#217 - What Makes A Good BHPH Deal w/ Jason March

You are listening to the Independent Dealer Podcast with hosts Luke Godwin and Jeff Watson.

Hello and welcome to the Independent Dealer Podcast brought to you by Buckeye Dealership Consulting. Today, Luke, we have a friend of the podcast, Mr. Jason March, all the way down there in Florida. Jason, how you doing, man?

Things are good, guys. A little slower than what we're normally used to here in tax season, but things are good.

Yeah, you know, we're seeing the same thing, Jason. We're over here on the, on the east coast and I don't know how the rest of the country is doing, but I've kind of, kind of got that vibe that it's a little slower than everybody wants it to be. And honestly, after the last two years we've had, I'm okay with it. I'm okay with it. How about you?

Yeah, well, our situation is I've always feel like we're about two weeks behind the rest of the country where I'm at. You know, I don't know if that's a time zone thing or what, but we're always a little bit behind everybody. So when I hear you guys start talking about the slowdown, I just know that it's coming, you know, because we have the same situation reverse. When you guys were all killing it three, four weeks ago, we were not yet seeing it, so. So I can definitely see that wave kind of moving through the more urban areas and rural areas as it kind of comes across.

Well, the biggest reason we got Jason here today is Jason is a presenter at Buy Here, Pay Here, United. We've been talking about that for the couple weeks at the summit. And Jason is speaking on Monday, April 11th at 1:30pm so Jason, what are you talking about?

So the topic is a 100 level topic and the title is what Makes a Good Deal. So I'm going to start with, I'm going to not focus so much on your credit application and time on job and time at the residence, because I feel like everybody knows that.

Right?

Yeah, those, those topics have really been beaten to the ground. Like, Jeff, you may do it one way. Luke, you may do it one way. I may do it one way. And it all works. I think. I think I'm going to go a little deeper into understanding your market. Specifically, where's your dealership located? Who's around you? What have they been buying? What are the people buying from you over the last several years? I think that's something that dealers have always just taken for granted. It's just like if I stock the vehicle, they will Come.

It's got to be the right vehicle, right, Jason? It's not just a vehicle.

So I'll kind of use an example here. If you're in the middle of a low income area that has a lot of, say, African Americans, public housing, if you are stocking a vehicle that appeals to that market, I believe you will have a lot more traffic. If you are stocking a vehicle that is not appealing to that segment of the market, I feel like you're not stocking your lot for your community.

Yeah. And that makes a lot of sense.

I think we've missed that a lot.

Sure. There's, there's so many people that just go out and they buy whatever they like, auction. They don't have it. They don't have a particular way to look at what they're buying and oh, that's a good deal. I'll buy that. Well, that's a good deal that we end up with a bunch of silver Tauruses and they can't sell them. And they wonder why. You know, you're, you're so right. And it's all. And also about price. You can out price your market too, Kenji.

Jason, you know, I, I thought one day I'd go to the auction and we'd try some lower mileage, newer vehicles that were off like a rental car type vehicle. So we, so we put some cars out there that were, this is probably six years ago. We're putting some $9,000 ACV units out on the front line, where at that point our ACV was closer to about six and it was a disaster. Those cars sat on the lot for a year. We ended up having to give them away. We didn't know how to sell them, we didn't know how to price them. And it was just something that was out of our, our wheelhouse. So I would encourage people to really look deep in their history, see what performs well and see where your customer's.

Coming from and also how much money they make too. Right, Jason?

That's a huge piece of it. You know, you can't have a $600 payment when your customers are making $1,200 a month.

Yeah, for sure.

And so, so much of what I think about is when, when you talk about like product, market fit, right? Like you have a market, you need to make sure you have the product that fits that market. You know, that's a big talk in the tech industry, but also how much of that has to do with where you positioned yourself in the market. Because I look at a guy like Luke, and he sells a very high acv, right. And I don't know what his demographic is in your market, Luke, but I got to imagine that in your same market there's a guy selling a very low ACV doing really well too because he says, hey, I'm in rural South Carolina, average income is maybe 40,000 a year, I gotta be in this cheaper range. And he could probably do really well. But then there's Luke that says, hey, guess what? There is a whole nother group of people that need our services that can afford a four or five hundred dollars a month payment on a nicer truck and they're willing to do it. And so my market is this segment of people and I'm going to market and my whole dealership is going to be geared towards those people. I mean, so is there a place for you to position yourself in your market? Kind of like where what segment you.

Want to service you can't be to everything to everybody. And I've tried to do that before, have a real high end acv, a real low end ACV and something in the middle. And nevertheless I'm going to have one unit sit. Either the low end or the high end is going to sit in the middle. Cars sell, have you noticed that?

Jason, I really like that idea what you said. You can't be everything to everybody. We've tried the same thing over the years. I mean, you guys have been in business longer than we have worked, 24 years. And we've tried several approaches. We've sold Mercedes and BMW here, we've sold Ford, Taurus here. And it all sells eventually. But I think in this day and age the key is turn. And you got to. The velocity of the lot is so important. The longer you have the vehicle, the more money you have tied up in it. And to do our best, I think the less we have, the least amount of time we have that car on our lot, the better. And the sooner we can get that payment stream coming in from that car, the better. And does that have to do with do that? You gotta position yourself in the market properly.

Yeah. And like you said, that's because those high turn vehicles in our buy here, pay here industry are high demand type vehicles. Right. So you want to find that best car that your market is going to love, you know, whatever that might be within your business model.

Right.

I mean I could sell all the Z71 Silverados in the world if I had them. Can all my people afford them? Not so much. But I also know that I can sell the crap out of a little Dodge Dakota too, you know, or a Chrysler 300 on a set of 19s are going to go like before it even rolls in front of the gate. But so, so, but are those well performing cars, you know, are those cars that are going to perform well in the long run? Where do you find that?

What's the greatest thing that happens? Talking about this when it does, and it's happened several times over the years to me, but to find a car that people really love and a car that is a really good car come together, it's rocket fuel. Because what happens a lot of time it says the cars that people really like suck. You know what I mean?

Yeah.

And so they break down all the time and they don't, the loans don't perform and then you have really, you know, really big issues. So you know, the way to help prevent that though is having a reinsurance company. And we'll move on to that. And Jason, I know that setting up, structuring a deal the right way involves giving warranties or selling service contracts and having Gap and all those type of things. And we know that you, you have a reinsurance company with Buckeye and offer other products. Can you walk us through your evolution of going from one bad performing reinsurance company to Buckeye and how scary can that be switching reinsurance companies and your experience in that whole thing?

So I'll go ahead and say that my experience with the previous reinsurance provider was not necessarily bad. I just wasn't really, I wasn't really. You don't know what, you don't know know. So I didn't know what I was missing. We were with our last reinsurance management provider since 2017, 2018 and. We were offering a warranty. We had done some self insured Gap and we had gotten our CPI program off the ground. So all good things to get going. The Gap was a little difficult for us to make sense of because you have to hold that Gap money until the end of the term, which is, you know, we're, we're doing about a 36, 38 month term. So that was a bit of a challenge for us. We want to redeploy that capital in a shorter amount of time. We were a little intimidated by switching because we felt that a reinsurance company is kind of a delicate subject and you don't want to be moving things around too much. But we were able to move it over to Buckeye from the previous provider. We were able to open a new bank account that was friendly towards reinsurance Companies that are based in an offshore country. And we eventually were able to get all the documentation we needed to switch over everything. And overall it was about three months of worry and one week of actual pain.

It sounds like a new DMS is like six months of worry and six months of pain. Right. Have you ever done that?

Lot less of a struggle than a DMS switch, that's for sure. And the guys at Buckeye really helped with that. They're great, the guys and the women at Buckeye, they were great.

And what was the catalyst for the move, Can I ask? Hey, guys, real quick, want to tell you about a new sponsor. Luke, you guys have heard about all of the great people that support the podcast. Now we want to tell you a little bit more about Pastime.

Pastime is a great company. Jeff. We've known Josh and Jake and all the folks over at Passtime for so long. They, uh, Chris. Chris has been on the podcast a couple of times and just great GPS product. Great company. Wireless or wired Starter interrupter. Not Starter interrupter. And Jeff, it's not just for buy here, pay here stores anymore, right?

Yeah. There's a lot of applications we've talked about even in the last few episodes where you could put a GPS in your retail vehicles just for peace of mind to know where those cars are at any given time. You can put a wired one in some of your more expensive stuff to make sure it doesn't run away. And you've also got the opportunity to sell that GPS or the access to that GPS to your customer. So it's also a profit center. If you're running a retail location, it's.

Protecting your assets as accounts. It's protecting your asset as your cars on the lot.

Yep.

And it can be a money making process. Great company. Pastime is. And Jeff, you know what? I'm so dumb. I should have put one in a car, one of my personal cars last week because guess what? It got stolen off my lot. Any one of my personal classic cars was stolen off my lot.

Oh, that's gotta be infuriating. And for. And for low. I mean, these things are so cheap these days.

150, 200 bucks. Whatever it is, it really doesn't matter. I would already have my Jeep back. And I don't. And I'm. I'm pretty sick about it.

Yeah, yeah, yeah.

So get on it. Call the guys over at Pastime, get a quote, get set up with them. I mean, it's the only way to have peace of mind for sure.

Back to the episode we wanted to offer a product. We wanted to do VSI with our customers. Right. And we felt like that would be a good opportunity to switch over. There were some things that we felt were missing from our previous reinsurance company, and we thought that VSI would be a good reason to go over to this, go over to Buckeye and they assisted with us getting, getting that set up and deployed on our current customers and our future customers. So overall, we're happy with the switch.

Vsi for everybody out there, it's a, it's a product that you can use your reinsurance. I'm not your reinsurance company. Your RFC and your dealership can insure the loans that you're writing out for kind of catastrophic repossession problems. And it's, it's a great product. We use it. It's something that everybody in the back here paying your business should be using Jason, currently. Now, when you sell a car, are you in making sure that deal is structured right? Do y' all give a warranty up front? Do you sell more back end? What do you do to make sure that loan is going to last long enough?

Doing a $550 warranty charge to ourselves. We include that with the price of the vehicle.

Is that 12 month or.

Yeah, we're doing 12 month, 12,000 miles. We call it a powertrain plus warranty. So we're covering the powertrain, engine trans, and we're doing the air conditioning and cooling system.

Got to have air conditioning down in Florida.

You know that that's something that's kind of silly, you know, if you don't, if you don't include that. And overall, air conditioning can be a pretty simple thing to get fixed, and people really find value in that.

Mm.

Do you notice loans performing better when they have the warranties on there?

So I think the old adage is if they pay for the first 12 months, chances are they're going to pay out. So if you can insure that first 12 months for that mechanical failure of the vehicle, I think you're really doing yourself a favor. Up until 2018, we always sold cars as is, and we would do a 50, 50 split with the cooling system and any oil leaks from the motor transmission for the life of the loan. And it was helpful. But we always found that in the first 30 days, we were pretty much doing a policy repair on the car where we would eat the cost. And this just gives people the incentive to get their oil changed every 3,000 miles as well as they get a peace of mind when they go home. And they show their, their friends or family members this new car they just bought. I don't know about you guys, but my average miles right now at time of sale is 159,000. Now we're doing a lot of trucks and SUVs, full size stuff. And so it's not, not like we're selling four cylinder Kias with 160,000 miles on them.

But.

When you put somebody behind the wheel of 175,000 mile vehicle and you send them down the road with a three year term and $265 every two weeks, you may get some eyebrows from the uncle who feels like he's the, you know, he's the auto professional of the family. Yeah. And he's like, you paid what for this and how many miles? And boy that's, you know, overcoming that can be a challenge sometimes, but the warranty definitely helps.

Yeah. And that's really the bottom line and I think we're all going to be facing that. I was talking to someone the other day and I said I think the US is going to slide more towards the Southern American type model or the Cuba model where it's like odometer's out the window. Don't even talk to me about what's, how many clicks are on the odometer. Talk to me about the shape of the body, the rust and I don't care if it's on its third, fourth or fifth engine and transmission combo. That doesn't matter. You know what I'm saying? Like we've got to put a new engine in it. 200,250 doesn't matter as long as the body's still straight. We're going to fix everything else and just keep, keep, keep it going, you know. So it's almost like that's the reassurance you have to give that customer is look, yeah, you got 180 on the odometer and you're probably going to need an engine at some time in this loan. But I got you covered.

So I want to present you guys, I want to tell you a story then get your thoughts on this. At the last Buckeye event I met this gentleman out in Arizona. His dealership is in Arizona. He has four locations and he buys cars that have accidents, both bad titles and, and clean titles. He has a shop that's devoted to fixing these cars and when he has so the ACV of the vehicle plus recon, he is in a, he is in his vehicles. $8,500 all in. The difference is his odometer says 75,000 miles on average.

Yeah.

Now, as a buy here, pay here guy, I don't really take that like I don't care what that title says. I'd rather know the condition of that. You know, if I'm buying us. If I'm putting a 75,000 mile vehicle out there on the road, I'm thrilled at $8,500. What are your thoughts on that?

Well, there's a, there's a guy who's way successful, more successful than all three of us talking right now in my DPG group. You could combine all of us and not, not hit this guy, former former national quality dealer of the year, who only buys salvage cars and very low mileage salvage cars and does buy here pay here. He's got his own body shop that repairs everything. And this guy, I mean one of the more one of the best people you ever speak to. I mean, just really, truly a good dude. And that's his business model. And he's buying high end, low mileage wrecks, bills them right, builds them the right way, sells them in customer discloses, everything got disclosed, Disclose, disclose. And he's, he's made a lot of money doing it. So there's a lot of, there's like, we always talk, there's a lot of ways to do what we do. Jeff wants to go these high miles cars, which I don't like. And Jason and you, you are doing that, you know, and I. But you're right. You may have to put transmission, you may have to put a motor in it. And is there any difference in doing that than actually, you know, putting a front clip on it? Maybe not. Yeah.

I don't know.

I like miles better than, I like low miles better than miles.

Yeah.

And I like a newer car better than older car.

Yeah. And if you've got the resources to have a body shop and a frame machine, you know, you're going to be straightening a lot of frames and you're going to be doing a lot of body work and you got to make sure you're getting the right salvage title, you know, or rebuilt title and not the wrong ones that are coming out of, you know, the deep waters of Texas or something. So there's probably. But yes, definitely, you learn that. But for sure, from a buy here, pay here standpoint, my retail price on a clean title is pretty darn close to the retail price on a salvage title. Right. I mean, the cars put back together, the title just has a brand on it. Not that it matters because when you're done or when you're sick of this car, you're trading it back into me anyways and I'm going to upgrade you into something better so, you know, you're never going to see the title.

I think there's value. I mean, I think there's value to the customer if it's done right. You know, done right, it's got to be done right. You've got to see why everything you do in that situation, not that we don't have to either. I'm, I'm not ready to get into that salvage car business, but I know somebody has made a lot of money and has done it, so.

But Jason, I think your bigger point is how do we make reliable transportation affordable?

Right?

That's really the answer. You're trying to get someone a 75,000 mile car that they could still afford because, you know, regular title, there's no way you can afford that one. And I look at the higher miles, okay, now you can actually afford to drive this body style of a, you know, Hyundai launcher or something.

So it goes, it goes back to Jason's point about, you know, the car matching the customer you have. And if you want that hiring customer, a nicer car is going to probably get, you know, get you a better customer. I don't know, you know what scares me death about that, Jason, and I want to know if you've been dealing with this this year, but I think hiring body technicians is probably the hardest thing on the planet to do. Even, even harder than hiring a regular technician. Do you do any body work at your shop? Do you, you have to hire any?

Nope. We, we just bought a shop close by to the dealership and that was the goal, was to find somebody that could come and run a body shop and a paint shop for us. But we, you know, we promised them a couple thousand dollars worth of work every month. But we're not affiliate, you know, we don't own you. You rent from us, we're going to give you a lot of work. But at the end of the day, you have your own tax ID number and you know, there's no affiliation as far as the ownership of the business. We've continued to expand our garage. We went from eight lifts to 13 lifts. We have eight technicians right now from A to C Tech. And we understand that piece of the business because we've been doing it so long. And I kind of get to thinking like, how scary is the body and pain business? Could you hire the right guy if you gave him the right working conditions? And you gave him good hours and you gave him good pay.

Sure.

Just like anything else, you'd learn it. I think our problem is we just don't know where to start and we don't have the appetite to, to go in there right now and do that. But we're doing more body and paint than we've ever done on these clean title cars. So.

Yeah, sure. My dad runs our body shop and it's. Yeah, we had a technician. He, he left last June, I think. And so now it's just my dad and he, I mean that's what he likes to do. He, you know, he really likes to paint and sand and that's fine. I never ever want to touch Bondo in my life. You know, I've done it before, I don't want to do it again. And you know, we've been trying to hire someone back. The experience, it's a different experience to learn body shop work than it is technician work. So you know, I, I read an article the other day about how, how long the wait was at most body shops in America. Like, I mean it is freaking three weeks to get a, just an estimate and then it's like two months to schedule it in. I mean it's, it's insanity.

But I think that's actually swaying the insurance providers between totaling a car because they don't want to pay for the rental car for two or three months. 100% is well.

And they know that they can total it out and go sell it for twice as much in parts. Yeah, of course. As buy here pay here. Those of you that have full coverage insurance and aren't just exclusively a CPI product, but we battle that all the time, man. Like hey, they're trying to total it out. I got to see pictures, you know, I got to see this first. Like we're not going to agree to a salvage or a total unless this.

Thing is really toast, you know. And back to that point about competing with other dealers on these clean title cars with low miles. I mean the, there's this book called Blue Ocean Strategies and it talks about red. A red ocean is full of blood from your other competitors. So a blue ocean is a clear body of water that you're basically swimming in by yourself. Right. There's no sharks, there's no things attacking you like your competition. So when, when we step out into that 155 plus thousand mile vehicle, we're competing with so many less dealers than everybody trying to buy that 140,000 mile or below car that still qualifies for a bank or a finance company criteria. So, you know, I think when you, when you step out of that 155,000 mile barrier that so many banks and credit unions and finance companies set, you're competing with so many less dealers with that higher mileage vehicle.

Yeah, that's an interesting takeaway, I think, is that using that red ocean, blue ocean is that we do need to start thinking outside the box because it's getting harder and harder to do what we do. And if we keep doing that, and I'm not sure there's any growth potential, but if we could see, if we could see a way to go in the opposite direction everybody else is going, I think there's money to be made and there's longevity in this business. What you think.

The blue ocean, in my opinion is, I like Jeff, what you said about this South American or Central American ideas of is the car sound, is the motor and transmission going to perform for the life of the loan? And I don't know about originating loans with 220,000 miles on. Again, like a four cylinder Korean or domestic car, I don't think that's going to really work well for the model. But are we looking at maybe doing shorter terms on cheaper cars just to keep that cash flow coming? Are we looking at. Everybody always talks about bumping out terms, you know, and the whole idea to buy your payer was like two to three year terms. You're in bed with the customer for a short amount of time. But I agree.

Yeah, well, everyone stretched them out.

But.

But guess what? That 70,000 mile Korean car is already on its second engine. So what's the difference, you know what I'm saying? Like, so what you're going to do a third engine and now getting the availability of these things is a whole nother story. So that's where the salvage thing becomes scary for me because you're getting the front end for a, you know, Hyundai launcher or something. There's just certain stuff that's just not out there. So if you're trying to rebuild all these things from parts, good luck because I'm trying to rebuild barely anything from parts and they're impossible to find.

So.

So yes, I get that this all breaks down because I cannot find the engine for my Hyundai Sonata.

Yeah, good luck. Well, Jason, we appreciate you being with us today. Jeff, you got any parting words?

No, that's great, man. We can have these conversations forever. So it's just like dealers getting around John, about, you know, our struggles, our headaches. But it also opens up your mind. You know, sometimes we try to challenge those things. So when we throw out crazy ideas like this, you know, carry some salvage, do some high mileage, stick to low mileage, do all jeeps, do all electric cars, whatever it is, we're just trying to expand people's thought process and kind of break down that paradigm of what you think you have to be doing what you think the buy here, pay here model is. You know, there's a, Luke said it earlier, there's a million ways to skin this cat, you know, so get some new ideas.

Well, let's get going. Let's try to sell some cars. Let's, let's go swim in some blue ocean and yeah, we're going to see.

You guys April 11th at 1:30pm for Jason's session on what makes a good deal.

Thank you, Jason.

Thanks, guys. Have a good day.

Dealers helping dealers. Please leave us a review and subscribe the independent dealer podcast.