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. Hey, everybody. Happy Friday. It happened again. Another week has mostly gone again. It happens every week. There are times that it just feels like it goes a lot faster. When there's an awful lot to do, by the time I hit the pillow for bed, I'm thinking, crap. It felt like we just did this Wednesday. It seemed like it was just... yesterday but it was day before yesterday yeah anyway it's been a it's been a good week we've had uh we've had some extra stuff happening of course people know we're moving in the process of relocating and getting all set up in the new place and so um last night hosted a v-eight meeting and that's part of what our conversation today is about it's kind of ongoing conversations around charge-offs and this and that. How things are looking for a collective of dealers. And our group last night, this was the first meeting of the month of November. And this is dealers that are from one hundred to five hundred accounts. So, you know, pretty representative of common buyer-payer structure. And kind of status, if you will. And, uh, many in the group had been, I think, uh, I think four of the members that were in their meeting last night had attended the forum and were really enthusiastic. So it was really great. Um, they had, uh, had some walk-up, um, attendance and so they're pretty good. Um, you know, uh, good attendance by their count and, uh, and really rich content. So people were pleased and saying, those of you who didn't go, make sure you get there next time. So, right. Yep. Well, it sounds like it's grown and has become richer from last year. Last year was the first year that they did the dealer forum as the structure for the event. Before that, wasn't it? I thought this was the second year. Was it the second? No, this is the second year. No, I thought they did it twice before. I don't think it matters. But they're getting into a routine where they have to like, I call them table captains, but I don't know if they call it just a moderator at a table on a particular topic. And then I think they rotate. I'm not sure exactly the format, but bottom line is you get dealers to get in around tables and have conversations with one another and learn from one another. And most of them had really good takeaways. Well, you know, that's one of the reasons why we're always saying conferences, live conferences are a good idea, you know, to at least tend one during the year, just so that you can get like a feel for what, what other dealers are experiencing one-on-one, be able to talk, make connections, talk to your vendors and a lot of them. So, yeah. Of course, for the same reason, we also want to see dealers join a twenty group or one of our V-eight dealer groups because those conversations in a conference setting are wonderful. The problem is you don't know Somebody's giving you advice, but you don't know if they're any better in that area than you are. You don't get to see their numbers. Or if they're just blowing smoke. Yeah, that's true. But sometimes you get some really great ideas. Of course. So like the numbers, that's one thing. But the ideas. Yeah. Um, you know, everyone loves a fresh idea and teams love to hear a fresh idea. And so, yeah, it's, it's a great, it's a great idea. Yeah. And I also, I didn't get it teed up to show on the screen, but I also, uh, prepared a link where dealers can book. I'll get it shared. I'll get the link shared with this broadcast since I'm mentioning it. that dealers can start to book with me to do a recording where they'll pick six. I'm calling it pick six, like a football thing, pick six questions out of a list of ten or more that you would like to come and answer on video just for the sake of the podcast going forward. And that way you don't have to be here live with us, but you can contribute to the conversation and answer the questions that you feel most comfortable with. So I'll share that link and people can get booked and come do those recordings with us. So, Shall we dive in? Yeah, absolutely. It's a numbers day. Yeah. And we won't be here long because there's, you know, after looking at the numbers, by the time you take out dealers who didn't have twenty twenty four data. So so let me kind of help folks understand our objective here today is to, first of all. Separate fact from fiction. Like a lot of people are chattering on social media and this and that about charge officer through the roof and this and that. And so we just go back and we look at our actual data and we see what's actually happening. Well, by the time I strip out the dealers who didn't contribute full data for twenty twenty four and I strip out some dealers who acquired paper and during the period, some of those kinds of things that would make their numbers unusual. Then, you know, I ended up with a pool of data from our VA members, excuse me, where Where you've got reliable data, you've got data that's been validated and you've got data that will be meaningful here. And the way I chose to lay it out, it's just simple counts. First, I just looked at number of sales and number of charge offs. And so we can get that on the screen. I'll get it teed up here. That document, hopefully you can see it well enough. All right. Those of you who are listening to the audio only, please go to our YouTube channel. And you can see the actual numbers or just kind of listen along. Of course. You can always email Jim away and I'll email this actual slide to you, but it's just a single slide. And all it lists is volume for twenty twenty four versus volume for twenty twenty five. And then charge off count, twenty twenty four versus twenty five. And then at the bottom, it has interest coverage. I also did net sales, which net sales is just the difference between the buy here, pay here. I'm sorry, the sales volume and the and the charge off count. So I'm going to put this ticker on the screen while we go through this. Michelle, just let everybody know. Data is October twenty twenty five year to date versus October twenty twenty four year to date. Right. So it's just basically looking at a ten month period. So it's a. Good pool of data, right? It's a broad enough pool of data, ten months of the year, stacked over the prior month, the prior same period. And so what it shows is... saying numbers but yeah you know it's like best recollection when you're live but this these are all validated these are numbers that we confirm they send in matching or send reports to confirm the data that's being presented so the um so what we did is the for those not seeing the screen we've got a column for high low and average we'll focus mostly on the average today So let's just get to it. On the sales volume for twenty twenty five versus twenty four, the average was only off by a half a percent. We're one half a percent lower than twenty twenty four in this group. So we're pretty much so par for actual sales volume for the dealers that are, you know, this is an aggregate too. Yep. And then the charge off count. was actually up by seventeen percent so almost eighteen so it's okay it's it's up but that's you know and that's that's obviously a big number to many depending on the size of their portfolio that can be just incredibly big And I made a note over on the side over there is what percentage of the dealers saw an increase. And so we didn't talk about it in sales, but in sales, thirty eight percent of the dealers actually experienced an increase in sales in twenty five over twenty four. And half of them experienced higher charge offs. So I think you could say the other half of the group did not experience an increase in charge-offs. So I think we've got to just remember that, that when we say charge-offs are way up, you have to just say not for everybody. You have to put an asterisk in there. That's something that I see on social all of the time is that someone will ask a question and someone – people – inherently latch on to negative news okay and so it's like no it's worse for and this is just kind of it's it's awful and and you hear just everyone wants to pipe in that it's awful most of the time because they it's like people like to commiserate on those kind of things and If, if, you know, you're you're perusing social media and someone is saying someone is saying, you know, Hey, it's lower. And you're like, they're full of crap. I've been just fine. You're not as likely to leave a note in there as someone that says, Oh my gosh. Yeah, you're right. Sure. So when I see these things happen, and this is, I just think it's human nature. When I see these things, people, when they're having a bad experience, love to commiserate. They love, you know, other people like to kind of jump on that bandwagon. And so when you see all this negative, negative, negative stuff, there is negative, but it's not hitting across the board like it's, perceived to be if you're a new dealer and you're down a little bit and you're seeing this it's like oh my gosh yeah the sky is falling right it's not yeah and i did look at this this pool has got many states represented it's also got dealers from our our portfolio size of five hundred and two thousand so that first line yeah and i didn't want to show the actual numbers intentionally because you have to understand the The volume varies. Like you've got dealers in there that did a hundred cars in ten months. And then you've got some that did eight hundred sales in ten months. So that's why I just focused on the percentages of change for each of those individually. And that's how we ended up with the sales volume only a half a percent decrease. And then in the charge off count, seventeen point six percent increase in charge off. so seventeen percent saw an increase seventeen percent yeah okay okay all right and then so the net sales number so let's put that on the screen that definition i got it it just says um that net sales definition this is just my own definition i've always called it net sales it's just looking at how many did we sell versus how many did we charge off in the same period Because, granted, you've got payoffs to think about there, too. But that's generally representative of how much our portfolio might have increased, right, in terms of number of accounts, which is going to translate into cash flow and so on. So just try to look at net sales. And net sales, when you factor in the repo increase, net sales were down by eleven point two percent on average. So dealers netted fewer sales as a result of the increase in charge off. And then we get to interest coverage, which is, yeah, I just picked one. And I thought if there's any one number, we talked about this in our, in our meeting last night with this group and looked at everybody's individual numbers. And it's, it's really interesting there. It, So let's back up. Let's remember what I have on the screen. The definition is interest collected in the period minus the net charge-offs in the period. So we know as a finance company, that's why we charge a higher interest rate because we anticipate higher losses. And so this interest coverage is really meant to calculate Do we bring in enough interest to cover our net losses? And if we don't, we might need to make some adjustments. It might be an indication we've got a charge-off problem. We may be able to pass along some interest savings to our customers because our underwriting is effective enough, apparently, that we don't have as high a charge-off, maybe. All these are things that you could deduce, maybe, from looking at this interest coverage. But you can see that interest coverage for our dealers actually averaged an eighteen percent increase. So their interest collected in the period versus the net charge-offs in the period in twenty five was actually up eighteen percent with this group. So it's an indication that portfolios are not as shaky as, you know, you might quickly get your eyes right. I mean, I think. Yes, I agree. I think that I think that there's there's uncertainty right now. And so, you know, a lot of people latching on to the negative side of this. I mean, there's a lot of uncertainty around capital. There's around car prices that we were just squirrel. We were just talking about how all the tricolor cars are going to be hitting the auction houses. Right, right. and it's hundreds and thousands of thousands of cars that are going to be hitting the auctions. And so, you know, it's kind of like, that'll be interesting to see what that does to prices. Um, will prices drop drastically? Um, will they maintain their, you know, whatever it is. I, I, yeah. So interesting, very interesting. So when you're looking at the interest coverage and the charge off, um, uh, How do those counteract each other? So it's like, you know, if on average we're seeing an eighteen percent increase in interest coverage and we're seeing an seventeen percent interest or increase in charge offs. So that really does kind of does that. I'm the way I'm looking at it is like that's almost canceling it out. I'm glad you brought that up because I needed to explain that. So I put on there that this – I looked at the charge-off count just to keep it simple. So when you get in charge-offs, if you're doing deeper analysis, you would look at both frequency, which would be the number, and then you would look at – Okay, so this is not dollars. This is units. That's right. So that's why I put count up there, charge-off count, whereas interest coverage down at the bottom is based on dollars. So that gets into what they call – It would be interesting to see the actual numbers, dollar amounts and charge-offs versus the interest coverage and see where, because that to me would be like, that could be canceling. If you're collecting better interest and it's counteracting that. That's a good point. I think it's worth noting here that, you know, and again, for the folks not seeing the screen, the percentage of dealers that have seen an increase in this pool, that have seen an increase in their interest coverage this year, year to date, is sixty three percent. So based on what they call severity, the dollars of the charge off, which would be net of repo recoveries. Right. So with this particular pool, that um sixty three percent of them saw that their interest coverage get better so it's like it's not all bad news what what attributes to that increase and what yeah well it's going to be a combination it's going to be yeah it's obviously interest collected is going to be we're collecting well if we're getting interest in the bank right because interest is only is it about raising interest rates or is it just about better collections better collections Very few of the dealers. I don't know that any of the dealers in this pool have made any changes to their interest rate during these two year period, roughly. So so in this case, they're just collecting. Well, they're banking interest and they are. They are recovering repos apparently well, because this would be net of, you know, the charge off is a net number. So it allows for the repo recoveries coming back in. So the repo recoveries must be coming in good value, which is mostly what we're hearing. Dealers are seeing a lot more voluntary turn-ins, people giving up on the cars and this and that, but that means the cars are coming back. you know, that aren't wrecked and that don't have blown motors and all that kind of stuff that dealers deal with a lot. So we see pictures of that, but that's not the, the norm of cars coming back. So, you know, I was reading the article, we talked about, um, uh, the, the Primal End bankruptcy. And one of the things that contributed to them needing to do that was the, that they've cited in, I forgot which newspaper, um, article that, that it was from, but it, They cited how one of the reasons why they needed to do this was because of COVID car prices. And so, I mean, God, how long has it been since the COVID spike? Five. Well, it would have started late twenty, I think, is what I remember. So we're not seeing, for most of the dealers that are out there, you've already seen all of those cars that you bought at a high cycle out. They're gone now. So they're no longer part of your portfolio for the most part. Yeah. So did prices, how long did it take for prices to start going down? Some would say they haven't gone down yet. At all. Well, it gets tricky because are you talking about percentage of where it was or are you talking about... Well, the reason why I'm saying is because there was this period of time, this is from the article, where prices were so high and then they decreased in value. So when things came in, they no longer met that threshold of having value. They had higher... amount owed than what the value of the car was because car prices had dropped does does that did what i just say make sense yes and i think that i'd just be interested to see the raw data myself in order to see what people are concluding because i think any one of us could have any one of us has been around this business very long in i probably said it we probably have it on some of my recordings on youtube way back it's like when when car prices jumped a lot Think about what was happening. Dealers buying a ten-year-old Honda Accord with a hundred and twenty thousand miles and they were paying X. And suddenly because of COVID, that same car, same profile of car, same age jumped a lot. Well, it's the same car and the customer is going to pay the same down payment and the same payment. So we could have guessed that that jump to that new number was not permanent. Yeah. So that means it's going to have to correct. Obviously, it only corrects at the pace that supply improves and all these kind of different elements can come to bear. But the reality is we should have known that car prices were going to. But even if we didn't know that, we had to have known that. the customer, because we ran prices up, you know, dealers had to, they were maintaining their margins and they ran prices up. And so we, we just, I think there's still some debate about whether we're through the bubble on that COVID thing. And here's why you said we're through it because we're five years in, well, we are five years in, however, you know, a lot of dealers recycle their cars and bring them back in. And that means they assign a value and they run it again. So a car that was high and they bought in COVID is probably still showing a high used car price last year and twenty four or whatever. And so so it's got to be coming down so i think you look at that and say and again we're you know we're dealing with a small pool but i think it's representative of dealers that we work with in terms of you know profiles and sizes of operation etc so i think for our interest coverage to be up there's just those three elements there's the interest that we collect from the customer And same period, the gross amount of charge-off. So what I mean by gross charge-off is the amount the customer owed at the time of the charge-off, irrespective of the repo. And then we adjust for the repo value. And obviously dealers... From one dealer to the next, they may not have the same exact practices. One dealer may use Black Book, some may use MMR, some may just put a number on it. But as long as they're consistent and they were consistent in twenty four over twenty five, and I would say virtually everybody we're working with here, that would be one that I also tossed out of the data pool because they did make a change in the way that they were booking repos in twenty five versus twenty four. And now their numbers look more like the rest of the group. And so they can better compare themselves to what's really happening. But I think the most significant piece here is that we just can see that it's not... There's still some more correction coming. Every indication is that used car prices are going to come down. We think that's inevitable, right? That it's going to soften some. A lot of factors that are beyond anybody's control. What do you think about... I was just watching a highlight of news. We don't have television. I mean... We don't watch television. Cable television. And so the news is stuff that we just kind of pick up on before I go on to my point. Good point. Amount of finance has gone up, but downs and payments stayed similar, which would mean more interest collected as better interest coverage. Jim Collison, If the contracts are performing, right, you only collect interest with contracts still paying. So, Katie Robbert, So, um, how do you I, one of the, again, highlights of the news is that, and I'm not sure exactly where it's at, but it's either coming down the pipe, or something. And I think it's from the big, beautiful bill, where auto loans are now tax deductible. The interest on auto loans are now tax deductible for everybody. It's probably not going to affect our, because most of our clientele aren't in a tax bracket that they need to use the interest, the interest as a tax deduction. So, okay. I just was wondering if you see that that is going to change anything. No. Okay. Nevermind. No, I mean, not in our subprime sector. I don't, you won't see anything near term that, that feels like any kind of a change that you could attribute to that because as you said, the customer that for the dealer, it will, but I mean, the dealer, yeah, the car that they buy, they drive demos, but they try. Yeah, that's true. Yeah. So they don't pay interest on their loan. So it's, so I think I, no, I don't see a lot of, I don't see a lot of change with that. I don't see our consumer and subprime, you know, uh, doing itemized deductions very often. And so I think it's pretty insignificant for us. So we'll see how that goes. But no, I don't foresee any kind of shift there. Yeah. So just another little spot of the news for those that are listening. I just saw a news release this morning that TSA agents that stuck around during the government closure were and that went above and beyond the call of duty will each be getting a ten thousand dollar bonus yes so i don't know how you change your marketing but you go out to the airports and start handing out cars to all of the tsa agents hey do you need a car hey do you need a car hey do you need a car because they're all going to be hitting a ten thousand dollar bonus and you know yeah I don't know when they said it was going to be going through, but it was like a press release. Or it was a live thing that I was watching. That's also a recruiting tactic. Because they can say, the next time the government shuts down, you stick around. You too can get a bus. Yeah, you too can get a ten thousand dollar bus. So, you know, we know that for the upcoming year, that tax... tax money back to people within our customer base is supposed to be rising. There will be, from all indicators, more money coming for that. Be prepared. We have tricolor cars hitting the market in the next month or two. We don't know. It's going to be up to the bankruptcy court probably to release whenever they Well, when that does, I mean, if it lowers car prices, that's a good time to buy if you've been holding on to a little reserve to get some cars that are at a lower price. It is the time of year when dealers would be stocking up in anticipation of tax refund season. And there was some question about whether or not tax refund season is going to be. you know, a lot of people say, according to the folks at tax max, it's going to be great. Yeah. Yeah. I've heard that in the past and dealers didn't experience the same. So we'll just find out what, you know, we'll see what happens, but I got to ask you a quick question just to decide you and I haven't talked about this, but personally, personally, Did you experience any impact from the government shutdown? Were you aware that the government, did you feel it? Um, the only way I felt it was uncertainty about whether or not we were going to make it back to Utah for Thanksgiving on our flight, just watching all of that. There was nothing else that had affected me at all. Um, And it affected me on the periphery around the, again, it's a feeling, the stress level for family members that rely on a government check of some kind, whether it be service or retired service or whatever. I was just asking about you personally. So me personally, I did not feel any of that. Just the potential of a flight. Yeah, I did not. Just trying to put government in perspective in our lives. No, I didn't. Maybe we should shut the government down for a while. That whole thing for me is there is perceived... threat purveyors of fear is a real thing and um you know that that fear sells And it's interesting with most big things. That's like the news of the day, the government shutdown. The news of the day and why everyone should be afraid or angry or whatever. And folks, from my experience... The majority of things we are told to fear never happen. Right. And so you think about all of the wasted energy we have around fearing what never happens. Now, do I say you should just go and be Mary, you know, I'm Pollyanna and everything is, you know, half full? Maybe. But, you know, you make sure that you're... always have your safety net in place and you know, you're doing the different things like, um, you know, that if you doubled your charge offs, would you be okay? Okay, we're good. And then just stop listening to all the rhetoric and all of the hype and just, um, at least, okay, not stop, stop consistently consuming all, all of the rhetoric and all of the hype. And maybe just avoid overreacting. Like, I think we just need to, you know, of course we need to react. We need to be responsive to what we see and anticipating, you know, things relative to competition and this and that. But otherwise, I would say, yeah, maybe this is an indication. And like I say, today was just like a lot of days. Just present data and let you decide. But the data says, survey says, you know, that charge-offs for not everybody, you know, is experienced. Yeah. Well, and it's kind of fun because I, you know, we listen to everything. The data, even though everyone gets the data, the conversation didn't turn towards the data until the last little bit of the meeting, because they all wanted to talk about other things. And so again, if you are interested in, joining a V eight group, being a part of that conversation, you know, Hey, just come and come and. join us some who are listening want to be in a group they just don't know it yet yeah exactly so yeah if there's anything we can do to help you please let's get caller text nine oh three eight one six zero two one six that is jim's personal cell phone so all right everybody thanks again for joining us we really appreciate you taking the time to be a part of our day um hope you guys have a great weekend and we will see you on wednesday thanks again
