#367 - The Refunds Are Upon Us!

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, we are knee deep. Knee deep, my friend.

Yes, sir. It's that time of the year. It's your favorite time of the year.

I think it's every dealer's favorite time of the year. Man, I don't know who, who doesn't love this time of year.

You know, it's funny about, about tax time and that's what we're talking about today. And, and we're dropping this on the day the tax money hits. And I saw some people posting the other day, or maybe it was in our group me, but they were saying I've y' all seen your tax money? And for. So everybody freaks out all the time before it gets here. And I used to do this, but then we really started looking at historical data and it is the date of 20, the 22nd, whatever that Thursday is or around that, that spot where the money hits and it's Thursday, Friday, Saturday, and you better be on your game. So today we're going to talk about what to do if you haven't already prepared. You may be sol, but there's some last minute things you can do. Jeff?

Yeah, some of our, some of our tax time tips, this will obviously strongly applies to our buy here pay here listeners retail. There's also a component to it because you are talking about, you know, when, when you suddenly get overloaded or, or you know, your, your CRM just gets blown up with leads, your phone, your walk on traffic. Is your team prepared? Do they have a strategy? You know, because you're trying to service, you know, kind of, you know, a lot of customers, a lot of folks that suddenly have cash in their pocket and managing those expectations and, and, and not hopefully losing them to the dealer down the street. Right. I mean that's what all this anxiety is about. I built up all this inventory, I got everything ready. Like when's the ones the floodgates going to open?

Yeah, hopefully you did get everything ready. That's the main thing. Your tax time preparation should really start on about November 1st. So if you haven't really started preparing for that and you're kind of, you're here at the last minute, you know, it's going to be hard. But for those of us that did start preparing and buying all those cars and getting them ready, you do get a little nervous that the money's gonna show up at Your lot and then you're not gonna do something right. And it's gonna go right down the street. Right?

Yeah. Well, and what's funny to me is so, so I prepare, you know, I buy pretty heavy at the first part of the year. And so right now I'm sitting on, you know, just as many dollars in units and inventory as I've ever had and some higher dollar stuff. You know, I kind of, you know, 90, 80, 75, 80% of what I do is buy here, pay here. But I've kind of had more of a strategy of if I'm going to buy something from the auction, it's going to be a fresh inventory. I'm going to start at the top of the food chain. So I'm trying to buy a $10,000 ACV, right? That's where I want to start the first car's life and then my repos, my trade ins, those can kind of fill in my second life of a car, you know, something more in the six to $7,000 ACV that I'm going to try to retail for 10 or 11. So, so that does cause that my average ACV of my car is higher than normal and that, that gets you nervous when you got a bunch of 15 and $18,000 retail cars out there. Like if I don't get rid of these during tax time when people got fine brand in their pocket, I'm going to be sitting on this all year.

Yeah, it's scary but, but the first, the first weekend is not always the best money. So it may be some of the biggest money but not necessarily the best way. The best money is, I mean, might not be the best customer. So good point. You know, tip one for this weekend, for today, tomorrow, Saturday is to pick the best customers. These are your first tax time customers. Make sure that every ounce of qualifying that you do is, is done properly and really dig in the get, get the pay stubs, make sure the pay stubs are right and make sure they're, they're earners and make sure that they're people that aren't going to flee the next week. And you can figure this out by how long they've been in there, how long they've been on the job. So make sure you're picking the right customer this weekend.

Yeah, I think big down payment undermines underwriting. Right. That's kind of a universal truth unfortunately in the buy here, pay here world is ah, boss, they got five grand down. Everything else must be great. These pay stubs must be accurate and, and One of my guys said it today in our training was it's found money. And that's something you got to remember is is tax return is found money. And, and you know, go back and check your static pools, do the analysis your tax time deals. Just because they had five grand down doesn't necessarily mean they're going to perform any better than the guy who had 500 down three months ago.

Yeah, I've seen, I've seen $10,000 down payments turn into repos. I've seen $25,000 down payments turn in to not a full repo, not a full charge off, but a CPI customer. So these are things that you really should pay attention to. Jeff, the second thing is, is this. It may be hard for some of us out there, but you need to be super engaged as an owner and hopefully a lot of owners are on there, but you need to be super engaged during this time of the year. You need to have boots on the ground yourself, looking at deals, waiting on customers because it's very possible there'll be so many customers on your lot that you will not be, your salespeople will not be able to touch them all. So you need to be there, your managers need to be super engaged. You need to be bringing food into the office and don't let people leave. Make sure people aren't on vacation. This is a horrible time for vacation. I, I would, I would never approve a, a vacation day in February or March just was not done. And I get it, sometimes things have to be done. But do not. You need to explain to your, your people who work for you up front that these are our busiest times of the year and I need you at the dealership.

Yeah. So much of it I think about is comes down to just teaching those skills and the policy that you have in your dealership to make sure these guys are selling efficiently. Right. So many of my salesmen, man, they will sit down with a customer and it's like, dude, this was a 45 minute conversation that had you asked the right questions in the first two minutes, you would have not wasted the other 45 minutes of your day going down this road with the customer. So you don't want to pre qualify, but you do want to ask qualifying questions.

Yeah. And you can wait on multiple customers at a time. And when people get bogged down like this, you can't. So the best thing to do is, is if you have an online application or something, a customer walks in, figure out if they fill out application yet, if they haven't just Send them to fill out application while you carry on with other customers. Any type of efficiency you can create today, tomorrow and Saturday is going to go a long way to you touching all the customers. And that's really what matters, is touching every single person that walks on the lot. Not physically touching.

Yeah, Luke, you're going to get us. You're going to get in trouble for that one. What it makes me think about, though, obviously to plug Compliance Unleashed, that's coming up in conjunction with Buy Here, Pay Here, United. Going to these conventions and hearing these things is where you start getting these ideas where you think outside the box. Right. And so many times our salesmen and ourselves, we get stuck inside the box. Like, no, I, I need to sit down and talk to this customer. I need to help this guy. Like, no, no, no. You need a multitask and you need an online application and you need a paper application. And you need to know that it's okay to step away from the desk for a minute and go help somebody. Like, people are going to understand. But going to these networking events, like I said, Buy Here, Pay Here, United down in Las Vegas April 22nd through the 24th, is a great time to learn those little tricks to the trade and little ideas that other dealers are doing that you're like, oh, I had no idea. Just like my salesman. Or like, well, I thought you wanted us to do this. No, no, no. I want you to help every customer. You were confused when I said don't take a phone call in front of a customer. Like, that's not what I meant. Like, so it's just really interesting stuff.

Yeah. And, you know, and ignite Steve over there, he can make sure that all your applications are, you know.

Right.

And that you're not making bad decisions when it comes to two, you actually are financing who you aren't financing because that can get you in a lot of trouble. You know, make sure you're not saying we finance everyone and then you don't finance anybody because that'll get you in trouble too.

Everyone's approved on my not your terms.

That's right.

What makes me think about that is when you say everyone's approved. One issue I have is because I've been stocking up with cars. I have some gems out there. Right. Like, so just some real gems, you know, like a Z71 on wheels and like a third row Pathfinder. Like these things are gonna go. And what I found is a problem is I don't have. I know a lot of Buy Here, pay your dealers will Have a minimum required down on every car. Right. Because of their bank covenants or just because they want to. And they'll say, hey, this is a four wheel drive Silverado. I've gotta have, you know, eight grand down on this thing. That's just it. And so you have to wait until someone has eight grand down because I don't have that. What I find is all my little gems, man. They are the first to go. They already got sold. They got sold last week. They got sold in January. And I'm like, oh, guys, like, we could get eight grand on this thing. We didn't need to take four. Like, or three. Like, why? So how do you handle that?

So I was at dealer last week in Dallas and it was interesting. They, they had this crazy system of, archaic system, I should call it not crazy, of using these, these cards for inventory. I'd never seen anything like this. And, and each card had the minimum down payment on it. And I really like that. I like the idea of, okay, this is, this is everything we've done to the card. And it was, it was just a little, you know, note card. This is everything we've done to the car. This is what, what we're in it for. But this is the down payment. Like, we don't go below that down payment no matter what. And I would encourage people to have that in mind. Especially if you were a smaller buy here, pay your store and you don't have just inventory, you know, everywhere. Know your inventory and know that if a customer walks in and they want that Z71 Tahoe or, or Navigator or whatever it is that, hey, I expect, I expect 3,500, I expect 5,000, I expect 10,000 down on this car. And if you do that, you can protect those cars that, you know, really only need to go to pristine buy here, pay here customers. And what will happen is they'll end up going to a customer either outside finance or a customer that is buy here pay here that really could go outside financing. Right. Cream of the crop inventory should go cream of the crop customer. And you can protect that by putting protections on certain inventories. Certain customers only deserve certain inventories. And I know some people tear their inventory system. Just make sure that you talk to your salespeople today about that. Reinforce it. Hey, make sure we're following guidelines. Make sure just because people have big down payments, we aren't jumping over everything else. Just keep a really, really, you know, hard, hard hand on who you are, are willing to finance on what car.

Yeah. And I'd Recommend putting it in your dms. I know all of them can track minimum or asking down or minimum down in their DMS. Might be easier than sorting through 3x5 cards.

Yeah, no, I wasn't.

$5,000 down section.

Yeah, I wasn't. I wasn't advocating to use the card. I just thought it was neat that they had it on there.

I think it'd be great if that's the way you sold them. Like, you just turned all the cards face down on your desk and the customer just grabbed one and like, that's their car.

Here you go.

But that's the mentality, right? And that's what we went over in training this morning was, look, people are going to have money in their pocket. They're going to think they have options. Now, if you have a car that you're stuck on, and if we're talking about car, we're going to have a hard time, guys, because I guarantee you There is a 2001 Toyota Corolla out there for cheaper than mine. There just is. So if someone's got five grand in their pocket, all of a sudden they think they're a Kardashian and they're going to be out shopping. What's going to keep them with me? Right? What's going to keep them here? What's your why buy? And we went over our why buy in training this morning. Because I think during tax time, that's really important that you differentiate. Because, yes, they could go down the street and they could get financed with CAC or Westlake or some other big bank, but why would they want to buy from me instead? Because both of us are going to take that guy with five grand down, right? Well, I'm fighting with all the subprimes for that customer this weekend, right? So why are they going to buy from me? And at the same time, what it does is it takes the focus off the car. So now if I have a customer who only has five grand down and they're looking at my truck that needs eight grand down, it's maybe going to be easier for me to change them over to my Dodge Ram and off my Z71, right? To say, hey, you, you know, this is the. You're here to buy the program. You're here to buy doing business with us. Now let's find a car that's going to fit your budget, right? Got to. Got to get off the car. Yeah.

I don't disagree. But one thing you got to do first thing is make sure all your cars are starting. You Know you may laugh about that, but it's going to be busy the next couple days. Make sure, go out there yourself, take all the keys, go out there, crank the cars, make sure the check engine lights aren't on. Make sure you know the TPMS lights not flashing anything that you normally do for your inventory. Make sure it's done. Because the last thing you want is, you know, to have a, have a customer sold on a, on an older unit and walk out there and not start, you know, this, this should have already been done. But you have time probably this morning to make sure that it's done. I know it might be cold out, got a big winter blast here on the east coast, but that's going to, that's going to be the difference in you selling that old inventory and maybe losing the customer. So make sure you and your porter or whoever's out there starting cars, make sure there's gas and all that good stuff because that really goes a long way to ensuring that the customers understand why to buy from you.

Yeah, it also at this point like having your processes downright from the sales side but then also from the back office side. And this applies to retail dealers as well. Like do you have your, your reinsurance product set up? Like are you going to take advantage of that? Because guess what? When these guys have more down payment, you've got more loan to value room. When you send that thing to the bank, you can put on a 336, you know, you can put on a gap, you can do VIN etching and all every other reinsurance product in the world because the bank's still going to love their loan to value. So if you're not trained to sell every single one of those products and you don't have your Buckeye products set up ready to rock and roll, guess what? You're going to walk away from a lot of money that you could capture this time of year just because the down payments are slightly bigger and the banks are going to say yes to those.

Yeah, I mean if you, if you look at what our penetration rate is in February and March compared to the rest of the year, it runs at 90% during this time of the year because people can put down more money to get their payments to be the same rate. And if you don't think that it goes a long way to the performance of your buy here, pay here loan or the loan of anything if they have coverage, you're mistaken. The better coverage your customer has, the better the loans going for, going to perform. And the better you're going to be in the long run because you can make more money.

Yeah, yeah, it is, it is the only time when it makes it really, really easy. Retail and buy here, pay here to get a yes on a lot of those things because they just look at it like, oh, yeah, oh, that's good. Yeah. All my payments stays the same. Yeah, you know, no problem. Give me an extra warranty.

They're not spending their money. They don't care.

It does kind of come back to the found money type side of it. So taking advantage of that is really important. As I look out here on my lot, my guys out spraying the cars down right now, you know, I'm gonna have them do spray downs every other day for the next couple of weeks just to make sure that my lot is shiny, the cars look good. We do startups once a week, make sure everything's running. Yeah, all those little things I think definitely play into getting your best shot.

Yeah, it's. You got to be on your game. And, and that's the best thing I can say. You got to be on your game. You got to put it all in. Because you, you know, a lot of us, a lot of us are going to sell more than a half of your cars in two months for the whole year. And then the rest of the year is just about collections, Jeff. And that's it. And you know, there's a good, you know, good product out there called Blitzpay that we, we endorse that really will help you with collections the rest of the year.

Yeah, that's a. Of course we can all put the cars out there with $5,000 down. If we're not doing a good payment to income, our PTI is not right. And then we have an easy way for them to make the payment with automatic pay. Then you're just setting yourself up for a big old headache because you didn't close them right. You didn't set them up right. You didn't set the expectation. Hey, Mr. Customer, the way we take payments here is through automatic payment. You're going to get a link text over to you, enter in your credit card info. This is how you manage your wallet. Like super easy self help. Get it done yourself. Go to the Walmart, make a cash pay. Like it really like empowers them to handle their own stuff. I'm not trying to take on a bunch of headaches this weekend with needy customers that don't know how to take care of their own payments. And I say needy, but I mean like you Know, I mean, still, even for me on a Friday morning, the phone just rings, rings, rings. Run my payment, run my card, run this. It's like, no, no, no, help yourself. You got the portal log in, run it yourself.

Yeah, you know, and, and that's the other thing. Payments will slow the first part of February and I'm sure some of y' all have, have experienced this. And what happens is customers know they're about to get this tax money and so they're spending their money on other things. So you got to make sure you're prepared to take those payments the next three days as well. Let's pay helps to do that. You can go ahead and send out those links and people can, can go ahead and set it all up, you know, but just as, as well, you need to be prepared for selling the cars. You need to be prepared for collecting for the next, you know, for the next 45 days. Because it's coming.

You know, that's, that's a really good point. I'm actually going to write that on my to do list is I need to set up a text campaign for past due customers and tax refunds as well as my side note pay downs. Right? I mean, this time of year, like you said, if they're current customers and they're also getting a tax return, this isn't always sales side. My current customers are getting a tax return. So hopefully they're coming in, getting current, maybe getting a payment ahead. And then if I can also send them an incentive, I can build a queue that is all my customers with a side note and say, hey, we're doing a 10, 20% discount on your side note if you get it paid current in the month of March or the month of February. Right. So that could also draw some cash in if these people come in and say, okay, cool, I know I got that side note hanging out, let me get it taken care of. I want a discount.

You know, that's fine if you want to do that. I don't discount, I don't discount side notes, buddy.

You don't want to get that cash in that you don't want to get cash in.

I want, I want the entire amount that you put on the side note in my pocket and no penny.

So what happens if they, if they end up repoing, wrecking, something happens and you didn't collect a little extra money because yeah, your customer's current and yeah, they're slowly paying your side note. But big deal, if you take a 10 or 20% discount on that side Note to get that cash today as opposed to letting it sit out there and potentially be a total loss.

You know, if it's a total loss, it would pay off on the total loss. If it's a repo, I would have had to fix it anyway. I. I'm not gonna discount it, but if you want to discount it, that's fine. I'm not telling you not to.

Oh, I hear you. I'll tell you what I've got. I'll. I'd have to look it up real quick, but I think I have in the area of, you know, I don't know, 80 grand probably sitting in side notes. Yeah. Does that sound really high? That sounds really high. I think that might include some accrued interest. I'm just kind of looking at my account balance total, so it's probably not that high. I. I imagine it's probably 30 grand. I mean, that'd be a pretty sweet cash influx if I could get most of that paid up this season. I wouldn't complain about that.

Yeah. Don't get me wrong. But I mean, how many is that gonna actually happen?

I don't know. I'll let you know. Send that text out right now and I'm gonna get back to you. Any other advice you got for everybody? Are we done?

Just be prepared. And that's really all it is. Know what you've got happening. Don't let it surprise you.

Yeah.

And be prepared.

Were you a boy scout?

Be a boy scout. Be a big time boy scout.

Be prepared. Absolutely. All right, guys, and be prepared for next week. We've got. We do have blitz play folks coming on. I think next week we're going to talk about some of the new happenings over there. So. So another shout out to them and. And how great. And hopefully, you guys, now's the time to get signed up for buy here pay here United. We mentioned it. I want to mention it again because it's going to be big. The agenda looks awesome. No complaints about being in Vegas in April. You're going to need a break at the end of this tax season. So it's a good time to be out there.

And you can hit compliance on lease while you're out there, too, and see Steve and get everything, you know, caught up in your dealership needs to be caught up. So it's going to be awesome. We're going to be there. I think we're gonna play some golf. You know, we're gonna have.

Yeah, we're having a good time. Hope you guys have a great weekend. Get that money and we'll talk to you next week. Thank you for listening.

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We'll catch you in the next episode.