Question-and-Answer Session
Operator
Thank you very much.
(Operator instructions)
And the first question comes from Edward Yruma with J.P. Morgan.
Edward Yruma - J.P. Morgan
Hi, thanks for taking my question. Charles, I know historically, you’ve prided yourself on having an operational decentralized model, and given some of the inventory pressures, are you taking more of that control in-house, and providing some governance to that.
Charles Oglesby
Edward, the inventory is certainly a concern for us as mid-line inventories rise. I would say that our model has always been great communications with our local CEOs. They are much more familiar with the needs in their local markets. Overall as an organization, we will look very favorably at reducing our inventories. So the communication style has not changed, but from a local standpoint, the opportunity for reduction in inventory, they will take advantage of it.
Edward Yruma - J.P. Morgan
And help me understand a little about your comments around sub prime and some of your historic successes there, and maybe some of the weakness you are now seeing. I couldn’t help but notice while I was in Florida recently, that they were very heavily advertising some of the sub prime promotions with your Coggin group. When did you start pulling back on that business in the quarter, and how long do you expect that to persist for?
Charles Oglesby
Well, the sub prime market is being affected in a number of different ways, Edward. That market is traditionally a solid market. There are some unique events that are going on now; part of it is that the fleet inventory that was returned to the market is a lot less than it used to be. So that market is more expensive. So normally, you’ve got to have the right customer with a substantial amount of down payment, and the lender looks to be behind book of what their inventory is. Those conditions are really not the same today. That’s a part of it, where it’s down.
We’re also finding that from a sub prime customer, that their cash is a little less today. Their disposable cash is going into other areas; higher gasoline, groceries, mortgages, different aspects of their budget. In the past, they may have been able to afford a $275 payment, while today they can afford a $210 payment. So that puts pressure on the margin, as well as the type of vehicle that you have available for that sub prime market.
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