#228 Dealer Panel Q&A Live From NIADA 2022

You are listening to the Independent Dealer.

Podcast with hosts Luke Godwin and Jeff Watson.

Hello and welcome to this episode of the Independent Dealer Podcast special edition coming to you from Niada 2022.

This is our fireside check.

There's no fire sitting beside each other.

All right, so introductions. Jeff, what are we doing today?

Yeah, we have got a couple of great dealers here. First off, guys, if you're listening to the podcast or you're watching it on YouTube, you missed out on a great convention. We're having an awesome couple of days here with some great, great dealers. Hopefully you've listened to all the other podcasts and some of the information that we put out. If you haven't, be sure you're subscribing. You're on there.

Review all those great things, sending emails to something or another.

Tell us what we're doing wrong and right. Mostly what Luke's doing wrong. I like those emails.

Yeah, yeah. I'm getting censored, I think, by the FTC or something.

Maybe.

Let's do some intros real quick. Luke, who do you got to your right? Okay.

Good friend of mine, a North Carolina dealer, Tracy Myers, tell us who you.

Are and what you do.

My name is Tracy Myers. I have a retail store that focuses primarily on subprime special finance. We've been. I'm fourth generation. My great granddad started our store 104 years ago this year. I bought the store for my dad in 2006. I can't believe it's been that long, but time flies, right? And we also have a buy here, pay here store. And we're getting ready to switch that over to lease here, pay here, but these guys definitely know more about that than I do. I've researched it for about two years. Talked to Nick a couple years ago at least, maybe longer than that. And I usually pull the trigger fairly quick, but that was a really big decision for us. But retail store sells 151 cars a month on average. And we run really, really lean with team members so they can make the most money possible instead of flooding the floor. That's a firm belief of mine. And that's why I believe that's why one of the reasons our turnover's so low, buy here, pay here store, which is someone asked me how close it was to the retail store last night and kind of looked and waved. We're quarter mile. If it were flat, we're in North Carolina, so it's like this. And if it were flat, we could see the buy here, pay here store. Different name different business. We don't send customers there from the retail stores operating completely separately. We tried it the other way. It didn't work. And we can talk about that later.

If we need to.

But that's my story.

I'm sticking to it. All right, thanks, Tracy.

And next to my left, I guess my left is Nick Marcosian from Utah. Tell us what you do.

I operate primarily a lease here, pay here dealership. We've been in business for 22 years and converted to lease or pay here in 2010. However, at that time, we were doing 80% conventional subprime retail deals. And at just as long little as five years ago, it was about 50% retail. And now we average around 240 units a month, and only about 20 to 30amonth are retail. The rest are in house leases. And we just opened up our fourth location in April, and I closed on number five just a few days ago. So I don't even know why I'm here. I should be there trying to figure all this out.

That was what I was gonna ask. What are you doing here?

Putting up desks and hanging signs and a large recon facility.

Yeah, I opened up. There's a county out in Tooelet, and we're right by a brand new Carvana facility where it's like right across the street from us. And it was this guy's man cave. He had World War II tanks in it. So it's like a brand new facility. He liquidated his stuff, and. And it's just perfect for a large recon center. So all of our vehicles will be reconditioned at that location. And then we're converting our existing recon center into a warranty center.

Yeah, I want to talk about that some more. But first, Dan, introduce yourself.

Hi, I'm dan Grosvenor from St. Louis. Been in business for 25 years this month. Actually just opened up our second location on Monday. So why am I here too, as well sell about 100 cars out of the. Out of the main location. So I'm kind of following in Tracy's footsteps. We do about 100 cars out of the retail store. About 10% buy here, pay here because the market on subprimes have been so, so, so darn good. But I really believe that we're kind of in that edge of with. With things pulling back. And maybe we'll talk a little bit about that on. On, you know, buy here, pay here, lease here, pay here. I'm also switching to leasing. August 1st. Started out of buy here, pay here 25 years ago, when you buy a $500 car and sell it for $500, down for 29.95 with no interest on a card as how you figured out what your balance was. So, again, we're switching to leasing Aug. 1 at the new store, and they just decided to be here.

Thanks, Dan.

Great.

So, Luke, introduce yourself. Yeah. For the folks that know the independent dealer podcast. Hi, I'm Luke Godwin from Godwin Motors in Columbia, South Carolina. We have been in business for 37 years. I am third generation. My grandfather was a Ford dealer. My dad started his store in 85. I've run it full time since 01. I'm old too, Tracy, so I would not pick it on you. We sell. We're primarily buy here, pay here. We sell five or six retail cars a month, and then the rest 30 or so or buy here, pay here. We've been doing it forever. That's. That's what we do. We have retail service as well as warranty service as well as policy service and recon service. So kind of like everybody else up here, a little bit of a separate facility. We can talk about that, too. And who are you, Jeff?

And if you don't know me, buy here, pay here. Dealer, 80%. Buyer, pay here, 20%. Retail goals, about 50amonth. Also closed on my second location tomorrow. I sign on my second location tomorrow. So I wanted to wait till prices and interest rates were at their absolute peak, and then I was going to sign.

Good old, good old Jeff.

Always bad decision. Who knows? Time will tell. That's where we're at. So, speaking of, that's the first question I want to have for you guys, because it interests me as fellas that definitely have your pulse on the industry give me advice. And other dealers that are in a situation of what to you is like that canary in the coal mine or what, really specific, like KPI numbers are you watching daily, weekly, monthly? That would say, hey, I'm healthy. I'm going in the right direction. We're still moving forward full speed here. Or, hey, this has gotten out of whack. It's time to pull the trick. Like, pull the brakes. Let's watch out.

Let's go from each one of y'.

All.

And that's a great question, Jeff. Let's just say this is what we monitor every day so we know if something goes wrong.

Oh, wow. So every day we look at contracts in transit daily. That's a little different than your question, but we can encompass the two contracts in transit daily on the on the subprime or the retail end, of course. Delinquent, owned by here, pay here daily. We have those conversations. Aging inventory, which we don't have a problem with. So we're very fortunate with that. We've been dialed into that pre Covid. We were dialed into that, and it's been zero issue since COVID so. But I put that caveat in there because I learned a long time ago that that inventory turn is so important. It's become more of a challenge with service issues, delays, whatever you want to call them, parts recalls. Nightmare for everybody, right? We also have a service facility we're adding. We're building five bays across the street. I'm landlocked at my retail store. Interstate on one side, an intersection on the other, and a bingo that my dad owns. And the rent's so good, I can't ask him to sell it to me. So that will be mine eventually, I would assume. But knowing my dad, maybe not. Another story for a different day. We get along great, by the way. That's not a slam. My dad, he's just a shrewd business person, as he should be. I learned from one of the best. And we're building three more bays at our existing facility. Is squeezing us for space for cars that are being delivered. But just doing easy math, the service will make us more money if I've got to rent land, additional land somewhere, even though I don't want my cars off site. If you don't have a service center, which at one time we didn't, you have to have that. You're sending your cars out anyway, and that's scary. So if you don't have a service center at the other location, which I'm assuming you will, but if you don't, you know, we used to go, as my dad used to say, we lay hands on the cars every day. So if there was something at Jim's and something at Bob's and something at Jerry's service centers, we actually had someone that would go touch those cars every day, which was smart.

I think what I heard Tracy say here is inventory's hurt.

Inventory turn, that is.

And it's so. You're so right, because the first thing you will notice when it starts to slow down is your inventory turn. Because it will go from, you know, some of y' all out there might be running it 12 to 14, sometimes 16, right this second, if that thing starts to drop, you know, to nine and then to six, and, you know, something in the market's fishy.

Right?

Yeah. Nick Any other numbers you are watching or indicators you would say would.

Could be red flags where I would put on the brakes. Yeah, well, the brake line in my life broke and the fluids like, I don't. My brakes don't work at all. I'm just go, go, go. It's just my DNA. But that being said, I think, you know, this is every, Every recession is unique. Every credit cycle is unique. This is a really strange one because jobs are so plentiful and unemployment is so low. What else makes this one just really unique? Certainly not unique. You know what?

Demand's still really high.

Demand is still there.

And people have had cash, a lot of cash on the sidelines until probably the last, what, two months, three months?

Yeah, I think so. You know, but I've heard Bank, Jamie Dimon with Chase bank said that we're six months left of stimulus and then there's going to be a hurricane. But the other unique thing about the situation we're in, I think, is our customers have a lot more resources. There's a lot of side gigs. You know, there's Instacart. I heard some of our customers make 200 bucks in a day on this new Instacart thing. Doordash, donating plasma. I told my collectors that they all need to go find a sideshow so that they can say, I did it, so can you.

So you're encouraging your staff to give plasma is what I just heard.

So that's a good. I said if you're comfortable with it. If you're comfortable. Because I don't want to give plasma myself.

No, no.

I don't want people to do something I'm not comfortable doing. Sure. But, but in regards to this unchartered territory and how it's going to impact our business, you know, the normal credit cycle is you. You see subprime buying, deep buying a lot of people, and then something happens and rent rates go up, they tighten up. And you see customers come to our dealership. But I heard my CPA something say, something very interesting yesterday when I had lunch with him. He said this is different because they're getting their money from different sources. Securitization. And what that means is when they securitize, bundle up those loans and sell them off to the market, it's no longer on their balance sheet. It's no longer a negative thing on there. I mean, I'm not any expert and I'm, you know, quoting him, so don't take it. But, but, but, but the point is, is we may not See, that typical pullback that we saw in the past, they just might securitize more and keep. And keep less paper on their books.

But then the securitizations go bad. That's what happened in the housing market.

Right.

That's true. But you know, I think historically speaking, subprime papers perform pretty dang well, you know, in good, bad, I mean. And so I just think, I think in the near term, you really can't hang your hat on that. I think perhaps if what you're saying comes to fruition, you could see that change. But I think in the near term, I don't think you're going to see the pullback that we probably saw in different credit cycles.

Definitely a different time, definitely different. Dan, what are you looking at?

So as far as my KPIs, well, first of all, to kind of go back to what Nick was saying, I play both sides of the fence, you know, kind of like, kind of like Tracy does. You know, we've got our retail over here and we've got our in house over there. And so if, if they continue to give us what we're. We're getting on the, on the subprime indirect. Right. This, this month, I looked it up yesterday. We're at $6200 a copy on our retail deals. What's. How the heck do you. I'll keep doing that.

Wow.

As long as they let me do.

It, I'll do it.

That's a huge number.

Right.

And so that, and a lot of guys are. So it's not like I'm that unique or we're that great at it. That's.

You can do it.

But if it does go, you know, start pulling back. So one of the things we look at is what's, where's that gross profit? Is it staying around that, you know, 5,500, you know, low sixes? Once we start seeing that decrease, maybe we change our focus a little bit. The other thing we look at is just overall lead count. We watch that every day. Well, on a weekly basis, you know, what is it, what is it to last week and what is it to last year? Same time and then conversions, you know, are we converting on those leads? Are they coming up to the showroom and just all the way down the funnel to delivery? So those are the big KPIs that I look at on a weekly basis. Another thing that's also really big for us and really a struggle for us right now. It's kind of been brought up as far as the inventory Turn is the number of frontline ready cars. What's interesting is whatever my service department can get through that week is about what we sell that week. I mean, we are selling them off the rack. So again, a KPI that we look at. And also one of my biggest challenges right now is that recon.

That's everybody's challenges. We hear that over and over. We were talking about that this time last year, Jeff, and we are still talking about that. Whether it is getting the parts, getting the techs to do the work, or getting the facilities to do the work. What is your setup like, Dan, when it comes to recon facility at the lot? Not at the lot. What you got going on?

Yeah, so we're going to do all of our recon centralized. So as we add additional stores, everything's going to be centralized at one location. So at our main location, we have eight bays at the main location. And then we bought again, following in Tracy's footsteps, we bought a piece of property about half a mile down the road. It currently has four bays. I got room for two more. And then there's a couple acres next door to that facility that we're considering buying. And again, expanding that, that, expanding that out. But the biggest thing is, is tax another. And that's always been. And it's going to be the problem for quite a while. But another problem that we're having is, you know, the, the pool of cars, it's becoming shallower and shallower. So you've got the parts. The problem is you're having to order more parts than what you did before because again, there's just not. The quality of the vehicle just isn't there as it once was.

Well, that's. Yeah, everybody's having that problem. It's so interesting to talk about recon, how everybody skins the cat because it's a big cat to skin. I think the next question was Jeff, about expenses.

Well, I want to touch on that. I want to get into recon more. But before we go down that road, I'm going to stay negative Nelly because I'm the doom and gloom guy.

Here we go.

Hey, guys, sorry to interrupt the podcast, but we need to tell you about Buckeye Dealership Consultants Consulting.

We do, and we're here at the.

Convention at Buckeyes setup.

Right.

This is the first time we've ever done an ad for them in their booth. But you guys know Buckeye Dealership Consulting. They have reinsurance, they have consulting groups, they have performance groups. They do it all.

Training, reinsurance, everything inside the Reinsurance cpi, vsi, warranty or service contracts, warranties, everything that is anything when it comes to F. And I can be done through your reinsurance company and should be done.

Through your reinsurance company.

And Buckeye is the right place to do it.

Yep. They got a ton of products. They support the industry. They support the independent dealer. Call the guys at Buckeye, get your reinsurance and your consulting going.

Yep.

If we're a dealer, say I'm a small dealer. Right. Which is 90% of our audience. I start getting nervous and I start cutting back. Right. And so I want to start saving expenses. Right. I want to start cutting those things off like Luke did in the pandemic. He shut down all his advertising. Right. You guys want to go back to episode like, yeah, we didn't need it.

50, but we didn't need it is what.

No, during when the pandemic hit. Well, Luke rained it all in March, March of 2020.

I did shut it off.

I'll own it.

I own it.

What things can we shut off? What things should we not shut off? From your perspective, if we're looking at cutting costs, we're getting a little nervous. What would your guys advice be on? Where do you cut back? Where do you absolutely not cut back.

So I never cut back on marketing. If anything, I ramp up marketing, but you know, that's, that's kind of my. My crack cocaine. Every one of y' all just. But it worked, you know, I don't know. Anyway, we can talk about that later. Never cut back on marketing. Never cut back on your people going back to text. I'm not saying it's easy to find text because it's not. But you have to. We had to steal text, pay them the same or more, work them less. So we got a techs from the new car stores in town who are working Monday through Saturday or every other. Every other Saturday. They hate Saturdays generally speaking. So we work them either Monday through Thursday or maybe half a day on Friday or Tuesday through Saturday type deal and pay them. We actually had one ATEC who's turning almost 78 hours a week. He's insane. He's a monster. Very few comebacks. He's legit. Paid him a little less. But his and this is, you know, leadership 101, right. You find out what, what their. What their selling point, what their why is.

Yeah.

And he single dad, three young girls. Never got to see them during school during the week and with the mother during the week. So weekends was his thing. So he gets off Friday at noon. He Gets picked him up, spend the whole weekend with him. He makes a little. He thought he was going to make less money, but he's turning more hours because we're selling cars. New car stores got more of a hold up than we have because we can turn. So I know that went down another rabbit hole, but that's, you know, I want to come back to the tech thing, right? Because you have to be as aggressive with team members as you are with selling cars to customers. And I think we're pretty all always fairly aggressive selling cars to our customers because my whole theory has been if they're in the store, they're not coming back. We know that that's not always the case. But your mentality has to be, they'll never be back. They'll never call back. They don't know your number, they don't care who you are. Yeah. Period. I don't care if they're your cousin, they're not gonna. So we instill that mentality in our team members.

So.

But cutting back, I kind of did the opposite. My dad always said, look, don't, don't jump over quarters to pick up nickels. So I did away with coffee bars and, you know, silly stuff. Looking back at the last recession, it's like seven, eight bucks and popcorn. I'm taking the popcorn machine out of here and you know, saving 25, 30 bucks. So it's not enough where most dealers that I work with because I do some consulting too. But the independent dealers I work with, they are usually staff heavy and that's. We sell 150 cars a month with seven salespeople and they work 43 hours a week, five days or schedule is like. Especially for retail and car business. Retail, it is insanely cushy. What we found out is if you give them opportunity, then they will come in on their day off. And you don't have to ask them, you don't have to make them feel bad on their, you know, why didn't you show up? You know, the way we were probably all raised in the car business, right? Yeah, you have the day off, but there shouldn't be a but there. Don't make them feel bad. Pat them on the back if they do come in on their day off. But if your culture's right, the truth of the matter is they're gonna make it. They don't need the attaboy because they made money.

Right.

If that's their motivator, if time off's their motivator, they're gonna take that time off. Anyway, and our top three salespeople are historically female and all three are single moms. So it's that once again, that why two of them worked at Verizon stores and I stole them from Verizon. They were working 60 hour weeks at the Verizon store and they said they loved it, but now they're working 43 hours a week. Make more money and I would like to think they have more fun because we, we have a fun environment in our workplace. Still haven't answered your question.

You're getting there. Tracy goes out there.

Don't cut back on anything, man. Just go. I'm like, Nick, man, just go. I mean cutting back is.

Yeah, Nick, what do you cut back on?

So tell your accounting department not to buy pens and use. Have the bank rep bring pens in. We've done that. That cut a lot. You know, no more tire shine. $5 in the cars instead of $10 of gas.

Yeah, well that's, that's only like a, that's like a half of a gallon though then.

I'm totally with Tracy. You just, it, there's, it just costs what it costs to run an operation. The, the, I think the biggest exposure is like Tracy said, personnel. And the other thing is frivolous inventory that we bought because we thought it looked cool and, and, or you wanted to beat out that one guy at the auction. That, that, that it puts us at a lot of exposure, you know, especially anything $30,000 plus in our businesses. You're exposing yourself to a tremendous amount of risk on those vehicles. When we're in this, when we get in this contraction, this recessionary period. And there are those that are experts in the 30,000 plus world and you know that better than I do. But, but those are the big ones. Personnel and inventory. Beyond that, it just costs what it costs. You have more of a revenue problem than you have a cost problem. And you gotta look at, I like looking at how much market share I have. I think that's really important. Are you gaining or are you losing market share? And your bank reps have great information from auto count. Your TV reps have.

Let's poll all that information they've got.

They have so much information on what's going on in our market and they are happy to give it to you for free. But I like calling the bankrupts. They have their finger on the pulse of the market and what's going on. And if everybody's busy but you, you know, that's, it's. How competitive is your product? You know, I think you know, I think the days of cost times two plus a grand, and the car in the buyer pay her business are gone. And I think, you know, the buy a two grand acv, get two grand down, and the payments are the profit. If those, if that's your mentality, if that's way you're thinking, you have to think how competitive is what I'm offering compared to what everybody else is doing. And do I have a compelling reason for them to do business with me versus everybody else? Can I answer that question really fast? And can everybody on my staff explain to a customer in just a couple of sentences why they should buy a car from you versus all the other competitors? And if you don't have an answer to that question, I think you got more of a problem than. Than buying. Buying too many pens for your accounting department.

So just throwing this out there and it brings it back to the $30,000 car. And that's not obviously not what we sell, even though it was 15 to 16 and now it's 25 or so. Right. So for the past 15 years, our lot's located on a highway at a busy intersection. So we are fortunate that we have a lot of drive by traffic. Even though I don't depend on the drive by traffic. It's really nice to have. Right.

So.

And we have what I call five points on the lot, or best visibility, five different points. So we will buy and monitor, but we know what our customers want. Right. Our top cars, request not sales, are chargers, Challengers, Yukons, Tahoes. Okay, all right. Subprime cars, right? Wants and needs. Kia Rios, bring nobody into the store. Impalas. Bring nobody into the store. So we have five or six of the point cars, which are probably 35, $40,000 cars. And they're turned every two to three weeks, usually at auction. And if we do lose money, which we haven't in well during all this because values have gone up instead of down. But when they didn't do that, that's marketing expense because it brought in enough customers say, oh, I want that. Then we go through a process, which you have to have a process in place to be successful. Educate. Right. We'll show you how to get that. But you have to start here. We call it down the road motors.

That's.

But anyway, you actively have a bait car. Oh, man. That's a trigger word, sir. We don't bait anyone. No, it's eye candy. Yes, we have eye candy cars. And we will turn those. Now we're waiting. We'll turn those 30 days now, because we can. But back when markets would drop on a $40,000 car like that, two weeks those auction and turn it.

And that's the thing too. So. So right now it's real easy to get.

Get fat and happy, right?

We watched a lot of dealers get fat and happy. And you know, prior to 0809 and so remember this to this day, it was a story that a good friend of mine, he had 150 employees. And so what Their first round of layoffs, you know, things are declining. First round of layoffs. How they decided who they were laying off is they had all their, their, their upper management in a room and they went down their entire roster of employees. And if nobody in that room knew who that person reported to, that's how they lost their job. That seriously, that's how big and fat and happy they got is they had people on the staff that they didn't even know who. What they truly did. So, you know, that's obviously an extreme, but I don't know how extreme is that in what we're seeing. So, you know, I do like the idea of you don't want to trip over nickels. You know, trip over dollars to pick up nickels. You know, don't get rid of the popcorn. But you know, you do need to look at where is that waste. Inventory is definitely a big piece of it. It's real easy to get. Get fat and happy with the inventory because it's not declining like it historically always has. At some point it's going to. And it's going to be on that higher. That higher acv, the cool stuff that maybe you like to have on that lot. You know, be really watching that. That stuff. Another big thing too that's important is, you know, if you're not in a 20 group to benchmark where all those expenses are. Well, that's really a great way through the composite. NIADA has actually done some. In the process of doing a lot of great things with changing the composite. I'm actually the chairman of the 20 Group steering committee. And that's a big piece of that ad.

Is that an ad we know, we plan. No, no, no. We love 20 groups. No, no, no, you're fine. We love 20.

Step outside the boundaries.

No, no, we love 20 groups.

I was just letting Liana know to.

Put in the register sound right there.

That was a marker. Okay.

And then we send a bill over to Bob if you leave.

Yeah, Bob, I thought I was being scolded.

Okay. So I was just wondering when Nia hired me.

It doesn't have to be an ida, but I'm just saying that the composite has gotten better. But the key is that you can look at the categories of expenses in comparison to all the other dealers in the entire benchmail, all the benchmarks. If you've got a red number there, well, that's something you focus on.

That's just so interesting that they, they all went to too much personnel. If you got a redundancy. Yeah, you should have redundancy. You should know what everybody, who everybody reports to because they don't report to. If nobody knows who they report to, they're not reporting to anyone and they're just riding around your car all day. Because I've had that happen before. And then inventory. So I've been trying to right size my inventory for the last couple months and it's really an interesting.

I want to steer into inventory fully and recon. But I wanted to make one more point that you brought up was right sizing. We have an expo hall right there with a lot of vendors and I think that's one thing you can look at during these times. Do I have vendors that provide the same thing for me? Because we have this vendor overlap that's going on where my current vendor that I've been paying forever, they just added this new feature and I'm paying some other vendor to do it. So I've got two vendors that do the same thing and I didn't even know it. So go to the expo hall, figure out where that overlap is. Maybe you can replace two vendors with one that's doing more now because these vendors are all branching outside. My phone system does reviews. So do I need a phone system and a review system or I need one system that's phones and reviews so you can look at those.

Well, one thing I want to add to the expo hall is the other side of that is, boy, there's a lot of shiny, cool stuff out there.

Yeah.

Excited.

Well, I mean, it's, it's just like I gotta have this new whiz bang, you know, and it's only $400 a month.

That's it.

Yeah, yeah.

You sell half a deal, you know, so that's the other piece. We really do have to watch expenses I believe, coming up. I mean, it's, it's, it's, you know, so the other side of that is. Yeah, find some, some things to consolidate, maybe even, you know, get rid of some staff with, or eliminate some needs for some staff. But don't buy things you don't necessarily have to have so easy to do.

So one.

And I like all that. One place we really cut back on is we had a six person bdc. We implemented texting still take inbound. Right. But because you can schedule the text as AI, not all AI, but AI grabs it so you can do text blasts. AI grabs it until the BDR can catch up and they don't know anything.

The AI does the heavy lifting and then installs.

And because it's a text platform. You know, the thing I know you've heard this before is look at your phone. How many text messages do you have that are unread? Probably none. Unless it's like me, my phone's turned off right now, but probably none. And I've got 104,000 emails that are on my phone that I just, I can't delete. You know, I just don't have enough time to delete them all. And I've got voicemail messages I haven't listen to.

So.

And that's not a plug for a texting platform per se. Right. But I know just right off the bat that eliminated. And I didn't, I wasn't looking to eliminate the position. I was looking to bring more leads in and create more opportunity and to follow up with the customer longer. Because we all know what generally happens in CRMs. Not the, the 90 day pluses. They all hate the 90 day pluses. All, all BDRs hate 90 day pluses so much. So I hired one person just to do the 90 day pluses because they're so cold, so stale, so dead. Right.

They could have already bought the repo by then.

Oh, absolutely right. But, but they don't like them. So what, what do they do? They generally skip over them or halfway work them. The texting platform eliminated all that.

Well, and I'm so opening up a can of worms for even bringing this up. But, but it's a whole nother conversation for, for another day. But, but the, you know, you brought up the BDRs. What else can you outsource? What all can you outsource right now? I mean necessarily a third party BDC. Every one of my, my BDRs. Again, can of worms is, is not in the store. They're in the Philippines. So there's a lot of, a lot of the US workers just don't want to, you know, you have to pay them so much money to do this job that they don't want. So what can you, what, what menial tasks can you outsource for much less that, you know, it breaks my heart to actually have to do that, quite frankly. But if the American worker doesn't want.

To do it and you can save.

Money doing it and why, you know, again, that was really. It was a hard struggle for me to even consider that he was.

He replaces people with a machine. He's not heartbroken. You're heartbroken.

You're replacing, you're feeding people.

I feel much better. Tracy's the evil one here.

Are you outsourcing anything, Nick?

Not at this point. I'm looking at it. There's a lot of people in my 20 group that are looking at different companies that will facilitate offshore employees. And I've heard great things about it. I've heard horrible things about it. But I do believe that it's something that we need to pay attention to and watch and see how it goes because it is going to just get harder and harder with, with labor. And we're competing with a lot of companies. I'm, I'm from Utah and we have the lowest unemployment rate in the nation, so. But you know, just speaking to hiring employees, I think, I think again, it's just like selling a car to a customer. Why, why should they work for you? What, what makes your place different? What makes it fun? Because they have so many options. There are so many options for people to, to work now. So what are we offering them?

Yeah, so let's transition into the recon thing because you guys said two things that had me really confused. You said recon's taking longer, so I've got more cars in make ready. But you also told me to reduce my make ready because I'm eating up too much cash and I'm sitting on stuff. And that's a place to look at cutting expenses.

I have a couple of things to say, so help me out.

How do I reconcile those between the fact that I just have to have more cars and make ready because they're taking so long to get ready and I don't want to be sitting on a slow turn time because now all of a sudden there's regular depreciation has come back into play of my cars.

Buyer pay here and retail are completely different when it comes to inventory.

They're, they're.

We don't look at turn. We, we look at any car under $10,000. I mean, even if the market goes 20% down, which it never will on a $10,000 car, it's just a different. You're not exposed to depreciation on a, on a buyer payer unit like you are on retail and so it's just not as. That's just not something that you need to focus on as much. Our somewhat solution and it's still not really working but our solution is just to have more inventory, get a deeper pipeline of inventory. But you don't want that inventory just sitting on your lot and then you re inspect it and then you order the parts and then you do the bodywork. You need to have a strategy before that car even lands and get a rough idea of what it might need by having your service guys look at the conditioner report analyzing that. If you can see it's going to need a new bumper. Order the bumper now so that it's ready to rock and roll and be replaced by the time, by the time it hits the lot. Another thing we're doing, we're selling 240 cars a month and we currently have 130 on the front line which my understanding is that's actually pretty good in this environment but that's not comfortable. I don't like seeing holes in our front line and I don't like it. And I'm opening up more locations and it seems like the problem's getting worse. And so what do you do? One thing we've just tried to implement is gotten a commitment from each individual store manager to recondition a certain number of vehicles themselves at shops around their stores. And they all gave, we just said what's the number? What do you think you can do? And it ranged from five units a week to eight units a week. And we are offering them $100 bonus if they hit that five unit or eight unit mark. And that's frontline ready, pictures taken, GPS installed, all of that. It's a new thing we implemented but it's just little thinking outside the box to try to solve this problem. And we, you know, we'll see how it goes in the long term. I think fixed stops because cars are just going to get more expensive and they're going to get older and they're going to require more work. I just don't see that changing. I just, I don't see it because they quit building cheap cars. There is no Ford Fiesta or Ford Focus or Ford Fusion and we can go on and on. They've discontinued them all. They're gone. They don't make them cheap. Cars are history from the new car world. And so our cars are going to get older and they're going to get higher mileage and we're going to have to learn how to Rebuild these suckers.

It's funny how we. When you get into the buy here, pay here and I'll speak buy here pay here for me. You have to retrain. I'm not a sales company, I'm a collections company. Right, we've heard that a million times. If you're in buy here pay here, it's almost like I'm not a sales company and collection company. No, no, no, I'm not a collection company. I'm a recon company, you know, and it looks like you guys have made large commitments to your recon to say this is going to be the most important thing now. It's always been an issue. It's going to continue to be a worse issue. I need to look at myself as a recon to sell it. Hey guys, sorry to interrupt the podcast again, but you guys know Pastime, Great sponsor of the podcast and a great asset for buy here, pay here and retail dealers for sure.

Protect your assets. That's all it's about.

COVID your assets.

It's a great game sets and Pastime does it best in my opinion. So if you're a retail dealer and you've got cars all over town, you got people test driving cars, stick a wireless device in there, they don't know that. And if they decide to leave, you know where it is, right?

If you got your stuff stolen for us in our buy here pay here, we use wireless because it's just easy. It's easy to deliver buy here pay here unit on a Friday evening or a Saturday because they just plunk drop the little wireless guy right in the headrest.

Cars on the road and for someone like me, sometimes sell really high end cars. It's the double protection I get with a wired unit and also the wireless unit in case one fails and sometimes or somebody pulls it off, I still got that backup. But I'm telling you, the asset in the buy here pay here industry is our accounts. And this technology has made it so much easier for us to do our job. And passtime, I think is the way to go.

Just look at what America's car mart's doing. You know, they're the largest publicly traded buyer payer dealership in the country. They always outsource their recon. They were able to have their little stores go find shops and recondition and it worked for a long, long time. Well, they're building their own recon facilities now. They're seeing it. It's just really hard to outsource your reconditioning. A lot of folks have Been successful with it for a very long time. But I think those days are over. And I personally believe that whoever has the most robust fixed ops is the winner. And how. Why? Because they're the ones that can get a decent, reliable car on the front line.

That's super interesting you talk about that. Because if you look and everybody went crazy a month ago or month and a half ago when it was announced that Carvana purchased the Odessa North America infrastructure. There's one reason and one reason alone they did that. It was for recon capacity, for repo capacity, for all these things that you have to streamline. And if, if they're, you know, they do have. They do have the money from shareholders to do this, and we don't necessarily have that, but $2 billion for all this real estate and all that infrastructure. It seems cheap if you're at the level they are. So it's very important to have that recon facility. It's very important to get those cars ready as fast as possible, because if you don't have it, you can't get it done. We are recon companies. We're recon companies, we're buying companies, we're selling companies, and we're financing companies. We have one of the hardest businesses to operate, I think, in the country.

It's very complex.

Go ahead, Tracy.

And another layer for us is when we open our service department 15 years ago, our whole goal was to drive customer pay because we were doing average. Not on buy here pay here, but it took about three days full recon to get the car through because we were five years older, newer, 60,000 miles or less, approximate. You know, of course, that's totally changed. But to drive the traffic we were part of our liebau was lifetime engine warranty. Right. And 1212 powertrain, a lifetime engine warranty to keep that active. If you're in a 30 mile radius, you had to bring it back to our shop and do your factory recommended maintenance. How do you do that? Yeah, you can't keep up anymore, right? So if you're gonna do that, if I take that away, a big part of our why buy is gone that we've worked on for 15 years and marketed for 15 years. And the customers are coming back to us and say, okay, we can change your old July 30th.

Well, Nick's gonna. I asked Nick this question the other day. They're in the leasing model and I can't wrap my brain around leasing because of ownership. And I say, how do you get them to take care of the car? How do you get them to the oil change? You've got to demand that they bring their car in every whatever so you can do the oil change for them. But I can't do it. Right. Cause I can't physically do it.

Yeah, we had to cut a lot of that out.

We did free oil changes, and we eliminated them about a year and a half ago. And the people that we just gave them, Jiffy Lube gift cards, the ones that were still in the program. It's just too much. It's overwhelming.

We didn't see it do anything in incremental business. They would get that. They wouldn't.

Right. So you have the people that are going to change their oil whether it's free or not, and you have people that won't change their oil whether it's free or not. Correct. And. And yeah. And it's. And so you know this. It's a numbers game. You're gonna. Doesn't matter how much you check the cars, how much you do see the customer, stuff like that. You're gonna have people that are going to destroy your car. Yeah.

So we just. You went to the leasing thing. You want to touch on that for a second?

Well, I was going to ask.

You're always super interested.

Well, I want to ask this question, and I know the answer to the question is leasing because of the residual word, the R word, not recession. How do we make cars affordable? We know recon cars cost more, parts cost more. It takes longer. It's not affordable. I can't get affordable cars to my people. How do I make my payment affordable? Do I stretch the term? Do I recon less? Do I have less gross? Do I have to switch to leasing?

Well, let's figure out. Dan's bought a switch.

Yeah, that was the big thing. Well, one, I've watched Nick and some of the others that have much, much larger and continue to do really well at it, because that's the whole thing. The residual piece was something I couldn't.

Wrap my mind around.

Either is. But. Yeah, but they're gonna. Same customer, they're gonna tear it up at the same rate. But a few things do make sense. In particular with the higher car cost is, you know, either have to get out of the buy here, pay here business or find a way for them be affordable because they're not gonna be successful at the current where we're going. So to put them in a. With the residual and you put them in a little nicer car, which I believe you will get a better customer because every Time we do get a better group of cars, we tend to get a better paying customer because they want the car. It's not because they have to have this car. So that was the big push for me to switch because the high car cost we have now to be able to still be able to sell cars and have it affordable to be successful. And the other piece is the, is the income tax benefits with the depreciation that was, Those were the two major.

Pushes for me and Nick, you, you've been in the lease here, pay here game for probably the, I guess about as long as anybody in this space. When did you get in there and what was. Because it was before prices went up. Why, why did you decide?

I'd looked at leasing for a long time and wanted to do it, but it's hard to switch. I mean it's. You're switching dmss, switching accounting. I didn't really understand the accounting for the first five years when I, when I switched to leasing. It's so it's really hard. What finally forced my hand was I was broke and desperate. And the sales tax savings, $600 a car that you didn't have to come up with up front was just monumental for my cash flow. And so that's why, that was the main reason why I switched. And then since that time I've become somewhat of an expert on it and I've just. The benefits are unbelievable. I could go on and on about the benefits, but I'm super glad that I did it. I do believe it's a legitimate competitive advantage for my company. And I especially in this environment with us being able to increase the residuals to reflect what that the increase in the value of the vehicles and what they're going to be worth at the end of that term, it's enabled us to continue to get around that 400ish payment and stay around there and still be able to sell a little bit higher priced vehicle than our competitors. It's just working really well.

Well, and you mentioned the competitive advantage. That's another piece too is the marketing.

Right.

You can actually market an actual price because the way leasing works is you have all your extra fees and things like you're not changing the price of the vehicle. It's just your system is set up so you can advertise your car at a reasonable price because at the end of the day we're not selling cars. I mean, you know, Jeff, you just brought that up where these people need a solution. They need, they need a way to get to work they need. And they don't really care to own the car.

They don't.

They just need to make a payment that's affordable. So at the end of the day, you can't explain it. But. But they don't know what else to ask. What's the first question when somebody calls you up? What's the first question?

Down payment or payment.

Right.

How much is the car? Because they don't know what else to ask. And down payment is the second is the second question because they don't know what else to ask. And if that's the measuring stick that they measure from dealership to dealership and your buy here, pay here. Well, if you give them a price of the car, you can try to dance around it and say, well, we, you know, come on in this, that and the other. Well, that kind of eliminates that. With leasing, you can really give them a price in the car.

That's, you know, because 90% of the advertising done by new car manufacturers on TV is a lease payment. You may not notice that, but it's 199amonth or two nights, probably no more than one, but it's 299amonth. But if you redefined this is a lease with $5,000 down, this, that and the other, even BMW Alexis, all these people, that's kind of how they do it. And this is a real treat, y'.

All.

We have three of the most, I guess, in my opinion, three of the. I don't say craziest, but zaniest average car marketers in the country right here on the stage.

Am I one of the three?

No, you are not, Jim. So we have a guy who wears a funny hat right here. We have a guy who likes to wrestle. I just saw on YouTube, professional wrestler.

Please.

Professional wrestler. We're about to get crashed over the head. And he wears a pickle suit.

I've seen him in a pickle suit.

We've seen. Sweet. Seen him in a pickle suit. So let's talk just real quick about advertising. What should dealers be doing? What's the first thing dealers should be doing to advertise in their market? How do you own your market? We have three people who can really speak to this. So, Dan.

Well, I don't. A lot of people would argue that the way that I did it was extremely expensive. And it's because I do all radio. I mean, everything that I do, I was on TV for a little while. But with this new store, we are. We are dipping more into the social media. So there's a big return, but I've already built a big name with the dumb stuff that I do. We were talking up here earlier, and I was saying after my. Some of my commercials came out, you know, my mother told people I was a drug dealer because she was embarrassed to say what I really did for a living. So.

Great.

God bless her.

You wear a pimple suit on the radio?

Actually, I may want to have my friends say I have a face for radio too. But no, in our. On the website and things like that. Yeah, we've done the pickle suit thing, but so I don't know that I'm really. The people would argue with how I do it, which again, spent a time.

Do you own radio? Do you own radio in your market?

Do I own radio in a market of 3 million people?

I'm right up there.

So that's. That's pretty interesting. That's interesting.

Let me just tell the Dan story real quick. I was in a retail 20 group with Dan, 2010 or so, and he was 20, 30 car a month guy. And he wanted to figure out how to grow his business and turn it into 100 cars a month. 2014, 2015, or we're going to these 20 group meetings. I'm spending two or three hundred bucks a couple car on advertising. He's spending five or six hundred dollars a car on advertising. And I'm like, are you insane? What is. You know, what are you. The guy's selling 100 cars a month and averaging $6,100 a car. He's got. I mean, I don't know if I. He's got millions of dollars in the bank that he doesn't know what to do with. I'm not kidding. He's kicking ass. Marketing is like a divorce. It's very expensive, but it's worth it.

So what do you do in your market? That is a great line. What do you do in your market, Nick?

So everybody knows Marcosian Auto. We do a lot of tv, a lot of radio, a lot of Facebook, a lot of. We just do it. We spend $600,000 a year on marketing, and we sell 240 cars a month, and we're kicking butt. And everybody knows who we are. And I'm the face. I'm the guy on the tv. I'm the guy talking on the radio. You could argue whether that's necessary, but what was John's last name yesterday? The keynote speaker. What was his last? The. The bar guy? Yeah, yeah. I mean, he couldn't. I couldn't have said it. Better myself. You know, you want to put a face to it, you want to make it fun, you want to make it interesting. You want people something that, that puts you on the map, you know, and it had the message needs to be just super simple, super easy for people to remember. Ours is job plus license equals approved, guaranteed. Don't get jerked around, get approved. That's it. And we just hammer that for years and years and years and we're, we're dominating our market and the three of.

Us are the faces of our dealership. And I think that is that you mentioned that. I think that's critical that you are the face, you are the voice, you are the same.

Here we have, we finance you, not your credit. So same type of thing. And Tracy, you own your market and you are the face. Let's talk about that.

Yeah. So we did television forever. And I would, if you had asked me five years ago, I would have stood here and said if you're not doing television or radio, you're crazy. Now I'll say whatever works for you. Just do that. And it's going to be different. I think for every dealer in every market. It really does depend. Television still works, radio still works, social media marketing works. But I will say that you have to have a clear message. You have to. For me it's clear message, call to action, deadline on the offer. And those are like for me that's marketing 101 stuff. The branding is completely different. That's a different conversation. But I truly believe with independence, we don't have co op money, so we don't have the blue oval or anything else. Right. So we have to have a brand and you're the brand stupid. I wrote a book called you're the brand stupid. You or somebody at your store needs to be the brand or it's just another used car store. We had new car stores. Don't ever want to do that again. We made a lot of money and made a lot of money when we sold and still don't want to do that again. I like working for myself. I like calling the shots, I like succeeding, I like failing on my terms. The switch for me came when my children who are now 20 and 16. I noticed they watched zero television. They don't. I've got a television in my, my home that might take up that back wall. I mean it's insane, right? It's a theater for a 51 year old guy. That's like, that's like the coolest thing ever. That's what I wanted when I was 12, right? And I'm sitting there and I'm like, yeah, let's watch this movie.

Nah.

So I went to the restroom one night. My 16 year old kid, right? My son, I think he's 20 now, I go up in his room, I'm like, he's watching that movie on a phone. That was huge for me, right?

You got to be where they are.

You got to be where they are. So where are people at? In every market. The biggest pool, social media is Facebook, period. No one else is even close. People can argue all day. Yes, TikTok. We've got to watch TikTok. Yeah, yeah, yeah. I'm not taking anything away, but I'm a believer in owning one thing and building right. So I said, I'm gonna start on Facebook. And we're still. We're $20,000 a month on Facebook just to second that.

There is no better return on investment than Facebook.

And I've put no cars on Facebook.

Facebook's gotten a little harder with the iPhone changes and stuff. But it's still. Nothing even comes close in my return on investment to social media and Facebook. I am a huge proponent of it. And you can do really cool campaigns for not a whole lot of money if you're looking to figure out how to get things rolling. Facebook, Facebook, Facebook.

But it still goes back to just like television, radio. How many times are they seeing it right Frequency.

We hired an expert at the beginning because we didn't know what we were doing. And we learned what we could from the expert. We got rid of the expert and now we do it ourselves.

That's how.

That's a great way to get started. Learn how to do it and rock and roll.

And I spent 10 to $15,000 a month for a year with zero to no return. But I was so frustrated because I know the people are there. Why couldn't we weren't turning that into an roi. So I was on television and Facebook and it came down. It wasn't Facebook. And that's what most dealers do. They blame Facebook. Leaks suck. They can't buy cars. The message sucks. Or your processes suck when they come through. Because Facebook is different because people are in different places in the funnel. I'm not trying to advocate Facebook, but they are, right, Meaning you may see somebody that has something, sees that message and they have. They're not in the market for a car at all. Right?

It's intrusive.

So it's correct. It's intrusive. Right? And somebody that's in the market, right now, and that goes back to the text marketing. You keep the people who aren't in the market at all, right? You create those text campaigns that weekly or bi weekly or once a month or whenever. You keep campaigning to those people. So drip. It's a aggressive drip campaign, really, if you want to go back to email days. What we call drip campaigns, right? And you can do that for two years out, but you're not spending any more money to capture them on Facebook because once the information is captured, you keep blasting the text. Then it's like, oh, my God. Then it's like, man, my car just broke down. Oh, my God, I just got a text from this guy. They've been texting me for two years. Let me text them back. That's the way it works. And when we discovered that, it's like, you know, the skies opened up and it was manna from heaven, man. It's amazing. We're at $133 per car sold on Facebook. The only problem is we don't. We need more. So we've gone to the market next door, which we've never been able to afford. Right. Or chose not to because it's a bigger market now.

We're there.

We're bringing people from 45, 45 minutes out, an hour out, which we never did in the past. And that may not be a big deal, some of you, but we're real concentrated, right? So an hours. Why would they drive to us, they're an hour away when there's 50 car dealers in their backyard? Well, because we had a call to action, an offer they couldn't resist, and a deadline, which, once again, those are the three big things.

Work and a strong process. Because I don't think you have to have the process.

And it's.

And it's got. And I want to drive that home again.

It's.

It's. You got to have the right process and the right process for that marketing. And you said like the right. So. So what I. What I do with the radio is different than what we would do with Facebook. It's just a different. It's a different way of them coming to us. So that I think beyond the marketing piece, how do you handle them once you get them?

But they probably already. If when you hit them on social media, they already know because they've heard you so much on the radio, it just. It's really easier to get another piece of.

It is those layers that Tracy kind of touched on that a little bit.

You. You.

You dominate one area and then. Then you layer it.

So you're 400 plus GRPs in your market, right?

I'm not.

Okay, where are you? Where are your GRP?

Like 2 7.

Sorry, we're having a conversation.

270.

Okay, so you're a little bit more than half.

Okay.

All right, what is it for GRP?

Right now we're like 68.

Okay, so we're in the weeds there. That's talking about audience on TV.

We're $40,000 a week to hit 400 GRPs on radio and TV in the market. So it doesn't make any sense.

All right, so we have spent an hour up here.

This is a lot of time.

So I want to ask, I want to ask if there's anybody in the audience that has any questions. There is an audience. Look, we've built an audience. Is there any questions? I'm gonna bring the mic to you if there is anybody. Okay. We discovered everything.

I guess we did. I think we covered it all A to Z. And of course you guys know these fellas. You know you can find them on social media. You know you can find them in the app. If you guys are listening to this podcast later on or watching it, you can reach out to us. I think we're, we're.

But you can say if you want.

To talk some more.

Paul.

Nick, I just want to say one thing that I've been, I've transformed my finances and my, my everything in just the last few years. And the reason why is because I decided to be one good at one thing in buyer pay here in house financing. You know, you've got your overhead and when you're starting out, your negative cash flow on the cars that you're buying and your negative cash flow in relation to your overhead. But at some point, if you sell enough cars and you build your portfolio enough, you're getting to the point where you're positive cash flow, where you're paying for all the cars that you're putting out on the road and you're paying for your overhead and there's more money left over. And there's only one way to get to that point and that's to take on leverage or be negative. Negative. But, but once you get to that point, you're there. And for me, I never was really good at retail like, like Dan is or Tracy is. I just never had the per car that those guys were ever to generate, able to generate. But the in house finance customer was there and they were ready to buy a car. I just needed to be willing to do it. And to take that chance and to go that. That. That negative cash flow for a couple of years and be uncomfortable for a couple of years, but. But there is light at the end of the tunnel. The model does work. And when you get to that positive cash flow level, it opens a whole new, new world. I guess my biggest point is, for me, what worked was finally just focusing on one thing. I quit my retail buyer pay here group. I went all in on buyer pay here, lease here, pay here, and it was the best decision I've ever made in my whole career.

I think Tavr said that yesterday. Be focused and make no excuses. And if anybody's failing, it's you. Because we can control us. That's about all we can do.

We talked about market share earlier, touched on it. Anyway, we gained market share during the last recession because I sat down with my dad and I'd already bought the store from him. From him. Of course, he's still not involved in the business, but he's my mentor, right? He had done it, and his dad had done it. His dad had done it. So I'm like, look, I don't know what I got myself into. We were rock and rolling, and then now there's a recession. What do we do? He said, you got two options. You can pull back and, you know, go to the bathroom where there's no glass and tuck your head and wait it out. And you'll probably lose everything you got anyway, right? Or you can hit the ground gas, and you can go, dude's brilliant. And, you know, no country mountain way, right? And it was. And I wrote it down, and we said, okay, fine. We doubled up on advertising, which was probably stupid, right? We bought more cars because nobody was buying cars, but we bought them crazy cheap. It was insane.

It was the best period of my whole career. Same here.

But we actually gained like 4 or 5% market share. And that doesn't sound like a ton, but that's a ton, right? And when we came out on the other side of the recession, you know, now we're selling more used cars than the new. Most of the new car guys in that market are like, where'd this guy come from? Right now we're at 150 cars a month retail, and there's not a new other than CarMax. And it is what it is, right? I don't have the money or the facilities or anything else to compete with them. Nobody sells close to that in my market.

And more recently, remember when Covid hit and everyone got so scared and stopped buying those that doubled down and bought were loving. When they got to retail those things.

And let people know that we were still there and we were doing business, that was key for us.

Dan, closing arguments.

I don't know that there's a whole lot more to say. We've said it all, I think. Yeah. It's been, what, an hour and a half now, right?

Is it.

Well, that this is. I mean, this was so much fun, so refreshing, I think. Thank you all so much for being up here. Thank everybody for being in the room. Hopefully we did a good enough job. They'll ask us to do this again.

Jeff.

We kind of just do this together, though.

Yeah. Dealers helping dealers. We love that. We love to be here. So if you do have further questions, obviously you guys can send something over to our email. We'll follow up with questions. We love ideas for episodes as well, so if anything struck a nerve, you want to hear more about it, we'd love to get it on the podcast and a take, talk more about it.

Right. Thanks, buddy.

Thanks for having us.

Thanks for being here.

Thank you.

Dealers helping dealers.

Please leave us a review and subscribe.

The independent Dealer podcast.