CIADA Aug/Sept 2012

• LEASE HERE-PAY HERE VS. BUY HERE-PAY HERE• MOBILE ADS A MUST FOR DEALERS• COMPLIANCE OVERDRIVE

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PRSRT StandardU.S. Postage

PAIDDALLAS, TEXASPermit No. 2079

V i s i t u s a t w w w . t h e c i a d a . c o m

AUTO DEALER NEWSC A R O L I N A S 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

AUGUST/SEPTEMBER 2012

PAGE 8What’s Being Done?Curbstoning

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AUGUST/SEPTEMBER 2012 C I A D A

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w w w . t h e c i a d a . c o m

WHAT’S NEW

MAGAZINE CONTENTS

ADVERTISERS INDEX

06 Formula for Summer Selling08 Curbstoning: What’s Being Done14 LHPH vs. BHPH18 Online Reputation Affects Sales22 Get Your Shipping in Shape26 Mobile Ads a Must for Dealers34 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]. The Carolinas Independent Automobile Dealers Association 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 CIADA 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 © 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

CIADA OFFICE

ADESA ..............................................................13Ally ....................................................................21Auto Auction of New England ...............................7Auto Portfolio Services.......................................31AutoTrader.com ...........................Inside Back CoverAuto Use ............................................................30Carolina Auto Auction ................. Inside Front CoverCharleston Auto Auction........................Back CoverChase ................................................................27GoldStar GPS .......................................................9Kelley Blue Book ..................................................5Manheim.com ....................................................17NIADA Certified .................................................28Nowcom ............................................................19Protective ..........................................................11STARS GPS ....................................................... 29Sterling Credit ....................................................15United Acceptance .............................................25UsedCars.com by Dealix ................................... 23Voisys ................................................................34

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PRESIDENTTRACY MYERSFRANK MYERS AUTO MAXX INC.WINSTON SALEM, NC

PRESIDENT ELECTMALCOLM SHEALORASHLEY PREFERRED AUTO GROUP INC.MT. PLEASANT, SC

NC VICE PRESIDENTMICHAEL DARROWTHE AUTO FINDERS INC.DURHAM, NC

SC VICE PRESIDENTLUKE GODWINGODWIN MOTORS INC.COLUMBIA, SC

TREASURERWILL DAVISG & B AUTO SALES OF LOUISBURG INC.LOUISBURG, NC

SECRETARYDARLA BOOHERDEAL DEPOT, INC.GREER, SC

CHAIRMAN OF THE BOARDCHARLES SAVERANCESAVERANCE FAMILY AUTO CENTERFLORENCE, SC

EXECUTIVE COMMITTEE

The Carolinas Independent Automobile Dealers Association was organized in 1955 to assist members in enhancing their reputation in the marketplace, gain political influence and provide opportunities to interact with and meet other dealers for the purpose of sharing business and marketing ideas.

As a mature and long-standing Association, we are proud to maintain the ideals and principles set by the founders. But today, we offer more…far more. With a fulltime professional staff, modern technology and world class educational programs, we have become a strong, effective and influential organization that exists for one reason only: To represent the independent, non-franchised automobile dealer!

CIADA is the only not for profit association that represents the independent automobile dealer in the Carolinas with a National affiliation.

The Carolinas Independent Automobile Dealers Association was organized in 1955 to assist members in enhancing their reputation in the marketplace, gain political influence and provide opportunities to interact with and meet other dealers for the purpose of sharing business and marketing ideas. As a mature and long-standing Association, we are proud to maintain the ide-als and principles set by the founders. But today, we offer more…far more. With a fulltime professional staff, modern technology and world class educa-tional programs, we have become a strong, effective and influential organiza-tion that exists for one reason only: To represent the independent, non-franchised automobile dealer!

P.O. Box 1088 Harrisburg, NC 28075

Phone: 704-455-2117 or 1-800-432-4232 Fax: 704-455-6810 www.theciada.com

CIADA is a non-profit 501(c)6

Lisa Kluttz Ext 107

Jayne Harris Ext 111

Leslie Waslo Ext 110

Catherine Neely Ext 102

Carl Mischinski Ext 109

Krista Simmons Ext 103

John Brown Executive Director

Ext 105

Meet Our Professional Staff





Lisa Kluttz Ext 107







Ext 105






Lisa Kluttz Ext 107







Ext 105






Lisa Kluttz Ext 107







Ext 105


EXECUTIVE DIRECTOR JOHN BROWNEXT 105

ANGEL LONG DRIS ASSISTANTEXT 109

CATHERINE NEELYADMINISTRATIVE DIRECTOREXT 102

LISA KLUTTZCUSTOMER SERVICEEXT 103

JAYNE HARRISCUSTOMER SERVICEEXT 110

LESLIE WASLODRIS ACCOUNTSMANAGEREXT 108

JULIA ROGERSACCOUNTINGEXT 101

CIADA STAFF

P.O. BOX 1088 • HARRISBURG, NC 28075 PHONE: 704-455-2117 OR 1-800-432-4232 FAX: 704-455-6810 • WWW.THECIADA.COM CIADA is a non-profit 501(c)6

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.

Independent dealers were given a voice in the National Motor Vehicle Title Information System (NMVTIS) when NIADA legislative /regulatory/compliance counsel Shaun Petersen was named to the NMVTIS Advisory Board.

Petersen becomes the second auto industry representative on the 27-member board, joining James Moors of the National Auto Dealers Association. Moors, who represents new car dealers, suggested adding Petersen to the board to represent the used car business, Petersen said.

“My appointment to the board will bring the voice of the used car dealer to the table,” Petersen said. “NIADA is seen as an independent and different voice from the new car dealer. I think it is significant they sought us out.”

The board – which also includes members representing the insurance industry, the salvage industry, law enforcement, consumer advocates, state departments of motor vehicles, organizations focused on preventing vehicle-related crime and the system’s technology partners – was established to advise the Department of Justice’s Bureau of Justice Assistance on ways to promote the effective and efficient administration of the NMVTIS program and database.

NMVTIS was created to prevent the introduction of stolen vehicles into commerce, to protect states and consumers from fraud, to reduce the use of stolen vehicles for illicit purposes and to provide consumer protection from unsafe vehicles. NMVTIS reports provide title and branding data, odometer readings, total loss history and salvage history. Insurance carriers, auto recyclers and junk and salvage yards are required to report data to the system, and states must perform an NMVTIS check before issuing a title.

NIADA’s Petersen Joins NMVTIS Advisory Board

I N D U S T RY U P DAT E

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Congratulations to Chris Martin, the new President of the National Independent Automobile Dealers Association Executive Committee. Chris began his term during NIADA’s 66th Annual Convention and Expo at Caesar’s Palace in Las Vegas.

Chris is President of Team E-Z Auto, his family’s dealership, in Fayetteville, NC.

Martin, the son of champion drag racer Buddy Martin – a member of the Motorsports Hall of Fame of America and the International Drag Racing Hall of Fame – succeeded 2011-12 President Don Fincher of Houston, Texas.

(Pictured: CIADA Executive Director John Brown, Chris Martin and his father Buddy Martin, wife Maria and daughters Marissa and Anabella.)

Here are a few highlights of Chris’ speech to those in attendance at the NIADA Annual Convention:

“I grew up around cars and many of you might know or remember my father, Buddy Martin. That’s right; I grew up around the famous Socks and Martin drag racing team. I learned from the best.”

“It doesn’t matter where you live, from the Carolinas to California; the independent car dealer is still the backbone of the greatest industry ever in the greatest Nation ever.”

“I generally consider myself an optimistic guy. I want to see the positive in every situation, every employee and in everything we do. I realize that if you want to chase what is at the end of the rainbow, then you have to put up with the rain.”

“While there are plenty of negatives and the industry has continuously been under attack from regulators and lawmakers, there are plenty of positives to talk about.”

“So I want to focus my time as your President on what’s right in our industry. I want to focus our thoughts on how we can keep growing the industry. I want to focus on 98% of customers who are satisfied with their purchase from an independent dealer.”

“We have every right to focus on the positive. We have every right to dream heroic dreams. Those who say that we are in a time when there are no heroes just don’t know where to look. You can see heroes every day going in and out of our dealerships. There are a growing number of entrepreneurs with faith in themselves and hope in an idea to create new jobs, new wealth and opportunity as independent

dealers each and every day. They still believe the best is yet to come.”

“I have used the words “they” and “their” in speaking of these heroes. I really should say “you” and “yours” because I am addressing the heroes of whom I speak - you, my fellow independent dealers.”

“Personally, at Team E-Z Auto, for almost 2 decades, we have served the Fayetteville, North Carolina area with the highest quality used cars and automobile financing available. Just like you, we continue to provide a valuable service to our community.”

“Because our dealership has been successful, we have been able to grow. We have been able to grow our sales, our customer satisfaction and give back to our community and industry. The wonderful news is that there are many recipes for success as an independent dealer.”

“I am so honored to be your President and I pledge to you that I will do everything in my power to advance the well being of the independent automobile dealer. I pledge to you that I will take the high road and while pointing out how to improve the industry when the opportunity presents itself, I’ll continuously talk about how we are the backbone of what is right in America.”

Chris, you continuously make all of us that are part of CIADA and NIADA, very proud. We wish you much success for a great year as President of NIADA. You can count on us.

I would also like to mention that another member of CIADA is on the NIADA Executive Committee as well: Billy Threadgill of Florence, SC. Billy is the Owner of Van’s Auto Sales. Last year Billy served as Treasurer of NIADA and this year will serve as Vice President. Congratulations Billy!

Please join us at this year’s CIADA Annual Convention and Expo, August 2-5 at the Marriott Grande Dunes Resort & Spa in Myrtle Beach, SC to learn from the best. We will be honoring Chris and Billy and the newly elected CIADA Executive Committee, so make plans to join us today!

Call 800-432-4232 to reserve your spot today.

Keeping you informed,

John BrownExecutive Director

Carolina Dealer Named NIADA President

Today’s tires are engineering marvels, improving performance and fuel economy, even if they tend to be largely ignored by motorists.

That’s also a problem that can turn a tire into a killer.

A new government study warns that as many as one in 20 crashes could be linked to tire-related problems, with underinflated tires posing an especially high risk of causing a problem.

“Tire problems are inherently hazardous to vehicle safety,” said the report by the National Highway Traffic Safety Administration, which based its study on crashes covering a three-year period from 2005 to 2007.

The report found underinflation was the biggest problem, with tires 25 percent below their rated pressure three times more likely to be involved in a crash.

Part of the problem is that a low tire reduces the vehicle’s stability even under ideal conditions, and it makes it significantly more difficult for a driver to maintain control in bad weather or during emergency maneuvers, such as swerving to avoid an obstacle in the road.

Problems also can result from worn tires, especially those that have gone bald or have damage to the tire that could lead to a catastrophic blowout.

The study noted that tire problems, in general,are more likely to lead to accidents in bad weather.

Industry officials say the study underscores the need to properly maintain tires, repairing or replacing those that are damaged while always keeping tires at the proper inflation.

That message should weigh doubly on the minds of consumers these days because properly inflated tires also deliver significantly better fuel economy. A low tire can reduce mileage by as much as 5-10 percent, according to various estimates.

Regulators and industry officials alike have been paying more attention to tire safety since the recall of 13 million tires used on the Ford Explorer a decade ago.

That has led many manufacturers to adopt more advanced TPMS technology, such as the kind that will be available on the 2013 Nissan Altima, that provides specific inflation information on each individual tire.

Those Underinflated Tires Could Kill You

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Formula for Selling in the Dog Days of SummerThe dog days of summer are here.

The time to make hay while the sun was shining has come and gone.

The typical Buy Here-Pay Here dealer will sell 40-45 percent of his annual units in the first three months of the year. He will also realize about the same percentage of his annual profit in those three months.

So if you got off to a slow start in 2012, the dog days of summer could be the only way to salvage your year. Because we all know the last three months are not time to try to make your year.

Being able to sell in the dog days is really no different than selling in the heydays. The same four key ingredients to selling are the same. The only difference is the focus has to be there.

In the heydays, selling is pretty easy. Customers have money. You have inventory. All is right with the world. But come the dog days, customers have less money. And they seem to be harder to find.

The first, and most important, of the key ingredients to selling in the dog days is training. Well-trained salespeople can sell any time of year. You should always be training your staff, always honing their skills. Both phone training and basic sales skills training should be done weekly, at a minimum.

Work with staff on overcoming objections – role-playing is a good way to accomplish that. When it comes to phone training, work on how to set effective appointments. Lot traffic is at a premium during the dog days, so your people had better know how to effectively handle it.

The second ingredient is appearance. Now, I’m not necessarily talking about your employees’ appearance, which should always be neat and professional, but your overall lot appearance. The No. 1 reason customers list as the reason they come in is “drive by.” So if that is the case, why wouldn’t you want

your lot to look the best in town?The lot should always be neat and

orderly, not with vehicles facing all four directions of the compass and then some. Vehicles should be spaced evenly, with a good mix of colors and styles.

A lot party or lot rodeo should be done at least once a week, if not more. It will really go a long way to making your lot look fresh. You should consider the vehicles on your lot your mannequins and treat them the way fine department stores treat theirs. Keep them fresh, neat, clean and always ready to sell. That goes for overall lot appearance as well. A fresh coat of paint and some weed killer can do wonders.

Marketing is the next key ingredient. Again, with traffic being at a premium, this is the time when repeat and referral programs really pay dividends. It’s a good time of year to focus on referrals, not just with your customer base but with outside companies and people as well. If you are not already paying referrals to non-customers, it’s something you should seriously consider. I can assure you some, if not all, of your competitors are.

Marketing also extends to your web presence. Make sure your website is up to date, especially if you are displaying inventory. I was on a dealer client’s website the other day and he had pictures of some of his inventory with snow on it.

In addition to the inventory, make sure all other aspects of your site are up to date. That includes any advertised specials, about us sections and employee introduction sections. You wouldn’t want someone calling or coming in asking for someone or something that is no longer there.

The last key ingredient in the dog days selling formula is advertising. In this very competitive industry, advertising in some form or fashion is

almost a must. The thing that makes advertising effective is reaching the right folks with the right message.

The two most popular media are, of course, television and radio. There is a thought people watch less television and listen to more radio in the summer, but that is just not the case. Studies have shown television viewing doesn’t drop off at all during the summer, and the same goes for radio listening.

The important thing to remember about advertising on both those media is to remember you are not your customer, so don’t advertise to yourself. Chances are your customers watch different television stations and listen to different radio stations than you do, so make sure the stations you are on are the ones your customers are watching and listening to. Customer surveys from new and existing customers are the best way to gauge their entertainment preferences. Simply put, just ask.

As with marketing, your web presence is also a way to advertise. The use of your website, as well as Facebook and even Twitter can be ways to get your message out. I wouldn’t necessarily count on those selling more cars, but they are perfect ways to advertise new inventory or special sales promotions.

The formula for selling in the dog days is the same as selling in the heydays. It just takes a little more attention to detail. There are usually fewer opportunities in the dog days, so capitalizing on them is much more important.

Remember, the two most important ingredients in the formula are the two most inexpensive. Hopefully, you have the right mix of all the ingredients to keep the dogs at bay.

BY BRENT CARMICHAELEXECUTIVE CONFERENCE MODERATORNCM ASSOCIATES [email protected]

B E I N G A B L E T O S E L L I N T H E D O G DAYS I S R E A L LY N O D I F F E R E N T T H A N S E L L I N G I N T H E H E Y DAYS .

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CARFAX Helps TV Station Take Aim at CurbstonerEditor’s note: Curbstoning – sales

of vehicles by unlicensed dealers – is a national problem that takes advantage of consumers and takes money away from state and local governments as well as legitimate dealers. This report from Memphis television station WMC-TV exposing a local curbstoner and explaining the issue to the public is a direct result of the commitment of vehicle history report provider CARFAX to fighting curbstoning.

“We brought the issue to the station’s attention,” CARFAX public relations manager Chris Basso said. “Tennessee is one of the biggest hotbeds for curbstoning, but it’s a nationwide problem. Whenever we hear about curbstoners in a particular area, we work to get the word out about the potential problems with the cars these people are selling and how to avoid them.

“Most curbstoners are selling cars reputable dealers won’t touch – cars with hidden damage or rolled-back odometers or such – because they’re trying to make a quick sale. Anyone buying a used car needs to be wary of not only the car but of who they’re buying it from.”

Basso said CARFAX has contacted other media outlets, including stations in Nashville and Phoenix, with similar tips, as part of the company’s ongoing efforts to help educate and warn consumers and dealers about emerging issues involving used cars in their area.

By Andy WiseAction News 5/WMC-TV

A police report revealed a car buyer intends to press theft charges against the son of a woman who is fronting used car sales from her home for a dealership, a practice called “curbstoning.”

Bill Sullivan filed a complaint with the Germantown (Tenn.) Police Department on May 23. The complaint alleged he gave $4,500 to Thomas Coleman, son of Deborah Coleman, to purchase three vehicles.

When their delivery was delayed,

Sullivan pressured Coleman to produce the cars’ sales documents. Once Coleman finally presented the sales documents, Sullivan said they revealed something else.

“The cars were never purchased by them on my behalf,” Sullivan said. “They were purchased by somebody else.”

According to the sales documents, that “somebody else” was The Auto Connection, an auto dealership at 1419 E. Broadway St. in West Memphis, Ark.

Sullivan’s police report alleged Coleman pocketed his $4,500 and never purchased any cars with his money. The cars the Colemans claimed to have purchased with his money, Sullivan said, were actually cars they sold on behalf of The Auto Connection.

“Correct,” Sullivan acknowledged. “They split the profits.”

The Action News 5 Investigators pinpointed Deborah Coleman as a curbstoner when the vehicle history tracker CARFAX warned that unlicensed or unforthcoming auto dealers have agents posing as private sellers on CraigsList and in classified ads.

“Somewhere between 80 and 90 percent of [auto sales] classified ads are believed to be curbstoners,” CARFAX’s Chris Basso said. “These are dealers posing as private sellers who are selling cars that have a lot of hidden problems.”

Coleman has posted numerous listings for used car sales on CraigsList, all found while running searches based on her cellphone number.

Kayce Wyatt of Arlington, Tenn., answered one of Coleman’s ads for a 2001 Nissan Maxima, thinking Coleman was the vehicle’s private owner putting it up for sale.

She met Coleman at Coleman’s home. That’s where the car was stored, Wyatt said.

After taking a test drive and negotiating the deal – but failing to run a vehicle history report or to have the car inspected – Wyatt paid $3,500 for the car, according to the paperwork.

It’s when Coleman handed Wyatt the title that Wyatt realized something was up.

“I got the title, and it said, ‘The Auto Connection,’ ” Wyatt said.

The dealership, owned by Jimmy Smith, is licensed with the Arkansas State Police to sell used cars in Arkansas.

But according to the records of the Tennessee Motor Vehicle Commission, The Auto Connection is not licensed to sell cars, new or used, in Tennessee.

It wasn’t long until Wyatt started having trouble with the Maxima. The “Service Engine Soon” light stayed on. The radio’s power switch malfunctioned. The brakes, pads, rotors, spark plug and oxygen sensor had to be replaced.

She nearly paid as much to repair the car as she did to buy the car.

If she had run a vehicle history report, she would have discovered The Auto Connection had Deborah Coleman curbstone Wyatt a car that had been in an accident in Michigan.

Neither Coleman nor The Auto Connection disclosed the accident to Wyatt.

“So it’s been wrecked,” Wyatt said. “I cried and cried and cried about it, but I had to do what I had to do. I didn’t have a way out of it.”

An undercover producer of The Action News 5 Investigators answered one of Coleman’s ads for a Volkswagen Jetta. The test drive revealed the “Service Engine Soon” light was on.

“That’s because it’s due for an oil change,” Coleman said to our producer. A CARFAX report revealed nothing of concern with the vehicle’s history.

Both the Jetta and a Cadillac Coleman was selling outside her home had Arkansas dealer temporary tags. When our producer asked about the out-of-state tags, Coleman admitted she was selling the vehicles for The Auto Connection.

“[The] business is over in Arkansas, and it just saves all the [document] fees, and it saves me about $1,500-$1,600 dollars per car,” said Coleman, who is also not licensed to sell automobiles in Tennessee,

U N L I C E N S E D O R U N FO R T H C O M I N G D E A L E R S H AV E AG E N T S P O S I N G A S P R I VAT E S E L L E R S I N C L A S S I F I E D A D S .

C O N T I N U E D O N PAG E 10

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according to state records. According to the Tennessee Code

Annotated, 55-17-109, “it is unlawful for any person to engage in business … as a motor vehicle dealer [or] motor vehicle salesperson ... without first obtaining a license as required in this part.”

“Tennessee law says that if you sell more than five vehicles in a year, you have to have a dealer’s license,” Basso said. “These are people who are skirting that law, selling hundreds of cars without getting a dealer’s license, costing the state and local dealers hundreds of thousands of dollars” in tax revenue.

Coleman refused to answer questions when confronted. Smith agreed to an on-camera interview, then abruptly canceled the interview the next day.

On the phone, he said Coleman “is my agent. She sells cars for me. Sometimes it’s from her own driveway. Sometimes it’s from a [drug store] parking lot. She’s just trying to feed her kids.”

Germantown police department records revealed another car buyer reported Coleman in December 2010.

According to the complaint, the buyer blew the whistle on Coleman after he said he witnessed her and her son altering a temporary drive-out tag on a vehicle. Coleman told the police officer who wrote the report that she sold the car on behalf of Star Auto Mart, in Collierville, Tenn.

“No, sir,” Star Auto Mart owner David Fleming said. “She’s never sold for me. Never had a salesman’s license here. Never anything.”

Germantown police determined there wasn’t enough evidence to charge Coleman with a crime and decided it was a civil issue.

“It’s a lose-lose situation with curbstoning,” Basso said. “The state loses money. The [licensed] dealers lose money and the consumer gets ripped off.

“If you’re looking online, especially through sites like CraigsList, you really need to be careful about what you’re buying.”

Coleman’s curbstoning operation may be in violation of a Germantown city ordinance that prohibits “receiving persons at a residential property for the purpose of buying, selling, ordering or picking up products in connection with a business.”

“Code compliance has had contact with [Coleman] in the past,” said Stacey Ewell, spokesperson for the city of Germantown. “We did provide notice for unlicensed vehicles in the street in November of 2010 but have not had anything vehicle-related since. In addition, there is no business license for” Coleman’s address.

C O N T I N U E D F RO M PAG E 8 CARFAX Helps TV Station Take Aim at Curbstoner

Report Shows Auto Credit Loosening Average credit scores for consumers buying a vehicle have dropped to

near prerecession levels in the first quarter of 2012, Experian Automotive reported.

According to Experian’s quarterly automotive credit analysis, the average credit score for financing a new vehicle dropped six points to 760 and fell four points to 659 for used vehicles. For comparison, average credit scores for the first quarter of 2008, just before the economy sagged, were 753 for new vehicles and 653 for used.

Lenders continued to set favorable terms for consumers during Q1 of 2012. Interest rates were lower and loan terms longer than in the first quarter last year, giving consumers access to potentially lower monthly payments. The average interest rate dropped to 4.56 percent for new vehicle loans and 9.02 percent for used, while the average loan term increased by one month for both new (64 months) and used (59 months) vehicles.

“Our report shows automotive lending is as healthy as it’s been since the market bottomed out in 2008,” Experian director of automotive credit Melinda Zabritski said. “With consumers doing a good job of paying back loans on time and the percentage of dollars at risk reaching its lowest point in six years, lenders are able to extend terms and provide lower rates.

“This thawing of the credit pipeline has been good for everyone, from consumers to lenders to automotive.”

The analysis also showed an increase in the average amount financed, which rose $589 to $25,995 for new vehicles and $411 to $17,050 for used vehicles.

Pace of Dealers Adding Inventory Slows Used car dealers have become less aggressive in bidding for inventory at

wholesale auctions in recent weeks, Black Book vice president and managing editor Ricky Beggs said.

Beggs noted that the retail market has backed off slightly and dealers have gotten less aggressive with bidding activity for the latest model years. Every car segment showed rate of decline and only two truck segments – compact SUVs and full-size crossovers – were up in May.

“While there are seasonality trends currently taking place in the retail markets, we’re starting to see hesitance of dealers to refill used car and truck inventory,” Beggs said. “Some of the rental companies are pushing a few more models into the market with a lesser demand for the 2012s and 2011 models, thus getting less aggressive bidding activity for the latest model years.”

I N D U S T RY C O R N E R

Rising Sales Lift FloorplansRising U.S. new and used auto sales have boosted dealership profits in 2012

and are strengthening already solid performance of dealer floorplan asset-backed securities, the financial ratings service Fitch reported.

Dealer floorplan asset performance has been solid this year, with most trust performance metrics at some of the strongest levels seen in the sector. Monthly payment rates are elevated above historical levels, dealer inventory agings are very low and dealer defaults are at record lows for most of the trusts.

Given the favorable conditions currently supporting U.S. auto dealership networks, Fitch’s outlook for both asset and ratings performance in 2012 is stable.

The report also discusses the health of U.S. auto dealerships in 2012, including sales levels, expenses and profitability, along with detailing other financial dealer metrics and overall industry health.

The report, “U.S. Dealer Floorplan ABS: Robust Dealers in 2012,” is available at www.fitchratings.com.

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Rent-A-Wreck of America, a franchise company with more than 150 used car rental locations throughout the U.S., is now offering NIADA members a $1,000 discount off the purchase of a franchise.

Rent-A-Wreck, an endorsed NIADA National Member Benefit Partner, has extended its commitment to independent dealers by pledging to contribute $1,000 to the dealer’s state association or the national association for every franchise sold to an NIADA member.

Since 1973, Rent-A-Wreck of America has offered used car dealers a franchise they can operate at their existing retail sales lot to bring extra revenue and additional foot traffic with little additional overhead.

“Our franchise brings used car dealers everything they need to become a player in their local car rental marketplace,” Rent-A-Wreck of America vice president of operations Michael DeLorenzo said. “We have financing, insurance, a global reservation system and a comprehensive and sophisticated training system that makes car rental a near turnkey opportunity for a used car dealer.

“Rent-A-Wreck is a great brand with a long and successful history with used car dealers. Our franchisees who are used car dealers see the benefit of additional cash flow and profits from rentals, but also see that the increased foot traffic helps them sell more cars as well.”

Rent-A-Wreck franchise owners receive access to a fleet leasing and purchase program that includes access to closed factory sales, a reservation system connected to multiple global booking channels, online travel agencies, rentawreck.com and 1-800 telephone reservations, point of sale integration with the reservation system, a comprehensive training program in pre-open and post-open phases, a dedicated area representative for recurrent and ongoing needs, insurance and more.

For more information, visit www.rentawreck.com/NIADA or call (469) 939-6132 to speak to a company representative.

Rent-A-Wreck Offers $1,000 Off a Franchise

E X T E N D E D C O M M I T M E N T

Black Book is predicting an additional 900,000 used vehicles will hit the market in 2012 – the effect of a hot new-car market – calling the massive influx a “glaring reason” for the drop in used prices that has already begun.

What’s more, if the new car market gets even hotter in 2013, used prices will fall further, the company said.

Black Book cited an outside prediction putting total new vehicle sales for 2012 (retail and non-retail) at 14.2 million units, which would be an increase of 1.5 million units over last year.

Black Book’s Ricky Beggs said 60 percent of those additional new vehicle sales are likely to have a trade-in attached, putting 900,000 additional used cars into the market.

“Almost a million more used vehicles will be added to the industry this year as a result of more trade-ins on new car sales,” Beggs said. “This is a significant driver of lower prices, combined with additional rental cars being sold at auction and dealers preparing for the coming 2013 models.”

So how big an impact does 900,000 additional used units make?Consider: Three years ago, 750,000 units were taken out of the used vehicle

market thanks to the so-called “Cash for Clunkers” program, and Black Book noted, “At the time, the auto community thought that would have a profound impact on the industry. By comparison, this year the industry will be adding 900,000 vehicles into the system, which is a glaring reason why prices are falling.”

Continuing a trend of softening prices, Beggs said in his June 18 report “Beggs on the Used Car Market” that the week ending June 15 showed car segment prices dipping $31 on average, with only one segment showing an increase. The downturn in truck prices was even steeper ($60).

Black Book said used car prices will continue to decline “well into next year assuming 2013 SAAR increases further.”Sales Projections

There are likely to be 4.43 million used sales in June, according to data from CNW Marketing Research. That would be down from 4.49 million used sales in June 2011 and up from 4.31 million in May, the firm said.

CNW said the “true delivery rate” for used sales – similar to the seasonally adjusted annualized rate often used by analysts in discussing new vehicle sales – was 40.19 million in June, down from 43.58 million in May.

CNW said the true delivery rate has stayed above 40 million for every month of 2012 except March, when it dropped to 38.54 million.

The latest forecast from J.D. Power and Associates’ Power Information Network and LMC Automotive projected 994,800 new car retail sales in June, a 15 percent rise from June 2011 after adjusting for one more selling day in June 2012. The resulting SAAR would be 11.9 million.

Analysts are expecting 1.27 million total new vehicle sales in June (retail and non-retail), which would be up 16 percent over June last year. That would translate to a total SAAR of 13.9 million.

The firms said the projections for June were based on the first 17 selling days of the month.

For the rest of 2012, LMC held its total new sales forecast at 14.5 million and kept its retail projection at 11.6 million.

“Despite a rising level of uncertainty with the economic recovery, consumers remain resilient in their willingness to purchase new vehicles,” LMC Automotive senior vice president of forecasting Jeff Schuster said.

“Concerns regarding the macro-economic environment and another potential summer slowdown have increased, but we expect the sales pace to remain strong and stable throughout the second half of the year.”

BY JOE OVERBY EDITOR, AUTO REMARKETING

Black Book: More Used Cars Will Cause Price Drop

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

LHPH vs. BHPH: Should My Dealership Switch?In recent years, the Lease Here-Pay

Here (LHPH) model has generated some buzz in the world of subprime auto sales – and for good reason.

LHPH is an offshoot of the Buy Here-Pay Here (BHPH) concept, but it involves a dealer retaining the title to each vehicle and charging usage fees to customers. While the difference might seem subtle at first, it can radically change how the vehicle transaction is managed, taxed and regulated.

Among the advantages of LHPH:•Deferred sales tax.• A federal income tax deduction for depreciation of your assets.

• It doesn’t require a related finance company (RFC).

•Less burdensome regulations.•Faster repossession times.• Vehicles can’t be claimed in a bankruptcy.

Probably the most commonly cited advantage of switching to a lease program is the ability to defer sales tax payment on your vehicles. Instead of paying sales tax up front – long before you’ve received all of the customer’s money – you’re allowed to pay the sales tax in installments, every time your customer pays you. That lessens your risk of losing money when a customer defaults, and it makes cash flow more even and manageable.

George Klinke, vice president of business development for the San Diego-based company LHPH, LLC, called that the greatest advantage of the model.

“There are 32 states where there’s a real cash flow incentive,” Klinke said. “When you buy a car in California, you pay an 8.75 percent sales tax on that vehicle. On a $20,000 car, you’re paying $1,750. That’s money that comes out of the dealer’s or the consumer’s pocket today.”

But in California and 31 other states,

dealerships can pay the sales tax on each vehicle as payments are collected, rather than at the lease’s inception. Additionally, lessors can collect a security deposit, which is not subject to taxation.

“This is a pool of money where if there are other expenses that come up in the lease, the security deposit can be applied against those,” Klinke said.

Unless state law mandates otherwise, the only up-front tax on a lease is paid on the cap cost reduction.

For years, BHPH dealers have avoided income taxes on “phantom income” through the use of a related finance company. An RFC is a legally separate corporation an auto dealership establishes to handle financing, often for customers who have difficulty obtaining credit from traditional lenders.

Usually, the dealership sells the note from each vehicle transaction to its RFC at a discount, eliminating most of the dealership’s profit on the sale, which would have been taxable income even though no payments had yet been collected from the consumer.

The RFC’s income on the note purchase, however, is taxed as the payments are collected, avoiding a large income tax on profits that haven’t been earned yet and creating a substantial cash flow advantage.

If executed correctly, this setup is entirely legal. The IRS has even written a guide for it, available at www.irs.gov/businesses/article/0,,id=137739,00.html. But the IRS also examines RFCs carefully for evidence that they’re substantive businesses that remain at “arm’s length” from dealerships, rather than thinly disguised shell corporations. One small misstep could place you in line for an audit.

For dealers wanting to avoid this compliance headache and the difficulty

of establishing a legitimate RFC, LHPH is an attractive option.

Because of the inherent tax advantages of leasing, it is not necessary to have a related finance company to handle LHPH deals – though dealers may still choose to keep their RFCs as a buffer against bad publicity, lawsuits and financial risk.

Because the dealer is the lessor and therefore the owner of the asset (vehicle), he can claim depreciation over the term of the lease based on IRS guidelines and use it as an income tax deduction, reducing the overall tax bill.

Jason Berger, managing partner of AK Acceptance, an RFC in Pittsburgh, said LHPH deals are not constrained by the tougher regulatory requirements that affect BHPH dealers.

At the federal level, LHPH deals fall under the less restrictive Regulation M rules that govern auto leasing, rather than the notoriously tough Regulation Z rules that govern auto sales. Under Reg M, a dealer is not obligated to disclose an annual percentage rate because there is no interest rate in a lease – just a “rent” or “lease” charge.

The lack of an interest rate also means you are is not encumbered by state usury limits. You can impose mileage overage charges to protect the value of the vehicle. And if the lessee declares bankruptcy after starting an LHPH deal, he won’t be able to avoid repossession because he never had ownership of the vehicle.

For the same reason, if a lessee breaches the contract, there’s no mandatory grace period to comply with for repossessions.

“We pull the trigger faster,” Berger said, noting dealerships can technically repossess a vehicle if a payment is even one day late – though that might not be a great way to build goodwill in the

T H E B E N E F I T S FO R T H E D E A L E R , R F C A N D T H E C U S T O M E R A R E R E A L LY C O M P E L L I N G .

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community. “My target turnaround time is 21 days from the time of default [to when the car is available to lease again]. With a loan, we’d usually let it go a little bit longer.”

LHPH has some appeal for consumers, too. Because they aren’t paying for full, lifetime ownership of the vehicle, drivers can normally afford a better quality automobile than if they insisted on purchasing. Like the dealer, customers can usually pay less cash up front. And when the customer is done with the car, he can simply return it and get another car, or become the owner by paying or financing the agreed-on residual value.

Klinke said given the choice, customers should prefer to pay the security deposit on their lease rather than a down payment on a loan.

“If the lessee does everything correctly,” Klinke said, “he can roll that [sum] over into a new lease or get his money back [at end of term].”

Many dealers cite those reasons when attempting to explain the rising national interest in the LHPH model. Berger’s dealership partner had operated on the BHPH model since 1999, but never experienced the growth it has since it switched to LHPH.

“Year-over-year, I’ve seen a 73 percent jump in originations,” Berger said. “The primary reason for that is leasing.”

But before you take the plunge, you should also consider the challenges of LHPH.

•An expensive retraining process.• It requires more advanced dealer management software.

• Vicarious liability issues that require contingent liability insurance.

• Less liquidity than BHPH.As advantageous as LHPH can be, it

is not a simple change for dealerships to make. LHPH deals require more advanced dealership management systems that can perform complex lease calculations like depreciation schedules and payments that include rental charges, depreciation and sales tax. Those programs often cost more than basic deal software.

Allen Lentsch, CEO of Northland Dealers and executive director of the Northland Independent Auto Dealers Association, said there is also some liability risk involved.

“When you do LHPH, you own the title of the car, so you can be held responsible for things your customers do with it,” Lentsch said. That includes causing an accident. The concept is called vicarious liability.

To be protected against vicarious liability and the risk of lawsuits, dealers must purchase contingent liability insurance, which many turnkey LHPH solutions provide for their dealers.

The Graves Amendment, passed by Congress in 2005, was written to prevent unlimited vicarious liability lawsuits, but the law has been challenged frequently. And despite the Graves Amendment, there is still potential vicarious liability for the dealer/lessor up to the state minimum financial responsibility limits.

Because of that risk, it’s incumbent on dealers to make certain each lessee has proper insurance coverage.

“We always make sure a customer has insurance, just as much as we make sure they’re keeping up with payments,” Berger said. “We disable vehicles if [a customer’s] insurance lapses.”

If you’re a BHPH dealer who sells loan portfolios to investors, you might have a tougher time drumming up interest in your LHPH leases, partially because the product is less commonly understood.

“Some lenders are opening up to this,” Berger said. “From what we see, there are going to be more in the near future.”

To dodge potential complications, many LHPH dealers use consulting organizations, such as Northland Dealers, LHPH, LLC and Lease It Own It, to advise them on compliance issues and provide training materials, forms and access to specialized insurance. The services can assume various levels of responsibility for a dealer’s compliance with lease regulations.

LHPH, LLC even goes so far as to adopt the responsibilities of the lessor, shielding the dealership from some legal risks.

Before switching, it’s a good idea to contact some LHPH services to learn the different approaches and costs associated with outsourcing LHPH implementation. Working with experts of some kind could be the smartest way to go.

Implementing a LHPH ProgramIf LHPH sounds like the right way

forward for your business, there are a

few things you should focus on right out of the gate.

“I would recommend to any dealer to try to set the most accurate residual [value] possible,” Berger said. “If you do that, you’ll get that vehicle back and put that vehicle back on the road. [You] can get eight years out of it and lease it three times.”

However, dealers should also remember the IRS imposes limits on how low residual values can be set and still remain a true lease.

Because dealers should keep leased vehicles in good condition for the next lessee, high-maintenance autos are not recommended for an LHPH program. In addition to requiring lessees to purchase comprehensive coverage for their vehicles, many LHPH dealers package in a warranty or service agreement so they’re able to keep their vehicle in good shape while profiting from the reconditioning.

Berger said the biggest challenge for the dealership he works with is persuading customers – and employees – to go along with the LHPH plan.

“Your customers need to understand that the vehicle isn’t really an asset, it’s an expense for them,” Berger said. “At the end of [a three-year lease], how much will this vehicle actually be worth?”

Berger recalled employees at the dealership he works with took about two months to get fully used to the terminology differences between BHPH and LHPH.

“When you have people who have been selling cars for 16 or 17 years and all of a sudden you hand them a new model, of course there’s a transition,” he said. “But when they see how much this helps us sell cars, they really want to learn it.”

To many dealers, the challenges involved in switching to the LHPH model are far outweighed by its rewards.

“I’ve never seen anybody switch back,” Klinke said. “The benefits for the dealer, RFC and the customer are really compelling, and to switch back would just be a real headache for everybody.”

BY ALEX BRAUNALEX BRAUN IS MARKETING MANAGER OF AUTOMANAGER, A PROVIDER OF INTEGRATED DEALER MANAGEMENT SOFTWARE, DEALER WEBSITES AND ONLINE VEHICLE MARKETING FOR MORE THAN 25 YEARS. HE CAN BE REACHED AT [email protected].

I I A D A G O L F T O U R N A M E N T - A W A R D S D A Y - T R A D E S H O W C O N T I N U E D F RO M PAG E 1 4 | LHPH vs. BHPH: Should My Dealership Switch?

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C O N T I N U E D F RO M PAG E 1 4 | LHPH vs. BHPH: Should My Dealership Switch?

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How Your Online Reputation Affects Sales We all know the saying, “Sticks and

stones may break my bones, but words will never hurt me.”

Unfortunately, the reality is for any business, words can break you.

It is imperative to your dealership that you proactively manage and build your online reputation. You need to have strategies in place to monitor what is said about you and respond appropriately.

That starts with knowing the sites available for dealership reviews. Google+ Local or Google Places, Yelp, Cars.com, DealerRater and CarHelp are some of the most popular sites.

Monitoring what is posted online about you allows you to contact customers who were dissatisfied and address their complaints. Addressing their concerns effectively eliminates the complaint.

Once you have satisfied the angry customer, you can ask him to please revise his statement and to always communicate with you directly should he have a concern. That responsibility should be handled by someone who has the highest authority to make customer decisions, such as giving away a free service or replacing a bare tire on a vehicle that was just purchased from your pre-owned selection.

Credibility is the most important part of any dealership’s sales.

It’s a good idea to have one person monitor review sites and report any issues to the general manager, who can then direct customers to the managers of the departments about which they had complaints. Every employee who has contact with customers should be trained on how to handle and manage

customer complaints, only escalating the situation to the general manager when a decision is needed beyond the employee’s authority.

Next, you need to effectively encourage your clients to post positive reviews about you. That’s actually much simpler than you think. Just ask.

If there is a customer you know comes in regularly for service, or who is purchasing his third vehicle from you, just say, “Thank you for your continued business. Can I ask what makes you continue to come back?” His response is your review.

Ask if he would mind posting a positive review about you, or if he would mind being recorded with a testimonial. That is a great tool to place in the header of your website, so that every prospect who visits your site receives a positive review to encourage him to come in and become a customer.

There are several ways to encourage a review, but you must be careful not to encourage or blindly ask your customers to post negative reviews about you. It takes 18 positive reviews to outweigh one negative review. And once a negative review is posted, it is almost impossible to get it removed.

The only way to rectify a negative review is to contact the person who posted it, address his complaints and turn the complaint into a compliment. That’s why monitoring what is said about you is imperative.

There are proactive measures you should take before a negative review is posted about you. Not only do you need to constantly encourage your customers to post positive reviews, you need to have someone responsible for following

up with each and every customer after the purchase of a vehicle or a service visit to ensure every customer was completely satisfied with his experience.

Have a polite script of no longer than 30 seconds in place. It is important that the person responsible for contacting your customers has the authority and understanding of what goes on in the dealership to proactively address any complaints immediately. The customer should not be passed to two or three managers, with none of them really sure of the entire situation. Making the customer repeat himself raises his level of frustration.

The person contacting the customer initially should be able to make a decision.

“I understand, Mr. Smith.” Repeat the problem back to the customer so he knows you truly understand. “I apologize that your visit was not completely satisfactory. I am here to help you. We need to have you bring your vehicle back to our service department so we can make sure to correct this problem. I will have a loaner car available for you. What time would be best for you, morning or afternoon?”

No promise was given, no diagnosis, no one was thrown under the bus. We listened, we acknowledged and we acted. Now we will have a manager handle the customer from here, with a full understanding of the situation and without passing the customer to two and three voicemails.

Follow-up is one of the most important parts of your online reputation. See the problem and fix it before it causes permanent damage.

Before contacting a customer for

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Step 1: CapitalAdequate capital is the most important aspect of becoming a

successful Buy Here-Pay Here dealer. If you run out of money before you reach the point of being cash flow positive, your chance of success is virtually nonexistent.

As they say, it takes money to make money.Ace Motor Acceptance, based in Matthews, N.C., recommends having

$1 million-$10 million of available capital in order to appropriately plan for success. Exact figures depend on anticipated volume, but the idea is to eliminate capital restrictions.

It is important to note a BHPH dealership is more of a financial business than an automotive business. AMAC is a leader in the subprime auto lending industry and creator of BHPH in a Box, a program that offers dealers a combination of receivables financing, floor planning and collections assistance.

Having one source provide all of those services can be extremely convenient and beneficial for reasons such as being able to defer floor plan payoffs until after capital has been received.

The senior management team at AMAC is composed of experienced veterans of the automotive and finance industries. Collectively, they have owned and operated multiple independent and franchise dealerships, successfully developed AMAC and helped dozens of dealers achieve success by tailor-fitting programs to suit individual needs and goals.

Choosing the appropriate third-party lender is critical, and AMAC has all the tools necessary to drive you toward success.

The AMAC BHPH in a Box program is available to dealers in North Carolina, South Carolina, Virginia, Tennessee, Georgia, Delaware and Maryland. AMAC expects to expand the service into several neighboring states in the near future.

For more information, call 704-882-7100 (ext. 7509) or visit www.acemotoracceptance.com.

Finding Success as a BHPH DealerV I S I T W W W. AC E M O T O R AC C E P TA N C E . C O M

follow-up, you should know:• When he came in.• What he came in for.• If service, was the service internal,

warranty, or customer pay. If a customer paid for the service, he is more likely to be upset or request some type of compensation if dissatisfied, and you should be prepared for that.

• Who was the service advisor or sales representative? The customer will expect you to know, and if you don’t, it immediately makes him feel impersonalized and like he is insignificant or unimportant.

• Who is the manager of the department? If there is a complaint, who will the customer be working with?

It is important to tell the customer who he should ask for and to let him know that a manager will be working with him personally to address his concerns. If he was unhappy with his service advisor or sales representative, he will not want to work with him/her to address the complaint he feels the advisor/sales rep might have caused.

Once the complaint has been addressed, the manager should build the integrity of the service advisor or sales representative back up with the customer and bring the customer and service advisor or sales representative together for an apology and understanding. If a manager cannot support his employee, the employee should not be there. Furthermore, that customer might need to work with that employee again. You never want to get into the problem of having to be careful of who you place customers with.

If the follow-up process is not handled correctly, you will end up with more complaints than if a follow-up was not made. Be sure to have policies in place for how to handle a complaint and be sure every manager understands the importance of handling a complaint with the highest sense of priority and urgency.

The bottom line is, your dealership needs to have strategies in place to ensure its reputation is secure. If your online reputation is not being monitored and proactively maintained, it will decline.

With 80 percent of your prospects checking your reviews before making a purchasing decision, it should be one of your top priorities.

BY PETER MARTINPETER “WEB DOC” MARTIN IS PRESIDENT OF CACTUS SKY COMMUNICATIONS. HE CAN BE REACHED BY CALLING (941) 756-1932 OR E-MAILING [email protected]. FOR MORE INFORMATION, VISIT WWW.CACTUSSKY.COM AND CLICK ON “REPUTATION BUILDING”

C O N T I N U E D F RO M PAG E 1 8How Your Online Reputation Affects Sales

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Car dealers are constantly adapting their business models to remain competitive in this era of information and e-commerce.

Dealers are attracting more long-distance buyers who are searching online for the perfect car. At the same time, a shortage of trade-ins and lease returns has dealers looking online for popular, late-model vehicles to stock their used car lots.

Both of those challenges require dealers to use auto transport companies outside of their local area, which might put them outside their comfort zone.

Auto transport, like auto sales, is a very competitive industry. There are more than 6,000 car hauling companies in the U.S., offering a variety of service options and operating in different regions of the country.

With so many auto transporters vying for business, it is critical that dealers align themselves with the right transportation partner to protect their bottom line. When dealers begin looking for auto transport, they should have a basic understanding of available shipping options and costs, and be able to recognize characteristics of a reputable – or disreputable – car hauler.

The two most common modes of auto shipping in the U.S. are truck and rail transport. Depending on timing needs, vehicle size and shipping distance, some modes can be more cost-effective or environmentally responsible than others.

TRUCK TRANSPORTUsing trucks is a direct, quick way to

ship cars, and the mode most familiar to dealers. Autos can be transported on a variety of trucks, including tow, flatbed, wedge and tractor-trailer vehicles.

Tractor-trailer car haulers are most common, and typically transport up to 10 vehicles at a time depending on the vehicle’s size and type. Truck drivers are highly trained professionals, responsible for loading and unloading

their rigs. While adjustable top decks have improved ergonomics and safety, it can take an experienced driver two to three hours to load and carefully secure a full trailer load, depending on the size and mix of vehicles.

Vehicles are secured on the transport trailer with specially designed wheel straps called soft ties. Wheel straps wrap around each tire to fasten the vehicle to the truck securely. As a result of rigorous quality testing, new car manufacturers now require trucks to use straps instead of chains. Wheel straps minimize incorrect tie-downs, use the vehicle’s own suspension to absorb bumps and sways, and prevent the hidden damage chains can cause to a vehicle’s undercarriage.

Car hauler trucks are either open or enclosed. The majority of trucks are open car haulers, with two levels of hydraulic ramps in an open chassis frame. Enclosed trucks have either rigid or soft sides that fully protect the vehicles inside. Enclosed truck transport is generally more expensive than open transport because enclosed trucks carry fewer vehicles.

RAIL TRANSPORTRail is one of the safest modes

of shipping cars. More than 70 percent of new cars in the U.S. are shipped to market by rail.

The Association of American Railroads (AAR) governs compliance with very strict loading and unloading standards, and audits railroad auto terminals’ damage-prevention programs. All automotive railcars in the U.S. are fully enclosed, which protects vehicles by reducing exposure to road debris and inclement weather.

The following rail equipment is used for auto transport by rail:

Bi-level: Can carry up to 8-10 trucks, SUVs or minivans.

Articulated bi-level (two bi-level railcars connected by a flexible panel): Can carry 14-16 trucks, SUVs or minivans.

AutoMax: Can carry 18-26 trucks, SUVs, minivans or passenger cars.

Tri-level: Can carry 14-15 passenger cars.

Unilevel: Can carry 2-4 oversize vehicles, vans or tractor-trailers.

Dealers now have easy access to rail transport through companies like ShipCarsNow. With door-to-door rail service, a logistics team coordinates and monitors the entire journey.

Even when shipping by rail, the transport usually begins and ends with a truck. A truck carrier picks up a vehicle at the origin location and brings it to the origin rail terminal, where the vehicle is carefully loaded onto an enclosed rail car. Specially trained loading personnel secure the vehicle inside the rail car with straps and tire chocks to prevent movement during transit. Once the train arrives at the destination terminal, the vehicle is unloaded and scheduled for final delivery by truck.

Rail offers significant cost savings over direct truck transport, especially for longer distance shipments, though rail typically takes slightly longer.

ENVIRONMENTALLY RESPONSIBLE AUTO TRANSPORT

Many car hauling companies are certified SmartWay transportation partners. SmartWay is a U.S. Environmental Protection Agency program that helps shipping companies improve efficiency and reduce fuel costs. Environmentally conscious dealers can reduce their transport carbon footprint using a SmartWay-certified carrier.

Auto transport by rail is the ideal option for dealers concerned about the environment. Trains are four times more fuel efficient than trucks, according to the AAR. A single freight train can take more than 280 trucks off America’s already crowded highways, reducing greenhouse gas emissions and costly road maintenance.

Get Your Shipping in Shape

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FINDING RELIABLE AUTO TRANSPORT

Auto transport is about more than getting a car from here to there. It’s about providing the most value to your business.

Every dealership is different. Some require instant shipping quotes or quick delivery to fill a customer order, while others are looking for economical transport when stocking inventory. Each has its own way of doing busines.Some prefer to work online instead of on the phone. Some use a mobile app to scan a VIN and order transport while walking an auction lot. Understanding those needs will help you make the decision about the right car hauler for the job.

When evaluating an auto transport company, consider:

Reputation: Years in business, customer reviews, trusted brand, BBB rating.

Reliability: Pickup and delivery timeliness, available capacity, communication.

Quality: Safe handling procedures, pre- and post-transport inspections, trained staff.

Industry recognition: Supplier certifications and awards, professional association memberships.

Issue resolution: 24-hour customer service, responsive, accountable.

Insurance coverage: Licensed and insured in accordance with the Department of Transportation and the Federal Motor Carrier Safety Administration, equitable claim process.

Shipment tracking: Status updates, accurate estimates of arrival times, online tracking.

Service options: Choice of transport options to meet price, timing and volume requirements.

Service range: Local, regional and national service, residential deliveries.

Convenience: Instant online quotes, easy to order and pay online, mobile app.

Most dealers do not think about auto transport until they need it, but it helps to do the homework ahead of time to avoid a bad experience or a lost sale. Some things to watch out for:

Bait and switch: Some transport companies will agree to move a vehicle for a very low price, take a deposit and pick up a car. When they cannot find

a car hauler to complete the move at the quoted price, the companies can hold the car or the deposit as hostage, telling the customer they need more money. Make sure your transporter discloses all fees up front, including fuel charges for pickup or delivery delays.

Poor communication: Look for a provider that provides timely online shipment tracking and delivery status. Too often, once a vehicle is assigned to a carrier, the dealer hears nothing after the vehicle is picked up, then finds out a few days later the vehicle has been sitting somewhere, undelivered.

Lack of proper trucks or equipment: Some car haulers lack the proper transport equipment to move smaller or oversized vehicles such as subcompact cars, large cargo vans and dually trucks. Some transport companies still use chains instead of straps to secure cars on a truck, which can cause damage in transit.

Unqualified transporters: Some cut-rate auto transport companies have no system or process for vetting and routinely monitoring the qualifications of carriers or drivers with which they subcontract. That can put expensive property in the hands of inexperienced and/or careless handlers who might not be properly licensed or insured. Using an unqualified transporter increases the chance of damage, delivery delays and even unrecoverable loss.

While wholesale prices are beginning to soften, vehicle acquisition costs are still high. Dealers need to maximize profit margins wherever they can.

Keeping transport costs manageable is important, but the adage, “You get what you pay for,” is true when it comes to auto shipping. Dealers need to be aware they might be sacrificing quality and reliability to get the lowest price. That could cost the dealer in the long run more than a reputable auto shipper would have charged in the first place, causing financial issues and possibly a lost sale.

It is possible to prevent problems and still save money.

Get competitive quotes: A dealer should make sure he receives the most value for the price by obtaining competitive quotes from at least three reputable auto shippers. Consult professional dealers and auto industry organizations for recommended

suppliers. Compare the services each transporter offers for the price. Ask about services such as online shipment tracking, 24-hour customer service and vehicle inspections.

Use multimodal transport for longer distance moves: Using a combination of rail and truck transport for shipments greater than 500 miles can offer significant savings as opposed to direct truck transport. Shipping a car by rail is generally more economical than trucks because of load factors and fuel efficiency. Through innovative co-loading initiatives available in certain locations – loading used cars with new cars – some auto shippers can offer rail car economy to dealers only shipping one or two cars.

Ship 10 or more: Consider how vehicle size and quantity will impact the load factor. Shipping a full truckload or railcar-load of similar-sized cars provides the highest load factor and is the most economical.

Dealers who don’t have the volume to ship full loads individually can collaborate with other dealers in their region to fill a truck or railcar and save on shipping costs from popular auction origins. For example, a group of Minnesota dealers purchased cars from a California auction and shared a railcar to benefit from the economics of full load pricing.

Look for backhaul opportunities: Equipment utilization is critical to keeping operating ratios low in the transportation industry. Car haulers are always looking for ways to fill their railcars and trucks for the backhaul, or return trip. Often, in less popular lanes, they might offer better rates for the backhaul.

Consult with your car hauler: Just like the car sales industry, transportation prices fluctuate with seasons, volume and demand. A dealer shipping one or two cars can take advantage of seasonal volumes, such as rental fleet shipments out of Florida in April, or from Las Vegas and Phoenix in May. Experienced auto transporters can help dealers determine when and where to get the best value for their shipping dollar, timing the market to get better wholesale inventory.

BY JEFF GRANDSTAFF JEFF GRANDSTAFF IS GENERAL MANAGER OF SHIPCARSNOW (PART OF UNION PACIFIC), A LEADER IN AUTO TRANSPORTATION AND LOGISTICS AND AN NIADA NATIONAL MEMBER BENEFIT PARTNER. FOR MORE INFORMATION, VISIT WWW.SHIPCARSNOW.COM OR CALL 866-207-3360.

C O N T I N U E D F RO M PAG E 2 2 | Go All In | B AC K T O T H E B A S I C S : G E T YO U R S H I P P I N G I N S H A P E

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Former Ohio State football player Michael T. D’Andrea of Columbus, Ohio was named 2012 National Quality Dealer of the Year by the National Independent Automobile Dealers Association during NIADA’s 66th Annual Convention and Expo in Las Vegas.

In a ceremony televised live from Caesars Palace to an online audience of 150,000 viewers, D’Andrea was chosen from the 21 State Quality Dealers nominated for highest honor given to one of the NIADA’s 20,000 dealer members.

D’Andrea is co-owner of Miracle Motor Mart in Columbus, a dealership he founded in 1989 with 40 cars and $150,000 worth of inventory. Miracle Motor Mart now has two locations and 46 employees, and has a combined inventory of more than 400 vehicles.

NIADA National Quality Dealer candidates are judged on a variety of factors, including contributions to the automotive industry and community involvement. A panel of judges from Northwood University selects the

annual winner.NIADA chief executive officer Michael

Linn said D’Andrea “has provided a superior level of service for his customers, his community and his industry that is beyond reproach. He says his goal each and every day is, ‘God first, others second and myself last.’

“Giving back to the community has always been on the top of his list – supporting youth summer camps, working for his church, distributing food, clothing, toys, medical supplies and prayer to more than 700 families each year. It is an honor and a privilege to bestow this great award to a well deserving dealer, member and automotive professional.”

D’Andrea, who played linebacker for Ohio State from 1979-81, and his partner, Mark Meadows, are heavily involved in charity projects in Columbus, including the Run the Race Club, St. Paul’s Outreach, Catholic Youth Summer Camp and St. Patrick’s Youth Ministry.

D’Andrea said his business prides itself on “teamwork, loyalty, ethics and honesty,”

NIADA Names 2012 Quality Dealer of the Year

G I V I N G B AC K T O T H E C O M M U N I T Y H A S A LWAYS B E E N O N T H E T O P O F H I S L I S T

and said as the dealership has grown, “in that growth you’re almost forced to do more. You’re almost required to do more.

“I’m proud of NIADA’s commitment to encourage dealers to make a difference in their community. We have all been given a great gift of self-employment and being in a free country. … We have a great responsibility with all these gifts we have been given. Let us share them with our friends, our families and our community.”

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Mobile Advertising a Must for Car DealersAccording to sales statistics for the

first quarter of 2012, shipments of desktop and laptop PCs fell another 5 percent, and tablets and smartphones are cannibalizing PC sales by 50 percent.

Just another reason for car dealerships to optimize websites for mobile devices and include mobile advertising in their monthly budget.

Many mobile users are cruising classified sites and social media sites from their smart devices. Therefore, it is imperative for car dealers to get inventory on all of those sites, such as Craigslist and Backpage. Those classified sites are growing rapidly with inventory and shoppers, and since posting on them is free, the return on investment is phenomenal.

In its Internet and American Life Project, in a study called “Americans and Their Cellphones,” the Pew Research Center found mobile phones have become a nearly ubiquitous tool for information-seeking and communicating – 83 percent of American adults own some kind of cellphone – and they have an impact on many aspects of their owners’ daily lives.

Cellphones are useful for quick information retrieval, so much so that their absence can cause problems. More than half of all adult cell owners had used their phone at least once to get information they needed right away. More than one fourth said they experienced a situation in the previous month in which they had trouble doing something because they did not have their phone at hand.

Cellphones are important tools in emergency situations – 40 percent of cell owners said they found themselves in an emergency in which having their phone with them helped. Cell phones can help stave off boredom – 42 percent of cell owners used their phone for entertainment when they were bored.

Despite the advantages, some

cellphone owners need an occasional break – 29 percent of cell owners turned their phone off for a period of time just to get a break from using it. Even the advantages can cause frustration – 20 percent of cell owners experienced frustration because their phone was taking too long to download something, 16 percent had difficulty reading something on their phone because the screen was too small and 10 percent had difficulty entering a lot of text on their phone.

Cellphones can help prevent unwanted personal interactions – 13 percent of cell owners pretended to be using their phone in order to avoid interacting with people around them.

Text messaging and picture-taking continue to top the list of ways Americans use their mobile phones, with 75 percent of all cell owners using their phones for those purposes. Other relatively common activities include sending photos or videos to others (54 percent of cell owners do this) as well as accessing the Internet (44 percent)

Thirty-five percent of American adults own a smartphone of some kind, and they take advantage of a wide range of their phones’ capabilities. Nine of 10 smartphone owners use text messaging or take pictures with their phones, and eight in 10 use the phone to go online or send photos or videos to others. Many activities — downloading apps, watching videos, accessing social networking sites or posting multimedia content online — are almost entirely confined to the smartphone population.

The statistics make it easy to see that mobile advertising is becoming increasingly important, and focusing on rich media advertising is even more important. Rich media ads offer more in-app interactivity via video, sound, gaming and so on.

The aesthetic value is an obvious advantage that will attract advertisers

and ad creators. Furthermore, with the growing adoption of smartphones as the device of choice, rich media is the natural progression toward more engaging ads on free sites, which captures a captive audience. The engagement rates are as high as 33 percent on rich media ads.

If a car dealership depends on its web presence in any way, it’s important to start thinking about mobile now. Check how the website looks and works – or doesn’t – on mobile devices. Mobile Internet use is growing faster than anyone realizes.

Don’t wait until 75 percent of your website visitors are using handhelds. That’s like waiting until most of your backyard is on fire before grabbing a water hose.

Start thinking now about how to make your website work hard for you on mobile devices, as well as getting ads developed for your dealership to run mobile campaigns. Mobile campaigns are used widely by manufacturers but can be brought to a local level with some geo-specific targeting. That means ads can be targeted to certain zip codes to run in your local area in order to attract more local business for your sales and service department.

Running coupon ads, loss leaders and teaser ads on mobile devices seem to be the most effective ways to attract local customers. The use of QR codes in paper advertisements can drive customers to either a mobile landing page or a video about your sales or service specials.

With the explosion of Internet video consumption, it is confirmed mobile video has largely been adopted. While video isn’t a huge focus for advertisers right now – many cite broadband and technology inadequacies as barriers – many static stats tell the story of video’s increasing importance for car dealers and salesmen.

BY DANI LUNSFORD

D O N ’ T WA I T U N T I L 7 5 P E RC E N T O F YO U R W E B S I T E V I S I T O R S A R E U S I N G H A N D H E L D S .

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Westlake Financial Services, a full-spectrum auto finance company, announced the first major overhaul of its finance programs since the company was founded more than 20 years ago.

Westlake has gone from four programs to three, each of them FICO-based rather than structure-based, as was previously the case.

The new programs are called Standard (0 – 599 FICO), Gold (600-699 FICO) and Platinum (700-plus FICO). Finance managers can make each deal “AAA,” meaning if certain credit and structure criteria are met, a deal can be “optimally structured” to get the lowest rates and discounts at each program level.

Westlake’s two profit-sharing programs for Buy Here-Pay Here-type deals – ProfitBuilder® and Partner Program – are still available, offering unique advantages that allow the dealers to choose the BHPH solution that best fits their current business model. Among the highlights of the programs:Standard• Westlake’s most popular and flexible program.

• All income types OK.• No minimum income, job or residence time.• Open bankruptcies and recent repossessions OK.• No vehicle age or mileage restrictions.Gold• Rate participation available.• No minimum income, job or residence time.• Open bankruptcies and recent repossessions OK.• No vehicle age or mileage restrictions.Platinum• Lower rates.• Rate participation available.• Minimal stipulation requirements.• Longer terms available.• No vehicle age or mileage restrictions.AAA Deals• 4.99 percent APR, $250 fees on any vehicle age or mileage.• 15.99 percent APR, $750 fees available on

even the lowest credit customers.Contact Westlake to learn how to turn any Standard, Gold or Platinum deal to AAA to get lower rates and fees.

ProfitBuilder® (for BHPH-type deals)• Control the APR – as low as 1 percent and

loan-to-value up to 200 percent of book value.• Receive up to 75 percent of book up front

and up to 50 percent of customer monthly payments.

• Ability to cash out early for a quick infusion of cash.Partner Program (for BHPH-type deals)• Control the APR – as low as 1 percent and

LTV up to 200 percent of book value.• Collect 100 percent of the principal

balance of the loan.• No discount fee.

All programs are built into the Westlake Buy Program™ at www.dealercenter.net.

“We have been listening to our dealers and are very excited to be rolling out these changes,” Westlake vice president of sales Mark Vazquez said. “Our dealers said they wanted things to be simplified, and moving to a FICO-based model was one way of doing that.

“Simplicity – it’s our theme this year.” For more information, call Westlake’s dealer

services line at 1-888-893-7937.

Westlake Simplifies Finance Programs

W E S T L A K E H A S G O N E F RO M FO U R P RO G R A M S T O T H R E E

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At the recent National Alliance of Buy Here-Pay Here Dealers (NABD) Dealer Academy in Las Vegas, NIADA and NABD jointly announced the details of their inaugural BHPH Certified Master Dealer training program, scheduled to be held in September in Dallas.

Though NIADA has been conducting its successful Certified Master Dealer retail program for several years, this new initiative marks the industry’s first BHPH certification program.

At a very important time, during which the BHPH industry faces many challenging legal and regulatory issues, this certification program is designed to help establish new operating and financial standards for industry leaders. Participants in the inaugural training program must meet certain operational standards,

including, but not limited to:•��Five years of successful operating

performance•��Membership in good standing in NIADA,

NABD or both•��Having a chief compliance officer•��Affirming that all dealership operational

documents and transactional forms have had a positive legal and compliance review from a qualified attorney

•��Maintaining financial statements prepared in accordance with generally accepted accounting principles.

In addition, the dealer’s historical performance must approximate the key industry benchmarks published annually by NABD and Subprime Analytics for debt/equity ratio, allowance for bad debts, average cash in deal, average gross profit per vehicle sold, average portfolio

delinquency, average net loss per charge off and average default rate.

A complete copy of the most recent BHPH industry benchmarks can be downloaded free at www.subanalytics.com or by obtaining a copy of NIADA’s Used Car Industry Report for 2012. For more information, visit www.niada.com.

The eligibility criteria were established with an emphasis toward encouraging compliance with all industry laws and regulations, prudent financial management and successful operating performance, and sound systems and processes. Those traits will distinguish graduates to both capital providers and their industry peers.

The inaugural session is planned for 2 1/2 days at a training site in the Dallas area to be announced in the near future. The program goal is to provide training

B H P H C E R T I F I E D M A S T E R D E A L E R P RO G R A M S E T T O K I C K O F FBHPH Perspectives

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for outstanding operators in the BHPH industry. As a result of the training and their commitment to ethical practices and high business standards, graduates should become even more successful.

Becoming a BHPH Certified Master Dealer is recognition of a dealer’s dedication to the industry and his or her record of proven stability, reliability and ethical business practices.

The instructors include several of the nation’s leading experts and most successful operators. The course curriculum provides interactive training and networking and will initially include:•��Economic overview, benchmarks and

trends•��Financial management, accounting,

taxes and metrics•��Vehicle acquisition and reconditioning•��Keeping vehicles running and

customers paying

•��Sales and marketing strategies•�� Underwriting best practices•��Collection best practices•�� Maximizing recoveries•��Legal and compliance•��Systems/processes/technology•��Much, much moreIt is contemplated that changes will

be made to the curriculum in the future based on input from the participants. The curriculum is designed for graduates to enhance their management skills, improve their advertising and financial management, build more positive consumer relationships and stay compliant.

Graduates will receive their BHPH Certified Master Dealer designation and use of the CMD seal for a period of 36 months. Each CMD graduate must subsequently obtain a minimum of 12 credit hours of NIADA/NABD-approved continuing education during each 36-month period

in order to retain the designation. At least 12 hours of continuing education opportunities will be offered throughout the year.

It is expected that some of these hours can be earned by attending the NIADA Convention and NABD training events. NABD will hold an East Coast National BHPH Conference in Atlanta on October 21-23, 2012.

The BHPH business requires specialized training and this program offers advanced sessions focused on achieving operating and financial excellence. Operators who strive to distinguish themselves from their industry peers are urged to participate.

Operators interested in participating can obtain an application by calling NIADA at 1-800-682-3837 or emailing [email protected], by contacting NABD at (832) 767-4759, or by emailing Joe Kearse at [email protected]. Space is limited.

K E N N E T H S H I L S O N , C PA , I S P R E S I D E N T O F S U B P R I M E A N A LY T I C S ( W W W. S U B A N A LY T I C S . C O M ) , A C O N S U LT I N G C O M PA N Y T H AT P ROV I D E S P O R T FO L I O A N A LYS I S S E RV I C E S A N D C U S T O M C R E D I T S C O R I N G S O LU T I O N S , A N D I S P R E S I D E N T A N D FO U N D E R O F T H E N AT I O N A L

A L L I A N C E O F B U Y H E R E - PAY H E R E D E A L E R S ( W W W. B H P H I N FO . C O M ) . H E CA N B E R E AC H E D AT K E N @ K E N S H I L S O N . C O M . U P C O M I N G N A B D C O N F E R E N C E S I N C LU D E T H E E A S T C OA S T B H P H C O N F E R E N C E AT T H E G E O RG I A I N T E R N AT I O N A L C O N V E N T I O N C E N T E R I N AT L A N TA O N

O C T O B E R 21 - 2 3 , 2 01 2 . FO R M O R E I N FO R M AT I O N , V I S I T W W W. B H P H I N FO . C O M O R CA L L ( 8 3 2 ) 76 7 - 47 5 9 .

BY KENNETH SHILSON

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The U.S. Supreme Court found in favor of the 2010 health care law, deeming the individual mandate to purchase health insurance unconstitutional under the commerce clause but upholding the mandate by now calling it a tax.

Because of the ruling, some of the key factors that will be taking place in the year and a half include:

Individual mandate: Starting in 2014, everyone in the United States must buy health insurance or be subject to a tax.

Those who cannot afford to buy health insurance – families at poverty level – will be subsidized by the government.

Families making more than $80,000 per year will not receive a subsidy. That provision was the heart of the lawsuit challenging the law. The individual mandate goes hand-in-hand with the next provision: guaranteed issue. Making everyone buy insurance stops people from buying it only when they become sick.

Guaranteed issue: Also starting in 2014, all health insurance companies must accept all applicants regardless of pre-existing conditions. NIADA members have access to guaranteed-issue, limited medical right now by visiting www.niadahealthplans.com.

Minimum essential coverage (MEC): The provision states the government will regulate what plans will cover and will not cover as a means to qualifying acceptable coverage. Having acceptable coverage means not facing fines or penalties.

It is expected the highest deductible will be $2,000 for an individual and $4,000 for a family. That, however, could jeopardize Health Saving Accounts (HSAs), which are linked to high-deductible health plans and are a popular option for the self-employed and for small businesses.

Health insurance exchanges: Each state will set up a health insurance exchange for consumers to shop for health plans. If they qualify, consumers will be able to receive subsidies through the exchange. NIADA members can Visit the NIADA Health Insurance Exchange right now to shop for rates from multiple carriers through www.niadahealthplans.com.

Additional questions on the law and how it will affect you? NIADA members can call the NIADA Member Health Plans hotline at 888-308-9340 or visit www.niadahealthplans.com.

BY TODD PAGE, JLBG HEALTHTODD PAGE IS VICE PRESIDENT OF JLBG HEALTH, THE ADMINISTRATOR OF NIADA MEMBER HEALTH PLANS.

What Health Care Ruling Means to You

V I S I T W W W. N I A DA H E A LT H P L A N S . C O M .

STARTING IN 2014, ALL HEALTH INSURANCE COMPANIES MUST ACCEPT ALL APPLICANTS REGARDLESS OF PRE-EXISTING CONDITIONS. NIADA MEMBERS HAVE ACCESS TO GUARANTEED-ISSUE, LIMITED MEDICAL RIGHT NOW BY VISITING WWW.NIADAHEALTHPLANS.COM.

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Bright to Head Northwood Auto Marketing Program

Elgie Bright has been named chairman of the Northwood University automotive marketing program, replacing Joe Lescota, who held the position since 2000. Lescota left the university in May to join NIADA as director of dealer development.

Bright, a graduate of Adrian College who earned a Master’s degree from Northwood, has more than 20 years of experience in the automotive retail, original equipment manufacturer and aftermarket industry.

Bright spent the past 12 years as a field district sales manager for General Motors, responsible for implementing market plans for assigned areas and meeting strategic growth initiatives. He also served as assistant manager for Art Moran Pontiac in Southfield, Mich., acting as liaison between the fixed operations department and General Motors.

“His long experience in various aspects of the automotive industry and his passion for helping students learn will maintain the quality and excellence of our automotive programs,” Northwood Academic Dean Dr. Lance Lewis said.

I N T H E I N D U S T RY

AFC Offers Expanded Financing for RV Dealers Floorplan provider Automotive Finance Corporation (AFC) has expanded its inventory finance product offerings to include more options for recreational vehicle dealers.

AFC said its RV inventory financing includes no restrictions on the type of RV unit a dealer can purchase – no make, model or year constraints.

“Many providers only finance a dealer’s new RV inventory,” AFC director of business development Neill Waters said, “and we consequently saw many RV dealers seeking financing that better met their used RV purchasing needs.”

AFC will advance 100 percent of an RV dealer’s auction purchases at more than 1,000 AFC-approved auctions, and the company’s financing gives dealers an extended time to pay off their units on floorplan for used inventory purchased from auction or taken in on trade. AFC’s RV financing applies to used motorhomes, travel trailers, fifth-wheel campers and other towable units.

I N D U S T RY N E W S

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Dates and locations are subject to change. Please visit www.theciada.com

for a complete schedule.

UPCOMING NC DEALER CLASSES 1‐800‐432‐4232

NC CONTINUING EDUCATION – 6 HRAug 3, 2012 Myrtle Beach, SC Aug 9, 2012 Statesville Aug 15, 2012 Raleigh Aug 22, 2012 Kenly Aug 28, 2012 Harrisburg Sep 6, 2012 Greenville Sep 11, 2012 Greensboro Sep 19, 2012 Smithfield Sep 25, 2012 Harrisburg Oct 2, 20112 Hendersonville Oct 9, 2012 Harrisburg Oct 11, 2012 Greenville Oct 24, 2012 Kenly Oct 30, 2012 Greensboro

UPCOMING PRE‐LICENSING CLASSES

1‐800‐432‐4232 NC PRE‐LICENSING – 12 HR

Aug 16‐17, 2012 Raleigh Sep 13‐14, 2012 Harrisburg Oct 4‐5, 2012 Harrisburg

SC PRE‐LICENSING – 8 HR Aug 30, 2012 Lexington Sep 27, 2012 Lexington Oct 18, 2012 Lexington

Charleston Auto Auction announced two more members of its management staff

have become IARA Certified Automotive Remarketers (CAR).

General manager Laura Taylor and assistant general manager Bill McCready joined the CAA national remarketing manager Chris Wise as graduates of the program, conducted by the International Automotive Remarketers Alliance (IARA).

Wise was the first in the country to receive the recognition.

To become certified, a candidate must complete a comprehensive 20-course curriculum encompassing all aspects of the remarketing industry.

“At Charleston Auto Auction we have a continuous desire to offer our customers exceptional service through superior knowledge,” Taylor said. “One way we achieve this is by having a better understanding of our customers’ expectations and goals. Completing the CAR certification program was an obvious decision to get a better perspective of our customer’s wants and needs.”

“I recommend these certification courses to anyone interested in learning more about the vehicle remarketing industry.”

Charleston Auto Auction is a member of the American Auto Auction Group. It holds a sale every Friday at 10 a.m., with a damaged and disabled sale on the second and last Friday of every month at 9 a.m.

For more information, visit www.charlestonautoauction.com.

Charleston Auto Auction Managers Earn Certification

R E C O M M E N D C E R T I F I CAT I O N C O U R S E S

Dates and locations are subject to change. Please visit www.theciada.com

for a complete schedule.

UPCOMING NC DEALER CLASSES 1‐800‐432‐4232

NC CONTINUING EDUCATION – 6 HRAug 3, 2012 Myrtle Beach, SC Aug 9, 2012 Statesville Aug 15, 2012 Raleigh Aug 22, 2012 Kenly Aug 28, 2012 Harrisburg Sep 6, 2012 Greenville Sep 11, 2012 Greensboro Sep 19, 2012 Smithfield Sep 25, 2012 Harrisburg Oct 2, 20112 Hendersonville Oct 9, 2012 Harrisburg Oct 11, 2012 Greenville Oct 24, 2012 Kenly Oct 30, 2012 Greensboro

UPCOMING PRE‐LICENSING CLASSES

1‐800‐432‐4232 NC PRE‐LICENSING – 12 HR

Aug 16‐17, 2012 Raleigh Sep 13‐14, 2012 Harrisburg Oct 4‐5, 2012 Harrisburg

SC PRE‐LICENSING – 8 HR Aug 30, 2012 Lexington Sep 27, 2012 Lexington Oct 18, 2012 Lexington

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BACK OF CARD

Carolinas Independent Automobile Dealers

Association

VIPSponsors

Member Hotline: 1-800-432-4232

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Apple City, NC 28687 Dealer # 12345

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EACH BLOCK IS GOOD FOR ONE BUY OR SELL FEE UP TO $100.00

FRONT OF CARD

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

When I attend industry events, I enjoy meeting dealers and hearing their takes on current challenges and trends facing the industry.

One topic that has come up recently is leasing. I have heard a number of dealers comment on how they would like to expand their dealership and start leasing vehicles. While that might sound like a natural step in growing a business, dealers must consider the differences between selling and leasing.

To be clear, by “lease,” I mean a contract allowing a customer to use your vehicle for a period of time (minimum: four months). At the end of the lease, the customer returns the vehicle and doesn’t owe you any more money as long as the vehicle has only reasonable wear and tear and was driven no more than the agreed mileage.

If there is an option to purchase, the option price bears some relation to the vehicle’s expected market value at the time the option is exercised. In other words, the lessee doesn’t have the option to purchase for $1 because that would really be a sale, disguised as a lease.

Look Before You LeaseAdding leasing to an independent

dealership might sound simple. You’re already arranging loans and payments for the vehicles you sell, so why not expand your in-house financing to offer customers another option?

But it’s not as easy as it looks. Here are key areas to consider when making your decision.

Licensing: Make sure your license for selling vehicles also allows you to lease vehicles. Your current license might not be broad enough to authorize leasing.

Insurance: When you sell a car, the title is transferred to the buyer. You focus on receiving timely payments and confirming the buyer has sufficient insurance to protect your security interest in the vehicle. You probably have property and liability insurance to protect your inventory and sales.

However, when a dealer leases a car, he still owns it. If the vehicle is involved in an accident, you might be subject to liability as the owner. As part of researching a leasing operation, meet with your legal counsel and insurance carrier to make sure you protect against liability exposure with appropriate insurance coverage.

Pricing: Determining the sales price of a vehicle is pretty straightforward. You know your costs to purchase and prepare the vehicle for sale, sales costs and profit margins, and sell the vehicle for more than your costs. You know at the time of sale whether you are making money on the deal.

With a lease, the calculations are more complicated. It might be easy to determine what the vehicle is worth today, but how do you know what it will be worth when the lease is up, say, two or three years from now? That depends on factors such as how many miles it will be driven and how well it is maintained.

There are also unknown variables. What if gas prices rise drastically and the vehicle is a gas-guzzler? That could impact the market value at the end of the lease (residual value). In most consumer leases, the dealer is on the hook if the residual value is less than predicted.

You won’t really know if you’re making money on a lease until you find out how well you predicted the residual value. You might be two or three years into the lease program before you realize you’ve set your residual values too high – and by then it’s too late.

Documentation and disclosures: You can’t just modify a retail sales contract to make it a lease. If you are planning to include leasing, you must make sure

your documents meet state and federal consumer lease requirements.

The federal Consumer Leasing Act and its implementing Regulation M are the lease disclosure equivalents of the Truth in Lending Act and Regulation Z for consumer lending. Reg M requires dealers to provide a great deal of specific pricing information in lease contracts. Many states require additional disclosures and consumer protections. As part of your leasing startup, you will need to create a unique document set of disclosures and contracts.

Taxes: In a lease you retain ownership, so you might roll your sales taxes to purchase the vehicle into your costs and lease calculations, but you might also need to collect use or other taxes on the payments throughout the lease term. Contact your accountant and/or the state to understand your tax obligations and how they differ for leases.

Collections: If a buyer doesn’t make timely retail contract payments, you can repossess the car. Fear of losing the car can help motivate a buyer into making past due payments.

In a lease, the lessee doesn’t own the car and may expect to return it and walk away at the end. That might make it a little easier for the lessee to emotionally handle repossession, but it might mean the lessee isn’t afraid of having the car repossessed and isn’t as motivated to make past due payments. As with a financed sale, once you repossess a vehicle, the lessee has even less motivation to pay any balance still due.

If a car is returned with wear or damage beyond what’s agreed on in the lease, it can be difficult to collect money to cover those costs. You can use the lessee’s damage deposit, so make sure you set it at a practical amount – it might be the only money you end up recovering for excess wear and tear.

These are only some issues to consider when starting a lease program. You can identify more by simply reading a motor vehicle lease contract.

The differences between selling and leasing are dramatic and can’t be overlooked. Your operations and compliance can be affected by the type of transaction, the vehicle and the state in which you are doing business.

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

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Documents

CIADA Aug/Sept 2012