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, welcome. Happy Friday. Uh-oh, you're muted. Looks like it. There. No, you're fine. yeah yeah good welcome um wake up buy here pay here people it is after all eleven a.m eastern so it's probably time to start collecting some car payment so it always cracks me up when I hear the intro wake up I'm like some people are well awake this time of the well you know but sometimes they maybe that's like it's time for another cup of coffee and I'm already feeling tired um yeah we we uh had a busy week this week y'all we did a rerun on wednesday because we had jim's son in town and and had some some things that we were we were doing with him so we were unable to to come live and as you can probably tell I'm at my brother's house up in twin falls so um recognize the room but I'm not at home yeah yeah yeah not with you so um Today, we got any announcements at all? Buyer pair forum is coming up. Yeah, it's November tenth through twelfth in New Orleans. Still time to get for that. So I would recommend dealers attend that. That's obviously I think most folks know it's a roundtable discussions. I'll put the banner up if I can find it quickly. But people will go to the NIADA website and find the dealer forum. There it is. Yep. And so that's where you get registered for that. So it's a chance to do some of what we're doing here. Maybe not as specifically there as what we're doing today. I brought together numbers. for repo conversation after seeing a pretty active thread on, on the success group, right. And Facebook. And so it's just, it's a reoccurring theme or a conversation. This last one was, had a lot of conversation attached to it though. Yeah. People ask questions about all the time. Yeah. So anyway, before we dive into all that, just other announcements. We've still got Group Three, which is our newcomer group. We've got some new folks going to be part of that meeting. We've still got a couple of seats in that one. So if you're a dealer with less than a hundred accounts and you want to get into a group, that has other dealers. You can compare numbers. And in that group, we do a little more coaching. So they're set to meet next week. We've also got a V eight plus session, you know, for our V eight members. They they'll have an event where Brent Carmichael will be joining us on the thirty first the morning of Halloween. We're going to do a session on collector pay plans. Yeah. And I think that's it. We can dove into our our subject. You got any other announcements? OK. All right. So just, you know, this thing about the conversation around repo, I think so. The post, which I didn't pull it together to actually show our viewers, but for those who saw the post, it basically was asking. you know, hey, how many repos are you guys seeing? Our repos are heavy. And then they asked more specific questions and the dealer chimed in and basically, you know, their numbers were about fifty percent of what they had sold. So in a real simple analogy, if they'd sold one hundred cars so far this year, they charged off around fifty. And so they were asking, is that normal? And people were, of course, chiming in with all kinds of answers about what's normal or what's typical. And just so one, I'm looking at that thinking, well, this is the beauty of, you know, a Facebook group and a chat thread like this when you're amongst dealers and you can speak about these kind of things. I just, I think it's also frustrating for me because it's, you know, people don't talk specifically enough, you know, in those threads and they don't. And there's just so many different ways to look at, repo losses and, you know, you can look at loss to liquidation rates and all these different things. And we have several numbers that we watch with our V eight groups and with our dealer clients. I just found that, you know, thinking out of it as a percentage of sales is interesting. If you're thinking about is my portfolio growing? Obviously, you can begin to examine underwriting and some other things that may be causing repo losses to look high. But the reason I think it's problematic in terms of looking at repos as a percentage of sales is that think about a dealer that's got a large portfolio, a thousand accounts or something. Well, obviously, you know what they're selling today versus what might be charging out off out of a large portfolio. You know, the relationship, that ratio is going to vary. Yeah. And so if you're trying to grow your portfolio, which means growing number of accounts and hopefully growing the resulting cash flow, then you would think about things like net sales is what I call it, where I sold a hundred, I charged off thirty. So I have seventy net sales for that period. Right. not being netted that in many accounts but that's the idea is that we we have a chance to move our account base forward by that many because we've we've we've sold some and charged off some and that's the net result so for those kind of numbers here you know as well and what we'll look at but I think it's just important to remember there's just so many different ways to look at these numbers and again I just to challenge everybody who's you know, weighing in on these conversations to get specific, like share, share numbers that are as specific as you possibly can so that dealers have good information. They have, you know, and of course all the numbers we're going to talk about today are validated numbers, meaning the dealer in a V eight group, the dealer either grants us access to their DMS so we can verify and validate numbers as needed, or they send the source reports that were used to produce the information that's going into their summary report. Okay. That just means all the numbers we're going to talk about today are, are confirmed. They're legitimate. They're not somebody's ball parking or, or guessing or, um, you know, speculating or rounding up or, you know, none of that. So I think it's just important to get as specific as we can. And so that's what I've done here today. Any questions before we dive into the actual numbers? Nope. So let me, uh, share the screen here. That's got, uh, a very simple spreadsheet that's pulled together and I'll just make sure that our, our listeners who are not seeing the screen, I'm going to kind of share what's on the screen. I basically have a YouTube like and subscribe. If when we're working off of visuals, that's probably your best place to go to be able to see the actual numbers. We can walk you through them and verbalize them, but it's, I don't know about you, but I'm a visual learner, and I'm not an auditory learner as much as I am a visual learner. Right. Yeah, and that's true for me, too. I certainly can lock things in better when I've seen them visually. But to help folks know what they're seeing, these, again, are from V-Eight dealer group members. And I found sixteen dealers just in a rush went through, and of the dealers that I could find that had – continuous data, September, because not all of our members have been in since the beginning in January. But I found sixteen who either had been in since January or who had built their data back to January so that we could have this kind of information to compare. And of those sixteen dealers, I just strung them all out and put up kind of a confidential ID on each one. So, you know, you can see them individually and you've got three different groups. Right. And now what this shows us and what I chose to track just again, super simple was count the number that we've sold financed January, September, the amount financed or the amount of notes that we've originated again, January through September. That's what all these numbers are. And then the number of charge offs. And then the gross amount of those charge-offs. So, in V-A, when we ask for gross charge-off, we're asking for the principal balance on the account at the time that it charged off. So, this doesn't have anything to do with repo values. It doesn't matter whether repo was recovered or not, in good condition or not. This is just looking at how much did we charge off? What was the principal balance? Okay. You know, looking at all those numbers, I put totals in there. So those sixteen dealers have sold or financed forty three hundred forty three oh six. The actual number forty three hundred six accounts since January. OK, so in the last nine months. Yep. And now that averages out to two sixty nine for the year per dealer. And then total amount finances just over sixty one million for those sixteen dealers, which comes out to an average about three point eight million per dealer. And then the number charged off fourteen hundred and seventy three. And then the gross charge off principal is just short of seventeen million sixteen eight ninety three. So those numbers are, you know, and again, to look at the numbers compared to what in the way that they were being discussed in that particular thread. This is kind of what they're talking about is what's what's typical. Well, this is. Exact. Like it's not typical or ballpark. It's like exact for this particular group of dealers. Average is between six and dealers. Yeah. And so what that says is that the average dealer has financed two hundred sixty nine since the first of the year and has charged off ninety two. They're financing their their amount financed again was about three point eight and they've charged off about one point. Just just short of one point. Yeah. Yeah. So, I mean, you know, that's kind of like a typical mid-sized healthy portfolio, right? Yeah, that's common. I mean, I would say, you know, we have dealers in our groups that are up to twenty five million. And then, of course, we have dealers that are brand new. This is around ten cars a month. Yep. Looks like it. Well, no, it's actually a two sixty nine average. Let's do that. Divided by nine. So the average two sixty nine for the year. So divided. Oh, then that's about thirty a month. Just a little under thirty. Right. OK. So that's kind of what you're looking at. And that's pretty common. Right. We got dealers in there that do cars a month that are being revoked. Right. Average. Right. Gotcha. And so these ones that you've, where you've got a high low, is that like based on actual numbers, not aggregate? Correct. So, so let me first explain these ratios that I have here. So when I did the math on just the number of, if I divide fourteen hundred seventy three charge offs by forty three hundred and six contracts originated, that came out to thirty four point two percent. Thirty four point two percent. The average is thirty four percent repo rate. Based on numbers or what, you know, what the you know, the finance people would call frequency. OK, so that's based on numbers. Right. And then the severity, which, you know, again, you got to be careful because most people who are talking frequency and severity, they're not really looking at these numbers as a percentage of current sales. You're typically looking at that as a percentage of your portfolio. Okay. So I didn't bring those numbers this morning. I'm just trying to stay in the same kind of track that the conversation over on social media was about. But again, the based on accounts, we're at thirty four point two percent for the year. So the dealer asked generally, hey, I'm at roughly fifty percent charge offs for the year. Is that high? Well, yes. According to our group average, that's high. Now, according to dollars. In dollars, I'm showing twenty seven point seven percent in dollars. Again, total accounts charged off in principle versus total originations. That's where I came up with twenty seven point seven. And down at the bottom, I just kind of left it in to kind of show if you just did an average of the averages, because I've got each dealer. Here's this last dealer in the group. They were at thirty point five and eighteen point four. So if you go and do an average across that row, it came out to slightly different. Thirty three point nine, twenty eight point zero and not enough to just to help people understand. I'm not an average of the averages. Those numbers I gave you before were were based on the actual totals and then high and low. If we look at the number of accounts, number of charge offs relative to the number of sales, then the highest in the group was fifty five point seven percent. And the lowest was twenty point three. All right. So just look at just kind of give a feel for the range. And then if we look at it on the dollar side, the numbers were similar. The highest in the group was fifty four point nine percent, where the low in the group, thirteen point six. That had the high and the low. I didn't check. I don't know. Probably not. So it wouldn't be the same with both if that's what you're asking. So it has to be different dealers for the high and low. But bottom line is just picking the dealer with the worst portfolio performance. But again, I think this is a problematic number because If you've got a large portfolio, it's the reason that the charge-offs you would be experiencing at any point in time would be higher relative to sales than a dealer who's got a newer, younger portfolio, so to speak. Well, so if you're looking at just like, are you talking about percentages or are you talking about just straight numbers? Well, I guess percentages. I mean, I think it would be the same for both. It's like you, it just stands to reason that, you know, you're going to have a percentage of your active accounts are going to be charging off at any point in time. Right. So as a portfolio grows, if you're consistently selling thirty a month, then you're not going to have that many charge offs early. But as your portfolio grows to three hundred, four hundred, five hundred accounts, then it makes sense that you're going to experience more charge offs at any given time compared to your thirty sales a month. You could have thirty or forty charge offs in a month on a five hundred account portfolio. What's the number of accounts that there's a percentage typical that the percentage of an average portfolio what percentage actually make it to the end of the note. Oh yeah. I don't, I don't have good numbers on. I remember what Brent Carmichael shared is that their study, when he was with us on the podcast before he shared that, their study said that only about fifteen percent. Right. So that says to me is that because, you know, usually it's we say the highest rate of repos happen within the first twelve months. And so that You know, that to me, if I were a dealer, not a dealer, that would be where I would be watching my repos more than the entire term of the note. Because it's like, because things happen and, you know, it's not about underwriting and it's not about those things. Once you kind of get in and it's aged a little while, it's about life events. It's about, you know, something happened recently bad to the car, whatever. And so if it were me, I'd be looking more at what is my, what's happening in my repos in the first three months, six months, nine months to twelve months. Good. And and that, you know, the considering that it's only fifteen percent, you know that you're going to have more. But when you're adding those into and you're looking at everything that's happening, because I bet you a lot of those numbers are not from three months, six months, nine months, twelve months, but they're from eighteen months, twenty four months, you know, all of that. Could be. Yeah, for sure. We definitely have mature dealers that are represented in this, you know, these numbers that we're looking at today. So you're absolutely right. And I think, you know, if I'm trying to answer that dealer's question who chimed in and asked the question, hey, are my repos high? I think that's, that's a good point that you make. I think I would, obviously we always recommend, uh, a postmortem analysis is what it's sometimes called. Go in and study the charge offset have occurred. What, what could have done been done differently. Um, you know, I always think about our dealer friend, Tommy Brandis in Pennsylvania, a long time dealer. He's now celebrated thirty one plus years, I think in, in business. And, uh, he talks about in a way that I don't hear enough people talk about this idea that, you know, you can, you can structure your deal. Well, you can underwrite it well to make a decision about the, uh, the applicant. And, but if you don't have a good system of collections, if you're not good at the other side of that, then the best underwritten deals in our particular segment are not going to perform very well. So I think we have to look at all those things. I'd certainly go back and look if I'm doing a post-mortem, I would be looking at, The deal structure. What did we do wrong in, if anything, in the structure? Did we mess up, put them in too much payment? Did we put them in a problem car? I always say that, you know, if we approve a deal, if we have a problem with a customer or the collateral, we're going to know in the first three months, typically. Yeah. We're going to know right away. I mean, it's kind of like the first three months is where all the troublemakers will come to the surface. Mm-hmm. And then you can just kind of slough them off. And, and I, and it sounds, I mean, I, obviously I've never been a dealer, but I have listened to a lot of, a lot of dealers. And so that, that first three months is going to tell you a lot about whether or not you're, you're financing people that are troublemakers and whether or not you've got underwriting that's starting to, to filter those out. Cause if, if, or me, that would be the number that I would be most wanting to decrease. It's that charge off rate in the first three months. Yeah. It's interesting, but it's challenging because when we talk about a troublemaker, what we're really talking about is a customer who really had ill intention. They really were setting out to take advantage and they do that, you know, with other people in their life. Right. It's not like you look at their credit report and there's a section called charge offs and a section called credit inquiries and then a section called, you know, troublemaking. It's not like, you know, in the credit. So obviously underwriting, you want to try to identify some of that. It's you're always going to have some. But most of our dealers report, consistent with my own experience, that that's a single digit number, the people who are actually out to take advantage. So obviously we're always trying to underwrite and avoid doing business with that customer. And that will, you know, that'll naturally resolve itself. But I would say if we underwrite and we go back in and look at our postmortem and we look at our underwriting, did we do anything wrong here with the underwriting? And then you also have to look at the collateral because, again, a lot of these repos and charge-offs are going to be related to mechanical problems. First of all, is there something we missed in the reconditioning? Was the car a problem and we overlooked it? That can certainly have an impact on these repos and charge-offs. And then the other part of that would be Do we have good solutions for helping the customer if they do run into mechanical problems, which they will, right? These are high cost used cars. Then solutions for keeping them on the road and avoiding the car drop. So we have to look at all those elements, right? And, you know, when I think about support, you know, there's, as we've talked to different dealers, a reinsurance program is a really great thing to have. whether or not you do self-reinsurance or you have a third party taking care of it because it's that support thing. And I hear dealers say it's very expensive to get it, but it's also very expensive to not it's in, it's more expensive to not have good support because what you might put into helping or to fixing a car that's keeping them in their contract. And so, you know, it's, And yeah, so reinsurance. Yes. It's, it's interesting to me though, you know, the, um, to, to see the, the, the, the range, um, twenty something percent up to fifty something percent. I don't, we don't have the numbers right here in front of me, but, um, uh, that, you know, fifty percent is not uncommon. Right. It's not. And I would say that the thing I look forward to doing, and we can bring this back on a future conversation because it's a separate kind of modeling scenario, but I think you can, in these kinds of scenarios, you can, you can run your charge off rates up and just say, okay, if I'm a typical dealer selling, you know, then how high can my charge-offs get? So that was kind of the premise of today is how many is too many? Well, today I just want to talk about how many is too many relative to what is typical. Like how many would be too much? But in a future conversation, we can analyze, because I've done it in the past in terms of just showing how high can the repo rate actually get and have us still perform from a cashflow standpoint and a profitability standpoint. Can we, because obviously in our business, those are very different things. Our profit and our cashflow are very different things. And so we can look at both and help dealers make a better judgment. Of course, we want low repo rates. You know, we want the accounts to, perform well and make payments and grow our portfolio, that's generally going to be the goal with most dealers we know. And so that's something to think about. But I ran the numbers over here, Michelle, while we were talking. I mean, you talked about repo. You talked about reinsurance and what could it cost you to not have solutions. I just did some quick math. On that twenty seven percent repo number that we have, if we could cut that to twenty five percent, or to twenty percent rather, that saves us almost three hundred grand in charge offs and profitability in that nine month period. So, you know, it's like it's just important to remember that that's a that's something that we don't talk about enough. But it's like the the cost comes up sometimes when we're talking, people are new. And we just say, look, the mistakes that we can make in this business can be so expensive. Yeah. And so we just know that. And this is part of why we like our V-Eight newcomer group is get in there, get with a group of other dealers and learn how they're doing it and learn what we do in our newcomer group is we share all of these numbers from the other groups. Not confidentially, right? We don't share the dealer's names, but we share numbers. kind of what the other groups are experiencing and can look at them on individual groups and individual dealers even. But that's part of what you get a chance to see is kind of how is it working with others? What's typical? And what could I do to move the needle and improve those numbers, right? That's ultimately what we want to do is make our business better. So, you know, people are obviously exchanging ideas over there. But I just think, you know, this kind of stuff is just, it's something I just want us to stay as specific as possible when we talk about numbers of this nature. Because people are making business decisions based off this information, right? That's true. That's very true. And to the shameless plug, VA is a very inexpensive way to be able to have very rich conversations with other dealers. And there's only so much you can do on social media. Sure. So it's through the end of the year, we aren't changing pricing, but we will be changing pricing at the beginning of the year. And so. if it's something that you've been thinking about, please feel free to reach out and, um, have a conversation, uh, uh, caller text nine Oh three eight one six Oh two one six. And we can get you put in a group. And if you're in a group prior to the thirty first, which is next week, you will get access to, to, um, the conversation with Brent Carmichael about pay plans for collectors because, collections you mentioned tommy brandis collections is key it doesn't matter how great your underwriting is if you don't have a good collections um team and process then it it yeah fifty percent plus um is is really what's going to happen so um So if that's something you've been on the fence about, please feel free to reach out. Again, I know three, eight, one, six, two, one, six. That's the end of my shameless plug. Oh, there you go. We should wrap up there and let folks get to their Friday. I'm going to do the same. I got a long list. Yeah. Until the end of the weekend. And so I'll see you all. Next one is. White Hat Wednesday, next Wednesday. And I don't think we have a topic yet, but we will. Lots of things to talk about. We haven't decided. All right. Have a great day, everybody. Thanks so much for joining. We appreciate you taking the time and we will see you on Wednesday. Thanks.
