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SAVED TIME IS MADE MONEY
Maximize Time in the F&I Office
F&I is the final step in a long car-buying process for your customers. The quicker you can provide value, get a signature and make the sale, the better your chances are for growing your profit potential on the back end of deals. Just like every second of your time equates to dollars and cents in your pocket, wasted time in the F&I office can cost you a valuable service contract sale. Maximizing the time you spend with customers in the F&I office helps them be more receptive to the value of a service contract and helps you make the most of every sale’s final moments. With a few small tweaks to your sales and F&I processes, you can save your customer’s time while simultaneously saving your bottom line. F&I Videos in Your Showroom You can start planting the seed about a service contract sale even before a customer steps in the F&I office. If you have a monitor in your showroom, put it to use. Turn off the news and run some videos that help explain the value of a service contract. Doing so gets the customer thinking about protection from out-of-pocket repair bills and understanding why it’s important to them.
Electronic Tools Modern online and electronic tools help speed along the process to get your customers out of the F&I office just as quickly as they got into it. When customers can sign electronically, view educational information on the fly and navigate the process without leafing through papers and signing or initialing multiple places, it makes the entire process simple and painless. Self-Service Post-Sale Tools Having a service contract provider that provides customers with on-demand resources that answer common questions can help you save time in the F&I office. You can save time explaining certain details if your customers have a place to get the answers they need once they leave your dealership. Information like how to file a claim, where to find a shop and looking up coverage details are just a few examples of information your customers should be able to find on their own whenever they need it. Quality Follow Up Reminding your customers of the coverage they have, where to find answers to questions and how to utilize their service contract coverage may be common practice, but there may be ways you can do it more effectively. Tools like Covideo can add a personal touch to the routine email or phone call commonly used in sales and F&I follow ups. Giving your message a better chance to be heard only increases the likelihood that it resonates with customers and results in the experience you desire for them.
www.newjerseyiada.org October/November 2018
DEALER NEWS
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INSIDE DEALER NEWS
2018 Member Discount Book
NEW JERSEY INDEPENDENT AUTOMOBILE DEALERS ASSOCIATION
03................................................Saved Time Is Made Money 05..........................................The Facebook “Secret Formula” 06......................................................................Lyft Some Risk 08.............................................................. Keeping Them Sold 10................................................. NIADA Government Report 13.......................................................................Email Security 14..................................................... Finding Good Cheap Cars
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2016 MEMBER DISCOUNT BOOK $5,000 IN AUCTION DISCOUNTS
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Certified Master Dealer Program
BSC AMERICA, BEL AIR, MD – $50 OFF REGISTRATION
Next Class November 5-7
Developed in 2001, the Certified Master Dealer program is one of the industry’s most respected training programs. Recently revamped, the program is taught by NIADA’s Justin Osburn, who brings over a decade of experience in retail and Buy Here-Pay Here executive management. The next class is November 5-7.
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MANHEIM NEW JERSEY – 1 FREE 7-DAY POST SALE INSPECTION MANHEIM PENNSYLVANIA – $100 BUY/ $100 SELL
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MANHEIM PHILADELPHIA – (TWO) $50 OFF BUY /OFF (TWO) $50 $50 OFF SELL MANHEIM NEWBURGH, NEW YORK – $100 BUY/ SELL
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 New Jersey Dealer News 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 New Jersey Dealer News 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.
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MANHEIM NEW YORK SKYLINE – (TWO) $50 OFF BUY / (TWO) $50 OFF SELL ROCHESTER CENTRAL AUTO AUCTION – $200 OFF BUY FEE; $200 OFF SELL FEE; ENTRY FEE ($35)
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Troy Graff • troy@niada.com EDITORS
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DEALER NEWS
October/November 2018
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SOCIAL MEDIA | By Kathi Kruse
THE FACEBOOK “SECRET FORMULA” TO GET MORE CUSTOMERS Three Crucial Steps
It’s a lot easier to sell to people who know you. Over the years, Facebook has been a conduit for dealers and their customers to connect. However, as important as it is in the digital marketing process, connecting doesn’t always equate to more sales. Dealers must make their “connecting” count. There’s a solution that seems to elude a lot of vendors in the social media space. They sell you on the buzzwords but then deliver stingy results. Real results take a proven formula with the right key performance indicators to guide you along the path. The Facebook “secret formula” I use to get more customers has three separate and distinct steps: 1. Attract. 2. Engage. 3. Convert. Each of these three steps contains specific tactics that guide in-market buyers through your sales funnel and into your showroom. Before we get into the formula, it’s important to point out it’s easy to waste time on Facebook. So, no matter what your business goals may be, it’s crucial to start with a solid Facebook marketing strategy (i.e.: what do we want to achieve and how will we get there?). Facebook has become a sprawling urban jungle and it’s easy to get lost in the brush without a plan.
THE FACEBOOK “SECRET FORMULA” Attract. Attracting buyers in this highly competitive online landscape requires a deep understanding of your target market. To attract your ideal customers, you must know who they are first! Identify who your target customers are, what they care about, and what influences their purchase decisions. You’ll start with your market area as a base point and then determine the attributes of your ideal customer – income range, credit worthiness, model of vehicles they purchase, etc. Once you determine the audience you want to reach, you can then begin to design content for Facebook posts and ads. It’s widely known consumers purchase
from dealers they know, like and trust. Facebook marketing allows you to consistently add value to your target customers’ lives through relevant information, expert tips and insights, entertaining/creative content, and specials offers and discounts. Engage. Engagement drives everything on social media and here’s where many dealers fall flat. They struggle with knowing what to do with their fans once they become connected. Fact: You really do need to be social on social media. To be social, you need a human. The first step is to choose someone who can easily speak for you online, manage your ads and your content, answer Facebook Messenger inquiries, etc. To engage successfully, create a “content strategy” that showcases your store and your personality. Post content and regularly review your results – then continue to post the types of content your target customers need and want. Don’t worry about being all things to all people. Focus on genuinely engaging customers and inspiring them to take action. Convert. The unique value of social media is its strength to attract and engage those customers who will most likely buy from you. Selling to people who actually want to hear from you is far more effective than interrupting strangers who don’t. Your targeted content informs, educates and entertains. The next step in the secret formula is to deliver just the right offer (and value) that helps your customers finalize their purchase decision. Once you’ve decided on the offers you want to extend, use Facebook ads to promote them. Facebook ads have become the single most important way to be seen on social media. Pro tip: Ad targeting is a highly prized skill. If you advertise to people who don’t know you, there’s a wall that needs to be scaled, and without a large budget that’s a tall order. Use Facebook ad targeting to bring in-market buyers closer to you so their decision is easier. Bonus Secret: Retain Social media is your secret weapon in customer service. Currently, 92.5 percent of brands fail to meet customer expectations on social media and these failures can have big implications. Quality customer service – regardless of channel – relies on a meaningful, efficient, solution-focused exchange between a dealership and its customers. The growing preference for social media as a preferred communication channel requires a “re-thinking” of your customer service strategy. Stakes are high, and sloppy customer care is not a risk any modern dealer can afford to take. Wrapping it All Up Facebook is where your customers spend their time. Take advantage of my “secret formula” to explore the opportunities for your organization. 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.
PRODUCTS & SERVICES| By Auto Remarketing Staff
CARS.COM LAUNCHES PRODUCT FOR FACEBOOK MARKETPLACE Promotes Dealer Listings
Cars.com has unveiled a new social solutions product designed to help dealers share their Cars.com used car listings with active shoppers on Facebook Marketplace. Cars.com’s new Facebook Marketplaceintegrated product, Social Sales Drive, can directly connect dealer’s inventory to its business page on Facebook. According to Cars.com, Facebook is two times as efficient as paid search when it comes to directing active car shoppers to a dealership’s website to engage with inventory. “Social is a must-have for automotive dealers with the increasing amount of time people spend on social media and their desire for a shopping experience that meets them where they are,” Cars.com chief executive officer Alex Vetter said. “The combination of powerful Cars.com advertising and targeting with the efficiency of social as a selling channel is a win-win for dealers and manufacturers. Cars.com is innovating at the speed of retail and leading the way for social selling in automotive.” In addition to Conversations, the company’s messaging platform that can seamlessly integrate into dealer websites for 24/7 chat options between dealers and car shoppers on Facebook Messenger, the Social Sales Drive solution can automatically upload a dealers’ complete used car inventory to Facebook Marketplace. According to Cars.com, over 50 percent of Facebook Marketplace car shoppers are connecting with dealerships during off-hours, between 6 p.m. and 9 a.m.
www.newjerseyiada.org October/November 2018
DEALER NEWS
5
MANAGEMENT | By John F. Possumato
Cover Story
LYFT SOME RISK
LEVERAGING RIDE SHARING FOR YOUR BENEFIT
Sometimes a counterintuitive but simple idea surfaces that seems so obvious you have a, “Why didn’t somebody think of this before?” moment. This is one of them. But perhaps it’s not so obvious unless you have some understanding of both the traditional BHPH/ subprime dealer world and the new world of ride sharing/ride hailing. As BHPH dealers, we have our money at risk every day. The skill is in judging whom to take that risk on and how to get them to pay us each month for their vehicle. In the completely different world of ride sharing – led by companies such as Lyft and Uber – the lifeblood is recruiting new drivers, but screening those drivers before they ever take on a passenger. Once screened, the best ride share driver tends to be a part time, “casual” driver who uses the on-demand employment of ride sharing to supplement income when his or her “day job” doesn’t bring home enough to pay all the bills. Those part-time drivers tend to drive 1020 hours a week. They are steady, reliable contributors and don’t seem to burn out or drive too much to increase the probability of accidents. As BHPH dealers, we frequently review credit, but we don’t have access to prospects’ DMV records or – even more useful – a full background check to know whether the individual to whom we are about to extend credit has ever committed a crime. We resort to asking for utility bills, next of kin addresses, etc., anticipating the worst. Even if we had the ability to quickly and accurately do DMV and background checks on every prospect who walked through the door, there would be a cost, particularly for the background check, of upwards of $35-50 per candidate. So here’s the idea: Why not combine the need for a strict ride share candidate screening with your desire to know whether the prospect you’re intending to risk your BHPH or recourse loan with has a clean DMV and background check? Specifically, why not set up an iPad online kiosk in the store and, based on your discretion in “reading” your prospect, suggest or even require a potential customer to apply to drive for Lyft (which has a more
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DEALER NEWS
October/November 2018
stringent background check than Uber) on the spot, the same way you require pay stubs, utility bills, addresses of friends/ relatives, etc.? You call the shots here, so you can make acceptance by Lyft to drive as another of your criteria for “buying” the candidate. Wouldn’t it be nice to know your potential new customers have passed a DMV check and a thorough background check before you trust them with your vehicle? Of course, if a candidate fails to qualify, you won’t know exactly why. But you will know something was wrong in one of those categories, so you can evaluate the situation accordingly. Best of all, with a Lyft kiosk in the showroom, the screening checks would be quick and cost-free to you. How can you beat that? Well, I’ll tell you how. Let’s say, hypothetically, one of your customers is a little overdue on a payment and gives you what sounds like a legitimate story about why he/she can’t pay you today. Now you could pull out the file, see he or she was accepted to drive and say, in a very understanding tone, “I totally understand why you are short on cash, but that’s in the past. Go turn your Lyft app on, take a few extra hours – I know you are approved – and come bring me all of the payment tomorrow.” A ride share driver can make up to $35 an hour and be paid the same day. Now if your customer doesn’t come in with all of the money to pay you in 24 hours or so, well, you know to turn off the vehicle and get it.
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On-demand employment truly answers a lot of questions, if not solve some of our problems. Now, you might counter, “I had a customer once take my vehicle and, unknown to me, drive for Uber/Lyft, kill my vehicle, never pay me and the repossessed vehicle was trash.” Everyone has had or heard a story like that, right? Well, you always have had to screen for abusers, long before there was Uber and Lyft. Ride sharing just makes it a little easier for that type to defraud both parties. So you will still have to use your judgment – there is no getting around that side of the business. However, if you are the one to introduce the idea of applying to drive, the prospect is less likely to already have that in mind, or to be a career driver. Maybe you can “root out” those who are career drivers if your new prospect responds to the idea by sharing he/she already is a ride share driver. You can then inquire further as to how many hours the prospect drives and use your GPS device to track miles more closely if you roll him/her. Additionally, those ride share drivers who “kill cars” don’t last long on the Lyft program. Every passenger rates every ride. If the vehicle has problems, the passenger invariably gives a low rating, and just a few low ratings can cause deactivation by Lyft. So there you are – perfect synergy here and a great way to leverage “new mobility” to your benefit. John F. Possumato is founder and CEO of DriveItAway, which recently integrated with HyreCar, to roll his “path to ownership” and “Lyft Your Down Payment” program, and dealer-based “Car Sharing for Ride Sharing” nationally.
www.newjerseyiada.org October/November 2018
DEALER NEWS
7
BHPH PERSPECTIVE | By Kenneth Shilson
KEEPING THEM SOLD IN SUBPRIME AUTO FINANCE
A Measure of Success
At Subprime Analytics, we measure success in subprime auto finance by “keeping vehicles sold” and subprime finance customers paying over the term of each contract. Some operators measure performance strictly on how many vehicles they sell each month, and not on collection performance metrics like static pool, loss/liquidation, and default rates. I liken this to “flying an airplane without an instrument panel.” What keeps subprime customers paying? What are ways you can increase cash flow and get the capital needed to grow your subprime auto finance portfolio? The last three years have been the most competitive in history for the subprime auto finance market. This fierce competition led to some very aggressive underwriting, which has translated into defaults. Total outstanding automotive receivables now exceeds $1.1 trillion. This makes auto financing the second largest consumer market, only exceeded by student loans. The outstanding BHPH subprime receivables are 6.4 percent of the total, or approximately $80 billion! The unprecedented growth has been fueled by cheap money from auto bond securitizations issued by Wall Street. The percentage of subprime auto loan securitizations considered deep subprime rose to 32.5 percent in 2017 – up from only 5 percent in 2010. The risk associated with these securitizations was passed to investors seeking higher returns on their investments. The poor performance and loan losses from many of these deep subprime securitizations have forced banks and private equity sources to shut down funding for an increasing number of smaller subprime vehicle lenders as they shift funding emphasis to prime and near prime customers. That lack of funding is causing many subprime lenders to close up shop and a credit tightening. This tighter credit availability will reduce competition in subprime auto finance and create an opportunity for independent dealers and their related finance companies to regain market share lost during the last three years. It is important to compare the business models from the independent operators’ benchmarks with the subprime models funded by the auto bond securitizations. Table 1 shows the important differences between them. Underwriting Differences Between the Models Cheap money and the investor’s quest for higher yields fueled the subprime auto bond securitization market the last three years. These securitizations were comprised of pools of loans with differing credit quality – prime, near prime, subprime, and deep subprime. In some cases, the deep subprime component was 33 percent of the overall pool, according to Morgan Stanley. The inclusion of deep subprime bonds in these pools increased the overall yield. Unfortunately, it also greatly increased the risk of default. TABLE 1
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TABLE 2
Business Model Comparison Amount Financed Used Loan Term Used Monthly Payment Average Finance Rate
DEALER NEWS
In fairness, several of the poor performing securitizations were done by issuers who had very limited experience with subprime auto finance originations and collections. They accessed the market when demand was greater than supply and filled the need! Investors were attracted by potential yields, which were greater than other investment opportunities. As indicated by Table 1, the bond terms were 55 months or greater, and began with higher amounts financed. This was necessary because the collateral for many of these deep subprime bonds was either new or CPO vehicles. Therefore, the original terms were lengthened to make the monthly payments “more affordable” to the borrowers. Investors derived comfort from the higher collateral values at origination. Independent BHPH dealers who previously dominated the “unbankable customer” market preferred shorter terms, approximately one year less. As the defaults on these deep subprime securitized portfolios have increased, some lessons can be learned: • Good underwriting requires the proper matching of the borrower with a vehicle they can afford. Historically this has been a vehicle model four years or older. Starting with better, more expensive collateral does not assure repayment. On the contrary, it results in higher bad debt charge-offs when subprime customers inevitably default. • Lengthening the term does not guarantee repayment of deep subprime loans – time is the enemy! Standard & Poors said it best: “Longer terms remain outstanding longer, and are exposed to adverse changes in borrowers’ credit conditions.” Vehicle performance and condition also deteriorates dramatically over time. Therefore, the longer loan terms increase both repayment risk and defaults. • Increasing sales prices and the amounts financed only benefits when and if you collect it! Otherwise, “paper profits” become “fool’s gold” instead of cash! • The high rate of competition in subprime auto finance caused down payments to be lowered and repayments to remain relatively unchanged. This was done primarily to retain market share in the more competitive environment. Unfortunately, these decisions result in substantially more “cash in deal” and greater risk of default to the lender. It also reduces return on investment when the borrower defaults during the term of the contract. The earlier they default, the higher the bad-debt charge-off, and the lower the ROI. Historically deep subprime customers typically only want to drive the same vehicle for approximately two years and then get another one. Now for the good news: many capital providers have now shifted their emphasis to higher credit quality prime and near-prime customers instead of addressing the underwriting mistakes above. This creates a “golden opportunity” for independents to regain market share. I hope we have learned from these past losses so they are not repeated.
2017 2017 Deep Independent Subprime BHPH per Experian Benchmarks $14,022 $11,951 55 Months 44 Months $394 $390 20.3% 20.5%
October/November 2018
Difference $2,071 11 Months $4 0.2%
Percent Difference 17% 25% 1% 1%
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Description Average Sales Price Average Amount Financed Average Monthly Payment Average Original Term (Months)
2014 $11,600 $10,765 $386 40
2015 $11,874 $11,090 $386 42
2016 $11,729 $11,015 $381 43
2017 $12,752 $11,951 $390 44
% Change 10% h 11% h 1% h 10% h
How Underwriting Differences Impacted Collections and Recoveries Although the deep subprime auto bond securitization model often started with new or CPO vehicles, independents have historically sold and financed similar credit score customers with much older vehicles over shorter terms. Wall Street convinced investors that newer and higher ACV vehicles help guarantee repayment and minimize default losses. I have personally analyzed more than 2 million subprime finance contracts. In my opinion, a newer, higher-cost vehicle does not assure repayment and typically results in a larger charge-off, if and when the deep subprime customer defaults. The vehicles that are sold look very different after they default! In many instances, they are unrecognizable due to diminished condition. To finance these higher cost vehicles, the auto bond contract terms were extended to 5-7 years. This increased the likelihood of default and lowered the realized return on investment. Due to the highly competitive subprime market the last few years, operators also reduced down payments to increase market penetration. My portfolio analysis indicates that lowering down payments while increasing vehicle costs often creates an economically unsustainable business model because it dramatically increases cash in deal and lender risk! At Subprime Analytics, we measure success by “keeping them sold” and keeping customers paying over the entire term of the contract. In comparing our independent subprime benchmarks trends from 2014-2017, we compiled the metrics in Table 2. We then analyzed how each vintage performed and the results are shown in Table 3. When we compared the dollars collected through the average default month versus the dollars written off at average default, it is apparent the risk versus reward of longer terms and higher ACV is not justified considering the higher default rate. The 2017 metrics indicate a 2 percent increase in amounts collected is more than offset by a 19 percent increase in average charge-offs. Although more “paper profits” are initially reported in the financial statements using higher sales prices, these metrics show they don’t convert into more actual profit due to increase in defaults. My question to you is simple: Are you in business to sell more vehicles or to “keep them sold?” Your business model and your performance metrics will give you the answers!
TABLE 3
Description Highest Default Month After Origination $ Collected Through Default (Including Interest) $ Deficiency @ Default Average Default Rate % Change In Collections From Prior Year % Change In Charge Offs From Prior Year
2014 2015 2016 2017 18th 21st 22nd 22nd $6,942 $8,099 $8,387 $8,580 $6,727 $5,966 $5,890 $7,037 31.2% 31.5% 34.0% 35.0% (3%) 17% 4% 2% (1%) (11%) (1%) 19%
The Importance of Risk Management Considerations Due to the highly competitive subprime market the last few years, some operators reduced financing rates in an attempt to increase market penetration. Unfortunately, that approach ignores a fundamental rule in finance: “Financing rates should be commensurate with risk.” In compiling the subprime benchmarks for 2017, I noted the loss to liquidation rate (pace of losses) for the operators surveyed increased from 31 percent in 2013 to 35 percent in 2017. This represents a 13 percent increase in default rates. During that same period, the average financing rates charged by the operators surveyed was reduced from 22.3 percent in 2013 to 20.5 percent in 2017. This trend indicates these operators wrongly reduced their rates while assuming more default risk by contracting with weaker credit customers. A fundamental industry postulate is “your losses should be covered by your financing charges.” In the aforementioned comparison the pace of losses exceeded interest rate coverage by a whopping 71 percent! Lowering rates to avoid regulatory scrutiny makes perfect sense. However, lowering finance charges for weaker customers caused by the increased market competition does not! For many years I have searched for a mathematical equation that properly measures credit risk in the deep subprime industry. After analyzing more than two million loans and over $20 billion in contracts, I concluded “cash in deal” best defines portfolio risk. Utilizing my historic portfolio metric data, I noted the average “cash in deal” for BHPH operators surveyed has increased from an average of $5,294 in 2013 to a $6,400 in 2017, a 12 percent increase! The increase in “cash in deal” results from operators paying more for the vehicles they sell while reducing their down payments, increasing sales prices and the amounts they financed. As previously mentioned, this practice results in higher charge-offs and default rates. This trend is economically unsustainable and should not be continued. Prudent risk management starts by using a business model that maximizes cash returns while minimizing cash in deal (higher return on investment). My analyses indicate selling vehicles that will run the term of the contract at affordable sales prices increases the probability of “keeping them sold.” The economic matching between customer and the right vehicle should occur during underwriting, by setting a reasonable markup at origination and determining the customer’s ability to pay. A reasonable markup that will be “collectible” during the contract term beats paper profits that become “fool’s gold.” I recommend operators analyze their own portfolios and business models to ascertain their cash return on investment. At Subprime Analytics, ROI is our primary gradient in measuring portfolio performance. The ROI calculation requires using your static pool and loss/liquidation rates to adjust estimated future cash flows. Do you know these loss rates for your own portfolio? If not, visit www.subanalytics.com for a metrics video on the home page. If you want to increase cash flow and capital you need to look under the hood of your portfolio! Kenneth Shilson is president of Subprime Analytics, which provides computerized subprime auto portfolio analysis using proprietary data mining technology. The company provides portfolio analysis, profit and cash flow enhancement and other consulting services to operators and capital providers nationwide.
www.newjerseyiada.org October/November 2018
DEALER NEWS
9
WASHINGTON UPDATE | By Shaun Petersen
or transfer all subscription services that might stay with the car, such as satellite radio or wi-fi hot spots, and to clear any connections between the old car and their devices – for example, apps that let you locate the car in a parking lot or control vehicle functions remotely. Those recommendations apply to dealers as well. Make sure all data is cleared from your vehicles before you sell them. Some vehicles have a factory reset option that returns all settings to their original state. Check the owner’s manual or visit the vehicle manufacturer’s website for information about how to reset and remove the information.
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
After a three-week delay requested by Democrats to gather more information, the Senate Banking Committee approved the nomination of Kathy Kraninger as director of the Consumer Financial Protection Bureau by a 13-12 party-line vote. Her bid to head the nation’s most powerful financial regulatory agency now goes before the full Senate. Kraninger, who currently serves as an associate director of the Office of Management and Budget, was nominated by President Trump to replace acting director Mick Mulvaney – Kraninger’s boss at OMB. Committee Democrats criticized Kraninger as unqualified to lead the CFPB, citing a lack of consumer protection experience, and took shots at her role in the policies of the Trump Administration’s Department of Homeland Security, whose budget she oversees. But committee chairman Mike Crapo (R-Idaho) said Kraninger’s “significant leadership experience at federal agencies and on Capitol Hill,” and “her depth and diversity of public service experience” gave him “confidence she is well prepared to lead the bureau.” If confirmed, Kraninger is expected to continue the policies of Mulvaney, who has eliminated what he called the bureau’s “regulation by enforcement” and has critically examined many of the policies implemented by his predecessor, Richard Cordray. Mulvaney has also backed proposed legislative reforms aimed at making the CFPB more accountable. “Personally, I think Ms. Kraninger will
“The Federal Trade Commission has issued a consumer alert advising those selling their cars to clear all data stored in the vehicle’s electronic systems, as personal data that was downloaded from syncing smartphones could remain” 10
DEALER NEWS
October/November 2018
GRASS ROOTS
do a good job of trying to rein in an agency that needs to be reined in,” Sen. Mike Rounds (R-S.D.) said.
REGULATORY
DOL is listening: The Department of Labor conducted a nationwide series of public listening sessions throughout September to gather views on its Overtime Rule, which spells out the details of the Fair Labor Standards Act’s requirement that employees receive overtime pay for working more than 40 hours in a work week. The rule exempts executive, administrative and professional workers from that requirement. The sessions were held in Atlanta (Sept. 7), Seattle (Sept. 11), Kansas City (Sept. 13), Denver (Sept. 14) and Providence, R.I. (Sept. 24). NIADA member dealers attended each of the sessions to offer their opinion on the rule. The sessions followed a request for information issued by DOL on July 26, seeking feedback on how the overtime exemptions are defined as the department studies a possible revision of the rule. Specifically, DOL is asking for public input about the appropriate salary level at which the overtime exemption should apply, the benefits and costs to employees and employers resulting from an increase in the current salary threshold of $23,660 per year, the methodology used to determine an updated salary level and whether DOL should regularly update the salary standard at certain time intervals. FTC consumer alert: The Federal Trade Commission has issued a consumer alert advising those selling their cars to clear all data stored in the vehicle’s electronic systems, as personal data that was downloaded from syncing smartphones could remain – and be accessible by the new owner. That information includes address books, phone numbers, log-in info and data gathered and stored on apps, location data or even garage entry codes for home or office. The FTC also reminded consumers to cancel
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In August, I represented NIADA at the American Association of Motor Vehicle Administrators International Conference in Philadelphia, interacting with officials from state motor vehicle departments nationwide. One of the topics we discussed was AAMVA’s proposal for a document spelling out recommended best practices for handling titles for junk and salvage vehicles. AAMVA has formed a working group to try to standardize the states’ various definitions for title brands, such as salvage. The group is working on a draft document of proposed definitions that state DMVs can take to their state legislatures to adopt, providing consistency across the country. The draft will also include best practices on how to handle those titles – for example, should a “junk” vehicle ever be allowed to be rebuilt and driven on public roads? NIADA and some of our partners – including NAAA, NADA, Cox Automotive, KAR Auction Services and Copart – met with AAMVA to raise concerns with some of the concepts currently being considered as best practices. Those discussions will continue as we work together to create workable definitions and best practices.
PAC
Rep. Mike Kelly (R-Pa.), a car dealer and a leading voice for the auto industry in the U.S. Congress, was named NIADA’s 2018 Legislator of the Year during last month’s NIADA National Policy Conference in Washington D.C. Kelly was also the speaker at the conference’s Power Lunch during our Day on Capitol Hill, when independent dealers and industry partners from across the nation met with members of Congress and their staff to discuss the issues that affect our industry. Kelly was one of several members of Congress to receive contributions from the NIADA Political Action Committee during the NPC. That group also included 2017 Legislator of the Year Roger Williams (R-Texas), Rep. Mark Walker (R-N.C.) and Rep. Barry Loudermilk (R-Ga.), all of whom participated in the annual Friends of the Automotive Industry Congressional Reception and Dinner. Shaun Petersen is NIADA’s senior vice president of legal and government affairs.
ONLINE MARKETING | By Kenny Atcheson
“DRESS UP” FOR YOUR DEALERSHIP
Step in Your Customer’s Shoes
Kids, adults, and pets got dressed up last year for Halloween to the tune of $9 billion. Hot costumes included characters from Stranger Things and Wonder Woman. This year, characters from The Incredibles will likely be hot costumes after a $180 million opening weekend for the animated movie. The hot costume for you and your employees this year should be to “dress up” as your customer. Pretend to be your customer and get into character. Forget everything you know about your business and look at it from an outsider’s perspective. Customers do not know your business offers the best service or products just because you say so. Your competitors say the same thing. Everything your customer has to go through to purchase from you is a direct reflection of your products and services. Therefore, their experience influences whether or not they buy from you the first time or a second time – and it influences whether they send referrals. Start from the beginning of the process as if you were a customer. Do not assume anything. What do you see? Type the same words into Google your customer would when beginning a search for a car, such as “bad credit car dealer.” Take note of what you see. Does your website show up in the top four? Do you have a Google ad in the top two? Is your ad a good reflection of your business? Does your ad display information that makes your dealership stand out as uniquely better than the competition? Is your rating a 4.5 or higher? When the customer looks at your “can’t miss” online reviews and review rating, is it at least 4.5? If not, there is room for improvement. If your company rating is a 4.5 or more, the customer may still click to read reviews about your dealership. If they do, is the latest review – or the one showing at the top – positive? The customer hasn’t made it to your actual website yet, but they are already making a judgment about your dealership. Does your business look like one of many choices – a good choice, the best choice, or The Obvious Choice? (The Obvious Choice is a trademarked training program offered by Dealer Profit Pros.) Is anything broken? The customer finally makes it to your website. Your company website may be up and running – but does it do its job? Your website’s job is to generate leads. If it is not generating enough leads it is likely not building trust with potential customers. How many trust factors are at play? Are there happy customer testimonials continuously
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populating on your site? Are there testimonial videos? Are there pictures of friendly people – not just cars? Are there any broken links? Your organization should have a regularly scheduled check-up of your website. Click around and make sure everything works. I’ve visited dealer websites on which everything looks fine until I filled out the beginning of a finance application only to be sent to an error page. The lead was never captured. Big, national companies are not immune to this problem either. While planning my travel to deliver The Obvious Choice training to a Buy Here-Pay Here dealer a few states over, I was looking for a rental car. I clicked on an advertisement for National car rental. The ad took me to a webpage that was under construction. Two weeks later I checked to see if National was still paying for advertisements that sent people to a broken webpage. Yep, the ads were still running. Become Sherlock Holmes Create an alias email and/or phone number, or hire someone to check on the followup processes of your dealership. Find out if your salespeople are following up with leads in a timely manner. Do they use the communications and processes you have created? I have a number of horror stories and examples of zero or putrid follow up. I won’t go into all of them here because that’s not the point. The point is that whatever you do, improve your customer experience and continue to monitor their experience and processes. You will earn more business, more referrals and more repeat business. This article doesn’t even discuss customer service. Think about how many other touches there are to get a customer to buy. • Is the person who answers the phone pleasant? • Does the salesperson connect with the customer and build trust? • Does the salesperson follow up after a purchase and non-purchases? There are so many places to make a mistake. If you don’t keep an eye on it, customers may feel like they are going through a haunted house, but not in a fun way. Your profits or lack thereof will be scary. The only thing that should be scary this Halloween are the costumes. Kenny Atcheson is the founder of Dealer Profit Pros and author of Marketing Battleground: How to Deploy Underthe-Radar Strategies to Explode Your Profits. His website can be found at www. DealerProfitPros.com
SECURITY WATCH |
INDUSTRY NEWS
By Tyson Lee
EMAIL SECURITY TIPS How to Keep Hackers Out
I recently received an email from a dealer we just funded on a bulk purchase asking to cancel the funds we had just sent electronically. He said he would send me his new banking instructions. Thinking this strange, I called the dealer and texted him a picture of the email I received. He said, “Tyson, I did not send this. This did not come from me.” While on the phone, I got our IT department involved. We found the hacker was deleting the messages the dealer was sending from the dealer’s email, but we could still pull them up in his archived folders. We had the dealer change his password, but the hacker was still able to send emails out. We then had the dealer unplug all Internet access, all computers and the router, and to power everything down. We had him call his Internet provider to make sure the IP address would be changed. The dealer also contacted his anti-virus provider to see what they could do. Just think what this hacker could have done if he was able to get ahold of credit card numbers or customers’ personal information! What a mess it could have been for this dealer. Here are some tips on how to keep hackers out. Use strong passwords. Strong passwords, although hard to remember, are your first step towards protecting your email and other online accounts from the bad guys. Use a combination of uppercase and
lowercase letters, numbers and special characters such as $, &, or %. Use a secure online strong password generator such as https://xkpasswd.net or https://www. passworddog.com if you need help. Don’t use the same password across all the online services you access. With the growing number of online services we access, remembering multiple passwords is getting harder. So, users tend to use the same password across all the services they use. The danger with this approach is if your password gets leaked or one of the online services you use gets hacked, all your online service accounts are vulnerable to unauthorized access. Don’t write your passwords on sticky notes. Do not write your passwords on sticky notes and keep them with your phone or leave them next to your computer. If you are having trouble keeping track of different passwords you use for your online accounts, there’s help for you in the form of password managers or password vaults that help you store you passwords in a secure manner. Check out LastPass free password manager at http://www.lastpass.com. Enable two-factor authentication (2FA). Most of the popular email providers such as Gmail, Yahoo, and Microsoft, and online services such as Facebook, Instagram, and Twitter support two-factor authentication. With 2FA, you use a second factor besides your password to access your account. This second factor, in most cases, is simply a verification code sent to your phone. Be aware of phishing. Phishing is a form of fraud in which fraudsters send you emails that look like the ones you would receive from a reputable company such as Facebook or Apple, but are meant to trick you into revealing your user ID and password so fraudsters can gain access to your email, confidential data, or other valuable information from your account. Once they gain access to your account, they will then try to send emails to people on your contact list and try to trick them into revealing their account credentials. Install anti-virus software with email scanner. Hackers send viruses, malware and spyware as email attachments. Virus and malware are software programs or code written with the intent to harm or disable your computers. Spyware is software written with the intent to steal your confidential information or let hackers control your computer remotely. One of the best ways to protect yourself from these is to install antivirus software that includes an email scanner. AVG Free is one such free software with email scanner (http://free.avg.com). Antivirus email scanners scan email and attachments and remove or block viruses, malware and spyware. Since hackers are changing their software constantly, make sure you update the antivirus software and virus definitions regularly. Tyson Lee is the marketing and sales manager for United Acceptance, Inc. He has been helping dealers across the nation for the past 12 years.
CARFAX RIDES FOR AUTISM AWARENESS
Event Raises $425,000 for Autism Research
More than 1,000 people, including 92 Carfax employees and family members from around the country, banded together to raise a total of $425,000 for autism research in the 2018 Bike to the Beach DC. On Aug. 3, bicycle riders and volunteers from DC-area businesses, members of Congress, charitable organizations and more came together to raise awareness of the disorder. The 106-mile ride from Washington, D.C. to Dewey Beach, Del. is an annual event held in association with Autism Speaks. This was the seventh straight year Carfax supported the event. The Northern Virginiabased company has raised a total of more than $170,000 toward the cause. Carfax’s goal was to raise $60,000 for this year’s ride.
INDUSTRY NEWS
ROUTEONE WELCOMES C&F FINANCE
Growing List of Available eContracting Finance Sources
C&F Finance Company is now an available eContracting finance source for dealers utilizing the RouteOne platform. eContracting enables the digital exchange of critical contract documents and data between dealers and finance sources to increase efficiency and reduce contracts in transit. RouteOne is the industry leader in eContracting, booking more than 10 million eContracts to date. RouteOne has over 7,200 active eContracting dealers and 50-plus finance sources in its rapidly growing eContracting customer base. C&F Finance is a leader in indirect auto financing, headquartered in Richmond, Virginia, and providing automobile loans in multiple states throughout the U.S. C&F benefited from a streamlined technical implementation process due to the eContracting certification their loan origination system, defiSOLUTIONS, had previously undergone with RouteOne. “We strive to continually deliver our customers solutions that streamline and solve challenges in the auto finance industry,” said RouteOne chief operating officer Brad Rogers. “eContracting is a solution that benefits all parties involved: dealer, finance source, and consumer. C&F Finance is a welcome addition to our eContracting platform and we are pleased to offer their services to our dealer base.” Dealers interested in eContracting should contact their RouteOne business development manager at 866.768.8301 or www.routeone. com/salesteam.
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DEALER NEWS
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n the first installment of this threepart series, we looked at how to take advantage of upstream online auctions. Upstream is just a fancy way of saying “before the vehicle is shipped to physical auction.” We focused on OLOCs (One-owner, Low-mileage, Off-lease Cars) and discussed how you can acquire affordable cars your customers want, without having to go to a physical auction. I received a lot of great feedback and even helped some dealers buy a few cars online for the very first time! Turns out, it’s not as hard as they thought! A lot of folks told me the cars they need – the $2,000 to $7,000 cars – are only at the physical auctions. So, in this article we are going to focus on buying cars from the physical auction. I’ve shared before that if you go to a physical auction there will be only a limited number of cars that might work for your lot and you will only be able to bid on a few. This means you probably won’t get the cars you need at the price you want – or at least not all the cars you need. So, why are we talking about going to the auction again? Well, I didn’t say we were going to go to the physical auction. I said we were going to buy cars from a physical auction. Some of the most successful used car dealers (and new car dealers as well) have mastered buying cars from multiple live online auctions. Remember, one auction will have a limited number of cars, but five auctions will have five times as many. How can you be at five live auctions at the same time? It’s made possible with the power of the Internet, of course. Thanks to advances in technology, nearly all auctions have a live video broadcast allowing dealers to bid and buy from the comfort of their office. You can watch and hear the sale, and then bid and buy right from your phone! Yes, multiple auctions, multiple cities and multiple states all from your computer or phone.
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The live online auction I’m most familiar with, of course, is LiveBlock from ADESA. You can preview cars that meet all the criteria you want and gather all the information you need to make an informed buying decision: vehicle history reports, build data, Autoniq data, Market Guide, book values and more, all at your fingertips. Then, you can bid on the cars live as they run across the block at auctions around the country. In fact, you can watch and bid four lanes at once! Yes, it will take some practice and, yes, it may be a little confusing at first – but like anything else it becomes much easier after a very short time. Do you remember your first trip to the auction? That wasn’t easy, was it? Over the course of my career, I’ve seen many independent dealers become successful at buying cars this way. They have multiple screens set up to watch, bid and buy at eight or more auctions at a time. I have seen big franchise groups with “war rooms” that have three or four employees in a room, each with multiple screens buying cars. The point is, you can do it! I know, you tried it once and it didn’t work out. You couldn’t buy the cars you wanted or the car you bought turned out to be a problem. Maybe that was a long time ago, or it just made you so frustrated you gave up and never tried again. Whatever the case, you should
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reconsider online auctions as a great way to acquire the cars you need. Don’t make this like asking for directions when you’re lost – if you don’t know how, ask for help! Any auction company will be more than happy to make sure you are fully trained and set up to succeed. Seriously, email me and I will connect you to people who will take the time to show you how to buy and sell online! If you’re still worried about making a mistake or getting a bad car – don’t be. There are now products out there like ADESA Assurance that can help reduce the worry – and the risk – of buying cars. If you underestimated the recon costs after buying or had a customer change their mind about buying a car, just send it back. Yes, you read that right: send it back within the defined timeframe and get your money back. There are, of course, some eligibility requirements and conditions but, boy, how times have changed. I want to close with one final tip regarding live online acquisitions: proxy bids. That’s right, proxy bids, also known as AutoBid. This is the most under-used tool in the toolbox. After reviewing the condition reports and data on the cars you need for your lot and determining exactly what you are willing to pay, simply set that number as your AutoBid. You’ll receive notifications if you win the car and what your winning bid was (which won’t exceed your AutoBid) or if you were outbid. You don’t have to watch the sale if you don’t have time – AutoBid will do the work for you. It’s really that easy! Next time I’ll uncover how to take advantage of the latest technology to buy fresh trades directly from the franchise dealer’s lot within minutes of the deal being closed. Until next time, have fun and sell cars! Doug Hadden is executive director of dealer consulting services for ADESA Auctions Inc.