Latest / Automotive Informants / CarMax’s Pricing Shift, California’s CARS Act, and the Dealer Profit Squeeze

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CarMax’s Pricing Shift, California’s CARS Act, and the Dealer Profit Squeeze · Automotive Informants

• Zach Fritz: Welcome back to the Automotive Informance. I'm Zach Fritz and I got my co-host Chris Martinez here with me. Thanks for joining, Chris. Chris J. Martinez: I'm glad to I'm glad to be back, sir. It's been a a week, but it's ⁓ a lot of great. I mean, every week it's amazing how everything it we don't we just everything just writes itself. You know what I mean? You're like every day I'm thinking, what's going on today? And may have a challenge even posting anything or talking about anything, but no, every day there's some new thing happening, and you're like, okay, let's see how can we make sense of all this, right? So ⁓ Zach Fritz: An interesting week. It makes my job as an automotive content creator awfully easy, so that's a nice thing about it. Chris J. Martinez: ⁓ All right. So where do where do we big begin today? We got it it's a lot. There's there's so much, you know. you know, we can roll right into ⁓ the thing. That one's a a big one. but I also do like the fact that we're gonna talk about the CarMax thing. We also have ⁓ the new CARS Act officially today. So if you're in California, this is a big deal for you. and Zach Fritz: That's the big question. There's so much. Mm-hmm. Chris J. Martinez: It to me it's it's a big deal, but you know, most stores I wouldn't say most stores, a lot of stores, they're they probably are not even gonna feel it. Like it's just gonna be like a know a normal day in in the in the business. But we're in October already, which is craziness to me, right? But it it goes by quick. ⁓ but let's get right into it. So Carmax, the headline, I this Zach Fritz: How did that happen? Yeah. Chris J. Martinez: I think yours was a little bit had more teeth in it. You want to go through yours real quick? I I'm I'm interested to hear what that is about. That was like an interesting angle. Zach Fritz: ⁓ let's all right. So it's no secret that CarMax is kind of how I got my big boost in the influencer world with some of my CarMax videos reaching almost a million views and you know, then doing some bad press and their PR department reaching out to me. So it's definitely been a ride. Now, I was actually planning on doing a video talking about CarMax and those Q2 earnings that just got released. Which was very interesting from the stock market perspective, which we can dive into. I think the kind of little of lesser news might be ⁓ how is coming out stating, you know, hey, this FTC, you know, price transparency ruling, that's helped them out. And I think just personally, that's kind of a symptom of their no-haggle pricing, you know, by default. No haggle pricing, you don't have to worry about addendums, you don't have other people coming out and saying, Well, this dealer has a markup after you get there. You just don't really have to worry about it with CarMax, because it's pretty open. What are your thoughts? Chris J. Martinez: Well, I think that sorry about that. I had to get this plugged in real quick, but now I think that the FTC, the fact that they're just doing away with the doc fee, I think that's a big deal. Like, I mean, they had a doc fee and now it's not there anymore. ⁓ but then, you know, they're they're saying that it's their their performance because you know, dealers have to put their actual price And now they look more competitive. So where before the dealer may have looked fifteen hundred dollars cheaper, but now it's all of a sudden they're five hundred dollars more expensive. So who knows? Zach Fritz: With that removal of the doc fee, I think we could kind of dive in just a little bit on that. For most dealers, and you can probably speak better to this than I can, I see CarMax as that dock fee removal not being that big of a deal since they have their own BDC and everything is pretty much internal with CAF. Would that probably be true comparative to another dealership not really being able to reduce the doc fee that much if they truly have to pay for documents? Chris J. Martinez: Well, here's the challenge, right? You you know, a lot of dealers get that doc fee. Not it's not just documents, but it's also like technology, security, compliance, making sure that you know they secure, you know, data. so there's there's a lot of reasons why that doc fee exists. ⁓ Zach Fritz: Mm-hmm. It's your cogs, right? Baked in. Chris J. Martinez: The the challenge there though is some dealers, like in Texas, right? The the dock fee is 250 bucks, 225, depending on your volume, right? So say it's 225, but Florida, their dock fee might be 1500 or Virginia, thousand, fifteen hundred, whatever. Like, you know, Oklahoma, 500, 600, depending on what where you're at. so it just really depends on. ⁓ Zach Fritz: It's a thousand. Yeah. Chris J. Martinez: But so then the argument is is is data security documentation fee all of that $200 or $1,500? You know what I'm saying? So it's if you cut that out like they have, Carvana does the same thing. I mean, you're talking a pretty big, a pretty big chunk. You know what I'm saying? Like that's that that's Zach Fritz: Yeah, absolutely. Chris J. Martinez: That that's a it and if you're a single point, you're you know, you own one store, or if you own three stores or smaller group, and you're selling, you know, a hundred cars a month, and now you do away with your fifteen hundred dollar dock fee, that's a real that's that's a real problem. So I don't I don't know that it goes away. I think that you know, you know, I think that my prices were still better in in a lot of cases, even with a doc fee. So I'll I'll give you an example. I've done videos before in the past where I could show them that a new ⁓ Ming MSRP sticker was cheaper than their their used car. So you know it's it's real. You know I mean like I don't you know Zach Fritz: Yeah. I do remember those days where it was sometimes cheaper just to buy the car new. I in fact I did that on Tacoma, because it was more expensive for a five thousand mile Tacoma from CarMax than it was brand new from the dealership, with all the fees and addendums and markups that I probably was paying for and didn't realize or wasn't tuned into at the time. Chris J. Martinez: You know, but I don't know that, you know, the fact that they they made that statement or they said that, you know, they felt like that enforcement helped them sell more cars. You know, maybe it's more regionally, I don't know, nationally, but I think in some areas it it could have. you know, some of the stores here in Texas where I've seen four or five thousand dollar addendums, I could see that, you know, being a real problem. and or actually Zach Fritz: Yeah. Yeah. Chris J. Martinez: be a a solution for them because if they'd got those big addendums, now CarMax looks like a deal. Zach Fritz: Maybe from a psychology perspective too, you know, let's face it, has not always had the cheapest cars. They've been reasonable, but not cheap per se. So then I think if you look at it and you're like, hey, I've got somebody going into finance to get approved, especially through CAF, then now you've got, hey, we don't have any dock fees. I mean Right there, there's this huge psychological trigger to say, ⁓ well, there's no dock fee involved. Great. I'm gonna go ahead and continue with this and not go shop around because you're gonna continue to see dock fees. But CarMax also has that power to drop the dock fees just due to their size and how massive they are. So it's a little, I don't want to say unfair, I mean this is capitalism. But they have a definite advantage to be able to drop it. Chris J. Martinez: Yeah, you know, I think that with Carmax, there's lot of other things, but they so they they did show their same store sales were up. I think it was like 13%. Their margin was down a hundred dollars per car. You know, I would have thought that the margin would have down a little been down a little bit more if they're removing those dock fees. ⁓ because in some states ⁓ it's yeah, I they charging like five, six hundred bucks. Zach Fritz: Yeah. Mm-hmm. Chris J. Martinez: Depending on the state. so you know, I'm not sure. I they have been charging, you know, a blanket 200 bucks across the country. I don't know. It's been a while since I've I've worked there. ⁓ but I think that there's there is opportunity for them to keep growing now. But I know the other, I mean, the you got the two largest news car retailers in the country, both don't have dock fees. You know, it's gonna interesting to see if. Zach Fritz: Mm-hmm. Chris J. Martinez: Any other dealers try to go that direction too? Zach Fritz: Yeah. Yeah, I mean I think really when you look at it, so kind of some of the things I put together on CarMax of this Q two earnings report. So yeah, so they're down, use units are up thirteen point eight percent, right? Same store sales are up percent, revenue is up nineteen point five percent, but their profit per car is down twenty one hundred bucks. Comparative to before Keith Barr took over. As CEO. And so whenever I looked at this, of what I'm seeing from CarMax ⁓ now they're looking at 22% ⁓ the loan volume from CAF being this, you know, let's call it tier two more riskier borrowers. Which, if you're really looking at CarMax, where they're making the most amount of money, you know, cut out the you know goodwill section of it. They're not really making their money on the cars right now. They're making their more money more so on the loans and everything financed through CAF. But they've done that through lowering their barrier to get approved for a loan. So they're basically taking on, in my opinion, a lot more riskier or bad debt that it's going to trigger. I mean, if you see a quarter point adjustment to the rate, I think it's going to trigger that debt. It's a way to make money, I guess, but it's sketchy. Chris J. Martinez: Or maybe to take it. I I'm I'm I imagine that they're they may they may be trying to follow a playbook from Carvana because they're very, you know, involved in that Bridge Crest or whatever the name of the company is that, you know, takes on all their loans and basically approves everyone. Now I I don't work there. I I don't know what their the lending guidelines, what they look like. but I've heard the same thing about Carmax in the past. And I I did work there and I can tell you they all it's Zach Fritz: Yeah. Chris J. Martinez: You know, they're all on the up and up and they have a scorecard just like every other, you know, blender. And ⁓ so who knows? I you know, it'll I'll be interested to see if that, you know, I I think what what's gonna go ahead. Zach Fritz: Yeah. Who was the? I was gonna say it it almost to me. So think about it like coming. So Keith Barr came from like the hotel world, right? And so almost to me seems like they don't realize that you can't run dealerships just off of the finance arm. You know, you need to have your service department. Like the service department at CarMax is making virtually no money right now, which is kind of a frightening part. But then ⁓ I also look at some of the consolidation and some of the people who have gone under in the past, you know, twelve to twenty-four months, such as Tricolor, and I'm like, Well, is CarMax coming in to kind of take over the spot in that customer segment that Tricolor handled? It'd be a hell of an opportunity in a way for them to make some quick cash, which they are desperately in need of. Chris J. Martinez: Well, I don't know that that would be I think Tricolor was like the reason why they kinda went out is because there was a vacuum of people no longer here, Like that you know, I think it's like three hundred thousand immigrants have been deported and like like three million or a million have ⁓ self deported. So I'm not sure that, you know, I know that the the type of clientele that they were going after, you know, proved to be challenging. Zach Fritz: Mm. Yeah. Chris J. Martinez: and they were going after some. I mean, usually like look at what happened with credit acceptance. Credit acceptance has just been, you know, put into a a position where they had to forgive like 55,000 loans over their lending practices. ⁓ now they've got to change their whole score scorecard. And when you look at, you know, that that's gonna Zach Fritz: ⁓ yeah, yeah. Yes. Chris J. Martinez: There's not a lot of lenders that would go after and even approve some of these people. I'm talking like they'd approve people with multiple repos, and if they've got to change that scorecard, I can't even imagine to think Carmax would go after that business. If if anything, they're gonna go after that Capital One business or Wells Fargo type business that you know, because normally they were always looked at as a prime bank, they compare themselves with Bank of America. ⁓ well not repair themselves but you know compete from the pro for the prime business that was one of their lenders so if anything they're just dipping in the the the credit pool because let's let's be real you know these last couple years the credit rating hasn't has gone down a little bit so ⁓ and opportunity to pick up some options there I don't know what Zach Fritz: Yeah. Yeah. ⁓ yeah. Chris J. Martinez: That looks like. So I haven't really read that part of the the statement or the release that just happened. but y that's a good point that you make. ⁓ I'm gonna I'm gonna look into it. So ⁓ Zach Fritz: Yeah, I'll send you over what I've got. It's it's pretty interesting. And I did do digging back to, you know, 2024, 2025 and some filings and really compile this because I think the story's a lot bigger. I was more so looking into all the layoffs that happened with them. But then it kind of opened up some things with some outside firms and you know it there's a whole lot going on that I think could get really, really interesting, you know, involving exits and people coming on and, you know, even caveats if people get fired now. that is insane and would probably have a pretty big impact. Chris J. Martinez: Yeah, that's I'm I'm I'm curious to to get your complete breakdown once you once you publish it. So I'm ⁓ I'm excited to look at the next thing. Zach Fritz: Yeah. Absolutely. Hopefully it'll ⁓ go well. I do expect a call from PR. ⁓ Chris J. Martinez: Well the next thing PR students they could be calling you now. Especially with I think you're they've got you on speed dial now, right? Zach Fritz: Yes. ⁓ yeah, yeah. ⁓ absolutely, yeah. Yeah. Chris J. Martinez: Well let's look at let's jump to the next one. The next one is the CARS Act fresh today. dealers in California. Now there's two parts of actually a couple of parts. The two that I highlighted were the fact that the dealer now has to have a return policy. If he didn't have a return policy, now you do. and it's for use cars specifically, anything under $50,000. And so as a Zach Fritz: Mm-hmm. Yep. Mm-hmm. Chris J. Martinez: used car operator dealer that if you sell used cars if it's under fifty thousand then you have if the customer changes their mind in three days you have to return it or they can return it and then but with a couple caveats like if they have ⁓ if they drive more than 400 miles then it's void and then you can charge them a a a restocking fee a Zach Fritz: Mm-hmm. Chris J. Martinez: $30,000 vehicle returned after 300 miles could cost the buyer, though, $500. So if they return it after $300, it's So what do you think about that? And then the second one was the Like if you have the price, your you have your car priced online, your first response needs to be with the what the actual price is. So you have to say, ⁓ Zach Fritz: Yeah. Chris J. Martinez: customer says, hey, is this vehicle available? You have to say, yes, the 2026, know, Dodge RAM is available and it's the price is XYZ the door. Or ⁓ they need you don't have to include the government fees or taxes, but you have to include the sales price, doc fee, addendum. So whatever you have listed on the website has to match on that first response. So and if it doesn't, Zach Fritz: Yeah. Chris J. Martinez: you know, you could be out of compliance. So those are the two. What do you think? Zach Fritz: I just I love I'll kick off on the having to list the price in the first communication. I think that's hilarious because it kind of breaks this rule of sales, right? Where you wanna start off with the rapport building and you know, really get them invested, figure out what they want, and then tailor the deal towards them. I think for a lot of people it's going to have to it's It's gonna throw the entire playbook out. So it's gonna be really interesting to see. But I also think that for people who are now negotiating car deals, and they definitely aren't brokers because they hate that term and you will get yelled at if you call them that, they are now kind of pointless, right? Like wouldn't you just send your Grokbot or your Muse out and say, Hey, contact 20 dealerships, find me a, you know, Hyundai Palisade and just shop deals that way? Figure out who's actually got the lowest price. Chris J. Martinez: 100%. That's that's here now. Like that's it is like your whole game, you've got to rethink your whole game. I'm trying to help dealers right now rethink that whole strategy. I'm trying to put tools in place to help dealers rethink that strategy just because you really need to it ⁓ here's the you're not like excuse me, you're not as big as Amazon. Zach Fritz: Yeah. Chris J. Martinez: So Amazon literally just came out and announced they're they're gonna stop these shoppers from going to the website. That's number one. So that may just be like negotiation, right? Like they're gonna negotiate well, let us go on your website and they want a piece of the pie, right? Because that's advertising they think it's gonna lower their advertising costs because now they got these agents that are gonna go after and shop for the consumer. Zach Fritz: Mm. Yep. Yeah. Chris J. Martinez: And Muse is giving their meta's given it to the the consumer for free in hopes of make generating profit off of every transaction that the shopper helps you with, which ⁓ but it's just an extra credit card fee, right? You got your personal shopper. Now you got to pay pay him a little percentage of everything you buy. ⁓ which conversation, and because what's that gonna look like on a car, right? Like if it does. Zach Fritz: Yeah. Chris J. Martinez: You know, they go to Carvana and the shopper buys it. Does the dealer pay or the customer pay? Like, what's going to happen there? when I think about from a dealer's perspective, your website really needs to be readable by these agents, or else they're just gonna go down next door the next door. And they may shop five dealers in your neighborhood or in your area. And if you're not if your ⁓ not readable by these things. ⁓ Zach Fritz: I yeah. Chris J. Martinez: then it's a problem. They're gonna just skip you and go and then you're you're just gonna be compared to they're gonna compare the four other stores and you're not gonna be in the in in the conversation. So and they can do that like that. It's not it's not something that's gonna take all day. It's this is something that they do pretty quickly. Zach Fritz: ⁓ absolutely. And I think that's where we're gonna see a lot of people make or break with people who aren't adapting and aren't evolving towards this new technology. And it makes it super interesting. The first thing is I think you're a hundred percent right with Amazon and the ad revenue. I actually was doing a little bit of digging on that and Amazon, I think it's like what, fifty billion in ad rev that they get every single year. And then the car, ⁓ yeah, the auto Amazon autos, it's like three billion in ad rev. And so, I think they're Chris J. Martinez: Huge. Well, that's why Google Google's even having a ch a pr a real problem right now, too. I mean, it's basically someone that guy Gary V just came out saying that it's ⁓ yellow pages, it's going away. Like it's Google real time we're seeing it that they are now yellow pages. I I I saw I heard that and I was like, he's not he's not that he's not wrong. I mean, think about Google. When you go to Google, it's it's more Gemini, it's ⁓ it's almost Gemini. Zach Fritz: Yeah. Yeah. Mm-hmm. Chris J. Martinez: Like a hundred percent. And you don't get the blue links and you know that's just gone away. Your your click-through traffic is falling off a cliff every day. you your dealers need to make sure their their websites are readable. And I know there's some website companies that have taken a hard stance on that. And if you're a dealer and they're making that decision for you, you may want to find out. Zach Fritz: Mm-hmm. Yeah. ⁓ yeah. Yeah. I was gonna say I know a guy who can help with that kind of stuff. You know, he's got an AI company and you know is really well versed on this that can help dealers out. I don't know. Yeah, that guy. it is gonna be interesting seeing the Chris J. Martinez: Yeah, I don't he's he you know he's it's this guy. I don't know that guy Martinez, I don't know. Skid stuff. Zach Fritz: what you said with who's going to end up paying that transaction fee or that convenience fee, whether it's let's call it a percent on fifty thousand dollars is the average price of a new car. So is that going to come off the dealership side from a kind of a kickback or a spiff or, you know, hey, thanks for bringing the customer in, or is that going to come off the customer side as like, hey, thanks for acting as my AI broker the deal, which On a fifty thousand dollar car, if you charge one percent, that's cheaper than a thousand, which some brokers are charging. So that would be interesting. That's half the cost. Chris J. Martinez: Well here's some here's an even bigger conversation. Are you gonna be are you gonna be paying now for ad revenue to make sure that they recommend you before they recommend someone else? Is that even is gonna be a thing? I mean that could be. I mean you don't know. ⁓ Zach Fritz: Yeah. Yeah, it's It's gonna be an SEO game all over again. Remember when ever everybody got into like web SEO and like, you know, hey, I can make sure your website ranks, and it was all about, you know, paying for ranking, paying for views. I think it's gonna come down to that again. But it'll be really fascinating to see it play out. The other thing was going back to these cars and returning them. Do you think that? If you're able to return a car under fifty thousand on a used, do you think that instead we're just gonna see a price jump to like fifty thousand and one dollar on a lot of cars if it's kind of borderline, like a thousand dollar or two thousand dollar jump more so? Chris J. Martinez: You know, it's don't know that they'll do the one dollar just because most dealers that I've ever spoke to and talked to, it's it was always some psychological strategy and like the 99 cent store, you know, like you just think it's you know, and so everything's forty nine ninety nine and some people forty nine ninety seven and forty seven fifty and like they just start messing with the numbers and you know, who knows? Like I think Zach Fritz: Like just game it. Yeah. Yeah. Mm-hmm. Chris J. Martinez: California though, I I there's just so many little things that that at what point does it does, you know, companies just say, you know what, I'm gonna I'm just gonna go somewhere else. You know, I'm gonna do something and that looks Zach Fritz: Yeah. Don't come to Texas and don't come to Colorado, please. That's my only ask. Chris J. Martinez: Yeah, that's there there is a lot of them right? But there's some dealers that you know that the weather, ⁓ you just can't the weather's amazing, right? Like you like I I've heard I've been there, it's still a lot of great things about it. So who knows? I it it's just so expensive. I I just couldn't I you know, I I wouldn't want to, you know, be out there having ⁓ to that plus, you know, what they take out of your in your taxes and stuff. That's just that's it's not for me, you know. Zach Fritz: Does ⁓ the cost of real estate, everything is so high. The cost of just registering a car is insane. Chris J. Martinez: Everything like it's it's but it's bone crushing. What the way I look at it, I'm looking at that like, man, that's that's a big deal, you know. Zach Fritz: Yeah. The real threat is California dealers moving to somewhere like Kentucky or Ohio or somewhere super unrestricted, and then they would absolutely kill it. That's the real risk. Chris J. Martinez: that would be ⁓ be that'd be an interesting deal. Well, here's a here's one more that I wanted to kind of jump in ⁓ this the IRS auto loan tax break. So ⁓ do you think about that? So you can actually do up to ten thousand dollars on auto loan interest rate reduction or deductions. So whatever you you can write off your interest every year up to 10 grand. Well, I don't know if it's up to 10 grand. Zach Fritz: Yeah. Yep. Chris J. Martinez: every year or if it's every year or for total of the loan. I don't know. I I definitely get some more details on that. From what I read and what I I posted, it was really about the negative equity. So if you have negative equity and you have interest, you cannot claim that as a deduction. So that was a that was one thing that was interesting because yes you can write off the interest, but if you've got negative equity rolled into that deal you cannot roll Zach Fritz: Yep. Makes sense. Chris J. Martinez: That negative that interest. And the way they calculate it is say you have a $45,000 vehicle, but you now you have $5,000 in negative equity, which is $50,000 total, then only 90% of that loan qualifies. So if the customer pays $4,000 in interest during the year, $3,600 is potentially deductible before income limits. So That's because it's ninety percent of the four thousand in interest. So it's ⁓ Zach Fritz: Makes sense why they did it that way. I mean, I understand you don't want to be, you know, writing off the interest on negative. You know, you're writing off interest on money, money that was already owed, that's already out in the ether. But do wish this existed, you know, five years ago, ten years ago, two years ago in my case. that would have been very, very convenient for paying off some vehicles and I definitely utilized it. So it kind of sucks and I don't wanna say too little too late because now it's here, but I'm also not in a position of buying a new car anytime soon, so Chris J. Martinez: Well, I I still have two cars. I did pay off my house, but I'm paying I still have two cars. So I'm definitely gonna be writing off. I mean, it's not that much interest, but hey, gonna take advantage of it no matter what. The next ⁓ the reason why I like talking about that, those type of things is it's a way to help your the consumer, like hey, to justify, hey, look, I understand because some some of the concerns consumer sentiment. Zach Fritz: Right? Especially with such a high rate right now. Chris J. Martinez: ⁓ that's a high rate because if you were buying a car three years ago, your rates were, you know, 199. Yeah, they were they're pretty low for a vehicle. But now they're paying six and seven percent on a new car. You can say, hey, here's the the the good thing: is you can actually write off us the the interest for that vehicle every year up to ten thousand dollars. So that's That should be a at like some kind of relief to help them, know. Zach Fritz: Well, I see it too. Like if you are a business, right, buy or buying something over six thousand pounds and kind of going that route and you're gonna run it on a one year long finance, that would be interesting because you can kind of double dip there. But the other side too is it would be really interesting to see if somebody could come up with a calculator of sorts to roll this into helping a deal along or to get across the signing desk. That would be Quite interesting to see how much people are actually saving in their specific case if they are doing an itemized deduction instead of standard. That could be a real advantage for a dealership. Chris J. Martinez: Yes. and you can that can build one in like two seconds. It's it's actually it's pretty pretty amazing. You know what I mean? But here's here's another one. I think this was last one we can we can go through. And this is Trump Bax MPG target rollback. So the rollback from 50.4 miles per gallon to 34.5. ⁓ Zach Fritz: I know a guy. Mm-hmm. Yeah. Chris J. Martinez: Miles per gallon. So it's an almost 16 mile per gallon reduction. what do you think? And it says the published proposal lowers a projected 2031 fleet average, and that's a 30 a 31% reduction. These are industry fleet compliance figures, not the MPG required on every vehicle. So does this mean the gas? ⁓ Zach Fritz: Mm-hmm. Yep. Chris J. Martinez: Engine vehicles are coming back or they're gonna still stick with hybrids because who knows what's gonna happen in the next term if everything changes again. Zach Fritz: I love this because I do think it's going to drive gas vehicle sales, the bigger overarching thing is if we look at what was done as a result of these higher fleet, you know, mile per gallon requirements, we saw thinner oils, we saw diluted gas, we saw all of these things, you know, hybrid drive trains, things that were expensive to maintain and fix, start to be implemented and engineered. And so now I think that we it's kind of twofold. It could be Hey, due to oil, we're going to have to refine it less, therefore, we can run thicker oil again and not have to thin it out just to hit these mile per gallon requirements, such as all the transition from like 5W30 to 020s, which is not great for cars long term. Therefore, we'll see cars last a little bit longer, but also reduce cost as far as oil, fuel, and everything else goes and refinement. But I also think this is going to open us back up to say, hey, this older technology where we hit the bar 10 years ago. Can't we just produce that cheaper now instead of having to redevelop and, you know, reshape the wheel? Chris J. Martinez: Yeah, no, I think I think it's you you make a good point. The challenge I see though is that this is 2031. When's the next election cycle or when's the election election happening? Will this just be all for nothing? And maybe, you know, the depends on whoever's in office, right? They may just change everything again. I mean, they went all the way this way. Zach Fritz: Yeah. That's the problem. Chris J. Martinez: on the the previous one and then they went all the way this way on this new one. So Zach Fritz: Yeah. Can't we just land at a happy medium? You know if if Toyota like Toyota killed the four liter, that indestructible, you know, V six that they had that was in the full runner, the Tacoma, and that was in every vehicle for like 20 years, they killed that engine because it wouldn't hit the mile per gallon requirements. Then they went to that three point five liter Atkinson cycle half Prius based top end with self-cleaning, just garbage motors. Chris J. Martinez: If you look at what's happening Zach Fritz: You know, not they're not garbage, but in my opinion, compared to the not as good. If they could bring that back and not have somebody saying, Well, it's not hitting the MPG requirements, well, holy crap, we would never have to buy new cars because everybody's car would just run forever on, you know, hopes, dreams, and miracles like a Toyota should. Chris J. Martinez: Yeah, I I it's it's different for me because I I look at what's happening across the world, all right. And you think what and ⁓ as an EV I even hate to even say it that way too, because I had my a different opinion back then about EV drivers, but now it's you know I'm I even hate to say that I am one, but it's because of the technology, right? The self driving, like. Zach Fritz: Good tech. Chris J. Martinez: If they had that technology in the ice vehicles, that would just that that could change my mind. You know what I'm saying? Like that could literally sway me to go back to to to gas and and go that direction. For me, I don't understand why are ⁓ OEMs in the United States haven't like tried to like advance to some of this technology. I and I see that's happening. I I know almost every OEM is trying to move in that direction. Zach Fritz: Mm-hmm. Yeah. Yeah. Chris J. Martinez: But I feel like I don't understand why it took them so long. You know what I mean? Because I think Tesla had this technology back in 2014 or 15, something like that. And here we are, you know, 2026. they're just now starting to catch up with some of this technology. Zach Fritz: Yeah. I think another fold too to kind of add into it that lines up. I don't know if you saw it yesterday, the big announcement of the investment instead of that whole Alaska pipeline with oil, that's pretty big news. Then we see this Iran war and then all the, you know, speculation, hey, it's gonna come to an end, we're fine, but then you've got Venezuela oil. So it's kind of in my head, I'm seeing all of these opportunities. We've got oil coming from the south, oil coming down from the north. It's Makes sense that we would lower the threshold for miles per gallon because we'll be able to buy fuel more often for less money. I mean, that's the only thing that makes sense to me. Otherwise, why would you roll that back? Wouldn't you wanna just squeeze it and keep the expectations super high? So fuel costs are gonna stay up, I mean, maybe we get down to like fifty cents a gallon. That'd be pretty rad. Chris J. Martinez: That would be amazing. I then you know look at what you're driving, but you know, I may just go that direction because you're gonna save, you know. I mean on truck ⁓ you're a truck you're driving right now, like what are you spending right now a month in gas? Zach Fritz: Cheaper at that point. with how little I've been driving it as of late and more so taking e-bikes, very little, but I mean I'm getting somewhere in the range of let's see, I'm on 35s now, so I'm about 13 miles to the gallon average. And it's But that's a lot of, you know, kind of Colorado, you know, foothill driving. So you're up and down, up and down, and the grade is what kills your miles per gallon here. And it's pretty miserable. What are you getting on your cyber truck right now? Chris J. Martinez: Sure. Okay. you know, I d I haven't really looked it like that. Every time I charge the truck, it's like a couple bucks. It's nothing outrageous. You know what I mean? Like it's literally a full charge and it's five dollars. You know what I mean? So whatever it is, it's not it's minuscule compared to some people that are paying spending three, four hundred bucks a month just in gas just to drive the thing around. Zach Fritz: Yeah. Yeah. see it's about 300 on my wife's car and so that's just you know a Volkswagen Atlas and so that's about 300 bucks a month right now just to drive back and forth and not been very fun Chris J. Martinez: No, no, it hasn't. But so here we we talked about a lot of good things today. I I feel like there was a couple other ones that I wanted to bring in, but we're running into the the end of the the hour, top of the hour. And so we talked about the CARS Act, we talked about we talked about these MPG rollbacks. I don't think that it's gonna help improve gas prices realistically. Zach Fritz: Yeah. Mm-hmm. Chris J. Martinez: it may it may in the short term, but is it gonna all a sudden all these gas cars are gonna show up? I don't I don't think so. I do think that maybe in 30 2031 the sum things might I know they've been pushing the tiny car. but we'll see. You know, it's you just don't don't know the next it's so inconsistent on ⁓ w what the direction you know we go. ⁓ Zach Fritz: Mm-hmm. Yeah. Chris J. Martinez: That I don't know that long term, especially, you know, what's happening right now with these, you know, these conflicts, all these different chaos that's happening all over the world. Like, who knows? Right. and then we we discussed the the the interest rate, tax break, the write off, and quite a few things. Like it's when you it all together, Zach. Zach Fritz: Mm-hmm. Yeah. Chris J. Martinez: What do you how do you tie this into a nice bow and tell a dealer, hey, look, this is this is what you should do and this is how you can get better. Zach Fritz: I think I see it as kind of a bit of an advantage, right? So we get it's this ebb and flow across our industry where you get bad news, such as the rates going up. That sucks, okay? But now we're seeing, you know, some ability to say, hey, well, maybe we can use this new trick and say, hey, you can now write off, you know, up to $10,000 on the interest of this car. That's a pretty big advantage, and I think far outweighs that interest rate, obviously, depending on the price range of the car. then you've also got This new technology coming in, I think that's a great place for dealers to start to learn and start to adapt and improve their process. And it shows that we're gonna have to adapt to this anyways. There's no more getting around it, there's no more hiding from it and saying, Well, I just hope an automotive broker doesn't call this dealership. Well, now you got AI doing it. So you got to adapt, you gotta get with the times. And whenever it comes to the fuel. I don't know. I think that there's something that we just aren't being informed of. I think it's a signal for things to come. all we can hope for is that these gas prices come back down so we can all just start driving more, selling more cars and getting our customers to drive a whole hell of a lot more. What about you, Chris? Chris J. Martinez: Well, I I agree with a lot of what you said. I do think that we are in a position today that they talking about some kind of, you know, black swan event that's gonna happen that is gonna literally just change how things like it's a big market correction, is what they keep talking about. ⁓ and Zach Fritz: Mm. Chris J. Martinez: you know, it it doesn't matter right now looking you know these different compliance regulations, state just do the right thing, you know, do the right thing. I think the all that's only gonna help. it puts everybody on a on a same playing field. you're not gonna and the and the that don't want to do it, they're they're gonna be put in a position that, you know, But they may be fined. And you know, there's already been other dealers' groups that have been fined and it's not fun. And if you've ever had to go through any type of, you know, audit and th those just they're just never fun. So when you when you look at all of these different things, these signals that are happening, I think you just stay focused on the basics, the fundamentals. And but just make sure you can't you can't just rely on these, you know. Different things that are happening, like your your your your store and be insulated. I think you still need to focus on what's happening in the in the marketplace, especially if you have websites that you want to be found and be read by some of these bots that are coming coming up. By every but mark my words, Christmas, every little kid, every there's gonna be adults that have these little tomagouchy things from Muse. They've got these little keychains. They're gonna have these little shopper assistants that hey, go shop that for me and help me buy this. And it gonna definitely change. So by Christmas, everybody's gonna be doing these these bots to shop. And ⁓ you're not preparing your your website to be able to read these things, it's competitors are gonna just Take that business. So it's it's it's pretty easy. But Zach Fritz: And if you're not subscribed to the automotive informants and you're not following along, liking and commenting on every single one of these podcasts, then I'd hate to break it to you, but you're gonna be out of the loop. So make sure that you are. Chris J. Martinez: Amen. So like, share, subscribe. Zach, as always, it's it's a it's always a lot of fun going through this. You helped me stay sharp and on top of my game and helping my dealers, you know, you know, really take their business to a different level. So until next time, thank you, Zach. This is automotive informants. Until next time, thank you. Zach Fritz: Thanks, Chris. Thank you.