NIADA Automotive Climate Forecast

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“I’ve never been to a 20 group that I didn’t pick something up that I didn’t come out of with more knowledge.” -Herb Anderson

Gordon Tormohlen joins us to share his insights on the evolving retail market in the automotive industry. He highlights the importance of building relationships with customers instead of focusing solely on transactions. He discusses the role of technology in making it easier and more convenient for buyers to purchase cars online and discusses the power of the National Independent Auto Dealers Association (NIADA).

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⏰ Highlights:

00:00 Introduction

6:50 Automotive News

10:00 Jury Duty

27:30 Scott Allen

35:00 NIADA Certified

44:00 Community Involvement

52:30 Next Five Years

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Transcript:

Herb Anderson:

Welcome to another episode of the Dealer Talk podcast. This is your host Herb Anderson. Thank you so much for tuning in on Flying solo today, But that’s okay because we got a great guest. Mr. Gordon Tormohlen. Did I get that right man?

Gordon Tormohlen:

It was pretty close. Yeah, I mean, I always give credit because with a name like Tormohlen.

Herb Anderson:

Right on? Man? Well, we’re very excited to have you on the show. You know, the season has been very very education. I was just talking to charity about this during our last session, just learning a ton about the independent side of the business and just be able to partner up with the NIADA his for the season has been super educational for us, so thank you, thank you. Yeah, we kick things off here with with an intro. So tell us about you.

Gordon Tormohlen:

Well, I’m your run to the mill, humble lovable use car dealer with fifty years experience in the business. So my dad started in 1940. Our family has been in car business for eighty three years. I came along in 1973, so I’m running up on fifty years, which is just weird to me, started on the franchise side At the, at the time that I joined in, My dad was a Chevelle dealer. He was in with a partner, sold out of the partnership and he and I bought a bankrupt Risler store. Together We ran that for about twenty years. a lot of successes onto started out with ten employees, wound up with 1972. By the time we finished,

Herb Anderson:

Wow,

Gordon Tormohlen:

I had an internal theft which is less than fun, I assure you, but we determined that it was wise to sell the franchise to bail out and fix that situation, and when we did, I had a small use car by here, pay her operation that we have been running since about ninety two, and the new guy didn’t thing to do with it, so I just moved two blocks up the hill to that and I’ve been doing it for twenty years now, So that’s that’s the quick view anyway,

Herb Anderson:

Right on so I’m always interested like we’ve had a couple of people here that have been on both sides, and I’m always interested when. when I have people with your experiences to ask about what is your? What’s the bridge Man between independent and franchise? How can? what’s the biggest lesson? and how can? More importantly, how can they collaborate?

Gordon Tormohlen:

I think first of all, the bridge, the real opportunity for collaboration where they really are very common. we’re all in in the transportation space. Obviously okay, A new car store is a great training ground because they are very system of tis. There’s a structure to it, lends over to the independent side, But honestly, the most successful new car guy is the most, the successful retail guys, most successful by her, pay here last year, pay here, guys that I know are true to their core, their entrepot, Or so, whatever the business is, they determine how they’re going to structure. They’re going to brand it how they’re going to build it, and they work up from there. It’s far harder to do to do that in a franchise system than it is independent,

Herb Anderson:

Sure, you know, Do you think it’s wise for? And and I know this stuff happens, and you know the better ones that I know, like for example in the Las Vegas, or you know, California, or even Colorado, regions where I consult a lot. There seems to be partnerships with some independent dealers in some franchise dealers like they’ll send people to each other and things of that nature. But do you think it’s wise to have a some sort of program where we help the customer graduate Right? So maybe they don’t have good credit, and then they start at the buy here, pay here, and they move up until they go and they get their brand new car right, Something like that.

Gordon Tormohlen:

Hundred percent, and so, depending on the market place, and in your offerings, okay, you can graduate a person from just you know, the bottom level of I’m stuck buying cash cars because nobody ill help me into A by her pay Here under that agreement do it well into secondary into conventional banking and move up, and in terms of quality and newness of vehicle at the same time, it’s a. It’s a long process that doesn’t happen in six months, But

Herb Anderson:

Sure,

Gordon Tormohlen:

they’ve got to prove themselves and they’ve got to work their way up into that world, But we also see in our experience and we’re very relationship based with our customers. We’ve got. We’ve got customers been buying this from us for 20-25 years, and they prefer the way we do business so well got, and we’ll get him a newer unit or they’ll just continue to buy here, pay here because they enjoy doing business with their friends And so it’s the relationship kind of determines where they can go with him.

Herb Anderson:

Yeah, now for sure. That’s another of the advantages I see with the independent side as a whole. If it has to be more relationship focused for the most part, I mean, there’s some. There’s some situations where where that doesn’t transpire, but for the most part the one that I’ve worked with and it’s faulted with their super hyper, focused on the experience more so than franchise dealerships.

Gordon Tormohlen:

Yeah. I think the franchise guys will presume that they’ve got actual number of customers coming, And we did this when we looked up to Chrysler store coming out the share relay background. I wasn’t sure what the crise was all about at that point in time. You know, Coca was a big deal with Christ back in that era, But what really is this? and we started looking at customer base and how many people were driving them within our county, And suddenly we realized the customer base was as large as Chevrolet, but they were going elsewhere because they weren’t being well cared for. So we, we focused everything on on care, Customer and relationship, and we pulled that business back and that store really worked well

Herb Anderson:

Yeah, so one of the one of the bigger advantages that we’ve talked about here have been twenty group relationships on the by her past base side on the independent side. Do you participate in that? Do you like that experience?

Gordon Tormohlen:

We have right now. I’m not in a 20 group, but it has high value. NIADA has over three hundred dealers in twenty groups right now, And they’ve got very expansive program. and then they operated by business model. So if your lease here, pay here if your secondary finance, if you’re by her, pay here if your conventional retail, If you’ve got service operations, we’ve got a finance group just for F and I, managers things of that nature and all of that is specific to what you’re trying to get out of it. But having that board of directors and other Opinions really s helpful it’s key to success.

Herb Anderson:

Yeah, that’s one of the things I was talking about. I think was Bill, one of the moderators for an idea, and I think that that’s a. I think two things for just from conversations, A lot of decision makers on the independent side that they’re concerned about sharing their information, and I think that that’s a big turn off for some of them and I wish that that was that they had more understanding or that was. there was just a better way of how the break that down. Because there’s really no A risk right. You’re talking to people outside of your market. You know what I mean. it’s just a different set up and to…

Gordon Tormohlen:

set up completely different as far as geography and all the rest of it.

Herb Anderson:

Yeah, number two is, I’ve never been to a twenty group that I didn’t pick something up that I didn’t go like. Oh man, that’s a really good idea. You know what I mean.

Gordon Tormohlen:

Oh, absolutely. I mean, your cost of going to a front group meeting is about five hundred dollars. Put your hotel bill and all the rest of it. It’s pretty easy to get your money’s worth out of that and make money on every meeting. And that’s the key. That’s what you’re looking for. If it doesn’t drive value to you, then you need to find a different group.

Herb Anderson:

Yeah, for sure, so highly encourage. You know, decision makers tuning into. Really, give that a shot because I think They’re missing out.

Gordon Tormohlen:

Yeah, it’s a big thing.

Herb Anderson:

Yeah, okay, kind of moving the conversation. I’m curious to get your perspective on 2023. What are your thoughts?

Gordon Tormohlen:

You know. it’s going to be weird year. Of course, we’ve been saying that for three years

Herb Anderson:

Yeah, right,

Gordon Tormohlen:

what we’re finding thus far and I’m very data driven. When we do, our sales to forecast will well forecast three months out week by week. From what we anticipate in January, we were pretty close to what we had modeled. We came up a couple of units short. February has been very spotty and it’s not uncommon if you, if you, if you take a look and really consider what your customers doing. what’s happening in their life. Okay, They’re finding it that. then There’s a delay on tary funds, and more folks are being audited because of the moneys that they were given over the last couple of years. Now they make sure that they were reporting correctly things of that nature. So that’s holding the market up. but we see demand is pretty steady. and so I think you know what we don’t capture in February will probably capture in March, and ensuing for the remainder second quarter. It will be interesting. I think by mid year will know if if the mentality of recession has really caught up with folks,

Herb Anderson:

Yeah,

Gordon Tormohlen:

And I think it’s gonna, it’s it’s going to fall in different places. Herb. In terms of what you’re marketing to, Um by her pay here we’re fairly steady. We’ve always got an income stream based upon the interest that we collect in things of that nature, So that protects us a little bit we can. We can ride the ebb and flow a little bit more great retail. It gets little panicky when you get to the end of the month and you’re at sixty per cent of your goal, So it’s it may. I think, at least by mid year we’ll know kind of where that’s going.

Herb Anderson:

Well, let me ask you this. Do you think an official recession will be in our immediate future?

Gordon Tormohlen:

I think in reality, we’ve been in a recession for probably at least one or two quarters. And so I think now It’s a matter of how much it’s promoted by the news media versus how much normality people are able to find their lives. You know, food prices, things of that nature are coming down, so that gives consumers a little more disposable income and a little bit more confidence. So far as that goes, and is very carefully watching that data and analyzing it so that you know we’re able to report to dealers what kind of an economy they can expect on a quarter by Quarter basis. So it’s I don’t know. And there are differences marketplaces too.

Herb Anderson:

So do you think I think that that’s beneficial for the independent side? Right because there’s going to push some. Some credits are probably, we’re already seeing you know, six fifties, even six eighties. In some cases, some cases, excuse me get turned down, so I think this is going to help a lot of independence by her pay here dealers kind of capture some of that business. What are your thoughts?

Gordon Tormohlen:

I fully agree with that. I think independent dealers are going to have a good year regardless, on the whole, but the thing that that each dealer has to determine within their market, Okay, so I’m a small dealer. I try and keep my market radius about a thirty mile zone around our business. If we have to do balls and re possessions, it doesn’t take half a day for our folks to get to them when we take a look at the customers that come in to us during times like these. If they’re traditionally conventional buyers, and so forth there More picky about the car. there will be less appreciation of our program. In short, they’re not necessarily our own long term customer, so they take a little bit different handling in order to cultivate that relationship and help them to understand what we’re going to do. self value of our program, things of that nature.

Herb Anderson:

Yeah,

Gordon Tormohlen:

So there may be a spike that then eases off in two or three years. Based upon that,

Herb Anderson:

So yeah, I think that that, even with, even if we do go into some some down times when I’ve been talking a lot about on the show is that you know it’s not like O eight or nine where there wasn’t any customers and we have this surplus of inventory. I think the thing that that’s really on our side in all aspects. Obviously you guys have the interest. The interest side is obviously beneficial for again for them, and buy here pay here, but as a whole as an industry, I think the fact that we have pent up demand and we don’t have nowhere near the levels. I mean, we’re talking about millions of cars that are missing

Gordon Tormohlen:

Exactly

Herb Anderson:

right and there’s pent up demand, People that didn’t transact during Covid because they wanted to wait. or you know what, I mean, they weren’t in cycle or whatever. So I think that that’s the big key differentiator and one that I think we’re kind of not taking into consideration when we’re talking about, You know, forecasting our predictions.

Gordon Tormohlen:

Like you’re exactly right. It’s going to push values up on vehicles for a longer term. Was a bubble of what, five or six million units that never made their way to market as new vehicles, and it will continue to press its way through, you know, late models and C pos, and then into mid range cars, and then eventually down to the buyer, pay her market, and those will be elevated Because of that, And that imposes a number of pressures. I mean, there’s the pricing, but particularly for by her payer customers, its payment pressure down payment, you know, man Things of that nature. All of those things that are going to factor marketing re gonna have to find ways around it. What the particularly the by her pay? Here you really does not want to do is purchase an elevated car and then extend term just to keep the payments comfort the customer, because when you do that, you increase the probability of mechanical issues, and so forth they’re goin, affect your customer relationship, so you want to be able to get the customer locked down into a short term to understand the value proposition of paying it off quickly and not paying extra interest and all the rest of it, So it may impose some market factors in terms of how we sell and how we present our value proposition, and that,

Herb Anderson:

Yeah, for sure. So the other thing that I wanted to kind of pick your brain on just to kind of get a better understanding. I don’t know if this is a fact or not. I would assume that as time progresses, Just like on the franchise side of things, it’s going to be more and more the case. But what about digital retailing selling to customers online? Is that something that you? that is at the forefront? Is that something that you run into on a regular basis or not yet?

Gordon Tormohlen:

I think it is very much on the forefront of the retail market, So if I’m just doing conventional finance and I want to find buyers and I want to make things easy and convenient for them. I would absolutely be looking at that all day long. I think it’s and even in our state, Carvana is working with the New Car Association right now to pass legislation to make it easier to sell on line, and I had a lot to do with accepting digital signatures and things of that nature. I would one hundred percent be on board for that. It’s a little different animal by here, Payer Because we want to form a relationship That customer to spend time building that relationship, so in that regard, sometimes he can pay a problem. so particularly when we’re If we’re I would never go out to the Chicago market, which is a hundred and twenty miles away from me, and just start retailing cars. I could put a lot of them out, but then I’d have to find them and all the rest of it, so actually seeing that person and verifying information in person is a high value for me as a buy here, pay here, dealer retail different animals, I think also, And NIADA is doing a lot with us right now. We’ve got a new certified pre own three sixty program And it’s a very dynamic program. There’s a lot going on with it, but one of the things that will soon make its way into that is you know after the CPO programs online and we’re doing digital inspections, We have a network of sixteen thousand places where people can go get their service through Technet, which is a division of Advanced Auto. And then we’ll start doing concierge deliveries, and that’s right down the online and making it community for the customer, wherever they may be. So

Herb Anderson:

So you do run into it? Do you have customers that are calling you like you know you’re in. Where are you? Where’s your store?

Gordon Tormohlen:

Little town called Freeport, Illinois,

Herb Anderson:

So in Illinois, Maybe somebody I don’t know. Seattle or something that finds your car online or whatever? Do you get people like that calling you like? I want to buy this car. Ship it to me. sort of a deal.

Gordon Tormohlen:

It’s more regionalized, but occasionally I also dabble with some classic cars and so forth. And and we sent that was all over the country.

Herb Anderson:

yeah, so for the right car, Of course, you’re going to get people coming everywhere.

Gordon Tormohlen:

Exactly

Herb Anderson:

I’m just fascinated by the whole aspect. It’s one of my biggest pet peeves on the franchise side, Because when they talked about it like not, they, the vendors that come in the pit You on these products they talk about it like. Oh, this is the Carvana dancer to Carvana, But it’s not really man, because you’re It’s not shipping the customer of the car to their house. You know what I mean, so yeah, they can start, Deal, or work the deal in some way she perform. But we still want the customer to show up right. We still want the customer present at the at the dealership. And so, um, I don’t know, man, I don’t think that that’s fully baked yet. I think.

Gordon Tormohlen:

And here’s

Herb Anderson:

Go ahead.

Gordon Tormohlen:

here’s little bit of wisdom or lack thereof. Okay, but if you stop and think about what it takes to transact business, you know you’re talking out an object that somebody needs. It may cost twenty or thirty thousand dollars. or maybe it just cost eight thousand dollars. Whatever the market space, it’s a significant amount of money for that consumer. Okay, And so, in order to sell that and make it worth their while, you have to provide sufficient value that they’re willing to part with their money. The value exceeds what the money is worth. Simple proposition, Okay, In my years in the business and I was raised by a guy that you know left good jobs because they treated customers poorly. Okay, but if you’re on a transactional basis, you can get on the Internet and you can sell them for a hundred dollars over invoice, or you know ten. You know, ten thousand dollars below Kelly, Blue Book, or whatever the case might be, you can make it sound good and you can transact a lot of business. En. you find the kind of complaints that you know some of the car rode. Some of these other folks get where The car was missing a lighter. and it’s a piece of junk and ran around around. Know nobody told me about the den and the fender. You know. those kind of things will give you poor ratings That cause your headaches because you’ve got to find a way to make right with them if instead you pursue a relationship which does require that you spend some time even if you do it on a zoom call or whatever, You’ve got to spend some time with that consumer and get to know them. and if you spend invest that kind of time you, you’ll get a higher growth and you’ll stay in business longer. That’s the. That’s the heck of it. So

Herb Anderson:

Yeah,

Gordon Tormohlen:

it’s essential to be relationship, not transactional,

Herb Anderson:

Yeah, you’re bringing up a really good point man. there’s there’s kind of like. Um, here’s there’s a. How do I say like there’s there’s a piece missing to that philosophy. Um, you know, we’re really going to do this with use cars when there’s the propensity for issues is so much greater. right. A new car is different because you can go and test right that your local dealer. you know you like the car. Now it’s just a matter of the features as have this color, this trim, whatever doesn’t have these features and you can get your car that way.

Gordon Tormohlen:

Even even on a new car, Herb. I mean, when we have the new car store, Okay, we trained our sales staff so that in concept they sold four things. they sold their personal integrity, sold the brand, which is why the people came there, but they also sold the integrity of the Termolan brand, and what our dealership did, That was different than others. Then they sell the service experience. If you’re doing nothing online, but here’s your car. Here’s your price. you know, email the paper work. You don’t get that value proposition You know, really conveyed to your customer, and it affects, got profited, affects their loyalty. When you watch loyalty go down is a sign that we’re doing things transactionally. We’re not paying attention to what the customer really wants. So effective in a new car store, Very effective in a use car store. Regardless if your proposition is CPO, regular retail, classic cars or buy your pay, her is spending time with a customer making them friends first providing them with value that exceeds. Is he? The whole thing begins. And I would argue with you that that’s the key. I see all these kind of articles there A minutes. Many lately, But you know industry experts who say we’re going to transact business in twenty minutes. Really? Would you spend forty fifty grand on a vehicle in twenty minutes Because I here act wouldn’t for ever is when I spend an hour and half two hours or more with a customer. They trust me. I trust them, Were talking in the exact same level Because we’ve both invested the time to do that and that’s when you get to the point where they’re just pleased as punch, and they led. They’re proud and they’re happy at what they spent because they’ve got something that they understand the full value of

Herb Anderson:

Yeah, yeah, for sure, and I agree with that. I agree that we’re focusing. We’re probably focusing on the wrong thing To a certain degree we should be. when we talk about the experience. It’s not so much. Sell me the car without going to the dealership. It’s maybe making that t hat shopping experience better right while I’m at the dealership. Don’t make me wait for the five hours like you said. Bring it down to something more realistic, like an hour and a half two hours. If we just focused on that itself, I think that there’s more value in that for that Consumer than it is. Can you ship my car to me without me ever having, Because the reason they don’t want to go to the dealer ship is because they feel like you’re wasting their time.

Gordon Tormohlen:

Well, and you know what has to happen before any of that occurs is as a business person, as an entrepreneur. You’ve got to know what your market is and what you’re trying to accomplish. You’ve got to have a vision and a mission statement in place, and you’ve got to have a structure, a selling structure. You know, this is what we’re going a do. Maybe in our store, we’ve got thirteen steps to a sale. Okay and begins with meeting and greeting, But it’s counseling and it’s shown on the car and it’s confirming that. That’s you know. we’re answering the questions. They have all of these things. It’s if you take an hour and a half of a customer’s time and it’s not high value. Now you’re wasting their time and they probably want back. But if it’s engaging and it’s high value and it’s responding to the concerns that they have, You’re gonna sell car?

Herb Anderson:

Oh, yeah, I know for sure, But five hours.

Gordon Tormohlen:

No,

Herb Anderson:

what’s the average? are now four to five hours. That’s too much.

Gordon Tormohlen:

And it’s hard on everybody.

Herb Anderson:

Yeah, Yeah, for sure. So no, that’s a great point and I totally agree. I think that that’s better time. because the other thing too, and I’ve talked about that on the podcast as well, But we’ve dealers have been selling cars online for a really long time. That’s not like this thing. Like they don’t promote. It is the issue and they don’t want to, right. They don’t want to like. Go out with them. So like they want people to go into their into their place of business for you. For what you were talking about earlier, They want to build at loyalty. They want to show them the service department. they want to show them He. welcome to the family, Sort of a deal. You can’t do that, you know through a screen, right,

Gordon Tormohlen:

We build touch points into that and we don’t do as much with the independent Storcos were smaller, but when I had the larger store and we were running a hundred units a month, and all the rest of it, we had touch points. as you tore them through dealership, we had a cookie bar, and that became of all things a real selling point for the dealership, But you know we gave cookies out when they’re sitting in the lounge. Right went through twenty seven thousand cookies a year, so a couple chubby customers. but know that was at stopping In and then you go into service and you introduce them to Harold and John, the guys working at the desk. And and they’re going to take care of you when you come in. We also do free pick up and delivery. If you don’t have time, we’ll come get it, you know, and then walk them around the corner and we show them some of the tectomers and stalls, but I also had a an information board up there that had to quote of the week and our customers satisfaction numbers, and some productivity data so that people could see Hey geese, these guys when they fix three hundred and twenty cars last week. Oh, my gosh, you know, and all of that builds value You, and it makes sense to the customer, so when they what you want to do in every situation, whether so by her, pay her store, new cars or Cpsoror, whatever the case might be, you want that customer. When you actually sit down to talk about price and figures and payments and all the rest of it, you want them thinking in the back of their head, man. I sure hope this works because I really like this place. This guy is deep, and now you’ve sold sufficient value to make it worth their time and their effort and their money to purchase the vehicle.

Herb Anderson:

Yeah, I love that that’s great. all right. So moving things along You. you talked about something. you talked about a certified program which I’m super super interested in. I had mentioned early on when I talked to Melanie that I used to be. I used to work for Cox automotive and one of the I was a rep for Autotrader KBB, and during my time with them they had, they were going to do the certified thing through KBB. And we actually had a couple of pilot stores here in Las Vegas that I thought were Under my, You know, under my Book of business, and so I was. I was personally excited for that because one. I thought. Obviously, this is an opportunity for us to go help some independent dealers with something that’s truly unique and different into. Um, I think it kind of levels out the playing field a little bit right. It gives. it gives the independent a way to compete with the with a franchise on the on the certified level, And I’m all for competition, man, I think competition is great we all win when we compete. yeah, for sure, and I think that that it motivate us, you know to do better and motivates the industry to do better. Plus, I think to certify program is going to do a lot of work towards the stigma issue that we have in this industry right. So because if we’re doing it correctly than where we’re making sure that our cars are standing tall. and that’s just helps. it helps our image. So you being on both right, Having been on the on the franchise side and know what that entails to certified a vehicle, and now seen this program. how do they compare? What are your thoughts? You think that it’s apples to apples.

Gordon Tormohlen:

I’ll tell you what, Herb. I think we’ve got a superior program

Herb Anderson:

Damn okay.

Gordon Tormohlen:

I’m not pulling. Let me give you a little history in NIADA CPO. Okay, We got into the CPO business back in the early two thousands, and it was an inspection designed by a group of dealers, and we had a Warranty company working with it and now we had several warrant companies. Over period of time, it all found that they know. Under their standard program it only worked in under a certain niche. Okay, so we went back to the drawing board and Lo to Is our past chairman, really took ownership of this thing And it was his brain child and he worked with it and he worked with the folks at NIADA and the staff. What they came up with was a program that offers you know steps that are important to a deal, or you can do a, three months, six months, twelve months, basic warranty on the car, all of which are upgradeable and upsellable to a program that’s far more profitable for the dealer and for the company in his service through four different providers. So you know Southwests your company. You can use them if you prefer. I can’t remember the others right now. I’m going blank. But if you, if you prefer a different servicer or if they provide more value to you as a dealer, you can choose who you’re going to have for want company. It’s still off for this program. Then it goes into a partner to a company called Carketta, who does an outstanding job. They provide a digital inspection, so everything you gene this vehicle will be photographed with proof that this is what we did this, And so forth, all of that can be uploaded to your website, so that when you’re know, when people are just looking at the website, it says C. po. Oh, my gosh, they did the breaks. Look. that’s what a tirade is. All of those things are documented and and pictorially put on the website so that people can see what happens then. after the vehicles sold, the servicing obviously can take place at the dealer ship, Because you want to build fixed operations if you

Herb Anderson:

Sure,

Gordon Tormohlen:

have that business. but if you don’t, it’s service through Tech Net, which has sixteen thousand eight hundred shops Across the nation. There’s no franchise that has that many shops to go to. Okay.

Herb Anderson:

Yeah,

Gordon Tormohlen:

Now compare all of this with a factory certified, which limits the miles to eighty or a hundred thousand miles, And it’s got to be six years old or newer, and we’re just we’re going to clap it on there and the cost is six hundred dollars to the dealer and you’ll pay extra. Okay. that’s a good program, but this goes to ten years old and up to a hundred and twenty five thousand miles, or in the verified program, twelve years and a hundred and fifty thousand miles, So you can literally get a certify Vehicle deeper into the market place where the prices are more attractive.

Herb Anderson:

Yeah, for the duration of what people are keeping their cars for? Because what’s the mean year now is like twelve years so there’s a lot of options. There’s a lot of consumer focuses And it came because we turned our program around and said Okay, we need to focus on what dealers want what consumers looking for, And how do we make those two work together

Gordon Tormohlen:

that’s how it was developed. We’ve had a changing focus over the last two or three years to dealer driven type programs, And this is one of them that really is kicking that off. So this is dealer driven so they can increase profitability and longevity and loyalty of their customers.

Herb Anderson:

Gordon. let me ask you. How do you see that it sounds amazing First of all, Let me just say that, two things that you said that got my ear, One, the car network like sixteen thousand shops. That’s I mean like that’s like you said. That’s untouched right. I mean it’s that’s like going to like having. I don’t know, like pet boys or something like that. Be your your shop the thing is the miner situation. That’s pretty impressive. Um, and you know that doesn’t exist in the franchise side of the business, so that’s That’s unless you have something internal, or you know, like a TCA or something like that, but

Gordon Tormohlen:

Most factory programs are limited to an off least type unit, which is great, but doesn’t qualify everybody’s budget. This way you can.

Herb Anderson:

Yeah, so it’s very attractive from a consumer standpoint, No question, but how do you promote that? That’s my. That’s my biggest thing, And that’s why KBB canceled their certification program And that’s trusted. Um, You know brand in the space. How do you promote it to customers so that they see the value in it?

Gordon Tormohlen:

There are a couple of things that have to occur there, and hereby to be telling you stories If I said, we just got it all figured out and it’s in beta stage. Now we’ve got I think somewhere around fifty dealers that have signed up since the first of the year on this program. So, but one of the things is we’re being careful about the dealers that we signed up. I don’t want the guy that went out and bought five eighty thousand mile, BMW. and he’s just looking to warrant you the thing to get it sold, because that’s going to destroy the program. Okay, the dealer that understands exactly how to market CPO And how to build value for customer and things of that nature. The other side of that is gaining acceptance from the car, gouges and outer traders of the world, and very simply we’ve had conversations once we have mass out there enough that they’re satisfied that it’s a sincere program, which won’t take long. maybe three to six months. Then they’ll start treating this program on par with factory certified programs, and I think that will be a great launching point at which we can really let this thing fly because consumers will now know. Hey, Use car, guys got their own thing, You know, and well know it works when people walk into the store to ask if you’re an NIADA member. And do you have CPO

Herb Anderson:

Yeah, I know for sure, and I mean if they. if I think, if the customer, if we get the information to the customer, like you know basics of the program. It’s a no brainer why would you not do it? It’d be dumb. not to. I just might. my kind of where my mind goes is how the way that this is going to be promoted needs to be There has to be a, you know the right approach for the consumer to have buying into it. You know what I mean.

Gordon Tormohlen:

Are you know? There’s marketing kids and things of that nature that we’re working on, But it takes a while to get that snowball rolling down the hill where people

Herb Anderson:

Sure,

Gordon Tormohlen:

have notoriety and they understand what it is.

Herb Anderson:

Yeah, so one of the things that I had asked before and I couldn’t get an answer. I don’t know if maybe you have an answer, But is this only available for independent dealers? It must be right.

Gordon Tormohlen:

It is only available for NIADA members who are independent dealers. So NIADA has approximately fifteen thousand member dealers nation wide, But we’re working in a market space that you know legitimate. You know. not the not the junk yard that has a dealer’s license, but legitimate independent stores. Market place is north of thirty thousand independent businesses across the nation, and

Herb Anderson:

Yeah,

Gordon Tormohlen:

I’ve learned by being on the board for a number of years that that independent is the number one factor that you can count on with these folks. Some of them just don’t Join things, And so forth that’s unfortunate, and it’s to their own detriment. But the folks we’re working with. That’s who this program is gained is really aimed at.

Herb Anderson:

It’s funny to me that we don’t have like an independent, like an auto trader. But for all the independent dealers, you know what I mean.

Gordon Tormohlen:

I know there have been attempts at it. Of course, then the new car guys want to jump in because they think they’re missing out on something.

Herb Anderson:

Right. there’s but I just for the sheer volume, like there’s this company I’m not trying to promote and I haven’t gotten any money to foresee this. You know, just fair disclaimer, But there’s cars for sale like their ninety nine dollar website, like that whole concept and there it just works because of the sheer amount of volume of customers that you know what I mean that are on there, and I guess there is a little bit more independent because if you have a website you’re on there, but I have seen it Franchise dealers on there as well. so um, I don’t know. I just think like you know, if there was spaces like that where consumers and independent dealers were connecting, that would be a great place to. Um. you know that d be a great platform. Kind of kick this thing agree, off.

Gordon Tormohlen:

I mean, even when you look in the franchise space, you know they’ve all got the factory provided website. But the smart ones have independent websites for the huge co operations where they’re heavily invested in AutoTrader, and all the others You know. There’s a handful of those spots Edmonds and KBB consumers know to look. And it’s a question for the deal or always of how much money do you want invest and what you are going to get out of it. And will the consumers be there? You know, there’s a lot Talk right now about what’s going to happen in Facebook Market Place and things of that nature. but you have to constantly be looking for customers.

Herb Anderson:

Yeah, speaking of Facebook marketplace, I wanted to. This is a perfect segue. Actually, wanted to get your thoughts on this because I’m thinking about peer-to-peer man, I think that there’s the last numbers I saw was 45% of transactions occur peer to peer and the peer to peer experience that exists right now is just part of my friend. Shit. it’s awful. It’s is really bad.

Gordon Tormohlen:

Yeah,

Herb Anderson:

Um, like my girlfriends, been trying to sell her vehicle for the past couple of weeks, and we listen in on offer up horrible experience To list it And then you get garbage. First of all, I got spammed immediately like Hey, put your vin number here and the people telling you like Yeah, I want to buy your car and, question, and then you get down to the deal Nd they’re like Hey, I need you to go to this website and upload your vin number on this thing and you know that they’re just trying to get you to. You know, Maybe they’re getting a commission or something. Who knows? Um, there’s no security, right dick? You don’t know who you’re dealing with. They connect you to your to your social media profile. So the people that are looking at your car now where you live or you know, it’s just a weird. Um, and there’s no. it’s just awful. it’s just awful.

Gordon Tormohlen:

It’s the Wild Wild West Is what it amounts to. I mean, you know we all know on the internet there’s fantastic stuff and there’s stuff you want to stay away from just in your personal life. Well, it’s the same in terms of marketing your products and your business and all the rest of it, And I think the one thing I don’t have an answer on her, but the one thing I would say is that if you have an association of dealers like N, i d a where you can, you can meet the industry thought leaders and the vendors and the folks that are trusted, and have some track records that you can At. I think you tend to have a better experience, but you also as an entrepreneur, you have to be looking. I mean fifteen, twenty years ago, I wasn’t worried about. so now I know what it is.

Herb Anderson:

Yeah,

Gordon Tormohlen:

I mean, say, like you have to seek education, And now, as of August, I would have been fifty years in the car business and starting when thirteen. So okay, but you know the things that I thought back then are completely. You know different than what the reality is in today’s market. It’ll be different again five years from now. Regardless of the amount of experience I’ve got. It only takes me so far. I’ve got a constantly reading and learning and looking and trying to get better. That’s where your association steps in and really helps you.

Herb Anderson:

Yeah, for sure, so really quick cause I want to. I just want to ask you this one question about this thought, but don’t you think that? Um, it’s don’t you think that if a company focused on the experience of selling your car peer to peer, that would be something that that could potentially be problematic for the industry. Like made it easy. Maybe a step by step. Here’s how you do it. Take the photo upload and, do it this way. Do the video Get a bill of sale with the customer at the police station. You know what I mean at the their design, their designated parking stuff, and like, educated the consumers and how to do that. You know what I mean like I don’t know, man, like, I just think like it’s so bad that it’s just right for somebody to come in there.

Gordon Tormohlen:

I think there’s an opportunity there, but I don’t know that there’s anybody has prepared to do that. You know, Eva tried to step in and you provide some of that And it’s and it’s fallen apart because the competition came up with better ways And you know, and then it’s so it’s I still. it’s It’s the Wild Wild West. I mean, I don’t think there’s anything that’s just going to be the magic cure for it.

Herb Anderson:

Agreed. agreed. but anyway, maybe we should build it, Gordon, you and me, man. let’s do it.

Gordon Tormohlen:

Absolutely put that on the agenda for our certified master dealer program to get that development.

Herb Anderson:

Okay, hey man, thank you so much for doing this. I really appreciate it. This’s been a fun conversation for me. There is one question that I ask everybody that comes on the show. But before we get that, I do want to get your thoughts quickly on Carvana. What do you think? Um, you know like overall, what do you think about the whole situation?

Gordon Tormohlen:

Wow, that’s a lot to unwrap. I think, Just like we talked about earlier, Carmina is predicated upon a transactional model. Okay, and so for them, in order for them to succeed and do the volume, they’ve been paying too much for use cars. Well, guess what. Now you know. Now they come up and they’re going to come because market values are coming down somewhat on use vehicles. in the process. They’ve not, you know, I’m one of the states where they got their license suspended For quite a period of time. They apparently works out my other sectary state now. But if you can’t handle getting a title to your consumer within thirty days, or whatever what the heck are you doing? They don’t have solid processes all the way through, so there’s something missing there. and until they address that, I think they’re very very. If they brought some great things to the market place, you don’t necessarily need a vending machine building in Freeport, Illinois. Okay, but they got notoriety doing that N. N. They’ve built their web presence to the point where people can transact. It’s just the details fell apart and there was nobody there to handle the customer service aspect And now you’ve got complaints, so they’ve got some work to do if they’re going to make it. You know, the other side of that is with a capitalization like they’ve got. that debt does roll around and catch you sooner or later.

Herb Anderson:

Yeah. Well, there, I was predicting that they would fall for bankruptcy yet before yesterday, because there quarter leads number came out, and I thought that they would. It would, just that, would be seven point six or seven point one billion dollars in debt.

Gordon Tormohlen:

Yeah,

Herb Anderson:

I don’t know how they managed to keep that going,

Gordon Tormohlen:

Well, I think automotive news today showed that they were in a position where they lost pretty close to eight dollars per share. I mean it’s yeah that’s not a good thing.

Herb Anderson:

Yeah, no, for sure we had. We had Steve standing on the program here for special Carvana episode. He wrote this article back in twenty seventeen, predicting not the way that it fell, but that Carvana could fail because it just from a math standpoint at, didn’t pencil Um, My thing with It Is what happens if let’s say that it goes down. How can dealers benefit from it? There’s got to be a way that can be leverage. I mean, there’s going to be a bunch of inventory. Probably go back to. I think Ally is their number one um bank for that kind of stuff, so they’ll have a bunch of inventory to dispose of. But for me on the marketing side, you know what I mean. Like put some marketing campaigns out there like Hey, did you buy a car from Carvana or stuff like that that you could really leverage

Gordon Tormohlen:

I think there couple of take aways out of that. I mean, Yeah, the there’ll be some market space opened up, But don’t think for a minute that somebody is not going to try and jump back into that market space. I mean, you know you’re talking hundreds of thousands of vehicles a year, or somebody’s going to want a piece of that pie. There will be individual markets where there’s going to be some space freeze up and customers can capitalize on it, But the other thing is what lessons can you learn from what they did well and what they did poorly? You know if they’ve they’ve certainly created an appetite among Somers to do everything online. Um, you know that’s that’s transactional, so how can that be modified to make it work relationship wise, so that you can build a business based on that M. I think you have to go back to to intelligent metrics in terms of vehicle values. You know, they tried to take marketshare by paying a ton for vehicles, and gosh, there were dealers that would you know that could actually get more than their retail price by selling it to Carvana.

Herb Anderson:

Selling it to the

Gordon Tormohlen:

Something is wrong there. That’s that’s That’s not a good algorithm. Okay,

Herb Anderson:

Yeah,

Gordon Tormohlen:

And so you know that’s going Have to return back to a market value whatever that may be, per unit. Okay, and if somebody can capture the good things they did and keep their metrics in place, there’s tremendous opportunities.

Herb Anderson:

Yeah, for sure. Anyways. thank you so much, Gordon for doing this. Really appreciate it. There is one question that we ask everybody that comes on the show And that question is where do you see the automotive industry headed in the next five years And why?

Gordon Tormohlen:

Five years. That’s that’s an eternity and Carvana. Of course, all, Herbert’s been a pleasure. I’ve really really enjoyed this great conversation. Um, In terms your word, is the industry going five years? people are not. you know, you hear autonomous vehicles, you hear all sorts of things. People are not going to give up the freedom that they enjoy with vehicles. There will be a market place for vehicles, Regardless that the price situation is going to be conundrum particularly on the new car side, because I think they’re bumping up at a point where they’re gonna start losing new car volume, Because the new cars costing forty five, fifty thousand dollars on average, transaction. Okay, and that will reflect in terms of use vehicle values, And what happens? It’s a market place no different than a stock market, So those things are goin to have to be adjusted to. I think consumers will adjust as well as entrepreneurs. in terms of how vehicles are sold. I really believe that the most successful operators will continue to find ways to build a relationship with a customer and build value. I don’t think you can go back into the seventies and eighties, and there were guys that were selling brand new cars for forty nine ninety five over. In voice, you know, and those guys all went out of business. It does not make sense to be the cheapest guy in the room, you have to find a way to write gross profit. That’s sufficient enough that you can. You can have a return on your investment. And so that will always be a problem for those guys of state transaction. It will be less of a problem for those guys who are relationship based because they Have more value, the customers willing to pay more for that vehicle and they can maintain a reasonable profit and stay in business. So I think you’ll see migration toward that. There’s an interesting thing and wait, pardon me if I side bar here a little bit we’ve. been working on the certified Master dealer program which you and I didn’t get a chance to talk about, But that’s a college level course for a dealer to really understand every single attribute from the initial value proposition down to building five year business plans for dealer To go through the N. D will soon be offering again. We’ve had it for a number of years and we, we shelved it and re thought it. and it’s coming out again later this year, But as we did the research for that we took a look at a lot of different operations, and one of the things I found interesting was in my little crises store in a small town of twenty five thousand people. We were expanding market and doing well by expanding services further out. So we did free. pick O been delivery for service for fifty mile radius. And I don’t care if they want oil change. We’ll send a guy out. pick up the car. bring it back and do it. What we found there was loyalty went over over the top on that, and it’s because we’re doing what the customer wants in trying to make life easier for them Every single time we do that. If we call them back, Hey, you know everything is fine on your care. You wait. mine. Did you check the breaks Because I’m not sure. but you know, and we wind up selling eight times out of ten. Okay and when we pick up the car, we had former sales people that were retired and these guys missed people in the worst way. They pick up the car at the point where people would ask you. Hey, is Fritz available to pick my car up, Because if he’s not, I can wait until Thursday, you know, and you’re building relationship and value with those people. Okay, what I’m finding is who did the research on C. M, D Is that type of business model is working everywhere. People used to tell me the Ah, you can do that in free board boat. You know you can’t do that in Chicago. Well if you Google Brian Benstock on Linked in, they run a hand store in New York City, And Paragon Honda

Herb Anderson:

Paragon Honda

Gordon Tormohlen:

the top volume Honda stores in the world, and they’re doing exactly that there, their uber drivers out to pick up the customers car and bring it back and do the service and take it back to him. So there are things that you can do in every single market place to build a relationship and build value. The dealers that do that will succeed and be stronger than ever. Five years from the dealers that don’t or say I, you can’t do that, but they’re really saying, as they refuse to compete on that level, they just want people to come to them and give them money. And that’s a dying business model, whether you’re selling I phones or cars, So that’s my five year.

Herb Anderson:

I totally agree. Yeah, thank you so much again, Gordon. for doing this. We really appreciate. It has been a great conversation. Excited to share this with everybody. Thank you for tuning in. That’s all the time that thank you for tuning in, and as usual, we will TALK later!

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