Indiana Car Lines Jan 13

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PAIDDALLAS, TEXASPermit No. 2079

V i s i t u s a t w w w . i i a d a . c o m

1987-2012

INDIANA CAR LINESJANUARY 2013

2012 INDIANA QUALITY DEALER OF THE YEAR GEORGE MAMMARELLA Page 3

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SAVE THE DATE!MONDAY, MAY 6, 2013INDIANA DEALERS SUMMITBLUE CHIP CASINO, HOTEL & SPA

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JANUARY 2013 C A R L I N E S

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2 01 2 J O E K R I E R Q UA L I T Y D E A L E R

The Indiana Independent Automobile Dealers Association is proud to announce Economy Sales of Knox has been selected as the 2012 Joe Krier Quality Dealer of the Year.

The award was presented to George Mammarella at the association’s 25th Anniversary Golf Tournament and Awards Day on Sept. 9 at Ironwood Golf Club in Fishers.

The Quality Dealer of the Year is chosen based on several attributes. The dealership must be consumer-oriented and the dealer must have a record of good business decisions based on honesty and integrity. The dealership must represent itself as a civic leader within its community.

Economy Auto Sales of Knox has all of those attributes.

In 1987, George and a business partner RSHQHG�D�VPDOO�FDU�ORW�DW�DQ�ROG�PXIÀHU�shop he purchased on a land contract. In 1989, George split with his partner and opened Economy Auto Sales in Hamlet, Ind. He got into the Buy Here-Pay Here business by accident – his restaurant employees wanted to purchase vehicles from his dealership and wanted George to take payments from their checks.

The business grew, and after selling the

restaurant, George moved the dealership to its present location in Knox in 1994. Today the dealership has eight full-time employees, sells approximately 500 BHPH, retail and wholesale vehicles annually, and includes a full-service repair facility.

Economy Auto Sales of Knox has been voted the area’s No. 1 used car dealer seven years in a row in the Leader/Review newspaper’s annual Best of Starke County survey. The dealership is proud to have many second- and third-generation customers. More than one third of its customers are referrals. George believes the “customers are priority one,” and Economy Auto is known in the community for its compassion.

George Mammarella is a member of the Leedom and Associates Dealer Twenty Groups, the Better Business Bureau, IIADA and the National Independent Automobile Dealers Association, and has been a member of the National Alliance of Buy Here-Pay Here Dealers. He is treasurer of the Starke County Youth Club, a board member of the Starke County Chamber of Commerce, a member of the Starke County Initiative for Lifelong Learning advisory board, treasurer and

two-time past master of Knox Lodge # 639 Free and Accepted Masons, and a member of the Bass Lake Shrine Club and Orak Shrine. He also serves on the Bass Lake Festival committee and the county ¿UHZRUNV�FRPPLWWHH��DQG�LV�LQYROYHG�ZLWK�or supports the Starke County Food Bank, Harvest Festival, Mint Festival, Yellowstone Trail Festival, 4H Fair and many other local sports, youth and civic organizations.

Economy Auto Sales of Knox will represent Indiana at the NIADA Convention at Las Vegas in June 2013, competing with Quality Dealers from other states for the National Quality Dealer Award.

The primary purpose of Indiana Independent Automobile Dealers Association is to address legal and legislative issues that confront the used car industry and to promote the businesses of its members while serving the public interest. IIADA has supported independent used car dealers in Indiana for more than 25 years.

The association is proud to have Economy Auto Sales of Knox as this year’s Quality Dealer of the Year.

Congratulations to Economy Auto Sales of Knox!

Economy Auto Sales of Knox Earns State’s Top Award

INDIANA QUALITY DEALER OF THE YEAR GEORGE MAMMARELLA OF ECONOMY AUTO SALES OF KNOX, AND HIS WIFE, DELLA.

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C A R L I N E S JANUARY 2013

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ADVERTISERS INDEX

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] Lines is published 10 times per year by the National In-dependent Automobile Dealers Association Services Corpo-ration, 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 6006-5203. The statements and opinions expressed herein are those of the individual authors and do not nec-essarily represent the views of Car Lines or the National Independent Automobile Dealers Association. Likewise, the appearance of advertisers, or their identification as mem-bers of NIADA , does not constitute an endorsement of the products or services featured. Copyright © 2013 by NIADA Services, Inc.STATE MAGAZINE MGR./SALES Troy Graff • [email protected] Andy Friedlander • [email protected] DIRECTOR Christy Haynes • [email protected] Nieman Printing

IIADA OFFICE

ADESA ...................................... Inside Front CoverAlly ....................................................................13 AutoManager .....................................................11Auto Search Technologies ..................................16CarMax Auctions ................................................17Dealer Services Corp./MAFS ...............................5Dyer Auto Auction ..............................................18 Indiana Auto Auction ..........................................14Manheim.com .............................Inside Back CoverKesler-Schaefer Auto Auction ...............................9Protective ............................................................7United Acceptance .............................................15VAuto ....................................................Back Cover

EXECUTIVE DIRECTOR • DEBBIE ANDERSENP.O. BOX 1393 • CROWN POINT, IN 46308PHONE: (800) 310-3112

Board of DirectorsAndy ZayPresidentZay Leasing & Rentals, Inc.4957 N. BroadwayHuntington, IN 46750Phone: 260.356.1588Email: [email protected]

Fritz KreutzingerChairman of the BoardLegislative ChairmanFritz AssociatesP.O. Box 168Fishers, IN 46038317.842.2228Fax:[email protected]

Tony Del RealVice PresidentDel Real Automotive Group1002 Walnut AvenueFrankfort, IN 46041Phone: 765.446.9204Email: [email protected]

Bruce NortonTreasurerDrive 1 USA Inc.1512 W. 96th Avenue Suite CCrown Point, IN 46307Phone: 219.661.1000Email: [email protected]

Sharon BrennanSecretaryFritz in Fishers8599 E. 116th StreetFishers, IN 46038Phone: 317.842.2228Email: [email protected]

Tricia TrentTrent Auto Sales1327 N 6th St.Vincennes, IN 47591812.882.3772Fax: [email protected]

Jennifer CottonDyer Auto Auction219.865.2361Fax: [email protected] Kim GrahamKim Graham, Inc.1648 A US 31 SGreenwood, IN 46143317.888.0100Fax: [email protected] Ed WhiteWhite’s Auto Sales1105 McKinley Ave.Rensselaer, IN 47978219.866.7553Fax: [email protected]

John StumpfGreater Kalamazoo Auto AuctionP. O. Box 697Schoolcraft, MI [email protected] Tony HoukKesler-Schaefer Auto Auction, Inc.5333 W. 46th StreetIndianapolis, IN 46253317.297.2300Fax: [email protected] Tyler TrentTrent Auto Sales1327 N 6th St.Vincennes, IN 47591812.882.3772Fax: [email protected]

Travis HuberThe Auto Store5474 US Hwy. 6, Suite APortage, IN [email protected] Harold Drees H.T.D., Inc.200 E. Main StreetThorntown, IN 46071317.402.2312Fax: [email protected]

Doug AlveyFirst Class Auto Sales, Inc.695 W. 900SHebron, IN 46341219.996.2600Fax: [email protected] Andrew J. InabnittApproval Auto Credit Inc.9825 Huggin Hollow Rd.Martinsville, IN 46151317.422.8001Fax: [email protected] David D. Baldwin IIBest Deal Auto Sales, Inc.1875 SR 8Auburn, IN 46706260.357.0099Fax: [email protected] Debbie AndersenExecutive Director128 S. East Street # 1393Crown Point, IN [email protected]

WHAT’S NEW

inside

The 2013 Indiana General Assembly will convene on Monday, January 7th for what is shaping up to be another interesting session. This year is a long session, meaning it’s a budgetary year. At the time of publication, no date had been announced for Sine Die, but it should occur around the end of April.

This will be Governor-Elect Mike Pence’s (R-Columbus) first legislative session, and he’ll be working with a Republican super majority in both the House and Senate. Outside of already signing an Executive Order barring any new business regulations, it will be interesting to see how many of his legislative goals are accomplished this year.

Forecasts from the past year show the State taking in more money than originally planned, so 2013 marks the first time in many years that Indiana will have extra money to spend without draining the State’s reserves. As such, expect education, infrastructure and health appropriations to see funding increases.

The Secretary of State’s Office will also re-introduce their Dealer Services recodification bill. As you may recall, they tried passing this legislation the previous two years. We’ve continued to meet with their office and offer input, and expect this year’s version to contain the same language as the last draft from the 2012 session. I will be sure to keep you updated as this bill progresses through the General Assembly.

Other items expected to be addressed in this year’s session include: eliminating various tax loopholes, sentencing reform and local government reform.

As always, please feel free to contact myself or Frank with any questions, concerns or comments about the 2013 Legislative Session.

We look forward to another great year with the IIADA!

L E G I S L AT I V E U P DAT E

2013 Indiana General Assembly Preview

Certified Master Dealer Program - Feb. & April 2013 Educates dealers on how to manage and grow a profitable business “Effective Management Practices”, “Business Planning”, “Human Resources”, “Merchandising”. “Financial Management” Call (800)756-4232 to sign up.

TAKE US WITH YOUwww.niada.tv - Free Dealer Education 24/7

BY MIKE SOLARI, IIADA LOBBYIST

04 Indiana Legislative Preview08 The CarLawyer06 President’s Message 12 New & Renew Members19 Associate Members20 Member Application22 Compliance Overdrive

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A DV E R T O R I A L

INDEPENDENT DEALERS NEED NEW ‘F&I MANAGER’

Having had the pleasure of serving automobile dealers for more than 50 years, we at Protective Asset Protection are committed to meeting the !nance and insurance needs of our dealer customers.

Like many readers of this magazine, we place great importance on industry studies to ensure we are on top of the latest market trends – and in particular, your needs. However, we recognize selling cars is more than numbers and charts. It’s a people business.

We spend countless hours working to support dealers of all sizes and types. We’re in the car business and a lot of what we do still takes place with a meeting, a handshake, leadership and good in-store training.

More than !ve decades of experience and doing business the old-fashioned way has positioned Protective to exceed the expectations of our dealer customers.

In our goal to share proven dealer solutions, we turned to the largest audience – the growing group of independent auto dealers. We wanted to better understand what you really need to help further drive your F&I sales and pro!ts.

We asked many of you from across the county questions about your operations, current selling processes and the importance of F&I to your businesses. Your feedback was informative and insightful, and aligned with many of the current successful approaches we use today.

Here is a snapshot of what we learned: When we inquired about the types of vehicles and service contracts being sold

today, we learned the average vehicle sold is 3-7 years old with 50,000-100,000 miles on it. We discovered more than 65 percent of you sell vehicle service contracts in your dealership.

When we inquired how Protective could better support you, we learned that ease of doing business is very important, followed by working with a company you can trust. On the technology front, 55 percent of you use or plan to use an electronic device such as an iPad® or a tablet device to educate your current and future consumers about F&I products.

We found that in general, consumers still rely on good, quality education from you to learn about the value of a service contract and most consumers don’t have preconceived ideas about what that value really offers them.

The study reinforces what Protective Asset Protection already does well: helping dealers make money selling F&I products.

So what is the best way to help you be more productive, drive more revenue and increase customer retention within the F&I process?

We think the answer is obvious – hire an F&I manager. No one said it was a simple solution. But an experienced F&I manager brings the knowledge and skills to provide customers with the best options and the true value of making an F&I purchase decision.

Obviously, adding to your headcount is no small task, and we asked ourselves what we could do. So we decided to “!ll” your F&I position for you.

Okay, we didn’t hire an F&I manager for each independent dealer. Instead, we created “the manager.” By combining your critical F&I needs with our 50 years of experience, we built Protective’s Protection Plus Solution, designed exclusively for you.

You might have guessed your new F&I manager is not actually a person but instead is an electronic sales presentation using an iPad, or a desktop/laptop-based solution.

While our new strategy might not replace an experienced F&I manager’s know-how and sales ability, it does provide you a tool to increase service contract sales. With our new F&I solution, you have the ability to offer a vehicle service contract customized to the speci!c needs of your customer, all with easy-to-use technology designed to overcome objections and help close the sale.

We want you to have the closest thing we could provide to an actual F&I manager. Protective’s Protection Plus vehicle service contract and supporting web/iPad app will provide you and your dealership with the next best thing.

Protective Asset Protection looks forward to expanding our nationwide reach and working with independent dealers to introduce them to their new F&I manager. You can learn more about the technology and our goal to bring you innovative new ideas and pro!t-growth strategies by visiting www.newfandimanager.com.

BY RICK KURTZSENIOR VICE PRESIDENT-DEALER SERVICES FOR PROTECTIVE ASSET PROTECTION HAS MORE THAN 23 YEARS OF INDUSTRY EXPERIENCE. PROTECTIVE ASSET PROTECTION PROVIDES F&I PRODUCTS FOCUSED ON ENHANCING PROFITABILITY AND CUSTOMER SATISFACTION. FOR MORE INFORMATION, CALL 800-950-6060, EXT. 5755, EMAIL [email protected] OR VISIT PROTECTIVEASSETPROTECTION.COM.

For many of us, the !rst quarter is full of expectations and anticipation as we set out on a new year. It is challenging to balance all the demands of our Dealerships with our personal, family and civic interests. With the support of family, friends, and associates, this time of year will be rewarding for sure.

It is an honor to be your new Board President for the Indiana Independent Auto Dealers Association (IIADA). I am a relative newcomer to the board, but am very excited and passionate about the prospect of leading a truly worthwhile organization in the coming years.

By way of introduction, I am the third generation in the car business. In a proud legacy in Indiana, following my grandfather and father, my family has operated from three locations in Huntington, Indiana since 1953. I have been directly involved in the car business since graduating from Indiana University in 1988. I’ve been married to the most patient and caring wife ever, Cindy, for more than 17 years, and we have !ve very active children - grade school, middle school and high school. The kids’ pursuits keep us in the gym in the winter, on the diamonds in the summer and on the cross-country trails and football !elds in the fall.

As your Board President, it is my charge to lead and grow our Association. There is power in numbers. From day one, I challenge each of you to enroll our fellow Dealers in the Association. Letters, candy, t-shirts and phone calls are a nice effort - however, a personal handshake and an encouraging reminder to send in the membership application are what will encourage your colleagues to join. Don’t let the opportunity slip by to invite other local dealers, as well as others around the State of Indiana, to join our award-winning Auto Dealers Association.

With a 25-year history to leverage and the best Executive Director – Debbie Anderson – in the country, the IIADA is here to serve you. Please ask questions, share problems, and initiate ideas (business, networking and social).

To our current members: thank you for your commitment to our Association. And to our new members: welcome to one of the !nest Dealer Associations in the United States of America.

In closing, I would like to wish everyone the best for a happy and prosperous 2013! Truly,Andy Zay

260-356-1588

A S S O C I AT I O N N E W S

Letter from the President

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I N D U S T RY N E W S

The CARLAWYER©Here’s our monthly collection of

selected legislative and regulatory highlights, and a recap of some of the PDQ\�DXWR�VDOH�DQG�¿QDQFLQJ�ODZVXLWV�ZH�follow each month.

Remember, what we report here is not even close to being every recent development. We select those we think are important or interesting to car dealers. Note that this column does not offer legal advice. You should consult your dealership lawyer with any legal questions.

We include items from other states. Why? We want you to be able to see new legal developments and trends. Also, another state’s laws might be a lot like your own state’s laws – if AGs or plaintiffs’ lawyers are pursuing particular types of claims, those laws and claims might soon appear in your state.

As always, though, there is no substitute for checking with your own lawyer before you rely on anything we report or if you have any questions.

FEDERAL LAWDebt collectors now subject to

federal supervision: In October, the Consumer Financial Protection Bureau SXEOLVKHG�D�¿QDO�UXOH��HIIHFWLYH�-DQ��GH¿QLQJ�³QRQEDQNV´�WKDW�DUH�“larger participants” in the consumer debt collection market, thereby allowing the agency to supervise large consumer debt FROOHFWRUV�IRU�WKH�¿UVW�WLPH�DW�WKH�IHGHUDO�level.

The CFPB has the authority to supervise “nonbank covered persons” of all sizes in the residential mortgage, private education lending and payday lending markets, but has the authority to supervise only nonbank “larger participants” of markets for other FRQVXPHU�¿QDQFLDO�SURGXFWV�RU�VHUYLFHV��DV�GH¿QHG�E\�WKH�UXOH�

The consumer debt collection market FRYHUHG�E\�WKH�¿QDO�UXOH�LQFOXGHV�WKUHH�PDLQ�W\SHV�RI�GHEW�FROOHFWLRQ��¿UPV�that buy defaulted debt and collect the SURFHHGV�IRU�WKHPVHOYHV��¿UPV�WKDW�collect defaulted debt owned by another company in return for a fee, and debt collection attorneys who collect through litigation.8QGHU�WKH�UXOH��DQ\�¿UP�ZLWK�PRUH�

than $10 million in annual receipts from consumer debt collection activities will be subject to the CFPB’s supervision. The CFPB’s actions are unlikely to directly affect any dealers, but BHPH dealers DQG�VDOHV�¿QDQFH�FRPSDQLHV�PLJKW�¿QG�the debt collectors they employ will be pressed to make changes in their collection practices.

Check your calling practices: In October, the Federal Communications Commission announced that previously made amendments to the Telephone Consumer Protection Act rule took effect Nov. 15, 2012. Amendments to the FCC’s regulation of prerecorded sales messages take effect Jan. 14, 2013. Amendments to the FCC’s regulation of sales calls to cellphones placed using an automatic telephone dialing system or prerecorded message and prerecorded sales calls to residential lines take effect Oct. 16, 2013.

Make sure you discuss the changes with your attorney and make any required changes to your calling practices.

CFPB takes a bite out of American Express: On Oct. 1, the CFPB, a state agency and other federal agencies announced coordinated enforcement actions and orders against American Express companies. The enforcement actions addressed deceptive credit card marketing and debt collection practices that occurred from 2003 to 2012.

The defendants allegedly misled consumers into believing they would receive a cash bonus if they signed up for the American Express “Blue Sky” credit card program, as well as charging unlawful late fees, unlawfully discriminating against new account applicants on the basis of age, failing to report consumer disputes to consumer reporting agencies and misleading consumers about debt collection.

The American Express entities have agreed to restitution totaling approximately $85 million to more than 250,000 affected consumers, and to the imposition of civil money penalties totaling approximately $27 million. Dealers take note – the CFPB has teeth.

STATE DEVELOPMENTSWe have an unusual number of state

developments to report this month.

California regulates BHPH dealers: California AB 1447 requires Buy Here-Pay Here dealers to issue a 30-day or 1,000-mile warranty to the buyer or lessee of a used vehicle bought or leased at retail price, and requires the warranty WR�FRYHU�VSHFL¿HG�SDUWV��7KH�%+3+�GHDOHU�is required to either repair those covered parts that fail or, at the dealer’s election, cancel the sale or lease and reimburse the buyer or lessee.

The new law also prohibits BHPH dealers from requiring buyers to make payments in person, with the exception of the down payment for the vehicle; prohibits BHPH dealers from repossessing vehicles or charging a penalty following timely payment of a deferred down payment on the grounds that the payment was not made in person; and prohibits BHPH dealers from, after the sale of the vehicle, tracking the vehicle using an electronic tracking device and disabling the vehicle with starter interrupt WHFKQRORJ\�XQOHVV�LW�VDWLV¿HV�FHUWDLQ�disclosure requirements.

AB 1534 requires BHPH dealers to prominently and conspicuously display a label on any used vehicle offered for sale that states the reasonable market value of the vehicle. The new law requires the label to contain certain information used to determine the vehicle’s reasonable market value and the date the value was determined. The law also requires BHPH dealers to provide prospective buyers a copy of any information obtained from a nationally recognized pricing guide the BHPH dealer used to determine the reasonable market value.

Let’s hope that what happens in California stays in California, but you and your state association need to be alert for consumers offering “copycat” legislation like this in your state.

“Show Me” some compliance: On Sept. 25, Missouri Attorney General Chris Koster reached a settlement with Carsafe LLC, a vehicle extended service contract seller, that requires Carsafe to pay $10,000 in restitution and $12,500 to the state. The consent judgment prohibits Carsafe from using deceptive sales techniques in the sale of service contracts and requires the company to detail the important terms and conditions

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of the contract during sales phone calls to consumers.

If Carsafe completes a contract with a consumer on the phone, it is required to electronically record all transactions and must mail the written contract to the consumer within three business days.

“Hey buddy, can you spare a half-million?” On Oct. 1, New York Attorney General Eric T. Schneiderman announced KLV�RI¿FH�SUHYDLOHG�LQ�D�ODZVXLW�DJDLQVW�several dealerships and their owner for deceptive practices in connection ZLWK�WKH�VDOH�DQG�¿QDQFLQJ�RI�YHKLFOHV��including publication of misleading advertisements in the form of deceptive contest promotions, misrepresenting the WHUPV�RI�WKH�VDOH�DQG�¿QDQFLQJ�GXULQJ�sales negotiations, adding the costs of unwanted aftermarket items into contracts �³SD\PHQW�SDFNLQJ´��DQG�¿QDQFLQJ�agreements, and using high-pressure sales tactics to induce consumers into signing blank contracts.

The defendants must pay a total of $510,000, which includes restitution of $294,500 to 46 victims and $215,500 in civil penalties and costs.

LITIGATION&ODVV�FHUWL¿FDWLRQ�GHQLHG�LQ�VXLW�

over spot delivery transactions when individual analysis required:

Two individuals went to a dealership to buy cars. They both signed retail installment sales contracts and spot delivery agreements. Later, the dealership asked the individuals to sign new contracts with different terms. The individuals ¿OHG�D�FODVV�DFWLRQ�DJDLQVW�WKH�GHDOHUVKLS��alleging violations of the Truth in Lending Act, the Equal Credit Opportunity Act, the Ohio Consumer Sales Protection Act and the Ohio Uniform Commercial Code.

The plaintiffs moved to certify a class and the magistrate judge recommended WKDW�FHUWL¿FDWLRQ�EH�GHQLHG��7KH�plaintiffs objected to the magistrate’s recommendation, but the U.S. District Court for the Northern District of Ohio adopted the recommendation.

As to the TILA claim, the court found the dealership had various customers sign different sales documents, which were not always the forms signed by the plaintiffs. Therefore, the proposed class was not DVFHUWDLQDEOH�EHFDXVH�RI�WKH�VLJQL¿FDQW�differences in forms signed by the various proposed class members.

With respect to the ECOA, OCSPA and UCC claims, the court found it would need to make individual factual determinations for each class member, rendering a class action unfeasible. See Givens v. Van Devere, Inc., 2012 U.S. Dist. LEXIS 131931 (N.D. Ohio September 17, 2012).

Lease assignor liable for failing to repurchase lease executed by identity thief: Any dealer who has an agreement ZLWK�D�¿QDQFH�FRPSDQ\��EDQN�RU�FUHGLW�union to sell its retail installment contracts or leases will be interested in this case. A leasing company entered into a dealer DJUHHPHQW�ZLWK�D�¿QDQFH�FRPSDQ\�WR�assign leases and leased vehicles to it. The agreement contained certain warranties, including a warranty that the lease and all related instruments would be executed by individuals authorized to do so. The leasing company was required to repurchase any lease if any warranty was breached.

The leasing company assigned a lease to WKH�¿QDQFH�FRPSDQ\�WKDW�ZDV�H[HFXWHG�E\�someone involved in identity theft. After WKH�¿QDQFH�FRPSDQ\�GLVFRYHUHG�WKH�IUDXG��it demanded that the leasing company repurchase the lease. The leasing company UHIXVHG��7KH�¿QDQFH�FRPSDQ\�VXHG�IRU�breach of contract and moved for summary judgment.

The trial court granted the motion. On appeal, the leasing company argued it ZDV�QRW�REOLJDWHG�WR�WKH�¿QDQFH�FRPSDQ\�because it was only responsible for making a good faith effort to verify identity, as established by the other warranties. The &RXUW�RI�$SSHDOV�RI�7H[DV�DI¿UPHG�

The appellate court determined that the

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C O N T I N U E D F RO M PAG E 9

The CARLAWYER©

The following information is a guideline for auto dealers to use. Your attorney and accountant should also be consulted regarding your individual records. The IRS website at www.irs.gov is also a useful resource.

ACCOUNTING RECORDSAudit Reports PermanentlyAccounts Receivable and Payable Ledgers 8 yearsBank Statements & Reconciliations 5 yearsCancelled Checks 5 yearsCapital Stock Book PermanentlyCash Disbursement and Cash Receipts Journals 8 yearsExpense Reports 6 yearsFinancial Statements PermanentlyGeneral Ledger and Journal PermanentlyInventory Records 8 yearsNotes Receivable Ledger 8 yearsParts and Services Sales Journal 8 yearsPayroll Earnings Records 5 yearsPayroll Journal 5 yearsPayroll Time Cards 3 yearsPetty Cash Vouchers 3 years Petty Cash Summary 3 yearsPrepaid and Accrued Expenses Journal 3 yearsSubsidiary Ledger 8 yearsTrial Balances 8 years Vouchers-Vendors or Employees 8 years

CORPORATE RECORDSArticles, By-Laws, Minutes, Corporate Records Permanently

CORRESPONDENCEGeneral 10 yearsLegal and Tax Permanently

OPERATIONSAccident Reports 6 yearsBills of Lading 10 yearsCredit Applications-denied 25 monthsCredit Card Slip 1 yearCustomer Files 10 yearsDamage Disclosure Statements 5 yearsEmployment Applications – Terminated 3 yearsEmployment Applications – Hired 3 years past terminationInsurance Policies – Expired PermanentlyInternal Repair Orders 3 yearsJunking Certi!cate 3 yearsOdometer Statements 5 yearsOSHA Records 6 yearsPurchase Orders 6 yearsRepair Estimates 9 monthsRepair Order Check Sheet 2 yearsRepair Order 6 yearsRetail Installment Contract, assigned 10 yearsRetail Installment Contract, not assigned 10 years past expirationSales Invoices 6 yearsService Contracts/Extended Warranties 10 years past expirationShipping and Receiving Reports 6 yearsVehicle Invoices 6 yearsVehicle Purchase Orders 10 yearsVendor Invoices 6 years

TAX DOCUMENTSForm 8300 ($10,000 Cash Reporting Form) 5 yearsIncome Tax Returns (federal and state) PermanentlyIRS Audit Results PermanentlyUnemployment Tax Returns (federal and state) 5 yearsWithholding Tax Returns (federal and state) 5 yearsWithholding Tax Statements 5 years

OHDVLQJ�FRPSDQ\�ZDV�OLDEOH�WR�WKH�¿QDQFH�FRPSDQ\�because the dealer agreement stated the leasing company was obligated to repurchase a lease if it breached any warranty, so the other warranties did not establish that only a good faith effort was required. See Transworld Leasing Corporation v. Wells Fargo Auto Finance, LLC, 2012 Tex. App. LEXIS 8275 (Tex. App. October 3, 2012).

Court refuses to dismiss RICO and negligent misrepresentation claims against dealership and its owner: An individual went to a dealership to buy a used car after seeing numerous advertisements by the dealership featuring its owner. The advertisements included a trademarked phrase by the owner: “I don’t care about your credit, I care about you.”

The individual signed a sales contract for a used car. After leaving the dealership, she realized she had paid a larger down payment than she had discussed with the salesman, which the dealership attributed to sales tax. She had many problems with the car and attempted to return it, but the dealership refused. The vehicle was eventually inoperable, and the individual sued the dealership, the owner and the salesman for violating numerous federal and state laws.

The dealer moved to dismiss the Racketeer ,QÀXHQFHG�DQG�&RUUXSW�2UJDQL]DWLRQV�$FW�DQG�QHJOLJHQW�misrepresentation claims, but a magistrate judge entered a recommendation to deny the dealer’s motion. The U.S. District Court for the Western District of Tennessee adopted the magistrate’s recommendation.

First, the court found that the individual properly pled the elements of wire fraud as the predicate act for purposes of RICO liability and the use of interstate electronic communication – in this case, the advertisements – in furtherance of a fraudulent scheme. The court also found the individual adequately alleged a RICO enterprise and a pattern of racketeering activity, a relationship between the predicate acts and a threat of continuing activity.

The court also concluded that the magistrate judge correctly recommended the negligent misrepresentation claim against the owner not be dismissed where it could QRW�¿QG�DW�WKDW�VWDJH�RI�WKH�OLWLJDWLRQ�WKDW�WKH�RZQHU¶V�trademarked phrase was mere puffery as opposed to a negligent misrepresentation.

The individual also alleged that the owner failed to display required Federal Trade Commission disclosures on vehicles for sale at the dealership, which could support a claim of negligent misrepresentation. See Moore v. It’s All Good Auto Sales, Inc., 2012 U.S. Dist. LEXIS 141190 (W.D. Tenn. September 30, 2012).

There’s this month’s roundup! Stay legal, and we’ll see you next month.

BY THOMAS B. HUDSON AND NICOLE FRUSH MUNROTOM ([email protected]) AND NIKKI ([email protected]) ARE PARTNERS IN THE LAW FIRM OF HUDSON COOK, LLC. TOM IS THE AUTHOR OF SEVERAL BOOKS, AVAILABLE AT WWW.COUNSELORLIBRARY.COM. TOM IS ALSO THE PUBLISHER OF SPOT DELIVERY®, A MONTHLY LEGAL NEWSLETTER FOR AUTO DEALERS, AND THE EDITOR IN CHIEF OF CARLAW®, A MONTHLY REPORT OF LEGAL DEVELOPMENTS IN ALL STATES FOR THE AUTO FINANCE AND LEASING INDUSTRY. NIKKI IS A CONTRIBUTING AUTHOR TO THE F&I LEGAL DESK BOOK AND FREQUENTLY WRITES FOR SPOT DELIVERY. SPOT DELIVERY, CARLAW AND THE BOOKS ARE PRODUCED BY COUNSELORLIBRARY.COM LLC. FOR INFORMATION, CALL 410-865-5411 OR VISIT WWW.COUNSELORLIBRARY.COM. COPYRIGHT COUNSELORLIBRARY.COM 2012, ALL RIGHTS RESERVED. SINGLE PUBLICATION RIGHTS ONLY, TO THE ASSOCIATION. (11/12) HC# 4834-7622-9905.

Record Retention for Auto Dealers

C O M P L I A N C E U P DAT E

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IIADA RECOGNIZES THE FOLLOWING MEMBERS

Circle City EnterprisesRon Povinelli Sr.Indianapolis

Indiana Auto AuctionEric AutenriethFort Wayne

Joe’s Auto SalesGeorge KrierIndianapolis

Leep’s Highway Auto SalesGerald LeepSchererville

GWC WarrantyWilkes-Barre

Arthur Inc., Auto SalesAva & Lloyd ArthurSolsberry

What A Deal MotorsScott EakinsKokomo

Russel Kobel InsuranceRussel KobelBurr Ridge

Belgray Auto Sales*Lee GrunerLouisville

Heritage Acceptance Corp.Curt HolmesElkhart

Triumph Consulting ServicesJack HaworthFishers

Main Street MotorsJohn KlisurichValparaiso

Heritage Crystal CleanJim SkeltonElgin

ADESA Indianapolis Auto AuctionDave EmersonPlain!eld

RC LeasingRandy ChuppElkhart

Druley InvestmentsThomas E. DruleyLaotto

Gagnon MotorsJohn GagnonAkron

Premier Auto Sales*John MorgavanValparaiso

Rosnett EnterprisesBrian RosnettTerre Haute

45th Street MotorsKirk SlikasHighland

Bessler’s Trackside Auto DepotDoug BesslerBatesville

Bob Sullivan MotorsBob SullivanNew Palestine

South Bend Mishawaka Auto AuctionGregg KobelMishawaka

Ohio Valley Auto BrokersDarrel EisslerNewburgh

Shaver Preferred MotorsMichael ShaverMerrillville

30 West AutoRick JacksonWarsaw

Clark County Auto AuctionMatt FetterJeffersonville

Cars To GoMark DimmichLafayette

Sam & Ed WolfPaul ShillingsIndianapolis

Cars2you.comStoyan StoyanovMishawaka

Tom Wood Automotive GroupTom WoodIndianapolis

Curtis Motor Sales Co.Mike HamiltonIndianapolis

Eaton Auto SalesJohn EatonMt. Vernon

C & G Auto SalesHarry GeorgalasGary

Quick AutoDan MorrisonElkhart

Burgess MotorsRon BurgessMichigan City

Roadside AutoDaniel EarlLebanon

Rock Solid Motor Co.Reginald ColbertWest!eld

Patrick’s Car and TruckMike HarrisWhiteland

Diversi!ed Vehicle Services*Ray RamseyIndianapolis

Blackhawk Finance*Bill CaanDesPlaines

A & M Auto Sales and Repair*Wissam HosnWhiting

Elite Auto Brokerage*Jonathan DownsNoblesville

Westside MotorsDelphi

Plain!eld Auto SalesMichael FirestonePlain!eld

Greer MotorsKent GreerThayer

Wilson MotorsAmy WilsonLawrenceburg

MotoramaBill McLaughlinMooresville

Ritchie Auto SalesDanny RitchieMiddlebury

Stutzman Motor SalesRandy StutzmanGoshen

Used Car FactoryJim WheelerFranklin

Economy Auto Sales of KnoxGeorge MammarellaKnox

KLM Car & TruckMatt EllegoodColumbus

Gaeta Auto SalesEva GaetaLafayette

Midwest Trailer SalesMax BelinNorth Vernon

NJ EnterprisesNicholas LoydIndianapolis

Thank you for your membership in Indiana’s trade association forINDEPENDENT DEALERS

The following members have joined* or renewed their membership since our last issue of Car Lines.

Test Drive Generator Does All the WorkOne of the great things about the Internet

invading the dealership business is the innovative new ways it helps sell cars. Certainly the availability of information about every vehicle on your lot has complicated the business – but sometimes it’s for the better.

An example is the simple idea that customers visiting your website should be able to make an appointment to test drive the car they like without any effort on the part of the dealer. That’s a good thing, because every day there are thousands of leads in your market, and it is pretty tough to engage them all.

Test Drive Generator, a company based in Mukilteo, Wash., has perfected software that allows any dealer, on any type of automotive website platform, to allow customers to schedule their own test drives without any human intervention. Customers just click the button next to the car they like and schedule

the test drive on their own.Why is that a good thing? Think about

it. If the customer is scheduling his or her own test drive, and Test Drive Generator appointments show up 90 to 95 percent of the time, why, oh why, would you want a salesperson to stick his nose in and screw that up?

Once the customer has scheduled a test drive, the folks at Test Drive Generator say, “Leave them alone!”

Nothing good will come of an email or phone call from a salesperson. At best, the customer will still show up. At worst, something the salesperson says or writes will give the customer second thoughts about coming.

Now, you might say your salespeople are tremendous, but why mess with a good thing? Customers are coming for a test drive. Leave them alone and let them arrive.

Have you ever seen a salesperson talk a person out of a sale by talking too much? It’s not a pretty sight.

Test Drive Generator takes care of scheduling the test drive appointment. It VHQGV�HPDLO�FRQ¿UPDWLRQV�DQG�UHPLQGHUV�and text reminders. The Test Drive Generator system has a 90 to 95 percent show ratio and a 60 to 70 percent sold ratio. Perhaps the best thing about Test Drive Generator is the price: $250 per month for a dealership, billed month-to-month, with no long-term contract and no setup fees.

Seems like a pretty good deal to me, whether you get 10 test drives per month or 100. If you want to hear more, call Test Drive Generator at 877-696-0415, email [email protected] or visit www.TestDriveGenerator.com to book a demo.

BY BRETT STEVENSONDEALER MARKETING MAGAZINE

N E W P RO D U C T S

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2013: What’s In StoreD E A L E R S H AV E S E E N T H E E R RO R O F T H E I R PA S T WAYS A N D A R E E N J OY I N G T H E S P O I L S O F T H E I R M O R E D I S C I P L I N E D L A B O R

What’s in store for your store in 2013?If it’s anything like 2012, it should be another

good year to be in the Buy Here-Pay Here industry. The new year will not be without its challenges, though. In fact, there are certain areas of the industry that could be more challenging than ever.

To get an idea of what to look forward to in 2013, we !rst need to review how 2012 treated the BHPH world. Tax season was again sporadic at best, which pretty much set the tone for all facets of the business for the rest of the year.

From a pro!tability standpoint, the dealers I have the distinct privilege of working with enjoyed another modest 3 percent increase in pro!tability in 2012 versus 2011. That increase was smaller than the previous year-over-year, and was due mostly to the continued focus on the “rightsizing” of overall operations.

Dealers focused on their entire operations, from top to bottom, on continuing not only to “cut the fat” but to keep it off and run their operations based on the cash being generated instead of relying on lines of credit.

I expect that focus to continue in 2013. Though funding sources have become more readily available, overall most dealers will be focusing again on generating the capital necessary to run their businesses from their businesses.

As always, there will be dealers looking to grow aggressively through borrowing, and rates will continue to make that a very viable option. I don’t see rates rising drastically in the coming year, so it will still be a good time to borrow.

Having said that, I still see it being dif!cult to secure new lines of credit in 2013. It’s going to take some patience and the willingness to educate some institutions on our industry.

Another !nancing option that has received quite a bit of interest recently is selling blocks of portfolios or payment streams to generate capital to operate with. The available resources for that are at an all-time high and rates seem attractive as well. Depending on the resource, it can be done either at point of sale or on seasoned receivables.

Rates will depend on the resource, aging, recourse aspects, performance and securitization. The key to this option is reinvesting the capital received back into receivables in a timely fashion so as not to affect future cash "ow levels.

Sales volume for our dealer clients increased by a modest 3 percent in 2012 over 2011. Not a record-setting year by any means, but a sporadic tax season and the resurgence of subprime and special !nance are the two dominant factors leading to it. Dealers

seemed to want to sell what their cash "ow and underwriting standards dictated rather than sell as much as possible.

We all know we can sell as many as we want or have the !nancial resources to in this industry. There doesn’t seem to be a lack of customers needing or wanting what we have to offer.

We will see those factors continue to hold for 2013. We should have the customers in the market to sell the vehicles we want or need. The biggest question will be the quality of those customers and the availability of inventory.

Now, I’m normally a glass-half-full kind of guy, but when it comes to this, I think the glass might still be half empty. Even though the prices somewhat leveled off during the last half of last year, the numbers still seem to be dwindling for that sub-$5,000 vehicle.

The 2012 portfolio performance included some stabilization from a dollar loss standpoint, but from a number loss standpoint, there was a slight increase or worsening from 2011.

That was driven by a couple of factors, the !rst being the need for inventory. Some dealers accelerated their repo times when a desirable unit was involved. That also helped stabilize the dollar losses, as the vehicles were repossessed earlier and in better condition and thus earned larger recovery amounts.

The other factor was renewed focus on underwriting and the overall collection process. Dealers remained more disciplined in both areas, seeking quality over quantity.

For 2013, I see more of the same. Dealers have seen the error of their past ways and are enjoying the spoils of their more disciplined labor. Expect the average charge-off to remain essentially the same and the number as a percentage of sold to remain higher than in past years, but expect collections dollars to improve as well as overall collection effectiveness.

The biggest thing to affect our industry again in 2013 will no doubt come in compliance. The Consumer Financial Protection Bureau was very active in 2012. It has reached out to a few dealers on a number of auditing fronts. Although no new formal regulations have been drafted, it is truly only a matter of time.

We did dodge a fairly substantial bullet with the legislation that was passed – and more important, the bill that was vetoed – in California. While it would only have affected California, passing tight new regulations easily could have in"uenced other state’s legislators.

Here is the best advice I can give to existing dealers as well as those wanting to get into the business in the coming year: don’t wait. Don’t wait to get compliant. Don’t wait to spend a little money to do so. Don’t wait to review all processes and procedures. Don’t wait to review all expenses. Don’t wait to review all of your employees. Don’t wait to train.

And de!nitely don’t wait to sell cars, collect money and make money.

BY BRENT CARMICHAELEXECUTIVE CONFERENCE MODERATORNCM ASSOCIATES [email protected]

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D E A L E R S H AV E S E E N T H E E R RO R O F T H E I R PA S T WAYS A N D A R E E N J OY I N G T H E S P O I L S O F T H E I R M O R E D I S C I P L I N E D L A B O R

United Acceptance Joins as a Bronze Partner8QLWHG�$FFHSWDQFH��,QF��D�¿QDQFLDO�RUJDQL]DWLRQ�IRXQGHG�LQ��WKDW�SURYLGHV�capital and servicing solutions to Buy Here-Pay Here vehicle dealerships, captive ¿QDQFH�FRPSDQLHV�DQG�LQGHSHQGHQW�¿QDQFH�FRPSDQLHV��KDV�MRLQHG�1,$'$�DV�D�Bronze level National Corporate Partner.

UAI’s strong long-term relationships with auto dealers and its employees have contributed to its growth from a local company in Atlanta to an organization that purchases receivables nationwide.8$,¶V�PLVVLRQ�LV�WR�EH�D�VWURQJ�¿QDQFLDO�SDUWQHU�WR�XVHG�FDU�GHDOHUVKLSV��DOORZLQJ�

WKHP�WR�DFFHOHUDWH�WKHLU�SUR¿WV�WKRXJK�WKH�VDOH�RI�WKHLU�UHFHLYDEOHV�±�LWV�VORJDQ�LV�³3UR¿WV�7KURXJK�3DUWQHUVKLS�´,Q�D�WLPH�LQ�ZKLFK�LW�LV�EHFRPLQJ�LQFUHDVLQJO\�GLI¿FXOW�WR�VHFXUH�FUHGLW�IDFLOLWLHV��

selling contracts can be a viable source of raising capital. United Acceptance purchases automobile installment sales contracts (bulk receivables) from BHPH GHDOHUV��IUDQFKLVH�GHDOHUV��¿QDQFH�FRPSDQLHV�DQG�EDQNV��,WV�EXON�SXUFKDVH�SURJUDP�LV�VLPSOH��DQG�TXLFN�IXQGLQJ�LV�DYDLODEOH�WR�DVVLVW�ZLWK�LPPHGLDWH�FDVK�ÀRZ�QHHGV�

UAI can turn uncollected receivables into liquid cash, reduce risk and UHSRVVHVVLRQ�FRVWV��LPSURYH�\LHOG��LPSURYH�SUR¿W�YHUVXV�SRLQW�RI�VDOH�¿QDQFLQJ�DQG�reduce stress by allowing dealers to sell vehicles instead of collecting debts.

FOR MORE INFORMATION, VISIT WWW.UAIDIRECT.COM OR CALL 877-281-2360.

A S S O C I AT I O N N E W S

In November and December, more than 4 million American businesses, including 740,000 retailers, will receive 2012 Economic Census forms. Responses to the questionnaire are required by law to be returned by Feb. 12.(YHU\�¿YH�\HDUV��WKH�JRYHUQPHQW�

conducts the Economic Census to develop a comprehensive portrait of American business, from the national to the local level, relying on timely and accurate data.

The U.S. Census Bureau has created a web page __ business.census.gov __ to provide information about the Economic Census as well as statistics businesses can use to assess and grow their business operations.

The site includes webinars and videos to educate businesses about the census and what it means to them, as well as a section geared toward small businesses.

FOR MORE INFORMATION, VISIT BUSINESS.CENSUS.GOV.

Economic Census Coming Soon

E C O N O M I C N E W S

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16

The Environmentally Conscious Dealer

N O T O N LY I S I T C O S T- E F F E C T I V E , I T CA N B E F I N A N C I A L LY R E WA R D I N G T O E M B R AC E T H E G R E E N R E VO L U T I O N .

Each day, consumers and businesses grow more environmentally conscious.

Yet we are a long way from where we need to be.

Make no mistake. This is a call for action.For all of us in the auto industry, each car

deal is part of a gigantic revenue machine. Our focus is on retail market value vs. wholesale cost. Subtract recon expenses, advertising expenses, commissions, etc., and we’re left with net pro!t.

The question many of us fail to ask: What is the impact on the environment?

Fact: The second-leading cause of global warming is carbon dioxide emissions from burning gasoline.

Our industry is married to the internal combustion engine. Our success is predicated on pro!ts from selling large volumes of gas-guzzling, oil-burning hunks of metal to consumers.

Often we gauge our performance on volume. The more, the better.

Given the nature of our industry, it’s vital that we all embrace, with open arms, the need for a heightened level of environmental responsibility.

There are countless ideas each of us can implement today that will make a difference to the environment while feeding our bottom lines.

GREEN SOLUTIONSRecycle: In my travels and visits to

dealerships, I’m constantly surprised – and disappointed – by the lack of recycling bins at dealerships. That is the easiest way imaginable to have a positive impact on the environment.

Electronic fax: There are several companies that provide the service. Using an e-fax service drastically cuts down on paper and ink, and is super easy to implement.

Forget traditional mailers: Typical response rate on mail advertising is a mere 2 percent. Save the paper, ink, fuel and money. Allocate those resources elsewhere.

Turn off the printer: We print so many things that just don’t need to be printed. Credit reports, for example. Instead try saving them on your computer along with the customer’s email address.

Turn off excess lighting.Use a green demo: Take the Prius for a spin

instead of the Yukon. Most of us drive without passengers a large majority of the time. Driving a smaller, more ef!cient vehicle will save you gas money while reducing toxic greenhouse emissions.

Walk or cycle: Go by foot or bike to work or to your favorite lunch or coffee spot.Smartphone apps: Use the extremely broad

selection of apps to replace paper whenever possible.

Do business with green businesses: Ask your body shop how it disposes of waste. Choose companies and vendors that act in an environmentally responsible manner.

Eliminate bottled water: Bottled water is extremely inef!cient. Instead, install and use a water !ltration system.

Hit the switch: Turn off and/or unplug unused appliances and computers when they’re not in use.

Lot lights: Be diligent about adjusting the timer that controls your lot lights.

Every one of these items can be easily implemented today with little or no negative impact on your business. In most cases, you will experience a signi!cant cost savings, especially when that savings accumulates over the course of one or more years.

Simply put, we can no longer ignore the fact we are depleting the world’s natural resources. We are driving at a very fast pace toward a hotter and hotter future. Why ignore the facts when you can bene!t in numerous ways by making some positive changes?

In addition, the consumer climate has changed to the point that it is not only cost- effective, but it can be !nancially rewarding to embrace the green revolution. Be green and make sure the world knows! You will attract better talent along with more customers as a result.

ELECTRIC VEHICLES AND HYBRIDSA major industry shift is staring all of us

in the face like a hungry bear fresh out of hibernation, and the electric/hybrid market segment is growing rapidly. Nearly every major manufacturer is getting into the space, and new competitors are emerging with cutting-edge products that use state-of-the-art technology to meet consumer demand.

The products currently on the market are extremely compelling, and the future of the segment is exciting.

C O N T I N U E D O N N E X T PAG E

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Here’s a lineup with some information about several of the products available now:

Tesla Model S: The !rst full electric vehicle to (mostly) overcome consumers’ No. 1 concern – range anxiety. There are different battery options designed to go up to 160, 230 or even 300 miles per charge at 55 mph.

Consumer interest in the product is phenomenal. The fast, sporty and beautiful sedan is expensive for the average consumer, but will be attractive to the masses on the remarketing side.

Tesla Roadster: Similar to the Model S, but not as practical. This is a pure sports car.Fisker Karma: Electric/hybrid with extended

range. It can go up to 50 miles on 100 percent electric power, then the internal combustion engine engages for another 250 miles. It averages about

58 mpg.BMW ActiveE: BMW’s !rst full electric

vehicle is only available in select markets on a two-year lease.

Toyota Prius: Arguably the most cost-effective solution on the market. Though not a full electric vehicle, it deserves a spot in the lineup based on its massive success in the U.S., coupled with its extreme ef!ciency at 50 mpg.

Chevrolet Volt: The Volt can go up to 50 miles on full electric power before engaging the gasoline engine for up to another 350 miles. Range anxiety is a thing of the past with this electric/hybrid vehicle.

Ford Focus Electric: The Focus can go up to 100 miles on a charge and is more affordable than any of its luxury counterparts. Super-fast charging, and 100 percent electric.

Nissan Leaf: The Leaf was the !rst mainstream pure electric car offered for sale in the U.S. It is an excellent urban commuter vehicle but falls short when it comes to the range anxiety concern.

Consumers are more informed and environmentally conscious today than ever. They are actively seeking out and going out of their way to !nd green solutions that meet their needs.

Additionally, gasoline prices are still historically high, so the !nancial and environmental need for alternative fuel solutions is growing by the minute. As more products emerge that meet the demands of the modern “eco-sumer,” those products will inevitably gain more traction.

When it comes to pricing, most of those vehicles are at the top end or just outside the reach of the average consumer. But as they "ow into the remarketing space, a majority of them will fall right into the sweet spot.

Unfortunately, a large portion of our electric power comes from coal-burning sources. According to the Energy Information Administration, the most predominant sources of electricity in the U.S. come from coal (48.7 percent), natural gas (21.5 percent) and nuclear power (19.4 percent).

Because so much of our energy is created by coal-burning power plants, it is arguable

THE ENVIRONMENTALLY CONSCIOUS DEALER

that electric vehicles consume similar amounts of energy and as a result produce nearly as much greenhouse emissions as gas-powered vehicles. Until we create more clean and renewable energy sources, electric vehicles will remain an imperfect solution, But they represent a big step in the right direction.

In the end, innovation without capitalization will die. But if enough of us buy in and support the movement, the sky is the limit.

The question remains: Where do you stand on the matter? Are you going to be one of the dealers with your hand raised when an electric vehicle crosses the block? Or are you going to stand on the sidelines and watch your competitors lead the charge?

Technology and the environment are two major items that in"uence and change how our industry looks and feels. DSC remains committed to providing you not only with the best !nancing options, but also cutting edge technological solutions to enhance and take your business to the next level.

We are also committed to shifting with your business as environmental needs and consumer demand dictates.

We are con!dent we have the most "exible "oorplan !nance solutions in the industry, designed to empower you and your business to embrace change and grow green.

BY GARRETT JOREWICZ NORTHWEST REGIONAL DIRECTOR OF DEALER SERVICES CORPORATION.

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18


AU C T I O N N E W S

Dealers across the country complain about WKH�GLI¿FXOW\�RI�¿QGLQJ�HQRXJK�RI�WKH�³ULJKW´�cars at auctions.

The complaint is completely understandable. The recession slowed the pace of new vehicle sales, leases and trade-ins, which has diminished used vehicle supplies at auctions.

In addition, vehicle owners are holding onto their cars longer – industry statistics say the average age of a vehicle on the road now is 11 years – another crimp in the auction vehicle pipeline.

On top of that, there are more dealers buying vehicles at auctions. The lanes are more crowded and there’s greater competition from online buyers for independent and franchise dealerships.

All that means one thing: Dealers who want to maintain, if not grow, their used YHKLFOH�VDOHV�YROXPH�DQG�SUR¿WDELOLW\�PXVW�take their efforts to acquire vehicles at auctions to the next level.

That means expanding the number of auctions you rely on to source inventory. Simply put, you need to cast a wider net and review more cars to ensure you and your buyers don’t come home from auctions empty-handed, or, worse yet, bring a bunch

of second-rate cars back to your dealership.I’ve come across three best practices from

independent and franchised dealers who have met the current used vehicle sourcing challenge with an effective and fresh perspective.

Go beyond “tried and true” auctions: Dealers say relying on one or two local auctions isn’t enough in today’s era of tight used vehicle supply. Many dealers have doubled or tripled the number of wholesale auctions they use to acquire used vehicles. Their new sourcing footprint often extends across several state lines.7KDW�FDQ�EH�D�GLI¿FXOW�FKDQJH�IRU�VRPH�

dealers/buyers. It means traveling farther and going beyond the familiar. It also adds greater pressure to acquire the cars for the “right” money because of the additional costs for transportation and related fees.

The good news: Every dealer faces the same challenge, which means those who are able to expand their sourcing efforts in the PRVW�WLPH��DQG�FRVW�HI¿FLHQW�PDQQHU�KDYH�DQ�edge over their competitors.

Get online: A growing number of dealers are sourcing a portion of their auction vehicles using online platforms from auction providers. That allows them to expand their

access to a larger number of vehicles in a more WLPH�HI¿FLHQW�PDQQHU�

Still, there are many dealers who prefer physical auctions, and some who refuse to buy online at all.

The resistance comes from a belief that dealers need to “see, touch and smell” the cars they might purchase. Many of those dealers are concerned that a vehicle purchased online will show up at the dealership with an XQSOHDVDQW�VXUSULVH�WKDW�ZDVQ¶W�LGHQWL¿HG�LQ�D�condition report or other disclosure.

I faced the same challenge when I was a dealer. At my store, we bit the bullet and went online to properly feed our inventory needs. We recognized there wasn’t any other way to get the cars, sales volumes and inventory turns we expected.

To be sure, we had a few surprises when the vehicles arrived at our dealership. But when that occurred and we initiated auction arbitration processes, we were rarely, if ever, GLVVDWLV¿HG�ZLWK�WKH�UHVROXWLRQ�

As the old saying goes, the squeaky wheel gets the grease.

A related tip: To help mitigate the risk of surprises, we would limit our live and proxy bids to vehicles with auction- or dealer-generated condition reports (with a score of 3 or better) to better size up each car’s potential risks.

Speed up your vehicle research and reviews:�$W�P\�GHDOHUVKLS��LW�WRRN�¿YH�WR�VL[�hours, twice a week, to review auction run lists DQG�UHVHDUFK�WKH�FDUV�WKDW�¿W�RXU�LQYHQWRU\�acquisition parameters. On a per-car basis, we averaged 10 minutes to access condition reports and valuation guides and determine our bidding strategy.

Over time, we were able to reduce that to about one minute per vehicle, thanks to technology and tools that helped us streamline our research process to determine if a car was worthy of our attention. Likewise, the tools KHOSHG�XV�EHFRPH�IDVWHU�DQG�PRUH�HI¿FLHQW�when we acquired vehicles through online auctions. 7KH�NH\��RI�FRXUVH��LV�WR�¿QG�ZD\V�WR�

LQFUHDVH�\RXU�HI¿FLHQF\�ZLWKRXW�VKRUW�FXWWLQJ�the amount of research you conduct to avoid surprises when auction-purchased cars arrive at your dealership.

Taken together, these three best practices will go a long way toward helping you acquire all the cars you need from auctions and doing VR�LQ�D�PRUH�HI¿FLHQW��OHVV�IUXVWUDWLQJ� manner.

BY TODD KINZLE CO-FOUNDER AND OPERATIONS DIRECTOR OF AUCTION GENIUS (WWW.AUCTIONGENIUS.COM) AND A FORMER INDEPENDENT DEALER IN LONGMONT, COLO.

Expand Your Auction Options

IN_0113.indd 18 12/19/12 2:30 PM


19


Absolute Surety, LLCBlair AshtonP. O. Box 547898Orlando, FL 32854Phone: 855.689.5106Fax: 407.674.7978

comabsolutesurety.com

Affordable Computer SystemsIvan DalePhone: 800-488-9992

www.acsds.com

AFCRyan Lewis2950 E. Main StreetPlain!eld, IN 46168317.453.1172

Auction Insurance/Robinson Adams InsuranceTom Adams & Debbie ThompsonPhone: 800-239-1327www.robinsonadams.com

Auto Services Co. Inc.Susan Williams/Clayton MorganPhone: 800-442-7116

Automotive Credit CorporationTony Stallworth28261 Evergreen Road Suite 300South!eld, MI 48037Phone: 888-268-1400

AutoStar SolutionsEdward Viator1300 Summit Ave., Suite 800Fort Worth, TX 76102Phone: 817.439.6164

autostarsolutions.comautostarsolutions.com

Auto ZoneKevin Kravig317.681.4273

BIDZPINShawn Foster1281 Winhenstschel Blvd.West Lafayette, IN 47906Phone: 765.479.0191Fax: 765.471.2050

bidzpin.com Blackhawk FinanceBill CaanMatt GleasonPhone: 847.824.6912

Briggs Insurance AgencyTim Briggs4000 W. Lincoln Hwy.Merrillville, IN 46410Phone: 219.769.4840

Cars.com175 W. Jackson Blvd., 8th FloorChicago, IL 60604Phone: 800-298-1460dealers.cars.com

Carsforsale.comAaron OestreichP O Box 91537Sioux Falls, SD 57109Phone: 605.306.3302

carsforsale.com

Chase Auto FinanceMike Smith and Don Williams1 E. Ohio, Suite INI-0126Indianapolis, IN 46277Phone: 317.523.4273

ASSOCIATE MEMBERS IIADA Associate Membership is available to automotive related businesses. Please call 800-310-3112 for more information on Associate Memberships or see our Associate Membership Application in this issue.

ClearGate Merchant ServicesLorraine OnesianExcellent RatesPhone: 775.336.6880

www.cleargate.com

Consolidated Automotive Services of IndianaChris Walsh59 E Main Street Suite NNashville, IN 47448Phone: 812-988-8300

consolidatedautoservices.comconsolidatedautoservices.com

Consumers InsuranceMike Hogan7830 Edge Manor Ct.Indianapolis, IN 46239Phone: 317.450.9946Fax: 615.896.0766

CVR-Computerized Vehicle RegistrationJordan VaughnPhone: 636.447.8351Fax: 800.464.9342

Dealer TrackDiane Zewalk115 Pohesanut Drive Suite 201Groton, CT 06340Phone: 860-448-3177Fax: 860-448-3187

Diamond Warranty CorporationJames Limongelli9 N. Main StreetPittston, PA 18640Phone: 800.384.5023

Diversi!ed Marketing Strategies, Inc.Andrea Pearman1330 Arrowhead Ct.Crown Point, IN 46307Phone: 219-226-0300Fax: 219-226-0303http://www.3dms.com/ Diversi!ed Vehicle Services1919 S. Post RoadIndianapolis, IN 46239Ray RamseyMike HockettPhone: 317.862.9100

DRIVE 1 USABruce Norton1512 W. 96th Ave., Suite CCrown Point, IN 46307Phone: 219.661.1000Fax: 219.661.2950

drive1usa.com

Envirotest SystemsJennifer Kharchaf1171 Breuckman Drive Suite BCrown Point, IN 46307Phone: 888.240.1684Fax: 219.661.8409

Express Motor Vehicle Administration CorporationKevin Clavert3960 Southeastern Ave.Indianapolis, IN 46259Phone: 317.322.0020Fax: 317.322.0025

Frazer Computing Inc.Michael FrazerPhone: 888-963-5369www.frazercomputing.com

GoldStar GPSMark Behne2035 Lakeside CentreKnoxville, TN 37920Phone: 866-655-8825Fax: 866-655-8285

www.procongps.com

GWC WarrantyCarmie Fruits - Indiana Dealer ConsulantP O Box 7900Wilkes-Barre, PA 18773Phone: 317-374-6271

www.gwcwarranty.com

Heritage-Crystal CleanJim Skelton2175 Point Blvd Suite 375Elgin, IL 60123Phone: 847-836-5670Fax: 847-836-6169

comwww.crystal-clean.com

Insurance Professionals-Dealer SpecialistsMike Lee8509 Zephyr DriveIndianapolis, IN 46217Phone: 317.432.1092Fax: 317.300.0501

Keystone Insurers GroupLori SimpsonPhone: 888-892-5860

com

Kincaid Insurance GroupDan Kincaid321 Main StreetRockport, IN 47635Phone: 812.649.5739Fax: 812.649.5740

Lincolnway Insurance ServicesGreg St. Germain336 E. Lincoln HwySchererville, IN 46375Phone: 219-865-2227

com Merchant ServicesScott NorrisPhone: 602.5681471

com

Nationwide AcceptanceBonnie HerdenPhone: 773-777-7600www.nac-loans.com

Penn Warranty CorporationJude Tuma & Michael Roe1081 Hanover StreetWilkes Barre, PA 18706Phone: 800-356-9441

pennwarrantycorp.comwww.pennwarrantycorp.com

Preferred Warranties, Inc.Gregg Reidenbach & Guy Loef"erPhone: 800-548-1121

www.warrantys.com

Reliable Auto FinanceBrian Chisholm954 28th St. SWGrand Rapids, MI 49509Phone: 616.245.5983Fax: 616.245.5978

com

RouteOneGeorge Hartman31500 Northwestern HighwayFarmington Hills, MI 48334

Russell Kobel InsuranceRussell Kobel100 Tower Dr., Ste. 120Burr Ridge, IL 60527Phone: 708.935.6509Fax: 630.468.1704

www.russelkobelinsurance.com

Security Auto LoansJoe Ruhland4900 Hwy 169 N Suite 205New Hope, MN 55428Phone: 763-559-5892Fax: 763-559-7549

www.securityal.com

Sentry InsuranceMike DonovanPhone: 800-373-6879

www.sentry.com

Ally-Smart AuctionJeff KubickiPhone: 812-455-7967

smartauction.bizwww.smartauction.biz

Somerset CPA’sRex Collins, CPA3925 River Crossing ParkwayIndianapolis, IN 46240317.472.2241

Stewart & Irwin, P.C.Don Wray, Attorney at Law251 E. Ohio Street, Suite 100Indianapolis, IN 46204Phone: 317-639-5454

www.silegal.com

SuretyBonds.comMike Patzius1200 Roger Street, Suite CColumbia, MO 65202Phone: 800-308-4358

www.suretybond.com

Triumph Consulting ServicesJack HaworthPhone: 800.875.3137

triumphconsulting.net

VideoTirekicker.comJohn Commorato2413 N. Meridan StreetIndianapolis, IN 46208Phone: 317.466.0321Fax: 317.826.1964

Wingham & AssociatesGary WinghamP O Box 1723Richmond, IN 47375Phone: 765-977-3902Fax: 765-966-4157

Zurich Insurance CompanyPhone: 800-728-6049

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Publications��&DU�/LQHV�3XEOLFDWLRQ��8VHG�&DU�'HDOHU�0DJD]LQH��)HGHUDOO\�5HTXLUHG�6DIHJXDUGV�3ROLF\�'RFXPHQW��)HGHUDOO\�5HTXLUHG�5HG�)ODJV�5XOHV�3ROLF\�'RFXPHQWV��,56�$XGLW�7HFKQLTXH�*XLGH�)RU�WKH�,QGHSHQGHQW�8VHG�&DU�'HDOHU��&XUUHQW�,QGXVWU\�,QIRUPDWLRQ��/HJLVODWLYH�$OHUWV��1,$'$�$QQXDO�0DUNHW�$QDO\VLV

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IN_0113.indd 21 12/19/12 2:30 PM


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BY CHIP ZYVOLOSKICHIP ZYVOLOSKI IS A SENIOR ATTORNEY FOR INDIRECT LENDING AT WOLTERS KLUWER FINANCIAL SERVICES. FOR MORE INFORMATION, VISIT WWW.WOLTERSKLUWERFS.COM/INDIRECT.

There’s no question that what a dealer says to a customer as part of the sales process matters.

But it’s not just about what is said by the F&I department and what’s documented RQ�D�VDOHV�FRQWUDFW�WR�¿QDOL]H�D�GHDO��,W¶V�also about what is being communicated outside, on the car lot.

No matter how accurate and compliant \RXU�¿QDQFH�GRFXPHQWDWLRQ�LV��LI�LW�disconnects from promises made during the sales process, you could be facing a problem.

Though the law is different in every state, most have passed some version of the model Uniform Commercial Code (UCC) § 2-313. It provides that an express warranty is created by the seller when it makes a statement of fact or promise to the buyer relating to the goods, which becomes part of the basis of the bargain.

The elements are pretty broad and cover a wide range of common statements a salesperson might make when discussing a vehicle with a potential buyer. For example, if a salesperson says to a potential buyer, “This car comes with a new spare tire,” as part of the sales discussion, the promise is probably an express warranty.

What happens if the customer picks up his or her car after the sales contract is signed and a used spare tire is in the trunk?

Contrary to what some might think, express warranties generally can’t be waived or disclaimed. UCC § 2-316 provides that words or conduct creating an express warranty and words or conduct disclaiming or limiting the warranty must be interpreted in a way that makes them consistent with each other. If that’s not possible, then the disclaimers or limitations will not be enforced.

In short, you can’t give with one hand and take away with the other. If a salesperson promises the car comes with a new spare tire and a used one is delivered, a written warranty disclaimer will not help.

Note that the express warranty doesn’t have to be in writing and it doesn’t require using the word “warranty.” As a result, what

the salesperson says can affect a transaction just as much as the documents produced by the F&I department.

That’s why it’s important to know what your sales team is communicating and, more important, promising to customers.

Sometimes the situation involves a simple mistake on the sales lot. A car could be presented as a six-cylinder when it’s actually an eight-cylinder. Or maybe the customer is told the car had two prior owners but there were really three. An uninformed or mistaken salesperson might also tell a customer the car has never been in an accident when in fact he or she doesn’t really know if it has or not.

The new spare tire example may sound farfetched, but a dispute about whether new or used tires were delivered was just one of numerous inconsistencies between promises and documentation by the seller and what was delivered to the buyer in the California case of Sanchez v. Valencia ( 201 Cal. App. 4th 74 (2011)). The case is known for its decision on arbitration clauses and wasn’t about warranties. Still, it is a good example of how discussions on the lot can have a big effect on the dealer’s liability.

Those kinds of express warranty-creating mistakes can be avoided by simply being careful about representations about vehicle features and facts.

While services like CARFAX and certain branding of vehicle titles can help prevent some of those mistakes, or at least bring them to light before an agreement is ¿QDOL]HG��GHDOHUV�DUH�VWLOO�IDFLQJ�VLWXDWLRQV�in which customers are unhappy because an expectation that played a key factor in their decision to buy has not been met.

So what can you do to help prevent this from happening?

Tell your sales staff that what they say matters and why: A salesperson is a liability risk if he or she thinks all promises are wiped out by a disclaimer in the sales contract.

Train your staff on proper sales techniques: That includes arming them

with facts about the inventory available for sale.

Encourage potential buyers to take a test drive: Also encourage them to take the vehicle to a mechanic or get a vehicle history report and other information about the car so they have the best opportunity to know the features, functionality and condition of the vehicle without relying on information from you. Some dealerships have installed Internet kiosks for customers to conduct on-the-spot research.

This is a complex area of law, littered with exceptions and replete with court decisions WKDW�DUH�YHU\�IDFW�VSHFL¿F�DQG�¿QGLQJV�WKDW�are not always consistent. For example, in some situations, disclaimers or waivers can be enforced if the sales contract includes a provision saying it is the all-inclusive and exclusive agreement covering the sale.

Whether a given statement is a statement of fact or promise (creating an express warranty) or merely sales puffery (not an express warranty) is regularly litigated. Many case decisions exist and entire books have been written on the subject.

The key point is that what your sales team says on the lot is important. If there LV�FRQÀLFW�EHWZHHQ�ZKDW�ZDV�SURPLVHG�during the sale and what was delivered, the dealer has a problem. The problem could be characterized as the breach of an express warranty, but it could also be a fraudulent misrepresentation, unfair or deceptive act, etc. – keep in mind that 15 causes of action were alleged in the Sanchez case based on the tires and other inconsistencies.

Creating consistency throughout the entire sales process and making sure the lines of communication between the sales staff and F&I team are open can help mitigate risk for your dealership, ultimately saving time and money.

C O M P L I A N C E OV E R D R I V E

Unintended Express Warranties: What Sales Staff Says Matters

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