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 from Oklahoma. Good to be back in the studio. Had a quick run to Texas. Had a friend go in the hospital after getting bucked off a horse, which that's the first time I think I've said that about a friend. Yeah, he breaks horses for his hobby. Not, not like in a round corral, like what you think about, but he, he, you know, works with young horses and, and he took a spill, I bucked him off and he busted up a bunch of ribs and he's lucky to, he's going to be walking away from it, but he's going to be very sore. So anyway, that kind of. I don't know if any of you out there have ever had that happen to you. I haven't, but man. So shout out to Tim, get yourself better. He's going to have a slow recovery and kind of a, he's going to be tender for a while. Yeah. But anyway, we're, we're back in studio, just been kind of a abbreviated week here because of some of that travel. And so we're, we're back here and kind of catching up. We're getting ready for, we have a big meeting in Denver next, not this Sunday, but next Sunday. Right. And you know, it's, it's going to be a big meeting. Yeah. Yeah. Sure. Got our team coming together. Yeah. Excited to have that done and a nice opportunity for us to kind of share what's happening. And yeah, and kind of give everybody a rundown. In Denver as well, the opening of NIADA's annual convention and expo starts on Sunday as well at the Gaylord in Denver. Yeah, it's a really nice resort out there. I do know that, I mean, you can still get tickets, but I believe the Gaylord is sold out. So if you're still thinking about coming to the, or going to the conference, there are hotels in the area. Yeah, of course. Tons of them out by the airport. So yeah, maybe we'll see a few folks out there that starts on Sunday evening with the reception and then sessions are mostly Monday wrapping up on Wednesday. So all good. We can dive into our subject for the day. This is a big subject. We kind of touched a little bit on it a couple of weeks ago when we talked about the news, the news that's affecting our industry. And this was a like this is an expansion on a few of the points. And as we were kind of going through the, our talking points, Jim's like, man, we could just have an entire show just on the first time. So we'll try to, we'll try to, you know, clip along. So y'all are, are not being overly inundated with, with our thoughts on all the things, but it's, it's some important stuff. I mean, there's some really big things that are happening. um, in the industry in, um, in, uh, yeah, federally. And, and for the, the sub subprime auto industry, the, you know, we know that the car's rule was kind of suspended. Um, and everyone thought that everything was going to be, um, was going to be, you know, like, Oh, that's, that's, that's a cakewalk. Yeah. It's like, there's nothing to worry about. And we talked a couple of weeks ago about how the, the lens has shifted. and multiple other places. Yeah. And I would invite, you know, if you're a typical, you know, mom and pop dealer, I would say, hang in here on this subject because at first read, you might think, well, this doesn't really apply to me. This is kind of, and there are pieces in here that you can say, yeah, this definitely doesn't apply to me, but you're going to, if you stay with us, you'll hear how it connects the threads to, this is really how it probably affects your operation like next week. absolutely absolutely so let's uh let's dive in shall we so yes uh first of all fed report deep dive right yeah so you yeah you so what we've got in fact i'll just go and share the link i got it uh up here so it'll hopefully when we share that it'll go out to facebook and linkedin for our folks who are tuned in there the link to the actual article at the fed reserve first of all just a quick note aside we we're we're learning because we don't pay a lot of attention to politics but and, and kind of even, you know, government structure for me. We have friends that go like, how can you not? Yeah. We pay attention to the news, what news clod or, or chat GPT wants to give us based on what we're looking for and what affects us. Yeah. And if you see something big in social media, you go investigate and make sure you know what's going on. But otherwise we, we, i find it i don't miss the news at all but anyway this is um the news i'm really referring to is it's not even news it's more just kind of political structure or governmental structure is that the fed reserve is not even really a part of the federal government it's a private thing those of you that pay attention they know that that it was it was formed like in the twenties yeah um and it just it It was, yeah, there's a big backstory. If you want to learn about how the Fed was created and what their overarching powers are. Yeah. So I think one of the first things is mentioned in here that I'll just say now, the Federal Reserve is not your regulator. If you're a buy here, pay here dealer, it's not like the Federal Reserve is going to knock on your door and have a problem with anything you're doing. That's not what we're saying here. what we're saying is what the federal reserve was they they put like five economists on the job of going to investigate the buy here payer to come back and report what is it how is it different from the rest of the auto industry and what should we know about it and what triggered it was the tricolor collapse right and so this is very much so the reason you as a local mom-and-pop dealer don't um Don't have to be concerned in the same ways because you didn't just cost Chase two hundred billion dollars or whatever, two hundred million. And, you know, you might have people out there saying the tricolor story is old news. It's not. It's just it's kind of like the catalyst. that's that's shifting a lot of pieces and they're continuing to shift yeah and they're going to be pieces that affect you and i will say that as we ran this through claude you know and asking for updates and it found this article and said this is really relevant to your audience it also i will say a lot of what it did is you know in in a contextual way that Claude and AI can work. It knows a lot about white hat way. And so a lot of what it fed back to us was kind of filtered through that lens. Right. So I think that's part of why we want to dig into this. I'll also say right off the top that Most of the data, because they really leaned on data, these economists, and what they went to was Equifax. It says Equifax credit panel data. So let's stop right there for a minute. Okay. If everything we're about to talk about is coming from Equifax credit data, then what that says is it only represents this much of the buy here, pay here segment. Those of you who are in the industry, those of you who are not in the industry, so just you all... Many buy here, pay here dealers choose not to report to credit agencies. Right. And they also choose not to do, there's a lot of them that choose not to even pull. Do a credit pull, right. So like Jim said, I don't know what the percentages of dealers that actually report credit I did a poll in Facebook. I didn't think to look it up, but it's on the low side. It's certainly less than half. But it's still a representation of those that do report credit. We don't notice a huge difference in business models. Or all of the other things with people that report credit and people that don't. Right. So, yeah. Yeah. So I think the thing to remember, though, is irrespective of what data they use, they use what data they had available. And they were able to identify in that data the difference between what we'll call subprime and deep subprime. Okay, so they're going to put buy here, pay here generally in the deep subprime market, right? So there's some indication in their data that said in the last seven years, deep subprime is less and less of a percentage of the portfolio. Where it was around seventy percent in twenty eighteen, it's now down to just above fifty percent, according to their data pool, is in a deep subprime. So can you define the difference between subprime and deep subprime? Yeah, they're they're basically the number was five hundred forty credit score. So, again, mathematically is how they're defining it. It's based on your your your credit score, credit profile, five forty, anything below that, which is interesting to me, is considered deep stuff. I mean, we we have our own conversations about how. how subjective that all of that is anyway. But so that's by the numbers, by the data. Yeah. Anyone with under five forty is then generally the main customer for by pay here. And this article was showing that there's been a shift from that. So, yeah, I would guess that if Ten dealers are listening to our podcast this morning. Let me say this right. nine out of ten of them don't even have credit score in the top five of the things that they would look at to make their decision yes or no and approving so yeah the federal reserve is not looking at job time right residency that's right right that's right they don't have that kind of data typically at least not of the applicants that are by your parent it's a good thing to to to use it absolutely is so we're not saying that to say that it's irrelevant we're saying that when you when you see the conclusions that they're drawing um there are both positives and negatives and again i don't i don't think that it means that anybody's going to be clamping down on you from a regulatory standpoint yeah because they don't have any really the fed doesn't have regulatory authority over buy here pay here but what it does is it is it affects our banking industry, our lending industry pays attention to this. They pay close attention to this. And so that's a big place where, okay, you know, we talk to dealers every day who are like, all right, I'm wanting to find new money. And there are plenty of, well, not plenty, Banks are scrutinizing things differently and, and understand too, that a lot of the, the lenders within our space are funded by banks as well, but it's, it's kind of that shadow money thing we talked about a while ago where it's like, so even a lot of the, the people that lend money within our space are, are also affected by these kinds of things because their money a lot of times are coming from financial institutions right by big banks sure yeah i think um you know you obviously can jump to the conclusion that this is going to affect pricing for dealers who are shopping for capital could affect access and there's a lot of things to talk about and think about there but i think that the key things that from the findings let's let's talk about what really happened it sounds to me like what i understood from the thing michelle if you spread it differently let me know I think the the Senate or Washington asked the Fed to investigate. The Fed put these economists on it. They did a report for the Fed and they fed that back to Washington Senate House to the Congress. Which is where Senator Warren was like, we need to do a deep dive. Yeah, she was already investigating. They were already sending letters and they're investigating. That was really about repo practices, kind of a carryover from COVID and the high repo rates. And so there's different things at play here. So the high repo rates were already happening before we got news about the tricolor collapse and the whole fraud thing that happened over there. So so that is our alleged fraud, we should say. I guess it's still under investigation, but that is that's the part that I think we want to be watchful about. And I think as we As we see this, irrespective of that, you've got two big banks, Fifth Third and Chase, I think, are the two banks that got hit to, you know, big, big numbers. Most everyone has heard of Chase. Yeah. Fifth Third is one that I didn't hear about until we went into the second. I have, being in the buyer-payer business, they've been around. They have a pretty large footprint, and they're more active in kind of the subprime sector, maybe. Yeah. but they they got stung to the tune of you know hundred million plus um you know with the color thing so it's cause i'm sure they reached out to the fed and say hey help us you know let's figure out what's going on here and uh and and i'm jumping around here in terms of material as these things occur to me but we can we can go through it more methodically michelle but i think the uh the thing that occurred to me is as they went through that they learned that actually the buy here pay here The lenders who are loaning into buy here, pay here, actually were suffering less than traditional. Previously. And then traditional because they had baked into their underwriting higher numbers, whatever, lower advance rates, all the stuff. and so they were actually seeing less default outside the big collapse of the tricolor thing they were actually seeing less so there are there are silver linings here um but i think what it also highlights is this thing about how buy here pay here dealers approach the business okay so what this really highlighted and some of what it talked about is it's We recognize, and this is saying in a very specific federal study of five economists who were paid well to perform the study, I'm sure, they're saying what we've been saying from before. We recognize that this is a segment where the consumer is at a disadvantage. And they go on to say these dealers in the buy here, pay here segment are fulfilling an important high risk service. A lot of people want to dip their toe in that. And they went on to say they're charging a higher interest rate, which is justifiable because of the risk profile of the consumer they serve. All good news in terms of supporting our business model. the thing they went on to say and this is the worst part where it gets a little bit um subjective i suppose you could say is that the question really becomes is if we know the customers are disadvantaged do we take advantage or do we create tools and solutions to help them be successful so this is a really you know kind of a long extrapolation from What the Fed really, their report, go in there and read it. We shared the link already. Go find the actual report of the Federal Reserve and you will see what I'm talking about. It is drawing that conclusion that, you know, this doesn't say that, oh, dealers aren't predatory. That's not what the report says. It says, Dealers are operating in these kind of margins. This is the customer they serve. This is the profile of the customer they serve. And it's really drawing that conclusion. And I think that what I would jump to based on what I'm seeing in the report is really in summary for me, it's like dealers who operate with integrity, you know, higher degrees of transparency and have solutions to support the customer. are going to be the ones who will have the best access to capital going forward. Well, and one of the things that was pointed out was those that are already doing that are better positioned to weather the storms. Not just to access capital, but they're better positioned to be able to weather the upcoming storms that are happening. And we're always coming across some really interesting data from our work with V-AID and things like that. And so it's interesting to see this report come out that we can like turn around both of them and it's like where are the where are the overlaps where where do things tie and it's really a testament to things like transparency things like you know, all those ninety seven letters that went out were about untransparent sales practices. And that's that was that should tell dealers an awful lot. It's like, are you being transparent with your customer up front, not during closing? Because that's, you know, everyone can say, well, it's in the it's in the it's in the the closing documents, which we've talked about this. How many of you read your closing document packets word for word before you sign them. Right. Absolutely. And, and we, those of us that have the, the are fortunate enough to have better credit than five, I mean, when's the last time with a car loan or a home loan that you, you don't read them. So say it's in the closing packets and you might brush over, they do the synopsis stuff. This is about letting them know, On the front end, exactly all of the terms, all of the fees, all of the everything that you could be experiencing, which is, that's a good thing. Yeah. Yeah, for sure. Let me read one section from this. This is talking about loan characteristics that they identified through the experience process. And again, this is representative of a sliver of prime versus subprime. So the average buy here, pay here subprime loan came in at fifteen four oh two. That sounds about right. Yeah. And the payment was four oh five. Which is low. And a fifty five month term at twenty five point three nine percent. So that the fact that they say a fifty five month term at those interest rates, you're talking about this is the this is the bigger operations. I almost never see fifty five months in our V eight circle. not for buy your pay here, you might for a new car. But this is calling it, they called it a buy your pay or subprime loan. Okay. The average traditional subprime loan. So they're differentiating between a subprime and BHP versus traditional. It says the average traditional subprime loan has a seventeen four balance with a lower payment of three fifty a month, a sixty four month term, longer term, lower payment and a lower interest rate, fourteen point six percent interest rate. Okay. So it says the BHPH customer is paying more per month on a smaller loan for a shorter term and at nearly double the interest rate. So what it says is that's a compressed affordability window. Explain to me what you understand about that. So what it's basically saying is it is compressing the note, making the customer pay more. So if the two customers have the same income, the affordability factor is harder. It's harder on this buy here, pay your customer. right okay that's basically the conclusion that one would draw because you're you're asking the customer to pay a higher payment on a it's a higher interest rate shorter term which you know we can we can get inside the math of all the one day and look at all that but i think the the key point here is that it it is harder for the customer to afford okay It were a buyer pay yourself a loan. Um, and it would be interesting to find out like there's an average buyer pay or subprime loan and average traditional subprime loan and where those credit scores, um, shift from one to the other because, um, I, and I don't know if, if, you know, if we were to look at, uh, let's say the local Chevrolet used car section and they're doing a subprime loan. what are their qualifications to sign off on that? And what are their charge off rates? Because what we see with the big guys is they flow in and out of the sector, don't they? What do you mean by the big guys? The capital? No, like the dealerships, the I think they're in it. Their underwriting may adjust and how deeply they write paper and their volume may adjust, you know, based on the barometer of the industry or whatever, but, and the economy. But I think the typical, you know, mom and pop main street dealer, they're over there slugging it out. But they're, you know, like I've always said, the dealer that we work with the most, the reason they're doing twenty-five sales and not twenty-six is because that's all they can afford. Right. They just only have enough capital to do that much business. And so they adjust their underwriting, you know, in their deal structure accordingly. So this whole thing kind of inspired me to look a little deeper into deal structure. And I've been working on some of that already to make a comment about because it's a compressed affordability window. It's exactly why collectors and customer relationship practices are important. the most important variables of your portfolio relationship practices relationships yeah because you're you're asking the customer to pay more and if you don't keep in touch with them basically then you can expect a higher failure rate right so that's part of what's happening there so now uh kind of moving into you know how dealers manage their risk right so again this kind of reference i don't see it here and what i'm looking at but i think what it referenced was drive time um america's carmart and i'm forgetting one but there were three large dealership groups that it referred to and and so i think a lot of what we can conclude here would say okay so they're they're looking at that segment and calling that buy here pay here and while it is true you know by definition buy here pay here they're doing their own self-financing in-house they're a much larger much more sophisticated corporate environment And so they're the ones who are more likely to have the credit reports representing the credit data, all that kind of stuff. You're going to have that. But I think the conclusions that can come from this are still meaningful. So let me kind of dive in. One thing it said here is that a customer paying twenty five percent who doesn't make it twelve months, that's not profitable for the dealer. So it's really I think you could I could read into that sentence that when we don't allow the customer When we don't position the customer to be successful, then we suffer, potentially our lender suffers, customer suffers, because that deal is not profitable. And we tied up time, resources, energy, and doing the deal, and it didn't work out. What I did appreciate about one of the things that talked about the higher industry is the Fed frames this as a legitimate risk pricing mechanism that the Fed said it's legitimate that they're doing this. There's a good reason why they price that way, because and I appreciate that because it was looking at it, you know, this report going to Congress and that that it was unbiased. Right. And it's like this based on the math. And I appreciate that an awful lot. And there were we'll probably talk about it in a bit. But there's there were some questions that were posed to NIDA and and trying to get some deeper information from some of these committees that are looking at based on this report and other things. that that um were addressing these kind of things right um and it was it was they referenced jeff martin and his response yeah yeah which is good and it really spoke to a lot of the same things you know i wrote an article for texas years ago about this thing about i think i call it something about one farm boys you know oh with it imaginary um cfpb a lunch a lunch conversation with the cfpb like if i got a few minutes with the cfpb here's what i would share with them right and what i would share which is really that You know, when you think about the you might look at that rate and think it's predatory, but what you need to really examine is what it costs dealers when they do experience repossession, the cost of the repos. Yeah. And so now dealers have also experienced this period, you know, through twenty four and twenty five. Now, you know, here we are having this conversation in June of twenty twenty six. So those who hear this later. you know june of twenty twenty six we're coming off of two years of heavy repo losses we watch in our v-eight dealer groups interest coverage which is the amount of interest dealers collect relative to the amount of net charge-offs they experience in the same period And we're seeing a lot of dealers be negative in that number for the first time. In other words, their interest, even at the high interest rate, is not covering their losses. So there could be a lot of factors there. There could be some reasons. And the dealers may bear some responsibility there in their underwriting or whatever, or the way they structure deals. But the reality here is that what it's telling us is that that has a correlation to everything else that we're talking about. And what it also goes on to say is that It talks about deal structure that and this is a clue to me. It says fourteen percent of BHPH subprime balances or loan balances in the Fed sample are on weekly and biweekly payment schedules. That that that's an indication that you're dealing with corporate level buy here, pay here, because in Main Street, that would be a much higher number. The mom and pop. It's a much higher number. And most of the people that you that we work with through VH. have a bi-weekly. You see a lot of bi-weeklies. Yeah. Yeah. You don't see as many weeklies now, but certainly you see way more bi-weeklies than monthlies. And so that number would be a lot higher if they stepped outside the, you know, the data pool that they were working with. So it's just an example. But I would say when it comes to these interest rates, you know, and the way that they do it, it's like that whole, or not the interest rates, but the deal structure, even the bi-weekly structure that dealers do, This is Claude's interpretation of what was stated. It says the structure isn't punitive. It's calculated how these customers actually live. So in other words, it's trying to provide a structure that will make it easier for the customer to manage and give them a chance to be successful. You know, it also cited that it helps the dealer's cash flow, you know, among the reasons that a dealer would do biweekly. And let me just, you know, as a former dealer myself is like, if a customer is struggling, I would not, you might not want to wait until you're thirty days down the line. It's just that kind of time sensitive in our sector. Like if you're fourteen days, then you're going to know in a shorter time period within, you'd rather know within seven days of a biweekly thing than thirty seven days of a month. Because if it's thirty seven days, your customer's not going to be able to catch up. And so it's like then you're looking at Repo or you're looking at thing other options that are just really not they're not ideal but it it can yeah and that that makes an awful lot of sense that especially when people are living on that tight of a budget because you know we've talked before about the the week was it last week of the week before the K mm-hmm and how how we can say that the economy is getting better for everybody. It's not for everybody. It is for a sector. Right. but it is not getting better for the lower angle for the cave. And that is our customer and some others. And so they're, it's getting harder for them. So yeah, I, I appreciate it's like this. It makes sense that it would be a biweekly, not necessarily a monthly payment because it makes it easier for, for dealers to be able to mitigate their risks and help their customers get back on track. Then if it were a monthly man, that's, i we watch that that is that is that is dangerous right dangerous waters to do a monthly payment and buy your painter yeah it can be um yeah we have dealers who do it successfully but it's um it's it's a different animal it's something to be aware of so let me just kind of touch on one point here before we move on this is kind of things that dealers would know i think but for anybody listening who's not deep in the world it says um BHPH loans are sixteen point six times more likely to be an active rep and active repossession than traditional auto loans. That's probably not a big surprise to most of our dealer listeners. It says it says in Q three twenty twenty five, approximately five percent. of BHPH balances were in active repossession. Compare that to half of a percent for traditional auto loans. Well, I mean, this is about like the repossessions that are that's the number that are going to it's going to be watched more carefully. And it's it's it's the number that will get attention. Talking about Senator Warren, This is the data point that Senator Warren and the media are going to focus on. So buyer payer dealers need to be able to speak to it clearly about, you know, the repossession practices and just where their numbers are. Yeah, I see here. I'm cleaning this up while I'm thinking about it. The third dealership that I failed to mention earlier was Byrider. So it's really interesting. It says match names from regulatory corporate loan data and identified over two billion in loan commitments from major banks, including Drive Time, Buy Rider and America's Car Mark. So they stated that that's that's understated. And they know there's more than that. Right. And so, you know, basically the Fed knows repossessions are going to be high because the risk is high. But we understand and we know that a repossession. is bad for everybody. Right. And so, you know, cause the customer loses transportation and it's not just about getting the car back, but it's the expense of getting the car back. And then what are you going to do with the car? And, you know, we, we hear horror stories all the time about a car, you know, someone's someone skipped payments and they, they didn't take care of the car and they get it back. And maybe the, the customer is angry. that they know that they're gonna get repoed and they trash. It's like, it's an asset that is a hundred percent lost. It's not something they can fix up and put back on the market. It's like, this happens frequently. And so, you know, it's, repossessions, the cost is a lot more than just the asset in this industry. It's having to clean it up. It's having to hire someone to go and fund it. There is a lot that's associated with it. Jeff Martin's response to Senator Warren, he referenced a lot of that, which I think is good. It's kind of like what I said about he referenced this idea that... He's a representative of the industry. I know that Jeff comes from Texas, and Texas has at least at the state association level, a high percentage of their members down there are buy here, pay here. So, you know, at the national level, as far as their association members, I don't, I don't know, but certainly buy here, pay here is, is a, you know, a significant portion of the membership of all independents. And so it's, he, he, he gave a thoughtful and, and, you know, a good, um, response to the senator and asking about that and i think it's just it's it's an example of you know we're trying you know we're trying dealers are trying to solve this problem and and you know obviously some dealers are doing more to help the customer be successful than others yeah and that's like that's the whole premise of white hat way And when we go around and we talk to different dealers, there are a lot of dealers out there that got into the business for very good reasons because they came from that or they've experienced firsthand what it's like to, to go through having that kind of, of credit profile and needing a car and how, how, Um, they, they make it a point that the, that the transaction is, is performed with a lot of respect, you know, a lot of understanding, uh, that it's, that it's, it's because it is that there's so many dealers out there that there is something close to their heart somehow to, to this sector. And, um, and so they're trying, they're trying to help them be successful. They're trying to give them the best opportunity for success, whether it be through their payment, the longevity of how long you're making your payments, or the interest rate. Yeah. Or even helping navigate them to a car that might not be all shiny. Right. but it will help them be successful. Yeah. And when you use the word successful, I think this is part of where my work has been, you know, as a former dealer myself and somebody works with a lot of numbers and I'll throw in the AI mentioned, like, this is what's happening. You're seeing it like with me right here, like in the last and recent weeks and months, we're, we're going to help dealers in a way that we haven't been able to help in the past to define success to be able to know what is, you know, you say, what is successful? Well, I want to be successful. I want to help my customers be successful. And I have more to more of my loans work out well, we can better help them understand. And I think this information also kind of supports that, but it's like, we, we gotta learn what it is that we, We really have to think about if we begin our business with the end in mind and we really had a great conversation with you last week around this idea that what would it take for you to get a better rate with your lender? Yes. Right. And that's the big thing is that so many dealers are out there. If I can shave. a percentage if I can shave off of what their money is, how, how it will help alleviate some of the stress that they're experiencing. And, you know, we, there people are dealers. You're like, how do I do this? Well, there's a couple of ways when you're talking straight line, it's like you, you've, It's cleaning up, making sure that you've got really, really clean data. In VA, we've had even collecting data with the members long enough that is now becoming a playground in a way for Jim to go, all right, what is the data really showing us? What is it that works? And that's the whole report card that we've been talking about too, that it's like, here are some, there's numbers behind it that are really, really strong. So let me read something else that this kind of what it calls a surprise finding. Okay. The Fed found that these BHPH credit facilities were actually lower risk. So credit facilities, meaning the lines of credit, I touched on this part earlier, but let me read what it actually said. were actually rated lower risk than loans to traditional auto dealers by the banks themselves. Okay. So because banks built in structural protections over collateralization, low advance rates, right? A loan guarantees special purpose entities that made the loan safer despite the underlying customer risk. So, so it's not all bad news here, but you have to ask yourself of those banks who did have more favorable experiences in the buy here pay here segment you know are they because this this part this part that varies they shrink and contract this thing i've seen is all the years i've been in the business i've seen money expand and contract uh access to capital wall street all of it like it comes and goes in this second almost you see some ebbs and flows and what we're seeing right now is going to be a tightening and i think the reason the reason we're bringing this conversation now is there are some real good clues in this report that are going to give all of us a better idea what is it going to take for me to one get access to a line of credit so i can grow my business and two have a favorable rate that doesn't just strangle me yeah and my business right so that's the part that we we want to watch so that that was all working well but the whole tricolor thing really kind of broke some things and it caused everybody to recoil and say, we better have a closer look at this because this is, and this, that's a really uncommon thing. But when you have two big banks get stung for big dollars, it naturally is going to have a ripple effect. And we've covered that before, but this study just really digs in and says, this is what we see about how dealers operate in that segment. Right. Again, Claude and ChatGPT, they're familiar with our entire library of podcasts and other things. And it said, the Fed spent months studying buyer-payer and essentially produced a document that validates what White Hat Way has been teaching for twenty-five years. This is a high-risk model that serves a real need. and the operators who manage it with integrity with structure and with relationship relationship first principles outperform those that don't this is this is uh you know basically ai looking at this this um this whole study and it's like Yes. Yeah, you're right. There's another statement here that's kind of the same thing. It says, dealers who will maintain and grow their capital access are the ones who can demonstrate clean books, transparent reporting, legitimate collateral management, and a values-based operations framework. So values is a key word in there. And I think, you know, it's a little like, I used to say this, and I think I said it in that article, like, It wouldn't be too hard for me if I were an examiner, it wouldn't take me long to get inside an operation and see the difference between predatory or not. I'm just, I'm just telling you, it's, it's a pretty clear line in my mind and it would be for a regulator. I'm not saying that a regulator is showing up at anybody's door tomorrow, but I think there's a pretty clear way to tell whether, you know, pick, pick a buy here, pay your operation. are they being predatory or not? And we can save that for another day, but I think it's pretty easy to spot. So I think we want to make sure, because we know that's really what they're targeting is predatory. They're not targeting the by-year payers. I think the senators who took a moment to read this report would say, okay, they need to be there. They serve an important purpose. And there are some that are probably being predatory in that segment. I think that's the other conclusion. So I think it creates an opportunity for those going forward. And this is what I say for the dealers who will be there in six months, in six years, I think what this is starting to paint a picture of is who will be standing, who are the most likely dealers to be still standing in tomorrow's buy here, pay here, you know, subprime financing segment. And I think this is why this story becomes important. So we've urged people to go, you know, read the entire report, make sure you know kind of what's there and what's relevant. Again, for our Main Street dealers, we don't think anybody's knocking on your door necessarily looking for, you know, to look into your books. We do think, though, that this provides a clue that helps you know, how can I run my operation today, tomorrow, next week in a way that positions me to make sure that I'm not in that group who is ultra scrutinized. If you take a minute to scrutinize my operation, you're going to see that we run a clean operation. We want to see our customers be successful. And now you're going to have better access to capital. And so, like I say, Mike, go ahead. It shows to me too, through all of this, how important it is for a dealer to understand their numbers. It's not just in, because that's part of that transparency. And when you're talking about banking, they want to know in a very clear picture. what your business model has done and whether or not it's a good risk. And it's alarming at times when we work with dealers that don't know their numbers and aren't willing to learn. um and and you know it's like the only thing they're doing is looking at well my bank account balance and i can pay my bills every month and i can pay myself and i can you know help help my kid in college so i'm good it's like oh Yeah, for sure. Yeah. Well, and that just leads me to one thing we can mention in closing is that we won't see dealers join our V eight dealer groups. The month of June here will be the second time that dealers have seen their report card. And we're starting to really analyze business models side by side. And so I think this is a clue that's going to allow dealers to go beyond this idea that I like my model for these reasons. Yeah. And I'm going to be asking dealers, why do we like that model? Why have you chosen to this cost? Sometimes it'll be limited by capital or whatever, as we said. But I really want to hear from them because now as we start to see the letter grades and see dealers lined up against one another in terms of their business model, now we get to ask, and say well you you know you like your business model but you're not banking as much money as the dealer next to you yeah so let's talk about that you know so uh go to whitehatway.com and um there's a v-page there there's a get more information um from there if you just want to be able to kind of look yourself um if you want to uh actually have a conversation with jim um Call or text, eight one six oh two one six. We can give you some information about that. And it's never too late within a month because you can get in and then participate in a observe before you actually are able to plug your numbers in and then see where they compare. And really, really valuable. We've gotten some great really great feedback about how powerful that grading system is. It's meaningful. Yeah, it's meaningful. And dealers, some dealers are going to be uncomfortable. And I think that's a good thing. I think it's good to have some analysis on that. We're tweaking the calculations in terms of what it does to make sure that it kind of allows for all the elements that are part of a business model. But yeah, the first read was really relevant data. So come be a part of it. Good conversation. It's Friday. It's the summer. It's kind of cloudy here. We're not going to spend time out in the sun. Enjoy your day, everybody. We're really glad that you joined us. Those of you who are heading to Denver next week for the national conference, have a great conference. Let me make sure before we close up, we've got Hugo Sanchez expected to join us next week. We may have to pre-record on that. Hugo will be in touch about that, but we, we have Hugo coming. Yeah, that's right. Michelle's birthday is coming up. She's going to be. Yeah. All right, everybody again, thank you so much and have yourselves a great weekend. We appreciate it.
