#165 - The Future of NIADA Education with Larry Dixon

Hello. Welcome to this episode of the Independent Dealer Podcast. This week we have Mr. Larry Dixon of Niada. We talk about a lot of great stuff. We're going to cover his expertise in pricing. This guy knows everything about used car pricing. Everything. That's probably a broad word, right, Larry, but. But he knows a lot about used car pricing. We're also going to talk about upcoming Convention 20 groups and the basic philosophy and forward movement of the association. So everybody strap in. Here we go.

Welco to the Independent Dealer Podcast with hosts Luke Godwin and Jeff Watson, a podcast by dealers for Dealers. Here we go.

But, yeah, so vice President of Industry analysis and insights is part of my role. I do have oversight of dealer development, training, 20 group programs, as well as meetings which would include convention.

Great.

So, Larry, what's your background?

So I spent about six years at JD Power as their Senior Director, Evaluation Services. Prior to that, I spent many, many almost 20 years at the NADA used car guide. Many of you are going to be familiar with, you know, the official used Car Guide, the values that are in that little gold book. So I really cut my teeth back in the day, so to speak, in setting the values for all trucks and SUVs that were in the official Used Car Guide. That was quite a big responsibility.

So we should fuss at you about the problems with the NADA Guide then?

That's exactly where I was going with that. Dealers are certainly not shy about voicing their opinions when it. When they believe that you're off base. They don't really give you the pat on the back, though, when they feel that you're spot on. But yeah, that was very. Well, I'll tell you what, that's where you learn to dot your I's and cross your t's. Right. You have to have a very strong argument for why you set a value where you set it, because you know that if you do a poor job, you're going to hear about it and heck, understandably so there was a lot riding on that.

So, Larry, can we go just down that rabbit hole just for a second?

Sure.

Right now, how can guides keep up? Any guides, I mean, you have that background. We're in a. We're in a cycle of an economy no one's ever seen before. And I mean, the book values have kind of been thrown out the window. What should a dealer do to stay, to make money? How do you do that right now?

Yeah, it's tough. It's really hard, you know, when you have wholesale prices that are banging up against retail prices. I Mean the guide, the guidebooks aren't going to narrow their margins down, right, in terms of that spread to reflect what, what is actually going on in the market. I mean, you see wholesale prices, they're essentially touching retail prices. So it's hard for them to keep up. But the best guidebooks are going to adjust values at a minimum on a weekly basis. They're using the latest data to try and manage as best they can, that relationship. But you guys know better than anyone that margins are being squeezed. The best way to, for a variety of reasons, the best way to kind of navigate through that, one of the best ways is to try to turn as fast as you absolutely can. Right. It's volume based. Hopefully the market settles down here in the next several weeks, slash months to where things kind of go back to normal in terms of the spread. Prices aren't going to fall off the face of the earth. There's no way that that's going to happen. They'll recede, they'll slowly drip lower, but they're not going to fall off the face of the year. So along with an answer to your question is guidebooks have a tough job under normal conditions, but when you go through periods like this that are unprecedented, it's even harder.

Yeah, I like what you said there. I think a lot of us get scared that all of a sudden we're going to show up tomorrow and prices are going to be back to what they were six months ago or some sort of massive drop. And I think people worry about that in all asset classes. I mean, your home, your whatever, all these things. And you're saying, especially from a car standpoint, don't be so worried about being caught with your pants down. It's not going to just the bottom's not going to fall out, but it will go back to a normal kind of depreciation.

Yeah, I mean, normal depreciation, that's going.

To be a while.

You know, again, you all know this average annual depreciation somewhere in that 16 to 17% range year over year prices. Vehicles haven't depreciated, they've only appreciated.

They appreciated.

So we might go to 10%, which would be great relative to history, but yeah, they're just going to drift lower. And there are several reasons why. Number one, used vehicle supply, very basic, right. The fewer new vehicles you produce, the less supply you have in the used side of the market. It's very simple. Okay. We know that for rental fleets, as an example, last year that new vehicle sales in the rental fleets were off by 50%. Oh, well, guess what? 12 to 18 months down the road, they're going to be 50% fewer one to two year old vehicles in the used vehicle market.

That's a fact.

Okay.

Your off lease supply is going to drop because lease originations were lower, so on and so forth. Okay. But in the lead up to Covid, used vehicle demand had just been ascending year in, year out. You know, you go from 17 to 18 to 19. The focus that both consumers and dealers had on used vehicles just continue to grow, grow and grow, and many of those fundamentals remain in place. Okay, so Covid aside, used vehicle prices would have continued to move up even if you would adjust it for inflation because there are more consumers demanding used vehicles and more dealers. You guys know this demanding used vehicles, CarMax, Carvana, all the franchise guys, Sonic, AutoNation, Lithia, you just go on down the list. So now you've got these temporary factors here where you've got folks that they can get up to $5,600 for a family of four from the latest round of stimulus if they qualify. You've got federal tax refunds as well that are outside relative to years past. It's a huge chunk of change that folks can use as down payments. And oh, let's not forget that their trade in equity is up too. Right. For folks that have trade in. So a lot of money for folks to put down on both new and used vehicles that only exacerbate things. As that stimulus money wanes, as that demand is kind of satiated again, I expect the prices will drift lower. We're in the middle part of April. Things are still really strong, probably in May. You know, we'll see things to start to drift lower, but they're not going to fall off the face of the earth. Especially when you have a new vehicle market where inventory is down by 25 to 30% year over year. You know, you've got a number of reasons for that. You still have Covid issues from a production standpoint. You have issues with the semiconductors, which I know many folks are aware of. That stymie production. You got seat foam that's in a shorts. There are a number of things going on. Right. So lack of that downward pressure on the used vehicle market will also help support used vehicle prices.

Larry, we didn't bring you on for that, but thank you for the insight and it's very interesting. It's an interesting time. I can remember where right after the. Right in the middle of the financial crisis, you could go to auction and buy Anything and everything you wanted. Cause prices crashed. I mean, demand crashed. Prices crashed, then production crashed. Well, when production crashed and then you had cash for clunkers, you know, prices spiked so high so quickly. It was just. I never thought I'd see that again. And now we're back in the same. In the same place. So it's just, it's so interesting that we're there. Most of our listeners have been waiting for convention and I think, you know, that's what we're here to talk about. It's in a new place this year, which is interesting to all of us. Can you kind of tell us where it's going to be and what was the thought process of getting it to San Antonio?

Sure, yeah. So it's going to be. Yeah, San Antonio, as you mentioned, August 23rd through the 26th. We're extremely excited about this. I hope you guys are as well. It's an in person show and that's one of the reasons why it was pushed to August and to San Antonio from June in Las Vegas. We wanted to ensure as best we could that we would be able to put on a robust in person show. We did a virtual show last year. I think we did the best that we could in terms of putting on a show virtually. But I think everyone would agree, and this is not a knock on NIA or any other organization, that virtual shows just aren't the same. Right. They don't have the same impact as in person shows. So the board of directors back in February decided to push the show from, from June to August. You know, that gives more time for folks to get shots in arms. You know, we're up to, I don't know, roughly 140 million people that have already been vaccinated. You know, at least the first round go around. Right. Things are starting to lighten up, if you will. So we're hoping that by August then we're in a much better place. We have an extremely well attended show. We're extremely excited about the educational sessions that we're putting on. We want to do our best to make sure that what dealers learn at the show that they can put into action when they get back to the dealership. Right. Actionable content is what we're trying to do. So I know it's a little bit different from what we've done in the past. You know, it's usually in what, June in Vegas. We're going to go back to Vegas next year, next June. But again, that's why this was pushed from June in Vegas to August in San Antonio.

Larry, one pushback I have to that is you're kind of in the middle of a lot of state convention time. How do you reconcile that with state conventions and how are you going to try to make sure people can make it a national when a lot of people are just going to go to state?

Yeah, yeah, it's tough. And that's a very legitimate concern. And certainly the board of directors thought about that and discussed that. I think that we're kind of in between or after some of the larger state conventions. So, you know, we certainly thought of it, but we were going to run into, into kind of balancing act issues regardless. Right. I mean there are other national shows that are going on. In fact, the IARA has a show going on in San Antonio at the same exact time. Right. Everyone is trying to push their show to the third or fourth quarter of this year. They're trying to do the same thing that we did. So we, unfortunately, circumstances kind of dictate some of these challenges. But again, it's a one year thing. We're going back to where we were from a timing and location standpoint next year and we're trying to make the best of it under very unusual, extraordinary circumstances.

Yeah, I'm just, I mean there's a lot of us dealers that are in states that don't have conventions. I mean, I don't. I know pretty much every state around me does not. So to even have one is great for us. I mean, you put it in friggin Atlanta. You put it in. I don't even care. Put it in anywhere you can. We're going to show up San Antonio, big deal. Convention halls are always freezing cold anyways. I don't go outside, so it's going to work out perfect for me. Anything we need to know about? Have they announced keynote speakers or any special, you know, curveballs or draws that the dealer that might be on the fence might be like, hey, you know, I mean from my standpoint lawyer, every dealer should be there, right? We are cooped up. We haven't seen each other in two years. Everyone should have this on their schedule. Like you just need to go, you need to go to the, I mean the education sessions. Luke and I push this every single week. You need to educate, you need to network, you need to meet the dealers that are in the communities that are in the Facebook groups and make those connections because they're lifelong friends and it's education that it's going to be worth leaving your dealership for three days to go attend Anything else that these dealers need to know that they might be sitting on the fence?

Yeah, Sir. First though, I appreciate that and thank you for that testimonial. Yeah, we're again very excited in person. But we also feel like we're putting together a very robust curriculum, if you will, that will really support dealer educational needs at a very challenging time. You know, we talked a lot about inventory. We, we know we have a new administration, we know what that can portend in terms of regulatory changes and oversight as it relates to our industry. But yeah, some of the more notable things or notable differences this year relative to years past, we have three primary tracks with a fourth, which is kind of a general catch all and you're going to have that at really any show that you go to. But the three primary tracks are retail, which would include subprime, buy here, pay here and service. It's my understanding after two and a half months on the job here that service is something somewhat new, somewhat new track for the NIADA show. And I can go into more detail or we'll go into more detail about those things in just a moment. But another thing that we're doing differently this year is that we have a dealer steering committee or advisory committee that is driving content, our sessions and what we put on. So we like to say that this year's show is going to be set up by dealers for dealers. Right. So the board members are heavily involved in helping make selections in determining the sessions that we're putting on. We have the foundation trustee members, some of the foundation trustee members that are also involved with this. And who better to hear from than the folks that actually have the boots on the ground, Right. I don't know what you guys need as intimately as you do. So I think that that's going to be an extreme benefit to attendees this year. You know, some of the things that we're looking at doing this year, obviously we want to focus in on new areas where dealers can make more profit. Right. New profit opportunities. You know, we talked about, you know, the difference in wholesale price and retail price and gross profit margins are narrowing. Right. Well, we need new profit centers out there and one of those that we're going to talk about at convention is going to be aftermarket accessories. So we're going to have panel with folks from SEMA as well as other aftermarket players where we can talk about how dealers can make more money there and increase the rate of inventory Turn. We're also doing something new this year called the service bay track, if you will. And These are micro sessions, 20 minutes, one speaker. Or we can cover a variety of different topics. For example, we'll talk about how to go about replacing torn seats. Right. Whether fabric or leather with replacement material and what that means from an ROI standpoint. How do you actually go about doing it? Again, going back to giving dealers information and insights that they can put into action once they get right back to the dealership.

Well, you know, that's. That's. I mean, doing things like. That's great, as long as you have the right person teaching it is what I always say. And I hope that y' all are getting the industry best at doing that.

Yeah, yeah, that's an awesome point, Luke. Going back to what I was saying about the dealers selecting for dealers. So working very closely with Lou Tedeschi, who's obviously the president and the board of directors, among other folks, other members of the board, and they're the ones that are picking these folks out. Right? You guys, y' all work closely with vendors like this in the past. So you know who's going to come in and show it, go over something that's tangible and useful rather than someone that would come in and give an infomercial. And I'll tell you what, all the folks that we've talked to, all the folks that I've talked to, it's been made very clear to them this is a no infomercial zone. Okay.

Yeah, I was going to say that we don't want you guys. Yeah, you guys have been good at that. I think there was maybe a year or two back in the day, and I don't remember NIAD or nabd, but got a little pitchy. But you guys have been very good about making that very clear. Like, this is not an infomercial. So I don't think dealers need to be worried about that. And Luke and I, we have experience with this. We bring on a professional. Hey, I get it. They're the expert in the field at this certain thing. But they do have a certain amount of blinders towards their product or towards their service. So, yes, some of their information is going to be skewed towards their specific product. But as dealers, we have to give them a little bit of leeway. Like, yeah, 99% of this information is going to be good general information. So, you know, he's the expert. Like, there's no one else better than him. So just deal with the fact that he might be a vendor for so and so company.

Exactly.

Yeah.

Make sure. Larry, you know what? I'm not even Going down that path.

Good. What about. We got a couple more minutes with you, Larry. Let's transition real quick into 20 groups. Obviously, Luke and I are huge fans. We're major advocates. Everyone we talk to. We believe you need to be in a 20 group when you get to the size where it makes sense for you. Any news on the 20 group front that you could share with us?

Yeah, yeah. So thanks for bringing that up. So 20 groups are an integral part of NIADA, who we are as an association and our commitment to providing the training and education necessary for dealers to not only be competitive today, but also stay ahead of the curve moving forward. As part of our strategic plan that was adopted by the board Back in February, 20 groups growing, enhancing 20 groups was an important part of that. I'm not sure if y' all have had the opportunity to review their strategic plan. It was in our UCD magazine, I want to say last month or the other month before that. You haven't had a chance to look at it.

Yep.

But I have just been absorbing information from the board of directors, 20 group members in terms of what they would like to see as far as growing and enhancing 20 groups, where our areas of opportunities. We have put together a steering committee of folks that have either been in 20 groups, are in 20 groups right now. You know, it's a cross section of buy here, pay here and retail. And what we're working on right now is settling on what is the purpose of a 20 group. We all have ideas in mind. Right. But we actually put this down on paper and everyone agreed to it. Okay, and then what are we looking for as it relates to moderators? You know, we know that we have two fantastic buy here, pay here moderators and Chuck Bonanno and David Brotherton. You know, they're spread thin right now because they're doing double duty, so to speak, as it relates to some of the other like retail 20 groups. And so what the board of directors in this 20 group, steerco, what they really want to see is, or what they've made a priority is hiring a new retail moderator or retail subprime moderator. So that's where my near term efforts are.

Good luck.

It's funny you say that. I've heard that so many times. If you saw the list of qualities, skills and qualities that we put together based on the feedback from the 20 Group steer company. Yeah, it's like a unicorn.

Yeah, it's a unicorn. Because it's like you have to know everything about a dealership, how to run a dealership. But yet you don't want the cushy life or the cushy money of actually having a dealership. You want to be on the road 51 weeks out of the year.

Like, I'm sorry, like, and you've got to take a pay cut, you know.

And you got to deal with guys like Lou friggin Haggling. Y' all meeting long?

No, you know, Larry, that's. I mean, we've had the association have had a real void of that retail group moderator for a bit. You know, we had one there for a little while and, you know, it seems like. It seems like that's just a difficult position to hire, a difficult position to keep. How do you find that person that has that experience? I mean, can you do it?

Well, the quick and honest answer is I don't know. I don't know just yet. Yeah, you know, I'm trying to figure this out. Okay. And I know I said unicorn, and that's. That's a true statement. We're trying. We're going to try and check as many boxes as we can. Okay. Also, I am working with Chris Leadham to, you know, help, you know, advise me and to, you know, steer me in the right direction, so to speak, in terms of moderator qualities and characteristics and how to go about setting up or training, spinning up the speed, a successful moderator. So I think that that is going to be a significant help. His support is going to be of significant help to me, working very closely with Joe McCloskey as well to help guide me through this.

You almost need someone who's just willing to do it as like a volunteer effort. You know, he's made a ton of money, he's retired, and he just wants to travel because, like, his wife died and his kids are gone, and he just wants to travel and meet dealers. Like, where do you find, like the Mother Teresa of car dealerships that just wants to like.

It's hard, it's hard. I've had a couple of folks reach out to me. One guy was one gentleman. He believes very strongly in his capabilities. So we'll see. We have to vet these things out, right? And it's not just going to be me. We're going to have the Chuck and David help with this. We're going to have folks that are currently in 20 retail, 20 groups help with this. Right? To really vet these folks out. And I know it's trial and error. We're just trying to reduce the number of trials and the amount of error that we have to go through.

Larry, when you talk about hiring someone who. This is an issue. I see. If you're talking about what Jeff's talking about, an older dealer who's out of the business, I think that creates a lot of issues. And I think the board of directors honestly has a bit of this issue is there's too many old white people on the board. And so what ends up happening is you get people who don't understand the car business anymore trying to run the car business. And I think a moderator who is out of the business now doesn't understand for one turn didn't exist back then. Number two is some of them never had a website and they just don't get the modern way to buy cars, modern way to do anything. So, I mean, I don't envy the situation you have. I just hope that you're getting the right opinions from people.

But what's the alternative, Luke? It's like, okay, so I'm going to hire a Justin Style that's like young buck. And he's like all. I mean, it's like Chuck was five years ago. Right? Well, you're dealing with a lot of very rich dealers that would love to hire you away for three times your NIADA salary because you're so competent.

Like, I totally. I do not envy Larry's job.

Quit your job, Luke.

You go do it.

You go do it.

I'm not, I am not going to quit my job right now to go do that. And I think that, I mean, honestly, that's. Honestly, that's a big issue, you know, that you're having to deal with. So I mean, how committed is Niada to 20 groups? Extremely.

Extremely committed. Again, I go back to the comment that I made about the strategic plan that would not. 20 groups in education and training, 20 specifically would not have been included in the strategic plan had the board not been committed.

So that's good to hear. I mean, we believe.

Very committed. You've got the president elect who is the chairman of this steering 20 group steering committee that I've referenced a number of times. Extremely committed. And that the balancing act or Luke, what you're talking about in terms of, you know, folks that have been been around for a very long time and they may be somewhat out of touch with how things are being done today versus someone that's extremely in touch with more modern ways of approaching things, but yet they don't have that depth of experience. That's going to be tough. It is a balancing act, but that is important. That is something that I have top of mind, you know, I'm not looking for someone that, you know, works in an independent retail dealership 25 years ago and they've totally lost touch and they don't have the drive to do what it takes to build the book of business. Because they have to build a book of business. I mean, you guys know that.

Yeah.

For it to have a successful retail 20 group. Yeah, we'll see. You know, maybe it's a couple of guys that are working, you know, 420 groups rather than one guy that's doing 820. You know, something like.

Yeah, that would actually be really interesting to almost a part time job for somebody. But, you know, obviously 20 groups are, to my opinion, kind of the core of the association. It's the hardcore. It's the one that keep things flowing. I know, I'm sure it doesn't make the association any money at all, but it parlays into convention. That does. Hey everybody, Sorry to interrupt the podcast this week, but of course we need to let you know about our sponsor, Dealer Re.

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Yes, sir.

Awesome. Back to the episode.

Yeah, Jeff, I've heard that from, from a number of folks.

Yeah.

That sentiment towards 20 groups, how integral it is to, to the association overall. You know, if one of our responsibilities is to enhance dealer training and development Right. Over the long haul, you need to have 20 groups to do that. Right. To really do that adequately in terms of other educational initiatives that we have on the plate a little bit further down the road because, you know, I've got a lot going on or we have a lot going on right now is virtual training, supporting smaller Dealers or dealers that are just starting up, less experienced. Right. We want to develop a path, if you will, that goes from, you know, your 100 level course all the way up to your 500 level graduate course. Right. Those are the guys that have been doing it for a long time. They've been in 20 groups for 15, 20 years. Right. But we have to have that logical progression. You know, what's a, what's a financial statement look like? What's a composite look like? Why is it important? Let's start there and then work our way up to more advanced things like, like the cmd.

How do you make, how do you make that affordable for dealers who just started out?

Virtual. Virtual is one way to do it. You know, you're not traveling, so there's a ton of savings. There's. But I think that that's the biggest piece. Right. They can stay in the dealership, they can spend a couple of hours a day, maybe broken out over, you know, several days. And there's a lot of savings not only for the dealer, but also for niada. So I think we've learned a lot guys over the past year in terms of communicating virtually what works and what doesn't work. And so we have to put those lessons learned into practice.

Seems like NIAD should buy and, or, you know, have some sort of a popular podcast that gets information out. I don't know where you would find one.

That's great. That's great, Jeff.

Couple of hags, Larry, Anything else you want to share with the community in closing? We've gone over time. I appreciate you being generous.

Yeah, sure. This is an exciting time. You know, I coined this phrase the golden era of used a couple of years ago and I think it's totally applicable and I firmly believe in that Today, you know, new vehicles, you know, they're increasingly the bastion of the well to do or the well off. Right. Used vehicles are going to continue to take on a more pronounced role overall, not just for consumers and dealers, but also economically. I think it's just an awesome time to be an independent used car dealer. There are a lot of competitive threats. You know, you've got some, some very large, well known publicly traded companies out there that we're all familiar with. You also have the franchise guys that while they're similar to us in many respects, they're also competitors. So you have to make sure that we stay competitive, stay ahead of the curve. And it's an exciting time for the association. You know, we see a lot of potential, a lot of areas of opportunity to help grow and support members. A lot of work to do. You look at that strategic plan, you see all the, all the great ideas that the board has come up with, but you also understand it's going to take some time to pull everything together. So I'm excited about the direction that the association is headed in. I love hearing from dealers in terms of what's important to them because really, that's how we're going to chart the course that's going to be best for the association and members overall. So awesome. Stay tuned, guys.

Is there any. If dealers want to get in contact with you or have, you know, concerns, questions, do they call? Email. Any way to get feedback to the association from our community?

Shoot me an email larry@niada.com okay.

Thank you, Larry.

Awesome, Larry. Thank you for your time.

Thanks, guys. Appreciate it.

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