0:00

When you say it's a

0:00

new way, way of selling cars, it

0:02

isn't it isn't. It's just we cut

0:02

out a lot of the time waste

0:06

about eventually we have a best

0:06

price and a consumer has the

0:09

best price that they're gonna

0:09

pay. We just shorten that time

0:12

and give that to you right away.

0:29

Some people love

0:29

car shopping, others dread it.

0:34

But like any industry,

0:34

technological advancements have

0:37

changed the landscape. Some

0:37

online services tell you what

0:41

the dealer's costs might be for

0:41

a new car to help you negotiate

0:45

with more confidence. But many

0:45

people just don't like to

0:48

negotiate. And at the same time,

0:48

they certainly don't want to

0:52

feel like they're leaving money

0:52

on the table. At a very

0:56

interesting conversation with

0:56

Chris Pfaff, the CEO of faff

0:59

automotive partners, his company

0:59

launched what they called the

1:03

future retail model of buying

1:03

cars in late 2019. No haggling,

1:09

their best price is offered

1:09

First, take it or leave it. And

1:14

it's been very successful. Chris

1:14

explains the reasons for the new

1:19

model, whether his competitors

1:19

like it or not, how his sales

1:23

team reacted and provide some

1:23

thoughtful insights into the

1:26

world of buying and selling

1:26

cars.

1:31

I need to point out that this

1:31

interview was originally

1:33

recorded before COVID-19 back in

1:33

January of 2020. I had delayed

1:39

publishing the podcast as it was

1:39

originally scheduled for March

1:42

2020. But large parts of the

1:42

country were being locked down

1:45

at the time and anything not

1:45

Coronavirus related was just not

1:50

on people's radar. Well, we're

1:50

hopefully starting to see light

1:54

at the end of the tunnel. And

1:54

perhaps more people will be in

1:57

the market for a vehicle in the

1:57

near future. So now it seems

2:00

like a better time to release

2:00

this episode.

2:10

This is mostly money. And I'm

2:10

your host Preet Banerjee. And on

2:14

the show today I have Chris

2:14

Pfaff who is the president and

2:17

CEO of faff automotive partners.

2:17

And we're going to talk more

2:21

about buying cars, specifically

2:21

about a new model of selling

2:25

cars that fap is brought to the

2:25

marketplace, how dealerships

2:28

make money, and more. Chris,

2:28

welcome to the show.

2:31

Thank you very much.

2:32

I'd like to

2:32

start with you telling the

2:36

listeners a little bit about

2:36

Pfaff automotive, by way of

2:39

background, most of the

2:39

listeners know that I'm a

2:41

gearhead. And when I see the

2:41

name fap and I see it all over

2:46

the place, especially at

2:46

racetracks, you sponsor race

2:49

cars. You've got a number of

2:49

different dealerships, but

2:53

perhaps you can tell the

2:53

uninitiated a little bit about

2:56

faff automotive, all the

2:56

background.

3:00

I was born into the

3:00

into the business my father had

3:02

one store in Newmarket, Ontario,

3:02

Volkswagen Audi, Porsche, and at

3:07

an early age. I always loved to

3:07

work there as soon as I could

3:11

probably around the age of 11 on

3:11

Saturdays, washing cars. And

3:16

because of the brand Porsche I

3:16

think we got involved early on

3:19

and go into MMA sport as a kid.

3:19

And I remember seeing the I my

3:23

first memories of the iconic

3:23

cannamd cars and Roger Penske,

3:26

his team, and Mark Donahue and

3:26

so forth, Jackie Stewart. And it

3:31

was just amazing experience. So

3:31

very passionate about cars.

3:35

That's that's my I'm very, I'm a

3:35

very simplistic life. It's all

3:39

about cars. So it's been very

3:39

easy that we have passion, you

3:44

tend to love what you do, and

3:44

you have a lot of fun at it.

3:47

And how many

3:47

dealerships are in the faff

3:51

group, because it's nationwide,

3:51

like coast to coast. We

3:53

are primarily

3:53

Southern Ontario based, but we

3:55

are located now in all other

3:55

three other major cities

3:59

Calgary, Vancouver and Montreal.

3:59

But 18 rooftops. And so the

4:07

growing business for sure.

4:08

And the Motorsports involvement. Was that something that started with

4:10

because your father initially

4:13

started the business wasn't

4:15

my father initially started the business back in 1964. Yes. Wow.

4:19

Wow. Yeah, that's a long time. And then the Motorsports involvement. Was it

4:21

from the get go? Was it since

4:24

you got into it? How did that all start? It was

4:25

sort of later 70s

4:25

when when I think the Volkswagen

4:28

Canada group was doing some

4:28

sponsorship at masport. That's

4:31

started light. And then it

4:31

really became more involved in

4:34

the mid 80s. When Porsche did a

4:34

one make series in Canada and

4:39

Scott Goodyear race for us. We

4:39

won that championship in 1988.

4:43

And that's sort of when it

4:43

started. And listen, we've been

4:46

out of it for four years in

4:46

between as well. So we did a lot

4:49

of it, including myself driving

4:49

a bit in the early 90s. In the

4:52

Firestone firehawk series, and I

4:52

think from about mid 90s, we got

4:57

out of it until early 2000s. And

4:57

then we've been back It in

5:00

varying forms ever since and

5:00

never more serious in the last

5:03

few years in the emsa series

5:03

Daytona 24 hours just got back

5:06

from that a few weeks ago. And

5:06

we're looking forward to Sebring

5:09

now coming up in March.

5:11

Well, you know,

5:11

I love seeing it. I love seeing

5:13

the faff name. And I follow a

5:13

lot of the drivers, as well. So

5:17

as a gearhead, you know, thank

5:17

you so much for the involvement

5:19

in motorsports. Now, let's,

5:19

let's talk about carbon, because

5:22

that's the whole reason that I'm

5:22

here. So your PR agency reached

5:25

out and I never respond to PR

5:25

agencies. And they reached out

5:29

and they said, Hey, our client

5:29

is Pfaff automotive, and they

5:33

want to talk about this new

5:33

model of selling. And as I said,

5:36

normally, I don't respond to PR

5:36

pitches at all, I just sort of

5:39

send them to junk. But what was

5:39

interesting about this one was

5:41

the fact name. And also a friend

5:41

of mine that I went to racing

5:44

school with is one of your

5:44

general manager, General

5:47

Manager. And there you go. So

5:47

Chris green. And I remember, I

5:52

think he had just gotten his

5:52

driver's license when we are at

5:54

the racing school, and I was a

5:54

few years older. And so yeah,

5:58

those two things put together I

5:58

thought, okay, let's, let's,

6:01

let's entertain this this

6:01

interview. And so the pitch was,

6:06

you have this new way of selling

6:06

cars. And so I want to get into

6:12

first, the whole caricature that

6:12

has been built up by popular

6:20

culture when it comes to car

6:20

sales, right? Because when you

6:23

look in a movie, a book, TV

6:23

show, or whatever, they always

6:27

refer to the car salesperson as

6:27

some kind of evil. Never do will

6:33

person always trying to take

6:33

advantage of people. Why did

6:35

that become a thing? Where

6:35

there's some bad actors long

6:39

time ago? were small shops that,

6:39

you know, do nefarious things?

6:42

Why is that that becomes such a

6:42

bad thing where you know that

6:46

I've been a car

6:46

salesman all my life, I still

6:48

consider myself as a car

6:48

salesman, number one, and one of

6:52

the least trusted businesses or

6:52

business professionals that you

6:56

can have. So I've been living

6:56

with being painted with that

6:59

brush my whole life, right. So

6:59

obviously not something that you

7:03

like to be painted with. I don't

7:03

know. I mean, I think some of it

7:06

the industry, we deserve it, I

7:06

think I think we deserve it. The

7:09

great thing is with technology,

7:09

consumer transparency, the

7:14

consumers having control of so

7:14

much information is that that

7:17

needs to go away now. And I

7:17

think that's exactly what's

7:20

happening. So when you say it's

7:20

a new way, way of selling cars,

7:24

it isn't it isn't. It's just we

7:24

cut out a lot of the time waste

7:28

about eventually we have a best

7:28

price and a consumer has the

7:31

best price that they're going to

7:31

pay, we just shorten that time

7:34

and give that to you right away.

7:34

And that gives you the truly the

7:37

best price we want to sell the car for.

7:39

So before we get

7:39

into the specifics of what this

7:41

new model is this talk about

7:41

what the frustrations are of car

7:45

buyers in general. So again,

7:45

you've been in the business

7:47

basically your entire life, what

7:47

are the things that people tend

7:51

to have hang ups about or the

7:51

things that frustrate the most

7:55

with the process?

7:58

two things one is

7:58

they didn't a lot of people, not

8:00

all but a lot of people but 80%

8:00

don't like to negotiate. They

8:03

don't like the process. They're

8:03

uncomfortable with that process.

8:07

That's number one. Number two,

8:07

which surprised me a little bit

8:10

initially was they didn't like

8:10

the time it took to buy a car,

8:13

they wanted to do it a lot

8:13

faster. So those are the two

8:17

main things that they really

8:17

didn't like about the process.

8:20

And there was also the

8:20

underlying, am I getting the

8:23

same deal as the guy next to me?

8:23

Right, right, who's doing a deal

8:27

at the same time. And, and quite

8:27

honestly, that was not the case

8:30

that there could be variances,

8:30

same car, just different price

8:35

different consumers. Maybe one

8:35

had a better negotiating skill.

8:39

And that really isn't right. So

8:39

that's that's what we tried to

8:41

get away from.

8:42

Okay, so let's

8:42

now talk about what this this

8:44

new model is that you've

8:44

introduced, because I saw the

8:47

placards everywhere that sort of

8:47

listed the bullet points of what

8:50

is this this model? So why don't

8:50

you explain in your own words,

8:53

what is this model?

8:54

So what we're trying to say to you is when you come in we price the cars, we

8:56

don't price you the customer, so

9:00

all the cars, everyone has the

9:00

same price to buy that same car.

9:04

And the cars are priced. They're

9:04

pre discounted based on what our

9:07

final best selling prices. So if

9:07

we give you the price, and you

9:12

say you're going to go shop and

9:12

go elsewhere, we say you know

9:15

Godspeed, go do that. And

9:15

hopefully, I'm sure you're going

9:19

to find that we're very competitive because we need to be to stay in business, right.

9:21

So we give you the best price up

9:24

front. We don't have any

9:24

administration fees. That's been

9:27

another way of building back

9:27

profit for dealers over the

9:30

years. So we've taken away the

9:30

fee so the price we give you is

9:34

the true price. We also have a

9:34

three day money back guarantee

9:37

so you can't make the wrong

9:37

purchase. So you can bring back

9:41

the car after three days and get

9:41

a full refund, not just an

9:45

exchange. So what if you drive

9:45

down to Tijuana and back? There

9:49

is a couple of a limit and a 300

9:49

kilometer. We asked you to

9:52

respect that you might be by 300

9:52

kilometers you'll never hear

9:55

anything right? Right purchase.

9:55

Also your trade value because

9:59

there was a Also some misnomer

9:59

about the best trade value. Even

10:03

if you don't buy from us, we're

10:03

still giving you that traded

10:05

value that we've put on your

10:05

car. So you know that we truly

10:08

are giving you the right

10:08

transparent up front price on

10:11

your trade,

10:11

right? Because that would be a point of negotiation where you can play

10:12

with what the value is of that

10:15

trade in, but you're willing to

10:15

say no, this is what it is

10:17

whether or not you actually sell

10:17

us your old car.

10:20

Exactly. And in

10:20

today's day and age on

10:22

consumers, again, they can get

10:22

fully confident with what their

10:25

trades worth with auto trader,

10:25

the cars are priced actually, as

10:29

to competitiveness, so you can

10:29

really see what your car is

10:31

worth. And makes it easier for

10:31

the consumer as well. And quite

10:35

frankly, for us to really prove

10:35

to a consumer, we're giving you

10:38

the right price.

10:39

Now something that you said earlier was that you price the car, not the

10:41

customer. So this reminds me of

10:44

back in a man this would have

10:44

been like 20 years ago, the TV

10:48

show The Cosby Show, there's

10:48

this episode where Dr. Huxtable

10:51

was going to buy a car. He was

10:51

taking his son Theo, and he

10:54

said, Nope, we're gonna go to

10:54

the dealership, don't dress

10:56

nicely, right? Don't let them

10:56

know that we're dead. I'm a

10:59

physician or whatever. So he's

10:59

playing this role going in

11:03

trying to look like he's down on

11:03

his luck trying to buy this car.

11:05

And then one of his patients

11:05

walks by in the dealership, he's

11:08

like Dr. Huxtable in the car

11:08

sales like, oh, you're a doctor,

11:12

are you? And then that changed

11:12

the the nature of that

11:16

conversation. So was that used

11:16

to be the case where you see

11:19

someone walk in you say, Okay,

11:19

well, this guy looks like they

11:21

can afford more. So I don't need

11:21

to negotiate that hard.

11:24

I don't know if it was a narrow necessarily based on that stereotype. In fact, it

11:26

was the reverse stereotyping

11:29

that we found, when I had people

11:29

complained to me was people that

11:33

just came into a store dressed

11:33

down and the salesman didn't

11:37

take them seriously, because

11:37

they weren't dressed down. So

11:40

that's sort of the stereotype

11:40

that I recall. But you know,

11:44

that was 2030 years ago, when I

11:44

got in the business. I think

11:47

people realize it's a, it's a

11:47

much more casual day and age,

11:50

you don't get dressed up to go

11:50

and buy a car, right? So I try

11:53

to instill it fast that we take

11:53

everybody seriously. And even

11:57

when we have kids coming in,

11:57

they influenced their parents

11:59

decision so much I don't have I

11:59

have two young kids, and they

12:02

influenced me a lot. So when

12:02

those those kids come in at

12:05

McLaren, and Chris and his team

12:05

are very good at that. We're not

12:09

even looking for that. So we're

12:09

looking for a new fan. And

12:13

usually there's good karma that

12:13

comes along with treating

12:15

customers that way.

12:17

Okay, so with

12:17

this new model, let's break down

12:19

a couple of the variables. So

12:19

you mentioned best price first.

12:22

So that applies to new and used

12:22

cars.

12:25

Yeah, that's correct.

12:26

Now, when it

12:26

comes to new cars, what is how

12:29

does it work when you have sort

12:29

of like the MSRP, versus what

12:33

you would actually buy the car

12:33

for at a dealership? Where does

12:36

the wiggle room come from in

12:36

terms of the the differences in

12:40

prices for a brand new car?

12:41

Yeah, simply supply

12:41

and demand is one initial one.

12:45

But so if you have a car like

12:45

Porsche GT three that are always

12:48

pre sold, it's at lowest price.

12:48

But if you have cars that are in

12:52

stock, and there's more supply,

12:52

really than demand, and it's

12:56

changes, and that's mostly the

12:56

case most of the time, so then

13:00

it becomes a factor of how long

13:00

is the carbon in stock, color,

13:04

if it's an unpopular color, if

13:04

it's an unpopular options, so

13:08

sometimes with the

13:08

manufacturers, we need to take

13:11

allocation of vehicles that

13:11

aren't really the best selling.

13:14

So those cars would immediately

13:14

get discounted more so than a

13:17

car that has the most popular

13:17

options. And so those are the

13:20

factors that we go into. pricing

13:20

on new cars uses a different

13:25

story. It's very easy, because

13:25

again, we've got Auto V auto

13:28

reports, which is giving you

13:28

pricing of cars and every

13:31

community, how many are on the

13:31

market and stuff. So both the

13:35

consumers have access to that

13:35

information. And we as dealers

13:37

do. So when we price cars, we're

13:37

pricing those us cars to the

13:42

market price.

13:51

The conversation

13:51

with Chris Pfaff from faff auto

13:54

comm continues in just a minute.

13:54

But first a few thank yous to

13:58

listeners who have comments on

13:58

Apple podcasts. jld today, thank

14:02

you for your kind words. And

14:02

Sonia Katherine was a big fan of

14:06

the episode with Melissa Lila,

14:06

the author of happy go money,

14:11

which is episode number 69. If

14:11

you haven't listened to it

14:14

already, if you want to check

14:14

that out, we had some fun with

14:17

words on that episode. And thank

14:17

you to everyone who leaves

14:21

ratings and comments on Apple

14:21

podcasts. I appreciate them. And

14:25

I do read them all. And now back

14:25

to the conversation with Chris

14:29

valve from Bath auto. And I think it's probably good

14:40

to break down and I am not an

14:44

expert in this by any means but

14:44

the relationship between the

14:46

manufacturers and the dealers

14:46

because you know this the the

14:50

location we're at here is FAF

14:50

outtie. But you're not owned by

14:54

Audi, right. Audi is the

14:54

manufacturer. You're the

14:57

dealership you have a relationship with that manufacturer, you With the name

14:58

on, on the signs of whatnot. But

15:04

do the manufacturers offer some

15:04

kind of incentives to help move

15:09

product? Like how did how does

15:09

that work? They don't just say,

15:12

here's the price of the car, go ahead and sell them and take a cut. I know there's

15:15

a lot of incentives

15:15

that happen all the time. So

15:18

every month there are they're

15:18

offering subvented, financing

15:21

subvented lease rates or could

15:21

be cash back. So there's always

15:25

usually with most models,

15:25

there's almost I would say,

15:28

80 90% of the time, there's

15:28

something going on, for sure.

15:32

And again, those are fairly easy

15:32

to see on our websites. So

15:35

consumer can see there's 1.9%

15:35

financing this month on an Audi

15:38

a4, for example, they can see

15:38

it, and is that that those sort

15:43

of like discounted financing

15:43

rates are those provided by the

15:46

manufacturers are they provided

15:46

by a separate financial

15:49

intermediary of the

15:49

manufacturers who owns those

15:52

financial companies. So the

15:52

subvention so the manufacturers,

15:55

most of them have their own

15:55

captive finance company. So for

15:57

example, Audi financial services

15:57

or Volkswagen, financial

16:02

services, and, but the paying

16:02

down of the rates to get them

16:07

below market is actually the car

16:07

companies. So Audi will pay to

16:10

Audi financial monies to get the

16:10

rates down below market rate?

16:14

And are there any dealer groups who have gotten together and say, let's

16:16

set up our own financial services? And we'll get some

16:17

kind of subsidization from

16:21

manufacturers ourselves? Or are

16:21

those financial services owned

16:25

by the manufacturer? It's

16:26

owned by the

16:26

manufacturers, there are some

16:29

some dealer backed financial

16:29

groups that do some of that, but

16:32

to very little extent.

16:35

Okay, the next

16:35

sort of feature in your your new

16:40

model is the lack of

16:40

negotiating. And so walk me

16:46

through that, are there some

16:46

people who are disappointed by

16:50

the fact that there is no

16:50

negotiate? Cuz I know that a lot

16:52

of Canadians, they tend to not

16:52

negotiate very hard compared to

16:56

other countries around the

16:56

world, but there's some people

16:59

who really look forward to it.

16:59

So tell me what what has been

17:03

the reception of this idea? Do

17:03

people feel like there's

17:06

something too good to be true about?

17:07

So I take exception

17:07

to the term lack of negotiation?

17:13

We have negotiated upfront,

17:13

we've given you the absolute

17:16

best ration to waste your time.

17:16

But having said that, you know,

17:19

again, our studies say there's

17:19

about 20% that do like to

17:22

negotiate, right? So for sure,

17:22

we've had people walk in and

17:25

they say, we find you

17:25

unflexible, and I don't want to

17:29

do business with you guys. And

17:29

so that so we lose that

17:33

business, but we gain a lot

17:33

more. That's that sort of that

17:35

relief of breath and go Thank

17:35

God, finally, we're into a new

17:39

age of doing business. So yeah,

17:39

we lose some that do you want to

17:42

negotiate and want to go go go

17:42

hard on the on the deal? And

17:46

maybe that's not for us anymore?

17:46

And it's and it's not for them

17:49

either. So

17:50

right? And I

17:50

guess in the end, because a lot

17:53

of people would say, Alright, well, you've done the negotiation upfront, you're

17:54

building a certain profit

17:58

margin. But all models only work

17:58

if everyone kind of wins. And I

18:04

get the customer in the long run

18:04

is not satisfied the model not

18:07

working, that model is going to

18:07

fail. So you need there's

18:10

there's a balance for both

18:10

sides, where you need something

18:12

that's going to work for you and something that worked for the customer. How long is this this

18:14

model been in place?

18:17

So interesting. So

18:17

we're, you know, it's pretty new

18:19

in Canada, but we're not the

18:19

only ones doing it in the

18:22

States. This

18:22

is not new. It's

18:22

been around for it's

18:24

been around for years and years. And it surprised me that we were saying

18:26

a lot of the reason for doing

18:30

this is because of the

18:30

transparency and technology. And

18:33

we need to prepare very shortly,

18:33

probably by the end of the year,

18:36

that we'll be able to sell cars

18:36

online from start to finish. So

18:39

consumer could go online, buy

18:39

the car, have we would deliver

18:43

arrange financing, and we would

18:43

deliver to your house, you never

18:45

even have to come into the

18:45

dealership. And right now

18:48

Google's telling us that's about

18:48

a take rate of about 15 to 20%.

18:52

us. So you need to have one

18:52

price to do that properly,

18:56

because there's no negotiating

18:56

right on online. So that was one

19:01

of the reasons we did it. But I

19:01

stumbled upon a BMW dealer in

19:05

Denver, Colorado that's been

19:05

doing this since 1993,

19:08

Ashley Schaefer,

19:08

BMW, that's an inside joke if

19:12

you have if you don't want to use bounding down.

19:15

But they've been

19:15

doing it and I'm almost envious

19:18

because because I've been doing

19:18

this now. We've been into this

19:21

for about 18 months and people

19:21

ask me, are you regretting? And

19:24

I said, No, I wish I'd done this

19:24

sooner. And I didn't need to

19:27

have technology driving it for

19:27

us to do it. It was just a it's

19:31

I think it's a nicer way of

19:31

doing business. And as I said,

19:34

they've been doing it for years

19:34

in a hyper competitive BMW

19:37

market in Denver. Very, very

19:37

successful market share very,

19:40

very successful customer

19:40

satisfaction scores.

19:43

Okay, you also

19:43

have eliminated what are called

19:46

pre loaded and administration

19:46

fee. So what are those or were

19:51

those

20:32

are really just

20:32

additional profit and may mean

20:34

there were there's dock fees and

20:34

so forth, which are really just

20:37

profit. There's also other fees

20:37

though, that are Genuine like

20:41

there's some Ministry of

20:41

Transport fees that are that are

20:45

necessary that are still coming

20:45

into the equation. But all the

20:50

fees that really aren't fully

20:50

justifiable now have just been

20:52

removed.

20:53

So okay, so one of the things that you know, people always talk about our

20:55

PDI, right, product delivery

20:59

inspection I think it stands

20:59

for, and there would be a charge

21:02

of I forget what the joke like

21:02

500 700 bucks something like

21:05

that. What would that have

21:05

caught? Would that just have

21:07

like a way to seek profit or is

21:07

that just, you know, opening up

21:10

the truck and make sure that the mats are there,

21:12

no, actually pre delivery inspection or real fees. So a lot of these cars

21:14

come a lot of miles away. So the

21:17

manufacturers insist that we do

21:17

another checkout on the vehicle.

21:20

So that can be depending on the

21:20

model of car, two to four hours

21:23

that you're actually going

21:23

through the vehicle again, and

21:25

also the cars come with

21:25

shipping, wax, etc, on the

21:28

vehicle. So when you're

21:28

detailing the car, there's quite

21:31

an involvement in taking off the

21:31

protective materials, and

21:34

getting the car ready for

21:34

delivery. So two to four hours.

21:36

What does that that entail, like

21:36

other than what you wants a full

21:39

inspection of all the functions

21:39

of the car, sometimes it's

21:42

removing shipping blocks that

21:42

raise the height of the car, so

21:46

they don't get damaged. So you

21:46

do stuff like that. There's lots

21:50

of different things, again,

21:50

depending on the model of the

21:53

car,

21:53

okay. Next, we

21:53

have the written offer to buy

21:57

used cars. So as you indicated

21:57

before you will provide to

22:01

someone if they have a potential

22:01

trade in vehicle, you'll put in

22:04

writing, this is what we would

22:04

pay you for that car or discount

22:09

the price of the car that you're

22:09

about to buy. And I think the

22:12

perception was that there was

22:12

room to play there. So if

22:16

someone said, Well, this is what

22:16

it would be worth, they could

22:19

play with that number to make it

22:19

look like a better deal on the

22:22

on the car that they're selling.

22:22

But you don't require that they

22:27

actually sell you the car. Is

22:27

that correct? Great. All right.

22:30

And was that the whole impetus

22:30

behind that? Like, what, what is

22:33

unique about this? Well, what

22:35

we're always saying

22:35

is that a lot of times in

22:38

historical sales, they will

22:38

instead of giving you a discount

22:41

a cash discount, they'll give

22:41

you less discount, but they'll

22:44

give you more money on your

22:44

trade. So they'll just pay one

22:48

pocket to the other, right? So

22:48

we're just saying here's the

22:51

best price on the new car,

22:51

whether or not you trade your

22:53

car in and then on your used

22:53

car, whether or not you buy from

22:57

us we're going to give you the

22:57

same money. So you know if we're

22:59

going to end up not selling you

22:59

something but buying the car, we

23:02

need to be giving you the fair

23:02

market value.

23:05

Right. So that definitely sounds more transparent.

23:07

never been a better

23:07

time to buy a used car for a

23:09

consumer and we're really seeing

23:09

such a growth in the business

23:12

not just because of the normal

23:12

marketplace. But because of

23:16

consumer laws are so much law

23:16

protecting consumers when

23:19

they're buying a used car to

23:19

know the history. And also the

23:22

pricing is so transparent to

23:22

them. So I'm convinced we're

23:25

getting people that made me in

23:25

the past wouldn't buy a used car

23:28

because they were worried about

23:28

paying too much or worried about

23:31

the history or now buying premium cars.

23:33

Yeah, wasn't

23:33

their thing. And none of this is

23:35

Ontario specific or Quebec

23:35

specific. But if he picked up

23:39

you know, you go to a smaller

23:39

used car lot a car that was

23:42

previously registered in Quebec,

23:42

if it was totaled, it was hard

23:45

to actually track that damage,

23:45

right? Absolutely. Is that gone

23:49

now? Okay, so

23:50

Canada wide, even

23:50

the US have a flood damage cars,

23:52

we've had cars come up from the

23:52

states that were imported with

23:55

flood damage. You can now

23:55

basically North America get

23:59

history in the cars. So okay, so

24:01

this is a big

24:01

operation, as you said, 18, roof

24:04

tops New And Used sales. But for

24:04

sort of like the individual lots

24:11

where I would imagine, you know,

24:11

we have a fly by night

24:14

operation. Maybe they're not around for a long time. And that's where these sorts of

24:16

nefarious things would pop up.

24:19

What kind of car buyer do to

24:19

protect themselves? Like, is

24:21

there some kind of association

24:21

that a dealership has to

24:25

register with to say, Oh, yeah,

24:25

we follow these standards. What

24:29

would you suggest?

24:29

Well on vixia,

24:29

Ontario motor vehicle, governing

24:34

body, which is authorized by the

24:34

provincial government, and the

24:38

dealer is actually self

24:38

regulated, but there's a lot of

24:41

stringent encumbrances put upon

24:41

them to make sure that they're

24:45

transparent with consumers. So

24:45

that's the body you can go to if

24:49

you ever have an issue, buying a

24:49

new or used vehicle, and they

24:53

will protect you for sure.

24:55

We talked about the money back guarantee and exchange guarantee. So

24:56

basically, you got three days

24:59

and up to 300 kilometers. And so

24:59

if you change your mind, you can

25:02

just bring it back no questions

25:02

asked.

25:04

Because there's some exceptions to that. And the only exception is is very

25:06

specifically specially ordered

25:09

vehicle, like a McLaren 650 S

25:09

Yes. in purple with a pink

25:13

interior Ray, that we really

25:13

couldn't take back. So there's

25:16

stuff like that exception, but

25:16

by and large, yeah, most cars,

25:19

it's not a problem.

25:20

What is the most

25:20

expensive vehicle you've ever

25:23

sold? Because you've sold a lot

25:23

of cars. Yeah, I mean, and you

25:28

you carry a wide range, right?

25:30

I'd say just under

25:30

$2 million US dollars we've

25:32

sold. Actually, I shouldn't say

25:32

that. We've actually got

25:35

polygons that are a little bit

25:35

more than that. So So we've had

25:38

a few of them. I don't know

25:38

Doesn't have 15 of them in the

25:42

last couple of years that have

25:42

been over a million dollars.

25:45

Now,

25:46

let's talk about

25:46

compensation of salespeople. So

25:49

the old model, I would have

25:49

assumed that there was some some

25:54

commission, which would be

25:54

partly based on how well you

25:58

could, you know, negotiate with

25:58

the customer. So, for the

26:01

salespeople who are now, you

26:01

know, the negotiation is done

26:05

upfront, and you've got your

26:05

best price first, how does that

26:08

change their compensation?

26:10

Well, they're no

26:10

longer on commission. So on the

26:13

gross profit of the deal, we

26:13

just pay them on a percentage of

26:15

the selling price of the car. So

26:15

now, the differences I don't

26:20

care really what car I saw you,

26:20

I really want to say what cars

26:22

best. So for example,

26:22

demonstrators, there wouldn't be

26:25

a lot of commission in that

26:25

because the cars are discounted

26:28

in US demonstrators. So they

26:28

would typically want to walk you

26:31

to a new car where I could make

26:31

more money, right? But maybe the

26:35

demo was exactly what would work

26:35

for you. And you were happy to

26:38

take the discount with some

26:38

miles on it. So now, there's

26:41

zero impetus for the salesman to

26:41

want to do that. So they really

26:44

are going to get you the best

26:44

car for what you're looking for.

26:48

So with 18

26:48

different dealerships, you've

26:50

got a lot of salespeople, and

26:50

you've probably got some hot

26:54

shots, and then you know, the

26:54

massive middle, I'm assuming

26:57

they're probably okay with that

26:57

change. But what about the ones

27:01

who are like, you know, making a

27:01

lot of money because they knew

27:04

exactly like, they're just, you

27:04

know, they're selling all day

27:07

long, and they knew where they

27:07

were gonna get their commission

27:09

from, do risk losing those sales

27:09

people,

27:12

there's a lot of

27:12

risk. And we've actually lost

27:15

some some of our good people,

27:15

but a lot less than what we

27:17

expected. The good ones, they

27:17

had the easiest, because they

27:21

really, they've got such great

27:21

customer relations and a lot of

27:24

repeat business, there's already

27:24

that trust in place. So they

27:28

were sort of working this model

27:28

anyways. It was I would say it

27:32

was some of the middle of

27:32

salespeople, the ones that sold

27:36

strictly based on price that

27:36

really had the hardest time

27:39

because they felt they needed

27:39

to, to only sell to you based on

27:42

what price they could offer you.

27:42

And those are the ones that have

27:44

either had to transform and

27:44

realize selling is not only

27:48

about price, selling a car is

27:48

about a lot of different things

27:51

for different people. So either

27:51

some of those have left for

27:54

sure, or some have actually

27:54

changed their styles. And the

27:57

most interesting thing was the

27:57

young ones. They are the newer

28:00

salespeople that a lot of the

28:00

millennials, young millennials

28:04

don't like to negotiate. So they

28:04

would struggle for six months

28:08

till we train them on how to

28:08

negotiate. Now there's no

28:11

negotiation and they start

28:11

selling 1520 cars a month right

28:15

out of the gates, we've seen a

28:15

lot of great success with that.

28:17

That's

28:17

interesting. Now, there are

28:21

associations for dealers. So

28:21

we've got Canada, the Canadian

28:24

Automobile Dealers Association.

28:24

So when you show up to these

28:27

meetings Now, with this new

28:27

model, you have all the other

28:31

dealer saying, Chris, what are

28:31

you doing? Why can't you just go

28:34

with the status quo? Why? Why

28:34

are you trying to make us look

28:36

bad, like what what's been the

28:36

reaction with with other

28:39

dealers.

28:39

So it's funny that

28:39

it's actually very muted. Oh,

28:43

really, in a lot of them face to

28:43

face. But I am hearing a lot of

28:45

background noise and a few

28:45

people that are closer to me

28:48

will tell them so that the

28:48

industry is watching and stuff.

28:51

So they're watching us closely,

28:51

some of them have been critical.

28:54

It's not working for us and

28:54

observing from the bleachers.

28:59

But I can tell you, as I said

28:59

earlier, the one big thing I

29:01

would say I wish I'd done it

29:01

sooner. I think we've had a lot

29:04

of bumps on the road this year

29:04

with execution and how we did

29:07

it, we could have done it

29:07

better. But it's been good. And

29:12

I quite frankly think it's

29:12

inevitable. Nada in the US the

29:17

Dealers Association down there,

29:17

predicted about six months ago

29:20

that by 2025. It'll be like this

29:20

model will be normal.

29:24

Interesting. Yeah. 100%. So

29:24

that's what they're saying. And

29:27

I tend to believe it. So.

29:29

And I want to

29:29

actually ask you as well about

29:34

some of the trends that we're

29:34

seeing in automotive sales and

29:39

financing. So, you know,

29:39

hindsight, obviously, is 2020.

29:43

foresight is anything but but I

29:43

think it's fairly safe to say

29:48

that we're probably closer to

29:48

the end of a credit supercycle

29:51

than we are to the beginning.

29:51

And we've seen the rise of the

29:56

so called Super amortized car

29:56

loans. You know, back when I

30:00

was, you know, 16 and thinking

30:00

about buying cars for the first

30:04

time. It was like a four year

30:04

auto loan was pretty standard

30:07

five years like whew, that's

30:07

long to today. I think the

30:09

average is like seven years for

30:09

new car financing. A friend of

30:14

mine recently was tweeting about

30:14

being at a boat show and they

30:19

have financing on boats that

30:19

were like 240 months 20 year

30:23

financing on a boat, which to my

30:23

knowledge is a depreciating

30:27

asset. So what are the trends

30:27

that you've seen? Is that that

30:32

sort of in line with what you're

30:32

seeing at your dealerships and

30:36

do you see that as a problem?

30:40

couple of thoughts

30:40

on that. One is is cars are

30:43

better today than ever, and they

30:43

will last longer. So if you do

30:46

typically stretch out of finance

30:46

not such a bad thing for

30:51

consumer, but for us, I don't

30:51

agree with it, we'd like to see

30:54

people coming back into the

30:54

market more frequently, when we

30:58

haven't really seen especially

30:58

at the luxury end, we haven't

31:00

really seen a lengthening of the

31:00

the terms of the loans. A lot of

31:05

our luxury businesses lease. And

31:05

the term still an average is 42

31:10

months. And it's been like that

31:10

for a long time now 10 years

31:13

plus. So some of the financings

31:13

got a little bit longer, but

31:16

again, not we've seen this

31:16

already 15 years ago where guys

31:19

were testing it. Some of the the

31:19

more volume oriented mainline

31:23

brands do do it more. But I

31:23

would say no, with even some of

31:27

our mainline like Toyota,

31:27

Volkswagen, it hasn't been

31:29

prevalent.

31:31

The subscription

31:31

pricing that we've seen some

31:33

manufacturers toy width is is

31:33

this something that you see

31:39

becoming more prevalent? And

31:39

what impact does that have on

31:43

dealers? Because they it sounds

31:43

like the they're kind of going

31:46

around you guys?

31:48

Well, no, were

31:48

they, they actually need us to

31:50

help assist in executing on it.

31:50

We've just piloted now with

31:54

Porsche for the first time in

31:54

Canada, they've been doing it

31:56

the US for a couple years. We

31:56

just started it. So it's too

31:59

soon to tell. In terms of a

31:59

model that works for consumers,

32:03

I don't know how many are going

32:03

to find benefit from it. What it

32:07

is good is that we're finding

32:07

that we're getting consumers

32:09

that maybe didn't consider that

32:09

product before. And were able to

32:13

eventually convert them into

32:13

permanent vehicles. So I don't

32:16

know yet which way this is gonna

32:16

go. It's interesting. And I'm

32:19

glad that we're in a test model

32:19

with Porsche on that. But I'm

32:22

not so I'm not so certain

32:22

there's been a lot of startups

32:25

that have not continued on. So a

32:25

lot of this shared driving

32:30

services and so forth, it's

32:30

still a really unknown space.

32:33

And maybe, and sorry, maybe we should break down with the subscription model

32:35

is so my understanding is very

32:38

cursory is that essentially you

32:38

pay an ongoing subscription fee.

32:42

But you also have the ability to

32:42

change vehicles more often. So

32:46

it sounds like a version of

32:46

leasing with a bit more

32:51

flexibility that you pay a

32:51

premium for is that basically

32:53

what it is,

32:54

yeah, so you're

32:54

getting the car all in, you're

32:56

not having to pay any

32:56

maintenance, you're not having

32:59

to pay for insurance. So you're

32:59

just getting one car insurance

33:02

to covers insurance to you have

33:02

to qualify, right? Yeah. For the

33:06

insurance. But yeah, and then

33:06

there's you can switch cars, and

33:09

again, varies by time by by the

33:09

subscription service, but some

33:13

of them you can switch every

33:13

week. And for a guy that's in

33:16

and out of cars all the time,

33:16

that's a pain, I can tell you

33:19

know, it's nice to drive

33:19

different models all the time.

33:21

But those cars like and some of

33:21

them you change once a month, or

33:25

once every three months. So you

33:25

could have a sports car in the

33:27

summer and switch to an SUV in

33:27

the winter and back again.

33:30

My last question

33:30

is about the next generations of

33:33

car buyers? Do they look for

33:33

different things than say my

33:37

generation would have? Or they

33:37

focus more on the tech than they

33:42

are? what's under the hood?

33:46

You know, I don't know how to answer that question. I don't I don't I

33:47

haven't seen any distinct

33:49

patterns there know, for sure. I

33:49

mean, I've younger you get the

33:52

easier it is to, you'll see that

33:52

you see consumers using all the

33:56

features that are in the cars,

33:56

right. So you'll see a lot more

34:00

of that. But in terms of

34:00

demanding, yeah, they are

34:04

looking at that you make sure

34:04

your technology is competitive

34:07

with other brands, but most of

34:07

them are most of them have Apple

34:10

CarPlay, etc. So I see more

34:10

usage, but I don't necessarily

34:15

see that they're focusing more on it.

34:18

What about

34:18

things like, you know, mileage,

34:20

with people becoming more and

34:20

more environmentally

34:23

environmentally? conscientious?

34:23

are they paying more attention

34:27

to that? Is it basically the

34:27

same? Like do you notice any

34:30

changing like drastically

34:30

changing tastes? Or is it just a

34:33

matter of, you know, that gets

34:33

reflected in what the

34:36

manufacturers put out? Because

34:36

they respond to Oh, no, we're,

34:39

you know, we live

34:39

we live by the consumer, not

34:42

what the manufacturer puts out,

34:42

for sure, especially today.

34:45

Tesla is such an interesting

34:45

story because I predicted their

34:48

demise 18 months ago, I was you

34:48

know, I'm here to say I was very

34:52

wrong. You know, NBC last last

34:52

year, they outsold every other

34:57

luxury brand in British

34:57

Columbia. Part of that is due to

35:00

tax subsidization. But But

35:00

still, nevertheless, a good

35:03

Feat. And so, electrification,

35:03

there are consumers that want

35:08

it. We're getting into it now

35:08

with Porsche and Audi in a big

35:11

way, and a lot of the

35:11

manufacturers will follow suit

35:13

very shortly. So it's going to

35:13

be interesting to see. But there

35:16

are certain consumers that want

35:16

an environmentally friendly

35:20

corner are demanding that for sure.

35:23

every guest on

35:23

the podcast gets commercial at

35:26

the end of the podcast. So

35:26

you've got a minute, two

35:28

minutes, you can say whatever

35:28

you want, you can sell whatever

35:31

you want. tell people where to

35:31

find you. The floor is yours.

35:35

I don't know what to say that's that's hard to say. Listen, I can tell you at

35:37

five auto. We do it appreciate

35:40

when consumers do business with

35:40

us. And I can tell you, we're

35:43

not perfect. We do make

35:43

mistakes. But I can tell you

35:46

that we do care when we do make

35:46

mistakes, and we're always

35:49

trying to get better. So that's

35:49

sort of what we're all about. I

35:52

always tell our team that we

35:52

want to we want to win. We want

35:55

to be good at what we do, and

35:55

that we also want to have fun

35:57

with it. So I appreciate the

35:57

opportunity to be on the show

36:00

today.

36:01

No, it It's my

36:01

pleasure. And I'll just point

36:04

out that spelling of faff if

36:04

you're looking it up is p F, A f

36:08

f, you got it back.

36:08

Alright, so photo Comm.

36:12

There you go. Perfect. Chris, thank you so much for being guests on the

36:13

show.

36:14

Thank you very much.

36:26

If you want more

36:26

personal finance content, or you

36:29

have questions for me or topic

36:29

suggestions for the podcast, you

36:34

can follow me on Twitter or

36:34

Instagram, same handle in both

36:37

cases at Preet Banerjee, I also

36:37

have two YouTube channels, you

36:43

can subscribe to my main

36:43

channel, which covers personal

36:46

finance and investing topics

36:46

that are global in scope, and a

36:49

Canadian specific channel as

36:49

well. That's it for this

36:53

episode. Thanks for listening.