Watch VINCUE Accelerate LIVE: What Dealers Really Think about VBC™

Danny Zaslavsky:

Okay, cool. Well, good afternoon. My name’s Danny Zaslavsky and I’m with Country Hill Motors and VINCUE and today I’m joined with two friends, Jeremy Zarfos and Dan Donegan, we’ll get to introductions in a minute. But the thing that we have in common is we all buy cars directly from the public and have been on the journey from starting with no private party acquisition to a little bit, and now working on scaling and figuring out how to grow that business using technology from VINCUE and then some muscle on the ground. So if you guys don’t mind, we can maybe start with some introductions. Jeremy, if you want to introduce yourself and your dealership.

Jeremy Zarfos:

Thanks, Danny. I appreciate it. Jeremy Zarfos from Bob Ruth Ford in Hillsborough, Pennsylvania, just outside of Harrisburg, Pennsylvania. I’m the operations director here at the store, Bob Ruth and I, and a majority of our team kind of came up with our buying center, and we’ve had some great successes thanks to VINCUE.

Danny Zaslavsky:

Very cool. Dan.

Dan Donegan:

Hey there, Danny. Thanks for having me. I’m Dan Donegan, I’m the principal at Topsfield Motor Company and we’re a small independent dealer on the North Shore of Massachusetts. We’ve opened our full steam vehicle buying center at the beginning of 2020, and it’s definitely pivoted the whole way that we purchase inventory, so that’ll be interested to dig into some of that today.

Danny Zaslavsky:

Cool. Well, yeah, let’s go. So to be effective, the things that we’re hopefully going to talk about today are, and I’ve got my notes to my left, so if I’m looking over that’s why, but brand, so we each have a brand for our car dealership. And how is that evolving? How is that changing. People, and have we changed our organizational structures? And what is that looking like today? Process, process of what happens now when customers come in store. Anything that’s innovative to share that you think is important. And then any metrics, I would love to hear about kind of where you were versus where you are versus where you’re headed. And that could be either dollars or percents or whatever metrics you care to share about your growth and then any struggles. And speaking of struggles, the good, bad, and the ugly. So anything that is going really well, anything that isn’t going well, we’d love to hear.

Danny Zaslavsky:

On the negative side, something I’ll share is, I had a bunch of naysayers early on when we were starting this in my organization, they’re saying, “Hey, this is a waste of time. You shouldn’t be doing this. We can’t focus on this quite now. You’re never going to be able to scale this, buying cars from the public.” And I was dedicated, I was on a mission. I’m like, “Nope, we’re going to figure this out.” So that’s certainly something that happened with us. But Jeremy, if you don’t mind I’ll start with you. Let’s talk about the Bob Ruth Ford brand, because it’s a powerful one.

Jeremy Zarfos:

Yeah, give credit to the team here over the years, and Rob, and even his father, Bob for branding Bob Ruth Ford as a community dealership, a very catchy slogan they had on the radio for years. It’s still, I think a little bit of folklore in a way that people just know it. So we don’t do as much radio anymore, but people, Rob and Bob, they really built the dealership on the brand early on, and that really helped a lot with when we started to do some advertising on something new, things in the community, things like that.

Jeremy Zarfos:

It’s really made it impactful to do some of these things and help speed up the process of buying off the street from our public and from the community, because we are recognizable in the community a little bit, not just as a dealership, we are a dealership, but we’ve been around a long time. So there’s some continuity there, some tradition. So it’s really helped us a lot because we’re not really in a major city we’re kind of on the outskirts a little bit from everything. So that that reach and impact was a great bridge to have this sped up in a quick way from really not buying from the public at all to where we’re at today.

Danny Zaslavsky:

Yeah. No, I get it. If you call my dealership, the first thing we say is, “Are you calling about buying a car or are you calling about selling a car?” We never did that before. Up until the vehicle buying center, we were just focusing on campaigns or specials or any promotions that we were running. Dan, what about you?

Dan Donegan:

Yeah, so our store predominantly we focused on late model, off lease, mostly luxury line vehicles, which essentially was just a pipeline to the auctions. I mean the off lease units they’re allocated there. We’re very much like an e-commerce store, so our branding and so forth is geared towards that. So yeah, we’re part of a community, but a lot of people, when they find us, they’re surprised where we are and there’s some great word of mouth from that. But the pivoting to the vehicle buying center has allowed us to do two things, I think really well. One, increase quality, and then two, definitely control our destiny more so than we had previously been doing. So solely buying from the auctions, obviously there’s an ease in that, but there’s also a huge disadvantage in that too. You don’t control everything, now much more control has been put really in our wheelhouse, which has been, I think a big surprise. I would say a fortunate surprise of buying from the public now.

Danny Zaslavsky:

So you mentioned something there that, I learned by just doing it, I didn’t expect it. But you said the type of inventory that you get from the public versus this type of inventory you get at the auction. Can you speak a little bit more about that?

Dan Donegan:

Yeah, sure. So the inventory at auction, I think we’re all aware that the quality is…

Danny Zaslavsky:

It’s a perfect time for Dan to freeze. The quality is…

Jeremy Zarfos:

I wonder where he was going with that? I think-

Danny Zaslavsky:

Leave something to be desired.

Jeremy Zarfos:

Exactly. That’s exactly right. There’s a lot of unknowns. There’s a reason it may be there, not just because that dealer didn’t want it. I think that, he’s a hundred percent right, we all do know that at auction you’re really kind of rolling the dice sometimes, and more often than not. And even if he’s buying them online versus in person, that’s also a challenge, which we were forced to do. And they’re not always represented the way you want them to be. They don’t come in in the condition you were hoping. And then you find out all the things that why it was at auction sometimes.

Jeremy Zarfos:

And really, at the auctions, it’s a lot of the same thing. They’re much of the same year, make, model, different colors, same thing over and over and over, it’s very repetitive. If they’re at auction being purchased, then everybody else has those same things as well and then you get into this competition of selling the same thing, and it’s just a lot of times a race to the bottom on price, and the car sits around. So buying off the street, and that’s probably what I’ll let Dan finish, but probably what he found like we found was lower market [inaudible 00:07:44] supply vehicles, they’re more rare, it has a better story behind it. It’s, people are selling them off the street, and if it’s a few years old with good miles and… They’ve taken care of the car, they care about the car. They’re not just dumping it on their front lawn because it’s a piece of junk. So, I think probably Dan is living the same thing. I’ll let him finish up there.

Dan Donegan:

Yeah. No, absolutely Jeremy, and that’s interesting to you where you mentioned a story. I mean, we’re not a big McDonald’s kind of store. It’s not 600 cars going through the gate every month. So when the cars are now coming in, we’re meeting customers, we know the previous owners, that does go a long way when you’re remarketing the car too. So yeah, the quality is higher, and then the quality of the whole experiences is improved. So it’s been a happy accident in that respect.

Danny Zaslavsky:

At my store, I’m getting churns on cars that I would never get. And quite frankly, never approach at the auction, because I knew that that car would be bid on by somebody else and they would get it and they’d pay more, whether it was an inexpensive car that a buy here, pay here would pay way more than I would ever pay because they price cost plus, they don’t price on a market based pricing system. Or an expensive car, whether it be even something in the 30 or 40,000 price range, like a low mileage Boxster Porsche or something that has some curb appeal, those cars would break the bank and I’d never have the opportunity.

Danny Zaslavsky:

And then Dan, you mentioned it, quality. We always felt like at times we were getting surprises because we were buying other people’s headaches that they would mask and then we’d get them at our lot, so I get that. So just to circle and close on the brand conversation, are you guys, I guess I know this answer, but I’d love a little color. How are you now branding yourself as a dealership that not only sell cars, but buys cars? What’s the messaging, how are you getting the word out? Dan, can I start with you?

Dan Donegan:

Yeah, sure. I think that’s interesting, Danny, where you’re greeting now has totally changed, right? You’re not just, welcome to your dealership, what are you looking to buy? Are you looking to buy or sell? So it’s really a complete change at the very beginning from picking up the phone call to, I would say social media marketing, revisiting customers that are returning customers to the store and so forth. A lot of people are surprised too. I mean, I think as dealers, we sometimes just assume, “Oh yeah, of course we’re going to buy your car, of course we’re interested.” A lot of it is, yeah, marketing and educating your customer base that you do that.

Dan Donegan:

There’s been so many times where we reach out to a customer or it comes through like a phone call or an email and they’re surprised, “Oh, you would be interested in the car we bought from you three years ago, that we’ve only put a couple thousand miles on because of the pandemic?” “Yeah, we’re really interested in that car.” So it’s definitely, I think marketing, but it’s also a dealership mind shift. You do like the sales team, the managers, and so forth, just getting everyone to, “Hey, we’re not just here to sell cars, we’re here to buy cars.” And that’s through the public, so we do need to kind of change our complete vision and approach.

Danny Zaslavsky:

Jeremy.

Jeremy Zarfos:

Yeah, I think that it’s a mindset, it’s kind of that will to do it sort of thing. Not just a mindset, it’s a mindset with us first, it has to start with us. Like Dan said, everybody in the world right now says, “We’ll buy your car.” What does that mean? There’s huge advantages to not just saying we’ll buy your car, it’s putting the effort in a lot of other ways, not just saying we want to buy your car, because again, Dan and myself, we may not be next to… Like Danny has an advantage here in Kansas City, right? So CarMax-

Danny Zaslavsky:

I’m across the street from a CarMax, yeah.

Jeremy Zarfos:

Right, so that’s that world. I have some cornfield surrounding me, so I can’t just say the words, it’s got to be in action and it’s got to be everybody. So we put the spiff out to the whole staff, service, parts, accounting, everybody’s involved. If you see a car on the side of the street, and let us know, let’s go get it. We have everybody involved on Facebook. I don’t care what employee it is, if they start a conversation with someone to buy their car, it’s an all out effort toward making progress on this.

Danny Zaslavsky:

I love it. Okay, so that’s a perfect segue into people, because seven years ago for us, maybe several years ago for you guys, that org chart maybe looked a little bit different. And now we have people that are dedicated to acquisition, not just from the auction, but dedicated to it on the private party side. And what kind of people are you hiring? Are you promoting those people? Are you finding them on the street? Let’s start there, Dan?

Dan Donegan:

So it’s definitely a full-time… And again, I’m talking about my size and scale, I’m a smaller store and it’s an absolute full-time position, where I’m even thinking of adding another full-time employee. The customers, or I should say the person that works best in the vehicle buying center is someone that has really good customer service experience that is able to communicate, to make connections, it’s not someone that’s trying to sell something. So a salesperson promoting them, wouldn’t be maybe the first choice. So if you can find someone that has just good, solid customer service qualities, that’s someone that should really succeed, but it’s absolutely full time. It’s amazing how busy someone can be just buying, even at a small store. So all you indie guys out there, it’s not someone part-time at night.

Danny Zaslavsky:

Jeremy, what do you think?

Jeremy Zarfos:

Yeah, so we’re not that different in a way, but we’ve scaled it a little bit. We’re, I’d say, a little bit further ahead in a sense of the scale side of it, but it’s not a very much a different answer. We found success with more of our experienced people that, they came from the BBC, two of our folks, right from the BDC that were some high performers, very good communicators, interested in cars a little bit too, so that helped some. They’re not experts on cars, but it’s really about the interaction and the engagement. Everything in this world’s the engagement. We’re trying to sell a vehicle out of the BDC. They put a lead form in, they may not answer the phone. Were they really interested? There’s a lot of that continuing contact, and it’s just repetitiveness.

Jeremy Zarfos:

This one is, the people are saying, “Hey, I want to sell my car.” Whether it’s an inbound lead or whether we’re doing outreach, they want to sell the car. So the engagement opportunities are higher, I would say. [crosstalk 00:15:04] saying, “Hi, yeah, I’m here. I don’t want to sell this car.” After that, then it’s the skills that come into play. So I think that you get a lot of engagement initially, and then what we’ve found in success is that it’s just asking simple questions, like it would be Jeremy talking to Danny, “Hey, I saw you have a car for sale, I’d be interested in it.” And start a conversation. After that, let the skill players, in a sense, take over. And it’s not that they’re not, it’s just that their skills are in a different area. The rest of it’s our appraisal, our processes, the things like that.

Jeremy Zarfos:

So we have a team of two fully dedicated BBC reps, and a few part-time really because our whole store is sort of part-time. So I have reps that’ll do it. I have managers that’ll do it. I have appraisers that’ll do it. There’s nobody off limits that will outreach and talk to a customer, start a conversation. But it’s two full-time for sure, doing the inbound and outbound leads. And then I have sort of a BBC manager. He handles most of the appraisals and a lot of the logistics. I have, Tyler, he’s in the BBC and he’s kind of doing a little bit of everything. He’s our utility player, he’ll go out to a customer’s home. He’s doing on some shadowing. He’s doing some calls. Doing a little bit of everything, we want to mold him into a third full-time, because as we’ll get to processes and things, more fishing lines, more opportunities.

Danny Zaslavsky:

And can I ask how many you bought last month?

Jeremy Zarfos:

The number was, I’m glad you asked, September, I had it on the screen and I moved it, I apologize, 118. We bought 118 cars off the street, of those 102 of those were retail.

Danny Zaslavsky:

Wow.

Jeremy Zarfos:

So only 16 were wholesale, that’s that’s an area actually we’ll probably, maybe talk about, opportunity.

Danny Zaslavsky:

Yeah, yeah. I’m going to write that down actually, we’ll talk about some wholesale opportunity there. Okay, cool.

Jeremy Zarfos:

118 off the street last month.

Danny Zaslavsky:

That’s more than we did, that’s awesome. So I want to circle back on people, and before we get into processes, somebody told me this the other day and I thought this was really interesting. They said that there’s less of a loyalty today with a dealership or even a brand, and there’s more of a loyalty towards experience. So if me, the consumer, thinks, “Gosh, I’m going to have a really good experience there.” I’m going to take that chance and go get that experience. And I think on the acquisition side, specially when you’re not just now selling something but you’re buying something, you’re writing a check, which is very different from a sales timeline perspective, I think we have a chance as dealers to provide a very low friction, digital acquisition experience. Jeremy, you’re going out to people’s homes, you mentioned, to buy cars and inviting them to come to your house. Dan, are you going out to people’s homes or are they coming just to you? What’s your process?

Dan Donegan:

Yeah, so we might be a little bit more different, just in the sense of the cars that we target. So we are on the road a lot, we’re on the road more than we’re having customers come here. So that’s why I was a little late actually to this, I was just coming back from Boston. We just picked up a pretty hard to get car and we’ve got two more for the afternoon.

Danny Zaslavsky:

That’s awesome.

Dan Donegan:

I was joking with the guys, I was like, “I’d love it if they came to me.” And we do try, and it does work out when they do. But look, the reality is everyone knows, customers have schedules, they have work, they might be working from home, we want to facilitate the easiest transaction possible. And it’s so interesting when you do take a minute and step back and think about it, the purchase I just came from, he had the guy catch his breath for a second, because he was like, “Wait, there’s nothing else?” We just paid off his loan, we gave him cash. I mean, it was seamless. And he was like, “There’s just nothing else I have to do? Why is it so…”

Dan Donegan:

And that’s the thing, we’re going to provide, than the private parties aren’t and they’re not going to be able to do, right? So it’s going to be more of a headache for him to sell it to his neighbor and all the other stuff that goes into it. So we’re going to come out, we’re going to execute, there’s not going to be any BS. We’re going to say what we do and he’s going to have a great experience. And yeah, and that definitely helps with the brand and so forth.

Danny Zaslavsky:

So I know your inventory, it’s really, really cool. Would you mind sharing just a couple of cool cars, year, make, models of stuff that you recently bought that you think is interesting?

Dan Donegan:

Sure. Yeah, so the car I was just talking about was a Diesel X3, which would be a really hard… There’s not a lot in the market, super low supply. He just moved from California, it still has California plates on it. That’d be a really hard car to get at the sale. That’d be a car where there’d be a lot of buyers on it. The other car that they continued on, and I came back, they’re buying a 2018 Tesla Long Range. They do very well, they are also hard cars to get. Again, and the cars that we’re targeting, sure, if someone has a Toyota Camry, we’ll take that phone call. We might not jump in our car to go get it, but we’ll invite them to the store and purchase it, there’s definitely a market. So we will open up our inventory, but-

Danny Zaslavsky:

If you don’t want that Camry, I think Jeremy or I will take it.

Dan Donegan:

Yeah, yeah, yeah, no problem. We’ll send it over.

Danny Zaslavsky:

So, okay, cool. So in these processes there’s… Well, I call it being a cowboy, because sometimes you can get paralysis analysis by just trying to write everything out perfectly, like, “This is how we’re going to do it, and this is the people we’re going to hire. And this is how we’re going to pay them. And this is how we’re going to buy cars. Here’s who’s going to do paperwork, la, la, la, la.” And you can get so far out that, at the end of the day, if a customer walks in through your front door that said, “I want to sell my car.” You kind of know what to do, right? So what have you learned as far as from a process perspective? Where have you been a bit of a cowboy and where have you been able to lean on either your skills or your team, Jeremy?

Jeremy Zarfos:

So this all really started with an idea, and we had to be cowboys for a while. So it’s really that buy-in, right? We’ve talked a lot about that, and kind of like how did you get started? A lot of dealerships tend to spin their tires a little bit and they get stuck in the mud and just kind of go, “Well, we tried it.” And it just didn’t work out or whatever the case may be, and they search for help, and I’ll give credit to our dealer principal, Rob, our owner. And he sat at the sales desk one day and said, “I’m going to buy cars today.” He got on Facebook and he bought five cars that day, in front of the whole staff and people bought in, there was other people doing it. It really was, this can be done and it’s not rocket science.

Jeremy Zarfos:

Sure, then we had to figure out the rest of it, right? But we had to start somewhere. If you lay out the plans so perfectly, you’ll never really get started. The start happens when you reach out to people and say, “I would like to buy your car. Can I buy it from you?” That conversation is everything, and it had to start somewhere. And give Rob credit that he did it and said, “I’m going, here we go. Let’s go.” And it started from buying 10 off the street, just because they fell in your lap to we’ve done 125, I think one time, almost near a hundred every month with a process.

Jeremy Zarfos:

Now do we have to put some things together? Absolutely, our accounting department would’ve killed us if we didn’t have something in place. So we can write checks and print checks on the spot. We can pay off any other transaction. There’s a background work that has gone in in building that infrastructure and getting things smooth so people don’t don’t want to kill us cowboys. But it had to start there at the cowboy phase and we’re getting better every day with more efficiency, less people doing steps, more people taking care of more steps at one time, so it’s not too many hands in the cookie jar, as they say. Communication, because then that’s where it breaks down is communication between one step to the next, to the next, to the next.

Jeremy Zarfos:

And I think that will continue to refine as we scale, because as soon as we scale up, we’re going to break something and then we’re going to fix it and make it better. So expect that things will be broken, that’s kind of what we’ve found, that we’re going to have to break it to make it better and get bigger. If we make it perfect now we’re never going to grow, and we’re never going to buy more cars. So it starts with a little bit of cowboy mentality at first, and it’s going to be somebody who’s probably going to upset someone in your dealership, but look, they’re putting the forward and ultimately efforts everything in this.

Danny Zaslavsky:

And before we move to Dan, your sales managers, are they paid on gross?

Jeremy Zarfos:

Yes.

Danny Zaslavsky:

Okay. And so has their… Obviously their attitudes changed, right? But there’s a difference between saying and doing, what are they doing that shows you that their attitudes change from a BBC perspective?

Jeremy Zarfos:

That’s a tough one because we have a pretty good desk management staff, they’re bought in. Through COVID they were troopers, they did awesome. They were closing deals on their own. These guys, they’re veteran guys, they’re experienced, their talented. I don’t think it was ever a fact that they weren’t bought in, but I don’t think they really… It was almost like seeing is believing, they needed to see results and they needed to see what was going to happen and how this could affect our business and in a positive way, and go, “Huh, we’re on to something here.” And then it’s not that they late to the party, in a sense, but they were kind of like-

Danny Zaslavsky:

They were busy doing deals, they were busy focusing on sales.

Jeremy Zarfos:

Sometimes they’re here because this is 16 sales people in their face and phone calls and all these things that are there, and it took a dedicated department, like Dan said, right? We have people set aside to do this. You can’t have a sales manager buying cars off the street and doing all these other tasks and expect you to go buy 100 cars off the street. It’s not going to happen, right? So for us, it was just a fundamental change in what we were doing, we had to stock. If I could go into a quick statistic, a year ago, September, 9% of our used inventory was made up of trades and off street purchases, today it’s 74%.

Danny Zaslavsky:

Wow.

Jeremy Zarfos:

Okay, so everyone’s gross went up in 2021-

Danny Zaslavsky:

Keep going, I’m sorry. I’m not going to stop. Keep going.

Jeremy Zarfos:

No, [crosstalk 00:25:52].

Danny Zaslavsky:

I’m grabbing my college calculator because I’m going to do some math here, keep going.

Jeremy Zarfos:

Every dealer’s gross went up in 2021, right? That’s not a secret, no one’s hiding that fact. But I don’t believe we would’ve been able to harness the improvement we’ve made doing it the way we were doing it before, buying at auction mainly, not keeping as many of the trades and just wholesaling them, not buying off the street. We would’ve never reached some of the heights we have this year if we did not make this change, to the point, we’ll get into some numbers later, but that changed everything, our turn, our front end profit, obviously back end profit’s a product of it. But more views, more action, more leads, all those things, so it was a fundamental change in our business model in how we get cars.

Danny Zaslavsky:

Cool. Dan, to you. I don’t even remember the question I asked Jeremy, I got so excited about this answer.

Jeremy Zarfos:

Cowboy mentality or structure.

Danny Zaslavsky:

Cowboy mentality, thank you.

Dan Donegan:

Yeah, you just got to do it. I mean, I think Jeremy said everything pretty spot on there. Don’t be intimidated, you just got to go and buy and it’ll all come. And then you’ll figure it out, you’ll you’ll mess some things up. You’ll fix those things. You’ll get better. You’ll buy more. You’ll get frustrated, you’ll go backwards. And it is a cowboy mentality in the sense that nothing’s guaranteed. I feel like you can go to the… It’s interesting too, because personally, I buy all the inventory at the store and going to the auctions you can kind of get some bad habits too. As a buyer you can get lazy. The inventory is just there, it’s kind of like a buffet, right? But are you really getting into that inventory? Are you spending the time to really pick the good from the bad? You have to get into this inventory when you’re buying off the street, you have to put in the time and you have to put in the work, but you will reap higher grosses, higher quality, so just do it, make mistakes and yeah, you’ll just get better.

Danny Zaslavsky:

Okay, onto the numbers. And again, share what you’re willing to share. But I guess my I’ll just kind of lay a wide swath here. My questions are to you guys, do you measure how much money in auction fees? Jeremy, what was your average auction fee?

Jeremy Zarfos:

Four to $500, four to $500.

Danny Zaslavsky:

And you bought 118 last month, so that’s $59,000 just last month in auction fees, you didn’t pay.

Jeremy Zarfos:

Yeah. I mean-

Danny Zaslavsky:

So that’s a metric. I mean that’s $59,000 in auction fees that you didn’t pay. Okay, sorry. So that’s one, so if you care to share percentages or grosses, I would love to know. And then we’ll probably end with goals, and how are you going to get there relative to where you are today? So Dan, do you mind if I start with you?

Dan Donegan:

Yeah, sure. I mean, I think everyone’s growth is, like Jeremy has been saying, they’ve all gone up. There’s a lot of patting on the back with percent sold and so forth, it’s just been such a strong market. But easily our grosses have gone up on the front end 20%, and I’m probably being a little conservative.

Danny Zaslavsky:

And that’s speaking specifically to private party acquisition relative to auction purchasing?

Dan Donegan:

Oh, a hundred percent. Yeah, a hundred percent. I mean, I think grosses have gone down at the sale obviously. So yeah, grosses have gone up, turns have increased… What was the other part of that question, Danny? Was there a part two?

Danny Zaslavsky:

Yeah, so as far… Do you notice a difference in how quickly you churn the inventory you buy off the street relative to the other avenues that you buy from? Are there any metrics that you can say, “Hey…” Like for instance, at Country Hill we measure our channels, and we look back and we say, “Okay, cool. Here’s the fishing wells, here’s the fish.” And when they go to market, what’s happening? That’s the kind of stuff we try to ingest and learn from.

Dan Donegan:

Yeah. No, for sure. I mean, it’s a complete sea change. So pre-2021 our inventory was made up of probably 15% trade, the rest auction, with zero street purchases. Maybe if someone came over because they bought a car or they referred over, and that was one every other month. There was no street purchases. We’re now, I would say, conservatively, 70% street purchases, making the rest up with trades and honestly a very, very small mark of auction inventory now.

Danny Zaslavsky:

What a difference. I mean, that’s the definition of an end, right? The thing does the whole cycle versus having to go outside to fill a need that belongs on the inside, that’s really cool.

Dan Donegan:

And the other thing too is the auction fees, they’re no joke. We’re paying, 500 sounds like a great… I mean, we’re paying like six, $700 auction fees, then we’re paying transport. Then we’re getting cars back that aren’t [inaudible 00:31:31]. And this isn’t nothing new, a lot of guys, they’re nodding their heads if they’re hearing this. So do the math, it’s wild how much you end up paying in fees.

Danny Zaslavsky:

Jeremy.

Jeremy Zarfos:

So I don’t want to get too specific, but I’ll just give you kind of a broad overview of how it worked. I have some statistics from January through July on here, I could have went a little further, but we’re not that far beyond. In January we bought 181 auction cars and we had 16 street purchases, our average front end gross was under 500 a copy. In July, we bought 105 street purchases, 43 at auction and our average front end copy was just under 2000. So we changed our entire business model, right? And it was okay, short front end gross is okay, you’re turning cars. We had a great turn. Even back then, volume, volume, volume, but it was priced. And we made it through the shop and it was great, but if you had an aging issue, what was happening? You were quickly in the wrong side of it, less than 30 days. And if you overstocked a little bit, you bought those cars, it was just a business model that couldn’t be sustainable forever that way.

Jeremy Zarfos:

So we wanted to make a change because auction, as we know with the world, the auction prices and where it’s at, and if you’re the last one with your hand raised, you’re not able to take that to a market that-

Danny Zaslavsky:

Expert tax.

Jeremy Zarfos:

[crosstalk 00:32:53] can’t sell the car, it’s going to sit there and we don’t own a museum, right? We have a retail business, we need to get rid of the vehicle. So we always had a pretty good turn. We always had a pretty good age in stock. We always were really good at that and efficient. We can get a car fully online and marketed within two days, we were always really, really good at that, but we weren’t really making the profits that were out there.

Jeremy Zarfos:

So if I was going to go to buy at an auction and buy that 18 Escape and pay all those auction fees and at 99%, 100%, and it sits there for 30 days and then you lose money on it. Or not have the auction fees, pay someone for that rare 14 Escape with 13,000, 20,000 miles on it, pay a little more than what they’re asking for it, no auction fees, and it’s a rare car. It’s a car that no one else has. So we just had to fundamentally change it and not let the market dictate what was happening to us. We needed to go dictate the market a little more and just put the power back in our hands a little bit to have a greater product on the shelf. We can still supplement our inventory with some products that we need. We’re a Ford dealer, so we don’t have any new cars, I don’t know what they look like more. But we need to have that late model, low mile vehicle and we can supplement our inventory. A 105 off the street versus-

Danny Zaslavsky:

I don’t know what they look like anymore, that’s pretty funny.

Jeremy Zarfos:

[crosstalk 00:34:11] I forget what it looks like. A 105 off the street versus 43 in July is a fundamental shift, and that’s just supplement because I need to had to have a few cars because we had a good retail month. I can’t run out a product on the shelf. And that’s the other thing, I talked to Rob a lot, our volume is a little bit down from years past potentially, but so is everyone a little bit, exceptions here and there, but we’re profitable. We’re making more money. We still have a good turn. We’re stocking a few less, but I think we’re stocking more vehicles in our whole area still, and we’re stealing market share right now because of the inventory we have. Everybody can go buy an ’18, ’19, anything right now at auction if they really wanted to. You don’t want to pay for it, but you could go find it. It’s out there, it exists. But they’re not going to sell that car at the term we want, and we’re finding vehicles… And you know, everything’s expensive.

Jeremy Zarfos:

So everybody’s average investment has gone up and up and up, right? Even if you carried the same thing you did a year ago, everybody’s average investment went up and the buyers are going, “Well, I’m not paying that. I know what that cost a year ago. The car’s not more valuable today.” Like a shopper’s mentality. So for us buying off the street also allowed us to open up windows of vehicles that are under 18, $15,000 that we cannot go find at auction that’s a quality vehicle, it doesn’t exist. And you certainly you aren’t going to continue to raise your hand on that car because then you’re just out of reality on what you have to ask for that vehicle with shrinking margins. So it was a fundamental change in our whole business model and what we do, and we have a lot of staff to employ, we want to keep them making a living for their families and doing a good job. And-

Danny Zaslavsky:

I was thinking about that when you were saying that, I know you guys have over a hundred employees and many of those employees, they don’t have a dog in the fight on the acquisition side, right? They’re there to do their part to drive the engine forward, and so you guys being innovative is really important to those people.

Jeremy Zarfos:

It’s everything, it’s their livelihoods. We don’t want to cut staff. We don’t want to get smaller. We don’t want to contract anything or take… We want everyone to make a living, and myself include, I benefit too, if they do-

Danny Zaslavsky:

Yeah, of course.

Jeremy Zarfos:

Bob, and everybody on the team. So it was everything to us. And like I said, I can’t really give you a huge on turn and things like that, because we did a good job, the volume. At one point we did 340 used cars in one month. We’re not that level yet, but we’re also stocking less and selling more, so we’re more efficient now too because we a product on the shelf than if we were just going to auction.

Danny Zaslavsky:

Well, you guys are both super innovative, and I’m not telling you anything you don’t already know, but for those listening, I think my advice is just to continue to be innovative. Both of you mentioned how you get to hear so many cool stories from people that are selling their cars, we’re trying to capture those stories on video, either in an exit testimonial, you can go to Sell to Country Hill Motors on YouTube, you can see them. But we’re also trying to capture them on paper in the exit interview, and we say, “Hey, can you tell us anything interesting about your car?” And then we’re taking that and putting it on the comments of the VDP that says note from the previous owner. And the people who are buying from us think that’s the coolest thing, because they actually hear from the previous owner. And so it’s just little stuff like that, that doesn’t cost anything, but you get to be creative and you get to stand out, because again, experience, I think is what people are after and I think different is better than better in this case.

Danny Zaslavsky:

So I have two last points and then we’re going to take you out of here. But my one comment, and then I’ll end with asking kind of what your goals are, my one comment is, I think that right now, if we’re not buying the car, somebody’s going to. A year ago, five years ago, that wasn’t the case. The car could linger, the car, whatever, it wasn’t as aggressive. In today’s world, we have an opportunity to buy that vehicle, if not and somebody else will. And that somebody else, for the first time in the industry’s existence we kind of have a common competitor, right? Carvana, Vroom, these online monsters that we’re now competing with as a dealer body.

Danny Zaslavsky:

And so I truly feel that he or she who has the inventory, has a business. And Carvana just reported that they bought nearly 300,000 cars last quarter, if you look at their earnings. So that is insane, the number of vehicles that is running through that machine. So just when we think about scaling our own businesses, I think this is a good place to segue, what are your goals from an acquisition standpoint? Jeremy, you brought up wholesale, because there’s a lot of wholesale opportunity online. Dan, I know you’re laser focused on having that niche inventory that’s hard to find. What are you guys’ goals, whether it be for the rest of this year or now when it comes to acquisition?

Jeremy Zarfos:

Yeah, I think for us it’s, we’d like to get to 200 retail units. I don’t know if that’s this year yet, we need more people. We have to scale continue to scale. I mean, I told Rob many times that if our average investment’s under $18,000, I don’t care if there’s 300 cars here, if we bought them all from the street. I don’t care how many are here, because I know that it’s good inventory. So there is no limit, I don’t have a ceiling on how many I want to buy, but I’d like to get to 200 retail units and then develop a wholesale strategy for wholesale. So in these times where retail volume is unpredictable, what the market’s doing, used car pricing, shopper mentality, the world, the world what’s happening out there. You can insulate yourself a little bit with that wholesale mentality, keep a healthy dealership and wholesale profit is not a dirty word if you’re strategizing.

Danny Zaslavsky:

It’s not. That’s totally right.

Jeremy Zarfos:

And why shouldn’t we have a piece of it as a dealer? We’re good at it. We live cars. Why shouldn’t we be doing that? And again, it’s an investment in people and time and resources and structure, but it’s probably more of a cowboy mentality consistently than a structure, because we know how to do the paperwork. We know how to write a check. We can go to their house, like Dan had earlier, and they’re like, “Holy moly, is this it? Are we done? We don’t have to go to the notary and do this, or lie about how much the car is actually worth? We don’t have to do all that?”

Jeremy Zarfos:

And that customer service side of it too, it’s a contact in your community. If it’s local, even if it’s not local, it doesn’t matter, it’s a contact that, we bought 100, what’d I say? We bought 120 car, whatever-

Danny Zaslavsky:

118.

Jeremy Zarfos:

[crosstalk 00:40:53] cars, that’s probably 117 happy people. How often can you say that on the retail side when you sell a car. If you sold 200 used cars, did you have 200 truly happy customers? Listen, we’re a retailer, that’s not realistic, but I’d say a high, high, almost 100% of the people we’re buying these from are like, “Wow, that was awesome.”

Danny Zaslavsky:

I’ve never thought about it that way, Jeremy. You just taught me something. That’s-

Jeremy Zarfos:

Think about that, it’s true. We’ve made it easy versus what they thought they would have to do to sell that car from the street. And Dan mentioned that earlier, like, “That’s it, are you sure?” We hear that all the time? Even if we took two days to do it, they’re still like, “Wow, this was great. You came here or I came…” Whatever, it doesn’t matter. “There’s the check. Here’s your keys.” “Okay, thanks. Take care.” There’s not a downside to this, but it’s literally the commitment and doing it and going after is. So we have big goals, that’s what we do at Bob Ruth Ford and we’re going to get there.

Danny Zaslavsky:

Yep. Well, we’re watching. Dan, what do you think? Goals?

Dan Donegan:

Yeah, our goal at the store is to really keep growing the actual VDC department, is hire another full-time staff member, which if you asked me four months ago, I’d be like, “Wow, we even have one, that’s crazy.” And I don’t see really a ceiling on that. That’s pretty exciting. The grosses and the sell through rates, we want to be consistently selling through 90 to 100% of our inventory. We’re doing that because of the cars we’re getting, and that all goes back to just the process. So that’s our goal for the rest of the year and continuing on.

Danny Zaslavsky:

Awesome. Guys, thank you so much. This is fun connecting with you guys, but hopefully we’re getting into some ears of other dealers who are considering getting into it. I had somebody ask me the other day, “Aren’t you worried that you’re going to have five people are around you buying cars?” I go, “I have 19 people around me selling cars, and it’s never affected me, so I’m fine. There is enough.” We look at how many cars come into the market every day, and just in our little market there’s 600 new private party opportunities coming into the market listed online every single day, that is just insane to me. So I would say, get out of that scarcity mentality and get out there. And our rule is BFC, buy some f’n cars. BFC guys.

Dan Donegan:

Yeah, I got to go, I got to go buy some cars.

Danny Zaslavsky:

Thank you guys.

Jeremy Zarfos:

Dan, we appreciate your time, buddy. Thank you.

Dan Donegan:

Yeah, yeah.

Danny Zaslavsky:

See you, bye.