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  June 2013 VOLUME 8 ISSUE 6  

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jimRagogna-AskExpertJim Radogna is the Pres­i­dent of Dealer Com­pli­ance Con­sul­tants and answers this month’s question.

Will rul­ings by the Con­sumer Finan­cial Pro­tec­tion Bureau impact the amount of reserve deal­er­ships can make on sales transactions?

Despite NADA’s land­mark vic­tory in get­ting most auto deal­ers exempted from direct over­sight by the Con­sumer Finan­cial Pro­tec­tion Bureau (CFPB), it looks like the agency has found a back-door way to make life more dif­fi­cult for deal­er­ships. The Bureau recently announced that lenders that offer auto loans through deal­er­ships will be held respon­si­ble for “unlaw­ful, dis­crim­i­na­tory pric­ing at the deal­er­ship level”.

The Bureau has indi­cated that it sees a poten­tial for dis­crim­i­na­tory pric­ing caused by the poli­cies of some indi­rect auto lenders that allow auto deal­ers to mark-up lender-established buy rates and that com­pen­sate deal­ers for those markups in the form of reserve. Their ratio­nale is that because of the incen­tives these poli­cies cre­ate, and the dis­cre­tion they per­mit, there is a sig­nif­i­cant risk that they will result in pric­ing dis­par­i­ties on the basis of race, national ori­gin, and poten­tially other pro­hib­ited bases. A cen­tral issue is that lenders tra­di­tion­ally leave it up to deal­er­ships to set the final inter­est rate cus­tomers pay on their indi­rect auto loans arranged by deal­er­ships. The CFPB guid­ance calls for addi­tional com­pli­ance bur­dens on lenders who pur­chase Retail Install­ment Con­tracts from deal­ers and expects those lenders to take “reme­dial action” with deal­ers when nec­es­sary. As the old say­ing goes, “stuff” rolls downhill.

Here’s the prob­lem: the CFPB is cit­ing the con­cept of “dis­parate impact” — which is purely a sta­tis­ti­cal analy­sis — in eval­u­at­ing poten­tially dis­crim­i­na­tory dealer rate markups. Only the num­bers mat­ter, not the intent or even the knowl­edge of the cred­i­tor. So, even if a lender or dealer didn’t intend to dis­crim­i­nate, they may still be held liable for per­ceived dis­crim­i­na­tion against pro­tected classes. You can be doing every­thing com­pletely neu­tral or unbi­ased but if there is a sta­tis­ti­cally sig­nif­i­cant adverse impact on a pro­tected class, you can still be held respon­si­ble under the Equal Credit Oppor­tu­nity Act (ECOA).

The CFPB fur­ther rec­om­mends that indi­rect auto lenders take steps to ensure that they are oper­at­ing in com­pli­ance with fair lend­ing laws as applied to dealer markup and com­pen­sa­tion poli­cies. These steps may include revis­ing dealer markup poli­cies, elim­i­nat­ing dealer dis­cre­tion to markup buy rates, and com­pen­sat­ing deal­ers using a dif­fer­ent mech­a­nism that does not result in dis­crim­i­na­tion, such as flat fees per transaction.

As a result of these announce­ments, at least one major bank has already sent a let­ter to deal­ers indi­cat­ing that it will “peri­od­i­cally review dealer port­fo­lios, address­ing indi­ca­tions of poten­tial dis­crim­i­na­tion”. The let­ter also stated in part “if you are unable to pro­vide any expla­na­tion for the pric­ing dif­fer­ences, or if we con­tinue to iden­tify unex­plained dif­fer­ences in your pric­ing to pro­tected classes on a pro­hib­ited basis, we will con­sider tak­ing fur­ther action”.

Who knows what these “actions” could include — per­haps dis­rup­tive audits or even demands for repur­chase of a dealer’s entire port­fo­lio?
Read More

AutoUSA Twitter
AutoUSA Featured Interview

Kevin BuslerKevinBusler-LogoPHoto
BDC Direc­tor
Day­tona Toy­ota Scion
Day­tona Beach, Florida

AutoUSA: Can you tell me a lit­tle bit about your deal­er­ship and your back­ground in the industry?

Kevin: Day­tona Toy­ota — Scion is fam­ily owned and oper­ated for more than 15 years.
My back­ground in the indus­try is a life­time car guy. My father was a Chevro­let dealer and I pur­chased the deal­er­ship from him in 2000. I was the dealer until 2005 when we sold the deal­er­ship. After that I became very inter­ested in the mechan­ics of auto­mo­bile inter­net mar­ket­ing. I exper­i­mented with a great deal of dif­fer­ent online endeav­ors which helped give me a much clearer idea of how online car sales should be gen­er­ated aside from the nor­mal processes and pro­ce­dures tra­di­tion­ally used by deal­er­ship inter­net departments.

AutoUSA: What is the size and struc­ture of your Inter­net Department?

Kevin: We cur­rently have 6 full time inter­net sales­peo­ple that han­dle 100% of our inter­net traf­fic and close con­sis­tently over 10% of our leads.

AutoUSA: What do you do that is dif­fer­ent from your competition?

Kevin: We have done exten­sive test­ing with direct mail and data min­ing and when using the Show­Pro reward card to drive traf­fic as an incen­tive and to con­trol our data base we get incred­i­ble results. Inte­grat­ing that with leads from AutoUSA gives us a boost of 15 to 25% in appoint­ment set­ting for our prospects.

AutoUSA: What types of mar­ket­ing and adver­tis­ing do you do to increase web traffic?

Kevin: The Show­Pro prod­uct was on our deal­er­ship web­site but was not being pro­moted. We inte­grated a sim­ple tem­plate pro­gram online and con­nected it to our CRM tool. We didn’t want to just wait for prospects to find it on our site so we take the link to them in direct mail and email pro­grams. Remem­ber not every­one uses the Inter­net in the same fash­ion, so mak­ing the offer­ing of a reward to set the appoint­ment via off-line mar­ket­ing allowed us to cast a broader net for auto shoppers.

Our biggest fear was that we would have too many peo­ple redeem­ing the Show­Pro incen­tive, but our Gen­eral Man­ager was sup­port­ive. We also made sure to imple­ment a redemp­tion process that was easy for cus­tomers and a process to help us keep the data base clean and current.

AutoUSA: What do you do to cre­ate a great cus­tomer experience?

Kevin: More effec­tive and pro­duc­tive Inter­net pro­mo­tions that gives our cus­tomer a more real­is­tic buy­ing expe­ri­ence, instead of mar­ket­ing with pro­mo­tions that over promise and under deliver. The Show­Pro reward card pro­vides us a great tool to nego­ti­ate cre­at­ing an appoint­ment as well as increas­ing our appoint­ment show rate.

Cus­tomers arrive at the deal­er­ship in a good frame of mind because they are focused on the reward for show­ing up and not think­ing about the deal­er­ship sales process. Our sales team main­tains that tone by being help­ful, friendly and high­light­ing our great atti­tude about the buy­ing expe­ri­ence and the ter­rific Toy­ota vehi­cles. Our Inter­net Depart­ment Sales increased over 40% since changes to this pro­gram. Addi­tion­ally we offer a Life­time Non-Factory War­ranty on every new vehi­cle pur­chased at no addi­tional charge, and that has been a real game changer for us. Buy­ers like hav­ing that peace of mind and it pro­vides an assur­ance about keep­ing their vehi­cle on the road in an ever chang­ing world.

http://daytonatoyota.com

AutoUSA News

JoshVideoJune2013-YouTube
 

AutoUSA Intro­duces Shop-By-Payment for Pay­ment Pro,

For The Major­ity of Car Buy­ers, It Is All About the Payment

AutoUSA Inter­net Sales Solu­tions (www.autousadealers.com) just intro­duced Shop-By-Payment for Pay­ment ProSM, pow­ered by Dri­veIt­Now, a patent-pending next gen­er­a­tion pay­ment mar­ket­ing tool that offers con­sumers a new way to shop on auto dealer web­sites. When a cus­tomer vis­its a dealer web­site with Shop-By-Payment, they are given the option to search inven­tory based on their desired monthly pay­ment. The cus­tomer is prompted to enter in their name and a few details—no SSN or DOB required. Shop-By-Payment searches the avail­able inven­tory based on their actual credit, the deal­ers’ cur­rent finance pro­grams and returns a list of new and used vehi­cles that match the desired pay­ment. Read More

View the Auto­mo­tive News Article

Web Selling, Marketing & Technology
Internet News Developments of Significance to Dealer Management

Five Benefits of Shop-By-Payment Tools

I’ve often advo­cated in my blogs the ben­e­fits of quot­ing a price to cus­tomers who sub­mit leads with a price inquiry. If the cus­tomer is sub­mit­ting leads to more than one deal­er­ship, not pro­vid­ing the price will likely elim­i­nate you from con­sid­er­a­tion. Yet accord­ing to CNW Mar­ket­ing Research, 70.5% of peo­ple finance their cars. Read More

Stop Being a Loser & Be a Leader

In my 30 years in the busi­ness, I have never seen such a lack of civil­ity, lead­er­ship and pro­fes­sion­al­ism in the auto­mo­tive indus­try. You can find man­agers any­where, but devel­op­ing lead­ers is a much more chal­leng­ing task. Man­agers are inte­gral, but lead­ers are essen­tial. It does not take char­ac­ter, guts or vision to man­age things, but it takes all three to lead peo­ple. Read More

Why No Social Media Vendors Exist In Automotive

Before you get all huffy (espe­cially the social media ven­dors that may read this), I want to nar­row my def­i­n­i­tion of “social media” for the pur­poses of this arti­cle down. Social media encom­passes a lot of things but I’m specif­i­cally talk­ing about Face­book and Twit­ter man­age­ment. There are not many peo­ple who would argue that, given the choice and means, any com­pany has the abil­ity to do their own social media bet­ter than any ven­dor. Read More

This newsletter is published as a combined news, editorial, and market research enewsletter by Automotive Information Network, Inc. and AutoUSA. The content is intended to be for informational, educational, and promotional purposes only.
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Web Editor: Mark Dubis

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1300 North Federal Highway Suite 200, Ft. Lauderdale, FL 33304
Contact: Vincent Hoag at 800-243-9935
or via email at support@autousa.com
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