BHPH July-August 2015 Front Page - and Page 17

By Nick Zulovich, Editor

ATLANTA — With new survey reports showing independent dealers are fearing a significant decline in customer traffic, Equi-fax is offering new tools for members of the National Independent Automotive Dealer-ship Association and National Alliance of Buy-Here, Pay-Here Dealers to create what company executives are calling a “transpar-ent environment” for customers with check-ered credit backgrounds.

BHPH dealers who are NIADA or NABD members can report their consumer auto loans and payments to Equifax without having to pass traditional barriers such as

holding a certain number of accounts. Pre-viously, operators needed to have at least 500 active accounts to send this information.

“That’s a really big deal because we’re making it easier for the smaller dealers now,” said Angelica Jeffreys, vice president and dealer leader for Equifax. “We’re trying to encourage transparency in this segment of the dealer population, giving them the tools they need to be a better, more-customer friendly organization.”

Jeffreys explained reporting trade lines not only improves the data available to deal-ers for qualifying future potential buyers, but it also encourages customers to make timely

payments because their credit rating may be directly impacted by how they perform on their loan.

In addition, she added dealer reporting will add trade lines to a consumer’s credit file to more accurately reflect their handling of debt, which may grant them even more op-portunities for competitive terms based on their credit history.

Jeffreys recollected a dealer survey Equi-fax recently completed with the assistance of NABD. She pointed out that 64 percent of what she called “progressive” BHPH deal-ers already reported credit activities to bu-reaus such as Equifax. That group included

operators in 43 out of 50 states.“That’s a good sign of taking steps to cre-

ate a transparent environment that’s good for consumers. The consumers will have the benefit of that reporting,” Jeffreys said.

The Equifax executive went on to em-phasize how the move to work with dealers of all sizes who are members of NIADA and NABD is showing the commitment to this space by the multi-billion dollar company.

“For a company like Equifax to open these doors, let’s face it, the independent market is a little more risky,” Jeffreys said.


CARY, N.C. — Buy-here, pay-here deal-ers might not have any problem purchas-ing a toy for their children or a gift for their spouse online. But acquiring inventory — especially vehicles at the price points where most operators need to stay in order to gen-erate the margins they need to survive — that’s a whole different ballgame.

When BHPH Report reached out to a wide array of auction executives to gauge the reasons why this dealer community in particular remains apprehensive about pur-chasing a large amount of inventory online, Keith Crerar offered six factors that sum-marized the sentiment. Crerar, who is cur-rently is vice president of dealer sales at AD-ESA, mentioned:

• The sensory experience• Trusting the accuracy of the condition

report• Training the condition report writer to

standardize it and remove subjectivity• Implementing better science

• Transportation delays• Lack of high-quality images“Dealers are used to touching and

smelling a car, sometimes even sitting in it. And there’s a little bit of value to that,” Crerar said.

“We hear that as a top concern that they use that information to judge a car and when they buy online, they’ll miss the sen-sory experience,” he continued. “They say that they can’t really get the same impres-sion of the car from images online.

“But as our technology is continually improving, we are able to incorporate more and more high-resolution images that allow buyers to zoom in on the vehicle, so that should be less and less of a concern,” Crerar went on to say.

Questions about vehicle condition

For several years in a row now, the Mike Roberts, who leads the Wholesale Institute for Cox Automotive, explains how to buy vehicles online during a seminar earlier this year in Raleigh, N.C.

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Auctions out to ease online buying apprehension

MEMBERS continued on page 17

AUCTIONS continued on page 3

Equifax removes reporting minimums for NIADA and NABD members

Do you truly treat this as a collections business?

Why NY dealer settlement impact might ripple elsewhere

6

13 18Beggs joins NIADA Ring of Honor as dealers honored at convention

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wholesale industry panel during the Na-tional Conference hosted by the Na-tional Alliance of Buy-Here, Pay-Here Dealers touched on this topic. Attend-ees often peppered panelists with ques-tions often connected with points Cre-rar noted, especially when it comes to condition reports.

“In many cases, dealers who aren’t yet buying online haven’t learned to trust the accuracy of the description in the condition reports,” Crerar said. “They find it difficult to understand the true condition of the car based on someone else’s — the CR writer’s — personal judgment, because judgment is subjective.

“To address that concern, we educate and train our CR writers on an ongoing ba-sis, and the goal of that training is to remove some of that subjectivity by setting stan-dards,” he continued. “During the certifica-tion process for our CR writers — let’s call it inspector college — we teach them how each facet of the condition affects the value.

“Also, as better science evolves, we in-corporate it into our process. AutoGrade is our method of utilizing details of the con-dition report to give a vehicle a standard grade, which helps valuate a vehicle,” Cre-rar went on to say.

Over at Manheim a similar process is unfolding. Mike Roberts, who leads The Wholesale Institute at Cox Auto-motive, highlighted that condition re-port writers take with them what he said is known within the company as “the brick,” a device similar to an iPad but thicker.

Roberts explained that highly trained personnel follow the instructions to review the vehicles inside and out at least six times, a process that takes at least 20 to 30 minutes. As the writer makes notations of scratches, dents and other condition elements, this

“brick” crunches the data using an algo-rithm and generates a vehicle grade.

“Unless that guy misses it — there is a little bit of a human element to it — we have minimized it because we still have to have people to do the work. We don’t have a com-puter or robot who can roam around the ve-hicle, and that may be coming some day; we don’t know,” Roberts said.

“Right now, with these folks being high-ly trained and getting the same training all across the board and the computer program that’s the same regardless of the car we’re running through, if you answer the ques-tions honestly, it’s going to give that buyer a pretty good view of what that vehicle is,” he continued.

“I’m not going to tell you it’s as good as be-ing there touching that car; it’s not. You can never replacing the physical, touching and seeing,” Roberts went on to say. “However, if you learn to really understand what that condition report is and how to read it, it pro-vides a whole more information than most folks think.”

Leveraging both physical and online sales

The auction executives who shared their thoughts with BHPH Report acknowledged

that most operators likely won’t go to ac-quiring all of the inventory solely online. Most experts suggest that BHPH dealers find a balance that works for them.

ServNet chief executive officer Pierre Pons emphasized that operators who use both avenues “get exponentially more suc-cessful, not just in finding the vehicles, but finding the right vehicles.

“A larger search yields more results; it’s that simple,” Pons continued. “By utilizing both online and in-lane sale resources, you increase your inventory access exponential-ly. Just in the same way that Internet mar-keting to consumers has helped dealerships improve their own sale results.”

No matter which auction path BHPH operators choose to take, Auction Broad-casting Co. president Jason Hockett is con-fident dealers will have more choices run-ning down the lanes or on their devices.

“With used-car volumes beginning to spike next year, I really feel that dealers will be able to fill their baskets at their local auc-tion,” Hockett said.

“Also, with lease volumes coming back in droves, transportation costs are already go-ing up and trucking companies are having a difficult time hiring enough drivers. Volume buyers who are experts at what they do will their local auction the day before the sale and then place proxy bids or bid on simul-cast from their place of business on sale day,” he continued.

“It’s supply and demand,” Hockett add-ed. “BHPH dealers have been competing in the lanes with new-car dealers the past four years because of a lack of supply. I person-ally feel that we will have an over-supply of used vehicles, which is good and bad for the BHPH dealers.

“The BHPH dealers are going to be able to lower their overall cap cost in the inven-tory purchased, but this will also affect the price of their repossessions,” he went on to say.

A vehicle inspector looking over a car at Manheim North Carolina.

“By utilizing both online and in-lane sale resources, you increase your inventory access exponentially. Just in the same way that Internet marketing to consumers has helped dealerships improve their own sale results.”

Pierre Pons, ServNet

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AUCTIONS continued from page 1

4 BHPH REPORT Vol.2 No. 6

BUD ABRAHAM

Elevating the vital role of the detailer

By telling inspiring stories of detailing staff taking a proactive, engaged and proud stake in their role, the detail industry can help push the detail narrative forward — and move beyond negative perceptions.

Talk to any dealer and he or she will tell you that reconditioning (detailing) is vital to their dealership, yet the role of the detailer is often per-ceived negatively.

And for the detailer, there is a lot more at stake than negative stereotypes.

Detailers are exposed to a great many chemi-cals, which can cause occupational asthma. There is also a host of other dangers that could come from mixing the wrong chemicals, and the in-creased likelihood of slip-and-fall injuries, not to mention the potential impact on used-car sales and profits.

Despite all of these risks, detailers play a huge role in the profitability of the dealerships. Then why the bad reputation, and why are they and the department treated so badly?

There are a number of reasons for this situ-ation — there are no education requirements or necessary certifications for detailers anywhere in the United States. Then, there is the problem of low pay; most detailers are paid by the car or just above minimum wage.

It is all theory regarding why the detail indus-try has not advanced in the United States. Never-theless, the prevailing thought is that most dealers or detail business owners want to keep the wage rates low. However, once you start attaching cer-tifications to any profession, it raises the amount you have to pay people. Detailers work hard, they do a dirty and repetitive job, they work late at night and there are many things that can go wrong.

They deserve to be paid fairly and treated as an integral part of the dealership.

Training means retention

Turnover is a constant problem in detailing, with rates cited anywhere between 50 and 400 per-cent by dealers and detail business owners. That means dealerships could be replacing their entire workforce between once every two years and four times per year.

Training programs are an underutilized way to help tackle this problem. Not only does regular, in-depth training provide the opportunity to raise pay, but it also shows workers that the dealership cares about them, enhances skills and job perfor-mance, and helps with turnover.

The key, of course, is, you must have people who are capable of being trained. You cannot im-prove the detail employee by continuing to hire the same type of people repeatedly. You will just keep getting what you always have.

With the people we have trained, we have seen that the programs that have led to higher pay also lead to better retention. One of our customers had an incentive program so that detail staff would make more money as they advanced through the stages of training.

After two years, most of these employees are still there. They do not use training to weed people out, but people weeded themselves out.

The budget often has the final say in training decisions. Many dealers do not see the value in training when they look at it on paper. They see an upfront cost, the potential of having to pay more

for certified and trained detailers, and the loss of man-hours that are spent training as negative im-pacts on the bottom line.

Some dealers do not want to train people be-cause they are afraid they will go somewhere else, but on the other side, what happens if you do not train them and they stay? Training will work if you hire the right people; you will get a positive return on your investment. Promoting higher worker value

Our approach to training is simple — get knowledge into the detailer’s head — knowledge about chemicals, technology and the supplies available to detail vehicles properly. Additional-ly, knowledge about the vehicles: paint finishes, wheels, leather, carpets, glass, etc. Most detailers we find have no real knowledge of the vehicle and are using techniques for detailing from the ‘50s.

The hands-on training breaks the detail jobs into these categories:

1. Engine clean2. Wheels3. Body wash4. Tar removal5. Trunk clean6. Complete interior clean and shampoo7. Exterior buff, polish and wax8. Final detail

For each of these jobs there is a step-by-step process so every detailer does the same thing, the same way. This gives management control over the entire detail process, instead of every detailer do-ing it “their way.”

Professional organizations, such as the Interna-tional Detailing Association, have training that re-sults in a certification, but it is a lengthy program that involves several on-line tests, and then hands-on training at an IDA recognized location. This is probably too long and too expensive for dealers.

On-site training is best for a dealership — training the entire staff at your location, using your tools and chemicals. You do not have to buy into a complicated training program to find in-depth, high-quality training for your detail work-ers. There are several good trainers who will come to your dealership.

Of course, a dealer can go to their chemical supplier and ask for hands-on product and pro-cedure training, but there is a question about the caliber of training they are going to receive. Most chemical companies only train to understand and use their chemicals, so your detailers are not real-ly trained at all.

Rather, find a training program that moves beyond how to hold a buffer and delves into the chemistry behind cleaning.

One way to identify a high-quality training program is to ask how often the staff should be trained. That is a good question to define what the supplier really thinks training is. It is like going to the gym. If you go once or twice a year it is not go-ing to make a difference. Training is the same way. If it is repetitive and constant, you are definitely going to get more buy-in from the staff.

There is no magic training program that is go-ing to transform your detailers into technicians if they are the wrong individuals, and the training is just a one-time thing. It is a continuous process with periodic refresher courses. The impact of recognition and praise

There is a famous story about President John F. Kennedy’s encounter with a janitor who was clean-ing a bathroom at NASA. Kennedy asked the man what he was doing, to which the custodian replied, “Mr. President, I’m helping to put a man on the moon.”

That is the kind of pride that exemplifies the true role of a person’s work. By telling inspiring stories of detailing staff taking a proactive, en-gaged and proud stake in their role, the detail in-dustry can help push the detail narrative forward — and move beyond negative perceptions.

Detailers have the capacity to improve the meaning and identity of their work by being pro-active, engaging with others and seeing their val-ue in the larger context of the organization. But it is up to the dealer to create this atmosphere. If the detailers are not engaged, nothing will change.

I have interviewed groups of detailers in deal-erships that fell into two groups: one group did not like detailing and did not value their skills or role as a detailer. The second, happier group took great pride in their work.

I noted the happier detailers understood the value of their work at the dealership and altered the relational nature of their job to form bonds with everyone in the dealership. These detailers enjoyed the work and felt they were highly skilled. They engaged in tasks that made the jobs and lives of sales people easier.

How do dealers promote this proactive, heightened sense of value in their detail staff and their entire dealership? Training helps. But praise and recognition are critical. The detailers have to see themselves as part of the whole, and the entire dealership must reflect this respect towards the detail staff.

Taking the time to notice when the job is be-ing done well will pay huge dividends in lifting de-tail employee morale and keeping them around longer.

Invite in a training company to provide train-ing for the detail staff. Then try something as sim-ple as giving detail staff a certificate and a pat on the back, and telling them that training was im-portant because what they do has a major impact on the dealership. Do this and do it well, and you will see less tardiness, less sleeping on the job and an overall upgrade in the work.

Finally, a pat on the back by the dealer prin-cipal cannot be underestimated. When you are talking to a group of detail employees, you do see them stand a little straighter when you tell them nobody else in the dealership has a more direct ef-fect on the profitability of the dealership than they do. Unfortunately, it is a message that dealers do not deliver enough.

If you are interested in learning more about training, contact me at [email protected].


How dealers avoid fl ood-damaged vehiclesJosh Hyatt, Staff Writer

CARY, N.C. — Th ere’s quite a bit of hub-bub being made in the consumer-facing me-dia following the recent fl ooding in Texas and the vehicles that suff ered water damage.

Th e National Insurance Crime Bureau, based on estimates from Copart, recently reported that the fallout from the fl ooding aff ected between 7,000 and 10,000 insured vehicles in the area. While the majority of media is focused on warning consumers, this feature will hone in on protecting auc-tions and dealers alike.

Th ere is a good chance that there will be folks who try to trade in a fl ood-dam-aged vehicle or that many of these cars may end up at the auction. But through Auto Re-marketing’s recent conversations with deal-ers around the country, it seems there are a variety of ways for the industry to handle this challenge.

Dealers we’ve reached out to, from both coasts and even in the heart of our automo-tive industry in Michigan, have said they haven’t seen any impact in trade-ins or in the lanes from the recent Texas fl oods.

One such dealer, who is intimate-ly familiar with fl ood-damaged vehicles, is Frank Fuzy, owner of Century Motors of South Florida in Pompano Beach, Fla.

Positioned near the coast of the Sun-shine State and less than an hour’s drive from Miami, Fuzy — with 31 years of au-tomotive sales in both retail and wholesale settings — is no stranger to identifying the negative eff ects of water on vehicles.

“It would be pretty obvious if you had any more than a foot of water in a car,” Fuzy

said. “I’m sure when the fl oods hit, it was probably that brown Texas color so I’m sure it would be excessively stained. I’ve seen some fl ood cars down when the hurricanes hit the Keys, and I’ve seen where I’ll have shells in the engine blocks in a Toyota or something. You can see the rust line and the water line, and fair enough, you can check under the seats, and they’re all rusty, too.”

One pro tip that Fuzy provides is simple: check the seat tracks to see if they will move.

“Th ose seat tracks will freeze up pret-ty quick if they’ve been wet,” Fuzy said. “So that’s usually a good tell-tale.”

Fuzy, although not worried about the potential threat, knows better than to not expect the unexpected, even though he hasn’t seen any sign of fl ood-damaged ve-hicles recently.

Fuzy said, “It’s probably that it’s not a real issue for us now, but it’s defi nitely good to watch out for.”

For any vehicle that has been mostly or completely submerged, Fuzy says it’ll be pretty obvious that you need to avoid it.

“A fully submerged car, if it was ever wet, I could smell it probably without even opening the door,” Fuzy said. “Th ose should be pretty easy to detect. Th e second item is if it’s submerged up to the seat lines — usually, if the power seats don’t work, that should be a red fl ag. Th ere’s no reason the power seats wouldn’t work in the car unless it went under water and the modules got wet.”

Although a vehicle may have some fl ood damage, the extent of the damages may not mean the vehicle is a complete wash, soto speak.

“I have had Corvettes come in, they sit low, and I have seen wet seat tracks,” Fuzy said. “But the extent of the water in the car was about an inch or two, not like a foot un-derwater, so all the computer stuff works. It just depends on how you evaluate afl ood car.”

On the West Coast at Capistrano Volk-swagen in San Juan Capistrano, Calif., you’ll fi nd Harry Haber, the dealership’s used-car manager.

Haber, whom we spoke with toward the beginning of June, is approaching the sit-uation with a conservative mindset, even though he hasn’t personally seen any fl ood-damaged vehicles in about a year.

“Anything from the Texas area, present-ly, if I see a registration or a prior history that a car was in the state of Texas I’ve been kind of shying away from those cars unless they’re from a fi nancial consignment lane,” Haber said.

“Today I was previewing some cars and they had Texas registrations on them here in the state of California,” Haber continued. “Th ey’re at the auctions. I marked ‘no inter-est’ on them.”

Blaine Marston, the general manager of the CARite location in Monroe, Mich., echoed a similar message.

“We have not seen any fl ood vehicles,” Marston said. “If discovered, we would not retail a fl ood-damaged vehicle.”

To recap, here are just a few spots rec-ommended to check for fl ood damage:

■ Seat tracks: Do they move? Are they rusty? Check the bolts on the rails and look under any caps — if the bolts are rusty, the vehicle may have previously been involved in a fl ood. If the vehicle has power seats, do they function?

■ Engine bay and exterior: Are there water lines anywhere in the engine com-partment or on the outside body/inside the fender wells? Rust lines? Unusual debris?

■ Interior smell: Does the vehicle have a musty odor? Is any of the interior up-holstery discolored or look unusually newor replaced?

“Those seat tracks will freeze up pretty quick if they’ve been wet. So that’s usually a good tell-tale.”

Frank Fuzy, Century Motors of South Florida


OVERLAND PARK, Kan. — Before we get to the content concerning the title of this article, I want to ask you two questions: How much do you value the collectors in your business? And, what kind of tools do you provide to help them succeed?

I have the honor of working with buy-here, pay-here and lease-here, pay-here dealers on a daily basis and get to dive into all aspects of their operations. Some dealers are doing a great job running their business and simply want a second set of eyes to review their processes and procedures and make minor tweaks. Other dealers are really struggling and on the verge of losing their business.

Why do I tell you this? Because there is one common theme that stands out amongst the successful dealers, and that theme is collections.

The successful dealers have accepted and understand that BHPH and LHPH is a collec-tions business. They spend a great deal of time, effort and money making sure they have the best collection staff, training and procedures in place.

At this point, you may be saying to yourself, “Yeah, yeah. I’ve heard this all before. I under-stand it’s a collection business. Tell me some-thing useful.”

Every dealer I work with tells me they un-derstand the importance of collections, but as I tell my 13-year-old daughter every day, actions speak louder than words.

I still see dealers spending a great amount of time hiring, recruiting and training the sales staff. There are daily or weekly sales meetings to discuss lost deals, lot traffic, follow-up activi-ties and more. Sales pay plans are constantly ad-justed to encourage more appointments, more down payment and more sales.

Don’t get me wrong; I’m a huge fan of sales training and do a great deal of it for my clients. But while all this training is going on

with the sales people, the collectors are going back to their office with very little training or encouragement. Their interaction with your customers is the single biggest determining factor to the success of your dealership.

Read that last sentence again. Am I the only one that thinks this is crazy? I continuous-ly see salespeople that make a very nice income and meet sales managers or owners that do a great job managing the sales activities. Rare-ly do I meet a collector or a really good collec-tions manager that is the highest paid employee in the dealership.

I think it’s pretty easy to understand why this happens. I started my automotive career in the new-car business as a salesperson and moved up through F&I and eventually became GM of a Chevy store.

Where did I spend most of my time? It was spent in the variable operations because that was where I was most comfortable. I knew the service department was extremely important to the success of the store and fully support-ed them. However, I didn’t do a very good job of learning that part of the business or develop-ing a plan to make sure I was hiring the best tal-ent possible and giving them the training they needed.

Worse yet, I did a very poor job of inspect-ing what I expected and holding my team accountable.

As BHPH/LHPH dealers, a lot of us are comfortable with the sales side of things, but we have very little experience with collections. Nat-urally, we spend the majority of our time think-ing about advertising to drive traffic and hold-ing our sales staff accountable to tracking and converting that traffic.

If you want to take your business to the next level, I absolutely believe that for every hour you spend with your sales staff, you should spend three hours with your collections staff.

I also feel very strongly that a great collector should be one of the highest earners in your dealership. I like to see a collector pay plan that consists of 65-percent base salary and 35-percent bonus and commission.

How important is repeat and referral busi-ness to your success? Your collections staff is the number one element that will determine whether your hard–earned customers come back to buy their next vehicle from you and whether they will refer friends and family to you. The sales department sells the first car; the collections department sells the repeat business. This is why BHPH and LHPH is truly a collec-tions business.

We know we are selling vehicles to custom-ers who have not paid their bills very well in the past. We know they are going to run into life emergencies that are going to prevent them from paying us on time. And, we know it is our collectors who are going to have to help the cus-tomer solve these problems. This is why BHPH and LHPH is truly a collections business.

Have we done a great job recruiting and hir-ing people with the right skills to be a great col-lector? Once hired, have we given them the proper amount of initial and ongoing training they need to be successful?

Do we spend the appropriate amount of time with the collectors each day inspecting what we expect and giving immediate feedback? Are our pay plans structured to encourage and reward outstanding performance?

If you answered no to any of those ques-tions, you have an area in your business where you can make an immediate and substantial difference.

Dustin Kerr is an executive conference mod-erator for 20 groups NCM Associates, spending more than 10 years managing BHPH dealerships in Oklahoma. Kerr can be reached at (913) 827-6677 or [email protected].

Do you truly treat this as a collections business?

The successful dealers have accepted and understand that BHPH and LHPH is a collections business.

DUSTINKERR


BRANDED CONTENT

8 BHPH REPORT Vol. 2 No. 6

10 questions BHPH dealers should ask in light of CFPB’s latest ruleFORT WORTH, Texas — Th e Consum-

er Financial Protection Bureau issuance of the larger participant rule early this summer came as little surprise to much of the industry. But SecureClose chief legal offi cer Steve Levine said many buy-here, pay-here dealers and oth-er fi nance companies may not realize how far the rule will reach — likely impacting more than just large participants.

Levine reiterated the offi cial language ex-tends the CFPB’s supervision to any nonbank auto fi nance company that makes, acquires or refi nances 10,000 or more loans or leasesper year.

“But that’s only the technical threshold. In reality, trickle-down pressure from cap-ital sources, fl oor plan providers and cred-it reporting agencies — all of whom are ac-countable for the actions of dealers they do business with — will place even the smallest dealers and lenders under the microscope,”Levine said.

“Not to mention plaintiff ’s attorneys, who seek out new cases based on the CFPB’s fo-cus areas, as well as local and state regulators who regularly pursue businesses below the 10,000-loan-or-lease threshold,” he continued.

Levine asserted that every BHPH deal-er and fi nance company should assess wheth-er they provide consumers with truly un-derstandable explanations as to what theyare agreeing.

“Car buyers are oft en confused about the terms of their deal, and this misunderstand-ing — combined with inadequate disclosures or proof of disclosures — leads to unnecessary confl ict and oft en legal action,” he said.

“We see time and time again that the best-informed customers end up being the best-performing customers,” Levine added.

Levine said SecureClose off ers a solution that fully satisfi es these disclosure and docu-mentation needs from the perspective of reg-ulators, lawyers and buyers. SecureClose tech-nology automates the closing process by using a computerized avatar to verbally walk each customer through his or her deal terms, while sharing legally compliant, easy-to-understand commentary along the way.

“It’s like having a lawyer close every deal — and having a cloud-based video record to prove it,” Levine said.

Levine went on to say traditional scripts or videotapes of closings — while some-times helpful — are not nearly enough in to-day’s environment, due to the high price ofhuman error.

“Dealers must ensure that customers re-ceive the right message, every time — and that closings are not compromised because an em-ployee is tired, untrained or wants to close the deal at any cost,” Levine said.

“I’ve written countless closing scripts, and with SecureClose, for the fi rst time I’m truly confi dent that my legal work is actu-ally provided correctly to the consumer,”he continued.

Levine recommended that all dealers and fi nance companies respond to the CFPB’s latest rule by asking themselves 10 questions. He cat-egorized them by the bureau’s areas of concern:

Fairly marketing and disclosingfi nancing terms

1 Do our advertising and marketing ma-terials accurately disclose the true

deal terms?

2 Do we provide simple checklists that ex-plain the auto fi nancing terms in a custom-

er-friendly way?

Providing accurate information to credit bureaus

3 Do we have a documented process that matches the complexity of our business?

4 Do we provide credit reporting train-ing and testing at least twice per

year to employees tasked with this func-tion, and do we document their personnelfi les accordingly?

5 Do we conduct adequate investigations of every single dispute, and can we demon-

strate the process?

Treating consumers fairly when

collecting debts

6 Do our customers know all the payment options available to them?

7 Are our invoices, collection letters and call strategies synchronized so custom-

ers receive a consistent message instead of aconfusing one?

8 Are we taking advantage of online pay-ments, Interactive Voice Response

(IVR) and text messaging, all of which lever-age technology and avoid confrontation withthe customer?

Lending fairly

9 Do we practice menu selling so no cus-tomer can claim different treatment?

10 Do we provide written explana-tions of each add-on product’s

key benefi ts?

Levine and other SecureClose execu-tives — including chief executive offi cer Allen Dobbins, formerly of AutoStar Solutions, and founder and chief vision offi cer Ace Christian, owner of Rock Solid Auto in Mesa, Ariz. — will be on hand to discuss the full impact of the CF-PB’s announcement at the Texas Independent Automobile Dealers Association annual con-ference in San Antonio on Aug. 9-12, and In-novate: Th e Independent Dealer Industry Conference in Fort Worth, Texas, on Sept. 20-23.

MIAMI — GPS tracking solutions pro-vider Skypatrol released what it’s calling a time-saving solution for batch communica-tions to customers in your related fi nance company portfolio who are behind on mak-ing their installment payments.

Skypatrol highlighted its AutoBatch for DMS can give buy-here, pay-here dealers and vehicle fi nance companies the capabili-ty to automate DMS-driven “machine to ma-chine” (M2M) commands to contract hold-ers in default. Now, operators can leverage the power of their existing DMS to output a list of defaulting customers and the type of action that is required.

Th is list is automatically emailed M2M, and Skypatrol’s secure servers communicate with the borrower’s GPS turning on a piezo, sending location information or deactivating the vehicle if parked.

Offi cials explained this process is

completed fully independent of any system integration or application program interface (API) exchange, making it easy for Skypatrol customers to implement the solution across all popular DMS platforms without special-ized technical support.

Each time commands are distributed, a detailed report is sent confi rming the ac-tion took place. If for some reason the vehi-cle can’t be reached, the system automatical-ly retries to establish contact — which is re-ported as well.

Depending on how much of your port-folio is in some level of default, Skypatrol in-sisted it’s vital that BHPH dealers and fi nance companies have an effi cient methodology for asset protection.

Skypatrol’s product and service solution combines proprietary GPS devices with in-novative soft ware systems that can help boost portfolio performance, increase operational

effi ciencies and reduce risk in the vehiclefi nance industry.

Th e AutoBatch for DMS system can com-bine with Skypatrol’s other fi nance industry products for a complete end-to-end solution. Its one-click Repo Mode Tool can gives time-limited secure smartphone access to recov-ery teams of a vehicle’s current location.

“Auto Batch for DMS will save lenders and dealers the manual and labor intensive task of individually creating actions one at a time when no integration is possible,” Skypa-trol chief operating offi cer Larry Jones said.

“Th ere are some DMS systems that don’t allow integration due to the lack of an API, there is a defi cient API or it is a legacy sys-tem,” Jones continued. “Either way, fi nd-ing a way to work outside of an API is just what our customers need to remain effi cientand competitive.”

Furthermore, Jones mentioned

Skypatrol’s Data Verifi cation Tool can qualify applicants and help locate them if they skip. Its Virtual Collector module can send auto-mated email and text reminders, increasing cash fl ow and reducing defaults.

“I am a very strong proponent of prod-ucts that automate communications and ac-tions around the default process,” said Jim Rhoads, a consultant to the BHPH industry.

“By removing the potential for human error, reaction to delinquency is timely and consistent,” Rhoads continued. “It also de-personalizes part of the process, allowing collectors to eff ectively blame ‘the system’ for early and persistent reminders.

“Automated communication also reduces the level of frustration that builds in collec-tors when they are unable to reach the debt-or/customer and it frees collectors up to do the more important work of solving prob-lems,” Rhoads went on to say.

Skypatrol enhances DMS integration to automate messages to defaulted contract holders


Single Interest Insurance, Inc. 18489 N. US Hwy 41, #267, Lutz, FL 33548

813-361-3525email:[email protected] www.singleinterestins.com

PROTECT YOUR AUTO LOANSVSI/CPI

Customer drops insurance and wrecks – We write

you a check.

B-H-P-H Consulting & Training

GPS TRACKERSSkip Protection

If the customer disconnects the GPS Tracker – We will fnd your Skip.

Skip Service – We will fnd your Skips.

Q: What kept you motivated after you hit an eight-f gure portfolio?

I don’t think there is a soul out there who doesn’t want to make more money this year and more the next year af er that. Everybody wants to make more and more and more. Given the fact that we have 70, 80, 100 people working for us over the years, now I think it’s about 120, the bottom line is everybody wants to make more money. So in order to do that, you have to sell more cars. Consequently, based on the fact that the employees wanted more, I wanted more. How do you get more? You’ve got to work a little harder. You’ve got to push a few extra hours. And more advertising. T at was always my key, advertising. T at’s what drives me to make more money, not only for me, but for every employee.

Ed says ...

Again, I have a passion for the car business. I don’t know what it is. I guess I equate it to the hunter who goes out and hunts, or the f sherman who goes out and f shes and get some kind of exhilaration from catching the big f sh or getting the big game. My exhilaration came from selling a car. Everybody who is in the car business and gets questions from someone outside the car business, they ask, what’s your favorite car? I always say it’s the one I just sold.

But I’m also goal oriented. At Credit Acceptance for example, we set goals in 2000 and they were 14-year goals. And at 2014 we hit the goals so we just reset our goals for 2025. Why that number? Our CEO is going to be 60 years old at that point. At CARite, it was the same thing. We set goals at the start. For me, that’s the excitement. It’s making those goals and not just making money. T e money comes along with it when you make your goals.

Don says ...

To me, I’m a goal-oriented person. I’m a competitive person. My thought was if one month we sold 100 units, the next month I wanted to sell 101 or 110. We wanted to do a little bit more each time. So whatever we had to do to tweak our business model to improve our fundamentals, that’s what we did. We always tried to improve. I was my own competition, regardless of what the others did. T e only competition I knew of was how to keep moving things forward.

John says ...

I think what kept me going was it is fun. I was having a great time. One of the things I learned along the way was about my own shortcomings. When we thought about tak-ing the company public, I found out exactly what it meant to grow a business at 20 percent a year and applaud anybody who can do a lot better than that. But I tell you, I got to the point where I knew I wasn’t the guy who could do that. But the thing that kept motivating me was I was having a great time. I was just having a lot of fun.

Julian says ...

Ask theHall of Famers

EdBass

“When you get into the Hall of Fame, it’s not about having a good year or two good years. It’s abouthaving a lifetime of good work and to make adifference in the lives of other people.”

Ken Shilson, NABD Founder

DonFoss

JohnLinnehan

JulianCodding

IMAGES FROM

CONVENTION


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Betcha Don’t Have These Digits

Beggs joins NIADA Ring of Honor as dealers honored at conventionLAS VEGAS — Ricky Beggs, former-

ly the senior vice president at Black Book, was recently named to the National Inde-pendent Automobile Dealers Association’s Ring of Honor during the 69th annual NIA-DA Convention and Expo at Caesars Palace in Las Vegas.

NIADA awards this honor each year to an executive demonstrating outstanding perfor-mance and leadership, while also helping the auto industry grow.

Beggs retired in April after 34 years with Black Book. One of the most respected leaders of the remarketing business, Beggs has been a key voice and provider of insight to the indus-try. He is the fourth person from Black Book to earn Ring of Honor distinction, which has now been awarded to 24 people.

“I am truly honored to have been able to have some influence on Black Book and the automotive industry and honored to be amongst this group of past recipients that have had a major impact on the way used cars are sold,” said Beggs. “I would not be receiving this special award without the efforts of all of the Black Book associates and especially the solid work by the entire editorial team.”

More NIADA awards

Elsewhere at NIADA, the association wrapped up its annual NIADA Conven-tion & Expo by recognizing many in the

industry for their individual contributions to the auto sector.

Darla Booher, the president of Deal De-pot in Greer, S.C., was named the 2015 Na-tional Quality Dealer of the Year during the event, chosen from the 20 State Quality Dealers nominated.

Selected by a panel of judges from North-wood University based on factors such as contributions to the industry and communi-ty involvement, Booher becomes the second woman to win the award since 2002 recipient Wanda Lewark.

“Over the years, Darla Booher has earned an exceptional reputation not only with her customers and staff, but throughout her com-munity and within our industry,” said Steve Jordan, NIADA executive vice president. “Giv-ing back to her community has always been a team effort for her and her staff.”

Other professionals honored by NIADA at the event include:

■ NIADA Association Executive of the Year: Todd O’Connell, Colorado IADA.

■ Crystal Eagle Award winners: Kimberly New, Style Financial Acceptance Co.; Dennis Pope, People’s Financial; Glen Reeves, Reeves Insurance Agency; Julie Colgate, Indepen-dent Dealers Advantage; Guy Padgett, Sterling Credit Corporation; Roy Daniel, ALS Deal-er Funding; and J. Wayne Meagher of M D Auto Sales.

■ Honorary Crystal Eagle Award winner:

Frank Fuzy, owner of Century Motors of South Florida, who was also named as the associa-tion’s president during the event.

According to the NIADA, O’Connell earned the award by putting his previously struggling organization on solid financial foot-ing, creating an association charity that raised more than $100,000 in the first year, starting a dealer defense fund to protect against frivolous lawsuits, adding an association Ambassador group to promote CIADA information, and establishing relationships with state officials.

Five scholarship winners

The NIADA Foundation, each year, spon-sors a student in each of the association’s four regions with a $3,500 scholarship to the college

or university of his or her choice. The foun-dation and Cox Automotive also award one $10,000 national scholarship once a year for an exceptional student to help them attend or continue his or her education at Northwood University in Midland, Mich. in an automo-tive-related field.

Here are this year’s five scholarship winners:

■ NIADA/Cox Automotive National Schol-arship: Alesandra D’Agostino, who just com-pleted her first year at Northwood University.

■ Region I: Emma Hammer of Indianapolis.■ Region II: Philip Hetzler ofMatthews,

N.C.■ Region III: Cash Forster of Washington,

Okla.■ Region IV: Maxence Weyrich of

Boonville, Calif.All of the students’ entries were judged by

Northwood University.In related news, ADESA, AFC and IAA

helped raised $27,500 for the NIADA Foun-dation on recently. Andy Gabler, of Lakeside Auto Sales in Erie, Pa., won a bidding war for a Mercedes C250W during the NIADA Con-vention. The three auction companies donated the vehicle where all proceeds of its sale will be used to help the NIADA Foundation.

Over the past three years, ADESA/AFC/IAA-sponsored auctions at the NIADA Con-vention have raised a total of $69,700 for the NIADA Foundation.

Ricky Beggs with NIADA’s Steve Jordan.

14 BHPH REPORT

LAS VEGAS — Your Swiss Army Knife didn’t allow for a lot of torque on tight screws, and the scissors didn’t cut very well, but the idea was awesome.

What is the Swiss Army Knife strategy? While many of your competitors practice linear thinking and how a tool serves only one purpose, you can be an independent thinker and focus on how to use your tools, ideas and strategies for multiple advantages to your business.

In case you didn’t have one, a Swiss Army Knife was an all-purpose tool that consisted of a knife, scissors, screwdrivers and more that could fi t in one little boy’s pocket.

Th is is how I teach dealers to think about their marketing and business strategies. For example:

You can use a Google Pay-Per-Click ad to send Web visitors to a page on your website where they are encouraged to fi ll out a form. Aft er fi lling out the form, your new lead is re-directed to a webpage where they watch a video of you explaining the “fi ve things to know when buying a new car.”

At the end of the video you encourage people to share your video on Facebook with their friends so they too can be informed.

All of this can take place as part of the lead generation and car–buying process. But instead of only attempting to sell a vehicle, you generate a lead in case they aren’t ready to buy at that very moment.

Because they fi lled out a form, they get an automated follow-up from you. Th e lead was directed to your webpage where your YouTube video is embedded. Th at video earns another “view,” which is good for SEO. Th is YouTube video contains keywords and tags about car buying and fi nancing, which is good for SEO for the video itself (videos are indexed by Google too). Th e video has a backlink that points to your website, which is also good for SEO for your website.

Videos help to build trust so that a customer who sees you in video is more likely to agree to come into your dealership aft er they have already seen your smiling face and heard your voice.

All of this from one ad that led to one visitor, that generated a lead, helped with SEO, boosted customer trust and boosted possible shares with other people in the community.

One idea; multiple benefi ts. Here is a specifi c example of one our

feedback and review system clients using the Swiss Army knife strategy — some of it is built into the system, but a part of it is the dealer deciding to use one tool for multiple benefi ts:

1 Fix systemic problems that are revealed by customers.

2 Print your positive feedback from yesterday, and read it to your team to start

the next day. Inspire employees with positive reinforcement.

3 Avoid negative reviews that hurt all of your marketing. When using an effective

feedback system, unhappy customers that vent to you through your internal feedback system don’t typically take their negative comments public.

4 Boost positive reviews to attract more customers. Some feedback systems like

ours redirect happy customers to a webpage with direct links to your Google, Facebook and other review directories. They are encouraged to write a review, and it is easier.

5 Positive reviews help to improve search engine rankings.

6 Build trust with customers, and make sure your fi rst impression is good. This can lead

to increased sales as well as positive reviews and testimonials on your website.

7 Demonstrate to customers that you care simply by asking for feedback.

8 Collect customer emails.

9 Demonstrate to the Consumer Financial Protection Bureau that you are making

every effort to be compliant by using a system to collect customer feedback. Could this protect you? Check with your legal department.

By using one feedback tool you can improve service, boost marketing, increase trust, improve fi rst impressions, inspire employees and more.

What are you doing with your tools and strategies to get the most out of our every dollar spent?

Kenny Atcheson is the president of Dealer Profi t Pros. He teaches workshops, speaks at 20 groups and his company off ers several done-for-you dealer marketing and advertising programs, including a newsletter program, a feedback & review system, pay-per-click management, and private consulting. His website can be found at www.DealerProfi tPros.com.

Practice independent thinking with the Swiss Army knife strategy

While many of your competitorspractice linear thinking andhow a tool serves only one purpose, you can be anindependent thinker and focuson how to use your tools, ideas and strategiesfor multipleadvantages to your business.

KENNYATCHESON


3 steps to solidify customer complaint response strategyCRYSTAL LAKE, Ill. — Especially in

these times of intensive regulator oversite, Automotive Compliance Consultants pres-ident Terry Dortch insisted that how your buy-here, pay-here dealership responds to customer complaints oft en determines whether the store’s good name gets blem-ished or a lawsuit results.

Viewed proactively, Dortch explained complaints can help BHPH dealers iden-tify process and personnel weaknesses tobe corrected.

Dortch acknowledged that every deal-er knows about customer complaints. But if operators are not hearing them personal-ly, he mentioned that perhaps a visit to re-view websites like Consumer Aff airs willbe enlightening.

And the Consumer Financial Protec-tion Bureau has its complaint database, too. Consumer complaints possibly made about your BHPH dealership or related fi nance company to the CFPB now are available for anyone to see.

For the fi rst time beginning this past June, the CFPB turned on its enhanced public-facing consumer complaint data-base, pushing more than 7,700 consumer accounts of problems they are facing with fi nancial companies concerning auto loans, mortgages, bank accounts, credit cards, debt collection and more.

“Th e bureau’s work improves as we hear

directly from consumers,” CFPB director Richard Cordray said. “Every complaint tells us what people are facing in the fi -nancial marketplace. Publishing these con-sumer stories today is a historic milestone that we believe will lead to better outcomesfor everyone.”

Unlike the CFPB’s database, Automo-tive Compliance Consultants has found that most review sites contain a number of positive reviews, but there are a share of negative ones about various dealerships,as well.

Dortch wondered how many complaint reviews might have never reached social media had dealers responded to customer concerns more appropriately, expediently and kindly.

Th e fi rm emphasized that proper re-sponse to customer complaints is part of an eff ective compliance management sys-tem (CMS). Th is system describes correct processes for complaint follow-up and oth-er best practices for ensuring BHPH deal-ership compliance with prevailing laws reg-ulating the business.

“A dealer can have put into place the right practices to ensure the business oper-ates according to these various laws, but if no set policy and responding practices are put in place for handling customer com-plaints, the CMS is broken,” Dortch said.

Automotive Compliance Consultants specializes in dealership and auto fi nance compliance, providing in-dealership con-sultations and analysis, compliance audits and training, and off ers solutions for all compliance needs.

When establishing a complaint re-sponse system, the fi rm explained a dealer-ship should consider:

■ Th e types of complaints received, and how to categorize them. Th ose from a reg-ulatory agency, and complaints regard-ing Equal Credit Opportunity Act claims should be placed in their own category.

■ How complaints are to be received and by which individual or individuals within the dealership.

■ How complaints will be documented, how information will be gathered about the

complaint, information about the individu-al making the claim, and each contact with the customer.

“Respond promptly and appropriately, whether in your estimation a complaint has merit or not, as certainly someone believes you violated their rights and certainly their emotions,” Dortch said.

“Ignore complaints or respond in a way that dismisses or demeans the customer and you’ll likely germinate a potential law-suit,” he continued.

Aft er receiving, logging and respond-ing to complaints, Automotive Compliance Consultants recommended that BHPH op-erators use them to improve the business, as they likely point to:

■ Weaknesses in sales andfi nance processes

■ Employees that may be exposing the dealership to risk

■ Needed improvements in customer handling

■ Broken compliance practices■ Need for remedial employee

compliance trainingTh e Automotive Compliance Consul-

tants staff has extensive experience in the retail automotive industry and focuses ex-clusively on dealership compliance issues.

For more information, contact Dortch at [email protected] or visit www.compliantnow.com.

“Every complaint tells us what people are facing in the fi nancial marketplace. Publishing these consumerstories today is a historic milestone that we believe will lead to better outcomes for everyone.”

Richard Cordray, CFPB


CFPB finds 26 million consumers are ‘credit invisible’WASHINGTON, D.C. — The Consum-

er Financial Protection Bureau published a report in May finding that 26 million Americans are what the agency is calling, “credit invisible.”

The bureau explained this figure indi-cates that one in every 10 adults do not have any credit history with a nationwide con-sumer reporting agency. Officials noted the report also found that Black consumers, His-panic consumers and consumers in low-in-come neighborhoods are more likely to have no credit history with a nationwide consum-er reporting agency or not enough current credit history to produce a credit score.

“Today’s report sheds light on the mil-lions of Americans who are credit invisible,” CFPB director Richard Cordray said. “A lim-ited credit history can create real barriers for consumers looking to access the credit that is often so essential to meaningful opportu-nity — to get an education, start a business, or buy a house.

“Further, some of the most economically vulnerable consumers are more likely to be credit invisible,” Cordray continued.

The CFPB contends credit reports and the three-digit credit scores that are based on those reports play an increasingly impor-tant role in the lives of American consumers. Most decisions to grant credit and set inter-est rates for loans are made based on infor-mation contained in credit reports.

As a result, those consumers who have a limited or nonexistent credit history face greater hurdles in getting credit.

The agency acknowledged consumers’

credit histories reflect how they have repaid their debts. Consumers’ credit histories may contain information about bank loans, vehi-cle loans, credit card bills, student loans and mortgages. They may also contain details about the terms of consumers’ credit, how much is owed to creditors, consumers’ pay-ment histories, and court judgments or liens against them.

“Credit history helps the consumer re-porting agencies determine how likely con-sumers are to repay their debts. The agencies use that information to produce credit re-ports and scores,” the CFPB said.

Further classifications

In broad terms, the bureau explained consumers with limited credit histories can be placed into two groups.

The first group is consumers without a credit report, or the “credit invisibles.” The second group, the “unscored,” includes con-sumers who do not have enough credit his-tory to generate a credit score or who have credit reports that contain “stale” or not re-cently reported information.

“The exact definition of what consti-tutes insufficient or stale information differs across credit scoring models, as each mod-el uses its own proprietary definition,” CFPB officials said.

The bureau indicated its newest report is designed to shed more light on the num-ber of consumers and the characteristics of those consumers who have little to no credit record at the nationwide consumer reporting

agencies. The report found that:■ Twenty-six million consumers are cred-

it invisible: About one in 10 Americans can be considered credit invisible because they do not have any credit record. About 189 million Americans have credit records that can be scored.

■ Nineteen million consumers have un-scored credit records: About 8 percent of the adult population has credit records that are considered unscorable based on a wide-ly-used credit scoring model. Those records are almost evenly split between the 9.9 mil-lion that have an insufficient credit history and the 9.6 million that lack a recent cred-it history.

■ Consumers in low-income neighbor-hoods are more likely to be credit invisible or to have an unscored record: Of the consum-ers who live in low-income neighborhoods, almost 30 percent are credit invisible and an additional 15 percent have records that are unscored. These percentages are notably lower in higher-income neighborhoods. For example, in upper-income neighborhoods, only 4 percent of the population is credit in-visible, and another 5 percent are unscorable under the widely-used model.

■ Black and Hispanic consumers are more likely to have limited credit records: Black and Hispanic consumers are consid-erably more likely to be credit invisible or have unscored credit records than White or Asian consumers. About 15 percent of Black and Hispanic consumers are credit invisibles compared to 9 percent of White consumers. An additional 13 percent of Black consumers

and 12 percent of Hispanic consumers have unscorable records under the widely-used model compared to 7 percent of White con-sumers. CFPB analysis suggests that these differences across racial and ethnic groups materialize early in the adult lives of these consumers and persist thereafter.

This analysis was conducted using infor-mation from the CFPB’s Consumer Credit Panel, which is a random sample of de-iden-tified credit records purchased from one of the nationwide credit reporting agencies and is representative of the population with cred-it records.

By comparing information in the cred-it panel from December 2010 with 2010 Census data, the bureau said it was able to estimate the number of consumers who were credit invisible or had unscored cred-it records.

“Part of our mission is to empower eco-nomically vulnerable consumers. It is hum-bling and important work,” Cordray said. “And in order to achieve that goal, we need to first understand the landscape that shapes how these consumers operate. Today’s re-port helps shed some light on the challeng-es they face.

“At the Consumer Bureau, we are ded-icated to fostering a responsible market-place that helps consumers get ahead rather than harming them and setting them back,” he went on to say. “We will be able to take the information from today’s report and ap-ply it in the future as we continue to work on behalf of the most vulnerable consumers among us.”

FactorTrust launches alternative data tool specific for auto financingATLANTA — Leveraging the possibil-

ities of alternative credit data to enhance the underwriting process percolated sever-al times during industry events earlier this year. In July, FactorTrust responded to the inherent need for increased credit opportu-nities for non-prime consumers by rolling out a new tool the consumer data provider is calling LendProtect Auto Score.

FactorTrust explained the LendProtect Auto Score is a credit risk solution for auto finance companies and buy-here, pay-here dealers serving non-prime consumers that is delivered independently of the three largest credit bureaus and is based on FactorTrust’s alternative credit data. The core data that is used to define a consumer’s score includes:

■ Unique alternative tradeline data■ Application information■ Stability metrics■ Payment dataFactorTrust chief executive officer Greg

Rable insisted those four data points are not available through the major credit bureaus. Rable indicated expansions of the score this new tool can produce are available. That ex-pansion can include other data points such as public records.

“The best indicator of future perfor-mance is past performance. In the past, lenders serving non-prime consumers have not had a full picture of a consumer’s credit history,” Rable said. “That changes with the LendProtect Auto Score, which opens up more auto credit access to millions of people who need access to transportation.”

FactorTrust reiterated the depth of the potential market where LendProtect Auto Score could be useful. The company point-ed out there are more than 50 million non-prime consumers in the U.S. who do not choose to use traditional credit opportu-nities due to convenience, lack of cred-it history or lack of a relationship with a credit provider.

FactorTrust also referenced a study by the Credit Union National Association, which estimated that this same population of people can increase their income by as much as 25 percent if they have access to re-liable transportation.

And to help finance companies BHPH operators cater to this demographic and po-tentially enhance quality of life, Rable said, “This score is purpose-built for the non-prime auto area.

“The consumer characteristics captured in the LendProtect Auto Score are tuned to the unique consumer profiles in this specif-ic market,” he continued. “Now non-prime consumers that have low FICO scores can benefit through increased access to cred-it and better rates, when positive alternative credit history is found in our database.”

FactorTrust went on to mention that fi-nance companies that leverage the Lend-Protect Auto Score now can offer consum-ers more flexibly priced loans, while at the same time mitigate losses through the in-corporation of alternative credit data.

Using proprietary alternative data, the LendProtect Auto Score can capture the highest-risk consumers in lower score bands and promotes the lowest-risk con-sumers into higher score bands. This pro-cess can allow finance companies that are working with consumers that would have identical profiles within the three large credit bureaus to be served more accurately.

“We are proud to offer the auto indus-try a solution to help them better serve non-prime consumers. Through this product we are further establishing FactorTrust as the leading provider of alternative credit data for the auto lending industry,” Rable said.

FactorTrust added the LendPro-tect Auto Score is compliant Fair Cred-it Reporting Act and the Equal Credit Opportunity Act.

BHPH dealers and finance companies that are interested in learning more can visit www.factortrust.com.


“For Equifax to open their doors to NIADA members and NABD members that shows how committed we are to this segment in providing a platform to create a transparent environment for consumers.”

Furthermore, the credit reporting avail-ability is a development cheered by Steve Jor-dan, executive vice president of the NIADA.

“Many of our members want to furnish their consumer auto loan portfolio to a cred-it bureau, however many are small business operators who do not understand the pro-cess and find it complex,” Jordan said.

“We are excited to work with Equifax and broaden access to the process and bring training to the space,” he continued. “Our relationship with Equifax has really grown over the last year, and our members will continue to benefit from Equifax data and industry expertise.”

Latest NIADA quarterly business confidence survey

More of that industry expertise is com-ing through the latest edition of the NIA-DA Quarterly Business Confidence Survey, which presents independent dealers’ sen-timent on the current state of the industry. Equifax provided insight on subprime auto lending trends.

But a key metric from the latest survey

wasn’t connected with a bureau score.A key statistic from the latest NIADA

Quarterly Business Confidence Survey in-dicated that the number of dealers who ex-pect their customer traffic to decline over the next quarter has more than doubled — from 8.3 percent to 17 percent — since the survey was last conducted.

Jeffreys explained this spike reflects heightened competition in the used market from large dealer groups.

“The growth of franchise dealers in the used-car space is not the only concern inde-pendent and BHPH dealers have expressed,” Jeffreys said. “Because many of these deal-erships do not report their accounts to a credit bureau, we’ve heard anecdotally that some consumers may opt to default on an auto loan since their credit score may not be affected.

“To help dealerships avoid these situa-tions, mitigate strategic defaults and reward positive consumer payment behavior, we are working with the NIADA to enable deal-ers to report consumer auto loans and pay-ments,” she went on to say.

NIADA Convention attendees learned more about trade line reporting during a training session at the event, which was hosted by Jeffreys and Jenn Reid, senior partner channel manager for Equifax, who both have retail dealership backgrounds.

The session was a BHPH break-out session titled, “Reporting Consumer

Credit: Advance Your Customer and Grow Your Business.”

“It’s a matter of being accustomed to how the report is written,” Jeffreys said. “At the end of the day, you’re looking to interpret the data, which is right in front of you. It’s not rocket science. It’s just looking at it to say, ‘OK, this customer had several inquiries from different areas over the past few weeks.’ They might be hopping different dealers.”

Jeffreys added that being able to inter-pret a credit report along with possibly le-veraging the income and employment ver-ification tools offered by Equifax can give

BHPH operators an even clearer picture of the potential buyer.

“What we’re seeing is there are a lot of buy-here, pay-here dealers who want to be proactive in taking steps to legitimize their business from the sense of creating a trans-parent experience for the consumers and also showing their lenders who come from things very by the book,” she said. “They’re verifying income and not just taking the word of a paystub. That’s steps to show the regulators that we’re in control of the en-vironment and we’re doing good things for consumers.”

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Jennifer Reid, left, and Angelica Jeffreys of Equifax make a point during the presentation, “Reporting Consumer Credit: Advance Your Customer and Grow Your Business,” at this year’s NIADA Convention.



LAKE SUCCESS and WOODSIDE, N.Y. — While dealership management empha-sized the settlement with the New York attor-ney general “acknowledges no admission of wrongdoing or liability,” Dealertrack Technol-ogies’ Randy Henrick shared his unsavory as-sessment of the “payment packing” possibly orchestrated by a trio of Honda stores as well as what the enforcement actions and multi-million dollar penalties could mean for deal-erships in the Big Apple and beyond.

General manager Brian Benstock re-leased a message in June later obtained by BHPH Report stating that “Paragon Hon-da, Paragon Acura and White Plains Hon-da announced they have reached a settle-ment with the New York attorney general’s offi ce related primarily to their long-discon-tinued sales of third-party credit services of-fered by Credit Forget It (CFI). Th ese servic-es were broadly available to consumers direct-ly from CFI, through automobile dealers andother providers.

“Th e settlement with the attorney general acknowledges no admission of wrongdoing or liability by the settling dealerships,” Benstock continued.

To recap, New York attorney general Eric Schneiderman explained the agreement, which returns more than $13.5 million in restitution to consumers, concludes an investigation into these dealerships for the alleged sale of fi nance offi ce products to 15,000 consumers — items that in some cases added more than $2,000 in “hidden costs and fees” onto the sale or lease price of a single vehicle.

“Paragon dealerships stopped off ering CFI credit services to customers in early 2014,” Benstock said in his statement. “We appreci-ate the attorney general’s offi ce bringing the matter to our attention and working with us to create a positive outcome for our custom-ers. We thank our employees and our custom-ers for their ongoing support. It is because of your trust in us that we are able to serve this market as we do.”

Th at trust, however, could be severe-ly damaged by this settlement. BHPH Report reached out to Henrick, who is associate gen-eral counsel for Dealertrack. Henrick regular-ly off ers instructional webinars and has been a presenter at the National Automobile Deal-ers Association Convention discussing the ad-vertising pitfalls and other behaviors in the fi nance offi ce that draw the ire of state andfederal regulators.

“Credit repair services are always a big target for regulators. Under federal law, you cannot charge a customer for a credit repair service until you’ve actually performed the service and repaired their credit. So you start with an unpopular product. Th is looks like they were essentially payment packed into the price of the vehicle or otherwise misrepresented to consumers,” Henrick said.

“Th is was bad conduct. Th is wasn’t some-thing anybody could defend as legitimate or unintentional or a mistake,” he continued. “Dealers know payment packing is unlawful. Th ey know credit repair services are dubious at best, although they are very profi table to re-sellers. I think having to put all of the mon-ey into a fund, as well as pay the $325,000 in penalties, that’s a pretty signifi cant penalty

even if the fund is only used to allow consum-ers to purchase additional services from the dealerships.”

What Henrick referenced was that the agreement requires Paragon to pay $6 mil-lion into a restitution fund administered by a third-party administer to be distributed to Paragon consumers with CFI contracts and to provide each of the about 15,000 consum-ers with a $500 “settlement card” that can be applied to one or more of the followingfrom Paragon:

■ Th e purchase or lease of any new or used vehicle

■ Certain services or maintenance, such as oil changes, tire rotations, tire repairs and wheel alignments

■ Certain accessories, such as mats and replacement windshield wipers.

“Paragon Honda and Paragon Acura are New York’s premiere Honda/Acura dealerships. We are family owned and operated since 1929. Our mission is to make every customer a customer for life by consistently providing world class service at our new and used car dealerships,” Benstock said.

“Paragon has a friendly and helpful sales staff and highly-skilled mechanics. We employ people from 24 diff erent countries who speak 22 diff erent languages. We have won multiple automotive industry awards including the American Honda Presidents Award, Council of Excellence Award for Finance, and Certifi ed Dealer of the Year Award,” he went on to say.

Despite that treasure trove of accolades and a diverse staff , Henrick isn’t upbeat about the prospect of those 15,000 customers returning to a Paragon store.

“Th ey’re depositing the money, but I don’t see anything here about them getting it back any of those unused funds. I would doubt that a lot of the consumers who were subject to this behavior are going to want to deal with those dealerships. It’s terrible publicity. It’s costly. It’s fl at out unlawful. I’m surprised in this day and age you would see conduct like this on such a mass scale,”Henrick said.

“Th is is not the (Federal Trade Commission) coming in and declaring something unlawful, something that previously was mainstream, as they’ve been doing with advertising,” he continued. “Th is is just bad conduct and known to be such. I’m not surprised by the harshness of the penalties given the magnitude of what the sales were.

“I suspect the majority if not all of it was payment packing,” Henrick added.

Details of Paragon investigation

Th e attorney general’s investigation found that Paragon used fraudulent, deceptive and illegal methods to sell the approximately 15,000 CFI contracts to consumers. Th at investigation into the three Paragon dealerships found that, between 2010 and 2014, they used deceptive sales tactics, including charging consumers for credit repair services and other “aft er sale” items without their knowledge or by misrepresenting that the services were free.

According to the investigation, and starting in at least March 2010, Paragon entered into an arrangement with CFI to sell its customers CFI’s credit repair and identify theft protection services. Every time Paragon charged a consumer for these services, offi cials explained the stores violated state and federal laws banning upfront fees forthese services.

Aft er a consumer worked with a salesperson to choose a vehicle, Schneiderman’s offi ce said they met with an F&I manager, who attempted to sell them additional products such as extended warranties, a security system and credit repair services.

In many instances, the investigation showed, Paragon simply charged consumers for the credit repair services and concealed that they were charging consumers. In others instances, Paragon allegedly falsely told consumers, who said they did not need or want the services, that the services were free. Some consumers were sold the services without their knowledge despite the fact that they had excellent credit.

In addition to charging consumers for credit repair and identity theft prevention services without their knowledge or consent, offi cials said the Paragon dealers added on charges for other aft er-sale items, such as tire protection and Lo-Jack, without clearly disclosing what they were charging for such items. Th e costs of these items were oft en bundled into the vehicle sale price and not separately itemized.

“As a result, oft en unbeknownst to the consumer, the price of the car stated on purchase and lease documents was infl ated by the amount of these aft er-sale items,” Schneiderman’s offi ce said.

Why NY dealer settlement impactmight ripple elsewhere

Paragon Acura was one of three dealerships to reach a settlement with New York attorney general Eric Schneiderman about a matter involving fi nancing.


The attorney general’s investigation fur-ther found that the dealerships failed to pro-vide required disclosures, such as a con-sumer’s rights to cancel the credit repair services contract.

In addition, Schneiderman’s office said the dealerships sometimes negotiated purchase and lease terms with consumers in Spanish and then only provided contracts and documents in English. New York City law requires that when the terms of an installment agreement are negotiated in Spanish, the seller must provide documents translated in Spanish.

The settlement prohibits Paragon from:■ Selling, offering to sell or marketing

credit repair and identity theft services in con-nection with the sale or lease of a vehicle

■ Selling, offering for sale, or providing to consumers any after-sale product or ser-vice unless, prior to such sale, certain materi-al terms, including price, are disclosed verbal-ly and in writing

■ Misrepresenting the price of the vehicle in final lease or sale contracts

■ Negotiating any terms of a sale or lease with a consumer in a language other than English without providing a translation of certain material documents in the language in which the terms were negotiated before the consumer signs these documents

■ Failing to provide consumers with sales or lease agreements that clearly and conspicuously itemize each after-sale product or service and its price

The Paragon dealers, all of which are owned by the same individuals, claim to sell or lease approximately 1,000 new and used vehicles a month.

Impact in New York and beyond

In recent months, Henrick has ramped up his educational and outreach efforts, espe-cially in light of actions involving not only the FTC in what it dubbed Operation Ruse, but also matters associated with the Department of Justice and franchised stores.

“I think there’s a number of dealers who see these things as a cost of doing business. Historically fines and penalties against auto

dealers haven’t been of this magnitude such that it could be a cost of doing business,” Hen-rick said.

“These are not all dealers or most dealers. These are a few dealers that view these kinds of things as a cost of doing business,” he con-tinued. “And even if they get caught, they were having to pay very little in relation to the prof-its, but Schneiderman here levied a very heavy penalty, and that’s what the FTC has been do-ing as well.”

Henrick recollected how the FTC recently penalized a dealer who pushed buyers into a program where they made biweekly payments, pitched on the promotion of saving money. Regulators found the program didn’t save customers any money, rather it actually cost them more, which prompted them to say it was “a deceptive trade practice,” according to Henrick. He said the store eventually had to pay the FTC a fine approaching $200,000.

“You’re beginning to see large numbers, and I believe part of that is regulators’ enforcement philosophy that this is no longer just a cost of doing business, that you’re going to straighten up and do things right or they’re going to pay a heavy penalty that’s not going to make it economically attractive. I think that’s the message here,” Henrick said.

Henrick also has anecdotally heard about the FTC currently “hammering our consent decrees for deceptive advertising” with multiple dealerships out West. Earlier this year, Operation Ruse led to millions in penalties against dealerships.

The furor of the FTC as well as the Consumer Financial Protection Bureau potentially is fueling enforcement officials such as Schneiderman as well as New York City Department of Consumer Affairs Commissioner Julie Menin, who were both quoted in this week’s settlement announcement. Henrick resides in New York so has a closer vantage point of both officials.

“Julie Menin is a very aggressive prosecutor. She’s been on a mission against auto dealers,” said Henrick, referencing a program Menin’s department announced

back in April. It’s a new initiative to create what she called a “safer” loan product for qualified secondhand auto borrowers and to help them “avoid financial ruin by predatory loans.”

When asked about New York’s attorney general, Henrick said, “Schneiderman is showing himself to be one, as well. He’s been very active in the securities markets and certain other areas. This is a major foray into consumer protection, and the dollars are large. I think the message he’s sending is clear: If New York auto dealers violate the law, particularly if they violate it in ways that are indefensible, they’re going to pay a hefty price and it’s not going to be just a cost of doing business.”

Henrick cautions dealers who might be far from New York about taking the approach that what happened in the Empire State won’t occur elsewhere. He suspects that other attorneys general will be discussing Schneiderman’s actions when they gather multiple times per year for their association events.

Henrick also mentioned plaintiff ’s associations also might be examining this settlement to see if any class action suits can be brought.

“You’ve got a lot of aggressive attorneys general. Many states have unfair and deceptive acts and practices laws that give consumers the right to sue and rights to bring private attorneys general actions. I think Schneiderman doing something like this is going to be looked at very carefully,” Henrick said.

“Many dealers will say, ‘I don’t have to worry about all that because I have an arbitration clause in my contract,’” he continued. “But I think unfair and deceptive acts and practices claims can be separated from contract claims, and they’re essentially statutory and tort actions. They’re not necessarily covered by the arbitrary class action waiver clauses. This puts it out there.”

Henrick left BHPH Report with one last point about this settlement and what the fu-ture implications could be.

“It’s an extreme case, but it’s not an extreme case because there are a small number of dealers, but in absolute numbers they’re not necessarily that small,” he said. “It’s not like the old days where the fines were $1,000 or $10,000. But we’re talking here at $325,000 penalty and a $13.5 million in restitution, albeit some of which will be spent on services at the dealership. But to the extent that the money is not all used up I think it’s going to be forwarded to the state. This is a multi-million loss for these dealerships even under the best of circumstances.

“This is the FTC’s and to a certain extend the CFPB’s approach in assessing penalties,” Henrick went on to say. “They’ve ratcheted up the numbers substantially from where they were just a few years ago. That causes people to sit up and take notice. Hopefully, it will indicate that the cost of compliance or the practice of compliance can put a dealer in a much better financial place than schemes like this do.”

Paragon Honda was one of three dealerships involved in a settlement associated with the sale of additional finance products.

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HANOVER, Md. — If you are a dealer and you have not heard that federal and state authorities are launching a serious crackdown on advertising violations, you must be living under a rock. For the last several years, there has been a steady increase in ad violation claims, with the most recent and most attention-getting initiatives being the Federal Trade Commission’s “Operation Steer Clear” and “Operation Ruse Control.”

With all the publicity about regulatory scrutiny of dealership ads, I fi nd it hard to work up much sympathy for a dealer who hasn’t gotten the word and is playing ‘ad roulette.’ Th at was certainly my reaction when I read the latest report of one of these enforcement actions.

Th e Offi ce of the Attorney General of Tennessee announced on April 20 that it had reached a settlement with a Tennessee auto dealer that the AG and the Tennessee Division of Consumer Aff airs had charged with using deceptive business practices to target military families. Th e dealer, Wholesale Inc., agreed to immediately change its advertising practices and pay the state $50,000.

A county court approved the settlement among the dealer, the Tennessee AG’s offi ce and the Di-vision of Consumer Aff airs. Th e settlement agree-ment centered around two advertising mailers sent to would-be customers. One mailer specif-ically targeted servicemembers living near Fort Campbell.

Aft er reviewing a servicemember’s complaint, the state alleged that the dealership made numer-ous false representations in violation of the Ten-nessee Consumer Protection Act. According to the state, a fi ctitious lender called “CreditAble Auto Funding,” claiming to be “by military, for military,” was off ering “a limited amount of loans to military personnel.”

Under the settlement, the dealership must maintain proof to support all ad claims and will be required to include the company name on all ads sent to consumers. Th e dealership also must devel-op written policies and procedures for reviewing and approving its ads.

Nothing in the settlement agreement men-tioned an ad agency, but I’ll bet my favorite bass lure that this dealer didn’t dream up this ad cam-paign, and that some ad agency has come up with an ad program it sells to dealers located near mil-itary bases. Some ad agencies seem to believe that it’s OK to say anything in an ad that will bring po-tential car buyers in the door — I’ve seen ad pack-ages off ered to dealers that seem to have absolute-ly no regard for the truth of the statements made in the ads. If the dealer bites and buys the ad pack-age, those statements, of course, become the deal-er’s statements.

If my suspicions are correct, one lesson from this Tennessee action is clear. Th e authorities will hold the dealer accountable for every ad and every claim in every ad. Th ey will require that the deal-er “substantiate” each claim made in the ad. So, if an ad describes a creditor company as “by mil-itary, for military,” it is the dealer’s responsibility to determine if that statement is true. If a creditor

named in an ad turns out not to exist, the authori-ties will hold the dealership responsible for imply-ing or stating in its ad that the creditor is real.

Another lesson is equally clear. Not only must dealerships pay attention to federal laws like the Truth in Lending Act and the Consumer Leasing Act, they must also contend with the Federal Trade Commission and state attorneys general — enforcers of prohibitions against unfair actsand practices.

So what should a dealership do to avoid being in the crosshairs of the ad police? I can think of a few things.

First, if a dealership’s ads come from an ad agency, the dealership should do a “due diligence” review of the agency to determine if the agency’s ads have ever created problems for dealers. Th e ad agency should be questioned about the level of dealer compliance training, if any, its personnel have received and should agree to stand behind its ads.

Th en the dealer should read the ads and confi rm that the statements in them are accurate and complete. If the statements make claims, the dealer should assume that those claims may, at some point, be challenged, so all such claims should be substantiated in writing before the ads are used. Th e dealer should confi rm that the ads meet the requirements of federal and state law, including, when applicable, laws regulating merchants generally, dealers specifi cally, and ads involving a lottery, a game of chance, or other regulated activity. Th at sort of confi rmation may require the advice of counsel, but there are many helpful ad compliance materials available on the FTC’s website and on the websites of organizations such as state auto dealer associations.

Th e dealer’s entire ad review process should be in writing and reviewed by counsel and should be updated periodically. All of these chores should be the responsibility of the dealership’s compliance offi cer.

Your dealership doesn’t have a compliance offi cer? Oh my!

We need to talk.Th omas Hudson, Esq. ([email protected]) is

the author of several books, and is also the editor/ author of the CARLAW F&I Legal Desk Book. Th e books are available at www.Counselorlibrary.com. He is also the publisher of Spot Delivery, a monthly legal newsletter for dealers, and the editor in chief of CARLAW, a monthly report of legal developments in all states for the auto sales, fi nance and leasing industry. For information, call (410) 865-5411 or visit www.counselorlibrary.com.

Are you playing roulette with yourdealership’s advertising?

With all thepublicity about regulatoryscrutiny ofdealership ads, I fi nd it hard to work up much sympathy for a dealer who hasn’t gotten the word and is playing‘ad roulette.’

THOMASHUDSON


The ‘bottom line’ of Spireon’s acquisition of InilexBy Nick Zulovich, Editor

IRVINE, Calif. — Spireon chief market-ing officer Shawn Hansen gave buy-here, pay-here dealers and subprime finance companies what he called the “bottom line” about the potential benefits of the company acquiring Inilex.

For operations that demand a GPS de-vice be attached to a vehicle in order for the financing and installment contract to be finalized, Hansen highlighted that Spir-eon clients now can pivot the conversion to show that it’s not just about underwrit-ing criteria. The device can open the door to a wide array of consumer applications, and more importantly for dealers and fi-nance companies, the chance to generate more revenue.

“There is a whole range of consumer ap-plications that can be layered once the GPS tracker is in place,” Hansen said during a conference call after Spireon announced the acquisition of Inilex in July.

Hansen continued that during the past 20 years, “the IT industry in gen-eral has been totally turned on its head because of what’s happened with consumer applications.

“Because of consumer demand, compa-nies have changed their IT policies in the way they give productivity apps to their

users. We see that same thing happening with car dealerships in buy-here, pay-here and subprime,” he continued. “We see that users will benefit from additional applica-tions they can use on their phones or get di-rect access to. This is a very complementa-ry fit that give the dealer an opportunity to show where the value is to their customers.”

Through this acquisition, Spireon now has 2.3 million connected vehicles in its network.

“An auto finance company or dealership who already uses GPS technology and can offer the customer the chance to track their vehicle can now make more money. That’s the bottom line,” Hansen said.

“They can make more money by offering theft recovery services and additional con-sumer applications to the end user,” he con-tinued. “It presents a way to increase their profits and to add another value proposition on top of the fact that their vehicle is being tracked and they’re getting a loan that they might not be able to get otherwise.”

While they might have been seen as in-dustry competitors, Hansen indicated Spir-eon and Inilex have had “a long-standing relationship.” That situation led in part to the deal.

“Inilex has been a customer of Spire-on in providing some of the underlying technology for them. It was a natural fit

for the two companies to come together,” Hansen said.

“We’ve been discussing this for some time. I’m not in a position to say how long it was going on, but the business relation-ship has been in place for some time,” he continued.

Hansen noted Spireon did not face any antitrust or regulatory hurdles to complete the acquisition.

“This is a relatively straightforward inte-gration of the two companies,” he said.

Hansen also mentioned a message to any BHPH dealers or finance companies that were solely Inilex customers prior to this week’s developments.

“Integration is happening right now. Sales and marketing channels are already integrating,” Hansen said. “As far as the technology is concerned, we’re kicking off those efforts. We’re going to out to all of our different dealer channels to let them know this work is being done and will be com-pletely relatively shortly.”

As the automotive industry transforms in the connected car era, officials high-lighted this acquisition enables Spireon to uniquely connect all major segments of the vehicle life cycle, ranging from franchised dealers to independent and buy-here, pay-here dealerships, fleets, finance companies, insurance companies and rental car fleets.

They added the acquisition expands Spireon’s strategy to offer rich services and business intelligence across any kind of vehicle.

Spireon emphasized that Skylink can leapfrog traditional theft recovery services by replacing legacy radio sets that have lim-ited coverage with next-generation GPS ap-plications that can be tracked with any in-ternet connected device. Instead of relying on proprietary technology that only works with a small number of police vehicles, Sky-link can offer ubiquitous coverage using na-tional cellular networks.

And with the combination of Skylink’s dedicated 24/7 call recovery center that works directly with local law enforcement and cloud-based phone applications, offi-cials insisted that vehicles can be recovered within minutes instead of waiting days for a dedicated police car to search manually for a radio signal.

“We are excited to join the Spireon fam-ily,” Inilex CEO Michael Maledon said. “This transaction allows us to scale our sales and marketing efforts to reach more dealers nationwide.

“Backed by world-class infrastructure, our customers gain the added assurance that Skylink will continue on our promise to deliver high value solutions and results,” Maledon went on to say.

Don Jasensky800-206-6964x21 [email protected] [email protected]

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CHICAGO — Have you ever wondered, “what does Gene do in this industry?” Well, I will tell you. I have turned into a store creator, I guess. I just turned the key on the third dealer-ship I played a big role in creating.

Two of these operations were put togeth-er for franchise dealer principals while the one just opened was a change. Th is store is for a large corporation that has quite a bit of business in re-lated fi elds (deep subprime fi nancial services) but not in auto, specifi cally.

What a chore it has been. I liken it to push-ing a block of cheese through a chain link fence. Nothing like a new challenge to help keep the mind spry and the grey hairs falling out!

It was a very satisfying feeling when I heard the impact wrenches start buzzing as we began reconditioning the fi rst wave of rigs for the lot. Th en the fi rst car sold, which made everyone cheer. Now we are two weeks in, and we rolled No. 25.

All of this has been rewarding. I have been asked about 50 times if I was excited to which I answer, no. I will be excited when we hit stock No. 2,000 (we started at No. 1,000). I believe that is when I will feel we have been successful and the new operation will roll on as planned.

Number signifi cance

Why No. 1,000? Th at’s when we will have data. Not just some data but enough to really

evaluate. We will have a clear idea of how to project the future. We’ll know how much it costs us to sell a vehicle. We will completely under-stand our market and have made the tweaks nec-essary to maximize every opportunity. Th e team will be honed and sharp. By the time we have sold 1,000 vehicles, I will know I can move on to the next “block of cheese” and the new fence.

What I am looking for is the numbers to reach a point that shows we will be fully cash fl owing before 30 months. If we get the right mix of inventory, where at least 70 percent of the ve-hicles in stock work for 70 percent of the people walking in the door and the other 30 percent ap-peal to most of the rest, we will be able to sell to anyone that fi ts our program.

As long as we continuously manage each deal according to plan, and we stay within our loan

guidelines and scoring for approvals, the only thing left is volume. When we are at 1,000 deals, we will have confi rmed if the program we built for this market is making folks happy. Our customer service will have prov-en to be strong as the other opera-tions I have put together, and we will see referrals growing.

Portfolio details

It will be interesting to see where the portfolio plateaus. Will it be 26 months or 32? Will be at having 1,200 on the books or 1,700? Will the portfolio be $9 million or $12 million?

Once we get there, we will know what our collection potential actually is, and we can make solid plans to ex-pand knowing the results of each new store we build.

Today we are averaging $6,000 ac-tual cash value on the sold units with a $4,700 gross average so far. Our in-terest potential is about $4,000 per unit with a 100 percent penetration on the service contract program we off er.

We have a specifi c program our sales people follow, and we are aver-aging $1,388 in down payment per deal.

Can we keep this up? My last startup is now almost 11 years old, and those numbers are holding with

a loss ratio around 10 percent of portfolio and a month end delinquency of under 15 percent to-tal. So I am planning on the program working again.

Why share these details

Th is isn’t about bragging, I am just sharing numbers and expectations I have in hopes some-one else can compare and decide if making a few changes will help them make more money.

I have met many dealers that feel the busi-ness isn’t profi table or certainly not worth the ef-fort, and a common theme for these guys is not charging enough for the vehicles and not under-standing cost of sale in their operations.

By no means does 25 cars make a portfo-lio, but when it’s the third portfolio and the in-dividual numbers are tracking as the others did, it won’t be long until our collection potential is running above 100 percent.

When I say cost of sale, I am referring to your overall expenses, everything you spend money on to operate your store. I do mean everything: lights, phones, salaries, perks, building, invento-ry and so on. All divided by the number of cars you sell each year. In most operations that num-ber ranges from around $1,800 up to more than $3,000 per sold unit.

Do you make that much in gross when you sell one for “cash”? How much are you making on the front, and how much are you collecting in interest? Does the interest you collect exceed the losses you are seeing? I know the previous two years that would be hard to say, but it should be back in line by now.

Another good metric is how you do with your repos. When you look at each repo individ-ually (total cost of sale versus all income received against it) do they make a profi t? You should see an aggregate profi t on all your repos each year. I have seen dealers that averaged over $2,000 a copy on repossessed vehicles. I am not talk-ing about your portfolio loss, just true cost and revenue.

I enjoy the BHPH business. Each time I spend a lot of time around new people that are learning, it is fun to discuss our industry vs. be-ing in the new-car franchise business. I get to help people that really need it, and I get to say no when they don’t deserve any credit from anyone. I get to take the car when a customer doesn’t act right instead of saying “yes sir, so sorry”, even when the customer is the sorry one.

My guys are rocking again today, and I’ll be back closing deals next week. No matter how far away from the desk I get in my responsibilities, I still like writing them and closing them.

Gene Daughtry is an experienced trainer and consultant specializing in BHPH/LHPH dealership operations. Daughtry now is director of BHPH op-erations for PLS Financial and has begun a mul-tistate project of building new BHPH dealerships in several states. He has 17 years of BHPH expe-rience. If you would like a “how to manual” on starting up and operating a BHPH dealership check out www.dealers411.net and get a copy of his book, BHPH 101 Plus. You can reach Daugh-try at [email protected] or (479) 970-4049.

I enjoy the BHPH business. Each time I spend alot of time around new people that are learning, itis fun to discussour industryvs. being inthe new-carfranchise business.

GENEDAUGHTRY

The joys and pains of starting up another BHPH dealership

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BHPH July-August 2015 Front Page - and Page 17

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Transcript of BHPH July-August 2015 Front Page - and Page 17