Latest / CBT Live / 20% of Financed Buyers Pay What? Plus Dealer AI, Carvana-Stellantis (10.06.26)

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20% of Financed Buyers Pay What? Plus Dealer AI, Carvana-Stellantis (10.06.26) · CBT Live

0:00
SPEAKER_06: AI is showing up for work, but what about everyone else at your dealership?
0:04
SPEAKER_06: Plus, Len Bolavia joins us to answer some legal questions.
0:07
SPEAKER_06: All that and more coming up next on CBT Live.
0:19
SPEAKER_02: Hey everyone, welcome into another edition of CBT Live right here at the CBT Automotive Network.
0:24
SPEAKER_02: Today is Tuesday, October 6th.
0:26
SPEAKER_02: I'm Jim Fitzpatrick.
0:27
SPEAKER_02: And I'm Bridget Fitzpatrick.
0:28
SPEAKER_02: Thank you for joining us, everyone.
0:30
SPEAKER_02: We've got a great show today.
0:31
SPEAKER_06: We do.
0:31
SPEAKER_06: We have a lot to cover.
0:32
SPEAKER_06: Two great guests coming on today.
0:34
SPEAKER_06: So we're excited about all of that.
0:35
SPEAKER_02: That's right.
0:36
SPEAKER_02: Yeah.
0:36
SPEAKER_02: Yeah.
0:36
SPEAKER_02: No question.
0:37
SPEAKER_02: Let's uh let's um I mean What would you like to do first, Jim?
0:42
SPEAKER_06: There's so much.
0:42
SPEAKER_02: What are we going to talk about?
0:44
SPEAKER_06: We could talk about the sponsor, we could talk about the news stories, we could talk about what's going on in our world.
0:51
SPEAKER_02: Well, let's jump right into the news stories.
0:53
SPEAKER_06: Let's do it.
0:53
SPEAKER_06: Yeah.
0:53
SPEAKER_06: Let's do it.
0:54
SPEAKER_06: So um, yeah, there's some interesting news.
0:56
SPEAKER_06: So new car buyers are borrowing at um all-time highs.
1:00
SPEAKER_06: According to Edmonds, the average amount financed hit a record$44,664 in the third quarter.
1:08
SPEAKER_06: The average monthly payment also hit a record of$787.
1:12
SPEAKER_05: Wow.
1:13
SPEAKER_06: And more than one in four financed new vehicles now have loan terms of 84 months or longer.
1:19
SPEAKER_02: What's the percentage?
1:21
SPEAKER_02: What did you say it was?
1:22
SPEAKER_06: 84 months or longer.
1:24
SPEAKER_02: Right.
1:24
SPEAKER_02: But what percentage of the loans have that?
1:26
SPEAKER_06: Did you say one in four?
1:28
SPEAKER_06: One in four financed new vehicles.
1:30
SPEAKER_06: Eighty-four months.
1:30
SPEAKER_06: Yes.
1:31
SPEAKER_06: 84 months.
1:32
SPEAKER_06: Incredible.
1:32
SPEAKER_06: Yeah.
1:32
SPEAKER_06: And more than 21% of buyers are also taking on payments of$1,000 a month or more.
1:39
SPEAKER_02: Hmm.
1:40
SPEAKER_02: You know, everybody that watches knows me, but I'm going to say when I was in the business, no, back when I was in the business.
1:49
SPEAKER_02: I remember when we went to 60 months from 48 to 60.
1:52
SPEAKER_02: And we're like, that's it.
1:53
SPEAKER_02: It's going to ruin the industry.
1:54
SPEAKER_02: Nobody's going to trade as often.
1:56
SPEAKER_02: People are going to be buried in their cars.
1:58
SPEAKER_02: And that was 60 months.
2:00
SPEAKER_02: That was incredible.
2:01
SPEAKER_02: That was in the 80s, by the way.
2:02
SPEAKER_06: And it also says here that um buyers will pay an average of almost 10,000 in interest over the life of the loan.
2:09
SPEAKER_06: Wow.
2:10
SPEAKER_00: Which is just incredible.
2:11
SPEAKER_00: Yeah.
2:12
SPEAKER_00: That's where we're at.
2:13
SPEAKER_00: Where is this headed?
2:15
SPEAKER_06: Analysis from Business Insider is now tracking nearly 20 EVs that have been canceled, discontinued, delayed, or otherwise pulled back this year.
2:23
SPEAKER_06: And this is happening across a lot of different brands.
2:26
SPEAKER_06: Hyundai has discontinued the standard Ionic 6 in the US.
2:30
SPEAKER_06: Kia's 2027 Nero lineup is now exclusively hybrid.
2:35
SPEAKER_06: Mercedes Benz is dropping the EQE sedan for 27.
2:40
SPEAKER_06: And Honda says production of the Prolog will end after the 2026 model year.
2:46
SPEAKER_06: Now, that doesn't mean they're necessarily abandoning the EVs.
2:50
SPEAKER_06: Some of these vehicles are just being replaced, some are being delayed, and others are just haven't found enough demand.
2:55
SPEAKER_02: Yeah, this is kind of pivoting, tweak tweaking the uh the fleet, right?
2:58
SPEAKER_02: That's what you got to do, right?
2:59
SPEAKER_02: Yes.
3:00
SPEAKER_02: Yeah, absolutely.
3:01
SPEAKER_06: Yes.
3:01
SPEAKER_06: In other news, um, this is interesting, especially with everything that we've been talking about with affordability, but new data out this morning from JD Power shows the brand loyalty is actually getting stronger.
3:12
SPEAKER_06: Overall brand loyalty rose to just over 50 percent, up from 49% last year.
3:18
SPEAKER_06: And some brands have really strong numbers.
3:21
SPEAKER_06: Ford leads the study with trucks at 66 percent.
3:25
SPEAKER_02: No shocker there.
3:26
SPEAKER_02: Ford F-150 continues to lead the truck industry.
3:29
SPEAKER_06: Another no shocker Toyota leads both mass market cars and SUVs at about 64 percent.
3:35
SPEAKER_06: And Porsche leads premium cars, and Lexus leads premium SUVs.
3:39
SPEAKER_06: Yeah.
3:40
SPEAKER_02: So Yeah, if you're driving a Porsche, where else what other car do you really compare that to?
3:45
unknown: Right.
3:46
SPEAKER_02: You know what I mean?
3:46
SPEAKER_02: Right.
3:47
SPEAKER_02: It's an incredible car.
3:48
SPEAKER_06: And what's interesting to note here is this is based on actual new vehicle transactions.
3:52
SPEAKER_06: It wasn't a survey or a study or anything.
3:54
SPEAKER_05: So very good.
3:55
SPEAKER_05: Actual.
3:56
SPEAKER_06: Okay.
3:57
SPEAKER_06: And finally, the car buying experience actually got a little bit harder in September.
4:01
SPEAKER_06: This is according to a CDK Global, um, their ease of purchase score fell 79%, the lowest it's been since December.
4:10
SPEAKER_06: Only 45% of buyers found the vehicle they wanted directly in dealer inventory.
4:14
SPEAKER_06: Getting financing also became more difficult.
4:16
SPEAKER_06: The percentage of buyers who said getting credit was easy fell from 70% in August to 56 in September.
4:23
SPEAKER_06: And 39% said the transaction took longer than expected.
4:27
SPEAKER_06: So most of those reasons were really no real shockers there in any of that.
4:31
SPEAKER_02: Yeah.
4:32
SPEAKER_02: Right?
4:32
unknown: No.
4:33
SPEAKER_02: I mean, with inventories, with dealers keeping smaller inventories, or if they can keep smaller inventories, um, then yeah, somebody's not gonna walk into it.
4:41
SPEAKER_02: For instance, Toyota, 12 12-day supply of cars.
4:44
SPEAKER_02: So if you walk onto a Toyota lot and say, Yeah, I want to go look at some cars.
4:48
SPEAKER_02: Do you really?
4:49
SPEAKER_02: We don't have a whole lot to choose from.
4:51
SPEAKER_02: Hopefully, you want a Tacoma.
4:53
SPEAKER_02: Right.
4:53
SPEAKER_02: A big supply of Tacoma's out there.
4:55
SPEAKER_02: But uh yeah, it's a little bit, it's a little difficult these days.
4:58
SPEAKER_02: We still have not, though, um won that that battle on time.
5:02
SPEAKER_02: How much time it takes to buy a car, consumers still uh car shoppers still have a real problem spending four or five hours on a Saturday afternoon in a car dealership once they've already decided to purchase the vehicle.
5:13
SPEAKER_02: Right.
5:15
SPEAKER_02: That is something that we we gotta get our hands around in this industry.
5:18
SPEAKER_06: What can we do about that, Jim?
5:19
SPEAKER_02: I don't know.
5:21
SPEAKER_02: I don't know what the answer is.
5:22
SPEAKER_02: Maybe, maybe to have 20 FI people saying goodbye at three o'clock on a Saturday afternoon, because sometimes that can be the bottleneck.
5:29
SPEAKER_02: Yeah, you know.
5:30
SPEAKER_02: As a friend of mine said recently, the reason it takes so long to buy a car is because consumers want to negotiate on the vehicle back and forth or drive different cars or what have you.
5:39
SPEAKER_02: But uh, and I agree with them to some extent, but it's also it it takes long to buy a car.
5:44
SPEAKER_02: It takes long to get an appraisal done in a dealership today.
5:47
SPEAKER_02: Paint you with a broad brush, folks.
5:49
SPEAKER_02: So save the emails.
5:50
SPEAKER_02: But it takes a long time to get an appraisal done.
5:52
SPEAKER_02: It takes a long time to get into F and I.
5:54
SPEAKER_02: It just like it seems like dealer in many cases, consumers are standing around.
5:59
SPEAKER_02: You and I have gone in to buy cars and we've said the same thing.
6:02
SPEAKER_02: We're like, yep, we'll take it.
6:04
SPEAKER_02: We love the number, we love the payment, let's go.
6:06
SPEAKER_02: Uh yep, that's the trade.
6:07
SPEAKER_02: Right.
6:07
SPEAKER_02: Within the first 45 minutes, we've already done that part of the deal.
6:10
SPEAKER_02: Right.
6:11
SPEAKER_02: Five hours later, we're taking delivery of that car, and we cannot figure out why.
6:15
SPEAKER_02: Right.
6:16
SPEAKER_06: It's been three years since we have bought a car, but it seems like with all this new technology and AI, and there seems like there's got to be something we can do in that process.
6:24
SPEAKER_02: That much newer technology at the AI, at the speed of AI.
6:27
SPEAKER_06: Are you kidding?
6:28
SPEAKER_02: So why three years is like it'd be interesting to bring somebody on to talk about that.
6:32
SPEAKER_02: How much has AI helped the delivery process in a dealership?
6:36
SPEAKER_02: I don't know.
6:36
SPEAKER_02: I don't know what the answer is.
6:38
SPEAKER_06: Maybe it can.
6:38
SPEAKER_02: Maybe it can.
6:39
SPEAKER_02: Yeah.
6:40
SPEAKER_02: Could be.
6:40
SPEAKER_02: Yeah.
6:40
SPEAKER_06: Obviously it hasn't, based on that.
6:43
SPEAKER_06: That's right.
6:44
SPEAKER_06: So right.
6:45
SPEAKER_06: We've got a great show coming up.
6:46
SPEAKER_06: We're talking AI.
6:47
SPEAKER_02: First, first, we have um uh a clip though, a social clip.
6:50
SPEAKER_02: Because you know I like social clips.
6:52
SPEAKER_06: Let's go.
6:52
SPEAKER_06: Let's do it.
6:53
SPEAKER_06: You know I like social clips.
6:54
SPEAKER_06: Jim likes social clips, everybody.
6:56
SPEAKER_02: I'm gonna drill it into this industry that if you're not doing social clips to your dealership, uh at least do them for Jim.
7:06
SPEAKER_02: No, because I I I think that these these these can be very entertaining.
7:10
SPEAKER_02: The one we're gonna show you is funny.
7:12
SPEAKER_02: Um, and there's different kinds that are out there, but it is free, folks.
7:16
SPEAKER_02: This is free.
7:17
SPEAKER_02: If anybody listens to Gary V and follows Gary V, you've got to be doing video clips for your dealership and getting them out there.
7:24
SPEAKER_02: We tr we drop hundreds of thousands of dollars to get the phone to ring, to call click, or come into a dealership.
7:30
SPEAKER_02: And meanwhile, these dealers that have got their hands around and really won in the social area, they've they got it dialed in and they're selling vehicles off of their social media presence.
7:41
SPEAKER_02: So take a look at this funny one.
7:46
SPEAKER_02: 8 55 p.m., by the way.
7:48
SPEAKER_02: Please note.
7:48
SPEAKER_00: How's it?
7:49
SPEAKER_00: How can help you today?
7:50
SPEAKER_02: Good.
7:50
SPEAKER_02: I was just coming in, seeing if y'all are still open.
7:52
SPEAKER_00: Oh no! Uh we all.
7:58
SPEAKER_03: I was looking to see if I could test drive uh a couple cars.
8:05
SPEAKER_01: I have been there.
8:07
SPEAKER_01: I have so been there.
8:08
SPEAKER_03: Like for a new Forester or um I'm actually leaning towards a used car.
8:20
SPEAKER_03: Perfect, perfect.
8:21
SPEAKER_03: And then when are you looking looking to buy?
8:27
SPEAKER_00: Uh actually, pretty soon.
8:28
SPEAKER_00: I'm looking to buy in the next uh six months.
8:37
SPEAKER_01: Oh my gosh.
8:39
SPEAKER_01: That's great.
8:40
SPEAKER_01: That's that's that's awesome.
8:42
SPEAKER_01: Awesome, awesome.
8:43
SPEAKER_01: No, yeah, y'all got the time to do it?
8:45
unknown: Yeah, absolutely.
8:46
SPEAKER_02: Yeah.
8:47
SPEAKER_02: Now, what's funny about that?
8:48
SPEAKER_02: That's more of like an industry inside, you know.
8:51
SPEAKER_02: I don't know the consumers are gonna get a lot of.
8:52
SPEAKER_06: I don't know they are when they you talk about four hours that it takes to buy a car, you're going in at nine o'clock at night.
8:58
SPEAKER_02: Oh my god, I know.
8:59
SPEAKER_02: Tell me about it.
9:00
SPEAKER_02: And when you're when I spent four years of my career in uh in F and I, and when somebody would come in at five minutes a night and want to drive cars, and you knew that this deal will could possibly close, and a lot of them do, you know.
9:13
SPEAKER_02: You're there till 11:30, 12 o'clock at night.
9:17
SPEAKER_02: I have missed so many kids, you name it, and it it's it's terrible.
9:21
SPEAKER_02: But I I feel for that salesman that's crying in the background there, and and many of you know what I'm talking about.
9:26
SPEAKER_02: Somebody goes in at five minutes to nine.
9:28
SPEAKER_02: It's like, oh my God, we I we had dinner reservations.
9:32
SPEAKER_02: We we had a night.
9:33
SPEAKER_02: Nope, forget it.
9:34
SPEAKER_02: Customer wants to look at cars.
9:36
SPEAKER_02: So that was more for the industry, I think, than consumers.
9:39
SPEAKER_02: But anyway, I think so too.
9:41
SPEAKER_02: That's right.
9:42
SPEAKER_06: And I get it.
9:43
SPEAKER_06: Well, uh, we've got a few other things to get to before we do.
9:45
SPEAKER_06: Coming up, we are going to be talking AI dealership operations and what the technology really means for your people with Mike Yates, the general manager at BMW of Bridgewater.
9:55
SPEAKER_06: And then later, Len Bolavia joins us, the founding partner of Bolavia Co NPC, and he is going to break down the Carvanas Celanus relationship and the legal questions surrounding it.
10:05
SPEAKER_01: So there's a picture of Lenny looks very, very, very corporate, very uh judge.
10:10
SPEAKER_06: He's an attorney, so it's close.
10:12
SPEAKER_01: Yeah.
10:13
SPEAKER_06: All right, before we get to those great interviews, I would like to thank our sponsor, Force Marketing.
10:18
SPEAKER_06: Great company.
10:19
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10:26
SPEAKER_06: Reach in-market shoppers, reconnect with website visitors, acquire inventory, and keep customers coming back to the service drive.
10:33
SPEAKER_06: Learn more at force mktg.com.
10:36
SPEAKER_02: That's right.
10:38
SPEAKER_02: 20-year-old marketing company that has pivoted in every aspect of the industry.
10:43
SPEAKER_02: I think they have like 1,600 rooftops now across the country.
10:47
SPEAKER_02: Incredible.
10:48
SPEAKER_02: And I think they have out of the seven publics, I think they have like five of them.
10:51
SPEAKER_02: Yeah, that's great.
10:52
SPEAKER_02: It's just incredible.
10:53
SPEAKER_06: Strong um service marketing arm there.
10:55
SPEAKER_02: Yes, yeah, service, no, no question.
10:57
SPEAKER_02: Yeah.
10:58
SPEAKER_02: What do we got?
10:58
SPEAKER_06: I don't know.
10:59
SPEAKER_06: Did you have anything else you want to talk about?
11:01
SPEAKER_02: No, I think I think we get right into this interview because I'm looking forward to it.
11:05
SPEAKER_06: Me too.
11:06
SPEAKER_06: AI is moving fast in the auto industry as any industry, but for dealers, the bigger question is how to actually use it without losing sight of the people, processes, and the culture that make a dealership work.
11:18
SPEAKER_02: That's right.
11:19
SPEAKER_02: Mike Yates, general manager of BMW Bridgewater, has spent 30 years in auto retail and has a unique perspective on where AI can really help dealers.
11:28
SPEAKER_02: So, Mike, thank you so much for joining us on the show today.
11:31
SPEAKER_03: Thanks for having me on.
11:33
SPEAKER_03: Nice to meet you, uh Jim and Bridget.
11:35
SPEAKER_03: Nice to meet you.
11:36
SPEAKER_03: Thank you for everything that you do for our industry.
11:38
SPEAKER_03: You guys are amazing.
11:39
SPEAKER_02: Well, thank wow, we got to have Mike on the card.
11:41
SPEAKER_02: Thank you.
11:41
SPEAKER_02: It's our we gotta have Mike on every day.
11:43
SPEAKER_02: This sounds good.
11:44
SPEAKER_02: I like this.
11:44
SPEAKER_02: Thank you very much for those kind words.
11:46
SPEAKER_02: We appreciate it.
11:47
SPEAKER_02: Means more than yours.
11:48
SPEAKER_03: So and before we get going, Jim, I I love the clip and app just happened to see one yesterday on Instagram, and it was a finance manager walking out of his office at like, you know, one minute to nine.
11:59
SPEAKER_01: Yep.
12:00
SPEAKER_03: And somebody walked in and they were putting a bow on a car in the showroom or something, and the guy you could just the look on his face.
12:07
SPEAKER_02: No, yeah, you know what I'm talking about.
12:08
SPEAKER_02: Struggle is real.
12:09
SPEAKER_02: Yeah, yeah.
12:10
SPEAKER_02: Mike knows what I'm talking about.
12:11
SPEAKER_02: Because it's just like, oh my God, I cannot believe it.
12:14
SPEAKER_02: You know, and and and a deal is a deal, and certainly towards the end of the month, when you need every single deal, you just spin right back on your heels and go, all right, you know.
12:22
SPEAKER_02: And then of course the FI manager, as you know, Mike, they'll run out and go, come on, come on, come on, give it, give it, give me the proof of insurance, give me the give me the invoices, give me the because you want to do everything you can, you know, that while the customer is is is waiting or what have you, you know.
12:36
SPEAKER_03: Load load that deal.
12:37
SPEAKER_02: That's right.
12:38
SPEAKER_02: That's right, it's exactly right.
12:40
SPEAKER_02: So, first and foremost, before we jump into today's discussion, how is business at your dealership?
12:45
SPEAKER_03: Uh, business is great.
12:46
SPEAKER_03: Actually, September was a record month for us.
12:49
SPEAKER_03: Wow, congratulations.
12:50
SPEAKER_03: That's awesome.
12:52
SPEAKER_03: Um, and uh there's only one other month that was even close, and that was in September of 2022, and we all know what was going on back in those days.
12:59
SPEAKER_03: So uh really, really proud of my team and uh and what we accomplished in September.
13:05
SPEAKER_03: It was a great month.
13:06
SPEAKER_02: What do you attribute that to, Mike?
13:08
SPEAKER_02: Why was it a good month?
13:10
SPEAKER_03: Uh we had a couple things that that really came together.
13:13
SPEAKER_03: Uh it was one of those months where all four profit centers really you know had it had a great month.
13:18
SPEAKER_02: Oh that's great.
13:19
SPEAKER_03: But most importantly, pre-owned.
13:22
SPEAKER_03: Um, pre-owned did uh phenomenal this month.
13:26
SPEAKER_03: My finance guys did great.
13:27
SPEAKER_03: Nice.
13:28
SPEAKER_03: But my used car managers has moved into more EVs, more pre-owned BMW EVs.
13:34
SPEAKER_03: Okay, and the timing was great, gas prices and the lack of a real um new EV in the BMW lineup has made the the late model pre-owned EVs really popular.
13:47
SPEAKER_02: Yeah, yeah.
13:48
SPEAKER_03: So it just came together.
13:50
SPEAKER_03: It was a great model.
13:51
SPEAKER_02: All the planets aligned, as they say, right?
13:53
SPEAKER_02: And that that is fantastic.
13:54
SPEAKER_02: Wow, congratulations on that.
13:56
SPEAKER_02: What is the BMW that we're interested in that we just saw yesterday?
13:59
SPEAKER_06: The IX.
13:59
SPEAKER_02: The IX.
14:00
SPEAKER_06: Yeah.
14:01
SPEAKER_02: The IX3.
14:02
SPEAKER_02: Yeah, yeah.
14:02
SPEAKER_03: Yeah, yeah, yes, very amazing.
14:05
SPEAKER_03: Yeah, we saw one yesterday.
14:06
SPEAKER_06: I'm like, that's one we will we'd like to test drive.
14:09
SPEAKER_03: Have you driven it yet?
14:09
SPEAKER_03: No.
14:10
SPEAKER_06: No, no, we'd like to.
14:11
SPEAKER_03: Okay.
14:12
SPEAKER_03: That's the best part.
14:12
SPEAKER_03: Okay.
14:13
SPEAKER_03: All right, good.
14:14
SPEAKER_03: Yeah.
14:14
SPEAKER_03: That's good to hear.
14:15
SPEAKER_06: Yeah, we have a few on our short list.
14:16
SPEAKER_06: Yeah.
14:17
SPEAKER_06: That's one of them.
14:18
SPEAKER_03: I'm not a big EV fan, but that's a car that I I want to get my wife into.
14:22
SPEAKER_03: It's just maybe not big enough for a real estate agent, which is what she does.
14:25
SPEAKER_03: So she kind of likes her X5.
14:27
SPEAKER_02: I gotcha.
14:27
SPEAKER_02: Nice.
14:28
SPEAKER_02: Yeah.
14:28
SPEAKER_03: But but I think once you drive it, you'll you'll be really excited about it.
14:32
SPEAKER_03: Oh, okay.
14:32
SPEAKER_02: Well, now I'm excited to try it.
14:34
SPEAKER_02: Is is that still a thing where real estate agents need to have like a big four-door car?
14:39
SPEAKER_02: Because we've purchased a number of homes because we keep moving in the last five years.
14:44
SPEAKER_02: And we've never I don't think we've ever been in a real estate uh a realtor or broker's car.
14:48
SPEAKER_02: We're always I'll meet you there, and you know, you see it on Zillow and you call and it's not the size to take clients around.
14:56
SPEAKER_03: It's uh it's the furniture she's always carrying around for the stage.
15:00
SPEAKER_02: Gotcha.
15:00
SPEAKER_02: Yeah, okay.
15:01
SPEAKER_02: Gotcha.
15:02
SPEAKER_02: Okay.
15:03
SPEAKER_02: Yeah.
15:03
SPEAKER_02: Okay, I see that.
15:04
SPEAKER_02: Yeah.
15:04
SPEAKER_03: It's cargo.
15:05
SPEAKER_06: Yeah, it's not people.
15:06
SPEAKER_06: That makes sense.
15:08
SPEAKER_02: That's right.
15:08
SPEAKER_02: That's right.
15:10
SPEAKER_02: Jump in then.
15:10
SPEAKER_06: Yes, let's jump right in.
15:11
SPEAKER_06: So you've been building AI tools inside your dealership rather than really going out and buying other things that are out on the market right now.
15:18
SPEAKER_06: Um, what made you take this approach?
15:20
SPEAKER_06: Talk to us about that.
15:23
SPEAKER_03: Um, you know, AI is something that I've been involved in or at least interested in for a really long time.
15:28
SPEAKER_03: And I my background, my previous life was in IT.
15:32
SPEAKER_03: So um I never really left that, you know, it's always been a hobby and a passion.
15:37
SPEAKER_03: So when I I AI really started getting um like more usable, I started uh looking at ways to make practical applications in the dealership.
15:50
SPEAKER_03: And you know, we we all have so many vendors in the store and they're and they seem so fragmented at times.
15:56
SPEAKER_03: We've got um CDPs and CRMs and uh and DMSs, there's just so many vendors.
16:03
SPEAKER_03: And I was looking for ways to to just either eliminate some of these vendors or to find ways to to use AI in a practical application, which uh it started out everyone was writing emails and and you know, maybe writing letters and stuff like that.
16:19
SPEAKER_03: And uh it was it was good at that, but I was really looking for something that that I could improve the dealership with, improve efficiencies with, and finding those practical applications.
16:29
SPEAKER_03: Yeah.
16:29
SPEAKER_03: And uh the the first one uh was just a really simple custom GPT, which I loaded our warranty policy and procedures manual from the OEM.
16:41
SPEAKER_03: And instead of going to the warranty admin and asking questions about whether something's covered, not covered, um, you know, uh how what is the policy and procedure with BMW?
16:52
SPEAKER_03: Um, every employee in the store could just go on this custom GPT and ask the question.
16:57
SPEAKER_03: Oh, nice, very nice.
16:58
SPEAKER_03: And and then I the service advisor started using it quite a bit, and then I I revised it so that it would give them uh it would basically load their lips with what to tell the customer if something wasn't covered, why it's not covered.
17:11
SPEAKER_03: So it became a really good tool for the service advisors, and then other dealerships started using it, and I thought, you know, this is this is something I I think there's lots of applications like this in the dealership.
17:23
SPEAKER_03: And uh that was probably a year and a half ago, a year ago, something like that.
17:28
SPEAKER_03: It's it's changed incredibly, as you know, since then.
17:31
SPEAKER_02: Yeah, for sure.
17:32
SPEAKER_02: Are there other areas that you've identified that AI can uh can that can lessen the workload and put more efficiencies in place?
17:40
SPEAKER_02: Are there any that you that you're currently working on in addition to that?
17:44
SPEAKER_03: Uh yeah, so there's I've got so many things running uh you know, at this point, there's so many agents running all at the same time.
17:53
SPEAKER_03: Okay.
17:54
SPEAKER_03: Um, but so it would be hard to start anywhere because there's so many different things I've got going on.
17:59
SPEAKER_03: Um, but like most dealers at this point, we're using AI in in the BDC and in our you know, our our internet leads and our leads, uh our internet responses.
18:12
SPEAKER_03: And I know you guys had uh Chris Hudson on a couple weeks ago at uh Mark Miller Subaru, and he's doing some really amazing things.
18:19
SPEAKER_03: And he's he's a little further along in that process than I am.
18:22
SPEAKER_03: But I'm in that same direction.
18:24
SPEAKER_03: Okay, I see that same vision that I think that Chris sees that this the landscape in the showroom is changing.
18:31
SPEAKER_03: And I I think cars are gonna be sold differently for the first time in a really long time.
18:36
SPEAKER_03: We've we've all been selling cars the same way for the last hundred years.
18:40
SPEAKER_03: It's it's definitely gonna change now.
18:42
SPEAKER_03: Yeah, we've all witnessed so many different disruptors in our industry.
18:46
SPEAKER_03: Yeah, the internet, everyone, you know, that's I was selling cars on the floor when that became a thing, and we all thought that we're gonna lose our job.
18:54
SPEAKER_03: And then there was true car, and we all thought, oh yeah, you know, that's right.
18:59
SPEAKER_03: What are we gonna do here?
19:00
SPEAKER_03: Because you know, these prices they're they're giving the cars away.
19:03
SPEAKER_03: It's a race to the bottom.
19:04
SPEAKER_01: Yep.
19:05
SPEAKER_03: Um, but I do think AI is a little bit different.
19:08
SPEAKER_03: It's it's advancing extremely rapidly, as we all know.
19:12
SPEAKER_03: Yeah, and if you if you look at the internet, uh it it's been around for let's say 40 years, 30 years, whatever it is.
19:18
SPEAKER_03: Yeah, it really hasn't changed much, it's just gotten faster.
19:21
SPEAKER_03: Yeah, but AI is totally different.
19:24
SPEAKER_02: Yeah, and now they're talking about AI building, building, really building itself, you know, which is I guess the biggest fear that people will have about it is that it's it's out of control.
19:34
SPEAKER_02: You know, that now that this is a computer that's actually taking over and going, step aside, people, we got this.
19:42
SPEAKER_03: Yeah, it's it's amazing.
19:44
SPEAKER_03: And you know, as someone who's been using it for, like I said, a couple of years now or longer, where it's come to today and and everything that it knows about me when I'm in there using it, it's a little scary.
19:57
SPEAKER_06: Yeah, yeah.
19:58
SPEAKER_03: And it's it's almost like having a really good manager.
20:01
SPEAKER_03: In in the beginning, you really need to give them all the context, you need to tell them what exactly you're looking for.
20:07
SPEAKER_03: These are the reports, this is what I'm looking at.
20:09
SPEAKER_03: Um, and then after you've had a really good person on your staff that you manage for four or five years, whatever it might be, they kind of know what you're looking for.
20:17
SPEAKER_03: AI is really no different.
20:18
SPEAKER_03: Now it seems to know me, yeah.
20:20
SPEAKER_03: It seems to know what I'm looking for, and I don't really have to give it a whole lot.
20:24
SPEAKER_02: Yeah, it's it is amazing.
20:25
SPEAKER_02: There's no question.
20:27
SPEAKER_06: So picking up where what Jim was talking about, how do you get employees to see AI as something that helps them rather than something that might threaten their jobs?
20:36
SPEAKER_03: Oh, I you just need to get them involved.
20:38
SPEAKER_03: Yeah, you need to you need to keep them involved.
20:41
SPEAKER_03: And and I've been very clear about this in the dealership.
20:44
SPEAKER_03: This this tool to me is a is an efficiency tool.
20:49
SPEAKER_03: This is not a uh reduce headcount tool.
20:52
SPEAKER_03: And we're a we're a family-owned single point, 70 employees.
20:56
SPEAKER_03: I don't have a lot of fat.
20:58
SPEAKER_03: I'm not looking to to bring a tool in to eliminate staff.
21:02
SPEAKER_03: Our people are our biggest asset.
21:05
SPEAKER_03: And and our employees are the the the best tool that I have.
21:10
SPEAKER_03: And all I want to do is is make them a little more efficient, uh, and hopefully give them back some time to spend more time with the customer, more time coaching a fellow uh co-worker, more time, maybe leaving work on time and getting home to be with their family.
21:27
SPEAKER_03: That's what I think AI is is uh where its place is in our dealership.
21:33
SPEAKER_02: Yeah.
21:33
SPEAKER_02: You've also spent some time looking at how AI views and recommends dealerships from the consumer's perspective.
21:41
SPEAKER_02: What have you learned uh about what actually influences that reputation in the eyes of AI?
21:49
SPEAKER_03: Yeah, well that that whole journey started out.
21:52
SPEAKER_03: Um I'm in two different NADA 20 groups.
21:55
SPEAKER_03: Okay.
21:55
SPEAKER_03: And one of them is uh is has kind of turned into more of an AI group.
22:00
SPEAKER_03: Group.
22:00
SPEAKER_03: It's a very advanced internet AI group.
22:03
SPEAKER_03: And they had a best idea session.
22:06
SPEAKER_03: And in this particular group, it's a really big deal.
22:09
SPEAKER_03: Like they are very serious about their best idea sessions.
22:12
SPEAKER_00: Yeah.
22:13
SPEAKER_03: So I had started working on a tool in-house to uh to identify what the LLMs see in our dealership and and how I could make um the dealership more visible on you know ChatGPT and COD and so on.
22:29
SPEAKER_03: Um so I built a tool that would score our dealership and then presented it to the group as a tool that they could use to score their dealership as well.
22:37
SPEAKER_03: And what I learned is is where the LLMs are finding the information about our dealerships, the the reputation scores that they're that they're pulling off of the internet and Reddit, et cetera.
22:51
SPEAKER_03: Um so uh you know, crazy enough, I didn't win the contests um because I really thought I was going in as a winner.
22:59
SPEAKER_03: Sounds like a tough group.
23:00
SPEAKER_03: It is a tough group and a very smart group.
23:03
SPEAKER_03: Um but what I did win is is just a lot of knowledge and what I learned in uh and how these systems are working.
23:10
SPEAKER_03: And I've I've spent a lot of time making sure that the dealership's not just visible, but that our reputation is solid.
23:17
SPEAKER_03: And I think that that's really the next step.
23:20
SPEAKER_03: And if if dealers aren't paying attention, the the reputation um is there's nowhere to hide anymore.
23:26
SPEAKER_01: Yeah, well, that's for sure.
23:29
SPEAKER_03: You know, the LLMs love the the whether it's uh dealer rate or you know, obviously they love Google's um rating as well.
23:38
SPEAKER_03: That's right.
23:39
SPEAKER_03: Um but you you can't buy a good reputation score with the AIs, at least not at the moment.
23:45
SPEAKER_03: That's right.
23:46
SPEAKER_03: So somebody will find a way, right?
23:48
SPEAKER_03: Yeah, yeah, they'll they'll find it.
23:49
SPEAKER_03: They'll find the the real information, whether it's on Reddit or in the reviews.
23:53
SPEAKER_03: The the AI will read the reviews.
23:55
SPEAKER_02: Oh yeah, absolutely.
23:56
SPEAKER_02: Now you said you're a single point BMW store?
23:59
SPEAKER_03: Yes, sir.
24:00
SPEAKER_02: But you belong to two 20 groups?
24:02
SPEAKER_02: That's very progressive.
24:04
SPEAKER_03: I like that.
24:05
SPEAKER_03: I am the the chairman of the IBO1, which is the BMW 20 group for NADA.
24:10
SPEAKER_01: Okay.
24:11
SPEAKER_03: And I was invited to the uh internet AI group um just as a uh as an observer.
24:18
SPEAKER_02: Okay.
24:19
SPEAKER_03: And uh asked to become part of the group.
24:22
SPEAKER_03: They did not vote me in on the first uh meeting, which is still kind of a funny story.
24:27
SPEAKER_03: I was a little surprised, but uh they are tough.
24:29
SPEAKER_03: They gave me homework and they uh they sent me back and and you know invited me to their next meeting, but they did not vote vote me in on the first uh first meeting.
24:40
SPEAKER_03: So um it just made me want to join even more, actually.
24:43
SPEAKER_02: Right, right.
24:43
SPEAKER_02: I I've been to 20 groups in my career and uh been part of them, but uh never two, never two for the same make, Brian.
24:50
SPEAKER_02: So I commend you on that.
24:51
SPEAKER_02: That's pretty cool.
24:52
SPEAKER_02: Yeah.
24:53
SPEAKER_06: So before we let you go, there's so much to do with AI on the consumer side, on the internal operations side.
24:58
SPEAKER_06: For the dealers or managers that are watching that are thinking, oh my gosh, I know I need to get started, but I have no idea where to start.
25:04
SPEAKER_06: What would you recommend?
25:07
SPEAKER_03: You know, I think that it instead of just staring at that that empty box and and you know on their AI and trying to think about what to say, ask AI to interview them.
25:19
SPEAKER_03: They should just go on and say until you're 95% certain that you can speak in my dealership's brand voice.
25:26
SPEAKER_01: Yeah.
25:27
SPEAKER_03: And then save that document and anything we do going forward, I want you to reference that document.
25:32
SPEAKER_03: I like that.
25:33
SPEAKER_03: It'll make it a whole lot easier.
25:34
SPEAKER_03: Yeah.
25:35
SPEAKER_02: That's a great idea.
25:35
SPEAKER_06: Yeah, great advice.
25:36
SPEAKER_03: Yeah, great advice.
25:37
SPEAKER_06: Thanks, Mike.
25:37
SPEAKER_02: That's fantastic.
25:38
SPEAKER_03: Thanks.
25:38
SPEAKER_03: Yeah, we do it.
25:40
SPEAKER_03: One last thing, Jim.
25:40
SPEAKER_03: I'm sorry.
25:41
SPEAKER_03: Um I'm not at a point where I'm calling it super intelligence yet.
25:45
unknown: Just let me know.
25:46
SPEAKER_03: You knew it was coming.
25:47
SPEAKER_03: Not yet.
25:48
SPEAKER_03: You knew it was coming.
25:49
SPEAKER_06: Oh my god.
25:49
SPEAKER_02: Super intelligence, the best, the biggest.
25:52
SPEAKER_02: We renamed it.
25:56
SPEAKER_06: We saw him yesterday talking about AI.
25:58
SPEAKER_06: And no, wait a minute, you said all internal government documents were going to be S I.
26:02
SPEAKER_06: And that's so true.
26:03
SPEAKER_06: Yeah.
26:04
SPEAKER_03: Yeah.
26:04
SPEAKER_03: And there's so many acronyms already.
26:06
SPEAKER_03: We've got A E O, G E O, I know.
26:09
SPEAKER_03: That's crazy.
26:10
SPEAKER_03: A I O.
26:10
SPEAKER_03: I don't need S I O.
26:14
SPEAKER_03: A I, E I O.
26:16
SPEAKER_02: Something tells me A I O.
26:18
SPEAKER_02: Right.
26:18
SPEAKER_02: Something tells me if something tells me if it was super intelligence, he'd want to rename it to Artificial Intelligence.
26:24
SPEAKER_02: Just to put his brand out there.
26:27
SPEAKER_01: You know what I mean?
26:28
SPEAKER_01: Yeah.
26:28
SPEAKER_02: Just to do it.
26:29
SPEAKER_02: Just to mess with everybody, you know?
26:31
SPEAKER_02: So uh wow, that that's so funny you should say that.
26:34
SPEAKER_02: Well, we do have a comment, by the way.
26:36
SPEAKER_02: How do you know an AI tool is actually saving time instead of adding another process for employees?
26:42
SPEAKER_02: Great question.
26:43
SPEAKER_03: Oh, that is a that's a really good question.
26:46
SPEAKER_03: Yeah.
26:46
SPEAKER_03: Um, I I think uh you asked your people.
26:50
SPEAKER_03: Like I said before, um I involved all my departments early on.
26:55
SPEAKER_03: We do have an an AI committee in the dealership as well.
26:59
SPEAKER_03: Um we meet on Fridays, we meet Friday afternoons, and you know, their input's important.
27:05
SPEAKER_03: And you know, all the people that that come in on Friday afternoon, their their input's important.
27:11
SPEAKER_03: And I think just getting feedback and being connected with the employees, they'll tell me if it's saving them time or not.
27:17
SPEAKER_01: Yeah, yeah, for sure.
27:18
SPEAKER_03: I I wouldn't ask uh AI if it's if it's helping save time because it's gonna say yes.
27:23
SPEAKER_03: You ask your people.
27:24
unknown: Yeah.
27:24
SPEAKER_02: If you ask AI, it's gonna say yes.
27:27
SPEAKER_02: That's great.
27:28
SPEAKER_06: Mike Yates, thank you so much for joining us today.
27:30
SPEAKER_06: It's been very informative and helpful.
27:32
SPEAKER_06: We really appreciate it.
27:33
SPEAKER_02: It's a great idea.
27:34
SPEAKER_02: Yeah, thank you so much.
27:35
SPEAKER_02: Thanks for those nice comments that you gave us.
27:37
SPEAKER_02: Yep.
27:37
SPEAKER_02: All right, take care.
27:38
SPEAKER_02: Have a have a great October.
27:41
SPEAKER_02: Thank you.
27:42
SPEAKER_06: To follow his screen.
27:44
SPEAKER_06: Yeah, yeah.
27:45
SPEAKER_06: Yeah, great guy.
27:45
SPEAKER_02: He's love hearing what they're all doing.
27:47
SPEAKER_02: It's it was interesting to hear that he said he had a record September.
27:50
SPEAKER_02: Yeah.
27:51
SPEAKER_02: That's awesome.
27:51
SPEAKER_02: I know.
27:52
SPEAKER_02: You know?
27:52
SPEAKER_05: I know.
27:52
SPEAKER_02: Yeah.
27:53
SPEAKER_02: That's that that's uh BMW.
27:56
SPEAKER_02: That's uh that's a great brand.
27:58
SPEAKER_02: It really is, you know.
27:59
SPEAKER_02: Yes, for sure.
28:00
SPEAKER_02: All right, so what else we got?
28:01
SPEAKER_06: So before we get to Len Belavia, I do want to mention there's a really good interview uh airing on CBT News right now.
28:06
SPEAKER_06: Lauren Fix and Jose Munoz.
28:08
SPEAKER_06: There's an exclusive airing today on CBT News.
28:11
SPEAKER_06: That's right.
28:12
SPEAKER_06: Um that's right.
28:13
SPEAKER_06: So be sure to check that out.
28:14
SPEAKER_02: I just want to mention that because Yeah, Lauren Fix has an opportunity to uh I I want to say sit down, but I don't but she was standing to the whole interview, but uh with Jose Munez, and and he is an incre an incredible CEO, obviously, for Hyundai, and uh did an incredible job for Nissan, and uh he's he's a he's a great guy.
28:31
SPEAKER_02: Yeah, and I think you'll really enjoy that interview.
28:34
SPEAKER_02: And speaking of interviews, by the way, uh I do want to mention one other thing, and that is um our other sister network, which uh many many of you know that we have another network that's much like CBT News, but it is for the entrepreneurial community and the small business community.
28:50
SPEAKER_02: Or I should say the business community, really SMBs, yeah, small to medium sized, yeah.
28:54
SPEAKER_02: Yeah, yeah.
28:55
SPEAKER_02: And we're showing that now.
28:56
SPEAKER_02: Um, but I've we've had some great uh, well, it's been eight years of great interviews.
29:01
SPEAKER_02: And we interview um, you know, the the Wolf of Wall Street and and uh and Voss, who's a negotiator, and I'm just so many other celebrity types.
29:10
SPEAKER_06: Um most watching aren't entrepreneurial, small business-minded people themselves.
29:16
SPEAKER_06: So there's really a ton of content that could help anyone in business for that matter.
29:20
SPEAKER_06: We have great partnerships with the um the U.S.
29:22
SPEAKER_06: Chamber of Commerce, with the SBA.
29:24
SPEAKER_06: You recently talked to the leaders over at the SBA about how they've doubled their their lending.
29:29
SPEAKER_06: That's right.
29:29
SPEAKER_06: Um so there's just a lot of really good information that can help anyone in business, whether you are entrepreneur or just getting started.
29:36
SPEAKER_02: Yep, shark tank, yep.
29:38
SPEAKER_02: Yes participants, and and uh yeah, it's it's great.
29:42
SPEAKER_02: In fact, we just had the CEO of um Acquisition uh on Acquisition.com.
29:49
SPEAKER_02: That's uh Hormosi.
29:50
SPEAKER_02: Yes, yeah, who's Mr.
29:51
SPEAKER_02: Hormosi's um uh company, which is an incredible many of you probably uh follow him, but uh this is the CEO.
29:59
SPEAKER_02: Uh it's a great conversation.
30:00
SPEAKER_02: If you get a chance, check that out.
30:02
SPEAKER_02: As I said, it's at asbn.com, which stands for America's Small Business Network.
30:07
SPEAKER_02: I think you're gonna like what you see.
30:09
SPEAKER_02: If you're anything like I was in the industry, and I think that the the car business um attracts uh entrepreneurial type people, because when you're selling cars, you're kind of in business, you know, with the dealer.
30:22
SPEAKER_02: You're in business, you're you're kind of an entrepreneur, you gotta go out and build your business, right?
30:25
SPEAKER_02: You gotta prospect, you gotta sell, you gotta some months you don't make a lot of money, some makes you make some months you make a tremendous amount of money.
30:32
SPEAKER_02: So uh, and then I remember sitting around the showroom with others in the industry, and we would talk about you know, if we opened up a business, what would it be?
30:39
SPEAKER_02: How cool would it be to be your own you know small business owner or what have you?
30:43
SPEAKER_02: And uh so I think you'll like what you see at asbn.com.
30:46
SPEAKER_02: So check check that out.
30:48
SPEAKER_06: So Yes, Carvana's growing relationship with Delantis is raising questions for franchise dealers.
30:55
SPEAKER_02: That's right.
30:55
SPEAKER_02: Joining us live is Len Bolavia, founding partner of Bolavia Cohen PC, to join uh to break down, I should say, what this could mean for dealers.
31:04
SPEAKER_02: Len, welcome into uh CBT Live.
31:07
SPEAKER_02: Welcome.
31:07
SPEAKER_04: Yeah, and Bridget, great to see you again.
31:10
SPEAKER_04: Thanks for having me.
31:11
SPEAKER_02: Absolutely.
31:11
SPEAKER_06: Thank you for being here.
31:12
SPEAKER_02: Absolutely.
31:13
SPEAKER_02: So um let's start with the Stillanis-Carvana relationship.
31:16
SPEAKER_02: There's a lot of consternation out there among dealers over this uh little cozy relationship.
31:22
SPEAKER_02: They took on um a few Stillanis stores, and in a few of them, they are knocking the cover off the ball, right?
31:30
SPEAKER_02: So, what what are some of the uh legal concerns that you see from the perspective of the franchise dealers out there?
31:38
SPEAKER_04: So it's interesting to watch uh the progression of various manufacturers try and get uh closer and closer to direct sales.
31:46
SPEAKER_04: With last time we were together, Jim, you may recall we spoke about Volkswagen and Scout and what we believe is their attempt, uh hence we filed a class action against VW and Scout over what we felt was uh an end run around the franchise system.
32:02
SPEAKER_04: Uh that case is pending still, so we'll wait and see what happens there.
32:05
SPEAKER_04: But here it is, you know, maybe six months later, we're essentially talking about the same thing because while a lot of the discussion is about Carvana's business model and uh their their historic direct-to-consumer model.
32:19
SPEAKER_04: What I think is happening is Stellantis is identifying a way to seek cover by not going direct to consumer overtly, but doing something you know out of the VW Scout playbook, but actually polishing it up a little bit more and forming this alliance with Carvana, who is typically a direct-to-consumer you know, business model historically, yeah.
32:42
SPEAKER_04: And essentially uh you know adopted them, whether it's a broker relationship, we all know it's under the guise of a dealer sales and service agreement, right?
32:51
SPEAKER_04: A traditional franchise.
32:53
SPEAKER_04: But when you you know peel back the layers, you find out that it's not a traditional franchise relationship because Carvana is getting a free pass that other dealers in the Christ in the uh Stellantis network don't enjoy.
33:07
SPEAKER_04: So, you know, I would argue that this is Stellantis' uh attempt to do a direct-to-consumer business model using Carvana as, for lack of a better term, you know, a shill to make it appear as though they're checking off all the boxes and only dealing through a franchise dealer.
33:23
SPEAKER_04: But uh one, you know, and I'm sure when you speak to Stellantis dealers, they will tell you that if they try to do something like this, they would have to have working capital and expanded you know displays and service departments and customer waiting areas, all the things that traditionally dealers have to comply with.
33:41
SPEAKER_04: Yet Carvana, who's selling now you know, a thousand vehicles a month at one of their stores, yeah, uh, doesn't have to have any of the indicia of a franchise dealer.
33:52
SPEAKER_04: So what's really at play here?
33:54
SPEAKER_04: And I would argue that this is Stellantis' bad faith attempt to emulate uh the direct-to-consumer model and the fallout you know for dealers, for regular traditional franchise dealers, is that they are being pinged along the way uh on on many fronts.
34:12
SPEAKER_02: Yeah, yeah.
34:14
SPEAKER_02: Could could this though, I mean, could there be some positive takeaways from the traditional dealer that or the the dealers that are running traditional franchise operations, could there be some positive things that that they could observe and maybe put into practice at their own stores?
34:31
SPEAKER_04: Oh yeah, yeah, I think I think at bottom what's happening here is, and I think franchise dealers will acknowledge it, maybe not overtly, but you know, that that you know consumers have identified a pain point, which is you know the traditional way of buying a car.
34:46
SPEAKER_01: Right.
34:46
SPEAKER_04: So you know, putting that aside, and I I think dealers will have to acknowledge that, hey, look, if a if a if a dealership was selling 30 to 50 cars a month and is suddenly selling a thousand cars because they don't have to go into the dealership, yeah, there's a lesson to be learned there, right?
35:00
SPEAKER_04: So the question is really in a traditional sense, how do how do you uh uh adopt that business model within the franchise network?
35:09
SPEAKER_04: You know, my my argument is Stellantis, if they really do believe in what uh Carvana is doing, then implement it amongst your several hundred dealers.
35:18
SPEAKER_04: There's nothing that Carvana is doing that can't be uh reproduced within the franchise network.
35:23
SPEAKER_02: Right.
35:24
SPEAKER_04: They have Stellantis has a national uh platform, a website that could be localized to dealers, so that a dealer in uh in Arizona doesn't have to deliver a vehicle to a customer in Massachusetts.
35:38
SPEAKER_04: Right.
35:38
SPEAKER_04: So the same framework can exist, but have it targeted to the local dealer in Massachusetts so consumers can enjoy a seamless, touchless experience, but not have to feel like they're doing business across the country.
35:51
SPEAKER_04: Right.
35:52
SPEAKER_04: And have a relationship with a local dealer so that the dealer that sells the vehicle has an invested um, I say, stock in the relationship with the consumer so that they can perform warranty and recall work and sell to family members, the traditional you know, fabric of a franchise relationship, which is missing from this Carvana Stilantis dynamic.
36:14
SPEAKER_06: So, Len, could this set a precedent for other manufacturers to pursue something similar or similar relationships with online retailers?
36:21
SPEAKER_06: Or and what would that mean for franchise dealers?
36:24
SPEAKER_04: Yeah, a great, great question because it would be foolish to think that Carvana is not sitting down with dealers of other brands.
36:33
SPEAKER_04: I'm sure they would love to have Chevy and Ford.
36:36
SPEAKER_04: So, although, you know, the topic we're discussing is Carvana Stellantis, it may as well be Carvana Nissan or Carvana Chevrolet.
36:44
SPEAKER_04: Because Carvana's enjoying success, so why would they stop with Stellantis?
36:48
SPEAKER_04: Right.
36:48
SPEAKER_04: So, you know, this this is going to come to a neighborhood near you, so to speak.
36:52
SPEAKER_04: And I think that dealers of all brands should be paying close attention to this and pushing back.
36:57
SPEAKER_04: You know, my frustration is dealers are always like, well, let the other dealer fight this fight.
37:02
SPEAKER_04: But it's not the other Stellantis dealer, it's the other dealer of any brand, any make, uh, that really needs to come to the forefront and put a put a stop to this.
37:12
SPEAKER_02: Yeah, for sure.
37:13
SPEAKER_02: No, ever I think uh all eyes are on this this uh situation for sure.
37:17
SPEAKER_02: It's got a number of dealers that I talked to have echoed what you're saying here, that it is not a currently a level playing field.
37:24
SPEAKER_02: They do have some advantages and some concessions, I think, that were made from Stellanis that the you know the franchise dealers haven't been been given.
37:32
SPEAKER_02: So, what options do dealer have dealers have in this situation?
37:36
SPEAKER_04: Well, I you know, I think first of all, National Dealer Council has to play a very proactive role here.
37:42
SPEAKER_04: Yeah, I think ADA has to play a proactive role.
37:45
SPEAKER_04: All of the state ATEs should be discussing this because, like I said, this this is a uh precursor of what I think is coming down the road across all brands.
37:54
SPEAKER_01: I agree.
37:55
SPEAKER_04: Uh, it's not difficult because keep in mind 28 states have on the books legal prohibitions against selling direct to consumers.
38:02
SPEAKER_04: Right.
38:03
SPEAKER_04: The other 22 states also have prohibitions against direct-to-consumer sales, with certain carve-out exceptions.
38:10
SPEAKER_04: You know, the traditional way of explaining it is the Tesla, Rivian, Lucid model, where you have a startup that does not have an existing dealer network.
38:19
SPEAKER_04: So those are the only exceptions.
38:20
SPEAKER_04: So, on the whole, uh the Volkswagen Scout model doesn't comply with the law.
38:26
SPEAKER_04: Right.
38:26
SPEAKER_04: The Carvana Stellantis model doesn't comply with the law.
38:30
SPEAKER_04: I mean, this is my opinion.
38:31
SPEAKER_04: I think that when you look at all of the things that Carvana's getting a free pass on, no parts department buildup, you don't have to stop charts, you don't have to do warranty work, uh, you don't have to adhere to the number of you know uh service bays required based on units and operation.
38:48
SPEAKER_04: Imagine selling a thousand cars a month and not having a customer lounge.
38:52
SPEAKER_04: So when a customer comes in to get service work done, warranty or customer pay, there's no place for them to relax.
38:59
SPEAKER_04: Uh you don't need if you're selling a thousand cars a month, shouldn't you have three thousand cars in stock, you know, a three-month supply?
39:06
SPEAKER_04: Drive past one of these seven Carvana dealerships, and you know, let's discuss what you see.
39:11
SPEAKER_04: You see used cars.
39:13
SPEAKER_04: Uh each time Carvana goes to a private, you know, closed auction, they're buying other dealers' inventory.
39:20
SPEAKER_04: They're buying deep.
39:21
SPEAKER_04: So they're they're taking away trade-ins.
39:24
SPEAKER_04: You know, things all of the things that the dealer agreements that other dealers, the other 300 and some odd dealers, have signed across the country, saying market locally, sell locally.
39:33
SPEAKER_04: I'm not saying anything Carvana is doing is illegal, it's not criminal, but it violates both the state statutes, and this is still this is on Stellantis, not Carvana.
39:43
SPEAKER_04: Carvana's getting away with whatever it can, like any business would.
39:46
SPEAKER_04: But Stellantis has what I would consider to be a different set of rules for the other dealers in the country.
39:53
SPEAKER_04: And it's not just, well, that's that's between Stellantis and Carvana.
39:57
SPEAKER_04: No, each sale they make out of their primary market area negatively impacts a dealer in that market.
40:03
SPEAKER_04: Think about the whole concept of pump-ins.
40:06
SPEAKER_04: You know, how many vehicles are being pumped into the PMAs of existing dealers?
40:10
SPEAKER_04: And you might say, well, that's you know, dealers are losing money, but if they lost five sales a month, all right, they don't have to close their doors.
40:16
SPEAKER_04: But it's not just five sales a month, it's the trade-ins because 60% of these transactions involve trade-ins.
40:22
SPEAKER_04: Right.
40:23
SPEAKER_04: Carvana's getting those trade-ins that local dealers should get.
40:26
SPEAKER_04: Yeah, that's true.
40:27
SPEAKER_02: That's true.
40:28
SPEAKER_04: We can go down the line of all the potential lost profit opportunities, but more importantly, is that if Stellantis or the next manufacturer embraces this relationship, now what are they going to do?
40:40
SPEAKER_04: What's the nefarious motive that might exist here?
40:42
SPEAKER_04: Yeah.
40:43
SPEAKER_04: And that is that uh, you know, there's negative impact when there's pump ins.
40:48
SPEAKER_04: Because now you got warranty customers, and you might say, well, this is great.
40:52
SPEAKER_04: It's gonna increase the fixed ops opportunities for local dealers to service these Carvana delivered vehicles.
40:59
SPEAKER_04: But that's not necessarily true because the customer is not gonna get immediate service because the dealer's got to satisfy his own customers first.
41:07
SPEAKER_04: Yeah.
41:07
SPEAKER_04: So that's gonna lead to unhappy Carvana customers.
41:11
SPEAKER_04: It's gonna have a negative impact on reviews, both uh uh reviews with with Stellantis and public reviews.
41:19
SPEAKER_04: Sure.
41:19
SPEAKER_04: So that's a blemish.
41:21
SPEAKER_04: Pump-ins are a blemish on a seller's uh a dealer's sales effectiveness ratings.
41:26
SPEAKER_04: So suddenly local dealers are are getting these bad report cards built up through no fault of their own.
41:32
SPEAKER_04: So when that dealer seeks to relocate, buy another store, it doesn't have to be a Stellantis store.
41:38
SPEAKER_04: It can be a store of another brand because it's all relevant, it all comes into the mix.
41:43
SPEAKER_04: So suddenly here I am a good dealer.
41:45
SPEAKER_04: I'm being negatively impacted by the Carvana model.
41:49
SPEAKER_04: And when I come go to buy another store, now I have a blemish on my record because I'm I'm not meeting sales objectives.
41:56
SPEAKER_04: Right.
41:56
SPEAKER_04: So there's so many, there are so many like this year.
42:00
SPEAKER_04: Yeah.
42:01
SPEAKER_04: And a nefarious manufacturer could use that against that dealer to try and you know rid them from the marketplace.
42:07
SPEAKER_04: I'm going to an extreme, but yeah, there's a lot, there's a lot that meets the eye here.
42:10
SPEAKER_04: That's right.
42:11
SPEAKER_04: That's why I say it's a call to arms for you know national dealer associations, regionals, and dealer council.
42:16
SPEAKER_04: Yeah, let this just go is inviting the next manufacturer that Carvana gets involved with to pull out the same playbook.
42:25
SPEAKER_02: Um, with all that the Stellanus dealers have had to deal with over the course of the last four or five years while they try to figure things out and write the ship, obviously with the last leadership that was disastrous.
42:38
SPEAKER_02: And now the new leadership coming in, which is really looking to the dealer network to say, hey, I'm in here, but I need all of you dealers to be on the same page and let's, you know, let's uh march up that hill together.
42:52
SPEAKER_02: Why would Stellantis shoot themselves in the foot with the dealers by by even approving um a dealer agreement with a carbana?
43:01
SPEAKER_02: It it seems like it would be one of those things that you say, you know what, not right now.
43:04
SPEAKER_02: It's just not the right choice.
43:06
SPEAKER_04: Um, I think this comes under the old adage, you know, desperate times call for desperate measures.
43:12
SPEAKER_04: I guess Stalantis really needed an infusion.
43:15
SPEAKER_04: You know, they were losing market share across the board.
43:17
SPEAKER_04: Yeah.
43:18
SPEAKER_04: So I I you know that's one component.
43:20
SPEAKER_04: I think they were wooed uh into this relationship on the theory that you know the reach that Caravana has will result in an immediate increase in market share.
43:30
SPEAKER_04: And if you look at what happened in their in their uh Arizona dealership, they went from 30 sales a month to a thousand sales a month for a relatively short period of time.
43:39
SPEAKER_04: Right.
43:39
SPEAKER_04: So that's a real shot on the arm for Stellantis.
43:41
SPEAKER_04: Is that a long term fix?
43:43
SPEAKER_04: No, I think it's a mistake for a lot of reasons, not the least of which is Carlana has its own funding source and they're buying very deep into bad credit profiles.
43:52
SPEAKER_04: Yep.
43:52
SPEAKER_04: So sooner or later, that type of a business model implodes.
43:56
SPEAKER_04: The other answer to your question, Jim, is you know, it's not.
44:00
SPEAKER_04: May be theoretical, but I think it's problematic on so many levels, and that is the CEO of Stellantis owns nine million shares of Carvana stock.
44:10
SPEAKER_04: Oh.
44:11
SPEAKER_04: So with each sale that goes to a Carvana dealership location, one of these sales that is effectively stolen from a franchise, a regular franchise dealer, lines the pockets of the Stellantis CEO.
44:26
SPEAKER_04: So I can't imagine a more glaring legal conflict of interest.
44:30
SPEAKER_04: Yeah, of course.
44:32
SPEAKER_04: Dealers not only have to deal with this imbalance and the gas that Carvana's getting, but at the helm is a CEO who has a vested financial interest in seeing Carvana do well at the expense of its own dealers.
44:45
SPEAKER_02: Wow, that that's that's not cool.
44:46
SPEAKER_02: That's yeah, that leaves a bad taste in your mouth, right?
44:49
SPEAKER_02: Oof, that's not good.
44:50
SPEAKER_02: That's not good.
44:51
SPEAKER_04: Yeah, I mean that that's just maybe that's at root of all this in conjunction with these other issues about you know consumer preferences, but it doesn't help to have the quarterback you know playing for the other team.
45:02
SPEAKER_02: What if we wake up to the headlines one day that says um uh Amazon just bought Carvana and because they wanted to get into the the car business and start with used cars, and then of course they've got these you know Stellanus stores.
45:18
SPEAKER_02: I mean it's things like this happen, right, in the industry.
45:21
SPEAKER_04: Well, that's right, and that's why it's important that dealers recognize that they are holding the cards because that in all 50 states have statutes that protect them against something like that.
45:33
SPEAKER_04: Yeah.
45:34
SPEAKER_04: But the you know, it requires dealers to step up, it requires dealers to assert their rights, and that's why ATAEs are very important, the association executives are important, uh, regionals, nationals.
45:46
SPEAKER_04: Yeah, so if there ever was a time for all of these industry leaders to to coalesce, yeah, identify, recognize this is not a Stellantis Carvana problem.
45:54
SPEAKER_04: Right.
45:54
SPEAKER_04: This is an industry-wide problem, just like BW and Scout, same, same situation.
46:00
SPEAKER_04: That's right.
46:00
SPEAKER_04: But these dealers that say, well, I'll let somebody else fight the fight, not me, I think is very short-sighted.
46:05
SPEAKER_04: It's not as though they have to go um you know belly up and pay huge amounts of money to fight it.
46:10
SPEAKER_04: I mean, class actions don't cost any money for dealers.
46:13
SPEAKER_04: Yeah.
46:13
SPEAKER_04: Uh fast actions, you know, I've handled many of those.
46:16
SPEAKER_04: You know, you get you get 10 dealers in each state, yeah, and you each throw a few thousand dollars into the pot.
46:22
SPEAKER_04: So it's not going to break the bank of any dealer.
46:24
SPEAKER_04: But sitting by and hoping, you know, that Carvana fails again is not it's not the playbook here.
46:30
SPEAKER_02: Do you know of a good law firm that that handles class action suits for dealers?
46:34
SPEAKER_02: I don't even do you know of a firm that does that?
46:37
SPEAKER_04: I know one or two, yeah.
46:38
SPEAKER_04: I'm blowing away.
46:40
SPEAKER_04: Um crazy as it may sound, you know, it's not it's not an immediate return, but ultimately uh it puts a stop on all this.
46:47
SPEAKER_04: I mean, look, I would argue that the Volkswagen uh class action that we started has actually borne fruit already because other manufacturers that said, All right, let me do the same thing here, are are holding back.
46:59
SPEAKER_02: Ah, pumping the brakes a little bit.
47:01
SPEAKER_04: Yeah.
47:01
SPEAKER_04: And and if we did the same thing here with Carvana and Stellantis, I can assure you that another manufacturer would not sign a dealer agreement with Carvana.
47:10
SPEAKER_04: So it's not even necessary to win the case five or seven years down the road.
47:14
SPEAKER_04: Just by just by waging war, uh, you can actually get a remedy.
47:18
SPEAKER_04: And hopefully, you know, in the intervening however many years it takes, uh they find something, some other project to chase.
47:25
SPEAKER_04: Sometimes delay uh and adjournments uh are are the victory in and of themselves.
47:30
SPEAKER_02: Yeah.
47:30
SPEAKER_02: Len does not get any Christmas cards from any of the OEMs.
47:33
SPEAKER_02: I I don't know what I'm saying.
47:34
SPEAKER_04: I'm not involved with too many of their holiday functions, Jim.
47:37
SPEAKER_04: So I'm counting on CBT or invite me.
47:42
SPEAKER_02: That's right.
47:42
SPEAKER_02: That's right.
47:43
SPEAKER_02: We'll fight the good fight with you.
47:44
SPEAKER_02: And I agree with you that this this is with the ATAs, ATAEs, and uh NADA so vitally important for dealers to see what every area that they can get involved in.
47:54
SPEAKER_02: And uh because I I agree with you.
47:56
SPEAKER_02: This is a this is this is a bigger picture here.
47:59
SPEAKER_04: So um good question.
48:01
SPEAKER_04: That's what we need the industry leadership.
48:03
SPEAKER_04: You know, the lawyers have their role too, but industry leadership is key because uh that's where the dealer body coalesces when they understand that you know there's a national initiative.
48:14
SPEAKER_04: Yeah, yeah.
48:14
SPEAKER_04: Boy, for sure.
48:16
SPEAKER_06: Well, Len, thank you so much for all the time you've given us.
48:18
SPEAKER_06: Anything that we can do to help the efforts, please let us know.
48:21
SPEAKER_06: We always appreciate having you on.
48:22
SPEAKER_06: So we look forward to the next time.
48:24
SPEAKER_02: Thank you so much for it.
48:25
SPEAKER_04: It's a pleasure to be with you both.
48:26
SPEAKER_04: Thank you for having me.
48:27
SPEAKER_04: Thanks.
48:28
SPEAKER_02: Yeah, it's it's a real issue.
48:30
SPEAKER_02: It is a real issue.
48:31
SPEAKER_02: You know what I mean?
48:31
SPEAKER_02: A lot of dealers, as you know, we've spoken to them about the Stellanus Carbana thing, and uh and uh they're like, what's what's going on?
48:38
SPEAKER_02: They're allowed to do things that we're not allowed to do, you know.
48:42
SPEAKER_02: It's not fair.
48:43
SPEAKER_02: It's not fair.
48:44
SPEAKER_02: It's not fair.
48:45
SPEAKER_06: It's not so yeah, it was a great conversation with Len and look forward to it.
48:48
SPEAKER_02: Right, and especially it comes at a time as I was saying to Len that you know, Stellanis is getting their act together and dealers are you know, right, are right there with them, and then all of a sudden that you know we we hear this news and I didn't know that the Stellanus CEO had that much starting in the world.
49:03
SPEAKER_02: So that's a whole nother That's a whole nother deal, right?
49:06
SPEAKER_02: That we're gonna have to digging in.
49:09
SPEAKER_02: That's not good.
49:10
SPEAKER_02: Yeah.
49:10
SPEAKER_06: Right.
49:11
SPEAKER_06: Anyway.
49:12
SPEAKER_02: Anyway.
49:12
SPEAKER_06: So we've got a great show coming up for you all tomorrow.
49:15
SPEAKER_06: We've got AI expert Todd Smith with Core AI and Brian Moss with California New Car Dealers.
49:21
SPEAKER_02: We can ask him about this very topic.
49:23
SPEAKER_02: Yes.
49:23
SPEAKER_02: Yeah.
49:24
SPEAKER_02: So Brian's a great guy.
49:25
SPEAKER_06: Yeah.
49:26
SPEAKER_02: And he's got a lot going on out there right now, especially with uh some of the things that just took place um for October 1 and what they can do and not do when they're selling cars.
49:35
SPEAKER_02: And so, yeah, there's a lot to catch up on.
49:38
SPEAKER_02: Catch up with with Brian.
49:39
SPEAKER_02: For sure.
49:40
SPEAKER_06: So thank you all for joining us today.
49:41
SPEAKER_06: We really appreciate it.
49:42
SPEAKER_06: And we look forward to seeing you back here again tomorrow at noon.
49:45
SPEAKER_02: That's right.
49:46
SPEAKER_02: And don't forget to uh uh sign up for our newsletter.
49:48
SPEAKER_06: That's right.
49:49
SPEAKER_02: Yeah.
49:49
SPEAKER_06: Don't forget.
49:50
SPEAKER_02: Don't forget.
49:51
SPEAKER_06: Go to cbts.com.
49:53
SPEAKER_02: Bye bye, everyone.
49:54
SPEAKER_06: Bye, thanks.