Nevada Dealer News

ALSO Marketing Your Vehicles Beyond the DealershipPLUS NAAA: Auction Industry Report

CASH FLOW: THE KEY TO STAYING AFLOAT

DEALERNEWSO F F I C I A L P U B L I C A T I O N O F N I A D A N E V A D A

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PRSRT StandardU.S. Postage

PAIDDALLAS, TEXASPermit No. 2079

V I S I T U S A T W W W . N I A D A . C O M

Season’sGreetings

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FOR INFORMATION ON HOW TO BECOME A MEMBER PLEASE CONTACT CINDY [email protected] • 800-756-4232

Dealers who demonstrate commitment and support the principles and ethical business standards of the CMD® designation complete a four-day seminar that addresses Business Management, Merchandising, Financial Man-agement, Human Resources, and Business Planning. Northwood University provides the instructor and awards 4 Continuing Educa-tion units for this course. The next class will be March 10-12 at the SuperMedia Hotel and Con-ference Center at DFW.

MAGAZINECONTENTSINSIDE

8 Cash Flow: The Key to Staying Afloat 10 NAAA Auction Industry Report 12 Insurance Coverage a Safe Bet 13 Auction Standards

ADVERTISERSINDEXAutoTrader.com .............................................. Back CoverCars.com .............................................. Inside Front CoverManheim Advantage............................................... 10, 11NIADA.TV .......................................................................3SmartAuction ....................................................................5Western Funding ............................................................. 9 Western General / Protective .............. Inside Back Cover

NATIONAL INDEPENDENT AUTOMOBILE DEALERS ASSOCIATIONWWW.NIADA.COM • WWW.NIADA.TVNIADA HEADQUARTERS: 2521 BROWN BLVD. • ARLINGTON, TX 76006-5203 PHONE (817) 640-3838FOR ADVERTISING INFORMATION CONTACT: TROY GRAFF (800) 682-3837 OR [email protected] Nevada Dealer News is published bi-monthly by the National Independent Automobile Dealers Association Services Corporation, 2521 Brown Blvd., Arlington, TX 76006-5203; phone 817-640-3838. Periodicals postage paid at Dallas, TX and at additional offices. POST-MASTER: Send address changes to NIADA State Publications, 2521 Brown Blvd., Arlington, TX 76006-5203. The statements and opinions expressed herein are those of the individual authors and do not neces-sarily represent the views of Nevada Dealer News or the National Independent Automobile Dealers Association. Likewise, the appear-ance of advertisers, or their identification as members of NIADA, does not constitute an endorsement of the products or services featured.

STATE MAGAZINE MGR./SALES Troy Graff • [email protected] COVER BY Mike MorganEDITOR Mike Harbour • [email protected] MGR. Jacob Kerns • [email protected]/PRODUCTION MGR. Christy Haynes • [email protected] Nieman Printing

John McElroy is host of the long-running “Au-toline Detroit” television program, covering all aspects of the automotive industry. In this pre-sentation, McElroy provides a thorough and insightful review of where we’ve been, where we now are, and where our industry is head-ed. Taped at the Automotive Fleet & Leasing Association’s Annual Conference.Log on to www.niada.tv and Click on “OPERATIONS”Remember we have over 400 hours of quality dealer education that can be viewed 24/7 on niada.tv.

THE CURRENT STATE OF THE AUTO INDUSTRY

CMD Classes

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Six vehicle auctions located across the U.S. were purchased by ADESA, one of the nation’s top auto remar-keters, from The Premier Auction Group (PAG).

“The acquisition of The Premier Auction Group demonstrates our commitment to in-creasing our dealer consignment business and enhancing the scale of our offerings to our national consignors,” said ADESA Presi-dent and CEO Tom Caruso in announcement last month.

Bay Auto Auction in Bay City, Mich., Dealers Auto Auction of Michigan in Clare, Mich., East Tennessee Auto Auction in Fall Branch, Tenn., Montpelier (Ohio) Auto Auc-tion, Premier’s Las Vegas Auction in North Las Vegas, Nev., and Wisconsin Auto Auc-tion in Lomira, Wis., were added to the com-pany’s lineup.

The acquisition of PAG’s auctions strategi-cally complements ADESA’s dealer consign-ment initiative and strengthens the compa-ny’s footprint in Michigan, Tennessee, Ohio and Wisconsin. It also provides ADESA with the addition of a specialty sale near the con-struction of the company’s new greenfield auction, ADESA Las Vegas.

Over time, these six locations will be in-tegrated into ADESA’s current infrastructure and resources, ultimately offering the full scope of ADESA’s product and service of-ferings.

To strengthen this transition, Bob Hu-bregsen, former PAG president, will serve as a vice president for ADESA.

Carmel, Ind.-based ADESA has 70 auc-tion locations in the U.S., Canada and Mexico.

ADESA Acquires Six Auctions

Dear Editor:

Carfax is constantly looking for ways to further improve the exceptional service we provide our independent dealer customers. We have a dedicated team of professionals that handles any customer requests quickly. As a result of our tireless efforts, I am proud to say that we have streamlined our data re-search process.

The research process is easily started with just a few simple steps. Any Carfax-subscrib-ing dealer in Nevada can access their Carfax account at carfaxonline.com. Next, click the link which takes you directly to the online Data Correction Form. After submitting the form with the 17-digit vehicle identification number and requested research, a Carfax rep-resentative will work with you throughout the data verification process and confirm the issue has been resolved. In most cases, the entire

process is completed in just a few hours. Carfax is always here to help, especially

on the rare occasions that data research is needed. Inconsistent odometer readings, for example, can raise a red flag but may be the results of simple human error. We’ve made it easier for dealers to initiate the process and get a faster resolution. We’re helping our cus-tomers manage a more efficient business and keeping their operations running smoothly.

Any dealer in Nevada that has questions about their Carfax account or the data re-search process can call Carfax Business Ser-vices at 888-695-1885. It is our pleasure to serve you.

Sincerely,

Kari SloanManager, Dealer Business UnitCarfax

Carfax Is Here To Help

SCHOLARSHIPS!Information and applications for the 2011 NIADA Foundation scholarships have

been posted at www.niadafoundation.org. Applications must be postmarked by Feb. 1, 2011.

If you know any outstanding high school seniors graduating this academic year who are headed to college, encourage them to go online to download and submit an application. At the annual NIADA Convention and Expo each June, the founda-tion awards four regional scholarships. These awards, which have been for $3,500 each for the past two years, are presented to the students’ colleges of choice.

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“Wall Street/Consumer” Financial Services Reform Bill

On November 17, NIADA General Counsel Keith Whann and Federal Ad-vocates will be meeting with staff of the FTC as a follow-up from the September 21 meeting. A series of questions have been provided to NIADA for discussion at the November session. To review, on Sep-tember 21, Whann and Federal Advocates met with staff of the Federal Trade Com-mission (James Dolan, assistant director; Carole Reynolds, senior attorney, Division of Financial Practices; Rebecca Kuehn, assistant director, Division of Privacy and Identity Protection; Katherine Worthman, attorney, Division of Financial Practices; and Daniel Hanks, attorney, Division of Marketing Practices) regarding implemen-tation of the above bill and its impact on the auto industry. Following discussion of various issues, with Whann leading the dis-cussion and answering various questions as to how the auto industry works (including the auction practice itself), it was decided to schedule a follow-up session to allow for a more detailed discussion of issues.

To review further, on July 22, President Obama signed into law the so-called Wall Street Reform Bill. As reported previously, the new law exempts certain auto retailers from increased oversight with respect to dealer-assisted financing. To get to that re-sult, advocacy activities included numerous meetings, strategy phone conference calls, letters, talking points, legislative alerts, etc. The law does grant increased powers to the FTC regarding dealer oversight. Also, it requires coordination with the Department of Defense to ensure that service members and their families are treated fairly by auto-mobile dealers.

Senate Motor Vehicle Safety Act of 2010

NIADA is reviewing the above bill pend-ing possible Senate Floor action in Novem-ber or December. To review, on June 9, the Senate Committee on Commerce, Science and Transportation marked up and reported S.3302, the so-called Toyota Bill. In earlier drafts of the bill and just prior to markup, language was included (section 310) which would have specified that a dealer may not sell or lease a used passenger motor vehicle (both wholesale and retail) until the dealer first notifies the purchaser or lessee in writ-ing of any recall notices. Working primar-ily with Sen. John Thune, R-S.D., his staff (Brenden Plack), and committee staff (Alex Hoehn-Saric and Chris Herndon), and as a result of concern raised by Keith Whann and his proposed suggestion, language was included in the final reported version

of the bill exempting wholesale transac-tions from the section’s application. While an initial victory, the remaining provision is still very troublesome and we continue to advocate on behalf of NIADA’s interest pending further action on the Senate bill as well as a possible House companion bill. The latest Senate draft and the companion House bill (H.R. 5381) are being reviewed by NIADA.

Small Business Jobs and Credit Act of 2010

On September 23, the House passed the Senate-passed bill, which includes an in-crease in the amount the Small Business Administration’s (SBA) Dealer Floor Plan Financing program can guarantee. This permits the SBA to guarantee bank and finance company loans up to $5 million, which should help, the committee believes, expand dealer access to floorplan lines of credit. We worked with Louisiana Demo-crat Sen. Mary Landrieu’s Committee and personal staff in conjunction with others on this. This bill may be the subject of subse-quent meetings with the Hill and the SBA on how the program “really works!”

White House Reform RequestOn September 23 and September 29,

Federal Advocates was contacted by the White House, which is still trying to or-ganize and schedule a meeting to include “people who are working to set up the CFPB.” This meeting is in response to a letter sent by NIADA to President Obama requesting “the opportunity to work with you to reform our industry in common-sense ways that achieve real safeguards for consumers, that promote accountability and transparency, and that really work.”

Department of DefenseRegarding the issue of “how to ensure

that service members and their families are treated fairly by automobile dealers,” Whann and Federal Advocates also met on September 21 with the Defense De-partment’s Frank Emery in the Office of Personal Finance, Family Policy Outreach Directorate. Whann relayed a specific ex-ample of how he helped a service member at Fort Bragg on an automobile situation working with the base JAG office and oth-ers. He also talked about his plan for a spe-cial program to teach dealers on how to deal fairly with service members and their fami-lies. Emery mentioned a November confer-ence in Denver where Keith could give a presentation. DOT continues to remain in-terested in looking for opportunities where Keith could lend his expertise. Details are to be finalized at a later date.

Federal Advocates October 2010

Lobbying Report

FEDERAL ADVOCATES IS NIADA’S GOVERNMENTAL

ADVOCACY PARTNER. To read past lobbying reports, visit http://www.niada.com/legislative_and_legal.php

REPORT 2010 LOBBYING REPORT • 2010 LOBBYING REPORT • 2010 LOBBYING REPORT

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NIADA has unveiled a brand new website that’s easy to navigate and offers many new technologically-advanced features for dealer members. Among them:

• The entire NIADA membership roster is now included on the home page via a state map.

• All state magazines published by NIADA can now be viewed inclusive of advertisements. The magazines also will be archived on the site. Plus, those same state associations will have direct links from their websites to our site promoting readership of their particular state magazine. To view these magazines go to http://www.niada.com/state_magazines.php

• NIADA National Corporate Partners (NCP) will now have the ability to add a company or product-specific video next to their NCP description.

• NIADA’s new dealer social network will be unveiled early 2011.

NIADA.COM ALL NEW FOR YOU!

Year-end is generally a time of reflection for many people. We consider the past year, what has occurred, how we have responded, and look ahead to how we can improve. From a business standpoint, it is a very helpful exercise—especially when considering how you can prepare for the year ahead.

As your dealership plans for 2011, here are three top compliance issues to consider:

Consumer Financial Protection Bureau – This new regulatory agency was formed to help protect consumers from abusive financial products. It will be funded by the Federal Reserve and will ultimately write and enforce rules related to loans and other products in the financial services industry. CFPB head Elizabeth Warren has said she supports a principles-based regulatory system versus one that’s rules-based as a way to provide clear disclosures rather than rules that state what you can and cannot do. All dealerships will need to pay close attention, as federal principles-based laws could impact state laws and the current safe harbors in place.

Red Flags Rule – While you’ve probably already heard a lot about this rule (which requires implementation of a written identify theft program) because it became effective in 2008, dealers must remember that the Fed-eral Trade Commission’s new enforcement date is Dec. 31, 2010. It’s also important to note that this is just one law among many that affect the way consumer data is protected. This is a trend that will undoubtedly continue into 2011 and beyond—especially as the methods by which we transfer information continue to change with the evolution of technology.

Risk-Based Pricing Rule – This new rule, which takes effect Jan. 1, 2011, requires companies that use a credit report or score in connection with a credit decision to send notice to a consumer when he or she is getting dif-ferent credit terms than others based on credit information. The goal is to make sure consumers understand how their credit report data impacts their ability to obtain new credit. If you haven’t done so already, your dealer-ship should sort through the notice options and evaluate loan underwriting processes. You need to determine if your business activity is covered by the requirements and if any exceptions apply. Remember, non-compliance penalties are steep, and some consumers might also try to recover damages under other legal theories.

As any dealer who has weathered the last few years knows, regulatory issues aren’t going away. The dealerships that have remained strong are those that have focused on compliance. While it takes time and resources to invest in compliance, the costs are minimal when compared to potential fines and reputation damage.

About the Author:Lee Domingue is CEO of indirect lending at Wolters Kluwer Financial Services.

For more information, please www.wolterskluwerfs.com/ilsolutions.

THE GOAL is to make sure consumers understand how their credit report data

impacts their ability to obtain new credit.

Beware of Compliance Issues Facing Dealers in 2011

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Business was strong for well-estab-lished Central Oregon Motors in rural Redmond. Sales grew steadily in the seven years since owner and car busi-ness veteran Dan Nicholson purchased the dealership, and he was confident about its new branding campaign.

“Half of what the dealership sold was trucks, so I started commercials at the end of 2007,” said Nicholson, who spent thousands of dollars on television and print advertising. “The com-mercials had the slogan, ‘The biggest little deal-ership in town,’ meaning we weren’t the biggest in size but we had the most trucks.”

Just as the dealership’s commercials hit the airwaves and presses, disaster struck. Gas prices skyrocketed to $5 a gallon for unleaded in Or-egon and rose even higher for diesel fuel.

“It was like someone turned off a light switch,” Nicholson said. “My trucks were worth half of what I paid for them on the wholesale market, and that’s if I could even get rid of them. Nobody wanted trucks, especially not diesels.”

To keep his dealership afloat, Nicholson bor-rowed from all sources he could, including the equity on his home; and slashed the dealership’s expenses to stop the bleeding. That included lay-offs and convincing the dealership’s remaining employees to accept salary cuts.

Amidst the pain and penny-pinching, Nich-olson realized how much he’d ignored the im-portance of cash flow. The mistake nearly cost him the dealership on several occasions in the months to follow. Now, in addition to $300,000-$400,000 in inventory, the dealership maintains another $30,000-$50,000 for cash flow, he said.

Unfortunately, Nicholson’s experience isn’t unique. And with the ongoing scramble to se-cure sales with fewer newer cars available in the

still-troubled economy, many dealers face simi-lar dire issues now or could in coming months, said Chris Leedom, founder and president of The Leedom Group, a Sarasota, Fla.-based con-sultancy specializing in pre-owned car sales, special finance and buy here-pay here.

“There are a lot of dealers who don’t even produce monthly financial statements; they do them once a year when it is tax time, or they just don’t worry about them,” he said. “But, the smartest thing you can do is produce monthly financials to get a good idea of how the dealer-ship performed; that way, you aren’t surprised and you can plan ahead.”

Leedom said the industry is in its worst period in 25 years, and nearly every dealership can and must trim expenses. Maintaining at least one to two months of operating capital reserves is vital.

“Really assess the financial health of your business, recognize issues and make adjust-ments that are necessary so you can ride out the storms when they occur,” he said. “You are never 100 percent; you are always making ad-justments and reacting to the market.”

Job cuts may not be necessary in a financial downturn, but restructuring pay plans, even for upper management, and tying bonuses to per-formance are advised by Leedom. Also scruti-nize reconditioning expenses, which increase quickly.

Leedom, who expects sales in 2011 on par with the past year but with more regulatory concerns and increased costs, said dealers in the high-end Buy Here-Pay Here (BHPH) market in particular need to know how much cash their dealerships consume; if a dealer wants to sell 50-100 vehicles a month at the higher end, he must understand the cash demands.

“It’s one of the few businesses where sales could actually be so good that a dealer could be threatened to go out of business,” he said. “It eats up so much cash that the dealer could find himself broke.”

Dealer Chris Martin, president of E-Z Auto in Fayetteville, N.C., said he’s seen many new owners make the mistake of purchasing toys for themselves, instead of saving money for their businesses’ down times.

“There’s nothing wrong with toys, and you want to enjoy life, but you need to reinvest in your business to get the business as financially solid as possible and get rid of as much debt as quickly as you can,” Martin said. “Once you are able to do that, you can take advantage of good situations that you can’t otherwise.”

That could mean buying more vehicles at good prices from wholesalers, investing in tech-nology or undergoing expansions.

“Right now, we are trying to buy every ve-hicle we can if we think it’s a good buy,” said Martin, who purchases from wholesalers such as Cash-N-Carry in Dunn, N.C.

The family owned dealership is less success-ful at auctions, where franchise dealers bid for the same vehicles. However, Martin travels to

auctions as far as Tidewater, Va., to find deals.“We’ve been able to increase our equity in the

business every year,” said Martin, co-owner of the business with his father, Buddy, who opened the dealership near Fort Bragg in May 1992.

The BHPH dealership has 13 employees. It sells about 30 cars a month now, but sold as many as 40-50 cars per month just 10 years ago.

Still, an aggressive collections program helps the dealership maintain cash flow even dur-ing slower sales periods. E-Z offers loans at 36-month terms or less, and the average cash value is between $5,000 and $5,500. To ensure timely loan payments, E-Z uses a payment as-surance system that includes a starter interrupt program with GPS. The starter interrupt prohib-its vehicles from starting if payments are more than a few days overdue.

“We aren’t trying to strong arm anybody,” said Martin, a NIADA Certified Master Dealer (CMD) and vice chairman of the NIADA Ser-vices board. “As long as they are working with us and they are telling us the truth, we are going to do the same. We are normally able to work out any situation if we are communicating.”

Many of E-Z’s customers can’t get vehicles from other dealers because of prior reposses-sions, bankruptcies or other credit issues. Still, they need solid, dependable vehicles such as the Kia Spectrums, Chevrolet Malibus and Jeep Grand Cherokees offered on the dealership’s two-acre lot.

“When you are dealing with a consumer who has had credit issues in the past, it’s hard to change those habits,” Martin said. “If you can get them to pay you reasonably on time for 36 months, you’ve done a really good job.”

Because there are fewer finance options for customers with damaged credit these days, E-Z doesn’t lose them to other creditors for original loans, refinancing or trades as often.

“(Revenue is) probably going to by up 10-12 percent over last year and I would hope to see us up another 10-12 percent in 2011 if things continue to improve in the overall economy,” Martin said.

Leedom supports aggressive approaches in a weak economy.

“(Dealers) can look at all that’s going on as the glass half full or as the glass half empty,” he said. “The good news is, if you are able to sur-vive these times, your dealership is clearly one of the stronger dealerships and has weathered another storm, and that bodes well for your busi-ness.”

That certainly describes Nicholson and his dealership, which boasts three employees and improved revenue. He will hire a business man-ager and possibly a mechanic in the spring.

Nicholson, also a CMD, has vowed never to borrow money again, except for flooring, and now has mix of cars, trucks and sport utility vehicles on his lot. SUVs, 2005 and older, and Toyotas produced between 2007 and 2009 are popular with his rural clientele.

the Key to Staying AfloatYour Dealership’s Life Preserver in a Turbulent Economy

CASHflowBy Stephanie Patrick

CONTINUED ON NEXT PAGECASHflow

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“I’ve never had a Toyota car on my lot that I didn’t sell,” said Nicholson, whose dealership doesn’t offer in-house financing but works with several banks to help customers secure loans.

Nicholson raised the actual cash value of his units to $12,000 from $8,000, and the change attracted older customers. He keeps roughly the same number of vehicles – 30 to 35 – in stock, selling about 20 to 25 each month.

“I try to keep a balance of what seems to work,” Nicholson said. “One of the counties right next to us has 17 percent unemployment, and our county, Deschutes, has about 13 to 14 percent unemployment and the housing market is really weak.

“I’ve just learned to be profitable with what I’ve got. Business was up 20 to 25 percent this summer, which was helpful.”

He reassessed the business throughout most of 2009. That’s when Nicholson learned to pur-chase vehicles like his customers.

“When I went to auctions, I didn’t even pull out my (Kelley) Blue Book; in fact, I haven’t taken a Blue Book to an auction in two years,” he said. “Instead, I’ll get a list of the vehicles I want to buy and then go on the Internet and see what they sell for, and buy them in relation to that.”

It retrained him to consider the retail market.“Eighty to 90 percent of buyers now look

on the Internet first,” said Nicholson, who was elected first vice president of the Oregon Inde-pendent Auto Dealers Association’s executive board recently. “When I looked at the Internet first before buying a car, it was amazing the difference and how much of a better buyer I became.

“It’s amazing that I’ll go to an auction and have a vehicle picked out, then go on the Inter-net and see what they are selling it for. Then, that vehicle will sell for just as much money, if not more, at the auction then it was on Auto-Trader; sometimes I scratch my head because there are three of the same vehicle selling for cheaper on AutoTrader, and that makes a huge difference.”

Following his CMD training on how to re-duce wholesale losses, Nicholson also gets rid of vehicles in 60 days by pricing them below what else is on the Internet.

Nicholson offers his insight to ward off fi-nancial disaster in difficult times.

“My advice is not to grow too fast,” he said. “Instead, take your time, save money and keep your expenses low. As you make money, use cash to do any expanding; don’t borrow money to grow.

“Once you’ve been in business a year, learn to live off the leanest month you have and make that leanest month your budget. Then, when you have good months, use the rest to invest in your business,” according to Nicholson. “It can be difficult. But, in long term, keeping ev-erything small and simple, allows you stay in business during the lean times.”

CASHflow

By Stephanie Patrick

EDUCATION AND TRAINING CONSORTIUMThe NIADA Foundation is accepting membership applications for the recently formed Education and Training Consortium. A consortium is a group of providers who can offer more as a group than each one could provide alone. By joining together, the group can offer a com-prehensive approach to training and education. If you have an edu-cational product or program, or know someone who does, visit www.niada.com/education.php or contact Georgia Brown at 800-682-3837 or [email protected].

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ECONOMY: SLOWDOWN?The recovery started strong as businesses re-

built inventories after slashing them to extremely low levels in anticipation of a worse recession than actually occurred. This is typical during business cycles, as firms do not know how bad things will get and overreact to protect them-selves against the worst. Then economic growth slowed as inventories were brought into balance with sales. A slowdown in growth at this stage of the recovery also is fairly typical, as the growth driver moves from inventory building to housing, consumer spending, and business investment.

While consumer spending has not been as robust as in some past recoveries, it has been growing at a modest pace and business investment has been relatively strong. Lack of growth in housing, re-lated to the extreme amount of overbuilding that was a major cause of the recession, has been a significant factor holding this recovery back. In addition, the uncertainty associated with the election, taxes, and health care appears to be lim-iting employment gains to less than what would be expected with recent real GDP growth.

As the uncertainty dissipates after the election and decisions on taxes and health care are made,

we should see a pickup in hiring and a decline in the unemployment rate. If this does not occur, the Federal Reserve is ready to provide more stimulus and, whatever the election results, poli-ticians will act if the unemployment rate stays close to 10 percent. With less uncertainty and the beginning of a true housing recovery next year, we expect real GDP growth to average around 3-4 percent during the next two years.

NEW VEHICLE SALES: SALES GAINS CONTINUE!

Third-quarter 2010 new light vehicle sales came in at an annual rate of 11.6 million units, the highest quarterly total in two years. On a year-over-year basis, the third quarter gain was only 0.6 percent above the Cash for Clunkers-boosted third-quarter 2009 sales rate. New light vehicle sales have recovered sharply from the 9.5 million rate in the first half of 2009. How-ever, we will not likely see the 16 million rate the industry averaged from 1994 to 2007 until the unemployment rate moves down to around 6 percent (probably not before 2014).

USED VEHICLE SALES: SALES FLAT!Third quarter 2010 used vehicle sales were

flat with last year as September sales fell 5.6 per-cent after being up 3.6 percent in the first half.

AUCTION VOLUME: VOLUME WEAK!Auction volume continued declining in the

third quarter at about the same rate as in the first half, as a small gain in dealer consignment was not enough to offset large declines in the fleet/

National Auto Auction Association Auction Industry Report

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lease and manufacturer/factory categories.Since Prices were flat with last year in the

third quarter, gross value declined at about the same rate as volume

Regions: Third quarter volume in the North-east was relatively stronger than in the other regions for the second quarter in a row. Unit volume in the Southeast and North Central were both down double-digit in the third quarter.

TYPE: Dealer consignment volume was only up 0.8 percent in the third quarter, the only sales type with an increase in each of the last three quarters. Reflecting weak past new sales, fleet/lease and manufacturer/factory volume declined in the third quarter by 17.2 percent and 25.5 percent respectively. The improving economy continued to result in reduced repos with a 24 percent decline in the third quarter, after a 32 percent increase in 2009.

SEGMENT: Although declining in the third quarter, CUVs and passenger cars continued to be relatively strong, while other segments were down sharply.

AUCTION PRICE: NO INCREASE!After five quarters of year-to-year increases

in the 4-10 percent range, auction prices in the third quarter were flat with last year. Year-to-date auction prices are still up 4.2 percent. The move up in auction and used car prices over the past year has brought the relationship between used and new car prices to a point where buyers see less benefit in buying a used car versus a new car - - putting a cap on used retail and auction price inflation.

3rd quarterNational Auto Auction Association Auction Industry Report

Source: AuctionNet from NADAAuction data come from a number of different sources and may not always appear to be consistent. In order to provide the most useful and up-to-date information about the industry, we utilize data from the most appropriate sources and provide you with the underlying implications. Due to their relatively small size and volatility, certain sales types are not included in the above table.

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By Donald Barrand

With its strange jargon, complex coverages and exclusions, most of us find auto dealer insurance nearly impossible to understand. Add a slew of regulations that differ from state to state and it can become a complete mystery. However, the most important thing to remember is a good insurance policy is one of the best investments an auto dealer can make. The right insurance not only protects you from potentially losing your business, it allows you to concentrate on what is most important -- growing your busi-ness.

Insurance for auto dealers can be divided into three main categories: liability, inventory and property.

Liability insurance protects against damage or bodily injury resulting from the way you do business. There are two types of liability insur-ance in a standard garage policy. Auto liability protects you against claims and suits arising from the operation of the vehicles in your in-ventory, whether driven by you, your employ-ees or customers. So if a customer wrecks one of your vehicles during a test drive and does not have insurance of his own, you’re covered. Garage operations liability, meanwhile, covers you for accidents that do not involve vehicles in your inventory. Let’s say a customer slips on a puddle of transmission fluid. You’re covered.

For most auto dealers, inventory is their largest asset. Dealer open lot insurance covers physical damage to the vehicles on your lot. If there’s a hail storm, for instance, your vehicles are covered. Or, if a vehicle is stolen from the lot, you’re covered. In addition, dealer open lot covers vehicles in your inventory while being test driven if they are involved in a collision

Property insurance covers your building and its contents. If your building is knocked down by a tornado, you’re covered. If there is a fire in your garage, you’re covered. Property insurance can also cover loss of income and extra expenses incurred to get back into busi-ness quickly.

Insurance premiums are based on risk. The more vehicles you have on your lot and the more valuable your buildings, the more you will have to pay for insurance. If your lot is in an area prone to flooding, expect to pay more. Yet when you consider the protection it pro-

vides, insurance is an excellent value. Here are some tips to make the most of your

insurance dollar:Don’t undervalue your inventory. If the ve-

hicles on your lot are worth $300,000, don’t value them for $200,000 thinking you’re going to save a lot of money. You won’t. The differ-ence in premium is miniscule. The difference in what you will collect on a claim could be significant.

Don’t insure your personal vehicles under your dealer’s insurance. Personal auto and dealer auto are two completely different cover-ages. There are big gaps in the protection they provide and your losses might not be covered.

Don’t confuse theft coverage with false pretense coverage. If a customer test drives your vehicle and doesn’t bring it back – it is not considered a theft, and therefore not cov-ered unless you had false pretense coverage on your policy.

If you offer customers financing, you should buy errors and omissions coverage for truth-in-lending laws as well as the Fair and Accu-rate Credit Transaction Act (FACTA) which goes into effect at the end of 2010. A minor data breech exposing a customer’s personal in-formation could result in a lawsuit that could potentially put your business in jeopardy.

Make sure your insurance company has an A.M. Best rating of at least A- or better, and a Fitch or Moody’s IFS rating of at least BBB (Good), or preferably A (Strong) or better. Your agent should be able to tell you the in-surance company’s rating. What good is insur-ance if your insurance company can’t pay a claim?

Auto dealer coverage is highly specialized. Talk to a few agents to determine who under-stands your business best and can provide the most comprehensive policy. Seek out an agent who can provide you with a program devel-oped especially for auto dealers. Your local NIADA chapter should be able to provide you with a list of agents.

Make sure your agent explains what cover-ages he or she is able to provide and that you understand what you’re buying. Ask questions until you are completely satisfied you under-stand what the policy you are buying covers and does not cover.

Good insurance enables you to stop worry-ing and concentrate on selling.

Don Barrand, transportation practice leader at V3 Insurance Partners, is a 34-year veteran of the insurance industry. More than 20 of those years were spent specializing in com-mercial auto and Don was a pioneer in the de-velopment of insurance programs designed for new and independent dealers. Don may be reached at 913-297-7468 or [email protected].

GOOD INSURANCE COVERAGE A SAFE BET

INSURANCE COVERAGE

Here are some tips to make

the most of your insurance dollar:

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The National Auto Auction Associa-tion (NAAA) is the leading remarketer of used vehicles in the world. NAAA member auctions sell about nine million ve-hicles per year through the physical auction lanes and online. Over the past several years, NAAA has been focused on developing con-sistent standards and practices to be applied at all member auctions to enable customers to buy with more confidence from any auction they choose, whether they buy in-lane or on-line. The ultimate goals are to improve buyers overall auction experience and increase vehicle residuals.

In connection with this renewed focus on standards, the Auction Standards Committee (ASC) was formed. It’s comprised of represen-tatives from Manheim, ADESA, ServNet and independent auctions. Because of the complex-ity of the issues and their importance to the in-dustry, the ASC also engages an outside indus-try consultant to assist in the development of policy. The ASC also works hand in hand with

other industry associations to help to ensure in-dustry acceptance and endorsement of the stan-dards and policies that are developed.

The first area of focus for the ASC was the development of a revised arbitration policy. The arbitration standard was completed and ap-proved by the NAAA board in October 2009 and became effective on January 1. This policy has been universally endorsed and adopted by NAAA member auctions and the rest of the ve-hicle remarketing industry.

The next area of focus was the development of a standard wholesale certification standard. The ASC determined although buyers believed there was a definite value to wholesale certifi-cation, they were confused by the large num-ber of programs and could not define them or quantify their value. In addition, the myriad of different policies created operational inefficien-cies at the auction level. The ASC was charged with developing a standard certification pro-gram that combined the major elements of all the separate policies while maintaining individ-ual company branding. After extensive study, the ASC – working with Agility Consulting and the IARA – developed the NAAA Certifica-tion Standard, approved by the NAAA board in September. This standard has been endorsed by IARA and will become effective on Jan. 1, 2011. The marketing materials for this program

are being prepared and will be available soon.

The ASC also has developed a process to receive comments on all NAAA standards so they can continually be updated. The committee will continue to look at other areas of standard-ization including vehicle grading.

As the leader in vehicle remarketing, NAAA is committed to the continued development of consistent auction standards and practices in order to provide the best possible service to the dealers.

All NIADA members and dealers seeking full detail on national vehicle condition stan-dards in place at NAAA auctions beginning next month should visit www.NAAA.com and click on Standards.

David Angelicchio is chairman of the board and past president of NAAA, which represents more than 317 auto auctions both domestic and international, with more than 8.9 million units sold each year. He is the general man-ager of the Pittsburgh (Pa.) Independent Auto Auction.

Standards to Make Auctions Better for Customers

By David Angelicchio

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In today’s digital world, it is becom-ing increasingly challenging for deal-ers to drive car shoppers from online browsing into their dealerships. It is also growing increasingly important for deal-ers to widen their reach beyond prospective customers in their own backyards.

To find success in today’s changing mar-ket, dealers need to broaden their reach and build relationships with consumers who may be hundreds of miles away. Nearly every cus-tomer considering an automotive purchase now turns online first to research, find and even buy. To reach those customers, many dealers take advantage of third-party automotive web-sites, such as eBay Motors, to promote their inventories and services to be introduced to a broader range of potential customers.

According to the 2010 J.D. Power and As-sociates Used Vehicles Market Report, 68 per-cent of used vehicle buyers use the Internet in their shopping process. This is an increase of five percent from 2009. Online classified ad use to shop for used vehicles has increased to 51 percent, up from 41 percent in 2006. Among the online resources customers use in their shopping process, independent auto-motive websites, such as ebaymotors.com, receive more visitors than dealer websites.

Marketing your vehicle inventory, parts and your dealership on the Internet requires new ways to establish the same reputation and trust it takes to get consumers on the showroom floor. Build awareness. When you want to reach customers in your hometown, you work hard to let them know you’re there. Billboards, commercials, classified advertisements or a combination of these are often used. The same premise remains true when marketing to online consumers.

When you want consumers to visit your virtual showroom, dealers need to pay close attention to search engine optimization (SEO). Search engines such as Google, Ya-hoo and Bing regularly visit websites with automated tools to index key words and phrases consumers often use when search-ing. To optimize your listings so the search engines can match your terms to what con-sumers are searching for, it is important you use everyday words and phrases that con-sumers are likely to type into a search. This way, your listings are more likely to appear in searches and more likely to be noticed by more potential buyers.

Search engine optimization can help a dealership reach new customers during the consideration and research phase and also to build a loyal customer base that will return to your site or come to your dealership when

they are ready to make a purchase. eBay Mo-tors regularly uses search to drive more than 14.8 million unique visitors – and potential buyers, looking for new and used vehicles, parts, accessories and services – each month to its website.

Show your reputation. When a customer visits your lot, chances are good they already have some degree of interest and trust, either with a previous relationship or based upon a recommendation. Their friend bought a car there, your children go to school together, or they know your dealership’s reputation from active community involvement. To build trust online, it is vital to provide as much information available as possible about not only the vehicles you sell but also your deal-ership and the people behind the dealership.

When developing online listings to sell vehicles or parts and accessories, use high-quality, professional photographs and well-written descriptions. This helps to boost con-sumer confidence and purchase potential. If customers cannot clearly see what they are purchasing, chances are higher they’ll move on to the next item with better images.

Also, provide complete disclosure as if customers were looking at the vehicle with you in person. Customers will expect most used cars have some sort of imperfection, so don’t try to camouflage any issues with a buyer. By being truthful and transparent with listings, dealers create a sense of trust and a willingness to conduct business.

Offer timely responses. While customers in your dealership may wait for you to call back and track down information, online customers expect a high level of service and responsiveness, even if it’s a response to say you are looking for information to answer the question. Since communication methods such as e-mail and cell phones are the norm, buyers expect quick answers. A buyer ready to make a purchase may be more willing to engage in business with a dealer who is re-sponsive to questions with timely communi-cation. Remember, online customers may be shopping in a different time zone, so regular business hours may not apply.

Research shows the majority of consum-ers now start major purchase decisions with online research. Now that consumers are shopping online, businesses have been quick to follow. With a SEO strategy, an online reputation that encourages trust, cus-tomer service and responsiveness, dealers can build a virtual business that drives real results and encourages new customers to shop with ease.

Marketing Your Vehicles Beyond the DealershipBy Clayton Stanfield, eBay Motors

RESEARCH SHOWS the majority of consumers now start

major purchase decisions with online research.

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