#148 - How I Built This w Scott Shook

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.

My name is Scott Schuck. I'm from Schuch Auto. We're in central Ohio. We've been here 42 years this year. It's a family business. We keep around 100 in stock, sell around 50amonth. Right now. We do everything from super prime to buy here, pay here.

Very cool, Scott, that's. So let's start in the beginning. So I think you've been in business a little longer than we have, and we've been in business for 35 years. Can you take us back to the beginning?

My father actually worked at a factory and was dabbling in cars, and they had a series of layoffs. And I think it got to the point where he was done. Gone back to the factory. So he'd have five or eight cars and started networking with other dealers. He never really went to the auction, so he had dealers that would just send him the trades. And then it grew and grew. Then I got involved. This is all I've ever really done. Everything from washing the cars to running service to running rental, running, finance company purchasing. Then I grew it quite bigger to where we could have up to almost 300 vehicles at one point.

And you say, okay, so let's kind of get a layout of your dealership. So you sell cars and. And do you still rent cars or no?

Yeah, we rent cars.

And you have a. Okay, so how many people work with you now?

We have around 20 employees.

Okay, very good. So, Scott, let's go to when you got into the business. How old were you and did you, like, I'm assumed, like me, started washing cars? Thank you. Said. And when did you get in full time?

Full time. This is all we've ever really done. I actually. We tore down an old building here probably 60 days ago, and I found one of my paychecks from 1990, which I was making $50 a week, so. And still going to school and playing football and everything in between, but probably in the mid to late 90s, really got heavily involved.

Cool. What year did you get high school? 92.

Yeah. Yeah, 92.

So you're a couple years older than me, so I can. I feel you there.

But we've seen a lot of changes throughout the years.

Yeah.

And did you always. When did you. You say you carry some of your own notes, maybe give us that breakdown on a typical month. What would you say is, you know, buy here, pay here as Opposed to subprime as opposed to prime from your.

Sales, it's probably, I'm gonna say 25% of the in house financing because we have a related finance company. It's probably a third or third or third.

Okay.

Is what it really is and it depends on the market because if some of the non prime lenders tighten up, we put more in our books and that's great for us because you know, it's a better problem, you know.

Yeah, you're able to kind of ebb and flow to where the loose money is.

Yes, you also do CAC or no, we do little.

We've yet to close our first pool. We've been in it for a couple years. But that's always a great backup plan for us because if something does happen with the finance company, you just never know. Ready?

So Scott, let me ask you this question. I think a lot of people have this qualm and I have an issue when you do it all. Do you ever get lost? You don't really have an identity because you are subprime and you're prime and you're buy here, pay here. Does it ever get confusing to know how to brand your message and also does it confuse the customers when you have a 2017 Nissan Titan sitting next to your 2007 Ford Focus and you got to explain to the customer why they can't have this nice shiny truck and it makes all your non shiny cars look even worse. How do you get around that? Do you have any tips for us?

Typically we try and pre qualify first and a good quality customer sometimes you can read them but we really like to try and pre qualify them. That way the sales nice sales guys are not putting them in the wrong vehicles after they drive the 2017. They don't want the 07.

Oh yeah.

You know and it's. And the branding part is difficult. We try and brand it's both. You know, even on our Facebook ads we're going to target late model, low mileage, you know, competitive rates for qualified buyers. And then we'll do the we finance ads also. And it comes down to the salespeople. The initial, you know, which we really like to see that we use drive it now, which it does. A soft pull gives us the score and the income. Then we can kind of figure out which direction to go.

So for those out there that don't have a reinsurance company, now's the time to get one. Jeff, you know anybody I can call?

Yeah, yeah, yeah. Tim Taylor Byrd over at Dealer Rent. Get it set up now. I mean, I know you guys are listening to this. It's probably mid December. You've got a couple weeks. I really like the idea. I'm just OCD about stuff. But if you could start this thing in January, February 2021, it's a great, you know, new year. New books, new accounting. Get that reinsurance company set up and start setting aside that money, man. Take those expenses, divide that money into your reinsurance account.

You know, it's a, it's a new year resolution. Make sure you have that thing set up by a certain date next year.

Make sure wealth building.

That's right.

That's what it is, it's wealth building. Right?

Make sure you. Building wealth for your family, for you and you know, making sure the IRS didn't get all your money.

Because this is really.

It's wealth building. The only way you build wealth is by not paying as much in taxes as the next guy. Honestly, that's the way you do it. And this is a great way to get, get involved and start Saturday. Get it done. So I assume you spend a good bit of time training your sales staff. And how many sales staff do you have?

And we have, we have three.

I'm sorry, I have three selling. Wow, that's. They're busy, aren't they? Yeah.

Yes.

Do you have a BDC or someone that's helping qualify these customers before they get to your salespeople?

I myself, I have Marlea here with me. She handles all the finance. And so we try and pre qualify everyone. We've been here for 42 years, so there's a lot of people come in. We know these people are qualified or we know the ones that aren't too. I mean, there's certain people we know that just stay away from.

How big is the. How big is New Philadelphia, Ohio?

Our county, I believe is around 80,000 people. And that's Dover, New Philadelphia and surrounding. But New Philly's in the 20s, 20,000 people.

Okay, so it's a mid sized town. How many other dealers are around you?

There's quite a few. There's probably at least 10 new car.

Stores included in that.

Yeah, yeah, there's probably at least, I'm gonna say seven or eight new car. The franchises and then independent stores. And in an area like us too, 20 miles can be a close dealer. So Canton, Ohio. Yeah, we pull 30, 40, 50 miles very easily.

So what is, what is the. What do you think the population is within the radius of people you pull from?

Probably at least a couple hundred thousand people.

Okay, you're. You're pretty good. Pretty good market then.

And what's your day to day, Scott? What do you do? What do you like? What's your. You the buyer? You the F. And I finance. Run the finance company. Do it all.

I do. Do it all. Do it all. I was here first.

You haven't given yourself one.

No, I was here first thing this morning getting service up and rolling, making sure they knew what they. Our priorities were for the day. And I'll come in and talk to the sales guys, see if there's anything left over from last night to make sure it goes over to finance.

Just putting out. I'm curious. How do you. Where do you source cars from in that situation?

What's your. That's very difficult. For probably. For probably 10 years I've been on the road, or I have not been on the road. Everything's been Internet. Sorry. For the last 10 years.

Oh, okay.

Yeah.

Yes. Years ago, I was on the road three, four days a week. Mannheim, Ohio, then Mannheim, Pittsburgh, then Odessa, Cleveland, consistently. Then it got to the point, you know, started having children. Can't be on the road three or four days a week. So Internet. But then it seemed like they figured out a way to burn us on the Internet. You know, previous paint work wasn't truly previous paint work. It was. The car was keyed and they touched it up with a black marker. So I've been back on the road last couple years to try and get a better product, but now we're trying to buy them off the street. You know, we're trying to avoid those huge fees and transportation costs, and whatever we can buy off the street, we're gonna try and buy it.

Interesting. How many of those?

Probably about five this month.

Okay. And you actively campaign? We buy cars, cash for cars, that kind of a thing.

Yep. We have an ad coming out, one of the papers. It's Ohio Auto rv. That'll come out this month. Yeah.

So I've always wondered what that business model is like. And I know we probably have dealers that hit it very, very hard to just have a guy in a flatbed rollback with just a briefcase full of cash, and all he does is just drives the neighborhood and just picks up cars and just keeps bringing them back in. I mean, is that. Is that a business model, you think? Does anyone do that?

That'd be tough. That'd be tough. That's why we're saying, hey, you bring it to us, send us, and then bring it in. But when we did it years ago, auto Trader had to trade in marketplace and it seemed like every guy with an old junk Chevy truck would come up, no rocker saying that the trade value is five grand. And we're like, it's 500. Yeah.

So yeah, you want to vet it first. You don't want to. And that's the argument is like, sure, you can spend an hour chasing down one car that may or may not, you know, not bring it home, but you're right. If you could have them coming to you pre qualifying them through text or email or phone conversation. Yeah, hey, we're in the ballpark. Bring the car by, let's verify it. We'll pay for your Uber back home or something.

And it may convert to a sale. They might be in the market to replace that vehicle.

Yeah, that's the one thing a lot of people forget, that just cause someone's wanting to sell their car doesn't mean they want to buy. And then if you can kill two birds with one stone, that's the best way to do it. So Scott, what platforms you buying off right now? Because you know, you got to be picking up cars virtually. And are you doing that? Do you have someone on staff doing that where you buy?

I buy them all. We'll buy off acb. That's worked out well for us. You know, we'll still do the Mannheim's and the Odessa's if need be, hitting some independent sales. You know, there's a lot of independent people out there. And like I said, I'm back on the road usually once a week now.

So you're managing the dealership, putting out the fires and you're buying 50 cars a month.

Yes.

Working hard, buddy.

Well, here's the thing. It all starts at the buying level.

It does.

You know, that's, that's where this whole thing starts. And we continually need to get better at it.

So no, I still buy. And I think that's a very important part of the process. Can't start if they're not bought. Right. And that you, you're doing that shows your level of involvement in the day to day operations. You were talking before, I think we got on air about your issues with getting cars to line. And I know that buying in the Rust Belt creates another issue. What is the, you know, what is your average timeline and is your service department only working on those cars? Is it taking in customer paid work as well?

We take in customer pay usually only our customers. If we sold it, we'll service it. We don't want to service it if we didn't sell it. You know, right now we're probably two weeks out.

Right.

On some of this stuff. If it's a 2016 with 30,000 miles, yeah, it's a 72 hour turn. You know, if it's an $8,000 car that we need for the finance company, it could take a week or two. And if it has to go to the body shop, they're backed up. The franchise stores, they seem like they're backed up on some of this Diagnostics is the big problem, you know that check engine lights. Not a quick O2 sensor anymore.

No, it's not.

You know, it's a nightmare. It's a wiring catastrophe. So that's our biggest hold up right now.

Yeah. So for people out there that don't understand the rust belt and the issues it causes and the extra recon that has to go into that $8,000 car, you know, what are the biggest issues you see when you, when you have that car?

The biggest issues are the frame, the frame issues, all the trucks. It's terrible. We're starting to see it on some of the GMC terrains. Some of the equinoxes, you know, they have plastic cladding on the bottoms. There's rust. There's rust that lives underneath there. Really bad rust.

There's little pockets that hold it, I guess. And what do you do if you get a car that has a rusted frame? I mean, I assume it's arbitratable. Can you repair something like that? What goes into it?

On the trucks that are repairable, we have guys locally that have templates already cut. They know what this repair is. We expect it. Typically it's the same problem areas and.

You disclose it to customers and people up there. Understand, I guess they come to expect that it's not.

If it's not how bad, that's what it is too. It's how bad. But a lot of them, you can catch them, right? They're very repairable, but some of them, there's just no repair to it.

Scott, is there something or have you ever looked into buying cars further south so you don't have to deal with that? Is there a. Do you do that? Is it worth your time? What's the difference in price? Do you see from northern trucks to southern trucks?

And a lot of times the southern ones are a lot more money and it depends on the transport cost. How much is fuel? Is it a not a good area to transport out of? Right.

And I assume it might be difficult to get to New Philadelphia, Ohio or what. What's the closest city?

No, because we're right on I77, so we're running north and south, 70 east and west, so we're easily accessible.

Oh, yeah, that's funny. I mean, I'm at the start of 77, so you must be way up near the end of it.

We are, yes, absolutely.

Okay. Yeah. Okay, so you're between Pittsburgh and Columbus. That's not. You must not be too far from. From Dan Real, are you?

No, no, he's northeast of us. He's right up the road.

Very good.

Sounds like a party.

Scott.

What? So outside of, you know, inventory acquisition and time to line, what would you say is the hardest part about being an independent dealer right now?

A lot of it's financing still. I know we talk about this time and time again, but some of these lenders, you know, they won't talk to us, but they take on the franchise stores and that's always a battle for.

Us finding good banks. Good, because it seems like banks always ebb and flow right where you, you're doing really, really good with cac and all of a sudden they change or tweak things or your rating drops and now you're over here with Westlake and they do really good and then they do something funny and tighten up their things and is that the issue? Just always trying to find.

It seems to be, yes. It fits right in the bucket. And our non prime is very difficult for us right now finding that bank that's going to buy the 670 customer and give them an aggressive rate and good terms whenever some of these guys have the allies and their captive finance.

Well, Scott, are you not, I mean, being in business 42 years, you should have a lot of financials you can give these big lenders. Do you have the Ally? Do you have the city? Do you have, I mean, the cap ones? Do you, do you have those banks or.

No, we, we had Ally, we've had Chase. And like I said, they come, they come and they go depending on what they want to do. And like the independent guy is always the black sheep. Sure. They have to keep, you know they're going to kick us. Yes.

Three to five deals a month. They're going to boot you. Are you in a position to take on more buy here, pay here customers if those, if those guys don't come back or if you don't have a subprime source, Would you be able to keep them in house?

Absolutely. Absolutely.

That's a great problem to have.

Yeah. But when you're telling these people a Certain rate and they think they should have a better rate and captives giving them a better rate. It makes it difficult for us.

Well, you can always adjust your rate as a related finance company, which I found out over the years, you can sometimes you pick up people that would go elsewhere and give them a little better rate and you get, you know where they think they can get, let's say 8% and you end up offering 12 to 15%. You can still get them. And so you're in a, you're in a perfect position, I think. I've never seen anybody do the model with great success, but it sounds like you're, you've got a blend that works. Why do you think that is?

Because we don't just sell to one. We cultivate. If a first time buyer comes in with zero credit, we report to the credit bureau, put them in a three year loan at 18 months, you trade them in, they have a 680 score and they go to the local credit union and buy a $15,000 car from us. So.

And you have those relationships with your credit unions in town?

Yes.

Do they let you hold any basis points or is it just. Are you able to sell your.

No, but it's not even the credit unions. Other banks will do it also. You know.

Scott. Sorry, Luke, tell us one thing along those lines of things being hard and we know, finding the banks. What would you give advice to dealers who are just starting out or even dealers that have been at it for a while? What's something you wish you would have known 43 years ago.

That this is ever evolving. You need to be prepared for change. We're seeing that right now.

Yeah, that's good advice.

You know. You know, Covid Carvana, I mean there's so many different, especially with the Internet marketing, you know, and that's one thing. That's why I told my guys this morning we have to get better. You know, we can't just get stuck in this lull. We have to get better.

Yeah, Scott, let's get, let's talk about trying times y' all were open during the Great Recession. You were open, you know, during the dot com. But I think the Great Recession probably affected your business pretty well. Can you go through, you know, that 08 to 12 timeframe and what you saw and what you're able to do and then talk about this year, if you will, about COVID Oh, eight.

That wasn't bad for us because we're in farmland, so people still needed trucks, full size SUVs. You know, they're not going to pull their trailers with a Chevy Cobalt in which we've seen a lot of people trying to. Trying to dump their big stuff to buy these small cars. But it helped us because the market was so soft. We could go buy three quarter ton trucks, you know, five, seven, eight grand back of the month and sell them, make a couple bucks and make people really happy. So that worked out well. That was a great year for us. But we weren't afraid too. A lot of people just wouldn't buy them. Dealers, they wouldn't buy them. They were terrified. And we kind of, we said, we're gonna do it, you know, we're gonna make a go at it. And it worked out real well for us.

And I'm sure having the model that you had, because I'm sure you had a bunch of banks pull out during that crisis, that financial crisis, and you were able to loan the money yourselves. I'm sure that that helped your situation, right?

Oh, it was great. And we had some very aggressive equity lenders. So when you're showing them a truck that wholesales for 20 and we're only financing 17, you know, they bought the deals. It worked out great for us.

That's so funny. I've never heard someone mention that during that time that if you were the banks were actually lending, if you had the deal done properly, you know, it's.

All about the structure.

That's right. What I heard mostly during that time was no banks are lending, period. But what you're saying is if you structure the deal right, it works. And I'm sure that's something y' all learned over the years and something that, That y' all continue to see today, correct?

Absolutely. That's very important. Very important. So about the deal.

So during COVID you know, you told us it's been hard to get inventory. You know, we did see that for a bit, but it's been easier for us lately to get inventory. Are you still having that crunch? Did y' all increase sales? Did you decrease sales during COVID What went on?

We were shut down for a couple of weeks. I know in some other states, people were completely shut down for a while. They let us open up. So we were selling cars. It was difficult to get inventory because the auctions were shut down. We've seen some dealers actually liquidate their entire inventories thinking that this Covid was gonna really shut them down. And people, people were still buying. We didn't liquidate our stuff. We kept on retailing it. We bought what we could. We did very well. This was a very good year for us.

Right.

You know, now it's softening up a little bit. You know, we're gonna keep on buying.

What this. This time of the year for you, is it typically busier or not? I see you got snow on the ground. I mean, I don't have snow on the ground. I'm never gonna have snow on the ground. Jeff may have snow on the ground.

Yeah, maybe. And if I do, I am not leaving the house.

So is this a slow time of the year for y'? All? What. What goes on during this wintertime?

This. This is very interesting. Yeah. Right. Right now we should see an uptick on the four by fours and trucks and things of that nature. Depends on if there's another round of layoffs. If they start shutting down factories and companies, we might not see that this year. We usually do Tax Max this time of year. We'll get aggressive with it, treading lightly this year because with all the unemployment. How accurate will these be?

Yeah, actually, let's stop you right there. So, as everybody knows, Tax Max is one of our sponsors, right, Jeff?

Yeah.

And this is a guy who. Who knows what he's doing. How many years have you done Tax Max, Scott?

There's quite a while. It used to be TRS maybe is company. Yeah. So that quite a ways, Jeff.

I'm not sure, but I think that's one of the huge endorsement. Ringing endorsement of Tax Max and what they do.

How much money do you think you get your hands on each year? Do you think you could ballpark that as far as checks or debit cards that you print?

Yeah. How many y' all do?

I'm thinking around 50.

Wow. Deals or 50 grand.

Probably 50 grand.

Yeah.

That's about. Where are we? I think I print probably 30 grand worth of down payments the last five or six years consistently through Tax Max. And I think. Would I have gotten all that money had I waited for the refunds to hit and then tried to scramble on it all on those two or three weekends? I don't know, man.

Do you use Tax Max in your service department, Scott? Cause I know that they. Who's the guy we have on, Jeff? I'm sorry, I just blanked.

Yeah, it naturally. I mean, it naturally trickles down to your service department. Right. I mean, those guys got cash in hand. You could do some specific engine repairs and say, hey, you know, when your taxes come in, you know, let's. Let's use it to get that note caught up.

And we will. Yeah, we definitely will. And we finance Repairs also through the finance company.

Yeah, yeah. Get those side notes caught up during tax time. So that's a great endorsement. And obviously, we love tax Max. Guys use podcast when you sign up and you get your discount. So, Scott, let's move along. Tell me, if your dealership just disappeared tomorrow and. And you had to start from scratch, what kind of a dealership model would you build? Would you build the exact same thing you're doing now? 30% subprime, 30% prime, 30% buy here, pay here? Or would you. Do you think you'd go down a different route knowing what you know now?

I think it's important to have all to cover all the bases. I think that's very important. I think that's where a lot of people lack. And we've seen it with the franchise source, where they started bringing in some subprime departments and they started bringing in the side lot for used cars. And I think they caught on to where you almost have to cover all the bases. Mm.

I think a lot of those large franchise guys, they all build a used car supercenter. Right. I mean, that's the natural evolution, because they look at it and they go, well, that's where the money's at. And I need to have its own standalone store to retail out of my trades.

And some of them, like, they have their lenders, like their own finance company. We signed up with a few of them to where, you know, it used to be a Chevy Stores finance company, and they branched out and took on other dealers. It's profitable. Yeah.

Do you think you'd also do your own service center? You say you have your own body shop.

We don't do outside body shop.

But you do have rentals. You do a rental program there. You have some rental cars you put out, and you think all those. Anything else you would step into, say you had more time or energy. Is there anything about the used car industry in one of those kind of integrated business businesses that interest you? Would you build your own body shop if you had more time? Would you?

You know, I'd like to grow rental. I think rental is important. You know, you can depreciate these vehicles and you pay them down and then you turn them into cash.

I'm missing that depreciation right now from the rental car company. Man, that was a. That was a slick thing to do at the end of the year and depreciate the whole, whole lot of them. I mean, it's huge, I think.

How many. How many units do you have in rental?

We're probably around 10 right now.

Yeah.

Scott. One thing I won't talk about, Jeff, is Scott's involvement in the, in the association. Scott's usually at the policy conference. Scott's always at convention. Can you talk about your. What you've done within this Ohio association National that why do you think a dealer needs to do it and what you've learned along the way?

I learned something new every day from it. It's amazing. I wish I would. That's one thing I wish I would have done years ago, is be more involved in the association.

Good, good advice.

The knowledge is amazing. You can pick up the phone, make a call, even traveling, meet so many good people, so many vendors, and it's very important, very important to be involved in this.

So many people don't understand the relationships you develop with vendors at conferences and things. And Scott, you brought that up. It's just so important because it's a lot easier to make a phone call to someone, you know, when you have an issue than have to go through the maze of emails and voicemails and this, that and other to get it all taken care of. Scott, are you on the Ohio board right now or.

I am currently the president this year.

Look at there.

Three presents in a row. Jeff. How's that?

And that was. Honestly, I reached out to these guys just throwing a dart in the wall because they looked interesting and they made great comments in the forums. Scott and I don't know each other. I don't know that we've ever met. And I reached out to these guys. I don't know how I'm batting 100 here. Batting 100. Guys, you got these. And here's the thing. I reached out to a lot more dealers and most all of them were very generous. And hey, we'd love to get on the podcast and share our story, but I think it does show the caliber of the kind of guys who are going to be in the association or going to contribute their time to lift all dealers up. You know what I'm saying? And they're willing to come here and give us 45 minutes of their time and share all their secrets and tell us all their stuff to lift all dealers. It's not like a. It's the dealers who just sit in their little pot in their little silo and just do their own thing and don't want to associate with anyone else either because they feel guilty about how they're operating their dealership or they just don't care or whatever it is. But, you know, then you've got the quality guys like Scott who are willing to share. And also, I mean, it takes a lot of time, man. You listen to him. He's wearing a lot of hats at his dealership. He's putting out all the fires, he's buying all the cars, and he's giving back to the association.

Yeah, that's amazing. Hey, Scott, one last thing before we wrap this thing up. Do you have reinsurance or no?

No. We have our own warranty company where we do our 90 day warranties, but at this point we do not reinsure.

That's interesting because I figured being in business as long as y' all had guys over there, up there would have already got you in. But that's. That's very interesting. Yeah. So do you have a. You sell. You give away a warranty at a time of sale that you, that you essentially have in house. Do y' all sell other service contracts and gaps?

Yes, yes, we have, we have other companies. We sell.

Okay.

And if you had more time, that sounds like an avenue you need to reach into. Scott, I know you probably listen to the podcast, but with the volume you're doing and the makeup of your buy here, pay here subprime, I mean, I've only been in a small time, but no, that's money you're put flushing down the drain.

Jeff, got anything else?

I think that's awesome. I mean, I could go on forever. Just great information. I don't know, man. I always learn. And even sitting here I make notes of like, oh yeah, gosh, that is something I should have been doing. I know I should have been doing it and I haven't done it. Why don't I do it? There's Scott here who's buying 50 cars and still running a dealership and I'm friggin complaining about having to cut checks still and do these other things. And then you've got dealers that are just. They get done more in their 24 hours than I think I do. And that's motivating to me.

It is. Well, Scott, thank you for your time. We appreciate it and thank you for your service up there.

Absolutely, absolutely. Thank you so much.

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