IL_0512_O

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PAIDDALLAS, TEXASPermit No. 2079

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PRSRT StandardU.S. Postage

PAIDDALLAS, TEXASPermit No. 2079

I L L I N O I S I N D E P E N D E N T A U T O M O B I L E D E A L E R S A S S O C I A T I O NDEALER’S EDGE

MAY/JUNE 2012

inside• AUTO SHOPPING GOES MOBILE• CASH IS KING IN BUY HERE-PAY HERE• 2012 QUALITY DEALER: JANETTE PEAK

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4 used vehicleScience of

Sourcing & Sales

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MAY/JUNE 2012 T H E D E A L E R ’ S E D G E

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ADVERTISERSINDEX

MAGAZINECONTENTS

ADVERTISERSINDEX

04 Provisioning: Used Car Science06 Cash is King in BHPH08 Make the Right Compliance Moves14 Auto Shopping Goes Mobile22 Compliance Overdrive

AFC - Automotive Finance Corporation ...Inside Front CoverAlly ..........................................................................15Auto Auction of New England ....................................9AutoTrader.com .........................................Back CoverDyer Auto Auction ....................................................20Insurance Auto Auctions ........................................21Lohman Companies ........................Inside Back CoverManheim.com .........................................................11Manheim Minneapolis .............................................5NIADA Certified .......................................................16Nowcom ....................................................................7Protective ...............................................................13United Acceptance .................................................17Voisys ......................................................................22

WHAT’SNEW

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] DEALER’S EDGE IS PUBLISHED BI-MONTHLY BY THE NATIONAL INDEPENDENT AUTOMOBILE DEALERS ASSOCIATION SERVICES CORPORATION, 2521 BROWN BLVD., ARLINGTON, TX 76006-5203; PHONE (817)640-3838. PERIODICALS POSTAGE PAID AT DALLAS, TX AND AT ADDITIONAL OFFICES. POSTMASTER: SEND ADDRESS CHANGES TO NIADA STATE PUBLICATIONS, 2521 BROWN BLVD., ARLINGTON, TX 76006-5203. THE STATEMENTS AND OPINIONS EXPRESSED HEREIN ARE THOSE OF THE INDI-VIDUAL AUTHORS AND DO NOT NECESSARILY REPRESENT THE VIEWS OF THE DEALER’S EDGE, THE ILLINOIS INDEPENDENT AUTOMOBILE DEALERS ASSOCIATION, OR THE NATIONAL INDE-PENDENT AUTOMOBILE DEALERS ASSOCIATION. LIKEWISE, THE APPEARANCE OF ADVERTISERS, OR THEIR IDENTIFICATION AS MEMBERS OF IIADA OR NIADA, DOES NOT CONSTITUTE AN EN-DORSEMENT OF THE PRODUCTS OR SERVICES FEATURED. COPY-RIGHT © 2012 BY NIADA SERVICES, INC. ALL RIGHTS RESERVED. VISIT THE NIADA WEB SITE AT WWW.NIADA.COM. STATE MAGAZINE MGR./SALES Troy Graff • [email protected] Andy Friedlander • [email protected]/PRODUCTION MGR. Christy Haynes • [email protected] Nieman Printing

DON’T FORGET TO VISIT OUR NEW WEBSITE FOR IMPORTANT INFO: WWW.IL-IADA.ORG

CHAIRMANRandy CraseCrase Auto Connection25355 E. Ames St.Channahon, IL [email protected]

PRESIDENTGordon TormohlenTormohlen’s Good People Automotive1800 S. Ihm Blvd.Freeport, IL [email protected]

1ST VICE PRESIDENTAnthony FerraroPayless Motorsport13449 S. Pulaski RoadRobbins, IL 60472708-388-2300 [email protected]

TREASURERLori Chignoli-CoraChignoli Auto Sales1850 Essington RoadJoliet, IL [email protected]

SECRETARYEric NelsonNelson Automotive Inc.1801 S. BusseMt Prospect, IL [email protected]

DIRECTORS:Mark AlcornCarlyle Auto Sales1708 BroadwayRockford, IL [email protected]

Paul GluchowskiTurner Acceptance4454 N. Western Ave.Chicago, IL [email protected]

Melanie BrownChicago Car Auction2731 Belvidere RoadWaukegan, IL [email protected]

Amy Goodnight Lohman Companies 3901 15th St.Moline, IL [email protected]

Alex TovstanovskyPrestige Motor Works Inc.8959 Hanslik CourtNaperville, IL [email protected]

Janette PeakPJP Auto Enterprise3100 S. Douglas Springfield, IL [email protected]

For information on how to become a member of IIADA, please contact Bruce Eklund at 800-987-6627 or [email protected].

Board of Directors

Inside OVE.com Honors Top Auctions Manheim Chicago was honored for its innovation 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.

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.

THE 2012 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

MAY 16 at the Greater Rockford Auto Auction CERTIFIED SALES

JUNE 11-14 at NIADA Convention in Las Vegas DEALER MANAGEMENT SYSTEMS

JULY 10 at the Manheim Arena Auto Auction BHPH ROUNDTABLE

AUG. 14 at the Greater Rockford Auto Auction BHPH ROUNDTABLE

SEPT. 12 at the Morton Auto Auction IS RENTAL FOR YOU?

You Have a Date 2012 EDUCATIONAL AND TRAINING OPPORTUNITIES FOR IIADAThe educational training is hosted by the Illinois Independent Automobile Dealers Association (IIADA) and includes expert trainers in each field, with an opportunity to become a Certified Master Dealer.

OCT. 16 at the Manheim Arena Auto Auction DEALER MANAGEMENT SYSTEMS

NOV. 15 at the St. Louis Auto Auction COMPLIANCE ISSUES

DEC. 10 in Oak Park at the Training CenterREVIEW OF ALL TRAINING

FOR INFORMATION, VISIT WWW.IL-IADA.ORG.We have created an education and training program with a mission to promote, educate and advance the independent dealer. We will make available a core of quality education and training opportunities that responds to current dealership needs.

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.

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T H E D E A L E R ’ S E D G E MAY/JUNE 2012

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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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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 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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Make All the Right Moves AS REGULATIONS INCREASE, STAYING INSIDE THE LINES BECOMES A BIGGER PRIORITY

Paul Taylor, chief economist for the National Automobile Dealers Association, recently predicted more than 13.9 million new cars and light trucks will be purchased or leased in the U.S. in 2012. With the influx of new car buyers to the market, it’s a safe bet that used car sales will also increase significantly this year.

While that’s good news for everyone, a dealer’s focus needs to be on more than just how many cars his store sells.

Getting back to the basics has always been a great tactic for boosting performance in the sales and fixed operations departments. Now it’s time to redefine what “the basics” means and focus on more than just strategies to create profit. Attention also needs to be given to basic legal compliance, an area that can have significant economic consequences if dealers are not focused on protecting their assets.

Thirty years ago, dealers had a lot less to worry about when it came to legal

compliance. A dealer could spend the majority of his time on advertising, marketing and merchandising, as well as on buying, selling and servicing cars, without any real worry about being sued.

Today, if dealers are not aware of every aspect of the business conducted in their store, they might have a lot to worry about. Even if a dealer has not been sued when an employee knowingly or unknowingly crossed the proverbial line, he most likely knows or has heard about a dealer who has been.

Dealers who aren’t as vigilant as they should be when it comes to compliance put themselves at risk every single day, and eventually the law can catch up with them. Though there are no specific statistics about exactly how many dealership lawsuits have occurred in the past decade, it’s safe to say there have been too many.

It’s not possible to cover every aspect of dealership legal compliance in limited space, but it is possible to highlight some important legal compliance areas for used car dealers to focus on.

The components that follow are basic items all used car dealerships need to make sure they are doing correctly in order to avoid potential legal issues down the road:

Privacy Laws

In recent years, the number of people who have become victims of identity theft has skyrocketed, which is why various laws have been created to protect consumers

from privacy violations. Businesses that don’t enact clear and solid practices to protect their customers’ private information can face tens of thousands of dollars in regulatory fines and potential civil liability.

General practices most dealerships use for protecting consumers’ private information (such as keeping customer information away from public view, having locks on the finance office doors and shredders at various work areas) might not be enough. Dealers may need to re-evaluate their practices when it comes to protecting consumer information and consider some basic privacy questions such as:

Do salespeople or finance managers work on computers in an area where others can easily glance over their shoulder? If so, it might be important to use privacy screens on those computers to prevent lurkers from seeing information they shouldn’t see.

Is there a glass window in your finance office, allowing someone to look in and read customer information on the finance manager’s desk? Perhaps blinds need to be installed to help prevent that from happening. The blinds need to be kept closed. If they are left open, they serve no purpose.

Even though you have shredders for disposing of customers’ personal information, is there a shredder within easy access of every salesperson or the finance manager’s desk? If the salesperson or finance manager needs to get up and walk a few feet to dispose of confidential

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BACK TO BASICSinformation in a shredder or can simply toss it in an unsecure wastebasket right at his feet, which option do you think he will select at times? Adding additional shredders near each desk might be necessary to ensure all documents are properly shredded.

Who has access to all of the customer information stored in your computer’s DMS or CRM tool? Best practice is to limit access to customer information to those employees who truly need to have it.

Dealers need to make sure their people truly understand why all privacy rules are in place, and thoroughly explain what actions need to occur to protect their customers’ information. Dealers must also appoint a manager to oversee the actions being taken to protect customer information. Not only is this required by law, it is also an effective way to track the privacy program in the store.

FTC Used Car Buyer’s Guide RuleFederal Trade Commission Used Car

Buyer’s Guide compliance is a key part of doing business for used dealers. Yet this is also an area where it’s easy to skip steps or get lazy with regard to following all aspects of the law.

According to the rule, used vehicles must have a Buyer’s Guide clearly and prominently displayed in a position where both sides are readable as soon as the car is in a spot where it can be inspected by a potential customer. That means every used vehicle that is for sale and parked on a used vehicle lot must have a Used Car Buyer’s Guide displayed.

Does your dealership meet this standard? If you were to walk your lot today, would every car have a Buyer’s Guide properly displayed?

Often, dealerships delegate the responsibility for generating and hanging the Used Car Buyer’s Guides to an outside company that sends a representative to the dealership once or twice a week to update the vehicle inventory. While that seems like a good option, the reality is there are probably several days each week when vehicles are parked on the lot without the required documents. Each of those vehicles could cost the dealership thousands of dollars in legal penalties.

Focusing on basic legal compliance means spending a little time and energy to ensure everything is done correctly. For Used Car Buyer’s Guide compliance, that could mean requiring a specific manager to be responsible for creating stickers for every vehicle prior to putting it out on display. This same manager should walk the lot daily to verify that all vehicles on the lot meet the Used Car Buyer’s Guide standards.

Truth in Lending Act/Regulation ZThe days of providing broad payment

ranges and payment packing are over. However, some managers still work deals by quoting a payment without a proper term and interest rate.

That is asking for trouble. Consumer advocates, exposés on national television, books and Internet articles educate today’s consumer about disclosure laws. Best practices suggest when quoting a payment, salespeople should also disclose the rate, term, down payment and finance balance to the customer. Today’s customers don’t just expect this information – they demand it. By providing proper disclosures from the start, you’ll be able to meet and exceed your customers’ expectations and create more sales.

Office of Foreign Assets ControlUnder the premise of homeland security,

the U.S. Department of the Treasury enforces economic and trade sanctions against individuals and groups who potentially threaten the national security, foreign policy or the economy of the United States.

As part of that, laws require automobile dealers to screen every customer against the Specially Designated Nationals (SDN) list. The SDN list contains the names of individuals, groups and entities, such as terrorists and narcotics traffickers, who are controlled by, or acting for or on behalf of, targeted countries.

The government takes the list very seriously and dealership employees need to as well. The penalty for non-compliance can be up to $250,000 in fines and up to 10 years in prison. But screening a customer’s name against the SDN list can take a few minutes, so it might be tempting for a salesperson or finance manager to skip that step in the sale.

Getting back to the basics for legal compliance means taking the time to ensure all required steps are taken in order to protect your store and your assets. Make sure all of your employees are properly trained on how to check a customer’s name against the SDN list and what additional steps they need to take if they get a match or near match.

Real SignaturesSome salespeople and sales managers try

to “save time” by signing a customer’s name or initials on a document that might have been overlooked when the customer was in the store purchasing a vehicle. Do you know if this is happening in your store? If it is, your assets are at risk.

Not only is the practice obviously not compliant, but if discovered it can result in large regulatory fines and even punitive

damages. Never sign a customer’s name or initials, or sign a document “signature on file.”

It seems obvious that signing a document for a customer is wrong, but getting back to basics includes reminders even about the obvious. Communicating to your staff a zero-tolerance policy underscores that obtaining real customer signatures is vital to the health of your business.

Misrepresentation and FraudDuring the course of a vehicle sale, it is not

possible to constantly monitor every word that comes out of a salesperson’s mouth. Dealers need to be confident that when left to their own devices, employees will provide accurate and truthful information about the vehicles and services the store provides. Dealers also need to feel confident that employees are making proper disclosures when necessary.

Misrepresentation or fraud can not only come back to haunt the salesperson or manager, but it can come back to haunt the dealer and the dealership as well.

For that reason, many dealerships are requiring legal training for all store employees. It is also important for dealers themselves to stay abreast of the current laws and regulations. Dealers should proactively seek out information regarding new laws or regulations from sources such as their legal counsel, NIADA or their state and local governments.

In addition, the FTC’s website provides a substantial amount of compliance information, some of which is specifically tailored for automobile dealers. What better place to seek compliance advice than from the agency enforcing compliance?

By educating dealers and their staffs on the current laws and regulations, basic compliance training is helping dealers avoid many of the headaches and lawsuits that accompany legal issues.

In this day and age, dealers can no longer afford to think “it will never happen to me” with regard to legal compliance issues. Today’s rigid requirements and well-informed customers mean dealers need to take clear and conscious steps to protect their assets.

While there is no guarantee a dealer will never be sued, making legal compliance a priority and taking simple steps to ensure it becomes an everyday habit in the store can significantly lessen the likelihood he will become a victim of a compliance issue.

BY JAMES CAHN, JM&A GROUPJM&A GROUP (WWW.JMAGROUP.COM) IS ONE OF THE LARGEST INDEPENDENT PROVIDERS OF FINANCE AND INSURANCE PRODUCTS IN THE AUTOMOTIVE INDUSTRY AS WELL AS PROVIDING CONSULTING SERVICES AND F&I TRAINING FOR USED CAR SALES OPERATIONS AND SERVICE DEPARTMENTS.

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Three “think outside the box” techniques when shopping for health insurance.

Anyone who had has the experience of shopping for health insurance knows it’s not an easy task. Figuring out ways to keep premiums affordable can be a major struggle. Shopping for apples-to-apples coverage with several carriers is nearly impossible and premiums for similar plans are vastly different from one carrier to the next.

So what’s a person to do?Purchasing health insurance requires a “think

outside the box” approach. Here are three simple tips to help you along the way:

• Consider shopping for a much higher deductible than you are accustomed to. Shop for plans that have a $10,000 deductible or more. It may shock you how drastically lower premiums will be. Too much risk for you? We will show you a way to combat that next. If you would like to see a rate for a higher deductible in comparison, visit www.NIADAHealthPlans.com for an instant online rate.

• To offset the high deductible, consider purchasing a critical illness rider, which attaches to your major medical policy. Critical illness riders pay a cash benefit for conditions like cancer, heart disease, stroke, coma and kidney disease, and the benefit can be used to pay off your deductible and leave you with additional money for other expenses, such as loss of income. Riders can be purchased to cover your deductible or more – up to $100,000 in cash coverage. Believe it or not, the premiums are very affordable.

• Also to help offset risk, consider purchasing an accident rider to attach to your major medical policy. Like critical illness riders, accident riders pay a cash benefit for accidents or injuries such as cuts, burns, broken bones or strained and pulled muscles. Again the benefit can be used to pay your deductible in the event you or your family is injured. If you have

children, especially ones in sports, this is a must-have rider. The premiums are even more affordable. So what types of claims will you then need to

worry about?Since health care reform passed, additional

benefits have now been added so you will not have to pay out of pocket for adult and child wellness exams, such as checkups, immunizations, lab work, mammograms, pap smears, PSAs and EKGs. They are all covered at 100 percent with no deductible. Why purchase a lower deductible when it’s covered regardless?

Additionally, there are no lifetime maximums. After your deductible, you are covered at 100 percent until infinity. There are no lifetime caps like $2 million, $3 million, etc. If you have a $20 million medical bill, your insurance must now cover it.

With a high-deductible policy you will have to pay for such claims as office calls for a cold/flu, asthma, skin disorders (other than cancer) and other forms of illness. However, most people would rather save $300, $400 or more per month and pay for the occasional office call themselves. And you will still receive the insurance company’s discounted rate for office calls.

Doing the same thing over and over again and expecting a different result … well, you know the rest. Thinking “outside the box” can not only save you money, but can also provide you with better coverage than you had before.

FOR MORE INFORMATION, PLEASE CALL THE NIADA HEALTH PROGRAM AT 1-888-308-9340 OR VISIT WWW.NIADAHEALTHPLANS.COM

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

NIADA Annual Leadership Conference

On 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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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

Wolters Kluwer Financial Services announced today that it has been added to the Illinois Independent Automobile Dealers Association’s (IL-IADA) list of Preferred Providers.

Through this new relationship, the IL-IADA has endorsed Wolters Kluwer Financial Services’ Indirect Lending business and supports the use of the company’s motor vehicle retail sales installment contracts, privacy disclosures and Red Flags Tool Kit among its members.

Wolters Kluwer Financial Services’ Bankers Systems® contracts and documents include retail installment contracts to support the financing of motor vehicles, as well as all of the necessary disclosure and ancillary documents to complete the transaction, including privacy disclosures. These contracts are protected by the company’s limited compliance warranty and are maintained by Wolters Kluwer Financial Services’ compliance experts who monitor federal and state legislative and regulatory changes affecting the auto finance industry in all U.S. jurisdictions.

The company’s Red Flags Tool Kit provides dealers with guidance and information resources necessary to implement an identity theft protection plan. This includes checklists, printable forms and templates that help record and report Red Flags according to Federal Trade Commission (FTC) requirements.

“One of our organization’s main goals is helping independent dealers in Illinois navigate the regulatory environment so they can devote as much time as possible to serving their customers and growing their business,” said Bruce Eklund, executive director of the IL-IADA. “Wolters Kluwer Financial Services helps strengthen this effort through compliance documentation and customizable tools that help dealers mitigate risk.”

“We are very excited to work with the IL-IADA to support Illinois’ independent dealer community and help more dealerships alleviate regulatory compliance challenges,” said Jason Marx, vice president and general manager of Indirect Lending and Residential Lending at Wolters Kluwer Financial Services.

For more information, visit www.il-iada.org or www.wolterskluwerfs.com/indirect.

New Member Benefit

www.il-iada.orgThe ILIADA would like to have all independent

dealers visit our new and improved website at www.il-iada.org. We have up-to-date information on legal and regulatory issues, curbstoning, auction information, an events calendar as well as membership information. Our member benefits and Auction coupons can save the Illinois independent dealer thousands of dollars by simply joining. Get all your local dealer information in one place. Visit il-iada.org and see how you can benefit by becoming a member OR how existing members can utilize all the benefits to save THOUSANDS.

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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Janette Peak, owner of PJP Autos in Springfield, was named Illinois’ 2012 Quality Dealer of the Year.

Peak, along with her husband and business partner Paul Peak, opened their dealership in 2002, but they haven’t always had smooth sailing.

In 2006, a tornado destroyed their building. Four years later, a fire destroyed PJP’s rebuilt facility.

The Peaks rebuilt again – bigger this time. PJP Autos now boasts a two-story building plus a service center, and has 13 employees and approximately 200 cars in inventory.

“We strive to treat all customers with dignity and respect,” Janette said of her business. “We will never take advantage of our customers or their situations. We will never sell products our customers don’t need or want. … It is always a joy to bless those who otherwise might not be able to get a vehicle.”

Janette is an active volunteer through her church, Abundant Faith Christian Center, and has worked with Big Brothers/Big Sisters. She and Paul counsel individuals and couples through a group called Overcomers, and carry their faith over to their dealership.

“We will minister to customers whether they buy a car or not,” she said.

Janette has been an IIADA member since 2003 and was named to the board of directors in 2011.

Congratulations to Illinois Quality Dealer of the Year Janette Peak!

J.D. Power: New Car Customer Satisfaction Rose in 2011

Janette Peak Named 2012 Quality Dealer

“WE STRIVE TO TREAT ALL CUSTOMERS WITH DIGNITY AND RESPECT,” JANETTE SAID OF HER BUSINESS. “WE WILL NEVER TAKE ADVANTAGE OF OUR CUSTOMERS OR THEIR SITUATIONS. WE WILL NEVER SELL PRODUCTS OUR CUSTOMERS DON’T NEED OR WANT. … IT IS ALWAYS A JOY TO BLESS THOSE WHO OTHERWISE MIGHT NOT BE ABLE TO GET A VEHICLE.”

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

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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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