How Car Dealerships Work

to figure out who I'm talking about. African American in Atlanta within the last two decades. I'm gonna am I gonna give you too much more information than that. I'm not trying to embarrass him, but it is an interesting story, and he was he was rolling. He bought a you know, I bought it, rent rented, bought whatever, you know, the mansion. I'm not sure of how that trend actually, I think

he bought it lost it, by the way. And most importantly, he had bought a convertible Rose Rice along with other cars. He's very, very proud of his car, flossing around town. Cool cool, cool. He getting afforded cool until he couldn't and he lost the ability to earn income, did not pay attention to the fact that it was a music business. It's the business of music, and you know, didn't pay

attention to his finances. But his so called accountant and those who spent his money for him did pay attention. And one day he realized that just like the postman or the teacher or whoever who had two much month at the end of their money, he was out of money too. He just more zeros around his income and

his debt and when his income stopped. You if you make thirty thousand dollars a year and you come up short one thousand dollars or whatever, you can find that somewhere through friends, maybe, But if you're making three million dollars a year and you had to go from that to making three hundred thousand dollars a year and you're short two point seven million dollars, where you can't go to Auntie Sue and get her to bail you out for two point seven million dollars, you just stuck like Chuck.

So he was happy when the lenders gave him the car loan, and he was ecstatic, and they gave him a great deal, and they whined and dine him and he said thank you and was all taking pictures with him and all of that. But when he lost everything what happened, he called the lenders racist. When they came after him looking for the cars factor repossessed the cars.

He did a whole stick back. There was no social media back then, so he couldn't, you know, go on his Instagram, but it was in the press he called this lender racist. Is a major bank in Atlanta, then called sun Trust, now called Truist, one of my partners. By the way, he called the lender racist, Well, I know the transaction, and I know the lender, and I

know the applicant, and it wasn't racist. It wasn't racist when he got the loan, when he got it at prime rates and was happy about it, taking pictures with the linders and all that. But when he couldn't pay, supposedly they were racist. Let me tell you something. If I loaned you some money and you don't pay me back, I'm gonna take the car, right, And I'm not racist. I'm a capitalist. Right. They loaned you some money, they want it back. What's complicated about that? You couldn't pay them?

You should have talked, called them and negotiated a restructure of that loan or given the car back. It always kills me where you have these folks and their car is about to be repossessed and they want to call you, curse out the toe men and chase them with a crowbar. You've seen the stories, you know, get in the car after food, pull out guns. By the way, You just going to jail. Now. You just made a bad situation, I don't know twenty times worse. You've won the battle

and lost the war. You rearrange the deck chairs and the Titanic of your life. The ship is sinking and you're picking drapes and you'll be picking them in prison soon too, because that's just stupid. We all seen the stories. But it's emotional, emotional, emotion emotional. You can't pay. Just relay, like here's the car, right, delay relay? You know we actually don't delay. Just relay the title back to the lender and be done with it. Renegotiate, negotiate your exit.

You can't provide your consistency the meaning making payments. Just negotiate a dignified exit for yourself. Go buy a car you can afford so you have transportation and reset your life. I had to do that. Everybody has to do. We all go through it. A saint is a center that got up. It's because you make a mistake. Doesn't make you a mistake, right, It's only when you make a bad situation and make it worse. So this rapper lost it all. Of course, the lender got their car back

and sold it and got their money back. And that guy lost his public battle with the lender, and of course we're ever able to do business with them there again. And no other lender wanted the loan of money because I said, well, when you loan, it's got money's and to call your racist and not pay you back. By the way, there are races, but it's typically not a

bank trying to get some money out of you. If the bank makes money by making you a loan and getting it repaid, why would a lender intentionally discriminated against you when all they want is their payments. I mean, again, there are races, but typically they're trying to not get you credit, not to not give you a loan in the first place. Right. So anyway, there you go. That's the trending topic for the day. Let's continue this conversation and make smart sexy again. We've been making dumb sexy

for way too long. We've dumbed down and celebrated it. It's time to make smart sexy again. Hey. Hey, it's John ho'bryant. This is Money and Wealth on the Black Effect Network. And this week I'm going to break down something that's near and dear to all of our hearts car dealerships. How does the car business work? So I've got a lot of personal experience with this, and you know,

used cars actually make more money. The used car business, on balance has a better what it's called margin profit margin, or the area between well, the percentage of profit that they have on the product. You actually would think they would have more of a profit on a new product typically because a lot of these folks are scoundrels. And I'm going to have a dear friend of mine come on on a future podcast, Tony Marzulo of gas Motor Cars, who's a really honorable guy who deals with previously owned

high end vehicles. Who are Who's going to come on and explain you some horror stories of how this business that he has witnessed actually an industry, actually works. But unfortunately, there's a lot of scandals and bad players in certain industries, use car dealerships being one of them. I've got some experience, as I've said, and I'll explain what happened when I was coming up. But it might surprise you that actually used car dealerships on balance make more money or have

a bigger profit margin. They may not make more money because they're smaller operations and all that stuff, and they can't scale. I'll explain why in the moment, mostly because of reputation issues that inability to brand what they're doing, so they may make a bigger profit margin, but have a low overall profit, low overall viability as a business. They just can't grow it. But again, I'm gonna stop talking around it and talk right to it. When I was coming up in well, it was south central LA.

My dad would go to the local car dealership and buy a car because his credit was tore up from the flow up. He was a small businessman, but you know, he would pay cash lot and he would flow checks. And you know, we've all done it. We've you know, growing up in the hood. You know I'm talking about we all have been there. So I'm not judging my father in this situation, he did the best he could

what he had. He thought that the people in charge of the bank were the branch manager, so he dealt the only relationship he had was the branch manager, who couldn't extend him credit. Really then or now, no diss to the branch manager. It's just the way the banking environment works. They have centralized their credit making authority, and a lot of it has been automated using technology, as

you've heard me say before. So artificial intelligence is going to make that even more this case, which is why your credit score is so important to getting the math right in your life. Another podcast for another time. So my dad would go to the car a lot, and he couldn't go to the major car lots because they dealt with the major bank lenders and the manufacturing lenders who wanted them to have wanted them to have a good what credit score, which my dad did not have.

I didn't know this back then. So let's just say my dad had a five hundred in something credit score, which is probably accurate. So he would go to a used car dealership lot and they would write him up and you know, they would say, what do you know? What do you want? To pay, and he would say, well, I want a payment of X. I do remember a couple of times my dad bought a raggedy vehicle. This

was actually pretty smart for cash. I actually recommend that if you can buy some car for cash and have no car payment for your first car, it's actually not a bad route. But a couple of times my dad got caught up in a situation where he wanted something more flashy or whatever and ended up asking the wrong question. You never asked what the payment is when there's an interest rate attached. Okay, so now I'm going to stop picking on my dad. I had start picking on me.

So my dumb ury and I went and lived with my sister in San Diego. Later on, when I was older and I was trying to be an actor, trying to be an entertainer. Yes, that was a part of my life too. I wasn't a very good actor or entertainer, but I tried. I did a few things. I was sure. I was going to tell you what I did, but you might like it's too nosy and start searching around, and then that becomes a conversation. So we're not going to talk about that. I just tell you It wasn't

all that great. It wasn't my highest and best hues being an actor. But I was in San Diego and trying to floss and I wanted it was two different cars. I wanted. I want a BMW three twenty I that was the car back then, and it was blue. I remember, it was like a midnight or it was not an ocean like a midnight blue. I loved it. A tan interior. Who I think, you know, there was a few actors who had that car back then. I wanted that car, that car. You know. This was convinced he was going

to make me cool and solve all my problems. Whatever decision you make emotionally is a bad decision, and this was an emotional decision. And I went to a car dealership a lot in La Jolla, California, high in area. It was a B paper lot or a sea paper lot. A paper lot is the best credit you can get. This was a B paper lot, maybe even a C paper lot. So a paper lot. The dealership actually is connected with a manufacturer, so Honda, Toyota, Mercedes, you know, whatever, Jaguar,

you know, Maserati. The lots you know where they forward, where they own. Uh, well, they have a relationship with the manufacturer. They give you preferred financing through the manufacturer. They get you know, it's it's a proper situation. A B lot is a lot that where you have impaired credit. They've gotten fairly nice cars, they're previously owned, but they're going to shop your credit a rund down to different lenders who are less than prime, less than perfect word

less in prime leaning. It's not going to give you the best raising terms, but you still get a decent deal, not a good deal, but somebody is going to finance your deal through the lender a CEA paper lot is when they finance your paper themselves, and they're really in the business of financing, not a business of selling cars. So I bought one of these cars on a sea paper lot. Well, no, it was a B paper lot that was also a C paper lot. Because I remember

they tried to finance me through lenders. They let me leave all the lot. They always ask this question, what payment do you want? Never asked what the payment is when there's an interest rate attached. If there's something they charge costs more than one thousand dollars, do not go with what the payment is. It's a trap. I fell into the trap. What do you want your payment to be? I told them what the payment, what I wanted the payment to do. They pulled my credit. They held their nose.

And of course the salesman's just trying to sell a car, so he writes the paper up. He gets me to sign the documents, gives me the keys, make sure I'm bound, which means that I've got insurance at least for the day on the car. And sometimes they will buy and being the insurance themselves with their insurance carrier, they get an override fee for that as well, by the way,

depending on what the insurance company is. And I leave the lot and the salesman is hoping he can place his paper the loan on the car, and yes, there's a purchase price I've agreed to for the car. Actually, with the most of these dealerships, an actual purchase price a secondary. That's not how they're making their money. They're making their money on sales, they're making their money on service, and they're making their money on financing. Typically there's a

couple other things like insurance. I'll get to this in a minute. It's break down exactly how they make their money. But on these B and C paper lots, you may surprise you. You're sitting at the spin all this time negotiating the purchase price. And these folks, these jokers, are making their money. They don't really care about that. They're making the money on financing you, and they're getting an override or kickback or a fee with the lenders to

finance you. And they're making the money when the car breaks down or you break down and the car comes back to them. But I'm getting ahead of myself on the story. So I take this car, and I think within a day or two they told me that I needed to bring the car back, and that of course made a small down payment. That became a negotiation. But the guy was unsuccessful in getting me to place me with a lender. So I added, bringing that car back broke my heart. But now I'm like half pregnant. I

want to buy something. So he then gets me into my second dream car emotional decision at that time, which was a two eight z X. I love that car. It dots him to aight Z and I won't get into the story what happened to that car before I lost it, because it's really embarrassing. I drove her from San Diego to Los Angeles, got into some not so honorable trouble and it was not good trouble. It was just trouble. I didn't hurt anybody, didn't hurt myself, but yeah,

it was not my finest moment. I can smile about it now, but I was really lucky so short version on that that car got repossessed. And I've got several of these stories about me and cars in life. Early on, and you know, I mean I did. It was several years I didn't pay my taxes. This was later on in my life. I ended up having to get hit with a bunch of tax fees and whatever, and I had to file a bunch of returns, like six years returns in one year in my early twenties because I

was so busy as I want to be entrepreneur. Now, this is when I was actually being more honorable, and I really I didn't pay, not pay because I was a flake. I didn't pay because I didn't have it, and that wasn't my priority to use the limited capital I have I had, I was reinvesting in my business. I ultimately end up having to file all those tax returns in arrears and of course paid every dime. Oh back to this story, this is a different version of me.

This was me that was trying to floss, trying to impress girls, you know, guys, whatever, you know my friends. I hung around the guys, the ladies I was trying to date, none of which, by the way, in hindsight matters spending money. You don't have to impress people you don't know about things that don't matter, on things that when you look back on that are just ridiculous. He's like trying to be, you know, a six square block celebrity, like you will to be a celebrity famous in your

six square block area. Later on in your life, you will realize that was wasting a whole bunch of time and energy, owing nothing and on nobody. So, yeah, I lost that car. There was one decision I made that was smart. I bought a used nineteen sixty seven Ford Mustang with a hard top, and it actually is a collector's card type. This particular car was toe up and the flow up, but it looked nice. And I remember

I put retreads, which means not dependable wheels. I put re treads on the car, and it was so hot outside the retreads came off the car. Winning a car was driving on the freeway. Another story for another time. So let's get out. Okay, now that you're laughing your tail off, and you know that I actually understand what I'm talking about. But I did paper that car in cash, that's the good news. And I had a cell phone, a fake cell phone in the car. This story is

getting worse. I wouldn't have wrote to what was in called radio shack and bought a cell phone kit, which is the antenna. Remember this, somebody, you guys, remember this antenna on the car and the hand cradle in the car, and I put the cord underneath the dashboards. Is really embarrassing, trying to impress somebody. This is my flossing period. All right. Here's how a car dealership works. The revenue side of

the car dealership. These are traditional car dealerships. The primary source of revenue for dealership is selling new and used vehicles. Dealers purchase vehicles from manufacturers or I had auctions and sell them to consumers of their markup. Be careful of

dealers that sell you a car at an auction. An auction vehicle sometimes is really tow up from the flow up, and they paint over problems and there's a reason the cars at the auction because it did not make it in a traditional buy and sell and trade in an environment, and you buy a car an auction and somebody might have turned back the odometer, the mileage meter and all kind of crazy stuff, gotten to an accident, repainted it might have been. You might have broken the frame or

something and welded it back together. You just never know what you're getting at an auction. Financing and insurance is a second way dealerships make money. Dealerships often offer financing options to customers, allowing them to spread the costs of the vehicle over time. That's pretty much all the time.

They also sell insurance products like extended warranties and gap insurance, meaning the difference between what the car is worth if something happens or you're trying to sell the car, whatever, and what you owe against the car. That's a gap that the insurance to cover the gap. I've had that before on high end vehicles, which provide additional revenue for the dealership. So they're making money on the gap insurance. They're making money on selling you insurance. They're making money

on extended warranties. No problem with any of this if it's honorable, and they're making money on financing. I'm gonna come back to this because in a traditional car dealership, well they're making money selling cars, primarily a new car dealership. But that's not what I'm talking about here, and that's not what I'm warning you about. Stay tuned here. Hold on. The third area is service and parts. Dealerships earn money

through servicing vehicles and selling parts. These include routine maintenance, repairs, insulations, and accessories. Last week I just had actually it wasn't need a car dealership. It was an entire company. I do business with installed and after market parts for me on one of my cars and charge me. They may charge me two thousand dollars. You know, that was mostly all labor. I think it was all labor. Actually, so they paid their people that say, you know, fifteen bucks an hour.

If they charge me the equivalent of forty five dollars an hour or whatever, then the difference minus the costs of their cost of your business is their profit. And I'll tell you about what the cost of doing business is for a car dealership in a moment trade ins when the customer trades in their own vehicle for new one. Dealerships may refurbish and resell their trade in adding to

their revenue fees and add ons check this out. Dealerships may charge fees for processing, paperwork, delivery, or other services. They may also offer add ons like rust protection, paint, sealantor then etching for an additional charge. I have paid for like you know, rims. You know, if you rub your rims against the curb. I paid a warranty to cover that for members of my family and myself for high end vehicles, and so if something happens to the rim,

you take it back to the dealership. They repair it or replacement for free. But that's not again, the kind of I'm not talking about honorable folks and people like me who can afford to pay these things for high end cars and a new dealership are quality previously on. I'm talking about folks who are trying to rob you in broad daylight and calling it a traditional business. Here's the traditional cost of running a car dealership. Vehicle acquisition.

So the dealerships have to purchase vehicles from the manufacturer or auctions or from you to resell it. The costs these vehicles affect their profit margins. Of course, operating expenses. This includes expenses like rent, their rent, utilities, their insurance for those facilities that they are purchased that they're operating from. Salaries for their employees, and marketing costs and equipment, inventory costs, holding inventory ties, capital and incurse costs such as depreciation,

financing charges, and storage costs. So a car dealership has a proper one has a finance vehicle. That finance is there. That's the floor inventory for the car dealership. Let's say it's making this up. They have a million dollar line of credit if you will, to put cars on the car lot, and then as they sell it to you, they pay down that line of credit. Hope doesn't make sense to you. So they can't core afford to hold

cars for a long long time. They're trying to get them off the lot as soon as possible, which is the advantage for you to negotiate. If car's been sitting there for a long time, you typically can get a better deal. And while service and parts of generating revenue, they also have a costs associated with labor, parts, inventory, and equipment. Just covered that with the car tire company

I mentioned that's doing some install for me. Advertising and marketing dealership spend money on advertising to attract customers and promote their business. Okay, there's nothing there's nothing you know crazy about any of that, right, And the profit margin

is the difference between the costs and their revenue. Now, you might be shocked to hear that the real way these folks make their money the less than honorable ones, the ones that hope you have a six hundred or five hundred credit score right or a seveator credit score. You're just not that bright and are not that wise, And somehow you've fallen yourself into a B or C

paper a B or C paper dealer. Are you just drove by someplace and emotionally you got captivated with some incredibly sexy car and you walked yourself into a B or C paper auto dealership didn't know that you were there. It is real sin if you have a seven hundred credit score and you end up on these places and don't know that you're being preyed upon. But certainly they're searching for somebody who doesn't have optionality, because if you show up at one of these places with a semilar

credit score. I'd hope that you have enough sense that the snuff out, even with you being em you're making a decision emotionally is a bad decision. That's another podcast episode that I would do at another time. But I'm hoping that if you have a similar credit score, even if you just really love this car, you'll go find that same cars someplace else. This b paper dealership is going to shop your loan. So first of all, you're gonna go there and the car's gonna be twenty thousand

dollars on the sticker. You're gonna try and negotiate that down. I'm making this up to you know, you're gonna say eighteen thousand, they're gonna say nineteen thousand and five. Twenty thousand dollars car. You're gonna say eighteen thousand and five. They're gonna say nineteen thousand, two hundred, and you guys are gonna ultimately, let's say agree on nineteen thousand, one hundred whatever. You know, you said, Oh, I've got these

folks down almost a thousand dollars. Fantastic, you know. But in this example of five eighty credit score, and you're saying, what's the payment. This is not gonna correlate, but I'm gonna just say the payment's, you know, six hundred dollars a month that they tell you that your payment's going to be, or you say that's what your payment cannot exceed. They walk into the financing department. Now this is where

they really make their money. They then talk to Joe's finance company and they have a relation ship with Joe's finance company, and they say they got a sucker, I mean, a client in front of them, and the purchase price is nineteen thousand, one hundred and your credit for courus five to eighty, and you want to pay men six hundred dollars a month. The lender comes back and tells the dealership Schmuckville, USA, will finance this guy. We want,

you know, fifteen percent interests. And the Schmuck Auto dealership company wants a brokerage fee. They want to points, they call it. They want points against this nineteen dollars purchase. So you think you're just paying a commission whatever is in the documentation to sell the car, they're actually making money, a lot of it on a brokerage fee with the lender. You have a right to know what that is. You should ask are you making a fee from the lender? If so, what is it? You might fall out your

chair to find out how much you're being paid. So, even though you've got to discount on that purchase price and they've made a profit another profit on the financing, it's points and interest, so points meaning they're getting let's say it's a you know, maybe five points so out of fifteen percent interest in this example, maybe they're getting five percent of the ten percent as a buyback or

a kickback. Really, so it's really the lender maybe saying, you know, they want a net a ten percent per interest from you per year from you, and the lender is getting five percent per interest as an override. So even if you leave that lot for the length of that car, you're paying you don't know this, you're paying as much as you know, in this example, five percent commission every month to this secondary lender. This sorry, this schmuck auto dealership that's acting like a lender. I'm getting

real complicated, but you get the gist. And then when the car breaks down or you can't afford to pay it or both, uh, the car comes back to them, and you and you, and they give you a lecture, and then they've shown they've sold you some bum insurance, by the way, which they're also getting a kickback on properly. And then they're going to repair that car in their own shop and threaten you if you don't pay them X, Y, and Z bring that car back that they're going to

damage your credit. So you may be paying an inflated amount for the repair of the car just to release yourself from liability. But in any case, they're going to repair their costs at their shop and resell that car to somebody else under similar terms and conditions. And this is capitalism. Don't don't get angry with these folks. When somebody's sitting across the table from you doing business. Remember this. Their job is to get as much money from you

with the least value as possible transferred to you. Your job is to get the most value transferred to you for the least amount as possible. Did you hear that or repeat it? Capitalism is a gladiator sport. It's not personal, it's just business. Your job in that negotiating table is to pay the least it's possible for the most value. Their job is to extract the most from you in costs for the least amount of value. They're not trying to Most people are not just trying to jam you

up and rob you. They're just trying to make a profit, and you're trying to get a good deal. Most great deals, or when most the buyer and the seller both don't feel great about it, you feel okay about it. That means you probably got a pretty good deal. The third dealership example, it is really crummy and that's where they own the car and the financing. That means your credit is toe up. Your credit so bad. It's not credit, it's credit. My dad used to call it credit. He said,

using my credit is bad. And you know, I don't know for one hundred and five ten, five point fifty, just bad, right, Like nobody wants to leave you money and you're so poor you can't afford the are you just pop peel And that's when they got you. Because you want this car and it's and when you buy that car and eighteen percent twenty percent interest, it's a mobile bomb. It's not a Mercedes. You bought is mercy? These payments and they got you. You know that car

is going to explode. That car is bought at an auction. They past it together with bondo glue, they painted over, they put rims on it. They made it smell good. Somebody threw up in the car. Somebody died the car, somebody did weed in the car. Who knows. They sprayed it with you know, deodorant, whoever. But the car is a bomb. The o'domino has been turned back. Whatever bad you think about it, that's what's happening with this car. They have wrint their own paper, meaning they've really not

a car dealership. They're a lender masquerading as a all dealership. They've written their own paper, asked you what the payment was, don't care what it is because they know they're going to get the car back. They're giving you twenty five percent fifteen twenty five percent interest, some crazy thing, which means for every dollar you give them yearly getting seventy five cents of value. You'll never get out of this. It's just modern day slavery, financial slavery. You're going to

get robbed. It's just a matter of time. You're renting the car essentially to drive it around, so they're gonna cover all their their costs in their front end. They're gonna so that cars worth ten thousand, they're gonna sell it to you for eighteen thousand and either going to pay it in the upfront purchase price, or if you're smarty pants and you know what the car really goes for because you check comps, then they're going to ramp it up in the financing costs and bury it in

the agreement over time. But one way or another, they're gonna get their pound of flesh from you because your credit is toe up, and you're financially illiterate, and you're emotionally tied to this car. Are you getting this? It's really important because a lot of us are hooked up in these really bad auto loans, and today I'm hearing you know, the average auto loan payment, even on good credit, is seven hundred eight hundred dollars nine dollars. This is approaching

what you pay for rent. That's not sustainable, and why should you be Why should you be doing that? Is another question. I have high end vehicles now, but I don't think about the payment. If you had to think about the payment, you don't need the car. I actually made money on the car recently. But you know, you need to understand that ninety nine percent of cars are depreciating assets, not appreciating assets. It's good debt and bad debt.

Good debt is tied to something that may or does go up in value, and bad debt is tied to something that is or is or is likely to depreciate or go down in value. And an auto loan typically ninety nine percent of time it's a depreciating asset. So it's actually bad debt unless it's good debt. What you meaning. It's either bad debt or it has a good purpose. You're buying the car to get yourself to work. You're buying the car to transport your family. You're buying the

car because it is your work. You're an uber driver, a lyft driver, you're a man. You know you're drive, we're living some way. Yeah, it's essential transportation. If you're flossing the car, I'm not quite sure in what industry that would work. I guess maybe the entertainment industry. But I can tell you a whole bunch of folks who went broke because it had a bunch of loans on expensive cars that they didn't actually own. Couldn't afford, they

lease it, they buy at it. You know, they're not paying attention to details, and literally the cars are building their wealth. Getting back to the story, now, this third type of car dealership is really a vulture, and i'd encourage you to do your research before you figure out what discide why you're going to do business with one of these companies. If the story's just going to end badly.

They make their money on the financing that they have in house, and then the car breaks down and they jack you up on the repair fees, and then they may even finance the repair fees, meaning they may you don't have the money to pay for the repairs and you need transportation, and you owe them money for the car, and so they they then pour the financing into the refinance of the car and then jacket up some more.

This becomes basically a payday loan situation you cannot get out of, and they own you, lock stock and barrel at some point, and then the car breaks down after a year, fifteen months, whatever you've you know you can't afford any more. There's drama nor the payment, so you give them the car back with the security deposits you put up or whatever. So they take that and you know they're threatening to destroy your credit and chase you

for life. You don't want that. Some local dealerships, so they know where you live, they know who you are, you know, blah blah blah, and then they take that car, go in the back, bondo it together again, fix it, resell it to the next sucker. I call you a sucker, but I'm saying that's how they see That's how they see you. That comes along with a five fifty credit score, which means you don't pay your bills. And by the way,

I've been there, I was the sucker. I was the guy with a five fifty credit score who didn't pay his bills. So I know the target market and know what it looks like. So I just gave you an example of how the car dealership industry works. This is not the honorable dealerships in the first tier, per se. This was second and third tier dealerships that I want you to stay away from if you can. If you can't,

then I want you to do your research. Do not ask what the payment is when there's an interest rate attached. Look at your documentation, Read your documentation. Be smart, about money and finance. Come to my Operation Hope team for coaching and counseling. Read my book Financial Literacy for All. Every week at the kitchen table, have a family meeting and break down what's going on in the family for that week, and really build a budget for yourself. I

have a budget every month. I check it every month and I'm doing I guess you can say I'm rich, but I have a budget. Everybody is a budget. People who are wealthy, you know, it's not about what you make, it's about what you keep right. So I want you to be smart about your money. I want you to monitor your credit score. My team can help you with that at Operation Hope, with have offices across the country. It's scholarship for you, meaning that I have sponsors that

have paid to fund financial coaching and counseling. And Hope Light is available to the public. And Hope you know Classic and Hope Platinum or services that are part tied to our partners, and that's worth thousands of dollars every year for those lucky enough to be tied tied to one of our partners. But you can call Operation Hope today and get Hope Light for free. There's no cost. Don't let somebody charge you money for credit counseling that

don't do that. Come to me and we will give you the services for free and help you get your credit score up, your debt down, your savings up. Read the book, and of course keep listening to this weekly podcast. It's my ministry of hope. This is my ministry of finance every week. This is my pull pit every Thursday. Tell your friends and I hope this was enlightening and maybe even a little entertaining. This is John O'Bryant. This is money and wealth. Every week I break down how

stuff works, love and light. I'm out. So We've got fan questions always, and I'm always honored to honor them to respond to them. I'm gonna tell you this one fan question here came from somebody that I love, and it's not so much a question, but it was a question to me. But I'm saying it to you without giving them attribution because I don't want to embarrass him. But I'm telling you there is no shame in the game of asking questions. Is the only shame in not

asking questions. And Andrew Young would say that men and women fail for three reasons, arrogance, pride, and greed. Right, my dad was prideful. He was not greedy, he wasn't arrogant. He was full of pride. Pride kills. So this young lady who I know, twenty four years old, twenty five years old, beautiful, smart, young lady went to college and through her friend, she came to me and she said, look, I need to ask you a question. Sure, what's a stock?

What's equity? And I'm proud of her because at least she asked and we had a good conversation about it. I'd answered her question right, and she's better for it. And now she's hopefully invested in the stock market and understands that she's building equity. So if you're buying, in this example, a car, and you've bought it for twenty thousand, and over time you paid it down to ten thousand dollars, So now you have a loan of ten thousand dollars

on your month statement. He purchased it for twenty thousand dollars. Right, Your payment every month and making this up is five hundred dollars a month. You have insurance of one hundred dollars a month. When you're buying a car, you have to factor in that cost of insurance or in the cost of maintenance and upkeep, or you'll have a bad you'll have a bad outcome. Okay, So the cost for her every month is six hundred dollars for this car. What is her equity when she sells this car, if

she trades it in. If she can sell this car were she bought for twenty thousand dollars, and she's able to then sell it to the dealer when she trades it in, or sell it to you the buyer on the open market, and she's willing to sell it for making this up fourteen thousand dollars. She owes an example ten thousand dollars. Her monthly payment is five hundred dollars a month and one hundred dollars in insurance, and she's able to sell that car before the next payment comes

due five hundred plus one hundred, six hundred dollars. She's able to sell that car and receive the proceeds in that same thirty day period to pay off that ten thousand dollars balance on the statement from her lender, what does she have equity in this example? She sold us for fourteen thousand dollars. She has four thousand dollars of equity.

That is her equity. If you have stock that you own and you've paid one hundred dollars for that stock, and it has gone up to one hundred and forty dollars, and you pay for that stock in cash, you have one hundred and forty dollars of equity. So your equity is your value minus what you owe against that value. All right, love and light, John O'Briant, let's go change the world together. Go to Operation Hope and take your life back. This is the Black Effect Network podcast called

John O'Brien on Money and Wealth. See you next week. Money and Wealth with John O'Brien is a production of the Black Effect Podcast Network. For more podcasts from the Black Effect podcast Network, visit the iHeartRadio app, Apple Podcasts, or wherever you listen to your favorite shows.