them, if we are not responding to this statistic, then our dealerships are missing the boat. Totally. ROI is a key driver in how we consider the physical programs and offerings we put forth to the consumer in our efforts
Explore new technology.
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MANAGEMENT MATTERS / BY JODY DEVERE
Employ marketing specialists comfortable with women’s needs. Eliminate procedures we have utilized just because we have always done so.
to entice them to visit our facilities. We do recognize Internet information access has affected profit margins, margins inflated by consumer ignorance as to how much flexibility in costs existed. The fact is we just cannot make the margins we used to, and have to find ways of addressing our concerns as survival efforts. Playing the numbers game of total sales for a month will eventually be passed with the money lost in potential profits. The bottom line is we must place our investment monies into areas of concentration that will bring us returns that will not only keep us in business but by their very nature help us grow in our financial viability, viability that is attractive to women who may be considering this industry as a workplace. Roadblocks to attracting women. Here are some reasons why we are not attracting women at this point: 1. Traditional resistance. Many organizations still are thematically maledominant and have programs in place that do not have interest to the new womendriven market. “What was good for my dad is good enough for me” is the motto above the entrance of many empty and abandoned dealerships. 2. Reluctance to trying new programs. Management and owners may not have the desire or courage to try new programs. Or they may be lazy. 3. Equitable pay and work programs. There need to be considerations for family needs and even part or adjusted time participations. Traditional long hour work periods do not work. 4. Knowledge and expertise. Existing dealership management may simply not have either or both of these to design and implement marketing to attract and hire women, or initialize training and financial or equitable incentive programs to make this happen. 5. Necessary minimal monetary investments. Many management personnel simply may not want to make these investments.
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must address the elimination of restrictive traditional procedures we may have in place. 5. Encourage our educational systems to step up to the plate, and support local and regional programs. We need realistic training at design, management, service, finance and especially sales. This must happen at all levels of the industry. Today’s women are time-constrained, pragmatic, comfort-conscious, and heavy into efficient and consistent communication with their employers. They are extremely effective at communicating within their own social groups and pay little attention to advertising. They are direct with their customers, and women are especially effective at establishing a meaningful rapport that translates into return business
transactions built upon trust. If we wish to survive, let alone prosper, we cannot wait any longer. Let’s do everything we can to attract these valuable women employees, and provide them with the incentives to keep them with us. The time is now, not tomorrow. Jody DeVere is an internationally recognized speaker, trainer, often quoted industry pundit and spokesperson for the automotive industry on the women’s market. As CEO of AskPatty.com, she provides automotive education to women consumers and an interactive online Certified Female Friendly certification training program for automotive retailers on how to attract, sell, retain and market to women. This article originally appeared on NCM’s Up to Speed blog (http:// blog.ncminstitute.com) and is reprinted with permission.
6. Difficult economy conditions. Many organizations lean on this often-perceived statement as an excuse. This is not an excuse. 7. Negative reputation: Previous poor treatment and lack of respect. The dealership’s experience has left a bad taste in many women’s mouths. Women are still greeted on the sales lot with detestable statements such as, “Is your husband with you today?” With such disrespect, it’s not surprising that women don’t consider dealership work as a viable option. 8. Failure to address the needs of female millennials. Times are different. Women in this largest group of consumers want to be in organizations that “feel good” to their basic drives, other than just to climb through positions or achieve high income solely. They want to have better communication with their administrators and are most often prefer working “with” them, as opposed to “for” them. So, how do we fix this, and not only bring talented women into our organizations but keep them there as well? With sales consultant turnover figures ranging from 72 percent to 80 percent, the highest turnover rate is women at a shocking 90 percent. Turnover among millennials is presently at 54 percent. It is obvious we are doing a lot of things wrong. Here are some realistic solutions to retain women: 1. Get off our butts and try new methods. Explore new technology. Employ marketing specialists comfortable with women’s needs. Eliminate procedures we have utilized just because we have always done so. 2. Re-examine possible positions that can effectively interest and challenge women. Conduct non-traditional interviews that ask what these interests might be. 3. Re-evaluate compensation incentives and adjust them. Consider not just the primary needs of full and part-time women, but their family and personal needs as well. 4. Take a new look at our models. We
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AUGUST/SEPTEMBER 2016 / AUTO DEALER NEWS 11
ASSOCIATION NEWS /
CAROLINAS LEAD THE WAY IN MEMBERSHIP DRIVE
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>> CIADA Brings Home Nine of 16 Crystal Eagle Awards
A NUMBER OF INDIVIDUALS were honored at Wednesday night’s National Leadership Awards Banquet at NIADA’s 70th annual Convention and Expo at The Mirage in Las Vegas. Awards included NIADA Association Executive of the Year Lisette Mariner of the Florida IADA, MVP Eagle Award winner Dennis Pope of People’s Financial, and 16 Crystal Eagle Award winners. Here the Carolinas led the way, bringing home nine of the 16 Crystal Eagle awards: Darla Booher of Deal Depot, Kim Bradshaw of First Nations Auto Sales, Martha Brown of Dealers Risk Insurance, Marty Coates of Coates & Associates, Will Davis of G&B Auto Sales, Luke Godwin of Godwin Auto Sales, Darryl Jackson of Crown Auto Sales and Finance, Steve Matthews of Matthews Motors and Kevin Pendergrass of Carolina Auto Sales of Myrtle Beach. The Crystal Eagle is awarded in recognition of their outstanding effort in generating new members for NIADA. The MVP Eagle, awarded for the first time this year, honors the individual who recruited the most new members during the association’s “Let the Games Begin” membership campaign over the past year. Pope sponsored 227 new members.
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ASSOCIATION NEWS ///
ASSOCIATION NEWS /
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NIADA CONVENTION RECAP
Kris “Tanto” Paronto, one of the heroes of the infamous Sept. 11, 2012 terrorist attack on the U.S. diplomatic mission in Benghazi, Libya, told the harrowing story of those 13 hours in a gripping keynote address >> that left the overflow crowd standing and cheering. Paronto discussed courage and handling adversity and crisis situations, as well as the decision of himself and his CIA Annex security FROM THE VENUE TO THE CONTENT , the 2016 NIADA Convention and team to speak out about what happened that night in the face of Expo was all about reinvention. conflicting reports from government and media that told a different While the theme of “Success By Reinvention” was created with the story. idea of helping dealers thrive in the rapidly changing used car business, Attendees also had a chance to celebrate, dance and loosen up at it fit the industry’s biggest event just as perfectly. the Cigars and Martinis and Margaritas welcome reception in a lush, NIADA celebrated its 70th annual Convention in a new venue – the tropical setting at poolside, and at a disco-themed closing party recently renovated Mirage, which provided a larger yet more intimate following the crowning of Florida’s Scott Lanier as the 2016 National setting – as well as a sold-out 60,000-square foot Expo Hall with more Quality Dealer. than 170 exhibitors and the most extensive dealer education agenda in In addition to the NQD ceremony – webcast live as always on history, featuring more sessions on more topics than ever before. NIADA.TV – the previous night’s National Leadership Awards Banquet It also included more attendees than ever before. The 2016 introduced new NIADA president Billy Threadgill as well as honoring Convention obliterated the event’s attendance record, sailing past the NIADA scholarship recipients and the winners of awards for the top previous mark, set in 2006 at the Las Vegas Hilton, by a staggering 24 performers within the association and the used vehicle industry. percent. The number of dealers and first-time attendees both rose by “I can honestly say my experience was far above and beyond my 30 percent or more. expectations,” said Daniel Johnson of LiteHouse Auto in Lakewood, “I got what I came for,” said Sean Schuetz of Klass Motors in Santa N.Y., a first-time attendee. “We will not miss a Convention from here Ana, Calif. “I wanted to learn new ways to take my business to the next on out.” level, and I’ll be spending the next several months implementing what The 2017 NIADA Convention and Expo will be back at The Mirage and I learned at my dealership. It was the most informative convention I is scheduled for June 12-15, 2017. Save the date and don’t miss your have attended.” chance to be part of the used vehicle industry’s biggest event of the While the education is always the focus, there was, of course, a lot year! more happening.
Reinvention Creates Success for 70th Annual NIADA Convention and Expo
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AUGUST/SEPTEMBER 2016 / AUTO DEALER NEWS 15
ONLINE MARKETING / BY KATHY R. TAFOLLA, LOBEL FINANCIAL
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DOES YOUR CONTENT MARKETING STRATEGY INCLUDE VIDEO? >> Video Outperforms in Driving Conversions VIDEO CONTENT is exploding across the Internet, in social media feeds and in social hubs. Given the growing quantity of social media, you can capitalize on video marketing. Even more, you can shoot, edit
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and produce these videos inexpensively. How is this possible? 1. Write a script. 2. Record a voice over. 3. Use Adobe to create the graphics. 4. Get a video recorder for live video. 5. Use Adobe After Effects for video editing. 6. Add music using sound effects. 7. Publish.
You can also use PowerPoint to video edit if money is a factor and Adobe is out of your budget. Video content marketing allows consumers to satisfy their information and entertainment needs all at once. It’s also a great way for small business owners to compete with larger businesses. Video is unrivaled when it comes to reaching your target audience. YouTube
reports over a billion viewers, almost onethird of the people on the Internet every day. Video content is straightforward, quickly shared and easily accessible. It’s easy to create a business channel where all of your video content can be found through an organic search. Since buying a car is a visual experience and your dealership website is primarily based on images, it makes sense to include video content as a way to build relationships with customers. You’ll make personal connections through your website and build prosperous business connections in the process. Some examples for you to consider are: • Stories from customers. • A fictional series. • Personal stories. • Documentary style videos. • An interview. All of these ideas will help your customers connect to your dealership. This can be a fun and exciting way to not only brand your dealership but engage existing and new customers as well. In content video marketing storytelling is crucial. It’s effective because people love stories and they connect to authentic human experience. It creates an emotional investment. Content can be defined as experimental as much of it is based on trial and error. You post content and track it through Google Analytics to see how it’s ranking in the search engines. You want to know how many website visitors are clicking on it and how long they’re staying on the page. Most B2C business owners know content marketing is the most commercially important part of your digital marketing campaign. Why? The object of content marketing is to help and inform consumers. It is to show people your business knows the industry and their expertise is credible. Mastering a video content marketing campaign will help you build relationships with your customers before they step foot on the premises. Content tells people why your products are good and how it benefits them. For dealerships this might include financing options, reliability, and what sets you apart from the competition. Content allows the consumer to view your offerings, and if presented well, compels them to buy from you. Online marketing reports indicate content videos outperform other content types in driving conversions. Videos increase consumers’ understanding of products and services and website visitors are more inclined to purchase a product after watching a video. Moreover, you can expect to see a rise in interactive and personal video content to help turn viewers into leads.
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BHPH PERSPECTIVE / BY DAVID ALGOOD
UNDERWRITING FOR BHPH SUCCESS AND AVOIDING PITFALLS
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>> Keys to Successful Underwriting
UNDERWRITING IS A KEY component of success for BHPH dealers. It can be broken down into two important categories: the customer and the deal structure. Remember, you don’t make your profit unless the customer pays. While underwriting a deal, the dealer must evaluate a customer’s willingness and capacity to pay. A common pitfall for many BHPH dealers is they avoid pulling credit bureau reports because they know the customers will either have no credit or poor credit. While this is often the case, it is an excellent way to do some basic fact checking with the customer and see if the information is consistent with the application and what they have told you. Some key items to look for are prior auto credit or installment loans and previous address information. If a customer has several repossessions, you will certainly want a very good explanation and check the timeline consistencies for things such as a job loss or divorce. The time and number of payments the customer paid for the previous auto loan is very important as well. When the customer has prior repossession(s), but had paid timely for over a year, you should ask them what caused the repossession, so as not to put them in the same situation. One example of this would be a customer who drives over 3,500 miles a month whose car broke down. This customer would need to be on a short term contract relative to the miles on the car. Conversely, if they paid for their last car or have paid installment loans, your likelihood of repayment improves significantly. Customers with multiple repossessions in the first year and no positive credit are
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ultra-high-risk and should be avoided or limited to deals where you have little or no money on the street. Additional valuable information may be gleaned from the credit bureau report. Review prior addresses with the credit application, discussing any significant differences between it and the bureau report with the customer. When the customer has recent prior addresses well outside of your area, find out what brought them to your area and the likelihood of their moving back. If they did move back it could make both collections and repossession more difficult. When the credit bureau shows a Red Flag alert you should get a copy of the customer’s driver license, proof of residence and, if the warning involves the social security number, a copy of their social security card. The next area to look at is OFAC (Office of Foreign Asset Control) warnings. An OFAC warning exists when the individual is considered to be a “person of interest” to the government. It is very important all OFAC warnings are cleared before a car is sold to the applicant. The second key to successful underwriting is proper deal structure. The proper deal structure will be affordable for your customer, for a term no longer than the useful life of the vehicle, and provide the dealership solid profit margins. BHPH customers often live paycheck to paycheck, and therefore getting a payment that works for both the dealer and the customer is vital. The monthly payment should not exceed the lesser of one week’s take home pay or two weeks net pay less rent. If the customer has a recent repossession while on their current job, their payment should also be at least $50 below their prior payment. In addition to these two items, the most successful dealers often work up a budget with the customer to help determine what they can actually afford. There is an old saying in the BHPH business: “When the car quits running - the customer quits paying.” With that in mind, it is important to structure the financing so the car will still be running at the end of the contract. To estimate the remaining useful life of the car you will need to consider how long you expect the car to last based on its current condition, make, model, age, and engine. Most customers will drive 15,000-20,000 miles a year, but some will drive substantially more. Someone driving 100 miles roundtrip to work
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NCM 2014 benchmark, the average gross profit per car sold was $4,484 on an average ACV of $6,237. each day will drive far more than someone who lives a mile or two from their job. How long the car will last will also depend on how much the owner is willing to do in repairs and maintenance to keep it running. Down payment is another key factor for underwriting and deal structure. A strong down payment will improve your cash flow, while also reducing your risk by lowering your cash in deal. Strong down payments will also increase the incentive to pay, especially when the cash down is money the customer has saved over time. On the other side of the coin, down payments below $800-$1,000 lead to a renter’s mentality. When they get tired of the car after 3-9 months, many will quit paying and you get your “rental car” back. BHPH dealers require a solid markup to be successful. While some dealers will mark up cars 200 percent or more, this is not advisable. Excessive markups will force either much higher payments or terms that far exceed the useful life of the vehicle. Both of these will result in higher credit losses and decreased repeat and referral business. According to the NCM 2014 benchmark, the average gross profit per car sold was $4,484 on an average ACV of $6,237. These reasonable profit margins allow for shorter contract terms and will put the customer in an equity position sooner. This allows you to sell them a car up to a year earlier. The BHPH business is built on repeat and referral business. This level of markup, combined with proper underwriting, deal structure and effective collections will lead to success in the BHPH business David Algood is the director of sales and marketing at AMAC, a rapidly growing finance company doing business in the Eastern half of the United States. For more information contact AMAC at 704-882-7100 (ext. 7509) or visit www.acemotoracceptance.com.
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IAA OFFERS EXPRESS NOTARY >> Electronic Assignment Of Title Documents
INSURANCE AUTO AUCTIONS Inc. recently announced its newest offering, IAA Express Notary, which allows for the electronic assignment of title documents. Carriers that choose Express Notary as their document delivery service can tap into a national network of mobile notaries who will travel directly to the vehicle owner and execute documents on the spot. The electronic assignment ability allows the notary requirement to be satisfied at a faster rate. SAFETY WATCH /
BMW RECALLS VEHICLES FOR CHILD SEAT RISK >> May Increase Risk of Injury
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According to the
AUCTION NEWS /
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BHPH PERSPECTIVE ////
BMW OF NORTH AMERICA LLC is recalling certain model year 2011-17 X3 sDrive28i, X3 xDrive28i and X3 xDrive35i vehicles manufactured July 2, 2010 to April 14; 2015-17 X3 xDrive28d vehicles manufactured March 10, 2014 to March 31; and 2015-17 x4 xDrive28i, X4 xDrive35i and X4 xDriveM40i vehicles manufactured March 3, 2014 to April 15. The affected vehicles have lower anchor bars for securing child restraint seats that may become damaged when using the EuropeanISOFIX-type, rigid-style connector, child restraint system. Damaged lower anchor bars may increase the child’s risk of injury in the event of a crash. BMW will notify owners, and dealers will weld a reinforcing bracket to the lower anchor bars and the vehicle body, free of charge.
AUGUST/SEPTEMBER 2016 / AUTO DEALER NEWS 19
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MANAGEMENT GAMEPLAN / BY SCOTT BERGERON
THE LOST ART OF THE SWITCH >> Bring the Pendulum Back
BACK WHEN car deals were far easier, and customers didn’t spend six months self-diagnosing their needs, the ability to switch a prospect out of one car into another was commonplace and done with virtually every deal. Today, switching prospects from one vehicle to another can almost be considered a lost art. Re-focusing on it, though, can bring your dealership more deals. Historically, switching vehicles was a natural part of the sales process. Today, customers are more rigid in their quest, and to them, it’s often more about finding the “exact perfect vehicle.” Prospects walk in armed with loads of online research information about vehicle history, equipment, trade-in and retail values. But often they haven’t accurately assessed the value of their trade-in or calculated their monthly payments. That’s when forward momentum stops going forward, and the deal starts going sideways. The Swinging Pendulum – from Too Pushy to Too Cushy Traditional used car salespeople often were branded as being too pushy, too money motivated, and far too aggressive in their efforts to make a sale. Today’s pendulum, in many cases, has swung too far the other way. Reacting to a prospect who seems to know it all, many sales reps have basically adopted an order-taker mentality instead of being a value builder and solution provider. Part of this is a natural aversion to the used car stereotype. Part of it is salespeople or the sales process being allowed to become too soft. Here’s a typical scenario: A prospect walks in with an inflated idea of trade-in value, and little or no idea what their actual monthly payment will be. The prospect has researched trade-in value based on retail versus wholesale, and perfect condition compared to actual condition. Other than perhaps a ballpark guess, the monthly payment is an unknown. In some cases, the salesperson may overhear comments about payments or terms, but may choose to still let it go to
20 AUTO DEALER NEWS / AUGUST/SEPTEMBER 2016
the finance office – where it can, and in many cases does, blow up. Where’s the sweet spot? Bring the pendulum back toward the center. Just because a prospect has done research and is somewhat knowledgeable doesn’t mean he or she doesn’t need or want an “expert” to help guide the process. A major key to successfully finding that middle ground is knowing and asking the right questions, and if need be, switching the prospect to another vehicle that makes more sense. Switching it Up Salespeople need to be well aware of their “switch car inventory” ahead of time. Rules of the road include: 1. Training the sales force on switching. During your sales meeting, sales manager(s) should go through their inventory with their sales team and train what’s new on the lot, the hot cars from auction, the perfect switch vehicles – such as cars sold at auction for well below Blue Book and that allow the dealership to essentially get the deal done when trade values are upside down. This gives the sales rep, and the dealership, much better odds at making a deal happen. 2. Training/retraining the sales team on taking charge and being tuned in. Can you tell how to spot a green-pea on the lot? They’re the ones being led by their prospects instead of the other way around. Sales managers need to make sure their team is controlling the deal, not being led down the wrong path by a prospect who seems to know “exactly what they want,” but in the real world isn’t even close to reality for payment and terms. During the initial introduction phase, salespeople should always work towards keeping the prospect as flexible and open to suggestions as possible. As smart as today’s prospects are, it’s always a good idea to remember most only walk into a dealership or purchase a car every four to five years. Salespeople and managers work deals bell to bell nearly every day. So you and your team’s opinion should be taken as expert advice, especially in terms of deal structure. You know what’s
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Former dealer executive Scott Bergeron is the founder and principal at Daily Gameplan (www.dailygameplan.com), a sales team performance company. Daily Gameplan’s Red Books and cloud-based CRM have been used in thousands of dealerships throughout the United States. Bergeron can be reached at 303.918.3169 or scott@dailygameplan.com.
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AUCTION NEWS / BY USED CAR NEWS
>>
going to work and what’s not. The key is having enough rapport and trust built to be able to efficiently lead the deal. This level of competence must extend to making sure walkins, rarer these days, are helped as soon as possible. I walked into a dealership a few years ago wearing my worst blue jeans, and a tank top covered in dried paint. I had finished my Saturday work around the house and was ready to go buy my dream car. I was looking for a certified pre-owned Porsche 911. I was on the lot for at least 20 minutes. There were several salespeople available, but no one acknowledged me. Being from the car business, I really wanted to see if prejudging still existed just from the clothes I chose to shop in. I did finally get help, and yes, I bought the car. But the first impression is still something people put a lot of stock in. 3. Understanding the marketplace. When I visit a town, I make it a point to find prevalent radio stations to get an idea of what, how, and who they’re advertising to. It gives me a quick snapshot of potential audiences for cars – whether it’s young “Kardashian types” or highly educated, more affluent prospects. If I were working at a used car dealership in that town, I would attempt to determine right away what station(s) a prospect tunes in to – which may provide some valuable intel about how to switch and sell a car. Sales managers need to train their people to do similar investigation, so they can learn to spot hot button motivators, as well as building value in benefits. Just segmenting by generation (e.g., millennials) won’t do it. No matter what traits predominate, at the end of the day it still comes back to buying from people they like and can identify with. A salesperson who can listen, build rapport and truly be an expert can switch when need be, or build the value up on the first choice so it makes sense to spend a little more.
ADESA PROMOTES WITHIN DEALER SERVICES TEAM >> Lopez and Loyd Take on New Roles
ADESA RECENTLY ANNOUNCED two promotions within the dealer services team. C.J. Lopez, previously major dealer accounts manager, has been promoted to director of major dealer accounts. Kjersta Loyd, previously general sales manager of ADESA Golden Gate, has been promoted to regional dealer sales manager for the Mideast/Midwest regions. Both positions will report to Steve Dudash, vice president of dealer services. In his new role, Lopez will act as a strategic partner and oversee relationships with major dealer groups. He will be responsible for sharing the latest technologies, products and services to support customers’ everchanging business needs and enhance their overall auction experience. Lopez started his career with ADESA in 2006 as the dealer sales and services manager of ADESA San Diego. In 2012 he was promoted to general sales manager, and in 2014 he was promoted to major dealer accounts manager. In her new role, Loyd will collaborate with local auction sales managers and provide guidance on managing dealer sales activities. She will develop plans and sales strategies to ensure consistency across auction locations and prioritize common goals, such as providing quality service to customers. Loyd brings nearly 20 years of automotive industry experience to her new position. She began her career with ADESA Seattle in 1998 and served in numerous roles of increasing responsibility for more than a decade. She worked at Washington Liftruck for two years and then returned to ADESA Seattle in 2010 in outside sales for the dealer consignment team. She was promoted to dealer sales and services manager at ADESA Houston in 2011, where she won 2012 Central Region Dealer Sales MVP and 2013 West Region Online Champion honors. In 2014, she was named general sales manager of ADESA Golden Gate.
AUGUST/SEPTEMBER 2016 / AUTO DEALER NEWS 21
AUCTION NEWS /
AUTENRIETH RETURNS TO CAROLINA AUTO AUCTION AS GENERAL MANAGER
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>> Moving Home from Indiana Auto Auction
HENRY AND PATTY STANLEY have announced that Eric Autenrieth will move to Carolina Auto Auction as the facility’s general manager. Autenrieth will transition to his new leadership role over the next several months, dividing his time between Carolina Auto Auction and Indiana Auto Auction, which he has managed and owned in partnership with his parents, the Stanleys, since 2007. “We’re delighted Eric will be returning to Carolina Auto Auction,” said Henry Stanley. “He has done an outstanding job at the Indiana Auto Auction in the nine years since we bought that facility. The time was right to make changes to the management structure at Carolina Auto Auction, and we know that the auction will continue to grow and thrive under his supervision.” Stanley explained that when he and Patty purchased the Carolina Auto Auction, Eric joined them in the family business, working there for a decade as an outside dealer sales representative, sales and marketing manager, fleet/lease manager, and finally as assistant general manager. When they purchased Indiana Auto Auction in 2007, Eric moved north to manage that facility. “2007 was not an opportune time to start a new venture in the auction industry,” said Patty Stanley. “The economic downturn presented all of us with serious challenges, but Eric showed tremendous leadership and skill in making Indiana Auto Auction a success. He has grown the sale to offer 800 cars a week, with an excellent balance of fleet/lease and dealer consignment.” Under Autenrieth’s leadership, Indiana Auto Auction has been named one of the top auctions in the nation for Fiserv every year since 2011.
22 AUTO DEALER NEWS / AUGUST/SEPTEMBER 2016
“Carolina is ‘home’ to me and my family, and I am excited to start working with the team at Carolina Auto Auction,” said Autenrieth. “Like their counterparts at Indiana Auto Auction, the staff at Carolina Auto Auction really focuses on one-on-one relationships with their customers, and I look forward to working with them all to build on the pattern they have set for excellence in service and performance.” As he manages operations at Carolina Auto Auction, Autenrieth will maintain close ties to Indiana Auto Auction, overseeing the management team there, which will be headed by Luke Dietrich. Autenrieth continues his family’s legacy of auction ownership and management, as well as industry activity and leadership. Following Henry Stanley’s lead, who was NAAA president in 19992000 and is a member of the NAAA Hall of Fame, Autenrieth has been president of Midwest Chapter of the NAAA, and currently serves on the NAAA board of directors. He is also ServNet’s vice president/treasurer, slated to assume the role of president in the spring of 2018, a position held by his mother, Patty, from 2014 through 2016. She is currently ServNet’s chairman of the board. Carolina Auto Auction holds sales every Wednesday at 9:00 a.m. In addition to their extensive offering of vehicles from top national accounts such as Exeter Finance Corp, BB&T, Fiserv, Credit Acceptance, United Auto Credit, Donlen, Wheels and ARI, the auction offers one of the largest dealer consignments in their region. All lanes are accessible for bidding online in real-time through EDGE Pipeline and all “No Sale” units are available for purchase after the sale. Carolina Auto Auction is a proud member of the ServNet auction group.
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AUCTION NEWS /
CHANGES AT MANHEIM DARLINGTON AS IT CELEBRATES 73 YEARS
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>> Growth Fueled by Investment and Innovation
TO BETTER SUPPORT DEALERS’ inventory needs, Manheim Darlington recently launched its Retail Solutions services, unveiled a new facility and announced local hiring plans. These milestones were celebrated during a series of anniversary events showcasing the Darlington, South Carolina location’s growth and commitment to be a strong business leader, community partner and area employer. The longest-running used vehicle auction in the world, Manheim Darlington is honoring its 73 years in operation and 25 years as a Manheim site. “Investment and innovation have enabled Manheim Darlington to grow significantly since our early days,” said general manager Danny Brawn. “Service, value and relationships have kept dealer clients coming back for more than seven decades.” Highlights of the anniversary festivities included: • May 25: Grand opening of the new Retail Solutions facility provided clients with greater access to high-quality services that produce retail-ready vehicles. The 48,000-square-foot building – featuring 32 lifts, two four-car paint booths and a state-ofthe-art Enhanced Vehicle Imaging Suite – houses equipment and team members that allow dealers to seamlessly obtain post sale inspection, professional vehicle imaging, and retail quality mechanical, detailing and reconditioning services. Along with options for merchandising, titling, financing, transportation and purchase protection, these services help dealers efficiently get their newly purchased inventory retail ready before leaving the auction location. These offerings help dealer clients shorten vehicle turn time and reduce overhead by lowering personnel and fixed costs. This frees up resources for customerfacing priorities. • May 25, 9 a.m. to Noon: Hiring event for the new Retail Solutions facility sought to fill approximately 75 positions by the end of 2016. • May 26: “Driving Dealer Success” 73rd Anniversary Sale offered opportunities for clients to participate in the wholesale auction, tour the new Retail Solutions facility and sign cards for members of the military in honor of Memorial Day. One dollar for every unit registered and $2.50 for every red vehicle registered was donated to the Eastern South Carolina Chapter of the American Red Cross. Evolving from Clanton’s Auto Auction, the business held its first one-lane sale in 1943, has been in its current location since 1948, and became a Manheim site in 1991. It has a rich history and is recognized as the first auction to host a factory sale, as well as guarantee checks and titles. While the company’s pioneering spirit has not changed over time, Manheim Darlington today functions, and is structured, differently than in the past. The business now offers both wholesale and retail services to dealers, with Manheim operating as the only Retail Solutions provider in the remarketing space. The Darlington, South Carolina location also registers about 1,200 vehicles per week on 125 acres that support 12 auction lanes and multiple facilities. 24 AUTO DEALER NEWS / AUGUST/SEPTEMBER 2016
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ASSOCIATION NEWS /
CAROLINAS’ BILLY THREADGILL BECOMES NIADA PRESIDENT
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>> Plans to Emphasize the Value
of Membership
BILLY THREADGILL, president of Van’s Auto Sales in Florence, S.C. and past president of CIADA, opened his term as president of the National Independent Automobile Dealers Association for 2016-17 by receiving the President’s Ring during Wednesday night’s National Leadership Awards Banquet at NIADA’s 70th annual Convention and Expo at The Mirage in Las Vegas. Threadgill, who succeeds 2015-16 president Frank Fuzy of Florida, said in his address at the banquet he is focused on making sure dealers understand the value of NIADA membership. “I often get asked about the value of joining the NIADA and the state IADAs,” he said. “I give them the facts – once they are a member, the benefits are endless. “For example, the NIADA Convention. It doesn’t matter if you are a traditional used car dealer, a Buy Here-Pay Here dealer, a Lease Here-Pay Here dealer, in the rental business or a wholesaler, the education from this conference can only make you want to be a better and more successful dealer.” Threadgill, 59, is a second-generation dealer, operating the dealership opened by his father Van on March 12, 1975 – though he actually began his career in the auto industry at age 7. That’s when Van, then working for a Ford franchise, put Billy to work washing cars, sweeping the lot and the office, and sifting cigarette butts out of the sand in the ash trays. “And I did the flower beds,” Threadgill said. His job description has changed a bit since then – in addition to his sales operation, he also runs a related finance company, a U-Save auto rental franchise and a subsidized transit company that provides transportation to and from work for federal employees. And he has a third generation – his son, Michael – working at the dealership as secretary-treasurer. Threadgill has been on the NIADA executive committee since 2009, serving as secretary, treasurer, regional vice president, senior vice president and president-elect. He is also a former chairman of the NIADA State Presidents Council. Threadgill was recently honored by members of the South Carolina legislature for his continuous efforts to support the Free Enterprise system and to enhance the reputation of independent automobile dealers. Earning political influence and providing opportunities for elected leaders to interact with and meet dealers for the purpose of sharing business information is vital to the future of the industry. We are excited to have one of our own leading the national association this year and look forward to what lies ahead. Congratulations, Billy! 26 AUTO DEALER NEWS / AUGUST/SEPTEMBER 2016
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Simple Rates
120 Day Plans
Lower Expenses
INDUSTRY NEWS /
CHRIS IRVING APPOINTED AS ROUTEONE’S CHIEF TECHNOLOGY OFFICER >> Irving Joins Executive Team
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ROUTEONE’S BOARD OF DIRECTORS recently appointed Chris Irving as RouteOne’s Chief Technology Officer. Mr. Irving has spent eight years with RouteOne and served as its director of application development and director of IT operations. He will now assume the responsibilities for managing all information technology and systems development, which were formerly overseen by current RouteOne CEO, Justin Oesterle. Mr. Irving now joins RouteOne’s executive team, helping build upon its strong strategic and operating foundation. Led by Justin Oesterle, the executive team will now consist of: • Janice Basile, chief financial officer, responsible for all accounting and financial matters. • Daniel J. Doman, chief legal and privacy officer, responsible for
all legal matters, security, internal audit and governmental affairs. • Chris Irving, chief technology officer, responsible for managing all information technology and systems development. • Todd Mason, chief strategy officer, responsible for managing product conception, development, and strategy, as well as all marketing-related strategy and tactics. • Brad Rogers, chief operating officer, responsible for managing all sales, customer strategy, integrations, and customer support services. Prior to joining RouteOne, Mr. Irving was responsible for information technology across the automotive and financial services industries, including information technology manager at Brembo S.p.A., NAO operations support manager at GMAC Financial Services, and senior operations manager of information technology at Kaplan Financial. He also spent time as a consultant for General Motors, focused on operations, process improvement, and governance. Mr. Irving earned a Master’s of Business Administration from Walsh College. He earned his Bachelor of Science from Michigan State University and graduated from the Electronic Data Systems Information Analyst Development Program. For more information on RouteOne visit www.routeone.com.
2016 EDUCATION CLASS SCHEDULE
NOTES:
28 AUTO DEALER NEWS / AUGUST/SEPTEMBER 2016
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SALES MATTERS / BY DEALERSOCKET
FTC SCHEDULES DISCLOSURES WORKSHOP
COMPETING WITH FRANCHISE DEALERS AND COMING OUT ON TOP >> How Converting Sales
THE FEDERAL TRADE COMMISSION will host a public workshop on Sept. 15 to examine the testing and evaluation of disclosures that companies make to consumers about advertising claims, privacy practices, and other information. The FTC’s workshop will explore how to test the effectiveness of these disclosures to ensure consumers notice them, understand them, and can use them in their decision-making. The workshop, called “Putting disclosures to the Test,” is aimed at encouraging and improving the evaluation and testing of disclosures by industry, academics, and the FTC. Effective disclosures are critical in helping consumers make informed decisions in the marketplace. The FTC has a long commitment to understanding and testing the effectiveness of consumer disclosures, and is especially interested in learning about the costs and benefits of disclosure testing methods in the digital age. Among the areas where disclosures play a key role in consumer protection are: disclosures in advertising, designed to prevent ads from being deceptive; privacy-related disclosures, including privacy policies and other mechanisms to inform consumers that they are being tracked; disclosures in specific industries designed to prevent deceptive claims, including jewelry, environmental claims, and fuel economy advertisements. The FTC is soliciting presentation proposals for the event, which may be submitted to disclosuretesting@ftc.gov. More information on the proposal process is available on the workshop’s website. Members of the public may also submit comments for the workshop online. The public comment period will remain open until Nov. 2. The workshop is free and open to the public. It will be held at the Constitution Center, 400 7th St., SW, Washington, DC 20024. 30 AUTO DEALER NEWS / AUGUST/SEPTEMBER 2016
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>> Putting Disclosures to the Test
to Service Can Help You Sell Cars
DEALERSOCKET’S DAR for Fall 2015 cites two primary problems independent car dealers face. One is used car sales and the other is repair services. Why are these issues for independent dealers? This finding is based on an independent dealer’s ability to convert used car sales to repair services, which correlates with customer satisfaction and retention. How do you convert sales to service? You must change customer perception. Almost all business is judged by the strength of the customer service department. You need to change consumer buying habits. DealerSocket reports for independent dealers only 30 percent of sold customers brought their vehicle back to the dealership for service within the first year. The average percentage of repeat customers is only 20 percent. They examined a Chrysler Jeep dealer and discovered the average sold customer who brought their vehicle back to the franchise dealer for service during the first year of ownership was 80 percent while the customer retention rate was 44 percent. How do they do it? According to DealerSocket, they have established a two-step process unique to their group and region. They introduce all new customers who purchase a vehicle to the service department at the time of delivery by scheduling their first oil change. Once the customer is in the service department, they created a program they call Platinum Plus. Every time a customer spends money in the Service Drive, 15 percent of dollars spent goes towards the purchase of their next vehicle. This has proven to increase retention in service. Converting customers who bought vehicles from the sales department into service customers is the formula for increasing customer holdings. The cycle of customer sales purchase to customer repair service, coupled with a 2-5 year trade-in is the pattern every dealership seeks to obtain. How does an independent dealer compete with the larger franchise? DealerSocket surveyed consumers and found 75 percent say where they purchase their vehicle is influenced by negative online reviews. Your online presence matters and there are ways to make it work for you. DealerSocket proposes several solutions: • Data mining or data discovery is the process of analyzing data from different perspectives and summarizing it into useful information. This information can be used to increase revenue, cut costs, or both.
This software is an analytical tool often used by retail, financial, communication and marketing organizations. It enables companies to determine relationships among internal factors like price, product positioning, or staff skills to external factors like economic indicators, competition, and customer demographics. This allows you to properly position your business and possibly increase customer sales and retention. Customer relations management software keeps a customer database with phone numbers and email addresses, so you can schedule follow ups, appointments, and email blasts that allow you to continually reach sold and prospective customers.
Every time a
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INDUSTRY NEWS / BY USED CAR NEWS
customer spends money in the Service Drive, 15 percent of dollars spent goes towards the purchase of their next vehicle.
• Schedule your customer’s first oil change before they walk out the door and send a reminder before the appointment date. This is an excellent way to build a sales/service cycle. • Examine sales trends, including the retail sales outlook, trends by vehicle type, web based and device driven sales, and the online shopper and how they’re utilizing your website. Traditional marketing processes are irrelevant in light of today’s online marketplace. The DealerSocket DAR for Fall 2015 summarizes their report the following way: Increase customer retention by: • Integrating sales and service processes. • Building trust and communicating the value of the service department within the first year of selling a vehicle. • Utilizing data mining software. Grow revenue by: • Implementing appointment confirmation processes. • Focusing on used car opportunities. • Decreasing spending on traditional advertising. • Creating a digital shopping experience that drives consumer engagement.
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COMPLIANCE OVERDRIVE / BY CHIP ZYVOLOSKI
LIFTING THE HOOD ON CFPB’S PROPOSED CONSUMER ARBITRATION RULES
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>> How it Might Affect You
BY NOW, YOU’VE READ about the Consumer Financial Protection Bureau’s proposed new rule affecting consumer arbitration agreements. The headlines are all about its proposal to prohibit consumer arbitration clauses from blocking consumers’ ability to join class action lawsuits. A lot has already been written about that point. But there are a few details that will help round out your understanding of the proposal. So let’s look under the hood at the proposed rule and how it might affect you if it becomes final. 1. Ban on prohibiting consumers from joining a class action lawsuit. This is the main point you’ve heard about. Arbitration provisions are often part of the retail sales contract or are separately executed to cover a motor vehicle credit sale. They commonly give either party the right to require the other to arbitrate a future dispute rather than resolve it with a civil lawsuit. That means, for example, if a buyer files a civil lawsuit or joins a class action civil lawsuit, the dealer can require the buyer to resolve the issue through arbitration. If the CFPB’s proposed rule is finalized, consumer arbitration agreements could no longer allow a dealer/creditor to require a buyer to arbitrate instead of filing or joining a class action lawsuit. If the proposed rule becomes final, consumer arbitration agreements entered into after the effective date will require the following provision: We agree that neither we nor anyone else will use this agreement to stop you from being part of a class action case in court. You may file a class action in court or you may be a member of a class action even if you do not file it. Dealers will need to modify their consumer arbitration agreements to include the new provision and to make the text consistent with new limitations. Of course, the other option is for dealers to simply stop using consumer arbitration provisions. 2. Arbitration class actions. The proposed rule does not seem to prohibit consumer arbitration provisions that prevent buyers from creating or joining a class-wide arbitration proceeding. Consumer arbitration agreements commonly prohibit class action arbitration proceedings, so those provisions could remain unchanged. 34 AUTO DEALER NEWS / AUGUST/SEPTEMBER 2016
3. Paying for consumer arbitration. In the past, the consumer arbitration process was criticized for potentially being more expensive for consumers than small claims courts or other civil lawsuit alternatives. If it was more expensive, the prospect of arbitration might cause some consumers not to pursue their claims. The cost of arbitration has been raised in lawsuits to argue that an arbitration agreement should not be enforced. Today, many consumer arbitration agreements provide the dealer will pay most or all of the arbitration filing fees, arbitrator’s fees and other arbitration costs. In addition, arbitration organizations like the American Arbitration Association and JAMS have adopted consumer arbitration rules requiring the dealer to pay most or all of the costs of arbitration. The CFPB’s proposed rule does not regulate who pays for consumer arbitration. Since claims will probably be subject to arbitration organization rules anyway, it’s not likely dealers will change their contract terms on who pays for arbitration. Dealers will probably continue to bear much of the costs of consumer arbitrations. 4. Required reporting of arbitration results. If the proposed rule becomes final, in any arbitration action that results from a consumer pre-dispute arbitration agreement, the creditor must provide the CFPB with certain information about the claim and results of arbitration. The CFPB plans to use the information as part of its research on the topic. 5. Timeline from proposal to final rule. The CFPB is seeking public comments on its proposed rule. Comments must be submitted within 90 days of the date the proposed rule is published in the Federal Register. If the amount of early media attention is any indication, the CFPB will likely receive a number of comments. It will then take some time to analyze the comments and consider any edits to the proposed rule. The proposed rule specifically provides that if it is finalized, it will become effective 211 days after publication of the final rule in the Federal Register. Putting these steps together, if the CFPB publishes a final rule, it probably will become effective no sooner than May 2017. The CFPB’s proposed rule is receiving a lot of attention in the auto finance marketplace. Most of the attention is on the proposal that dealers can’t use an arbitration agreement to prohibit consumers from joining a class action lawsuit. Much will continue to be written about that specific item. But remember the other details will help determine whether the engine of consumer arbitration agreements will continue to run or end up on the scrap heap. Chip Zyvoloski is a senior attorney for indirect lending at Wolters Kluwer. For more information, please visit www.wolterskluwerfs. com/indirect.
MARKET WATCH /
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BLACK BOOK UNVEILS RESIDUAL FORECAST ON THREE-YEAR-OLD VEHICLES >> Rising Supply’s Continued Impact
BLACK BOOK, a division of Hearst Business Media that provides new and used vehicle valuation services and custom data licensing solutions, unveiled its May residual forecast illustrating the downward pressure on prices that increased supply will continue to have over the next few years. Black Book forecast data shows residuals on an average three-year-old vehicle will dip from the current three-year retention of 52 percent in 2016 to 47.8 percent by 2019. Retention values on a three-year-old vehicle peaked in 2013 when vehicles were retaining approximately 54.5 percent of their original typically-equipped retail. Favorable credit availability, continued growth in demand, and consistently low gas prices have provided support in keeping retention rates high in the last five years. Increased used supply in the marketplace, driven by the significantly large volume of sales on new cars and trucks has played a driving role in slipping retention rates this year. Here are the historical three-year retention rates and the projected residual forecast on an average three-year-old vehicle according to Black Book: • 2012: 53.8 percent. • 2013: 54.5 percent. • 2015: 54.1 percent. • 2016: 52.0 percent. • 2017: 50.1 percent (forecast). • 2018: 48.6 percent (forecast). • 2019: 47.8 percent (forecast). The historical data represents published Black Book Wholesale Average values as a percent of new typically-equipped retail. The forecast represents published Black Book Residual Values averaged across all threeyear-old models. “Despite the industry’s continued efforts to maintain a strong pace of sales on new cars and trucks, the increased level of supply in the used market has begun to weaken prices on both cars and trucks,” said senior vice president of automotive valuation and analytics Anil Goyal. “We saw the first sign of this in 2015, when cars saw above-average depreciation on the year, and this year we will see rising depreciation for truck segments as well.” www.theciada.com
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AUGUST/SEPTEMBER 2016 / AUTO DEALER NEWS 35