#135 - Profit Through Reinsurance with Taylor Byrd

As you know, we have Taylor Bird here with Dealer Re and Luke. If anyone listens to the podcast, they know that Dealer Re has stepped up and really supported the podcast. We've been doing this for two years and just kind of throwing it out there on our own. And you and I decided that we needed to take it to the next level. We wanted to be able to get some sponsors so that we could put some money behind this and really push it out to more dealers. And one of our first calls was to the Birds. And Tim and Taylor said, absolutely, we want to support you guys. So if there is any vendor that is a friend of the independent dealer, it is the Byrds, right?

Sure. I'm sure they've been supporting niada, the Carolinas association, for a long time. And that's what we look for. Because vendors that do that, they're supporting our calls as dealers. Even if you don't use that dealer, even if you don't use that vendor, these vendors are helping, helping us with all the things that go on inside of association, making sure laws are passed properly, making sure that we stay compliant. All that stuff costs money and just a little bit of dues we paid to our state, national organization. It doesn't do it. You got to have vendors that step up like Dealer Re and the Birds, to really get to the next level. And that's what they've done. And there's so many great vendors out there and we just appreciate that, Taylor, and we appreciate you being here today.

Hey, thank you guys for having me on. And yeah, we are proud to sponsor the Independent Dealer podcast and we're proud members of the NIADA and several state associations and we know that the industry would not be where it is without those associations. And you know, to be candid, you guys, podcasts helping the industry to get better and better each week. So that's what we're here for.

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.

So, Taylor, we wanted to get you back on. Obviously everyone who has heard our podcast knows that episode 19 we had Tim on. And Tim, we go into a pretty good deep dive in episode 19 about what reinsurance is, why dealers need to have it, the structure of the company, some of the products. Today, let's get into a little bit deeper dive on what those products are and how dealers can really, really capitalize their reinsurance company as a profit center or a profit capturing center and a wealth building. You know, that's the other big thing is you're building this wealth. But maybe give us just a real quick nutshell. What is a reinsurance company? For anyone that hasn't yet listened to episode 19 or, or maybe just to refresh us, what are we talking about?

Okay, perfect. So a reinsurance company is a separate entity owned by shareholders. Typically for a dealership, the reinsurance company would be owned by the dealer himself and maybe a spouse or something of that nature. And again, it's separate from your dealership, but it's an entity that you can use to offer different products to your customers at the dealership. For example, limited warranty, a certified warranty, vehicle service contracts, which a lot of people might call extended warranty, still gap and in the buyer pay here space, collateral protection, insurance or debt cancellation coverage. There are, there are many, many, many different products that you can do through the reinsurance company. But the main thing that you're trying to do is instead of as a dealer sending that money, which previously would be cost, for example, for a service contract, instead of sending it every month to a third party vendor, you now are going to be sending it to your own insurance company that you own to reserve there to pay for any claims that arise. Then whatever is left over, you get to keep as profit as the dealer instead of that third party vendor. Does that make sense?

Yeah, Taylor, that does make sense. And it's, I mean, I've been on it for years. People know what I think about it. But tell me this, what's the advantage of setting up the reinsurance company instead of me just saying, you know what, I'm gonna give a warranty with each one of my cars. What's the difference?

You mean a limited warranty?

Yeah, let's just say I was giving away a warranty and I was kind of just reserving the money myself. But you know, what's the difference in doing that liability wise and tax complicated tax reasons?

Okay.

What's the advantage of having the reinsurance company instead of just doing it on my own?

Sure, that's a great, that's a great question. So when you set up a reinsurance company, okay, it's a separate entity from your dealership and most dealers are set up as s Corps or LLCs. So you know that every dollar that you do not expense at the end of the year flows through to you as profit as the dealer and you pay your ordinary income tax bracket on that profit April 15th the following year. Well, by owning this insurance company, okay, you are still, what you can do is you can expand warranty premiums to pay for future warranty claims. Okay. From the dealership to the insurance company that you own. Okay. It being lowering your tax liability there at the dealership. Okay. Moving it over to the reinsurance company where you will pay your claims out of there, but everything that is left over becomes your profit as the shareholder of that company. Okay. And the tax benefits that are given to these types of small insurance companies under IRS code 831 is that you won't pay taxes on the premium that you send to the company. The company does pay taxes on investment income, like the interest that it may bear in the account that it's sitting in. But then the shareholders will take the money out as a dividend or you can loan it, which is another possibility. But when you take it out as a dividend, you're going to pay the capital gains tax rate on that dividend, which because it's a qualified dividend, you're going to either pay 15 or 20% versus maybe 32, 35 or 37% if it were to flow through to you as profit at the dealership. So that is one benefit is that you can have a significant tax savings. But for those that aren't doing a limited warranty currently, it adds value to why customers should be purchasing from you versus buying from the guy down the street. Yeah, go ahead.

Is there any liability protection by doing it through the warranty reinsurance company instead of, you know, on the lot?

That's a good question. So give me an example of that.

So let's say, you know, let's just say I had a customer that, let's say I don't have a reinsurance company. I just, I gave my, I just gave everybody a three month, 3,000 mile warranty. Let's just say that happened. But I don't have a reinsurance company. And let's say the customer did something.

And.

I didn't warranty it because I thought it was neglect or whatever, and they came and sued me. Compare the two, the two situations. Could I get in trouble one way compared to another or is there any liability?

Well, so that's a good question. So with, by setting up a reinsurance company, the management of the claims side of things is taken care of by the administrator that you might hire. If it's theore, if it's, you know, it's another company, I'm, you know, that is taken care of by another entity that you're paying an administrative fee for. Okay. And so that liability is really placed off on, on them, if you will, versus if you're the dealer, you know, yeah, you could say that it's neglect, but you're going to have to keep proof of that. And you know, that might be, that's just an added step in all the different administrative tasks that you guys have. And somebody could come back and say, hey, you know, he gave me a warranty, but he didn't cover it because of this. But I think he was being, you know, he was discriminating against me for X, Y or Z reason. So that would be, I guess, the liability portion. A benefit is that we're going to adjudicate your claims based on the contract language of the policy that you decide to give or sell that to your customer. And if it's not covered by the contract language, then we're going to tell the customer that it's not covered by the contract language and they have to prove that there is a, that there's a failed part most of the time that that failure or that RO is going to come from your shop. So you guys already have the proof. You're going to pass it on to us. But for declined claims, that's going to come from us instead of coming from you, which can help you guys save face, certainly in the face, you know, with your customers.

Yeah, there's definitely, I mean, there's so many reasons to have reinsurance and I think that kind of covers what a reinsurance company is. Jeff. So now we got to sell the product, right?

Yeah. So what's interesting to me is you've got, I mean, the fact that you're just capturing money that you could, that you were previously sending off to Wins or Guardian or one of these other warranty companies, service contract companies. I mean, that alone is just, I mean, you've got to do that. I don't know any dealers that like service contract companies. I don't know any dealers that do because their job is like every day.

Somebody, it seems like every day somebody's complaining about them on the Facebook page in it. Right.

Their job is to not pay your claim so they can make money. I always had that rub. So I would never ever sell an outside service contract, especially on buy here, pay here. I mean, that's just. If you're doing that right now, just stop it because it doesn't make any sense at all if you're buy here, pay here and you're selling some third party service contract. So let's talk about that. Let's start first, Taylor, with what are the products that say I'm a retail dealer, right. I sell cash, I sell credit union. I maybe do a little bit of subprime. And obviously within the subprime category, we know each lender has its own quirky little specifications about what service contracts they'll take and which ones they want. So maybe we can leave that one off the table because, you know, CAC is only gonna let you sell a wins warranty. They're not gonna let you sell your own, you know, service contract or whatever. But let's start with that. As a retail dealer, what products can I do? And then let's talk about as a buy here, pay here, what products do I have?

Okay, perfect. So for a retail dealer, you can, you can give your customer a limited warranty. So you can, instead of selling your cars as is, you can say, hey, we're going to warranty this vehicle for 3 months, 6 months, 12 months, whatever you want to do. You can give your customer a limited warranty. And that's going to be included in the price of the car? Yes.

When we say warranty or guarantee, that means it's free, right? It's not a line item contract.

Correct.

You are giving it to them. It's not quote unquote included in the price of the car because that would be, it's literally a freebie.

Right, Luke, that's very important to distinguish between the two. Because people say, well, I'm giving you, you're buying a warranty. Well, you don't buy warranties. And so dealers out there really need to understand the difference. And that is the difference.

Okay, so you can do that. Or it could be a limited warranty, it could be a certified warranty where you, you know, manufacturers have been, you know, pouring millions into certified pre owned. Right. So why not? You can utilize that marketing that they've been doing and certify your card by putting them through an inspection checklist and then having that checklist there for the customer and then saying, oh, just in case, Mr. Customer, that we missed anything on this certification, then we're also going to warranty the car for X amount of months and X amount of miles. Then you can upsell, okay, you're upselling from a vehicle service contract, which is, you know, that's the stake on the F and I plate, if you will. Okay. So the vehicle service contract is the number one profit maker for F and I or retail dealers and buyer payer dealers too, but that is the stake of the plate. Okay. And then you can obviously sell different ancillary products like dent, you could sell key replacement, which is tough with independence because you might not always have two keys. You have to have two keys. Windshield. You could do paint and fabric, all of those different things. You can also do F and I to make an additional gross and then reinsure them. And we.

And you could do service to like oil changes and. Yes, you can prepaid service plan, something like that. Right.

Maintenance program. As long as you have your own shop, then it would, it might make sense for you to do that detail.

I mean, is that something where it's like, hey, we've got a detail shop and this you prepay for one deep cleaning a month. I mean, is it really kind of like sky's the limit?

You could include that. I mean it has to make sense financially.

Yeah, yeah, you'd run the numbers.

But. But you can include that in your prepaid maintenance program. And that's kind of that, that can be customizable to your, to your program. But interesting. But for buyer, I mean for retail, that would be it. We tell our clients, typically when you're not the lien holder, gap is something that you should do through a third party company. Yes. Okay. And Tire and Wheel also has the most claims out of any product. Tire and Wheel has the most claims. Okay. So we tell our clients that they should do Tire and Wheel through a third party company and let them put the bill for those. But all those other ancillary products you can do through your reinsurance company. You can actually bundle them together, which I think my dad talked about in the previous episode, and include that as. You can include that as a giveaway to the customer. Okay. Like roadside assistance, Denton Ding and windshield coverage. You can include that as a giveaway for one year and then upsell that as a package in F and I to a three or five year program specifically for retail. Okay. And that, that creates another profit center that you know, for F and I gross for the dealership. And then ultimately, you know, you guys can capture that extra profit with the reinsurance company on the back end of those policies. So for retail, that's basically that would be the portfolio of products that I would recommend for a retail dealer.

And would you, would you be, would you want to be cautious if your retail like ACV or the type of cars you're selling? I mean obviously if you're too far down on the cash, like 500 $1,000 type cars, you may want to be a little bit careful because your claims are going to be crazy high as far as quantity. But then on the other end, if you're selling Maseratis and Audis, are you going to want to be careful because your claim dollar amounts are going to be ridiculously high.

Great question. So like if you're selling vehicles that on average are 200,000 miles or more, okay. You're probably not going to be selling 12 and 24 month contracts on those because you're going to lose your shirt on them. You might give a three month warranty because you know you're probably going to fix them anyways if they break and come back just so you can keep your good name in the marketplace. So you might give a three month warranty on those, but you know, you want to set for yourself. And this is something that we do for our clients is we help them to know, hey, our cars have 175,000 miles on them, then we're gonna, you know, we're not gonna do anything longer than a 12 month policy or if it has 150,000 miles on it, we're not gonna do anything longer than a 24 month policy. You see what I'm saying? So you're gonna scale that risk back.

Yeah, makes sense. You gotta be smart about it.

Yeah, you're gonna scale the risk back based on your inventory. Now the higher end stuff like I said, Maserati, Porsche, some of those, to be candid, we won't even do through our program like a Land Rover because they're just, they cost so much to fix. But you know, Mercedes, Audis, that type of thing. BMWs you can do through your reinsurance company, but you need to reserve properly for the claims that you're going to see for that. So, so if you're selling mostly F150s and Honda Accords and you know, that type of thing, you're going to be reserving less for those cars than you would for a BMW, Mercedes, Audi, if that makes sense. Because they're going to cost more to fix.

Makes a lot of sense.

Yeah. Do you, I mean, do you get like a rate sheet when, if you're doing that, I mean, is it each car different, Taylor, or is it just kind of when you, is it just like one big, you know, algorithm that controls what we do or when you sell a product like that?

That, that's a, that's a great question. So it just depends on the, the program that you're doing really with the administrator that, that you've chosen. Okay. So there are programs that are actuarial by the make and model, by the, by the year model and by the mileage that's on the vehicle, what you're selling, it's going to spit out, out of a matrix. Okay. This is how much you're going to have to reserve for that vehicle given the coverage that you sold. And then, and all of that is built into a portal so you don't have to flip through a book to find it. You can just type then. And mileage in with most of the providers. Okay. And then there are other programs that are based, that are based kind of on a. On a simple system which whenever we can make things simple, guys, for our salespeople and F and I people, we want to do that, right? Because the more complicated it gets, the less they're gonna sell it. It just comes down to that. So if you can give them one price for a term and coverage, then that, that's the. That's the best thing that you can do to get more penetration on. On those types of contracts, which is. Ends up getting more, you know, being more profitable dealership. So there are other programs that we, that we come up with that are simple so that, so that again, it's simple for the, for the customers. And then we can, I mean, for your sales folks, and then we can add surcharges on for like European or diesels, you know, those, those types of vehicles. You got a reserve.

So say. So we talked about retail opportunities. We've got the service contracts. We want to upsell our warranties to service contracts and VIN etching and key nonsense and occasional wheel and tire if it's in house. But so more in house products for Buy Here Pay Here. If you are a Buy Here Pay Here dealer, that opens up a debt forgiveness gap, depending on the state you're in. And then also your collateral protection insurance. Right. Help us out with Buy Here Pay Here products that are also available in addition to the basics.

All right, so buy her Pay here. You can still do the limited warranties and certified warranties. Okay. And I encourage that you do that because not many buyer Pay Here dealers are selling their cars with a warranty. Most of it's as is. So if you can stand out from your competition, you need to do so. And that's one way to do that. Then you can upsell to a vehicle service contract. Okay. And when you upsell to a vehicle service contract, then you're going to build that, you know, whatever that retail cost is into your contract and you'll collect it from the customer over the term of the loan. What we do that's a little bit different is that we'll Help you to pay for it to your reinsurance company over the term of the loan, which provide here allows you to stay cash flow positive. Because if you. Let's take an example. If you had a, if you had a thousand dollar contract, it cost you $1,000 and you sold 20 of them this month, it would be very tough to send 20 grand away next month, which is what you would have to do with most warranty companies. But you know, through our program, you pay for it over 24 months instead of.

Yeah, we talked about that a lot with Tim. Your program amortizes that payment, which helps. Which really made the decision for me. I was scared to think that I was going to have a $20,000 cash drain every month from day one, you know, but this has let me build into it. And yeah, I'll get to the point where I'm funding a 20th of 200 contracts one month. And it will be a month.

20Th of 800 contracts a month.

Yeah, yeah, 800 contracts, as that kind of stacks and builds on itself. But that's a great thing. And then we also have Gap help us understand that from a buy here state. Because I feel like for me, I don't quite grab my head around. It's still where those fit.

Okay. And I'll try to see if Luke can chime in here too. So with Gap, okay, right now, if most dealers that are listening to this, if they're buyer pay here, what they do is if their customer has a total loss and the insurance company pays you, I'll give you an example. The car's worth six grand and the customer owes you nine. They get in a total loss, the insurance company pays you six grand. After you pull their teeth out trying to get that six grand. But you get the six grand, they still owe you $3,000. Your customer owes you $3,000. Most buyer payer dealers forgive the debt. Right, because if you go after them, first of all, they don't have it. They don't have it. So going after them is fruitless. And when you do go after them, then you alienate that customer and their family and friends.

You just want them to buy another car from you and you forgive the debt.

Right.

Because it's your model that put them back in to begin with.

So what did you just do, Jeff? You gave them free Gap?

I did. I just. And I've been doing that for two decades. That's part of my shtick, is I include a Gap in all my cars. If you buy another car from us, I forgive the balance and that'll go ahead.

Yeah. So you know, it's. That's what most buy here payers do. Jeff, if you know we've been doing this for 35 years and you know it's a, it's a good business practice to do that because number one, you're probably selling the car for more it's worth. Well, most, most buy here payers stores are selling the car from way more than it's worth. And so you're building in a gap anyway. And every, every car purchase essentially, if you're financing it, you're. There's a gap. And it doesn't matter if it's buy your pay your retail, whatever, right? It's just, it is what it is. And if you've been doing that your whole life and giving it away, why not use your reinsurance company to get some of that money back and you can, and the customer can help you pay for it. You know, it's something we started. Taylor, what did we do two years ago?

Maybe something like that.

Yeah, something like that. And it took us a while to really feel great about the product to start offering it. Now. I don't know about Yalls customers, but my customers wreck a lot, okay? They wreck a lot. And my Gap has been, it's gotten hammered. But Taylor and I started thinking about that when we had to put a little more money in reserve because we were getting hammered. But that money would have been lost either way. This way I get to reclaim some of that money that I wasn't losing and the customer is helping me pay for it. So it's a product that I encourage especially buy here, pay here dealers who have a little higher ACV like me and require customers to have full coverage. Man, our penetration and penetration for those out there that maybe don't know what it means. Penetration is how many products you're selling compared to how many cars you're selling.

Right.

So we're in the 60 to 70% range on gap because our customers understand Gap and you may think they don't, but every single one of them knows a friend or a relative who has crashed a car who had good credit and next thing you know, they didn't have Gap and they were. They ruined their credit. So these customers understand Gap and it's easy to sell as long as you offer it right. It's a good profit center and it's good for the customer and it's good for the dealer. It's a win win.

So Luke, let's distinguish the difference between Gap which Gap is an official insurance product. And I know in the state of Utah we have to be licensed to sell Gap as me, Jeff the salesman.

Yeah.

So in Gap is in some states, in very few states, it's viewed as an insurance product. In most states, it's viewed as a waiver. A waiver.

Okay, so that works if my customers have their own physical damage insurance through Geico Progressive or American Family or someone else, Right? That's the Gap product that you are going to fill. Now, Taylor, if I'm offering my own cpi, which is my collateral protection insurance, the next product we're going to talk about for buy here, pay here, you wouldn't sell a Gap, you would sell a debt forgiveness, right?

No, actually. So with cpi, okay, with cpi, CPI is going to pay just like your customers. Physical damage insurance would pay if the customers in a negative equity situation, okay? So if the customer owes you $9,000 and the cars worth 6, your CPI program will pay you the 6, okay? They're still gonna owe you 3,000. So you can still sell. And I would encourage you strongly to still sell Gap to those customers.

Huh?

Okay.

Okay, I was misled. So what is debt cancellation then?

Debt cancellation. And in some states it may not be called debt cancellation, but debt cancellation is a waiver product, okay? It's not an insurance product. CPI is insurance. Debt cancellation is a waiver, much like Gap, okay? But the agreement is between you or your finance company and the customer that they do not have to have physical damage insurance, okay? They still have to have liability insurance. That is state law. They do not have to have physical damage, but they're going to pay you a premium each month. And this is only debt cancellation. Only really works for dealers that have a lower ACV car. If you have a higher ACV car, I don't encourage debt cancellation, but if the, if the customer total losses the vehicle, then you forgive their total debt, okay? And so they're going to pay you a premium each month for that coverage instead of having to go pay, you know, the general or some other, you know, crappy insurance company more than likely to cover your car, okay? And that will save your customer money each month to carry that, that waiver with you and pay you the premium each month. And you're gonna stack, you're gonna. It's a wash at the dealership. So you're gonna take the money from the customer at the dealership and then pay it to your reinsurance company.

So how do, how do you. Where I've always got. I guess I have a problem Selling debt cancellation or CPI is that my customers got to have insurance anyway, got to have liability. It seems like it's hard to get past that. Do you have any special sauce of. Well, I've already got to go and pay for liability and liability cost a lot in most states. That's where most of your charges, you know, yeah, you can pay them your liability, but you need to pay me for debt cancellation. How can you really. What's the best way to get past that? Objection.

That's a good question. So I provide our clients with a form and I suggest that in your sales process you include getting a quote for your customer and you may get multiple quotes. Okay. For your customer for insurance and I mean full coverage insurance. And you show them, Mr. Customer, this is what your liability costs and this is what your physical damage costs. Okay. Some customers, and obviously it depends on the location that you're in, but some customers are paying north of $200 a month for their insurance. Okay. And they have a down payment that they have to make. So if, if you could say, hey, you know, instead of that you can pay me $50 a month for this debt cancellation program, then I mean, a lot of times it's just a no brainer for the customer because they don't have to come out of pocket and they don't have to pay an extra. You know, if you're saving them, if you're saving them more than $25 a month, Luke, and you can show them that probably nine times out of ten they're going to sign up with you on your program.

Do you recommend the person, say you recommend your salesperson selling this or someone else in your office selling that side? Because it sounds like there's a lot more work that goes into that.

Who tells your customer to get insurance?

Well, the salesperson does at ours, at our place.

Who checks that they have insurance before they leave?

Salesperson. And typically the collections person, that would.

Be the person that I would have present to them the option. So with debt cancellation, it's a, it's a item that you can sell to your customer. Okay. So you can sell it to them there and give them the option to purchase. And if they don't get that cancellation, then you say no problem, you know, get your insurance and then bring me the binder. Okay, I want to leave. That would be the person that you would train to offer these options to your customers.

Okay?

What?

And I can't. I'm trying to wrap my head around this thing. So debt cancellation, really not for me. CPI Explain that one more time.

Okay? CPI is a. And I'm going to give you an example of how the two pay out. Actually, I'm going to give you an example how those two payout and then a full coverage insurance would pay out. Okay? So this is the example. A customer owes you nine grand. The car is worth six. With debt cancellation, you're going to forgive. They get a total loss, okay? Across the board, total loss. With debt cancellation, you're going to forgive the full $9,000. Yeah.

Because you get nothing. Right?

Right. In some states there's a deductible, but with debt cancellation, you do not sell gap. Okay? Debt cancellation and GAP have overlapping coverages. So debt cancellation, you wipe out the debt. The customer in some states has a deductible and you try to roll them into a new car. You get to keep the car to part out or to salvage or to take to the scrap yard, okay? That's with cpi. CPI pays six grand, okay? Because that's what the vehicle is worth. The customer still owes you nine. The customer owed you nine previously, so they still owe you three. Okay? So CPI customers you should be selling Gap to, okay? If you're doing. If you're doing CPI at your dealership, you should be selling Gap as well, okay? Because otherwise you're gonna forgive that Gap that we just talked about, that $3,000, you're gonna forgive it for free like you have been doing. If you collected $10 from every customer for a Gap policy, then you would be $10 per customer further ahead than you are right now with on Gap, okay? And most of our clients will sell it to their customers for 400 or $449. So you may not collect $449 from every customer, but if you got 200 from each customer, think about how much further you are ahead for that risk that you're already forgiving. You're not adding any risk. Right. This is just a revenue flow. Yeah. And then full coverage insurance, of course, would pay the same as CPI would in that. In that circumstance, they would pay six grand, and then customer still owe you three. Now let's flip it and say your customer has positive equity, okay? In this. In this car. So they owe you four and the car is worth six. Okay? With debt cancellation, we're going to pay four, right? Your. Your debt cancellation is going to pay four. The customer is not getting a $2,000 positive equity check, okay? With CPI, we're going to pay for the customer's not getting a $2,000 equity check, right? CPI is the lender's policy. It's not the customer's policy. It just so happens that you, being the lender, have the right because they are. They did not uphold having physical damage. You can purchase a policy, which is what you're doing, and then pass the cost on to the customer. That's what CPI is.

Yes. That's why we call it collateral protection.

Got it.

I got it.

Because it's protecting your collateral, which is the car.

Correct.

Could I buy a CPI product on my entire portfolio?

That's a good question. I mean, you could. You basically are buying a policy for your entire portfolio and then placing it on certain accounts as they lapse on their.

Yeah, but you're making them pay for it. Luke, if you wanted to put a CPI on your entire portfolio, you take 600 cars times $90 a month. That's not a premium you would want to pay.

But no, I don't want to pay that premium. I want to take a look at. Look at my portfolio and say, okay, this is the chances of someone totaling without insurance.

Right, right.

And then I want to stick it through an insurance algorithm and spit out exactly what I should pay per month for that coverage.

I understand what you're saying. You should re.

What. You should pay your own reinsurance company.

Yeah, I know what you're saying, but no, at this point, no, there's not a.

Okay, so.

And the other side of that is too, what you need to know with cpi, as opposed to physical damage coverage from geico, is when the front bumper gets taken off in an accident, you decide if you want to fix that front bumper or not, because it's your collateral protection insurance.

So.

Right, Taylor, like, you've got to be aware as a, as a lien holder that if they just smash in their side door, they don't have anyone to go to to get that side door fixed. Like GEICO or Progressive, they come to you and you decide whether you want to fix it or not.

Correct. You're gonna file the claim because it's your policy. Okay. It just so happens that the customer directly benefits from you filing a claim to the vehicle against your policy.

And it goes to your repair shop and your body shop and you pay it at the real price and not.

Right. It doesn't have. I mean, yes, we want that to happen, but if they're out of state, they can go to somewhere else. And your. Whoever your CPI administrator is should be able to basically take care of that claim on your behalf for that. So.

Yeah, but you don't have to fix it, right? Are you, I don't think you're obligated to fix the collateral if it's still drivable.

You know, that's, that's great.

I don't know, maybe something.

Okay.

All right, so we got all these products. Now how do we get our staff to buy in to sell it? Because I know Jeff, you say that's your, that's one of your biggest problems is you're having, you're having an issue getting it going. And so, you know, I was, I was like that for a long time. We had these, these extra service contracts we could sell, but I could never get a good buy in from my staff to sell it. And we don't have an F and I person sitting in the office selling back end product. That's not what we have. And then most buyer payer stores don't. Your independent stores, your bigger independent stores that are prime, they probably have someone that does that all day long. The number one reason people can't get things sold is they don't offer it.

Right.

And, and that's what you've gotta, you've got to learn. And it's something I think Joe Lascoda taught us years ago in a 20 group meeting. He says you got to sell 100% of the product 100% of the time.

100% of the time. That's right.

And if you do that, guess what? If you sell 100% of product, 100% of the time, you sell product, and you're not gonna sell 100% of the product, but you're gonna sell, you probably end up getting 30 to 40% buy in automatically. So for people out there that, that don't think they can sell a product, you got to train to sell your product. It's just not gonna happen. And it's got to be simple. I think Taylor was talking about earlier, the simpler the product, the easier it is to sell.

And I think, yeah, make it a package. Don't try to sell every little piece.

Well, you know, so, so what we do and how we got better buy in than what we had in the past. And this is so old school car that you just, you can't believe it works, right? So for every time we sell a car, we offer, we offer five things, but we offer six payments, right. And most of our customers are payment buyers, Most every customer. If Jeff, you go buy a new house, you're looking for a certain payment, right?

I just pay cash.

We're all payment buyers. So you need to talk in Terms of payment, you also need to tell them how much it costs. But if I've got five products, I can give that customer six different payment options. I can give them a base payment without, without anything.

Right.

But the way we do, we have a sheet of paper and it's, it's a six square. Now it used to be a four square.

Right.

And you did that. And anyway, our six square is pretty simple. Top left hand corner is the highest payment. It's GAAP and 36 right now that's probably an extra 40 to $50 a month for our customer. That's a lot. But it's a lot of protection too. The next square right beside it is just 36. The second square on the left down is 24 in gap, right next to its 24. Then the bottom two squares is just gap and base payment. And we get the customer to look at what this cost and they have to initial and circle inside which one they want. Now we, we explain all of the protection they're getting. And I tell you, it is, it is. Very rarely somebody walks out without buying at least one product.

Yeah.

And you've got to have your salespeople, they can't. I tell our sales staff, you can't spend someone else's money. You can't do it. You've got to give them all the options and let them make an informed and educated decision. And you know, we're selling a lot of product. Now. Our losses have gone up inside of our reinsurance company, but that's going to happen because we're selling so much product. And you know, I encourage everybody, whether you're selling your own product to reinsurance company or you're still dealing with another source for vehicle service contracts and tire and wheel and gap and all these things, you've got to sell the product 100% of time. And you got to train your staff to sell product 100% of time. If you don't, you're losing thousands and thousands and thousands of dollars, probably hundreds of thousands of dollars.

So if you're a retail dealer, it makes a lot of sense to even bonus your salesman or your F and I guy or your whoever to sell these products because you're getting cash from the dealership, from the finance company for the products. If you're a buy here, pay here. Does it make as much sense to bonus your, your finance guy, your salesman for up sales?

Yes, 100%.

Okay.

Yeah.

So you should have some sort of a compensation package built in. Like if you get a 1212 or a 3636 or Gap or. Or if you get them to sign up for cpi, you get X amount.

I can tell you this. When a commission at end of month, and I pay a little small commission. Okay. But the commission at the end of every month is another thousand dollars in that salesperson's pocket. Typically, that's a big number.

That's a big number.

So. But I mean, look at what we're. You know, look at what the dealer is getting compared to what the salesperson getting. The salesperson's static. They're making that much extra money.

Yeah.

So if it's a 1212 and it retails it, I don't know, 1400 bucks or something.

We do 1212. We give. We give a 1212. So you're upselling there.

Okay, 24. 24 is gonna cost you 14, 1900 bucks.

Yeah, we're making. We're making $500 every time we sell one or something to that effect.

So we bonus them 40 bucks or 20 bucks or 50 or whatever it.

Is, $25, whether they're selling 24, 36, or Gap to get 25 bucks.

And the big thing we talked about too early was if you're giving them, like, for me, I give them a 3 3, right. As a warranty. Now, if my salesman can go in and move them from a 3 3, which is pure cost to me with no profit income, and if he can move them to a 1212, now, it is no cost to me. And it's actually got a profit. No, it's still a cost to me, but now it's got a potential for profit. I mean, that's huge, right?

Yeah, definitely. Absolutely. Something that Luke said about. Yeah. You gotta. You gotta present the product 100% of the time to 100% of your customers. I mean, just think about this. If you see, if you say pretty girl at the bar, there's no way. And you're a single guy, there's no way you're getting her number unless you ask for it, Right. So you got to ask for the sale. Just like when you're selling a car, you got. You got to ask for the sale. And so if you don't, you don't get what you don't ask for. My dad always says that you do not get what you do not ask for, so you got to ask for.

It, and that's huge. I've seen so many salespeople in my life, no matter the industry they're in present amazingly, right? And, oh, man, you're like, oh, Yeah, I want to buy this. I want to buy this. And then they forget to ask you whether you want to buy it. Right, right. And I've had good salespeople that do that. Don't get me wrong. There's ways to train that out of them. But, you know, some people have it. Some people ask for the sale before they present, and some people can make that work. You can't always make that work.

So also with your customers, okay, with everybody, you make decisions most times out of fear or out of greed. Okay? So I'm not telling you to scare your customers, but you need to remind them when they don't get this, you know, they don't get this coverage. If the vehicle breaks 24 months from now and you don't have a coverage for it, you're paying for it to fix it, Right? If the customer. If you wreck your car in total losses and the insurance company pays and you still owe money, you're paying me for a car that you can't drive anymore. You gotta explain the downside just as much as you explain the upside of purchasing the. Purchasing the product.

So, so important. The one thing you can tell every customer that you sell a car to is you're not going to want to say this, but the one thing you should say, I can guarantee you, Mr. Customer, this car is going to break down.

I say that all the time.

It's going to. It's just the nature of any mechanical object.

It's going to break down.

And it's not scary and it's being truthful. And these are the ways we can protect you from when this car does break down, because it's going to. And that. That's how you get it done.

Taylor, this has been awesome, man. So much great information. There's a ton of things I obviously need to get squared away in my dealership. How do dealers get a hold of you guys if they want more info, if they want to learn more, if they're ready to jump in and get their company set up?

Great question. Thanks for asking. So you guys can give us a call at 804-824-9533. You can send an email to infoealere.com or you can visit our website@dealere.com and send in a contact us and we would be glad to get in touch with you.

Yeah, for sure. And are y' all doing the virtual expo coming up for niada?

We are. So we're going to be doing the virtual expo, but we're going to be taking part of that with Assured Vehicle Protection, which is our longtime partner. So we will be flying under the Assured Vehicle Protection flag for that. But if. If you guys want to come through, to be candid, I don't know exactly what that's going to look like, to be honest.

None of us do yet.

But if you go to the Assured Vehicle Protection booth virtually, then you can. You can contact us through that there at the NIDA conference.

And when you do contact Tim and Taylor Bird, make sure you tell them that the independent dealer podcast sent you there so that these guys know their advertising dollar is well spent.

Yeah. One thing I want to include is that we are partnered with the College of Automotive Management, and it's a digital F and I training and sales training platform. Okay? And every one of our clients, we will give the F and I program, which cost $1,500. Okay. But it's a digital F and I training class, okay. That we will give to you and your people that you're going to have selling these F and I products. And they can access it digitally on demand, which in this whole Covid nightmare that we're going through right now, that's very, very important. You don't want extra people in your store that you don't need, okay? So we will give you that to help you with your penetration on all of these products. So anyways, if you guys need me, then you can reach me at my phone number or email. And I really appreciate you guys having us on today. And, you know, we're proud sponsors of this. I think that you guys are doing an awesome job with this podcast.

Thanks a lot, Taylor.

Thanks, Taylor.

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