By on September 28, 2011

Nobody in the auto retail business can possibly be unaware of the horrible reputation that car dealers have earned over decades of shady dealing. Heck, the internet has even created a pseudo-meme for the entire business, in the form of the passed-around image you see at the top of this post. But one industry’s horrendous reputation can be another another industry’s opportunity, and Kevin Hurst thought he had come up with a goldmine. By creating software that guides dealers through compliance with a number of federal regulations, he figured he could leverage the stereotype of the sleazy car dealer to get potential clients interested in demonstrating their commitment to walking the straight and narrow path. It’s a brilliant idea, and the kind of move that would show that market self-regulation and government regulation can work together to serve consumers. Unfortunately, Hurst made a fatal error of calculation: he assumed car dealers care about fixing their reputation and living up to national standards.

As Hurst tells WardsAuto, the auto retail industry has no such interest:

“Dealers are interested in selling cars and making money. Put simply, they don’t want to be bothered with government regulations or anything else that interferes with that selling activity.”

Many dealers choose not to comply with all those regulations “or are ignoring them altogether,” Hurst says. That puts them out of the market for Infinity’s software that systematically goes down the regulation checklist.

“We spent $1 million on codes and thought everything was in place,” he says. “We figured we had a slam-dunk product, because law requires compliance. But we didn’t anticipate the lack of interest at the level we’re seeing.”

Big dealerships, especially publicly owned chains, usually obey all the rules, he says. Some franchised dealers think they are doing that, but unwittingly aren’t. Still other dealers, particularly independent used-car lot owners, don’t even try.

“One guy told me the federal government doesn’t have the resources to catch a mouse running across his desk,” Hurst says. “Some are thumbing their noses at the laws.”

Hurst says the risks of non-compliance with federal regulations are just too low to get dealers to care. He compares it to people cheating on taxes in the hopes of getting lost in the shuffle, but notes that the risks of being busted for failure to follow federal rules on credit, money laundering, identity theft and more are even smaller. And until dealers begin to actually care about their reputations, or suffer the consequences of non-compliance at the hands of the government or the market, there’s no reason to expect them to clean up their acts. And though non-compliance with things like identity theft prevention laws may not seem like a huge deal, flouting even one law creates an atmosphere of impunity, which almost always translates into a poor customer experience.

And you’d think the car dealer community would know by now that, when it comes to reputation, they’re already fighting an uphill battle.

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32 Comments on “Quote Of The Day: Car Dealer Cliche Edition...”

  • avatar

    The post is positevely begging for being co-authored by the TTAC Resident Master of the Trade, Mr. Lang himself.

  • avatar
    Steven Lang

    Every independent auto dealership association in this country offers their membership a checklist for compliance. I have been a member of the GIADA since 2003 and it’s not exceedingly difficult to stay in compliance with federal regulations.

    There isn’t a day that goes by where I don’t get solicited for software products.Truth be told, if you keep up with the industry, use the association forms, and a basic spreadhseet program, it’s not really much of a juggling act.

    As for complaints by profession, car dealers aren’t even in the top 20.

  • avatar

    Unfortunately, Hurst made a fatal error of calculation: he assumed car dealers care about fixing their reputation and living up to national standards.

    Now there’s a rather biased conclusion. I suppose if Mr. Hurst had tried and failed to sell a dumptruck full of broccoli in a high school parking lot it would mean that nobody is interested in nutrition(?)

    Try again, sir; this time without the sour-grapes attitude. Succeeding in business takes the persistence of a Pitbull, the patience of a Saint, and a willingness to go back to the drawing board as often as it takes. If you find what motivates car dealers, you will learn just how easy it is to sell to salespeople.

  • avatar

    “Many dealers choose not to comply with all those regulations “or are ignoring them altogether” ”

    Most probably, many customers tend to ignore such regulations, too. Maybe, they both have good reasons?

    BTW: Are there regulations in the US regarding car sales that are especially stupid? As, e.g., in Germany, where you have to give warranty, even for a twenty year old car, if, and only if, the car is a company car?

    • 0 avatar

      There really aren’t any regulations of the buyers’ actions. The only regulations on the buyer are that the vehicle be registered in the location of residence, the sales tax be paid, and if it’s going to be driven on the road, usually that it have valid insurance coverage. And since the tax part of that regulation involves money, the state is usually pretty insistent on following the rules.

      • 0 avatar
        Mr. K

        Yo, my man I got me $x in cash right here, for that fine whip you are looking for $x-y on. Can we dispense with the silly paperwork?

        (insert other ethnic group, no slur intended on the folks I used)

        Now do you see how some regulations impact some groups.

        Oh gosh, the check engine light will not go off whatever shall I do? Can you help me Mr. Car Man (fanning 5 20’s)

        and so on… now do you see, Mark?

  • avatar
    Educator(of teachers)Dan

    They could have used a picture of Danny Devito’s character in Matilda instead of that guy, FWIW. I always felt sorry for that old Buick in the film “Matilda.”

    I’m not surprised about non-compliance, part of my job is trying to get people to do what are largely considered “non-negotiables.”

    • 0 avatar

      Are you really an educator of teachers? At a university? If so, keep fighting the good fight, brother. By day, I work in the schools (many districts) and by night, I teach a couple of courses at a university for future teachers in special education. And, damn if non-compliance and non-negotiables aren’t a GIANT part of my professional life.

      I think maybe the difference between what I see and deal with versus what happens in the auto industry involves intent and motivation. The teachers usually have a motive to help/contribute/save the world, but are required to know a zany number of federal, state, and local laws and regulations. I’m sure the car dealers have crazy and obscure laws also. It seems like most of the teachers I know try their best to follow laws, but dont always know about them. And I picture the car dealers knowing about them, but choosing not to follow.

      On the other hand, I have met many people in the schools who confuse ego with altruism. Kinda like that skit on Mr Show where the blind guy gets paid to let people help him so they can feel great about themselves. Ok, that was maybe an obscure reference.

      • 0 avatar
        Educator(of teachers)Dan

        I work for central office (ok, Student Service Center, SSC) in a large (geographically) rural district in NM. What my department does is try to go support teachers/buildings in the implementation of various district instructional initives. You got to love the resistance when you ask people to change the littlest thing or give something a try.

        I was a classroom teacher until August 2010.

      • 0 avatar

        Ha! yes- I think the tendency to resist any change reflexively (no matter how small or sensible) exists in almost everyone, but some seem to border psychosis.

        Good for you- I hope you are enjoying the new job. It sounds like you might be living the itinerant life? If so, I do too-which is maybe why cars are becoming an obsession.

        I really miss the Great Southwest. 2005-2009, I lived in what people in certain circles describe as a very bright blue dot in a sea of red in southern AZ.

        Of the many downsides living in the the cold hell I now call home (again) that I seem to think about all the time: summer tires all year round.

  • avatar
    DC Bruce

    The temptation to “dogpile” on this is great . . . but I will resist. Instead, I will point out that there are regulations and there are REGULATIONS. My guess is — and it’s only a guess, but based on a lot of experience (I’m a lawyer) — is that some of the regulations are regulations that are only of interest to one or two “consumer groups” and regulators who get a kick out of exercising their regulatory authority. I recall a discussion with a NYC meter maid a couple of years ago about the merits of my parking a U-Haul truck in a no parking zone on a Sunday on a totally parked-up street in the East Village as I and my daughter were quite visibly and actively loading stuff into the truck.

    With the increasing use of the Internet and various dealer rating services, both specialized and generalized like “Yelp!,” dealers who deliver a bad customer experience will face an increasing risk of being penalized in the marketplace. I’m sure there’s some correlation between the quality of the customer experience and compliance with regulations, but I doubt that it’s perfect.

    The problem with this article is that it assumes a perfect correlation. And yeah, it does seem like this guy made an elementary entrepreneur’s mistake: developing a product before research the potential demand/need for it.

  • avatar

    If a regulation isn’t enforced, does it make a noise?

    You can easily end up broke trying to comply with a bunch of regulations that are designed to prevent a recurrence of that time that Senator Kennedy’s grandma bought a Buick and the dealer charged her an extra $20 for a clearcoat option that she specifically opted out of, or you can make money and not go insane trying to be in full compliance with rules written by people who have found a productive outlet for their OCD.

    • 0 avatar

      80% of regulation is written by industry insiders.. to make doing business very difficult and expensive for smaller companies forcing them out of the business. Therefore, it effectively limits the pool of competition and raises prices.

      • 0 avatar

        It seems like a lot of private sector, and most certainly all of the giant commodity-based industries (pharmaceutical, oil/energy, telecom, to name a few) feature just such a setup: a sort of oligarchy kept in place and reinforced by lobbyists… er… industry insiders.

        It just breaks my heart to see all these mom n’ pop cell phone carriers and oil companies trying to make it in an Exxon and Verizon world.

      • 0 avatar

        Here in Florida, governor Rick Scott has been trying to get rid of required licenses for trades that don’t require them to protect the public interest. So doctors, real estate, plumbers and other tradesman that have to show competency in order to protect the consumer stay, while others he wants to go away. One of them is interior decorators. But wait – the Florida Interior Decorators Association (or whatever they call themselves) is protesting! One of them stated before a legislative hearing that if the license requirements for interior decorators is removed it could mean as many as 80,000 people will die due to customer allergic reactions! Yes, we need government licensing so that you don’t die a horrible death due to exposure to plaids and stripes.

        You don’t have to be a big multimillion buck corporation to keep the riff raff from competing with you. You just have to form your little association and keep the business to yourself and your friends.

  • avatar
    Kevin Jaeger

    he assumed car dealers care about fixing their reputation and living up to national standards.

    The untested premise of this article is that this guy’s software is in anyway effective at addressing those issues. Maybe the dealers do care about those things but determined this software didn’t help them, though it perhaps addresses the needs of some distant bureaucrat. Problem is those bureaucrats aren’t his customers.

  • avatar

    I have found to be a good resource. Not all dealers are listed, but reading the reviews, one can get a good sense of the trustworthiness of the dealership.

  • avatar

    I agree that it sounds like bellyaching from someone who tried to market a product without fully understanding the customers and marketplace.

    What negative feelings exist towards car dealers don’t tend to have anything to do with compliance to identity theft protection, money laundering reporting, or other government regulations on the industry. In fact, I’ve had multiple potential customers get angry with me when I’ve tried to explain why I can’t let them fill out a credit application in someone else’s name without that person being present, or why we are required to register/title the vehicle they are purchasing and collect the state sales tax.

    My dealership is independently owned, but large enough that we do make sure we are in compliance with all federal and state regulations. We use software from a different provider to train staff on the regulations and to check deals as they are in process and have a full time employee whose job it is to monitor compliance with legal regulations as well as Ford’s programs and rules to make sure that if we are ever audited that we have all of our ducks in a row. The reason few dealerships signed on with Mr. Hurst’s program might simply be that better options exist, rather than those dealerships not caring about the rules.

    • 0 avatar

      I hate to rat out my own brothers who have worked successfully in the new-car, multi-brand retail business for more than 30 years in four different states, but they, and their sales staff have done whatever it takes to make a sale. Compliance is the furthest thing from their mind, unless they are held to account by authorities. Rarely happens!

      When it comes to used cars and program cars the sky’s the limit, as in one used program Towncar that was sold at a $6K profit. That isn’t good salesmanship. That’s pushing the envelope and getting away with it.

      Then again, as in any transaction, Caveat Emptor.

      • 0 avatar

        The attention to the rules likely differs from dealership to dealership. We will do whatever we can to make a legitimate sale, but it isn’t worth risking potentially huge fines selling a car to someone who might not be who they say they are, and then having that car come back anyway, now with miles and potential damage, when the whole thing turns out to be a sham. When it comes to people trying to launder money through vehicles, dodge taxes, etc, the small number of sales you might get from turning a blind eye aren’t worth souring your reputation with the powers that be and then having to work under a microscope in the future.

        As far as your second point, there is nothing unlawful, or even unethical, about making a large profit on a car. The dealer and salesperson want to make as large a profit on the vehicle as they can, and the customer wants to buy the vehicle for the lowest price they can. Many times making the sale means taking a skinnier deal than the dealership or salesperson would like, but when someone gives you the opportunity to make a profit and they agree to pay a price for a car that results in 6, 7, or even 10 thousand front end profit, as long as the customer is happy with the deal there is nothing wrong with that. The article listed in the post also has nothing to do with any of that.

        There are of course salespeople who will say anything to get someone to buy, telling them that a car has features it may not, has a history different from what it actually is, or who agree to one deal with the customer then switch things when it comes time to sign the papers hoping they won’t notice – that’s unethical and bad business, I agree.

      • 0 avatar

        What law or regulation is violated by making a $6k profit selling a Town Car?

    • 0 avatar

      I work for a Mercedes-Benz dealership and we have compliance personnel. M-B insists on it. They are not going to ruin their reputation because of a shady dealer. We go above and beyond providing all the info the customer needs to make an informed decision. It’s not about making a touchdown and never seeing the customer again but making a series of field goals with him, his family and his friends.

  • avatar

    If dealers can simply ignore the regulations altogether, why do they need to spend money to purchase a sofware that help them comply with regulations they’re ignoring anyway?

    • 0 avatar

      Certain dealers may feel they can ignore the regulations altogether, but it’s just gambling away the future of the business for short term gain. Just like the tax analogy used in the article – you could cheat on your taxes and get away with it for years, but if that audit ever comes, you’re in much deeper doo-doo than if you’d just played it straight from the get-go.

      This behavior is also far from limited to car dealerships. If you look at any industry you’ll see examples of business cutting regulatory corners to make a little extra money up front.

  • avatar

    Still other dealers, particularly independent used-car lot owners, don’t even try.

    Well color me shocked that “Honest Roy’s No Credit Used Cars and Crystal Meth Shack” doesn’t worry about adhering to all regulations.

  • avatar

    NADA and their dealers spent millions to escape overview of the Consumer Financial Protection Agency. Being prevented from ripping off soldiers and little old ladies is not in their interest.

  • avatar

    The simple fact that he didn’t anticipate that some dealers would go all out to not follow any regulations was the red herring I saw right way as a little research would’ve told him what he needed to know in the first place.

    I know in the past it was more a problem with the used car dealers than the used car lots of new dealers and it may well still be the case with some bottom feeders in how they gussy up that old car to make it look newer/better shape than it actually is.

    I read an article in one of the car mags, I think Popular Mechanics from the mid 60’s where a dealer salesman showed how a less than honest dealer can take 2 cars, the same year and model, similarly equipped and rolled back the odometer (true, it’s illegal these days and has been for a long time and today’s cars are I think much harder to tamper as far as that goes anyway), repainted etc the more worn one and left the other in its original condition but it was in MUCH better shape overall and how the customer went for the new shiny paint against his wishes as he was trying to sell this customer the less shiny, but much better shape vehicle instead and later had to take the shiny car back due and replace with the other car, which the customer should’ve gotten in the first place.

    Now I know it was from the mid 60’s when things like ball joints etc needed frequent repair/replacement but still, the old adage still applies, check out the car before one buys – especially at a used car dealer as today’s cars still need that kind of maintenance but at over 100K miles and many of today’s cars can still look pretty good in 10 years too for cars that are well beyond the CPO range.

  • avatar

    self regulating is being improperly used here in place of self-policing.

    I also hope that TTAC is shoring this editorial up with more than the press release of one dude hocking software.

    And, while in a perfect world non-compliance with the law could automatically be written off as a bad move, this isn’t that world. What sorts of regulations are not being met, and what is the argument that they are beneficial?

  • avatar

    I’m not a fan of car dealers, but this reads like a press release for software sales.

    The guy tried to sell software but failed. The only thing that proves is that he failed to sell software. It doesn’t prove that the dealers are complying or aren’t complying with the laws.

    And it certainly has nothing to do with restoring reputations. A consumer’s interactions with the car dealership most likely have very little, if anything, to do with this software. The average consumer will judge the dealer by the treatment that the dealer provides, not with the dealer’s compliance or lack thereof with federal paperwork requirements.

  • avatar
    Rick Korallus

    I was wondering how long it would take to post another anti-dealer biased article. Stereotyping us all as crooks and cheats isn’t much different from calling all journalists uninformed hacks that sensationalize and “stretch the truth” to sell advertising. “Unfortunately, Hurst made a fatal error of calculation: he assumed car dealers care about fixing their reputation and living up to national standards.” Or maybe most of us already do care and take our profession seriously?! NADA, state and local associations do a great job of keeping us informed on new rules to follow already. Why pay twice for the same information? “Hurst says the risks of non-compliance with federal regulations are just too low to get dealers to care.” The threat of jail time and huge fines that would put smaller stores out of business isn’t enough? Did this guy do any research before he attempted this failed business venture? Is this Hurst guy the same type of customer who would come in and ask a service department or body shop to commit warranty or insurance fraud and then complain when we refuse?
    “And though non-compliance with things like identity theft prevention laws may not seem like a huge deal, flouting even one law creates an atmosphere of impunity, which almost always translates into a poor customer experience.” Too bad poor journalism isn’t a crime. Breaking the law is a big deal.
    Many of us give back to the community and are good, God fearing people. But that doesn’t make for an interesting read, does it!?

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