The Profit Squeeze: 5 Costs Dealers Are Reducing — And Why It Matters | Donald Kemp, General Sales Manager at Stowasser Buick GMC

Instead of looking at everything from a relationship standpoint with everyone, we kind of did the more aggressive approach and said,

Hey, look, this is what, you know, we could be paying elsewhere.

We want to keep that relationship going and really did our research on what the other people in the market were paying for the same kind of services

and refining that process.

So how are they charging?

Today, I'm joined by Donald Kemp, General Sales Manager at Stowasser Buick GMC.

Margens are tight, valuations are moving fast and dealers are being forced to scrutinize every dollar that leaves the store.

Donald breaks down how he's cutting vendor blow, turning used inventory in 21 days and moving the FNI conversation up front to drive higher penetration.

This is a grounded operator level look at what actually works when the market stops being forgiving.

A big thank you to our sponsors for making this episode possible.

Experian Automotive, Privacy for Cars and Nomad Content Studio.

And now let's get into the show.

Donald Kemp on the CDG podcast, calling in from sunny California.

Donald, welcome to the pod.

Hey, good morning.

Donald, what's new?

How's biz right now?

You know, we've been pretty consistent.

It's we have not had a big jump in business so far this year.

Tax season's here.

Usually we kind of see a bigger flow of traffic than we have, but overall, it's been steady.

I'm hearing that a lot, although I will say that the sentiment at NADA was expecting a flat to down year for many dealers.

So if anyone out there hears this and thinks differently, you know, give us a shout, let us know.

But that has been the sentiment.

So we'll see.

We'll see how it plays out.

You know, I did something fun before the beginning of this podcast.

I haven't done this before, but when I was doing some homework on you and your dealership at Stowasser.

I actually put it into a lot GPT.

So you may have heard me talk about this tool.

It's from Lotlinks.

It's sort of like a dealer centric LLM long story short.

So I asked it.

I said, Hey, a lot GPT.

Tell me about Stowasser Buick GMC through your lens.

So it's pretty cool.

It gives me objective insight into what is going on there.

So I said a couple of things.

It said you're running roughly a 70 30 split newly used that oscillates.

Which I found interesting.

It said that you have relatively low lot days or days on lot for your used inventory at about 21 days.

Is that right?

Yeah, that's about perfect spot on.

Okay.

And then it's get this.

It said you're pricing your used inventory around 92% to market.

So roughly 8% below market.

So there you have it.

That's a lot to be.

So I'm coming here well informed.

Donald, you can't BS me today on the pot.

Not that you want.

I love it.

No, I'm not.

I love that.

That's great.

Did it.

And that's through.

What's the name of the platform you use?

That's through lot GPT.

I've talked about on the pod.

We'll put it in.

It's from lot links.

We'll put it in the show notes below for anyone wants to check it out.

It's free.

So tell me, Donald, like what is the let's just start there, right?

You're GSM at Stowasser here on the West Coast.

What's your strategy right now for for used cars?

What are you doing there?

Well, I think, yeah, in all of our group meetings, everything we've been

discussing, I think our overall goal right now is to turn, try to build up

our inventory and turn as quick as possible, especially with the influx

of the market.

I'd say the way Kelly Bluebook and everything's jumping up and down.

So that 21 day turn is very important.

That's that's kind of our goal right now is getting in price

competitively and try to just turn as fast as we can.

When you say Kelly Bluebook is jumping up and down right now.

What do you really mean by that?

What's your perception right now?

What's happening to valuations in a market like, you know, versus

how it's been historically?

Yeah, I would say right now, at least from my experience, what I'm

feeling is that our pricing that we were setting out is competitive

initially, but the book has been going up and up and up.

So right now at auction and everything else, we're having a hard time

purchasing vehicles at what we normally buy them at.

So we're having to pay a little more for the vehicle because the values

are just going for that at the market.

So on Kelly Bluebook side, like we buy a car last week and then

the next week it goes up.

Whereas normally we're seeing it go down right now.

We're seeing a lot of just, I don't know.

I would call it like volatile.

It's just, I really can't predict necessarily what's going to happen

with the values.

Now, are you mostly, you told me actually pre-recording that you're

doing about 80 used a month, roughly retail.

Would you say that's, where do you source these vehicles mostly?

Is it mostly auction or off lease?

Like what's your mix?

Yeah, our mix, we're pretty heavily on the auction right now.

Ideally, we'd like to get more out of, you know, customer acquisition

like getting it off the street or through service drive.

So our mix right now is probably, I'd say probably about 70% auction.

The rest is just us getting in trade-ins and trying to, you know,

get creative through like social media and so forth to get off the

street purchases.

And what do you, what are you acquiring nowadays in auction?

Like what type of vehicles are you after?

You know, I am curious how it's impacting your margins.

Many, many people are in your shoes, right?

It used inventory has never been tighter.

I should say quality used inventory has never been tighter.

Right now in our market, since we're, we're on the central coast

and we deal with a lot of agriculture and so forth and we're a GMC store.

So we are really heavy in trucks and SUVs and that's kind of what

we tend to shoot for in the auction, but finding quality ones, you

know, that's the challenge most of the time in auction.

So I know you have a lot.

Yeah.

I know you have history in the FNI office.

You were, I believe previously a FNI director for five years or so,

or even more.

We'll talk about a little bit about, you know, what that means and,

you know, what you're seeing there.

Tell me about just like, how is general performance?

How's gross holding up?

So right now, again, with that, the goal in mind right now, where

we're pricing things heavily competitive in the market and having

to pay a little more to auction, our grosses, I would say, overall

have decreased on the front end.

So we're just having to, you know, move them a little quicker, but we've

put a lot of emphasis on trying to make as much as we can in other avenues.

So whether that's through the service drive or through our finance

department, that's where we're seeing the majority of our gross increase.

So it's kind of balancing out.

So tell me more about the finance office.

You spent many years in the finance office.

You're still tangential to it now.

How are you seeing performance in FNI office trend?

Like, what can you tell us about that from your perspective?

Yeah.

So from my perspective, I think finance plays such a vital role, especially

in sustaining profitability overall.

I really put a lot of emphasis in the very beginning when we kind of

transitioned to more of the quicker turn, more competitive pricing, that we

were going to make sure that we're offering every product to every customer.

I'm really educating the consumer on those products.

So our penetration on service contract is about 70 to 80% on average.

But we've done a lot more focusing on gap and the other products that

necessarily weren't always, you know, pitched as heavily, I would say.

So right now we're educating the customer on the full package, which

seems to be working well.

So going through that process, we've increased all of our penetrations

and back in gross is the highest it's been.

So let's break that into two pieces.

So first of all, you mentioned the process, right?

Every product.

I've spoken with some dealers that have issues with that or just

inconsistency with, you know, mentioning every product.

What is your, like, how have you architected the process in your

store to make sure that happens, to maximize gross?

What have you done?

Yeah.

So I've taken a lot of time to make sure that every sales associate or anyone

that's at that point of contact with the customer from the beginning, we

made sure that they're all fully educated on the product and, you know,

the value it brings to the consumer.

And so when we're presenting numbers and going through it, we always give

that option up front in the very beginning.

So in the past, I think the old way of doing it was, you know, hey,

we closed the deal, bring the customer into finance and the finance guy's

going to now take a shot and go over everything.

So we change as we do that all from the very beginning.

So from the moment that they start the process, we're discussing the service

contract and the cert, you know, discussing all those options.

And so that's been really successful from our, and just making sure

that the sales staff is all fully up to par and knows what the benefits

are of the products.

So you're presenting the products up front.

How early in the process are we talking for your store?

I have the sales staff to start talking about it immediately even

before we go over numbers.

So they start bringing it up at points of the sale.

So, you know, maybe when they're talking about the coverage of the current

coverage of the vehicle that currently has at that time, they'll talk

about, Hey, you know, and also there's different options, you know,

where we can extend out that coverage for peace of mind.

And how is overall like, how would you say performance has been for you?

I mean, I, I can, I can imagine you've been doing this for quite a while,

but I'm just curious.

You mentioned earlier a stat on back end.

So right now I'm at 70 to 80% on average, at least for service contract.

But generally speaking, yeah, even, even with any of the other products,

we're probably right around that 70% or so.

I saw that increase when we took that step.

So to make sure that the sales staff was educated on it.

Cause in the past, you know, I think most dealerships across the whole country

probably have their sales people pitch the product, maybe, you know,

in the, in the pencil or in their numbers.

But I don't know how many of them are fully educated on what those are,

you know, what, what it means and like how the actual product works.

So once I did that, I felt that that made a huge, I think we increased

about 15% at that year that was 2024.

We got, we had about a 15% increase.

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show notes below.

How are you maintaining these, this penetration?

I mean, I think about your market.

It's pretty rural.

You said many lots, lots of trucks.

And so my assumption is maybe a bit higher price point,

a bit older vehicle, used vehicle, you know,

which means a more expensive VSC and just more expensive products

in general, which means lower margins.

Like what's the balance here?

How are you, how are you just, you know, balancing everything?

I just said, how do you think about that in a market like yours?

We have many listeners who obviously sell trucks and many of

them that are in rural markets.

And I'm curious what's your, how you're approaching that,

which is going to lead me into affordability.

But let's just start there.

Yeah, I think in general, I think we were running into issues,

you know, where the service contract cost has gone up

and the price point of a service contract on, you know,

an $80,000 Sierra is high.

And we were running into issues where, you know,

a lot of the lenders weren't able to hold that, you know,

price say it was $6,000 for a service contract.

You know, the lender had a cap at $4,000.

And so we're running into some issues there as far as how to

keep the penetration up.

So we kind of found a balance in just setting a standard price

point for our service contract.

So our service contracts are for $42.50.

So $4,250 is the standard pricing across the board.

But then we let the customer tailor it.

So, you know, if they want to go a little longer year,

you know, less miles or whatever the case may be,

then that's where that price point changes.

For me, I went and I went through every lender.

And I think that's a big part for anyone out there experiencing

this, those kind of struggles, I would say, is just really get

to know the lenders and who you have at your fingertips,

who you can work with.

I found success with Fifth Third Bank.

I don't know if you're familiar with them, but Fifth Third

has a great, they have a great, yeah, so they have a great

backend structure.

And if you do a lot of business with them, that increases in,

you know, once you become a bigger dealer with them,

it really, really helps.

And so we were able to maximize a lot more by choosing our lenders

and who, and how our desk is quoting, you know,

when we base our interest rates and how we set that bar.

We kind of tailored it around, say, Fifth Third or TD Bank,

who all have great back-end programs.

So that's really, I think, a successful, our end.

We kind of stayed away from the credit unions as much and kind

of stuck to that.

I also deal with a lot of itens out here, which I don't know

if you're familiar with all that, but itens are really heavy

in our market.

So that's interesting finding lenders that'll work with itens.

How has that impacted your business, right?

With like the, with like general deportations and, you know,

I presume you're in probably a pretty, like a Latino dominant

market, right?

So like, how is that just impacted?

Do you even feel an impact of that?

Yeah, that's a great question.

It really has been a big impact.

So in our market specifically, I would say it's more of an impact

mentally.

So like the consumer is impacted more than anything.

So a lot of consumers in this market are, you know, fearful

going out, fearful of, you know, running their credit or putting

themselves in position where their information is out.

So if, say, someone, you know, is afraid of, say, deportation

or their family was just deported or something like that.

So our market kind of has been a little slower based on that.

I mean, we're seeing a decrease a little bit in traffic.

I think generally speaking, we're still pretty average,

but it's definitely a topic.

It gets brought up, but you know, almost every day, right?

And how do you, you're not the only dealership that, you know,

is kind of maneuvering this, right?

Washington DC had, you know, the layoffs, so they had to face,

you know, that like there's always some headwind that every

dealer is facing.

In your case, I'm curious what's been your strategy?

Like, has that hurt conversion?

Is it people that are getting to the dealership but didn't just

not executing or are they just not even getting to the dealership

to begin with?

Like, how do you, in your position, solve for that?

We just had a really good meeting with the staff this week and

talked about, you know, what are some of the things that we're

facing?

What are things we're hearing from the consumer?

What are we running into roadblocks on?

I was in that meeting.

You know that.

I was listening.

I was eavesdropping.

Were you?

Yeah.

That's why you need a question.

Yeah.

And in that meeting, we discussed, we discussed it though.

And it was, it was something we did talk about.

And, you know, the majority of my staff said, we're having issues

where consumers are just afraid to take that next step.

So maybe they come out, look at a car, they love it.

Everything makes sense.

But they're like, hey, we're going to, we're going to kind of

wait it out a little bit and see what's going on.

And so that, that's one part.

I think that overcoming that has just been trying to show

confidence in the consumer, to the consumer that, hey, we know,

we know what the process is.

We're, we're going to help you come in, you know.

But on the flip side, I think what we felt the most is just

a decrease in general, like internet leads or people coming

in the front door.

That's what we're feeling the most of.

What was the, what's the takeaway?

Like what's the team doing differently to increase conversion

again?

Just showing comfort, like trying to comfort the customer and,

you know, really make them feel more comfortable.

Yeah, I've shown that.

And again, most of my staff is Hispanic as well.

So they're feeling that same, you know, topic.

It's the topic that everyone's talking about, right?

That seems like, you know, you have to kind of work around that to

make sure it, you know, you mitigate the impact to sales.

I want to touch on another point that we discussed in our

sidebar prior to the podcast, which I found interesting.

You are a proxy to many dealers in the market who have not

integrated any AI tools and have just been on the sidelines and

I've just been getting educated.

You know, I've spoken about this.

Like there's some dealers that have some, you know, some dealers

that have tried and have, you know, gone back some deals that

are, you know, doing a phenomenal job with AI tools and

selling yourself that are still kind of trying to understand.

Tell me a little bit about your thought process.

Like where are you at?

You can only, you can bet you that there's many dealers

listening right now who are in a similar position as you.

So what has been your thought process about, you know, integrating

AI technology in your store and, you know, why you haven't

done it yet?

Tell us a little bit about that.

Yeah.

Well, I'm very enthusiastic about it.

So I love the concept of the integration of AI into everything.

So me personally, when, you know, chat, TBT first came around

and other platforms similar, I was one of the first people

personally to use it.

So I really found it useful.

Ownership.

We're a little bit more of a mom and pause store.

And so I'm sure there's plenty of people out there just like me

who, you know, are trying to educate a generation of people that are

not as familiar with it.

So I've been eager and trying to learn as much as I can on how

the AI platforms that are coming out would integrate with our current

setup.

And it sounds like some of the systems we use because we were

pretty heavy with Cox.

So we use, you know, VIN solutions, a dealer track.

And it sounds like they're based on everything I've heard from

Natta that sounds like they're kind of getting on board with AI

and have some stuff rolling out there.

But yeah, as a store, I think we are excited to get into AI.

I think it's just taking that first step and where we're going

to be utilizing it first, you know, whether that's on the

internet lead side where we have maybe, you know, an AI response

system or something that helps streamline that.

But on so many years, I've heard too, talking about it being

used in service drive.

That's where I could see that being a huge benefit to our store,

you know, learning about that and how that would work for us.

What are your thoughts on that AI?

I think it's generational shift in the business.

I think it's not magic.

It's as close to magic as you could probably get.

I think every store has to solve for different needs.

You mentioned that you didn't make it out to any DA because

you're under resourced at the store.

And I think, you know, that's almost like a perfect use case in

my mind.

I think you need to invest a good amount of time and setting it

up the right way, not just kind of slapping some piece of

software and expecting it to work for you because you have

your own store, your own market, your own nuances.

Like we just mentioned a bunch of nuances about where you are.

You're a pretty rural store.

You're heavy into trucks, you know, heavy Latino.

So like all these things combined, that would impact, I'm

sure, some of the processes and if you want to respond in a

certain language and whatnot.

So yeah, I think, I think, you know, it seems like I'm just

curious, you know, what is the kind of been the rationale

decision making for you.

And from what my understanding is you're still kind of getting

educated, would you say?

Like, have you, have you dabbled in anything or you simply just

want to kind of, you know, accumulate more information

before making a decision?

Yeah, I think I really think it's just dabbling and playing around

with it.

Like we set up, I believe it was called Vanessa at the time

through VIN solutions, which was like an AI version of response

systems and so forth in VINs.

And so we kind of tested that out, but at the time it wasn't

really smooth, I would say, you know, there's a lot of hiccups.

So we kind of halted back when that didn't work the way we

wanted, you know, but now that technology's gotten better, it

seems like they're rolling out better programs.

I think we would want to jump into it again, probably on that

side first, that's probably where we would start.

I was smiling because of the names like, you know, there's so

many named like after like, like Vanessa and all these

and it's like this whole world just like I created in the last

year.

Yes.

There's crazy.

I know.

Tell me about sticking on the vendor topic.

I had a note here that, you know, just like identifying hidden

fees and vendor overcharges that impact the ocean profitability.

This was, you know, another hot topic as usual.

I actually discussed this at NADA with Don South on stage at

Hague Partners Conference.

He's one of the top NADA moderators in nationwide and he, you

know, asked him, you know, tell me about what the best dealers

are doing with vendors and he told me a story.

This was on stage.

It was very interesting.

He said he has one dealer who as soon as he signs up with a

vendor, he actually immediately like submits his cancellation.

Now, not with the intention of actually leaving them, but rather

I'm here showing you like deliver value or else I won't be here.

I'm not going to start the shot clock at 60 days.

So that was pretty interesting.

I'm sure he's getting attention.

So I'm sure, you know, it's working for him.

Yeah.

It's aggressive for sure.

It's aggressive.

Some people will do it.

Some people won't do it.

It's not everyone's style.

But anyways, it works for him.

You could say, you know, he's kind of starting off on the wrong foot.

On the other hand, you're starting, you know, you also may be starting

on very transactionally.

But, you know, if it works for him, then it works.

So we thought that was pretty neat.

Like when we're talking about on stage, I never heard of that.

So I'm curious from your end, like what have you done to identify

just like fees or stuff like that that often go unnoticed?

What have you seen?

Yeah.

I mean, there's a few different things.

I mean, I got kind of tasked at the beginning of the year to look

at our overall budget where we're spending the majority of money on

reconditioning likes a dent pro or, you know, paint, touch up, that kind of stuff.

And, you know, we've had long-term relationships with a lot of these vendors.

And so what ends up happening is you kind of get comfortable and just continue

signing off on these charges.

But when you really dig down into it, you see, hey, you know,

we're paying a little more than the guy next door or, you know, those situations.

So what we did is instead of looking at everything from a relationship standpoint

with everyone, we kind of did the more aggressive approach and said, hey,

look, this is what, you know, we could be paying elsewhere.

We want to keep that relationship going and really did our research on what

the other people in the market were paying for the same kind of services

and refining that process on how, how are they charging?

You know, are they just every car that comes through automatically gets charged

that fee or are we actually physically touching and looking at the vehicle to

see, you know, was that done?

That helped a lot.

And then I got a really good call from a company called Merchant Advocate.

And I worked with these guys.

Oh, they're just great.

We just had them on the podcast.

Yeah.

Oh, did you?

Yeah.

So I've been working with these good big shout out to Adam and Donnie.

They both have done a great job kind of explaining and educating us on all these,

you know, just junk fees and stuff that you get charged through through your

terminals.

So like when you're charging credit card fees and debit card fees,

you don't see that on the reports.

So we go, so we trusted them to go look through it.

And yeah, we're going to save just on that, which is very, you wouldn't,

it's something you almost wouldn't even think about, but we're going to save

over $7,000 just by that company jumping in and helping.

So yeah, anyone out there that has a, anyone out there that's taking like

large down payments on debit cards and stuff, I highly suggest looking into that.

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century there for merchant advocate Donnie.

Look at that.

Donnie's gonna be happy about that.

Yeah.

They were on the podcast.

I like businesses that align incentives.

It's like, you know, if I win, you win.

I love that because it just so it's just if you win, right?

They win and vice versa and it just makes it so easy.

Okay.

So credit card fees.

That's a big one for you.

What else?

Where else have you found like waste?

We thought it fraud and abuse.

No, I'm just kidding.

It's just waste.

This isn't this is not the government.

Where else have you found waste in the dealership recently?

You know, there was a lot of wasting and our internet lead sources.

I feel it looking through the quality of leads that we were getting and

what we were paying per lead.

I mean, I don't necessarily want to throw out there exactly who, but

there's just a few out there that, you know, they sell you on, hey,

this is going to be, you know, guaranteed 10% of the leads are going

to be, you know, quality or get appointments or you might make a sale

out of it.

But in reality, you know, going back over months, the quality wasn't there.

And so cutting some of that really did save us a lot of money.

And I felt like we were bleeding there a little.

So one second.

We're talking third party listing sites.

Yeah.

Okay.

So how do you know?

Tell me more about that because I see both sides of the coin here.

I see dealers that do well with them and I see dealers who don't do

well, but I also see there's dealers who don't do well because they

legitimately are getting, you know, recycled or badly.

It's not from every provider.

I'm not saying I'm not painting a broad brush, but there are dealers

who don't do well because their internal processes just suck.

And so, you know, they're not able to commit to the proper followup.

You could also make the argument that, you know, the provider is

partially accountable for this because maybe they need to, you know, be

closer to the dealer to ensure their success, right?

The relationship manager or whoever.

Anyway, with all that said, this is an interesting topic.

Like how do you, how did you identify that they are the problem and it's

not you?

Well, so literally going through for a whole month I spent where every

lead that would come in, I would follow it through.

So, you know, we're, we're not a huge store.

So luckily I'm able to do that.

It would be nice to have an AI platform.

Maybe they can help, you know, dive into those more, but going through

them and just seeing, okay, well, the data points are, are wrong.

Like they're not to say bad leads, but say you get a hold of the customer

and they're like, hey, I, you know, I wasn't even looking for a card.

Like I was just on a website and somehow, you know, now you're calling me.

And so keeping track of that, you know, just, you could probably get away with it

for a week, you know, just look through the leads for a week and see.

And so looking through that, I just found that the majority of the leads

coming in were just not a real consumer that was trying to purchase a vehicle.

You know, it might have been someone that got fished onto their website

and clicked the button and it not became lead.

You know, and so that to me was just a waste of money.

So it was a low quality lead.

Yeah.

Yeah, very low quality.

Like you might be able to reach the consumer, but they're not actually a consumer.

Like they're not trying to buy a car.

That wasn't their goal.

Yeah.

So yeah, I think that was part of the process.

And then just calling kind of like that aggressive approach of saying, hey,

we're going to cancel service.

And then all of a sudden they're like, okay, well, we'll give you X amount for free

and try those.

And then we go try those and turned out, yeah, still the same story.

Bad leads.

Mm hmm.

Okay.

That's a, that's a great example.

And all right.

So that's, so we identified two credit card fees.

We've identified, you know, relooking at the leads, which everyone should always be doing.

Um, what's a deal?

Is there anything else that comes to mind where you've, you know, recently optimized

and this kind of, you know, this focus on efficiency, anything else you've cut?

Yeah.

I mean, in our market, it's very heavy credit unions.

So credit unions, credit unions, credit unions.

That's, that's what the majority of the dealers in our market are using.

Um, but those come with, you know, every deal you do, you have a bank fee or they call it

a, you know, a processing fee of, you know, 75 bucks.

And so trying to do the research on the different lenders that are available.

They're in comparison rate wise or program wise.

Like we switched over where we pretty much do looking at the stat 85% of our deals are

going to retail banks.

And so by going through that, even if it's only 60 deals a month, 60 deals a month at

$75 that you're saving because we're sending a, you know, near prime deal that doesn't

have a bank fee.

We're saving that $75 per transaction.

And so again, it doesn't sound like a lot, but it adds up.

Okay.

So wait, just so I understand how did you cut those fees?

By switching who the lender was that we're going to.

So instead of going to a credit union that's going to charge us the $75 processing fee,

finding a lender that doesn't have that processing fee, but can be competitive in the same rate

range.

And you were getting the same rate or better.

You're getting, you know, same LTV, like no issues otherwise.

Yeah.

Maximizing that.

And then if anything, our reserve penetration or not penetration, but a reserve per copy

increased because we were actually making instead of doing 2% of line seven through,

you know, one of the credit unions.

Now we're getting up to 5% through fifth third or TD with no processing fee.

And fifth and fifth third goes off retail book just like the credit unions out here do.

And so yeah, just, just being creative and finding avenues and, you know, working with

the staff to overcome when a customer really wants to go to their credit union locally.

And we can say, Hey, but we can save you interest rate.

Those, those practices really have increased our overall per copy.

Okay.

Well, let's keep, let's keep milk in this one because I'm loving this topic.

So we got, we have so far, we mentioned third party listing sites, credit card fees, credit

union fees.

You mentioned vendors and just realigning that by the way, huge opportunity for many dealer.

And I'm talking about like the in store vendors, right?

Like not, not that, not that the tech vendors is not a topic, but also like you said, just

like the everyday stuff that you forget about after years, right?

Suddenly you discover you're overpaying for transportation and, you know, other things

like that.

These just, you know, they just over time, there's just a creep of cost creep that just

rises.

Um, okay.

So that's four.

Give us a fifth.

You have to have some other fifth juicy one, whether, whether it be in the F and I office

or elsewhere.

What's the other area where you've, uh, found efficiencies over its past couple of months

or year?

Well, I think as most of the dealers across the nation have switched over to, um, you

know, e-sign.

I go to say 50% or more.

Yes.

Precisely.

Uh, and I think everyone's switching in and went over to e-signing.

So we were kind of on the back into that, um, just like we are with AI.

So we switched over to e-contracting back in 22, um, was about the time we did, but

we were still papering out quite a bit of deals.

Like 50% of the deals were still just, you know, papering out hard copies.

So sending those and FedExing and doing all that stuff, that was another one that we saved

a ton of money by switching to Geico and say, uh, no, we saved a ton of money.

You could just tell me, no, see you're being a jackass.

Now you're good.

Uh, we saved a ton of money though by switching, um, primarily to all e-contracting and e-funding.

So it's that saved us so much money in FedEx and, you know, snail mail, customer experience,

you know, just a better, a better customer experience.

Yep.

Absolutely.

And then not only that, but it's, you know, we have quicker turnaround on funding and so

forth.

And then a sixth one that was interesting, um, which I think that like you said, there's

like the creep of cost of just staying with the company for a very long time.

And you know, for us, we were working with a company that did our business cards and,

you know, name badges and that kind of stuff, but we've been with them forever.

And as time went on, obviously technology changed, things are, yeah, merge and stuff

is a lot easier to get now online and do online ordering for those things.

So we like to shop local, keep business local, but, um, there came a point where we started,

you know, pricing out like, Hey, can we get business cards for 50% of what we're currently

paying?

And so renegotiating those deals with the existing company and keeping it in-house still

with them.

Um, and that was another way we saved some money.

Yeah.

I'm a big believer in that, um, whether it be like you stuff you give to customers like

real merger, you know, pens, shirts, whatever maybe, or like you said, internal staff, um,

you know, uniforms and whatnot, these things at a quick, um, you know, I, at one point,

I was, you know, shopping for these things, ordering many of them, uh, branding them.

And I just remember seeing the variability in prices.

It's, it's very, very, very significant.

Um, so that is, yeah, it's always a good air.

I mean, everything you just mentioned, you know, you hit every single one of those, it

adds up suddenly, you know, you're shaving off.

I mean, you know, some percentage off your OPEX and, you know, three to 5% at margin

business, that can mean the difference of being profitable in a month or not.

So it's a, it's a, it's a big deal.

Yeah, it is.

And, uh, I think talking, like circling back to one of the topics you were talking

about earlier about, um, you know, the, the market and how we're trying to get

people, um, in the door to purchase and things like that.

One of the things I mentioned was, um, trying to make people feel a little more

ease or, or comforting them through that process and making sure they're reassured

that, um, on my end, we've really put a lot of emphasis on social media and trying

to get out there and show these guys that, you know, we're normal people too.

You know, we try to be a little funny in our social media, try to get out there

in that way, and that's really been, that's been really good.

Yeah.

Just showing work humans too.

You know, we're, we're experiencing all the same things they are.

And, um, that's been really successful.

I think that's, that's one of our bigger achievements so far in the last few months

of pivoting toward instead of the typical guy who's just posting a picture and saying,

Hey, look, I got this car for sale.

It's, you know, $10,000.

Um, instead of doing that consistent post that almost every dealership seems to do,

we started doing more comical, kind of funny approach to things that we're not

trying to sell anything in our videos.

So like the content we're putting out, we're not sitting there trying to sell a

vehicle and say, we're just showing people, Hey, we're, we're normal, you know,

come hang out with us.

You know, that process, I feel like it's been helpful.

Yeah, this is, I talk a lot about Nomad content and Nomad, it's, it's, um, it's

basically our sister company where they do all the social media marketing with

dealers, but this is exactly the, the thesis behind it.

It's people want to buy, they don't want to be sold.

And if you could just show your experience, have fun or show me like

document the dealership and the highlights, right?

Imagine what essentially what is done at, you know, just like 200 clients at this

point, um, it's basically you just videotape the entire day and then you take

the 1% that's, you know, a highlight and then you promote that.

You are, you post that organically on, on social, um, and it works super, super well.

And so when did you start doing that?

Like how, you know, tell me about how, how that, if you're, how that's driven sales

for you or, or, you know, ROI.

So we played with it a little bit, um, you know, middle of the year last year, I had

seen a couple, I think on tech talk or something.

I thought that was a interesting approach.

And then, um, the beginning of this year, we decided, Hey, you know what, instead

of necessarily shooting it and posting it up on our store, social medias,

um, we kind of encouraged everyone to do their own on their own social media and

see if it drove, I wanted to see if like one sales guy had doing a certain style

video, you know, maybe was getting more attention and more leads off of it himself.

And now that we've been practicing that for a few months, there's been, um, a

huge increase.

Like, I mean, I wish I had the exact stat, um, but me personally, like I posted a

video a few weeks ago and it was just a silly 15 second video and I had 10

referrals off of it and I think we sold four of them.

So I mean, that penetration, um, was 10 times better than any video I ever

posted of the cool car on the showroom, you know, it's crazy.

So showing the guys and us looking at the data now and starting to see, I'll be,

I love like Instagram, um, how it has the ability to really give you the metrics

and show you, you know, what percentage is it male, female looking with, I mean,

that data's really helped.

Got amazing data.

Oh yeah.

Yeah.

So that, that's really, that's something we're looking at.

I think we're going to pump up.

So I think we're going to really put a little bit more energy into it and maybe

look at other companies that can help come in and maybe help with that content.

Um, I think right now we've been doing it all in house, but these guys want to

get out there and sell cars and not necessarily, you know, be a social media

expert either.

So that's something that we're looking into now.

This episode is brought to you by Nomad content studio.

Many dealerships are still getting social media completely wrong.

They either ignore it, post inventory photos or hand it off to someone on

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That's where Nomad content studio comes in.

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That's trynomad.co to book a call or click the link in the show notes below.

Yeah.

So what are you?

Okay.

So let's talk about kind of goals and what's next for you.

You, you specifically mentioned like five to six areas where you've cut costs.

Um, that was something you were very deliverable about that you as a, you

know, dealership and arguably lower budgets, you got to watch every basis point.

So you've done that.

You lean into social to grow sales.

What else is on, you know, what else are you focused on?

Well, you know, what's, what's next for you?

Yeah.

Strategy right now is we're, we're going to try to pump up inventory, get our

inventory, uh, use car inventory up probably double than what we're at right now.

We were a little lower on inventory.

So moving forward, we plan on trying to sustain a higher inventory amount with a

quicker turn.

So just price it, uh, effectively and be a little bit more of a volume store in that way.

So it's kind of what we're looking at moving toward right now, especially with

the market, that's, that's kind of what we're shooting for.

Um, I think educating the consumer on the type of loans and stuff that they're going

into, I think I mentioned this, uh, I think it was off this podcast, but I've

mentioned it before that I think during COVID, so many people signed up for that

84 month loan, you know, with a $10,000 markup and right now we're feeling that,

you know, the majority of the consumers coming in have extremely high negative

equity points and trying to get them out of that is hard.

So they got another year or so, you know, before they're even in a position.

So the new people that we're selling cars to the new customers, I'm really trying

to get other guys to, uh, get stronger and educate the customer on, Hey, you

know, maybe let's go 60 months on this loan, even though your payments a little

higher, let's go 60 months and give this customer a good experience.

So in two, three years when they're ready to trade it in, they actually can

trade the car in and we can retain them again in a second time and get, get

that warm fuzzy feeling back, you know, right now instead of customers feeling

like we did something wrong to them five years ago because, you know, now they

can't trade their car and, um, so that's something we're focused on.

Have you seen your, have you seen loan terms come down in your store specifically

over the last 12, 12 months or so, 24 months?

Yeah, we, we have, but we've also put a ton of focus on that.

I think that's something we talk about daily.

Oh, you've made a deliberate effort to do that.

Got it.

Yeah.

Like I really am trying to encourage them to stop.

Like if we can educate the customer and convince them not to do an 84 month

loan, go, let's do the 72 or let's do a 60.

Um, us talking about that so much and educating the customer.

I've seen that very rarely even right now are we doing 84 month loans, maybe

on the Hummer, you know, cause it's $120,000.

Yeah.

You know, one of the most, um, like I would say some of the most short-sighted

people I met in this business were never thought about the bank when selling

a car to lender.

I know it sounds like you can never, it can never be perfect.

You can never perfectly align interest, but if you think about it, like the more

you can properly, you're sending the right deals to the right banks, not just

to maximize profitability, but actually to maximize the health of your portfolio.

It's just the better you'll do long-term, right?

At the end of the day, if they're losing money on you or, you know, if they're

not hitting targets, they're not happy.

That's not good for you.

It's not good for them.

So I think to what you just said, um, you know, if, if you can, if you can

thread that needle and make the bank happy, their performance is great.

In turn, your performance is great.

I mean, it's obviously the win-win.

So again, easier said than done, but I think having that mindset is, uh, you

know, again, unconversely, some of the best people I've seen have thought

about that, have thought about who are all my stakeholders, um, you know, at

the dealership for everything we're doing and not just, you know, let's

link some paper because, you know, you, you know this business.

I mean, it's, it's, it's a month-to-month business.

I mean, it's, it's frigging, it's a day-to-day business to a certain extent.

So it's, uh, it's, it's, it's easy to get into that whirlpool and just think

very short-sighted, but the key is, you know, to, to be around the people that

think, you know, in decades, and I mean that in literally in decades, those

are, that's where the best decisions typically come into play.

Absolutely.

I couldn't agree more.

I think that's, that's something I take pride in.

I've always, I've always put emphasis and keeping a great relationship

with the lenders that I work with.

And I think they were any, any of the reps or anyone that I deal with on a

normal basis would say that we do have a pretty good portfolio, but that

takes effort and that wasn't like unintentional.

So us trying to make sure we're sending them the right paper and sending

them the right, um, customers, it's a, it's a hand in hand.

Like when we have a good relationship with that bank, you know, five years

from now it matters.

So that's when, when that good portfolio really pays out is when you have a

good relationship with that bank.

Amazing.

Donald Kemp, Stowasser over in California.

Donald, this was super fun.

Any, did I not ask you something?

Is there something in the back of your mind that you're going to be, you know,

at home tonight, eating your, eating your dinner thinking, man, we should've,

we should've spoken about that one topic.

One thing I would like to say, especially for all the, the smaller

dealers that are out there is, um, you know, if you're in a position where

you're a leader in your store, you just got to remember that as a leader,

like you bring the weather.

So when you show up to work, you know, you need to come into it and make

it a sunny day for your staff and your people.

No matter what's going on in the world, all the politics, all that stuff, um, as

a leader, I just do believe you really are the person that brings the weather.

So you have to, you have to show up with that attitude.

You are bringing the weather.

Well said.

I like that.

What a way to end the pod.

Great, great quote.

So as we wrap up, I would like to say, um, I'd like to invite you to join us

in circles as well.

Circles is our, uh, modern peer group for car dealers.

It's really where there's just intelligence flying around.

How much are you paying for this vendor?

We were using for this.

So if you haven't joined us, you seem like a pretty inquisitive intelligent person.

Um, I think you'd fit in really well.

Um, if you're interested, cdgcircles.com and, uh, yeah, join us.

You just, uh, you know, over a hundred, everything we have over 450

dealers already in there.

So representing thousands of rooftops.

So notice there and Donald kept Donald.

Thanks so much for coming on.

Had a ton of fun.

All right.

Hope you enjoyed that episode.

Please give the podcast a rating, consider subscribing to the show and check

the show notes for links to what we talked about.

Thanks for tuning in.

I'll see you guys next time.

The Profit Squeeze: 5 Costs Dealers Are Reducing — And Why It Matters | Donald Kemp, General Sales Manager at Stowasser Buick GMC

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Kelly Blue Book

21 day turn

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used inventory

GMC

trucks and SUVs

service contract

GMC Sierra

lenders

84 month loan

negative equity

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