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. Hey, good morning. Good morning, Michelle. How are you? You know, I'm pretty good so far today, you. I'm doing well. Thank you. Why are we so dang formal? I, I don't, I just, I forgot the show was starting, I think. Yeah, welcome folks. Happy Friday. Happy to be back with you on the By Here Paying Morning Show. Just getting back from some travels. Yeah, I was invited to come and speak at the Houston IADA. My first time in Houston, aside from just passing by. through the airport and in a while was glad to be there. Got to see Crystal and Luis from Scopex Pros, you know, somebody we've worked with over the years. They're friends and we've worked with them. Yeah, colleagues and just, you know, consummate professionals and they came over to the event, but they were kind of picking me up at the airport, came over to the event and had a ticket for the thing. Wonderful event. Those guys do a really great job. You know, you see it on social media when they do their stuff. We're on their email list and And they kind of rotate speakers in there once a month. And I was I was pleased to be invited and really enjoyed my time. It's always fun to see people in the crowd that, you know, I've known for some time. We see these new faces and new faces and people that meet at social media. So it was a really great time. Spoke about the subject of AI, but in particular AI. I was supposed to record it and I forgot. He was like, I was going to have it all set up. And then I got there and people wanted to talk. And then it was just like, I was introduced and I was like, okay, well, I guess I'm doing this. Yeah. I just got wrapped up in chatting with everybody. Which is not a bad thing. No, for sure. It's not. I just had meant to capture it because it was an important conversation. It was, I chose, And I told the audience, I said, this is one of three ways I could have gone with this topic. And I chose the one that I think is most personal and intimate, right? So that we could talk about it in the room, which we did. The feedback was excellent. The reaction in the room was excellent. I'm glad to have a chance to have that conversation. We'll find ways to bring that back. Well, and we are anticipating doing a series of three segments that we will release likely on tech watch, which is a podcast that we have developed and we haven't had its grand opening yet, but it will be happening very, very soon. So, right. Yeah. Yeah. So again, thanks to Chris Donnelly and April Hansen for the invitation. Was glad to be down there with y'all. And it was a quick turnaround trip. And now back in Oklahoma doing our thing. So we've got a big subject for today, Michelle. This is a subject that has bounced around. It keeps coming up in our podcast. V-eight meetings and you see it on social media. And I think today I just I want to hit it right between the eyes. We just jump in there and just get it. And just so you all know, I mean, it's well, yeah, I'll get to what that as we get talking about the subject. It's not about this or that. It's this and that. Yeah, it's both. You're right. Yeah, it's a good way to bring that up, I think. So today we're talking about recon and in particular recon bottleneck. And most of what we're going to talk about here would apply for a retail business. It would apply for certainly our buy here, pay here and lease here, pay here people, which is where we hear it, that, you know, you consistently hear dealers say, Recon is my bottleneck. You know, they'll, they'll kind of be apologizing and meeting my sales are slow, but my recon's a problem, you know? And so that's a, that's a, that's thing we've been hearing. That's not a new thing. And it just happens that I come from a background where among the things I did in my time in ownership and management was to address some of this. And so for today I brought some math to kind of illustrate for our viewers and kind of what to really think about and and so in my description of the broadcast i just said look we gotta it's kind of like when there's a dam in the river you know we we just got to go in there with some dynamite and blow it up you know we just gotta we gotta yeah we gotta clear the bottleneck clear the bottleneck and that is um you know how many times we've had conversations about those things that i've heard myself as it's like if i could just get you Two more, five more, ten more. I mean, it's like it would change everything, but it's like it's taking too long to get it. We've been to dealers where it's like you look at their lot of cars that are waiting for recon, and there's a lot of them sitting there. Yeah, and I think before we dive too deep into this, I'd like to back up and even talk about my experience in... twenty groups. And in my experience, you know, keep in mind, when I first got in the car business in ninety five as a salesperson, I was in the franchise world. So in franchise world, you have a service department, sales department, all this stuff. And I moved into sales management. So there was direct interaction with the service department and then being involved in twenty groups, which included some franchise dealers. It's really common. So let me just kind of paint this as a backdrop for our conversation today, because I think what happens is In the franchise world, it's common for, and especially let's break it down even further. If you're a franchise dealer who also has a buy here, pay here division, maybe it's a separate building, but it's a buy here, pay here satellite off of the franchise world. Well, it's common for franchise people to want, or even demand that all of the recon goes through their shop. Okay. So if I'm a franchise dealer and I'm only selling X number of cars, I'm having trouble getting a number amount of gross on the new car side, which we know happens. Then I count on the revenue. in my service department, right? So I want that service there. I want and maybe I give the buy here, pay here a special rate. Maybe I don't. We've seen it. We've seen the gamut on that. But the main premise is that franchise dealers want that car to go through their shop. It's understandable, right? They would want to keep that internally. And even if they pay themselves a high rate, they'd rather pay themselves than somebody else. Understood. Okay. Where it becomes a problem is when that policy starts to stunt our growth, our sales, our ability to sell. If in the same breath, we're saying, well, we lost the tech, and so we have problems with some of our lifts, and so we're stacked up, and we're running behind, and so our sales are slow. Mm-hmm. Well, that's just something that if you said it one month, I'd understand if it was a temporary thing. But if you find yourself saying it month after month after month, then it's time to relook at the whole process. And I think part of the breakdown here is sort of a, it's a mindset. It's like a trap that we get in our mind that says we, we need to recondition our own cars because one, we want some control too. We know we're going to pay less in our own shop than we're going to pay externally. True. There there's truth to that. Let me tell you what's also true. Um, missing sales cost you in a big way yeah yeah and the the i get uh most dealers that we've talked to it's like that they're watching where pennies are going i mean they're they're they're watching those things and so it's like well we should be able to do this and be able to keep our costs to this and it's just like it's do we need to add another bay do we need to to be able to accommodate it I know we've put multiple dealers, we've helped multiple dealers start up their business and not all of them have a recon. And so this is kind of a hybrid of what it is that you did when you were a dealer and um you know dealers that have have a bay that have have people there to work on on their um on getting things ready for the front line and you know i think there's a couple of elements in here too i i uh that i hope that we get weaved into it is um If you're going to do your own recon, are you also doing customer repairs? I'm glad you brought that up. Yeah, because that will be one of the quickest ways to slow down what's coming out of recon. Yeah. It just will. I'm glad you brought that up. Let's talk about that on the front. I've got numbers to share and I would encourage people to hang in here because the numbers that we're going to talk about today are going to be extremely relevant. They're tied back to our V eight dealer groups. I've actually got data through April. We're recording this in mid May. So we're actually working off very fresh six month averages. We got real numbers on selling prices and gross and cost of car and all that stuff. So going to get to some real numbers but i think the the relevant parts and i'm glad you you touched on that part custom repairs we meet dealers and they may have i'll give a quick example they have a service department with six lifts and they have they dedicate two of those to customer repair which is is fine that's that's better than Some might do. Yes. In theory, that's what they have. But if they've got two cars up on lifts waiting for a part and someone's got an emergency, now it's spilling into where it's just it does. And so it requires a pretty high level of consistency and knowing that it's a commitment to that policy. Yeah. Yeah, let's take the slow approach to this thing, because I think there's a couple of things that I don't recall that you and I've really broken these down in any kind of specificity in the podcast in the past. So let's get this stuff on record. Like my own experience, I was a dealer myself for about seven years, but outside of that, I also managed some operations. And some were doing the, you know, I've had dealerships where... I did a complete overhaul of a dealership that went from selling junk cars to selling quality cars and pretty good volume and had a great customer service process and good collections. I mean, there's a story there and there's a recon element to that. There's a dealership that I managed that had a franchise store at the center of it and had four buy here, pay here stores all within about a twenty minute radius of the franchise store. Okay. So there was that experience. And that one, let's talk about for a minute, because when I arrived on the scene as a newly hired general manager, they didn't expect me there. And you had four stores and they all had their own little processes, right. For how they did things. And, and they, that dealer did not. mandate it didn't require that the stuff came through the franchise service department okay so they had a little bit of flexibility but there was a scenario where when i showed up there was one shop and keep in mind these all four of these slots are really underperforming in terms of volume they're doing you know they're selling six to eight cars a month or whatever and And they're in good markets. They should be selling much more. And one of the things I identified was the recon bottleneck was that we had one shop, for example, one location where the dealer themselves insisted that all the stuff go to this one mechanic because he trusted this one mechanic. You're grinning because you know the story. Well, I know the story, but I also know the layers, too. I mean, that's like a whole other trap. isn't it it's a whole nother trap yeah we can we can break that whole thing down but i think the the relevant part of this one is that that manager who um that manager was insisting that all of the recon go to that one this is a different layer i'm remembering the story now let's don't even say where it was there's stories there's angles here that are and it's a whole different thing yeah but The recon part of this is I go to that building because one of my jobs is go in there and first thing I want to do is go in and figure out where all the assets are. Where are the cars? Where are the stuff? Well, because that was what your job was to go through and make sure. So early on was my job was to kind of let's figure out where all the stuff is, assets and whatever, bank accounts and all the stuff. And in going through inventory lists and finding out that we have twenty cars in recon, as an example, and fourteen of them are sitting at this one shop. And I go over there. They're just sitting. So I go over there to this one shop and there are cars that it's clearly been sitting there for weeks. Right. There's there's easy ways. And you all know it's like if there's a lot of dust or there's a lot. They just they. Yeah, it was clear. They've been there for a while. planted yeah you know the the the tires have brought they have dry rot you know where they're sitting whatever it's like you could just tell these cars have been sitting in the car and then in the dealership by the way is underselling right they're definitely not selling much and they're waiting on cars and this and that well here's what can happen so let's this is why i think it's important for us to tell the expanded version because dealers have been there and they're going to hear this when i say the things like mechanics are going to come to them and say an external mechanic hey i'd love to have your work you know if i could if i i do you a special rate on labor if i could get all your work uh-huh which i mean you know hustle yeah well dealers can fall into that it's just that what you find is you can end up just like what this was because that was the scenario here this guy's got all these cars stacked up and we're at their mercy and what incentives do they have to turn our cars out any faster than all the other cars that are coming in Unless we're just standing on top of them, you know, breathing down their neck every day for cars, get me cars. And they're an independent shop. So we have to have some incentive in that, right? To be able to, we have to have them, the shop, have some incentive. So I'm going to offer today some very specific ways to address that. But I think the main thing we're here to talk about today is the difference of internal versus external. Okay. Yes. So, and it has, I mean it, it can work. um this and that it can work this or that right i mean that they can work as as long as you have policies that are keeping inventory flowing yeah yeah so i'm going to come back to i'm going to talk about exactly how we solved that thing and not everybody was happy by the way in the deal except the dealer principal who owned all four locations because suddenly sales volume went up right and business started happening and so We did solve that problem. And so I think it's important for people to tune in and stay with us because I'm going to share with you exactly how we solve that. And I think this applies. It doesn't matter if you're a store selling a hundred a month or selling ten a month. The premise is the same. And so I think it can work for most anybody. Buy here, pay here or retail. okay so we'll come back to that another one that i worked with a dealer who was struggling with that small shop didn't have a lot of lifts didn't have a lot of techs and they were dealing with customer repairs right they're dealing with higher mile cars and so suddenly what can happen is i'll just exaggerate it here is you suddenly can find that you you had a good month last month you sold thirty five cars and they're high mile cars and now suddenly A lot of those customers are back in the shop needing help with this or that. And so suddenly you look up and your techs are busy handling customer stuff, which can be a limitation on sales because suddenly we're not reconditioning our own inventory because we're wrapped up in customer repairs. Not a new problem, but it's like we have to have solutions because if we can't afford to service the customers that we have and still sell cars, then that's obviously a problem we need to solve, right? And so this is what we're gonna talk about today, also solve some of that. But I remember working with that particular dealer down South and I said, if you were to just today make a policy that says, customer repairs can go to an outside shop. It can be the, the, the, um, choosing of the customer to the choice of the customer, wherever it's convenient for them. Somebody they know and trust. It can be a friend or family member as long as they trust them. And now the dealer I asked him to think about, think about that customer repair. It's just a financial matter. It's just, it's an account matter. I'm going to support that customer after delivery and I'm going to support them financially. Now, this will be true whether I'm doing side nodes, whether I'm doing it as a goodwill repair, whether I'm doing it through a service contract or warranty. It's all the same. It's like, it's a financial matter. I'm still supporting the customer and I'm just getting out my paycheck and writing or write my checkbook and writing a check to be able to keep that customer happy, get their problem solved and get them back on the road. So that's an uncomfortable thing for a lot of dealers to think about because one, I'm going to go out and pay somebody else to do a water pump at a hundred and twenty five dollars an hour where I could do it myself. So this is the thing. Go ahead. I'm going to throw you a curveball. So if you had to choose between recon and customer repairs with relationship, Okay. In mind, which would you put where if you had three base? If I had three base. Yeah. With custom repairs, I would just have an advocate as you and I have talked about. The repairs would all be done outside. The custom repairs. So where you're keeping the, the, the. thread the connecting thread to the dealership is through that customer advocate which we've we've talked to um you know some dealers that we've worked with they have them where they're there to help facilitate um getting the cars repaired it's not that they're not going to sit in their lot but the facilitate as in like okay so it's going to go here and we're going to get a check on it and and And that they're keeping that kind of conversation going. So you're keeping those, that communication layer open. It's, it's really a question of who turns the wrenches. Okay. Who pays for it. And then back to the thing about, in your example, if I just have three lifts, look, if I, if I tie up my lifts doing customer repair, which I don't, let's stop misunderstanding i'm going to take care of my customers oh absolutely customers are going to be supported yeah okay so this is not ignoring my customers this is a matter of who turns the wrenches and how the money moves okay okay so that's all that really is i'm still taking care of the customer in fact i could probably make the case that my customer gets taken care of faster By me just saying, you pick a shop that's available that you trust and we'll approve the thing. You know, there's a process where we can quickly approve it and we're going to write the check and you'll have your car fixed. And the other thing I like about that is if there's a problem with the car not being repaired right, that's between the customer and the shop now. I'm just a lender. That's absolutely... Because that's... Okay. Yeah. Yes. And it's different when it's outside of your shop, then it does become a different balance on who's responsible for paying for this kind of thing. No, and I'm glad you're, I want you to poke holes because I know our dealers, I can imagine our V eight members listening to this. And when I have our meetings this month, they're going to want to poke holes. Anything they heard me say here, because I'll share this recording because I I think it's central to what we do. But let me go a step further. If I choose to tie up my three bays with handling customer repairs all the time, I can end up with happy customers. But if I'm not still selling cars, I'm just going out of business slowly. I'm just going out of business. It's a question of what pace I'm going out of business. Because if I can't continue to produce sales and produce cash flow and profit. It means you have to buy a high mileage car that's ready for frontline. And that's not easy to find. So you'll see the numbers when we get inside what dealers are spending on average to buy a car. It used to buy a heck of a car. Now it buys a high mile car with a lot of problems. And so they have a lot of recon problems. Yeah. I guess we can start to show this, but please help me remember to get back to those things that we touched on because there are some other scenarios that we need to kind of wrap up. So let's look at scenario number one. So this is just a PDF of a spreadsheet that I put together. I'll show the actual spreadsheet in just a minute. So for those not seeing the screen, if you're just listening by audio, this is... This is actual data from our V eight dealer groups. And I chose to just reference that the groups that have members of one hundred to five hundred accounts. OK, so that's pretty representative. I mean, a lot more dealers in that group than dealers with more than five hundred. OK, so I think this is pretty representative of a typical, you know, small market dealer or whatever or small volume dealer. Average selling price. Fourteen eight oh one. This is not numbers that we're just pulling out of air because they sound good. This is the average selling price of the dealers that you're pooling. Correct. This is based on April data. Okay. The average acquired purchase cost. I have that in gray because I calculated that. We don't break that down. We have some data in there, but we don't show it in our summary. Okay. But what we do have is the average total reconditioned cost of seventy eight, fourteen and an average reconditioning expense. This is both parts and labor. We don't ask them to separate it and be where we're simple. We want simple and fast. And so we want so we've got sixteen hundred fifty four dollars average recon. Again, I don't know how much is parts and labor. So I'm piecing together different things here to arrive at something meaningful for our conversation today. That means an average gross profit comes in at sixty nine. Eighty seven. Call it seven. And for those of you who are not are not buy here, pay here dealers or those of you that are new to buy here, pay here. Sounds like an awful lot. But but there is there are averages of people that you don't collect the entire thing because, you know, you're shipping to another company. car or any number of things. The dealer's taking a tremendous amount of risk. They do take a lot of risk. They're financing a customer who hasn't shown a lot of financial responsibility in the past. They're doing, they're putting actual cash at risk. And so they're, they need to make a substantial profit for that risk. Okay. It's reward to risk. The average payment came in at five hundred and twenty one dollars. This is on cars that were sold in that six month period. So average payment across all customers and all dealers was five hundred and twenty one dollars. so now what i did is i had to back into how much the the recon that we show above of sixteen hundred fifty four dollars is labor and i had to back it way down i think it's much higher than this but let me explain okay before we get there i if that was all labor or if that's just well so let me kind of go through all this stuff um i because i i didn't have a choice here i don't think i can to to make it relevant based on all the information we have i did a poll a while back and i asked dealers and we went into the retail group and kind of polled dealers and and what was coming back was an average of about six hours of shop time per car That sounds reasonable. It sounds high to me, but that's, that's twenty twenty six versus one. Yeah. Well, especially if you're keeping your pricing the same as it was before COVID. Yeah. Yeah. That doesn't that that because the car costs have gone up, but people can't afford a more expensive payment. And because cost of car have come up, this dealer spending an average of sixty one hundred sixty dollars to buy a car at the sale. And that. that sounds like quite a bit of used car, but I'm just telling you in today's prices, you're buying cars with miles and problems and maybe some light body damage. And, you know, you're, you're getting some cars with a lot of times. They're not the prettiest cars that are coming through the, the, uh, the auctions, you know? So obviously the, the, the, the tech, uh, because we don't differentiate between body, you know, mechanic turning wrenches or a body shop, you know, spraying paint. We're just labor parts. That's all we're really looking at is dump it all in one bucket. But if, if we, if we have that and we say, and I backed this down to say, okay, with, if the, I had to back it down to how much would be if I use an internal labor rate of it varies, it's all over the place with our dealers. But if you have, if you just use for an internal labor rate, Then I had to get that down to about three hundred bucks in order to say that was equivalent to about six hours. I needed to have that be about three hundred dollars total labor. OK. All right. So what that would make then your recon thirteen hundred dollars of the parts. That's right. So that's what I came up with. All right. So yeah, parts is the other is the rest. So again, I have six labor hours. You can see their arrows pointing to this next. I'm going to show you the next slide, but I've got, I used a hundred and twenty dollars for an external labor rate. I don't know what it is, but it varies, but we know what we pay when we go to a mechanic locally or whatever. So it's just, this can be your Firestone. It could be your Mr. Muffler. It can be Joe's shady garage. Yeah. Shade tree garage. Don't send your car to shady garage. If he does good work, if he turns out the car. So here's, here's the thing. When I go to this next slide, what you're going to see, and we may have to reposition our screen here a little bit, Michelle, because this is, um, This is smaller because it's just a larger version of the same screen. But I just ran a scenario that said, okay, if I could sell three more cars a month by sending vehicles to an outside shop... Go keep going. Cause it's just like, I can feel puckering. Yes. I want to pay a hundred dollars an hour. Yeah. Yeah. But I'm, I'm starting to lose patience with it. Frankly, this is why I'm saying we've got to hit this thing between the eyes. It's like this math is just, you can't really hide from the math. And math doesn't lie. It doesn't. Yeah. So, so now back to, if I do three extra sales a month, doesn't matter what our volume is like i just picked three units i mean you can go back and say ten percent increase five percent increase in sales at three units that is let me get this expanded where i can see it better myself uh that came to almost twenty one thousand dollars not surprising we're seven thousand dollars a unit we now have twenty one thousand dollars of additional gross profit in that month because we sold three extra cars The additional payments at the five hundred twenty one dollars times three more customers paying next month means we're going to bring in another fifteen hundred sixty two dollars next month in payments that we wouldn't have had had we not sold those three cars. So and here's the big one that you're coming to the next number. And so how much additional labor costs if you sent it out? How much? This is not even additional. This is total labor costs. So see the arrows? Three additional units. times six hours per unit times a hundred and twenty dollars per hour at the external shop means i shelled out another twenty one hundred sixty dollars more than you would have it had been in house no that's a total okay so and if it had been in house you can cut that roughly in half okay so it's about one month's worth of payments for those three units that that yeah so so you can think about profit you can think about cash flow but you can simply say if dealers are saying my recon my shop is my bottleneck okay so then you have to ask yourself okay why wouldn't we pay more externally and i don't maybe it's maybe the shop is forty five minutes away you can sit down and add all these costs to what it takes extra to go pay a hundred twenty dollars an hour at the town over because they can turn out two more cars a month all right and so so let's keep it simple here if so let's go back now to the story about how we solve that and i guess let me finish this map i I do have a quick question. Slava asked, include details in the vehicle. So I'm not sure exactly what it is that you mean by that Slava, but, but it's, you know, we, we do know that this is something they're buying at the auction for about sixty one. Yeah. Sixty, sixty one hundred separate analysis. So we just lost the light. So it may just be, Now we're going mood lighting. It's okay. No, no, no. Anyway, we, so we have, we now know that that, that profit return, if I'm going to spend an extra two grand in labor, because I'm just, these are cars that are fixed elsewhere because I couldn't, my shop couldn't get to them. Yep. So I spent an extra two grand externally in labor to get these three cars ready. And now I brought in another twenty one thousand dollars of gross profit. So that profit ROI is nine hundred and seventy percent. I'm getting nine times more, almost ten times more. on my money in gross profit if we want to measure it that way if we want to measure it in cash instead yeah you filled out more cash than you brought in yeah i didn't even look at down payments and the sales on this i just that's a different thing yeah but but it takes about one point four months in car payments to recover the extra labor that I put in. And this is also saying you don't have a floor plan. Yeah. Because if you have a floor plan, every, every car that's sitting is costing you even more money. And so for a lot of people, if they're, if they're doing it in house and they've got a floor plan that sucks, then they, I mean, it's sixes. Even if they don't have a floor plan, it's costing them money. It's just a question. It's their money versus the floor plan company's money. right it's like they're it's their money that's you know the floor plan they have expenses it's yeah it's just a different line item that's it that's it you're still paying it i can promise you when i went to that dealership and there were fourteen cars sitting it was costing somebody money for those cars right and so that's why i'm saying it's it's uh we can stop sharing that and take that off the screen But I think that's the relevant part that I wanted to have a chance to share. And I've got in spreadsheet, we can go into the actual spreadsheet and change those numbers and change the math. But I think people have enough math. They have enough representation out here to see how they would do that math for themselves. But let me go back to the scenarios where, let me tackle the one about the guy who I said, let's just write checks for the customer work outside. Okay. Okay. So suddenly, because of that, the techs were happier. The morale thing was solved. And how many of you dealers out there recognize that having a morale, taking care of morale in your own shop? Right. that helps keep tax around for one thing. Yeah. So why it's frustrating for a tech to be in the middle of a car and maybe they got it up on the lift and they're waiting for, you know, whatever delivered. And now they're being pulled off of that because the, the, They're being asked because there's a customer with a problem and obviously we're trying to make our customers happy. So we have to move a car off the lift that's incapacitated and we have to make the lift available. So tax can get frustrated and we lose tax, right? So this can be among the things that can be solved. But I can tell you back to that one dealer, what that one dealer told me is my tax were thrilled. When I told them that we were shifting that policy and we're going to start doing customer work outside. Why? Cause that meant they could focus on this. That meant they didn't have to, to be involved in the heat cases or whatever, the unhappy customers and the pressurized calls, the calls, the calls. Cause that is, that is one thing, all the dealerships that we've gone and we've talked to people where they were, uh, they have their own lifts. It's like dealing with customers calls too. It's like, where are we at? What's happening? And it's, uh, You don't have that if they're just doing recon. If they're just doing recon. Yeah. And I'm selling more cars. Yeah. My cars are ready. My front line gets full. I'm able to sell more cars. Now, you know, you can end up like the Lynn Hickey Dodge where you sell so many cars you can't service them. So that's a story for another day. We talked about some of that. Oh, we did. We had some fun on the drive. Yeah, for sure. So there's a whole story we've touched on before about Oklahoma City dealer Lynn Hickey Dodge. You can look up. There's a little history out there. But But bottom line is you sell so many that you can't really support them. And we're not advocating that. We want to support these customers. So as I said, everything that we're talking about here does not preclude providing excellent support to your customers. Yeah. I'm simply just saying that... If we're so locked in on this idea that we have to do the work in our shop because our labor rate is less and we want to save that money, we need to also allow for the fact that what's costing us? Well, it's like you're, what are they? I can't, I'm going to murder this, I'm sure. But it's like you're tripping over dollars to save pennies. I thought of that phrase too. Yeah. It's like, so you're stepping over something that is more cost effective to save pennies. So I think, so let me go back to the thing about, let's talk about that one dealership that had fourteen cars stacked up. and that at the outside shop that's a whole nother can of worms but yes so let me just tell you what happened i went in there as a general manager with the authority to do this kind of stuff and i told the guy i told that that tech he was a business owner and had a full shop there and i said i need to get the keys to xyz i gave him a list of about eight cars i need to get the list the keys to about eight cars i'm taking them elsewhere He was not happy. My understanding was I'm getting all the work. I said that that understanding has been nullified. We're not doing that anymore. And so I was able to pull those cars out, take them elsewhere. And then we implemented with him what I had done, you know, in other places, which was. Yeah, I love this. We're taking we just it's a great policy. Everyone listen and take notes. Yeah. So basically what we did is I just said, you're going to get two cars at a time. And when those cars are ready, you can have two more. Mm hmm. And he didn't love it. He didn't love it. But you know what? Why? Why didn't he love it? Well, you can answer. You can guess what his answer would be. Because it's like if you can get two cars done in four days, you get two more cars. So there's another part. So if I can do this, let's just pick any shade tree mechanic that's forty five minutes away. I love there's a shade tree back in Utah that I just. loved them so yeah the name is like that means something to me yeah so yes so it's like the uh the idea here is that you you tell the the shop and again i think it's best to pick an example where somebody's clear across town mm-hmm somebody you're not using now you go sit in there and you talk to him say i want to start bringing you two cars i'm i'm joe's used cars i want to start bringing to you two cars at a time and uh and we will have done an assessment and so when we bring them to you we're just really asking you to either replace the water pump or we're we're just hiring you to do a job and we'll accept the responsibility if that doesn't fix the problem we're not going to be giving you a hard time They need to know that and they need to come trust that. I'm just hiring them because what I'm really still doing is I'm still assessing the car at my shop. I need somebody on my team who can give me a good thorough assessment, that that can say here's your hit list yeah yeah that we've done yeah like again i think we're we're gonna run along here this morning but i think some of this stuff is important to get recorded because i think this is the stuff that um in my own work we definitely solve some of this stuff that i'm hearing dealers talk about and i think i'm going to tell them exactly how to solve it okay So you go in there and you just tell them, look, I'm going to bring you two cars. I'm going to hire you to do this job. And I can either supply the parts or use your parts. Some of them want to mark up their parts, whatever you just work with them. But it's like my approach would be this if and again, I'm picking a shop that's forty five minutes away. And so I'm going to go over there and I'm going to bring them two cars and I'm going to say, we want to hire you to do this job. Let's talk about how you want to do parts. You use your parts, whatever we charge them on my account, get them delivered to you, whatever. We're going to work that out. But then when you get them done, I'm going to bring you, I'm going to come pick them up. I'm going to bring you a check and I'm going to bring you to, I'm going to bring you two more cars. Okay. And I can promise you that that shop over there, especially the ones that are outside of town, they're a little bit slow. There are shops out there that are hungry for this work. Everybody talks about shops are busy, but not everybody's this busy. And if this guy is slow and they can only turn out two cars a month, that's two cars I wasn't getting anywhere else. They were just going to sit on my asphalt anyway. And so they weren't going to get done. And we deal with dealers that have... very small amount of asphalt and we, you know, so this is this is a solution for for that as well it's like you don't need a ton of asphalt when you're turning no you do not need a ton of asphalt so what you're doing is you're sending these cars to another shop now initially with and i can tell you we had one that i worked with a dealership group that we that one that i overhauled and we we just completely reworked that thing rebranded it all new new location new people and just kind of completely overhauled that thing and one of the things that we settled into was We got the best shop in town. Everybody said they're the best. And they started making a priority of our work. Why? Because our checks were good. They knew that if they turned their invoices in by five o'clock on a Monday, that they got paid by noon on Tuesday. Every time. We made sure they had their check every time on Tuesday by noon. And they got to liking that. They got that again. That again, that takes it's like discipline. Yeah. As a dealer, are you disciplined? You know, discipline is a big deal. But are you disciplined to do that? Because it will pay dividends. And what you can do is the same thing I did with that shop. When I went in there, I didn't say, hey, I got a lot of volume over here. I want a better labor rate. Nope. I went in there and I said, yeah, I'm going to bring you two cars. And when you finish them, I'm going to bring you to. Yeah. Yeah. And I paid their rate. And I continued to pay their rate. And I continued to write them a check every Tuesday morning. And they were thrilled. And then one day I went in there and sat down with them after we had started doing a pretty steady volume. And then we talked about a labor rate. See, okay, now that's something that you've encouraged dealers that are new to this is like, don't negotiate the labor rate. Give them at the beginning, give them what their labor rate is. And as they see and they can start to trust because we are in the trust business, this is the white hat way. It's like, you can trust this is gonna be happening. That's when, that's, and I love that because it's like, okay, then they can start to run their numbers and go, This makes a lot of sense. And after you've done it for two or three months, yes, I've been paying a higher labor rate, but suddenly I'm getting a lot more cars reconditioned. I'm selling a lot more cars and I can go sit down with Mike. I'm going to call Mike and I'm going to say, hey, I'm going to bring your check over on Tuesday at lunch. Can I bring sandwiches for you and your whole team? And would I be able to sit with you for thirty minutes and talk about this? Amen. Right? Amen. And I sit down with them and I say, okay, so can we talk about this labor rate? You can now see we're going to do a lot of volume. You can see that our checks are going to be good every Tuesday morning without having to say all that stuff out loud. He knows that. And so we're able to just negotiate a rate. And maybe we renegotiate every six months or whatever. But I'm saying, you just saw, even if I have to pay the hundred and twenty dollars an hour, I'm still ahead. I'm still... doing sales that I wasn't doing before. Yes. Right. Yes. And so this is, I'm still using my shop and I'm still running my shop at full capacity. Right. And I'm using my shop to do assessments and I'm letting my shop cherry pick the jobs that makes the morale in my shop even better when they can say, okay, I'm going to work on these four, you know, in the next two days and I'm going to pick the jobs and I'm going to send these jobs that I don't like out to somebody else. They're thrilled that your own shop is thrilled. So I think this is the part that, we've touched on this here and there but it's like we just you know this is a problem that's solvable now in your market you have to drive a little bit and you may have to have a driver that goes you have two drivers that go drop off pick up let me tell you what else will happen these techs and these mechanic shops they would start to get to the place where they were hungry enough and say hey we got two people we can drive them over to yeah they're done can we can we can we drive yeah so they would drive them over you can even negotiate that with them after You know, after doing it for a little bit, you know, there are a couple of pitfalls. Well, one, you know, you'd mentioned pay the rate. Don't negotiate at the beginning because it is about building trust because there are there are like the one that was getting all of them. It's like, I'll give you this killer rate if I get all of them. Well, no. You could get that killer right somewhere else after having that kind of track record. The other thing that we've seen, it doesn't happen all the time, but especially if you've got a GM or someone that's helping out a friend by giving them the business. Oh, yeah. you want to be like you know we talk about theft we talk about a lot of that just be really careful um that it's that it's not an under the table deal yeah um because that does happen yeah and and and you know but i'm not saying that that happens with everyone but just be careful of that kind of thing because that's just a pitfall in taking it outside of the dealership but the benefits of doing that far outweigh the risks or the cost. Yeah. And you, you described a lot of it is solved. If I'm doing my own assessment, you know, you become vulnerable when you send a car out that, you know, needs three hours of labor and the shop over there says, well, it actually needs this and that's five hours of labor or they're just charging. Five hours worth of work when it really just needed three. So the key really, from my mind, a way to limit what you're talking about is to make sure we have a good, thorough assessment on the front end. And look, I've been there and I've told shops and when I take it in the past, I've got a car that has it's not running like it's got an engine problem. I can't drive it. well until i get it running and get it out on the road i may not know that it's got a front wheel bearing that also needs to be replaced or you know a cv axle or something i'm not going to know that until i can actually drive i get that that's my risk i'm taking that chance when i step into it this is why i said one of the words i used early was an accurate and thorough assessment when because there's another one that's uncomfortable it's almost a whole separate subject michelle We never have to recon the car. Oh, my gosh. Oh, my gosh. Oh, my gosh. And that has been like I. Yeah, it's it's been a curious thing to me where I will see. It's like they want it to be off the line. Perfect. And it's a used car with a lot of miles. And Jack Carter, one of the things that I really enjoy, I love how he does a walk around a car a lot of times. And he will point out every scratch, every dent. When he's putting it on. When he's putting it out on his front line. He will talk about this. It's got this. It's got this, it's got this, but it runs well and it blows cold. And so it's like if it, you know, you can leave a dent in the side panel, you can leave a crack in a bumper if you need to. You can leave... uh you know uh something that is not exactly perfect on the interior yeah i've i've watched dealers like repair leather and i'm i'm just it's just it's because they want it off of the off of the the uh again a different subject for a different day the part that i was referring to when i say you never have to recondition it i'm saying you never need to write the first check to spend to even detail. Yeah. You know, you probably would be beneficial to, to recondition or to detail the car and send it back to the auction. But what I'm really saying is if you get a thorough assessment on a car, And you say this car and be disciplined about it. You can say, I have a maximum reconditioning policy of X. It may be labor hours. It may be two thousand dollars at whatever it is. And if you do the checklist, a thorough checklist on this car and it comes back in excess of that amount, you can choose not to start. yeah you can send it back to the house yeah you may lose five hundred eight hundred dollars in wholesaling that car and you will be money ahead take that cash and buy something that's another one of those looking out further than your end of month or whatever and listen it's painful i've been there especially when you're smaller shop doing small volume it's painful You made a mistake. And so own it. Don't make them a second mistake because I made a mistake. I bought a car. I paid too much for a car. I overlooked some problems. Okay. Don't make a second mistake by now throwing a bunch of money into that car. And now you look up and you have a lot of money in it. You've got three weeks in five weeks in this car, still not on a lot. It's like, we just, these are hard things to measure, but it's a real problem. direct cost to your business it's stunting your sales and you see what you're missing in terms of gross profit by not addressing those things i think it's just important for for dealers to get comfortable with this idea that you know get a thorough assessment spread the work around go find the shops yeah it's not easy yes you're going to spend more to to get them to do the work but you're going to have more cars available for sale and you're going to sell more yeah you know and so this is the part that we just got to kind of let go with some thinking that that has us trapped in this idea that we have to run every car through our own shop in reality yeah yeah well and uh it's we're kind of wrapping up the the topic today but if you need help um please feel free to call or text nine oh three eight one six oh two one six or reach out to jim at jim whitehatway.com um you know that's yeah i i can't tell you how many times jim will just answer a question too but um yeah so so yeah just feel free right yeah or send us hey that's another idea uh send or text a topic something that you would like to see um us talk about or my phone number's still right there on the screen well you can if you do a comment on the streams but you know that's that's all okay i'm always open to dissenting viewpoints uh yeah yeah great conversation thank you so much it was fun for me too so it's Friday everybody enjoy your weekend I know a lot of you guys are going to be on the lot and it's we know that you make a choice to listen and we really really appreciate your time and consideration so I hope everybody has a fantastic rest of your day and we will see you next week. Enjoy your weekend. Thanks so much.
