
The internet has brought about numerous changes in the dealership business model. For many dealers, the internet represented a breath of new life and more sales.
As in most businesses, though, with added sales comes added documentation.
Since day one, we have known that lenders require a perfected title on all collateral for the financed purchase. Yet, for many dealerships, out-of-state title registration presents unique challenges. The most common questions I get involve sales tax liability and the correct title documentation for each county and state.
Most often, the sales department has created a buyer’s order identifying the sales price and trade value, in addition to any down payment by cash, check or wired funds. Other clients want consumers to use a credit card for convenience as their initial payment.
I will address cards later, but for now, let us focus on handling the sales tax and the title and registration documents.
Two-Visit Process
Customers expect all information to be readily available online. Proper communication will go a long way in setting realistic expectations and securing all the required information regarding taxes and fees. I want to point out that not all required information is a click away and readily available. We have a two-visit process, which allows time to collect proper, accurate information.
Finance representatives would do well to disclose the reason behind our two-visit process. The RV’s sales price is firm, and the consumer’s trade-in value depends upon the trade condition described to the sales department at delivery time.
One great valuation resource is the National Automobile Dealers Association (NADA) guide, available via NADAguides.com. The website offers downloadable Department of Motor Vehicle (DMV) title and registration documentation. Although we don’t know how current the online guide is, the print version is updated at least yearly.
Many finance professionals call an RV dealership in the consumers’ residence location to verify sales tax rates in that particular area. Sales tax is tricky due to the various state, county and city sales tax rates. Many municipalities are dealing with revenue shortfalls. Because sales tax is their primary source of revenue, sales tax rates can change in a blink of an eye if a municipality must raise more funds quickly.
Several industry vendors provide varying degrees of assistance with out-of-state titling, registration and sales tax information. The issue you need to determine is how often they update their web portals.
Where do they secure their information? How reliable is their source? How fast is their response to your inquiry?
As with any vendor, the dealership should perform proper vetting. In most cases, the phrase “immediate” in relation to a vendor’s response time is not realistic. The key to a successful customer experience is setting proper expectations at the beginning of the documentation road.
Consider Title Processing Fees
Title service providers perform various tasks, including quoting taxes and fees, supplying documents, contacting consumers, overnighting documents and returning documents via overnight service.
Once the titling work is complete, the vendor will submit the title documents to the state(s).
Having a vendor provide additional services will add expenses to the transaction.
Some dealerships have outside vendors that perform title work for out-of-state deliveries and then charge consumers a processing fee along with the registration fees. These fees can range from $200 to $499.
You should check with your lenders and the state DMV to see whether they allow an additional processing fee. Added documentation equates to higher deal expenses, which is a simple fact. Consider turning an additional expense into a profit center.
Many state DMV internet sites make state-specific documents available for free. Many dealerships use a generic Vehicle Power of Attorney document for a sold RV.
Here is a helpful hint: Secure an additional power of attorney document for the trade vehicle. This is a good business practice, just in case you need to seek a duplicate title. If the consumer buys a motorized RV, get signed odometer statements for the sold motorized RV in addition to the trade-in.
Do Not Delay
A good rule to live by regarding vehicle titles is an old adage: “The job is not complete until the paperwork is in the accounting office.”
For many dealerships, the finance officer must track titles to the trade-in RVs as well as the perfected titles for RV purchases financed through a dealership’s funding source.
Previously, our standard practice was completing the Manufacturer’s Statement of Origin (MSO) and cutting a check to the consumer for the sales tax and registration. This practice puts your faith in people with no urgency to deliver titling documents to their county’s DMV.
In fact, many consumers view the check as a refund and use the money to go camping. Not everyone does this; some consumers actually do what they say they will. I have heard finance professionals say they have consumers sign a document saying they will take the funds and documents to their county seat to secure their RV’s registration.
However, I am pointing out that signing a paper does not guarantee the consumer will fulfill their responsibility. If consumers fail to file their documents, the dealership remains responsible for delivering a perfected title to the lender as collateral for the loan.
The dealership’s repercussions are eye-opening. The lender will send a demand letter to the dealership requesting the dealer to pay off the loan. We all realize no dealer wants to pay off a loan and function as a consumer’s lender.
Each finance department should have a process for handling out-of-state transactions. The sales department should immediately notify the finance department so the finance representative can make the necessary calls to secure the correct sales tax and fees. Doing so can make the documentation part of the sales process seamless.
Although sales and finance are separate departments, they should work in tandem to ensure an accurate information flow. This synergy will enhance consumers’ buying experiences.
Be Wary of Credit Cards
Finally, I wanted to offer a word of caution about accepting credit cards to secure the initial payment for a finance purchase.
Many lenders will view this practice as a seller-assisted loan because, rather than a buyer using cash or a cash alternative,
the payment is put on a credit line. Dealers should disclose all seller-
assisted loans to the lender before obtaining loan approval.
Over the past decades, we have come to rely less on cash and checks and more on our plastic as a form of payment, including debit and credit cards. Securing an initial payment via debit cards should be fine, as the money is taken from a checking or savings account.
When a credit card is presented, you face another challenge. Using a credit card to make the initial payment increases consumers’ debt load and monthly payments. Some of our consumers are already in the gray area regarding debt-to-income ratios.
One best business practice is to check with your lenders and verify how they want to handle transactions when consumers use a credit card for the initial payment. Be sure to document each lender’s sage directions to minimize the dealership’s legal exposure regarding the finance contract.
Consider one other variable in this case: Did the consumer order the RV? If so, the consumer may have adequate time to pay down the credit card charge made for the initial payment.
Either way, remember to disclose the payment method to the lender before obtaining approval.
Jan Kelly is an educator and consultant, convention speaker and writes frequently for industry publications.