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. Hello. Hey, good morning from Utah. Good morning from Idaho. Idaho. Michelle's visiting her brother, so we're in two different places and a bit discombobulated and a little bit late this morning getting kicked off. But it's all good. I'm late. She's late. Well, you know, both my brothers are here and we just got chit-chatting and I was like, crap, I need to go take a shower and get ready to do this. So... yeah like thanks for the extra five jim no I needed it myself it's just a little bit scrambling around here trying to fit in too many things this morning so I've also got uh our v8 plus thing happening after this so stuff happening today but it's uh it's good stuff and I think um you know our conversation for today will be of interest to many and I want to talk about it with the the idea of brand new dealers in mind so we'll get to that I think um first just a couple of announcements the v8 plus thing is for our v8 dealers only so I'm really excited to share all the great content that we brought together for that that kind of bonus education and that's been you know the the nerd and analyst in me has been going to that where the subject is pricing and markup so we're digging into that in some detail and um So that's it. I mean, last day of the month. So, uh, yeah, I've been reporting pretty slow sales. It'd be interesting to see when the sales come in for July, how they compared to June. But for the most part, dealers are, are talking about pretty low volume in the last typical for this time of the year. Yeah, I mean, I was just telling our group last night that I generally have been able to say that April through October is pretty consistent. Now we're getting more data where I'll be able to see and get a better feel for what actually statistically happens, you know, month over month. But generally speaking, I mean, the summer months are slower and that's kind of what happens. But yeah, it should hopefully pick up in August for many. So non-buy-here-pay-here stuff. I got in last night to visit my brother up in Twin Falls, and my younger brother asked if he could go. And we watched... recordings because we aren't watching it live because everything's happening in Paris, the Olympics, and got to watch the women's gymnastics team take gold. It was pretty fun. So for me, I'm like, I love gymnastics. It's an Olympic thing. I like the stuff that Yeah. Winter Olympics, it's figure skating. Summer Olympics, it's gymnastics for me. So I was pretty excited. I haven't seen any of that. They're only days in. They're already awarding team medals for... The team medals. Wow. Simone Biles, she's on the gymnastics team. She is the most decorated gymnast in the history of the Olympics now. Wow, because I can remember some Olympics from yesteryear that were, you know, I don't want to name the names because then people will know how old I really am. Mary Lou Retton. I can think of something before that. So, yeah, there's some well-decorated gymnasts from yesterday. So, yeah, I'm glad to know that, you know, USA, USA. It was really just kind of fun to watch patriotism and, you know, the flag and people getting super excited. And what I love, too, is that those that are in deep competition with each other Just embrace each other after they're done. And there was like a really monumental photo that was taken of North and South Korea taking a selfie there. And I'm not sure what team it was, but it ran across my social media. And I'm like, that is what... It's like those are goals. Those are world goals that people that are typically at odds with each other are just like, get in here and let's take a selfie and find some commonality and enjoy the spirit of what we're here to do. Amazing. Good stuff. Yeah, I think there's a social media darling. I don't know if she's a media darling, but I'm going to have to check out. um, women's rugby. There's some woman who's, um, really popular. She's very just gregarious and fun. And, and, but she's also just, um, A force to be reckoned with. She's a force. And so I got to check that out. I've never seen a women's rugby game. It's been fun. You do have a television. We don't watch TV at home. So it's an odd thing for the TV to be on. And I'm like, we do have a television. We do have Xfinity. Plug for Xfinity. Sure. I'll watch it. The way I'm currently tracking, I should be caught up in mid-September. Maybe later. That's going to be a binge watch from now on. Yeah, I guess so, yeah. I'll save that for wintertime when I'm locked in. Deal. So, yeah, it's all good. But we should get to our topic. Okay. Shall we? Yes. So let me share the post. I'm going to put it on the screen here. This is – whoops, it's not working as well. Okay. I'm on a Mac over here, so my life is all messed up today. So this is a – what, Michelle? What's the thing? Okay. She's Mac, I'm PC, so I'm on her device. Yeah, yeah, of course, most times. So the post says, customer buys a car today, couple of hours later, it starts overheating. He isn't paying attention and drives it until he blows the engine. What do you do? So this is not a new conversation, right? This stuff happens. This is something we've touched on it in past episodes of The Morning Show, and it'll continue to be something that is discussed. But in particular on Wednesday, Michelle, I really wanted to kind of break it down from a white hat perspective. And so for those not familiar, if we got some people turning, tuning in new white hat way for us is just a, you know, how would the good guys or the good gals in the industry take on this, this matter. And there are a ton of them out there with white hat way. We're just kind of putting a name around it, what it looks like. And, uh, I think there are so many pieces we better back up and kind of go to the beginning of this. Can I like one thing when, when I see this it's something that Jim has talked about many times before is, you know, when they, when you do a postmortem, a postmortem is like a exercise businesses do when something happens that kind of puts a kink and whatever, or, at the end of an event or, you know, something like that. And so like my post-mortem thinking, Jim has written an article about who screwed up. Yeah. And, and it's about, you know, as a dealer, where are we letting things fall through the cracks that should be our, it's being accountable for what we could have done to make the situation better. I'm glad you mentioned that because you're right. All these kinds of things, we, we really would, serve ourselves well as a business when we can get in the habit of looking at every scenario like this through that lens of before we just jump on the customer, we have to be in the habit of kind of, you know, self-inspection, kind of do a self-assessment first of our own processes. And is there something we did to contribute, which is exactly what I believe a white hat dealer will do. Yeah. And it's, and the thing is, is if, if you see that you've done everything, cause if you've got your processes or what, or your current process, your current, if you've done everything you normally do, okay. There still is a problem. Is there anything you can do more of in the future? Yeah. And I got a nice text message from Crystal Aguayo, which you, you probably saw the thread too. It's like Crystal saw that this was our topic for today. And so she sent a text to us this morning saying, you know, she's somebody with a ton of experience. She came out from the biggest buy here, pay her operations in the country and, and you know, has a lot of direct experience there. And she kind of went to the same thing I was thinking about, which is education. Like the first, the, Because as you know, Michelle, I'm always when I have these kind of things and I'm talking to new dealers, I say, you know, especially we want to think about how how this is going to go, not just with this customer, but the next 50 customers, the next 500 customers. So it's, you know, with this particular customer, you can see on the little post that I put in there that this, this thing just went out in the BHP success group yesterday. And there were 72 comments in the first 24 hours or so. And they're still, it's still active this morning. People are still in there and we didn't have time to go through all the different, um, three, parts of the thread, but you can imagine what the reactions would have been. Some dealers will say, you know, it's on them if it's as is whatever. And it just an example. I think this is one example, but I think it's, it's a good one to be able to walk through the, the white hat practices of this. Like if you're, if you're really, and so what is a white hat dealer? It's somebody who wants to be known as an asset in their community. They're playing a long game and, And so how would a white hat dealer, especially a new dealer, set themselves up to limit these kinds of situations and then ultimately have a solution to resolve them? So let me just say when we, everything we talk about this morning, it's all with the expectation of making the customer happy and having that customer with us for many years. Yeah. It's a 10, 30 year approach. Yes. And what? a 10 or 30 year approach. Yeah. Sure. Sure. Yeah. We used to say a 10 year approach and then we realized there's dealers like Tommy Brand is out there. I've been doing this for 30 years and they've got customers that have been with them for generations and decades. So yeah, we just kind of expand it. But I think everything that we would suggest here is kind of in that context. It's like thinking about, so first if we, let's back up and look at what, what happened here. The car failed the, the dealer, the very short amount of time after a lot. Yeah. And so, so that can happen. And I remember, so let me, I always kind of take this back to my own experience because my own direct experience as a dealer was sort of an exaggerated scenario here because I was doing inexpensive cars. We were doing a kind of a special business model. It was based on our available cash and kind of limiting risk. And, and so we were doing, Really affordable cars, higher miles, and strictly as is. But as you know, you've heard me say many times, just because we were as is did not mean that we didn't offer the customer solutions and support after they bought the car. It's just that because it was as is, we went to great lengths to make sure the customer knew what their responsibilities were going to be and what our responsibilities would be. So let me ask you, Jim, if this was a scenario that you would, have had when you had your dealership. And you're doing your postmortem. It's like, this is a thing. And you're looking at it. What is the first thing that you would be like, where did I screw up? Well, the very first thing is going to be in the recon and in the pre-sales evaluation. So you're going to run the car through the shop and you're going to do an assessment. Here's one of the challenges. we as dealers, we're not probably going to be afforded the opportunity to drive the car for hours like this customer may have. I don't know how far the customer drove the car or, you know, if it's in a metropolitan area, which I know this particular dealer is, then, you know, could it take an hour to get home, you know? So, so I think when you're creeping through traffic on a hot day in Texas and the AC is running, you're going to stress the car in a way that you don't really get the opportunity to do as a dealer. So I'm just saying, um, I'm not saying the dealer messed up here I'm simply saying this stuff can happen even if you go through all the steps so but the first thing to answer your question the first thing I'm looking at is did we assess the car thoroughly after we completed recon and and to me that means getting the car warm for exactly this reason so you so it's about getting enough time and in the car to to to stress it a little bit. You know, let's get it warm, run the AC and give it a chance to overheat if it's going to because we know that you can put all the education in the world. You can run the customer through a video, which is part of what crystal suggested as part of what we would be suggesting is like, you can sit the customer down and, and have them watch a video and educate them on what their responsibilities are going to be. We just know that some customers just, you know, they're, it's like, they're just going to keep pushing it. And in the thread, you can hear other dealers chiming in and say, had a similar situation, you know, with the, with their scenario. So yeah, this is going to happen. Um, customers are not as experienced as we are with this sort of thing. Some of our customers are young and inexperienced and some of them are negligent, whatever the case would be. So I think more of the question is how do we go about doing it? Let's back up to the buying side. Let's, let's take this in and bit. So if I back up to the, to buying the car, um, first of all, we know we want to buy the cars that have the best chance to perform well. And I know that a lot of the dealers chimed in on this particular post because it was said what kind of car it was. And so we don't, we don't buy that car. Or if we do, this is how we handle the repairs because those cars have known issues. Okay. So that's one thing we would try to make better decisions. And by the way, we met some people recently who provide some really important analysis on What kind of models are performing best for you? What kind of, which sources are performing best for you? Something dealers might know kind of anecdotally, but they typically don't have that depth of analysis. They have the auction that they know that when they get a car, they can rely more. Yeah. No, it's like, but think about most of these repairs that dealers are faced don't happen in hours. They're over weeks, months, right? So sometimes the buyers over here buy. And in a bigger operation, you've got a buyer, right? You got a service department, you got a sales manager, underwriter. They don't have a buyer. But it's like the, but the problems can be kind of amplified when there's a disconnect in communication that, that we can't say, stop buying that car model. You know, we don't, we don't know why that particular series of cars doesn't perform well. We just know that a number of our customers have problems. So communication from front to back obviously would be a thing. So buying the right cars. And by the way, if you want to get in touch with the people that provide that analysis, it's a it's a monthly service and they sweep your data and they provide it so you can reach out to us and we can put you in touch with them. They're just not a very visible company, but they have a really cool solution. And so it can be a really important way to, you know, to to identify this kind of thing. Yeah. And the cost on that is just like one bad engine or one repo or whatever difference. Would you pay a year? Would you lose more than that in a single bad buy? Yeah. So it's about making better buying decisions first. We want to make the best possible buying decisions. Then obviously when we get it back, we want to do a really thorough assessment. So part of what that involves for me is and typically what we would be recommending to a new dealer is do a thorough assessment of the car before you start into any kind of reconditioning. Yeah. OK, so I've heard you say that you do that. And then sometimes it's like this one has way too many problems and it goes right back to the auction. Yeah. And I think to add to that and we don't have to go that deep today, but it's like. Sometimes I hear dealers get to a place where they just feel like they have to recondition the car. They buy a car and they just kind of keep going and we got to finish it. And we're, you know, another $300 and we'll have this car ready. And then they spend that 300 and now it's another 500 and, you know, they find something else. And so I think you never have to recondition a car. So I guess my point here would be. You know, if you have a thorough analysis of the car when it comes in, then you don't proceed with any repairs. You don't sink any money into it until you feel like you have a really comprehensive understanding of what the car is going to need. Because you don't want to start something it can't finish. And you don't want to spend $300 on something and then find out it needs $1,000 on something else. So this is where... You know, the actual inventory side is part from a white hat way standpoint is like the white hat dealer is going to do the best they can to buy cars. Well, they're going to assess cars as thoroughly as possible. Then they're going to recondition them according to their policy. Policies can vary on this. And so a white hat policy would be, you know, that we. we make sure the cars are in good condition for the benefit of the customer. And for us, obviously there's financial benefit for us to make sure that the car and the contract performs well. And we know that, look, dealers who are brand new at this, maybe there's somebody out there who hadn't heard this yet, but if the customer's car is not running, they don't want to pay. And I just had a dealer talk to me about that just this week. And so I just kind of used the expression that I've talked about before. It's like, In that kind of scenario, we've got to make sure we have a plan, like a strategy for how to deal with that. So now back to the assessment. And now we do the best assessment we can pre-recon. Then we recondition the car as thoroughly as we can or as reasonably. This is tricky, Michelle. We could spend the whole session. We could spend a week talking about reconditioning decisions because... how far you go is going to vary with each dealer and we can never, we'll go broke. It can get super costly. I mean, where, where it's that, you know, you talk to a dealer and they're like, I don't understand. We're not making as much money as dah, dah, dah, dah. And then you, you dip into their shop and how much they're spending on reconditioning. And it's like, that that's that's a big deal it's subjective right I mean there's there's some dealers want to recondition stuff in a way that it's um they just go like all the way like they try to do every single thing and if that's your model and that's the approach that you want to adopt then that's what you do but I would say that this is really about I think it's it's more about how do we How do we satisfy the customer, fulfill what it is that we need to do from a policy standpoint? Because we have our own financial interest to think about here. Of course, we've got to make customers happy. That's the biggest part of making our business sustainable. And we have to manage our cash. So this is why I'm saying we ought to have a policy that says, I just recommend a guideline. When I'm working with a new dealer, I say, we've set a number, set a number. And that's why it's important to do the pre-assessment. If my number is $1,500 max reconditioning and the estimate comes back at 2,200, then I can make the judgment not to proceed before I ever sink the first hundred in. So, so this is why we kind of recommend, go ahead. I'm just, I, yeah. So you continue. Cause I was like, so everything is working, you know, we've, we've gone through our process and now the car is sitting on the lot. What happens now? Well, obviously now the thing we have to talk about, especially thinking about new dealers is I have to have now it's like, what are, what's my program? Like, am I as is no warranty? And if so, how do I communicate that to the customer? Yes. They sign the document. Yes. There's they, they cover the ground that is legal. We had them sign the, as is FTC buyer's guide. That part's clear enough. It's legally we've, we've covered ourselves, but now we, from a standpoint of customer relations and community relations and our business reputation. how do we handle those things you know when that comes up so you know for the most part the approach would be the same for me as is no warranty or you could do a short-term warranty or you can have a customer you know buy an optional service contract there's all these different ways to provide support to the customer after delivery so I think that's the first thing you have to set policies that say this is the way we're going to support customers after delivery and for me I hear dealers, you know, we covered some time ago the thing about goodwill repairs, right? And so just kind of paying for stuff on the customer's behalf is just kind of quote, and those dealers definition, it was their way of being a quote, good guy, good gal. Um, I, I think there's more and people can seek out that, that podcast on Goodwill repairs, because what I'm really trying to do is create consistency in the process here. Yeah. Okay. And I know in, in what, uh, what we coach, especially if it's an as is that part of the buying process, not the closing process, but part of the buying process is that the customer takes the car to an independent mechanic. Right. and, and just has someone look. So it's, it's, it's about now you've had what we've done and what we say, and then what someone that you trust or whatever says as well. And with that, you know, it's like, There's a level of ownership that happens to that transfer of ownership when they've done that as well. And so now they're coming in more as an educated buyer about the car than they were before. And that's something that I don't come from automotive, but it's like that's smart. That's smart. Yeah. And it's something that, you know, this came from the Rick Reeves education that Tommy Brandes and I, we come from that background. Many, you know, learned that way back in the late 90s. some before that. But I do think that is smart because what it, and it doesn't keep the car from breaking down. You can find the episode on mechanical evaluation that we did once before, but in our case, we just all but required it. Like you would have a hard time buying a car at my dealership without a signature on that piece of paper. like and if you didn't it would be a rubber stamp and you sign the waiver instead that's like a big deal okay okay you're fully aware yeah so it's it's kind of that's that's in the context of transferring responsibility now even if I do that I buy the car well I assess it well I recondition it well I assess it again I i put it on the lot a customer takes delivery and I have disclosed all the stuff and they watched a video and they signed all the stuff doesn't keep the car from breaking down There's not anything I've done there that necessarily guarantees that the car is going to perform. So I think this is where, and I always say, you know, that, and I think it's generally still true that If there's a problem with the customer or the car, you're going to know in the first three months. In this case, they knew in the first three hours that there was a problem with the car. So again, we have to be prepared for that. It can happen that we deliver a car that's got problems. And if we miss something, we miss something. And we want to make sure and have a solution for that without throwing all of our other policies out the window. Right? So this is why I think having these policies written and decided in advance, because I got a message from somebody on Facebook this morning, a former dealer who said, you know, I just used to hand those off to my managers. That was going to be their responsibility and, you know, large enough operation, that would be true. But what ground rules are the managers operating on as they're representing your name and your brand as a dealer, you know, to make sure that we're consistent there. So I think for me, I'm always just watchful about, I don't, you know, this is the old thing about the customer's always right. Well, sure. The customer's always right. And there are both legal matters here. There's legal boundaries to think about. That's more about the goodwill repair. When we step out there and do goodwill repairs, we're kind of stepping into some tricky legal areas. So I'm obviously not an attorney, but I'm trying to protect dealers from stepping into dangerous legal waters. And then there's the customer relations part. So we expect to make the customer happy. And I just want to do so in a way that's consistent. So certainly in this case, we would do what we could when the customer ran into that problem. And then in the context of making those repairs, I would be having a conversation with the customer and reaching an understanding before we proceeded. Because as we say, the customer often wants to withhold payment if the car's not running, they want to withhold payment. And that's probably something we should save for a different conversation. But I would just say that there's a whole element here that I would just say, how do we, so how do we handle this situation? What do we do? Well, the first order of business is to get it back in, do an assessment, have a conversation with the customer. And then, you know, for me, I would be, if it's going to be warranty, if I'm going to cover it in the context of something that we missed, then I'm going to have to, button that up in a way the customer understands we're doing this because of this situation. And if we're to finance or put you in a replacement vehicle, then this needs to be the understanding. So I would be updating the understanding. I might be adding some additional education to the understanding, maybe even a separate signature document. I'm simply saying, I'll do it once. I won't do it twice. So it's like we have to make sure. So again, everybody can write their own policies, but I'm simply saying, I used to say to my managers, Michelle, and this was only in times when I was especially frustrated or really trying to drive home a point. And that was that, look, if the customer's signature on a piece of paper doesn't mean anything at all, then I don't know that I want to be in this business. You know, and so it's like, why would I want to be in a business where I have to accept responsibility for everything? If I can't get the customer to accept responsibility for those things that are theirs, then I don't think this business is very fun. The part about, you know, it's one thing to just say you have to take responsibility. But I was kind of thinking on the drive up here the other day, and I was thinking about White Hat Way. in general. And I was like, what is White Hat Way about? And it was, and this is the first time Jim's hearing this, but this, it kind of, it's a synopsis of a lot of things we talk about. And it's about helping, or it's about improving the relationship and developing trust between people business dealer and consumer. And, you know, how do we do that? We do that through education, services and tools. And so, you know, when, when we look at it that way, it's like education is so important. It's so, so important that we, that we, because we know that our, our customers in general, I mean, you know, looking at an aggregate, are not educated about contracts and about responsibility for these kind of things, about budgeting, all of that. And so there is an opportunity for us to develop a better relationship and more trust through educating them. And then offering, like you said, it's the offering services, which is great. You know, the the whatever it is, it can be it can be like we are going to do a budgeting class and you're welcome to come or we'll help fix this car or whatever and tools. So it's like giving your giving your your customer. And, you know, this is like I'm looking at what tools are we creating for dealers and all of that out there, but giving customers. How are you making it easy for your customers to pay? Do you have the tools to do that? Do you have the right tools to really be able to support a customer? A tool can be a video. So it's education, services, and tools. And you're using those things to be able to improve our relationships and develop trust. Right. Yeah. And I think one way that you can supplement that is, you know, to educate them on the day they're buying the cars. One thing is we've talked about when we also did a podcast on this thing about doing videos and kind of dripping videos. Right. So I think and that's kind of what Crystal touched on as well. It's like I like the idea. And I think this is about just ongoing education because I really I really, really want to see the customer get educated. It's not that I'm. having them do this sign here. And now I'm done as a dealer because the day they're buying the car, that's a fire hose situation. There's a lot of stuff coming at them, all the, all the paperwork and all the warranty and this purchases like that. Yeah. And so it's like, it's the nature of it. So I think having education at the day of delivery is important, but then the ability to drip education, which is part of what white hat way is moving toward to be able to help dealers and to retain engagement and education through education and certain education would be part of how we engage. Because I think our customers don't want to be engaged if every time they are contacted by us, they're being sold something or some reason to buy something. Or they're getting their hand slapped. Yeah. For for collections matters. Right. Or whatever. So I think what we can do is help to create that sort of drip education and engagement in a way that that helps the dealer have a dialogue. It helps the dealer put that education in front of the customer about these kind of things. And this also helps transfer that responsibility to the customer and helps them. Ultimately, they're going to be more successful themselves in their contracts. And I think we just want to always be able to get to a place where their customer can take responsibility for what's theirs. Obviously, we would be asking the dealer as a white hat dealer, you're going to you're going to. Always be ready and willing to accept responsibility for what is yours. You're not going to dodge that. You're going to step in there and meet that. And I just think for me, I want to see the customer do the same. Or I just would be happy to end the business relationship. If the customer can expect me to pay for everything every time, then that's a relationship I'd be prepared to end. Well, you know, like with that education services tools, a tool can be your reinsurance program, too. You've got the powertrain warranty, all of that, or you've got the service contract that you've educated and it's like it's only going to cost X amount or whatever. Or you just have a very expanded warranty. Then that happens and it's like, oh, we got you covered. Yeah, for sure. You know, we'll get that taken care of, you know, things slip through the cracks. We're so sorry. Yeah. Uh, we got to wrap up. I got to move. I got up my B plus and then I've got a fly in here. That's taunting me that I've got to deal with. I can't see it, but I see your crazy eyes. You hear it buzzing. You know, I feel like it's like, like it's so loud, but there is a, there is a fly buzzing in here, but anyway, we'll, uh, we'll wrap up there. And I, I, Appreciate folks tuning in. And we will be away for a chunk of next week, but the morning show will be pre-recorded and available in the regular times next week. And I think that's it for me, Michelle. Absolutely. Hey, everybody, thank you so much for joining today. We really appreciate your support. Happy White Hart Wednesday. Hope you wrap up your July well. Yes, absolutely. Have a great day. Thank you so much for joining us. I didn't pull up right here and I'm bringing it up. There we go. Have a great day.
