#76 Hot Topics WIth Jeff & Luke

You are listening to the Independent Dealer Podcast with hosts Luke Godwin and Jeff Watson. Thank you so much for tuning in. Let's do this.

Hello and welcome to this episode of the Independent Dealer podcast. Want to thank everybody for tuning in week after week. So excited for season two. The growth of the podcast has been amazing. You know, our downloads, everything's just, just been going up and up and up. So we appreciate you guys sharing this with your friends, your fellow dealers, and we really appreciate those of you that left us a review on itunes or Google or any of those places. This week we caught Luke on the road. What are you up to, Luke?

Buying cars, Stocking up for tax season.

Stocking up. So we are just right at the doorstep of tax time and Luke is going out there doing some last minute shopping. Scrambling to get that lot filled or you filling up your backlot now?

Well, you know, we've, I kind of get in buying mode probably in November just to really, really stay on top of it. And I honestly, we've had, we had such a good fourth quarter that it kind of cut into our normal supply. So we're back to normal levels. Maybe a little above normal levels now. So this, this buy in trip here is that extra that we'll need because I, I know 40 days from now I will not be able to buy. So I'm just trying to stay ahead of the game a little bit.

So let's talk about that, Luke. This episode, I'd love to do kind of a rapid fire question and answer. We're going to touch on a bunch of topics that are kind of been kicked around in some of our dealer groups. Maybe you could speak a little bit to that. What has been your experience with buying inventory around tax time? I know a lot of dealers say, hey, I like to really stock up in like October, November and sit on them for 90 days. A lot of dealers maybe don't have any kind of a plan or maybe they don't have a large enough flooring line and they just have to buy them when they need them. What's been your experience in the past?

So I think each dealer's business model will affect this. But if you're buy here, pay here, I think you, you should do that. You should, you should have a plan to stock up. If you don't. If you don't, you're gonna be behind the eight ball and then you're gonna be buying cars that are way too expensive and they aren't ready to go. And the worst buying mistakes I make are in March In April, because I'm buying projects sometimes that are not gonna be ready to go and I'm gonna have too much in them. I'm buying on that market. So my opinion is to have a really good plan. So if you know that you're selling 30 cars a month and that we're gonna need, you know, come February we're gonna need 60 cars. Then I would start in November buying 50 more car, 15 more cars per month, up to up to 30 more cars. A couple things is you've got to have a place to put them, which could be a problem for a lot of people. Number two, Number two is paying for them. So you got to have a good idea of how you're going to pay for them. And number three, you just got to, you know, you got to get them ready. So just make sure that you've got a plan and just don't go at this willy nilly because if you do, you're going to have way too many cars. You're not going to get them ready, you're not going to have anywhere to put them and you're going to just put them on the back lot and you're never going to see them again. So make sure you have a plan of what you're going to buy and how you're going to go about doing it.

Yeah, you know, that makes me think getting them ready, you know, that's one of the biggest things I know I've got. I've got twice as many cars as I'm holding as what's actually frontline ready. Because half of these are sitting back in recon. Because my recon process is. Doesn't have the turn time that it should. You know, I've worked really hard and got it down below 30. Well, I should say my guys have worked really hard and gotten it down below 30 days. But even 30 day turnaround from purchase to frontline is way too long.

It's way too long. And you know, I battle this and heck yeah, nabd. I put together a presentation on this and it's a, it's a really, really hard process to develop. And then once you develop the process of getting all the buy in and getting people to adhere to it, um, I have the process and we stick, we have tried to stick to it and not still struggle. If I can keep it, you know, if I can keep it at 15 to 18 days, I think I'm doing good. And it's still, it should be half that. And you know, yeah, I don't know.

That'S a strong success, I think for anyone, especially in buy here, pay here. And that's going to, you know, it depends on your acv and some of it depends on strategy. A lot of people might have a pretty strong shop or they like to build value by buying projects and that's kind of their philosophy. And then you've got other people that are maybe on the V auto or the, you know, quick turn where they're buying near new, off lease type stuff. And yeah, it shows up with a lot. It needs a detail and it goes to the front line. What are you seeing down there at the auction? What are you seeing, Luke, as far as the CR reports or our CR reports coming in accurate? I've seen a lot of conversation and disparity around the fact that no auction can get on the same page and it's some minimum wage worker that's putting a CR report on these things and we're not able to trust online buying because of that.

So that's an interesting thing. And CRs, you're going to get lucky on some CRS and you're going to get unlucky on some CRS. You know, you kind of really need to, to take that into account. Manhattan will tell you that there is, you know, their secret sauce to how these things are graded. And I, I encounter at the Florida auctions, especially Okoy Manheim Orlando, that I believe the cars are overrated. And I think they're overrated by a good bit. But I think it's because the wholesalers down there have learned how to work the CR system. I don't believe there's a actual malice on the part of Mannheim. I just believe that some wholesalers have figured it out.

What do you mean? They're being deceptive? They're covering up problems or.

No, I think they know exactly what needs to look perfect to get a higher result in the cross. So like I said, I don't think there's malice. I just think it's, it's a way they're working the system. So I don't think this is a Manheim problem. But, you know, I found, I bought Alexa a car a few weeks ago and it had a 2.8 cr and I looked all over the cr and I'm just going, how in the world Is it 2.8? Well, I get it in and I promise you it was a 42 or 4 4. So both ways. It goes both ways.

Yeah.

And you've got, you've got to, as a dealer, take that in there into Account because we're going to buy a lot of two fives and two eights. And even I bought a 18 the other day that in my opinion was a 4 0. So you got to know that this is going to go both ways. And you just got to, you got to be willing to, to understand that. You got to study the cr, you got to know the auctions you buy from, what to expect, because each auction is going to rate things a little differently. So just make sure that you do your homework, read your cr, and you got to trust it, but you've also got to trust where it comes from.

Yeah. And you got to know that like you said, Luke, you're going to win some, you're going to lose some.

That's right.

To me, there's certain issues on there that, I mean, the car could be flawless on the body panels and the, you know, but if it smells bad or has been smoked in, I mean, that instantly takes it for me down to a two. I don't care about anything else. But, you know, maybe in the CR it really doesn't. Whereas to me, it's a deal breaker. To them it's not. I could care less about previous accidents and body panels because of the way I went run my operation. But to other people, an accident is a complete deal killer.

That's right. And that's very important. Make sure there's several places on the CR that describe those things. It'll tell you interior odor. And if you see foul on there or smoke on there, you know that's not a car for you. But you've got to. As a buyer, you really, really need to study how CRRs are done and you need to look at every piece of them. And once you do this 20 or 30 times, then you can go on a CR and really understand what's given the value. So make sure that that's your study and what you. What you're buying.

And I don't. We've gone down this road before. I am not a subscriber to either Carfax or Auto Check. Been at it for 15 years. I've probably pulled three in my whole life, so. And that's my business model. And, and I train my sales guys that, you know, Carfax and Auto Check. It's not the bible of cars. It doesn't prove everything. I have a million different reasons as to why I don't believe in them. But I know there's people that live and die by them, you know, and they fully bought into carfax's advertising that you have to have a history report on this car in order to sell it or in order to buy it. And then there's of course, attorneys in California that are make the dealer responsible for the entire history of the car. And I, as the dealer or the reseller, have to know everything that has happened to this car in its entire life and disclose that to the new buyer. Like somehow I'm the savant or the fortune teller of this vehicle. So I know you do subscribe to a history report and you believe in it. I mean, the room for both those.

Yeah, you know, I'm a Carfax guy and I pay a lot of money for carfax. I believe it builds value in the car I sell. I believe it. It helps me when I'm buying cars. Now you're exactly right. No, no history report is going to give you the history, the entire history of the car. Because some shops report, some don't. Some accidents get reported, some don't. So there's all this to build in. But just, you know, look at all the cars. I look at. If I can pull a Carfax real quick and decide whether it came from up north or didn't or if there has been an accident reported, then I'm going to walk straight to that panel and look at that panel to decide at the accident, what I graded the accident as. So I think there's definitely a place for. I did see where Gus had posted on. On the independent dealer forum about, you know, California requiring both. I really have an issue with the discrepancies between the two reports between AutoCheck and Carfax. The biggest, I guess AutoCheck gets their most information from auctions, which I have a really. I have a big concern with because of the reason, with the history, with the condition report. It's that you're. If you've got a guy who's making 12, 15 bucks an hour, determining whether a car has structural damage or not is a big problem. And what I've seen. And what I've seen is auto check throws a structural damage on a car that doesn't even come close to having structural damage. And that's coming from the auction. And the auction is doing it to cover their tail. And it's just. And there's no way to get it all right now.

It's all of a sudden printed in history like it's the gospel. And this $10 an hour guy, he's just trying to get through the 50 cars that day that he needs to get that's right. So he's permanently causing damage to that vehicle. Now on the flip side of that, if I don't disclose the history of the car to the customer, I'm in the state of California and I am then liable for not disclosing. But here's the deal, Luke. If Carfax or Auto Check didn't tell you the accurate history, you can't sue them.

Yeah.

You know what I'm saying? Like sure, I can't sue Carfax report.

I've had this issue and it's not just California. If I sell a car in South Carolina and, and I get everyone to sign a carfax, no doubt it's going to have a carfax presented to the customer. They're going to sign it. They're going to initially. But the problem is if that carfax is perfectly clean, but for some reason the auto check is not clean and somebody really wants to make an issue of it and sue me for it, I need to settle. Because if it has had an accident or the auto check says that it had an accident, you are somewhat liable for that. And it's a real sticky situation that I, that I hate. But unfortunately it's part of our business.

Again, I think it's a self inflicted wound of dealers. I think we have allowed places like Carfax to set themselves up as a gospel or as some sort of government entity that is flawless and now we're beholden to them legally to disclose that or provide that information to our customer. When have we ever been. How many industries are legally required to buy into a vendor? I'm almost thinking like this is like Obamacare. You are going to be taxed if you do not buy healthcare. So I am going to be fined if I don't subscribe to some third party service that is flawed because it is not gospel, it is not accurate. It's got so many issues. But, but yet I can be sued for that. That to me just.

It rubs me the wrong way.

I think a million different ways.

Yeah, I think you're a little, I think that's a little over the top there. But I believe that, I believe there's a place for carfax on Auto Check. I like it. I think it helps me buy cars. I think sometimes it can help you sell a car. But we shouldn't be. The burden shouldn't fall on us and it's always going to fall on us because we're direct to consumer. But we just have to cover our bases, make sure that if you get A car in and you've got it. And if you think there might be auto check something that's not on the carfax, provide both. If you can call a friend dealer that has auto check and say, hey man, can I just get you to check this car, this auto check?

And you get the summary free through Manheim when you scan it in your MMR app. And that's if I ever have a customer with an issue, that's what I show them. I just scan it with the MMR and say, oh look, here's the auto check summary. One owner, no accidents. You're good.

Yeah. And I believe, I believe there's a free. I think the government actually has a free Inventus report or something to that effect. So that's another option as well. So you don't have to pay for this. But, but you know, who knows?

Anyway, and that's the last analogy I'm going to draw. Luke, I know you've bought a home. I've bought quite a few homes. And when I buy a home, it is up to me as the buyer to go get a home inspection, right? I pay for the home inspection. It's not the realtor, it's not on the realtor. If I move in to that house and I get pissed, I don't call the realtor. I've paid a home warranty company to inspect this home and tell me what is or isn't wrong. And they're putting their neck on the line. And of course some of them are liable, some are not. Depends on how you, what you pay for. But I mean, so when is this put on the dealers? We need to tell the customer, you know what, great, go to carfax, get that history report and if it's wrong, you can sue them for not giving you accurate information. Anyways, that's all. I'm done with that. Along those lines, another self inflicted wound is we've talked a lot about the online listing platforms and the race to the bottom. And, and we as dealers, when did it ever get to the point where we are paying a company to tell us that we're selling our cars too high or that we're making too much money or that we're a bad deal? We're paying for a service to give our consumers more information and education, right? When did they ever flip that model? When did these online listing places ever get us to pay for them to run their business model instead of the other way around? It seems like These CarGurus and Cars.com and Auto Trader As a consumer, you should pay to get Cargurus pricing information to know if you're buying something overpriced or underpriced. Why do we pay as dealers to give public that information?

You know, Carter Roosie has, has done this to us and I guess we've done it to ourselves. It's a auto trader. You know, if you go back years ago to when that all started, the biggest problem with Autotrader originally wasn't they didn't sort about price. They, they sorted by whoever paid them the most money to list their cars. And I think it finally people got fed up with that and started this different model with hey, if we list our cars cheaper, this will work. And Cargurus was able to actually start a business because of that. It's still, I tell you, racing to the bottom is not the way to do it. It's not sustainable business practice. And if we push back on appears that a lot of dealers are pushing back on it, that we're going to fix this model. Don't let CarGurus or other third party sites tell you what you can sell your car for.

And I agree, I think it's a great service for the consumer. And I price shop when I do everything. But as a consumer, I'm gonna pay for that information because I'm the one that wants to save the money. So flip that model around, make it a subscription service or a one time for the people who are buying the cars to have access to it, whatever that is. But what I think is really funny, Luke, is in all these conversations, there's probably. Well, there's not probably. There's definitely a handful of dealers that are sitting back and just laughing and saying, great, you know what? I'm gonna talk all these other dealers into getting off Cargurus and I'm gonna stay there and be the last dealer standing and the only one getting that leftover traffic that Cargurus might have, you know, for the final six or 12 months of their life until they implode.

And that's funny because I. Because how many times does that happen? You know, it's so, so funny.

Yeah, you talk everybody to your sinks, your ship is sinking. So you talk everyone to jumping overboard and you stay in it and all of a sudden you're fine. So other listing platforms are gonna help with that. You know, it's like you said, you know, Auto trader was ousted by these guys and these guys are gonna be ousted by Truecar, Walmart and Craigslist. Killed the Penny Shopper and Facebook Marketplace killed Craigslist. And you know, so there is that natural evolution of attention, right? I mean, that's really what we pay Auto Trader for is they marketed, they got the eyeballs. And so as dealers, we all went flocking there and said, here, take my money so that you can put my cars in front of your eyeballs now. Well, what can get our own eyeballs, Luke? We need to go out and get our own eyeballs as dealers and not rely on these guys to create this traffic. Right? Facebook allows us to do that. Our own websites allow us to do that.

That's the, that's the first thing. And you're so right. The reason Auto Trader was so huge to start with because very few dealers had their own website. That's. That were worth a dirt. You, you know, you had to upload your cars to autotrader, you had to take these pictures and it was such a new thing. So you got to understand that, that the reason these kind of took hold was because dealers didn't have their own way to promote their products beside the drive by traffic or the newspaper. So you're exactly right. We've got to make sure our websites look outstanding. I know you're big on this. You want your website to look like carvanhas and have the feel of you right there with the car. Anything you can do to make your website look better and anything you can do to brand yourself and to get consumers to your website is the best money you can spend. It's not these third party sites, it's getting them to you and off the third party site.

Yes. Build your brand, build your database, build your email list. You know, even, even within, you know, a Facebook model that is becoming more saturated. It's harder to get your cars through the noise. You got to have it on your own. You've got to have your own, your own place, your own home. And then you're gonna be able to remarket to those. Right?

That's right. It's not, you know, you can flood Facebook with cars and let me tell you, you're not gonna sell many that way because people are gonna unfollow you so quickly. You know, being it, being on the podcast, I get a lot of, a lot of friends on Facebook, you know, and I accept most everybody's request, but what happens when I get their requests and I start, you know, every time it shows up in my feed, it's a dealer, you know, showing me a piece of inventory. Well, I don't care about your inventory, really. What I care about is you as a dealer and so make sure you're doing it the right way because it, if you're not, you're not going to have many followers and you're not going to have many friends.

Yeah. So talk about that. Where do you end up, where do you end up spending that dollar? And that's something that we've talked about as well, is that cost per acquisition. You're spending it on your own website and your own. You know, I think the question was asked the other day, what is your best marketing? And I see this probably once a week. Right. Everyone wants to know outside of Facebook and this, what, where are you guys seeing a return on your dollar?

Yeah, that's the age old question for car dealers. You know, it, it probably started with, you know, a big goofy sign or a dinosaur and then a blow up dinosaur. Then it, you know, then it was the newspaper, it was the big color newspaper ads that everybody was running. You know, it's, you got to stay in, you got to stay in front of the market. And I don't, I don't know, I don't know what's next. But you've got to build your brand. And if you don't build your brand, there's no way to do it. You've got to make sure you're taking care of your customer. And that's got to be projected out on Facebook. That's got to be projected out in your community.

Yep. And I think any long term dealer, anyone who's been around for a while is going to tell you the number one source of sales, the cheapest and the best customer is repeat and referral. Repeat and referral. Repeat and referral. And we all know that. But do we, we take it for granted. I mean, it's like anything else in our life. When it comes easy, free or cheap, we don't even see it for what it is. We're going to go throw $3,000 at these online sites where my argument is you take that same $3,000 a month and you invest it back in your customers because you sent them a thank you card or you fixed a problem that you wouldn't have otherwise fixed, or you have a strong referral program or you have customer appreciation parties or you, I mean, come on, the list is endless. But to get that raving fan, that fanatic, we've talked about that in previous episodes, to try to create that fan base that is by far your best spend on money.

My opinion, 100%. 100%. That's, that is. You said something Right there that I want dealers to really, really listen to in the racing to the bottom and not making much money on a car. Sometimes it's hard to spend that money on a car you saw that needed something done. But let me tell you, it's costing you money. And what you said there was, take that $3,000 you would have spent, you know, on autotrader or Cargurus or whatever it was and pay that back to the customer and fix something you wouldn't normally have fixed. I'm telling you that goes a long way. And if you continually do that over and over again, it will reward you ten times hundred thousand times over. So that is a huge deal that you talk about.

Okay, Luke, so we spend our money, we're focusing on repeats, referrals and other avenues. We're bringing that all into our CRM. I mean, we've talked about this in the past also. It's so important that we are tracking where that is coming from that we're collecting customer data, we're seeing what our spend is and we're remarketing to those people.

And that's, I tell you, dealers, if you don't have a CRM right now, you need to go get one. It's so important and it's important for what you just described, Jeff. It's also important for our salespeople to keep track of the leads that are coming in. So if you just, even if you're just yourself, having a CRM will help organize the leads you have. Most customers aren't going to beat down your door to come buy your car unless it's just the one of a kind, rarest car ever put on the planet. What's going to happen most time is your lead's going to come in and you're going to actually have to work that lead. You're going to have to call them, you're going to have to email them, you're going to have to call them again, you're going to set an appointment, you're going to have to make sure they show for the appointment. All these things have to be done. If not, you just get the lead. You think the customer is going to show, they're not. So no matter how big or how little you are, there's free CRMs out there. There's CRMs that cost a little bit more, that do a little more stuff. Then there's really high end CRMs that do everything. So if you can figure out how to work them and that, that's a whole different thing. But you Need a CRM. And you need to work your CRM, because if you don't, you're not gonna sell the amount of cars you have the potential to sell.

Yeah, you've already spent the number. You've spent the money to get those people to raise their hands and say, hey, I'm a kind of person that buys a car. I buy it from a car lot like yours. You may not have the exact car I wanted two years ago, three years ago, two months ago, but maybe you do now. Or, you know, maybe that piece of junk that I bought for cash only lasted six months, and now I'm back in the market, and you guys treated me right, and you kept in contact with me, and now you're top of.

Mind or possibly, and this might blow some of your minds, but maybe that customer was a 500, and you couldn't get them financed before, but maybe their credit has gotten better, and Maybe there are 700 now, or maybe there is 600, 625, and you can get them financed now. Just think about that. Every. Every customer's credit doesn't get bad and stay bad.

Yeah.

So make sure you're staying a hold to that customer.

Mm. Very smart. Great, great information, Luke. I think it's been fun. Fun to rant with you. Hope you made it to your destination safely. And I hope everyone that was listening, I hope that this triggered something, just triggered something that you can change in your dealership that would make your life better, more profitable, more enjoyable. That's really why Luke and I do this. We just want to be able to share our thoughts, our insights, and if you guys do enjoy it, share it with your friends, your dealer buddies. Leave us a review. We love those. And we can keep growing this thing bigger and bigger.

Let's do it, man. I love it. And just get better. That's all it's about, right?

Yep. That's all it's about. Dealers helping dealers, Luke. All right, travel safe and we will talk to you next week.

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