IT's Do's, Don'ts and Alerts
By Mac Gordon Ward's Dealer Business, Oct 1, 2007 12:00 PM

Veteran dealer CPA Carl Woodward warns. veteran dealer CPA Carl Woodward lists several vendor IT pricing tactics dealers need to know when negotiating a new contract. He also provides five steps dealers can take to limit their exposure at contract time.

Some of the tactics on Woodward's list are:

1. Salesmen offering a ‘required upgrade’ first for $100K, then for $75K, for a system sold elsewhere for $50K.
2. Withheld published-list prices along with discounted prices.
3. Requests for inflated prices well above what a third-party vendor would charge.
4. Requiring use of vendor's credit bureaus at much higher prices than if the dealer dealt directly with a bureau.
5. Offering price reductions for longer-term contracts. “A vendor who waits until the last minute on purchase of a new system or a ‘required,’ upgrade is suspect,' says Woodward, “because the dealer is deliberately denied time to shop other vendors or get a better deal.”

Other tactics include pushing unneeded products such as document management systems; insisting on a new long-term agreement upon renewal or for a minor purchase; and demanding overlapping agreements with different expiration dates to keep dealers from changing vendors.

Automatic-renewals are another no-no, authorizing renewal if the dealer forgets to terminate the agreement years later.

Also on Woodward's list of IT terms to avoid are confidentiality clauses, which limit information sharing at dealer 20 groups, and extra-long legal documents that minimize and limit the vendor's obligations.

To avoid exposure in future agreements, Woodward recommends the following measures by dealers:

1. Tell vendors in a registered letter that the dealer principal is the only employee authorized to sign agreements. This letter should state that all written agreements are to expire on the same date and be identical with that for the main agreement.
2. Have someone read all agreements carefully whenever one is presented for signature, including documents residing on web sites when mentioned in the primary contract.
3. Limit agreements to one-year periods, or require a one-year termination notice period without financial cost to the dealer.
4. Ask the vendor for names of same-state dealers who have previously used that vendor.
5. Make sure your IT consultant is truly independent and charges either a ‘not-to-exceed’ fee or a flat amount.

Woodward's CPA firm is based in Bloomington, IL, and can be reached at 309-602-8797. It is a member of the AutoCPAGroup, which can be accessed at www.autocpa.com or at 1-800AUTOCPA.