How To Keep Your Car Audio System Safe

30Thieves don’t stay in one place because if they do, they’d only be putting themselves in immense danger. That’s why they have to keep moving from one parking lot to another. I’m particularly talking about car thieves here. If your car looks enticing enough, thieves would take it with them as a whole piece. If not so, then they would only take some parts, like a shining steering wheel accessory made of gold, state of the art side mirrors, no-nonsense rims attached to the wheels, and the most favorite of robbers – guess what? – None other than a fancy car audio system.

Knowing these things makes any car owner instantly vigilant, taking notice every suspicious-looking person staring or going around his or her car – that’s paranoia. But really, the thing most car owners are worried about is the actual process of protecting their possessions. Besides, no one has the time and the energy to pay close attention to his or her car 24/7, right? Now, you should take note that we are talking about your car investments here. You won’t just let it slip away when you know you can do something about it. So where do we start? In your car audio system.

Tinted Windows

After cars are parked when respective owners proceed to their offices or schools, the vehicles are practically left alone in parking lots by themselves, with no one. This is where the purpose of tinted windows shine the brightest!

What do you think is the purpose of having one’s car windows tinted? Well, there is actually more than one reason why these tints are installed on vehicles. Aside from UV protection, tinted windows also give owners more privacy and protection against people who may be given countless opportunities to take a peek at car owners’ belongings. Such occurrences may possibly stir notions of stealing to those who do it for a living. Your newly installed car audio system stays in place, where they should be.

Disguised Apparatus

This one is crazy, but really effective! I’ve seen some articles telling car owners to give their digital car audio systems a form of disguise from car breakers. “What form?”, you say. Some business-minded people have actually thought of selling cassette tape players to car owners. Clearly, they are smart enough to know that the market for it has depreciated over the years, as digital systems take over an old music trend. What the cassette players are here for is to play as a form of façade, deceiving would-be thieves to turn down a conniving idea. These players are used as covers of the real audio system.

Activated Alarm

Last but definitely not the least is the installation of car alarms. Do you have it right now in your own car? Aside from protecting your newly installed car audio from getting stolen, most importantly, it protects your from being taken away. Period. With a number of car alarm customizations provided by car companies, 24/7 security is assured.

Investing in Car Dealerships – How to Do it Right

140417_EM_CarDealershipThe financial characteristics of the automobile dealership are attractive:

“….moderate growth and risk and high returns. Franchised new car dealer revenues have grown at a 7.2% annual rate since 1992, about twice the rate of GDP. Moreover, this growth has come with only moderate risk, as the dealer body didn’t lose money (on a pretax basis) for a single year in the last twenty – even during the 1989-1991 industry down-cycle. Finally, despite major changes in the auto industry’s structure, dealer returns have remained high, with pretax ROE averaging 26.1% over the last twenty years”. [MerrillLynch, April 19th, 2004 Report on “Automobile Dealers”.]

Athletes from almost every major sport have invested in new car dealerships: Rick Hendrick, Roger Penske, John Elway, Troy Aikman, Evander Holyfield, Arnold Palmer, Michael Jordan, Scottie Pippen and Alex Rodriguez to name a few.

The idea isn’t new. Johnny Lujack, 1947 Heisman Trophy winner and Chicago Bear Pro-Bower, started a business in 1954 that would eventually expand to 16 franchises; spread over 40 acres, with sales of over 10,000 vehicles and $150 million, per year. Lujack retired from the auto business after almost 50 years as a successful dealer.

WHEN IS THE RIGHT TIME?

“This is the time you have been waiting for”, reports Greg Gilmore in the June 2005 issue of Dealer Magazine.

Dealer Executive reported that last year (2004) ranked as the 4th best for new unit sales by franchised new-vehicle dealers. Total dealership dollars exceeded $714 billion, up more than 2% from 2003.

The fact is that anytime is the right time. In 1991, in the depths of an automotive depression, John Elway asked me, prior to signing his purchase contract, if “this” (1991) was the right time to buy. I told him that it is how you buy it and how you sell it that count. That year he made a $20 million investment. At the time he had a single Mazda store on Arapahoe Road, in Englewood. I sold the Mazda franchise for him and Nissan gave him its franchise to put in the old Mazda building. Shortly thereafter, I put together another transaction that had John buy the Mazda store on 104th Avenue, in Thornton. John then terminated Suzuki and put the Mazda store with his Oldsmobile and Hyundai franchises. After that he bought one more dealership (a Ford franchise) and then, in 1995, sold the entire package to Republic Industries for $86 million.

A lot of people were afraid to buy a dealership in 1991 and thought that John took a big gamble. But, he didn’t “gamble”. He structured his purchases and sales correctly, and then capitalized on his investment.

For example, although GM and Ford lost money (as they did in 1991), individual dealers made millions, according to NADA (National Automobile Dealers Association) and Automotive News statistics, the average dealers’ pretax margin varies between one and two percent of their total sales. Why? The dealers capture a broader business base than the manufacturer. While the manufacturer makes its money on new car sales, the dealers have the additional balance of the parts departments, service departments, used car departments, finance departments, insurance departments and, in some instances, body shops. Consequently, while the manufacturer is dependent upon each year’s new car sales, a dealer’s success is based more on the total number of vehicles in operation.

DOES THE DEALERSHIP’S HISTORY MATTER?

A little, but don’t be intimidated by it. After Jimmy Vasser won the CART racing championship for Target, I put together a transaction for Jimmy to buy a dueled Chevrolet-Toyota franchise, in Napa, that lost money for the previous 10 consecutive years. I put Jimmy together with a dealership manager and Jimmy’s dad, who had some previous used car experience, signed-on as used car manager.

Subsequently, after going to dealer school and passing through the chairs, Jimmy’s dad took over as General Manager; the store thrived; and Jimmy not only bought the dealership land and facility, but bought the Ford store in the next town, and is currently building a new Toyota store so that his Chevrolet and Toyota franchises can have separate facilities.

WHAT DOES IT TAKE TO BE SUCCESSFUL?

Good advice. Good advice is both important and hard to find. In the words of Trace Armstrong, past president of the NFL Players Association: “There’s just so much bad advice out there being given to these guys. It’s really kind of scary.” [Reported by Eric Fisher, March 27, 2000.]

As with the Entertainment and Sports Industries, there is so much money in the car business, that everybody wants to get a piece of it. Consequently, everybody thinks he or she is an expert in analyzing and structuring deals, when in fact they just want to be a broker that gets a commission from the deal.
Sidebar: New car dealership revenues reached almost One Trillion Dollars in 2004. The dealerships and dealer related industries account of over 15% of the Gross National Product of the United States.

HOW TO CREATE A SUCCESSFUL TEAM?

An investor needs a team. Generally, it’s the same team they have, supplemented by an expert in the car business. Don’t get lulled into a false sense of security that loyalty is synonymous with the “factory” or “bankers”.

For example, Ford made one of its black dealers (a superstar athlete) the point man, brokering meetings with senior executives and acting as a conduit between the company and Jesse Jackson. He mediated disputes between Ford and its dealers, and he promoted the company in public appearances. He even had a close relationship with some Ford family members.

“He had some friends in high places,” said John Clissold, a retired Ford Credit executive. “[The head of Ford Credit] was a very strong supporter.” But, when trouble came, it didn’t matter. Business was business. ” …one factory executive familiar with the situation summed up the prevailing feeling at corporate headquarters: ‘[the superstar] was headed for a cliff and we weren’t going over with him.'” [Story by Bill Vlasic and Mark Truby / The Detroit News Sunday, May 26, 2002.]

The fact is that the factory and bank employees have a duty to do what is best for the factory or bank, not what is best for your client. It’s the law. They have a legal obligation to their shareholders – no matter how nice or how close your client is to them.

Financial statements and an accountant are not enough. Your client needs a member of your team that is a student of the industry. A profitable automotive statement can be certified and comply with every principle of accounting, yet still convey a false impression of success. There are so many nuisances in defining and structuring automotive transactions, that your client needs an expert in the field who can determine both what automotive deal is best for the athlete and what is the best way to get it.

So while your team may consist of accountant, attorneys, agents and managers that are excellent at their jobs, unless a student of the industry is added (someone who does nothing but structure buys and sells everyday), a key ingredient to success will be missing.

Think of it in terms of any sport or business. If a person wants to create a championship team in a particular sport, is it created with people who play the game 50% of the time, 75% of the time, or someone who plays it everyday?

Remember: The nicest thing they ever said about Richard Nixon was: “He looks like a used car salesman.”

Mr. Pico served as a court appointed “Consultant to Debtor” in bankruptcy cases, a “Court Appointed Mediator” in automotive disputes, the “Court Appointed Arbitrator / Appraiser” in partnership disputes, a “Court Approved Consultant to Receiver” in a check-kiting case, as a “Superior Court Mediator” in dealership/lender litigation and has been recognized as an expert witness on both State and Federal levels.

Why Choose The Best Luxury Cars Trusted Dealers Offer

28When talking about luxury cars, most individuals think of its price. Surely, these types of cars are quite expensive. But, luxury car dealers claim investing in such vehicle can provide them with unique benefits that are listed below.

First, the value of cars does not depreciate easily. One of the main reasons why individuals invest in such cars is these vehicles do not depreciate in value easily. Due to the increasing number of car models and brands, the value of cars can immediately decrease. Because of this, buying a new vehicle these days is not practical. However, when buying a luxury car, you are rest assured that your investment is secured since values of luxury cars are quite constant. Not to mention, some models and brands may turn into a gold mine on wheels since these vehicles increase its value sometime in the future.

Secondly, you get to enjoy the best performance and style at the same time. The next reason individuals invest in such vehicles is to enjoy a vehicle that can provide them with performance and style at the same time. For instance, there is a car brand that is known to manufacture some of the world’s fastest cars. Apart from that, it also does not compromise the style of their vehicles. This is achieved since it only makes of the best materials such aluminium for their chassis and wheels as well as fully furbished interior made from durable fabric.

Additionally, these types of cars provide useful features. Apart from speed and style most luxury cars also offer useful features. This feature is highly useful because it gives users the ability to handle a host of actions such as from online shopping, to booking flights, to reminding you of the day’s loaded itinerary. As a result, drivers can accomplish some personal tasks while driving.

Lastly, you will have access to special privileges. When buying this type of car, car manufacturers can provide owners with special privileges from free passes on their events, discounts on accommodations up to limited collectibles. Car owners can also obtain better benefits by purchasing these from trusted car dealers since luxury car dealers can provide car buyers with competitive payment options as well as insurance.

A Really Large Investment for Consumers

27Purchasing autos can be really large business. The costs of a new car may be very high for your salary or annual budget. There are other options of buying a vehicle. Buying from a dealership is another method. These ways do not always warrant the best cost for the vehicle. Another method to take up a car is with the help of the auction. This method differs from the rest. At auctions the highest bidder is the winner of the car. Auctioned cars are obtained by dealers for a great number of reasons. Some auction cars have been in an accident or a collision. That is why they have been reconstructed.

Others are cars that have been repossessed because of default of payment. The seller and possessor of the title may feel that this is the best method to get much cash from the vehicle. Other auction cars, trucks, and vans are former possessions of government or private organizations. These types of auction cars might have higher mileage, therefore they are being auctioned off for the purpose of obtaining cash and for the purpose of getting new autos. Many government agencies as well as companies have certain policies that are directed to selling off vehicles when they reach the mileage amount established by the government. People who are searching for a used car can successfully come across a gainful deal at some auto salvage auctions. Most auction cars are inspected by auto mechanics, so they practically in good running condition. Auto auctions who have been in auto business for a long period of time. So this is your best selection for purchasing a used vehicle.

One can find an abundant source for taking up vehicles to satisfy the need in transportation – cars, vans, trucks and others. Numerous auto auctions exist which are open to general public. So if a person is searching for a car auctions will help him to attain his goal successfully. These auctions are open to the car public throughout the country for convenient access and at more than reasonably competitive prices. All makes and models are available for purchase by outbidding other interested buyers. Some of these vehicles may belong to different makes and models, and much more, an assortment can please every taste and wallet. Public auction cars offer a great way to find bargain vehicles for many people.

Buying from the salvage cars auctions block offers an advantage for those who desire a better car than what might be available for purchase within a specific budget. Of course, the competition of bidding may make it a challenge to purchase the desired vehicle on the block; however, it is worth the attempt. What better way to meet the budget and still get a vehicle worth more than its final selling price. Salvage car auctions represent another way to open up even more opportunities to purchase the “just right” vehicle for the consumer. Auction cars for sale are also an excellent means of increasing the inventory of salvage cars dealers. Successfully bidding at such an auction sale enables the owner to keep his overhead costs lower and thereby earn a good profit for the sale of vehicles in his business.

Investing in Car Dealerships – How to Value Them

26Most business valuations are driven substantially by the company’s historical financial statements, tempered by other factors such as: location, brand name, management and such. In truth and in fact, the dealership’s balance sheet represents less than half the information necessary to properly value an automobile dealership. The balance sheet is but a starting point from which a number of factors must be added and subtracted in order to determine the true value of the assets.

Valuing new car dealerships has to do with projecting future profits and opportunities based upon the “dynamics” of the particular dealership being valued and of the automobile business itself.

The Internal Revenue Service recognizes that valuations include more than financial statements: “The appraiser must exercise his judgment as to the degree of risk attaching to the business of the corporation which issued the stock, but that judgment must be related to all of the other factors affecting the value.” Revenue Ruling 59-60, Section 3.03.

DEFINITION OF MARKET VALUE

The definition of market value according to the American Institute of Real Estate Appraisers’ Dictionary of Real Estate Appraisal, is: “The most probable price in cash, terms equivalent to cash, or other precisely revealed terms, for which the appraised property will sell in a competitive market under all conditions requisite to fair sale, with the buyer and seller each acting prudently, knowledgeably, and for self interest, and assuming that neither is under duress.” American Institute of Real Estate Appraisers, The Dictionary of Real Estate Appraisal. (Chicago: American Institute of Real Estate Appraisers, 1984), 194 195.

In Revenue Ruling 59-60, the Internal Revenue Service defines “fair market value” as follows: “…the price at which the business would change hands between a willing buyer and a willing seller when the former is not under any compulsion to buy and the latter is not under any compulsion to sell, both parties having reasonable knowledge and relevant facts.”

The purpose of Revenue Ruling 59-60 is to outline and review in general the approach, methods and factors to be considered in valuing shares of the capital stock of closely held corporations.

The methods discussed in the Revenue Ruling apply to the valuation of corporate stocks on which market quotations are either unavailable or are of such scarcity that they do not reflect the fair market value.

The Ruling goes on to state that no set formula can be devised to determine fair market value of closely held stocks and that the value will depend upon such considerations as:

(a) The nature of the business and the history of the enterprise from its inception.
(b) The economic outlook in general and the condition and outlook of the specific industry in particular.
(c) The book value of the stock and the financial condition of the business.
(d) The earnings capacity of the company.
(e) The dividend-paying capacity. The ability to pay dividends is often more important than a company’s history of distributing cash to shareholders, especially when valuing controlling interests.
(f) Whether or not the enterprise has goodwill or other intangible value.
(g) Sales of the stock and the size of the block of stock to be valued.
(h) The market price of stocks of corporations engaged in the same or a similar line of business having their stocks actively traded in a free and open market, either on an exchange or over-the-counter. With respect to an individual dealership sale, the best comparable is the amount the public company paid or received for buying or selling a similar dealership, not what the public company’s stock value or earnings multiple, per se, that is reflected on the stock exchange.

In practice, in arriving at the fair market value of a new car dealership, several different formulas have been used:

1. Return on Investment (or earnings valuation) Formula: The value of a business to a particular purchaser based upon a return on investment analysis. This value varies from purchaser to purchaser, according to the purchaser’s investment criterion, and it may or may not reflect fair market value. The National Automobile Dealers Association (NADA) refers to this value as “Investment Value.” A Dealer Guide to Valuing an Automobile Dealership, NADA June 1995, Revised July 2000.

The capitalization rate is determined by the stability of the dealership’s earnings and the risk involved in the automobile business at the time of sale, investment, or valuation. This method is highly subjective as the capitalization rate is based upon the particular appraiser’s perception of the risk of the business; consequently, the lower the appraiser perceives the risk, the lower will be the capitalization rate and the higher will be the price he would expect a potential purchaser to pay for the business.

In short, the capitalization rate is the appraiser’s opinion as to a rate of return on investment that would motivate a prospective purchaser to buy the dealership. Considerations include those specified in Revenue Ruling 59-60, as well as available rate of return on alternative investments.

2. Adjusted Net Worth Formula: Net worth of the company, adjusted to reflect the appraised value of the assets used in the day to day operations of a business, assuming that the user or purchaser will continue to make use of the assets. To this “net worth” value will be added blue sky or goodwill, if any. The “Adjusted Net Worth Formula” is the most common method used in purchasing and selling a new car dealership.

3. Orderly Liquidation Formula. This method values the assets as if all of them had to be sold – not at a “fire sale,” but in an orderly manner and without time constraints. Normally, if the dealership is profitable, some value will still be placed upon goodwill.

4. Forced Liquidation. The lowest of all values, forced liquidation means that all of the assets must be sold at a forced sale such as an auction, creditors’ sale or by order of a bankruptcy court. A bankruptcy proceeding regarding a new car dealership almost never brings goodwill. This might be the most appropriate formula if the dealership has no lease (or only a short term remaining on its lease) and cannot, as a practical matter, relocate.

5. Income Formula. The income formula is basically taking the store’s earnings and multiplying it by an appropriated capitalization rate. The trick here is the definition of “earnings.” In determining “earnings” a perspective purchase could use any combination of the following:

(a) current earnings
(b) average earnings – add the last five years together and divide by 5
(c) weighted average earnings – usually an inverted weight with the current year multiplied by five, last year by four, the year before last by three, four years ago by two, five years ago by one, then adding them together and dividing by 15
(d) cash flow – net income plus agreed add-backs such as depreciation, LIFO, personal expenses, excess bonuses and such
(e) forecasted earnings – future projected earnings discounted to present day value.

6. Fair Value. NADA also refers to a third value in addition to “Market Value” “Investment Value,” which it calls “Fair Value.” NADA describes “Fair Value” as being “…primarily used when a minority shareholder objects to a proposed sale of the company in assessing liquidating damages.” and defines it as: “The value of the minority interest immediately before the transaction to which the dissenter objects, excluding any appreciation or depreciation in anticipation of the transaction and without reference to either a minority or non-marketability discount.”

The NADA guide states: It is not common for auto dealers to run across this particular valuation standard. This author has never used, nor has ever seen this value used with respect to valuing automobile dealerships.

As can be seen in this report, this author in discussing valuations excludes what NADA describes as “Fair Value”.

7. The Greater Fool Theory. The National Automobile Dealers Association publication (A Dealer Guide to Valuing an Automobile Dealership, NADA June 1995), bemuses, in part: “A Rule of Thumb is more properly referred to as a ‘greater fool theory.’ It is not ‘valuation theory, however.” (In its “Valuing an Automobile Dealership: Update 2004” NADA dropped the reference to “fool” and simply states that the theory is “. . . rarely based upon sound economic or valuation theory,” but advises sellers to “Go for it, and maybe someone will be stupid enough to pay [it].”

The considerations for valuing new car dealerships are more complex than those used for valuing most other businesses. Dynamics such as the unique requirements of automobile manufactures and distributors can limit the amount of monies that may be paid for a dealership, regardless of what perspective purchasers may offer to pay for the store.

Therefore, the value of a new car dealership varies based upon the needs and ability of the purchaser and, consequently, the same dealership could have two different values to two different purchaser and both values would be correct.

Thus, our valuation of the subject dealership should be considered in the context and limitations of the facts and history of new car dealership sales as delineated herein.

Mr. Pico served as a court appointed “Consultant to Debtor” in bankruptcy cases, a “Court Appointed Mediator” in automotive disputes, the “Court Appointed Arbitrator / Appraiser” in partnership disputes, a “Court Approved Consultant to Receiver” in a check-kiting case, as a “Superior Court Mediator” in dealership/lender litigation and has been recognized as an expert witness on both State and Federal levels.

He has consulted on upside-down positions of over $50 Million, out of trust position of over $4 Million and a bank overdraft of $30 Million. Since 1972, Mr. Pico has completed over 1,000 automobile dealership transactions, whose combined values exceed One Billion Dollars.