Wake up, Buy Here, Pay Here people. It's a beautiful day. Go grab yourself another cup of Joe and say hello to Jim and Michelle Rhodes on the Buy Here, Pay Here morning show. Take it away, you two. Hello, friends. Welcome to a Saturday broadcast. Got some big stuff to talk about. Just on a personal note, just wrapping up a week with your brother's visit. That's been nice. Got to check out Guymon and do some Guymon things. Yeah. And among the things he figured out we could do here in Guymon is play bad golf. So we played, we, we, we played yesterday. We're exhausted by the time we finished playing pretty poorly. It was their second day in a row of playing eight team. And you know, I, yeah, I've never done that. And I know, I know I probably won't do it again. It was like, I've done three, six on one day and another eight team the next day. And it was like, good. yeah but we were both pretty mentally checked out by the time we got to the second nine like yesterday i went to go play mahjong with the girls yeah yeah oh good yeah um uh yeah we are we're right after the the uh buyer payer united conference right and um had heard good things about uh how everything went for sure and uh I hope that those of you who were there traveled home safely and took a lot of notes and are now ready to implement all of the things. And that is like where a lot of dealers just kind of, we've talked to so many dealers and they're like, we go to the conference, we take all these notes and we have all these great intentions. And then next year, when it's time to get ready to go to the next conference, they run across their journals of all the notes that they've taken. And it's just like, well, so implementation is like a super important part of doing conferences. And so I, you know, shameless plug, if you need help implementing some of the things that you that you learned. Yeah, of course. So among the things they probably talked about was sales and down payments, which will be our subject for today. We're going to talk about in particular, we're going to talk about and forgive me, I'm going to try to get on this microphone better because I know when I move around a bit, it fades on us. But this down payment subject, you know, something always comes up. And obviously, You know, I haven't been around it a long time. This is not a new conversation. This is something that, you know, comes up quite a bit, came up most recently in our V-A meetings, mostly because I raised the question and we bounced it around and heard from some very experienced dealers. And we've heard from, I mean, there is a multitude of schools of thought. Yeah. And one thing we do know about the dealers in the buyer payer space is they're they're highly they're just like they're highly entrepreneur. um can kind of be called mavericks because it's like they they figure it out they get in the trenches they dig out the holes that they need to have dug out and you know get their system working and every system is a little bit different yeah and i it's absolutely true and i think the the data pool we're going to look at today is going to show evidence of that, like very visually show some evidence of the differences in the way people do business. I think the main premise for today is kind of coming back to this conversation. If you talk to a dealer who says, and it's funny, you'll be working with somebody who's a mentor or somebody who's had many years of experience, and they will say sometimes that, more down payment translates into a better performing loan or whatever phrasing they might choose. Like the more down payment you can get the better. And obviously there's scoring systems out there that we, the one of the things we talked about in our meeting on Thursday was scoring systems and how they sort of weight the down payment in the, in the underwriting process. So it's all an ongoing thread. It really is. And some of the people that we have, had really rich conversations with that are not dealers, but people that collect data. Historically, you know, tax time season is a time where people get high payments, higher down payments. And Historically, those notes that are written during a tax return season have a higher probability of default. Yeah. Yeah. So, you know, we don't we've heard that anecdotally. We haven't studied that exactly in our VA. We're now we're now twenty seven months of data with many of our members. And that's mostly the data that I brought today is that I selected the dealers that were that one we had a data all the way back to inception in january of twenty twenty four so i i need to say uh for the sake of everything that you're going to look at today is driven off of that twenty seven month window and beyond that um most everything is driven off of a a three month rolling average so in other words you have a you have twenty four months worth of a three month rolling average. So it's it's really valuable data. I think it's a small pool in terms of the number of dealers. But one of the things I want to put on the screen here is that that first of all, the the pool size that we're working with for today is represents over eighty four hundred sales for those not seeing the screen. This is part of what we try to do. One hundred and fifteen million dollars worth of origination. originations or contracts. So this is when we say small pool, it's a sizable pool in terms of the number of contracts analyzed across twenty seven months. It's a small pool in terms of the number of dealers that it represents. So, you know, relatively small. But if you're a single dealer, by the way if you're if you're tuned in today please keep your cell phone handy if you're watching on a cell phone then find a way to snap photos screenshots because I've got about three things that I want to make sure that that folks who are tuned in today if you're not a member of our v-eight dealer group one of the things I want them to snap a photo of is our QR code for joining a v-eight group because when they see some of the data that we're going to talk about today I think they'll get a sense of what can be gained by being part of these conversations and what we have a chance to learn. The other thing I wanna share is that a lot of the portfolio conversion rates, and I've explained this a number of times, but I'll say it again, that what I call conversion rate is just really the rate at which portfolios convert to cash. So others might call that a liquidation rate, but that's really what we're referring to. And in this case, I leaned on the dealers who, most of the assumptions, the financial assumptions we're gonna look at today, are driven off of our groups that have one hundred to five hundred accounts. Which is your your average dealer. Yeah, that's typical, I think. Yeah, certainly based on what we see in terms of the participation of V.A. and so on. But that's just be aware. That's most of what we're going to be talking about. And, you know, I have challenged in the past, Michelle, folks who talk data and talk about these things especially business model strategy like people are banking their business model and they're they're working hard every day based on a certain strategy and i think when we talk about strategies we need to not talk about it flippantly we need to make sure we're as specific as possible so that's what we've done today just digging and give very concrete information and i came at it with just you know the idea that we're going to work from valid data and we're going to look at whatever the data tells us. And so we just kind of looked at what what what does the data support in terms of these ideas that more down payments suggest, you know, a better loan performance? I mean, one of the reasons why Jim brings me along is, you know, I think different besides the fact you're cute. Oh, thank you. It's better than looking at a blank screen. um, across from you, uh, that I, I have a different way of viewing a lot of these things. Um, one is that, you know, I, I don't like women, women are men from Mars, women from Venus, maybe that could be part of it. Um, uh, I also, I wasn't, I, I haven't spent my career in this industry. And so I kind of look at it from a different perspective and I'm a bit woo. So how, and that's where it's like, I'm looking, I, a lot of times I will look at these things through the lens of the human experience and, and, you know, like the plight of people and, you know, the, the more human, feeling squiggly line side. Yeah. And I don't know how much of that we will get into today because we have another... I will try to just, you know, keep myself out of that. No, it's fine. I just think we might have an expanded conversation later around what this data might mean. Yeah. Because I think there's quite a bit for us to talk about today around what the data... tells us right like what what can we actually see in the results and so i think probably the first thing i need to do is share uh just to give folks a feel for where this information is coming from give me just a minute because i have to share this thing um individually so one moment i'll get this done on my side and then you can i didn't prepare something to fill the silence with Oh, yeah. Sorry. You want to sing a little song? Let's get this. Let me get this thing. Sure. All right. So yeah, I know. Let me actually get the other one. So these are the assumptions that we're working with. And so I mentioned that this is our groups that have one hundred to five hundred counts and when i talk about conversion rates i mentioned that earlier everything you're going to see today is driven off of these numbers do you see my cursor michelle okay so those numbers there are the ones that we're going to be leaning on as we drive the portfolio okay so the other thing i want to pause and say so i don't forget to say it later is that i chose in this modeling to lock down virtually every variable except two and so we'll get to that and so i think it's important to remember that that there are two there are two numbers that we're going to toggle here and uh but i i'm choosing to lock the others in place because you just get too many moving parts and the data becomes meaningless so so this is what i'm trying to uh present here today. So there are some key numbers. This is one of the things I was going to urge people to screenshot, because if you're not a member of a V eight group, these are, these are averages. Okay. Not, this is not like a, you know, what a Tony group would call a, a benchmark. This is a group average. So I think it's a, and it's it's usually this particular pool is a number of dealers would be in the teams that are driving these averages. Okay. So, so this becomes what drives the numbers. So I'm looking at the six month average. You can see up here, this is actually from March of twenty twenty six. So this is our most recent six month average. We're recording this in April of twenty six. So let me just show you this is the cash flow modeling tool that you've seen me use plenty. I brought this to the podcast in the past. This is what I use when I'm working with a new dealer. And I would say. let's be careful not to get too bogged down in any of the numbers that you're seeing kind of on the perimeter what i'd look at is these numbers in yellow are are the assumptions that i've got loaded in here and the reason this becomes important important is because these assumptions drive the rest of what happens back here i'll take folks into these individual sheets but first i would just want to make sure that people can see let's just talk a little bit about the assumptions and this is these are based on um based on the numbers for the dealer is around seventy one hundred it's exactly seventy seven hundred seventy seven oh two so for those not seeing the screen the number is seventy seven oh two is the average reconditioned cost for our dealers in v-eight based on a six month average correct okay and then the purchase the sales price is just let me a little bit over or . So is our actual six month average in our V eight groups. So again, a large data pool there that's driving these numbers. So, And I also adjusted the add ons to make sure that the average amount finance came out to be exactly what our group averages. Okay. So we're just trying to help everybody understand we're doing the best we can to make sure that we, we drive stuff. That's exactly. That's an important thing that there's, these are based on a lot of contracts. These are based on a lot of time. And so this is the average. So those of you who are, are not a member of the group or though, or, you know, like you're watching for the first time, these are, this is what your average buy here, pay here dealer. is going to be experiencing as like what their costs are in and what their costs are, or what their, their sell price is. And so I think also, I just, I don't mean to squirrel too much for those that are listening that are potentially new to buy here, pay here, or aren't in buy here, pay here. um that these these uh to understand especially if you are are like a customer type of thing that when you come and buy a car from a dealer they are putting a lot of risk on the road too so i mean it's it's based on your down payment and what what dealers will do is the down payment they feel is like decreasing their risk on the road. So that was my. Yeah. So, so that's what that risk number is up there. We've got the average cash and deal over here, which Michelle alluded to cash and deal for most dealers is reflected there somewhere. I'm not seeing it at the moment, but we've got it certainly in our there's the calculated cash and deal right there, sixty thirty five. So that's where that number drives from. but what this does is it drives some numbers that i chose to measure and then i'm going to go over and we're going to um so what let's just go through these a single month right here i've got those laid out in a separate sheet but what i've done is i've i've taken this scenario And I've made adjustments to two numbers. I adjusted the average down payment that you see there. And then I adjusted the volume. You and I talked about this morning because I just wanted to pick some numbers that we felt like would be reasonable projections and reasonable adjustments to a business model. So that's what we're doing. It's just like the average down payment that is. Based on the average a lot of averages of the numbers that are out there and you know of course you're gonna see some that are substantially lower and you're gonna see some that are substantially higher and this is kind of like the average that's right so yeah this is actual results of actual dealers so that's what we're seeing on the screen currently now what i want you to see then is i've got a separate model teed up over here which is the same all other assumptions locked down um and and uh then i changed just the volume yeah so a volume just the volume I changed the volume. I changed the average down payment. We'll get to that. Okay. So I changed. So, so you see on the screen now with a count of twenty. Okay. So average. And that's, that's a pretty average amount for people to sell. So twenty, twenty, twenty units. Yeah. But I think the critical part here is that all I've done is adjust the down payment from about seventeen hundred. We were at sixteen sixty seven. Which again is the average. Right. About. Yeah. And so now I'm adjusting that manually. I'm just saying if we adjusted that average down payment to twelve hundred, this is just scenario. Four hundred down or four hundred less. What kind of almost five hundred? Just small percentage. But the we're really just trying to say and I think most dealers can hear this and say, If I took a little less down payment, if you just look through all your applications and how many customers do we miss on a given month because we're holding out for a certain down payment based on our model and our strategy. So obviously I'll say it now again, so I don't forget. We understand that capital constraints are going to be a factor here. Sometimes dealers are doing what they do because that's what they can afford to do. And if capital is the constraint, then that's that's what's going to keep us from doing things differently potentially right but i think what we want to illustrate today is a couple things that i i looked at and kind of measuring these things was let me get over here and show you these different numbers so now here's here you've got them both stacked side by side and so what it does is it gives the the results where you can see that again, this one in column B is based on the actual averages from our dealers. One thing I didn't show specifically, and I better hop back over there and make sure folks see this. The drivers back here are really critical. These are numbers that are the actual assumptions that I showed at the bottom of the conversion rates. These are the actual conversion rates that our dealers are experiencing. So what that says is as we finance notes and we put them in the portfolio, this is the rate at which we can expect them to produce. Principal that we collect, principal that we charge off, interest that we recover or that we collect, and then repos that we recover. So that's really important math that drives, and we use that in a lot of our modeling, that methodology to drive forecasts. So when I have those conversion rates loaded here, I have it for both scenarios and I kept those numbers the same. One other thing I don't want to forget to mention is that in this modeling, I chose to keep the customer's payment the same. Some dealers would say, well, if I'm taking less down payment, I'm going to want to see the customer pay more. Well, if the customer can afford that, fine. But if the customer can afford that, why don't we charge the other customer with more down payment? you know, the same. So what I would really say is for this modeling, I kept the payment the same, which means what are the terms a little bit longer, just a little bit longer. So all I'm really doing is keeping the customer's payment the same operating on an idea of the customer's applications, the same, their incomes, the same. I just locked in the payment amount. And all we've done is adjust the down payment that we accept on the day of delivery. Yes. So, and it's like, I want to back up because I was talking about twenty as an average. Sixteen is the average. Twenty is we're just looking for four more units a month. And I'm saying that based on if I adjusted that down payment to twelve hundred. And these are the only variables that are you seeing green is the only two levers that we're adjusting. And only you dealers that are listening know what deals you you turn away. And so, you know, if if you can look back on your history from the last year, two or three months and see, you know, if I, if I decreased it by this much and we're able to sell those other units, this is kind of giving you an illustration of what that means over a little bit of time. Right. So I also just, let's pause a minute and talk about something that just anecdotally across my career. And let's go backwards from there. Like Thursday night of this week, we had a dealer who's very successful, been in business almost twenty years. He was able to share with the group. He's really very much like a mentor in this group, more years of experience, larger portfolio, good performance numbers. And the dealer shared that they asked for all the down payment. They'll ask for twenty, thirty percent of the selling price for a down payment. And then they negotiate and they end up, you know, what do you got to work with? And then they make a yes or no decision based on whatever the customers got to work with. Yeah. yeah and that's you know that's that is something that does require a human element and not a you know just or like a a flexible human element um because when we are when we are are boxed in based on algorithms and and softwares and all of those kind of things like this is a no this is a yes Yeah. You know, it's, it's that, that human element can make a big difference. Yeah. And then also we had another dealer appear with us on the podcast. Once upon a time, we won't say the name here, but we had a dealer who appeared who had one of the lowest down payments in our portfolio of, of dealers, you know, in our, in our V eight groups, yet they have some of the strongest collections results. Now we have some understanding of what was going on there, but, they were kind of anomalous in that they had this tremendous collection rate right um but you could see that their average down payment that they actually collected from the customer at delivery was lowest also the number it averaged four hundred dollars or something it was a very very low and yeah i i just know that part of the reason that was the case is because in that case that dealer had the customer reserve cash because they had to use their own cash. The customer had to use their own cash to go do some of their plate transfers and whatever. So that was part of the reason. In a lot of states, the dealer would have collected that from the customer and handled those transfers and plates themselves. So that's part of the reason this dealer didn't see as much down payment at delivery. But the plate still got transferred. Customer put less down out of their pocket and the deal still performed exceedingly well. So I think that's another anecdote. And then one more going way back to way back when I started, I remember working with a very, very successful dealer, multiple locations, had a sizable portfolio. And I remember them saying to a room in one of our conferences that we hosted that he said, you know, we just kind of try to look past the down payment. And I think that's such an important phrase to consider here. And it's really what we're, you know, we're not necessarily lobbying for anything as much as we're showing the math about when we can get comfortable with the idea of looking past the customer's down payment today or being prepared to adapt our model just a little bit in the interest of confirming that the other data that I'm going to share here is going to show that we really have We have enough data here to support this idea that you've got to make the case to me, based on what I see in our data, you've got to be able to make the case to me if you say to me, More down payment leads to better loan performance. There's so many ways we can track loan performance. You can look at severity. You can look at frequency. There's just math after math, right? I chose for today, I looked at two things. I just looked at... I chose to look at down payment as a percentage of the selling price, because obviously selling prices vary. And instead of looking at five hundred versus fifteen hundred down, I just said if the down payment I didn't look at the cost of the car, I'm not really looking at cash and deal. I'm just saying if the down payment I have today as a customer, if we just look at it from the customer side, my down payment as a percentage of the price of the car that I'm buying, that's that's my commitment as a customer. Right. So if we look at that, And then the other number I chose to look at on the collection side to decide what is, what would I pick if I was gonna say, what's an indication that the portfolio is doing well or not doing well? We have lots, we look at several different indicators and now we'll kind of tell a little different story, but I picked one today. And the one I picked was the percentage, the rate at which we collect principal versus the rate that we charge off principal. Okay, so I really heard people talk about that. I don't know what you might wanna call that ratio, but I'm just gonna say it again. The measurement is the amount of principal collected, and again, across, you know, twenty-seven months of data here, the amount of principal collected versus the amount of principal charged off. That's the indicator that I chose to say, what's the correlation between down payment and percentage versus how well the portfolio yields principle, right? How much are we collecting versus how much are we losing to charge off? So let me take folks inside the data of this. Again, we have nine dealers representing that. What was the number? Fourteen million? No, it was one hundred and fifty million. We'll find it again. I've got it right here. One hundred fifteen. One hundred fifteen. I see it on our banners there. But So this I've got the same information to show graphically, but I just kind of wanted to show you the table. The way I approach this is I had it rank the the dealers in terms of their down payment rank, rank being the highest percentage of selling price. OK, so you can see that these dealers range from about twelve seven five percent again across a very long data pool. uh down to about seven and a half percent okay this is the percentage of the sales price that they typically collect right okay and now if you look at that though you can see over here that you know dealer number one who collects the highest percentage of down is also the highest um collector at three point five percent they collect a high multiple of their their charge-offs which is great However, it starts to break down as you kind of come down the track here. Dealer number two, who has the highest, next highest percentage of down payment collected, falls to number eight in terms of their collection results. Okay. And then so on. Dealer number three is at number two position. Number four is a number. So they're kind of, they're mixed here. But if you look down here, like at the bottom, dealer number nine, who's the lowest of the down payments is in the middle. Like there's just nothing there that tells me that. So let me show it graphically. Let's do this one instead. So this is the same data that I just showed, but in a graph. And this is presented kind of different. This is this is Claude, by the way. I'm running this data through AI and Claude is generating some of these results that you're seeing visually. But the blue bar, you can see the blue bar is the ranking of the percentage of down payment. But then you can see there's no correlation there. Again, if you just look at the green relative to the blue, the blue indicates the rank of the dealer's down payment percentage. Okay. With this being the, actually, this is the best percentage. The short blue bar is actually the best, ranked number one. Of the lowest down payment? No, the highest down payment. They get the highest down payment. But then if you look at that, then you start to see the charge-off results. So the green is going to indicate the... The, the actual charge off information. So I think it becomes, and let me just show one more. It's a different way to show the same thing. And I'm going to, this is when you might want to snap a photo of, because I think we need to study this one. I mean, I certainly had to study it a minute to make sure I could get in my head what the quadrants represented. but when you see the hopefully you can see that graph well enough to see the the dotted lines there that divide the quadrant and what it's saying is this is average collections the the horizontal bars average collections so in other words the ones down here would be below average and everything above the line would be above average collection okay So there's only two dealers that are above average. These two are skewing the average even. Most of these dealers are falling down in this range. But now this vertical bar is going to be your average down payment. Okay. So the lower down payments are going to be to your left, right? The higher down payments are going to be to your right. Yeah. So this upper right hand quadrant says, these are the dealers that are high average down and high average collections. Okay. Just got two. Okay. And that that fall in that bucket. So based on that information alone, if you look at the red, you could say, well, for the two dealers that are in that green quadrant, we have three dealers that are in the red. They're, above average down but they're below on collections right so you just got you'll study this and and it'll start to make sense to you as you kind of analyze uh the data in there but but essentially what what i would conclude from looking at this is there's no strong correlation here any correlation that we would have is pretty weak okay so yes i get that i i totally get that that there's it's like all over the place yeah so you know it It it doesn't seem to be down payments do not seem to be a differentiating factor to success of the law at all. I'm based on this squirrel. I really would love to dive deep into the business models of both Florida, too, and Pennsylvania. Yeah. And when you say their business models, you probably mean I was thinking about business approach, philosophy, what kind of right methods they use. You'd like to know. Because The down payment, it's like, how are they achieving a higher down payment? So what is their methodology around receiving a higher down payment? And then again, what are their practices? What is their methodology around collections? Because they seem to have two pretty important pieces dialed in for themselves. Right. For sure. Yeah. Let me get back to the spreadsheet. Cause I think the real important math is over here because now that we understand kind of what we're working with and we understand that, you know, the math doesn't support the premise that down payment, higher down payment means better portfolio performance based on the indicators that Jim chose. All right. So if I, but if I take that information and I go back here over here and okay, say, okay. So if I accept that premise and I were to adjust my model a little bit and just say, I'm going to take a little less down payment. So back to these numbers, I'm going to take twelve hundred down instead of seventeen. And we just kind of kept it conservative and said, if that just translated into four more sales a month, How does that look? And let's just let's go line by line here, Michelle. Let's go. So now our total down payment that we're collecting from customers in scenario one over here is twenty six six and it's twenty four thousand. You're about twenty six hundred dollars less down payment that we're collecting. So again, if you have capital constraints That may mean an awful lot to you. Cash and deal policy will be a big driver. But so I think the bigger part is we have twenty four thousand dollars in scenario two to go replace now one hundred and fifty four thousand dollars we have to spend to replace the twenty cars that we sold. Now our gross profit is up, you know, pay per profit. We have now instead of one Oh eight for those not seeing the screen, I'll try to read these numbers out loud for you. But the the gross profit in scenario one is one call it one hundred nine thousand. And in scenario two, the volume of twenty is one hundred thirty six thousand. Average cash in deal goes from about sixty thirty five to sixty five or two because we're up, you know, three hundred some odd dollars. And then the months to break out is about one month longer that it takes us to recover our risk. Go ahead. So this is also just a single month. And so you start to compound that. I'm like, if you've got the ability to have access to capital to replace your inventory, that So, you know, and there's a lot of different ways of doing that, a lot of different ways of doing that. But that's like in just one single month, that's about thirty thousand dollars more. What are you looking at? And that you're of your own cost of replacing inventory. Oh, the gross profit. It's like thirty thousand dollars more that you you are now you now have on your portfolio. And listen, profitability matters. So part of how we're gaining that profit is every month that just, yeah. And we didn't change our, we didn't change our profit when we adjusted our down payment. Down payment is just how the customer pays for the car, the down payment or the gross profit per deal remains the same. And so we're, we're simply increasing our volume. So again, we're, we're looking just at kind of a single month and how that breaks down. Now let's go down to how this really translates to the business when we start to sell twenty instead of sixteen. And by the way, I don't want to forget to say that my dealers have heard me talk about this in our V-eight environment where Part of this is decided based on capacity, what I call capacity. If I'm a dealer who has the personnel and the real estate and the ability to flow and generate a volume of twenty sales and I'm only doing sixteen, then that just begs the question right off the bat is if I'm under utilizing my capacity, isn't that potentially a problem? So I think our podcast today ends up becoming a pretty good advertising clip for capital providers. Because I think what you're about to see is that when we move that needle in terms of volume, especially if we have the capacity, if we're not having to increase our overhead to produce those extra four sales a month in our example, then what is the outcome, right? So let's go through that. If we did that in month, number one, our payments coming in alone and month number two would be instead of eight, three hundred on those sixteen sales, our payments are going to be about ten three. Okay. Now, At the end of year one, if we continued on that clip, selling twenty instead of sixteen, instead of having one point eight six two in the portfolio, this is just principle. We would have two point four. OK, so that's just receivables. That doesn't that doesn't help us much of anything except it might impact our borrowing capacity or whatever. But it's not money in the bank, but it's right. It's it's paper receivables now. At month thirteen, you'd be getting P&I payments. This shifts over at month thirteen. We're using those portfolio numbers that I saw. I hopped over to month number thirteen and said, this would be the yield off of the portfolio in March. um, thirteen months. And is this if you're compounding every month four more, four more, four more, four more? Right. Okay. Right. So you're, instead of, instead of adding sixteen contracts to the portfolio each month, you're adding twenty. So that just, obviously, that drives the portfolio size. So we, we, we don't look at it in terms of number of account, or number of accounts driving a number of payments. We look, we start to shift it into, this is how much principal we have in the portfolio at the close of month x and that tells us how much money we should be bringing in in the next month okay so now that says that we're gonna be bringing in again one twenty seven uh monthly at uh at the thirteen month mark our year five notes receivable we'll have at the close of five years following the same model all the way through instead of having three point one six at the end of uh five years we would have four point zero eight So in five years of just adding that much more, you're, you're increasing. I mean, like a dollar percentages are, but a million dollars. Yeah. And I think the cashflow too, this is, I'll jump down here because what I looked at is, you know, there's a lot of different ways and it kind of gets out of order here. But if you look at your year two cashflow, so if I just, for, for the first twelve months, I do twenty instead of sixteen. Okay. At the, at year two, instead of bringing in one point seven four seven, I'm going to bring in two point two five six. OK, so that's pretty substantial. So so now the question becomes from a capital perspective is like how how much more could we borrow draw which is another thing we do in our in our va environment is we calculate kind of the the um what do i call it the the basically the the capital uh demand like do you have the performance to support um a line of credit so so it's like so this is part of what would be important math to help that from a gross profit standpoint in year one, if we're doing sixteen, we'd have one point two seven five. And this is adjusted gross profit, which factors in charge of. well like the average amount of charge offs that you have yeah it's just basically using those same conversion rates to say this is how much dealers are charging off this is how much principal they're collecting etc so what it says is when we factor in adjusted gross profit for those not familiar we've talked about on the podcast a few times but adjusted gross profit is really just all of the kind of what you might call the front end profit from your business before operating expenses. So in a, in a buy here payer, it's probably more than front end because you have, you have basically the profit from sales. You have the interest that you collect and then minus net charge offs is really going to give you your net charge off. That's kind of everything that happens in your buy here payer operation before expenses. Okay. So in this scenario, you would have instead of one point two seven five, you'd have a one point five nine. So again, allow me for charge off and we're taking more risk or cash and deal in year one. We need about another four hundred fifty thousand dollars. It looks like in order to produce those extra four sales times, twelve months, you know, so this is you're going to have you're going to consume more cash. Yes. Getting a little less down payment and you're selling more. So you're going to consume more cash. So so we got to make sure we can afford to do that. We got the capital to to be able to capitalize that strategy. But I think what you're seeing is the impact of that is now we're bringing in You know, the difference between in month thirteen alone, we're bringing in one twenty seven versus ninety eight in principal and interest. And so you can see how the money comes back. We just got to make sure that, you know, and so so look, you know, I know that people watch this and think, well, you're not allowing for the fact that charge offs could be going up. Well, the reason I'm not allowing for is because our data doesn't support that. I'm just not. And that's an interesting thing that I really appreciate that we've seen in the last few years, just a lot of this. It's obviously not COVID, but we've seen an awful lot of that. And you hear anecdotally on social media and things where they're like, crying, this is, it's a bad time, this and this, and so you're basically saying, based on the numbers, and that's really, numbers don't lie. They don't lie. And so you can have a feeling around something all you want, but the numbers don't lie. And yeah, so it's like, I'm not trying to, here comes my woo, I'm not trying to say your feelings don't But when I am, I made a switch and I was trying to find that QR code and I killed the whole thing. I will do that for you. But yeah, it, it makes, it does make a difference now. For listeners that are not necessarily in the industry, because, you know, we do get those. We have family members that listen and they're like, I didn't understand what you said. So, you know, we can say we collected that much, but that doesn't mean that's what our gain is for the year. Say that again. So we can say over the course of five years, we've collected this much, but that doesn't mean that's what your gain is. It lands in your pocket. That lands in your pocket because you have an operation to, to, to continue running and inventory to, you know, to put back in and, and all of the different things. And so, you know, when you look at like there's a lot of money running through this kind of a business, but that doesn't mean all of that money is, Right. It's it's it's it's a pretty big and thirsty ecosystem. Yeah, for sure. Yeah. Yeah. I think, you know, there's obviously angles off of all of this, but I think we've covered the parts to me that were most significant. And I would just challenge. anybody who has this belief that they're just just bring us the math. If you believe that your math supports a different and I would just say that, you know, if it's your own individual data, then obviously you have to allow for your own operational approach, your philosophy and collections, the number of team members you have. I mean, there can be variation from operation to operation in terms of how these numbers look. But if somebody's got a larger data pool, I'll invite them. We can have this conversation and dig into it. Because at the end of the day, what we're really trying to do is give dealers access to the right information so that they can be sure that they've got good information to make decisions. This is a challenging business, and this is an especially challenging time for dealers. And I think where you were going earlier is, If, in fact, we're in some sort of a recession, we know for sure gas prices are up. We know that, you know, the dealers or consumers are struggling. And so what is... This is where my feely stuff comes in. Well, I would say, irrespective of the feely stuff, just simple mathematics say, if we... if we have a number of consumers in our market that are struggling and it kind of goes back to the way I've said it to dealers early on is like when I'm working with a dealer, who's brand new. And I've said this to dealers throughout my career and given market, we're going to help a dealer set up a dealership in Dubuque, Iowa. You could sit in the middle of Dubuque, Iowa, and you could draw a circle and say, there are X number of customers in this circle that can do two thousand down in a poor credit situation. if i if i say what's how many customers are in the market that could afford a thousand down well that's a much bigger pie right that's so so it's really the the math really applies here so it's really from a pure mathematics and strategy standpoint yeah you know because i know you're going to the place about compassion and working with people my well my thing is is your level of economically challenged has really not an awful lot to do with your ability or your, you know, responsibility to pay things. Yeah. Because, you know, people, it's like ebbs and flows and everyone is just really, really, everyone is feeling the pinch. Those of us who have more cushion don't feel it as much, but we do feel it. I mean, you know, I, I, I look at, uh, like, uh, food prices, gas prices, good example with all the stuff that's happening, gas prices are, you know, and so we were like, oh, we'll have to pay an extra, um, fifty dollars. I mean, we just filled up the, the, our car. just the other day, and Jim was like, that was this much. And I was like, wow. Now, for a lot of people that are more economically challenged, that's like a make or break. Are we buying milk this week? Yeah, could be. You know, that kind of thing. And so my premise is if we can make our model work and not... allowing or not allowing more bandwidth for our customers, not allowing, I mean, it's like, I have a little bit of a challenge with get as much as you can. Just get as much as you can. When you're managing cash bank accounts and whatever, I can see where it comes from. I think all we're trying to really suggest here is when you can make minor adjustments to your business model. and you can make your services more attainable and you can look past the down payment as that dealer that I talked about from twenty plus years ago. I need to start saying almost thirty years because I started in this business as a coach in twenty and two thousand. But the basically what I'm saying is when you when you can look past the down payment and say, does this customer meet our conditions otherwise? Because if I'm asking them to step into a three year note, I think it makes sense for us to be more focused on what's the likelihood of this customer being successful across thirty six months than the amount of money they have in their pocket today. So if I look at their stability, their income, the payment ratio and those kind of things, and then, of course, down payment is going to matter. I'm not saying down payment doesn't matter, but when we can adjust our model to allow our financing to become more attainable, then we have the chance to increase our volume, which may still be within our capacity. And now we just have to look at where does the math take us? What will our business look like in year two and year three when we make that adjustment? And so I think, again, if you think, well, if the premise is, Those loans aren't going to perform as well. I'm just going to say, just prove it to me, please. Let's just come back and prove it because that's just not what our data says. And so the data is showing that having more down payment is not about loan performance. You're not going to get better loan performance. You're just getting more down. Based on this data pool. Yeah. Right. Yeah. And there are other data pools. I'm just saying our data pool doesn't show. that that premise, if you just have somebody to see other people's data pools. I mean, not just a single dealer, because I know that there are dealers out there that have been tracking for decades. Yeah. But like a pool of. Thirty dollars dealers that are out there. Yeah, because I guess it is true, like you like you've shown. that there are outliers. There are those that they have a high down payment and they collect better. Don't know if those two are the same thing, but they do collect pretty well. It's numbers don't lie. Yeah. Numbers don't lie. We got to, we got to just kind of lean on the numbers until we have something to the contrary. Right. So, so yeah, I think that's where we're at and I appreciate folks tuning in. I would say that let's just keep the conversation going. We'd love to have you get in one of our V eight dealer groups. I'll close with a shameless plug, please. If you're not. Yeah, for sure. Yeah. So we, so I said it was shameless. There should be no shame in. Right. Right. Yeah. Yeah. So anyway, we, we'd love to have you in a V eight dealer group. This is a, these are where the rich conversations happen. People learn from one another. One of the biggest things is like dealers teaching dealers. Yeah. Well, when you can sit in the group with this dealer and ask them the question, how, how do you do that? Why don't, why is the little down payment? Right. And find out how there's work. Right. All right. Well, Hey everybody. Thanks again for joining. It's a Saturday. Thanks for joining us on YouTube. We appreciate that. And yeah, hope you guys have a great rest of your week and we'll be back next week with another. Yeah, for sure. Yeah. All right. Have a good day guys. Enjoy your weekend.
