Enrique Mayor-Mora: The receivables will tend to sit in our warehouses for between three to six, seven months, right, until the time they then go into the securitizations. And so, that’s why you see a little bit of a timing delay, right, between the performance of those two buckets of receivables.
Chris Bottiglieri: Got you. Just one last quick one, just we brought it up. The season has been ticking up a little bit. Is that — is there any — I know some of it is the Tier 2, Tier 3, but is that just the ABS markets still aren’t perfectly loose, you’re just not secure as much as you would like to or why I guess why is it seizing up a little bit versus what we might have seen pre-COVID.
Jon Daniels: Sure. Yes. I think that really comes down to volume. I mean, we’re obviously a ton of sales CAF continues to originate $2 billion a quarter. We look at the securitization market and we try and match the amount of the volume that we put into each deal with the demand that’s out there, obviously, with our growth. We’re doing about $1.5 billion each deal times four deals. We’re originating about $8 billion. That has great a year. That has grown over time. So therefore, naturally, it has to sit a little bit longer than the warehouses. I don’t think it’s anything unique going on there. It’s just purely a timing thing.
Operator: We’ll go now to Michael Montani with Evercore ISI.
Michael Montani: Yes. Wanted to ask, first off, on the provisioning front, we were thinking kind of $90 million plus seems to be a run rate trend and obviously, it came in better. So, is that the right way to think about this, maybe starting with a six handle in the near term given some of the tightening that you’ve done and all that we know? And then I just had an SG&A follow-up.
Jon Daniels: Sure. Yes. So just to touch on the provision once again. Again, two main components. It’s any change, we believe in the existing book of business versus what we had reserved for in the preceding quarter and then the new originations. The way I think about that is, let’s take the second one first. New originations, we did $2 billion this year. There’s a piece of Tier 1, Tier 2, Tier 3 business. We’ve cited Tier 3 is limited. Tier 2 is in test volume. Tier 1 is the bulk of it. You sign an anticipated lifetime loss rate plus the cost to recover from a repossession standpoint, which is relatively small, but a sign up an overall expectation of the $2 billion. That’s one piece of your provision. And then, it’s a function of how well we’ve reserved for it from the preceding quarter.
As we mentioned this quarter, we felt like we’ve done a good job. Nothing we saw within the quarter performance suggested we were materially off — and so that’s how you ended up with $68 million. So, I think you’ve got to bifurcate those two pieces and that’s how you set your provision each successive quarter.
Michael Montani: And I guess just a follow-up then on SG&A to gross. Is the mid-70s kind of near-term target still the right way to think about that level? And just overall, I mean, do we think that SG&A dollars can continue to come down in the near term if this is kind of the demand backdrop? Or do we start to build SG&A dollars to try to drive volume and share.
Enrique Mayor-Mora: Yes. So a couple of questions there. In terms of the mid-70% SG&A as a percent of gross profit, it’s absolutely our next step that we’ve communicated. We’ve made material strides in driving efficiency in our business. And hitting that mid-70 is our next school. But in addition to the cost management efforts that we’ve undertaken, we’re also going to require the consumer to return with some strength. SG&A efficiency is also a function of gross profit. And so to hit that in 70%, we are going to need to see some decent gross profit growth as well, but that’s absolutely our next step. When it comes to SG&A kind of moving forward, again, we’re proud of the material year-over-year reductions that we’ve been able to deliver.
And what I’ll point out is that we’ve done that at the same time that we’ve improved our customer and our associate experience as we migrate further along in our omnichannel, right? And this focus on efficiency really positions us well for when sales rebound. Now for Q4, it will be a little bit more challenging as we’ve largely anniversaried over our cost levers. So Q4, I would tell you it will be more impacted by our sales performance in terms of that year-over-year SG&A dollar movement.
Bill Nash: Yes. And generally, historically, Q3 to Q4, your SG&A does go up to the reasons you’re pointing, which is more volume, and as Enrique said, volume-driven.
Operator: Our next question comes from John Murphy with Bank of America.
John Murphy: Just a question on inventory. I don’t know if you can disclose this or if you have the information, but what do you think the average ASP is in your inventory that you’ll sell out? I mean you’ve seen ASP come down about $2,000 from the peak, and we’re still not getting the same-store sales comp lift that you might expect as that price is coming down. I’m just curious what’s in inventory? And are you able to acquire inventory at lower prices going forward just to drive the comp?
