Friday, August 30, 2013

August 2013 SDADA Column

Like most of you, I was proud of South Dakota's billing as America's Top State for Business for 2013 by CNBC in July. It was something that we, as business people, already knew. It was great to see the rest of the world let in on that well-kept secret and the coverage provided invaluable exposure for our state.

The fact that we have no corporate income tax, no personal income tax, no business inventory tax, no personal property tax and no inheritance tax played into South Dakota's high rating. But let us not take any of this for granted. Every year, there are bills submitted in the legislature that go right at the heart of these advantages we enjoy. We need to be vigilant in protecting these strengths.

We must continue to work hard to ensure that our regulations and laws are reasonable and eliminate unnecessary burdens for our businesses and for those entrepreneurs who want to start a business. Governor Daugaard made these points in an editorial published in many of the states' newspapers.

As community leaders, let us work to continue to build the South Dakota tradition of being "great place to do business".

Why the Dealer Franchise System Is Here to Stay
Franchised auto dealers are on track to sell more than 15 million new cars and trucks this year, including a half million electric, natural gas, hybrid and other alternative technology vehicles. These Main Street businesses – the backbone of their communities – are leading America’s economic recovery. Franchised auto dealers employ nearly a million Americans, provide good jobs that can’t be shipped overseas and engage in robust market competition.

For more than 100 years, automakers have contracted with franchised dealers to sell and service their vehicles for one simple reason – it’s the most efficient and cost effective way of doing so. Franchised auto dealers’ cumulative investment in land, equipment and facilities exceeds $200 billion – expenses that auto manufacturers would otherwise have to incur. Ford and GM tried owning their own dealerships and failed. These experiments proved that factory stores did not deliver better customer service or reduce consumer costs.

A question has been raised as to whether automakers should be licensed to sell directly to consumers. A better question is who should decide this licensing issue – and the answer is the states. In our federal system, states have the right to license lots of important retail industries – everything from eyewear to alcoholic beverages. The states are best positioned to decide what level of accountability, regulation and competition is best for their citizens. Although all states regulate the auto retail marketplace, their approaches differ widely: many allow automakers to sell direct; others require a local licensee as an additional layer of accountability. This reflects the fact that, when it comes to auto retailing, one size doesn’t fit all.

It is easy to understand the rationale behind state laws that foster the presence of a well-capitalized, independent dealer network. New vehicles are expensive, generally require financing and often involve a trade-in. Consumers are better served by multiple retailers competing for their business. A Ford dealer’s biggest competitor, for example, is usually the other Ford dealer down the street. Most buyers, according to the Harvard Business Review, value a combination of online service, personal service and physical locations over standalone Web distribution – which sounds exactly like the dealer franchise system that’s currently in place.

2014 ATD Convention: Online Registration and Housing for New Orleans Now Open
The city of New Orleans will host the 51st annual ATD Convention & Expo next January. The Big Easy has recently undergone major restoration projects, such as $800 million in hotel upgrades, $77 million in street improvements that includes a new streetcar line connecting the Sports District to the Central Business District and French Quarter, and a 55 percent increase in the number of restaurants over the past seven years. “There’s a limited number of hotel rooms available at the Hilton Riverside, which is the ATD headquarters hotel, so we're encouraging dealers to register as soon as possible,” said ATD Convention Chairman Steve Parker. “A benefit of staying at the Hilton Riverside is that ATD dealers, managers, spouses and relatives can attend the daily continental breakfasts and evening receptions sponsored by Eaton.” The ATD convention runs concurrently with NADA from Friday, Jan. 24 to Monday, Jan. 27. ATD attendees who register by Oct. 7 will receive a $150 discount from the onsite rate. For more information or to register, visit

Monday, August 5, 2013

July 2013 SDADA Column

As summer winds down, the CFPB's assault on dealer reserve continues to gear up. On July 16, 2013, the U.S. Senate confirmed Richard Cordray, a man who is quoted as saying, "consumers should not have to pay more for a car loan simply based on their race" (as if to insinuate that car dealers believe that they should), to a five-year term as the CFPB's director. Sen. Tim Johnson, who chairs the Senate Banking Committee, called the vote "a win for the American people."

From its website, here are the CFPB's definition of "buy rate" and its tips for negotiating a loan:

"A buy rate is the interest rate that a lender quotes to your dealer when you seek a loan directly through the dealer. Your dealer may offer you a rate that is higher than the buy rate. The rate the dealer offers you is called the 'contract rate.' Sometimes the lender pays the dealer a fee that is based on the difference between these two rates, which can give the dealer an incentive to charge you a higher interest rate than you qualify for.

"TIP: Ask the dealer what the buy rate is and offer to pay the buy rate plus a flat fee, rather than paying an interest rate that is above the buy rate. This could save you thousands of dollars over the life of the loan.

"TIP: The dealer may offer you a higher interest rate than you can get directly from a bank or credit union. Shop around to find out who offers the best interest rate."

As we dealers know, indirect loans at the dealership can often undercut the rates on direct-to-consumer loans. I think most dealers would encourage consumers to shop around and see who offers the best and most convenient deal on a loan -- a bank, a credit union or a dealership.

Getting the best overall deal is not as simple as securing the lowest interest rate. Trade-in value; down payment; manufacturer incentives that are exclusive to a captive finance company; the convenience of having multiple lenders bid for the dealership's business; etc. are all factors that affect the value of the deal.

How long before our customers show up at dealerships demanding a loan at the buy rate and not a cent more?

NADA Moves Dates for 2015 – 2018 Conventions
Beginning in 2015, the NADA Convention and Expo will be held Thursday to Sunday, instead of Friday to Monday. “After surveying the membership and exhibitors, the consensus was to end the convention on Sunday, instead of Monday,” said Desmond Roberts, chairman of NADA’s convention committee and a Chevrolet dealer in Hodgkins, Ill. “The Thursday to Sunday timeframe will allow convention attendees to be back at work earlier the following week.” The 2014 NADA and American Truck Dealers (ATD) conventions will be held concurrently in New Orleans from Jan. 24-27 as scheduled from Friday to Monday.

Here are the revised dates for the NADA and ATD conventions:

2015 – San Francisco (Jan. 22-25)
2016 – Las Vegas (March 31 - April 3) 2017 – New Orleans (Jan. 26-29) 2018 – Las Vegas (March 22-25)

For more information on the NADA convention, visit For more information on the ATD convention, visit

OSHA Targeting Dealerships
OSHA is targeting automotive repair and maintenance businesses, including new-car dealerships, through a Region 8 ( Local Emphasis Program. This focused inspection activity, scheduled for between April 16 and at least Sept. 30, 2013, stems from five complaints OSHA Region 8 received in FY 2010, all of which resulted in citations. NADA urges dealerships nationwide to review the inspection directive ( and their health and safety compliance. Dealerships with specific questions regarding their compliance should contact Lauren Bailey, NADA Regulatory Affairs, at or (703) 821-7040 or contact their state or local dealer association.