Texas Dealer September 2017

TIADA Welcomes 2018 President

Greg Zak

Also In This Issue: – Michael W. Dunagan on the CFPB Arbitration Rule – TIADA Annual Conference & Expo Wrap-up – Use Debt to Increase Cash Flow – Are You Leaving Gross Profit “In the Middle?”

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2018 TIADA Board of Directors PRESIDENT Greg Zak/Dixon Motors 7902 North Freeway Houston, TX 77037 Office: 281.931.1300 Email: gzak@windstream.net PRESIDENT-ELECT Juan Sabillón/Mi Tierra Auto Sales 7935 Gulf Freeway Houston, TX 77017 Office: 713.644.2446 Email: jmsabillon@mitierraautosales.com CHAIRWOMAN OF THE BOARD Kathrine Tolsch/CICO Auto Sales 11050 Harry Hines Blvd.

Dallas, TX 75229 Office: 214.352.9282 / Fax: 214.352.8227 Email: cicoauto@verizon.net SECRETARY Robert Beck/Stop N’Drive Motors 711 N. General McMullen Dr. San Antonio, TX 78228 Office: 210.432.1101 Email: stopdrive@texas.net TREASURER Mark Jones/Mike Carlson Motor Company 264 Exchange Burleson, TX 76028 Office: 817.703.7973 Email: markjones_1@att.net VICE PRESIDENT, WEST TEXAS (REGION 1) Paul Scott/Fiesta Motors – Lubbock 2599 74th Street Lubbock, TX 79423 Office: 806.765.3640 Email: pscott@gofiestamotors.com VICE PRESIDENT, FORT WORTH (REGION 2) Eddie Hale/Neighborhood Autos 1717 US 287 Decatur, TX 76234 Office: 940.539.2272 Email: ehale@neighborhoodautos.com VICE PRESIDENT, DALLAS (REGION 3) Greg Reine/Auto Liquidators 39670 LBJ Freeway Dallas, TX 75237 Office: 972.780.0001 Email: greg@autoliquidators.net VICE PRESIDENT, HOUSTON (REGION 4) Ryan Winkelmann/BJ’s Autohaus 5005 Telephone Road Houston, TX 77087 Office: 713.641.0980 Email: ryan.winkelmann@sbcglobal.net VICE PRESIDENT, CENTRAL TEXAS (REGION 5) Robert Blankenship/Texas Auto Center 6809 N IH-35 Austin, TX 78744 Office: 512.280.5333 Email: bob@texasautocenter.net VICE PRESIDENT AT LARGE Greg Phea/Austin Rising Fast 8024 IH 35 North Austin, TX 78753 Office: 512.828.001 Email: greg@risingfastmotorcars.com VICE PRESIDENT AT LARGE Vicki Davis/A-OK Auto Sales 23980 FM 1314 Porter, TX 77365 Office: 281.354.3355 Email: aokautosales@embarqmail.com TIADA EXECUTIVE DIRECTOR Jeff Martin 9951 Anderson Mill Rd., Suite 101 Austin, TX 78750 Office Hours M-F 8:30am - 4:30pm 512.244.6060 • Fax 512.244.6218 jeff.martin@txiada.org

Volume XVII

/ Issue 9

/ S e p t e m b e r 2 017

texasDealer

4 Officers’ Message

contents

by Mark Jones, TIADA Treasurer

6 Upcoming Events 8 House of Delegates Meeting Minutes 8 TIADA Scholarship Winner 11 Legal Corner: CFPB Issues Rule to Limit Use of Class-Action Waivers

by Michael W. Dunagan

12 Local Chapters 19 On The Cover: TIADA Welcomes 2018 President Greg Zak

by TIADA staff

24 Save the Date: TIADA Annual Conference and Expo 25 2017 Legislative Summary

by TIADA staff

27 TIADA Member Application 28 2017 VIP Auction Card Directory 30 Use Debt to Increase Cash Flow

by Scott Bates, CPA

36 New Members 38 Members Rave about 2017 Conference

by Michael Spurlin

43 2017 TIADA Awards Wrap Up

by Michael Spurlin

46 Behind the Wheel

by Jeff Martin

What’s happening at w w w . t x i a d a . o r g ?

DID YOU KNOW... The fall education schedule has been announced?

The education offerings include our brand new Virtual Workshops you can attend online from your own computer! You can find the lineup and register online under Resources/Education on the TIADA website.

The Editor of the Texas Dealer magazine is Michael Spurlin, Social and Communications Director of TIADA. To change your address for subscription and/or for other TIADA products, call the TIADA state office at 512.244.6060 or fax 512.244.6218. E-mail: info@txiada.org. New Membership/Subscriptions: If you are a member of TIADA, you may receive this magazine free of charge. Membership year runs from Jan 1 to Dec 31. Back issues are available for $20 each subject to availability. Send a check or money order, along with your name and mailing address to TEXAS DEALER, Attn: Back Issues, 9951 Anderson Mill Rd., Suite 101, Austin, TX 78750. Sorry, no billing. Notice to all members concerning services and products: TIADA was established in 1944 to develop professional standards of service and conduct for the independent auto industry. Opinions expressed herein are not necessarily those of the TIADA management, the Board of Directors or the membership. Likewise, the appearance of advertisers or their indemnifications of TIADA does not constitute endorsement of the products or services featured.

officers’ message Are You Leaving Gross Profit “In the Middle?”

P

ick any trade show, conference, or 20 Group meeting that I have attended in the last 25 years and the talk among dealers always seems to get around to the two activities they enjoy the most (and ironically, they are better at than anyone else in the room!) ...buying and selling cars.

Just recently at the TIADA Annual Conference, I was involved in such a conversation in which the age old chicken or the egg question came up. Do we earn our gross profit when we buy the vehicle or when we sell the vehicle? For certain, there are almost always varying opinions between dealers over which is the correct answer.

Honestly, we all pay about the same as the next guy for a particular year, make, model, and mileage. We may occasionally “steal” a unit here and there, but at the end of each buying day, the marketplace usually dictates what price we paid to acquire our inventory.

How then can we make more gross profit than another dealer if we all paid a similar price AND we all sell the units for roughly the same margins? The answer may lie in improving the “middle process” between buying and selling — controlling and reducing our reconditioning expenses.

Here is a short list of ideas that I hope will get your “wheels turning” and help you to minimize the amount of your gross profit being spent in your makeready shops.

Does your shop have access to the numerous Warranty Extensions that are “unadvertised” by the manufacturers?

Just in the last couple of years, we have saved thousands of dollars by utilizing the JLWARRANTY Guide that is published annually. This guide not only provides all the information about the standard warranty

4

by Mark

Jones

Mike Carlson Motor Company (Burleson) TIADA TREASURER

coverages on all years, makes and models, but more importantly it gives you each of the Manufacturer’s Warranty Extensions as well.

Often times, these warranty extensions are mysteriously “unknown” and/or the new car dealerships will not advise you a repair is covered unless you give them the Warranty Extension Number. Each month, we send no less than five cars to various dealerships to have what would have been otherwise expensive repairs done for free.

This particular guide is around $20 (hard copy or mobile) and you will find out fast that you have probably been paying for numerous repairs that the manufacturer would have covered at no cost.

Challenge: Regardless of the resource you use, find one that provides you with Warranty Extension Information and you will see just how quickly you will make back 10 to 20 times your investment.

Are you fully using the web to maximize how much you can save on parts & accessories?

In the past, many dealers (including myself) were close-minded to the idea of waiting for parts to be mailed. The notion was that it would drastically slow down our make-ready process. I was wrong! In today’s world, we get almost every part we order within 48 hours and the savings adds up to some real cash each month.

One of the most eye-opening exercises we do to prepare for each Service 20 Group meeting is a simple Parts Pricing Assignment. Every member gets the same list of 25 parts with the SKU #’s and we call our normal parts supplier and get our “discounted price (cont’d on pg. 6) T e x a s

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September 2017

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Officers’ Message (cont’d from pg. 4)

Upcoming Events TIADA DEALER ACADEMY Online Registration available at www.txiada.org

September 2017 1 4 Virtual Workshop:

Credit Reporting Compliance Online

1 8 BHPH Compliance:

A Comprehensive Workshop Fort Worth, TX

October 2017 1 7 Better BHPH Financials:

How to Get Organized for Growth San Antonio, TX

2 6 Virtual Workshop: Repossession and Bankruptcy Basics Online November 2017 6 Collect the Cash, Not the Car

Dallas, TX

1 4 Virtual Workshop: Credit Reporting Compliance Online December 2017 4 BHPH Compliance:

A Comprehensive Workshop Houston, TX

OTHER TIADA EVENTS October 2017 1 6 Board Meeting

Austin, TX

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quote.” When we get together, we compare to see who is getting the best deals on their parts and where they are buying them from.

Every time, the dealerships that have converted to buying their parts online rather than from their local suppliers are the winners. At our last meeting, the difference between best and worst was over $1200 on the 25 parts!!

Challenge: Look at a recent part ($50 or more) that you purchased from your local supplier.

Google search the item # and check on Ebay or Amazon to see how much money you might have saved buying online vs. traditional local part suppliers.

Consider joining/forming a CO-OP with other local dealers or businesses to purchase big ticket items at the lowest cost possible

Since becoming part of a CO-OP for new tire purchases in 2015, our average tire cost has dropped $22 per tire! We teamed up with multiple dealers in our area and presented our total annual combined spend to five different tire distributors.

(Whichever distributor who gave us the best pricing won all the business from all the dealers.)

By pulling our volume and dollar spends together, we were able to qualify for much lower pricing tiers from the distributors than when we were working individually. All invoicing is done separate for each dealer in our group, and we all pay the exact same amount for each tire size. Overall, we are saving almost 30% on tire purchases compared to what we paid prior to the CO-OP. Challenge: At your next local chapter meeting, ask other TIADA dealers if they are interested in putting their spending

dollars to work. CO-OP’s could certainly be used in many other areas such as parts, batteries, oil, detailing products, etc.

Are you efficiently utilizing parts from your wrecked units and/or vehicles you are sending to the auction?

Like most dealers, we find that we routinely purchase the same 15-20 year, makes and models over and over again each week.

Consequently, almost all of our wrecked units are still valuable from the standpoint that we are able to recycle many of the parts that we need to repair other vehicles that are in the make ready process.

How many times have you sold a wrecked unit for $500-$600 at the auction only to need a transmission or engine for the same type of vehicle two weeks later? My experience is that we end up paying $1200 to the salvage yard for what we just had! Aside from the major components, even utilizing trim pieces, radios, spare tires, jacks, and interior seats will save you lots of dollars in your overall reconditioning per unit.

Challenge: Set aside 15-20 minutes per week and evaluate which vehicles you are sending to the auction could still have “recycle dollars” left in them for you in the next 30-60 days. If you have a person(s) involved in your reconditioning process, get them involved as well. You might be surprised at how excited they get when they directly help save the dealership money.

We know that every dealer has their own unique standard and criteria of what a well reconditioned vehicle looks like. Let’s not work harder, let’s work smarter between buying and selling and keep the extra gross profit for ourselves!

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house of delegates meeting minutes July 23, 2017 | San Antonio, Texas

compiled by Texas Dealer staff

At its meeting on Sunday, July 23, 2017, TIADA took the following actions: President Kathrine Tolsch called the meeting to order at 4:02 p.m

2018 Officer Elections

With no contested races, Chairman Phil Lathrop asked for a motion directing the Secretary to submit a single ballot for the following candidates: President: Greg Zak; Chairman of the Board: Kathrine Tolsch; President Elect: Juan Sabillon; Secretary: Robert Beck; Treasurer: Mark Jones; Vice President Region 1: Paul Scott; Vice President Region 2: Eddie Hale; Vice President Region 3: Greg Reine; Vice President Region 4: Ryan Winkelmann; Vice President Region 5: Robert Blankenship; Vice President at Large: Greg Phea; Vice President at Large: Vicki Davis.

Moved by Scott Allen, seconded by Jerry Smith — Passed.

2018 Membership Dues

Kathrine Tolsch recommended that the Association increase the membership dues amount to $499 per year.

This is the first dues increase in eight years. A motion was made to accept the proposed changes to the membership dues.

Moved by Mark Jones, seconded by Greg Reine — Passed.

Bylaws Committee

Wayne Meagher presented the Bylaws Committee Report.

No changes to the Bylaws were proposed by the Bylaws Committee.

Legislative Committee

Chris Knox presented the Legislative Committee Report.

A motion was made to accept the proposed changes to the Legislative Program presented by the Legislative Committee.

Moved by Chris Knox, seconded by John Freeman — Passed.

A motion was made to adjourn the meeting.

Moved by Wayne Meagher, seconded by Juan Sabillon — Passed.

Meeting adjourned at 4:46 p.m.

A complete copy of any reports referenced in this document and more detailed notes from the meeting are on file at the TIADA office and available upon request.

THE MARVIN NORWOOD SCHOLARSHIP WINNER: LAURYN GREIG.

Now entering her third year at Texas Christian University’s Neely School of Business, she serves on the executive board of her sorority and the student leadership of the college ministry, and has maintained a 3.9 GPA. She was nominated by her parents, Steve and Theresa of Automaxx in Fort Worth.

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legal corner

T

CFPB Issues Rule to Limit Use of Class-Action Waivers

he Consumer Financial Protection Bureau (CFPB) has issued its anticipated final rule limiting the use of class-action waivers in arbitration agreements in certain consumer financial transactions. In a 775-page statement, the CFPB set forth the rule and its reasons for doing so.

The effective date of the rule is September 18, 2017, but the rule only applies to contracts entered into after March 19, 2018. Thus, existing contracts and arbitration agreements that contain class-action waivers can continue to be used up to March 19 of next year.

The rule does not ban the use of arbitration agreements in consumer financial transactions or limit a creditor’s ability to include mandatory arbitration provisions in a contract that would force a customer to arbitrate individual (as opposed to class) claims.

The rule is very close to the proposed rule that was published in May of last year. Over 110,000 comments to the proposed rule were submitted during

by Michael

Dunagan

W.

TIADA GENERAL COUNSEL

The effective date of the rule is September 18, 2017, but the rule only applies to contracts entered into after March 19, 2018. Thus, existing contracts and arbitration agreements that contain class-action waivers can continue to be used up to March 19 of next year.

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the 90-day comment period, including comments from groups representing franchised and independent dealers.

In addition to eliminating class-action waivers in arbitration agreements after March 19, 2018, the rule would also require creditors who use arbitration agreements to include in the agreements language that preserves the consumer’s right to participate in class-action suits and informs them of this right. Also, certain information and records must be provided to the CFPB regarding any actual arbitration proceedings that take place.

For many years, most of us were used to hearing about arbitration in the context of labor disputes and possibly baseball player contracts 11

Local Chapters VICTORIA Billy Jurkash Northpoint Auto Sales, Inc. 361.655.9191 npas@att.net Meeting – 1st Monday (Monthly) FORT WORTH Mark Jones MCMC 817.703.7973 mjones@mcmcauto.com Meeting – 4th Thursday of Jan–May and Sep–Oct DALLAS COUNTY Eddie Hale Neighborhood Autos 940.539.2272 ehale@neighborhoodautos.com Meetings as needed/TBD HOUSTON Rick Maroney Maroney Auto Sales 713.691.3800 rmaroney@usa.net Meeting – 2nd Tuesday (Monthly) SAN ANTONIO Robert Beck Stop N’ Drive Motors 210.432.1101 stopdrive@texas.net Meetings quarterly (dates announced at www.txiada.org) EL PASO Ricardo Gardea Cars Plus 915.778.8285 cars_plus@att.net Meeting – 3rd Friday (Monthly) 12

negotiations. But over the last 20 years or so, more and more businesses, especially in the finance and investment industries, have turned to arbitration as an alternative to the cost, time consumption, and, in some cases, risk, of litigation.

Arbitration has been around for a long time and has been used extensively in certain industries. For example, many of the construction contracts that are printed on American Institute of Architects forms contain arbitration clauses. Auto auctions have traditionally used a form of arbitration to resolve disputes between sellers and buyers.

TIADA first recommended the use of arbitration agreements to its members almost 20 years ago. In a 1998 article in Texas Dealer, it was recommended that dealers consider the use of arbitration agreements as a way of avoiding expensive and time-consuming litigation and pointed out that arbitration agreement forms were available from Burrell Printing Company. There were no dealer-management-software (DMS) packages back then, so pre-printed forms were either filled out by hand, or run though a dot-matrix printer.

Although acceptance by dealers was slow at first, interest picked up in 2002 when a lawsuit was brought against over 300 buy-herepay-here dealers in Texas claiming that the handling of deferred sales tax by dealers amounted to overcharging of finance charge. Those dealers who had arbitration agreements in their files were immediately dismissed from the suit by

the plaintiffs’ attorneys. (All suits were ultimately dismissed with no proof brought forward that systematic overcharging had taken place.)

Now, almost all dealers use arbitration agreements and most if not all DMS packages include arbitration lan-

…over the last 20 years or so, more and more businesses, especially in the finance and investment industries, have turned to arbitration as an alternative to the cost, time consumption, and, in some cases, risk, of litigation. guage either imbedded in retail installment forms or in separate agreements.

Congress passed the Federal Arbitration Act in 1925 with the express intent of placing arbitration agreements upon the same footing as other contracts. With a growing concern about the increasing number of lawsuits being filed in our state and federal courts, the U.S. Supreme Court has in recent years recognized the legitimacy of alternatives to litigation.

The court has consistently upheld the right of parties to a contract to agree to binding arbitration, often overruling the decisions of lower courts that would have restricted enforcement of arbitration. The Texas Supreme Court has also consistently recognized that T e x a s

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the Federal Arbitration Act applies to contracts involving interstate commerce, which includes motor vehicles and just about every other product offered for sale.

Arbitration is, in essence, a process through which parties to a contract agree to resolve disputes in a nonlitigation setting. While arbitration doesn’t eliminate or prevent consumer claims, it does change the venue for deciding disputes from the courthouse to an arbitrator’s office.

In binding arbitration, the parties are legally bound to the decision of the arbitrator. Professional arbitrators are usually certified by organizations such as the American Arbitration Association (AAA) to provide a fair, unbiased findings and decisions. Most arbitration agreements provide that either party can (but doesn’t have to) invoke arbitration if a dispute to the contract arises. If the clause is not invoked by either party, the case can be litigated in the courts.

Usually, the contract refers to one of the nationally-known and accepted arbitration organizations (such as the AAA) as the source of arbitration rules and the choice of arbitrators.

For many years, binding arbitration had been limited largely to commercial disputes; that is, disputes between businesses. In the last two decades or so, however, arbitration has been seen as one possible way of handling consumer complaints at a lower cost than litigation. First, it was large bank holding companies that put arbitration clauses in customer agreements.

Banks reported that the cost of resolving complaints and disputes were reduced substantially when mandatory arbitration was in place. Then, securities brokers, real estate agents, health care providers, insurers and finance companies began inserting arbitration clauses into their consumer agreements.

When the number of class-action suits against financial institutions started to rise a number of years ago, class-action waivers were added to standard arbitration clauses.

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Opponents of arbitration and class-action waivers began to challenge the waivers as anti-consumer and violations of consumers’ rights to access to courts. But despite some setbacks in state and lower-level federal courts, the U.S. Supreme Court has consistently ruled that arbitration provisions prohibiting class actions were enforceable.

It was inevitable, then, that such an effective tool would come under attack by consumer advocates. Attempts were

The question remains whether buy-herepay-here dealers should continue using mandatory arbitration agreements should the CFPB rule go into effect prohibiting class-action waivers. made in Congress and state legislatures (including Texas) to prohibit or restrict use of mandatory arbitration agreements in consumer contracts. But these also met with little success.

Then, when the CFPB was created, review of use of mandatory arbitration agreements in consumer contracts was listed as one of the initial agenda items.

Many experts thought that the use of arbitration

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agreements in consumer transactions might be totally eliminated by the CFPB, especially after a lengthy report was issued that was extremely critical of arbitration practices. But it came as no surprise when the preliminary rule was released focusing class-action waivers.

Congress has now weighed in on the CFPB rule, with both the U.S. House of Representatives and the U.S. Senate taking up resolutions under the terms of the Congressional Review Act (CRA) to legislatively veto the rule. The House passed a veto resolution on July 25. At the time this article is being written, a Senate has pending before it a veto resolution. It is not known whether the Senate has the votes to pass the resolution before a late October deadline.

If the Senate passes the resolution (and assuming the President would concur), the rule would be rescinded.

(Obviously, TIADA and NIADA will keep members advised of the status of the CRA process through normal communications channels.)

Interestingly enough, there is precedent for congressional action to nullify an agency rule affecting the automobile sales industry. In the late 1970s, the Federal Trade Commission proposed a rule that would create what we now know as the FTC Buyer’s Guide disclosure form that would require display of the form on all used cars offered for sale. The proposed form would have contained an area listing various vehicle component parts and systems for which the seller would have to check “O.K.” or “Not O.K.”, effectively creating a potential mandatory warranty on the vehicle. After a massive petition drive and lobbying effort in Congress by TIADA, NIADA, and the National Automobile Dealers Association, the “O.K-Not O.K.” portion of the rule was pulled down.

The question remains whether buy-here-pay-here dealers should continue using mandatory arbitration agreements should the CFPB rule go into effect prohibiting September 2017

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class-action waivers. Some commentators have indicated that they think arbitration agreements would become almost worthless to banks and large financial institutions without the class-action waiver.

It is my opinion that the average Texas buy-here-pay-here dealer is more at risk from individual claims (such as allegations of misrepresentation under the Texas Deceptive Trade Practices Act) than from class-action suits. Arbitration agreements that lack class-action waivers

can still be a part of the arsenal of tools available to a dealer to help resolve consumer disputes. As such they still have value.

Michael W. Dunagan is an attorney in Dallas, Texas who has represented the Texas Independent Automobile Dealers Association for 40 years. He has written a number of books and hundreds of articles for trade journals and law reviews.

His clientele includes dealers, banks, finance companies, auto auctions and credit unions.

.

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Dealer Academy 2017 BHPH Compliance: A Comprehensive Workshop Presented by Michael W. Dunagan, TIADA General Counsel and author of the standard-setting books, “Dealer Financing of Used Car Sales” and “Texas Automobile Repossession: A Lien Holder’s Legal Guide.”

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on the cover compiled by Texas Dealer staff

TIADA Welcomes 2018 President

Greg Zak Tell us about your personal history — where you grew up, family, education, other ventures, etc.

Well I am a native Houstonian.

I have been married to my wife Melone Zak for 31 years. We have three grown children and one grandson. Our son, Christopher, is 29 and married to Sherri. They have a 2-year old son named Kaiden. My daughter Emily, who is 27, recently graduated from Texas A&M and works in the dealership. Our other daughter Jessica is 22 and is currently attending Texas A & M and will graduate next year.

I graduated from the University of Houston with a double major in finance and accounting. I spent a career in college. It took me 12 years to complete my degree. I started out going to school full time while working part time in banking.

The bank management wanted me to come on full time and I finally gave into their pressure and started working full time at the bank and attended college at night. Well, marriage came around and a few kids, and the next thing you know I’m graduating 12 years later.

Like a lot of dads, I’ve spent a number of years coaching my kids in sports and going to a lot of sporting events, all of which I would never trade for anything. For the first part of my adult life, school, career and kids kept me busy. I am just now at the point where I am looking at some other ventures. I have dabbled

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Greg speaks at the Presidential Awards Banquet on the final night of the conference.

a little in real estate and I’m looking to expand my interest in that area.

How did you get in the car business?

I spent 14 years in banking and initially thought I would be a

banker forever (essentially I still am). While I was at the bank, I had a customer of mine who was in the oil & gas business and for six months he pursued me to come work for him. So I thought the only way to shut him up was to give

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him a very high salary amount and benefits I was looking for, expecting him to say no! Wouldn’t you know it, he simply said yes to my demands. So I went to work for him as his CFO. After four years of working for him and some differences in business philosophy, I began to search for my new career.

We had a long-time friend of the family, Robert Wells, who is a car dealer and I approached him about going into business for myself.

Robert dealt with a lot of corporate customers in selling them their car fleets. I thought the best approach was to talk with Robert to see if any of his clients were interested in selling their business. Robert just took that as an opportunity to approach me to run his buy-here-pay-here lot. At the time, that sounded a whole lot like another banking job to me. As the old saying goes, I had already bought that T-shirt and EPI-TIADAhalf_Sept2017.pdf

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8/6/17

Representative Ed Thompson speaks with Greg during 2017 Lobby Day.

owned plenty of them and didn’t need anymore.

In the persistence of Robert and his accountant, we started a finance company that bought

automobile paper from Robert’s dealership and three other dealerships in and outside of the Houston area. This continued for a few years when I decided to get

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legislative efforts in Austin. At the time, Don Fincher was president, and Don’s lot was just down the road from my lot. I realized that I needed to help rather than just sit on the fence because this was my industry as well. I called Don to let him know I was willing to do whatever I could to help. A month later, Don Fincher and Jeff Martin showed up at my lot and the next thing you know I’m serving on a committee for TIADA. A little time went by and before you know it I’m a vice president of TIADA, and ten years later here I am as president.

It’s been a tremendous and fun ride along the way and I’ve had the pleasure of serving under Jeff and his team and the many wonderful board members over the years.

Greg wins the Harley Davidson at the 2016 Annual Conference.

into the retail side of the business and generate my own automobile paper and operate my own buyhere-pay-here lots. So here I am in the banking world again. In 1998 I bought Dixon Motors and run this as my dealership today. We have one location that is on the north side of Houston. At one time, we had four locations and I have to admit one location is a whole lot easier to keep up with than four.

Could you summarize your personal business philosophy?

I believe in treating my customer’s with respect, appreciation, and how I would want to be treated.

Our customers have a lot of challenges today. I believe whenever they walk onto my lot it’s our responsibility to do the right thing for them. We focus on selling them a vehicle that fits their needs and their financial situation. I am interested in building customers for life not just a few months. There have been hundreds and hundreds of times when we have a customer

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who comes to the lot and has a good down payment but has minimal income and wants to buy and finance a vehicle from us. I usually suggest that they buy a cash car as oppose to financing their car purchase knowing that they will fail in the financing within the first two months due to their limited income. The last thing I want to do is take their down payment money that they have worked hard to save knowing they are not going to be able to make the payments.

Ninety-nine percent of the time the customer walks out of my lot and I never sell them a car. I only hope that they listen to my advice and buy a cash car for their transportation needs for the time being.

I have a greater interest in doing the right thing as opposed to just making money at the expense of someone else’s determent.

How did you first get involved with TIADA?

About 11 years ago I was reading an issue of Texas Dealer in which there was an article about TIADA’s

What challenges do you foresee in the coming year?

Change. As I said the night of the banquet, we as dealers have all seen a great deal of change in the last several years. I hear dealers all the time reminiscing about how things used to be and without saying how they would like for things to be that way again. Times have changed and as dealers we’ve got to change with the time, or else become irrelevant as dealers and lose to our competitors. Today there is not an area of your dealership that you can go to sleep on and expect to continue to do business as usual and think everything is going to be great.

I’m of the opinion that subprime lending is here to stay. We continue to lose customers to the subprime lending market. Interest rates are headed up about another 1/2 percent this year, and that makes borrowing money a little more expensive. In the next few years, I foresee most financing for receivables all but drying up.

I foresee more consolidation in our industry and it will become tougher for the small dealer to survive. So, speaking of the change, 21

as I mentioned, it’s a matter of figuring out how to do business in the new world we live in.

payroll, and that is the best money any and every dealer can spend.

What do you think the role of TIADA should be?

What do you see in the future of TIADA?

A resource and advocate. I tell dealers all the time that TIADA is a great resource for anything you need.

I’ve called the TIADA offices over the years on legal matters and issues with various regulatory agencies.

I’ve called the TIADA offices when I needed a dealer referral for when my customer broke down somewhere in the state and I needed a shop. My staff has attended numerous educational classes provided by TIADA. TIADA has worked hard watching out for my (and all dealers’) best interests when it comes to legislative matters. What most dealers don’t realize is during the legislative session, Jeff and his team spend more time watching bills that could hurt our business than trying to get legislation passed.

Trust me, I get my $499 membership in value every year, plus a whole lot more — and I’m not even counting the auction card. As a business owner and dealer, not only do I have my own employees working for my best interests, but I have an entire staff at the TIADA office in Austin who have my back — and it only costs me $499 a year to accomplish all of what they do.

That’s a pretty cheap person (or team) to have on the

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Change. As our industry is changing, so must our association change. As an association, we have worked over the years to provide quality education to our members. Education in our industry will always be around due to the everchanging legal issues and just the general change in our industry. Not only should we provide the resources, but we should provide them in a manner that can reach the most members possible. As an association, we have worked on this through eLearning but we will need to step up this effort in the future.

TIADA needs to extend its legislative reach and continue relationship building. Legislative victories can only be had when relationships are built.

TIADA does a great job in this area, but there are new legislators coming onboard all the time, so the work cannot stop in this area.

Do you have any final thoughts or message for our members?

Well, if I could quote my good friend and past TIADA president, Phil Lathrop, “Just get one.” A few years ago when Phil was nominated as president of TIADA, he gave a challenge to all TIADA members to go and just get one new member. I would like to echo Phil’s words. If we all go and just get one new member we can accomplish a whole lot more than we are currently achieving.

Next, I would ask every member to contribute to INDEPAC.We as an association could accomplish more in Austin if we had a larger budget in our political action committee, INDEPAC. If every dealer in our association just gave a $100 to INDEPAC, there is no telling what legislative accomplishments we could achieve. Out of 1,550 TIADA members, only 60 members contribute money to INDEPAC. That means 1,490 of our members do not give a single penny towards the legislative efforts from which our entire industry and members benefit. You can go to the TIADA website to contribute. OK, I’ll get off my soapbox for now.

I look forward to serving you in the upcoming year as your president and if you ever need something, reach out and give me a call.

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feature 2017 Legislative Summary compiled by Texas Dealer staff

B

elow is a summary of the bills TIADA tracked throughout the legislative session.

HB 2067 Oliveira

This bill would eliminate the annual registration for a related finance company and repeal the comptroller’s authorization to charge a fee.

TIADA supported this bill.

TIADA’s Action: TIADA worked throughout the

session with Rep. Oliveira and Sen. Nichols to pass the legislation. TIADA staff worked with members to contact their legislators and urge them to support this bill. TIADA member Erica Blankenship and Executive Director attended the hearing to testify.

What happened to this bill? BECAME LAW MAY 29.

HB 2949 Holland

This bill would eliminate the OCCC notification

requirement for dealers who charge a doc fee less than or equal to the “Safe Harbor” amount, currently $150.

TIADA supported this bill.

TIADA’s Action: TIADA maintained a close working re-

lationship with Rep. Holland and Sen. Creighton throughout the session to help shepherd the bill through the legislative process. TIADA Legislative Committee Chair Chris Knox testified in support of this bill at a public hearing.

What happened to this bill? BECAME LAW SEPTEMBER 1.

HB 915 Thompson | SB 923 Perry

These are companion (identical) bills that would allow named driver only insurance policies if the following characteristics are present: (1) it is also an operator’s policy; (2) any “named driver exclusion” specifically names each driver that is not covered under the policy; (3) it does not exclude an entire class of people; and (4) The named insured accepts any and all exclusions in writing.

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Call today 877.281.2360 September 2017

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www.uaidirect.com Se Habla Español D e a l e r

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85 Legislative Session... th

By the Numbers Over

TIADA supported these bills.

TIADA’S Action: TIADA Treasurer Robert Beck testified

at a public hearing in support of HB 915. TIADA members sent over 100 emails to legislators to vote it out of the House and to the Senate. Despite this support, it stalled in the senate. SB 923 did not receive a public hearing.

What happened to these bills? DID NOT PASS

HB 849 Murr

This bill would require insurers to notify a lienholder of a policy cancellation no later than 10 days before the effective date of the cancellation.

dealers attended

TIADA supported this bill.

TIADA Action: TIADA member John Miller, Jr. of

meetings with legislators and their staff on Lobby Day TIADA Staff searched more than

,

HB 2321 Turner

This bill would modify and update the AirCheck Texas program, which offers financial assistance for replacing a higher emissions vehicle to eligible buyers.

TIADA supported this bill.

TIADA’s Action: TIADA monitored this bill’s progress

bills filed during the session

throughout the session. It passed the House but stalled in the Senate.

What happed to this bill? DID NOT PASS

…and tracked over

HB 1693 Dean | SB 1062 Perry

bills that could impact the industry TIADA members sent more than

National Car Rental testified in support of the bill in a public hearing. It was voted out of the House but stalled in the Senate. TIADA worked to have the language added as an amendment to SB 1450 (Taylor) which passed and became law.

What happened to this bill? BECAME LAW SEPTEMBER 1

emails to lawmakers in support of bills

These are companion (identical) bills that would direct the TXDMV to provide the secured power of attorney form and the dealer reassignment form in electronic format.

The bill would also remove the requirement that odometer disclosure statements be made on a form proscribed by the TXDMV.

TIADA supported these bills.

TIADA’s Action: TIADA monitored the status of these bills throughout the session. SB 1062 was passed and signed by the Governor.

What happened to these bills? BECOMES LAW 1/1/18.

SB 878 Hancock

This bill would allow agents more flexibility when offering “named driver” and “excluded driver” insurance policies.

TIADA members testified at 26

public hearings in support of bills

TIADA opposed this bill.

TIADA’s Action: TIADA monitored this bill throughout the session, constantly assessing its support. It passed the Senate but stalled in the House where it lacked support.

What happened to these bills? DID NOT PASS T e x a s

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TIADA Membership Application

2017

Business Name: ____________________________________________ Select one:

Dealer Member

TIADA texas independent automobile dealers association

TIADA texas independent automobile dealers association

Associate Member

Contact Person: ____________________________________________ Address: __________________________________________________

2017 TIADA Prorated Membership Dues:

City: _________________________________________ State: _______

Join Date:

Dues:

Zip: __________________ County: _____________________________

Jul. / Aug. / Sep.

$215*

E-mail address: _____________________________________________

*Membership good through 12/31/2017 (all dues include NIADA membership)

Phone: _______________________ Fax: ________________________ Dealer P Number: ___________________________________________ Who referred you to TIADA? __________________________________ Mailing Address (if different from above): __________________________________________________________ City: _________________________ State: _______ Zip: ___________

PLEASE INDICATE PAYMENT METHOD: Check or Money Order payable to TIADA Check # __________ Credit Card Card Number: __________________________________________________ Sec.Code: _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ Expiration Date: ____________ Monthly Payments - Prorated monthly based on current dues.

Via Credit Card (Please enter card information above) Via Bank Draft (Authorization Agreement required - contact state office)

Mail or Fax Application To: TIADA Membership Services, 9951 Anderson Mill Rd., Suite 101, Austin, TX 78750 FAX 512.244.6218

www.txiada.org

512.244.6060

Dues are not deductible as charitable contributions for income tax purposes but may be deductible as miscellaneous itemized deductions, subject to IRS restrictions. It is estimated that 20 percent of your dues dollars is used for lobbying activities and is therefore not deductible.

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2017 TIADA VIP Auction Card Directory

Manheim ADESA Dallas Austin Manheim ADESA DFW Dallas Manheim ADESA El Paso Houston Manheim ADESA Houston San Antonio Manheim San Antonio AA Abilene Alliance Manheim Texas Hobby AA Dallas Alliance Alliance

im ManheHousto n ew South

AA Longvi

Alliance

AA Waco

Metro AA Dallas

AA San Corpus AA Christi Antonio a’s a Americ Americ AA Austin/ antonio Can! Cars for Kidsn San Arlingto a’s Big Americ Dallas Valley AA AA Donna a’s Americ CM AA ny Houston Compa s Auction a’s Americ El Paso AA North n ndent Indepe AA Housto of Texas n AA Heart AA Waco

Housto

Metro AA Texas Lone Star AA Austin Carrollton Lufkin s Dealer r Tyler AA AA

Greate

Rockwall Auto Auction Insurance s Insurances Auto Auction Christi* Corpus Auto Auction Austin* Insurance s Insurances Auto Auction Auto Auction DFW* Dallas* Insurance s Insurances Auto Auction Houston* Auto Auction El Paso* Insurance s Insurances Auto Auction Longview* Auto Auction North* Houston Insurance s Insurances Auto Auction n* Auto Auctionk* McAlle Lubboc Insurance s Insurances Auto Auction* San Antonio Auto Auction Basin* Permian locations *valid for

ABILENE

ce AA

at Insuran

IAA*

Manheim Dallas

6657 US Highway 80 West, Abilene, TX 79605 325.698.4391, Fax 325.691.0263 General Manager: Jimmy Compton Friday, 10:00 a.m.

4701 Agnes Street Corpus Christi, TX 78405 361.881.9555, Fax 361.887.8880 General Manager: Adriana Serrano Wednesday, 9:00 a.m.

5333 W. Kiest Blvd., Dallas, TX 75236 214.330.1800, Fax 214.339.6347 General Manager: Rich Curtis Wednesday, 9:00 a.m.

C.M. Company Auctions, Inc.

DALLAS / FT.WORTH METROPLEX

2258 S. Treadaway, Abilene, TX 79602 325.677.3555, Fax 325.677.2209 General Manager: Gregory Chittum Thursday, 10:00 a.m.

ADESA Dallas

12101 Trinity Blvd., Fort Worth, TX 76040 817.399.4000, Fax 817.399.4251 General Manager: Nicole Graham-Ponce Thursday, 9:30 a.m.

Alliance Auto Auction Abilene www.allianceautoauction.com

www.cmauctions.com

AUSTIN ADESA Austin

www.adesa.com

2108 Ferguson Ln., Austin, TX 78754 512.873.4000, Fax 512.873.4022 General Manager: Rich Levine Tuesday, 9:00 a.m.

America’s AA Austin / San Antonio www.americasautoauction.com

16611 S. IH-35, Buda, TX 78610 512.268.6600, Fax 512.295.6666 General Manager: John Swofford Tuesday, 1:30 p.m. / Thursday, 2:00 p.m.

IAA*

www.iaai.com

2191 Highway 21 West, Dale, TX 78616 512.385.3126, Fax 512.385.1141 General Manager: Geoffrey Rabb Tuesday, 9:00 a.m.

Metro Austin Auto Auction www.metroautoauction.com

8605 Cullen Ln., Austin, TX 78748 512.282.7900, Fax 512.282.8165 General Manager: Brent Rhodes 3rd Saturday, monthly

CORPUS CHRISTI Corpus Christi Auto Auction

(formerly known as Sparkling City AA Corpus Christi) www.CorpusChristiAutoAuction.com

2149 IH69 Access Rd., Robstown, TX 78380 361.767.4100, Fax 361.767.9840 General Manager: Wade Walker Friday, 9:30 a.m.

* VIP card accepted for sell fees only 28

sell fee only

Get up to $200 off a buy or sell fee at these participating auctions using your TIADA VIP Auction Card!

www.iaai.com

www.adesa.com

3501 Lancaster-Hutchins Rd. Hutchins, TX 75141 972.225.6000, Fax 972.284.4799 General Manager: Brad Garrett Thursday, 9:30 a.m.

Alliance Auto Auction Dallas www.allianceautoauction.com

9426 Lakefield Blvd., Dallas, TX 75220 214.646.3136, Fax 469.828.8225 General Manager: Christopher Dean Wednesday, 1:30 p.m.

America Can! Cars for Kids www.carsforkids.org

7100 Marvin D Love Frwy Dallas, TX 75237 972.274.5437, Fax 214.944.1950 General Manager: Jennifer Kitchens Saturday, 9:00 a.m.

America’s AA Dallas

www.americasautoauction.com

219 N. Loop 12, Irving, TX 75061 972.445.1044, Fax 972.591.2742 General Manager: Robert Hammonds Tuesday, 1:00 p.m. / Thursday, 1:00 p.m.

IAA*

www.iaai.com

4226 East Main St., Grand Prairie, TX 75050 972.522.5000, Fax 972.522.5090 General Manager: Jennifer Wesner Tuesday, 9:00 a.m.

IAA*

www.manheim.com

Manheim Dallas Fort Worth www.manheim.com

Metro Dallas Auto Auction New! www.metroaa.com

1836 Midway Rd., Lewisville, TX 75056 943.492.0900, Fax 972.492.0944 General Manager: Scott Stalder Tuesday, 9:00 a.m.

Rockwall Auto Auction

www.rockwallautoauction.com

1810 I-30 Frontage Rd., Rockwall, TX 75087 972.771.9919, Fax 972.722.4827 General Manager: Frank Post Tuesday, 7:00 p.m.

Texas Lone Star Auto Auction www.tlsaa.com

2205 Country Club Dr., Carrollton, TX 75006 214.483.3597, Fax 214.483.3814 General Manager: Jeff Dunning Tuesday, 1:00 p.m. / Thursday, 2:00 p.m.

EL PASO El Paso Independent Auto Auction www.epiaa.com

7930 Artcraft Rd, El Paso, TX 79932 915.587.6700, Fax 915.587.6700 General Manager: Luke Pidgeon Wednesday, 9:30 AM In-op Video Sale / 10:00 AM Standard Sale.

IAA*

www.iaai.com

14651 Gateway Blvd. W, El Paso, TX 79927 915.852.2489, Fax 915.852.2235 General Manager: Jorge Resendez Friday, 10:30 a.m.

www.iaai.com

Manheim El Paso

204 Mars Road, Wilmer, TX 75172 972.525.6401, Fax 972.525.6403 General Manager: Henry Valenzuela Wednesday, 9:00 a.m.

485 Coates Drive, El Paso, TX 79932 915.833.9333, Fax 915.581.9645 General Manager: Brian Walker Thursday, 10:00 a.m.

www.manheim.com

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IAA*

MIDLAND / ODESSA

2535 West. Mt. Houston, Houston, TX 77038 281.847.4700, Fax 281.847.4799 General Manager: Michelle Casper Wednesday, 9:00 a.m.

IAA*

www.iaai.com

Manheim Houston www.manheim.com

14450 West Road, Houston, TX 77041 281.924.5833, Fax 281.890.7953 General Manager: Eddie Pope Tuesday, 9:00 a.m. / Thursday 6:30 p.m.

HARLINGEN / MCALLEN Big Valley Auto Auction www.bigvalleyaa.com

4315 N. Hutto Road, Donna, TX 78537 956.461.9000, Fax 956.461.9005 General Manager: Lisa Franz Thursday, 9:00 a.m.

IAA*

www.iaai.com

900 N. Hutto Road, Donna, TX 78537 956.464.8393, Fax 956.464.8510 General Manager: Ydalia Sandoval Tuesday, 9:00 a.m.

HOUSTON

Manheim South Houston New! www.manheim.com

9605 Galveston Rd., Houston, TX 77034 713.948.0001, Fax 713.948.0300 General Manager: Darren Slack Tuesday, 6:00 p.m.

Manheim Texas Hobby www.manheim.com

8215 Kopman Road, Houston, TX 77061 713.649.8233, Fax 713.640.6330 General Manager: Darren Slack Thursday, 9:00 a.m.

ADESA Houston

LONGVIEW

4526 N. Sam Houston, Houston, TX 77086 281.580.1800, Fax 281.580.8030 General Manager: Michael Schenks Wednesday, 9:00 a.m.

Alliance Auto Auction Longview

www.adesa.com

America’s AA Houston

www.americasautoauction.com

1826 Almeda Genoa Rd. Houston, TX 77047 281.819.3600, Fax: 281.819.3601 General Manager: Rob Frazier Thursday, 2:00 p.m.

America’s AA North Houston www.americasautoauction.com

1440 FM 3083, Conroe, TX 77301 936.441.2882, Fax 936.788.2842 General Manager: Buddy Cheney Monday, 6:30 p.m.

Houston Auto Auction

www.houstonautoauction.com

www.allianceautoauction.com

6000 East Loop 281, Longview, TX 75602 903.212.2955, Fax 903.212.2556 General Manager: Jeff Loftin Friday, 10:00 a.m.

IAA*

www.iaai.com

5577 Highway 80 East Longview, TX 75605 903.553.9248, Fax 903.553.0210 General Manager: Robert Dunning Thursday, 9:00 a.m.

www.iaai.com

701 W. 81st Street Odessa, TX 79764 432.550.7277, Fax 432.366.8725 General Manager: Barbara Hallmark Thursday, 11:00 a.m.

SAN ANTONIO ADESA San Antonio www.adesa.com

200 S. Callaghan Rd. San Antonio, TX 78227 210.434.4999, Fax 210.431.0645 General Manager: Clifton Sprenger Thursday, 9:00 a.m.

IAA*

www.iaai.com

11275 S. Zarzamora San Antonio, TX 78224 210.628.6770, Fax 210.628.6778 General Manager: Brian Sell Monday, 9:00 a.m.

Manheim San Antonio www.manheim.com

2042 Ackerman Road San Antonio, TX 78219 210.661.4200, Fax 210.662.3113 General Manager: Mike Browning Wednesday, 9:00 a.m.

San Antonio Auto Auction

(formerly known as Sparkling City AA San Antonio) www.SanAntonioAutoAuction.com

13510 Toepperwein Rd San Antonio, TX 78233 210.298.5477, Fax 210.298.5484 General Manager: Brandon Walston Tuesday, 9:30 a.m.; Thursday, 1:30 p.m.

TYLER Greater Tyler Auto Auction www.greatertyleraa.com

LUBBOCK

11654 Hwy. 64 W, Tyler, TX 75704 903.597.2800, Fax 903.597.3848 General Manager: Wayne Cook Tuesday, 5:00 p.m.

IAA*

WACO

www.iaai.com

5311 N. CR 2000, Lubbock, TX 79415 806.747.5458, Fax 806.747.5472 General Manager: Lori Davee Tuesday, 9:30 a.m.

Alliance Auto Auction Waco www.allianceautoauction.com

LUFKIN

15735 I-35 Frontage Road Elm Mott, TX 76640 254.829.0123, Fax 254.829.1298 General Manager: James Barron Friday, 10:00 a.m.

IAA*

Lufkin Dealers Auto Auction New!

Heart of Texas Auto Auction

16602 East Hardy Rd., Houston, TX 77032 281.443.1300, Fax 281.443.4433 General Manager: Louis Cappi Thursday, 9:00 a.m.

2109 N. John Reddit Dr., Lufkin, TX 75904 936.632.4299, Fax 936.632.4218 General Manager: Wayne Cook Thursday, 6:00 p.m.

2508 Old Marlin Hwy. 6 Waco, TX 76705 254.755.7713, Fax 254.755.7746 General Manager: Allan Wichkoski Thursday, 7:00 p.m.

6767 North Freeway, Houston, TX 77076 713.644.5566, Fax 713.644.0889 President: Tim Bowers Tuesday, 1:00 p.m.

www.lufkindealers.com

www.iaai.com

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www.heartoftexasautoauction.com

29

feature Use Debt to Increase Cash Flow

by Scott Bates, CPA

Partner, Cornwell Jackson

I

30

n the life cycle of any auto dealership, there will be times when cash flow is tight. Buy-here-pay-here dealers in particular face complexity to ensure enough inventory is on hand to attract buyers — and offset that investment with a healthy flow through collections. This balance is never perfect. Dealers need strong banking and/or equity relationships that will extend credit to fill in the cash flow gaps. In this article, we define what a healthy credit relationship looks like and lay out options to effectively use debt for cash flow.

Receivables Rarely Keep Lights On

The average used auto dealership operates differently today than it did prior to 2008. Although margins can be healthier for buy-here-pay-here dealers than for market rate dealers, accounting for these dealerships is complex, and cash flow is a constant concern. Dealers must balance inventory investment with collections. Yet, receivables alone don’t support healthy cash flow.

inventory, coverage of overhead or anything else.

If the dealership has common ownership in a related finance company (RFC), then there is the additional burden of ensuring the RFC has enough cash on hand to pay the dealership for the vehicle at the time of each financing transaction. In a previous article, we explained that RFCs allow dealerships to work with consumers who have little,

There are two common scenarios that lead to buy-herepay-here dealership cash flow problems. Some dealers focus too much on buying vehicles, tying up their cash in inventory and experiencing a lag between car sales and collections. For the dealerships that try to balance inventory investment with receivables, it is difficult to sustain cash flow due to the car financing default ratios. Until they reach a certain size, dealers don’t collect enough in receivables alone to support regular investment in

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no or bad credit. The consumer is able to finance a car through the RFC, separating the dealership from direct payment collections and other potential liability. The dealership collects cash up front. The RFC earns the income as it is earned from the car buyer’s payments.

Whether dealers are focused on inventory, receivables or expanding their transactions through RFCs, they will typically experience gaps in steady cash flow without some type of debt or equity contribution.

A secure supply of cash flow requires regular management and vigilance as well as education around how to develop a healthy banking relationship. But there are appropriate ways to use debt (credit) to support cash flow while maintaining a healthy balance sheet.

Healthy Dealers Get Credit

It stands to reason that dealerships with good access to credit are considered healthy among other lenders or equity groups. They tend to have several things in common: Good location: Geography still matters in this industry, so lenders or investors will consider the physical location of a dealership, its longevity and the size of the city to support extension of credit.

Good traffic: Traffic counts around the dealership will support projections of customer walk-ins, brand visibility and expectations for sales volume.

Strong collections: The proof is in the numbers. Dealerships must show an emphasis on receivables directly as well as through an RFC. Unlike the IRS, however, lenders and investors will view the dealership and RFC as one entity when extending credit to one or the other.

ell-performing loan portW folio: Although the industry

standard is that just 10 percent of notes will survive the entire term, dealers must show that the majority of the portfolio is performing.

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Of course, recent notes are considered healthier than notes extending into year three or four when customer defaults and refinancing tend to occur.

Healthy margins: Lenders and investors want to see a profit margin year over year in the dealership and the RFC.

Debt Management is Proactive

Even if their balance sheet is healthy, dealers on the shy side of $1 million in receivables will likely get a less favorable interest rate on credit than more established or larger dealers. This does not mean that smaller dealers should accept rates of 10 to 15 percent. It pays to shop around and to understand how the bank or private equity firm will consider the characteristics explained above to justify their terms.

By working with your CPA, you can provide the lender with financial statements and accounting that aligns with their expectations. As part of the terms of the loan, dealers may be required to provide reviewed or audited financial statements. Because of this additional expense and also to get more favorable terms, it’s important for dealers to actively seek lower interest rates. It is perfectly acceptable to shop around.

Contact competing banks as well as your existing lender and ask about new credit options. Talk to colleagues about the banks they are using. Request multiple offers.

Strong accounting, tax and compliance practices help with this process. On the accounting side, owners need regular financial statement preparation to view trends and forecast cash flow — helping them prepare for lending conversations and extensions of credit at the right time each year. On the tax side, the number one tax planning technique for buy here pay here dealers is the discount (or loss) on the sale of notes from the dealership to the

What’s included: Funding for receivables You collect or We collect Floorplan Lines Simplified Insurance tracking

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RFC, which requires cash. Dealers may also qualify for opportunities such as bonus depreciation and deductions with regard to employee perks and compensation.

Management may also consider a review of operational efficiencies or gaps in controls that can affect cash flow. Keep in mind that every dealership is different when it comes to managing cash flow, so best practices must occur within your own dealership.

As buy-here-pay-here dealerships grow to portfolios of $4 million and above, more favorable financing opens up.

But it’s not a guaranteed scenario. Dealers should weigh the benefits of obtaining more financing against the extra administrative costs of public accounting services.

Once you have the credit you need, there are various ways to reinvest in your business. Some dealers may decide to purchase their location — adding real estate holdings that support extension of credit in the future. If the dealership also has a service department, cash flow can be set aside to cover repairs and maintenance on recently sold cars. Some dealers choose to cover repairs on cars shortly after purchase in order to support the customer’s ability and willingness to keep making monthly payments. For example, a repair may cost $800, but it leads to another six to 12 months of customer payments.

Compensation is another area that cash flow can

Whether dealers are focused on inventory, receivables or expanding their transactions through RFCs, they will typically experience gaps in steady cash flow without some type of debt or equity contribution. support. Attracting and keeping good back office personnel supports collections, which in turn supports the business. Dealers may also consider additional compensation for good salespeople.

Let’s say you’ve done as much proactive management

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September 2017

as you can. At certain points in the life of a dealership, you will still experience challenges. Some of these challenges can’t be handled alone. Whether you’re with a big bank and have secured a favorable interest rate or your dealership is still considered high risk for lenders, don’t ignore cash flow problems. Your CPA can help you formulate a plan to show numbers and communicate effectively with lenders in a way that is focused on solutions rather than the immediate problem. Lenders don’t like to call a loan for a short-term issue, and there is usually room for negotiation on loan modifications that will support cash flow as well as repayment.

However, year-over-year problems make lenders less willing to keep taking a risk on default. As soon as an issue comes to light, prepare your strategy to keep a strong lender relationship. Work through it like you and your lender are on the same side. It’s in the best interests of you and the lender to find a solution.

Debt Management Supports Valuation

It is also in the best interests of the dealership longterm to show a consistent history of loan financing, healthy cash flow and debt management. Owners want to show a return on investment and consistent profitability, tied to valuation of the business.

There are different approaches to valuation. A key component, however, is determining equity value, which is the market value of the dealership assets minus the market value of its liabilities.

Assets include such things as the dealership’s auto inventory and fixed assets including real estate. They can include intangible assets such as the goodwill value of the dealership’s name and location, sales and service agreements, and also synergies such as multiple locations and strong management.

Liabilities will include debt, any excess compensation, tax and rent issues, inventories and contingent liabilities such as environmental issues related to the storage and disposal of fuel, oil or batteries.

The bottom line is that a well-performing portfolio, a good location and healthy foot traffic — combined with properly managed debt — will be attractive to a potential buyer. A dealership that is attractive to lenders is also attractive to buyers or outside investors, even with debt factored in.

Scott Bates, CPA, is the managing partner for Cornwell Jackson CPAs and supports the firm’s auto dealership practice group.

His clients include small business owners for whom he acts as both a controller and strategic tax advisor. Contact Scott at Scott.Bates@cornwelljackson.com or 972-202-8000.

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33

Ignorance is no defense.

Know the law.

Repo and financing issues are among the most common violations found by the OCCC. If you own a previous edition of these books from 2008 or earlier, it is recommended that you upgrade to the current editions.

Dealer Financing of Used Car Sales This comprehensive book covers all aspects of the complicated world of seller-financing in Texas, including Maximum Finance Rates; Retail Installment Contracts; Contract Amendments; VIT; Repair Charges; Federal Disclosures and more.

TIADA Member Price: $125 (non-members $175)

Texas Automobile Repossession: A Lien Holder’s Legal Guide Everything you need to know about repossessions is addressed in this book, including Notification Requirements, Post-Repo Procedures, Private Sale vs. Strict Foreclosure, Bankruptcy, Post-Disposition Accounting, Tracking and Shut-off Devices, the 60% Rule and more. PLUS – includes all required forms.

TIADA Member Price: $125 (non-members $175)

TIADA

Now available for purchase online at www.txiada.org under “Legal Resources” or call 512.244.6060 to order by phone.

When ordering online, login with your TIADA username and password to receive the discounted rate. All prices include shipping. Orders are shipped in 3-5 business days. texas independent automobile dealers association

Attorney Michael W. Dunagan is the author of the two must-have books for every Buy-Here, Pay-Here dealer in Texas. Mr. Dunagan has been General Counsel to TIADA for over 40 years.

His law firm specializes in the representation of independent Texas car dealers.

TIADA texas independent automobile dealers association

West Michigan

MI

I-94 Auction Harrisburg Lancaster

Chicago

21

Detroit Toledo

Pittsburgh Virginia Beach

St Louis

LOCATIONS

Bowling Green

Tulsa

Greenville Birmingham

Atlanta

Dallas Austin

North Houston

Baton Rouge

Pensacola

Jacksonville

Houston

BUY ONLINE AT www.AmericasAutoAuction.com

Atlanta, GA Austin, TX Baton Rouge, LA Bowling Green, KY Birmingham, AL Chicago, IL

4

Dallas, TX Detroit Toledo, OH Greenville, SC Harrisburg, PA Houston, TX Interstate 94, MI

Jacksonville, FL Lancaster, PA North Houston, TX Pensacola, FL Pittsburgh, PA St Louis, MO

Tulsa, OK Virginia Beach, VA West Michigan, MI

Austin

TUESDAYS & THURSDAYS AT 1PM

LOCATIONS IN TEXAS

Dallas

TUESDAYS & THURSDAYS AT 1PM 219 N. Loop 12 Irving, Texas 75601 Phone: 972.445.1044

16611 South IH 35, Buda, Texas 78610 Phone: 512.268.6600 Houston

THURSDAYS AT 1:30PM

1826 Almeda Genoa Rd, Houston, Texas 77047 Phone: 281.819.3600

AuctionCredit is located within each of our Texas facilities for all of your auction financing needs. www.auctioncredit.com

North Houston

MONDAYS AT 6:30PM

1440 FM 3083 Conroe, Texas 77301 Phone: 936.441.2882

Please Welcome Our Newest TIADA Members DEALER MEMBERS 1980 Cassie Samons 405 Lone Star Dr Justin, TX 76247

Encore Motors Nicolas Villarreal 27423 Lasso Bend San Antonio, TX 78260

Payless Used Cars Antero Patlan PO Box 762065 San Antonio, TX 78245

Southern Auto Group, LLC Ryan Hayungs P.O. Box 720060 McAllen, TX 78504

A Cash Cars Eric Allen 4839 Winfree Houston, TX 77021

Family Fine Cars Trucks & SUV’s Inc M Basilovecchio 2524 Franklin Avenue Waco, TX 76710

R & R Auto Sales Coleman Roddy 1124 S Twin City Hwy Nederland, TX 77627

Triple P Auto Sales Todd Pearah 12751 State Highway 198 Mabank, TX 75156

ATX Truck and Equipment Doug Prince 3039 E Hwy 71 Del Valle, TX 78617

First Samuel Worldwide Emmanuel Afoah 207 Northern Dove Lane, Suite C Copperas Cove, TX 76522

RoadKing Motors LLC Shahzad Ahmed 8240 Telephone Road Houston, TX 77061

Veloz Auto Group Erika Mondragon 10124 Long Point Rd Houston, TX 77043

Auto Web Expo Ardi Fazeli 2311 Midway Rd Carrollton, TX 75006

JB Auto Sales Juan Balderas 2401 N. Raul Longoria Road San Juan, TX 78589

Rockstar Motorsports, LLC Chris Schmidt 9120 Leroy Rd Princeton, TX 75407

Ziilex Inc (dba) Houston Motors Alex Zegere 13125 Kuykendahl Rd Houston, TX 77090

Brandon Chaney Motors Brandon Chaney P.O Box 1404 Seguin, TX 78156

KerrTex Motors Andres Sanchez 212 G Street West Kerrville, TX 78028

Ronnie Smith Motors LLC Kenny Smith 4101 Bob O Link Dr Abilene, TX 79606

ASSOCIATE MEMBERS

Car Boss, LLC Sherry Cogburn 4019 Barrington St San Antonio, TX 78217

Magallon Automotive Industries Pablo Hoyos 5153 Roosevelt Ave San Antonio, TX 78214

Cash Car Kings William Bingham 9725 North IH 35 Austin, TX 78753

Magallon Automotive Industries - Branch Pablo Hoyos 4519 S. Panam Expressway San Antonio, TX 78225

Roxie Enterprises LLC DBA RoxieCars.com Todd Pribanic 985 East Business State Highway 121, Suite 606 Lewisville, TX 75057

Classic Remarketing Autos, LLC Jackson Akhigbe 2500 River Hills Court Apt. 809 Arlington, TX 76006

NSJ Motorsports LLC Nathan Graham 2217 Crown Road Dallas, TX 75229

Seven 7 Motors Peter Fritsche 800 Walden Ct. Allen, TX 75002

Car Care Promotions MyCarCarePlan.com Joe Gast 7730 Meadow Park Drive #103 Dallas, TX 75230 S. Brown & Associates Jeff Feldman 150 River Rd, Ste. M3 Montville, NJ 07045 Upstream Inspections Sid Siddiqui 2210 Desert Vine Ct, Suite 123 Sugar Land, TX 77498

resource guide The TIADA Website:

www.txiada.org Members can log in with their username/ password and access our Dealer Member Directory, Legislative Action Center, Legal Consultation Service and much more.

Register for all upcoming TIADA events online at the Calendar of Events; access our online membership application; find contact information for all our Local Chapters, and find many additional resources at our Knowledge Base.

36

Texas Department of Motor Vehicles 888.368.4689 www.txdmv.gov

NIADA 800.682.3837 www.niada.com

Office of Consumer Credit Commissioner 800.538.1579 www.occc.state.tx.us

American Recovery Association 972.755.4755 www.repo.org or contact TIADA state office

Texas Comptroller 800.252.1382 www.window.state.tx.us

REPOSSESSIONS

FORMS

Burrell Printing 800.252.9154 www.burrellprinting.com

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Dealer Academy VIRTUAL

WORKSHOP

SERIES

Credit Reporting Compliance A virtual workshop with Eric Johnson, Partner at Hudson Cook Credit reporting is a hot topic in the auto industry, and for good reason. Our customers want to be rewarded for their strong payment performance. However, complying with the many regulations surrounding fair credit reporting is not easy. Failure to comply may result in serious consequences.

Eric Johnson, an auto finance law expert, will go over the basics of credit reporting law. He will also share some best practices for maintaining compliance in an ever-changing regulatory landscape.

11:00am - 12:00pm CST $49 TIADA Members

Dealers frequently have customers who believe that making full, timely payments on a retail installment contract will improve their credit score. The reality is that properly reporting customer information to a credit reporting agency is complex, and one mistake by the furnisher (that is, auto dealers or finance companies) can lead to a costly investigation, or worse. Eric will discuss the basics of getting your credit reporting and furnishing house in order.

TIADA

Thursday, September 14, 2017

texas independent automobile dealers association

Register online at: w w w . t x i a d a . o r g /e d u c a t i o n

Texas Independent Automobile Dealers Association

TIADA texas independent automobile dealers association

feature Members Rave About 2017 Conference

by Michael Spurlin Texas Dealer Editor

I

n July TIADA members traveled to San Antonio to attend the 2017 Annual Conference & Expo, one of the most successful in recent memory.

Over 250 dealers, 102 of whom were first time attendees, came to hear from some of the industry’s leading experts who presented over 30 hours of breakout sessions. In addition to the education offerings, attendees walked our sold out Expo Hall featuring over 100 sponsors. They also heard an inspiring and

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captivating keynote address from Texas advertising legend Roy Spence.

TIADA is always working to grow the association’s political influence, and that growing influence was apparent at this year’s conference. Several state lawmakers found time to get away from the special

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session and speak to attendees about the most recent legislative session and key issues affecting the industry. To start the conference, State Representative Roland Gutierrez spoke during the House of Delegates. State Representatives Trent Ashby and Oscar Longoria addressed attendees at the Opening General Session the following day. Then on Tuesday, State Representatives Larry Phillips and Ryan Guillen participated in a discussion panel hosted by TIADA Executive Director Jeff Martin during the General Session Luncheon.

Finally, State Representative Justin Holland spoke during the Presidential Awards Banquet.

The legislators all stressed the importance of dealers getting involved with the legislative process by communicating with their specific representatives.

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The conference ended on a high note when Martha Yanez of Don Carro walked away with the $10,000 Special Membership prize, sponsored by CP Insurance Associates. Congratulations Martha! Thank you to all the dealers and sponsors that made this year such an outstanding success!

Don’t forget to mark your calendars for July 29–31, 2018 when we will be headed to the Hilton Anatole in Dallas.

We can’t wait to see you there!

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feature 2017 TIADA Awards Wrap Up

by Michael Spurlin Texas Dealer Editor

T

he enormously successful 2017 TIADA Annual Conference & Expo concluded once again with an exciting and at times emotional Presidential Awards Banquet where those who make the association so great were honored for their work.

Among the first to be recognized were the top recruiters that have helped TIADA grow steadily over the past year.

Chairwoman of the Board Kathrine Tolsch presented NIADA Eagle Awards, recognizing those who recruited at least 20 members in 2016, to Jose Engler of Irving Motors in San Antonio, Mark Brown of Red Carpet Auto Sales in Seguin and Michael Zak of Dixon Motos in Houston. Additionally, Wayne Meagher of MD Auto Sales in Grand Prairie and Ahmed Belmeshkan of New Rio Grande Motors in Fort Worth were recognized for recruiting over 100 members in the past two years with the NIADA’s highest honor, the Crystal Eagle. It was Meagher’s TIADA record fourth Crystal Eagle.

Two of the top honors of the evening were awarded to men who were not dealers. First, Bill Murphy of CP Insurance Associates

TIADA Hall of Fame Inductee Wayne Meagher and his wife Pat

Golden Eagle winners Mark Brown, Jose Engler and Michael Zak September 2017

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TIADA Quality Dealer of the Year recipient Greg Phea of Austin’s Rising Fast (center) is presented his honor by NIADA 2017 National Quality Dealer of the Year Robert Blankenship (left) and TIADA Executive Director Jeff Martin.

Crystal Eagle Winners Wayne Meagher and Ahmed Belmeshkan

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received the Presidential Award for his outstanding contributions of time, money and resources to the association. For years Murphy has attended TIADA conferences, sponsored education seminars, visited chapter meetings and participated in lobbying efforts at the Capitol in Austin. This year, he sent his client list to the TIADA office and asked staff to make sure all his clients were members. All of them have since joined the association.

Texas State Representative Justin Holland took home the other non-dealer honor, the Independent Award. Holland, a freshman representative from Rockwall, earned the award for his work during the recently concluded 85th Texas Legislature. He introduced House Bill 2949 that eliminates the need for dealers to notify the Office of Consumer Credit Commissioner when they increase their doc fee above $50 but below the safe harbor amount set by the Finance Commission. This law will free dealers from burdensome regulation, increase government efficiency and could save them significant money.

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Bill Murphy accepts the TIADA Presidential Award

In one of the highlights of the evening, NIADA CEO Steve Jordan took the stage to introduce the newest member of the TIADA Hall of Fame, Wayne Meagher. Meagher, a fixture at TIADA events and meetings, has served on and chaired numerous association committees and served on the TIADA Board of Directors. However, his relentless drive to recruit new members really sets him apart from his peers. He has recruited over 400 members in just the last eight years.

Finally, 2016 TIADA Quality Dealer of the Year Robert Blankenship, who was recently named 2017 National Quality Dealer of the Year at the NIADA conference earlier this summer, announced this year’s Quality Dealer of the Year Award — Greg Phea of Austin Rising Fast. Congratulations to all the recipients!

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Recipient of the Independent Award Texas State Representative Justin Holland with past TIADA President Chris Knox 45

behind the wheel

Martin

Horrible Mention

O

ne of my favorite stories about miscommunication comes from my then seven-year-old nephew and his Holiday Popcorn Balls at the local county fair. My nephew had entered his creative work of culinary art in the local county fair dessert foods competition. After all the judging had taken place the kids could go see what, if any, prize they might have won. Shortly after all the kids went to retrieve their entries my nephew approached a small circle of adults. He was holding a lime green ribbon and he was fighting to hold back tears. His grandmother (my mother) quickly asked what had happened. He held up his green ribbon and said, “Look, ‘Horrible Mention!’ I asked Cassie what it said because she’s in the third grade and she told me it says, ‘Horrible Mention.’” His grandma spent the next half hour trying to explain what honorable mention represented and why it starts with the letter “h.” Anytime there is miscommunication in our family now we simply call it, horrible mention.

After visiting with some dealers from around the state I believe we may have a case of horrible mention within TIADA. I hear some of our non-active members tell me all the time, we are so overregulated. I agree our industry is overregulated. But, saying we are overregulated is a very nice way of skirting the fact that we are underrepresented. These dealers don’t want to discuss the complacency and apathy that creates an underrepresented association because it’s easier to complain about being overregulated.

I am not talking about the 20% who are active members that have recruited members, made INDEPAC contributions and or attended the annual conference.

If you’ve done one or two of the three you deserve an honorable mention and if you did all three, like the

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by Jeff

TIADA EXECUTIVE DIRECTOR

dealers listed below, you deserve more than honorable mention: Ahmed Belmeshkan, New Rio Grande Motors Wayne Meagher, M D Auto Sales Eddie Hale, Neighborhood Autos Greg Reine, Auto Liquidators Jerry Smith, H J Smith Automobiles Christina Sabillon, Mi Tierra Auto Sales Robert Blankenship, Texas Auto Center Keith Hagler, Taylor Auto Credit The good news is we are starting to shake that apathy and improve our level of representation as was evident in this year’s legislative session. But we can do more and you can help. In fact, there are three things you can do:

Recruit non-members.

Members ask me all the time, what do you tell someone who won’t join? There are a number of tangible benefits for joining TIADA but if that doesn’t convince them, tell the non-joiners that they are the reason we are so overregulated. By not joining they are keeping our industry under-represented.

Make a contribution to INDEPAC.

We can directly affect our influence with legislators through your INDEPAC contributions.

Attend the Annual Conference & Expo.

Not only will you be a more informed and educated dealer if you do attend, the state convention provides you with the platform to have your issues heard.

I challenge you to do at least one every year and help us overcome the overregulation with more representation.

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