Hurricane Harvey - Dealership Corridor

Contributing Author:
Jason Hash
Training Manager
EFG Companies

In the wake of large natural disasters like Hurricanes Harvey, Irma and Maria, car sales typically go up in the affected areas, along with identity theft and fraud. Criminals need cars too, and a car-buying surge that has dealers scrambling to accommodate the increased traffic gives them the perfect time to slip in without anyone being the wiser. Think about it for a minute.

Your dealership has more people in it now than it has in the last three months. With so many customers ready to buy now, your sales and F&I teams are struggling to move the buying process along to capture the business of as many customers as possible. With that sense of urgency, it’s all too easy to let compliance processes slip just to keep the process moving. And, in comes a customer with a fake ID or social security card.

The good news is that most dealerships have well-trained staff when it comes to fraud prevention through their compliance processes of checking Red Flags and the Specially Designated Nationals List (SDNL) published by the Office of Foreign Asset Control (OFAC). After all, the penalty for violating the Red Flags rule is a $3,500 fine per violation along with injunctions, and the criminal penalty for failing to comply with OFAC is 30 years in prison, a $10 million fine for corporations, and a $5 million fine for individuals.

The fines alone should be incentive enough for dealership staff to keep up with those compliance procedures. But, when people get busy, it’s all too easy to just focus on getting the deal done. And, it’s during those busy times that dealerships are the most vulnerable to fraud. Here’s the other good news. The post-disaster car buying surge normally has a lag time as consumers wait to get their insurance payouts. This gives dealers the opportunity to train their staff on how to be on the lookout for fraudulent behavior and to reinforce their compliance procedures.

Contributing Author:
John Stephens
Executive Vice President
EFG Companies

As a native Houstonian and an automotive industry executive, I am closely following the news coverage of both the impact of Hurricane Harvey on the Houston area itself, and on the automotive industry within the area. A recent article from Wards Auto caught my eye, with the headline, “Expect Post-Hurricane Car-Buying Surge”. The article details how auto demand will increase in the extended aftermath of the hurricane as people evaluate the damage to their homes and vehicles, and begin receiving insurance payouts.

This is good news for those dealers who are able to quickly replace their damaged inventory with new vehicles. With an estimated 500 dealerships affected by the storm, it can be expected that while it will be a race to update inventory, there will be a period of “downtime” while both dealers and consumers survey their homes and businesses to understand the full scope of the damage.

When a large scaled natural disaster occurs, dealers can typically expect an upsurge in unit sales. However, this means that in addition to addressing inventory concerns, dealers need to prepare their teams to better manage an increase in foot traffic. In the immediate aftermath of a natural disaster, dealers have the time to undergo these preparations, and it’s important that they use that time effectively.

One of the biggest challenges during a car-buying surge is simply servicing the increased traffic. This could mean extending dealership hours, scheduling to have more employees cover the showroom floor for longer hours, and even hiring more sales and F&I team members to help spread the load. In addition to ensuring coverage, it’s important that your sales and F&I teams manage each customer’s time effectively.