#361 - Looking Forward to 2025

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 with special guest Luke Godwin.

Oh, that's so mean, man. I'll tell you, you, you're trying to scare all the dealers off. Tell them that I'm, you know, not going to be on the podcast that's. You're trying to take over. Yeah. Hustle. Hustle. Takeover. From Jeff Watson to the Independent Podcast. Hey, hey, hey.

I didn't, I didn't leave. You left me.

I'm still in business. I'm. What are you talking about? I'm still in business. Look, still have a.

We had everybody real scared with last week's episode. Luke is still around, obviously, still operating and cleaning up the paper and, and running a dealership and, and who knows what other exciting stuff. So, yeah, he's not going anywhere. I appreciate all the resumes that got. I sent through email of people looking for, to take this position over. I will file them away for now.

Yeah, and I appreciate anybody reaching out, wanting to do some consulting. I still have probably two to three more, you know, open spots that I can do some consulting for. So if you are, if you are looking for something like that, give me a ring.

Yeah. What about marriage counseling? You do that kind of consulting?

Well, you know what's funny is I, I, I'm decent at marriage. Yeah, I'm pretty decent at it. So, yeah, I can, I can help.

Out better than your average dealer.

I mean, I'm 20. I'm 20 years in and all my hair hasn't fallen out. My wife still loves me. You know, that's, I'm doing all right. There you go.

Yeah. Still on the first wife?

You still on the first wife? And I'm getting better as I go. You know, I, I started out kind of weak, and I've gotten better. You know, I'm pretty good now, pretty solid.

That's great. Hey, what I want to do in this episode, Luke, we're going to talk about your 2024 financials and mine, how we panned out for 2024. Did we make any money? Was it an up year? Was it a down year? And of course, we encourage all dealers. You absolutely have to do this exercise. So we're going to give you some of the metrics that we track, some of the tools and the ways that we do it. It's not sophisticated. It's not super crazy. There are some fractional CFOs and some people you can hire to help you be more sophisticated. So we're going to give you kind of the basic, basic, basic stuff that you definitely need to be tracking. Dumping into a spreadsheet and sitting down with your team and going over every year. I mean, obviously should do this monthly or quarterly, but very, very fun to do it at the end of the year to look at a 12 month picture.

Yeah, yeah. And you know, I'm pretty sure we've done some forecasting episodes in the years back, so I would definitely go back and make sure you listen to. And I'm pretty sure that we had a forecast spreadsheet built. So Jeff, we'll make sure to attach that to the newsletter that goes out on Sundays. We'll do it this week so you'll have it and. Right, we can do that, right, Jeff?

I have no idea.

Well, we can. Anyway, if you hadn't seen the newsletter, it's been revamped and the guy doing it is doing an amazing job. A lot of great content in there and look for it, look for this worksheet and really dig into it because this, if you do this right, you can really, really nail your numbers and know where you stand in the year.

Yeah. So let's start with it. How do you do it physically? Where are you tracking these? I know most dealers, we, we have some sort of accounting program that's tied into our dms, hopefully tightly tied into our dms. Whether we're using a native accounting like inside of our, our, our DMS or whether we're using QuickBooks, QuickBooks Online. What do you do with the data after that?

I pull the data and put it into Google Sheets or Excel spreadsheet, whatever you're using. And that way I can build historical data. And with AI, I mean when I started this, the first year I did this I think was in 2016. So we're looking at eight years of data. I'm sure that I could take AI right now and set it on top of my spreadsheets and have amazing metrics. I don't know how to do that, but I'm sure somebody out there does know how to do it and I'm sure Google has Gemini that could just go in there and really crush this data and show us, you know, some really cool metrics.

Yeah, that's what I do. So I do similar. And this is what we would recommend for all dealers is just have, have a folder inside your Google Drive where you just keep some, some sheets. Right. And you're going to build out different ones for different things. I have a couple. I have one where, you know, obviously I track some weekly numbers. My whole team has access to that scorecard. We look at what we did that week, and then I also sit down with them and look at annual things like we just did. I said, hey, guys, let's go back and look at the whole year. Let's look at what we spent on recon, let's look at what we spent on goodwill, what we spent on warranty or service contract repair, and let's see where we're trending. You know, let's look at our leads. Where are we trending? Let's look at the leads we had scored. Where are we trending? So we're kind of looking at that to just say, hey, did we get total offline? Are we completely. And of course, you know, I'm tracking, you know, monthly sales. I'm tracking, you know, dollars financed. I just kind of start adding things as I feel like they're crucial to be tracked. But I don't overdo it. I know Luke is a spreadsheet jockey. He likes to have every metric under the sun. I don't want Google or Gemini going in and dissecting my crap every other way, because, honestly, at that point, I don't even know what to pay attention to. So I try to keep it somewhat simple.

Well, yes, I. I'm. Sometimes I get a little carried away. But I can tell you this. There's a lot to tracking about here, pay here, dealership. I mean, it is. It's. You know, and there's. There's a lot to track in a retail dealership.

Yep.

So you have to determine when I first started doing this in 2016, I think I had. I had 15 metrics I was looking at.

Right.

And that we were forecasting. And today, you don't want to Hear what I'm.

1500 probably. I think 15 is a good number. 10 to 15, probably. Pretty solid.

It's pretty solid. So I'm up to about 30. I doubled it. And, you know, that comes with adding different layers is what that does. And I don't. I don't know that there's any better data in those 30s than compared to 15. But I would recommend everybody start with 10 and. And get going. And. Yeah, let's. Let's go over what we got.

Yeah, it's really fun to do it year over year, too. So as. As you start, go back as far as you have the patience for, but then move forward and you start to really build out a picture. So along with that, Sheet. I also track my net equity. That's a really fun one, you know, so I really care about that. I want to know what do I owe people and what do they owe me? What is my property worth? How much money do I have in my flooring that I own? So I like to track a net equity number from my dealership and I'll update that. I'll project it out for next year, and then I'll update it in December of every year just to see if net net. I'm moving in the right direction. Right. Because I could have zero growth in sales. I could have zero net income for the year, but maybe I put a bunch of money away in my reinsurance company or maybe I paid down my debt substantially. So, yeah, my net worth has grown. It just doesn't really look like that. You might think you've had a flat.

Year and actually having a flat year, sometimes it's okay because it reduces your tax liability and that helps you grow as well. So as long as your equity is growing, as long as your net worth is growing, you're fine. And that's. That's a great thing to track.

So tell me this, Luke. Let's get into some of the nitty gritty, not to bore people with the details, but to illustrate the picture.

Yeah.

Of how your 24 went. What would you say? Like, how did your net sales. Let's start at the very beginning at the top and say net sales. Where were you at? No, no, sorry. Gross sales. Total sales for the year.

So this is. This is the first thing on my list, Jeff. And what's. What's interesting about this. This is going to blow your mind. This is how good I got in forecasting. We forecasted 423. Sold cars retail and buy here, pay here. I sold 426. And I did this forecasting in December of 23, mind you. Okay.

Yeah.

That's how. That's how close we nailed it.

Okay.

And gross profit of those sales, we had forecasted at 1.5 million in gross profit. We were at 1.45 million. To miss it by 50 grand. Forecasting to me was perfect. And the difference was we were slightly off on the gross profit. We were slightly off. And. And it wasn't much. It was a difference between 30 $600 forecast and 30 $400 actual. So we were off $200 a car.

So was that growth projection or was that. You kind of know that you guys are at a. A level. You've kind of leveled out on the dealership hey, I'm gonna sell X amount every month. I'm not planning on growing. Or was this projection based on a.

That was, that was projection based on growth. And we grew by one month last year is what you look at. We grew by one month of sales last year.

Okay, 10% or so.

Yeah.

Okay. If I look at my 2024 and to give you guys some hard numbers, I actually, I was 8% off on sales. So my total gross dollar amount sold, I was 8% less on a dollar amount, which translates into about. I was 8%, almost 10% less on vehicles sold. So I'll give it to you guys at percentages because I know when we say, well, I want to sell 500amonth, well, is that good or bad? I don't know. Is 500 good for you? Is 500 bad for you? So we only sold 50 last month. Well, I don't know what that means. Do you normally sell 60 or do you normally sell 160? Like that's the hardest part I have when dealers know, give it to me in percentages. You know, we were up 10% this month or down. So I'm down 10% on the yearish. Right. In that ballpark. What really is interesting to me is my cost of cars is also down. So I, my inventory all in was less expensive. Even my, even my recon leveled out. You know, I didn't spend as much on recon as a percentage of normal growth as I would. Well, I take that back. I, I was almost flat from 2023 to 2024. I spend about the same per car on recon. So I don't know if that's me being cheap or the price of parts leveling off. I don't know.

So our ACV was down $1,000, 9% down. And so I think that was across the board. I think every dealer that's in the buyer pay your space would notice that and I think you would notice it higher on the retail side. Two reasons the higher end cars quit selling for retail dealers and, and cars backed up in value. So we're saying let's, let's call it a 10% reduction in and price of the car sold. I think you saw with the auction lanes anywhere from 10 to 20% of, of deflation. I don't, you know, people don't like to say that word, but that's actually what it was.

Yeah, you know what I found and this was interesting to me because I could easily stop there and say, hey, yeah, you're right, that makes a Lot of sense. You know, I paid less for cars. My recon was a little stagnant. What I found is my gross profit per car actually went down by 23%. So what does that tell you? If my ACV stayed about the same and my sales price went down and my gross profit went drastically down.

You're paying too much for cars or having to recon too much is what I would say.

I'm not charging enough for my cars, right?

Well, I would argue that's definitely not the problem. But okay, yeah.

So what my data tells me is that my gross profit is down. Right? My gross profit, that's just sales price minus cost of car.

Your gross profit is down because you pay too much for the car, not because of the sales price.

Well, it's both.

Well, no, it's not because you would have to. If you, if you increase your sales price, you might not sell as many cars.

Well, you might not, but I definitely didn't.

The market. But the market, the market says what you can sell the car for. So it's got to be a cost prop, not a. Not a market problem.

Well, I don't know, man. Not in the buy here, pay here world, right?

No, not for me. I see it. I see the difference. I see the price does matter in buying your favor. A lot of people don't, but that's neither here nor there.

Okay, so what I look at is I say, okay, my gross profit per car. Right. That's basically my markup. What did you. What was your average gross profit per car?

34, 22, 62.

Okay, so mine was 37. Was my gross profit per car down from 48 the year before? Right. So I was down $1100 gross profit per car when my ACV also went down a little bit.

Yeah.

So that is going in the wrong direction to me. Right. That's a pretty drastic drop in gross profit per car.

I would say you're getting rights asked because I believe the other model of super high grosses lead to super high charge offs.

I. Oh, I agree with that. I'm not making six or seven grand gross profit per car, which some buy here payers do, Right?

Yes.

And you would argue that. Yes. You're never going to collect that, so why charge it? Yeah, I think 37's low. Hey guys, real quick to break in and let you know about a great, great, exciting new sponsor the podcast has for 2025, Ignite Consulting Partners. I know you guys know who they are. You've heard of Steve Levine. He's been at Every convention. He does a great convention himself and he's here to help out independent dealers sponsor the podcast.

I tell you, I've used Steve and Ignite Consulting for as long as I can remember. And, you know, we talk about reporting credit. Well, he has a way that they can audit the way you're reporting credit, make sure you're doing it properly, because it's a super important thing when it comes to buy here, pay here business. You know, deal jacket reviews, all these type things that are super important when it comes to making sure your business is running the right way. Because what you don't want to happen is to be sued by that local attorney that, that takes, you know, all the hard earned money you've used. Steve's there to help you not have that problem.

Yeah, and that's what I'm going to do in 2025. My commitment and one of my goals for 2025 is to build out my processes so that my dealership can run better. And part of that is an audit on these types of things, my legal compliance. Do I have my policies in place so that I'm covered? And do my employees know? Am I training them? You know, Steve does a deal jacket review for me and it's great. Man. There are so many forms of signatures that you need, and if you miss something or all of a sudden your salesman gets sloppy and like some form falls out of the packet for some reason and they just never updated it and you didn't catch it. Like, you could have sold hundreds of cars and missed the signature in the right spot because you just weren't set up. Right, right. Like that. That is some scary stuff. And I think it's really, really important. When we talk about building wealth, we talk about knowing your numbers and what is your net worth of your dealership. You've got to be protecting that stuff as best you can.

Yeah, he's done. He's done scripts for my salespeople when they. When they close the deal. He's reviewed my deal jacket. He's helped me purchase an account portfolio, went over that with me. You had the right documents for me. Steve is one stop shop when it comes to compliance with, with any dealership. And compliance unleashes right before buy here, pay here, or during buy here, pay here, United. So, yeah, come out, visit and you know, get. Get compliance. Is that a word?

Yeah, it's going to be great. If you've got questions for Steve, his email is infoignitecp.com it'll also be in the show Notes So reach out to him and make sure you got your ducks in a row. So that would lead me to my second issue that I ran into that I'd like to share with you guys. My operating overhead per car. So if you remember my gross profit was 3, 700. My operating overhead is 3,600. What does that mean? That means a hundred dollars per car sale in 2024.

Yeah. You need to make some interest money there.

Not really sustainable.

No.

As a used car dealer.

So again if you're a finance company, it's not the end of the world. It's not the end of the world because. Are you looking at our composite numbers?

No.

Okay. I would tell you that I'm probably close to breaking even. And it's because we make so much in the finance company and if you manage your charge offs and you make enough interest income, then net even on car sales is totally fine.

Sounds like a bad way to run a business.

It's not, it's. It's. I mean it's a finance company is what it is. And, and truly that's what. That's what I think a properly run buy here pay your store is the finance company. That's it.

That's true. And when I say that net profit or that total expense compared to my gross, that doesn't include my discount on notes sold. Right. That comes after. So I made $100 on a car and then those notes got discounted when they got sold to my rfc. So yeah, that's a problem. When you look at the net net operating income that comes after. So that runs a little bit different. So where were you at when you say I had a. What was your operating expense per car?

Do you know you got some calculator real quick?

Okay.

No, I don't but give me a second. I can tell you kind of. So we would have to look at my.

Just your total operating expenses divided by how many cars you sold.

Yeah.

That's all I did. And that does. Obviously your recon is separate. That's in your cost of car. I'm just talking about straight operating expenses. Right. Your sales commission, your power, gas, liability insurance, memberships, softwares, training, all the basic stuff that goes into that operating overhead.

We are talking like. But I told you we sold two. See.

Well you look that up.

Yeah, keep talking.

Well, I would say my other interesting facts. I track my sales commission per car. Still a little bit high. I averaged like.

I've been talking to you about that.

400 per car sold sales commission and my advertising expense. I run about 200, 220 for the last two years per car sold in advertising expense. So that might be a little bit on the. I don't know, probably a little bit on the average side. 200 advertising dollars per car sold is not crazy. And that obviously depends on your market. We know guys who are close to $40 a month, and we know guys who are close to 400amonth. Right. It kind of depends on how competitive your market are where you're advertising things like that.

Let's say we are at $1643 per carcell.

Okay, that seems drastically low. We don't apples to apples there, but I have to see what all you put in that number. All right. So, you know, the saving grace for me is when I look at this and I say, okay, yeah, hey, maybe my dealership broke even this year. But you gotta remember the reinsurance component, right? And that's where that silver lining comes in. And when. If you're at a dealership who is stagnant, maybe you're just kind of sustaining your level. If you are spinning off what could be potential net profit into your reinsurance company, that's a good tax strategy for now.

Yeah, it is. And, you know, luckily, Buckeye set us up on the right direction with CPI in the last couple years. And you want to talk about growth, we saw our CPI per month collected grow by 80% last year. And it was, you know, a buy in from me and a buy in from staff that got us there. And. And there's a lot of dealers out there, Jeff, and we've talked about this before that without cpi, they're not. They're not dealers. And so it's. It's a huge component. CPI is a huge component. And if my penetration for gap last year 67%. We made, you know, perhaps $46,000 in income for the dealership there. Selling that. We are 55% on VSC penetration. That's a hundred thousand dollars in. In extra income to the dealership last year. So that's 150 grand in net profit. Not net profit, but profit just from those two things. Not even talking about cps. So those are key components that we track that you should track with your reinsurance company.

Yeah, yeah, the CPI is a huge one. You know, I went from $1,000 a month in 2023, just kind of half invested. And we've gotten it up to about 10,000amonth, which for me is great. You know, 100 people on my program. I'd really like to get to 200 on my program, which is going to be my goal for 20, 25, is try to get that up in that 50, 60% kind of participation range, which I think any buy here, pay here's got to get to just to keep your balance, your losses balanced. Right. If you only have 20 or 10 on the program, those are going to be your worst.

Yeah, yeah, for sure. And it, you know, we went from last, the end of last year at like 10, we made it up to 30% of penetration for CPI. I think that's probably. That was our goal. 40 was our goal, but we got the 30% and we'll still pick up people as we wind this down. But it's huge, man. We read from collecting 10,000, you know, right before the end of last year to collecting 22,000 per month now, I mean, that's a, that's a big number. And our claims have not been all that, you know, not been crazy. We had, we collected 230,000 in CPI last year and claims in the. Should end up through December at about. About $90,000 in claims.

Yeah.

So that's what. That's with 30% penetration so you can make money doing it.

That's not bad. That's not bad. And you've got some really nice cars. So when they total out, they total out.

Yeah, I mean, we, and we had some big, total losses in there. 2019 Camry SE with less than a hundred thousand miles that totaled. That's a $19,000 loss, you know, and then a 17 maxima that was, you know, a $12,000 loss. So you can't be afraid of those big losses because you got to, you got to spread the risk over everybody. And then we've had some damages that we've had to repair.

Yeah.

So.

And you got to plan on that again. We got one thing to transition. One thing I want to touch on that I'm kind of proud of myself this year is I did get out of some debt, so I got focused on paying down. I had a line of credit with a local bank that, you know, four years ago said they didn't want to do business with me anymore, put me on a, on a, on a forced payoff plan. So I guess I can't take much credit for it. But they, but I got focused to pay that down and get that out from underneath me. So I no longer have a UCC one sitting over top of my portfolio, which is pretty exciting, even though I do still have some investor money or debt that I would have to, you know, essentially if they ever called it due, I'd have to pay them back before I'm really, really debt free. And of course, you know, real estate loan that I've been focusing on, I've got an SBA on both my properties separately, but on both my properties that will reset. It's a 5 year, 5 year, 25 year and with a 5 year life. So I've got a really, really great interest rate on that sucker that is going to reset here in about two years that I need to start planning on because that will change things, right? In a high interest rate environment.

Yeah, it will. Debt is huge. We've been lucky to, to operate without, without debt. The only debt we've ever had is on real estate and we use that to leverage up. I, you know, we talk about this so often, dealers, the best thing you can do is pay your debt now. Now don't get me wrong, you have to have debt to grow sometimes in this business. But you, you have a plan. You don't just borrow the money and think you're just going to continue to owe it. You got to have a plan after the growth to stabilize, get your stuff together, pay the debt down and then if you need it to grow again, do it again.

Yeah, and that's why they call it a revolving line of credit, right? Especially for buy here, pay here guys. Right now is when you probably dip into those revolving lines, whether it's a HELOC or credit cards or a line of credit from a bank that you could get during tax time, you are going to dip into those to stock up on inventory. But if you don't have those things paid back to zero by December, then you probably got in too deep or you're going the wrong direction. So I would definitely, that would make me very, very nervous. The fact that I could get those adjustables paid off before December was good for me. You know, that makes me feel comfortable. The other thing that I would say is debt for don't getting into debt. To own your property in my opinion is really smart. And when I did it, I was like, well, this sucks. You know, I've got this huge payment. It wasn't a whole lot more than what it would be for rent. Especially nowadays, I look at what these guys are renting these dealerships for around me and it's like insane. I'm about ready to get out of the business and just lease my property to somebody. But it always looks better in hindsight, right? You look back five years and you think, wow, that was a really smart Decision for me to pay that price for that property, even though I thought it was crazy, even though I didn't know I could handle it. I'm so glad that I'm five years into my mortgage and I'm that much closer to owning this, this property that I'm on.

And Jeff, you have a beautiful piece of property on a great piece of dirt, great visibility. Dealers out there just take it, go to, go to Google and check out just place. But it's, I mean, it's so important to own your dirt.

Yeah, that's the point. Try your best to own what's underneath you. Right. Because that is. And especially if you're a retail dealer, it's almost more important because you're not necessarily putting money away into a buy here, pay here portfolio like buy here, pay here dealers do. Right. That might be their retirement someday. As a retail dealer, if you're not investing somewhere, you know, whether it's in your, your lot, your flooring line, trying to have all your cars paid cash that you could someday turn into a retirement account, or the property that's underneath you as you slowly pay down that mortgage and use that as your retirement. You know, if you're living paycheck to paycheck as a retail dealer, that would make me very nervous.

Yeah. You know, Jeff, we, we talked about the. Making money, the part of it. You know, we also forecast our repos and 2024 was tough.

Yeah, how'd that go?

So we had forecast 96 charge off events and, and typically I can get under that number this year. We did not get under that number. We had a total of 102 charge off events. And not all those are repos. Some of those are small charge offs after, after an insurance claim on a customer didn't have Gap or the Gap didn't cover everything. So not all of those are true repos. But the repos we had, buddy, they were a lot more severe than they were good ones, buddy. So I had forecast $442,000 in charge off losses and we had 654,000 in charge off losses. We got, we got hammered in the fourth quarter.

I mean, hammer, I'd still beat you.

We were, we were dead on to, to having a super low charge off year. And then in the third quarter, man, we had, we had 43 charge offs in the, in the fourth quarter, which, which was insane for us.

Cleaning house.

We were, we cleaned house. You know, we still came in at under 12% percentage for the year, which is my goal. My goal is definitely to stay under 1% a month. That is a goal none of you should strive for because it's almost imposs do. It has to do with. With different things. But under 24 is definitely where everybody should try to forecast and be at. Jeff, we're right in the middle of it. I know you love it, buddy. I know you love it. You know what it is, right?

Absolutely, man. This is the first week of January, second week of January. We've already done probably five or six filings. Wow. I was just hearing a young lady in the office today that got her taxes filed, applied for the refund advance. She's going to get possibly up to six grand back in a check later today. We'll take a portion of that as her down payment. And she rolled out in a car. So it's happening. People have their W2s in hands. We are filing every customer we talk to. It is, hey, do you have your W2s? And would you like to make this deal better by filing your tax returns?

It's that easy. And I'm sure that those folks at Tax Mask can still get you set up. Make sure you're using Pod 2024 for their VI podcast, 2024 for their VIP package. And it is literally sign and get your money. So give them a call, get signed up. If you can't get somebody to phone, call me.

Yeah, it's, it's really interesting. Like, so they've told us 87% of those refunds actually, refund advances actually get approved.

Wow.

So there's a really, really good chance that you can get that refund advance right away, which is, I mean, incredible. We've also started a text campaign, which is their file and keep driving event. So my collector has the link and she has sent it to every one of our past due accounts that says, hey, you're past due. Let's get you back on track. Let's file your taxes for you. So it's, it's really. I mean, it has answers for both sides. How I can sell more cars and how I can keep more of my portfolio on the road. Getting access to that tax money quicker and faster and easier is. It's just crucial. Yeah, I. So we're going to do that homework assignment at 20 Group next week and look at the autopsy for our last 10 charge offs out of hand. What do you think they were just off the top of your head, what do you think the. Some of the biggest factors were on you seeing increased charge offs?

Oh, man.

Bad underwriting?

No.

Did we all have Bad underwriting?

No, I think it was payment. Payment amount. Payment amount had a lot to do with it. Payments had gotten out of hand during COVID and at some point people can't afford it so they turn them in. We had some mechanical failures which we don't typically had. What was interesting is a car that we had sold really well for a while. All of a sudden all our repos was that one car.

Yeah.

And we don't sell Chevy versus but it's interesting. It was two cars and I'll put this out there for people to think about. Infinity Q50 which we sell a lot of and we, they've performed well. Well we had a bunch of charge offs on those the last three months. Accurate TLX is same thing. A lot of charge off in the last couple months. And what we noticed in those particular cars was the amount of miles people were driving them and so.

And the amount of cigarette buds left in the car.

Marijuana leaves and aromas and things like this.

It was any accurate, you just guaranteed it's going to smell like smoke.

Well, I tell you it's just super, super interesting because if you compare that exact same car, which is a Honda Accord and if you compare the two, the charge off rates are super different.

Yeah.

And I can't tell you why.

Attracts a different customer.

It attracts a different customer.

Yeah.

And so we had some issues like that. We did have some just people walk in and just hand us their keys. Jeff. And we see that typically in June and maybe some in December, but we saw it in October, November and December. So I don't know, I don't know what happened. I didn't like it. I do believe that underwriting, we got a little looser with underwriting trying to hit some numbers and we, we hit our growth numbers and, and we paid for it a little bit. But I've always been a little too tight so it probably, it probably helped with growth.

Well, obviously you're still very much within a safe operating range of charge off so I would worry about that. I doubled my charge offs almost 43 growth in charge offs in 24 compared to 25. So that was drastic. Which takes me up close to the 20, 25% charge off for the year which is just insane for me. Very scary. A lot of it is clean up and a lot of it is what you said. I think dealers might be able to relate. It's just, just everything under the sun, man. You know, everything from like you said, drop offs to cut back hours to family emergencies to wrecks to you know, lot of, a lot of cut out solutions.

Oh man. A lot of cut back our cutbacks, a lot of that, A lot of short term layoffs. We see in December, saw a lot more short term layoffs this year than we saw previous years during COVID recalls. Jeff, that is something so interesting that we have seen customers just get adamant about a recall that we have nothing to do with and somebody, a new car dealer has scared them so much about the recall that, that the new car dealer can't do that. They just turn the car in when there's absolutely nothing wrong with the car. Super. Yeah.

And the next wave will be the negative equity drop off.

Right when buddy, there's a bunch of that out there.

When the, when the new car store financing gets a little loose and aggressive and they convince your customer just to leave the car and get a new one. Those are, those are also.

Well, that's, that's the reason, that is the reason it's super important to report credit on your customers. I know there's been people out there that talk about do or don't. We have a new sponsor to the podcast. Jeff, that, that can help you with that. But let me tell you this, it is to me, if you don't buy here, pay here the right way, it's super important to report credit.

Yeah, yeah, absolutely. What are some, just to wrap this up, what are other metrics that you track on a year end basis that we talked about sales, we talked about operating overhead, we talked about net profit, gross profit per car sale and now you're talking about charge offs. And I talked a little bit about debt. You know, because that to me is ultimately the most important thing. What, what is my, my, you know, net worth inside of my dealership? Right. What, what is everything put together? Do you, do you track that number at all?

You know, we've talked about that before. I mean, I can look and see what it is in QuickBooks. It's not something I necessarily track. What I do track is growth in portfolio and portfolio end of month ar, you know, principal ar. Every month we look at that, we, We've been targeting 9%, not 8 to 9% growth per year. We're hitting that number. And as long as our debt, does it go up, we've got a, you know, it's, it's worth whatever it's worth, 8 or 9% more every year. And so we've hit those numbers and I would, I would definitely forecast end of month accounts for each month so that you can kind of stay on Target of getting there. Yeah. You know, other things we track is term length. I think super important cash in deal, super important, average acv, super important. Things like that, that can really help.

One thing we haven't talked about is I spent less on payroll in 2024 than I did 2023.

Yeah.

So it's not like I'm giving anyone pay cuts. I, I think part of it is I'm maybe operating with a, maybe a less. A couple less people than I maybe did before to sell the same amount of cars.

Yeah.

Maybe getting more efficient. Maybe, you know, we. We aren't having to quite pay up like we did coming out of COVID for employees when it was kind of like, you know, the, the era of the great resignation and everyone was jumping jobs. I think people are maybe a little more stable now. I don't know if that's just me experiencing that or everyone.

I think, I think payroll, I think everybody's experienced that. I think we right sized. I think we'd gotten out of whack and we had, we've had, we've talked about this several times about how I right sized after January last year because we'd gotten way bloated. I think I saved about 200 grand in payroll this year getting right size, just firing them.

The one thing that we do that's. I recommend all dealers to do also is go into your bank statements and write down every single recurring charge. Look at every single vendor. And I know we've talked about this in multiple podcasts, but we like to do that, you know, this time of year. And typically halfway through the year, we'll do this kind of an audit of all of our services, whether it's Internet uniforms, you know, what other kind of softwares do we have? And we just go through each one line item and say, is this one still bringing us value? Can we cut it out? Do we still use it? Does anyone even know that we still have it? And the better question is, will one of our vendors replace a vendor that we had before? Because as all these vendors, they all kind of add little modules and they grow out. And all of a sudden you didn't know that this vendor is also providing this service that you are paying a whole nother vendor for. And you can add it for like $100 a month to get book values or to get, you know, whatever it might be. So that's a really important thing, is to explore that with your vendors.

Can I consolidate and also changing vendors? You know, we had this conversation with somebody on Facebook the Other day about. We changed. We changed our phone vendors. Say 300 bucks a month. Well, that's 30 $600 a year. Right. Well, we're changing our. Our inventory fee provider right now. We're going to save $1,000 a month. You know, there's typical. There's things that you can always do and get the same value sometimes or maybe a little less value, but the difference in the value and what you're paying per month is. Still makes sense to do it. So sometimes you just have to pull the trigger. Speaking of vendors, Jeff Blitzpay. Blitzpay really can help you save money when it comes to credit card merchant fees. One of your, you know, one of your biggest line Items. Back in 2019, before we went to the fee model, we were. We were spending something like $60,000 a year in credit card fees. Well, that's down to less than $12,000 a year, and that's directly to the fee model that Blitzpay helped us introduce.

Yeah, I went from paying 2 to $3,000 a month in credit card processing fees, and I am down to, like, almost peanuts. I'm down to like $11,000 a month or something. I went from $40,000 last year. Two years ago. Yeah, I cut it in half. Save 20, 25 grand by switching over to a better model. Yeah.

If you don't think that this is a game changer for your bottom line, you're mistaken, because it is.

It's an easy one. Not to mention it's a better service. My customers are more happy. So that was kind of a win win. And they don't mind the fee.

They don't mind the fee because they paid on everything else. Now you can actually go to a model where Jeff doesn't even take cash in office anymore.

Yeah, we are working on that actively right now. There's a little bit of pushback from some of our demographics, but they're learning.

Yep. And you might get a little pushback at the start, but it won't be long. And. And Jeff is. Blitzpay allows us to do this. So give Blitzpay a calling and get set up.

Yeah, absolutely. Other than that, I think that my 2024, while it was down, and I think all those factors we talked about play into it. I'm. I'm pretty excited for 20. Like, I think we see a lot of reasons to be excited. You know, administrative changes in. In the country. You've got, you know, some banks that are maybe being a little tighter because they're also seeing the losses that might push some more people into the buy here, pay here space. Cars becoming more affordable, the supply chain kind of getting back to normal, where they're dumping some more of the new cars into the market. Some of those incentives are coming out and pushing those prices down. So that stuff all kind of leads me to say, I. I think if with buy here, pay here dealer specifically, we love a good recession, right? That's great for us, man. We love good people with bad credit. Right. What we don't like is the ride to the bottom. You know, it's the ride to the bottom of a slowing economy or a jobs market or that's hard for us because that's our guys getting laid off, losing their second jobs. But once we kind of bottom out, it's great for us. So I think we're kind of seeing that.

Yeah, I think 2025 will be really good. 2026 will be really good. And, you know, Jeff, if you need a good consultant, I know one.

All right, guys. Hey, thanks so much. We will chat with you next week. Thank you for listening.

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