The #1 Bottleneck in Car Sales: Broken Tech Integrations—and How to Fix Them | Sanjiv Yajnik, President of Financial Services at Capital One

Interactive Transcript

Speaker A At the end of the day, the entire vehicle is not becoming less complex now. The mechanisms to drive it are becoming less complex, but all the computerization and everything surrounding the vehicle is becoming more complex, not less. And I will predict that the way in which they need to be looked after is going to be order of magnitude different from internal combustion engines.

Speaker B Today I'm joined by Sanjeev Yajnep, president of financial services at Capital One. As president of one of the most sophisticated lenders in auto, Sanjeev spends his time untangling dealer pain points and the number one dealership bottleneck he sees today something that isn't just killing deals, but could take lenders down with it if a recession lands. A big thank you to our sponsors for making today's episode possible. Cox Automotive, Warcloud, and of course, Capital One. And now let's get into the show.

Speaker C Sanjeev Yagnik on the CDG podcast. Sanjeev, welcome back.

Speaker A Hey. Thank you. Y How you doing back?

Speaker C It's. I'm doing great. It's been a year since we got the chat on air. Excited to do this again. We had a pretty jam packed episode last year and a lot has changed since then. How are you doing?

Speaker A I'm doing pretty good. I mean, just there's so much going on in the industry and I really appreciate a lot of the work that you do in keeping people up to speed on, especially dealerships up to speed on what's going on, what's changing news that is coming, you know, Right. Hot off the press. And I think that's, that's been really.

Speaker C Great and lots of news. But nonetheless appreciate you pointing that out. We're, you know, doing our best here to kind of COVID everything as it happens so and bring value to dealers. I wouldn't, I want to turn the table back on you though, because a year ago when you were on the podcast, you. So I went back and re listened to the podcast. I do this sometimes when I've, you know, guests. I've spoken with this in the past and you said something that was, you know, kind of caught my attention. You said you sort of laid out this math about the EV market and no doubt today it's, we're recording this, it's end of September tax credit. The EV tax credit is literally going away imminently. And you said Yosi 265 to 270 million cars are on the US roads today. We sell about 16 million cars each year and about 12 million are scrap. And your point was basically that even if Every single new car sold tomorrow was an EV or a hybrid. It would still take 15 to 20 years to flip the fleet. Right. Do a complete recycle. Now that felt pretty prescient at the time, but fast forward to today. The tax credit is going away, which changes the economics of this entire industry and what people should expect from sales. So I want to start off just general your opinion on that statement a year ago. You hear it again today. How do you see this? Do you think that has your opinion changed on the industry at large? EV was a particular, particular part of this industry that you were noting last year. But now, given this sort of reversion to the mean or whatever we want to call it, what is your overall long term perspective on this industry?

Speaker A Yeah. Thank you, Yossi. Look, you know what, what I like to do is just look at the facts because there's so much emotion and hype and other things running around and people are reacting to a variety of things. I like to look at the data and then try to make predictions of the future. Just looking at the mechanics of the industry to start with because there's always something people are very excited about. The latest and greatest when it came to EVs, like you said, even if every manufacturer only built EVs and consumers only bought EVs, it would take us over 15 to 20 years actually to replace all the cars that we had, we had on the road. And that obviously would not happen. The other thing about EVs is in general, when you see disruptions happening in any industry, it normally starts at the bottom of the industry. So the cheapest product and then it becomes higher quality and it continues to go up. It's called the left hand turn. You start at the bottom, you make things really cheap. People give that place away. Companies come in, do it better, cheaper, faster, and then slowly start climbing up the chain. EVs have entered the market in a very different way. They've entered at the top and they're working their way down. That's a very different kind of a strategy and a very different route. So it will take time. What I would tell you is EVs are going to be the predominant way in which locomotion is going to happen in the future. The timeline though is just going to be much more elongated than people expected at that point. I still remember that article that said not only will EVs take over and electric vehicles take over, but it's not only going to be in cars, it's going to be in flying taxis. There's this beautiful article that I show my team even today. But back in 2018 and 2019, they were predicting that there would be flying taxis that were electric in Dallas and in Dubai. And of course we are far away from that. So the trend is going to be towards EVs and they're going to get better and better over time, but it's going to be a slower, it's going to be a slower burn.

Speaker C Okay, So I think as a dealer, I feel pretty good hearing Cat Capital One, a multi billion dollar organization, is bullish on the dealership model.

Speaker A We made a prediction that dealerships are going nowhere. In other words, they were going to be there, they were going to be the center. And I am predicting today. And so we'll come back after a year and two years and we'll find out. We are going to find that dealerships are even more important when you have EVs than even when we've got internal combustion engines. They're going to be incredibly important because at the end of the day, the entire vehicle is not becoming less complex now. The mechanisms to drive it are becoming less complex, but all the computerization and everything surrounding the vehicle is becoming more complex, not less. And I will predict that the way in which they need to be looked after is going to be order of magnitude different from internal combustion engines. Now, in internal combustion engines, you've got to do the lub, oil change and you know, the X thousand miles and all this stuff. It is not that you'll have less mechanical parts, so you'll have less servicing going on there, but you'll have way more servicing on the other side when it comes to the electronics and the computer chips and the cards, etc. In a car. And so it's both in the selling of the product because there are going to be a variety of products out there and customers need to understand what these products are going to do for them and then the servicing after the fact. I think it is change in dealerships, but it's not going to go away. At one point people thought that everything will be done by the manufacturer and then the dealerships will be like managing fleets and doing some work on the margin. My prediction is I don't think that is true. I think dealers are going to be in the center required for a very, very long time. So a long time period. Beyond that, who knows the thing is going to produce. And so it was with that kind of a backdrop that we did the survey, because I am intensely interested and focused on dealerships and what is the Advice for dealers, where does the model go? Is it going to remain the same? Is it going to be different? What should they be looking for in the future?

Speaker C So can you tell us at a high level, what were you looking to understand? Because where I want to get to, I want to understand is where are you investing, right as Capital One, supporting dealerships. I want to understand as you're aggregating these insights from dealers, who are your partners and people you work with, I want to say how it's impacting your direct investments and what you're focused on.

Speaker A One of the things that you say I try very hard to do is to try to keep Capital One out of it. When we talk about the strategy part and then we are informed by where the world is going, so then we start thinking about what we need to do. So let me just continue to focus on the strategy part. So what do I see with dealerships and where does the investment need to go now? Jensen Huang spoke very recently about the state of technology and the industry. And he is saying what a lot of us have been feeling for some time, that even as opposed to the digital revolution that started a while back actually, and then the Internet took off in the 90s and so on, this current revolution of not only Gen AI, not only generative AI, but also the kind of technology that is coming to bear, which is apples and oranges compared to the old technology that we had, is a new industrial revolution. It is a new industrial revolution. And I want to remind us what happens in industrial revolutions is that everyone is impacted and everything changes. So now the dealership model is rapidly changing from a low volume, high margin business to a high volume, low margin business. And most successful dealers understand that what you need in a low volume, high margin business is a particular way of operating. What you need in a high volume, low margin business is a different way of operating. And for that you do need technology to help you make it frictionless, to make it move quicker, to connect with customers in a different way and to kind of go through that flow in a different way. So what I was very interested in is there was a feeling that dealerships are fighting against technology because they don't want the customer to see certain things and so on. And I wanted to understand where do dealers stand regards to that, like their orientation towards certain technology that's not only helping the operations get better, but it helps the customer see things in a clearer way. Are they resisting it? Are they going with it? And then what do they need?

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Speaker C So are we talking about technology or transparency or are you sort of combining them as one?

Speaker A So there are two types of technology that, that help a dealership. One of them is technology internally focused. So how can I do my job better? How can I find my inventory, the right inventory? How can I find, what's the cost, how many cars on my lot, how many days are they on the lot, what is the price, what's the clearing price, and so on and so forth. It's not internally focused. And then there's an externally focused technology which is can I help the customer move faster and quicker into the car? The actual car buying process and the leaning of dealerships was always let's, let's solve for the internal piece, right? I want my internal piece to be done well, but the transparency I'm not so clear about. Is it good for the customers to see everything? And so one of the things I was curious about is are they more open to customers getting that transparency because it is going to help them go through the sales process. How much are they embracing that kind.

Speaker C Of technology and what did you find out?

Speaker A Well, it is pretty amazing from the last time we were looking where dealerships said, yes, we need technology and there was a little bit of push and pull. By and large, what is coming back is a very clear signal. Dealers understand now dealers are some of the best entrepreneurs we have in the United States. I've said that all the time. They understand that their business model is changing. There has to be a certain amount of transparency. They can't only focus on tools that are fixed within the, within the dealership. And they are looking for technology to help them move the sale faster. When a customer walks in the store, they want to make sure the sale goes through because time kills deals. And right now the customer has a very small, I would say, tolerance for friction.

Speaker C But given the information you just shared, given dealership tech adoption, which is higher than it's ever been, there's no dealer that does not use any tech. That's obvious. Where are you investing from a product perspective? What are dealers really looking for right now to really help them as much as possible within their dealerships? Or, and this could also be an. And it might be combined with. They're looking to consolidate because I've spoken about this like tech fatigue, right? Where, like when is too much, you know, when is it just too many tools and too many things going on in store? And now, you know, you have these stores where we had a dealer on the podcast or a consultant on oem. Consultant on the podcast who was, you know, testing out a dealer in Florida and he submitted a lead and got like 10 responses, right? And that's terrible, right? Because now you're harming the customer experience. The dealership looks terrible and they have all these different tools responding to one customer. Now that's not just the fault of a dealer. You also have all these OEM mandated tools that conflict with each other. That's a whole other ball of wax we could talk about. But when is enough enough, Right? What is the right type of balance with tools and technology? And how do you view that what.

Speaker A Has happened is probably what happened with the Internet in the 90s. So there's an opportunity and everyone has rushed into that opportunity with tools. I still remember when machine learning was a big thing, everything was a machine learning tool. And now that gen AI is a big thing, everything is an AI tool. The problem that dealers face is that the tools don't do all the work that is required for it to do and the tools don't talk to each other. And you would think it's a pretty easy thing for one tool to talk to another tool to talk to another tool and so on. It is actually pretty hard because each tool, it's both the tool and the data behind the tool. And how do all of those things integrate? So for the tools to integrate, each one can be built on a different system or an application. It may be really hard to connect up to for them to talk to each other. Then the business logic may be a little different the software and the way in which it is built, if it is not modular, that may be different, then the data is really an important piece of the puzzle we're having. A lot of data is like being surrounded by water and water that you need to drink, but it's all seawater. To make that fresh water, you've got to do a lot of work with things called metadata and other things that will allow the data to connect, interconnect with each other so that the tools can actually talk to each other. What we are finding is there's water, water everywhere. There's tools all over the place. There's data all over the place, but it is still not reducing the friction. It's still not reducing the amount of time the customer has to spend in a store. And dealers get promised a lot. It's like over promise and under deliver. And that's going on right across the industry. And that's again what we are observing. So that's the biggest need right now. It's not about, should I use technology. Dealers are basically saying, look, I've got a business to run. I'm a busy person. Don't give me a whole bunch of stuff. I want simple tools that are integrated, that talk to each other and get the job done. That's not my secret sauce. The technology is not the dealership's secret sauce. They've got to work on a whole bunch of things to make their magic happen. And that's the biggest issue, and that's what we're finding in the survey as well.

Speaker C I noted on the survey of the delays in the finance office, which I actually just spoke with a finance expert a couple episodes ago about the F and I office and, you know, getting lending and why it's taken so long. And it's a big friction point. Is that something that you're actively working on to, you know, improve how are you doing it? Of course you're a lender, but there's. There's one thing of being a lender and there's nothing going into, you know, being in the dealership office and making that process more efficient and quicker. How do you view that? And potentially solving that or kind of reducing the time for consumers?

Speaker A It is. That particular one is a really big issue in general for the industry. Now we've developed mass scoring, as you know, which is patented. I actually personally have a patent on that, but we've developed mass scoring. We have Developer Navigator where the dealership and the F and I office can go and they can play around to restructure their loan without actually having to talk to anyone. And now we have flow down, we have other lenders on it as well. But over time something like that is going to continue to get developed and we are going to continue to develop that. But it is a sticking point and the tension for dealers is if a customer only wants to put a certain amount of money down and so on and so forth and the dealership needs to make its share of the profit, how do you actually structure the whole deal? And customers don't want to wait. So what is the danger of letting the customer drive away with the car without doing the whole thing and, and making a guesstimate but having the danger of having to call the customer back with the car or if they can work with lenders who can work that really quickly. Now in general, Capital One is in a great space because we are the fastest on the market given our technology and given analytics and so on. But many are not and they are finding that.

Speaker C Okay. So just to, I want to put a pin in this though, I want to make sure we don't miss the primary question which is do you see a path to reducing the time to finance within a dealership? Being that it's such a big sticking point, I want to preface that with some context. You know, we have our CDG20 group, which is our, our group chat where we discuss with really high level dealers about what's, what's on their mind and everything there is confidential. So I'm not going to go into too much detail, but I will share a topic that's been discussed which is dealer owned finance companies. And during that conversation there was a side conversation about, you know, the benefits, the, you know, the advantages, disadvantages. But something that was brought up was about the creating a more efficient finance process and how it's integral. As you mentioned, financing plagues the entire industry. It's extremely slow part for the customer, but creating more ways for dealers to be able to finance customers more efficiently, quicker and just, you know, improve the customer experience, not to mention of course, profitability. And so as you think about that, the customer experience, what can we do? Right, what can you do with dealers to continue improving that really difficult or kind of slow part of the car buying process today.

Speaker A Yeah, so let me hit the question in two different ways. There's one part that you talked about was dealer financing and dealers are trying to solve a few problems here. One is speed and get the financing done and the other one is it feels lucrative because it's a business that they feel can generate a whole bunch of profits. And they're seeing that in some dealers who are going into their own financing and starting their own little financing shops. So I have had some financing shops. The caution I would tell dealers is that it is wonderful in the good times and it will in an instant wipe you out in the bad times. And I think big companies like GE found the same thing. They opened a finance shop there to get rid of it at the end of it. But just think about the downside of financing is when a recession hits, companies get completely wiped out because the leverage factor is so high that it is unsustainable by any company of any given size. Now, the problem is, since the Great Recession till now, we've really not had a big downturn. And this is one of the longest time periods where I would say the real downturn, the real. When things really turn south, 50%.

Speaker C We haven't had that yet.

Speaker A We haven't had that yet. And when that happens, the lending is a business where the loans are huge and the margins are thin and losses can easily double and more than wipe out the margins and the losses can become so huge that you can take on entire huge companies. So it's a little bit like risky investing and in the good times, making money. And the second something goes completely bad, it can actually take you in the negative in a way that is devastating. So it's not an easy game. If it were easy, everyone would be doing it.

Speaker C I will say. I will say that to your point, the sentiment wasn't too jolly by any means. This is not like. I don't think people that are. That have spoken about this are just like, oh, yeah, like this is, you know, money doesn't grow on trees. I don't think that's the sentiment at all. I think it's more of, like an exploratory. You know, there's margin compression. I want to be smarter, see what opportunities just lie ahead. And if that means, you know, profit or customer experience. But I think the things you just pointed out are very real and were discussed. Right. Which is, you know, people that have done it and maybe are not doing it anymore or have sort of lowered their volume echoed the sentiment that you just expressed, which is that, you know, it's a very cyclical type of thing and it's not a primary, like, revenue generator. For me, that was sort of the takeaway that I got from it.

Speaker A Yeah, it's not only a cyclical one. The companies that are not sophisticated enough, they get completely wiped out if you think about the Great Recession, the number of companies that just went away is unbelievable. There are hardly any left standing. If people remember and I remember what dealerships went through and many of them turned to me. And that's the time we stood by dealerships and we took them through it. But most players, especially in the subprime near prime area, they went away. The prime companies, they didn't want to lend any more money because they were preserving capital. I mean, it dries up very, very, very quickly. So there are things that we are doing in that regard. It is a fairly sophisticated business. The other thing that happens is there are many companies that do a distributed judgmental underwriting model. But again, over time it has been seen that judgmental underwriting most often will be shut down in a recessionary period.

Speaker C What's judgmental underwriting? How do you define that? Judgmental underwriting?

Speaker A In other words, someone says, well, this loan kind of looks good. It's a one off human intervention. I like this and this structure. It makes sense to the human eye. The thing you've got to understand, and everyone has to understand, Yossi, is they're not good and bad customers. All customers are good. Everyone intends to pay off. I mean, by and large there's some fraud, but they intend to pay off. Random things happen. Bad things happen to good people. And so you can't predict that. It's not predictable. It is a statistical thing. And the number of variables you need to look at to make that call is crazy. Now we end up being at one of the most sophisticated lenders. But to make one decision for one lender at one dealership for one car on a particular day, because prices vary, we have to choose from 1 in 200 quartero decillion combinations. Quarter odecillion means 1 in 200 followed by 15 sets of three zeros. So that's the sophistication we've got to use. And we are continuing to get more and more sophisticated because we are trying to help dealers for that deal. But it is the game of high sophistication. And I would say I understand what dealers are trying to solve for. I probably would say this is not the way to go, is you start your own shop. And it's not self preservation that says it because we've got a long tail of lenders. It's a very fragmented industry. But again, you will check this when we next have a recession and we are on the podcast, let's have a look at that list. The entire tail will get cut off because this is what happens every single time. And then new people come in who have not been burnt and this thing goes on. But it is, you know, the delay is a real thing and I think lenders are working on that. But having people who are pre qualified is a good idea without any impact to their credit score. And having people do the test drive, et cetera, while you are running the show. So the process that dealers use, which is right now sequential, but the more it can be parallelized, the better it is because. Because customers have to wait less for that to. To go through.

Speaker C So what do you mean by on? When I. When I read through your survey and it spoke about dealers pointing out integration being a big issue for them in dealerships.

Speaker A Mm.

Speaker C Can you explain to us specifically what they were referring to by integration? Is it tool to tool? Is it tool to dealership? And then I want to get to how we solve that. But can you just start off high level? Why is integration such a big problem at dealerships? Not what I expected to see as the top response here. We survey dealers all the time here at Cardioship Guy. And this is just not what I expected. So I'm curious to know, what's your thought on that?

Speaker A Well, there are two types of integration that are troubling to dealers. And then there's one other thing in technology that's really troubling them from my perspective. One integration is someone shows up with a tool and says, I can do this, this can do that. And they're really excited, okay, why don't we put it in? And then it takes huge amount of time to actually put it into the dealership because often the tool doesn't sit on its own. It has to talk to some data, it's got to pull some data, it's got to do some of these other things. So that's one of the issues, the bigger issue, potentially even after going through all of that trouble and the dealership puts it in, one of the big issues is the tool doesn't do everything and it doesn't talk to other tools. So people have gotten fairly proficient at keeping seven or eight or nine screens open and they're jumping from tool to tool. One of the things that is frustrating, most frustrating for people is re keying information as well. I've got this information here, I've got to rekey it there. Then I get that answer, then I put that back here and then I do this. And you know, when we talked about it earlier, integrating tools is not easy. And that is something that we are massively focused on.

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Speaker C How do you recommend today when it comes to a tech stack for a dealer? Like, what is your recommendation from, you know, as as unbiased as you can be? Like, how do you, how do you sort of view that and what's the optimal stack for a dealer today to deploy in their dealership? And by tech stack, I'm just fancy term for what are we actually using in a dealership to perform as best as we can from a tech perspective.

Speaker A If I had a dealership I would be really busy right now making sure that I have the right amount of inventory and I have the right pricing and the dealership is running well and so on and so forth. It is very hard for me to disrupt a dealership by getting people to undergo too much training or to get any major product in to disrupt the operations of my business. And we are not at a great place right now from the standpoint of the economy is good, but there's a lot of uncertainties, you know, all the tensions that are going on and so on. So you can't take your eye off the ball right now as a dealer. And so things like people talk about DMS and other things, it's just massive, massive projects that are very hard for anyone to take on at this point. What I would be recommending to dealers is find the tool that does where you are finding the most friction. Find the tool that is going to get you to alleviate that part of the friction. And right now the dealership has to live in a digital world. In other words, some physical, some digital. Everything is not going to be digital, but only choose tools that are built on a modern tech stack. This is a very important point. One of the questions I would be asking is how's your data stored? How do you take care of your metadata? What is your technology built on? How modular is the technology? How many engineers are working on it versus what's your ratio of engineers to salespeople. If you have more salespeople and just a few engineers working on it, that means you're selling me. You're more interested in selling me than you're interested in building the thing that is going to be incredibly good. And then there's one other question I would be asking. What happens after you sell me this product? How long will it take for you to fix it if something goes down? Because it's my livelihood as a dealership, I can't go down for four hours or five hours while customers are wandering through the store. I can't afford that. What redundancy do you have? What does your cybersecurity look like if you get hacked? If someone does the, you know, has cyber ransom, is my dealership going to get impacted? So I've got a whole bunch of questions that I could put together and maybe I should for dealerships to ask.

Speaker C I was just going to provider. Yes.

Speaker A Yeah, I think I should do that.

Speaker C Because you really think about it, you build the tools, right? So you naturally know what to look for, where the skeletons are, you know, And I think that's actually a very important part because look, we get at this point, I mean, every day we get leads from AI companies who are interested in advertising or doing some sponsorship. And we obviously say no way more times than we say yes, whether it's duplicative of another partner of ours or many other reasons or it's too small or blah, blah, blah. The point is, though, you mentioned this is there's sort of this rush into the space now, especially amplified by AI. And I think where dealers are getting burnt in many cases is these products that are kind of, you know, fly by night companies. There's, they're out there, right? But at the same time, a dealer is not a tech or software engineer. And so I think having a proper source, which resource, which by the way, we'd be happy to distribute of what to look for is really, really important when there's a record number of AI and or tech companies that are just approaching dealers to try to help them, you know, sell a car, service car in a better way.

Speaker A So, yeah, I'm just taking a note down because I can totally do that for dealers. I just want to remind you, Yossi, as well that, you know, and I want to say this directly to the dealers who are watching this podcast. I'm not interested in trying to oversell Capital One products. I'm not interested in nickeling and diming anyone. Just not interested. And people can say the words But I'm showing it with my actions. I don't force you to finance with Capital One. When customers are coming to Auto Navigator, you get the choices, what is right for the dealership. I walk through as I go around the country and I walk into dealerships and I meet up with dealer principals, I tell them all the same thing. Do not do a single thing that hurts your dealership. And I want no pressure of buying a Capital One product. I want to earn the right to come in the store. If you think it's good for your store, you're going to buy it. If not, don't do it. Because I want vibrant dealerships out there into the future and I want all the dealerships who work with us to be incredibly successful and we will earn our way into the right products. And we will never do all the products. There will be others. The other thing I would like to do, and we are already working with many of the partners here, is work with the current providers of products so that we can make your products better by integrating into your products in the things that we do really well. So there's a bunch of things that we want to do. I think the suggestion of putting together a checklist of what should dealers look for when they're looking for a tool, an unbiased checklist is not biased towards Capital One. I think it's a great idea and I think I should do that.

Speaker C I think so too. So, Sanjeev, before we wrap up, I want to understand from an ROI perspective, look, margins are going to continue compressing. That's my opinion. You could tell me if you think differently, but I think if you look at Q4 especially, let's talk near term EV tax credit going away, that is going to price some customers out of the market. I had a dealer text me and he said that we have on average, get this on average, he told me we've added $663,000 of down payment per month using the used EV tax credit. Pretty freaking incredible, right? That's all gone. All that down payment disappear. It's going to impact sales, no doubt about it. It's going to impact affordability. And not to mention, we are sort of at the trough of the used car shortage right from the underproduction of vehicles in the early 2000s. So all this stuff combined, we should expect borrowing other crazy stuff, we should expect to see more margin compression. What are the highest ROI options for dealers from a tools perspective? I've spoken to lots of dealers about inventory tools, marketing tools. People want to get time to line faster, they want to market the vehicle better, et cetera, et cetera. What do you see as the highest ROI options available today?

Speaker A I wish I could, I could tell you something really profound here. But it all comes down to what are the tools to buy the cars at the right price. Now this one, because it is a high volume, low margin business is done. The dealers, this is secret sauce, this capital. One can do nothing here. People can give tools and all this stuff, but there is a feel for what is the right inventory for me and to get as much information about the real time information. But at the end of the day, you got to make the call. By the way, there is one thing that capital one can help in. We've got a massive amount of data and we already have a tool out there where we can tell dealers what is happening in their market yesterday. There's no other tool in the market that can say it's literally real time, showing the flow of inventory, but they've got to pick that up. That's a very high roi. The second is generating leads. And in marketing their product. But generating leads. Most dealerships who I meet up with, they basically say, I have no idea which one is doing what. I know I have to get leads. So I'm just going to put a little bit of my eggs in so many different baskets. We do have a product that gives you an attribution model and it actually tracks all this stuff. So that would be a very high ROI product. And then how do you actually market your vehicle? Many use very small kind of vendors, but looking for the right vendor to be able to market your product will be a good idea. Especially what has been found is the actual image of the product is incredibly important. And so that image enhancing technology. Now it so happens that we've developed that, so we have a product for that. But whichever product that you look for that is really important to try to find it in and then to your high velocity point. Let's remember in the CRM system you've got tens of thousands of leads. Of course, of all the leads that a dealership pays for in a year, guess what percentage will actually buy a.

Speaker C Car of the leads they pay for? Wow.

Speaker A Yes. They have got tens of thousands of leads. Okay.

Speaker C They pay for low single digits.

Speaker A It's 6%. Yeah. Okay, so you pay for 100%. 6% are going to buy a car not at your dealership, they're actually going to buy a car somewhere. And imagine trying to get your salespeople charging off trying to contact 100% of the leads when 6% are going to be looking for the car, looking for a needle in the haystack. Finding tools that find you that needle in the haystack is incredibly important. That's very high roi, because if you can find the people who are actually looking for a car, you can convert some of them and bring some of them in the store.

Speaker C I was going to end with with your prediction for digital adoption, but I think what I'd rather end with is what is on your mind for this next 12 months? Like, what are you thinking about? Where are you sort of treading or heading in this environment, given all the circumstances that we're in in the current market? What's on your mind?

Speaker A I like to look, try to envision in a picture format what the future of a dealership will look like, because that will inform everything that we do. What is the future of dealerships from a lending perspective? Consumers are going through economic downturns, upturns, downturns, et cetera. So I just want to put that aside because there'll be ebbs and flows. But what will a dealership actually look like? Will it look like what it looks like right now? Will it look like what it looks like right now and just a little more efficient with some tools, or is it going to look very different from what it looks like right now? And there's been a bunch of articles written about EVs and how dealerships will change. I don't think that is the story at all because there is going to be servicing, there's going to be people looking for cars. People are connected to the brand. They will want to come and touch and feel the car. Dealerships, no matter what the vehicle is, dealerships are going to be around and customers are going to come in, but it is going to look different. It is going to be a much more efficient dealership, much fewer people per car sold, a different way of informing customers and a different way of operating so that the operating costs of the dealership will go way down compared to what it is today per car. I'm not saying it's letting people go. It's just dealerships are going to be selling. Successful dealerships will sell more cars for the same footprint. They may have the same people, but per person in the dealership, there'll be way more cars. And I also predict that right now, dealer principals pay a lot of money for tribal knowledge of this lender does this and that lender does that and this thing does this. And I know that stuff is going to get simplified massively. The secret sauce cannot be, I know this about this particular lender or this particular thing. It's going to be way more about understanding your inventory, understanding the trends, customer service, marketing, attracting people in the physical layout. How does people move through and move through in a very rapid way. The dealership is going to look different. And I'll just end with one quick analogy here. Yossi, please. I started my career designing and building ships. Okay? I was an engineer, and not only designing and building ships because I was passionate about engineering and machinery and all this stuff. I also worked on the ships as an engineer. I dismantled things. I dismantled engines and turbochargers and you name it, I've looked at it every which way, putting it together, so on and so forth. And operating the ship also on a ship, operating it till I became a chief engineer with Mobilon. When I started in shipping, a ship to do the work had approximately, I think it was 120 to 150 people on board when I left, a ship more than 10 times that size had about 25 to 30 people. All I'm saying is, per person, when the big changes happen, the efficiency becomes way different and the kind of work you're doing becomes different. Just the knowledge of which logbook to put things in and which thing and what is the procedure that you don't need anyone for. What you need is for the soft skills. You need it for the real knowledge of how do you run a dealership. And so my advice to dealerships right now is, is look into the future and don't say, give me a tool that fits in with the way I run the dealership right now. At every increment, think about how you're going to make your dealership more efficient and you're going to have a tremendous amount of success because you're going to beat out all your competition. And everything that I'm doing in Capital One right now is building backwards from that eventuality because that is going to happen.

Speaker C Well said. Sanji, I want to thank you for coming back on and recapping from what we spoke about last year until today, including your survey and where the industry is headed. So always appreciate your insight. Sanji Vyajanik from Capital One. Thanks for coming on the podcast.

Speaker A Thanks so much, Yossi. Till next time.

Speaker C All right, Hope you enjoyed that episode. Please give the podcast a rating, consider subscribing to the show and check the show notes for links to what we talked about. Thanks for tuning in. I'll see you guys next time.

The #1 Bottleneck in Car Sales: Broken Tech Integrations—and How to Fix Them | Sanjiv Yajnik, President of Financial Services at Capital One

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