The Truth About Car Prices: Tariffs, Loans, and the Illusion of Affordability

Chris J. Martinez: Alright, welcome back to this next episode. I don't even know what number this is, Frank, to be honest with you, my apologies for knowing. ⁓

Frank Lopes: That's okay. I have no idea what episode number I'm at up with live with Lopes or ultimate sales pro know, or of the shows I do. have no clue. I just keep doing them. That's it. Just keep to who cares what number it is. That's it. Who cares.

Chris J. Martinez: Just keep doing them. Right. Yeah. Well, who cares? Well, the good thing is here's, here's the thing. This is a little bit different from what the normal kind of podcasts that we've been on it or the ones you even do.

It's, it's more aligned along the lines of, you know, what is, what are the headlines today? Last week, what's you, what's on your mind looking it from an operator's lens or a marketer's lens and trying to see, okay, well, how do we, can we apply it?

Learn from this? How do we apply it in our own business? And how can we grow? Right. And so we can avoid any kind of pitfalls. Cause I think a lot of the times most dealers just operators in general, you know, they try to stay head down and just work when reality, if you could, you could pick up some margin, you could pick up some valuable insights.

If you stay and attention to the market. and that's, that's kind of the idea behind what we do. ⁓ every week with the automotive informants. Zach is out today. in the middle of moving, but he'll on next week.

And so went ahead and asked you, Frank, thank you for for joining on last minute. But you know, a lot of topics I just didn't want to get past because every day there's always new topics, right? There's always new headlines, new, you know, craziness that's happening in the world that affects automotive specifically.

that's what we're going to kind of talk through. So Thank you, Frank, for jumping on it. If you guys don't know who Frank is, Frank is, you know, a living legend in automotive. You know, he's been doing this for how many years now,

Frank Lopes: Too many, too many to count and too many to count. you want to be, if you want to be technical, since I was 11 years old, I've been involved in dealerships, you know, but with starting with going to work with my father at the dealership that he worked, ⁓ that he worked at, he was not the general manager or the sales manager or a sales person.

He was a make ready guy. You know, he was the prepare for delivery guy. And then he wound up becoming the go-to guy for everything that went on. You know, in the store, if anything broke, if anything needed to be done last minute, you know, he was number one on the alarm list, you know, so a lot of 2 AM calls, 3 AM calls, you know, from the police and stuff go to the dealership.

There was a lot of that going on. I started selling cars when I was 17 years old, the Monday after I graduated high school, wearing the suit that I graduated high school in that I went to my high school graduation in, I wore that exact same suit.

No, I did not get it dry clean. There wasn't enough time, you know, I did wear a clean shirt though. Okay. They wear a clean shirt and, uh, you know, and started, you know, if started officially in marketing and advertising and sales training and process and consulting and all the good stuff that has to do with retail automotive started there officially in 1996.

Chris, you were, know, Chris, you were a dealer partner of mine at Charles Montoya. Uh, believe it or not, Chris, that is 10 years ago now. Okay. That's 10.

Chris J. Martinez: Isn't that crazy? And you know, it's funny when we, you know, we met and I just said, Hey, saw your, some of your content online. said, man, I you're in Austin. I don't know. I don't even know what you're in Austin for, but I said, man, it'd be great if you just stopped by and kind of see what we could do. And, you know, let's see what, and sure enough helped us and helped our store grow and

Chris J. Martinez: did some really amazing things. not 10 years, I can't even believe I had darker hair. You and I both had darker hair back then. it's ⁓

Frank Lopes: Yeah. Me especially mine was way there. You're used to look like, you you look like you're living in some kind of a time machine or something and you just keep, you know, the time goes forward, but you stay exactly the same, almost like a Benjamin Button type of thing you've got going on over there.

You know, me, you know, me, I look older. That's for sure. You know, that's for sure. But, you know, Chris, it's so funny to see a random Facebook message that you, you know, that, that you sent to me like, I see you're in Austin.

Frank Lopes: And I remember looking at that Facebook message saying, ain't got no time to be stopping at no dealership or anything. got someplace I got to go. got something I got to do and didn't realize, you know, for completely forgot that there was a one hour time difference.

So I suddenly, I suddenly wind up with an hour with an empty hour, know, and I was already like three hours ahead. So I'm like, all right, I'm going to stop and see. And, know, and then it turns into not only a dealer partnership,

Frank Lopes: at Charles Mount Toyota, not only us selling over a thousand cars a month at Charles Mount Toyota, not, know, in Austin, Texas, not, just that, not just moving on to Jackie Cooper, automotive and Tulsa together, but a that I greatly, greatly value and that I cherish. And, ⁓ know, you're one of my closest. So I appreciate you very, very much. And I appreciate you sending that, that message on Facebook messenger 10 years ago.

Chris J. Martinez: Man, that's awesome. Now I'm glad you read it, man. I think, you know, who knows where I'd be, you know, today without that interaction, because I do value your insights and you know, it's always good.

And so that's why, you know, I'm glad you, you took the time to jump on this, this, this podcast today, because there's a lot of information, a lot of headlines this last week that I know, you know, people will get some value from your insights specifically.

And, and here's one that probably is more your alley. know, meta just started recently just came out talking about know, similar to how Google came out, Google came out saying they're going to do like price enforcement.

So whatever your advertising needs to be the same price, the customer goes and when they buy and now Metta is doing it from a different angle, still same concept. They're just talking about data, complete So Vin, everything's got to match.

They're not saying specifically price, but pricing is included in that. So if that doesn't match, there's going to be some pushback where your ads won't promoted. They'll be, you could get kicked off.

can, there's all kinds of things. So what do you think about that?

Frank Lopes: know, I think the the the era of transparency is ⁓ you know Like we are in the prime of it right now and who knows maybe we're only in the infant stage of it and not the prime and we just don't realize it yet We don't realize like how much more is gonna happen ⁓ at everything that happened a few years a few weeks ago with the FTC and with the you the the dealer groups Lindsay automotive that got fined You know, that got fined all this money and everything for breaking FTC violations.

know, transparency is really is what it's all about. It's funny, later this morning, I'm going to be doing a webinar for dealer e-process talking specifically about transparency in deal sheets and what deal sheets do when a customer takes that deal sheet and loads it into a large language model AI, you know, a chat GPT or a Gemini or a Claude.

or a perplexity and they, you know, they type, they load up that deal sheet and they say, is this a good deal? They asked Chachi PT, is this a good deal? And whatever comes after that is basically the voice of God.

And that voice is concerned about one thing and one thing only transparency, a fair deal, disclosure of all fees and everything. So I think this is all this is, is just Meta now jumping on the back of Google, then saying, hey, people hate it when they see an ad and the ad says, take $10,000 off an F-150, and they click on that ad and they wind up someplace in the dealer's website where they can't find an F-150 that's $10,000 off.

Chris J. Martinez: It happens more often than than we like to admit. you know, I'll tell you, see, my only thing is it's it's I feel like it's starting in automotive, but it definitely needs to be across the board.

And I'm going to give you two specific reasons. reason my wife loves to shop and loves to save money, right. So when she's shopping, she'll go to the store and to see if it's online cheaper. And, you know, I'd say five times out of 10, it's cheaper online than it is in the store.

and it's just, so it's just not specific to automotive. This happens at every retailer and I'm talking, target talking, Walmart places like that, that the everyday shopper goes to that, you know, the, the price is different in store than it is online.

In addition to that, I recently went to Indiana and asked chat GPT to help me. ⁓

Chris J. Martinez: find a hotel that area where I was going to be meeting, some individuals out there for business. And when I went down, so I went, did that whole process and chat GPT said, well, these two options are probably the best one based on what you want to do.

And so then I went to their website based on the link that it gave me. guess what? The prices were like a thousand dollars a night. versus the 250 that it said was gonna be. you know, is that now mean that chat GPT or any of these other LLMs like Grok and all of that, that people are actively doing that type of shopping today?

Are they gonna have those types, those same strict transparency guidelines that Google and now Metta is starting to do?

Frank Lopes: Yeah, absolutely Chris, absolutely. about this, You've got, look at the landscape of LLMAI right now, okay? You've got basically ChachiPT, who is way ahead right now, okay? They're way ahead with the amount of users and all that type of stuff.

But you've got Claude right behind them, you've got Grok right behind that, you've got Gemini right there, you you've got Meta with theirs, you've got Perplexity with theirs, there's probably eight or 10 more that we don't even know of yet.

that we've never even heard of. Yeah, every single one of them are all fighting for one thing and one thing only, right? Attention, because they know attention will lead to dominance. The exact same way that Google focused 100 % on getting market share of search, and the comparison of Google to Bing is not even worth bringing up in conversation.

Chris J. Martinez: ⁓ the Chinese have a bunch of them. Yeah. That are even cheaper.

Frank Lopes: to number one here. So the exact same thing is happening again. And they understand that after a little while, if a user goes and asks questions and has shown certain results and they follow through on the result and then they can't find it, they don't where the result went to.

They blame the result itself. And then in blaming the result itself, then they blame where it came from. So absolutely the LLMs are gonna be right there. And they already are. There's already issues with your seeing with automotive.

You're already seeing issues where if, one of the things I'm gonna bring up in this webinar is a result that I found myself where the deal sheet was actually $500 more than the online price. Okay, so when.

Chris J. Martinez: That happens, that happens a lot. know, someone just presented, I don't know. I think it was this, one of these influencers that is talking terrible about dealers and, he just seems to find all of the terrible dealers, right? Like he calls them and when he, what was the deal sheet where the, the, the dealer actually put the salesperson's commission at 2 % on there. Like

Chris J. Martinez: you know, it, you know, and I guess they're trying to justify it like a realtor would except these are, you know, a hundred thousand dollar cars ⁓ and not ⁓ And so putting a 2 % commission on there. they say, okay, this is the addendum. This is a MSRP. And then this is the, commission. It's 2%. And ⁓ so you'd surprised. I mean, some people just say, okay, and just

Chris J. Martinez: are okay with that. then others, you're like, got to pay your commission to I mean, generally, that's in the price. It's not like you don't go to Walmart and or Target and say, Hey, look, I want to buy this TV. And then you get a markup for the the, you know, associates, you know, commission, I just, it's part of cost.

Frank Lopes: Yeah, the Socialist Commission, the that put it on the shelf, or the kid that brings it, that rings it up, and all that type of stuff. And I how people at times will use a whole other industry without understanding the context of that industry, and then all of a sudden use it as justification to do something that is on the edge of ⁓ retarded and stupid. ⁓ Like, ⁓ they do it in real estate.

Frank Lopes: And it's like, you idiot, regulated in real estate. You need to disclose what the seller's, what commission is that's going to the agent. Like it must be disclosed. It's part of the deal.

It's part of the law. ⁓ That's has to be done. And that's not what goes on in, that's not what goes on in automotive, but it's amazing at how, as soon as the government, any government, whether it be state or ⁓ state federal or local, once they talking about the Doc fees got to be disclosed, right?

Then, then everybody goes is up in arms. Everybody goes sideways over, you know, over this, but the reality is and trust, it's all about trust. know, for the one that you catch asleep or for the one, for the one who like really, really, really, really, really, really wants the car.

Like you have a black Honda, you know, a black on black Honda pilot and nobody else has one, you know, elite. black edition, blah, blah, blah, blah, and you have it and they really, really, really want it, or the guy's wife is like, I really want that car, then they'll up with it.

That's all it is. You didn't catch nobody asleep. They just put up with it.

Chris J. Martinez: Well, yeah, I mean, it same thing for Yeah, same thing for those unique specialty cars like Mercedes or Porsche. I mean, they don't there's no reason I mean, some of those cars, you know, during even the pandemic, we're bringing 100 grand over sticker 150 over sticker Porsche still there's some specialty cars that still bring $250,000 over sticker.

And it's like, that's what it is, right? Because they're gonna hold on to it and a year or two ends up going up in value in some cases, but you know, here's.

Frank Lopes: Yeah, but there's nothing special about a black Camry XLE though. Okay, can we just agree on that? Can we all on the same page with that? There ain't nothing special. There's nothing special.

Chris J. Martinez: in I agree. Especially if you got 10 of them, right? So it might be special if only have the one but if there's not if you've got 10 of them, it's there's really not and it's the only one in the market, right? But well,

Frank Lopes: Right. All black. Nothing's special there. So it makes total sense that Matt is jumping on Google's back with this.

Chris J. Martinez: Yeah, I think it's going to be, it'll be interesting. Who knows how long that's going to be for the LLMs to catch up. They've been iterating pretty quickly. And right now I use these different LLMs for different things.

I feel like, you know, when you do ⁓ research, things like that, think GROK is still up there. Chat for everyday things, but you know, sometimes you just got to test each one of them. Cloud, it's just right?

Like it's the best that, you know, helping you develop things. ⁓ but what I was going to say, get to now is this kind of ties into, ⁓ there was a, just heard about this lawsuit and it's, was settlements in December, but it's still ongoing.

and it's a state farm lawsuit against the Hyundai Motor Company and Kia corporation. And so basically what they're suing ⁓ is saying that too, because of some viral videos that went online. and this was.

couple years ago, apparently, didn't even didn't even know that this was a thing. But people were showing you how easy it was to steal one of these cars. And so at State Farm, I guess they were paying out too many losses because these cars were getting stolen so often.

And so they sued the Hyundai and Kia Corporation, and got they won. So they've had to settle things. And so what that ⁓ me, it was interesting because ⁓ you know, like now you got to tell me how to make my car and because it was just too easy.

And now the state attorneys and different companies are still going, dozens of states are still going after them. And I guess the state AG lawsuits were settled in December, but then there's still other things that are other pending litigation that's going after them.

it's, it's kind of interesting. What do you think?

Frank Lopes: It is. It is. think the first thing that we should look at here, and I don't have the answer to this question, but I believe with a little bit of research and maybe a little grok can help out with the answer to this question.

I'd like to know how much it is that the insurance industry and these major insurance companies, much they donate to super PACs and to, you ⁓ and individual politicians. I wonder how much money they spend on lobbying.

right, on lobbyists and things of the sort. And I think if we see the answer to those questions, we will then see why they won that lawsuit. Because it's pretty ridiculous, in my opinion, it's very, very ridiculous to go for an insurance company who has the choice to be able to choose if they want to cover a particular driver or a particular owner or a particular car.

At any moment, the insurance company can say, no, no, no, we're not covering that anymore. Okay. It's up to, doesn't matter how much the policy is. We're not doing it. How in the world, the company that has the first yes or no can now go to a vehicle manufacturer that they said, sure, we'll cover that car.

And they can say, you know, we're going to sue you now because you made your car is too easy to steal. He just made them too easy to steal. You know,

Chris J. Martinez: Is it that crazy? I, you know, I thought my sentiments exactly. thought the exact same thing. was like, man, how's that even real life? You know, like this is a separate company, separate entity.

You decided to ensure my car that I sell to this customer. And now you can sue me for building a car that, you know, they could have bought low Jack. They could have bought any other anti theft device that they sell.

Right? Like they sell all of this stuff for a reason because people steal stuff like

Frank Lopes: It's, right. So maybe the insurance company should do a whole private study the exact same way that the highway traffic, the highway traffic commission of the federal government does all these safety studies and the crash studies and all that stuff on vehicles. ⁓ it'd be a good idea for the insurance industry to do a, how easy is this car to steal? Study. know, like I said,

Frank Lopes: Let's take a look really let's figure the side not here during during the show but on the side Let's take a look how much money does State Farm insurance donate to super PACs? How much money do they donate to individual politicians? How much money does the CEO of State Farm and you know the whole C suite? How much are these guys donating to? Politicians was was this a state or was this a federal federal case

Chris J. Martinez: this multiple states, dozens of states, owners over theft risk and lost value. And then still, it's still part of a broader litigation that's tracking this year. So which is State Farm and others. So apparently, other other insurance companies jumped in, they just were first but I mean, this

Chris J. Martinez: this is going to increase prices and things like that. But from a dealer standpoint, this is where you, you're selling Hyundai's and Kia's, you just kind of tell them, hey, look, we've got these other anti-theft device and try to the customer at ease and keep moving forward. ⁓

Frank Lopes: Right. Instead of your ProPak being the blinky light in the back, maybe your ProPak should be LoJack. Something that actually saves the customer some real money on the, you know, on their insurance.

And I know there's probably a, you know, there's probably a 0.0001 % savings for the blinky light and stuff. And, you know, and I know the blinky light makes a lot of money. about you just provide some real value over here.

If you're a Hyundai or Kia dealer, how about you not worry so much.

Frank Lopes: about brokers and you worry more about your customers, you know, and not getting, not getting, and your manufacturer not getting sued. How about that?

Chris J. Martinez: you All right. Well, you know, that kind of leads into like the car buying this car last car buying you know, tax season is over at this point, right for people I mean, because it started it started earlier now, like February, March now. Here we are, everybody had to pay whatever they had to pay or they got a check, you know, yesterday was the final, right. So what auto trader just posted was this necessity is driving tax season car buying as ⁓

Chris J. Martinez: shoppers seek affordable vehicles according to Cox Automotive Survey. But I think challenge what I see when they post these types of surveys or these notices is it's already like last month's information.

You're now in a whole different part of it. So people are looking at that headline. They need to be looking at today's information not yesterday's yes, you can learn hey, I missed the boat maybe is what some dealers might say if they didn't buy enough inventory or have enough inventory on stock.

But right now, to me, what stood out to me was it said 62 % of buyers say vehicles are too expensive. And honestly, I'm not surprised it wasn't 100%. So what are your thoughts on that? That's

Frank Lopes: Yeah, on the exact same page. mean, vehicles are expensive. They are more expensive than they ever have been. And of course, anybody can say, well, all you gotta do is just let time go by and the vehicle's always gonna be more expensive than was before.

But there is a certain point where the expense painful. It's the same thing with gas, right? Like there's a certain toleration level that the general public will allow. And that generation, you know, that toleration level is somewhere in the vicinity of like $3 a gallon for regular under three bucks a gallon, 2.99.

You know, once you start getting into the threes, once you, people start wiggin out, once you get into the three fifties, people start freaking out. Once you get to the fours, people start showing up with pitchforks and, know, and starting, starting to scream about midterm elections and, know, and things of the sort.

So we have definitely crossed the threshold. for the majority of Americans when it comes to that tolerance level over the price of a car. Hence, you're seeing a whole ton of people that are now getting into leasing, which is definitely much better for everybody involved in this, to be honest.

except ⁓ the leasing company. because they're the ones who are really rolling the dice, but it's great for the consumer because they get a car at a much lower, brand new car at a much lower payment, great for the dealer, because you have an automatic, know, an automatic 24, 36, know, 39 month comeback, the customer's gonna show back up again, because they gotta do something, and they're probably not going to buy out the lease, they couldn't afford to buy a car three years ago, they probably can't three years from now, so that, you know, so that's a very, very good thing.

But the reality of the situation is, once again, like what you said at the beginning, Chris, have to do a much, much better job of playing chess, and we gotta stop playing checkers. I know that's one of the oldest analogies in the book, but it's very, very true.

You see so many dealers ⁓ now, okay, are saying, wow, March was an absolutely great month. ⁓ my God, we did so good. Not only did we sell more cars, but we also made more gross. and then you look and you're like, yeah, that's because the majority of your people got free money and what happens when people get free money?

They spend it at will with very, very little regard for where the money came from. Where does free money come from, Frank? Just go back a little bit in time and take a look at all the news articles saying that the average tax return, the actual tax, the average tax refund this year was up somewhere depending on the article you read.

somewhere around 13 to 20 % for the average American, right? 13 to 20 % more in their tax refund this year. That could result in an extra $800,000 for some people. And then what winds up happening? I got a free $1,000.

I'm going to go buy a car. I've been waiting to buy a car. So getting ahead of these things are dramatically important. And if we know now that vehicles are so expensive,

Frank Lopes: Think about this from a marketing perspective. What in the world is it that the message should be? Affordability, discounts, low lease payments, a lot of zero down, right? You should be talking a lot of zero down thing, right now.

All of those things are gonna at least get you the eyeballs and get somebody to take the next step. That's that whole chess versus checkers thing. know, checkers, all you're trying to do is just get your.

piece to the other side of the board so that you can get, so you gotta get kinged. on, let's think a little bit in depth and more than that.

Chris J. Martinez: Well, look, I think I think you're right. I think that you just imagine the now we talked about those tariffs in the beginning. I mean, that tariff increase, that's 100 to $200 a month payment, right?

They're just an increase just in tariff. So it was already expensive. And now these tariffs could potentially, you know, just break some of these dealers that are already struggling, like giving an example Nissan, they're already been struggling this last year or two, right?

They've had to sell off, you know, seven different factories or the land and they're just leasing them back and they're doing all kinds of cost structuring just recently and now you know all these cars that they you know thought was a good idea building them in Mexico and you know shipping them that way now they're going to be even more expensive and then you know just a lot of you know a trickle effect that happens right now now you're thinking it's a

Chris J. Martinez: The $25,000 and under car, people used to look for the $5,000 car, then it went to $10,000, now it's $25,000. That's just crazy to me.

Frank Lopes: Yes. The tolerance level, right? The tolerance level has risen over time and the only thing I can say is this is why Toyota stores, good luck finding a Corolla on the ground. This is why the Honda stores, right?

It's a challenge to find Civics. That's why, know, at the Nissan stores, it's hard to find Centra's and now they're gonna go up 20, you know, they're talking about they're gonna bring them up 25%. I don't think they will.

Right? I don't think they will. think Nissan's going to understand that that's suicide for them to do. Um, but, and if you go to the lots, what's sitting all the cars that are in the, in, that are in the 50, 60, 70, know, $80,000 range.

Chris J. Martinez: Those big high dollar cars, right? Well, this, this kind of leads right. This leads right into the segue. We had this, the NADA data data just came out. And I, I looked at, when I looked at all the data, it showed like the average new car dealer sells, 79 new cars and used cars.

about 45, 50 cars. So realistically most new car dealers are missing the boat. I think they're easily losing 20 to 40 car deals a month just in used cars, right? And so I had a comment on one of the posts I did, one of the guys said, well, have you even tried looking at auction and how expensive cars are?

And I'm like, well, that's the problem. You think CarMax is going to auction to buy all their cars? 70 % of their inventory that they acquire comes directly from the public. So if you don't know how to, you know, buy into that model and do buying centers, service drive, eight salespeople that try to drive acquisitions through there.

You have enough acquisition channels. You're not gonna, you're right. It's not be fruitful for you. But.

Frank Lopes: Yeah, Chris, I'm going to give I'm going to give you a major credit here because 10 years ago at Charles Montoya, right? What think about if you know, went you're not that old, you can remember that, you know, it wasn't that long ago.

You can remember back. What in the world is it that we focused so much on service acquisition, buying center, taking people out of cars, pulling them out of leases early and getting them into something else.

And what was the main reason selling the new car was the byproduct? of it for us at that time, 10 years ago, right? 10 years ago, we weren't worried about just getting our checker piece to the other side.

So we'd get a King now. What were we worried about acquiring vehicles and acquiring vehicles the right way? Yeah. MMR and you know, MMR and retail sometimes most times are the same number now. Yeah. I can't remember.

⁓ can't remember very much of a time when it wasn't like that. Okay.

Chris J. Martinez: And they've been like that for forever. Right. You know, in the last I don't know how long now. 23 years I've been doing this. I don't remember a time auction prices weren't higher than buying straight from the street.

Like that's just the way it's always been. So you need to have a strategy if you haven't figured out a strategy that a you're you're not in a good you're going to be these other dealers at the average store, right?

And so this is the average there's some stores that are even less than that.

Frank Lopes: Right. Right, and think about this Chris, think about this Chris. You wanna know a phrase that you have never ever heard, a used car manager, a general sales manager, or somebody who buys cars at the auction, whether they physically go to the auction are in the lane, or if they're doing it online, or OVE, you know what ⁓ a phrase you never ever heard? I got a great deal on this car at the auction. Never!

Frank Lopes: Nobody has ever ever said, got a great deal on this car at the auction today. No!

Chris J. Martinez: Yeah, I stole it, right? Yeah, I stole it at auction. Yeah, that never happened.

Frank Lopes: I stole this car at the auction. No, not. So if you're buying cars from the auction because you have to or you want to, or that's what you're used to or whatever the reason is, right? That's up to you.

That's your strategy. That's your reason. You don't quit bitching about what the cars cost at the auction. They cost what they cost, man. And you keep hitting the bid button or you keep raising your, you you keep raising your ticket with your number on it.

You keep doing it over and over and over again. You know, is kind of a little backwards here. ⁓ the one who's saying yes. You're like, you know, you're like State Farm. You're the one who's saying yes.

And then you're, then you're crying about saying yes afterwards, but you had the right and the option to say no at any moment. Nobody forced you to buy anything at the auction, dude. You know, I don't know what you're, I don't know what in the world it is that you're bitching about, but once man, got to get serious about vehicle acquisition this afternoon.

After my webinar, I'm going to a local store. to talk exactly about that, about acquiring used vehicles and how dramatically important it is to do it because if you just wait for trades or if you try to hook every trade, for them is stupid in the first place, okay?

That's a horrible strategy. But then when you have waited and one shows up and try to hook it for three grand and if you can't hook it for three grand, you don't take the deal at all. Right? Like, are not strategies.

Chris J. Martinez: Yeah, that's, that's the worst part. And you know, what's funny is I usually whenever, anytime I go into a store and I turn them around, it's usually, I start with used cars, because that's like the lowest hanging fruit, because most of the time the used car operators in the market are sleeping at the wheel.

They're, they, I've been, I remember that Toyota store specifically, I had a Honda store down the street that basically said they were not going to buy any more cars at auction. Like they're just not going to buy any more.

And hold on. Excuse me. Sorry about that, sir. Well, anyways, so we had, they'd said they were just not going to buy cars. They are only going to buy if the customer came in and traded. And so they made decision and they were selling like 40, 50 used cars a month.

Our store literally down the street from that store. And we took store from 50 used cars a month.

Frank Lopes: Bless you. That's how you know it's live, sir. That's how you know it's live.

Chris J. Martinez: to over 500 used cars a month. Number two in the nation in certified sales for, I mean, for a very long time. And so, you know, and in the smallest facility too, like that, you remember that lot. I don't even know how we sold over a thousand cars a month. Like it was, it was like stacking cars on top of each other. was crazy.

Frank Lopes: It was so tight. Yeah, it was so tight and it was a little treacherous getting in and out of that lot too. I'm just saying it still is. still is. have,

Chris J. Martinez: Thanks. actually, they're doing some new updates over there. I saw them tear down the whole service facility and they're rebuilding it. I just how much ⁓ more, how tighter it got because now ⁓ you think and trucks and all kinds of people that are going to be moving in and out of that lot, expect lot damage to go up and hopefully they got a plan to store those cars. But ⁓

Frank Lopes: of this. Yeah. for sure. I'm sure, I'm sure Steven over there is pulling his hair out right now. And if there was ever a store that needed a parking garage, it was, that one. It's not, it's Toyota, North Austin, which is what Charles Mon Toyota now is, you know, you know, it, store needs a parking garage for sure.

Chris J. Martinez: It was. yeah. They do. You know, it's funny, we were actually in the process of trying to get one built when I was there. But then I talked to the owner and I said, look, guys, I just went down the street and look at, look at how many trucks are at that.

And it's just a building. Imagine what you're going to have cranes and all kinds of stuff, trying to put this garage door or parking garage here. Like, I don't know that, you know, we want to take that investment today because you know, we're selling, you know, 1000 cars ⁓ at the time, I think we're selling like six or 700 cars a month.

And I said, I mean, do you really want to go backwards a little bit? I mean, let's think about it for a And that's I literally had to say. And then, you know, the owners are just like, Yeah, we're just not gonna do it.

Frank Lopes: ⁓ yeah, well the way you framed that up, Chris, I'm thinking about not doing it too. And I just put the idea out there. don't want anything, ⁓ my God.

Chris J. Martinez: Well, you think about it, just go to a construction site. There's probably 30 trucks all parked around there. And yet mind you, they could have, I guess they could park underneath the freeway.

They'll probably have to get another, um, what do you call it? A permit and all that to park there, but doesn't mean there's still not more construction. got to have a tent, a fence all the way around it for 10 feet.

Where are you going to put it? And then you're going to have to move all of those cars that you have. I mean, you're going to move three, 400 cars just to make like, so now you're thinking, okay, where am going to put them all?

You go get another lot. Yes, that's, that's possible, but it's going to cause it's going to be a major investment, not just, you know,

Frank Lopes: Yeah. lot damage. You know, there's somebody right now watching who's to themselves, build a parking garage. you know, I I had those problems. I wish I was selling six, seven, know, a thousand cars a month, and I wish I had those problems. You too can have those problems, sir. You can, absolutely. You know, that store didn't.

Chris J. Martinez: Yeah Yeah. And believe me, and we've expanded that as much as we could. And I think they could still grow that that store to me, I felt like it gets to 1500 cars a month. I just felt like there was a piece of property that we always wanted that was down the street that they should have bought.

But the guy just never wanted to sell. But I think that's that same problem happens at every store today, even in fixed stops. I'll give you an example. You know, we we help stores drive traffic to, you know, service and sales.

And in some instances, some, some service operators will say, Hey, look, I got way too much business. and to me, I'm always just thinking, well, that's a problem. I mean, how many bays do you have? Well, why aren't you looking at a way to expand?

Because what's going to up happening is the jiffy lubes and all that of the world that are going to just build a shop down the street from you and start taking all the business you can't handle. So you might as well just expand, you know, add another

Chris J. Martinez: you know, 10 tech bays, if that's how much business you're leaving behind, make that investment, and then let us drive more traffic to your business. And, and you'll hear it from operators too.

they'll ⁓ it's just hard. are you gonna find the people? And, you know, I, you know, I've been blessed and fortunate enough that that that's never really been an issue. Because, you know, if you have the right processes, you do things the right way.

⁓ It's funny thing a lot of people want to work with you and kind of cool.

Frank Lopes: Yeah, no, that's true. What's the last? What's the last topic, Chris?

Chris J. Martinez: I think you had that last one you wanted to talk about.

Frank Lopes: The, the, you know, and I put my phone, I put my phone away. I over, I'm not over here with a telephone and I had it on my phone sitting there. Okay. This is the one I'm going to talk about, you know, and my phone is like outside my studio right now. What was the last topic?

Chris J. Martinez: You The last topic you sent me is the seven year car loans. And for me, we actually just recently talked about this. The seven year car loans is a big thing, but when I see credit unions doing 120 month loans, now mind you, are loans, cars that are over a hundred grand, but still 120 month loan on a car. That's a little nuts.

Frank Lopes: Yeah, I mean, this is what's funny, Chris, think about it. Think about what you just said, okay? 120 month loan on a car, that's a little nuts, okay? It wasn't that long ago that people were saying 84 month loan on a car, wow, that's pretty nuts.

A little bit before that, 72 month loan on a car, wow, that's pretty nuts. Back in the day when I was a salesperson, a 60 month loan on a car, five years, wow, that is absolutely nuts. I mean, we're going to continue to expand the term to be able to make it so that the payment is tolerable to the consumer.

Frank Lopes: Well, if the consumer says that that's what they wanna do, then all we're doing is just providing the market with what it is that the market desires. it's gonna go to the banks and then the banks are gonna say, well, I gotta get this money on the street, X amount of loans, they don't go term anyway, they're gonna trade this car in and this car's gonna get paid off and okay, fine, ⁓ write that loan.

And let's just hope that they don't take a page out of State Farm's book. and then say, well, wait a minute over here. I didn't know this car was gonna depreciate this much. And now these consumers are all, they're all upside down.

And now, you know, that my default rate is going through the roof. You know what I'm gonna do? I'm gonna sue the dealers.

Chris J. Martinez: Yeah. it's, it's no different than what you're seeing now in, mean, didn't Trump just tout like 50 year loans and in the market. I mean, that's to me was just pretty wild. mean, so now automotive 120 month loan, but really 84 months, people are just doing it like it's no, no big deal. ⁓ But there have been some lenders that have actually stopped that know when I was still at Mercedes.

Chris J. Martinez: they weren't even doing 72 month loans. They stopped doing 84 months altogether. Like, yeah, we just don't want that paper. And then 72 months, they would only, they'd cap you at any kind of warranties and things that you could buy.

you had, they almost were trying to force you to put the customer in a 60 month loan. then they they were going to lose a lot of... people that were trying to finance with them. So they ended up just incentives if you wanted to go ahead and do the same car deal, but except use a different lender.

And so that to me was wild because most of the time that you're captive is that's where you're supposed to send all your paper. And reality is they were telling you, Hey, look, we understand if you have to go to another lender and here's a, here's a rebate.

Frank Lopes: And think about it, Chris, going to applaud Mercedes-Benz Financial for that because that is a responsible lender. That is someone who is actually looking at the real risk that's involved in this.

⁓ the risk is not just default. The risk is what happens in future when the customer comes to buy another car, okay, and they're that upside down. Of course, they're going to blame the dealer, but the lender also does have a certain amount.

of exposure when it comes to that, whether, I'm not talking about legal exposure, I'm talking about emotional exposure. Exposure to the customer to say, I don't want to finance through them again. Last time I financed with them, I had to come up with $10,000 to get rid of the car.

We've seen this happen with leasing companies with these huge disposition fees. Leases over, they want to turn the car in, they've to come up with an extra 9.95.

Frank Lopes: It's like, wait a minute, I have to turn the car in, right? Like, I have to give it back to you. Yes, sir, the lease is over, but I have to pay you an extra 9.95 to do something that I have to do anyway. That's what you're saying. Like, I got, sir, that's right. Well, I'm not.

Chris J. Martinez: Here's the, well, here's the only thing I'd push back on that 99, 995 sounds like a lot, but if you were in that same customer and you financed it for 72 months or 84 months and try to turn it in at year three, that instead of paying 995, you might've paid five grand in, in being upside down. Right. So I'd rather pay the 995 instead of the five grand that I would've been upside down at the third year.

Frank Lopes: Okay. in being upset. Yeah. Now, Chris, I totally agree with you, But about the customer, right? Think about the customer, think about what I say all the time, customers have no idea what it is that they're doing.

That's not a knock on customers, that's just the truth. They don't buy cars every day. They don't deal with the numbers of car deal. When I the numbers, I mean like the figures and the calculations and the math and everything.

They don't have the reasoning experience that we have when it comes to looking at these things. So what are they going to do, Chris? Yeah.

Chris J. Martinez: Yeah, and you're right. You're right. Because they would have, you know, the salesman or salesperson probably really gave them that information day one, but then they slept since then and they don't remember. So I can see that. I could see that.

Frank Lopes: Sure, of course it's not relevant. Yeah, it's not relevant. Of course they don't remember. Why would they, why in the world would they worry about it? They could, you know, there's just, you don't worry about these things until you gotta worry about these things then your memory is horrible.

Chris J. Martinez: Yeah. horrible. You're like, what? I'm good. They never told me and then they got you on recording and they're like, ⁓ here it is. This is we told you and they're like, yeah, that's right.

Frank Lopes: ⁓ well I didn't understand. I didn't understand when you said that to me. See, is where I say, I applaud Mercedes-Benz financial for that because they understand that the potential for that to happen is extremely high. That could reflect bad on the brand. And just don't want to have anything to do with it. you know, good for them. And if Chase or or Santander or, you know, or anybody else wants to take that.

Frank Lopes: wants write that paper, God bless them, let them do it too. This is America, they can do whatever they want. Just understand, well, I shouldn't say this is America, you can do whatever you want, because that sure as hell ain't true. ⁓ that has a lie. ⁓

Chris J. Martinez: Yeah, no. Actually, there's some recent stuff that I didn't realize I couldn't do and now that I can't do it, I'm like, well, why can't I do it? You know what I mean? It's just funny.

Frank Lopes: Yeah, like why not? you know, think that's a whole nother show. I think that's whole completely different show.

Chris J. Martinez: That's a whole other show. Hey, well, Frank, it's been fun. It's been real. So what we usually talk about at the last couple minutes is now tie this all into together in a bow, right?

We talked about, Google coming out or meta coming out with the same kind of transparency type thing that, that Google's already announced. we talked about Hyundai and their, you know, court battle that they're going through right now.

⁓ We talked about the NADA, we talked about the car buying. How do we learn from this? How can we apply it in our current business today? And how can we improve or just be aware of what's going on?

Frank Lopes: I think it's pretty simple, Chris, like stop being, stop trying to be slick. That's really, I think that's really the message of all these topics that we see in everything that's going on today.

Stop trying to be slick. You were never slick in the first place. Okay, you're not that damn, you're not that sharp. You're just not. You know, so the politicians, politicians and the lobbyists got, all got you beat when it comes to that.

Okay, so you just, you ain't that slick. So stop trying to be slick. and start trying to do the right thing. Start being transparent. Start standing, you know, start standing behind your word. If you say something is going to be a certain way, make it be that way.

Don't do the whole put offers out there and hey, only give it to them if they ask for it. If they don't ask for it, don't bring up that type of, you know, stop all that. Stop trying to be slick. You ain't beating nobody.

You're, you know, the only person in reality that you're beating is yourself in the future. You're beating your future self because the customer at this point is broken down They don't really know what they're what they're doing.

They realize they don't really know what they're doing They just want the car the kids hungry. He wants his chicken nuggets. The wife is sick of looking at cars all day They just want to leave, know, so they buy you know, so they buy the car, but then they never come back They never come back.

So you got your 1199 Pro pack over there, know, Cleet, nice job. You got your 1199 ProPak, but the lifetime value of a customer in service can be as high as eight to 10 times the amount of gross in your ProPak.

And the dealership lost that. Now I know that you're saying right now, Cleet, I know that you're saying to yourself, you know, oh, well, I don't get paid all that money. So I don't really care about, you know, I don't really care about that.

That's a dealer's problem. That's it, you know, no dealer, no, no job, Cleet, you know. No dealer, no job. And if the dealer's not making money, guess what? When you go into him and you ask him for an extra quarter point, he starts to, you know, he's on the phone texting me saying, hey, can we put an ad on Indeed for a new general sales manager?

Okay, that's what winds up going on. So you're not really winning. So transparency, stop trying to be slick, be upfront, do what you say you're gonna do. You know, provide the absolute best experience because the bar is still dramatically low.

right now, right? It's still low. So provide the absolute best experience and that's where the win is going to be.

Chris J. Martinez: I agree. think of these stories, you think about it, the, the, them, some of can feel like shortcuts, but reality, it just sounds like a lot of it just seems like work. Like when I think about used cars, right.

NADA numbers that, you know, they just, they're, they're just like, Hey, look, I'm going to fit in this little box and this is how we're going to make money. And I think that, you know, they've taken shortcuts or they're just not willing to put in that effort.

I think that's where. They should learn. mean, those those to me, those those are the real tactical things that they could do just today by improving. But then to tie in what you're saying, don't take shortcuts on on those on those prices.

And even though you might think that you need to because that's what everyone else is doing, you don't have you you don't have to to do things like that that are going to compromise you long-term. know, there's a book called the 48 laws of power and, and, ⁓ it talks, one of the, one of the rules is simply that protect your character at all costs and, your, it's character at all costs, but, it's basically just saying like, look, you have a reputation, ⁓ you need make sure that you protect it.

And, and that's it. Like, you know, the worst thing do, you know, I think what's his name?

Chris J. Martinez: Berkshire Hathaway guy, what's his name? Buffett. says, you know, 20 years to create a whole legacy five minutes to ruin it. And that's that's really the game you're playing. If you're trying to cut those corners and not do things the right way. But I think the used cars is really what you need to do. If you're a dealer today, figure it out. You know, you know, I've I've written some books. I know you've written some books, I mean, on topics about used cars.

Chris J. Martinez: pick that up, it'll, it'll help you, you know, it's worth all the money to, learn because you're, costing yourself millions of dollars. mean, 20, 40 cars a month. mean, does that do for your service department? Your, your team ⁓ all way around. I mean, it's just, it's long-term play that is only going to benefit you and your company. So Frank.

Frank Lopes: Yes. Right, look Chris, velocity selling, number one, right? Velocity selling, number two, overall value of a deal, not just the front end gross, the overall value of a deal. Sometimes ⁓ that equation, that first line could be a zero, or it could be a negative number, okay? But when everything else picks up, and then you look at the third thing, which is the lifetime value of a customer, right?

Frank Lopes: Chess, not checkers. I know four or five, eight, 10 moves ahead. Not just, ⁓ how do get my piece as close to the back row so that I get kinged? Like, come on, man. Like, come on. These are the things that right now, without a doubt.

Chris J. Martinez: I agree. Well, Frank, I appreciate your time. Thank you for coming on. I think this was fun. think, I think our audience will get some value out of it and, ⁓ everybody can tune in next week again. but Frank, thank you for, ⁓ stepping and really stepping to, bring a lot of value to the audience.

Frank Lopes: No, it's my pleasure, sir. Anytime, anything for you, number one, anything for you, only for my good friend, but also for my dealer partner and ⁓ in ventures, business partner as well. So very, very, very, very happy to do anything for you and as always, very happy and blessed to be able to bring value to the audience. You're doing amazing things here, Please don't stop. Keep going.

Chris J. Martinez: I appreciate it. Thank you guys. Until next week, we'll see you guys.

The Truth About Car Prices: Tariffs, Loans, and the Illusion of Affordability

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