Full Transcript for Stop Asking "Do You Have a Trade?" Do This Instead.

do their shopping online. No, you're gonna hear deeper about that today. So, John, fire away, buddy. Share a little bit more detail on that the day supply one. Boy, that caught my attention. John Anderson (03:29) I I plead the fifth. You covered it all. Chris Keene (03:33) No, I did not. I gave highlights. John Anderson (03:35) All right, I'll move on from I'll move on from that quickly. Okay. so no Yeah, y you know it's interesting cause we you know, I watch these headlines and and and hear me out. I'm not I'm not I'm I'm certainly not trying to pat ourselves on the back. This is not what I'm saying. But what's interesting to me is is I catch these headlines, and then I relate that to what we talk about in our meetings and what we see with our dealer partners and they align. They align so it's just confirmation, right? That that what we do as a company is spot on. because you're you got You got headlines here that are referring to that. And what I'm talking about on this one is that that day supply. and thirty five thousand dollar thirty-five thousand dollar and up inventory at at fifty days, right? The sweet spot is that ten to twenty thousand dollar inventory, which is you know, if if you guys I know we're all working we're all working wearing many hats with with our company with Lot Pop. But all of us are involved with dealers and doing weekly calls, each one of us are. And and so I know for me, when I'm working with my dealer partners, that's exactly what I'm seeing. I'm seeing any inventory that's over thirty-five grand, if we're if the dealership is heavy in that, that inventory is slow moving, right? It's typically the stuff that bleeds through and ages out, right? Chris Keene (04:55) Mm-hmm. John Anderson (04:55) any any inventory that is that 10 to 20 grand or less, that that inventory is moving. If it's not moving, it's typically a merchandising problem. You get in and and you you see an in the merchandising, right? There's a there's a light on in a dash, there's dirt on the floor, there's something that would cause a customer to hesitate to send a lead in on that vehicle because they're questioning that vehicle because of the condition they're seeing online. But other than that, if it's tight, it's rolling, it's moving. So yeah, that day supply discussion just lined right up with what we see. The the money right now is in the tw ten to twenty can Grand band, the 35k Chris Keene (05:31) Mm-hmm. John Anderson (05:31) and up, those unit, those units are sitting. And again, 50 days, 50 day supply, 20 grand and under is just a hair over 30 days, 31 days. So, you know, it the the the data doesn't lie. The data doesn't lie. So, dealers, you know, I would encourage you. you know, the nice thing about our tool is we have a way to sort that inventory based on. all different types of criteria. So we can go in and we can sort high to low from a price point and look at how much inventory is sitting on a lot compared to what we've sold in the last 15 days. So that would be an exercise I would encourage dealers, you guys do that, right? Go in and look at how much inventory you have sitting over 35 grand and then look at what your sale rate has been in the last 15 days. Again, with the idea of being like a coach going in at halftime of the ball game, right? What adjustments do we need to make at halftime? So if I'm underselling in the last 15 days, what adjustments do I need to make to make sure that we get that 35 grand and up inventory movement? Chris Keene (06:31) No no, that's Renaldo Leonard (06:32) Man, you know, between you and coach, you hit the nail right on the head. It's it and it's not this is not a new development, I don't believe. it's something that's been trending out for quite a while. And folks are looking to, you know, stretch that dollar as far as they possibly can. And when you talk about transportation needs, only so many vehicles are gonna fit into that price bucket. You know, and it amazes me having those conversations. And you know, I was talking to a dealer the other day that brought in a Tesla Cybertruck. We always do well with them. I was like, Yeah, but you always do better with those 15 to 20,000 Chris Keene (07:08) Ha ha ha. Renaldo Leonard (07:10) vehicles, right? you can sell three of those at the same price as a cyber truck, which takes you twice as long to sell as that. $15,000 to $20,000 vehicle. So how does that really equate into a strategy that's going to drive, you know, success with that huge pile of leads that you have in that $15 to $20,000 price bucket? That's what folks are looking for. So we have a term that we like to call feed the beast. And that's exactly what it means. Buying that inventory and scratch. the itch and the appetite of consumers in the marketplace. But you guys, you know, you covered it stem to stern. Chris Keene (07:50) Well it's but Ronaldo, okay, let's play devil's advocate here. Okay, show me where I'm gonna get that inventory. Renaldo Leonard (07:56) I'm glad you brought that up. Chris Keene (07:56) Wh where where where where where am I gonna get that inventory, man? That's all gluted theory and I know the numbers, you know, they're the numbers. But I can't go Renaldo Leonard (08:04) Mm-hmm. Chris Keene (08:04) by that car. Renaldo Leonard (08:05) Well, and this is kind of a dual, you know, point, counterpoint to your devil devil's advocate, but also it's also a shout out. One of our dealer partners just posted in the month of July that they sold three hundred or actually purchased three hundred and thirty-one vehicles off the curve or across the curve, either through service drive or mining. Individuals trying to sell vehicles in their marketplace. 331 purchases in the month of July. If they open up their, you know, take the blinders off and look for Chris Keene (08:37) Mm-hmm. Renaldo Leonard (08:38) every opportunity to purchase inventory, it's out there. It is out there. John

Anderson (08:42) Yeah, if it's the same dealer I think you're talking about, I gotta give kudos to the two ladies that were having the competition that they bought fifty percent of those vehicles, just two two ladies did, man. That's that's that's beast mode right there, man. So at a I think Yeah, okay. Yeah. Yeah. But here, let me s let me say let me say this. Renaldo Leonard (08:55) Yep. It is the same dealer. Yeah. Absolutely. Chris Keene (08:55) Must we know. Okay. So then I'm gonna go ahead, go ahead, go ahead. John Anderson (09:04) No, what I was gonna say, Chris, is how many times do we look at, because we always look at it, and we go in and we look at because we have that insight with our software that allows us to look into the the lead management side of things, right? And how many times do we go in and we look for the percentage of trades on leads? And what is what is typically that average percentage? What do we typically see? Ten to twelve percent. Ten to twelve percent. Right. Renaldo Leonard (09:28) Yeah. Chris Keene (09:29) Bes John Anderson (09:31) And so Chris Keene (09:32) At best. John Anderson (09:32) to Ronaldo's point, right, there's a huge opportunity there that I just don't I just looked at one this morning. As a matter of fact, I had a call this morning. They had three hundred and three hundred and thirty-one active leads over the last sixty days, and only eight percent trade on lead. And here's the other side. In the last two weeks, they're performing well. They got a sixty percent. 62% two week sell rate. In the last fifteen days, they sold 43 units. You know what they pumped into their zero to fifteen day bucket? 17 units. How quickly is that going to get out around? You sold 43 in last 15 days. You pumped in 17 and you got an eight percent, you only have an eight percent trade on lead. Guys, this is the kind of stuff that has to be paid attention to. It it's crucial, right? If you're saying that there's none of that inventory out there, then you can't just continue to sit there and say, Well, none of that inventory out there and throw your hands in the air. I gotta develop ways Renaldo Leonard (10:29) Yeah. That's the previous. John Anderson (10:30) to go find that inventory, right? I have to develop ways. That's part of my responsibility as a manager or a GM at a store. If it's not coming through, I can't rely solely on the auction. I just can't. Cost of market's Chris Keene (10:44) No. John Anderson (10:45) higher on that inventory, right? If you're the last person hand holding your hand up at the auction lane, my buddy Bobby Hollins had loved that dude. And he's the number one wholesaler in in the world, right? And and so that's where he that's where he he he does phenomenal there, right? But the fact of the matter is, if you're the last person holding your hand in the air, right, you're you just paid the most for the car. And so I've got to offset that. I have to offset that. W my my my livelihood depends on it 'cause I've got a I've gotta bring my overall cost of market down by acquiring inventory by purchase and by trade. So guys, this is not something Renaldo Leonard (11:20) Mm-hmm. Chris Keene (11:21) Mm-hmm, mm-hmm. John Anderson (11:22) to just continue to throw your hands in the air and go, I can't find it. You can. You may have to work a little bit harder, but you can, right? So man, these are serious discussions to have. you know, specifically with what we were talking about this morning. You know, I've got I've gotta offset that above thirty five grand inventory. Look, if you're here, if you're Renaldo Leonard (11:40) It well and I think Chris Keene (11:41) So John Anderson (11:42) s if you're clean and you're selling it, then okay. W so all right, but I I I promise you we're talking about we're that's not the majority. That's not the majority. You're you're if you're clean and you're selling inventory above thirty five grand, then you're the minority, not the majority, right? So we're talking to the majority. Renaldo Leonard (12:01) Right. And that that going to the auction to purchase inventory should be the icing on the cake rather than the cake. You're going there John Anderson (12:10) One hundred percent. Renaldo Leonard (12:10) to source vehicles to to fill in holes in your inventory. but you're also bringing an inventory that should generate leads into your inventory, right? Unless I'm thinking about that wrong. If I go to purchase a vehicle at the auction, it's gonna be late model. it should be something that I haven't been able to trade for, but I know when I get it back to the store, this vehicle, 75% of the time, someone's gonna trade in to purchase. And so I should get that wheel going to get another source of inventory flowing into the dealership, which is going to be a trade-in. rather than trying Chris Keene (12:46) Which Renaldo Leonard (12:46) to engineer your entire inventory with auction purchases. It will never work. Not sustainable. Chris Keene (12:50) Right. And it's not gonna happen. It's it's just not gonna happen. But j you know, Ronaldo, we've talked about it umpteen million times, and John, we've talked about it a bajillion times as well. You you have to manufacture those trade-ins. And one advice I would give dealers today, especially with that data point, John, that you you just shared about how we're getting squeezed on that $35,000 plus inventory and our average day supply is just climbing on it. Does that mean there's not an appetite for that inventory? No, there's an appetite for that inventory. We just don't have the amount of shoppers we had before, okay, for that inventory. John Anderson (13:31) Exactly. Chris Keene (13:32) So we're not screaming doom and gloom here. What John Anderson (13:36) Mm. Chris Keene (13:37) we're screaming is a strategy. And here's one of the best strategies for your inventory north of $35,000, which typically speaking is going to be

that, you know, depending on what brand of a dealership you are, if you're a franchise store, you know, if you're big three General Motor Four Chrysler, or if you're a Toyota Kia, Nissan, whatever, obviously your your your ticket items typically are a little bit smaller. When you're that Nissan, Kia, Hyundai, Toyota, when you're that big big three, you got big trucks, and typically it's gonna be a bit higher. So we're not saying that vehicles north of $35,000, if you have those, you're in trouble. No. But if you want to That margin compression that you're feeling. Take that 22, 23, 24, 25 model vehicle that you're getting and stop being so in love with it. Because that late model inventory is going to yield you those trade-ins. That are that ten to fifteen thousand dollar. So stop being so in love with that. Get that inventory through your shop. Get it reconned up. And when you're reconning these vehicles, pretend you're putting your 85-year-old grandmother into this vehicle and she's going to drive it cross-country. Stop cutting corners on it. You'll have that quality vehicle to draw that inventory as a trade-in that you can't go buy at the sale. That would be my two cents worth to it. John Anderson (15:12) And get it out of there by day thirty. Chris Keene (15:14) that's yeah, no doubt. Yo, here's an exercise for you guys to do. John Anderson (15:16) None of that none of that inventory should hit none of that inventory should hit thirty one days. Chris Keene (15:21) None of that inventory should hit twenty one days, John. John Anderson (15:23) I I I would agree, but I'm I I'm just saying I I'm just thinking about our sixty five percent, right? sixty five, thirty-five. I I just Chris Keene (15:32) Yeah, yeah. John Anderson (15:32) I would I'm just thinking about in terms of I would go a hundred percent on that thirty five grand up inventory being out of there in thirty days. But you're right. Sixty five sixty Chris Keene (15:41) Absolutely. John Anderson (15:42) five percent of that should leave by day twenty one. I agree. One hundred percent. Yeah. Yep. Chris Keene (15:45) Yeah. Cause 21 is your new 45 listeners, viewers. 21 days is your new 45 days. So you know, with that being said, you know, when you look at that, I mean, hell, I'm looking at a very good performing dealer right now. Their entire auto group, I'm looking at their their data. And I know they're a good performing dealer because I just spent three days in their stores and I've I got to see their operations firsthand. And they're a really good performing dealer. But looking at their overall, I mean, listen to this, viewers, listeners. 23, 24, 25 model inventory is selling in 35, 36, 47, 43 days old. And that's from 22, 23, 24, 25. That inventory is selling well north of 30 days. And they're transacting that inventory at 95%. And this is a used you this is a franchise dealership with a combined used car operation of six hundred used cars. But yet they're transacting well north of, and this was one of the things we coached on while I was there. You know, that inventory, you should be moving and shaking that inventory south of 30 days. Because then when you start looking at the inventory that is selling rapidly. It's that 2010 model, that 15, that 11, that 12, that 21, that 20, that 18 model. Well, you're not gonna go buy that as a sale, you go trade for that. You may get lucky Renaldo Leonard (17:07) Okay. Chris Keene (17:08) and buy one off the street or out of your service drive, but that's gonna be the exception, not the rule. And to John's point, use your CRM to its fullest capacity. Understand. What customers are replacing. If you went right now, because this is something that gets under John Ronaldo in my skin every time we launch a new dealer with our software, but if you did this exercise today and you went in to do your one-on-one with your salespeople, if salespeople BDC, you're listening, get a step ahead. But if you would go in and look at every last one of the opportunities for an individual that they had in the last three weeks, and if that individual had 50 opportunities, but only five of them are showing that they have a trade-in, that's a problem. I'd ask your I'd ask your team. So you're telling me 45 people out of these 50 don't have a trade-in or a vehicle that they're selling out right themselves, or something that they're replacing? If they say no, well, you might want to go back to the drawing board and do some training because they just aren't asking the right questions. But use that CRM to your advantage. Because, John, I don't know about you, knowing what we know now, Ronaldo, wouldn't you go back in to your CRM today if you didn't have anything that exposed it for you and went shopping for? inventory to fill your lot with from that run list you could pull directly out of your CRM. John Anderson (18:33) One hundred percent. Renaldo Leonard (18:34) Absolutely. John Anderson (18:34) One hundred percent. And I would train I would train my staff not to ask for a trade but ask what the customer is currently driving. I would make that shift immediately. Okay. Renaldo Leonard (18:44) Absolutely. Chris Keene (18:44) Well, I'd add to that, John. I I would add to that. I a hundred percent agree with you. But that person also could have just took out their vehicle or they've already handed it down to another family member. So I would ask that question, what are you currently driving? And if you're not currently driving something, what are you replacing? John Anderson (18:59) Right. No, one hundred percent. I I my g my point was stop asking the customer for a trade because they Yeah, it is. Right. They Renaldo Leonard (19:07) Right. Yeah. Chris Keene (19:05) That's a defense. That's a defensive mechanism to throw up. John Anderson (19:09) they go and they more more than likely they already have a number. we trained them during COVID to do that. So more than likely

they already have a number. So, you know, you think about it from a consumer standpoint, right? There's typically working a deal and what's my trade worth are the two intense things for for the two eight hundred pound gorillas, right? What's my payment gonna be? What's this what's my what's this unit gonna cost me and what's my trade worth right and so if I've already done the the legwork of getting a number that I'm happy with on my trade and then you're asking me about the trade I've already I'm I'm I'm good there. So you're bringing up now you're creating now you're creating more anxiety now. Because you're asking me about the trade that I've already I've already got a number on, right? So I think it's important to get away from that verbiage and go to something that they have no problem in answering. What r what are you replacing or what are you driving currently, right? And that should be a part of your listen, if I get a lead from a customer I would want to know what they're driving now, what they like about it, and what they don't like about it, comparing to the one they're looking at with me. That that should be a part of your co your normal conversation. Renaldo Leonard (20:19) Yeah. John Anderson (20:20) Just casual conversation, right? Just casual conversation. Renaldo Leonard (20:23) Yeah. Chris Keene (20:24) Should be. Renaldo Leonard (20:24) And and doesn't that give you doesn't that give you some information that you can use to put the deal together? Yeah. My favorite question I asked, after they've already d John Anderson (20:30) one hundred percent. Right. Right. So Chris Keene (20:33) But you know, Go ahead. Renaldo Leonard (20:36) you know given you the default numbers to your questions about, you know, what are you driving? Yeah, most of the time, well, that's not important. Yeah. Or everything that A customer's prepared to say to answer those questions. And you mentioned it, Chris, is a defensive posture. I don't want to give up more information than I have to. And but I always love to ask, do you have something that you're selling on your own? Chris Keene (21:00) Mm-hmm. Renaldo Leonard (21:01) And they always want to talk about how great of a salesperson they are in trying to unload that 15 Nissan Murano. And and they're gonna get full retail on it from somebody who's gonna buy it, you know, off a Facebook marketplace. And then you're off to the Chris Keene (21:16) Yeah, power too. Renaldo Leonard (21:17) race. Boom. But what we what we find out is with all of those people who don't have a a proportionate number of leads that have a trade attached to them. And then when we run that against the number of deals they did the previous two weeks that had a trade included, doesn't match up. But with the ones that did, right there when you think you're at the goal line, they will always ask, hey. I got a fifteen Murano. How much would you guys give me for that? Chris Keene (21:43) Mm-hmm. Renaldo Leonard (21:44) And slide it in there the last minute. As opposed to if we had that information from day one as soon as we got contact from that lead, it changes the way that we could progress that deal and maybe get it done a little bit sooner. Or even, you know, take some of the frustration out of it for for a prospect. But we're not asking the right questions. And we're not dealing with the right numbers. Yeah. Not dealing Chris Keene (22:01) That yeah, no just fine on Renaldo Leonard (22:07) with the right numbers in order to get going back to our original starting point, sourcing inventory. We don't have that information at hand, then we can't put a game plan around bringing in inventory that we're most successful with and not having to rely so much on buying at the auction. It's it's all related. All related. And it goes back to what we talk about on a regular basis. Processes. Gotta have proper processes in place in order to perform at or above standard. Keep doing what you're doing, you're gonna keep getting what you're getting. Chris Keene (22:38) I'm gonna throw this at you, gentlemen. And I was having a conversation with an old buddy of mine that we got in the car business together years ago. He got in a year or two after I did. And he's the operator of a store now. And he was telling me he was very, he was very convicted. He went and sat the desk a week or so ago and Salesperson brings the deal up, brings the deal up to the desk and talking about, you know, hey, I got this customer on this, blah, blah, blah, whatever. And, you know, he got back in his element, you know, of of working deals at the desk. And, you know, he's got everything. He's pulling everything up, and he's having a conversation with salesperson sometime. He goes, Chris. The number one question I asked the salesperson that he couldn't answer that made me go, holy shit, how we've missed the boat here. He said, I looked at the salesperson after I got the vehicle pulled up. I pulled their trade up in V Auto, and I was going through it all. And I looked at the salesperson and said, Hey man, do they like you? And I just kept going. And then there was this awkward silence. So he stopped and he looked at him. He goes, Do they like you? And the salesperson goes, Well I guess. I mean, we're working a deal. He goes, We need you guess. Do it's do they like you or not? And fast forward to where he was convicted, he goes, he says, Chris, I'm working a transactional deal now. That's all it is, is a transactional deal. And then it made me really share with him some of the coaching that we give. And I said to him, I said, you know, here's the thing that we were taught when we first started selling cars. Having charisma and being a great salesperson with all the right word tracks. and processes and delivering that stuff, that's great and all. And it's needed. So I'm I'm never gonna discount that. But viewers and listeners. If we're looking at all this data that keeps coming in,

and we keep scrambling around like a chick with no head and keep trying to find a magic bullet to take out the big bad wolf, instead of this, remember what your job is. Our job in this industry is to provide the consumers. With all the necessary information they need, so they can make a logical buying decision. Are you doing that? Are you providing all the necessary information to yourselves and to your dealership to help the customer make a logical buying decision? How can we help a customer make a logical buying decision if we don't have all the information like the trade in? We can't. So it kind of really goes both ways here. Are you providing the consumers with the necessary information they need to make a logical buying decision? And are you providing yourself with all the information to be able to help that consumer? If you're not, I would probably tell you all of the scripts and money you're spending for trainers to come in and spend time with your people and the workshops and the online and the apps and it's a waste of your time if you can't do that right there. So put a pin in that, John. One of the big things that you you talked about, because I don't want to run out of time on this, we brought it up. Shoot, I don't remember how when it was, but you brought up a very interesting statistic, John, about the amount of EVs coming back in the marketplace. Over the next several months. Well, we're in those next several months and they're now coming back in. And one of the things you talked about was that residual on those EVs. One of the things you talked about this morning before we jumped on stage here is that residual of what it was predicted, what it's at now. Unpack that a little bit more because I want our viewers and listeners to be hyper aware of this. John Anderson (26:19) Well yeah, it's definitely an area that that you can you can play in. you know, l the data that I brought we brought up a few weeks ago was that there was a there w and they're still on that number, three hundred thousand off lease EVs are expected to be in the market by end of year twenty twenty six. And then when you look at 2027, which is this the first time I've seen this projection, they're projecting six hundred thousand in twenty twenty-seven. So those off-lease EVs are gonna be have already started and are gonna continue to flow into the market. the interesting thing that you referred to, Chris, is that a lot of those leases were figured assuming a fifty percent residual. And right now those residuals are landing somewhere in the thirty-five thirty-five to forty percent range, which indicates that a lot of those cars are gonna be going to the auction because they're dealers aren't gonna keep with that with that data, right? And so the auction volume should come up. so there should be there should be an excellent opportunity. but the article said, and I would agree, right? well here, go back, because I know I want r Ronaldo brought up a good point and I want him to bring that up when we were talking about this off air. but a few weeks ago we talked about or what I look what came up was that that average that average price of that EV was twenty a little over twenty six grand. So think about that in relationship to what we were just talking about, that over thirty five grand inventory, right? So here you got a you you got a unit under that thirty five grand off lease, right? And an EV, which is important right now because of gas prices. Nobody knows where this is going. But I you know, this wouldn't be a unit that I would just run out and go, hey, E Vs are in the market. I'm gonna go out and buy some and try some. I that wouldn't be the approach I would take. You you y you know, the a E V's a different a different unit and you gotta make sure that your team is prepared. on how to talk to that EV customer and how to sell that EV. So, you know, do your homework and educate yourself and then educate your staff before you run out and start bringing these EVs in. If you're not familiar with it, it is a different animal. so I've got there are cer certain things that I've got to make sure that we're prepared for as a staff for that E V customer because if we're gonna put online, we're gonna start bringing those people to the table. And then Ronaldo, you brought up a good point. I want you to touch on that again because it you know, I think that That bears. That that bears. Renaldo Leonard (28:44) Yeah. Well, yeah, just kind of digging into those projections. I mean, if if things are going to bear out the way that we think that they will, I mean, there are going to be a lot of those folks who are coming at the end of those lease agreements who are just gonna they're just gonna make the decision to keep it when they look at the cost of replacing it. And so some of those projections may be off a little bit and we not have that total number of units hitting the market, Chris Keene (29:07) Yeah. Renaldo Leonard (29:08) which is going to further make those particular vehicles at the price bucket a little more in demand. And so it it could shift the complete opposite way. But I I wanted to bring up that for and you mentioned it, John, you know, warning guys not to go and load up on that because you're not particularly sure that your team is prepared to sell it. Let's go a bit deeper. How about in fixed operations? Is our organization prepared to be able to service that vehicle? Because that's John Anderson (29:38) Nice, nice spot on. Chris Keene (29:40) Good. Renaldo Leonard (29:41) that's gonna bring on another, you know, another headache or another group John Anderson (29:44) Great point. Renaldo Leonard (29:45) of pain points that we're not prepared for because we're jumping in kind of after the pack after the fact. I mean, that's the reason John Anderson (29:52) Great point. Renaldo Leonard (29:53) that we brought this up earlier in the year to kind of streamline it and give guys

a timetable to prepare for. But right now, if you just go out and buy it, you're really kind of setting yourself up on a couple couple of different aspects to not be able to take advantage of it properly. And so Chris Keene (30:09) Yes. Renaldo Leonard (30:10) well, it's yeah, it's just one of those things. And it it should be that strategic mindset behind everything that we do with the inventory. But with the data that's coming out, there's great opportunity there. but we have to go through it, you know, with a process and with a plan and then execute on that plan. Chris Keene (30:28) Which I know I know a lot Renaldo Leonard (30:29) Okay. Chris Keene (30:29) of dealers, Ronaldo, have gone in and revised their service policies Renaldo Leonard (30:37) Mm-hmm. Chris Keene (30:37) to accommodate, because a lot of dealers have their their own service policies for various different reasons, but they revise their service policies to be able to cover, you know, give better coverage to the consumers for these EVs. Renaldo Leonard (30:51) Right. Chris Keene (30:51) But that is a such a valid, valid point. I mean, that's cool and all that you're gonna warranty them or you know, give them extended coverage, but can you give them extended coverage at your dealership? I mean, are you you're a you're a a Ford store? You know, do you have technicians that can help diagnose a Tesla or a Kia wind or Anything to that nature? I mean, do we have that capability to capitalize for ourselves, you know, on that service money? Or are we going to end up farming it out to somebody else? Do we do we have that capability to to not just work on the vehicle? But or not just cover the vehicle, but to actually work on that vehicle. And I think that is such a valid point because John, if I wrote that if I wrote that down correctly. Renaldo Leonard (31:36) Can you can can you rear in cash that check that your mouth just wrote? Right. You know? Chris Keene (31:41) A real. But John, you says six hundred thousand are projected to come back in the market in twenty seven. Is that right? But then Ronaldo brings up another point. Yeah, those projections are based on maturation dates of those leases. And if I sit there and I look, and if I'm if I'm a EV owner and my residual is X. And the market is why, whatever that may be, I may be better off keeping it versus turning it back in. So I mean that's a great point. Renaldo Leonard (32:09) Mm-hmm. Because here's what's gonna happen. Here's what's gonna happen. If they're saying that the residual was written on that original deal at 50%, but they're coming back at 35, what does that do with the residual of the new deals that are coming out? It could be written at 40, 40 to 35, right? Which is gonna drive that payment up. Chris Keene (32:24) It could readjust them again. Renaldo Leonard (32:26) Absolutely. So it's Chris Keene (32:27) That's you. Renaldo Leonard (32:28) yeah, I mean it it's it's it's just the economics of things, right? You know, and the numbers. Chris Keene (32:32) Mm-hmm. Renaldo Leonard (32:33) What What what do you have on your shirt? Both of you. Get the WTF. Chris Keene (32:37) You Renaldo Leonard (32:38) But the facts are the facts, right? And and and that's part of being proactive as opposed to being reactive, right? We got all this data at our at our disposal, but it's just digesting that data and making the best decisions. It's gonna bite a lot of people in the ass. Chris Keene (32:55) I don't know. Renaldo Leonard (32:55) Because they're not prepared all the through. And that question about whether or not we're prepared and fixed, that's been an issue forever. Not having enough technicians to turn the wrenches and do the work in service. Right? That's been a happening for the last 10 years where it's tough. And you're having your, you know, eight team technicians can't find them, can't get them. And those dealers that when they saw the bubble coming. Developed or started to put in a development plan to filter in technicians and grow them and develop them and pay them accordingly, they're not having that issue. But that is the exception rather than the rule. The majority of dealers are struggling. And that goes back to the amount of time it's taken us to get vehicles to the marketplace. Well, what John, did you you mentioned it earlier? The average amount of time it takes to get vehicles through recon? John Anderson (33:47) it is now it is ten to twelve days. Renaldo Leonard (33:50) Right. And and and Chris, you brought up the fact that guys are taking shortcuts in order to get vehicles to the I mean it's just we see it time and time again. Being reactionary puts you in a bind, you start to take shortcuts, and then next thing you know, that apple pie that should be as sweet as America tastes like doo doo. Chris Keene (34:10) Yeah. So I mean John John Anderson (34:13) Look, I I Renaldo Leonard (34:15) I digress. I apologize. John Anderson (34:16) No, you're good. Chris Keene (34:17) No, you're fine. John Anderson (34:17) All good. Renaldo Leonard (34:18) Okay. Chris Keene (34:20) You know, John, with that being said, I mean, I I that was again the the data on the EVs and the residuals. I mean, that is just phenomenal. Something that we as as automotive experts, we all should be paying attention to. Okay. And you know, with that abundance of inventory that's starting to come back in the market. It's going to be very, very crucial, dealers. And we'll put a pin in the EV side of this because John, I want you to bring up that recon. Ronaldo, you already started that conversation a little bit, but I want to it you know end today with recon. But the thing that we also have to remember, guys, when it comes to the writing that's out there, that's on the wall, and these are factual pieces of information. This is not. In no way, shape, or form, you know, like SAR, a projected. Okay. The facts are is you have

north of 300,000 off-lease vehicles that are EVs that are going to come back into the market by the end of this year. That is a stone cold fact. Yeah, is there a percentage of them that the consumer is not going to Surrender the vehicle and just turn around and keep it? Sure. Wildly, I will tell you it's going to be a very low percentage. So, with that being said, if you solely look at just the market day supply of a vehicle, it is a great barometer, but it is not the end story. You guys need to dig deeper. If you start taking in a bunch of these EVs, you guys need to dig a little bit deeper beyond the market day supply. And you need to really start looking at how your store in your market with your people, how are you moving with those EV type vehicles? And if it's not good, Then you already know from day one your exit strategy should be from a wholesale mindset. If you want to get good at the EV game, then you better start studying now. You really should have started studying 18 months ago on how to better sell those vehicles so you can give yourself a true gauge of how your market could do it. So Strongly recommend, guys, start digging back into your data about the EVs. But Ronaldo, you brought up the recon piece of it. And John, share with our viewers and listeners that that data you pulled about reconditioning that got us all fired up right before we went live here. John Anderson (36:55) Industry average recon cycle is still sitting around 10 to 12 days against a three to five day benchmark. Say that again, three to five day benchmark. that that well that well-run shops actually hit, and every day a unit sits cost roughly $50 in carrying costs. So our last number there that we got as an average was $55 a day. So now this is a different source, but Figure fifty dollars a day in holding cost. The trend to watch here isn't encouraging. Budget pressure is pushing some stores to cut corners on recon just to get units frontline ready faster, which trades short-term speed win for longer term reputation and comeback problem. The stores getting this right are sourcing cleaner units in the first place. Trade-ins and service lane vehicles need far less work. than auction buys rather than trying to fix a sourcing problem on the recon line. So let me Chris Keene (37:55) Mm-hmm. Mm-hmm. John Anderson (37:57) I I I feel it I feel a need as we've been talking to to reiterate this. I'm going back to day one when we were sitting in a meeting and I brought up the fact that I would like to do I would like us to do a podcast. And the reason why we decided to do this was to help dealers. Solely, that's Chris Keene (38:12) Mm-hmm. John Anderson (38:13) our solely And and we took a cue from our owner, Jason Rice, who has for the last twelve, thirteen years of just has thrown out tons and tons and tons and tons and tons of content, which a lot of it has been duplicated by other people out there in the marketplace. I'll say it. Other third party vendors

have have grabbed that information and duplicated it, which is should be a compliment to Jason. But Jason for years Chris Keene (38:39) Mm-hmm. John Anderson (38:40) has given away content at no charge to help dealers. And as a company, that's what we want to do. So by no means are we sitting here, I don't I don't want this to be perceived as a negative. And I'll and and I'll be transparent on myself. If I was back in a store, I would run a store completely different based on what I know now. But does that mean that I would have all the answers? No, because things shifting fast, you're wearing multiple hats, right? So The things we bring up on a weekly basis, I hope you all are receiving this as things that we're seeing that are areas that need your attention, right? And if you look at these areas and your dealership is performing well in those areas, fantastic, fantastic. Right, good on you. but but Renaldo Leonard (39:19) Good on you. John Anderson (39:22) here's the thing: every day we wake up and come into our store, there's something that needs attention, right? And all we're trying to do as as a as a three quartered strand here, Ronaldo, Chris, and myself, is to share with you those areas that we consistently see with with dealer partners that need attention. Right. and so the things we're talking about today, I'm just reading headlines. I'm I just I'm just looking at what the market is saying, right? And reconditioning. Listen, I I can tell you a question without without fail, a question we ask every time when we onboard a new dealer. And without fail, the answer to this question is a hundred percent yes. And that question is do you agree that inventory sold in the first 30 days makes and retains the highest profit? And the answer to that question resoundingly, I've never had a dealer tell no, I disagree with that. Everybody Renaldo Leonard (40:14) Yeah. John Anderson (40:14) agrees with that. Okay, well then a so I'm a simpleton, I'm a simpleton. I'm a simpleton. Okay. Then why do we let so much inventory Drift past 30 days. And then once it drifts past 30 days, we don't manage any, we don't manage it properly, right? Why do we do that? So I I Renaldo Leonard (40:29) Somebody revive. S somebody went. John Anderson (40:33) I get some of I get some of it because I look at it, right? We got a unit that's 45 days old and we're already at a $4,000 loss. Your butt's puckered and you don't want to move pricing on that unit, right? But the the unit I looked at one this morning. We got a $4,500 loss. It's sitting at forty eight days and we got zero leads and zero switch opportunities. We got nothing happening and it's getting a VDP conversion on two major third parties of less than two percent. Are we gonna what a and on top of that, listen, I will say one thing about our company and Jason Rice. We give a predictive index on on inventory on your inventory. Now listen, that has nothing to do with us other than us compiling the data.

It's your data, it's our dealer partners' data, but we're going back in and looking at your sold data over the last 60 compared to the last 15 days. And I can tell you, dealer after dealer after dealer is spot on. If our predictive index said you should be selling that inventory in 39 days, based on like inventory that you've sold in 39 days at 98%. And then we look at how you act the inventory that you've sold in the last 15 days, it's typically on 39 days, maybe 38 days, and at 95 or 96%. Time and time again, it's spot on. So here's my question. If if and I'm getting off sidetrack here, but I thought it was necessary to say if I've got a unit that's 48 days old and the predictor says 98% and I'm still priced at 102 and I got no leads on it. Right. So reconditioning back to what how we started this, right? If you're thinking about that fifty dollar a day carrying cost, the more I sit on that, right? And and and the fact that the average is ten to twelve days, when here's another thing we always ask cust dealers where where do you want your bench where do you want your inventory to turnaround time to be? And it's always in that three to five day range. Everybody says that it's always in that three to five day range, right? And so All these things all these things are, you know, I I get it, right? Here's three guys, three goofballs behind mics, right? And they're talking about how we should be doing stuff, right? And it and you're sitting there going, Well, I'm sitting in a chair, brother. I got the I got the pressure on me and I'm wearing a different hat. I get all that. I do. But it but it listen, if you've got a bunch of inventory that's not getting through the process and you know thirty days is when I gotta get that inventory out to maximize my profit. profit, does it bear does it bear my attention to look at how can I help? Absolutely. You know what happens? When we when we get with a new dealer partner, the first thing we do is we turn up their volume. That's typically the first thing that happens. They start they start cranking more volume. And guess what that causes? That causes downline pressure on their service. I got a I got a group of dealers that's going through that right now. They crank their volume way up. They're selling and they're selling a lot of fresh inventory, but they're not they're not getting now they're the what they're bringing back in it they got downline pressures, right? We're trying to push more inventory now that we're selling more, trying to push more inventory through our service department. Did we set did we set anything up differently or we just we got the same amount of text that now we're trying to push more inventory through. And then once it comes out of service, it goes to detail. Did we set up our detail department to handle more inventory 'cause now we're pushing more through? Likelihood we didn't. Right. And so that causes a problem and it slows things down. So the reason why we talk about these

things, it's things that we commonly see as things start to change. And I I just felt that I felt that I needed to to to say that is that we I get it, you guys. You guys gotta a manager in a dealership has a hell of a job nowadays. They do, because there's so many moving targets. But we're just trying to help you. That's what we're trying to do. We're just trying to help you. Chris Keene (44:06) Which in turn causes us to start cutting the corners on the reconditioning. And John Anderson (44:10) One hundred percent. Chris Keene (44:11) what you know, a term that one of my mentors who's been on the show with us when we were talking about leasing a few months back, Jim Holman, you know, he sat there in a term he used with us all the time. He would look at us and go, Son, don't mortgage your future. And when you cut corners. On your reconditioning to hit a number that three to five day. When you cut that corner, you're mortgaging your future. Because it's the inevitable. Renaldo Leonard (44:36) Sure. Yeah. Chris Keene (44:38) If you decide not to do something because it's going to leave it in the shop longer, or you know what, those Renaldo Leonard (44:44) Mm. Chris Keene (44:44) tires are passable, we'll make it work. You're going to give it up on the backside. Your wheel. You know, your wheel policy is gonna go up. But what's gonna end up really happening? John Anderson (44:54) Or your reputation is gonna go down. Renaldo Leonard (44:57) Okay. Chris Keene (44:57) What's that's exactly where I was gonna go. What's really gonna happen is that extra eight hundred dollars that you didn't spend on that recon is gonna cost not just that customer to come back to you again, but any referrals. That you might have got from there because we all know what happens. Give somebody a great experience, and they're gonna go tell four or five people how wonderful it was. Give somebody a shitty experience, and they're gonna go tell four or five hundred people. Renaldo Leonard (45:26) Big ol' tail everybody. Chris Keene (45:28) how awful the experience was. So John Anderson (45:30) TikTok, tick tock. Renaldo Leonard (45:32) Yep. Every social media outlet that they got hands on. Chris Keene (45:36) It John Anderson (45:36) That is d that is Chris Keene (45:36) did it lowered my John Anderson (45:37) different than when we were coming up in the car business, right? That is something, man. People will go like they can hit the ma they can Chris Keene (45:42) it is. It it is definitely John Anderson (45:44) hit the masses. It's not word of mouth, it's freaking social media hit the masses, right? So you gotta consider that. Yeah. Chris Keene (45:50) Absolutely. Renaldo Leonard (45:52) Well think think about that. We I guess we had a John, you might have brought it to our attention. A dealer in North Texas, and there was a social media Chris Keene (46:01) Yeah. Renaldo Leonard (46:02) influencer who went to purchase a vehicle, and John Anderson

(46:05) Yeah. Renaldo Leonard (46:05) he was reaming from the mountaintop. Some John Anderson (46:08) Yeah. Renaldo Leonard (46:08) tricky shit that they tried to pull. And John Anderson (46:11) Yep. Renaldo Leonard (46:12) you know, it just in our reach as individuals. Yes. John Anderson (46:14) guy's got billions millions of followers, millions of followers. Chris Keene (46:17) Hey, hey, John, that was like that was like back in John Anderson (46:17) And he dropped their name. He dropped their name. Chris Keene (46:20) the day when you when you sat there and sold like the producer from the TV station a vehicle and Renaldo Leonard (46:27) Yeah. Chris Keene (46:28) gave a bad experience. And you all they had was like like here locally in my town is is Griffin Media. Well, they're the ones who own the CBS affiliate station here. And you didn't pay no attention. And the next thing you know, you just get roasted. John Anderson (46:43) Yep. Renaldo Leonard (46:43) Your whole community. But now it's the entire world. Chris Keene (46:48) it's John Anderson (46:49) Here's to the Chris Keene (46:49) awful. John Anderson (46:49) here's to the point, and and here's what I would c based on what we've been talking about here, and Chris brought up, right? Cause we I hear this all the time, and I know you guys do too, right? we see an im we see a unit, we ask about it, and they're like, Well, yeah, I know it's twenty eight days old, but I just got it frontline ready, right? Man, stop taking that approach. Renaldo Leonard (47:09) Mm-hmm. John Anderson (47:09) Day w day one is Chris Keene (47:10) The John Anderson (47:11) day one. When you cut that check, that's day one. That's day one. Chris Keene (47:14) Million percent. When it hit your floor plan when you cut that check, it is day one. John Anderson (47:18) That's day one. Stop taking that approach because that's what gets you into trouble. You know? If I listen, if I've got a if I gotta spend a little extra money to make the sure the vehicle's right and it costs me some time, then this w when that vehicle when that vehicle comes out of service, then don't look at it as I just got out of service. No, it's it's it's day twenty one. I gotta price it accordingly, I gotta merchandise it accordingly, and I gotta get this thing out of here. Right. Chris Keene (47:44) Hey, John, Mother Market does not give you a hall pass. Okay. John Anderson (47:47) No, no. Chris Keene (47:49) She's gonna come at you grinning and smiling, waiting John Anderson (47:51) Right. Chris Keene (47:52) for you to blink. So she don't care. John Anderson (47:55) So stop, stop Renaldo Leonard (47:55) yeah. John Anderson (47:56) use stop using that mentality. It's like, listen, we all have done this. We've all helped our new car departments get a deal by pushing a trade, right? and and probably pushing a trade unrealistically, right? So when that trade comes from the new car side into my inventory, don't make a s don't make a second mistake, right? I gotta target that unit and get it out of my inventory in the first 20 days. Because I may have to put it at zero markup out of the gate, but I don't want that thing lingering because I went deep into it to help our new car department, which I should help our new partment new car department get a deal, right? So what do I want to do? What do I want to do with that thing is turn it fast, hopefully get some F and I and get a trade, and now I can start rolling, right? So man, Chris Keene (48:42) I got market share. John Anderson (48:43) right, little tweaks, but they're important tweaks. These little things make a huge difference. They absolutely do. Renaldo Leonard (48:48) Huge, huge. Chris Keene (48:50) And it goes it goes back into everything we've talked about here today. Okay. And I know we didn't get deep into the first deal being your best deal, but matter of fact, what we're gonna take everything from today and next week's episode. That's what we're gonna do. We're gonna really hone in on that first deal being your best deal. But today, we've just set the stage for it, and that organically happened, not by design. But everything John just ended with there bleeds back into improving that day supply. Bleeds back into the experience with EV. It bleeds back into reconditioning. It bleeds back into earning those trade ins. Every last bit of what he just said. goes back to improve every last bit of those topics we just talked about. And if I'm a viewer, if I'm a listener on this today, I would take heavy note and go back and look at our inventory at our dealerships north of $35,000. I would go back and look at how long is it taking me To sell that late model inventory that can yield me that very desirable vehicle that when you look at the shopper index that's out there today, the majority of those people are looking for that inexpensive vehicle because of the economics and the pressure we're receiving there. Does it mean? That we can't sell that there isn't a market for vehicles north of 35,000. We just got to be quicker, smarter, faster with it. So I'd go back and look at that. Go back and look at your experience with your EV. Number one, are you to Ronaldo's point earlier? Are you even set up to be able to service that customer when you sell it? And if you're not, I'd probably reconsider selling them. Because if you can't take care of the customer after you sell it to them. It's purely transaction. You'll never get nothing else from them. And you'll dampen any future you may have outside of an EV with them. I would go back and look at your reconditioning. This is a big one, guys. A $20,000 car to you may not be expensive. But a $20,000 car to that consumer, that is the end of their budget. And that is 1 million percent what they. See as their new vehicle to them. So in your reconditioning, don't cut your costs there, guys. Make your $20,000 vehicles look like $40,000 vehicles. Make your $40,000 vehicles look like $80,000 vehicles. Because it may not be new to you, but it's going be new to somebody else, and that's their hard-earned dollars, not yours. I want to dive in deep next week to this number, and I want y'all all to think about this. 65% of the consumers today completing online transactions with an automobile. We'll go dig deeper into that next week. But until then, we've hit the top of this hour. We're out of time. And John, as we always say it, where did it go? Because we could do this for John Anderson (51:42) No. Chris Keene (51:42) hours upon hours upon hours. So, with that being said, viewers and listeners, continue to like, continue to share, continue to rewatch these episodes to pull the pieces out that you might have missed, because I promise you, there's something in there that you might have missed. And as always, we thank you so much for all the love that you're showing us on Apple. We thank you so much for continuing boosting us up on our YouTube channel. We strongly please, please, please, we strongly recommend and ask of you to continue to like, share, send us in your feedback, send us in your QA. Lotttalkpodcast.com. You can get John, Ronaldo, my information. Drop us an email if you like something, if you hate something, if you got more questions about something, or if you just flat out want our help. We can't tell you enough that if you are to call us and ask for our help, that the cost to get our help, to help give you some direction and advice is zero. Won't cost you a thing. So reach out to John, reach out to Rodalda, reach out to myself, and most importantly, tune back in next week. Same bat time, same bat channel. And we're going to unpack more of this next week. And we're going to talk deeper about how that first deal is the best deal. Until then, we wish you nothing but the most success on behalf of Mr. Anderson, Mr. Leonard, our Lop Pop family. We thank you for tuning in, and we will catch you next week. We out.