Wake up, Buy Here, Pay Here people. It's a beautiful day. Go grab yourself another cup of Joe and say hello to Jim and Michelle Rhodes on the Buy Here, Pay Here Morning Show. Take it away, you two. Hey. Yes, good morning. Hey, friends. There we are. Okay. How are we today? me yeah I don't know I'm still trying to figure out I don't know it's been a kind of whirlwind morning it's one of those mornings where I decided the topic this morning knew knew for some time that I wanted to bring this subject but I had quite a lot of prep you know data prep to get this thing together yeah jim abbreviated uh coffee time those of you guys who listen know that we every morning We spend an hour or so just no phones, no electronic devices, usually. Usually. And coffee and just kind of chatting. Even in the wintertime with patio heaters, we were able to do that out on the patio, which is wonderful, even though there's like four feet of snow outside. It was fantastic. Yeah. So, yeah. It was nice. I did cut a little bit short. I had work to do on the spreadsheet, so I got that knocked out. And I told you, this topic today, which is on debt load, right? So what I've done is I'm taking... one of our V eight groups data. And just as an illustration, right? I just picked one that had enough debt members that had enough, um, history of data to be able to build this. And I'm bringing what I called in the hashtag on the thing, my farm boy logic to this conversation. Okay. Yeah. It's kind of like common sense of this is going to affect this and this is going to affect this. And yeah. And so it's not, you know, I've said to people, people, I describe myself as an analyst. I'm pretty handy with numbers and spreadsheets. I'm not, you know, I don't have a finance and or, um, you know, high math degree. What I'm doing is I'm bringing the mathematics as a dealer, as former dealer myself, looking at these numbers, you know, thinking about, and because I'm all the time thinking about how to, how to help dealers better visualize the movement of money in their business. Yeah. Right. Yeah. Yeah. Yeah. Yeah. Performance of these assets, which is namely the portfolio really is what we're working with today. Before we dive into our topic, because I keep notes next to my station, and there was one thing that I wanted to just kind of, it's not really an announcement, but it's kind of an announcement. At NIADA, you all know that Jim is speaking at NIADA, and he's going to be giving some tools away for free for cash flow. But there is our friends, Hugo Sanchez and Chad Randash are going to be doing a class on wealth creation through reinsurance. I think that's going to be a really good, a lot of our clients, that's something that all of them would benefit from going to. So if you're going to be at an IADA, that's another, and you're in buy here, pay here, lease here, pay here. I don't know how much that just affects regular independent or not. I'm not as familiar. It can be the same. But to have a really great accountant who also has a background of managing wealth. Right. Hugo has a very strong background in managing wealth. So if you're going to go, yeah. So wealth creation through insurance. And I would say, good point. I got a little share of my own that I came across my social media feed this morning. I'm going to put it on the screen. Look at that. We saw that this morning. Our friend Jimmy Rambo, who's been in the capital space for a while, he's worked with a different company, and we just really, really have appreciated him. I have a ton of respect for Jimmy. And such a white hat way operator. Yeah, he definitely believes in the long game. He's been with Spartan a long time. And so we just saw, obviously, it's on social media now. We had no clue. Our founding sponsors, one of our founding sponsors, LHPH Capital, he is now a member of their team. Makes so much sense. Yeah, makes so much sense. Congratulations, Jimmy. Congratulations, LHPH Capital, too. Fantastic situation. Obviously, there have been some conversations going on that we're not privy to, and that's okay. Yeah. We get it. That's a, but it's a big, that's a nice move. That is a really, really good. So yeah. Excited for them for that. Yeah. So, um, all right. So we dive into the thing. Yeah. So let me kind of, let's dive into some terminology first. These are, yeah. Okay. And I didn't load these on the screen for everybody. These are our terms. There will not be a test at the end of the podcast, but these are our terms. So when we talk about debt load, we're basically sort of like leverage. How much leverage or how much debt can a portfolio support in this case is really the way I approached the topic. And I simply chose a method that we currently use for building, you know, some in the lending business would call it a rolling twenty four, where you take the portfolio as it is, you take the history of the collections rates, you know, loss to liquidation rates and I call them conversion rates, the rate at which the portfolio is converting to cash. You apply that to the portfolio, and if you quit putting contracts in the portfolio or just run that portfolio off at your current rate of collections, then that would be these projections. And I've got some of those numbers to share here. So let's think about that part first. We've just taken a dealer's actual portfolio based on their, in this case, everything we're going to look at today is based on six months of collection history. So a pretty good range to say this is not just last month. This is a range that is pretty indicative of the rate at which we're collecting. Okay, and are you finding that a lot of your dealers are collecting at similar rates? No. I mean, when you say similar, they're, you know, no. So your success in collecting is a factor in how much debt you can handle. Right. Okay, gotcha. it will be and so what the way I chose to approach this is I locked in I used a fifty percent advance which is pretty common so if I took this portfolio And by the way, as a separate aside, we don't have the data in yet. It's coming in now for the month of May. Yeah. But we're working off April numbers here. So this is a six-month period. But I mean, it doesn't really matter. No. Because it's the portfolio in whole. And you've got, it's like a three-year-old portfolio for some of the, okay, gotcha. But I'm just, these are real numbers from real dealers. And so this is a new way that they'll be seeing this in the month of June as I present to each group in the, in our V eight format, I'll be presenting to them this information. So this morning was just a way for me to kind of, you know, get it on paper and start to talk about it and help everybody understand, you know, the way I'm thinking about this. So I took up, I used a fifty percent advance. If a dealer went and got a fifty percent advance on their current portfolio and And they simply and I used a fifteen percent interest rate. So I'll show that stuff here in a minute. But I use the same interest rate toyed with a calculation that I often use, which is how much principal would I need to apply to the debt? in order to make sure that I stayed in favor with my line of credit, which is really about the advance rate. Okay, so at a fifty percent advance rate. And that's pretty industry standard. Pretty typical. I mean, I've heard of some that want to do a higher advance rate than that. I've seen some, right? But that's really what we encourage is that you not really go over fifty if you can absolutely help it because that will help keep your portfolio stronger. Yeah, it'll keep your cash flow and the health of your operation in a better place just so that you don't get overly leveraged. Because one of the things I calculated here is the... rate at which I'm sorry, the amount of interest expense on in twenty four months across the portfolio. So why does this matter? So bear with me, folks, because there's quite a lot here that I want to make sure before we start looking at the numbers that you can make sense of kind of the methodology that I use. So I'm simply taking a portfolio, and while this is not exactly the way it would work with your typical line of credit providers, okay, in an asset-backed, you know, line of credit kind of scenario, what I chose to do is the same way I model it out with dealers when I'm working with their cash flow modeling. I will do that, that I said, okay, here's our interest rate, here's our borrowing rate, the percentage that we're borrowing against these contracts. And now I'm going to say, okay, how much of the principal that we collect from consumers would have to be applied to the debt going forward in order for us to make sure that we stay within that fifty percent advance rate. We're required to by covenant. So the borrowing rate, that's that's not the same thing as the advance rate. I kind of is. I mean, the the so let's be careful. I'm saying the advance rate is or the draw is this kind of same thing. You're you're it's how much you're borrowing. So, again, I use everything we're going to look at here. I use fifty percent. with every dealer as though they borrowed fifty percent of against the portfolio they had at the close of april okay now we put no new contracts in that portfolio part of what have we have to do here is isolate and this is by the way this is what I think is tricky about managing this kind of thing in the line of credit is that when you when you isolate it in the way that we've done here you don't put any new contracts in it so we're just testing The rate at which the portfolio is performing now, if we could somehow isolate that and have this portfolio have this line of credit and just measure against that line of credit. There's nothing we're going to look at today that has anything to do with operating expenses. We're just saying the rate at which your portfolio is converting to cash is How well could it support a fifty percent line of credit? So I kind of tested that a couple of different ways. And but again, dealers do have operating expenses, right? So so that's you know, we we just this is about isolating the numbers so that they can make more sense. to those who would look at it, okay? And I do recognize from the many dealers that we've talked to that this whole idea of supporting capital, advance rate, all of that, they're relatively standard. I mean, they're relatively standard. The thing that is not standard is your operating expenses. Right. um that is that is not standard and so a lot of times if you're at that fifty percent and you're still struggling then it's time to really dig into those operating expenses I would agree with that and I think we've talked about in the past that um This test, and I've got some graphs we'll get to, but this sort of puts a test on the portfolio yield. And also it says, okay, well, if I apply, and I think I end up using seventy-five percent of principal. So remember I said that my method has been, I want to figure out how much principal do I need to use In order or of the principle that I collect from customers, and I typically include the repo ACV that I recover on, you know, bad, bad debt. When you have a repo charge off, I'll apply that, treat it like principle cash coming back in on the portfolio. So when you apply that. it allows you to then anticipate, you know, how, how well would that allow me to stay in favor above my fifty percent advance rate? And now that'll let us know, okay, how long does it take to repay the debt at that ratio? Now, again, that's not typically the way it works, but this is why you hear dealers struggling. We certainly hear it in V eight groups. We hear them talk about it's a struggle. I draw money out. You know, I, I, I, put in some new contracts. I draw money out. I pay down what I'm required to pay down based on what I've collected. And, and so it's just kind of a, you know, it's kind of a back and forth and it's, it's challenging to keep. And I've managed a line of credit myself in a dealership. It's challenging to keep, uh, a good lens into where, where am I at with that? And am I making any progress? Right. Yeah. We actually, we had a conversation about this, touched on it a little bit last night where it was like, it's, uh, if, if you don't, if you aren't paying attention to, and measuring and finding ways to improve the amount that's staying in the dealership, it is a very difficult proposition to get out of a capital situation. Yeah, and I think what... What this is trying to say is why is it more difficult for some than others? Yes. Okay. Yes. Okay. Yeah. So this is the part that's like, let me, let me go ahead and get the spreadsheet shared. If you'll give me a moment, let me get on the screen before you share that. And I'll get back to the top. Can I add it now? Almost. Okay. All right. Let's, let's start with this one. Okay. You ready? Yes. Let me make one more change so it can view it a little better, I think. And then I can try to expand it. Can you see the numbers well enough? Uh, barely. Let's expand it a little bit. See if that works. Okay. That's better. That's better. Yes. So what you've got, this is our method. And I just bought a little typo up there and some more stuff, but the, um, bottom line is what you've got here is the, uh, This is kind of getting into these conversion rates or, you know, in our language today for the podcast, we called it loan flow. Okay. Okay. So the loan or portfolio flow, the cash flow that's being generated by the portfolio. So when I talk about conversion rates, this is my typo right there. When we talk about conversion rates, that's basically just the... The rate at which we have been collecting principal. Okay. Okay. So right there on that row four, then row five is the rate at which we've been charging off principal, which that doesn't affect cash, right? That's money that left the portfolio. That is not cash. Okay. And that's a little on this one. It's a little bit higher. It is. This is a dealer who in the last six months, ending in April, they were charging off more principal than they were collecting. So this begins to put pressure on. Even if it's a very small amount, it starts to add up. Yeah. And why? Because this dealer will lose one hundred thirty three thousand dollars in their portfolio. If you continue to collect at the same rate, they would lose one hundred thirty three thousand in their portfolio. doesn't go in the bank leaves the portfolio and so it's it's sort of liquid leakage it's that that loss to liquidation thing we're losing money out of the portfolio and it's not generating cash for us so this is why these numbers become especially important now we do the same thing with a repo acb and then we do the same with um interest collected okay so All the numbers that we're going to look at here have nothing to do with an amortization. They have nothing to do with what the dealer typically sells a car for, what their cost of the car is, none of that. This is just looking at... how much do we collect on the portfolio and how much of that is interest and how much of that is principal basically. Okay. So now there's a lot of stuff in here that we we've covered some of this. We started, we did a podcast on this topic over here about cash on cash return. That's all still in here. This is all part of where a lot of the heavy lifting on the math happens. And then we've got, This, you know, what I call the PRI index, which I've got referenced down here at the bottom, but I just want to show folks first with picking a simple sample dealer is how this modeling works. And listen, dealers, you could do the same thing yourself, but what you have to be able to do, and we've provided, we've offered a template. You can email Jim at White Hat Way. If you want to put that email on the screen, you can email Jim at White Hat Way. Ask me for our template. We can provide you a template that'll help you do these calculations so that When you can build this, you can see that no new contracts going in the portfolio, this much collected principal, this much charge-off principal. The result would be that we would close the month with that much principal. Okay, so this is basically what you're kind of doing with this is you're siloing a snapshot today of what we have in there right now. If we went and just this and ran it off, and this is what it looks like. And that's why I like the silo approach because it lets us test. forget all that money that's moving it forget the overhead for just a minute we know your overhead is going to be in your business but what what we're doing here is testing the portfolio's ability to support debt okay and so I think this is significant because I talk to our dealers a lot about the importance of and the opportunity that exists in leveraging earning assets. We meet dealers that are a little bit debt-averse, right? We meet dealers that built their whole business on debt, right? And so it runs the gamut. We have some really fascinating conversations about this. What I'm really saying is, irrespective of your outlook on debt, this says your current rate of collecting and converting your portfolio, this is what it's going to show in terms of your portfolio's ability to service debt versus the guy next to you or the woman next to you. It's like this is the rate that I got to get to the bottom here. So bear with me. I know it's hard to watch somebody else move a screen like this. So I've taken all these numbers, and I've modeled it out for six dealers. Are you seeing that on the screen okay? I can probably increase the screen size a little bit here and still show everybody. Okay, so you're just at the bottom of that same spreadsheet. Yep, and so now what I've done is I brought those dealers down. Oh, okay, I see, across the left to right. Right. Okay. So what I didn't get a chance to do is go in and measure because what I like to show is what is our maximum leverage? Did we ever get above the fifty percent? And I know just from a glance, some of these dealers, even at a seventy five percent of principal applied, we're still running slightly like fifty, fifty one percent across the way. So that's why I like to model that out. So ideally, individually, you would have this be a different number with dealers. But so we got a fifty percent draw and that shows the opening amount. So let's let's look at this NC dealer that we looked up at the top. So they have about a four point eight million dollar portfolio. So a fifty percent draw on that portfolio would have they would have drawn in two point four. OK, now across all twenty four months applying the debt, the seventy five percent of everything that we collect, we would have paid down one point seven. OK, so that says the principal paid as a percentage of the original amount borrowed is seventy one percent. OK, which was and you can do that in reverse and say, OK, so we have about twenty eight percent remaining in debt that's unpaid at twenty four months. Even though we've applied seventy five percent of the money that we collected of the principal, not the interest, by the way, I'll show you interest separately, but the principal that we collect from the consumers, the repos that we collect from the consumers apply seventy five percent of that to the debt. Mm hmm. And this dealer would have retired in twenty four months time, seventy one percent of that debt and have that much remaining. So now let's just look at that part for a minute. This dealer seventy has paid down seventy two percent of the debt. Same formula for everybody. But this and this dealer has paid down eighty four percent. This dealer, ninety nine percent of their debt has been repaid in twenty four months. And it looks like it's at twenty five months. They've paid it all off. Yeah. Based on that. So you'll see that what happens there is and this gets a little this stuff is a little heady. Like I'm just trying to move slowly because it's there's there's some things to understand that on the surface. Might not make sense, but, um, but bottom line, let's focus on this part, which is like. Seventy eight, eighty seven, sixty nine. So you asked, are they all the same? Well, according to this, they're not, they're not all quite the same, right? They run, run, run from seventy percent to a hundred percent. in terms of how well they can service their debt at that rate. So then I looked at, okay, how many months does it take to repay in full at their current rate of collections? Again, everybody's at seventy five percent payback. Everybody's at fifteen percent interest. All of the dealers took thirty six months or more to retire the debt. Except one. This dealer that's running ninety eight percent. They retired the debt in twenty five. So how why? Why is the difference? It's because the because their cash because so much cash is being applied as a percentage. See, they borrowed one point one and they've repaid about one point one by just applying the same seventy five percent that everybody else is applying because they're collecting better. Okay, so basically, the reason why they have paid down so much more is because they're collecting better. That's really right. That's my way of thinking about this. So you can say collecting better. They're converting their portfolio into cash better. Now, keep in mind, repos come into that number too, but... Generally speaking, I think it's true. We're definitely collecting better. We should be converting the portfolio to cash. So we're applying it to the line of credit. We paid it down more. We owe a lot less. And our interest expense across that time period has been... And I may have a problem in this formula here because let me double check something. So this is something I can bring back as just to verify. But what I did is a quick test about interest expense across that period of time. Obviously, interest expense is going to be higher when the dealer's got a larger line of credit. Yes. Right? And then we use the interest spread across twenty four months, which is the interest that they collect from the consumer versus the interest they're paying on their line of credit. Uh huh. Okay. Okay. Okay. And so I'm just curious, like Alabama one, one hundred and thirty five thousand is what they their debt. Yeah. Which is a lot lower than. I almost I almost removed that dealer because they're kind of special situation, but they their their portfolio is smaller there. So so it's it's kind of. Oh, it exaggerates the numbers maybe because the numbers are small. Regardless, they still are showing the same basic rates as most everybody else of how long, what they look like at the end of the year based on their collection history, all of that. Sure. Yeah. And so I think I'm just really trying to look at, okay, so how much interest, like if it takes me longer to retire the debt, then how much... Direct expense, because every dollar of interest that we write a check to that line of credit provider, that's a direct expense to our company. And that money's not coming back to us. So that means that we're going to suffer more interest expense, obviously. I have a question for you, though, because we're talking about that percentage of advance at fifty percent. Now we've seen dealers at sixty, sixty five percent. So what does that mean? The advance rate is sixty five. Yeah. If they've got an advance rate of sixty five, how does that change what it is that we're seeing? Because it's going to take a heck of a lot longer, probably. Well, I do have the setup where we can change those numbers. Not all the numbers will follow. For example, this one I had to look up manually. But the the the reality is it's going to. This is why we want to... Keep it at fifty percent. Well, we can bring that back and have that conversation another day because I'm afraid that change here would flow through to a lot of things that would affect some things we're going to look at. But I think the short answer is... If we increase that debt, then one, it's going to increase our cash demands because, you know, I've chosen seventy five percent up here to support the fifty percent draw. If I do a sixty five percent advance, I'm now going to have to remit more cash that I collect from the consumer. So now I get more cash up front. But the demands on the portfolio going back and the cost of the interest, right? The interest expense is going to be higher because I've got more debt percentage-wise against my portfolio. So it does start to put pressure. And these are among the things that we'll be able to use this tool right here to test exactly those questions you're asking. So I would say, let's wait and come back and look at that separately. But I think, you know, for my purposes today, I just wanted to show folks, like if you had a fifteen percent And this could be a private investor. This could be your interest rate on your money. And as at fifteen percent, I know that it's just been kind of moving a bit is fifteen right now where most people are at. Um, yeah, I mean, I see some people have some private, uh, investment deals that are lower than that. Uh, but yeah, I think I remember Brent Carmichael on the show and was talking about, uh, it was like eight percent and, and we had a lot of people that wrote in and said, how the heck do you get eight percent? Um, and I think a lot of that is, you know, are you tracking, are you, you know, what kind of relationships do you have with, with your neighborhood banks? I do want to say, for those of you guys that are listening, if you want to see, if you're not seeing this on our Facebook channels or YouTube, you're just listening. So please go to our YouTube channel, jimandmichelleroads.com. slash by her payer auto finance coaches. And you can see the video of these so that you can kind of look at what it is that we're looking at as, as we go. You know, I, we, I should have said that at the beginning. So if stop listening and go to YouTube and while you're there, like, and subscribe, like, subscribe, subscribe. But okay. So Jim and Michelle Rhodes. Yeah. So I think the other thing I would point out here is the, you know, the, you see the dealers that have the higher rates of principal paid. They also have the highest, this is our PRI index, which we've talked about in the past, but this PRI index is basically using those same numbers at the top. And then this is my own calculation. I just do principal repo recoveries and interest. And so that's all cash coming in on the portfolio. Right. And so that's what these numbers. So you can see that this dealer at eighty eight percent, this dealer at eighty percent are the two highest in the group. And they're also the two that have, you know, lower interest expense. They have they're paying it off. They're paying it off faster. So this, what I'm kind of seeing is that this PR, that's a reflection of how well they're collecting too. It is. Yeah. And keep in mind, repo ACB, it's just cash. It's all forms of cash coming in on the portfolio. So you don't know when you look at that if a dealer's got a But you know that total cash yield off of the portfolio is that. So I think this is the part that, you know, when lenders are working with a dealer on a new line of credit, this would be amongst the kind of things that they would be analyzing in order to make you determine what kind of advance rate makes sense. Yeah, yeah. And I know, too, I'm going to plug this. If you need help getting these kind of figures put together, just reach out. You can reach out jim at whitehatway.com or call or text. Yeah. That is Jim's cell phone. Yeah, call him. Touch me. Yep. And so we can set something up and have a conversation around this. Because these are important things to... understand. It's really important to understand. It's really important to be tracking because when you are looking for capital or when you're looking to refinance capital or any of those things, the clearer you can show how we've been mapping, how we've been tracking with really solid numbers, the the better chance you have of getting capital one and getting capital potentially at a better rate than you do. So I think not only do these dealers, do we have a rolling twenty four on these dealers? We have a rolling twenty four for many months of history. So we have like a couple of these dealers or some of our pilot dealers when we kicked off in a beta back at the end of twenty three. So some of these dealers in this in a V.A. summary report, we've got, you know, approaching twenty four months of data now. So. Yeah. And some of them we've been working with for years before. So we actually have that data that goes back even further if need be. But I think this is why, you know, we like to see our dealers get in a V eight group. And then once we get at least six months worth of data strung together, then that lets them kind of drop into the graphs that are more comparable with everybody else. And so there's a lot of that stuff that we, you know, we'll use a three month average until we have six, but we basically we, we like to work off a six month average. And so this is just an example of what can be done. And I think, What I'm trying to do is help dealers get past the noise, get past the opinions, get really inside their numbers. Yeah, well, it feels like, or this is what it's like, okay, so show me the data. And we've talked about that so many times before with dealers that said, I made an assumption it was X, started tracking it, and I was wrong. Yeah. And so once you understand what the pieces really are, then you have a better... You're not just going to throw stuff at the wall and what's going to work. You have a better idea about what to do. And I think the other thing that I try to do... I try to do gently. Occasionally we have to get a little more, you know, poignant maybe with the way that we approach this, but dealers can be guilty of, and business owners can be guilty of falling in love with their business model. They like the way they do business. They like telling everybody else how they choose to do business. And I think what, what this does is it puts everybody on the same sheet of paper and says, you know what? I know you like your model, but when you look at this dealer, number six, your portfolio is not converting to cash as well as the other dealers. As a result, it will not support debt as well as the others. Do you need debt? I don't know. I'm just telling you, you're not getting as much cash out of your portfolio as your neighbor. And so this is where, or, you know, your fellow member. And so it's a question of how to, You decide. So I enjoy, as kind of the moderator of the VH stuff, I like bringing these numbers to the dealers and presenting them. And you guys tell me, is this a relevant number? Will this number help you in day-to-day, month-to-month management of your business? Yes or no? If it doesn't, we'll move on and we'll quit talking about it. And that's been kind of a fun thing. I've already taken that spreadsheet off the screen. That's kind of been a fun thing with some of the dealers that we've asked that. And they're like, oh my gosh, we talk about things that I've never talked about before. And I've been involved in a lot of different peer groups too. So it's just different ways of looking at what it is that's happening. Because it's in everything in life. Yeah. your perspective is not the only perspective. And the more you can see it from all angles, the clearer picture you have of what the thing is. And so if you're only looking from here, you're not getting the full picture of what the thing is. And so it's like looking at it from a lot of different ways that you build a much clearer picture. picture. It's like a three D picture of the thing. I like the idea of the three D thing because I am trying to offer, especially when it comes to portfolio performance. I always say we, we have like six or seven different numbers we like to look at. That's probably moving to more like ten now that things that you could look at to give dealers a different perspective on the portfolio. And I think, you know, obviously what we're, what we're striving to do here is to, it's sort of like a stress test. It's like if I made a dealer for the first time and we're starting to do cash flow modeling and this and that, we need to first figure out how's the portfolio performing now because that's what's going to help us. If we're going to do anything predictive and build some sort of pro forma projections, we have to know how to extrapolate what's happening in the portfolio now. I think by doing this, it's sort of that stress test that says, okay, you know, put aside your operating expenses, put aside these other things, and just test your cash flow against your fellow members. We were talking with Darla Boer, who's on the board for NIADA, and she had just a simple test. Do you remember what that was? Um, no, I remember you. Yeah. And I will have to see if we can find it. And she, it was something about if you can handle this amount of loss, then you're in a good position with your cash. And that's like an overall arching. All right. This is, but I have, I may not have to find out. I kind of think she was referring to something that I think we can credit Ken Schultz and with that, if I'm right about what was said, but basically, um, Double your charge off rate. That was it. Okay. Double your charge off rate and see where that leaves you, which we could go back and do the same thing here as a stress test. But you got to be careful. Like this is one of the things about our buy here, pay your business. And you've heard me say, one of the things we want to do, especially with White Hat Ways, We're going to speak very specifically. We're going to move past opinion. And this means we need to be very careful about how we talk about these kind of things. When you say double your charge-offs to see if it still works, works how? Profitability? Cash flow? And then let's do this, this health test. And cause as we can start to peel off the layers and look at things individually, then you really know what to do to improve because you may see that that's not going to do the stress test. So where do I go? What do I do? Um, you know, so I, I, and I appreciate that, that it's like, if you, if you can't handle doubling your charge off rate, then you, It's time to take a really good look at what's happening in your portfolio. Yeah, that's good. I think what I'm also seeing is that, you know, this, and people know, I think who followed our podcast know that I'm a cash flow first person in buy here, pay here. I'm just like, and I always make the wisecrack about, you know, we can't pay our techs with some contracts, right? They're going to expect cash on Friday, right? Yep. So we got to make sure we manage our business and manage our cash. So this is why I looked first at this one with cash. We could do the same thing, come back and look at the profit aspect of this portfolio and the related debt. But I think irrespective of your profitability, I'm saying you could break even and still maintain a line of credit. But if your cash flow fell below a mark where you could no longer support your line of credit, you're looking at a liquidation or foreclosure or selling off the paper. I mean, the cash has got to support the thing. Right. And so this is why I think this stuff becomes important to make sure we can stress test our portfolios and make sure, can they support that much debt? And it'll be really excellent for dealers to ask, you know, dealer number three or whatever. Let's break down how you collect so much better than we do. Which is one of the beautiful things about being involved in any kind of peer group. Yeah, yeah. Because we hear all of the time and we know that we're so grateful for this platform that we can talk to people because there's a lot of dealers out there that we get feedback from that is like, I was lone person on the island. I did it the way my dad did it. Yeah. And I didn't really quite understand what could be improved. And so you're going from, remember, it's like this very tunnel perspective about what's happening in your portfolio. And so being able to talk to other dealers that are, well, I mean, in most peer groups, not just ours, but they usually group based on size of portfolio. portfolio and then location, all of that. Um, so you actually, you can start to see how, how you're doing with those kinds of things. One of the cool things that, that I just, I saw that happened recently and you just don't get this anywhere else that I can think of is that if you miss your meeting that you can go to another meeting and you had a dealer that had, that's one of the big boys that went to, uh, one of the smaller, yeah, medium size and And it was like mentoring. Yeah. It's like this, this is, we've been through that and this is how we overcame that. And like for you want to get to this, these are some of the lessons that we learned. And I would say that dealer has a larger portfolio also learned some things that night. Oh, cool. Right. It's not that, because different people have different approaches, right. To the model and to the business and this and that. So I think, you know, there's things to be learned really. So I would say first and foremost, the, the, the guy showed up with an open mind and right. And, and able to, to learn from the others as well. So, yeah, it's, it's, it's, it's really been a good format, but I would just say that, that, you know, one area we could wrap up with is it's, Traditionally, buy here, pay here has been among the businesses that you could run without knowing all your numbers. You could hustle and create business. And in spite of not knowing your numbers, you could be successful because there's a fair amount of margin for error in the buy here, pay here space. But I would say that's shrinking. And, and, and from my, I mean, I, I'm relatively new to the space. There may be room for error, but it can be a very fast track off a cliff. Amen. Yeah. So it's like, if, if you're, if you're aggressive, that, that, room for error is nil or negative if you're just doing things in that kind of way. Let's, let's talk about thoroughbreds on another day. So that's what I've called thoroughbred things. Like we can, we can keep going on that stuff all day. But I think, yeah, that's, that's the premise I think is we're just trying to put good information in front of dealers so they can make better decisions for themselves. Absolutely. Again, if there's, Some stuff we'd like to be able to plug your numbers into this and get some. We do have the tool, so if you'd like access to that, reach out to Jim, Jim at White Hat Way, or call or text us, and if you're interested in getting involved in a dealer peer group, Let us know. One last mention. June thirtieth. I haven't put it on the calendar yet, but we're going to invite dealers to a discovery. This will be the first time we've done a virtual open discovery. Oh, so it'll be open to just the public, kind of, about what, yeah, the dealers. On June thirtieth. That'll be a Monday night. All right. So we'll send those invites. Well, everybody, have a great weekend. It is Friday. I hope you guys get outside in nature a little bit. Yeah. It's really, really good stuff. Yeah. All right. And we will see you on Wednesday. Yeah. Thanks for tuning in. Thanks so much.
