From 2009 through about early 2011, you could buy a good 8 to 12 year old car for anywhere between $1000 and $2500 at a wholesale auto auction. Unpopular brands and unpopular models were stacked as far as the wholesale heaven of repo lots and auto auctions could hold them. Millions of them, with no buyers in sight.
That was the good news. The bad news was that the economy made what had been a series of quick cash deals for me not too long ago, into a bumpy finance driven ride to destinations unknown.
I would become the bank and, in time, I would also become everything else my customers needed of me.
Before the cars went on the front line, the cheaper vehicles always needed paint jobs and a variety of cosmetics. While the more expensive models would have garage kept exteriors and a nice stack of dealer records.
Paint jobs were still $200 for a basic decent one. Parts were inexpensive, for now. Cars were cheaper than they would ever become. The world of 2009 may have been the pits for new car dealerships. But an organized entrepreneur who didn’t have to worry about channel stuffing or the stigma of selling older cars was in an excellent position to build a following.
To do that, you had to protect your customers even before you handed them the keys. Repair checklists. Carfax histories. Detail work. Craigslist. Autotrader. Cars.com. Se habla Espanol. Heck, se habla whatever was needed to get the car on the road and keep it there.
Before I knew it, I was covering every possible angle for my customers. Oil changes at a $10 cost. All repairs done at cost during the duration of their financing, all of which were put on the back of the loan at no interest. Free towing. Free rentals. Even free coffee for the three times in 2009 that I needed to use those other two services.
Within a matter of three months, I was financing over 40 customers and sold just as many for cash money. To make payments easier for my customers I set up an account at a bank (Flagstar Bank) that was even open on Sundays so that my customers could make their payments even if I wasn’t at the lot… which was quite often. I needed to get cars.
(Welcome to Flagstar Bank. How may we help you?!)
The ‘face’ of my business had to be sustained by arms that would help keep track of it all. The bank would make a duplicate receipt so I could keep track of all the deposits. Late fees were usually waived if the customer called me ahead of the time. If not, then the situation would quicken based on their conduct.
My policy was simple when it came to payment issues. If you can’t pay, at least tell me the truth. If you can’t tell me the truth, at least return my call.
If you don’t return my call, the clock would start ticking. My decision to get back the property would rest solely on the customer’s prior conduct and personal character.
The truth is I didn’t want the car back. I wanted to be paid and have everyone live happily ever after. Before I entered the world of financing, I had tried my best to avoid the headache of it all.
I hated debt with a vengeance due to seeing so many repos come to the auctions over the years. I wanted to have customers who were owners and keepers instead of perpetual debtors. But like all ideals, the aspirations of virtue sometimes had to give way to the economics of pragmatism.
The ‘keeper’ ideal wasn’t always possible. There were the families who thought they could use my car for 1000+ miles and have unusual herbal essences inside my property. They got all of 0.1 hours past the payment deadline along with those who committed fraud or used the vehicle for felonious criminal activities.
There was one time where I went to a local bulletin board and saw one of my customers on the front page for stealing radios and GPS units out of other vehicles. Another time I recovered a Lexus and saw a phony bill of sale in the glovebox that showed the car was destined for the Bahamas. A fluke, in a blown brake light that kept the car in park, was the only thing that saved me from a $3000+ loss.
The sad fact is that some folks simply decide to augment their income by using their automotive freedom as a tool for abusing greater society. I quickly began to recognize the sores, scars, and unusual skinniness of meth addicts. Along with the dangers of dealing with people who were unusually friendly, and had identities that were as phony as their smiles. GPS units soon became standard equipment on some of my more expensive finance vehicles. Credit checks, criminal background checks, a top notch repo operation, and a watchful eye became my shields in a business where a few of the natives had knives in their pockets and spears of meanness in their minds.
I would gradually build an information system that stood on the shoulders of giants of friends of mine who had been in the business for decades. One of my best friends in the business had befriended me back when I was working in the auctioneering staff at five different auctions. He, along with a long line of older experienced dealers (none of them were younger than 50), shared with me hundreds of stories and thousands of insights that turned out to be far more valuable than any degree I could get at an Ivy League university.
How to read customers. How to assess risk. How to figure out what a customer is capable of financing given that nearly all of them didn’t keep a positive bank account balance on a regular basis. What surprised me is that so many people lived in a cash driven economy these days. And that this phantom economy, if you looked at it with the right lines of questions and observations, could be quantified.
Maybe not in a perfect way 100% of the time. But the implicit body language and those recent pay stubs, bills, and personal references could offer a far more complete picture than a black and white credit report.
For a guy who had spent 1000+ hours a year reading faces at the auctions as a ringman and auctioneer, this type of real-time auditing was one I could easily understand. My work at Capital One Auto Finance liquidating 10,000+ vehicles a year also let me in on some of the more financial tools of the trade which were still relevant in a world where credit data was limited.
The fear of the unknown in late 2008 became an opportunity to mold a business that would challenge and reward me on multiple levels. There would be pains and stresses that came from bad customers and unusual repairs. However so long as I looked out for the good people in my life, it all seemed to be well worth it.
2009 turned out to be a success, albeit one that required far more discipline than the easy cash sales of times past. It would also be a grounding in a finance driven business that would require more money and more education. I would learn a lot, and I would most certainly be paying the bills for all that education.
The economics of financing turned out to be more favorable than what I expected by the time all the numbers were tabulated on a Google Docs spreadsheet. But even as my business grew, I began to wonder about the debt within it all.
Would my customers become owners? Or debt addicts? Was I the solution? The problem? Or an amoral force in a free market? In time the economics of a well-run debt driven business would do battle with the conscience of a maturing man who saw the opportunities and traps that came with signing an indentured dotted line.