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DOES YOUR RFC PASS THE IRS VALIDITY TEST?

DON’T LET YOUR RFC BECOME A LIABILITY PAGE 06

BUILDING RELATIONSHIPS

CLIENT RELATIONSHIPS AREN’T THE ONLY IMPORTANT ONES PAGE 08

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AUCTION PERSPECTIVE

AUCTION NEWS | BY AUTO REMARKETING STAFF

LYNN WEAVER NAMED IAG EXECUTIVE DIRECTOR Auction Veteran Fills Inaugural Role

SNOWY AUCTION Digging Out a Sale Question: What do you do when Mother Nature sends you more than 65 inches – over 5 feet – of snow in less than two days? Answer: You have an auction two days later! Question: What do you do two days later, when another 30 inches, or two and a half feet, of snow falls? Answer: You have an auction two days later! Welcome to Erie, Pennsylvania, over the holidays in 2017. This prolific event shattered several snowfall records that date back to 1893 in Erie, as well as a Pennsylvania state record. It was an all-time record for two-day snowfall in the state of Pennsylvania, as well as an all-time record for snow in any single day in Erie with 34 inches on December 25. The previous record was 20 inches on November 22, 1956. Erie’s records for two-day, three-day, seven-day and 13-day snowfall were also broken during this lake effect event. The following are a few past snowfall records: • Two-day snowfall: 26.7” Nov. 24-25, 1950 • Three-day snowfall: 30.2” Dec. 29-31, 2002 • Seven-day snowfall: 39.8” Dec. 27, 2001 - Jan. 2, 2002 • 13-day snowfall: 52.8” Dec. 31, 1998 Jan. 12, 1999 That’s not a misprint. Erie picked up more snow in less than 36 hours in this event than its previous 13-day snowstorm record. Needless to say, the 120.8 inches of snow in December is the city’s snowiest single month on record, clobbering the previous record of 66.9 inches in December 1989 by over four feet.

This is also more snow in one month than Erie averages in an entire winter season – 100.9 inches. What’s more, this is also the snowiest month on record anywhere in Pennsylvania, according to the Pennsylvania state climatologist. Erie picked up more snow in this event than the yearly average snowfall in the following cities: • Minneapolis/St. Paul: 53.4” • Boston: 43.5” • Chicago: 37.1” Officials declared a snow emergency for the city. City officials stressed roads were “dangerous and impassable.” At Greater Erie Auto Auction, staff declared “We can do it!” With an amazing team of hardworking employees – one person in the loader non-stop, two people in plow trucks non-stop, two people out trying to find shovels in stores that were sold out, one person going home to bring back a snow blower, two people driving tow trucks, and more than 20 employees digging continuously between vehicles to clear tail pipes to get the car out from five and a half feet of snow – they did it! The auction industry is made up of hardworking individuals, who “put on the show” every week. Some locations have multiple auctions weekly. The relationships they build within the industry are strong and true. During this snowfall event, Greater Erie had an auction friend offer to send additional loaders for snow removal. Auction representatives said, “We are truly blessed to be a part of the auction industry and proud of the relationships we have built. All of us face many challenges to get our weekly sales put together. In Erie, Penn., snow happens to be one of them. We decided to embrace it! We decided to walk into work with a smile and positive attitude, and our team – working together – nailed it!”

Lynn Weaver has been named the firstever executive director of the Independent Auction Group. Weaver is the former owner of Harrisburg Auto Auction, which he sold to Americas’ Auto Auction in December 2014 and then remained general manager until he retired from daily operations on January 1. He was previously the volunteer co-chair of IAG, which is made up of the 195 National Auto Auction Association members that are independent auctions. Weaver’s responsibilities in the newly created executive director post include “advancing initiatives to address the needs of the organization’s membership,” said NAAA. “We felt that Lynn was the perfect person for this new executive leadership role because he has been involved with both NAAA and IAG for more than two decades,” said IAG co-chair and former NAAA president Charlotte Pyle. “He helped build the group to represent and promote the interests of independent auctions and has been instrumental in planning this change of direction for us.” IAG launched in the mid-1980s as the Independent Auctions Advisory Committee, with a goal to “unify, protect and promote independently owned auctions as a single voice in the NAAA and provide support services for owners, managers and staff.” IAG co-chair and DAA Seattle general manager Dave Blake said the organization has been planning a restructuring for nearly two years that would move IAG from being a public relations and resource entity to become more policy- and issueoriented. “Our new mission is broader and more proactive, to take the lead in addressing the needs of independent auctions and make an impact on the challenges we face as we move forward into the future, such in the areas of training and technology,” Blake said. www.oiada.com

March 2018

OIADA

p 06..........................Does Your RFC Pass the IRS Validity Test? 09...............................................The Used Vehicle Donut Hole 09.....................................Help! Repeat Buyers Gone Missing 10................................................. NIADA Government Report 12........................ Kelley Blue Book Best Resale Value Award

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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. OIADA Dealer News is published monthly 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 6006-5203. The statements and opinions expressed herein are those of the authors and do not necessarily represent the views of OIADA 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.

STATE MAGAZINE MGR./SALES

Troy Graff • troy@niada.com

Hecht & Hecht Insurance Agency Larry Hecht 503-542-1130 Shepard & Shepard Business Solutions Todd Shepard 1-855-396-0488 #8

DEALER AUCTION

Manheim Seattle Auto Auction Ray Priest 206-762-1600 Manheim Portland Auto Auction Alex Fraser 503-286-3000 ADESA Seattle Auto Auction Mark Dumbler 253-735-1600 DAA Seattle Dave Blake 253-737-2200 United Vehicle Auctions Lori Jacoby 503-380-1927 ADESA Northwest Auto Auction Mark Melton 541-689-3901 ADESA Portland Auto Auction Jerry Hinton 503-492-9200 Crosspoint NW Dealer Auction Brian Hardy 503-594-2800 DAA Northwest (Dealers Auto Auction) Mitzi VanVoorhis 509-244-4500 CarMax Sean McDonald 804-747-0422 DEALER SOFTWARE

Frazer Computing Inc Jake Morley 888-963-5369 Motor Vehicle Software John Brueggeman 546-270-6699 FINANCING

Credit Acceptance John Bragg 360-980-2214

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Jacinda Timmerman • jacinda@niada.com Andy Friedlander • andy@niada.com Christy Haynes • christy@niada.com PRINTING

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Lobel Financial David Lobel 714-816-1301 NextGear Capital Robert Torbet 503-358-3911

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MAGAZINE LAYOUT

Lobel Financial David Lobel 714-816-1301 Oregon Auto Finance Gary Veum 541-868-0472 The Equitable Finance Co. Brandon Fox 503-808-7939 Pac West Credit LLC John Kiefer 541-868-2595 United Finance Todd May 503-238-6488 Oregon Community Credit Union Rich Black 541-681-6311 Nationwide Insurance Mark Tischer 503-339-4165 Credit Concepts Inc Jason Moon 541-342-8545 Veros Credit John Pierce 714-415-6125 x21131 Reliable Credit Associations David Marx 503-462-3022 Ted Investment LLC Tom Garza 503-213-1109

Floorplan Xpress Josh Chandler 503-621-9260 Auto Cap Services (ACS) Michael Smith 800-800-6494 ONLINE REVIEW MANAGEMENT

Podium Kaylie Smart 801-376-0677

PUBLIC AUCTION

Woodburn Auto Auction Steve Morin 503-981-8185 Petersen Auction Group of Oregon Curt & Susan Davis 541-689-6824 SECURITY

Pro-Vigil Kris Brackin 210-858-1105 SERVICE CONTRACTS

AUL Corporation Jacqueline Swank 800-826-3207 Elite Warranty, Inc Al Ham 503-530-0912 Automotive Business Developers Shannon Meany 541-944-9186 Benchmark Dealer Services Jacob Bangert 360-834-3333 Protective Asset Dylan Doran 818-836-1455

F&I MATTERS

| BY SCOTT BATES & MIKE RIZKAL

DOES YOUR RFC PASS THE IRS VALIDITY TEST? Don’t Let Your RFC Become a Liability

WE FIND MANY RFCS

A N D D E A L E R S D O N O T R E G U L A R LY R E V I E W T H E I R O P E R AT I N G A G R E E M E N T S O R O P E R AT I O N S T O C O M P LY W I T H V A L I D I T Y FAC TORS FOR T HE RFC A ND IT S TRANSACTIONS.

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Related finance companies were not designed to be a tax-planning vehicle to reduce or defer auto dealership income. If the IRS validity test discovers noncompliance that cannot be explained in the RFC’s or dealership’s documentation, additional taxes and penalties can be severe. We find many RFCs and dealers do not regularly review their operating agreements or operations to comply with validity factors for the RFC and its transactions. The process is understandably time consuming and complex. You can rest assured, however, that if the RFC receives an IRS query, a dealership query often follows. RFCs are usually set up as S Corporations. The RFC acts as the lender in the dealer’s financing of used vehicles. The notes are sold to the RFC at a discount due to the higher risk the RFC incurs in the transaction. The RFC accrues the income as it is earned from the car buyer’s weekly or bi-weekly payments. The dealership collects cash up front then books a current and deducted loss for the difference between the full contract and the discounted contract. According to the IRS, a valid RFC must have the following characteristics. • When the finance contract is sold to the RFC, title has been transferred to the RFC in accordance with title and lien holder laws. • The discounting of the car dealer’s receivables is sold to the RFC at their fair market value. • There is a written arms-length contract between the dealership and the RFC. • The finance contracts are normally sold without recourse between the two related parties. • The RFC is responsible for repossessions. • The RFC is operated as a separate entity from the dealership and has the following characteristics: • Adequate capital to pay for the contracts. •M eets all state and local licensing requirements. • Maintains its own bank accounts. •H as its own address and phone number and operates as a separate entity from the dealership. •M aintains its own books. •H as its own employees who are compensated directly by the RFC. •P ays its own expenses. •C ustomers make payments to the RFC, not to the dealership.

The IRS Audit Technique Guide cites two common issues that put the validity of the RFC into question. Either the dealership and RFC do not treat and record the sale and financing properly or the RFC is operating like a shell company rather than a legitimate separate entity: • At the time of each transaction, the RFC must show actual cash reserves in its own bank accounts to pay the dealer. The dealer in turn must record receipt of payment for the note. Each entity must have separate journal entries for the transaction. If journal entries don’t match up, the IRS may disallow the transaction. • As for its validity as a separate entity, if the RFC doesn’t have a separate address and does not advertise itself as a separate company, it factors into the validity test. It must also be proven the RFC is directly collecting payments and paying actual employees.

T H E R F C M AY B E C O M P L E T E LY VA L ID, A ND T HE L EG A L FOR M A BL E TO BE PROVEN, BUT DEALERS AND MANAGERS MUST BE CONFIDENT IN THEIR ABILIT Y TO SHOW P R O O F A N D D O C U M E N TAT I O N IN THE EVENT OF AN IRS QUERY O R A U D I T. S H A R I N G S TA F F O R RUNNING RFC BOOKKEEPING AND A D M I N I S T R AT I O N T H R O U G H T H E DE A L ER SHIP T O S AV E NOW C A N P R O V E C O S T LY I N TA X E S A N D P E N A LT I E S L AT E R O N . If the IRS does not view the RFC as a separate entity by these tests of validity, it will not allow the dealership to claim a deduction for losses on the sale of discounted vehicles to the RFC. It will defer to related party rules under IRS code 267 that do not allow loss deductions in transactions made between related persons. Without proper structuring as a separate operation, an RFC can become a liability. The RFC may be completely valid, and the legal form able to be proven, but dealers and managers must be confident in their ability to show proof and documentation in the event of an IRS query or audit. Sharing staff or running RFC bookkeeping and administration through the dealership to save now can prove costly in taxes and penalties later on. The IRS may determine the RFC is not a valid separate entity. This finding, in effect, invalidates the cash method of accounting for the sale of notes to the RFC. Interested in more details about RFCs and auto dealership accounting? Download our whitepaper at http://info. cornwelljackson.com/rfc-irs-target. Scott Bates, CPA, is a partner in the audit practice and leads Cornwell Jackson’s Business Services Department. Contact him at scott.bates@cornwelljackson.com or 972-202-8000. Mike Rizkal, CPA, is a partner in Cornwell Jackson’s Audit and Attest Service Group. Contact him at Mike.Rizkal@cornwelljackson.com or 972-202-8000.

MANAGEMENT MATTERS

| BY JOHN CHAPIN

BUILDING RELATIONSHIPS Client Relationships Aren’t the Only Important Ones

We all know relationships are important with clients. If you own the relationship with a client account, you most likely own the business. Just as important as client relationships are the relationships within your organization and with vendors who help your business run smoothly. Problems in these relationships usually lead to problems in client accounts, which could result in lost business. You spend a good amount of time with vendors and coworkers, so the better your relationships with them, the more pleasant your work life will be. That said, how do you ensure good, solid relationships within your organization and with vendors? STEPS TO BUILDING STRONG RELATIONSHIPS Step 1: Follow Stephen Covey’s Habit #5: Seek first to understand. To build a relationship with someone you have to get into their world. Here are some ways to do that with vendors and people you work with. Ask them: What can I do to make your job easier? During my first week at Diebold Banking Equipment, I approached each individual in installation and service and asked this question. When they realized I was willing to work with and help them, they in turn were willing to work with me and help me.

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March 2018

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Ask vendors this question too. You want to make their lives as easy as possible. An example of this is with insurance agencies I work with. They ask their carriers what a perfect submission looks like and then do their best to achieve that. Also keep in mind your objective is to be a great customer for your vendors. Be easy to work with, make sure your interactions with them are good ones, and thank them when possible. Talk about their favorite subject. Talk about them, their family, kids, pets, and related subjects. Try to keep the conversation positive and upbeat. While you may have to talk about someone’s cancer treatment or illness, you want to keep most conversations focused on good things going on in the person’s life. Be careful not to one-up people. If someone is talking about their daughter playing soccer, you can mention your daughter plays soccer too, letting them know you have something in common. Just don’t talk about your daughter being a superstar or shift the conversation from their daughter to yours. Ask about activities they’re involved in such as bowling leagues, softball, or golf. Make sure to listen more than you talk. You have two ears and one mouth. Use them at least in that proportion. Drop in some of your own personal information so they have something they can connect with you on but make sure they are talking most of the time and be careful not to outshine them. Remember everyone’s favorite radio station: WIIFM: what’s in it for me. Focus on that when you talk to people. What do they want and what are they interested in? Let others be right, let them go first, and make them feel important. Everyone’s number one need, provided they have food, shelter and the basics, is to be recognized and feel important. Most people are mirrors. When you let other people be right and let them be first, they’ll do the same for you. They’ll also be much more willing to work with you. Use Dr. Tony Alessandra’s Platinum Rule. The Golden Rule is, of course, treat others the way you want to be treated. It’s effective more than 90 percent of the time. To get closer to 100 percent, use the Platinum Rule: Treat others the way they want to be treated. Ask for preferences regarding communication and other business protocols. Don’t assume your preference is everyone else’s preference. Step 2: What gets rewarded, gets repeated. When I worked for Diebold, I used to give $5 and $10 gift cards to people in the installation and service departments. I also gave them baseball tickets and other gifts. On special occasions, during the holidays, or when they really went above

and beyond, I used to give more expensive gifts such as jewelry or alcohol. Based upon rules and regulations you may or may not be able to do some of these. Either way, you must acknowledge and thank them for helping you and doing a good job. Stop by their office, thank them for what they just did for you, give them a small token of your appreciation, and ask about their favorite subject. Here are some other ideas for rewarding people that don’t cost anything: • Send an email telling the boss what an asset they are to the company. Make sure you copy them in. • Send a handwritten thank you note. • Call them on the phone and thank them or stop by in person. • Build them up with sincere compliments. • Praise them in front of their peers or higher-ups. Step 3: Treat co-workers and vendors like one of your top accounts. A great way to build relationships internally and with vendors is to give them the same extra-special treatment you give your top accounts. Here are some ideas: • Send them birthday cards and holiday cards. • Give them holiday and birthday gifts. • Study their areas of interest so you can have intelligent conversations with them. • Give them books, articles, and other items related to their areas of interest. • Pass on articles and other information about their high school, college, and hometown. • Pass on good articles and information you come across about their kids, spouse, relatives, or their related interests. • Find articles and other stories written about your vendors’ companies and industries, and occasionally discuss some of this information with them. • Pass on items of religious and political interest. • Give gift certificates to restaurants and stores. • Give tickets to sporting events, shows, dinner events. • Contribute to one of their favorite charities. • Make a small investment in their business or something else they are involved in. • Give vacations or trips to trade shows and other industry events. • Get creative and come up with other great ideas to turn coworkers and vendors into loyal partners and great friends. 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

ACCELERATE | BY GWC WARRANTY

HELP! REPEAT BUYERS GONE MISSING Did You Disappear? Used car dealers are well aware just how important repeat buyers can be. But are you really getting the repeat business you’d like to see? Far too often when repeat buyers go missing, it’s because the dealer disappeared in the months and years following a sale. To tell the tale of the missing repeat buyer, you first must look at what happened with the dealer after a sale. Whether customers engage with you or not, maintaining front-of-mind awareness with them keeps you relevant while ensuring the lines of communication are always open. Post-sale communications can range from a variety of topics, such as service reminders, trade-in offers or just a friendly note to say hello. But if you’re not at least getting started with the basics, the likelihood of your repeat business fading off into another dealership’s lot increases with every passing day. Be strategic. Knowing what to send customers and when is the first step in making sure you don’t disappear from their memories. A good example of a relevant, timely follow up message is checking in with a customer if you’ve sold them a vehicle service contract. Checking in at

MANAGEMENT MATTERS | BY DALE POLLAK

THE USED VEHICLE DONUT HOLE Three Ways to Work Around and Through

I’ve been struck by three trends in the current used vehicle market. First, late-model – three years and younger – vehicles account for almost 60 percent of retail sales, a fact affirmed in the latest Used Car Market Report from Edmunds. You can trace this development to the rise of offlease supply, which many analysts expect to continue, albeit at a slower clip than recent years. Second, the prevalence of late-model inventory is a bit tricky. Lower-mileage, nearnew used vehicles are facing competition with heavily incentivized new vehicles. As a result, the near-new vehicles aren’t selling nearly as fast as similarly aged units with higher miles. The Edmunds report affirms this trend. It said, “High levels of lease returns coupled with increasingly stringent mileage limits will feed an expanding pool of low-mileage used vehicle inventories that have proven to have a limited buying audience.” Third, there’s strong demand and interest for older, higher-mileage vehicles, but they aren’t nearly as plentiful as the later model

the expiration of a contract gives you the opportunity to inform the customer of their expired coverage while offering the opportunity to trade that vehicle in for one with a new service contract. At the very least, this scenario allows you to offer a service contract renewal, where you can still land some unexpected profit. Be creative. A simple text-based email or an unsuspecting voicemail won’t do the trick. But a video-based email or personalized text message might strike the right chord. Anything you can do to stand out from the countless phone calls, emails and solicitations customers receive on a daily basis will help prevent your message from getting glazed over like the rest of them. Be persistent. But not too much. It could be a while until your customers are in the market for a new vehicle, so they may not want to hear from you every week or even every month. Set a messaging cadence that ensures your customers never forget about you. Because even if they aren’t in the market for a vehicle, landing messages with them consistently could remind them of a friend or family member who is in the market. So the next time you’re asking yourself where all the repeat buyers have gone, take a step back and see if your customers should be asking where their selling dealer has disappeared to. Often the mystery of the missing repeat buyer can be solved by finding the dealer who went missing after the sale.

year inventory. The consumer demand for these vehicles isn’t surprising. There’s always strong demand for cheap, reliable transportation. Indeed, Edmunds noted these vehicles are turning faster than most other used vehicle inventory. In many ways, these trends force dealers to work around and through what might be described as a “donut hole” in today’s market. Here are three recommendations to help dealers address these market conditions: Re-assess your inventory strategy. The best Velocity dealers have been evaluating whether their inventory allocations for vehicle types and cost segments are truly correct and sufficiently precise for the current market. In some cases, dealers realize they’ve effectively given up on lower-cost vehicles and their buyers as they’ve placed a greater priority on higher-cost, late-model inventory. Inevitably, as dealers examine their allocations they find corrective opportunities to right-size segments they’ve overlooked, overstocked and understocked. Examine your inventory age/days to sale by segment. This analysis can affirm and illuminate inventory strategy assessment takeaways. Which vehicle segments are moving faster or slower than they used to and why? How do the Market Days Supply and Price to Market metrics compare to those of your fastest sellers? Dealers who conduct this analysis often find one of two factors, and sometimes both,

account for slower-movers – either the vehicle itself or its merchandising/pricing isn’t “right” for the market. Both suggest an opportunity for process changes. Dealers who apply these lessons learned are more likely to achieve the goal of retailing at least 55 percent of inventory in less than 30 days. Address Cost to Market creep. I have written before about the rise of inventory-level Cost to Market metrics climbing close to 90 percent, leaving only a maximum 10 percent spread for front-end gross profit. Dealers often know they should strive to maintain an inventory level Cost to Market ratio of 85 percent, but the creep occurs nonetheless. It’s true the prevalence of near-new inventory contributes to the Cost to Market increase. But it’s also true these vehicles are the easy pickings and perhaps reflect a lack of desire, discipline or interest in finding vehicles with more favorable Cost to Market ratios. I also recommend dealers revisit their reconditioning costs, particularly those associated with outside vendors, to find additional savings to help reduce Cost to Market ratios. The good news is that most forecasts call for a relatively robust used vehicle market in the months ahead – a suitable environment to make inventory management adjustments that help you work more effectively around and through the donut hole. 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. www.oiada.com

March 2018

OIADA

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.

REGULATORY The Consumer Financial Protection Bureau is taking a hard look at itself under acting director Mick Mulvaney. Mulvaney, the White House budget director filling in as CFPB head until President Trump appoints a permanent director, has issued a “call for evidence” to determine whether the bureau is “fulfilling its proper and appropriate functions to best protect consumers.” To gather that evidence, the bureau is posting a series of requests for information, seeking comments on various aspects of its enforcement, supervision, rulemaking, market monitoring and education activities. Mulvaney said the RFIs give the public a chance to submit feedback and suggest ways to improve outcomes for both consumers and businesses. The first RFI asks for comments about the CFPB’s civil investigative demands, which the bureau issues when collecting information from an entity during enforcement investigations. The comments will help the bureau evaluate its CID processes and procedures and determine if any changes are needed. The CFPB has since posted an RFI regarding its administrative adjudication procedures. The RFIs represent a rare opportunity for independent auto dealers to make their voice heard by a regulatory agency that has left a large imprint on the auto finance industry in recent years. Tell the CFPB about your experience with a CID, the issues you’ve faced in responding as a small business and how the process could be improved to become more efficient. To make a comment on the CFPB’s RFIs, visit www. consumerfinance.gov/ policy-compliance/noticeopportunities-comment/opennotices/call-for-evidence.

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March 2018

LEGISLATIVE The Senate will soon be voting on whether to confirm four candidates nominated by President Trump to serve as commissioners of the Federal Trade Commission. Trump sent their names to the Senate on Jan. 25. Among those names is that of Joseph Simons, a former FTC antitrust attorney whom the President said will be his choice for chairman of the commission. The others are Rohit Chopra, a senior fellow at the Consumer Federation of America and former CFPB student loan ombudsman; Noah Phillips, chief counsel to Sen. John Cornyn (R-Texas); and Christine Wilson, senior vice president for regulatory and international affairs for Delta Air Lines. The FTC is led by a fivemember panel that can include no more than three members of any political party. Simons, Phillips and Wilson are Republicans and Chopra is a Democrat. Currently, there are only two FTC commissioners – Republican acting chairman Maureen Ohlhausen, who has been appointed by the President to serve as a judge on the U.S. Court of Federal Claims, and Democrat Terrell McSweeny. Both will leave the commission when their successors are confirmed. There has not yet been a nomination for the fifth spot on the commission, which will be filled by a Democrat. Reuters News Service recently reported Senate Minority Leader Chuck Schumer (D-N.Y.) has recommended his chief counsel, Rebecca Slaughter, to the White House as a nominee.

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PAC The day before NIADA’s Winter Leadership Meeting opened in Dallas in January, CEO Steve Jordan, president-elect Andy Gabler and executive committee members Joe McCloskey and Scott Allen met for lunch with Rep. Michael Burgess (R-Texas), a member of the House Energy and Commerce Committee. Rep. Burgess is a champion of small business who has engaged with NIADA on issues that impact dealers, such as used vehicle recalls. A longtime physician and member of the Subcommittee on Health, he discussed health care policy and sought to understand more fully the challenges independent dealers face due to rising health care costs. In addition to Burgess – to whom the NIADA-PAC made a campaign contribution – the meeting included a special guest: Rep. Kevin Brady (R-Texas), chairman of the powerful House Ways and Means Committee and author of the recent Tax Cuts and Jobs Act. Rep. Brady thanked NIADA for pushing Congress to keep the tax deduction for net interest expenses for floorplan-related costs and advocating for a small business exemption for all other interest-related expenses. He asked the NIADA dealers how the legislation was impacting their businesses and requested NIADA to continue to engage him on any issues related to the tax legislation. GRASS ROOTS Georgia IADA is mobilizing its members to fight a bill under consideration in the Georgia House that would change the way the state’s title ad valorem tax is calculated. The bill proposes switching the tax calculation from the vehicle’s fair market value to its retail selling price, which, according to the state’s legislative fiscal report, would result in a tax increase of more than $300 per vehicle. GIADA’s legislative team and lobbyists have begun introducing arguments and testimony against the bill and are gearing up for an extended battle. Meanwhile, the association has contacted dealers throughout the state and provided them with the names and contact information for all 12 members of the Georgia House Ways and Means Public Finance Subcommittee so the dealers can tell them to vote no on the bill. It is also encouraging dealers to contact their state representatives and senators. GIADA has supplied its members with talking points to make sure key issues are understood by the legislators. Among them: The tax change would mean consumers who buy a used vehicle from a dealer would pay hundreds of dollars more in taxes compared those who buy from a private seller, which would encourage more curbstoning by unlicensed sellers – a practice that can negatively affect consumers. GIADA is calling for all Georgia dealers to make their voice heard on this important issue.

MARKET WATCH |

KELLEY BLUE BOOK BEST RESALE VALUE AWARD 2018 Winners Announced Kelley Blue Book recently announced the 2018 model-year brand and category winners of the annual Best Resale Value Awards, which recognizes vehicles for their projected retained value through the initial five-year ownership period. “Once again, Toyota and Porsche earn top honors in the brand and luxury brand categories, respectively, with the highest average projected resale value among their full model lineups,” said Kelley Blue Book director of residual values Eric Ibara. “The top 10 vehicle winners are predominantly trucks, reflecting the high demand that exists for these models. Despite the higher incentives available on trucks today, used car buyers are willing to pay more for trucks, relative to the initial MSRP, than they are for sedans. Without the prospect of higher gas prices, this trend doesn’t appear to be slowing. This is the third Best Resale Value: Brand win for Toyota, which previously won in 2014 and 2017. This year marks Porsche’s second consecutive Best Resale Value: Luxury Brand win.

2018 BEST RESALE VALUE: Luxury Brand

Porsche

2018 BEST RESALE VALUE: By Vehicle Category

Subcompact Car: Honda Fit Compact Car: Subaru Impreza Sporty Compact Car: Subaru WRX Mid-Size Car: Honda Accord Full-Size Car: Toyota Avalon Entry-Level Luxury Car: Lexus RC Luxury Car: Lexus GS High-End Luxury Car: Porsche Panamera Sports Car: Porsche 718 Cayman High Performance Car: Porsche 911 Hybrid/Alternative Energy Car: Toyota Avalon Hybrid Electric Vehicle: Chevrolet Bolt EV Subcompact SUV/Crossover: Honda HR-V Compact SUV/Crossover: Jeep Wrangler Mid-Size SUV/Crossover: Jeep Wrangler Unlimited Full-Size SUV/Crossover: Chevrolet Tahoe Luxury Compact SUV/Crossover: Porsche Macan Luxury Mid-Size SUV/Crossover: Lexus RX Luxury Full-Size SUV/Crossover: Lexus LX Mid-Size Pickup Truck: Toyota Tacoma Full-Size Pickup Truck: Chevrolet Silverado HD Minivan: Honda Odyssey

2018 BEST RESALE VALUE: Top 10 Cars Chevrolet Colorado Chevrolet Silverado Ford F-Series GMC Sierra Honda Ridgeline Jeep Wrangler Subaru WRX Toyota 4Runner Toyota Tacoma Toyota Tundra

CHEVROLET BOLT EV

Toyota

2018 BEST RESALE VALUE: Brand

HONDA ACCORD

s TOYOTA TUNDRA

Note: Residual values used for award calculations are based on the 2018 model-year vehicles that appear in the January/February 2018 Kelley Blue Book® Residual Value Guide. Top 10 models appear in alphabetical order. The 2018 Jeep Wrangler and Wrangler Unlimited honored in this year’s Best Resale Value Awards is the JK model. Depreciation often is the greatest expense incurred by drivers during the first five years of vehicle ownership. An average 2018 model-year vehicle will only retain about 35.1 percent of its original value after a five-year ownership period. Vehicles with average or below-average resale values are generally plentiful in the marketplace. However, certain vehicles are projected to hold their value better than others. While much of a vehicle’s resale value is based on supply and demand, as well as current and projected future market conditions, vehicles that retain their value best are typically discounted the least and tend to generate high levels of consumer interest. By comparison, all vehicles in Kelley Blue Book’s Top 10 for Best Resale Value are projected to retain more than 46 percent of their MSRP after five years. Kelley Blue Book’s Best Resale Value Awards are in their 16th year and are based on projections from the Kelley Blue Book Official Residual Value Guide. These values are established by experienced automotive analysts that review the output from statistical models built upon millions of transactions. Vehicles that earn the highest five-year residual values, expressed as a percentage of their original Manufacturer’s Suggested Retail Price, are selected for these prestigious awards. Low-volume vehicles are excluded from award consideration, except in the electric, luxury, sports car and high-performance categories. For more information about Kelley Blue Book’s Best Resale Value Awards, please visit www.kbb.com/new-cars/best-resale-value-awards/.

OIADA

March 2018

www.oiada.com

The 72nd Annual NIADA Convention and Expo JUNE 18-21

20 18

FOR MORE INFORMATION OR TO REGISTER: www.niadaconvention.com or call 1-800-682-3837 Register to attend by May 18

For the Early Bird rate of $549 – and don’t miss out on our group discount opportunities for additional attendees from your dealership.

BMSM: Buy More, Save More! $549

1 attendee

$549.00 each

$899

2 attendees

$449.50 each 18% off

$1,299

3 attendees

$433.00 each 21% off

$1,599

4 attendees

$399.75 each 27% off

$1,899

5 attendees

$379.80 each 31% off

NIADA is Rewriting the Playbook for the biggest event in the used vehicle industry by coming together with the National Alliance of Buy Here-Pay Here Dealers to create a combined Mega-Conference that blends the power of NABD’s BHPH expertise with NIADA’s wide-ranging education agenda – not to mention the largest Expo Hall in our history. The used car game has changed drastically over the past few years and continues to change rapidly. To keep up – and thrive – independent dealers not only have to adjust the plays they’ve been running for years, they need an entirely new playbook. Come join us in Orlando and rewrite your playbook to success!

What’s in it for YOU?

3 of the industry’s best conferences under one

roof as NIADA, NABD and FIADA come together at the NIADA Convention and Expo to create a used car Mega-Conference, offering the most complete and up-to-date education available.

tracks of education to serve the needs of all independent dealers: Retail, BHPH, Legal & Compliance, CPO and digital.

60+

education sessions covering topics such as hiring and retaining sales staff, BHPH collections best practices, certified pre-owned sales and operations, alternative profit centers, prospects and sales, BHPH to LHPH, wage and hour issues, best practices for F&I sales, and many more.

The

largest Expo Hall in NIADA Convention history, featuring more than 210 exhibitors offering the latest state-of-the-art products and services to help keep you ahead of the pack in today’s competitive market.

BOOK YOUR ROOM BEFORE MAY 1

To receive the NIADA/NABD room rate of $159 per night including resort fee. Rooms at the Rosen Shingle Creek will sell out quickly. Please book now!

No seriously, you need to book your room ASAP!

OIADA CONTINUING EDUCATION PROGRAM |

OIADA CONTINUING E D U C AT I O N P R O G R A M

READ & RESPOND CERTIFY BELOW

Complete this test and certify below that you have read the articles for March 2018. “DOES YOUR RFC PASS THE IRS VALIDITY TEST?” True/False: For a RFC to be valid, when the finance contract is sold to the RFC, title is transferred to the RFC in accordance with title and lien holder laws. True/False: Sharing staff or running RFC bookkeeping and administration through the dealership to save now can prove costly in taxes and penalties later on. “DEALERS REQUIRED TO BEGIN USING NEW BUYERS GUIDE” Dealers have until which date to exhaust existing supplies of the old Buyers Guide? a) January 28, 2018 b) March 14, 2018 c) April 1, 2018 d) May 9, 2018 True/False: The essential requirements of the Buyers Guide have also changed. “HELP! REPEAT BUYERS GONE MISSING” What is a good idea when it comes to post-sale communications? a) Be strategic. b) Be creative. c) Be persistent. d) All of the above. “NIADA GOVERNMENT UPDATE” True/False: Mick Mulvaney, the White House budget director filling in as CFPB head until President Trump appoints a permanent director, has issued a “call for evidence” to determine whether the bureau is “fulfilling its proper and appropriate functions to best protect consumers.” True/False: Rep. Kevin Brady (R-Texas) thanked NIADA for pushing Congress to keep the tax deduction for net interest expenses for floorplan-related costs and advocating for a small business exemption for all other interest-related expenses. I certify to OIADA that I have personally read these articles in The Oregon Dealer News Magazine for March 2018. STOP!! Before you sign and send this form, make sure you have answered and completed all the quiz questions to receive Continued Education Credits. My Name ____________________________________________________________ ____________________________________________________________________ Dealership Name ______________________________________________________ Dealership # __________________________________________________________ Dealer License Expiration Date: (Month)_____________________________________ (Year)________________ Signed: _________________________________________ Date _________________________________________________________________

FAX TO: 503-364-7331 MAIL TO OIADA at 9150 SW Pioneer Ct Ste H, Wilsonville, OR 97070

OIADA

March 2018

www.oiada.com

PRODUCTS & SERVICES |

ADESA LAUNCHES REWARDS PROGRAM Enrolled Dealers Earn Points for Purchases

ADESA has launched a rewards program for buyers at its auctions and websites. ADESA Rewards allows customers to earn points when they purchase qualifying vehicles and specialty units at ADESA U.S. auction locations and on ADESA.com. Customers can use earned reward points as ADESA Dollars toward buy fees on future eligible purchases, or convert their earned points

SAFETY WATCH

to use toward the purchase of merchandise, travel or gift cards. Dealers enrolled in the ADESA Rewards program get reward points with their first transaction – earning on all eligible open sale vehicles as well as on special promotions throughout the year. Also, bonus points are awarded when dealers show an increased purchase history at ADESA. Single button access to the rewards program at the top of the ADESA home page allows dealers to join the program with a valid Auction Access number and a current ADESA.com username and password.

FORD RECALLS RANGERS FOR PASSENGER AIR BAGS Inflator May Explode Ford Motor Co. is recalling 2,700 2006 Ford Ranger trucks. Upon deployment of the passenger side frontal air bag, excessive internal pressure may cause the inflator to explode.  Ford will notify owners, instructing them not to drive their vehicles. Dealers will replace the passenger’s frontal air bag inflator with an alternate inflator, free of charge. Ford’s number for this recall is 18S02.

SAFETY WATCH

COOPER RECALLS TIRES FOR SEPARATION Incorrect Rubber Compound Cooper Tire & Rubber Co. is recalling 41,014 Cooper Cobra Radial G/T tires, sizes P215/70R14, P225/70R14 and P225/70R15, Cornell 1000 tires, size P235/75R15, El Dorado Golden Fury GFT tires, size P205/75R15, Futura GLS Super Sport tires, size P225/70R14, Mastercraft Avenger G/T tires, size P225/70R14, Mastercraft MC440 tires, sizes 185/60R15, 215/60R16, 225/60R16, 225/60R17 and 205/55R16, Starfire RS-C 2.0 tires, sizes 215/60R16 and 205/55R16, Starfire SF-340 tires, sizes P215/65R16, P185/60R15, P215/60R16 and P225/60R16, Cooper Trendsetter SE tires, sizes P205/75R15 and P235/75R15, Mastercraft A/S IV tires, sizes P205/75R15 and P235/75R15, and Vanderbilt Turbo-Tech G/T Radial tires, size P225/70R14. These tires were manufactured with an incorrect belt rubber compound that may result in poor adhesion of the rubber to the belt wires, potentially resulting in a belt separation. Cooper will notify owners, and dealers will replace the tires, free of charge. The manufacturer has not yet provided a notification schedule. Cooper’s number for this recall is 170.