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The industry’s leading source for F&I, sales and technology
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-READYChacon Auto’s Gary Chaney and Two Other Dealers Discuss How They’re Navigating the World of Online Reviews
OF FIRST LINE
Learn Why Experts Believe the New Risk-Based Pricing Rule
Could be a Blessing in Disguise
JANUARY 2011 $10.00
SALES DRIVER: 6 NEW SALES TIPS | MAD MARV: SQUISHING THE FLEA | LEGAL: FTC ON THE HUNT
A BOBIT PUBLICATION FI-MAGAZINE.COM
COMEBACKExperian Automotive Says
Auto Finance Surged in 3Q2010 — Even for
Below-Prime Buyers
THE
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2 F&I and Showroom January 2011
January 2011 Volume 14, Number 1
Technology
12 Your Online ReputationWord of mouth has always been the dealer’s best marketing tool, but the Internet age has changed the rules. Find out what dealers are doing to regain control of their reputations.
Auto Finance
16 Doors Open for Below-Prime BuyersIn the third quarter, subprime originations increased for the fi rst time since the credit crisis. Auto fi nance analyst breaks down the results.
Compliance
22 First Line of DefenseKarina Grile worked overtime to get Voss Auto Network’s stores in line with the industry’s newest rule — one that experts say could be a blessing in disguise.
Q&A
26 Getting ResourcefulThe magazine catches up with The Warranty Group’s Michael Frosch to discuss F&I, automotive retailing and the road ahead.
Special Finance
28 Direct Mail Mounts a ComebackMailers were the fi rst line item scratched from many dealers’ advertising budgets during the downturn. Marketing ace says it’s time to add them back.
4 Letters
6 Editorial Page
8 Developments
30 Sales Driver
31 Mad Marv
32 Legal
35 Bottomliners
37 Ad Index
40 Industry Trends
Departments
Features
F&I and Showroom (ISSN 2154-1728) (USPS 018-706) (CDN IPM# 40013413) is published monthly, by Bobit Business Media, 3520 Challenger Street, Torrance, California 905031-1640. Periodicals Postage Paid at Torrance, California 90503-9998 and additional mailing offi ces. POSTMASTER: Send address changes to F&I and Showroom, P.O. Box 1068 Skokie, IL 60076-8068. Please allow six to eight weeks for address changes to take effect. Subscription Prices: United States $20 per year; Canada $35 per year; Foreign: $35 per year. Single copy price: $10; Fact Book: $30. Please allow six to eight weeks to receive your fi rst issue. Bobit Business Media reserves the right to refuse nonqualifi ed subscriptions. Please address editorial and advertising correspondence to the executive offi ces at 3520 Challenger Street, Torrance, California 90503-1640. The contents of this publication may not be reproduced either in whole or in part without the consent of Bobit Business Media. All statements made, although based on information believed to be reliable and accurate, cannot be guaranteed and no fault or liability can be accepted for error or omission.
12
26
28
22
Endorsed as the offi cial publication of the Association of Finance
& Insurance Professionals
Contents
FI0111toc.indd 2FI0111toc.indd 2 12/28/10 8:59:47 AM12/28/10 8:59:47 AM
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© 2011 Innovative Aftermarket Systems L.P. All Rights Reserved.
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4USFOHUIFO�DVTUPNFS�SFMBUJPOT�XIJMF�EJGGFSFOUJBUJOH�UIF�EFBMFSTIJQ
*ODSFBTF�4FSWJDF�%FQBSUNFOU�SFUFOUJPO�BOE�MPZBMUZ�XJUI�PVS�TDIFEVMFE�NBJOUFOBODF�XBSSBOUZ
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FI0111toc.indd 3FI0111toc.indd 3 12/28/10 8:59:54 AM12/28/10 8:59:54 AM
Complying With the RBP RuleTO THE EDITOR: After reading Michael
Benoit’s column (“The Exception Is
the Rule”) in the December issue and
then reading all 200-plus pages of the
Risk-Based Pricing rule, I noticed the
FTC kept saying, “Final rules apply
to any person that uses a consumer
report in connection with …” If I
don’t pull a bureau on a customer, am
I exempted from both types of notic-
es? There are several of us F&I folks
out here that do not pull bureaus. We
merely send the credit application to
our lenders.
Michael WilsonFinance Director
What you have to remember is that pulling a credit report isn’t the trig-ger point for the rule. It’s the act of applying for credit. Now, in a two-party situation like you asked about, your dealership is acting as an agent for the fi nance source that engages in direct auto fi nancing. That means your dealership may be called upon to provide your consumer applicants with a credit score disclosure notice on behalf of the fi nance source. So, you may want to contact your fi nance sources to ask how they will comply with the rules. — Gregory Arroyo
Advertised Price vs. Selling PriceTO MICHAEL BENOIT: I’m a big fan of
your column and was hoping you
could answer a question for me. Most
dealers use a third-party service like
Dealer Specialties or AutoUplink to
pull their used-vehicle inventory and
feed it to the dealership’s Website
and used-car portals like Autotrader.
com, Cars.com and others.
Now, my understanding after read-
ing the FAQ section on the Federal
Trade Commission’s Website is that
the same rules that apply to tradition-
al advertising apply online. So, if a
dealer has a vehicle listed online and
a customer visits the store not know-
ing the price advertised on the Web,
would it be a violation if the customer
pays more than the price advertised
online? I would appreciate any com-
ments you can make.
Eric Damiani
Great question, Eric. The answer is that if you advertise the price (re-gardless of where you advertise it), you cannot sell it for more than the advertised price.
One caveat may be if you limit the amount of time the price is available, e.g., “This price is good through Dec. 2, 2010,” and treat it as a limited time only discounted price. Otherwise, if the advertisement is out there with-out a limit on the timeframe for which the price is good; don’t sell for more than the advertised price.
You’ll never be able to know for sure whether your shopper is aware of the advertised price, so the best practice is to assume he or she is aware. You’ll be happy you did if your customer turns out to be a FTC mystery shopper. — Michael Benoit
F&I Menu for Fleet SalesTO “MAD” MARV ELEAZER: I just read
your November column (“The Slump
Cure”) and the one thing that caught
my eye was what you said about the
menu. I work for an outfi t that’s strict-
ly a commercial dealer, where walk-in
and show-fl oor traffi c is non-existent.
Everything is outbound and we don’t
currently use a menu. Do you have
any menu and best practices recom-
mendations for a gig like mine?
Mike JohnsonCommercial Business Sales and Leasing
Boyer TrucksMinneapolis
Thanks for the note, Mike. I’ll be sending over some menu recommen-dations offl ine. In the meantime, I would suggest you utilize a process wherein the F&I department struc-tures the menu and e-mails it to the fl eet company’s purchasing agent. Then, you can make the presentation over the phone. — Marv Eleazer
Letters
4 F&I and Showroom January 2011
Vice President Group Publisher, Auto Group
Sherb Brown
Publisher, Dealer GroupNational Sales Manager
David Gesualdo727-947-4027
Executive EditorGregory Arroyo
Managing Editor / Art DirectorTariq Kamal
Senior EditorJustina Ly
Great Lakes Sales ManagerRobert Brown Jr.
Sales & Marketing CoordinatorTracey Tremblay
E-Media and Print Production Manager
Brian Peach310-533-2548
Web ManagerSam Kim
Audience Marketing ManagerTony Napoleone
Chairman Edward J. Bobit
President & CEOTy F. Bobit
Chief Financial Offi cerRichard E. Johnson
Business and Editorial Offi ceBobit Business Media3520 Challenger St.Torrance, CA 90503
Phone: 310-533-2400Fax: 310-533-2503
Change Service RequestedReturn Address:
Bobit Business MediaPO Box 2703
Torrance, CA 90509
Subscription Inquiries888-239-2455
Printed in U.S.A.
FI0111letters.indd 4FI0111letters.indd 4 12/28/10 8:58:56 AM12/28/10 8:58:56 AM
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FI0111letters.indd 5FI0111letters.indd 5 12/28/10 8:58:58 AM12/28/10 8:58:58 AM
Au
6 F&I and Showroom January 2011
I wrote it last year and I’ll write it
again: the Risk-Based Pricing Rule
(RBPR) represents our chance to
“uphold our job requirement.” I agree
that you shouldn’t be held responsible
for the fi nancial education of your
customers. However, just for a sec-
ond, think about the doors a conver-
sation about credit can open.
Before we get into that, there’s one
thing you need to understand about
this new rule: The Federal Trade
Commission (FTC) and the Federal
Reserve Board (FRB) went out of
their way to make complying with it
as easy as possible. Think about it:
You don’t have to evaluate the rate
your fi nance sources offer your cus-
tomers. Nor do you have to calculate
the impact of your markup on a deal-
by-deal basis. If you did, then I’d un-
derstand why many believed this rule
would be the death of F&I.
But you don’t. In fact, all you have
to do is present a credit score disclo-
sure notice to every one of your cus-
tomers who applies for credit. And
don’t forget about the host of compa-
nies lining up to help you automate
that process, as you’ll see on Page 22
of this issue.
Will it add to your process? Sure,
but let’s try to pull out some positives
here.
Take the dealer exception I just de-
scribed, which the National Automo-
bile Dealers Association lobbied for
on our behalf. Did the FTC and the
FRB have to listen? Did they really
have to consider what goes on inside
the dealership? No, they didn’t.
The agencies also listened when
dealers talked about how they might
not know the credit score their fi -
nance sources pull on their custom-
ers in cases of two-party fi nancing.
That’s why, if you’re handling the
notice on your lender’s behalf, as the
rule allows, you can use the credit
score you pulled, even if it’s differ-
ent from the one your fi nance source
pulled on your customer.
The FTC and the FRB also consid-
ered how you comply with the rule
when it comes to telephone and In-
ternet customers. They’re actually al-
lowing dealers to fi gure out when it is
“reasonably practical after the credit
score has been obtained” to hand the
notice to your customers. For out-
of-store customers, that could mean
mailing the notice or handing it to
the customer when he or she comes
to the dealership to consummate the
transaction — the rule specifi es that
the notice must be handed to the cus-
tomer before that point.
RouteOne recommends handing
the notice to the customer after an
approval decision is communicated
to the consumer; but, again, it’s up
to you to determine when it’s reason-
ably practical.
Now, let’s think about what this
rule is asking you to do — hand ev-
ery customer who applies for credit a
credit score disclosure notice. Yes, the
rule is set up so the customer, armed
with his or her credit information,
can walk out the door without ever
buying a thing. But seriously, how
many of your customers are really go-
ing to seek out better terms? I mean,
the California state vehicle code the
exception is modeled after has been
in effect since January 2006, and I
haven’t heard any complaints.
But let’s think about this notice for
a second. Can you think of a better
way to introduce the F&I process to
your customer than by handing them
this notice? After all, it lets them
know where they stand and that your
F&I guy or gal can arrange for fi -
nancing with one of the major auto
lenders, local banks and credit unions
— maybe even the one they already
belong to. That’s one heck of a cred-
ibility builder, don’t you think?
The new notice is going to be a real-
ity check for some of your customers,
especially for those below-prime cus-
tomers bent on buying a vehicle you
know they can’t get fi nanced on. So,
this notice may be your way to transi-
tion them into a more fi nance-appro-
priate vehicle. It could even represent
a nice segue into why your customer
may need your F&I products.
Hey, you guys are the experts on
the frontlines, so I’m sure you can
fi gure out a couple of ways to use
this rule to your advantage. Heck, I
bet someone will even come up with
a nice cash conversion technique
that utilizes these notices. And that’s
my point. It’s time we start making
these rules work for us, rather than
against us, and the RBPR is a great
place to start.
Customer Education Isn’t a Bad Thing
Letter from the Editor
It might seem like just another regulation targeting dealer-arranged fi nancing, but the editor believes the Risk-Based Pricing Rule might be the kind of icebreaker F&I managers have been seeking all along. By Gregory Arroyo
The notice is going to be a reality check for some of your customers. ... It could
even represent a nice segue into why your customer may
need your F&I products.
FI0111editor.indd 6FI0111editor.indd 6 12/23/10 4:59:52 PM12/23/10 4:59:52 PM
Automotive News – Full Page Ad Trim Size: 10.875 x 14.5 (Bleed Size: 11.125 x 14.75)
TM
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FI0111editor.indd 7FI0111editor.indd 7 12/23/10 4:59:53 PM12/23/10 4:59:53 PM
A seasonal hike in the rate of
loans 60 days past due dur-
ing the third quarter didn’t
dampen TransUnion’s outlook for
the new year, as the credit reporting
agency says the year-over-year rate
continues to decline.
After a 9.4 percent quarterly in-
crease in the 60-day delinquency
rate, which stood at 0.58 percent in
the third quarter, the Chicago-based
credit agency said it expects the rate
to be at 0.62 percent by the end of
2010. However, TransUnion expects
the rate to fall to an even 0.60 per-
cent by the end of 2011 — a 3.2 per-
cent decline over the course of 2011
and a staggering 30 percent decline
from 2008.
“This trend toward fi scal respon-
sibility is refl ected in year-over-year
results, as auto delinquency rates now
have dropped 28.4 percent since the
third quarter 2009 — the largest de-
cline since the summer of 2001,” said
Peter Turek, a TransUnion executive.
“On a state-level basis, 12 states ex-
perienced a drop in their quarter-to-
quarter delinquency rates, while only
two states showed an increase on a
year-over-year basis.”
Additionally, average U.S. auto
debt for 60-day borrowers fell from
$12,643 to $12,500 between the sec-
ond and third quarters and was “es-
sentially fl at” on a year-over-year ba-
sis; however, auto-loan originations
were up 5 percent.
Toronto-Dominion (TD) Bank
Group and Cerberus Capital
Management announced on
Dec. 21 an agreement under which
Chrysler Financial will be sold to
TD for cash consideration of
approximately $6.3 billion.
TD will take over Chrysler
Financial in the United
States and Canada, as well as
the former captive fi nance com-
pany’s processes, technology and ex-
isting portfolio of retail assets. Fol-
lowing this transaction, the business
— combined with TD’s current plat-
forms in Canada and the U.S. — will
be positioned as a Top 5 bank-owned
auto lender in North America.
The acquisition is expected to close
in the second quarter of TD’s fi scal
2011. Following the completion of the
transaction, Chrysler Financial will
continue to operate as a North
American business headquar-
tered in Toronto. TD offi cials
said they expect to rebrand
Chrysler Financial under the
TD brand by spring 2011.
“It’s the foundation we need
in the U.S.,” TD Chief Executive Ed
Clark said on a conference call. “We
needed franchises to generate assets,
and this is an asset class that has held
up well during the cycle. We can take
this platform and grow it, and grow it
a lot faster than we’re assuming.”
Chrysler ‘Showcase’ Dealership Set to Open in Downtown Los AngelesVISITORS TO THIS YEAR’S L.A. AUTO
Show were treated to the debut of a number of new models and concept vehicles in the cavernous confi nes of the Los Angeles Con-vention Center. A few blocks to the south, another attraction awaited
visitors: a “showcase” dealership that will house all four of Chrysler LLC’s vehicle brands, as well as a Mopar-branded service center and a FIAT franchise.
“The Los Angeles Motor Village goes above and beyond the tradi-tional Chrysler Group dealership,” said Peter Grady, Chrysler Group’s vice president of network develop-ment and fl eet. “Our customers will experience our brands in unique salons that refl ect each brand’s identity and character.”
Situated within sight of the Staples Center and convention center footprint, the dealership also will feature a fi ve-story glass tower topped with three large LED reader boards that will house vehicles from all fi ve brands. The tower faces the busy I-110 freeway, which hosts an average of more than 350,000 cars per day.
The store is the site of a 1920s-era Pierce-Arrow dealership, and its opening will mark Chrysler’s return to downtown L.A. after a 10-year absence. Chrysler offi cials planned to open the dealership this month.
TD Bank Acquires Chrysler Financial
Developments
8 F&I and Showroom January 2011
conti
Am
t
s
C
T
“
d to
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The opening of Chrysler’s Los Angeles Motor Village will mark the Detroit Three automaker’s return to down-town L.A. after a 10-year absence.
The latest fi gures from TransUnion show that more U.S. car buyers are making payments on time and reducing their loan balances.
Sixty-Day Delinquency Rate Up in 3Q, Down for 2010
TD BANK CENTRE PHOTO BY SCOTT PULSIFERTD BANK CENTRE PHOTO BY SCOTT PULSIFER
FI0111develop.indd 8FI0111develop.indd 8 12/28/10 9:12:30 AM12/28/10 9:12:30 AM
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Volvo Adds CPO Maintenance ProgramVOLVO CARS OF NORTH
America LLC has added a new maintenance package to its certifi ed pre-owned warranty pro-gram. “Protection Plus+” offers factory-backed coverage on thousands of components, systems and operations, coverage for defective components for up to six years or 100,000 miles, roadside assistance, transferability between owners and a CARFAX Buyback Guarantee.
Columbus Ups Advance for NIADA CPOsCOLUMBUS FINANCE INC.
will provide an additional 10 percent advance, or up to $1,000, on ve-hicles with the National
Independent Automobile Dealers Association certi-fi ed pre-owned warranty. Customers also will re-ceive a 1 percent discount
on CFI’s program rates. Administered by NAC, NIADA’s CPO program aims to help dealers offer their customers
high-quality pre-owned vehicles, get higher resale value and compete with factory certifi cation programs.
BofA Launches Car-Buying SiteBANK OF AMERICA HAS
rolled out a new online shopping site for new and used vehicles that links prospective buyers to the bank’s certifi ed dealers. The new Web-site, www.bankofameri-ca.com/carbuyingcenter, will provide consumers with an upfront price in writing, which will be honored by the more than 4,000 dealers certi-fi ed by Bank of America. The site was created by Zag, a division of True-Car Inc. and a provider of private-label online and mobile car-buying programs.
THE INAUGURAL CLASS
for the DeVos Graduate School of Management’s Dealership Executive MBA program received their diplomas during Northwood University’s commencement cer-emony on Dec. 11, 2010. Introduced in 2008, the
DEMBA program, which attracted students from a host of dealerships and industry companies, including Manheim, Credit Acceptance, and Ford Motor Credit, is an MBA program designed specifi cally for the auto retail market.
NAC, a service contract sales and administration company, has hired Henry Paoli as the company’s new
national business development manager. He will manage agents in Ohio and Michigan, recruiting new agents and focusing on current client relationships. He previously served as the southeastern U.S. regional sales manager for Warranty Solutions.
In addition, NAC hired Paul Leary as its new national sales manager. Leary, who will also serve as a strategic relationship
manager, will be responsible for working with agents in the western U.S. and building on NAC’s recent expansion initiative. He previously served as the national sales director and business development leader for Warranty Solutions.
JM&A Group, a provider of F&I and service-related products, has promoted Michael Stellmach to vice
president of sales and opera-tions. He will oversee and grow JM&A’s OEM relationships and manage the company’s reinsurance business and in-house training center. Stellmach has more than 20
years of industry experience and began his career at JM&A in 1999 as an F&I specialist. He recently served as division manager for the Georgia and South Carolina markets.
Ford Motor Co. named K.R. Kent, former CFO of Ford Motor Credit Co., to the newly created position of executive director of investor relations. Kent will lead the OEM’s efforts to further strengthen the investor relations function. He will report to Ford Vice President and Treasurer Neil Schloss. Replacing Kent is Michael Seneski, former controller of global and U.S. marketing and sales. He will report to Mike Bannister, chairman and CEO of Ford Credit.
Developments
10 F&I and Showroom January 2011
Northwood Graduates First Dealer MBA Class
Moves and Hires
FI0111develop.indd 10FI0111develop.indd 10 12/28/10 9:12:32 AM12/28/10 9:12:32 AM
© 2010 Associates Underwriting Limited L.L.C.
Helping dealers carry home bigger profits for 20 years.Give us a call or visit us online and we’ll share our story of industry leadership, and more importantly, our passion for relentless customer service.
Service Contracts. It’s What We Do.®
800.826.3207www.aulcorp.com
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FI0111develop.indd 11FI0111develop.indd 11 12/28/10 9:12:33 AM12/28/10 9:12:33 AM
12 F&I and Showroom January 2011
Technology
When it comes to
online reviews,
the stories being
told may not tell
the entire story.
Just ask the owners of Chacon
(pronounced “CHAY-con”) Autos, a
Dallas-based dealer group that lays
claim to six used-vehicle locations
and two Suzuki franchises in Texas.
Gary Chaney, the group’s CEO,
says customer satisfaction has al-
ways been the name of the game for
the 60-year-old operation, and it has
the awards to back it up. The dealer
group earned Suzuki’s President’s
Club Award in 2006 and 2007 for
sales and service. The dealership
also has been recognized by Baylor
University and the Texas Historical
Commission for its business success.
It even made Inc. magazine’s list of
the nation’s 5,000 fastest-growing
private companies.
“We like customer service,” Chaney
says. “We even try to keep the same
employees at each location, so when
customers come in they see the same
faces all the time.”
The problem is, that’s not the story
being told online.
A quick Google search reveals that
the dealer group received an aver-
age of two out of fi ve stars from 15
reviews. Customers either loved or
hated Chacon Autos.
Chaney says the reviews are the
byproduct of working in special fi -
nance, a market the dealer group was
founded on in 1950. Chaney points
out that many of the less favorable
reviews come from disgruntled cus-
tomers upset about their vehicle be-
ing repossessed. He understands their
frustration, but says the reviews don’t
tell the full story — especially con-
sidering the fact that nearly a third
of the dealership’s sales come from
repeat customers.
“I’ve never had a lot of confi dence
in those [ratings], because I know our
customers like us,” he says. “Thirty
percent of our business is repeat cus-
tomers. That’s what our business is
built on.”
Still, in today’s Internet age, Chaney
knows his organization needs to get
out in front of this new word-of-mouth
medium. That’s what Chaney’s daugh-
ter, Stefani Musick, the dealer group’s
controller, is now attempting to do. She
recently established accounts on Face-
book, Twitter and LinkedIn for Cha-
con Autos and says her goal is to use
those platforms to market the dealer
group, tout its vast inventory and dis-
tinguish it from the competition.
“Right now we’re using social me-
dia to market ourselves, to get some
followers,” Musick says. “I guess
we’re still in the infancy stage, but,
ultimately, it would be great to get
some customer feedback.”
New Media, New Management ToolsReputation management is not a new
concept to the industry. Manufactur-
ers frequently track what consum-
ers think of their vehicles and their
franchised dealerships. Dealers also
conduct their own surveys to learn
more about the experience they of-
fer consumers. The difference now
is that consumers can broadcast what
they think via blogs, social network-
ing sites like Facebook and Twitter
and, in some cases, the dealership’s
own Website.
“Consumers have always talked
about their experiences with brands
and products,” says Jared Hamilton,
founder of DrivingSales.com, a ven-
dor rating Website. “Now, with the
Internet, it’s in a public setting,”
More consumers are turning to
Your Online
Word of mouth has always been the dealer’s best marketing tool, but the Internet age has changed
the rules. Find out what dealers are doing to regain control of their reputations. By Justina Ly
PHOTO BY DAVID JOHNSTON
FI0111csi.indd 12FI0111csi.indd 12 12/28/10 9:12:57 AM12/28/10 9:12:57 AM
that public setting as part of the car-
shopping process. According to a re-
cent J.D. Power and Associates study,
about eight out of 10 new-vehicle
buyers who turn to the Web visit at
least one third-party site. One of the
most popular sites for doing just that
is Edmunds.com, which features cus-
tomer ratings and reviews of dealer-
ship sales and service departments.
A recent report by Cambridge,
Mass.-based Forrester Research also
points to the impact rating sites are
having on consumers. According to
the study, 49 percent of male Internet
users and 42 percent of female users
consult ratings and reviews at least
once a month. In contrast, 23 percent
of males and 17 percent of females
post ratings and reviews regularly.
The study also found that, while
consumers are not heavily infl uenced
by peer reviews, they still read them
before making a major purchase.
“People tend to seek out reviews when
they are about to purchase a big-ticket
item and they are reading the reviews
to make themselves feel more com-
fortable with spending that money —
like they have done their homework,”
Forrester’s Reineke Reitsma wrote
in a recent blog. “But, in the end, it’s
their own judgment they rely on.”
DrivingSales.com’s Hamilton says
customer ratings and reviews in to-
day’s social media world come in two
formats: structured and unstructured.
Structured reviews can be found on
Websites such as DealerRater.com, a
car dealer review site featuring more
than 30,000 U.S. and international
dealers. In these reviews, customers
grade dealerships based on customer
service, quality of work, friendliness,
price and overall experience.
It’s the unstructured reviews — in
which customers discuss their experi-
ence at a dealership with friends on
social networking sites like Facebook
— that Hamilton says dealers need
to pay attention to. “You need to be
cognizant of how people are talking
about you, even if they are not fi lling
out a form,” he says.
Some dealerships, like Chacon,
choose to manage their online reviews
in house, while others have turned to
third-party vendors. Hamilton offers
a bit of caution to dealers who have
opted to outsource their online efforts.
“Social media didn’t exist at this scale
three years ago,” he says. “These so-
lutions are just being invented.”
ADP Dealer Services and Reyn-
olds and Reynolds both offer online
reputation management solutions.
Aside from monitoring social media
sites, both companies’ solutions in-
clude consultation services that teach
January 2011 F&I and Showroom 13
e ReputationConfi dent in Chacon Autos’ long-standing tradition of stellar customer service, CEO Gary Chaney is willing to absorb the occasional negative review in the interest of serving Dallas’ special fi nance market.
FI0111csi.indd 13FI0111csi.indd 13 12/28/10 9:12:58 AM12/28/10 9:12:58 AM
dealers how to handle negative com-
mentary. They even offer recommen-
dations for attracting positive brand
awareness among consumers.
Another company offering similar
services is Riverside, Calif.-based
eXteresAUTO. It offers a solution
that aggregates reviews and com-
plaints, tracks social media sites and
sorts reviews based on keywords. The
company’s trainers then go one step
further, helping dealers organize the
reviews and use customizable e-mail
templates to send responses. Like
anything that goes on at the dealer-
ship, Merla Turner, director of dealer
training for eXteresAUTO, says suc-
cess with services like hers needs to
start from the top.
“We know we’re dead in the water if
we don’t get the owner or GM buying
in,” she says. “It really does require a
culture change at the dealership.”
Finding the Right VendorWhen it comes to selecting an online
reputation management company,
DrivingSales.com’s Hamilton says
dealers should be wary of companies
offering to “improve” or “fi x” their
dealership’s reputation. They may not
be able to deliver on that promise or,
even worse, may provide unexpected
and unwanted results.
BMW of San Antonio learned
that lesson the hard way. The store
was caught with fake online reviews
after an investigation by San An-
tonio’s ABC News affi liate, KSAT
12, revealed they came from a paid
service. When reporters contacted
the dealership’s general manager,
John Bruns, he confi rmed that the
dealership hired a company called
Review Boost to contact custom-
ers and generate actual reviews. He
said the dealership also questioned
the authenticity of the reviews after
viewing them online, and had since
canceled the service.
However, Hamilton says instances
like that will do little to curb the on-
line marketing race. “People are so-
cial beings. Whether they talk face
to face or online … they’ll always be
talking about the industry,” he says.
Three years ago, Randy Powell
was tasked with creating a positive
conversation about his dealership.
Powell is the general manager of
RBM Atlanta-North, a Mercedes-
Benz dealership in Alpharetta, Ga.,
22 miles north of Atlanta.
The dealership opened in late 2007
— at the start of the recession — and
faced an undeveloped market and
stiff competition from other local
high-line stores. “The fi rst year we
opened was a challenge,” he recalls.
“[We had] no client base. We knew
we needed a strong online presence.”
After a few false starts, the deal-
ership partnered with eXteresAuto.
Powell says he made it clear to the
company that he wanted authentic
and genuine survey results, not just
perfect fi ves across the board. He
adds that he now has a fi rm grasp of
how to handle negative comments.
“We generally don’t try to rebut it,
because it gives the comment a lot of
prominence,” he says. “We also will
adjust our templates to surround it with
love and a lot of good reviews to make
sure it’s not the most prominent.”
So far, the approach has led to
some positive results. “We have the
most reviews and better placement
than other stores,” says Powell, who
adds that the dealership has managed
to capture 20 percent of Alpharetta’s
new-vehicle market and 35 percent of
its used-vehicle market. Powell now
has his sights set on fi xed operations
and is employing eXteresAuto’s tools
to create e-mail campaigns he hopes
will boost business for RBM’s ser-
vice department.
George Grubbs III, executive man-
ager of Grubbs Infi niti in Euless,
Texas, managed his dealership’s on-
line reviews before he outsourced the
work to a third-party company. It was
hard work: At the end of each month,
he would compile a list of customers
who returned favorable manufacturer
surveys and contact them by e-mail.
He would include hyperlinks to sev-
eral highly traffi cked Websites and
ask the customers to post a review.
“I did this for a year, and the result
was very few [customers] taking me
up on my request,” he says. “Instead,
we got almost no good reviews and
most bad [reviews were] from upset
customers wanting to rant. There was
no balance.”
After doing some research, Grubbs
turned to Advantix Marketing, a Dal-
las-based Web marketing company.
“They take the same list I compile
at the end of the month and call the
customers to get permission to post a
review on their behalf using their ini-
tials,” he says. “Only those customers
they make contact with and get per-
mission from get reviews posted. … It
really is a clean process, one we could
do in house if we had the manpower.”
Providing great car-buying expe-
riences has always been part of the
game plan for Powell and Grubbs;
they just needed to make a little in-
vestment to make sure the experience
they offered was refl ected online.
“Two, three or fi ve years ago, [com-
plaints were] handled behind closed
doors. … Now, in 30 seconds fl at,
your customer can write a review and
air your dirty laundry,” says eXtere-
sAUTO’s Turner. “It’s time for deal-
ers to really embrace a new way of
doing business and a transparency
they haven’t done before.”
14 F&I and Showroom January 2011
Technology
After a year of soliciting customers to post favorable reviews online,
George Grubbs Infi niti’s George Grubbs III turned to a third-party
marketing company.
PHOTO COURTESY GRUBBS INFINITI
FI0111csi.indd 14FI0111csi.indd 14 12/28/10 9:12:59 AM12/28/10 9:12:59 AM
CarMor® is the product marketing name used by Allstate Dealer Services. Allstate Dealer Services is a marketing name for Pablo Creek Services, Inc., E.R.J. Insurance Group, Inc. (d/b/a
American Heritage Insurance Services), the dealer services division of American Heritage Life Insurance Company (Home Office: Jacksonville, FL), Northbrook Indemnity Company,
(Home Office: Northbrook, IL) and First Colonial Insurance Company (Home Office: Jacksonville, FL); each of these entities is a part of the Allstate family of companies.
©2010 Allstate Insurance Company allstate.com
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FI0111csi.indd 15FI0111csi.indd 15 12/28/10 9:13:03 AM12/28/10 9:13:03 AM
Doors Open for BelIn the third quarter, subprime
originations increased for the fi rst time since the credit crisis. F&I’s auto fi nance
analyst breaks down the results. By Melinda Zabritski
The auto fi nance market continued to thaw in the
third quarter, particularly for the below-prime
credit segments. Consumers deserve much of
the credit, because more on-time payments
have led to declines in repossessions, charge-
off and delinquency rates.
For the quarter ending in September, subprime origina-
tions grew by 8 percent, marking the fi rst increase for the
high-risk credit segment since 2007. Even terms are be-
ginning to stretch out again for the below-prime tiers, with
the deep subprime category claiming the longest average
term for new-vehicle fi nancing and the largest increase in
term for used fi nancing during the quarter.
Repossessions fell by 5 percent during the period, while
the average charge-off amount dropped by $2,252. The
most promising sign was the drop in the percentage of auto
loans 30 days past due, which fell below the 3 percent mark
for the fi rst time since 2007. Additionally, the total balance
of 30-day delinquent loans dropped by $4.5 billion.
The following analysis will provide a more detailed pic-
ture of how far the auto fi nance market has come since
the credit crisis took hold two years ago and a snapshot of
consumer activity in the third quarter.
Risk Distribution Still Geared Toward Prime The overall risk distribution between the credit tiers has
remained stable over the last several years, with more
loans falling into the low-risk prime and superprime seg-
ments. However, outstanding dollar balances during the
quarter were down $38 billion from the year-ago period,
with banks and captive lenders experiencing the largest de-
creases — $15 billion and $13 billion, respectively. Credit
unions and fi nance com-
panies decreased their
outstanding balances by
$6 billion and $4 billion,
respectively.
On a quarterly basis,
the percentage of con-
sumers who fell into the
combined low-risk tiers,
prime and superprime,
increased by 0.2 per-
cent, inching up from
62.6 percent of all open
automotive loans to
62.8 percent in the third
quarter. Compared to
the year-ago quarter, the
outstanding balance for
both low-risk categories
increased by 3.12 per-
cent and 3.05 percent,
respectively.
The percentage of open
automotive loans falling
into the deep subprime
category experienced a
slight quarter-over-quar-
ter drop, declining from
13.3 percent of all open
auto loans in the second
quarter to 12.9 percent in
the third. The decrease
was more signifi cant on
a year-over-year basis,
with the percentage of
open automotive loans in
the highest risk tier fall-
ing by 14.27 percent. Subprime stayed fl at at 8.8 percent
on a quarterly basis, but its percentage inched up by .02
percent from the year-ago quarter. Nonprime grew slightly
from 15.3 percent to 15.5 percent. On a year-over-year ba-
sis, the credit tier’s percentage of open automotive loans
increased by 1.67 percent.
60-Day Delinquencies Continue to FallFor the second consecutive quarter, year-over-year delin-
quency rates decreased as consumers continued to do a
better job of repaying their loans. Sixty-day delinquencies
fell 17.4 percent from the third quarter 2009 to 0.77 per-
cent. The total dollar balance of 60-day delinquent loans
16 F&I and Showroom January 2011
Auto Finance
Risk Distribution of Open Loans 3Q2010
Deep subprime (<550)12.9%
Subprime (550-619) 8.8%
Nonprime (620-679)15.5%
Superprime (740+)24.6%
Prime (680-739)38.2%
ILLUSTRATION ©ISTOCKPHOTO.COM / PALTO
FI0111experian.indd 16FI0111experian.indd 16 12/23/10 5:16:13 PM12/23/10 5:16:13 PM
elow-Prime Buyersfell by 32.1 percent, or
$1.9 billion, to $4.077
billion.
More importantly,
the decrease in 60-day
delinquent loans was
realized by all lending
sources, with banks and
captives leading the way.
On a year-over-year ba-
sis, banks experienced a
22.74 percent decrease.
Credit unions realized a
16.32 percent decrease,
while credit unions, cap-
tives and fi nance com-
panies touted decreases
of 16.31 percent, 19.99
percent and 12.20 per-
cent, respectively.
Finance companies
held the highest bal-
ance in 60-day delin-
quent loans at $1.4 bil-
lion, which was down
$388 million from the
year-ago quarter. Credit
unions touted a 60-day
delinquent balance of
$509 million, $169 mil-
lion less than the third
quarter 2009. Banks
experienced the largest
drop in the balance of
60-day delinquent loans,
which fell $833 million
from the year-ago quar-
ter. Captives realized a decrease of $539 million.
Credit Scores Remain ElevatedAlthough credit scores during the third quarter registered
a slight decrease for both new and used vehicles compared
to the year-ago quarter, they remain elevated from what
was seen before the third quarter 2008 — the last quarter
before the credit crisis took hold.
Average scores on new-vehicle loans fell six points on
a year-over-year basis to 769 — still seven points higher
than the 762 score seen on new-vehicle loans originated
in the third quarter 2008. Credit scores for used fi nancing
fell one point to 683 on a year-over-year basis, which was
still 13 points higher than the average score registered in
the third quarter 2008.
The still-elevated levels in credit scores means the auto
fi nance market remains restrictive, with about 63 percent
of loans originated during the third quarter going to con-
sumers with prime credit. Still, the 4.1 percent drop in
prime originations and the 8 percent increase in subprime
originations is a clear signal that the market continues to
settle into pre-credit crisis patterns.
Lenders Softening Stance on RiskAccess to credit has been one of the biggest challenges
for dealers attempting to secure fi nancing for their credit-
challenged customers. The situation improved slightly in
the third quarter, with the share of new vehicles fi nanced
to nonprime, subprime and deep subprime customers in-
creasing by 12.7 percent.
Although new-vehicle loans made to customers with
prime and superprime credit during the quarter accounted
for 80.94 percent of all new-vehicle loans, the nonprime,
subprime and deep subprime tiers all registered market
share gains. The share of loans to nonprime customers
rose from 9.79 percent to 10.86 percent, while the share
of loans made to subprime customers increased from 5.66
percent to 6.61 percent. Deep subprime’s share increased
from 1.46 percent to 1.59 percent.
On the used side, 51.98 percent of loans went to custom-
January 2011 F&I and Showroom 17
2.0%
1.5%
1.0%
0.5%
0
0.87%
0.67%
Bank
0.74%
0.59%
Captive
3Q2009 3Q2010
0.48%0.40%
Credit union
2.30%
2.02%
Finance/other
60-Day Delinquency Rate
Average Credit Scores by Vehicle Type
800
760
720
680
640
600
769
683
3Q2010
775
694
3Q2009
New financing Used financing
FI0111experian.indd 17FI0111experian.indd 17 12/23/10 5:16:17 PM12/23/10 5:16:17 PM
FI0111wellsfargo.indd 1 12/7/10 1:07:58 PM
18 F&I and Showroom January 2011
ers with superprime or prime credit in the third quarter.
The share of used-vehicle loans made to customers with
below-prime credit scores rose by 2.69 percent to 48.02
percent. Loans made to nonprime and subprime custom-
ers grew by 6.2 percent and 10 percent, respectively, while
deep subprime fell by 5.5 percent.
Average Amount Financed RisesThe $2,530 year-over-year jump in the average amount fi -
nanced seems unaccountable until one considers the effect
of Cash for Clunkers. The rebate program had a dramatic
impact on how much lenders were willing to fi nance in the
third quarter 2009. The market conditions during the year-
ago quarter must also be taken into account when consid-
ering the $977 increase in used fi nancing.
Looking at third quarter data from two years ago, the
average amount fi nanced registered at around $24,000, an
approximate $1,200 difference from the average allow-
ance in the third quarter 2010. On the used side, the aver-
age amount fi nanced in the third quarter 2008 stood at
$15,983, a $723 difference from the third quarter 2010.
Looking at year-over-year data, the greatest amount
fi nanced among new vehicles was for the prime risk tier
($26,579), while the nonprime risk segment realized the
greatest year-over-year increase of $2,830.
The average amount fi nanced for used vehicles increased
across all risk segments, with the prime tier experiencing the
greatest year-over-year increase ($1,130). The superprime
risk tier claimed the highest amount fi nanced, resulting in
an average amount fi nanced of $18,044 per vehicle.
Rates Dip Across the BoardAnother positive sign for car shoppers during the third
quarter was the year-over-year drop in interest rates, which
fell 79 basis points for new and 34 basis points for used.
The only rate increase was seen in used fi nancing’s two
highest risk tiers.
Looking at new-vehicle fi nancing, superprime custom-
ers benefi ted from the lowest interest rate of 3.94 percent,
a decrease from the 4.8 percent rate offered in the year-ago
quarter. Even the deep subprime category realized a year-
over-year decrease in interest rates, which dropped from
14.02 percent in the year-ago quarter to 13.54 percent.
On the used side, rates for deep subprime and subprime
increased 156 basis points to 17.81 percent and 45 basis
points to 14.71 percent, respectively. Rates for nonprime
registered at 10.18 percent, a decrease of 48 basis points.
The average rate for prime and superprime stood at 7.44
percent and 5.49 percent, a decrease of 89 and 105 basis
points, respectively.
Market Healing Despite RestrictionsThe automotive fi nance market showed a marked improve-
ment in the third quarter, as a higher percentage of loans
were written for credit-challenged customers. Interest
rates were down and delinquencies continued to fall, all of
which point to a much healthier lending environment.
Despite the positive signs, the automotive fi nance indus-
try remains restrictive compared to 2007 and 2008, when
loans were much more readily available for customers in
all risk tiers. However, the pendulum seems to be swinging
back toward a more robust lending environment.
Melinda Zabritski serves as director of automotive credit for Experian Automotive. E-mail here at [email protected].
Auto Finance
Deepsubprime
Subprime Nonprime Prime Superprime
14.0%13.5%
11.4%10.5%
8.2%6.9% 6.2%
5.2% 4.8%3.9%
16%
14%
12%
10%
8%
6%
4%
2%
0
3Q2009 3Q2010
Average Rate for New-Vehicle Financing
$15,729$16,706
Used financing
$22,743$25,723
New financing
$30,000
$25,000
$20,000
$15,000
$10,000
$5,000
0
Average Amount Financed 3Q2010
3Q2009 3Q2010
New vehicles Used vehicles
100%
80%
60%
40%
20%
0
Financing by Vehicle Type 3Q2010
1.59%6.61%
10.86%
13.80%
67.14%
17.62%
15.61%
14.79%
13.65%
38.33%
Despite the positive signs, the automotive fi nance industry remains restrictive
compared to 2007 and 2008. However, the pendulum seems to be swinging back
toward a more robust lending environment.
FI0111experian.indd 18FI0111experian.indd 18 12/23/10 5:16:21 PM12/23/10 5:16:21 PM
1Commercial banking products and services are offered through Wachovia Bank, a division of Wells Fargo Bank, N.A. and/or Wells Fargo Bank, N.A. Member FDIC and Equal Credit Opportunity Lender. 2Vehicle service contracts offered through Warranty Solutions® a member of the Wells Fargo family of companies. Wells Fargo Dealer Services, Inc. is a subsidiary of Wells Fargo Bank, N.A. © 2010 Wells Fargo Bank, N.A. All rights reserved. 2010680-001 10/10
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Compliance might create
industries, but it’s also
responsible for what is
and what will continue
to be a critical post in-
side the dealership: the compliance
manager. Such is the case with Kar-
ina Grile, who has held that title for
much of her 19-year career with the
nine-store, Dayton, Ohio-based Voss
Auto Network.
Grile assumed her post 15 years
ago, shortly after her organization
hired a new CFO. He made it abun-
dantly clear that, under his watch,
deals would be turned away if they
weren’t done right. It was Grile who
stepped in to fi gure out what “right”
was, and she continues in that role to
this day.
“I guess I kind of fell into this,”
says Grile, who was serving as the
assistant to the fi nance director when
she assumed her current position. “I
guess if it wasn’t for the CFO and my
dealer, I wouldn’t have a job.”
Leading the ChargeGrile has since grown into her po-
sition. She leads the dealership’s
new-hire training, stays in constant
contact with her state dealer associa-
tion for any regulatory updates and
tackles any issues or questions that
come up about her compliance pro-
cedures. In fact, she’s fi elding ques-
tions daily from her F&I managers
about the dealership’s Red Flags
Rule (RFR) procedures, which she
established shortly before the Federal
Trade Commission (FTC) delayed its
enforcement of the rule for the fi fth
time back in May 2009. The enforce-
ment moratorium was expected to be
lifted on Dec. 31.
“I get [Red Flags Rule] calls daily
with questions like, ‘This is what I
have, what should I do?’ That’s when
we start looking at DealerTrack,”
she says. “The process itself takes
maybe fi ve minutes, but it was yet
another step in all the paperwork we
have to do.”
The group’s RFR protocol has yet
to nab any would-be ID thieves, but
Grile says she’s had to turn away
one or two deals because customers
couldn’t provide the required verifi -
cation. Because of the way the RFR
played out, the compliance manager
admits to taking a wait-and-see ap-
proach to the new Risk-Based Pricing
Rule (RBPR), which was expected to
take effect on Jan. 1. In December,
she found herself racing to get her
group’s procedures in place, signing
up for whatever Webinar she could
fi nd for guidance. “It’s defi nitely
been a thought this entire year, but
I knew it would snowball toward the
end of the year,” she says, adding that
she’ll once again turn to DealerTrack
for a solution.
Lining Up for BattleGrile says she was a little nervous
when she fi rst caught wind of the
new rule through the Ohio Automo-
bile Dealers Association (OADA),
but was relieved when she found out
about the dealer exception. The rule
— mandated by the Fair and Accu-
rate Credit Transaction Act of 2003
— requires creditors, including deal-
ers, to provide a specifi c notice to
applicants who, based on their credit
report, receive credit terms less fa-
vorable than those granted to other
consumers. Not factoring in penal-
ties at the state level, noncompliance
with the rule can lead to fi nes of up to
$16,000 per violation.
If not for the work of the National
Automobile Dealers Association
(NADA) in securing an exception,
dealers would have been forced to
evaluate the rate their fi nance sourc-
es offer on a deal-by-deal basis. That
work would include determining the
impact of their markup on that rate,
then executing a disclosure based
on those fi ndings. With the exemp-
tion, dealers are merely obligated to
hand every customer who applies for
fi nancing a credit score disclosure
notice, which, among other things,
must contain a written description
or graphic representation of how
the applicant’s credit standing ranks
against other consumers in the same
scoring pool.
Manas Mohapatra, who serves in
the FTC’s Division of Privacy and
Identity Protection, says dealers can
thank the advent of risk-based pricing
— a practice where lenders set or ad-
just the price and other terms of credit
provided to a customer based on his or
her credit worthiness — for the rule.
“With the adverse action require-
ment, people are told information in
22 F&I and Showroom January 2011
Compliance
Karina Grile worked overtime to get Voss
Auto Network’s stores in line with the industry’s
newest rule — one that experts say could be a
blessing in disguise. By Gregory Arroyo
First Lineof
FI0111comply.indd 22FI0111comply.indd 22 12/23/10 4:59:20 PM12/23/10 4:59:20 PM
their credit report probably caused
their denial of credit,” Mohapatra
says, “However, what had been occur-
ring was that people were not being
denied credit, but were getting much
worse material terms and weren’t be-
ing informed of that fact. This rule is
supposed to fi ll that gap.”
Although the rule is intended to
help consumers make an informed
credit decision, it’s also intended to
help them spot errors in their credit
report. That’s why the rule is very
specifi c about when the notices must
be issued, requiring that the notice be
handed to consumers as soon as “rea-
sonably practical” after the dealer-
ship pulls the credit report and before
consummation of the deal.
“This is a consumer education rule,
so the idea is to try and get that infor-
mation to the consumer at a mean-
ingful time,” Mohapatra adds.
Back in the TrenchesGrile isn’t so sure reality will match
the FTC’s expectations. She says it’s
clear consumers are more aware of
their credit standing these days, esti-
mating that about 75 percent of her
customers know exactly where they
stand. However, she doubts the notic-
es will result in consumers shopping
for better credit terms.
“Given what happened to our econ-
omy, I certainly think the average
consumer needs to be educated,” she
says. “But making dealerships respon-
sible for that? I just don’t know that it’s
going to serve the intended purpose.”
The ones really benefi ting from the
rule, Grile says, are the credit reporting
agencies. Because the rule encourages
customers to shop for better terms,
the cost for pulling a bureau (usually
between $2.50 and $4) could soon be
walking out the door with each deal.
“Once you add in OFAC and Red
Flags checks,” Grile points out, “that
cost can jump up a little bit.”
The rule will cause a major proce-
dural change at Grile’s dealerships.
Her salespeople don’t touch credit
reports — a procedure she put in
place because she felt it was a con-
fl ict of interest for them to have ac-
cess to credit reports. With the rule’s
timing requirement, that may need
to change.
Forming a Battle PlanWhere in the sales and F&I process
the credit score disclosure notice is
issued will depend on the dealer-
ship’s policy, which will also need
to factor in Internet sales. Whatever
a dealer comes up with, RouteOne’s
Dan Doman, vice president and gen-
eral counsel, said dealers need to
consider how the rule could open the
door to a more constructive conversa-
tion with nonprime customers.
“It’s going to be a reality check for
some customers,” Doman says. “And
it doesn’t take a real inventive individ-
ual to say, ‘Mr. Customer, you fall at
the 45 range. I can help you out. I’ve
sent your application to four fi nance
sources and here are the rates I got
back. Let’s see if we can’t do better.”
For that reason, Doman sees the
January 2011 F&I and Showroom 23
Defense PHO
TO B
Y S
TEP
HA
NIE
GR
IFFI
N /
VO
SS A
UTO
NE
TW
OR
K
FI0111comply.indd 23FI0111comply.indd 23 12/23/10 4:59:21 PM12/23/10 4:59:21 PM
new requirement as one that dealers
should welcome.
“I think this is one of those rare fed-
eral rules that serves the intended pur-
pose of the legislature and would be a
helpful tool to the industry,” he says.
RouteOne began digesting the
rule last February before engaging
its lender and dealer customers in
June and July. By mid-November,
the company began staging educa-
tional Webinars, the last of which
was held Dec. 21. The company then
joined fi ve other providers — includ-
ing CoreLogic Credco, DealerTrack,
Reynolds and Reynolds, and Wolt-
ers Kluwer — in releasing a solution
aimed at automating the dealer ex-
ception process.
RouteOne is offering its solution
as a complimentary tool within its
credit application management sys-
tem. DealerTrack is offering its solu-
tion for free to all dealerships on its
credit application network. Reynolds
24 F&I and Showroom January 2011
Compliance Automating ComplianceTHE FTC WAS PRETTY SPECIFIC ABOUT what it expects from dealers opting for the dealer exception when com-plying with the Risk-Based Pricing Rule. In fact, the FTC’s 200-page rule summary includes model forms deal-ers can easily adapt to comply with the exception requirement — just as long as they are able to deliver the required content. The key ele-ment is the ability to show potential buyers how they stack up against other consumers in the same scoring pool, but there are 12 additional items that need to appear in these notices. That’s why software provid-ers are offering solutions to help automate that process. Here are fi ve companies that are doing just that:
CoreLogic Credco: The company provides an exception report free of charge with each Credco credit report ordered. The report includes
model forms prescribed in the 200-page rule summary published by the Federal Reserve Board and the FTC.
DealerTrack: The DealerTrack Performance Suite offers a RBP Rule compliance tool for free to all dealerships on the DealerTrack credit application network. Deal-ers will be able to print credit score disclosure notices prefi lled with all the required information, as well as exception notices on their lender’s behalf for two-party fi nancing. In addition, dealers subscribed to the DealerTrack Compliance Solu-tion will be able to electronically store and view status reports on all exception notices generated by the
FI0111comply.indd 24FI0111comply.indd 24 12/23/10 4:59:22 PM12/23/10 4:59:22 PM
and Credco are offering notices with
each credit bureau inquiry report,
while Wolters Kluwer is making its
tool available to dealers using its Ap-
pOne credit platform.
Each solution allows dealers to
print exception notices prefi lled with
all of the mandated information.
In the case of two-party fi nancing,
most solutions will allow dealers
to provide exception notices on the
lender’s behalf.
Although she was racing against
the clock, Grile has no doubt her deal-
ership will be in compliance with the
rule some said would bring the F&I
process to its knees. But the work of
a compliance manager is never done,
especially as the industry heads into
a new period of rulemaking with the
Consumer Finance Protection Bureau
looming large. In fact, the bureau will
oversee any further rulemaking with
regard to the RBP Rule.
“We’ll roll out [our RBP Rule pro-
cesses] regardless of whether they put
the brakes on it, because it’s the right
thing to do and because it’s inevita-
ble,” Grile says. “As for what lies
ahead, there’s so much unknown. I
know we were carved out of the bu-
reau, but there’s language in there
about third-party paper, and every
dealer in Ohio does third-party pa-
per. I also know they were picking on
dealers located near military bases,
and we have one right here in Dayton.
I guess we’ll just have to wait and see
what they’re going after.”
January 2011 F&I and Showroom 25
dealership through the solution’s dashboard and audit tools.
Reynolds and Reynolds: Reynolds is offering exception notices with each credit bureau inquiry report a dealership pulls. The notice will contain all of the text and contents prescribed by the regulation.
RouteOne: The company is offering a complimentary Risk-Based Pricing Notice tool within its credit appli-cation management system. The company also offers a two-party fi nancing option whenever a dealer is issuing the exception notice on the lender’s behalf.
Wolters Kluwer Financial Services: Wolters Kluwer is offering the required credit score disclosure notice for dealers utilizing its AppOne credit platform.
“I think this is one of those rare federal rules that serves the intended purpose of the legislature and would be a
helpful tool to the industry.”
— Dan Doman, RouteOne
FI0111comply.indd 25FI0111comply.indd 25 12/23/10 4:59:23 PM12/23/10 4:59:23 PM
It’s the largest single-source
provider of underwriting and
administration of service con-
tracts and extended warranties,
touting a global footprint that
extends into a variety of consumer
goods, from autos and electron-
ics to major home appliances and
travel. But as complex as The War-
ranty Group has become, it remains
true to its principles, says
Michael Frosch, the com-
pany’s president and COO
of North American opera-
tions. Frosch opened up to
the magazine and offered
his vision of the road ahead
for the automotive industry.
F&I: The Warranty Group and its Resource Automotive entity have been through a lot of changes. Can you get our readers caught up with where your company stands today?
Frosch: The big picture is The
Warranty Group, whether it’s in
China, Latin America or North
America, or whether we’re talking
protection products for electron-
ics, appliances, travel coverage or
automotive. Resource Automotive
simply represents the auto side of
our business.
F&I: What was the strategy during the downturn?Frosch: The strategy was to work
with the best of the best. It was about
helping dealers through automation,
enhancing our solutions and provid-
ing support to maximize the benefi t.
F&I: Your insurance carrier, Virginia Surety, defi nitely won some battles in the trenches
this year, picking up clients such as Safe-Guard and Interstate. What was behind that division’s success this year?
Frosch: There have been a lot of com-
panies that have come in and out of
our business. A lot of them thought
they could do it, but, in the end, they
couldn’t. Unfortunately, the only ones
who got hurt are the dealers and their
customers. So, what you saw
in 2008 and 2009 was re-
ally a fl ight to quality, which
obviously benefi ted us since
the clients we picked up were
looking for a partner with the
focus and experience in this
very specifi c business.
F&I: Talk about the company's ResourceVIP program, which you rolled out in 2004. If I’m not mistaken, it represents your fi rst foray into inventory management.
Frosch: Well, our mission is to maxi-
mize income for our clients on a
per-vehicle basis, and ResourceVIP
supports that concept. It’s a custom
program that helps dealers manage
their returns on their inventory and
allows them to see what’s moving,
when it’s moving and what the re-
quirements were for their inventory
to move.
F&I: Where do you stand on all this talk about dealers combining sales and F&I roles?
Frosch: We continue to see great val-
ue in the F&I model. It has worked
and it has been successful. How-
ever, we recognize that there is no
one-size-fi ts-all [solution], so we sup-
port our clients as they wish to be
supported.
F&I: I’ve noticed a real pickup in interest for reinsurance. What are you seeing?
Frosch: Reinsurance remains a suc-
cessful model in this industry, and it’s
an extremely valuable tool if you part-
ner with a company that understands
it, has experience with it, knows how
to handle claims, takes care of cus-
tomers, knows how to price and con-
fi gure the product and will act as a
partner to you. And that’s what we
bring to the market.
See, we’re not a monoline, one-
approach kind of company. We have
direct programs, reinsurance pro-
grams, dealer-obligor programs. We
are the underwriter, the actuary and
the administrative company, and we
own our own compliance groups and
entities. So, it really is about what our
Getting The magazine catches up
with The Warranty Group’s Michael Frosch to discuss F&I, automotive retailing and the
road ahead. By Gregory Arroyo
26 F&I and Showroom January 2011
Q&A
PHOTO ©ISTOCKPHOTO.COM / LEVENTKONUK
FI0111qa_frosch.indd 26FI0111qa_frosch.indd 26 12/23/10 5:02:36 PM12/23/10 5:02:36 PM
clients want to accomplish. I always
like to phrase it as, ‘What you need,
when you need it.’
F&I: Talk about your prepaid maintenance product and the things you’ve done to increase customer loyalty.
Frosch: It defi nitely is a great prod-
uct for pumping the service drive.
However, we view our entire product
portfolio as valuable components of
a customer-retention strategy. What
makes us different is the customer
touchpoints we’ve built into these
products — e-mail reminders, things
of that nature.
So, prepaid maintenance is a vi-
able product, as is our QCertifi ed
product, as is our LUXCARE envi-
ronmental protection product, as is
GAP. We just believe it’s the technol-
ogy we employ that really adds value
for the consumer.
F&I: Do you consider mobile devices a viable touchpoint?Frosch: We’re looking at every po-
tential touchpoint with a consumer as
you would expect, and each customer
really has a different way that they
wish to interact. So, we’ll continue,
as others in the industry will, to look
at new options and opportunities.
F&I: Fuel effi ciency remains a big topic in the industry. How has that impacted your offerings?
Frosch: When you see the Volt or
the Leaf come out, it’s clear prod-
ucts must continue to evolve. It’s the
same thing when you see manufac-
turers offering longer warranties or
longer powertrain coverage. Now,
the advantage we have is that when
new technology is introduced, we’re
going to see it pretty quickly because
of our global exposure. Remember,
electric cars are not a new concept
and neither are hybrids. What we are
able to do is leverage the information
we collect, pull it together and make
decisions on how to create, custom-
ize and adapt.
F&I: Speaking of longer warranties, were the fears expressed a couple of years ago regarding the factories extending out warranties ever realized?
Frosch: That defi nitely didn’t have
an impact, because, again, we found
mechanisms to expand our cover-
age to complement whatever the
expanded warranty was. Expand-
ing powertrain coverage is great,
but that’s not expanding the cover-
age on the vehicle. There are still
a lot of items out there where the
customer needs protection. Still,
when these changes come down the
pike, it’s about how well you under-
stand the business and about how
quickly you can market and devel-
op new products to complement the
changes.
F&I: Given the intense fallout from the US Fidelis debacle, where do you stand on the direct-to-consumer sales model?
Frosch: We have multiple points of
distribution. At the end of the day,
it really is about how the customer
wants to be interacted with and mak-
ing those options available to dealers.
As for US Fidelis, we don’t view that
as a distraction to that model.
F&I: With the economy growing again and added stability on the lending side, will we realize the industry’s “new norm” in 2011?
Frosch: There are micro- and macro-
economic issues that are driving ev-
erything, so right now the new norm
is holding your vehicle longer. The
new norm also is change, which is
why it’s critical that you partner with
someone who is fl exible and can
adapt. As for my outlook, there’s no
denying that the last couple of years
have been interesting, and that the
next two will be the same. The good
news is, we’re looking at a big block
of consumers who will be coming
into their prime spending period.
For right now, I just think we’re in a
transition period.
January 2011 F&I and Showroom 27
Resourceful
FI0111qa_frosch.indd 27FI0111qa_frosch.indd 27 12/23/10 5:02:38 PM12/23/10 5:02:38 PM
FI1010friendly.indd 1 9/21/10 1:43:39 PM
As the founder and
president of Dealer-
Link, a Charlotte,
N.C.-based marketing
services provider, Tim
Parker has helped his auto dealer cli-
ents launch all manner of direct-mail
campaigns. The economic downturn
and onset of the Internet age, however,
put mailers on the back burner for
many dealers, but Parker believes the
medium is poised for a comeback —
so sure that his company is offering a
money-back guarantee. The magazine
caught up with Parker to fi nd out why
he thinks dealers will turn to direct
mail in a big way in 2011.
F&I: Just how badly did direct mail suffer as a result of the credit crisis?
Parker: Certainly, a number of deal-
ers cut back. But direct mail suffered
for other reasons as well. First, for
years, dealers had been doing direct
mail almost blindly, without any con-
sideration for whether the customer
could qualify. It’s known in the in-
dustry as saturation mail. Why, in to-
day’s economy, would a dealer want
to advertise to someone who simply
can’t qualify to buy?
Second, in talking to dealers over
the last two-plus years, it was evident
they felt opportunities were missed
when they were fi elding the inquiries
from customers on their direct mail.
See, during the downturn, many deal-
ers disbanded their BDCs, so their
salespeople had to answer phones.
F&I: In the third quarter 2009, subprime auto loan originations grew for the fi rst time since the onset of the credit crisis. Did you see more orders from dealers looking for special fi nance customers at that time?
Parker: Across the board, we started
to see an increase in activity. Lenders
still are asking more questions. Scor-
ing is in place for prime, but they’re
double-checking everybody else.
F&I: Do you think dealers will react to that news by sending more-targeted mailers and restaffi ng their BDCs?
Parker: Yes and no. I do expect deal-
ers to choose their campaigns more
carefully, and they’re going to want
to know exactly where they’re spend-
ing their money. As for the BDCs, we
have eliminated that concern because
we insist that our call center, which
is based in the United States, fi eld all
the calls and set appointments based
on a schedule the dealer provides. We
also follow up with any no-shows.
F&I: What types of campaign are you recommending for 2011? Parker: We don’t offer saturation mail,
only bankruptcy and credit score-
based direct mail. Frankly, we see
anywhere from three to six times bet-
ter results from the credit score-based
mail than the bankruptcy mail.
F&I: Why is that?
Parker: Just because a consumer
has a discharged bankruptcy doesn’t
mean they can qualify for an auto
loan. There are any number of factors
that may disqualify them, such as re-
cent derogatory credit items after the
fi ling, or multiple bankruptcies. Or
they may simply not meet the banks’
minimum credit criteria.
F&I: If you’re going by credit score, what’s your target range?
Parker: We let each dealer determine
the credit score range for his or her
campaign, but our history shows the
greatest success with scores between
525 and 675. There’s not much re-
sponse from consumers above 675.
However, if you have in-house fi -
nancing — or perhaps Credit Accep-
tance — and can do anything below
525, you can have a lot of fun with
this program. And, to my knowledge,
DealerLink’s credit score mail is the
only one in the industry that is willing
to guarantee the dealer’s investment.
F&I: What do you say to dealers who believe direct mail’s role is better fi lled by Internet and social media marketing?
Parker: Social media marketing is
certainly a medium in which every
dealer should have a presence, but the
consumers you reach through social
media marketing already know who
you are, and they may not qualify for
the fi nancing you’re advertising. The
consumers you get from our direct
mail programs are new to you, and
they absolutely will have the credit
required for you to sell them a car.
28 F&I and Showroom January 2011
Direct MailMailers were the fi rst
line item scratched from many dealers’ advertising
budgets during the downturn. Marketing ace says it’s time to add them
back. By Tariq Kamal
Mounts a Comeback
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2
3
4
5
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30 F&I and Showroom January 2011
Forget those New Year’s resolutions. Here are six things you can do to improve your chances in the showroom in 2011. By Cory Mosley
If you’ve been reading my columns
over the last few months, you’ve
heard me talk about taking respon-
sibility, setting goals and the benefi ts
of continuing to be a good student.
I want to drive that message home
with what I believe are the six keys to
making 2011 your best year ever.
Reinvent Yourself: Whether you re-
alize it or not, you’re a brand, and that
brand is refl ected in how you sell or
manage. In fact, at this very moment,
you are known for something. It could
be that you’re great with customers.
Maybe you’re a strong closer.
Now, whatever you are today
doesn’t have to be what you are tomor-
row. Way too often, people will hide
behind the idea that they are simply
just the way they are, which is really
an excuse to ignore their opportunity
to be better. Why not try to become
a specialist in trucks, SUV or coupes
and learn all there is to know about
the category, including competing
brands? Not only will this newfound
confi dence contribute to higher gross
profi t, it will eliminate the fear of los-
ing deals to products of lesser quality.
Create Separation: When all things
are equal, you have a 50/50 chance to
win or lose with each prospect. While
those odds may be OK on the roulette
table, I doubt they will work in the
showroom. That’s why you need to
focus on enhancing the customer ex-
perience to the maximum level. For
instance, instead of telling people to
“come on down,” invite customers to
schedule a “price and vehicle con-
sultation, where we use all of our re-
sources at the dealership to help you
make the best car-buying decision.”
Doesn’t that sound more intriguing?
To improve in 2011, you must fo-
cus on enhancing the experience and
your approach on the road to the sale.
During a recent celebration for my
grandparents’ 60th wedding anni-
versary, my grandfather gave a short
speech and offered a few words of
wisdom about marriage that I think
is extremely relevant in the sales en-
vironment. He said that the way you
stay married for 60 years to is to al-
ways make your wife think she’s in
control. The same goes for your cus-
tomers, make them feel like they’re in
control. All it takes is a little fi nesse.
Focus on Service: It saddens me to
see salespeople who spend their day
staring at the door, waiting for the
next “up” to come in. I don’t care
what you sell, every brand and deal-
ership retains a certain percentage
of its customers. It is your responsi-
bility as a salesperson to maintain
a relationship with your customers
after the sale. And we all know the
rewards associated with customer
retention: referral business, sales to
others in the household and less ne-
gotiating the second and third time
around. In most cases, the result is a
higher gross profi t.
Strive for Excellence: If you don’t
care, who will? Strive to be the best
and don’t settle for anything less.
And if your gauge for excellence is
what others are doing, stop.
There’s a story I like to tell about
a salesman I once knew named Al
Bowers. He could literally take half of
the month off and roll 20 cars in the
last week. Al, who had two phones at
his desk, didn’t mess around. Some
salespeople were jealous of his tal-
ents, others just wanted to beat him
on the monthly leaderboard, but
never thought it was possible — well,
until someone fi nally did.
Evaluate Outcomes: Start taking
a look at the deals you don’t make.
Sales guru Zig Ziglar states that ev-
ery sale has fi ve basic obstacles to
overcome: no money, no hurry, no
time, no desire and no trust. Instead
of simply deactivating that lost deal
from your CRM system and moving
on to the next customer, take a mo-
ment and refl ect on which obstacle
you might have failed to overcome.
Work the Payplan: Do you really
understand how your payplan works?
More importantly, do you know how
to maximize it? If not, you could be
leaving big money on the table. Are
there special “spiff” cars that pay
double the commission? Do you get
a piece of the back-end action, but
haven’t taken the time to work closer
with your F&I manager? Are there
bonuses on aging inventory? You
need to know all of these things be-
fore you work your next customer.
Finally, let’s have some fun! Ex-
perts who track the business say it
should be a good year for the busi-
ness, so let’s rock ’n’ roll and make it
the best year ever!
Cory Mosley is principal of Mosley Train-
ing LLC, a nationally recognized training
provider focused on new-school tech-
niques, products and services. E-mail
him at [email protected].
6 Sales-Driving Ideas
Sales Driver
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Will creating a list of New Year’s resolutions really help you better yourself? The magazine’s front-lines columnist doesn’t think so. By Marv Eleazer
In just about every trade publica-
tion this month, you’ll fi nd some-
thing written about setting New
Year’s resolutions and getting back
to the basics — each touting a “fresh
start” message. These articles cer-
tainly catch our attention, and why
not? They come at a time when we’re
refl ecting on our shortcomings from
the past year, so we pause and read
in hopes of changing for the better.
Good for us, right?
Well, I’d like to take a different
tack with my New Year’s column.
It just seems like the same promises
appear on my list year after year:
treat people better, stop smoking (I
love my cigars) and lose weight. The
problem is, we tend to fall back into
the same old habits after a short few
weeks or months. Hey, we’re crea-
tures of habit, aren’t we?
See, unless we have some sort of
epiphany, it’s often diffi cult to con-
vince ourselves to endure a behavior-
al change. The truth — whether we
accept it or not — is that we are lim-
ited by our own desire to improve.
Consider the common fl ea. This
tiny, fragile critter thinks nothing of
biting creatures thousands of times
his size. You might think he was
determined not to allow anything to
get in his way. A simple experiment,
however, proves otherwise.
See, it is common knowledge that
a fl ea, after having been sealed in a
jar and after having made numerous
attempts to jump out, will not leap
beyond the height of the jar’s lid —
even after it has been removed. It only
takes a few knocks on the head before
the fl ea begins to realize that jump-
ing into the lid only leads to pain. The
experience engrains in the fl ea’s mind
that he can only go so far.
Now, if you really want to be
amazed, try adding fl eas
to the jar that weren’t
part of the original ex-
periment. The new ad-
ditions will jump right
out, but, incredibly, the fl ea
from the original experiment won’t
follow his kin, even as he watches
them leap to freedom.
If his friends are able to escape,
why can’t he do the same? The an-
swer is simple: He doesn’t believe
he can, so he remains a prisoner of
his own self-imposed limitations.
Doesn’t this sound familiar?
Some of you began 2010 with a
renewed vigor to improve your profi t
per retail unit, so you made a resolu-
tion to change. However, somewhere
between then and now, your vision
started getting cloudy and your num-
bers fell back into the same rut —
or worse. What happened? Did the
lumps on your head cause too much
pain to try again?
Listen, I’ve been there and ful-
ly understand what you’re going
through. Like the fl ea, I’ve believed
something couldn’t be done while I
watched others leaping right past me.
I was convinced by my self-imposed
limitations that that’s the way it was,
which meant I kept falling short of
my abilities.
During the course of our lives, we
become accustomed to staying within
certain parameters. We do that be-
cause moving beyond those check-
points would require us to risk a
little pain. So, we stay in our
self-imposed ruts to avoid
leaving our comfort zones.
It’s easy to stay where
we are because there is
no suffering when we’re
in our comfort zones. But ask your-
self, are you satisfi ed with where you
are? Are you okay with not rising to
the challenge in this new economy?
If you’ve made it this far in the col-
umn, my bet is your answer to those
questions is a resounding “No.”
If that’s the case, then, right here,
right now, analyze what you want to
accomplish this year and beyond and
determine what behavioral changes
you need to make to get there. Don’t
make another silly New Year’s reso-
lution. Be brave and make a promise
to yourself to truly improve. Don’t do
it because I’m challenging you — do
it because you deserve it, your family
deserves it, your dealer deserves it,
and, Lord knows, it’s about time you
did! So, stop bumping your head and
leap out of your jar.
Marv Eleazer is the fi nance manager at
Langdale Ford in Valdosta, Ga. E-mail
him at [email protected].
Squishing the Flea Mentality
Mad Marv
January 2011 F&I and Showroom 31
It’s easy to stay where you are because there is no suffering when we’re in our comfort zones. But ask yourself, are you satisfi ed with where you are?
Are you okay with not rising to the challenge in this new economy?
PHOTO ©ISTOCKPHOTO.COM / NNEHRING
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32 F&I and Showroom January 2011
Legal
The FTC has been poking around at some dealerships in recent months. What is the agency looking for? The magazine’s legal expert weighs in. By Tom Hudson
My dealer client called in a
blind panic. He had arrived
at his dealership that morn-
ing to fi nd a letter lurking in the mail
from the Federal Trade Commission,
or, more specifi cally, from the FTC’s
Division of Financial Practices, Bu-
reau of Consumer Protection.
The letter announced that the FTC
was conducting a “nonpublic inves-
tigation” to determine whether the
practices of my client’s dealership
complied with the FTC’s Trade Regu-
lation Rule Concerning Preservation
of Consumers’ Claims and Defenses.
The letter requested that the dealer
voluntarily provide, “in lieu of com-
pulsory process” (hint, hint), a boat-
load of information, and requested
copies of a number of documents, in-
cluding copies of all consumer credit
contracts executed by the dealership
on or after Oct. 1, 2009.
A little background is in order at
this point. The rule referenced in
the FTC’s letter is commonly called
“The Holder Rule.” It has been on
the FTC’s books since the Pilgrims
landed at Plymouth Rock. The Hold-
er Rule was the FTC’s response to a
particular abuse it had identifi ed in
the credit sale of consumer goods.
See, way back when, a merchant
who sold a shoddy refrigerator on
credit could assign the consumer’s in-
stallment contract to a fi nance com-
pany. When the consumer quit mak-
ing payments to the fi nance company
because the refrigerator was a piece
of junk, the fi nance company could
claim that it was a “holder in due
course” of the customer’s obligation
and, by virtue of that status, was im-
mune from the consumer’s claims.
The FTC’s Holder Rule brought
those practices to a grinding halt. The
rule required credit sellers to include
a provision in their contracts stating
that the holder of the contract was
subject to the claims and defenses of
the consumer. Problem solved.
I was a new lawyer when the Hold-
er Rule took effect, and I still recall
the anguished screams of banks and
fi nance companies who bought retail
installment contracts from car deal-
ers and who thought they would be-
come targets for all of the car buyers
who had claims or defenses against
the dealers who sold them their cars.
It never happened. Dealers and fi -
nance companies stuck the required
language in their credit contracts,
and banks and fi nance companies
amended their dealer agreements so
that dealers would be on the hook for
any consumer claims and defenses
asserted under the Holder Rule. Sure,
there were a few problems here and
there, but the world didn’t end.
So, why did the FTC suddenly
get its shorts in a twist about dealer
compliance with the Holder Rule?
The short answer is, I have no idea.
About the only thing that I can
come up with is that the members of
the FTC’s newly formed Auto Dealer
Task Force were sitting around a table
trying to fi gure out a good fi rst move
to show how serious they are about
curbing abuses. So, they decided to
gather some facts about one of their
early consumer protection initiatives
to see how it was working. To my
knowledge, the FTC has never taken
any steps, formal or otherwise, to as-
sess the Holder Rule’s effectiveness.
If that is what is going on, I predict
that the FTC will be mightily pleased
with what it fi nds. I haven’t seen a re-
tail installment contract printed since
the Holder Rule went into effect that
didn’t contain the language mandated
by the rule.
So, let’s get back to my dealer client.
After he recovered from his panic, I
told him that unless he had encoun-
tered a specifi c problem lately, it was
not likely that the FTC had a particu-
lar interest in his dealership, and that
it was more likely than not that such a
letter was sent to a random sampling
of dealers in an attempt by the FTC
to test industry compliance with the
Holder Rule.
This particular story has a happy
ending. The dealer forwarded the let-
ter and we worked with the FTC’s
staff to scale down the scope of what
our client would produce. Our client
does a little legwork for the commis-
sion and can rest easy that he isn’t in
the FTC’s gunsights.
The next story might take a nastier
turn, though. Industry compliance
with many of the FTC’s rules and reg-
ulations isn’t what it should be, and the
next letter might be directed at prac-
tices where dealers are much more
vulnerable. If you haven’t had lunch
lately with your friendly dealership
lawyer, now might be a good time.
Thomas B. Hudson Esq. is a partner in
the law fi rm of Hudson Cook LLP and
author of several books. For more on
his books, visit www.CounselorLibrary.
com. ©CounselorLibrary.com 2010, all
rights reserved. Based on an article
from Spot Delivery. Single print publica-
tion rights only, to F&I and Showroom
magazine. HC# 4819-7967-3352 (12/10).
The Hunt for Noncompliant Dealers
FI0111legal.indd 32FI0111legal.indd 32 12/23/10 5:01:40 PM12/23/10 5:01:40 PM
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• More Friday Events including 2 full afternoon workshops sessions and a NADA Welcome Reception co-hosted by J.D. Power and Associates
• Dynamic Speaker line-up including former Secretary of State Condoleezza Rice and hero pilot Capt. Chesley Sullenberger
• New Specialty Workshops including Google, J.D. Power and Associates and our exciting new Social Media Series
• Early 3:30 pm closing on Sunday so you can take advantage of one of the Super Bowl Parties!
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Bottomliners
January 2011 F&I and Showroom 35
After acquiring CoVideo and its streaming video e-mail technology in December, EasyCare is making the company’s proprietary communications platform available to its dealer customers. The new offering will allow dealers to create and send personalized video e-mails and embed links that direct recipi-
ents to the dealership’s Website or F&I microsite. Dealers can use the tech-nology to communicate with existing customers
or to create campaigns to attract new prospects. The platform also allows users to track the success of their campaigns. For more infor-mation, visit www.easycare.com or www.covideo.com
EasyCare Acquires CoVideo, Offers Video E-mail
CAR-Research XRM Adds Service Drive Module
CAR-Research XRM, a CRM solution provider, has added the Service Drive Control Manag-er module to its CRM. The new functionality
helps service technicians identify needed maintenance and repairs in their customers’ vehicles. The mod-ule, which is built into the CAR-Re-search CRM solution, also provides service departments with an online scheduling tool and a route sheet that automatically displays key information related to repair orders. For more information, visit www.CARResearchXRM.com
Counselor Library Releases RBP Rule GuideBook CounselorLibrary has launched, “Dealer Compliance Guide: Risk-Based Pricing,” which addresses the obligations of dealers under the new federal Risk-Based Pricing Rule, which was expected to go into effect on Jan. 1. The 53-page book focuses on best practices for compliance with the RBP Rule and provides an overview of the various compliance methods. To purchase the book, go to www.counselorlibrary.com/public/com-pliance_dealer.cfm.
ATcon Offers Updated RO Analysis ToolATcon, a consulting fi rm focused on fi xed operations, has launched Electronic Repair Order Analysis v5.0, a management tool that sorts through and analyzes thousands of repair orders to identify trends and deviations from best practices. The solution also can be used to create e-mail and direct mail campaigns using customized reports based on ZIP code, make/model, year and mileage. To download a free, 30-day trial of EROA, visit www.atconsse.com/TryTheEROA.
KBB Launches Free App for AndroidKelley Blue Book has launched a free, interactive app for Android mobile devices, which pro-vides car-buying and -selling information. Users gain access to new- and use-car values, including MSRP, invoice, fair purchase price and more. Dealers also can use this information in vehicle transaction negotiations. The app also offers directions to dealers, vehicle photos and video reviews. To download the app, visit http://market.android.com/details?id=com.kbb.mobile on any Android device.
Product Feature
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Introducing F&I TV’s
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January 2011 F&I and Showroom 37
Company Phone Web Page
Allstate Dealer Services 888-244-1935 allstatedealerservices.com/ads008 15
Association of Finance & Insurance Professionals (AFIP) 817-428-2434 afi p.com 24
American Financial & Automotive Services 800-967-3633 afasinc.com C4
AUL Corp. 800-826-3207 aulcorp.com 11
CNA National 800-345-0191 x720 cnanational.com C2
Dealerlink 800-890-8850 DealerLink.us 25
F&I TV – Tip of the Week • fi -magazine.com/FITV 36
Friendly Finance Corp. 800-872-2877 friendlyfi nancecorp.com 29
Innovative Aftermarket Systems (IAS) 800-346-6469 x8989 smartdealerproducts.com 3
NAC (National Auto Care Corp.) 800-548-1875 nacsolution.com 7
NADA Convention & Expo • nadaconventionandexpo.org 34
National Automotive Experts 800-810-8859 nationalautomotiveexperts.com 9
Protective 800-794-5491 protectiveassetprotection.com 5
Reahard & Associates Inc. 866-REAHARD go-reahard.com 1
Resource Automotive 800-527-3448 resourceautomotive.com 20-21
Ristken Software Services 800-368-9680 ristken.com C3
United Car Care 800-571-6412 unitedcarcare.com 35
Vision Menu Inc. 800-413-9902 visionmenupro.com 33
Wells Fargo Dealer Services 888-937-9997 wellsfargodealerservices.com 19
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38 F&I and Showroom January 2011
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40 F&I and Showroom January 2011
Several factors will contribute to successful year-end sales, including an increase in consumer demand and higher loan approvals.
Strong November sales and an in-
crease in consumer demand had
the industry poised for a strong
end-of-year sales month and an even
better fi rst quarter, CNW Research’s
Art Spinella predicted in his Decem-
ber “State of the Industry” report.
Retail sales as a share of total sales
increased 64.2 percent in November,
according to the Bandon, Ore.-based
market research fi rm. Total new-
and used-vehicle sales increased 4.8
percent in November, following a
spike of 26 percent in October. Based
on Spinella’s preliminary data, total
vehicle sales could be up as much as
8 percent in December.
“In fact, this month may be the
most positive outlook this early in
a month since pre-2007,” he wrote
about December. “If it is, the fi rst
quarter of next year should be
extremely bright.”
The performance of December
sales will depend on the infl ux of
consumers who are entering the new-
vehicle market. Looking at the months
of October and November, as well
as the fi rst full week of December,
CNW believes the measure of new-
to-market share could climb to more
than 46 percent by the end of the
fourth quarter 2010.
Floor traffi c jumped in the early
part of December by more than 33
percent for new cars and more than
54 percent for used cars, compared to
20 percent and 6 percent, respectively,
in November.
This increase in demand shortened
the average delay of new-vehicle
acquisitions in November, which could
bode well for the fi rst quarter 2011.
Another positive indicator of the
industry’s improving health is the
shrinking gap between average
transactions prices and MSRPs,
wrote Spinella. The gap hit 85
percent in November and may close,
based on preliminary data, to nearly
86 percent in December.
Meanwhile, loan approvals
continued to increase for subprime
buyers, reaching 8.51 percent in
November. Additionally, 66.29
percent of nearprime loans were
approved, while 84.17 percent of
prime loans received approvals.
November also was the sixth
consecutive month in which the share
of fi nance units increased. Spinella
attributed that streak to looser credit,
a general acceptance of lower credit
scores and the willingness of banks to
lend on private-party sales. Spinella
added that recent increases in used-
vehicle fi nancing should continue in
December and into the fi rst quarter
of next year, putting the industry back
on track for a 40 million-unit year.
The average FICO score for used-
vehicle sales in December is expected
to be 622, the lowest fi gure of the
year. Additionally, the share of used-
vehicle sales under the 670 FICO
score was expected to reach 37.23
percent in December, the largest
percentage of the year.
Leasing also continues to pick up
steam. In November, Ford equaled the
industry average with 25.4 percent of
vehicles leased, while 29.28 percent
of Toyotas and 28.46 percent of
Hondas were leased.
“The drive for leasing among some
automakers — especially second-tier
Asian and weaker Detroit nameplates
— is the extremely positive results
leasing has on brand loyalty,” Spinella
wrote.
This year, 39 percent of customers
who took out leases back in 2008
ended up selecting the same brand at
the end of their lease term. The share
is slightly higher for lessees who had
short leases written in 2009.
Sales to Strengthen in December and Beyond, Reports CNW
Industry Trends
40%
35%
30%
25%
20%
15%
10%
5%
0
8/2009
9/20
09
10/2
009
11/2
009
12/2
009
1/20
10
2/201
0
3/20
10
4/201
0
5/20
10
6/20
10
7/20
10
8/20
10
9/20
10
10/2
010
11/2
010
12/2
010
Share Used Sales Under FICO 670680
660
640
620
600
580
560
8/2009
9/20
09
10/2
009
11/2
009
12/2
009
1/20
10
2/201
0
3/20
10
4/201
0
5/20
10
6/20
10
7/20
10
8/20
10
9/20
10
10/2
010
11/2
010
12/2
010
Used Avg FICO Score
FI0111industry.indd 40FI0111industry.indd 40 12/23/10 5:01:10 PM12/23/10 5:01:10 PM
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