#315 - Make That Backend Money

This is the Independent Dealer Podcast, Education by Dealers for Dealers. Now here are your hosts, Luke Godwin and Jeff Watson.

Hello and welcome to the Independent Dealer Podcast brought to you by Buckeye Dealership Consulting. We are going to talk about back end. Luke, I know you love nothing more than a big fat back end, right?

Yes, I think the back end of dealer products and selling cars is wonderful, Jeff. That's the, yeah, those type back ends, Jeff. But yeah, let's put just a clause.

On the first this episode. I'm probably gonna use a lot of like euphemisms and like, you know, inappropriate innuendos on this because of the topic. So if you have sensitive ears, please stop listening. Also, I know my mother in law listens to every episode. So Joyce, you should probably turn this one on.

It's so great.

Luke loves a big backhand. I love a big backhand. And another guy who loves a big backhand, Mr. Micah Robinson. Thanks for joining us, Micah.

No problem. Thank you guys for having me. Appreciate it. So.

So Micah has a very unique situation. Micah, tell us real quick. Give us a background on your, the dealerships you run and also your auto business that helps dealers with this back end product we want to get into.

Okay. All right. Well, so I started back in the industry when I was 19, so 2004, and just decided, okay, I'm gonna make money by buying a Honda Accord and then selling it and then just, you know, had $5,000 on a credit card. And so that's kind of how I built. And then now it's, it's called Investment Auto. We're located in northern Utah, one in Brigham City, Utah, one in Centerville, Utah. And you know, it's been good carry, you know, just under 200 cars, try and sell half of those every month. But it was about, it was back in 2018 and probably similar to a lot of independents out there where we were selling warranties, paying a third party company to cover those warranties and those obligations. And then when you have a really angry customer or whatever because the warranty didn't pay for it, so then they always blame the person who sold the warranty. And then to keep the customer happy, we pay the money and you know, anyway. Yeah, so, but this particular one just kind of ticked me off. It was one of those tipping points where you're just like, okay, this pushed me over the club, excuse me, Cliff, because I got to do something different. Where it was, it was a Ford that had an engine claim and the warranty company came back to me and said, well, it has aftermarket components. Well, I knew the customer, and the customer was a good dude. I mean, we're talking about one of those guys that takes care of everybody, everything they possibly can. Their shoes are in order, their socks are all folded, color coded, everything like that, right? So the customer calls me, and he's like, I've never done anything to this truck. So I call the warranty company. I'm like, what is aftermarket? We don't have anything on our report of showing it aftermarket. They send me the report, and it was a K and N air filter. They were denying a $5,000 claim over a K and N air filter.

Oh, my goodness.

And so that just threw me through the. I mean, through a roof on that. So what I did then is. Okay, well, I just did the quick math, and I was like, okay, we are sending essentially $50,000 a month to this warranty company. Okay, $600,000 they're getting every year. So I asked them, okay, how much. How much have you guys paid in claims in the last 12 months? And any guesses of how much they paid?

Something crazy.

Very low. Very low grand.

I'll never forget this. $47,000. I've given them 600,000 in one year. Oh, my goodness, $47,000. And they're sticklers enough to deny a $5,000 claim over a K and air filter. And I'm like, what is this? So I'm sitting there going, where did the. Where did the other $550,000 go in this? So just doing some research and everything, we've all kind of looked into, like, reinsurance, and how do we do this ourselves? How do we retain the most money? And I just kept digging and digging on, okay, well, if I pay them to do this and just take the claims, it cost me that much. If I pay this much to do this, then they're also going to take this much. And it ended up being, well, why don't I just start my own? Because. So I. I called my inventory manager and I said, okay, let's start a company, and we'll sell the service contracts, we'll make sure that it's all legal, we'll get it all set, and let's come up with price points of how much we should just put into a savings account. So when a claim happens, we pay it from there. And so we started it back then. It was called First Secured Administrators. And it was just, you know, going through a lot of the laws, going through a lot of the things of, okay, how do we make this right. And it ended up okay. Then we had happier customers, and then we had dealers, you know, friends of mine. We're all kind of a small community. And as independents. Well, what are you doing? So then I would set them up on the program. Then, then I started calling people. And then more than anything, it's now turned into a software to help dealers one, retain most of their money and then two, sell the product that they should and. And then the ease ability of actually doing it. So it was more of a hole within the industry of, okay, we have all this money that we always focus on buying the car for 10 grand and then trying to sell it for 13 grand or whatever it is. And then we pay out all this money, we take all this risk. And that's what's really interesting. Dealers take so much risk every single day by spending hundreds of thousands of dollars a week buying inventory that they hope they sell within the next two months. Right, well, what happens if you reverse that and you just go, okay, well, I have sold this car. Now why don't I get paid for selling a service that most likely I'm going to come out ahead on? Because richest companies in the world are insurance companies, guys.

So we've recently switched our payment processor over to blitz pay. As you guys know, it has been the smoothest vendor transition I think I have ever done. Getting set up, getting people ported over to their new login portal, getting them to set up on auto pay. Just the ease of use and the ease of training from our customers. You know, the interface is super smooth. Our collector's been really enjoying it. So really, if you are looking to move payment processors, you're a buy here, pay here. You're collecting a lot of payments, or maybe you don't have one right now. Look at blitzpay get set up with them. They integrate with all the major DMSs. So it's a very, very quick, seamless process to take payments and get them posted into your dms.

Yeah. One of the worries every time you go to switch vendors is the ease of transition. But like you, Jeff, we've been on it for a year now, and it's seamless. It works great. It helps my collection numbers, actually, Jeff. My collection numbers, I had the lowest legacy I've ever had at closing business on Friday, and I attribute a lot of that to Blitzpec.

So make sure you tell them that. We sent you the independent dealer podcast. You're going to get three months of software for free and three months of the upcoming Cash Network which means people can take their car payments to any Walgreens CVS 711 and make the payment right there. You no longer have to collect cash in your dealership. So that's really a cool thing. So make sure you tell them. Independent dealer podcast sent you.

Yeah, I went down the same rabbit hole you went down and decided that reinsurance was the way I was going to go. I'm not smart enough to set up a software company and do that, but, you know, the real, you know, basis of this conversation is the way to make a lot of money or extra money in the car business is through. Is through ancillary products.

Right.

Margins have been squeezed to death. Talking about selling a car for 13, you buy for 10 after auction fees, this and other. There's just not a lot left on that, on that meat on that bone. So you've got to come up with different products. And it sounds like you've really gone down that rabbit hole of what can we sell the customer, what's good for the customers, what's good for the dealer. Was that brought about because margins got. I mean, I know it was brought about because of your dissatisfaction with. With what your warranty companies were doing to your customers, but also there's. Did you go down that rabbit hole because there's more money to be made for where your dealerships.

Yeah. And you know, when. When you actually start looking into the statistics of how much a person now researches the car before they actually purchase it, it's totally different than it was, you know, 20 years ago when they just drive down State street and they hit dealer to dealer to dealer and try and find their favorite salesperson. But what's happened now? And that little green icon that dealers hate but consumers love, that says great price on auto trader Cargurus. That becomes the death of us real fast because now we have to associate, okay, Getting traffic into the dealership from wherever it is, unfortunately, price. Because if you're selling, you know, a Corolla for 15,000, but someone else that's five miles away has it for 14, five, they're not going to you first, you know, they may. It's just unfortunate that way. But what's the one thing that's never advertised? What's the one thing that's always variable and that is the service contracts. That is the answer. Products. And it's not going to be advertised either, you know, because in order to get that great price, you have to show as good a value as you possibly can on that vehicle. And then after the sale, you may now make your what used to be a two pound deal and now it's a $500 deal. But you've got to make that up somehow.

It's funny how car dealers were less about car sales, were almost becoming more products and insurance type companies, right? Oh yeah, and Luke and I have joked around about that in the past that there's some dealers we know are literally just insurance companies between their reinsurance and their CPI products. If they're a buy here, pay here, that's where they make their money. And that, that's where, you know, forget making anything on the front end. They almost don't care. You know, it's those back end products. Is there any, any dealer that owning your own reinsurance company, it, it's not good for. Is there any dealers this doesn't work for? Like if I'm high end European, do I just not even want to mess around with this? Or if I'm super, super low, you know, two, $3,000 cash car, probably not worth it.

I would say it's kind of a loaded question because it depends. Yeah, and we do a lot of reinsurance for dealers. We deal with Buckeye, you know, who sponsors this quite a bit. They're great to work with. But I would say that there is a sweet spot there. Okay. If you're selling just higher end cars and you have like 30 of them, okay. I would say there's products to reinsure, but a service contract is definitely one you probably want to shy away from.

Because you don't have enough. You're not spreading the risk out.

You're not spreading the risk out enough. I mean, it would be like, you know, offering cheap life insurance to the guy that's 94 and you get a million dollar payoff. You know, it just doesn't, the math doesn't work. And the only way to make the math work is that you price yourself so high on what you need to put into your reinsurance account that now you're, you know, your debt to income, your loan to value, everything gets skewed and so you can't actually offer the consumer a valuable price for the service contract.

That makes sense. So like, I understand there's that sweet spot in the service contracts based on, you know, kind of your car makeup. What, what other products do make sense? What is a universal sellable product that all of the dealers should be making into that have good margins, easy sales? Like what would you say, is there one or two that just kind of like top your list that we should be doing today?

Okay. So everyone's kind of heard of etch. Okay. And we kind of talked about it before Etch, or what we call vehicle theft registration. It's a very easy sell. I'll just tell you that right now. There are things that I love about the income, but I also don't like that it's very valuable to the consumer because our loss ratio on etch is less than 1%. Wow.

And you're checking like the, the typical VIN etch, right? You, you etch the wind, the glass, you etch the whatever.

Ours is basically a data dot that has a UV coating on it that goes on each panel. It literally costs, you know, it costs less than $50. Typically the dealers are what we call, you know, front loading it for anywhere between 299 and some dealers are front loading it for 999. Okay.

And.

But that is, is a good moneymaker and it's actually most of our dealers that front load it are usually over a 90% penetration. And so it's, it's insane. But let me explain to you why I say the word front load on that. There is. And so just trying to basically be very clear what a dealer is doing, and I do recommend it, is that you always have one product that you are pushing and you're almost directly putting that on every car. The customer does not have to buy it legally. They can reject it, but you assume the sale on one product. The other big thing to that, the big catch to that is make sure that that product has other products attached to it that they can easily access. So for instance, if a finance manager has to log in and create the contract for an etch or vehicle theft registration, right next to it should be another service contract that gives them the price. Another, because we all know salesmen like the path of least resistance and we get lazy. So it has to be so easy that now you have a really easy front loaded product and you have a product right next to it, they can go, okay, do you want to do this? I would tell you right now, most dealers do not sell back end products because they do not offer it.

Yeah, yeah. Oh, I want to get into that. Definitely.

100 of the product. 100 of the time.

Yeah. You know, you're saying vin edge, if you front load it mean it goes on every single car. When the car hits the lot, shows up front. And at that point, literally a customer can say, I don't want Vin edge. Take it off, or I'm not paying for this. And then you as a dealer can decide to Just eat it and just leave it on there and not say anything.

Yeah, it costs you less than 50.

It's not even there. But what that allows you to do is say you like vinh. Oh, what you're really going to love is my key replacement then too. You know, let's get your key replacement. Let's get your tire and wheel for an extra 20 bucks month or whatever it is. So it does.

It's a. It's a value that the dealer themselves wants to buy into one. I mean, dealers do etch because they buy into the value of how much income they're receiving. But I have some dealers that front load undercoat because they do trucks and they do it on every single truck and they're going to warranty that undercoat for the next five years for the consumer. And if you're in the Northeast. Yep. And so if any kind of rust or anything happens on that. And so auto has its own undercoat that we have proprietary and it's awesome stuff, but they put it on there. And I mean, less than 1% loss ratio. Again, we don't have very many claims on it, but typically that is a product that again is costing them less than 100 bucks to apply it. It comes with the product and everything makes the car look nicer. But then they are front loading it for 900 to the dealer, to the consumer. Okay. And it is a product. It has a guarantee behind it, has a warranty behind it.

So what is the claim on that? Because I'm sorry, I. In the south, we don't do undercoating.

Okay. So the claim process on undercoat, it's very, very simple. So if you get up into the northeast and stuff like that and you start to see any kind of rust within that. The second thing is, is that it comes in for a reapplication to make sure that that rust is not corroded into the interior frame. Okay. And then if that. That's most of the time, I've never had a claim go beyond that with our undercoat. Okay. And it was usually only because of misapplication that they didn't get every crack or crevice with that. So. So to go beyond that, then yes, in the contract it does go into. It will repair that damage in any kind of way that it sees fit really within the contract. So it does help that way. I have some dealers like you mentioned, key replacement, and this is a big one for independence. So like with our key replacement or a lot of dealers key replacement that they just internalize you have to put on that registration page how many keys you have when you start, whether you have one, whether you have five. It allows you to buy up to two keys per year. Okay? Up to 350 per key. Plus it gives you roadside assistance, plus it gives you, you know, trip interruption, gives you all of those extra little benefits. But if a dealer has one key, what's. And they're about to close and wrap up and do everything else like that to overcome that objection at the beginning, you know, where it's like, I have one key on this car, but we'll take care of that for you. And now you have a key replacement. If you lose this key, guess what? Call this phone number, they will get you another one. Guess what? If you lose that one, they will get you another one. If you lock it in your car, guess what? It's covered. So it's a lot easier now you're, you're actually changing that objection into a profit. So that's helped at my dealership quite a bit. We do my, my finance managers, I, I always have a marker for them and it's contract count per customer. So if I can get my finance managers to get above a 3, then they're doing pretty good. If they're above a 4, they're a rock star. If they're below a 2, then they don't work for investment auto very long.

So what does that mean? Contract count per customer? You mean different products? Three different products?

Exactly.

Customer per sale. So whether it's service, contract gap, key replacement, theft recovery, vinh, whatever those things are. So the goal is to get three of those products placed on every car?

Exactly, exactly. The goal is to get three of them placed on every car all the time. The, the problem that a lot of finance managers run into is they get greedy. They'll only hit one product, okay? Mark it up as much as they can, the customer fights about it, and then they'll draw back that one product. It's a lot easier like within a menu system to offer them three products or five products and pull off one of them. And therefore their payment comes down.

I love that front end loading. I, I never, never even thought about doing that. But that's, that's. I like that.

Yeah. And it, it helps. And even on like our registration page, it's, it's like it's in 14 point bold font. This is not required for the purchasing of this vehicle. Okay. Because the last thing. Sorry about that, guys. Last thing we want is, you know, any kind of illegality within it because as you guys know, in a finance manager's office, his, his primary job is protect the dealership. That's what it all should be.

And it's the primary place of complaints too. I'll be honest with you, when you look at dealerships that get, you know, tore apart or have legal issues, it's something happening in the finance office. Whether that's know. Yeah, pushing products that don't mean anything. You know, interest rate disclosures, all those types of craziness. It's interesting we talk about that in the Buy here. Pay here is selling a VIP package, right. Some of us will, we'll do service contracts, maybe we're doing cpi, but we don't do a VIP package. That is service contract, debt cancellation, you know, key theft recovery, you know, GPS access. Like you really could sell it as this VIP package that, hey, this, this is what we do for every car. It's this amount, you know, this is what we recommend. This is what most of our guys are doing. It seems like a smart way to go. And then if people are like, oh well, I get, I get roadside assistance with my insurance, I don't want that one. You know, like you said, it's easier than to maybe pull out one or two of the package but still have a good claims or a good penetration ratio.

Hey Jeff, we're going to be a buy here, pay here United Summit. And I hope everybody out there is going to be there too.

Yeah, I would not miss it. In fact, I don't think I can miss it. It's going to be April 23rd through the 25th at the Bellagio. So we are what, two months out right now? Jump on it. Get your rooms booked, get your tickets booked. It's a great time to be in Vegas. The weather's amazing. I mean, if there ever is a good time to be in Vegas, I guess April would be the time. But we're going to do some great stuff at the end of each day. We're going to have some dealer question and answer, Hot topic wrap up. We promise to bring a lot, a lot of value during those sessions. So you're guaranteed to take home ideas that will pay for the trip. Absolutely guarantee.

And what's great about these wrap up sessions, Jeff, is a lot of times you sit in these classes and you don't. Either you didn't understand what the, what the presenter was saying or it was just not a concept that you're used to. So when we start to wrap these up, we're going to bring some of our knowledge and knowledge from the crowd out there, and we're going to figure it all out. So this is going to be a great way to learn what you don't know. Learn what you know and get better at what we do.

What are you seeing at your dealership? What's, what's your highest, like, what's the top selling? Is it service contract, Is it gap?

Top selling is our front loaded product because we're hitting over 90, 90% on that. And we, we do that on BTR. I'll just tell you that right now.

Okay.

I am changing that here in a couple months to an actual GPS device with an app. Fortunately for me, my dealership, and probably unfortunately for my guys, whenever I'm wanting to introduce a new product to the market for a bulk amount of dealers for, you know, for the over 600 dealers we have, it's like, okay, guess what? You guys get to be the guinea pigs. Yeah. Make sure that this all works and, and flows really well.

But that's smart though. And, and here's, here's the argument back to the very first of our conversation. You said you had an itch and you scratched it with auto, right? You're like, hey, I don't like service contract companies. I want to control my own. Luke and I talked about this last week or the week before about starting these dealerships, these businesses inside your dealership, right? It's great because when you go guinea pig this thing, you're guinea pig in your own self, your own money, your own livelihood, you're on the line. Whereas when some of these outside vendors, whoever they are, think they want to guinea pig some program a, they don't know the practical application. They don't get direct feedback from their managers who are pissed and want to quit because all of a sudden you changed everything around. And, and it's not their own skin in the game where it's like, hey, do you want to pilot program this thing? And you're like, hell no, I don't want to jack up my sales for two months because I'm trying a new CRM that isn't figured out. Like, yeah, yeah, so it's cool that you have that proving ground and put your money where your mouth is when you are jacking around with stuff.

Well, it, it is definitely an advantage because I can because of, with my guys and my dealership and we can see the numbers, you know, daily of is this working? Is this not? And believe me, my, my guys are the first to complain to me. I'm sure with you too. It's the same way if they have a problem with anything, you're going to hear about it because it affects their pocketbook and they're going to up and down all they can. There was one part even just two weeks ago, I changed some of the coverages. That's the benefit of what we could do. We can take a coverage and go, okay, well, let's enhance that because you want to now cover this. If you, if you lock yourself into an someone else's contract or something else like that, our software will actually be able to dynamically change that contract and then also change how much the cost should be based upon the new coverage. So that's where it's kind of turned into a software thing. But like to go back to your initial question. Yeah, if I have a finance manager at my dealership that is selling less than 60% service contract penetration, and so we're talking about the warranty itself. That guy one definitely needs more training. We've got it. We need to fix the problem right away. Okay. If it still doesn't get there, I, I move on. And that's usually after extensive training within.

You said 60%. 60%, that's, I mean, that's a, that's a high number for vsc.

It is. But then I want you to think about something because we always compare ourselves as independent dealers, you know, just to other independent dealers. We're going to go and ask our friends like, hey, how you doing this month? And sometimes we like the answer that they're slow because misery likes company. Right? Yeah. But why don't we compare ourselves to the higher performers? So when you're looking at a franchise dealership, if you have a franchise dealership and your finance manager is less than 70, they're definitely having a problem with it.

Oh, wow.

You know, so. And interestingly enough, this is such a weird statistic. The average penetration percentage for a franchise dealership nationwide is 68%. Okay. On service contracts. You know what it is for independence.

Oh, I bet it's in the 20s.

You're exactly right. It's. It's on the low 20s. It's like 21.

Yeah.

It's insane. So why.

I don't know. I think Luke, Luke, he's, he's a big fan of penetration. I just don't know that he gets to it as often as he'd like to.

That's why we're talking about the back end with Luke.

It's not quite as deep as he would typically, but some people are just born that way. Some people aren't. How do you get your guys to buy into that? How do you get your team to like, really, Is it all money? Is it like I'm gonna come over here and crack you in the head? Is it like, is it just internal, like culture? How do you get them to sell 100 of the product 100 of the time?

It's all of those, Jeff. Because what it is, is. Well, one, I do think that there's a massive mistake when a dealer doesn't focus on the back end to go to our initial thing. I think that it's very hard for a dealership to maintain a good profit margin overall. Okay. On the vehicle when you don't segment the sale. If you have a guy that's overcome all of these objections outside on the sales floor or out on the lot, and then now he has to come in and show them a payment and now overcome more objections on a service contract or a VTR or a gap, you are draining that guy down. You have to separate it some degree. Okay. You will always have a higher amount of, of income and penetration. If one guy's job is to get that number, the other guy's job is to get the commitment, the other guy's job better be to get that number. So that's why, I'm sorry, but with these franchises, that's why they have, you know, sales floor, then they have a sales manager and they have a desk manager, then they have a finance manager and they're all playing a role. And that role always adds up to a lot more money than what us independents are used to, you know?

Yeah, that's, that's super interesting. Hadn't I haven't thought about that before? The reason is segmented because you're, you're. And it. There's. There's multiple ways to think about this too. Once they've already said yes, getting in to say yes again is not all that hard.

Right, Right.

But it, it's harder for that salesperson to continue down that road because they've already won one battle. Right.

Well, then they've been beat down and they're so scared, they're so skittish that if they have another.

If I ask, if I ask again, they're going to walk.

Right.

And so, ah, super interesting way to look at it.

I've never. We don't have one dealer we. That has a higher profit margin per vehicle that does it as a switch than one that's segmented. So, meaning, like we have a bunch of dealers on our network, but we do have some dealers that act as Swiss army knives and you know, as car guys, we're always prideful. So I have a couple of dealerships that are like, no, my guy knows how to do it. He does everything front to back. He's great. And so they just have three or four salesmen that do everything front to back. They're great. Okay. But if I show you their numbers compared to a store that does it more organized and segmented, you'd be shocked at the difference in profit. I mean, and it's not just a little bit. We're, we're talking 3 to 400 per unit, which adds up to a lot in the long.

Yeah, it does. It's, you know, it's hard for a lot of time for independent dealers to look past the cost of, of that extra person in the dealership. But if you can show them the extra profit in that. And it's that much difference, I mean that's, that's huge. And I, I mean once it, you know, the difference in, in penetration percentage from, from the salesman selling F and I compared to an F and I person selling F and I. Mm.

Yeah. And I mean, when you think about it, if you're going to go, if you have a problem with their BMW or whatever and you take it to Jiffy Lube, they most likely aren't going to know a whole lot about the product on the problem of the BMW. Right. You take it to a BMW expert, okay. They're going to be able to dissect and diagnose that, that problem relatively quick. Well, it doesn't work that much different in the car industry. If you're going to take a 24 year old kid and try and introduce service contracts and warranties to him and everything, he's going to do his best. Maybe. Or he's going to tell his manager, yeah, I tried, but you need to go to a person that actually studies it, that actually just designates his entire time and his family's welfare on selling service contracts. And so going back to the culture problem, going back to all of those things that kind of create a cohesive dealership. You've got to have experts in different, in, in different areas.

Hey guys, since we're talking about reinsurance, of course Buckeye sponsored podcast is the place to go to set up your own reinsurance company. Luke and I have both done it. We control our own products.

Yeah. And there's no better way as, as we were talking about than making money building wealth is, is learning to sell these products and have the right products available and then reinsuring those products yourself. Because not only are you making the money on the, on the back end, as Jeff really likes, you're also getting the benefit of the actual insurance product. So make sure you set up your reinsurance company, then build training to sell it the proper way and off you go.

You know, it's same thing we talked about Luke when we were talking to Brandon a couple of weeks ago. Right. On our board of directors episode where he's struggling to get sales because he can't find banks that will give him good callbacks. And it's like, well, that's because your salesman is also your finance guy.

Yeah.

And he doesn't know. So he has one bank that says yes to him. He's not interested in being a pro at all banks or finding a better bank. So, yes, you're. If your salesmen are selling the insurance products, why would they push for more? They already got a commission on the sale. They don't want to chance it. They don't know the products that well. They're trying to learn the cars. They're not going to know everything else. It does make a lot of sense to just make sure that stays separate and you incentivize that person. Does it have to be commission based? Can you put an F and I guy just on a salary and get performance out of them or do you think that's not possible?

I, I always am a fan of eat what you kill. And I mean, yes, you can give them a baseline to start it off, but I would also say that, you know, when you get good talent, that is so invaluable. And what I mean by that is, and a lot of independence. And this is really. And I started doing this about eight years ago, a lot of independents kind of keep themselves in house and so they're going to hire their neighbor's kid or something like that because they think, okay, that's the best scenario. But what ends up happening is if you do get a trained salesperson, at least you start off with that way. Okay. There are a lot of guys that are franchise trained, that have been out there, that are finance managers, that don't even understand that the grass is so much greener. The independent world, they, they are used to getting there at 8am, going home at 10pm, working six days a week, and that's what their job has been. Okay. They are used to having managers grind on them, being really restricted within their, their talents. But when you can open up that world to those guys where it's like you're going to make just as much money because even then on an independent, you have way less overhead, typically than a franchise dealer does. You don't have to pack your cars as much. You can offer them a higher commission percentage. You can give them a better lifestyle, you can give them a demo because you're not corporate run. You can give them a lot of little perks that they haven't quite even seen. And then now you're bringing on a guy that immediately is used to a 68 penetration, that knows that he can sell these service contracts, that knows the banks, knows the relationships, and he's coming in and he's making more money working 40 hours a week than he was making 60 hours a week at a big corporate store. So you. I think independents have to get outside of the mindset that they can go a little bit more talent than they even think.

Yeah.

World does give a lot of benefits to those really talented guys. So.

Yeah.

Yep.

The last thing I want to touch on, Michael, before we wrap this up is the final step, which is getting the money from the bank on these products. Right. Is there any advice or tips or tricks you'd have for us dealers to say, hey, is it all just straight loan to value, like just 100%? You can put on as much as you want, but the bank's only going to give you 110 or 120% based on credit score or whatever? Or is there any other way to, to look at that when you're presenting it to a bank?

Okay, great question. So kind of going also into the talent, employees and everything else and segmenting it all goes hand in hand with getting the right approval from the bank. Just give you an example. So at my dealership, we have, you know, obviously sales, salesperson, we have a desk manager, we have a finance manager. They're all, they're all separated, right. Then we have a general manager. The desk manager is going to fight and give leg any way he possibly can. What I mean by leg is he's going to. If a customer comes back and they know that they can get them at a $300 a month payment, he's going to go back to the desk and say, okay, with $2,000 down, I can get you at a $323 payment. Okay? So that down right there has established gross. That's one part the salesman doesn't know or doesn't have the emotion of. This is what I can do. The desk manager knows he's given that person leg. And the Finance manager knows. Okay, well, this is what I have room to play with that that customer signs on there. Anytime you're dealing with loan to value, it's always a matter of down payment or trade or something along those lines. Right. So no matter what you do, those numbers that you give to a customer should always have the ability to come down. Do not have them go up. So it's, it's. Just, it's, it's just such a. It's an easy concept to understand, but yet so many guys do it backwards. Okay.

Yeah, they're scared to hit them hard, so they hit them soft and then they get the reality and then they're like, oh, by the way, you got to go up to this.

Yeah.

As opposed to the other way around. Yeah.

Quit being afraid of no, no, no. Is going to the next. Yes. Okay. Quit being afraid of no. And I, I was in my store three days ago and I love my, my general manager. His name's Anthony. He's awesome. And he was desking that day because the desk manager was off. Salesman comes back in and he's like, okay, I can get him at this. And he says, no, I'll give you this much. Then he comes back in. And it went back three, four times before Anthony said, okay, now you can do this. They had bumped the guy, okay, 68 in payment, which is a lot, and a thousand dollars in down payment, which is a lot. And then came back and I'm looking at the deal and I'm like, dude, that was a good deal with the first numbers. And it's like, yeah, but what you have to understand is that salesman, I'm not going to name him, he's weak. If I push him, he's really strong. Okay. That is the fight that dealers go through that we don't even recognize that. It's like, okay, you've got to have accountability within the numbers you're presenting. And the only way you're going to have accountability is if you have one more than one person. So you've always got to have someone that touches the desk, touches a finance manager. Heck, go out into the detail shop and just talk for a minute, slow down, come back, but you are losing.

Gross.

If you don't methodically go through things. If you don't slow the customer down, you've got to slow them down just a little bit. Then when you come down, now you're going to come into reality. Now you're going to get them to the point of, okay, I'm actually making money on this deal. Even though I was giving the front end away from by $300, I'm making 20 $200 because I captured everything on the back end of what I can. So. And to your point, it is really pushing somewhat of a down payment. Down payment is always going to associate with your direct gross. If one of my guys comes back with zero down, I'm really disappointed in him.

Yeah, yeah. Especially those people that think they're big, big credit ballers that want to roll in with zero down or something on a big truck. It's. It's probably more difficult too, when books are volatile and book values are heading in the opposite direction of reality on the street. That's the big, you know, like a, like a nice just even market or like a, just a gradual depreciation. We like normal times. Right. Because we can much pretty predict that. But when books take these huge spikes and huge drops and things get crazy, that's when it's unpredictable. Right.

And it's also hard depending on what state you're in, what book you're using. So like, I mean, you know, here in Utah, we use J.D. power, right. And that's what a lot of the banks and credit unions want. They want JD Power retail. It's beneficial for us because if you have, let's say a 2016 F350 with 90,000 miles, try and book that same truck on Kelly, it's massively different. Okay. You go down to Arizona, your loan to value is going to be a lot less because they're using Kelly. Just. And it could be the same bank. That's what's crazy to me. Picks me off, actually. But you have to associate what your inventory is and the book value based upon who your lenders are within this. And with you guys, I mean, you're dealing with subprime. So it's like, okay, we're doing with 100 of wholesale on Kelly and maybe sometimes black book and you have no idea. And the books are so different on their values, but depending on Miles. It's crazy.

A whole nother conversation is, is that, that, that to me is just nonsense. I mean, the facts are the facts. The reality is the reality. How can those they be so far off from each other?

I don't know.

It's got to be a game. That's all I got to say. It has to be some sort of a game or, or who gets paid by who. It doesn't make any sense.

But you're going down your rabbit conspiracy hole now. Yeah, whatever.

It's always who gets paid by who? I mean, that's just.

This is.

Follow the. If you will, the answer. Just follow the money.

Follow the money. Micah. Hey, man. We really, really appreciate your time. This has been some great stuff. I definitely have some stuff to take back to my guys and. And as far as getting the right products set up and getting that good backend penetration.

Yeah. Cool. Well, thank you, guys. I really appreciate you having me on.

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