Issue 5 | 2023 Cybersecurity: Do You Know How to Lock Up Your Dealership? Understanding and Transferring Cyber Risk for Auto Dealerships
Running a dealership comes with its share of uncertain terrain. But one thing is certain. Our Dealer Financial Services team is dedicated to being by your side with the resources, solutions and vision to see you through. John Kratsch john.r.kratsch@bofa.com 862.485.4467 business.bofa.com/dealer Making business easier for auto dealers. Especially now. Chris McCawley christopher.mccawley@bofa.com 267.675.0151 “Bank of America” and “BofA Securities” are the marketing names used by the Global Banking and Global Markets divisions of Bank of America Corporation. Lending, other commercial banking activities, and trading in certain financial instruments are performed globally by banking affiliates of Bank of America Corporation, including Bank of America, N.A., Member FDIC. Trading in securities and financial instruments, and strategic advisory, and other investment banking activities, are performed globally by investment banking affiliates of Bank of America Corporation (“Investment Banking Affiliates”), including, in the United States, BofA Securities, Inc. and Merrill Lynch Professional Clearing Corp., both of which are registered broker-dealers and Members of SIPC, and, in other jurisdictions, by locally registered entities. BofA Securities, Inc. and Merrill Lynch Professional Clearing Corp. are registered as futures commission merchants with the CFTC and are members of the NFA. Investment products offered by Investment Banking Affiliates: | Are Not FDIC Insured | Are Not Bank Guaranteed | May Lose Value | ©2022 Bank of America Corporation. All rights reserved. 4826555 08-22-0145
WE MEAN BUSINESS New York • Newark • Jersey City • Basking Ridge • Philadelphia Genova Burns LLC • www.genovaburns.com ATTORNEYS AT LAW
EDITOR: BRIAN HUGHES PUBLISHED BY THE NEWSLINK GROUP, LLC 855.747.4003 ©2023 New Jersey Coalition of Automotive Retailers | The newsLINK Group, LLC. All rights reserved. The New Jersey Auto Retailer is published four times each year by The newsLINK Group, LLC for the New Jersey Coalition of Automotive Retailers (NJCAR) and is the official publication for this association. The information contained in this publication is intended to provide general information for review, consideration and dealer education. The contents do not constitute legal advice and should not be relied on as such. If you need legal advice or assistance, it is strongly recommended that you contact an attorney as to your circumstances. The statements and opinions expressed in this publication are those of the individual authors and do not necessarily represent the views of NJ CAR, its board of directors, or the publisher. Likewise, the appearance of advertisements within this publication does not constitute an endorsement or recommendation of any product or service advertised. The New Jersey Auto Retailer is a collective work, and as such, some articles are submitted by authors who are independent of NJ CAR. While NJ CAR encourages a first-print policy, in cases where this is not possible, every effort has been made to comply with any known reprint guidelines or restrictions. Content may not be reproduced or reprinted without prior written permission. For further information, please contact the publisher at 855.747.4003. table of CONTENTS NJ CAR Executive Committee and Board of Trustees 2024 NJ CAR BOARD OF TRUSTEES BY REGION NORTHERN REGION I (Bergen, Essex, Hudson, Passaic, Sussex) Joseph Agresta, Jr. (Alt.) Timothy Allocca Jeffrey Brown John Fette Matthew Haiken (Alt.) William Kundert, Jr. Brian Lam Renee P. McGuire James Russomano (Alt.) Richard Selman Todd Van Duren NORTHERN REGION II (Hunterdon, Morris, Somerset, Union, Warren) Greg Ciocca, Jr. David Ferraez Chris Gilbert (Alt.) John Johnson, Jr. Sean Lyons Trent Miller (Alt.) Chris Preziosi, Jr. (Alt.) Edward J. Rossi Michael Salerno William L. Strauss, III Stephen Tilton Eric Nielsen . ........................................................................................ Chairman Ronald E. Baus, Jr. .....................................................................Vice Chairman Andy Shapiro ........................................................................................Secretary Ed Barlow, III ........................................................................................Treasurer Michael P. DeSilva ...................Regional Vice President (Northern Region I) Mark Montenero .....................Regional Vice President (Northern Region II) Richard Malouf, Jr. ........................Regional Vice President (Central Region) David Kull .....................................Regional Vice President (Southern Region) James Curley, III .....................................................................Budget Chairman Michael McGuire ..................................NJ CAR Insurance Co. Ltd. Chairman William L. Strauss, III ....................................NJ CAR Services, Inc. President Richard DeSilva, Jr. ..........................................NADA Director for New Jersey Frank M. Pezzolla..................................................Truck Committee Chairman Charles S. Miller ..................................................................CAR-PAC President Thomas DeFelice, lll ..........................................................NextGen Chairman James B. Appleton ..............................................................................President CENTRAL REGION (Middlesex, Monmouth, Ocean) Robert Ciasulli Lisa Ocasio Devivo Kevin DiPiano (Alt.) Garry Foltz Elizabeth Giglio Adam Kraushaar Veronica Maoli (Alt.) Paul Sansone, Jr. Anton Semprivivo Joseph Wajda (Alt.) Jordan Wright SOUTHERN REGION (Atlantic, Burlington, Camden, Cape May, Cumberland, Gloucester, Mercer, Salem) Russell Abate Jason Elkins Jeremy Fisher William Kassner (Alt.) Steven Kindle Judith Krupnick (Alt.) Stacey Lilliston James Magee (Alt.) Marcy Maguire James McCormick Robert D. McCormick Tina Wright 7 PRESIDENT’S MESSAGE Amazon-Hyundai Partnership Still Has a Lot of Questions (and Concerns) BY JAMES B. APPLETON 10 CHAIRMAN’S MESSAGE Clean Vehicle Tax Credits Become “Cash on the Hood” Incentive for Customers Starting January 1, 2024 BY JAMES CURLEY, III 12 NADA DIRECTOR’S MESSAGE Plug-In Vehicles Have a Role to Play in a 100% EV Future BY RICK DESILVA, Jr. 14 Adopting ACCII Ignores Economic Realities on the Ground 16 Cybersecurity: Do You Know How to Lock Up Your Dealership? BY CHARLES PEARSON 20 NJ CAR Compliance Forms Series The New Car Lemon Law Notice BY GREYSON P. HANNIGAN, ESQ. 22 NJ CAR Is Focused On Strengthening Dealer Protections and Boosting Consumer Recall Completion Rates How 2023 Election Results Influence NJ CAR Efforts in 2024 BY MAGDALENA PADILLA, ESQ. 24 ICHRAs: A Radically New Way to Offer Health Insurance BY STEPHEN HORVAT 26 Understanding and Transferring Cyber Risk for Auto Dealerships BY STEVE ROBINSON 28 NJ CAR Recognizes the Dealerships That Have Contributed to CAR-PAC 33 Thank You to Those Who Contributed to NADA PAC 34 Every Dealership Should Be a Member of NJ CARPOOL 4 new jersey auto retailer
Can Your Family Wealth Management Plan Pass the 360° Stress Test? Kevin Ellman CFP, CEO and Paul D. Miller are proud to announce the publication of their latest book. Wealth Preservation Solutions, LLC. 45 Eisenhower Drive, Suite 550 Paramus, New Jersey 07652 wealthpreservationsolutions.com Contact Kevin Ellman CFP Tel: (201) 632-2022 Email: kellman@wpsllc.net A Personal Family Office Critical to the success of a Wealth Preservation and Succession Plan, is having a 360° Family Wealth Manager oversee and coordinate the diverse cast of professionals responsible for implementing a plan’s complex elements and techniques to achieve the desired results. Can your Family Wealth Management plan pass the 360° Stress Test? Call (201) 632-2022 to receive a complimentary copy of our new book. Securities offered through Kestra Investment Services, LLC (Kestra IS), member FINRA/SIPC. Investment Advisory Services offered through Kestra Advisory Services, LLC (Kestra AS), an affiliate of Kestra IS. Wealth Preservation Solutions, LLC is not affiliated with Kestra IS or Kestra AS. Investor Disclosures
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PRESIDENT’S MESSAGE Amazon-Hyundai Partnership Still Has a Lot of Questions (and Concerns) JAMES B. APPLETON If you need a book, vitamins, or a million other simple, low-cost products, Amazon is an excellent resource. But these items don’t involve trade or financing. They don’t require titles or registrations and don’t involve governmentmandated disclosures and wet signatures on transaction documents. If the goal of the Amazon-Hyundai partnership is to simplify the car buying process and allow consumers to enjoy a frictionless e-commerce experience like the one they have when they’re buying toilet paper, then I applaud the effort, even if I’m somewhat skeptical they can pull it off. However, if the goal is to learn how to bypass Hyundai (and other brand) dealers, then it should be a concern for both dealers and consumers who lose their ability to compare options from various inter- and intra-brand dealers who compete for sales and service when manufacturers sell direct. Amazon is the world’s biggest retailer and a leader in the e-commerce space. But I think they will find selling cars isn’t like selling toilet paper. First, the average sale on Amazon is $50. The average new car sale price today is almost $50,000. Second, most new car deals involve a trade-in and/or financing. A vehicle must also be titled, pursuant to 50 different state laws, and must be registered with each state’s DMV. Don’t forget that many of the transaction documents required to accomplish a vehicle sale require wet signatures, and there are many legal disclosures and government-mandated notices that must be delivered to consumers at the point of sale. These are the very real reasons no one has yet made buying a vehicle feel like any other e-commerce transaction — because it’s NOT. This “pilot” will still require consumers to speak with and take delivery from a dealer. How does this make Amazon any different than other lead generators (i.e., AutoTrader, cars.com, etc.)? Amazon and Hyundai are spinning the partnership as something more, but it remains to be seen what that means. The announcement said customers will be able to do everything online through Amazon and simply go to the dealership to pick up their car. That’s not 7 new jersey auto retailer
new or different. Today, many consumers shop online for the vehicle that best fits their family’s needs and budget. Some visit the dealership for a test drive, but many consumers never visit the dealership except to pick up the car. That is already happening today, without Amazon, so it’s not clear what else they are bringing to the party. Don’t forget the stack of papers every customer needs to sign — some required by state or federal laws, some required by manufacturers, some required by the finance or leasing company, and others required to title and register the vehicle. Many of these documents require wet signatures and can’t be signed electronically. How will Amazon handle this important step in the purchase process? Amazon and Hyundai should be careful not to oversell what they are offering consumers. I’m concerned they will leave the dealer with the unpleasant task of delivering bad news when the customer shows up at the showroom and finds out their trade isn’t worth what Amazon told them or they don’t qualify for that low-interest loan or favorable lease deal or the vehicle they wanted isn’t available. The customer is still going to spend time signing a stack of required legal documents at the dealership. No doubt, the consumer will blame the dealer for any hiccups in the process, but not Amazon or Hyundai, even though Amazon and Hyundai failed to manage customer expectations adequately. I also have concerns that the Amazon-Hyundai partnership is going to give Amazon an education that will enable them to facilitate direct sales for manufacturers that don’t appoint dealers, and I believe consumers should be concerned about that as well. While the Amazon-Hyundai deal seems like it will function like any other lead generator, it offers Amazon a learning opportunity that may enable them to facilitate direct sales for companies — such as Tesla, or Amazon partner Rivian — that don’t currently use a competitive dealer network. This is bad for consumers because the direct sale model eliminates competition for sales and service, placing the fox in charge of the chicken coup when it comes to warranty and safety recall services. This is why most state legislatures have enacted laws that require automakers to sell through a network of independently owned and operated new car dealerships. Manufacturers can’t be trusted to honor warranty and safety recall claims fairly and faithfully. Look at the recent Reuters story about Tesla dodging warranty claims of wheels falling off and suspensions collapsing on new vehicles. Tesla blamed problems on customer abuses, when documents show they had been tracking the defects for years. If Tesla had dealers who get paid to fix those flaws, they would have never gotten away with that. Overall, if the goal of this partnership is to give Amazon insights into how to sell direct and enable existing and future automakers to bypass neighborhood new car dealers, then it should be a concern for dealers AND consumers. AGAIN, IF THE GOAL OF THIS PARTNERSHIP IS TO GIVE AMAZON INSIGHTS INTO HOW TO SELL DIRECT AND ENABLE EXISTING AND FUTURE AUTOMAKERS TO BYPASS NEIGHBORHOOD NEW CAR DEALERS, THEN IT SHOULD BE A CONCERN FOR DEALERS AND CONSUMERS. 8 new jersey auto retailer
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CHAIRMAN’S MESSAGE Clean Vehicle Tax Credits Become “Cash on the Hood” Incentive for Customers Starting January 1, 2024 JAMES CURLEY, III As of January 1, 2024, customers will be able to transfer their federal new and used clean vehicle tax credits to dealerships registered through the Energy Credits Online (ECO) portal at the time of sale. Moreover, as of January 1, all dealers (regardless of whether the customer elects to transfer credits or not) must submit time of sale reports for clean vehicle transactions through the ECO portal. Dealers must be registered with the ECO portal in order to submit the time of sales reports. Seller Reports are also necessary for clean vehicle sales involving certain credits (Sections 30D and 25E (used) credits) and must be provided to both buyers and the IRS at the time of sale. If you are unsure what to do, there are abundant resources. The IRS issued a new User Guide in late December, with step-by-step instructions explaining how to create time of sale reports for clean vehicle sales in the ECO portal. The IRS also issued updated dealer registration FAQs, important background information for consumers about transferring clean vehicle tax credits, and a checklist of information buyers must provide to eligible dealers for clean vehicle sales involving the transfer of credits. The above-mentioned resources can be found via the QR codes at the end of this article. BACKGROUND ON CREDITS FOR NEW CLEAN VEHICLES PURCHASED IN 2023 (OR AFTER) Consumers may qualify for a clean vehicle tax credit of up to $7,500 under Internal Revenue Code Section 30D if they buy a new, qualified plug-in EV. In order to qualify, the customer must buy the qualifying vehicle for their own use (not for resale) and use the vehicle primarily in the U.S. In addition, the customer’s modified adjusted gross income (AGI) may not exceed $300,000 for married couples filing jointly, $225,000 for heads of households, or $150,000 for all other filers, and customers can use their modified AGI from the year they take delivery of the vehicle or the year before, whichever is less. 10 new jersey auto retailer
The credit is nonrefundable, so consumers can’t get back more on the credit than they owe in taxes, and they can’t apply any excess credit to future tax years. The amount of the credit depends on when the customer takes delivery (vehicle was placed in service), regardless of purchase date. For vehicles placed in service between January 1 and April 17, 2023: Customers are eligible for a base amount of $2,500 base amount, plug $417 for a vehicle with at least 7 kilowatt hours of battery capacity and another $417 for each kilowatt hour of battery capacity beyond 5 kilowatt hours, up to a maximum of $7,500. For vehicles placed in service April 18, 2023, and after: Vehicles will have to meet all of the same criteria, plus meet new critical mineral and battery component requirements for a credit up to: • $3,750 if the vehicle meets the critical minerals requirement only. • $3,750 if the vehicle meets the battery components requirement only. • $7,500 if the vehicle meets both. A vehicle that doesn’t meet either requirement will not be eligible for a credit. HOW TO DETERMINE WHAT ELECTRIC VEHICLES QUALIFY In order to be eligible for the clean vehicle tax credit, the vehicle’s manufacturer suggested retail price (MSRP) cannot exceed $80,000 for vans, sport utility vehicles and pickup trucks or $55,000 for all other vehicles. There are a wide variety of additional factors (e.g., manufacturer, where vehicle’s final assembly occurred, critical mineral and battery component requirements, battery capacity, gross vehicle weight, etc.) that impact vehicle eligibility. Dealers can find a specific vehicle’s weight, battery capacity, final assembly location (listed as “final assembly point”) and VIN on the vehicle’s window sticker and use this information to search fueleconomy.gov to determine if that specific vehicle is eligible for the new clean vehicle credit. Please call NJ CAR headquarters at (609) 883-5056 if you have any questions regarding the clean vehicle tax credit. IRS NEW AND USED CLEAN VEHICLE TIME‑OF‑SALE REPORTING USER GUIDE https://www.irs.gov/pub/irs-pdf/p5867a.pdf IRS FAQs FOR THE DEALER AND SELLER ENERGY CREDITS ONLINE REGISTRATION https://www.irs.gov/credits-deductions/frequently-asked-questionsfor-the-dealer-and-seller-energy-credits-online-registration IRS IMPORTANT INFORMATION FOR CONSUMERS TRANSFERRING CLEAN VEHICLE TAX CREDITS https://www.irs.gov/pub/irs-pdf/p5900.pdf IRS CLEAN VEHICLE CREDIT TRANSFER: INFORMATION YOU NEED TO PROVIDE TO THE REGISTERED DEALER https://www.irs.gov/pub/irs-pdf/p5899.pdf 11 new jersey auto retailer
NADA DIRECTOR’S MESSAGE Plug-In Vehicles Have a Role to Play in a 100% EV Future RICK DeSILVA, JR. Consumer interest in EVs is real, strong, and growing. According to Escalent research, the proportion of “EV intenders” — new-car buyers that have a high propensity to shop for an EV — has climbed from 16% in 2020 to 25% in 2023, but the increasing interest in EVs is not translating into more purchases. (NOTE: In New Jersey, the current mandate calls for 22.5% of all vehicles sold to be EVs. Total EV sales in 2023 will likely come in right around 10% when all is said and done.) So, if interest in EVs is up, but sales are plateauing and inventories are rising, what’s going on? The answer is most likely an age-old problem with bringing new technology into the market. In the book Crossing the Chasm, author Geoffrey Moore describes the difficulty of transferring new technology from early adopters into the mass market. This problem is so universal and so difficult that Moore says there is effectively a “chasm” in the market between early adopters and the mass market that is nearly impossible for tech companies to cross. While early adopters “find it easy to imagine, understand and appreciate the benefits of new technology,” early majority customers “share some of the early adopters’ ability to relate to technology, but ultimately … are driven by a strong sense of practicality.” WHAT’S STOPPING CONSUMERS? EVs’ enhanced driving performance and record on the environment excite many early adopters. Early majority consumers are excited, too — but the reallife drawbacks of range anxiety, slow charging, and undeveloped charging infrastructure are keeping many from buying them. In a survey by NADA, dealers report that 69% of consumers who decline to purchase an EV cite driving range as their chief concern. According to J.D. Power, four of the top five reasons for EV rejection relate to charging, with 76% of consumers citing at least one charging-related concern. The state of America’s charging infrastructure bears this out. While there were about 54,000 charging NADA CEO Mike Stanton authored an article in mid-November that spelled out why many dealers feel that plug-in hybrids can serve as a crucial (and necessary) bridge to the 100% electric vehicle future that seems unrealistic given the current economic realities and the relatively short time frame that State and Federal officials are pushing to phase out gas-powered vehicles. Below is a modified version of Mike’s published piece, titled “Crossing the chasm on EVs may require plug-in hybrids.” 12 new jersey auto retailer
22 Florence Street • South Hackensack, NJ 07606 • Learn more at WASCOonline.com • 800-732-4511 Why Should Your Dealership Partner With WASCO? Dealership Supplies & Exceptional Customer Service WASCO helps me manage a very diverse, very difficult business. Interacting with many vendors on my behalf really helps me simplify the entire process. — Ed Rossi, Rossi Chevrolet Buick GMC “ ” VOLUME PRICING DISCOUNTS PURCHASING EFFICIENCY ANNUAL DIVIDEND stations nationwide at the end of 2022, there were three times that many gas stations — where refueling takes a small fraction of the time necessary to charge a battery. Meanwhile, state and federal regulators are pushing EVs harder than ever. The EPA has proposed that 67% of new cars sold be zero emission by 2032 — an approach even beyond the standards adopted by the California Air Resources Board (CARB). The CARB rules adopted in 2022 are supported by the automakers and allow for up to 20% of vehicles manufactured for sale in California and CARB states to be plug-in hybrids, a much more realistic approach than the EPA has laid out. But current incentives for EV charging infrastructure and consumer incentives do not appear sufficient in pushing EVs across the chasm — at least not until fast charging is ubiquitous enough to ease mass-market consumers’ concerns. A POTENTIAL SOLUTION If the goal of regulators is to decrease overall vehicle emissions, public policy should be focused on turning over the combustion fleet, getting consumers used to charging, and getting cleaner vehicles on the road. Promoting plug-in hybrids may be the way to get EVs across the chasm. Many plug-in models utilize smaller batteries — with 20- to 50-mile electric ranges — in tandem with gasoline engines. These vehicles can achieve zero emission commutes and are easy to charge at home with a 120- or 240-volt charger. Gasoline backups will also eliminate anxiety about finding an open fast charger. Plug-in hybrids continue to sell well, with sales up 51% year-over-year. It’s hard to see a retail environment in 2032 where 67% of new-car sales are fully electric EVs (or 100% EV by 2035 here in New Jersey, as Governor Murphy has proposed). However, it’s very easy to see a 2032 where a majority of new-car sales are plug-in hybrids. Plug-ins would help ease consumers into the transition toward EVs, get consumers used to charging, create the demand necessary for investments in the charging network, and build a bridge across the chasm to bring EVs to the mass market. State and federal policymakers should ensure that plug-in hybrids are included in future regulations and incentive programs. Doing so would ensure that early majority consumers can make their next vehicle an EV. 13 new jersey auto retailer
Adopting ACCII Ignores Economic Realities on the Ground The California Advanced Clean Car II (ACCII) Rule, adopted by the New Jersey Department of Environmental Protection (DEP) in November, will allow ONLY electric vehicles (EVs) to be available for sale in New Jersey by 2035. This extreme government mandate limits consumer choice and threatens to make new cars unaffordable for working and middle-class families. NJ CAR conducted an aggressive grassroots campaign against ACCII, asking dealers, dealership employees, and others to contact their elected officials to voice their opposition. The campaign saw nearly 900 individuals send nearly 3,600 emails to their legislators. Three legislators (Senator James Holzapfel, Assemblyman John Catalano and Assemblyman Gregory McGuckin) received more than 100 emails, three others (Senator Vin Gopal, Assemblywoman Kim Eulner and Assemblywoman Marilyn Piperno) received more than 75 emails, and dozens more received more than 40 emails each. Governor Murphy also received nearly 600 emails voicing opposition to ACCII. Our campaign got the attention of many New Jersey State Senators and Assemblymembers, including dozens who spoke out or officially filed comments opposing the adoption of this rule and its unrealistic mandates. The Governor doesn’t seem to want to acknowledge the valid concerns many of them, on both sides of the aisle, have raised. The Governor has said ACCII “does not impose obligations on consumers or car dealers,” but that is simply not true. The rule explicitly prohibits consumers from buying any new vehicle that isn’t an EV from in-State dealerships come 2035. Dealers want to sell what consumers want to buy, but they can only offer what automakers build and allocate to them. The extreme California mandate will disrupt New Jersey’s new car marketplace in ways that will have a profound impact on consumers and car dealers by limiting choice and driving up the price of ALL vehicles. This heavy-handed government approach is likely to backfire. If consumers cannot afford an EV or it doesn’t meet their family needs, they will hold on to their gaspowered vehicle longer or simply won’t buy an EV HERE. Instead, they will shop out-of-state to buy the vehicle that fits their budget and meets their needs. New Jersey’s neighborhood new car and truck dealerships are “ALL IN” on EVs. Indeed, they already offer 40+ vehicles with a plug, with that number growing to 140 models in every vehicle category and at every price point. ACCII calls for an increase in EV sales from the current 9% to 43% by 2027. The mandate continues increasing until it reaches 100% percent by 2035, which is not realistic. New Jersey consumers have already demonstrated that the demand for EVs can’t keep pace with the more modest mandates already imposed under the current California Clean Car rules. Policymakers should focus on getting New Jersey EV sales to 15% or 20% before pushing for even higher mandates. The DEP has chosen to ignore other options, such as the stringent federal clean car rules recently proposed by the Biden Administration. If New Jersey opted to follow the federal EPA proposal, automakers would still be required to build and deliver more EVs for sale in New Jersey, but consumers would be afforded greater choice, and there would be less impact on vehicle affordability. In the end, consumers will decide when New Jersey becomes a 100% EV market. 14 new jersey auto retailer
The information contained herein is offered as insurance Industry guidance and provided as an overview of current market risks and available coverages and is intended for discussion purposes only. This publication is not intended to offer legal advice or client-specific risk management advice. Any description of insurance coverages is not meant to interpret specific coverages that your company may already have in place or that may be generally available. General insurance descriptions contained herein do not include complete Insurance policy definitions, terms, and/or conditions, and should not be relied on for coverage interpretation. Actual insurance policies must always be consulted for full coverage details and analysis. Insurance brokerage and related services to be provided by Arthur J. Gallagher Risk Management Services, Inc. (License No. 0D69293) and/ or its affiliate Arthur J. Gallagher & Co. Insurance Brokers of California, Inc. (License No. 0726293). © 2022 Arthur J. Gallagher & Co. | GGB41888 In association with ajg.com The Gallagher Way. Since 1927. • Broker-friendly access: Dealerships don’t need to give up their existing relationship. • Industry-specific classification rules: Premium reductions between 15%–20%. • Scheduled underwriting credits: Up to 25%, based on individual dealers’ risk profile. • Collaborative claims advocacy: Aggressive claims investigation and cost containment. • Access to NJ CAR’s Zero Injury Program: A proven industry loss prevention program. NJ CAR Workers’ Compensation Program Lowering costs for franchised auto dealers across New Jersey. NJ CAR in partnership with Gallagher and AmTrust, offers the industry's most comprehensive workers' compensation program custom tailored to New Jersey Franchised Auto Dealers. One of the key benefits of the program is a generous dividend return of up to 25% of your policy premium — not a credit applied to future premiums — and is based on individual loss experience rather than group performance. In 2022, the program paid $1,007,689 in dividends to participating dealers, beating the previous high of $840,505 paid in 2021. Other program benefits include: For more information, please contact: Pattie Collins Gallagher Area Senior Vice President T: 732.837.9150 | E: Pattie_Collins@ajg.com Charles Russo NJ CAR Director of Risk Management and Insurance T: 609.883.5056, ext 314 | E: crusso@njcar.org Northern New Jersey $2,264,134 Returned South Jersey $595,091 Returned Central New Jersey $$7903,035 Returned
Cybersecurity: Do You Know How to Lock Up Your Dealership? BY CHARLES PEARSON, TECHNICAL COORDINATOR, NJ CAR In today’s digital age, every business needs to utilize the latest technology to stay at the forefront of their industry. For auto dealerships, that need is just as prominent. Worldwide advances like artificial intelligence (AI), and other developments such as electronic titling and the need for dealerships to stay intertwined with technology keeps growing. As a result, dealerships MUST focus on cybersecurity. To mitigate the risk a cyber breach could pose to a dealership’s finances and reputation, dealerships must understand what exposures they have and what steps they can take to mitigate those risks. The first step any business must take is to analyze their risk in the same way they would analyze their physical security systems and the protections put in place. Dealers need to break down their cyber systems to find what needs to be protected. Dealerships also need to understand what avenues of attack a cybercriminal may take (i.e., phishing emails, ransomware, bad actors, etc.). The results of cyber incidents can be devastating to 16 new jersey auto retailer
any business, with dealerships requiring as much as 16 days (on average) to recover from ransomware attacks. With all these potential digital threats, protecting a dealership’s network may seem like a daunting task. However, with the appropriate steps, even the smallest vulnerability can be protected. Training for users, multi-factor authentication, and data encryption protocols are a few options to prevent potential cyber attacks. In the event of a successful attack, an incident response plan and a comprehensive cyber-insurance policy can also help get the dealership back on their feet. In addition to what dealerships SHOULD do to protect themselves, there are also a few items they are REQUIRED to do to ensure compliance with regulations. The FTC Safeguards Rule, revised in 2022, has various requirements, including performing periodic risk assessments; regularly testing or monitoring effectiveness of safeguards; overseeing service providers; and evaluating and adjusting the dealership’s information security program in response to the results of testing and monitoring. These regulations provide an understandable starting point for dealerships to safeguard both their customers’ private information and their own secure data. By conducting regular system penetration testing and vulnerability scans, dealerships are given the opportunity to shore up their cyber defenses before an incident occurs. Even with a comprehensive security plan in place and properly executed, dealers must realize that not all protective measures are foolproof. Because of how fast technology is evolving, safety precautions to protect against potential threats will always be lagging behind. No matter how much you train your team, someone can always have a bad day. Incidents can happen at any time, and because of this, it’s imperative that dealerships obtain a cybersecurity insurance plan with the appropriate limits. You can read more about insurance coverages in the article authored by Steven Robinson found on page 26. On top of a sturdy cybersecurity insurance policy, dealerships should also put into place a cybersecurity strategic plan. A robust cybersecurity strategic plan allows the dealership to implement an easy-to-follow game plan for their staff and develop a culture that prioritizes cybersecurity. A welldeveloped plan should include security policies such as access control, data encryption, backup, and retention: • Access control can be handled in many ways, such as following the Principal of Least Privilege, multifactor authentication, network segmentation, and even physical securities such as a locked door to your IT closet. Essentially, access controls should only allow an end user the minimum amount of access they need to perform their job. • Data encryption must be done while data is at rest, such as stored in a hard drive, and while in transit, like when emailing. • Data backups should be kept in three separate versions. The data that is being used, a physical backup, and an offsite backup. • Data retention should dictate how long data is held. Typically, data is held for seven years before being destroyed, however it’s important to research the appropriate retention requirements for specific documentation. Training programs and phishing simulations should be conducted regularly as a part of a cybersecurity strategic plan. This allows a hardened front to what is widely considered the weakest link. Additionally, periodic vulnerability assessments should be a routine part of every plan. A white-collar hacker can provide dealerships with a way to expunge any inadequacies in their systems. Most importantly, dealerships should develop a detailed incident response plan. This document should include the roles and responsibilities of all stakeholders in the event of a breach. This provides a pathway for anyone to get the business back on its feet after an incident. Charles Pearson is NJ CAR’s Technical Coordinator. He can be reached at (609) 883-5056 x134 or via email at cpearson@njcar.org. 17 new jersey auto retailer ArentFox Schiff’s Automotive Group drives innovative strategies forward. Our cutting-edge, national practice advises automotive leaders as the industry faces a dizzying array of competitive and regulatory hurdles. Smart in Automotive Smart In Your World afslaw.com Key Contact: Michael P. McMahan Partner, NY 212.484.3982 Michael.McMahan@afslaw.com
As a recognized leader in the industry, Citrin Cooperman’s Automotive Dealership Practice continually provides local-level attention and top-notch client service through a robust foundation of highly specialized expertise and a team of dedicated professionals. Start your journey towards excellence by contacting us today. citrincooperman.com "Citrin Cooperman" is the brand name under which Citrin Cooperman Advisors LLC and Citrin Cooperman & Company, LLP, independently owned entities, provide professional services in an alternative practice structure in accordance with applicable professional standards. ELLEN KERA Partner ekera@citrincooperman.com WILL FERNANDEZ Partner wfernandez@citrincooperman.com 290 W. Mt. Pleasant Avenue, Suite 3310, Livingston, NJ 07039 709 Westchester Avenue, White Plains, NY 10604
NJ CAR Compliance Forms Series The New Car Lemon Law (N.J.S.A. 56:12-29 et seq.) provides purchasers and lessees of new vehicles and motorcycles the right to demand a refund or replacement of any new vehicle deemed to be a lemon. Failure to comply with the provisions of the New Car Lemon Law is deemed an unlawful practice under the New Jersey Consumer Fraud Act (N.J.S.A. 56:8-2 et seq.). Under the law, vehicles are covered for up to two (2) years or 24,000 miles, whichever occurs first, from the time of delivery. A new vehicle is deemed to be a “lemon” if it suffers from a “nonconformity,” which substantially impairs the use, value, or safety of the vehicle, and the manufacturer fails to correct this nonconformity. There is a presumption that a purchaser has a right to a refund or replacement in the following three circumstances: 1. When there is a “nonconformity,” which continues to exist after three or more repair attempts. 2. When there is a nonconformity, which is likely to cause death or serious bodily injury, which continues to exist after one repair attempt. 3. When the vehicle has been out of service due to repairs for a total of 20 cumulative calendar days during the Lemon Law warranty period, and the nonconformity continues to exist. The New Car Lemon Law Notice BY GREYSON P. HANNIGAN, ESQ. DIRECTOR OF LEGAL & REGULATORY AFFAIRS, NJ CAR 20 new jersey auto retailer
N.J.S.A. 56:12-34 provides that “at the time of purchase in the State of New Jersey, the manufacturer, or, in the case of an authorized emergency vehicle, the manufacturer, co‑manufacturer, or post-manufacturing modifier, through its dealer or distributor, or at the time of lease in the State of New Jersey, the lessor, shall provide directly to the consumer a written statement prescribed by the director, presented in a conspicuous and understandable manner on a separate piece of paper and printed in both the English and Spanish languages.” The New Jersey Division of Consumer Affairs promulgated regulations setting forth rules for advising purchasers of their rights under the Lemon Law and specifying the form of notice that must be given. The two-page long notice in English and Spanish must be on a separate sheet of paper and not combined with the Retail Order Form (or any other document) and must be in at least 10-point, bold-faced type. A record that the customer received this notice must also be kept by the dealership. A copy of the notice with a signature where the customer acknowledged receipt meets this requirement. The New Car Lemon Law Notice (SKU: 150B) can be ordered by calling NJ CAR Services (609) 883-5056, x402 and from various Dealer Management Systems (DMS). The form can also be ordered on the NJ CAR Services website (njcarservices.com). Greyson Hannigan is NJ CAR’s Director of Legal & Regulatory Affairs. He can be reached at ghannigan@njcar.org. DID YOU KNOW? Enjoy your association news anytime, anywhere. Scan the QR code to visit our online publication to stay up to date on the latest association news, share articles and read past issues. new-jersey-auto-retailer.thenewslinkgroup.org 21 new jersey auto retailer
NJ CAR Is Focused On Strengthening Dealer Protections and Boosting Consumer Recall Completion Rates NJ CAR is preparing a legislative initiative that would amend the New Jersey Franchise Practices Act and hopes to have it introduced in the New Jersey Legislature in 2024. Unlike most legislation NJ CAR monitors, this bill (which traces its origins back to a year-long discussion with NJ CAR leadership) will be introduced at the Coalition’s request. Legislators will want us to tell them why this initiative is important to our industry. Support from members through participation in our NJ CARPOOL grassroots platform and legislator visits will be invaluable to help encourage legislators to join us in supporting the bill. We encourage dealers and their employees to step up to voice their support when NJ CAR calls on everyone to contact their elected officials. The current draft of the legislation amends the New Jersey Franchise Practices Act to benefit consumers and dealers by protecting both from potential manufacturer overreach. Specifically, it provides clarity in dealership reimbursements for warranty and repair work and promotes greater highway safety by creating a consumer notification system to encourage warranty and repair services. The amendments NJ CAR has prepared will address a variety of issues important to dealers and consumers. Some of the provisions that NJ CAR is seeking to include relate to the following: • Prohibiting the sale of unsafe used vehicles under a “stop sale” or “do not drive” recall. • Requiring all used car dealers to check the National Highway Traffic Safety Administration (NHTSA) website (safercar.gov) for open recalls on a vehicle before it is sold. • Codifying the existing requirement for dealers to disclose whether a vehicle is subject to any open recall at the time of sale. • Providing a “safe harbor” defense to any consumer fraud claim, as long as the dealer checked the NHTSA website and found no recall on the vehicle before it was sold. The amendment also makes clear the dealer is not liable for any errors or omissions on the safercar.gov website and has no obligation to continue checking the website after the sale. • Requiring automakers to provide the New Jersey Motor Vehicle Commission (NJMVC) with a list of all New Jersey-registered vehicles under recall for six (6) months or more (that have yet to be repaired) and, in cooperation with the NJMVC, to send notice to those registered vehicle owners with unresolved recalls. • Requiring automakers to compensate their franchisees for specified costs associated with a “stop sale” or “do not drive” order. • Defining the dealers’ recall costs more clearly and requiring automakers to compensate dealers 1.75% per month of the book value of any used vehicle subject to a “stop sale” recall. • Clarifying provisions in existing law, which require an automaker to pay dealers a fair retail rate of reimbursement on parts and labor to repair vehicles under recall. • Protecting auto retailers from being subject to financial or other penalties levied by an automaker in the event they bring a claim for reimbursement of recall costs. • Prohibiting manufacturers from recovering their cost of compliance with state law and requiring retail reimbursement to the dealer for parts and service provided for warranty and safety recalls. How 2023 Election Results Influence NJ CAR Efforts in 2024 BY MAGDALENA PADILLA, ESQ., DIRECTOR OF GOVERNMENT AFFAIRS, NJ CAR 22 new jersey auto retailer
• Prohibiting manufactures from arbitrarily and unilaterally reducing the retail price of parts required for warranty and safety recall services immediately preceding or during a recall campaign to avoid paying dealers fair compensation for warranty and safety recall work. As of the time of this publication, the bill has not yet been introduced. This is a perfect time for our members to prepare themselves for the work we will need to do together. Assess your readiness and availability for hosting dealership visits by legislators (or for you to visit your legislators’ offices) and ensure all of your employees are included in our NJ CARPOOL grassroots email list. NJ CARPOOL is our grassroots team that sends emails to state legislators to voice their support for our industry. Most NJ CARPOOL members are dealership employees. Please take steps today to ensure that your dealership is in NJ CARPOOL (membership requires the approval of a dealership principal). Confirming your NJ CARPOOL membership now will be important before we engage with the new Legislature elected in November 2023. 2023 ELECTION RESULTS IN MANY NEW FACES IN TRENTON Following the November 2023 election results, the Democrats retained control in both houses and gained seats in the Assembly. In the 80-seat Assembly, Democrats grew their lead 52 to 28; in the 40-seat Senate, Democrats retained their lead 25 to 15. When the 221st New Jersey Legislature was sworn in on January 9th, beginning the new legislative session, 25% (30 of the 120 legislators) were new faces. That means our bill will be considered by many people who do not know us or have any previous state legislative experience. For NJ CAR members, that means we want to continue our relationships with the remaining 90 experienced legislators while introducing ourselves and our priorities to the new 30. Below is a brief listing of the legislative districts (LDs) in which the new legislators are located: 3 New Senators without prior state legislative experience • LD 8 — Senator Latham Tiver (R) • LD 9 — Senator Carmen Amato (R) • LD 12 — Senator Owen Henry (R) 27 New Assemblymembers without prior state legislative experience • LD 3 — Assemblywoman Heather Simmons (D) and Assemblyman Dave Bailey, Jr. (D) • LD 4 — Assemblyman Dan Hutchison (D) and Assemblyman Cody Miller (D) • LD 8 — Assemblywoman Andrea Katz (D) • LD 9 — Assemblyman Gregory Myhre (R) • LD 10 — Assemblyman Paul Kanitra (R) • LD 11 — Assemblywoman Margie Donlon (D) and Assemblywoman Luanne Peterpaul (D) • LD 14 — Assemblywoman Tennille McCoy (D) • LD 16 — Assemblywoman Mitchelle Drulis (D) • LD 17 — Assemblyman Kevin Egan (D) • LD 24 — Assemblywoman Dawn Fantasia (R) and Assemblyman Michael Inganamort (R) • LD 27 — Assemblywoman Rosy Bagolie (D) and Assemblywoman Alixon Collazos-Gill (D) • LD 28 — Assemblywoman Garnet Hall (D) • LD 30 — Assemblyman Avi Schnall (D) • LD 31 — Assemblywoman Barbara McCann Stamato (D) • LD 32 — Assemblywoman Jessica Ramirez (D) and Assemblyman John Allen (D) • LD 33 — Assemblyman Gabriel Rodriguez (D) and Assemblyman Julio Marenco (D) • LD 34 — Assemblyman Michael Venezia (D) and Assemblywoman Carmen Morales (D) • LD 39 — Assemblyman John Azzariti (R) • LD 40 — Assemblyman Al Barlas (R) Fortunately, some new Senators (who were previously Assemblymembers) already know about the tremendous value New Jersey’s neighborhood new car and truck dealerships bring to the State’s economy. These new Senators are: 6 New Senators with Prior Legislative Experience • LD 3 — Senator John Burzichelli (D) • LD 24 — Senator Parker Space (R) • LD 27 — Senator John McKeon (D) • LD 31 — Senator Angela McKnight (D) • LD 32 — Senator Raj Mukherji (D) • LD 34 — Senator Britnee Timberlake (D) Equally beneficial for NJ CAR dealership members is that the Democrat leadership — which maintains control — has been supportive of our $40 billion industry. Ultimately, since this will be OUR initiative, we will need to be very active in educating the legislative members about the benefits of supporting our bill and encouraging passage in 2024. Please contact me if you are interested in setting up legislator visits (either at your dealerships or in their offices). Also, please contact NJ CAR Member Liaison Anne Smith (asmith@njcar.org) about participating in NJ CARPOOL, in order to help the Coalition with grassroots outreach to legislators. 23 new jersey auto retailer
ICHRAs: A Radically New Way to Offer Health Insurance BY STEPHEN HORVAT, VICE PRESIDENT AND SENIOR BENEFIT CONSULTANT, CORPORATE SYNERGIES Even if you offer multiple health insurance plans, trying to address the diverse needs of employees can seem impossible. Budgeting for unpredictable group rate renewal increases can be equally challenging. Thankfully, an innovative alternative, like Individual Coverage Health Reimbursement Arrangements (ICHRAs) could be the solution. ICHRAs flip the script on how employers offer health insurance. Instead of trying to accommodate all employees with a few plans, employers can offer ICHRAs to defined classes of employees. This provides more freedom and flexibility to employees while stabilizing costs for employers, allowing them to offer coverage to employees in ways that otherwise wouldn’t be feasible. In the right situation (and with the right partner), ICHRAs can offer more advantages and cost savings than other options, including multiple carriers and networks, expanded plan designs, copays and deductibles, and more predictable budgeting processes. FLEXIBILITY AND ACCESSIBILITY FOR EMPLOYEES, COST SAVINGS, AND STABILITY FOR EMPLOYERS ICHRAs were created under the federal Affordable Care Act (ACA) regulations and made available to employers in 2020. In this relatively new arrangement, employees choose their own carrier and health plan directly or can use the federal marketplace. This offers many more choices compared to the two or three plans employers typically offer. Employers can then contribute to the health reimbursement arrangement in order to reimburse their employees fully or partially for their insurance premiums. These plans also satisfy ACA requirements for coverage. Since each ICHRA plan rate is based on an individual, annual renewal increases are smaller and more predictable — typically 1%-3%. Other group health plans tend to have larger annual renewal increases since the carrier needs to factor in a range of high and low claim groups. By adding ICHRAs, you can serve all your employees’ diverse healthcare needs and still offer them ancillary benefits such as vision, dental, and voluntary benefits. WHAT TYPE OF ORGANIZATION CAN BENEFIT MOST? The flexibility of ICHRAs can benefit employers in a variety of situations. They can be a great option for small business employers who otherwise couldn’t afford to offer coverage. They can also benefit larger organizations with diverse or changing employee needs. Employers can even offer ICHRAs to seasonal, part-time, temporary, or hourly employee classes. Usually, these types of employees wouldn’t be eligible for health benefits; however, this added perk could be a defining factor in attracting employees. ICHRAs can also address challenges with geographically diverse workforces. Consider a large organization that offers benefit plans utilizing a local network for employees at their headquarters. This company, however, also has a facility in another state with employees who wouldn’t be able to access those local network providers. One solution would be adding a high-cost PPO option or an additional carrier to accommodate out-of-network needs, creating two more plans and renewals. In this case, the employer could offer ICHRAs only to the employees at that facility, allowing those employees to choose their preferred plan and network while still receiving the subsidy benefit. This reduces costs for both the employer and employees. For any organization, ICHRAs reduce the pricing volatility associated with self-funding and fully funded plans. This includes the liability for the high claims of self-funding and the high, unpredictable renewals of fully funded plans. In this way, ICHRAs can make health insurance costs lower and more predictable. 24 new jersey auto retailer
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