Banks, Bowie and Consumer Behavior with special guest Damon Lester

March 14, 2023
Welcome to Tuesday as we’re on the ground with Damon Lester of Nissan of Bowie. We also talk about how banks failing affect the auto industry, controlling what you can control, and insights into what the consumer is thinking about.
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  • Everyone’s talking about the collapse of Silicon Valley Bank, and Damon uses some of his CPA background to talk about what it means, especially for the auto industry.
  • Damon shares the view from his area of the industry.
  • Fixed Ops is the “weight room” of his store.
  • Customers have questions about EVs, specifically when it comes to EV tax credits.
  • On a practical note, Damon says that “How you start your day determines how you end your day.”

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Paul Daly  00:00

All right, it's Tuesday, March 14. And as you can see, Kyle and I are not in Nashville in Syracuse respectively. Actually, we're booing Maryland with the one Oh, only Damon Lester Damon, thanks for joining us and let us borrow your service. Oh, and

Damon Lester  00:12

thank you for having me. Thank you for visiting. This is awesome.

Paul Daly  00:16

You know, we love being on the ground, and then the dirt as we call it. This because there's always so much going on and so much moving. But the talk this week starting, you know, was it Thursday? What? Let's talk about banks, you have an accounting background, you understand what's going on in the finance world? What is your whole perspective on what we're seeing happening with SBB? And I know people might be, some people are probably sick of talking it and some people are probably just starting to figure out that it probably affects them in a in a way or two. What's your whole thought on that perspective on the situation?

Damon Lester  00:48

First, it's, it's a little concerning, because all of us who were in around 2008 2000 Now we all had this PTSD thing generated particularly me, right. And I was in my role with me, Matt, and kind of on Capitol Hill and dealing with banks and bankruptcies and closures and things like that. And so, right now, it's interesting to see and watch how this all plays out. And the reason why in which now we're understanding why, why the three or four banks need kind of growing right now, and hopefully that slows down to see what the Fed does. But ultimately, we're we can see that the government is trying to take us into a recession, interest rates still going to be increasing, you're seeing prices rise, and you're seeing layoffs that are unusual, even post COVID layoffs when we're trying to increase employment. So all of these things right now they're happening within our environment are pretty, it's pretty interesting to see,

Kyle Mountsier  01:43

you know, the very first kind of bank to fall was SVB last week and Silicon Valley Bank and for a lot of people that might be hard to kind of go, how does that impact me, right? Because there's a lot of technology startups, a lot of startups in the US over 50%, actually, in the US Bank, with Silicon Valley Bank. And so it's kind of disorienting to go, how does that relate to me as an auto dealer, as a dealership employee, or as a technology employee in the automotive industry? Can you maybe tie that a little bit together?

Damon Lester  02:14

Look, every store, whether you're a large dealer group, or a single point operated such as yourself, cash is king. And as interest rates rise, and as inflation continues to rise, cash needs to be king. So what's concerning for me is my my floating rate, interest rate on my markets keeps going up. And that's a little concerning, as we're seeing prices also go up. And so it's concerning to kind of make sure we're managing our cache and managing our expenses and not trying to cut too fast and just slim things to the point where we're going to lose productivity and lose efficiency. So we're really paying attention to this overall environment that we're in right now.

Kyle Mountsier  02:58

I think it's important to I mean, Paul, and I use these words a lot, take a measured approach, right? The sky isn't completely falling or anything like that. And like you said, there's some PTSD from those that have been in the auto industry for 15 plus years. But the sky isn't falling by any means. There are still measures in place. And they're, you know, like taking one day at a time, a lot of people on Friday and Saturday where the sky is falling government steps in on Sunday. Right? So taking that measured approach, recognizing that there may be things in your business that are impacted by banks and legislation, but the sky isn't falling, controlling what you can control is important. What are some of the things that right now that you are looking at controlling what you can control, especially as a dealer, working through some of the things that are happening in use cars, and maybe inventory coming back? What are those control words that you're seeing

Damon Lester  03:48

what we've used cars, definitely with trying to make sure we buy properly, and make sure that when we do buy them, we can sell them also at at a fair price without without over being overly zealous and keeping cars on your lot too long. And so I think for all of us, both new and us, turn, turn, turn volume, volume, volume is a key on both fronts. And so we have to be more and more watchful and mindful of that, because also our floorplan expense goes up. And so that's a term that we haven't heard of, and quite a bit of time right now. And so, floorplan expense also rises. So we can't be married to the cars that are on our lot. The goal is to keep volume moving on both sides.

Paul Daly  04:30

So obviously, if you're just listening, you can hear that there's a lot of work going on in the service department. And so I think that's a stark reminder for us that even though the world's talking about interest rates, and the economy and banks collapsing, auto dealers are still every day. Customers are pulling cars in there is work to be done. I haven't heard anything about any kind of layoffs within the auto dealer world. Are you in a position where you're staffing up looking for more people like what's the what's the look on the Round from one dealer's perspective

Damon Lester  05:01

you know we're axes with behind vortex we have a couple of new Texas started today and so the more Texas we can hire to take make sure that we service our customers and make sure they're in and out more efficiently. Look, this is the weight room, the service department is the weight room and to get everything fixed and ready to roll and get customers to and from work to, uh, from soccer practices and all of their their things that they do on their personal time. So this department here, this area right here with these lips behind me are the key incubator of of any dealership, particularly ours. So our fixed absorption rate, and we need to maintain a fairly decent rate and make sure our expenses are aligned, and that we're operating efficiently.

Paul Daly  05:42

Alright, so let's talk about the news in general, let's zoom out for a second because everyone's sick of talking about banks and interest rates. I mean, it's the most important thing, and very important, but talking about service, let's zoom out for a minute, when when you start are starting to approach springtime, and the mindset that your people and your customers seem to be in just like, again, thinking mindset, consumer mindset, what are the kinds of trends that you're seeing? Or what are people looking forward to in the spring? Even if it's market specific, that's fine. But But how are customers behaving acting thinking? What are they looking forward to etcetera?

Damon Lester  06:14

You know, what we're seeing a huge interest in EVs are electric vehicles. And so although that interest is piqued, now, the challenge is, there's a tax credit fit, particularly in his DC, Maryland, Virginia area. You know, it's key because we're a very tight knit metropolitan area that's government driven. Everything around here is government or government contractors. And so we're seeing an uptick of interest in it. The challenge is tax credits don't fit for all vehicles. And so I think that's something that from a legislative standpoint, we have to lobby a little bit more to make sure everything is fair, and equitable for all manufacturers all makes and brands and all electric vehicles. I'm sorry, 2030 2030 is the year when we have to become majority. Evie.

Paul Daly  07:01

We got a little trigger. He's been very kind Well, you have some vehicles out front, the Nissan Aria is one that is not eligible for the credit, right, but you have some beautiful cars up front that you're trying to sell. And you're looking for like some fairness, especially for cars that have already been created. Right now,

Damon Lester  07:18

Aria just came out about a month and a half ago. And it's a beautiful vehicle. And it's definitely a testified as well as other brand new OEM Eevee fighter that's out there. And the challenge is it doesn't fit, right. And so we have to be creative and make sure the value added is the vehicle sells itself and the vehicle is the quality within our vehicles also sells itself and compares to our competitors.

Kyle Mountsier  07:39

Yeah, you know, it's interesting, because with this, with the whole AV landscape, there's so much misinformation across the landscape on what do I get what I not get? Where do I find the resources that are appropriate for me, and it's really kind of up to the dealer has been left with the shoe, holding the shoe saying, like, Hey, this is how we can educate your customer. This is what's accessible. This is what's available to you. This is what's not available to you, this is what applies to our cars or doesn't apply. And there's so you know, whether it be the vehicle or the income or anything like that, like what are the challenges facing dealers as we re educate and then re educate again, and then re educate again, as legislation continues to change.

Damon Lester  08:21

You got to stay current, because it is definitely a changing landscape, that we all don't know what the rules are, because they don't know what the rules are. And so everyone's kind of on this pivoting. Let me make sure that we're at least knowing what the new the new rule is for the for the particular day or for the particular week. And it's still changing and hopefully they change more for the better for all of us to be able to be more abreast of it. But it's key for your man management, your salespeople to know what the law is, as it stands today and what the new rules are.

Paul Daly  08:52

All right. Last question. It's morning everyone's getting ready to go through the day. You are a motivated individual. Most people don't know this man is a triathlete that is on the comeback. Right? Right from the little hip thing coming back in. So so just giving people something to chew on this morning when it comes to whether it's motivation or one of your mentalities or mindsets that keeps you in the game every day.

Damon Lester  09:14

You know how I start my day matters. And how I start my day for me I am up at 4am at the gym by four to five and I'm in the score between 630 to seven and so that gets me going and I tell our team here is how you start your day and how you start your day matters or how you end your day and so being up and Adam we all have challenges waking up kids go to school, all of the little challenges when you come up but when you come to work it should be your your Calgon take me away moment and that's what we try to have an environment here where whatever truck problem of problems that you may have elsewhere. This is a place of home and refuse but you got to be efficient and let's get going.


Oh hey look, if there's a place to stay current and get up early in the morning, right? It's right here with a soda. If you're not signed up for the daily email, you should grab that at a That's a s o t You get to hang out with friends like Daymond and a lot of others across the industry that are pushing the boundaries of innovation and keeping their customers current. We really think Damon for hanging out with us,

Damon Lester  10:17

man is a nice morning here and then so let's let's get grindon Let's get it


going. There we go. Hey, we'll see you soon. And thanks for joining us here on the troublemaker today.

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