Wake up, Buy Here, Pay Here people. It's a beautiful day. Go grab yourself another cup of joe and say hello to Jim and Michelle Rhodes on the Buy Here, Pay Here morning show. Take it away, you two. Good morning, everybody. Good morning. Happy Friday. Buy here, pay here, people. And lease here, pay here, people. And lease here, pay here, people. It's so pretty out here. Spring has sprung, and we've been taking our morning coffee out on the patio. and having our evening watching the sunset outside, because it's just nice, and listen to the birds, it's so awesome. Yeah, for those of us who've been frozen in Utah. Yeah, this is like, yay! Yeah, I remember growing up in Washington State, and we didn't have snow there. I grew up in the Seattle area, and way back when, before the weather patterns started really changing with Mount St. Helens, that and other things. But we would – from October to about now, you wouldn't see the sun at all. Right. I mean, like, you didn't see the sun. It was just misty, cloudy, no sense in having an umbrella, all of that. And so the first day that it got sunny – more people were calling in sick, kids were skipping school and you had to any place that you could sit around as a group of friends and just soak in those race. So I, you know, I come from a place where I really, really appreciate when it gets nice. Yeah, absolutely. It's been excellent. Yeah. It's nice to have, uh, uh, mornings that are warm enough to be outside and have the coffee and all that fun kind of stuff yeah all right shall we uh let's get to our announcements there's a bunch so everybody grab a pencil let's go because we know you take notes right yeah so we got uh tuesday night we have our group four meeting I put some stuff out on social today and uh you know, people are speaking up really positively about their experience and, uh, you know what they're doing. Yeah. There's room in that one. And it's, uh, uh, that's a midsize. It's like, um, a hundred to 500. I would need to hear from you soon. If you want to sit in on the April meeting to review March data. And then, uh, We have on next Thursday, the 18th, we have our dealer roundup. Yes. So did you mention? It's going to be good. It's going to be good. Brent Carmichael is co-moderating. Got three really great topics. We've got a dealer panelist joining us. And so yeah, it should be really great. And then Tuesday, the 30th, we have our group three meeting. That's the one for newcomers. That's generally dealers that are under 100 accounts. So if you have an interest in that, you can jump in there. Those are all real affordable. And then we got the Neo users on the 23rd. We are looking so forward to that. Yeah. And then BHBH United starts the day after on Wednesday, the 23rd. 4th for a couple days. Well, they have their cocktail hour on the same day in the evening. That's true. And then it goes for, it looks like they've got a really great lineup and good speakers and all that kind of stuff. So folks will be arriving on Tuesday for BHBH. You, I'm sure, will see a lot of people at the Bellagio. Oh, yeah, yeah, yeah. We're not doing Buy Here, Pay Here United, but we are doing the User Summit. And, well, we have some meetings in Vegas, but we will be in Vegas for our 300th episode, which is going to be that Friday, the 26th. 300 episodes. And, and I think, you know, I, who was it? I was talking to someone yesterday and, and I said, 300 episodes. And I said, I, uh, I think that we've only had maybe four or five tops reruns that we've done. I don't know that we've had that many. I don't even know. Yeah. I mean, I think it's like maybe three. Yeah. Um, so, you know, we, uh, come rain or come shine. Uh, you know, we've, uh, you folks put up with us. It's been great. It's been great. You would have to, I guess for them to stop the show, they'd have to come to our house, kill the internet connection at the house. We're otherwise we're going to keep talking about what's going to happen. And it's kind of cool. Cause we, we get to go on the road and take it with us. And, Those of you who follow us on social media have seen setups at hotel rooms with ironing boards and all of that. Sometimes we're a mobile roadshow. Yeah, we really enjoy it. And regardless of what it is that we, as we grow and build and there's a lot of stuff on the road map, this is something that I think that we're always going to have our fingers in and cause we just love it. We love getting together with, uh, with y'all and, and talking about the things and bringing it along. It's a great way to bring stuff to folks. And today's a new example. Like, you know, this really came about as a result of some of our conversations in around the data work, you know, obviously with our V8 meetings and other client meetings and, So this is kind of the area where the numbers nerd in me just continues to dig in and just kind of see what we can figure out that is going to be of benefit to dealers. So when I put the post out this morning, Michelle, I said, you know, there's a couple things we could talk about today around deal structure. You know, one is going to be what we know, you know, what we don't yet know. And then what we may never know in this buy here, pay here segment. So are you saying that there's some stuff that we just have to take trust our guts or what? No, I'm just saying you're never going to know the parts that longer term performance. Yeah, we can get together and we can get a number of dealers together and we can learn from the pool of dealers that are there. Mm-hmm. I don't foresee the day currently, not in my lifetime, that we're going to have enough data strung together all the way through the process to really know how the collections management works. Because it's one thing to look at somebody's portfolio results, but you can never really know what their collections approach is. Oh, yeah. The effectiveness of their collections. I mean, because nothing is standardized in this industry. No, and that's the part that, you know, we gather what we can gather and we share it, you know, through these different channels. And people are certainly learning from it. It's just, it's not that. It's that... There's parts of this that are going to be challenging to know. So over today, we're really talking about deal structure, which is really just about how the deal looks at the time of delivery. So, so today we're talking about, you know, we're going to show some slides and these, these graphs, I would just make sure everybody knows you're just looking at a graph from one group from one month. Both of the graphs that we're gonna show you. This is, they're from March? Correct, these are both from, these are fresh numbers from the month of March. What do you wanna see? We can pull that other one up, the gray one there. This one here, okay. Yeah, let's talk about this one. So this is risk as a percentage of term. So I'm gonna let people look at that, and if you're catching this later on audio, Then what we've got is a chart of, it's a bar chart with seven different dealers represented. Again, snapshot of their numbers from the month of March. And then there's a group average. And so the group average I'll share comes in, I think that says 37.9%. So is this one of those things that, I mean, you want it low? I think you do. I mean, really, this is one of the areas where we're all still kind of learning. Some of this data that we're sharing, it really hasn't been presented in this way to my knowledge. I've never heard about it. It certainly wasn't something I saw. So tell me what this means. I mean, you've finished a deal and you're at 36.5%. What does that mean? What that means is that we take... All the deals. So let's let's look at dealer number seven. Their numbers are what? Forty five point seven. So what it says is all the deals that that dealer did in the month of March, their risk. So you just take the the. the cost in the car, including recon minus any down payment in that trade. And that gives you a cash in deal figure sometimes called exposure, sometimes called risk, you know, risk in the deal, but it's, it's the cash in deal. So now we take the, uh, The average payment of all those contracts that were originated in the month of March. And we say, okay, if this is our average risk and this is our average payment, this is how long it takes us to break out of that risk. Okay. So what I'm seeing then, what I'm hearing then, let's say that 45.7%. has a 36-month contract, right? So 45% of the length of time that they're paying on that contract, they're in risk. In risk, that's right. So that only leaves them about 54.3% of that contract is where it's that they've recouped all of their costs okay great because we already we also have the total term of the contract so what this is really saying is that the term of the loan relative to the risk is this, really I'm saying it backwards, but the risk percentage of the total term of the contract. So it's just all payments. It doesn't matter how much is gross profit, how much is interest earned. It's just saying our actual risk of the payments that we collect from the customer, in that dealer's case, 45% of the payments, as you said, or if it's a 36-month term, then about, what is that, 16 payments are covering the cost and the rest go to profit. Well, wouldn't this bar be moved based on how long you want to collect? So like the person who is 21.6, could they have a longer term than the person that's 56.3? They could. But what this is really looking at is irrespective of the length of the loan, it's saying this percentage of your loan. is okay risk okay so yeah that dealer's got lower risk but they could also have a longer term yeah we don't know that it's a shorter term we just know that their risk as a percentage of the total length of contract is lower for that one dealer but I think you know this is an example of some of the kind of stuff we're seeing inside of v8 conversation is like You know, look at the disparity in those numbers across. Michelle, you've got to sneeze. I've got to sneeze, but it won't come, you know. Yeah, I feel my pain. You've got a mute button on your microphone over there. So she's trying to find the right button. It's a new board. So anyway, the this is kind of you can see look at the difference in those again, just one month. Right. But look at the difference in those numbers across that group. So you can see why this stimulates conversation. And then when we go to the next slide, it's even got more layers of information. So by the way, go ahead. Yeah. Yeah. So this other one, this is looking at, so again, for those on audio, what we've got on the screen now is, again, a group average. This particular group had only six members submit data in the month of March. And so you've got kind of a stacked column graph. And the bottom of the stack is the risk. okay the middle that that's the green band and then the the blue band is the gross profit so um hang on I'll finish explaining that I'll come back to that question uh so then the gold band at the top is going to be the apparent interest calculation, because again, we're kind of using similar math to what you saw on the other one. We know the total term of the contract on average, we're using averages. We're taking the average term of the contract of all the contracts originated by these dealers. And some of these dealers in this particular group have, um, we're doing hundreds of deals. Okay. So you're talking about a pretty good size pool of data. And now we just take that. We know the total term. We know the risk. We can calculate the risk in the way that you heard us talk about in the prior slide. And now we know the gross profit on the deal. So we can say, okay, if we have the gross profit, we divide that by the number of payments. Then now we know about how much of that contract is going toward gross profit from the sale, the markup, if you will. And then the yellow bar being an interest. There's, there's a question we have from one of our people and I'm, I'm, Is this the same? Is dealer two the same as? No, they're different groups. Oh, okay. Okay, because I was like, yeah, that there's, yeah, okay. Let me just get an answer. I've got it right here on my laptop. Okay, cool. It's in the group that has the, let me make sure, the group that has the blue bars, that group's average is 32.8%. 32.8 is average. Okay, so yes, let me just say, Tyler Simmons, what's the average term for the group? And so let me pull this back up. Is 36.2? Correct. 36.2. You can answer that right there. So the blue bar is just for the sake of other people who might pick up the thread later. The blue bars, that group average is 32.8. And then let me find it on this other group. Okay, so I'm adding that to the stream. Okay, cool. So when I look at this, when I look at the one that is the stacked colors, the Ohio dealer number two, just from what I'm seeing, that to me looks like the best deal. Why? Um, because, uh, there's low risk and deal. There's high gross profit and there's lower interest. And so to me, this is just how I interpret it. That's probably the best deal for a consumer too. Because they're paying less profit. Do you know what the term is for this one? I know what the average term is for the entire group. It would take a minute to go in there and find the individual. Well, it actually says right there on the bar. That particular dealer, the bar on the left, that dealer you're looking at is apparently about 34, 35 months. See the axis on the left? Oh, this is 40 months. Okay, gotcha. So it is high profit, low risk. um and they're because they're keeping their interest rate low yeah that they're able to get it done in 36 months and I guess you know I realize now I can answer tyler's question right here on the bar that the that bar on the far left tyler if you're seeing the screen is the is the group average so that's coming out right at just short of just under 40 months Yeah, and this particular slide. Which is interesting because I've heard, especially during COVID, and I don't know if it's been shifting back, but there was a period of time where everyone was like, we're having to go to 40 months to 45 months to 50 months in order to get the kind of profit that we want out of it. And so is it that things are, cost of cars are coming down so that you're able to do it? Um, do it in less time or, you know, or people have just at least the people that are in V8 have not typically had that, that mindset. I can't really answer that, but based on everything I see, which is more anecdotal, I don't have enough like year over year data to be able to say that cost of cars are coming down because obviously people buying practices change within the data pools that we work with. So we are hearing anecdotally across Facebook and whatever that car prices are stable, maybe coming down some, but that can be seasonal. We're just coming off of, you know, prices can get high leading into tax refund season and during tax refund season. Now we're coming off of that. So I think another good measuring stick would be, you know, where do car prices land come June, you know, will be a pretty good indication of what the thing looks like. But I, I follow your logic behind the structure there and, for this dealer, their risk is lower, their term is shorter. And so, yeah, there's a lot to like about that. Well, if you're a finance company, and so this is part of what's interesting about our business. If you talk to a lender, the lender might like that dealer over there with the longer term and the high interest. So it's interesting because you have the dealer's interest, you have sometimes the lender's interest, you have the consumer's interest. Well, I mean, it's like, are you building your loan structure to please and support a lender? Sometimes. Well, the pressure is there. If you can't afford to fund the deals without your lender partner, then you're going to have to play that game, right? I can imagine that the conversation in this group, when they're looking at dealer number two, they're like, what are you doing? Because the gross profit is high. And so is it your business model? Is it the cost of car that you've got coming in? You know, what is it that's doing that? And I would love to see in relation to this what they're doing. We know what their average term is, but what their repo rate is, is it pretty standard across the board? Do they have all that? You want to finish this about the average term of the three bar graph is $39.5. So, yeah, I think, yeah, it is that kind of conversation. One of the things that we're doing with V8 is validating the data that's coming in. So it's not like the dealer is fudging on their cost of car. You know, we're having them send a source report so that we can verify that. You know, especially if there's a question or we can go back in and verify the values that we're looking at. But you're right. I mean, this just kind of shows the difference. I mean, look at those two dealers side by side. You mentioned the Ohio dealer next to New Jersey and look at the risk in the contracts of those, the risk relative to the profit. Yeah. So in their model, they've got less gross profit and more APR. Yeah. Right. So which one's right? Well, I think the thing that I mentioned also in the comments that I was going to quote, you know, dealer friend Tommy Brandes, because, you know, Tommy always talks about something that I think. So let's let's connect the dots on a couple of different things. I always talk about that. there are two types of structure that if you can get these right, you really help yourself a lot in this business. You, you mitigate a lot of the risk that is by your payer. So the first structure is your, your funding structure, how you, how you borrow or how you source funding. How the dealer is getting money. Right. Okay. So how they source money and how they structure their funding inside their operation. That's, that's one. And that's not what we're talking about today. The other one is this kind of deal structure, loan structure to the consumer and, When you get that formula right, so people say, well, what is the right formula? Like the other thing I said in the comments, we've had dealers asking us, even recently, we're working with quite a few new dealers lately. And it's like, they'll ask, you know, what is the recipe? Like, what is the thing? It's like, well. There's a lot of questions. There's a lot of questions that we have for you before we can answer that. It's going to bend on funding and lots of different things to help you make a determination what works for you. Because there's a lot of them that could work. Most of these dealers on this slide have been in business a long time. Yeah. Yeah. Yes. So it's working. Is this, is this the bigger group one? I can't say. Yeah. Okay. Um, yeah. I'm not at liberty to divulge that information. Um, but yeah, it's, uh, I, I would, I am so interested in how the conversation might flow from, you know, looking at these things and, and just like how rich that could be. Um, Yeah. So Tyler says, I read his comments. I says, I really liked the analysis. It's it does create great conversation. Tyler, we're definitely seeing, you know, some really, you know, interesting dialogue inside there. And the dealers are also, you know, appreciating this sort of visual aspect. uh presentation of of you know what we're doing because it's uh it's just like you know I'm visual like it's and you know most people most people do learn somewhat visually yeah yeah and I think it just helps to see it this way to kind of see especially comparatively to be able to see how exactly my now again we're just looking at one month so if you looked at a broader average this might look a little different yeah because you know we're coming off of refund season it's interesting we had Probably, I would say, half of our dealers, their March volume was about half of their February. And then the rest of them, their volume was right on par with February, which was a pretty substantial volume for many of them. So that's interesting. But anyway, back to the Tommy thing, I think... You know, Tommy always talks about and he's he's right. I mean, this thing I feel certainly from my experience that Tommy talks about, look, you can have all the deal structure be right. You can have the best underwriting in terms of grading your profile. But the collections management is so important here. It's like you can you can optimize deal structure. And while that certainly gives. yourself gives you a better chance to be successful financially in regardless of your collections practices. But I think what Tommy always tries to bring home and I, I, again, I agree with him. I think you, you can get the structure right. But one of the things we had when we, when we did our kind of tip of the hat to Rick Reeves a few weeks ago, we've pulled out some of those old materials from 95. And I remember one of the things on there was, you know, the, the credit, the customer in this segment that we serve will not pay unless we require them to do so. Okay. Or will not pay on time. Well, I mean, I can hear a lot of, of course we want them to pay. And it's like, but is that what they're hearing from you? Is that what you're saying? It's about process and methods and making sure that we've got a way. And obviously you and I talk a lot about relationship with the customer. So I'm simply saying this is only one piece. And this is why I said in our comments, there's part of this that we're never going to know. Now, certainly we can measure. these dealers and we can continue to track and see what their charge off rates look like. And we'll all learn something as we go down that path. But what we can't know without getting deep inside it is, you know, if, if dealer number three here proves to have the best, you know, charge off rates, how much can we know about how much of that is deal structure? How much of that is the collections practices, right? So this is the part that we're always going to have. It'd be a little bit nebulous. I feel like in our business. And I think, but certainly the, Today we're talking about deal structure and we certainly all of us. So if I'm, if I'm Tommy or if I'm anybody else, I certainly want to make sure that when I collect well, that my, my profit relative to my risk is, is well balanced. So that can look different for everybody because one dealer may be funded in a way that they can handle a little more risk, a little longer contract. They may be in a higher APR state, so they choose lower gross and more APR. I mean, you know, business models are always going to vary, I think, in our line of work. And that's okay. I just think what we're trying to illustrate here is that when you compare it side by side, it's like if I'm dealer six over here, I look at that graph and I say, oh, you know, gosh, I see now other people have a much different structure. Some people have... you know, why do you, why do you have so much risk over there dealer for, you know, why, why is your risk so much higher than the rest of the group? What is, what's your model? What's your strategy, right? Yeah. And that's, you know, that, that is like Tyler said that, that does create some pretty interesting conversation. And, and I have, you know, as, as Jim is finishing up, um, this is the January, March the fourth, the fourth meeting for, uh, you know, those that started in January, um, I guess. Yeah. Well, if you count the beta, we did some beta stuff on beta in 2020. Early or yeah. And later in 2023, but, but that as they are getting to know each other too, and, and having the conversations that it's just like, you know, like I could just like, dude, what? Yeah. Oh, yeah. Yeah. Yeah. No, it's true. When the numbers come in, it's like sometimes it's pretty eye-opening. And probably some high fives. It's like, man, you've really shifted your this or whatever. And I know, too, there's a lot of stuff that is covered when... when they go through data and so this is just a very small sampling of all the things so there's probably a lot of other pieces that make these pieces have um a more full context yeah we must look we bring in about 30 pieces of data like 30 data points and then we turn around yeah I don't know probably 60 well that's things but it's like yeah there are several of them around deal structure because that's certainly something that we're able to examine with the data points that we have and some depth. And so, yeah, it's been good. I think last night's conversation was good. We had one dealer that's really struggling to figure out volume in a more rural market. And so, you know, the group was able to kind of offer some tips and suggestions on that part. So it's good. It's definitely been useful to kind of, you know, have a way to get people to do it that way. So I know, you know, it's a dealer performance group or a dealer. It's a dealer connecting. Sorry, dealer. Sorry to all of you. Old phrase, old phrase. Yes. We know that it's a dealer group, but peer group. Is it just open to dealers or? Uh, managers can be like general managers can be a designate. Yeah. Okay. I just wanted to clarify that because I, um, we had, uh, we had one of our dealers, um, from the group and their manager join us for a webinar. Oh yeah. Yeah. Yeah. Yeah. The manager can be there. And so, yeah, a lot of times the managers are the kind of the, the designate, they're the ones running the day to day. Well, and this specific dealer, the dealer is like part time. Yeah. He's part-time. He's an absentee dealer. All right. Well, what else you got for me on this, son? That's it. I think we covered the parts that I wanted to bring in terms of the data. I think that's a ton. We can kind of give people a feel for what that looks like. But, yeah, this is part of what we're certainly learning is kind of the thing about structure. And I think, like I say, it's a bit of an understatement to say – business models vary. People do business differently. It's just, I also think that as people see, get better glimpse inside how others are doing business, that it will, we've had that happen. Like this really, that's, that's the number. Like you guys have a selling price of X, you know, like, yeah, We've been doing that for years, you know? So it's like people just getting their eyes open to new, new ways of doing it. You know, and, and yeah, yeah. And it's, and sometimes we have the conversation with dealers that it's like, do you have this kind of car on your lot? Because that's what you like to see. Oh, yeah. Or do you have this kind of car on your lot because that's what customers need and want and what would be best for them? Because we see frequently that there's, and a lot of dealers will have one or two that are like eye candy. But it's that, well, you know, it's like just, just to understand that, that, that this isn't this model, your model isn't the only model and that, you know, how much of what it is that you're choosing to have on your lot is because it makes you feel good when you land on the lot. Right. Yeah. Oh, it's true. Yeah. That's a, that's a different conversation. Geez, Michelle and her squirrels. Hey everybody. Hey, we really do appreciate you joining us and making us part of your day. I hope you guys have a fantastic. It's, it's, it's. Friday. Yeah. Don't forget to find us on YouTube. Subscribe over there. Absolutely. And those of you who are like listening to this on our syndicated podcast stations, please go to YouTube, like and subscribe. That will get you access to, you know, getting an alert every time something comes in. And also when we show graphs, which we do on occasion, that's a good place for you to go and take a look. So, hey guys, everybody have a great weekend. Thanks again for joining us. Have a good one. Monday.
