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DEALER NEWS

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N E W J E R S E Y I N D E P E N D E N T AU T O M O B I L E D E A L E R S A S S O C I AT I O N

D E C E M B E R 2 0 17

RETAIL

READY Building New Roads in 2018 PAGE 08

DALLAS, TEXAS Permit No. 2079

PAID

PRSRT Standard U.S. Postage

W W W. N E WJ E R SE Y I A DA .O RG

INSIDE INSIDE

06........................................Improving Your “About Us” Page 07................................................Avoid Post-Sale Complaints 08............................................................ Building New Roads 10..............................................................New Profit Sources 13...........................................................Flood Damage Basics 14................................................BHPH Income Opportunities

WHAT’S NEW

SPECIAL FEATURES: DISASTER RELIEF

NIADA and Spireon recently teamed up to provide disaster relief to those directly impacted by hurricanes Harvey and Irma. Partnering with the NIADA Foundation Disaster Relief Fund, Spireon is contributing $100,000 through the end of the year to help with recovery. Spireon is also helping customers get their businesses back up and running through data on their NSpire platform. To learn more, check out the story on NIADA.tv’s Special Features channel.

ADVERTISERS INDEX

AmTrust.................................................................................IFC Auto Use..................................................................................7 Black Book...............................................................................3 CarMax Auctions.....................................................................9 Manheim................................................................................11 Manheim New York.................................................................5 NextGear Capital...................................................................12 VAuto......................................................................Back Cover

OFFICE

For information on how to become a member, please contact Paula Frendel: 855.694.2324 or njiada.pfrendel@gmail.com

NIADA HEADQUARTERS NATIONAL INDEPENDENT AUTOMOBILE

DEALERS ASSOCIATION WWW.NIADA.COM • WWW.NIADA.TV 2521 BROWN BLVD. • ARLINGTON, TX 76006-5203 PHONE (817) 640-3838 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 © 2017 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

Christopher Hanley • chris@niada.com PRINTING Nieman Printing

2017 MEMBER DISCOUNT BOOK 2 0 1 6 M E M B E R D IS C O U N T B O O K $5,000 IN AUCTION DISCOUNTS

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For complete membership information please visit vwww.newjerseyiada.org 4

DEALER NEWS / December 2017

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ONLINE MARKETING

BY KATHI KRUSE

TIPS TO IMPROVE YOUR “ABOUT US” PAGE Start on the Right Foot

Customers who view your “About Us” page will spend 22.5 percent more than those who don’t. And, according to Blue Acorn, those who view it are five times more likely to make a purchase. I’ve often wondered why dealers don’t put more effort into these great opportunities to bring customers closer to the store. The average “About Us” page is a boring, self-serving mix of me, me, me, and us, us, us. But this page is so vital to your business! In fact, it’s usually the first place people look before they start to take you seriously. Get it wrong and you could be turning people off without even knowing it. A Good “About Us” Page is Crucial to Digital Operations A good “About Us” page is hard to come by because they’re difficult to get right. An “About Us” page that actually converts should: • Focus on your target customers and the value they get. • Provide testimonials, social proof, and other facts that prove your value. • Be a visually appealing page with photos and videos. • Convey your personality and why people buy from you. Ah, but how to achieve these objectives can be tricky. It’s all about trust. The “About Us” page builds a relationship with customers and gains their trust. While trust is largely intangible and unable to directly account for its ability to win customers, it is the undeniable invisible force behind sales performance and retaining customers. TIPS TO IMPROVE YOUR DEALERSHIP “ABOUT US” PAGE 1. Start with simplicity and clarity. Begin with a short introduction about your store. Sum up what you do in two to three sentences, but keep the language very simple – no jargon. Tell the story of your inception. Use meaningful language to engage customers. Talk about the dealership’s core values, principles, and goals. Talk about the obstacles you’ve overcome, the things you’ve learned along the way, and anything that makes you sound like more than a machine pumping out products. 2. Stop using mug shots. I have seen my fair share of employees’ pictures on dealership websites. Who takes these photos, an off-duty cop?

DEALER NEWS / December 2017

A better alternative is to take candid shots of your team doing their job. Have them look at the camera, smile and illustrate their enthusiasm. 3. Tell a story about each team member. Interview each team member to get their heartfelt responses. Here’s what we use at Kruse Control: Hi there! We’ve put together a survey that will help us connect better with our customers and our community online. With your help, we can tell the story of our dealership. We pride ourselves on transparency and introducing you digitally will not only show how much we value your daily contributions but help you connect with our customers and community as well. Please help us by answering just a few short questions about yourself. We really appreciate your participation and we promise to make you look good! Name:___________________________________________________________________________________________ 1. What is your title and job description here at (dealership name)? __________________________________________________________________________________________________ __________________________________________________________________________________________________

2. How long have you worked at (dealership name)? __________________________________________________________________________________________________

3. What do you love the most about working for (dealership name)? __________________________________________________________________________________________________ __________________________________________________________________________________________________

4. What do you like to do when you’re not at work? __________________________________________________________________________________________________ __________________________________________________________________________________________________

5. What brought you to the automotive industry? __________________________________________________________________________________________________ __________________________________________________________________________________________________

6. What kind of car do you drive? What do you love about it? __________________________________________________________________________________________________ __________________________________________________________________________________________________

7. Do you volunteer or support any local causes in our community? If yes, please tell us about it. __________________________________________________________________________________________________ __________________________________________________________________________________________________

Thank you for answering these questions and for making our customers’ experience memorable. 4. Show examples, with links, of ways you’re participating in the community. I can’t tell you how many dealerships I’ve managed, and/or know, that spend thousands of dollars supporting local community causes. What I don’t see very often is evidence of that on their websites! It’s not self-serving to emphasize your good works. If a team member has answered “yes” to #7 of the questionnaire, make sure to illustrate how they’re giving back. 5. Include testimonials and social proof. A good “About Us” page always needs to have some mention of past successes, achievements, social proof, etc. Include a testimonial from one of your satisfied customers. Pick one that combines a compelling story with real examples of how your company met his or her satisfactions. Video is very powerful. Film customers or your employees and pick people who are engaging and feel comfortable in front of the camera. Putting it All Together How does your “About Us” page measure up? If the answer is “not so much,” let me know and I’ll help you improve it. KATHI KRUSE is an automotive social media marketing expert, blogger, consultant, author, speaker and founder of Kruse Control Inc. Kruse Control coaches, trains & delivers webinars focused on integrating social media and online reputation management into dealership operations. She can be reached at kathi@krusecontrolinc.com.

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ACCELERATE

BY GWC WARRANTY

AVOID POST-SALE COMPLAINTS Three Easy Steps

With the voice today’s modern consumer has on social media and online review sites, it would be naïve to think a dealer’s obligations end the day of a sale. How a vehicle performs in the months following a sale – and how you prepare your customers – can go a long way toward shaping your reputation both online and in your community. The fundamentals of avoiding postsale complaints begin with protecting your customers from the unexpected. Nothing helps guard your customers against being blindsided by repair costs better than a vehicle service contract. With this in mind, the following steps will help you properly prepare your customers who purchased a vehicle service contract for the unlikely event of an unexpected mechanical breakdown. Train Yourself There’s no way you can effectively present the benefits of your service contract offering without first educating yourself on all the ins and outs. Knowing the subtle differences between coverage levels and the finer details

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about component coverage, claims procedures and limits of liability will help you pass this knowledge along to your customers. If you’re going to educate your customers in a way that protects your reputation, you will first need to be a subject matter expert yourself. Delve Into Details Getting deep into the details of a service contract isn’t recommended for your F&I presentation, but once a customer is on the hook, it’s important to go over what they can expect from a repair experience. Even if you don’t do a full dive into some details, directing your customers to where they can look up claims procedures, component coverage details, labor rate information and more will provide them the resources to have a smooth claims experience. You can even direct them to the service contract provider’s website and helpful tools there that can assist in obtaining coverage details and finding a local service facility. Provide a Resource Let’s be honest. Going over component coverage, claims procedures and limits of

liability at the end of an exhausting F&I presentation can be information overload for a customer. But if you have a place on your website where customers can go to learn more about the service contract they just purchased, you’re providing them a place to learn more once they’ve come down from the excitement of driving off in their new vehicle. This spot on your website should point to your service contract provider’s resources so customers can quickly find out how to look up coverage, find a service facility and more. These three steps will help you protect your reputation and avoid post-sale complaints with actions you can take before, during and after a sale. By becoming an expert in your service contract products, passing this knowledge along to customers and providing a post-sale resource for them to use as a reference, you are fortifying your reputation by ensuring any post-sale mechanical failures can be corrected quickly.

December 2017 / DEALER NEWS

MANAGEMENT MATTERS

BY JUSTIN M. OSBURN

RETAIL READY Building New Roads in 2018

In the United States, millions of drivers jump in their vehicles and take to the roads each day. These drivers are from different states and backgrounds, with different levels of education. Though a diverse group, almost none just get up and decide to drive down the wrong side of the road. Why? They know this would be high risk for the safety of themselves and others. They know which side of the road to drive on and at what speed because the federal, state, and local road officials have a common vision of how traffic should flow. To prevent accidents and tragedy, drivers must receive communication from those visionaries. This communication is done primarily through driver’s education and signs. The road visionaries did not expect traffic to just “know” when to stop, when to not pass, what speed to drive, which side of the road to drive or when to exit or stop. Similarly, most workers get up every day with the intention to go to work and do the right thing. Most do not get up with malicious intent to cause chaos at their work place, or at your dealership. However, when the dealer and organizational leaders have not stepped back and thought about how they want their “roads” to function, the vision they have cannot be communicated. Leaders must decide which side of the road drivers will drive on before they can post the sign. The leaders must decide how fast people should drive for safe and efficient travel before they can post a speed limit sign. At the dealership, the senior leaders must have a vision how the business will operate before they communicate it to their team. Leaders must decide what the sales process is before they communicate such to the sales team. If the visionaries of the road system just built a road and no one took the time to decide how it would function, can you imagine what chaos traffic would present each day? Imagine no rules, no signs, no stop signs, no stop lights, no yield signs, no “no passing” zones and signs. Without an organizational vision for your operation, your business might resemble a road system with no thought or communication on how to use it. If you’re familiar with my “Gears to Profitability” dealer model, you know internal service quality precedes external service quality and the result and combination of both dictates profitability. Your responsibility as a leader is to provide short and long term vision. I find many dealers are confused what that means. Back to the roads, if you decide

DEALER NEWS / December 2017

roundabouts are safer and more efficient than traffic lights, visionaries will begin to plan the best place to put a roundabout, what the flow of traffic will be and what rules and signs will organize it best for drivers. This is a long term vision. However, if a bridge is about to fall down and requires immediate repair, or an ice storm hits and salt is needed in the dead of night, this is a short term vision to keep traffic flowing until the longer term possibilities are completed. The dealership’s overall vision sets the framework that each leader inside of the business uses to create their own vision for individual departments. Think of the department managers as state and local roadways working together in congruence with overall highway rules. Leaders take responsibility for creating and communicating a compelling vision. This is essential for leading your team to success on the lot, in service or in the office. There is no better time to create and drive a clear vision than at the beginning of the year. So what is a strong and clear vision? It is a picture of the future that is created in the imagination and catalyzes action! The compelling argument for a clear and communicated vision is to prevent organizational chaos. Each leader’s vision is critical to individual success and impact. Effective leadership focuses on doing the right things. Do you do the right things? Do you do things right? Does your team do the right things? Do they do things right? First, know and understand the vision of the organization, how the roadways work. If you are the dealer, have you communicated the vision of the business clearly? This will enable your leaders to develop their own visions within the areas they control in the business to support the overall goals of the dealership. Second, leaders must create a vision that supports and contributes to the overall vision of the organization or department. As a leader, it is not healthy to construct and distribute a vision that is not a primary effort to advance your department toward the overall vision of the business. Doing so will cause you to conflict with the business itself, resulting in friction with other leaders in the operation, conflict with other departments and confusing communication to those in your charge. Imagine you are in charge of the roadways in a small town, and you decide it

makes more sense for everyone to drive on the left side of the road. Your vision is not congruent with the overall operation’s vision and will cause chaos and tragedy. Last, communicate the organization’s vision in a way that is compelling and inspirational. Part of your responsibility is to consistently broadcast the direction of the department and the dealership to nonleaders on the team. When you are traveling in an unfamiliar, large, downtown area and using GPS to assist you, the directions for your next turn are given two miles, one mile, and half a mile in advance as well as at the time of the turn. Signs are also used, frequently, to communicate the vision – think exit signs, speed limit signs, mile markers, etc. All these communications work to support the overall operational objective. As a leader in your organization, your behaviors demonstrate your vision and impact your dealership’s success. If you tell your team to drive 65 miles per hour on the right hand side of the road, but every day you drive 85 miles per hour on the left hand side of the road, you are not offering yourself or the organization any value. How well does your vision create a shared and meaningful purpose? Does it inspire passion and interest? Does it guide decision-making and strategy? Does it convey values? Effectively communicate your vision. This allows others to decide to follow your vision. The impact is emotional commitment. The New Year brings new beginnings. The page is turning and it brings a fresh start mentally and emotionally. We step out in January and breathe in the new air while feeling anticipation of how this year will be better than the last. While most of us “feel” this reset, it fades away in a relatively short period of time. Make a long lasting effect this year. Imagine and motivate with a vision. I get great satisfaction receiving all of your emails. I’d love to hear your story on vision. Also, contact me for more information on Gears to Profitability or an NIADA 20 Group. Write me at justin@niada.com. JUSTIN OSBURN is a moderator, consultant and trainer for NIADA Dealer 20 Groups, offering more than a decade of experience in retail and Buy Here-Pay Here executive management. He can be reached at justin@niada.com.

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INDUSTRY PERSPECTIVE

BY DALE POLLAK

LESSONS FROM THE SALE OF ROLLING STONE Don’t Make the Same Mistake

When I was a teenager, if you wanted to keep up on music and politics, you read Rolling Stone. I credit my older brothers for introducing me to the magazine. Once I’d read it the first time, I was hooked. I especially remember the writing. For me, Rolling Stone was a way to be in the front row at concerts, or behind the scenes of a political campaign, without actually being there. It didn’t hurt the magazine had an edgy reputation – just the sort of thing that made a teenage kid from the Midwest want to get his hands on the latest copy. These memories came to mind as I read news that, on the eve of its 50th anniversary, Rolling Stone is up for sale. The news didn’t surprise me. It’s been years since I’ve read a copy, and it’s tough, in general, for magazines to be successful in today’s digital age. But I was struck by some of the reasons

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that apparently led to the sale, and the lessons they offer for dealers. Resistance to change hurts. Rolling Stone’s founder and publisher, Jann Wenner, reportedly didn’t think a print magazine would ever fall out of favor, even as subscribers declined and shifted online in recent years. There’s a lesson here in the way many dealers regard, and often resist, the purchase preferences of today’s car buyers. I suspect Rolling Stone would be better off today if it had opted to reinvent its business and distribution model a lot earlier. The same seems to be increasingly true for dealers and the rise of online retailing. In the end, there may not be much “it” to get around to if you wait too long. Reputation and relevance are related. I can’t recall a specific reason I stopped reading Rolling Stone. I do remember the articles and stories seemed less compelling to me in college and beyond. Perhaps the last time I sought out Rolling Stone followed the controversy over its story of an alleged gang rape at the University of Virginia. I read the piece for myself and thought, “This won’t turn out well.” Subsequent investigations found serious breaches of journalistic fundamentals, all of which damaged the magazine’s reputation. Dealers would do well to remember your

reputation is only as good as the worst online review or your last miffed customer. Likewise, today’s consumers have long memories, and social media outlets to vent, when you break their trust. Talent sets the tone. You could make the case Rolling Stone thrived the most when it consistently fielded top-notch writers and photographers – some of whom Wenner had the foresight and guts to give their work its first significant chance. The same is true for dealers. When your people really shine, so does your dealership. As their leader, it’s your job to create the environment where they have a real chance to reach their potential, and continue to grow as individuals. By definition, this outcome means dealers have to do way more than simply provide an attractive paycheck. A New York Times article reports Wenner, in the late ‘90s, turned down an offer of $500 million for Rolling Stone. Last year, Wenner sold a 49 percent stake in his company for $40 million. Perhaps those figures represent the biggest lesson of all. DALE POLLAK is the founder of vAuto and an executive with Cox Automotive. This column originally ran on his blog. For this story and all his posts, visit www.dalepollak.com.

December 2017 / DEALER NEWS

ASSOCIATION NEWS

WELCOME NEW NJIADA AFFILIATE MEMBER UNITED AUTO CREDIT United Auto Credit Puts you in the Fast Lane

Established in 1996, United Auto Credit has grown to become a national leader in non-prime automotive finance. Its core business involves working with franchised and independent dealer partners to provide reliable and affordable transportation to customers recovering from past credit problems, or to establish credit for first-time buyers. United Auto Credit’s newest tool, The Fast Lane, is an exclusive website designed to put the dealer behind the wheel of the financing process. Offering instant approvals, live funding updates, and the ability to rehash a deal, it is an invaluable tool the dealership cannot afford to be without. A common sense lending model, coupled with a strong technology base and an intense focus on dealers, is what separates United Auto Credit from the competition. For more information on becoming a dealer partner, contact • South Jersey: Ryan Camm, (949) 243-2440. • Central/North Jersey: Mark Longo, (949) 309-1224.

DEALER NEWS / December 2017

ACCELERATE

BY GWC WARRANTY

5 NEW PROFIT SOURCES YOU CAN START TOMORROW Small Changes Can Give You a Big Boost

At a certain point, every business – even the best ones – can go stale. Numbers are good, customers are happy, but there’s always the lingering thought of “could it be better?” Oftentimes, the answer to this question can lie in the little things – small changes you can make quickly that give you the boost you’re looking for. Trying new things can be difficult and sometimes uncomfortable, which is why it’s important to start small. Giving a new approach, product or service a shot could be the first step you take toward major changes that greatly benefit you and your dealership. With that in mind, let’s take a look at five of these “first steps” you can easily integrate into your dealership. Try a New Product Your vehicle service contract approach might be spot on. Your penetration rates are high and you know just what to say to get a customer on board with a service contract purchase. But if you’re looking for a little extra F&I profit or simple ways to better protect your customers, a new product might be just what you’re looking for. Products like GAP, Certified, Service Lane and more are good opportunities for you to apply your F&I skill set on small, but impactful new products. Try a New Strategy If your vehicle service contract presentation is lacking the effectiveness you desire, trying to attack it from another angle could help give it a breath of fresh air. Luckily for you, there are plenty of online training resources available – some at no charge – that can lay out these new approaches and processes in a simple, easy-to-implement manner. Try a New Tool Customers are more savvy than ever before, especially when it comes to technology. If they’ve spent hours researching a vehicle and landed at your lot, replicating that technology experience can help them drive away in a new vehicle. Even the F&I process can be done on tablets with apps and other useful tools your provider might offer. Try a New Follow Up Plan Do you make follow up calls? Are they achieving what you’d like? Do they appeal to the modern-day customer we just discussed? Something like Covideo can go a long

IF YOUR VEHICLE SERVICE CONTRACT PRESENTATION IS LACKING THE EFFECTIVENESS YOU DESIRE, TRYING TO ATTACK IT FROM ANOTHER ANGLE COULD HELP GIVE IT A BREATH OF FRESH AIR. way toward ensuring your message is heard. The union of personalized video messaging and email delivers your message in a candid way via a communication tool today’s customer prefers. Try New Lead Generation Even just one phone call a day can add up when it comes to your efforts to drive new leads into your dealership. If you’re selling vehicle service contracts regularly, knowing which contracts expire when can be a good start to build your call list. For GWC Warranty Elite Dealers, we even do that check for you with our Elite Lead Generator. You can also set reminders for when service contracts expire so you know when to call a customer who might be in the market for a new vehicle or another VSC. By giving one of these simple new tools or tactics a try, you’re taking an important first step toward making small changes that have the potential to make a big impact. And once you’ve perfected one, don’t be afraid to try another. The best dealerships are constantly improving, which most times means making small changes along the way that add up to major profits over time.

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eTemp Tag Paper – TTP

Approved by the New Jersey Motor Vehicle Commission (NJMVC), the New Jersey Independent Automobile Dealers Association (NJIADA) has available for purchase the paper that meets all specifications of the NJMVC and NIC, the eTemp Tag vendor. To place an order, please complete this form and return to NJIADA by fax (201-581-0226) or email (orders@NJIADA.com). Circle one: Quantity 25 50 100 200 500 1000

Price – NJIADA Member $24.00 $43.00 $75.00 $127.00 $285.00 $525.00

Price – Non-member $26.00 $49.00 $79.00 $139.00 $300.00 $570.00

Prices do not include sales tax or shipping. Contact us to become a NJIADA member on NewJerseyIADA.org or call (855) 694-2324. Ordered by: ______________________________________________________________ Dealership: ______________________________________________________________ 5-digit Dealer ID (MVC Requirement): ________________________________________ SHIP TO:

PAYPAL

AMERICAN EXPRESS

Credit Card No.: ___________________________________ Exp. Date (Month/Year): ___/____ Cardholder Name: ________________________________________________________________

Credit Card Billing Address: [ ] Same as Shipping Address

_______________________________________________________________________ (Street) _______________________________________________________________________ (City) (State) (Zip Code) Receipt (e-mail or fax): ______________________________________________________ I AM AN AUTHORIZED USER OF THE ABOVE-MENTIONED CREDIT CARD AND NJIADA IS AUTHORIZED TO CHARGE THIS CARD THE TOTAL AMOUNT DUE. CARDHOLDER SIGNATURE: _________________________________DATE: ____________ New Jersey Independent Automobile Dealers Association ∙ 115 Franklin Turnpike, Mahwah, NJ 07430 www.NewJerseyIADA.org ∙ (855) 694-2324

DEALER NEWS / December 2017

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MARKET WATCH

BY MATT ARIAS

FLOOD DAMAGE BASICS Tips on Flooded Vehicles Damage to vehicles by floodwater is a topic that keeps coming up as we continue to analyze issues around the country that have physical effects on vehicles. As stated by NAAA, “Vehicles are frequently exposed to moisture during their ordinary operation, maintenance and reconditioning. Occasionally, such exposure may leave residual marks or indicators similar to those left by exposure or immersion of the vehicle in floodwater.” We also know that flood damage carries a stigma that damages the overall value of a vehicle. It is vitally important that a systematic and complete inspection be performed by personnel qualified to appropriately evaluate each condition in the context of the total condition and vehicle history. WHAT IS A FLOOD? According to the National Flood Insurance Program’s website (www.floodsmart.gov) a flood is defined as “a general and temporary condition where two or more acres of normally dry land, or two or more properties are inundated by water or mudflow.” Floods are caused by events such as hurricanes and damaged or overflowing levees, dams, drainage systems, rivers, ponds or lakes. The majority of floods are caused by rainfall. HOW DO WE INSPECT A VEHICLE FOR EVIDENCE OF FLOOD DAMAGE? As outlined in the NAAA Auction Standards Training, flood damage involves the entire vehicle, any relevant history and title status. Below is a recommended course of discovery to determine if a vehicle requires disclosure for flood damage. Data History Ideally the majority of insurance companies that manage flood-related claims to all property will report to various vehicle-history databases. One of these databases is run by the National Insurance Crime Bureau, a North American non-profit membership organization created by the insurance industry to address insurance-related crime. It works closely with law enforcement agencies. NAAA recommends using more than one credible source to help establish the claim may be valid by creating a need to inspect visually. Title Status The title may or may not be branded due to the effects of the flood. The vehicle may indicate “total loss” history but have a clean title. It is important to understand the reason the vehicle was deemed a “total loss.” If the title is branded, the vehicle will require a proper disclosure by sellers to would-be buyers when selling at an auction that falls under NAAA policy.

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Physical Condition The vehicle may have been cleaned up partially or fully. The indicators below will help the inspector determine the actual presence of flood damage. • Strong musty odor in interior or luggage compartment. • Surface rust under dash or seats on unfinished steel brackets, frames or springs. • Dampness in seat cushions, headliner, visors and other upholstered components. • Mud, silt or sludge build-up in wheel wells; inside bumpers, hinge boxes, door openings/ sills, or door drain holes; under carpets or luggage compartment floor mats. • Surface rust on underbody components, brake rotors/drums, exhaust system, pinch welds, brake lines, chassis components. • Mud or sludge build-up inside door panels, behind luggage compartment side walls, beneath dash, inside glove box, etc. • High water marks on door panels, upholstery, trunk interior, or head or tail light lenses. • Deposit of debris such as silt, grass and small twigs. • Accumulation of silt/rust inside major mechanical components. • Extremely corroded wiring harness, fuse boxes, etc. • Corrosion to structure that requires disclosure, per NAAA Structural Damage Policy. Some caveats exist with the physical inspection. The NAAA policy exempts vehicle affected by water ingress by the following: • Heavy detailing: Some carpets and upholstery are badly stained or soiled. This may require hard scrubbing with hot water and strong chemicals during the detail process. These signs alone are not proof of flood damage. In many cases, carpet wetness or dampness and odors in the trunk area and interior are misdiagnosed as flood damage. • Dirt road usage: Many vehicles are operated on unimproved, dirt and gravel roads. Many are subjected to off-road conditions. Thus mud, silt and sludge build-up may be normal and should not in itself be considered flood damage. Interior dust and dirt accumulated during normal operation may become muddy during the detail process. • Normal wear and tear: Light surface rust is common on exposed metal surfaces and is not sufficient alone to prove flood exposure. The absence of rust on exposed metal should also be considered, although not conclusive, as evidence of no flood exposure. • Disclosure requirements: No disclosure is required nor is arbitration allowed for the following types of water exposure, provided that none of the components outlined below are damaged: o Rain, snow or sleet due to open windows, doors or tops, or leaking seals. o Car wash or rinse water. o Carpet or upholstery shampooing or cleaning. o Stream, pond, puddle or floodwater that does not rise above the rocker panel or otherwise enter the passenger compartment. o Stream, pond, puddle or floodwater that enters the luggage compartment, but does not damage any electrical components – such as lighting or wiring harness – or does not enter the passenger compartment. Disclosure is required and arbitration shall be allowed under the following conditions: o Claim filed within specified timelines (per NAAA Appendix 1). o The title has been correctly branded indicating flood history of the vehicle. o Any of the following components have been damaged due to immersion:  Front or rear lighting or wiring harnesses.  Engine and its major components.  Transmission and differential.  Dash instrument panel and wiring.  Passenger seat cushions.  Power seat or window motor.  Major sound system components. The recommended disclosure that a seller should make to would-be buyers is “Flood Damage.” This disclosure requirement should be made regardless of sale light, but buyers must be mindful of sale channel exemptions (e.g, salvage sales). All stakeholders must be mindful of the vehicle’s history, physical symptoms and policy disclosure requirements when selling or buying at auction. Keep in mind that flood damage vehicles are like floods. They can appear anywhere it rains! MATT ARIAS is Manheim’s director of operational excellence. This article originally appeared in NAAA’s On the Block.

December 2017 / DEALER NEWS

MANAGEMENT MATTERS

BY SCOTT BATES

BHPH INCOME OPPORTUNITIES Long Term Profitability

For dealers who want to keep control of their portfolio but also increase profitability long term, they need to focus on customer longevity. To keep their customers in a vehicle longer, more BHPH dealers are offering some kind of warranty. Many more have optional service contracts available. Offering mechanical protection up front with the car sale increases the chances a customer will contact the dealer if the car breaks down. Some warranties include an option for free towing, which gets the car – and customer – back to the dealership to resolve any issues. With warranties and service contracts, of course, you need a well-run service department. The service department staff needs to focus on a good customer experience, not just keeping a car running. Staff also should understand exactly what is covered under the warranty or service contract to communicate with the customer and handle proper repairs. For example, a dealer may explain up front the customer has a full or limited warranty on any mechanical repairs for a set period of time. This option is designed to keep in contact with the customer and make small repairs to avoid bigger ones. Frequently, a broken down car equals stopped payments. Instead, the dealer offers to make repairs, eliminates this common excuse for non-payment and stays in contact with more customers. By staying in contact with customers, the dealer can offer more options to keep them happy and making payments: • Get the vehicle in and inspect it proactively/make repairs. • Provide a discount. • Add missed payments or big repairs on the end of the existing loan. • Get customers into another vehicle through refinancing. • Adjust the payment schedule to support changes in circumstances. Consider offering regular spot checks on the vehicle or letting customers upgrade to a nicer model while keeping payments the same. Extra service can sustain thousands in payments each month while reducing the need to sell as many cars per month. One of our BHPH clients recently spoke to us about outsourced bookkeeping services to free up his time to spend on repairs. He calculated time spent in service was more valuable than in the back office if it meant getting more cars back on the road and payments in the door. In this competitive environment, the industry is advocating decisions like this, focusing more on

DEALER NEWS / December 2017

customer longevity and extra service options. Dealers who free up their time from the back office or sales can focus on service and collections practices, including: • Reviewing all existing customers weekly and identifying which customers are currently behind on payments. • Contacting customers and inviting them to the dealership to talk about getting current on payments. • Offering a list of options that can support up to date payments. • Training staff on a welcoming experience that demonstrates your interest in keeping the relationship. • Monitoring payment habits and communicating as soon as there is a change. Ultimately, a customer-centric approach will help your dealership become self-

sufficient – with enough cash flow to reinvest in the dealership operations and enough efficiency to focus on attracting new customers and new revenue streams. If your vision is also to provide a valuable service to the community for people who need a car and can’t get one any other way, then a customer-centric approach is certainly the right business model. Cornwell Jackson works with BHPH dealers frequently to adopt new approaches to service, cash flow and profitability. For more information, visit www.cornwelljackson.com. SCOTT BATES, CPA, is a partner in the audit practice and leads Cornwell Jackson’s Business Services Department. Contact Scott at scott.bates@cornwelljackson.com or 972-202-8000.