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inside• AUTO SHOPPING GOES MOBILE• CASH IS KING IN BUY HERE-PAY HERE• STOP SELLING PRICE

PRSRT StandardU.S. Postage

PAIDDALLAS, TEXASPermit No. 2079

V i s i t u s a t w w w . o h i a d a . o r g

INDEPENDENT DEALERO F F I C I A L P U B L I C A T I O N O F T H E O H I O INDEPENDENT AUTOMOBILE DEALERS ASSOCIATION

MAY/JUNE 2012

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10 used vehicleScience of

Sourcing & Sales

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MAY/JUNE 2012 I N D E P E N D E N T D E A L E R

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w w w . o h i a d a . o r g

Akron Auto Auction Wins Otto AwardAkron Auto Auction was honored as

OVE.com, Manheim’s 24/7 bid or buy now wholesale vehicle marketplace, announced its top performing auction locations at the fourth annual Otto Awards ceremony.

Akron Auto Auction won an Otto for highest dealer volume among independent auctions.

Named for the company’s ferret mascot, the Otto Awards honor two winners in each of five categories – a Manheim auction and an independent auction.

The awards were presented by Manheim executive vice president and chief operating officer Janet Barnard and National Auto Auction Association (NAAA) president Charlotte Pyle during the NAAA-sponsored Conference of Automotive Remarketing in Las Vegas.

“OVE has been a tremendous auction partner for Akron Auto Auction,” auction co-owner and general manager Chad Bailey said. “From their arbitration policies to their involvement in facilitating the sale, OVE has made buying and selling vehicles online

a seamless experience for us and for our customers.”

Bailey said Akron Auto Auction averages 75-100 vehicles sold per month through OVE.

“It has been exciting to see the growth in volume and activity on OVE since we began using that platform three years ago,” he said. “While our customers selling on OVE are primarily from northeast Ohio, we have seen OVE buyers from virtually every continent. Late-model luxury imports attract buyers from all over the world, and OVE is a strategic link in the process of connecting with both domestic and international buyers in rapidly increasing numbers.”

Founded in 1973, Akron Auto Auction is owned by Jeff Bailey, Chad Bailey, James Fisher and Richard Wakefield. The 30-acre facility includes six auction lanes. The auction offers more than 1,200 vehicles on Tuesdays at 10 a.m., featuring consignments from lease and fleet companies, financial institutions and new and used car dealers.

THE 2012 OTTO AWARD WINNERS:Most Innovative: Manheim Chicago, America’s Auto AuctionsOnline Buyer Confidence Award: Manheim Central California, Norwalk Auto AuctionHighest Commercial Volume: Manheim Pennsylvania, Greensboro Auto AuctionHighest Dealer Volume: Manheim Pennsylvania, Akron Auto AuctionHighest Year-Over-Year Growth: Manheim Tucson, America’s Auto Auction Jacksonville

CHAD BAILEY, CO-OWNER AND GENERAL MANAGER OF AKRON AUTO AUCTION, ACCEPTS OTTO AWARD FROM CHARLOTTE PYLE, NAAA PRESIDENT (LEFT) AND JANET BARNARD, MANHEIM EXECUTIVE VP AND CEO.

Recovery Services Firm Offers Free Software

Consolidated Asset Recovery Systems, a Raleigh, N.C.-based repossession and remarketing services company, is launching a new open-source, freeware version of its IBEAM™ web portal to the agent and lender community.

The new version of IBEAM is specific to repossession and invoice management, providing all the capabilities of asset tracking, real-time monitoring of updates, online condition reports and complete transparency throughout the recovery process.

The new freeware version of IBEAM will be offered at no charge to any lender and any repossession agent who is an active member of the Time Finance Adjusters (TFA), National Finance Adjusters (NFA), Allied Finance Adjusters (AFA) or American Recovery Association (ARA). It will include all of the platform’s standard capabilities for repossession management and invoice management with the exception of real-time agent score-carding.

FOR INFORMATION, VISIT WWW.EZ-RECOVERY.COM.

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I N D E P E N D E N T D E A L E R MAY/JUNE 2012

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MAGAZINECONTENTS

ADVERTISERSINDEX

MAGAZINECONTENTS

ADVERTISERSINDEXADESA .......................................... Inside Back CoverAlly ......................................................................15AutoTrader.com ..................................... Back CoverAuto Use ..............................................................13Berkshire Risk ......................................................22Chase ...................................................................18Columbus Fair Auto Auction .................................11Corry Auto Dealers Exchange ...............................21Indiana Auto Auction ..............................................3Insurance Auto Auctions .......................................17Manheim.com ........................................................9NIADA Certified ....................................................20Nowcom .................................................................7STARS GPS ...........................................................19 United Acceptance ..............................................16UsedCars.com by Dealix .........................................5Voisys ...................................................................26Westlake Financial .......................Inside Front Cover

WHAT’SNEW

DON’T FORGET TO VISIT OUR WEBSITE FORIMPORTANT INFO: WWW.OHIADA.ORG

NATIONAL INDEPENDENT AUTOMOBILE DEALERS ASSOCIATIONWWW.NIADA.COM • WWW.NIADA.TVNIADA HEADQUARTERS: 2521 BROWN BLVD. • ARLINGTON, TX 76006-5203 PHONE (817) 640-3838FOR ADVERTISING INFORMATION CONTACT: TROY GRAFF (800) 682-3837 OR [email protected] OHIO INDEPENDENT DEALER NEWS IS PUBLISHED BI-MONTHLY BY THE NATIONAL INDEPENDENT AUTOMOBILE DEALERS ASSOCIATION SERVICES CORPORATION, 2521 BROWN BLVD., ARLINGTON, TX 76006-5203; PHONE (817) 640-3838. PERIODICALS POSTAGE PAID AT DALLAS, TX AND AT ADDITIONAL OFFICES. POSTMASTER: SEND ADDRESS CHANG-ES TO NIADA STATE PUBLICATIONS, 2521 BROWN BLVD., ARLINGTON, TX 76006-5203. THE STATEMENTS AND OPINIONS EXPRESSED HEREIN ARE THOSE OF THE INDIVIDUAL AUTHORS AND DO NOT NECESSARILY REPRESENT THE VIEWS OF OHIO INDEPENDENT DEALER NEWS, THE OHIO INDEPENDENT AUTOMOBILE DEALERS ASSOCIATION, OR THE NATIONAL INDEPENDENT AUTOMOBILE DEALERS ASSOCIATION. LIKEWISE, THE AP-PEARANCE OF ADVERTISERS, OR THEIR IDENTIFICATION AS MEMBERS OF OIADA OR NIADA, DOES NOT CONSTITUTE AN ENDORSEMENT OF THE PRODUCTS OR SERVICES FEATURED. COPYRIGHT 2011 BY NIADA SER-VICES, INC. ALL RIGHTS RESERVED.

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

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R A2Z EDUCATION SERIES - AutoZoneEducating the independent dealer to deliver the highest quality service levels to your customers, manage your shop efficiently, train your technicians and maximize profits.niada.tv

R NATIONAL TIRE SAFETY WEEK: June 3-9National Tire Safety Week is a nationwide event sponsored by the Rubber Manufacturers Association to raise consumer awareness about tire safety, help consumers keep their tires safe and demonstrate the industry’s commitment to motorist safety.Visit www.betiresmart.org and fill out the form to receive your free National Tire Safety Week kit that includes brochures and other materials.

06 Stop Selling Price10 Provisioning: Used Car Science 14 Auto Shopping Goes Mobile18 Cash Is King in BHPH26 Compliance Overdrive

Inside Board of Directors 2012

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CONTINUED ON PAGE 8

I have conducted many sales training seminars, and during my Sales Schools I always ask the attendees this question: “Why are you here?”

There were many responses as the attendees tried to come up with the answer they thought I was looking for, but without fail, a few of them would say, “I want to learn how to sell more cars.”

And therein lies the problem. You don’t sell cars – you sell the features and benefits, or at least, you should. Too many salespeople try to sell a car to a prospect, and because of improper training and bad habits, the salespeople try to negotiate their way to a sale by reducing the price. Start high and settle somewhere in the middle. It is a fact that salespeople who sell features and benefits have much higher grosses and sell far more vehicles.

To learn the proper way to drive your sales, you must first be on the right road.

THE ROAD TO A SALEStep 1: Greet

The proper way to sell a prospect is to first greet him properly as he arrives at the dealership. When you approach a prospect never, ever say, “Good morning, can I help you?” The immediate response from the prospect will be, “No thanks, I’m just looking.” Any time you ask an open-ended question, you immediately lose control of the sale. A simple greeting would be, “Good morning, my name is John Smith (extend

your hand and shake theirs), and your name? Is there anyone in particular you are here to see?”

Step 2: Qualify By now you should already know the

prospect are not looking for anyone in particular and is there to buy a car. You need to ask the prospect questions that will assist you in locating a vehicle that meets his needs. You need to know if he needs a car, truck, SUV or van; two doors or four doors; two-wheel drive, all-wheel drive or four-wheel drive. Next you need to ask how the vehicle will be used – family use or work vehicle. Then verify what features are necessary, such as engine size, air conditioning, power windows, etc. Locate a vehicle in inventory and prepare to make an award-winning presentation.Step 3: The Presentation

Remember, if the prospect pointed out safety was a concern during the qualifying step, you should emphasize safety during the presentation. Additionally, if style or performance was a concern, those areas need to be emphasized.

Known also as the walk-around, this is the step that separates professional salespeople from order-takers. Now is the time to sell the features of the car and how those features will benefit the prospect when he takes delivery of the vehicle. A proper presentation should commence from the front of the vehicle, pointing out at least five features and

explaining the corresponding benefit of each.For example: Point out the crumple zones

in the fenders and the hood and the fact that they are designed into these body parts as a safety feature to provide protection to the prospect and his family in the unlikely event of a frontal collision.

After you have explained the benefits of at least five features at the front of the vehicle, the next move should be down the passenger side, discussing design and tires, and opening the doors so the prospect can sit in the front and the rear seat to experience the comfort and roominess of the interior. While the prospect is seated, point out all of the features in those areas and their benefits as well.

The next move is to the rear of the vehicle to point out the size of the trunk, spare tire, rear taillights, impact bumper, rear defroster, etc. The final action in the presentation is to move to the driver’s side and into the driver’s seat, where features are presented, benefits explained and arrangements for the test drive are prepared.

Step 4: The Test DriveThe test drive is an opportunity for the

prospect to make a final decision as to whether he wants to buy the vehicle. I make that statement because by the time you reach this part of the Road to a Sale, everything you have done and said to your prospect will be added to the experience of the test drive, and the prospect will make an

Stop Selling PriceBY JAMES R. MITCHELL, EXECUTIVE DIRECTOR

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emotional decision about the purchase.Most salespeople think the prospect only

decides to buy after he beats you down on the price, which is why eight out of 10 salespeople sell price instead of features and benefits. You never sell just the vehicle. If you listen to what the prospect tells you during the four step walk-around you will know exactly what it takes to break the trust barrier. When that is accomplished, the prospect will become your customer.

Step 5: The CloseFinalizing the conditions by which the

prospect will agree to make a purchase is also known as closing the sale. Most salespeople try to close on price instead of closing on the value of the purchase created by the explanation of features and benefits. The result of that compromise is failure.

To make an example of that point, consider this: If I told a group of people at an auction I had an iron pot for sale and I let them examine the product, I would most likely get a few small bids. But if I told the same crowd I had an iron pot for sale that was owned and used by Abraham Lincoln while he was president, that he also used the pot in his log cabin and that fact made the pot priceless, I feel certain the bids would be substantially higher. The difference in the price paid for the iron pot was the fact that I explained the features and benefits of ownership and not just the obvious fact that this was an iron pot.

Formula 1: features plus benefits equal value, and the perception of value is why people buy.

When presenting the price to the prospect, start by pointing out the obvious. Review the vehicle he is considering and accentuate the features and benefits explained earlier. Then present the retail price as the offer, and finally say, “Mr. Smith, if everything is agreeable to you I will need your authorization on this line and a small deposit of 10 percent so we can arrange delivery.” After you present the price to the customer, keep quiet. The next person who speaks … will lose.

From this position you can be assured the prospect will purchase the vehicle and, even after some negotiation, your gross will increase.

Step 6: Delivery and Follow upThe average salesperson (average:

av·er·age; noun, the best of the worst and the worst of the best) will not call the customer after the sale because of the “fear factor.” Salespeople are afraid the customer will find something wrong with the vehicle and file a complaint – they use the excuse

they are way too busy selling 10 cars a month to make the phone calls.

I learned in the early ‘70s from the best salesperson on the East Coast. He sold an average of two vehicles per day and had learned from the best of the best, Joe Girard, who is actually in the Guinness Book of World Records as the greatest salesperson ever. Girard averaged six new retail vehicles a day and also in the book for most new retail sales in one day (18), most new retail sales in one month (174), most new retail sales in one year (1,425) and most new retail sales in a 15-year career (13,001). Now that’s selling.

I had the honor of meeting Joe on two occasions, and I remember what he said in one of his seminars about a customer complaint: When a customer complains to me, it is an opportunity to sell him another vehicle. If I can satisfy that individual when something goes wrong, he will never forget me. However, if I don’t try to satisfy him, he also won’t forget me. The big difference is, one way he will buy from me again; the other way he won’t.

Here is the formula taught to me about follow-up, and this is what I have taught thousands of salespeople during my career.

Delivery: Always be on time for your deliveries and have all of the paperwork complete so the process goes smoothly and you don’t have to call the customer to return and re-sign a document you forgot or completed improperly. Have the vehicle “detailed to retail,” and facing forward so the customer can drive forward when he leaves. Before the customer leaves you will want to obtain the birthdates of both the husband and wife, and the date of their wedding anniversary (always ask the wife for this date so no one gets shot).

Note: When completing the odometer statement, always look at the odometer in the vehicle and never trust the number in your computer.

Before the customer leaves your dealership, go out to the vehicle with him. Make sure he understands how all the accessories operate and ask if he has any questions. Thank him again, then ask one final question: “Who do you know who might be thinking about buying a vehicle?” Don’t ask, “Do you know anyone who wants to buy a car?” because you will almost always get the easy answer, “No, I don’t.” If a name is offered, ask if you can use your customer as a reference, and if he says no, don’t. Thank him again, give him two or three of your business cards and simply ask to please give them to friends who might be looking to purchase a car in the future.

Follow up: This is not the last step in the Road to a Sale. It is the first step in the next Road to a Sale. Think about that statement

for a minute. You don’t just follow up with your customer to make sure he is happy with the new vehicle. You want to keep in touch so you can sell him his next vehicle and sell a vehicle to everyone he knows.

Here is the formula for your next sale:1. Call the customer three days after he

purchased the vehicle. Ask if all is well. If the answer is yes, ask. “Who do you know who needs to buy a vehicle?” If the answer is no, help him fix the problem.

2. Call the customer 30 days after the purchase and repeat step one.

3. Call the customer 90 days after the purchase and repeat step one.

4. Call the customer every six months after the purchase until he buys his next vehicle from you. Then repeat steps one through three.

5. Call both the husband and the wife and wish them a happy wedding anniversary. You call the wife because she will never forget you for doing this and you call the husband because he will never forget you for reminding him.

6. Call the customer on the anniversary date of the vehicle purchase, ask if everything is OK. If all is well, ask for a referral. If the answer is no, help fix the problem.

Mail:1. Send a thank you card three days after

the vehicle purchase.2. Send an anniversary card for the

wedding date and the date of the purchase.3. Send birthday cards to the husband

and the wife.4. Send a Christmas card.If you adhere to these simple principles

you should have a minimum of 70 percent repeat business. Now do the math. Consider that the average customer will trade every three years. If you are selling a minimum of 10 vehicles per month, you would sell 120 vehicles per year. After your third year, you could expect to sell an additional 84 vehicles – a total of 204 per year. After the next three years, you could expect to sell an additional 142 vehicles – 346 total sales for the year.

The continued results are exponential. If your average gross is only $1,000 per vehicle, you should increase your gross profit by a minimum of $142,000 per year. When you consider referrals from customers and word of mouth advertising, the results are even more impressive. Sometimes the simplest answer to a problem is found in the basics.

These examples are not pie in the sky. They are very attainable. All it takes is 100 percent commitment from you. The effort you deposit into a program like this will bring you better dividends than any bank can offer.

Be blessed and may success be yours.

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The New Science of Used Vehicle Sourcing & Sales

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

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

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

What Is Provisioning?Provisioning is defined as the efficient

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

Put simply, for your business to thrive, you need to know what cars to buy, what to pay for them and where to find the right units for your inventory. Provisioning is a new way for dealers to set their used vehicle

strategy (size of inventory investment, ROI/turn expectations) and efficiently pursue the vehicles necessary to execute their plan successfully.

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

What types of information?Demand: The number of people in your

area searching online for a specific vehicle.Interest: The average conversion rate

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

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

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

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

Availability: The number of units currently available at auction.

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

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

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

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

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

still hold gross.If you’re a dealer in the Northeast in the

winter, you might have difficulty finding enough SUVs to keep your inventory fully stocked. Similarly, a dealer in the South probably can’t find enough convertibles in the summer months. Wherever you are, there’s inevitably a shortage of certain cars in demand. So it can pay to look outside your immediate area for quality inventory.

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

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

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

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

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

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

PROVISIONINGBY DALE POLLAK AND CHAD GOODSON

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PROVISIONING

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Here’s the latest from the National Independent Automobile Dealers Association’s team of lobbyists and advocates in Washington, D.C.

NIADA Annual Leadership ConferenceOn March 22-23, Federal Advocates

– NIADA’s lobbying firm – attended the NIADA Annual Leadership Conference and participated in a panel presentation on advocacy efforts and status regarding various meetings and legislation, including S.1449 and a proposed auction sale amendment. The formulation of an Association PAC was also discussed.

D.C. MeetingsOn March 7, NIADA met with staff

members of the Consumer Financial Protection Bureau (CFPB) and the Federal Trade Commission.

With respect to the CFPB, there are three areas of immediate interest and direct interest to the association.

The first is the regulatory role the CFPB will play with respect to motor vehicle financing. While there has not yet been any activity with respect to this issue, NIADA, through Shaun Petersen, the association’s legislative/regulatory/compliance counsel, will continue to monitor the process.

The second issue relates to education of servicemembers. Pursuant to the law, the CFPB is required to ensure “servicemembers and their families are educated and empowered to make better informed decisions regarding consumer financial products and services offered by motor vehicle dealers, with a focus on motor vehicle dealers in the proximity of military installations,” and “complaints by servicemembers and their families concerning such motor vehicle dealers are effectively monitored and responded to, and where appropriate, enforcement action is pursued by the authorized agencies.” NIADA will be pursuing options/opportunities for assisting the CFPB in that effort.

The third area of interest pertains to the Consumer Advisory Board that the CFPB is

directed to establish. The board is charged with advising and consulting with the bureau “in the exercise of its functions under the federal consumer financial laws, and to provide information on emerging practices in the consumer financial products or services industry.”

NIADA is monitoring the membership appointment process to the board with interest. Legislative committee chairman Chris Martin has submitted an application for appointment.

Executive Agencies Regulatory Review

Shaun Petersen will be leading the regulatory review effort on behalf of NIADA. He will be reporting on the FTC meeting noted above and developments in the regulatory process.

Federal entities of interest include the FTC, EPA, NHTSA, IRS and SBA. Early last year the President issued executive orders 13563 and 13579, which directed all federal agencies, including independent agencies such as the FTC, to prepare plans for the periodic review of existing regulations in order to determine whether those regulations should be modified, streamlined, expanded or repealed.

In September, as an example, the FTC issued a 10-year review schedule and accelerated its review of a number of rules and guides in response to recent changes in technology and the marketplace. NIADA, where appropriate, will coordinate its review efforts with the National Automobile Dealers Association.

Auction SalesDiscussions are ongoing regarding

consumer and law enforcement issues related to auction sales. Pending those discussions, an April 9 meeting with the Senate was cancelled at the request of Senate staff.

That stakeholder meeting was to include, but was not limited to, the NHTSA, FBI, Department of Homeland Security, staff of members Pryor, Lieberman, Blumenthal,

Waxman and Butterfield, the National Auto Auction Association, NADA, NIADA and representatives of various auction companies.

An attempt was made by Sen. Pryor (D-Ark.) to file and pursue an amendment to the Senate Highway Bill that would require auction companies to make available certain information to bidders at the time of sale and certain information that would have to be maintained and possibly made available to the public after sales. Following NAAA negotiations with the senator, he agreed to not file or pursue the amendment pending a dialogue with the affected stakeholders.

While the amendment/issue does not on its face necessarily directly impact NIADA, we will continue to monitor the situation to ensure the association’s interest are protected.

S.1449, the Motor Vehicle and Highway Safety Improvement Act

S.1449 is the bill that had an onerous recall provision/process included in an earlier version of the bill considered last Congress. We lobbied for its exclusion and the language was not part of the July 2011 introduced version of the bill. Working in conjunction with NADA, committee members were contacted on Dec. 13 to guard against any attempts to reinstate the language. No effort materialized. As currently constructed, nothing in the bill directly impacts the automobile industry.

S. 1449 was included in S.1813, the omnibus Highway Bill that passed the Senate last month. In the House, jurisdiction over the S.1449 issue is shared between the Transportation and Infrastructure Committee and the Energy and Commerce Committee and is expected to also be addressed within the context of the House Highway Bill.

To date, there is no comparable provision in the bill being drafted. Timing and final resolution regarding it are also uncertain although mid-April may be the target date for House floor action. The current program, which expired March 31, was extended until June 30 by Congress to allow more time for final resolution of a highway bill.

NIADA Legislative Team Update

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NIADA Legislative Team Update

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BY DANI LUNSFORDDANI LUNSFORD IS A NATIONAL SALES AND MARKETING EXECUTIVE WITH SHOWCASE PUBLICATIONS, INC. SHE HAS BEEN IN THE RETAIL AUTOMOTIVE INDUSTRY FOR 14 YEARS, WORKING IN SALES, SERVICE, E-COMMERCE MANAGEMENT AND AS A CONSULTANT TO IT COMPANIES AND DEALER GROUPS. SHE CAN BE REACHED AT [email protected].

Smart Dealers Should Aim Their Ads at Smartphones

Did you know that men aged 30-49 do more mobile shopping than other age groups? That 50 percent of the popular Groupon’s business over the next couple of years will come from mobile devices? That Starbucks has taken more than 3 million micropayment transactions?

A Leger Marketing survey reported one in 10 respondents said they’d rather lose their mother-in-law than their cellphone.

Those trends and figures are not only interesting, they affect mobile shopping for cars and trucks as a whole. Understanding the upcoming trends will help car dealers see how important mobile sites, mobile applications and mobile marketing campaigns will be.

In 2011, mobile auto consumers climbed 60 percent. Used car sales are soaring, and more people are looking to buy thanks to a comfort level they have achieved with the state of the economy.

According to Google/Compete Research, 81 percent of smartphone users access the Internet on their mobile devices, and one of three searches has a local intent. Out of all the mobile shoppers in the world, 17 percent are looking at automotive websites and 53 percent of those end up at a dealership buying a car.

Because shoppers use their mobile phones to search for “stuff” in time of need, you have an opportunity to reach them when they are ready to buy or shop your dealership. According to Go Mobile, adding GPS capability to mobile phones has transformed the phone into a targeted weapon focused on the immediate surroundings.

According to the 2011 Auto Shopper Behavior Study by Google/Compete/R.L. Polk, today’s auto shoppers research and decide faster, use searches to navigate and compare, and expect dealer sites to be helpful.

The study also determined:• Mobile shoppers watch videos to discover

and compare brands. • Some 81 percent of mobile auto shoppers

make a decision within three months. • New car purchasers tend to search for

“Offers” first, followed closely by “Build Your Car,” “Locate a Dealer” and “Search Inventory. ”

• More shoppers than ever are searching inventory on third party sites – 42 percent of them searched “Inventory” first, then “Model Information” (32 percent) and “Trade-In” (29). “Request a Quote” and “Reviews” were next, cited by 22 percent.

• The most frequent research conducted on

mobile phones was comparing features at 55 percent, followed by price comparisons at 47 percent and reading general car and truck information at 44 percent.

• The advertisements cited as most useful by mobile users were online videos at 52 percent, sponsored or paid search engine listings (49 percent) and, surprisingly, newspaper ads at 45 percent.

All that data should speak loudly to car dealers. We must start following shoppers through this complex yet simple path to purchase rather than relying on traditional online destinations alone.

Car dealers need to examine their digital presence and understand navigation is the key to helping auto shoppers do research through many mobile portals.

So here are six things to take to the next level:

GPS-based marketing: Location-based services are mobile marketing platforms dealers can use to engage shoppers and develop promotions.

Dealer apps: A basic app, including inventory, costs about $300 per rooftop, but it’s worth its weight in gold. You can also allow users to accept notifications and send out weekly sales and alerts.

Mobile-friendly websites: A developer can easily add codes to your home page to adjust to tablet or cell sizes, allowing your website to display content quickly and optimize even on a very small screen.

Mobile ad campaigns: Target customers who are looking to fill an immediate need – oil changes, tire rotations, a special of the week, manager’s special or aged inventory on sale.

QR or 2D codes: Incorporate QR codes on all web pages and in newspaper or magazine ads. A QR code is a symbol with an embedded URL. When smartphone users scan it, it drives them to the URL. Some areas to advertise are: browse a website, send an email, make a phone call, Google maps, Foursquare venue, latest tweet, follow us on Facebook, Wi-Fi network inside dealership, or any text or message you want the customer to see.

YouTube channel: According Google/Compete, video ads drive initial interest – online videos ranked as the most useful ad format and a significant influence of brand choices. The last bombshell is that YouTube led two of three shoppers to the car/truck they ended up buying, indicating that YouTube is a leading driver to get

customers to notice your vehicles. The new iPhone has an assistant named Siri.

She finds answers to questions from the user.If a mobile phone user asks, “Where is the

closet dealership?” Siri will deliver a specific answer with directions. She will only deliver one answer.

The problem from a car dealer’s standpoint is she is not a search engine or a database. She will only deliver qualified filtered results. Siri reportedly uses Wikipedia and Yelp, among other websites, as information providers. Each of those sources work differently. Wikipedia provides encyclopedia-style information but can be modified by any user. Yelp is a national review community.

Dealers should make it a point to claim their information on those sources and keep watch on reviews and information regarding their dealership. Many believe Apple’s goal is to move completely away from Google – there are rumors about a partnership with Bing to help power Siri (so make sure your dealership is listed with Bing).

In a study by the Arora Report, 40 percent of Siri users reported no need to search Google. That provides evidence those users changed their habits, and as a result, Google searches could decline as Siri becomes widely available.

The latest trends and statistics indicate the mini-computers we call phones will be at the heart of any and all tasks in the near future, especially auto shopping. That makes a difference for advertising purposes, including the manner in which dealers reach potential customers.

Convenience is king, and phones are becoming the go-to resource in our everyday lives. Today’s users are looking for detailed vehicle information, interesting videos and compelling mobile ads to direct their search for a vehicle.

This is a once-in-a-lifetime generation changer. As smartphones get smarter and consumer expectations rise, the automobile industry needs to offer the services customers are expecting. All dealerships’ advertising needs to be geared toward the mobile phone war.

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After repeated requests from its members, the National Independent Automobile Dealers Association has announced it is entering the 20 Group business.

NIADA CEO Michael Linn announced the NIADA 20 Group program, which will organize and moderate groups of independent auto dealers from around the country to meet and share new ideas and best practices.

Linn said the move is being made after repeated requests from within the group’s membership of nearly 20,000. Dealers have voiced a strong desire to share best practices and operational data between the various member sets.

“NIADA members have historically been a tight-knit group of dealers. Developing a 20 Group platform for them to facilitate ideas and compare operational practices is a natural extension of their close relationships,” Linn said. “Additionally, we have mounting feedback from dealers participating in existing 20 Group models who feel their best interests are being underserved or even ignored. One dealer told me she felt the escalating cost to participate in her current 20 Group was not

worth the combative discussions she endures or the pressure she gets to conform to their benchmarks.

“For 66 years as a nonprofit trade association, NIADA has represented the voice of independent auto dealers and has found ways to help them improve their businesses. I can assure you NIADA and our 20 Group program will always put the needs of our dealers first. We will never sacrifice the quality or service we provide our dealers.”

The NIADA 20 Group program will be under the direction of Joe Lescota, who was recently

introduced as NIADA’s new Director of Dealer Development, effective June 1.

“Even the most successful independent dealers are constantly seeking new ways to improve their businesses,” Lescota said. “They know the slightest change in sales, financing, service or operational policy can have a major impact on their profitability. Our 20 Groups will be a great way for NIADA dealers to stay on track because colleagues will be there to prod, poke and encourage improved performance. The new platform will match dealers of like size, sales volume and revenue mix for maximized compatibility. They will share ideas and best practices and learn from one another regardless of size or geographical region.

“No independent dealer is too large or too small to contribute, learn and benefit from the collaborative dialogue of a 20 Group discussion. Every one of our members is encouraged to participate.”

The first phase of NIADA’s 20 Group format will focus on independent auto retail operations. More information will be available at the NIADA Convention & Expo in June at Caesars Palace in Las Vegas.

JOE LESCOTA

NIADA to Launch New 20 Group Program

THE NIADA 20 GROUP PROGRAM WILL BE UNDER THE DIRECTION OF JOE LESCOTA, WHO WAS RECENTLY INTRODUCED AS NIADA’S NEW DIRECTOR OF DEALER DEVELOPMENT, EFFECTIVE JUNE 1.

N E W 2 0 G R O U P P R O G R A M

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Mike D’Andrea, co-owner of Miracle Motor Mart in Columbus, will represent Ohio at the upcoming NIADA Convention as the state’s 2012 Quality Dealer of the Year.

The former Ohio State football player opened his dealership in 1989 with 40 cars and $150,000 worth of inventory. Now Miracle Motor Mart boasts two locations with a combined 400 cars worth $4.2 million and 46 employees.

D’Andrea said he started working in sales at a local Nissan dealership and “liked it so much I never returned to school.” He served as used car manager, asset manager and new car sales manager before starting his own business.

“We pride ourselves on teamwork, loyalty, ethics and honesty,” he said. “Miracle Motor Mart employees are with us three times longer than the national average for dealership employees.”

D’Andrea added his friend Mark Meadows as a partner in 2007, which led to the opening of the second location.

D’Andrea and Meadows are active in area charities, including the Run the Race Club, St. Paul’s Outreach, Catholic Youth Summer Camp and St. Patrick’s Youth Ministry.

D’Andrea will represent Ohio as a nominee for the National Quality Dealer of the Year Award, which will be presented at the NIADA Convention & Expo in June in Las Vegas.

Congratulations to Ohio Quality Dealer of the Year Mike D’Andrea!

D’Andrea Named 2012 State Quality Dealer

Automotive marketing intelligence firm Polk has announced it is providing Internet lead conversion reporting to Autobytel, provider of third-party auto lead generation, for its dealer and OEM customers.

Autobytel and Polk worked together to create a solution that defines vehicle sales conversion rates for Autobytel auto leads. It includes conversion reporting at a variety of levels, including OEM, vehicle segment type and those leads that are dealer-assigned.

The partnership allows Autobytel to provide transparency in lead quality to its customers and establishes quantifiable metrics for return on investment. It also enables dealers to better understand lost opportunity revenue and identify Internet lead competitors, helping them align their follow-up strategies with customers.

For more information, visit www.polk.com or www.autobytel.com.

Polk Provides Internet Reporting to Autobytel

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Cash Is King in Buy Here-Pay Here

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

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

Cash is not as available as it was this time last year. The good news is it is still available, which isn’t true in some other unfortunate industries. It’s just not as easy to find or secure, not to mention afford, since the rates we enjoyed a year ago are no longer there.

Local banks and credit unions appear

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

The three necessities to securing a line with those sources are patience, persistence and preparation. The days of simply walking into a bank and securing a line of credit on a handshake and a promise to pay are long gone. Local banks and credit unions have learned from the mistakes of the regional and national banks and have become smarter and more sophisticated in their approval process.

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

Persistence is needed because the

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

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

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

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

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

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

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

Having the model is only the first step. Having the discipline to manage to it is the challenge. Without it, a dealer

might as well have the “sell some cars, collect some money” business plan and hold on for dear life – a plan that is not used by successful BHPH dealers.

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

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

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

BY BRENT CARMICHAELEXECUTIVE CONFERENCE MODERATORNCM ASSOCIATES [email protected]

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Warrantech to Administer New NIADA CPO Program

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

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

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

For more information, visit www.experianautomotive.com.

Experian Enhances Its AutoCheck Reports

The NIADA announced its 66th Annual Convention & Expo will be held June 11-14, 2012 – a week earlier than previously scheduled – at Caesars Palace Hotel and Casino in Las Vegas.

NIADA’s showcase event will offer an expanded dealer education program for 2012, including more sessions covering more topics than ever before, as well as an enhanced Expo featuring more companies representing all facets of the automotive industry. Expo exhibit dates are June 12, 13 and 14. The Convention, to be held for the third consecutive year at spectacular Caesars Palace, will kick off with activities beginning on Monday afternoon, June 11.

Online registration is now open at www.niada.com. Rooms at Caesars Palace will be available at the discounted rate of $154 per night.

NIADA’s Annual Convention & Expo provides its members with an opportunity to network with their peers, participate in quality education sessions and gather valuable information they can take back and apply toward their dealerships’ success. Educational offerings will cover topics for both retail and Buy Here-Pay Here dealers. The event is also a gateway for vendors to build and foster relationships with dealers through the Expo, an industry marketplace of top-notch vendors showcasing their products and services and the benefits they can provide to dealers.

NIADA has held its Annual Convention & Expo since 1947 and has continued to flourish as the most sought-after and reputable used motor vehicle industry event for automobile dealers.

NIADA ANNUAL CONVENTION & EXPO SET FOR JUNE 11-14, 2012

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As U.S. troops return from Iraq, no welcome-home parade is planned. More than 6,000 families have lost a

father, mother, son, daughter, brother, sister, aunt, uncle, niece or nephew, and once again many of those families who are left to financially fend for themselves suffer daily because someone they loved died defending our great country and our freedom.

I have heard it said, “But they volunteered and knew what they were getting into.” The fact is that’s true. But the families of these brave American soldiers who died for their love of our country, in a land thousands of miles away, didn’t volunteer to have their loved ones suffer the “ultimate sacrifice.” The sad truth is that most of these families will suffer financial setbacks as a result of their sacrifice.

The OIADA has been blessed over the years to have many members join our

organization, and in recognizing a great need across our country we would like to do our patriotic duty to help these brave families. In October, I received a call from Mark Reis, a music industry professional, and a plan was born.

We at the OIADA are proudly inviting everyone to celebrate your American spirit, to honor those who serve and remember all who have fallen.

Mark has donated three guitars to the OIADA.

One was autographed by legendary guitarist and Rock and Roll Hall of Famer Joe Walsh of the Eagles.

One was autographed by the Red Rocker guitarist and lead vocalist Sammy Hagar and his group, the Wabos.

One was autographed by four-time Entertainer of the Year and Grammy winner

Kenny Chesney.All three of these collector guitars, complete

with letters of authenticity, will be raffled off in an effort to raise money for the OIADA PAC Fund and the Our Sacrifice Foundation, which was formed to provide support to those families who have suffered as a result of the ultimate sacrifice.

Now is your opportunity to aid two wonderful organizations, support military families and have a chance to win one or all three collector guitars, worth thousands of dollars each. Tickets are on sale for $5 each or five for $20. The winner will be announced Aug.10 at the OIADA Golf Tournament. Entrants need not be present to win.

To purchase tickets with any major credit card call the OIADA offices at 614-863-5800, return the order form on page 20 or visit our website at www.ohiada.org

GUITAR RAFFLE

OUR SACRIFICECHARITYFUNDRAISER

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Remember: Experience doesn’t mean that you know how to do it …. correctly!

Approximately 8 of 10 dealers violate the following laws and

compliance requirements and don’t realize it until it’s too late:

(1) Adverse Action Compliance (2) Privacy Laws (3) OFAC Compliance (4) Risk-Based Pricing (5) Red Flag Rule (6) Safeguard Rule (7) Gramm Leach Bliley Act (8) Selling Out Of Trust (9) Power of Attorney Compliance (10) Truth In Lending (11) Temp Tag Compliance (12) Consignment Compliance (13) IRS Form 8300 Compliance (14) FTC Buyers Guides (15) Spot Delivery (16) Ohio Deposit Rule (17) Written Limited Warranty (18) Repossession Violation (19) GPS Disclosure (20) Illegal Fees (21) Odometer Disclosures (22) UDAP Statutes (23) TDR Compliance (24) Payroll Violations (25)Paying Bird Dog Fees (26)Title Compliance (27) Temp Tag Compliance (28) Doc Fees (29) Forms Compliance (30) IRS Rules

Every year more than 800 used car dealers go out of business in the state of Ohio, and the majority of these dealers violated one or more of the laws listed and didn’t know they did anything wrong until it was too late. As a licensed dealer you are required by law to comply with many laws you might not be aware of, and violation of any of these laws can result in:

a) Class-action lawsuits b) Fines of as much as $16,000 per vehicle displayed on your lot c) Suspension and/or revocation of your license

THESE WORKSHOPS ARE HELD QUARTERLY: They will last eight hours and lunch will be included for all attendees. The price for this workshop is $129 per person. It includes a 500-page reference manual, and everything listed above will be addressed at this workshop – and much more. Now the decision is up to you, but if you violate the law this time what excuse will you use? Get a $10 credit when you mention this publication.

Remember! You can’t tell a judge you don’t have time to attend a hearing. To check the dates this is being offered, go to www.ohiada.org and check the Event Calendar. Or simply call the offices of the OIADA at 614-863-5800 and get registered today.

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Congratulations to the following independent dealerships for being nominated for this year’s NIADA/Manheim National Community Service Award.

Independent dealerships across the nation contribute to their communities every day but often go unrecognized for their community support. Many participate through special projects while others provide sponsorships or financial contributions, or lead innovative community improvement activities.

The winning dealership will be named June 13 at the Leadership Awards Banquet during the National Independent Automobile Dealers Association Convention and Expo in Las Vegas. Manheim representatives will present the award along with a $5,000 check payable to the dealership’s chosen charity.

Community Service Award Nominees

Gas Price Scenario $4.00 $4.50 $5.00 Segment % $ % $ % $ Intermediate Compact 1.7% $179 6.0% $638 10.4% $1,102Intermediate Midsize 0.8% $103 2.1% $262 1.8% $233Near Luxury 0.3% $69 -0.2% -$38 -3.0% -$650Large Car 0.3% $39 -0.3% -$34 -3.2% -$415Compact Utility -0.3% -$37 -2.8% -$408 -8.7% -$1,272Luxury Midsize -0.3% -$73 -2.9% -$751 -9.0% -$2,313Midsize Van -0.4% -$49 -3.2% -$453 -9.7% -$1,355Midsize Utility -1.0% -$188 -6.4% -$1,144 -16.5% -$2,959Large Pickup -1.5% -$275 -8.6% -$1,540 -21.3% -$3,817Large SUV -1.6% -$387 -8.9% -$2,148 -22.0% -$5,298

NADA Used Car Guide Chart Impact of the Rising Cost of Gas on Used Vehicle PricesExpected change in used vehicle price under certain gas price scenarios

Source: NADA Used Car Guide

MEMBER APPLICATION

THE 2012 NOMINEES ARE:Ertle Brothers Discount Auto, Sterling, Colo.Noegel’s Auto Sales, Starke, Fla.Southeast Car Agency, Inc., Gainesville, Fla.Matthews Motors, Clayton, N.C.A-1 Auto Sales of Dulles, Sterling, Va.Reel’s Auto Sales, Orwell, OhioBourne’s Auto Center, South Easton, Mass.

Fran Morelli Sales & Service, Brockway, Pa.Ed Holewiak’s Auto Sales, Somerset, Mass.Premier Motors-Leasing, Inc., Hardin, Ky.Ron’s Auto Sales, Inc., Lawrenceville, Ga.M&F Auto Sales, Albuquerque, N.M.Alamo Valley Auto Sales, Kalamazoo, Mich.South Tacoma Auto Sales, Inc., Tacoma, Wash.Fairly Reliable Bob’s, Inc., Boise, Idaho

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

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

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

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

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

It seems consumer finance complaints can originate in at least three ways: • You did something wrong and the customer complains about it.• The customer didn’t understand the agreement and thinks you did something wrong as a result. • You did everything right, but the customer has unreasonable expectations and complains.

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

You did something wrongCustomers should complain if you misrepresent, overstate or lie about the products and services

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

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

Customer didn’t understand Some reported court cases I’ve read seem to be based on a lack of consumer understanding that

spun out of control. The dealer didn’t necessarily do anything wrong, but the consumer seemed surprised at having to pay for cover insurance, or the gap amount, or having a vehicle repossessed, or any of a number of other predictable outcomes. The financing documents generally cover the fees, responsibilities and consequences, but the consumer didn’t read or understand them until long after the documents were signed.

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

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

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

Customer is unreasonableThere will always be unreasonable customers whose expectations far exceed the terms of your sales

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

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

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

Chip Zyvoloski is a senior attorney for indirect lending at Wolters Kluwer Financial Services.

For more information, visit www.wolterskluwerfs.com/indirect.

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