TN 0814 by NIADA

T E N N E S S E E

I N D E P E N D E N T

A U T O M O B I L E

TENNESSEE

DEALER

D E A L E R S

A S S O C I A T I O N

CONNECT AUGUST/SEPT 2014

magazine

AUTO LOAN DEFAULTS THE SUCCESS OF INDIRECT LENDING REQUIRES CONSIDERABLE ATTENTION TO BEST PRACTICES FEATURE STORY ON PAGE 6

inside u

• CONVENTION HIGHLIGHTS • WASHINGTON UPDATE • JOE’S GARAGE

DALLAS, TEXAS Permit No. 2079

PAID

PRSRT Standard U.S. Postage

V I S I T

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LEGAL

INSIDE 06 A Review of Default Basics

08 Important Notice 10 State Convention 14 Washington Update 16 Joe’s Garage 22 Share of Older Cars Hits 5-Year High 24 NIADA Convention 26 Teslas Entering Used Market

WHAT’S NEW

Mark Your Calendar for the National Leadership Conference

NOVEMBER 11-14, 2014

The 2013 NIADA National Leadership Conference and Legislative Summit was a huge success. You don’t want to miss this year’s event! You’ll hear the latest legislative and regulatory updates in the industry and have the opportunity to voice your concerns to your U.S. congressmen. Make plans now to attend Nov. 11-14 at the Omni Shoreham Hotel in Washington, D.C.

ADVERTISERS INDEX

Ace Motor Acceptance Corp..........................18 ADESA.................................. Inside Back Cover Ally.....................................................................5 Black Book.........................................................3 Dealer Funding................................................20 Hamilton State Bank.......................................23 Manheim.com....................... Inside Front Cover Manheim Pennsylvania.....................................7. NextGear Capital...............................................9. Peritus Portfolio Services...............................22 Preferred Warranties.......................................17 Protective.........................................................19. United Acceptance..........................................21. VAuto.................................................Back Cover

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. The Tennessee Dealer Connect is published bi-monthly by the National Independent Automobile Dealers Association Services Corporation, 2521 Brown Blvd., Arlington, TX 76006-5203; phone 817-640-3838. 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 individual authors and do not necessarily represent the views of TNIADA or the National Independent Automobile Dealers Association. Likewise, the appearance of advertisers, or their identification as members of NIADA, does not constitute an endorsement of the products or services featured. Copyright © 2014 by NIADA Services, Inc. All rights reserved. State Magazine MGR./Sales Troy Graff • troy@niada.com Editors Andy Friedlander • andy@niada.com Jacinda Timmerman • jacinda@niada.com Magazine Layout & Graphic Artist Chantae Arrington • chantae@niada.com Art Director Christy Haynes • christy@niada.com Printing Nieman Printing

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NEWS

SAFETY

WATCH

ARIZONA GETS AHEAD OF THE CURB

FORD RECALLS SUVS

ARIZONA IADA LEADS PUSH FOR NEW CURBSTONING LAW

EXPLORERS MAY HAVE TROUBLE STEERING

The Arizona IADA formed a task force in 2013 to push for legislation that would help eradicate curbstoning. The mission was accomplished on April 16, when the new law was signed by the governor, the first step toward significantly reducing the estimated $650 million worth of cars curbed in Arizona every year, which will result in more vehicles sold by legitimate dealers in the state. It’s a great example of the power of your state association. Under the new law, which took effect July 25: • A ny vehicle parked, for the purpose of sale, on any public property is subject to tow. • A vehicle parked, for the purpose of sale, on any private property that has free access to the public (e.g. Walmart parking lot) is subject to tow. • L isting for sale more than six vehicles over a rolling one year period, without a retail license is against the law and subject to significant fines. • A ny licensed dealer offering a vehicle from inventory for private sale may lose his or her license for two years – five years on the second occurrence. • O ne licensee consigning a vehicle with another licensee is against the law.

Ford Motor Co. is recalling 179,027 model year 2011-13 Ford Explorer vehicles manufactured May 17, 2010, through Feb. 28, 2012. The affected vehicles may experience an intermittent connection in the electric power steering gear, which can cause a loss of the motor position sensor signal resulting in a shut down of the power steering assist. If the vehicle experiences a loss of power steering assist it will require extra steering effort at lower speeds, increasing the risk of a vehicle crash.

FORD WILL NOTIFY OWNERS, AND DEALERS WILL UPDATE THE POWER STEERING CONTROL MODULE SOFTWARE, FREE OF CHARGE. Ford will notify owners, and dealers will update the Power Steering Control Module software, free of charge. If a vehicle shows a history of a loss of motor position sensor signal when the vehicle is brought in for the recall remedy, its steering rack assembly will be replaced free of charge. Ford’s number for this recall is 14S06.

Board Members Executive Director Darryl Noble P.O. Box 2219 Lebanon, TN 37088 615-506-4968 Cell 1-866-5TNIADA (586-4232) 615-443-7486 Fax dnoble@tniada.com

President-Elect Marcus Davis Marcka Auto Auction 150 Cox Avenue Crossville, TN 38555 931-456-7555 Office 931-456-7566 Fax marcka@citilink.net

Chairman of the Board J.T. Livezey Mid-State Auto, Inc. 1023 Bridge Ave. Murfreesboro, TN 37129 615-962-9147 Office 615-962-9175Fax 901-484-4840 Cell jtlivezey@yahoo.com

Sr. Vice President Mark Noble AmeriCar, Inc. 200 W. Main Street Lebanon, TN 37087 615-977-3313 Cell 615-547-6075 Office 615-443-7486 Fax mnoble@tdstn.com

President Alan McFadden Al’s Auto Mart 202 Hwy 52 W Portland, TN 37148 615-325-2727 Office 615-403-1190 Cell 615-325-1190 Fax Carnut3333@yahoo.com

Secretary/Creative Marketing Phyllis Sartin Creative Marketing P.O. Box 680574 Franklin, TN 37068 615-838-3110 Cell Creativemktg1@yahoo.com

AUGUST/SEPTEMBER 2014

Auction Member Representative Stephanie Baker DAA Murfreesboro 1815 Old Ft. Parkway Murfreesboro, TN 37129 615-217-2848 Office 615-217-6994 Fax sbaker@dealersauto.com Member David Stancil D&B Auto Sales 1384 Poplar Drive Crossville, TN 38558 931-707-8899 Office 931-707-9341 Fax

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COMPLIANCE

OVERDRIVE

A Review of Default Basics

THE SUCCESS OF INDIRECT LENDING REQUIRES CONSIDERABLE ATTENTION TO BEST PRACTICES

Indirect lending through auto dealers is an attractive way for lenders to build lucrative loan portfolios, offering a steady stream of business without all the expense and effort involved in marketing traditional direct to consumer loans. As with all business segments a lender serves, however, the success of indirect lending requires considerable attention to best practices in how to best manage the asset, build effective dealer-lender relationships and meet the particular needs of the borrower. For all the benefits that make indirect lending attractive, it also introduces more risk into a loan portfolio because the lender buying the retail sales contracts never directly interviews the potential buyer/ borrower. Ultimately, lenders count on their dealers to provide information they need to analyze and make offers to buy completed retail sales contracts. Often, the vehicle buyer doesn’t have any formal relationship with the lender beyond that. One of the more challenging aspects to the indirect lending scenario is the area of default. S&P Dow Jones Indices and Experian for the S&P/Experian Consumer Credit Default Indices provide a comprehensive measure of changes in consumer credit defaults. Data through April 2014 showed the national composite recorded its lowest post-recession rate. It posted 1.11 percent in April, the lowest default rate since June 2006. The auto loan rate of 0.92 percent is a new historic low, beating out the previous low of 0.99 percent set in March. The picture isn’t quite as rosy for the nonprime sector. Data recently published by the National Bureau of Economic Research drives home the realities: The average subprime purchaser finances around 90 percent of the price of the automobile, with the average loan size approximately $11,000. More than half of the loans default, with the majority of them defaulting within the first year of repayment. Whether you are holding or selling prime or non-prime retail sales contracts, attention to default is important. Management of default is one of the key opportunities for overall risk reduction in a loan portfolio. Managing default risk is important if (1) you hold and service some of your own contracts, (2) you agreed to buy retail contracts back from lenders if they go into TENNESSEE DEALER CONNECT

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default or (3) your lender becomes unhappy because a high percentage of the contracts you sell go into default. As we have seen with other compliance issues impacting dealer-lender relationships, the area of default has also faced increased regulatory attention in the past year. In November 2013, the Consumer Financial Protection Bureau issued an Advance Notice of Proposed Rulemaking specific to debt collection practices (ANPR Docket No. CFPB-2013-0033, RIN 3170-AA41). The notice sought industry comments on 162 questions that fell into four categories: transfer and access of information; collector conduct when interacting with consumers; state law issues; and record keeping, monitoring and compliance. As my colleague Chris Zimmerman, default servicing principal with Wolters Kluwer Financial Services, commented, “Once finalized, we expect that these rules will have a significant impact on the cost of collecting on defaulted obligations.” Even at the relatively low levels we are currently experiencing in the market, regulatory pressures and the opportunity to manage against risk factors remain. The bottom line? Paying attention to default is critical. What qualifies as a “default” varies a bit depending on state law. In general, a default is the buyer’s failure to keep a promise made in the retail sales contract. The obvious breach is a failure to make installment payments when they are due. But, the buyer also typically promises to keep the vehicle insured and name creditor as loss payee when it is used as collateral to secure the contract. When the vehicle is collateral, buyer also usually promises to keep it in good repair, notify the creditor of any damage or loss to the vehicle, use insurance proceeds to repair it, not allow any creditor to have a superior right to the vehicle (including mechanics who service or repair the vehicle or the government for vehicle taxes owed) and more. Some states allow the creditor to declare a default if it feels insecure about the buyer’s continued ability to keep its promises and pay. Such insecurity clauses provide broad protection for creditors, but can be treacherous to enforce. Creditors should seek legal advice before relying on an insecurity clause to declare a default.

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BY CHIP ZYVOLOSKI The creditor often has options on how to respond to the buyer’s default. Those options differ from state to state, but a few are nearly universal. For example, a creditor can choose to do nothing for a period of time to see if the buyer corrects the default. Retail sales contracts often include language that the creditor doesn’t give up the right to consider the event a default by tolerating a late payment or if future payments are late. Another option a creditor often has is to correct a default and pass on the costs to the buyer. For example, if the buyer fails to pay vehicle taxes, the creditor can do so and bill the buyer for reimbursement. States vary as to whether the creditor can charge interest or finance charges on these amounts when they are not immediately repaid. A creditor may also choose to purchase property insurance on the vehicle if the buyer fails to keep it insured. Again, the creditor bills the buyer for reimbursement. Retail contracts often warn that any cover insurance the creditor purchases may be more expensive than comparable insurance the buyer could purchase. Creditors may be tempted to buy cover insurance that includes skip trace and other protections in addition to simple property coverage. Creditors should be extremely cautious about doing so. Many cases have been litigated where the amount of the debt dramatically increased because the creditor bought a deluxe cover insurance policy. The buyer sued or defended saying it should not be required to pay the additional costs because they were unreasonably high and/ or were for protections beyond property coverage. Another response to default is to negotiate a workout with the buyer. Agreeing to a workout plan can often be less expensive than repossessing and selling the collateral. It can also help maintain a good relationship and reputation with buyers and the marketplace in general. A modified plan may involve extending the term to make up for missed payments, reducing monthly payments and extending the term, reducing the interest rate or making other adjustments. The parties may also agree to defer certain past due or future scheduled payments. Modifications should always be in writing CONTINUED ON PAGE 8 W W W. T N I A D A . C O M

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Compliance Overdrive

CONTINUED FROM PAGE 6

and agreed to by the parties. Note that some modifications may require new Truth in Lending disclosures. For example, if the prior debt is satisfied and a new credit agreement is executed. Another response to default is to repossess the collateral – the vehicle. Every state has its own laws on how and when a creditor can repossess a vehicle. While the specific legal features vary, there are some common approaches. Usually, before taking any action, a creditor is required to provide a notice to the buyer that he or she is in default on the retail sales contract. Notices typically explain the default event and give the buyer a chance to correct the default or clear up the misunderstanding if he or she believes that a default hasn’t occurred. Sometimes the state law prescribes the default notice terms, number of times the notice needs to be sent and/or how much time the buyer must be given to correct the default. In some states, the creditor may declare the entire unpaid balance due, so buyer must pay off the entire contract to correct the default. Other states require or allow the creditor to simply have the buyer pay past due amounts to correct. If the buyer fails to cure the default after the notice period expires, the creditor may proceed with repossession. After a default and repossession, creditors usually resell the vehicle. Laws vary, but many LEGAL

states require that the creditor also inform the buyer of the sale date and location. If the vehicle is sold for less than the amount originally owed, some states allow the creditor to collect the remaining amount owed plus creditor’s costs to repossess and sell the vehicle. Disposing of the vehicle in a timely manner directly affects the loss the creditor incurs since the vehicle continuously loses value as it ages. The method of disposing may also affect the amount recovered. Creditors should investigate all options for disposition, including auctions, retailing or third-party administrators. The investigation should take into account the average value obtained from each method, including disposal time. Once a creditor repossesses a vehicle, it should also cancel all added backend products such as warranties, maintenance agreements, credit insurance and gap insurance. This step is easy to forget, but could be a good source of unearned premium refunds on early policy terminations. Retail sales contracts often include provisions allowing the creditor to receive the refunds and apply them to amounts owed on the retail sales contracts. Premium refunds can help minimize the loss per credit transaction for the creditor, so it is important to keep track of cancellation requests to ensure that refunds are received and applied to the contract balance.

Of course, a final response option is to sue the buyer for default on the retail sales contract. A related option is to pursue an alternative dispute resolution process, such as arbitration. Litigation and even ADR can be expensive, so creditors often try to exhaust other options first. Responses to default should include all potentially responsible parties. If there is more than one buyer and/or a guarantor, a creditor’s response should consider them all. Remember that someone who “cosigns” the retail sales contract may not be named on the vehicle title, but is still liable to repay the debt. Despite a creditor’s best efforts, some retail sales contracts default. Since vehicles are often depreciating assets, the sooner a creditor is able to take action on a default, the greater the recovery (and the smaller the loss) is likely to be. The prospect for further gains in economic activity and consumer confidence is good, as shown by the continuing decline in consumer credit default rates. Still, a thorough understanding of default is important to understanding the best course of action to pursue in each case. This is key to a creditor’s overall success monitoring and tracking loan performance and maintaining a healthy view of his or her indirect loan portfolio. CHIP ZYVOLOSKI IS A SENIOR ATTORNEY FOR INDIRECT LENDING AT WOLTERS KLUWER FINANCIAL SERVICES. FOR MORE INFORMATION, VISIT WWW.WOLTERSKLUWERFS.COM/INDIRECT.

NEWS

Important Notice for Businesses with Consumer Clauses RULES FOR THE ARBITRATION OF DISPUTES ARISING FROM CONSUMER AGREEMENTS consumer review and registry fee. The The American Arbitration Association AAA reviews the clause for compliance has announced the upcoming launch of the with the Due Process Protocol. If the Consumer Arbitration Rules (“Consumer clause is compliant with the protocol, Rules”). Effective September 1, 2014, it the AAA will administer disputes arising is the AAA’s first stand-alone set of rules out of that clause, and the business will developed specifically for the arbitration be included on the publicly-accessible of disputes arising from consumer Consumer Clause Registry, which contains agreements. The Consumer Rules will the name and address of the business, apply to all applicable cases filed on or after the consumer arbitration clause and September 1, 2014, and as of that date will additional documents that may be related replace the Consumer-Related Disputes to the clause. The AAA may decline to Supplementary Procedures. administer a case if a business does not This advance notice is to alert you to comply with the Due Process Protocol and/ one of the important provisions of the or registration requirement as per this rules: A business currently providing for notification. or intending to provide for the AAA to Notes about Fees: administer its consumer arbitrations under • The consumer review and registry fee the Consumer Rules or another set of AAA represents the cost of reviewing the clause rules in a consumer contract must register and maintaining the clause on the registry. its consumer arbitration clause with the This fee is non-refundable. newly-created AAA Consumer Clause • For clauses submitted to the AAA Registry. within the 2014 calendar year: The fee is The procedure is simple: The business $650 per clause, which covers the cost of submits the clause, accompanied by the

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appearing on the registry through 2015. A yearly fee of $500* will be charged to maintain each individual clause on the registry for each calendar year thereafter. • For clauses submitted within the 2015 calendar year: The fee is $500. A yearly fee of $500* will be charged to maintain each clause on the registry for each calendar year thereafter. • For a demand for consumer arbitration received by the AAA pursuant to an arbitration clause not previously submitted to the AAA for review and placement on the registry: The fee is $250, in addition to the review and registry fees described above, for an expedited review of the clause. *Future registry fees are subject to change. To register a consumer clause or view more information about the AAA’s Consumer Clause Registry, go to www.adr. org/consumerclauseregistry. For questions, please contact the AAA at consumerreview@adr.org. W W W. T N I A D A . C O M

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SERVICING THE FRANCHISE AND INDEPENDENT DEALER WWW.TNDEALERNEWS.COM

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2014

REV UP YOUR REVENUE

Get in Front of the Decision Makers We are expecting over 45+ vendors. Space is limited.

Hotel Information Embassy Suites Hotels Nashville SE - Murfreesboro 1200 Conference Center Boulevard Murfreesboro TN, 37129 For Reservations call: (615) 890-4464 Room Rate is $139.00 per night

*Deadline to reserve room rate is Sept. 5th 2014

FAQ’s

Once I arrive, when can I register onsite? Friday, September 26 - 8:00 am and Saturday, September 27 - 7:00 am Do I have to be a TAA or TNIADA member to attend?

No, anyone involved in the automotive industry and their guests are welcome (Vendors must exhibit or sponsor) What is the attire? The event is business casual, because meeting room temperatures vary, please pack a light sweater or jacket. For Saturday Night’s banquet feel free to wear your best Jimmy Buffet style Hawaiian shirt. Can I bring a guest into training sessions and exhibit halls? Anyone attending any event must be registered and wearing convention badge. No badge, no admittance. Spouse/ child registration provides access to exhibit halls but not training and education sessions.

SERVICING THE FRANCHISE AND INDEPENDENT DEALER

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DEALER CONFERENCE

DEALER CONFERENCE Bob Weaver - Tennessee Automotive Association FEATURED SPEAKERS

FEATURED Ken ShilsonSPEAKERS - National Alliance of Buy Here Pay Here Dealers Bob BradWeaver Hayes -- Tennessee Protective Automotive Association Ken - National Alliance Buy Here Pay Here Dealers RonShilson Gorsline - Hudson, Cook of & Association Brad Hayes - Protective Patrick Merkle - Cameron & Association Ron Gorsline - Hudson, Cook & Association Patrick Merkle - Cameron & Association

FRIDAY SEPTEMBER 26TH

8:00 am SEPTEMBERRegistration Opens FRIDAY 26TH 8:00am am - 2pm 8:00 8:00 am - 2pm

6:00 pm - 10:00 pm

Golf Tournament Registration Opens (Old Fort Golf Club Murfreesboro, TN) Lunch at the Club Golf Tournament (Old House Fort Golf Club Murfreesboro, TN) Silent Auction & Dealer Lunch at the Club House Reception w/ Entertainment (Bring Auction items for auction to benefit Children’s Charities of TAA & TNIADA) Silent & Dealer Reception w/ Entertainment

(Bring items for auction to benefit Children’s Charities of TAA & TNIADA) SATURDAY SEPTEMBER 27TH

SATURDAY SEPTEMBER 27TH 7:00 am Registration Opens 7:00 am Registration Breakout Room Opens 1

Breakout Room 2

Breakout Room 1 Analysis Workshop 8:30 am Dealership

Breakout 8:30 am Room TBA 2

10:30 am Buy Here Pay Here

10:30 am Making Money After the Sale

8:30 Analysis Workshop 9:30 am am Dealership Social Media 9:30 MediaPay Here 10:30am am Social Buy Here

11:30 am - 2:30 pm 11:30 am - 2:30 pm 2:30 pm - 3:30 pm 2:30 pm - 3:30 pm 3:30 pm - 5:00 pm 3:30 pm - 5:00 pm 7:00 pm - 10:00 pm 7:00 pm - 10:00 pm

8:309:30 am am TBAThe New Way to Buy & Sell Inventory 9:3010:30 am The WayMoney to BuyAfter & Sellthe Inventory am New Making Sale

EXPO & Luncheon with Vendors EXPO & Luncheon with Vendors Federal Legislation - New FTC (Hudson, Cook & Associates) Federal Legislation - New FTC (Hudson, Cook & Associates) TN Legal and Legislative Updates (Cameron & Associates / Bob Weaver TAA)

Awards Banquet & Entertainment (Spend the Night in Margaritaville)

TN Legal and Legislative Updates (Cameron & Associates / Bob Weaver TAA) Awards Banquet & Entertainment (Spend the Night in Margaritaville)

with with

Saturday Saturday NightNight SeptSept 27th 27th

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TAA)

2014

DEALER REGISTRATION RESERVE YOUR SPACE REGISTER TODAY ONLY $129.00

Print as you want your business to appear in convention program

Organization Information Company Name

Phone

Address

City

Primary Attendee

State

Cell No.

Zip

Email Address

($129.oo)

Name

Golfers

(Golf Tournament at the Old Fort Golf Club scheduled for 8 am Friday, Sept. 26th) List golfers $199 foursome w/carts with Cell Number. Four players to a team. Name

Cell No.

Name

Cell No.

Name

Cell No.

Name

Cell No.

Payment Info: Name on card

Card Type:

VISA

Card Number

MC CHK# Exp Date &

Security Code

Signature of Cardholder

www. tndealernews.com PO BOX 2219 Lebanon TN 37088

Complete and Fax: 615 443-7486 or email: dnoble@tndealernews.com

For more info call Darryl Noble (615) 506-4968

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WASHINGTON

UPDATE

National Independent Automobile Dealers Association

NIADA GOVERNMENT REPORT HERE’S A RUNDOWN OF SOME OF THE L ATEST GOVERNMENTAL ISSUES AND ACTIVIT Y AFFECTING THE USED CAR INDUSTRY FROM NIADA REGUL ATORY COUNSEL SHAUN PETERSEN AND NIADA LOBBYIST SANTE ESPOSITO.

REGULATORY REPORT Consumer Financial Protection Bureau Indirect auto financing: In recent testimony before the House Financial Services Committee, director Richard Cordray said the CFPB will issue a white paper this summer regarding the proxy methodology used in identifying discrimination in indirect auto financing. Congressional members of both parties and industry representatives, including NIADA, have been asking for that information for more than a year. Cordray also said the bureau will consider issuing advisory opinions in appropriate cases. GE Capital settlement: The bureau settled an enforcement action with GE Capital Bank involving deceptive and discriminatory conduct related to credit card add-on products. The deceptive marketing practices cited included promoting a product as free when only under very rare circumstances could one avoid the fee. GE allegedly failed to tell consumers they were ineligible for products and did not make it clear consumers were making a purchase rather than receiving a benefit. GE also falsely suggested the products were a limited time offer. Additionally, GE Capital is alleged to have engaged in discriminatory practices by not offering some promotions to consumers who indicated they preferred to communicate in Spanish or had a mailing address in Puerto Rico, even if they met the program’s qualifications. GE Capital agreed to end the practices and will provide $225 million in consumer relief and pay a $3.5 million civil penalty. Mobile financial services: The CFPB is requesting information related to the opportunities and challenges of using mobile financial services. The bureau wants to know how mobile technologies are impacting unbanked and underserved consumers with limited access to traditional banking systems. The comment period ends Sept. 9. NIADA will review the request for information and make recommendations if it warrants a response. Federal Trade Commission Geolocation privacy: The FTC testified before Congress about its efforts to address the privacy concerns raised by the tracking of consumers’ locations, as well as TENNESSEE DEALER CONNECT

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proposed legislation to protect the privacy of geolocation data. The FTC considers precise geolocation data as sensitive personal information. The testimony provided the commission’s views on the Location Privacy Protection Act of 2014, proposed legislation that seeks to improve the transparency of geolocation services and give consumers greater control over the collection of their geolocation information. The FTC testified it supports the goals of the LPPA and believes it is an important step forward in protecting consumers’ sensitive geolocation information. Debt collection settlement: The FTC settled a lawsuit against Houston debt collection company RTB Enterprises, Inc., which does business as Allied Data Corporation, and president Raymond T. Blair for illegal debt collection activities. The defendants allegedly violated the FTC Act and the Fair Debt Collection Practices Act by using false and deceptive methods to collect more than $1.3 million in so-called “convenience fees” and “transaction fees” from consumers who authorized payments by telephone. The defendants allegedly trained their collectors to deceive consumers into believing payments would not be accepted by mail and the fees were unavoidable. The FTC also said the collectors claimed to speak for attorneys, falsely threatened to sue consumers who did not pay and used deceptive schemes to coerce consumers into paying or providing their personal information. The defendants are required to pay a penalty of $4 million, which was partially suspended based on inability to pay. LEGISLATIVE REPORT H.R. 749, Eliminate Privacy Notice Confusion Act; S. 635, Privacy Notice Modernization Act of 2013 As reported in the June update, these bills would eliminate a costly and duplicative requirement of the GrammLeach-Bliley Act that all financial institutions mail their customers a copy of their privacy notice each year even if there has been no change in the policy. NIADA prefers the already-passed House bill because of concerns over an addition in the pending Senate bill that requires customers be provided access to the most recent disclosure in electronic form, which could be problematic for some small dealers.

AUGUST/SEPTEMBER 2014

On June 6, we met again with staff of the House and Senate Banking Committees to express NIADA’s support of the bills and concern about the Senate’s added language. In addition, the CFPB issued a proposed rule on the issue and accepted comments through July 14. Rockefeller Motor Vehicle Safety Act of 2014 On June 27, Sen. Jay Rockefeller (D-W. Va.), chairman of the Committee on Commerce, Science and Transportation, introduced the Motor Vehicle Safety Act of 2014 to give the National Highway Traffic Safety Administration increased capabilities and increased resources in the wake of the recent flood of recalls from General Motors and other automakers, which highlighted gaps in the agency’s ability to regulate the industry. Rockefeller’s bill gives NHTSA the authority to remove dangerous vehicles from the road and raise caps on civil penalties for safety violations; increases funding for NHTSA’s vehicle safety programs by imposing a vehicle safety user fee on auto manufacturers; prohibits car dealers from selling used vehicles with known pending safety recalls without fixing the defect or notifying the consumer; and improves consumer access to early warning data and the vehicle safety database. W W W. T N I A D A . C O M

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MANAGEMENT

MATTERS

THE MONEYBALL PHENOMENON

THE ANALY TICAL AND STATISTICAL APPROACH THAT HAS TAKEN OVER BASEBALL CAN HELP RAISE YOUR DEALERSHIP’S BATTING AVERAGE BY JOE LESCOTA

The more I work with dealers the more enthused I get about the Brad Pitt movie Moneyball. It’s the story of Oakland A’s general manager Billy Beane as he challenges the system and defies baseball’s conventional wisdom when he is forced to rebuild his small-market team on a limited budget. He ends up doing it with the help of a Yaleeducated economist who happens to be a whiz at crunching numbers (data). That new number crunching system changes forever the way baseball is played and teams are put together. I recently read an article about how NBA teams are also embracing the Moneyball phenomenon by hiring statistical analysts. The article explained how important it was for players to understand the smallest nuances of their playing abilities by scouring metrics and game films. In other words, while scoring baskets is obviously important, it’s even more important to understand details like how many times an individual player actually dribbles a ball before being able to successfully make a shot. In essence, the statisticians are quantifying every aspect of the game. So how does this tie in to selling more vehicles? Well, you decide if it does or does not. For more than 30 years, I have successfully captured enough data from automotive retail dealerships to make the following assumptions: • In today’s efficient marketplace it takes approximately three selling opportunities to sell one vehicle. That means you have to get people to come through the door of your dealership. • For every three visitors who come into a dealership, at least two of them must be given the opportunity to test drive a vehicle on your lot. • Both of those potential customers who took a test drive must be given the opportunity to purchase a vehicle from you. That is done by making a formal written presentation (offer to buy) to the two potential customers. • Of the two potential customers who were presented a written offer to buy, both should make the purchase and one should actually end up being delivered (based on credit approval ratios). Does that type of analytical approach really apply to a typical independent dealer? You only have to read about the nation’s top used vehicle seller, CarMax, to see just how effective an analytical, number-crunching TENNESSEE DEALER CONNECT

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approach to running a car dealership can be. Small dealerships can benefit greatly from such an approach. Why would you want to know how many guests it takes to sell a retail unit in your dealership? Because you want to discover just how effective or ineffective you are when it comes to working with each of your guests. Remember, there is an actual hard cost associated with attaining each potential buyer. Wouldn’t you want to know if your marketing efforts are effective or being supported by your sales staff? Wouldn’t you want to have a strategy in place to compensate for the lack of traffic in your dealership if you should discover you only had two guests in a day when you know that in your dealership it might take three guests to sell one car? If you only see two guests, you know statistically you need one more “swing of the bat” to improve your odds of making a sale. Where is that additional guest going to come from? You have to look at it this way: If in your dealership it does indeed take three guests to sell one vehicle and you only saw two guests today, you would have to see four guests tomorrow to make up for today’s lack of a sale. The effort to sell increases exponentially. Here’s the crazy part about all of this. It’s frequently the dealer who begins to defend his staff by saying something like, “You know, I try to get my people to keep track of traffic, but I don’t know of any dealer who is able to get his salespeople to write down everyone who comes into the dealership.” I hear you, but I respectfully and emphatically disagree with any dealer who makes such a broad statement. I meet dealers throughout North America, and let me tell you effective dealers not only know the importance of tracking the number of guests who walk into their dealership, call their dealership and search their virtual dealership, but also understand that knowing that is not an option. What I’ve learned from successful dealers is this: If it’s important, you get it done. I’ve heard it and you’ve heard it – the importance of not only keeping track of guests who walk into the dealership but, even more important, keeping track of what happens to them once they arrive. I’m not sure I ever really get this message across enough, but this industry is no longer fighting a pricecompetitive battle. That battle is over because the Internet says so. We are in an efficient marketplace. That said, dealers had better find another way to sell used vehicles, and one of the best and

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THAT NEW NUMBER CRUNCHING SYSTEM CHANGES FOREVER THE WAY BASEBALL IS PLAYED AND TEAMS ARE PUT TOGETHER. most effective ways I know is to sell value. All too frequently I still see salespeople meeting and greeting guests either on the showroom floor or on the blacktop, and within minutes the salesperson and the guest are sitting at a desk and proceeding to discuss pricing without ever having sold the first ounce of value through a value selling presentation or an emotional and exciting demonstration drive. When I ask those salespeople why they didn’t take their guests on a test drive, they’ll say something like, “Oh, that’s one of my customers. He and I have got a good relationship. He’ll drive it later if he likes the price.” Seriously? It’s not about what the salesperson wants, thinks or assumes. It’s about giving and presenting value in order to maximize gross profit opportunity. People spend more money on products they are emotionally involved with. The demo drive evokes emotion. What about this one – the potential customer who comes into your dealership after spending approximately 18 hours of online research, takes a test drive of the vehicle she came in to see, then leaves the dealership without ever being given the opportunity to purchase it. Surely you can’t tell me you’re not the least bit curious to find out why a guest who actually took a test drive of one of your vehicles was not given or presented with an official written offer to make a purchase or CONTINUED ON PAGE 18 W W W. T N I A D A . C O M

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might not have wanted to be given the opportunity to make a purchase. Perhaps the guest didn’t want to discuss price because a salesperson never gave the guest the opportunity to make a purchase, or perhaps something happened or was discovered during the test drive that dissuaded the guest from taking the transaction any further. A Moneyball approach to managing your dealership’s daily sales activities is not meant to overwhelm you with data but rather to give you a better handle on what’s actually occurring during your attempted selling process. Here is where reality replaces assumptions. Don’t assume you know what’s going on because you’re a small dealership and you’ve convinced yourself you know what’s going on because you know your people. Prior to writing this article I spent four days with three dealerships. In each of those dealerships I found some pretty awesome people working pretty hard. But being nice and working hard is no assurance of success. Many car dealerships, both independent and franchised, have gone out of business by attempting to work harder than they’ve ever worked before only to find out they were working hard at the wrong thing. As a matter of fact, they probably weren’t sure what they were really working hard at. A Moneyball approach is a matter of removing some of the guesswork (notice I said some of the guesswork, because, trust me, there’s always some guesswork involved) out of running a sports team, a multimillion dollar business or just an ordinary – or extraordinary – independent dealership in order to make the best, most educated business decisions possible. Businesses aren’t necessarily successful because of extraordinary employees. Rather, they become successful by average employees achieving extraordinary things. A reasonable person would ask, “Who has the time to keep up with this sort of statistical analysis when I need to focus on selling something today?” The answer is simple. You do, because you cannot afford to not know how effective your selling process is – or is not. Today’s dealer needs accurate information to make the best decisions possible in order to maximize selling and profit results. Wouldn’t you play harder to win if you knew the odds of winning were in your favor? So keep track of the stats and you learn to pick the odds. Another way of improving your winning odds is by learning more about how you can become an NIADA Certified Master Dealer or by becoming a member of an NIADA Dealer 20 Group. Visit www.niada.com and click on the “Training” tab for more information about these programs designed to help you analyze your business and find ways to make it more efficient and profitable.

JOE LESCOTA, A VETERAN OF MORE THAN 25 YEARS IN THE AUTOMOTIVE INDUSTRY, IS NIADA’S DIRECTOR OF DEALER DEVELOPMENT AND INSTRUCTOR FOR NIADA’S CERTIFIED MASTER DEALER PROGRAM. HE CAN BE REACHED AT JOE@NIADA.COM.

PRODUCTS

& SERVICES

Half a Million Camaros Recalled POTENTIAL IGNITION PROBLEM INVOLVING FIFTH-GEN CAMAROS The latest in a recent series of General Motors recalls involves all fifth-generation Chevrolet Camaros and a small number of 2014 Chevrolet Corvette Stingray models. The expansive Camaro recall is due to an ignition-switch issue similar to the one in the high-profile Chevy Cobalt and Saturn Ion recall, although General Motors Company has said that the switch used in the Camaro is different from the one that triggered the previous recall of 2.6 million cars. In the affected Camaros, a driver’s knee can knock the key out of the “run” position, cutting power. GM said it knows of three crashes, resulting in minor injuries, that may have been caused by the defect. Airbags reportedly didn’t deploy in any of those crashes, but no other details have been released. GM reportedly became aware of the problem during internal testing in the wake of the Cobalt controversy. It will modify the Camaro key design so the key and fob are separate pieces. The National Highway Traffic Safety Administration hasn’t posted a recall

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BY MOTOR AUTHORITY

notice, but Camaro owners will receive letters telling them how to set up appointments to have their keys replaced, free of charge. The recall affects all 2010 through 2014 Camaro models, meaning every car of the current generation. That includes 464,712 cars in the U.S. and 46,816 sold in Canada, Mexico, and other markets. Meanwhile, GM is also recalling 33 examples of the 2014 Corvette Stingray built between April 23 and April 25, 2014, because of the potential for a short circuit in the cars’ Sensing and Diagnostic Module. This could deactivate the airbags and seatbelt pretensioners, meaning they won’t deploy in a crash. GM will replace the SDM free of charge, although it hasn’t said when owners will be able to have the work done. Owners can contact GM at 1-800-222-1020; the number for the recall is 14219. A recall notice can be found on the NHTSA’s Safercar.gov website, under ID number 14V299000.

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ASSOCIATION

NEWS

PRODUCTS

Certified Master Dealer Program

DealerCenter Integrates With SiriusXM Pre-Owned

HELPING DEALERS MANAGE AND GROW BUSINESSES The CERTIFIED MASTER DEALER® program was developed in 2001, in collaboration with Northwood University, to help dealers manage and grow their businesses. Since then, it has grown into one of the industry’s most respected training programs. Dealers who attend this training are committed to the industry, support ethical business standards and practices, and are leaders in their communities. They bring a wide range of experience to each class, and leave with new strategies for analyzing their business practices and increasing their bottom line. Instruction is provided by Joe Lescota, NIADA Director of Dealer Development and former retail automotive executive with more than 25 years of frontline dealership, selling management and training experience. For more information, please contact Georgia Brown at (800) 472-8101.

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& SERVICES

SIRIUSXM CONTINUES TO EXPAND INTO THE PRE-OWNED ARENA SiriusXM continues to expand into the pre-owned arena. Most recently, the company has partnered with Nowcom to integrate the SiriusXM Pre-Owned Program with its DealerCenter dealer management products. DealerCenter helps dealers manage their customers and leads, sales, inventory, financing, websites and online marketing. “DealerCenter’s integration of the SiriusXM Pre-Owned Program offers dealers another way to easily give their customers more with their vehicle purchase and join more than 12,000 dealers already participating in the program,” said Joe Verbrugge, senior vice president and general manager of the auto remarketing division at SiriusXM. “Once enrolled, dealers can demonstrate SiriusXM’s unparalleled entertainment offerings and give customers the added value they look for when buying a pre-owned vehicle.” The 4,500 dealerships that utilize DealerCenter now have the ability to enroll in SiriusXM’s Pre-Owned Program, identify vehicles in their preowned vehicle inventory equipped with factory-installed satellite radios and demonstrate SiriusXM during test drives. Furthermore, customers purchasing a used car with a factory installed satellite radio from these same dealers will receive a three-month SiriusXM subscription. “DealerCenter provides dealers with the best resources and technology in the marketplace to help generate sales and increase profits,” said Rob Lekstrom, chief operating officer of Nowcom. “We continually strive to innovate and improve DealerCenter with the goal of adding value for our dealers. Now with just a click of a button, dealers can participate in the SiriusXM Pre-Owned Program strengthening their ability to offer the latest audio entertainment features and amenities in high-quality vehicles at an incredible value.” As of April, SiriusXM Pre-Owned also integrated with AutoManger.

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ASSOCIATION

NEWS

DEALER 20 GROUP THE POWER COMES FROM THE DEALERS THEMSELVES The power of NIADA’s Dealer 20 Group comes from the dealers themselves – working and sharing their ideas and real world experiences with each other. If you’re tired of constantly reinventing the wheel and enjoy the sharing of ideas and best business practices with dealers like yourself, the NIADA Dealer 20 Group is for you. Dealers are matched with other dealers of like size and sales volume (outside of the other dealers’ selling area) all with one goal in mind – to be more successful and to learn how to improve day to day operations, increase sales and make more profit. While the NIADA Dealer 20 Group traditionally meets three times a year, dealers have access to their financial performance each and every month of the year. These unique groups are designed for NIADA’s independent dealers as they do business today: retail, BHPH – or a little bit of both. Sessions are moderated by Joe Lescota, NIADA Director of Dealer Development.

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M ARKET WATCH

How Many Miles Until a Car Loses All Value? A UNIQUE STUDY FROM MOJOMOTORS Multiple studies have been done on the reliability of various vehicles and car brands. MojoMotors.com recently conducted a unique study in which they looked at how much mileage a vehicle could accumulate before it becomes worthless. The company analyzed over 500,000 cars, model years 1995 to 2014 listed on MojoMotors.com to determine the average selling price depending on a vehicle’s mileage. Using a linear regression model, they calculated the dollars of value lost as mileage increased and, ultimately, the number of miles until a car lost all value. According to the company’s blog, less reliable brands will lose value quicker since they have a greater chance of breaking down with fewer miles on the odometer. However, the blog points out, “Just because a car is considered valueless beyond a certain number of miles in this study doesn’t mean it won’t drive for another 100,000 miles.” “The public perceives Toyota as one of the most reliable automakers and our study concurs with this perception,” said MojoMotors. Toyota topped the list, rated at 210,705 miles until worthless. Honda came in next at 209,001 miles. The site points to Honda’s versatility: “Honda excels at pretty much everything.” Straggling behind the two leaders, come Ford (198,409), Dodge (198,266) and Chevrolet (195,754). Honda and Toyota boast a 10,000 mile lead over Ford alone. According to the site, much of Dodge’s ranking comes from the strength of Ram pickups. Rounding out the top 10 are Nissan (195,593), Subaru (189,370), GMC (188,584), Acura (178,947) and Mazda (177,729). For the complete blog post, visit www.mojomotors.com.

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MARKET

WATCH

Share of Older Cars on Road Hits 5-Year High PERCENTAGE OF OLDER VEHICLES ON THE ROAD CONTINUES TO GROWS Though the economy continues to improve – perhaps pushing many who would otherwise delay their car purchases into showrooms for vehicle replacements – the percentage of older vehicles on the road continues to grow. In fact, according to recently released Experian Automotive data, the percentage of vehicles on the road predating the 2001 model year has reached its highest level since 2009. The company’s latest Automotive Market Trends analysis showed that in the first quarter, vehicles this age made up more than 28.3 percent of all vehicles on the road, up from 22.1 percent six years earlier, before the economic downturn. And the total number of vehicles on the road remained unchanged year-over-year at 247.4 million in Q1. Back amid the toughest recession years – 2008 and 2009 – consumers were staying in their older vehicles mostly for economic reasons, but now, analysis shows consumers might simply be deciding to hold on to their vehicles a bit longer, perhaps due to

increasing production quality. “Auto companies have been seeing the benefits from consumers coming back to market due to pent up demand following the recession. However, it’s clear that more and more consumers continue to drive oldermodel vehicles,” said Melinda Zabritski, Experian Automotive’s senior director of automotive credit. “While the growth in early model vehicles on the road is slowing, getting the most out of the vehicle they purchase still appears to be top of mind for consumers.” During the first quarter, the top model year 2000 and older vehicle makes and models were the Ford F-150, Chevrolet Silverado 1500, Honda Accord, Toyota Camry, Ford Ranger and Honda Civic, according to Experian data. The company also took a look at new vehicle registration trends for Q1 and found that consumers were buying entrylevel crossover utility vehicles

BY AUTO REMARKETING STAFF

more than any other vehicle segment. This is the first time in 10 years that a CUV was the top registered vehicle segment, Experian pointed out. To notch the No. 1 position in Q1, the CUVs surpassed full-size pickup trucks as the top vehicle segment among new registrations. From a make-and-model perspective, the top five CUVs registered during the quarter were the Ford Escape, Honda CRV, Chevrolet Equinox, Toyota RAV4 and Nissan Rogue. The top five new vehicle models registered across all segments in Q1 were the Ford F-150, Toyota Camry, Nissan Altima, Chevrolet Silverado 1500 and the Honda Accord.

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DEALER

PERSPECTIVES

Do You Really Know How to Listen? BASIC REASONS WE FAIL TO LISTEN

Have you ever been having an important conversation, in which the other person is telling you something you need to know, and while you know you should give your full attention to what’s being said, you just can’t stop thinking about that annoying sound of static coming from a nearby radio? Or you can’t stop watching the other person shaking their knee? Or you feel compelled to answer every phone call that comes in to your cell? Everyone’s attention has been drawn away from important exchanges now and then – but not everyone realizes how detrimental this is to effective communication. Too often, people simply allow the distraction to persist, and lose out on valuable information. Therefore, you must eliminate noise and distractions in order to be an effective listener and communicator. These barriers may be in the environment, like noises in the room, other people talking, poor acoustics, bad odors, extreme temperatures, an uncomfortable chair or visual distractions. Or they could be physical disruptions such as telephone calls or visitors. Another kind of barrier is something distracting about the speaker. Maybe he or she dresses oddly, shows poor grooming and has disturbing mannerisms, confusing facial expressions or body language. Or perhaps he or she has a thick accent or an unappealing presentation style.

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BY TONY ALESSANDRA

Yet another barrier has to do with you, the listener, and can be either physical or psychological. Maybe it’s close to lunch or quitting time and you’re preoccupied with how you feel. You’re hungry, tired or angry, or maybe have a cold or a toothache. If so, you’re not going to be listening fully. Another physical barrier could be your proximity to the speaker. If he or she’s either too close or too far away from you, you may feel uncomfortable and have a hard time concentrating. Another sort of internal barrier is psychological. Perhaps you’re closed-minded to new ideas or resistant to information that runs contrary to your beliefs and values. Or maybe you’re bored, daydreaming or jumping to conclusions. There are five basic reasons we fail to listen well. 1. Listening takes effort. As I said, it’s more than just keeping quiet. It means really concentrating on the other person. An active listener registers increased blood pressure, a higher pulse rate and more perspiration. Because it takes so much effort, a lot of people just don’t listen. 2. There’s enormous competition for our attention. Second, there’s now enormous competition for our attention from radio, TV, movies, computers, books and magazines and much more. With all these incoming stimuli, we’ve learned to screen out information we deem irrelevant. Unfortunately, we also screen out things that

are important. 3. We think we already know what someone is going to say. The third reason why we don’t listen well is that we think we already know what someone is going to say. We assume that we have a full understanding right from the start, so we jump in and interrupt. We don’t take the time required to hear people out. 4. There’s a difference between how fast we talk and how fast we listen. The fourth reason has to do with the speed gap – the difference between how fast we talk and how fast we listen. The average person speaks at about 135 to 175 words a minute, but comprehends at 400 to 500 words a minute. For the person who’s not listening well, that’s plenty of time to jump to conclusions, daydream, plan a reply or mentally argue with the speaker. At least that’s how poor listeners spend the time. 5. We don’t know how. We do more listening than speaking, reading or writing. But I bet you’ve never had a course in listening, have you? It would serve you well to learn to truly listen. TONY ALESSANDRA IS AN AMERICAN BEST-SELLING AUTHOR, ENTREPRENEUR AND MOTIVATIONAL SPEAKER IN THE FIELDS OF SALES AND MARKETING. ALESSANDRA HAS WRITTEN 27 BOOKS AND HIS WORK AS AN AUTHOR AND SPEAKER HAS BEEN FEATURED IN MEDIA OUTLETS INCLUDING OPRAH MAGAZINE. THIS ARTICLE ORIGINALLY APPEARED ON NCM’S UP TO SPEED BLOG (HTTP://BLOG.NCMINSTITUTE. COM) AND IS REPRINTED WITH PERMISSION.

AUGUST/SEPTEMBER 2014

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ASSOCIATION NEWS

CONVENTION OVERVIEW DEALERS GET ON THE RIGHT TRACK AT 68TH ANNUAL CONVENTION AND EXPO

The 68th annual NIADA Convention and Expo was right on track from beginning to end. That’s because NIADA provided the right tracks. The 2014 Convention was built around a strong program of dealer training sessions structured into three tracks – focused on retail, Buy Here-Pay Here and compliance – allowing dealers to decide which was the right track for them. Add in a special all-day dealership analysis workshop from director of dealer development Joe Lescota on the Convention’s opening day and the result was a resounding success judging by the increased attendance and overwhelmingly positive feedback from dealers. “Our goal was to offer an outstanding agenda, talking about what is important to the dealers and what’s most on their minds,” said NIADA director of events Holly Swanzy, noting that 22 percent of the attendees were at Convention for the first time. “That strategy paid off in a great event.” The new compliance track, featuring NIADA regulatory counsel Shaun Petersen and other experts, was a popular addition to that agenda. Dealers completing all seven of the track’s sessions were presented with a certificate of completion to display at their dealerships. Of course, there was plenty more than that going on at Las Vegas’ spectacular Caesars Palace. The event got off to a rollicking start Monday evening with Cigars and Martinis by the pool, followed by a Welcome Reception featuring high-energy music from a tribute to country legends Willie Nelson, Shania Twain, Tim McGraw, Garth Brooks and Reba McIntyre. Tuesday included a rousing call to action from Rep. Roger Williams of Texas; the popular Lender One-on-One Fair, where dealers met face-to-face with lenders to get answers to their specific issues; and the Grand Opening of the sold-out Expo Hall, this year in a new, more accessible space. Wednesday was highlighted by keynote speaker Bobby Bowden, the winningest coach ever at college football’s highest level. Bowden mixed humor and tales of his coaching career with a powerful message about belief, commitment and heart that applies to business – and life itself. That night, Arlan Kuehn was introduced as NIADA’s new president at the National Leadership Awards Banquet, which also honored the NIADA scholarship winners as well as the association’s top state executive, leaders in membership and community service, the newest members of the coveted Ring of Honor and two recipients of the new Michael R. Linn Lifetime Achievement Award. The Convention wrapped up with Marc Powell of New Mexico earning the coveted title of 2014 National Quality Dealer in a ceremony broadcast live on NIADA.TV. Planning has already begun for the 69th NIADA Convention and Expo on June 22-25, 2015 at Caesars Palace. Save the date and don’t miss your chance to be part of the used vehicle industry’s biggest event of the year!

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TESLAS BEGIN ENTERING THE USED MARKET NUMBERS AND INTEREST INCREASES

With the help of a hefty loan from the Department of Energy in 2009, Tesla Motors has survived infancy, and is becoming more and more popular, as it expands its lineup and plans to offer a more affordable option for consumers in the near future. The company has now been around long enough to start making a splash on the remarketing side of the industry, though the amount of Teslas entering the used market remains low. For example, earlier this month, online auto retailer Carvana announced that what it’s calling the first Carvana certified preowned Tesla is now available on its website. And Tesla postings on AutoTrader.com are showing significant boosts in shopper interest this spring. Auto Remarketing gained some insight into how these used vehicles are performing on the site from Mark Strand, industry intelligence manager at AutoTrader.com. If you don’t think Tesla is making waves among car shoppers, check out this statistic. Last month, Tesla models showed 929 percent more interest per listing than other vehicles in their competitive set on AutoTrader.com. “As the number of listings for used Tesla models on our site increases, the interest level will naturally become more consistent with other vehicles in the competitive set,” said Strand. With that in mind, due to the increasing number of Tesla listings, AutoTrader is seeing a decline in the number of views per listing, he explained. “However, this does not mean that interest is necessarily waning. As of right now, people interested in searching for TENNESSEE DEALER CONNECT

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BY SARAH RUBENOFF

used Teslas have fewer listings to view, so the percent of views per listing is naturally higher,” he said. “As more listings are posted on the site by dealers and private sellers, the percentage of views per listing will normalize.” Interest in the luxury vehicles is still growing, though, and AutoTrader anticipated the difference in interest per listing to remain high for the foreseeable future. And though the Tesla units still account for less than 1 percent of their competitive group on the site, the number of used Teslas listed on AutoTrader.com has grown by 820 percent. But since the pre-owned market penetration remains low, Strand said, “They are unlikely to have a significant impact on the used market at their current level, and it will likely be several years before that could change.” But there is no denying the number of used Teslas entering the market is growing. And this brings up the following question: Will dealers seek them out for their lots? This poses an interesting point as franchised and independent dealers alike have been rallying against the automaker in opposition to its direct-to-consumer sales model, with lawsuits popping up all over the country in early 2014. Strand said this shouldn’t have any impact on whether dealers intend to sell used Teslas. “I think dealers will be able to keep any feelings around the Tesla direct sales model separate when looking at the profit opportunity a used Tesla could present. If the opportunities are there, I think dealers will be open to them, especially independent dealers who specialize in highend luxury and exotics,” said Strand.

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M ARKET WATCH

But it is too early to know much about Tesla retention rates and whether they will prove to be a good investment for dealers’ used departments. “It’s early to draw definitive conclusions at this point. However, given the restrained supply and rave reviews the car gets, dealing in a good quality used Tesla seems like a solid opportunity for a dealer who is experienced in handling exotics and high end niche vehicles,” Strand said. Market trends such as supply and demand are at work here, too. “In the short term, limited supply should keep used values on Teslas relatively high,” Strand said. “But further down the road, as production capacity expands and the buzz dies down, I would expect used Teslas to lose some of their premium. From the consumer perspective, if someone is in the market for a Tesla, I don’t think he or she will be focused foremost on value retention and investment, as that person likely has some cash to burn,” he continued. “Even with strong value retention in the short term, we don’t know enough about how these cars age to know what the investment/depreciation will look like five to 10 years out, with high mileage or when the batteries near end of life.” Much is still unknown about Tesla’s potential impact on the used-car industry, but the numbers are growing at a rapid pace – only time will tell what long-term effects the automaker will have on the EV and remarketing industries. AUTO REMARKETING STAFF WRITER THIS ARTICLE WAS ORIGINALLY PUBLISHED BY AUTO REMARKETING. IT IS REPRINTED WITH PERMISSION.

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