<ul> <li>Meeting the customer at touchpoints they determine</li> <li>Using technology to introduce compelling financing offers</li> <li>Building a brand with differentiated customer experiences</li> </ul> Panelist: Patrick McKeever, Vice President of Sales and Business Development, Rodo Brian Jones, Chief Executive Officer, Gravity Lending Toby Russell, Co-Chief Executive Officer, Shift Moderator: Amanda Harris, Associate Editor, Auto Finance News [toggle title="TRANSCRIPT"] <div class="transcript-scroll-box">Amanda Harris 00:18 after noon everyone and welcome to our session on facilitating the online car buying experience. Amanda Harris, Associate Editor for auto finance news. As we all know more customers are shopping online for everything from groceries to clothes, and even larger purchases such as home goods. I, myself now have groceries in home supplies delivered straight to my front door. It's pretty great. And I've seen friends sell their home online without a single open house. So it's no surprise that consumers are becoming more likely to look for and purchase cars online as well. The covid 19 pandemic has accelerated the need for lenders and dealers to meet customers where they are by providing streamlined digital shopping and financing options. However, it's not always easy for lenders who have been around for say 40 plus years to quickly adopt digital car buying tools and processes, especially when it relates to financing. After all in person dealerships have long been a cornerstone of the auto finance industry, and dealers long have been the bridge between the consumer and funded contract. I'm happy today to welcome our panelists, Patrick McKeever, Vice President of Sales and business development of rhodo. Brian Jones, Chief Executive Officer of gravity lending, and Toby Russell, co Chief Executive Officer of shift, I will let them each tell you more about who they are and what they do.Patrick McKeever 01:59 Why don't you start us off, Patrick? Sure. Thanks, Amanda. I wanted to thank the auto finance summit family for for hosting this and having us. I think it's a really timely and perfect conversation to be having in light of the pandemic that that unfortunately continues to sort of keep going here. That being said, my name is Patrick McKeever. I'm the VP of sales and business development with roto. I've been in the car space since I got out of college, including four years at the retail side with a Philadelphia area Porsche Audi store. And at the core, I'm just a car guy. I love cars. And that's sort of how I fell into all this. What we've done with roto, is we've created a marketplace, strictly focused on the new car transaction, both leasing and financing. And essentially bringing an e commerce experience similar to similar to having your groceries delivered to Amanda, although a little different. where consumers can come in through roto. See Vin specific, accurate monthly lease payments or monthly finance payments, upload the necessary documents, and literally have the car delivered next day, same day. And really give the customer the experience that they're used to in just about every other facet of their life these days, and what they're essentially expecting at this point. So I'm thrilled to be here and looking forward to the conversation. Amanda Harris 03:23 Great, Brian? Brian Jones 03:26 Yeah, thanks for having me as well. I'm Brian Jones, CEO and co founder of gravity living. I've been in the automotive refinance industry for more than 15 years at this point. And the teams that I led and funded well over 7 billion in auto reifies, gravity lindens, our newest creation. And what we were doing is trying to put together a stack of technology to provide the best consumer experience when it came to revise. And we haven't had a lot of early success with it. Our conversions right now, or 98%, are signed electronically, which was the key to the whole company. And that's allowed us to grow extremely quickly at this point. So we gather applications nationwide, and then we use a network of lending institutions to originate on their behalf to help those consumers out. Amanda Harris 04:12 Fantastic, and Toby. Toby Russell 04:15 I'm Toby Russell, co CEO of shift calm. We're an e commerce offering in the used auto space. So you can go on shift calm and buy or sell your car. The technology we've put in place lets you go end to end in terms of shopping financing, either online, or at our kind of industry leading mobile point of sale in the field. So folks can actually literally push a button on their computer, have a car brought to their home, test, drive that car and buy it right then and there with financing, warranty and all the products you'd expect to go along with the transaction in the comfort of their home or right there in the driveway off of an iPad app that we've created. Amanda Harris 05:01 Perfect. Well, thank you so much each of you for being here today and taking the time. This is an exciting time in the industry in some ways. So I'm looking forward to hearing your thoughts. I wanted to start with asking you all kind of a two part question. So the first part is how has consumer demand shifted as it relates to online car buying and financing? And then the second part is, what are the touch points customers have now determined? And how can lenders meet them at those touch points? Patrick McKeever 05:36 Patrick concerns offer? Sure, I'll start us off. So I think, from motors perspective, and in general and the folks, you know, we I speak with me with on a regular basis, including Toby, both on the new and used cars side of things, we've seen a pretty seismic shift and uptick in business and overall interest in the e commerce experience overall, whether it's new or used. So thankfully, roto was founded Ark, we found ourselves in a great position, quite frankly, where we've already been doing this for the better part of three years. And folks that are looking for a new car today, or go back to March or April, quite frankly, didn't want to leave the house didn't want to spend five or six hours at a dealership. No, no, no offense, if you're a dealer listening to this, but they they wanted to kind of get in and get out and make it a pretty seamless transaction. So we've seen the better part of 50% uptick in orders and consummated transactions. I would tell you since since March, or April, when things sort of started, you know, kind of hit. So overall, we found ourselves in a great, great position, quite frankly, and our dealers, we've got about 1200 dealers nationally on the platform, this point on new car franchise stores, really reap the benefits of that. So we've had, you know, a Honda store that's new in New York, sold over 50 cars through us last month, for example. So you know, and we've been able to kind of keep everyone happy. So it's been a really win win win experience for all consumers love it. dealers are happy that we're able to push them the business that they need and crave and keep those local businesses intact. You know, meanwhile, also, of course, driving some revenue to roadshow. So yes, that's sort of where we're seeing things. And we haven't really seen things lead off, as we're halfway through October so far. Toby Russell 07:38 Know that whoever would like to jump in next very much. with Patrick on that one. I can speak mostly the use car space, which is where we operate. And what we see is something that's really fascinating. And that is something like 95 96% of people who start their car shopping journey do that online. I've said this before. And that is the idea of driving the dealership to dealership at physical retail, in order to shop for a vehicle is dead. However, less than 1% of those transactions occur online. So if you look at our market, it's about an 800 and $40 billion market. And like less than 1% is done by ecommerce. That's staggering. that everyone's starting online and finishing offline. And you got to ask yourself the question Why? I would argue in large part, it's not because everybody's like, boy, I really need to shop at retail. It's because fulfillment is not easily available in an online to offline fashion. customers do want to stay in channel they want to go seamless, we've seen other other you know what shift thinks of his peers, carvana room and ourselves saying, hey, people want to be able to buy online. But one of the biggest challenges at least in our journey of making that possible, of being able to not just bring a car to a customer to test drive, that's relatively easy, but actually being able to transact right there. And then on the spot, was enabling the financing. And the actual purchase transaction that is non trivial. We spent the better part of like a year and a half, building out the basic tooling. And we're an indirect lender, doing the basic tooling that will allow us to have a customer in real time, apply for get approved for financing, you know, select the loan they'd like, identified the VSC, the vehicle service contract that they'd like to attach, enable gap insurance, just just sort of the basics of what one would expect from a marketplace like ours, in order to transact and obviously, you know, there's technology that lets you do money movement online. Now that facilitates that entire transaction for the down payment. That was a huge effort to really close the difference between being able to shop online to being able to buy and and a lot of that has to do with the level of E contracting and real time electronic exchange with the underwriting happens, that's really the linchpin that enables that. And I think that's gonna be a massive part of the future customers want to be online. And in order for them to be there, dealers are increasingly going to be gravitating towards where their customers are, which is online, as well as then wanting to work with the lenders that will support real time electronic underwriting and contracting. Brian Jones 10:22 Brandi has some thoughts on that. Yeah, we were actually very fortunate from a time perspective, as unfortunate as the pandemic was, the demand for the loans, the reef eyes increased dramatically, because the inventory had been saturated the last few years. And so you had a massive demand on the consumer side. And then the lenders followed suit with that, because they did lose so much business from the dealership side, they still had quotas they had to hit. And so we happen to start our company and launch it about six or seven months before it hit. And demand on both side really spurred our growth roadshow and shift or in a perfect position. market is going this way. It's inevitable at this point. And I think that this really, really sped up with the consumers going that route, and now that they can see the experience and see what's possible, I think they're going to be more comfortable with moving forward. But I agree the consumers nowadays, when they look at the vehicles they buy, I was looking at one of your sites earlier, and they chose I chose a vehicle and it gave me four other three other models that were basically the same type of product with different prices. And I think that's how a lot of consumers are looking at these vehicles, is it's a way to get to a to be more than what we're needing. And we've been overpaying for vehicles for quite some time because we buy so much technology whenever use. Yeah. Great. Those are fantastic points. And we kind of touched on, you know, talking about what consumers are looking for. But we know consumers, obviously are all the same. So my next question is, how do you build a system where you can reach both customers who want to do maybe a portion of the buying and financing a car online? And those customers who want to do everything from start to finish themselves? Patrick McKeever 12:12 They'll go ahead, Patrick. Yeah, I was, I'll take the first step of that, because we've had some interesting learnings at think. And, Toby, I'm curious to hear, hear what your thoughts are. So we learned I would tell you pretty early on that. As much as consumers think they don't want to interact with folks with a large purchase, like a vehicle new or used. They have questions, they want their handheld, they just want to know the intricacies of it right. So inside rodo. And we say this a lot to our staff, we have to keep in mind, this is a big purchase, even if they're leasing the vehicle, it's every three years at most, right. And in some cases, we see first car buyers coming to us, and it's a big deal. So early on, we actually have now given our consumers sort of Choose Your Own Adventure is what I call it, path a, they can really go through and know and have very very infrequent touches from both the dealer and from rodo, the consumer can kind of do the thing on their own, they get their credit approved, they'll upload their insurance, they really won't hear from anyone until we're essentially setting up delivery vehicle. And then there's path B, which is what we call sort of our concierge experience, which we see today about 80% or so of our consumers checking that box, where they want to have someone in their corner at someone from rodo and that someone will literally handle the order from A to Z until the car is delivered, same person the entire time. And we have found that consumers the feedback has been so positive they love having that car person in their corner, right? Yeah, does it does matter. Well, the cord hold three, three child seats. Can you get a window sticker, all that sort of stuff. So we we have found that even though we're doing everything digital, people just they still want that human interaction. And they want to have have some comfort, knowing about to write a big check whether it's leasing a new car financing a new car doesn't matter. They just want to have that person kind of hold their hand. And I think early on, we quickly adapted to that. And I've seen that and sort of reap the benefits. And we you know, will we sort of have a shout out almost every morning where we'll go through our either app reviews or Google reviews. And more times than not customers typing in. You know, Jimmy was unbelievable. I'll never buy another new car. That's the old way again. Steven was incredible. He He followed up with me after delivery to make sure everything was great, all that sort of stuff that you might take for granted. But we've quickly learned that that's that's sort of the key to to keeping customers happy. sending them, you know, having them send us referrals and, and having them come back, because now we're starting to see folks coming back and their leases are expiring or their, their husband needs a new car and all that fun stuff. So yeah, it's, I'm curious to hear what your take is, Toby? Toby Russell 15:16 Well, we, um, I've observed two types of customers just in really simplistic terms, and I'm sure everybody else is experienced as well. We have what we lovingly call car first customers, and we have financing first customers, but I mean, people come to shift calm, and there's effectively a conversation happening. And that is, hey, if you've got the car that I need, I want to like check it out test drive, it, um, tends to be like upper FIFO. So prime near prime or like, I know, I can get financing. What I'm interested in is, if you got the car that I need, I'll go through that thing with you. And then I'll worry about the financing. Literally, on the back end, there's another set of group, which obviously tends to be more more subprime lower near prime, that are saying, hey, look, if you've got financing available, then I'll buy from you, we'll find a car that fits my budget. And so we basically had to architect the system that meets the core of those two very different user needs. For the first group, again, non trivial, we had to be able to say, let's match you with the car, get you a test drive at your home, out in the field, and then actually be able to transact there. That's like one major use case, because somebody's like, okay, I like the car. I've seen it. I've, you know, literally kicked the tires. Let me go ahead and buy it now. And we, when we first launched shift, the very first feature question we got after the whole, hey, this is a great car was you got financing for that. And so people were saying, like, obviously, I'm not walking around with $20,000 in my pocket, like, Where's the loan? And so we're like, yep, to close this deal and make this transaction work, we're gonna have to build a mobile point of sale the first in the industry, once you do that on the spot. So that's really for the car, first customer, for the financing first customer. Again, it's a totally different conversation. It's, uh, can you get me finance right here online. And if so, then I'll shop. So we've created we've had to create a very different user experience. Starting with a pre qual where we are we do soft credit books, people don't want a hard credit poll just to shop for a car, and then be able to identify with machine learning what someone's likely to get approved for, and then truncate the entire inventory down to cars that will fit their budget in terms of their lending marks. From there, we can then say, Yep, you can go ahead and apply right now on this car, and get financed, before you test drive, because that group hates the idea of scheduling a test drive to their home, and then discovering Oh, actually, I'm not going to get approved for a loan, they're like, You wasted my time you wasted your time. That's a terrible experience. And so you go from an amazing experience to just like a catastrophe. So two very different use cases and needs. Were, again, at the core is the financing conversation that has to enable pretty meaningfully different flows. And to do that we had to build a pretty flexible system that can that can, they can either move up front or in the back. That's that's kind of unusual for an e commerce flow. Typically, in e commerce, people are like, Alright, have you selected your item? Great, what's your form of payment? Okay, now, let's talk about shipping. We've had to create a thing that decouples that and can let you kind of choose your own adventure, as Patrick was describing. Brian Jones 18:21 Perfect. Brian, do you have any thoughts, just from your experience on this train, we have the benefit of not having the collateral really in the mix. And from a choice standpoint, right, we've got a captive customer. And we also use the pre qual method. And that's something that's going very well for so when we actually submit the consumer for approval, the approval rates are coming back in 70 75% range, because we do have some technology on the back scoring decisions to make sure we understand what these lenders are buying. And then on any given week, 80% of those people that are getting approved are completing their transaction. And so it's allowed us to convert a much higher amount of our applications without having to spend all those extra marketing dollars and run through so many applications. But these guys with the collateral choice, the complexity increases dramatically. And that's kind of why we chose this line at this time. Smart, you're smart, right? Amanda Harris 19:18 Yeah. So definitely when we're talking about, you know, moving to online and carbine, I don't want to, you know, ignore the area of refinance. Obviously, it's also going to be a big part of this. So Brian, this is kind of directed to you. We know refinances an area where loans, you know, typically can perform better, especially in a recessionary economy. So can you talk to some of the hurdles you've experienced when it comes to this space and how gravity reaches customers who may benefit from refinancing their vehicle. The interesting thing about the refinance space and it's somewhat true in the purchase space is you really don't want to find customers that are looking to refinance their car. Those consumers Brian Jones 20:00 Traditionally, a lot of trouble, the credit scores are going to be much lower. So it's how do you position yourself in front of the population that should refinance, but isn't aware of the product. And so we use a multitude of channels to bring those applicants in. And the you take a lot of the risk out of the loan when you refinance. And once they've been in for six or nine months, the vast majority of that risk has been removed. And that's why they perform better your loss ratios, your charge offs are about a third as much, but your yield is also going to be squeezed as well. So some of the challenges for us are really trying to maintain this growth, intelligently, trying to combine the right lending institutions with the light, right marketing channels with the right individuals on the back end, employees wise, the technology was complex in the beginning, trying to get everything configured it up and running. But once we got all those pieces together, got some great lending partners hooked up with some great lead aggregators, lead generators, everything kind of fell into place. And that's where we're able to go from there. You know, managing the product sales and being compliant, all that proper disclosures, and all of those things for a new company like us is always a challenge. But we've got some history and experience to help guide us through that part of it. Patrick McKeever 21:14 Billy, and Toby Patrick, do you have anything you want to add on just kind of thoughts on trends in the refinance space, or anything that you're seeing? No, I actually had a question for Brian, I was curious. Brian Jones 21:26 As you were talking him, what sort of percentage or how many folks are? are you dealing with people buying their car out of at the end of the lease? Are you seeing quite a bit of that nowadays, or not so much. lease pilots are a very small percentage, okay, quite a bit more complex. Although we do enjoy them and do them, they have an higher average revenue per transaction for us because more people are buying the products and so but in terms of the taxes, and the filings, and all of that, it does make it slightly more complicated, but I would say at least files are probably less than 5% of our business. Interesting, but it's a great section to tap into. And if I had access to those, I definitely would like to pursue what we should we should we should chat after the call. Definitely. So Amanda Harris 22:13 you can definitely do that as well know that you're connected. Perfect. Well, as we talk about, you know, online car buying, obviously, the one of the biggest things we'll end up talking about is technology. And that's kind of the driver behind everything that we're talking about today. So I want to ask each of you, what sort of ways are you harnessing technology to introduce compelling financing offers to consumers? Toby Russell 22:38 So we all have you take take tickets first step? Yeah. So alluded to it earlier, I would say two things about machine learning and mobile technology. So the first one is being able to do that predictive work. Obviously, we're indirect. So we're not the underwriter, we don't actually have the ability to extend credit at scale. And so we have to predict what's likely to happen with our customers based on past experience, and kind of do that do that matching. So we're, we've developed a machine learning algorithm to do that. So that we can highly accurately predict with likely to happen if someone does a hard credit poll at a prop and a full application. tricky to do that, before you have, as Brian mentioned, the asset selected. And when you're not the actual, you're not the actual literal underwriter. So that's part one. Part two is mobile technology. And this is that a thing that I would say is a big ask of folks in who are doing of lenders as it were, that is, we've created a mobile experience on an iPad app, it's effectively a point of sale, that allows the customer as well as us use route one. And so we'll go out submit an application received back responses, and then do everything right there by E contracting. So I actually think it's a we can do that in a mobile setting. Or we could literally do that online, we can do either one by on a customer's device on, you know, our device, in that case, you name it. It's ubiquitous in terms of interface. But the thing that that all hinges on is the ability for our lending partners to do both algorithmic underwriting in relatively real time, and IE contracting. So where folks are doing manual underwriting or need physical paper, it really breaks down the online transaction. As you can imagine, in a world where the expectation is that an f&i manager will make a phone call and do back and forth, there's going to be a four hour exercise in a back office to get things done. That's not consumer preference. And it's actually incredibly during the COVID environment, like frightening for people to sit in the back office for four hours with somebody. I mean, it used to be it used to be a challenge and now it could literally mean death. So what I think what we are seeing is the ability to do those do that work with software and with with with data and electronically, allows lenders to scale allows that scale to, you know, manage risk better. And I think I believe we'll get positive selection over the long run, the channels that are bringing you algorithmic, rhythmic requests for underwriting, as well as E contracting, are probably going to be the channels that will produce high quality assets over time. And so I would really encourage and coach if I may, investing in that, because that's the way the future the progressive channels are going to be moving that way. You know, and I get the whole idea of the internet, like, spent spent some time in, in online finance in my career. And, you know, there's in the very early stages, you know, the online world ends up being negative selection, people who are, as Brian mentioned earlier, who were like really hungry, hungry for credit. But after a while, that tips, and you get massive positive selection. So the folks who are shopping online, tend to be the more credit worthy, tend to be, you know, same. Even if you're like, same FICO, same profile, everything looks the same. It's it's more of like the, you get the software engineer from Apple, who's then file, as opposed to someone who's got, you know, a bunch of defaults, even if they're at the same FIFO. So what's the point that the online world is the way of the future and I think the tipping point is happening, where that's where the positive assets are. And so algorithmic underwriting on any contracting is the way I feel is the way forward. Patrick McKeever 26:37 Tell me what's really interesting, I'll ask the question, but you just, you just made me think of something. So what we've seen in every new market that we sort of turn on, so to speak, right? It is, this has happened in every new market, we've gone into the first orders, or the first consumers that are coming into rodo, trying to buy or lease a new car, are almost exclusively kind of subprime near prime, sort of hoping and praying that somehow through rodo, they'll be able to get a new car. And it's happened literally in every major Metro market that we've launched in the US. And then to your point, maybe 30, or 1530 days later, all of a sudden, we start to see folks come up, scores go up deals getting done. But it's really been interesting to watch. I mean, you caught it perfectly, because we've seen it happen, literally every single market we turn on. Toby Russell 27:29 And if when you step back from Patrick, and Brian, imagine you see this as well, it makes sense. And the reason is, when something's brand new, there's a cognitive hurdle to go over. who's willing to make that go through that cognitive hurdle. The people are really credit hungry, right? Because they're saying, hey, look, I'll jump through any hoops? I'll do I'll do anything to get the money because I can't I can't get funds elsewhere. Yeah, that's the negative selection dynamic. Yeah. But pretty soon it switches over where if you create a more convenient experience, a smoother and better experience, you start tapping into the folks are saying, look, I can get credit anywhere. What I want is a good experience. And so and so you actually it goes from being negatively selected to table stakes for positive selection. And that that that I think is what's happening in the auto industry in particular is that that shift is occurring and occurring fast, particularly because of COVID. Even we used to talk to folks, and it'd be like, hey, yeah, I know, I need to be able to sell online. But that's not going to happen sometime in the next five years or so I'll get there. And then you know, we're having California big, big auto market, you know, it was looking at California, car max stores, car Max, like leading auto used auto retail karmak, stores were literally shut down. That's unheard of. And so it goes from a, you need an online strategy. And like sometime in the next five years to like right now. And with that, obviously new financing partners who want to be there getting the access to what is the best part of the file, and that is the folks who want the convenience and the speed of being able to transact online. Brian Jones 29:04 Yeah, the speed thing is critical to us. So when we started gravity, the whole point was is to do everything electronic. Obviously, we have 2%, that's not occurring. But by forcing that upon the consumer consumers as this is how we do business. It's sped it up so much. I mean, our average time from application to funding is just over four days. So that's signing the documents, getting the stipulations waiting two days to get the title dogs back via FedEx, and you're already funding so these consumers are coming in and filling out an app and turning this thing basically overnight in their mind. And the technology that we're using with lyoko with the stip collection has just made it so easy, where they can take pictures of their driver's license and pay stubs with their phone automatically attaches to the doc file, and it just is a very seamless process for us. We're also finding that by forcing this we've been able to reduce our need for labor, and so our people are almost twice as productive as they have been in the past for us. Amanda Harris 30:04 Definitely. Well, so we've talked a lot about, you know, how things are changing in the car buying world and, you know, moving more online and refinance and all those things. But at the core of it, we know people are people. And we know that, you know, consumers still are very interested in two things when it comes to buy a car, you know, they're interested in the monthly payment and the down payment. But we know there are so many other factors that go into underwriting alone. So I wanted to touch on how do you balance presenting a transparent financing product, while at the same time not overwhelming consumers with too much information? Patrick McKeever 30:45 All Um, yes, I'll take that only, primarily because that was really the core of how rhodo became where our founder, who really doesn't have an automotive background, saw a saw an ad, I think you were shopping for a minivan at the time for his family saw an ad in a newspaper, sort of a lost leader 199. Fast forward to him being in a Nissan dealership in New York, six hours later, leaving the dealership without a car disgruntled. And I think the quote he left with on the same car was that 399 a month, right, and went home and tried to essentially find new car leasing online with with clear and transparent and accurate monthly lease payments are due at signing, and they simply didn't exist. I think in our opinion, it's still really doesn't exist. So all you know, rhodo sort of core is presenting then specific, you know, monthly lease or finance accurate payments to that consumer based off their credit score. And to your point, we've tried to keep it really clean in terms of user experience, where they'll see very clearly what the monthly payment is. That monthly payment includes taxes, DMV, Docs, any sort of applicable rebates, conquest, loyalty, all of which is going on behind the scenes to your to your question, there's a lot of stuff going on behind the scenes. But we've went so far as to literally build out our own calculator engine. So our tech stack is our own, it's proprietary. And if a consumer wants to kind of dive into the details, they can within the order itself, they can see who the lender is, they can see what the money factor is the disposition fee, residual, you have a subset of those consumers that do want to get into the weeds on that. So we we do it is there they can do it. But to your point, they just one consumer just wants to know what what what they write a check for, and what their monthly payment will be. It's pretty actually pretty simple. And we think we're the React reaction, the responses that we've already received, you know, seen from consumers is that it speaks volumes. They don't, they don't want to play the games, they're okay with the paying x, they just want to know what it is right up front. They don't want to, they don't want to sit, spend six hours in the box and go back and forth, especially today. So I think those days are few and far between. And once they sort of get a taste of it, they there's no going back, they're not going to they're not going to spend six hours in the store. It's just not going to happen. So so at a core, that's been our main main focus on the new car side of business is just being able to calculate and present really accurate payments on a particular order a particular vehicle that a consumer can then place an order on. Brian Jones 33:43 I was doing some research prior to this on average cost of the vehicles over a year and so forth New And Used purchases, and I kept coming across something I couldn't find. Is there any comparison out there of price from a dealership to the online buyers? Is there a way for us to look because you know the products you're going to get far less expensive online would be my guest and in a dealership. I went and bought my daughter rav4 recently, and they tried to charge me $4,000 for a BSc but they didn't know what I did. And I knew the reason for that service driver. $400. Right. And so, but I couldn't find any data anywhere. Is there any comparison or research out there that shows if I buy a rav4 at a dealership? It's experts online? It's why. Patrick McKeever 34:31 The Great question, I don't know if the top of my head I can tell you story after story anecdotally, where, you know, one comes to mind from last week we had a new york police officer who was buying a BMW be paid fairly well, apparently, and he had already been into a store was looking at a four series came back to us and we ended up placing an order and getting a car through us he saved himself. 80 bucks a month. By using rhodo I don't think he bought any f&i products, to be honest. But he then went on to write a glowing review. And he was like, what an unbelievable savings, right? 80 bucks a month times 36 months or 39 months in that scenario was a huge savings. And it meant meant a ton to this guy, you know, both financially and just sort of peace of mind, right, especially on the new car side, for you to drive, you know, pull up your driveway and maybe see the neighbor next to you. You might have the same car. And there might be huge variation in terms of what who's paying what. So we see it, we hear it quite a bit. Yeah. Brian Jones 35:41 Yeah, but I think consumers knew that they would speed up the purchasing all automatically. I think you're right, I think you're right. Patrick McKeever 35:48 Yeah. Amanda Harris 35:49 Right. Well, that kind of segues into my next question, which is about, you know, the different experiences that you want customers to kind of have with your company. So we know that part of successfully offering digital carbine is building a brand with those differentiated customer experiences. So first, I think it's important to define exactly what building a brand means. So you can each talk to that. And then how important is this? And what does it involve? Toby Russell 36:28 At the brand building. We've been thinking a lot about this recently, it shift and thinking about how we can expand and build our brand. We started out very much with a classic like tech company mindset of, hey, we're gonna create great user experiences. And people will tell people and that's, that's really your brand. It's the reputation you build with people who experience you and are they willing to tell their friends about it? That is very true. And that is a reality. What we found is that we also want to be thinking, in addition to creating a just a great experience, we've we've started to put in the effort to say okay, and also how do we want to position ourselves as a brand in the marketplace? How do we want to think about messaging what we're about in, you know, literally like messaging, like, sorry, linguistic, visual, and, and other terms. And, you know, we're in the process of rolling out a new brand strategy around that and thinking about alternative channels outside of digital. You know, a lot of I think a lot of folks have a lot more experience than we do with the non digital channels, we really grew up direct consumer, direct response digital, because we're, you know, online online, we go all the way through. And so we started thinking about brand building into two ways, or the core is creating a great customer experience. But now, alternative communication, and a different actual positioning with the consumer. For us, that's a really big deal. Because we're in used auto, most of the industry operates in the franchise world, at any rate, under the OEMs brand, by and large, the OEMs do massive brand spin and have incredible brand awareness. You know, it's hard to get on a call and say something like BMW or Toyota, or you know, Nissan, just about any car that sells in any volume. In the US, it's pretty hard to say, Well, yeah, I've never heard of that brand. That happens in you know, toothpaste, but not automobiles. And so what you what you find in you to use face is brand is really critical, because you're Yes, working off the OEM brand. But each of those assets is unique. Each of those vehicles has been literally used, and it has its own journey. And so you've got to be able to represent quality and fairness in the form of the the price that you're charging, and particularly in an online space. Now that segues to a slightly different aspect of Brian's question, which is we're finding that we move to a no haggle or not move. We started with a no haggle pricing structure. It still boggles my mind, to be honest, that us consumer auto, probably the largest retail category on the planet is fundamentally a haggle pricing environment. That's crazy. And we oftentimes say we think that's like wildly discriminatory. Why because it's literally priced discriminatory. The idea is, how do we figure out how to get this individual to pay the maximum they can, because the next person might pay a different price. And it's just like, it's in my mind. And so I think that with the advent of a lot of online comparison, that price gap is closing. We're gonna see movement rapidly toward price parity, less less margin and the haggling, you know, if you ask Folks that say, you know, 10 years ago, you'd see huge, huge variation in the haggling. Now you're seeing that close because consumers are educated, they know what the price is going to be. And so a lot for us about a brand is saying, hey, we've we've calculated this price algorithmically, you can trust, it's fair. So there's trust in the price. And we've done 150 point inspection, and brought the car to full retail quality, you can trust in the quality. And we'd like to think that our lending partners also can then trust the assets underneath that. And trust that the consumers we're getting our again, positive selection, for good asset, good customer and good process. And so brand brand makes that go round for everybody in that in the transaction, because we're, you know, pulling together lots of different players. So, the the lenders, the voc providers, the automakers in their brand, and then really the consumers and making that whole thing, whole thing work. And that that needs to hang under our brand and have awareness of that. Patrick McKeever 40:58 Yeah, I think, I think I think Toby probably the nail on the head, certainly for for rhodo on branding, where customer by customer winning each one, having them have just sort of as mind blowing, wow, experience, be super happy about it, and then sort of, you know, goes down the lane. So I think we're based on the stage we are today that's still happening. And we're still really sort of hammering that home. which ties into your other point on on pricing and haggling. Because we are a marketplace. So we'll have picked New Jersey, we'll have multiple Honda dealers on our platform on roadshow. So some of that price, that that that variants essentially, almost has to go away, or we'll have a dealer Come on, and they'll set a price. And we'll walk them through and say, Listen, if your record is $30 more a month, than the other guys, it's a commodity, right? So it's a little different than than what you all experienced on the used car piece where they're literally selling the same two accordi x's, right 20 miles from each other. So I think for the consumer, and they love that, because they there is some peace of mind saying Alright, I'm not overpaying for something. And and they know up from you know what the price will be. Because most of the population doesn't want to haggle, they don't want to go back and forth. There is a subset that we do see, right where they will come in, and they'll they'll try to go back and forth. And if the dealers up for playing that game. Great. But I think for us, it's building that brand. And the feedback we get from consumers is relatively consistent. It's, you know, it's painfree was easy, it was quick, who's transparent. And all those sort of buzzwords keep coming up over and over and over again, from our customers. So we're just sort of, you know, kind of staying the course. And because it seems to be, you know, hitting, hitting, hitting home with with folks. Brian Jones 42:58 Yeah, I can only reiterate a lot of what they're saying to I mean, the experience, we all have our own opinions on what it should be. But we're just at the first start of our journey. So we started with a product that we know and understand we're trying to be the best at that in the business. And then we're going to move into some other consumer lending products in the near future. One of the things that's really helped with our experiences the methods of communication, historically, with the other companies I've run, it was 70 80% call volume. Well, with this company, it's completely flipped, but 75 80% texting, yeah, and via text and email, we're completing entire transactions without even hearing each other's voices, processes clear enough and the platform's we have are efficient enough, or they're enjoying that. And I know myself as a consumer, I don't want to be on the phone with you. And very short, I'm very quick, I need to go to something else very rapidly. And so if I can answer your text every 10 minutes, and keep it moving, that's a wonderful experience to me. But as we've learned that all of a sudden, it opens up so many other things of what else can we do with tax? And how can we automate more of that? Where do we need to spend our money and assign our resources in order to build that portion out, and you don't want to drift so far away from it, because what you've seen is that the solely texting transactions, they don't acquire as many products which decreases your revenue per transaction. And so you've got to find that balance between the two of them how to make enough money to stay profitable, in addition to providing that great consumer experience. Amanda Harris 44:29 Definitely, and I'm with you there. I don't like to spend a ton of time on the phone I'm trying to get something done so texting and and being able to this is pretty great to start seeing that come up, although I only own one car, so we'll see how it goes when I actually buy another car in my life. We're gonna take your shift comma roadshow. Toby Russell 44:50 Don't worry about Amanda. We got to take care. Yeah. I will add to what Brian was saying is two things. One, that idea of texting and people Want to be able to ping and get responses fast when we put in place a while back this concept of speed to lead, we just I mean, it's it's, it's, it's obvious in retail when you look back on it. But when somebody's like, Hey, I'm interested in buying Can I buy from you. And if you don't respond like right away, they're under what's next, because this is a highly fragmented market. And that means as a retail, you got to be responsive. What does that also mean? It means your lenders need to be highly responsive. As we're moving into an online world onto text and chat and web interfaces, we need interfaces that allow us to ping a lender and get a response fast, because the ones who can respond fast will be the ones that we can work with. And then when you don't get a quick response, you're out of luck with the customer, you're done. Now, Brian made another point, I think is really, really valuable. That is, there is a degree to which if you're not interacting with a customer, you can't actually educate them on products. And that's a concept that I've actually seen play out. And that is, we have a concept of deal fatigue, if it takes a long time to get the financing approved, if it's a lot of work, and a lot of back and forth. A customer, not only are they not getting that quick response, they get fatigue, they're like, Look, I just want to be done here. And they don't want to hear about a voc. They don't want to hear about a gap, even though you know, a like new vehicle service contract is going to protect your asset is like a great answer. You can't have that conversation. If things don't move quickly through the through the financing. If you can't get the deal set up and done relatively quick, get through steps get through get through the basics, you as a retailer, and as as they interface with the customer can't actually get them the right package that they need. Because again, your frontline folks, and your customers experience deal fatigue. They're just like, I just want to be done, get me out of here. And so that ability to do the as Brian's a texting that velocity, that that high, high speed back and forth on data is just critical to being able to make the whole transaction go round in the next in this next generation age, because people don't want to spend a bunch of time going back and forth on the basics, and then miss out on that the full deal. Brian Jones 47:12 It's funny, you said that Toby, we had a four star review yesterday from a lady that applied and had her vehicle paid off within 72 hours. And she said it took too long. You just shake your head and go Okay, yeah, we're trying to speed it up. But that's exactly what you're saying where the consumers are, why isn't this happening instantaneously? Toby Russell 47:31 Yeah. When it has to do with where the consumer mindset is, right? folks are saying, Amazon's their shame day next day. They're saying, when I go to Facebook, I push a button. And my everybody I know in the world sees the thing right now. Yeah, you guys are and then they look at us. And they're like you're trying to get an answer on essentially, what's a data product alone or a VSC? Like, it's not like you have to manufacture that it exists to data product that should be in software, like that's the consumer expectation is like, like, why isn't instant? And then you're and we're you know, on the front lines, we're saying? Well, it's not instant because of this. And that the other thing, and it just makes no sense to a consumer, their expectation is where you know, Amazon, Google, Apple are and that is real time. Yeah, Patrick McKeever 48:18 they don't want to hear it. You're right. And we we deal with it a little bit because of because of our flow, we're obviously going through our dealer partners, which adds an interesting wrinkle, right? So we have some policies in place that, you know, if a dealer is dragging their feet for a couple hours, or what have you, we're flipping it, we're flipping that over to another dealer, we do your point, we cannot wait that long, or the customer's like, I'm out. I'll see you later. I'm gonna go get my Honda somewhere else. So yeah, we take it super seriously. We because we see it. Certainly early on. We we follow up now I've already got my other car. Forget it. So we Yeah, speed, speed is speed is everything without a doubt. Amanda Harris 49:00 And that kind of segues into kind of my next closing question, which we know where and what we're talking about right now is that digital retailing really has skyrocketed, you know, especially amid the pandemic. And online financing. As you all mentioned, you know, it's top of mind right now for many auto lenders we've seen that are reporting as well. But proponents of the digital retailing model think this is this trend is here to stay. But what would you say to critics of the model who are of the opinion that this might just be a temporary trend that's born out of a pandemic? Brian Jones 49:37 and paying attention for the past 10 years? What I would probably say, right, Patrick McKeever 49:42 yeah, I think, I think yeah, I think we just all covered it where, nowadays, it's expected in every every aspect of someone's life, really, I mean, from groceries to shoes, I mean, you name it. This is the expectation. So I think if someone's saying, Oh, this is a fad They're going to be, they're going to find themselves in a pretty rough spot in pretty in a pretty short period of time. And I think we're pushing it, you know, companies like, like roto, and shift and gravity are pushing the needle pretty hard. And I think all of us are seeing the customers react to it, and it's where they want to be, and it's how they want to, it's how they want to buy, it's how they want to interact with folks. And I think, you know, either either people get on board or or get out of the way not to be harsh, but that's that's sort of where we are. Toby Russell 50:35 Amanda, you know, doesn't know this is like, big picture, long term crystal ball gazing like, you know, Netflix style, I like the analogy of, of what Netflix did, they kind of said, Hey, we're gonna sell DVDs, or we're going to rent them in this case, we're gonna do that online. And every city All right, you know, like blockbuster, they have their, their their local DVD retail. And then there was the online thing. And Netflix was competing, and it got hard for blockbuster, having fees and all that and things were tough. And then the next phase of the natural evolution of that thing happened, where it wasn't about retail versus online, it became the core product itself. And I think that in the next, in the next three to five years, we are going to see a massive shift towards online shopping for the vehicles that we know. And over the longer run, we're going to actually see vehicles that are autonomous, that can drive themselves. And when those vehicles become autonomous and can drive themselves, I don't believe people will not want to own them, I think people will still want to own a vehicle. But I think it's crazy to think that they will physically go to retail to buy them. Yeah. And they will go online, they will push a button and that vehicle will come to them, it will have the expectation that they can buy that vehicle with no human being involved right there and then on their mobile device. And that is the the streaming video of our industry. And it's coming, it will happen. And I'm a lender, I'm getting ready for that, that mail the DVD instead of the retail DVD right now. So that I'm prepping for the next stage of that thing, which is really a true true retail environment. Because the car will come to the people that we you know, we have a joke, it's like, we bring the test drive to you. It's not hard because the car has wheels. And the that that is going to be the way the future that the industry is going to evolve and then transform, as we see the underlying technology and the vehicles themselves move more into a online and connected state. Brian Jones 52:39 Yeah, I think they're both spot on. I don't think it's a question that whether it's going to move more online or not. I think the ownership model is the bigger looming question. How is that going to differ from rural towards urban areas and generations and things of that nature? Some of the research, we were looking at the average used car cost six grand a year, the average new car is between nine and 10 grand a year? Well, if you look at that and break it down, you're spending 20 to $28 a day to own that vehicle every day of the year. Are you taking that much trip that much mileage? You know, how far is your commute? And I think for different generations, it's going to be different things. But I also think the blockbuster analogy is very important, because if the large dealership groups aren't paying attention to blockbuster story, they're gonna miss the boat. And these folks like roto and shift that are in the position that they're in. They've got such a great runway ahead of them. They can accomplish so many things. And I think they're ahead of the curve. Amanda Harris 53:40 All right. Well, I'm excited to see you know, what the future will hold when it comes to purchasing and financing cars online. And maybe I'll give that a shot when I finally buy a new car. And who knows how long it will take me but it'll be interesting to see, maybe by then the car will just drive itself to my enemy. Great. Well, thank you so much, everyone, for your insights today. We really appreciate the time. That will end our session today. And I again, thank you to the panelists and to everyone watching. If you have any questions for our panelists, or you would like to connect with them, please message them through the conference app. And thank you so much again and everyone. Have a good day, everybody. Thank you, Patrick. 54:23 Thanks. Good. </div> [/toggle]
