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LOUISIANA INDEPENDENT AUTOMOBILE DEALERS ASSOCIATION

AUGUST/SEP TEMBER 2018

SPOTLIGHT AUCTION

LOUISIANAâ&#x20AC;&#x2122;S FIRST CHOICE AUTO AUCTION SUPPORTS LIADA.

DALLAS, TEXAS Permit No. 2079

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SALES MATTERS | By John Chapin

FOUR KEYS TO MASSIVE SALES SUCCESS

Planning for Success

I was recently speaking with an extremely successful executive known for being able to walk into an organization, clear away all the clutter, and make it extremely successful. He boiled his process down to four keys that can also be applied to successful selling. FOUR KEYS TO SALES SUCCESS Simplicity The formula for success in sales really is simple. It comes down to talking to enough of the right people the right way. That means talking to plenty of qualified prospects and having the skills necessary to find a problem, solve the problem, and get them to take action on the solution. Where people complicate the issue is when they start looking for shortcuts – the simpler, easier way. There isn’t one. Hiding behind social media, email, and reactive marketing will never take the place of in-person calls and phone calls. Set your annual, monthly, and weekly goals, and then calculate your daily activity (how many people you need to talk to). From there, practice and prepare for all sales situations and scenarios. Finally, get out there and make the contacts necessary. As a salesperson, producer, agent, or whatever you call yourself, your first job is to sell. Everything else is just a distraction. Simple. Innovation Innovation is all about value and standing out from the rest of the pack. How do you deliver more, how are you better, and how are you different in a good way? Just as important, how can you deliver more, how can you be better, and how can you be different in a good way? Where are you, your company, and your product truly unique and how can you further adapt, change, improve, and stand out or deliver more value? Of course this begins with you. You are the one thing the competition does not have. If you are willing to out-service, out-work, and out-relationship the competition, you will stand out. How can you personally deliver more value? It can start with handwritten thank-you notes and gifts to let people know they are appreciated. It can include adding products and services, or augmenting them. You can also add hours of operation, be more responsive, or add features such as home delivery. You’re looking for anything that enhances and improves the client experience – anything that better meets the needs, wants, and desires of the client. Innovation also means not resting on your laurels and realizing that what has made you successful thus far may not be what

makes you successful in the future. This is challenging the old rule of “If it isn’t broken, don’t fix it” by improving further on what already works. It’s refusing to say, “This is the way we’ve always done it” and “That’s good enough.” It’s asking questions like, “How can we bring something completely new to the industry?” “How can we turn the standard way of doing business on its ear?” “How can we reinvent the wheel and make it better?” Bottom line: what can you do to further stand out and deliver more value? Passion Successful people at the highest levels are the most passionate about what they are doing. For many, their work is not work. It’s love. They’d do it for free. Passion is all about the personal why. It is the deep-rooted reason you work crazy hours, persist through failure after failure, and keep getting up no matter how many times you get knocked down. Ideally that passion comes from helping clients, a strong belief that people want and need your product, and enthusiasm about the personal life that sales allows you to live. For most people, the personal why is the strongest. This usually includes either proving something to yourself and others, acquiring money and possessions that give you feelings of fulfillment and help you reach your highest life values such as freedom, helping and contributing to the important people in your life, or a combination of all three. In many older clients I’ve also seen a passion to get out and help new customers, knowing their years of experience puts them in a unique position to “save” others. Still other people may have a passion for meeting new people and making new friends. Others have such a belief in their product they seem to have a save-the-world mentality. Whatever your passion is, it is the fuel that will drive you and keep you going. If strong enough, it will get you up early, keep you up late, and give you tons of energy. To find it you have to ask yourself what’s important to you in life. What will you fight for or die for? What are your most important values? What do you care most about? Once you know what those deep, emotional drivers are, the next step is to tie those to going out and selling your product or service. Execution This is all about taking action. Getting out there and doing what needs to be done. Nike: “Just do it.” Once you know what you want to do and why you’re doing it, put a quick plan together and take action on it. Don’t make it a big complicated plan. Again, think simple. Then execute on the plan as soon as possible. Don’t worry about it being perfect, either. Just take action and then course-correct as you go. Generally speaking, the more action you take, the faster you’ll get to success. John Chapin is a sales and motivational speaker and trainer. He has over 27 years of sales experience as a number one sales rep and is the author of the 2010 sales book of the year: Sales Encyclopedia. For more information, visit www.completeselling.com or email johnchapin@completeselling.com.

SAFETY WATCH

CHRYSLER TELLS ALMOST 5 MILLION DRIVERS NOT TO USE CRUISE CONTROL

Defect Could Prevent System from Disengaging

Chrysler is recalling 4,846,885 2014-18 Dodge Journey, Charger and Durango, RAM 2500, 3500, 3500 Cab Chassis (more than 10,000 lb.), 4500 Cab Chassis and 5500 Cab Chassis, Jeep Cherokee and Grand Cherokee and Chrysler 300, 201419 RAM 1500, 2015-18 Dodge Challenger, 2015-17 Chrysler 200, 2016-18 RAM 3500 Cab Chassis (less than 10,000 lb.), 2017-18 Chrysler Pacifica and 2018 Jeep Wrangler vehicles.

THESE VEHICLES ARE BEING RECALLED TO ADDRESS A DEFECT THAT COULD PREVENT THE CRUISE CONTROL SYSTEM FROM DISENGAGING. These vehicles are being recalled to address a defect that could prevent the cruise control system from disengaging. If, when using cruise control, there is a short circuit within the vehicle's wiring, the driver may not be able to shut off the cruise control either by depressing the brake pedal or manually turning the system off once it has been engaged, resulting in either the vehicle maintaining its current speed or possibly accelerating. Chrysler will notify owners, and dealers will inspect the software and perform a software flash on the engine or powertrain control module, free of charge. Owners are advised to stop using cruise control until the software update has been performed. In the event that cruise control cannot be disengaged while driving, owners should firmly and steadily apply the brakes and shift the transmission to neutral, placing the vehicle in park once it has stopped.

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August/September 2018

OPEN ROAD

INSIDE OPEN ROAD

LOUISIANA INDEPENDENT AUTOMOBILE DEALERS ASSOCIATION

06 ............................................................... Good Cheap Cars? 08..................................................................Auction Spotlight 10................................................. NIADA Government Report 12...............................The Right Way to Get More Millennials 14.............................Common but Costly Facebook Mistakes 18....................................................Smart Debt Management

WHAT’S NEW

National Policy Conference The 2018 National Policy Conference will be held September 24-26 at the Ritz-Carlton Pentagon City. Make plans now to join NIADA in Washington, D.C. as we meet legislators face-to-face to make your voice heard! Learn more and register today at niadapolicyconference.com.

ADVERTISERS INDEX

America’s AA - Baton Rouge..............................................IBC AmTrust Financial................................................................... 9 DAA Dealers Auto Auction, LLC............................................ 5 LA’s 1st Choice AA...............................................................IFC Manheim ...............................................................................11 NextGear Capital ..................................................................12 Texas Direct Auto Auction......................................................7 vAuto...................................................................... Back Cover

OFFICE

For information on how to become a member please contact Emily LeBlanc Domangue: louisianaiada@gmail. com or 225-313-9131.

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 Open Road is published bimonthly by the National Independent Automobile Dealers Association Services Corporation, 2521 Brown Blvd., Arlington, TX 76006-5203. Periodicals postage paid at Dallas, TX and at additional offices. POSTMASTER: Send address changes to NIADA State Publications, 2521 Brown Blvd., Arlington, TX 76006-5203. The statements and opinions expressed herein are those of the authors and do not necessarily represent the views of the Open Road or NIADA. Likewise, the appearance of advertisers, or their identification as members of NIADA, does not constitute an endorsement of the products or services featured. Copyright ©2018 by NIADA Services, Inc.

STATE MAGAZINE MGR./SALES

Troy Graff • troy@niada.com EDITORS

Jacinda Timmerman • jacinda@niada.com Andy Friedlander • andy@niada.com MAGAZINE LAYOUT

Christy Haynes • christy@niada.com PRINTING

Nieman Printing

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August/September 2018

BOARD MEMBERS PRESIDENT

BOARD MEMBERS

Robert Perry Doug Perry Wholesale Cars 311 N. 4th Street Monroe, LA robertperry2010@yahoo.com 318-343-8611

Scott Ledet Ledet’s Auto Sales PO Box 1505 Gonzales, LA 70737 scottledet@ledetsautos.com 225-644-2886

VICE PRESIDENT

Jacob Warren Louisiana’s 1st Choice Auto Auction 18310 Woodscale Rd. Hammond, LA 70401 jacob@lafcaa.com 985-345-3302

Rudy Martinez Ponce Imports, Inc. 6060 Florida Blvd. Baton Rouge LA 70806 rudymp@cox.net 225-927-4346

EXECUTIVE DIRECTOR

Emily LeBlanc Domangue 8792 Highway 28 West Alexandria, LA 71303 225-313-9131 louisianaiada@gmail.com

SECRETARY

Daniel Guinn Guinn Auction Company, Inc. 1635 Thibodeaux Rd. Jennings, LA 70546 daniel@guinnauctions.com 337-368-7713

TREASURER

Chuck Hill Lake Charles Auto Auction 2435 E. Broad St. Lake Charles LA 70601 chuck@lcautoauction.com 337-433-8664

David Albritton Redline Motorcars, LLC 605 Cypress Street West Monroe, LA 71291 dcalbritton@gmail.com 318-605-3655 Jeff Hernandez Airline Automart Inc. 4520 Airline Hwy Baton Rouge LA 70805 airlineautomart@yahoo.com 225-357-1597 Scott Rabeaux Rabeaux Auto Sales 6882 Johnson St. Lafayette, LA 70593 srabeaux@yahoo.com 337-991-9100 Tim Blanchard America’s Auto Auction 3960 Blount Road Baton Rouge, LA 70807 Tim.Blanchard@ americansautoauction.com 225-778-3737

Eric Stroderd My Dealer Supply 850 Kaliste Saloom Rd. Lafayette, LA 70508 877-427-1238 Kevin Reeves Dixieland Autoplex 15600 Florida Blvd. Baton Rouge, LA 70819 kevin@dixielandautoplex.com 225-248-6519 Ricky Donnell Best Stop Auto Sales LLC 3591 Front St. Winnsboro LA 71295 Bsas03@yahoo.com 318-435-6565 Matt Chiasson Greater Shreveport/Bossier Auto Auction 1315 Grimmett Dr. Shreveport, LA 71107 mattautoauction@att.net 318-573-5562 Walter Warren Tint City Auto 1410 W. Thomas St. Hammond LA 70401 tintcity1972@yahoo.com 985-969-0940 Joel Couvillion Joel’s Auto Sales 5517 Coliseum Blvd. Alexandria, LA 71303 hotbyjoel@yahoo.com 318-442-3448

SAFETY WATCH

KIA RECALLS 508,000 VEHICLES

Airbags May Not Deploy

A faulty control unit that could prevent airbags from deploying in the event of a wreck has prompted Kia to recall 508,000 2010 through 2013 model year vehicles. Kia said the airbag control unit, which tells the airbag and the seat belt pretensioners when to activate, could be “susceptible to electrical overstress” in the event of a frontal collision. If the control unit is damaged internally, it may not relay the severity of the crash to the airbags and seat belt pretensioners. The recall covers a wide swath of Kia vehicles, including the 2010-2013 Kia Forte sedan and Forte Koupe, 2011-2013 Kia Optima sedan, 2011-2012 Kia Optima Hybrid sedan, and 2011-2012 Kia Sedona minivan. The vehicles were built through August of 2012. The recall stems from a lawsuit filed in 2014 when a 2012 Kia Forte sedan was involved in a wreck and its airbag didn’t deploy. A Forte Koup was involved in a similar wreck in which the airbag didn’t deploy in 2017. Kia, the NHTSA, and the supplier that produced the supplemental restraint system used in the Forte conducted an investigation in May to determine what was at fault and what needed to be repaired.

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August/September 2018

OPEN ROAD

Cover Story

remember when I became the used car manager at the small Mazda store where I had been doing F&I. I took to used cars. I’m not sure why. I guess there was such a sense of accomplishment when one sold. The salesperson won with commission. The store won with profits from the shop, parts, the retail sale and F&I. I won by adding revenue to the used car department. And the customer won because they got a dependable used car they could afford. OK, so maybe I was young and hadn’t been through the grind of wholesale loss, aged units, or getting buried in trades to make retail deals. Nor had I experienced being run up the pole at the auction, discovering a $900 repair six days after the arbitration window closed. Nor had I dealt with the customer’s car coming back on the hook 20 days later with a bad tranny. That was a long time ago, more years than I care to admit. And it has only become harder to maintain a reasonable profit selling used cars! When was the last time you uttered the words “five pounder?” Today more than ever, it’s hard to find cars that meet your stocking needs. This is especially true when looking for those under $12,000 (it’s a payment thing). With the cost of new cars rising every year, long term financing and the number of off-lease cars in the market, the question becomes: How do you find good cheap cars? In this three-part series, we will look at ways to acquire the vehicles you need to stock your lot that are affordable and customers want to buy. Let’s start at the higher end of the range, say $12,000 to $9,000. Hard to find? Yes. Impossible? No. But you must change your buying behaviors. How many times have you gone to your local auction with the plan to buy four or five cars in that wholesale price range and come home with none? It’s no fun and not very productive. Even at larger auction facilities, there is a limited number of vehicles that fit your buy list.

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Do the math. One auction will have x number of vehicles. Five auctions will have 5x. So how do you buy from five auctions at once? Online, of course. Now don’t get me wrong. I’m not saying don’t go to your local auction. After all, I work for one of the largest auction companies in North America. I want you to buy from my auctions. All the technology in the world won’t bring an end to physical auctions – but you need to learn how to use the technology offered by the auctions to make your purchase decisions more informed. Alright, I can already hear the pushback: “I bought a car online once and it cost too much to transport, took too long to get to my lot and it had damage.” I get it. Let’s back up a second and look at some ways successful, small and large independent used car dealers are buying cars upstream, which is a fancy way of saying “before the vehicle gets to or is offered at a physical auction,” and live online at the physical auction. Let’s start with upstream, online auctions. These are what I call eBay-style auctions. You can shop and buy 24/7. Sellers range from new car franchise captive finance companies, national banks, and large fleet/lease operators to local or regional banks, among others. The cream of the crop are the OLOCs. What’s an OLOC, you ask? One owner, low mileage, off-lease car. Yes, I made that up and I use it all the time.

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What’s that you say? Prices are too high, transport costs too much and only new car dealers buy those cars? Wrong! As I write this today, I’m looking at an off-lease, 2014 Honda Civic 4-door LX in my Marketplace app on my phone. The photos of the car – taken by the thirdparty inspector – show the car sitting in the lessee’s driveway. I can see every detail of the car – including seller, transmission type, mileage, trim, Autograde and even the number of scuffs or marks on the vehicle. The bid now price is $9,900. Like-mileage vehicles in the Market Report from Autoniq have sold wholesale in the last 18 days for a low of $8,600 and a high of $11,500. The Profit Guide in Autoniq shows like vehicles have a 17-day turn and an average retail sold price of $12,378. The average sold price and turn time is pulled from dealerships reporting actual retail transactions. Yes, actual DMS data: what the vehicles are sold for in your market. With a bid now of $9,900 and an average retail price of around $12,300, it looks like there is room for transport, fees and reconditioning. I know these are averages, but they are averages of real retail transactions. Priced too high? Maybe not. Millions of vehicles are sold every year online. Can all of them be priced too high? Again, I’m not saying you can buy all your cars online, although I know independent dealers who do. What I’m saying is, start looking and learning how to take advantage of what online auctions have to offer. Typically, you will find great vehicles (OLOCs) and enjoy lower fees – and, by the way, NAAA rules provide more buyer protection online than in-lane. Next time we’ll dive deeper into both online upstream and live online auctions. We will have tips and best practices to get you started finding the vehicles you need. You don’t want to miss it! Have fun and sell cars! Doug Hadden is executive director of dealer consulting services for ADESA Auctions Inc.

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August/September 2018

OPEN ROAD

AUCTION SPOTLIGHT By Emily LeBlanc Domangue

LOUISIANA’S FIRST CHOICE AUTO AUCTION IN HAMMOND

This month’s spotlight auction is Louisiana’s First Choice Auto Auction in Hammond. Managing partner John Poteet has always been a huge supporter of the LIADA and our mission to bring positive change for the future. On Tuesday, June 12, LAFCAA held a very successful membership drive at their sale. Several new members joined and a generous $10 was donated to LIADA for every vehicle sold, which resulted in a grand total of $3,800 donated to LIADA. The LIADA is very grateful for the wonderful partnership with LAFCAA. We encourage all of our members to check them out at LAFCAA.com. Sales are every Tuesday at 8:45 a.m. MANAGEMENT MATTERS | By Dale Pollak

AUCTION-BUYING IS MORE DIFFICULT THAN IT SHOULD BE

Four Contributing Factors

You might think that with rising supplies of wholesale vehicles dealers would have an easier time seeking out auction cars to fill gaps in their inventories. But the reality is different. Dealers still struggle to acquire cars that will appeal most to buyers in their markets, and purchase them at prices that will yield respectable margins. Competition accounts for part of the struggle. Even with more available cars, there are more dealers vying for them. But the difficulties dealers face also owe to four factors that encompass the ways dealers prepare for auctions, their auction expectations, and the inherent inefficiencies of sourcing vehicles from remote locations. Knowing Exactly What to Buy Despite technology that can efficiently tell dealers the exact vehicles they should acquire before they go to an auction, many dealers and their buyers just show up. They do little homework. Instead, they rely on instinct to size up cars they believe they need. This approach is far less efficient than using technology to determine the precise

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August/September 2018

cars to pursue. Likewise, it’s not uncommon for dealers who rely mostly on instinct to find that their auction units contribute significantly to inventory age issues. Finding the Right Inventory It’s one thing to know the exact used vehicles you need. It’s another task altogether to locate these vehicles at auctions across the country. While some dealers have adopted new technologies to efficiently identify the auctions where the cars they need reside, many still rely only on auctions closer to home. This preference may help minimize transportation costs, but in today’s wholesale market it also limits selection and concentrates competition for the same vehicles. The end result: Dealers restrict their opportunities to acquire the right inventory when they stay local. Buying at the Right Price A dealer recently shared that while he’d love to pay less to acquire near-new vehicles for his certified pre-owned program, he’s come to understand that’s impossible if he wants to maintain his retail sales velocity. “I’ve found the ‘right’ price at auction translates to a roughly $1,000 front-end gross,” he said. “To me, they’re ‘spinner’ cars that we buy and then spin them through the shop and sell fast. Then, we repeat the cycle.” The key take-away: The dealer’s determined the “right” price for himself with every car. He uses technology and tools to calculate each unit’s profit potential (accounting for the costs

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of acquisition, transportation, reconditioning, etc.), and the maximum he might pay, before he places his bid. When dealers complain they can’t acquire auction vehicles for the “right” money, I typically find they haven’t conducted a dispassionate calculation of the “right” price for themselves, or their expectations for a front-end profit don’t match the realities of today’s market. Reducing the Time Required Dealers who proactively address each of the preceding factors will, by design, become more efficient as they source vehicles from auctions. But the level of efficiency dealers achieve will depend primarily on how well they use the technology and tools that facilitate faster acquisitions. I would add that auctions, as well as solutions providers, could do more to make the wholesale marketplace a more efficient place for dealers to do business. It’d be pretty cool, I think, if dealers could count on a system that, almost automatically, began the work of re-supplying their inventories when a retail used unit heads home with a customer, if not sooner. Until that day, however, there’s much dealers can do themselves to become more effective and efficient at acquiring the cars they need at auction. Dale Pollak serves as executive vice president for Cox Automotive, a position he’s held since the company he founded, vAuto, became part of the Cox family in 2010. Dale pioneered the Velocity Method of Management, which has been adopted by thousands of dealers.

WASHINGTON UPDATE | By Shaun Petersen

NIADA GOVERNMENT REPORT

GRASS ROOTS

Latest Government Issues and Activity

NIADA is your voice in Washington D.C., advocating for independent dealers, the used vehicle industry and small business. Here’s a look at the latest news and NIADA efforts regarding legislative, regulatory, PAC and grass roots activities.

REGULATORY

Perseverance and Stick-To-Itiveness Remember back in January, when it became mandatory to display the revised version of the Buyers Guide in the window of all used vehicles for sale? The Federal Trade Commission remembers. And just to make sure dealers did, too, the FTC joined with 12 law enforcement agencies to visit 94 dealerships in 20 cities across the nation to check on compliance with the amended Used Car Rule. The agencies checked dealerships in California, Florida, Illinois, New York, Ohio, Texas and Washington in the three-month span from April to June, and what they found was not exactly encouraging. Only 14 of the 94 dealerships had the new Buyers Guide posted on all of their vehicles, and just 33 had it on more than half of the vehicles in inventory. While 70 percent of the 2,300-plus vehicles checked did have Buyers Guides displayed, less than half of those had the revised version as required. By law, the civil penalty for failing to display the proper Buyers Guide is $41,484 per violation. The dealerships, which were not identified, were informed of the results and of resources to help them comply with the rule. The FTC said it will conduct follow-up inspections in the coming weeks.

O N LY 14 O F T H E 9 4 DEALERSHIPS HAD THE NEW BUYERS GUIDE POSTED ON ALL OF THEIR VEHICLES, AND JUST 33 HAD IT ON MORE THAN HALF OF THE VEHICLES I N I N V E N T O R Y. W H I L E 7 0 PERCENT OF THE 2,300PLUS VEHICLES CHECKED DID HAVE BUYERS GUIDES DISPL AYED, LESS THAN HALF OF THOSE HAD THE REVISED VERSION AS REQUIRED. 10

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LEGISLATIVE

The Senate is in the spotlight after President Trump nominated D.C. Circuit Court of Appeals judge Brett Kavanaugh to fill the Supreme Court seat vacated by the retirement of Justice Anthony Kennedy. The Senate vote on whether to confirm Kavanaugh’s nomination is expected to be close, breaking down along partisan lines. Senate Majority Leader Mitch McConnell (RKy.) has said he wants to have a final vote by the end of fall. In the meantime, Kavanaugh will meet with senators from both parties and appear before the Senate Judiciary Committee. In his position on the circuit court bench, Kavanaugh was part of a three-judge panel that found the structure of the Consumer Financial Protection Bureau to be unconstitutional in a 2016 ruling for which he wrote the majority opinion. He held that same position writing a dissent when the full court overruled the panel in January. The question of the bureau’s constitutionality could come before the Supreme Court after U.S. District Judge Loretta Preska resurrected the issue by ruling in a New York case that the CFPB is unconstitutionally structured, contradicting the D.C. Circuit Court’s finding.

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A new set of rules for used car dealers issued by the New York City Department of Consumer Affairs took effect June 24, requiring all licensed dealers to make additional disclosures to consumers and created a new consumer bill of rights for the used car industry. The new rules require dealers to provide a financing statement that includes “sale terms,” “financing terms,” and pricing information for any add-on products or services before the execution of any retail installment contract. The financing terms must include both the contract APR (presumably the same APR as TILA disclosures) and the “lowest APR offered to buyer by any finance company with the same term, number of payments, collateral and down payment,” intended to help consumers comparison shop. Consumers must also be given a twoweekday period to cancel the sale for a full refund. The “Used Car Consumer Bill of Rights,” which must be provided to each customer and posted conspicuously anywhere contracts are negotiated or executed, advising consumers of their rights to buy a car at the advertised price, know all the details of financing before signing and arrange financing with an entity other than the dealership. The document also informs consumers that dealers must certify the car is safe to drive at the time of sale, post the total selling price for each used car where the car is being offered for sale, and post a refund policy where sales take place, among other requirements. It also spells out various protections provided by city law, including protection from discrimination in seeking access to credit. “In New York City, where household budgets can be especially strained, the dangers of predatory lending are immense,” Department of Consumer Affairs commissioner Lorelei Salas said. “We believe consumer education, including our Consumer Bill of Rights regarding used car dealers and financing is one piece of the solution to stamping out predatory lending.”

PAC

On July 12, the NIADA Political Action Committee served as co-host for a dinner in Washington D.C., for Rep. Susan Brooks (R-Ind.), a key member of Congress with a strong history of supporting the used vehicle industry. Brooks’ district includes the city of Carmel, Ind., where the headquarters of J.D. Byrider, KAR Auction Services and NextGear Capital are located. She is a member of the House Committee on Energy and Commerce, which has jurisdiction over many of the issues important to independent dealers. She is also a member of the Congressional Automotive Caucus and the Congressional Automotive Performance and Motorsports Caucus. Shaun Petersen is NIADA’s senior vice president of legal and government affairs.

ACCELERATE |

By GWC Warranty

here’s a right way and a wrong way to go after more millennial business. Do it right and you’re capitalizing on a demographic with loads of discretionary income. Do it wrong and you could miss out on a gold mine of profit opportunity. A recent study by eBay found that despite delayed tax refunds, most millennials filed before the technology incidents that caused a delay for others. Furthermore, the research reported 37 percent of millennials planned to use their returns to buy a car and 80 percent planned on rewarding themselves with their returns. But are you ready to pounce on this limitedtime opportunity? Advertise in the Right Places Millennials won’t be able to find you unless you make the effort to get noticed where they’re looking. Social media advertising can be an affordable way to reach a highly targeted audience with a highly targeted message. You can select the age, location and other characteristics of your audience and speak directly to their needs and wants. Have the Right Cars If you often look back to see what sells well before you head off to auction, now’s the time to take it to the next level. Go back in the books to see if there are any trends in what past millennial buyers have purchased from you. If you don’t have much of a history with this group, some research from outside the car industry could help. It’s been widely reported how much millennials rely on recommendations, how much they research a purchase of this size and how image-conscious they are. Making sure you have vehicles that are reliable and competitively priced with all the right perks will go a long way.

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Communicate the Right Way Millennials, more so than most audiences, are bombarded with emails, text messages, phone calls and more on a daily basis. So before, during and after a sale, your messages need to stand out. Tools like Covideo, which embeds personalized video messages into emails, can make your messages stand out from the crowd and get noticed. Using these kinds of messages throughout the buying experience can help a millennial customer stay more engaged with your dealership. Appeal to the Right Sensibilities We mentioned earlier how 80 percent of millennials are looking to reward themselves with their tax returns. This supports the idea that millennial decision-making is driven by emotion and self-image. Playing to this personality trait while millennials are on your lot or interacting with you online is an effective practice to get them in a car from your lot. Let them know how their image will benefit from this purchase and it could pay dividends. Provide the Right Protection Perhaps more so than anything else, millennials have high expectations after pouring hours upon hours of research, negotiations and time on the lot into making a vehicle purchase. Because of this, you don’t want a repair – big or small – after the purchase to put a damper on your millennial customer’s entire experience. This makes getting a service contract on every millennial deal an absolute necessity, especially since this demographic is also more likely to leave a review online.

5 W’s

ACCELERATE |

By GWC Warranty

EVERY VSC CUSTOMER SHOULD KNOW

How to Effectively Present VSC to Your Customers

The reasons why dealers sell a vehicle service contract may vary, but in general a VSC can provide dealers a way to avoid postsale complaints and protect customers in a way that keeps them coming back time and time again. But to provide the type of experience that yields these desired results, it’s all in how you present a service contract to your customers. Stealing a page from a reporter’s handbook, we have the five W’s that every customer should know to preserve a positive post-sale experience. Who First and foremost, your customer should leave knowing everything there is to know about your VSC provider. Highlighting the length of time the company has been in business, how much they’ve paid in claims

F&I MATTERS |

By Chris Miller

TOP 5 FLOOR PLANNING MISTAKES DEALERS MAKE

Avoid These Common Mistakes

Floor planning is a basic process: Open a line of credit, purchase inventory with that credit, sell inventory and pay back the loan. However, intertwined among the basics are a lot of moving parts that can cause complications. While many variables are beyond the dealer’s control, such as the economy or auction prices, it’s important to understand the five most common mistakes dealers can avoid. Mismanaging Cash Flow One of the benefits of floor planning is that it frees up cash for expenses and business investments. However, a common mistake is not taking into account that many of these bills mature at the same time. Improper cash management may cause dealers to get into a borrowing cycle that provides little wiggle room and therefore creates a shell game of constantly shifting cash from one debt to another. Over-Extending Far too often, dealers over-extend themselves when it comes to inventory. When you purchase more inventory than you can

and any awards or endorsements from recognizable industry names will help your customers feel more confident in their service contract purchase. What By the time a customer signs on the dotted line for a service contract, it’s the end of a carbuying process and they’re likely chomping at the bit to get behind the wheel of their new car. Knowing this, it’s understandable how some vital details about how a service contract works can get overlooked. You can let your customers know what’s covered when you sell a service contract, but point them towards online coverage lookup tools from the VSC provider that can help them get quick answers about coverage whenever they need them. When It’s impossible to know when a customer will need a service contract. It could be on vacation, during work travel or right in the middle of a busy week with the kids. Because of this unpredictability, it’s important to highlight for your customers when a service contract comes with roadside assistance, rental car coverage or lodging reimbursement and how to utilize each benefit. This will help your customers easily overcome an expensive repair, regardless of when it happens. Where Knowing where your customers can take their vehicles in the event of a covered repair

sell, you put yourself at risk if you can’t make the payments. Moral of the story: Just because you are approved for a $250,000 line of credit doesn’t mean you have to go out and spend it all at the next auction. Buy in proportion to your sales figures. Communicating Inadequately with Your Floor Plan Provider No business likes surprises, especially finance companies. Keep your floor plan provider abreast of any changes or issues regarding your business. You won’t be able to make a payment on time? Let them know ASAP. By being proactive and honest, you stand a better chance of your floor plan provider working with you to help resolve issues. Raising Red Flags There are three red flags your floor plan company is always watching for: NSFs, collateral audits and turn-times. NSFs: Insufficient funds (or NSFs) are directly correlated to the first two points above. When you can’t make your payments on time, or your checks/ACHs bounce, rest assured your floor plan provider is now watching your account closely. This is one of the biggest indicators there is an issue with how you’re managing your account, and ultimately how the creditor views their chances of being repaid. This puts the floor plan provider at risk because they have advanced funds on a certain piece of collateral.

KNOWING WHERE YOUR CUSTOMERS CAN TAKE THEIR VEHICLES IN THE EVENT OF A COVERED REPAIR IS ANOTHER IMPORTANT POINT TO SHARE WITH THEM. is another important point to share with them. Using your provider’s Find-A-Shop tool can help you point to preferred service facilities near them. Sharing this tool with them at the time of sale can also help them look up shops anywhere in the country should a breakdown occur away from home. Why It’s last but certainly not least. In fact, why customers need a service contract would be your leading talking point during a VSC presentation. A great tool for this is video, given its engaging and concise manner in which it delivers a message. A video that covers the cost of common repairs can be an enlightening experience for customers who may not realize just how devastating a major repair could be to their monthly budget.

Collateral audits: Your floor plan company is a collateral-based lender and that collateral is the physical inventory – not the title of the vehicle. It’s important the collateral can be physically verified based on the agreed terms, usually monthly. When your floor plan provider can’t verify inventory, a red flag is raised. If you need to move inventory to another location for a big tent sale or to an auction, let your floor plan provider know. Turn times: Used inventory should be turned every 45 days, because your ability to make money on aged inventory goes down over time. While this may not fit every dealer’s business model, your floor plan company is going to get nervous if they see a vehicle on your lot for an extended period. Many times dealers hold inventory “looking for the right buyer” instead of cutting their loss and moving the unit at auction so they can acquire fresh inventory. Improperly Managing the Account When you open a floor planning account, find out when payments are due and what different resources are available, such as valuation tools or payment schedules, that can make it easier to run your business. Your floor plan representative is also a valuable resource who can provide great insight.

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Chris Miller is the director of strategic initiatives for NextGear Capital. He is an automotive re-marketing veteran leader with expertise in strategy, operations, sales, project management, marketing and finance.

August/September 2018

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SOCIAL MEDIA | By Kathi Kruse

COMMON BUT COSTLY FACEBOOK MISTAKES

Top Pitfalls to Avoid

If there’s one thing that's constant about Facebook, it’s change. It seems like every week there’s a new feature or advertising element, some new trick to learn, or a new way to be more visible. Many dealers unknowingly make several common Facebook mistakes, and it's hindering their success. Facebook is a valuable tool for business but there are a lot of potential pitfalls. Here’s a list of common Facebook mistakes you should avoid. Taking Off Without a “Runway” Facebook success is in the details. Before you take to the airwaves of social media, you need a plan. It's like this: if you're taking a trip and you don't know the way to your destination, you check the GPS app on your phone. You do this because it saves time, expense and a whole lot of needless suffering. Social media strategy works the same way. Begin with the end goal in mind. For most dealers, the goals are to gain more site visits, engage more customers, and generate leads. Once you've determined your goals, you'll need a social media strategy “runway” to reach them. Making It All About You Facebook marketing is successful when you've provided entertaining, useful, sharable content. Think about the Facebook pages you follow and why you follow them. It's not so you can see sales promotions. Fans and customers are no different than you! People stay engaged when the posts they see are meaningful to them. Pro tip: Avoid violating Facebook's terms of service. I can't tell you how many dealership pages I see that are broadcasting sales messages through the newsfeed. Save those messages for Facebook ads and you'll avoid the pain of having your people click the nearest exit. Failure to Engage Regularly One of the best ways to build a lively, loyal community on Facebook is by engaging regularly with your fans. Facebook is not a one-way communication tool. Create a solid engagement strategy that includes designating someone to engage with the people who comment on your posts. Respond to all page messages timely. Do not rely on the autoresponder. Respond to all reviews – both positive and negative. Every negative comment is an opportunity to turn a critic into a fan. Abandoning your customers on Facebook tells them either you're not paying attention or you don't care. No Serious Investment If you've spent any time in the dealership Facebook marketing ecosystem, you know there is a time investment. Building

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August/September 2018

relationships through trust takes time, and if Facebook is your chosen platform, be prepared to make an investment. A Facebook page should be considered a valuable company asset and, as such, there are other investments required to retain its value: • Strategy and planning. • Financial resources. • Human resources. • Attention. In fact, sometimes a dealership will need to restructure their operations to accommodate social media. If your team doesn't have the expertise, you may need to invest in training. Pro tip: It's not healthy to think that Facebook is “free.” That thinking will only allow your competitors to take all the customers. Not Completing Your “About” Section Your Facebook “about” section projects the image of your dealership. This is an incredibly important step when setting up and optimizing your page. You want to ensure your “about” is complete and sends the right message to anyone visiting your page: • Add your founding details. How did your dealership begin and when? What’s your mission and what drives your operation on a day-to-day basis? • People will quickly scan your content. Add your most important details within your first paragraph. • Add keywords, terms and phrases that anyone searching for your products would use. Keywords matter in social media as much as they do within your website and blog. Don’t overlook them! • Answer questions your community needs answered to make an educated decision. This is a place to create differentiation and separate you from your competitors. • Keep industry jargon out of your “about” section. Your customer doesn’t work in the auto industry, so don’t speak to them as if they do. Keep your language relatable and easy to read. Not Using Facebook Ads Facebook advertising can be a smart complement to your current advertising budget. Facebook ads let you grow your page and generate leads without adding a hefty expense. Part of your investment in Facebook is for Facebook ads. Simply put, you will not succeed (i.e. improve customer engagement and generate leads) without Facebook ads. Why? Ten years ago, social media was a fertile field of wildflowers, brimming with kittens and unicorns. The marketing landscape was wide open for dealers who wanted to capture attention and engage like-minded customers. Today, social media is a dense, crowded, noisy, smoggy urban jungle. Simple tactics alone are no longer effective. You must pay to promote your content and products on Facebook. The good news is that Facebook ads work! It's a mistake not to leverage this powerful tool.

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FACEBOOK MARKETING IS POWERFUL, BUT O N LY I F Y O U 'R E A L L I N . THIS AWESOME POWER O N LY W O R K S T O Y O U R ADVANTAGE WHEN YOU'RE FIRING ON ALL CYLINDERS. Failing to Track, Measure and Analyze Your Results Too often dealers jump onto Facebook without a plan or clear idea of what success really means for them. Look for success markers on your Facebook marketing journey. Just like the maps app on your phone shows the best route to take to your destination, Facebook key performance indicators guide you to what success looks like for your Facebook marketing. KPIs give you a solid foundation from which to measure results. Develop a process – including the tools you'll need – to track, measure and analyze. Facebook allows you to figure out what's working and what's not in real time. Facebook mistakes don't have to happen. Facebook can help build a bridge between your dealership and your customers. Facebook marketing is powerful, but only if you're all in. This awesome power only works to your advantage when you're firing on all cylinders. Kathi Kruse is an automotive social media marketing expert, blogger, consultant, author, speaker and founder of Kruse Control Inc., which coaches, trains and delivers webinars focused on integrating social media and online reputation management into dealership operations. She can be reached at kathi@krusecontrolinc.com.

LIADA AUCTION MEMBERS ADESA Shreveport

7666 Greenwood Road Shreveport, LA 71119 318-938-4400 Phone 318-938-7623 Fax www.adesa.com Sale Wednesday at 9 a.m.

Alexandria Auto Auction

515 N 3rd Street Alexandria, LA 71301 318-484-9672 Phone 318-484-9699 Fax www.alexandriaauction.com Sale Tuesday at 5:30 p.m.

America’s Auto Auction Baton Rouge

3960 Blount Road Baton Rouge, La 70807 225 778 3737 www.auctionbroadcasting.com Sale Thursday

Louisiana’s 1st Choice AA

18310 Woodscale Road Hammond, LA 70401 985-345-3302 Phone 985-343-5735 Fax www.lafcaa.com Sale Tuesday at 8:45 a.m.

Long Beach Auto Auction

8494 County Farm Road Long Beach, MS 39560 228-452-2030 Phone 228-452-9588 Fax www.lbautoauction.com Sale Wednesday at 1:30 p.m. 1611 St. Mary Street Scott, LA 70583 1-337-237-5620 Phone Sale Thursday at 10:00 a.m.

Manheim Mississippi

1826 Almeda Genoa Rd. Houston, TX 77047 281-819-3600

Bayou State Auctions, LLC

Manheim New Orleans

134 ½ Galbert Rd Lafayette, LA 70506 337-289-9191 Sale Tuesdays at 5:30pm

Brown’s Auction Co.

61077 St. Tammany Slidell, LA 70460 985-643-2061 Phone 985-643-2122 Fax www.manheim.com Sale Wednesday at 9 a.m.

6249 Hwy 190 Mid-South Auction Eunice, La 70535 1657 Old Whitfield Road Phone: 337-457-4919 www.brownsauction.com Jackson/Pearl, MS 39208 601-956-2700 Phone Sale is quarterly (call for more 601-956-5603 Fax information). www.midsouthaa.com Sale Tuesday at 9 a.m. Greater Shreveport-Bossier 8000 Highway 80 Mike McTurner Dealers Shreveport, LA 71119 136 Gregory Drive P O Box 29590 Monroe, LA 71202 Shreveport, LA 71149 318-343-8200 Phone Phone: 318-221-3362 318-343-8259 Fax www.gsbautoauction.com www.dealersautoauction Sale Wednesday at 1:00 p.m. monroe.com Sale Tuesday at 10 a.m. Insurance Auto Auction 29000 Frost Road Oak View Auto Auction Livingston, LA 70754 13451 Florida Blvd 225-686-9197 Phone Baton Rouge, LA 70815 225-686-8197 Fax 225-272-5139 Phone www.iaai.com 225-272-5314 Fax Sale Monday at 9 a.m. www.oakviewautoauction.com Sale Friday at 10 a.m. Lake Charles Auto Auction 2435 E Broad Street Z66 Auto Auction Lake Charles, LA 70601 66 N Mingo 337-433-8664 Phone Tulsa, OK 74116 337-436-7197 Fax Phone: 918-794-0660 www.pedersenandpedersen.com www.z66aa.com Sale Wednesday at 5:30 p.m. Sale Friday at 11:30 a.m.

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Membership ($400.00 yearly dues.)

Manheim Lafayette

7510 U S Highway 49 Hattiesburg, MS 39402 601-268-7550 Phone 601-579-7202 Fax www.manheim.com Sale Thursday at 9 a.m.

America’s Auto Auction Houston

privileges. ($400.00 yearly dues.)

August/September 2018

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*Auction Discount Coupon Books worth $4,050.00 available to LIADA members. Coupons can be redeemed at the following participation auctions.

P.O. Box 13751 Alexandria, LA 71315

LIADA DEALER SERVICE PROVIDERS DETAILING ADVERTISING Jose Upholstery Auto Sweet Jose Delgado Christopher Lentz 4776 Fairfields Ave. lenny@autosweet.com Baton Rouge, La 70802 3240 W. Henderson Rd. Phone:225-316-4575 Columbus OH 43220 Phone: 614-448-9089 M M Topshelf Detailing & Recon Lonnie McCauley ATTORNEY lmccauley@eatel.net Tureau & Tureau, APLC 4452 Jeffery Dr. Ralph Tureau & Steven Tureau Baton Rouge, LA 70816 steven@tureaulawfirm.com Phone: 225-603-4600 12320 Hwy 44 Suite 3C Fax: 225-622-5994s Gonzales, LA 70737 Phone: 225-647-8529 FINANCES Fax: 225 647-8530 First Consumers Financial, LLC Bob Chedville AUTO PARTS bob@fcfcarloan.com AutoZone 14580 Florida Blvd. Derlyn Odom Baton Rouge, LA 70819 deryln.odom@autozone.com Phone: 225-272-9009 6517 airline why Nationwide Acceptance Metairie LA, 70003 Martin Less 228-990-5669 mless@nac-loans.com Pull A Part 3435 N Cicero Ave. Toby Thompson Chicago IL 60641 Baton Rouge, LA 70814 Phone: 800-622-7605 Phone: 225-247-9160 Preferred Loans LLC BODY SHOP Shana Quick preferloans@eatel.net Custom Colors 12241 Roddy Rd. Pete McKnight--Billy Rapp Gonzales, LA 70737 customautocolors@gmail.com Phone: 225-644-0304 11550 Cloverland Ave. Fax: 225-644-6862 Baton Rouge, LA 70809 Phone: 225-752-5947 Reynolds & Reynolds/AppOne Fax: 225-752-5940 Michael Riley michaelriley@reyrey.com BUSINESS SERVICES Davenport Business Services LLC 4150 2nd St. South Suite 550 St. Cloud MN 56303 David Davenport david@davenportbusinessservices.com Phone: 877-277-6631 X 57628 14 Concord Place Westlake Financial Services Gulfport, MS 39507 Rob Wilson Phone: 228-547-9219 4751 Wilshire Blvd, Suite 100 Los Angeles, CA 90010 CREDIT CARD SERVICES dealers@westlakefinancial.com Applied Merchant www.westlakefinancial.com Jeff Gallo Phone: 888-8YES-YES jgallo@appliedmerchant.com 26775 Malibu Hills Rd. FLOOR PLAN Calabasas, CA 91301 AFC Phone: 800-236-2179 Tim Ormiston 1610 A St. Mary St. DEALER MANAGEMENT SYSTEMS Scott, La. 70583 Dealer Market Exchange timothy.ormiston@autofinance.com Holly Jonsson www.Afcdealer.com holly@dmx.io Phone: 337-593-8992 B5 Calle Tabonuco AFC Guaynabo PR 968 Michael Meyers Phone: 970-749-0851 Michael.Meyers@autofinance.com Frazer Computing Inc. 18310 Woodscale Rd. help@frazer.com Hammond La. 70401 P.O. Box 569 Phone: 877-739-0218 Canton, NY 13617 Phone: 1-888-963-5369 Automotive Finance Corporation Fax: 1-888-963-3366 Cassie Lasley 106 Village St. Suite 1 DEALER SUPPLIES / FORMS Slidell, La 70458 My Dealer Supply Company Office: 985-288-6431 Eric Stroderd Cell: 504-235-4264 ericstroderd@mydealersupply.com Cassie.Lasley@AutoFinance.com 311 A West University www.AFCDealer.com Lafayette, LA 70506 CarBucks Floor Plan Phone: 877-427-1238 Brandon Ziebarth Romano Promotions LLC www.usecarbucks.com Megan Romano 381 Halton Road megan@romanopromo.com Greenville, SC 29607 42062 Gardens Blvd Phone: 225-819-6747 Hammond, LA 70403 NextGear Capital Phone: 985-634-8274 Stuart LaBauve slabauve@nextgearcapital.com Phone: 225-620-1660 Fax: 866-550-8694

GLASS/WINDSHIELD

Babin’s Auto Glass Inc. Brent Babin babinsautoglass@eatel.net 13283 Airline Hwy. Gonzales, La 70737 Phone: 225-647-1369 GPS

Position Plus GPS Andy Seckinger aseckinger@spireon.com 950 Market St. Shreveport, LA 71107 563-581-7693 INSURANCE & BONDS

Affordable Insurance Solutions Janis Fallaw agentj0912@aol.com 751 Hwy 51 Madison, MS 39110 Phone: 601-856-9447 Carmouche Insurance Inc. 516 N. Burnside Ave Gonzales, LA. Phone: 225-647-8552 Charles Carmouche charles@carmoucheinsurance.com Crossland Insurance Agency Andrew Arceri andrew@crosslandins.com 1101 Hwy 90 E. New Iberia, LA 70560 Phone: 337-367-6035 Dwight W. Andrus Insurance Bonnie Dozier bbd@andrus.com P.O. Box 60970 Lafayette, LA 70598 Phone: 337-981-7300 Insurance & Bonds, LLC John Sonnier 9131 Interline Ave. #10-B Baton Rouge, LA 70809 Jsonnier60@gmail.com Phone: 225-922-3700 S. Brown Associates 150 River Rd. M3 Montville, NJ Phone: 973-270-2270 US Agencies Low Cost Insurance Sharon Miller Sharon.Miller@confiegroup.com 440 Third St. Baton Rouge, LA 70802 Phone: 225-615-0957 Fax: 225-987-5144 US Agencies Low Cost Insurance Kenneth Champagne kchampagne@usagencies.com 440 Third St. Baton Rouge, LA 70802 Phone: 225-408-8492 Fax: 225-987-5144 MARKETING

Interactive Financial Marketing Group Travis Weisleder dealerinfo@interactivefmg.com 1509 West Main St. Richmond, VA 23220 Phone: 804-225-1880

PAINT TOUCHUP & INTERIOR REPAIR

VEHICLE HISTORY

MasterMatch Eddie Krueger eddielsufan@yahoo.com 1104 Pine St. Suite A Monroe LA 71207 Phone: 318-322-2886

Carfax Kathy Collins kathycollins@carfax.com Phone: 703-934-2664 5860 Trinity Pkwy Centreville, VA 20120

SECURITY SYSTEMS

WARRANTY

Integrity Audio Visual LLC Steve Clay Steve@Integrity-av.com 39089 South Angel Court Gonzales, LA 70737 225-235-1528

AUL Corp Shelton Green Shelton@sadrinc.com 704 Hickory Ave. New Orleans, LA 70183 Phone: 504-722-8123 CTR Warranty, LLC RENTAL CAR Ken Rugg Enterprise Rental Car 319 North 3rd St. 3545 N 1-10 Service Rd., Ste. 101 Monroe, LA 71201 Metairie, LA 70002 Phone: 318-323-6385 Phone: 504-454-1717 Ferrell Dealer Services RENT TO OWN 18016 Shadow Creek Ave. Seadra Inc. Baton Rouge, LA 70816 John Garner Phone: 225-978-5111 john@seadraonline.com fspruell@gmail.com 10555 Lake Forrest Blvd. GCWS, LLC New Orleans LA 70127 Rock Brunet Phone: 504-241-0211 rockbrunet@gmail.com 101 Shumard Dr. TIRES Lafayette LA 70508 Cooper Tire and Rubber Company Phone: 337-258-2998 Michael Wertz mtwertz@coopertire.com GWC Warranty 820 Rivers CreekLn. James W. Hester Little Elm, TX 75068 jhester@gwcwarranty.com Phone: 567-525-2765 40 Coal St. Wilkes-Barre, PA 18702 TITLE – NOTARY Phone: 225-771-9766 Dealertrack Registration Protective Solution LLC and Titling Services Rick Cole Processed by Auto Title Express rcmarketingllc@me.com Amy Casey 4211 Sterlington Rd. 3445 Causeway Blvd Suite 103 Monroe, LA 71203 Metairie, LA 70002 Phone: 877-697-2533 7 locations throughout Louisiana! PWI Go.dealertrack.com/LA Sharon Coleman Contact Sales: 888.346.3087 sharon@warrantys.com Express OMV PO Box 278 Brooke Barnett Orwigsburg, PA 17961 Phone: 225-243-6925 Phone: 800-548-1121 485 Florida Blvd. Denham Springs LA 70726 Southern Auto Dealer Resources 704 Hickory Ave. LeBlanc Auto Title Company Harahan, LA 70123 1116 E. Cornerview St. Shelton Green Gonzales, LA 70737 sheltongreen3@aol.com Phone: 225-644-4591 Phone: 504-466-88002 Fax: 225-644-8207 hopeleblanc@eatel.net TOWING & RECOVERY

Smart Tow Kevin Rembert 3045 Rosenwald Rd. Baton Rouge, LA 70807 kevinpremert@yahoo.com Phone: 225-356-3002 Fax: 225-356-3222 TRANSPORTATION

Masney Auto Transport Inc. Greg Hedges page@masney.com 831 Maguire Rd. Ocoee FL 34761 Phone: 407-877-8882

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August/September 2018

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BHPH PERSPECTIVE | By Scott Bates, CPA

SMART DEBT MANAGEMENT

Fill Gaps Between Inventory and Collections

In the life cycle of any auto dealership, there will be times when cash flow is tight. Buy Here-Pay Here dealers in particular face complexity in ensuring enough inventory is on hand to attract buyers – and offsetting that investment with a healthy flow through collections and debt management. This balance is never perfect. Dealers need strong banking and/or equity relationships that will extend credit to fill in the cash flow gaps. Debt Management is Proactive Even if their balance sheet is healthy, dealers on the shy side of $1 million in receivables will likely get a less favorable interest rate on credit than more established or larger dealers. This does not mean smaller dealers should accept rates of 10 to 15 percent. It pays to shop around and understand how the bank or private equity firm will consider these characteristics to justify their terms. By working with your CPA, you can provide the lender with financial statements and accounting that aligns with their expectations. As part of the terms of the loan, dealers may be required to provide reviewed or audited financial statements. Because of this additional expense, and also to get more favorable terms, it’s important for dealers to actively seek lower interest rates. It is perfectly acceptable to shop around. Contact competing banks as well as your existing lender and ask about new credit options. Talk to colleagues about the banks they are using. Request multiple offers. Strong accounting, tax and compliance practices help with this process. On the accounting side, owners need regular financial statement preparation to view trends and forecast cash flow – helping them prepare for lending conversations and extensions of credit at the right time each year. On the tax side, the number one tax planning technique for Buy Here-Pay Here dealers is the discount (or loss) on the sale of notes from the dealership to the RFC, which requires cash. Dealers may also qualify for opportunities such as bonus depreciation and deductions with regard to employee perks and compensation. Management may also consider a review of operational efficiencies or gaps in controls that can affect cash flow. Keep in mind every dealership is different when it comes to managing cash flow, so best practices must occur within your own dealership. As BHPH dealerships grow to portfolios of $4 million and above, more favorable financing opens up. But it’s not a guaranteed scenario. Dealers should weigh the benefits of obtaining more financing against the extra administrative costs of public accounting services. 18

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Once you have the credit you need, there are various ways to reinvest in your business. Some dealers may decide to purchase their location – adding real estate holdings that support the extension of credit in the future. If the dealership also has a service department, cash flow can be set aside to cover repairs and maintenance on recently sold cars. Some dealers choose to cover repairs on cars shortly after purchase to support the customer’s ability and willingness to keep making monthly payments. For example, a repair may cost $800, but it leads to another six to 12 months of customer payments. Compensation is another area that cash flow can support. Attracting and keeping good back office personnel supports collections, which in turn supports the business. Dealers may also consider additional compensation for good salespeople. Let’s say you’ve done as much proactive management as you can. At certain points in the life of a dealership, you will still experience challenges. Some of these challenges can’t be handled alone. Whether you’re with a big bank and have secured a favorable interest rate or your dealership is still considered high risk for lenders, don’t ignore cash flow problems. Your CPA can help you formulate a plan to show numbers and communicate effectively with lenders in a way that is focused on solutions rather than the immediate problem. Lenders don’t like to call a loan for a shortterm issue, and there is usually room for negotiation on loan modifications that will support cash flow as well as repayment. However, year-over-year problems make lenders less willing to keep taking a risk on default. As soon as an issue comes to light, prepare your strategy to keep a strong lender relationship. Work through it like you and your lender are on the same side. It’s in the best interests of you and the lender to find a solution. Debt Management Supports Valuation It is also in the best interests of the dealership long-term to show a consistent history of loan financing, healthy cash flow and debt management. Owners want to show a return on investment and consistent profitability, tied to valuation of the business. There are different approaches to valuation. A key component, however, is determining equity value, which is the market value of the dealership assets minus the market value of its liabilities. Assets include such things as the

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dealership’s auto inventory and fixed assets, including real estate. They can include intangible assets such as the goodwill value of the dealership’s name and location, sales and service agreements, and also synergies such as multiple locations and strong management. Liabilities will include debt, any excess compensation, tax and rent issues, inventories and contingent liabilities such as environmental issues related to the storage and disposal of fuel, oil or batteries. The bottom line is that a well-performing portfolio, a good location and healthy foot traffic – combined with properly managed debt – will be attractive to a potential buyer. A dealership that is attractive to lenders is also attractive to buyers or outside investors, even with debt factored in. If your dealership struggles with debt management or cash flow – either intermittently or throughout the year – don’t let it hinder opportunities to grow. Speak to professionals to help you understand the proper structure of financial statements to support proactive lender conversations. Scott Bates is an assurance and business services partner for Cornwell Jackson. He supports the firm’s auto dealership practice. Contact Scott at scott.bates@ cornwelljackson.com or 972-202-8000.