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NEVADA INDEPENDENT AUTOMOBILE DEALERS ASSOCIATION
AUGUST/SEPTEMBER 2018
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NEVADA INDEPENDENT AUTOMOBILE DEALERS ASSOCIATION
06....................................................Smart Debt Management 07....................................... Common Floor Planning Mistakes 08................................................................ Good Cheap Cars? 10................................................. NIADA Government Report 12...............................The Right Way to Get More Millennials 14.............................Common but Costly Facebook Mistakes
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INDUSTRY NEWS
By SubPrime Auto Finance News Staff
GWC WARRANTY ADDS 5 EXECS
Sales Management Team Expands
GWC Warranty recently announced several additions to its sales leadership team, all experienced veterans. Five newly created regional sales manager positions were created to enhance an already robust sales team by adding more than 100 years of combined experience in sales and the automotive industry. Brian Francis, who was hired as a business development specialist last July, was promoted to GWC’s Midwest RSM position, overseeing GWC’s sales team in Michigan, Ohio, Pennsylvania and the surrounding Midwest states. Francis’ career spans more than 20 years in various positions with dealerships and F&I product providers. Chancler Encalade joins GWC as the RSM for the company’s South-Central region, overseeing a team in Colorado, Illinois, Indiana, Louisiana, Oklahoma, Texas and other territories in the central United States. A University of New Orleans graduate, Encalade has spent nearly 25 years working in leadership positions at large dealerships and national lenders like Capital One and HSBC. Scott Lugger, GWC’s new RSM for the Western region, manages a team in Arizona, California, Nevada, Oregon, Washington and
SAFETY WATCH
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 Nevada 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 Nevada 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.
KIA RECALLS 508,000 VEHICLES
Airbags May Not Deploy
STATE MAGAZINE MGR./SALES
Troy Graff • troy@niada.com EDITORS
Jacinda Timmerman • jacinda@niada.com Andy Friedlander • andy@niada.com MAGAZINE LAYOUT
Christy Haynes • christy@niada.com PRINTING
Nieman Printing
KIA SAID THE AIRBAG C O N T R O L U N I T, W H I C H TELLS THE AIRBAG AND THE SE AT BELT PRE T ENSIONERS WHEN TO ACTIVATE, COULD BE “SUSCEPTIBLE TO ELECTRICAL OVERSTRESS” IN THE EVENT OF A FRONTAL COLLISION. 4
DEALER NEWS
August/September 2018
additional territories in the western United States. Lugger graduated from the University of Oregon prior to spending more than two decades in the automotive industry, including stints with Chrysler Financial and Wells Fargo Dealer Services. Charlie Maybin becomes the RSM for GWC’s Northeast region, inheriting a team from Delaware, Maryland, New England, New York and Pennsylvania. Maybin most recently spent six years with Gateway One Lending & Finance, following a successful career in pharmaceutical and automotive sales. He is a graduate of Kean University. Mark Whatley has been hired as the RSM for GWC’s Southeast region, which covers much of the southeastern United States, including Florida, Georgia, North Carolina, South Carolina, Tennessee and Virginia. Whatley graduated from the University of Arkansas at Little Rock prior to nearly two decades in the automotive finance field. “The GWC Warranty sales team is an integral part of maintaining successful partnerships with dealerships across the United States,” said GWC Warranty chief executive officer and president Rob Glander. “In adding such experienced and talented sales professionals to our sales leadership team, we are confident our dealer partners will be the direct beneficiaries of an even greater level of strategic service aimed at helping them improve their businesses with a best-in-class vehicle service contract offering.”
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A faulty control unit that could prevent airbags from deploying in the event of a wreck has prompted Kia to recall 508,000 2010 through 2013 model year vehicles. Kia said the airbag control unit, which tells the airbag and the seat belt pretensioners when to activate, could be “susceptible to electrical overstress” in the event of a frontal collision. If the control unit is damaged internally, it may not relay the severity of the crash to the airbags and seat belt pretensioners. The recall covers a wide swath of Kia vehicles, including the 2010-2013 Kia Forte sedan and Forte Koupe, 2011-2013 Kia Optima sedan, 2011-2012 Kia Optima Hybrid sedan, and 2011-2012 Kia Sedona minivan. The vehicles were built through August of 2012. The recall stems from a lawsuit filed in 2014 when a 2012 Kia Forte sedan was involved in a wreck and its airbag didn’t deploy. A Forte Koup was involved in a similar wreck in which the airbag didn’t deploy in 2017. Kia, the NHTSA, and the supplier that produced the supplemental restraint system used in the Forte conducted an investigation in May to determine what was at fault and what needed to be repaired.
MANAGEMENT MATTERS | By Dale Pollak
MAXIMIZE PURCHASED UNIT PROFITABILITY
INDUSTRY NEWS
an auction, feeling pretty proud of what they purchased. Such is the psychological nature of the auction-buying format. Your bid is the winner! But, on the other hand, your winning bid might also mean you simply paid more than anyone else to acquire the vehicle. To test this dynamic, I’ll sometimes Three Pointers How compare the Cost to Market ratios for I’ve heard more complaints from dealers essentially identical vehicles a dealer lately that it seems impossible to acquire wholesale inventory and make the front-end acquired via auctions and trade-ins. The comparison typically reveals the Cost gross profit they expect. to Market disparity noted above – the Indeed, if you compare the typical Cost to cost of the purchased unit runs about 10 Market metrics for purchased and trade-in percent higher than the trade-in. I’ll note units, you can see why some dealers are this finding doesn’t necessarily suggest complaining. cause for pride. Rather, it’s a reflection of The typical Cost to Market range for the wholesale market’s efficiency, and the auction-purchased units tends to run inherent advantage trade-in opportunities between 85 percent and 90 percent – a ratio offer dealers. that includes the cost to acquire the vehicle, 3. Focus on faster sales velocity. buy/transportation fees and reconditioning Ideally, there shouldn’t really be any estimates. difference in the number of days it takes Meanwhile, dealers who acquire a higher to sell purchased or trade-in units. Time percentage of trade-in units (based on their is money with every used vehicle and, look-to-book ratios) tend to bring in these vehicles at a Cost to Market range between 80 given the Cost to Market disparity between purchased and trade-in units, it’s even percent and 85 percent, or even less. more important that you This Cost to Market retail auction vehicles as disparity between efficiently and fast as you can. purchased and trade-in But here’s the reality in units can mean as much, inventories across America: and sometimes more, than Purchased units typically a 10 percent difference in take longer to retail, and they the potential margin, or often make up 70 percent to spread, between the cost to 80 percent of a dealer’s aged acquire the units and their vehicles. prevailing retail asking You can usually trace this prices. problem back to the “pride trap” noted When dealers ask me for advice on how best to deal with this disparity, I’ll share three above. When used vehicle managers are too proud of a purchased unit, they’ll set an pointers. initial asking price higher than it should be, 1. Recognize the reality. given competing units in the market and The Cost to Market differences shouldn’t the unit’s initial Cost to Market ratio. Such surprise anyone. Since the dawn of the used decisions make the vehicle less appealing vehicle business, dealers are more likely to to price-smart buyers, and slow its eventual acquire the most cost- and profit-favorable inventory at the curb, rather than the auction. retail sale. Top-performing dealers mitigate this But auction vehicles are a necessity for most temptation by striving to maintain at least dealers if they want to maintain their retail 55 percent of their inventories under 30 sales volumes. You can’t sell the cars if you don’t have them, and it’s unlikely most dealers days of age. These dealers will also strive to keep their days to sale average consistent will be able to acquire all the inventory they across their purchased and trade-in units. need from trade-ins. Once dealers recognize this reality, they are Both types of oversight tend to drive more market-realistic pricing decisions that better able to understand that it’s imperative maximize every unit’s front-end gross to efficiently find the most profit-favorable profit potential and sales velocity. vehicles at auction, and apply an appropriate Dealers who make these pointers part amount of cost discipline to acquire the most of their wholesale acquisition process profit-favorable units. The dealers also know that sometimes it makes more sense to simply tend to complain less about the high cost of purchased units. Instead, they focus acquire the vehicle, rather than walk away. on the age-old principle that “you make In such circumstances, even if a vehicle’s Cost to Market parameters aren’t as favorable your money when you acquire a vehicle” and manage each investment, regardless as you’d like, the opportunity to retail the of its source, to preserve and produce the unit, and generate additional gross profit in maximum profit possible. service/F&I and potentially secure another trade-in vehicle, can outweigh the inherently Dale Pollak serves as executive vice higher acquisition cost. president for Cox Automotive, a position he’s held since the company he founded, 2. Avoid the “pride trap.” vAuto, became part of the Cox family in 2010. Dale pioneered the Velocity It’s not uncommon for used vehicle Method of Management, which has been managers and buyers to come back from adopted by thousands of dealers.
COX AUTOMOTIVE HIRES PRODUCT CHIEF
Marianne Johnson
Marianne Johnson is joining Cox Automotive as chief product officer, reporting to executive vice president and chief operating officer Mark O’Neil. In her new role, Johnson will partner with the Cox Automotive executive team to focus on building products. As a 30-year veteran in the fintech field, Johnson joins Cox Automotive from First Data, where she was head of product innovation and technology for the network and security solutions line of business and senior vice president of enterprise commercialization. Prior to First Data, Johnson was an executive vice president at Elavon, a U.S. Bank company. Before Elavon, she served as a key driver of strategic growth at Equifax as senior vice president of U.S. growth and operations, where she successfully delivered new product innovation that resulted in significant revenue growth and served as an impetus for future innovations.
PRODUCTS & SERVICES
BLACK BOOK PARTNERS WITH SERVICE TOOL
Enables Better Resale Opportunities
Black Book has partnered with Mobility Sales Solutions and its new Vin-Up solution for automotive dealers and their service customers. Under the agreement, automotive dealers are immediately alerted to each vehicle’s latest Black Book value when vehicles come in for service, enabling better resale opportunities with their service customers. Service valets at automotive dealerships are equipped with Vin-Up portable scanners and printers, handing the vehicle owner a VinUp ticket as they exit their vehicle. The ticket displays the latest Black Book value of their vehicle, and dealers have the option of offering incentives to that customer to take a few minutes to discuss the sale of that car. “A turnkey automotive service customer vehicle buyback program that combines technology such as Vin-Up and the most accurate vehicle values from Black Book will foster a more productive dialogue for dealers and their returning customers,” said Black Book executive vice president Jared Kalfus. “Customers returning for service aren’t typically in the shopping mindset, so the ability to create a dialogue with an accurate value of their vehicle creates a less adversarial environment to begin a discussion, creating a win-win scenario for both parties and fostering an environment of trust.”
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August/September 2018
DEALER NEWS
5
BHPH PERSPECTIVE | By Scott Bates, CPA
SMART DEBT MANAGEMENT
Fill Gaps Between Inventory and Collections
In the life cycle of any auto dealership, there will be times when cash flow is tight. Buy Here-Pay Here dealers in particular face complexity in ensuring enough inventory is on hand to attract buyers – and offsetting that investment with a healthy flow through collections and debt management. This balance is never perfect. Dealers need strong banking and/or equity relationships that will extend credit to fill in the cash flow gaps. Debt Management is Proactive Even if their balance sheet is healthy, dealers on the shy side of $1 million in receivables will likely get a less favorable interest rate on credit than more established or larger dealers. This does not mean smaller dealers should accept rates of 10 to 15 percent. It pays to shop around and understand how the bank or private equity firm will consider these characteristics to justify their terms. By working with your CPA, you can provide the lender with financial statements and accounting that aligns with their expectations. As part of the terms of the loan, dealers may be required to provide reviewed or audited financial statements. Because of this additional expense, and also to get more favorable terms, it’s important for dealers to actively seek lower interest rates. It is perfectly acceptable to shop around. Contact competing banks as well as your existing lender and ask about new credit options. Talk to colleagues about the banks they are using. Request multiple offers. Strong accounting, tax and compliance practices help with this process. On the accounting side, owners need regular financial statement preparation to view trends and forecast cash flow – helping them prepare for lending conversations and extensions of credit at the right time each year. On the tax side, the number one tax planning technique for Buy Here-Pay Here dealers is the discount (or loss) on the sale of notes from the dealership to the RFC, which requires cash. Dealers may also qualify for opportunities such as bonus depreciation and deductions with regard to employee perks and compensation. Management may also consider a review of operational efficiencies or gaps in controls that can affect cash flow. Keep in mind every dealership is different when it comes to managing cash flow, so best practices must occur within your own dealership. As BHPH dealerships grow to portfolios of $4 million and above, more favorable financing opens up. But it’s not a guaranteed scenario. Dealers should weigh the benefits of obtaining more financing against the extra administrative costs of public accounting services. 6
DEALER NEWS
August/September 2018
Once you have the credit you need, there are various ways to reinvest in your business. Some dealers may decide to purchase their location – adding real estate holdings that support the extension of credit in the future. If the dealership also has a service department, cash flow can be set aside to cover repairs and maintenance on recently sold cars. Some dealers choose to cover repairs on cars shortly after purchase to support the customer’s ability and willingness to keep making monthly payments. For example, a repair may cost $800, but it leads to another six to 12 months of customer payments. Compensation is another area that cash flow can support. Attracting and keeping good back office personnel supports collections, which in turn supports the business. Dealers may also consider additional compensation for good salespeople. Let’s say you’ve done as much proactive management as you can. At certain points in the life of a dealership, you will still experience challenges. Some of these challenges can’t be handled alone. Whether you’re with a big bank and have secured a favorable interest rate or your dealership is still considered high risk for lenders, don’t ignore cash flow problems. Your CPA can help you formulate a plan to show numbers and communicate effectively with lenders in a way that is focused on solutions rather than the immediate problem. Lenders don’t like to call a loan for a shortterm issue, and there is usually room for negotiation on loan modifications that will support cash flow as well as repayment. However, year-over-year problems make lenders less willing to keep taking a risk on default. As soon as an issue comes to light, prepare your strategy to keep a strong lender relationship. Work through it like you and your lender are on the same side. It’s in the best interests of you and the lender to find a solution. Debt Management Supports Valuation It is also in the best interests of the dealership long-term to show a consistent history of loan financing, healthy cash flow and debt management. Owners want to show a return on investment and consistent profitability, tied to valuation of the business. There are different approaches to valuation. A key component, however, is determining equity value, which is the market value of the dealership assets minus the market value of its liabilities. Assets include such things as the
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dealership’s auto inventory and fixed assets, including real estate. They can include intangible assets such as the goodwill value of the dealership’s name and location, sales and service agreements, and also synergies such as multiple locations and strong management. Liabilities will include debt, any excess compensation, tax and rent issues, inventories and contingent liabilities such as environmental issues related to the storage and disposal of fuel, oil or batteries. The bottom line is that a well-performing portfolio, a good location and healthy foot traffic – combined with properly managed debt – will be attractive to a potential buyer. A dealership that is attractive to lenders is also attractive to buyers or outside investors, even with debt factored in. If your dealership struggles with debt management or cash flow – either intermittently or throughout the year – don’t let it hinder opportunities to grow. Speak to professionals to help you understand the proper structure of financial statements to support proactive lender conversations. Scott Bates is an assurance and business services partner for Cornwell Jackson. He supports the firm’s auto dealership practice. Contact Scott at scott.bates@cornwelljackson. com or 972-202-8000.
F&I MATTERS |
By Chris Miller
TOP 5 FLOOR PLANNING MISTAKES DEALERS MAKE
Avoid These Common Mistakes
Floor planning is a basic process: Open a line of credit, purchase inventory with that credit, sell inventory and pay back the loan. However, intertwined among the basics are a lot of moving parts that can cause complications. While many variables are beyond the dealer’s control, such as the economy or auction prices, it’s important to understand the five most common mistakes dealers can avoid. Mismanaging Cash Flow One of the benefits of floor planning is that it frees up cash for expenses and business investments. However, a common mistake is not taking into account that many of these bills mature at the same time. Improper cash management may cause dealers to get into a borrowing cycle that provides little wiggle room and therefore creates a shell game of constantly shifting cash from one debt to another. Over-Extending Far too often, dealers over-extend themselves when it comes to inventory. When you purchase more inventory than you can
sell, you put yourself at risk if you can’t make the payments. Moral of the story: Just because you are approved for a $250,000 line of credit doesn’t mean you have to go out and spend it all at the next auction. Buy in proportion to your sales figures. Communicating Inadequately with Your Floor Plan Provider No business likes surprises, especially finance companies. Keep your floor plan provider abreast of any changes or issues regarding your business. You won’t be able to make a payment on time? Let them know ASAP. By being proactive and honest, you stand a better chance of your floor plan provider working with you to help resolve issues. Raising Red Flags There are three red flags your floor plan company is always watching for: NSFs, collateral audits and turn-times. NSFs: Insufficient funds (or NSFs) are directly correlated to the first two points above. When you can’t make your payments on time, or your checks/ACHs bounce, rest assured your floor plan provider is now watching your account closely. This is one of the biggest indicators there is an issue with how you’re managing your account, and ultimately how the creditor views their chances of being repaid. This puts the floor plan provider at risk because they have advanced funds on a certain piece of collateral.
MANAGEMENT MATTERS |
FCRA
By Sandy Zannino
It’s not just for Sales and F&I
Shocking but true: Dealers should review their processes for compliance with the Fair Credit Reporting Act in their hiring practices. Virtually all employers run background checks on candidates they want to hire, dealers included. I have encountered unfeigned surprise and genuine confusion when explaining this compliance issue to management. In our industry, FCRA compliance points to sales and F&I – not the hiring process. We spend significant time, energy and resources ensuring compliance in that arena – as we should. We should also not overlook unintended exposures created by innocent ignorance. “I didn’t know” or “I wasn’t aware” has never been an effective defense for noncompliance in any courtroom. Craft store Michael’s discovered just what a pain it can be if the correct steps are not followed to ensure compliance in the hiring process – and the latest FCRA claim against it, in January 2017, was not the first. The most recent litigation, noted in an article by the Society for Human Resource Management as one of the top 10 employment
Collateral audits: Your floor plan company is a collateral-based lender and that collateral is the physical inventory – not the title of the vehicle. It’s important the collateral can be physically verified based on the agreed terms, usually monthly. When your floor plan provider can’t verify inventory, a red flag is raised. If you need to move inventory to another location for a big tent sale or to an auction, let your floor plan provider know. Turn times: Used inventory should be turned every 45 days, because your ability to make money on aged inventory goes down over time. While this may not fit every dealer’s business model, your floor plan company is going to get nervous if they see a vehicle on your lot for an extended period. Many times dealers hold inventory “looking for the right buyer” instead of cutting their loss and moving the unit at auction so they can acquire fresh inventory. Improperly Managing the Account When you open a floor planning account, find out when payments are due and what different resources are available, such as valuation tools or payment schedules, that can make it easier to run your business. Your floor plan representative is also a valuable resource who can provide great insight. Chris Miller is the director of strategic initiatives for NextGear Capital. He is an automotive re-marketing veteran leader with expertise in strategy, operations, sales, project management, marketing and finance.
cases of 2017, was truly a nuisance claim and was dismissed because there was no injury to the claimants. A group of individuals filed a claim alleging the FCRA was violated because they did not receive a required notice, presumably notice of intent and authorization to obtain a consumer report – the dreaded background check. All the individuals in the claim were hired, which is why the case was dismissed. Further investigation showed Michael’s did give notice but that notice was not in a stand-alone document. It was in the online application, which is not sufficient, and that error gave someone ammunition to be a pain. Sometimes people are just looking for a deep pocket to dig into, and that appears to be what happened here. But while the claim was dismissed, the fact is Michael’s neglect to follow the very clear steps for running background checks caused the company to have to spend very real money to defend a claim that went all the way to the courtroom – just to be dismissed. Dealers should take the time to make sure they are compliant. Ensuring notice is given, authorization is obtained and confirming the two-step adverse action process is followed can significantly lower a dealer’s exposure to ridiculous and unnecessary nuisance claims. Just ask Michael’s.
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Sandy Zannino has been helping car dealers find simple HR compliance solutions since 1998, focusing on dedication, integrity, service and enthusiasm. She can be reached at (941) 306-8310 or sandy@innovativeautohr.com.
August/September 2018
DEALER NEWS
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Cover Story
I
remember when I became the used car manager at the small Mazda store where I had been doing F&I. I took to used cars. I’m not sure why. I guess there was such a sense of accomplishment when one sold. The salesperson won with commission. The store won with profits from the shop, parts, the retail sale and F&I. I won by adding revenue to the used car department. And the customer won because they got a dependable used car they could afford. OK, so maybe I was young and hadn’t been through the grind of wholesale loss, aged units, or getting buried in trades to make retail deals. Nor had I experienced being run up the pole at the auction, discovering a $900 repair six days after the arbitration window closed. Nor had I dealt with the customer’s car coming back on the hook 20 days later with a bad tranny. That was a long time ago, more years than I care to admit. And it has only become harder to maintain a reasonable profit selling used cars! When was the last time you uttered the words “five pounder?” Today more than ever, it’s hard to find cars that meet your stocking needs. This is especially true when looking for those under $12,000 (it’s a payment thing). With the cost of new cars rising every year, long term financing and the number of off-lease cars in the market, the question becomes: How do you find good cheap cars? In this three-part series, we will look at ways to acquire the vehicles you need to stock your lot that are affordable and customers want to buy. Let’s start at the higher end of the range, say $12,000 to $9,000. Hard to find? Yes. Impossible? No. But you must change your buying behaviors. How many times have you gone to your local auction with the plan to buy four or five cars in that wholesale price range and come home with none? It’s no fun and not very productive. Even at larger auction facilities, there is a limited number of vehicles that fit your buy list.
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Do the math. One auction will have x number of vehicles. Five auctions will have 5x. So how do you buy from five auctions at once? Online, of course. Now don’t get me wrong. I’m not saying don’t go to your local auction. After all, I work for one of the largest auction companies in North America. I want you to buy from my auctions. All the technology in the world won’t bring an end to physical auctions – but you need to learn how to use the technology offered by the auctions to make your purchase decisions more informed. Alright, I can already hear the pushback: “I bought a car online once and it cost too much to transport, took too long to get to my lot and it had damage.” I get it. Let’s back up a second and look at some ways successful, small and large independent used car dealers are buying cars upstream, which is a fancy way of saying “before the vehicle gets to or is offered at a physical auction,” and live online at the physical auction. Let’s start with upstream, online auctions. These are what I call eBay-style auctions. You can shop and buy 24/7. Sellers range from new car franchise captive finance companies, national banks, and large fleet/lease operators to local or regional banks, among others. The cream of the crop are the OLOCs. What’s an OLOC, you ask? One owner, low mileage, off-lease car. Yes, I made that up and I use it all the time.
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What’s that you say? Prices are too high, transport costs too much and only new car dealers buy those cars? Wrong! As I write this today, I’m looking at an off-lease, 2014 Honda Civic 4-door LX in my Marketplace app on my phone. The photos of the car – taken by the thirdparty inspector – show the car sitting in the lessee’s driveway. I can see every detail of the car – including seller, transmission type, mileage, trim, Autograde and even the number of scuffs or marks on the vehicle. The bid now price is $9,900. Like-mileage vehicles in the Market Report from Autoniq have sold wholesale in the last 18 days for a low of $8,600 and a high of $11,500. The Profit Guide in Autoniq shows like vehicles have a 17-day turn and an average retail sold price of $12,378. The average sold price and turn time is pulled from dealerships reporting actual retail transactions. Yes, actual DMS data: what the vehicles are sold for in your market. With a bid now of $9,900 and an average retail price of around $12,300, it looks like there is room for transport, fees and reconditioning. I know these are averages, but they are averages of real retail transactions. Priced too high? Maybe not. Millions of vehicles are sold every year online. Can all of them be priced too high? Again, I’m not saying you can buy all your cars online, although I know independent dealers who do. What I’m saying is, start looking and learning how to take advantage of what online auctions have to offer. Typically, you will find great vehicles (OLOCs) and enjoy lower fees – and, by the way, NAAA rules provide more buyer protection online than in-lane. Next time we’ll dive deeper into both online upstream and live online auctions. We will have tips and best practices to get you started finding the vehicles you need. You don’t want to miss it! Have fun and sell cars! Doug Hadden is executive director of dealer consulting services for ADESA Auctions Inc.
5 W’s
ACCELERATE |
By GWC Warranty
EVERY VSC CUSTOMER SHOULD KNOW
How to Effectively Present VSC to Your Customers
The reasons why dealers sell a vehicle service contract may vary, but in general a VSC can provide dealers a way to avoid postsale complaints and protect customers in a way that keeps them coming back time and time again. But to provide the type of experience that yields these desired results, it’s all in how you present a service contract to your customers. Stealing a page from a reporter’s handbook, we have the five W’s that every customer should know to preserve a positive post-sale experience. Who First and foremost, your customer should leave knowing everything there is to know about your VSC provider. Highlighting the length of time the company has been in business, how much they’ve paid in claims
and any awards or endorsements from recognizable industry names will help your customers feel more confident in their service contract purchase. What By the time a customer signs on the dotted line for a service contract, it’s the end of a carbuying process and they’re likely chomping at the bit to get behind the wheel of their new car. Knowing this, it’s understandable how some vital details about how a service contract works can get overlooked. You can let your customers know what’s covered when you sell a service contract, but point them towards online coverage lookup tools from the VSC provider that can help them get quick answers about coverage whenever they need them. When It’s impossible to know when a customer will need a service contract. It could be on vacation, during work travel or right in the middle of a busy week with the kids. Because of this unpredictability, it’s important to highlight for your customers when a service contract comes with roadside assistance, rental car coverage or lodging reimbursement and how to utilize each benefit. This will help your customers easily overcome an expensive repair, regardless of when it happens. Where Knowing where your customers can take their vehicles in the event of a covered repair
KNOWING WHERE YOUR CUSTOMERS CAN TAKE THEIR VEHICLES IN THE EVENT OF A COVERED REPAIR IS ANOTHER IMPORTANT POINT TO SHARE WITH THEM. is another important point to share with them. Using your provider’s Find-A-Shop tool can help you point to preferred service facilities near them. Sharing this tool with them at the time of sale can also help them look up shops anywhere in the country should a breakdown occur away from home. Why It’s last but certainly not least. In fact, why customers need a service contract would be your leading talking point during a VSC presentation. A great tool for this is video, given its engaging and concise manner in which it delivers a message. A video that covers the cost of common repairs can be an enlightening experience for customers who may not realize just how devastating a major repair could be to their monthly budget.
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August/September 2018
DEALER NEWS
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WASHINGTON UPDATE | By Shaun Petersen
NIADA GOVERNMENT REPORT
GRASS ROOTS
Latest Government Issues and Activity
NIADA is your voice in Washington D.C., advocating for independent dealers, the used vehicle industry and small business. Here’s a look at the latest news and NIADA efforts regarding legislative, regulatory, PAC and grass roots activities.
REGULATORY
Perseverance and Stick-To-Itiveness Remember back in January, when it became mandatory to display the revised version of the Buyers Guide in the window of all used vehicles for sale? The Federal Trade Commission remembers. And just to make sure dealers did, too, the FTC joined with 12 law enforcement agencies to visit 94 dealerships in 20 cities across the nation to check on compliance with the amended Used Car Rule. The agencies checked dealerships in California, Florida, Illinois, New York, Ohio, Texas and Washington in the three-month span from April to June, and what they found was not exactly encouraging. Only 14 of the 94 dealerships had the new Buyers Guide posted on all of their vehicles, and just 33 had it on more than half of the vehicles in inventory. While 70 percent of the 2,300-plus vehicles checked did have Buyers Guides displayed, less than half of those had the revised version as required. By law, the civil penalty for failing to display the proper Buyers Guide is $41,484 per violation. The dealerships, which were not identified, were informed of the results and of resources to help them comply with the rule. The FTC said it will conduct follow-up inspections in the coming weeks.
O N LY 14 O F T H E 9 4 DEALERSHIPS HAD THE NEW BUYERS GUIDE POSTED ON ALL OF THEIR VEHICLES, AND JUST 33 HAD IT ON MORE THAN HALF OF THE VEHICLES I N I N V E N T O R Y. W H I L E 7 0 PERCENT OF THE 2,300PLUS VEHICLES CHECKED DID HAVE BUYERS GUIDES DISPL AYED, LESS THAN HALF OF THOSE HAD THE REVISED VERSION AS REQUIRED. 10
DEALER NEWS
August/September 2018
LEGISLATIVE
The Senate is in the spotlight after President Trump nominated D.C. Circuit Court of Appeals judge Brett Kavanaugh to fill the Supreme Court seat vacated by the retirement of Justice Anthony Kennedy. The Senate vote on whether to confirm Kavanaugh’s nomination is expected to be close, breaking down along partisan lines. Senate Majority Leader Mitch McConnell (RKy.) has said he wants to have a final vote by the end of fall. In the meantime, Kavanaugh will meet with senators from both parties and appear before the Senate Judiciary Committee. In his position on the circuit court bench, Kavanaugh was part of a three-judge panel that found the structure of the Consumer Financial Protection Bureau to be unconstitutional in a 2016 ruling for which he wrote the majority opinion. He held that same position writing a dissent when the full court overruled the panel in January. The question of the bureau’s constitutionality could come before the Supreme Court after U.S. District Judge Loretta Preska resurrected the issue by ruling in a New York case that the CFPB is unconstitutionally structured, contradicting the D.C. Circuit Court’s finding.
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A new set of rules for used car dealers issued by the New York City Department of Consumer Affairs took effect June 24, requiring all licensed dealers to make additional disclosures to consumers and created a new consumer bill of rights for the used car industry. The new rules require dealers to provide a financing statement that includes “sale terms,” “financing terms,” and pricing information for any add-on products or services before the execution of any retail installment contract. The financing terms must include both the contract APR (presumably the same APR as TILA disclosures) and the “lowest APR offered to buyer by any finance company with the same term, number of payments, collateral and down payment,” intended to help consumers comparison shop. Consumers must also be given a twoweekday period to cancel the sale for a full refund. The “Used Car Consumer Bill of Rights,” which must be provided to each customer and posted conspicuously anywhere contracts are negotiated or executed, advising consumers of their rights to buy a car at the advertised price, know all the details of financing before signing and arrange financing with an entity other than the dealership. The document also informs consumers that dealers must certify the car is safe to drive at the time of sale, post the total selling price for each used car where the car is being offered for sale, and post a refund policy where sales take place, among other requirements. It also spells out various protections provided by city law, including protection from discrimination in seeking access to credit. “In New York City, where household budgets can be especially strained, the dangers of predatory lending are immense,” Department of Consumer Affairs commissioner Lorelei Salas said. “We believe consumer education, including our Consumer Bill of Rights regarding used car dealers and financing is one piece of the solution to stamping out predatory lending.”
PAC
On July 12, the NIADA Political Action Committee served as co-host for a dinner in Washington D.C., for Rep. Susan Brooks (R-Ind.), a key member of Congress with a strong history of supporting the used vehicle industry. Brooks’ district includes the city of Carmel, Ind., where the headquarters of J.D. Byrider, KAR Auction Services and NextGear Capital are located. She is a member of the House Committee on Energy and Commerce, which has jurisdiction over many of the issues important to independent dealers. She is also a member of the Congressional Automotive Caucus and the Congressional Automotive Performance and Motorsports Caucus. Shaun Petersen is NIADA’s senior vice president of legal and government affairs.
ACCELERATE |
T
By GWC Warranty
here’s a right way and a wrong way to go after more millennial business. Do it right and you’re capitalizing on a demographic with loads of discretionary income. Do it wrong and you could miss out on a gold mine of profit opportunity. A recent study by eBay found that despite delayed tax refunds, most millennials filed before the technology incidents that caused a delay for others. Furthermore, the research reported 37 percent of millennials planned to use their returns to buy a car and 80 percent planned on rewarding themselves with their returns. But are you ready to pounce on this limitedtime opportunity? Advertise in the Right Places Millennials won’t be able to find you unless you make the effort to get noticed where they’re looking. Social media advertising can be an affordable way to reach a highly targeted audience with a highly targeted message. You can select the age, location and other characteristics of your audience and speak directly to their needs and wants. Have the Right Cars If you often look back to see what sells well before you head off to auction, now’s the time to take it to the next level. Go back in the books to see if there are any trends in what past millennial buyers have purchased from you. If you don’t have much of a history with this group, some research from outside the car industry could help. It’s been widely reported how much millennials rely on recommendations, how much they research a purchase of this size and how image-conscious they are. Making sure you have vehicles that are reliable and competitively priced with all the right perks will go a long way.
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Communicate the Right Way Millennials, more so than most audiences, are bombarded with emails, text messages, phone calls and more on a daily basis. So before, during and after a sale, your messages need to stand out. Tools like Covideo, which embeds personalized video messages into emails, can make your messages stand out from the crowd and get noticed. Using these kinds of messages throughout the buying experience can help a millennial customer stay more engaged with your dealership. Appeal to the Right Sensibilities We mentioned earlier how 80 percent of millennials are looking to reward themselves with their tax returns. This supports the idea that millennial decision-making is driven by emotion and self-image. Playing to this personality trait while millennials are on your lot or interacting with you online is an effective practice to get them in a car from your lot. Let them know how their image will benefit from this purchase and it could pay dividends. Provide the Right Protection Perhaps more so than anything else, millennials have high expectations after pouring hours upon hours of research, negotiations and time on the lot into making a vehicle purchase. Because of this, you don’t want a repair – big or small – after the purchase to put a damper on your millennial customer’s entire experience. This makes getting a service contract on every millennial deal an absolute necessity, especially since this demographic is also more likely to leave a review online.
SALES MATTERS | By John Chapin
SALES SUCCESS LESSONS I LEARNED FROM MY MOM
Principles for Success
My mom passed away recently. As I was writing her eulogy, I realized a lot of what she stood for and taught me led to my sales success as well as success in life. Here’s what I learned.
MOM’S LESSONS FOR SALES AND LIFE SUCCESS
Perseverance and Stick-To-Itiveness In my first job out of college as a stock broker, I was having a really tough time and was going to quit. Mom said, “John, anything in life worth having isn’t going to be easy. It’s going to be tough. Life will test you to see how serious you are, how badly you want it, how committed you are to your dream. And here’s the thing: all you have to do is hang in there long enough without quitting. If you hang in long enough, eventually the tide will turn in your favor and you’ll win – every time.” I stayed, and the tide turned shortly thereafter. Within two years I was the youngest branch manager in the country. I started my speaking business in Fall 2008. The economy subsequently dropped off the cliff and the speaking business imploded. I remembered what my mom said: “If you hang in long enough, eventually the tide will turn.” And it did. She was right again. Mom’s lesson: The bigger and more important the endeavor, the more difficult the journey and the more likely there will be temptation to quit at some point. You don’t fail until you quit. To succeed you need to persevere and hang on after others have let go. Commitment My mom was a substitute teacher for many years. One time they called her to substitute and she was really sick with the flu, but she felt an obligation to help out. So she put herself together as best she could and went to work. Later I asked her why she agreed to teach when she was that sick. She said, “John, people rely on me when other people are sick. I’m not supposed to be sick. In life it doesn’t matter how you feel physically or mentally, what matters is the commitments you make and that you live up to them – in good times and bad, whether you feel like it or not.” Mom’s lesson: Commit and be all-in. The client doesn’t care how you feel, or about any other excuses you have as to why something didn’t get done. They just want what they were promised when they were promised.
Go Above and Beyond – Add That Little “Extra” My mom believed if you’re going to do something, you do it right and you do it all out. She always pushed herself to continually improve and be the best she could be. It started in school where she was her high school class valedictorian. In college she got straight As. But it wasn’t just the “big” things she took seriously. She always believed in doing even the smallest things at the highest level. One Halloween I wanted to be a ghost. That’s easy, right? A sheet with two holes for the eyes – done. Not my mom’s ghost. I mean, I was the ghost but the ghost outfit was going to represent my mom. She had that sheet on me four nights in a row, adjusting, cutting, sewing, tailoring, and changing. On Halloween she put that sheet on me and made a few final changes before sending the perfect ghost off into the night. Mom’s lesson: If something’s worth doing, it’s worth doing right. Always take it to the next level by doing more than you get paid for and delivering more than people expect. Everything you do reflects back on you. Leave no stone unturned. You want to make sure you do everything you can to win a sale. As a last-ditch effort, any time I lost a sale I used to ask, “Is it a done deal? Is there anything I can do to still get the business?” This led to me getting the “lost sale” back about 40 percent of the time. Be a team player. Make people feel important and special. In public my mom always had a smile on her face and a spring in her step. She was positive and upbeat. She wanted to leave a good impression on people and she wanted to make sure they felt good and important when she was talking to them. What people didn’t see behind the scenes was the enormous pressure my mom put on herself to be the perfect mom and wife. She never let people see the weight she carried on her shoulders. Regardless of that weight, she put her game face on in public, and got done what needed to get done, from coaching softball, to teaching, to everything she did in the church, to everything she did for her family. She always put others first. She was a team player and always wanted to help. She understood it wasn’t just about her – she had an obligation to her family, those she worked with, and those she made commitments to. Mom’s lesson: At the end of the day it’s all about people and relationships. As Zig Ziglar used to say, “You will get all you want in life, if you help enough other people get what they want.” This is also another great example of commitment. Finally, if you find yourself in a comfort zone because you think you’re making enough money, remember: it’s also about being in a position to help others. I always said I got my backbone from my mom. My mom projected a solid character and inner strength. She exemplified in her words and deeds how important it is to have
MOM’S LESSON: AT THE END OF THE DAY IT’S ALL ABOUT PEOPLE AND REL ATIONSHIPS. AS ZIG Z I G L A R U S E D T O S AY, “YOU WILL GET ALL YOU WANT IN LIFE, IF YOU HELP ENOUGH OTHER PEOPLE GET WHAT THEY WA N T.” a strong belief in yourself and what you stand for. My mom’s legacy is one of perseverance, commitment, and keeping your priorities straight along with your obligations – doing what you need to do and what you committed to do, without complaining and regardless of how you feel, physically or mentally. You keep going, no matter what, and never quit until you succeed. Your word is your bond. And at the end of the day, help as many people as possible. Thanks, Mom. John Chapin is a sales and motivational speaker and trainer. He has over 27 years of sales experience as a number one sales rep and is the author of the 2010 sales book of the year: Sales Encyclopedia. For more information, visit www.completeselling.com or email johnchapin@ completeselling.com
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August/September 2018
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SOCIAL MEDIA | By Kathi Kruse
COMMON BUT COSTLY FACEBOOK MISTAKES
Top Pitfalls to Avoid
If there’s one thing that's constant about Facebook, it’s change. It seems like every week there’s a new feature or advertising element, some new trick to learn, or a new way to be more visible. Many dealers unknowingly make several common Facebook mistakes, and it's hindering their success. Facebook is a valuable tool for business but there are a lot of potential pitfalls. Here’s a list of common Facebook mistakes you should avoid. Taking Off Without a “Runway” Facebook success is in the details. Before you take to the airwaves of social media, you need a plan. It's like this: if you're taking a trip and you don't know the way to your destination, you check the GPS app on your phone. You do this because it saves time, expense and a whole lot of needless suffering. Social media strategy works the same way. Begin with the end goal in mind. For most dealers, the goals are to gain more site visits, engage more customers, and generate leads. Once you've determined your goals, you'll need a social media strategy “runway” to reach them. Making It All About You Facebook marketing is successful when you've provided entertaining, useful, sharable content. Think about the Facebook pages you follow and why you follow them. It's not so you can see sales promotions. Fans and customers are no different than you! People stay engaged when the posts they see are meaningful to them. Pro tip: Avoid violating Facebook's terms of service. I can't tell you how many dealership pages I see that are broadcasting sales messages through the newsfeed. Save those messages for Facebook ads and you'll avoid the pain of having your people click the nearest exit. Failure to Engage Regularly One of the best ways to build a lively, loyal community on Facebook is by engaging regularly with your fans. Facebook is not a one-way communication tool. Create a solid engagement strategy that includes designating someone to engage with the people who comment on your posts. Respond to all page messages timely. Do not rely on the autoresponder. Respond to all reviews – both positive and negative. Every negative comment is an opportunity to turn a critic into a fan. Abandoning your customers on Facebook tells them either you're not paying attention or you don't care. No Serious Investment If you've spent any time in the dealership Facebook marketing ecosystem, you know there is a time investment. Building
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relationships through trust takes time, and if Facebook is your chosen platform, be prepared to make an investment. A Facebook page should be considered a valuable company asset and, as such, there are other investments required to retain its value: • Strategy and planning. • Financial resources. • Human resources. • Attention. In fact, sometimes a dealership will need to restructure their operations to accommodate social media. If your team doesn't have the expertise, you may need to invest in training. Pro tip: It's not healthy to think that Facebook is “free.” That thinking will only allow your competitors to take all the customers. Not Completing Your “About” Section Your Facebook “about” section projects the image of your dealership. This is an incredibly important step when setting up and optimizing your page. You want to ensure your “about” is complete and sends the right message to anyone visiting your page: • Add your founding details. How did your dealership begin and when? What’s your mission and what drives your operation on a day-to-day basis? • People will quickly scan your content. Add your most important details within your first paragraph. • Add keywords, terms and phrases that anyone searching for your products would use. Keywords matter in social media as much as they do within your website and blog. Don’t overlook them! • Answer questions your community needs answered to make an educated decision. This is a place to create differentiation and separate you from your competitors. • Keep industry jargon out of your “about” section. Your customer doesn’t work in the auto industry, so don’t speak to them as if they do. Keep your language relatable and easy to read. Not Using Facebook Ads Facebook advertising can be a smart complement to your current advertising budget. Facebook ads let you grow your page and generate leads without adding a hefty expense. Part of your investment in Facebook is for Facebook ads. Simply put, you will not succeed (i.e. improve customer engagement and generate leads) without Facebook ads. Why? Ten years ago, social media was a fertile field of wildflowers, brimming with kittens and unicorns. The marketing landscape was wide open for dealers who wanted to capture attention and engage like-minded customers. Today, social media is a dense, crowded, noisy, smoggy urban jungle. Simple tactics alone are no longer effective. You must pay to promote your content and products on Facebook. The good news is that Facebook ads work! It's a mistake not to leverage this powerful tool.
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FACEBOOK MARKETING IS POWERFUL, BUT O N LY I F Y O U 'R E A L L I N . THIS AWESOME POWER O N LY W O R K S T O Y O U R ADVANTAGE WHEN YOU'RE FIRING ON ALL CYLINDERS. Failing to Track, Measure and Analyze Your Results Too often dealers jump onto Facebook without a plan or clear idea of what success really means for them. Look for success markers on your Facebook marketing journey. Just like the maps app on your phone shows the best route to take to your destination, Facebook key performance indicators guide you to what success looks like for your Facebook marketing. KPIs give you a solid foundation from which to measure results. Develop a process – including the tools you'll need – to track, measure and analyze. Facebook allows you to figure out what's working and what's not in real time. Facebook mistakes don't have to happen. Facebook can help build a bridge between your dealership and your customers. Facebook marketing is powerful, but only if you're all in. This awesome power only works to your advantage when you're firing on all cylinders. Kathi Kruse is an automotive social media marketing expert, blogger, consultant, author, speaker and founder of Kruse Control Inc., which coaches, trains and delivers webinars focused on integrating social media and online reputation management into dealership operations. She can be reached at kathi@krusecontrolinc.com.
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August/September 2018
DEALER NEWS
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