#370 - 3 Signs of Carpocalypse

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, you know what we're going to talk about? Carpocalypse. You ever heard of that?

Well, I think it's the word we just made up. The car apocalypse.

Car apocalypse. You're going to give us the three signs, the three horsemen of the Carpocalypse and we're going to talk about some of the things you've seen as you've been out a little bit more in other dealers operations. Just kind of the missteps, you know, we talk about these all the time. So I'm sure we have numerous, numerous episodes the dealers could go back and look at to get more in depth. So we're going to keep this one kind of brief but spell those out for us because I think this time of a year you've really got to be careful about those things. Right. I mean there's a lot of headwinds out there as far as car prices, tariffs, administrative changes, tax implications, cash draws because we have so much inventory and then we get hit with our income tax burden. Like there's a lot of stuff right now if we're not keeping our eye on the ball, it could get messy.

Yeah. And, and shout out to the three dealers I was at in the last two weeks. They're really good dealers. And what I mean, and what's great about those type of dealers is they, they're really good dealers and they want to get better. And, and that's awesome. And when you see dealers wanting to do that. And so one of the things I typically see when I, when I'm out consulting with other dealers is a inventory stagnation problem. And the one thing I did not see at any three of these dealers is inventory stagnation. And when I say stagnation, it's, it's the cars that you buy that may cost money to repair and you just don't do it. You move on to the one you, you just bought yesterday that you can get ready and sell fast. And what that causes is, is tied up capital. And as much as capital costs many people out there in the form of, of floor plans, which is stupid, stupidly expensive or money from your portfolio that you borrowed. It's just a lot of money. It cost you the depreciation of the, of the car itself and the interest income and the loss opportunity of selling. So you've got three on our on our thing with, you know, the three car apocalypses, you know, Right. There is three things that cost you a lot of money, but I didn't see it at these deals, which is. Which is a good thing. But you need to be aware of it. If you've got a car that is sitting, you need to get it fixed and you need to sell it immediately.

Yeah, we talked about that a lot. Is the opportunity cost, too, your carrying cost? Do you know what it costs you every single day to have a car in the back and not at the front? Right. And what if you just wholesaled that car, took your losses, and moved on to something that wasn't going to bog down your shop or tie up, you know, capital? I'm at the first time in, since COVID I have actually gotten my days in inventory for my recon down to about 14. Right. Which is incredibly low for me. Like, I'm. And that's only because I stopped buying the last four weeks. I really just bought onesie twosies because we were kind of stocked up for tax time. And then tax time for me was like Thursday, February 28th or something. And that was other than my tax max deals. Tax time was about one day so far. So I'm still holding my breath. But my point is, I had a mandate on my shop to get the cars out, and I purposely tried to thin it down and say, hey, we're just going to have two weeks worth of work. We're not going to have two months anymore.

Yeah, you need a process for those hard to repair vehicles. Actually, one of these dealers I went to, that was one of their big, big problems is they didn't have a good enough tech to start with. Now they've hired one since, but they didn't have a good enough tech to take care of those problem cars. And a lot of us don't. I mean, that's one of those things. But I'll ask you, is it better to pay the dealer 200 an hour in a process you've designed to get that car ready into the front line? I'm going to tell you it is because it's costing you a lot of money for it to sit there. So write down a process you already have, your normal recon process, and what, what you're doing. And 14 days, Jeff, is. Is still on the high end, but it's. It's getting better. Right? That's. That's really good. But if you had, after a day of one of your texts, looking at it, you had a process that was kind of a side shoot of that recon process. That said, hey, hey, guys, if we have spent $1 in parts that didn't fix this because we were just guessing and we fired the parts canning, send it to the dealer, figure out the problem, get them to fix it. Let's get it. So you'll save yourself a ton of money and time and aggravation and to.

Plug, buy your pay here United coming up. Obviously, guys, hopefully you've signed up by now. Clock's ticking. There's going to be some great sessions on that where they're going to dig into that some more. So make sure you've got your tickets, you've got your hotel, you've got your flights booked. We're going to have a great time in Vegas.

April, something to something 22nd through 24th at Caesars, which I'm glad I moved it there. I love Caesars, but they're going to actually have a whole car in there to help you see how CRS are done. All kind of ways that will help you on the front end of buying. But there also be other dealers who are really good at the recon process. They're helping you fix your recon process. And, you know, I know a guy who did a session a long time ago on, On Time the line, and he can help you too. So, you know, walk up to me, say hello when we're by here, pay or United, because we're going to help you fix problems, too.

Yeah, we're also going to have. Steve Levine's got his new book out and he's going to be there the day before with the compliance session. So I just. I mean, I don't know how we're going to fit all this in. And as far as like fire hose and a teacup, you know, it's going to be kind of a bit of a overwhelming experience. But Steve's also got his book that it's. I've got on order.

It's called Counterpunch Compliance Strategies for. For car dealers.

Yeah, yeah. So it's a great time to focus on that and just pay attention. Luke, your number two sign of the Carpocalypse.

What was it?

We got sales processes.

Sales processes, yeah. You know, there's. If you've seen there's dealers that are wanting to move because smart dealers get this. Smart dealers see that there's going to be a slowdown on the retail side and so they're trying to find new ways to. To capitalize on the good customers. They have that credit just not so great. So they're going, okay, let's get into the buy here, pay here a little bit. And you've got to have a really good sales process to make sure that your salesperson is saying the right things on the lot. And we preach this. We preach this. But if you don't know what your salesmen are saying, you aren't training to what your salespeople were saying. They are probably saying the wrong thing.

Yeah, you're going to have a lot of angry customers if your sales process is not set up to handle your financing solutions. Right. We handle customers differently based on a couple of upfront questions that our sales team are required to ask. And in the first or second question so that we know, hey, are we talking about financing products and our financing products, or are we talking about our retail units? Because of course, you handle those customers differently. At my car lot. I don't know, what have you seen?

Yeah. And don't get me wrong, everybody out there, listen, this is hard. This is hard to get right. And if you're strictly buy here, pay here, your sales process is probably still not as good as it could be because you don't have it written down. But if you, if you are straight by your pay here, you can nail it. If you're straight retail, you could probably nail it too. But when you're trying to do prime business and subprime business and buy here, pay here business, you really, really have to make sure you got it right. Because you could go down a path thinking somebody's a prime customer and waste two or three hours of your time and their time, your F and I managers time, and you've just gotta, you gotta make sure that your salespeople know what to say every time, because if not, it just creates a big problem. And, and on the back side of the sale, Jeff, we talked about this, but there's a checklist that your salesperson should finish every time they, they get done with the customer speaking to the collections agent, which is a big deal. Right. And make sure that they understand what, what they're supposed to be doing. Making sure all the docs are done with. Steve Levine can make sure your, your packet looks right. And did they request the review? Are they being paid for the review? Are they doing a service walk, which is super important for those out there who have service problems. You got to get that, that, that customer that you just sold that car to to service their car to dealership number one. It'll help you with warranty claims and it'll help you with policy claims. And it's just a good idea to sell them retail products later on. So all these little things, you just have to make sure you're wrapping it. Hey, did they check the GPS to make sure it's working? You know, simple things like that?

Yeah, and I tell my sales team that all the time. I say, look, guys, you guys have a really hard job. There's about four dozen things that you have to make sure checked off, right? Everything Luke just mentioned. Plus I want you to sell back end products. I want you to make sure you're talking to them about my CPI and the fact that we're going to upgrade their warranty to a 1212 service contract. Right. Like, and at the same time, you're still trying to keep that in a payment to income ratio. So the sales process is very, very difficult, which is why at many dealerships, those guys get paid the most. Right. And you have to continually explain that to them. Like, this is, this isn't easy. This isn't just, you know, even if buy here, pay here, it's not just shooting fish in a barrel. You've got to make sure you're dotting your eyes and crossing your T's or it gets out of hand very, very quickly. A good underwriting process, a good scoring model, review from your F and I manager to make sure that everything's being done the same way every time. Which ultimately boils back down to your processes, right? Your checklists, things that help the salesman. You can't expect them just to memorize 48 different items. There's gotta be some sort of checklist on your deal jacket or in the deal packet that says, hey, here's the 48 things you've gotta note. Did you do them all?

Yeah. It's super important to have that checklist because salespeople are very good at sales, but typically they're very poor at details. Details. So if they've got something they can look at and check off, it really helps. And you know, it's just a process. And the further you move away from processes and the less you train on processes, the, the further away it is from their mind. So make sure you're training a lot and writing those processes down.

And it's your experienced salesman that just gets stuck in ruts. They think they know it better, they think they can do it better. And all of a sudden you're six months into deals that haven't been sold a service contract or haven't been set up on auto pay or, you know, your guy's been saying the Wrong thing about CPI the whole time. And you wonder why your penetration's so low. So to that point, training is super important. So get with the guys at Buckeye. You know, Brett, these guys, they'll come out to your dealership, they'll train you. If you're set up with them and you don't feel you're optimizing it, reach out to them again and say, hey, Steve, Brett, guys, I need you here to train my guys. I don't know enough about how to sell this CPI product. I need help so that I can help my guys. Or I just need you to come into my dealership and do it for me. They'll do it.

Yeah. Reinsurance is the greatest product you can have inside your dealership, bar none. And Buckeye does a great job. And if you're not using it after you get signed up and you're not using it, you need to use it, make sure you're doing it. So reach out, call them and call me. I'll help you take care of that. We'll figure it out.

So you're not saying the greatest business inside my dealership is not setting up a rental car company or title loan or daily rental or wheels and tires or focusing on those.

You should be, you should be focusing not on rental cars. And I'll tell that to everybody. You need to be focusing on.

What about selling sheds? Sheds out of the back.

You know, if you've got, if you got U Haul. No, not U Haul, Sheds. You know, whatever. I don't care. I tell you, title loan seems to be a good business, but it's got to be run as a separate business.

Yeah. Yeah. Okay, so let's talk about your third point. We're talking about the famine, the pestilence of cash. It is if you're, if you're in the seven year drought and you're wandering in the wilderness and you don't got your cash coming in, like I mentioned in the beginning, this is the time when it can really kick you in the teeth. Right? You're heavy on inventory. You, you just paid your income tax because you probably put that off all year like some people. And now you're trying to make payroll and everything else all at the same time as you're trying to grow your portfolio. This is the time where if you are a buy here, pay here, and even if you're retail, it is the heaviest cash all. I would say.

So many dealers out there know how to sell cars and they get the cars on the books, right? Yay. It's going and then you're going to have a percentage of portfolio, let's call it 70% of your portfolio is going to pay no matter what. They're just going to pay. So then you've got that other 30%. Well, that other 30%, they got to be prodded and, and whipped and called and texted and emailed and disabled all this to get them paid. And then only 20% of the next 20% is going to pay after you do all that. That last 10% not going to pay, period. So you've got to have collections and you've got to have collection processes put down on paper and you need to do exactly what your collection processes say. You need to train your collectors because this is a big deal. That is money you put out there that you may collect or may not. And if you don't call us, let me tell you what you're not going to collect.

Yeah, it's so funny. My collector's bonus, you know, on one day, $1 and she's get done really good. I think this is the first time we've been down in the single digits in a long, long time. So that's, it's really, really exciting. But now she's getting hung up on people who are paying slow, slow payers, you know. Oh well, they're not in. I can't get that. My, my one day, $1 down. Because this person just always wants to pay late and they keep breaking promise to pays and this is this. And I'm like, they're paying like they're paying like I'm sorry but like that's, that's a problem. I'm just going to deal with.

You know, I tell you this and I tell so many people this. You know why they're our customers?

Because they're slow payers.

Because they're slow payers. Are there no payers? And, and we've got to love them for that. And it's our, it's our opportunity to help them, to help them communicate, to show them how you should communicate and to help them get to work. And they're going to be slow. And if, and if you can't deal with that, you shouldn't be in our business.

Yeah. When you talk about those processes for collections, we always discuss how important it is to stay compliant and have those things written down. Right. Because if you're repoing one guy at day 10 and you're repoing the other guys at day 45, you got to be really careful about how you're Executing the conversations you're having, what your collector's saying, both on the phone and by text. So again, what you don't know and what I found is that with the absence of direction or the absence of very specific instructions, collectors just kind of go and do and say what they want to say.

They do whatever. So yeah, make sure that's, she says.

Hey, you know, well, this, this, I told him this and I was like, whoa, whoa, whoa, wait, why would you tell them that? Like, no, I never told you to say that. Like, that's very harsh. Like they're going to pay, it's okay. Like they're going to be late. Oh, well, if they don't bring me their payment. No, they'll get to it. Like, let's figure this out. So sometimes those collectors get a little heavy handed if you're missing it. And what we found is through our payment, you know, we're using blitzpay to take payments. It makes it that much easier to set up those promise to pays. And I told her, I said, promise to pays need to be specific, right? It's how much, how are you going to do it, when are you going to do it, and in what form of payment are you going to make? So when you help a customer think through those specifics. Well, I don't know how I'm going to pay you next Friday. I said I'd pay you next Friday and I don't get paid next Friday. Okay, where's that money coming from? Okay, are you going to do it here in the office? Are you going to take it to one of the locations? Okay, and how much is that going to be exactly? You know, like very specific. And that's what happened with my previous collector. It was just so easy to leave a voicemail or a text message and say, oh, I'll be in next Friday. And then of course that didn't have any teeth in it. These promise to pays have no teeth unless you help the customer think through the specifics of how they're going to do it.

I've talked to people that I've consulted with about, about that. So go, oh, we're on weekly payments. I said, well, does your customer get paid every weekly get paid every week? And they look at me, no. And I said, well, how are they going to pay every week and that. And sometimes you've got to, you got to think, do that. So even when you go to set up how you're gonna, how you're gonna do buy here, pay here, that's something you need to think about 30 years ago, people got paid weekly. People don't get paid weekly. Very little anymore. Very, very little. McDonald's, maybe. So make, make sure, make sure you're thinking about that and thinking through everything. When you, when you do create your processes. And processes are so important, Jeff. If you don't, if you don't have written processes, you don't have processes at all. And if you don't train on your processes, you don't have processes at all. So make sure you're doing this.

Yeah. So, Luke, I'm about to get kicked out of my hotel room. But just to summarize what you found being on the road and your three horsemen of the Carpocalypse are track your inventory, make sure your turn time is up. Don't get that money back there sitting. Being lazy.

Yep.

Sales process. Or you got a lazy sales process. It's not written down. I mean, I don't want to get back into that again because it just makes me think of a million issues that I'm having right now because that's really my biggest hang up. I would say that's where my bottleneck is right now. My sales, they're just, that's struggling. And then the collections process, which for me, I'm hitting on two of the three right now, but I don't have the third. It's like a stool, right? I mean, I'm going to fall over.

And that's going to happen and you're going to be banged up on two and then you'll bring that third one up and then another one's going to go down. This is a never ending. So just as long as you're training, as long as you're fighting all of them, you're going to be just fine.

All right, good times. Catch you next week.

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