Texas Dealer April 2019 by Texas Independent Auto Dealers Association

In This Issue: – Michael W. Dunagan on Selling to Licensed Drivers – Employee Theft: MORE or LESS – Can an Automobile Dealer Decline to Accept Limited Insurance Policies? – Launching in Buy-Here, Pay-Here: Top 10 Things to Know

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2019 TIADA Board of Directors PRESIDENT Juan Sabillón/Mi Tierra Auto Sales 7935 Gulf Freeway Houston, TX 77017 Office: 713.644.2446 jmsabillón@mitierraautosales.com PRESIDENT ELECT Robert Beck/Stop N’Drive Motors 711 N. General McMullen Dr. San Antonio, TX 78228 Office: 210.432.1101 stopdrive@texas.net CHAIRMAN OF THE BOARD Greg Zak/Dixon Motors 7902 North Freeway Houston, TX 77037 Office: 281.931.1300 greg@dixonmotorcars.com SECRETARY Mark Jones/Mike Carlson Motor Company 264 Exchange Burleson, TX 76028 Office: 817.703.7973 mjones@mcmcauto.com TREASURER Ryan Winkelmann/BJ’s Autohaus 5005 Telephone Road Houston, TX 77087 Office: 713.641.0980 ryan.winkelmann@sbcglobal.net VICE PRESIDENT, WEST TEXAS (REGION 1) Brad Kalivoda/Fiesta Motors 2599 74th Street Lubbock, TX 79423 Office: 806.765.3640 bkalivoda@gofiestamotors.com VICE PRESIDENT, FORT WORTH (REGION 2) Eddie Hale/Neighborhood Autos 1717 US 287 Decatur, TX 76234 Office: 940.539.2272 ehale@neighborhoodautos.com VICE PRESIDENT, DALLAS (REGION 3) Greg Reine/Auto Liquidators 39670 LBJ Freeway Dallas, TX 75237 Office: 972.780.0001 greg@autoliquidators.net VICE PRESIDENT, HOUSTON (REGION 4) Vicki Davis/A-OK Auto Sales 23980 FM 1314 Porter, TX 77365 Office: 281.354.3355 aokautosales@embarqmail.com VICE PRESIDENT, CENTRAL TEXAS (REGION 5) Robert Blankenship/Texas Auto Center 6809 N IH-35 Austin, TX 78744 Office: 512.280.5333 bob@texasautocenter.net VICE PRESIDENT, SOUTH TEXAS (REGION 6) Armando Villarreal/McAllen Auto Sales 4215 S. 23rd Street McAllen, TX 78503 Office: 956.668.8088 armando@mcallenautosales.net VICE PRESIDENT AT LARGE Greg Phea/Austin Rising Fast 8024 IH 35 North Austin, TX 78753 Office: 512.828.0001 greg@risingfastmotorcars.com VICE PRESIDENT AT LARGE Jose Engler/Irving Motor Corp 211 Braniff Dr. San Antonio, TX 78216 Office: 210.385.2568 pepeton2002@hotmail.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 XIX

/ Issue 4

/ A p r i l 2 019

TexasDealer contents

5 Officers’ Message

by Mark Jones, TIADA Secretary

9 Board of Directors Meeting Minutes 11 Legal Corner: Driver’s License Required? by Michael W. Dunagan

12 Upcoming Events 15 Legislative Bulletin 16 TIADA Scholarship Application 18 Employee Theft: MORE or LESS by Bob Cumberworth, CPA

21 Can an Automobile Dealer Decline to Accept Limited Insurance Policies? by Chris Bean

24 TIADA Conference and Expo 31 Launching in Buy-Here, Pay-Here: Top 10 Things to Know About Banking the Unbankable by Jim Rhoads

36 TIADA Auction Directory 2019 38 Local Chapters 40 Telephone Consumer Protection Act and Text Messaging: Are Your Dealership’s Texts Up to Code? by Zach Klempf

43 TIADA Member Application 45 New Members 46 Behind the Wheel by Jeff Martin

2019 Conference Registration Now Open! You can register to attend the 2019 TIADA Conference & Expo! Turn to page 24 for information or register online at Tiadaannualconference.com. On The Cover: Bluebonnets along a Texas Hill Country Road. 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.

Editor: Christopher Bean

Magazine Ad Sales: Patty Huber, 512-310-9795

LOCATIONS

BUY ONLINE AT www.AmericasAutoAuction.com

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

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

Austin

LOCATIONS IN TEXAS

Dallas

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

Tulsa, OK Virginia Beach, VA West Michigan, MI

TUESDAYS & THURSDAYS AT 1PM

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

officers’ message You Don’t Know What You Don’t Know

’m really not sure who first made the comment, “You don’t know what you don’t know,” but I am pretty certain that it must have been said during a conversation between car dealers somewhere in Texas! It doesn’t matter how many months, years, or even decades that you have been in or around the automotive business, there is always more to learn... and all of us certainly don’t know what we don’t know.

QUESTION: How do we learn more about our

own business, our overall industry, and all the newest products and services that are available to improve our efficiencies, productivity, and ultimately our bottom lines? ANSWER: That’s easy!! The TIADA Conference & Expo (July 21–23 at JW Marriott Hill Country Resort & Spa in San Antonio). One of the best things about being a member of our State Association is the opportunity to participate and learn each year at the TIADA Conference and Expo. If you have been to the Conference in the past, then you already know what a huge difference being part of this great event means for your ongoing business success.

If you have not attended the Conference and Expo, then you are in for a huge treat! The abundance

by Mark

Jones

MCMC Corporate (Burleson) TIADA SECRETARY

of information that you will learn and receive in just 3 days will dramatically change the way you think about, evaluate, and operate on a daily basis. Best of all, it will improve your business. Today, I would like to share with you just a few of the benefits that the TIADA Conference has provided to myself and countless other dealers in the past. Regardless of whether you have attended before, or 2019 will be your first time, here are just a few of the advantages that you can expect to take back to your dealerships.

TOP TIER EDUCATION

TIADA offers high level education for all of the dealers (and their employees) who attend the conference each year and the classes are taught by the top professionals from around the entire country. This year’s learning tracks will cover BHPH, Special Finance & Retail, Compliance, Management, and Technology. Briefly take a look at the following list... Do you need to improve in any of these categories? How can I sell more vehicles each month? How do I better train my people? How can I attract better customers? How can I get different lenders? How can I purchase better inventory and where do I find it?

One of the best things about being a member of our State Association is the opportunity to participate and learn each year at the TIADA Conference and Expo. April 2019

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How can I reduce my reconditioning expenses and still deliver a safe, quality product? How do I improve the collections and/or charge-offs of my BHPH portfolio? How do I better utilize technology to improve my profits? How do I know if I am compliant in the various areas of my business? These are literally just a few of the topics that you and your staff will get to choose from this year at TIADA. There has never been a year that I did not come home with a notepad full of ideas and/or changes that needed to be implemented at our dealership or various departments. One of the strongest benefits you will get by attending these classes is the mentally rejuvenating effect to get better at what you do.

EXPO HALL GALORE

Have you ever felt like you are always the last dealer in town to find out about the latest technology, a new capital provider that has entered the marketplace, or products and services that you could utilize in your dealership to increase your P&L statement each month? YOU WILL FEEL THAT WAY NO MORE!! The Expo Hall at the TIADA Conference is absolutely second to none. This year there will be over 200 national and regional vendors that will display in the massive exhibition hall with products and services that can benefit every aspect of your business. This is truly a “one stop” venue to not only find tools that will make your business better, but also to gain huge advantages over your competition that doesn’t know yet what you’ve discover at TIADA. Remember the phrase, “You don’t know what you don’t know.” Attending the TIADA Conference allows you to directly meet the companies and people who can help you with just about anything you need. From financing sources to insurance needs, dealership software to compliance obligations, recovery tools to inventory sources, and the list goes on and on. If you are interested in getting the “fresh” ideas in our industry, THIS IS THE PLACE. Trust me when I say you will not be disappointed.

NETWORKING OPPORTUNITIES — DEALER ROUNDTABLES

Texas is so big it is very difficult to arrange trips and time to visit with other dealers from across the state who share similar business models and serve similar customers. One of the best perks you receive by attending the TIADA Conference is the ability to meet and have conversations with people just like yourself. One of the quickest ways to discover different ways to solve challenges you are facing is to speak with other dealers who have faced those challenges themselves.

Getting to spend time with other people in the industry that you can relate to directly is absolutely invaluable! Some of my dearest friends are dealers whom I have met by attending TIADA conferences over the years. Not a single week goes by that I do not have conversations with them regarding market changes, new techniques, trends, or law changes that affect our business. Some of the best information I have ever received has been obtained at “the meetings AFTER the meetings.” If you come to TIADA for no other reason than to meet and talk with other dealers about the positives and negatives in your business... you will have paid for your price of admission.

POLITICAL AWARENESS — HAVE YOUR VOICE HEARD

One of the biggest values of being a member of this great association is the legislative planning, execution, and work that our Executive Director Jeff Martin (along with the entire TIADA staff in Austin) does for us. They spend countless hours each year working with state agencies, county tax-assessors, and legislators from both the House and the Senate to protect the interests of the independent car dealers. Jeff and his staff have always been extremely open to receiving ideas and suggestions from YOU — the person that they represent. The TIADA Conference gives every independent dealer in the state the opportunity to come and share their ideas and opinions with the TIADA Legislative Committee. Our Legislative Agenda is determined by the dealers and, if you are not present, how can your voice be heard? Every year we are blessed to have numerous Texas State Representatives and Texas State Senators who attend our conference in person. This is your chance to meet the lawmakers face to face and converse with them about the things that impact your business. Don’t miss this chance!! As I finish writing this article, I am reminded why I get so excited each year about the TIADA Conference & Expo! It is truly my hope that you will make the decision to participate this year in one of the best industry events in the nation. Incidentally, If you have made it this far, then you can no longer use the excuse, “You don’t know what you don’t know.” Look forward to seeing you soon.

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Dealer Academy in partnertship with

and

Presents

Leadership, Management & Coaching Presented by Jay Rose President, Global Training Solutions Attend this workshop with your biggest challenge written down and you will leave with an action plan on how to implement change, get the results you want and make 2019 your best year. Jay has designed a high impact, results-driven workshop that will give you the tools you need to implement an overall strategy for success by reviewing the most important parts of running your dealership. Independent dealers wear many hats and this one-day seminar is geared toward helping a large cross section of Retail or BHPH dealers from owners, general managers, sales managers, internet mangers, comptrollers and any key employee who wants to see your dealership grow. Do not miss this opportunity.

9:00am - 4:00pm $249 Members, Each Additional $199 (must be from same dealership)

$499 Non-members

Section one will include:

Section three will include:

• Building a successful team, hiring and keeping the right people • Processes and procedures that allow dealerships to measure success • Setting goals and helping your team get there

• Selling vehicles professionally with an eye towards referrals • Structuring deals for customer success and a better bottom line • Follow up after the sale

Section two will include:

• Going over the specific challenges that participants have at their own dealership • Providing advice and solutions to these challenges so you can have the best tax season

• Training any size BDC to work with your sales team • Generating the right leads in the digital world • Turning phone calls into customers

Section four will include:

***Email your challenge ahead of time to education@txiada.org, with the following subject: Leadership, Management & Coaching with Jay Rose***

Monday, May 6, 2019

Sponsored by:

Sheraton Suites Market Center 2101 N. Stemmons Freeway | Dallas, TX 75207 214.747.3000 www.dealersocket.com

Register online at: w w w . t x i a d a . o r g /e d u c a t i o n For more information or to register over the phone, please call the state office at 512.244.6060

Texas Independent Automobile Dealers Association

TIADA Auction App turns your phone into

CASH

*Only available to current TIADA dealer members. Cash only represents redeemed discount value and does not mean actual currency.

board of directors meeting minutes February 11, 2019 Doubletree Hotel | Downtown Austin

compiled by Texas Dealer staff

Board Members in Attendance Juan Sabillón, Jose Engler, Armando Villarreal, Vicki Davis, Bob Blankenship, Ryan Winkelmann, Robert Beck, Greg Zak, Mark Jones, Greg Reine, Eddie Hale, Brad Kalivoda, Greg Phea. President Juan Sabillón called the meeting to order at 1:04.

Special Projects Manager, Teresa Orkun, gave an update on membership renewal rates, changes, and usage of the TIADA Auction App. Director of Associate Members Relations Patty Huber reported on Affinity Partners, Sponsors for TIADA day at the Capitol, Conference and Expo, and the Business Partner Program.

Minutes of the Last Meeting

Director of Dealer Compliance and Strategic Communications Chris Bean provided an update on TIADA’s web traffic and social media platforms.

Secretary Mark Jones presented the minutes from the last meeting.

Old Business

A motion was made to accept the minutes by Greg Phea.

The Board discussed allocation strategies for the Investment Fund.

Seconded by Vicki Davis. — PASSED

Mark Jones made a motion to invest in Agency GCE 2.4% for 3 months at $35,000; Corp A for 3 months at $30,000; and invest the remaining $30,000 in Triple B Bonds.

Treasurer’s Report Treasurer Ryan Winkelmann presented the Treasurer’s Report.

Seconded by Vicki Davis. — PASSED

A motion was made to accept the report by Eddie Hale.

New Business

Seconded by Robert Blankenship. — PASSED

President’s Report Juan Sabillón updated the Board on the NIADA Leadership Conference in Washington, D.C.

Executive Director’s Report Executive Director Jeff Martin provided an update on the TIADA Legislative Day, Indepac, Keyman list, NIADA, Chapter updates including a new chapter in Corpus Christi, and TIADA personnel.

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No action. Meeting adjourned at 3:49 p.m. Respectfully submitted, Mark Jones, TIADA Board of Directors, Secretary

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.

CP INSURANCE ASSOCIATES “CP Insurance Associates has been providing Texas Dealers a Custom CPI Program for over 20 years!

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The photo in the background was the August 2017 flood caused by Hurricane Harvey in Houston, Texas. “Our Dealers were there for their Customers, and we were there for our Dealers!”

NONE OF US KNOW WHEN THE NEXT CATASTROPHE WILL STRIKE, BUT YOU CAN BET WE WILL BE THERE FOR OUR DEALERS AND THEIR CUSTOMERS! CP INSURANCE ASSOCIATES IS PROUD TO BE A TIADA BUSINESS PARTNER! WE WOULD BE PROUD TO PARTNER UP WITH YOU AND HELP PROTECT YOUR COLLATERAL! CPI IS INSURANCE THAT THE CUSTOMER CAN’T CANCEL!

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Taylor Smith (601-540-3178)

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legal corner

Driver’s License Required? by Michael

DEALER QUESTION: I have

had a policy of not selling to anyone who doesn’t have a current driver’s license. Recently, I’ve turned down some otherwise eligible buyers only to see them purchase from a nearby competitor. Am I required by law to verify that a buyer has a current driver’s license before I can make a sale? ANSWER: While the law doesn’t specifically require a vehicle buyer to be currently licensed in order to purchase a vehicle, or for a seller to sell a vehicle to an unlicensed driver, there are a number of considerations that come into play in making the selling decision.

irst, state law requires that persons operating a motor vehicle on the roads and highways of Texas be licensed to drive. Obviously, if an unlicensed person purchases the vehicle and drives it, there is a risk the person will be ticketed or arrested for violation of the law. Secondly, state law dictates that certain types of identification for vehicle purchasers must be presented at the point of title transfer in order for transactions to be accepted. (Dealers are required to keep copies of approved I.D. forms in their files and notate on the transfer papers descriptions of the documents.) And since dealers are required to timely handle transfers of title for their buyers — unlike in sales from non-dealers — it is critical that the buyer have one of the approved forms of I.D. if there is no driver’s license. There are exceptions to the

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rule requiring dealers to handle title transfers, such as sales to out-ofstate buyers who certify that they won’t operate the vehicles in Texas. A third concern is the potential liability that a dealer may face if a vehicle is sold to an unlicensed driver who causes an accident. Texas law carries a presumption that an unlicensed driver is an unsafe driver. A number of years ago, a bill was filed in the Texas Legislature that would have required a valid driver’s license to purchase a vehicle. The bill was opposed by, among others, groups representing disabled persons who might purchase vehicles to be driven by licensed care-takers. The bill did not pass. What are the acceptable types of identification that a dealer can use to be able to meet the dealer’s obligation to complete title transfers? Driver’s license or state identifi cation certificate issued by a state of territory of the United States; United States or foreign passport; United States military identifica tion card; North Atlantic Treaty Organization (NATO) identification;

Dunagan

TIADA GENERAL COUNSEL

...in a situation where the driver of a vehicle who causes an accident is unlicensed, an attempt may be made by the injured party to seek damages from the seller by alleging a breach of some other duty by the seller of the vehicle. Identification issued under a Status of Forces Agreement; United States Department of Homeland Security identification document; United states Citizenship and Immigration Services identification (green card); or United States Department of State identification document. Matriculas consulares or Mexican driver’s licenses are not acceptable forms of I.D. 11

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

May 2019 6 Leadership, Management & Coaching

Dallas, TX

June 2019 3 BHPH Compliance:

A Comprehensive Workshop San Antonio, TX

OTHER TIADA EVENTS July 2019 2 1 – 2 3 TIADA Conference & Expo

San Antonio, TX

2 2 Board of Directors Meeting

San Antonio, TX

How about the dealer’s potential liability for selling to an unlicensed individual who causes an accident after the sale? Generally, to be liable for an accident, a person must breach some duty to the injured party. For example, a driver of a vehicle has a duty to maintain control of his vehicle so that he can avoid striking a vehicle in front of him. If he causes an accident by driving too fast, by not keeping a proper watch out, by not braking soon enough, or by violating some traffic law, he has breached that duty, or put another way, has been negligent. In order to be negligent in the ordinary sense, a person must be driving the vehicle. Unless the selling dealer or one of his employees was driving the vehicle when the accident occurred, the dealer wouldn’t be negligent in breaching a duty to drive safely. So, in a situation where the driver of a vehicle who causes an accident is unlicensed, an attempt may be made by the injured party to seek damages from the seller by alleging a breach of some other duty by the seller of the vehicle. One such theory is called negligent entrustment. This type of negligence refers to the negligence of an owner in entrusting a vehicle to someone the owner knows, or should know, is an unsafe driver. Some people think — incorrectly — that the owner of a vehicle is automatically liable for the negligence of someone else. First, mere ownership without something more is not a sufficient legal basis for liability. Second, a dealer who has sold a vehicle, even if a lien is retained, is not the owner. A seller who has completed a sale is no longer the owner.

Some people think — incorrectly — that the owner of a vehicle is automatically liable for the negligence of someone else. First, mere ownership without something more is not a sufficient legal basis for liability. Second, a dealer who has sold a vehicle, even if a lien is retained, is not the owner. A seller who has completed a sale is no longer the owner. Under a typical fact situation, the Court of Civil Appeals in San Antonio held that a selling dealer could not be liable for negligent entrustment, even though the title certificate to the vehicle had not yet been transferred at the time of the accident. First, the court held, the law of Texas is that a seller can’t have liability under negligent entrustment. Next, the court addressed the non-transfer issue by concluding that ownership passed upon signing the sales contract papers, payment of the down payment, and delivery of possession to the buyer. Title transfer, while important, was not the same as transfer of ownership. The Texas Supreme Court, in the case of National Convenience Stores, Inc. v. TT Barge Cleaning Company, refused to review or change the T e x a s

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long-established rule that a seller in Texas can’t be held liable for the acts of a buyer under the theory of negligent entrustment. We’ve seen several attorney demand letters and even lawsuits alleging that the selling dealer was liable for an accident caused by an unlicensed or uninsured driver driving a vehicle the dealer had sold. None of these claims has succeeded. If a demand letter is received by a dealer, however, it should not be ignored. The dealer should contact his or her attorney and also consider notifying the garage-liability carrier about the claim. One warning about relying on the defense of a completed sale: this defense would not be available if

the sale is incomplete. In one court case a dealer “sold” a vehicle to an employee, but failed to have all the paperwork signed. The dealer was found liable under the theory of negligent entrustment when the employee caused a wreck, even though the accident occurred on the employee’s personal time. Another word of warning: This rule does not apply to test drives.

A seller could theoretically be held liable under a negligent-entrustment claim. Thus, it is risky to allow a potential customer to test drive a vehicle without (1) a current driver’s license and (2) a valid liability insurance policy. Since the law carries a presumption that an unlicensed driver is an unsafe driver, it would be an easy step to establish that a dealer negligently entrusted a vehicle to an unlicensed (and thus, unsafe) driver in a demonstration drive situation. Michael W. Dunagan is an attorney in Dallas, Texas who has represented the Texas Independent Automobile Dealers Association for over 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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legislative bulletin

by Jeff

Martin

The Latest Update on Bills that TIADA is Currently Tracking

ith the deadline for filing new legislation behind us, the Capitol is abuzz as legislators start the tedious process of moving bills through committees. TIADA will remain vigilant throughout this committee process as some times legislators change the language in a bill while in committee and these “committee substitutes,” as they are called, often bear little relation to the legislation originally filed. Keeping in mind that from our editor deadline to the time you are reading this bulletin a few things have probably changed. Here is the latest update on the bills that TIADA is currently tracking:

HB 259 (Thompson, Ed)

This bill would require insurers who sell named-driveronly policies to specifically name each excluded driver in such policies. TIADA supports this bill.

HB 3059 (Holland)

This bill would eliminate the VTR-136 and allow dealers to make title application in any county in Texas.

TIADA supports this bill.

HB 3225 (Springer)

This bill proposes to amend the Tax Code and reduce the penalty from $500 to $100 for failure to file the monthly vehicle inventory tax. It also strikes the word

“shall forfeit” and replaces it with “may be required by the collector to pay” in an effort to give tax assessors more latitude. TIADA supports this bill.

HB 4120 (Lucio III)

This bill would allow a motor vehicle dealer to also be the provider of service contracts on vehicles sold by the dealer if the dealer has a security deposit not less than $25,000. TIADA supports this bill.

HB 1087 (Kuempel) SB 2240 (West)

As proposed, these bills would allow a metal recycler, salvage vehicle dealer or used automotive parts recycler to purchase a vehicle without obtaining a title to the vehicle as long as the vehicle is at least 10 years old and is purchased solely for parts, dismantling or scrap. TIADA is currently

working with the author of the bill but as written the association is opposed to these bills. Your best source of up-to-the-minute information on legislative issues that will affect your industry is the Legislative Action Center, found under Advocacy at the TIADA website, www.txiada.org. As always, we welcome the input of our members regarding legislative matters. TIADA’s legislative team will work diligently to keep you abreast of the issues and call on you to act when needed.

As always, we welcome the input of our members regarding legislative matters. April 2019

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ATTENTION STUDENTS!!!

$1,000

Marvin Norwood Scholarship DEADLINE

May 10, 2019 {Applications and/or any required documents received after May 10, 2019 will NOT be accepted.} Criteria and Guidelines 1. Each applicant must be entering or currently enrolled in an accredited college or a trade school. Proof of enrollment must be included with this application.

Date: Name:

DOB:

Address: City:

State: (You will received email confirmation of receipt.)

Telephone Number: High School Last Attended: Address:

3. Each applicant must complete the application form.

Date of Graduation:

4. A copy of high school transcripts is required for applicants who are college freshmen. If applicant is currently enrolled, provide college transcripts with official university imprint.

Other High Schools Attended (Names and Addresses):

6. Compose an essay of no more than two typed, double-spaced 8 ½” x 11” pages. The essay should discuss the applicant’s relationship with their TIADA scholarship sponsor, current education goals and future aspirations as it relates to the applicant’s subject/training area. 7. Provide at least two (but no more than three) letters of recommendation, no older than one year, from college/high school faculty, employers or other appropriate sources (not related).

Zip:

Email:

2. Each applicant must provide a letter from their TIADA member sponsor that includes the sponsor’s address and phone number.

5. Provide a detailed description of participation in any academic, honorary, civic or extracurricular activities in college. In addition, a detailed description of high school activities is required from college freshmen along with a college acceptance letter.

SCHOLARSHIP APPLICATION

City:

State:

Zip:

Dates of Attendance:

College(s) you are attending or plan to attend for admission:

Parents Name(s): TIADA Member Name (Sponsor): TIADA Member Company Name: TIADA Member Address: City:

State:

Zip:

Sponsor Signature Should you have any questions, please contact TIADA at 512.244.6060. Please return the completed application with all required documents to: TIADA Attention: Scholarship Applications 9951 Anderson Mill Rd. Suite 101, Austin, TX 78750

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feature by Bob Cumberworth, CPA of Lane Gorman Trubitt, LLC

Employee Theft:

uper Bowl Sunday finally arrived. I was anxiously awaiting the kick-off and the commercials. With only five minutes to go, the phone rang. Should I answer it or let the answering machine take it? On the final ring, I decided to grab

MORE or LESS

it. I knew I could get rid of this person quickly and not miss the kick-off. That phone call was disturbing news about a person from my past that I grew up with. Had I heard that he and his wife were charged with stealing from

their company? I hadnâ&#x20AC;&#x2122;t seen or heard from this person for over 15 years and they lived in a state far from me. But that call, which caused me to miss the first quarter of the Super Bowl, intrigued me. With the information Iâ&#x20AC;&#x2122;d been given, I searched T e x a s

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the internet. I discovered that this person had destroyed a company and caused over a hundred innocent employees to lose their jobs through his fraudulent actions. He was given the maximum sentence of seven years in prison and required to repay $750,000. His thievery cost the county in which he lived and worked nearly $2,000,000. Don’t think this could happen to you? Think again. I wouldn’t have suspected my old acquaintance of being a fraudster. Unfortunately, neither did his employer. Read on and you can learn what you can do to prevent fraud from happening to you.

Fraud – the Elements

To prevent fraud in your automobile dealership, it is essential to understand the elements that comprise it. Often called the fraud triangle, an acronym known as MORE may better define the elements — after all, the common fraudster wants MORE of what belongs to you. M stands for motive — and the motive of every fraudster is financial. Their reasons are varied and may include debt or substance abuse issues. It could also be that they simply like living the high life. One key to prevention in your own dealership is to keep your eyes open. Make background and credit checks a standard part of your employment process. Also, beware of the employee that seemingly spends beyond their means. O stands for opportunity. Who has access to your dealership’s assets? These individuals, more than any others in your organization, have the opportunity to steal, should they choose to do so. But, of course, as an employer, you would not hire someone you do not trust implicitly — especially if they are going to have access to your assets! So, just in case you hire someone with a hidden agenda, it is essential

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to have good internal controls in place. Internal controls serve to limit access to dealership assets and establish a system of checks and balances. Of course, it is important to remember that many fraudsters are quite cunning. Even with the best controls in place, they may just find a way to get around them — thereby making it your responsibility to keep a close eye on things. R and E stand for rationalization and excuse. The typical fraudster has to rationalize and excuse his or her criminal act on the front end, and the back. It is almost like balancing scales. But, once they rationalize their heinous crime and excuse it a few times, they become hardened and fail to hear their conscience any more. Now, you have a basic understanding of the mind of a fraudster. The question is, how do you prevent your dealership from falling victim?

Fraud Prevention

The key to preventing fraud is to attack the elements. If you dismantle and disengage MORE, you will LESS en the chance of falling victim to fraudulent behavior. What comprises LESS? L stands for leadership. Setting a good example is essential. Employees notice when their superiors operate with integrity. In fact, when employees witness good leadership practices, they often attempt to emulate them. The opposite is true, as well. If your dealings with customers, employees, vendors and others are lacking in integrity, your employees may choose to adopt the same methods of behavior. E stands for education. No matter what business you are in, employees need to be subjected to routine ethics classes. Yes, instilling values was their parent’s job. Unfortunately, with the number of single parent families

or dual income households, the media raises a fair amount of our youngsters. So, do yourself and your dealership a favor — train your employees. Be sure to include case studies like the one in this article. It is important for them to understand the consequences of inappropriate behavior. Finally, your own employees can help you keep a watchful eye out for fraudulent activities. Provide them with a discreet way to report any unethical behaviors. After all, they may know long before you do. S stands for systems. As mentioned previously, establish systems, or controls, in your dealership. This will not only reduce access to your assets but, by keeping a close check on your controls, you may just be able to prevent a fraudster from skirting them. S also stands for surprise. Checking transactions, balances, reconciliations, test counts of parts, cash and other assets on a surprise basis, can be a major deterrent to a fraudster. Utilize a CPA firm with dealership experience to make those unexpected visits either in person or electronically, or both. If your employees know someone is watching, they’ll think twice before stealing.

Final Thoughts

The most unlikely people can be involved in fraudulent activities, and just one fraudster can ruin the business you have worked so hard to build. By taking some simple precautions, however, you can decrease the likelihood of becoming a victim. Remember, attack MORE with LESS!

With a team of dedicated professionals, Lane Gorman Trubitt LLC has more than 50 years of experience serving close to 100 dealerships throughout the Southwest. For more information, contact Bob Cumberworth today at 214.461.1464 or via email at bcumberworth@lgt-cpa.com. 19

feature

Can an Automobile Dealer Decline to Accept Limited Insurance Policies? by Chris Bean

TIADA Director of Dealer Compliance & Strategic Communications

amed Driver, Excluded Driver, and Limited insurance policies have plagued TIADA membership for years. Common iterations of these policies include named-driver coverage (policy only provides coverage for the driver listed on the policy), excluded-driver coverage (the policy that states that it does not cover a specific driver), and high-deductible policies. Car creditors throughout the state wonder whether they can refuse to accept such “problematic” insurance as a way to protect their collateral. The answer is yes, so long as your refusal is based on a reason that the Office of Consumer Credit Commissioner has established as acceptable. Texas Finance Code Section 348.201 permits a lien holder to require that a retail buyer procure insurance to protect the motor vehicle that is the subject of a retail installment contract. Due to the proliferation of limited policies like those described above, TIADA took action by pointing out the problem to the OCCC that these policies fail to provide adequate coverage. The Texas Insurance Code Section 549.052 provides that, in a financing transaction, “a lender may not require as a condition of financing that the borrower obtain an insurance policy covering the property that is the subject of a transaction from ‘a particular agent, insurer, or other person[.]’’

In light of this Insurance Code provision, OCCC issued a motor vehicle sales finance bulletin on property insurance in December of 2012 OCCC ( see occc.texas.gov/sites/default/files/ uploads/disclosures/b12-7-mvsf-propertyinsurance.pdf) declaring that lien holders may do the following: Require a buyer to obtain an insurance policy that contains certain terms that protect the holder’s interest Prohibit a buyer from obtaining a named-driver policy Prohibit a buyer from obtaining an excluded-driver policy Require that the buyer purchase a policy that has a deductible below a set amount. Office of Consumer Credit Commissioner

While a seller can’t dictate from whom insurance must be purchased, there is no prohibition against the seller referring the buyer to an agent or company that provides appropriate coverage. However, a lien holder may not prohibit a buyer from obtaining insurance from a particular agent or insurer unless, pursuant to Insurance Code Section 549.056(c), the prohibition is based on reasonable and nondiscriminatory grounds relating to the financial soundness of the insurer or the insurer’s ability to service the policy (emphasis added). Notice that I emphasized “ability”. Ability to service a policy is not the same thing as willingness to service a policy. The key takeaway is one from our counsel, Michael Dunagan: The best procedure would be to counsel buyers on what is expected in terms of insurance before they are sent out to purchase insurance and explain why an existing limited policy is not acceptable. While a seller can’t dictate from whom insurance must be purchased, there is no prohibition against the seller referring the buyer to an agent or company that provides appropriate coverage. 2601 N. Lamar Blvd Austin TX 78705

512- 936-7600 Fax: 512-936-7610 Consumer Helpline: 800-538-1579 Email: info@occc.state.tx.us

Motor Vehicle Sales

December 20, 2012

Finance Bulletin

Property Insurance

This bulletin discuss es what restrictions a Chapter 348 holder policy when the retail may impose regardi installment contrac ng an t requires the retail for a motor vehicle that is the subject buyer to obtain propert insurance of a retail installm y insurance ent transaction. Under Texas Finance Code §348.201, a holder may require protect the motor a retail buyer to procure vehicle that is the subject of a retail contract promulgated insurance to installment transac by tion. The model physical damage insuran the Texas Finance Commission also includes a model ce. 7 TAC §84.808 clause for require (11). d Retail sellers have expressed concern s that in some circums insurance that does tances, retail buyers not provide adequa te coverage. Specific are obtaining include coverage known as “named types of policies that -driver” coverage are drivers listed in the of concern (a policy that provide policy), “excluded s coverage only for driver” coverage provide coverage the (a policy that states for a specific driver), that it does not month-to-month policies , and high-deductible policies. Texas Insurance Code §549.052 provides that, in a financing as a condition of transaction, a lender financing that the borrower obtain may not require that is the subject an insurance policy coverin of the transaction from “a particular g the property statute also prohibi agent, insurer, or ts the other person[.]” The insurer, or other person lender from requiring insurance from a “particular type .” or class of agent, In view of the above Insurance Code provisio installment transac n, the agency believe tion, a holder may s that in a motor not require the buyer vehicle retail from a particular agent to obtain a propert or insurer. Likewis y insurance policy e, a holder should insurance from a not particular agent or insurer unless, pursuan prohibit the buyer from obtaining prohibition is based t to Insurance Code on reasonable and §549.056(c), the soundness of the nondiscriminatory insurer or the insurer grounds relating ’s ability to service to the financial the policy. The purpose of §348.20 1 Tex. Fin. Code is adequate protect to allow the holder ion of the holder’ to require insuran s interest in the motor ce that provides object if a holder vehicle. Therefore, requires a buyer to the OCCC will not obtain protect the holder’ s interest. For exampl an insurance policy that contains certain e, a named-driver protection of the terms that holder’s interest when policy could be seen as inadequate it cannot be reasona bly expected that the named driver

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MVSF Bulletin: Property

Insurance Published: 1/8/2013 Page 1 of 2

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

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We’ve Got You Covered! Find out what a Specialized Insurance Agency can do for you! Garage Liability Package

Workers Compensation

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Williams & Stazzone has been insuring dealers since 1989. Our Garage Liability Program represents STABILITY for your dealership.

• Garage Liability Specialists • Competitive Rates • Fast, Easy Quotes • One Stop Insurance Shop

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info@wsins.com | 800.868.1235

www.WSins.com April 2019

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The best d the best edu

July 21

JW Marriott San Anto

Featured BHPH

SPECIAL FINANCE & RETAIL

JIM RHOADS

ZACH KLEMPF

TRACKING AND IMPROVING BHPH PORTFOLIO PERFORMANCE

THE LEAN DEALERSHIP: STARTUP PRINCIPLES YOUR DEALERSHIP CAN LEVERAGE

FOUNDER AND CEO, OCTANE GROUP

SESSIONS

CEO / FOUNDER SELLY AUTOMOTIVE

MANAGEMENT

PANEL DISCUSSION NOTHING WORKS WITHOUT MONEY T e x a s

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dealers in Texas, ucation anywhere.

dealer EXCURSIONS These Tuesday afternoon excursions are a perfect way to experience the JW Marriott Hill Country Resort, see what San Antonio has to offer or simply relax and have some fun while networking with fellow dealers.

River Boat Tour

1–23, 2019

onio Hill Country Resort & Spa

All aboard! Come cruise with us while our captain shares interesting info and stories about San Antonio’s rich history. Enjoy this 35-minute narrated cruise with a nice, refreshing cold beverage. Bon Voyage!

Salsa/Guacamole Makin’ COMPLIANCE

TECHNOLOGY

Holy moly, guacamole! Let’s get together at the JW and make some fresh salsa and guacamole from scratch! This onsite excursion is led by our award winning chef.

Painting with a la T IADA Twist

CORRIE THOMPSON DIRECTOR OF ENFORCEMENT TEXAS DEPARTMENT OF MOTOR VEHICLES

DMV CALLED; WHAT DO I DO NEXT? April 2019

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KATE FROST PRESIDENT, KATE FROST, INC.

IT’S WORLD — WE JUST LIVE IN IT

Calling all Picasso’s and Van Gogh’s! We will provide the brush, canvas, spirits and a beautiful resort as a backdrop. You just bring your creativity and a masterpiece awaits!

Rebecca Creek Distillery Hop on our bus and let’s head on over yonder to experience a little bit of whiskey/vodka making! You’ll also meet Carl while visiting this great Texas distillery! 25

Thank You

OUR

P L A T I N U M

L I M I T E D S P O N S O R S H I P & E X H I B I T I N G O P P O R T U N I T I E S AVA I L A B L E 26

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CURRENT G O L D

Sponsors W Walker Auction Group

MULLEN Insurance Agency, Inc.

S I L V E R

EL PAS O INDEPENDENT A U T O A U C T I O N

An XLerate Group Auction

S P E C I A L T Y

ACV AuCtions – Happy Hour ADEsA – Hotel Key Cards BACklot CArs – Happy Hour AmEriCA’s Auto AuCtion – Special Membership PrimAlEnD CAPitAl – Meeting Digital Signage trADErEV – Dealer Networking Excursion V12 softwArE – Lanyards B R O N Z E

C O P P E R

A N D

Advantage GPS by ProCon Analytics AutoAction DMS AutoZoom

AFC

AutoRaptor

Birdeye

AUL Corporation

Calhoun Law Firm, PLLC

El Paso Independent Auto Auction Lobel Financial

AGORA Data Inc.

MicroBilt

NEO

Preferred Dealer Solutions

First Texas Auto Credit

PTS Gap

Shilson Goldberg Cheung & Associates, LLP Tri State Dealer Services Inc.

Ignite Consulting Partners

OfferUp

Route One

Westlake Financial Services

Auction123

Avis Dealer Direct

Car Care Promotions Inc.

DealerCenter Keymotive, Inc.

Ominique Shop Management

Podium

SDA, Inc.-Small Dealers Assistance, Inc

Strategic Dealer Services

TrueCar

Alliance Auto Auction

Auto Master Systems, Inc.

Calldrip

NextGear Capital

ALLDATA

United Acceptance, Inc.

Tax Refund Services-Tax Max vAuto

TexasARP

VSC Auto Finance LLC

Williams & Stazzone Insurance Agency, Inc.

C O N TA C T PAT T Y H U B E R AT PAT T Y. H U B E R @ T X I A D A . O R G / 5 1 2 . 3 1 0 . 9 7 9 5 April 2019

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Dealer Registration Options 2019 TIADA Annual Conference & Expo July 21-23, 2019 JW Marriott Hill Country Resort – San Antonio, TX Customize your conference experience by selecting from the options below. Please complete the registration form and return it with payment in full to the address listed or for online registration, go to www.TiadaAnnualConference.com.

EARLY BIRD RATE

CONFERENCE OPTIONS

through June 21st

Full Conference Pass—Dealers Only (includes Welcome Reception, Monday & Tuesday Education /Sessions, Expo Hall, Legislative Luncheon & Awards Dinner)

Save $100 per attendee.

1st Registrant 2nd Registrant* 3rd + additional Registrant*

$595 $495 $495 $395 $395 $295

One Day Dealer Pass

$300 $400 non-members

(Monday 7/22 or Tuesday 7/23) (includes Monday or Tuesday Education and Expo Hall on your selected day)

Non-Member (Dealers only)

$895 $795 (except as noted)

TADA and out-of-state IADA members are eligible for TIADA member rate (coupon code required)

Session Recordings

$99 $399

With Conference Registration Regular (Non-attendees)

Special Membership Ticket—Win $10,000 Each $100 membership donation enters you in the $10,000 drawing to be held at the Conference. You need not be present to win!

$100/each

Sponsored by America’s Auto Auction *Registrants must be from same dealership to receive discounted rate

Hotel Accommodations

Discounted guestrooms are available for $215/night plus $5 discounted resort fee for TIADA Conference attendees. Please contact the hotel directly to book your room. Must be reserved on or before June 21st to receive discounted rate.

JW Marriott Hill Country Resort / 23808 Resort Parkway / San Antonio, TX 78261 Call 210.276.2500 or book online TiadaAnnualConference.com/jwmarriott-hillcountry.com 28

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Dealer Registration Dealership: ______________________________________________________ Phone: ____________________ Address: ________________________________________________City/ST/Zip: ______________________  BHPH Dealer

 Primarily Retail Dealer

REGISTRANT DETAILS

1st Registrant 1st TIME ATTENDEE? Yes No

2nd Registrant 1st TIME ATTENDEE? Yes No

Name: __________________________________________________ Name for Badge: _________________________________________ Title: ___________________________________________________

Email:__________________________________________________  FULL CONFERENCE ($495 Early Bird through 6/21)  ONE DAY PASS ($300) Circle Preferred Day MONDAY TUESDAY  Expo Hall Guest Wristband (10 & older) ($99 x ____)  Addt’l. Awards Dinner Ticket (10 & older) ($50 x ____)  Tuesday Dealer Excursions* ($10 x ____)  River Boat Tour  Salsa/Guacamole Makin’  Painting with a Twist  Rebecca Creek Distillery

$____ $____ $____ $____ $____

Email:__________________________________________________  FULL CONFERENCE ($395 Early Bird through 6/21)  ONE DAY PASS ($300) Circle Preferred Day MONDAY TUESDAY  Expo Hall Guest Wristband (10 & older) ($99 x ____)  Addt’l. Awards Dinner Ticket (10 & older) ($50 x ____)  Tuesday Dealer Excursions* ($10 x ____)  River Boat Tour  Salsa/Guacamole Makin’  Painting with a Twist  Rebecca Creek Distillery

$____ $____ $____ $____ $____

2nd Registrant Subtotal $_____

1st Registrant Subtotal $_____ 3rd Registrant 1st TIME ATTENDEE? Yes No Name: __________________________________________________ Name for Badge: _________________________________________ Title: ___________________________________________________ Email:__________________________________________________  FULL CONFERENCE ($295 Early Bird through 6/21)  ONE DAY PASS ($300) Circle Preferred Day MONDAY TUESDAY  Expo Hall Guest Wristband (10 & older) ($99 x ____)  Addt’l. Awards Dinner Ticket (10 & older) ($50 x ____)  Tuesday Dealer Excursions* ($10 x ____)  River Boat Tour  Salsa/Guacamole Makin’  Painting with a Twist  Rebecca Creek Distillery

$____ $____ $____ $____ $____

3rd Registrant Subtotal $_____ Need to register more staff? Call us at 512.244.6060

Payment Information

A LA CARTE OPTIONS TUESDAY DEALER EXCURSIONS*

May select one (1) excursion per dealer registrant; may bring one (1) guest over the age of 21 years old. Some excursions may sell out! For offsite excursions, buses depart at 3p. *For more info, visit www.TiadaAnnualConference.com/dealer-networking.excursions/.

SESSION RECORDINGS+  $99 with Conference Registration  $399 Regular (Non-attendees) +Approximately

$____ $____

20 hours of recorded breakout sessions

SPECIAL MEMBERSHIP TICKETS $100 X _____

$____ A la Carte Subtotal $_____

Total Amount Due $ ____________

 Make check payable to TIADA.  TIADA is hereby authorized to execute payment to the following credit card:

 AMEX

 Visa

CC Number__________________________________________________________________Exp. Date ____________

 MC

 Discover

SVC _________

Name on Card_________________________________________________Authorized Signature_______________________________________ TIADA | 9951 Anderson Mill Rd, Suite 101; Austin, TX 78750 Phone 512.244.6060 | Fax 512.244.6218 | conference@txiada.org April 2019

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e-Tag Supplies —

In Stock for Immediate Shipment!

MOTO

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ETAIL

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SALES

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Launching in Buy-Here, Pay-Here: Top 10 Things to Know About Banking the Unbankable

uy-here, pay-here is a great business! It is an excellent way to build wealth — both equity and positive cash flow. It can be a solution for used car dealers and franchise dealers alike who are missing sales due to low credit scores. While it takes a substantial amount of cash to get a BHPH lot over the top, financing those missed customers can pay huge dividends! For those considering buy-here, pay-here as a new profit center, here are some top tips for getting started:

Verify the TAM

In marketing, TAM refers to the total addressable market. Before any entrepreneur launches any business, they should verify that the available market is large enough to support their proposed business. Same in buy-here, pay-here. Once we know that for sure, we can turn our attention to creating a business that will attract our share of that market. But, we should never allow enthusiasm to cause us to skip Step 1.

Explore Inventory Sourcing Options

Cost of car is huge in BHPH. Huge! I’ve said about a thousand times that BHPH is NOT the car business. It is not about sales. It is not about offering a wide selection and satisfying the customers’ wants. BHPH is about financing. It is about underwriting and collections and managing cash flow. You did not hear me mention leather or 3rd row seats or sunroofs. Those are of interest to car dealers, not those offering poor credit financing with a financial target in mind. So, verifying that inventory is available at the right price point is critical. When advising new clients, I often say that buying for a BHPH lot is more about shopping for a number than it is about shopping for certain makes and models. Again, those from a retail car dealership background often have trouble with this paradigm shift. Buyers must recognize that they are providing a transportation solution to those whose needs take priority over their wants. It can be challenging for some to develop the discipline to stay within their number — the limit that is tied to the business plan. Deviating from that number can mean going

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Featured Presenter by Jim Rhoads Founder/CEO Octane Group

away from the business plan — a dangerous practice! Now, to choosing that business model …

Decide the Business Model — RFC vs Leasing

This is a big subject. There are many things to consider. Some of the things addressed later in this article might cause you to rethink your business model. But, to get started, it is important to first understand that profit will not be your challenge in BHPH. Yep. Let me say it again. Profit will not be the hard part in BHPH. Fatter markups in BHPH are the norm. It is necessary to charge higher interest rates. So, profit per deal will be excellent. The P&L will show positive numbers on the bottom line right out of the gate! Nothing to it! In fact, we earn so much early profit on paper that we can expect an income tax problem if we don’t prepare for it and structure ourselves accordingly. This is why leasing and rent-to-own prove to be good options for many who enter the business of self-financing automobiles. Income is not recognized in the same way in leasing. Generally speaking, income is realized as payments are collected. As a result, there is no front-loaded income and resulting tax burden. Leasing is a good solution for many but there are potential drawbacks to consider. That’s another article. Alternatively, many dealers opt to set up a Related Finance Company (RFC). I have participated in setting them up Utah to Texas to Florida and many points in between. In planning with startup clients, I usually start by running the profit and cash flow as if doing conventional retail installment without the RFC. The profits numbers can be intoxicating to those who are new to BHPH. Of course, with income comes income tax. Death and taxes, they say. So, it is important to forecast profits, especially to the extent that it will impact cash in the growth stage of the business. More on that in #4.

Forget Profits, Forecast Cash Flow!

It is easy enough to set up an Excel spreadsheet with simple assumptions to see some profit per deal and per month based on sales. But, projecting the 31

portfolio growth and long-range cash flow is best left to the pros. I think of BHPH as a cash flow business. To know how much capital is required, we must project the inflows and outflows over 1 to 3 years. My forecasting tool is set up to do 5. I can toggle the RFC on and off. This is where I lose potential “launch” clients. As I show them the numbers, they see that it takes a lot of cash to open a BHPH lot — even one doing moderate volume with reasonable overhead. Better to know that going in. No one wants to start something they can’t finish. I urge dealers to set their sights on positive cash when business planning and deciding on a model. Part of my job becomes to help them do exactly that. But, we can’t see real positive cash flow until we pin down cost of sales (funding), operating costs, and finally net profits (income tax obligations).

Investigate Capitalization Options

Now that we have decided to launch a BHPH operation and we know how much cash is required in the first 18 months, we can shift our attention to funding the business. There are plenty of ways to capitalize in BHPH. Obviously, which ones are available have a lot to do with personal credit, net worth and perhaps the standing of other businesses owned. For the most part, local banks do not have an appetite for

BHPH operations, especially new ones. So, unless there is substantial net worth or a long-standing relationship, I’d put them on the “long shot” list. Other options include debt and/or equity from friends and family, payment streaming, specialized finance companies, or selling of contracts in bulk. Obviously, to do the latter, dealers need enough cash to acquire the inventory and fund the initial sales. There are sector-specific finance companies who can be a decent option, but they are more than reluctant to fund startups. While I have seen exceptions, most are looking for 2 years in business before they’ll offer a conventional, receivables-backed line of credit. Some do offer other solutions in the first 2 years — too many programs to mention here. Again, a subject for another day. Until then, just know that there are options.

Take a BHPH Philosophy 101 Class

Most have heard the expression ‘P&P’ in business. That is typically shorthand for policies and procedures. I prefer to include a third ‘P’. Or better yet, a first ‘P’ — philosophy. There are essentially two paths to take in BHPH. One is a short-sighted approach that usually includes high markups, max interest rates and near-brutal collection tactics. This is certainly not what my firm teaches. Rather, we encourage clients to choose

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the second path which means offering quality inventory, sensible pricing, excellent customer service, and a bend-without-breaking approach to account management. We teach dealers to play the long game and enjoy the repeat and referral business that results. Before a policies and procedures manual can be constructed for BHPH, it is necessary to first adopt a philosophy – to decide how you want to be conduct business and be known in the community. The P&P manual can then be drafted accordingly.

so choosing the right one is important. I won’t go into much depth here since I have articles out there on this subject already. Just know that the right software is worth the extra dollars. There are browserbased options that handle inventory, sales, collections, the seamless transfer of accounts to the RFC, and accounting for all of the above. And the best systems offer integrations to key providers such as GPS, credit reporting, etc. Make the right choice and you will not

outgrow your DMS in a few years. With our BHPH “Launch” training and consulting packages, one of the key areas where we make launching easier and more efficient is serving as a liaison between the dealer client, his/her CPA, and the DMS. We know the business and know what the CPA needs to understand about the journal entries coming over from the software. Again, choosing the right software is about more than having the buttons for selling cars and collecting payments.

.Get your CPA/ CFO/Consultant Involved Early

You already heard me say that BHPH is more about cash management than it is about getting profitable. Anticipating cash needs in a growing operation is critical! So, involving an expert who can do more than bookkeeping and tax returns is a smart move. Outsourcing can work just fine and there are multiple providers out there on the national landscape. I always recommend that clients build that expense into their plan and get that person involved in the strategy meetings from the outset. Dealers across the US have heard my bad joke that “I am not a CPA, but I have educated a few of them.” This is true when it comes to the RFCs. Not all CPAs have the occasion to be exposed to these advanced solutions. Introducing these methods or tactics to dealers and CPAs is part of how we provide value to our clients. But, we can better help to get things right the first time by engaging early.

Choose the Right DMS/Software

First, DMS is software. It stands for Data Management System. Some refer to them as Dealer Management Systems. Either way, it is the software that we use to run our BHPH business

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Learn the Importance of Pricing and Deal Structure

There is no rocket science in pricing BHPH inventory. But, there is a method to it and the method is best learned through experience. Before printing window stickers, it is important to think about risk and reward. My clients often hear me refer to what I call the reward to risk ratio. This can first be measured based as gross profit divided by cost. That would yield the rate of return or gross margin. Simple enough. But, the real risk is better calculated after adjusting the down payment received from the customer. That net risk, often referred to as cash-in-deal, is the number that matters more. This is why I suggest that pricing is best learned through experience. Once a new dealer settles in to the typical down payment or the down payment to expect on premium inventory, it is possible to back into a price based on several factors related to the anticipated financing. If we know the down payment to expect, along with the typical installment payment amount, we can then run some finance quotes based on those figures. In the end, I urge dealers to set a price that 1) results in a reasonable loan terms relative to the reasonable life expectancy of the vehicle and 2) yields a healthy reward to risk ratio. The resulting price and terms should address both. See? No master’s degree required. But, there is some simple

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mathematics that the dealer needs to use and to monitor as prices are set. This math is best done long before the customers see the car sparkling on the lot. The hazard of setting a price too low is obvious. Setting the price too high translates into paying income tax on profits that will never make the bank account. Plus, it results in far too many unsuccessful and unhappy customers. When dealers use the method I’ve suggested here, they almost always arrive at a number that is below what the consumers would be willing to pay. Great! Dealers get ample reward for their risk and the consumer pays off sooner, buys another car, and refers friends and family! The long game!

Setting Sights on “Smart Volume”

I covered the importance of achieving positive cash flow. While creating profits and equity through growth are a priority for some, virtually all my clients want to experience positive cash flow in their not-so-distant business future. They want to stop putting cash in at some point! Remember, we already established that profits are not the challenge in BHPH. Therefore, I urge all new clients to work with me to identify that allimportant tipping point — the point at which cash collected from all sources exceeds the cash leaving the checkbook. Maybe I will start to refer to it as the “Hallelujah!-point.” To reach that mark, it is important to create contracts. Doing so creates everfattening bank deposits — down payments and car payments! So, while it is understandable to be reluctant in the early months, it is critical to create cash flow. Critical! I see no greater risk than operating for too many months without producing sales and car payments. As I say to my clients, the customer may or may not pay as expected but we know the overhead is not coming back! Naturally, there are many more things to consider when starting into the business of buy-here, payhere. This short list was intended to offer a sense of the most important things to contemplate. In webinars, I say that a lot of dealers and entrepreneurs would jump into BHPH tomorrow if they had the know-how and access to capital. With experience in 26 states, we are pleased to be a source for both!

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Jim Rhoads is a consultant and trainer in the buy-here, pay-here industry who has on-site experience in 26 states and counting. He will be presenting at the TIADA Conference & Expo taking place from July 21–23 at the JW Marriott Hill Country Resort & Spa in San Antonio.

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www.iaai.com 900 N. Hutto Road, Donna, TX 78537 956.464.8393, Fax 956.464.8510 GM: Ydalia Sandoval Tuesday, 9:00 a.m. $AVE : up to $200 Sell Fee

BIG VALLEY AUTO AUCTION**

www.bigvalleyaa.com 4315 N. Hutto Road, Donna, TX 78537 956.461.9000, Fax 956.461.9005 GM: Lisa Franz Thursday, 9:30 a.m. $AVE : $200

www.manheim.com 14450 West Road, Houston, TX 77041 281.924.5833, Fax 281.890.7953 GM: Brian Walker Tuesday, 9:00 a.m. / Thursday 6:30 p.m. $AVE : $100

MANHEIM TEXAS HOBBY

www.manheim.com 8215 Kopman Road, Houston, TX 77061 713.649.8233, Fax 713.640.6330 GM: Darren Slack Thursday, 9:00 a.m. $AVE : $100

Longview

ALLIANCE AUTO AUCTION LONGVIEW

Houston

ADESA HOUSTON

www.adesa.com 4526 N. Sam Houston, Houston, TX 77086 281.580.1800, Fax 281.580.8030 GM: Michael Schenks Wednesday, 9:00 a.m. $AVE : $200

AMERICA’S AA HOUSTON

www.americasautoauction.com 1826 Almeda Genoa Rd, Houston, TX 77047 281.819.3600, Fax 281.819.3601 GM: John Swofford Thursday, 2:00 p.m. $AVE : $200

AMERICA’S AA NORTH HOUSTON www.americasautoauction.com 1440 FM 3083, Conroe, TX 77301 936.441.2882, Fax 936.788.2842 GM: Buddy Cheney Monday, 6:30 p.m. $AVE : $200

www.allianceautoauction.com 6000 East Loop 281, Longview, TX 75602 903.212.2955, Fax 903.212.2556 GM: Chris Barille Friday, 10:00 a.m. $AVE : $200

IAA LONGVIEW*

www.iaai.com 5577 Highway 80 East, Longview, TX 75605 903.553.9248, Fax 903.553.0210 GM: David Cooper Thursday, 9:00 a.m. $AVE : up to $200 Sell Fee

Lubbock

IAA LUBBOCK*

www.iaai.com 5311 N. CR 2000, Lubbock, TX 79415 806.747.5458, Fax 806.747.5472 GM: Lori Davee Tuesday, 9:00 a.m. $AVE : up to $200 Sell Fee

AUTONATION AUTO AUCTION - HOUSTON TEXAS LONE STAR AUTO AUCTION** www.autonationautoauction.com 608 W. Mitchell Road, Houston, TX 77037 822.905.2622, Fax 281.506.3866 GM: Mike Green Thursday, 6:00 p.m. $AVE : $200

HOUSTON AUTO AUCTION

www.houstonautoauction.com 6767 North Freeway, Houston, TX 77076 713.644.5566, Fax 713.644.0889 GM: Tim Bowers Tuesday, 1:00 p.m. $AVE : $200 April 2019

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www.lsaalubbock.com 2706 E. Slaton Road., Lubbock, TX 79404 806.745.6606 Wednesday, 9:30 a.m $AVE : $75/Quarterly

Lufkin

LUFKIN DEALERS AUTO AUCTION

www.lufkindealers.com 2109 N. John Reddit Dr., Lufkin, TX 75904 936.632.4299, Fax 936.632.4218 GM: Wayne Cook Thursday, 6:00 p.m. $AVE : $200

IAA PERMIAN BASIN*

ONLINE

ACV AUCTIONS**

www.acvauctions.com 800.553.4070 $AVE : $250

San Antonio

ADESA SAN ANTONIO

www.adesa.com 200 S. Callaghan Rd San Antonio, TX 78227 210.434.4999, Fax 210.431.0645 GM: Clifton Sprenger Thursday, 10:00 a.m. $AVE : $200

IAA SAN ANTONIO*

www.iaai.com 11275 S. Zarzamora San Antonio, TX 78224 210.628.6770, Fax 210.628.6778 GM: Brian Sell Monday, 9:00 a.m. $AVE : up to $200 Sell Fee

MANHEIM SAN ANTONIO

www.manheim.com 2042 Ackerman Road San Antonio, TX 78219 210.661.4200, Fax 210.662.3113 GM: Mike Browning Wednesday, 9:00 a.m. $AVE : $100

SAN ANTONIO AUTO AUCTION**

www.sanantonioautoauction.com 13510 Toepperwein Rd. San Antonio, TX 78233 210.298.5477 GM: Brandon Walston Tuesday, 10:00 a.m. / Thursday, 1:30 p.m. $AVE : $200

Tyler

GREATER TYLER AUTO AUCTION www.greatertyleraa.com 11654 Hwy 64W, Tyler, TX 75704 903.597.2800, Fax 903.597.3848 GM: Wayne Cook Tuesday, 5:00 p.m. $AVE : $200

Waco

ALLIANCE AUTO AUCTION WACO

www.allianceautoauction.com 15735 I-35 Frontage Road Elm Mott, TX 76640 254.829.0123, Fax 254.829.1298 GM: Carmen Robinson (Sales Manager) Friday, 10:00 a.m. $AVE : $200

Local Chapters CORPUS CHRISTI G.R. Moore The Car Shack 361.813.2466 grcarshack@grcarshack.com (dates announced at www.txiada.org) DALLAS COUNTY Graham Lathrop VP Auto Sales 972.864.1300 grahaml@vpautosales.com (dates announced at www.txiada.org) EL PASO Ricardo Gardea Cars Plus 915.778.8285 cars_plus@att.net Meeting – 3rd Friday (Monthly) FORT WORTH David Byrd Byrd Autos 817.915.2185 david@byrdautos.com Meeting – 4th Thursday of Jan–May and Sep–Oct HOUSTON Rudy Roudbari Sarco Enterprise 713.672.3950 Meeting – 2nd Tuesday (Monthly) SAN ANTONIO Jose Engler Irving Motors Corp 210.385.2568 pepeton2002@hotmail.com (dates announced at www.txiada.org) VICTORIA Rowdy Ransom RTR Motors 361.484.6526 rowdyroy78@yahoo.com Meeting – 1st Monday (Monthly) 38

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, Compliance 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 access many additional resources at our Knowledge Base.

Texas Department of Motor Vehicles 888.368.4689 www.txdmv.gov

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

Texas Comptroller

800.252.1382 www.window.state.tx.us

NIADA

800.682.3837 www.niada.com

REPOSSESSIONS

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

FORMS Burrell Printing

800.252.9154 www.burrellprinting.com

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feature

Telephone Consumer Protection Act and Text Messaging: Are Your Dealership’s Texts Up to Code?

ould your auto dealership bounce back from a $2.5 million mistake? Sounds daunting, doesn’t it? Well, the executives at Lithia Motors faced that very real question just a few years ago. The source of their troubles was a text messaging law called the Telephone Consumer Protection Act (TCPA). In 2011, Lithia Motors of Medford Oregon sent a short text message to 57,800 consumers. A week later, they sent a second message to 48,000 of those people. What followed was a class action lawsuit that forced Lithia to settle for $2.5 million. Luckily for Lithia, they are one of the country’s largest auto groups. But could your dealership take a blow like that? For most independent dealers, the answer is a resounding no. How can dealers avoid this fate? The answer is simple, although not always easy. Complying with TCPA text messaging rules can be challenging if you don’t have the right tools in place. In this article, we will review TCPA text messaging law and show you how independent dealers can stay compliant.

TCPA Text Messaging Laws and Lawsuits

The Telephone Consumer Protection Act (TCPA) is a 1991 law that prohibits companies from sending any form of unsolicited communication to customers via telephone technology. TCPA applies to pre-recorded messages, robocalls, faxes, and yes, text messages. For a dealership to call or text a customer, they must have prior written consent. But that’s not all. Business communication must also comply with several other conditions as outlined by TCPA. Lithia Motors is not the only dealership that has paid for violating TCPA. In 2016, Interstate National Dealer Services agreed to a $4.2 million class action settlement after sending out robocalls to customers with unsolicited offers . Then in 2017, another dealership faced legal action for texting customers about a vehicle recall. This message seems innocent enough, but because the recall wasn’t

Featured Presenter by Zach Klempf CEO/Founder Selly Automotive

covered under the car’s warranty, the plaintiff claimed it was a scam to get her to buy more services. The lawsuit was unique because it expanded TCPA law to “servicerelated” communication instead of just marketing. The latter case illustrates just how fine a line auto dealers must walk with texting customers. If only one of your salespeople makes a mistake, the penalty could be steep. Fines can cost up to $500 per text message in violation of TCPA regulations.

How to Keep Text Messages TCPA-Compliant

One of the biggest risks for dealerships is salespeople messaging with customers from their personal phones. Those messages are not TCPA-compliant, which means your dealership is at risk of facing legal action as we saw above. Maintaining TCPA-compliant text messages takes a lot of work. Luckily, there is a shortcut for dealers to maintain compliance without all the hassle. Here are the guidelines dealers should follow to adhere to TCPA:

Acquire Written Consent.

First and foremost, GMs should ensure that ALL communication with a customer has been agreed to beforehand. Consent must be in written form and consist of T e x a s

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a double opt-in. In other words, when a customer agrees to share their phone number with you, dealerships need to send a follow-up message that asks them to confirm. That message could look something like this: “ABC Motors News and Deals Updates. Messages sent weekly. Reply HELP for help. Reply YES to confirm your sign up.” A customer must reply with a Y or YES to start receiving messages. This is to ensure customers are not signed up without their permission.

e Specific and Share B Important Information.

Customer consent is not universal. Dealerships need what’s called “contextual consent,” which means customers agree to specific types of communication, like marketing or service-related messages only. Dealerships need to be specific with when requesting permission. Instead of asking customers to simply “subscribe,” dealers should ask them to, “subscribe to weekly promotional deals and updates.” Dealers also need to make customers aware of any fees they might incur. With some cell phone data plans, customers must pay for each text message received, whether or not they consented to receive it. Dealers need to include, “message and data rates may apply” in their opt-in messages. A dealership’s privacy policies should be easily accessible on their websites. Add a link to your company’s privacy policy in the footer of your website. Make sure an attorney reviews the policy.

Stick to Your Word.

Even after obtaining consent from a customer, dealerships can still violate TCPA by not sticking to their word. Remember, customers must consent to specific types of communication. If they sign up to receive vehicle recall messages, you cannot send them marketing messages without consent for those, too. Consent is also broken by sending more messages than promised. If you say messages will be weekly, but you send them out daily, those extra messages are considered unsolicited and in violation of TCPA. The rule regarding contextual consent is simple: Do what you say you were going to do, and nothing more.

llow Customers to Opt-out A at Any Time.

Just as important as opting-in is giving customers the opportunity to opt-out at any time. Every message sent by your dealership should include, “Reply STOP to cancel” at the end. Dealers need to maintain a Do Not Call list of all customers who have opted out. It is critical this list

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is maintained and followed. Many TCPA class action lawsuits are filed because dealers ignored customers’ requests to be removed from call lists.

tay Up to Date on Changing S Regulations.

Since becoming law in 1991, TCPA has evolved several times. The most recent example is the “services-related messaging” lawsuit (see https://www.classaction.org/news/ tcpa-suit-filed-against-interstate-national-dealer-servicesover-extended-warranty-robocalls) we mentioned earlier in the article. With each new case, TCPA’s interpretation changes. It’s important to stay up to date with the latest reading of the law to avoid unknown pitfalls.

Take the TCPA Shortcut: Use a CRM System

If maintaining TCPA text messaging compliance sounds like a lot of work, you would be right. From managing opt-ins to auditing messages to keeping up with new regulations, TCPA compliance is a full-time job in itself. Luckily for busy independent dealers, there’s to a shortcut to TCPA compliance that will save you significant time, money, and headache. The secret is using an automotive CRM with built-in, TCPA-compliant text messaging. CRM systems automate the process so you and your salespeople can focus on the customers. When you add a phone number to your CRM, the customer automatically receives an opt-in message. Each message after that includes opt-out instructions, and the CRM keeps your Do Not Call list up to date. Additionally, all text messages are stored inside the system, not in a salesperson’s private phone. If a salesperson ever leaves the dealership, they won’t take any sensitive customer information with them. CRMs also make sure your salespeople stay TCPAcompliant with phone calls. No matter the method of communication, using a CRM ensures your dealership stays on the right side of the law and away from lawsuits.

Using a CRM to Stay TCPA-Compliant

It’s smart to use text messaging to communicate with customers. However, dealerships absolutely need to protect themselves from expensive TCPA violations. The steps to stay TCPA-compliant are clear, but implementing them on a regular basis is difficult and timeconsuming. The better way is to rely on a CRM system to take care of it for you. With the right tools, TCPA-compliant text messaging is easier than you think.

Zach Klempf will be presenting at the TIADA Conference & Expo taking place from July 21–23 at the JW Marriott Hill Country Resort & Spa in San Antonio. 41

TIADA texas independent automobile dealers association

Become a TIADA Member Business Name: ____________________________________________ Select one:

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TIADA texas independent automobile dealers association

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Contact Person: ____________________________________________ Address: __________________________________________________ City: _________________________________________ State: _______

Membership Dues:

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Dues include NIADA and local chapter membership where applicable.

Business Phone: _______________________ Fax: ________________________ Cell Phone: ___________________________________________ 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 - $41.58 per month 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

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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.

April 2019

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Dealer Academy

in partnership with

Presents

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.” This revitalized seminar is the final answer in BHPH compliance. Mike speaks dealer, and with 40 years of experience representing hundreds of BHPH dealers, he knows your business inside and out. Attend this workshop and learn all about…

9:00am - 4:00pm $249 TIADA Members, $199 Add’l Members (must be from same dealership)

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