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, good morning. Welcome to the morning show. We're late today. I have to own that. I chose the wrong time when I pushed the broadcast. And it's not an easy fix. Once you push the broadcast, all the channels, you just kind of, yeah, it would just confuse people. So I was able to fit in. Yeah. I was able to fit in a recording with a highly experienced dealer. Look forward to bringing some of that education back to our listeners because We're now recorded, too. I've got a few more we've got to get squared away, and we'll be away next week, so it might be a little bit before we get a chance to schedule some more, but I'm enjoying doing that. That's fun to ask those questions. Let them pick the questions that they want to answer, and we We worked through it, but there's a lot of good stuff we've learned already. It's just some in-depth interviews with dealers where a list of questions is sent and they get to choose so many of them that they want to answer. Yeah. Yeah. That way they feel a little more prepared and get to kind of stay in their comfort zone. So all good. Less than a week away from Turkey day. Yeah, that's right. We've got Thanksgiving. Yeah. And we're heading back to Utah and Was it informed by the kids? It's like hey, can we just do brunch? Okay, yeah, so yeah, we'll be doing Thanksgiving brunch and Yeah, not sure what's gonna happen in the evening. Yeah, can we do two meals? Well, we can't because, I mean, it's not going to be a Thanksgiving dinner at breakfast. Yeah, I just don't know. I've never had pumpkin pie for brunch, but I mean, I don't see why. We could do like pumpkin something. Pumpkin muffins and stuff for breakfast. I mean, why couldn't we? So, yeah. Yeah. Shall we dive into our thing? I think that's a great idea. And we won't be here long today, folks. It's just some kind of simple stuff and some kind of new presentation of data. And I'm going to show it to you in a couple of different ways. Let's look at this thing first. So this is the raw data. And I'm just going to show it briefly because I want folks to get a feel for what kind of numbers we're talking about. I chose a dealer group that has five hundred and two thousand accounts. And so I'm just again, today is just representative. We can come back with more data from the other groups as well in the coming days. What I'm really looking at is breaking down what I call portfolio yield. So Michelle, if you're a buy here, pay here dealer, your portfolio basically generates cash you collect payments and of those payments, it's broken down into principal and interest. And so I split that out. I say, how much principal did we collect? How much interest did we collect? And then the other type of yield that the portfolio would have, this is not counting things like late fees and some other small stuff, and the other thing would be repo recoveries. Like that's something that's generated by the portfolio that obviously drives our bank deposits. And you can sit in here, argue all day, whether repos are cash or not cash. In reality, we're just saying it's something that is generated by the portfolio. It's equivalent to cash because we put a value on it that should be equivalent to its cash value. So that's what we're looking at. But I also want to share this. We're going to go over and look at percentages instead. But I wanted people to see that the data we're working from is dealers who have collected you know, almost twelve million, nine point five million total. Right. They've collected, they've collected some of them. Let's look at the interest. The largest was twelve five. Yeah. And the smallest in terms of interest earnings, because they might not be the smallest dealer, they might have lower interest rates. So this is part of why we look at these kind of things. The dealer with the lowest number in terms of interest yield was one just over one point one point zero million one point zero two. So so that's significant. That's ten months worth of interest collected. Right. And so I just kind of want folks to see that part first and understand that's the kind of data pool that we're. we're looking at but when we look at on percentage basis i put it in a graph and so when you look at on percentage basis let's let's take our time and talk through this and make sure that first line is the group average so you can see that and i chose to to stack it up this way if you think of it in my mind the first thing we collect is interest most of our dealers that are by here pay virtually all of them are simple interests so that means if i'm financing the car to you michelle when you make a payment i first collect interest so if i think of my interest first then that's the green line there and you can see that the dealers averaged across again across ten months and millions of dollars Those dealers average collecting twenty nine point one percent of all the money they collected. Twenty nine point one percent is interest and fifty six point one percent is principal. And then that last fourteen point eight percent is in repo recoveries. So now if you look at, let's just study the green line for a minute and you can see kind of how that varies by, even though these dealers are all good size, well-established dealers, you can see the deviation in, in their numbers. So you've got the lowest. terms of interest earnings or interest collected as a percentage was nineteen point nine percent okay see that yeah but they also collected the most oh well no they didn't collect the most um principal yeah true yeah so so it this is why i think it's important to kind of visualize this data and begin to understand well how why are their businesses so different They're all up there with, you know, eight hundred account, thousand account portfolios, and they're all financing, you know, the same kind of customer. Why so different? So I have a couple of questions. And let's see if I can answer them. So, you know, when you're looking at things, obviously indicative of different business models. And so I'm like looking at these ones that have really high principal collected and lower interest collectors that have anything to do with. their APR? Yes. If I understand, you said the relationship of how much principal they collected versus interest collected. Yeah. It's going to be a function of APR. So would someone that's collecting that much more principal than interest probably has a lower APR? likely it could also be there's some other factors to consider in there um but i would say that yeah primarily you're talking about the the rate of interest keep in mind maturity of the portfolio would also be a factor because again in simple interest the the newer the contracts are the more interest we would be collecting Right. So there's always, like I said, there's no easy answers here. And that's what part of what makes our business a little bit complex. But I would say part of the reason I chose this particular group for this data presentation was they're, they're established. These are people who do substantial volume. Right. And they, so they're, they're pretty much have mature portfolios and you've got dealers in there selling, you know, eighty to a hundred a month. Yeah. So there's always some fresh contracts in the deal, but certainly overall, I think what it helps us to look at is, you know, how does it break down? And I think this can really be an interesting thing for us to, within our groups and our VA groups and our conversations, it helps people to start to look at I just, I enjoy just presenting the data for people and let them talk about it and decide for themselves what the, what the meaning is. And whether or not it holds a lot of value. It's just, it's interesting to see the, you know, and it just, it, it starts to make me think of a lot of questions like dealer eight, um, has a really high principle collected, um, you know, uh, average. just right on the average of interest collected and very, very low repo. Does that mean that they don't have a lot, but they're repoing? It does, or it doesn't, or it could mean most of our dealers in this group are consistent in the way that they value repos. You know, you put a book value on it. So it's also a reflection of business model. Some of these dealers, In fact, one of our members in a meeting just last night said, you know, our repo rate is low percentage wise because we're doing a high ACV car, or sorry, high mileage, low ACV car. And often when we repo, there's not much left to finance. Yeah. And so that's, again, a reflection of business model. And will that dealer make an adjustment to their approach based on what they now see from other members of these groups? So it starts to really kind of beg the question. Well, there's a lot more questions to ask in there. Yeah. And I think, you know, we talked about it. For those not seeing the screen, you know, be sure to find us on YouTube. If you're listening on audio, another one to find on YouTube so you can see these visuals that we're presenting. But the lowest dealer in the group, just going back to this interest section in green, The lowest dealer was nineteen point nine percent of all the money that they've collected in ten months. Less than twenty percent was interest. But the highest is more than double. They're forty one point nine percent of what they have collected is interest. So they're charging a higher interest. That would be what my assumption would be from that is that it's a higher interest contract. Well, let me add another assumption to that. So think about you're the lender. So you're the lender and this dealer is collecting forty one point nine percent interest, which helps their profitability and probably can help. Certainly, you know, it all goes in the bank. But you can see why this dealer has also collected the lowest principal in. the group, which suggests that their portfolio is, they're holding more value in their portfolio, at least principal. You know, if you talk to somebody who's got a ten million dollar portfolio, that's usually principal. So you're saying that if they were to stop selling tomorrow, they would have a longer, if they're holding more in there, then they would have a longer stream. Yeah, and what we're not looking at here is the gross charge-off numbers. We're only looking at the money coming in. The charge-off obviously just gets written off and it's not cash, so it's not showing up here. But one could conclude that if we're paying a lot more interest and we're paying less principal in this example, then it stands to reason we're going to be carrying more principal in our portfolio and any given customer would have a higher potential principal balance, which means our charge-offs would be higher, right? When we write off an account because customer quit paying. The dollar amount of a drop-off would be higher. Exactly. So that goes the same direction. Yeah, it's part of what you can expect to see. So I think it's an interesting thing to be able to analyze. And it's part of why I tell our members, and you've seen me do it plenty of times, a lot of times when I'm up before you are, it's in the mornings and it's quiet in the house. I ended up spending some time digging into this kind of stuff because I'm just always looking for ways to be able to present the data in a way that'll help people see it visually. And a lot of that's for me as an analyst to be able to visualize and see kind of what the movement is in the numbers. And obviously it can help our members in these V eight groups and our clients as well when we do this kind of thing. But I think that's all I was trying to do today was again, show a new way to think about of the money that we yield, where's it coming from? Yeah. Yeah. And so takeaways, what, what, what takeaways can a dealer, you know, looking and listening, um, uh, take from the conversation? Um, I'm, my first thing is, is, is be aware of, of where, what buckets are being filled. Yeah. Um, and you know, uh, what buckets other people have being filled and, and whether it gives you an opportunity to contrast and compare. Right. and have a conversation about how are you doing this differently than me? Well, some of the takeaways for me would be, let's take one. Business models vary. Yes. Okay. Here's just eight dealers represented. This is actual data, January through October, twenty, twenty five. Business models vary. Yield varies. Okay. Does it? Go ahead. Do you have a question? It's just, it's a statement. It's like, you know, when you sit around a lunch table at a conference and everyone's talking about how well, it's, it's, there is so, so much more involved in the wise. And so, you know, to, uh, I can see a younger dealer coming in and going, well, they're getting this. Why am I not getting this? It's like, it must be. And, and it's like, it's, it's those kinds, these kinds of, uh, like variations that create deep conversations around the business model. Yeah. And why we choose to do it the way we do it. And look, the reality is they can all be right for that particular dealer. The strategies vary, access to capital varies. I mean, time in business and your own financial standing might be a factor here. But I would just say that What this slide says is that business models vary and not any one of them necessarily is better than the other. It might be better for that dealer. It might not be. This is an opportunity for them to learn from one another. The other thing I think you could see from this is just lean on the group average and go back and look at your own numbers because this is a number that dealers should be able to run on a napkin. You can run this on a napkin at your desk right now. Run January through October. Look at your interest collected. Add that to your principal collected. Add that to your your repos recovered, and now you can just run the same math and ask yourself how your own numbers compare to this group average. For those, again, not seeing the screen, I'll run through those numbers again. The repo recovery is coming out to fourteen point eight percent on average of all money yielded by the portfolio. the principal collected is fifty six point one and the the uh interest collected is twenty nine point one so those would be your key takeaway go back and look at that it's not that one is necessarily better than the other in this slide that's it wasn't what i was trying to present today as much as it is look at look at your own numbers and see how yours might be different and then obviously final takeaways join a va group yeah exactly and that's that's that's the big part is um is you know dealers that are very seasoned kind of understand this at a uh just because that's just they just from listening and watching younger dealers need to understand. Um, and there's one of the reasons why I think this is helpful is, is to understand that there are so many nuances. And so when someone says, this is what you should, or this is the why or whatever, it's like, it goes, there are so many other moving pieces and, and you know, it's, this is, um, how we set up our loan structures, all of that is not regulated. Like other, like a doctor couldn't come in and just be as so many different moving pieces and parts like people in our industry, you know, setting up a shingle, a lawyer couldn't do it. And so in our industry, it is so challenging to be able to look at a number, whether you're in a VA group or a Just sitting around a conference lunch table, there are so many nuances in this business that to listen to someone who's successful and have them say, no, this is what you should do without understanding all of the nuances is they're probably just preaching their model. Yeah. And people do get attached to their model, but it's like, you know, if it works for you, it works for you. It's just that it's important to remember that you use nuances. And I'd say sometimes it's actual limitations. Like I can't do what you're doing because I don't have access to that kind of capital. So I can, if I did that rules in your state. Yeah. Whatever the limitations might be, but often it's capital restricted. It's like, I can't, if I did that, I can only afford to sell well cars a year or, you know, I'm exaggerating, but it's like, you know, the idea is like, yeah, yeah we need access to capital to do some of these uh to execute some of these models right yeah and there's oh and you know well capital squirrel okay uh just saw some news reports uh are we can i are we is there more you want to talk about uh are one of our founding sponsors who now is in by your pay your capital as well so they service both have now joined by her payer united and um I sent off an email to EO and Tim and just was like, congratulations. This is a really, really great move for the industry, great move for them. So what they're going to be doing as part of this, it's Steve Levine and his folks. Compliance unleashed. now part of Buy Here, Pay Here United. So the LHPH summit is now part of Buy Here, Pay Here United. So for one ticket price, you're getting access to all of the different things. So I just, you know, hats off, great move. I'm really happy for them and for the industry, for the dealers that go, cause they're gonna, they're gonna, really be able to learn some stats and all of that from someone who understands both models deeply. And let me just mention LH Page Capital is the original founding sponsor of White Hat Way, which you can look at their website and see that means they stand for trust and transparency and leadership. Oh my goodness. Very, very ethical folks to deal with and just a great team of people. They picked up Jimmy Rambo too, who is like one of my, one of my, uh, favorites from going to conferences when I first started, especially just a really, really good guy. Well, they're just all good people over there. So you, if you don't know LHBH Capital and you're going to be at the BHBH Summit, get out there and reach out to us and we can get you an introduction. Absolutely. Yeah. We know where to find them. We know where to find them. Alrighty. Anything else? No, that's it. Let's wrap up. Okay. Well, again, it is Friday and so the weekend before thanksgiving so um there are those i think most of us will have like uh lists of things especially if you're hosting it's like honey we need to get all of the tables out we need to get this you know and i've got friends around here it's like i'm not hosting we're flying out on monday so have me come over and help yes there's just a lot of activity this weekend and so Everybody, enjoy the fall colors. Enjoy some football. Enjoy a big pot of chili, whatever, as you're getting ready. And maybe collect a few carpets. Maybe collect a few carpets. Yeah. Does make the world go round. Yeah. All right, everybody. Thanks again so much for joining. We will see you on Wednesday. All right. Have a good day.
