#330 - Perfect Storm For BHPH

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. Gentlemen, it is hot out there. Hot, hot, hot. And you know what happens at my place when it gets this hot?

Cars blow up.

Everything blows up. Everything. I cannot tell you how many customer cars we have in our service. Well, I can tell you because I have a list right here that need engines. It's like, who. Who builds these cars and why. Why can nothing handle 100 degree heat? Is that what you guys are seeing?

I. We get that problem. By the way, we got Josh Sellers with us today from Auto Express of Hamilton up in Ohio. He. He did a How I built this with us, Jeff, a while back. I don't know what number it is.

268. 268. So if. When you listen to Josh in this episode, you want to get more background on him, a great, great episode. Stay on until about. I think it's like the 20. About halfway through the episode, he really gets into his philosophy on his facilities and stuff. It is. It's. It was honestly a great, great episode and definitely a. An attitude changer for me. But, Josh, thanks for being here.

Well, hold on. Also, Josh, I want everybody just to Google Auto Express of Hamilton and look at his facilities, because once you listen to that and do it, you need to see it. Josh, thanks for being here.

Pleasure. I love the. I love the. The last time and appreciate all the kind words and the opportunity to be back on again. So, yeah, pleasure.

Josh, I've got a couple things I want to ask you from. Updated from that episode as we get into this, but right now, what are you seeing? I mean, is it the same thing for me? Sales are slow, repos are high, blowing up cars are high. My shop is basically just triaging customer cars right now. We're not even worrying about recon or getting cars to the front line. It's a freaking ghost town out here. What are you guys experiencing over on your side of the country?

I'll go first. Lucas, is that okay?

Yeah, man. Yeah. We're interviewing you.

Nobody cares about Luke.

Yeah, they don't like to listen to me anymore. They listen to me longer.

So I got.

I got.

I got a couple numbers. So I'll start off with some stuff that I thought was really, really good. So. And if you're a buy here, pay here, nerd like myself, some of these numbers, will I still get excited about them? So February 24th versus February 23rd. We did 141 deals. We're single point location. We did 141 deals this year. Last year we did 152 deals. So we did a, we did 11 less sales and our average cash in deal this year was $300 less. Okay, so 11 less deals, $300 less and we got 50,000 more dollars down.

Yeah.

This year than we did Last year on 11 less deals at a $300 less cash and deal or sorry, ACV, not cash and deal or ACV was $300 less and 11 less deals and $50,000 more in down payments. That was just huge for us.

Yeah, that's big. Did what, what do you contribute the more down payment to? Were you using our friends at tax max? What, what was going on there?

We did use some tax max. And you know when, when you get in, I'm, I'm in the office every day. I don't do anything behind, behind a desk. So I don't know how many tax max. I'm not going to pretend to be something I'm not anymore. I don't know how many tax max deals we did. I know this is our very first year using tax max. I probably should have did a little bit more homework because obviously that's a really, really good question.

But it happened nonetheless.

Yeah, you know, I don't know, it just, it just happened. And then the only negative is it's, it just came to a screeching halt like the first week of March for us. So downside is I'm stuck with, I mean I probably have 25 or 30 cars on my lot like for sale out of 70, 65, whatever we have out there that I normally wouldn't have outside of tax time. So I'll give you an example. When we got, right now we have a 2020 Malibu with like a buck 20 on it, base model. It's got, it does have wheels, $2,000 down. Looks like an eighteen, nineteen thousand dollar car for us. That's pretty much a. Why have fifteen or twenty cars like that that are just going to be onesie twosies for the rest of the year. They're great inventory. It's a step up vehicle for us. That does kind of create a little bit of a problem outside of tax time too. Because when I have those cars that's where everybody wants to go and that's traditionally been what we do. So our sales have been slower. Most of our cheaper stuff is selling number wise. Right now we are total ar about 25 accounts over where we projected we did sales numbers. I'm going to give you in. I told you already what we did in February. We did 98 in March, which was lower than what we project. We did 83 in April, we did 83 in May and we have 23 out for this month, which is really, really slow. And I just have been feeling this, you know, my gut in, in my dealership is, is 19 years of gut. So it probably deserves a better word. But we have some full size third row inventory like, you know, for us, you know, don't laugh at me if this is a, A, a turd for you guys. But 2009 Chevy Tahoe with 175,000 miles on it. But third row, full size leather, good looking rig that doesn't sit on our lot ever, you know. Yeah, bucks down. We got four or five of those. Most of the stuff that we've been selling right now is stuff that is 10, nine or less. And that inventory is just very difficult for us to get. You know, we include a warranty with every deal. We're unfortunately about two grand a copy in recon. So it's very difficult for me to get a car through, put a warranty on it that I can sell for, for 10. It does happen. Our buyer's been with us a long time. I still buy some stuff. So we've been really trying to hunt that stuff down, force it to the front of the line in our reconditioning process. But I just feel that sales are just a little bit, they're just a little, little off. So energy that we've always had.

Yeah. And, and I, we've seen the same thing. Josh and I made a commitment that by the end of March and sometimes we have some really high line stuff that, that I was not going to have anything over $25,000 retail price unless actually anything, anything that was not a truck had to be under 20. And we've gotten down to one still. But when you have that high, high dollar inventory, if you're a lot, you can see sales just drop. And June has been tough for us. I don't even want to say how many cars we got out. And even we're talking about because it's been that bad. But, but we were good. We had off January. May was good, but June has died and the repos. Holy cow. And the freaking cpi crashes.

Oh man.

It's like, I don't know what's going on out there, but there is something in the environment that is, that we hadn't seen in five years, I think. I mean, how, how are your repos been?

So my younger brother has been with me for over a decade. He's boots on the ground, runs the day to day gm. We had some turnover the beginning of last year in our collections department. We hired an assistant GM that I think is possibly a two year training job. There's just so many moving parts in our industry. I'm not going to go into all of them. Most of you guys are aware of them. But just to learn how everything works. When you have service and detail and tow trucks and sales and you know, not to mention the staff, but the dollars, the cid, et cetera, et cetera, et cetera. So my brother got kind of stuck being the collections manager and he definitely understands the big picture of our business has been. Been on the ground a long time. So he's been in the back. So our collections has been really, really, really good. At some point in time, I'm gonna have to figure a way for him to get away from that collections role because, you know, it's. I can see and feel other things lag because, you know, he's tied to a desk a little bit more than he wants to be in, a little bit more than I want him to be. But our collections is, well, pretty good right now because he's back there.

Yeah, but that's, honestly, again, we talk about this all the time. That's the most important job. I would put my most valuable person on that because look at, I mean, Luke's talking about his charge offs, right? And I'm talking about my charge offs. You know, my April and May, I ran 4% and 3% respectively for those two months. So if I'm charging off 4% of my portfolio in one month, if I do that 12 months in a row, I'm in big, big trouble. So if you have a guy who's keeping you at 1% or 2%, which is acceptable, that's serious money you're keeping on the books. I mean that's a, that's a huge swing for you. It's big for me, it's massive for you, right? One or 2% is hundreds of thousands of dollars.

We've always been a high charge off, you know, we've always been. When I first started, you know, we're, we were 29.99, 3999. Then we went to 49. And you know, the progression, you know, of our retail price cars, we've always been a pretty high charge off model where we love being under 3%. And we've been there pretty consistently, but even, you know, a quarter of a percent.

Yeah.

Especially when you start running this thing out, you know, through six months. So we're going to have probably a little bit of a downtick in sales. That feels like probably a little bit of an uptick in cash in deal because we have the hangover cars from tax time. And I don't know what I'm going to do with them. I'm not going to take them back to the auction and lose money. But I mean, I might. It might be a really good idea, you know, Louis, to just pull eight or 10 of them off and go high. I got a service department that has, you know, parking for about 400 cars. I can go maybe park 10 or 12 of them over there and keep two on a lot. You know, it just, it's. They're a distraction, you know, they're a way to get people to walk off the car lot when they only got 800 bucks because they would normally buy eight of the cars that we have for sale, but they only see the five. They can't have that.

Well, that's it.

That's when I argue about this all the time. Right. Because I run. I'm. I'm 70% buy here, pay here, 30% retail. So I do have some, some. Some credit union units next to my buy here, pay here units. And it is distracting for customers. It's very hard to understand, and it definitely makes your 2012 Ford Focus look horrible next to a 2020 Ford Focus. But a lot of it is the customer training like. Or the salesman training. You know, that's a lot of it. I think you can have those two models next to each other in the same car lot. I know a lot of dealers that do it successfully. It's training the salesman to help set up the expectation for the customer, in my opinion.

I think, I think, yes, that. That helps, Jeff. I think sometimes, though, taking cars that. That won't sell and instead of just cutting the price, taking them off your website and drive them for a cup, driving for a month or so, you know, if you need something to drive or if you got somebody needs something to drive and then bring it back in.

But he's not talking about won't sell. He's talking about not having customers to qualify for him. Right, Josh?

Probably. Probably a little bit of both. Yeah. There's no. No, no cosmetic issues. No drivability.

Yeah, yeah, yeah, yeah, yeah.

Forever people have been able to come here with, you know, the Last, the last couple of years, you know, Covid, and up until now, it's down payments have rose, you know, hundreds of dollars. But we were 7, $800 average down payment for over a decade. You know, now we're over a grand, 12, 1300. But I got cars that are, we pay sales tax up front. Not saying we always collect it from a customer, but we ask for it. I got, I bet you I have 25 or 30 cars that are 1500 dollars down plus taxes, which is a 22, 2500 dollar down payment. And they're better looking and newer than the 300 down cars. And it sometimes could help us to lose a sale because I have something that the customer can't get.

Josh, why are they 1500 down? Why is that a requirement? A hard, hard requirement? Is that a lender thing or is that your own decision?

You know, good question, Jeff. Just our deal structure, you know, we're, we're.

Why was that your decision or is it your lender?

We don't have, we don't have a lender.

Yeah. So if it's a $1,500 down car and you just arbitrarily pulled that number out of the air because you decided it's a $1500 down car, why is it not a 500 down car for the right customer and get it out there and get money.

Definitely, we do do that. We definitely do do that. But I'm not looking to do six year loans, you know, so when you have a 18 or $20,000 car, it's very difficult to do a deal like that with no money down.

Someone doesn't got $800 a month to pay 600amonth.

Absolutely. Yeah. Well, we don't have people coming in here that can pay 750, $900 a month on a car in our market. So these are really.

That car, Sorry I'm stepping on you, but that car will do a five year loan. That'll last a five or six year loan. It'll make it at 500amonth for 60 months if you chose to. With the right customer. Right.

Probably a lot of them. And, and then, so we're, we're used to this market in this deal structure. You know, if you own a McDonald's and all of a sudden you go in and say, hey guys, we got meatloaf in the back and it's $42. We don't sell stuff that costs 42. We don't have a bag for meatloaf. So even my salesman, my CRM lady who's been here for a decade when they start looking at cars that are 18, $20,000. Historically, we're 12, 13 grand and under the. Everything just looks different. So it's a whole different. The payments different, the length of the loans different. Like our underwriting sheet, we don't even have. It doesn't even go up that high. So we have to get mad. It's. It's just.

I got to add lines to my spreadsheet.

Yeah.

It's just.

It just changes our model, so.

Okay, I get it. I get it.

I would love to sell a little bit nicer car, but. So for me, passion deal and deal structure is absolute, dad. I mean, if I don't control that, I. I can't financially run my business, you know?

Yeah.

This is 19 years next month. And if I don't watch my cash and deal, it's, you know, game over. I mean, it's the most important number I pay attention to. Some don't care about it, but for me, you know, you sell 80, 90 cars a month and that number slips by a grand.

Yeah. You're in trouble.

That's a big number. Yeah.

Yeah, I guess. I guess maybe I'll take the other side of that because honestly, I don't track cash in deal. Yeah, I see it at the end of the month. I don't track it. I don't really care about my cash in deal. What I care about is getting that asset on the road, earning me back a payment that the customer can make. Right. So what if he. If I say, you know, I'd like to get two grand down on that car, but homeboy only has a thousand, that doesn't change his payment so much that it makes a big deal. As long as he can still afford the payment. Right. Because payment to income is the number one thing. Can he make the payment? We all know these customers aren't going to 48 months. They're not going 60 months. They're only going 24 months. No matter how long the term is, they're only paying for 24 months. At that point, they're going to wreck it, repo it, or trade it in. So I could set this term for. I could set the term for 20 years.

It doesn't matter. That's your lease mindset.

I totally agree that I would much rather have all these cars in somebody else's driveway, getting them to work and producing income for our dealership. You know, I want them to go to the grocery store and soccer practice in my vehicle. I want them so we can fund our store. I've already bought the cars. The cash and deal isn't the same on cars I've already bought as projecting out the rest of the future year. I've already bought the cars. I would much rather have them in some somebody's driveway. We've done several trade ups. We've definitely either eaten gross or taken less down or stretch turned on some of them. I'm definitely not scared to do that. But I have from for us some pretty much tax time exclusive cars. I was projecting to do 30 or 40 more cars in March than we did which would have solved the whole problem. It just came to a halt. I probably bought more than I need and sold less than I projected. So it's not a major problem. It's just we have inventory that we're not used to having. We have down payments that are a little bit higher. Trying to meet some sort of deal structure that makes sense for us and our customer to try to control the losses on the back end. But we absolutely have to make a decision to either move some of them off the lot so there's not so many of them as a distraction or focus one at a time on hey listen, we're going to stretch this term a year, but this car is going to be in somebody else's drop driveway.

A little less down, a little longer term.

I'm going to make changes as soon as I get off of this podcast.

The only thing I want to point out, and I don't want to, I don't want to beat this point to death, sometimes we have these, these underwritings or these mentalities or structures of our dealership and there is, there's that fine line, right, between like, hey, I need to be flexible with the market because this is the, this is the reality of the economy we're in today. Sure, I would love to still have a $3,000 ACV car that I can sell for 9.99 cost plus two plus a thousand. But it doesn't exist anymore. And so I've had to adapt my mentality to accept the fact that it's different now. People that haven't have just gone out of business. Right? Well, I'm not going to do that. I'm not going to buy this car. I'm not going to pay that much for a Honda Accord. Sorry bro, then you're not going to have any cars. Right? So I do think there's that point of like, hey, I got to be flexible because this is what the economy is telling Me. And the other side of it is like, yeah, you don't want to be irresponsible. Sure. I don't want to give everyone a car for, you know, no down and yeah, be. Be completely flipped.

What, Josh, what do you see moving forward this year? Is there something that you think's hiding behind the corner? Are you looking forward to the remainder of the year? What do you see?

We've. We've never been slow in sales ever. In, in literally 19 years, we've never been slow. So the, the last couple months, even though we've crept into the 80s, it's just been, you know, we had a day where we did nine, we had a day where we did 10. We just have had more zero in one day than ever. Traffic is slow and a bunch of people coming in with 7, $800 down. I don't want to have one or two bad collections month on the same time. We have one or two bad sales months and everything we work so hard for, preparing for tax time, underwriting, collecting, reconditioning administratively. I don't want to give all that back. You know, it's so hard to put on account. So. Yeah, yeah, you know, our expenses are always going up, our payroll is always going up. I need the revenue to remain where it is and, or grow so I can keep taking care of my staff, so they can take care of my employees. But I do have like this eerie feeling that, you know, we're going to have a couple of months where our charge offs are way higher and our sales are way lower. And then, you know, for a portfolio our size, we're low 1700s, you know, two months in a row, and I'm down to 1650 or 1660. It's not the same business. I mean, it's not, you know, we're not going bankrupt, but, you know, our expenses are set up to have the amount of accounts that we have. Yeah, I want to grow. I want to grow our portfolio. I might be a little unrealistic, but I'd love to get up to 2,000 and, you know, we're training the staff in place. We have the funds to do it just, you know, getting, getting. It's. There's a lot of moving parts and by here, payer and I feel like we're always doing great at four or great at five or great at three. And it's like, you know, it's always misfiring, you know, whack a mole. Yeah, absolutely.

You haven't had the charge offs yet. You're doing great, man. I mean, if you're not seeing what I'm seeing right now, because I got, I'm getting hit on both ends, right? Slower sales, smaller grosses, more recon cost, and now I got a charge off issue. Right. So, man, if you've got through that, then you're doing good. And of course, guys that don't have strong bank covenants or that aren't already leveraged to a dangerous extent can weather storms like this, you know. Yeah. You might shrink the portfolio because of sales. You might have a season of bad cash in deal or some extended terms or something, but you're going to get through it because your leverage ratio is healthy. Right. And maybe I got to cut staff back or maybe I'm going to eat into my buy here, pay here to fund things for a couple of months. But when you, when you are leveraged or matched that you're lending, that's, that's the recipe for disaster. And those are the guys that have got to really keep their thumb on this.

Yeah. Honestly, extremely fortunate, lucky, blessed. We have, we're about 30 leveraged and it's fixed for 30 years. Very, very low interest rate. We don't have any covenants on anything we do inside of our dealership at all.

So. Awesome.

So it. And I know, you know, I have dear friends in a dealership in, in the industry that I talk to on a regular basis. And you know, some have no lines of credit, some are debt free and some are 60% nightmares of what they got to go through at the end of the month. I have guys that I think are 10 times smarter than me and been in business just as long or longer that went from 5 or 6% to 12 or 13% and they're, they're going out of business. You know, it's. The model doesn't work, paying 12 and a half or 13%. You know, they're running the same business paying 30, 40, 50, 60 grand a month in interest and they're shrinking their portfolio down to pay their bank. And it just.

Yeah, and then they get out of.

Those guys that are sharp and in some bad spots and pure luck that I'm not in one of those spots.

Yeah, there are, there are many people out there like that, unfortunately, when.

Yeah, Josh, I want to ask you your last episode. I want to, I want to get a follow up on this. You're still closed Saturday and Sunday. Was that a good decision or do you regret it?

No, no, I think it was a fantastic decision. So we're going on January was, was our One year anniversary of it. So, you know, we're, we're pot committed now. Same with the. Yeah, you can't get away from your loaner cards. I can't go, you know, so through tax time.

Through tax time, you stay closed on Saturday and open till 6 or 7 on weekdays.

We're open till 6 on Tuesday and Wednesday. And we're, we're open 10 to 7, Monday, Thursday, Friday. So. Wow, we have really good hours. We did 152 deals in February last year and 100. Yeah, 41 this year. That's Monday through Friday.

Wow.

I'm not telling you my sales staff doesn't stay late every once in a while. Yeah. You know, but we're not, if we close at 7 o', clock, we're not doing test drive at 7 o'.

Clock.

They got somebody on test drive at 6:15, 6:20. They're here till 7:30.

Yeah.

So, you know, divvy it up between to have two people stay. But we're not in here till 8, 9 o' clock and Saturday or Sunday.

You still open Saturdays?

No, we've been closed on Saturday since March of 2020.

Jeez, now am I the only one? What's the deal?

I don't know. We do open Saturdays in February and March only. And it's, it's 10 to 4 and, and that's it. And we're, we're open from 8 to 6, Monday through Friday. But the 8 is 8 o'. Clock. Is service. Service department open from hour earlier.

Man, I got to rethink that. Hey, guys, real quick. Of course, when you're talking about being closed on Saturday and Sunday, which is really, really interesting to me, I'm going to get off this podcast and go talk to Adrian right now and discuss that. You got to have a great payment platform. Blitz pay, like we mentioned, is the way to do it. I mean, automatic texting, like I Portals, you know, the cash pay network. Like that's the way to do it. Get a little freedom.

Yeah, it is, Jeff. We closed, we're going on 18 months now being closed, and our collections on Saturdays have not dropped off. And actually when I say 18 months, we've been four years now since we've been close on Saturday, but our, our payments have not dropped off. And that's because the ease of making payments through BlitzPay really, really takes the cake and lets our customers feel like they can do business with us even when we're close.

Yeah. So make the switch. Get them set up for your credit card processing your payment portal and tell them the podcast sent you.

The one thing I was so concerned about when we went to the Saturday close was collections. I wasn't really worried about sales, but I figured we could, we could pull the sales through till Monday. But we, we are collecting essentially the same amount Saturday, Sunday now than we were before we closed on Saturday and Sunday. So it did make a difference.

Yeah. And if you can have all your, you know, online options for payments, plus some automated text reminders that go out through your blitz pay, then of course it makes it so much easier to not be there because those, some of those interactions are still happening. That, that, that's really surprising to me. I'm. I'm going to reevaluate that.

That's percentage of sales Watt is if you're Monday through Saturday, I think each day, you know, 16, 17% to get to 100%. We were doing like 23% of our sales year over year on Saturdays. Yeah, it was just a little bit better than an average day. But our, our Monday was the same. And then we were like down on Tuesday, up on Thursday, down on Wednesday, depending upon what day the month was. But when we, when we switched it, I mean, we, we had the last year. We had the best first quarter we ever had in the history of our company. And it was our first ever Monday through Friday, like, literally, we just did it.

I think it's a mindset.

Yeah, absolutely. It's just how we talk about the service department. There's guys that are killers in Biker Payer without a service department. Yeah, there's. There's guys that are killers in Buy here, pay here, that are leveraged more than you would feel comfortable being leveraged. There's guys that do all their collections overseas. You know, there's just. It's whatever you feel comfortable with and make it work for us. It was all staff hiring when we put out a job ad. Now it's unbelievable, the response we get Monday through Friday. I mean, it's the first Monday. No nights, no weekends.

I mean, yeah, if Monday's a holiday, then you got weekends happening.

And you know what we do? We just recover, man. We just recover.

That's right.

That's so interesting. I want to change gears one more time, Josh, because I think this is interesting that I've never asked both of you. We touched on it a little bit. So Luke sells a very high acv, right? And his cars are kind of, you know, everything's spotless. He fixes every dent, bumper, scratch, smell. And then you and I, you know, I think we love that low ACV area. And, and I mentioned to you guys before we recorded that yesterday I spent the entire day chasing up a mountain to find one of my loaner cars that had been flipped over into the bushes down a mountainside. One of my precious Kia souls is now a frickin trash can.

At least you didn't lose anything.

Yeah, I got it. Hopefully the engine runs because the engine's worth more than the entire car. But anyways, what I'm driving at is this customer that we had, we put them into like a 2003 Mazda 6, right? It was one of those just like, should I be selling this car buy here, pay here or should I just send it to the scrap yard? So it's a really, really low ACV. It was like a, you know, a 9999 car. The guy had maybe like two nickels down and a freaking like bicycle to trade in. So I want to ask you guys and Josh, from your standpoint, is there a customer that is attracted by the really low affordable cars that is just a customer we don't want because they tend to be maybe more of a headache maybe, you know, I mean, this guy had his Mazda two months and the engine blew up. He had our loaner car and was driving all over God's green earth at 100 miles an hour. Because I get the notifications, like, is that me being like only seen one little sample? Because I mean this happens to me a lot. But do you have that opinion of like, wait a minute, there is too cheap of a car. There is like the bottom of the barrel and I don't want to have those cars because I don't want to attract those customers.

I'm, I'm gonna answer my opinion then. Josh. Go, go right ahead. Yes, there's. You get the wrong customer with the wrong car. I found this out in the rental car business. People who can't, can't afford and can't qualify for a buy here, pay here, they end up in rental cars a lot of times. And they're the worst, okay? It's just really bad. The lower end, buy here, pay here car, you get the worst customer you get. In my opinion, Josh, yours.

I built my business selling that car. So we're 1730 accounts. I think I'm 5 million in debt on 15 and a half million. I got probably close to $2 million in inventory off selling that car. So I totally disagree. I still think that there's, you know, hey, I'm not going to, I'm Never selling something that I don't think is going to make meet the term right. My service manager is, is an agreement upon that. You know, I'm never selling something that I hope runs for six months. I mean, we're, we're too far. Cash and deal. I mean, I don't, you know, I don't, I don't want any of the cars back. It does change your operation where, like you chasing a car up a mountain. We leave cars all the time. You know, I got somebody.09 Malibu with 150,000 miles on it that's been doing DoorDash for 13 months. The car don't start, it's impounded, or has a window busted out and it's on a jack stand. I'm skipping that car off and moving on to the next one where I know I have buddies that, you know, they sell, they send me some of their repos and they're, you know, they paid 20 grand for it. The customer had a car for 18 months and the car's worth 15 grand. There's. It's just different. I don't have the cash to sell that. I can't afford it. It just, you know, I can do onesie, twosies, threes and foursies, but I've never had the access to capital to be able to drastically change my acv. I, right now in my life would love to sell something that was nicer with a higher gross, have the same business and sell less, less cars. So I'd love to be able to keep 171800 accounts and sell 65 or 70 instead of 85 or 90 and put a little less stress on everything around here. But I don't know how to do that. But I'm very interested in. I have a lot of friends that sell way nicer cars than me. I just don't understand the money of it. I just don't. Well, two grand a car. I can't get a better car for 500. If I go 2 grand a car, do you know what that does my business? Two grand a car at the end recon. I mean, just anywhere, wherever you do.

Oh, oh, just.

Yeah.

If you jumped up, acv, it's your cat.

Your cash is gone.

Yeah, well, it is, but now you're just selling less cars, right? So.

Well, well, because your grosses. I don't think your gross is going to grow up. Go up.

Your grosses aren't. But like Luke argues, is that, hey, Luke has a higher acv, a lower gross, but he's collecting more at the end of the day. Right. So the, the, you're going to have less recon headache, you're going to have less goodwill warranty claims because it's a nicer car quote unquote. So yeah, you might have a lower markup up front and yeah, you're going to have less accounts on the books but your dollar portfolio is going to be the same and your charge offs are going to be lower the same.

Way I cash and deal is a big deal to me. I've always looked at AR in number versus dollar like I really don't even care about my AR dollar amount. But when Luke and I could be wrong on this, it's just how I've always ran my businesses. I, I'd rather have three people paying me 400amonth than one person paying me $800 a month with that same money, you know, so always been my philosophy.

Yeah, I think, I think that's the right philosophy.

For. But that's not your philosophy, Luke.

It's not. I think it's the right philosophy though. I don't want to be in that business.

But it's a different business. It is a different business.

But the reason I think it is the right model from a cash standpoint is that there's a lot more cash produced with a lot more cash out late. So I believe the return on that cash for cash is better, is a better percentage. So I don't want to be in that business but I think it is, it is probably the traditional way to think of actually. How about here pay here store is supposed to work. That makes sense.

I'm still intimately involved in 20 groups and you know, industry summits and talk to buy here pay your dealers on a daily basis. I think it's changing to Luke's model the industry more and more and more. There's guys that are buying 10, 12, 15, 18. I got buddies that buy 25 and 30 thousand dollar cars and I think they're awesome. I just don't know how to make it work. I can, I, I just. But here's. I personally don't know how to make it work.

Well, the argument's this. You cannot go up an ACV without going up the credit ladder. So if you think you're just going to increase your ACV and you're going to sell it to the same customer, but just give that same customer a nicer car, you're in big trouble. That is a recipe for disaster.

That is we don't technically at our dealership and I mean this with all due Respect. If any of them hear this. We don't have a traditional sales staff. You know, we have basically order takers. We have a customer walk up. How are you doing, sir? My name is Josh. I'm looking for a car. Okay, let me get a little bit of information from you. I'll tell you exactly what, what you can do. Not saying this is impossible, but when I'm selling a two year back Tahoe with 72,000 miles on it, they probably have more options or more questions. That makes the whole sales process different too. Not only the credit and underwriting aspect of it, which we don't do. It's, you need a real salesman that is maybe more of a car person than some of our people. It's just a total different business. You know, it's, you know, you don't, you know, back to the McDonald's analogy. You know, McDonald's doesn't have the same, you know, help staff as a restaurant that sells $150 steaks and $300 bottle of wine. They're still servicing a customer. You know, we're just, it's, it's a different model. And I, I, I truly think they're different businesses. Mine is only because of the cash it takes to, to run that model.

Jeff. You know, it's, we talk about it every week. Reinsurance is, is everything. Um, if you're not doing it, just do it today and set up. Start with something simple, Jeff. Give a warranty on the car. You sell 30 days, thousand miles, three months, 3,000 miles. Whatever you do, just get it out there. Because the more you do it, the earlier you do it, the more benefit you'll see to your bottom line. For your personal bottom line.

Yeah, it's like Josh was talking about in this episode. He gives a 2 year 24 and he sells a low ACV. That blows my mind. Like, wow. But he also spends a lot on recon. Right. And the car's got to run the node. So if you want to protect your portfolio, regardless of whether you're selling low ACV or high, say cvs, you need those assets running. If you look at it like your cars, your assets, and even if you're in a non lease model, you know, the lease model is very much benefited by this, but the non lease model is still benefited by making sure the car is running. And if you got to put some money aside to help that customer out, do it. Call the guys at Buckeye, get it set up right now.

I think my business is not a buy here. Pay here Store in general. I, I look at what we do now. I still, we still call ourselves by here, by here, we're really a finance company. That's. That's really what we are. And, and we're looking for a customer with a F. That's right. A 550 credit score is what we're looking for. If we can get 555s all day, 565s all day, that's what we're looking for. And people who make, you know, 3,000 net a month, that is our customer. That's who we want. And so it's not as profitable as another model, But I think the headaches are less. And that's kind of what I decided to go to, was something that just made. Just made a little. Just made our job a little easier. I'm not sure that it's happening right.

Now, but I would argue for you, Luke, is you might not be as gross profitable as the other model, but you might be as a net profitable. I think you may still put the same dollars in your pocket at the end of the day. Guys like me, I'm doing twice as much work on twice as many cars to make the same amount of money as maybe someone like you doing half as much work just lending to a nicer customer, a nicer car. Those. I know, I know that my AR has grown. My. My dollar has grown way more than my accounts have grown. If I look at my historical right, I've added maybe 10% to my accounts in the time that I've doubled my AR over the last five years. Right?

Yeah.

So just how many cars right now.

Luke, how many cars on my lot? Probably 50 and some change go out.

Raise all the prices by like 800 bucks gross problem fixed.

But that's not Luke's model. Luke is competitive with his prices, and then he just has to collect every single dollar. He doesn't have room for high charge offs. Right. Whereas guys like you and me, we might have these large grosses upfront, higher prices, and we look great on paper, but we're going to have larger charge off.

My charge off, you know, my gold charge off is less than 1% a month. That is my gold charge off. And that's why it's. And that's where we land. And so if that got up to 2 and 3%, I would be unprofitable. I mean, it's. It's that simple.

But I think there's some probably risk in there that you would be taking that you're currently not taking that you're not accounting for that would be profitable too. You're only taking the negative of it. So I riverboat gambler, you know, always have been.

But I think go back, you've done a great job, Josh. So I don't think it's gambling at this point. I think it's knowledge of the industry.

When, when we first started, I'm telling you, I didn't know anything. I didn't know anything about cars, finance. My bread and Butter was a V8, 1990, 1991, 1992 Lincoln Town Car. I bought everyone I get my hands on bucks. I'd sell them for 29 or 30, 900 bucks, 50 bucks a week. I detail on myself and that was it. They go right on a lot. I drive them back, put them on a lot, check the oil. And I didn't even realize.

15 million in a receivables right now.

I didn't even realize man, that, that, that I was having a lot of fun and didn't even know it. You know, I mean education, bro.

15 million in receivables and you owe 5.

That's right.

Are you done? Are you done? Go get on a real riverboat.

I got a three year old man.

You got a three? Exactly. Get out of here. If I was in your position, man, there'd be a for sale sign in front of the lot. You those notes out. I, I'd hit the road.

It's, I still really enjoy the business. It's really difficult, but it's not always difficult. But there's just, there's more moving parts in this business. I know I'm obviously you guys are well aware there's more moving parts in this, this thing than, than a lot of other businesses.

My wife around. My wife says, Luke, you're, you're always looking to do another business. She says, what you don't, you don't give yourself credit for. And I'm going to say this to every buy here, pay here operator or retail used car operator out there. We have five or six businesses.

Yep, 100%.

Oh my gosh. All day long.

Josh, what's it look like underneath your hat ball? See, that's the difference. We're bald and we got gray in our beards because we do low ACV high because we deal with that low ACV customer. Look at Luke. He's got a full head of hair. He's got a baby face because he's dealing with higher. If, if that's not a testimony to getting your ACB up, I don't know what is, man?

I do have gray in my beard. I just don't have one.

Before I started the buy here, pay here, I had a full, beautiful head of hair and I was full figured. And now I'm like a. I'm a stressed out.

I've been short. I've been short, fat, and bald for long.

Hey, Josh, are we gonna see you out at Vegas next week at Niada?

I. I am not.

Okay.

I gotta start making some of these. Yep. My, my. My wife is. We have four children. She really is very easy going. Like, I don't hang out a whole lot. I go to bed early, I'm boring. My wife is much more exciting and a lot funner to hang out than I am.

And.

But if I told her I want to play golf with the boys on Saturday, I want to golf three nights, I want to go on a golf trip, I'm going to hang out with. She doesn't ever care. She just has this thing about me going to Vegas. I'm like, Lindsay, what do you think? Like, Instagram models are just flocking to me. I'm like, I respect. You know, I struggle to make it up till midnight in Vegas. I promise.

I guess I don't.

I don't.

And guess who's coming with Luke. My wife. His wife. Exactly. She knows she's got to keep a. Keep a leash on him.

I like to play. I like to play craps a little bit more than a normal person. Maybe that's it.

Well, you're a gambler. Appreciate your time, Josh. This has been a lot of fun. Hopefully everyone learned something from this and, you know, in a couple hundred more episodes, we'll get you back on for another update.

I love it. I love what you guys do for the industry. Godspeed. Okay, thanks for having me.

Thank you for listening.

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