dealer business journal, october 2013

October 2013 DEALER BUSINESS JOURNAL | 1...Your Success Is Our Business

PRST STDU.S. POSTAGE

PAIDFULTON, MO

PERMIT NO. 38

Understanding Static Pool AnalysisPage 6

Create More Traffic0

BDCs Make a ComebackPage 28

2 | DEALER BUSINESS JOURNAL October 2013 DealerBusinessJournal.com

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October 2013 DEALER BUSINESS JOURNAL | 1

...Your Success Is Our Business

PRST STD

U.S. POSTAGE

PAIDFULTON, MO

PERMIT NO. 38

Understanding Static Pool AnalysisPage 6

Create More TrafficPage 10

BDC’s Make a ComebackPage 28

ContentsIN EVERY ISSUE 4 CORNER OFFICE

6 FRONT LINE

8 BHPH BOOT CAMP

10 IMPROVING PROFITS

12 PAYMENT PROCESSING

36 INduSTRY NEwS

LEGAL & LEGISLATIVE LEADERSHIP & TRAINING BUSINESS OPERATIONS

Legal Opinion14 Understanding Hidden

Finance Charges Be sure your advertisements

meet TILA standards. By Tom Hudson

General Counsel16 Creating an Electronic

Communications Policy Set clear standards for

employees on how their professional, and personal, communications will be monitored at work.

By Debra Dawn

Legal Compliance17 Too Easy Boys, Too Easy Preparing a Compliance

Management System to meet CFPB requirements.

By Eric L. Johnson

Learn to Lead18 Thirty-One Cultural Tips,

Tenets and Tests Building a high performance

work culture based on five key pillars.

By Dave Anderson

Stop Loss 20 Prepare Yourself for

Insurance Quotes An ounce of preparation

is worth a pound of good business sense when it comes to insurance quotes.

By John Krivacsy

Health Insurance24 How Will Health Reform

Affect Your Dealership? Plan your strategy for

compliance with the new Affordable Care Act.

By Dave Wiggins

Market Watch26 Leaves are Falling, but Cars

and Trucks Improve Watching trends coming from

the auctions. By Ricky Beggs

Business Ideas28 Three Reasons BDCs Are

Making a Comeback Today’s modern Business

Development Center is outperforming most of its predecessors.

By Greg Wells

SALES & SERVICE

Online Strategy30 Social Media Presence is

Huge in Today’s Market Focus on developing a

conversation with your customers.

By Cesar Yepez

Tax Time32 Tax Max Delivers Early Tax

Season in the Fall The new, early tax season is

known as the 4th Quarter Tax Season.

By Chip Wiley

Customer Service34 Stop Spinning Your Wheels,

Start Wowing Women Tips for catering to women

when selling a car. By Jody DeVere

Volume 10, Issue 10 October 2013


Dealer Business Journal3700 S. Tamiami Trail, Sarasota, FL 34239Ph: 800.966.8733 | Fax: 941.371.2874

Executive PublisherChristopher M. Leedom | [email protected]

Associate Editor Buy Here-Pay HereChuck Bonanno | [email protected]

Contributing WritersDave Anderson | [email protected] Brotherton | [email protected] Dawn | [email protected] Garcia | [email protected] Hudson | [email protected] Prassel | [email protected] Sweeney | [email protected]

Guest ColumnistsRicky Beggs | BlackBookAuto.comEric L. Johnson | [email protected] Krivacsy | [email protected] Wells | [email protected] Wiggins | [email protected] Wiley | [email protected] Yepez | [email protected] DeVere | [email protected]

FOR QUESTIONS REGARDING SUBSCRIPTIONS CALL 800.966.8733or subscribe online at DealerBusinessJournal.com

ADVERTISING INQUIRIES CALL 941.371.7999OR [email protected]

DISCLAIMER: The information included in this publication is obtained from sources believed reliable and has been produced with reasonable care in production and editing. It is not intended to be legal, accounting, tax, technical or other professional advice. Readers are advised to consult a professional for ap-plication in their particular situation. Copyright 2013 Leedom and Associates, LLC. All Rights Reserved. Content may not be photocopied, reproduced or redistributed without written permission. Dealer Business Journal is a publi-cation of Leedom and Associates, LLC.

POSTMASTER: Send change of address form to Dealer Business Journal, 3700 S Tamiami Trail, Sarasota, FL 34239

LEEDOM GROUP

Corner OfficeMining for Ideas

This month’s issue is dedicated to ideas that impact the profitability of your business. For those of you that are long time readers this is not something

new for us here at Dealer Business Journal. Our publication is entirely dedicated to helping dealers run a better business and make a profit. This issue highlights some great ideas that are timely and that are proven to work in dealerships just like yours. As we head into the fourth quarter it is a great time of the year to assess what is and isn’t working in your dealership. I just wrapped up two Twenty Group meetings and my sense is the market is heating up from a competitive standpoint. Third party lenders are very aggressive; there is increased competition for the customer and this is a good thing. But it also means you have to be on top of your game as you try to earn the customer’s business. This is also a perfect time for you to make a commitment to change the things that are holding your business back. Think through what your targets are for 2014. How are you going to achieve improved performance? Is your team fully equipped and trained to perform at a high level? Are you prepared to do what it takes to improve business? I find many clients thinking about these types of questions during the fourth quarter of the year. You should do the same. If nothing else do a quick forecast by month so you know what your key objectives are for next year. Or if you are more sophisticated, plan out a budget and forecast for the entire year. This will become your road map and is the best way to

manage your business in a competitive environment. While we are talking about ideas I would be remiss if I did not mention the incredible impact a Twenty Group can have on your business. I just had a chance to speak at the MARIADA Convention in Atlantic City and during his gracious introduction, Mr. Mike Brill passionately told the audience how a Twenty Group was one of the two best things that happened to his business. We hear this from many dealers and it truly speaks to the quality of the membership. If you have been considering joining or re-joining a Twenty Group don’t delay – do it today!! Request an invitation by

emai at [email protected]. Finally, I want to thank our long time editor, Peter Salinas for his years of service. Peter has moved on to some bigger and better things and we wish him all the best. Thanks Peter for your service to our industry. So now I invite you to read on, enjoy this issue and I hope it is packed with ideas for you to improve your business. Have a great month!

Chris LeedomExecutive Publisher

DEALER BUSINESS

A L e e d o m G r o u p p u b L i c At i o n

JOurnal


LEEDOM GROUP

Front Line

You’ve all heard the terms “Static Pool” and the “Static Pool

Analysis” many times. Many buy here-pay here dealers have the impression that this is some new and exotic way to analyze their loan portfolios. It strikes fear in some

dealers and others just “pretend” to understand. Let’s unravel the mystery of this elementary method of portfolio analysis and make the effort to understand its value, its strengths and its weaknesses. Today, most any bank or other financial institution willing to provide capital to help you grow your business will require this important loan portfolio analysis. First, let’s decipher the words “static pool.” The definition of static in this case means “unchanging.” The definition of pool in this case means, “group.” It’s that simple. We are going to analyze “unchanging groups” of loans. Pools can be ANY group of loans. The pool could be comprised of loans made on red cars, loans made to married couples, loans made with no money down or loans approved at the end of the month because you need deals. The industry standard is to use individual months as pools. An example of that would be the loans the dealer originated in October 2009. To analyze a static pool such as “October 2009” the dealer will track losses on ONLY those loans originated in October 2009. Loss

Static Pool Analysis: Mystery Solved!tracking will be complete only when the last of those loans either pays out or is charged off. Not too difficult so far, right? You must now define losses to take the analysis another step forward. There are two components that make up loss-events (charge-offs). The first is the total number of charge-off events or “frequency of charge-off ” and the second is the total net loss on the loans in the pool or the “severity of charge-off.” Both numbers are important to you although most industry standards revolve around the “severity” number. As time passes our original pool liquidates, either by cash payments or repossession/charge-off until the point where none of the original loans remain on the books. This is considered a “mature” pool. From this pool you can now calculate frequency of charge off (sometimes called repossession frequency) by dividing the total number of charge-off accounts in this pool by the total number of accounts originated in that pool. This is a piece of cake, right? You can also calculate the severity of loss on this pool (sometimes referred to as charge-off rate) by dividing the net loss dollar amount from all charge offs in the pool by the total dollar amount of original “amount financed” that made up this pool. That wasn’t so hard! Okay, that was easy. Now what? You must take this pool and every other pool and track them

By Chuck Bonanno

the same way. You need to develop a spreadsheet that tracks many pools over time and add new ones every month. When you “spread” these pools and review, you can see

trends in newer pools that may be performing differently than typical pools in the past. The example might be that those June 2010 loans are now 6 months old and have experienced a 15% loss frequency and a 7% loss severity and you have historically seen 6-month losses at 10% frequency and 5% severity. You can deduce that the pool will not perform as well as your other pools have over time. So you ask the questions: “Why? Has there been deterioration in your collection effort? Has your underwriting and investigation process been compromised? Is the product life an issue? Are there external forces in the marketplace we need to address?” You can see that this is a simple analysis of loan performance. It is the only TRUE loss-tracking method and the only one you can use to predict future losses with any degree of certainty. This is why most banks and lending institutions want to know your historical loss experience expressed as static pools before they lend money. So it’s simple, everyone

Continued on Page 9

in this case, the definition of static means “unchanging” and pool means “group.” it’s that simple; analyzing “unchanging groups” of loans.


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8 | DEALER BUSINESS JOURNAL October 2013

LEEDOM GROUP

BHPH Boot Camp

“That’s how we’ve always done it” is one of the most

dangerous phrases in any business setting. It implies that minds are now closed, innovation is now stifled and that some are content to rest on their laurels until a hungry,

forward-thinking competitor comes in and knocks them off their perch. Doing something simply because it’s how it has always been done means that our team members are now doing their tasks by rote instead of by reason. No one is thinking about “why” we do what we do and, instead, we focus on doing it the same way enough times to validate our existence. In our industry, technology and the competitive landscape both change at a breakneck pace. When an organization starts spending its time looking backward instead of forward, you will lose your place in line to the competition that focuses on looking ahead. This is not to say that processes and procedures aren’t important. Nor does it imply that some tasks must be executed the same way each time. It does mean, however, that we must ruthlessly evaluate these processes, procedures and personnel on a consistent basis to ensure that we aren’t being left behind. Is our vision still valid? Are we still approaching the business according to our core values? Do we still have a consistent message? Are we developing our bench-strength

That’s How We’ve Always Done Itor are we settling for good enough? If you think about it, “good enough” is just another way of saying the same thing. Now, don’t get me wrong, I don’t expect any organization to have the best possible players at every level. I do, however, expect you to try to— particularly with your key positions. Evaluating your team regularly is a big part of avoiding this “good enough” or “that’s the way we’ve always done it” mentality. A question I ask is “where is your next deal coming from?” I like to see if the sales person is thinking about their business and taking ownership in their process and results. The answer, by the way, shouldn’t be from the next lot-up but, that is the subject of a different article. In a broader sense, where our business is going to come from must be evaluated ruthlessly. It is a moving target and we are having to fight competition, the auctions, other lenders and the customers themselves. What makes us attractive? Why is a customer going to drive past the competition to come and buy from us? What is our reputation in the marketplace? How do we interact with our customer base? Are we as good as we used to

By David Brotherton

be? Are we as good as we should be? Applying these questions to the problem of where our next deal is coming from is critical to staying ahead. None of us have unlimited budgets and we must prioritize our marketing efforts. A multi-level approach to touching your target market is still the best approach but it is how you go about defining and touching that market that makes the difference. Be serious and ruthless in your evaluation of your people and processes. Allow no sacred cows in your thinking. This is an area where an outside influence that is not emotionally attached to your business can really benefit you – such as your favorite, friendly neighborhood consultant.

in our industry, technology and the competitive landscape both change at a breakneck pace. When an organization starts spending its time looking backward instead of forward, you will lose your place in line to the competition that focuses on looking ahead.

David Brotherton is a consultant and Twenty Group moderator with the Leedom Group Contact him [email protected]

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October 2013 DEALER BUSINESS JOURNAL | 9...Your Success Is Our Business 26 Dealer Business Journal September 2013

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AutoTrader.com Sets New RecordFor Smart Phone Visitors to Site

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AutoTrader.com’s mobile properties include a robust mobile site and a car shopping app for iPhone and Android phones.

“We know from our research that usage of the Internet in the car shopping process in general has increased substantially—even in the last two years—and the proliferation of mobile devices has given con-sumers the ability go online and get the information they need anytime, anywhere,” said John Kovac, vice president of marketing at AutoTrad-er Group. “The increasing role of mobile in the car shopping process is quite evident in our site traffic, and we expect that trend to continue.”

In addition to the 60 percent increase in mobile traffic, the num-ber of unique visitors to the core AutoTrader.com site also increased 13 percent year-over-year in July, bringing the total to just over 17.7 million unique visitors. That is an increase of 17 percent over the same time last year. The strong traffic in July led AutoTrader.com to a fifth straight month with double-digit increases across all key metrics. The continued double-digit growth to the AutoTrader.com site has been driven by a multifaceted media strategy, as well as the overall health of the automotive industry.

“With the increases in traffic that we’ve seen throughout 2013, it’s clear that consumers are returning to the car shopping process in droves, and the strong sales numbers that automakers have been post-ing month after month indicate that those shoppers are turning into buyers,” Kovac said.

Industry News

DBJ_2013_SEPT.indd 26 8/29/13 4:12 PM

should do static pool analysis. There are, however, some drawbacks, limitations, and general issues involved in doing this type of tracking and analysis. The first is that it takes a very long time to create meaningful numbers. Imagine you are going into business today and you want to start tracking your loan pools. It may be as many as 30 to 36 months until your very first pool matures. If you have underwriting and collecting problems now, you probably won’t be around to judge your pools three years from now. A second is that if at any time you purposely and materially change variables such as the customer that you service, the vehicle you sell, the underwriting criteria or the collection process, typically you will not get the same loss results. Thirdly, if you are one of those dealers whom continually “re-write” notes or roll customers out of one vehicle and into another vehicle, the analysis waters become very muddy. Despite the issues listed above, I urge all dealers to begin static pool analysis and continue throughout their lives of their dealerships. The analysis provided is invaluable and will help you develop a better performing loan portfolio by adjusting to changes in performance and reacting to underwriting and collections mistakes. There are software systems that provide some form of static pool loss tracking and a few of those provide true analysis and future loss prediction. If your system provides these reports, use them. If your system doesn’t, call your software provider and ask for these reports. If you require an outside service to accomplish this, do so.

Chuck Bonanno is the executive vice president and senior partner of the firm, Leedom and Associates, LLC. He is an Executive Conference Moderator of Buy Here-Pay Here and Automotive Finance Twenty Groups. He is a nationally recognized speaker, author, industry trainer and consultant. [email protected].

STATIC POOLS continued from Page 6

Dealer Business Journal brings you expert advice from leaders in the industry. Send us your questions at [email protected].

...Your Success is Our Business


Sound familiar? I’ve heard this several times during my travels

the last few weeks and it didn’t matter what part of the country or what franchises.I was at a long-time Ford client last week who I first started working with in September of

1997. They are coming off of another great profit year, but January had started off a little slow. I noticed the sales staff was a little down and in conversations the main topic was that there was very little traffic and that the dealer needed to step up the advertising. This dealer has always been aggressive and innovative in his advertising and marketing to the

Improving ProfitsIf I Had More Traffic, I Could Sell More Cars

up, but to give them a few ideas on “opportunities to do business.” I pulled up our Salesperson Training Manual that was originally developed in 1995 and that has evolved over the years. One module focused on the salespersons’ responsibilities to generate their book of business. As we started the meeting, I walked up to the easel and across the top I wrote “25 percent” in big bold print. I looked at the room of 10 guys and asked, “We get paid 25 percent of the profit when we sell a vehicle, right?” “Right,” was the quick response followed by, “it can go up to 32 percent if we hit volume bonuses.”I told them that I’ve been in the business for 36 years now, both the retail environment and then into training and consulting. I’m sure there are other occupations, but the

By Jay Prassel

with a nice desk. Do we pay any rent?

• Telephone Expense? Business cards?

• How much do we pay for advertising?

• OK, what out-of-pocket expenses do we have to work at ABC Ford?

Everyone was now very attentive and I think my point was made; they had no financial investment, but participated (received) 25 percent of the profit when they sold a vehicle.Our Salesperson Training Manual suggests (just my opinion) that 50 percent of your business will have to come from other than walk-in traffic. I stated this back in 1995, pre-Internet, and it’s even more relevant today. I told them that I personally believe that a salesperson has an obligation to prospect and follow up in return for the opportunity that the dealer has given us. In our manual, we listed 101 Sources of Prospects back in 1995. Instead of handing that out, even with the updates over the years, I walked back to the easel and asked a few more questions. Let’s make a list of businesses and people that we do business with and have a relationship with.Several salespeople shouted out some suggestions:1. Dry-cleaners2. Restaurants3. Bars (of course)4. Accountants5. Doctor / Dentist6. Neighbors7. Relatives

LEEDOM GROUP

What would happen if we were to get on the phone and start reaching out to our friends and associates to let them know that this is a great time to buy a vehicle and share the incentives with them?

point that it is above benchmark in expense. It’s a smaller dealership surrounded by many formidable competitors. When discussing the agenda with the dealer and his general sales manager, I requested that I hold a sales meeting with the staff to attempt to not only pump them

car business offers an interesting and unique opportunity. I asked a few questions of the staff:

• How much of an investment do we have in the inventory?

• We work in a real nice facility


8. Soccer / Basketball / Gymnastic / Dance Parents

9. Pharmacist10. Church11. And more ………….

Let’s talk about small local businesses (fleetail) that need vehicles:1. Cable Company2. Plumbers3. Heating & AC Contractors4. Handyman Repair5. Construction Contractors6. Auto Part Stores7. Electricians

Now we were on a good roll!What would happen if we were to get on the phone and start reaching out to our friends and associates to let them know that this is a great time to buy a vehicle and share the incentives with them? How much money would it cost us to make 10 calls a day? How much time would it take? At this point the dealer made the comment, “You’ll still have time to read the newspaper, play fantasy football, update your Facebook and download music.” I then offered to sit with them, one-on-one, and help make the calls. It doesn’t have to be anything elaborate, just a 30- 45 second script.“Hello, this is Jay Prassel at ABC Ford, I just wanted to let you know that we have some great deals and incentives right now. 0% financing for 72 months, rebates of $9,000 and end of the year discounts. We also have over 50 quality pre-owned vehicles priced for immediate sale. If you or anyone you know needs a vehicle, give me a call. Mr. Customer, if you could do me one favor? Text everyone you know and

tell them that I have great deals at ABC Ford!” One last question to the group:“Who has a Facebook page that Mr. Dealer sarcastically referred to earlier?”Most everyone raised his or her hand. Would it make good business sense to post the information from our phone scripts on our Facebook page every other week or so? A hand goes up in the back of the room…… “And you know what, Jay? It doesn’t cost me anything!” As we walked out, three or four salespeople asked me to sit with them to make the first few calls. That is what makes my day! A few closing thoughts and ideas:

• The management team now needs to hold the sales staff accountable. My recommendation is to review with each salesperson their daily activity list and do this 30 to 60 minutes before they leave each day.

• Make it fun, not a beat them up session. Maybe a contest for the first vehicle sold off their call list?

OK, I know none of this is revolutionary, proprietary or is going to change the car business as we know it, but is it better than waiting for the door to swing open or throwing money at a sale event?

Jay Prassel is the Leedom and Associates Vice President, Director of Operations. Jay has 37 years of automotive experience and has worked with over 300 dealerships as a profit improvement consultant and Twenty Group [email protected]

Dealer Business Journal is a publication you will find in the hands of over 20,000 dealer principals, general managers and dealership executives each month. It is a magazine read by the decision makers of the industry.

Don’t miss out on an opportunity to connect with this educated, experienced group of professionals in one of our many media outlets:

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DealerBusinessJournal.com


It seems as though merchant services sales reps have been

given a bad name with accusations of false promises, forceful sales tactics and just flat out lying. While many articles have been written to alert dealers of the deceptive practices used by these payment processors, none have yet to educate the dealer. What questions to ask, what information to look for in the savings analysis, and what costs are negotiable as opposed to which ones are not? Every processor out there is not a bad apple, and while some have proven these accusations correct, there is a way to find the good ones in the bunch. For instance, what do you do with calls from representatives saying they are associated with MasterCard and Visa? “Technically” if you are selling merchant services you are associated with these brands, after all you are offering the ability for the merchant to accept these cards. However using a big name to try and help your cause is just a sales tactic and it shouldn’t intimidate or impress. Some may say that they are associated with your bank, and that could hold some truth. Many banks,

Payment ProcessingA Few Bad Apples Spoil the Bunch

mainly large ones, have a merchant services arm as a separate business. Nevertheless the bank is likely still going through a processor, and you are not cutting out one of the middle men by choosing them. Also note this service is not the banks main product and therefore may not have as many resources in pricing, customer service or education. The call to watch out for is one where the sales rep says they are with your current processor and want to upgrade your service or lower your costs. Unless the sales person that signed you up initially or the customer service representative that you speak with when you have an issue, calls to upgrade your service or lower your cost, don’t bite. Probe the caller, ask them what company they are with and see if they say your current processor. Let them know you’re going to contact your initial representative to verify and you’ll give them a call back. Don’t just assume that they are with your current processor as this is a scam used by the bad apples. Savings analysis or cost comparisons are effective tools in making decisions to move your

By Jessica Sweeney, ETA, CPP

processing for better rates. It is no different than getting a better rate on your mortgage. As I have mentioned before, Interchange Cost Plus is the best pricing model for BHPH Dealerships. When looking at a savings analysis you should note that it should at least includes the following: Interchange Breakdown, Association Fees, and Discount Percentages. An interchange breakdown should be an estimate of MasterCard and Visa transactions processed in a month as well as which of those are credit and debit; fees for those transactions and volumes should then be calculated with estimated interchange percentages. For example, consumer research shows that about 80% of BHPH Dealership’s transactions are debit cards which have an average interchange rate of 1.80%; of that 80% about 75% are Durbin Regulated and should only be charged a rate of 0.05%. This can sound confusing so keep in mind two very important things about interchange; the interchange table has about 360 different card types and even lots of ways to process those cards that all affect the

LEEDOM GROUP


19Dealer Business JournalSeptember 2013

From page 8digest the fi rst one. You have to look at reports, see what is available and see the integration for yourself. This is the most critical point in the relationship where it’s time to make a commitment.

TrainingWill your provider send people to you to install and train? How

much support is included?

Fear of ChangeBeing afraid of change is a good thing when considering changing

your DMS solution. Every single person in your organization will have to start back at zero. Everything will be different. Speed and effi ciency will drop in the short-run and you may have to do a lot of double-entry to ensure that the data is maintaining its integrity and the new DMS is working as advertised. Accounting integration won’t be the same, etc. Knowing all of this means you should not make this sort of decision cavalierly: it is a big deal to change systems and you need to make sure that the new features are worth the price.

Growth PlansDoes your DMS have new functionality in mind? Are they en-

hancing reporting, integration or analysis? Your DMS needs to be in a position to grow with you. Do you want an innovator and industry leader (read more expensive here) or are you satisfi ed with a follower As I said before, our business runs on data. How that data is captured, interpreted, utilized and analyzed is absolutely critical to growing your business and maintaining your competitive advantage. This is the most critical system you will make in your business.

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DBJ_2013_SEPT.indd 19 8/29/13 4:11 PM

interchange percentage. Secondly interchange fees go the issuing bank, your processor, bank or ISO have no control over these fees and they will be the same no matter where you choose to place your business. If you currently have a fixed rate model, these fees are factored into that rate. Also, look for association fees on your savings analysis, Visa and MasterCard charge 11 basis points on all volume and $0.0195 on all transactions. These fees go to Visa and MasterCard and again your processor, bank or ISO have no control over them. There are also miscellaneous fees charged by Visa and MasterCard that your sales rep should note in your comparison. Discount percentages should also

be on these analyses and that is what the processor or ISO have control over to, in turn, offer you lower rates. ISOs, like Paymaxx Pro, group all of their merchants into one portfolio and use that to negotiate lower costs with the banks. A single merchant that processes 50 transactions a month totaling $15,000 would not have as much leverage to negotiate lower pricing as a group of merchants processing 6,000 transaction per month totaling $1.8 million, and that is why ISOs say that they can lower your costs. We know that there are many schemes and tactics to get you to spend money and it is prevalent in all areas of business, not just with payment processors. It is

important to educate yourself and ask questions. If a sales person is honestly trying to sell you their product they will be happy to answer any questions you have and if they cannot answer them, they will be willing to research it for you. Don’t be afraid to do a little research yourself; do a quick search on the internet for complaints against the processor or ask the sales rep for references. There are still good apples out there, you just have to know how to pick them.

Jessica Sweeney, ETA CPP, is the relationship manager for Paymaxx Pro, the national payment processing division of the Leedom [email protected]


LEGAL & LEGISLATIVE

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DBJ_2013_SEPT.indd 29 8/29/13 4:12 PM

Would you lease a billboard at the edge of town and plaster

a sign on it that identifies your dealership and says WE VIOLATE THE TRUTH IN LENDING ACT. How stupid would that be? Some dealers are

doing the equivalent of that on the Internet, however. A friend of ours from South Carolina sent us this Internet ad posted by a local dealer:

2004 Toyota Camry Solara SLE, 149,672

OMG!!! THIS IS ONE SHARP RIDE!!!

JUST $7995 AND ONLY $2500 DOWN AND $250 A MONTH.....

NO INTEREST!!!!WOW!!! WOW!!!! WOW!!!!

WOW!!!!!!!!!!!!OR IT CAN BE YOURS FOR JUST

$5800 CASH.....OUR SPECIAL WHOLESALE PRICE.....AND

HAVE NO PAYMENTS!!!EVEN BETTER WOW!!!!!!!!!!!!!!!

Not one, not two, but three Truth in Lending violations in one ad! Failure to state the cash price, claiming no interest and failing to comply with federal advertising rules. A trifecta. Having two different figures for the cash price of the vehicle doesn’t work. It’s clear that the car can be bought for cash for $5,800. That,

Legal OpinionUnderstanding Hidden Finance Charges

then, is the “cash price” for TILA purposes. The price of $7,995 for an installment purchase clearly contains a hidden finance charge – the difference between $5,800 and $7,995, only in this case, it isn’t exactly “hidden,” since the dealer has been kind enough to leave the equivalent of a signed confession by saying the cash price is $5,800. The dealer might be under the mistaken impression that the so-called “no interest” transaction is not subject to the Truth in Lending Act. That would be wrong, first because it is clear as a bell that the difference between $5,800 and $7,995 is a finance charge, and, second because TILA applies to any credit transaction repayable in more than four installments whether interest is charged or not. If TILA applies, those provisions of TILA that regulate advertising apply. Those advertising provisions say that if an ad contains a “triggering term,” as the above ad does, additional disclosures are required that are not in this ad. Dealers, and especially dealers away from the large metropolitan areas where the federal enforcement agencies often have offices, were once able to fly under the radar when it came to strict compliance with federal consumer protection laws. That’s a lot more difficult now. All those young, idealistic enforcement lawyers who work for the Consumer Financial Protection Bureau, the Federal

By Tom Hudson

Trade Commission, the Department of Justice, state Attorneys General offices and other enforcement

agencies have computers. They can sit at their desks in the home office and, when they aren’t playing Angry Birds, cruise the web, looking for advertising violations like this one. The radar keeps getting lower. And the discussion above deals only with the federal law problems with this ad. Any plaintiff ’s lawyer worth his tasseled loafers could gin up some state law violations, as well. Maybe the dealer who put this ad together should contemplate other ways to make money. I know! Maybe he could sell exclamation points!

Tom Hudson, Esq. ([email protected]) is the author of CARLAW®, CARLAW® II, Street Legal and CARLAW® III, Reloaded. He is also the Editor/author of the CARLAW® F&I Legal Desk Book. The books are available at www.counselorlibrary.com. He is also the publisher of Spot Delivery®, a monthly legal newsletter for auto dealers, and the Editor in Chief of CARLAW®, a monthly report of legal developments in all states for the auto finance and leasing industry. For information, call (410) 865-5411 or visit www.counselorlibrary.com.

tiLA advertising provisions say that if an ad contains a “triggering term” additional disclosures are required.


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In today’s high technology environment, every dealership

should have a written electronic systems communications policy which covers not only social networking but also includes e-mails, faxes, cell phone calls, instant/text and voice mail messages and internet usage. Companies should monitor electronic communications sent, received, or stored by dealership’s electronic communications systems and equipment, which includes dealership provided cell phones, smart phones, and laptops. A current electronic systems communications policy should contain the right for the dealership to disclose the content of electronic communications, even after they have been deleted, when, in the dealership’s sole discretion, there is a need to do so. All electronic communications should be used only for business purposes. To the extent employees use electronic communications for non-business purposes, the dealership should reserve the right to monitor personal use to the same extent that it monitors business use. This may include the use of automated software. The dealership should reserve the right to log, record and store all out-going and in-coming electronic communications as well as the right to access the contents of all electronic communications stored in an employee’s e-mail, voice mailbox or other electronic medium at any time. Employees should be prohibited from using the dealership’s

General CounselCreating an Electronic Communications Policy

electronic communication systems to set up or run a personal business, transmit or download offensive materials or engage in any other acts not in the dealership’s best interest. Employees should not access the internet or any social networking sites during work hours unless such access is directly related to their job duties. Employees should also be warned about accessing personal e-mail accounts on dealership computers or on personal devices during work hours. Employees should not expect that electronic communications, even those marked as personal or accessed by a personal I.D., are private or confidential. As such, employees have no expectation of privacy in the electronic communications sent, received or stored by the dealership’s electronic communications systems. An agreement should be signed between the dealership and the employee stating that the use of any electronic

By Debra Dawn

communications system or equipment constitutes consent to monitoring and recording and that failure to adhere to this policy may result in discipline or dismissal. As a final step in implementation, the policy must be evenhandedly applied at all levels of the dealership. Employees who violate any of the terms and conditions of the policy should be subject to progressive discipline. Unless properly enforced, the use of social media will infiltrate the work day and result in a significant loss of productivity and employee morale.

Debra Dawn is Leedom Group’s General Counsel and Compliance Director Debra Dawn has formed AUTOLAW Group to assist dealers in all facets of dealership compliance.

[email protected]

LEGAL & LEGISLATIVE


LEGAL & LEGISLATIVE

I’ve been doing quite a bit of talking lately to my BHPH dealer friends

about the Consumer Financial Protection Bureau (CFPB or Bureau) and how they need to get ready for the CFPB now. Of particular focus in my discussion is the requirement to prepare a robust Compliance Management System (CMS). I’ve also been walking quite a few dealer lots lately as part of the onsite audits we’ll often perform for our clients. Now, I’ve been walking dealer lots since I was a kid so I know what a lot is supposed to look like, how the cars should be displayed and what’s supposed to be on the car itself. On the way back home the other day from a recent audit, I realized how dealers may be making it too easy for the CFPB. As you might have heard, at the end of October last year, the CFPB released a report titled “Supervisory Highlights: Fall 2012” that described the problems its examiners discovered through the Bureau’s supervision process. In its report, the CFPB stated that a “critical component of a well-run financial institution is a robust and effective compliance management system (CMS), designed to ensure that the financial institution’s policies and practices are in full compliance with the requirements of Federal consumer financial law.” The CFPB has also stated in its Supervision and Examination Manual that it “expects every regulated entity under its supervision and enforcement authority to have an effective compliance management system adapted to its business strategy and operations.” As a

Legal Compliance Too Easy Boys, Too Easy

BHPH dealer, you’re not under the CFPB’s supervisory authority yet, and won’t be until it issues a “larger participant” determination for BHPH dealers or catches you engaging in bad conduct; however, you are under the CFPB’s enforcement authority for any alleged violations of Federal consumer financial laws. Think of those complaints you may get from a consumer after you’ve repossessed their car; get too many of those complaints reported to the CFPB and it may exercise its supervisory and enforcement authority over you. The CFPB considers an effective CMS program as including four interdependent control components: Board and management oversight; a compliance program; a consumer complaint response; and a compliance audit. The CFPB believes that when all of these control components are strong and well-coordinated, an entity should be successful at managing its compliance responsibilities and risks. In its Supervision and Examination Manual, the CFPB has stated that its examination will include a review and testing of components of the supervised entity’s CMS and an initial review will help them determine the scope and intensity of its examination. Think about that—the CFPB will conduct an initial review of your CMS, provided you have one, and that review will help determine what other violations they may look for, and how hard they’re going to come at you. But, if you don’t have a CMS in place, where does that leave you? I think I can help answer that question by telling you about my walks on the lot as part of our onsite

By Eric L. Johnson

audits. When I first arrive at a dealership to conduct an onsite audit, I’ll walk the lot. I do so to see if I can find any easy compliance violations, such as a Buyer’s Guide not being displayed on a vehicle out for sale, or one that is displayed but has incorrect statements, such as stating a service contract was available for purchase from the dealer when the dealer doesn’t actually offer one. Not having a Buyer’s Guide on the windshield makes it very easy for me to spot compliance violations. If a dealer messes up even those simple requirements, it makes me dig a bit deeper in my audit on the more complicated requirements. I know that the scope of my review will be rather broad and that I’m going to be at the dealership for a long time that day. Now, equate that to the failure to have a robust CMS at your dealership. If the CFPB does come knocking at your dealership, and you don’t have a CMS ready for them to initially review, you’d better get prepared for a deep and powerful review of all your operations. You’ve made it too easy for them to broaden the scope of their review and to intensify that review. Compliance is hard enough, but don’t make it too easy for them by not having a robust CMS in place.

Eric L. Johnson is a partner with Hudson Cook, LLP in Oklahoma City. He practices automotive finance law, banking and consumer financial services law. This article is provided for informational purposes and is not intended nor should it be taken as legal advice.


Over the past three years my most-highly requested keynote

or seminar topic has concerned how to build high performance cultures. I’ve written a lot about this topic, as well as produced several DVDs on the matter. Leaders are

right to seek strategies for improving their cultures because of this important principle: culture dictates behaviors and behaviors ultimately determine results. Thus, when you seek to improve an operation you must return to strengthening its foundation; the culture. After all of my teaching and speaking experiences, I also have come to believe that many people learn better when material is presented in bite-sized segments, making the strategies more memorable, digestible,

LEADERSHIP & TRAINING

Learn to LeadThirty-One Cultural Tips, Tenets and Tests

and applicable. The pointers I’m presenting in this article will address one or more of culture’s five key pillars: core values, mission, performance standards, core competencies and people. Following are thirty-one cultural tips and tenets to test your culture, and evaluate how you can improve it; even if it’s outstanding at the moment. In fact, that possibility brings us to the first point:

1Culture is never done. It’s like a garden that requires constant

attention. Ignore it for long and the weeds and bugs will take it over.

2Embrace the mess; growth is rarely neat and orderly. Pervasive

organizational equilibrium precedes death.

3The wider the gap between top and bottom performer, the

weaker your culture.

4Avoid the temptation to ignore corporate strengths simply

By Dave Anderson

because they’re strong. Leverage them instead to make them greater.

5Measure people by two standards: performance outcomes and

behaviors. But first you must define expectations for both.

6Evaluate your performance standards: are they high and

clear enough? If not, redefine them. Under-performers love gray areas.

7Protect your culture by interviewing rigorously and

hiring slowly. Just one bad hire can severely infect your culture.

8Improve accountability with written performance standards;

otherwise your “standards” are simply suggestions.

9Your culture is your organization’s foundation. Failing

to address its cracks and flaws puts the entire entity at risk.


10 Multiple cultures under the same rooftop weaken an

organization. Each department must do their part to strengthen their own culture.

11You can’t not have a culture. The questions are: What is it,

and who or what is shaping it?

12If team members don’t share the same mission,

they’ll pursue their own agendas, unknowingly working against one another.

13Changing your vision won’t create sustainable changes in

employee behavior; changing your culture will.

14Essential competencies of high performing organizations:

hiring great people and creating outstanding customer experiences.

15Evaluate a leader based on the culture he or she has created

in their department; it’s their report card.

16Some people have a vested interest in being destructive

and divisive to distract from their shortcomings; cultural infections.

17Lack of accountability rolls out the red carpet for entitlement

to infect your culture.

18Mission is part of your culture, vision is not. Your mission-

driven culture must align with and support your vision to be successful.

19Much like basic hygiene, strong cultures require

constant attention. Ignore either for long and people start to notice.

20 Building a culture has no finish line. Just about the time

you think you’re done, YOU’RE DONE.

21Great companies don’t talk about hundreds of things.

They hammer the same themes repeatedly: values, mission and standards.

22Strong cultures stretch people to reach their bar; they don’t

lower their bar to accommodate one’s competence or comfort zone.

23Close the gap between where you’re at and where you aspire

to be by getting people better or getting better people.

24Toxic cultures are evidence of toxic leadership. A fish rots at

the head: it starts to stink at the top first.

25Like a sculptor shaping a masterpiece, great cultures

are built by hands-on leaders; not by memo, voicemail or email.

26A leader who daily lives an organization’s core values

communicates them better than one hundred speeches on the matter.

27Low expectations presume incompetence. They say, in

effect, “We believe you’re only this good.”

28When the performance bar is too low, people tend to live

down to it. Leaders should be in the stretching business.

29Daily walk your talk; your people would rather see a

sermon than hear one.

30It’s difficult to improve your culture without first

improving your leadership. The best step to growth is to get in front of a mirror.

31Leaders of robust cultures act more as pace-setters

than scorekeepers; catalysts versus administrators. Step up!

There’s much more to learn and apply concerning culture, but the points here provide a framework for tuning yours up. Incidentally, if you follow me on Twitter, you have already had the opportunity to benefit from these points as I continually add cultural tips there, as well as other strategies. To get continued daily education and inspiration for your business, my Twitter handle is @DaveAnderson100.

Dave Anderson is president of LearnToLead. He is an international author and speaker, giving 1,000 leadership presentations over the past decade in 14 countries. Dave has been a car salesman, general manager and director of some of America’s most successful dealerships. He is the author of 12 books, including “Up Your Business,” and “How to Lead by THE BOOK.” Dave spoke at the NADA Convention for ten consecutive years. Call 818.735.9503, e-mail dave@ learntolead.com, or visit www.learntolead.com. Follow Dave on Twitter @DaveAnderson100.


When you purchase new or are renewing your existing insurance, it’s imperative to collect the

right amount of information to allow your insurance agent to assess the potential risks confronting your business, home or life. Although the initial task of putting all this information together may be daunting and a little challenging, it will provide both you and your insurance agent with a helpful checklist for subsequent years to come; allowing to update as needed; thus always providing

you with the best, most accurate information for quoting your insurance needs.

SUGGESTED MATERIALS AND INFORMATION TO PROVIDE TO YOUR INSURANCE AGENT The following documents give your insurance agent enough information to adequately understand your business situation and its limits to create the right coverage and best protection:

1. Current financial records for each of your companies including, tax returns

2. Corporate and partnership documents and business licenses

3. Franchise agreements 4. Lease agreements 5. Service agreements6. Vehicle inventory records for owned, service and

those held for sale7. Personnel and payroll information for owners,

company officers and employees8. Current insurance policies and employee benefit

plans

CREATE A LIST OF ALL YOUR COMPANIES Compile your list with complete legal names, tax id numbers, addresses, email addresses, phone and fax numbers; your list should also include any subsidiaries. This information should be available to you through items 1 and 2 from the list above. Describe each of your companies’ type of business and the year each company was created. Double check everything. Do not have your

Stop LossPrepare Yourself for Insurance Quotes

company incorrectly named in your insurance policy or fail to describe your business correctly in your insurance application. These types of errors can jeopardize coverage under your insurance policies.

CREATE A LIST OF YOUR BUILDINGS OWNED OR LEASED BY YOUR BUSINESSES Items to include are: your list of owned buildings: the square footage; building use, types of construction; types of installed security systems and the age of building. Don’t forget the buildings or spaces you may lease to others. You should have recent appraisals of your owned buildings, prepared by a qualified appraiser. This appraisal includes: photos of your property and the inside and outside of your buildings. For buildings leased to you; your lease agreement should be available for your agent to determine what coverage you need and if your policy will need any special endorsements providing any coverage to your landlord. Your list should include the same information, plus itemization of any betterment or improvements you may have made to the leased property to adapt it to your specific use.

GATHER AND REVIEW ALL OF YOUR CONTRACTUAL OBLIGATIONS AND AGREEMENTS Your agreements should outline each party’s responsibilities: specifically their obligations to provide certain insurance coverages’. Items to include: any franchise, building, equipment, signs and billboards, employment and service agreements. If you lease any property, whether it is a building or equipment; designate which party will provide property or liability coverage. If your lease states you are to provide coverage, obtain additional details regarding the building or equipment; that way your agent can accurately price this coverage. You may also need to provide liability coverage for the leaser requiring specifically endorsing your policies to cover what the lease agreement requires. Review the franchise agreements and/or financial agreements for vehicle inventory to determine what, if any coverage the manufacturer or lender are providing for the vehicle inventory and what coverage, if any, needs to be provided by the upcoming policy. Many car dealers and auto service shops provide service, under a written agreement, to auto clubs, car rental agencies and

By John Krivacsy

BUSINESS OPERATIONS

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chased a vehicle.In addition to ramping up its marketing, TrueCar is now looking

at a related though as yet relatively untapped market — independent dealers. Potter said TrueCar has always had the ability to provide this service to independent dealers, but now the company is gearing up. It purchased a new booth for the independent dealer trade show circuit and was a sponsor at the June National Independent Automo-bile Dealer Association Convention and Exposition.

“The total loss product we have fi ts in very well with used ve-hicles since the average total loss unit runs between $8,000 and $12,000,” Potter noted. “Independents typically have the lower-cost units that fi t well with replacement vehicles.”

Because TrueCar can easily work with franchise dealerships’ DMS systems, the pay-per-deal model works best in the states where it’s allowed. Fragmentation among DMS systems among in-dependent dealers requires a subscription-based model. Pricing can range from $299 to $2,500 a month depending on the volume of in-ventory at the dealership.

“At the NIADA show our booth was literally overcrowded,” Potter said. “Dealers know about us, and were excited to learn we had a product available for them. We will continue to roll out our product line to independents at various events across the country.”

The company is also testing and getting ready to roll out na-tionally a private-party to private-party and private-party to dealer vehicle purchase program. The idea came about from the military members in their affi nity portfolio who often have to move from base to base or get deployed overseas. They very much like the idea of being able to put their vehicle on the site and sell it quickly, easily and get a fair price, Potter said.

“Would-be sellers are asked to answer about 50 questions re-garding the vehicle,” he said. “Was the vehicle smoked in? Are the headlamps fogged? We ask for a Carfax or AutoCheck and dealers and other private individuals can purchase the vehicle.”

It’s done in an online auction-like setting and another member of their credit union or other affi nity partner can purchase the ve-hicle or a used car manager can buy it.”

The program has run for three months in a beta test and several hundred vehicles were sold. Potter said the program will roll out na-tionally soon.

“We don’t like to even use the phrase ‘lead-generation’ about our service,” Potter said. “We prefer the term ‘introduction.’ It does more accurately refl ect what we do. We introduce the buyer to the seller and detail the parameters of the price of the vehicle they are interest in. It’s worked well for hundreds of thousands of sales and now we’re getting ready to expand.”

DBJ_2013_SEPT.indd 25 8/29/13 4:12 PM

various government agencies. These agreements should be included in your gathering of contractual obligations to assure that you are meeting your insurance and other obligations.

FINANCIAL AND PERSONNEL RECORDS All your relevant data is needed to provide information concerning your annual sales: break these records down by various indexing categories: such as; car sales, service, parts, etc. Helpful, itemized information is used to properly price your insurance and assist in getting the right amount of insurance coverage and their limits. Execute a financial records and physical review. Develop a descriptive summary with values of all your owned and leased personal property: examples would be; office equipment and supplies, furnishings and shop tools, this would include property owned by others that you may be responsible for, or decide to provide insurance coverage for; like employee tools. Your decision to provide any coverage for property owned by others may require adding special endorsements or coverage parts to your insurance policy and may be influenced by any lease or employment agreements. Monthly financial records should be reviewed to determine the value of vehicle inventory. Providing information reflecting the inventory values for new vehicles, used vehicles, service vehicles and demo vehicles monthly allows the company to adjust for peak values and normal variances in the inventory and will result in more accurate pricing.

PAYROLL INFORMATION Payroll and employee figures are used in the pricing and underwriting review process. Be prepared to provide information concerning your company officers and employees that reflect payroll figures, employee position, number of full time employees, number of part time employees, subcontractors and consultants. Leased employees should also be included and your agreement with them or an employment agency should be reviewed to determine your responsibilities to these employees and any outside agencies. Have your current insurance policies and employee benefit plans available. This will allow you and your agent to compare your current insurance products to those proposed for your upcoming policy year. Review

Continued on Page 22


the deductible structure in your current coverage. Many times, deductibles have an impact on the pricing of your account and usually result in an increase in the deductible. If the deductible is increased, the carrier not only provides a credit for the higher deductible, but the variance in the deductible can also be used to adjust the value of the losses.

RETAIN CLAIM INFORMATION FOR THE PAST FIVE YEARS Claim Losses are a very important piece of information that is needed to price your insurance. It allows for comparison of your loss information to

the insurance company’s loss data. The loss information provided by the carrier for the past five years should be reviewed thoroughly. In fact, a full review of carrier loss data periodically is a good idea. Ask your carrier to provide you with loss runs’ each quarter or bi-annually and plan a management

review with appropriate department managers. Some key items to look for, fact check and correct in a timely manner include:

1. Are all the losses reflected on the loss runs for your operation? Not surprisingly, errors do happen on carrier loss runs. A thorough review will enable you

to get any such error corrected before it impacts on your policy premium.

2. Are there multiple losses of a similar nature such as theft or auto accidents? Or are there any type of losses for which a corrective action could have been made to prevent future losses? If so, have you made any adjustments in your procedures or security to prevent future losses of the same type? For example, if you had several vehicle thefts, did you enhance your lot protection or add a security guard? Did you paint the curbs after a customer tripped and fell in that area? This information may be crucial in allowing the carrier to look at the losses in a more favorable light.

3. Are there any large losses? Most carriers consider a single loss for which a payment is made in excess of $25,000 to $50,000 to be a large loss. The carrier will want as much detail as possible about a large loss. Here again, be sure to include any information for adjustments in your procedures that resulted from the loss.

Preparation is the key when submitting an insurance quote. Start by collecting all of your documents, materials, obligations and agreements. Create the necessary lists of all your companies, buildings, employee info, financial and personal records. By gathering and analyzing this information you will better define your insurance needs by tailoring your policy to cover what is actually needed and not pay for unnecessary things resulting in managed costs of your insurance.

John Krivacsy is a senior vice president and Claims and Loss Control Manager with Automotive Risk Management and Insurance Services, Inc., (ARM) based in Stockton, Calif. To reach Mr. Krivacsy, send an e-mail to [email protected].

BUSINESS OPERATIONS

INSURANCE QUOTES continued from Page 21

by gathering and analyzing this information you will better define your insurance needs by tailoring your policy to cover what is actually needed and not pay for unnecessary things resulting in managed costs of your insurance.

Get the Dealer Business Journal delivered directly to your dealership, your inbox, or BOTH for FREE! Sign-up online at:dealerbusinessjournal.com/subscribe.php


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DealerCentric Solutions, the consumer fi-nance management system innovator, today launched ID Drive, a patent-pending ID scan-ner technology that gives dealerships the most powerful protection against fake IDs and iden-tity theft imaginable.

ID theft is now a national epidemic, and more criminals are using fake IDs to test-drive, and even buy, cars. Developed in partnership with AssureTec Technologies, an ID authentica-tion technology firm, ID Drive is the first solu-tion that gives dealerships the same, state-of-the art protection used by Homeland Security and the U.S. military.

With one scan at ID Drive, dozens of com-plex tests for thousands of ID types are automat-ically performed, leading to instant validation or red flags going up. But the dealer benefits don’t stop there: with that one swipe, a customer’s in-formation is put into serious action: it’s extract-ed, purified and enhanced, and can be pushed into a dealer’s CRM and finance systems.

The customer, the vehicle, any pre-existing lead or credit app data, the sales and F& I de-partments, and sales management are all elec-tronically connected and able to communicate. So, when that test-driver returns, the right deal structure can already be in place, shrinking

time-to-close by hours. “The ID thieves hitting dealerships today

are super-sophisticated and so is their technol-ogy. But dealer ID verification processes aren’t” said Pete MacInnis, CEO of DealerCentric. “With all that endless photocopying, barcode-scanning and verification calling, they have re-mained in the Dark Ages, powerless against this fast-growing and incredibly costly problem. ID Drive may be small and sit on a desk, but it’s the most potent anti-fraud and test-drive security solution ever invented for dealerships.”

National & Dealership Epidemic: ID theft is an American epidemic. According to the FBI, it has overtaken the drug trade as the most cost-ly U.S. crime. According to an Open Security Foundation report in 2013, more than 267 mil-lion consumer records were exposed, and a re-cord, 60 million pieces of personal ID wound up in the hands of identity thieves, last year. And more dealerships are reporting that more fraudsters are presenting impeccable-looking (fake) IDs for test-drives, and then driving off…or even successfully purchasing vehicles with them.

The government requires dealers to take steps to flag identity fraud. But dealerships use barcode scanners, which can only verify that

data is present on a card, not that it’s valid. And dealers are forced to make time-consuming calls to organizations like the DMV to verify iden-tities, but most cars are bought on weekends when these organizations are closed. It’s be-coming an increasingly expensive, scary prob-lem: some lenders are now requiring dealers to buy back ID-theft-related deals.

ID Drive’s Extreme Technology: ID Drive was created through an exclusive auto retail-ing partnership with AssureTec Technologies, which is the ID authentication solution cho-sen by the Department of Homeland Security, the Department of State, the NYPD and DMVs nationwide. ID Drive incorporates the world’s most powerful ID-scanning hardware and soft-ware and customizes it for auto retailers, so they have the extreme technology they need to fight back against the fake ID wave.

“At DealerCentric we’re on a mission to innovate solutions that will make the test-drive-to-sales-to-financing process radically more ef-ficient for both dealers and their customers,” MacInnis said. “ID Drive is a key component in what will ultimately be the first end-to-end deal-ership solution that bridges the gap between the auto sales and financing processes, at the pint of sale.”

DealerCentric Unveils ID Scanner Technology

DBJ_2013_SEPT.indd 33 8/29/13 4:12 PM

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Believe it or not, the Affordable Care Act (ACA), was signed

into law over three years ago. This landmark legislation promises to change the delivery and cost of health care within the U.S. for years to come. Considering all of the press, newscasts, and articles written on the subject, many dealers are not sure if the reform laws will affect them, and if so, how. There are many facets of health reform and it will likely affect everyone either through your business or through individual coverage. Unfortunately, trying to understand the impact to your business can be confusing and difficult. In this article I hope to lay some of the ground work in determining if these laws will apply to your dealership, and if so, share some of the planning considerations. For many dealers the decision to not provide health insurance in the future may cost you more. Although the employer mandate and penalty provisions were delayed one year to January 1, 2015, here’s what you should prepare for now.

DETERMINING WHETHER YOU “PAY” OR “PLAY” First you must determine if your business is a “large employer,” which is defined as a business that has 50 or more full time equivalent (FTE) employees. To determine if you have 50 FTEs, you must go through a calculation. You must count your full time employees for each month plus the hours of your part time employees, divided by 120, to determine how many FTEs you have

Health InsuranceHow Will Health Reform Affect Your Dealership?

for the month. If you average more than 50 FTEs for the prior year, you are a “large employer” and subject to the employer mandate and penalty provisions. If your dealership has less than fifty FTEs, you will not be subject to the employer mandate and penalties.

PAY If you are a “large employer”, you must offer a minimum value, affordable health plan to your employees or be subject to a penalty of $2,000 per employee per year. However this penalty only applies to full-time employees in excess of the first 30 full time employees. Therefore, if you have 51 FTEs and 50 full time employees you will have to pay a penalty of $40,000 per year (20 full time employees times $2,000). This is considered a penalty for tax purposes, therefore it is not deductible by the dealership. The non-deductable portion of this penalty equates to a tax deductible amount that may be up to 40 percent higher than paying deductible health insurance premiums (depending on your tax bracket). Thus the $40,000 penalty mentioned above would equate to a deductible health insurance payment of about $70,000.

PLAY If you offer health insurance, and have 50 or more FTEs you are not out of the woods yet. Any of your employees that make less than 400 percent of the federal poverty level for their families — and who do not purchase your health insurance, but instead enroll in the state or federal health insurance marketplace — may

By Dave Wiggins

cause you to pay a penalty of $3,000 per employee if they are eligible for and receive a premium tax credit. They are only eligible for the tax credit if you do not offer minimum value, affordable health insurance. Thus it is difficult to know if you will have penalties even though you are providing health insurance, until you determine whether you are offering a minimum value, affordable coverage to all full time employees and their dependents. These penalties are also non-deductible. Four-hundred percent of federal poverty level is about $22,000 for an individual, and $88,000 for a family of four. As you can see, this may encompass many of our dealership employees and their families.

ALTERNATIVE OPTIONSSetting up a company Many dealers with more than 50 employees have wondered if they can set up several companies to avoid the 50 FTE count. However, there are provisions based on tax law statutes that tie related businesses together and will treat them as one employer. The related party provisions are complex, but let’s just say they will treat commonly owned dealership entities as one business. Having said this, you may be able to change the ownership of your businesses to include unrelated parties or non-direct family members. We recommend that you contact your CPA to discuss this option. Beware that you will need to count your dealership and related finance company as one employer for purposes of determining whether or not you are a “large employer.”

BUSINESS OPERATIONS


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LEASING EMPLOYEES Another alternative that may be particularly helpful for dealers that are just over the fifty FTE limit, is to consider reducing the number of full time employees by using “leased” employees. These are people that work at your site, but are leased to you by another employer. Such employees must meet certain rules to be considered leased employees, but if properly structured, they will not be treated as your common law employees, rather they will be employees of the leasing employer .

PART-TIME EMPLOYEES Another way to minimize the penalties is to employ more part-time employees. Although such employees are still considered in determining whether or not you are a “large employer,” the penalty is only calculated using employees that are full time. “Full time” for this purpose is someone who works 30 hours or more per week or 130 hours per month. For example, if you have 51 FTEs, but only 40 of your employees are allowed to work in excess of 30 hours per

week, your penalty would only be $20,000 per year, since there is no penalty for part-time employees. Some very large companies, including restaurants and convenience stores, have been severely reducing the hours of full time employee in 2013 to avoid having to offer them coverage under the ACA. One way to determine how much health reform will cost your dealership, is to get specific, concrete information to help answer that question. CliftonLarsonAllen’s Health Insurance and Penalty (HIP) calculator will help you weigh your options. Although we have barely scratched the surface of the many provisions that continue to be enacted with regard to health reform, hopefully this gives you some basic understanding of the penalty provisions that may affect your dealership and some of the planning ideas you should consider.

Dave Wiggins is an automotive CPA with CliftonLarsonAllen and has expert knowledge of the inner-workings of both retail and buy here-pay here operations.

HEALTH INSURANCE continued from Page 24

BUSINESS OPERATIONS

There is no question that there is a hint of fall weather in the air and a few leaves scattered around the yard.

As the old saying goes, when the leaves fall, prices will also fall. Notice I said a “few leaves.” This means it is still a relatively solid market. Most of the comments included within the Black Book survey personnel reports from the past week indicated an overall softness with a few describing the market as leveling off. The average segment change this past week dropped to -$73, which is lower than the most recent three week average of -$78. Gas prices continued to decline this past week by -$.05 for gas and -$.025 with the diesel pumps, with this being the third straight week for gas and diesel declining prices. In traditional times one would think the more fuel efficient vehicles would be in less demand, thus bringing softer values within the wholesale market channels. When looking at the four car segments with the smaller declining levels, they are all from the more fuel efficient vehicles. The Entry Mid-size Cars at -$29 and the Upper Mid-size Cars at -$30 were followed closely by the Entry Level Cars at -$31 and the Compact Cars at -$35. The

Market WatchLeaves are Falling, but Cars and Trucks Improve

next level of change was the -$50 for the Full-size Cars. Of the best four, all of them had dollar declines of less than half that of the segment average. The trucks at a -$54 average segment change amount had change levels as little as -$14 for the Compact Pickups to as much as -$123 for the Luxury SUVs. When looking at the past three weeks of average change the Full-size Pickups and the Compact Pickups lead the pact. A couple of weeks ago we were looking at the level of change of the Compact Crossovers and how this segment had the largest percentage change of any segment - car or truck. Over the past three weeks the average weekly change for the Compact Crossovers is identical to the total truck segment change at -$53, and right in the middle of the pack for the percentage level of change of all twenty-four segments.

Ricky Beggs is the Editorial Director at Black Book, a provider of accurate pricing insight, mobile solutions and online vehicle trade-in valuation for the automotive industry. www.BlackBookAuto.com

By Ricky Beggs


27Dealer Business JournalSeptember 2013Dealer Business Journal — 2013

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From page 17object to the device as a condition of their loan… still not convinced?

Legal LiabilityThe second and most important reason to disclose the use of GPS

and Collection Technology devices is to reduce your legal liability re-garding the devices.

Depending upon which type of device you are using and which fea-tures of that device you are using may determine how far your legal obli-gations go with customer disclosure. However, with Right to Cure laws, Consumer protection acts, Consumer Privacy Acts, not disclosing the use of the device could open you up to legal issues such as fines or even civil action.

So even if you are reluctant to disclose based upon the possibility of the customer tampering with the device, the risk of legal liability greatly outweighs any loss incurred by tampering.

Tom Hudson, partner at law firm Hudson Cook LLP encourages dealers to disclose the use of devices, stating, “Every state that has legal-ized devices by statute has also required a dealer or finance company to disclose that a vehicle has been equipped with a device. Further, more than one state has fined dealers for failing to disclose the devices for en-gaging in an unfair, deceptive or abusive act or practice. You’d have to be brain dead not to disclose the presence of the device.”

Additional interest in the BHPH industry by various governmental agencies has brought legislation to the books in California as well as other states, seeking additional regulation on the industry. So, while there may not currently be a law in your state that expressly requires the disclosure of the device, there could soon be. It makes sense to get ahead of any ad-ditional regulations and cover your business before it becomes an issue.

GPS Disclosure

DBJ_2013_SEPT.indd 27 8/29/13 4:12 PM


By Jeff KargPasstime USA

In today’s technology driven world, using GPS to track assets and Collection technology to help customers make their payments and as-sist in vehicle recovery is common practice in the subprime finance and BHPH space.

While improvements in the technology, lower prices, and additional features have made utilizing technology for asset management and track-ing mainstream, it has also increased the need to fully disclose these sys-tems to the consumer.

Informing the consumer of the device, how it operates, and how it will be used by the lender, is essential to maintaining a good customer ex-perience for the consumer and addressing compliance and liability con-cerns for the lender.

And if you are not disclosing, your argument against it is likely: ei-ther the customer will object to the device and you will lose a sale or the customer will tamper with the device if they know it is in vehicle. Even that being said, there are two distinct reasons that you should be fully dis-closing these devices to your customers:

1. It’s a good business practice, and 2. It’s the best way to lower your liability as a lender against poten-

tial legal action regarding the device First off, disclosing the use of a GPS tracking and/or Collection

Technology device is a good business practice. One of the single best ways to succeed utilizing these devices is to

disclose the device to the customer. Disclosing the device in a positive way can help get “buy-in” from the customer, which can reduce the like-lihood they will become delinquent. Many technology providers offer written disclosure forms for lenders to have customers sign at the time

of installation. These documents provide information about the devices, how they operate and what responsibilities the customer has in relation to the devices.

Additionally, a benefit of disclosure is the psychological aspect that affects a customer who knows a device is installed on their vehicle. This is a powerful tool. When a customer knows their vehicle has a GPS de-vice that can determine their location and/or prevent them from driving if they do not stay current on their loan, they have good incentive to make payments. If you don’t disclose the device, this psychological tool disap-pears. The method of disclosing is also important. Many device provid-ers offer written disclosure forms that can be used. A signed consent from the consumer is the best way to ensure that the customer understands and agrees with the use of a device.

A recent, independent survey study -addressed the issue of disclo-sure. Ninety-four percent of the asurvey respondents indicated that they use written disclosure forms from device providers. The use of disclo-sures improves the customer experience and leads to referrals and repeat business. Not “leaving your customers in the dark” can create a better, long-term customer if they are treated with respect and fully informed of their obligations and the consequences if those obligations are not met.

I know what you are thinking: you will lose customers if you tell them about the device. However, the study has found that customers rare-ly object to the installation of the device whatsoever. Specifically, when responders to the survey were asked if customers object to the installation of a device as a condition of their financing/leasing, 99 percent answered no or infrequently. Only 1 percent answered that their customers object to a device as a condition of financing.

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AutoTrader.com Sets New RecordFor Smart Phone Visitors to Site

ATLANTA — More shoppers than ever visited AutoTrader.com from a smart phone in July, setting a new record in the company’s his-tory. Over 2.1 million unique visitors interacted with AutoTrader.com from a smart phone during the month, which represents a 60 percent increase year-over-year.

AutoTrader.com’s mobile properties include a robust mobile site and a car shopping app for iPhone and Android phones.

“We know from our research that usage of the Internet in the car shopping process in general has increased substantially—even in the last two years—and the proliferation of mobile devices has given con-sumers the ability go online and get the information they need anytime, anywhere,” said John Kovac, vice president of marketing at AutoTrad-er Group. “The increasing role of mobile in the car shopping process is quite evident in our site traffic, and we expect that trend to continue.”

In addition to the 60 percent increase in mobile traffic, the num-ber of unique visitors to the core AutoTrader.com site also increased 13 percent year-over-year in July, bringing the total to just over 17.7 million unique visitors. That is an increase of 17 percent over the same time last year. The strong traffic in July led AutoTrader.com to a fifth straight month with double-digit increases across all key metrics. The continued double-digit growth to the AutoTrader.com site has been driven by a multifaceted media strategy, as well as the overall health of the automotive industry.

“With the increases in traffic that we’ve seen throughout 2013, it’s clear that consumers are returning to the car shopping process in droves, and the strong sales numbers that automakers have been post-ing month after month indicate that those shoppers are turning into buyers,” Kovac said.

Industry News

DBJ_2013_SEPT.indd 26 8/29/13 4:12 PM


Today’s modern Business Development Center is

outperforming most of its predecessors. Great BDC dealers

have moved beyond phone and Internet. Outbound campaigns like equity mining, showroom and service lane follow up, event marketing,

service marketing and email marketing drive incremental sales and more profit. But why now? What has changed? I know many dealers who have failed with their BDC in the past but have come back to the BDC model. Back and in the black! The first contributing factor is we are in the middle of a changing generation of car people. Analog desk managers of old are being replaced by the digital manager of today. In addition, the second, third or fourth generation owner has taken over the reigns in thousands of dealerships. These new owners, principals and GMs grew up with the Internet. It is as natural to them as electricity to my generation. No longer are these dealerships at odds with their customer on the process. The new generation of car people would absolutely buy a car the same way and have aligned their selling system with car buyers to create chemistry rather than conflict in the customer’s experience. This makes customers like them and want to do business with them. The second factor is technology drives traffic to your website and

Business IdeasThree Reasons BDCs Are Making a Comeback

online inventory prior to your showroom or service lane. Even if it’s just to grab your phone number, your website is the portal to your showroom. Customers using your website communicate differently. They may want to call, send you an email, a text or just chat. The quality of that interaction may very well be the determining factor in whether or not they decide to visit your showroom or service department. A BDC can deliver an exceptional experience across all these channels and drive more traffic to the showroom. Some visit by appointment but not all. There are plenty of stealth shoppers who will just show up in your showroom. Let’s take a closer look at the oldest technology in the dealership; the telephone. Did you know that on average, 70% of all customer interaction happens on the phone? That’s right. Add up your total inbound rings and outbound calls and compare that to your total internet leads, showroom ups and closed service RO’s. Hopefully you will have that “aha” moment and realize you have to be great on the phone. Think what your business would be like if every time a customer hung up the phone with someone at your store they thought, “wow!” A BDC can deliver the highest QOI level (quality of interaction). Smooth call flow, permission based handling and good old-fashioned telephone etiquette gives customers the feeling they are being served. This QOI transcends the phone. Timely and relevant responses to emails, value added tactics like video

By Greg Wells

and chat skills, dynamic meaningful voicemails and someone to just make it easy for customers to do business with you all flow from the QOI mindset. It’s really obvious that this QOI is much easier to achieve with a small group of people in a positive environment than through front line employees spread out all over the dealership with little supervision at the interaction level. The third reason BDCs are making a comeback is because incremental sales are easier now with the development of new technologies. CRM capabilities, equity tools, landing pages and microsites all create new business. If your BDC is just handling phone ups and Internet leads then it’s capturing potential lost sales but outbound campaigns and personalized, targeted marketing truly develops sales, and we are talking about business development! Education has played a big role in the modern BDCs success. Correct staffing, skillsets, accurate benchmarks, performance standards, better buy in from the showroom and meaningful financial metrics are all lessons learned from past failures. Ronald Reagan said, “Each generation stands on the shoulders of the generation before it”. Todays BDC is a good example of learning from the past and picking up where others left off in the evolution of an effective and profitable business development center in the digital age.

Greg Wells began BDC Masters, Inc. in July, 2009 to help dealers set up and maintain highly effective and profitable business development centers.

BUSINESS OPERATIONS


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SALES & SERVICE

Being connected any time, any place is a crucial part of business

today as businesses are able to interact with their mobile assets, workforces and customers instantly. In fact, according to PR Newswire nearly 97% of all consumers use online media to shop locally. The Wall Street Journal reports that over 80% of consumers looking to purchase a car, spend over 18 hours online researching models and prices. For auto dealers to stay competitive, online presence is essential. You need to have a clear goal to stay ahead of your competition and drive as much traffic to your website. Here is how you can.

SOCIAL BRANDS COMPETE 24/7 For auto dealers today, managing their brand includes managing their online reputation, as well as their internal reputation (dealer’s employee’s view of the brand). Positive customer experiences can be a competitive advantage as the use of user-generated online ratings and reviews have become more and more critical in the automotive sector. In fact, users opinions are becoming among the most influential type of review, compared with the once-dominant professional critiques. A recent Capgemini Survey reports that over 61% of consumers purchasing a car reference social media tools to research vehicles. Thus having a positive online brand image that reflects your focus on providing the best customer service, is essential.

SOCIAL BRANDS ARE DYNAMIC AND PERSONAL In the current 24/7 world of social media, your brand is never stagnant. It changes day-to-day. As

a dealership, keeping a consistent brand voice, while taking advantage of social media’s dynamic conversations, becomes an integral part to a successful social media strategy. Your values should always be consistent while your interactions need to always be fresh. Dealerships are all the same, right? Wrong. There are many different approaches to working with customers. Some that are engaging and involving dialogues, rather than simply selling cars. You have to modify your strategies based on clientele, location, and shared values.

BUILD CREDIBILITY AND RELATIONSHIPS Participating in local community activities can make a huge impact. It will help you build your dealership’s image by showing care for your community and at the same time offer the opportunity to build relationships with key influencers. As mentioned previously, many consumers are now going online to shop locally. Every opportunity you have to display your name and build sentiment through user-generated content and word-of-mouth is yet another touch point and way to engage with the consumer in your local area.

SIMPLE STEPS FOR IMPLEMENTING SUCCESSFUL SOCIAL MEDIA The development of a successful social media program requires a careful, step-by-step process. Following are some of the top suggestions to get you started and become social media savvy. 1. Build a Quality Website. The

most important item is one’s website. A strong website (built

on best practices) is the central communications hub, without it there is no social media plan. After launching a site then tie it into social media channels i.e. Facebook, Twitter, LinkedIn, YouTube.

2. Design a Simple Communications Strategy. A successful social media plan can’t be achieve without a clear communications strategy. Social media is about open dialogue—a two way conversation— for sharing relevant information and having conversations. Ultimately, you want to gain advocates for your brand. You need to fully understand what you want to communicate to your current and future clients. The topics you want to cover must be relevant to your audience and should be open for them to add their opinions and share ideas. Then you need to clearly define what channels you will be communicating with. Depending on your audience these might change, but a good start is to use the most common social media sites like Facebook, Twitter, and YouTube (if you planning on doing video ads). Don’t bite off more than you can do. Remember, social media is about fresh, current events. You need to post regularly to it. You may want to consider adding a blog area on your site where consumers and users can post comments. This opens up the door for conversation with them. Blogging can also feed all of your other social media channels and generate customer interaction,

Online Strategy By Cesar Yepez

Social Media Presence is Huge in Today’s Market


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SALES & SERVICE

As autumn begins, buy here pay here dealers around the country

are preparing for the early tax season. Starting in October, peaking during the holidays, and continuing into the New Year, thousands of customers are committing a portion of their upcoming February tax refund for a car that they need before the money eventually arrives. This is the new, early tax season, known as the 4th Quarter Tax Season. This is NOT a zero down promotion or some other dangerous gimmick, but an opportunity to put the customer into a vehicle they can afford without breaking the bank ahead of the holidays. It gives you the ability to help your customer as opposed to exposing yourself to unnecessary risk. Plus, the beauty of this promotion is that many dealers who only use outside finance companies do not have the flexibility to make this work. Buy here pay here dealers are often the only game in town. The process includes getting a normal down payment, starting the weekly or bi-weekly payments, and using the future tax refund to fill the gap between what you need and what the customer can afford. This is technically the same as a pickup payment, except instead of hoping the customer can come up with the $500 that they owe you, there is an actual, imminent cash source to get the payment from. The early 4th Quarter Tax Season is the solution to this ‘money juggling’ scenario. Other obligations were delayed and money was borrowed to come up with your initial down payment. Next month, other bills

are put off to catch up with last month. Three or four months down the road, after the cachet of the new car has worn off, it is your turn to get shortchanged to pay the overdue cell phone and pay back mom for the down payment loan. When children are involved, the average tax refund is a single check totaling over $5,200. With this ‘Monopoly Money’, that $500 pickup payment can easily become $1,000 or more. Use the ‘Monopoly Money Effect’ to help customers make decisions that benefit them in the long run. In February, once you have the customer’s tax refund check in hand, you have the chance to sell them again: a 2nd down payment, insurance, or warranty. “After the deferred down payment is deducted, your agreed refund check is $4,700. But if we are able to

write you a check for $4,200, look at how your payments drop. Wouldn’t your life be easier with $60 per week payments instead of $80?” Play with the numbers. Show the benefits of a higher, second down. Another benefit to dealers, especially buy here pay here, is that instead of extending the life of a loan from 24 to 30 months (for example) to compensate for a customer’s low down payment, savvy dealers are banking on tax time, deferring a portion of the down payment, and cashing in come January and February. The fall season can be slow, your salespeople can be aggressive and want you to write deals, but you do not have to go overboard and gamble on an uncomfortable contract. With the 4th Quarter, you are not expecting to make loans that you

traditionally pass up. The early tax season is an opportunity to fund the gap between what you want down and what the customer has to put down. Make good customers better. Do not expect to make a bad customer good. So if you want $1,500 up front and the customer only has $1,000 to put down, you can take that smaller down and get the remaining $500 when the tax refund arrives. This can help keep your risk in check while helping the customer during their most expensive time of year…the holidays.

Chip Wiley is a Corporate Trainer at TRS Tax Max. Find out more at TaxMax.com | 866-642-4107 | [email protected]

Tax Time By Chip Wiley

Tax Max Delivers Early Tax Season in the Fall

sp


which will greatly improve your search engine rankings, along with positive review on different rating sites like DealerRater.

3. Find Contributors – Inside and Outside Your Dealership. Most businesses implementing social media marketing programs may find the volume of the daily status updates, written content, online conversations and monitoring activities to be daunting. Focus on the items that provide greater relevancy to your customers and your site and optimize your workforce. Start with employees who are more social-media savvy (they tend to enjoy working on social media) and don’t force those who are uncomfortable to get involved.

4. Create Original Content. This is so important and often overlooked! A successful social media is all about unique content. Sure it is great to repost relevant content generated by others, but remember social media is much more than having a Facebook ‘Like’ button. You want to provide useful information, insights for your customers, be seen as a thought leader in your space.

5. Develop a Solid Following in Your Community. “Engagement” is a buzzword that has gained prominence with the rise of social media. Engagement essentially means the pursuit of relevant connections. You want people from your area that can

contribute to conversations and help your dealership connect to your local customers. Use social media to find evangelists for your brand that will provide reviews, ratings and user-generated content that has a strong weight for most consumers. You want people who can spread the word about your dealership in a positive light.

Remember to always focus on building relationships and trust through online dialogue so that when it comes time to purchase a vehicle, your dealership will be first in the customer’s mind.

Cesar Yepez is the Integrated Marketing Manager for Spireon, Inc.

SALES & SERVICE

SOCIAL MEDIA continued from Page 30


SALES & SERVICE

How great is your customer service? How is your customer

satisfaction? These are fairly common questions when it comes to marketing folks, and I’m going to be honest. I really don’t like them. “Customer Service” reduces the customer to a task list, and “Customer Satisfaction” doesn’t go far enough. I don’t want customers to be merely “satisfied,” and in the auto industry, you shouldn’t either! No woman in history has ever gone out of her way to tell her friends and family about a “satisfactory” experience she had at an automotive retailer. In my world at AskPatty.com, our nation of automotive professionals go beyond customer satisfaction when it comes to their women customers: we WOW women. We settle for nothing less. We make sure they’re showered with kindness, praise, and helpfulness that they get simply blown away by the experience. If you want to stop short-changing your customers on their “wow” experience, read on and let me teach you how AskPatty.com Certified Female Friendly locations wow women customers.

THE FIRST IMPRESSION This is your one, singular chance to win a loyal woman customer! The first experience any woman has when walking into your shop is the one image that will stick with her, and it will forever color her opinion. This means that not only should your customer care be stellar when it comes to greeting and consulting

new customers, but also that your facility should be clean, warm, welcoming, and inviting. Take down those old outdated car ads and put up some nice art. Get rid of the Hot Rod magazines from the 80’s, and put out copies of Good Housekeeping. To keep things topical, consider using Vehicle MD. It’s a publication just for auto professionals, and contains article content that is well written and appealing to the everyday customer, including lots of content aimed at women.

ALWAYS STOP TO LISTEN When it comes to wowing women, the first thing you should do is stop talking altogether, after greeting her, and listen. Women often come into an auto shop with a story to tell. Listen patiently, and identify the problem she has that needs correcting. Learn her name as early as you can, tell her yours, and use it in conversation. Once she’s finished her story, recount the problem back to her. “Okay, so you had a blowout, and now you need a new tire but you’re not sure of the size? All right, I can help you with that right now.”

STOP SAYING “NO” AND START SAYING “NO, BUT...” It’s inevitable that your customers will have requests that you can’t fill, or questions you can’t answer. Never answer a question with a simple “No.” Instead, always offer solutions. If you must say no,

follow it with “but...” and a possible solution. To continue the tire shop example, if the woman asks if you

have an exact match of a tire brand you don’t carry, you would say “No, but I can show you some very good comparable brands, and review the specifications with you, or if you’re sold on the brand you have, I will check on ordering one for you.” Anytime you have to tell your women customers “no,” follow it immediately with some additional options, so she knows you’re doing all you can to help her.

KEEP IN TOUCH The key to retaining women customers is making the experience more personal to her. After she’s made her purchase or picked up her vehicle, give her a follow-up call a few days later to make sure she’s still satisfied with the product or work. Ask if she has any further questions, and make sure you tell her she’s always welcome to contact you personally if she needs anything else. Follow these easy steps and the result won’t just be a satisfied customer – she’ll be WOWed!

Jody DeVere is the CEO & president of AskPatty.com. Contact her via email at [email protected].

Customer Service By Jody DeVere

Stop Spinning Your Wheels, Start Wowing Women

no woman in history has ever gone out of her way to tell her friends and family about a “satisfactory” experience she had at an automotive retailer.


INDUSTRY NEWS

Despite carrying higher auto loan balances, Americans are staying on top of their loan

payments. According to a recent article, average auto loan balances have increased, rising to $13,435 in the second quarter, up 4.5 percent year over year and a 1.3 percent up-kick from the first quarter. “It’s encouraging to see consumers take on more auto debt while delinquencies remain low,” said Peter Turek, TransUnion’s vice president of automotive via an article on Desert News. “Consumers clearly are more confident in managing additional debt.” According to TransUnion, the rate of U.S. auto-loan payments, late by 60 days or more, was flat in the April-June quarter, only creeping up to 0.80 percent from 0.79 percent in the second quarter of last year. The auto industry as a whole is experiencing continued sales growth – United States auto sales jumped 14 percent to 1.3 million is July – due to more readily available credit for new and used car buyers, as well as an increase in subprime lending. With more drivers looking to purchase a vehicle,

subprime lenders are making loans, which often tend to have higher balances, available to borrowers with less than impressive credit. Although, the late-payment rate among subprime borrowers slightly increased to 5.02 percent from 4.94 percent a year. This may be attributed to the fact that subprime borrowers are carrying balances that are more than 7 percent higher than the same quarter last year, according to TransUnion. Moreover, subprime borrowers accounted for 14.9 percent of all auto loans in the second quarter. Even though auto delinquencies are on the decline, taking on customers with less than impressive credit is still high risk. That being said, there’s no better time to invest in a GPS vehicle tracking solution than now. Not only does a GPS tracking solution help protect your bottom line, manage and mitigate risk.

To learn more about choosing a GPS tracking solution designed specifically for the automotive finance industry, visit http://www.GoldStarCMS.com/dbj-email-relationship

Trend SpottingDelinquencies on the Decline

Are the cool days of autumn coming faster than anticipated? Preliminary numbers suggest that the

automotive sales boom, at least, is cooling down after a torrid summer that took almost everyone by surprise.Though the industry won’t release final numbers until next week, the sales pace has clearly slowed during September, according to reports from both manufacturers and analysts alike. The seasonally adjusted annual rate of sales, or SAAR, is projected to fall from a hot 16.1 million units in August to something closer to 15.2 million this month. “September 2013 new-vehicle sales represent the first year-over-year drop since May 2011, due to slower retail sales, two fewer sales days in the month, and this year’s Labor Day sales included in August 2013 totals,” said Alec Gutierrez, senior analyst at Kelley Blue Book.On the positive side, the summer surge means that 2013 is still likely to be the industry’s best year since before the nation’s economy collapsed – and sales seem on track to surpass the forecasts most experts made early in 2013 which called for volume to slide somewhere between 15.0

and 15.5 million. “Despite the cool down this month,” forecast Gutierrez, “sales will remain on track to exceed 15.6 million units in 2013 because of strong product introductions from automakers.” That’s in line with projections by both J.D. Power and Associates and LMC Automotive, their joint forecast data indicating September slowed slightly from the industry’s sprint of recent months. Even so, the industry won’t go into the red on a retail level. Excluding fleet numbers, Power and LMC projected a 2% increase over September 2012. Total light-vehicle sales in September are expected to rise 4%. “Although the year-over-year sales gain in September is smaller than has been observed in recent months, it’s important to recognize that September sales are being heavily influenced by a quirk on the industry sales calendar,” said John Humphrey, senior vice president of the global automotive practice at J.D. Power.

—Source, The Detroit Bureau

Automakers Brace for September Sales Slide


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• Best Idea Session• Access to Training, Expert Advice• Consulting• Networking• Proprietary Online Forum

• BHPH, LHPH• Comptrollers• Finance Company• Retail• Service

DBJ_2013_SEPT.indd 39 8/29/13 4:12 PM

INDUSTRY NEWS

Finance Express, the leading provider of web-based financial services and technology for independent

auto dealerships, announced today that their integration with RouteOne LLC will now allow Finance Express’ unique pool of independent dealers to submit applications to all RouteOne lenders with whom they have an existing relationship, saving dealers time and eliminating duplicate entry into multiple systems. RouteOne is a complimentary web-based credit application management system that provides dealers and finance sources the ability to manage their full book of credit application business. Finance Express’ independent dealer base will be able to submit

applications from Finance Express directly to their affiliated lenders in RouteOne.

“We are proud to integrate with RouteOne! We have a great deal of

respect for what they do in the industry. Independent dealers always need finance sources, and RouteOne offers a wide variety,” says David Huber, President of Finance Express. David goes on to say, “we are excited to be able to provide our dealers with additional finance sources, along with making their deal process more efficient.” “Through this unique integration with Finance Express, RouteOne is able to offer independent dealers access to the wide variety of finance sources available through our platform,” said RouteOne CEO Mike Jurecki. “Duplicate entry is eliminated, as the applications may now be entered through a single application point, saving dealers time and simplifying and improving the credit application process.”

Vendor UpdateFEX Integrates with RouteOne LLC

30 Dealer Business Journal September 2013

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Buy here-pay here and deep subprime automotive dealers have long sought a lead-generation service specifi cally for their customer base and have often been disappointed, but a new service will offer up unique, Internet-generated leads targeted specifi cally for their lo-cation and not offered up to anyone else.

DriveNowNetwork.com was tested in Little Rock, Ark. and Tul-sa, Okla., during last year’s tax season, and is a new endeavor by Bill Neylan, CEO of TRS TaxMax, the popular tax refund for use as a vehicle downpayment and tax preparation fi rm based in Tampa, Fla.

In fact, TaxMax is often credited with pulling the automotive tax-buying season into the fourth quarter of the current year. Such major players in the buy here-pay here marketplace as America’s CarMart and J.D. Byrider as well as several thousand dealers use the program to estimate a consumer’s tax refund based on the customer’s last check stubs. Dealers are then able to secure larger down payments us-ing the refund when it arrives, usually by mid-to-late January.

Neylan said the idea spontaneously generated from the number of people who visited the TRSTaxMax.com Web site looking for a means to put their future or current tax refund to work as a downpay-ment on a vehicle.

“We were looking at all these leads and decided the mix was per-fect to provide to dealers using our refund program services,” Neylan said.

The program is simple and dealers should highly value both the pricing and the guarantee that no lead generated in their market will be sold to anyone else, Neylan said.

Consumers using popular search engines like Google or Bing or Yahoo! using keys words like “tax refund” “W-2” and “downpay-ment” will fi nd the DriveNowNetwork. Consumers are asked a fi ll out a few basic contact information questions. Once the form is sent, the TaxMax dealer in that area is sent the lead within fi ve minutes.

“Dealerships can select their radius for the leads at 10 miles, 30 miles and 70 miles,” Neylan said. “In stead of paying per lead, deal-ers pay a fl at fee of $999 for the full year and they get the TaxMax program at their dealership for free, which costs $300.”

TaxMax uses a Web portal that dealers sign into online. Drive-NowNetwork.com leads will populate into that portal, and they can then use the portal like a CRM tool, all within the TaxMax system.

“The conversion rate for these leads was very strong,” Neylan said. “Fifteen to 20 percent of the leads were closed the same day. Because our leads arrive so quickly, consumers are often still online when they get a call.”

Neylan was quick to point out while the demographics of those searching for tax refunds for auto purchases tend to the lower end of the economic spectrum, it by no means is only a service for buy here-pay here and subprime dealers.

“Today, most consumers are strapped for cash and with tax re-funds averaging near $4,600, people from all walks of life look to put the program to work for them.”

Neylan said many dealers still confuse the old way of dealer tax preparation and tax refund estimating services with the new program TaxMax has brought to the marketplace. “Dealers are not required to fi ll out any complicated forms or tax information or estimate tax-es,” Neylan said. “Our proprietary system asks three basic questions, which are entered into fi elds on our Web portal. Our system then gen-erates an estimate within seconds, along with the paperwork neces-sary to secure the dealers portion when the refund is sent to the con-sumer.

“Most dealers believe tax season begins in January or February but we have pulled the season into October and November.”

Reach TaxMax at (866) 642-4107 or via email at [email protected] or visit its Web site at www.taxmax.com.

TaxMax Launches BHPHLead Generation Program

DBJ_2013_SEPT.indd 30 8/29/13 4:12 PM

Share your news with us. Send press releases, story ideas and tips to @dealerbusinessjournal.com.


It’s Your Dealership —Isn’t It Worth HavingExperienced Support?

You wouldn’t climb K-2 without a strong team having your back. Twenty Group membership provides you with support, market intelligence, business insight and friends across the country that operate a dealership just like you. For a low monthly membership fee, you can have that strong team guiding your business.

TwenTyGroupsTT“For 20 years our Dealer Twenty Group program

has helped auto retailers across this country achieve financial success.”

— Chris Leedom, founderLeedom and Associates Twenty Groups


IT TAKESA TEAMA TEAM

• Three Meetings per Year• Carefully Monitored Expenses• Weekend Format• Full Financial Composite• Dedicated Group Assistant

• Best Idea Session• Access to Training, Expert Advice• Consulting• Networking• Proprietary Online Forum

• BHPH, LHPH• Comptrollers• Finance Company• Retail• Service

DBJ_2013_SEPT.indd 39 8/29/13 4:12 PM

Vendor Update


[email protected]

www.paymaxxpro.com

COMPLY 2013OCTOBER 22ND - 24TH

TAMPA, FLORIDA

REGISTER TODAY$595 / PERSON

$1495 / GROUP OF 3

HOW DO THE NEW INDUSTRY REGULATORY UPDATES IMPACT MY PAYMENT PROCEDURES?

WHAT IS EMV AND WHY IS THE DEADLINE OF OCTOBER 2015 IMPORTANT TO ME?

WHAT IS THE DIFFERENCE BETWEEN A SURCHARGE AND A CONVENIENCE FEE, AND CAN I

WHAT WILL I LEARN?HOW DO THE NEW INDUSTRY REGULATORY UPDATES IMPACT MY PAYMENT PROCEDURES?

WHAT IS EMV AND WHY IS THE DEADLINE OF OCTOBER 2015 IMPORTANT TO ME?

WHAT IS THE DIFFERENCE BETWEEN A SURCHARGE AND A CONVENIENCE FEE, AND CAN ICHARGE THEM IN MY STATE?

WHAT ARE MY OPTIONS FOR AFFORDABLE HEALTH CARE?

WHAT NEW PAYMENT TECHNOLOGIES ARE AVAILABLE TO ME AND HOW WILL IT HELP MY BUSINESS GROW?

WHAT SHOULD I KNOW ABOUT DEALERSHIP COMPLIANCE?WHAT SHOULD I KNOW ABOUT DEALERSHIP COMPLIANCE?

DBJ_2013_SEPT.indd 40 8/29/13 4:12 PM

dealer business journal, october 2013

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