#371 - Helping Luke Transition

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. For those of you that are not aware if you are a frequent listener to the podcast, you do know about Luke's transition. He's transitioning currently. And so as good friends and supporters of Luke, we try to be here emotionally for him as he goes through this tough, tough time of transitioning. How. How's that going?

You're so funny, Jeff. You're so funny. I'm glad, you know. I'm glad Trump's in office now so that he can pay for my transition.

No, I think he stopped paying for the transition.

Oh, he stopped paying for transition trans. That's the problem, dad. Government. I'm gonna have problems, buddy. Yeah. You know, Jeff, I, you know, I've always done by here payer. You know, I might look young, but I'm 46, and I've. I mean, I've really been involved in buy here, pay here. I think I sold my first buy here, pay here, pay your car when I was 13. So 33 years or something to that effect.

You know, like a scooter, a wagon.

No, it was. I. I remember it was a Buick Catalina. Buick Catalina, Big car, big white car. I probably got 500 down on the payments for probably1.99amonth. You know, I don't. I don't recall the exact numbers, but I remember having to handwrite everything and flip through the payment book and figure out exactly what the payment was going to be. But, you know, and now my daughter's 13, which is wild that she could. Anyway, and we're trying to transition now where we're winding down our portfolio and. And somebody asked the other day, is it taking. Are you losing accounts faster than you thought? And actually, I'm losing accounts slower than I thought, which is. Which is a good thing. I like that. So I'm going to hopefully stay in that path, but we're trying to do retail, and I'm not doing it. And let's just get this straight. I'm. I am, for the most part, done with selling cars, and I've been done with selling cars for a while, but, you know, I'm focusing on collection, and I'm trying to get my sir, my sales manager to. To have his own dealership. Now. It'll be backed by us and partially owned by us. We're all owned by us right now. But, you know, I want to try To, I want to try to get him to do retail. And we've, we've known this since October, so we're trying, we've been trying to get it all set up and going since October. And Jeff, it's a lot harder than I originally thought it was going to be.

And yeah, guys, so I think if you're a retail dealer, you're now getting the, I don't know, the pat on the back from Luke. You know, you're finally getting your, your deserved recognition by Luke saying that retail is harder than buy here, pay here.

Well, you know, it was funny. We were sitting in 20 group and Jack called retail sales for, that was for knuckle draggers. And, and I was like, well, I guess I'm a knuckle dragger right now. But it, it's just getting things set up has been difficult for us, like getting everything wired into dealer track and getting, getting these banks, you know, and luckily we've been in business for 40 years, so we can call banks and give them financials out the wazoo. And, and it's not a big deal. Like, but the problem is, is I still don't have dealer tracks set up. Right? And, and we're missing some deals because of it. Another thing, you go, okay, well, I've known for years what sells buy here, pay here wise. And that really doesn't change. But the retail markets fickle and you know that with EVs and what's going through that right now. But you know, I, I've decided, okay, this is the path we're going to take when it comes to what we sell. We're going to be very specific. We're going to keep about two or three brands and mostly trucks, SUVs, a few cars and under, you know, under 30 grand. And then you go, well, okay, I, I can, I can buy that inventory, but how much can I mark it up? Right? That number's a lot smaller. A lot smaller. And, and how do you, how do you buy it, right? Then how do you market it after you buy it? It is a lot that goes on inside of it.

I want to, I want to dig into a couple of those things. So just, it's, it's the exact same way that we, you know, we warn retail dealers that want to get into buy here, pay here, right? That. Whoa, whoa, whoa, wait. This is not car sales. This is car collections, right? You got to come and buy here, pay here from a collector's mind. And you also have so many just, you have so much padding as A buy here, pay here dealer. Because I don't have to buy a car perfectly right. I don't have to kill it. I don't have to worry about how many days it's been sitting on my lot. Eventually it will sell. I look at a car like will this car run the note, not how quickly can I flip this, you know? Yeah. So I think there's so many different wirings of a retail dealer to a buy here pay here dealer that you really do have to relearn the business and say, now I'm talking about days in supply. I'm talking about market demand. I'm talking about percentage, you know, cost to market. Like what's my retail price based on market? And I've got to be very aggressive on the pricing. I'm not going to make three or four grand gross on these cars necessarily, unless I rip a trade in. But I'm not going to go down to the auction and bid against somebody else for a Z71 and think I'm going to come home and make four grand on it. No, I'm going to make a 500 bucks and then I better make another thousand dollars on back end products to keep the doors open. And that, that's my view of the retail world. And, and obviously I do about, I'm like 70, 30, buy here, pay here to retail. And we go after those cars and, and you have to price them differently, you have to treat them differently, you have to act differently. Oh, it's, it's different, man.

It's a, it's a different world. And you know, I've been consulting at some retail dealers that are wanting to get into, to buy here, pay here. And what I found there is, is, it's again, it's a different mindset that people don't always flip. I'm having a hard time flipping that way and they're there sometimes their staff's having a hard time flipping the other way. I don't get me wrong, I think I can do it. But if I were a dealer that decided I was going to open my dealership on January 1, 2025, I would be in some serious trouble right now, Jeff. I would be in serious trouble. Because don't get me wrong, we're selling cars and we're making money selling those cars. But it's, I can see how people go out of business really quickly in our business. It's not, it's not that easy.

Yeah. I'll tell you what, it has slowed. I mean, I talk about my march, I'm 50% off where I should be right now. As far as a typical March goes for me, you know, halfway through the month, we're not going to hit our goals like we should. And it's, it's been quieter, you know, for us. If it wasn't for tax max, our tax time, our tax season would have been February 27th. Like literally Thursday, February 27th was tax time for me. And other than that, it's been like onesie twosies. So I don't know, I, I think you guys on the east coast maybe got a little bit better or something, but as far as my dealership was concerned, it was a flash in the pan, man.

Yeah. Well, hopefully we see some more tax money. You know, collections have been fine. They, I haven't seen the, the crazy collections that we, sometimes we get. So I don't know, tax season, maybe here it may be gone. Who knows? You can't bank on it. A lot of, you know, a lot of buy your pay here stores do. I don't think it affects retail dealers as much. You know, I think one of the things that's hurting, you know, Jeff, we talked about this all fair, was this evs and how difficult it is to price these evs right, and, and get them sold. But it's like there's almost a whole new segment of the market that's dragging the market down. Do you see that out there?

Yeah, I think it's an interesting dynamic when you talk about depreciation or demand of cars. You know, cars fall out of favor with the public and maybe the demand is, is lessened when they have a massive recall or, you know, there's a body style change from one year to another. Right. And this is a new factor you get with specifically Teslas is the EV and, and the Elon Musk factor of now. You have a cultural shift where people say, I do or don't want to own a Tesla based on the CEO of the company. Right. Like, I mean, that might have happened back in World War II with Volkswagens. I don't even know if we were selling Volkswagens here back in the day. But if you, you know, the old CEO of that company was not something really wanted to line up with. So. So it's really kind of a weird deal to see those prices kind of take a bit of a, a beating in the wholesale market and be sitting on somewhere. You know, I've got a couple model Threes that I'm going to have to give away. They qualify for the tax credit. Great cars, great condition but just no takers, just dump them.

Is there a way for a dealer to capitalize on this right now?

That is a good question. I haven't figured it out, man.

Okay.

I think if you, it's, it's maybe if you had a long term view, like let's take the, the Jettas, you know, the TDIs, back in the day, right, when they had that snafu with the diesel engines and you could go out and buy them a dime a dozen, right? I mean, those prices tanked over the course of a couple of weeks. And if you were willing to sit on them until the fix came in or sell them with the known issue or whatever you were doing back then, you, as far as the buy here, pay here portfolio, you did pretty well because those things came back up. And maybe that'll happen with Teslas where, hey, this is, this is the time in a moment in time where you can buy them on the cheap, just like you might be able to buy the stock on the cheap. And if you really believe in the long term mission, maybe you're going to be sitting pretty in three months, six months, three weeks, I don't know.

Yeah, I mean, it's interesting. Typically when there, when there's a market correction or market pushback, there's usually an opportunity. The question here is once Elon's done with Doge, will people return to buying Teslas? We all know sitting here that there's only one EV that you need to buy, right? There's, there's only one that really works like it's supposed to. Is that still the sentiment, Jeff? Are there other evs that can even compare with a Tesla?

Well, I mean, I think as far as the companies that are coming out with hybrids, yeah, you've got a handful. You know, Kia is doing really well. I think some of theirs look beautiful. Service and the charging network's an issue. Rivian's coming a long ways. That's kind of become the Tesla alternative. I think everyone's turning to Rivian. So you've got those ones. But I think what the bigger problem you have as a retail dealer, and this applies to all vehicles, is you, you don't have time to find out. If you're a retail dealer, it doesn't matter what might come, it's what's happening today. And if you don't turn that inventory, even if you're taking a loss today, knowing that in two months from now that price is going to come back, you can't sit on it for two months. It doesn't matter, Right? Sell it today, take the loss, rebuy one tomorrow at wholesale at the new lower value, and then resell that one again next week.

That's. Yeah, that's so important.

Turn time is so think about it in the diesel. You know, if you're a diesel truck dealer, you do not want to sit on those things for longer than a couple of days, even if you ride it up and down. And all this buy here, pay here. Dealers think we were so smart because we were stocked in inventory during COVID and all of a sudden, the COVID prices shot up over the course of, you know, three to six months. Oh, man, I made so much money on those cars, blah, blah, blah. And it's like, yeah, you might have ridden that wave up once, you know, because of COVID but you can just as easily ride that wave down if you think you want to sit on your vehicles for three to six months.

Yeah. I was explaining to my sales manager yesterday afternoon. We were talking about. We had sold. We had retailed a couple repos that we had brought in that. That were good cars. And. And we, you know, we did well on those, of course. And. And I said, well, the reason we're retailing them is because if I take this car to the auction, it's going to bring, let's say, $9,000, and we can get $13,000 retail. I said, but you got to think about this when it comes to cars we buy at the auction. And maybe we had to over recon. We had one last week. There's a subaru forester that we had to put a transmission in. Well, we were. We were at, like 15, 6 or into this car that was worth, you know, 12 5. Right?

Yeah.

And a customer came in, and they were. They wanted to trade a car that was worth, in my opinion, 15 4. I said, do the deal. And he's like, we're not making any money. I was like, there's going to be a lot of times we don't make money. We got to make sure that we cut our losses, though, because the losses are what are going to kill you. That when I have to take that same 15, six car to the auction, it brings 12, six. I just lost three grand. I'm much. I'm much happier selling it at a discounted retail price and hopefully get a good trade, which luckily we got a trade that's worth, you know, I think retail 18. So we're able to keep going. A lot of people can't. Can't make that middle magic work, but you have to.

Yeah, you've got to look at that. $16,000 is, you know, I, I lose on some, I win on others, but it's just like the stock market. It's, it's time in the market is more important than timing the market. Yeah, I can't sell that for below 16 because I'm into it.

16 doesn't matter.

You're gonna sit on that thing forever. You're gonna have it another 365 days because that price ain't coming back up there.

Yeah. You know, because you, you Forget about that $5,000 when you made. Right. And you got, you got to take those, you've got to have one or two five thousand dollar winners every month because you're gonna probably have a couple thousand dollar losers every month.

Yeah. Luke, we gotta add some ads here because we've got great sponsors that, that let us sit here and, and do this. And upcoming is Buckeye and Buy Here, Pay Here United. Obviously it's the big event of the year for them and for all Buy Here Pay Here dealers is to be in Vegas April 22nd through the 24th.

You're right, Jeff. You got it right this time.

Finally. And that is a month from today.

Oh, wow. Just about. Yeah, just about.

Isn't that crazy?

So that is great.

Perfect time to buy your flights. I think tomorrow when this airs possibly on March 20th might be the last day to get your discounted hotel rooms too. So. Yeah, and we're at, jump on it.

We're at Caesar. It's going to be great. Also during that time, Ignite is doing their compliance and you know, we hate to talk about compliance, but guys, it's so important. And if you look at the Trump administration's, they haven't changed a ton. You know, CFPB might not be in full effect, but it's still there. So Attorney General, especially in the, the blue state's going to be out to get you because they can't, they can't wait for national to do it. So yeah, got to be there, you got to be compliant. Steve Levine is the best in the business at it.

And the trial attorneys, you know, the slip and falls, the, the class action guys, they are just as active as ever. That's one thing you'll see when you go to Vegas. Every billboard is for a personal injury or a class action attorney. They are making some money because they are paying fortunes more money than we will ever make. They are paying to have those billboards up there.

A buddy, a guy I know pretty well apparently made like 10 million last year. And he's one of these attorneys and you're like, golly, boom, you're the wrong business. Yeah, I don't want to be that slimy. And car dealers are slimy enough. I don't want to be a injury attorney. But that's the reason you need Steve Lavine and Ignite Consulting. They will take good care of you.

Yeah, we're just, we're just slimy without the money.

They're slimy.

I don't know. I guess that's what we picked, huh? All right, good. I, I, I hope you do get signed up. I hope you get down there because there it is. Definitely changing the, the sentiment of the used car industry. Right. Both from lenders and supply. You know, we talk about those Covid cars coming off of lease pretty soon. You know, a Bunch of those three year leases that were, that were originated back in 21, 22 are all coming back into the market. You know, what do we do with those, those kind of quote unquote Covid cars that were built during 2020 2020s that you know are, are now hitting us. Are they good cars to have on your lot? Do you retail them? Do you are they buy here pay here potentials? It's really kind of an interesting inventory.

Mix we have soon it is but you also got to think about there wasn't a lot of cars made in 21 and 22, so it should keep prices high. You know, it's again, this is just, it happens so often. Industry is so, so cyclic that you just don't know when to time it. And like you talk, you just got to continue to go.

What else have you learned? Being in the retail space more often, is there anything that sticks out to you as blaring differences between being the way you marketed your buy here pay here cars as opposed to the way you feel like you need to market being a retail dealer.

Yeah, I mean I think it's a lot harder to, to figure out the marketing for it to be right. It to me it was pretty simple in the buy here pay here space marketing. And, and you. I am consulting. Don't call me to consult on marketing because I don't know how to do it. But I don't buy your pay here was was this we finance you, not your credit. And we were advertising us. Godwin Motors, we are the bank. We're not advertising cars here. We're advertising a program. And this program is going to help you customer. And we know how to Collect it as well. Not only do you know how to sell your car, but we know how to, how to advertise. We're advertising to show you how to keep the car too. So to me that was pretty easy. Now it's more price oriented and so people, people will buy from you because they bought from you before. You're gonna still have that if you can get them qualified. But then the next, the next way you have to market is about price. Do I have, do I have the best price on the right vehicle? So it's a two pronged approach. We have, we've noticed that Facebook Marketplace is a powerful, powerful place. Now there's probably not a good way to get your cars as a dealer onto Facebook Marketplace. So that's a challenge. But luckily you have sales people that can get their cars on there for you. I think that there's probably other good marketing avenues. I have not found them yet, but I am searching. But the best one we have found currently is, is Marketplace.

Yeah, you, you haven't signed up for all the third party sites yet.

We have one third party that we're using and, and we get leads. We're not closing a ton of those leads. And it's, you know, I think it's frustrating for sales people to work these leads over and over and over and they just don't respond. What's great about Marketplace and, and those type of, and that in that platform is that they can, they message you back and forth and it's, it's, it's just you typically get responses and, and a lot of times these third party leads, you don't feel like you're getting the response. So you know, I'm diving, I'm deep diving here and trying to figure it out. But it's something I, I'll just continue to work, you know, work my salesman and try to figure out.

Yeah, I think that's one thing I definitely notice is the blaring difference between the buy here, pay here and my retail stuff having to be on the third party websites. You know, I'd always kind of poo pooed them all because of the fact that my prices are never going to show up at the top of your search. You know, I'm not going to be on car gurus because I'm never going to have the good deal great deal badge on my cars because my buy here pay your cars, they're just not priced aggressively. Can't be now when I have my retail units and now I'm on, you know, auto trader. I Pay those guys and maybe for a couple more weeks. There's another third party site that's kind of specific to our state that's very, you know, trafficked. Still not as great as Marketplace in my opinion. I mean, we get a handful of leads from them, but I don't know that they're closing at the same ratio as just having your salesman post these cars to Marketplace. And of course, you make sure you disclose it. You're a dealer, your dealer, license number, all that stuff in the listing. But it is still where people shop. The fact that Facebook is just completely shut dealers out blows my mind. You know, that they wouldn't have like a premium product for dealers. And I know there's some third party companies that claim to be able to post there, but I think it's still kind of a workaround.

Yeah.

Type situation. From what I know and, and all the listings I've seen, it's possible, but that retail space is drastically harder now. Let me ask you this, Luke. Are you doing anything different from a purchasing standpoint? Because again, with buy here, pay here, we just have so much more buffer. You know, there's so much room to make a bad buy or miss something. But when you're in retail, you're like, look, I got slim margins. I can't, if I miss the AC on this thing and I got to put in a new compressor condenser and have it charged like I'm, I'm blown out of the water.

Like, I can't be. Yeah, it's definitely different. You going in, you know, your, your profit margin is going to be smaller. And so you have to figure that into the, to the price. We're sticking to certain brands that we really, really, really know. And I'm not going to go into models and makes because it just, you know, I buy all over the country. But it's, it's very you. You got to be on it. You got to make sure you're buying what's going to sell and you've got to know how to fix something. Will I still take a chance on something because I know the product? Yeah, I will. But we are, I'm, I'm very narrowly focused on two to three brands and that's it. And I, and I think you almost have to find a niche, especially where we're focusing on prime deals. We're not, we're not, we're not going to worry about subprime. I've had enough of that in my life. I don't need that headache. So it's Very specific and it's very specific brand oriented that I know how to fix and that I can search every one of those questions. Cars in that brand I'm going to buy and make sure I pick the right ones.

It's interesting when you get into that more retail side and, and you're looking at all, I mean that kind of. If you're talking about prime bank credit union now you at least have a year and a mileage filter you, you can set. Right. Because you know you don't want anything over X amount of miles. You don't want everything because your, your banks, your credit unions aren't going to touch older vehicles quite as much. And, and you might want to narrow it down by make because you don't want to deal with a surprise on an Audi or a BMW. So there's some similarities there to your buy here, pay here. You know, you kind of know what you know. Yeah, you're just now dealing with you know, 30 or $40,000 SUV and not a $8,000 SUV. You know, it's very interesting.

Yeah. I think, you know, I think you do have to have a price limit though. We all know that the higher priced cars take longer to sell. Typically you just got to find the right ones with, with the right history, the right miles and you can't pay too much, which is super hard to do.

Have you thought about buying from the public? Just going back to that model? Because now you're.

If I would, you know exactly what you're getting if I were in a. No, no. I just, it, that's brain damage. And I'm not, and I'm not saying people can't do it because I think certain people can do it and do it very successfully. I think you need a standalone business on a busy intersection and you have two people that all they do all day long is by cars.

Yeah.

You know, having it at your dealership and, and, and being successful at it. I, I don't know, maybe, maybe somebody could do it. I, I didn't take the time to deal with that.

Well, I do want to make a point on that, but before we do, I want to mention blitz pay, obviously the one shining star in this current economy and what's going on here. It's definitely not my freaking IRA account because that's getting freaking slaughtered. But my collections are great, man. I'm down to like low double digit, like single digit, one day, $1 right now.

So that's great.

I, I mean some of it was from charge offs the last couple months, but Some of it is just people are paying. And I think that might be it. I think maybe folks are wanting to get, take care of their current debt and obligations and not get into new ones. Maybe when they're kind of waiting to see what's going on, you know, making their cars last a little bit longer instead of trading in, maybe not getting a second vehicle, maybe that's what's going on in the market. But my collections have been years, years. Doing okay with what you got left?

We still got, we still got a bunch of accounts left. We still got 800 plus accounts left. And without Blitzpay, it would be, it would be difficult, I can tell you that. And we've been on it for two years now. I can't say enough good things about Robin and the team over there. It's easy. It's easy to pay. It's easy to communicate. That's our Jeff. That is our, our only way to communicate not only, but our 99.9 of the time communication with our customers is through Blitzpay. And it, it just works out great.

Yeah, yeah, it's, it's, it's easy. The Cash Network has worked really well for some of our, you know, maybe unbankable type customers or ones that deal specifically in cash. So that's actually been going really smoothly for us. So, Luke, to wrap this up, where do you see this going for you as far as retail over the next couple of months?

We started this and said that I was going to give, I was gonna give my sales manager a year, give us a year to try to make this thing work. And, and the caveat to that is I'm not gonna be in the office. I'm gonna be out consulting with dealers. I'm gonna be traveling. I'm starting another business that we're under that were. There were a couple months away from launching and he's got to figure it out. And so hopefully that works. I'm, I'm here. We've got cash to do it. We're going to try to make it work, and I hope it does. And if we get up to where we're selling 25 to 30 cars a month, it's going to be a wonderful success. If we hang around a 15 to 20 to 25, it's going to be good. And so I'm okay with that as long as everybody else is invested. It's got to be open in some form or fashion to collect out all these accounts. And, and that's, that's, that's what we're Here for. We're here to collect the money out and to secure my dad's future, my future with that money. And that's what we're doing. And if we figure out how to retail cars along the way, then that's going to happen. And, and luckily the service department is still here to service our customers. And we're getting into. Now we have figured out something. We figured out marketing on the customer pay service side. That's easy to figure out, by the way. And if anybody wants to go check out our new website for repair. It's, it's, it works great and advertising great. Godwin Car Repair sc.com or something to that effect anyway, but we're figuring that out. And, and you, you know, sometimes you get people that just call you and we, we just talked about this before and they call you and they're just shopping price. Right. And if y' all haven't shop price lately on what things cost to be repaired, it is astronomical. And, and people have been commenting. Well, I'm like, oh my gosh, they're charging 250 an hour at the Hyundai store. Well, they get 250 an hour at the Hyundai store. We quoted and did a job just the other day that was 160 an hour for our text. There's money to be made and you just have to, you have to sift through it. It's just like working leads at a car dealership. You got to sift through the, the bad to get the good and, and then roll with.

Seems to me like. And again, I don't do retail service work, but every service shop in my town is bursting at the seams.

Dude, we are, we are literally two weeks out.

Yeah. So, yeah, and that's the big issue you have is, is it is a business that is painful. You know, I've, I've, I've thought about it so many times, opening an outside shop because of the amount of service we send out that we can't handle, not to mention our customers that we don't even touch, not to mention the public. And I see a wave of hybrid and electric vehicle service that isn't being touched or handled at all. In my area, that I think is a huge opportunity. But all that comes with headache, right? All that comes with brain damage. Because we're talking about text, we're talking about training texts, we're talking about them having the skills to handle these things, deal with customers, deal with cars. It is a mountain of brain damage that I. Yeah, that's. It's hard man.

It's. It's hard. And you're doing an industry where there's shorter and shorter supply of skilled workers. And if we don't fix that problem, I mean, hopefully once Elon gets over with his Doge, he can maybe focus on spinning up Tesla text and spinning up just regular text, because it's. There's no relief in sight from that. And cars are only getting more complicated, so, you know it. Good luck out there.

I'm glad to be one of those little robots he's making the humanoid robots.

I'm okay with that. If it fixes the car, I'll buy 10 of them.

Yeah, yeah, just put one of those. And they record everything they do, I'm sure. And you could probably just upload the repair manual right into them, and they would just get their little. Little mechanical fingers down in there and. And make it happen, I guess. All right, man. Luke, good times. We'll talk to you next week.

All right, buddy. See you.

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