#219 - What We Learned From BHPH United

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. Luke, we are a full solid five days out of buy here, pay here United. We had a great time down there in Las Vegas chit chatting with a bunch of great buy here, pay here dealers. You recovered?

Yeah, finally. I, I've been traveling so much, I just, I didn't know what day it was, what town I was in. So glad to be home, back in the dealership, trying to iron things out that we've learned. And it's been a busy week of training and getting people back on the right course because there was a lot out there, man, you know, from, from getting cars ready and talking about service to buying cars, all the way down to the changing underwriting and you know, we talk about when you go places and you come back, you really shouldn't do wholesale changes. But we've already been working some of the process, new processes and we were able to come home and fine tune a little bit and I think it's moving in the right direction.

Yeah, it's really, really great. And to preface this whole thing, thank you everyone who came and said hi to us and talked to us and of course Luke and I being around 300 other buy here pay here dealers is like when we're just like a pig in a frickin sty. Like that was just great. It's so much fun to be around other dealers. We are, I mean, really the best business owners, entrepreneurs on the planet are used car dealers. You know, I mean, we're scrappy, we adjust, we find ways to make it work. We're out there. It's where the pavement meets the road. You know, it's not always sexy and flashy and fancy, but like, you know.

I often wonder about that. You know, we are essentially, we're so much different than a lot of other retail people because we essentially have to manufacture our product and then we have to source it, remanufacture it, then sell it, then lend it, then collect it. I mean, there can't be anybody else doing the amount of all the moving pieces and what we do. There can't be another, you know, retail. I mean, I'm sure there is, but you know, retail company does the things we do. Yeah, it's hard.

There's not many. I mean, you think about it, if you're going to, even if you try to finance, you know, mattresses or jewelry or something, these are coming out of the box. They're. They're pre done. If you're a new car dealer, you're getting things from the new car store, and you just have to sell it, and then you're servicing a new product for sure. Our niche is. Is tough, and we're continually adjusting, and we wear every single hat. That's what's so interesting about these conventions is we're talking about sourcing, we're talking about reconditioning, we're talking about marketing, we're talking about sales and pay plans, and we're talking about, you know, from a buy here, pay here standpoint. Now we throw in everything about collections and repossessions and, you know, legal issues. So really, hats off to all of us used car dealers out there. I think I just want to pat myself on the back, you know, coming back, having a little bit of a slow couple weeks here at the dealership. You know, always kind of questioning your choices, but, man, it's a lot of fun, and we had a great time in Vegas. So to get to the point, we're going to share with you some of our top takeaways, things that we took back to our dealerships. And like Luke said, we always try not to come back and just, like, stick a fire hose in a teacup when we get back here. I definitely recommend all dealers to kind of pump the brakes, because when you go to your first couple conventions or 20 groups, you have such a page of notes that you want to just come back and just tear up the whole place and rebuild it from the ground up. But that can. Often your employees are always, like, running for cover when you get back from a convention or something. Oh, for sure.

Especially when you take somebody with you, too, and it's, you know, and they come back fired up. There's never, you know, people who've never been to the convention. So, yeah, it's pretty awesome. You know, Jeff, one thing we didn't put on the list, but just still the talk out there when it comes to sourcing inventory, that, number one, it's hard. Number two, that there's not enough out there, and number three is let's just talk about sourcing from the public. You know, I'm trying it, Jeff. I think you're trying it. It's not easy, right? And. And what I found that there's so many other people out there trying it because, you know, you're trying to. What I found, you're trying to beat people to the punch to. To source the inventory, and they already have offers from Carmax from Carvana from your. Your local, you know, Toyota store. They've got all these freaking offers. And if you don't get to them quick enough, or if you do get to them quick enough and their price was great. They've already got offers price. It's hard. And I'm not sure I have the. I'm not sure I have the ability just to stay focused on it. What are you doing there?

So what's interesting is, so I just barely. Two days ago, I sat down and I looked at every car that I bought in 2021, and I have a report set up that will pull up my source, right? So I look at my three main sources, which are, you know, auction, backlot, private party, and then I excluded trade ins and repos because those are kind of fake. So then I went through each one of those, and I look and I say, okay, what is my average recon for all those cars? And then what was my all in cost to retail, which is book. I just took, you know, book value. I didn't say what could I retail those for? Because obviously there's some. Some real outliers in there. When you get into the cheap cars, of course, you can sell them for way more. But anyways, so what I'm trying to basically compare is, am I getting a cheaper car from the public? Am I putting less money into it? And so when all is said and done, am I into that car in a better position compared to retail? So what I have found over the last three months for me is, yes, I am putting less money into the cars that I'm buying from the public. You know, my recon is about $500 less, which for me is about a third less. You know, I've typically put about $1,500 into a car. My stuff I'm buying off the street, I was putting about a thousand into it. So. But I'm also overpaying for those cars a little bit. So at the end of the day, yes, I'm still into those cars the exact same amount as I'm into a Manheim car or a backlot car, something that I'm buying from an auction. But my argument is I'm spending less time in recon. The turn time is way faster. Right. Because these things only need a set of brakes and nothing major. They're not bogging down my shop.

I'm only spending 500 on those.

Yeah. Also, the cars, when I looked at the list, they're in demand cars. These are cars that were real gems. And I'M not going to find them at the auction. So I still think that holds up. Also, we'll go over this in a future episode. But man, I've been putting PSI on every single car out of Mannheim and I'm sending back one out of four or I'm not even taking delivery on one out of four.

I'm not even going to go down this route with you because I'm going.

To get the math for you because I know you don't agree, but I'm going to give you the math on this. So had I just taken all those cars in from Mannheim and I had not been PSI ing them and sending back the real junk, my recon would have been through the roof on auction.

Yeah, I just.

So. But back to the bigger discussion of I think you have to treat that buying from the public. It's a business. And that's what's funny. It's not a guy. It's not just your owner going out and buying a couple cars on a Friday morning. It is a full time job. So if the economics work out for you to have somebody full time in Facebook Marketplace, in your local listings, visiting people, having them come to your dealership and create it like a business, you know, that's what I think you have to do. Yeah.

I mean it's a true vehicle buy in center with salespeople and their outbound sales people have to know cars. You're so right, Jeff. It's a process. It's not somebody you can take from your dealership that's going to do sales. And this, they can't do it. If you're going to truly make this work, it's got to be one person, maybe two people, depending on how many you're doing. I think you possibly even need Kelley Blue Book Buying center to really push a lot of that stuff to you. We had so many people come up and talk to us about this because they, you know, we're doing it. It's just, it's not something you can do half heartedly. And if you do it half heartedly, you're going to get half hearted results. And I think I told that to somebody that, you know, I started out having fun with it and then it got aggravating because half the stuff on Facebook is scams and the other half on all the other sites are priced way too high. And so then you're just kind of throwing your hands up at the end and you're tired of. Tired of wasting the time doing it.

Yeah. And so what I'm going to do is I'm making a bigger commitment. The guy that I hired that's going to handle a lot of the car buying for me. We have a dot com that we set up, and I'm trying to drive inbound leads, right? So kind of like the Kelley Blue Book buying center, which I know I can't compete with, but on a smaller level, I can run Facebook ads. I can run things and try to draw inbound people that will go to my website, my.com, submit their car.

And yeah, we've done that.

My guy can follow up on them. So two. Two ways. Yeah, Full on buying center, getting the inbound leads, but then also having the time and the energy to run out and chase those outbound guys. That might be a good steal.

Yep.

What. What are the notes you take away, Luke?

Yeah, we probably talked about this too much last week, but it's underwriting, and it's about speed of underwriting, Jeff. And what data do we truly, truly need? And how can we get that data? And how can we get it fast? And how can we get a fast approval? Just think that every time someone logs onto your website and submits an application, they're there for one reason, right, Jeff? To buy a car and you get approved. Right? But if they sent us an application, they probably sent seven other people applications, okay? How quickly can and how painless can we get an approval for that customer? And that's something. I believe that. So I started digging into the data of. All right, how many. How many true applications did we get last week or last month? And we took the numbers, and let's say we had 140 applications, right? And we were able to deliver 28 of those. 143. Well, how many did we. Did we actually have approvals? And what was funny is we had 35 approvals. So I said, okay, well, how many not approvals do we have? Our turndowns. And it was like 50 something. And then we had all these conditioned, conditioned and not quite approved. Well, my opinion is the reason they were not quite approved is because they went dead. Somebody else approved them faster. Or we started asking for so many documents that they just threw their hands up and walked away. And so we've got to make it easier. And that is what I came back this weekend. We're exploring some new data that we can use to really streamline that. It's essentially a driver's license, your last pay stub, and the bank link. And if you can do that and everything looks okay, we're going to Give you approval within five minutes.

So if you have the bank link and you see their deposits, you really don't need a pay stub.

You don't need a pay stub. The only reason we got the pay stub was to show that you were there last week. Right.

So here's what's interesting to me is two things is you're talking about the speed of approval, but you're also talking about the maximum approval. And I think sometimes that's where us independents can get tripped up, is, sure, I can get you approved for a car, but I don't. I think you're kind of in that gray area. I don't really want to take a big risk. So I'm only going to prove you for the $8,000 car. Whereas the dealership down the street has got them approved on the $12,000 car, and that's where they're going to go. They can afford the $12,000 car. I just don't know it because my underwriting model is not sophisticated enough to know that I can approve that customer for a nicer car than what maybe my internal gut thinks that they should have. Right.

Everybody listening out there. And I was, I was not a fan of this for years, but I've changed in the last year. If you are not using a scoring model that is automated and you're still using your gut, you are missing a lot of deals and you're approving a lot of deals that probably don't make sense. You got to get away from your gut. You've got to use what the data tells us. But we also have to have the right data as well.

And what we talked about last week was verifiable data, not subjective data. Not what they say. Oh, I've been here for 10 years. I've been on my job for, you know, six years. It's like, no, you've been in the same industry for six years. You. You left this job and came back.

Like, which is not a problem.

You're part time, you know, so we're using some of those numbers. Well, we can't verify that. So it's all about it in our underwriting model.

Verifiable, good data.

Yeah. And then you're also able to get your salesman to focus more and spend time on those good ones. Right. So if I can have an APPLIC come in in a five or ten line application, I can decide whether or not this customer is an upper tier type customer or someone I really want to spend time with, then my salesman know who to really focus on quickly. If they come in on a Monday morning and have 20 applications in the queue, they can jump on the top four or five that are most likely to happen, right?

Yep, A hundred percent.

And not fall down on trying to get a square piece to fit into a round hole.

Verify the data you have and roll it.

Yeah. You know that makes me think when they talk about data, I know we talked about GPSs last time and so I've been thinking a lot about that and if I'm going to go back to a wired GPS only for the reason that I can now get better mileage reporting.

So I mean, you know, past Ahmed, they're a great person in the industry. They the vendors that really help you out, give you, give you some of this data and pass time to sponsor buyers now. But I've been using Pastime for probably for five or six years now and the wired is the way we've always gone. That's our first line of defense is wired gps. And the data is out of this world, man. And we've only been using wireless for a little bit, but we use it in tandem with Wired and I don't know, is the wired data that much better? Jeff?

I think with wired and again I haven't dug in it too deeply. It's on my to do list. You get real time odometer or more accurate odometer.

Right.

Because you're called this constantly tracking, it's a lot. Whereas with the wireless it's only checking in, you know, once a day. So you don't really know what happened in between those check ins. So using some of that GPS data is really interesting to me to set up more alerts and alarms to high mileage drivers. I don't know what I would do with that information. It's not like I'm going to bring them in and rewrite them but, but.

Anyways, your collectors can use that, that information to know how far to let a customer go, you know, and Pastime, they'll set up those reports for you because we actually did this when we got back and if you know, customers hit a certain amount of miles within a certain period of time, if you get a report on that, you can, you can send it to your collectors and say hey, just to let you know this, this customer is driving a lot. And so either they've got a job using their car, so if they tell you they don't have the money to pay, they're wrong. Or you can be quicker to repossess.

A car or they Ain't got no job because all they're doing is driving.

Yes. So. So if you do see somebody abusing something, you have a tighter leash when it comes to collections.

Yeah.

So I think that's where the data really makes a lot of sense.

Yeah. So anyways, that's our plug. That's our sponsorship for pastime. Guys, if you're not using GPSs and you're in the buy here, pay here and retail got to do it. Well, anyone who's not anymore, I saw.

One of our friends had a truck sold off their lot last night. Yeah, I wonder if they had a GPS in it.

Probably wouldn't have posted that. If he did, he'd already know where it's at.

I'm so sick for him. So sick.

There is an inch. Yeah, that's an interesting argument. You know, you put your GPS's in at the time the car hits the lot during the recon process, wire it in. Especially if you're exclusively buy here, pay here.

We do.

No big deal. Everything's going out on a note. You know, mine's a little. I kind of pick and choose. But with today's world, man, that's, that's a, that's a large piece of mind just to have a GPS installed in every car. And even if you never have to use it, but the word gets out in your neighborhood, in your community that you're a GPS dealership, that's not going to be a target that people are.

Going to look at and may even save you some money on garage liability too.

You know, interesting, Luke, a little bit about CRM. We go back to underwriting, you know, kind of, kind of learning that the, the lines between underwriting and CRM and kind of becoming blurred. Right. I mean, it's, it's not even a, it's not even a thing. I don't know if CRMs really even exist anymore.

So, you know, big retail establishments need a very robust CRM with service departments and things like this. You need, you need the CRM because you need to be touching the customer. The problem is you've got to have somebody to manage that CRM. So that's another manager. Then you have to have your salespeople doing it properly and you have to have your service department using your CRM properly. So most of us are too small for that, Jeff. And when it comes to buy here, pay here, people buy cars quickly. So when they send that application in, you probably have a 7 to 14 day window to get that car, get them approved and sold and after that, you're probably calling and wasting their time and you're wasting your. You're wasting your salespeople time. So I don't believe that CRM is the future when it comes to buy here, pay here. I think it's a integrated model of a CRM and approval software that sets tasks and allows you to text through them and call through them. And that really gives you more or less than a full CRM, but more than just a phone, you know, a phone tree or, you know, whatever.

Yeah, yeah, that does make a lot of sense. And I've had that philosophy for a while, you know, creating these endless tasks for your salesman to email and text and call and just keep hounding these people for the next six to 12 months. I haven't really seen that make a lot of sense. Yeah, yeah, you work the lead and in seven to 12 days, it's dead. And then guess what? Pick that lead up again in 24.

Months, you know, or 12 months.

Yeah. Remarket to them when they're back in the. In the. In the market for a car through your outbound sourcing.

And honestly, the most important data you have is. I can't remember the guy who we had on here, maybe Andrew street, maybe you talked about that. What, first data? The first degree data or whatever it was. It's the people you currently have as customers and the people you sold to before. That data is so important. Download it out of your dms, upload it to Facebook and use it to market that way. Have mailers once a year. All these things are twice a year. All these things to keep the people you've sold and the people you currently have on the books engaged is what we really have to do.

Luke, anything else that stuck out to you from last week?

That was my list there, Jeff. I picked three things and nailed them.

The only thing that. The only other thing I brought home for me was the importance of processes and procedures and having accountability in your dealership. I'm going to take a more concerted effort to have kind of a controller or a comptroller or whatever you call them, to look at every expense, to look at every credit card charge, to reconcile those to the parts management system, to reconcile those to, you know, your vehicle expenses. You know, I think once you. If you grow past three to four to five employees and you start getting stuck in that 10 to 20 area where everyone kind of has a specific job and no one's job is to really kind of look at each individual expense and you have so many transactions coming through that, it becomes kind of a big blur and a big nightmare. You eventually have to kind of rein it back in and say, hey, I need some really tight policies to make sure that things aren't slipping through the cracks.

Well, the one concern I have there is you got to hire someone that knows how to set those policies up. Unfortunately, I'm not smart enough when it comes to a business, to the accounting side of business, to know how to set up a process where for every part that comes in, make sure it's put on every ticket or gets returned. Yeah, that is something that it's.

Well, what's happening is when you're small and you start getting to that mass capacity, everyone starts cutting corners. Right. So you start ordering parts and you're not documenting things and you're not tracking core returns and you're not, you know, looking at every invoice and allocating it to each car because it's just a time thing. You can't do it. So it's very intuitively hard to say I'm going to take a step back in efficiency to be more effective or more detailed in my accounting, you know, so it really is. You have to go to the guys and say, hey, you know what? Yeah, I either need to get you a helper or get a parts manager or have a comptroller that's going to come in and do it and they're going to have you go through new policies. When a part comes in, it's got to be checked in through the system. Don't just grab a receipt and throw it in the box, you know?

Yeah.

You've got to put it into the system and it's got to be checked off as received. Because now when I go to do a reconciliation, I better have, you know, 20 liters of oil sitting on the shelf and I better have a receipt for a core return on that transmission.

Leaders, are you. Did you all of a sudden move to Europe?

Yeah. What did I say?

Leaders.

Yeah, we do everything in leaders. In Utah, I run on the metric system exclusively and Mountain Time.

Who.

So. But you know what I'm saying, like, you really have to take that step back. And that's. That's something I'm trying to wrap my brain around and then build out those policies because guess what? I don't know that any has them. The big guys probably have them, but they're not.

I'd be willing to bet you they still. I'd be willing to bet you they still lose 5% of parts. Yeah, I mean, I think I don't know. You know, when you're not charging a parts markup.

Yeah.

You're losing so much money.

Well, I happen to go through an invoice from a parts supplier the other day, and I just real quick took a look. I'm like, wait a minute, we got charged twice for the same transmission. What happened? And I go, oh, yeah, they were supposed to credit that for us. Like $2,000. Like that just. I almost just cut a check for an extra $2,000 because I didn't look.

Or the $500 cord has been sitting in your shop for three weeks.

Yeah.

Or then when you send it back, it doesn't get credit back anyway.

Yeah. Incredible. So anyways, kind of realizing that, yes, it does take time. Yes, you do have to slow down and it may cost you some money to save money. Eventually you get to the point where that's a very, very important thing. And if you as the dealer owner don't have time to do it or the brain power or efficiency, you really do need to find someone who can or build out some processes and then teach it to somebody and have kind of division of labor and division of responsibilities, so there's no sketchiness. But sure, Luke, that's a lot of stuff. I mean, yeah, I got a couple other things that I went over, but we won't get into it because I think that's a lot for dealers to kind of process. And it's one thing at a time, one step at a time. Again, we've say this a ton. I've been to dozens and dozens of conventions and Dozens and dozens, 20 groups, and I'm still bringing back notes on crap that I should be doing for sure.

And let's give a shout out to Buckeye. You know, Buckeye dealership consultant is someone who puts their money where their mouth is. This conference was probably one of the. Probably the best conference we've ever been to. And it's because of visionaries like Rob Fox and Sean Peterson and Jason Gosling who did this, along with all the other vendors that put this on. But Buckeye is someone. We talked about reinsurance, we've talked about psi, which Jeff is giving his money to Manna for some reason on that VSI and all these things. But Buckeye Dealership Consultant, not only do they to have those products which everyone should use, but they also given us all this, you know, this great content. And I think there's more to come with. With their dealer performance groups and. And supposedly they're building out a. A training module so much to come from Buckeye.

Yeah. Great, Luke. See you next week.

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