#125 - Luke & Jeff 20 Group Takeaways

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.

Hey, everybody. Welcome to this episode of the Independent Dealer Podcast. Luke and I are coming to you from the exact same location this week.

Isn't that crazy? But we're not very social. Distanced.

No. You can't see there's a big sheet of plexiglass right here between us. Yeah. Keeping it safe. We are out here, 20 group, Coeur d', Alene, Idaho, having a great time with other dealers and getting educated. Right?

Yeah. You know, 20 group is something Jeff and I talk about a good bit, and we really, really glad that we were able to do it with all that's been going on. Jeff doesn't like some key words about COVID so I'm going to stay away from those. But it was really good to see not everybody, but we did. We were able to see some new folks and really get some good stuff done. It was a service oriented.

Yeah, yeah, we had a service theme and we'd love to. You know, obviously we're not going to give away all the secret sauce and all the insider stuff. All the dealers pay a lot of money to be in these groups, as do we. And much of that is the interactions between dealers. And we've talked about that. Your friendships, your circles, and just talking with other dealers about specifics. But we're going to share with you some of the general ideas and takeaways that we had from this meeting just to give you guys something to ponder on, something to think on. Maybe treat this like your own little mini 20 group right here during this podcast. So, Luke, give me one of your largest takeaways. What's something you're gonna do the second you get home and get your feet back in the dealership?

Well, you know, what's really funny is you, you know, we've been doing this a long time. I've been doing this a long time, and I really think that my processes are probably as good as anybody in the country. Well, you get out here and you listen to other dealers and you realize that I'm still making a lot of mistakes. And it was funny. We sold a car yesterday at the dealership and a guy flew in to pick it up. Well, when he flew in, everything went perfect. And then he goes to drive it home. And something that either we missed our inspection or something we didn't reinspect after we inspected was wrong. And so the guy. We wasted the guy's whole day he wasn't happy. He wasn't happy we didn't sell the car. So what I know that we have to do is we need to start reinspecting after the inspection. And I know that sounds just really stupid, but, you know, I'm thinking we need to drive the car as soon as it gets here, note things, then make sure that our tech drives the car. And then after everything is done, I'm going to have to reinspect it or I'm going to have to have another party inspect it. A drive, you know, a 15 mile drive or something to that effect because we still miss things, which is odd. And we just got to get better at that.

Yeah. And coming. I want to talk about that, the missing things part. I think there's definitely some things that can be missed. But one of the dealers had mentioned he wants three people to have inspected the car. You know, you have your initial guy, maybe a B or C level mechanic that does kind of your pre delivery inspection the second the car hits the ground. Then you have your a mechanic who's really doing the diagnosis and putting his hands on it to make sure that right parts are being put on. And then you'd have a third person that maybe drives it after detail before it gets stickered and put on the front line or whatever your process is. But to have that interim person that's going to be touching it after mechanics have touched it and before the customers touch it, you know, and that's what.

You know. That seems like a lot, right, Jeff?

Yeah, it does. It's hard to catch them all.

It's hard to catch everything. And it might even be something where if you've got a customer, you know, who's coming in to get a car and test drive a car, the salesperson that's selling it should probably even drive it, you know, the day before they get there or the morning before they get there. I don't know. I don't know. But I know we lost a sale yesterday and a very big gross and a lot of cash we could have put back in the bank because something broke down in my inspection process. And this isn't the only time this happened. It didn't just happen yesterday. I can go back and tell you the other times it happened. So my process has to get better. And I know that we've got to implement something to do it. And so that's my big takeaway. That's exactly what I'm gonna figure out when I get back.

Yeah. One of the things I do in my lot And I have about six people that are allowed to take a car home overnight. Right. And some of them are on my insurance policy because they have a demo. And some of them are mechanics and service riders that are using it in the course of business. But they'll take a different car home every night. And that's the rule, is that they have to take a different car every night for that purpose. You know, something that maybe just hit the lot. The salesman will take something home overnight to do that overnight test drive and check it out. I could imagine one person trying to drive every car that hits the lot. Could be a full time job. But having four or five people take one home a night, your insurance liability is, you know, a bit of a scary mix. But it could help out with that.

It could. And I think it's a really good idea. I think service riders taking cars home at night is probably the best way to fix this problem.

Yeah, at least one of them. And so to build on that point, one of my takeaways is my reconditioning process and my we owe statement. So, you know, got a lot of flack for having a we o statement. Both of us did, actually.

I gotta eat up on that one.

And to promise customers things at the time of sale and is, I think, I don't know, I don't see how you go around it. I don't recondition my cars to the point that they're perfect. And I sometimes have a very hard time with just saying like, well, that's the way it is because we miss things. And sometimes my guys purposely miss things so that we have three or four items at the time of sale that's like, yeah, I get it. The back window doesn't go down and there's a tear in the driver's seat. And the stereo has some worn off buttons. But of those three things, you know, I'm allowed to contribute $200. Which of those is most important to you? And let's take care of one of those. And the customers normally really. Oh, well, I really care most about the seat. Great. I can put $200 towards that. We'll put it in the we o statement. Let's get this paperwork signed. And they're more than happy to feel like they got something at the time of sale. I think a lot of us are programmed to just not run in and pay sticker for stuff. We feel like we want to get something back sometimes, even if it's small little concession from the dealer. That's my philosophy.

You know, I like A car to be perfect. And I got a lot of flack about that. And I've got to realize I am selling a used car. I just want to make sure that my car, my used car is better than most. So I rely on that. I rely on that as my, you know, that's what we do. So I over, you know, I over recon and then I feel like I'm recon again sometimes at the we owe statement and it's costing me money and I've got to, I've got to get better at that. We got to let people understand they're buying used cars and I got to get better at that.

Yeah, one thing too is I'm going to get on is, you know, my general manager is going to listen to this tomorrow morning. He's going to agree with me. We have got to be closing our ros at the time the car leaves the shop. There's about a 2412-24 hour period between the mechanics handing it off to the detailers and the detailers getting it put to the front line and it going to oil change and then coming back. That's enough time to close out ros if you have to. If you have an open, if you have a, you're waiting for an invoice or a bill from some vendor. I get that that might happen one out of a hundred times but very rarely do you pick up the car, you don't know what that bill was or what that invoice was or what that part was you ordered. And if it's still open and, and you put it on the front line because you're going to do the stereo later or you're waiting for this part to come in, close out the ro and open another one when that part comes in. Because what we can't have is my salesman and my manager selling cars when we've got a thousand or $1,500 ro left open. They think they made money when actually we lost money or didn't make what we should have. So the timeliness and whatever it's going to take for my service writer to have the manpower to close those ros within a 12 hour period. It's just gotta happen.

I got beat up a little bit on policy expense and my policy expense always runs high and it's because I give too much to customers.

Right.

But another reason is because we're not closing those ros all the time. You know what will happen is we're so ready to get that car sold that for some reason a Bill doesn't get added to the car. So like you're talking about, it looks like you made let's say a 4, $4,000 front end gross when you had a fifteen hundred dollar bill that wasn't closed. And so Ro. Whatever you want to call it, and so it wasn't added to the car and then it gets stuck in your policy expense and then it makes everything look bad. So we've got to work on that, a better process, making sure it's done, making sure the salespeople know it's done, but we got to do it. So I'm working on that.

Yeah. Luke, tell me this. Do you do when you, when you're doing some customer work, say you just sold that $20,000 truck to a gentleman and he needs some tires redone and you gotta yank him out for two days. What do you tell him? You're walking for two days. You better head down to the rental company, get yourself a vehicle. You don't do loaner cars, right?

No, I don't. And the reason I don't is threefold. Okay. Liability is always number one. And so the liability aspect of this is you don't want someone to put your company in. In jeopardy. And unfortunately that can happen. You know, the worst case scenario is somebody has an accident in one of your car and let's just say they were drinking or they weren't drinking, but they were speeding or whatever you want to say, and they kill somebody, it's going to be horrible and you don't want to be involved in that. So that's number one liability. You should always move away from that. Number two, what I found when we had loaner cars, every single one of them are being used all the time. And number three is if your service advisor knows that that person's in a loaner car, they don't rush to get that car fixed. So what we do is if we have a customer that needs a job done and it's a three to four hour job, well, we say, unfortunately, you're going to need to drop your car off in the morning. We'll have it back to you that afternoon. Now if something unfortunately happens and the car has to stay overnight, we let the customer know as soon as possible and we can reimburse them for a rental car. But that is the only way we do it. We say, yeah, go get a rental car. You've got, I think we. $30 a day or something to that effect, we will reimburse. So I think there's ways around it beside Having rental cars. And you'll notice that if you have rental cars, they're all out. And those cars don't get done fast enough.

Interesting.

What do you do?

So I don't have that experience. So from the liability standpoint, it's a separate llc. I have my own rental insurance on it. So it's not any way connected to the lot. They're all licensed with their own license plates.

There's still liability there.

Yeah, as much as an LLC has liability. Right. So if they're gonna sue you, your LLC, and you as the owner of the llc, then they want to come after you personally, then you're gonna have an umbrella insurance policy.

What they may also say is, hold on, this was a loaner car, but who was the loaner car for? Was it for the dealership? Well, okay. Then they start sucking in the dealership. And I'm not saying this will happen, but I can say is I think the best policy is not to have loaner cars.

I'd love to see evidence where someone in a Hertz or an Avis car has gotten in a wreck and Hertz or Avis has gotten sued.

Oh, it happens every day.

So Hertz and Avis would be completely out of business.

No, they have internal attorneys who take care of everything.

Well, they've got enough insurance.

But most of those people are self insured.

There is a law anyways, I don't see a liability standpoint to cover the headache of. And I don't have an issue with my loaner cars being out there. Three of them, they're complete hoopty rides. There's nothing, no one wants to be in them longer than they have to be.

What happens if one of those break down? Why you've loaned it to somebody?

Yeah, then we go get it towed, we bring it in. Well, they were in a car to begin with. I wasn't making them walk. And here's the thing. My customers don't have $30 to go down and get a rental. They don't. Literally. And they don't have the credit nor the credit card to even get a rental.

Right.

And that happens, let alone they can't even get to the rental company. So the fact that I've just sold them a car and it's broken because of, I would assume my neglect because I missed something or I didn't test drive it well enough or something just happened, I do feel obligated to keep the them driving. And the potential liability and headache from that is way, way, way, way, way, way less than me telling A customer, they got to walk for three days.

I agree with that.

After they just put three grand down.

I agree with that.

On their brand new car.

Well, you know what we do? If we have a customer that just bought a car and for some reason it doesn't start or whatever, man, they are high priority. We race out, we get it towed in, or we get them to tow it in if they have coverage. We, whatever it is, we get out there, we get the car, we get it back, it's pulled directly in, the shop doesn't wait in line, and we get it fixed. Now, there's cases where if it needs a motor or transmission, it may take several days. If that's the case, then we try to figure out something else. Luckily, we don't have a lot of that, but, you know. Oh, well.

And you tow it back with your own tow truck.

Yeah.

And you're worried about liability?

Well, I mean, that's what my. I've got tow. I've got. So I've got liability insurance on my department. On my service department. Yeah. And that's separate from my garage liability. Then I also have a separate policy on the tow truck. So the tow truck has probably two and a half million dollars worth of liability. And then. So if it got past that, it would go to my service department, which probably has another two and a half million dollars liability. I think I'm pretty safe there. Yeah.

Yeah, absolutely. Any other takeaways, Lou, from this week?

For sure. I had been working really hard at reducing my recon cost, and I had done a great job. Well, according to my composite numbers, it's crept back up and something I got to work on. I got to get my recon cost down by $200. And this is the big thing. I got to have the same quality. So anybody can cut recon by $200, right? Yeah.

Yeah. Just cut corners.

Just cut corners. Well, I'm not going to do. I can't do that. I cannot cut corners. But what I do have to look at, which we talked about a little bit earlier, is what do I not have to fix cosmetically to still get the same quality in the car? But, you know, is it not painting certain bumpers, you know, that I paint now? So I've got to look at that. I really got to look at my cars and what my customers want, and I've got to learn to sell them and say, hey, you are buying a used car. Yeah. And we price this accordingly to that. Now, if you do want us to paint the bumper, we can.

Yep.

And it's going.

It's going to cost you 200 bucks.

Or what I can do is just say, you know what you don't want. You do want this car. I will do that in the we O form. Now, I'll talk about this for a second. We put it on the we. Oh, right. But let's say 10 bumpers we didn't do, and one out of 10, they say we need that done to sell it. Well, I just saved $1,800 instead of $2,000, but I did save $2,000 to start with. So I think there's ways to less recon but still get customers satisfied. Yeah. And so maybe that's something we look at.

Yeah. And that's. That's kind of been my philosophy I mentioned in the beginning, is there are definitely cosmetic things, you know, drivability, safety. You've got to do those cosmetic stuff, man. You could spend the moon repainting every faded Nissan Altima that you have on your lot, you know, and we have.

Our own body shop. Yeah. So we, you know, for us to pull something in and paint the whole car, we. I mean, we've done it.

Right.

We painted five panels or this. That and other. It adds up. Yeah, it adds up in time to recon, too. Time to line. And I know everybody knows what I think about time to line. When you start doing all these things, your time to line just creeps up. Yeah. And costs you money every day. But you still. Your cars need to look good. And I think people pay for cars when they look good.

Yeah. I typically like to do that once I feel like the car is a little bit aged if it's been on my lot too long, and I feel like it's a bit of an ugly guy. And maybe no one jumped at it because the bumper was wrinkled or the hood was faded. Then it's like, all right, let's put a paint job on this thing, send it through detail one more time, refresh it, and then we'll get some eyeballs on it.

That's funny you say that. Alexa and I were talking about that last night, and she said, well, we don't have to paint everything. We can just put it out there on the lot. Well, then I walk out there and I go, why has this car been here for 40 days? Yeah. You know, we do a lot while it's faded. Well, yeah, because the bumper looks like garbage.

Yeah.

So then we have to pull it off and do it, you know, so that. I don't know what the right answer Is. But we're gonna try a couple things and figure it out because I really think that that's our business is so. Well, it's just different than any other business. Right. Because of inventory and, and getting the used inventory and recon in it that we've got to. Sometimes it's trial and error and that's what we're gonna go back. And thankfully things were put out to me that I gotta fix and I'm gonna fix them. Yeah.

Yeah. And part of this, when you've got post sale repairs, Luke, it helps that you've got your own reinsurance company. Right?

Sure.

And you know that we've got the guys over at dealer Re, they've sponsored the show.

They're our boys.

They are. And I use them for my reinsurance company, which means out of every sale I am giving a three month, 3,000 mile warranty which I fund into my reinsurance company on each sale. But I can also upsell my customers to a service contract. Right. And we talked a little bit about this in our groups as well. The benefit of that is I'm able to reduce my tax base now. Right. Because before I would just give them this warranty and I would kind of self insure, it would just be like a, a mental line item on my books to be like, hey, yeah, I know I've got these three month, 3,000 mile warranties out there. I need to be prepared for X amount of goodwill or warranty claims over the next three months. Now I'm physically taking that out as a line item, as an expense. Right. So it's reducing my taxable income and I'm shifting it over from my right pocket to my left pocket and my left pocket is ready to step in and do those types of repairs. Right?

Yeah. You know, it's amazing what people do and you know, you need what they call an arm's length away from a lot of transactions. And that, you know, dealer Re and reinsurance really helps you with that reduces your taxable liability and also it reduces your liability because if, let's just say the CFPB came in and said, hey, you've been given this warranty, so called warranty, but you've been upping your price, right?

Yeah, that's what everyone says, well, why don't I just up my price by 500 bucks?

So what that really is, is a finance charge. Really. So make sure that you do reinsurance the right way, you do warranties the right way. You know what the difference between a warranty and a vehicle service Contract is, Jeff.

Who pays for it?

Who pays for it? Because a warranty I'm giving it. Right. Nobody pays for it except the dealer. And vsc, the customer is actually buying it.

It's a line item in the contract. Yep. Do it. If you, if you sell more than 20, 30 cars, buy here, pay here.

A month, for sure. I mean, I think. I mean, shoot, if you're doing 10 cars a month, why not. I mean, call our folks at dealer re, because they will help you.

Yep, yep, yep. So any, Any other takeaways you had from this week, Luke?

It's better processes, you know, and we always talk about that. You may have processes written down, Jeff, and you may think they're great, but what you should do every once in a while is you need to get with the people inside the process and verify they're doing what you have told them to do. Because sometimes they don't. Right?

Yeah.

So inspect your processes today or this week to make sure that everything you've trained on is being done. Yeah, Training, training, training. Right.

Yep, yep, yep, yep. And walk through it like you're a new employee. That's the funniest thing is you have this process and you assume you know where this sticker is and where that goes and where the car moves and where to keep the keys, because you've always been there and everyone's always been there. But those inconsistencies and kind of flaws creep into the process when you're not staying consistent and reteaching and retraining.

You should get one of your salespeople to close you on a deal. Right. Because you need to know you may have trained him on a certain word track when it comes to signing documents. And, and you get in there and let them sign you up on one, there's gonna be holes in that process. They may be saying the totally wrong thing and you need to inspect it. If you're not using secure clothes or something like that, you really need to inspect that process because they may be telling the customer, oh, yeah, well, you know, you can bring this thing back a year later. And we're going, we're gonna, we're gonna trade you out a year later from now. Today we got you. So you need to make sure of what you're not even salespeople, service people, whatever. You need to make sure your collectors, you need to make sure what they're doing.

Well, it makes me think I just need to pre record my closing. Even if it's not a fancy service like a secure close, but just have a 20 or 15 minute video, 10 minute video that just runs through the closing with them. I thought about that years ago for that consistency. One thing that was really interesting to me too, about those processes that I'm going to implement when I get home is my service guys. When they do the walk around or when they do their pre delivery inspection, I'm going to add in there, delete, reset factory settings in stereo gps. Didn't know that was an issue, but apparently people are buying cars, seeing that there's addresses saved in it.

Yeah.

Then they can go to the person's home, hit their garage door opener in the. In the home link.

Wow.

And open their garage door.

That's true.

And if we sold our car to someone and they did that, we are open to that liability because we did not wipe the memory inside the gps.

Which makes no sense. Which makes no sense.

Which makes absolute sense.

You kidding me?

Well, I mean, the reliability, it doesn't make sense.

But why are we liable for that?

That's silly.

Yeah, it's the same reason when, I mean, if you sold your wallet, you're gonna clean it out before you give it to the next guy. Right.

So that means you need to look in the glove box and make. Make sure all the registration, insurance information is taken out of there too, right?

Yeah. And we do that. I mean, that's pretty normal. But the thought of wiping the stereo just never even dawned on me.

Never. And you know, how many cars have you left your cell phone hooked up.

To the last one I just sold.

Oh, my gosh. So make sure that you're undoing all that stuff because you just never know. One other thing that Alexa just pointed out a text to make sure I was saying the right things. But look at your numbers daily. How many of us do that? You can look at them weekly. You know, especially if you're in 20 group, you're looking at them monthly because you're putting them into the composite. I hope you're putting them in the composite, Jeff.

Yes.

Okay. But sometimes things can get so out of whack that a month is too far out. If you see things daily, then you, you can really focus on them. So make sure you have a good doc report, a daily operating control, and look at those numbers daily. Because if you don't, you can really get yourself into some trouble.

Absolutely. I think that's a great thing to wrap it up on, Luke. I mean, we harp on it all the time and you know, this has been a great meeting again, we can't say enough about Even if you don't want to join a formal 20 group in any of the associations, get involved with the dealers, make the phone calls weekly, monthly, reach out to guys, bounce ideas off them. Just like Luke said, for as many years as he's been doing this and I've been doing this, and I feel like I've got my processes down, you get here and you realize it could always be better.

It could always be better.

And I realized some blaring holes in my process that I just, I didn't even know were there, you know, man.

You know, very interesting what you just said, and I won't harp on this long, but just because someone's your competition down the street doesn't mean you can't share with them. It doesn't mean you can't talk to them because they're going to make you better, probably. Or you're going to make them better and you could tell them your secret sauce. And the chances of them being as good at it as you is probably very, very unlikely. So don't be afraid to call the folks in your town and share with other dealers in your town, because in the end, I think you'll be better because of that and they will be better because of that. And really, we want our industry to be better, right?

Absolutely. All right, Luke, good chatting with you. Hope you travel safely and we will talk to everyone in the podcast and next week.

So good.

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