94: Buying a car without haggling? The Future Retail Model of selling cars

Some people love car shopping… Others dread it. But like any industry, technological advancements have changed the landscape. When trading in an old vehicle, it used to be hard to really know what a good price might be. But for years now, you could look up comparable cars on the market, controlling for trim level, mileage, condition, and more. Some online services tell you what the dealer’s costs might be for a new car to help you negotiate with more confidence. But many people just don’t like to negotiate, and at the same time they certainly don’t want to feel like they are leaving money on the table. I had a very interesting conversation with Chris Pfaff, the CEO of Pfaff Automotive Partners who operate almost 20 locations in most major cities in Canada, selling a wide variety of cars, from McLaren and Pagani, to Porsche, Toyota, Volkswagen, and more. His company launched what they called The Future Retail Model of buying cars in late 2019. No haggling. Their best price is offered first. Take it or leave it. And it’s been very successful. Chris explains the reason for the new model, whether his competitors like it or not, how his sales team reacted, and provides some thoughtful insights into the world of buying and selling cars.

I need to point out that this interview was originally recorded BEFORE COVID-19, back in January of 2020. I had delayed publishing the podcast as it was originally scheduled for March 2020, but large parts of the country were being locked down at the time. Anything not Coronavirus related was just not on people’s minds. Well, we’re hopefully starting to see light at the end of the tunnel. And perhaps more people will be in the market for a vehicle in the near future, so now seems like a better time to release this episode.

Links:

Pfaff Auto website
Facebook Page
YouTube Channel
Instagram 

Transcript

Chris Pfaff: 0:00

When you say it's a new way, way of selling cars, it isn't it isn't. It's just we cut out a lot of the time waste about eventually we have a best price and a consumer has the best price that they're gonna pay. We just shorten that time and give that to you right away.

Preet Banerjee: 0:29

Some people love car shopping, others dread it. But like any industry, technological advancements have changed the landscape. Some online services tell you what the dealer's costs might be for a new car to help you negotiate with more confidence. But many people just don't like to negotiate. And at the same time, they certainly don't want to feel like they're leaving money on the table. At a very interesting conversation with Chris Pfaff, the CEO of faff automotive partners, his company launched what they called the future retail model of buying cars in late 2019. No haggling, their best price is offered First, take it or leave it. And it's been very successful. Chris explains the reasons for the new model, whether his competitors like it or not, how his sales team reacted and provide some thoughtful insights into the world of buying and selling cars. I need to point out that this interview was originally recorded before COVID-19 back in January of 2020. I had delayed publishing the podcast as it was originally scheduled for March 2020. But large parts of the country were being locked down at the time and anything not Coronavirus related was just not on people's radar. Well, we're hopefully starting to see light at the end of the tunnel. And perhaps more people will be in the market for a vehicle in the near future. So now it seems like a better time to release this episode. This is mostly money. And I'm your host Preet Banerjee. And on the show today I have Chris Pfaff who is the president and CEO of faff automotive partners. And we're going to talk more about buying cars, specifically about a new model of selling cars that fap is brought to the marketplace, how dealerships make money, and more. Chris, welcome to the show.

Chris Pfaff: 2:31

Thank you very much.

Preet Banerjee: 2:32

I'd like to start with you telling the listeners a little bit about Pfaff automotive, by way of background, most of the listeners know that I'm a gearhead. And when I see the name fap and I see it all over the place, especially at racetracks, you sponsor race cars. You've got a number of different dealerships, but perhaps you can tell the uninitiated a little bit about faff automotive, all the background.

Chris Pfaff: 3:00

I was born into the into the business my father had one store in Newmarket, Ontario, Volkswagen Audi, Porsche, and at an early age. I always loved to work there as soon as I could probably around the age of 11 on Saturdays, washing cars. And because of the brand Porsche I think we got involved early on and go into MMA sport as a kid. And I remember seeing the I my first memories of the iconic cannamd cars and Roger Penske, his team, and Mark Donahue and so forth, Jackie Stewart. And it was just amazing experience. So very passionate about cars. That's that's my I'm very, I'm a very simplistic life. It's all about cars. So it's been very easy that we have passion, you tend to love what you do, and you have a lot of fun at it.

Preet Banerjee: 3:47

And how many dealerships are in the faff group, because it's nationwide, like coast to coast. We

Chris Pfaff: 3:53

are primarily Southern Ontario based, but we are located now in all other three other major cities Calgary, Vancouver and Montreal. But 18 rooftops. And so the growing business for sure.

Preet Banerjee: 4:08

And the Motorsports involvement. Was that something that started with because your father initially started the business wasn't

Chris Pfaff: 4:15

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

Preet Banerjee: 4:19

Wow. Yeah, that's a long time. And then the Motorsports involvement. Was it from the get go? Was it since you got into it? How did that all start? It was

Chris Pfaff: 4:25

sort of later 70s when when I think the Volkswagen Canada group was doing some sponsorship at masport. That's started light. And then it really became more involved in the mid 80s. When Porsche did a one make series in Canada and Scott Goodyear race for us. We won that championship in 1988. And that's sort of when it started. And listen, we've been out of it for four years in between as well. So we did a lot of it, including myself driving a bit in the early 90s. In the Firestone firehawk series, and I think from about mid 90s, we got out of it until early 2000s. And then we've been back It in varying forms ever since and never more serious in the last few years in the emsa series Daytona 24 hours just got back from that a few weeks ago. And we're looking forward to Sebring now coming up in March.

Preet Banerjee: 5:11

Well, you know, I love seeing it. I love seeing the faff name. And I follow a lot of the drivers, as well. So as a gearhead, you know, thank you so much for the involvement in motorsports. Now, let's, let's talk about carbon, because that's the whole reason that I'm here. So your PR agency reached out and I never respond to PR agencies. And they reached out and they said, Hey, our client is Pfaff automotive, and they want to talk about this new model of selling. And as I said, normally, I don't respond to PR pitches at all, I just sort of send them to junk. But what was interesting about this one was the fact name. And also a friend of mine that I went to racing school with is one of your general manager, General Manager. And there you go. So Chris green. And I remember, I think he had just gotten his driver's license when we are at the racing school, and I was a few years older. And so yeah, those two things put together I thought, okay, let's, let's, let's entertain this this interview. And so the pitch was, you have this new way of selling cars. And so I want to get into first, the whole caricature that has been built up by popular culture when it comes to car sales, right? Because when you look in a movie, a book, TV show, or whatever, they always refer to the car salesperson as some kind of evil. Never do will person always trying to take advantage of people. Why did that become a thing? Where there's some bad actors long time ago? were small shops that, you know, do nefarious things? Why is that that becomes such a bad thing where you know that

Chris Pfaff: 6:46

I've been a car salesman all my life, I still consider myself as a car salesman, number one, and one of the least trusted businesses or business professionals that you can have. So I've been living with being painted with that brush my whole life, right. So obviously not something that you like to be painted with. I don't know. I mean, I think some of it the industry, we deserve it, I think I think we deserve it. The great thing is with technology, consumer transparency, the consumers having control of so much information is that that needs to go away now. And I think that's exactly what's happening. So when you say it's a new way, way of selling cars, it isn't it isn't. It's just we cut out a lot of the time waste about eventually we have a best price and a consumer has the best price that they're going to pay, we just shorten that time and give that to you right away. And that gives you the truly the best price we want to sell the car for.

Preet Banerjee: 7:39

So before we get into the specifics of what this new model is this talk about what the frustrations are of car buyers in general. So again, you've been in the business basically your entire life, what are the things that people tend to have hang ups about or the things that frustrate the most with the process?

Chris Pfaff: 7:58

two things one is they didn't a lot of people, not all but a lot of people but 80% don't like to negotiate. They don't like the process. They're uncomfortable with that process. That's number one. Number two, which surprised me a little bit initially was they didn't like the time it took to buy a car, they wanted to do it a lot faster. So those are the two main things that they really didn't like about the process. And there was also the underlying, am I getting the same deal as the guy next to me? Right, right, who's doing a deal at the same time. And, and quite honestly, that was not the case that there could be variances, same car, just different price different consumers. Maybe one had a better negotiating skill. And that really isn't right. So that's that's what we tried to get away from.

Preet Banerjee: 8:42

Okay, so let's now talk about what this this new model is that you've introduced, because I saw the placards everywhere that sort of listed the bullet points of what is this this model? So why don't you explain in your own words, what is this model?

Chris Pfaff: 8:54

So what we're trying to say to you is when you come in we price the cars, we don't price you the customer, so all the cars, everyone has the same price to buy that same car. And the cars are priced. They're pre discounted based on what our final best selling prices. So if we give you the price, and you say you're going to go shop and go elsewhere, we say you know Godspeed, go do that. And hopefully, I'm sure you're going to find that we're very competitive because we need to be to stay in business, right. So we give you the best price up front. We don't have any administration fees. That's been another way of building back profit for dealers over the years. So we've taken away the fee so the price we give you is the true price. We also have a three day money back guarantee so you can't make the wrong purchase. So you can bring back the car after three days and get a full refund, not just an exchange. So what if you drive down to Tijuana and back? There is a couple of a limit and a 300 kilometer. We asked you to respect that you might be by 300 kilometers you'll never hear anything right? Right purchase. Also your trade value because there was a Also some misnomer about the best trade value. Even if you don't buy from us, we're still giving you that traded value that we've put on your car. So you know that we truly are giving you the right transparent up front price on your trade,

Preet Banerjee: 10:11

right? Because that would be a point of negotiation where you can play with what the value is of that trade in, but you're willing to say no, this is what it is whether or not you actually sell us your old car.

Chris Pfaff: 10:20

Exactly. And in today's day and age on consumers, again, they can get fully confident with what their trades worth with auto trader, the cars are priced actually, as to competitiveness, so you can really see what your car is worth. And makes it easier for the consumer as well. And quite frankly, for us to really prove to a consumer, we're giving you the right price.

Preet Banerjee: 10:39

Now something that you said earlier was that you price the car, not the customer. So this reminds me of back in a man this would have been like 20 years ago, the TV show The Cosby Show, there's this episode where Dr. Huxtable was going to buy a car. He was taking his son Theo, and he said, Nope, we're gonna go to the dealership, don't dress nicely, right? Don't let them know that we're dead. I'm a physician or whatever. So he's playing this role going in trying to look like he's down on his luck trying to buy this car. And then one of his patients walks by in the dealership, he's like Dr. Huxtable in the car sales like, oh, you're a doctor, are you? And then that changed the the nature of that conversation. So was that used to be the case where you see someone walk in you say, Okay, well, this guy looks like they can afford more. So I don't need to negotiate that hard.

Chris Pfaff: 11:24

I don't know if it was a narrow necessarily based on that stereotype. In fact, it was the reverse stereotyping that we found, when I had people complained to me was people that just came into a store dressed down and the salesman didn't take them seriously, because they weren't dressed down. So that's sort of the stereotype that I recall. But you know, that was 2030 years ago, when I got in the business. I think people realize it's a, it's a much more casual day and age, you don't get dressed up to go and buy a car, right? So I try to instill it fast that we take everybody seriously. And even when we have kids coming in, they influenced their parents decision so much I don't have I have two young kids, and they influenced me a lot. So when those those kids come in at McLaren, and Chris and his team are very good at that. We're not even looking for that. So we're looking for a new fan. And usually there's good karma that comes along with treating customers that way.

Preet Banerjee: 12:17

Okay, so with this new model, let's break down a couple of the variables. So you mentioned best price first. So that applies to new and used cars.

Chris Pfaff: 12:25

Yeah, that's correct.

Preet Banerjee: 12:26

Now, when it comes to new cars, what is how does it work when you have sort of like the MSRP, versus what you would actually buy the car for at a dealership? Where does the wiggle room come from in terms of the the differences in prices for a brand new car?

Chris Pfaff: 12:41

Yeah, simply supply and demand is one initial one. But so if you have a car like Porsche GT three that are always pre sold, it's at lowest price. But if you have cars that are in stock, and there's more supply, really than demand, and it's changes, and that's mostly the case most of the time, so then it becomes a factor of how long is the carbon in stock, color, if it's an unpopular color, if it's an unpopular options, so sometimes with the manufacturers, we need to take allocation of vehicles that aren't really the best selling. So those cars would immediately get discounted more so than a car that has the most popular options. And so those are the factors that we go into. pricing on new cars uses a different story. It's very easy, because again, we've got Auto V auto reports, which is giving you pricing of cars and every community, how many are on the market and stuff. So both the consumers have access to that information. And we as dealers do. So when we price cars, we're pricing those us cars to the market price.

Preet Banerjee: 13:51

The conversation with Chris Pfaff from faff auto comm continues in just a minute. But first a few thank yous to listeners who have comments on Apple podcasts. jld today, thank you for your kind words. And Sonia Katherine was a big fan of the episode with Melissa Lila, the author of happy go money, which is episode number 69. If you haven't listened to it already, if you want to check that out, we had some fun with words on that episode. And thank you to everyone who leaves ratings and comments on Apple podcasts. I appreciate them. And I do read them all. And now back to the conversation with Chris valve from Bath auto. And I think it's probably good to break down and I am not an expert in this by any means but the relationship between the manufacturers and the dealers because you know this the the location we're at here is FAF outtie. But you're not owned by Audi, right. Audi is the manufacturer. You're the dealership you have a relationship with that manufacturer, you With the name on, on the signs of whatnot. But do the manufacturers offer some kind of incentives to help move product? Like how did how does that work? They don't just say, here's the price of the car, go ahead and sell them and take a cut. I know there's

Chris Pfaff: 15:15

a lot of incentives that happen all the time. So every month there are they're offering subvented, financing subvented lease rates or could be cash back. So there's always usually with most models, there's almost I would say, 80 90% of the time, there's something going on, for sure. And again, those are fairly easy to see on our websites. So consumer can see there's 1.9% financing this month on an Audi a4, for example, they can see it, and is that that those sort of like discounted financing rates are those provided by the manufacturers are they provided by a separate financial intermediary of the manufacturers who owns those financial companies. So the subvention so the manufacturers, most of them have their own captive finance company. So for example, Audi financial services or Volkswagen, financial services, and, but the paying down of the rates to get them below market is actually the car companies. So Audi will pay to Audi financial monies to get the rates down below market rate?

Preet Banerjee: 16:14

And are there any dealer groups who have gotten together and say, let's set up our own financial services? And we'll get some kind of subsidization from manufacturers ourselves? Or are those financial services owned by the manufacturer? It's

Chris Pfaff: 16:26

owned by the manufacturers, there are some some dealer backed financial groups that do some of that, but to very little extent.

Preet Banerjee: 16:35

Okay, the next sort of feature in your your new model is the lack of negotiating. And so walk me through that, are there some people who are disappointed by the fact that there is no negotiate? Cuz I know that a lot of Canadians, they tend to not negotiate very hard compared to other countries around the world, but there's some people who really look forward to it. So tell me what what has been the reception of this idea? Do people feel like there's something too good to be true about?

Chris Pfaff: 17:07

So I take exception to the term lack of negotiation? We have negotiated upfront, we've given you the absolute best ration to waste your time. But having said that, you know, again, our studies say there's about 20% that do like to negotiate, right? So for sure, we've had people walk in and they say, we find you unflexible, and I don't want to do business with you guys. And so that so we lose that business, but we gain a lot more. That's that sort of that relief of breath and go Thank God, finally, we're into a new age of doing business. So yeah, we lose some that do you want to negotiate and want to go go go hard on the on the deal? And maybe that's not for us anymore? And it's and it's not for them either. So

Preet Banerjee: 17:50

right? And I guess in the end, because a lot of people would say, Alright, well, you've done the negotiation upfront, you're building a certain profit margin. But all models only work if everyone kind of wins. And I get the customer in the long run is not satisfied the model not working, that model is going to fail. So you need there's there's a balance for both sides, where you need something that's going to work for you and something that worked for the customer. How long is this this model been in place?

Chris Pfaff: 18:17

So interesting. So we're, you know, it's pretty new in Canada, but we're not the only ones doing it in the States. This

Preet Banerjee: 18:22

is not new. It's been around for it's

Chris Pfaff: 18:24

been around for years and years. And it surprised me that we were saying a lot of the reason for doing this is because of the transparency and technology. And we need to prepare very shortly, probably by the end of the year, that we'll be able to sell cars online from start to finish. So consumer could go online, buy the car, have we would deliver arrange financing, and we would deliver to your house, you never even have to come into the dealership. And right now Google's telling us that's about a take rate of about 15 to 20%. us. So you need to have one price to do that properly, because there's no negotiating right on online. So that was one of the reasons we did it. But I stumbled upon a BMW dealer in Denver, Colorado that's been doing this since 1993,

Preet Banerjee: 19:08

Ashley Schaefer, BMW, that's an inside joke if you have if you don't want to use bounding down.

Chris Pfaff: 19:15

But they've been doing it and I'm almost envious because because I've been doing this now. We've been into this for about 18 months and people ask me, are you regretting? And I said, No, I wish I'd done this sooner. And I didn't need to have technology driving it for us to do it. It was just a it's I think it's a nicer way of doing business. And as I said, they've been doing it for years in a hyper competitive BMW market in Denver. Very, very successful market share very, very successful customer satisfaction scores.

Preet Banerjee: 19:43

Okay, you also have eliminated what are called pre loaded and administration fee. So what are those or were those

Chris Pfaff: 19:52

are really just additional profit and may mean there were there's dock fees and so forth, which are really just profit. There's also other fees though, that are Genuine like there's some Ministry of Transport fees that are that are necessary that are still coming into the equation. But all the fees that really aren't fully justifiable now have just been removed.

Preet Banerjee: 20:13

So okay, so one of the things that you know, people always talk about our PDI, right, product delivery inspection I think it stands for, and there would be a charge of I forget what the joke like 500 700 bucks something like that. What would that have caught? Would that just have like a way to seek profit or is that just, you know, opening up the truck and make sure that the mats are there,

Chris Pfaff: 20:32

no, actually pre delivery inspection or real fees. So a lot of these cars come a lot of miles away. So the manufacturers insist that we do another checkout on the vehicle. So that can be depending on the model of car, two to four hours that you're actually going through the vehicle again, and also the cars come with shipping, wax, etc, on the vehicle. So when you're detailing the car, there's quite an involvement in taking off the protective materials, and getting the car ready for delivery. So two to four hours. What does that that entail, like other than what you wants a full inspection of all the functions of the car, sometimes it's removing shipping blocks that raise the height of the car, so they don't get damaged. So you do stuff like that. There's lots of different things, again, depending on the model of the car,

Preet Banerjee: 21:13

okay. Next, we have the written offer to buy used cars. So as you indicated before you will provide to someone if they have a potential trade in vehicle, you'll put in writing, this is what we would pay you for that car or discount the price of the car that you're about to buy. And I think the perception was that there was room to play there. So if someone said, Well, this is what it would be worth, they could play with that number to make it look like a better deal on the on the car that they're selling. But you don't require that they actually sell you the car. Is that correct? Great. All right. And was that the whole impetus behind that? Like, what, what is unique about this? Well, what

Chris Pfaff: 21:55

we're always saying is that a lot of times in historical sales, they will instead of giving you a discount a cash discount, they'll give you less discount, but they'll give you more money on your trade. So they'll just pay one pocket to the other, right? So we're just saying here's the best price on the new car, whether or not you trade your car in and then on your used car, whether or not you buy from us we're going to give you the same money. So you know if we're going to end up not selling you something but buying the car, we need to be giving you the fair market value.

Preet Banerjee: 22:25

Right. So that definitely sounds more transparent.

Chris Pfaff: 22:27

never been a better time to buy a used car for a consumer and we're really seeing such a growth in the business not just because of the normal marketplace. But because of consumer laws are so much law protecting consumers when they're buying a used car to know the history. And also the pricing is so transparent to them. So I'm convinced we're getting people that made me in the past wouldn't buy a used car because they were worried about paying too much or worried about the history or now buying premium cars.

Preet Banerjee: 22:53

Yeah, wasn't their thing. And none of this is Ontario specific or Quebec specific. But if he picked up you know, you go to a smaller used car lot a car that was previously registered in Quebec, if it was totaled, it was hard to actually track that damage, right? Absolutely. Is that gone now? Okay, so

Chris Pfaff: 23:10

Canada wide, even the US have a flood damage cars, we've had cars come up from the states that were imported with flood damage. You can now basically North America get history in the cars. So okay, so

Preet Banerjee: 23:21

this is a big operation, as you said, 18, roof tops New And Used sales. But for sort of like the individual lots where I would imagine, you know, we have a fly by night operation. Maybe they're not around for a long time. And that's where these sorts of nefarious things would pop up. What kind of car buyer do to protect themselves? Like, is there some kind of association that a dealership has to register with to say, Oh, yeah, we follow these standards. What would you suggest?

Chris Pfaff: 23:49

Well on vixia, Ontario motor vehicle, governing body, which is authorized by the provincial government, and the dealer is actually self regulated, but there's a lot of stringent encumbrances put upon them to make sure that they're transparent with consumers. So that's the body you can go to if you ever have an issue, buying a new or used vehicle, and they will protect you for sure.

Preet Banerjee: 24:15

We talked about the money back guarantee and exchange guarantee. So basically, you got three days and up to 300 kilometers. And so if you change your mind, you can just bring it back no questions asked.

Chris Pfaff: 24:24

Because there's some exceptions to that. And the only exception is is very specifically specially ordered vehicle, like a McLaren 650 S Yes. in purple with a pink interior Ray, that we really couldn't take back. So there's stuff like that exception, but by and large, yeah, most cars, it's not a problem.

Preet Banerjee: 24:40

What is the most expensive vehicle you've ever sold? Because you've sold a lot of cars. Yeah, I mean, and you you carry a wide range, right?

Chris Pfaff: 24:50

I'd say just under$2 million US dollars we've sold. Actually, I shouldn't say that. We've actually got polygons that are a little bit more than that. So So we've had a few of them. I don't know Doesn't have 15 of them in the last couple of years that have been over a million dollars. Now,

Preet Banerjee: 25:06

let's talk about compensation of salespeople. So the old model, I would have assumed that there was some some commission, which would be partly based on how well you could, you know, negotiate with the customer. So, for the salespeople who are now, you know, the negotiation is done upfront, and you've got your best price first, how does that change their compensation?

Chris Pfaff: 25:30

Well, they're no longer on commission. So on the gross profit of the deal, we just pay them on a percentage of the selling price of the car. So now, the differences I don't care really what car I saw you, I really want to say what cars best. So for example, demonstrators, there wouldn't be a lot of commission in that because the cars are discounted in US demonstrators. So they would typically want to walk you to a new car where I could make more money, right? But maybe the demo was exactly what would work for you. And you were happy to take the discount with some miles on it. So now, there's zero impetus for the salesman to want to do that. So they really are going to get you the best car for what you're looking for.

Preet Banerjee: 26:08

So with 18 different dealerships, you've got a lot of salespeople, and you've probably got some hot shots, and then you know, the massive middle, I'm assuming they're probably okay with that change. But what about the ones who are like, you know, making a lot of money because they knew exactly like, they're just, you know, they're selling all day long, and they knew where they were gonna get their commission from, do risk losing those sales people,

Chris Pfaff: 26:32

there's a lot of risk. And we've actually lost some some of our good people, but a lot less than what we expected. The good ones, they had the easiest, because they really, they've got such great customer relations and a lot of repeat business, there's already that trust in place. So they were sort of working this model anyways. It was I would say it was some of the middle of salespeople, the ones that sold strictly based on price that really had the hardest time because they felt they needed to, to only sell to you based on what price they could offer you. And those are the ones that have either had to transform and realize selling is not only about price, selling a car is about a lot of different things for different people. So either some of those have left for sure, or some have actually changed their styles. And the most interesting thing was the young ones. They are the newer salespeople that a lot of the millennials, young millennials don't like to negotiate. So they would struggle for six months till we train them on how to negotiate. Now there's no negotiation and they start selling 1520 cars a month right out of the gates, we've seen a lot of great success with that.

Preet Banerjee: 27:37

That's interesting. Now, there are associations for dealers. So we've got Canada, the Canadian Automobile Dealers Association. So when you show up to these meetings Now, with this new model, you have all the other dealer saying, Chris, what are you doing? Why can't you just go with the status quo? Why? Why are you trying to make us look bad, like what what's been the reaction with with other dealers.

Chris Pfaff: 27:59

So it's funny that it's actually very muted. Oh, really, in a lot of them face to face. But I am hearing a lot of background noise and a few people that are closer to me will tell them so that the industry is watching and stuff. So they're watching us closely, some of them have been critical. It's not working for us and observing from the bleachers. But I can tell you, as I said earlier, the one big thing I would say I wish I'd done it sooner. I think we've had a lot of bumps on the road this year with execution and how we did it, we could have done it better. But it's been good. And I quite frankly think it's inevitable. Nada in the US the Dealers Association down there, predicted about six months ago that by 2025. It'll be like this model will be normal. Interesting. Yeah. 100%. So that's what they're saying. And I tend to believe it. So.

Preet Banerjee: 28:49

And I want to actually ask you as well about some of the trends that we're seeing in automotive sales and financing. So, you know, hindsight, obviously, is 2020. foresight is anything but but I think it's fairly safe to say that we're probably closer to the end of a credit supercycle than we are to the beginning. And we've seen the rise of the so called Super amortized car loans. You know, back when I was, you know, 16 and thinking about buying cars for the first time. It was like a four year auto loan was pretty standard five years like whew, that's long to today. I think the average is like seven years for new car financing. A friend of mine recently was tweeting about being at a boat show and they have financing on boats that were like 240 months 20 year financing on a boat, which to my knowledge is a depreciating asset. So what are the trends that you've seen? Is that that sort of in line with what you're seeing at your dealerships and do you see that as a problem?

Chris Pfaff: 30:00

couple of thoughts on that. One is is cars are better today than ever, and they will last longer. So if you do typically stretch out of finance not such a bad thing for consumer, but for us, I don't agree with it, we'd like to see people coming back into the market more frequently, when we haven't really seen especially at the luxury end, we haven't really seen a lengthening of the the terms of the loans. A lot of our luxury businesses lease. And the term still an average is 42 months. And it's been like that for a long time now 10 years plus. So some of the financings got a little bit longer, but again, not we've seen this already 15 years ago where guys were testing it. Some of the the more volume oriented mainline brands do do it more. But I would say no, with even some of our mainline like Toyota, Volkswagen, it hasn't been prevalent.

Preet Banerjee: 30:51

The subscription pricing that we've seen some manufacturers toy width is is this something that you see becoming more prevalent? And what impact does that have on dealers? Because they it sounds like the they're kind of going around you guys?

Chris Pfaff: 31:08

Well, no, were they, they actually need us to help assist in executing on it. We've just piloted now with Porsche for the first time in Canada, they've been doing it the US for a couple years. We just started it. So it's too soon to tell. In terms of a model that works for consumers, I don't know how many are going to find benefit from it. What it is good is that we're finding that we're getting consumers that maybe didn't consider that product before. And were able to eventually convert them into permanent vehicles. So I don't know yet which way this is gonna go. It's interesting. And I'm glad that we're in a test model with Porsche on that. But I'm not so I'm not so certain there's been a lot of startups that have not continued on. So a lot of this shared driving services and so forth, it's still a really unknown space.

Preet Banerjee: 31:53

And maybe, and sorry, maybe we should break down with the subscription model is so my understanding is very cursory is that essentially you pay an ongoing subscription fee. But you also have the ability to change vehicles more often. So it sounds like a version of leasing with a bit more flexibility that you pay a premium for is that basically what it is,

Chris Pfaff: 32:14

yeah, so you're getting the car all in, you're not having to pay any maintenance, you're not having to pay for insurance. So you're just getting one car insurance to covers insurance to you have to qualify, right? Yeah. For the insurance. But yeah, and then there's you can switch cars, and again, varies by time by by the subscription service, but some of them you can switch every week. And for a guy that's in and out of cars all the time, that's a pain, I can tell you know, it's nice to drive different models all the time. But those cars like and some of them you change once a month, or once every three months. So you could have a sports car in the summer and switch to an SUV in the winter and back again.

Preet Banerjee: 32:50

My last question is about the next generations of car buyers? Do they look for different things than say my generation would have? Or they focus more on the tech than they are? what's under the hood?

Chris Pfaff: 33:06

You know, I don't know how to answer that question. I don't I don't I haven't seen any distinct patterns there know, for sure. I mean, I've younger you get the easier it is to, you'll see that you see consumers using all the features that are in the cars, right. So you'll see a lot more of that. But in terms of demanding, yeah, they are looking at that you make sure your technology is competitive with other brands, but most of them are most of them have Apple CarPlay, etc. So I see more usage, but I don't necessarily see that they're focusing more on it.

Preet Banerjee: 33:38

What about things like, you know, mileage, with people becoming more and more environmentally environmentally? conscientious? are they paying more attention to that? Is it basically the same? Like do you notice any changing like drastically changing tastes? Or is it just a matter of, you know, that gets reflected in what the manufacturers put out? Because they respond to Oh, no, we're,

Chris Pfaff: 33:59

you know, we live we live by the consumer, not what the manufacturer puts out, for sure, especially today. Tesla is such an interesting story because I predicted their demise 18 months ago, I was you know, I'm here to say I was very wrong. You know, NBC last last year, they outsold every other luxury brand in British Columbia. Part of that is due to tax subsidization. But But still, nevertheless, a good Feat. And so, electrification, there are consumers that want it. We're getting into it now with Porsche and Audi in a big way, and a lot of the manufacturers will follow suit very shortly. So it's going to be interesting to see. But there are certain consumers that want an environmentally friendly corner are demanding that for sure.

Preet Banerjee: 34:43

every guest on the podcast gets commercial at the end of the podcast. So you've got a minute, two minutes, you can say whatever you want, you can sell whatever you want. tell people where to find you. The floor is yours.

Chris Pfaff: 34:55

I don't know what to say that's that's hard to say. Listen, I can tell you at five auto. We do it appreciate when consumers do business with us. And I can tell you, we're not perfect. We do make mistakes. But I can tell you that we do care when we do make mistakes, and we're always trying to get better. So that's sort of what we're all about. I always tell our team that we want to we want to win. We want to be good at what we do, and that we also want to have fun with it. So I appreciate the opportunity to be on the show today.

Preet Banerjee: 35:21

No, it It's my pleasure. And I'll just point out that spelling of faff if you're looking it up is p F, A f

Chris Pfaff: 35:28

f, you got it back. Alright, so photo Comm.

Preet Banerjee: 35:32

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

Chris Pfaff: 35:34

Thank you very much.

Preet Banerjee: 35:46

If you want more personal finance content, or you have questions for me or topic suggestions for the podcast, you can follow me on Twitter or Instagram, same handle in both cases at Preet Banerjee, I also have two YouTube channels, you can subscribe to my main channel, which covers personal finance and investing topics that are global in scope, and a Canadian specific channel as well. That's it for this episode. Thanks for listening.