Show Notes with links:
Here are the 3 biggest questions facing the used car industry, according to Steve Greenfield
Kyle will be judging the NAVIcon Cup at Used Car Week
Paul Daly: 0:36
Good morning. It is November 3 Friday rolling in hot. We're kind of gearing up for next week Coronavirus. First visit us car week. So we're gonna have Steve Greenfield on the show today to talk about it. Because he is a used car week veteran, professional, professional.
Kyle Mountsier: 0:53
This is this is actually this is just completely selfish. Like what are we getting ourselves into?
Paul Daly: 0:59
Right? Like, let's try not. How do we not embarrass ourselves? Actually, I don't know if anyone could advise us well on that because it's bound to happen. We're gonna embarrass yourselves at some point. But But use car week is an event that we've been hearing about. And every year we're like, hey, we have to go to use car week, next week, next year. And this is the year finally happened. Basically, we said that last year about SEMA two, and we didn't make it this year.
Kyle Mountsier: 1:22
And we haven't got time for CES potentially. So that's true. Yeah, that one is that right? No, wait, did we just miss CSRC? Manam Yeah,
Paul Daly: 1:31
we met what see what's going on right now. We're missing see him? Yeah, that's over.
Kyle Mountsier: 1:35
See. Yes. Is in January. So we got option. We got options. You got option?
Paul Daly: 1:39
I don't know. I don't know. But either way. We're getting ready to be wheels up next week. But we have Steve Greenfield on the show. Nathan bring Steven. I don't know where he's gonna be where he is. We're in the field. Steve. I
Kyle Mountsier: 1:51
saw him down there. He was in the greenroom side. He was like these guys.
Paul Daly: 1:57
I'm reconsidering. They read
Kyle Mountsier: 1:59
my weekly email. I tell you what we do. We do
Paul Daly: 2:02
actually do we do?
Steve Greenfield: 2:04
rental car in a Hertz Rental Car at Midway Airport? In the parking garage? Here I am.
Paul Daly: 2:11
In midway. You
Kyle Mountsier: 2:14
start with that you because you're all over the year all over the country, sometimes in a rental car, sometimes in an Uber. Like what's the anecdotal evidence on the rental right now?
Steve Greenfield: 2:25
Especially in Chicago? Yeah, lots of EVs. Lots of EVs. Although, if you saw their news this week, earlier this week, Peter hertz has said that they're going to not the commitment of 100,000. Tesla's they're going to pull back on that now. One, because prices are so volatile. I mean, they're sitting with a lot of cars that are worth a lot less because of these price discounts. But also just repair costs, apparently, so when they do have repairs. It takes a long time to get Tesla repairs.
Paul Daly: 2:51
Because initially when I remember the story like six months ago, Connor were talking about it they were like hey, are our maintenance costs are way down? Because of the EVS. This is gonna be great stock goes up, right? But now it's like, oh, but if there's a repair, ah, kind of flips. Because we were trying to figure that out. Were like, Wait, didn't they just say that it was cheaper? But, you know, repairs? I guess
Steve Greenfield: 3:14
a thing? Yeah, yeah, regular maintenance. What do you have to do you change tires once in a while, there's no oil changes or anything? I mean, if you do get an you know, a bumper crash or something, these things take a long time apparently to fix.
Paul Daly: 3:26
Well, they go well, they know they have they have one renter in you, Steve, you are definitely a used car week veteran. Why do you like the event? Like what's the unique proposition of use car week versus some of the other events out there?
Steve Greenfield: 3:37
Ah, so you have to go back in history actually. Because, you know, I spent 10 years in Mannheim. So I was in the remarketing world, very, very deep. And we used to have like two weeks in a row where we were basically parked in Las Vegas with three different conferences. So the history is used car week is actually an amalgamation of like three conferences that converge like a decade ago or something, oh, well, instead of being in Vegas now three, two weeks in a row. You're actually very efficiently in and out in like three days
Paul Daly: 4:06
in Phoenix, in Phoenix. Okay, so
Kyle Mountsier: 4:09
what were the original, the original three or two or three things
Steve Greenfield: 4:12
that you're gonna make me remember? One was remarketing when was like a finance related conference? And I think one of might have been like, a repossession. Someone's gonna call me out on this
Paul Daly: 4:24
inflatable gorilla suit maintenance. Exactly. Conference.
Steve Greenfield: 4:28
They're all roughly like used car related, but they they realized that we're greatly inconveniencing all these people and stretching the audience over two weeks. So they, I mean, I think it's worked well you'll you'll find when you guys are there, you know, next week, there's a lot of people that show up for this conference. Yeah, no,
Kyle Mountsier: 4:43
I think like looking at the attendee list, which is something that they post which is a little bit different than a lot of other conferences like yes, you see some dealers, but there's actually a high level of interest across like financing and remarketing and and use car opera. Raiders that are more like national level use car operators or shippers or things like that it's a much more broad industry partner look most of these events, outside of maybe NADA, you, you really are narrow in the type of industry partners. But this is way more broad. And I'm guessing the content.
Steve Greenfield: 5:20
And it's awesome dude, I can tell you this like as you get closer to transportation conferences, and then at the far end repo conferences, the number of piercings and tattoos. Great. So I mean, depending on which room you're in there and who you're meeting with. There's some wild and crazy characters and
Paul Daly: 5:39
I hear I hear a Soto audience expansion is what I hear yes.
Kyle Mountsier: 5:46
We're actually going to be at a conference with flat bills where everybody's gonna be like, that's normal.
Paul Daly: 5:50
No, they're not even going to think about it. We're like, Dude, we need some tattoos.
Steve Greenfield: 5:54
The tattoos to fit in here. Yeah. Easy, easy.
Paul Daly: 5:57
So we're going into the week, what are the what are the one two topics that you think are going to be top of mind? Or the top of the conversation? What are we going to walk away from, you know, hearing throughout the halls?
Steve Greenfield: 6:10
Well, I think it's, you know, it's almost passe. Now, EVs are a big thing. And this world that you guys are going into next week, it's more about these residual values, right? So hertz is a good example, where there's a lot of fleets out there that have EVs, and with all the price cuts that Tesla's done, it's really disrupted. I mean, if you're sitting on 100,000 EVs right now, and prices dropped by five or $10,000, man, I mean, no, it's a real real problem. And then, you know, the flip side of that is like, if you if you're like, you know, basically originating, you know, vehicles into a fleet, and you're trying to forecast what an Eevee is going to be worth in three years. Well, good luck right now, because of the volatility and without the have some certainty around what that residual value is going to be in three years. I mean, you can't. So a lot of these guys are like, we don't want to put EVs into fleet, you're hearing a lot of dealers in the US car departments won't even take EVs on trading, because they don't want to take the risk. One is how do you price them? And then
Kyle Mountsier: 7:13
how do you upgrade? And then you hold it for 15 days, all of a sudden, the price change $7,000. And now you're holding the bag? Yeah,
Steve Greenfield: 7:20
this is a big issue, a big issue, you need a really stable and healthy ecosystem of used vehicles in order for like new cars, either into fleets like hertz, or even for a consumer to say, look, I don't want to buy a Tesla right now. Because it could be worth a lot less tomorrow, the day after I buy it. So that's a big challenge right now. And like all the stuff we talked about repair as well handling these things, and you know, getting them in charge is definitely a challenge. But I think the biggest thing could be just like residual values used car prices on EVs.
Paul Daly: 7:54
Okay, so EVs definitely, it's, you know, maybe it seems passe. But look, everyone's talking about it. What's another topic?
Steve Greenfield: 8:01
I think the other the other thing is like, look, a lot of the auction participants are going to be here, right? All the big auctions, all the online only auctions, and they're sweating a little bit, because, you know, we had this 3d Three years, where there was a depression in new car sales. And you know, two or three years down the road, all those new cars become used cars. And so if I'm a dealer, you know, I'm a very big retailer from Carvanha, or Carmax. I'm sitting here saying, Hmm, my forecasting models mean that, you know, a couple of years from now, there's gonna be a shortage of good low mile, good quality lately used vehicles, and the auctions aren't, aren't going to have the volume to sell. So we're going to see this interesting dynamic, again, back to, to residual values, how do you forecast what a used vehicle is going to be worth? When we know there's gonna be a shortage, there can be more demand than supply, which will support us car prices. But if you look at you know, Manheim use vehicle value index, which gives you an idea of like, what use values are selling for you see what cars are selling for? It's in very, very high. How long is that going to last? And how volatile is going to be so
Kyle Mountsier: 9:06
we haven't even seen, we haven't even seen, you know, we've been the used car market has been high because there's not new car inventory. But we we still have yet to see the part, the part of the play where the used car value remains high because there's no use cars, right? Inventory.
Paul Daly: 9:25
And then as it swings, right, new car glut after that, and then it goes round and round.
Kyle Mountsier: 9:30
It's this massive, yeah, it's a massive thing. And I didn't even think about the impact of the auctions like the impacts of just their revenue, because less less going through it. And then these large retailers rely on the auction so like we hear a lot of dealer dealers saying I want to get out of auction I want to go you know, direct to consumer and it's a lot different proposition, buying 5060 used cars off the street, then it is hundreds of 1000s of used cars to go across the country. And then
Steve Greenfield: 10:01
then we get to topic three. So they're going to head up Paul's question. So, topic three, topic three is related to that. So think about this. So yes, Carmax, for example, wants to be independent of auctions and be able to get all their cars through trades, right? Well, or buying cars off the street. But what we know just happened is everyone who bought a car for last three years paid more than MSRP. And when those consumers come back in to trade in their car, they're going to be shocked to be like, What do you mean, it's now worth like, 15, grand less than I thought it was worth, because we're gonna get back to regular depreciation, these cars, these cars are going to be so far underwater, meaning that consumers are going to owe so much more than the car is actually worth, that there's no way you can like rule all that negative equity into a vehicle purchase, no one's stuck, they're gonna be stuck, it'd be like, I'm gonna have to own this car a lot longer, and just burn off all that negative equity by just holding on to it. Which means I think we're going to see many fewer in an environment where dealers are going to be craving these like three year old vehicles, consumers just aren't going to be able to bring them back into the market because there'll be so much negative equity.
Kyle Mountsier: 11:08
I had a situation. Well, is that I, like the devil's advocate on that. And I haven't seen the reports on like, the water to loan, right, like how much water is in consumer loans right now? That's a big question that I have, because you still saw, you know, 50 to 60%, of new retails getting trade ins. And so those trade ins would have been high in that timeline to like, are we? Are we actually going to experience the high water on loans? where consumers aren't going to get out of them? Or is the gap much closer? I haven't seen any concrete evidence to that. And maybe you have that's why I'm asking the question.
Steve Greenfield: 11:44
I haven't. But you guys are gonna be like the feet on the street next week. I would try to like burrow into that question, if you can find some people to comment on that. That's a big potential problem in the industry. And it needs to get exposed one way or the other.
Paul Daly: 11:58
I haven't. And anecdotally, I have an executive from New York City called me. We were actually filming the fourth episode of more than cars. We are Mohawk Chevrolet. And I got a phone call. And he was saying, hey, because all of a sudden them his car guy I know about cars, right? So like, here's what I have. I want to get into a bronco. I was like, perfect timing. I'm at a dealership. Let me see your car's worth and he was in an equinox. So give, you know, went back and forth, found out what he owed on it. And he had the means, right. But still, he was probably five grand backwards. He owned the car for two years. And even he was like, I think I'll just stay in it for now. Right? And that was somebody who had the means to do just sideline, immediate, immediate. No, he was out of the conversation as soon as he found the value. And I explained why it was like that, because he was also confused. Right? I know, things were high, but I don't think people realize what that actually means is that oh, things were high. You pay this and the residual values change. It's a major difference. Why are you talking about like a 2028 or a $30,000 Equinox? And he was$5,000. Apart from where he thought he was? Yeah.
Steve Greenfield: 13:07
And when you see these studies that show like half of Americans have less than$500 cash in the bank account. They have no means to like buy their way out of the
Paul Daly: 13:16
hole. Yeah. And then we didn't cover the story. But there's definitely like, the savings. The headline was something like all of that savings we gathered during the pandemic is now gone. Basic wrote it online and print it off. Yeah, it is no longer bought all I
Steve Greenfield: 13:35
spend on Keyspan. And you know, credit card rates are going up. And we're just looking through the US consumer is continuing to spend it is the thing.
Kyle Mountsier: 13:43
Hey, real quick before we go. Give us the give us a little insight into what navcon Yes, like, day where you kind of are moderating a little portion of this event. Like what what can people look forward to? Through the day that day, besides kind of trying to make them cry? Right, that
Steve Greenfield: 14:01
we're gonna get Kyle up on stage as a judge Shark Tank style. So that'd be awesome. So no, Thursday, all day, you'll see me up on stage. You know, I've got the CEO of CarGurus kicking us off Jason Trevathan, followed by the car dealership guy, although, you know, I've tried to convince him to get up on stage with some kind of like mask on, but he's gonna be zooming in. But we're gonna take open questions from the audience. So if you've been wanting to ask car dealership guy questions, we will be taking questions live on the spot ask question, which is super cool. And then, you know, we've got we've got a few of our portfolio companies up on stage getting interviewed from by Chase Fraser and Fraser McCombs capital. And he is he's interviewing them. And then we're going to get caught up on stage and put them in a seat and have five five minute pitches. He's used to this. He's been through this a few times before, and Kyle can pepper, pepper them with questions and then ultimately score these guys at the end and they'll take away nabokovian cup. And we'll word that right after lunch,
Paul Daly: 15:02
which is so cool. Who makes the never con cup every year?
Steve Greenfield: 15:07
There is a guy up in Detroit, who welds these things for me. And we've gotten a lot of business. So you got to see this. Hopefully we can put that image up on screen here for everyone to see. But yeah, I mean, you gotta see this guy. He's truly talented. He's a welder. He does the work himself. And as a result, we've got him a lot of extra work, but I can definitely if anybody wants, you can, you can message me happy to put in contact with this guy, great guy. And he does great work work of art
Paul Daly: 15:35
every year. I'm like, who makes these things? And now we know that we know. All right, well, there you go. There's the show for your Friday. Thank you so much for joining us. We can't wait to hang out with you next week and cause a little trouble baby. In the meantime, we'll get some earrings, some tattoos and try to hang out with the repo guys. Talk to you guys.