Pub. 5 2024 Issue 1

PUB. 5 2024 ISSUE 1 THE OFFICIAL PUBLICATION OF THE VIRGINIA AUTOMOBILE DEALERS ASSOCIATION Virginia Dealers Show Up for Industry’s Future 16 NADA Reception Photo Gallery 4 Don Hall’s Column on Engagement 14 Martinsville’s Barry Nelson Honored as TIME Dealer of the Year Nominee for Virginia

© 2024 Virginia Automobile Dealers Association (VADA) |The newsLINK Group, LLC. All rights reserved. Virginia Auto Dealer is published four times each year by The newsLINK Group, LLC for VADA and is the official publication for the association. The information contained in this publication is intended to provide general information for review and consideration. 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 specific circumstances. The statements and opinions expressed in this publication are those of the individual authors and do not necessarily represent the views of the association, 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. Virginia Auto Dealer is a collective work, and as such, some articles are submitted by authors who are independent of VADA. While VADA and the newsLINK Group encourage 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 newsLINK Group at 855-747-4003. 7 14 16 CONTENTS Pub. 5 2024 Issue 1 Virginia Automobile Dealers Association A MESSAGE FROM PRESIDENT AND CEO DON HALL 4 Our Future Means Engaging in Industry Events 6 A Refresher Quiz for 2024 By Barrett “Barrie” Charapp Beaty, Esq., Charapp & Weiss LLP 7 Will a Southwest Virginia Auto Dealer be West Virginia’s Next Governor? For West Virginia Gubernatorial “Wild Card” Candidate Chris Miller, It All Comes Down to Economics 11 Save the Date! HRADA Charity Golf Tournament 12 Economists Size Up 2024 for Auto Retailers By Michael Skordeles, AIF,® head of U.S. economics at Truist Advisory Services Inc., and Jonathan Smoke, Chief Economist for Cox Automotive. Brought to you by Truist Dealer Services. 14 Martinsville Dealer Honored as TIME Dealer of the Year Nominee 16 VADA, MADA, WANADA Joint Reception Photo Gallery 17 A Refresher Quiz for 2024 — The Answers By Barrett “Barrie” Charapp Beaty, Esq., Charapp & Weiss LLP 20 Registration is Open! VADA ‘24 21 VADA ‘24 Convention Sponsors 22 Leadership 23 Thank You VADA Allied Members 24 Thank You VADA Program Partners 26 VADA Pushes Streamlining of Buy/Sell Transactions in Virginia General Assembly Bill on the Way to Governor’s Desk for Signing into Law 2 Virginia Auto Dealer

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AAs I reflect on the recent NADA Show and look forward to the VADA Annual Convention in June, a thought persists: the power of the dealer body and the importance of staying connected to our industry’s pulse. This year’s NADA Show in Las Vegas was a reminder of the collective strength and innovation within the auto industry. It was a place to get inspired, recharge, and learn about emerging trends, such as electric vehicles and the latest tech shaping our operations. As I looked around the room at our reception with the Maryland and Washington area associations, I saw many familiar faces. But I also noticed those of you who were not there, and it’s apparent that more Virginia dealers should take part in these events — especially senior management. A few Virginia groups had numerous leaders in attendance. For example, Carter Myers Automotive brings a huge delegation to these shows, and it shows in their forward-charging dealership operations. The NADA Show isn’t just an opportunity for learning; it’s a venue to contribute to our industry and our association’s collective wisdom and strength. It is disheartening when I hear short-sighted views that perceive attendance at these gatherings as a loss of valuable time back at the dealership. I truly believe it is your loss and that of your dealership organization. With 45 years in the industry, I’ve learned that our success is intertwined with the contributions of those who came before us and the collective effort of our peers. No dealer is an island, and the future of our industry depends on our shared engagement and willingness to learn from one another. Consider the benefits of active participation in industry events. It’s about more than just the immediate takeaways; it’s about fostering a culture of continuous learning, collaboration, and advocacy that will propel our industry forward. Let’s build our presence at the NADA and VADA conventions, not just for the sake of attendance, but to actively contribute to and shape the future of the auto industry in Virginia. So when these events come up, show up. You can start with the VADA Annual Convention June 9-12 in South Carolina. Details at vada.com/convention. A MESSAGE FROM PRESIDENT AND CEO DON HALL Our Future Means Engaging in Industry Events 4 Virginia Auto Dealer

Anticipate every turn In an industry that’s always evolving, your dealership can rely on our Dealer Financial Services team’s 90 years of experience to see what’s around the corner, forward-thinking insights to prepare you, and technology to keep you ahead of the curve. What would you like the power to do?® JL Winslow, jl.winslow@bofa.com business.bofa.com/dealer ©2023 Bank of America Corporation. All rights reserved. DFS-699-AD 5949042 Investment products offered by Investment Banking Affiliates: Are Not FDIC Insured Are Not Bank Guaranteed May Lose Value “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, derivatives, 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., which is a registered broker-dealer and Member of SIPC, and, in other jurisdictions, by locally registered entities. BofA Securities, Inc. is a registered futures commission merchant with the CFTC and a member of the NFA.

A Refresher Quiz for 2024 By Barrett “Barrie” Charapp Beaty, Esq., Charapp & Weiss LLP This quiz is to refresh dealers on everyday scenarios that impact a dealership’s business. Many of the questions will appear clear, while others may jog a memory that needs to be refreshed. This quiz tests your knowledge on the status of issues for your dealership. The answers are on page 17. 1. True or False? This advertisement is correct: “3.25% Annual Percentage Rate financing available on all new cars.” 2. True or False? We have some especially low lease rates. Even though those are like the annual percentage rate, we cannot advertise those as low APR leases. For example, this language is improper: “We have 0.9% annual lease rate leases available on any new car.” 3. True or False? We do not use the NADA Fair Lending program but still train our sales and F&I employees that finance rates should be provided to customers on a non-discriminatory basis. Our fair lending training should protect us from lawsuits. 4. Choose the Correct Answer: When a subprime lender charges a lending fee we wish to pass to the vehicle buyer, we may only do so if we (choose one answer): a. Show it as an addition to the vehicle price; b. Show it on the RISC as an amount paid to others; c. Either a or b; or d. Neither a nor b. 5. True or False? We spot-delivered a car, and we cannot find a finance source to accept the RISC. We also cannot find the customer or the car to repossess it despite diligent efforts to locate them. We can report the vehicle as stolen. 6. True or False? We feel the best way to determine whether employees are working the hours required is to have them punch a time clock. Some of our commissioned employees are objecting. We feel we must do this to protect the company. 7. True or False? We hired a new sales manager. He wanted a minimum pay guarantee for six months. I met him at the local diner, and we scratched out a pay plan on a napkin, which stated his rate of pay and a minimum pay guarantee for six months. The manager did not work out. He was fired after one month. He is claiming his pay for the remaining five months. The dealership is not obligated to pay him. 8. True or False? An employee filed a claim of harassment. After a thorough investigation, it was determined that she was not harassed and that the claim was groundless. Since we didn’t violate federal law by harassing the employee in the first place, we can’t be found liable for taking action against the employee for filing a complaint. 9. True or False? We are doing a deal with a $8,500 cash down payment. The buyer is someone I know to be a drug dealer because he is my brother-inlaw’s supplier. I believe the down payment funds are the proceeds of illegal drug dealing. Even though the $8,500 down is below the threshold for notification to the government on IRS Form 8300, we should file an 8300 form anyway and mark it as a suspicious deal. 10. True or False? Nine years ago, our service manager signed an agreement with a supplier for three years. It contains a provision that, unless we give six months’ notice of termination, it automatically renews for a similar term at the end of a term. We no longer want to be in this contract because it costs too much. We sent notice to the company and let them know we are canceling. They have refused to cancel since we did not give six months’ notice, and it rolled over to a new three-year term. Unfortunately, it looks like we are stuck with this contract for the next three years. 6 Virginia Auto Dealer

For West Virginia Gubernatorial “Wild Card” Candidate Chris Miller, It All Comes Down to Economics So, things are going well for you. Why on Earth are you going into politics? At the end of the day, if I ran my businesses the way the government spends our tax dollars, I’d be broke. And that’s a primary reason why I want to get involved. But I really also like problem-solving. The governor should be looked at as the CEO of the state. And to realize that all of us as taxpayers really should be looked at as shareholders. And the entire job of the CEO is to manage a company, a state, to maximize return on investment for the shareholders. We should have a very customer-centric focus on how we interact with taxpayers. Car dealers live and die by the Customer Satisfaction Index. We understand how to take care of customers, and we need to bring that same idea to government. As Governor, you say your focus is on rebuilding the economy and running it like a business. But you say your passion is about families and keeping people in West Virginia. Explain that concept. West Virginia’s greatest export, as of now, is not our coal or natural gas. It’s our kids. It’s our educated kids. And they leave the state to go find gainful employment, to go find opportunity. And there’s absolutely zero reason why we can’t be doing that inside the state to keep our kids here. There are all these people, interestingly, who have gone all around the country and are dying to come back home. They want to be a part of what is happening inside of Will a Southwest Virginia Auto Dealer be West Virginia’s Next Governor? HHaving a healthy neighbor is important, and West Virginia has a number of challenges it must tackle and opportunities it must seize in order to gain a steady bill of health. So at VADA, we’ve been keeping our eyes on the state’s 2024 governor’s race, as current Gov. Jim Justice’s term ends in January 2025 and he eyes a seat in the U.S. Senate. (Justice’s company owns The Greenbrier resort, the site of our joint convention in 2023 with West Virginia, Kentucky and Maryland dealers.) Part of the reason why we care: One of the candidates is Chris Miller, who, among his numerous family businesses, owns Dutch Miller Auto Group with his family. The group has 13 stores, including one in the Southwest Virginia town of Wytheville. He is one in a crowded field of Republican candidates in a solidly red state where the state attorney general, Patrick Morrisey, is the one to beat. Jeff Kelley with VADA spoke recently to Miller, 45, about why he wants to enter politics (he is the son of West Virginia U.S. Rep. Carol Miller), his goals for the state and a little about his boxing career. Tell us: Who is Chris Miller? I was born and raised in Huntington, West Virginia. I love the state. When I got involved in our family’s business, we had two businesses. Through a lot of blood, sweat, tears and hard work, we got into 26 different enterprises. We have 13 car dealerships; we have several real estate companies. We’re in insurance and reinsurance. I’ve got a data and technology company. And we’re also bison farmers. vada.com 7

West Virginia and want to come home because, at the end of the day, that’s the most special thing about our state: We’ve got fantastic, fantastic people, and people want to come home. It’s a plain fact that West Virginia is one of the lowest-ranked states on a range of socioeconomic indicators. What’s it going to take to turn this ship around? West Virginia has this incredibly rare window of opportunity in front of it, but also has a serious set of challenges. We’ve been declining in population for the past 40 years. We have an aging population. And it’s going to create this perfect actuarial storm where, eventually, we don’t have enough of a productive tax base working to justify the big, bloated existence of government. And that is going to be a very, very bad day for the state of West Virginia. Bond ratings get affected, and the cost of government dramatically increases. It becomes a travesty. And the real way to fix that is through economic growth and to grow the population of the state. We have this incestuous good ol’ boy system that’s been running our state for far too long. And it gets in the way of actually managing government efficiently and effectively. That’s one of the first things that need to change. We’re also dead last in just about everything from the economy to education to the number of grandparents raising grandkids. And that’s what’s happened, [grandparents raising grandchildren] with the opioid epidemic — it has absolutely decimated a portion of the up-and-coming generation. Does everyone in West Virginia know someone affected by the opioid crisis? Me, myself. In my first year of marriage, I had to choose between drugs and alcohol and my wife. I used just about every drug underneath the sun, but my real demon was alcohol. But I’ve been sober from alcohol and opiates for 20 years. Addiction has impacted just about everybody. I understand it and understand what detox is. I understand where we go so wrong with rehabilitation; I understand the entire demon. And it’s something that I’m very passionate about wanting to get involved and fix. Because everywhere around the country, we do rehabilitation wrong. What the long-term data and studies tell us is that it takes 13 to 30 months. You have to have individual and group sessions. You have to have responsibilities and jobs inside of the community. You have to have rigorous exercise. You have to have a foundation of faith. And you have to have a purpose. One of the number one reasons for relapse is a lack of economic opportunity or economic mobility. This leads to your economic plans, which seem centered on workforce development. I’m 1,000% convinced that we need to incorporate trade training into the last stages of long-term rehabilitation to not only provide economic mobility, but to solve problems. We’ve got an entire generation of kids that can’t do anything. There’s a workforce participation issue, and there’s also a major issue for demands and trades. As automotive dealers, we know how hard it is to find mechanics, but I’m talking about boilermakers, masons, HVAC repairmen, welders, carpentry, electricians and plumbers. The list just goes on and on of people who can do stuff with their hands. These are high-demand jobs of the future because we don’t have enough of them. And so we need to not only fix long-term rehabilitation by focusing on rewiring the pathways to the brain of the addict, but there is a problem-solving function, which is trade training and minimizing the chances of relapse. H. D. (Dutch) Miller founded Dutch Miller Chevrolet in 1961. Now owned and operated by Dutch’s son, Matt, and two grandsons, Chris and Sam Miller, the business has grown to include Chevrolet, Dodge, Chrysler, Jeep, Ram, Hyundai and Kia. The group employs 300 people and proudly serves the Tri-State from Huntington, Barboursville and Charleston locations, in addition to Southwest Virginia and Charlotte, N.C. 8 Virginia Auto Dealer

You’ve been branded the wild card in the West Virginia Governor’s race. You’ve got money, but the polls aren’t tipped in your favor. Do you consider yourself an underdog? I’ve been looked at as an underdog my whole life and been told, “You can’t do that. You can’t do that. You can’t do that.” And guess what I’ve done? I’ve always gone out and done it. To consider myself an underdog is nonsense. When I look at the data and when I go around the state and talk to people, it’s exactly what people are looking for. They’re looking for a business guy, they’re looking for an outsider that’s never been involved in politics, they’re looking for somebody that speaks their mind, they’re looking for authenticity for once. And they’re tired of the way these politicians sound. Every single chance that we get to be in front of an audience on stage with all the other candidates, we’re able to expose all of that. We’ve taken off like a bat out of hell. There’s a reason why [national conservative organization] Club for Growth is attacking me. It’s because they’ve seen the same numbers that we’ve seen. They’ll poll twice before they deploy capital. And then to be out attacking me and only me says something — it’s that they know that I’m dangerous. Let’s talk auto retail for a moment. You’ve set up leadership in your stores, so you aren’t in the day-to-day as much. What did it take to remove yourself and focus on other enterprises and, now, running for governor? Technically speaking, as a third-generation family business, I’m the one who’s supposed to blow everything up, right? It’s the old adage, “The first generation makes it, the second generation keeps it, the third generation loses it.” That’s one of the things that drives me: to do what everyone else says you can’t do. One of the things that can happen when it comes to growing businesses is to grow it on the cult of personality. I grew all of our businesses based on my drive, hard work and the cult of personality, and had to restructure it. My brother stepped in and took over the role as president. We brought in a chief operating officer. We had a changeover in the CFO position. And then we restructured and reorganized the administrative side of the business to facilitate what our people needed. Because, at the end of the day, my job as a leader is to solve problems and provide an infrastructure that allows the people we work with to thrive. We all know that the real key to any business — and in particular, our business — is people. It’s the ability and the privilege to work with good people that allows you to be successful. Keith A. Laudenberger, CPA klaudenberger@cbmcpa.com Councilor, Buchanan & Mitchell’s automotive dealership accounting team is your trusted partner in achieving your financial goals. Our professionals are experienced leaders with a deep comprehension of the challenges and opportunities faced by the automotive industry. Contact us today if you are ready to experience personalized service. cbmcpa.com 301.986.0600 7910 Woodmont Ave, Suite 500 Bethesda, MD 20814 John R. Comunale, CPA jcomunale@cbmcpa.com STEERING YOUR FINANCIAL SUCCESS IS OUR BUSINESS Tax Planning & Preparation Cost Segregation Analysis Mergers & Acquisitions Audits, Reviews & Compilations Business Process Review Succession Planning LIFO Inventory Fraud Prevention Buy/Sell Agreements Business Valuations Financial Planning Wealth Management Our Services: vada.com 9

What are the issues in retail automotive that you think other leaders need to be watching? At the end of the day, the most important thing is the consumer. And right now the consumer is making different decisions because they’ve been clamped within inflation. And what they’re really worried about is the cost of a gallon of gas and the cost of a gallon of milk. The amount of disposable income when it comes to being able to buy a car has changed. Increasing costs and interest rates have impacted that. And then you’ve got really bad federal policy when it comes to forcing EVs down our throats, which is something the market does not want. And the utility grid system can’t facilitate it. We’re experiencing a shift when it comes to the postpandemic automotive space. The dealers that let processes dissolve are the ones that are going to be struggling the most moving forward. The dealers that really focus on process and allow for a sales process to be followed, and have a service writer process, are the ones that are going to do better as we move into this post-pandemic automotive economy. It’s going to be like a return to 2016 but with higher interest rates. Focusing on process and F&I opportunities is where dealers are going to be able to thrive. You consider yourself a staunch conservative in a red state. But West Virginia still has independents, moderates and liberals who will be critical to earning your vote. Why should they support you? We can argue about little dumb things and get distracted. But really, at the end of the day, everything is about economics. It is about how much money is in your pocket for just about everybody out there. One of the most important things that we can do is not only remain true to the values that we all believe in, but run a government more like a business to create an economy that thrives. Anybody that wants to be a part of that, that’s a great thing. Those are the real problems we face that are important to fixing our state. If you think about what economic growth does and what population growth does, not only does it grow the state’s ability to have good, solid financial standing, but then everything else that’s connected to it. The cost of healthcare goes down. Workers’ comp modifiers decrease. Insurance premiums go down. Everything gets impacted by economic growth and development. Capital flows like water to the places where it’s most welcome. And when you make yourself welcome to investment, then all of a sudden, Whammo, you’ve got all the ingredients to grow an economy, and everything else gets impacted by that. What is your first order of business if you get elected? Working with the legislature to accelerate getting rid of the state income tax. Three of the four fastest-growing states postpandemic are Tennessee, Texas and Florida. And they all have one thing in common: zero state income tax. Secondly, we are moving into a time, as we grow technology, that you must have baseload power to provide the technology growth and the infrastructure needed for any economy. West Virginia has an abundance of coal, it has an abundance of natural gas, it has the potential for nuclear power, and we also have more water that passes through our state than any other state in the country. Chris lives in his hometown of Huntington with his wife Cassie, their three children, and two puppies. For Miller, boxing runs in the family. He’s hung up the gloves on fights but continues to train and spar. 10 Virginia Auto Dealer

Can coal come back to West Virginia, or do you have to look for alternative industries? The history of our state is that we’ve been extracted and don’t have a lot to show for it. Coal will be a part of West Virginia, and the trick is getting Environmental Protection Agency approval on mines. We do have more coal to be mined. But when you have a federal government that wants to sit on permits, or deny permits, or not let you open up mines, you’ve got a problem. We do have several active mines that are doing a great job. We are still one of the top coal producers in the country. But we actually can do more if we get smart and we get creative. And there are rare earth elements in West Virginia. I believe that we can leverage all of our resources to make West Virginia the state in the union with the cheapest power in the country and use that for the foundation of all of our economic growth and development. And I’m talking about a 50 to 70% reduction in power costs and using that as something that not only drives the economy but is something that is good for everyone. A business will look at West Virginia as having incredibly low taxes, low regulatory barriers, and very, very cheap power as a place to come. And if you think about older West Virginians, if you cut their power bill by 50 to 70%, you’ve done something impactful and meaningful for them. That’s more money they have in their pockets to take care of their grandkids. More money to do things inside of the local economy. More money to do anything that they need. That’s what I think is the great leveling game changer: leveraging our assets to do something to drive economic growth and development for everybody. What do you do outside of politics and business? My wife, Cassie, and I have three children. I box. I was rated number one in my age and weight class and division in USA Boxing in 2022. I’ve now hung up the gloves because that was the deal I had with my wife; apparently, fighting made her nervous as can be. So I hung up the gloves to run for governor, but I still train and workout and spar. My family has a history of boxing, and I love the sport. Any final thoughts or messages? Watch out. We are breaking away as we speak. And we’ve got some very fun creative advertising and marketing out there that is going to be very different than what politicians have provided when it comes to communicating with voters. As an auto dealer, you assuredly have that creative ace up your sleeve. As auto dealers, we’re good at marketing. And an election is a marketing contest. Save the Date! HRADA Charity Golf Tournament Grab a Foursome or Become a Sponsor Today! Ford’s Colony Williamsburg, VA Tues. May 7, 2024 Scan the QR code to sign up! vada.com 11

What economic conditions should auto dealers be preparing for in 2024? Truist Dealer Services spoke with Mike Skordeles and Jonathan Smoke to get their views on emerging economic trends and their impact on automotive retailing. Slower Economic Growth and a Rolling Recession For Skordeles, the big picture is all about interest rates and where they’re heading. While a recession is still the base case entering 2024, he now sees that a soft-ish landing is possible. “From a GDP perspective, we may have a negative quarter or two, but without the corresponding job losses,” he says, “it’s not going to be a classic recession, nor should it be deep if it does happen.” Rather than across-the-board declines, Skordeles sees signs of a rolling recession, with some sectors of the economy contracting while others expand. “Manufacturing, construction spending and construction hiring are coming back in a big way,” he points out. “Meanwhile, the banking and finance sector is retrenching and seeing layoffs — largely because the mortgage business isn’t coming back any time soon.” Smoke also expects slower growth in 2024. He anticipates the weak growth environment may result in modest GDP declines but not necessarily job losses. Like Skordeles, Smoke observes that regional variations indicate stronger economic performance in the Southeast and through the Sunbelt, with population declines and job reductions in California, New York and Chicago. In fact, he cautions that California could experience a full-blown recession due to high job losses in the state. Both economists recognize the strong influence that UAW strikes have had in the industrial Midwest, including Cleveland, Toledo, Detroit and parts of Kentucky. Ripple effects left many industry suppliers furloughing workers, but strike-related economic sluggishness should ease as production resumes. Smoke thinks growth in this region could ramp up more aggressively as incomes rise, noting, “A substantial increase in wages and income is flowing through the industry, and not just for UAW workers — we’ve already seen Toyota preemptively increase wages.” Strong Labor Markets and Investment-Related Growth The UAW agreements reflect a labor market that continues to show exceptional strength and resilience. Labor markets remain tight across most industries with wages and incomes still growing, but the rate of growth is slowing down. According to Skordeles, “Business owners say they still have demand. It’s not as strong as it was last year, or even earlier in 2023, but with positions to fill, they’re not letting people go. In fact, they’re likely hiring for some positions.” At present, the entire country is benefiting from tremendous investment, some of which relates directly to policies and legislation pushed through by the current and previous administrations. “Tax changes incentivized companies to bring capital and manufacturing back to the U.S.,” explains Skordeles, referring to the Tax Cuts and Jobs Act of 2017. “When you layer on the CHIPS Act, the Inflation Reduction Act and the infrastructure bill, that’s a big push toward growth, especially in the Southeast and Texas.” Delinquencies Rise, But Loan Performance Remains Strong Auto loan credit performance can often serve not just as a leading indicator of auto demand but of the overall direction of the economy. “The credit part of the auto market has been an area of concern for a lot of people because we’ve been witnessing record levels of severe delinquencies on auto loans,” says Smoke. “But those delinquencies are not resulting in a corresponding level of expected defaults.” He cites multiple factors to explain why auto loan performance hasn’t exhibited more significant deterioration. Consumers are painfully aware of how difficult — and expensive — it has become to replace their current vehicles, so they are likely prioritizing auto loans over other forms of debt. Some are trading down to lower-priced vehicles when faced with a financial crunch; others are reaching out to lenders to find solutions before they fall into default. The critical point, in Smoke’s view, is that consumers have jobs. “Historically, we have seen high delinquencies and high Economists Size Up 2024 for Auto Retailers By Michael Skordeles, AIF,® head of U.S. economics at Truist Advisory Services Inc., and Jonathan Smoke, Chief Economist for Cox Automotive. Brought to you by Truist Dealer Services. 12 Virginia Auto Dealer

SET YOUR PLANS TO PREPARE FOR THE CONDITIONS IN 2024 Planning involves being ready for future conditions while preparing to support both ICE and EV vehicles over the long term. Your Truist Dealer Services relationship manager can help you anticipate what’s on the horizon so you can position your business to make the most of it. Scan the QR code to learn more. https://www.truist.com/commercialcorporate-institutional/industryexpertise/auto-dealer Truist Bank, Member FDIC. ©2024 Truist Financial Corporation. Equal Housing Lender. defaults when people are losing their jobs but not when we have an unemployment rate below 4% and continued positive job creation,” he says. “The fact that people are employed resolves a lot of the stress.” New auto loan demand remains strong. The pool for new loans shows exceptional quality, with higher credit scores than ever before. Despite rate hikes and delinquency concerns, credit flow has been remarkably stable in 2023, providing a solid indication of lenders’ ongoing willingness to lend. A Constrained Automotive Market Overall, Smoke believes the automotive market is in a good place. “I think we’re on the cusp of what I’m describing as a constrained recovery,” he says. “We’re optimistic that we’ll see growth in every channel in 2024. Demand is repressed because of affordability due to interest rates at 23-year highs and tighter credit requirements by lenders. On the supply side, we’re not back to the level of production we had previously for new vehicles — I don’t think we’re getting there anytime soon.” Lower production levels and greatly reduced fleet sales in the last three years have impeded the used car market. The shortage of nearly-new vehicles will contain any acceleration in the depreciation of used cars and keep a floor under used prices. Smoke believes that used car margins will stabilize, even as dealers must work harder to maintain inventory levels. Shifting Markets for New and Used Vehicles Increased production and the recovery of fleet sales helped drive a 12% year-over-year increase in new car sales in 2023. Smoke projects a slower pace of 1% to 2% growth in 2024. Beneath that modest growth are changes emerging in the new car market that could extend beyond 2024. OEMs are shifting their production, catering to buyers who can afford more expensive models and premium configurations. Producing fewer high-priced vehicles keeps manufacturers’ margins high, incentives and discounting low, and vehicle supply tighter. As one of the biggest surprises in 2023, OEMs have effectively dropped entry-level vehicles from their new vehicle portfolios — only two new vehicles currently carry a sticker price under $20,000. Certified pre-owned vehicle (CPO) sales have been and will continue to fill this gap created in the market. CPO programs have changed eligibility requirements to allow older cars and those with higher mileage to qualify, providing buyers priced out of the new car market with an opportunity to access extended warranties and better financing options. As manufacturers begin to promote attractive leasing programs to consumers, Smoke expects leasing volumes to lead growth in 2024’s automotive markets: “After effectively abandoning leases over the last four years, OEMs will go back to relying on leasing offers to address affordability, grow volume and boost demand without resorting to even higher incentives.” The Long Road to Electrification Smoke expects electric vehicle (EV) sales to continue their current path of growth supported by generous tax credits, government policies and manufacturers’ target production levels. After years of demand exceeding supply for EVs, production has caught up, creating a potential challenge for dealers who may have a greater days’ supply of EVs as opposed to vehicles with internal combustion engines (ICE). While demand may be enough for California dealers to clear EV inventory, dealers in more rural markets throughout the South and the Midwest — where consumers aren’t yet exhibiting strong demand for EVs — may struggle to move their EV allocations. On the service side, a more EV-centric market is turning out to be better news for dealers than feared. “The silver lining showing up in the service data is that dealers are making more money servicing EVs,” says Smoke. While today’s service work is weighted toward recalls, he adds, “EVs are more expensive vehicles, prone to having sensor issues and other complex problems. When there is a service appointment, it tends to be a more expensive one.” Smoke points out that while EVs are steadily gaining share, ICE vehicles are not going away quickly. “We think this is the beginning of what will likely be a 30-year plus journey, where EVs and ICE vehicles coexist in the automotive market.” vada.com 13

Martinsville Dealer Honored as Note: Barry Nelson of Autos by Nelson in Martinsville was honored at the 2024 NADA Show in Las Vegas. This article was published in October 2023 at the time of the announcement. The following has been edited for length and clarity. Barry Nelson was one of a select group of 49 dealer nominees from across the country who was honored at the 107th annual National Automobile Dealers Association (NADA) Show in Las Vegas, Nevada, on Feb. 3, 2024. The TIME Dealer of the Year award is one of the automobile industry’s most prestigious and highly coveted honors. The award recognizes the nation’s most successful auto dealers who also demonstrate a long-standing commitment to community service. Nelson was chosen to represent the Virginia Automobile Dealers Association in the national competition — one of only 49 auto dealers nominated for the 55th annual award from more than 16,000 nationwide. “Seeing the personal and professional growth of our company’s team members has been undeniably the most rewarding aspect of my career,” nominee Nelson said. “We started at very humble beginnings and, as we scaled to new heights, witnessing the progress of our team was invigorating.” After graduating from George Washington Carver High School in Martinsville in 1975, Nelson started working at a Ford store in Basset, Virginia, owned by his father, G.R. Nelson. “I learned the car business from the ground up and worked in every position at the store,” he said. “My on-the-job training in each department gave me the necessary insights and operational experience to manage a dealership and eventually lead our auto group.” Nelson and his father began to expand their business footprint by adding franchises and acquiring stores. Today, Autos by Nelson encompasses multiple new-car dealerships in Virginia, representing Chevrolet, Ford, GMC, Honda, Kia, Mazda, Subaru and Toyota. “The key to our success is our team members, who consistently strive to be better,” he said. “I am also thankful for the great mentors who have helped me along the way. Through hard work and determination, we have achieved so much, and we continue to grow.” As a longtime member of his community, Nelson’s passion for sports drives his philanthropic giving. He coached American Legion Baseball for 16 years and continues to donate to the Martinsville Community Recreation Association in support of the baseball program. He is also a board member and local supporter of the Fellowship of Christian Athletes. “Coaching and mentoring young people has given to me a platform to positively affect their lives in ways that I would not have been able to otherwise,” he said. Nelson was also instrumental in creating the Patrick & Henry Community College (PHCC) baseball program, where he was a coach for five years, as well as leading the charge to build Hooker Field, a turf field used by PHCC baseball and the Martinsville Mustangs, a local team that competes in the Coastal Plain League. “The program I founded has led to a vast expansion in opportunities for athletes and for the college,” he said. “PHCC has now grown to become part of the National Junior College Athletic Association (NJCAA), which has brought hundreds of student-athletes to the school and has helped increase enrollment.” Beyond athletics, Nelson has worked with the Martinsville Henry County Chamber of Commerce and the Henry County Industrial Development Authority to attract businesses and jobs to the area. Left to right: Jessica Sibley, CEO of TIME; Barry Nelson, President of Autos by Nelson; Don Hall, VADA President and CEO; Doug Timmerman, Ally Interim CEO and President of Dealer Financial Services 14 Virginia Auto Dealer

TIME Dealer of the Year Nominee “Giving back to the community has been an honor,” he said. “Hopefully, our contributions will empower our community for generations to come.” Dealers are nominated by the executives of state and metro dealer associations around the country. A panel of faculty members from the Tauber Institute for Global Operations at the University of Michigan will select one finalist from each of the four NADA regions and one national Dealer of the Year. Three finalists received $5,000 for their favorite charities and the winner received $10,000 to give to charity, donated by Ally. In its 13th year as exclusive sponsor, Ally also recognized dealer nominees and their community efforts by contributing $1,000 to each nominee’s 501(c)3 charity of choice. Nominees are recognized on AllyDealerHeroes.com, which highlights the philanthropic contributions and achievements of TIME Dealer of the Year nominees. “At TIME, we are proud to uphold the decades-long tradition of honoring automotive dealers who make a positive impact and show dedication to their communities through our TIME Dealer of the Year award,” said TIME CEO Jessica Sibley. “We are excited to keep this tradition of applauding these community contributions together with our partners at Ally.” Doug Timmerman, president of dealer financial services, Ally, said, “Auto dealers nominated for the TIME Dealer of the Year award have demonstrated an unwavering commitment to not only the industry but to their respective communities through volunteerism, sponsorships and supporting charitable causes, no matter the market climate. Whether their clients are purchasing a first car or upgrading for a growing family, these selected dealers have successfully extended their relationships beyond the showroom and have been steadfast in driving their communities forward.” Nelson was nominated for the TIME Dealer of the Year award by Don Hall, president and CEO of the Virginia Automobile Dealers Association. Nelson and his wife, Patti, have two children. vada.com 15

VADA, MADA, WANADA Joint Reception Photo Gallery Thank you to our Virginia dealers and friends who attended the joint reception at the NADA Show in Las Vegas. A good time was had by all! To view all the photos from the event, scan the QR code. photos.app.goo.gl/Dz4ysW3jcocrWztZA 16 Virginia Auto Dealer

A Refresher Quiz for 2024 — The Answers By Barrett “Barrie” Charapp Beaty, Esq., Charapp & Weiss LLP 1. True. The Federal Trade Commission is on the hunt for car dealers, and improper advertising is an easy find because it is public and very visible. Compliance with the Truth in Lending Act and the Consumer Leasing Act is critical because both laws are clear. The advertisement is correct so long as a dealer advertises an available rate as the annual percentage rate or APR, it is appropriate. And APR advertising is not a trigger term, so no follow-on disclosures are necessary. However, if you advertise a limitation on the duration of credit at the advertised APR (“3.25% APR available for up to 60 months”), the number of payments is a trigger term, and you then must make further disclosures under TILA. In advertising credit for a motor vehicle, any of the following is a trigger term: (1) The amount of the down payment (expressed as either a percentage or dollar amount); (2) The amount of any payment (expressed as either a percentage or dollar amount); (3) The number of payments or the period of repayment; or (4) The amount of any finance charge. If you use a trigger term, you then must disclose: • The amount or percentage of the down payment; • The terms of repayment; and • The “annual percentage rate,” using that term or the abbreviation “APR.” If the annual percentage rate may be increased after the consummation of the credit transaction, that fact also must be stated. 2. True. Often, dealers seek to equate lease rates to APR and advertise low rates in connection with leases and nothing more. Such actions are prohibited by the Consumer Leasing Act. In advertising a lease rate, you may not use the term “Annual Percentage Rate,” “Annual Lease Rate” or another equivalent term. In addition, if you do advertise a lease rate, the following statement must appear near the rate with no intervening language or symbols: “This percentage may not measure the overall cost of financing the lease.” 3. False. As you are aware from many of our articles on the subject, this is a hot item for the FTC. In addition to the FTC, private litigants, state attorneys general and the U.S. Department of Justice can all enforce equal credit laws. Moreover, practices in selling voluntary protection products are not only potential subjects of legal action by those enforcers, the Consumer Financial Protection Bureau is not prohibited from investigating VPP practices. If your dealership is not using a fair lending program and a program for the sale of voluntary protection products that requires offering finance rates and VPPs at uniform pricing levels, with deviations for nondiscriminatory reasons, and with results you can review and for which you can take corrective action for non-compliance, you are not adequately protecting your dealership. The “Fair Lending Program” and the “Program for Sale of Voluntary Protection Products,” published by the National Automobile Dealers Association, are comprehensive programs your dealership should implement and follow. The answers for the “Refresher Quiz for 2024” from page 6. vada.com 17

4. d. It has long been the law that lending fees charged by subprime credit sources may not be passed along to the customer directly or indirectly. Any attempt to do so that can be identified — such as listing the fee for the customer to pay on the buyer’s order, increasing the price of a vehicle to pay for the fee, or even telling the customer the vehicle could not be further discounted because of the fee the dealer had to cover — can lead to a claim for violation of the Truth in Lending Act. 5. False. As we have previously written about, spot delivery is a hot topic and is under attack by the FTC. The FTC and consumer groups often want to conflate lawful spot deliveries with “yo-yo” sales in an attempt to outlaw the practice of spot delivering vehicles. Protecting spot deliveries through lawful practices is of the utmost importance. Having decided that you can rescind the purchase contract, but the recovery service could not locate the vehicle, what do you do? The wrong reaction is to have the person arrested, which is often a decision made out of frustration. Even if the customer was not candid when he bought the car, he has not been cooperative in working with the dealership, or he appears to be hiding the vehicle, an arrest is the wrong reaction. The car was not stolen. You gave the customer possession of the vehicle under the transaction documents. Even a misdemeanor charge of wrongful use may lead to a malicious prosecution lawsuit since the customer is operating on legally issued documentation, even if it is overdue. Even if you win the suit, the publicity about the events will likely damage the dealership. The answer is a civil suit to recover the vehicle. The dealership then can quickly obtain a judgment it can use as the basis for discovery from the customer to find the vehicle and to potentially recover damages if the car can never be found or to recover the dealership’s losses for the period the vehicle was withheld. 6. True. Employees in a car dealership not entitled to premium overtime, such as salespeople, must still be paid minimum wage for every hour worked. The best way to determine the number of hours worked by employees is to have them punch in and out on a time clock. Carefully supervising that each employee is punching his or her own time is a perfectly acceptable way for the company to expect its employees to operate. It is important, especially in tough times, to be sure all employees earn minimum wage for hours worked. Even for commissioned employees, there should be a regular determination that the employee earned at least minimum wage for every hour worked during the pay period. How do you know this without a time clock? Timesheets are notoriously inaccurate. Eliminating the requirement for recording time and relying solely on schedules is worse. The time clock is the best method for knowing the hours worked. 7. False. We have been telling you for years to stop doing pay plans on napkins. A pay plan written in haste that just provides how the employee will be paid with a minimum guarantee is likely to be misconstrued by a court as an employment contract for a specific duration. A pay plan simply describes the method for calculating pay due to a manager or salesperson. Prepare a professional pay plan. What are the elements of a professional pay plan? • It must be in writing, and it must be signed by the employee. • Carefully describe the basis on which the employee will be paid. • If it is a sales pay plan, be sure the basis for pay is commissionable gross determined in the sole discretion of dealership management, and the plan should specifically state that. • There should not be a specific definition of vehicle cost. • No length of time should be specified, or the plan could be construed as an agreement for employment for a specified time. 18 Virginia Auto Dealer

regardless of the form of funds or amount, of over 100 specified crimes may be money laundering, a serious felony. If you know or have reason to believe that the proceeds of a transaction result from a prohibited felony, you should not do the deal. Reporting receipt of suspicious cash, although seemingly the proper thing to do, only identifies that you did a deal you know you should not have done. 10. True. Courts will enforce contracts as they are written. A common provision in supplier contracts to trap dealers into continuing is to establish a lengthy duration for the contract and provide that the contract will automatically renew for subsequent similar periods unless terminated with substantial advance notice. Mistakenly, many dealers believe that after the initial term, they are on a month-to-month contract. That is not the case. Courts will generally enforce these rollover provisions. Dealers need to review their contracts with suppliers and know what is being entered into, even the boilerplate on subjects like duration and renewal. For what reason are you signing a three-year contract? Sometimes, when the supplier has an investment, like a uniform contract, there may be justification for a one-year or eighteen-month duration. But why a cleaning contract? Sign the contract for the shortest duration possible, and there should be no automatic rollover. The contract should specifically provide that it will renew from month-to-month after the agreed term, and it can be cancelled at 30 days’ notice by either party following the end of the initial term. Your dealership should have someone who has on file all the supplier contracts and term dates and calendar the dates for the notice of cancellation. Dealers also need to be mindful of the choice of law and venue provisions. You want the state in which you operate to be the state of venue and choice of law for any disputes. You should not be fighting the vendor in Michigan if your dealership operates in Virginia. • Reserve the right for the dealership to change the pay plan and to correct mistakes. • Reserve the right to recoup overpayments from future earnings. • Include a disclaimer of the contract: “This pay plan only describes the method by which employee will be paid. It does not alter employee’s status as an at-will employee. It is not a contract. It does not ensure employment for any specific duration.” 8. False. Retaliation can be a separate violation of the law even if there is no underlying offense. Managers and employees must be well-trained in the company’s policy and process against discrimination and harassment. Every complaint must be taken seriously. When investigating, always warn those with whom you discuss the circumstances leading to the complaint that retaliation is against company policy and can lead to discipline, including termination. Retaliation is the most prevalent category of complaints to the EEOC, according to the agency. Protect the dealership against retaliation claims. A company must be very careful with an employee who files a complaint alleging discrimination or harassment. It is easy to stumble into a retaliation claim by taking some sort of negative job action regarding that employee when the employer finds it groundless. Even if you believe that the employee trumped up a charge against a supervisor to create protection against termination for poor performance, do not rush into taking negative job action against the employee. If the complaining employee’s performance is subpar, after you have explained the company’s reason for not taking action regarding the complaint, you may carefully watch the performance of the employee as you would any other employee. Where the employee’s performance continues to be subpar, counsel with the employee. Give the employee the opportunity to cure shortcomings. The EEOC may view a precipitous termination of an employee after a complaint to be retaliation. 9. False. A car dealer must not only know of the laws about cash reporting (which require a report of cash or cash equivalents over $10,000 in a transaction or series of transactions) but also the laws preventing money laundering. Doing a transaction involving the funds you have reason to believe are the proceeds, vada.com 19

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