By on April 19, 2013


The car business can be a pain for three distinct reasons.

The first comes from the cars that you sell. Botched repairs. Unhappy customers. Surprises that just seem to spring up and bite you in the ass. I can deal with that.

The second comes from people in the industry. Employees and contractors with productivity issues. The unending myriad of regulations and paperwork. Continuing ed classes with little relevance to reality. I can deal with that too.

What I can’t deal with is…

people who belittle the work that I do.

Those who are hopelessly inexperienced with the retail car business think of this world as some literal gold mine where you can easily buy a nice car. Take a few pictures. Post it online, and sell it for a healthy four figure profit.

If it were that easy, this business would be better than sex. Everyone would want to do it — again and again and again. Except for maybe a few old folks, confused nuns, and hermits.

I recently wrote an article for Yahoo titled, “How To Become A New Car Dealer In Seven Difficult Steps.” Those steps seem to be pretty simple on the barest of surfaces. If you pay enough money, you can join the proverbial club of car dealers.

That’s the easy part of work in any profession, spending money. The hard part comes with paying for an even more expensive education after the basic entrance fee.

I was fortunate, in the sense that I first started off working in the auction staff at five different auto auctions in the southeast. I talked to the bigger players, learned a few things, and watched for a long time before ever buying my first car.

That first car was a 1986 Honda Civic base model which I bought way back in 1999. We’re talking vinyl seats, 4-speed manual, 1.0 Liter engine, and wafer thin a/c. It took me six months and well over a hundred auctions before I was confident enough to buy my first vehicle for all of $525 at a public auction.

I adjusted the idle. Took pics. Put it on Ebay, and sold it for about $1700 to a Polish PhD student from my old alma mater, Emory University. A month later I bought a 1988 Toyota Celica All-Trac for $1600 that had all of 100k. That one I spent $700 in repairs and eventually sold it for $3300.

Two for two right? Yes, but there was a lot learned between the time I first got into this business, to the time I sold that second car.

For starters, I knew the sellers of those vehicles and the quality of the inventory they typically brought to the sales. In fact I worked their lanes at the auctions as a member of the auction staff and they knew that if I got burnt, it may cost them as well.

With those experiences, I also took part in all the major tricks needed to stimulate and simulate demand on the auction block. Running the bid up, double bumps, squeezing the seller for more money after the bidding stops. I could bite them if they bit me.

I also knew the major players and, back then, you could easily play the kings rule of giving a favor and taking a favor. Back in the late 90’s very few people gave a flip about the $1500 trade-in that required substantial mechanical work. So I chose my battles in the fields where I would meet the least resistance.

Those daily experiences at the auctions, and my work with all those dealers and fellow auctioneers, gave me the confidence I needed to begin buying and selling cars. But it took six long months just to buy and sell two cars. Even after the first two successes, it took several more years for me to finally invest in the fixed expense and opportunity that came with a used car dealer license.

I made money, and lost my ass. Let me expand on that for you dear reader.

I… lost… my… ass…

I also learned a lot along the way. Sometimes I would seemingly lose my ass and then, I would learn something new which gave me a slight temporary reprieve from the abyss of a devastating loss. A recall from a manufacturer. A tool that would add value to what I sold, such as Carfax or a well-designed web site, that allowed me to pay more for a quality vehicle.

Or even something less technologically advanced and more relationship driven; such as a detailer who worked with a large dealer network and offered me the same recon rates because I helped him buy a good van at the actual cost.

Every problem required an added expense, a new quest for knowledge, and an opportunity to further my career.

So what about becoming a car dealer now? Get some experience first. The cost of this business has increased dramatically since 2008 along with the sophistication and ‘noise’ of advertising cars. That Toyota and Honda I mentioned earlier? They cost more now than they did back then, and they can be financed for more money as well.

The profit of a cash deal is now usually less because you have to usually pay more at the auction. Most dealerships now have to compete against Main Street and Wall Street thanks to the rise of sub-prime lending.

The ‘tote the note’ return may pay out more, because the financing terms are longer. Yesterday’s two year is now a five year note, and you will need a lot of ‘right’ to make that work.

The right mechanics. The right detailers. The right buyer. The right advertising strategies. The right financing partners. Even with all that, you still need to buy it at the right price which means you need to be at the right auction where you will likely spend a lot of time trying to find that right car. Make sure to handicap your risks accordingly.

This business was never easy. Now, for the small businessman and novice dealer, it is far, far worse.

In the good old days of 1999 thru 2008, many car dealers were able to, “Hit em’ where they ain’t.” The Chrysler minivan that was traded in and reconditioned by a VW dealer that had no business trying to sell that type of vehicle?  I could buy that for cheap. Or a Toyota dealer that tried to retail a Lincoln. You could buy those ‘right car / wrong dealer’ vehicles for even less money if you helped that seller in the past.

Other times the deal would come in the form of a repossessed inoperable vehicle that was not given the chip key needed to make it run. Or, an older used car that had an amazing dealer maintenance history that nobody knew about. Sometimes you could even find a repo that had only been on the road for a couple months and had been diligently maintained for several years until that brief period of time.

I still find these nuggets of opportunity. But where I could buy five or six of these in one large auction, now I am only getting two to three a week. If I’m lucky. Even then I sometimes get an unpleasant surprise and end up losing money.

I am reiterating this salient fact of losing money because if you try to get into the car business today without some unique skill that you can couple with that used car dealer license, you will not be buying those cars for long. The mistakes now cost far more than it did back then. Parts, labor and expertise all cost more. Even for the big guys.

As for those big guys, they usually specialized in some unique facet of the business before dedicating their full time energy to the retail car side. Mechanics, finance specialists, exporters, reconditioning experts, body men, every step to long term success came with having a true tangible advantage that made that first step an easier one.

So you still want to be a car dealer? Meh. Fine. Start small, educate yourself, and avoid the chronic diseases that come with having too much confidence. Nothing is easy in life.

If it was, we all would be doing it.

Editor’s Note: This write-up builds on a recent Yahoo! Autos article you can find here. Hope you enjoy both of them.

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42 Comments on “How To Become A Car Dealer… Without Ruining Your Life...”

  • avatar

    Wonderful writing Steve.

    Oh and I hope you find your ass, I know when I lose mine its always in the last place I look.

  • avatar

    I love the setup I have now. My partner does wholesale (dealer to dealer) and I do the retail end and we help each other when we need to. Its a small operation (staff of 7) and we all have to bust ass to make things happen, but it works.

    You’re spot on about one thing in particular – I found out over the past five years of this business that IS a hard-scrapple life if you can’t bring something unique to the table. I found out my forte is retailing online and now that we’ve moved to a small retail location (~20-25 late-model, low-mile cars), we can do both wholesale and retail efficiently.

    Efficiency. That’s another thing I learned about. The last guy I was with loved to have a bloated staff, hiring his 20-year-old kids’ friends to do anything and paying everyone for menial tasks like money was going out of style. Pick up a car at the auction? $40. Exchange a lien receipt for a check at a finance company? $25.

    At one point, we had a lot with 50 cars and 16 employees, including one son’s friend detailing (i.e. misting a car with calcified water at around 1PM in the Florida sun, darker-colored cars first of course), one’s girlfriend as a runner who couldn’t find any of the places she needed to go with a map, GPS, and directions…but I guess she looked good doing it, the other son’s girlfriend to run as well, though her job was to apparently pad local bodyshops by ripping off air dams, and of course the GM’s equally pilled-out harlot from the Pasco County Skank-of-the-Month Club who was paid to do…nothing.

    Worked real well until he had to do it with his OWN money. That tap dried up pretty quick, then it was all IOUs and ‘Promise I’ll pay you after I’m done with this line.’ Got pretty bad. Then it closed. Obviously.

    Oh well. At least I can say I’ve done THAT part of the car biz while still young. I feel much better just doing what I wanted to do when I started out – sell cars, make money, not screw anyone, and just have fun.

  • avatar

    Not in relation to your experiences, or in offense, but I use to work for a dealer.

    The owner I worked for inherited it from his father. He hired a very good GM, and showed up to the place maybe 2 hours a week to “check on things”. His own son had held every job there, not being able to do any of them (and would of been long fired if a regular off the street). Worked in the sho;, warranty, service writer, parts, ran the parts department, and last I heard is doing internet sales. Apparently he does very well with the internet sales….. The only shining light is the older brother is apparently back, and apparently he’s not an idiot.

    Lazy, incompetent, but a thriving business none the less.

    • 0 avatar

      “showed up to the place maybe 2 hours a week to “check on things”.

      Nothing wrong with that. I’ve seen too many successful family businesses go under because an incompetent, arrogant, lazy kid, or grand kid, took over and believed he was the smartest thing on two feet. They would have been much better off if they hired a competent GM and audit firm and left it at that.

      It takes a big man to admit he’s in over his head.

  • avatar

    Big corporations took all the fun and good salaries out of the new car business and gradually their doing it in the independent used car business. Cox Enterprises often seems to make more on the car than we do or even the government gets in taxes. First you buy the car at one of their Manheim auction then you floorplan it with NextGear and then get it home and advertise it with AutoTrader, all owned by Cox Enterprises. This is known as a vertical monopoly. AutoTrader itself is involved in a very successful variation of monopolistic competition. In reality there is nowhere else to go for dealers to effectively advertise cars but Autotrader. is barely enough competition to say there isn’t an actual monopoly. In the real world, Autotrader has a de facto monopoly because the competition is so weak. So weak, when the rep comes to your dealership, one of the first things they is not to drop AutoTrader. Software companies, vehicle history report companies, Title Tec, Fed Ex, HewlettPackard cartridges, on and on…

    • 0 avatar

      IMO, offers more bang for the buck than AutoTrader. I know the numbers are bigger with AutoTrader, but their tiered advertising system screws smaller independents who don’t have the scratch to afford ‘Alpha’ listings or have co-op money like franchises.

      Also, I have lots of inventory that competes with the big spenders, so that’s where’s level ad fields shines. On Cars, my ’10 Flex SEL Ecoboost is listed first if you sort by price; on AutoTrader, mine will be after all the Alpha, after all the Premium Plus, and Premium, and be the first of the Preferred listings, which may be on the second page that people mostly don’t bother visiting because they assume the lisings are ingenuous.

      • 0 avatar

        AutoTrader is running quite a bit of a racket. If you are selling something like a 2008 Honda Accord though, how do you stand out? Even w/democratized listing orders, someone’s cars are gonna be first. Online listings are def a gift and a curse.

        I prefer the interface of Autotrader to Cars for some reason. I do a lot of very specific searches and Autotrader seems better catered to that. Plus I think they might just have more listings.

    • 0 avatar
      SomeGuy is under AutoTrader also because it is an inferior website. Just isn’t setup as nicely IMO.

      I used to work in Internet Sales (GM) and post cars to both sites…

  • avatar

    Buying and selling used cars and making a good living takes a certain skill. We have 7 good size lots plus the new dealerships all in a town less than 10,000 population and they are all thriving. There is MONEY in used cars.

  • avatar

    “Those who are hopelessly inexperienced with the retail car business think of this world as some literal gold mine where you can easily buy a nice car. Take a few pictures. Post it online, and sell it for a healthy four figure profit.”

    How true. I have a few acquaintances that catch a glimpse of the cars I move and think they can do the same. Their attempts usually result in frustration and failure.

    Their methods are usually as follows, find a bunch of cars on craigslist, find the KBB value and lowball the sh1t out of every owner until they find a catch for “well below KBB” that they think they can flip for “retail” money.

    Thing is, they don’t have the specialties that Steve mentioned. I make it work because I am an ex-mechanic and body man, so I can get a turd in top shape for the cost of well discounted parts and a bit of time. At the least I get paid at mechanical shop rate to do the work.

    Those guys wouldn’t know how to change the loose ball joint even if they know how to identify it. So usually after a couple tries of sitting on some heap for a few months, and losing their ass on it, they give up.

    • 0 avatar

      Curbing cars works out really well for John Q. Public until they encounter a blow head gasket, a hard transmission problem that’s NOT a solenoid, or a “$50 part” that requires 15 hours of labor to get to.

      • 0 avatar
        Kevin Jaeger

        As if those things don’t happen at used car lots. Or new car lots for that matter, if they happen to be selling Northstars or Subarus.

        • 0 avatar

          A used car lot – a good one, at least – gets parts and labor for wholesale, has a buyer with experience enough to know what to look for and to avoid, and the $$$ to fix such issues before retailing that car or the outlet of wholesaling it at an auction to ‘get out of it.’ Average Joe doesn’t.

          • 0 avatar

            Which is why I am now seeing quite a number of 1990s Northstar-powered Caddies out at my local pick-n-pull! The smart used car dealers avoid them and the junkyard ends up being the high bidder. Dealer or not, there is no way to short-cut a head gasket job unless you consider the miracle-in-a-can fix a legitimate one.

            My mechanic friend has worked for a number of car dealers, both new and used. Oh, the stories he has told me!

          • 0 avatar


            You ain’t kidding about those Northstars. I’ve worked on a lot of cars over the years, but you couldn’t give me a Northstar equipped Caddy with a blown head gasket….even if the rest of the car was in showroom condition.

            The only way to do a proper Northstar head gasket is to drop the engine/trans-axle assembly from the bottom of the car. No, just no.

  • avatar

    Steve, out of curiosity, how hard does Georgia make it to get a dealer license? Maine is pretty ridiculous. And then you have to do a certain volume of sales to keep it. Had a friend in the business who started out much like you. He eventually gave it up and got into the metal recycling business and is getting rich.

    • 0 avatar
      Steven Lang

      Easy if you are rural and in the right county. Middling for the ex-urbs, and a full blown migraine if you’re in metro-Atlanta.

      The counties can make it challenging. The state is always more than happy to collect the license fees.

      • 0 avatar

        What state/county has the cheapest (and lowest bond dealer?) license?

        I’m not really interested in making money in selling cars, but I would buy and sell many more cars (for the sake of satisfying curiosity) if I didn’t have to pay sales tax every damn time.

  • avatar

    I have not done what you do, and I wouldn’t belittle you, but you’re not the only one who is suffering. The commercial construction industry has become a clusterfuck in the past ten years. There are triple the amount of entities involved besides the traditional “Owner/Architect/Contractor”. Electronic communication doesn’t solve problems, it just makes problems come at you so much faster with the expectation of them being solved just as fast. It takes over 90 days from performing the work to actually seeing payment. Competition has whittled us down to an average 1% profit margin. In summary, business just sucks all around these days.

    • 0 avatar

      Scales of economy are eating into small players and for years indie lots around pittsburgh were where you went to pickup trash. In recent years as the big players migrated to specialized used lots the indies got some room but I would be hesitant to buy.

  • avatar

    I’ve always wanted to do it small scale. Virginia only lets you do four cars without a license though. Seems like all the running around will leave you with minimum wage pay, or losing your ass…

  • avatar

    I would think knowing how to use Craigslist would be a great asset selling used cars. If you can write good ads that can be found and entice a buyer, then that is a valuable skill.

    The ads should clearly state what is for sale, and for how much. I won’t even bother to contact a seller who doesn’t list price and miles. Why do these idiots post “Call for price”. Are you kidding?

    Learn to write the post heading in a clear manner so it doesn’t look like Craiglist spam. All the special characters don’t help. Just keep it short and sweet. What are you selling?

    Learn to word things so that Craigslist aggregators can find your ad. I used services like Temptest to find a car in a wider area than my local city.

    Track how many of your customers, and inquiries come from your CL ads. Experiment, and track the results. You will find what works, and what doesn’t work.

    I’ve bought vehicles from used car dealers that I found on CL. The way their ads were written is what go me to respond.

    Respond to your profile on Yelp! Yes, you will have some negative feedback. And there are always some asshole customers. But if that negative review is followed by a reasonable response, then that actually is better than no negative post at all. It shows prospective customers that if there is a problem, that you will rectify it.

  • avatar

    I don’t understand the people who belittle what you do either. I bet a lot of people think of the big dealerships that have huge markups and slimy salesmen, underhanded finance guys, and indifferent owners’ sons as managers, vs. the little guys, and lump you all together.

    It takes a lot of hard work and a lot of good experience to do what you do, and the bureaucratic hurdles due to your big dealership colleagues are insurmountable for many people. Your Yahoo article was a great description of it for those who aren’t familiar.

    • 0 avatar

      People don’t realize that used car dealers are a small business like any other and support the local economy in similar if not often more meaningful ways.

      People also think you’re making a big buck where there is none. Advertise a car for what you owe on it because its due soon (i.e.: what you have to pay for the title from your floorplanner, NOT including recon, transport, pack, or the 20% you paid down it 90 days ago), and someone STILL always offers you $3000 less.

      There’s an old saying that buyers are liars. They can also be scumbags of a higher caliber than the worst dealer:

      -Lying about their trade’s history and mechanical woes or its TRUE payoff amount.
      -Lying about their income situation on their credit application.
      -Giving you phony stips that don’t pass the sniff test.
      -Not telling you about the wrecker lien, soon-to-be suspended license or some other issue preventing you from registering their new car.
      -Never showing up for appointments and never returning calls.

      And the list goes on. Its a tough gig and I respect anyone in the business.

      • 0 avatar

        “There’s an old saying that buyers are liars. They can also be scumbags of a higher caliber than the worst dealer:”

        I get that if you run a BHPH, you’ll get all kinds of people who lie about their income and their trade. I’m also not surprised that low income people also won’t show up for appointments or return calls — I’ve heard about that issue from people with law practices, dental practices, and doctor’s offices too, so car dealership must be way down the priority list.

        But there’s always the flip side. I have stellar credit and more than enough income to pay, but a few years ago, a new car dealership using a four-square ran my credit to see if I qualified for 0.9% (better than paying cash if you ask me), and they came back with some BS about me being “tier 2 credit” and said the interest rate would be 12%. This was when prevailing rates for outside financing were something starting with a 5, and I could easily qualify for the lowest rate for any bank/credit union financing. Wtf? At least if they had said 6.9% is the best we can do, it would have been plausible (even though a lie), but this didn’t even pass the sniff test, as you said.

      • 0 avatar

        “There’s an old saying that buyers are liars. They can also be scumbags of a higher caliber than the worst dealer:”

        There’s a large multi-brand new car dealership in my hometown that has taken to charging new ‘hires’ exorbitantly for training. They bring job seekers in by the room full, hard sell them on the training, and tell them about the guy from the previous class that already sold two cars. I wonder if they in-house finance the cost of the course? They could be missing out on an opportunity. More likely, they’re either doing it already or they know that only one in twenty woul be able to pay off the loan.

        I saw some stuff when I worked for a car dealer many years ago. It is unfair for everyone in an industry to be tarred with the brush of the most unscrupulous actors, but the dealer I worked for grew to be one of the huge dealer chains with their systems-house methods. I probably buy an average of two cars a year. Dealers I encounter that don’t attempt misdirection while slipping in charges, push add-ons that are of no value, try to hammer you into what they’ve got instead of what you want, or lie like they think you’re blind and stupid are the exception. When that exception comes along, I’m thrilled and I direct as much business to them as I can until the good people I dealt with leave, typically within a couple years.

        • 0 avatar

          I think that’s the biggest difference between a franchise and an independent, at least your ‘typical’ one. Franchise stores seem be a machine to create that kind of ruthless environment for buyer and seller alike where everything is met with skepticism and confrontation. I think it comes from that general disconnect that employees of big new car stores have – a closer closes, a salesman ups, a finance guy sits in his box and crunches numbers.

          Like Steve, as an independent, I’m more of a one-man-band. I’m involved with a car from acquisition to sale and beyond and VERY hands-on with it. It gets to the point with some inventory where you drive to the sale or bid online, drive it, buy it, PSI it, take it home, recon it, get parts for it, photograph it, list it, take inquiries on it, show someone it, SELL someone on it, write it up, and even walk to deal at Motor Vehicle to get their plate. It almost becomes like you’re a concierge for their purchase. And its so much work that you just don’t even feel the need to bullshit anyone about anything anymore; I know I don’t.

          I think I’m just ranting at this point. Been a long day. Anyway, I’ll end with…”SUPPORT YOUR LOCAL INDEPENDENT DEALER” :P

          • 0 avatar

            Why go out of your way to support a local dealer? Private party transactions are often cheaper, more transparent (can see the service records and the previous owner’s garage), and the previous owner tends to know more about a car than a salesperson (other than Steven Lang) would.

            The only use that I have for dealerships is to take test drives. Spending money at a dealership doesn’t usually even occur to me.

  • avatar

    “Body men”

  • avatar


    Your comments about the “hopelessly inexperienced” remind me of one of my favorite quotes about being a professional. The subject is a different profession but it could apply to a lot of professions including, I’m sure, used car dealer. (It’s long; I had to look it up to make sure I didn’t misquote it):

    There are some subjects on which everyone is an expert. Teaching is a good example. Anyone with an IQ over 80 and knowledge of some subject or other is supposed to be able to teach. At least that’s the theory on which the American university system is founded. In the United States, a professor is insulted, outraged, and likely to start legal action at the mere suggestion anybody in the world could show him anything to improve his classroom teaching.

    Also in the United States, everyone is an expert on the subject of waiting tables. A European waiter may train for ten or twenty years before being allowed to serve in a first-class restaurant. In America, you become a waiter by answering an advertisement and putting a towel over your forearm.

    – Gerald M. Weinberg

    • 0 avatar

      “In the United States, a professor is insulted, outraged, and likely to start legal action at the mere suggestion anybody in the world could show him anything to improve his classroom teaching.”

      I disagree. I’m a PhD student at Berkeley, and I interact with many professors on a daily basis. I give them all kinds of suggestions about teaching and other things, and it’s almost always well received. I’ve never been screamed at or sued.

    • 0 avatar

      “Also in the United States, everyone is an expert on the subject of waiting tables. A European waiter may train for ten or twenty years before being allowed to serve in a first-class restaurant. In America, you become a waiter by answering an advertisement and putting a towel over your forearm.”

      That’s probably a bit of an exaggeration, but it is true that waiting here is considered something you do when you’re an out of work actor or writer vs. a profession. Same thing being a barman in some cases — that’s why the tipping culture is different too. You wouldn’t tip your doctor, so why would you tip your barman at the local pub?

      • 0 avatar

        “A European waiter may train for ten or twenty years before being allowed to serve in a first-class restaurant.”

        This sounds like the punchline to a, ‘how dumb are Europeans?’ joke.

      • 0 avatar

        The quote from Gerald Weinberg is at the beginning of an article where he lists (exaggerated) examples to make the point that we often don’t realize the value of a professional and often think anyone can do (whatever it is) as well as that field’s professionals do it. The article and the quote came to mind when I read the paragraph about the “hopelessly inexperienced.” They seem to also not see value in the professional car dealer and think anyone can do it. The same way we might not think there is value in being a professional waiter because we think anyone who can set a plate on a table can be one. Setting a plate on a table doesn’t make one a professional waiter and putting a used car for sale ad in Craigslist doesn’t make one a professional used car dealer.

        @yaymx5: Not to argue with you but perhaps you have just been lucky at Cal. I have been in a couple of classes where the instructor knew the subject very well but had no business being in front of a class. One in particular was a very good at programming and a very lousy teacher. I didn’t offer him any advice on improving his teaching because I didn’t think it would be appreciated. He could have been an excellent professional programmer instead he was a sub-par non-professional programming instructor who thought he was a great teacher.

  • avatar

    “Those who are hopelessly inexperienced with the retail car business think of this world as some literal gold mine where you can easily buy a nice car.”

    Oh, but for the buyer or private party seller, it is! I can buy and sell clean Miatas and TDIs all day at reasonable prices. The (craigslist) world is your/my oyster. Living in California helps though.

  • avatar

    TTAC is great in how it really covers all the angles of selling cars, from platform development to used car sales. Keep it up.

    I am wondering if with the economy slowly turning around the used car biz will get back to “normal”. Prices are still crazy high and I imagine many small shops went by the wayside as good product whithered away. There are def some demo changes too… I think baby boomers are going to cut their buying frequency over the next couple of years and we are heading into that 70s-80s baby demo “dip”

  • avatar

    Without ruining your life? In today’s market, as a start-up business – impossible. Too many 70-80 hour weeks. Unless you’re lucky enough to involve your family in a positive and productive way. When I was six, I washed the cars on the line while standing on a bucket and swept the showroom and shop floors. My Mother was the office manager. Maybe it was just the time – the late 1950’s – but I cannot picture this happening in 2013. As a short-money entrepreneur, you would have to find some unique niche to set yourself apart or find a Cal Worthington or Dick Balch style promo to generate a buzz that goes viral and transcends the original goals. What would be the modern equivalent of the dog, Spot?

  • avatar

    Great article. I have always been curious as to how the industry worked, especially at the used car level.

    Do any of you become involved in financing? Either through your own capital, or with a partner? Just curious.

    BTW, I have respect for people who can run any business in a competitive field.

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