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. Happy Friday. Is it time to do another Buy Your Pay Your Morning show? Yeah, it is. Happy Friday, y'all. Nearly to the weekend. There'll be a lot of car payments coming in today. Yeah. So, stuff happening. You want to give an update on anything else that's happening before I... I'm going to give a couple of V8 updates. Nope. Had to postpone our meeting from last night. Yeah, internet was up and down. Yeah, they were working on the lines. Really, that's one of our downsides of virtual is you've got to have reliable bandwidth. But because no one has to travel, it's just shifting a schedule a little bit is all. So it makes it, you know. We had it all shifted in a matter of minutes, and we're done. That means three meetings next week. And the other quick announcement is that we just are starting to get the signatures in for the first formation of Group 5, which is the dealers of 500 to 2,000 accounts. So that's our second group of that. Yeah, of that size. Yeah, so that's nice. That gives them that kind of what I call floater status where they can move between the groups when there's a conflict. um but yeah that's uh we we started doing just getting at least four signatures before we form a group just so there's at least enough people there to have a conversation right so yeah or a rich conversation yeah and uh so that's that's happening now we're getting that group form so just uh remind dealers we got seats of all sizes and uh so of all portfolio sizes I should say and uh so so if you can find a spot in the group and um I feel like I'm forgetting something. I know I didn't jot down notes. So this morning was a scramble. It kind of was. We just, yeah, there were a lot of things that have just shifted for us schedule-wise in the last couple of days. Family matters. So there's just, yeah, it did feel a little bit like a scramble. Yeah. Yeah. And, of course, I'm kind of a perfectionist about these numbers. Yeah. And so I pulled together some numbers early this morning for our conversation today because I'm hearing a lot of dealers out there talking about repos. Hey, are your repos up or down? Yeah. And they chime in. And charge us. And I just think we've got to be so careful. We've talked about this in the past where I just think we've got to be careful about – you know, anecdotally throwing out something without knowing the whole kind of picture. Yeah. And go ahead. Well, and you know, when you ask questions for people to align with you, everyone who might not normally say anything on the whatever is going to like me to me. Cause then it feels like, Oh, I'm not the only one. Right. If, if you're struggling at the time, but you know, as we go through some of these numbers, it's, it's, uh, um, I just want to get specific about that stuff. I think what troubles me about it is people are making really important business decisions off of this. Sometimes if they're just throwing out something on Facebook and they're getting feedback. It's kind of a knee-jerk reaction to things. That concerns me. I just want to make sure that we're as specific as possible and as thorough as possible when we talk about And especially if something is serious, because, I mean, I was hearing a tone that suggests people are like, oh, man, these portfolios are tanking, the economy's tanking. And, you know, it's just kind of a, well, it was me, these guys following sort of. Well, I mean, and as a business owner, when you start to see something like that, unless you're like really seasoned. Mm-hmm. or have a network that you can talk to, you know, you are. And that's one of the challenges with the industry, with this type of business, is that there's so many people that are out there kind of like Lone Island. And so, you know, that just it becomes magnified and troubling, right? Where it might not, you know, there are things that you can do, troubling for them. Yeah. Yeah. But there are things that you can do to mitigate and also look at things through a different lens, which can be comforting. Sure. Mm-hmm. Yeah. So I just, I, I want to get specific. And even though this is a smallish data pool, it's, it's more than any one dealer has, especially a dealer who's not in a 20 group. So you can go out there and I would just say what you're going to see on the screen today. And of course, we'll talk through the numbers for those people who are listening audio after the fact, but, um, or in their dealership and busy and just have it on, on a speaker or whatever. But The numbers are from a small pool, but I'll get very specific about what the pool is. And you can see the numbers. And what I did was look at January through July just to see, are we actually spiking right now? What are the trends right now with this? right yes yeah so I just looked at dealers that I knew had um stable portfolio sizes right so they were in business you know at least two years and uh and that I i needed to have a data pool of january through july I need all seven months so that's what I think so it was dozens of dealers No, it ends up being nine dealers across seven states is what I pulled together. And I only, I have three numbers to present or three types of numbers or ratios to look at today. So we can show this first slide. Let me get it teed up here. I'll let you handle that. Every time I try to help, it's like, you put it up, I take it down. Yeah. So again, you're looking at January through July. So let me read the header on the report. It's the current month or the month, each individual month versus the monthly average in dollars. So that 100, that's like the 100%, the green line is the average for those nine dealers across the entire time, the seven months. Okay, so that's, yeah. So let me read the description line there. It says, this is gross charge-off principal for nine dealers across seven states and it represents 3.5 million in charge-offs okay not not their portfolio but this is just I mean that's that's a big that's a big number but but let me ask you first when you talk to these dealers are they like wigging out No, not at all. No, I don't hear anybody and anything close to even a concern. The dealers that I'm personally directly communicating with, I don't hear concerns. I mean, obviously, you know, as a former dealer, I know, boy, there's weeks that you feel beat up. Like you just have a spike of charge-offs and it feels like you've got a rash of them. And so it's uncomfortable. But that's why I think we've got to pause and look at the numbers and say, are we – let's just let's you guys can react from everybody who's listening can react to what I'm presenting it's just it's it's real numbers like it's just it's um and it's validated yeah yeah oh yeah which is like a whole nother thing but um you know and and so like yeah I'm gonna go down that rabbit hole for just a second validated makes a huge difference And validated isn't just about someone stretching their numbers. It's also about a dealer understanding where to find and how to calculate the numbers as well. So validated has also helped dealers with what we've done in V8. It's not so much about the truth factor. as it is, let's compare apples to apples. And so how are you collecting this information? So where with with other with other Yeah, it's just like, here's the stuff, fill in the blank. And there's not the same kind of comparative validation. Yeah, so the way that we validate is we ask the dealers to, well, it's really like three ways. So in their agreement with us and V8, so all these dealers that we're looking at in the screen today, all the nine dealers are members of V8. That's where this data pool comes from. NV8, we ask them to validate one of two ways. They either give us access to their DMS, and obviously if they don't know us well or they're new to it, then they may not be ready to do that or have other reasons to. Or they can send us the source reports that they use to prepare the numbers that they submit. And there's one more step. We make an effort to reconcile portfolio balances to plus or minus 1%. So that means the numbers that are coming in here that we're using that we have for gross charge off is going to be accurate because our closing portfolio balance has to be plus or minus 1%. Yes. So this is just I'm just trying to help people have comfort and speak as specifically as I can about what it is that we're looking at so that people can make their own decision about what they want to do. And I just I think that's an important thing. So again, in dollars, which you can see there for those who aren't seeing the screen, January and February were above the seven month average. Okay, so 111 and 120%. And then March and April were down, which I think I'll stop to explain it. I think I will see what the other chart looks like, but it's common for dealers in tax refund season. First of all, they'll take heavy charge-offs sometimes in December before they close their fiscal calendar year. And so that's common for them to write off any stuff that's marginal or questionable because they want those write-offs on their calendar year or their fiscal year. Then they'll also typically take heavier charge-offs in tax refund season. Why? Because their sales are good. So charge-offs as relationship of portfolio and sales is a little easier to stomach. And so they'll sometimes take heavier charge-offs there. But then when we get into March and April, charge-offs are lower. And so those not seeing the screen, 77% and 74% in March and April. And then May was above average at 121%. June was below at 88%. And then July at 106%. so um you know a couple of questions I've got for you again none of the dealers are freaking out nope nope um so like having spikes at the different times of the year you know when I when I um am watching the conversation on social media Someone will ask a question and they're in a little bit of a panic, and the more seasoned dealers will pop in and it's like, no, this is what happens, or this is the this. And so it's having the ability to be able to bounce that off of people that you know that are just like, we're watching the stuff and we're paying attention and we're keeping track and that they're just not seeing a reason to panic. Sure. And it's, you know, from everything that I see and from all the people that you talk to, it sounds like it's... Hi, Michael. It's... You know, it's just kind of part of the business. It is. It's just this kind of stuff. I mean, obviously, if it gets out of the norm, then we would certainly come back. Yeah. And this portfolio, this pool of data will grow, right? We'll have more and more information. And we can continue, like, you know, every so many months. Because we do recognize this is, yeah, I'm not going to call it a possum. It's a possum. Okay. which means it's related, but it's not a squirrel. I know, right? I really should put a banner in there. Is that what we've been wanting to do for a really long time is to get large pools of data, good, solid, clean data, and then be able to educate online on the podcast. about what it means and what the trends are, so dealers can run their own stuff and then compare themselves with this data pool. And the cool thing about it is that it's continually changing, and so we frequently bring some kind of As we see a question, it's like, well, let's pull the data together and see what it is that we're seeing. So this is actually something that we're really excited about with having V8 and being able to pull in data and be able to present it to all dealers for all dealers to be able to benefit from. In the meantime, I'm happy to go elsewhere and work with folks who have larger pools of data. It's just that I don't want to invite them to these microphones or to our podcast unless they're able to reveal in specific form like what we're doing here. And we would want to see it ourselves. I mean, in raw form at least or confidential form. Michael Rodriguez asked, can you educate me on about write-offs? Sure. So, and I think for a purpose of our conversation here, what we're talking about, Michael, would be the gross charge off balance. So what I mean by that, and it's principle. So meaning if a customer paid for a while, they originally had a $13,000 balance, they paid it down, and now we've repossessed. And so this, what we're working with here is the gross charge principal balance of the account that was written off, regardless of the repo recovery. I didn't explain about that. This morning I only had time to pull together gross. So we just looked at grocery. So let's say gross is, and this is what the entire balance of the loan is, minus what's been paid off. is the gross principal balance. That doesn't include unrealized interest. That's just to that date, you know, what it is. It's not late fees. It's not any other ancillary balances. Now, if you had a service contract, that would be in the principal balance. That would be probably financed on the original note, and that would be part of the note. It would be credited to the note, wouldn't it? It would still be part of the principal. We don't differentiate between, because it's part of the loan. That's what the customer financed and borrowed, if you will. And so I would say that for Michael's benefit here, we're really just dealing with this morning a gross principal balance charge off. And I didn't bring the numbers to the studio this morning, but you and I looked at it this morning. It was either $56,000 or $58,000 difference. was the average amount of charge off per month across these dealers. So again, you're talking about- Yeah, that was per dealer per month was around $56,000. And these are dealers that are one to $500. No, there's more than that. I think most of the ones in that pool are that size. Our 1 to 500? Yeah. Well, and it's interesting as you can get into the bigger ones and they still experience the same kind of percentages for the most part. Yeah, and the next slide I'm going to show is going to be percentages, but I think just to make sure we're clear before we step away from this, this is just... So I took the pool and said, okay, when I look at the month of, and again, I only worked with the dealers that I had the full range of data from January to July. And so what you're seeing there is the gross charge off per month. Is it, did you already put the other one on? No, no, I'm about to. So just kind of explaining the difference. So we've got, this one is the dollars. Now let's look at the same pool of data in percentage And so let me explain this one. So the header, the title of the slide is gross charge off principle as a percentage of the opening or the open of the month principle. So we've talked about that in the past. That's a kind of a, that's a, I call it a conversion rate. Lenders probably call it a liquidation ratio. It's like the rate at which we're converting cash. And so this is a, about how much charge-off are we experiencing as a percentage of the opening amount. And again, I didn't bring to the studio what their average came out to be, but we talked about that a month or so ago on the podcast, so you could probably do a search in our YouTube channel and find the... There's a playlist. For those who are not familiar, we've got a playlist over there. So talk to me about the gross charge-off principle as a percentage of the... of the entire portfolio, right? So a simple example would be if a dealer had a million dollar portfolio at the start of January, and in the month of January they charged off $100,000 in gross receivables, that would be a 10%. That's crazy high. They're more. Well, and these numbers, when you look at 122% or what, it's it's not like it's not numbers, it's percentages. It's percentage of what's the average. Yes. And so the average is where that 100% is, where that green line is. And so it's and that's an average. You know, we talked about average is around $56,000. per month and so this is taking um like comparing it to the overall overhaul portfolio what percentage um and so um where do you have the number for like what is the average I didn't bring it here and I don't like talking about numbers when I don't have them right in front of me because I just don't want to say it wrong. So basically what this is showing is it's, you know, when you see 122%, that's not, that's not, that's like just 22% above average. Where'd you see the 22%? 122%. Oh, yeah. So it's like 22% above average. That's a fair way to express that. And like, you know, January was like 6.7% above average. And then other months it's like 7% below average. So it's pretty close. Yeah. And I think I can answer your question generally because I got, you know, Michael standing by kind of trying to understand this math here and others, I'm sure, who would hear this information. Mm-hmm. I can tell you that most dealers principal collected as a percentage of their opening principal each month, probably with most of our dealers ranges in the two and a half to three and a half percent range. We have dealers above and below that, but it depends on model and term of contract and a lot of different things can be a factor can also be a factor with if you if you're newer and your portfolio is growing fast and your simple interest then you're going to have more principal in your more interest in your payments and less principal so that would also affect these numbers it's all the more reason to have a larger pool of data to work from and again I chose dealers who have been in business at least two years So now you've got a pretty good representation of what is happening in terms of, you know, so again, if you're a lender, you're looking at performance of portfolios across a range, kind of what we're looking at here. So, yeah, I think the way you express it is a fair way to say it. I would want another cup of coffee to make sure that I think. There's never enough coffee. Goodness gracious. But just to kind of read the numbers across the slide here, let me give our listeners, our audio listeners in particular, the numbers that are on the screen. So in January, the collected percentage was 106. So it was 6% over the average. And then in February, 97%. So that was 3% below. And then March is 93%. April, 97%. May was the one with the spike at 123% almost. And then June, 88%. And July, 94%. So certainly nothing too dramatic. And it's interesting that the largest spike in this is in May. And there was in the last graph, May was a pretty good amount. But let me ask you this is, is may, uh, uh, historically that, I mean, I know we don't have the data strung together for years and years and years, but from the work that you've done with dealers over decades, is that something that, that you have any, um, any, uh, like historically that's about what happens in may. Yeah. no no okay so I'm just wondering I mean and and as we continue to collect this data and string it together it'll be like oh it's may or you know potentially or oh it's this I don't think aside from so I'll offer my own thoughts on the thing generally speaking but But no, to answer your question, over many years, I don't have, you know, data on this kind of number on a calendar month basis. I don't see it in that way. But it's an interesting thing to look at going forward. But I would tell you one other quick thing, and then I'll come back. Well, the reason why I find that, you know, as we string this together, like when COVID hit and all of these different things, there was a lot of... There's a lot of it is the worst and it's but they're but they're the only place you could find like real solid strings of number was was through your 20 group composites. That was the only place that you could go. And so, you know, it was something that was talked about in a magazine or it was talked about at the national convention or a state convention and all of that. And, and there was a lot of speculation about why and da da da da, but as, as we start to string this and pay attention to it month after month, you know, it, it, I, I believe it will alleviate and we'll be able to, to, to alleviate that. stress of younger dealers or whatever. It's like, I'm experiencing this. And we can start addressing what in the industry is happening that is creating this kind of thing. So I think in this case, we don't know. We don't know. We don't know those dealers that are out there saying, hey, my repos are way up. Is anybody else experiencing this? I think experienced dealers that are hearing that would say, I think you better look and see if you have a me problem. so well and and that's that's it's it's like and talk to me about your underwriting yeah or talk to me about you know also talk about the time of year because I have said for many years I said somebody recently is like it's always been my belief that if you if you approve a customer that you meet for the first time right you don't know them you don't have a history with them then if you have a problem with the customer or the car as collateral, you're going to know that typically within three months. Which that's, you know, May. So if these are, if what we're hearing on social media is dealers who are newer to the business and they generated a bunch of, you know, with weak underwriting in February. It's like, yay! question it's not a statement I don't know what happened here I'm simply saying I think experienced dealers would hear that and say wonder if you just rushed through your underwriting in february and you know we also can say that it used to be and I i don't have enough data myself but I remember ken shilson always saying that um you know their their history said that the pool of data that was originated in February, which was our traditional tax refund spike, that that paper was the worst performing static pool. Oh, I've heard that as we've talked to different capital providers and all of that. It's like that is the worst time for performance, I mean, the strength of the deal. And, you know, a lot of dealers get, it's, they're hungry. It's like, this is, this is their, this is their, their, what do they call it? Black Friday of the Christmas season. It's like, you're, you do, you know, it's like, oh my gosh, everyone's got money and let's do lots of, and they're, they're, you know, a lot of dealers were getting ready come like October and November and they're getting ready with inventory and all that because they know it's coming. Yeah, and I would just say, I'm going to go back to the dollar slide from the screen. I would just say that this, again, what are we talking about? We've got nine dealers across seven states, so it's not like it's three dealers in one place. It's a pretty good representation, still small, but it's more specific and it's broader than what we might just hear in a social media post. So I just think this is what you have to think about. And what you're seeing here is these dealers aren't experiencing a kind of spike. and so this is um just a question is could it be that what we're hearing from the spike is just those dealers who are less experienced and they're seeing um and there's nothing wrong with being less experienced but it's just like trying to alleviate that um that stress of like this is this this is abnormal and should I be worried and it's like Well, and perhaps because it'd be an interesting thing for our V8 dealers to see in our January meetings that are upcoming, I think we can pull together the net side of this because you'd also want to see how did we do with repo recovery? Like if you had a higher charge off month, but your repo recovery was running high, then that would be interesting to also know what was the net loss, you know, would be the thing. January is going to be a fun month for meetings for V8. oh after the close well it's like yeah because it's for a lot of them they've been with you since January and it'll be a full year and it's like let's do the annual recap of what that'll be fun a lot of that over the years and it's part of the value of what you get over there by having people participate for that long and many of our dealers are signing now we're helping them go back and back build to January so that they can you know have the benefit of that same comparison but Yeah, I would say one other quick data piece that I pulled together, I'm going to put it on a banner on the screen here, is that I looked at a single dealer. I went back to a dealer that's, they're more than 25 years in business. Okay. So I have, so I was able to, and I've got DMS access. So I just got in there and this is a single dealer in the Northeast. And what I did is I pulled their numbers and I can tell you that I've got them written here. The, the number of dealers, The dollars of charge-offs, gross charge-off in their finance company in 2023 was $1.178 million. So a pretty good-sized pool. This is charge-offs. This is not originations and contracts. This is actual charge-offs that occurred January through July of 2023. So we're just talking year over year for that seven-month period. And in 2024 so far, they're at 1.005. So they're actually down 14.7% over last year. So we've been working with them for a while. We don't say who they are. Okay. But do you think that's because we've been helping them to strengthen underwriting? Of course. Of course. What kind of softball question is that? No, I honestly don't think that's a fair thing. I mean, these folks are experienced. They are. They're not. And they have experienced crew in their collections side. So if anything, it would be more a reflection of underwriting. I can say that they've made some changes in their underwriting. But there's a tale associated with that. So it's hard to know from that January through July what is the timing of the impact of the shift in underwriting. We'll watch that, and we'll have better information over time. But it's too early to say. Yeah. i mean but I would say that in reality what you've got there is just one dealer who's got a significant portfolio who is not seeing a spike they're not they're they're actually down down compared to what they've done in the past in terms of charge off losses it's better than it was last year so I was I i wanted to address uh michael um you know his I the wow because he he piped in with a wow when he was asking about uh write-offs and um you know Do you know who Michael is? No. Okay. Not sure what background Michael has, if he's a dealer or if he's just someone, a vendor in the industry, all of that. I remember when I first started working with Jim in the numbers, and the numbers he would throw at me were like, my gosh, that's huge. It's just, you know, when you think... Last year, it was one point something million dollars of write-offs, charge-offs. And I'm like, that is crazy. a criminy big amount of money or- You started to say something else, didn't you? I did. You know me. When she started to form the words, I thought, I know what she's gonna say. And this industry, we've run numbers as we've done some of our, yeah, we're just educating people about the industry. This industry is a multi-billion dollar industry annually. We did an episode on that a while back. And I had always heard 10 billion, but our number said it's more like 15 to 25 maybe. I mean, we're just kind of extrapolating. Billion dollars. Now, a billion is not what a billion used to be when I was… Isn't that true? I just find that I can't go as far with a billion. I know. Well, I mean, nowadays, if you say you're a millionaire, it's like, meh. It means you just got a little extra cash in your bank account compared to when we were young, young pups. And if you had a million dollars, you'd never have to work again. And nowadays, that's not necessarily the case like it was before. Right. Anything else you wanted to add to? No, I think that's it. I just would remind people that part of the reason I wanted to bring this subject is on the heels of some of those social media conversations. I think it's great to respond and try to help out fellow dealers. Absolutely. Let's just try to be as specific as possible. Instead of just kind of flippantly throwing out answers, let's try to... let's try to make a moment to give them as specific information as you can. Because again, they're making important business decisions. A lot of people are only getting their feedback from social media or Facebook. Which is better than being a complete lone island. Yeah, it's just that I want the information to be as precise as possible. Hey, everybody. Thank you so much for joining us today on The Morning Show. It's Friday. We will see you here again on Monday. Hope you guys have a great day of collections. Go get it. Yeah, go get it. We'll see you next week. Thanks so much for joining. Here we go. Thank you.
