28 Jan 2026 · 62 min
Jeff Watson and Luke Godwin talk with Jack Carter about running a dealership. They debate buying cars in person versus online, discuss auction tactics and charge-offs, and cover staffing decisions and how to handle customer service problems.
Chapters
This is the Independent Dealer podcast, Education by Dealers for Dealers. Now here are your hosts, Luke Godwin and Jeff Watson.
Welcome. The Independent Dealer podcast brought to you by Buckeye Dealership Consulting. Hey, we got, we got Jack Carter here. Fireman Carter. His, his engine. Where you headed, fireman Carter?
You know, I'm headed to cause charge offs, I guess.
Chasing charge offs with the, that's right. Jason with the big hose.
That's right.
Are you, are you really going to pick up a repo right now?
I, No, I was, I was headed to drop off a tractor, but, but I didn't receive a repo order while I was out, so it's possible.
You know, I, I've received two repo orders this morning, so it's amazing that we are firefighters. We run around as business owners and, and what we do is fight fires and, and a lot of times it's charge off fires. Friday it was cpi, fires that are total that I have to go pick up. And so it's, it's always something and you know, it's, we're blessed to have the business we have, but every day there's something going on that we have to, we have to chase. And unfortunately, not unfortunately. And unfortunately, that's our, that's our calling.
Yeah, it's interesting. So basically, Jack of all trades, huh?
Jack better be there.
Yeah.
The other day, you. Do you physically put your hands on every car you buy?
I do, Yeah, I do. I work.
I mean, like, talk to me. You're out of the office every day of the week going to auction or three times a week going to auction and you're buying this stuff like you still are walking lanes and bidding in lane on vehicles like we used to do back in the 90s.
Yes, I am. I absolutely do. I, I'm fortunate that, you know, in Atlanta, I'm, I'm surrounded by auctions. Right. So I'm kind of cheating a little bit with, logistically. But yeah, I go and I go touch them, man. I, I, Because I don't trust, I don't trust crs. I don't trust. You know, what other industry do you do? You just take what the seller says as the, as a condition report and believe it.
My doctor.
Yeah. And they're wrong. They kill people more than anybody, you know, so, I mean, they kill, they kill everybody. So I just don't, I just don't. It just seems like it's a conflict to me to take, you know, and look at the forums, look at what we see on Facebook. Every day somebody's complaining about, look at this car I got in this condition report and this rush or this this and this that. And it's like, man, you trusted the seller to tell you the condition. So, I mean, think about that.
Yeah, you know, Jeff, I know why you brought this up because you want to, you want me to be the devil's advocate here.
Do you buy in Lane, Luke?
I haven't bought in Lane since before COVID And so, so I'm going on for over four years of buying exclusively now. Before that I bought a lot virtually as well, but I physically, I physically have not been to an auction since July 1, 2020. Okay. And so we're over, we're over four years now. My, you know, what's different is my Transportation expense is $10,000 a month and Jack's is essentially zero.
That was a big part of that was a big part of this too, Luke. That just looking at added cost and what we were spending on transport was a big deal.
It is a big deal. And. But I don't have the luxury of being surrounded, Jack, surrounded by.
Six to.
Eight auctions I think within probably a 50 mile radius. And I buy and I buy some of those auctions as well. But it definitely. That $10,000 a month in added transportation costs is a real number. I trust CRS at certain auctions. Okay. And the reason is that I gotten used to looking at crs and. Not that you haven't, Jack, but I trust what I see because of, I'm looking at that CR. There are times that I look at CRS that are, let's call it a 4.1. And I can look at that car and tell you it's a 2.1. But that's because, because I buy so many cars virtually, I'm able to see.
That you've been studying it a long time.
Been studying a long time. And it takes that. And the folks that you see making true mistakes buying, I think. And I'm, I'm specifically talking about Mannheim here because I buy a vast majority of my Carson Mannheim. They do a good job for what they're doing and the people they're paying to do it. But when it comes to mechanical, they, they do a poor job because there's no mechanical cr, which I wish they really, I wish there was, but there isn't.
Yeah. So Jack, when you go to the auction and you inspect it, you're basically trying to figure out which cars you can overpay for. Right. I mean, we're going to pay full money for all of Them regardless. You're just hoping that because you inspected it, you know, that this thing that might have a 2.1 or a 2.5 cr is really not a 2.5 in your book. And you can get it, because if it comes up as a 4 or 5 or a 5. 0 on Mannheim, you're going to be bidding against everyone in their dog anyways, and you're bidding it through the roof. So I guess my problem that I had is when I went to the auction and inspected the cars, I only figured out which cars I could overpay for, and I still had to overpay for them because everyone else knew the same thing. Right. Are you. Are you. Are you doing it differently? Are you finding that you're having any. Like, you're just figuring out the ones that were listed at a 5. 0 that really aren't a 5.
0? Well, first of all, I don't look at the CR report at all, so I don't know. I have no idea what. I don't. All right. So when I was buying online during COVID you know, I would. I would. Everybody looks at a run list, right. And that's step one. You pull up a run list. Yeah. And then you're like, searches either way. Yeah. Right. I like. You know, you put a little star by them or whatever it is, and you build your list, and it's like, man, I like these 20. Right. Well, I find that when. If I were to make a list online before I go, I would skip over a lot of cars that in person, I recognize are good cars. Right. Like, you know how everybody's got the no buy list? Or maybe, you know, have you ever opened the door to a car and thought, dang, this thing's in great shape. But had you been 100 miles away looking at a list online, never would have clicked on that car because of.
Totally agree with that, Jack.
But I can open a door on something that maybe. Maybe it's a year older than I wanted, or maybe it's two years older, or maybe it's a little over on the miles, but you're like, wow, somebody, you know, the factory floor mats are in place, the radio knobs are not messed up, the steering wheel looks new. And it's like, damn, this is a really good car. And so there's one. There's one aspect right there. I see a lot of stuff that I think the online buyers would skip over naturally just because of the number, because of what it is on paper.
Yeah.
All right. So that's one aspect Another aspect is it lets me buy a cheaper acv, right? I can go and pick out cheaper ACV units that I think an online buyer wouldn't. Can't roll the dice on, right? Because, because of maybe the miles or because of the CR or any number of things. You know, I can, I can target a lower ACV unit because I touched it. There's other stuff, like cold rattle startup, right? Like if I get there, I, I preview everything. So if I'm the first guy to crank that car, I've got a huge advantage over the 50th that's cranking that car today or just listening, listening to it through the lane. So I can avoid a lot of timing, chain rattles, cam phaser problems that, you know, that's, that's huge to me. I can, you know, looking for coolant leaks. I mean, I feel like I've been buying cars a long time. I'm not the best buyer, by no means, but, you know, I feel like I can spend two or three minutes with a car, with my scanner, I can tell whether it's any good or not, at least within a small margin of error.
I think you're right. I mean, I think you're right and I think the benefits you have is being in a large metropolitan area where there are a lot of cars for sure. Jeff, if, if you are, if you're in Orlando, you're in Atlanta, you're in Nashville, so kind of Charlotte, but not really. But if you're in some of these areas, you have the benefit of doing that, putting your hands on a lot of cars in, in a small amount of time. And Jack, you are a great buyer. I mean, you buying 8,200 cars a month, it's hard to do that and not make big this big, buying mistakes. But, you know, it's hard for me to do that. I, I don't have time to do.
It and I don't, I'm finding, I'm finding that, man, there's a lot of dealers that just. The car buying, the car buying process is so time consuming and it's so costly if you don't do it right. I mean, golly, y', all, what. You know, that's where everything begins. Everything that affects your shop starts at the hammer, right? Everything. And so, I mean, all the way down to the user's experience, your customers experience. Are they going to pay you? I mean it. All of it, all of it starts at time of purchase.
I agree.
Dealers just don't have time to do it.
If I, if I had the time to do it and I was in an area where I didn't have to drive like before. I was driving to Orlando every two weeks and spending, you know, and spending 48 hours away from my family. If, if I had that, had a way to do that and not, and not have to do the 48 hours away, I'd probably still do it. Because you're totally right about finding those, those cars that are, that don't fit 100% in your program but are great cars. I do not. I'm not able to do that anymore. And so if without doing that, my ACV has gone up, my recon has gone up, but still I'm here an extra 48 hours. So are my collections better because of it? And I'm managing better because of it And I think I probably am.
I think so. And I think I have to give up some of that. I bet you're doing a better job at that in your store than I am because I'm, you know, I'm saving money in one area, you're saving money in another. So there's something to be said for both styles for sure. And I respect the online buyer. I do. I mean those guys, are they, the ones that can do it successfully are, you know, they're as honed in as, as I am in person.
Yeah. I think a lot of these guys, like when you talk about buying, buying online or buying in person, we know that's the most important thing, right? We always talk about that. Whether you're retailer buy here, pay here, the money is made when you buy it, you know, so I find that interesting. Luke sent me a text the other day that was talking about how my, my charge offs are directly related to the type of cars I sell. And Jack, you're a guy that'll, like you said, you'll buy a red light, something cheaper, maybe a three or four.
I prefer red light.
Now I always debate and we have this constant argument of am I better off selling two, you know, five thousand dollar ACVs to two different customers that might be okay with that kind of a car? Or am I better selling one ten thousand dollar ACV if I can get the slightly nicer customer, put them in the slightly nicer car. Right. Do I lessen my headache? Do I lessen my post sale repair? Is that customer more likely to pay out the term of the loan? Because it's not a Dodge Dart, it's a, you know, nice Toyota Camry.
Right. Can I recycle the car if I do, you know, how many times is it recyclable? There's, there's a lot of those factors, man. And I just, I don't have the answer, Jeff. I don't know. I mean, I, we, we've repoed nice cars from people and we've repoed bad cars from people. And it's just I, you know, when.
You look at, I, I have historical data to back up what I'm saying, okay, that the nicer car produces nicer customers, that produces lower charge offs. I can historic historical data from 40 years that that'll tell you that that's the case. But I'm not saying it's, it's the only way to do it or the right way to do it. What I would tell a about your pay here dealer out there is that if your charge offs are high and you're frustrated with them, you've got to look at the source of the charge off and got to look at the, at the source at your acv. Because I think the first place to look is, okay, are we repoing this car because of mechanical issues? And most of the time you are. We kid ourselves sometimes and tell us that and tell ourselves, no, we didn't, we didn't repossess this car because of a mechanical failure. Well, you may not have repossessed because of a mechanical failure, but what you may have done is repossessed it because the customer didn't like it anymore because it was starting to give trouble or it's dirty or it's got, or it's got body damage or whatever.
What you're talking about is like a pride of ownership. And I completely agree with that. I mean, I, we see it. I mean, I'm foolish enough I buy here pay here Mercedes all the time.
We do too.
And I, and the Mercedes people are proud to have them, you know, And I think that pride of ownership is an unmeasurable factor that absolutely exists.
It does. And, but, but again, there's two different business models. One of the richest guys I know in the buy here, pay here space, he's now into the selling trailer space and buy your pay here in trailers. But his business model was essentially, we know we're going to repossess this car. There's no doubt we're going to repossess it. But what that, that allowed him to do was never really have to purchase all that many new, new cars. And so it was essentially a rental car model in the buy here pay here space. And it just churned cash because they'd repossess it, they'd recon it, they'd sell it again and it was just continual. And when you don't have to pump out cash to buy new inventory, man, that thing really just starts to pump off cash. So there is, there is a headache model which I call that, or there's the long term finance company model which I would prefer to be in. They both work, they both make a lot of money. So you know, it really depends on what you as a dealer believe is right for your area and what's right for your sanity.
That's what I would say is it's a lot of it is situational. Right. It depends on what market you're in. Right. I mean if you're in downtown Las Vegas or downtown Atlanta, it's going to be very, very hard to go up ACV because you're not necessarily going to be attracting the higher credit score customer. Right. So you don't want to put a 520 credit score into your ten thousand dollar ACV cars. You're not, it's not going to be a good recipe, right?
Yeah, yeah, I think to a point. But you look at someone like MCMC who's in downtown Dallas, that has made a lot of money doing that.
So.
It'S possible it can work.
Yeah. I mean I would be interested to look at their actual credit scores of the people they're putting in their higher end vehicles. I, I doubt just because they're in that area. I bet there's still enough people that they're still skimming the right level of the credit score or they might be a non credit score person because they don't have a social right. I mean if they're doing a lot of the Hispanic market, those guys can afford a $20,000 truck. Right. At $800 or $1,000 a month and they will keep it forever. So there's, there's business models within the business model. And I think that's what you have to remember is what people get into trouble is they're known as the $500 down 250amonth dealership. And all of a sudden they try to get into selling, you know, 2016 Camrys. And that's just not going to be a good recipe. Right. Because you're still selling to the same customer.
Yep.
Do you guys do.
Oh, I'm, I'm sorry, but Luke, you said something I think, I think really, really matters for all dealers. And it's just, it's a true. Everywhere is understanding what's causing your charge off, you know, and going back and looking at those accounts and pulling them and why did this happen? And I was talking Bill Elizondo and I talk about that a pretty good bit and he had me do an exercise and pull off everybody that default did, you know, maybe loans that were only seven months old and younger and we didn't have many mechanical failure charge offs. We had a lot of I can't afford this, I can't afford this payment charge off. And so I think that that, that prompted me to go to a lower acv. And you, on the other hand, if you've got, you know, a dealer that's got mechanical failure cards off, you need a higher acb. So I think that was a, what you said there was very important. It's understanding why your accounts are charging off is, is and then you know which way to adjust.
But agree.
I'm guessing, Luke, yours is the same. Your charge offs are not mechanical.
So what's interesting is that they can become mechanical because typically my customers stay in their car so long. So early defaults will not be mechanical. In our situation, a lot of them are exactly what Jack's talking about. Our early defaults are customers that can't afford the car. Even though we did our homework and we don't put anybody in, in a payment that's more than 20% of their net monthly income. But what happens is, is the customers realize that they, they can afford a 550amonth car payment and they do default early. Our, our longer term repos are ones that typically hit over, over 24 months that usually they hit around 31 months or so are typically mechanical failures. One, they're out of warranty and those customers put a lot of miles on the cars and they haven't been coming to us for, for service work. The customers that don't come to us for service work default at a rate that's just exponential compared to the ones.
Oh that's a, that's a neat, that's a neat way to measure that. The ones that come to you now do you, do you take somebody that's put a bunch of miles on your car and it's had good payment history and then the car starts to fail just due to time and just the nature of automobiles. You put them in another car 100.
We do it all the time and, and we, we help to show them why, why this car is giving them problems. And sometimes it's just the car. I mean that happens and either we'll, we'll help them fix the car or we'll just trade them out and send that car on down the road.
Yes.
So you've, you've probably noticed a higher charge off dollar amount because we bought all those cars high in 20, 21, 22, stocking them back in low and just taking a bath.
So I actually, Jeff and I had this conversation via text the other day that our severity of charge offs is. It's gone up by almost, it's gone up by 70% severity wise since 2021 and it's gone up about. If you look back at 2019 compared to now, we were charging off at about $4,800 occurrence in 2019 and now we're at 7,000. I think I told you last month, Jeff. Yeah, and that's, that's a big number for me. It's scary.
You see that too though, Jack, right? I mean think on all ACVs we're having higher severity, right?
Yeah, we, absolutely, we did. But I mean that, that and one of the adjustments we made with trying to understand why our cars are charging off and since they weren't mechanical, we went to a little bit lower acv, which again, back to the buying, prompted me to be in person. You know, it just, it all runs in a circle. I hope I've made the right adjustments for turnover. I don't know. You know, we don't know until, until a couple of years down the road.
To wrap back to my point, what I was driving out with Luke is dealers like us don't have mechanical charge offs, right? Because why? Because we put a warranty and we're willing to fix it no matter what. Right. We know we're going to fix that car so might as well fix it for the customer, right? Whether they're at 3 months or 31 months, we're going to put an engine in that thing and keep it running for them or trade them out into something else. So I don't think dealers like us really have a lot of mechanical charge offs. What we have is lifestyle changes, right? We all have payments, but whether it was a 250amonth payment or whether it was a 1200 dollar a month payment, whatever we underwrote that customer at, at the time of sale, something has changed and now they can't afford it. Right. Luke has the same problem I have. We are having affordability issues at all, at all ACVs, that's, that's my argument. So when you say, hey, I'm, I'm coming down an ACV to try to save my charge offs because people can't afford the Payments. I would. I mean, and again, it's demographic, right? Maybe you just. You just can't attract a customer that can handle $500 a month. Maybe you just can't get there right because of your demographics, your area, your marketing strategy, your positioning, whatever it is. But it comes back to my first point of am I better off selling one car at a higher ACV and picking a really, really slim group of customers out of all my customers, and Instead of selling 100amonth, I'm only going to sell 60amonth? Or do I go down the credit scale, the ACV scale? Now all of a sudden I can sell 200amonth, but it's a bunch. A bunch of low ACV cars.
I. I don't know.
I'm going the other way.
Yeah, yeah, it's. It's a fine line, Jeff, because I can see this. I can see that we're getting 200 applications a month. We're telling 100 people no. And it's, you know, it can be. It can be good or bad both ways, but you got to decide what's best for your business.
I think it's good. I would rather have 200 applications a month and sell to the 20 best people and have 20 great loans than to sell to 80 of them and still only have 20 great loans. Right? Like, it just seems like you said that. High headache, high repo, high headache. Every time I sell a PT Cruiser or a Cobalt that is the most needy customer, they will blow it up within six months. It will be a trash can within six months. Like, just guaranteed. It doesn't matter. So anyways, let's move on. Do you guys do PSI's? Would you be post sale inspection? Luke, you're buying online.
You know, we talked about the Buckeye product I've used for. For so long. Good, good lead into to Buckeye here. And, and that's another. Another way I can buy virtually. And, and if I do buy a car with a bad transmission or a bad engine, I've put that 150 per car into my reinsurance company and I just pull it out and, and use it. I'm not going to give Mannheim that money. Heck no. Now, if I buy $100,000 car, I may, but. But I don't do that a whole lot. But typically, everything we do, we. We reinsurance. Reinsurance. And. And out of 40 to 50 cars we buy every month, we end up with maybe one bad transmission, one bad head. So not a big deal. It all watches out in the end. It's All a law of averages.
Yeah.
Just like your CPI is, your PSI is. Your loans actually are too. You know that in general, they're going to default at a. Whatever percentage rate. So that's the reason I won't give Manha my money for a psi. How about you, Jack? Well, you're there looking at. You probably don't do bsi.
Yeah, man, not only do I not, I don't. I've never psi'd in my life. I feel like I'm there. That's my job. So I don't psi, don't arbitrate. I probably arbitrated two or three cars in my entire life less than I can put on one hand. And. And for the same reason you just said, luke, I'm just not going to give them. I'm not going to pay more than I'm already paying. I'm not. And if I'm doing my job, then I don't need to include those extra fees. I mean, it's. You throw in PSI and transport and you've spent 500. You know what I mean? And it's just like, man, there's. There went all my money.
I tell y' all a funny story. I'm saying with you, Jack, I rarely, rarely arbitrate, but I bought a car about four months ago. The car was freaking money. Just beautiful, right? It gets here and the motor sounds like a skeleton is inside of it. You know what I mean? I'm like, oh, my gosh. And it's a seven thousand dollar engine and this car is so beautiful. And I start, I'm like, there's. This car's had to be in an accident before. So I tear apart every panel inside the trunk, right? I get out my flashlight, I'm going everywhere. And all of a sudden I see that the left rear quarter panel's been replaced. And I'm like, oh, my gosh, I am so lucky. I sent that joker back to the auction here. I bought it in Florida, sent it to the auction here in South Carolina. And. And it has structural damage. And I got out and I was just so. I was like, holy cow, I'm so lucky. Anyway, that usually works the opposite way. But you got to know the auction rules, I guess, is what I'm getting at. If you psi, for some reason, there's rules around that. Manheim gets out of it all the time. But if you know the arbitration rules properly, you can use them to your advantage.
Yeah, it seems to never work for me. Regardless. It could be black and white and they will say you're stuck with it. Buyer bot. And then they'll just stop returning my emails. And yet I still buy from Mannheim. It's you just about being a little fish.
Those people that arbitrate a lot, though, Mannheim doesn't give them an inch. But people like Jack and I and Jeff, if you don't arbitrate very much about a lot of cars, they see your volume and the amount of arbitrations you use, they take your arbitration way more seriously than they do. That people arbitrate.
If you buy a lot.
That's right.
You said it right there. If you buy a lot and if you're not buying from someone who sells more than you buy, right. If, if you buy a car, that's a factor. Store that is feeding them a ton of stuff, they ain't going to arbitrate against the new car store. You're on the list.
Yours, regardless.
I, I had Mannheim a few months ago. I bought a five zero pre Tesla Y. I mean, it was a five zero and it was from Hertz or Avis or wherever. And I get it here. And it had damage on the, on the rear bumper. And I'm like, y', all, this is not a 5o. And I, I argued it and argued it. And finally Manheim said, you know what? We're just going to give you $500. I said, thank you. That's all I needed. And you know, oh, well, the Y.
That I bought the other day showed up with the cracked roof glass.
Oh, that's not cheap. I bet that's cheap.
Eighteen hundred dollars piece of glass. So I, I'll let you know how that pans out. Because, yeah, they're going to, they're going to definitely ride that until they can ignore it. Speaking of horrible customer service, guys, is the customer always right at your dealership?
Absolutely.
I'm gonna let you, I'm gonna let you start with that.
Oh, man, no, absolutely not. I, I, I sometimes I just need to ask, but I, I don't let them run over me, man. If we're right, then we're right. If we're wrong, we'll apologize. But, you know, somebody that's abused a car, you know, it's, it's typically the ones that are, I mean, I think it's human nature that when people are backed into a corner, at least, at least what I've experienced, they lash out. You know, we don't have problems out of customers that are sitting on buckets of money and can pay their bills. We have, we have, we have personal problems. Out of customers that are, they're back in the corner and they don't have an option and they think that they can, they can complain or fuss their way out of a situation by, you know, if they raise enough hell, they can get something done for nothing. There's a fine line, man. I mean, you know, I think it, I think one of the rules in life that I've always, my mama taught me is treat others how you're treated. And you know, we try to be as good as we can to folks without being run over. But they will absolutely run you over if you let them.
I totally agree. And you know what's, what's interesting is one of Nike's 10 principles. And this is Nike. Right. The, the last one is if we do things right, we'll make money damn near automatic. Right. And if you run your business in a way that is right, customers rarely will, will go to that extreme. And so are the customers always right? No. And they know they're not always right. And so sometimes you just have to call them on it. And so a couple different. For instances in the last week, customer bought a car from us less than a week ago. It breaks down two days in, they send it back to us. They got a little rowdy. We found out that they put diesel in their gas tank. Was. It wasn't our fault. Right. But what we did is we took care of that customer and so, and when he explained it to the customer, customer realized they had made a mistake.
Right.
A car gets towed in yesterday, They've had it for about four months and it wouldn't start. No problem. We'll get it looked at. We can't look at it until then. We open the hood and a squirrels living in there.
Right.
Not our fault. Not so. Not our squirrel. We didn't sell it to you with a squirrel in it. So you explained that to the customers. They calm down. That's right. They calm down quickly. But we do make mistakes. When we do make mistakes, we make sure we fix them quickly. And, and we tell the customer we made a mistake.
Sorry.
We put the timing belt on that Honda Accord and it was a tooth off. And that's the reason your car's been misfiring for three months and we messed up.
We're sorry.
Yeah. I'd be willing to bet that 80% of the, of the go backs or the issues I have post sale have probably been caused by the customer or the customers, brother, cousin, uncle, mechanic putting their fingers in the pot and causing some sort of an issue or Making something worse, right? Like, I can't prove it, never admit it, but I guarantee you that that little issue that popped up or that engine problem was either because they ignored the fact that it was leaking oil for the last three weeks, or they thought they needed to top it off with something. Same thing applies in my dealership. Right. I was talking to Luke the other day, I'm sitting here, we're recording a podcast and I'm watching my son carry a gas can out to the pressure washer that I know right on top of the gas can says mixed. It's got oil and gas. It's meant for a two cycle. He's taking it out there to put it in the pressure washer. And I'm just watching the whole time, like he's really going to put that gas in the pressure washer, that thing up right now. So I have to text him in of our recording. But that happens a lot, I think, with our customers, but also with our employees. Right. It's like stuff's just breaking. What do you mean stuff's just breaking? Like stuff just breaks. No, it's been like that forever. Or you abused it, or you didn't treat it right, or you didn't say something. Do you guys think that if you paid more money, if you paid more in payroll, if you paid for top talent, would you get more competent people and you would be less of a firefighter in your dealership?
I love that question.
I, I don't know.
I, I don't know either. You would think so, but I'm not. I, I feel like I've got some really good staff members and I feel like I've, that are really good, like probably the best I've ever had. And then I also feel like there's some guys that wouldn't matter what I paid them. I'd get exactly what I'm getting right now. You know, it's just, I, that's a beautiful question. I, I, if you know the answer to that, you're something else.
Well, Jeff's always had a, had a theory. I think it's a decent theory that, that the more you pay, the better you get when it comes to employees. Now I think that very well is true if you, if you interview them right and you train them right when they get here. But just because you pay more than, than, than you should to hire a position doesn't mean you're going to get top talent either. So, yes, a fine line, man. I, I, I don't know. I don't know.
So What I'm. What I'm digging at. And I would love someone to chime in and email me and tell me the answer to this. We have positions in our dealership where we do try to get away with the minimum. Right. There's certain areas where it's like, well, I can get them to work for $18 an hour or $20 an hour. That's going to be my collector. And it's like, okay, you want to pay for a bargain collector, you know, know you want to pay for a bargain mechanic, but do you know what they're actually costing you in the long run? So like a shop manager, right? So say the guy that handles all your repairs, he handles all your customers.
He.
He orders parts, he does everything. What are you. You're paying the guy three, four grand a month.
Let's say you're getting more than that. Yeah, you better pay him more than that.
You're getting just the average $25 an hour kid that can run your software. What if you paid him ridiculously more? You know, what if you paid the kid 10 grand a month? You paid the position 10 grand a month. Now if that guy can perform to ten grand a month and save you the difference because he's buying better parts, he's helping your customers stay in their cars, he's making the mechanics more efficient, he's handling customer service issues. Not only does he.
How about he performs in your absence?
Right?
I mean, how about that? How about when you're not there, they're actually wrong?
Go figure. Yeah.
So let's just say, let's look at our severity real quick. Because, Jeff, this great point, that if they cost you one less repo a month, that's saving me $7,000. Yeah.
One last mechanical drop off. Because he handled the customer right and didn't tell him to go suck an egg. Right?
Yeah.
He has the soft skills to talk your customers down. That's a crucial position. Let's say, just as an example, if I was paying that person a hundred thousand dollars a year or that position, what kind of talent do you think I could attract? Right. Enough talent that it would pay for itself.
Probably.
Probably.
Probably.
Why don't we all do it?
Luke's right too, though, because, I mean, it's just like it starts at the purchase, it starts with the hammer, it starts at the interview. You could, you could pay the wrong person all the money you want to.
Totally. I mean, but guess what? I'm flunking them out after two months or after a month, I'm flunking that guy out. Yeah.
Because you, because your leash, your leash is a lot shorter on that.
Expectations super high. Right.
But what that expectation? Because I'm paying him top dollar and he doesn't want to lose that job because he knows he's getting paid. Ridiculous. What is a. Hopefully perform.
What is a service manager or assistant service manager making a month at a new car store?
Yeah, probably 100 grand.
I bet it's two. I bet it's 200 grand.
Yeah.
Yeah.
And so, so you got to think about that.
You might not be in the ballpark.
Might not be in the ballpark. But let's look at what someone in that position at Firestone is making or Mavis Tire or whatever. You have it, right? Yeah. Christian Brothers. Are they making, are they making 100 to 150? And that might be the guy you really want.
So does the same thing apply for all positions? That's my argument. Right. We look at this and sometimes we talk about like, well, what, what can we get away with? You know, is me hiring one detailer at $25 an hour, is that better than me having two at $12 an hour? Right. Like to just minimum wage guys that might show up, might not, or do I pay a 25, $30 an hour guy that really takes pride in his work and is a professional? You know, I wonder about these situations. Same with salesmen. If you, if you had a top notch pay plan, would you attract top notch talent that would handle themselves and then they would sell more cars and actually pay for themselves?
I mean, have you, where have you, where have you implemented this in your dealership? Jeff, who do you, I mean, you got a position right now that you're overpaying. That's, that's over performing.
No, no. I mean, I would obviously like my manager. He is top notch. He gets paid pretty well, I think. You know, I'm not sure he handles everything. It's his, he runs it like it's his dealership. He takes care of, baby.
Let me say, let me say something else that comes into play in this and this, Jeff, I tend to agree with you. I think if you're, if you're paying them, they're going to do. Right. They're going to stay late, they're going to get there early, they're going to make sure the cores are returned. They're going to just do the things without being instructed to do the thing. I, I tend to agree with you, even though I shy away a little bit from doing it. But you know, one of the Problems I have in my office. And bless them, I love my office. But, you know, if I've been paying somebody 25, 28 an hour for the past couple years, it's hard to hire in somebody new at $40 an hour without making them other people mad, you know, and so I can't advertise it. I can't ever. Like, let's say I want to hire a new shop manager, right? And I'm gonna, I'm gonna do what Jeff says. I'm gonna pay him 45, 50 an hour. But I want it to be right, by God. But then what if I've got somebody else that's been there five years, that's making 30 an hour, now they're mad. And I have that dynamic in my store that I deal with at every hire. And it, you know, it's frustrating. It's frustrating. That's a real, that's a real issue.
It is a real issue and it's something that, that we've struggled with. I hired the best salesperson we've ever had. He's our sales manager now. And I had to pay him a lot to hire him. And you know what happened? I had to pay everybody else more. And did I get any more in return? Maybe, maybe not from the other people, but I did from him.
From the other people?
No, but other people.
But here's the thing. You hired the guy in at that pay rate. That was a job description. He had qualifications that justified that pay. You're not just hiring the exact same carbon copy of the kid you had before. That's a 21 year old that has had two years experience at a fricking big old tire. Like you're hiring someone that qualifies. Maybe they have a college degree, maybe they have ASC certifications, maybe they have some sort of a background that performs. I think it's easily justifiable to say you guys don't work the same.
Yeah, it's really, it's real justifiable until you enter, until you inject human emotion for sure.
You want to talk about a race.
For five years, you know, and here's.
How we're going to get you to that raise. Here's what you need to accomplish in the next four weeks to get that raise. And now guess what you got. You want me to pay you the same? Now I'm going to hold you to that same standard. Guess what? Yeah, your job's on the chopping block now because I'm paying you a hundred thousand dollars and you're not A hundred thousand dollar position.
So this is what I, this is my first opportunity.
You're out of here.
Well, that's the reason you have to, that's the reason we have to be the best managers that we know. And Jeff, you and I, we've been back and forth on this and I said this in a, in my, in my talk at Niada. We are all to our core car dealers and, and the, the car dealer is, this car dealer is someone who knows how to buy a car and recon and sell the car. That's what we are best at. What we're not best at is managing because that's not what we were. That's not what we are. And so we have to learn to be better at managing, managing those people to.
I didn't know you guys were going to attack me personally here.
Hey buddy, like I'm staying.
Hey buddy, it's me too. And you know when I, I started buying and selling cars when I was 12 years old, guys, that's what I know how to do. Yeah, you, I didn't start managing, I did not start managing people properly until 10 years ago. I was 35.
And if you ask them, they say.
You'Re still not there, still not doing it. But you know what I've been working on every day for the last four years is managing people better. Maybe not even four years, maybe three years. You have to put expectations out there. No matter how much you pay the people, even with people that, that you pay a hundred thousand dollars a year, you still have the expectations for them to get the job done and you got to manage them to that point to get the job done. And if, if you pay them too much there and don't manage them, they're not going to produce what you need to produce anyway. So you, it's a fine line between paying people the right amount and managing the right way. And if we get that right, we may even be able to hire somebody for a little less money and manage them up.
I would rather my philosophy and I haven't gotten there yet, so I can't say this works, but if I pay them too much, then they are begging me to stay. If I pay them too little, I am begging them to stay. And I just don't like that dynamic. Right. I want, I want them to know we have a great environment, we have a great culture. Right. The only other aspect is the pay. There's only three components to your employee, right? Pay, benefits, culture and your physical facilities. That's my opinion. I got two of the three. If I just crank that pay up and all of a sudden I'm paying more now, I can hold them to a higher standard. They're not looking for another job the whole time. I'm not begging my detailer to stay here. I'm not begging my salesman to come in. Like, I don't know. That's my issue. Let's move on. Jack, you said something the other day. You don't charge a doc fee. That's funny to me. Why not?
I'm in my own way. I mean, to be honest, it's one. It's just a. I think it's just a personal flaw or fault. It's a gotcha. It's a junk fee. It's you choosing to do business here. Well, I'm g. I'm gonna tax something right over else on you. And it's. It's insulting. I mean, as a consumer. If I'm the consumer.
Yeah. Even the.
The title of the fee. I mean, are you telling me that. That you're selling me a car and because that car deal produces documents that I have to pay you extra to. To what? Print them, File them? What am I paying for extra? I just feel like.
Jack, I'm g. Stop.
No, no.
You feel like Luke.
Screwing people over. Luke is screwing. No, I just.
It's just it. It's a. Everybody else does it, so I'm going to do it. Gotcha. And invite your pay here. When I look at my charge offs, when I look at my charge off percentage on my portfolio, do I ever collect that money? And I'm going to say that half the time I don't ever collect it. And I just feel like, you know, we were. We're talking about back. Back to charge offs for just one little blip second. I changed a lot of things. I. I changed a lot of things a little bit. Acv, instead of a. Instead of a vehicle service contract, I include a warranty. I did things that lowered my customers payments. I think taking a doc fee off, I also raised my down payments. Right. Luke taught me that. Luke gave a presentation one day and we went around the room and asked people for money. And next thing you know, he had it. Well, we asked for more down and we get it. So I might not charge a doc fee, but I get more down than most of y'. All. Okay? And that's real money that I'm depositing. Doc fees is ar. Doc fees is contractual paper money that you can't deposit. And it's a point of contention. And I like Telling my customers, we don't charge you that. Everybody that messages me, how much is the car out the door? It's just the price and the tax bubble. So. And people appreciate that. So I, I'm. I bet I'm wrong about this. Like, I'm, I'm okay if I'm wrong about this.
Whatever.
I'm wrong, but can I, can I, can I. I'm. I'm arguing the counterpoint here. And I was. And in 2016, I argued your point, Jack, okay? Argued it till I was blue in the face, sitting at a 20 grit. And Michael Darrow, the president of, of NIADA, looked at me and said, luke, you're wrong. And whatever your max is in your state charging, okay? And it. And Everybody else with 20 group looked at me and said, you're wrong. You need to charge a doc fee. And I changed it, okay? Since. Since January 1st of 2019, that is equal 481,000 reasons that I was wrong. $481,000 in five years. I was wrong, okay? Now we charge off at 12% annually. So you can knock 12% off of that, that number, and that's where we are. I think you're wrong, Jack. And I, And I would encourage you, you don't have to be, you don't have to be crazy with this. Our max, our max state fee is 225. You can charge more, but you have to produce documentation or whatever. But it's a real number. When you look at it over a long amount of time, if you look at it just at 225 per deal, no, it's not a big number.
But 481,225 matters. Just like that, $10,000 a month in transport matters. I get it. You're absolutely right. I might be eating crow a few years. I might look back at this and be like, man, I sure was stupid. But I mean, I know what our charge offs are, and I know what my markup is, right? And I feel like if I'm marking my car up to where my cash and deal is right, and I'm getting the good down and I'm keeping the terms right, and I'm keeping my customers payment where it needs to be, I'm gonna make enough money per car that I'm. If I can just successfully put these deals together and do good underwriting and do my job and put a good person in a good car, man. And, and what about the cars Act? I mean, coming, right. I mean, so soon, you're going to have to advertise that doc fee into your sale, into your price.
Right, we, we already do that. It's our state law.
So you're already doing. Right, state law. We have to do that.
Yeah, I totally agree. Because there's a lot of 995 doc fees in South Carolina that people aren't advertising. So yes, you have to do it the right way. But if you look at every car on my website, it ends in 225. So if it's, if it was a 14.5car, it's advertised as 14175 because that's state law. So they don't.
So what if you sold that same car for 14. What if you just increase your price by your dock fee and did away with your document difference whatsoever?
No, not at all. But guess what? Nobody's ever said one thing about the dog fee ever. Not one time. And so yeah, it, so it's a non, it's a non starter.
Right.
And that's, that was my argument years ago. I can, I can be the person that doesn't charge doc fee. You know what? Nobody cares if you got the car. They won't if you got retail.
I agree. Buy your pay here. I just don't know that you collect it. Yeah, I'm not sure.
And I don't mark my cars up like normal buy here, pay here store. So you know, it might make.
Oh, wait a minute, wait a minute. You know your, your markup isn't as much as a normal store. You got a lower markup my way.
Way lower. So our average gross profit on a car is 3, $700.
So mine's 5 grand.
That's right.
Yeah. You've already.
Do I need to. So, so at the end of the day, are we, are we in the same position monetarily?
Yeah, you may not need to.
That's the big argument. It's, it's the, it's the all inclusive model and it's the all a cart model. Right. Especially in the buy here, pay here world. So if I just want to put a five grand markup on every single car, include the doc fee, include gap, include a 24 month warranty, everything's in the price of the car. Yeah, the price is really wild when you look at it compared to the other Ford Focus down the street. Right. But you get this, this, this, this, this, this all included in the price. Right. It's like going on a cruise, right? It's going to a resort. You know, why am I going to go to an all inclusive resort when it costs so much More. Oh, well, all your food's included. All your drinks are included. Oh, okay. Or it's the bargain where, like, I'm going to have a really low advertised price, but then I'm going to Southwest you and just nickel and dime you on the upgrades you've been. Yeah, the pen expense, the, like, oh, you had two sodas while you were in the showroom. I'm going to line item that for you. You know what I'm saying? So it's definitely a different philosophy for me. It's a little bit of both. I realized that I. Because I'm a hybrid model, I do, you know, 30 outside finance. I like to have a more, you know, like, affordable price up front. You know, something that's a little closer to book value. So that.
That's right. I agree. And what Luke says about nobody ever complains about DOC fees. Well, nobody ever complains about my price.
There you go.
It's the same thing. It is. I bet I'll. I bet my position on this will shift at some point in my life. Right now I'm just dug in, you know. Yeah, I hear you.
Nothing wrong with that.
Nothing wrong.
I don't know if people are still listening, but we gotta plug Blitz Pay right now. Obviously a sponsor of the podcast. So as we talk about keeping the payments affordable and getting your payments in, that's the guys I use. I know Luke uses them. Jack, I don't know who you use for your payment processor, but don't, don't mention it.
Actually, I think we're fixing to start talking to Blitzbay. Actually, I didn't know they sponsored the.
Show, but a repay or one of those. So I would have that conversation, you know, that would be our sales pitch to you, Jack, is go, go. Look at your. Look at your fees, man. Look at what you're paying. Look at your. Your software stack. We found that switching over to them has been so much easier for our customers to make their payments online. Luke's got some people that are in the Cash network that are making their payments by cash at a 7 11s or a Walgreens. We look forward to getting into that.
Yeah, works good.
Part of it is just finding these little areas to improve on your business. Because I, I text Luke the other day about it. I'm like, I think I could probably sell everything right now and just put it in a high interest CD and probably live reasonable the rest of my life, you know? Like, I'm kind of starting to look at that and I don't know how you get over the midlife crisis of being like, I don't want to be a firefighter anymore. I can't grow a mustache like Jack. So I'm not market of being a firefighter. But like we get burnt out of putting out fires at our dealership and kind of the same old, same old. What have you guys done to like keep that passion going and not just want to shut the whole place down and go retire on a lake and fish all day?
And I shared with you, Jack's just dying laughing here, but I, I shared with you, I was in the same position two years ago. And it's hard, Jeff. And maybe it's just because I'm older than both of you idiots that maybe it came to me quicker. But you know, I'm 40, 40 years, 30 years into this business and, and I feel like I've been in 100 years. And the first thing I did was move out of my main store. I moved to a separate location where I don't hear the customers all day long because that's, that's brain damage. And so if you can move to a portion of your dealership or another building that has less of that foot traffic, the better you'll be gamify it is what I as what I told you, be a better manager. We're poor at it, so learn to be a better manager. Have metrics that you search every day and you build a spreadsheet so you can build scoreboards at the end of the week is huge for me. It keeps me with my pulse on everything that's going on. Coming. Starting cpi, that was one of my big ones, you know, how can I learn to do CPI the right way? So that's something we've been trying to, to scale here lately. And then buying accounts, that's my newest business, my newest way to scale. And every time I add something on, does it add a harder layer? It does, but it keeps me interested and it keeps me going and, and talking to all you guys helps keep me interested and keep going.
You think that working for you, the passion has been found by staying in the business and finding other things inside your business to keep you passionate about it. Jack, what about you? Do you find your passion by fine tuning in your business or by getting out and finding an outside passion that brings you back?
I mean, I just, I like buying cars so much, man. I, I'm. We. I think I'm just a weirdo. I, you know, I, I'd rather be in, you know, a building with seven lanes going and the Noise, volume, crazy than I had to be on the beach. I just, It's. It's competition, you know, I just love the competitive nature of the auction and buying cars and knowing that, you know, everybody in the building had the same opportunity as I did. And, you know that there's a lot of work to be done at that place, and there's a lot of work to be done with your reputation and, and who you are as a person and in your community and with your friends and with your network and with other dealers and. And so, you know, anybody can buy that Fusion, but Jack can go buy it and make more money than the other person and sell it faster. Because I'm trying to work on both sides. You know what I mean? And so I love the competition that I feel personally inside me, with the people around me even. Even that may. Don't know that I'm trying to compete with them, but I just feel this hunger to compete and try to win in whatever I'm doing. If that makes. I don't even know if that makes any sense.
It's gamification. This is what I was talking about. It's gamification.
Yeah. Okay, well, you. You got bigger vocabulary. I mean, I'm sitting in a tow truck and you're in a million dollar office, so I. I like that. You know, Ben and I, we're opening up a rental car company and within Turn and burn. So we're going to start doing some rental car stuff. We've got all the infrastructure, we've got the shop, we've got the inventory, we've got the people. Maybe that's. Maybe that's crazy, but I've been there, buddy. I think we can do it. So, I mean, And. And you, you sitting there doing that right now makes. As soon as I get off this phone, I'll be like, I'm. I'm gonna prove Luke wrong.
Yeah.
I'm gonna call him. Be like, what? You know, so that kind of thing is just. Is just such fuel for me as a. As a human. And then. Then there's the responsibility of knowing I've got all these people and families I support and just wanting to give to my own children and give them something. I don't know, Jeff. I don't know if that answers the question or not. I'm hungry. I'm just hungry.
That's great. I. I mean, I think that's the passion, man. You still got it. You still got it in you. You want to compete. You want to. You want to make more or you know, maybe. Maybe you look at the bank account and your net worth and it's not enough yet. Or maybe it's just internal and you're going to do it until the day you die and it doesn't matter how much you make.
Yeah, I think I'll die at the desk for sure. I'm fine with that. You know, what else am I gonna do?
Yes.
Spend time with your wife and your kids.
You know, I love them. I mean, when I'm at home, man, I just piddle anyway, you know what I mean? I'm, you know, I'm just piddling and I don't know, I just. I think my relationship with my family, I feel like, is pretty tight and. Yeah, I just. I love the car business, dude. I just absolutely love it. I wish they were eight days a week that I was. Yeah, I don't know.
That's all.
I just really like. I really like it, man. I look forward to Monday mornings. I love a Monday morning. You know, I. I don't know, man. I don't know what else I'd do.
That's awesome. I love your passion, Jack. I always have. I love, I love what you do marketing wise. I love what you do for the industry. You're now on the national board, and I think that's one of Jeff's last points here about your. Your passion for association and. And what we do. Jeff, Right? Isn't that one of the last points here?
Yeah. How's that going?
It's going well. So one of the last talks they had with me was like, you know, anytime you do an interview or whatever, you need to get the questions and run them. I'm like, I don't know about that.
Did they. Did they know who they hired, who they asked to be on the board?
I mean, I asked them. I was like, are y' all gonna try to hold me back on what.
I've got to say?
And then they said they weren't gonna. But then they won't. You know, I don't, you know, I don't know.
Jeff Martin texted me while we were on this interview. So you must add a premonition that you're here.
Oh, I didn't say anything. But, you know, I just think that there's God for me, guys. What? I mean, I know you guys because of the association, right? My state association led me to Luke and led me to Jeff and I. You guys are assets to just be able to talk to. I mean, I can call either one of you, but it's just done so Much for my. The association has done so much for my business and it's, and it's the networking with the people, it's speaking to lenders and other dealers and it's just done so much. But I think that we've got a. There's a true duty to have influence over legislation. I mean, there really is. And Luke, I think you and I were talking about the third party insurance problem that Texas has solved that Georgia hasn't solved, but Georgia's. Yeah, Georgia's on the cusp. I mean, that's something that, if we can get that done, Luke, that's. That will affect every buy here, pay here dealer and lender in the Southeast. Right. I don't know about the rest of the country, but I mean, what, what, I mean, what an incredible thing. What an incredible opportunity to give that back to the business and even yourself. And I don't know, man, I just, I think that the, I think that the associations play a tremendous role in the background of all of us. And so it's just that I care about it.
Yeah. So what's funny is a dealer from Florida that listens to the podcast text me. I won't reveal his name, but he texted me the other day and said, you know, they're asking me to be on the board in Florida. Why should I be? Right? And so he said, is it worth it? Now? You know, this is my response. Just so y' all know, I said I would. I was on the board of the Carolinas years ago, spent seven years doing it. It really made a big difference in my business and my life just as, just as Jack said. And I went on, you know, they said, is it distracting? I said, no, it, it hadn't distracted me at all. If you have a good executive director, which the national national does for sure, that they should handle all the day to day stuff. And a board member, you just have to make some decisions. But talking about personally, you know, I was really young when I got on the board. I didn't know much about the car business. I knew how to buy and sell cars. Not much about the business. And being around dealers really helped me. It helped me with these people with that have been in the business for 20 years, taught me how to start to manage, taught me how to look at financials by sitting in those board meetings. And it led me to 20 groups. It led me to, to be on this podcast with Jeff. It's made me so much money being involved with our associations that all I can do is give back because it's given me so much. And so that was Jack's point. And I'll. I'll second that for sure. And, Jack, we really appreciate you taking the time to be involved in National Board because we need more dealers like you that want to be involved in it, that are helping us all with our livelihood. Mm.
I hope so, man. I hope I can. I hope I can help out, and I sure want to help. You know, I don't want to do anything to embarrass the board or cause any headache or anything like that. It's going to be. It's going to be hard to. I don't even know that I will rein it in, you know, but you should. I just want. I just want to help them. I just want to help them. That's all.
Well, the. The. The whole. The whole reason or the good of you being on the board is because you're not reined in, right? If we wanted just the basic. And this is what we talked about in the leadership meeting when your name was brought up. Jack Carter's got to be on the board because he represents so many of us dealers that aren't buttoned up. We don't wear suits and ties every days. We don't wear penny loafers like we are just. We say what we want to say, and. And it's not going to be appropriate sometimes, but it's going to be straightforward. Right. We're not going to sugarcoat it. We're not going to, you know, preview our answers before we have a press conference. Like, we'll give it to you straight, and that's what the board needs because there's so many dealers that identify with that, Right? Like, it can't just be some, you know, cookie cutter bunch of yes man on a board. I just feel like that doesn't represent the. The population of dealers. So I think you've got a great opportunity to. To. To kind of just, you know, steer maybe a little bit and have some of that good Jack influence on the board. I think it's great.
Y. I hope so, man. I hope so.
Hey, and thank you for your time, Jack. I appreciate you being here. Hopefully you guys stuck around for this. We know it's a long one. Maybe we'll split into two. I don't know. Maybe you just listen to part two.
There you go.
Right? Awesome.
All right, Jack. Take care.
Very much. I enjoyed it. Thank you, guys. Thank you for listening. Please leave us a review. We'll catch you in the next episode.