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. Oh, goodness. Good morning, everybody. Hey, good morning. Happy Friday. It's Friday. I pause like, you know, the days have been running together and I look up and man, it's Friday. I still got stuff to do. I know. We had this conversation this morning and he's like, hey, can we like do a sync and make sure that we get some of these objectives together? Let's check some stuff off the list. Let's check more stuff off the list. It's like, well, there's been progress. But yes, yes. It feels good. And there's something more to celebrate when you do that. So, you know, something to watch with Michelle and me. We are kind of living in this precarious place between, you know, bootstrapping and kind of working in our business. It's just right there. We're shifting into working on the business. And it's been an interesting thing. It feels like we were in a hurry up and wait mode for a long time and And now things are starting to really kick in gear and move quickly. Yeah, yeah, yeah, yeah. And people are just kind of falling in our laps. Yeah, we're having some really great partnerships coming together and the opportunity to kind of bring in a strong team and make this thing happen. So I have to, you know, personal stuff. I have to. Oh, you got stuff? Okay. So this is for all, you know, everyone out there in listening land that is married and all of that. Oh, no. Is this going to be about me? Oh, no. wait a minute let me find the mute button I gotta let me find that no it's not I so I get this uh I get this message from from my aunt earlier this week and she goes hey I have two tickets for this thing and it's okay you have to know me I grew up on the carpenters I grew up on the Carpenters. I had the greatest hits. I knew every, every song, every word fit my voice perfectly. My brother and I, um, would just like, we'd sing along when we were, you know, we were, my brother and I weird when we were teenagers, we were like really good friends. And, um, So carpenters. And so there's a cover band for the carpenters that's happening tonight. And so she's like, I have two tickets. She doesn't drive at night. You can have them. You can invite me or your mom or Aunt Susie, who's my mom and her sister or whatever. And I said, well, why don't we all go? And Jim would like to go too. so jim has me and my mom and two of my aunts and he's got a carload of girls a lot of girls we're going to a concert this wasn't the way yeah it wasn't so it'll be interesting it'll be fun I'll report on that wednesday but I just know that I'll be singing like no no other I love the carpenters okay shall we oh one other quick announcement um we've got next wednesday we're going to bring another f word to the morning show oh yeah we're going to talk about the other dreaded effort so we already covered the thing about failure and you know fear is something that we talk about in this industry fear between dealers dealers fear the consumer consumers fear the dealer dealers feel that fear other dealers They do. And there's, there's just lots of layers to that. So yeah, we'll, we'll tackle that on Wednesday. So look, look forward to having folks join us on next Wednesday. All right. We're going to bring in our guest. Good morning, Alan. You're joining us from Austin area, right? Yes, yes. We're gonna start sweating here. Yeah, that's right. Not too long. And I, Jim, Jim's been working with with Alan on a couple of things for the last last few weeks. And I just, I met Alan. I think I want to hear the story. Yeah, well, it's I and I'm pretty sure that we met at a conference. And then we were coming through Austin. And we were talking about a bunch. And so Alan, just so graciously, let us use one of their offices to do a lot of recording for the Institute and all of that. And we got a chance to get to know him and the team. And Alan is like, he's got some really, really cool trophies in his office. Alan is a big game hunter and it's just like, okay, that's really cool. And what I learned about Alan is Alan is a data nerd like my husband. They can geek out over spreadsheets like no other. And for people that find that attractive like I do, it's just like, this is so heavenly. I love it. Yeah. Yeah, that's pretty nerdy stuff. My wife is not as impressed as Michelle, Jim. No, I feel you. So Alan has very sophisticated tools for analysis. You know, I'm over here working on... a Microsoft spreadsheet. So I too was really thrilled to see what Alan was going into. And of course, it was fun to spend some time with him because a lot of folks know Alan. He has been around the segment for a good while, been around the brick and mortar side for a bit, was a bulk buyer. um you know for a time and so he's managed that side of uh the buy here pay your space and uh he's got a bit of a story which he tells more you know alan will be a recurring featured guest on this bhph market watch that we've kicked off which we've actually recorded one got it in production now so folks can expect to see it yeah And this conversation kind of ties in, Alan. Like today, we're going to talk about inventory and kind of what AI tells us the outlook for inventory is. And as I was sharing with you before we started the broadcast, that we had our first V-Ape meeting last night for the month of April. And there was a lot of discussion in there amongst the members around capital and kind of feeling some pinches here and there, some of them. And so I think this is... This is timely for us to kind of, you know, kick off this market watch thing and also be able to kind of monitor what's happening. Kind of starts with inventory, right? And so I think the outlook for cost of inventory for these dealers is going to be... you know, a significant factor. And then obviously we're going to be watching to see how these lenders in the space are adjusting, you know, and kind of bake, you know, they're, they're out there making their own predictions and making their own decisions about their business based on the outlook for the, for the industry. So it's just an interesting time. I feel like we're in. It's the wild West pew, pew, pew. I mean, it's just, there's a lot of stuff that's happening. I suppose. I mean, Well, it is. I like the pew-pew. Yeah, yeah. That was a nice add. Michelle does sound effects. It's part of the fun. The more time you spend with me, the more you're going to be like, she's weird. You do nerdy data stuff. I do sound effects. Okay. Hey, we're all weird. We're all cool. Yeah, it's all cool. I'll get along a lot of weirdness over here. But yeah, I think the, the thing that's going to be interesting is it just feels important. It feels timely for us to be kind of tracking on an ongoing basis. You know, you can get paralysis analysis around this stuff and there's a whole lot of stuff that is not knowable as we learned from that. We learned that word from, What was his name? I forgot the name. Former Defense Secretary under Bush. Not knowable. Yeah, things that were not knowable. Anyway, the idea that there's just a lot of stuff that we're all working through it together, but trying to kind of anticipate – you know, the demand in this space and kind of where the capital is going to come from. And so this is obviously an area where you have lived. And those who don't know, Alan came from a background of being a financial analyst and worked in kind of the stock market side of things. You want to tell folks a little bit about that background, those who won't hear the MarketWatch podcast? Yeah, I think, sure. I basically came from public markets. So specifically options, options education. I basically came to the conclusion after a number of years that no retail investors should know what Gamma Theta Vega row ever means. Because it means a lot to an options portfolio manager, but to a really sophisticated individual trader. You know, maybe we shouldn't be so short term and reactive, which may be the story here with tariffs, inventory costs and things. I don't know. We'd have to talk about it. Yeah. And so I think, you know, what we do is share what we know. And so in that way, I don't feel like we're being reactive as much as we're just kind of sharing whatever the latest information that we have and let dealers in this case, that's mostly our audience is going to be buy here, pay here, lease here, pay your dealers. just put information in front of them, let them make decisions for themselves about, you know, what feels right for them. But with that, I can, let me just kind of share the, the, the, the, thread that I put together with, uh, chat GPT. It's interesting. I've been working more with, um, deep seek Allen. I kind of like it, but I discovered and look at that, that deep seek for whatever reason, this on this thread was working for some kind of outdated information. And so I, but so chat GPT found something a little more current, current. So I don't know, Michelle, if we can make that more prominent right there, if we're not going to be in the screen. Or you can try that other one where we can. So do you want me to read the question and you can read the answer? Yeah, go ahead. Okay. So in the next one to three years, what is the outlook of experts regarding the impact of tariffs on used car prices in the U.S.? Great question, Jim. Thank you. I'm trying to learn a little bit about the prompts. We're learning. Yeah. But, yeah, so what's particularly interesting about this one is that, you know, it says over the next one to three years, experts anticipate that U.S. tariffs, the T word, on imported vehicles and auto parts will significantly impact used car prices, primarily due to increased demand and constrained supply, which is interesting. Not a new thing, which, by the way, what we're talking about here is not just buy here, pay here. When we talk about the used car segment, obviously those dealers that are doing used car retail, you know, they would be affected by these things as well, which obviously trickles down and impacts the buy here, pay here dealer. And obviously what happens in the new car side obviously impacts as well. So there's some talk about that as we move into this. In fact, this first one says key factors influencing prices. Let me get over here where I can run this thing a little differently. So key factors influencing used car prices. Tariffs on new vehicles and parts. The twenty five percent tariffs imposed on imported vehicles and auto parts are expected to raise new car prices by four to twelve thousand dollars. The increase is likely to push more consumers toward the used car market, thereby elevating demand and prices in that segment. I have a comment. Yeah, this is not my world, but it's like I pay attention to some of the stuff people are talking about on social. And I've heard things that new vehicle franchises, Ford, whatever, and I don't know which ones, They're talking about we're lowering our prices to kind of offset what we expect to be happening so that the consumer isn't going to be seeing the same price on a car, but they're going to have it. It's like an employee whatever discount thing so that it will help offset the pocketbook of the consumer. And Michelle told me about that, Alan, and I said, I'm not impressed. I've seen them offer employee prices on cars. tv ads in the past so you know that sounds more like a promotion than anything else to me what do you think yeah I think that's ford right michelle I think so yeah yeah so uh I watched it to the end and then there was a disclaimer they're like yeah except for the super duty trucks and oh by the way the expedition and I don't know about the explorer the high-priced vehicle yeah so yeah I'm like, well, I mean, I, you know, I love trucks. I love big trucks. You know, that's what I'm like, oh, of course you're not going to offer it on what I want to buy. But yeah, on the edge. Okay. It makes sense. Well, would you, you know, knowing that you're average American, would you choose a different vehicle based on that? Yeah. I mean, you're going to have to, right? I mean, at some point, wherever we fit in the strata of society, we may all have to make concessions that the eight thousand ton suburban isn't the most cost effective place. vehicle on the planet yeah whatever well and I I see that there's like this is this is not the same thing but it's like we just are pulling ourselves out of the same constriction that we experienced during covid and it's just haven't fully rebounded and we're you know it's they're expecting skin so let's move to two actually before we um move too much further it reminds me of something that came up in our conversation last night alan with the dealers just um And I would be interested in kind of your feedback around this part. It's like one of the things that we're seeing as you know here we are in early twenty twenty five you know covid hit us in twenty it still was hitting us hard and twenty one in a lot of ways and so you know one of the things that I have shared just kind of from a big picture like zoom way out and look at you know used car prices and the buy here pay your segment and it felt like to me that in twenty one and just through that stretch you know used car prices shot through the roof What didn't shoot through the roof was the customer's ability to put a down payment or their ability to make a regular payment. So what that meant to dealers is they were running up prices to make sure they had enough margin in their deals. And so now you ended up with... long contracts and or high payments or, you know, some combination there. And it just felt like, you know, where's the tail on that? Because I remember thinking back then, you know, this is probably not sustainable. There's going to come a kind of a day of reckoning. You know, don't want to sound alarmist, but it's like there's going to be a day of adjustment. on this and it and it feels like to me it's again wide view it feels like we should have experienced that already now some we had some of our people say in the meeting last night that accountants are saying that twenty twenty four was the hardest year on buy here payer they've seen So I haven't seen those numbers coming in on the financials. But if you just look at it, and I think P&Ls and balance sheets aren't the best way to really measure the success of a buy-here-pay-here operation. It can give you a snapshot look, but it's not necessarily the best health barometer. So I just kind of want to hear your perspective on the timing of that. How much of what we're experiencing now, do you feel like are we still in a post-COVID tail or not? No, I actually do not think we are in a post-COVID tale. And here's my thought process, and there's some data to support it on the nerdy side. When you look at these portfolios, particularly in Deep Sub Prime and particularly in Buy Here, Pay Here, the life cycle of a portfolio is only about a few years. And so if you looked at some high price, high interest rate environment loans from twenty twenty two, really by the end of twenty twenty four, that's made its way through. In fact, being more selective, if our average contract in the space is forty eight months, the majority of our losses of our portfolios are in the first twelve months. Yeah. And so those that are left over and we'll say left over, let's be honest, those are solid gold and buy here, pay here. If you have a twenty twenty two loan today. Yeah. Four, eleven, twenty, twenty five. You need to figure out a way to keep that consumer. And they're great because they've managed to navigate from a personal financial responsibility. Some pretty difficult economic times. Yeah. Yeah, that's true. Yeah. So those are, in my mind, the COVID tail, if you will, and buy here, pay here is over. Where it's not over is you will see that in particularly in like the deep subprime securitization. So like I'm pretty active on LinkedIn. And so you'll see these stories, right? I get texts like ten times a day from guys. Hey, have you read this story? Have you read this story? And I get this pop and they're like, wow, delinquency is popping and this and that. Also in buy here, pay here, this is something that maybe others haven't thought about, but I had a really interesting discussion Wednesday night at dinner with a pretty high profile buy here, pay here dealer. And what we were talking about was modifications. In securitizations, you can actually modify a contract numerous times. but if you go back to a lot of the principal agreements within buy here pay here so whether that's bank you know non-depository financial institution who lends warehouse facilities in this space they're really really really restrictive having had a few myself you know they're pretty restrictive relative to modifications when you go look at securitizations in the deep subprime I mean they're modifying maybe two times three times a year and they're also modifying as many as six to eight times per the lifetime of the contract so you know that what that does is that extends the tail in deep subprime right so you know mrs smith you know extends in and then she does it in and it just kind of kicks the can a little bit and so I think that tail and d in subprime is definitely still exists and has to be worked through. But I don't, I think in the buyer payer for the majority of the portfolios out there, the pain is pretty much done. In fact, if you go look at your portfolio by vintage, just look at it by quarter or year and just run your principal balance that you have outstanding just by vintage, you'll see pretty quickly. You probably don't have a lot left from, I would say you have very little left from twenty one, if anything. And you have very little left from twenty twenty two. Yeah. So I want you to recount a phrase that you use there, a non depository. What did you call them? Non-depository financial institution. Okay, got it. I think I know who he's talking about. It's all right. I just want to... I don't. The typical warehouse players, right? So that falls into private investors, private groups that provide debt in the space. Okay. And they're all the same names we know, right? Yeah. And there's really only... There's not that many in that space. But then you have... Go ahead, Jim, sorry. Oh, we don't typically name names over here. We can, everybody knows who we're talking about. No, no, no. I'm staying away from names. Yeah, yeah. But then you also have, and you could think of these also like credit funds, right? So everybody kind of hears if they pay attention to some of the market private credit, it's getting big, right? Like Apollo, KKR, and I'll use their names because they're twenty bazillion dollar credit funds. But those, yeah, those would be all classified as non-depository financial institutions. Gotcha. Yep. So I was just curious about that part. I think, you know, as we dig into this, I'll stop to say that, you know, we probably won't get through the whole thread on this chat GPT thing. Well, we've covered different parts of it just in the conversation. Yeah. So you might throw up my email over there, Michelle, and anybody who wants the full thread, just email me. Absolutely. I have to say one of the things you mentioned in the last little bit of an explanation of your thoughts around the market is I remember sitting in your office and talking about for paper dealers. It's like the prime, if you can get it past twelve months or eighteen months, it's like there is your window. If you can manage that account that long, that's gold. That's gold. Right there. It really is. If you can get them to twelve months, the majority of the losses are done and it's smooth sailing. Well, I mean, relative smooth sailing, but smoother. yeah when you look at like when these portfolios kind of have their max charge off by vintage if you do it kind of by month it's somewhere and I haven't seen any buy here pay here and I've looked at hundreds that doesn't have that max loss between like month six and month nine Like those months, that third quarter after origination is just like terrible. Like it's awful. It's very stressful. Yeah. So Alan's, you know, he's basically saying on the scatter graph, which you know what that is. Yes, I do. On a scatter graph, you know, you can see where the peaks are. So a lot fewer dots on the graph after you get past that. So going on into our thread there, let me get back over there so I can scroll up. So, it talks about, obviously, the parts which we touched on, supply constraints. The used car market is already experiencing limited inventory due to reduced new vehicle production. So, we're still kind of on the after effects of that part. With fewer off-lease vehicles and trade-ins, the supply of used cars remains tight. So, again, we think about that from the top down. We saw in COVID that new car dealers couldn't get inventory, so they were buying heavily on used cars. which meant the used car dealer down the street was having to pay more if they could get any inventory at all, which obviously trickles down to the buyer. So are we thinking that this, all of the stuff with what's happening in tariffs and all of that, that we're going to have like the first cousin of what happened during COVID where it's like. And listen, I'm not, I'm saying I'm not, I'm not prognosticating over here. I'm reading what alan did you not appreciate that I mean don't ever say it out loud michelle yeah yeah so it's so I I'm no expert you used you talk about you kind of defend yourself with not being an expert I'm not trying to be an expert here I'm trying to read you know with somebody who has a little can connect some dots based on our perspective I'm just trying to read what the stuff says because I think we're not trying to be prognosticators here we're just trying to you know I'm looking at this too and it's saying fewer off-lease vehicles and trade-ins available is that does that mean because of what has been happening in economy for the last so many years people are holding on to them longer or you know they're not trading in they're just buying because they don't want to like a repeat of what happened to them it doesn't say but it references an article in car and driver where you can go for more detail like all this stuff is it references like thirty some odd different sources on the thing so you can go get more of the detail. But increased repair costs, so tariffs on imported auto parts are expected to raise repair and maintenance costs. As a result, consumers may delay trading in their vehicles, further reducing the availability of used cars and contributing to higher prices. So again, this is ChatGPT pulling together from mounds of information, right? And it's kind of how it's arriving at this. And then I'll finish this one out and then we'll get some feedback from Alan. Consumer behavior. Surveys indicate that a significant number of Americans are postponing vehicle purchases due to anticipated price hikes and higher interest rates. This behavior could lead to a surge in demand for used cars once consumers reenter the market, putting additional upward pressure on prices. Now, there's nothing here that talks about exactly the impact of economy or The economy, the price of eggs. I mean, we're not seeing a lot of problems in at least my cursory view of the news, Alan. I don't see a lot of problems with employment in this country. I think folks are mostly employed. We're still like at four percent. Yeah, we're very well employed, which I always say that's one of the things in my experience that if something's going to hurt us in in buy here, pay here, it's going to be losing a lot of local employment that can obviously take away. car payments and become a problem but there's nothing in what I just read there that kind of talks about those elements currently and again I'm asking for a one to three year outlook right in this projection but thoughts on what we read there yeah I actually disagree on number four I would disagree with higher interest rates you know what really smashed in my mind buy here, pay here dealers with the COVID is you had higher inventory costs, higher recon costs, and a number of those factors, but you also had interest rates going ballistic, right? I mean, they went from, we thought free money was a forever thing to holy cow. I went and bought a uh a new car during covid um when used car prices were high I got rid of my used car got max value and bought a new car um but compared to my other truck it was like six hundred basis points higher rate right so um I think the the saving grace here in the macro environment for the next few years is looking at the forward pricing curve of SOFR, which is the standard overnight rate with the Fed funds. And I don't think that anyone's really pricing that to go ballistic again, which gives some comfort and cover, financial cover to buy here, pay here dealers, because in theory, we shouldn't face the same, you know, Hey, my, my operating interest expense on my operating statement went from, you know, three thousand, three hundred thousand to three million. So, I mean, you know, at the end of the day, they should have a little more cash to be able to to soften some of the expenses that we certainly anticipate to rise. Yeah, it's a good point. I think we've certainly seen that, that dealers have had to navigate a pretty difficult stretch just based on the three kind of points that you brought forward right there. It's been a period of pretty substantial adjustment for buy here, pay here. And I think what that typically does, in my experience, being more of an operations guy is like, it puts pressures on efficiencies. Like a business, if it's not very efficient, then it starts to have all these added costs and it really applies pressure to an operation. And in a lot of cases, we hope it causes them to go get more efficient and make sure that they're managing their business. And I don't find it necessary to say very often now, but we meet these dealers who um you know we'll ask the question I've sometimes I've finished a presentation in a room and I'll say you know are you are you running your business or is your business running you you know or do you own your business or does your business on you and it really is it kind of this is the stuff where it starts to really separate we we have to manage our way through this right we have to we have to really take ownership of it, find a way there. And last night's V eight meeting, I got to tell you, Michelle was a really good indication where dealers are looking hard at expenses and where can I cut recon costs or they're trying to figure out how can I get leaner and healthier? And I think that's appropriate. Well, and, and, um, I mentioned before, I mean, this isn't First Cousin, whatever, but it's another thing, another speed bump or whatever. And in life, I'll bring this down to, you know, this is my shtick. You know, if you don't learn from past experiences, then you're doomed to experience the same negative effects. And so what did we learn from COVID and how can we apply what we learned to this? We've seen a lot of dealers that chose not to learn anything and they've been the ones that have hurt or closed, shuttered their doors. And so what have we learned? which I love with your v-eight group it's like okay we see this thing coming what do we do now because because covid I mean that was not something that people really expected but it's like we can see that there's something coming what did we learn from the last one what can we change this time and do better and have you know a very different kind of um ex you know the the experience even if the factors are similar The experience can be different because you learn from the last one. Right. And I, I think Alan, what we're seeing is like, I, um, I'm not an alarmist. Like people know I'm pretty, I'm pretty level and I'm pretty even. And so I try to kind of keep it, um, I kind of keep it pretty steady. And I think, um, and, but what we are seeing and I've shared with on the podcast, I've shared it in our V eight meetings, what we are seeing as coaches who, you know, work with dealers and our V eight members across the country is like, We are seeing lenders take a different posture in the, and maybe more specifically the non-depository, you know, folks that you're talking about. Do you need a little sticky note like you have here for me for the CFPB because I can never get the acronym right? No, I just love this expression. I'm usually calling them, you know, private lenders or whatever, but Private lenders. It works. It works. So anyway, the idea is that we're seeing at the point of renewal, there's a lot more pressure being applied. They're looking hard at profitability. Whereas, you know, dealers used to just go through that thing and sign a new renewal every year. It's like there's a lot more scrutiny at that point of the renewal where they're You know, they're looking at advance rates. They're looking at profitability in a closer way than they used to. Some of what I'm hearing is really curious. And so I think it's just an example where we want to make sure that we're healthy, that we have good margins. And then from a White Hat Way perspective, Alan, we're asking our dealers, look, just communicate. Like, just make sure that you are in communication, that you have, you know, that you're transparent with what you're doing and that you, you know, that's the part that we just have to keep in touch. And that's the thing that we've talked about this. It's like, what do you expect from your customer? cash communication communication and so it's like do the same thing for people that you're their customer right it's like yeah it's it yeah yeah so let's let's get back to the inventory thing and then you and I can on the market watch conversation we're going to continue to uh kind of go through a lot of these pieces but the uh and I'll kind of we can start to wind down here and I just let folks find the rest of this um you know online or what have you but The kind of outlook, it says, if tariffs remain in place, used car prices are expected to continue rising over the next few years. Analysts predict that prices for popular used models could increase by nine hundred to about five thousand. And depending on the vehicle and market conditions, the combination of higher new car prices, limited used car inventory and increased repair costs create a challenging environment for consumers. Seeking affordable transportation, which obviously you could replace that with this challenging for dealers as well, who are trying to, you know, maintain some degree of profitability. And they're always balancing reward to risk when they're out there buying cars and reconditioning cars and so on. And so I think, by the way, I think the deep seek thread. really didn't predict an increase in price, but it predicted no decrease in price. It basically said there's, based on the market conditions, there's nothing to really foresee that it would decrease any, was really kind of the outcome from that. So like we've decreased as much as we're going to decrease from the thing that happened a couple of years ago, and it's not going to be decreasing. It's not going to be improving, is basically what it said. And so, you know, this is just hard math. And look, this can be, you know, there's a lot of different factors here. But as we said, One of the things that came up last night, Al, is I used to, as a dealer, there would be times that as either managing a store or having my own dealership for about seven years, there were times that car costs would adjust. Sometimes seasonally, tax refund season certainly puts pressure on used car prices jump. We're just coming off of that here in April. But I would say that one of the things that we would say is that because I never was a car guy, right? I've been in the business since ninety five, but I'm really more of a numbers financial guy. And it's a financial aspect for me. It's a cash flow risk to reward thing. And the car just happens to be what we finance. And so my point was, look, when car costs adjust, I have to now, because I'm going to be disciplined about my model, I now have to buy a car with a little more miles, maybe a few more dents on it in order to keep it my financial model, right? I have to stay disciplined to my financial model. And so that's part of what we're encouraging dealers to kind of be watchful about and be prepared to make some adjustment because the math has got to make sense. In the end, it's got to support the financial strategy and the whole business plan. And so I think this is where we just got to be watchful and see, you know, kind of what's going to happen there. But thoughts on what we covered there? I'll jump back into it just a minute, but go ahead, Ellen. Oh, I was just going to say, yeah, I mean, data is great. You know, we can nerd out on data and look at really cool charts and all of these things. But at the end of the day, you know, what's the actual intelligence that you take away from that conversation? And knowing the data is different than creating an insight to what you should be doing. You know, there's not a lot of elasticity or you know there's not a lot of bandwidth for these these consumers you know they don't have four thousand dollars for a new engine and a tranny and all of those kind of things they just don't have it and so what should our reaction be to these increased costs relative hard costs and their real cash costs right um relative to our business and buy here pay here and I think That comes back to policy and procedure. What is your policy and how well are you adhering to that policy? And maybe you need to change some things. For example, maybe your business model can't take more risk from a financial perspective. Maybe you need to require a little bit more down payment. Maybe your modification policy isn't very lenient and maybe it should be. And what data do you have within your portfolio to support that position? Maybe you need to tighten underwriting standards. Maybe you need to if you do those three things right you tighten um underwriting standards you reduce maybe your average loan terms you know not increase them because that's not always the best in this space right I just saw somebody was I literally just saw it this morning there's a tick up in car loans in the new car space it's over eighty four months oh boy So, you know, maybe we want to keep terms where they are, maybe compress them a little bit, require a little bit more down payments. We don't have so much cash and exposure in the deal. But what that really then does is it shrinks your addressable market. And I think it would be really cool and maybe one day, wink, wink, nod, nod, we'll be able to do this, Jim, you know, Michelle, is we'll be able to look back and go, hey, what did the dealers do that maybe didn't sell as many cars during COVID? Right. You know, I mean, I know lenders want you to sell cars. You want to sell cars because that's how you make your money is through the cash flow of those loans. But what if you just didn't? Right. Maybe it would have been better, you know, maybe it would have been better. So I can add kind of again, bringing around the white hat element of this, all the things that you said are perfectly relevant. I would add one. spend more time with your customers, engage the customers that you have, hold their hand if you need to, keep them in their cars, keep them, support them so that we're not losing the customers that we already have on the books. And that lets you, because we always say, Ellen, Saving an account is the same thing as selling a car, in my mind. It's like, you know, if we save that payment stream, you know, it's the same thing as creating a new sale. In fact, it costs us less, right? So I would say, you know, let's focus on that. Let's support our customers. And if we have to take a little pause, you know, in our sales and to focus on getting some of those systems in place to better support the customers that we have, then I think that would serve us as well as any other kind of things. And certainly on the front end of all the things that you mentioned, you know, are gonna make a difference as well. But I think this is where we wanna try to urge dealers to look at all the elements and some of those will be less tangible. Like it won't show up in the graphs in the same way that, you know, a lot of the things that we're talking about here. So I just think it's an appropriate time for, you know, dealers to be especially mindful of getting healthy. And some of those things that factor into health to me are not necessarily, you know, gonna show up on the balance sheet. And, and a human side, it's a time to come together and work together instead of building walls to protect yourself. Yeah. It's, it's time to work together. Yeah. Yeah, for sure. Well, any closing thoughts, Alan, we probably should wrap up there and we, and you and I, like I say, I've already recorded one on the market watch. I think there's a lot of developments that we'll have plenty to talk about, but I look forward to having you, you know, come back as a, as a regular returning guest on that. We'll continue this conversation, but anything else for today? No, not really. Just basically look at your policies and processes. Look at your historical data performance. Dig into some of that stuff. If you're not in the V-A group, why not? Give yourself some comparative benchmark. I mean, I sit in this office, right, and sometimes it feels like an echo chamber. And I, having been sitting in my office in Austin years ago, I felt like I was sitting in an echo chamber. And I'm like, well, am I convincing myself or who am I convincing here? And get your data, get some perspective, join a group, do something. helps you make better decisions. And don't necessarily go off gut all the time. Look back on that data and let it guide you. Amen. We say all the time that don't assume, measure. Don't assume, measure. And we watch different people that it's like, well, I assumed this and then we did a measurement and it's like, well, my assumption was not correct. Yeah. And I think, you know, I say the same thing in a different way. Like, I think we're in twenty twenty five. There's lots of tools out there. We can move beyond opinion. Right. We can go find the data to support what we're what we're setting out to do. And it's out there and people can do twenty groups, you know, they want something more intensive and they can certainly do. VA groups is a great way to get your your feet in the water of life. really understanding what it is that's happening with your portfolio. Yeah. And I'll renew the offer today, Michelle, that folks out there who want to get a free portfolio analysis, we've got a little template that we can provide. So just email me at the jim at whitehatway.com email, and we'll provide you that template so that people can kind of throw in their, their historical data. And then we will do a free analysis and give comparisons to the V eight folks. So So that's probably enough for today. Shall we let Alan get back to his work and we'll get back to our own? Well, Alan, if you wouldn't mind just sticking around for a minute so we can say a proper goodbye after we've closed out the podcast. sounds like a plan all right thank you so much for joining thanks for having me appreciate it great conversation all right um I like hanging around with smart people I do too and even though I have to say okay I what does that mean please explain to me because I don't yeah um I I'm I've not this I'm married in listen I've been at this for yeah twenty plus years and I'm still learning every day right there's there's stuff to learn and know it's like Well, yeah, there is. All right. It is Friday, everybody. Oh, my goodness. out enjoying the blossoms, the whatever, and just breathing. I've been stuck in my house for the last four months air. Some folks in the southern part of the country, they've been at this already for a while. Well, we lived in Florida, and it's like... Okay. We're the ones that are thawing out in northern Utah here. All right, everybody. Thanks so much for joining us. We know that you have a lot on your plate already, and you get to give us the time to listen to us talk about things that we just get excited about. And again, thank you so much for Alan for joining us. Hope you guys have a great rest of your week, and we will see you on Wednesday for another... For another F word. Another F word about fear for our White Hat Wednesday. All right, everybody. Thanks so much. Have a great weekend.
