#289 - Inventory Sourcing - Housekeeping Series

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, it is hot, hot, hot, hot. Still hot, hot and humid. And I'm sweating buckets, man.

I tell you, it's. Yeah, it's been a, it's been a rough summer. I'm ready for it to be over.

The last thing I want to do, which I have not done for probably four years, is go down to Vegas and stand on the 130 degree asphalt and FRE in a exhaust filled lane against a bunch of other guys that are just going to make me overpay for everything.

It's been, it's been three years since I've set foot in an auction lane, Jeff, and I don't regret any bit of not being in Orlando in the middle of summer when it's freaking 110 degrees, 85% humidity and feel like 150. Yeah, I'm good. I'm done with that point.

You're like, you're buying because you're angry and you're buying because you want to get out there or you're not buying.

Because you're not buying.

Freak out of there, right?

I tell you that's the worst feeling in the world, is to be, to be in Orlando and work four auctions and not buy a car and it be 110 degrees because that is the worst feeling in the world.

And you're like, well, I could, I could stand out here for another two hours and wait for these last two runs to go through thinking you're gonna steal them or get a deal on them and then it doesn't happen and they go through the roof and then you're like, what in the world? Then you gotta live my life.

Then you got a five or six hour drive home, which is even better. Yeah, yeah, yeah, it's even better.

So you guys, this is our housekeeping series we're talking about. This is a great time to get your processes in order, right? Revisit what you're doing, maybe try something new, maybe tighten up a current process that you have. So this week, let's talk about inventory buying. Right now there's a lot, a lot, a lot of different options and places to get inventory. And there's a ton of strategies or techniques or people's personal preferences, right? So it's, it's a touchy subject, man. It is a touchy subject because talking to people about what cars are good or bad or how to Buy. And there's some guys that will just. They will laugh you up one side and down the other. If you're not going to physically be there to inspect the car. Right. If you're not starting and driving it, like, how the hell do you know what you're getting? You know, you got to put your hands on that sucker.

If that were the case, there would not be very many car dealers in the country anymore, because I would, I would think there's more people buying virtually now, especially after Covid, than there are in the lanes.

When you think so, yeah, definitely. And for me, and, and, and I'll. And I'll admit, like, yes, I'm sure I miss out on a lot of gems because I will not buy anything that's as is. I do not buy red light online. I don't want to take the gamble. I don't want the risk. I don't need to right now. I don't think I've got a lot of inventory. And sure, maybe I'm missing out on some little hidden gems that could be red light but might be in the wrapper. Whatever. If I really felt like I was missing out on money or having issues, I would go down and walk the lanes and kick all the tires and then battle against everybody else for that little as is cream puff that we're all going to bid through the roof anyways.

Yeah. You know, and so I think what you're talking about is having a plan, Jeff, and I think that's number one when it comes to buying. You had a plan when you opened up your dealership, and who knows what that plan was. You may have decided that your plan was, I'm only going to sell high end European cars. Or your plan was, I'm only going to sell 2500 undercars. But you had a plan. And so going into inventory, buying without a plan, it's really a bad idea. So that plan may include like mine does with buying red light cars, but your plan is, no, I'm not buying red light cars. So that's my plan. Whatever it is, have a plan. If you don't have a plan, you're just not gonna. You're not gonna succeed it.

To me, this is one of the hardest parts. Right. Because if you've got money for flooring, and that's not your issue, it is really, really hard for me to stay disciplined on stuff that looks good and is cool and fun. And I mean, dude, don't even get me started on the freaking Rubicons I have out here that have sat and the smart car and the, you know, some of these little freaking bright gold transit van that just. I get so sucked in by like a bright green Kia Soul man. Like, I don't care who you are, I will buy that hand in a second. I will buy.

Oh, my gosh. Oh, my God.

It might sit for a long time. And now I start collecting all these really, really odd one off cars that just don't fit my model. Right. Instead of just sticking to my bread and butter affordable third row SUVs, I start getting distracted by all these other things. So, yes, having a plan and sticking to it. And part of that is your buy don't buy list, right, Luke? We should all have formal buy and don't buy lists because if it's you, obviously you got to stay disciplined. And we all have our preferences. Hopefully we're backing these up with as much facts as possible and not just anecdotal. Like I. I once had a, you know, Honda Odyssey that blew up on me. So I'm not buying those things because the transmissions are way too expensive. Right?

Yeah.

Hopefully it's backed up by facts. But also, someday you might want to buy. Let someone else handle this job for you. Right. So if you've built out a great buy don't buy list based on the performance recon, whatever your factors are, it makes it a little bit easier to pass that off to somebody.

Yeah. And this is one of the hardest things to pass off to someone. So it is, it's very important to have that buy or no buy. So you know it's going to change over the years too. So you need, every once I need to. Need to audit that list. And because there have been times where we didn't buy certain Honda Accords, but now I buy every Honda Accord that I can because we know how to fix them if they break. We know what to look for, we know what not to look for. So there's really a good idea to, to hone in on that list, write it down so you can pass it along. I'm not ready to pass along buying. I do have a buyer, but he buys what I tell him to buy. But I'm, you know, it's one of those things. It's. It's the hardest thing to let go of. But you really need to have an idea of what you should be looking at. Just the other day, Jeff, I was like, man, this 21 tundra is really cheap. I should buy it. And something in the back of my head said, hold on, that's not your. This is not your business plan. Stop doing it. And I stopped. And so. But you have to have that written down in the back, your head, wherever. Make sure you don't do stupid things like buy green souls.

Yeah, green Kia souls sell like hotcakes, man. I will, I will. I will fight anyone that says. But yeah, I was looking at the same situation. A tundra with a. Of body work, right? Oh, man. Dude, this is great. It's a killer deal. Like, we just got to replace 10 panels. You know, that's not my thing. I don't have a body shop. I can't. I would have to do it at retail. You know, I don't. So, yes, it was a great deal. Thank goodness I did not pull the trigger because, yeah, it would cost me a fortune in these types of things. We used to buy every traverse in Acadia and Equinox we could get our hands on, Right? In hindsight, maybe not the best decision because now they're all frickin blowing up like popcorn, man. It just. It's nonstop. So, yeah, like you said, those things change. Now, what also changes, Luke, is the sources that you get these cars from, Right? So, yeah, and that can be regional, it can be preference. I mean, certain auctions, certain online platforms have different. You know, Odessa might have been a great place to get cars from, and now it might be horrible, right? You might decide that you want to get things from CarMax or Carvana online auctions or backlots or ACV. Or maybe you're someone that's just buying 100% from the public or 80% from the public, because all of a sudden the market's flipped and now, you know, you've got that window of opportunity where the consumer or the public doesn't know that their cars are worth a lot more than what book is telling them it's worth, right? So there are those windows of arbitrage. So it's important to develop a lot.

Yeah, avenues, for sure. You know, some people are just super attached to buying at a very small regional auction. And that's fine if you're selling five cars a month. But what I would tell you to do if you're that that person, is that you need to branch out. Because that auction could be bought by Mannheim tomorrow, right? Could be bought by Carvana tomorrow. Whatever. You need to make sure that you have an idea of if something changes. You know, they could lose one account, and all of a sudden you not have any cars to buy. So you need to make sure that you develop every source There's a lot of sources out there. Cars being traded in every day, cars being repossessed every day. The public's needing to sell cars every day. The government has to sell cars every day. So there's different resources that you need to make sure you have access to and develop, because if not, you're. You're going to be hemmed in and not be able to sell the amount of cars you want to sell.

Yeah, I mean, like 20, 18, 19. My brother in law, who was my old partner, who was my buyer, he spent every waking hour down at the new car store. He was there, he was buying them dinner. He was buddies with them and hanging out with them and everything. And that was the exclusive source for our inventory, was this new car group and overnight turned off. Right. CEO decided, nope, no more wholesaling. Everything goes to the auction. Boom. All that goodwill, everything was built up, turned off overnight. So I'm. I'll admit right now I'm definitely in a disadvantage. I buy 90% of my new stuff, you know, outside of repos and trade ins, comes from Manheim. You know, it's easy for me. I understand the platform. That's. That's probably the next point I would bring up, Luke, is you need to understand. So, yes, you want to develop a lot of sources, but if you're just a jack of all of them and you don't understand them like backlots. I don't buy off backlots. It's not. It's. It's semi strong in my area. I don't understand their crs. I hate their user experience. It doesn't work for me. So, yeah, I'll check in once a week and then I'll log right back off because I don't freaking get it. I don't trust it. So I should learn it. I should. I should. I should say, hey, I've got to figure this out because I want to develop that. You know, same with private Party, Luke. Like, if you're buying from private party, what kind of rules do you have so that you're not getting taken advantage of? You know, people. People come into Felicia and give you a car that's wrong or miles are off or you're facilitating some Curbstoner. I tell my buyer when he gets stuff from private party, the title has to match the guy's driver's license. No more of this freaking open title crap. We're not going to facilitate curbstoning.

Yeah, platforms are super important. I. I love Manheim's platform. I love Carvana's platform. I, I don't necessarily like Odessa's platform and I don't even deal with backlot. I love ACV's platform. I think they have some really good advantages that Manheim's trying to, to develop. But the thing is, like you said, understand it, understand how the platform works. There's advantages, there's disadvantages. And make sure, you know, I wrote a, I wrote a dang book on how to, how to do it and so that, that I have in house and so if I ever need to refer back to it or something, updates, I just update and so make sure you're doing this. And not only that, within the platform there's different choices of PSI that include deal shield and things like that that you can use your advantage. I don't recommend those things. I recommend reinsuring your PSI through Buckeye. But there are different ways to take advantage of platforms availability.

So you mentioned Buckeye, Luke. How do you do? Give me specifics on how you do the PSI product. And for those that don't know, that's a post sale inspection. Right. So if you use any of the platforms, all of them for the most part that I know of, offer some sort of post sale insurance which is either a nonsensical inspection that some Yahoo claims to send it through after the sale, which, but basically all it's doing is it's an insurance that's buying you either additional time or some peace of mind. You're saying that through your Buckeye products you can do that on your own. How do you do that?

So we reserve $150 on every car we buy every month. Right. And we send that to our reinsurance company and so we buy 40 to 50 cars a month and they just, they just come in. Right. And if we can arbitrate a car with the auction, we do that first. Okay. And buying online actually gives you a little more advantage of arbitration than buying in the lane. So there's some advantages there. So we buy online if, if we didn't buy it and we buy red light too. So we can post sell every single dose through our reinsurance company. And if we get the car and it's red light or something happens and it needs a transmission, well, we just, we are able to make a claim through our reinsurance company for that four thousand dollar transmission and pull four thousand dollars out of the PSI we've already reserved. So it just gives us a way to ensure the purchases ourselves. This is something that Buckeye has set up vetted and I tell you it is a great product. It has. I can tell you this year I had a bad engine in a car that we had to hit. I had two or three bad transmissions. So it's really worked out in my favor. So I was still able to get the car I wanted and still fix it and sell it.

But you're taking money out of your left pocket and putting it in your right pocket and calling yourself covered.

Well, I am, Jeff, but I would be willing to bet you most people out there post sale, inspect their cars at the auction anyway. And so you gotta make a decision. Do I want to give Mannheim $150 or I don't want to give myself $150. Cause in the end, I promise you, I'm gonna win on this deal because I'm gonna reserve more than I'm gonna spend on reconditioning and on bad buys.

Yeah.

So.

So. So that's what I would look at, team, is yes. If you look at over. Over. The house wins. Right? The house wins. Deal. SHIELD Will win. If you ever think you're winning the house, guess what? You get kicked out. Yeah.

If you think they have your fee. Yeah.

Or if you're thinking they're going to up your fee, they're going to cut you off. Right. So, sure, if you're an unprofitable customer, you ain't going to be their customer any longer. If you're unprofitable to yourself, that's okay. Because just like with your warranty, if you're reinsuring for your own warranties, yeah. You're taking money out of your right pocket and put in your left pocket, but you're also expensing that. Right. Because your deal SHIELD or your PSI Luke would be an expense to your company upfront. And then when you. If you have to bring that money back in as a warranty claim, then I assume that's shop income or something. You know, you account for that money coming back in as income, but the net net you're able to keep in your reinsurance company, and you start building it up just like all those guys do, Just like Deal SHIELD does. Just like acv, just like all these guys that have aftermarket, you know, insurances to make sure that they're doing the job they said they did. They said they inspected it in the transmission was good, but you got to pay them an extra 50 bucks to have them re inspect it and make sure it's good.

And then you got to send it back to the auction. All these things anyway. It's. This is the Way I like to do it.

Ridiculous.

Yeah. You know, we talk about that. We talk about, you know, condition reports, and we kind of talk about. Know the rules of the platform. And condition reports are so important. I use condition reports in tandem with vehicle history reports to makes to verify certain things. Right. If the condition report says, hey, it was painted on the right side. Well, if I pull the vehicle history report and it says that it was wrecked on the right side, I kind of know where I'm going. Right. Also use it to look at mechanical faults. What you can see a lot of times is at the very end of the condition report, hey, this car has been serviced here, here, and here over the last three weeks for the same issue. So it tells me there's a further issue that I need to plan for or don't buy the car or that the dealer has had this car. They bought the car at auction in January, and now it's August, and they still hadn't sold it. There might be something going on here. So there's always ways to use these two. Two tools in tandem.

Yeah, I like that. I like that time more than I like the short time. Wait, he's had it on his lot for six months and hasn't sold it. I get it. He's wholesaling it. He's had it on his lot for six days, and he's wholesale.

You can use it both ways.

Or yesterday when my guy came in, he's like, hey, that Sierra you bought, it's got a misfire, and it looks like it's got a new plug and a new coil and, oh, my gosh. I was like, just arbitrate it and send it back. Don't even look at it. Like, don't even do a compression test. It's obviously bad. That same situation looks like you're saying about if you saw on the service report that it had been serviced for an ABS module and it still has an ABS module, there's a reason why it's got an ABS light. So I use vinq. I don't know if you're still using them, but one issue that's really cool on there is, like, it will show you if that car is on someone's website or the history of it on their website or at the auction. And all of a sudden I'm looking at it, and I'm like, oh, okay. You know, they tried to sell that thing for eight, nine, and now they've got it at the auction for eight, you know, or whatever the numbers are. It just gives you a Little more of a background and insight there.

There are very good third party softwares out there that will help you buy cars and.

Yeah, you know, but there's also a third party that will help you not buy cars.

Not buy cars.

That's probably the caveat to all this, is I can talk myself out of every purchase if I look at enough data and sources. That's honestly why I don't pull history reports.

I don't know.

I don't want to know. I don't want to have to know to say no or tell them yes or no. We just don't know. We don't know. And I know that's not how it works these days, but I can talk myself out of buying any car if I look at it long enough. Especially when you just take the VIN and you copy and paste it into Google. How many times has it said like, you know, front end paint or. And then you copy and paste the VIN into Google and the whole front end of the car is missing from the photos that were taken at Copart. You know what I'm saying? You're like, oh, this thing was sold at Copart like six months ago and it's missing its whole front end. And here it is at Manheim, looking pretty and shiny with a new paint job.

You know, I've never tried to copy and paste it into, into Google. That's funny.

Yeah. Sometimes it's great to, you know, the carfax might say front end damage. And then when you look at the photos that were posted by the, you know, original auction house, it is a mess.

Jeff, this is something that's near and dear to me and it's something I brought up at Ciada when we were talking in it. Some people get so hamstrung into buying cars in certain places. And what I've decided is that in Columbia, South Carolina, there's not enough cars for me to survive with every other dealer. And so, you know, we draw a big circle and we go, okay, we're going to buy cars within a thousand miles of Columbia, South Carolina, because we believe that within a thousand miles of Columbia, South Carolina, we're going to be able to get exactly what we need, not just what's available. So what I'm getting to here is don't be afraid to ship a car. If you develop your sources properly, you learn people's platforms, you can buy a car anywhere in the country. We even buy cars in California every once in a while, if it's the exact car we need, because we know it's going to be $1,000 to $1,200 to get it here. Well, if we factor that into the cost and into our profit, it's okay to buy that car because it might be cheaper out there. So don't be afraid to ship a car because you may be able to find the exact car you're looking for somewhere else for less money and for less recon. These are all things that matter.

Yeah, of course, everyone wants to buy trucks out of Texas and cars out of Florida. Nobody wants to buy them in the Northeast. And if you're buying Teslas, you want to buy them out of California because they're a dime a dozen, you know, and you want to ship them across the country. So, yeah, the difference between a $200 shipping cost and a twelve hundred dollar shipping cost, even though that's a thousand dollars out the door to the whole, to the shipper, it might be all the difference in whether or not you actually can move that car or whether you even have the car on your lot to make any money on. Right.

That, that's the key.

If you're in the Northeast, you ain't. You're not finding trucks. Right. You're not getting an affordable truck that's not completely rusted out. So.

Right.

Yeah, you got to ship, ship it.

Ship it from wherever. As long as that shipping difference is the. Is profit or like, like you talk about, you got to have it. You got to have it no matter where it has to come from.

Yeah. You ain't making money if you don't have it. So one thing on that, but before we do, the Primal End guys, obviously sponsors of the podcast, when we talk about buying inventory, flooring inventory, having the cash to buy inventory, or your dealership in general. I know primaland is a great place to go if you're looking to get into your property. You know, a lot of dealers like Luke talked about in previous episodes, well, inventory is just too expensive. I. I can't find, I can't get cars.

Blah, blah, blah, blah.

Okay, man, you're gonna go out of business.

Yeah.

And you're gonna fold up shop and I'm gonna come in and buy your location because it's prime and you didn't want to adapt. So when that plays out, which it is, in my town, I have two, three dealers that have gone out in the last couple of months. One retired and two just folded up shop because they couldn't make money or didn't choose to make money. Great time to contact primaland and make an offer. On that property.

Gotta have a relationship, Jeff. And these guys are all about relationships and they will help build your business. Because most of us out there, when we think about our business, we want to grow and we want to get better and we want to do better things. And if you're listening to this podcast, I know that's the way it is. So call primaland if you need cash.

Yeah, and I want to touch on, you know, last episode we talked about KPIs and tracking. What's really, really important also is to track your sources, you know, so hopefully your DMS will spit you out an Excel spreadsheet of all the cars you've bought in the last six 12 months, 24 months. And you can sort that by source of inventory. And then so what I do every about six months is I look and I say, okay, how are my private party cars comparing to my auction cars through these different sources based on dollar recon, or what I like to look at is total cost of car, you know, purchase price, recon compared to what is retail quote unquote, you know, high nada, book, whatever that number is, as long as it's consistent. Because, yeah, my private party cars, I pay more for them, right? So if I just looked at what I'm paying for cars, then crap, why would I buy private party? It's more expensive. But when I look at it, what am I into it based on book after recon and everything else. Now that paints a different picture, right? So, whoa, whoa, whoa. I'm paying more, I'm spending less on it. It's going through recon faster. So I'm looking at those numbers to look at sources. And that's part of why I just completely cut off backlots, you know, it just was not good for me, you know, it wasn't a good source. I paid more and I spent more on recon.

Yeah, we, we are actually currently, which is funny that you mentioned this, building a huge spreadsheet that's going to spit out all kind of data like this. And it's going to be very useful for me when it comes to buying. We. We're building it for recon more than anything. But I can use that recon data to help my buy no buy list. So it's going to be that. No, that buy no buy list could even be, hey, you buy from this auction, but not from that auction too. So a lot of cool things you can use when you build, you get that data and build a spreadsheet to tell you what to do and what.

I do with my buy. And no buy list is obviously guys, I'm sure you're all using saved searches inside these platforms forms, but you know, I have those buckets that's just very quick to like, you know, hourly. Sometimes I'm refreshing these saved searches to see what's come up new on the auction. I'm a big, big fan. Like I said, I buy a lot through Cox Manheim. I do most everything through Buy it now or make an offer. I hate timed auctions, I hate waiting, I hate for that freaking 4 o' clock Eastern deadline to come up. And all of a sudden in the last three minutes, everything shoots through the roof. And I just spent all 24 hours thinking I was going to buy some of these cars and they don't. So I'm a big fan of the buy it Now. So yes, I'm refreshing my searches hourly because if something new pops up, boom, I'm making a buy it now or I'm making an offer and I'm trying to snag that thing before the other person does. So, you know, obviously save searches and having the time and availability to do that for sure, I get it. Sometimes it's not the best use of my time sitting here just hitting the refresh button over and over and over, but you got to do it right.

Well, the cool things about the save search is you can actually get alerted by text message if something new hits the blocks. You don't always have to be at your, at your computer. So save searches are something that, that are just amazing. You don't have to have that third party software telling you where this car is if you have enough safe searches because they will notify you. So use them. Use your, your buy no buy list to build those save searches because it will save you, I mean, just astronomical amount of time.

Yeah, I actually everyone in my dealership gets a text notification when a green Kia Soul pops up. Auction listing. And we all pounce, we powwow.

And oh my gosh, the other thing.

Luke, to wrap this up, to kind of put a pin in any other tips or techniques, obviously your technology is important. So whether that's third party software, whether it's the physical technology that you' using, right. So if you have to go out, you know, a lot, you'll see some of those guys in the new car stores or the big wholesalers or the dudes that have got like 15 computer screens and they got a different lane on each one and it looks like they're launching satellites for NASA, whatever. If that's what it takes. That's what it takes. Because think about it, you add another screen, it's 200 bucks. But if that's making you more efficient and you're getting a car better, cheaper, faster, you're able to have multiple, you know, avenues pulled up to see what's going on, where that can pay dividends. Man. When you're trying to buy a laptop. Yeah.

If, if you go into any dealership that is selling 100 plus cars a month, you know, the people that come to mind dare solve you. Go back and watch that episode with him and, and my friends in, in, in Oregon at Freeman Motor Company, that was really the first place I saw multiple screens being used with multiple buyers. And your, your computers have to be gaming computers to run these things. Just to let you know that up front, I have gaming computer, which I've never played a game on a computer in my life. And I have Alienware high definition monitors so I can really pin down those pictures and make sure I see what I'm seeing. Our wi fi is perfect. You gotta have all this technology if you're gonna buy online. Because nothing is worse because I've been there when your computer decides to shut down, when the next car on the block is the car you need because you have sold. So make sure you have the right technology to win these auctions.

Yeah. My worst buys are the ones that I did on my phone when I was at home and bored, or I was on vacation and bored, and I jumped on my listings to look and I'm like, oh, hey, that looks great. And I'm looking at it on my tiny little screen without any of my other resources. And for some reason I hit the buy button and then the thing shows up and I'm like, oh, crap. I literally didn't even scroll down to the second fold of the listing to see that all these disclosures were on it. Because I was out of my element, right? Yeah, I was out of my routine. The other thing is just to touch on the mentality too, both good and bad. I. My goodbyes and bad buys can sometimes be when I'm in, when I'm desperate. Right. Or maybe I'm feeling overconfident in the fact that we've just been killing it lately. And I'm like, I just, I just gotta have another Ford Flex. Like, I just gotta have a Flex. Like I gotta buy three of them today, right? And so maybe I'll buy stuff that's out of the ordinary or I'll be a little too aggressive. And on the flip side of that, sometimes when I come in after lunch or I'm ornery or grouchy or angry or I've been back in the shop and I've seen the recon bills, then I become too anal and I'm nitpicking everything and we end up with nothing. Right. So having the right mentality and a routine. Right. So like I said, the auctions on Manheim ended a certain time. I like to be on right. When they get the relistings refreshed that evening. Right. That for me is a good time to buy. I'm mentally ready. The inventory is fresh. So anyways, coming up with those routines and those processes, super important they are. Luke, anything else? Words of wisdom?

No. You know, have a plan, work the plan. And that's what we say about everything we do. It's. It's that simple. Have the tools to do it, have a plan, work the plan and be consistent at the plan. And I think you'll be successful.

Yeah. And I hope you guys have enjoyed our Housekeeping series. This is going to be our last installment for August. I think hopefully you guys enjoyed it. Hopefully you took advantage of some of these ideas and you had some input. If you need any other info, information, always feel free to reach out to us, Luke, via email and text and Facebook or whatever it is. You know, we're always here to help and, and the dealers that do reach out, we might not have all the answers and, and hopefully we can give you point in the right direction, but we'll find the person who has the answer and get you in contact with them. So always feel free to reach out.

Dealers helping dealers. Please leave us a review and subscribe the Independent Dealer podcast.