west coast dealer

• PROVISIONING: NEW SCIENCE OF USED CARS• GO ALL IN ON SERVICE• COMPLIANCE OVERDRIVE

InventoryTurn Your

40% Faster

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JUNE/JULY 2012PRSRT Standard

U.S. Postage

PAIDDALLAS, TEXASPermit No. 2079

I N D E P E N D E N T A U T O M O B I L E D E A L E R S A S S O C I A T I O N O F C A L I F O R N I A

WEST COAST DEALERpa

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NMVTIS Created to Help Dealers

Assembly Bill 1215 was signed into law by the governor, requiring auto dealers to run vehicle history reports on every vehicle offered for retail sale. The reports must be run through the National Motor Vehicle Title Information Service (NMVTIS). The program begins July 1, 2012.

Reports from other non-NMVTIS sources will not be considered compliant with the new law.

IADAC, through its affiliation with NIADA, has partnered with CARCO, whose website is NIADA.checkthatvin.com. Our solution is to provide reports that will assure California dealers are compliant with the new law. Reports through NIADA.checkthatvin.com for IADAC Members and California dealers will have Special reduced pricing.

Dealers must examine the reports for any title branding, such as salvage or flood, and post the report in the window of that vehicle (see example below), clearly identifying that vehicle as having a branded title. Every dealer must also provide a copy of the NMVTIS vehicle history report to the buyer. Dealers will be able to increase the doc fee $10 to cover the cost of the report.

Post the following disclosure on the vehicle while it is displayed for sale at retail in at least 14-point bold black type, except for the title “WARNING” which shall be in at least 18-point bold black type, on at least a 4-by-5.5-inch red background in close proximity to the Federal Trade Commission’s Buyer’s Guide.

This warning must be posted in any vehicle with a title brand:

Special pricing for California Dealers!-$1.95 per search To get this special pricing, YOU MUST USE SPECIAL PROMOTIONAL CODE:

CA 102 when registering at NIADA.CheckThatVIN.com

Special pricing for IADAC/NIADA California Members-$1.95 per search To get this special pricing, YOU MUST USE SPECIAL PROMOTIONAL CODE:

CA 101 when registering at NIADA.CheckThatVIN.com

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T H E W E S T C O A S T D E A L E R JUNE/JULY 2012

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WHAT’S NEW

MAGAZINE CONTENTS

ADVERTISERS INDEX

08 Legislative Report10 Provisioning: Used Car Science12 Go All In on Service18 Cash Is King in BHPH26 New NIADA CPO Program30 Compliance Overdrive

NATIONAL INDEPENDENT AUTOMOBILE DEALERS ASSOCIATIONWWW.NIADA.COM • WWW.NIADA.TVNIADA HEADQUARTERS: 2521 BROWN BLVD. • ARLINGTON, TX 76006-5203 PHONE (817) 640-3838FOR ADVERTISING INFORMATION CONTACT: TROY GRAFF (800) 682-3837 OR [email protected] West Coast Dealer is published bi-monthly by the National Indpendent Automobile Dealers Association Services Corporation, 2521 Brown Blvd., Arlington, TX 76006-5203; phone (817) 640-3838. Periodicals postage paid at Dallas, TX and at additional offices. POSTMASTER: Send address changes to NIADA State Publications, 2521 Brown Blvd., Arlington, TX 76006-5203. The statements and opinions expressed herein are those of the individual authors and do not necessarily represent the views of The West Coast Dealer, IADAC, or the National Independent Au-tomobile Dealers Association. Likewise, the appearance of advertisers, or their identification as members of NIADA, does not constitute an endorsement of the products or ser-vices featured. Copyright 2012 by NIADA Services, Inc. All rights reserved. STATE MAGAZINE MGR./SALES Troy Graff • [email protected] Andy Friedlander • [email protected]/PRODUCTION MGR. Christy Haynes • [email protected] Nieman Printing

IIADAC OFFICE

ADESA ........................................Inside Back CoverAllen L. Hawkins Insurance Services .................17Ally ....................................................................15AutoDataDirect ....................................................9Auto Portfolio Services ......................................21AutoTrader.com .......................... Inside Front CoverBerkshire Risk ...................................................22Black Book ........................................................20Brasher’s Sacramento Auto Auction ......Back CoverCARCO Group ......................................................3CarMax Auctions ................................................23 CARFAX .............................................................27Chase ................................................................16Insurance Auto Auctions ....................................25Lobel Financial ....................................................7Manheim.com ....................................................11NIADA Certified ..................................................26 Nowcom ............................................................13Thrifty Car Sales ................................................19United Acceptance .............................................18Voisys ................................................................30 Westlake Financial ..............................................5Wolters Kluwer ....................................................8

inside

FOR INFORMATION ON HOW TO BECOME A MEMBER PLEASE CONTACT [email protected] • (916) 601-4976

Rod DavisPresidentBrasher’s Auto AuctionRio Linda, CA [email protected]

T H E W E S T C O A S T D E A L E R DECEMBER 2010 w w w . i a d a c . o r g

John McElroy is host of the long-running “Auto-line Detroit” television program, covering all as-pects of the automotive industry. In this presenta-tion, McElroy provides a thorough and insightful review of where we’ve been, where we now are, and where our industry is headed. Taped at the Automotive Fleet & Leasing Association’s Annual Conference.

Dealers who demonstrate commitment and support the principles and ethical business standards of the CMD® designation com-plete a four-day seminar that addresses Busi-ness Management, Merchandising, Financial Management, Human Resources, and Business Planning. Northwood University provides the in-structor and awards four Continuing Education units for this course. The next class will be March 10-12 at the SuperMedia Hotel and Conference Center at DFW.

MAGAZINECONTENTSINSIDE

ADVERTISERSINDEXAction Auto Recovery .............................................. 6Allen L. Hawkins Insurance Services ....................... 9AutoTrader.com ............................ Inside Front CoverBlack Book ............................................................. 13Brasher’s Sacramento Auto Auction ........ Back CoverCars.com ......................................Inside Back CoverDealerClick .............................................................. 5J. L. Von Arx & Associates ..................................... 12Manheim Advantage.......................................10, 11SmartAuction .......................................................... 7Western Funding ................................................... 16Western General / Protective .................................. 3

6 Named IADAC Quality Dealer of the Year 8 Auction Standards Help Customers 13 Credit Applications Do’s & Don’ts 14 Striking Gold: IADAC’s 42nd Annual Convention

NATIONAL INDEPENDENT AUTOMOBILE DEALERS ASSOCIATIONWWW.NIADA.COM • WWW.NIADA.TVNIADA HEADQUARTERS: 2521 BROWN BLVD. • ARLINGTON, TX 76006-5203 PHONE (817) 640-3838FOR ADVERTISING INFORMATION CONTACT: TROY GRAFF (800) 682-3837 OR [email protected].

The West Coast Dealer is published bi-monthly by the National Ind-pendent Automobile Dealers Association Services Corporation, 2521 Brown Blvd., Arlington, TX 76006-5203; phone (817) 640-3838. Periodicals postage paid at Dallas, TX and at additional offices. POST-MASTER: Send address changes to NIADA State Publications, 2521 Brown Blvd., Arlington, TX 76006-5203. The statements and opinions expressed herein are those of the individual authors and do not necessarily represent the views of The West Coast Dealer, IADAC, or the National Independent Automobile Dealers As-sociation. Likewise, the appearance of advertisers, or their identifica-tion as members of NIADA, does not constitute an endorsement of the products or services featured. Copyright 2010 by NIADA Services, Inc. All rights reserved.

STATE MAGAZINE MGR./SALES Troy Graff • [email protected] Mike Harbour • [email protected] MGR. Jacob Kerns • [email protected]/PRODUCTION MGR. Christy Haynes • [email protected] Nieman Printing

THE CURRENT STATE OF THE AUTO INDUSTRY

CMD CLASSES

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Dear Editor:

Carfax is constantly looking for ways to further improve the exceptional service we provide our independent dealer customers. We have a dedicated team of professionals that handles any customer requests quickly. As a result of our tireless efforts, I am proud to say that we have streamlined our data re-search process.

The research process is easily started with just a few simple steps. Any Carfax-subscrib-ing dealer in California can access their Car-fax account at carfaxonline.com. Next, click the link which takes you directly to the online Data Correction Form. After submitting the form with the 17-digit vehicle identification number and requested research, a Carfax rep-resentative will work with you throughout the data verification process and confirm the issue has been resolved. In most cases, the entire process is completed in just a few hours.

Carfax is always here to help, especially on the rare occasions that data research is needed. Inconsistent odometer readings, for example, can raise a red flag but may be the results of simple human error. We’ve made it easier for dealers to initiate the process and get a faster resolution. We’re helping our cus-tomers manage a more efficient business and keeping their operations running smoothly.

Any dealer in California that has ques-tions about their Carfax account or the data research process can call Carfax Business Services at 888-695-1885. It is our pleasure to serve you.

Sincerely,

Kari SloanManager, Dealer Business UnitCarfax

Carfax Is Here To HelpSCHOLARSHIPS!

FOR INFORMATION ON HOW TO BECOME A MEMBER PLEASE CONTACT [email protected](888) 315-2869

Westlake Financial Services has named their top five auctions for Q3-2010. They are:

1. Manheim Nevada 2 Rawls Auto Auction 3. Norwalk Auto Auction 4. Brashers Salt Lake Auto Auction 5. ADESA Golden Gate

Westlake Remarketing saw strong performance in the recent quarter and is recognizing these top auctions for their superior efforts. Rankings are based on a combination of sale results and

service. All five topped the sale rankings. Man-heim Nevada ranked first overall for the second straight quarter, ranking first for sale results and third for service.

Bill Walters, VP of remarketing, says over-all auction performance has been improving: “Development of these grading measures has helped us recognize strengths and address short-comings in our current network. The continued support of these auction partners is integral to our remarketing success.”

“Westlake Remarketing Releases Q3 Top Auctions List”

Rod DavisPresidentBrasher's Auto AuctionRio Linda, CA 95673916 - 991 - [email protected]

David Aah1Chairman of the BoardNorth Bay Auto AuctionFairfield, CA 94534707 - 864 - [email protected]

Mark GloverSr. Vice PresidentAzteca Auto SalesGalt, CA [email protected]

Larry LaskowskiTreasurerThe Auto OutletRoseville, CA [email protected]

Terry DegmetichSecretaryI - Deal CarsRoseville, CA 95678916-870- [email protected] Cardinale

Vice PresidentA to Z MotorsWinters, CA [email protected]

Rick GomezVice PresidentRJ Auto BrokersCarmichael, CA [email protected]

Mike CaseyVice PresidentCal West MotorsSan Leandro, CA [email protected]

10 10 Questions for AutoCheck14 Auction Security18 In the Spotlight

12 Local Auto Dealers Usedby Clunkers

MAGAZINECONTENTS

ADVERTISERSINDEX

INSIDE

Action Auto Recovery ..................................................8ADESA ......................................................................17AutoTrader.com ................................ Inside Front CoverAutoXplorer................................................................13Black Book..................................................................19Brasher’s Sacramento Auto Auction ..............Back CoverCars.com .......................................... Inside Back CoverDealerClick ..................................................................5J. L. Von Arx & Associates ..........................................9Lobel Financial ..........................................................15Manheim Advantage ..........................................10, 11SmartAuction ..............................................................7Western Funding ........................................................18Western General / Protective........................................3

Dealers who demonstrate commitment andsupport the principles and ethical business stan-dards of the CMD� designation complete a four-day seminar that addresses Business Management,Merchandising, Financial Management, HumanResources, and Business Planning. NorthwoodUniversity provides the instructor and awards 4Continuing Education units for this course.NEXT CLASS OCTOBER 28-30, 2010VISIT NIADA.COM FOR MORE INFOMATION

CERTIFIED MASTERDEALER� PROGRAM:

T H E W E S T C O A S T D E A L E R OCTOBER/NOVEMBER 2010 w w w . i a d a c . o r g

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NATIONAL INDEPENDENTAUTOMOBILE DEALERS ASSOCIATIONWWW.NIADA.COM • WWW.NIADA.TV

2521 BROWN BLVD. • ARLINGTON, TX 76006-5203PHONE (817) 640-3838FOR ADVERTISING INFORMATION CONTACT: TROY GRAFF(800) 682-3837 OR [email protected] WEST COAST DEALER IS PUBLISHED BI-MONTHLY BY THE NATIONAL IN-DPENDENT AUTOMOBILE DEALERS ASSOCIATION SERVICES CORPORA-TION, 2521 BROWN BLVD., ARLINGTON, TX 76006-5203; PHONE (817)640-3838. PERIODICALS POSTAGE PAID AT DALLAS, TX AND AT ADDITIONALOFFICES. POSTMASTER: SEND ADDRESS CHANGES TO NIADA STATE PUBLI-CATIONS, 2521 BROWN BLVD., ARLINGTON, TX 76006-5203. THE STATE-MENTS AND OPINIONS EXPRESSED HEREIN ARE THOSE OF THE INDIVIDUALAUTHORS AND DO NOT NECESSARILY REPRESENT THE VIEWS OF THE WESTCOAST DEALER, IADAC, OR THE NATIONAL INDEPENDENT AUTOMOBILEDEALERS ASSOCIATION. LIKEWISE, THE APPEARANCE OF ADVERTISERS, ORTHEIR IDENTIFICATION AS MEMBERS OF NIADA, DOES NOT CONSTITUTE ANENDORSEMENT OF THE PRODUCTS OR SERVICES FEATURED. COPYRIGHT2010 BY NIADA SERVICES, INC. ALL RIGHTS RESERVED.STATE MAGAZINE MGR./SALES: Troy Graff • [email protected]: Mike Harbour • [email protected]/PRODUCTION MGR.: Christy Haynes • [email protected]: Nieman Printing

FOR INFORMATION ON HOW TOBECOME A MEMBER PLEASE [email protected](888) 315-2869

EXECUTIVE COMMITTEE

Mike Macaulay, Magazine Committee Chair • Car SystemsRoseville, CA • 916-784-7155 • [email protected]

When it comes to motor vehicle bonds, alldealer principals are not alike. At BondSource Insurance Agency, we offer a com-mon sense approach to underwriting. Abusiness’ net worth is the key along with thepersonal character of the business owner.

Since 1993, Bond Source InsuranceAgency is committed to fast and friendlybond service. IADAC members may contactNancy R. Chapman for a bond quote at888-855-0100 or [email protected].

D E A L E R B O N D H E L P

BREAKING NEWS!BREAKING NEWS!

Check out the newlyredesigned IADAC websiteat www.iadac.org.We want to know what youthink of the new site. Let usknow by e-mailing us [email protected].

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Sincerely,




















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David AahlChairman of the BoardNorth Bay Auto AuctionFairfield, CA [email protected]

New Executive Committee

Executive Committee: Rod Davis, President (same picture) Mark Glover, Sr. Vice President (New Picture, see below) Mike Casey, Vice President (Same Picture) Vince Cardinale, Vice President (Same Picture) Greg Meier, Vice President (New Picture, see below) Terry Degmetich, Treasurer (same Picture) Mike Gough, Secretary (New Picture, see below) David Aahl, Chairman of the Board (same picture)

Mark Glover

Greg Meier(crop to head shot please)

Mark GloverSr. Vice PresidentCounty FinancialGalt, CA [email protected]

Vince CardinaleIADAC Vice-PresidentA to Z MotorsWinters, CA 95694











CMD CLASSES

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Dear Editor:





Sincerely,




















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EXECUTIVE COMMITTEE







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Terry DegmetichTreasurer I-Deal CarsRoseville, CA 95678916-870- [email protected]

New Executive Committee

Executive Committee: Rod Davis, President (same picture) Mark Glover, Sr. Vice President (New Picture, see below) Mike Casey, Vice President (Same Picture) Vince Cardinale, Vice President (Same Picture) Greg Meier, Vice President (New Picture, see below) Terry Degmetich, Treasurer (same Picture) Mike Gough, Secretary (New Picture, see below) David Aahl, Chairman of the Board (same picture)

Mark Glover

Greg Meier(crop to head shot please)

Greg Meier Vice PresidentDiablo Motors, San Ramon, CA 94583Phone 925-830-8747

Mike GoughSecretaryMG Auto Wholesale, Vacaville, CA 95687Phone 707-481-6646

Larry LaskowskiExecutive DirectorThe Auto OutletRoseville, CA [email protected]

EXECUTIVE COMMITTEE

Michael CaseyCal West Motors1977 E 14th StSan Leandro, CA 94577-5022510-352-9230

I just reserved my spot for the NIADA Convention & Expo, set for June 11-14 at Caesars Palace in Las Vegas. It should be another great event, and I hope everyone is planning to attend.

I’m not trying to sell you on this because NIADA needs the attendance. I’m convinced every car dealer in California would benefit from the opportunities that are available.

I went last year for the first time and was completely blown away. Everything was first class, especially the education opportunities. I’m a big believer in learning new things and adapting business practices in an ever-changing business environment. There’s no better place for that to happen than at the NIADA Convention.

In addition to the events sponsored by NIADA, IADAC members will get together for a few events as well. This is an official quarterly meeting, so the board of directors will meet and possibly see a show together.

I’m looking forward to seeing many of you at Caesars Palace. Rod Davis

President’s Message

For IADAC dealer members who have children or grandchildren entering college, please note the July 31 deadline for scholarship applications. You can access the application and rules by visiting www.iadac.org, then clicking on “Benefits” and “Scholarship.”

Last year 33 applicants were granted scholarships for their quest for higher education. If you have any questions, please contact the IADAC office at (916) 893-3306 or email [email protected].

Scholarship Application Deadline: July 31

Fastenal, a national distributor of industrial and construction supplies, has introduced an expense reduction program for auto dealerships to save owners time and money related to their shop supplies and essential tools.

The centerpiece is Fastenal’s FAST Solutions℠ industrial vending system. To date, 8,000-plus machines have been installed to help organizations reduce supply consumption, move the cost of inventory to Fastenal, and increase worker productivity.

To access products, workers enter an ID code and a repair order number, then make a selection. If the request is authorized, the machine dispenses the product and automatically reports the details of the transaction, making workers accountable for what they use. Controls can also be established so that workers only have access to the products (and amounts) needed to do their jobs.

For more information, visit www.fastenal.com.

Fastenal Launches Expense Reduction Program

Sirius XM Satellite Radio is America’s satellite radio company. Independent dealerships can now offer a free SiriusXM three-month trial on all pre-owned vehicles with factory-equipped satellite radio. In addition to selling your customers a quality vehicle, you’ll be giving them the opportunity to enjoy satellite radio. And there’s no cost to your customer. Visit www.siriusxm.com/niadaprogram to enroll your dealership today!

NIADA Member Health Plans, administered by JLBG Health, bring you choice and flexibility when designing your personal health plan while providing potential savings of thousands of dollars annually. To review the plan details and receive an instant online rate, visit www.NIADAHealthPlans.com or call 1-888-308-9340.

Mike Gough, (crop to head shot please)

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Many auto dealers in California have been targeted by a Sacramento-based attorney concerning lawsuits under the Americans with Disabilities Act of 1990.

The attorney finds any violation and threatens legal action against your company. It can be as simple as a mirror in the restroom that isn’t low enough for someone in a wheelchair to use.

It has happened to me and many other dealers. I am disabled and thought my business was in compliance. The attorney is disabled and claims he cannot do business with a dealership because it is not ADA compliant. He files 300-400 cases per year and is working his way through California. You might be next.

The ADA statute is federal, so the cases are filed in federal court. They could be filed in California state court but would probably be thrown out because proof of a real injury and damage costs have to be certified. The federal court has two remedies for ADA action – injunctive relief (a court order demanding ADA compliance) and awarding fair attorney fees for the winning attorney.

The state of California has a fine of $4,000 per violation that can be levied, but again, the proof of an injured party and loss is required. That does not happen in this form of legalized extortion.

Without legal defense, most cases are settled for $8,000-$10,000. Most dealers have been settling because they are faced with that much or more in legal fees to go to federal court. With legal defense, the filing attorney can usually be talked down to a settlement of $3,000-$4,000. But then you have an attorney bill to pay.

Roseville Auto Center, owned by Brad Jordan, was sued on the same ADA issue. Brad has been an IADAC member for more than 20 years. Brad refused to be extorted and found counsel with Michael Welch, a Sacramento-based attorney who is an ADA defense specialist.

Welch inspected Roseville Auto Center and determined that the federal lawsuit was unfair and justice had to be done. He took up Jordan’s cause and got the matter dropped with no money paid to the legal extortionist. The filing attorney lowered his settlement offer to $500, but Welch advised Brad to not settle and justice was done.

The legal extortionist would rather face a non-ADA attorney than Welch. The legal fees were very reasonable and much less than the settlements mentioned previously.

Welch charges a flat fee up front that covers you for as long as the case is in litigation, whether it’s 10 days, 10 months or 10 years (quoted from a conversation with Welch). We all know how fees can add up paying by the hour. One dealer approached Welch after amassing a legal bill of more than $65,000.

Michael Welch is considered an expert in all ADA compliance issues. He is a 1983 graduate McGeorge School of Law and has been an ADA expert since 2003. Mr. Welch is an IADAC associate member and offers discounts for current members. His contact information is:

Michael D. Welch770 L St. Suite 950Sacramento, CA 95814E-mail: [email protected] is the first report of

a total victory over the legal extortionist. I wish I had found Welch before I settled for $8,000.

BY MIKE MACAULAY MIKE MACAULAY IS IADAC MAGAZINE CHAIRMAN AND OWNER OF CAR SYSTEMS IN ROSEVILLE, CALIF. HE CAN BE REACHED AT [email protected].

ADA Complaints: Legalized Extortion?Thanks to all of you who stepped up and

contributed with letters or personal contact to help oppose the proposed legislation that targets the used car industry, Buy Here-Pay Here dealers in particular. Your lobbyist, Bill Dohring, and I have spent countless hours at the Capitol in an attempt to educate legislators on a complex industry about which they have little or no knowledge.

Despite our attempts, these bills are moving along the path toward becoming law. There are still hurdles they must clear and we will continue our opposition, but because the California legislature is heavily weighted toward liberal democrats, we are fighting an uphill battle.

Please don’t give up hope and help us continue the fight so we may at least mitigate the impact of these bills.

Our democracy provides opportunity for people to vote for those they would like to represent them. I urge you to make your voice heard by voting for those you feel can improve the situation here in California.

Clearly, most of our elected representatives in this state do not act responsibly with our money, as they prove time and time again by voting for measures that require funding that is not available. Currently in this state, the balance of power is very far to the left and in order to right that we must act when we have the chance.

One of our IADAC members took the time to come to the Capitol and testify in opposition to SB 956. His story was one of an immigrant who came to this country, where he found opportunity and potential reward for those willing to take risk. He asked why he, as a Buy Here-Pay Here dealer who charged no interest, would have to license as a finance lender.

To all of us, it is illogical why this industry is being burdened with additional regulation when no proof of wrongdoing exists. Afterward, he told me he didn’t understand why the legislators were trying to create a ruling government that removed incentive for hard-working, risk-taking entrepreneurs. He suggested that he take the legislators to his country, where opportunities do not exist, so they might realize the direction they are going. I only wish that were possible.

BY LARRY LASKOWSKIEXECUTIVE DIRECTOR

Executive Director’s Report

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It has been a bad couple of days in Sacramento for California’s used car industry, to say the least.

Most people are under the assumption that lobbying is like selling. Nothing could be further from the truth.

When a person walks onto your lot there is an assumption he is a potential buyer, and then it’s up to you to ply your skills and assist him in purchasing a car.

On the other hand, as a lobbyist you make an appointment with someone who doesn’t want anything, would just as soon not have you there and doesn’t want to hear what you have to say.

That is especially true in California, with term limits. The House and Senate are controlled by Democrats, who see the light more clearly for consumer groups and unions, making our jobs very difficult indeed.

Take the monumental task we’ve had in lobbying against SB956, AB1447 and AB1534. Those bills were supported by every consumer group in California, as well as consumer attorneys. The opponents made every inflammatory statement they could about the used car industry – we prey on poor people and military, mark the cars up a minimum of $4,000 to $6,000 over Kelley Blue Book. All the time the Democrats were salivating, waiting to pounce on the used car industry.

But when you look at the numbers provided by the Motor Vehicle Recovery Fund and the DMV,

they don’t add up to a measurable problem. Of almost 4 million cars sold, only 9,300 complaints were received by DMV—and that was the total of complaints, including those against new car dealers, wholesalers and consumers. DMV only took 500 actions against dealers in which it revoked or suspended their licenses.

All of those bills flew out of committee on a straight party line vote.

The bills don’t do one thing to help the consumer. If a dealer won’t carry the paper it will be assigned to a subprime lender at a rate higher than the 17 percent limit Sen. Lieu wants. If a subprime lender won’t finance it based on the buyer’s lack of creditworthiness, that potential buyer will be riding the bus.

That’s another thing the legislators don’t understand – it is the buyer’s creditworthiness that dictates the interest rate, not the dealer.

Our fight is not over and we will continue to move ahead. Executive director Larry Laskowski and I are planning meetings with the DMV and the Department of Corporations to start working on a veto with the administration.

Never in my 30 years have I ever seen anything so one-sided. And to further demonstrate the legisla tors’ incapacity, they support their entire position based on three fraudulent LA Times articles that with only one exception are related to incidents outside of California.

It is a lot of nonsense, but the fight rages on!

Legislative Report

BY BILL DOHRING

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These days, dealers are looking for every edge to find quality inventory for their lots. Americans are holding onto their cars longer than ever, causing higher prices at auction and a smaller crop of quality vehicles on which dealers can bid.

According to a new study by R.L. Polk, length of vehicle ownership recently hit an all-time high: 71 months for new vehicles and 50 months for used cars and trucks. The study also noted that people holding onto their cars longer has resulted in decreased used-vehicle supply.

In this crowded marketplace, you need to assess your strategy for long-term success if you want to outperform your goals and beat the competition. To help, consider this new method dealers are using to better evaluate and acquire in-demand units others might pass up. It’s called provisioning.

What Is Provisioning?Provisioning is defined as the efficient

allocation of resources to achieve a successful mission. To be clear, the mission for dealers is to operate a financially successful used car operation.

Put simply, for your business to thrive, you need to know what cars to buy, what to pay for them and where to find the right units for your inventory. Provisioning is a new way for dealers to set their used vehicle strategy (size of inventory investment, ROI/turn expectations) and efficiently pursue the vehicles necessary to execute their plan successfully.

Provisioning is like a science because it provides a methodical approach to buying used vehicles. It helps evaluate certain types of information vital to the success of your used car business.

What types of information?Demand: The number of people

in your area searching online for a specific vehicle.

Interest: The average conversion

rate from search results pages to vehicle details pages for a vehicle in your area.

Volume: The number of units recently sold in your area.

Market days supply: The current available supply of similarly configured vehicles and the rate at which such vehicles have been sold over the past 45 days.

Profitability: The spread between average asking price and wholesale price – the auction price vs. list price in your market.

Availability: The number of units currently available at auction.

Experience: The success of your recent sales for a specific make/model.

Analyzing that information on your own isn’t easy. But technology and tools can help you determine the types of vehicles that will deliver the best return on investment every month, giving you a huge advantage on your competition.

What to Pay and Where to Find ItOnce you determine the cars that sell

fast in your market, you’ll want to make sure you pay the right price for them. At auction, there aren’t too many obvious deals these days, but you can still find gems with a little guidance.

Many dealers rely on professional buyer solutions like those by vAuto, for example. Those services use in-market data to help determine which units are worth your investment. They can even help you identify the price point at which a vehicle will get the most attention, get you the profit you need and cover your reconditioning costs so you still hold gross.

If you’re a dealer in the Northeast in the winter, you might have difficulty finding enough SUVs to keep your inventory fully stocked. Similarly, a dealer in the South probably can’t find enough convertibles in the summer months. Wherever you are, there’s inevitably a shortage of certain cars in

demand. So it can pay to look outside your immediate area for quality inventory.

Use online auctions to help keep your lot full of vehicles you know will sell. Online auctions can be some of the best places to find cars at good prices without the hassle of waking up early, checking pages of run lists and elbowing past other dealers to find your spot in the lane. Instead, sit back with your coffee and bid from the comfort of your home or the office.

How to Reduce Acquisition RiskOf course, if you bid online, you won’t

be able to “kick the tires” and inspect the vehicles in person, so you’ll especially need to consider the condition and history of those vehicles. Otherwise you might end up paying too much for a car that seems perfect but has reported damage or another incident that could affect its retail value.

The key is knowing the cars with good service histories that merit your bids, since those vehicles often sell for better prices.

Many successful dealers run a vehicle history report on every car they consider buying as part of their standard procedure to assess a vehicle’s condition and spot any related acquisition risks. Whether through online auctions or in-person trades, this triage ensures the dealer and his buyers feel more confident that the inventory placed on the lot will turn fast and make top dollar.

With declining supply and increasing demand for quality vehicles, there is little room to make acquisition mistakes on vehicles you “had a feeling about” but didn’t take the time to carefully vet. Provisioning helps you avoid these mistakes and turns your ability to efficiently and effectively evaluate and acquire used vehicles into a competitive advantage.

BY DALE POLLAK AND CHAD GOODSON

The New Science of Used Vehicle Sourcing & SalesU S E O N L I N E AU C T I O N S T O H E L P K E E P YO U R LO T F U L L O F V E H I C L E S YO U K N OW W I L L S E L L .

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U S E O N L I N E AU C T I O N S T O H E L P K E E P YO U R LO T F U L L O F V E H I C L E S YO U K N OW W I L L S E L L .

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C O N T I N U E D O N PAG E 1 4

For independent dealers, having a service department isn’t something that should be taken lightly.

Not all dealerships offer service – it isn’t for everybody – but for those that do it should be an integral part of the business, used to give the dealer an opportunity to attract, retain and better understand customers.

Joe Lescota, the NIADA’s new director of dealer development, said he knows many dealers who lose money in the service department because the money that comes in through service goes into one big pot.

“There’s a whole process in operating a service department,” said Lescota, the longtime instructor for NIADA’s Certified Master Dealer program. “Dealers think they are selling service when what they’re really doing is selling time.

“A dealership only has so many hours in the day to operate. So a dealer should take the number of techs he has and multiply that number by the number of hours in operation. So a dealer might have 80 hours a day of time to sell. From a profit standpoint, it doesn’t matter if the dealer is changing oil or dropping an engine.”

Doug and Nyla Borgmann, owners of Creighton Auto, Inc., in Creighton, Neb., manage to keep their mechanic and their body man pretty busy, which is good for their business.

That means doing repairs for everyone, not just customers.

“Offering service works for us,”

Doug Borgmann said. “We advertise on our store sign. Service accounts for between 25 and 30 percent of business. Our mechanic has been with us since the early 1980s. He’ll retire in four or five years and that has me worried. Replacing him will be hard. Our body man has been with us for about three years. Before getting him, we had a hard time getting someone full time to do our body work.”

J.R. Westbrook, owner of Tyro Auto Sales in Bay City, Texas, has been offering service at his store since 1971. He does outside work in addition to working on the cars of customers, but he doesn’t advertise. He depends on word of mouth.

Westbrook has kept his technician for years, operating on the theory that it’s easier to keep the person you have happy than go out and find new people.

Staff is a key component to offering a good service department.

Getting good help was one of the reasons Randy Yates, owner of Yates Motors in Gering, Neb., closed his service center.

Yates is a third-generation dealer. His lot has been around for 66 years, and for much of that time, it offered service. Eventually, though, it wasn’t worth the trouble.

“We got rid of our old service center, must be around nine years ago,” Yates said. “It was hard getting and keeping good people. I’d train people and they would get the skills they needed to do the job. But then they’d go to

dealerships, often franchise operations, that would pay better wages and I’d have to start the process all over again.”

Yates said he realized he was better off if he stuck to what he did best – sell cars. Now he sends his cars to be fixed by people who do what they do best – repair and recondition cars. By letting the work get done by specialists, he doesn’t have to bother with the hassle of hiring and training technicians, then replacing them as they leave his business.

Yates said he ended up spending a lot of time trying to drum up business for his mechanics instead of selling cars.

“If the mechanics aren’t busy all the time, then they aren’t making as much money as they could be,” Yates said. “It finally came to the point where it became too much work for me to find work for them and for myself. Now I have less headaches just selling the cars and farming any mechanical work out.”

He also didn’t have to keep up with the expense of getting new equipment all the time. For one thing, the types of tools a service provider must own has changed dramatically. Gone are the days when a mechanic could do all his work with a lift and some wrenches. Cars now are computerized, and dealers and shop owners have to invest their own money in the purchase of scanners and other electronic devices used to communicate with a vehicle’s electronics.

Lescota said Yates’ situation reflects a reality of operating a service department – it’s not easy. But, he

A Service Department Can Be a Big Edge for Dealers Willing to Make the Commitment

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added, the payoff can be tremendous when the job is done right.

“It’s always a challenge to get good technicians,” Lescota said. “So I suggest that dealers go the technical schools and start grooming technicians before they even graduate. Also, you have to give someone a reason to stay at your dealership.”

Usually that means giving them enough to do. As Yates discovered, if technicians don’t have enough to do, they’ll go somewhere where their skills will be in more demand.

It might also mean giving them more money. After all, technicians have to eat too, Lescota said.

“When I hear that a dealer can’t keep a technician, my thoughts first run to him not getting either enough work or enough money,” Lescota said. “And you can’t cheat on the equipment. It’s the cheap man who pays the most for things. By trying to save money on new equipment needed to work on today’s computerized cars, a dealer will end up having to spend a lot of money trying to keep technicians.

“People like to work in comfortable environments and technicians are no different from anyone else. I always say if a dealer can’t keep good mechanics, it can usually be traced back to poor lighting, poor parts and poor work conditions. There’s a demand for technicians and they’ll go where they feel most comfortable.”

Having a service department is a full commitment, Lescota said. And getting good technicians is a competitive sport between dealers. Maybe that tech left to go to a franchise operation because the boss there promised to send him to an ASE-certified program, where the tech could improve his skill set. Independent dealers should consider similar actions.

Bill Elliff, owner of Elliff Motors in Harlingen, Texas, is an example of a dealer who is committed to his service department. His lot provides a full variety of services, and he long ago realized that in order to have a service department, he had to have enough service work to keep his employees busy.

To better service his customers, his dealership can do anything from changing oil to engine replacement. He owns a couple of lots with a total

of seven service bays and 10 people working them. He advertises in print and on the signage around his lots.

He said finding qualified people isn’t that hard. Finding qualified people who are dependable and can be counted on to show up on time ready to work every day is the tough part, Elliff said.

But the effort is worth it. By hiring the right people, a dealer can have a service department that drives potential customers to the store, Elliff said. While they’re getting their car worked on, many of his service customers will wander around the lot and take a look at inventory. Maybe that person is looking for something new, and if he sees something he likes that service customer can be converted into a vehicle customer.

Elliff estimates his service department accounts for about 20 percent of his total business. He said some of his fellow dealers don’t realize that a service department has to be able to make it on its own. It shouldn’t be a loss leader.

Additionally, he sees dealers actually short-changing themselves when it comes to pricing their cars. A dealer might, for example, put $100 worth of reconditioning in a car he bought for, say, $5,000. When it comes time to price the car, he’ll want $1,000 profit. So he’ll price the vehicle at $6,100, Elliff said.

That’s a mistake. Any work put into a vehicle using the dealership’s own service department should be reflected positively in the price of the vehicle. If $100 of work was put into the car, that should translate into adding, say, $200 to the back-end value of the vehicle. So that car should be priced at $6,200, not $6,100.

“As an owner, you have to put the money in to develop the infrastructure needed to run a good service department,” Elliff said. “That means having the latest diagnostic equipment. But if you charge right for your services, you will always come out ahead.”

Ultimately, having a good service department should mean more than another revenue source, Lescota said. By having a service department aimed at serving the public at large and not just his current customer base, Elliff is bringing in new potential buyers to look at his inventory.

He’s creating a captive audience.But a good service department can

do even more. When a customer brings in a car, a dealer can glean all sorts of information about the customer. It’s built-in market research.

“The smart dealer should now know all sorts of things about that customer,” Lescota said. “The dealer should know how that service customer uses his car. Does he baby it or does he really run it through the ringer and wear it out? With that knowledge, the dealer can better help the customer make an informed decision on the best vehicle to buy when it comes time to get another car.”

By having a complete service department, a dealer can get a customer used to bringing his vehicle to his dealership. Need an oil change? Bring the car to good old Joe’s. In an accident? Have the car towed to Joe’s. Need some engine work? Go to Joe’s.

“There comes a time in every car’s life when it becomes counter-productive to keep putting more money in that vehicle,” Lescota said. “If you have a good relationship with your customers, and they bring their cars to you for service, you can tell that customer when it’s time to get a new car.”

A service department can also help Buy Here-Pay Here dealers with their bottom line, Lescota said. It’s a rule of that segment of the used car business that when a car stops running, the payments stop coming.

If a dealer has a service department, the customer can bring the car in to get fixed and the cost of repairs can be added to the payment schedule. A customer might not have $300 on him right then and there, but he can usually make his payments if that $300 is spread out over the rest of the payment schedule.

“A good service department gives dealers control,” Lescota said. “It gives the customer a reason to keep coming back to you. But if you’re going to have a service department, you can’t go in half-hearted. As they say in poker, you have to go all in – but the rewards can be huge.

“These days, dealers need every edge they can get. Now more than ever, dealers who don’t keep up, fall behind and go out of business.”

BY JIM STICKFORD

C O N T I N U E D F RO M PAG E 1 2| A Service Department Can Be a Big Edge for Dealers Willing to Make the Commitment | B AC K T O T H E B A S I C S : G O A L L I N

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CARFAX has launched its newest wave of television ads as part of the national “Show Me the CARFAX” campaign.

Starring again in all of the ads to deliver the message of smarter used car shopping is the knowledgeable Car Fox. The spots, which humorously depict people buying used cars from various types of sellers, illustrate how CARFAX vehicle history reports can build confidence in the cars people buy as well as the dealers from whom they’re buying. Car Fox issues a friendly reminder for consumers to make an educated buying decision from a trusted seller by saying, “Show Me the CARFAX.”

“Smart used car shoppers make good buying decisions by consulting the experts first,” CARFAX communications director Larry Gamache said. “An inspection by a qualified mechanic and a trusted CARFAX Report is the best one-two punch.

“We’ve watched Car Fox help boost traffic at dealerships and build

confidence with consumers everywhere since he became part of the ‘Show Me the CARFAX’ campaign. We fully expect that success to increase with these latest ads.”

The new ads can be viewed on the CARFAX channel on YouTube or the company’s website, carfax.com.

“The ads featuring Car Fox have been wildly successful,” said Zevin Auerbach, a creative partner at Zimmerman Advertising. “The new series will give fans something to really look forward to. In essence, they’re mini-TV shows with a car dealer as a recurring character. The imaginative dealer is constantly trying to outfox Car Fox with a series of gimmicks like a ‘seal of approval,’ which is actually a live sea lion.

“Of course at the end, the customer says ‘Show me the CARFAX,’ as our dealer makes one last humorous attempt to provide an alternative.”

Carfax gives free marketing materials featuring Car Fox to dealers, including an inflatable Car Fox for Carfax Advantage Dealers.

CARFAX Introduces Its Latest TV AdsT H E L AT E S T | visit carfax.com

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Dealers attending Manheim Central California on April 19 were treated to a special event that brought a dozen premier vendors to the auction.

In conjunction with auction general manager Theo Wilson, IADAC vendors offered state-of-the-art products and services that could help dealers save and/or

make money for their dealerships.Five new members were signed by

senior vice president Mark Glover. IADAC welcomes those new members to the association.

Later that evening, IADAC’s board of directors joined the Fresno chapter at a local restaurant, where guests were treated

to a brief acknowledgment by Assemblyman Henry T. Perea. The primary discussion at the board of directors meeting was the legislation currently working its way through the Assembly.

IADAC thanks the Fresno local chapter for its support and help putting the event together.

IADAC Vendor Trade Show at Manheim Central CaliforniaI N T H E I N D U S T RY | local news

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The two keys to Buy Here-Pay Here are risk management and cash management. Both, as always, are hot topics. More so now with everything that is going on in the automotive industry and the economy in general.

But cash – and the availability or the management thereof – seems to be on everyone’s mind, and in some cases closing their doors.

Cash is not as available as it was this time last year. The good news is it is still available, which isn’t true in some other unfortunate industries. It’s just not as easy to find or secure, not to mention afford, since the rates we

enjoyed a year ago are no longer there.Local banks and credit unions appear

to be the best sources for lines of credit. The large regional and national banks still seem to be staying out of the car business. Local banks and credit unions have smaller organizational charts and usually less turnover, leading to a more stable decision-making future.

The three necessities to securing a line with those sources are patience, persistence and preparation. The days of simply walking into a bank and securing a line of credit on a handshake and a promise to pay are long gone. Local banks and credit

unions have learned from the mistakes of the regional and national banks and have become smarter and more sophisticated in their approval process.

Patience is needed because local banks and credit unions need a complete education on our industry. Not everyone is familiar with what we do and how we do it. In some cases, it can be hard to convince a bank to loan money to a business that will in turn extend credit to someone who has shown little ability to repay it. They need a K-through-12 to make their decision and continuing education after the line is secured.

Cash Is King in Buy Here-Pay HereCA S H I S K I N G I N O U R B U S I N E S S . N O T O N LY T H E AVA I L A B I L I T Y O F I T B U T T H E E F F E C T I V E M A N AG E M E N T O F I T A S W E L L .

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Persistence is needed because the days of lending institutions seeking out beneficiaries of their generosity have just about ended, especially to those dealing with subprime clientele. BHPH dealers have to be willing to go door-to-door and sell our business to lenders. In most cases, it will take knocking on more than one door. And once in the door, it will take more than one cast to reel them in.

Preparation is the determining factor to success, initially and in the future. Because banks and credit unions have become more sophisticated in their decision-making, BHPH dealers have to provide more sophisticated information to them. Performas, financial statements and cash-flow analysis are a few examples of data that needs to be provided up front to obtain a line and on an ongoing basis once a line is secured.

The key to maintaining a good relationship with a capital source is providing as much information in the beginning as possible and to keep doing so on a regular basis so they never have to ask for anything. Full and accurate disclosure is paramount. Put yourself on the other side of the desk. What would like to know if it was your money? In this instance, there really is no such thing as too much information.

Having all the access in the world to capital will be worthless unless you know how to manage it. In today’s tight credit market, BHPH dealers have to manage not only their credit lines, but cash in general. Not understanding how to manage available cash has closed more BHPH dealers’ doors than any other cause. It is that important.

The best tool to effectively manage cash is common sense. Don’t spend what you don’t have. Too many dealers feel the need to live the lifestyle. Success can breed contentment and contentment can breed laziness, which usually leads to failure.

A cash-flow model helps keep common sense at the forefront. The model can be very detailed or simplified to cover the basic cash-in, cash-out categories. Either way, it should show a one-, three- and possibly five-year analysis, and should be updated at least annually or when there has been a change to the overall business model.

Adding a location, an increase or decrease in ACV, or even a change in underwriting standards can impact cash needs. The model should be realistic. Pie in the sky and wishful thinking serve no purpose.

Having the model is only the first step. Having the discipline to manage to

it is the challenge. Without it, a dealer might as well have the “sell some cars, collect some money” business plan and hold on for dear life – a plan that is not used by successful BHPH dealers.

The model should be looked at on a monthly basis and compared to actual performance. That way, adjustments can be made immediately to either the model or the personnel in charge of managing to it.

Cash is king in our business. Not only the availability of it, but the effective management of it as well. There are BHPH dealers who operate without the need of a credit line because they understand how to manage cash. There are BHPH dealers who operate within credit lines effectively because they understand how to manage cash. But there are too many dealers experiencing capital reductions and, in some cases, all-out line calls because they don’t understand how to manage cash.

Having the patience, persistence and preparation to obtain and secure cash, then the discipline to manage it, will take a load off your mind and help keep your doors open.

BY BRENT CARMICHAELEXECUTIVE CONFERENCE MODERATORNCM ASSOCIATES [email protected]

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Said Barzegar of Eurosport Auto won the grand prize in Automotive Finance Corporation’s Fee Free Flooring for a Year contest – no floorplan fees or interest for a year, up to $25,000.

Barzegar’s dealership was drawn from thousands of entries from around the U.S. and Canada.

The San Jose dealership has been an AFC customer since 1998. AFC regional manager Johnny Shroyer, AFC Cal branch manager Tony Souza and the entire AFC San Francisco staff sprung the news on Barzegar at a party at ADESA Golden Gate auction, presenting the dealer with a cake and an oversized check for $25,000 to represent free flooring and AFC’s 25th anniversary.

“I started out buying and selling Porsches using my personal credit card,” Barzegar said. “AFC took a chance on me and my new business, and set us up with a small credit line. Through the ups and downs, AFC has been there for me and for my business, helping us to grow and be more successful.

“Starting out, it was just me. Now we have 10 wholesalers working for Eurosport Auto and a large AFC credit line. Thank you, AFC! The $25,000 in … flooring will go a long way.”

San Jose Dealer Wins Free Flooring from AFCFOR MORE INFORMATION ABOUT AFC, CALL 1-888-345-0600 OR VISIT WWW.AFCDEALER.COM.

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MONARCH AUTO SALES OWNER DAVID LANZER (SECOND FROM LEFT), WITH STAFF MEMBERS (FROM LEFT) ALEX BODIFORD, TERRY LANZER AND RAYSHAWN JUMPER.

Adding Rentals Can Help Drive SalesDavid Lanzer sells used cars. That’s the primary

mission of Monarch Auto Sales, the dealership he owns and operates in Greensboro, N.C.

But Lanzer also rents used cars through a franchise with Rent-A-Wreck, which, he said, fits neatly with mission No. 1.

“For the retail used car dealer, there’s so much synergy it’s not even funny,” Lanzer said. “Our rental customer is that same customer we end up selling a car to. They come to Rent-A-Wreck because their 14-year-old car with 250,000 miles on it just died and they’re stuck for a car.”

That makes the rental operation a magnet that attracts prime prospects for sales, and Lanzer said he takes full advantage of the opportunities it provides. Throughout the rental process, the dealer considers every rental customer to be a potential sales customer, too.

“We market car sales hard to every rental customer that walks in the door,” he said. “We make it clear that all of our cars are for sale, and we talk to our customers. We find out why they need to rent the car, and we sell about 100 cars a year just to our rental customers. That sales volume has been consistent for us for years.

“We do insurance replacement rentals where a customer will have just gotten into an accident, and before that customer is even in buying mode, we’re planting the seed that his rental is available for sale and finding out what he’s looking for in his next car. We’ll entice him with a rental ‘test drive,’ where we’ll put the cost of the rental toward the car if they wind up buying. “

Lanzer said the rental operation has also helped him with inventory for his retail dealership, a big advantage given the current short supply and high price of quality inventory.

“The cars we fleet as rentals end up as perfect retail units for our customers,” he explained. “We fleet a 1-2 year old car, run it profitably in our rental fleet for 18 months to two years, then we’re left with a 4-5 year old car and those are very desirable and in short supply at the auctions now. “

Lanzer said the rental business does require a dealer to make some adjustments from the typical dealership model. For example, he said the typical dealer floor plan is for 90 days, while a typical rental floor plan is much longer – more like 12-36 months.

In 2011, 11.8 percent of National IADA members offered rental cars at their dealerships, down from 12.4 percent in 2010. Of those, 78.1 percent ran an independent rental operation while 21.9 percent – including Lanzer – worked through a franchise.

Lanzer said he prefers the franchise route because of the support offered.

“Rent-A-Wreck earns every dime of the royalties I pay them,” he said. “The systems they have in place to deliver reservations and market you on the Internet and travel websites,

the support they provide you as a franchise on everything from your insurance to your financing, the legal stuff, the operations and business management software, coaching and the company sponsored dealer 20 groups – those are all things an independent would have to do for themselves on their own. “

Rent-A-Wreck is currently offering a $1,000 discount for state IADA members through the end of the year, and the company said it will donate $1,000 to the dealer’s state association for every franchise sold to an IADA member.

R E N TA L N E W S

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For a Buy Here-Pay Here operation, repairs are just part of doing business. All BHPH dealers know the adage: to keep the payments coming, the car has to keep running. What’s more, those cars are usually in need of reconditioning before they’re sold in the first place.

So what is the best, most cost-effective way to have those cars serviced and repaired? Does it require a complete repair department on site? Maybe just one mechanic on staff? Or perhaps you should simply outsource your service work?

For every BHPH dealer, there is a different correct answer. The best way to determine what will work best for your business is by reviewing all the options and weighing the pros, cons and costs involved.

“There is no cookie-cutter answer to the service question for all Buy Here-Pay Here dealers like there might be for retail stores,” said Jay Rose, a partner in Global Training Solutions, an international dealer training and business development company. “There are so many things to consider.”In-House Service Department: Pros

Building your own in-house repair department, no matter how large, can be advantageous for some BHPH dealers. If executed and operated properly, it can result in lower reconditioning/repair costs, reduced repair time, better quality control, increased sales and enhanced customer satisfaction. The caveat is that any dealer entering the service business has to be fully committed to make it work.Lower repair costs: When a car is sent

to an outside repair facility, often the price of the repair is calculated based on a pre-set repair metric. If a certain repair is listed as taking two hours and costing $400, that is what will be charged, even if the facility is able to repair the problem quicker and with fewer parts.

“If you are running the repairs, you have the ability to control those costs,” said Richard Chilgreen, a partner in Global Training Solutions. “That can significantly lower the cost of the repair. By doing this you are helping the customer, creating great customer relations and helping save them money that they are then able to use to continue to pay back their loan.”

Another way an in-house repairshop can save dealers money is better

utilization of quality used parts.

Making Repairs in the Buy Here-Pay Here World

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Making Repairs in the Buy Here-Pay Here World“Especially when reconditioning cars,

often a good used part can be used at no sacrifice to safety or quality,” Chilgreen said. “Instead, many independent repair facilities buy complete new replacement kits and use only what is needed and charge for all of it. This is an ever-growing expense in the BHPH arena. By having your own service department, you can make use of used parts suppliers when applicable.”Reduced repair time: Most BHPH customers not only do not want to spend a lot of money on repairs, they also cannot afford to be without their vehicle for an extended period of time. Maintaining a well-run repair facility allows you to make sure your customers get back on the road quickly.

Just as important, an in-house service operation can significantly cut down the time it takes to recondition newly acquired units and get them ready for sale, if only by eliminating a trip to an

outside service shop and back. And the faster the car can get out on the lot, the faster it can sell.

“If you are running the repair facility, you can determine which cars take priority,” Chilgreen said. “This can help expedite any issues internally, instead of just hoping a major repair will take priority with another service provider. This is a great customer service.”Quality control (with a great staff): Having control over the quality of repair work being done is important for the overall customer satisfaction experience. It starts with hiring a quality staff – especially the person overseeing the shop.

“Having the right people oversee everything is crucial,” said Scott Allen, owner of Auto Land in Haltom City, Texas and the 2011 NIADA Quality Dealer of the Year. “As dealers, we need to understand that running a mechanic shop is very different from running

a sales and finance operation. Most dealers I know are very good at sales and finance, but not necessarily in what it takes to run a repair shop.”

Gary Gosselin, owner of Shannon Motors in Johnston, R.I., agreed. In addition to his two mechanics and a detail expert, he hired a service manager to operate his repair facility.

“It is necessary to have someone in charge who can speak with customers and manage the workload,” he said. “Even if I outsourced my service work, I would want a point person to speak with customers and outside vendors related to service. He is vital to my operation.”

The quality of the work is directly tied to the quality of mechanics hired. Most experts agree that with the sophistication of cars now, certification from an organization such as Automotive Service Excellence

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(ASE) is critical, along with experience, knowledge of a variety of cars and a good work ethic.

The certification can be a major selling point as well, letting customers know your mechanics have thoroughly inspected the vehicle before the sale.

“If you are able to advertise a multipoint inspection by an ASE-certified mechanic who is part of your team, that offers a lot meaning to your customer,” Chilgreen said. “Even if you do not have a full-service department, but just maybe one certified mechanic, offering this inspection helps your customers know it has been examined and repaired properly.”In-House Service Department: Cons

On the flip side, before hiring that service manager or mechanic and starting a service department, BHPH dealers need to consider the nuts and bolts and costs that can make an in-house operation the wrong choice – at least for the moment.

Chilgreen and Rose, as well as many dealers who have operated in-house facilities, stressed a careful examination of areas such as cost vs. profit, liability and other legal expenses, and state regulations before opening a service department.

“There are two schools of thought when it comes to repairs that we discuss a lot in our dealer 20 groups,” Gosselin said. “Send the work out and eliminate the expense of things like workman’s comp, or keep it in house and keep a better eye on things. You have to decide which works best for you.”Cost vs. profit: Rose said at Global Training Solutions, he sits down with dealers considering the addition of service and asks them to consider a few financial facts.

“Do they have an adequate number of accounts in place?” he said. “Do they have the ability to recruit a master mechanic and the right number of people to work? Without the right number of employees, you are going to lose money right away.

“Do they have an appropriate facility or will they have to rent one? How much will they have to spend on equipment – both mechanical and things like new computer programs to operate this end of the business, as well as insurance and other fees? Many times a dealer will think,

‘I can save 30 percent by bringing this in-house,’ but they don’t factor in all the costs they will incur and they either don’t break even or lose money by offering service. Sometimes it makes sense, but other times, at this point anyway, it doesn’t make sense.”Liability and other expenses: Depending on the state in which your dealership is located, you also need to examine all liability and other legal and regulatory issues that might be involved. Certain states carry more restrictions than others and possibly make in-house servicing of vehicles very cost-prohibitive. In addition, some states require auto service facilities to be licensed.

Always check your local laws and regulations before beginning a service/repair operation.

“Some places have much higher insurance costs and regulations dealers have to follow,” Chilgreen said. “For example, where I live, in Maine, there is a very high fee for the handling and disposing of waste oil properly. If you don’t do it right and have the right machinery to do it, you set yourself up for lawsuits and fines.”

Other considerations that must be made include making sure all equipment is approved by the Occupational Safety and Health Administration (OSHA) and that you have appropriate insurance in place in case an accident happens in the shop or after a repair is made.

“All repairs that are made to critical parts such as brakes need extra attention,” said Chilgreen. “The potential for liability is very high in these areas for Buy Here-Pay Here dealers. These issues can also vary from state to state so it is very important for dealers to understand their own state laws and regulations.”Offering Service – But Outsourcing It

If the costs, regulations or other issues are too prohibitive to open an in-house service department, but you want to offer quality service, partnering with good outside vendors can be the answer for some BHPH dealers.

When Allen started his business 15 years ago, he offered in-house service, mainly because other dealers in his area were doing it. After three years of dealing with internal problems, he decided to close the in-house facility and began to outsource his repair work. After some investigation into local facilities, he

contracted with several who now work with his dealership.

“I got out into the community and went in and talked to people at several different repair facilities,” he said. “If they were a quality shop, I negotiated an hourly rate with them and I never promise any amount of work. If the quality is there and the price is right, I send them more work. If not, I stop. I try to keep about 10 to 12 shops on the list at any time. They know I will use others as well, so they know they have to do what they promise or we will go somewhere else.”

Although his customers know the repairs are outsourced, Allen said they don’t mind because he still maintains control of the process and the customer drops off and picks up the car at his dealership.

“They don’t really care as long as they get their car fixed right and at a reasonable price,” he said. “The only difference might be that they can’t drive in Saturday morning with a problem and expect it to be repaired right away – they will have to come back Monday. But I think we are good about letting them know that up front and it hasn’t really been an issue.”

Amy Eversole, owner of Sojourner Autoplex in Crystal Springs, Miss., also uses an outside service facility. For her small dealership, she appreciates another business coming alongside her to share any liability issues that might arise.

“It gives me more confidence that before I sell a car to someone, it was not just us that looked it over but another, independent company,” she said. “It allows us to bring someone else in to shoulder any burdens with us and take care of our customers.”

Whether service and repairs are made in-house or are outsourced, they are part of doing business for the Buy Here-Pay Here dealer, and figuring out the most cost-effective, customer-friendly, hassle-free way of accomplishing them is crucial for the success of the dealership.

Talking to other dealers can help point you in the right direction.

“Learn from others’ experience,” Gosselin said. “At dealer 20 groups, we talk about issues like this and help each other find ways to make service and other challenging and changing issues work best in our own situation.”

BY LAURIE PONDER

C O N T I N U E D F RO M PAG E 2 3| Making Repairs in the Buy Here-Pay Here World

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If you are a small employer with fewer than 25 full-time equivalent employees who earn an average wage of less than $50,000 per year, and you pay at least half of employee health insurance premiums, there is a tax credit that can put money in your pocket.

The Small Business Health Care Tax Credit is specifically targeted to help small businesses and tax-exempt organizations. The credit can enable small businesses and small tax-exempt organizations to offer health insurance coverage for the first time. It also helps those already offering health insurance coverage maintain the coverage they already have.

Here is what small employers need to know so they don’t miss out on the credit for tax year 2011:

• Qualifying businesses calculate the Small Business Health Care Credit on Form 8941, Credit for Small Employer Health Insurance Premiums, and claim it as part of the general business credit on Form 3800, General Business Credit, which they would include with their tax return.

• Tax-exempt organizations can use Form 8941 to calculate the credit and then claim the credit on Form 990-T, Exempt Organization Business Income Tax Return, Line 44f.

• Businesses that couldn’t use the credit in 2011 may be eligible to claim it in future years. Eligible small employers can claim the credit for 2010 through 2013 and for two additional years beginning in 2014.

For tax years 2010 to 2013, the maximum credit for eligible small business employers is 35 percent of premiums paid. For eligible tax-exempt employers the maximum credit is 25 percent of premiums paid. Beginning in 2014, the maximum credit will go up to 50 percent of qualifying premiums paid by eligible small business employers and 35 percent of qualifying premiums paid by eligible tax-exempt organizations.

Additional information about eligibility requirements and calculating the credit can be found on the Small Business Health Care Tax Credit for Small Employers page of IRS.gov.

IRS Tax Tip: Claiming the Small Business Health Care Tax Credit

I N D U S T RY T I P S

Experian Automotive announced the launch of AutoCheck® Elite, a program that gives car dealers information and insights into the market, the vehicles and the people who buy them.

In addition to the vehicle history data of the original AutoCheck, AutoCheck Elite allows dealers to access reports providing in-depth insights into dealer sales performance, vehicle registrations and consumer demographics in their market. Dealers can use that information to evaluate their sales performance against the competition, track sales trends of the most popular makes and models, and better understand the consumers in their market.

And AutoCheck Elite dealers receive other features, including access to AutoCheck best practices training, a sales event marketing guide and enhanced showroom materials.

For more information, visit www.experianautomotive.com.

Experian Enhances Its AutoCheck ReportsV E H I C L E H I S T O RY

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NIADA has selected Warrantech, an AmTrust Financial Services company, to administer its all-new NIADA Certified Pre-Owned Vehicle Program.

The NIADA CPO Program is the premier certification option for independent automobile dealerships seeking to effectively compete in the certified pre-owned vehicle market.

Warrantech, a leading provider of extended service contracts for the automotive industry, will administer the plan, address all post-sale customer needs, and customize dealer and consumer marketing materials. The company will work closely with NIADA’s state affiliates to launch the program nationwide in May 2012.

“Our research is telling us that 65 percent of consumers begin their vehicle search looking for a certified pre-owned vehicle, and that number is growing,” NIADA CEO Mike Linn said. “NIADA is committed to helping our members give customers what they are looking for and offer a top-notch buying experience for car buyers in their communities. We see the NIADA CPO Vehicle Program as a primary way for NIADA members to further separate themselves from their competitors and give customers a better vehicle with additional peace of mind after the sale.”

With three unique plans under the NIADA CPO program, dealers will be able to select the option that is right for their market and their customer base. These options include:• A three-month/3,000-mile limited warranty that

includes 36 months/36,000 miles of engine and air conditioning component coverage.

• A six-month/6,000-mile limited warranty that includes 36 months/36,000 miles of engine and AC component coverage.

• A 12-month/12,000-mile limited warranty.The NIADA CPO limited warranty options

include coverage of engine, air conditioning, turbocharger or supercharger, automatic and manual transmission, transfer case, drive axle, steering components, select electrical components and seals and gaskets.

For more consumer choice and confidence, the NIADA CPO limited warranty options above can be supplemented by adding the extended NIADA Total Care or the NIADA Total Care Plus coverage, which includes front and rear suspension, brakes, fuel system, cooling system and additional electrical components.

“In re-tooling the NIADA CPO Program, we recognized independent dealer business models vary widely and that we had to offer additional CPO options to specifically meet the operational

demands of our dealers,” NIADA Chief Operating Officer Steve Jordan said. “Warrantech’s successful track record with independent auto dealers, varying product offerings, world-class claims operation, nationwide sales footprint and long term commitment to support the success of our dealer members made the partnership decision easy to make.”

In addition to the coverage, NIADA and Warrantech will provide dealers with comprehensive sales training on how to use the CPO program to sell more vehicles and extended service contracts, as well as marketing support that includes in-store signage and promotional materials.

“Warrantech is honored to have been selected by the 66-year old NIADA as its CPO program administrator,” Warrantech CEO Sean Stapleton said. “We applaud the time-honored tradition of excellence NIADA member dealers observe, including their adherence to a strict code of ethics. We feel that commitment mirrors Warrantech’s dedication to excellence and drive to provide superior products and continued quality customer service.”

For additional information regarding the NIADA CPO program please call (877) 310-0288 or email [email protected]

Warrantech to Administer New NIADA CPO ProgramI N D U S T RY N E W S

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Warrantech to Administer New NIADA CPO Program

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Scholarship Application Deadline: July 31For IADAC dealer members who have children or grandchildren entering college, please note the July 31 deadline for scholarship applications. You can

access the application and rules by visiting www.iadac.org, then clicking on “Benefits” and “Scholarship.”Last year 33 applicants were granted scholarships for their quest for higher education. If you have any questions, please contact the IADAC office at

(916) 893-3306 or email [email protected].

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ACTION COMMENT • Required in California as of July 1, 2012.

• See www.vehiclehistory.gov for more

information, including information on NMVTIS report vendors.

1. Must run NMVTIS report on all used, retail

deals.

• Does not apply to new car deals. • Does not apply to wholesale deals.

2. If report does not show junk, salvage, or branded title status, stick report in used car deal jacket to show law complied with and you’re done.

3. If report shows junk, salvage or branded title status, then do two things:

• The most likely “brand” other than the junk or

salvage status would be flood or lemon-law warranty buy-back brands.

• Although some vehicle histories are not

“branded” on the title, the new NMVTIS law does not eliminate the dealer’s obligation under California law to disclose certain other known used vehicle histories in advertising and to the consumer, including former taxicabs, rental vehicles, publicly owned vehicles and demonstrators. However, these “other” vehicle histories are still simply disclosed using the “Used Vehicle History Form” and do not require posting of the NMVTIS “Warning” notice.

a. Give customer copy of the report on

request.

• Law only requires a copy of the report on customer request. You pulled the report already (See #2 above) so just give the customer a copy and have him sign that he received it.

b. Post NMVTIS Warning Sign next to

Buyer’s Guide.

• The law has very specific requirements on the warning sign, including the color of the sign (red), the size print and the language on it. It also requires that it be posted in “close proximity” to the Buyer’s Guide.

In the April/May issue of West Coast Dealer, Scott Reep and Stephen Gizzi did a great job discussing the details of the new law requiring NMVTIS reports effective July 1, in California. Here’s a handy-dandy cheat sheet to help get you through it. Be sure to figure out how you want to pull the reports prior to July 1, and take a few practice swings before then to get your systems down. I guarantee you DMV will make enforcement of this new law a priority beginning July 2, so be prepared.

BY LAWRENCE W. MILES JR.LAWRENCE W. MILES, JR. IS FOUNDING ATTORNEY OF THE MILES LAW FIRM, A PROFESSIONAL CORPORATION, IN SACRAMENTO, AND HAS BEEN REPRESENTING THE AUTO INDUSTRY FOR ALMOST 30 YEARS.

NMVTIS (National Motor Vehicle Title Information System)

CHECKLIST

Spurred by economic conditions, lengthening car ownership cycles and a year filled with extreme weather, protection and convenience products were the hottest sellers among automotive accessories in 2011, according to the annual AOA Auto Accessories Trend Report released by izmocars.

The reports found that paint protection products ranked No. 1 for dealer profits, replacing upholstery in the top spot.

The izmocars report analyzed accessories sales data from dealerships across the country, highlighting the accessories that were most popular with consumers in 2011, as well as the categories that had the most traction across different U.S. regions and the vehicle models that attracted the highest volume of accessories sales.

“In spite of economic pressures – and the residual impacts of the tsunami [in Japan] – dealerships continued to generate solid profits from accessories sales in 2011,” izmocars vice president

Sidney Haider said. “With improved new car sales on the horizon, dealerships that have cracked the code of selling accessories are in a unique sweet spot for 2012. And, as the economy has driven consumers to hold onto their vehicles for record lengths of time, dealers and OEMs should note a key trend that surfaces in this report: more and more car buyers are opting for protection products, reflecting an emerging new car buyer mindset focused on a longer vehicle life.”

The report is based on a diverse sampling of 150 dealerships that sold a total of $39 million in accessories in 2011. The average dealership generated more than $260,000 in annual sales of accessories to new car buyers, with an average of more than $475 in accessories sales per vehicle sold, an average gross profit margin of 45 percent and an after-commission net profit margin of 32.3 percent.

The full report is available at www.izmocars.com/trend-reports/aoa-2012.pdf.

Protection Products Lead Accessory SalesI N D U S T RY T I P S

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The concept or image of the “complaint department” isn’t anything new, and has provided fodder for jokes and comic strips over the years. But the decision by the Consumer Financial Protection Bureau (CFPB) to expand its consumer complaint system to include complaints regarding vehicle and consumer loans is no laughing matter.

If you haven’t been to the site yet, consider taking a look. The site, www.consumerfinance.gov/complaint, makes it very easy for anyone to register a complaint. It asks for a description of what happened, the desired resolution and the parties and products involved.

The CFPB’s decision to start accepting and reviewing complaints related to vehicle loans should get your attention for a few reasons. First and foremost, it signals that the CFPB is gaining momentum and is ready to try to identify

C O M P L I A N C E OV E R D R I V E

Reducing the Impact of Consumer Complaintsand resolve current problems in the industry – and to prevent future ones.

Second, the complaint process opens a whole litany of questions about how the CFPB will respond to complaints and how dealers will be involved. We don’t know much about the process yet, but hope the CFPB will provide more detail soon.

For now, the question all dealers should be asking themselves is, “How do I avoid complaints in the first place?”

It seems consumer finance complaints can originate in at least three ways:

• You did something wrong and the customer complains about it.

• The customer didn’t understand the agreement and thinks you did something wrong as a result.

• You did everything right, but the customer has unreasonable expectations and complains.

You can take steps to avoid or reduce the impact of all three scenarios, particularly when it comes to finance and insurance (F&I) processes.

You did something wrongCustomers should complain if you

misrepresent, overstate or lie about the products and services you provide or the nature, reason and amount of charges. If you are running your business that way – or you have a renegade employee who is committing such acts – you should expect whatever consumer complaints, lawsuits and/or criminal charges come your way.

The complaints and the liability they bring can be avoided if you run an honest and high-integrity business. You also need internal oversight, management and audit processes to help discover and eliminate any employee misconduct.

Customer didn’t understand Some reported court cases I’ve

read seem to be based on a lack of consumer understanding that spun out of control. The dealer didn’t necessarily do anything wrong, but the consumer seemed surprised at having to pay for cover insurance, or the gap amount, or having a vehicle repossessed, or any of a number of other predictable outcomes. The financing documents generally cover the fees, responsibilities and consequences, but the consumer didn’t

read or understand them until long after the documents were signed.

In one recent case, the consumer asserted he hadn’t read the retail sales contract or been given time to read it. He said he simply signed and initialed where he was told to. He later complained and sued regarding a number of obligations he hadn’t understood, and the lawsuit didn’t turn out well for the dealer.

One strategy to avoid this would be to take the time at closing to educate the consumer. You could point out key provisions of the documents, such as late payment provisions, failure to insure, and conditions of and consequences of default. You could emphasize the importance of reading the documents and asking questions before signing, and back it up with a willingness to give consumers time to read and ask basic questions.

The idea is, if you tell the consumer what happens on default, he or she is not surprised – and is less likely to complain – if the car is repossessed.

Customer is unreasonableThere will always be unreasonable

customers whose expectations far exceed the terms of your sales agreements, warranties and commercial reasonableness. With those folks, you might not be able to avoid complaints. However, a regulator is more likely to conclude that a complaint is unreasonable if its investigation shows you run an honest, high-integrity business, have compliant processes and documentation in place, work hard to educate customers and set appropriate expectations.

While you can’t always please everyone, running a high-integrity business and educating your customers will undoubtedly help prevent customer complaints. The more positive view is that you won’t just be avoiding complaints and mitigating reputational risk, you will be building customer satisfaction and retention.

Either way, it’s an investment well worth making.

BY CHIP ZYVOLOSKICHIP ZYVOLOSKI IS A SENIOR ATTORNEY FOR INDIRECT LENDING AT WOLTERS KLUWER FINANCIAL SERVICES. FOR MORE INFORMATION, VISIT WWW.WOLTERSKLUWERFS.COM/INDIRECT.

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