#118 - MM - Selling Your Notes

Hey.

Hey. Happy Monday, Luke. Hope you're having a great, great week. Getting geared up to finish out the month of June real strong. Right. I mean, it's been mixed month for us. We had a great first couple weeks. It slowed down a little bit. I think it's my manpower. It seems like when I pay attention to the forums, my state and my area is always about a week or two behind what everyone else seems to be experiencing. But my portfolio, it's been a little stagnant. I'm not really able to grow it much from a buy here, pay here standpoint. Tell me, man. I mean, when does it get smart to free up capital, sell accounts, go out, get lines of credit? I mean, do you ever sell accounts?

No, never have. Let me back up. We did back in 01 and I don't again, I'm not. I don't recommend it. If you can, there's times you have to. But if you can weather the storm of low cash flow, then don't do it. And that may mean not buying inventory. Now. You don't want to hear that, but.

Well, I can't buy now anyway, so it's all right.

Yeah, that's right. So you could just sit there and collect your payments come in, but you're never gonna. If you continually sell your accounts, you're never gonna be to the point where it makes cash flow sense to be in the buy here, pay here business. You understand what I'm saying there, Jeff?

Yeah, you gotta. We've talked about this in previous episodes. Hitting that kind of critical mass where your cash flow is exceeding your expenses. And the worst thing about selling those accounts is you think you're freeing up cash or you're cashing out of these loans when really all you're doing is maybe breaking even.

That's. It's another business model, you know, it's really not much different than a CAC type model. Right. If you know that you're gonna sell accounts, well, you've gotta build in that loss you're gonna take by selling the account. So your car's gonna be a lot higher than most people's, right?

Yeah.

So again, if you're working CAC every day, your cars are probably not even priced. They're probably a lot higher than most because you're taking that big cut from CAC when you do the deal, or from Westlaker or whatever, ABC subprime company. So you gotta build that model in. If you're making little gross on the front end and buy here, pay here, and you're saying, oh, I'm making all this money. Then you go and sell your accounts and you're taking 70 cent on the dollar, a principal dollar for those you're not making any money.

And those are the best accounts too. That's the other side that I always chime in on this. They're not taking your whole accounts. They're gonna cherry pick all your best collateral and your best payers and that's who they're gonna keep. Heaven forbid you have any kind of a first, second payment or six month recourse on the hands and you're forced to buy them back.

And you're going to see all this cash coming to your business at one time and you're like, oh, this is great, right? But then you start trying to collect those accounts they didn't take, which were kind of bad, right? And none of that money comes in and you're going to repossess those cars and you're going to essentially be back at zero. So know what you're getting into. Don't get me wrong, there are good companies out there to work with and there comes a time where you have to sell accounts because of taxes or things like this. Just be smart. If that's going to be your business model, start your business model. That way. Don't get to a point where you have to sell accounts.

Yeah, awesome. All right, Luke, we'll talk to you Thursday.