Dealership hot topics

December 5, 2016|Jason Kiehnau, Tyler Ninneman

Keeping your dealership humming is about more than just making sure your financials are in check. Keep these hot topics on your radar to stay on top of the cutting-edge information you need to succeed.

Pay plans

Sunday activities and live chat

  • In Wisconsin and a number of other states, car sales are banned on Sundays. Dealerships take note: the limitations also extend to prohibiting communication with prospective buyers. Sales personnel and other dealership staff should have no conversations regarding sales on Sundays. This includes all forms of communication, such as email, text messaging, voice calling and live chat support services.
  • If a live chat conversation involves the discussion of a possible sale, the individual who represents the dealership must be licensed to sell a vehicle.

Cyber liability insurance

  • As you may have seen in recent headlines, companies have been experiencing large losses as a result of harmful cyber activities. In response, the market for cyber liability insurance has grown tremendously over the past few years. Cyber liability insurance generally covers customers’ personal data should a breach occur.
  • Dealerships often retain credit card numbers, addresses and other personal information about customers that is of value to hackers. As dealerships increasingly use technology to conduct business, your odds of being affected by a cyberattack increase. Moreover, as technology becomes more complex and sophisticated, so do the threats you face, which make it imperative for you to be covered by cyber liability insurance. Dealerships need to protect their data.

Software audits

  • Nearly all software vendors retain the right to audit their clients. A software audit can take an extraordinary amount of time and other resources if you are not prepared. Your dealership will be considered noncompliant if you cannot provide license entitlements for each application on each computer or your usage is greater than what is stated in the contract. If your dealership is found to be noncompliant, you will be required to purchase the missing licenses at their retail value and potentially pay a fine two to four times the cost of the software for each instance.
  • Microsoft is the most aggressive vendor as they have been auditing their clients at a much faster rate than their competitors. Other vendors that have been actively auditing include Adobe, IBM and Oracle.

Tax depreciation and qualified improvement property modifications (PATH Act)

The Protecting Americans from Tax Hikes (PATH) Act of 2015 was a tax extenders package passed by Congress which affects several depreciation-related provisions. The PATH Act has several benefits to dealerships:

  • The law makes the $500,000 Section 179 deduction permanent starting in 2015.
  • Qualified real property is no longer limited to $250,000 and computer software is now permanently allowed.
  • Asset additions up to $500,000 can be expensed immediately, with the phase out for the deduction beginning with $2 million in total asset additions and completely eliminated at $2.5 million.
  • 15-year recovery periods for qualified leasehold improvements and qualified retail improvements are made permanent.
  • Bonus depreciation (which allows 50% in 2016, 50% in 2017, 40% in 2018, and 30% in 2019) of qualified property to be immediately expensed in the year it is placed in service through 2019.
  • Starting in 2016, a new qualified property category was added. Qualified improvement property (QIP) is any improvement to an interior portion of a building done after December 31, 2015 which is nonresidential real property, placed in service after the building. QIP includes any improvements that are not enlargements, elevators/escalators, or internal structural framework. This new category is eligible for bonus depreciation. Section 179 deduction can be taken if it also meets the qualifications of a qualified retail improvement (three years after building placed in service) or qualified leasehold improvement (three years after building placed in service, leased between non-related parties).
  • The energy-efficient commercial building tax deduction is extended to 2016. The credit allows a rebate amount of $0.30 to $1.80 per square foot for energy efficiency improvements.

Contact us for assistance

If you have any questions or need additional information about these topics, please contact a Schenck dealership consultant today at 800-676-0829.

Jason (Jake) Kiehnau, CPA, is a Shareholder and leader of Schenck’s Dealership Industry team. Jake has 15 years of public accounting experience, and also previously served as general manager/controller for an import and domestic auto dealership.

Tyler Ninneman, CPA, is a supervisor and helps lead Schenck’s Dealership Industry team.

Tags: Dealerships