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CONGRATULATIONS TO 2018 OHIO STATE QUALITY DEALER CHRIS HAUS OF HAUS AUTO GROUP!
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January/February 2018
INDEPENDENT DEALER NEWS
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INSIDE
05................................ Maximizing Impact and Focus in 2018 06............................................................Understanding CSPA 07.............................................................. Director’s Message 12.....................................Combating Dealer Margin Declines 16........................................OIADA Convention Highlights
WHAT’S NEW
NIADA ACQUIRES NABD
NIADA has acquired the National Alliance of Buy Here-Pay Here Dealers. The acquisition was finalized in December. Look for details in upcoming NIADA publications. See you at the NIADA/NABD convention June 18-21 in Orlando!
ADVERTISERS INDEX
ACV Auctions ................................................................... IBC Columbus Fair AA .............................................................. IFC Corry Auto Dealers Exchange............................................ BC Manheim............................................................................... 11 Micro ......................................................................................4 NextGear Capital.................................................................. 12 Protective ..............................................................................14 Skipco Auto Auction ............................................................. 7 Value Auto Auction ................................................................3 Vauto ......................................................................................9
OFFICE
PREFERRED PARTNERS 700 Credit ACV Auctions ADESA Cincinnati / Dayton, Inc. ADESA Cleveland Auto Auction ADESA Mercer AFC-Automotive Finance Corp American Guardian Group of Companies AutoZone Carfax CARS.COM Car-Ware Columbus Fair Auto Auction Comsoft Cox Automotive Media
BOARD OF DIRECTORS EXECUTIVE DIRECTOR Wendy Rinehart OIADA 614-863-5800
PAST CHAIRMAN
Mark Meadows Miracle Motor Mart 614-337-0037
CHAIRMAN
For more information, contact us at (614) 863-5800 or www.ohiada.org
NIADA HEADQUARTERS NATIONAL INDEPENDENT AUTOMOBILE
DEALERS ASSOCIATION WWW.NIADA.COM • WWW.NIADA.TV 2521 BROWN BLVD. • ARLINGTON, TX 76006-5203 PHONE (817) 640-3838 For advertising information contact: Troy Graff (800) 682-3837 or troy@niada.com. Independent 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 the Ohio Independent Automobile Dealers Association 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.
David Adkins Wilmington Auto Sales, Inc. 937-382-7714
PRESIDENT
Lauren Bowden Thomas Bowden Motors 937-593-0014
STATE MAGAZINE MGR./SALES
Troy Graff • troy@niada.com EDITORS
Jacinda Timmerman • jacinda@niada.com Andy Friedlander • andy@niada.com MAGAZINE LAYOUT
Christy Haynes • christy@niada.com PRINTING
Nieman Printing
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eBay Motors Electronic Merchant Systems Frazer Computing, Inc. Lease IT Own IT Manheim Cincinnati Auto Auction Manheim Ohio Auto Auction NextGear Capital PassTime Pro Credit Express / ProMax ProGuard Warranty Inc. Protective Asset Protection Stolly Insurance Group The Milby Group Insurance Agency, Inc.
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VICE PRESIDENT
BOARD MEMBERS Randy Shirk Jay North Jay North, LLC 937-325-3748
Randy Shirk’s Northpointe Auto 419-729-2688
TREASURER
Robert Fahey Fairdale Auto Sales 740-432-4185
Thomas Smith Smitty’s Auto Sales 937-981-4317
Thomas Onesti Car Port 330-726-6633
Chris Johnson Towne Auto Sales 330-723-2550
Scott Welch Lock 20 Auto, LTD 740-498-8811 Craig Leitwein Gahanna Auto Sales 614-475-7148
SECRETARY
Scott Shook Shook Auto Inc. 330-339-5711
Dmitry Shilman Cleveland Auto Wholesale 440-951-0808
| BY JUSTIN M. OSBURN
MAXIMIZING IMPACT AND FOCUS IN 2018 Designing the New Year for Better Success
No matter what position you hold in your operation, the nature of an auto dealership, especially Buy Here-Pay Here, can cause daily chaos in every department. In sales, an unexpected visit by an unhappy customer over a service; in collections, a vehicle that has gone off the radar; in accounting, attempting to cover an immediate cash flow crisis can quickly take your day off the intended course. Before you know it, you look at the calendar and another year has passed and many of the building blocks you intended to design are still sitting on the shelf. There are a few easy steps you can master to assist in maintaining control of your time and priorities while designing the new year to result in a better organization than you started with. Step one: Spend a few minutes to reflect on the areas of the business in which you make the most productive difference. Production means selling cars, collecting dollars, and/or controlling expenses. What skills and talents do you possess that offer the greatest impact on the ability to affect these areas? Once you identify a few primary contributions you offer that make a big impact, begin to set daily priorities focusing time to exploit these gifts and skills. Step two: Take your monkey with you. Dave Ramsey wrote in his book EntreLeadership he imagines everyone who comes to him throughout the day has a monkey (or problem) on their back. Their goal is to take that monkey (or problem) off and put it right on your desk for you to deal with, most of the time unintentionally. He suggests we encourage that team member to take their monkey with them. If there is a challenge that arises during the day, do your best to allow your team to solve it within their capabilities. Have them take their monkey with them and come back with solutions to the problem. This will eliminate many distractions from your day and allow you to oversee their solutions while nurturing their ability to solve problems. Step three: Recognize priorities in your operation and dedicate time to those priorities. In The 7 Habits of Highly Effective People, Stephen Covey outlines four quadrants people spend time in throughout their day. The quadrants are: Urgent/Unimportant, Urgent/Important, Not Urgent/Unimportant, and Not Urgent/ Important.
If you think about it, we spend a great part of our day in the Urgent/Unimportant area putting out fires as they arise. Making a decision to focus more resources on the Urgent/Important and Not Urgent/ Important quadrants will lead to more impact in the operation over time. Step four: Build a financial forecast for 2018. If you have never built a financial forecast for a year, I offer some simple tips to make it less intimidating. Simply export your 2017 monthly profit and loss statement to an Excel spreadsheet. Look over the areas of income and expense you would like to improve in 2018. Add columns between each month for 2018 and type in these targets. Then, each month, add the actual numbers and see how you did.
SPEND A FEW MINUTES WITH THE MANAGERS AND REVIEW T H E I R A C T U A L S . H AV E T H E M C O M M U N I C AT E T H E I R R E S U LT S – WHY THEY MISSED THE AREAS THEY FELL SHORT IN A N D W H AT W O R K E D . H AV E THEM DO THE SAME WITH THEIR RESPECTIVE TEAMS. This can also be done by managers in their departments, and front-line team members on their individual production. Brief meetings with each team member and their supervisor to look over the forecast can create opportunities to enhance the forecast as well as align each forecast to support the overall goal. For example, if the owner increases the sales income for 2018, do the sales professionals’ projections support hitting that increase? Step five: Recap and review each month. Much of this is a waste of time if there is no review. The point of these actions is to invest your time in areas that make an impact and stay focused on the targets for your business in 2018. Go grab some coffee and come in the office late or go into the office early one morning each month and review how the operation did that month compared to your goals. Spend a few minutes with the managers and review their actuals. Have them communicate their results – why they missed the areas they fell short in and what worked. Have them do the same with their respective teams. These very simple actions will assist your operation in growth and foster focused review by the entire team. These are activities common in a 20 Group, with the benefit of having other dealers share their financials and goals, which you can compare. If you would like more information on a 20 Group or if you would like me to send you a sample forecast, email 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. www.ohiada.org
MAXIMIZING IMPACT AND FOCUS IN 2018
RETAIL READY
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LEGAL MATTERS | BY MARK TURNER
IGNORE OHIO CONSUMER LAW AT YOUR OWN PERIL Understanding CSPA This article is part of a series on Ohio’s consumer laws designed to raise awareness of a part of business owners’ potential pitfalls of these laws and how they can be avoided. You do not want to find yourself on the wrong side of a CSPA lawsuit. Why You Need to Understand the CSPA The CSPA, or Consumer Sales Practices Act, is a collection of statutes passed by the Ohio legislature, rules enacted by the Ohio attorney general and case decisions by Ohio juries and judges that collectively set out the requirements suppliers must follow in most commercial transactions. The CSPA, along with other consumer laws, most notably the Home Solicitation Sales Act, mandates suppliers follow certain procedures, include specific language in contracts, prohibit specific conduct and even specify the font size of certain advertisements. If you or your company sells goods, provides services, or any combination of goods and services for personal, family or household use, you need to know about Ohio consumer laws. Failure to take these laws into consideration can put you and/or your business at risk. Penalties for violating some of the statutes can be up to three times the damages claimed by your customers, plus $5,000. In some cases, you or your employees may be held personally liable for the violation. Furthermore, in many instances, if you lose the lawsuit, you may be responsible to pay the other side’s attorney fees. Worse yet, under many general liability insurance policies, the treble damages and attorney fees may be considered “punitive damages” and not be covered, meaning you may have to pay these costs out of your company’s bank account. In Ohio, there are more than 25 separate state consumer protection laws. However, the CSPA is the state’s main consumer protection law. Other consumer protection laws are more focused on particular segments, such as credit cards, auto sales or door-to-door sales. The CSPA is an umbrella consumer protection law. Violations of most other consumer protection statutes are also viewed as “per se” violations of the CSPA, meaning no additional proof is required to prove a violation. This means if you violate another consumer protection law, you most likely also violate the CSPA.
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UNDERSTANDING
CSPA
T H E C S PA I S A N U M B R E L L A C O N S U M E R P R O T E C T I O N L A W. V I O L AT I O N S O F M O S T O T H E R C O N S U M E R P R O T E C T I O N S TAT U T E S A R E A L S O V I E W E D A S “ P E R S E ” V I O L AT I O N S O F T H E C S PA , M E A N I N G N O A D D I T I O N A L P R O O F I S R E Q U I R E D T O P R O V E A V I O L AT I O N . T H I S M E A N S I F Y O U V I O L AT E A N O T H E R C O N S U M E R P R O T E C T I O N L A W, Y O U M O S T L I K E LY A L S O V I O L AT E T H E C S PA . Who Must Worry About The CSPA? As mentioned, the CSPA applies to most transactions of sales of goods or services for personal, family or household use. The consequences for failing to abide by these laws can be severe. Most sales of goods or services to a consumer, called a consumer transaction, are regulated by the CSPA. The Ohio attorney general defines a consumer transaction as “the purchase, solicitation for purchase, or award by chance, of a product or service that is intended for home, family, or personal use.” The attorney general’s office gives several examples of consumer transactions: • A motor vehicle dealer selling a used or new vehicle to a consumer. • A wallpaper company selling its goods online to consumers. • A department store advertising a sale. • A home improvement contractor soliciting consumers at their homes. • Third party debt collectors calling consumers to collect debts. • Salespeople making telemarketing calls to consumers. • Credit repair companies contracting with consumers to improve their credit. However, not all consumer transactions fall under the CSPA. Transactions that are exempt from the CSPA include, but are not limited to, the following: • All sales between businesses. • Services for accounting. • Doctors and dentists. • Attorneys. • Public utilities such as telephone, gas, electric, and pipeline companies.
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• Financial institutions including banks, credit unions and the like. (However, non-bank financed residential mortgages fall under the CSPA, too.) • Insurance companies. •V eterinarians (for medical services to pets, but not ancillary services such as boarding). • New home construction, which are covered under a separate consumer statute. Most other sales of goods or services in Ohio fall under the statute and/or its sister provisions. These statutes will be discussed at a later time. The most common lawsuits involving the CSPA include: roofers, home repair services, plumbers, masons, electricians, contractors, car dealers, auto repair facilities, alarm service suppliers and installers, retail shops and restaurants. This is by no means an exhaustive list. Almost any business other than those exempt can find itself on the wrong side of a CSPA suit. Next time, we will cover what violates the CSPA and how you can avoid being sued under it. Be sure to watch for this column in the next issue, or visit www.gertsburglaw. com/blog for the next part in the series and for more legal tips for your business. Mark Turner is an attorney at The Gertsburg Law Firm Co., L.P.A. Mr. Turner does not present or intend his column to be taken as legal advice. Readers seeking legal advice should consult with an attorney. Mr. Turner may be reached at 440-571- 7773, mt@gertsburglaw.com, or www.gertsburglaw.com.
ASSOCIATION NEWS
| BY WENDY RINEHART
DIRECTOR’S MESSAGE Help Make a Difference I need a favor – we need to help make a difference and help make history! We have an associate member, The Gertsburg Law Firm, that’s doing something great for students! For the third year in a row, The Gertsburg Law Firm and Chagrin Valley Chamber of Commerce are teaming up for a one-of-akind high school essay contest: “We Solve Problems.” In 2017 the topic for the essay contest was distracted driving. From the four high schools that participated – Kenston, Chagrin Falls, Orange, and Newbury – there were 845 essays submitted. A total of $13,000 was awarded to students and schools. The students who wrote the top 27 essays were invited to a reception, where they were awarded between $100 and $2,000 each. Essays were evaluated by 186 judges who were community and business leaders, including business owners, politicians, and district attorneys. They gave away $10,000 the first year and $13,000 the second. The goal this year is to raise $50,000 from local businesses
and professionals. Every penny donated is tax-deductible and goes to winning students and their schools. Sponsors can alternatively choose to receive a dollarfor-dollar credit of up to $375 from the law firm to use toward legal services. This year, 6,000 students from seven high schools will try to solve a real-world problem in a well-written essay. The essay question can be found at www. wesolveproblems-essay.com. Who knows how big this could get?! Let’s take it to the next level. Let’s get this big enough to include the entire state! Here’s my request for a favor. We need some help: • They need judges. You’ll read 10-20 essays (or more if you’re willing) and grade them according to a provided scoresheet. • They need sponsors. They’ll take donations in any amount, from $20 to $20,000 or more. Go to the website to see a few benefits of being a sponsor. • They need multipliers. Get your team, your employees, or your friends on board. A company- or department-wide volunteer effort would be incredibly helpful to the scaling up of the contest this year.
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FROM THE FOUR H I G H S C H O O L S T H AT PA R T I C I PAT E D – K E N S T O N , CH AGRIN FA L L S, OR A NGE , AND NEWBURY – THERE W E R E 8 4 5 E S S AY S S U B M I T T E D . A T O TA L O F $ 13 , 0 0 0 WA S A WA R D E D T O STUDENTS AND SCHOOLS. Please do me a favor: go to www. gertsburglaw.com and click on “Essay Contest” to sign up as a judge or sponsor, or both. You can also email essay@ gertsburglaw.com, or call the firm at 440571-7777 and ask for Nelly Gertsburg, if you have any questions. Thank you for supporting a great cause and helping the next generation of thinkers!
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SOCIAL MEDIA
| BY KATHI KRUSE
ANNUAL SOCIAL MEDIA POLICY REVIEW Why It Is a Best Practice It’s 2018 and you know what that means – it’s time to assess and realign things for the new year. Do you have a social media policy in place for your dealership? If so, how often do you review it?
PROTECTING COMPANY ASSETS It’s a good business practice to regularly assess company assets. Public or private, a dealership’s market value or equity is based directly on the assets it retains. Assets both tangible – such as cash, property and buildings – and intangible – such as your digital reputation, policies and procedures, and social media presence – are directly responsible for a store’s market value. Social media policy falls under the intangible asset category, and reviewing your policy on an annual basis is a best practice. Just as a regular review of expenses and operations results in many benefits, so does a social media policy review. WHY DO AN ANNUAL SOCIAL MEDIA POLICY REVIEW? There is often a lot of angst and fear around social media, and an annual review takes some of the sting out. You can’t control everything, but with a good policy in place and regular reviews, you’ll leave a lot less to chance. Reaffirm company guidelines for employee use of social media. When hired, each employee should have signed an acknowledgment of receipt of the company’s social media policy. A process to conduct annual reviews of company policy on everything is always a good idea but it’s crucial for social media. Why? Because social media changes often and a dealership’s social media policy should change along with it. It’s an insurance policy in the event of a social media crisis. We’ve seen enough social media debacles at Kruse Control in the past nine years to know it’s not a matter of if, but when it could happen.
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Are you prepared should it happen to you? First, it should be determined and documented what a social media crisis is. Having a company-wide plan in place will empower you to act quickly and effectively when a crisis begins. Instead of wasting time debating how to handle things on social media, you’ll be prepared to take action and prevent the crisis from growing out of control. It helps avoid legal trouble and exposed liabilities. There’s a lot of pressure for dealers to communicate online today. It’s easy to overlook that social media brings certain responsibilities to mitigate liability. Some of the places a dealer could get into trouble are: • Using work without permission. • Defaming competitors. • Promises not kept. • User privacy. • Contest violations. Pro Tip: The use of social media increases the risk of accidentally committing libel, slander, copyright infringement and privacy invasion. All those tweets and posts can lead to lawsuits, but a general liability insurance policy can help. It includes protection for “advertising injury,” meaning claims from your competitors that you badmouthed them in an ad. It safeguards against accidental leaks of confidential information. Social media is a growing security risk as a source of data leaks and misinformation. Vigilance and training are crucial to minimizing risks for individuals and the company. Employees using personal electronic devices discuss all sorts of work-related topics on social media – both during and outside of work hours and locations. As a result, confidential data can leak directly. Another security concern about social media – which continues to make headlines – is criminals can exploit social media to rapidly disseminate “fake news” and other forms of misinformation. Such devious tricks impact more than just politics. They can be used to manipulate stock prices, harm personal or business reputations, or even cause people to take actions that harm innocent parties while helping criminals. In Kruse Control’s clients’ customtailored social media policies, we
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spell out the consequences that come from accidental leaks of confidential information. We determine where risks lie and recommend actions to prevent them. It protects a company’s digital reputation. Businesses around the world ranked damage to their reputation or brand, magnified by social media, as their top risk management concern, according to Aon’s 2017 Global Risk Management Survey. Warren Buffet said, “It takes 20 years to build a reputation and five minutes to ruin it.” That is especially true today, as highprofile crises including cyber attacks, product recalls and damaging social media posts become more prevalent. In the current environment, protecting reputation and actively managing risk can take on strategic importance. Yet for many organizations, managing reputation presents challenges. Many dealers do not have a written process exclusively for reputation management. Truthfully, until social media showed up, you didn’t really need it. Reputation management was left to the marketing and PR people. Today, every employee is a marketer. A review of social media policy will support ongoing efforts to build and protect a company’s digital reputation by spotlighting internal practices and processes. It keeps HR in the loop on marketing. More and more, dealers are using social media as a recruiting tool. With the addition of “social selling” into the sales process, it’s easy to see that HR is fast becoming a necessary participant in the social media marketing process. There’s a trend toward hiring employees who already have a current social media following because they are influencers and are often seen as subject matter experts, especially if they’re in sales positions. A review of social media policies and procedures should include an update on how HR folds into social media and outlines its stake in decision-making around social media. 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.
MANAGEMENT MATTERS | BY DAVE ANDERSON
ARE YOU TRULY COMMITTED? Traits and Behaviors that
Demonstrate True Commitment In 20 years of teaching LearnToLead seminars in 17 countries, across multiple industries – both for profit and non-profit – I’ve concluded one of the least understood, most overused declarations from a performer at any level in an organization is, “I’m committed.” Sadly, most people are not. They are interested, but not committed. Being “interested” is to be curious about something. Being “committed” means to pledge oneself to something. The difference between the two is staggering, and it rarely takes long when observing one’s behavior or conversations to discern only a handful of those espousing to be “pledging themselves to something” are actually paying the price on a daily basis to validate their assertion. The rest are talking right then walking left. Real commitment is about paying a price consistently over time to achieve a goal. I’ve recorded two podcast episodes on this subject you may wish to listen to for further depth on the topic: The Game Changer Life podcast episodes “The Price is an Installment Plan” and “What Real Commitment Looks Like.” Following are seven traits and behaviors that demonstrate true commitment. There are certainly more than seven, but this is a good start. Evaluate your own commitment level toward your most important goals, and measure others against these criteria as well. Commitment manifests in sacrifice. Sacrifice is defined as “the act of giving up something that you want to keep especially in order to get or do something else or to help someone.” You may need to give up certain habits you enjoy but are unproductive, pastimes that are trivial and nonessential, excuses, attitude, and more. Sacrifice may involve spending less time with unproductive or negative people who distract you from your goals, even though they’re longtime friends. When you’re willing to give up what you enjoy now for what you want most, you demonstrate commitment. Commitment manifests in change and risk. When you pledge yourself to something you deeply crave, you’ll need to change what you’re doing to achieve it. In fact, if doing what you’re doing currently was enough to attain your goal, you would probably already have achieved it. Thus, you will need to give up what’s comfortable and familiar in some areas for what’s uncomfortable and unfamiliar
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T R U LY C O M M I T T E D P E O P L E D O N ’ T H AV E T I M E F O R E X C U S E S , B L A M E G A M E S O R O T H E R VA R I O U S “ L O S E R ’ S L I M P S ” T O E X P L A I N A WAY T H E I R L A C K O F P R O G R E S S O R R E S U LT S . to grow to the point that you can reach your goal. The old adage is true: “If nothing changes, then nothing changes.” Committed people are willing to sacrifice temporary ease for temporary discomfort to attain significant achievement. Commitment is about having a cause bigger than yourself you put ahead of your own selfish agenda. If you’re on a team it means putting the welfare and goals of the team before what’s best for your comfort zone or pride. In a family, it’s about sacrificing for your spouse, kids, and your future together. As John Maxwell said, “If you’re just in it for yourself you’re in a mighty small business.” Commitment to a meaningful cause can often draw out in you what you never knew existed. It gives purpose and passion not just to work but to life. Commitment manifests in persistence. Persistence means “to steadfastly advance in pursuit of a goal despite obstacles or setbacks.” Persistent people don’t quit when it gets tough, when they lose, or when it hurts. When you pledge yourself to something, you work through those things because what you aspire to be, or to have, is worth the fight. This is why it’s important to carefully choose to what, or whom, you commit. It needs to be worth the sacrifice, pain of change, risk, and persistence required to attain it. Commitment manifests in resilience. Resilience is different than persistence. Resilience means “an ability to recover quickly from disappointments, setbacks or defeat.” One may have persistence to keep fighting through a tough month, but lack the resilience to get back on track and motivated after the month turns
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out poorly. There will be setbacks and disappointments on the journey. That’s not the question. The question is: How quickly can you recover, get back in your zone – mentally and physically – and begin daily executing again what matters most? Commitment manifests in personal responsibility – owning it. Truly committed people don’t have time for excuses, blame games or other various “loser’s limps” to explain away their lack of progress or results. They are so focused on what they can control and impact on a daily basis they don’t have time to whine about conditions they can’t control. They remain humble and teachable, believing ultimately it’s up to them to make it happen – and genuinely committed people wouldn’t have it any other way. Commitment manifests in consistency. Consistency can actually work against you when you consistently execute what’s ineffective or unproductive. However, consistently making sacrifices, changing and risking to break from comfort zones, subordinating your agenda to a greater cause, and demonstrating persistence and resilience can make you unstoppable as you pursue your personal and business goals. So, if your team were grading you on these seven items as being a leader who was truly committed or simply interested, how would you fare? And how is your personal example impacting the team’s own level of commitment on a daily basis? As a leader, if you’re not committed, you can hardly expect your people to be. You have no credibility asking your people to run through a wall unless you’re willing to go first, and do it every day. Dave Anderson is president of LearnToLead.
MANAGEMENT MATTERS
| BY DALE POLLAK
COMBATING DEALER MARGIN DECLINES Selling and Servicing with Greater Efficiency
How many dealers figured they’d make up for ever-smaller margins in new and used vehicles by selling more cars in 2017? If you asked the question in a room full of dealers, I suspect most, if not all, hands would be in the air. “You make up your gross in volume” is the age-old rule of thumb in the car business. But what if the thumb is broken and the rule doesn’t fit anymore? That’s the situation in today’s retail automotive market. In June, the National Automobile Dealers Association reported dealers are seeing declines in two important places – on the gross and net profits they realize when they retail new and used vehicles, and in the overall number of vehicles they actually retail. Gross/net profits: NADA reported gross profit as a percentage of new vehicle selling price dropped to 5.9 percent in the first half of 2017 compared to the same period in 2016. For used vehicles, the gross as a percentage of the sales price dropped to 12 percent. Meanwhile, the net profit per new vehicle retailed fell 74 percent to minus-$396 and the net profit for each used vehicle retailed fell nearly 50 percent to $112. Retail sales: In the first half of 2017, dealers averaged 449 new vehicle retail sales, up just two vehicles from the same period a year prior. Used vehicles had a slight drop, averaging 358 retail sales, down from 362. Those dealership data points suggest dealers who believe they can retail their way to improved profits are probably kidding themselves in the current market. If that strategy worked, shouldn’t we see decidedly different numbers from NADA? The data amounts to a call to action. Dealers need a better way forward that doesn’t rely simply on selling more cars to make more money. Similarly, cutting expenses won’t provide dealers sufficient relief from the combined pressures of margin compression and a softer sales environment. The best way forward rests with increased operational efficiencies. Dealers simply have to find a way to sell and service customers with greater efficiency and lower costs. The good news here is that most dealers have three areas of longstanding inefficiency that, if addressed, can
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help them achieve the higher levels of operational efficiency, productivity and profitability they need to thrive in the years ahead. Human capital: Dealers continue to suffer from an average annual turnover of 67 percent in sales and 40 percent across their operations. Those figures suggest a high level of dissatisfaction. You can only wonder how many deals are lost or bad decisions made on any given day because the hearts and minds of dealership employees aren’t in the game. Dealers who have tackled this inefficiency have formalized their hiring processes around key personality traits and cultural fit and have moved away from the traditional practices of commissionbased pay and uncertain work hours. Inventory: I see signs of inventory inefficiency every day. If I had to summarize the problem, I think it’s fair to say up to a third of dealers’ vehicle inventory is effectively dead capital. Those are over-age vehicles that haven’t sold, and they’re preventing dealers from reinvesting that capital in more profitproductive units. Of course, there are a multitude of reasons behind such inventory inefficiencies but they all point to the same underlying need for more investmentminded inventory decisions. Dealers need to do a better job of assessing each vehicle’s retail prospects before they own it, then work more diligently to retail every unit more quickly, before its ROI and front-end gross effectively disappear. Technology: Dealers have invested sizable sums in technologies that should help their sales associates and service technicians work more productively and profitably. Yet sales associates still average about 10 retail sales per month and technicians about 40 hours per week – averages that haven’t changed in nearly 40 years. The statistics suggest solutions providers can and should do a better job of helping dealers achieve greater use of their tools, which would help dealers realize the promise of increased efficiency and profitability the technology and tools are intended to produce. Those three areas of opportunity don’t represent an end-all, be-all list. But they do offer starting points for dealers to push back against margin compression and a softer market, and gain back some of the profitability that seems to dissipate with each passing year. 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.originally ran on his blog. For this story and all his posts, visit www.dalepollak.com.
WASHINGTON UPDATE | BY SHAUN PETERSEN
NIADA GOVERNMENT UPDATE
Latest Government Issues and Activity
NIADA IS YOUR VOICE IN WASHINGTON D.C., ADVOCATING FOR INDEPENDENT DEALERS, THE USED VEHICLE INDUSTRY AND SMALL BUSINESS. HERE’S A LOOK AT THE LATEST NEWS AND NIADA EFFORTS REGARDING LEGISLATIVE, REGULATORY, PAC AND GRASS ROOTS ACTIVITIES.
LEGISLATIVE The future of the Consumer Financial Protection Bureau’s controversial indirect auto lending guidance could now be in the hands of Congress. On Dec. 5, the Government Accountability Office, responding to a request from Sen. Pat Toomey (R-Pa.), issued an opinion that defined the guidance document as a CFPB rule for the purposes of the Congressional Review Act. That ruling opens the door for the guidance to be overturned by a simple majority vote of both houses of Congress. According to the CRA, all federal agencies must submit their rules to Congress and the Comptroller General before they can take effect. Congress can then repeal the rule with a vote of disapproval – as it did last year when it voted to overturn the CFPB’s Arbitration Rule. The indirect auto finance guidance, issued in March 2013, claimed dealer discretion on interest rates creates a “significant risk” of unintentional disparate impact discrimination and spelled out the bureau’s intention to pursue enforcement actions on that basis. Its critics have pointed out that the CFPB’s theory is based on shaky methodology for determining disparate impact and that the guidance was put in place without comments from stakeholders, public hearings or studies of its impact on the cost of credit to consumers.
REGULATORY The Federal Trade Commission ended the year with a flurry of enforcement actions. Last month the FTC reached a consent agreement with Cowboy Toyota in Dallas over charges of deceptive advertising of loan and lease terms in a Spanishlanguage newspaper. The FTC said Cowboy Toyota ran full-page ads in Spanish that highlighted favorable terms for buying or leasing a vehicle. But the limitations for those terms ran in English fine print at the bottom of the ads. In addition, the FTC said the ads did not clearly and conspicuously disclose required credit or lease terms, violating the Truth in Lending Act and the Consumer Leasing Act. The complaint also accused the dealership of violating the FTC Act by misrepresenting various claims – among them that no down payment was required and that certain new 2016 models were available for purchase when they weren’t. A month earlier, the FTC reached a $1.4 million settlement with the Los Angelesbased Norm Reeves dealership group for allegedly violating a 2014 FTC administrative order banning it from misrepresenting the cost to finance or lease a vehicle in its ads. The FTC said the group ran deceptive ads that claimed customers could pay nothing up front to lease a vehicle but did not mention large fees and other costs.
GRASS ROOTS Michigan IADA has begun a push for legislation to require pre-licensing education for the state’s independent auto dealers. While a bill has not yet been introduced in the state legislature, MIADA president Otto Hahne said the association has been busy paving the way, hiring a lobbyist and setting up a state PAC fund to raise money for the effort. “We’re building up our soldiers to get out there and get it done,” he said. “We’ve already got support from people in legislative areas, so hopefully, we’ll be able to pull it off.” MIADA is modeling its proposed education program on the one already in place in Ohio, working with OIADA and executive director Wendy Rinehart on designing the program. “They’ve already got the curriculum and various things that will save us a lot of time and money,” Hahne said. “They’ve laid the groundwork for us. We’ve already been down there to see what they do. Wendy has been absolutely awesome to work with.” Hahne said the plan is for MIADA to conduct the classes, and he said the association is hoping to implement an idea that came up at a recent state presidents meeting. “What we want is for the bill to establish MIADA as the stateapproved provider of pre-licensing education,” he explained. “That will ensure the program is done right.”
PAC As the campaign season begins for the 2018 mid-term congressional elections, NIADA-PAC is keeping a close eye on a number of key races. In particular, the focus will be on several seats that will be vacated by legislators who have announced they are not running for re-election, including some currently held by legislators who are supporters of independent dealers, the used vehicle industry and small business. Among those are three Republican House members from Texas: Rep. Jeb Hensarling, Rep. Joe Barton and Rep. Sam Johnson. Hensarling, chairman of the House Financial Services Committee, has been mentioned as a potential candidate to replace Richard Cordray as director of the CFPB. Barton is vice chairman of the House Energy and Commerce Committee. House Judiciary Committee chairman Bob Goodlatte (R-Va.) has also said he will not seek re-election, as have Sen. Jeff Flake (R-Ariz.) and Sen. Bob Corker (R-Tenn.), chairman of the Senate Foreign Relations Committee. NIADA-PAC will watch those races with interest, looking for candidates who will continue to fight for the interests of our industry and small business. Shaun Petersen is NIADA’s senior vice president of legal and government affairs.
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January/February 2018
INDEPENDENT DEALER NEWS
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ASSOCIATION NEWS |
2017 OIADA EXPO AND AWARDS BANQUET Education and Awards On November 4, OIADA held its annual Expo and Awards Banquet at the Nationwide Hotel and Conference Center in Lewis Center, Ohio. The independent dealers of Ohio were welcomed by an expo hall filled with over 35 of the industry’s leading companies looking for dealers to partner with. They also enjoyed a full day of speakers from around the country taking the time to educate and inform dealers on compliance changes, business techniques, ways to save money, and best business practices. Because of our great sponsors, every independent dealer in Ohio was invited to attend the expo free of charge! Once the classes and seminars were finished, the expo hall was transformed for the 2017 Awards Banquet. This year’s dinner speaker, US Congressman Bill Johnson, addressed the guests with updates from the nation’s capital. It looks to be a positive future for Ohio businesses. Each year during the awards banquet OIADA recognizes some of the outstanding people in our industry and announces who will be representing the state as the Ohio Quality Dealer of the Year. This year’s nominees were Sam Snellenberger Jr. and Steve Snellenberger of ABC MotorCredit in Akron; Lauren Bowden Thomas of Bowden Motors in Bellefontaine; and Christopher Haus of Haus Auto Group in Canfield. All three nominees have proven themselves and their dealerships as quality dealers but only one could be chosen to represent Ohio for 2018. The award went to Christopher Haus of Haus Auto Group! This June, Chris will represent Ohio in the National Quality Dealer of the Year competition during NIADA’s Convention and Expo in Orlando, Florida. In addition to announcing the nominees and winner of the Quality Dealer Award, OIADA recognized Brady Bulger with an NIADA Eagle Award, Thomas “Smitty” Smith with the President’s Award, and L.J. Marhefka with the OIADA Lifetime Achievement Award. The banquet was finished off with a live band and after party that went well into the night. Congratulations to everyone and I hope we see you all back next year! If you didn’t get a chance to take part this year, please make sure to mark your calendar for 2018. The expo will be held at the same location on Saturday, October 27.
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h President’s Award Winner Thomas “Smitty” Smith (Left to Right: David Adkins, Wendy Rinehart, Tom Smith)
h N IADA Eagle Award Winner Brady Bulger (Left to Right: David Adkins, Lauren Bowden Thomas, Wendy Rinehart, Brady Bulger)
h L ifetime Achievement Winner L.J. Marhefka (Left to right: Wendy Rinehart, L.J. Marhefka, Bob Fahey)
h 2018 Ohio Quality Dealer of the Year Chris Haus (Left to right: David Adkins, Jeannette Haus, Chris Haus, Wendy Rinehart; Front: Gavin Haus)
h 2018 Quality Dealer Nominee Lauren
h 2018 Quality Dealer Nominees Sam
January/February 2018
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Bowden Thomas, Bowden Motors
(Left to right: David Adkins, Lauren Bowden Thomas, Wendy Rinehart)
Snellenberger Jr. and Steve Snellenberger,
ABC MotorCredit (Left to right: David Adkins, Wendy Rinehart, Steve Snellenberger, Sam Snellenberger Jr.)
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January/February 2018
INDEPENDENT DEALER NEWS
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2017 OIADA EXPO AND AWARDS BANQUET CONTINUED
Sam Agresti, Brady Ware Dealership Advisors Mike Platts, Carfax Allison Harrison, Allison L. Harrison Law, LLC Ken Shilson, NABD Shaun Petersen, NIADA Justin Osburn, NIADA Alex Gertsburg, The Gertsburg Law Firm Co., LPA Mark Turner, The Gertsburg Law Firm Co., LPA Bob Harwood, Interactive Financial Marketing Group Lynda Clark, Franklin County Clerk of Courts Alexa Jenkins, Franklin County Clerk of Courts
THANK YOU TO OUR SPONSORS! ProGuard Warranty AGWS ADESA Cincinnati Dayton TradeRev Cox Automotive brands: Autotrader, KBB, Manheim, NextGear Capital, Dealertrack, vAuto Allison Harrison Law Columbus Fair Auto Auction Frazer Manheim Cincinnati Stolly Insurance Group The Milby Group Nationwide Acceptance Corp Freedom Warranty Value Auto Auction Drive It Now
PRODUCTS & SERVICES | BY AUTO REMARKETING STAFF
MANHEIM BROADENS OVE Gives Dealers Digital Sale Hosting Capability
For dealers with units that just won’t turn, Manheim recently rolled out another solution to solve that problem. To offer dealers more ways to meet their buying and selling needs on their terms, Manheim launched a new OVE “Dealer Direct Event” sales channel. With this offering, dealers can host digital event sales using inventory on their lots without transporting it to a physical auction location. “This is one of many ways we are helping dealers prepare for the emerging digital future,” said Manheim vice president of digital Derek Hansen. “We are bringing more options to dealers than ever before – especially outside our own locations – to give them the flexibility and control they need to more efficiently buy and sell vehicles.” Collectively, Manheim’s offsite solutions, which include Digital Assurance, Dealer Direct Event Sales and Mobile Auctions, have grown 50 percent in volume year-
AUCTION NEWS
| BY USED CAR NEWS
NAAA HONORS BRASHER AS PIONEER Auction Veteran Recognized The National Auto Auction Association has named auto auction veteran Larry F. Brasher a pioneer of the industry for his achievements and contributions to the remarketing profession. The honor was presented to the former owner and chief executive officer of West Coast Auto Auctions during NAAA’s 69th annual convention. This Industry Pioneer Award, given to those who have worked in the wholesale motor vehicle industry and/or NAAA, recognizes an individual who has innovated or enhanced methods of improving services to remarketers through NAAA member auctions, has championed NAAA member auctions as providing services for motor vehicle remarketers unavailable from any other source, and has consistently followed the standards of the NAAA Code of Ethics. The NAAA represents more than 340 auction members and 100 associate members in North America.
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over-year. Manheim said significant growth reflects rising demand for – and usage of – these useful tools by dealers. The Digital Assurance solution offers unique value for dealers who have a smaller quantity of high-quality wholesale units on their lots. With this solution, qualified vehicles can be listed on OVE with a complimentary DealShield 21-day purchase advantage guarantee provided to the buyer, which gives buyers greater confidence in making the purchase online. Manheim’s Mobile Auctions – where the auction comes to the consignor – are designed for those who have a minimum of 100 units to sell, but are far from a physical auction location. With Manheim’s growing fleet of mobile units, company officials said the versatility of these sales has proven to be a convenient and efficient option for independent and franchise dealers, as well as commercial consignors. “Mobile Auctions generate the highest sales rates among all Manheim channels – nearly 70 percent – and dealers tell us that they enjoy more profits from these sales,” said Manheim division vice president Alan Lang.
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NAAA HONORS BRASHER
THANK YOU TO OUR SPEAKERS!
Larry Brasher is also one of the founders of the ServNet Auction Group that created a network of independent auto auctions in 1987 strategically located across the country working together to provide customers with the latest in services and technologies. Brasher has the distinction of being the first son of a former NAAA president and Hall of Fame member to hold the same office and join that illustrious group. Elected president in 1989 and inducted into the Hall of Fame in 2005, Brasher followed in the footsteps of his father Frank, who served in the top executive post from 1973 to 1974 and entered the Hall of Fame in 1987.