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MVC NEWS
MEMBER APPLICATION
HELP IS HERE
May/June 2007
Tennessee
DEALER NEWS
&
Official Publication Of The Tennessee Independent Automobile Dealer Association
MOM POP SALES Continue Their
SUCCESS
SAVE CARS TO Save Lives PRSRT Standard U.S. Postage
PAID
FORT WORTH, TX Permit No. 1122
NIADA 61st Convention & Expo Update. PAGE 12
TNIADA BOARD OF DIRECTORS
IN THIS ISSUE
David Andrews – President City Auto Sales 4932 Elmore Road Memphis, TN 38128 Phone: (901) 377-9502 Phone: (901) 333-0103 dsa@cityauto.com
John Taylor Taylor Auto Sales & Rental 3832 Clarksville Pike Nashville, TN 37218 Phone: (615) 259-3797 Fax: (615) 259-8969
6 BHPH Opportunities In The Alternative Financial Services Marketplace
Don Flanders Guardian Warranty 1800 Colonial Shores Drive Hixson, TN 37343 Phone: (423) 596-7601 Fax: (423) 842-3906 donflan@bellsouth.net
10 Mom And Pop Sales Competing With Franchise Giants
Danny England – Vice President Danny England Motors P.O. Box 1620 New Tazwell, TN 37825 Phone: (423) 626-9500 Fax: (423) 626-9543 Cell: (423) 526-7190 dannyenglandmotors88@hotmail.com John Niven, Jr. – Secretary/Treasurer Auto Agency, Inc P.O. Box 382664 Germantown, TN 38183 Phone: (800) 325-5440 Phone: (901) 756-8557 niven@bellsouth.net
Darryl Noble – Executive Director P.O. Box 2219 Lebanon, TN 37088 Cell: (615) 506-4968 Office: (866) 5-TNIADA Fax: (615) 443-7486 dnoble@tniada.com lnoble@tniada.com
Tony Moorby 141 Woodward Hills Place Brentwood, TN 37027 Cell: (615) 714-7991 Fax: (615) 866-5511 tonymoorby@aol.com
please visit our Web site tniada.com
Few people are aware of another emerging market called “alternative financial services,” which now includes an estimated 80 million unbanked or underbanked consumers. By Ken Shilson
With 65-70 percent sales, Clarksville Auto Auction’s success relies on the father and son team.
12 Catch A Country Tune NIADA’s Convention & Expo will be the best step to take on the “Fast Track To Building A Better Business.” By Laura Patterson
14 TNIADA Vendor Fair Every tool you need to do business.
18 Save Cars To Save Lives ABC Nashville helps The National Kidney Foundation with sales in order to raise money.
INDEX TO ADVERTISERS ADESA Knoxville ..................................................................................18 ADP – Dealer Services Group ..............................................................17 Aircept/Rental Track ..............................................................................8 Auto Trader Publishing ............................................ Inside Front Cover AUTOSAVE ..........................................................................................16 AutoTrader.com ....................................................................Back Cover CAR Financial Services, Inc. ................................................................15 Cars.com ..............................................................................................13 Credit Acceptance Corporation ................................Inside Back Cover Dealer Funding, Inc. ................................................................................5 Frazer Computing ................................................................................10 Guardian Warranty Corporation ..........................................................3 Manheim’s Nashville Auto Auction ......................................................9 Manheim’s Tennessee Auto Auction ....................................................19 McNutt Auto Transport Service ............................................................4 Preferred Warranties, Inc. ......................................................................7 United Acceptance Corporation ..........................................................11
NATIONAL INDEPENDENT AUTOMOBILE DEALERS ASSOCIATION www.niada.com • www.niada.tv
NIADA Headquarters 2521 Brown Blvd. • Arlington, TX 76006-5203 • phone (817) 640-3838 TN Dealer News is published bi-monthly by the National Independent Automobile Dealers Association Services Corporation, 2521 Brown Blvd., Arlington, TX 76006-5203; phone (817) 640-3838. Periodicals postage paid at Dallas, TX and at additional offices. POSTMASTER: Send address changes to NIADA State Publications, 2521 Brown Blvd., Arlington, TX 76006-5203. The statements and opinions expressed herein are those of the individual authors and do not necessarily represent the views of the Tennessee Independent Automobile Dealers Association or the National Independent Automobile Dealers Association. Likewise, the appearance of advertisers, or their identification as members of TNIADA or NIADA, does not constitute an endorsement of the products or services featured. Copyright 2007 by NIADA Services, Inc. All rights reserved. Visit the NIADA Web site at www.niada.com. For advertising information contact: Troy Graff (800) 682-3837 or troy@niada.com. For information on how to become a member of TNIADA, please contact Darryl Noble at (615) 506-4968 or e-mail dnoble@tniada.com. State Publications Manager/Sales: Troy Graff • troy@niada.com State Publications Editor: Laura Patterson • laura@niada.com State Publications Art and Production Manager: Rebekah Petty • rebekah@niada.com State Publications Graphic Artist: Christy Haynes • christy@niada.com Printing: Southwestern ColorGraphics Printing & Mailing Specialists
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TENNESSEE DEALER NEWS
MAY/JUNE 2007
BHPH NEWS
By Ken Shilson
BHPH OPPORTUNITIES In The Alternative Financial Services Marketplace Dealers must spend every dollar prudently in order to prosper in the BHPH business.
Everyone knows how important banks and financial institutions are to our national economy and to the capital markets. However, few people are aware of another emerging market called “alternative financial services,” which now includes an estimated 80 million unbanked or underbanked consumers. What is the alternative financial services marketplace? The following table illustrates what services are included:
Type Of Services Check Cashing: 22% (marketshare) Pawn Lending: 22% Rent-to-Own: 7% Payday Lending: 10% Installment Lending: 5% Buy-Here, Pay-Here Auto Sales: 24% Title Pawn and Other: 10% It is estimated that the alternative financial services market now aggregates more than $321 billion, according to Stephens, Inc., Investment Bankers. If the size of this market surprises you, consider the following: - Approximately 10 percent of the U.S. population (30 million Americans) do not have checking accounts. - Approximately 26 million Americans make less than $25,000 per year. - Approximately 28.4 percent of all unbanked consumers do not write enough checks to have a bank account. - An estimated 25 percent of the U.S. population has a credit score of less than 600 or no credit score at all. Where do all these credit challenged customers come from? 1. Consumers who were formerly banked but had a negative credit experience (like bankruptcy, repossession, etc.) or account termination, and don’t qualify for traditional loans. These consumers have limited transportation alternatives. 6
TENNESSEE DEALER NEWS
MAY/JUNE 2007
2. Immigrants who don’t use banks. 3. Consumers who need credit alternatives to make ends meet. 4. Consumers who live paycheck to paycheck. 5. Convenience-driven consumers who need extended hours and financial services not offered by banks. 6. Those who require close proximity to their home or job. As mentioned earlier, Buy-Here, Pay-Here auto sales provide 24 percent, or approximately $77 billion, of the financing in this market. Last year, according to the National Independent Auto Dealers Association, independent dealers sold approximately 14.2 million vehicles and about 56 percent of these sales were finance deals.
THERE ARE THREE KEY ELEMENTS IN EVERY BHPH FINANCE DEAL: THE CUSTOMER, THE VEHICLE AND THE PROPER DEAL STRUCTURE. The aforementioned information suggests that there is no apparent shortage of BHPH customers, so then, what is the challenge? Simply stated, to prosper in the BHPH industry requires the skill of managing the collection risk associated with a subprime portfolio and not in merely selling used vehicles. There are three key elements in every BHPH finance deal: the customer, the vehicle and the proper deal structure. However, all three elements are critically important to the ultimate success of each deal. Therefore, all BHPH operators must do the following to prosper: 1. Underwrite each deal prudently and put the right customers in a vehicle which they can afford.
2. Implement a business model (which is limited by capital availability) but which maximizes profits and cash flow. 3. Implement sound systems and processes to operate efficiently and profitably. An emphasis must be placed on collections, which provides the cash flow for working capital and to repay debt. A good collection operation is 70 percent of a successful BHPH operation. 4. Provide each customer with a total transportation solution that includes keeping the vehicle running over the term of the installment contract. This often requires financing significant repairs after the initial sale. 5. Train and develop key personnel who are needed to grow and manage the portfolio successfully. Success in the BHPH business also necessitates avoiding fatal legal and regulatory mistakes which can cause an otherwise successful operation to fail. Large and small operations alike are more susceptible to these compliance pitfalls when operators don’t take the time to properly educate themselves on all of the various federal, state and local legal and regulatory requirements. The BHPH business is very capital intensive. Therefore, dealers must spend every dollar prudently in order to prosper. Every finance deal starts with negative cash flow (“money on the street”). Therefore, making trial-and-error mistakes in building a portfolio can cost a dealer millions of dollars in losses. Given all the aforementioned challenges, those who are considering the BHPH business are encouraged to: 1. Read all available industry trade publications and understand current developcontinued on page 8
MVC NEWS
BHPH NEWS
ments which will affect their business. 2. Obtain the necessary national, state and local training to avoid the fatal industry compliance pitfalls. 3. Assemble a team of professionals which must include a knowledgeable lawyer, CPA and lender. 4. Locate the appropriate dealer management software system to grow and manage a portfolio. 5. Hire or develop an experienced management team which won’t squander precious capital via trial and error. 6. Implement sound operations, systems and practices and monitor performance. 7. Accurately estimate the capital requirements needed and obtain the required
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TENNESSEE DEALER NEWS
MAY/JUNE 2007
capital before starting. 8. Network with other successful dealers in order to develop the best practices. Although the challenges above are formidable, the rewards are great. Dealer education and networking will significantly shorten your learning curve. Good luck!
Kenneth B. Shilson, CPA, is a principal in Shilson, Goldberg, Cheung & Associates LLP and is president of Subprime Analytics, which performs electronic portfolio analysis. Mr. Shilson is also the founder of the National Alliance of Buy-Here, Pay-Here Dealers, which will host a BHPH Collection Academy near Atlanta, Ga., at the Manheim DRIVE Center, Jan. 9-11, 2007. Collection and underwriting practices will be discussed in detail at the Collection Academy. For further information, visit the NABD Web site at www.bhphinfo.com, or call (713) 290-8171.
Tennessee Motor Vehicle Commission Appoints New Executive Director Bob McKee brings a unique background of business and government experience to the Commission.
Chairman of the Motor Vehicle Commission, Ted Russell, has announced that former State Representative and businessman Bob McKee will serve as the new Executive Director of the Commission. McKee is a native of Athens, Tenn. He is married with two children and four grandchildren. He served 16 years in the state house of representatives as a sub-committee and committee chairman and was also a member of the McMinn County Commission. McKee formerly owned a tire store in Athens and was involved in numerous civic activities. “We are thrilled that Bob McKee will be joining us,” said Ted Russell, Chairman of the Commission. “He brings a unique background of business and
government experience to the Commission.” The Motor Vehicle Commission is the regulatory and licensing authority of auto auctions, automobile, truck and RV dealers and it is housed within the state’s Department of Commerce and Insurance. The Commission is comprised of automobile dealers, industry representatives and citizen consumer members. Sales of motor vehicles are the largest single source of Tennessee sales tax revenue with total dealer sales of $13.9 billion from 435 franchised dealers and 4,000 independent dealers statewide. For more information about the Motor Vehicle Commission, please visit http://www. state.tn.us/commerce/boards/ mvc/index.html.
TNIADA MEMBER SPOTLIGHT
Mom And Pop Sales Competing With Franchise
Giants With 65-70 percent sales, Clarksville Auto Auction’s success relies on the father and son team.
Brooks and Kip Jarrell with Clarksville Auto Auction continue to run their successful “mom & pops” auto auction. The business started in 1986. The father and son duo have been in business together for many years. Brooks owned University Ford Lincoln Mercury in
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TENNESSEE DEALER NEWS
MAY/JUNE 2007
Murfreesboro from 1974-1986. Kip worked for his father at the Ford dealership. He has been the general manager for Clarksville Auto Auction for 10 years. Kip personally drives all lease cars brought to the sale, and he believes in the open door policy. When asked about their arbitration policy, they said they like to talk it out and always try to make their customers happy. “Our interest is to protect our customers and be fair,” Brooks says. “You’re not just a number at our sale. We work for you.”
The auto auction has registered dealers from Mississippi, Alabama, Tennessee, Kentucky and Indiana. The sale has five acres and runs three lanes. The auction averages 250 cars. The sale consists of 60 percent dealer consignment and 40 percent fleet lease. The sale day is Tuesday at 12 p.m. “We fought off the biggies, and we’ll keep pounding the pavement,” Brooks says. “I’m not ready to go home.”
NIADA CONVENTION & EXPO
By Laura Patterson
Catch A Country Tune NIADA’s Convention & Expo Will Be The Best Step To Take On The “Fast Track To Building A Better Business.” Music hangs its hat in Nashville,
its. The grand opening of the Expo is June
the 61st Annual Convention & Expo in
14. This sold-out experience will give every
Music City.
dealer the opportunity to shake hands
More than 1,500 attendees flocked to the 2006 event, and this year, NIADA
with some 150 vendors and suppliers. More than 35,000 viewers tuned in
expects a greater turnout as they bring
to NIADA’s live broadcast of the National
southern charm to the Convention & Expo.
Quality Dealer Awards ceremony last year
NIADA invites all motor vehicle professionals to the majestic Gaylord
on NIADA.TV. That number is expected to increase as the schedule for this event
Opryland Resort in Nashville, June 12-16.
places it on Saturday evening this year.
Experience the single greatest event that
Friday night’s festivities will be an accu-
delivers the best in industry education
mulation of several events. The National
along with the most comprehensive
Leadership Awards Banquet and Show will
selection of industry goods and services. All attendees will see why this
include presentations of leadership awards, announcements of scholarship
convention will provide the “Fast Track To
recipients and naming of the Association
Building A Better Business,” as they have
Executive of the Year. This great event will
the opportunity to participate in more
end with one of country music’s premier
than 30 hours of education sessions.
up and coming stars, Jeff Bates, enter-
This year’s Keynote Speaker is Charles
taining all attendees with his latest hits.
Vogelheim, vice president of Automotive
This premier week of events will
Development with J.D. Power and
prove why NIADA members help make
Associates, who is responsible for the
the Association the voice of the used
International Automotive Roundtable, the
motor vehicle industry. Come join the
premier forum for industry leaders and
“Fast Track To Building A Better
executives to share and discuss market
Business.”
forces affecting the automotive industry worldwide. Education experts will inform and
Reserve your spot now to join NIADA in Music City. For more information about the convention, go to www.niada.com.
educate attendees during sessions that
The site provides a schedule of events,
provide information on topics such as
hotel information and a registration form.
Buy-Here, Pay-Here, Dealership
You can view some of last year’s conven-
Operations, F & I, Legal/Compliance
tion activities by logging on to
issues and Retail Sales.
www.niada.tv.
NIADA’s Expo will provide total convenience and one-stop shopping for innova-
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tive products and ideas to increase prof-
Tenn. and so will NIADA as they celebrate
TENNESSEE DEALER NEWS
MAY/JUNE 2007
MEMBERSHIP INFO
Member Call In Conference Line
HELP IS HERE Got A Problem? Need Some Advice? Maybe we can help…the member call in conference line is now available. Phone: (212) 812-2800 Code: 89755560 TNIADA Board of Directors will be available during call in times to help with all your questions. Upcoming Call In Conference Dates: May 31ST Conference call begins at 4 p.m. CDT.
Tennessee
Motor Vehicle Commission Director’s Report : Independent Dealers in Tennessee: 4,086 Dealers Closed since January 2007: 61 Dealers Open since January 2007: 95
There is a new 2007 State of TN Rules and Regulations Handbook AVAILABLE ONLINE THROUGH www.lexis.com/bookstore.
Promise Yourself… To be so strong that nothing can disturb your peace of mind. To talk health, happiness and prosperity to every person you meet. To make all your friends feel that there is something special in them. To look at the sunny side of everything and make your optimism come true. To think only of the best, to work only for the best and to expect only the best. To be just as enthusiastic about the success of others as you are about your own. To forget the mistakes of the past and press on to the greater achievements of the future. To wear a cheerful countenance at all times and give every living creature you meet a smile. To give so much time to the improvement of yourself that you have no time to criticize others. To be too large to worry, too noble for anger, too strong for fear and too happy to permit the presence of trouble. 16
TENNESSEE DEALER NEWS
MAY/JUNE 2007
GET INVOLVED
Save To
Cars
Save Lives
ABC Nashville helps The National Kidney Foundation with sales in order to raise money.
Doug Jones with ABC; Beverly Campbell, Kidney Car Campaign Coordinator; Angie House, ABC
The National Kidney Day was celebrated at ABC Nashville on March 8, 2007. The National Kidney Foundation accepts “pre-loved” vehicles, which they call Kidney Cars. Once a month, these vehicles are taken to auction in order to raise money
for the Foundation’s patients’ medications and transportation needs. On this particular day, the Foundation raised $9,700. Vince Perry, Sr., an 88-year-old man who treasured his old Cadillac, felt the Kidney Car Program was the best way to put his beloved car to good use when he couldn’t drive it anymore. “We all came to the happy conclusion that even though getting rid of the car signaled the end of an era,” Perry says, “knowing it was going to help someone with kidney disease made the experience a lot more tolerable.” The sales are held monthly at ABC Nashville. “Trader Charlie” Lackey who was at the sale knows all too well the importance of making a difference to these patients. A
Donated Car
“Trader Charlie” and Beverly Campbell
year ago, he donated his daughter’s entire body to the organ donor transplant program. From the donation, four people were saved. The process is simple, and the sale price can be taken off your income taxes. Help make a huge difference in a patient’s life. To donate a car, call (615) 383-3887, (800) 488-2277 or e-mail nkfmdtn@bellsouth.net.
Join us at ADESA Knoxville! Weekly Consignment Sales Every Tuesday Night - 5:30 PM • Every Friday - 9:30 AM
Call now to reserve your numbers 865/988-8000 18
TENNESSEE DEALER NEWS
MAY/JUNE 2007
1011 Adesa Parkway Lenoir City, TN 3771 865/988-8000 - 865/988-5674 Fax
Monday
Tuesday
Wednesday
Thursday
Friday
Manheim’s
ADESA Memphis 9:00
Manheim’s Nashville Auto Auction
9:00
ABC Nashville 10:00
ADESA Knoxville 9.30
Chattanooga Auto Auction 9:30
Memphis Auto Auction 9:30
East TN Auto Auction 10:00
Jackson Area Auto Auction 10:00
Manheim’s
ABC Murfreesboro 3:00
Airport Auto Auction 5:30
Bristol Auto Auction 10:30
Tennessee Auto Auction
4:00
Tennessee Auto Auction
10:30
Cookeville Auto Auction 6:00
Clarksville Auto Auction 12:00 Jackson Area Auto Auction 4:00 ADESA Knoxville 5.30
Out of State Sales (Members of TNIADA) Tallahassee Auto Auction Tallahassee, FL 6:00
Dealer's Auto Auction Huntsville, AL 9:30
ADESA Atlanta 9:30
Dealer’s Auto Auction Horn Lake, MS 9:30
Manheim’s Manheim’s Bishop Alabama Auto Auction Moody, AL Atlanta Auto Auction Brothers 1:00 9:30 Atlanta, GA 10:00 Kelly Auto Auction Gadsden, AL 6:30
ADESA Lexington 10:00
HADA Auto Auction Huntsville, AL 10:00 3rd Friday Only