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, everybody. Happy Friday. I'm like, I woke up when we started looking at this morning. It's like, why does the camera seem so yellow? I feel like I look a little jaundiced today. So yeah, we might have to, you know, I, yeah, we'll, we'll figure something out. But yeah, Friday. Friday. I think you mentioned that part. Friday. You're just not really ready. I'm just, you know, I'm really excited. It's going to be a great Friday. And, you know, today we... So to let you a little behind the curtain of Jim and Michelle. Oh, boy. Here we go. Well, you know, we all know that we do like coffee time. It's a ritual. You know, family party, we're talking about what rituals or what things do you do to, you know, make sure that you... stay connected and all of that and so coffee time is one of the things that we do and so it's like usually the first hour plus of the day is we are enjoying coffee and enjoying conversation and um we try I would say it's 80 of the time there is no um no devices so no phones no laptops or whatever And so, you know, it's just kind of that connection time. Well, when we get ready in the morning, we like love to turn up music. And so it's just blasting. And I'm, you know, Jim's shaving and I'm like just enjoying the music. I said, we should dance more. He's like. I'm trying to concentrate on my morning show. I know. And I'm like just dancing and having fun. I mean, how many of you out there, once you get married, and we actually didn't when we dated, but when you're younger, you go dancing. You just enjoy dancing. And then when you get older, it's like, meh. And I thought, you know what? You're speaking for you. Okay. Then I'm speaking for me. If, if, if y'all have different experiences with, uh, with, uh, you know, dancing as a couple or individually, good morning, Adrian. Um, uh, you know, let us know. But so I was like, I choose, choose to create more opportunity to dance. Yeah. Nice. Good. The end. Thank you. Behind the curtain. Well, good. That's good for me. That'll be fine. Yeah. What do we got coming up? We got V8 meeting on Tuesday night. We've got our dealer roundup coming up on the 18th. We've got... Neo User Summit on the 23rd in Las Vegas. We will be there. Please stop and say hi. We now have seats available in V8 for all levels of accounts. So regardless of your business size, we have a spot for you now. We've added enough groups, and we're probably going to add another group in May. But just know that regardless of your size of business, if you want to get involved, it's affordable, and it's a good way to get started. Comparing numbers. Yeah, I mean, $129 a month. Mm-hmm. to, you know, be able to look at your numbers with somebody else. And, and I see some of you guys, the rich conversations, 129. It's like, that's dinner. Okay. Um, dinner with a couple of drinks, nice bottle of wine. That's yeah. That's kind of, and you know, yeah. So I, we're, we're going to segue into the topic, which is like, you know, money and that kind of stuff. And we do live in a different paradigm as anything else that we need to talk about before we, um, So last night we went to bed and Jim's like, you get to choose the topic. And I was like, yeah, I'm going to bed. Yeah, if we wait too late, we get tired. We don't have the brain power for it. So he wakes up well before I do. And I know that he's just going to go like, I have the topic. It's about inspiration. We have a long list of topics for the future. It's a matter of choosing the one. Well, y'all have seen me before. Frantically writing down things because then it goes on this list that sits on our counter and it's kind of like, here's the list of topics or things we've been thinking about. And a lot of times that there's ones in there that it's like, it's got an asterisk next to it because we need to have, it just would be a much richer conversation with a panel or a guest. So this was one when, when, uh, I was like, Ooh, that wasn't on the list. this is going to be so we talked about it during coffee time this morning Jim threw some stuff up on the on the TV and something he's going to share and I was like I married a really smart man. Oh, well, thank you. You're welcome. I, I, this came about because I was having a conversation with a client. We've been working with some clients who are newer to the business and some of the stuff that comes up. It's really awful to see yourself on, you know, camera and go, Oh, there's a hair at it. Okay. I know. So the, the conversation recently was around, you know, payments and income and, you know, underwriting overall. And, I was reminded of something and this is definitely the start of a conversation again that we want to bring panelists and others to this conversation going forward, because what prompted the thing for me is like thinking about how to help a dealer look at fixed income as an example. One of the things that always used to come up, I was sharing with you in my own business was when you had fixed income folks, the challenge became, you know, maybe you'd show that they had enough income to support the payment. The problem became that they didn't have enough spare change to, to handle any repairs. And of course, if you, regardless of how we're going to handle repairs today, we can talk about service contracts and warranty and as is with side notes, all the stuff. Like the reality is, That's either coming out of my pocket as a dealer or it's coming out of the customer's pocket or some combination. And when you've got a situation where the customer cannot afford those repairs, they're just not room in the budget for repairs. That's what really prompted me to kind of do this math that we're going to show you today. Well, and that is, that's like, it seems to me that that's two questions, right? And both of them should be talked about at purchasing. But one of them frequently isn't the way that that real life kind of questions. And, you know, we we we talk about, you know, making sure that we're within a certain payment to income ratio. and all of that. And then, you know, do we have the conversation with our customers that say their cars, they will break down. So, you know, what do you, what do you, um, I mean, do you have the ability to, to pay for repairs? And, and if, if you're working on some PTI where it's like, it's a sliver, then you'd, you'd, that's the reason why we repo frequently too is because they just they can't make the payment the car has broken down it's certainly among the reasons yeah so I think you want to go and show the slide when you start talking about the uh and and for our folks who will be listening on audio this is one of those broadcasts where you know again do the best we can to explain what you're what's on the screen but this is uh something I created this morning as a way to be able to illustrate graphically what it is that we're really talking about. And so we began to break down income of folks and look at basic living expenses. Basic, basic, basic living expenses. And we all know how much more expensive it is to live today. And this is just living expenses. This is not outside whatever expenses. Food is a lot more expensive. And so this is part of the conversation we had this morning where it was like, what is the average amount that people spend a month on food? And, you know, everything that I was looking at, it had it ranked, you know, low. So it's like you're eating at home most of the time, medium and high. And we chose the this is actually lower than the low number. Yeah, so we actually did a little research on this to figure out what is, you know, across the country, what is the, you know, typical expenditure. And, you know, for today, we can use whatever numbers that, you know, our listeners want to hear because, you know, you can shoot in the comments in there what numbers you'd like to see because all the numbers that you see on the screen in yellow are numbers that we can change. We can modify those numbers and have the results flow through to the chart. Mm-hmm. We just wanted to be able to kind of illustrate. And I think for me, the real foundational piece of this is I've always said, and I still feel this way, like I think our customers are going to prioritize a few things over their car payment. And that to me is when they have a family, when they have children, I think this becomes even more true. But, you know, you're going to have a roof over your head. So you're going to you're going to prioritize a roof over your head and you're going to prioritize feeding your family. Mm hmm. Feeding yourself or your family? I mean, those are just necessities, right? I don't know about you, but $800, as I, you know, I had a, one of my sons had been living with his brother who owned his own home. And so he was like, I want to go and do this on my own. $800 is crazy. It's not going to get much. Yeah. For a single person to live in. It obviously varies by region, by, you know, community, whatever. It's like rents are going to vary. But for today, it's just kind of keeping it kind of general about our typical customer. I threw a poll out this morning and it's kind of just as an afterthought, but it'll kind of continue to feed the conversation here about this. And we barely got a few poll respondents so far this morning. But the majority of the respondents said so far that the income for their typical customer was in the $15 to $18 an hour range. Okay, so we're going on the high end of that and the low end of other things. The low end of groceries, the low end of rent. And so, you know, one of the things when I said I married a smart man. Oh. Um, look at if we have two people in the household, do you want to add the food? Just like they got to explain the whole thing. Sort of line by line. So what we have listed for expenses or basic expenditures, as I called it, was a renter mortgage. That's the roof over your head. Food and groceries, which we did a calculation there so that we could change the number of people in the household. And then we did gas and fuel because, you know, if they're buying a car from you, we assume they're going to go back and work. So, right. And then everybody's going to have a cell phone. I'm sorry. That's a burner. I'm not sure. It could be. I mean, I don't know what people are for a cell phone, but I'm just saying, I think people are going to have a cell phone, but will they have a car? It's my belief that people are going to probably work on a cell phone. Well, who does a landline anymore? You can't even catch a bus without a mobile app or whatever. Yeah, yeah, yeah, yeah. I mean, yes. Uh, that's all part of the thing. I say you can't, most people who catch a bus now. Uh huh. So the, I mean like, and then utilities. Yeah. And that's like your, that's your internet cable, uh, your, uh, gas and your electricity and that's low. Yeah. So I wonder, though, if we can. So again, for today, this is all set up in a way we can show the numbers and change the numbers on the fly. And it's just a way for us to be able to, you know, tweak these numbers according to whatever your typical applicant looks like. And so, you know, again, send in the comments if you have the numbers that you want to see. there's a couple of things that I, as, as we were talking about this, you know, the withholding might be a little bit different based on, um, so we're talking about 20% of their hourly rate at 18. And there's a couple of things that are not in here. Um, it's like clothes, um, Yeah. You know, per person, you know, birthdays, Christmas, those kind of things that people, you know. Here's an unfortunate reality. Yeah. Some people can't afford Christmas and birthday gifts. Exactly. Exactly. So those are optional things. And I think what this is going to show is if I'm a customer financing a car from you at these income levels and these expense levels, let's just face some harsh realities today. is available to make a car payment and then we're seeing obviously in COVID period car payments went up car prices went up and in the interest of trying to keep the term from getting too long payments up which is understandable it's just that incomes didn't go up yeah they temporarily went up through the COVID period for you know with some government help but the reality is now we're back to To our own income. Yeah. And so let's just do the math. Let me take you through the income side over here on the right side. Just a real simple analysis. If we said this customer's working 40 hours a week, then you got a gross pay of 720. That comes out to just a little over three grand monthly gross. And then we just use 20% for withholding. They might get it all back at their tax return time. That doesn't help make a car payment tomorrow. It doesn't make a car payment tomorrow. So it's like, yeah, that's cool to think about. But it's like, that doesn't help me today. So it's like, if when I look at... back to the expenditures over here. So now at the 800 rent or mortgage, and let's keep it simple. Like you may say, Jim, but what about a second applicant? Jim, what about, you know, overtime or whatever? Let's keep it simple. Let's go to the base level per person. And let's look at, you know, the renter mortgage. We've got that in there. We've got utilities at 150. So that adds up to $1,400. And at the numbers that we have over there at $18 an hour, that base expenditure comes out to 56% of their total pay. So now we're to $2,500 net pay. This is calculating from those numbers on the right and bringing it over. And now we have to allow for car insurance. So whether we're doing full coverage or whether we're doing CPI plus liability, we've got to buy some insurance, right? And so this is why... And we use $150 because most of the clients that we're working with are being urged to charge $100 to $115 a month for CPI. You have to believe liability is another $50, $35 to $50 monthly, right? And so now, you know, you're in that $150, which is what we pay roughly for car insurance. So it's like, you know, it's a pretty workable number. And what this tells us now is that those numbers... The base, and you can look in the pie chart over there, that bright green section is the number that is what we have available for a car payment, which in this case looks pretty favorable. After insurance, we're at 944 at that $18. Now the question becomes, you know, what if that rent's a little higher? Let's say it's $1,000 and that you have two people in your household. Okay. On the one income. On the one income. Okay. Okay. Now you've just dropped it down to 414. Now, and this is another thing that was interesting that as I was, because I was going through a lot of different websites and it talked about your, like those base expenditures should not be more than, what was it? I want to say it was 50%. I don't remember. Yeah. But so like right now, that's 76% of their income is going just for living expenses, just without a car. It's just living expenses. And, you know, you've got two people. So, I mean, when you're talking to people, and I looked at prices, what people spend for groceries, you know, you have... It broke it down to children to grown adults and how much you spend. And 300 was about a median because for adults, it's more than 300 is the low end. I've been using 200. This is kind of borrowed from a section of an underwriting tool that I created in spreadsheet form for some of our clients some time ago. And it does the same thing here. It kind of gives pie charts. So visually you can see how much is available for the customers. And you know, your $200 a person is grocery prices. We all know how much they've gone up. So it's about a hundred dollars more. And everybody's spending will be a little bit different, but it's like, you know, it's like if we're just using some ballpark, then I think one of the articles Michelle found was that the most recent average came out to about $84 per per person per week, food and groceries. So, you know, if, if you, even if that's meals out plus groceries, you know, $84 a week comes out to three 35 or something. I forget what the number was. You know, we were, we were like, you know, we have a, we have a budget for like our bills and then we have, you know, it's leftover and food and stuff like that. I'll come out of that. And so, you know, we were, when we were talking about this, I said, we went out to dinner last night. And we got, we went to Italian. Italian's usually not very expensive. I think that we spent about $17 per plate and shared a dessert and we brought most of the food home and then got a bottle of wine. Not expensive bottle of wine. It was like $27. And our bill was, it was before tip was like 60 bucks. Mm-hmm. So I was like, $60? Once a month, that almost takes away one person's food budget for the week. Yeah. I mean, I think our customers aren't going out and having bottles of wine. True. But I mean, okay, so I took my mom to get her haircut yesterday. Or the day before, yesterday. And the gal that was cutting her hair, known her for decades. And she said, my husband and I, we went out to the new place that's a burger place, drive-thru, all of that. We ordered a couple of burgers, some ice cream, $36. Mm-hmm. And I was like, yeah, I mean, you can go to most of your fast food restaurants and it's like for two people, it's pretty easy to spend 30 bucks. Listen, when you're talking, Jim, you're talking to somebody who spends $36 a day on ice cream. And maple donuts. So, okay. So, you know, we're, we're, we're breaking all this stuff down. So what does this mean to dealers? Well, I think the first thing it means to dealers is we've got to really be watchful. At that $18 rate, we know a number of applicants are going to come in at $15 an hour. And we still have two people in the household over there. If you've got a kid at home, and look at what this did to the numbers. Look at that green sliver down there. That's what's available for a car payment. If you're at $15 an hour, and we know this, people have to have the conversation with customers. It's just... we look forward to kind of having this available, this tool available to both dealers and consumers so that people can do this math themselves and see kind of where it leaves them. Because, you know, as we know, I just talked to a dealer this week who lost a deal to insurance. The customer couldn't afford the insurance. And that happens all over the country because insurance is a chunk, especially for our young people. And so it's just definitely something. But look at how that number jumped up to 91% of the You know, now at $15 an hour, 91% of these just base living expenses. There's so many things left out of there. Michelle mentioned to me this morning, childcare and stuff like that. It's like, you know, you haven't even begun to do those things. that's gonna jump you up about eight to eighteen dollars an hour because you're working part-time at the other and so I it's just I you know survivors tommy brandis is like I have never met people that can take a dollar and stretch it as far as I mean so like mad respect oh sure for no it's you know and obviously um necessity is the mother of invention is that the expression so you know they get resourceful and coupons and whatever else they can do to kind of make this all work but I just think you know the other thing it shows is even if at the thousand dollar a month rent And these other base numbers, let me back this up to one person in the household. Let's just look at one person paying $1,000 rent. So now I'm at $744 after base expenses and after paying my car insurance for a car payment, which our numbers, I didn't get a chance to go back and refer to them, but I want to say our average car payment in the V8 groups is around $600. $600. So we don't know when that term is set up. I don't know whether there's a service contract in that number or not. But bottom line is customers are being expected to pay about $600. So now if you look at that number, even at $18 an hour, My question becomes back to my original thought about, you know, when you got a fixed income person or a lower income person, can they handle repairs? Now, this is why, you know, what used to happen with fixed income, it didn't take long to realize as a dealer, you know, chief underwriter, if you will, that what would happen is the customer. Could afford the payment, but anytime there were repairs at all, which are going to happen, so if you go back to an as-is kind of scenario with side notes, then the customer could not afford to do the repairs. So all they could really do is you could, as a dealer, I could put the payments all the way at the end, which I really refuse to do. And I'm not... I would expect the customer to pay something, I don't know, $5 a week, pay something toward the repair so it doesn't all go at the end. And that obviously hurts the customer on interest and causes me to take all of the risk. And that's just something that I think we shouldn't do as dealers. The customer should share in the risk and the responsibility here. And so, you know, how that split, that will vary from deal to deal and circumstances to circumstances. But I just think what this illustrates is that this customer at a $600 car payment It does not have much left. And so if there's a $700 repair that comes up, what's going to happen? So, again, this $600 payment could have a warranty. It could have a service contract. There's going to be different ways to think about that. But I think my main objective in bringing this conversation forward was recognizing, you know, this customer is going to need to afford these repairs one way or the other. Right? So, yeah, two things. One Facebook user asked, can you share this with us? We expect to. Yeah. In a web tool. I mean, certainly you can reach out to me and provide your email and I can get it to you in a spreadsheet version. What we expect to do is make it available in a web tool. And so, you know, because as I was looking at this and I just like that graph to be able to illustrate in a visual form Um, it's like, it's a really easy way to communicate. Most everybody can understand visual things that it's like learning. Most everyone can learn visually. Um, and then, you know, I, cause I, so I was like, this would be a really great tool for a dealer to be able to kind of like, let's just really look at the things and, and, um, And, you know, when you get down to having the conversation, it's like cars are, they are machines. They will break down. And, you know, and so how, to me, the question that comes from this is, do we support cars? And how we support. Because there are plenty of dealers we see all through social media that it's like, yeah, we don't support. It's their problem. And so it's like, well, the numbers, what is it from? May the fates be with you. Well, the fates are against you. If you are sending your customer on their merry way with zero way of supporting them, the fates are against them. Yeah. And you could argue. And against you. Well, some dealers, I'll just tell you, I don't recall that you and I've talked very much about this, but the reality is there are going to be some dealers out there in this segment. It's part of why the CFPB is so watchful of our industry is there are dealers out there who almost hope for the repair they look forward to the repair because they've done some math and they've determined that it's actually somehow financially to their advantage to recover the repo and resell it and so it's it's they're they're almost they don't have a lot of vested interest in the customer success most of the dealers we work with do so it's important to kind of make that distinction most of the dealers that we work with do see that they are playing a long game they do recognize the importance of helping that customer be successful and I think what we just tried to break down here was that of course we got to collect more data and see where the income really is you know for most of our applicants but I think you can see in this range that you know most of the respondents that said so far they're in the 15 to 18 an hour range Well, you can see even at the high end, this is what it changed. Nothing else. One person in the household, you know, regardless if they're working wherever they're working, you just got, you got almost nothing left for a car payment and you certainly got nothing left for repairs. So that's the kind of where the math starts to, You know, where the rubber meets the road, as they say. If you can push that up to $25 an hour, now you've got ample income. Look at how much that changes everything. If you're making $25, you know, maybe even if you're making $25, so you decide to go with rent that's $1,200. Yeah. You know, it's like you can have a better, you know, whatever. And look at how much better that becomes. $20. Let's try $20. $20 is still, yeah. $20. pretty important. You've got customers got a thousand dollars of, of available income after the, the insurance allowance. So yeah, I think that's, you know, that's kind of where we're, we're seeing that, that, that it's, it's often important for us to coach the customer through this. And I think this tool can help us. There's nothing here that the customer couldn't see. Like we're just, we can sit at the desk and certainly I expect dealers will use this in training their people. And then a salesperson would be able to use this with a customer and and show it on the screen and help them to think through their own math and think through the insurance piece and think through the repairs piece and the payment with and without a service contract. So look at what's gonna happen if you don't have a service contract and you face some repairs, then I think this is something that, We're just mindful of this. And it's all about setting the customer up to be successful, which in turn makes us successful. So this is where we have to just kind of start to do some hard math and figure out who we can help. Yeah. And I know there's a lot of dealers out there that know this, that understand this. There are some that don't. And we talk to ones all the time, don't understand this. And so they're just like, what are you guys paying? You know, what's your average payment? And they're not really looking deeply into having the conversation with the customer. This is what, because this is like budgeting 101. And, you know, the surveys that we've done with consumers, with our customers, is they don't understand budgeting 101. And they were never taught budgeting 101. And so this is a really great, what I love about it is it's especially, you know, Jim, smart man, you know, a really great visual way of looking at it. So thank you for the great spreadsheet. So one quick thing, let's just show some quick math on the screen. If your average payment is 600 and you're looking at a PTI of 20%, which most everybody says as a take home, as a percentage of net, that's pretty much what I hear everybody say their target. So that means that if you multiply that times five, then your customer would have to be at $3,000 of take-home pay in order to hit the average payment that we're talking about. And so that means our customer needs to make $22 an hour. If it's 20% withholding, they need to make $22 an hour to net three grand a month. So, you know, it just makes it pretty tight for us to finance a customer under $22 an hour. And this is part of why you hear people talk about this living wage. Survival. And so when something breaks down, it's like, well, I can't afford this, but I can still afford a payment of four or five, whatever, hundred dollars. So I'm just going to go get another car and let them repo that. So these are the economics that dealers are, you know, wrestling with out there all the time. eager to do business and they're stretching with that customer for $18 an hour. And, and we can just see from the math that, you know, that's a, that's a tough recipe. It doesn't mean it can't work. It just, we gotta be prepared for, because, you know, I just, I feel the same way. Like you said earlier, like when the customer, when the car breaks down, like not if the car breaks down, when the car breaks down, how's that going to happen? It's the same thing as when you get sick. And you're going to have to go to the doctor and get some antibiotics because that's going to happen in the three years, whatever, you know, or one of your kids gets sick and you've got to, you know, whatever. And you don't see health insurance. You don't see health insurance on this. And the interesting thing is, is that the way that like Medicaid, Medicaid, um, their, their max amount that you can earn to, to qualify for Medicaid is, is like $1,200 or $1,500 a month. So above that, you're not eligible. So you're not eligible. And so you're hoping you're getting insurance by your employment. A lot of people are not. And so that's another reason why emergency rooms, a lot of people end up there, and then they end up having to write off the expense of the emergency room. Or it's like, how do I get medicine? Because that's where their money is going, not for the emergency room visit, but for medicine. And so, you know, what does medicine cost? And so that was, again, that's not even accounted for because people get sick just like cars get sick. And if, you know, if you're withholding some, if the employer's charging you something for some insurance or whatever, then that would maybe adjust the withholding over there. But I would have to say for, for me, um, I'm going to take this off the screen, uh, hats off to our customers for surviving the way that they do. They are survivors. And for me, looking at this, it's like, I understand why so many people default on their loans, if that's the kind of financial world they live in. And so if we know that, how are we as dealers and those that support dealers, How are we supporting the customer? Because it's going to happen. So I would say hats off to those dealers who are thinking long term, even at their underwriting desk, thinking long term and thinking about the customer success. And also who are employing an approach on the collection side that is a bend without breaking. Because we've got to be able to bend a little bit in order to help this customer be successful because it's tight. And I also, you know, consider, I think this tool is a great way for you to look at what you're paying your people. Yeah. Yeah. It's a good, good thing to think about. Yep. It's also, it gives you an idea of what it costs to live and what's left over. And so how do you want your people to live? Do you want them to have to have a second job in order to support a family? Do you, you know, uh, yeah, yeah. It's just math folks. It's just math. Yeah. And you can't, you can't argue numbers. It's, and so, you know, there may be some little bits here and there that, that shift, but it's, This is a really great way of looking at, you know, are you, are you, you're, you're a lot of times our employees are our customers. And so what are we, what are we setting them up for as well? Success or not success. So, okay. Alrighty. I think that we can bring this conversation back with some panelists because we want to hear from others on this subject. Yeah, absolutely. Thank you. You know, you guys, we really, really appreciate how everyone, you know, includes us in their morning. And we're grateful for that. We really, really are. Those of you who are... um listening via one of the syndicated podcast stations obviously there's not visuals yeah so please just so folks know those usually aren't available till about 24 hours after the broadcast yes yes um so if you are listening on the audio and you want to take a look at the at the charts please go to our youtube channel there you go um and subscribe while you're there yeah exactly hey guys it's friday I hope you all have a great day today and thanks again so much for joining us Thank you. Have a good weekend.
