A recent Tip of the Week from Ignite Consulting Partners delved into the social media world your children might know well — TikTok.
Ignite recapped that during the last few weeks, a TikTok video went viral and gave consumers some “bad ideas and created even more headaches for dealers and finance companies.”
The video recommended that consumers send letters directly to dealers and finance companies, claiming a “right to rescission” regarding their retail installment sales contract (RISC) and vehicle.
Ignite explained what a “rescission” is, noting that the law cited in these letters is rooted in Truth in Lending Act.
“Rescission is basically a written notice to terminate or cancel a contract or agreement that was previously signed, with some requirements and exceptions,” Ignite said in an industry message. “It’s a formal notice of the consumer’s intention to undo the agreement and return to the previous situation as if it never existed. All because the creditor omitted important disclosures. Sounds serious, doesn’t it?
“Not in these cases. See, the devil’s in the details,” the compliance firm continued. “And the security interest has to be retained or acquired in a consumer’s principal dwelling, each consumer whose ownership interest is or will be subject to the security interest shall have the right to rescind the transaction.”
Generally, Ignite said the word dwelling means a residential structure, whether or not that structure is attached to real property. Examples include a condo unit, coop unit, mobile home, and trailer, if they are used as a residence.
“A car is not considered a dwelling under the law because it is not intended for permanent or long-term habitation. Cars are primarily designed for transportation and not equipped or intended for use as a permanent living space. Fortunately, these letters were sent in the context of a motor vehicle RISC,” the firm said.
Ignite acknowledged that if a dealership or finance company received one of the TikTok-inspired letters, it might have caused a compliance ruckus.
“Where people get tripped up is in the filler. The letter is usually combined with multiple claims of fraud, lack of disclosure, etc. You should be incredibly careful when responding to them as they are written to be confusing. A best practice is to separate each claim in the document with brackets and address them individually,” Ignite said.
“Also peppered in the letters were additional claims that the terms of the deal weren’t disclosed and that a laundry list of itemized fees from the RISC were not allowed under law and were, therefore, a hidden finance charge,” the firm continued.
“The letters all end in some version of a statement that says the car belongs 100% to the buyer and that the dealer must send them a $10,000 check for everything they have paid to the dealer, including ancillary items like CPI. Our advice is to stay calm and dissect each claim methodically. You never know when a missed assertion could come back to haunt you. It can be difficult to respond citing the correct law that governs each claim,” Ignite went on to say.
If you need help writing a response or don’t know how to start, contact Ignite via email at info@ignitecp.com or call (817) 900-8754.
Cox Automotive acknowledged that by nearly every measure, 2022 was a difficult year for independent dealers, who were challenged by historically low vehicle inventories, high prices and the ongoing risk of an economic recession.
With predicting the year ahead will be one of transition, as both consumers and the industry move past the remains of a global pandemic and set a new course for growth, the NextGear Capital field team compiled 10 tips to help independent dealers thrive in 2023.
The recommendations include:
1. Aged inventory is not your friend. Holding costs will hurt your profits.
2. Money is made at the buy. Use tools to expand your reach to find the desired inventory at the best price. Look for tools that allow you to wholesale and retail at the same time.
3. Know where your inventory is at all times. Use tools such as Account Portal to make your audits and reconciliations more efficient and profitable.
4. It is important to be lean in 2023. Watch expenses closely such as reducing unnecessary costs, ensuring your marketing spend generates returns, and investing carefully to stay competitive.
5. Change your pricing strategy regularly to match market conditions.
6. Leverage the resources of your vendor partners. They have the ability to provide access to unique data which is key to driving stronger profits. Also, choose partners that work together to improve your efficiency and strategy.
7. Focus on the client experience. Consider time on the lot, pricing transparency, and the overall process. Give your clients an experience to remember and they will spread the word to others.
8. Build long-term relationships. Become involved in your community, learn from your competitors, and stay close with your vendors to keep abreast of new products, offerings and opportunities.
9. Knowledge is power. Pay attention to industry news and stay on top of trends.
10. Satisfied clients are a gold mine. Invest in a strong CRM to stay connected to them and remain top of mind.
“NextGear Capital is steadfast in our commitment to the success of independent dealers and delivering solutions to help them thrive in any environment,” NextGear Capital president Scott Maybee said in a news release.
“Our team members are in the trenches with independent dealers day in and day out, providing insights to help them make more informed decisions, streamline their operations, and create efficiencies. These tips are a reflection of the expertise they bring to every client relationship,” Maybee added.
Used-vehicle prices are falling, inventory is still difficult to acquire, and economic conditions continue to weaken. These are challenging times for independent dealers.
In times like these, inventory management is key to staying profitable. Here are a few tips to improve inventory management in 2023.
Stay in your wheelhouse
When inventory is scarce, it’s tempting to acquire makes and models that you would not normally sell. This strategy might result in a lot full of vehicles, but slower turn rates.
Dealers spend years building a brand and reputation. If you are known for carrying a good selection of pick-up trucks, you will not be top of mind when customers think economy cars, and vice versa. When it comes to inventory, something is not better than nothing. I’d rather have fewer vehicles that turn faster than a lot filled with vehicles that just sit there.
Another downside of having unfamiliar vehicles on your lot is that your sales team probably doesn’t know how to sell them. Stick to makes and models that your team knows.
Sprinkle in hot vehicles
For every rule there is an exception. Now that I’ve recommended sticking with what you know, I am also going to encourage breaking that rule—on occasion.
If you have the opportunity to acquire a hot car such as a Ford Mustang, Tesla or any hybrid for that matter, you know that vehicle is in demand.
If you work with a marketing company, they should be able to tell you key phrases that car shoppers are using to search for vehicles, as well as the most popular makes and models. Check these terms monthly and adjust inventory strategy as necessary. Google Trends is another source that can tell you which vehicles are trending.
Any time you have a vehicle that is not part of your regular inventory mix, go the extra mile in merchandising. Place the vehicle up on a pedestal at the front of your lot so it can be seen from the road, and make an inventory video to post on your vehicle display pages (VDPs), third-party listings and social media pages.
Track turn time
When inventory costs are high, turn rate becomes more important than ever because every day that a vehicle sits on your lot cuts into profit.
While some dealers count turn rates from the first day the vehicle is on the lot after recon, I encourage tracking turn rates from the day the vehicle is acquired. The day you acquire the vehicle is the day it begins costing you money. The bank doesn’t care when the vehicle is ready to sell, so tracking from acquisition helps to create urgency during the recon process.
The advantage of tracking turn times is that it takes the emotion out of the decision to acquire a vehicle. It’s very easy to let personal bias and recent activity enter into the equation. For example, if you acquire one Ford Mustang and sell it for $3,000 in profit after three days, you might run out to look for another Mustang to acquire—even though historically, Mustangs sit on your lot for 45 days.
Remember, it’s better to sell three cars in 45 days making an average of $1,500 per vehicle, than it is to sell one car every 45 days and make $3,000 per vehicle.
Ramp up marketing
Let’s face it, marketing is an area where there is always room for improvement. For dealers, it is a better strategy to stock fewer vehicles and use the extra time to ramp up marketing efforts so those vehicles turn faster.
First, do an honest assessment of your inventory photos. If you take photos of your vehicles in a cluttered lot with power lines and a busy road in the background, you might want to rethink location. After recon, take the time to drive your vehicles to a nearby park so the photos are attractive and the vehicle is the center of attention.
Please don’t use stock photos. Some dealers still post stock photos as a tactic to force consumers to come down to the lot to see the actual vehicle. This is bad for business because from the consumer perspective, it looks like you’re hiding something. Transparency is always the best policy.
Speaking of transparency, if you want to stay competitive with the Carvanas of the world, post vehicle prices. If you ask the customer to send you their email address in exchange for a price, that customer is gone. In today’s world, transparency is mandatory if you want to attract and retain customers.
If you have a certified pre-owned (CPO) program, make sure all CPO vehicles are featured on the home page of your website with badges that identify them such. On the vehicle VDP, insert two or three slides into the photo carousel that highlight the features and benefits of your CPO program and vehicles.
In 2023, we hope to see an easing of the supply crunch that has affected inventory availability, but it might happen just as the U.S. enters a recession, impacting consumer demand. Smart inventory management allows dealers to maximize profit on every deal, so they can operate efficiently in lean times.
James Virgoe, who is senior vice president of GWC Warranty Sales, has more than 20 years of experience in the automotive industry. Virgoe has a strong track record of managing top-performing territories, developing new channels of business, and building revenue-producing relationships. GWC Warranty is a part of the APCO Holdings family of brands.
Ignite Consulting Partners continued its Tip of the Week series by again focusing on the enhanced Safeguards Rule set to be implemented by the Federal Trade Commission.
Ignite said that independent and buy-here, pay-here dealerships should have completed or at least are in the process of compiling their risk assessments and formulated a report mandated by the FTC.
The firm said that these reports should contain details based on your investigation about events where the FTC says pose a foreseeable risk “to the security, confidentiality, and integrity of customer information.”
Those risks could be physical or digital, internal or external, or in any combination of those and no two are going to look the same.
Ignite then noted three components these risk reports must contain, including:
• Be written: The first rule is that it must be documented in writing.
• Define risk criteria: Every assessment must include the criteria you used to determine those risks. Examples include high/medium/low and urgent/not urgent.
• Include plans for periodic reassessment: It is not a one-time event, but ongoing. Changes to your business and the emergence of new threats are ongoing and your assessment procedures should reflect that.
“Examples of changes that would prompt a review include moving to a new building or changing high risk vendors such as your ISP or cloud storage solutions,” Ignite experts said. “During COVID, many of you changed your work from home policies, allowing employees to work remotely and even use their own devices.
“Major structural changes like these present their own set of risks and require a reanalysis. New threats may come from external sources such as new viruses or vulnerabilities found in the hardware or software you use,” they continued.
To help dealerships and finance companies even more, Ignite is rolling out what it’s calling “The Works.” It’s a six-part package designed to help operations navigate through preparations for the intensified Safeguards Rule, which is set to go into practice in December.
And through Oct. 31, Ignite is offering a 40% discount on “The Works.”
If you have questions about compiling this initial report, choosing a qualified individual and would like to speak to a compliance specialist or to get more information about “The Works,” send an email to Ignite at info@ignitecp.com or call (817) 900-8754.
With another month closing on Wednesday, Ignite Consulting Partners mentioned firm compliance experts often are peppered with questions at this junction on the calendar about independent dealers creating their own retail installment sales contracts rather than relying on the documents within their dealer management system (DMS).
Through its Tip of the Week, Ignite emphatically replied to those operators by saying, “not so fast!”
Firm experts elaborated about their reasons for taking such a strong stance.
“We’re big believers in keeping things simple, and, although we know that there’s a charge each time a transaction is booked within the DMS, in the long run we think it’s both safer and cheaper to use the contracts provided,” Ignite’s experts said.
“First, creating a proprietary RISC can be pretty expensive on the front end. The contracts already being used are licensed from providers and protected by copyright law, so you just can’t duplicate them,” they continued. “Secondly, creating your own RISC would then mean that you are responsible for the upkeep of the document and any changes that are needed as a result in a change of law, or even caselaw. Keeping up with all of that can be pretty daunting.”
Ignite also touched on other paperwork that some dealerships create themselves.
“Lots of you have your own proprietary ancillary forms that are also used at closing, and those are a little bit of a different story,” Ignite said. “Lots of times, it makes sense to create and maintain your own because they deal with a unique aspect of your business.
“We do recommend that these be reviewed annually just to make sure they still fairly and accurately represent your business needs,” the firm added.
Whether it’s assistance with those documents or other compliance matters, Ignite can be reached at info@ignitecp.com or (817) 900-8754.
Both a federal agency and multiple national associations are urging the Federal Trade Commission to delay implementation of amended Safeguards Rule.
However, if the regulation stays on its course to be enforced beginning in December, the Texas Independent Automobile Dealers Association (TIADA) is trying to help operators prepare.
TIADA recently reiterated that it launched a dealer portal earlier this year to educate dealers across the country and develop an affordable way to address some of the new requirements found in the FTC rule.
TIADA explained that the FTC amended its Safeguards Rule earlier this year, creating new requirements for non-banking financial institutions, including dealerships. The new rules become effective in December and are much more specific than the old rules.
A few key provisions to the updated Safeguards Rule include:
• Each dealership must identify a “Qualified Individual” who is responsible for the program within the dealership and reports to the dealership’s board of directors or management annually,
• Dealerships will be required to have a written information security program and manual,
• And dealerships will be required to have an employee training program.
TIADA pointed out the FTC is ramping up its enforcement efforts this year. According to its website, “The FTC has brought legal actions against organizations that have violated consumers’ privacy rights, or misled them by failing to maintain security for sensitive consumer information, or caused substantial consumer injury.”
Among other things, TIADA pointed out the dealer education portal was built to help dealers stay compliant.
“Our goal is for this training to be used as a tool for dealers to avoid inadvertent exposure of customer information, government enforcement actions, lawsuits, and bad press,” TIADA executive director Jeff Martin said in a news release.
TIADA is working closely with several state and national automobile dealer associations to create an affordable option for their dealer members and help drive revenue for the associations.
“We already have dealers from all over the country taking the course. If a dealer from Colorado takes a course through the portal, we send 50% of that revenue back to Colorado,” Martin said. “Since we already developed the course and have an online platform to deliver it, it just made sense to partner with other associations.”
The safeguards compliance course through the dealer education portal was designed specifically with dealers in mind. There are two courses available, one for the dealership’s qualified individual and another for all other staff.
There is a volume pricing option available for any dealership with ten or more employees who need to take the course.
TIADA said the courses are easy, quick, affordable, and specifically designed for dealers. The program includes model safeguards policies and agreements for dealerships at no additional charge.
For more information, go to www.txiada.org.
Subprime Analytics president Ken Shilson appeared again on the Auto Remarketing Podcast to discuss what he thinks is one of the most important operational challenges buy-here, pay-here dealers are going to face before the end of the year.
It’s implementation of the Current Expected Credit Loss (CECL) accounting standards.
Shilson offered recommendations for how both BHPH dealers and their accountants can get organized in order to comply with CECL, which goes into effect on Jan. 1.
To listen to the conversation, click on the link available below, or visit the Auto Remarketing Podcast page.
Download and subscribe to the Auto Remarketing Podcast on iTunes or on Google Play.
Ignite Consulting Partners offers a compliance tip each week for dealerships.
This week’s installment delves into a business segment buy-here, pay-here operators often face — repossessions — recapping a $98 million settlement as being possible when regulations aren’t followed exactly.
The compliance firm compiled what it called a minimum 8-point checklist to reinforce the importance of adhering to requirements of your state law for repossession notices. Here is part of Ignite’s reasoning.
“In yet another example of how important it is for car dealers and finance companies to have strong compliance in their post-repossession process, a large national auto finance company had to agree to forgive over $98 million in deficiency balances for consumers due to improper repossession notices,” Ignite began in an industry message. “The settlement affected almost 8,500 accounts with deficiency balances — all of which will be wiped clean.
“The consumer class action claims allege that the company's repossession notices failed to comply with the requirements of their state law, which contains detailed requirements for exactly what needed to be itemized in the repo notices. States’ statutes’ requirements are often detailed and deviation means the debt left over after selling the repossessed car cannot be collected,” the firm continued.
To help dealerships and finance companies avoid a similar — and expensive — situation, Ignite spelled out a checklist that included:
• Notice of strict compliance (if applicable)
• Notice of repossession
• Notice to right to cure (if applicable)
• Notice of sale and disposition of collateral
• Public sale versus private sale
• How you determine “commercially reasonable”
• Ancillary product refund calculation and issuance
• Deficiency balance notices to consumers
“There’s a lot of regulatory attention being given to these issues right now,” said Ignite, which is also hosting a three-day training event called, “Compliance Unleashed,” set for May 16-18 in Grapevine, Texas.
To reach Ignite’s compliance professionals send a message to info@ignitecp.com or call (682) 888-3426.
As I write this article, Major League Baseball is back with Opening Day arriving on Thursday. While the players union and team owners hashed out their collective bargaining agreement, I rarely heard anything about the group of people who matter most — the fans — you know, the customers who spend $15 on one beer and $10 for a hotdog.
I don’t begrudge the millionaires and billionaires on either side for doing what they can to get paid for their business acumen and risk, talent, or hard work. I am a capitalist after all.
As part of the agreement, a Joint Competition Committee will be formed, comprised of four active players, six members appointed by MLB, one umpire, and two fans. Just kidding on the last part. There are no fans who are part of the Joint Competition Committee. There should be some fans or a liaison to the fans or some consideration of them.
Without fans, neither side gets millions or fame.
According to MLB.com, beginning in 2023 the committee will be tasked with adopting changes to playing rules such as a pitch clock, base size, defensive positioning and automatic ball/strike zone.
I am glad they are finally considering some rule changes that may make the experience better for the fans.
Although a purist might not like some rule changes, the game is about entertainment. Lately the game has been losing fans. MLB has talked about the game being too long. Actually, the game is about the same length as an NFL game.
As the author of one of the most influential books of all time, Think and Grow Rich, Napoleon Hill reveals the success principle of “Accurate Thinking.”
MLB officials could have used “Accurate Thinking” the last few years when talking about the game being too long. Actually, the game is too boring for some. There is too much time between action. The NFL is non-stop action, which is why nobody complains about the length of the game.
Before I get too much hate mail from baseball lovers — I love baseball. I do not watch the NFL any longer. But I adhere to the principle of “Accurate Thinking.”
Increasing base sizes may encourage more base stealing (a lost art that my team, the St. Louis Cardinals used to capitalize on). More base stealing will make the game more exciting. Making a rule that keeps two infielders on the left-side of second base (eliminating the shift) may encourage more action that fans care about, because it will lead to more hits.
Baseball analysts have talked about the game becoming boring because of the three-outcome trend. Most at bats end in either a home run, strikeout, or walk. Getting rid of “the shift” will lead to more players getting hits. This puts players on base. It may lead to more base running and stealing — ACTION!
The takeaways for your business:
—Practice “Accurate Thinking.” What is it about your business, leadership, and team that nobody is talking about — or avoiding? What needs to be addressed right now? Do you need help addressing it? Is anyone on your team focusing on what “should be” versus “what is” and what you can do about it?
—Don’t be boring. This is one of my top principles when it comes to your marketing. Inject some fun, entertainment, or value.
—Provide a good experience. A family may save up for a long time to get to a Major League Baseball game. But if the experience is boring because of the “three outcome” trend, they may not be back. You may be able to make an initial sale right now with high pressure and sneaky tactics, but you will not get a repeat customer or referrals unless you provide a top-level experience.
Kenny Atcheson is the founder and president of Dealer Profit Pros and author of Marketing Battleground: How to Deploy Under-the-Radar Strategies to Explode Your Profits. Kenny teaches workshops and speaks at conventions and 20 Groups. His company offers several marketing and advertising programs, customer service and sales training. His website can be found at www.DealerProfitPros.com.
While Kenny Atcheson has written books and been a regular contributor to BHPH Report, the founder and president of Dealer Profit Pros is back for another appearance on the Auto Remarketing Podcast to discuss the potential benefits of using video.
Although that previous sentence contained a lot of different media paths, Atcheson explained how video, in particular, can be the smoothest way dealers reach current and prospective customers successfully.
To listen to the conversation, click on the link available below, or visit the Auto Remarketing Podcast page.
Download and subscribe to the Auto Remarketing Podcast on iTunes or on Google Play.
