view newsletter online November 16, 2023

A Word from MTIADA President, Chad Randash

I hope that your November is going great so far.

I have seen many Sales Lots over the last month, and it appears to me that Independent Lots are geared up and have a nice line of inventory for end of year sales and 1^st quarter tax time.

As we approach Thanksgiving it is a time for being thankful for so many things that we are blessed with. I personally want to thank each of our vendor partners that help MTIADA. I want to thank each member that has stood by the organization and their continued support.

The MTIADA mission is to promote, educate and advance the Independent Auto Dealer in Montana by offering opportunities to members that enhance & better their business and to lobby for legislation, regulations and polices effecting our industry. It is my hope that as a member of this association you will consider becoming a board member to further strengthen our presence of dealers across our great state of Montana. If this is something that you would like to learn more about-please contact me at

406-570-5426

For all members and non-members, I wanted to thank everyone involved and trusting in the association. The most common thing that I hear from all independent dealers is, what can the association do for me? As the President of this association, it is my intention to first deliver a consistent message of local and national news items that may affect your business. In addition, I have asked for strategic partners like Buckeye Dealership Consulting, PassTime, Kinetic Advantage, MVD Express, ADS and others to help light our way. But we also need Dealer Participation. With a consistent message and dealer participation on the board as well as in our communities, our mission is to serve all independent dealers in our great State of Montana.

Happy Thanksgiving to each and every one of you.

Chad Randash

President

Jump start your 2024 Membership

MTIADA is incredibly grateful for your membership, and we are always stronger when we stand united. With its members’ support, your association can continue to advocate for all independent dealers at the state Capitol and offer the education and resources you can always rely on.

Visit our Website to Renew/Join

Maximize the Benefits of Reinsurance

This is the second of a four-part look by Buckeye Dealership Consulting’s CEO Rob Fox regarding the independent automobile dealers and finance companies can maximize the benefits and profit opportunities that come from establishing their own reinsurance company.

Part II: Reinsurance Adds an Additional Profit Center

Record wholesale prices, inventory shortages, and increased operational expenses are issues seemingly every dealer has faced, especially over the last 12 months and may face into the foreseeable future. As margins on vehicle sales continue to get pinched, finding alternative sources of income in the dealership is more critical than ever. Whether you’re a retail or buy here, pay here dealer, having a robust F&I office is a vital a tool on a dealer’s belt to offset those tighter margins. Having your own reinsurance company will add tremendous value to your F&I office as a profit center.

Selling third-party products results in you sending premiums and profits elsewhere. Sure, there are commissions and some small profit-share opportunities, but the third-party earns the interest and reaps the majority of benefits of the earned premium.

With your own reinsurance company established, you can pay yourself the commission on the sale of the products and take part in 100% of the underwriting profit. Keep in mind, that money won’t just sit idly collecting dust. It will be placed in U.S. banks and earn investment income for you. (More on that below.)

Control Customer Satisfaction

As the used car marketplace becomes more competitive, dealership reputation plays an important role in sustained success. Unfortunately, reputation can be damaged when selling a voluntary protection product if claims administration is not handled properly.

Far too often, consumers complaints end up in the hands of the Better Business Bureau, a state/federal regulator’s office, or worse – an aggressive plaintiff’s attorney. These complaints often mirror a similar fact pattern: consumer has a warranty or bought a service contract, experiences a breakdown, and then has a claim under the warranty/service contract denied. These consumers allege that they were duped into purchasing a voluntary protection product that has no value.

When you sell someone else’s product, you lose control over how claims are handled. It is that entity’s administrator who decides what claims are and are not paid. But, in the consumer’s mind, “you” make the decision, because it was “you” that sold the product.

By establishing a dealer-owned reinsurance company, you assume the risks associated with any claims. Because it is your risk, you get to decide how the claims process is handled and what gets paid, consistent with the terms of the product agreement with the consumer. In turn, you get to interact with the customer, manage customer expectation, and appropriately react when a claim is paid or denied.

WHAT IS FLOOR PLANNING?

Floor plan financing is a specialized form of vehicle inventory financing that enables independent car dealerships to access the capital they need to purchase and stock their lots. With floor planning, dealerships can acquire a wide selection of vehicles, making them readily available for customers to test drive and purchase. The lender retains the titles of the vehicles until they are sold to end-users. When cars are sold, the dealership pays back the original balance plus interest. This allows dealerships to keep a revolving supply of inventory without having to make large upfront purchases or drain their entire cash flow.

How Does Floor Plan Financing Work?

Floor plan financing works similarly to a revolving line of credit. It is a type of short-term financing designed to help dealerships cover the cost of their inventory while also allowing them to adjust their stock without incurring a major financial burden. When a dealership wants to purchase a vehicle, they send a request to their finance company. When approved, the finance

company will release funds for the vehicle purchase. The finance company then holds the title to the vehicle. As the dealership sells the car, they pay back the original balance plus interest and then take out additional capital to buy new inventory.

What Are The Benefits Of Floor Planning?

Floor plan financing offers several benefits to independent dealerships. By using a line of credit, dealers can maintain a healthy cash flow while also stocking a diverse inventory. This helps dealers attract a wider range of customers, as well as respond quickly to changing market

trends.

Expanding On The Key Benefits Of Floor Plan Financing

Floor plan financing offers several advantages for both dealerships and customers. See some of the key benefits:

1. Increased Inventory - Floor plan financing allows dealerships to maintain a larger inventory, ensuring a wide selection of vehicles for customers to choose from. This increases the likelihood of making a sale and satisfying customer preferences.

2. Streamlined Inventory Acquisition - By accessing funds from a lender, dealerships can quickly and efficiently acquire new vehicles, keeping their inventory up-to-date and attractive to potential buyers.

3. Enhanced Customer Experience - With a well-stocked inventory, dealerships can offer customers the opportunity to test drive and purchase vehicles immediately. This immediate availability improves customer satisfaction and can lead to higher sales.

4. Improved Cash Flow - Floor plan financing frees up cash flow for dealerships, as they can allocate their funds to other operational expenses. This flexibility allows dealerships to invest in marketing, staff training, and other initiatives that drive business growth.

5. Reduced Administrative Costs - By utilizing floor plan financing, dealerships can streamline their inventory acquisition process and reduce administrative tasks associated with purchasing vehicles outright.

What Are The Risks Of Floor Planning?

While floor plan financing can be a helpful option for independent car dealerships, there are some risks involved. Dealerships who struggle to sell their inventory quickly may be at risk of accruing higher interest rates or other charges. Some non-Kinetic dealers have also expressed frustration with hidden or excessive admin and audit fees.

Sponsored by Buckeye Dealership Consulting, Kinetic Advantage, & Passtime