#343 - What's Your Dealerships ROI?

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. Luke, I've been doing some thinking.

Oh, I smell something burning all the way on the east coast.

The rest of the hair off my head. Dangerous pastime, indeed. I think that you and I are. I think we're in the wrong car business.

Okay.

I think buy here, pay here is bad. I think it's. I think it's a bad idea. I think it's worse than if we ran a retail location.

I don't disagree. From a cash point of view, I don't disagree. I think there's. I think. I think it's hard, but I think if you do it right, you can make a lot of money and. But you got to have a lot of money to make a lot of money, which is. It's one of those things.

You know, the reason that got me thinking was I would re. Listen to our podcast a couple days ago about lease here, pay here, and, you know, I started thinking about our cash on cash return, right? What's the ROI of our dealerships? What. What is the cash invested compared to the cash made? So have you heard of this thing called the yen carry trade? I have not carry trade like the Japanese yen. There's an investment instrument vehicle scheme, whatever you want to call it, that's kind of jacked up the economy a little bit lately. But. What.

Oh, yeah, I have heard of what you're talking about.

You go out, right, And Japanese interest rates are, you know, manufactured low, right? They're. They're low. So you go over to Japan, you've got some sort of collateral. You put up. You borrow a million, 100 million yen, you bring it over to America, convert it into dollars, and then loan it out, put it in the market, whatever you do here in the market. And the spread between the low interest rate in Japan and the slightly higher interest rate in America is like a guaranteed return, right?

Yeah, I think the. I think. But Japan just upped their rates a little bit to try. To.

Try to. They tweaked it. Yeah. That really screws things up because I think you're. It's like a 6 to 8% return, right?

Something like it is. I think they were at one and a half percent or something. So, yeah, there was. There was a six.

Not foolproof, but it's pretty close. So if you had something that you could invest in that gave you an 8, let's say 10% return to be healthy. Would you do it?

I. Yeah. I mean, risk out.

Minimal risk. Minimal. Minimal. No headache, whatever. Yeah.

I mean, if you can return 8 to 10% with no headache and not doing anything, you take all your cash and you put it there, is what you do.

You probably would, right? You would go out and leverage every.

Possibility, everything you got.

You'd go to Japan and just borrow from every single person that would give you a dollar and you would put it into this thing and make 10% for as long as possible and just cheap churning that over and over and over and over and over and over and over.

I would never. I would never have to work a day in my life. And you could give me that investment.

Probably wouldn't. Right? So what's so interesting is, is it's very, very similar. Not similar, but, you know, I can make the argument that it's a similar thing in our car dealerships. Right? So. Okay, let me walk you down this path. Let's talk about the ROI of the car dealerships, right? Let's take the two different models, right? We have a retail model, which is I buy a car, I fix it, I sell it, and someone else gives me money for that thing and see you later. And then we've got the buy here, pay here model, which you and I are in because we're glutton for punishment. And we buy the car, we fix the car, then we finance the car, and we wait 36 to 42 months to recoup and get that cash back in the door, right?

Yeah.

So let's just say you start a dealership. I started dealership. You went retail. I went buy here, pay here today. We both had $10,000 to start this dealership with. So let's walk through the math for everybody. What that looks like just super simple because I find it almost.

What am I going to sell? How am I going to start a buy here, Pay your dealership with 10,000.

Hypothetical. Call it 10,000, call it 10 million, call it a million, whatever. We're going to use 10,000 as an easy number. So if you're a retail dealer, Luke, and you have a $10,000 car, you. 10,000 of inventory, whatever it is. 10 million. You sell that $10,000 car for what's a typical gross?

Let's. Let's call it $12,000. Let's. Let's call it 12,000.

I'm going to call it 13 because I already put it in my spreadsheet.

So why are you asking?

Then you made $3,000 front and back. Right. It's easy. That's pretty slim for a $10,000 car. Right. But say you made 15 on the front, 15 on the back or two and one whatever it was. Now how many times can you do that in a year? How many times can you turn that $10,000 and make 3,000 on it?

Well, things would, most people would tell you the best, do it 12 times a year.

Yeah. Okay, so let's take the not best because I already put in the spreadsheet and it's six times a year. You're turning every 60 days. Let's say.

I think that's fair. I think that's fair.

So let's say you took that $10,000 in January, turned it six times and come December you netted, grossed, let's say $18,000 on your $10,000 investment. Right? Okay, that's pretty darn good. You take a normal overhead and some expenses that you're going to have kind of basic, maybe a 30% personnel overhead and 30% of something else. But you're making with or without overhead around. That's like 180% ROI or something, right. It's like.

Well, that's gross. What are we talking about net you didn't take?

Yeah, yeah. So let's just say the expenses are the same for both dealerships. Right. You have personnel, you have lot rent, you have carry on interest, maybe if you had it, or utilities, blah blah blah blah blah. Right. So whatever that is, those are going to be the same for both dealerships. With the argument that the buy here pay your dealership would actually have a higher headache.

100.

Let's do the same thing on the other side with the buy here pay here side so we can compare apples to apples. Got a $10,000 car. Yep. Now you're buy here, pay here. So maybe you sell that thing for 15.

Like I say. Let's say let's say 14.

Yeah, let's say 15 because I got it in the spreadsheet and it makes my numbers easy. You grossed five grand, Right. How many times can you do that a year? Per year? This is a tough one.

Well, a quarter, 25% of the time. Yeah, maybe 33.

Because you, let's say you put this on a 36 month loan.

Yeah.

And that's super aggressive. That's like a 700 payment on a fifteen thousand dollar amount financed. They had no down or they covered their tax and license, whatever. Super simple. So you're only able to turn that point three times a Year. Right. Not six times a year like the retail guys doing it. You're only turning it point three because you're only returning 33% of that each year. Now the difference is you've got, you're going to collect a third of your gross each year. Right. Which is you grossed five grand. So each year, let's, let's not amortize it, let's just put it in a straight line to make it simple. You're going to collect a third of your gross profit and a third of your interest. So your gross profit was five grand. Your interest is like 6,800 bucks. If you're like me, at 24.9% interest. Right. You're going to collect a third of that each year, which ends up being like through $3800 that you brought back the first year. You'll bring back 38 of your profit and interest the next year. And then the third year you bring the rest of it, right?

Yep.

So if you have the same 30% expense ratio that they had, your net at the end of the first year is a 12% cash on cash return on your initial $10,000 investment that year. Right. So in an entire 12 month calendar, you made 12%. The retail dealer made 120%. So they made 10x more money in the first year loaning out that 10, using $10,000 to run a dealership that you did as a buy here, pay here dealer using $10,000 to run their dealership. Right. Or to sell cars. That to me, in a, in a, in a world where your funding is limited, makes buy here pay here horrible.

Yes. I don't disagree. I think the reason a lot of people end up in the buy here, pay here business is because of this lack of banks to, to help them get that car financed. And next thing you know, they've got a floor plan full of cars and they can't sell them. Well, then somebody walks in, says, well, I'll give you a thousand dollars down. And they get into it because it's easier to sell a car. And it, that's a bad reason to get into the buy here, pay here business. Reason. That's the reason my dad got to buy your business. And you see it happen a lot. My dad didn't have a floor plan, so that, that was not a, that wasn't an issue. But he saw the writing on the wall that if I want to sell a certain amount of cars, I'm going to finance myself. Your good retail dealers out there, there's a lot of Them, they, they know how to do it. They know how to secure the banks. They know how to buy the right inventory. They know how to turn the inventory. Retail dealers.

Are.

I'm a buy here, pay here dealer, so I'm gonna. They are, they're a little more savvy when it comes to buying and selling cars.

Yeah, they gotta be.

They're a little more savvy because they.

Have way less cushion than I have. Right.

They have. They can't make mistakes. They, they make mistakes, but it really costs them a lot of money to make a mistake. We are more savvy when it comes to collecting it, making sure we, we deal with the repos properly. You know, there's a different mindset. A car guy I don't think would be as good as a buy here, pay here dealer as he would be as a retail dealer. And so it's just, it's really two separate businesses which, which we're talking about. But yeah, if I could, if I could have a separate lot that was retail and that did, you know, like we talked with JD the other day, 100 cars a month, I mean, yeah, that's the way to do it.

So that's kind of what I'm driving at, is if you opened a dealership Today, you had $10 million and you said, do I do retail? Do I do buy here, pay here? Retail to me is the absolute smartest choice. $10 million. No flooring line. I'm going to use that 10 million, all the floor cars, and just churn that 10 million and turn it into 10 million in the first year.

And I can tell you the one thing you have to do, you have to, to hire a finance manager that's been at a store. That, that man, he's got the connections with all the banks. He knows how to make it work. And you got to pay that guy half a million dollars a year. You know, you're gonna have to do that. Your location's gonna have to be way better than any other buy here, pay here store. You know what I mean? Like, location matters a lot in the retail space. That finance manager, the one that can get those deals hung, is your number one driver to making sure you're successful. So if you're not that guy, good luck, because you're going to have to have a lot of expenses up front to get it done.

Yeah, I definitely think it's a harder deal and you're competing with a lot of people because that is probably an easier form of car dealership to get into. You can go get a flooring line and you can get signed up with some basic banks. Pretty easy, right? I mean, that's kind of the entry level of everything. Getting into buy here pay here is much, much harder on a grand scale because of the capital hurdles that it takes to actually fund a respectable buy here pay here. So I would go back and argue that the guys that I know that do the hybrid models, you know, like our good friend Harry, who has grown ridiculous is because he's combining a buy here pay here model with retail as well. Right. He does a lot of retail units and he'll do some, some really, you know, quick, quick buy here pay here terms that almost treats it like it's a retail unit. Right. He's not waking, he's not waiting 36 months to get his cash back. He's putting them on like 18 month terms somehow because of his demographic and the model that he's got. But that would be my argument to saying, hey, I, I like my hybrid model because I need some cash to turn quicker. I need to make a higher ROI on that money on my retail stuff. And then I'll have my buy here pay here maybe, or maybe I won't. I mean, the more I look at the numbers, the more I think, man, I could, I could probably, I don't know, man, what, what's the other ROI of a buy here pay here dealership? Luke, what else do I have? Why, why would I want to do that?

The interest income will sustain you when, when the economy goes bad. The one thing I'd say properly run buy here pay here store will, will return, you know, 15 to 25% a year. Not, you know, and not even account for your reinsurance money that goes in there. And you can, you know, when you build that asset, you can use your, your receivables to borrow against it to do other things. Our good friend Steve Greg just, you know, a champion of this. He used his portfolio to be able to invest in real estate and things like this and made him a lot of money.

Right.

I think, I think there's a lot. I think without cash, Buy here pay Here is in this day and time almost impossible to do properly.

Yeah.

So it's, so it's really, it's, it's hard thing to get started from, from the grassroots for sure.

It's funny you say that, you know, Steve used his buy here pay here portfolio to get cash to invest in other things that made him a lot of money. It's like he used it to get out of it, you know, he used it to get into real estate, which we see a lot of buy here pay, which you would argue you'd see all dealers do, right? Even guys that are retail are spinning off excess capital and doing things that are more, you know, tax benefit and protective from a buy here pay here standpoint in an roi, I would think, you know, maybe the only other things is, you know, you do have some, some, maybe some tax benefits, you know, and like you said, the big argument is that you're building equity or you're building, you know, maybe long term payment stream or long term wealth in your portfolio. Right.

And I think I might be wrong on this. And not to mention all the garbage that all of us dealers run through our dealership, that's our personal. But there's, I think if you got, if you grow to a certain point and, and we've been there for years and I'm still trying to grow, but, but if I decided tomorrow, you know what, we're going to sell 25 cars a month, we'll keep our portfolio at 700 accounts. I'm going on cruise control. I could do that tomorrow. And it would spin off cash like crazy. And so you, you could do that, you could set it and forget it essentially for 20 years, tweaking things every once in a while as the dealer. But you wouldn't even necessarily have to come to work because it would spin off so much capital that you could live a very, very nice life and, and just hang out and don't. You could do that at a retail store as well. But when the economy gets tough, let me tell you this. Buy your, pay your stores, make it. When the other dealers went out when I was, in 2008, man, they fell, retail dealers fell like, I mean it was the dang. This thing. You'd walk into the dealer, you'd walk into the auction one day and the guy who was the, you know, the top buyer for the last two years, you say, hey, where is such and such day? Oh man, they, they close him down, he's done.

Then you see all his cars running.

Through lane 10, you see. And you see all his cars in lane five. And, and that has happened that, that goes on and on and on. So I shouldn't, no matter, no matter what business you choose to be in, in the, in the car business, buy here, pay here, lease here, pay here, or, or retail, you still got to run it, you know, you got to run it like it's, you know, you got to have your, your fist wrapped around it. All the time. Because you can get out of sorts even making 120% return. There's a lot of planes being bought, there's a lot of helicopters being bought, there's a lot of boats being bought. A lot of money going in the places it don't need to be going.

Yeah, yeah. We know some dealers like that that probably make great, great money in a retail lot and they probably spend right to the end of it every single month. And maybe that's what the buy here, pay here advantage is in the unseen ROI is. It's almost like a forced savings account. Right. If, if you were a retail dealer and you were only doing credit acceptance deals, that's almost like a forced savings account. Right. Because they're giving you a little bit upfront to stay alive and then they're going to promise you this residual back end portfolio income every single month for the next 48 months. Right.

That, that never comes.

I don't, some guys do.

You know, Jeff, I, I did, I did leave out one crucial, crucial way to make money in the buy here, pay here space. And, and we have a buddy that essentially all his income is cpi.

Yeah.

And you can't, you can't do that in, in retail space.

That's true.

We, and we know some guys doing 80, $90,000 a month in CPI. When you get to that spot, I don't see how in the world you're going to, you're going to compete with that in the, in the retail space on something you really have, you don't have to do anything to do.

Yeah, I mean obviously our guys at Buckeye are, are the ones to talk to. If you guys are buy here pay here and you don't have a CPI program set up, you definitely should because that is one of the very, very few extra income sources. Right. Like you could run a service center, you could do wheels and tint, you could run a repo company, you could have some of these outside services that maybe you provide to your customers that bring in extra money outside of just trying to sell more service contracts, more gap, more, more back end products or make more money on the front end. The CPI is actually, it's money that would have gone to Geico or Progressive that's actually coming to you. So, so yeah, if I'm a, if I'm a respectable size dealer as a buy here pay here and I have say 500 accounts on the books and I got a good majority of them pay me a hundred dollars in CPI each month. That's, that's Notable for sure. I think you could factor that into your ROI and say hey, this is now getting a lot more competitive with, with the retail dealers. As far as my cash on cash return.

Yeah. I think if I brought that in we, we would come up to probably 20, mid to high 20% return. And I mean and that doesn't, that doesn't count for add backs because I'm paying myself rent. You know, I'm, you know, I pay for other stuff that you know, I got a car, I got gas, you know, all these things that we, we forget about. There's a lot, but a lot of.

Dealers do that too, you know.

Yeah, sure, sure, sure.

No matter your model, you're paying for your cell phone, you're paying for your gas, you don't have a car payment.

Yeah. But when you factor that into overall return, I mean every little bit, you know, you're probably at the end of the day you're in a 30 return. I mean good gracious, that's a after, after you're paying yourself for salary too. Yeah. That return goes again if you're, you're.

Still adding those same three or four points on either business model.

Oh yeah, for sure. Oh yeah, yeah yeah.

Business model. Right. So now your, your 20 went to 25. But guess Matt, my 120 just went to 125. Right.

Well I keep, I keep talking to this guy about Subaru store up in Utah. So hopefully one day that he will, he'll, he'll think about it.

Yeah, it's, it's, it sounds like a lot of work. One more thing that I want to discuss with that that also made me think to transition is why do we, it's it about cash flow. So if you, if you look at, if you go back to the yen carry trade, what I'm trying to find is the arbit, arbitrage. I'm trying to find the spread, right. I know what my debt service is. I know what my monthly nut is and here's what I can make every single month and I'm going to take the difference, right. And I'm going to ride that into the sunset. I'm not trying to own it. I'm not trying to own all these yen. I'm not trying to reinvest my own yen. I'm going to keep borrowing that yen at 4% or 3% and I'm going to keep putting it out there at 6 or 8%. Right. So why is it that there is some badge of courage in the buy Hairspay, hair space Specifically for us to own our portfolio or own our flooring line or have a low a 0:10 debt leverage ratio.

I think, I think that's a, I think it's a super important question and I've been thinking about that ever in the last little bit because every Fortune 500 company out there has debt and they use that debt to increase their profitability. The debts either to the shareholders or it's to, to big banks. It's bonds, it's all these things. And these big companies use debt wisely and you know, we should be using debt wisely. The difference is this getting debt on our portfolio, number one, it's hard and number two is expensive. And so the reason we look in the buy here, pay here space of paying off of our, you know, not having any debt on it is because a lot of people are paying debt at 12 and 15%. And when you're paying debt at 12 and 15% and you're only returning, you know, run properly 22%, that, that takes that margin down quickly, real quickly. So if you're debt, if your interest service every month, 50 grand, I mean that, you know, it starts to really peel into your, your net income.

Yeah. So that, that's what I, I just like to think opposite of what sometimes we preach on this podcast, which is own your car lot, get it paid off, get out of debt, get your portfolio, don't borrow, don't leverage. You know, like sometimes we do we get in that routine of saying that like, but why, why be so conservative? What do you think is a healthy debt leverage ratio on your line of credit or your flooring line or your real estate? Like, do you think it's so 6, 50, 60, 80%? I could go as high as 80 and.

No, no, no, no, no, no, no. On your, on your real estate, yeah, you can go as high as 100 on your real estate. I, I don't see a problem there because it's going to be at a such, at such a lower rate. I think that you in the buy here, pay your space, you should own your, all your cars. I don't think you should be flowing your cars because that's, that's another expense you just don't need.

And so I want to challenge you on that. Why, why would I tie up my capital, say I had $1 million in flooring, that was my cash. Why would I tie that up when I can put that million dollars out there and make 22, 25 return in my buy here, pay here right annually And I'm Paying the flooring companies 8 fees and curtailments and everything else.

You're probably paying those, that foreign company 12 to 15 to 18. You're not 10% spread, but let's say, let's say that's, let's say it's this because some of them are, let's say you're borrowing money on your, on your receivables at 8% and you're, you're paying a floor plan company 15%. You got 7% problem here. So I think all, I think you get feed to death floor planning cars. And that's the reason you probably shouldn't.

Do it because if you factor that into the, you know, overall that in the recipe and know that it's coming. I think the reason why sometimes we pay these off is because it's easier to not have to pay attention to it. Right. Like if I own my cars, I don't have to worry about turn time. I don't have to worry about curtailments. I don't have to worry about interest rates. I don't have to worry about audits or being out of covenant or making some payment every month. It's just there, it's just, it's just, it's just there for sure.

People get in trouble doing that. If you go, and I said this on the podcast with, with Tim Lawrence of the day, but if you go to most failing dealerships, the number one thing you'll see is car sitting cars 8, not, not frontline age units, backline age units. Because what happens is, is it's just stuck, it's a stuck asset. Just people don't think about $5,000. If they drop $5,000, they'd go pick it up, right?

Yeah.

But if there's a $5,000 car sitting back there, they can't get running. They, they try to forget about it, but it's really, it's $5,000 in cash sitting back there.

Or you just wait for the mechanic ferry to show up one day and suddenly it is running.

That's right. You take it somewhere and you get it fixed or you junk it and you move on. You take the loss. You know, it's. But that's the number one thing I see at fatal dealerships is sitting assets, bad cash management.

So to argue that point on my side, a flooring line makes you be a little tighter, right? A flooring line forces you. I won't turn times and be on top of your inventory because they won't let it sit or they're going to make you buy it.

I think you should be cognizant of that if you're using your own money.

So treat it like it is. I don't know. Maybe that's a way to do it. Or maybe there is a flooring leverage. That's fine. Hey, I'm going to floor half my cars, and I'm going to keep another half million in cash so that if it is an aged unit that I like, I can keep or I'm prepared. If my flooring line gets pulled, I can transition over. You know, let's.

Let's think about. Let's think about what happened at the first of COVID Yeah. All of a sudden. All of a sudden, those floor lines across the board, all of them said, you're done. That $500,000 flooring line you thought you had today, it's $20,000.

Or it's like they capped everybody what they owed, right.

And that was it. They couldn't buy another car. And so you got to be prepared for those things.

Yeah.

Yeah, that's better.

Yeah. You got to have it. So answer me this then, Luke. Why do I want to own the land or why do I care if I own land that I'm sitting on?

I think it's a way to build. I think it's a way to build wealth. You don't have to. People have to.

But that's. That's relative, right? I mean, it could be great. One day could be bad, the next day could be worth something. One day could be worth nothing the other day.

I think it's cheaper than renting, probably. Maybe if I had to guess. But maybe not. Maybe not.

Here's the thing. Obviously, rent is completely deductible, but the. The argument I would have. If we go back to this cash flow argument of I'm not trying to build equity, I'm not trying to build assets, I'm not trying to own anything. What I'm trying to do is maximize the spread between what my cost of operations are and what I can make as an operator, Right. I'm just trying to maximize that spread because that gives me freedom, gives me a great lifestyle right now. You know, I. I can do these things or live my life or have all this stuff, or I gotta make double mortgage payments because I'm so darn set on paying this mortgage off. Right? Like, I just. I want to. I want to own this thing. And it's like, ok, I want to hold my portfolio, so I'm going to slow grow. I don't want to borrow Because I'm just going to slow grow this thing. Okay. Dude, you're going to be 80.

I think there's a. I think there's a happy medium in there. I'm one that likes to pay off debt. I don't like debt. So I'm the.

I'm arguing this, man. I get it.

Yeah. I'm the one that'll pay. That'll pay a double, A double payment every month until it's paid. It's just the way I am. Okay. You know, I don't want any. I don't want much leverage on my portfolio, that's for sure.

Yeah. But again, my argument is if we manage, and I'm not saying this is the right way, definitely everyone listening just know I'm devil's advocate here. If you manage your dealership off the cash flow statement and not off the balance sheet. Right. Like, to me, it's about maximizing cash flow. Think about people that buy real estate, Right. If you had a real estate mentality, what does it matter? What it matters is what cash do I have to put in to get that building? What's going to be my return every month?

That's. That's how developers get huge.

Three grand a month. I will buy it, right?

Yeah.

I will do it if that. If I got to put in 100 grand and it's going to cash flow me three grand a month. That is a great use of my cash. It's a great return. I'm going to borrow the 80% from the bank. I'm going to put 20% down. I'm going to pay the bank 8%, 9%, 10%. All I know is it still cash flows, you know, 12% return and a 20% IRR. Right. So, sure. Why don't we think of that like as our dealerships? Why don't. I mean, that's.

I mean, it's an interesting. It's an interesting take and I. It's probably, it's probably the right take.

I'm going to use my cash to make more cash. Right. Like it.

It's probably the right way to do it until things get tight.

Yeah.

And when. And when things get sideways, you see what happens to big developers.

Yep.

When, when, when rates go up and the banks aren't helping out, they repossess everything.

And they bought in the peak of 08 at a high fixed or variable rate. And all of a sudden the rates change and they go variable and all of a sudden your renters fall out and then your vacancy goes through the roof. Yeah. A lot of people were hung out to dry because they were over leveraged, right?

Yep. And I think that's key. And you ask what do you think the right leverage is on. On your, on your portfolio? You know, I think most people will say that 55 and, and less is fine. I would probably tell you 20 to 30% is the right one.

But you know, a lot of dealers that make killer money at 80% or 70%.

Dude, I, I've seen people about out of business at 80% and then all of a sudden they're. They're at 20% because they just grew like crazy. So I, you know, I think. But if, I think there's a time.

And place, if you're making a 25% net return on a million dollars, why not leverage that at 50% and make a 25% on $1.5 million or $1.7 million right. The next year? So, so that's again, the argument is like, okay, well, I'm leveraging not to, not to pay for expenses and not for these other things, but I'm actually leveraging this in order to have a higher dollar amount that I can then loan out. Anyways, one more time before we leave, Luke, we got to make sure we plug blitz pay. If you do have a portfolio, you're buy here, pay here. And you are trying to leverage or not leverage, regardless, you got to get the cash. If you're managing off the cash, which I don't recommend, but it could work. You got to make sure that cash is flowing.

Yeah, that's for sure. And Blitzpay helps us do that. And you know, it's just the ease of use. Customers typically will pay you. One of their car is running two if they can actually make the payment to you. So Blitzpay helps with getting that money in your bank account. So I reach out to them as soon as possible.

Yeah. So with all this being said, Luke, and to put a pin in this, I think I'm going to probably get out of buy here, pay here and just go straight to a retail model. I think if you, if you could take my net equity, if I sold everything today, Real estate portfolio, flooring line. No, no, not my flooring line. My floor, my, My vehicles, my cash that I owe. I take all of my equity out of my dealership and my portfolio and I dump it all into my flooring line. Right. I dump it all into cars. Now I have whatever it is, $5 million of paid for inventory. I mean, that's. I don't know. I mean, depends on your model, but that's, that's putting 200 cars on the ground and I can sell half those every single month. That's a big, at a three grand return, man. Now what? Now I'm making some sweet money.

I think your, your location lends well to that, to, to a retail spot and it looks great. You know, I, I'm don't. I would not argue against that model at your, at your store. I think, you know, I think the other thing that, that's hard about retail is this, is finding the right car to buy for your area. You know, when it comes to buy here, pay here, you kind of know if I buy a certain type of car, it's going to be a certain payment, a certain down payment. You can kind of force people into certain things if they wanted to.

Not selling financing. You're not selling a car, you're selling your program.

Yeah. Now my source is a little different. We buy cars that people like anyway. That's, that's not here or there. But knowing your market when it comes to what you buy and retail is, is key because if you just buy a bunch of Ford Tauruses, which they don't even make anymore, I don't think, but it set those or Ford Focuses and set those on your lot, they're not going to sell. It's just not going to happen. So you got to study your market. You got to know what's selling, what's hot in your market, how quick am I going to turn that, what's the most I can pay for? Everybody else in your, in your area knows the exact same things. So I think it's again, you have to be a little more savvy of a car person and, and marketing type person, I think to make it work in, in prime, close to prime retail compared to what I do.

Mm. Yeah, it's. It's a super interesting thought. So guys, if you're still listening, thank you. I hope this gives you some thought. And that's all we wanted to do here. We're not trying to give you legal or financial advice or anything. Of course, run your own numbers. But the key is to look at what is your roi, right. From both. What's your ROI from a financial standpoint?

What.

What are you investing into your dealership cash wise? What is your return on that cash? Are you running a smart model, Luke? I would almost argue that Luke runs a retail dealership. He just happens to have his own bank. Right.

Like, and that's.

You buy cars they want. You don't have a normal markup, you don't have a normal repo rate, and you just run a subprime bank, basically.

And. And that's what I want to be. Yeah, that's what I want to be.

That's okay. So are you doing that, and are you getting stuck in no man's land where you're neither a buy here, pay here, nor a retail? Or are you doing hybrid and are you doing it well? Or again, are you straight hybrid? And like Luke said, do you know what your market is and what's your niche inside of that? And the overall roi, right? Like, there's the financial roi, but there's also the lifestyle roi, right? Your personal life, your dealership doing. You enjoy what you do? Is this bringing you excitement and passion for it? Because you're, you know, you're in a business that you enjoy, that you care for. So there's. There's a lot of different ROIs to calculate, that's for sure.

Yeah, I agree.

All right, guys, good talking to you.

Thank you for listening. Please leave us a review. We'll catch you in the next episode.