#114 - Life Lessons with Gene Daughtry

Hello, and welcome to this episode of the Independent Dealer Podcast.

Luke.

Today we have a real special guest, Mr. Gene Daughtry. Gene, hello.

How are you doing?

Good. Luke, what do we talk about today?

Well, we just kind of go through the history of buy here, pay here in Gene's version. It's very interesting, and he shares his insight and just sit back and enjoy the ride.

You are listening to the Independent Dealer Podcast with hosts Luke Godwin and Jeff Watson. Thank you so much for tuning in. Let's do this.

All right, Gene, thanks so much for joining us this morning. We really appreciate your time. We know you've got a busy, busy season down there, and you're battling roosters and everything else that's trying to take over your property. But, Gene, introduce yourself to the Independent Dealer podcast audience. Give us your background story. What led you through the car business and to the place you are today?

All right. You know, I got in the car business in 1990, just went to a new car store. I had children to feed, and I thought, I'll go do this until I can find me a job. I used to be in the transportation industry, and I'll go sell some cars till I can find me a real job. And Ms. Salesman of the Month. The first three weeks, I was in the car business by half a unit, and the second month I was in the business, I set the store record for sales. And so I thought, well, okay, I think I can make a living at doing this. And so that started the car business way back in Arlington, Texas. But quickly I started learning about bad credit. You know, we kept having deals. You couldn't get nothing bought, couldn't get a deal done. You know, it was just a constant problem. And so I started thinking in my own mind that that's the direction I might want to go, is to learn about how you help people with bad credit. So I started finding out about TransUnion and Acadia Financial and different ones, Western funding that were out there doing some bad credit. And that led me to another dealership that was dealing with those kind of lenders. And I started learning that and getting with the finance people. And eventually I ended up in another store to be a special finance manager. And that grew to a regular finance manager. And then I was a general sales manager off of that and all of that retail business. I just found that I wasn't as comfortable as I was dealing with the bad credit customers. And somebody asked me about running a buy here, pay here store. And in 1996, I went into Grand Prairie, Texas, And I started managing a Buy here, pay Here store for a big Chevy operation and did that for a couple of years. And then I got an opportunity to build, start the construction of and creating a new store for the Sewell Organization in Dallas, Graham and Garland. And so I was involved in the construction of how that store got set up. What is the format for that store, how's it going to run and operate? And I took that and did that for six years. And Sewell and his partners decided, let's get out of buy here, pay here and get into the Mercedes Benz business or something. And so I left there and used. Mr. Shilson actually referred me to a dealer in Arkansas. And I went to Arkansas and I built a car dealership that was my own model way I wanted it to be. And that operation is called Bestride. And it's been there ever since and still operates today. And from that it sprang board into some consulting. And I did a program, I did a presentation at the NABD Academy for new dealers about getting into Buy here, pay here. And a big check cashing company saw that and they asked me to help them set up a car dealership. And so I moved. I ended up moving to Chicago. And did I just foul this up again? Okay. But I ended up moving to Chicago and putting a store together for this company in, in Indianapolis. I'm sorry, mom, computers going haywire there. Something opened up and I couldn't get rid of it. I apologize. So I don't want to know what popped up. I opened up some new. A new dealership in Indianapolis for this company. And so that kind of had become what I did. I either was consulting, did a lot of work with, helping dealers with their service departments. I opened up the dealership in Indianapolis for the company in Chicago, out of Chicago, a check cashing company called pls. And then they wanted to build a store in Texas. And I ended up building a store in Dallas for them. And every store that I put together, full shop. And I hired all the team, I bought all the inventory, I got all the vendors together, set up everything, created the business model, fought with the lawyers, dealt with the compliance, all the people in the corporation world and got them all set up and running. And that's that. That sort of just all of a sudden it's been 25 or 28 years of doing that. And I put that last story together in Dallas and that was the end of that agreement that I had with those folks. And I started doing other things, dealing, basically working as a vendor and a consultant. And I do a lot of process writing, procedure writing at some dealerships and help with some service departments and train dealers on using Automaster systems when they do conversions.

Gene, what's interesting, you talked about not being able to get deals done with bad credit back in the early 90s, and my dad has kind of the same story. But it was in the early mid-80s that TransUnion was big during that time. Jeff probably don't even know what transunion is. So anyway, it's funny how the need for something in the economy spurred you to get into special finance and into Buy here Pay here. Can you talk a little bit more about that? Because I think a lot of dealers don't know the evolution of how Buy here Pay here really kind of started and how hard it was to get subprime bought back then.

Yeah, that was, you know, it was difficult. The lenders that, you know, capital was not, I guess, available as much. You know, back in those days somebody just had a bankruptcy. They couldn't get a loan bought if they had a bankruptcy. And so I think that. But when I started in 1990 and the dealership I was at was we were selling 600 cars a month. You know, we had hundred car Saturdays at this retail operation, Pontiacs and GMC trucks. But they couldn't deal with half the customers that were coming in because they had bad credit. And it's like they didn't really want to deal with them. You know, all the old sayings and jokes and everything, that was really what went on. And I just kept thinking that's a lot of people, you know, that can't get bought and there has to be a way. And as I investigated it, I found that there was like, say TransUnion was really the best company you could go to and make some money on a car deal. And you could get quite a few people approved through them. And Acadia was more of a longer term let's, let's carry a bigger, you know, they would go 120% a book or whatever. At that time it was pretty good sized carry on book and it made that, you know, it made, it made you able to help some people that were not getting help at the other stores. I actually ran an ad that was just a one by two ad in the Dallas Morning News and it said credit wizard. When everyone else says no, give me a call. And 80 calls a day started coming into the dealership I was at. And I actually became 20% of the retail business at that Chevy store at that time that I was at where that ad ran and it really was still people starving for that type of business. And I was learning as I was going, but I didn't really know that much about buy here, pay here at that moment. And so I think note lots and places like that existed where you could get a car further down would cover the cost and $50 a week till it quit running. And that was sort of the note business. And since then it really has changed a lot. You know, what you guys do daily with the note biz. Buy here, pay here, lease here, pay here. And you know, even what I did was a long ways away from what, what the note business was in the 80s where that was just the junkers and they quit running. You just, you know, you might have repoed them, you might not.

So yeah, Gene, talk to me about, talk to me about that. The overall concept of, you know, it seems like at that point in your life and throughout your life you've seen these opportunities. Opportunities and you've had the courage to jump at them or go all in. And whether that was relocating cities or completely changing industries or hooking your wagon to some other people, that gave you some opportunities to grow and expand. Like, talk to me about that overall philosophy of. As dealers, how do we know that we're not just chasing a shiny object or making an actual business decision? Whether we. It's a buy here, pay here that wants to get into lease here, pay here, or whether it's a retail lot that wants to start carrying some of their own buy here, pay here or whether you are a buy here, pay here that wants to get completely out of it and just go straight to subprime and retail. Like what's your mindset behind actually making a jump and either repositioning yourself or your brand?

Probably hard headedness is part of it, but you know, I mean, really it comes down to passion for what I felt I wanted to do, the drive of what I wanted to do. I guess it's a personality trait for me is I did that already and it worked. And so let's try something else. I want to try something else. I'm not, you know, this is, I'm kind of get to a point of I'm done with that sort of feeling. And part of it was the way that I, I was a consultant, more or less. You know, when I went to the place in a dealership in Arkansas that it was like, here's the money, here's the controller. You know, I don't want anybody to know that I have anything to do with it was what the dealer principal was telling me. And so you let everybody kind of think it's yours type thing. And I just took the ball and ran with it. Well, that's exactly what I really wanted to do, other than owning it, you know, outright for myself. But this was a great opportunity to really test what I was doing and to, you know, I wanted to get to a smaller market. So, you know, what was driving that was just what I was thinking in my mind was this would be interesting and I'd like to try this outside of Dallas, Texas. Let's go try this in a more rural setting. I believe Car Mart at that time had heard about them, you know, and they're all in rural settings. They're not operating in big cities having a lot of success. And so each time it was just the driver of I did that and I want to try. I think this ought to work, I ought to try this. And I was spending a lot of time with people that I had met that had been in the business for a long time and learning from them and what they were teaching me. And I really wanted to experiment. When I went from Dallas to Arkansas, I wanted to experiment and I put that store called Bestride together and it was my marketing plan and. And everything that I did there. And I even got on the radio and did a radio show for eight years. And that market and that. Does that help with marketing? You know, just did different things and. And then from there, that's where I started writing articles was back in 0807, back in those days, because I wanted to share what I was learning with other people. And I think that drove a little bit of how I finally ended up consulting. You know, I just kept writing the articles and talking to other dealers that would reach out to me from the articles and offering my advice. And it just grew into that consulting job where I built the two stores out of one in Indianapolis and one in Dallas for the check cashing place. That was started out as a consulting job and ended up being full hands on, you know, their branding and everything else was my business model and the vendors that I wanted to use and hired who I felt was the right people. And so that it's just. It was just the drive to do something different. You know, I never really say this too much out loud, but, you know, I got to a point where I really didn't want to be the guy sitting behind the desk and everybody's coming in there and they're tired of hearing whatever the shop said and I want to talk to Gene. I want to talk to Gene. Let me talk to Gene. Sometimes loudly sometimes, you know. And so I just had gotten to that point where I really wanted to be out and let's go talk to other people and go into other dealerships and learn what other people are doing and share what I know.

Gene, wasn't there a. Back during that time in Arkansas when you set it up, wasn't there?

It was.

That was a hard market, wasn't it? Like limited interest rates and things like that.

Yeah, it was. See, I wouldn't use the word as a hard market. We were, you know, the interest rate was controlled by the discount rate. It was one point over the discount rate, I believe. And so at one point we were only able to charge 5.99% interest rate. And so then it was about making sure that there was enough markup in the price of the vehicle. But I would not have said that that was really a difficult time. What became difficult, more difficult was when the rate was allowed to be raised. 0809 whenever we could raise the interest rate to 17%. And the people could not stand the thought of that. And so we never were able to raise the rate really high. I believe we finally were at 9.99 when I finally left Arkansas on the interest rate and just kept marketing that, you know, others are charging 17, we're only charging 9.99. And nobody really discussed price that much. It was really, can I get it? And you know, what kind of warranty do you have or service contract? And you know, we had a reputation.

Yeah, I mean, I can't. My business will not operate on a 9% interest rate. Just. It won't do it. So, you know, I mean, if you marked up the cars, you charge an interest anyway. So that's kind of. That's kind of interesting. But it's. I've heard. I've heard times about that in Arkansas and just. I didn't. I didn't know how it operated, but I. That blows my mind that that's the way it was.

I mean, I had. We had a. What was. What was originally an old 70s Oldsmobile dealership with 14 Bay Shop. And I think the. I think the lease on that place was $2,700 a month. And you know, so it was. It wasn't quite as expensive as trying to operate in a big city as far as expenses go and, and employees and that kind of thing. That the pay rate wasn't. Didn't drive, have to be quite as high and so that probably prompted it. But you know, let's just say we ran pretty well and had pretty good operation and we generated quite a bit of revenue. And so you sold that store? No, I didn't own the store. I was, I set it up as a consultant and it belonged to a Ford Lincoln Mercury dealership that, you know, had me come in and they paid me and I had a writer on part of it. But that was a situation where that owner and I just decided it was time that I moved on. So let's just go with that. And I went on to do something different. I was ready to, you know, I had an opportunity to work outside of the car dealership and that was sort of where my thinking was going at that time.

What it seems like you've done a lot and I've always been interested in this. Setting up a buy here, pay your store with, in conjunction, I would say, with the new car store. And I don't think you see that as much anymore. Is that. How'd that go? You know, it just doesn't happen anymore as much. I think you see it out there.

Now they're out there and I have actually been talking to another group, a dealer group about, you know, that possibility. And the big part of the conversation is you can't run it out of the back of one of your new car stores. You cannot. It's got to be. You got to think about branding it separately. You know, your dealership might be, you know, Cogswell Ford Lincoln Mercury or whatever this needs to be called Crown, Buy here, pay here, you know, Sunshine, buy here, something separate in another facility and let it generate its own business. The thinking for the franchise operations that want to get in is, you know, I'll just send all my bad credit business over there and they can take all of our trade ins and we can run all their business through the shop. And none of those things work very well. You know, if you're, if your new car friend dealership shop is got all those numbers are filtered through Ford or Chevy or whatever and that really affects you if you try to. And the buy here, pay here operation can't stand those retail rates and then you have all the, if you're going to discount prices or whatever inside, you know, it just turns into a lot of problems between the teams and it usually ends up you're going to have to separate it. So you might as well start out with I'm going to get and buy here, pay here. It's another lot down the corner. I got a piece of property and it's going to have its own mechanic shop. And so, you know, can use some of the sub lick and buy some of the parts from you and you can move cars back and forth and you can bird dog some customers over to them and report credit and create some new car customers from your your buy buy here pay here can build some new car customers for the the new car store by, you know, reporting credit. We did that type of stuff, but really it's got to be a separate business venture more or less for the franchise dealer. And there's not a whole bunch of it, but there are some that are interested because it does generate a good ROI if you set them up correctly. You guys already know that. Sure.

Yeah. Every new car buy here pay here subprime lot I've seen have a relationship. It always sounds good on paper and the initial setup seems like it's gonna work, but it quickly deteriorates into I'm not getting the trade ins I thought I'd get. They're not sending me the things. They're making me go through their shop at full retail service hours and parts markup and all that stuff kind of deteriorates very, very quickly, I think. Go ahead, Luke.

One thing that Gene, I think you hit on that I'm not sure that a lot of buy here pay here people understand is the importance of a shop. And I heard you say during talking about what you've done, that every time you set up a store that you had a shop on site and facility there, talk about how important that is.

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Well, I'll tell you that the. There's lots of argument and discussion about how much it costs to have a shop, et cetera, but how much does it cost not to have a shop? I think it's really important, you know, and especially in a rural market, you know, the bigger the market, the more you can water down the grapevine. And the bad news, but I want control of my customer. I do not want my customer going and talking to Joe's muffler shop about what's wrong with their car. And there's a lot of dealers that'll have a warranty. They'll set up something with some guy down the street. When customer calls and says, I got a problem, Go down and see Joe at the muffler shop, you know, and. And he'll take care of. And they go down there, and Joe always gives them a list of $1500 of things wrong with that car. I can't believe they sold it to you. Your kids are in danger driving, you know that. I've heard that so much. And the customer comes spinning up to the dealership with their hair on fire, you know, about. Oh, my. You know, they believe Joe immediately over your. Over you, you know, and so I just. I don't. I never want that to happen. I want control of my customer. And you've got bought cars. They come from the auction. They might need to be arbitrated. Got a knock in the motor that wasn't there before you when you looked at it, or whatever. $250 to fix something versus $2,000, because it's got to go to an outside shop or $300. You know what I'm saying? Though the. Much cheaper to take care of it yourself and just get it done. Now let's get a check from the other dealer for 600 bucks. I mean, I have an example in my mind of a tahoe that came in quiet. Soon as they changed oil, it started knocking. That's part of the reason I got involved with that lubricant product. But the bottom line was we could repair that vehicle with that $600 for about $800 or $850 total. And so we're out the door for a couple of hundred bucks, and it's on the lot in a couple of weeks, ready to go instead of a long battle or trying to arbitrate or send it back. But when my customer rolls up right now and they got a problem, and even if it's a check engine light and they're uncomfortable, I can run out, scan the light. I've got. Somebody knows what they're doing. It can roll into the shop about. You know, we had priority lists on our procedures and things, so we knew, you know, when to interrupt something or. But bottom line was we could be the customer service entity all the time, and we could control the cost of doing the repairs so much better. And we could. We knew what parts we were buying. We knew what parts we were putting in the vehicles. We knew what we had. And that, to me, is. It's just almost immeasurable. Yeah, it costs some money. But it's not. You can run a shop operation on a buy here, pay here, and not just think of it as, you know, you're bleeding money out the back. It's just got to be set up correctly. And. And I just couldn't see operating without one myself.

Now, I did hear you talk about title loan company setting up a buy here, pay here. Did y' all do title loans inside those stores?

We did not do those inside the stores. Now, what the. The title loan check cashing business that I set the stores up for, when we built, we built two facilities or renovated two facilities. They put a check cashing store in that building, but it would be, you know, you could tell it was completely separate. Like two different suites in an office building, sort of. But both places were car dealerships. And we just renovated and built a check cashing store on the property as a separate business because it brought people to the car lot. I mean, why do you put up balloons? You know, let's bring people to the car lot? Well, you know, we cashed. They cashed a lot of checks, and.

Money came straight to you, hopefully.

Well, I got my share, you know, I mean, but, you know, the bottom line was, is we had lots of customers coming to the lot that were not our customers organically. And we were able to have salespeople that were very, you know, they were out there on the lot talking to them and showing them the shiny cars. And we always kept a hot rod inside the showroom so they could see them. And so people would come into our dealership lobby and look at the hot rod. And that just, you know, opens up the door for conversation. And so I didn't have to spend as much trying to market because I had a nonstop flow of people coming through that were using the other services.

Gene, what do you. What do you see? Because, you know, we all think about this as buy here, pay here. You know, it's almost like a life business, and it's hard to get out of it. It seems like you've. You're sitting down there at Crystal beach with the roosters crowing in the background, and you got a little RV park. I mean, what. How do you get to that situation?

Well, now, of course, I was never the dealer principal, so it wasn't as difficult for me. And it just sort of, like I said before, life got me here. But I have talked to a lot of dealers about, you know, because that was a big conversation. That's been a big conversation topic for two or three years, maybe more, at the conferences. Et cetera. I think that it's a long term plan. I think you get into the business and maybe you've been in it five years and it's starting to be very successful. You need to start thinking about getting out for. You need about years. I think that you need to start thinking about getting out 15 years before you get out, before you want to. Yeah, yeah, you need to have a long term plan. I talked to one dealer, he's up in the Vermont area. He has got a great plan for many years and he has four dealerships and he started selling parts of his portfolio, reinvesting that into his real estate, got all of his real estate completely paid off, started leasing it to himself and, and buying other. So he's moved his portfolio money into real estate, rental property and those types of things. And he's starting to look at a get out plan, completely getting out. And that would be just leasing his car lots to other car dealers and having those still generating revenue, having his rental houses and then just sell the rest of his portfolio all off at one time for what, you know, 50, 60, 70 cents on it, whatever you get for an entire portfolio in one sale. And you know, take that, that's your, that's your money. But it was a long term plan. And I think that's just from talking to different people like David Keller and some other folks that you guys might know and just discussing it with different dealers. You know, I've heard the horror story. I'm going, my children are going to take over and I'm going to Naples, Florida to live. And you're only down there for a year and you're coming back because the business is crumbling or whatever's happening. And I've heard that story more than I've heard successful getting out of the business stories. And I liked Brian's story about I'm gonna just keep selling off parts of the portfolio, taking that cash and turning that into other things until I can get to a point where I'm comfortable, sell off the balance of the portfolio. Of course, he's still selling, growing, he constantly growing his portfolio even as he sells off parts of it. But it was just a good plan, you know, where he ended up with he doesn't have any debt whatsoever. And he used his portfolio to get to that stage and now he could just sell it all off and let the lease money come in and have the, you know, the money from the portfolio sale.

So sounds like you're going from buy here, pay here to rent houses. I don't know, I don't know. I want to do that, but.

So much easier, Luke. So much.

Well, you know, I mean, we're talking about. You're only talking about a handful of lake properties, you know, so it's not tons of houses. So it's mostly buying real estate and having it pay for itself and generate revenue.

So when we talk about exit plans and so tell us about what you're doing now down there.

Well, right now, what I'm doing down here is we. My son was in the military, got some disability, and so he. He wanted to invest in something, and my parents at the same time loved it, being living at the beach and got ran off once by Katrina and kind of want. So anyways, all that came to. We bought a piece of property together, and we decided to put the little RV park because we had a pond that was part of our property down here. So this is a nice area. We set up a small RV park, and that led into a unique situation here where you could rent golf carts. And so we have now got a small fleet of golf carts that we rent out. We have RVs that we rent through Airbnb and on Facebook. And so that business is running. And so I spend time down here along with the other things that I, you know, still consult and do training and those kind of things. And. But I can do some of it from down here with the rooster out back and the pond over here, and the beach is like 3/10 of a mile, and I got a fleet.

I'm jumping on Airbnb. I'm going to book one of those suckers and come down and hang out for extended period of time. Gene, it's been so awesome. How can people get a hold of you if they want to learn more about what you do? Your consulting, things like that?

You know, the best way to do that is call my cell phone. That's what most people do. Or text me. My phone number is 479-970-4049. You can YouTube just Gene Daughtry and I have a YouTube channel that has about 40 videos there. From Buy Here, Pay Here operations to the lubricant product, we talked about a little bit. And they can. My emails are there. All my phone numbers are there. You know, of course I'm on Facebook and LinkedIn, so there's lots of ways to get in touch with me. Somebody said, I write articles. I've been writing articles for many years now. And so the Buy here, Pay here dealer, Buy Here, Pay Here report, they're gonna always be an article in each one of those. And there's in the bio, there's emails and phone numbers there. So it's not very hard to find me, even though I might be moving all around or driving my pickup up and down the state of Texas. But you know, you can reach me at any time. And I'm old car guy. You know, like I told somebody the other day, I did a, I did a call on Saturday afternoon. If y' all are working, I'm available. I'm working so that people can call me anytime. And I deal with from the east to the West Coast. So I'm up at 5 and down at 10. So, you know, call me up. I'm happy to talk. I'm full of it. I share it.

Awesome. Thank you so much for your time. Really appreciate it. Just the wealth of knowledge. Really appreciate it.

Thank you so much guys. It was great talking to you and anybody needs my help, just reach out. I'll be happy to share.

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