#201 - Shawn Richardson - How I Built This

Foreign.

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

Hello, and welcome to the Independent Dealer Podcast, brought to you by Buckeye Dealership Consulting. Today we have Mr. Sean Richardson out of Oprah.

Matt.

Really, really excited about this one, because Sean is a dealer that I look at and I say, man, hopefully someday that is where I can get to. I mean, with the caveat of more money, more problems, and maybe Sean will tell us a little bit more about that. But, Sean, introduce yourself to the podcast community and give us your quick 0 to 60. You know, your business model. Where you at? What do you.

Well, I'm an Oklahoma buy here, pay here dealer. All we do is buy here, pay here, no retail. I've got five retail locations, four in the Oklahoma City metro area and one in Tulsa. I've also got a separate warranty department in Oklahoma City, and then I also have a separate corporate office for administration and finance from a finance company.

That's interesting that we're going to dig into all of this. And Jeff's like, yeah. I look at him and go, I want to be that. That would make me throw up, that I would have all that to deal with every day. You know, don't get me wrong, what you've done, Sean, is amazing. And I did have that thought in the back of my mind. This is the way I want to go. But, man, I tell you, after this past year, with all the struggles that. That we've had with inventory, with employees, I'm at a point where I'm like, I just want to shut it down. I mean, do you ever feel like that every once in a while, Sean?

All the time.

Okay.

Just as long. As long as I'm not the only one here. So. So, Sean, let's. Let's start at the beginning. What year did you open? And it's. Let me get this right. Credit. I mean, express credit, Auto. Correct.

Correct.

Okay.

We opened in November of 1996. So this is our 25th year in business. And it was my dad and I, we were the operators. And then we had another partner that we brought in for additional capital. And now my dad's retired and living his best life in Florida.

That's what everybody does. Retires and goes to Florida. No wonder there's so many cars down there. Low mileage cars. Well, Sean, if in 1996 when you opened, were you strictly buy here, pay here, then, or did you look at it, hey, I'm getting into the finance business, or did you look at it as getting into the car business.

I always did a few notes, but it was always a sideline business in the beginning mostly. You know, the lenders were so aggressive back then that we did third party financing for allowed other people like Jayhawk acceptance, credit acceptance, and a handful of others that aren't in business anymore. But that was where we specialized. And then it. I could tell that it was. The lenders kept tightening up. Funding was getting slower and slower. And I could just see the writing on the wall that, hey, this loose lending party is about to implode. And so that's whenever I started pivoting to buy here, pay here.

What year do you think that was when you decided, hey, this is, this is where I'm going and this is how we're going to do it?

About 1998. Because.

Yeah, and that's, you know, I was starting to get more involved in the business in 98. I was in college and my dad had been open since 85. So I don't recall, you know, because we were already at that point Pretty much 100% buy here, pay here. I don't recall there being a wholesale switch in lending. It seemed like maybe, I guess you're saying 97 or 8. It started tightening up. But I recall, you know, in the early 2000s when everything started loosening back up again. Was there a period from 98 until, you know, mid, I guess, early aughts that. That it was tight, that I don't recall.

Yeah, it was. The deep subprime buyers basically disappeared and they didn't come back. It's never been that loose since.

That's interesting because you think of the time from 05 to right before the Great Recession. We think about how loose the capital market was then, but you're saying it was even better prior to that, which is, which is super interesting.

Yeah, they were basically financing deep subprime customers without proper verification and things like that. Based on what I view as proper verification. You know, they were basically a driver's license and a credit app and we could get people funded.

Yeah.

So, Sean, when you guys decided you wanted to start carrying stuff in house and you saw the writing on the wall, how did you get started with that? Because I think a lot of dealers might look at that and say, hey, great, yeah, you know, I can sell through CAC and some of these other guys, but if I really want to start doing some buy here, pay here, how do I. Do you reach out to family and friends and start borrowing money? Do you go out to the big lenders right off, or how did you do it?

Well, we just fought through it with our own cash flow. I was young, and back in 1996, I was 21 years old and was living in a mobile home and didn't have kids. And my wife is, you know, very easy to please financially. So, you know, I just reinvested every dollar. Back then, I could live on $1,500 a month. So we just took all the money and reinvested it back into the company. And I know that's not an option for most people, probably hardly anyone, but for me, it was one of my saving graces, because also I understood the power of compounded interest. And I knew that if I just kept reinvesting my money, that there was going to come a day to where I'd make more money than I'd ever want to spend.

Shawn, that's an interesting take, because that's exactly what my dad did. And, I mean, it's paid off. We don't owe anybody anything. And it is a very interesting take. Do you believe with the current price of the cars that you could have that you could redo that model? I think that, you know, when my dad started buy here, pay here, you know, cars are 500 to $1,500, and he was getting $500 down or whatever. And I mean, don't get me wrong, it was super tough to do it then, living, you know, reinvesting everything. Can it be done today with the price of cars compared to then?

It can, but not in scale. And. And it wasn't. And it was easier to do it in scale back when I got started on a cheaper car. But now it's just a knife fight. You know, the guy just got to go to the auction, probably live auctions, and fight it out on finding those more affordable cars that people are neglecting. Maybe they need a little more repair to get them ready for sale, things like that. But absolutely. I mean, you can still buy cars for, you know, three to $5,000 and, and. And note them out. It's just. I don't think you can do it at any scale. But. But getting started. Absolutely.

When do you think that. I mean, when do you think that magic number has to switch from getting started to going to scale? I mean, do you have an idea of that anymore? Like, is it 400 accounts? Is it 800 accounts? You know, if there's a. If there's a limit.

Well, the problem with that lower end car is that you're going to attract the highest Risk customers and they're going to have the worst severity on your repossession rate. So it's going to be hard to build a portfolio in that business that's sustainable. It's going to liquidate really fast. Probably within 18 months you'd have 75, 80% of your sales off the books. But with that being said, it is a high cash flow business though on that lower end, where the cash flow comes back really quickly is what I mean by that. So it's just one of those businesses to where I think that the number, I don't know about the number of accounts, but it's probably around 40, 40 to 60amonth. Is realistically in sales volume all that you could probably realistically do, but that depends on if you're rural, urban. You know, there's a lot of variables, down payments, how many auctions you have around you.

Sean, so for you, the evolution of your dealership. When did you guys start, I mean, when, I want to know when you started to scale. When did you start adding locations? I think, you know, you've got five retail locations and I mean, just doing some crazy stuff. When did you start to scale that out? Was it a certain amount of notes, a certain amount of cars, or did you have kind of a growth and game plan that you said, hey, I want to be, I want to have this many notes under, under collections and things like that. How did you get there?

I just ran hard with my foot against the gas pedal. I didn't really have those kind of goals. Sometimes I think people spend way too much time planning. Planning is important. You need to understand your cash flow and stuff, but you need to be able to do it on a napkin. You don't need a 10 page spreadsheet on, you know, people spend too much time thinking about it. And what I was doing was whenever opportunities would arise, I would look at my cash flow, take a gut check on whether or not I was willing to do that work and hire, hiring additional staff and, and if everything said green, then I, then I went. And so I've always been very opportunistic and I try not to force things to happen. So with opening stores and things like that, I've done that once and it's been a struggle because the store just cost too much. You know, the store that I did forced to happen in a lot of ways compared to the others where they just, the opportunity just kind of fell into my lap and it was a great deal. The one that I forced is, is the one that's Temporarily closed right now. I could never get the volume up to where it want, where I wanted it. It holds easily over 100 cars. It's, it's average monthly sales were 55 units and it's, it's rent factor is $30,000 a month. So. But I thought, you know, I got to have, I got to have a store in Norman to complete my puzzle. And did I really? I don't know.

Well Sean, that, that, that's so, that's so good for people to hear because what you find is as car dealers and maybe other business owners, but I can speak as car dealers. Once you feel like you have something that works, you want to force it, you want to do it again. Right. And maybe it's, it's better to wait for the opportunity, wait for the right piece of property, wait for the right deal on the right piece of property to do that. So in 98 you said okay, we're going to do buy here, pay here. What year did that second location, the right opportunity come to you?

I don't have those timelines in front of me, so I'm just going to go. Based on my memory, it was about three or four years. So 2021, 2022, we opened up our South Oklahoma City location and then in about 2006 we upgraded. We moved out of our original location and moved to a five acre facility that was a Nissan store. 20 25,000 square feet, five acres and then it attached 10,000 square feet. So that was a big move for us and that put me on a huge growth mode having, having reconditioning in my corporate office and, and high volume store under one location. It's just so easy to run compared to everything else I've done.

And how many units do you sell out of that location a month, do you think?

Well, right now we're Covid hobbled. So aren't we all right now? It's not that great. Yeah. But typically it was 125 to 150 units a month was its range before COVID Now with COVID you know, I've been, I've been. Unfortunately I was leaning into defense through Covid. That was a mistake and it's kind of ground my volume down to that store is doing about 60. So it was a huge mistake playing defense through Covid.

It's, that's a playing defense. During COVID I felt like I was playing offense for a bit and then I got put on the defensive. Do you think that's opposite with you? I felt like I Played offense early, and now I'm just. Yeah, I'm playing defense.

Yeah. First, when the inventory prices melted down and Hertz was going bankrupt and we just had a ton of inventory available, I was gobbling it up and. And doing well. And then I got it in my head about the. In January or December of last year, December or January of this year, that. That, hey, the market's going to. These high prices are going to drop in six months. So then I started playing defense, and then. And then I got to May, and I was like, oh, well, my timing was wrong. Prices are going to drop in six months.

You and I. You and I. You and I were looking at the same crystal ball, just to let you know. Yeah.

Luke's is.

Yeah. And now I'm like, heck, I think they're still going up and probably for the next two years. So. But I've just. I've had to let it go. It caused a lot of unnecessary stress with me trying to time the market, so to speak. I should have just floated with it. I should have just replaced what I sold for, focused on the inventory that works for us, and I should have just not put too much thought into it. I should have just floated with it.

There's definitely something to be said about having a short memory in the buying process. Right. Because you look at the cars that I bought last year, well, if I had just held onto them for an extra 12 months, I would have made three times as much as I made 12 months ago. But I'm paying $3,000 more for the same car that I retailed 12 months ago. But you just can't play that way. Right. You got to look at, okay, what does it cost me today? What can I sell it for tomorrow? Great. Turn time. Even in the buy here, paying your industry, I don't always look at turn time. I don't care. But it's still pretty important.

It matters.

Yeah. I think right now, I think turn is important because I don't think any of us want to get caught in the potential bubble burst, especially if people are flooring inventory. For those of us that have cash inventory, cash paid inventory, I think that, you know, we could take more risk, but. But we all need to be cautious to a degree.

Yeah. Sean, let me. So let me ask you that. So when you. I mean, I could imagine you've got. Let me take a stab at 2,000 accounts on the books. How many accounts mind sharing?

8,400.

Yeah. Yeah. You were way off, buddy.

I don't even know what I'm thinking so, Sean. No, no, but here's what I'm drawing the picture of. I know that when Covid hit In March of 2000, whatever it was 2020, I panicked, right? Cause I'm like, oh, I could have a couple hundred cars show up on my doorstep tomorrow. You're thinking, I could have a couple thousand cars show up on my doorstep tomorrow. You know, so when Covid hits you and those things happen, everything is amplified by 8,000 times what a dealership like me deals with. But on the flip side of that, also, you're looking at your asset, you know, your portfolio is an asset. And thinking, well, geez, those cars are worth a lot more now than they were 12 months ago. You know, as far as, like, my collateral recovery rate has gone up because I've almost welcomed some repos right now. I wish I could find some just to get those, those cheap cars back in my inventory. Has that affected you at all?

No, because I knew that the loans would perform better. Our loans always perform better in crisis. Always.

That's, that's.

Customers get scared and they make their payments. Our loans perform worse when the economy's booming. Our loans perform better in crisis. It's always been that way.

Yeah, definitely. I remember back in the Great Recession, that's exactly what happened. And, and I always thought that was going to happen, but then I didn't. I didn't think about the COVID being the crisis that it has become. I guess we know in the beginning we thought it was going to be a very short lived, maybe two or three months that that was going to wreck havoc. And then maybe we could try to get back to normal. But it's drug on as long as probably the Great Recession kind of did. But yeah, our loans have always performed better because it's harder for people to get cars. But then when they pump the cash into the economy, it kind of screwed everything else up too. Sean, how many employees do you have? When we're talking about 8,000 accounts, five locations, recon warranty center. I mean, you must have 200 employees.

Yeah, I try not to get there, but it's typically 140 to 160. We're beefing back up and we're closer to the 160 number right now. We're just, we. I've just decided that I can't keep playing defense. That's. It's been the wrong move. But we've been staffing up, we've been gearing up our advertising, and I believe that this next tax season, as far as the amount of tax dollars available per sale for down payment is going to be the highest and best we've ever seen in our lifetimes.

That's exactly what Tax Max told us. Isn't that right, Jeff?

Yeah.

Yeah. They definitely have done the math and they know so. It's always funny when you get in, you hear dealers try to chime in and give their two cent about how tax is going to be horrible because this, this or that, you're like, come on, man, just listen to the professionals, you know, don't try to be the Nostradamus yourself. Let's go to the people that know. Hey, since we're talking about taxes and tax time right now, make sure you are signed up with Tax Max. It's the end of December. It's not too late to get signed up with Tax Max. Use our dealer code to get 20% off of your signup fees and start filing those taxes and deferring the down payment.

Yeah. And don't listen to all these other dealers out there talking about there's not going to be any tax money. There's not going any tax money. We heard it from a legend in the buy here, pay here business. It's going to have some tax money. He's planning for the biggest tax season of all. And Tax Max told us that two months ago. Jeff, get ready. It's coming. It's going to be a lot of money.

Yeah, I've already done five deferred down deals just for some preferred customers that we have to the tune of I think six grand or so, seven grand. So. So I'm already getting my hands on some of that money filing, pre filing their taxes. So it is time. Get at it now.

And Sean, when it comes to how are you preparing this year for tax season, you talking about revving up? Are you going into the lane and buying cars and just paying what it takes to get them? Have you, you started sourcing differently? What do you think is different this year compared to last year when you, when you look at that or compared to years prior?

Well, we're, we're still trying to get those cheaper cars for us that the auction value would be 8 to $12,000. Those are the hardest cars to get bought that we're after. It's right. There's been a little bit of a dip in our, in the trucks that we purchase, maybe by about $2,000. So we bought a whole bunch of trucks lately, about 200 of them to get ready for tax season. So where I'm putting my bet or my investment is in trucks and we're going to try to move a lot of trucks this first quarter.

You know Sean, when, you know, if we look back maybe five to 10 years and we start talking about Drive time, when Drive time showed up in my, my area, I really thought that they were, you know, a competition. Like, I mean they're here, they're going to be big competition. And for someone like you who's, I mean as big as, I mean not probably nationwide, as big as Drive Time, but in your area you probably beat Drive Time from, from day to day. Can you talk about the evolution of maybe all this corporate money coming into our industry and how you've fault it? And what do you see happening in the future when it comes to Drive Times, United Auto Credit or Car Mart or whatever? What do you see going on there?

Well, we need to pay attention. They are more innovative on digital sales. They're more innovative on buying direct from the consumer through Carvana. So we need to pay attention and learn. They're also really good digital advertisers and their messages on their ads are really good. Drive Times landing page is really good for generating leads. So we need to watch them and learn and borrow their best practices for ourselves. But we have an advantage and that is we're the local guys, I mean trying to take care of a problem with Dry time or Carvana. You can just look at their reviews and see, look at their one star reviews. And I mean it is just those poor people, they just can't hardly get to the right decision maker or the right problem solver. And not only that, but I haven't seen any Drive time or Carvana support for high schools, junior highs, the, the baseball teams, the soccer teams and all of that kind of stuff. So we really need to beat the drum on who we are. We're the local community driven dealer. And if you want to deal with a digital dealer, then good luck.

That's an interesting segue because when we first started this you talked about having a warranty department only, which I think is such a creative idea, I've never even thought about it. And I assume you have your own reinsurance company so can you walk us through how you've set that warranty department up? How many people are staffed there and how do you handle all that volume? Because with, I mean I see on your website you have a 36, 3 year 36 warranty included in your sale and 8,500 accounts that has to create crazy volume. How does that work?

Yeah, it's It's a customer service. It's. It's like training day. I mean, every day our customers have high expectations. They, they need their cars. They have high expectations because they, they can't afford for their car to be broke down. And it causes, you know, their whole, as you guys know, their whole life can get turned upside down if their car's broke down for too long. And, and then they don't have the money a lot of times even for a tow bill, much less a repair. So they are high stress. So you need a lot of customer support on the phones a lot more than I thought. You know, we've got altogether nine people, three in Tulsa, six in Oklahoma City that are warranty advisors and answer the phone and take care of the customer service. And it's full contact. I mean, they are mad, they are upset and they want it repaired now and got to have the right people with the right mentality and everybody needs to understand the situation from the customer's point of view.

Do you have a separate service department that only handles warranty claims or do you farm those out?

I keep them separate. The problem is that, that I had is, is that whenever I had them under one shop, the customer always took priority, you know, because the customer's the one, you know, a lot of times making all the complain, complaining and calling. So it just. We had to separate so that we could also recondition cars and, and sell them because.

And that is. That is your. That's. You own the service department or do you have outside service companies doing it?

It's just a department within Express Credit Autos, so it's in house.

Your warranty, do you administer your own warranty or are you using outside services to kind of field the phone calls and do that?

We self administer with Buckeye. Yeah.

Yeah, I think, honestly, I think that's the best way to handle it because even though, you know, we own the reinsurance company, it seems that, you know, the reinsurance company is going to. Gonna be a little tighter than we are. It seems like when it, when it comes time to repair.

Yeah, let me talk about that shop because, you know, we love the guys at Buckeye and they sponsor the podcast, but how has that affected you? I mean, I could imagine when you're doing that many accounts and that many sales and if you're tucking money away into your reinsurance company every single month, a. That's a huge amount of cash and maybe a cash drain, I don't know. But I mean, what was your philosophy there? Do you use that Warranty company to the extent you can to save taxes or is it just kind of like, hey, we try to run it at a minimum just to keep customers happy.

Well, ultimately it was set up just to take care of the customer. But it has turned out to be a very profitable venture too on the side. But that was a little bit of the unintended part. I mean, of course we didn't want to run a loss, but even now we could seed more. And we're looking at that because what we're seeding is below the market rate. But yeah, it's a great tool, wealth building tool. You know, you can have children's or grandchildren's trust, own it, give them deferred income off of that. And there's just, it's a wonderful tool for wealth management and there's more ways than we have time for to use it.

Sorry to break in, but as we will hear, one of the major changes in Sean's whole business model was providing warranties for customers. And Jeff, we've got a company that does it. Buckeye Dealership Consulting. One of the best in the industry, if not the best in the industry when it comes to getting this taken care of.

Yeah. And if you're in, buy here, pay here and you're giving the customer some sort of a guarantee or warranty on their car. I did it for years and years and years.

Right.

And I just thought, hey, I'm just going to self fund this. I'm just going to call it a warranty, but I'll just keep it in my slush fund. I don't want to set it aside. It really doesn't make a lot of sense.

Because it doesn't make sense.

Have the opportunity to expense that dollar amount, whatever it is, 300 a car, 400 a car, 800 a car. Expense that out and set that aside into your separate reinsurance company and it.

Will change, it will change your life, it may change your grandkids life and it'll change the directory of your business because once you start doing that, customers understand that they are buying value.

Yeah, yeah, they're getting value. And you're getting value because it's like a forced savings account, you know, it's like your Dave Ramsey plan to put a little money aside every single month for yourself in the future. And it builds and builds and builds and builds. And in 20 years from now, you got a couple million dollars sitting in your offshore company. So get with the guys over at Buckeye and get your reinsurance company set up.

Sure, Sean. And what year did you start your reinsurance company?

You know, I was, I was one of the first, I believe I was the first one that created the included warranty for buy here pay here. I did that with Sidecars back in golly, probably about 97.

Oh wow. Yeah, definitely affordable.

That they, they did not. All they had was service contracts back then. Everybody and I had this idea of a included warranty rather than a service contract. And I contacted Paul, I can't remember his last name, but Paul Degrego or something like that at Sidecars and, and I pitched him my idea and he went to work on it and, and the birth of included warranties for buy your pay your customers was created.

Well, I know there's plenty of customers out there that should be thanking you because. And plenty of dealers there too, because I mean that really transformed our business. I remember, I think we started including warranties, I would think in probably, oh, 7, oh 8. And in our area that was, I mean it was pretty, you know, pretty dramatic. And I think it started like maybe with a 30 day warranty because we were doing it anyway. And I'm sure that's how yours evolved. And then it, you know, then we moved to a three month and then I did move to a 36 month and I drew it back some. Has yours evolved like that or you did, you know, have you been at 36 for a long time? How does, how does that look?

Well, we, yeah, I was at 12 for a while and then I bumped it up to 24 and I just kept seeing repossessions come in. You know, one year in the purchase, 25, 26,000 miles on them, and the customer would assume that we wouldn't help them. And we'd get a hold of the customer after the reposition, say, hey, we saw that your motor's out. Maybe that's why you let it go back. We'd like to work with you. And they, then a customer typically would say, well, I didn't think you would. They're making assumptions and they went and bought a car somewhere else. So because of that is why I went to the three year 36. Most of the time it works out to be about 18 months to two years for most customers. Not the three years. There's a few, I mean I shouldn't say a few, but a smaller amount that does go to three years, but it's not as often as a dealer would assume.

And did you see a jump in your collateral recovery rate at that point or a decrease in your repossession rate.

Yeah, we did. We had a decrease in our repossession rate and happier customers, and we're still in. That was really kind of the start of where we are today as society. You know, it's like, why, why would we do something good for the customer and have tools available and not tell them? And that's where the industry was years ago to where it's like, hey, well, if you would have called me, I would have policy expense it or whatever. But, you know, our customers need to know their resources. Yeah.

Sean, I want to ask a little bit about your business model as far as your deal structure goes, because I find it so interesting to be buy here, pay here on, you know, cars that range from 12, 13 grand up to 30, 40 grand. Like, I think if some of us dealers here, the fact that you are carrying the Note on a 20 or $30,000 Dodge Ram, they would just blow their minds that that's even profitable. How do you make that work?

I mean, he's got, he's got a $48,000 Chevrolet truck on his website right now for buy here, pay here. Yeah, let's talk about that deal.

Sean, in that example, what kind of these people coming in with 10, 15 grand down and they're paying 2,000amonth and you're making, you know, maybe help walk us through a structure like that. How does that make sense?

Well, we're not very much on deal structure unless it's a high risk, low value car. High risk customer in a low value car. That's where we get the bigger down. I might only get $300 down on that $48,000 truck because that's going to be a subprime customer. It's not going to be a deep subprime customer that buys that truck. So we're after the customers with the 600 FICO, the 625, the 650 FICOS. We're after those customers too. We have tiered interest rates. We have interest rates as low as the 8.98%. We go 60 months or a little bit more sometimes to get the deals done. But that business is more profitable and less work than the 6 to $8,000 wholesale ACV car.

Yeah, I've seen that.

The full coverage insurance component is so crucial. Or do you do that or do you have a CPI product? Because I don't want to. I mean, that would scare me to death to have a 30 or $40,000 car. Even if it's an A credit customer, they can still let their insurance lap total it out on a Friday.

Yeah, we don't verify insurance at the time of sale. We assign every customer to collateral protection and then allow them to send us their insurance after the sale. And if they provide it within a certain before their first payment is due, then we remove the collateral protection. So we just take the risk. And there's many times where maybe there's some time without coverage technically. Cause we force place the collateral protection, but then we're not gonna charge them for it. So Sometimes they get 7, 10, 15 days for free. And we just take that risk.

So on a car like that, for a guy like me who's looking at like a cash on cash return, when you sell a 20 or $25,000 truck ACV, I mean you really can only mark that thing up still three to four to grand maybe, right? I mean, you're definitely not doing a similar model like with me, where if I sell a $6,000 car ACV, I can almost sell it for twice 10 to $12,000. I can make about 100% markup. Obviously in those higher end cars, the markup's not there. Does that.

Well, it's more than three. It's more than 3,000, Jeff promise you that?

Yeah, it's more than 3,000. We have a flat markup basically, or a flat range of a markup between 5 to $10,000. So if we get a, if we get a steal at the auction and it's a higher ACV vehicle, it could be marked up $10,000. On the low side, it's $5,000 markup, but it's just kind of a, per unit, where the market's at, what kind of buy we got, and, and, but typically the higher ACVs we try to get, you know, seven, eight thousand dollars of a markup.

What is, Sean, what is your average, if you know this, what's your average monthly payment when you look at, across your portfolio and how much have you seen it going up in the last, let's say 18 months?

We haven't been tracking that. I'm, I'm a little bit light on staff and we haven't tracked that in probably two years. So I'm not for sure where I'm at right now, but when we were tracking it, it was about $110 a week. Okay.

And on these really high end, I mean, are people paying $1,000 a month? I mean, does that happen?

Yeah, yeah. I mean that's kind of, that's where it kind of stops though, a lot of times. But, but on a Monthly payment. But typically if it, if it's bi weekly, it could be 499, 599, bi weekly sometimes. But you know, they have that we do, we budget everybody out, make sure they can afford the payment.

It seems to me like, I guess my, I get, I get tripped up on the fact that I feel like as I creep up in ACV or as I creep up in credit tier, I'm getting a more price conscious shopper. So I'm not able to mark up that car as much because now maybe they have more options. So they're shopping my car against the one at the new car store who's only trying to make $1000 on the front end and then another 1500 on the back end. And maybe they've got some crazy bank that'll carry a 600 credit score, you know, or 620 credit score or something. So do you have, do you end up competing on price as you start creeping up an ACV and credit tier?

I don't, I don't look at that. I don't even consider it, I think, but it, but I think, you know, the thing is as you have nicer vehicles, you are going to attract more non buy here, pay here customers to your, to your location and those people are going to be more price conscious. So. But you know, they're not our customer.

Yeah, that's interesting. They're just not our customer. And sometimes we find that at our dealership that hey, this customer's trying to buy. Well, honestly, they just, they don't fit our box and they may be fine people and may pay perfectly, but that's not our customer. And when they come and look at, they're looking at your car, you know, and they came there for a reason. They can see the price on your website. So, you know, I think you're right there. What, Sean, what's the one thing you've done in the last 25 years that was the exact right thing and that you want people that are trying to learn to build a operation like yours. What is that one thing that we should all do?

We should all warranty our cars.

And you think that changed that, changed the dynamic of your business, do you believe?

Yeah, it definitely did. Especially whenever I was in the lower ACV model period. Sometimes we'd have cars, you know, quite often we'd have cars with 120, 140,000 miles. And that gave the customers a reassurance to go ahead and pull the trigger and purchase the car.

You're talking about like A limited powertrain warranty, right?

Well, we. Our warranty is limited, but it's much. It's power, tank, powertrain plus. Plus. Plus.

That's what ours is.

Yeah, I mean, it's, you know, you gotta. You gotta. We gotta keep the cars running. I mean, it's no different than a landlord having a home with a clogged toilet. You know, you're just. They're just gonna do more damage to the home and they. And they're not going to want to make their rent payment. It's the same thing in the car business. Or buy here, pay your dealer. If the car is not running, they're not going to pay. So we got to keep the cars running, and we need to have enough profit in there so that we can afford these policy expenses.

So. So your advice to dealers would be warranty their cars, provide it for free. You know, stand behind your product, especially in the buy here, pay here. Do you have something that you did that was just, you would say a bonehead move? Can you think of anything in your past where you said, man, guys, I stepped on this landmine. This is what I would tell dealers to not do.

Overspend digitally. Google and Facebook will take all of your money and tell you why you need to spend more. And so don't trust those algorithms. Don't. If you are spending a lot digitally, get a consultant or somebody else that can manage those funds. Even if it's, you know, a lot of times it's 1,500 to $4,000 a month, you got to find the one that fits your budget. But they'll save you a lot of money and it'll perform a lot better than doing it yourself.

And what do you think? I mean, your size operation, I mean, I'm sure you're spending, I mean, a ton of money on marketing, you know, is for someone who's, you know, not as big and, you know, a normal size operation. How do we decide what that right number is, Sean? I mean, is it per car sold, is it per lead? How do you judge that?

Well, I would be out there on Facebook. The small dealer actually has more of an advantage because they can create more fresh content for Facebook and Instagram that can focus on that and it be locally for one or two locations, so it'll be more relevant. It's really that social media really, they need to be really good and really understand social media content, how to create it, how to post it. And if they don't, they need a consultant to do it for them and help them with it. And then referrals. Ask for a referral. Who do you know that's going to be buying a car next? So ask referrals and ask. Ask for it correctly.

And you have a referral program where you pay customers that refer or how do you. How do you all handle that in house?

We do. It's not, it's not a lot of money. It's 200 bucks. And they. And they get it posted to their payment to. It reduces their payment for the next time. So it's just a little thank you, but mostly just doing good business and asking for referrals. It's that, you know, because we are the local community dealer, so we're not going to be able to get the impressions on TV that Drive Time does. We're not going to be able to be a better digital advertiser than drive Time. But. But we're in the grass. We're in the grassroots and we can execute a lot better.

So true.

And Sean, I want to point out one thing before we close here. You had mentioned that in 2000, just before 2000, you were living with your wife in a trailer, starting your buy here pay here. Fast forward 20 years. And 20 years is not a long time. I mean, really, like for any of you guys with kids, 20 years goes real fast. Right. I imagine you're not living in a trailer anymore.

No, no. But I'm probably not living in as nice of a house as everybody thinks. I still have my tightwadness, you know, like I'm driving a lot vehicle and, you know, but I'm just being me. A lot of people try to tell me what I should be doing with my money and how much I should be spending of it, but I'm just being me. And I'm more of a saver than a spender.

Well, Sean, that I think a great way to wrap it up. Cause to be a true buy here pay here dealer, when it starts it from the bottom, you have to save. You've got to reinvest, you got to pay your taxes, you got to do all this. And I think Sean is the epitome of what, you know, anybody that wants to be a really successful buy here pay here dealer, you're the way that we need to go, I think.

Yes.

So glad you joined us. Please, please take a minute to leave us a review and share this podcast with a friend, the independent dealer. Podcast Dealers Helping Dealers.