Pub. 19 2020-21 Issue 4

2020 has become a roller coaster year for auto dealers. Everything appeared to be moving along just fine until the arrival of COVID-19. The spring was a period of uncertainty for dealers. Dealerships were forced to briefly shutter their doors, resulting in a significant reduction in revenue, furloughed or laid off employees and the rise of financial uncertainty.

It’s a pandemic, and your old sales methods may not be working. You’ve got to get people in the door, so you run all sorts of advertisements. It’s a crazy year, so anything goes, right? Wrong. State and federal regulators are watching closer than ever to ensure consumers are not hurt by businesses looking to make a quick buck. As dealers have been required to focus on COVID protocols to safely operate their businesses over the past year, it’s important not to forget about adherence to other regulatory compliance requirements.

On November 3, 2020, New Jersey voters overwhelming
chose to amend the New Jersey Constitution to legalize the recreational use of cannabis by adults age 21 and older. On December 17, 2020, the State Legislature passed the proposed enabling and regulatory bill which, as of this writing, awaits Governor Murphy’s signature. While many are excited by this upcoming change, dealerships are rightfully concerned with how recreational cannabis use will affect the workplace, such as safety and productivity.

During the early months of the COVID-19 pandemic, motor vehicle manufacturers all but ceased conducting regularly scheduled dealership sales incentive and warranty audits. Almost a year into the pandemic, manufacturers have started scheduling new audits, and some are rumored to have a plan to audit every dealer in the United States. We have heard from several Nissan dealers who have already been audited and are in the process of receiving the results of those audits, including claim chargebacks. With this backdrop, New Jersey dealers should remember that they have very strong franchise protections when it comes to a manufacturer audit and any resulting proposed chargebacks.

Many dealers have struggled to hold on to incoming inventory to meet the market demands with industrywide inventory shortages. With the sales fluctuations for new and used car dealerships, it will pose some problems going into year-end tax planning scenarios for those valuing inventory under the Last In First Out (LIFO) accounting method.

Recently retired National Automobile Dealers Association (NADA) President and CEO Peter Welch authored a column near the end of his tenure that I feel everyone should read. What follows is an edited version of Peter’s important message:

Other than COVID, the 2020 election was the dominant news story much of this past year. There was some suspense, as control of the Senate was left up in the air and was determined by two runoff elections in Georgia in early January. 2020 was an important election, but 2021 is also critical right here

Customers are the lifeblood of any dealership. If consumers aren’t purchasing cars and trucks or servicing them properly, our businesses suffer. That is why dealerships have ALWAYS adapted to serve our customers WHERE they want, WHEN they want and HOW they want. That quick ability to adapt was never more important than it was in 2020.