#180 - Sourcing Inventory In A Post Covid World - TIADA 2021

Welcome to the Independent Dealer Podcast with.

Hosts Luke Godwin and Jeff Watson. A podcast by dealers for dealers. Here we go.

All right, guys, welcome to the Independent Dealer Podcast. Live recording session coming to you from Tiada in Round Rock, Texas. Very special episode today. We are live studio audience.

How about it? Let's hear it. Well, today we've got a topic that is on everybody's mind. You know what's funny? I think Teresa called us in March and she said, we'd like to do a live podcast. We're like, that's great. And she's like, well, what topic are you on there? And I was like, oh, my gosh. I didn't know what to do. And so March, if y' all remember back, we could buy cars, right? Anybody have any problems buying cars?

March?

Not really. Right. Well, then all of a sudden, everything worked was we can't buy cars for.

A month or two.

Well, before that, we said, let's do a panel about sourcing cars in a different manner during COVID or post Covid. We all thought it would be post Covid by now, and it's not. So today we have two great panelists that discuss different ways to buy cars. I'm gonna let them introduce themselves because they know themselves better.

Not.

First we've got Danny.

Yeah. Hey, guys. Danny Zaslowski. I'm in Kansas City. I have a single point independent store. We do about 200 retail a month and 100 wholesale a month. And I've been in the business since I was a kid.

Awesome.

All right, next we have Chad.

Yeah, so Chad Coast Coast Boaters in Houston and also in Oklahoma. We have seven retail locations. We do primarily buy your pay here, although getting into some point of sale at one of our, I guess, hydro stores. So kind of like. Danny, I've been basically in this business most of my life. I bought my first car when I was seven years old. So it's just kind of in my blood, I guess you could say. So I really enjoy it.

That's because all of us have been in dealerships probably since we were born almost.

Jeff.

Not so much, really.

About 15, 20 years.

I mean, you're about to.

All right.

Yes, we were buying. It was just a quick aside. I was on. My grandpa owned a Ford store, and in a small town. Ford store in the early 1980s. I mean, it was rough. It was a bad situation. Well, the building was so bad. And they had buckets in the sterling floor catching water when it would rain. It rains a lot south. Well, I was at a play Pen on the floor, on the serving floor next to the Mustangs and F150s with buckets of rain. Anyway, it was a tough time. So today sourcing's hard and we've got to get down to the way to buy. So we've got a couple topics we want to talk to both about, and then we're going to break it out. And you can also submit questions via the app.

Yeah, so that'll be the format. Guys, we've got a couple questions we're.

Going to go over.

You can submit questions via the app and you can also raise your hand. This is a panel discussion. We want you guys to be able to ask questions. The whole context for our podcast is dealers helping dealers. So this is all about that conversation and how we can educate each other. So when we get to that point, raise your hand, ask questions. I know these guys can take any hard questions. They can answer it. We'll just divert the hard ones to them. We'll take the easy ones.

And it is not about picking on an auction or auction source or CDRs or armchairs. That's not what we're here for. We're here to learn how to buy cars, to write. Okay, first question.

So the question we're going to go to.

Chad.

Chad, what do you see the future of sourcing look like? I think your traditional channels are brick and mortar, let's say, and some digital stuff. Where do you see that going? Where do you see that opportunity in those avenues and maybe talk to us about some of the pitfalls. We know sometimes basing our purchases off someone else's CR can be a little bit dangerous. You know, where do you see those advantages?

Disadvantages? No, it's good. It's good. So, you know, as you mentioned, you know, we're pretty, pretty old school when it comes to purchasing traditionally, and we do a lot of auction purchases, a lot of brick and mortar, but we also do a lot of online. Especially at the beginning of COVID we had to really pivot and start looking at the other sources, whether it was backlog or ACV or different things. And we have a lot of success there. But I believe for us to be successful, for us, I think we have to be. You know, if you're a baseball fan, you've probably heard of the term a five tool player. I think in our sourcing, especially in today's environment, we've got to be able to do everything. I think we have to be able to meet at the option physically, you know, whatever that means, whatever it looks Like, I think we have to be, you know, in front of the public, like, what Andy's going to talk about. I think we have to be online. You know, whether that's. You pick one source that you like, or maybe it's. Maybe it's all of them. But I think we have to be. Have to have that mentality of I'm going to do whatever it takes to source the amount of inventory that I need to not just survive, but thrive, succeed. And that's kind of the attitude that we've taken is, you know, especially at the beginning of COVID you know, a lot of dealers said, I want to focus. You're going crazy. I'm just going to sit here and point this out. And we did that for about a week.

So you say in the days of showing up to the auction on Friday and filling up two carriers, that's not there anymore?

No, no. I used to just go. And, you know, it was. I show up and I spend all day at the auction, but I can go up to 30 or 40 cars. Right. And that's just not going to happen anymore.

And can you be good at every aspect of buying? Can we be good online? Can we be good at the. At an auction? Can we be good at buying off the street? Or should we. Should we have every tool in the kit but know that we're really good at some areas and not others?

Yeah, I think you got to be semi proficient in a lot of them, maybe not all of them, But I think it definitely has to be diversified. You know, I've got, you know, a couple buyers who are phenomenal in the lane, and they know exactly who to buy from, and probably more so not to buy from. As far as, you know, the market is there in the south. And then I've got another guy who's really excellent about buying online. I buy online and, you know, so I think we have to be diversifying that and kind of have a mixed bag. But I don't know that you can be an expert in all of them, but you definitely have to find, you know, what works for you. We were at the panel the other day or yesterday at the roundtable, and I thought it was really cool about this guy. He's like, I'm really successful here. This guy over here is not really successful here. I like this on the platform, and I hate that one. But so I think you have to figure out, you know, what works best for you and what you're good at.

Yeah, yeah, 100%. Danny, same question to you. You're an expert in sourcing cars from individuals off the street. Is that. Are you focused mainly on that or do you buy from auctions as well? How do you see this moving forward?

So a little bit of both. So I'll tell you a quick story. My dad, we're immigrants. My dad born in 79. And when he got into the car business in the mid-80s, in the late 80s, early 90s, you guys remember when next cell phones came out, My dad bough next telephones and he said, I'm going to go pass them around to a couple new car stores. And he convinced them. He said, when you're trading for a car, page me. I'll tell you what it's worth and I'll come buy it and I'll buy everything. The good, bad, the ugly. And at the time, we called it war wholesale auction, retail. So wholesale, if we're going to wholesale to another dealer, auction for an auction, retail for another retailer. And so early on we figured out if we can create these partnerships and buy cars from other dealers and then buy in packages, move money around and then sell it, we'd have some strategy there. So we started doing that. And we found out also that there were a bunch of power sports stores. And we do this to this day. Harley Davidson stores, RV stores, they trade for cars all the time. And so we buy it all. And he taught me as a kid, you know, they don't make money, we don't make money. So we paid for things what they were. But it was still less expensive than going to the auction. But my dad continued to go to the auction. And I never liked it. I pretended to like it when I was a kid. And I just felt stupid. I felt stupid because I'd have to raise my hand and be the last guy paying the most competing with other experts. And so about six years ago, unfortunately, my dad had a stroke. He's still pretty good, but it took him out of aim for buying. And I decided I'm not gonna. I'm not going to continue doing this auction thing. So we created a vehicle buying center and I'll talk more about it. But today we buy about 120 cars a month directly from the public. And then I've got a small team doing that. We still buy a little bit at the auction, but still have the deal network.

So both of y' all have teams of buyers, right? Okay. And you expect a certain buyer by a certain amount. Are y' all both managing that team of buyers? How does that looking your dealership?

Yeah. So we'll we create a buying plan, you know, pretty much month to month, sometimes week to week, based on the need. And, you know, like I said, we have a team of buyers. We have, you know, guy in Oklahoma that buys for us there, a couple of guys, I guess technically three in Houston that will purchase for us. And so we. Our plan is as localized as possible. So for Houston, for instance, we. We attempt to source all inventory in Houston. We're pretty successful there. We try to do the same thing in Oklahoma, but the inventory supply is not as great there. So we actually have to source out of Houston. So. But, you know, we. We make a buying plan pretty much every month. You know, here's what we expect to buy, here's what the need is. But just as with anything, sometimes, you know, if our need is, you know, let's say 70 in a week, sometimes they buy 30, because especially these days, that's what's there. That's the supply of inventory that's out there. And then some hundred or plus. And so we just kind of ride through the waves and reassess, especially now, every week.

And Danny, how many people do you manage to buy? Is everybody buying a store?

How does that work?

So we have kind of a hybrid model. So we still, like I said, we buy maybe five cars a week at the option, not that many, mainly because we sell some stuff there and we happen to see something. But we have a vehicle buying center with one manager, currently four agents. I just hired all four. And each agent is required to buy between 20 and 30 cars per month directly from the public. And the manager manages those people and they get leads. And those leads are either generated inbound. We have a way that we market to the public, that we buy cars and. And we find these avenues, email marketing campaigns, social media and so forth, and ingest those. And then we go out now to buy cars directly from the public. Facebook, autotradercars.com Anything that has private party listings on it. And then we do some third parties like KPI scales and stuff like that. But those are what we track. This is really. I'll tell you the biggest advantage that I found in the last few years is tracking it. And so you guys all use dmss. Raise your hand if you use a dms. Cool. All right, so this is a little lesson I had to learn. Know that the. The DMS is malleable, right? So it's not like fixed, meaning you can find a line in the DMS where it's like, cool, I'm going to use that Line to track this thing as long as it is connected to recording. So I use Reynolds, which is like the oldest homogeneous system. And, and in blue screen there's this thing called 4008. Line 19 is status and location. And so there's this other line called weight. We don't care about weight. We don't use weight. However, it is a reportable line. So for dynamic reporting, I can create reports. And this is something that I'll tell you, open our eyes. So we created a report and identified 1 as an auction buy, 2 as a trade, 3 as a dealer network purchase, and 4 as a vehicle buying center purchase. Right? So 1, 2, 3, 4. And so when we stroke a check for a car and it goes into the DMS, we put in the line 1, 2, 3 or 4 option trade, dealer network or BBC. Then at any given time or at the end of the month, we can run one of two reports. And so it's an acquisition by channel report. So we look at sold inventory. So in a given month, say in the month of June, we sold 200 cars. How many vehicles sold that were purchased from Auction Trade Deal Network or dvc? What was the average churn, what was the average gross, front, back, whatever metrics I want, then I can do the exact same thing on in stock inventory of the inventory I have. What inventory am I sitting on that was purchased at auction trade, BBC or Duo Network? And pay plans are then are tied to that, right? So my BBC, the manager is tied to that pay plan from front doors of what he creates for the store. So then you can see that becomes a little bit culturally ingrained in the way that we do acquisition because we can immediately see that, okay, we're making 900 bucks on the front for copy on an auction buy, making $3,300 on the BBC acquisition. Where are we going to spend our time?

So it sounds like Dave, guys, if you guys have questions, submit them via the app or get ready. We're going to open up for questions pretty soon. But it sounds to me like you're treating the buying process the same way we've always treated the selling process. Right. We're tracking every single lead. We're tracking sales, we're tracking grosses, we're tracking how that lead came in, which is our most profitable referral source. We do all that on the selling side. We've never done it on the buying side. Right. We don't mirror the backside of our dealership the same way we do the front side of our dealership. But it sounds like if you're expecting one purchasing agent to buy 20 to 25 cars a month. That's what we expect from our sales.

Right.

And I'm assuming you give them a budget, an advertising budget to make that happen. So what an interesting shift in paradigm, guys, to say, hey, you know what, I'm going to treat my acquisition team and the guys buying my cars the same way as Rockstar. They're going to treat them like royalty. The same way I treat my top salesman. Right.

Are you paying commission as well? Like for you to pay commission to a salesman?

Yeah, yeah. So we. So a BBC agent makes a flat either 2 or $3000 a month and then they get $100 per car acquired. And it's a split a deal with another BBC agent. Manager gets a base plus usually about $20 a car purchase from the department. And then the manager gets a percentage of front gross of the vehicles that were purchased by his department that sold in a given month. Make sense? Yeah, it's a lot. Right? It's like, what's that?

He's doing the same thing you're doing on the sales.

Exactly, right. Yeah, yeah. That's the point. And somebody asked me this the other day. It's like, do you run a P and L? Because aren't you spending like I know how much I'm spending on my department and personnel and all that kind of stuff. And. And it comes out to be between $220, 2 to $220 per acquisition. But keep in mind, my average gross per copy is up like 1700 bucks. Plus $500 in transportation. I don't have to pay. Plus I don't have to pay post sale inspection fees. Plus this I did not expect. Reconditioning is half of what it would be on an auction buy because I'm not buying other people's headaches. So I'm buying vehicles that I have the ability to pre negotiate, reconditioning, get a vehicle that I can be proud of, spend time with it. And then there's some other cool marketing stuff that I'm doing that I'll.

So I'm gonna go to Chad. Right this has your transportation expense gone to zero?

Yeah, we don't transport. Okay.

Chad. I spend, probably everybody in the room spends a normative amount of money on transporting cars from. I mean I bought a car in Houston sporting. So you know, it's like I'm in South Carolina. So that's $600 out window right now.

Right.

So Chad, how much do you spend? Because you're Buying for dealerships in Oklahoma and Texas being system located. If I were you I'd be buying in California, I'd be buying in South Carolina as well.

So how much use go in per.

Copy when it comes to transportation?

So if we, if we buy you know, regional enough to buy Houston and ship to Oklahoma, we're spending know 3350 you know per unit to, to get there used to be 250. But as we know transportation cost is so you know we, we attempt to buy as much regionally as we can. Or if you know, let's say we're buying for four taxes, you know, we'll buy it on you back on ACV whatever. And of course those that shipping's in there. So you don't necessarily see that cost the cost of the car.

But.

But yeah we definitely do know definitely. You got to show check you say.

Do you say your compensation plan for your buyers, how are they payable? Did you mention that?

No, they're all on salary.

They're all on salary. Okay. Good guy, good buys, bad buys, everything Salary?

Yeah, everything's salary.

Any bonuses at all?

Oh no.

Not paying on gross of the car. Whether it's good or bad, ugly. It's just. It's what it is.

No, it is what it is. I mean I, I know it's a little bit unique situation but you know both of these guys have been buying actually all three or four of them have been buying for decades and so they're highly experienced and skilled at what they do.

What is your average recon cost? How long does it take you from the time they finish purchasing to its ready for your lot?

Yeah.

So something that we're an interesting dynamic and that's something that we're going to look at is we're actually seeing a higher recon cost on average from the stuff we're buying online versus in person. I know some of that has to do with our buyers and their abilities at the auction and sometimes you know, if you actually run the report the guy that has the highest refund online buying online is actually me. So I try to stay away from as much as I can. I'm not that fire anymore. But.

So time the line and average recalls.

Yeah. So I mean it kind of varies depending on you know, if it was on backlog, time of transportation. But once we, once we get it it's a pretty quick turnaround. We, we create kind of a fast lane for those, those new purchases and so you know that expectation they're on a lot within 24 hours per launch. I mean, not always depending on. Depending on the backlog. But, you know, we have a huge shipment of soy merchants coming out. We know we can pump those out real quick. So we'll shove that. We'll shove those kind of through the fast line because they typically don't need near as much as being buyer here. We have repos, so those take a little bit more care to get ready. Are you.

Do you have a certain CR that you buy in or is. Or do you buy across the board? You just say, I'm not buying anything below three. I'm not buying anything above four or five. You have a slot.

When I used to buy a lot from, you know, Manheim Online, you know, pretty much 3.0 or higher was where. Where I wanted to stay. But anymore, you know, we don't really buy Manheim online anymore. Most of our online purchases are ACV or backlog or something like that car. And we just have to understand we're.

Not going to buy.

Anything with structural damage or major water damage. I mean, cosmetic stuff. It's not a big deal. We can take care of those things. So we just kind of stick to rigid standards as far as that goes, and not necessarily on the scale.

What I find so interesting is I think we all know that if we're in the lanes and we can, you know, touch it, drive it, taste it, we're going to get the wool pulled over our eyes. Maybe one out of 20 times, one out of 30 times, we might get fleeced on the bad buy. And it has so much to do with the inspection, the cr. I start to think that the online platforms like your backlot and your acv, totally drastically different experiences two dealers could have, right? Some people hate acv.

Some people love it.

Some people love backlog. I'm starting to follow the inspector. And when it has, you know, Michael Q is the inspector on this thing, and I know I can trust his inspections, then I can bid on his cars with confidence, no matter whose platform I'm on. It doesn't matter the brand name. You know, it's that spectrum. It's like, I think you're.

You're right on there. Say it's. It's a similar scenario with the auction, you know, when, when I just buy heavy. What our buyers do now is, you know, they're based on bad experiences. They're definitely remarketers or dealers that they bought from that they won't touch anymore.

We don't even go in the lane.

We don't even tempt Ourselves with, with, with those inventory because we know that they're not very much. So I think you're right on that.

I think that's.

If I got any questions. We're trying to do this and go to Danny and talk about buying on the street. Any questions?

I got a question for Danny. Yeah, Danny, do you have your purchasing center? Is it on your location or your retail lot or is it separate? How does that work? Yeah, it's in my store. So you walk in. So the experience.

I'm sorry, before we, to, let's just go over what you, how you have it set up. That might, that might send a lot of questions.

It's of kind. Start with you bet. So here's the process. What's your name?

My name's Steve.

Steve, so if you were my customer, you would arrive at my car dealership and we'd greet you and we'd say, what brings you in? Actually, when you call, we ask you, are you calling to buy a car or sell a car? So it's one, it's again, it's ingrained in our process. And when you were to come in, you're greeted and then you say, hey, I'm here to sell my car. No problem. Traditionally, we had preset an appointment. We have a digital board if you, if you just happen to be driving by yourself or that's fine too. And then somebody comes out to reach you and then gives you an intake form. That intake form asks you questions like how many keys do you have? How would you rate the mechanical condition, cosmetic condition of your car? What's the most you would take? What's the least you would take? What's your, what's your payoff, who's it through, all that kind of stuff. In the meantime, while you're filling that out, we're driving the car. I'd say about 20, 30%. Taking it to our good and off site service center, like half a mile away. Sometimes we'll run it through there if we think it needs to, and then we'll have a look at it and we'll come back and then the, the appraiser will put it into software called BenQ. They'll, they'll scan it, put it in, they'll appraise the vehicle and sit down with you. We try to. So first of all, if you, if we were talking to you over the phone, we always give highest and best first. We used to do lowest where we say we give you 16 grand for your car and then try to convince you that that was a Good offer. We'd like stop doing that because it's just a stupid approach. And we started saying, okay, cool. We think we can give you 18 for your vehicle, seeing that you may have listed it for 19 or 18 5, but that's really highest and best. Then when you come in, we can see, all right, it may need tires or it may have this scratch or whatever. It's a lot easier to devalue the vehicle authentically in person than. Than try to steal over the phone. Then when you come in and we agree on a price, if it's a cash deal, we write a check on the spot. If it's. If you owe money, then we give you enough paperwork to make you feel safe, and then we give you a check within 10 to 14 business days. We pay off the vehicle, and then we do an exit interview always. And we ask, would you mind if we take a little video of you? You tell us about your experience, and we give you a form to fill out in person. And this is, I think, one of my favorite things about it. We ask you, is there anything you would like the next owner to know about your vehicle that made you proud about it? And so they fill it out, and then that goes to my inventory manager, and then it goes up on the BDP in the comments that says notes from the previous owner. And then we insert it in there, and then we take that video, put it up on social media, and use it to drive traffic to our selfie page. And I will tell you that is probably one of my biggest lead providers.

That's powerful, right?

Yeah. So then we'll, you know, maybe we'll try to make you a celebrity and get it out there and drive. And drive more traffic. Do you have a software tool that calculates, a valuation tool? They can get a value online. Is that. Is that what BigQ is? That is. Yeah. Yeah. So we use GenQ for that. We also. This is the other thing. Remember I told you there's inbound, outbound, third party? So inbound is just that. It's inbound. You have to. What's your dealership name? Midtown Motor Company. Midtown Motor Company. Buy a URL, sell to Midtown Motor Company. That's it. That's your URL. Sell to Midtown Motor or Midtown Motor Company buys cars, whatever. That's the landing page. You gotta give your consumer a place to land right then. Because right now, if anybody tells me their URL and I say, well, I want to sell you my car, where do I go? Most of your websites don't have A place for me to actually land and sell you my car. Right. So they land there. The software gives them a value on their vehicle and then it puts it into private party acquisition CRM. So that's where we manage all that. That's where we can manage all that stuff. And then on the outbound side we just, we collect all of the AutoTrader, Facebook, Craigslist, Cars.com, eBay. They all land in this place. And then we through this, through the system we communicate directly out to people and set appointments and communications and blah blah blah. And it's all tracked by individual and so we can see their conversions from opportunities to connections to appointments to acquisitions. Are you buying a certain price range of cars certain year? Are you buying everything or is there a limit? So that's a really cool point. So I. Here's where I'll tell you. I'm buying stuff that I would have never bought at the auction either A because I wouldn't have had a chance to buy it because somebody else like would have raised their hand and got to it before me or taking a chance. I bought a Maserati the other day that I made like 11 grand on that I would have. Some highline guy would have. It was a 15 for like 40,000 miles. So it wasn't super expensive. But I bought it. Right. I have a 10,000 mile plume of prowler on my lot right now that I bought off the street. Yeah, yellow with flames on it. So I haven't seen one of those for 15 years. So my average price car I'm selling is about 18 grand and my lot is probably, you know, I was sharing this earlier. 30% in that 6 to $12,000 price range, 50% in the 12 to 20 and then the remaining in the 20 to 50,000 price range. So $18,000 retail price. 18,000 retail. Are you doing special finance?

So there's got more questions.

You guys a retailer or do you do anything I.

You were very good at buying a day here.

Yeah, mostly Biker Payer but we do. Do you know some retail? We have one store that we do, you know, hybrid from and I love this model by the way and it's something that we plan. I'm already, I'm already making some plans to adopt. I don't know how much I'm going to be able to scale it. I do believe it is scalable but for biker payer we have a. At least for our operation. I know it's all over the map. Provider deals or what I talk to but we have a buy list and we have a no buy list. And our buy list is about this long, put next to each other this long. And so we found what works great for us, works great for our consumer and what we're comfortable with buying mechanically. And so I think this is something that we can scale for our business, but I think it works very, very well for retail.

Danny. Does it? Can you build a program for this only targeting certain cars? You have to buy everything or you can just say, okay, I've got a buy list and that's what we're going to go after.

Can you do that? So our software, it gives us, there's a picture with an airplane with a check mark through it. We call that our no fly zone. So we, the saying we have around the cardio ship is the better it gets, the better it gets. So we try not to keep our people stupid. And what I mean by that is our DVC agents, we want them to be able to appraise the vehicle, right? Our salespeople, we want them to be able to appraise the vehicle. And that takes time, especially when you're hiring a 17, 18 year old person to get used to understanding, like how to appraise a vehicle. We get them to get comfortable with the range first and then we get them closer and closer and closer. Regardless, the desk has the final say. So the desk has the final say of whether the vehicle is bought or not. Right. But the agents are responsible to make those appraisals. The software gives them the range. The software gives them the ability to understand comps, whether you're looking at retail transactions or wholesale transactions or similars or whatever. But then the. Your question, can we.

Hold on.

Yes. So as we learn what we want, what we don't want, we make a. In the software, we keep a no fly list and a targets list and it filters out those vehicles and it puts color for temperature to understand, like go after that vehicle, we want it versus something that we don't, like a whatever, a tag that I don't care about. What software are used, is it proprietary or what software can I share?

I don't know if we can share that. Chris, did you have a question?

Yeah.

So from the time that the customer walks in, the time that they leave, what's your. We do the same thing. But I'm just curious, how much time do you spend from the time they walk in, each time they leave to actually purchase.

To purchase tradition. So let me give you conversions first and then that makes sense. So inbound yeah, yeah, yeah. Inbound leads convert at like 20, 20%. All right? So if they're knocking on your door, they want to sell their car. So as long as you can appraise it and like, don't screw with them, just give them a real offer, talk to them, convert, blah, blah, blah, you'll convert about like 20%. And usually they'll do it the same day. And so we're spending at most an hour. And it really your. Title. People can be a total pain in the ass. Right. So it depends on your process in titling. How quickly can they write a check, how quickly will they processing, will they fight you on it, all that kind of stuff. So your relationship with your back office is important, but with the consumer, it's really pretty straightforward. Outbounds converted about 12% because you're knocking on their door and then working to get them in, assuming that you want the car. But then in store, roughly the same process. Outbounds tend to have a little bit more desire to get like another offer. Have a CarMax literally across the street, and I have a sign that says we'll pay up to 250 more than CarMax. So we want again, we're serious about highest investment, which is still significantly cheaper than raising my hand at the option. Right. And then third parties like KPD and so forth convert about 4%.

I'm in the same boat with the other CarMax.

Yeah, I was going to ask that question. I didn't know this before, but having CarMax Fluff street has to help your numbers. Oh, sure.

Okay. Yeah, yeah. How.

How significant do you think that is?

So before we early in our vehicle buying industry, I used to ask people, have you gotten a bid anywhere else? And they're like, oh, no, of course not. And then I get in their car, and in their passenger seat is a bid for CarMax. And so I'm like, cool. And so I go for a drive, come back, and, you know, I appraise the vehicle, and if I can give $50 more, $100 more. Yeah, I think I'll take it.

It's so funny how many of us out here have gotten in a car that somebody wanted to trade in and they have a CarMax. Yeah, CarMax offer there. It happens every day. That would be interesting to do that.

There's a question on the app from David. He wants to know how many of those people convert to sales. That's something. Thinking they're just going to trade in the car, sell it to you, but they actually end up Trading it in on something else.

So that's something we measure in software and in the DMS. Remember I was telling you about that 1, 2, 3, or 4. So 15% is the answer. That's kind of what we aim for. But there's a big thing here that we learned, and we call it motivators. So as consumers driving down the street, seeing a car dealership, we know what they want. They want to sell a car. When a dealership calls you to buy a car or you hear an ad, the motivator for the dealership is they want to buy your car. But as experts, we've got to think about what is the motivator for the consumer and how can we solve that problem. And so when you're talking to your consumers, whether through email marketing, social media, television, whatever you're doing, think about their motivators. So an example is they need money. That is probably the most common answer. But sometimes they just want to stop looking at it. Sometimes they need to get out from debt. Sometimes they want no longer make a payment on it. Sometimes they need to get out of it because it was their wife's car and they're not together anymore. So be curious about what the motivator is and then stop talking about everything else and only solve that problem. And once you do it that way, your conversion will go up.

A comment that I can make, another one is that a lot of people.

Are transferring or moving.

Moving somewhere else is what I'm finding. And then the other one that comes in is a lot of people go.

To the car dealerships, and we're all independent dealers for the most part.

At the end of the day, the new car stores still hit them pretty.

Hard for their cars, whereas we're going.

To pay more money for them. That's the biggest thing I can tell you.

And that's where they say the highest, best first. That's got to be a brain switch. Takes us a long time to get over. Because everybody knows that somebody comes in for a trade. For the past 100 years of car business, you want to hit them at the bedrock.

We buy cars from people that are trading at a new car store. We did an email marketing campaign that said three second opinions. So we buy the plate, buy, sell us your car, then go buy. I don't have a new car store. So then go buy a new car, but give me a chance to buy your car and give you a better deal than what they're going to give.

Me on trade because so many times it's thousands of Dollars more.

Have you ever seen when you're doing that, people talking about the value of tax when they trade it in?

So that's in the offer. When they get an offer. If you guys actually just write down these two URLs, selltocountryhill.com and if you, you can do an offer on there, just use the word test as your last name please. Otherwise they're gonna blow you up. So when you fill it out, just do test as your last name. You'll see what it looks like. That offer will give you three options. It'll give you what we'll pay for it, what you can get on trade with the sales tax credit, and what you can sell it on your own for. So, and then that's the conversation we have is say, hey, this is what we can buy for you for. But hey, you can sell it on your own. Here's the demand. Here's what the average time online is for that vehicle. And so, yeah, that's absolutely part of the conversation.

I have one more comment and then.

Could you just repeat that URL.

Sell to country hill.com sell to country. Like, yep. The second URL is if you go to YouTube and type in Sell to Country Hill Motors, you'll see all of our videos that we, our video testimonials, our commercials. And I'm just saying, like, borrow bag, steal, take it. Make it your own, because I want you guys to win. Interesting.

I like it.

Any other questions from the audience? Okay, can you guys talk to us? About what? About book values. I've always, I always have such an interesting thing like do we need to switch the paradigm because we all think we're paying too much for cars. Is it possible to pay too much.

For a car or are you just paying what the market is?

And we just need to adjust and realize that the $5,000 car is now a $7,000 car and our $3,000 car is now a $5,000 regard. It's just the way it is.

Yeah. I don't mean to be rude, but I would just say put on your big boy pants and do what it takes to be successful. Because you know, we. And yeah, within reason. So we chased. Let me just kind of give you an example. We chased the 2012 F150 with 120,000 miles from 15 grand up to 23 grand. Because that's just what we had to do to buy that truck. I'm not saying that that's, that's a great long term plan, but at the end of the day we're in the business to sell cars and if we don't have them, then what are we here for? So we just took the mentality that, you know, now if we just go to the auction. Go to the auction, you know, during COVID with all this inventory shortage and hold our hand up. No, we made the wide list and smartest decisions. You know, one of the things that we had to do was, was really branch out. And we went to auctions that we, you know, sometimes never even heard of before or didn't think there was a good opportunity to buy. And we went to all kinds of different places. So. But we did, there was a line, you know, we said, okay, we're going to chase these up to this point, but we've got to stop somewhere. And you know, maybe we had to. So we had to step back, you know, a year or two. A year or two on our average year, managed to go up a little bit in the miles, back off a little bit on, you know, some of our conditions, on the condition of the vehicles and just kind of roll with it.

So if it's the right car to look, value really doesn't matter. Is that kind of what we're.

In a lot of ways. I mean, for us, you know, we have the advantage of biker pays. We price everything cost plus. And so for, but for the. We, we have a very specific buying plan, very specific types of units that we will, that we will purchase for us is heavy trucks and SUVs. So if it goes to our wheelhouse, we know that we can, we have, we can get a high down payment on this vehicle and it's going to sell. Then, you know, there, there's. Obviously there's a limit, but we're going to do whatever it takes within reason.

Danny, is your, is your thought process different because you, you know, you're not paying that professional fee, I think that's.

What you call it.

You're not paying that professional fee. But the other way around that consumers know how dire we are to have cars right now and they know the value. They can educate themselves. Just like.

So this kind of goes back a little bit to your question. So we again, within our software, my dad loved looking at MMR transactions, right? And I always thought, gosh, that's a silly number to look at because it's like a total lagging indicator because those are 30 days old and those decisions are based off of like 30 days prior to that when somebody had a gut feeling. So it's old data. Within our system, we look at the retail transaction data. What's that vehicle leaving the Internet for? Right. What's that last price online? So I'll give you an example. So see if you were to come into my dealership and I'd say how much do you want for the car? I want 19 grand.

Cool.

How did you come up with that number? Well, that's what I see him going online for. Excellent. I look at the vehicle, I see what they're asking online for and then I can see what they're leaving the Internet for. And I can show you that and say, oh, people are asking 20 or 19,000 but they're actually leaving the Internet for 17. 8. Average, average price drop on this car is $1200. And then from there I can help you understand that your vehicle's worth less. Plus it needs this, this, this or whatever. Right. So retail transactions history is our number one indicator. We look at for acquisition.

That's a whole nother podcast about how to do that. So. So books don't matter to you. It is retail transaction. Does that correlate to book value at all anymore? Are they disconnected?

Book values currently are high. So I don't really. We don't do buyer pay here. We traditional or we do subprime but it's through indirect lending but. And we have a 60 something percent finance penetration. So we've never really looked at book values for acquisitions.

It's all retail I guess prior to retail transactions. Something that thing.

Interesting.

Does that bring up any more questions we got for you?

So what about cost? Like between Chad and you, Danny, to go from not having a buying team and to go from, you know, having a software paying for that and the time that you have to spend to buy those cars from the public, it's got to be two or three more time consuming than buying. You know, when I go home, I'm on my phone buying online, pull my bids in over the wick and whatever, pick up, you know, 30 cars versus the time that it takes to pick up 30 cars from the public.

I don't think he's not, it's not, it's not a commitment. It's a commitment. It's a different mindset.

It's a different mindset. But I mean I have four full time people manager and three agents that are buying all day long. And so, and they're using the desk to communicate back and forth on bids. And so I mean from it's, it's of the machine I guess is the best way I can describe it. We don't really go. The only option I ever buy in anymore is Fort Lauderdale Mannheim, because they have what I call wannabes, a lot of cars that look really good. There's a big saturation of BMWs and Mercedes with 40, 60,000 miles, and I can buy them cheaper there. So I'll buy some cars out of Fort Lauderdale mainline, but that's about it.

Yeah, that's a. I got so many questions, but we don't have time. Yeah, yeah, we're running short.

Maybe a tip. And one of the things that I've done buying online to save time is just we can start, you know, as dealers. Some of us are the buyers. Some of us are the office staff. Some of us are the salesman. But we can take those little steps on Facebook, Marketplace, or Craigslist and throw out the. Hey, I'm really interested in your car. It looks great. The condition, the price. Can you meet me at my mechanic shop to have it inspected? You know, and that's been the line I've used. And most of the people, they're very accommodating. Great. Where's your mechanic shop? Oh, well, it's Four Seasons Auto off Reddells Parkway. Meet me there. It's my dealership, you know, Meet me.

Meet me there.

And they don't have a problem.

They come up, you go to court.

Because I'm not able to drive the county and chase down cars for five hours every day, you know, I think I'll breathe. So being able to bring them into you is so key, I think, to buying off the street. And I know there are dealers that will. They have a trailer and a truck and a briefcase full of cash, and they send someone out to drag the.

County and pick up cars. But that's really big.

But if you're a small guy and you don't have the time, start with a little straw line. Hey, bring it by, bring it by, bring it by, bring it by. And those guys start showing up because.

Yeah, they come to us.

Yeah, you love it. You stroke them with chest.

Just remember, it's every. Every process that everybody has in here takes time. You may not think that you buy it online. It takes time. But if you're doing it at home, it takes time from your family. If you're doing it in your office, it takes time from you working on the business, you know, so every process you have takes time. If you're willing to put in the time to build a process that Danny has, to build a process that Chad has, then you can. Once that process is up and going, you can remove yourself from that process. So just remember that as well. Any more questions? Because we about have to wrap up here. Yes.

Sometimes.

Are you buying and thinking. Because I'll buy stuff inside.

I will tell you so. I mean because I got the luxury of looking at it, the software system and seeing like hundreds upon hundreds of highest party. We're traditionally only buying for retail. Sometimes we'll buy a sienna minivan with 190,000 miles that we know will bring the bank and the auction. Right. Stuff like that. But 99% of the time we're buying retail. But there's somebody can clean up wholesale because there is so much inventory out there that is in that really nice wholesale space. But no, we're. Unless it doesn't for some reason doesn't pass inspection or something like that. We're buying for retail.

And Chad across you, is it just strictly buying for the retail lot? Only mistakes go back to wholesaler?

Yep.

It's a lot of time either way, right?

Yeah, it's pretty simply. It is a lot of way. We just, we just. This is what we do best and that's what we're focused on, right? Yeah.

And that's.

That's the only stuff I said to auction my mistakes.

Any party wisdom that you want to give Chad and then we'll go to.

Danny for that for us. Well, it is, you know, the pandemic obviously changed so many things. And the used vehicle inventory, well, actually whether it be new or used, we're talking to buyer this morning. He's got a lot of connections in the new car business. And. And one of the things we're talking about is this pandemic is. Has changed the car environment and most likely has changed it for a very long time. We're not talking about six months or a year. We're talking about years down the road. And so what that means for me and for our operation is we're probably going to have to shift our mindset. We're going to have to get used to doing things that were probably a little uncomfortable doing, you know, a little unfamiliar doing. And so I would encourage, you know, you guys out there and you know, this is, this is how I live my life and running businesses. I'm going to do things that. That are uncomfortable for me to do if it makes me successful. And so whether it's my personal life or business. So, you know, I don't know, you know how to buy on Craigslist. But I guarantee it we're going to figure it out because for us to be successful in the long run, we're going to have to do things.

And Danny.

Yeah, the power one. I mean, that's the, that's really the answer. I shook a guy's hand five years ago and said, hey, we're going to figure out how to buy 100 cars a month. And he goes, okay. And you just kind of one foot for the other. The first month we bought like five or six. And we figured it out and we made a little form that said, cool, we should probably make a customer package when we buy a car. And then we took the next step and we said, well, how do we scale this? And we thought about what kind of person, if we were going to hire somebody should be in the seat. We quickly figured out salespeople aren't the right people to sit in that seat in the vehicle buying center because they want instant gratification and they're not. They're focused on selling the customer and not the product of the acquisition. So we found out that, like, the heart of a teacher is a better communicator. And so we found people that align with that better. And it's just one foot in front of the other and slowly you kind of get better and better. And I'm still on a journey, right? My goal is 200 cars a month. And I'm at, I'm averaging about 100, 120. So I've still got a ways to go.

We, we decided to build one podcast.

In front of the other.

Started in November 2018. Anybody that's listening, we really appreciate it.

Jeff.

How can people.

I think that's the number one thing, the theme I take from this guy is the reason we're at convention and the reason is to learn from each other, right? I don't know what I don't know. And that's the biggest thing about these conventions and getting with other dealers. I see a dealer who's doing it right or doing something different than I am and I'm like, I can do that. They're doing it. I've seen the map to success and that's what podcast is all about. We've got 180 episodes on there. Luke and I are dealers. We do it for fun. So subscribe. Please leave us a review. It helps boost our rankings in the algorithm situation. So jump on the podcast. This episode will come out in two weeks and we've got a lot of other great stuff. Presenters. Brett Carmichael was on there a couple of weeks ago, so listen to his.

It was awesome.

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