In this transcribed episode of the Used Car Dealer Podcast, Zach interviews Dave Sutton, Vice President of Business Development and Industry Relations at Montway. The discussion covers vehicle reconditioning, condition report writing, and the current state of the recovery industry. Dave also shares insights on how technology is shaping these areas and what the future holds for the industry.

Zach: Hey, everyone, Zach here and I'm excited today to welcome Dave Sutton, the Vice President of Business Development and Industry Relations at Montway on the show today. And we're gonna dive into some fun topics. We're gonna talk about vehicle reconditioning, condition report writing, and the recovery industry. It's gonna be a great conversation. Dave, thanks so much for joining me on the podcast today.

Dave: Oh, my pleasure. Yeah, I love talking about the car business. Any aspect of it. It's time well spent. I always learn something from every interaction and that's been over a good bit of time for me. So, if I can share any today, it would be helpful. I'm happy to do so.

Zach: Awesome. And to kick off this podcast today, can you tell us a little bit about your background and how you got into the auto industry?

Dave: Sure. So, I was kind of born into it. I was actually born in Detroit, spent my earliest years in Detroit proper, 313 area code, and then I moved to the suburbs and grew up around Detroit. My dad worked for AMC for a while. Uncles worked with Chrysler, they worked for GM, neighbors worked for Ford. I mean, you just grew up in Detroit. And later when I went on to go to Central Michigan University, I studied business and then this was in the early eighties, and then there was an opportunity a new minor, they have it called management information systems. This thing called the internet was percolating up and things like that. So, my wife was following the same track. We just, she was my fiancée at the time, we jumped into that. We said, you know what, probably be good to be able to write a computer program, understand systems, blah, blah, blah. And again, this is like 83, 84, 85. It turned out to be a good thing because when we graduated, GM had just acquired EDS Ross Perot's company to shore up on their IT services and that we are graduating. We had a business degree, we could program, we wanted to stay in Michigan. We wanted to live in the Detroit area. And I ended up spending 14 years with EDS. And it was a really good career. I was closely tied to the GM account. And for my last four years, I actually was doing a GM job. It's kind of a contract employee to them working part of the GM Decision Support Center, working on GM strategy projects. I left that, joined a small consulting group that spun out of GM. And we actually had almost all of our projects were IBM corporate in New York. But then we also did projects in other parts of the world wherever we were needed to do strategic decision making, strategy design development, training the new IBM execs. I left that and joined Volkswagen of America and had a good 10-year run with them. The 10 years that I was there, I coordinated the pre-owned strategy between the auto finance company, Volkswagen Credit, Audi Financial Services, and the VW and Audi brands in the US and Canada. So that was an exciting time. And the last, I think, five, six years of that, I was managing the auction operations for VW and Audi. So we sold at 26 auto auctions in the US and Canada, we sold about 120,000 vehicles per year. Most of them were off-lease, some recovered vehicles, some company cars. That's where we really fell in love with the wholesale auto industry, got to know a lot of the major players at Mannheim, at ADESA, the independent auctions, got to know the dealers, what they were looking for, and was absolutely blessed with an awesome team that handled the auction operation for VW and Audi. And then after I left there, I joined Carfax, the vehicle history company. I took my knowledge, what I knew about wholesale there, and helped them in the data acquisition part of their business, and developed a data product and helped to develop a second data product which basically could help a consignor, commercial consignor, know what's on the vehicle history report prior to them reconditioning a car, validating condition reports, and ultimately properly disclosing it. So that car got the right buyer, and they understood what they were getting because prior to that, you had dealers reading the Carfax reports and then that may alter how much they're willing to bid for a car. Maybe it's got an awesome report so they know that they're gonna retail it easier. So their willingness to pay is higher than normal or the converse is also true. Yeah, it looks OK, but man, this thing's been driven by Stevie Wonder. I mean, it's got dents, dings, it's got a bad history and so it's probably gonna be a little bit more difficult to retail, maybe more difficult to finance. So that, you know, getting that information out ahead of time, the commercial consignors and a product called ConsignAlert seemed to be a big hit. We did well with that. We did a similar product called AuctionAlert. And then just over four years ago, I left Carfax and I consulted for a little bit with Montway Auto Transport, liked what I saw, loved what I saw, and joined them full time as a VP of Biz Dev and Industry Relations just over three years ago. That brings me to today.

Zach: Really cool story, Dave. And you're definitely a veteran of the automotive industry. So my next question, condition report writing, it's always been a crucial part of the vehicle resale process. How have you seen condition report writing change over the years, especially with the rise of digital platforms?

Dave: Wow, we could talk for two hours on this subject but it but I'll, I'll try to hit the high points. So when I first started, condition reports largely were on paper, they were multi, the white, the yellow, or the pink copy and then things got digitized and, and they were in a brick where they were answering specific questions and then they started adding photos and said, oh yeah, we had a photo when you take the photos that you did back in the nineties and compare them to the awesome stuff you can get done today. It was amazing. So when you think of a condition report, there's a few different elements to it. One is who's writing the report right now with technology, there's several apps out there where a lessee or an owner of a vehicle can walk around the car, they're prompted, they follow the prompts, they take the pictures. If the picture's not in frame or not good enough, they're lightly asked to retake the picture. So one could say, well, that's a condition report. But really, to me, if you're buying a car, the more valuable car, the more important the condition report. You really want to be sure that the person who's doing it is highly skilled. And it always perplexed me within the wholesale world is sometimes the most entry level folks were the guys that they shoved outside of the cold and the rain and the sun and they wrote the condition reports sometimes under adverse conditions, but it's so important because if you get it right, you're gonna get the right money on the right car. If you get it wrong, you're gonna have a higher than normal arbitration rate or other bad things can happen. And the thing that really, really pointed out to me was when I was with Volkswagen of America and managing the auction operations, we were pretty progressive at the time. And I inherited a great program from Tom Klia who had since retired, and he's left us since then, but he's in the NAAA Hall of Fame, and he was a very, very crafty car guy. And so he had developed what they call the Audi or what do they call them, they call them tech centers, VCI tech centers. And so at 12 of the auctions, we actually had a dedicated garage space where the auction gave it to us, essentially rent-free. We brought in our own people or persons, one or two who actually acted as shop managers, and they took the cars that were coming back. And if it was a car that they could make CPO eligible, CPO ready, they did everything retail dealer would do. They were trained, they went through great training, they produced great vehicles, and those provided a very nice reference point in the guidebook saying this is what a three-year-old Passat should sell for. And so we did that through, through great cooperation with our auction partners. And then beyond that though, you can only touch so many cars and produce so many cars and the upstream sales platforms hadn't totally taken over yet. So we're still getting a good volume of cars through the physical auction. And one of the things I started as I looked across the industry, looked to see what GM Finance was doing and others, is just a great fraternity within the remarketing world. And a lot of us started adopting what we call smart repairs, which basically if a vehicle arrives at an auction and hopefully it's not gonna be there long, you know, we, we like to keep our days to sale right around 20 from the time we've checked in to the time it was sold. If it was obvious that maybe it needed a fresh battery, you know, they were jumping it all the time, if we could do some things to make the car run through the sale better and ultimately be a better value to the dealer. The rule was no lipstick, don't do any temporary repairs, don't get it to limp over. That doesn't mean we filled every car with a full tank of premium gas. But what it did mean is, yeah, don't, don't rust O M over rust. If you fix it, fix it right like it was your own car. And the reason for doing that is you have to be able to be a trusted seller. So you rely upon the condition reports to be accurate. And so you look at it and on paper, and these were on paper before you even look at the car, it's got to be a candidate for, you know, what we'd want to enhance. And condition report writing can be enhanced if you know the vehicle history. You know, if it's been in rear-end incidents, front-end incidents, you know, to look for quality repairs. We used to call it x damage but I don't remember the last time I saw a passenger vehicle on a frame, it's all unibody now. But the condition reports, if they're in the hands of somebody who's been trained well, there's great training available through the NAAA. The guy who does it, Bryce, is great. The guy who did it before him, Matt Arias, who's now with ACV, he was a great guy. They trained me and I learned a lot. And I think if anybody who's involved in the wholesale industry should go through that training because that is a thing that's gonna cause you to, if you know what to look for, you're gonna know when you see a good condition report, you're gonna be able to use that information to your advantage, to properly recondition the car and most importantly, to properly disclose the car. So it's evolved quite a lot. Now, there's some products out there that blow me away. You just drive your car into a spot or they drive the car, it's circled by cameras and AI is working. They look at the underbody. ACV has products like this. There's a few other companies out there who have that product or competitive products. They're all the best, I'm sure. But it does give the buyer a whole lot of information. And again, if I'm looking for a transportation special, not so important. I'm gonna trust my ear, I'm gonna trust my nose, I'm gonna trust my experience. But cars are so darn expensive now, the more expensive the car, the more important it is to make sure that there's a good condition report written. And I would love to see the condition report writer's name on every report. Like, this is my work, you sign it like a painting, like, this is what I do. And so certain condition report writers, not that you'd want to influence them in an improper way, but they should be recognized because they could be real heroes of the industry. I know that as a consignor for Volkswagen Credit, if we had a guy who understood our product, who did a good job, I would pretty much tell the auction, keep Joe or Sam or Sue or whomever on our account. If you have to pay them more, fine, I'll pay it. They were that valuable to our business.

Zach: And could you touch on photos, video, like some of the tech aspect about the condition report being even more evolved year over year with the increase in technology?

Dave: Wow, the technology is amazing and they're coupling it with AI. But the ability, the resolution of the cameras, the ability to look around, spin a picture, to focus in on what you want to see. Sometimes you can see a car better on the online condition report than you can in the auction lane. The auction lane is awesome with lots of excitement and it's a circus. But if you really want to study something, I know a lot of dealers. I work with three screens here at my office in Florida but I know a lot of dealers deal with six. I don't think I could do that and incredible high-res and they can really, really, really get a good look at the, if it's been repainted, the quality of the paint. Guys who are smarter than I can look at a car and know instantly if it's been hit, how bad the hit was and look at those areas more carefully. The measurement too, is it within specs, how it was manufactured, having all that being done automatically? I mean, it's not replacing a good used car person but boy, it's getting close and this is an extremely, extremely enabling for wholesale car platforms selling to remote bidders and buyers. They don't necessarily have to be there at the auction. They can trust the condition reports if they're done by the right vendor or auction house and if it's being disclosed by the right seller. And I think that's a huge thing. Ultimately, the auction is there to whether it's a wholesale online or brick and mortar auction. Their job is to create a fair marketplace for buyers and sellers to connect and they offer services to help that. But ultimately, it's you, the seller, whether you're a commercial seller or a dealer selling or third-party remarketing services selling, you need to properly represent your cars. If you do not, it will come back to bite you. You won't be able to command the premium. You won't have loyal followers or buyers with your car. And that's one thing if anybody, you know, if you're a dealer who's selling on the block, interact with your sellers. And if, and if you're too embarrassed to do that, I wouldn't want to buy a car from you.

Zach: In kind of shifting gears for those not familiar, and you mentioned this term a little earlier, explain what frame damage is and how it affects both the vehicle's value and the safety perception of the vehicle.

Dave: So the term frame damage is a little bit of a dated term. Now it's more accurately called unibody damage. And basically, the way cars used to be built back when I was buying cars and back in high school, in the seventies and eighties, there's largely had the body that sat on the frame. Body and frame was the most normal. And then over the years, as we've tried to improve fuel economy, the frame is a pretty heavy component. So the automotive manufacturers figured out ways to create a unibody. Basically, the panels of the car, the structure of the car was all designed to absorb impact, to make them safer and also to be lighter without a frame. And that's through a unibody through some amazing engineers. They figured this out and they fine-tuned it over time, which is awesome pieces. Car can be crash-rated to certain mileage and rating everything like that. But once some of those key components, let's say it's the B pillar on the car, the C pillar, the A pillar, or some other major, the rear quarter. Once it's compromised and it's damaged, it can never be the same just about. I mean, you do have some repair shops who have the right tools and technology to make it right. But when a car incurs that damage it does lose value because it's probably never gonna be as safe again. And there's a question mark, there's a little bit of uncertainty is how well is it gonna perform if God forbid, someone in the family or whatever is involved in a car wreck or car crash. So that's unibody damage. And of course, it's a big scale. It can be very, very small where, you know, I, I've got two kids, love them to pieces. Would I put them in a car that has unibody damage? Yeah, I probably would but I wanna know a little bit more about, OK, what was, what was the severity of the incident, et cetera? There's a lot of people who look for unibody and they specialize and they know there's people who run away from that, but a good salesperson can talk through that and explain it. And so I know a lot through it because I was involved in disclosing it properly when I worked for Volkswagen Credit and managed the auction operations.

Dave: Later, I learned even more when I was in Volkswagen Credit—excuse me, when I was with Carfax, we used Carfax for reporting on the vehicle history work. Well, Carfax as well, AutoCheck says and all that other stuff. And, you know, if your audience, if I can assure them one thing today, both those vehicle history companies do a good job. I think I gotta tip my hand at Carfax because they have more data sources, and that was part of it. And I know how the sausage is made, and they really, really work hard to describe it accurately, and what they're trying to do is just level set so that the person buying the car isn't surprised—they know exactly what they're getting. And so all the rules that go for full disclosure from the wholesale side, I think, apply for the retail side. And if you fairly represent your product, you put it in its best possible light, you're gonna get all the money for the car, and that customer is gonna refer people to you or they're gonna tell other wholesale buyers, "Yeah, go to Volkswagen Credit Lane. They're good dudes. They'll take care of you."

Dave: One thing you gotta be careful of, though, in the wholesale world is occasionally you get buyers who want to come back and orchestrate a car. You know, "This was worse than you said," etc., etc. And we generally just say, "Hey, if you don't like the car, we'll just take it back." They're like, "No, no, no, I really like the car. I just want it for less." We'll say, "Well, you bought it for that much. There's a guy who's willing to pay $100 more than you right behind you. We'll just take the car back if you want." And so once you, you know, develop some good policies like that, I think they know that you're gonna work extra hard to minimize the times arbitrations are even requested. And if we called it wrong, if we missed it, we're more than happy to—where we work—and I say we because it was such a great team—take the car back, take it to your local auction as part of your network, check it out, make sure you didn't miss something. If you didn't, and if the dealer's yanking your chain a little bit, you write their name in the book, and they probably won't get a lot of consideration in the future. But if you miss something, you gotta go back. If you're smart, you're process-oriented, and who missed it? How did we miss it? How could we prevent it in the future? And you make sure all of our locations know it, and you get to this continuous learning cycle. And I think that's how some commercial consignors like Volkswagen Credit, Toyota Financial Services, GM Financial—I mean, they really, really work hard to make sure that they properly disclose the cars.

Zach: So moving on to vehicle reconditioning, when is it appropriate to recon a vehicle before selling it? What factors should the sellers consider with recon?

Dave: So I can speak to it in the wholesale world, but I think so much applies to the retail world. You know, the basic thing is wash the car, wash the back of the car. I mean, some guys are bad at this—spend the 20 bucks, have the car washed and back so that the dealers see exactly what they're getting, so they're not surprised. Otherwise, they're gonna think you're hiding something or they left it dirty for a reason. No, wash and back it. That's one—that's level one. Come everything. If it's in—maybe you want—maybe not that car, and the guys are by with the power washer, spray it off. But for the most part, you want to sell clean cars. And when you look at additional reconditioning, I'm a huge believer in paintless dent repair. We worked a lot with Dent Wizard when I was at Volkswagen, and that company is aptly named. They are wizards. If you get the right crews, good—they're fast, they're efficient, and they can pop out door dings. They can do it very, very cost-effectively. Because for them, they don't have a lot of windshield time going from dealership to dealership—they roll into an auction, they're there for two or three days, and they're busy, but they do high-quality work. Hailstorm, you know, these guys are like knights in shining armor—come back and restore the value of all those vehicles. PDR to me was always a no-brainer. The other thing is, the vehicles have to be safe to drive and operate in the lane at the auction. And a lot of dealers, a surprising number, if they buy a car, they put it in a deal in place, they want to drive it home or have one of the guys in their crew drive it home. Make sure the car is roadworthy if at all possible. That means decent tires, you know, the seatbelts or, you know, things like that. It seems like a small thing, but it's just the right thing to do. You go beyond there, stone chips, repairs, cracks in windshields—quick, easy. You should be able to do it for less money in the wholesale setting than any dealer can do it at their own retail setting. Because a lot of times people don't think about it, depending upon the store. You know, if it's your own little store, you can run it however you want. But oftentimes the used car manager is behind retail customers, so it slows down the time that you can retail the car when you get back to your store. So part of doing good quality recon is you make it easier for the wholesale purchaser of that vehicle to get that car on the front line and sold. So most major consignors, they'll sell once a week or once every two weeks or maybe once every four weeks. So you have time in between your sales events to recondition the car. Shame on you—the day the car arrives, condition report's done, you should have your criteria met of, "It's below 100,000 miles. If it's condition grade 2.2 or higher, then these are the repairs that are prior authorized up to this total dollar amount. Just do it as a matter of fact, not only do I want you to do it, if you don't do it, I'm gonna be very upset." And so the auction, if they play their cards right, they know, "Great. You know, this consignor wants its stuff done." They have all the vendors on property to do the repairs. Sometimes it's replacing the tires—maybe it's just used tires, maybe the tires are completely shot. If you can do it cost-effectively and time-effectively, do those cosmetic repairs. Bumper covers—wow, what a huge impact item. Wholesale cost to repair and repaint a bumper cover is really easy. Again, we're just talking about the cover, folks, we're not talking about all the other stuff, but it really takes away from the look of a car. And some of the larger auctions, they have great paint facilities where they have local vendors who can come in and do the work. As long as they're doing quality work, have that type of stuff done. Beyond that, clean the interiors, do all the stuff. You don't have to make it complete front-line ready unless you have a program that's gonna designate it that way. But if the car is sitting idle, you can be a good consignor. You can help the auction make more revenue off the car. Certainly negotiate the rates, make sure you're paying fair market price to get this stuff done. But when a dealer is looking at buying a car in the lane, no matter who's selling it, they're looking at it like, "Hm, I can retail that car, I think for around 16 grand. I know my transportation cost to get it back to my store is gonna be this. I know my auction buy fees and all the other stuff." They know how to quickly back down to, "Okay, well, I can afford to bid up to this amount." And the thing that causes that amount to be a lower amount is if they still have to do some of the things you could have done preemptively. And if you do that properly, not only does it make for a happy customer, it also shows better values in the guidebooks, which is really important if you're with the captive finance company.

Zach: So what are some of the most impactful recon services that could enhance a dealer's vehicle marketability? And what sort of ROI can they expect out of investing in this kind of recon process?

Dave: Great question. Paintless dent removal is a big one. I would say paint dent removal—back in the day, you could get up to eight dings per panel for like 200 bucks. That is a great value, and for every dollar you put in, you get $2 back. Windshields and glass—you should be able to do that very, very cost-effectively. It makes the vehicle safer to operate while you're selling it at auction. It's something I can't—unless it's a complete, you know, transportation $2,000 special, that is gonna have to be done. So with that, you should be able to get a buck 25 to a buck 40 back for every dollar that you put in. A car that starts and runs and operates because you put in a new battery? Oh, that's—you get $2 back for everything there. Nothing worse than just, "Oh, yeah, it's an older car. We're gonna try to limp it through," and the dealer's not gonna retail the car like that. If they have to charge it every day, if it goes dead, check the battery health. If it's not there, replace it. Get it done, get it done right. Those are the biggest ones. I think the other things that you can do—I mean, there's, depending upon the wheels, if it has alloy wheels that have been scratched up and dinged up, a lot of times you can do alloy wheel repair very, very cost-effectively and get back $3 for every dollar that you put in it. Because if the dealer had to buy new wheels, now you're talking about him deducting 1,000 to 2,000 from what he was willing to pay for the car. The other thing is detailing the car. We used to pay for highline detail for all of our average and above-average cars because it was pretty much front-line ready, you know, when we sold it wholesale. And it may need to be touched up, but it helped the dealers retail the cars faster. And for detail, like, shoot, I think you get $3 to $5 back for every dollar that you put in.

Zach: Hmm, pretty significant. And do you see dealers outsourcing this or handling it in-house? And do they use any technology that you've seen to kind of manage the recon process?

Dave: Well, it's all over the board. You know, every dealer, especially used car dealers—some of the smartest people I've met are in that business. It's their money on the line. Every vehicle is an opportunity to make money or lose money, and you're hoping everything's making money, but it's not always the case. But some of them, they've got great relationships either with adjacent vendors and stores that will come in and handle parts of the recon for them. I think that's probably the best model. Sometimes if you're a smaller store, you can kind of do it yourself and send a guy away so he can do the paintless dent removal for you, etc. But the challenge with that is you don't have a lot of bench strength, you know? Should he leave, be, you know, get married on his honeymoon, you lose that capacity. So if you deal with vendors and you have a good relationship with your vendors, I think that's probably the better play for a lot of it. You look at your staff—who do you have on your staff? What are the porters doing? Are the porters available to do detailing, and can you appropriately train them, give them the right tools and products to use to do that so that their utilization rate—when they come to work in the morning, they've got a full day, don't kill them, but give them a full day. Make use of that. A lot of times what I found in business is when you look at the utilization rate of assets and people, if a company is doing well financially, utilization rate is 75 to 85%. If a company is struggling, they're struggling to make payrolls, they're just not doing all that they could or should do. Invariably, I think the utilization rate, they've got people who are idle, and that's not the worker's problem. That's the management team's problem. They've got to design the right processes and systems and staffing levels and incentive programs to keep those people productive. And what you do, you know, I don't know about you, but I love working on something—at the end of it, it looks better. It's nicer, it's safer, and I think people are wired that way. Not looking to hide—you just got to get the right tools and training and support, and they'll do great things for you.

Zach: So now shifting gears to repossession and recovery, can you explain for the audience the difference between a repossession and a recovery in the auto industry?

Dave: Sure. So when you think about repossession, essentially, it's a recovery. The words are synonymous. But when we think about a repo, we think of an involuntary repo where the repo or recovery agent will pick up a car. It's parked in an area that they've got cameras out, they've got camera cars driving throughout the neighborhoods, reading license plates, trying to profile cars, trying to spot it, trying to find clues, breadcrumbs somewhere. And then once they zero in on where the car's at, the car's usually parked, usually in the evening or at night. If it's garaged, there's not a whole lot you can do about it. But, you know, when they pick up the vehicle, they can't break the peace. It can't be like a feud or a war going out there in the parking lot or the driveway. If things get a little bit weird or hairy, you just need to back down and go away. That's what they should be doing. And what's crazy is those people are just doing their job. I mean, that vehicle is owned by a finance company, the person driving it has fallen behind on their payments. I know the lenders, I know that they work really, really hard—they do not want to repossess cars, they want you to make your payments, they can work with you, but sometimes it doesn't work out. That's gonna happen for a myriad of reasons. If that happens, then the recovery agent is a very valuable part of the automotive ecosystem. And sadly, a lot of companies now require their guys to wear bulletproof vests, body cams, you know, because people can get a little bit crazy and out of sorts. What's interesting though is, depending upon the portfolio of cars, like when I was with Volkswagen, most of our cars that we sold, we had to announce it properly as a repossessed vehicle. I don't think the word "recovery" was really in wide use at the time. But I think 40% were voluntary repos. They brought the car in, they dropped it off at the dealer, they ran into a curveball in life. It could be a huge hospital bill, illness, loss of a job, and they just couldn't make that payment anymore. And so they turned it in with both keys, they take their personal possessions, and, you know, we then—our job as marketers was, "Okay, honor that person. Honor that vehicle, get the vehicle to auction." Have to be careful about what you invest in it if you do those repairs and recon that we talked about earlier because those go against the proceeds and the customer's responsible for the deficiency. So let's say it was a retail car and they still owe 10,000, and you sold it after it was recovered, and you sold it for 8,000. We'll keep the math easy—that person still has a bill for 2,000. They just didn't walk away from it, and it still goes to collections—they have to deal with that. The last couple of years, it was crazy because used cars were more valuable, and so they may owe 10,000 on the car, and you sell it and it's like, "Oh, we sold it for 11,000. We need to send you a check," which just blows my mind. But, you know, we were in some crazy times due to the pandemic. But, you know, when you think about recovered vehicles, I can send you—I’ll have to check to see if Vaughn, the president of the American Recovery Association, will give you permission to share it with your dealers. It's an awesome six-minute video on the recovery process all the way through—the proper way. Cars are picked up when they're brought back to the recovery yards, how they're stewarded—talk about a fragmented industry, the recovery industry. There's really big companies—a lot. The majority of small companies were real estate challenged, equipment challenged, employee challenged, and it does create a little bit of a hardship when you're trying to move those cars from the recovery yard to auction to sell them. And the industry is really wrestling with that. But, you know, when you think about it, there's the vehicle, there's the people's possessions in the vehicle, there's keys—are the keys available? One key, both keys? Keys can be super expensive depending upon the make and model. But typically, you know, once a vehicle is recovered and is secured by a recovery agent or is at a recovery or repo yard, it's kind of like game over, and then that individual has the opportunity to come and collect their personal effects. There's a lot of things they have to do to secure personally identifying information to protect the rights of those individuals. And I think on the whole, they do a great job. And then once the vehicle is recovered, you know, some people, they're naive, think, "Oh yeah, that car, someone drove it like crazy. They didn't take care of it," etc., etc. Part of this, maybe, but rarely. You know, make sure that the oil has been changed—that might be relevant. Look at the maintenance records. So companies like Carfax, you know, provide that and track that. But the other thing, it's just a car. You know, they didn't kill the car, they just drove the car and missed payments. And so, when you get to those cars, that's where you may want to be looking at it more closely. You want to pay attention to maybe some slight cues as to maybe how the car was driven, how long the car was driven, how hard the car was driven. There's geographic factors—was it in an urban environment, was it in a country environment? I won't say who, but the worst lease return ever that I saw was a very, very, very, very expensive car that a diplomat's son, who had some substance abuse issues, saw fit to drive through a field. And there was not a panel on the vehicle all the way around and on top that wasn't dinged, dented, or scratched. It was ridiculous. That was the cheapest Bentley someone ever bought.

Zach: Oh my gosh. And, as you mentioned earlier, the recovery space is somewhat fragmented, and I would have to think there have been a lot of changes in the space in the past, let's say, 10 years. How do you see technology playing a role in the recovery industry, and what are some of the big changes, you know, in the past decade?

Dave: Well, you know, I'm just really coming up to speed on that myself. You know, I was aware of it, you know, as a consignor, I knew we recovered, or we had agents repossess cars. But now that I work for Montway Auto Transport, you know, we move a lot of cars from recovery yards to auctions. I mean, there's a lot of cars that need that, but that's a challenge because the recovery yards aren't available 24/7. It's not like an auction where it's easy to get in and out. You have to make appointments. The cool thing is there's companies out there like RDN that provide tools not only to the recovery agents to receive assignments, to pick up cars, to know the location of cars, to report on the condition of the cars. And basically, they're able to do their whole job on a tablet through their software. Transporters can use their product, ClearData, to confirm instead of calling, trying to reach a receptionist who he or she may have just got in, they weren't there the night before. They don't know what vehicles were dropped off in the dark of the night by the agents. But we can see just through their data, "Oh, the car was checked in. The car has both keys, it runs, steers, brakes, it drives, it's good for pickup." And there's other things that you have to be aware of, like when the redemption period, etc. But the biggest thing is the information tools that are available to recovery agents, to transportation companies, to auctions are pretty amazing. I think RDN is a leader. MBSi is one of their competitors that's out there. But there's a gentleman, Justin Zane with OpenLane, who RDN rolls up underneath, and he and I talked at last year's Used Car Week. I learned so much from him, continued to talk to him, learn more and more from him and his team. And I'm just encouraging everyone in the industry—I'm a huge, huge advocate of education. Way back in 2008, the International Automotive Remarketers Alliance developed a Certified Automotive Remarketer curriculum. It's 20 modules. At the time, roughly if you printed it out on space-and-a-half paper, it's like over 400 pages of content about all the aspects of remarketing. And there's a module in there on recovery and repo. And now there's a module in there on transportation that I co-wrote with some others in the industry. And so, whatever part of the industry you're playing in, the more you do to educate yourself so you understand not only what your role is but what the other players in the field are doing in their positions, it allows you to be a better participant in the circus that we call the automotive marketplace. So I was fortunate enough to be involved in developing the curriculum, and I was the third person who became a Certified Automotive Remarketer. And I'm so excited because I think by this time next year we'll have over 500 Certified Automotive Remarketers who've been through the program.

Zach: Nice. And looking ahead, how do you see the future of the recovery industry, especially with the use of vehicle tracking and telematics improving, changing?

Dave: I think it's gonna improve. I think one, telematics is—you know where the cars are, the cars can be shut off, disabled, whatever, which makes it easier to pick up. The technology does get a little bit scary when you think about the Big Brother aspects. But I think the pros way, way, way overshadow the cons of that. I think recovery agents will have access to some very, very cost-effective tools—they do now, and those tools will just get better. The trucks that they drive are incredible, what they can do to do their job safely and efficiently. One of the things that may happen is there may be some other players in this space that—when you look at the recovery process, there's the actual, "Where's the car?" that piece. So maybe there's companies who become more specialized in pointing out where the car is. Then there's the actual locating the car and securing the car on your truck or on your flatbed or whatever. So the recovery agents, usually when you think of them, you think of that. But then there's also the people who run really slick operations of secure recovery lots that accept the cars, that are bringing in the recovery vehicles. They quickly inspect the vehicles, and then they store the vehicles in a very efficient way. Sometimes they're stacked in there pretty darn tight. You know, it's not like a retail car lot where you drive through it and it's—they've got to make good use of it. They've got to store the cars over a certain redemption period, and there's a lot of information to keep track of. So I think service providers will be offering better tools for them to use. I think there might be an opportunity for some of the bigger recovery companies to do franchise, have multi-sites. If you run four sites really, really well, why shouldn't you run 20? And I think there might be some consolidation there, but I think the consolidation will take place more within the actual recovery lot operations, releasing the vehicles. That's where I think things can be systematized perhaps easier, and they're more capital intensive. But I think the actual recovery of the vehicles—getting the assignments, locating the car, recovering the car, dropping that off—I think that's gonna remain fragmented. And I frankly think that's a good thing because those are individuals who can make a very, very good living. They make it off their intellect, their hard work. And I think if they find like people to work with, the recovery industry I think is going through metamorphosis, and I think it's gonna become maybe stratified. There's gonna be some elite guys and gals who own and run very, very efficient, awesome operations, and the big finance companies are gonna align with them, almost guarantee it. And then you're gonna have the mid-tier and a bottom tier. What you don't want is you don't want somebody handling maybe an Audi that's worth $30,000, hauling or moving that in an unsafe vehicle or truck where it could get damaged even further. And then there's a liability issue. So coming from the transportation side, you know, making sure that whoever's moving the vehicle is properly trained, licensed, and insured—not only their company but that individual driver. I think there's an opportunity for better information, better validation, better information sharing across the different transport companies at auction. So that's what I see happening in the next 5 to 10 years. It's not gonna happen overnight, but that's where it's trending, I think.

Zach: Nice. And the current economic climate has definitely changed since the pandemic. Rising interest rates probably have had some level of impact on repossession rates. What advice would you give to dealers who are navigating these changes?

Dave: I think due to COVID, there were a lot of finance companies who kind of waved or dialed back their recovery efforts in trying to be mindful of the fact that the whole country—our, you know, across the world, people were going through a really, really tough time. But I think that's over. I think basically it's back to business as usual. The challenge is a lot of these recovery yards, recovery companies, are not staffed as high as they used to be staffed. They, like a lot of companies, are finding themselves challenged in getting the people to do that type of work. And I think it really starts with the retail side. I mean, if somebody's really stretching to get in a car, yeah, sure. Certainly, they deserve safe transportation to get to work. But maybe it doesn't have to be this car. Maybe it could be this car or this car, something that fits better with their needs. And then every finance person that I know—if you can keep the customer in the car, extend the financing, give them another year, restructure the payments, please do that. One, you're gonna make more money. Two, it's more humane. And three, you never know the value of a car. The biggest thing that people need to—if you haven't learned it already—the last 2, 2.5 years was a complete aberration. Used cars do not appreciate in value unless they're the ones you buy at Barrett-Jackson or a place like that. The cars will depreciate, depending upon the value of the car, it could be $5 a day, it could be $40 a day. But the depreciation curve is like this. So if you can keep somebody in the vehicle, keep them through the term, that's great. If you do have to recover the vehicle, work with reputable people who are not gonna create liability for you or your company.

Zach: And finally, is there anything coming down the pipeline at Montway that you're excited about this year?

Dave: Oh, probably the biggest thing I'm excited about is the technology that the company has. Our sister company Ship.Cars has a product called LoadMate Pro, and LoadMate Pro allows a dealer group or fleet company or an auction to manage all the transportation that's coming in or out of their facilities. It manages drive teams—who drove the car, what time did they pick it up, where did they pick it up, how many miles did they drive, when did they drop it off? Really helpful information. You have a chain of custody. You can start measuring efficiency. I've got my MBA or it many, many years ago, and if you can measure it, you can improve it. And so transportation has been kind of one of those things where it just—transportation just goes from here to here. But the better data you have, the higher your utilization rates can be for people and for vehicles. And we even, you know, talk to some of the auctions. Their trucks—a lot of them own maybe two tow trucks, a few rollbacks—they're really, really, really busy right before and after sale day, but they might have a couple of off-days, you know? I tell them, "Hey, we're moving cars all the time. If we need cars moved around your local area, would you be interested in moving those cars for Montway?" And they're like, "Hell, yeah." You know, their drivers want to make money, they want to employ people full time. So I think our product LoadMate Pro is—I believe is the best tool for a dealer to manage all their transportation. It could be their own drive teams, could be outsourced drive teams, their own equipment, could be local carriers, could be major brokers like Montway. It could all be managed in one place, one dashboard. And, you know, it makes for a very efficient operation with great record-keeping. Accountants love it. Investors love it because you can take this one side of your business that's been pretty loosey-goosey, maybe a lot of side money being passed back and forth, and it just makes everything transparent. And once you can measure it, you can be more efficient at it. So LoadMate Pro is something we talk a lot about with auto auctions, with fleet lease companies, and anybody who has to manage a large number of vehicles. Keep track of all those in one spot, wherever you're at—it's all in the cloud. Pretty awesome.

Zach: Definitely. And Dave, thanks so much for sharing all your insights today. I'm sure our listeners are gonna find this episode extremely valuable. So, Dave, thanks for joining us on the podcast today.

Dave: My pleasure. And if they want to find out more, talk to me—j