Pub 5 2023 Issue 2

Positioning for the Future of EV Market Growth A Delay in the Safeguards Rule, But Dealers Should Not Wait

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10 ©2023 Utah Auto Dealer | The newsLINK Group, LLC. All rights reserved. Utah Auto Dealer is published four times each year by The newsLINK Group, LLC for the New Car Dealers of Utah 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 the New Car Dealers of Utah, 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. Utah Auto Dealer is a collective work, and as such, some articles are submitted by authors who are independent of the New Car Dealers of Utah. While the New Car Dealers of Utah 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. PUB. 5 2023 ISSUE 2 18 5 EXECUTIVE DIRECTOR’S MESSAGE NCDU: RISING UP TO MEET THE CHALLENGE By Craig Bickmore, Executive Director 6 A DELAY IN THE SAFEGUARDS RULE, BUT DEALERS SHOULD NOT WAIT By Hao Nguyen, Esq, Chief Legal Officer, ComplyAuto 8 EVs AND THE SERVICE DEPARTMENT By Justin Carr, Vice President Warranty Processing Company 10 POSITIONING FOR THE FUTURE OF EV MARKET GROWTH 15 HOW AUTOMOTIVE DIGITAL RETAILING CAN AFFECT YOUR DEALERSHIP 18 THE RIGHT TIME FOR A RISK MANAGEMENT RESET By Brandon Artigue, Director, Financial Risk Management, Truist Securities 8 CONTENTS 4 UTAH AUTO DEALER

NCDU: Rising Up to Meet the Challenge Summer has finally arrived. We are halfway through this year, and I for one, am so proud of all that we have accomplished. There are many more changes on the horizon and problems we must face, but if there’s one thing I know, it’s that NCDU and its members will always rise up to meet the challenge. New FTC regulations are pressing right now as dealers have a deadline on June 9 that they need to meet. We have included an article in this issue that addresses the important changes that need to be made. If you have any questions or concerns about the FTC changes or meeting the deadline, please don’t hesitate to reach out. A common theme of change that isn’t going away is EVs. As our industry works hard to adapt and embrace EVs and all of the regulations that accompany them, we are here for you. NCDU works tirelessly to advocate for dealers’ interest in the halls of Utah’s Capitol, and we always will. This is an exciting time for our industry, and we want to make sure that you have all the tools and information you need to excel and succeed. I am honored to serve you and want to hear from you in regard to issues you might be facing. I hope to see you at one of our upcoming events. Sincerely, Craig Bickmore BY CRAIG BICKMORE, EXECUTIVE DIRECTOR 5 UTAH AUTO DEALER

In this article, we discuss the Federal Trade Commission’s (FTC) delay of the effective date of the revised Safeguards Rule (Rule) and its practical impact to your dealerships. We will then explain why you should not wait to implement data protection and cybersecurity safeguards at your dealership because the FTC will still come after you under another section of the FTC Act that gives them broad authority. Safeguards Rule – Some Requirements Delayed Until June 9, 2023 The FTC gave dealers across the country an early Christmas present when it announced on November 15, 2022 that it is extending the deadline for the Rule by six months. However, it is important to note that this extension only affects some of the requirements and will make them effective on June 9, 2023. Specifically, the provisions that have been extended to June include the following: • Designating a qualified individual to oversee the information security program; • Completing written risk assessments; • Monitoring the access and use of sensitive customer information; • Completing a penetration test & vulnerability scan; • Encrypting systems containing customer information; • Training employees on security awareness; • Conducting Vendor & Service Provider risk assessments; • Implementing multi-factor authentication (MFA) on all systems containing customer information; and • Creating and updating a device and systems inventory. Notably, the provisions that have not been delayed (and never were) are: • Creating a written Information Security Program (ISP) for your organization; • Obtaining signed contracts from your vendors (Service Providers) who collect customer information promising to implement reasonable safeguards; • Periodically assessing your Service Providers to ensure that they have reasonable safeguards in place; and • Implementing a system capable of detecting attacks and intrusions on your network. Dealers Should Not Wait to Implement Safeguards Rule Solutions On paper, the delay sounded good. However, once you dig into the details, the delay is not as sweet as it sounds. Because some aspects of the Rule still became effective in January of last year, dealers should not take this delay for granted. This is the time to press on in reinforcing their data protection and cybersecurity practices. Why? Firstly, completing all requirements of the Rule can be time consuming because so many players are involved. You will need to coordinate with the vendor to oversee compliance (like ComplyAuto), the dealership staff, any Service Providers they work with (to complete their requirements), and potentially your IT company or Managed Service Provider. Unless you are working with an efficient and responsive team, natural bottlenecks may arise as one party waits on the other. Secondly, you should not “miss the forest for the trees,” meaning that the FTC should not be the main reason why your dealership is establishing these data protection and cybersecurity protocols. Yes, we want to fulfill these requirements to keep the federal government at bay, but I would argue that the main focus should be to prevent data breaches, ransomware attacks, or other cybersecurity incidents! Think about the different forms of damage to your organization that could arise as a result of a data breach or ransomware attack: • Reputational damage: Dealerships are pillars in their community and word of a data breach will spread quickly. Additionally, vendors may be wary about working with you in the future. • Data breach mitigation: Depending on the level of your cybersecurity coverage from your insurance company (or lack thereof), you could be paying out of pocket for forensic professionals to “stem the bleeding”, so to speak, and try and recover what you can. • Dealership downtime: You can bet that your dealership will suffer significant delays as you try to survey the extent of the breach and work through the mitigation efforts. A DELAY IN THE SAFEGUARDS RULE, BUT Dealers Should Not Wait BY HAO NGUYEN, ESQ. CHIEF LEGAL OFFICER, COMPLYAUTO 6 UTAH AUTO DEALER

• Data recovery: If it was a ransomware attack that resulted in the loss of employee, customer, and dealership information, the road back to where you started will be a long one. Think of all the information that existed prior to the attack that you will now need to rebuild from scratch. • Consumer protection efforts: Depending on the extent of the breach, you may be legally responsible for the cost of providing identity theft protection measures to all of the consumers who suffered a release of their information. • State and federal penalties: Suffering a breach does not earn you any pity from the government. State and federal enforcement officials will come in shortly thereafter to “pour salt in the wound” in the form of heavy fines and penalties. • Class actions lawsuits: Always a significant concern for dealers is a class action lawsuit by harmed individuals who had their information either stolen or released. FTC Using its Broad Authority under Section 5 for Cybersecurity Concerns Section 5 of the FTC Act prohibits “unfair or deceptive business practices in or affecting commerce.” Given that this clause has been around since 1914, it is safe to say that the authors did not consider cybersecurity during the time that it was drafted. Nevertheless, as a Nobel Prize laureate once said, “the times they are a changin’' and the FTC has wielded this section as a sword to strike down businesses who have displayed poor cybersecurity practices. This has become such an issue that Brad Miller, Chief Regulatory Counsel at NADA, spoke about this during one of the educational seminars at the Dallas convention. Defining false data security or privacy representations under both “unfair” and “deceptive” terms of art since 2002, the FTC has negotiated consent agreements since then with most businesses as many of them never wanted to test its authority over regulating cybersecurity. It was not until 2012 when a private company that had been victim to a cyber attack three times moved to dismiss the FTC’s lawsuit, stating that it had no authority, rather than enter into a settlement. Going all the way up to the Third Circuit, the court affirmed that the FTC does in fact have the authority to regulate cybersecurity based on factors I won’t bore you with here. Since then, there have been no direct challenges to the FTC’s authority over a business’s cybersecurity practices under this broad Section 5 and the FTC continues to use it repeatedly and effectively: • Consent order with an education technology provider for alleged poor data security practices that exposed sensitive information about millions of customers and employees. Specifically, it did not require employees to use MFA, stored information insecurely, and failed to provide adequate security training to employees. — January, 2023 • Consent order with an online alcohol marketplace (and its CEO, personally) over allegations that its security failures led to a data breach exposing personal information of approximately 2.5M consumers. Specifically, it did not require employees to use MFA, did not limit employees’ access to personal data, failed to monitor security threats, and stored information insecurely. — January, 2023 • Consent order with an online customized merchandise platform that failed to implement reasonable security measures and failed to adequately respond to several security breaches. Specifically, it stored SSN and passwords in readable text, did not require employees to use MFA , retained data longer than was reasonably necessary, and covered up major data breaches. — June, 2022 With the Safeguards Rule and the looming Motor Vehicle Trade Regulation Rule that the NADA is actively opposing, we believe that automotive retail is squarely in the sights of the new FTC commissioners. It is imperative that dealers continue in their efforts to expeditiously comply with all the new requirements of the Rule to achieve full compliance by the new deadline. If you’re feeling behind or overwhelmed, we’re here to help. Send us a message at info@complyauto.com or visit our website at www.complyauto.com to learn more about our “one-stop-shop” solution for the Safeguards Rule and our Compliance Guarantee. 3 This article should be used as a compliance aid only and though its accuracy has been made a priority, it is not a substitute for professional legal advice. Each dealer should rely on their own expertise when using it.

EVs AND THE Service Department BY JUSTIN CARR VICE PRESIDENT, WARRANTY PROCESSING COMPANY Change is tough, but a lot of good can come from it. We’ve seen this repeatedly as disruptors redefine and restore balance to industries. EVs will cause a big shift, complete with changes to policy and procedure. However, as electric vehicles go mainstream, there will still be plenty to do in dealership service departments. EVs need maintenance and repairs despite dealer concerns that EVs require less maintenance than other vehicles because they have fewer parts and no need for engine-oil changes or regular service visits. For many dealerships, the service department’s bread-and-butter revenue mainly comes from work involving alignments, brakes, electrical systems, suspensions and tires. So it will help worried dealers to remember what’s on EVs: brakes, electrical systems, tires, steering systems and suspensions. Lube, oil and filter services have been the entry point for most service departments. Still, because EV batteries are heavy, EVs weigh more than otherwise similar vehicles with gaspowered engines. The weight wears out tires faster. Since EV tires need to be rotated and replaced more often, tire maintenance and replacement will be the new entry point for EVs. Additionally, EV repairs are usually expensive. History tells us that new technologies need an iron-out period, and EVs are no exception. Components break, and batteries have issues. As the vehicles evolve, there will be new opportunities for service. Starting with Ford, manufacturers seem to be giving the impression that they want to copy Tesla’s methods for handling repairs and eliminate the labor rate or parts markups they currently pay when dealers are involved. Doing so would increase their control and improve their bottom line, so manufacturers are putting requirements in place regarding the repairs a dealer can do. For example, Ford won’t allow dealer service departments to fix certain vehicles without having a specific equipment set. It will be interesting to see how this power play ends. We know dealers must protect the value of their service departments, and we also know that dealers understand service better than the manufacturers do. What are the first step in finding a better solution? Recognize what the market is today and how it affects you. Also, continue planning for the future by getting clients in the door to repair and service their vehicles, and give them the best experience possible. A general manager may not have an expert to explain why a cost-cutting decision in the service department is a EVs need maintenance and repairs despite dealer concerns that EVs require less maintenance than other vehicles because they have fewer parts and no need for engineoil changes or regular service visits. 8 UTAH AUTO DEALER

mistake, and it’s easy to miss important variables that drive revenue in the service department when you make decisions from 30,000 feet. Getting parts will continue to be a problem, and some repairs will take longer than others. As a dealer, do what you can to control processes, training and oversight. If you don’t have the bandwidth, find a strong partner who can fill in the gaps and work closely with your team. People are trying to automate the warranty process. It is nice when you can get simple repairs handled, but not everything is cookie-cutter. Your bread and butter comes from a few areas. One is maximizing the bigger repairs and understanding how to get the most out of that newly acquired labor rate or parts mark-up percentage increase. Another is creating efficiencies and processes that benefit the entire service department team. Education is still the key to growth and progress in service departments. When managers see markets drop, it’s easy to make hasty decisions without understanding the impact of that decision on the service department. Managers might think they can find cheaper ways to do things, but then receivables shrink or inefficiencies cut into profit margins. Claims fall, revenue decreases, and management doesn’t get the same knowledgeable reporting. That’s why it is important to think about how decisions affect everyone down the line as well as planning for the future. Everything will fall into place if we make good moves that benefit everyone. The service department must ensure their people understand their role and do their jobs to legitimately maximize warranty dollars. If the department can structure itself properly, which includes processes and efficiencies, they will be ready for the future. That future includes a rebounding market. When that happens, you want to be ready to absorb the full level of profitability by making sure the service department can deal with increased work without hiring staff. Manufacturers always make changes, so you need to hire and retain staff with the knowledge to direct repair orders. A Service Manager, Technician, or Service Advisor like that can bring everyone else up. Even though it can be hard to find and hire staff with tribal knowledge, a lower-cost person doesn’t have the same skills. Skilled team players are expensive because they know their roles and what they should be doing. They stay in front, training and lifting the department. Hiring the right person or partner is like deciding whether to buy steak or jello. Jello costs much less, but it is no substitute for steak. If you end up hiring inexperienced staff in critical positions, in the absence of having a lot of senior people, it is easy for bad habits to spread. Then you have bigger problems to fix and miss out on the money you could have been earning. Cleaning up these types of internal messes pulls your critical team members down rabbit holes they shouldn’t be in. Although many dealers don’t have the time and money to train in-house, they can create partnerships by consulting and outsourcing with a good outside company that acts like a life coach and mentor for their business. The dealership can use a consulting company to keep employees on track and responsible, including new people. The consultants can do stand-in work when employees are gone, lift teams, and keep them on track. The right company will actively find patterns of problems, spoon-feed dealers the information they need and give them options to improve. Dealers can then learn from the consultant’s processes and keep moving forward. With a nonbiased partner, you can find ways to help everybody and grow the service department. It’s important to know why you are doing something because you will get stuck or slide backward if you do things for the wrong reasons. Success comes from acting purposefully for all the right reasons. Although EVs are a big change, they offer dealers many new opportunities.3 Justin Carr is a VP at Warranty Processing Company, which recently relocated to Texas. Justin works with dealers nationwide to increase efficiencies within service departments and educates dealer staff on why efficiencies matter.

POSITIONING FOR THE FUTURE OF EV MARKET GROWTH 10 UTAH AUTO DEALER

Elon Musk recently commented that he couldn’t see his closest competitor in the EV market with a telescope. Those are admittedly bold words, and that kind of posturing is typical as the jockeying within the EV market heats up. But many dealers selling OEM brands think Mr. Musk doesn’t need a telescope; he needs a mirror. And since objects in mirrors can be much closer than they appear, he should put down his telescope and turn around instead. It’s true that from 2018–2020, approximately 80% of the EV market belonged to Tesla. But the market balance is shifting. It decreased to 71% in 2021 and 65% during the first nine months of 2022. The biggest market gains were for cars selling at less than $50,000. By 2025, experts like John Murphy, the Managing Director and Lead Auto Analyst at Bank of America Merrill Lynch, think Tesla’s market share will drop to the low teens. Other companies have been working on more than a dozen new options that will start selling within the next year. Experienced and powerful competitors such as General Motors, Ford and Mercedes-Benz are actively competing with Tesla. Registration data on a national level shows that their work is being rewarded, and people are buying new EV models from manufacturers other than Tesla. There’s a name for what Tesla has experienced: “first-mover advantage.” Michelle Craig, an Executive Analyst at Cox Automotive, said she always expected Tesla’s market share to go down at some point after the competition began to catch up with them. Tesla has revolutionized the auto industry by focusing on impressive battery power. Still, as she pointed out, people want the affordable, eco-friendly EVs that are starting to hit the market. They will appreciate the chance to buy those EVs from trusted manufacturers at a lower price than what Tesla currently offers. Tesla’s inadequate support system for auto repairs will also persuade customers to choose something other than a Tesla when they decide to buy or replace an EV. Even though Tesla has been dropping its price on some vehicles and plans to offer at least one more-affordable option soon, that still doesn’t solve the company’s biggest weakness: being unable to repair its vehicles quickly. It also doesn’t erase the fact that other manufacturers will compete head-to-head on aspects such as equal or better technology and production build. Legacy manufacturers have been preparing to capture market share in the EV race: • Ford sold 61,575 vehicles in the U.S. in 2022 and now plans to meet the demand by doubling its production target. What do customers want to buy from Ford? Electric vans, Mustangs and trucks. Car and Driver magazine named Ford’s Mustang Mach-E model the 2021 “Electric Vehicle of the Year.” It was number three in sales of electric sport utility vehicles. Ford unveiled the F-150 Lightning in May 2022, then took 200,000 reservations. Three-fourths of them were buyers who had never bought a Ford before. According to a survey conducted by Cox Automotive, respondents preferred the Ford F-150 to Tesla’s Cybertruck. They chose the Ford F-150 because of its price, driving performance, size and design. • Volkswagen is spending tens of billions to meet a goal: moving half its U.S. sales to EVs by 2030. The company plans to produce 1.5 million EVs by 2025 to meet new EU emission targets. • Hyundai’s award-winning IONIQ 5 has been named the Best Electric Vehicle by Cars.com in its Best of 2023 Awards. The IONIQ 5 surpassed all the 2023 EVs in the market tested by the company’s editorial team of expert car reviewers. Other manufacturers to consider are General Motors, Volvo and Xpeng. The Detroit Bureau expects a dozen or more all-electric pickups to be available by 2025. In addition to vehicles manufactured by Toyota, Hyundai and others, people will buy the Chevrolet Silverado EV, Ford’s F-150 Lightning, the GMC Hummer and Sierra SUV and the Ram 1500 EV. Don’t discount Chinese companies like Nio and Xpeng, even though they seem too unfamiliar for Americans to worry about. Elon Musk has said he considers his biggest competitors to be Chinese automobile manufacturers, even though (characteristically) he thinks everyone is so far behind Tesla that they are a “distant second.” But despite Tesla having an advantage in its worldwide Supercharging network, 11 UTAH AUTO DEALER

Consumer Reports rates it seventh on Advanced Driver Assistance Systems. (The best Driver Assistance systems in the U.S. were Ford BlueCruise and GM SuperCruise.) Also, the German Level 3 system made by Mercedes-Benz surpasses Tesla’s Level 2 system. Just how fast is the market for EVs growing? In 2011, manufacturers sold 45,000 vehicles globally. The number was 3.24 million in 2020. Experts think 27 million vehicles will be sold by 2030. Tesla has done well financially. In 2012, annual sales were $400 million. They were $31.5 billion in 2020. However, maintaining that growth may prove impossible as other companies get involved and make the investments necessary to meet their goals. The drop in Tesla prices was good news for prospective owners but bad for existing owners. After all, there’s nothing quite like seeing the value of an expensive vehicle drop 20% in one day. In addition, Tesla vehicles have had construction problems and stale designs, and the federal government has been investigating 16 Tesla crashes that involved Autopilot or Traffic-Aware Cruise Control. Having stores where people can bring their vehicles for service and repair is a big advantage for dealerships. Earthweb estimated 2.5 million Tesla vehicles on the road at the end of 2022. According to Electrek in an online article dated June 2022, Tesla had more than 673 stores and service centers and more than 1,372 mobile service vehicles. Although Elon Musk said about the same time that his goal was to improve service in North America, he hasn’t been able to close that gap adequately yet. The reality for many Tesla owners is that they might not be close to any service center or mobile service vehicle. Even if they are, they might have to wait weeks or months for service from an authorized center. Elon Musk hoped that Tesla vehicles would need so little service that the shortage of repair places would have been no problem, but it hasn’t worked out that way. For example, Tesla windshields crack like windshields in other cars, but nobody has them in stock for next-day repair. Tesla’s inadequate service network creates an opportunity for its competitors. According to Mark Reuss, GM’s President, GM dealers started repairing Teslas in 2021. Other companies are doing the same thing. There’s even a website (fixyourtesla.com) with a national directory of third-party Tesla service shops. The world is moving to electric vehicles, and that will change the automotive landscape, but Tesla doesn’t have a lock on what that future will be in terms of market share. Tesla benefited from U.S. prosperity and a lack of competition. Those days are done. Legacy vehicle manufacturers are finding ways to adopt Tesla’s best ideas without dismantling the dealership model that has been developed and proven over time. 3 Success is no accident It is hard work, perseverance, commitment, never giving up, sacrifice, getting results and the LOVE of what you are doing. For over 24 YEARS we have been LOVING what we do…. WHY WOULD YOU TRUST YOUR BUSINESS TO ANYONE ELSE? 24 years of putting YOUR dealership profits FIRST! www.firstinnovations.com www.firstinsuredgroup.com The First Group Family of Companies Better Products • Better Prices • Better Service 12 UTAH AUTO DEALER

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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. Paul Cluff paul.cluff@bofa.com 385.268.0556 business.bofa.com/dealer Making business easier for auto dealers. Especially now. “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 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. Paul Cluff paul.cluff@bofa.com 385.268.0556 business.bofa.com/dealer Making business easier for auto dealers. Especially now. “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

HOW AUTOMOTIVE DIGITAL RETAILING CAN AFFECT YOUR DEALERSHIP Digital retailing makes it easier and more exciting for customers to shop for cars. The physical and digital processes of buying a car are merged into one seamless experience for the customer, creating more engagement and more sales with the dealership. What is Automotive Digital Retailing? In the early 2000s, customers would visit, on average, five dealerships before purchasing a vehicle. Today, customers may visit two dealerships before making a decision. They know what they want to buy, and they know exactly where to go to get it. With this new age of consumers searching online for the car they want, dealerships need to change how they approach vehicle sales. Digital retailing is different from digital marketing. It’s more than just viewing an online inventory or marketing the dealership on social media. With digital retailing, customers can dive deeper into the car-buying process from the comfort of their homes. They want to buy a car the same way they buy every other product online: with an easy and streamlined checkout process and without pushy sales tactics or overlycomplicated forms. They want to pick out exactly what they want and show up to your dealership ready for the keys. Even though it may feel like dealerships are losing influence and control in the car-buying process, it doesn’t have to be a bad thing. Omnichannel Digital Retailing Omnichannel is defined in terms of business strategy as a way to provide a seamless shopping experience from your phone to the store. There is no one right way to implement omnichannel because it depends on the needs of the business and the customer. No matter how the customer wants to shop, they should remain interested and engaged across all shopping avenues. Using omnichannel, your dealership can control how the customer interacts with your brand and inventory. You can guide customers to the general inventory, or you can be more specific and push them towards a specific model of car you are trying to sell. Customers then will have control over where they go to complete the process, but your dealership pushed them in the right direction. This way, customers create their own experience while digging deeper into the buying process. You are able to reach your customers directly without an email or phone call while the customer makes their own decisions. The Two Types of Customers Digital retailing gives customers the opportunity to shop exactly how they want, and there is one of two ways they usually do. The first type of customer rushes through the whole process, wanting to make up their mind quickly. They want to offload their trade-in, secure financing, and complete the sale within a matter of hours from any device. They don’t want to be upsold and want to finish the process as quickly as they would at any other online retailer. They will only need to show up to the dealership to sign the final papers and grab the keys to their new vehicle, making the interactions in the dealership quick and minimal. They know what they want and don’t need to contemplate their decision. The second type of customer needs time to think everything through. They need to sell themselves on the idea of buying the car before they make any big decisions, contemplating all the possible options and making sure they are getting exactly what they want. They may want to discuss their options or ask questions about the specific qualities on the cars they are analyzing. They don’t want to feel rushed for fear they will end up regretting their choice after the sale is already complete. No matter which type of customer you get, both eventually end up at your dealership. An omnichannel provides flexibility for both types of customers to shop how they want. Whether the customer wants to race to the end of the buying process online or wants to do thorough research on various vehicles without hours of repeated conversations with a salesperson, an omnichannel solution is the way to go. A fluid omnichannel digital retailing experience allows the customer to go between your website and your dealership without losing their place or being forced to provide the same information multiple times. Customers like transparency and control, and when they have both, the chances of a sale improve exponentially. 15 UTAH AUTO DEALER

Implementing Omnichannel Digital Strategies There are multiple ways to implement omnichannel, but it can be difficult to know where to start. One of the most important aspects is simply knowing what the customer wants as part of their online shopping experience. Your dealership must create the strong online presence over multiple platforms that the customer is used to from other industries. Another important aspect is ensuring the customer has a seamless transition between digital and physical channels. AI features such as virtual assistants and virtual test drives boost the customer’s experience while also collecting data. This data could be about the customer’s vehicle preferences, what specific features they’re looking for, what features they are avoiding, and more. You can then save that data and use it for the customer’s in-person experience in the dealership as well. This will assist in reducing the number of repeated conversations between the customer and salesperson and avoiding asking for information that could have already been collected earlier. With smoother transitions and faster sales, the customer will walk out of your dealership feeling satisfied with their purchase. Plus, the new technology will make the process quicker and shorten the length of time it takes to process a sale, closing the gap between the fast‑paced online markets and traditional in-person stores. Plus, customers will always be happy to no longer sit in a dealership for four or more hours. Even after the sale is complete, there are still opportunities to connect with the customer using omnichannel. The data collected from the online channels can be used to create personalized interactions and establish a long-term relationship with the customer. AI assistants can help remind customers about regular check-ups for the car and increase engagement with add‑on services. The customer won’t feel like they are part of a mass email to every customer that has ever shopped at your dealership, and instead, they will feel like they have a more personal connection with your dealership, building rapport and brand loyalty. In Closing Like everything else, the automotive industry needs to embrace the transition to the digital world. It may be difficult to begin, but a strong digital retailing experience will smoothly integrate your dealership with an online presence. It opens the door to new ways to leverage customer data, build trust with the customer, generate leads, and increase the dealership’s closing ratio. You could be closing more deals without using any extra manpower. It may be a challenge, but making this extra effort will pay off for you and your customers. 3 A WHOLE NEW WAY TO WHOLESALE Introducing Dealer Exchange, a FREE service by KSL Cars • Move inventory easily and locally • Avoid costly auction fees • Buy and sell wholesale right on KSL Cars • Quickly move listings from retail to wholesale https://cars.ksl.com/dealer-exchange Hit your target market Get more exposure • Increase revenue To advertise in this magazine, contact us today. 801.676.9722 | 855.747.4003 thenewslinkgroup.org sales@thenewslinkgroup.com 16 UTAH AUTO DEALER

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THE RIGHT TIME For A Risk Management Reset BY BRANDON ARTIGUE DIRECTOR, FINANCIAL RISK MANAGEMENT, TRUIST SECURITIES The past two years have seen auto retailers adapt to limited vehicle inventory and pandemic restrictions while driving profits to new heights. Now dealers face rising interest rates — a critical concern for an industry that relies on capital to fund operations and growth. For some, it’s time for a balance sheet review and risk management reset. Changing Conditions Dealers Must Watch The Fed (Federal Reserve) has already taken aggressive steps by raising rates to throttle persistent inflationary pressure in the U.S. In the past year, we’ve seen the Fed hike the short-term rate by 3.00% (300 basis points). But with low inventory and reduced need for floor plan loans, many dealers haven’t yet felt the full impact of rising rates. 1-Month CME Term SOFR Since the Beginning of the Pandemic As you imagine what’s next for the economy and your dealership, the impact of rising rates comes into sharper focus. For instance, if vehicle supply and demand start to realign, higher inventory levels could mean more floor plan loans on balance sheets. As you look at business assets, the recent surge in inflation strengthening real estate values could provide an additional source of funds that you can tap into if needed. Unfortunately, when it comes to expansion and new construction, inflation will cut the other way by driving up building costs and the loans needed to finance them. Sustained volatility in economic and market conditions makes planning for these possibilities and others both challenging and critical. Your risk management planning needs to focus on balance sheet moves available to you today — options that may be closed off tomorrow — to protect your dealership from economic and rate volatility and keep your cost of capital low. Actions To Get Ahead As economic and market conditions are shifting, you’ll want to ground your capital decisions in your business plans for your dealership and your personal goals as an owner. You can walk through a few steps — on your own or with your banker — to gauge the impact that rising rates will have on your business and identify actions you can take to mitigate their effect: Step 1 — Start with your goals and plans: Balance sheet risk management starts by asking, “Where will my business be in five years?”Your goals might lead you to look for funds to grow, seek ways to release capital to equity holders or lenders, or explore other restructuring moves that might accomplish a bit of both. Timing of those capital flows matters, and your options may look very different if you’re planning to exit the business versus being committed for the long haul. 18 UTAH AUTO DEALER

Step 2 — Evaluate funding flows: Look at where you need funds, where you have them, and what sources (and especially at what cost) you can tap into to find capital. What happens to your cost of capital and valuation as rates rise? Where do you have needs in the future that will likely have to be met with additional, higher-cost capital? Have you considered ways to manage cash more strategically now that effective liquidity management can yield elevated returns? Step 3 — Envision what the future looks like for your dealership: Add the dynamics that you expect will change over the coming years. When do you think floor plan inventory will return to normal levels? One year? Two years? Potentially a longer time frame? What do higher construction costs mean for your dealership? Will the economy cool before you have to undertake your next building project? What changes will the ongoing electrification of vehicles and any regulatory shifts bring to your dealership? Step 4 – Get specific about actions you should take: When you’re protecting yourself in a rising rate environment, your primary move is to raise capital earlier when rates are lower and consider financial instruments like swaps as insurance. It doesn’t make sense for all situations, but commercial real estate and bluesky loans are often amenable to this strategy. As you’re thinking about what works for your business, some of the strategies below might fit your situation: • If you expect inventory to return to more normal levels but want to protect your business from the risk of higher floating rates, you could target more liquidity to cushion against increased interest expense on floor plan lines. Or, to protect your bottom line, consider fixing rates on other outstanding loans that may currently be variable and subject to future rate hikes. • If you want more cash to invest in growth or to be ready for whatever comes next, you can secure loans now. Consider a cash-out commercial mortgage that, if fixed, could protect you from higher interest rates down the road and give you funds for capital expenditures like renovations or preparing for the shift to EVs. If rates continue to climb, you’ll have the peace of mind of having funds at a lower cost to cover future uncertainty. (Don’t forget that the cash-out proceeds from the loan can be earning interest all along.) • If you need cash for family/ shareholder dividends or to finance a transition or succession, think about a dividend recap, particularly if you need liquidity now while you’re continuing to make moves that could help your dealership draw a higher valuation in the future. Or, as mentioned before, you could tap into increased real estate values to provide these proceeds. Step 5 — Look at all elements of financial risk: Interest rates may be front and center, but a comprehensive approach to financial risk needs to look beyond the cost of capital. Cyberfraud threats and weather events, along with business property, lot inventory, and liability exposure, can have a devastating effect on a thriving dealership. Insurance can protect you from events that can put your dealership at financial risk — talk to Truist’s McGriff Insurance to see how we can help. Preparing your dealership for a range of financial possibilities should be a priority for you and your financial advisors. With a rising rate environment, now’s the time to talk to your Truist Dealer Services relationship manager about a balance sheet risk management review. Have You Taken Measures to Keep Your Cost of Capital Low While Rates Rise? Preparing your dealership for a range of financial possibilities should be a priority for you and your financial advisors. With a rising rate environment, now’s the time to talk to your Truist Dealer Services relationship manager about a balance sheet risk management review. 3 19 UTAH AUTO DEALER

RETAIL WARRANTY REIMBURSEMENT ARMATUS WORKS WITH 50% OF UTAH DEALERS ON AVERAGE, UTAH DEALERS ADDED $89,028 IN LABOR UPLIFT ANNUALLY ON AVERAGE, UTAH DEALERS ADDED $87,720 IN PARTS UPLIFT ANNUALLY ARMATUS HAS COMPLETED OVER 129 SUBMISSIONS IN UTAH The new Utah Warranty Reimbursement law went into effect on May 4th, 2023. While some dealers were previously able to submit for retail reimbursement under the old law, the new law provides significant advantages to help you achieve your true retail rates and all dealers should be taking advantage of this opportunity. Reach out to us today for a no-obligation evaluation of your parts and labor rates. OUR COMMITMENT TO OUR CLIENTS: ÙYou Won’t Lift a Finger: Armatus does all the work for you. ÙFully Contingent Fee: You only pay when you are approved. ÙSpeed and Accuracy: No one can complete a submission faster. ÙData Governance: Your customer information is safe with us. (888) 477-2228 info@dealeruplift.com WWW.DEALERUPLIFT.COM

For over 24 years, First Innovations has focused on growth through getting better, not growth through acquisitions. We understand that Bigger is Not Better, Better is Better. First Innovations is dedicated to providing personalized value driven support with Better Products, Better Price and Better Service. Every account is valued and not just a number on some large conglomerates balance sheet. YOU are important to us and there is no structure, product, or program that we don’t have. First Innovations remains unapologetic for its hands on personal holistic approach to dealership income and personnel development. First Innovations, Inc. —The Full Dealership Income and Wealth Development Company Better Products • Better Prices • Better Service With all of today’s mergers and acquisitions there are two important questions YOU need to ask yourself.  Does your provider’s merger or acquisition by a larger Private Equity or Publicly traded company make YOUR business better? a. Have your costs gone down? b. Has your level of service increased? c. Are your results improving because of the merger? d. Do you now feel more like a Small Fish in a bigger pond? e. Do you work directly with the Administrator / Provider, or thru independent general agents. We ONLY use direct employees! No middleman commissions or conflict of interest.  What is the Mission Statement of the controlling entity long term? a. Are they building a company to LAST or a company to sell again? b. Are you going to have to go through provider ownership transitions every 4-6 years? c. Are they cutting long term employees and expenses from the acquired providers to drive up their EBITDA for resale valuation? First Innovations (part of the First Group Family of Companies) has spent over 24 years building a company to LAST, NOT RESALE, and our Vision and Mission statements have not changed. We are growing ONE VALUED CLIENT AT A TIME. OVER $100 BILLION IN ASSETS BACKING US! 1-800-395-8664 www.firstinnovations.com “INNOVATIVE AUTOMOTIVE SOLUTIONS AT WORK”

©2022 CliftonLarsonAllen LLP WEALTH ADVISORY | OUTSOURCING AUDIT, TAX, AND CONSULTING Investment advisory services are offered through CliftonLarsonAllen Wealth Advisors, LLC, an SEC-registered investment advisor Richard T. Haubrich, CPA | 801-545-4512 Derek Evans, CPA | 801-364-4949 Salt Lake City CLAconnect.com CLA can help you reach your goals, then reach further. Success has a way of finding collaborators. ONE LAST THING ... Did you know that you can enjoy your association news anytime, anywhere? Scan the QR code or visit: utah-auto-dealer.thenewslinkgroup.org Check it out! The new online article build-outs allow you to: • Stay up to date with the latest association news • Share your favorite articles to social channels • Email articles to friends or colleagues There is still a flipping book for those of you who prefer swiping and a downloadable PDF. 22 UTAH AUTO DEALER

Plan ahead for your dealership’s long-term legacy Setting up a succession plan is an important consideration for the future of your dealership. Now’s the time to think about your priorities, such as maintaining control, taxes, liquidity, employees and family. What would you like the power to do?® Learn more with our comprehensive overview of Dealer Financial Services Succession Planning at business.bofa.com/dealer. “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. 4882341 05-22-0512 Plan ahead for your dealership’s long-term legacy Setting up a succession plan is an important consideration for the future of your dealership. Now’s the time to think about your priorities, such as maintaining control, taxes, liquidity, employees and family. What would you like the power to do? Learn more with our comprehensive overview of Dealer Financial Services Succession Planning at business.bofa.com/dealer. “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. 4882341 05-22-0512

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