#172 - Buckeye Dealership Consulting

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

Hello. Welcome to the Independent Dealer Podcast. Thank you everyone for joining us today. We appreciate your time. Know there's a million places you could be and probably a million places you should be, like running your dealership, but you have chosen to be here with us today. A couple of housekeeping items, Luke, the reviews are going great. We appreciate everyone for leaving them on Spotify and itunes, things like that. We still don't have a winner from last week's episode of Guess what Luke was in the back of. That sounds odd. Guess what car was in the back of. So be sure to listen to last week's episode and get that out there. And more importantly, this is a super exciting episode. If you're watching online, you see we have got a load of talent. We have the guys from Buckeye Dealership Consulting. Sean, Jason, say hello.

Hello, everybody. Good to be with you today. Thanks for having us.

Hey, guys, thanks for having us. Been a fan for a long time. Glad to finally get to participate.

Thanks, Jason. And I tell you, Sean is an old friend of the podcast and a friend of the industry. And if people don't know, Jason, Jason Gosnell is a good old South Carolina boy. So we always, we love to have those on the podcast. Jeff may not be able to understand.

Them, you know, but I've got subtitles dubbed in, so that's good.

So, Jason, how long have you been with Buckeye?

So I am approaching my five year anniversary with Buckeye.

Okay. And so for. For all those that maybe not sure exactly what Buckeye Dealer Consulting is, they're a reinsurance company. They help dealers set up reinsurance companies. Sean or Jason, can one of y' all go through the history of Buckeye and. And you know where it's located?

Yeah. Buckeye was founded in 2007 by our founder, Rob Fox. Rob had a long history with Portfolio, which is a large company that provides reinsurance products to the finance company and franchise space. And Rob saw an opportunity to service the Independent dealer through independent dealers and buy here, pay here. So he founded the company in 07 and has been growing and strong since then.

It's in Ohio, is that correct?

Our corporate office is based out of Boardman, Ohio, which is right outside of the Youngstown area.

Very good. So, Sean, I assume you've been aware of Buckeye for a long time. Being from up in Ohio, I mean.

Once a Buckeye, always a Buckeye, whether you're in Youngstown or whether you're in Dallas, Texas. Right. So, yes, you know, Rob's. Rob's built a great company. And to Jason's point, it's grown significantly, including probably doubling in size in just the last 12 months. The trajectory for Buckeye is fantastic.

Sounds like maybe they hired somebody that's really smart and has been in the industry for a while, huh, Sean?

Yeah.

Jason was a great hire.

Well, both of you are great guys, and I've known both of you for a while, and we really appreciate you being here today.

Let's.

Let's dive into reinsurance a little bit. Jason, we talk a lot about Buy.

Here, Pay Here Reinsurance.

Why should a retail dealer or a prime dealer or maybe a subprime dealer not participate in Buy Here, Pay Here? Why should they open up a reinsurance company?

Yeah. So we look at a dealership participating in reinsurance twofold. One, it could be identifying risk inside of the dealership. That could become a potential profit source or additional revenue source that we may be giving to a third party ancillary product or other insurance company that we identify that and could allow the dealer to take part in the profits of that program. And, you know, just like everything, margins are getting tighter for all of us in every business. And so anytime we can identify something that could be an additional revenue and profit source for a dealership that fits into the fabric of what the operation does on a daily basis, it just makes sense to take part in that.

That's very interesting. And you've. You've brought some of those to my attention over the last six months or so. And, you know, one, I thought that was really neat, was a way to actually reinsure your psi. Can you. You talk. Talk us through that?

Yeah. So psi, that stands for post sale inspection, and it's something that we identified late last year as the demand for inventory really started to increase. We all know when I talk to dealers across the country, one of the biggest challenges facing our guys right now is finding quality, affordable inventory. And what we found was, is a lot of our guys saying, hey, we're buying the deal shield. We're buying post sale inspection from the auction. And, hey, you know what? Even in that situation, I'd like to keep the car, and I have the ability to fix that myself, but there is still risk there. And so something that you can look at is purchasing a PSI policy and reinsuring that for the pool of vehicles that you're buying on a monthly basis.

That's just a really good idea because we hate to give Money away to auction companies, whether it be Manheim or Car or ACV or whoever, that's money we could keep for ourself if we can learn how to mitigate the risk. And, and honestly, buying so many cars online is, I mean, pretty much everybody is right now. I'm sure that that was something that came up quickly during this because there's so many people getting psi.

Absolutely. And then when you talk about being able to potentially bring in that risk, but also bring in that experience, again, if you have the expertise to be able to recondition the car and take care of that, you're not potentially going, you know, filing a claim with a third party auction. And what we also find is, is is we have a lot of savvy guys when it comes to buying and can diagnose some of those things. And even in the event that something is wrong with the car, you know, greater than what a typical reconditioning might be, you have the expertise to be able to fix that and now you still have that piece of collateral to be able to market it.

How important is it to have a service department as an independent dealer to help with these things that you reinsure?

Yeah. So I think either having your in house service department allows you to control that or if nothing else, having good relationships with people in your market to where you have pre negotiated parts, you know, cost and rates and whatnot. One, we're also looking out for our dealership, but also we want to have good people to be able to refer our clients to because again, if I'm going to refer a client over, I want to give them the same type of service and respect that our dealership is doing.

I agree that's so key. And I think making those relationships, if you don't have a service department is number one. What else can a retail dealer do? Before we jump on the buy here, pay here, we all kind of know that space. What are some other products that the retail dealer can offer in their reinsurance company?

So Luke, if I jump in, Jason, and maybe not address it from a product side, and I'll let you take that one. But maybe one of the great benefits, and this I think is true for both sides, whether you're a retail dealer, buy here, pay here, dealer, but retail dealers, you know, as they face pressures.

From.

You know, lack of inventory, you know, new car dealers coming into the space, you know, more and more, you know, having reputation management is huge.

Right.

We all know the importance of things from Google reviews to word of mouth and everything in between. I think the one thing that a dealer owned reinsurance company can help with is your reputation management. From a claims processing side. When you're taking that third party product and you're sending that off and you're sending your customer off to have a claim adjudicated by somebody else, you know, you're, you're taking your name and giving it to somebody else and your reputation to somebody else to make a decision, am I going to cover this, am I not going to cover it? And when that customer doesn't get what they think that they're entitled to, who's it coming back on? It's not going back on that third party administrator, it's not going back on the insurance company, it's going back on you, the dealer, because you're the one that sold the product. So a dealer owned reinsurance company can help you manage those claims. You know, you're in control, you're the decision maker, you understand what the products offer and don't offer and you get to decide, yes, this is something that we're going to take care of. We're going to make our customer happy, we're going to manage and control our reputation. Ultimately it's going to come back on you, Sean.

And that's what really got me the most about this whole thing was that was my major frustration with ever buying an outside service contract. I spent a ton of money on them and then when I needed a claim covered, it wasn't covered and so I just gave up. And I'm like, well I'm just going to self insure my cars and I'm just going provide a warranty. So now I'm doing all the same thing that I was doing without my reinsurance company, but I wasn't getting any of the tax benefits of doing it. So if you think you can just do it on your own, don't. The other side, it just blows my mind. You look at these like turn type dealerships, right? The velocity type mentality. It's like, well, I'm going to sell this thing at cost, but I'm going to make $500 marking up that warranty and another buck 50 on Gap. And I'm like, what in the world? You can't even keep your dealership open making $600 on back end products. But if you own the reinsurance company, that makes a big difference. Now I can make $600 profit on those contracts. But guess what, I'm also putting away $1,000 or $1,200 into my reinsurance company for My future. So that's where I don't. I mean, it's a no brainer for buy here, pay here, but it seems like an absolute no brainer for retail companies that have zero gross margins and they're putting it all on the back end. And that leads me to Jason, what else can I put into this reinsurance company? Because I look at it, I'm like, man, I want to reinsure everything. Like, my plants look a little weak. Like, I don't know about my lights or my balloons. Those get beat up in the wind.

Like, man, yeah, great question. So I think that dovetails into what you're saying. So much is customer experience. And, you know, what we're finding from some of our leaders is the cost to acquire a customer now and keep them happy is really expensive. So we find independent and Buy here, pay here dealers giving a short term warranty. Again, we want to take care of the customer, especially right out of the gate. Nothing worse than a reputational, you know, hit to the dealership if something happens to that car in the first 30 to 90 days. And so giving some type of short term warranty to just stand behind the reconditioning of the vehicle and the value that you create there, that is a reinsurable risk. And just like franchises have been doing for multiple years, is you can give a short term warranty and then you can upsell that service contract for a longer period of time. And that can be for an independent or a buy here, pay here dealer. And as Sean alluded to a lot of these things, you're able to customize some of these coverages based on your knowledge of the inventory that you're carrying or the capabilities of what your back shop or your referral sources can be. And that can be components, coverage that can be the term, the mileage, whatever you see fit. So again, so much of those fit into the fabric of what you want to do in regards to taking care of your customer, taking care of the reputation of your dealership. And there's real value to the consumer because again, we want to be able to take care of them for the car to stay on the road. You know, Gap is not something that we are starting to shy away from. Gap, you know, values and whatnot are there, but maintenance agreements could also be something if you do have a good shop. And again, we want to bring that customer back and see touches. A prepaid maintenance plan.

So I can, I could reinsure a prepaid maintenance plan.

Yes.

Oh, wow.

Yes. Yes.

That's a cool one.

Yeah, absolutely. So your oil changes, your tire rotations, things and such. And you know, so for the independent guy, there's also something where in the event that you know, you do have to, you know, buyback from a third party bank, there are policies out there that could protect you in the event that you have to buy back some of those deals. So those are just a few things for the independent, you know, guy that's out there and you know, possibly using a third party bank.

What about like those other little knickknack products that all the new car stores get to do, like the clear bra and the etching and the under absolute.

There's key fob replacement. Fabric replacement is a big one now. You know, fabric in the vehicles is getting more expensive and we all have kids, so anything that gets filled, that can be handled.

As an independent dealer, I could put together a package of like five or six or seven of these like most popular items, put them together in some sort of a dollar amount reinsurance item that I sell to my customer at the F and I desk. But all that money goes into my reinsurance company to future administer claims on glass and whatever else.

That's exactly right. That's exactly right. So not only you now are you created a new potential profit center by your F and I profits, you've also got the reinsurance potential profits on the background. And then the customer satisfaction and the tie back to your dealership is a huge deal. So there's really a three components there that benefit the consumer and the dealership.

Very right.

And tax savings.

Yes, absolutely. There's an income tax advantage to owning a producer owned reinsurance. Yes.

Okay. You know, it's, I've known a lot about reinsurance companies. I think I've, I'm ten years into one. And you just brought us some things that, you know, I hadn't even thought about. So I. That's, that's awesome. My mind gets blown all the time when we talk about this. Let's go back to the, to the reputation management side. And Sean, you brought that up and I know that it's so important and it's gotten so much more important. If a customer, mine does file a claim, who is administrating that? How are they making sure, how are they making sure that I'm taking care?

Yeah. So great question. And so where we have the consulting in our name, what we really try to do is talk with an individual dealer to understand what their needs are. And so there may be instances where we provide you with a third party administrator to Answer the phone and take care of that consumer. There may be instances where you want to direct the consumer back to you and your dealership. So it's all about the want, needs and the capabilities of the individual dealer. Right.

Because I mean, some of us don't have a service partner, some of us don't have the staff big enough to take care of that administrator. So. So y' all make sure that's taken care of, right?

Absolutely. So it's not a one size fits all. It's really trying to understand, you know, the size and the scope of what the dealership's trying to accomplish. And it's not just customizing the coverages, it's actually how it impacts the operational piece because we want to control that customer experience. So the worst thing we can do is promise something that we can't deliver. So it's very much understanding how you want that back end experience to go for the consumer and then tying that to bringing you a third party or allowing you to participate in that.

Very interesting. So if, you know, you brought up size of dealerships, what's the minimum size I can be to have a reinsurance company? That makes sense.

Yeah, so that's a great question. So you know, reinsurance at its core is just like typical reinsurance, which means, hey, we're trying to, you know, create a pool of money, a premium if you will, to take care of future losses. And just like any business, we want to do this to make a profit. And so, you know, your standard dealer, depending on the products that they reinsure, you know, we look at it probably from a cars sold standpoint, but hey, we have guys that run profitable reinsurance companies selling 15, 20 cars a month depending on their type of business, maybe the products that they have and the amount of premium that they can generate and that a lot of times is based on the product that they're doing.

Okay.

Yeah, I imagine if you're a buy here, Pay here dealer 15 to 20 and you're putting a warranty on every single one of them and maybe an upsell on a service contract because you can do it out of your own money. It makes sense if you're a retail dealer and 95% of yourself goes through CAC. It probably doesn't make a lot of sense if you've only got five, you know, two or three that are potential, you know, cash deals that you could put because. And that leads me to the point there are certain lenders that will advance on a dealer owned reinsurance companies, service contracts and f and I products. But then there's some of those guys that don't play ball. Right. I mean, yeah.

So your third party lenders are all, if they, if, you know, some CAC is a great example where they're going to require you to sell their particular products. And so you are somewhat limited in what you can do, which I don't.

Know this to be fact, I'm going to state this. They probably own part or all of that warranty company they're making you use. They're doing the exact same thing you should be doing. So just.

Yeah, that's a safe assumption. I think that's a very safe assumption. Yeah, one of those.

Yeah.

But.

But what? But there are other ones. Right.

Or so any third, you know, if you're, if you're a current independent dealer and you have a bank or a credit union that's allowing you to sell anyone's third party ancillary product, then we would bring you an admitted carrier in that particular, the state that you operate that would be approved with that bank. And then now you can be in your own reinsurance company business.

Very interesting. So I think that kind of takes us through most of the retail side of this. And you know, Jeff and I are, Jeff does a little bit of retail. But let's talk about Buy Here, Pay here. Did I got, did reinsurance kind of in the independent space start with Buy here, pay here or is it something that retail dealers have done for a long time as well?

Yeah, so I believe reinsurance started really in the finance or the franchise phase and I believe from there it trickled into the independent and then to Buy here, pay here.

Okay, what you see most buy here, pay here dealerships, what are the products we're more likely to sell and profit from or what can we use to protect the risk as a buy here, pay here.

Yeah, so buy your pay here. You do have more flexibility to what Jeff alluded. You are making the credit decision and a lot of times you are effectively your own finance company. And so if you're willing to finance that to the consumer, then obviously you're not so concerned about what those ancillary products may be. And that's why reinsurance makes a lot of sense for a buy here, pay here. The low hanging fruit that we find for buy here, pay here across the country is collateral protection insurance, cpi. You know, so many things that we hear across the country right now are third party insurance companies. You know, rates are increasing and it's becoming more and more difficult for our consumers to find good Reliable third party insurance. And even in the event that the consumer does everything they're supposed to, you know, they go pay that company in the event of an accident. The first thing that that company is trying to do is what insurance companies do look way to mitigate loss, which is not pay a claim. Which unfortunately means that's our buy here. Pay here. Guys taking it on the gym, you know, taking for settlement, then less the amount owed. You know, we're seeing a lot of name driver. Excluded driver.

Just barely had one. Yes. Yeah, just barely on a, on a $12,000 loan balance, which is high for me. Oh man. Excluded driver, you know, like kidding me.

Pre existing can, you know, damage. And so they're looking for that. So again that shorts our dealer and you know, go back to that, that, that scenario where we're wanting to provide a good customer experience. So maybe a customer, you know, had an accident through no fault of their own. But if our finance company or RFC is not made whole, what do we do with that balance? I mean, we don't want to necessarily go after the consumer. We'd love to keep them. And so it puts us in a very precarious situation. And so collateral protection insurance is a great thing because it is a blanket policy. They can be issued from a carrier to your particular lienholder and anyone that is active in the portfolio can be eligible to be covered. And in lieu of you asking the consumer to go pay the third party company and all those problems that we just discussed, you are allowed to collect that premium from the consumer and forward that money onto the admitted carrier. And they take care of all the reporting, they take care of the administrator claims. And the beautiful part about it from a dealer standpoint is any underwriting profit at the end of that month can be considered profit into your reinsurance company that you own.

And so CPI is something that you buy as a whole, but a customer pays for with their monthly payments or weekly payments.

That is correct, yeah. It's a blanket policy that covers your lienholder. And in the event that the consumer chooses not to or fails to provide you proper coverage for protecting the lienholder, you can pass along the cost of that policy to the consumer and then forward it along to the carrier. And what we're finding is because the RFC is the covered entity and not necessarily that particular driver, in some instances the rate can be advantageous to the consumer. And then what we also find is that our dealers are a lot more flexible in regard to how we collect from our consumers. We're very motivated to be flexible and to work with our consumers, which is why we find a lot of weekly and bi weekly payments to our consumer. And the same thing can be done for cpi. Unlike a lot of third party insurance carriers that require a monthly all upfront premium that again is getting very expensive out in the market.

What is the normal cost of CPI per account, Jason? Is there a normal cost? Is it?

Yeah, so I don't know that we have normal cost. What we typically try to do is assess your individual portfolio and the ACV that that you're selling. And again, CPI is not based on the individual, it's not based on driving record or credit. It's really based on the collateral because that's what's covered. And so each dealer, we would do a collateral assessment, understand the ACV and assign a particular monthly premium that would take care of the risk of your particular pool. So while one dealer may have one CPI premium for his customers, there may be a separate one because again, based on the acv, the vehicle that you're.

Selling, is this a full portfolio coverage? Like does every one of my deals have to be included in this CPI or only customers who choose not to have full coverage insurance?

That's correct. It is a blanket policy to collect that. But no, not every customer has to be on that. And, and you'll find, I mean a lot of customers do what we ask and go get their own insurance. What this is, is to cover those consumers who are having difficulty finding their own or unfortunately let that lapse. And we've got to provide a solution for the consumer but to also protect our interest in the vehicle.

So we, you know, in our industry we talk about penetration rates a lot. Is there a certain penetration rate that you need with CPR to make it make sense? Sense?

You know, so we're also going to go in about a pool of money, but I don't know that we have a target penetration rate. You know, we see different, you know, pools around the country where, you know, penetration rates may be different. I mean, ultimately, as a dealer, our goal was to have 100% penetration on insurance coverage. We want all of our collateral coverage, whether that's third party insurance or cpi, we don't really care which. We just need our collateral coverage.

What other products is buy here, pay here. Do we need to be looking at what should be on our top list?

Yeah, great question. So just like I mentioned with the independent, you know, the other one is a reinsured warranty and we very much look at this as accounting for the transaction that we in the Buy here, pay here space are already doing. Yeah. We are more motivated than anyone to ensure that that car is on the road and driving because it is very much tied to the performance of the collateral. So it is very much documenting that transaction. Let's put in writing what we will fix and let's, let's document that so we can take care of that consumer. We are seeing an increase in our dealers offering longer term service contracts. Everyone's well aware that ACVs are going up in the industry, so we're starting to see some of that stretching of the term. And therefore, hey, you know, what better way to protect that than a reinsured service contract to the consumer? So those are the two things right out of the gate that keep that car on the road. Good customer experience and help our collateral stay in good shape.

And how many buy here pay here dealers are already fixing the car whether they've got a product in place or not? Right. Put the product in place and make a little something on the backside.

Right. And that's so much about the reputation management and actually portfolio management. Making sure that car is running is so key to both of those things. Typically our customers want to pay you. If the car's running, they can get to work. People don't believe that in our industry, but that's really the truth. You know, we saw a lot of gap. Jason, what do you think about that when it comes to Arshawn? Either one. What do y' all think about that when it comes to buy here, pay here portfolios and gap coverage?

Yeah, so I like GAAP for the Buy here, pay here and the reason being is a lot of times we're charging off that balance anyway. I mean, we're effectively the bank. So again, going about better way to account the transaction. And I think there can be an argument made that it's a nice tool for the consumer as well. Because if we can wipe out their balance, potentially reimburse them for a deductible that maybe have to a third party insurance company or your CPI program for that matter, it could be a very easy way to put them in the next vehicle to keep them on the road. And so I think there's a really, really good customer satisfaction component in there. But I also think that from a profitability standpoint, again documenting accounting for the transaction that we're already doing, gap makes a lot of sense.

But you wouldn't sell Gap on a CPI customer. Right. Am I getting those confused? Like they wouldn't have a CPI because.

That Means they don't because CPI is actually going to act like more a traditional insurance policy. So there could be a scenario where the third party administrator of your CPI program predetermines what the multiple payout would be similar to what an Allstate or a State Farm or a GEICO may do. And so just because you have cpi, CPI doesn't necessarily mean it would wipe out the entire balance of the loan. So you could do a gap policy in current with cpi.

But if I understand so CPI is, protects me as the collateral owner. This isn't collision and dents and dings. I mean someone tears their bumper off, they don't make a claim against the CPI policy to get their bumper put back on. Right.

Actually the collateral is protected. So it can be in the event of a fender bender or in the event of a total loss.

Yes, that's up to me as the lien holder to decide whether that gets a new bumper or not.

Well so there's, there's a deductible on CPI very similar to traditional insurance. And so consumer comes in and files a claim, they're going to make a decision and you're going to make a decision based on what that claim may be whether a claim needs to be filed but it is very much protecting the collateral to a fender bender or a total out. And the third party insurance company will make that determination.

So I don't know if you guys do, but where do, where do I. There's always a blurred line between gap and debt cancellation. That's a separate product, right? A debt cancellation, is that something you guys do or would that be a buy here pay here product you'd ever get into.

So in our opinion debt cancellation was really popular back in, you know, when buy here pay here was more of the, the $2,500 $3,000 car, you double the price and whatnot. What we've seen and obviously this is exasperated even more the last 18 months with vehicle prices increasing, debt cancellation at its truest form should cancel out the debt. Well as the ACV and pre pandemic, what we were saying is an average ACV in the buyer pay your space was around $6,500. We've seen that number increasingly go up. So the odds of a consumer having an accident and it not being total out now because the higher ACV car is actually great. And so there may be where you know, you know Luke and I are here in South Carolina. So customer hits a deer and maybe it's a front panel damage. We don't necessarily want to total that far out. We may want to fix the $2,000 worth of damage, take care of our customer, send them on their way. That's more of a CPI claim than debt can in moving it out.

So Jason, I set up a product with y' all last year, vsi. You want to go down that rabbit hole?

Sure, yeah. So vsi, it's actually one of the oldest insurance products out there, you know, for finance companies. And it does work very well for a dealership that has, you know, your own, you know, finance company. BSI is vendor single interest and it can, it's a policy that can be purchased out in the open market from third parties or it can be reinsured. And what that is going to do, it's going to protect the lienholder in the event that you have to incur costs such as skip tracing, such as impounds or if there's damage to the vehicle during the repossession process or you repossess the vehicle and unfortunately find out that it's damaged and there was no insurance. All things that we in the buyer pay here space are more than likely incurring on a monthly basis. So that is a third party product that you can go out and purchase to protect your interest and you can also choose to reinsure that.

And the way I kind of look at it and Jason, if I'm wrong, please correct me. Is that it kind of we're going to all repossess cars. We know this and it's kind of it's protection for the above and beyond repos or skips that happen, correct?

That is correct. That's exactly right. You know, you go repossess a car and you know you're able to take it immediately to the auction. That's just a normal credit loss. You know, we put that in our model and we're making those decisions. What we didn't plan for was when we go repossess a car and we find out it's been on the side of the road, you know, wreck and there was no insurance and our recovery is half of what we modeled out for it to be. That could be a potential DSI claim because it's just outside of our normal everyday business.

So Luke, how do you do that in your dealership? Is that a flat fee on every buy here, pay here deal that you.

Well, it's forward to your company. I don't want to say the wrong thing here, but what I understand is is that you, my RFC is and my dealership are buying this Policy to cover it. It's not a cost to the, to the consumer, correct?

That is correct. Yeah. So you can do BSI one of two ways. It is a cost that could be passed along to the consumer. You know what we see a lot in the buy here, pay here space is, you know, look, I'm happy with the price that I'm getting and you know, very sensitive about passing additional cost on. So BSI though is something that the RFC can just go purchase a policy on. It can be just like, it's a policy like a workers comp or just things that you're doing to purchase insurance to protect your business for losses greater than what just standard everyday operating.

Right. And from a, so from a buy here, pay here. Sorry, I'm going to, I'm slow. So it would maybe be $50 per buy here, pay here account and maybe 5 of it is going to actually be the insurance policy that I have to pay a third party insurance underwriter and then the rest goes into my reinsurance.

Yeah, so that's a good way. So you know again we would go back to our same model that I mentioned earlier in regards to CPI as we would understand the ACV that you're dealing with because that directly correlates with what your potential loss may be. Obviously the larger the ACV cars, your losses may be bigger. So we would assign a premium for each contract that's sold. We see premiums ranging anywhere from the 150 to 250. We very much want to keep it market standard because again you can go buy this from a third party insurance company and let them take the risk or you can choose to reinsure it. And so once we assign that premium. Yes, you send the premium into the insurer. If you choose to reinsure, they would take an administrative and a clip fee and then the remainder of that premium goes to your reinsurance company. Any underwriting profit above and beyond your claims would be considered profit in the reinsurance company and you get the 831b tax advantage of that.

That's, that's so great. I was just looking through some notes that Sean sent me and he said it's your company, it's your money and it's your program. And it really sounds like you can, you can do so many things with reinsurance companies to, to make it, you know, best for your company and best for, for your, your employees, best for your, your customers. Is there something we're missing that, why we shouldn't do this? I don't know. I've Been preaching it for years. What else can we do that we hadn't thought about?

You know, there's all kinds of things. But you know, we've hit warranty service contract gap, VSI again. I think PSI is something that we're going to see a lot of in the buy here, pay here space. You know that that's a good start, you know, and so on that.

Jason, let me dig into that for just one minute. Sorry to interrupt you. So when you say a psi, a post sale inspection on the car that I bought from the auction, I don't have to get it post sale inspected to put this psi. That, that's what I'm doing, right? I'm instead of me paying the auction to have a post sale inspection done, I'm just putting that money into my PSI reinsurance company. Bad buys.

That's right. What you're saying is, you know, I think we all understand the concept of hey, stop paying the big bad third party service contract on me. Keep those products for ourselves, control the customer experience. The same concept can be true here. You don't have to pay by deal shield from one insurance company, you can buy it from a separate insurance company. And if you choose to reinsure that and there's money left over after you make your claims, then fantastic, you get to take part in the profits of that program.

It wouldn't work for Jeff because Jeff really buys some crappy cars.

We buy a lot of bad cars, so the premium on that would be massive. And I guess that's where I look at like a psi. For me, when I get it from the auction or if I run a car through psi, it's pretty much to hedge against the fact that I'm pretty sure it's a crappy car even though they ran a green light. And I want to be able to arbitrate it and send it back when I find out it really is a crappy car. So it's not going to stop me from buying crappy cars because it's not a, it's not like a blank check to go out and buy a bunch of shitty cars just because you can make claims against your own thing. But it's more of a strategy for the ones you might have missed or we all miss.

I mean, I don't, I've never psi'd a car, but maybe I have back in the very early days of, of Internet buying. But we make mistakes, you know, so it's going to happen. This is just a great way to mitigate your risk and to help Your cash flow when you do screw up, because it's going to happen, you're going to buy a car with a bad transmission, it wasn't called. And even if it was psi at the, the auction, it probably wasn't going to be, you know, picked up anyway. So, you know, I think this is a great product. I'm glad to see it's in the reinsurance market.

Yeah, I think at a bigger level, you know, Jeff, you bring up a good point. Like, hey, maybe I'm not comfortable because I want this reinsurance is very much. Do I want to give this risk to someone else to have peace of mind, or is this something that. Yeah, hey, listen, we're really all in the numbers game. Can I wrap my head around the fact that I think I'm comfortable with taking this risk myself? Some months I may win, others it may not work out. So it's very much comfortability with the risk that you're taking inside of your dealership.

So can I not, can I not reinsure my garage keeper liability insurance?

Yeah. So we shy away when we hear liability and reinsurance. And what I mean by that is, is I very much want you to reinsure things that we know kind of what the max loss would be. So let's take PSI for example. You know, worst case scenario, if you do buy a really bad car, the max you're out is what you paid for that car. The same thing could be true for cpi. Worst case scenario, if our customer completely totals that car, I know what the value of that car is and that's the most money. Now there's definitely risk there and we can insure that, but it's capped. Based on what? That when we hear the term liability, there are caps certainly. But we look at it from a business standpoint is that could be uncapped losses and things that we would rather give that risk to the big billion dollar company because they're creating massive amounts of risk that they can better adequately account for that than what we can. The smaller pools that we're creating.

Yeah. In wrapping this up, can we address one more issue? Luke said the word cash flow. And I think a lot of buy here pay dealers have that rub. You know, as a retail dealer, when you sell a product, you're getting the money from the bank. No big deal. Great, let's make some money. Let's put it in our reinsurance. But as a buy here pay here dealer, I am now looking at that and saying, wait a minute, I just sold a service contract. So there's you know, $1,200. I got a front to my reinsurance company and then I'm going to do a VSI and I also did the PSI on it. Plus I sold tires and wheel package and a prepaid lube. All of a sudden I got up front thousand dollars, $2,000 to my reinsurance company. That can hurt cash flow, right? If I'm doing 20 deals a month at $2,000 a pop.

Yeah, absolutely. So we look at it as twofold. Some products are new revenue sources, the service contracts, the gaps. And we'll try to work with you to customize. How are you funding your business? My background prior to reinsurance was actually in the banking of buy here, pay with financial partners. So we try to dig in to understand how you're funding your business and how you will ultimately fund the reinsurance company. The other products that we've talked about today, it's a better way to account the transaction that we're already doing. And so I work with a lot of dealers. When we go in and look at the reinsured warranty program, what we actually find is they're already cash flowing a lot of this because they're fixing the cars already. What we're going to do is we're just going to reallocate where we put this cash to better account for that transaction that they're already doing. So there are a lot of factors in how we're able to mitigate the cash flows and the negative impact that that could be on a monthly basis. But ultimately you're maximizing how you account for this. And you know, from a buy here, pay here perspective, we see the dealership, the RFC and now the reinsurance company. We very much try to work with everyone on how the three of those would work in unison. For a independent, it works really well because we do find that a lot of times they're already shipping a lot of this cash out to a third party insurance company. Now we're going to show them how to put it into an affiliated reinsurance company.

And also. What? Jason didn't even say that. A lot of times the negative cash flow that actually happens is sometimes mitigated by the tax savings as well. So there's a lot to look into and I know that Buckeye does a great job of showing the dealer exactly how that works. All right, anything else? I guess we need to. Sean, Jason, how do we get ahold of y' all to get our reinsurance company set up?

Now the best, best way to get a hold of us, we've got a lot of information out on our website, Buckeye Reinsurance. Our telephone Number is up there, 330-726-9030. Jason and I are both accessible via email. Mine is spietersonbuckyreinsurance. His is Jason Gosnell. Buckeye reinsurance.com Please feel free to reach out to us on any of this stuff. In fact, one of the things that we're announcing today as part of this, our CEO Rob Fox and I were up shooting a string of various videos and out of the blue we were shooting a video. He's like, I want to offer this to anybody that wants. We'll come in and we'll do a free assessment of your reinsurance program and see where we can help you with maximizing your profits and all the sorts of things we talked about today. So as part of our podcast today, I want to reiterate that offer to anybody that's listening. You know, please give us a call. At no cost, at no risk to you. We'll come in, we'll do an analysis, and if we can work together, great.

And I think we're going to be at some conventions here soon together as well. Y' all are going to be at Texas, right? And probably the Carolinas.

We will be through most of the state conventions as you look for us at Alabama and Georgia and Texas, Virginia later in the year, we'll be in Florida. We'll be at niada Ohio in October. Arizona, I think, is doing one later in the fall, we'll be at that. So yeah, we'll we'll make the rounds and be accessible at any time.

Yep. Glad to be back in person.

Aren't we all? Thank you all so much for being on the podcast today. Thanks, guys.

Thanks for having us.

Thank you for having us.

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