ohio independent dealer

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ALSO Preparing for the FuturePLUS Marketing Your Vehicles Beyond the Dealership

2010 OIADA ANNUAL EXPO

PRSRT StandardU.S. Postage

PAIDDALLAS, TEXASPermit No. 2079

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

INDEPENDENT DEALER

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T H E I N D E P E N D E N T D E A L E R JANUARY/FEBRUARY 2011

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

INSIDE

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 DEALERSASSOCIATION SERVICES CORPORATION, 2521 BROWN BLVD., ARLINGTON, TX 76006-5203; PHONE (817) 640-3838. PERIODICALS POSTAGE PAID AT DALLAS, TX AND AT ADDITIONAL OFFICES. POSTMASTER: SEND ADDRESS CHANGES TO NIADA STATE PUBLICATIONS, 2521 BROWN BLVD., ARLINGTON, TX 76006-5203. THE STATEMENTS AND OPINIONS EXPRESSED HEREIN ARE THOSE OF THE INDIVID-UAL 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 ASSO-CIATION. LIKEWISE, THE APPEARANCE OF ADVERTISERS, OR THEIR IDENTIFICATION AS MEMBERS OF OIADA OR NIADA, DOES NOT CONSTITUTE AN ENDORSEMENT OF THE PROD-UCTS OR SERVICES FEATURED. COPYRIGHT 2010 BY NIADA SERVICES, INC. ALL RIGHTS RESERVED. STATE MAGAZINE MGR./SALES Troy Graff • [email protected] Mike Harbour • [email protected] MGR. Jacob Kerns • [email protected]/PRODUCTION MGR. Christy Haynes • [email protected] Nieman Printing

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MAGAZINECONTENTS

ADVERTISERSINDEXADESA............................................................11AutoTrader.com ..................................Back CoverCars.com ...........................................................9Columbus Fair Auto Auction ...............................5Corry Auto Dealers Exchange ............................7Manheim.com ..........................Inside Front CoverProgressive Dealer Solutions ............................18Smart Auction ...........................Inside Back CoverUnited Acceptance ..........................................13Western General / Protective .............................3

6 2010 OIADA Annual Expo 8 Preparing for the Future 15 Marketing Your Vehicles Beyond

the Dealership 16 OIADA Member Benefits

Manheim, the world’s largest provider of

vehicle remarketing services, cares about its employees, the environment and the communities it serves. From fund raising drives to tutoring kids after school to supporting long-term conservation efforts, Manheim and its employees are dedicated to giving back to their communities and knows independent vehicle dealerships across the country share in this commitment.

For the first time this year, Manheim is recognizing and honoring those dealerships by awarding the 2011 National Manheim Community Service Award at the 65th NIADA Annual Convention and Expo. For information on how to nominate and to obtain more in-depth information, please contact Georgia Brown, NIADA director of education, at 817-640-3838.

NIADA/Manheim Community Service Award

Past ChairmanThomas SmithSmittys’ Auto Sales668 S. 7th StreetGreenfield, OH 45123Tel: 937-981-4317Fax: 937-481-9317Cell: 937-218-3658 Email: [email protected]

Chairman Thomas OnestiCar PortPO Box 9943Youngstown, OH 44513Tel: 330-726-6633Fax: 330-726-2633Cell: 330-565-6833Email: [email protected]

President Jay NorthJay North LLC501 E. Columbia StreetSpringfield, OH 45503Tel: 937-325-3748Fax: 937-398-1075Cell: 937-206-0575Email: [email protected]

Vice President Ron HausRon Haus Auto Group, Inc.4141 Boardman Canfield RoadCanfield, Oh 44406 Tel: 330-702-4287Fax: 330-627-9777Cell: 330-565-4422Email: [email protected]

Secretary Daniel ReelReel’s Auto Sales LLC547 East Main StreetOrwell, OH 44076Tel: 440-437-5893Fax: 440-437-5758Cell: 440-319-1247Email: [email protected]

Treasurer Mark MeadowsMiracle Motor Mart2380 Morse RoadColumbus, OH 43229Tel: 614-437-0037Fax: 614-337-1063Cell: 614-348-6503Email: [email protected]

Executive Director James R. Mitchell,OIADAPO Box 216Brice, OH 43109Tel: 614-436-3393Fax: 614-916-3023Email: [email protected]

Jeff RaderRader Car Company1429 Schrock RoadColumbus, OH 43229Tel: 614-888-3111Fax: 614-888-3811Cell: 614-582-1822Email: [email protected]

John RemyRemy’s Auto Group58905 US 50McArthur, OH 45651Tel: 740-596-4694Fax: 740-740-596-5526Cell: 740-395-4214Email: [email protected]

Robert VaughanVaughan Motor Car Company808 Parsons AvenueColumbus, OH 43206Tel: 614-444-7839Fax: 614-444-1133Cell: 614-565-5682Email: [email protected]

Ty WhittenburgCarMax Auto Superstores2700 Farmers Dr.Columbus, OH 43235Tel: 614-799-8077Fax: 614-799-6547Cell: 614-493-8294Email: Manager_7176- [email protected]

Terry ReinekeRino’s Auto Sales Inc1610 Industrial PkwyCelina, OH 45822Tel: 419-586-6161Fax: 419-586-8700Cell: 419-305-4009Email: [email protected]

Robert FaheyFairdale Auto Sales6209 Glenn Rd.Cambridge, OH 43725Tel: 740-432-4185 Fax: 740-435-0765Cell: 740-607-4011Email: [email protected]

George PolceJenroc Auto, Inc.101 N. Tuscarawas Ave Dover, OH 44622Tel: 330-364-2525Fax: 330-364-6726Cell: 330-268-4724Email: [email protected]

Shawn R. PayneAutos Direct Online, Inc5212 Mills Industrial ParkwayNorth Ridgeville, OH 44039Tel: 440-327-9780Fax: 440-815-2100Cell: 216-219-5926Email: [email protected]

Lauren Bowden ThomasBowden Motors1426 South Main StreetBellfontaine, OH 43311Tel: 937-593-0014Fax: 937-593-0514Cell: 914-216-4994Email: [email protected]

Randy GriesdornComplete Automotive Repair & Sales, Inc.123 East Main StreetColdwater, OH 45828Tel: 419-678-3969Fax: 419-678-3575Cell: 419-852-331Email: [email protected]

BOARD OF DIRECTORS

FOR INFORMATION ON HOW TO BECOME A MEMBER CONTACT JAMES R. MITCHELL EXECUTIVE DIRECTOR

OIADA • 2040 BRICE ROAD • SUITE #110 REYNOLDSBURG, OH 43068

PO BOX 216 • BRICE, OH 43109-0216

OFFICE: 614-863-5800 • CELL: 614-436-3393 • FAX: [email protected] • WWW.OHIADA.ORG

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What DRIVESConsumers Toward Certain Models?

Given a choice of five fac-tors, 37 percent of con-sumers indicated theirdecision to buy a vehiclewas most heavily affectedby the model’s quality, ac-cording to a recent CarMaxsurvey.

The poll, done via tele-phone, posed the followingquestion to respondents:“Which of the following factorsmost influences your car-buy-ing decision?”

Following quality, the sec-ond most-cited factor wassafety, as 28 percent countedit as their top choice. Twenty-two percent claimed thebiggest influence was safety,while environmental or greenfactors were cited by 6 percentof respondents.

Four percent pointed to thevehicle’s resale value.

Breaking it down by gender,43 percent of men said qualitywas most important, while 34percent said the same. Qualitywas No. 1 for both males andfemales.

Interestingly enough, this isa change from what womenclaimed was the top factor ayear ago, when they pointedto price. That particular surveywas done online, officialsnoted.

“We want consumers to getthe most for their money, andbuying a used vehicle is agreat way to get more car forless,” stated Rod Baker, who isvice president of service oper-ations for the Phoenix region.

“It’s why we put our carsthrough a rigorous CertifiedQuality Inspection, checkingmore than 125 points to meetour high-quality standards,” headded.

Ipsos Public Affairs did thepolling for CarMax, contactingover 1,000 adults in the U.S.This was done between Aug.19 and Aug. 22. Just threeconsumers did not respond.

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The National Auto Auction Association (NAAA) is the leading remarketer of used vehicles in the world. NAAA member auctions sell about nine million ve-hicles per year through the physical auction lanes and online. Over the past several years, NAAA has been focused on de-veloping consistent standards and practices to be applied at all member auctions to enable customers to buy with more confi-dence from any auction they choose, whether they buy in-lane or online. The ultimate goals are to improve buyers overall auction experience and increase vehicle residuals.

In connection with this renewed focus on standards, the Auction Standards Committee (ASC) was formed. It’s com-prised of representatives from Manheim, ADESA, ServNet and independent auctions. Because of the complexity of the issues and their importance to the industry, the ASC also en-gages an outside industry consultant to assist in the develop-ment of policy. The ASC also works hand in hand with other industry associations to help to ensure industry acceptance and endorsement of the standards and policies that are developed.

The first area of focus for the ASC was the development of a revised arbitration policy. The arbitration standard was com-pleted and approved by the NAAA board in October 2009 and became effective on January 1. This policy has been univer-sally endorsed and adopted by NAAA member auctions and the rest of the vehicle remarketing industry.

The next area of focus was the development of a standard wholesale certification standard. The ASC determined al-though buyers believed there was a definite value to whole-sale certification, they were confused by the large number of programs and could not define them or quantify their value. In addition, the myriad of different policies created operational inefficiencies at the auction level. The ASC was charged with developing a standard certification program that combined the major elements of all the separate policies while maintain-ing individual company branding. After extensive study, the ASC – working with Agility Consulting and the IARA – de-veloped the NAAA Certification Standard, approved by the NAAA board in September. This standard has been endorsed by IARA and will become effective on Jan. 1, 2011. The mar-keting materials for this program are being prepared and will be available soon.

The ASC also has developed a process to receive comments on all NAAA standards so they can continually be updated. The committee will continue to look at other areas of stan-dardization including vehicle grading.

As the leader in vehicle remarketing, NAAA is committed to the continued development of consistent auction standards and practices in order to provide the best possible service to the dealers.

All NIADA members and dealers seeking full detail on na-tional vehicle condition standards in place at NAAA auctions beginning next month should visit www.NAAA.com and click on Standards.

David Angelicchio is chairman of the board and past president of NAAA, which represents more than 317 auto auctions both domes-tic and international, with more than 8.9 million units sold each year. He is the general manager of the Pittsburgh (Pa.) Independent Auto Auction.

Standards to Make Auctions Better for CustomersBy David Angelicchio

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A new year brings new goals, and new hopes for improved sales, more

lenders, and more profits for everyone. As with any change in the marketplace, dealerships must prepare their team to meet the current demands of the marketplace.

SALES: From all I’ve read, the customers are back. People are once again going to the dealerships to replace their old vehicles with smaller, more fuel-efficient models, and some are adding to their family fleet so they can meet the weather challenges. The great news is the customers are back from their long hiatus.

What are they finding at the dealerships? The customers are finding store personnel stretched, and the once-many choices of inventory they enjoyed in the past now cut. The product selection step in the selling cycle will need to stress selling what you see in front of you. During the past few years, those dealerships that survived have learned how to manage inventory more effectively, as well as turning it more quickly. They’ve also learned how to operate in a lean environment.

PERSONNEL: Plan on hiring sales personnel and educating them. Personnel are stretched to the point of having job descriptions blurred. I think the time is coming to redefine the roles and create a work environment where they can focus upon the job at hand and cease worrying about what additional items will be asked of them. Multitasking can become dysfunctional after awhile.

Sales processes while basic never change, I find each dealership has a specific culture and the process often must be modified to reflect the culture so management will support the process after the educator leaves.

Education is not a one-time event. Plan a continuous relationship with your education resource. Every process should be monitored, measured, and modified as required. After the modifications have been made, the new process needs to be re-implemented, monitored and the producers need to be held accountable.

LENDERS: The industry needs more of them, and we need them to approve loans. Dealerships will need to continue to seek local credit unions and other local lenders to approve consumer financing. Credit unions may not be use to the independent dealerships, but this is an opportunity to put your best face forward and sell yourself and your business acumen to the lenders.

I was asked how important relationships with lenders are; they’re critical to your success. Lenders again wish to become a close business advisor to your operation. They’re going to want a piece of every banking transaction you have; wholesale, retail, merchant services, checkings and savings, personal and business.

When you think of lenders, what was old is now new again. Keep your ears to the wind; contact every source prospect for lenders at every opportunity.

COMPLIANCE ISSUES: Spend the time it takes to create a binder with your policies and procedures regarding the plethora of federal regulations we must meet. The following is a beginning checklist for those policies and procedures:

With the creation of the new credit protection agency, I think we’ll begin to see enforcement of the rules and regulations and perhaps some additional items will be added to the list of required written documentation.

Review your existing policies and verify what’s written is what’s actually happening. If not, then change either the policies or your practices. Once a policy and procedure is placed in writing, the company is bound by the words it writes.

Conduct self-audits as written in the policies and procedures. Document the education content and the timing of the education of new hires. Document any breaches of security, or failure to adhere to the company policies.

As you know, I am not an attorney and this is not to be used as legal advice. These words are meant to be educational only. Please consult your legal counsel for all legal issues.

The future is once again bright. Prepare for success.

______ DISPOSAL RULE P______ SAFE GUARD RULE P______ OFAC SDN LIST P______ RED FLAG RULE P______ ADDRESS DISCREPANCY RULE P______ RISK-BASED PRICING RULE P______ ADVERSE ACTION LETTERS P

FutureBy Jan Kelly, president of Kelly Enterprises

Jan Kelly is an educator and consultant, international convention speaker and writes frequently for industry publications. For information about educational venues or joining our F&I 20 Group, call 800-336-4275 or visit www.JLKelly.com.

P R E PA R I N G F O R T H E

ONCE A POLICY AND PROCEDURE IS PLACED

IN WRITING, THE COMPANY IS BOUND

BY THE WORDS IT WRITES.

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P R E PA R I N G F O R T H E

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“Wall Street/Consumer” Financial Services Reform BillOn November 17, NIADA General Counsel Keith Whann and Federal Advocates met

with senior staff of the FTC as a follow-up to the September 21 meeting. A series of questions had been provided to NIADA for discussion at the November 17 session. At the meeting, Keith walked them through the process of buying a car and provided samples of purchasing documents. The FTC is in the middle of formulating questions for public comment regarding various aspects of the auto industry as it relates to consumers. FTC staff was not forthcoming as to the timing of that effort, its scope and its intended purpose. The results of the November 17 meeting were reported to NIADA’s Legislative Committee by conference call on November 23. To review, on September 21, Keith Whann and Federal Advocates met with FTC staff regarding implementation of the above bill and its impact on the auto industry. Following discussion of various issues, with Keith Whann leading the discussion and answering various questions as to how the auto industry works (including the auction practice itself), it was decided to schedule a half-day session to allow for a more detailed discussion of issues (i.e., the November 17 session). To review further, on July 22, President Obama signed into law the so-called Wall Street Reform Bill. As reported previously, the new law exempts some auto dealers from increased oversight with respect to dealer-assisted financing. To get to that result, advocacy activities included numerous meetings, strategy phone conference calls, letters, talking points, legislative alerts, etc. The law does grant increased powers to the FTC regarding dealer oversight. Also, it requires coordination with the Department of Defense to ensure service members and their families are treated fairly by automobile dealers.

Senate Motor Vehicle Safety Act of 2010NIADA is reviewing this bill pending possible Senate floor action in December. To

review, on June 9, the Senate Committee on Commerce, Science and Transportation marked up and order reported S.3302, the so-called Toyota Bill. In earlier drafts of the bill and just prior to markup, language was included (section 310) which would have specified that a dealer may not sell or lease a used passenger motor vehicle (both wholesale and retail sales) until the dealer first notifies the purchaser or lessee in writing of any recall notices. Working primarily with Sen. John Thune, R-S.D., his staff (Brenden Plack), and committee staff (Alex Hoehn-Saric and Chris Herndon), and as a result of concern raised by Whann and his proposed suggestion, language was included in the final reported version of the bill exempting wholesale transactions from the section’s application. While an initial victory, the remaining provision is still very troublesome and we continue to advocate on behalf of NIADA’s interest pending further action on the Senate bill as well as a possible House companion bill. The latest Senate draft and the companion House bill (H.R. 5381) are being reviewed by NIADA.

Small Business Jobs and Credit Act of 2010On September 23, the House passed the Senate-passed bill, which includes an increase

in the amount the Small Business Administration’s (SBA) Dealer Floor Plan Financing program can guarantee. This permits the SBA to guarantee bank and finance company loans up to $5 million, which should help, the committee believes, expand dealer access to floorplan lines of credit. We worked with Louisiana Democrat Sen. Mary Landrieu’s committee and personal staff, in conjunction with others, on this. This bill may be the subject of subsequent meetings with the Hill and the SBA on how the program really works.

White House Reform RequestOn September 23 and September 29, Federal Advocates was contacted by the White

House, which is still trying to organize and schedule a meeting to include “people who are working to set up the CFPB.” This meeting is in response to a letter sent by NIADA to President Obama requesting “the opportunity to work with you to reform our industry in common-sense ways that achieve real safeguards for consumers, that promote accountability and transparency, and that work.”

Department of DefenseRegarding the issue of “how to ensure that service members and their families are treated

fairly by automobile dealers,” Keith Whann and Federal Advocates also met on September 21 with the Defense Department’s Frank Emery in the Office of Personal Finance, Family Policy Outreach Directorate. Whann relayed a specific example of how he helped a service member at Fort Bragg with an automobile situation, working with the JAG and others. He also talked about his plan for a special program to teach dealers on how to deal fairly with service members and their families. The DOD continues to remain interested in looking for opportunities where Whann could lend his expertise. Details are to be finalized at a later date.

Federal Advocates

January 2011 Lobbying

Report

FEDERAL ADVOCATES IS NIADA’S GOVERNMENTAL

ADVOCACY PARTNER. To read past lobbying reports, visit http://www.niada.com/legislative_and_legal.php

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BHPH CHOOSING YOUR FINANCING PATH By Stephanie Patrick

The struggling economy, a troubled housing market and skyrocketing car and truck prices were all factors in Daryl Spear’s decision to offer Buy Here-Pay Here (BHPH) at his new dealership.

His base clientele was the working poor. They had low-wage jobs and damaged credit histories, but they needed cars and wanted reliable, pre-owned General Motors vehicles to transport them to their jobs safely without breaking their families’ already-tight budgets with high repair bills.

Spear’s Auto Sales moved to a larger location in 2009 and there are a few Toyota, Honda, Saab and Subaru vehicles sold alongside GMs these days, but the Spokane Valley, Wash., dealership’s business model and philosophy remains largely unchanged nearly 28 years later.

“When people are down with economic woes, it’s great to be able to give them the chance to start over with us and build back their finances,” said Courtney Spear, Daryl’s daughter, who took the reins as the dealership’s president in 2004 when her father retired.

“People just want a chance, and they can be very loyal customers if you put trust in them.”

The dealership has second- and third-generation return customers to prove the late Spear’s business decision successful. But establishing BHPH operations and making them work in the long-term require much

more, said his daughter and other BHPH veterans.

Build a well-planned cash forecast to provide an understanding of how much money you’ll need during the first 24 to 36 months to operate a business that often caters to frazzled single moms, overworked factory workers and tired waitresses all struggling to afford reliable transportation, said Chris Leedom, founder and president of The Leedom Group, a Sarasota, Fla.-based consultancy specializing in pre-owned car sales, special finance and BHPH.

“The single-biggest mistake that somebody makes is they say, especially if they are already a dealer, ‘How complicated can this be? I’m selling cars,’” said Leedom, who owns several BHPH dealerships. “Even in 25 months to three years, a dealership can consume as much as $1 million in cash.

“A lot of people miscalculate how much cash it’s going to take them as a dealer.”

Leedom said both those entering BHPH for the first time in 2011 and BHPH veterans must maintain Excel spreadsheets monthly. That way, they understand the cash demands

of BHPH and effectively can develop cash forecasts and their own business models.

Leedom’s firm counsels about 150 new dealers and non-dealers each year, ranging from cardiologists to certified public accountants, since 1995.

“We typically tell them that if they don’t

have readily available at least $500,000 or $750,000 of working capital, and they can’t see in the first 12 months of operation where they have that at their availability not where they can go out and borrow it--- they are probably going down the wrong path,” he said.

“You might call that the price of admission. If you don’t have $750,000, which is pretty much the price of admission on a new start up, you’re probably pursuing the wrong business opportunity.”

Leedom said existing dealers should set aside $250,000-$500,000.

Even automotive industry veterans often fail to factor financial realities in BHPH situations, he said. In an average BHPH scenario, the customer may pay $500-$1,000 down, but that doesn’t cover costs associated with reconditioning the vehicle or taxes; so, the real cost is likely more than $3,000 per vehicle.

With the typical BHPH customer paying about $300 per month loan payments, if paying as agreed, it takes nearly a year to recoup costs. Multiply that by 25 units, and it’s nearly $1 million not including overhead costs of running any store.

The flipside is BHPH helps dealerships in slow sales months because they can expect previous customers’ loan payments each month. And as long as dealers are cognizant of the cash considerations, Leedom said BHPH-only models are easier for new dealerships to

“THE SINGLE-BIGGEST MISTAKE THAT SOMEBODY MAKES IS THEY SAY, ESPECIALLY

IF THEY ARE ALREADY A DEALER, ‘HOW COMPLICATED CAN THIS BE? I’M SELLING CARS,’” SAID LEEDOM, WHO OWNS SEVERAL BHPH DEALERSHIPS. “EVEN IN 25 MONTHS TO

THREE YEARS, A DEALERSHIP CAN CONSUME AS MUCH AS $1 MILLION IN CASH.

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adopt when the store is opened.“The advantage is now all of your inventory,

all of your marketing and your entire business effort, is narrowly focused on one type of business,” he said. “You are strictly trying to attract customers (who really) need financing for vehicles, and you can craft your marketing that way.

“Where it becomes difficult is if you are trying to become all things to all people. It can be challenging to attract the Buy Here-Pay Here customer who requires financing and the same time try to sell me a 2-year-old Chevy Tahoe for $22,000...you are probably not going to be able to carry that type inventory.

“There are two completely different marketing paths there.”

Ken’s Kars, which opened in Dayton, Ohio, in the 1940s, offers pre-owned vehicles that range from $2,000 Chevy Cavaliers to $30,000 Chevy Tahoes. But, third-generation owner Ken Smiley said the dealership is moving away from its long tradition of offering BHPH-only loans.

Smiley said most cars are too expensive to finance via BHPH these days, and the Cash for Clunkers program now has too many new car dealers keeping more of their used vehicles and purchasing additional used units at auctions.

Ken’s Kars sells 15-20 vehicles each month under BHPH with 18-month terms, compared to about 60 vehicles per month five years ago.

“Typically, I try to only BHPH finance cars under $9,000,” he said. “I also stick with American cars, such as the smaller SUVs, Bonnevilles and Chevy Impalas because they last longer and they don’t break down as often.

“Most of the Buy Here-Pay Here that goes bad is because the car breaks down. If the car breaks down, the customer just gives it back; (the customer) doesn’t have any remorse because they are going to run across town and buy something from someone else.”

The dealership’s revenue was good when offering more BHPH, but losses mounted when the housing market started to fall apart a few years ago. The vehicle repossession rate reached 20 percent, but now it’s down to 2 percent or less because Smiley chooses his loan recipients more carefully and sends others to subprime lenders.

“My best advice is not to do Buy Here-Pay Here right now,” he said. “If you are, proper screening of the customers is most important because people’s credit situations are so bad; it’s a great time to find customers but if they can breathe, they can get financed.

“I have people with multiple bankruptcies

that I can get financed through subprime companies. To me, it seems crazy to put your money out (with BHPH loans) when you can make good profits through a subprime company.”

There’s still a need for financing, but some people asking for BHPH now have gotten to the point where they haven’t paid any bills, he said. In addition, gone are the days when a 600 or higher credit score is needed.

“Now, you are looking at 450s and you’re getting them financed through the banks,” Smiley said.

He and Leedom said customers have grown to expect “more cars” for their money, a trend that has most BHPH dealers increasing the average cash value of the vehicles on their lots. Loans for BHPH are typically between $5,000 and $10,000, and Smiley is increasing the quality and average price of his vehicles to compete with new car dealers in his area.

“There’s huge profit in (BHPH), but banks are realizing that, too,” Smiley said. “If they can get somebody with a couple credit dings, they are going to jump all over them at 25 percent interest; that’s what they are doing.”

He recently sold a car to a woman with a 490 credit score, who was bank-approved for a $15,000-$16,000 car.

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“I don’t want to lend her a $15,000 car,” Smiley said. “You have to get the money collected, and it takes you forever to get it collected.”

Casey Skapik, Smiley’s cousin, understands the frustration. While he runs Keowee Auto Sales in Dayton as a more traditional BHPH operation, the former banker considers pre-owned car sales to be more finance-oriented than sales-oriented.

Increased government regulations and the shortage of affordable cars to sell have him considering offering service contracts and insurance products to generate more revenue in 2011. The 65-year old, family owned dealership sells 15-20 cars a month, and the average price is about $7,000.

“I could sell three times more cars than I do, but I would have 10 times more headaches,” Skapik said. “I tend to be more selective who I will sell to.”

He said dealers need to look for signs of financial stability, such as steady jobs and stable housing or rental histories. Skapik requires BHPH customers to provide, on average, a 22-percent down payment and offers 30-month terms.

“There are a lot of people who come in with

$400 or $500 for a down payment but if you let them drive away, you’ll have that car back in a few months because they can’t afford it,” he said. “And they aren’t as committed to the car because they only had $400-$500 invested in it, where my average customer has $1,200-$1,400 in it; they are going to be more attentive to making the payments.”

Keowee’s repossession rate is about 10 percent. Meanwhile, the dealership has a large number of return customers who purchase 1997-2004 vehicles such as Buick Park Avenues and LeSabres, Chevy Impalas, Tahoes and Suburbans, as well Dodge Durangos.

Each dealer also develops a few unwritten rules to protect the dealership’s best interest.

Smiley avoids BHPH loans to the younger crowd and home health nurses, whose jobs often have them traveling to new communities and make them more difficult to track. Leedom’s Florida dealerships opt not to loan to anyone without a Florida driver’s license because that state’s population is so transient.

“Generally, you need to avoid people who are in your area less than six months or a year,” Leedom said. “They are the ones most likely to leave.”

In addition, a BHPH dealer must be flexible, said Spear, whose dealership also began dabbling in non-BHPH finance options a few months ago. Even well-intentioned customers have financial disasters affect their abilities to pay their loans, and each late-paying situation should be handled with respect and consideration.

“Our business is tough right now in general, but so is everyone else’s business,” she said. “We have to remember that because our buy here pay here customers really do need us.”

The dealership has about 60 cars on its lot at any time and records about five repossessions in a month, and customers can get them back if they pay their accounts. The repossession rate decreased steadily as the dealership increased the value of its vehicles, selling them for $5000-$14,000.

Spear still wants to sell less expensive cars, those in the $3,999-$5,000 range without salvage titles, because there’s customer demand. However, like the many other dealers nationwide, she can’t find enough now.

“You can’t just go after the quick buck,” she said. “If you get into car sales, it’s because you like people; if you get into Buy Here-Pay Here, it’s because you care about people.”

BHPH continued FROM PAGE 13

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JANUARY/FEBRUARY 2011 T H E I N D E P E N D E N T D E A L E Rw w w . o h i a d a . o r g

MEMBERSHIP APPLICATION ENDENT AUTOMOBILE DEALERS ASSOHIO INDEP OCIATION

Business Name: _______________________________________________ License Number ______________ Contact Name: ________________________________________________________________________________ Address _______________________________________________ City _____________ ST ______ Zip _______ Tel: _______________________ Fax _____________________________ Email__________________________

Type of Business: Retail_____ Wholesale_____ BHPH______ Lease_____ Lease to Own ______ Service ______ (Check all that apply) Average monthly inventory: _________ Do You Have a Floor Plan: Yes No

Number of Employees: ______________

Number of years in business: _________

Do you have a Service Department: Yes No

Do you have a Parts Department: Yes No

Do you have an F & I Department: Yes No

Average monthly sales: 1‐10 11‐20 21‐30 31‐50 50‐100 100 +

Do you Sell: o Vehicles 1 to 7 years old Yes_____ No_____

Vehicles older than 7 years Yes_____ No_____ oService Contracts Yes_____ No_____ oGap Waiver Yes_____ No_____ o

it is important to me to be recognized as a professional! Enclosed are my annual dues of $295.00

This information will be used to compile data for use in developing a competitive insurance program specifically designed for members of the OIADA.

Signed: ____________________________________________________ Date: _________________ YES to make sure

Membership dues are deductible for federal income tax es as ordinary and necessary business expenses.

my business has all the advantages OIADA provides to put me at the forefront of my profession. By completing this form, I am consenting and giving OIADA, its affiliates and subsidiaries, my permission to contact me and provide information to me at the mailing, email address, fax and phone numbers herein listed which I have provided.

X

Mail to: OIADA Membership Department * 2040 Brice Road * Suite 110 * Reynoldsburg, Ohio 43068 Phone: 614‐863‐5800 Fax to: 614‐863‐5801

purpos

(They are not deductible as charitable contributions)

Visit us at: www.ohiada.org

15

In today’s digital world, it is becom-ing increasingly challenging for deal-ers to drive car shoppers from online browsing into their dealerships. It is also growing increasingly important for dealers to widen their reach beyond prospective customers in their own backyards.

To find success in today’s changing market, dealers need to broaden their reach and build relationships with consumers who may be hun-dreds of miles away. Nearly every customer con-sidering an automotive purchase now turns on-line first to research, find and even buy. To reach those customers, many dealers take advantage of third-party automotive websites, such as eBay Motors, to promote their inventories and services to be introduced to a broader range of potential customers.

According to the 2010 J.D. Power and Asso-ciates Used Vehicles Market Report, 68 percent of used vehicle buyers use the Internet in their shopping process. This is an increase of five per-cent from 2009. Online classified ad use to shop for used vehicles has increased to 51 percent, up from 41 percent in 2006. Among the online re-sources customers use in their shopping process, independent automotive websites, such as ebay-motors.com, receive more visitors than dealer websites.

Marketing your vehicle inventory, parts and your dealership on the Internet requires new ways to establish the same reputation and trust it takes to get consumers on the showroom floor. Build awareness. When you want to reach customers in your hometown, you work hard to let them know you’re there. Billboards, commercials, classified advertisements or a combination of these are of-ten used. The same premise remains true when marketing to online consumers.

When you want consumers to visit your virtu-al showroom, dealers need to pay close attention to search engine optimization (SEO). Search en-gines such as Google, Yahoo and Bing regularly visit websites with automated tools to index key words and phrases consumers often use when searching. To optimize your listings so the search engines can match your terms to what consumers are searching for, it is important you use every-day words and phrases that consumers are likely to type into a search. This way, your listings are more likely to appear in searches and more likely to be noticed by more potential buyers.

Search engine optimization can help a deal-ership reach new customers during the consid-eration and research phase and also to build a loyal customer base that will return to your site or come to your dealership when they are ready to make a purchase. eBay Motors regularly uses search to drive more than 14.8 million unique visitors – and potential buyers, looking for new and used vehicles, parts, accessories and services – each month to its website.

Show your reputation. When a customer vis-its your lot, chances are good they already have some degree of interest and trust, either with a previous relationship or based upon a recom-

mendation. Their friend bought a car there, your children go to school together, or they know your dealership’s reputation from active com-munity involvement. To build trust online, it is vital to provide as much information available as possible about not only the vehicles you sell but also your dealership and the people behind the dealership.

When developing online listings to sell ve-hicles or parts and accessories, use high-quality, professional photographs and well-written de-scriptions. This helps to boost consumer con-fidence and purchase potential. If customers cannot clearly see what they are purchasing, chances are higher they’ll move on to the next item with better images.

Also, provide complete disclosure as if custom-ers were looking at the vehicle with you in person. Customers will expect most used cars have some sort of imperfection, so don’t try to camouflage any issues with a buyer. By being truthful and transparent with listings, dealers create a sense of trust and a willingness to conduct business.

Offer timely responses. While customers in your dealership may wait for you to call back and track down information, online custom-ers expect a high level of service and respon-siveness, even if it’s a response to say you are looking for information to answer the question. Since communication methods such as e-mail and cell phones are the norm, buyers expect quick answers. A buyer ready to make a purchase may be more willing to engage in business with a dealer who is responsive to questions with timely communication. Remember, online customers may be shopping in a different time zone, so regular business hours may not apply.

Research shows the majority of consumers now start major purchase decisions with online research. Now that consumers are shopping online, businesses have been quick to follow. With a SEO strategy, an online reputation that encourages trust, customer service and respon-siveness, dealers can build a virtual business that drives real results and encourages new cus-tomers to shop with ease.

By Clayton Stanfield, eBay MotorsMarketing Your Vehicles Beyond the Dealership

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16


INSURANCEDealership Liability InsuranceGrafmiller & Davis InsuranceSarah Mendenhall103-A Commerce Park DriveWesterville, OH 43082Tel: [email protected]

Medical InsuranceWells Fargo Insurance Services, USA, IncJamie Zelewicz580 N. Fourth StreetColumbus, OH 43215Tel: [email protected]

Workers Comp Group InsuranceCompManagement Inc.Genny Hart6377 Emerald PkwyDublin, OH 43017Tel: [email protected] Life – Disability – Retirement InsuranceMutual of Omaha Insurance Co.8800 Lyra Drive, Suite 530Columbus, OH 43240Tel: (614)[email protected]

CREDIT CARD PROCESSINGElectronic Merchant Systems5005 Rockside Road Penthouse 100 Independence, Ohio 44131Tel: 888.558.4367www.emscorporate.com INTERNET, WEBSITE, COMPANIESAutoTrader.comColumbus, OhioTony [email protected]

Higher Turnover, LLCRobert “Jake” Jacobson22 Brook LaneShelburne VT 05482Tel: [email protected] FORMS – DEALERAutomotive Dealer Resources Nancy Chapman55 E. Long Lake RoadTroy, MI 48085Tel: [email protected] GPS – STARTER INTERRUPTPASSTIMEJ R Jones861 Southpark Dr., Suite #200Littleton, CO 80120Tel: [email protected]

DOCUMENT MANAGEMENTIntellineticsJim Perry2190 Dividend DriveColumbus, OH 43228-3806Tel: 614-921-8170 [email protected] VEHICLE LOCATOR SERVICEEbuy Auto.comFrank Wertenbach160 Clifton Dr Suite CWarren OH 44484Tel: [email protected] AUTOMOTIVE PARTS PROGRAMAuto ZoneTom Edgerton463 Waterbury Ct Ste BGahanna, OH 43230Tel: [email protected] SERVICE CONTRACTSA U L CorporationKevin Cullop1250 Main St, Ste 300Napa, CA 94559Tel: 800-826-3207 Ext - [email protected]

Diamond Warranty CorporationSamuel McArthur/Jim Limongelli9 N Main StPittston, PA 18640Tel: [email protected]

The Milby GroupMike Milby210 Pershing Dr. Suite ALancaster, OH 43130Tel: [email protected]

National Auto CareChristina Schrank575 Westar XingWesterville, OH 43082Tel: [email protected] DEALER SUPPLIES & DISPLAYSDisplayability.ComTom Williams P.O. Box 100 Excelsior Springs, MO 64024 Tel: [email protected] INTERNET SECURITYNuspireMichael Vaughn3155 Dellavo Ct.Commerce, MI 483920Tel: [email protected]

OIADAMEMBER BENEFIT & VENDOR GUIDE

AUCTION – FEE - DISCOUNTS

MEMBERS RECEIVE (2) V.I.P AUCTION CARDS THAT ENABLE YOU TO RECEIVE A NUMBER OF FREE BUY AND/OR SELL FEES FROM 11 DIFFERENT AUTO AUCTIONS

(Value up to a maximum of $200.00 each)

____________________________________________________________________________________________________________________________________________________

INSURANCE

Dealership Liability Insurance Grafmiller & Davis Insurance Sarah Mendenhall 103-A Commerce Park Drive Westerville, OH 43082 Tel: 614-818-9467 [email protected]

Medical InsuranceWells Fargo Insurance Services, USA, Inc Jamie Zelewicz580 N. Fourth Street Columbus, OH 43215 Tel: 614-324-2821 [email protected]

Workers Comp Group Insurance CompManagement Inc. Genny Hart 6377 Emerald Pkwy Dublin, OH 43017 Tel: 800-825-6755 [email protected]

Life – Disability – Retirement Insurance Mutual of Omaha Insurance Co. 8800 Lyra Drive, Suite 530 Columbus, OH 43240 Tel: (614)785-1122 [email protected]

CREDIT CARD PROCESSING

ELECTRONIC MERCHANT SYSTEMS5005 Rockside Road Penthouse 100 Independence, Ohio 44131 Tel: 888.558.4367 http://www.emscorporate.com

INTERNET, WEBSITE, COMPANIES

AUTOTRADER.COMColumbus, Ohio Tony Phillips 614-989-0467 [email protected]

HIGHER TURNOVER, LLCRobert "Jake" Jacobson 22 Brook Lane Shelburne VT 05482 Tel: 800-430-2119 [email protected]

OH_0111.indd 16 12/20/10 11:34 AM


17


Do:Look for an online auction that makes the buying process as seamless

as possible. An auction offering comprehensive services will enable you to purchase and sell vehicles more quickly and efficiently. Having services such as financing, transportation, third-party vehicle inspections and vehicle condition reports at your fingertips that are already integrated and offered on the auction site will make the buying process much easier.

Try before you buy. Peruse the inventory at different auction sites to ensure they have the kinds of vehicles you need. Online auctions source their vehicles from a wide number of consignors and providers and will offer thousands of vehicles at any given time that should meet your inventory needs. Defined search parameters should be available to help you quickly locate the cars that you are seeking.

Utilize multiple channels simultaneously to sell vehicles. Incorporating online auctions doesn’t mean it’s an either/or proposition. Consider online auctions to be a complement to your existing buying and selling practices, and you can slowly begin integrating online auctions into your operations.

Ensure the auction has a support team available to assist you during the registration and listing process. With a dedicated customer service line in place, you will have confidence in knowing you have a support team ready if you run into any problems or have any questions during the transaction.

Use market pricing to determine the accurate values for your vehicles. Before making guesses on how to most accurately price your vehicles, refer to the auction’s market pricing guidance resources to ensure you’re selling at the right price.

Take advantage of dealer networks to market your inventory online. Online auctions are shared by dealers across North America and many feature a community of dealers to purchase from in addition to consignors. Utilize existing networks and make other dealers aware of your online presence and tell them to spread the word.

Take lots of pictures. With online auctions, dealers don’t have the luxury of seeing the vehicle in person and kicking the tires. That said, with an array of 360-degree photos to accompany each vehicle, and a comprehensive third-party inspection report on the listing, potential buyers have all the information they need to make a decision.

Don’t:Rush into listing cars online without knowing the ins and outs of the

auction itself. Conduct due diligence and make sure you’re familiar with the process for each online auction you are considering. Some have extra fees you may not be aware of, so be sure to investigate all auction processes, including state regulations or arbitration policies.

Misrepresent the vehicle you are listing. Not only do your profits rest on your vehicle listings, but your reputation does, too. Be honest in your assessment of the vehicle and ensure your inspections are accurate and complete at the time of delivery or run the risk of losing sales and customers or having to go through arbitration.

Release vehicles to buyers without confirmation of payment to your dealership or the online auction. Like any other business transaction, make sure payment has been processed and cleared before releasing a vehicle to the buyer.

Forget to immediately remove a vehicle from the auction once sold to avoid double selling. To avoid any confusion about vehicle availability, make sure once a car sells, it’s removed from the auction.

Although buying and selling cars online may seem daunting to beginners, the technology is very easy to learn; once it’s been adopted into a dealership’s remarketing strategy, there is a world of possibilities.

Andrew Iorgulescu is a co-founder of OPENLANE, a leading North American online auction company for auto dealers to buy and sell wholesale vehicles. He’s the vice president of business and dealer development at the company and formerly held positions at GO Networks, Autobytel.com and GE Capital Financial Services.

Dos and Don’ts

Online Auctions 101:

In the recent economic downturn, the automotive industry, like many others, was hit hard.

Dealerships around the country had to adapt to industry changes as well as adopt their business operations to grow profits and increase overall business performance.

This adaptation has prompted the incredible growth of the online wholesale auction industry. The sector made huge strides in the past five years and is continuing its upward trend. That outstanding, widespread growth, coupled with the resulting benefits dealers have reaped from buying and selling online, has made virtual auctions a mainstay in many dealers’ operations.

Although physical auctions still dominate the remarketing business, online auctions are becoming increasingly vital to dealer operations, primarily because of the time and cost savings realized by avoiding travel to physical auctions and a large, nationwide selection of inventory. With thousands of vehicles available online, dealers are privy to the freshest inventory from a wide variety of sellers and realize significant savings by buying and selling directly from the comforts of the dealership. In addition, dealers now have the luxury of using online auctions as a virtual showroom offering myriad choices to customers that extends the inventory they house or what’s found at regional auctions.

With the comprehensive services now available on the best online auction sites, dealers can take care of everything needed for a complete sale, including floorplanning, transportation, fair arbitration and transaction policies for a seamless end-to-end transaction. Not all online auctions are the same, nor do they offer the same services. Before you begin buying and selling on the Internet, it is important to do some research and find the online auction that works best for you and your dealership.

BY ANDREW IORGULESCU

OH_0111.indd 17 12/20/10 11:34 AM


18


As the new Risk-Based Pricing Rule takes effect this month, auto dealers need to make sure they have information, resources and tools in place so they are ready to comply. Applying to Buy Here-Pay Here (BHPH) dealers and those who do business with third-party creditors, the rule requires dealers to notify consumers when they receive materially less favorable credit terms than others based on consumer report information.

According to the new rule, a risk-based pricing notice must be provided to the consumer before signing the credit agreement (direct lending note or indirect retail installment sales contract). The notice must:

Include information about the elements of a credit report.State the annual percentage rate and other terms were set based on

the consumer’s credit report.State the terms offered may be less favorable compared with the

terms offered to consumers with better credit histories.Encourage the consumer to verify credit report accuracy.Identify all consumer reporting agencies that supplied a consumer

report used in the credit decision.Inform the consumer of the right to a complimentary copy of a

consumer report from those agencies for 60 days after receipt of the notice.

Provide guidance on obtaining a consumer report.Direct the consumer to the Federal Reserve Board and Federal

Trade Commission’s websites.Dealers can use a case-by-case method, a credit score proxy method

or a tiered pricing method to identify which customers must receive a notice. For more info, a Adobe PDF is available at www.ftc.gov/os/2009/12/R411009riskbasedpricingfrn.pdf.

An exception to the Risk-Based Pricing Rule allows dealers to provide a credit score disclosure notice to all customers who apply for credit. This option is only available to dealers who use credit scores in the decision to extend credit. This exception notice must include the consumer’s credit score, the date it was created, its source, and information about the range of scores and how lenders use them. In addition, the notice must provide a description or graphical representation of how the applicant’s credit score ranks in comparison with other consumers. For this, dealers will need data from their consumer credit report suppliers.

The exception notice may be the easiest path to compliance for many dealers, as it avoids the analysis of who is required to receive a risk based-pricing notice. However, each dealer should look at its own unique business to determine which compliance option will work best.

While dealers may be concerned that the new rule will create more paperwork and administration, risk management platforms can help automate indirect lending, credit approval and compliance processes. By unifying lending transactions and simplifying documentation, a technology platform can enable quicker decision making and help prevent financial and legal penalties resulting from non-compliance.

Whatever notice option your dealership pursues under the new rule, automating credit approval and compliance processes can help you ease the regulatory burden on staff resources, reduce your risks of non-compliance, and safeguard your dealership’s reputation.

Lee Domingue is CEO of indirect lending at Wolters Kluwer Financial Services. For more information, visit www.wolterskluwerfs.com/ilsolutions.

Complying with the Risk-based Pricing Rule

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d Progressive Dealer Solutions a supplier of quality products and services to new and independent auto dealers. Progressive has part-nered with one of the areas leading finance companies that has been around since 1992. Agents will be responsible to represent this exciting finance program and have access to represent the multitude of other prod-ucts that Progressive Dealer Solutions has to offer. We offer our Independent Sales Representatives: • Unlimited commission

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