What’s Your Best Price?

According to a recent study by JD Power, customers visit an average of 1.4 dealerships before purchasing a vehicle.  As recent as 2005, consumers visited 4.5 dealerships before purchasing.  By using the internet to gather information, customers are significantly narrowing the list of potential vehicles they wish to purchase prior to visiting dealerships.  Before online advertising, dealers often advertised a limited number of vehicles in print, on the radio, or on television.  Now, it is common for dealerships to advertise their entire inventory on their own websites, as well as inventory aggregation websites such as Cars.com or Autotrader.  This leads to higher occurrences of pricing errors and disputes arising from selling a vehicle for a price higher than the price advertised online.

The Federal Trade Commission (“FTC”) recently revised the .com Disclosures, which offer businesses guidance on what types of disclosures businesses should include in their online advertisements to avoid claims of unfair and deceptive practices.  Disclosures should be “clear and conspicuous,” and placed in close proximity to pricing information or triggering terms such as APR, lease payments, and down payments.  If a vehicle is priced incorrectly, a consumer may claim that the dealership’s refusal to honor the posted price constitutes a deceptive practice.  Your goal should be to minimize errors occurring, and promptly correcting any errors you find.  If you fail to do so, consumers may claim that these errors are endemic of the dealership’s deceptive practices.

If you decide to offer “internet only” pricing, you will have to make additional disclosures in your online advertisements.  First, your disclosure should state that the price is only available if the consumer produces something, like a printout of the vehicle display page from your website or the inventory aggregation website.  Also consider excluding prior sales, in case a customer purchases a vehicle and later checks your listings to see what the price posted online is.  If you do not, your failure to honor the advertised price may be deceptive.  This disclosure must be on each vehicle display page, and not only at the bottom of your website’s home page or each department’s webpage.  Your pricing online should be realistic; a customer should be able to purchase the vehicle at the advertised price without making additional down payments, having a particular FICO score, financing the purchase through your dealership, or qualifying for rebates that are not available to all customers.  Remember, if you provide an inventory feed to a third party website, you will be responsible for errors on the third party’s website.  You should review each website to determine whether the disclosures are compliant.

Recording F&I Transactions? Here Are Three Things To Consider

 An editor of Automotive News recently reported on a seminar held at a F&I conference where the panelist generally endorsed using video cameras to record transactions in the F&I office.  There are pros and cons to recording these transactions.  While recordings can be helpful tools for enforcing compliance, training staff, and rebutting accusations by consumers of wrongdoing in the F&I office, they can also be the “smoking gun” of unlawful business practices that provide plaintiffs or regulators with the evidence needed to impose costly penalties and damages.

Deciding whether to record F&I transactions takes more thought than merely selecting what equipment to use.  Before you get your cameras rolling, you should consider the following:

Will You Record Every Transaction?  That one transaction your staff forgets to record could be the one where problems arise.  Worse, an employee who is violating the law may selectively record transactions or edit recordings in order to hide any transgressions.  If you decide to record your F&I staff, you should consider mandating that every F&I transaction is recorded.   If a consumer refuses to be recorded, document the refusal, and maintain adequate records to help reconcile all transactions against ones recorded.

How Does Recording F&I Transactions Fit With Your Coaching And Counseling Processes?  You should train your staff on how to record the transactions, including obtaining the consumer’s informed consent.  This will require developing a consistent script to use with consumers to obtain consent, and some written document signed by the consumer evidencing consent.  You will need to designate who will review the videos and what remedial steps are taken when problems are discovered.  Remember, supervisors should not to use the videos in a manner that demeans or humiliates their subordinates.  These ‘candid camera’ moments, used at the expense of the employee, could provide ample evidence for an employment discrimination claim.

How Does Recording F&I Transactions Fit With Your Compliance Programs?  Laws such as the Safeguards Rule and the Red Flags Rule impact how you record F&I transactions and store the recordings.  It is likely that these recordings will capture information protected by state and federal law, such as nonpublic personal information, so you will have to take necessary steps to protect this information, and determine when breaches occur.  You will need to amend the documents and records you maintain for compliance programs accordingly.