DEALER’S
ILLINOIS INDEPENDENT AUTOMOBILE DEALERS ASSOCIATION
EDGE
JANUARY/ FEBRUARY 2019
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• Placing the guide in the glovebox or
INDUSTRY NEWS |
By Auto Remarketing Staff
XLERATE GROUP
BULKS UP
DIGITAL TEAM
Growing Beyond the Physical Lane
XLerate Group Auctions has made two moves the company’s chief executive says help the auction group “continue leading independent auctions beyond their physical lanes.” XLerate promoted Kelly McAllister to serve as executive director of digital strategy, while also hiring a digital manager of remote markets. Named to that position is Keith Fetz, who most recently was with Clark County Auto Auction. McAllister’s most recent post at XLerate was as director of online business development. He has been a part of XLerate’s corporate team since 2015 and was part of the team at Texas Lone Star Auto Auction when it was bought by XLerate years earlier (when it was known as the American Auto Auction Group). “As the digital buying and selling space in our industry continues to expand and reveal new technologies, it is important to identify and develop a strategy for our growth,” XLerate chief executive officer Cam Hitchcock said. “Promoting Kelly McAllister, and augmenting our digital sales team with Keith Fetz allows us to continue leading independent auctions beyond their physical lanes,” Hitchcock said. XLerate senior vice president of sales Pat Dudash said McAllister has helped the company boost its online sales by more than 450 percent since 2015, adding that bringing in Fetz “will strengthen our ability to build and grow XLerate Group’s multi-platform online sales initiatives.” McAllister said, “Non-traditional sales channels are fast becoming traditional in our industry. I have watched our industry approach auction sales as either online or in the lane, and am now witnessing our auctions learning to blend and tailor their approach to both.”
REGULATORY MATTERS |
By Anthony Cacciatore & Adam Steele
FTC USED CAR BUYER’S GUIDE
Three Things Auto Dealers Need to Know
Though its usage rules may seem straightforward, the Federal Trade Commission’s Used Car Buyer’s Guide includes several requirements that seem to catch many auto dealers off guard. First and foremost, the FTC requires it be displayed on all used cars sold by a dealer. The guide must contain details concerning the vehicle’s background along with any warranties available to the buyer. Failure to perform these steps can lead to private class action lawsuits and FTC enforcement penalties reaching $41,484 per incident. DON’T FORGET TO DISPLAY THE ENTIRE GUIDE The FTC requires the guide be affixed to the vehicle in such a way that both sides of the guide are easily readable by potential buyers. This rule, however, presents an initial challenge because the guide is two pages long. Per the FTC, compliance can be accomplished by: • Displaying the guide on one of the vehicle’s windows so that both sides may be read. • Hanging the guide from the vehicle’s rearview mirror. • Placing the guide in a plastic sleeve on the outside of the vehicle so buyers may remove and read it. • Another creative solution that doesn’t prevent the consumer from seeing the full document for the vehicle. What doesn’t work? • Using a double-sided print so that the reverse is only available by looking through the other side of the car window.
under the seat. “AS IS” PROVISIONS DON’T PREVENT ALL CONSUMER CLAIMS Another area that is particularly sticky for the Buyer’s Guide is warranties. Many dealers are under the false impression that checking the “as is – no dealer warranty” box prohibits all consumer claims. Unfortunately, that isn’t the case. The reality is that a dealer selling a car “as is” only prevents claims arising from implied warranties. Implied warranties can be disclaimed. There are two so called “implied warranties” involved whenever a car is sold – implied because they exist even if they are never spoken aloud or written. They are the implied warranty of merchantability and the implied warranty of fitness for a particular purpose. In laymen’s terms, this means warranties that a car is fit for sale (i.e., merchantability) and will be useable for driving (i.e., fitness for the particular purpose). Express warranties, on the other hand, cannot be disclaimed through the use of an “as is” provision or some other expression the car is offered without warranty. Dealers, and especially sales personnel, have to be particularly careful when selling a used car not to cross the line from sales puffery to an unintended warranty. Express warranties are created when a salesperson makes a verbal or written statement that essentially guarantees product performance or quality. Example of express warranty: “This car will last you 200,000 miles!” Example of sales puffery: “This car is in good condition and a great value!” Express warranties also obligate the dealer to claims concerning those representations. Dealers need to be careful about what representations they make about a car to buyers because an “as is” provision doesn’t nullify those representations. UPCOMING ENFORCEMENT Arguably, the most important thing dealers need to be aware of concerning the Buyer’s Guide is that regulators will be cracking down. The guide has been on the FTC’s watch list ever since rules governing the guide were revised in 2016. Last year, the FTC performed a random compliance audit of more than 2,300 vehicles nationwide to see if dealers were following the rules. They weren’t. In fact, over 50 percent of those vehicles failed to either include the guide or display it properly. Seeing such a huge red flag, the FTC is surely signaling an increase in regulatory crackdowns. Savvy dealers will take steps to ensure compliance with these regulations and avoid potentially substantial fines by working with experienced automotive counsel that can advise and audit their guide use and related consumer compliance obligations. Anthony Cacciatore and Adam Steele are attorneys with Ohio law firm Mac Murray & Shuster LLP. For more information, call 614.939.9955 or visit www.mslawgroup.com.
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JAN/FEB INSIDE
2019
03.............................FTC Used Car Buyer’s Guide 06..................................... Facebook Marketplace 07.................................................. 20,000 by 2020 09...............................NIADA Government Report 10...................Educating the Educated Customer 13......................... Reconditioning Best Practices
ADVERTISERS INDEX
Dyer Auto Auction............................................... 5 Manheim ............................................................. 11 NextGear Capital................................................12 Textmaxx Pro...................................................... 7 vAuto................................................... Back Cover
WHAT’S NEW
NIADA HR SUPPORT CENTER NIADA is proud to announce the creation of our new HR Support Center. NIADAHR.com is designed to help dealers navigate today’s hazardous and litigious business environment. Need a form? Need a document? Need an employee handbook? Need advice? It is all at your fingertips! Welcome to NIADAHR.com, your complete HR Resource Center. And it is currently offered at a 25-33 percent discount! For more information or a tour of the services, contact our developmental partner at Robin@MyPayrollSite.com or 888-8782101 Option 2.
ASSOCIATION NEWS
CONGRESSMAN VISITS LOCAL DEALER
Building Relationships
Congressman Mike Bost (R-Ill.) recently stopped by to visit his constituent and NIADA member Auto Credit of Southern Illinois. NIADA BHPH Commissioner and ILIADA board member Steve Taylor gave the congressman a close up view of the great service provided by the dealership. If you would like to have your member of Congress visit your business, please call our government affairs department at 817.640.3838 and we can assist you in making those arrangements.
BOARD MEMBERS
OFFICE
For information on how to become a member of IIADA, please contact Scott Alpeter at 800-987-6627 or alpeterscott@gmail.com.
NIADA HEADQUARTERS NATIONAL INDEPENDENT AUTOMOBILE
DEALERS ASSOCIATION WWW.NIADA.COM • WWW.NIADA.TV 2521 BROWN BLVD. • ARLINGTON, TX 76006-5203 PHONE (817) 640-3838
For advertising information contact: Troy Graff (800) 682-3837 or troy@niada.com. The Dealer’s Edge is published bi-monthly 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 Dealer’s Edge or NIADA. Likewise, the appearance of advertisers, or their identification as members of IIADA or NIADA, does not constitute an endorsement of the products or services featured. Copyright ©2019 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 Jeffrey McQuirk • jeffrey@niada.com PRINTING Nieman Printing
CHAIRMAN
Gordon Tormohlen Tormohlen’s Good People Automotive 1800 S Ihm Blvd Freeport, IL 61032 815-232-5543 goodpeople@aeroinc.net
PRESIDENT
Joe Mok G Motor Cars 2411 E. Oakton St Arlington Heights, IL 60005
VICE PRESIDENT
Eric Nelson Nelson Automotive Inc. 1801 S Busse Mt Prospect, IL 60056 eric@heycars.com
www.il-iada.org 800-987-6627
TREASURER
BOARD MEMBERS
Mark Alcorn Carlyle Auto Sales 1708 Broadway Rockford, IL 61104 815-262-2231 mark467@frontier.com
Ginger Higgins Integrity Motor Cars
SECRETARY
Alex Tovstanovsky 8959 Hanslik Ct Naperville, IL 60564 (630) 631-2535
EXECUTIVE DIRECTOR
Scott Alpeter IL-IADA Headquarters 129 S Phelps Ave Suite 706 Rockford, IL 61108 (800) 987-6627 alpeterscott@gmail.com
Angus Macaskill Carmax Randy Crase Crase Auto Connection Steve Taylor Auto Credit of Southern Illinois Steve Luczak Advantage Auto Mike Wells Integrity Motors Arien Whitehall Standard Automart Gary Dixon Dixon Auto Sales John Gentry Gentry Motors Moises Aleman Roselle Motors
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ASSOCIATION NEWS | By Scott Alpeter
10 WAYS TO ELIMINATE
ISOLATION AND CONNECT
Director’s Message
One of the major benefits of an association like IL-IADA is being able to connect and band together with others who have similar interests and good ethics. There are certain things that are difficult to accomplish on our own. Here is some helpful advice on connecting with others from Dan Rockwell, the “leadership freak.” Everything is worse when faced alone. Lousy leaders withdraw, build barriers, condone silos, and stifle relationships. Pulling away feels safe, but it’s destructive. Isolation causes, magnifies, and exacerbates every issue leaders may face. For example: • Distrust expands when you hide in your office. • Arrogance, the deadliest leadership failure, grows in segregation.
• Earning respect from older, more
experienced employees doesn’t happen from a distance. • Fear and insecurity increase in isolation. Everyone knows something’s wrong when you close down and pull away. Those we push away become the enemy. Pushing others out is a tragic expression of inexperience. People cause the problems, but they solve them, too. The more you feel like pulling away, the more you must connect. Leadership in isolation is an empty title. CONNECTING • Learning connects. Use four words every colleague wants to hear: “What do you think?” Know-it-alls push away. • Fascination connects. Feel people leaning in when you say, “That’s fascinating.” • Aspiration connects. “How can we be better?” • Purpose connects. “How can we make a difference?” “Why does this matter?” • Compassion connects. • Vulnerability connects. • Listening connects. • Progress connects. “What’s the next step?” • Respect connects. “You are great at ________.” • Serving connects. (As long as it’s not meddling.) “How can I help?” Connecting is the first step toward leveraging opportunities and resolving issues.
You know how to connect. Stop making excuses for not doing it. No one builds connections for you. At best, others open doors, but you step through. POWER OF CONNECTIONS Craig Groshel said, “Show me your friends and I’ll show you your future.” Connections determine the direction and destiny of your leadership. Every leadership capacity and ability is magnified through connection. Connected leaders are strong. Disconnected leaders are fragile. NEXT STEP Exponential influence: help others connect with others. Dan is direct and I’ve learned that he really knows his stuff when it comes to leadership. The Illinois IADA is here to help educate and advocate on your behalf. This is your association and we need to encourage others to join with us to make our organization stronger and better. Who can you connect with? Who do you know that ought to be an active member of our association? Let’s encourage other good people we know to join with us to help us leverage opportunities and resolve issues. I hope 2019 is a great year for each of you! Sincerely, Scott Alpeter Director, Illinois IADA
INDUSTRY NEWS
J.D. POWER PROMOTES VALUATION EXPERT
Jonathan Banks
Jonathan Banks has been promoted to vice president and general manager of vehicle valuations at J.D. Power. Banks has been in the auto industry since 1995. He’s managed the development of analytical models related to new and used vehicle demand and pricing for the last 20 years, and he’s overseen the development of the J.D. Power residual values model. In his new role, he’ll be managing the overall operations strategy of Used Car Guide and spearheading initiatives to improve the valuation process. WWW.IL-IADA.ORG JANUARY/FEBRUARY 2019 DEALER’S EDGE 5
ONLINE MARKETING | By Digital Air Strike
FACEBOOK MARKETPLACE FOR AUTO DEALERSHIPS
Explained in 60 Seconds
Facebook Marketplace is an easy, convenient way to buy and sell just about anything, including cars. More than just a replacement for sites like Craigslist, Facebook is quickly turning Marketplace into the world’s largest online e-commerce site. Your dealership needs to be ready. Facebook recently revealed a series of partnerships with automotive companies like Kelley Blue Book, Cars.com, Edmunds, and others that are quickly turning Facebook Marketplace into the biggest car buying site, used by 550 million people each month – and quickly growing. It’s free to manually upload used vehicles to Marketplace and start selling!
Dealerships can also partner with companies to help them automatically upload their inventory onto Facebook Marketplace. Once posted, vehicles and dealerships on Marketplace are displayed to shoppers based on their location. By default, Marketplace shows listings and dealerships within 40 miles of a person’s location. Shoppers can sort through car listings using typical filters like price, model, and mileage. A big bonus of Marketplace is that after a shopper views a vehicle, it will be advertised to them again in their newsfeed, as well as newly added similar vehicles. This is a great cost-effective way to keep your vehicles and dealership fresh in a customer’s mind during that critical consideration phase. Facebook Marketplace doesn’t stop at listing your used inventory. You can also advertise on the platform, allowing you to reach customers where they’re spending their time. This gives your dealership an advantage over your competitors because you are connecting with customers who are actively shopping for vehicles. Interested buyers can quickly and easily
contact dealerships directly from the vehicle listing with Facebook Messenger. Facebook Messenger conversations are a little different from your typical chat interaction (in a good way). Unlike some website chat interactions, conversations in Facebook Messenger don’t disappear. This opens the opportunity for future follow-ups to help nurture the sale. Additionally, shoppers are notified of new messages on both Facebook and Messenger apps, which helps increase read and response rates. While it’s great that you can access Facebook messages in the future, problems arise when dealerships do not have a team to tend to incoming messages. Typically, when a shopper contacts your dealership, your sales team must respond. Your entire team may not have access to your Facebook business page, may be focused on other customers, or your dealership may be closed. Still, the longer you take to respond, the more likely your customer is to lose interest or check out other vehicles being sold by other dealers. The solution is to integrate A.I. powered messaging onto your Facebook page. A bot can automatically qualify the interest level of every lead that comes in your system. When a lead is hot, the correct team member is notified by text and email for instant follow up! For more information email sales@digitalairstrike.com or visit www.digitalairstrike.com.
be illegal not to. Several states, including California, New Jersey and Nevada, have recently passed laws requiring disclosure of GPS devices to the consumer. The laws vary by state on exactly what must be disclosed and exactly how it must be disclosed, but disclosure itself is not an option. Even if it is not specifically illegal not to disclose in the states you are doing business, by choosing not to disclose the use of GPS devices to your customers, you are still exposing your business to some serious liability. With Right-to-Cure laws, Consumer Protection Acts, and Consumer Privacy Acts, not disclosing the use of the device could open you up to legal issues such as fines or even civil action. Hudson Cook LLP partner Tom Hudson encourages dealers to disclose the use of devices: “Every state that has legalized devices by statute has also required a dealer or finance company to disclose that a vehicle has been equipped with a device. Further, more than one state has fined dealers for failing to disclose the devices for engaging in an unfair, deceptive or abusive act or practice. You’d have to be braindead not to disclose the presence of the device.” And, of course, the CFPB could take notice of your position not to disclose. If you think you’re too small to get the attention of the CFPB, I wouldn’t count on it. Just look at Y King S Corp., which does
business as Herbies Auto Sales, in Colorado. Last year, the company was ordered to pay $700,000 in redress to consumers for what the CFPB called violations of the Truth in Lending Act and the Dodd-Frank Wall Street Reform and Consumer Financial Protection Act. Would the CFPB consider failing to disclose the use of GPS technology a violation as well? It is fair to say that having a customer sign a written disclosure about the existence of a device, how it operates, and how it will be used by the creditor helps reduce the liability of your company. It could prevent a lawsuit or other type of consumer complaint. So, if your GPS provider is saying you don’t need to disclose, maybe you should ask them if they are also offering to cover your legal fees, a potential fine from the CFPB or a classaction lawsuit for invasion of privacy down the road. Choose a GPS provider that offers technology that is compliant with state and federal regulations. Additionally, use a company that employs certified compliance officers and offers advice, recommendations and training such as webinars to its dealer customers. Does your provider do that?
REGULATORY MATTERS | By Blair Witter
ONE OF THE BIGGEST THREATS TO YOUR BUSINESS
It Could be You
Yes, really. It might be you. Despite the record sales you’ve brought in. Despite the cost saving measures you’ve put in place. Despite the efficiency of the organizational procedures you’ve implemented. If you’re the person putting GPS tracking devices on the vehicles you’re selling – without disclosing it to the consumer – you might be putting your business at risk. The use of GPS devices to help mitigate the risk for creditors in the subprime auto finance industry has been around for a long time. Yet, even after all this time, there are GPS providers – and dealers or creditors – who still operate without obtaining written disclosure from the consumer when using this type of technology. Let’s not kid ourselves. It is not the technology that’s the problem. It’s your choice not to disclose the use of that technology – or failure to comply with state and federal regulations – that is the problem. This decision could make you a threat to your own business. Why should you be disclosing? Well, depending upon your state, it might
6 DEALER’S EDGE JANUARY/FEBRUARY 2019 WWW.IL-IADA.ORG
Blair Witter is PassTime’s vice president of sales for the Southeast Region. His vast experience includes 11 years at Credit Acceptance and founding and managing two large-volume dealerships in Biloxi, Mississippi, and Mobile, Alabama, for over a decade. Contact Blair at (239) 240-6913 or bwitter@passtimeusa.com.
COVER STORY
ASSOCIATION NEWS | By Paul John
The NIADA Begins New Membership Initiative The National Independent Automobile Dealers Association has begun a new nationwide membership initiative. Its goal is to reach 20,000 members by 2020. The organization will reach this goal by focusing on the states with the highest growth opportunity. This simple strategy measures current market share – number of members compared to number of licensed dealers. NIADA state-affiliated associations that provide more dealer educational programs and effective advocacy at the state capital – and are able to negotiate exclusive member discounts for their members – generally have a bigger footprint, typically between 30 and 60 percent market share penetration. NIADA has already begun working with the state organizations by working closely with the state directors and their board members to understand their state-specific challenges as
T H E O R G A N I Z AT I O N W I L L R E A C H THIS GOAL BY FOCUSING ON THE S TAT E S W I T H T H E H I G H E S T G R O W T H O P P O R T U N I T Y. T H I S S I M P L E S T R A T E G Y MEASURES CURRENT MARKET SHARE – NUMBER OF MEMBERS COMPARED TO NUMBER OF LICENSED DEALERS. well as develop a clear understanding of their goals. And more importantly, NIADA is working with states’ leadership on specific strategies that will pave the way for state associations to grow and stay relevant. Paul John is NIADA’s vice president of national field operations. He can be reached at paul@niada.com or 770-616-5156.
SAFETY WATCH | By Digital Air Strike
HONDA RECALLS VEHICLES FOR BRAKE ISSUES
Brake Caliper Pistons
American Honda Motor Co. is recalling 64,785 2017-19 Acura MDX, 2017-18 Acura MDX Sport Hybrid, 2018-19 Honda HR-V and Honda Odyssey, and 2016 Honda HR-V vehicles. The rear brake caliper pistons may have an insufficient coating, causing gas pockets to form, reducing brake performance. As such, these vehicles fail to comply with the requirements of Federal Motor Vehicle Safety Standard (FMVSS) number 135, “Light Vehicle Brake Systems.” Owners will be notified, and Honda or Acura dealers will bleed the brakes, free of charge. Honda’s numbers for this recall are C31 and L30.
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ASSOCIATION NEWS
NIADA PARTNERS WITH DEALERSHIPS TO OFFER CPO VEHICLES Two New Dealerships Added to the CPO Family
RLB Sales & Leasing and 6th Gear Auto – both of Fort Worth, Texas – are now proud members of the NIADA Certified family. To celebrate, NIADA held kickoff launches at both dealerships. “It’s important to us to be here,” said Warrantech business development manager and program administrator Mike Sims. “Not only to us as a whole, but to these dealerships as clients, as partners of ours with NIADA.” Scott Lilja, NIADA’s senior vice president of member services, was also on hand to offer support and explain the benefits of partnering with NIADA. “We’ve been around for 73 years protecting dealers’ interests, putting together programs to help them get to that next level in terms of differentiation and quality, and trust and transparency with consumers. And that’s what the NIADA CPO program is really about.” The NIADA Certified Pre-Owned Program offers high-quality used vehicles backed by a powerful warranty with nationwide reach, and backed by NIADA – a national association whose more than 15,000 members are dedicated to integrity and subscribe to a strict code of ethics. For a vehicle to be considered “NIADA Certified,” it must undergo a 125-point inspection conducted by a licensed repair facility and be backed by a rigorous vehicle history report. Once all requirements have been met, dealers are then able to offer these vehicles to their customers along with a number of features and benefits, including the following: • A CARFAX vehicle history report. • Special financing for qualified customers. • Flexible, fully customizable warranty options. • Roadside assistance, towing, vehicle rental and lost key/lockout service. Offering these benefits is already paying big dividends for both dealerships. “My turnover is in the 40s now and that’s what I’m really proud of,” said 6th Gear Auto Sales owner Chris Johnson. “We’re selling cars faster, but more importantly, our systems, our procedures and our policies through Warrantech have helped us sell more cars through our training processes.” “It adds value to what we’re doing here,” said RLB Sales & Leasing general manager Shane Collins. “It adds value to every vehicle we sell. We’ve already seen the uptick. We’re pacing 60 cars this month when last month we did 30, so we’re excited. It’s going to be a long, happy journey.” To learn more about how your dealership can become NIADA Certified, visit niadacertified.com/dealers or call 1-877-3100288 to sign up today.
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6th Gear Auto – Fort Worth, Texas
RLB Sales & Leasing – Fort Worth, Texas
WASHINGTON UPDATE | By Shaun Petersen
NIADA GOVERNMENT REPORT
Latest Government Issues and Activity
NIADA is your voice in Washington D.C., advocating for independent dealers, the used vehicle industry and small business. Here’s a look at the latest news and NIADA efforts regarding legislative, regulatory, PAC and grass roots activities. LEGISLATIVE The Bureau of Consumer Financial Protection has a new leader after Kathy Kraninger was confirmed by the Senate for a five-year term as the bureau’s director in a tight 50-49 vote that went according to party lines. Kraninger, who had been associate director of the White House Office of Management and Budget, replaces her former boss, OMB director Mick Mulvaney, in the position. Mulvaney had served as acting director since previous CFPB director Richard Cordray left in November 2017 to launch his failed bid for governor of Ohio. Senate Democrats vehemently opposed Kraninger, arguing she had no experience in regulating the financial sector and criticizing her role in Trump Administration immigration and disaster relief policies. Republicans applauded Kraninger’s confirmation, citing her budget experience with OMB, the Department Homeland Security and the Senate Appropriations Committee, which they said would help her rein in the bureau’s excessive spending of the Cordray regime. Kraninger is expected to continue Mulvaney’s policies, including eliminating what he called the bureau’s “regulation by enforcement” and easing regulatory burdens on smaller businesses. We at NIADA look forward to working with Ms. Kraninger as she begins her new role, while continuing to advocate for extensive reform of the bureau that includes replacing the single director with a bipartisan five-member commission and giving Congress oversight of the bureau’s budget through the appropriations process. REGULATORY The Bureau of Consumer Financial Protection completed its first major enforcement action in the automotive F&I space in November, when it announced its settlement with Santander Consumer USA over charges the lender misled consumers about the cost and terms of auto loans and GAP coverage.
The bureau accused the subprime lender of telling its customers they could lower monthly fees by allowing them to make interest-only payments without explaining it would increase the total cost of the loan, as well as failing to explain that its GAP policy would not cover the cost of replacing a car destroyed in an accident if the loan was worth more than 125 percent of the value of the vehicle at the time of purchase. The bureau said Santander contacted consumers who had fallen behind on payments and offered to extend their loan by moving monthly payments to the end of
the term – but did not tell those customers how or when the accumulated interest would be repaid. According to the settlement, Santander will pay almost $11.8 million – $2.5 million in fines and $9.29 million in restitution to more than 2 million customers. The company must also develop a new compliance plan and risk-management program related to auto loan origination and servicing, and must incorporate new training materials into its employee compliance training. GRASS ROOTS As the new year begins, legislative sessions are ready to open in state houses across the nation. Which means NIADA’s affiliated state associations will be hard at work advocating for the used vehicle industry and small business at the state level. As always, we expect recalls and use of GPS and starter-interrupt devices to be among the hot issues taken up by state legislatures. Other issues likely to come up include regulation of F&I products such as service contracts and GAP coverage, requiring and/or capping an “all-in” APR that would include other fees and charges in addition to
interest, regulation of blockchain technology in the auto retail industry and how to handle autonomous vehicles. As always, NIADA and our state IADAs will continue to monitor any proposed legislation that comes up in the 2019 legislative sessions. We stand ready to mobilize to protect independent dealers and the used vehicle industry by supporting bills that will help dealers make our industry better, such as anti-curbstoning laws and pre-licensing and continuing dealer education, and by fighting against those that will adversely affect our businesses and our customers. PAC The NIADA-PAC Fund heads into 2019 the strongest it has ever been after a record-setting 2018 in terms of both fundraising and the reach and effectiveness of how those funds have been distributed. Last year, more than $200,000 was raised for the PAC fund, and NIADA used it to support candidates in the midterm elections who have shown their willingness to fight for independent dealers, the used vehicle industry and small business. Among those candidates was NIADA’s 2018 Legislator of the Year, Rep. Mike Kelly (R-Pa.), who won a tough battle to hold his 16th District seat, and 2018 NIADA Convention and Expo speaker Rep. Stephanie Murphy (D-Fla.), who was reelected in District 7. In addition, many dealers interacted with their elected representatives, either at events like the NIADA National Policy Conference, candidate fundraising events or by hosting them at their dealerships. While all the activity surrounding the midterm elections is over, that doesn’t mean it’s time to forget about politics and the PAC for awhile. The reality is, politics never stops. Campaigns have already begun for the 2020 congressional elections and, believe it or not, the 2020 presidential election. We strongly urge all NIADA members to stay involved this year, whether that’s by contributing to the PAC fund, attending the National Policy Conference (scheduled for Sept. 23-25 in Washington D.C.) or by engaging with your senators, representatives and candidates at the federal, state and local levels. Invite them to your business and show them how our industry works, what you do and how the laws and regulations they create affect you, your business and your customers in the real world. Shaun Petersen is NIADA’s senior vice president of legal and government affairs.
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ACCELERATE | By GWC Warranty
SAFETY WATCH
EDUCATING THE EDUCATED CUSTOMER
FORD RECALLS MORE THAN 1.25 MILLION CARS
Teach Them Something They Don’t Already Know
– something they can’t deny demands a higher-than-normal premium. EXPLAIN RECONDITIONING Continuing to build on the fact that higher quality vehicles demand a higher price, you can go into detail with your customer about the work you’ve done to get that vehicle ready for them. Showing you’ve inspected the vehicle for common problems with brakes or replaced tires and fixed cosmetic problems explains value that no third-party website can account for. BACK-END PRODUCTS If a customer is surprised by a monthly payment that includes vehicle service contract coverage, you can explain how the tools they used to come up with a monthly payment don’t include the price of a service contract. If a customer sitting across from you is sensitive enough about a monthly budget to do all these calculations ahead of time, they’ll also be sensitive to what a major repair could do to that same monthly budget. Educating customers on the cost of common repairs and how damaging that can be to a tight budget will help demonstrate just how valuable that relatively minor added monthly cost for a VSC can be.
AUCTION NEWS
leadership team as a co-founder of the Women with Drive employee resource group at Cox Automotive. She also held roles on the Manheim Diversity and Inclusion Committee and the Women in Technology Board of Directors in Atlanta. Maxine Mane has been promoted to general manager of Manheim New England. Mane joined Manheim in 2012 as the promotions manager for several operating locations in Florida before being elevated to dealer services manager for Manheim Palm Beach in 2014. Most recently, she served as assistant general manager for Manheim Dallas, overseeing the front office, arbitration, call center, client experience, and marketing and promotions teams. Maxine was instrumental in increasing dealer sales last year. Tom Rastelli has been promoted to general manager of Manheim Portland. He joined Manheim in 2014 as a field sales manager in the Northeast and has shown a passion for developing others, leading teams, and driving results. Previously, as assistant general manager for Manheim Phoenix, Rastelli was instrumental in growing dealer volume year over year and surpassing vehicle volume benchmarks in 2018. “The deep roster of talent we have in
Today, more than ever before, customers are walking through your doors with a plan and a price in mind. It’s a dangerous situation that can cut into your margins if you aren’t prepared to teach them something they don’t already know. A recently released report from Jumpstart Automotive Media and Ipsos reported 86 percent of consumers show up to a dealership with a price in mind for the vehicle they want. This price, despite your best efforts, will likely be lower than sticker since the report showed that 81 percent of consumers don’t believe a dealer’s lowest price is available prior to negotiation. So how do you combat this type of consumer approach when you’re priced competitively and you can’t sacrifice any more off your margins? CERTIFY YOUR LOT Certified Pre-Owned programs aren’t just for franchise dealers, but you can thank them for the cachet behind the name. Explaining to your customers your price includes short-term coverage from expensive repairs shows them you’re providing an assurance of a quality vehicle
FIVE NEW AND EXPANDED GM ROLES AT MANHEIM
Manheim Chicago GM’s Role Expanded
Building on its efforts to promote talent with proven skills and execute on its business objectives, Manheim has announced five general manager selections for new and expanded roles at its operating locations nationwide. Dana Lowenthal has been promoted to general manager of Manheim Central Florida. Her career with the Cox family of companies began in 2008 at Cox Newspapers before transitioning to the technology and digital space at Manheim. She then held roles of increasing responsibility before becoming assistant general manager of Manheim Palm Beach in 2015. Most recently, she was the auction manager at Manheim Central Florida before her promotion to general manager this summer. Lowenthal is a stalwart of Manheim’s
10 DEALER’S EDGE JANUARY/FEBRUARY 2019 WWW.IL-IADA.ORG
Canister Purge Valve May Malfunction
Ford Motor Co. is recalling 1,282,596 2012-18 Ford Focus vehicles with a 2.0L GDI or 2.0L GTDI engine. The Canister Purge Valve (CPV) may malfunction, possibly causing excessive vacuum in fuel vapor management system. Ford will notify owners, and dealers will reprogram the Powertrain Control Module. Dealers will also check for fault codes and replace the CPV as needed. If the CPV is replaced, dealers will inspect and replace the carbon canister, fuel tank and fuel delivery module as necessary. Until the vehicle is serviced for this concern, owners are advised to keep the fuel tank at least halfway full. Ford’s number for this recall is 18S32.
the field was essential to us being able to quickly fill these general manager roles from within,” said Manheim senior vice president Patrick Brennan. “I am proud of our tremendous team and excited about how these leaders will serve our clients.” Additionally, Manheim has expanded the roles of two general managers with proven leadership skills. Mike Cesta, general manager of Manheim Chicago, has assumed the additional responsibility of general management for Manheim Arena, also in Illinois. Cesta joined Manheim in 1998. His leadership highlights include establishing the Retail Reconditioning operations at Manheim Chicago in 2016 and engaging team members to nearly double Manheim Chicago’s financial performance. Emily Decker, general manager of Manheim Indianapolis, will take on general management for Manheim Cincinnati in 2019 upon the retirement of current GM Anita Jamison. Decker joined Manheim in 1997. Under her team leadership approach, Manheim Indianapolis has generated notable growth and been recognized as one of Indiana’s top places to work for three consecutive years. To learn more about Manheim, visit www.manheim.com.
ACCELERATE |
By GWC Warranty
EARNING TRUST IN F&I
Showing Customers the Value of F&I Products Perhaps the most difficult obstacle to overcome in the F&I office is getting your customers to trust that the products you’re offering will be worth the added cost. Establishing that trust is the first step in building the foundation for long-term F&I success. But how do you go about gaining the trust of someone whose money you’re looking to spend on additional products like a vehicle service contract? Just like most things in life, honesty is the best policy in the F&I office. Being upfront about monthly costs, coverage limitations and the company backing your products will help customers feel the confidence they need to feel to make a service contract purchase. PAYMENT TRANSPARENCY For the vast majority of customers, you’re negotiating on monthly payment and getting them on board with how the cost of a service contract impacts what hits their bank accounts each month. At a glance, the added cost can be staggering, especially in a world where 78 percent of people are living check to check. But breaking it down by daily cost could help overcome this hurdle. For example, the daily cost of a $300 payment is roughly $10 a day. If you add $50 per month for a service contract, that daily cost is just over $11 a day. This nominal daily increase compared to the cost of major repairs can help customers see the value in added vehicle protection.
COVERAGE TRANSPARENCY Not all coverage levels were created equally. It’s important to impart this to your customers. If you’ve mastered your menu selling strategy, working backwards from the highest level of coverage achieves this goal for you. Focusing on what customers miss out on and using this technique in tandem with highlighting small daily cost differences, it’s easy to spell out value that will help your customer see you have their long-term financial interests in mind. PROVIDER REPUTATION Customers may object to a service contract due to the industry’s reputation. But working with a reputable partner has its benefits – most notably your ability to showcase that reputation to customers. When you can show customers the product you’re selling is backed by a company with decades of experience and billions in claims paid, peace of mind will come easily – and quickly. SHOWCASE PAST RESULTS Does your customer still not trust your F&I process? Even the most difficult customers can’t deny real-life results. Keep close a file of past work orders or a claims paid report and show that difficult buyer all the money VSCs have saved your past customers. No customer can refute the value of a VSC after seeing exactly what it’s done for people in their shoes.
AUCTION NEWS | By SubPrime Auto Finance News Staff
KAR RAMPS UP RECOVERY SERVICES
Auction Company Purchases Clearplan KAR Auction Services recently announced it has boosted its asset recovery capabilities with the purchase of Clearplan. Based in Reno, Nev., Clearplan is a digital platform for recovery agents, drivers, forwarders and lenders that acts as a centralized, mobile “cloud-based hub” for repo workflow and logistics management. KAR said the move ramps up KAR’s Software-as-a-Service capabilities, which also include Recovery Database Network (RDN). “KAR is focused on leveraging the best in digital technology to help our customers operate more efficiently and effectively,” said KAR president of digital services Peter Kelly. “Clearplan quickly established itself as a market leader by developing a data-driven, user-friendly communications platform. By integrating Clearplan with our existing capabilities, we will be able to offer smarter, faster and more convenient solutions that serve the entire asset recovery ecosystem.”
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Clearplan was launched in 2014 with the goal of streamlining the vehicle asset recovery process. Today, the platform works to connect thousands of recovery agents to more efficiently list, log and track vehicle recovery activity. The acquisition is highly complementary, KAR said, to its RDN subsidiary, which provides software and data solutions to the repossession industry. “We are thrilled to extend and strengthen our partnership with RDN by becoming part of the KAR Auction Services organization,” said Clearplan co-founder and president Justin Zane. “We look forward to serving our shared customers and delivering the next generation of innovative, technology enabled solutions to our industry.” Clearplan will retain its Nevada headquarters and become part of KAR’s digital services group of companies.
MANAGEMENT MATTERS | By Adam Tobias
RECONDITIONING USED CARS
Best Practices
To earn top dollar in the automotive industry, you have to offer top products. And when you deal with used cars, most of the inventory you stock will need some love before you can present it to a customer. Auto reconditioning is what transforms banged up trade-ins into cars that customers will love. The used car market is booming, which is pushing the price of used vehicles higher than ever. To compete with these rising prices and customer expectations, dealers need to invest in better reconditioning practices. Doing so will not only improve a dealer’s profits, but provide the long-term benefit of happy customers. WHAT IS AUTO RECONDITIONING? No used car, whether bought at auction or through a trade-in, will be immediately ready for retail. Investing a small amount of time and money to fix minor issues can significantly boost a vehicle’s retail value. This is the purpose of reconditioning. Reconditioning includes, but is not limited to: · Engine repairs. · Oil and filter changes. · Maintenance on the drivetrain and suspension. · Equipping new brake pads or tires. · Fixing dents, chipped paint, and cracked windows. · Buffing out scratches. Auto reconditioning attempts to restore a vehicle to its optimal condition so it can be sold at the maximum price the market will allow. THE BENEFITS OF AUTO RECONDITIONING Reconditioning ensures buyers leave the lot happy and return with a smile when it’s time to purchase another vehicle. The benefits of reconditioning far outweigh the cost in time and money when done correctly: · Higher retail prices. Reconditioned vehicles can be sold for a higher retail price. There is usually a several thousand dollar variance between vehicles in average condition and those in clean condition. In the image above, you will see how the same exact type of vehicle is appraised differently based on its condition. The condition of a vehicle can have a big impact on the market retail value. · Faster turn rates. Humans like things that look nice, and the market for fixeruppers is much smaller than for vehicles ready to drive off the lot. This is why reconditioned vehicles are more likely to find a buyer quickly. · Warranties and certifications. Reconditioning allows your dealership
Audi 2.0 Premium
Audi 2.0 Premium
Condition:
Condition:
Odometer: 41,000
Odometer: 41,000
Market Price: $13,650
Market Price: $15,180
to issue certifications and warranties, which increase consumer trust and satisfaction. THE COST OF RECONDITIONING Reconditioning is an investment, but it does not have unlimited returns. The money spent on reconditioning needs to be monitored and compared to the margin you make on each vehicle. It’s essential to accurately appraise a vehicle and factor in reconditioning costs before approving the work. A good ballpark for reconditioning costs is $1,000. If you designated the vehicle as a retail unit, anything higher than $1,000 should be subject to review: · Is the vehicle in high demand? · Does it have high mileage? · Can you sell it quickly enough? The goal for reconditioning is to restore a vehicle to its maximum retail price while spending the least amount possible. However, this should never come at the cost of quality. BEST PRACTICES FOR AUTO RECONDITIONING Cost and speed are the two major considerations when reconditioning vehicles to sell. Time is money, and every day your vehicle goes unlisted is money lost. Remember the saying: “20 percent of the effort is responsible for 80 percent of the result.” Here are some reconditioning best practices to make sure you put in the right 20 percent in every vehicle. · Optimize reconditioning costs. Dealers should constantly root out inefficiencies and excess costs in their reconditioning process. One way to reduce costs is by using quality, nonOEM parts. However, dealers should make sure this doesn’t disqualify them from any certification programs. · Fast turnaround. Complete reconditioning should be within 3-4 days of acquiring the vehicle. More days
in reconditioning means longer turn rates and less gross profit. The optimum period to sell the vehicle is 30 days. · Buy better vehicles. Sometimes the best way to reduce reconditioning costs is to buy vehicles that need less work. Look for vehicles virtually ready to roll off the lot to offset the cars that need extra work. · Have a reconditioning team. Don’t make your services team decide between reconditioning a vehicle and working on a customer order. Eliminate this conflict by having a dedicated reconditioning team. · Recondition for wholesale. Some dealers overlook reconditioning for wholesale, but this is a mistake. Dealers are human too, and everyone is more likely to buy a vehicle that is in good shape. Reconditioning a vehicle before auction could help you net a few hundred, even a few thousand, dollars more. INVESTING IN RECONDITIONING Can you afford the investment in reconditioning? The real question is, can you afford not to invest? Reconditioning used vehicles is an investment that can reap huge dividends for your dealership. When done right, reconditioning can add thousands of dollars to the final selling price, netting you higher profits and happy customers. The benefit is multiplied with every extra vehicle you sell thanks to faster inventory turn rates. Doing reconditioning the right way takes its own investment of time, education, and tools. Dealers who commit wholeheartedly to improving their reconditioning practices are setting themselves up for success for a long time. Adam Tobias is the co-founder and COO of Dealercue, which provides dealerships with real-time, intelligent, market-driven vehicle appraisal, pricing, inventory management, and sourcing solutions. He can be reached at adam@dealercue.com.
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MANAGEMENT MATTERS | By Dave Anderson
THE FOUNDATION OF ACCOUNTABILITY
Two Non-Negotiable Pillars
I’ve written and spoken extensively about accountability in the 20 years since we started Learn To Lead – how to do it, why it’s important, the consequences for not doing so, and more. In my recent How to Master the Art of Accountability seminar I identified and outlined the two non-negotiable pillars of accountability, and how to develop both. Essentially, holding people accountable requires both the right skill set and the right mindset. Knowing how to hold people accountable but not doing it reflects the wrong mindset. Wanting to hold people accountable but not knowing how to do it indicates a deficient skill set. In this piece I’ll go over the fine points of each of the two non-negotiable pillars for holding people accountable. THREE QUICK OPENERS ON THE IMPORTANCE OF ACCOUNTABILITY ·A ccountability protects the culture, morale, momentum, brand, employee experience, customer experience and credibility of leadership. ·W hile the cost of holding someone accountable may seem high or uncomfortable, the cost for not holding someone accountable is staggering and creates more cultural discomfort. The cost is also enduring, rather than a one-time penalty. In essence, the consequences for failing to hold others accountable create a form of misery on the installment plan. ·A ccountability isn’t an option for someone in a leadership position. It’s a duty. If you can’t do it or won’t do it, you’re unfit for leadership. It’s that big a deal. THE FIRST PILLAR OF ACCOUNTABILITY Holding people accountable requires you have the right skill set. This includes setting clear expectations for outcomes, essential daily activities and core values. Without clarity there can be no accountability because the question becomes, “Accountable for what?” It also takes skill to effectively give feedback on performance, establish and enforce appropriate consequences, and know what to say when you confront a poor performer. These are not tools that come to you in a dream one night after you’re promoted from advisor to service manager, or from salesperson to sales manager. They must be taught, learned, and applied to perform one’s duty as an effective leader. Because of this need for accountability “how to’s,” the accountability categories of our virtual training library are always the most used by managers from all departments in an organization.
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I should emphasize that part of the skill set for holding others accountable mandates you develop a skillful style as well, and it should be more conversational than confrontational. Holding people accountable isn’t a license to be a jerk, become profane, shout, or get personal. In fact, those tactics make you look like a leadership amateur. Your approach should be direct, respectful, firm, and attack the performance rather than the performer. THE SECOND PILLAR OF ACCOUNTABILITY Holding people accountable requires the right mindset. Mindset is defined as “the established attitudes held by someone.” If you don’t have the right attitude concerning holding people accountable you’re unlikely to do it with urgency or consistency. The right accountability mindset is established when you realize and believe that holding someone accountable isn’t something you do to them, but for them. Frankly, if you believe you’re doing something “to” someone you’ll be reluctant to do it, and will likely apologize for doing your job – making you the “bad guy” and the nonperformer “the victim.” However, when you believe you’re holding someone accountable to help them, to correct their course, to facilitate their growth, and to make them more successful, you’ll execute this vital duty without hesitation or apology. In an age dedicated to political correctness and not doing something that would offend someone else, holding people accountable has increasingly become seen as harsh or unfair. But is it really harsh to let someone know what is expected, how to improve, where they stand, where they need to be and by when, or what the consequence is for failing to do their job? If you think about it, it doesn’t really get any fairer than that. In reality, what’s truly harsh is letting people live in a gray area, allowing them to fail, fall further off track, and permit things to get so bad for so long you have no choice but to remove them, and they never see it coming or have a chance to correct their course because you failed to tell them. While it’s true that
holding an accountability conversation can make both you and the other person uncomfortable, that very discomfort is what’s necessary for you both to grow and get better at what you do. What’s more uncomfortable is failing to do your job and having nonproducers, or toxic achievers, remain on your team, which is unfair to the rest of the team and jeopardizes your own job. The bottom line is that the best time to start holding people accountable would have been several years ago. The next best time is now. Where holding people accountable is concerned, if you know what to do, why it’s important, and what’s at stake if you don’t do it, and yet still fail to do it, you are the one that should be held more accountable for subordinating what’s best for the person and team to your own comfort level. When you think about it, holding others accountable is a cornerstone of any leader’s job description, so expecting you to do your job and hold others accountable seems like a reasonable expectation. Developing the right skill set and mindset – the two non-negotiable pillars of accountability – offers you a road map to get the job done. Dave Anderson, “Mr. Accountability,” is a leading international speaker on personal and corporate performance improvement. He is also the author of 14 books and host of the podcast, The Game Changer Life.