ny driving force jan 13

JANUARY/FEBRUARY 2013

• JOIN YOUR INDEPENDENT DEALERS ASSOCIATION• 2013: WHAT’S IN STORE• COMPLIANCE OVERDRIVE

Embrace the Green Revolution BECOMING ENVIRONMENTALLY CONSCIOUS CAN BE

COST-EFFECTIVE – AND FINANCIALLY REWARDING

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PRSRT StandardU.S. Postage

PAIDDALLAS, TEXASPermit No. 2079

V i s i t u s a t w w w . n e w y o r k i a d a . o r g

T H E N E W Y O R K

N E W Y O R K 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

DRIVING FORCE

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T H E N E W Y O R K D R I V I N G F O R C E JANUARY/FEBRUARY 2013

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WHAT’S NEW

MAGAZINE CONTENTS

ADVERTISERS INDEX

06 2013: What’s In Store10 The Environmentally Conscious Dealer16 Government Report18 Join Your Independent Dealers Association 22 Compliance Overdrive

OFFICE

ADESA .............................................Inside Front CoverAlly ..........................................................................17Auto Auction of New England ..................................13AutoManager ............................................................5Auto Search Technologies .......................................12Auto Use .................................................................20Corry Auto Dealers Exchange ..................................15Dealer Services Corp. ...............................................7MAFS ......................................................................21Manheim.com .........................................................11 Manheim New York .........................Inside Back Cover Protective ..................................................................9STARS GPS ..............................................................3VAuto ........................................................Back CoverWolters Kluwer ........................................................14

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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] New York Driving Force is published bi-monthly by the National Independent Automobile Dealers Association Services Corporation, 2521 Brown Blvd., Arlington, TX 76006-5203; phone 817-640-3838.Periodicals postage paid at Dallas, TX and at additional offices. POSTMASTER: Send address changes to NIADA State Publications, 2521 Brown Blvd., Arlington, TX 76006-5203. The statements and opinions expressed herein are those of the individual authors and do not necessarily represent the views of New York Driving Force or the National Independent Automobile Dealers Association. Likewise, the appearance of advertisers, or their identification as members of NIADA, does not constitute an endorsement of the products or services featured. Copyright (c) 2013 by NIADA Services, Inc. All rights reserved.

STATE MAGAZINE MGR./SALES Troy Graff • [email protected] Andy Friedlander • [email protected] DIRECTOR Christy Haynes • [email protected] Nieman Printing

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FOR INFORMATION ON HOW TO BECOME A MEMBER OF THE NYIADA, PLEASE CONTACTPAULA FRENDEL (855) 694-2324 [email protected]

Message from NYIADA Executive Director Paula Frendel

Atlantic City was great!So was the Mid-Atlantic Regional Independent Automobile Dealers Associations

(MARIADA) Conference 2012, which was held at the Trump Taj Mahal Resort in Atlantic City on Sept. 9-10, 2012.

The speakers did a great job on both days. The exhibit hall was sold out and filled with vendors and the dealers visiting them for the latest and greatest information on useful goods and services to help dealerships serve their customers while making a solid honest living selling and buying cars.

We had dealers and vendors in attendance from New Jersey, New York, Pennsylvania, Maryland, Delaware, Ohio and Virginia. That why we called it a Mid-Atlantic conference.

We received extremely positive reviews from attendees, speakers and vendors who filled the exhibit hall with their booths, knowledge and experience for our dealers.

We are planning a MARIADA 2013 – and beyond.We look forward to seeing you there next year.Enjoy the MARIADA recap on page 19 within this issue.

A S S O C I AT I O N N E W S

Certified Master Dealer Program - Feb. & April 2013 Educates dealers on how to manage and grow a profitable business “Effective Management Practices”, “Business Planning”, “Human Resources”, “Merchandising”. “Financial Management” Call (800)756-4232 to sign up.

TAKE US WITH YOUwww.niada.tv - Free Dealer Education 24/7

BY

PA

ULA

FR

EN

DE

L

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auto mgr

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2013: What’s In StoreD E A L E R S H AV E S E E N T H E E R RO R O F T H E I R PA S T WAYS A N D A R E E N J OY I N G T H E S P O I L S O F T H E I R M O R E D I S C I P L I N E D L A B O R

What’s in store for your store in 2013?If it’s anything like 2012, it should be

another good year to be in the Buy Here-Pay Here industry. The new year will not be without its challenges, though. In fact, there are certain areas of the industry that could be more challenging than ever.

To get an idea of what to look forward to LQ��ZH�¿UVW�QHHG�WR�UHYLHZ�KRZ��treated the BHPH world. Tax season was again sporadic at best, which pretty much set the tone for all facets of the business for the rest of the year.)URP�D�SUR¿WDELOLW\�VWDQGSRLQW��WKH�

dealers I have the distinct privilege of working with enjoyed another modest 3 SHUFHQW�LQFUHDVH�LQ�SUR¿WDELOLW\�LQ��versus 2011. That increase was smaller than the previous year-over-year, and was due mostly to the continued focus on the “rightsizing” of overall operations.

Dealers focused on their entire operations, from top to bottom, on continuing not only to “cut the fat” but to keep it off and run their operations based on the cash being generated instead of relying on lines of credit.

I expect that focus to continue in 2013. Though funding sources have become more readily available, overall most dealers will be focusing again on generating the capital necessary to run their businesses from their businesses.

As always, there will be dealers looking to grow aggressively through borrowing, and rates will continue to make that a very viable option. I don’t see rates rising drastically in the coming year, so it will still be a good time to borrow.

Having said that, I still see it being GLI¿FXOW�WR�VHFXUH�QHZ�OLQHV�RI�FUHGLW�LQ�2013. It’s going to take some patience and the willingness to educate some institutions on our industry.$QRWKHU�¿QDQFLQJ�RSWLRQ�WKDW�KDV�

received quite a bit of interest recently is selling blocks of portfolios or payment streams to generate capital to operate with.

The available resources for that are at an all-time high and rates seem attractive as well. Depending on the resource, it can be done either at point of sale or on seasoned receivables.

Rates will depend on the resource, aging, recourse aspects, performance and securitization. The key to this option is reinvesting the capital received back into receivables in a timely fashion so as not to DIIHFW�IXWXUH�FDVK�ÀRZ�OHYHOV�

Sales volume for our dealer clients increased by a modest 3 percent in 2012 over 2011. Not a record-setting year by any means, but a sporadic tax season and the resurgence of subprime and special ¿QDQFH�DUH�WKH�WZR�GRPLQDQW�IDFWRUV�leading to it. Dealers seemed to want to VHOO�ZKDW�WKHLU�FDVK�ÀRZ�DQG�XQGHUZULWLQJ�standards dictated rather than sell as much as possible.

We all know we can sell as many as we ZDQW�RU�KDYH�WKH�¿QDQFLDO�UHVRXUFHV�WR�LQ�this industry. There doesn’t seem to be a lack of customers needing or wanting what we have to offer.

We will see those factors continue to hold for 2013. We should have the customers in the market to sell the vehicles we want or need. The biggest question will be the quality of those customers and the availability of inventory.

Now, I’m normally a glass-half-full kind of guy, but when it comes to this, I think the glass might still be half empty. Even though the prices somewhat leveled off during the last half of last year, the numbers still seem to be dwindling for that sub-$5,000 vehicle.

The 2012 portfolio performance included some stabilization from a dollar loss standpoint, but from a number loss standpoint, there was a slight increase or worsening from 2011.

That was driven by a couple of factors, WKH�¿UVW�EHLQJ�WKH�QHHG�IRU�LQYHQWRU\��Some dealers accelerated their repo times

when a desirable unit was involved. That also helped stabilize the dollar losses, as the vehicles were repossessed earlier and in better condition and thus earned larger recovery amounts.

The other factor was renewed focus on underwriting and the overall collection process. Dealers remained more disciplined in both areas, seeking quality over quantity.

For 2013, I see more of the same. Dealers have seen the error of their past ways and are enjoying the spoils of their more disciplined labor. Expect the average charge-off to remain essentially the same and the number as a percentage of sold to remain higher than in past years, but expect collections dollars to improve as well as overall collection effectiveness.

The biggest thing to affect our industry again in 2013 will no doubt come in compliance. The Consumer Financial Protection Bureau was very active in 2012. It has reached out to a few dealers on a number of auditing fronts. Although no new formal regulations have been drafted, it is truly only a matter of time.

We did dodge a fairly substantial bullet with the legislation that was passed – and more important, the bill that was vetoed – in California. While it would only have affected California, passing tight new regulations HDVLO\�FRXOG�KDYH�LQÀXHQFHG�RWKHU�VWDWH¶V�legislators.

Here is the best advice I can give to existing dealers as well as those wanting to get into the business in the coming year: don’t wait. Don’t wait to get compliant. Don’t wait to spend a little money to do so. Don’t wait to review all processes and procedures. Don’t wait to review all expenses. Don’t wait to review all of your employees. Don’t wait to train.$QG�GH¿QLWHO\�GRQ¶W�ZDLW�WR�VHOO�FDUV��

collect money and make money.

BY BRENT CARMICHAELEXECUTIVE CONFERENCE MODERATORNCM ASSOCIATES [email protected]

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D E A L E R S H AV E S E E N T H E E R RO R O F T H E I R PA S T WAYS A N D A R E E N J OY I N G T H E S P O I L S O F T H E I R M O R E D I S C I P L I N E D L A B O R

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A DV E R T O R I A L

INDEPENDENT DEALERS NEED NEW ‘F&I MANAGER’

Having had the pleasure of serving automobile dealers for more than 50 years, we at 3URWHFWLYH�$VVHW�3URWHFWLRQ�DUH�FRPPLWWHG�WR�PHHWLQJ�WKH�¿QDQFH�DQG�LQVXUDQFH�QHHGV�of our dealer customers.

Like many readers of this magazine, we place great importance on industry studies to ensure we are on top of the latest market trends – and in particular, your needs. However, we recognize selling cars is more than numbers and charts. It’s a people business.

We spend countless hours working to support dealers of all sizes and types. We’re in the car business and a lot of what we do still takes place with a meeting, a handshake, leadership and good in-store training.0RUH�WKDQ�¿YH�GHFDGHV�RI�H[SHULHQFH�DQG�GRLQJ�EXVLQHVV�WKH�ROG�IDVKLRQHG�ZD\�KDV�

SRVLWLRQHG�3URWHFWLYH�WR�H[FHHG�WKH�H[SHFWDWLRQV�RI�RXU�GHDOHU�FXVWRPHUV�In our goal to share proven dealer solutions, we turned to the largest audience – the

growing group of independent auto dealers. We wanted to better understand what you UHDOO\�QHHG�WR�KHOS�IXUWKHU�GULYH�\RXU�),�VDOHV�DQG�SUR¿WV�

We asked many of you from across the county questions about your operations, current selling processes and the importance of F&I to your businesses. Your feedback was informative and insightful, and aligned with many of the current successful approaches we use today.

Here is a snapshot of what we learned: When we inquired about the types of vehicles and service contracts being sold

today, we learned the average vehicle sold is 3-7 years old with 50,000-100,000 miles on it. We discovered more than 65 percent of you sell vehicle service contracts in your dealership.

When we inquired how Protective could better support you, we learned that ease of doing business is very important, followed by working with a company you can trust. On the technology front, 55 percent of you use or plan to use an electronic device such as an iPad® or a tablet device to educate your current and future consumers about F&I products.

We found that in general, consumers still rely on good, quality education from you to learn about the value of a service contract and most consumers don’t have preconceived ideas about what that value really offers them.

The study reinforces what Protective Asset Protection already does well: helping dealers make money selling F&I products.

So what is the best way to help you be more productive, drive more revenue and increase customer retention within the F&I process?

We think the answer is obvious – hire an F&I manager. No one said it was a simple VROXWLRQ��%XW�DQ�H[SHULHQFHG�),�PDQDJHU�EULQJV�WKH�NQRZOHGJH�DQG�VNLOOV�WR�SURYLGH�customers with the best options and the true value of making an F&I purchase decision.

Obviously, adding to your headcount is no small task, and we asked ourselves what ZH�FRXOG�GR��6R�ZH�GHFLGHG�WR�³¿OO´�\RXU�),�SRVLWLRQ�IRU�\RX�

Okay, we didn’t hire an F&I manager for each independent dealer. Instead, we FUHDWHG�³WKH�PDQDJHU�´�%\�FRPELQLQJ�\RXU�FULWLFDO�),�QHHGV�ZLWK�RXU��\HDUV�RI�H[SHULHQFH��ZH�EXLOW�3URWHFWLYH¶V�3URWHFWLRQ�3OXV�6ROXWLRQ��GHVLJQHG�H[FOXVLYHO\�IRU�\RX�

You might have guessed your new F&I manager is not actually a person but instead is an electronic sales presentation using an iPad, or a desktop/laptop-based solution.:KLOH�RXU�QHZ�VWUDWHJ\�PLJKW�QRW�UHSODFH�DQ�H[SHULHQFHG�),�PDQDJHU¶V�NQRZ�KRZ�

and sales ability, it does provide you a tool to increase service contract sales. With our new F&I solution, you have the ability to offer a vehicle service contract customized WR�WKH�VSHFL¿F�QHHGV�RI�\RXU�FXVWRPHU��DOO�ZLWK�HDV\�WR�XVH�WHFKQRORJ\�GHVLJQHG�WR�overcome objections and help close the sale.

We want you to have the closest thing we could provide to an actual F&I manager. Protective’s Protection Plus vehicle service contract and supporting web/iPad app will SURYLGH�\RX�DQG�\RXU�GHDOHUVKLS�ZLWK�WKH�QH[W�EHVW�WKLQJ�3URWHFWLYH�$VVHW�3URWHFWLRQ�ORRNV�IRUZDUG�WR�H[SDQGLQJ�RXU�QDWLRQZLGH�UHDFK�DQG�

working with independent dealers to introduce them to their new F&I manager. You can learn more about the technology and our goal to bring you innovative new ideas and SUR¿W�JURZWK�VWUDWHJLHV�E\�YLVLWLQJ�ZZZ�QHZIDQGLPDQDJHU�FRP��

BY RICK KURTZSENIOR VICE PRESIDENT-DEALER SERVICES FOR PROTECTIVE ASSET PROTECTION HAS MORE THAN 23 YEARS OF INDUSTRY EXPERIENCE. PROTECTIVE ASSET PROTECTION PROVIDES F&I PRODUCTS FOCUSED ON ENHANCING PROFITABILITY AND CUSTOMER SATISFACTION. FOR MORE INFORMATION, CALL 800-950-6060, EXT. 5755, EMAIL [email protected] OR VISIT PROTECTIVEASSETPROTECTION.COM.

While the National Insurance Crime Bureau (NICB) warned of the potential for fraud regarding vehicles affected by Hurricane Sandy, The Associated Press reported the dire predictions of hundreds RI�WKRXVDQGV�RI�ÀRRG�GDPDJHG�YHKLFOHV�was way off the mark.

According to insurance claim data reviewed by AP, about 38,000 claims have EHHQ�UHFHLYHG�E\�¿YH�PDMRU�LQVXUDQFH�carriers in the area, far fewer than expected.

Early estimates predicted the storm that hit the densely populated Northeast to result in more damaged cars than the 600,000 affected by Hurricane Katrina, which hit the Gulf Coast in 2005. NADA senior analyst Larry Dixon said as many as 200,000 vehicles could end up scrapped because of the storm.

But that apparently is not the case, VDLG�)UDQN�6FD¿GL��D�VSRNHVPDQ�IRU�WKH�National Insurance Crime Bureau, an insurance company group that monitors fraud and other trends. He said insurers watched by his group are logging far fewer claims than they did with Katrina.

“It doesn’t translate to there’s going to be 2, 3, 400,000 cars out of this thing just because this is such a huge geographic storm,” he told AP.

Even if there are fewer than expected, WKHUH�DUH�OLNHO\�WR�EH�PRUH�ÀRRG�GDPDJHG�vehicles on the market than normal, and many won’t be labeled as such when they are sold in the wholesale or retail markets.

“Unscrupulous salvage operators and dealers often try to conceal from potential buyers the fact that vehicles have been damaged by a natural disaster,” NICB president and CEO Joe Wehrle said.

After Katrina, NICB established VINCheck, a free service that allows individuals to check if a vehicle has ever been declared as salvage by one of NICB’s member insurance companies. VINCheck is available at www.nicb.org.

I N D U S T RY N E W S

Sandy Not as Hard on Vehicles as Expected

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The Environmentally Conscious DealerN O T O N LY I S I T C O S T- E F F E C T I V E , I T CA N B E F I N A N C I A L LY R E WA R D I N G T O E M B R AC E T H E G R E E N R E VO LU T I O N .

Each day, consumers and businesses grow more environmentally conscious. Yet we are a long way from where we need to be.

Make no mistake. This is a call for action.For all of us in the auto industry, each car

deal is part of a gigantic revenue machine. Our focus is on retail market value vs. wholesale cost. Subtract recon expenses, advertising expenses, commissions, etc., DQG�ZH¶UH�OHIW�ZLWK�QHW�SUR¿W�

The question many of us fail to ask: What is the impact on the environment?

Fact: The second-leading cause of global warming is carbon dioxide emissions from burning gasoline.

Our industry is married to the internal combustion engine. Our success is SUHGLFDWHG�RQ�SUR¿WV�IURP�VHOOLQJ�ODUJH�volumes of gas-guzzling, oil-burning hunks of metal to consumers.

Often we gauge our performance on volume. The more, the better.

Given the nature of our industry, it’s vital that we all embrace, with open arms, the need for a heightened level of environmental responsibility.

There are countless ideas each of us can implement today that will make a difference to the environment while feeding our bottom lines.

Green SolutionsRecycle: In my travels and visits to

dealerships, I’m constantly surprised – and disappointed – by the lack of recycling bins at dealerships. That is the easiest way imaginable to have a positive impact on the environment.

Electronic fax: There are several companies that provide the service. Using an e-fax service drastically cuts down on paper and ink, and is super easy to implement.

Forget traditional mailers: Typical response rate on mail advertising is a mere

2 percent. Save the paper, ink, fuel and money. Allocate those resources elsewhere.

Turn off the printer: We print so many things that just don’t need to be printed. Credit reports, for example. Instead try saving them on your computer along with the customer’s email address.

Turn off excess lighting.Use a green demo: Take the Prius

for a spin instead of the Yukon. Most of us drive without passengers a large majority of the time. Driving a smaller, PRUH�HI¿FLHQW�YHKLFOH�ZLOO�VDYH�\RX�JDV�money while reducing toxic greenhouse emissions.

Walk or cycle: Go by foot or bike to work or to your favorite lunch or coffee spot.

Smartphone apps: Use the extremely broad selection of apps to replace paper whenever possible.

Do business with green businesses: Ask your body shop how it disposes of waste. Choose companies and vendors that act in an environmentally responsible manner.

Eliminate bottled water: Bottled ZDWHU�LV�H[WUHPHO\�LQHI¿FLHQW��,QVWHDG��LQVWDOO�DQG�XVH�D�ZDWHU�¿OWUDWLRQ�V\VWHP�

Hit the switch: Turn off and/or unplug unused appliances and computers when they’re not in use.

Lot lights: Be diligent about adjusting the timer that controls your lot lights.

Every one of these items can be easily implemented today with little or no negative impact on your business. In most FDVHV��\RX�ZLOO�H[SHULHQFH�D�VLJQL¿FDQW�cost savings, especially when that savings accumulates over the course of one or more years.

Simply put, we can no longer ignore the fact we are depleting the world’s natural resources. We are driving at a very fast pace toward a hotter and hotter future. :K\�LJQRUH�WKH�IDFWV�ZKHQ�\RX�FDQ�EHQH¿W�

in numerous ways by making some positive changes?

In addition, the consumer climate has changed to the point that it is not only cost- HIIHFWLYH��EXW�LW�FDQ�EH�¿QDQFLDOO\�UHZDUGLQJ�to embrace the green revolution. Be green and make sure the world knows! You will attract better talent along with more customers as a result.

Electric Vehicles and HybridsA major industry shift is staring all of us

in the face like a hungry bear fresh out of hibernation, and the electric/hybrid market segment is growing rapidly. Nearly every major manufacturer is getting into the space, and new competitors are emerging with cutting-edge products that use state-of-the-art technology to meet consumer demand.

The products currently on the market are extremely compelling, and the future of the segment is exciting.

Here’s a lineup with some information about several of the products available now:

Tesla Model S:�7KH�¿UVW�IXOO�HOHFWULF�vehicle to (mostly) overcome consumers’ No. 1 concern – range anxiety. There are different battery options designed to go up to 160, 230 or even 300 miles per charge at 55 mph.

Consumer interest in the product is phenomenal. The fast, sporty and beautiful sedan is expensive for the average consumer, but will be attractive to the masses on the remarketing side.

Tesla Roadster: Similar to the Model S, but not as practical. This is a pure sports car.

Fisker Karma: Electric/hybrid with extended range. It can go up to 50 miles on 100 percent electric power, then the internal combustion engine engages for another 250 miles. It averages about 58 mpg.

BMW ActiveE:�%0:¶V�¿UVW�IXOO�HOHFWULF�vehicle is only available in select markets on a two-year lease.

C O N T I N U E D O N PAG E 1 2

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Toyota Prius: Arguably the most cost-effective solution on the market. Though not a full electric vehicle, it deserves a spot in the lineup based on its massive success in the U.S., coupled with its extreme HI¿FLHQF\�DW��PSJ�

Chevrolet Volt: The Volt can go up to 50 miles on full electric power before engaging the gasoline engine for up to another 350 miles. Range anxiety is a thing of the past with this electric/hybrid vehicle.

Ford Focus Electric: The Focus can go up to 100 miles on a charge and is more affordable than any of its luxury counterparts. Super-fast charging, and 100 percent electric.

Nissan Leaf: 7KH�/HDI�ZDV�WKH�¿UVW�mainstream pure electric car offered for sale in the U.S. It is an excellent urban commuter vehicle but falls short when it comes to the range anxiety concern.

Consumers are more informed and environmentally conscious today than ever. They are actively seeking out and going out RI�WKHLU�ZD\�WR�¿QG�JUHHQ�VROXWLRQV�WKDW�meet their needs.

Additionally, gasoline prices are still KLVWRULFDOO\�KLJK��VR�WKH�¿QDQFLDO�DQG�environmental need for alternative fuel

solutions is growing by the minute. As more products emerge that meet the demands of the modern “eco-sumer,” those products will inevitably gain more traction.

When it comes to pricing, most of those vehicles are at the top end or just outside the reach of the average consumer. But DV�WKH\�ÀRZ�LQWR�WKH�UHPDUNHWLQJ�VSDFH��a majority of them will fall right into the sweet spot.

Unfortunately, a large portion of our electric power comes from coal-burning sources. According to the Energy Information Administration, the most predominant sources of electricity in the U.S. come from coal (48.7 percent), natural gas (21.5 percent) and nuclear power (19.4 percent).

Because so much of our energy is created by coal-burning power plants, it is arguable that electric vehicles consume similar amounts of energy and as a result produce nearly as much greenhouse emissions as gas-powered vehicles. Until we create more clean and renewable energy sources, electric vehicles will remain an imperfect solution, But they represent a big step in the right direction.

In the end, innovation without

capitalization will die. But if enough of us buy in and support the movement, the sky is the limit.

The question remains: Where do you stand on the matter? Are you going to be one of the dealers with your hand raised when an electric vehicle crosses the block? Or are you going to stand on the sidelines and watch your competitors lead the charge?

Technology and the environment are WZR�PDMRU�LWHPV�WKDW�LQÀXHQFH�DQG�FKDQJH�how our industry looks and feels. DSC remains committed to providing you not RQO\�ZLWK�WKH�EHVW�¿QDQFLQJ�RSWLRQV��EXW�also cutting edge technological solutions to enhance and take your business to the next level.

We are also committed to shifting with your business as environmental needs and consumer demand dictates. :H�DUH�FRQ¿GHQW�ZH�KDYH�WKH�PRVW�ÀH[LEOH�ÀRRUSODQ�¿QDQFH�VROXWLRQV�LQ�WKH�LQGXVWU\��designed to empower you and your business to embrace change and grow green.

BY GARRETT JOREWICZ NORTHWEST REGIONAL DIRECTOR OF DEALER SERVICES CORPORATION.

C O N T I N U E D F RO M PAG E 10 THE ENVIRONMENTALLY CONSCIOUS DEALER

While new car sales were strong throughout November, a shortage of trade-ins caused E\�+XUULFDQH�6DQG\�LV�H[SHFWHG�WR�UHVXOW�LQ�a tighter supply of used vehicles and higher prices for the near future, Black Book managing editor Ricky Beggs said.

New car sales reached 1.14 million in November, an increase of 15 percent, and a handful of carmakers had record months. Beggs said the pace of new-car sales combined with the continued replacement of inventory from Hurricane Sandy vehicles impact used cars in a several ways.

The jump in new sales to a seasonally adjusted annual rate of as much as 15.6 million, according to some industry estimates, should mean additional trades entering the lots, increased inventory that would ease the supply of used cars and offset prices from the Northeast demand. But the percentage of trade-ins for those vehicles has been unusually low, Beggs said.

While usually about 60 percent of all new car sales involve a trade-in, Black Book estimates project the trade-in percentage in the Northeast since Sandy could fall as low as 30 percent, which could cause prices on used cars in the region to continue to rise in the near-term as dealers get fewer used cars from trades and ORRN�HOVHZKHUH�WR�¿QG�LQYHQWRU\��

Northeast Used-Car Supply Tightens

NY_0113.indd 12 12/18/12 4:07 PM

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Test Drive Generator Does All the WorkOne of the great things about the

Internet invading the dealership business is the innovative new ways it helps sell cars. Certainly the availability of information about every vehicle on your lot has complicated the business – but sometimes it’s for the better.

An example is the simple idea that customers visiting your website should be able to make an appointment to test drive the car they like without any effort on the part of the dealer. That’s a good thing, because every day there are thousands of leads in your market, and it is pretty tough to engage them all.

Test Drive Generator, a company based in Mukilteo, Wash., has perfected software that allows any dealer, on any type of automotive website platform, to allow customers to schedule their own test drives without any human intervention. Customers just click the button next to the car they like and schedule the test drive on their own.

Why is that a good thing? Think about it. If the customer is scheduling his or her

own test drive, and Test Drive Generator appointments show up 90 to 95 percent of the time, why, oh why, would you want a salesperson to stick his nose in and screw that up?

Once the customer has scheduled a test drive, the folks at Test Drive Generator say, “Leave them alone!”

Nothing good will come of an email or phone call from a salesperson. At best, the customer will still show up. At worst, something the salesperson says or writes will give the customer second thoughts about coming.

Now, you might say your salespeople are tremendous, but why mess with a good thing? Customers are coming for a test drive. Leave them alone and let them arrive. Have you ever seen a salesperson talk a person out of a sale by talking too much? It’s not a pretty sight.

Test Drive Generator takes care of scheduling the test drive appointment. It VHQGV�HPDLO�FRQ¿UPDWLRQV�DQG�UHPLQGHUV�and text reminders. The Test Drive Generator system has a 90 to 95 percent

show ratio and a 60 to 70 percent sold ratio. Perhaps the best thing about Test Drive Generator is the price: $250 per month for a dealership, billed month-to-month, with no long-term contract and no setup fees.

Seems like a pretty good deal to me, whether you get 10 test drives per month or 100. If you want to hear more, call Test Drive Generator at 877-696-0415, email [email protected] or visit www.TestDriveGenerator.com to book a demo.

BY BRETT STEVENSONDEALER MARKETING MAGAZINE

N E W P RO D U C T S

VISIT WWW.TESTDRIVEGENERATOR.COM

NY_0113.indd 14 12/18/12 4:07 PM

JANUARY/FEBRUARY 2013 T H E N E W Y O R K D R I V I N G F O R C E

15


Manheim has named Bill Harbourne as general sales manager for its Northeast market, while Nicole Graham-Ponce will take over as general manager at Manheim’s Dallas-Fort Worth auction.+DUERXUQH�ZLOO�OHDG�0DQKHLP¶V�1RUWKHDVW�¿HOG�VDOHV�WHDP��IRFXVLQJ�RQ�EXLOGLQJ�RQ�

its relationships with dealers. He has 14 years of remarketing experience, serving most recently as an account manager for the company’s major dealer team, working with some of Manheim’s largest dealers nationwide.

“Bill is helping to lead change in an evolving marketplace, while growing sales through teamwork, strategy and business development,” said Scott Michaels, Manheim’s Eastern UHJLRQDO�YLFH�SUHVLGHQW�RI�¿HOG�VDOHV�

Graham-Ponce, who began her career in the car business running an independent dealership with her father and has worked in auctions since 1998, will be responsible for all business, employee and customer operations at Manheim DFW.

Manheim Names Regional Chief

Chinese-made counterfeit airbags have been used as replacement parts for as many as 230,000 used vehicles that have been involved in a crash over the past three \HDUV��WKH�1DWLRQDO�+LJKZD\�7UDI¿F�6DIHW\�Administration warned.

The NHTSA’s tests showed the black-PDUNHW�IDNH�DLUEDJV��ZKLFK�ORRN�OLNH�FHUWL¿HG�original equipment parts right down to the manufacturer’s logo, either don’t deploy DW�DOO�RQ�LPSDFW�RU�H[SORGH��VHQGLQJ�¿HU\�shrapnel toward the driver’s face.

The airbags are being sold to independent repair shops as original equipment, the NHTSA said. The agency has compiled a list of makes and models for which the counterfeit airbags are known to exist, but admitted it does not yet know the “full scope and scale of the problem” and said the list is likely to “evolve over time.” The list is available at www.safercar.gov.

Cars that have had their airbags replaced by independent shops or by airbags purchased online during the past three years are at risk, the NHTSA said. Owners of such vehicles are asked to contact the call center established by their car’s manufacturer to have the vehicle inspected and the airbag replaced if necessary. The list of call centers and other information is also available at www.safercar.gov.

In August, federal agents arrested a North Carolina auto mechanic and discovered more than 1,500 counterfeit airbags, according to various media reports. The case was reportedly linked to a case in 2011 in Tennessee, in which a &KLQHVH�FLWL]HQ�SOHDGHG�JXLOW\�WR�WUDI¿FNLQJ�in counterfeit airbags and was sentenced to 37 months in prison.

The NHTSA said no deaths or injuries have been tied to the counterfeit bags but said it is unclear whether police accident investigators would be able to identify a fake airbag from a real one after a wreck.

WA R N I N G

NHTSA Warns of Counterfeit Airbags

NY_0113.indd 15 12/18/12 4:07 PM


16


NIADA LEGISLATIVE TEAM UPDATEG OV E R N M E N T R E P O R T

REGULATORY REPORTFederal Trade CommissionProposed changes to the Used Car Rule:

Last month, the FTC released a proposed change to the Used Car Rule, which would make the following changes to the Buyers Guide:��$GG�D�VWDWHPHQW�HQFRXUDJLQJ�FRQVXPHUV�

to seek a vehicle history report and directing them to an FTC website with information on vehicle histories.��$GG�D�VWDWHPHQW�WR�WKH�(QJOLVK�%X\HU¶V�

Guide noting the document is also available in Spanish and informing Spanish-speaking customers they can request the Spanish guide.��$GGLQJ�FDWDO\WLF�FRQYHUWHUV�DQG�DLUEDJV�

to the systems covered on the back of the guide.��3ODFLQJ�ER[HV�RQ�WKH�EDFN�RI�WKH�JXLGH�

giving the dealer the option of informing the consumer whether the manufacturer’s warranty still applies or whether a manufacturer’s used warranty (such as a CPO warranty) or another third-party used vehicle warranty applies.

The FTC is seeking comments regarding the changes. Comments must be submitted by Feb. 11.1,$'$�FKLHI�RSHUDWLQJ�RI¿FHU�6WHYH�

Jordan, Region III vice president Gordon Tormohlen and counsel Shaun Petersen met with the FTC attorneys responsible for oversight of the Used Car Rule on Dec. 12 to discuss the proposed changes.

NIADA also plans to submit written comments.

In addition, the commission made minor changes to the Spanish guide, effective Feb. 11. The revised Spanish version is available at www.ftc.gov. Dealers can use up their remaining Spanish-language guides after Feb. 11, but must transition to the new guide when existing stock is used up.

The FTC is also seeking comments on the nature and prevalence of deception in Internet vehicle transactions. NIADA will submit comments.

Settlement with car loan PRGL¿FDWLRQ�FRPSDQ\��On Nov. 29, the FTC entered into a settlement agreement with D�PRWRU�YHKLFOH�ORDQ�PRGL¿FDWLRQ�FRPSDQ\�regarding its unfair and deceptive practices. 7KH�PRGL¿FDWLRQ�RIIHUHG�E\�WKH�FRPSDQ\�allegedly promised to save vehicles from repossession and lower vehicle payments. ,Q�RUGHU�WR�REWDLQ�WKH�PRGL¿FDWLRQ��WKH�consumer was required to pay high up-front IHHV��8OWLPDWHO\��WKH�PRGL¿FDWLRQ�SURYLGHG�QR�

value to the consumer.No civil penalty was assessed to the

directors or company, but the company and its owner have heightened reporting and record retention requirements over the next 20 years.

Interim Red Flags Rule, limiting WKH�GH¿QLWLRQ�RI�FUHGLWRU� The interim rule constricts the term “creditor,” which is covered by the Red Flags Rule. Under the new rule, a creditor is covered if, in the ordinary course of business, it regularly obtains or uses consumer reports in credit transactions, provides information to consumer reporting agencies in relation to a credit transaction or advances funds to a person.

The FTC has invited comments on the proposed change. NIADA is evaluating the changes.7RS�RI¿FLDOV�OHDYLQJ� The FTC

announced David C. Vladeck, director of the Bureau of Consumer Protection, left Dec. 31 to return to a faculty position at Georgetown University Law Center. Deputy director Charles A. Harwood will serve as the BCP’s acting director.

In addition, FTC executive director Eileen Harrington retired at the end of 2012, with deputy executive director Pat Bak taking over on an interim basis. The executive director is responsible for the administration and management of the FTC, including human resources, information technology, ¿QDQFLDO�PDQDJHPHQW��DGPLQLVWUDWLYH�services and legal document processing and records management activities.

Consumer Financial Protection Bureau

On Dec. 6, the CFPB submitted its annual report to Congress, as required by the Dodd-Frank Act, relating to its supervisory powers under the Equal Credit Opportunity Act and the Home Mortgage Disclosure Act. The report highlighted the CFPB’s investigations over the past year and urged congress to re-examine WKH�WUDQVSDUHQF\�RI�FRQVXPHU�¿QDQFH��VSHFL¿FDOO\�VWXGHQW�OHQGLQJ��

The CFPB announced plans to share consumer complaint data with state agencies that have jurisdiction over consumer protection activities via a secure FKDQQHO�WKDW�SURWHFWV�FRQ¿GHQWLDO�DQG�SHUVRQDOO\�LGHQWL¿DEOH�LQIRUPDWLRQ��7KH�bureau plans to accept complaints and information from state agencies in the future.

The Federal Reserve Board and the CFPB

increased the dollar thresholds in Regulation Z (Truth in Lending) and Regulation M (Consumer Leasing) for exempt consumer credit and lease transactions. Transactions at or below the thresholds are subject to regulation. For dealers, the Truth in Lending Act and the Consumer Leasing Act generally will apply to consumer credit transactions and consumer leases of $53,000 or less beginning Jan. 1.

The Wall Street Journal reported deputy GLUHFWRU�5DM�'DWH��WKH�&)3%¶V�1R��RI¿FLDO�behind director Richard Cordray, will leave the agency he helped create Jan. 31, after the &)3%�¿QDOL]HV�WKH�VODWH�RI�PRUWJDJH�UXOHV�Congress mandated.

Date played a critical role in the agency’s mortgage rulemaking project, considered the agency’s signature and most complicated assignment. He ran the agency from August 2011 until Cordray was appointed.

LEGISLATIVE REPORTRental Cars (S.1445, S.3502, H.R.

6094)Sens. Charles E. Schumer (D-N.Y.),

Barbara Boxer (D-Calif.) and Claire McCaskill (D-Mo.) reached an agreement with the top four U.S. rental car companies to stop renting or selling vehicles that have been recalled by their manufacturer.

Under the deal, rental car companies Enterprise/National/Alamo, Hertz/Advantage, Avis/Budget and Dollar/Thrifty, as well as the American Car Rental Association, have endorsed new legislation authored by the senators to ensure recalled vehicles stay off the road. Together, the four companies represent 93 percent of the rental car market.

The deal caps a long push by the senators DQG�FRQVXPHU�VDIHW\�DGYRFDWHV�WR�¿[�D�loophole in current law. While car dealers are prohibited from selling a recalled automobile, rental car companies are not barred from renting or selling one.

The new Senate bill would change that, requiring vehicles under a safety recall to be grounded as soon as possible. Rental companies would have up to 48 hours for recalls that include more than 5,000 vehicles LQ�WKHLU�ÀHHW�

Also under the legislation, the National +LJKZD\�7UDI¿F�6DIHW\�$GPLQLVWUDWLRQ�ZLOO��IRU�WKH�¿UVW�WLPH��KDYH�DXWKRULW\�WR�investigate and police rental car companies’ recall safety practices.

The timing of any action on the new legislation is still unclear.

NY_0113.indd 16 12/18/12 4:07 PM

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18


N U M B E R S M AT T E R . T H E Y G I V E U S P OW E R . W E A R E P OW E R F U L A S A G RO U P A N D N O T S O M U C H A S I N D I V I D UA L S .

JOIN YOUR INDEPENDENT DEALERS ASSOCIATION NOW

It’s 3 a.m., and I am writing this blurb before we start a day that includes getting 700 units in and ready for auction this Thursday and Friday on the ZKROHVDOH�VLGH��SXWWLQJ�RXW�¿UHV�RQ�WKH�after-auction side, a bunch of meetings dealing with project management on the technology side, hiring new people, timelines/ prioritization of projects, and dealing with an ongoing IRS audit �VL[�PRQWKV�LQWR�LW�RQ�¿YH�VHSDUDWH�companies/entities).

So why do I want every dealer in the country to join his independent dealers association?

I’m sure you’re saying, “Who gives a rat’s back end what time it is, what you’re doing and why you want me to join?”

You can’t BS me. I know you.OK, here’s the deal. I’ll pay. You got it,

I’ll pay, so it costs you zippo to join.You’re too cheap to pull up a couple

hundred out of your pocket? No sweat, I’ll pay.

Read on and I’ll tell you why you are going to join your dealers association, at no additional cost to you

If you haven’t joined until now, or you belonged before and never saw the value and quit, or you say you’re too busy, or you are apathetic, or you don’t know why you should because you can’t see what’s in it for you, or are so cheap you don’t want to reach in your pocket for a couple of shekels because you can’t see the value because you are too busy to stop and understand, I’m paying for you.

Ready to pay attention?Numbers matter. They give us power.

We are powerful as a group and not so much as individuals. Together we generate billions of dollars in revenue and support businesses way bigger than ourselves. We employ hundreds of thousands of people. We spend big money.

Think about it. We spend billions in workers comp, trucking, recon products, insurance of all kinds, at auctions, with ¿QDQFLDO�LQVWLWXWLRQV��DW�ERG\�VKRSV��at dealerships, at bid lots, on parts, making keys, at ports, on advertising (all

kinds of advertising), on accountants and lawyers, with website designers and computer programmers, in gas, on tolls, renting/buying properties to run our businesses, on taxes, zoning and 1,147 other important things too boring to mention, helping make all of those entities bigger and better – which, in general, helps the economy move.

We are the grass roots of free enterprise. Start with an idea – um, I want to buy something and sell it for little more. Good idea, right? Ever have that idea? Why?

Because if you do it enough times it will liberate you. You become a free spirit responsible only (initially) to yourself and your family. Work is no longer work because you are doing it for yourself.

If you haven’t experienced it you obviously aren’t a used car dealer. It’s what drives us to get up early and go to EHG�ODWH��,W�LV�WKH�GH¿QLWLRQ�RI�IUHHGRP�LQ�my world.

So enough nauseous rambling. Here is the point, and why I’ll pay your fee to join. You can’t wait to see how I’m going to close you, can you? You’re going to love it.

Ever hear of Consumer Reports? Ever KHDU�RI�GHDOHU�¿QDQFLQJ"�

Start with Consumer Reports. You know what it does. It rates things.,I�ZH�DOO�EHORQJ�WR�D�QRQSUR¿W�

organization, what do you think that organization can do for us? Rate things, all things. We will rate auctions, truckers, ¿QDQFLDO�LQVWLWXWLRQV��UHFRQ�VKRSV��insurance companies, accountants, lawyers, bid lots, politicians, auction policies, products, sellers at auctions and captive sellers at auctions by name brand. Why you can even rate us to be sure what we say is true.

It gets better than that. They can rate us, and with that rating we can bargain with them. Everybody wants to sell us something. Let’s use the organization to rate them so we all know what others in our group have experienced.

What about forming our own dealers ¿QDQFLDO�LQVWLWXWLRQ�WKDW�OHQGV�RQO\�WR�us? Sounds silly? Not too silly. Don’t

forget, the average dealer is paying up to 25 percent interest on the money he ERUURZV�IURP�¿QDQFLDO�VHUYLFHV��'R�WKH�math. It isn’t a beef, it’s a fact.

If dealers are able and willing to pay that, wouldn’t it be better for us, the dealers’ body, to have ownership in the entity that is able to charge usury rates with near-zero exposure?

Sound silly? Use a few hours of road time traveling to your next auction or bid lot thinking about it. I have. For four decades.

Not only is it true and the concept correct, but the solution is in hand. :H¶YH�VHW�XS�D�¿QDQFLDO�LQVWLWXWLRQ�ZH�all can own shares in, and have total transparency into the operations of, and not only control who and how we lend, but leverage peer pressure to ensure borrowers are kept in check to the point they will pay our bank back what they have borrowed before they pay the food bill at home.

Peer pressure is a powerful thing. Look at your 9-year-old kids if you don’t think so. More on request – or in our next article. 6R�ZK\�MRLQ��DQG�ZK\�MRLQ�D�QRQSUR¿W"�

Join because it gives us weight, power, EDUJDLQLQJ�SRZHU��LQÀXHQFH�DQG�possibilities we don’t have as individuals. We become a franchise of our own, helping guide our own destiny.:K\�D�QRQ�SUR¿W"�%HFDXVH�WKHUH�LV�QR�

special interest to squelch the message or distort the intent of the goals. If we all belong, think about the consumer report. That baby will have power to make WKLQJV�KDSSHQ��IRU�RXU�EHQH¿W��SHULRG�

It is the ultimate form of free speech, and baby, I love freedom and free speech. I prefer death over lack of freedom, and that is no exaggeration.

We have been given this organization to connect and take advantage of our freedom. It feels good, but it’s going to feel better when we have 50,000 independent dealers who belong to and HQMR\�WKH�EHQH¿WV�\RX�JHW�IURP�EHLQJ�part of our organization.

So, I’ll pay for your subscription. How? I’ll take $20 off the purchase of every car

NY_0113.indd 18 12/18/12 4:07 PM

JANUARY/FEBRUARY 2013 T H E N E W Y O R K D R I V I N G F O R C E w w w . n e w y o r k i a d a . o r g

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@piadatodayDealerNewsPAwww.pennsylvaniaiada.com Affiliated with NIADA OCTOBER 2012

MARIADA CONFERENCE 2012 FINALLY HAPPENED...

BIG TIME!IADAs

M A R I A D A

MID-ATLANTIC REGIONAL INDEPENDENT AUTOMOBILE DEALER ASSOCIATIONS CONFERENCE

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HOLLENSHEAD INDUSTRY POWER OFFER - PAGE 12

14 | OCTOBER 2012 WWW.PENNSYLVANIAIADA.COM

Speaker Donna Breegle, Auto Use

Speaker Merle Ziegler, CVR

Speaker Mike DeLorenzo, Rent a Wreck

Speaker Tom Kontos, ADESA Analytics

Speakers Michael Jackson & Chris Jackson, Auto Search Technologies

2000 Dealer Drive | Newburgh, NY 12550 | PH: (845) 567-8400

youtube.com/user/manheimny

It’s a Dayat Manheim New York

Sale Wednesdays 9:00 AM• Monthly featuring Heavy Truck & Equipment Sales Boat, RV, & Motorcycle Sales

• Ford Factory Sales Monthly

MANAGEMENTGM Mark Pester

OPPORTUNITIES

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M A R I A D A 2 0 1 2

SPEAKERS AND PRESENTATIONS

Speaker Lou Rendemonti, CLU, CHFC, Devon Financial Partners, LLC

“Great info within

driving distance.”

From left: Speakers, Alan S. Mosher, Constellation Automotive Services and Bill Debreceni, Bollinger, Inc.

Speaker L.J. Marhefka, L.J. King and Associates

19

BY ROBERT HOLLENSHEADROBERT HOLLENSHEAD, FOUNDER OF HOLLENSHEAD AUTO SALES, INC., OF MANHEIM, PA., CALLS HIMSELF THE LARGEST INDEPENDENT WHOLESALE CAR DEALER IN HISTORY, WITH ANNUAL REVENUES APPROACHING $500 MILLION.

I sell you until we hit the amount it costs you to join your state’s independent auto dealers association.

I am inviting any branch to come to the auction and use the table in my lanes to advertise and sign up dealers willing to join your organization. You are also welcome to use any of my facilities to promote, sign up and educate any dealer with an interest in becoming a member. I’ll pay.

Our goal is to increase membership to include everybody, no exceptions. That translates, in our region, to 30,000 dealers.

I sell 500-700 units a week. I sell 80 percent of my cars to independent dealers like you. On a good day at Manheim, I have about 1,000 dealers online and another 2,500 in the lanes. That’s one auction one on one day. So 30,000 dealers is not an unrealistic number. There is no doubt in my mind we can get everybody in, and I am willing to share the cost because I think the end game is big.

A consumer report function puts real power in the organization. It won’t work unless we have everybody in. But when we have everybody in, it won’t just work, it will be to our benefit. Not small – big, real big, huge, massive. You won’t only be free, you will feel the power of free and big, real big.

Many entities have us as customers, clients, doormats, etc., and make us do dances for them while we are their customer. It doesn’t sound right to me. Feels worse. But not bad enough to give up my freedom for a roof, not close.

But I know that with a united voice and agenda, we not only can keep our freedom, we can cause others who make us dance to their music instead dance to our collective music. Like it or not, sir, numbers matter.

Beyond that, a lending facility, owned by dealers, is not only possible but ready to fly.

We can have an influence on our future. We just have to use our collective power and brain to our advantage.

Sell Well,Robert Hollenshead

The Mid-Atlantic Regional Independent Automobile Dealers Associations (MARIADA) Conference 2012

NY_0113.indd 19 12/19/12 11:35 AM


20


In November and December, more than 4 million American businesses, including 740,000 retailers, will receive 2012 Economic Census forms. Responses to the questionnaire are required by law to be returned by Feb. 12.(YHU\�¿YH�\HDUV��WKH�JRYHUQPHQW�

conducts the Economic Census to develop a comprehensive portrait of American business, from the national to the local level, relying on timely and accurate data.

The U.S. Census Bureau has created a web page __ business.census.gov __ to provide information about the Economic Census as well as statistics businesses can use to assess and grow their business operations.

The site includes webinars and videos to educate businesses about the census and what it means to them, as well as a section geared toward small businesses.

FOR MORE INFORMATION, VISIT BUSINESS.CENSUS.GOV.

Economic Census Coming Soon

E C O N O M I C N E W S

A S S O C I AT I O N N E W S

United Acceptance Joins as a Bronze Partner8QLWHG�$FFHSWDQFH��,QF��D�¿QDQFLDO�RUJDQL]DWLRQ�IRXQGHG�LQ��WKDW�SURYLGHV�FDSLWDO�DQG�VHUYLFLQJ�VROXWLRQV�WR�%X\�+HUH�3D\�+HUH�YHKLFOH�GHDOHUVKLSV��FDSWLYH�¿QDQFH�FRPSDQLHV�DQG�LQGHSHQGHQW�¿QDQFH�FRPSDQLHV��KDV�MRLQHG�1,$'$�DV�D�%URQ]H�OHYHO�National Corporate Partner.

UAI’s strong long-term relationships with auto dealers and its employees have contributed to its growth from a local company in Atlanta to an organization that purchases receivables nationwide.8$,¶V�PLVVLRQ�LV�WR�EH�D�VWURQJ�¿QDQFLDO�SDUWQHU�WR�XVHG�FDU�GHDOHUVKLSV��DOORZLQJ�

WKHP�WR�DFFHOHUDWH�WKHLU�SUR¿WV�WKRXJK�WKH�VDOH�RI�WKHLU�UHFHLYDEOHV�±�LWV�VORJDQ�LV�³3UR¿WV�Through Partnership.”,Q�D�WLPH�LQ�ZKLFK�LW�LV�EHFRPLQJ�LQFUHDVLQJO\�GLI¿FXOW�WR�VHFXUH�FUHGLW�IDFLOLWLHV��

selling contracts can be a viable source of raising capital. United Acceptance purchases automobile installment sales contracts (bulk receivables) from BHPH dealers, franchise GHDOHUV��¿QDQFH�FRPSDQLHV�DQG�EDQNV��,WV�EXON�SXUFKDVH�SURJUDP�LV�VLPSOH��DQG�TXLFN�IXQGLQJ�LV�DYDLODEOH�WR�DVVLVW�ZLWK�LPPHGLDWH�FDVK�ÀRZ�QHHGV�

UAI can turn uncollected receivables into liquid cash, reduce risk and repossession FRVWV��LPSURYH�\LHOG��LPSURYH�SUR¿W�YHUVXV�SRLQW�RI�VDOH�¿QDQFLQJ�DQG�UHGXFH�VWUHVV�E\�allowing dealers to sell vehicles instead of collecting debts.

FOR MORE INFORMATION, VISIT WWW.UAIDIRECT.COM OR CALL 877-281-2360.

NY_0113.indd 20 12/18/12 4:08 PM

NY_0113.indd 21 12/18/12 4:08 PM


22


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

There’s no question that what a dealer says to a customer as part of the sales process matters.

But it’s not just about what is said by the F&I department and what’s documented RQ�D�VDOHV�FRQWUDFW�WR�¿QDOL]H�D�GHDO��,W¶V�also about what is being communicated outside, on the car lot.

No matter how accurate and compliant \RXU�¿QDQFH�GRFXPHQWDWLRQ�LV��LI�LW�disconnects from promises made during the sales process, you could be facing a problem.

Though the law is different in every state, most have passed some version of the model Uniform Commercial Code (UCC) § 2-313. It provides that an express warranty is created by the seller when it makes a statement of fact or promise to the buyer relating to the goods, which becomes part of the basis of the bargain.

The elements are pretty broad and cover a wide range of common statements a salesperson might make when discussing a vehicle with a potential buyer. For example, if a salesperson says to a potential buyer, “This car comes with a new spare tire,” as part of the sales discussion, the promise is probably an express warranty.

What happens if the customer picks up his or her car after the sales contract is signed and a used spare tire is in the trunk?

Contrary to what some might think, express warranties generally can’t be waived or disclaimed. UCC § 2-316 provides that words or conduct creating an express warranty and words or conduct disclaiming or limiting the warranty must be interpreted in a way that makes them consistent with each other. If that’s not possible, then the disclaimers or limitations will not be enforced.

In short, you can’t give with one hand and take away with the other. If a salesperson promises the car comes with a new spare tire and a used one is delivered, a written warranty disclaimer will not help.

Note that the express warranty doesn’t have to be in writing and it doesn’t require using the word “warranty.” As a result, what

the salesperson says can affect a transaction just as much as the documents produced by the F&I department.

That’s why it’s important to know what your sales team is communicating and, more important, promising to customers.

Sometimes the situation involves a simple mistake on the sales lot. A car could be presented as a six-cylinder when it’s actually an eight-cylinder. Or maybe the customer is told the car had two prior owners but there were really three. An uninformed or mistaken salesperson might also tell a customer the car has never been in an accident when in fact he or she doesn’t really know if it has or not.

The new spare tire example may sound farfetched, but a dispute about whether new or used tires were delivered was just one of numerous inconsistencies between promises and documentation by the seller and what was delivered to the buyer in the California case of Sanchez v. Valencia ( 201 Cal. App. 4th 74 (2011)). The case is known for its decision on arbitration clauses and wasn’t about warranties. Still, it is a good example of how discussions on the lot can have a big effect on the dealer’s liability.

Those kinds of express warranty-creating mistakes can be avoided by simply being careful about representations about vehicle features and facts.

While services like CARFAX and certain branding of vehicle titles can help prevent some of those mistakes, or at least bring them to light before an agreement is ¿QDOL]HG��GHDOHUV�DUH�VWLOO�IDFLQJ�VLWXDWLRQV�in which customers are unhappy because an expectation that played a key factor in their decision to buy has not been met.

So what can you do to help prevent this from happening?

Tell your sales staff that what they say matters and why: A salesperson is a liability risk if he or she thinks all promises are wiped out by a disclaimer in the sales contract.

Train your staff on proper sales techniques: That includes arming them

with facts about the inventory available for sale.

Encourage potential buyers to take a test drive: Also encourage them to take the vehicle to a mechanic or get a vehicle history report and other information about the car so they have the best opportunity to know the features, functionality and condition of the vehicle without relying on information from you. Some dealerships have installed Internet kiosks for customers to conduct on-the-spot research.

This is a complex area of law, littered with exceptions and replete with court decisions WKDW�DUH�YHU\�IDFW�VSHFL¿F�DQG�¿QGLQJV�WKDW�are not always consistent. For example, in some situations, disclaimers or waivers can be enforced if the sales contract includes a provision saying it is the all-inclusive and exclusive agreement covering the sale.

Whether a given statement is a statement of fact or promise (creating an express warranty) or merely sales puffery (not an express warranty) is regularly litigated. Many case decisions exist and entire books have been written on the subject.

The key point is that what your sales team says on the lot is important. If there LV�FRQÀLFW�EHWZHHQ�ZKDW�ZDV�SURPLVHG�during the sale and what was delivered, the dealer has a problem. The problem could be characterized as the breach of an express warranty, but it could also be a fraudulent misrepresentation, unfair or deceptive act, etc. – keep in mind that 15 causes of action were alleged in the Sanchez case based on the tires and other inconsistencies.

Creating consistency throughout the entire sales process and making sure the lines of communication between the sales staff and F&I team are open can help mitigate risk for your dealership, ultimately saving time and money.

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

Unintended Express Warranties: What Sales Staff Says Matters

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