Latest / Automotive Informants / AI, FTC, CarGurus... The Rules Just Changed

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AI, FTC, CarGurus... The Rules Just Changed · Automotive Informants

• IgniteUps.ai: All right. everybody. This is Automotive Informance. we've got a special guest, Dennis from Lotlaw. Zach, you know, we we I've I saw Dennis because he recently he's been probably doing content for a long time, but I just recently started seeing it on my feed and I was like, man, this guy's got some good information. He's talking as from a an attorney's lens, a dealer operator owner lens, and just an all around ⁓ great background and when you see some of his content, he I mean he's really l really thorough. So Dennis, thank you for for jumping on board with us today. Dennis: Well thank you, Chris and Zach. It's it's a pleasure and ⁓ this is this is my first podcast and we're gonna start at the top. So I appreciate it. IgniteUps.ai: All right, cool. Well well let's start at let's just jump right in because yesterday I saw it on social I forgot what forum I was in and somebody posted something about carguru sending letters to dealers yesterday and it's exactly what a lot of the content recently you've been talking about, Dennis, and I really like your opinion because when I saw I've been talking to to dealers, even some of the the people I've worked with in the past that had Zach Fritz: Thank you. IgniteUps.ai: addendums and you know, I I just did never felt good about how they we had to disclose some of this stuff. They would put it in the notes at the bottom, but they wouldn't really say a dollar amount. and now that's all coming ahead now. So Dennis, you you wanna kinda like here jump in and tell us about your your two cents on this car guru thing? Dennis: You know, I only found out about it obviously yesterday with everybody else. I didn't get the email because thankfully I am no longer part of the car guru's ecosphere. I ⁓ am very proud of that. So I was only I've only heard about it secondhand. I have not seen the letter. so the letter i i if you want to go through the letter, maybe we can comment a little bit more on it. IgniteUps.ai: Yeah. ⁓ yeah, I've seen that. Yeah, yeah. I'll tell you real quick. I've I've got it here. So basically starting July 14th, dealers who don't disclose their fees, addendums, will have their used inventory labeled no rating. And they're gonna be pushed lower in search results, making their vehicles less visible to shoppers. So that was the the whole You know, it was a pretty couple it was like maybe two, three paragraphs in that letter, but that was key takeaway. So, do you think July fourteenth is too late or what do you think? Dennis: Well yeah, ⁓ Well, ⁓ certainly for the regulators, you know, they can go back on this. And I have been maintaining for a while that if the FTC wanted to do something that was actually helpful, they would go after the third party listing sites. ⁓ you know, this is the well from which it all springs. you know, dealers are highly incentivized to have low numbers ⁓ you know, and then change them when you get into the dealership. Well, you know, one of the things there's a lot of things that got me out of the business, my poor customer service probably being at the top. But one of the things that that just drove me crazy was I really want to give value to my customers. And in an independent space, I think you give value to your customers by de-risking used cars as best as you can and having your own processes internally streamlined to give that value. But when you are up against a dealer that will come in two to three thousand dollars under you, get them in the box, and then just lean on them, we all know it works. And come out then, you know, fifteen hundred dollars ahead of where you are. You never get the lead, you never get the person in front of you, and you lose even though you have the far better deal and the far better value. So as an industry, I think that, you know, most of us anyway are gonna be very happy. The people that thought that this was, you know, more fuel for your private jet are gonna be a little sad because they're gonna find out this business isn't as profitable as they once thought it was. But for most of us, I think this is the business we always thought it was. IgniteUps.ai: I I agree with you. I think especially for independence, right? Independents have had the br a brute like the brunt force of all of this, right? Like dealers would have these four or five thousand addendums and then they couldn't compete because they're trying to do it pretty ethical. to s certain degrees, 'cause you know, I I heard a on social the other day that's fifty percent of ⁓ are great and fifty percent are crooks or something like that. I don't know what the real you know benchmark is on that, but there is there is that. And this guy from Delivered, believe it or not, because I've been listening to how he's negotiating, it's actually made me more aware of how bad some of these dealers are because it's it's kind of crazy. And what I feel like, you know, addendums started out with window tent, you know, 499 window tent. And then they've they kind of ballooned and evolved into these five thousand dollar addendums with some you know, weird protection that you never heard of it's just it it got kind of crazy. Dennis: It's it's beyond crazy. I, you know, I think when you look at this stuff, it isn't stuff you would buy. It's stuff you would tell your family to run from. and it's all incredibly high margin. And, know, when I was doing it, we ⁓ we were cursed with selling the the six liter four diesels. And you know, everybody you know, the bulletproof EGR package. And so that was one of our add-ons, right? We would sell the bulletproof EGR package, you know, the base one was 2,900 and it would go all the way up to eight grand. And people couldn't wait to pay and they were thrilled to pay. ⁓ obviously it wasn't the margin of the titanium wheel locks or the desert protection package or any of these other silly ones. But the idea that dealers can't get back to real add-ons that really provide value, again, they're not as lucrative as what you have now, but there's a ton of stuff that that can really help the customer add value, you know, and it can be done legally and can be done through section five. You know, none of this stuff is written out. You just have to have the same story end to end. I I think that's really what's gonna change for some of these dealers is you know, when you start it, when you advertise it. Zach Fritz: Thank Dennis: All the way through your pencil, all the way into the buyer's order, and then the installment contract, we need to tell the same story. IgniteUps.ai: I agree. I think you know what what's what's funny is then you start looking at what's going on with these dock fees, right? 'Cause you know, I've worked at different stores across the country and you see some where they're two hundred bucks, you so see some for like fifteen hundred dollars and how they're so just all over the place. Now that they're gonna have to actually ⁓ that the website and put exactly what kind of dock fee they have. What's the likelihood you think that dealers are gonna actually start those or now margin goes away? Dennis: Well, you know, this is this is my kind of own hot take. you know, with with the section five stuff, ⁓ let me back up a second. With the section five, it's still a little bit of Wild West into figuring out what the regulators want to really get into. We're gonna have the FAQs coming out here any day, and that will really help some of this. But in my opinion, right now, reading the tea leaves for the doc fee, you know, is that that fee has to be obviously included in your overall price. So it factually what it's become now is just dealer accounting. I I don't if you said that your car is thirty thousand dollars and you want to charge a twenty-nine thousand dollar dog fee, so long as the state doesn't preclude it and charge a thousand for the car, I don't actually think there's anything wrong with that. You're still selling it for thirty thousand. You still are hitting the number. They can buy it for what you've advertised it for. So I think now you're just looking at it's just simply an accounting metric and you know what you want to do internally and how you wanna work the pack and you know, ⁓ pay your pay your guys and all that. IgniteUps.ai: Yeah, and Zach, you know, when you look at it from from your side of the the house, you know, I I get like a mixed bag on service like people my service department, you know, I used to hear them think, ⁓ my dealership's trying to screw me, or they're, you know, trying to get me to. what did what is your experience when you you've seen some of these ad addendums and dock fees? Zach Fritz: Mm-hmm. As a technician looking at an addendum, know, the best example I have is looking at Toyota dealerships because they're horrible about it. You go and look at a Tundra or Tacoma that's got a three you know, pro comp lift on it or some garbage lift and they're charging eight, $9,000 for that. I think personally ridiculous, but I also look at it through a technician lens and working for Mercedes and doing the silly illuminated stars in the front grill. I made so much money at that. because I could do it quickly and it paid a lot. So I love it and I hate it at the same time. I love it as a tech, I hate it as a consumer, but then you look into dock fees and the bigger question I have, and maybe I'm just ignorant to this, but we see these, let's call it third party sites or more middlemen and people putting their hands in the cookie jar. Are we seeing all these dock fees and addendums start to go up on higher margin items such as that window tent, ceramic coats, which we know literally costs nothing to apply. Are we seeing those costs start to be baked in as more brokers and third party sites enter the market to kind of pad their margins a little bit. IgniteUps.ai: Yeah, no, well here's the the challenge there. Once everybody's like on the same playing field, it's hard to pad a four thousand dollar markup, right? Because now you just look like you're four thousand dollars more than everybody else. So ⁓ this is where what's that? Zach Fritz: But if everybody's doing like it's it reminds me of the Amazon play, right? If you are in the CPG space at all, or if ever dabbled in it and you look at Amazon, I compare that to kind of car gurus where you've got all these listeners selling, you know, let's call it the same item or similar items. And it's who can get down to bottom dollar. But eventually they get to a point where it's like, okay, well this person can raise their price a few dollars here and then everybody else raises theirs. And I don't really feel like that's going to be great for the consumer because there's no longer going to be deals to shop for. So then we talked about brokers. What's their role then anymore? IgniteUps.ai: Well, there's that, you know, 'cause you know, True Car for the longest time, made you wanna just, you know, or encourage you to discount your your cars or else you wouldn't get at the leads. And so that was like a knife fight to to the the end, right? Everybody was discounting just to get the customer. but You know, if everybody's on the same playing field, then everybody's just gonna have to, you know, price their their to the market and what the market is showing. So I don't I I don't necessarily think that people will just lose their margin. I think it on the the the opposite's gonna happen. I think if everyone's on the same playing field, people will actually make more. What do you think, Dennis? Dennis: I I don't know that I can sign off on the on the make more. I think what we're gonna see is it's gonna be normalized. You know, so the dealers that were playing more of the straight up game, their I their margins probably aren't gonna increase, but their gross certainly is. And the guys that were playing, you know, these games, they're gonna see their margins fall and ⁓ probably their gross fall with it. So I I think we're gonna see a flattening of the market. and and dealers are gonna have to get back to, you know, what's your unique selling proposition? You know, mine was this kind of streamlined ⁓ you know, back in where I could keep my cost low and deliver that onto the consumer. you know, if if yours was I can underprice things on car gurus so that I can knock it up when you walk in the door, ⁓ take six hours of your life and then jam you into a contract, that's not gonna be so unique anymore. and you're gonna have to figure out a better way to do it. But you to to Zach's point, I I actually don't so much mind, you know, the the lift kits and that sort of stuff getting added. You I always wonder why Toyota doesn't have a TRD exhaust on every super that goes out. You that's how the the semi custom home industry works. You know, you want a a different faucet or you want a new door on your house, ⁓ they charge you retail plus, you know it, and they roll it into the loan and everybody's fine with it. And, you know, I I think that's a legitimate way to do it. I I don't that that that that doesn't shock me. I the customer knows that they could get it cheaper, but it's a convenience and they can roll it into their loan and it's fine. Zach Fritz: Mm-hmm. IgniteUps.ai: Yeah, and that that part I don't mind so much. I think it's the the the weird warranties that I've seen on some of these these addendums that I just, you know, I it I just would don't really agree with. but then I I look at where I think you'll see it kind of flatten and they won't make money is those dealers that have been unethical or not necessarily unethical, just not disclosing anything. I don't know, you take your pick which one you want to use, which term. But specifically in Florida, when you see dealers that the dock fee just ranges so You know, I've seen some I dock fees at like fifteen hundred dollars, some at eight hundred dollars. And it's just I think if anything, that's gonna kinda normalize either gonna go to the same number, ⁓ like it does in Texas. Like once you can get to two twenty five two fifty based on your volume you get there and every dealer get tries to get there. but you you're capped. You can't get go over that. But then in Florida and even like Oklahoma, I don't I don't know that there is a real cap there. So I think if anything, that's where some of that margin compression will happen because now that everyone has to disclose it, it's it's not it's not gonna be as ⁓ exciting you you try to hide it going in. Zach, you look like you have something on your mind. Dennis: No I Zach Fritz: I So just thinking to myself, if kind the bad dealers start to go away and, you know, everybody's just upfront and honest and fair, does that mean there's going to become a serious lack of content available for calling dealerships on the phone and exposing bad behavior and making catchy thumbnails and titles about it? That would really be a IgniteUps.ai: I I don't know that that ever goes away. I think if everybody turned into Carmax maybe, but I just don't I just don't see that happening. Zach Fritz: Mm-hmm. IgniteUps.ai: sounds like you got you got a sore spot for somebody, Zach. But I know Dennis, maybe Dennis can get l have some insight there. I know you had a conversation with ⁓ delivered here recently. and I, you know, I actually personally I think what he's doing is kind of cool because I it's brought to light what a lot of these dealers are doing. And it's it's crazy to me when I see some of these salespeople talking to ⁓ Dennis: Yeah it IgniteUps.ai: him and trying to be, you know, the bravada that they have, knowing that they're still being recorded. it's kind of wild. Dennis: Yeah, well, I mean, I you know, where to start, right? I I think, you know, from a a hundred thousand foot perspective, as an industry, I I think internally we like to see ourselves as a little bit precious you know, the the good people fighting the fight. Externally we're seen as, ⁓ you the the people that are just lighting our pockets. And you know, quite frankly, I'm a pilot and I in Tucson. And if the best way to have a private jet on the field is to own a franchise dealership. So ⁓ You know, pr pretending like this, you know, isn't shoveling money in many instances is really disingenuous. So I think we kind of have to start from that framing of, you know, the consumers are already skeptical of us and they have good reason to be skeptical of us, right? We're not the victims here. and then when you watch somebody like Tommy, you know, go through this ⁓ you know, you see him call the BDC, who claims to be sales, and then they pass you off. And then somebody in pseudo sales or whatever gets the phone, they have no idea what you just talked about. You start over again. You're trying to get prices. All they want you to do is come in. You know, your presence is your power. Everybody internally knows that that's marketing junk. We all know that that's wrong. you know, so you're just you're just putting the customer through all of these unnecessary hurdles. And the fact that nobody can seem to want to give customers a dual lane to buy a car. Right. There's some people that want the Carvana experience. I know what I want. Give me the numbers. I'm gonna send you the wire, ship me the car, we're done. There's other people that, you know, I want a laser light show, I want to show up with palms waving to me as I walk in as the champion. they want both and nobody can seem to offer them both. So I think until we we get to that, you know, sort of level where people understand there's two lanes and we need to figure out what customer wants what, we're gonna keep seeing these these videos online and ⁓ you know, this kind of kind of craziness. I don't know that I quite answered the question, but that was my own rant. IgniteUps.ai: I think it's true. I think look, I think they're they're providing a service. Initially I was always the guy that and that and I had to write a a post recently saying that I was wrong. Like I used to say, man, there there those dealers don't exist anymore. Like we're all we're you know, I know a lot of really good dealers. We're doing good, you know, doing this for twenty-three years. But then he started I started watching some of his stuff and I'm like, man, this is eye-opening. I was I was shocked at how bad some of these conversations were, and I was just like, it's it's crazy. I ⁓ but I even I've even commented on some of these guys' posts and saying, well, I think the people that keep this narrative alive are the reason why people have this, you know, negative affliction towards car dealers. But reality is no, it's because you there's a lot of people out there that are doing things that are just not as ethical as you could you could be. Like I I don't know why, like you said, there should be at least two lanes and at the very least, just have the one. name. Just be, you know, tell people what the price is. It is what it is. If you don't want to move forward, let's let's see if we can find you another pri vehicle in your price point. Zach? Welcome to America. I mean that's that's the name of the game, right? Dennis: Yeah, well, you know, you always hear, Well well, I'm gonna get shopped. I mean, welcome to America, yeah. Yeah. I I it's I i th there's that kind of precious attitude that comes in and you know, yeah, the people it's the internet. IgniteUps.ai: I love that. I I love what you just said there. That it's that precious attitude. And you're right. I really I really believe that. Dennis: Yeah. Yeah. Sorry, Zach. Go ahead. Zach Fritz: ⁓ you're good. I don't know. I take a different approach with it because it ties back into what happens whenever everything is level and even. You know, in my opinion, it becomes a participation trophy for all where everybody is equal and everybody has the same opportunity to win a customer and it's going to come down to who has the better coffee and donuts in their, you their room. And I just, I look at it from the same lens of If we don't have competition and there aren't, you know, let's say bad actors and consumers just get lazy and no longer inform themselves, you know, how many people do you think actually read the manual in their car these days? And then they come into the shop and it turns out to be a, you know, normal condition of operation when the technician wastes an hour of warranty time to diagnose it doesn't get paid. It's most. IgniteUps.ai: I I think you're right to certain point. Let me tell you, when this g ties right back into this FTC thing. Then why would the FTC send ninety seven letters to dealer groups? Not just like ninety seven stores, ninety seven dealer groups. And if you added how many stores that was in a collective, it it was a pretty big number. I I I didn't get the exact number specifically, but Zach Fritz: Hmm. IgniteUps.ai: They were like major dealer groups. It wasn't like like a mom and pop type deal. This was real real stores. I know ⁓ Dennis, you kind of like had some insight on that letter. What what what was your take on it? ⁓ Dennis: Yeah, I've you know, obviously I've read the letter, I've read the settlements, you know, I've I've gone through the whole thing. You know, it's been kind of interesting to watch the evolution of this, you know, where they started with the CARS Act and, you know, for procedural reasons that got thrown out. And then, you know, like every good administrative agency, they said, ⁓ wait, we have the power anyway, we don't need that. We already have section five, you know, with our unfair and deceptive language, and we're gonna make it mean whatever we think it means, and off we go. But You know, from that part of skepticism, you know, and I I kind of gruffle at at when they enforce this stuff that way. But then you look at what they actually said and what those letters were and what they are alleging. And, you know, obviously the dealers didn't admit any fault to this. But you read this stuff, and I mean, this isn't dealers that were, you know, tacking on a two ninety nine dock fee. ⁓ you know, even though that's not allowed. That's not what this was about. And if that's all it was ever about, we wouldn't have had this. I mean, this was truly about deceptive stuff. I mean, and and frankly, just stealing, outright stealing. ⁓ putting things into contracts that weren't there, you know, burying things in disclosures that should have been right up front. people that truly, truly didn't know what they were buying, informed consumers that didn't know what they were buying, you know, attorneys that didn't know what they were buying. And finding all this stuff out after the fact, you know, I I I I think they're right. And ⁓ you know, if if you go back and you look at like the Lindsay settlement and the Napleton stuff and all that, you're just gonna see this this gross deviation, you from business norms. And you know, really profits at at all costs. And you know, I I hate to say it as a as a former dealer and you know, somebody that loves the industry, but a lot of this stuff is really gross. IgniteUps.ai: Yeah, it and especially when it comes to the fact that it was like they were being deceptive. Like whatever was on the the worksheet wasn't on the actual contract. you know, it reminds me of a story, I'll tell you this, of a an acquaintance of mine. We're having conversations about the some of the craziness that you've seen and or or you've heard in this industry. And he told me about a story about this one guy back in like the nineties or I don't remember. He said this was a long time ago. So I don't I don't know exactly when what time frame this happened. But said that this one salesman was so ruthless he was he would tell him like, Hey, look, this vehicle, I'm gonna go and get throw in the warranty, this and that. And then once the customer got the contract, there was a a three thousand dollar fee for a warranty. And he said, wait a minute. You told me you were going to give this to me for free. And he said, No, no, no. I gave it to you for free, but I had to put it on the contract to make it look like it was there. And to when I heard that, I was like, I couldn't believe that someone one had the like the just the courage to just be completely just dishonest like that and then one to get away with it. Like I I just ⁓ it's it's shocking to me that there are people that would go to those lanes to do things like that. Zach. You look like you wanted to say something right there, sir. Go ahead. Zach Fritz: No, it's just there are 100 % highly deceptive people in the industry. mean, it's always been that way, but I also challenge, have you ever bought a house? You ever bought anything else? mean, you ever bought produce in the grocery store where they say it's organic, but it's sprayed with 10 different kinds of shit? I mean, every industry lies. Every industry has bad actors, but why are we? IgniteUps.ai: Does it but does it make it right? Does it make it right? Well, because I could tell you the same thing happens at Target and Walmart all the time. My wife, if I go into the store and I try to buy something, she says, make sure you use the app. And I'm like, and I was like, Okay. So you'll be you'll be surprised how many times you use the app and online it's cheaper than it is in the store. And this is at any retail establishment anywhere, which is but you know, and I get your point, you know, automotive is put at a different level. and I think it's because you hear it the most. And that's, you squeaky wheel gets the greed. Zach Fritz: That's what I'm saying. Yeah, I don't disagree with that. I struggle with a government agency getting so involved in car sales. That's really where I start to struggle because Why are we seeing that happen? What's the long-term push there? Especially when it comes to the FTC and everything else that goes on. IgniteUps.ai: Well, I I don't disagree. I think and maybe you can shed some light on this, Dennis. You know, dur during the C F P B era, I remember them fining dealers you know, because they weren't, you know they were like they were bas they would base it on discrimination lending practices, right? And you would see I think Toyota was one of the ⁓ companies, Wells Fargo, there's a lot of l lot of lenders that actually I think got fined at some point. I'll have to go back and research. But what what I didn't like about that, because I had the conversation with the lender and they said, well, you know, you have, you know, African Americans, Hispanic, Asian, and all these, and these people you're actually charging higher interest on. And I go, okay, how do you know that? And so, well, based on zip code. And I would look at some of these zip codes and I'd be like, Well, I'm Hispanic. I don't live in this zip code, but because I'm in this zip code, I'm considered white. Like I I just didn't understand their methodology that how they would come out about charging dealers or fining them based on you know discrimination. And you're looking at them like, well, I and I looked at a lot of these zip codes that they stated, all these are predominantly Hispanic communities, or these are predominantly African American communities. And I would look at ⁓ like it just it just wasn't accurate. And I'm and you would see different other cultures like Indian and and Asian minorities. for whatever reason they paid even less. So, ⁓ know, and then you start thinking, well maybe it's more of the culture thing where, you know, some cultures just negotiate more others. And and you know, I I don't know. ⁓ What your thought on that whole C F P V Era. Dennis: drove me bonkers. because that that you know, the disparate impact fishing expeditions, you know, I thought is is really what they were. You know, the disparate impact idea, I'm gonna get a little ahead of my skis here. Now I have to go back to my bar prep work, you know, remember them all my constitutional law stuff. But you know, that comes from figuring out protected classes and laws were facially neutral. So you'd have a law that was facially neutral where you said, well, it doesn't discriminate against anybody. But then they look at the data in aggregate and they say it has a desperate impact. And then they would start hooking laws that way. And you know, so they're applying the same kind of logic to ⁓ know the the lending world and saying, well, if we can show you know the numbers in aggregate, then somewhere, somehow the puppeteer is manipulating these things. You know, rather than what you said, where you know, instead of simply basing you know on on the basis of somebody's skin color or sexual orientation or some other protected class. It may be cultural. It may be there may be other reasons and it may just be statistical anomalies. Who knows? And the fact that they could make, you know, these kind of crazy cases out of whole cloth, no, that that drove me absolutely bonkers. I'm really excited and happy to see that they've done away with that. hopefully too never return. IgniteUps.ai: Right there with you. I hope they never return. But then you think about what today's administration you hear they have an AI czar, somebody that's really into that AI space is is f best friends with, you know, Elon Musk and all these other people that are in technology. And think about how easily they're incorporating technologies in our government. The dealers today that just are not afraid to, you know, price their their cars a certain way, I think are going to be in a rude awakening sooner than later, because you know, they didn't need a CFPB, they didn't need any of these other you know, agencies to after dealers. And now with technology as is easy as it is to create, I think from an auditing perspective. Perspective, I think dealers are gonna be in in in for a rude awakening. What are your thoughts on on the that that angle, Dennis? Dennis: You know, so it it's interesting because, you know, you and I are are actually we're both in tech. I'm an electrical engineer by my undergrad and I've developed all of the software for my dealerships. I continue to develop software, you know, I'm working with the frontier models every day. And I talk to dealers, you know, as I'm sure you guys do, about the different AI stuff. And they all seem to be in disbelief because ⁓ it's not that good. It's I got a chat bot that does this. But as we know, you know, we're dealing with the frontier stuff that's really pushing the edge. They're dealing with, you know, Gemini two point five flash that doesn't know anything. And so we're like, yeah, you know, you're the stuff you're seeing is already a year and a half, two years old. And, you know, just wait until we get there. So it it seems like there's kind of two conversations happening where we talk past each other. So I would just say to the dealers, you know, that have a skeptical eye on this, and you know, I tried a chat bot once and it didn't work, and these things are stupid, and they don't know what they're doing, and they're certainly not gonna be able to audit me and come through and look at this stuff in mass. you you are deluding yourself. It is it is coming quickly now. It can be used for offense, it can also be used for defense. You know, I think that the biggest thing today is you need a comprehensive look, which is what you I'm trying to do with Lotlaw, a comprehensive look at what your compliance strategy is. You know, does your social media match your pencil, match your addendums? Does it, you know, is can you tell a coherent story front to back? And that is one of the things that AI is going be really good at helping you with. So I don't see it so much as a ⁓ sword, but a shield that can really ⁓ work well for your particular store. IgniteUps.ai: You know, and I I'm I'm interested to learn more of what about what your technology is, because I do know from a compliance standpoint, a lot of dealers just aren't there. They they bought a couple of compliance tools back in you know, last couple of years that were hot on the market, but they feel like to that extent that they're safe. How how deep are you doing your analysis when you when you you get these generated reports for dealers? Dennis: Well, so right now I'm trying to figure out where the dividing lines are, you know, where they need help. You know, do we need safeguard audits? Do we need deal jacket audits? Do we need social media and advertising audits? ⁓ you know, where are the lines actually breaking down? ⁓ you know, I can tell you, for instance, I'm doing a social media audit program right now where you know you have your salesman log into TikTok, for instance, you know, do a OAuth API back to my service. And then every video they post, I then send off to Google for Translate. I take a screenshot every five seconds, scrape the screenshot, scrape the description, and start looking for, you know, are they using trigger words or you're or certain things that would in implicate trigger words? you know, I came across a guy the other day, salesman, I felt bad, he was trying to do the right thing, but he was making a raffle for anybody that came by to test drive a a truck to get a Rolex. And, you know. That that that is just begging for the attorney general to come storming down your door. You know, and dealers don't know that this stuff is happening. So you really do need a comprehensive, you know, look at this stuff, I think, from end to end. And so, you know, I just started this, you know, frankly, six weeks ago. as as Tommy was ⁓ sure to remind me, you've only been doing this for six weeks. I mean, I've been living dealer compliance for 20 years. but ⁓ as far as figuring out, you know, to your question, you know, how do dealers, you know, look at this? It's an ongoing question. It's still an open question for me. ⁓ but I think you know, we're we're getting there and we're trying to figure out where the where the bounds are. IgniteUps.ai: I think you you hit a really big subject. ⁓ there's a lot of people on social media that wanna become, you know, Facebook famous, that are ⁓ saying things about their dealership, pricing, rates, that on on their forever. And you know, ⁓ what point does the you know the ⁓ the government go and start auditing some of these videos and now that the technology that you have exists where they could audit every Facebook YouTube video that is out there, where do they draw the line? Do they say, well, if you've got a salesperson, a rogue salesperson that's out there advertising, you know, $100 payments with zero down and you know zero percent, that's okay because it's not on your main site. Dennis: Well no, that that is definitely gonna fall within the purview of yeah, that that you you've yeah, you've got some guy out there acting rogue, but he's still acting on your behalf. He's still your responsibility. That is absolutely gonna come down, you know, on the dealership for allowing that and not policing it. So, you know, you like I said, you you need a a comprehensive system, you know, to to look at these things and make sure that these guys are staying within the guardrails. ⁓ because, you know, like you said, they wanna make, you know, their whole TikTok famous, you know, have a a dealership essentially within a dealership. But ultimately it's gonna fall back on your license. it it is something, you know, you've you've really gotta, you know, have some kind of system in place to pay attention to the stuff. IgniteUps.ai: The other thing I wanted to ask too is because you have a lot of these salespeople and just people employees at stores that are negotiating with customers on on the phone, and you're they're he you're hearing the customer's voice and they're not trying to like tell the customer's name, but they are you can hear their voice. At what point does having to mask the voice come become even more important as well? I mean, could a customer come back and sue the dealership because this salesperson recorded the whole conversation without telling and then didn't disclose the name, but they did have their voice and people some people could hear that voice and determine that it was them. Dennis: Well, I will put a pin in this and and a disclaimer for everything, right? I'm an attorney, but I'm not your attorney. This is not legal advice. and I can only speak generally on this. You know, this isn't a a topic that I know terribly well. I've done a little bit of research into this, but in if you are in a a one party state and the customer reaches in and calls you, it's this call's gonna be subject to your laws. And so there really wouldn't be little wrong recording it and letting it out. now, broadcasting is a different story. So you'll see on the lives where people are broadcasting, there are different laws that have governed, you know, people that were put on, for instance, you know, CBS national, and they didn't know that they were and they got made fun of and ridiculed and all that stuff. So the candid camera stuff has has always been allowed to go on you know, within bounds of you know, name, image, likeness and how to control that. but it it is something you have to be careful of. And I would definitely encourage if you are a dealership that's doing lives, ⁓ especially with customers that don't know that they are on it. Absolutely talk to your local attorney and figure out if that's allowed in your area and you know what the national implications could be. IgniteUps.ai: Yeah, 'cause you're even seeing some of these guys with their their meta glasses ⁓ these conversations with customers while they don't even know. And yeah, they don't tell ⁓ their name, but you definitely see their face and hear their voice. Dennis: Yeah, and and I'm sorry not to interrupt, but you I I forgot too that, you know, obviously if you start getting into any kind of financial stuff, even the fact that they are financing, you're implicating a lot of safeguard stuff at this point now, too. you know, what what what is your compliance strategy for that ⁓ you're leaking it on the internet? it it's it's a lot to to worry about. You know, that's why ⁓ you know, the safer route is to tell the customer you're doing it, record it, then have some sort of compliance. It doesn't have to be an attorney, but somebody that knows at least what they're doing and make sure that you know, you're not putting it out there in a way you don't want. Which I I think is always good business strategy anyway, right? I mean we should know what we're putting out there. IgniteUps.ai: Hundred percent. Zach, what what what are your two cents on that? Zach Fritz: wholeheartedly agree. There are reasons why I do not make certain types of content because if it were to sway a certain way one day it could come back and not be a very pretty sight and I think a lot of people just they kind of they skirt the line and sometimes they may dip a toe over but damn I don't like getting that close to it it's just a dangerous IgniteUps.ai: Yeah, no, it's it's it's an interesting time to say the least. When I think about all the technology I mean, we saw what happened recently with Mythos, the the Fable Five, and basically they released that for Claude, They shut it down within a week because they were able to break through NSA within seconds and AI just went in on their own and did it. which I found fascinating when I read that article. But you know, when you see these types of technologies, how how quickly they can literally just, you know, run through the whole internet, find data, audit. mean I think dealers really need to understand the the times we're in and they should be really trying to figure out how to, you know, make sure that they're at least pricing their vehicles 'cause, know These a lot of these videos and and things that they they promote are on on the internet forever. It's not like it's something they can go and just scrub out pretty quickly. but they've got to be careful what they're saying, how they're saying it. it's just ⁓ definitely times. But Zach, we one article I thought we were gonna kinda go through to kind of jump to this new subject. And I I'd I'd love to hear what your your opinion on it was. There was a guy that came out recently a technician standpoint and he was really of breaking down how much dealers make versus what he makes. And wanted to get your your take on that that article. Zach Fritz: You know, are going to have a very different ⁓ here, I'm sure of that. But from a technician standpoint, I mean, I can understand a dealership is going to take on all the risk in buying the building, buying the inventory, with a credit union, a bank, whatever, hiring salespeople. I understand that. They're also floating the insurance policy, the shop, and most the lifts and equipment. But at the same time, it follows the same analogy of the boss makes a dollar, I make a dime. It's a very unbalanced equation. when you look at a dealership and you look at the hours that technicians are supposed to run, how much stuff gets goodwill by service, and then technicians get screwed, and then dealers want to come out and bitch and say, well, we don't have enough techs. I wonder why. And then you're going to have no service department. You expect robots to catch up in the meantime, that's not going to happen because who's going to service the robots? Probably a technician. IgniteUps.ai: There's gonna be there's gonna be other technicians. But Dennis, just to give you s a little bit more context on this this article, and it was really a breakdown of some YouTuber that did a really good job, but he went through ⁓ he just gone through NADA's earnings or release of whatever ⁓ however dealers get paid on labor sales, how how they pay their technicians, all of it. And so what he came to the conclusion was the technicians are thirty percent of that cog the dealers make the the the rest of the the margin when it comes to charging customers. I think we're you know good for the dealer to to to make the money he's making or her she's making but you know ⁓ ⁓ is that crossing a line I I don't know that thirty percent is know unfair. I I think you know the market dictates what people get paid and I I don't know that you know if dealer can make more money, God bless him. What are your th what are your thoughts, Dennis? ⁓ Dennis: You know, I I don't know the warranty side of this terribly well. You know, I know the independent side very well and where the dealers have to compete with the independent shops. you know, and you got these you know, in my area, you know, in in Arizona and especially in Tucson, you we're not exactly ⁓ the biggest metropolitan area. And I don't know of a good tech that isn't flat rate making six figures. I mean, they there's just a lack of of people in the industry right now. If you're a good body guy, you call your shots. there's there's just nobody out there. So I I I would assume the dealers are are experiencing kind of the same sort of crunch. You know, I know that in the independent repair space, you know, oftentimes they don't like dealer techs because, you know, the dealer techs just tend to read books and throw parts at it and see what sticks. ⁓ I'm sure I just angered everybody out there, right? But ⁓ IgniteUps.ai: Hey, no I'll tell you. used to say that about my body guys because I would go, man, when do you guys you guys never even like repair bumpers anymore? It's always let's replace it and and fix it. I'm like, it's never like Bondo or I mean you guys just wanna replace the part and let's move on. So yeah, no, I get that. ⁓ Dennis: ⁓ but but you know, to your to directly to your question, you know, I heard of a a dealer, I think it was an Audi dealer in Santa Monica, that's charging 420 an hour or just some crazy number. You know, and I'm sure that tech is not being paid, you know. I mean, what would be the equivalent flat rate of that? You know, 150 an hour? I there's no way. So I I I am sympathetic a little bit that they're bringing in a disproportionate amount of value. you know, but I would say that given how few techs there are, you know, that are worth anything. ⁓ if you're a good tech and you know, that you can really call your shots to. So you know, I I would say, you know, use your advantage, you know, don't ⁓ stick with the same guys if you think you're getting messed over because I'm there's there's somebody that's definitely gonna pay you what you're worth. IgniteUps.ai: A hundred percent. And y and just just to kind of put sh some light on that, I I read a a study once ⁓ somewhere where the people who move frequent in their their career tend to make more money. So if you if you're a tech that's been there for twenty years you may want to look at go and I you know I'm I'm not trying to like encourage you if you're happy stay there but if you want to make more money you you're more likely to make more money if you move to a different store. and they may because of your experience pay you even more than you thought you you could be paid. So I do think that you know you're right, Tex. I thought this guy missed the mark on it. I think, you know From a a from a consumer standpoint, I could see the argument that maybe the the rates have gone up, but you know, what I've seen in the marketplace, we've been paying techs even more money. So I don't I don't know that the the data was a hundred percent w where he was looking at, but I can just t tell from my experience and maybe as a whole in these rural areas, maybe. but you know, in the bigger cities, I think it's a lot more competitive for sure. Zach, you wanna you got that little look on your face, man. I wanna you know, you you kinda wanna jump out at it. Zach Fritz: I don't know. Yeah, it's interesting. I, looking at it and have lived it, I agree with what you're saying about moving around. The thing that I found and what ultimately got me out of turning wrenches and onto, you know, ADOS and calibrations and, you know, developing, you know, tech and whatnot. That's really where that wouldn't train their guys, that's the big problem in the industry because with every sir, it usually comes an extra dollar an hour flat rate or whatever you want to equate it to. But the other thing that I challenge is, that proportionate? Yes, we're paying tax more, but is it in proportion to how expensive everything else has gotten? Because from what I've seen, it's not. Salespeople make more than tax. That's the issue. No matter how many cars. IgniteUps.ai: Sometimes. I I well I'd say twenty percent of the staff might, eighty percent of that staff isn't making nearly ⁓ what techs are making. I can tell you like from a sales standpoint. Like those salespeople it's the eighty twenty rule that you know, twenty percent of your staff, you know, makes big money in sales, but the eighty percent of just just aren't. It it just it is what it is. But hey, ⁓ we're we're coming ⁓ to an end now ⁓ and know I I d ⁓ definitely thank both of you guys for jumping on today. But before we we close this out, you know, understanding everything we kind of talked to and I think we could have even expanded more on some of the the the the dealer groups you talked about that the Nissan dealers specifically that got fined getting audited right now. and FTC and all I mean there's just so many things happening all at once. What do and I'll start with you, Zach, what do you think dealers could do today to help them, you know, improve and and basically just win their Zach Fritz: I think a big part of it's education. It's education, it's start to become more transparent and understand, I mean, they're becoming fewer and fewer places to hide these days. And so, yeah, you need to start the herd, culling your employees and figure out what's get me through this and also get me to that next level and how do I become a a dealer that's providing the education. keeping everything in line with incoming regulation and rules and audits. And then also, just be more transparent. Because you're gonna get called out. There are plenty of people making- IgniteUps.ai: Yeah. Yeah, with social media the way it is, it's it's I I you gotta be careful about those people that can't wait to put you on record. Dennis, what do you think? Dennis: Well, you know, I I I've talked I've spoken to a lot of good dealers 'cause of course the dealers that contact me are the ones that wanna be good, right? So I don't hear from the ones that wanna pull their shenanigans. and the ones that wanna be good, you know, they're they're really scared. And I think that they need to tone it down a little bit. You know, I think Chris, as you said earlier, and it's absolutely true, the squeaky wheel here is gonna get the grease. And, know, if you're the guy who's really trying to do it right, you have processes in place, sometimes you slipped up. You you can read in what these auditors say and what they write. I mean, they are not ready to slam the hammer down one or two mistakes. You know, if your social media guy has a car that's posted for sale that's been sold, you know, it's not a bait and switch. Everyone's not going to jail. We're not getting FTC letters. You know, perhaps if somebody actually saw it, you might get a a warning or some I mean, ⁓ even just a a ⁓ thought on it. But, you know, don't don't get overly wrapped up in that. But I would say to everybody else, you know, it's gonna be about creating one cohesive story. I think if you can create a story and you can say, you know, from the price that I put on the website that my salesman said to the time that they walked in, to the time that they, you know, got the first negotiation, to the time they signed the buyer's order and they got the retail salesman contract, this is all a cohesive unit. There wasn't, you know, things being added, weird things being thrown in. They weren't surprised. It's all part of our same story and we tell the story every time. You're gonna be 99% of the way there. IgniteUps.ai: Yeah, I I agree with you. I think we need more dealers like that. ⁓ unfortunately there there just are for as many dealers that are trying to do it right, there's still that many trying to cut a corner, they're just not listening to what's happening in the marketplace at all. and I think that the whole transparency, like that's just That's just what it it should be. because now with AI answers and all these different, you know, there's I think it's like a billion users a week on GPT, and asking questions and if you start popping up as the the the dealer to avoid, you you've got some some pretty big big problems there. but I as as long as they've got technology and and you know, people out there trying to take care of them. It's all about how how they're hiring people because the worst thing, because I've seen some good dealers have the wrong hire that cost them a fortune because they did some craziness. and believe me, I've had to let go of several people because of some of the shenanigans that I heard they do. so you you've got to be careful on on how you're hiring people, especially in today's market, as people do tend to, you know, hop. But Dennis: I I couldn't agree more. You as I said to other dealers, you know, ⁓ you know, your compliance story now may be fine, but the turnover is so hot and heavy, you can find yourself on the wrong side of it quickly. IgniteUps.ai: Yes. that that's that's the end. I this was this went by really quick. thank you for jumping on today, Dennis, Zach. As always, it's always great to have you on on and working through ⁓ the pros and cons of things. ⁓ I like how you know you you're my sounding board when I try to reach out and think, am I doing am I looking at this from one lens or let me let me always hear a different perspective? So thank you for being here today. But guys, if you could please share, like, comment, subscribe. We're gonna posting this out. But Dennis, I will send you a video here afterwards that way can have it and you can share and do what you what you want with it. But tune in every week, everybody. Thank you guys for jumping on and look forward to next week. Zach Fritz: you. Dennis: Thank you.