#15 - Dan Reel - Retailing As An Independent Dealer

Hello, everyone. We got Dan Real, the big freaking real deal here today. And so he's gonna educate us on a couple things. Y' all, get ready. It's all about moving into the prime space. It's about the appearance of your dealership. It's about turn. It's about your pricing. Get ready. It's gonna be great.

Dan, say hello to everybody.

Hello, everyone.

Say, let's do this.

Let's do this. Welcome to the independent Dealer podcast, the.

Podcast for auto dealers to learn and grow together. Here are your hosts, Luke Godwin and Jeff Watson. All right, here we are with our good friend Dan Real of Reals Auto. Dan, this is our very first section. We're gonna call it the 0 to 60 in 60 seconds. Tell us your backstory a little bit, where you came from, your history, how you went from selling zero cars to selling up to 60 or close.

So our business started in 1998. We were 100% buyer payer dealer. We moved. Oh, let's back that up.

We got 60 seconds, buddy. Step it up.

Honestly, I got my start in the business by dumb luck. My father and brother had a dealership, small dealership, 10 cars, and I joined the family business. And today we just do all retail business.

Nice, nice. So you're 100% retail.

100% started in.

Buy here, pay here.

Dan, tell everybody. Tell everybody where you are, man. Expand on that 60 seconds. That was like 15 seconds, man. Tell us where you are, what you do.

We're in Orwell, Ohio. Orwell is an hour east of Cleveland, our west northwest of Pittsburgh, or so. Our town has 1900 people total. Um, so we're literally in the middle of cornfields and factories, and it's a small, small town, and thankfully for the Internet, we drive track traffic here. Yeah. So super, super duper small town. Probably one of the smallest ones that you could hold a dealership in. We got one stoplight, tons of Amish buggies driving by every day. I'm not kidding. I mean, we got Amish buyers.

It's.

It's a. It's very unique demographics.

Are you the used car dealer in town?

I'm the used car dealer in the county. I mean, there's. There's probably. There's 57 of us, but we. We are definitely the. We set the. We set the bar for everybody. Not only. Not only in the number of sales, being the leader in sales for 10 years in a row, but leading them in how we. We react in the community.

Well, that's. That was a great segment there, Dan. That you segue into what. What I was going to talk about. Dan does set the bar for a lot of us. And if y' all don't know, Dan and a friend of ours down in Fort Myers started the Facebook page. And Dan's also a leader on the NIADA. What? You're the vice president, Region 2, right, Dan?

Region 1, Region 1, that's right.

I'm in Region 2. And so Dan really sets the bar for all of us independent dealers. And Dan, talk about your experience.

And.

What you've learned from working with other dealers, because you really, you're really close to a lot of dealers and you really listen and hear a lot that some of us don't hear. How does that help you in your business today?

So that's a wonderful question. And to be honest with you, when I started in the business, I knew nothing about the business, minus changing tires, washing a car. I learned how to sell a car like back in our buy here payer days, you know, and. But being part of an association has really come full circle. I didn't have any experience whatsoever selling cars, so it's allowed me to meet people like yourself, other dealers around the state, some of the best operators in the country, and actually go there and shadow their dealerships, kind of take my notepad and just be a fly on the wall and pick up every little thing I can. And I go to all the different NIADA and state functions. I don't think I've missed maybe one or two total in nine or 10 years. But when I do that, if I find myself in, say, the DFW Dallas Fort Worth area, I'm not just going to go to the meeting. I'm going to actually Google which dealers are in that market that are part of our Facebook group, which there's 7, 800 people in there. And I'm going to visit them and I'm going to talk to them and get to see their offices. I mean, I visited Godwin Motors, but they. Luke wasn't there, you know, so if I ever go out to Salt Lake, I'm gonna visit Jeff. I made sure I went on a dirt bike trip down in West Virginia. I'm looking for dealers because I want to visit everybody and learn. And so basically what the association has done for me, the number one thing has been that networking power. And that networking power is massive. I mean, coming from a guy that I'm good at math, right? But I. And I'm good with people, but I didn't know squat about cars. I don't know about marketing, don't know about, you know, how long my recon process should take, how long my turn should be. There's so many details that the association and our group have taught me and they've really helped me mature. I wish I would have had this stuff 10 years ago. I mean, like, been invested as much 10 years ago.

I agree. I agree with everything you said, Dan. But Dan, you're really, you're very. You're very good at doing that. I don't typically go to other dealers and look at their operations, but maybe that's something I should start on. So let's. So let's back up to the process and what we really want to talk about today is how you transformed from being a buy here, pay here dealer. And there's nothing wrong with being a buy here, pay here dealer. I'm a buy here, pay here dealer. I do a little retail.

But.

What helped you move from being that buy here, pay here to being all retail? What was the process and how did you. What made you decide to do it and maybe lead us through the process of doing it?

Sure. So first of all, I miss buyer payer. I mean, I'll still do a couple buy hair payers every once in a while just because I miss it. I love is my background. It is what I did. I did it very well. I mean, we were successful at it to a certain degree. But the reason we switched to the retail side of things, to be honest with you, is we were 100% organically funded. We didn't have line of credits. We didn't have a bunch of. So every dollar that was on the road in our portfolio was money that we had invested. So it was a cash flow, cash flow decision for me. You know, there was times when I had $5 million in the portfolio and I'd still worry about on Thursday, about Friday's payroll. And to me, I needed to know what else was out there. So at first I started dabbling with some. A couple subprime lenders. And you know, they're okay. I mean, they are what they are. And it was kind of a gateway drug. Like credit acceptance was big for us because we started doing credit acceptance and seeing some. Seeing some profit day one, you know, that that was kind of the transition period. And then next thing you know, I started signing up other lenders and I had to beg. Oh, man. As an independent dealer and many guys that will listen to this and hear this for us as an independent dealer at the time, we had a gravel lot. We had old Cars out there. And banks laughed at me. They're like, no way. So I decided to invest heavily in the dealership, put new signs, pavement lighting. And then I re. Approached the banks and I started sending them emails and taking pictures in going to the, going to the banks in person and say, hey, give us a shot. And we had a couple, couple banks that signed us up. And today we probably have 16 or 17 banks.

So tell me that, Dan, out of that makeup, what percentage of those are cac? What percentage is subprime independent? How does your sales, just out of.

Curiosity, you're not 100%, 60% near prime or prime, and 40% subprime. And so with that being said, our only subprime lender that we truly deal with is CAC.

Okay, so the 40% of your sales is CAC.

Last month was 31% out of 40, 47, I believe. Now, with that being said, we do have some of our lenders that are buying a little deeper. Some of the credit unions will actually, they'll buy some of that paper and a few other national lenders that'll buy some of that stuff now.

But as far as the basic lender profile, the bulk of it is banks, credit unions, and then you dabble in the CAC, 30 to 40%. Okay.

Which is funny. RCA, we were one of the top dealers in. Well, we were the top dealer in our market for four years in a row for credit acceptance. But as I mature and learn more and more about retail and how to structure a deal and, and work more as a finance manager, and my guys understand it, it's kind of graduated us and we've matured some.

So tell me that. I'd love to know from an inventory standpoint, how did you mature? Because I think sometimes those people that dabble in or that do buy here, pay here and then want to start dabbling in retail. And I'm speaking for myself, it's very easy to get caught in the middle. And that's the big argument of why people say, hey, I don't want to get into retail. Because what happens is then I put a 2014 sonata next to my 2004 sonata that I'm trying to buy here, pay here, whatever the case, you know, and then my lot is a mess and nobody knows what I am. How did you do that? Did you do it quick or did you do it over time?

Well, kind of. So this has all happened over the last four years. So four. Well, about five years ago, we were still 100% buyer payer. Just five years back, go back four years, we were 50% buyer payer, 50% CAC. Move forward. We keep at a bank, out of bank, and we kind of at this point. But to answer that question, it was challenging in the beginning to a certain degree, but our ACVs were still low back then. So the cost of our inventory back then, our average cost was probably about five, six grand. Today, if somebody comes to the dealership looking for a car for cash, for five grand, I literally yesterday they had this happen. Five, six grand I couldn't find. Yeah, no one really can, but I know, I mean, it just don't happen.

Do you find. Tell me the good and the bad. Tell us the good and the bad. I mean, obviously everyone thinks, well, when I'm dealing with nicer, newer cars, I've got less headache, less customer headache, less car repair. Do you find that to be true with, with a nicer, you know, something with 50,000 miles or 40,000 miles, or are you still putting just as much into them?

No, I mean, our recon cost went down slightly, but then again, you have their different headaches. You still have headaches. The good credit customer, they're picky, right? They're very picky. And so it depends on the customer and the vehicle. But the good and the bad, I mean, there's a lot more good than bad for me. I mean, the good is the cash flow. The good is the opportunities because of that cash flow that I could provide to my employees and do more, more good with what I have. I don't, I don't struggle with the money like I did in the past. And I know that as many cars as I sold buy here pay, I was still doing it wrong, you know, so there's no, there's no shame in the buy here pay your game. I mean, it's just I was good at selling cars, not good at managing my portfolio. That's a huge. Yeah, I mean, that, that right there.

It'S a collections game that'll put you.

Out of business real fast.

Exactly. And you know, if I was to join a 20 group, say six years ago, I'd still be a buyer payer, dealer, because I would know how to do it better. So it's just how it worked out for us.

Do you battle compression? Gross. Gross margin compression. I hear about that a lot in that prime area because you're competing with so many people and these cars are just commodities. I mean, I don't know what the markup is on a 2014 sonata, but it can't be more than A couple hundred bucks, you know.

Yeah. Dan, are you, are you pricing the market? Along with the same lines of. Jeff, let's talk about that. Let's go down that rabbit hole. Are you a V auto dealer? Are you pricing the market? Does your market bear a little different than most. Most markets? Can you, can you expand?

Yeah, actually my market is going to be vastly different than say an urban dealer. I'm not a, I'm not a V auto. I won't probably, unfortunately never be a V auto dealer. I price nada retailer right around. Does that eliminate me from some of the prime buyers that are price shopping? Probably. But then again, like I said, we're in a rural area, we got a great reputation, we're very involved in the community and people will see the value of most time in buying a car from Dan or from reals versus buying the best, cheapest thing out there. So we do sell the value of the service of the customer after sale service, stuff like that, you know, and, and going back to the Sonata question the margin, you know, or just not Sonata, just sedans, cars, late model stuff. They're. The market's flooded. I literally probably had 25% of my inventory is going to be sedans. The rest are going to be trucks, SUVs. I have so many trucks out there right now. I think there's probably 25, 25 trucks that I got over 20 grand in. You know, I, I don't do cars. They sit and they sit and they sit.

I mean you're also in a farming community and you're also in bad weather community. So I could see how that happens. So Dan, down that same line here. You know, people I guess buy here, pay here. Dealers don't really concern themselves a ton with turn. I tend to worry about days on lot and turn a little more than probably most, most buyer pay here dealers. But how concerned are you being in the retail space with your turn? Number one, what is your turn? And number two, how concerned are you and what are you doing to speed that process up?

So absolutely I worry about turn. So right now at this moment, we are still using a traditional floor plan. I have an opportunity right now with a large bank to probably move away from that in the future. So if any of our future sponsors hear this. But anyways, yeah, we are looking at moving into a more traditional, lower cost of money. So the days on the lot, the turn time is super important because when you buy a truck for 20 grand, that curtailment is going to be pretty heavy. So we do focus heavily on that our cars are turning on average of right now thanks to the 20 group stuff. I think 37 days, that's great, man.

That's 37 days is awesome.

Yeah, we still got an old one every once in a while, but on average we're doing pretty well there.

Do you have a drop dead date or do you, do you rarely take them back to auction? How do you, how do you make sure when a car gets to 60 or 90 days that, that you're figuring.

This out so we will just lower prices? I mean taking them back to the auctions really not a reality for me. I will take a few aged units if I had the thing for 100 days. I'm tired of looking at it. I'll just take a beating at the auction, move on. If I, if I'm not getting any, I. A bad buy is a bad buy. Sometimes you can't bounce out of it. But in reality I try to avoid wholesaling retail ready units at all costs. If a car needs a ton of recon, yeah, I'll ship it out. If it's not, if it's not a car that fits my newer image, it's gone. You know, and that's.

Man, I'll tell you are leading me into all kind of good stuff here. So one of the things I heard when you were talking about getting those banks that you got was the appearance of your dealership. Let's talk about. I've seen the transition and I've not been to your dealership, but Dan and I are really good friends and I like to do some snooping like he does with me and look at pictures. He sends me some pictures. But your dealership going from the dirt lot to pave lot and you've, you've updated your showroom and you've updated your service facility. Talk about the. How much it matters for your brand and for business that your dealership looks like somebody wants to do business there.

Yeah, the image overhaul that we did was single handedly the best decision we ever did. It was expensive. We bought new equipment. We bought obviously the pavement on the lot, the LED lighting, the fancy sign on the building. I get compliments from the community all the time. I get the car, that 14 Sonata we talked about, you know, how much better it looks when it's shined up on asphalt than on. And I had nice gravel. Nothing wrong with getting gravel. But the car looks better. And I have a good friend of mine, he won a national quality dealer out of Columbus, Ohio, Mark Meadows, and he had bugged Me for a couple years. He's like, you need to fix that right away he goes, that car's gonna look better. It's gonna sell better. Just fix your image, you know? So we invested the money. One of the other major things that came along with that was the quality of the staff. You're getting a better quality customer. Right. The image is there. It's more dealership than car lot. And you know how many times people are like, a car lot dealership? It's like, no, we're a dealership, but it's. The quality of the actual employee has changed drastically over the last few years. You know, we're obviously pulling in better talent and able to pay them what they need. So that's been huge.

And better staff equals whole, better operation, right?

Oh, my God, it's so awesome. I mean, we have everybody that we have working for us. We're blessed, man. I mean, I don't have any weak links right now, and I've always had weak links, but if I don't work for the next month, there's still deposits going to the bank.

It's a good place.

Yeah.

You know, that makes me think. Yesterday I wanted to put a post on the. On the Facebook page about that exact topic. I would love to get everyone who's on there, who's active to just put a picture or a couple pictures of their dealership or the inside or the outside or those things they're doing that are kind of maybe fun and unique that we could all get ideas from. You know, I would love to see Dan's lot and his LED lighting. You know, what does it look like? Why did he go with that? Or what's he doing on the inside? Does he have oversized couches or a television or a kid's play place? Or, you know, just clean look like that kind of a thing, I feel like. Would be really interesting if we could. I might. Maybe I'll do that post today and I'll see if I can't solicit everybody to contribute.

We have all that you just named. We have all that.

You have that in your lot.

We have all that you just named. Yeah.

Feet. I would love to see what that looks like. I got a little patch right here. I would love to do a slide and a swing and a little fence around it so the kiddos can be outside. I don't know what that looks like. I don't know that people are doing it. What else do you got, Dan? Give me some ideas.

I don't know. I think you named Them all. But basically, well, I want to see pictures later. We have more things on the burners that we're going to do. We're building a new service center this year because being that we're in the country, we're doing a lot of wheel and tire packages and lifting up trucks. So we really want to expand on that quite a bit. So that's something I want to do a car wash as well. But it's funny, we talk about the lighting, right? Like, so we're in the small town of 1900 people and everybody in this town tells me I should turn my lights down a little bit at night. They say my dealership's keeping the whole place up, you know, like the lighting, pollution.

Yeah, that's wonderful.

Yeah.

Well, Dan, you know, the thing we really wanted to concentrate on was moving, you know how your move from buy here, pay here to retail. Give the listeners your top three things that got you from. From there to where you are today.

Top three things that they have to do, in my opinion, to consider it. First of all, when I went to, when I decided to go from buyer payer to retail, I told myself I'm not going to dabble. I'm going to put both feet in. And that's where a lot of dealers might find that trouble is, like I tried for the first few months to do a little bit of a hybrid, right? Buyer payer, some subprime, some bank. It's hard as heck. It's just hard to do that. So I told myself, okay, I'm going all in. I'm going to go retail. And I was lucky that we were here for 20, 20 years or at that time, 16 years. So we had a reputation already that was pretty good. But the biggest thing that you have to do is consider, are you prepared for that? Like, is that an, is that a. There's such a different business model between the two. Buy here, pay here. You're. You're an underwriter and a collector. Retail, it's. You're selling it and it's gone and it's forever gone. Now there's things that we do to touch base with customers to keep them coming back in. But anyways, that's the biggest thing, is making sure that you're ready for that image is obviously super duper important. I mean, I'm not saying that there's, there's some buyer payer dealers. They, their image smokes mine. I mean, I've been to a few, there's been, there's a couple in Texas. I went to they look like Carmax. I mean, they're massive. So you can do it right and still look good. Your place is beautiful, Luke. And so is yours, Jeff. I've seen both of them. But anyways, image is important. Reputation. And getting those banks is gonna be the hardest thing that a buyer payer, dealer might run into. For us, getting the banks, it was challenging at first, but once we got a couple and we started feeding them 15, 20 deals a month or whatever, they. They see that there's different sites that banks look at. They could see how many loans you're doing. And then they started approaching us.

Well, cool.

So that, that, I mean, that's it. I mean, I agree, Dan. It's the. Don't dabble your dealership's image and get in your banks. You know, we could spend probably two hours on figuring out how to get the banks and we may do that at some point.

Thanks. You can't get the banks without the financials though. So even though we were in business for 16 years, all the banks want to see Your P&L's, balance sheets, your bank statements. They want to see that you're legit like that you could back up what you want to do. And as we continue and are continuing to grow, we're getting more national lenders versus your regional lenders. So as you continue to grow, you'll get more. But I mean, if you're going to go into retail, be prepared to literally go under a microscope because they're gonna look at everything.

And that's the reason it's so important within our business to have a good CPA you can count on and good books. Cause if you don't, you're not gonna get to the point where Dan is today.

Yeah, absolutely. With a couple minutes we got left with you, Dan, real quick, could you, could you plug or tell us about the Facebook group and why dealers need to be involved? I just, I just want to make a plea to those that are kind of on the sidelines. It's. It's the same handful of guys that are real active and contribute. How do we get them more into it?

Absolutely. So the independent dealer page on Facebook, there's a couple out there, but the independent dealer, like Luke said, Leanne from Fort Myers Auto Mall and myself, we kind of brainstormed this and came up with the idea. And we got 780 dealers in there. There's a tremendous amount of professional information there. By far the. The best group that I belong to. And I'm not saying that because I'm Biased, but it is a very, very strong group. But dealers, if you're a dealer principal, you need to be in there because of the knowledge that's in there. I mean, there's dealers in there that we need to get kind of out of hibernation that are such a. I mean, there's some dealers in there, Luke and I know they make our numbers look like nothing, right? And they're super successful guys, and they kind of like, I'll see them at national events and they're like, yeah, it was a good post. I'm like, man, why don't you ever talk? I was like, you are, like, way, way ahead of everybody else. We need your knowledge, you know? But anyway, if you. If you're not part of that group, I would. I mean, there's a lot of things in that group that people overlook. For example, the documents. There's a file section. That file section has so many useful things in it that, I don't know, the dealers ever click the files. I mean, I think there's like 300 different documents in there that us as dealers can modify to make them our own. Whether it's a social media release or if it's a goodwill form or a we owe or different policies and procedures and sales scripts. And I mean, it's just loaded with information.

And people can search that group. You can search it for previous posts. So if you got a topic, search and go research what we talked about last month or last year, you know, and the other thing. Chime in, like everyone, like you said, Dan, so many people on the sidelines, they read it, they take in all the information, but they just. Just have. Just speak up, you know, everyone. I'm sure you've got something good to say.

That's right. Absolutely.

And don't be afraid to ask. There are no dumb questions. Just. Just ask. We won't crucify you too fast.

Everyone's gun shy after Luke's post about being appropriate.

You know what? Let's talk about that really, really quickly. So that that group. The one difference that separates that group from many of the other groups on Facebook is that we are a group of dealer principals. And we. The most important word. There's principles, like. So we don't want people to lose their morals and swear at people or degrade people or degrade a company that might be a partner vendor of either our state or national associations, or a vendor that many of us love and use on a regular basis. Vulgarity is not acceptable. You know what people tell me it's Like, I'm a little too uptight about it. I'm not uptight about it. It's become a brand, and it's got to remain clean. It's got to remain. It's got to remain a resource for people of every race, religion, creed, and size of dealership. And the only way to do that is, unfortunately, police. And I've had some people that sent me some pretty nasty messages. But at the end of the day, it is what it is. We're going to keep growing it, and that's good.

Mm.

One of the best things podcast. I mean, think about that. That's. That's great.

Well, Dan, we really appreciate your time today, guys. If y' all haven't had a chance to. To be around Dan, he's. He's a real blessing to our industry. He cares, he listens, he will help you. So if. If you have a chance to meet him, talk to him, you will be better off. So thanks, Dan. We appreciate it.

I appreciate that, Luke. I mean, I'm not really a pedestal kind of guy, and I don't want to ever be there. I just want to be a dealer that helps other dealers and treat you all like brothers and sisters, you know? So I do appreciate the acclaim, although I'm just a regular dude, so thank you.

Thanks, Dan.

Thanks, Dan.

Appreciate it. It's always about the beginning. That's where a lot of dealers screw up, man. They, like, get. They get to the 25th of the month, and they're like, oh, shit, we're not tracking where you been all month.