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. Good morning. Hey, good morning, friends. Welcome to the mountainside in New Mexico. We snuck away for a little kind of spontaneous getaway. We just had a little bit of break in the calendar this week and said, let's just run in the mountains. We got a friend back in Oklahoma is always offering his place and we just finally took him up on the offer and ran up for a few days of uh fishing and recreation and just being in the woods listening to the birds and all that super nice yeah it's been uh it's been good for me to get back to an area that i'm i'm quite familiar with but yeah anytime i can get where i can uh I can trout fish at sunset and have a chance to smell the pines and be amongst the aspens. That's good for the soul. So, you know, it's been what this week has been all about. So happy that you're here with us. Got a couple of updates from our side. And then our topic for today is... Talking about trading customers, especially in a lease-here-pay-here scenario, and that came up, Michelle, because of a conversation I had with a dealer who's adding lease-here-pay-here. He's done buy-here-pay-here for some time, and now he's adding lease-here-pay-here. As a dual thing, or just⦠A dual thing. He's doing it at an additional location. It has to do with the state sales tax. And so he's adding a new state. And so he's looking at lease your pay here for that state to help offset the heavy sales tax. Yeah. Yeah. Well, we know that different states have different laws around when you pay the taxes on a sale. And, you know, so it's going to be in a lease your pay here environment. The taxes are paid as you go. So that's what was really prompting the dealer to to reach out and ask questions about that. And we were talking software and the various things about lease your pay here. And one of the topics was this thing about trading. And so it just, we'll just dive into that. I think You know, when we talk about an lease-your-pay-your thing, I'll just kind of walk you through the conversation that I had with him. And keep in mind that my experience also includes several years of managing a lease-your-pay-your operation. And so we got quite good in the training and the sales process with that. And I think your opportunity... as far as it relates to what we're talking about here today, is that our opportunity in customer retention and leasing is really high. And, you know, it's about creating a process, like getting a system. Instead of just hoping the customer buys again, the lease or pay your environment sort of forces a conversation, which as a salesperson, you know, or dealer who wants to retain those customers, then you know that's that's why that becomes an important you know element and of course a buyer payer dealer could do the same it's just that the structure of the lease your pay here deal really forces a conversation it it forces us into a place where we have to have a conversation with the customer because the lease term is coming to an end we've got to decide what to do about that residual And, you know, you can tie in a related conversation that we had with some other dealers on go who are doing lease your pay here. And we were just kind of exploring that whole thing about lease to own. You know, do you give the customer the option to own when they get to that residual? How does that work? And so these all kind of sparked a conversation. I thought we just haven't talked about that. in some time and probably not in enough depth about why a customer would trade at this stage. So why, I mean, well, my first question is, is how important is it for someone to own their vehicle? Okay. So I think that that trade-in is going to really depend on that because some people are in the process of paying off debt and they're looking at, I would really like to not have that car payment anymore. But there's going to be plenty that just want to know that they have a set amount that goes out every month and are willing to do that. And it really is when we've talked about it, it's a great opportunity when you get to a certain point where most of your expenses, and the vehicle has been paid, and you've done all of the, they've been making payments, six hundred dollar payments for the last two years, and where that leads you to just continue the new, we've always been real advocates of trading someone in, and added about the two year mark, but this is adding another layer. Yeah. Element. So maybe it helps to back up and kind of talk through it as though if you were my customer and thinking back to the dealership that I managed in Lease Your Payer and the way we taught our people to approach this and the way that I did it many times myself working with a customer, would be to say let's say at the point of the buying the car they can say we can say here's the deal you're gonna you're gonna you chose this car you can put a certain amount of down payment of X you're gonna have a payment of Y and it's gonna be for I'll use twenty four months it's gonna be a twenty four month lease term and you're gonna decide at the end of two years whether or not you want to keep the vehicle it's a lease with an option to buy so you don't have to decide about that right now so for example We can wait. At the two-year mark, we'll know kind of what your needs are. Your circumstances may change. You might want a different kind of vehicle at that point in time. So we can just decide about that part then. You don't have to feel the pressure of, owning this car and paying for it for a very long time. So that really became a nice, easy way for us to get there. And I think for today, then you fast forward to now we're twenty two months in. In my example, I realize a lot of dealers who would be listening are doing more like a thirty six month term on their lease. And that's OK. Whatever it is, it's just that all you're really doing is you're stacking that residual at a time based on your own strategy and at what point you want to recover the collateral if you are to trade the customer. But in this case, let's say we're at that twenty two month mark. And it's time to notify the customer, hey, you're you're residual is coming due your lease term is coming to an end it's time for us to get together and decide you know how what do you want to do and then when we meet with the customers like how do you feel about the car is it treating you well is it still serving your needs do you want to keep it if so we just can set it up where your payments will remain the same and you can keep make making those payments until you own it as you said some people want to own it like they where they want to be without a car payment they might want to own it Others will say, you know what, this car's got some miles. I see that you've got that new model out there. Are you saying you could trade me into that car with the same payment and I wouldn't need much of a down payment? And if the answer is yes, then that's a pretty easy transition for a customer. And it's a win for me as a dealer. So this is the part that we have to work through that math is for dealers to see what is the book value of that car at that point in time? What is the customer's outstanding balance? Obviously that's our residual. If we're hitting the end of that lease term and, and, is our policy set up and what this is really doing is sort of systematizing that process whereby we, we have that conversation. It sort of forces a conversation with the customer to let's, let's talk about what you want to do. Do you want to trade? And then if you think about everything we just talked about, if I'm in a buy here, pay here structure, and I'm going to, you know, a forty month buy here, pay here structure, now we're at twenty four months or thirty months. I can have that conversation with a customer, say, hey, what do you want to do? But there's no, there's nothing contractually structured. There's no urgency on their end. And that's actually one of the reasons why, you know, taking it outside of the math, one of the reasons why I like this model. is because it forces a conversation at about two years. And we've talked an awful lot about how much are we communicating with them regardless of where they're at with on-time payments and all of that. Because we've taught... that it's really important to keep those lines of communication open. So this is kind of a forced communication after about two years. Imagine when when you get to that point and you've been in communication, you have a good relationship, you've maybe solved a few problems together. And then that that conversation comes around where it's like it's time to make a choice. How much easier it is for the customer to make that choice to stay in the relationship because you know, it's, if you're building relationships and if your relationship really is the most important thing, everyone appreciates, um, a relationship that they know that there's a level of trust and, and that it's like, it's familiar. Um, and, and that they know that, that, you know, there it's almost like not just trusting, but you kind of like, like this, um, this dealership because they've worked with you, they've communicated with you. And how just how easy that conversation now becomes rather than zero communication. And then you hit that time and they're like, well, you really don't care about me. So, you know, let's pay it off or or I'm just going to turn it in and I'm going to go look elsewhere because I saw this whatever vehicle. So it's just I really do like this model for the built in communication and the built in kind of forcing a decision yeah and it also has an appropriate amount of pressure on me as the dealer to make sure the customer is satisfied at the end of that lease term and will want to continue because if i'm building my business and i think this is among those things where we talk about the smaller the market we're in the more important it can be for us to retain the customers that we win And so if for us to earn them again, it's a little like if I can get a customer who's happy doing business with me and I can provide them a solution that works well, and I can continue to kind of keep them in collateral. It's somebody said to me a long time ago, and this is a little bit oversimplified, but it's like, if the customer will keep me in a six hundred dollar car payment, I will keep them in a car. so it's a little like you know the idea that i'm going to provide them wheels and there's there's also a warranty consideration here because you know in my own experience with the short-term lease uh with the option we did have a warranty so not only was the lease term coming to an end but the warranty was coming to an end which is beautiful it's another really really great conversation because if you've got a warranty and you've been able to communicate all the way through they haven't had the issues um, that, that would normally, uh, take place. So it's, it's like another one of those layers that when you have these layers of taking care of your customer, different things that you, that are, that may not be very expensive for them to do, but you start layering those things in layering and the communication, it really becomes, I mean, gosh, you want this decision to be like, I'd be, I'd be not very smart. to not take this opportunity. There's a lot of significant math here to consider, but I think in that scenario, when you say to the customer, hey, your lease term is coming up. It's time to decide if you want to keep the car, if you like the car, wonderful. We can always refinance it and keep your interest or keep your payments the same until you finish paying it off. And now we can also say to the customer, just remember that if you choose to continue making those payments, then now it will become your financial responsibility going forward. Doesn't mean we couldn't sell the customer service contract at that point in time for the remainder of the deal. So you kind of, in a way, hope that you've had some kind of interaction around that warranty, that it saved their bacon, it saved your bacon. And then that becomes, it's like, remember the thing that that happened and the warranty took care of the thing. So this just all kind of ties together. And so it really is a, is an easy and natural way for us to, you know, you say force a conversation, but it really does contractually where we have to sit with a customer and reach an understanding. What do we want to do? And we do have options, you know, years ago, um, leases were more, um, consumers were more vulnerable in a lease. And the way that leases are written now is in a lease your pay here environment, closed in kind of lease, option to own. Then it makes it easy to be able to have that conversation at the end of that lease term and be able to trade into another car. And I think dealers have to go back and do their own math. But I think most dealers would like to have, in our example today, we've used twenty four months a lot. But imagine that car is going to have greater value, the car that we're bringing back in off the lease term. is potentially going to have more value because of mileage and everything else. We would have a car that has value and we can make it a wholesale retail determination, but we're basically, putting the customer back into the car, renewing that term, keeping a good customer on the books and keeping them. And now we, same thing. We just make another decision in two years time. How do we feel about the car? By then we might have additional kids. We might need an SUV. Life can change. This just gives the customer a lot of flexibility, a lot of options. Or the kids have grown up. They've got their own car. We don't need the big car. We can downsize. Yeah, and get away from the gas, which was a factor when we got these lease things. It was definitely looking at something that was cheaper on gas, you know, depending on what was happening in the market at the time. I would also, making that shift, I mean, obviously you're going to communicate that you're in a lease and that we're switching into a regular purchase. but you don't want there to be very much that changes for for the the consumer so if they're going to continue making payments that it's not something that's that's changed it's it's a pretty it's pretty fluid that they're moving into this or if they're trading it in then it's just you know come on in choose your car but making it um it's doing this too is i think one of the keys is that it's it's if you continue, there's like no change. I mean, you're just going to have to sign some papers or whatever. And again, if you've had a good relationship and they trust you and they, you know, they recognize that you, you care and that you're there to help solve problems and all of those no brainer that just, it, it, I know for me as a consumer outside of buy here, pay here, but if I'm working with a dealership, even if it's a purchase and a, that if there is, um, you know, the warranty and they've worked with you and it's been a really good experience and even, even something like that, like, um, you know, know you you get called in and say hey and i i do though that's the thing is that when you buy from a dealership or whatever they usually will reach out to you after a couple of years and say hey it's time for an upgrade or whatever so and and if they've had if you've had good experience then gosh darn it yeah i really enjoyed the experience i might try a different size or a different you know whatever but it is different um when you've got you know, that environment, like it's, it's one thing to say to send a customer a notice in a buy here, pay here saying, would you like to trade versus. It's time. It's time for a conversation. Yeah. We got to decide. Come on in for some popcorn or donuts and, or whatever. And we'll have a conversation about it. Way back when I first got in this business in the late nineties, I remember working with a trainer and I liked the phrasing that he chose or it really it's the approach that they brought. and and back then they were doing pretty short-term notes but i think everything that we're talking about here aligns philosophically his approach was this and keep in mind back then more customers made payments in person but everything we're talking about here would still apply it's just a question of how we have the conversation with the customer but imagine that you have a customer that's been with you for some time you have a great relationship with them they've been good about their payments whatever and now one day they came in to make a payment. And so they got their six hundred cash to make a payment or whatever. Maybe they're on the phone with a debit card, whatever. But if you could say to them, imagine the in-person aspect of this to be able to say, hang on, instead of making that six hundred dollar payment today, keep that cash in your pocket for just a minute. Let me show you something. And they walk out and show them a car on the lot. It's like your six hundred dollars could be your dad. What if this became your down payment? What if we were to use this as down payment? Isn't it smart? It's so smart. So it kind of drives home the idea of the approach and the philosophy here that we really gain. And you can do it in that buy your payer thing with that sort of approach. Buy your payer or lease your payer. That type of thing works. But it requires a little more kind of finesse, I guess, and technique in order to. It also doesn't, there isn't a forced conversation. It is something, it is more that you have to chase the customer to get them to have a conversation with you. But the premise is the same here. And I think what happens is, you know, we get, and as I've always said, even if the warranty is expiring, customers, you know, been in this car two years. sometimes that car's got a little rattle in the back end or one of the wheel bearings make a little bit of noise or whatever. And so the idea becomes kind of appealing. You know, if I could trade this into a fresher, you know, newer set of wheels with lower miles or whatever, then that can be appealing for them. So I think this whole conversation today was really just about again, we were focused on lease your payer because that's where the conversation had been most recently, but then looking at a buy here payer, we could bring the same approach. So absolutely. Yep. So we can wrap up there. Oh, just want to quick mention that for those folks who were interested in getting involved in our V eight dealer groups, we are really getting a lot of attention around that. And we're happy to fill some seats in V eight groups. I think our new report card that we rolled out has been really interesting and intriguing to a lot of dealers and rightfully so. So if you're interested in becoming a part of our, our peer groups, by all means, reach out. Let's get you in one of our V-A dealer groups. We meet virtually in the evenings. Yeah. Right there. Yeah. So we meet virtually in the evenings and we're putting lease your pay here and buy your pay your dealers in the same groups and asking lease your pay here to kind of adapt their math to a buy your pay your structure. And that has gone well. We're making some some important recent progress and the letter grades have kind of sparked some of this. It lets us kind of see where, where the data isn't quite lining up and with some dealers. And so it's been, it's been really informative. And so I think it's a, it's a great time to jump into a VA dealer group with us. We'd love to have you in there. And it's, it's interesting. Just one quick comment about the letter grade system is, you know, not all dealers are really data nerds, you know, that, that can look at a composite. And, you know, I, I know, um, from your experience working with a twenty group or other, that there's just a lot of data and, and then you have to be able to interpret that data. And, you know, have a conversation around it. This doesn't the interpretation is like, OK, here is how we interpret. Here's where you stand. It's a it's a it's a way for a dealer who doesn't do a lot of deep data analysis to be able to look in a very holistic way at where their business is. And it's it's simpler. It's simpler for them to to. to be able to see the different places where where they could make some shifts and and i know you recently had a conversation with one of the dealers that has this and they're like okay um after i look at this a little bit more i'm gonna want you to help with like how do i get this this um what's the one thing that i can do to raise this grade. And, and it's, and it's really, it's been fun to see the reaction. That is the right question. So let's, yeah, let's, let's figure out which of these we need to focus on and let's go to work on the next ninety days. Absolutely. And good morning, Karen. Hi, Karen. Karen's always watching, but she's a creating relationship. It is. And that's the six hundred dollar a month payment. All right. What else do we have? Okay. Wrap up. We're going to head back to home and get settled back there. We'll be back in our normal rhythm next week. So again, reach out if we can do something to help. Yeah, and again, you can reach out to Jim directly if you're interested in V-Aid. Please go to whitehatway.com, and there is a page there around V-Aid. It'll give you some information, and there's a form you can fill out, and we'll give you a call back. All right, everybody. Thanks again so much for joining, and we will see you next Friday with another fun and exciting topic. That's right. We just won't be here. Right. Darn it. Have a great day, everybody. Thanks again.
