New Car Dealers, You Have a Future in "Buy Here, Pay Here"

As new-vehicle sales continue to be affected by thespecifically for BHPH by NCM, CarBiz and Leedom
economy, and with the decreasing average creditAssociates. You will learn more here than you can use,
scores of vehicle purchasing customers, manybut it also is intensive and if you are not open to
franchise dealers are considering adding a buy-herefriendly criticism, stressful. There is no better way to
pay-here operation as another profit center for theirlearn BHPH and how to run your business effectively.
business. This addition of Buy Here, Pay Here is not as2) You have to figure out how much you want to
easy as opening another used car lot and can beinvest, before you decide how large and how fast you
expensive and cash flow negative for some time. Thewant to grow. The negative cash flow numbers can
long term profit potential, however is more consistentbe HUGE ( they can be $100's of thousands a year if
and predictable than the new vehicle department. Thisyou are not careful). Slow solid growth is the way to
is Part 1 of a series of articles to help new car dealersgo.
understand the BHPH business.3) For new franchise dealers, in my opinion, you need a
I started my BHPH business when I had a new carseparate lot, with a new company name to make this
store and ran them both for over 26 years.work. With the lot, you also need dedicated BHPH
For some time, buy-here, pay-here has had the imagepersonnel. Your new car people will probably not be
of an operation not particularly good for new carable to make the adjustment without some physical
franchisees. To begin with, due to the difference inseparation.
demographic of the customer, new car franchise staff4) Be sure to set your underwriting guidelines and deal
and owners have been concerned that they wouldstructure (how much your cars cost, the profit and
have too many BHPH customers tieing them up in theirhow much money you want at risk per deal) before
new car showrooms. Also, there may have been athe first car is delivered. Don't understand this stuff...see
concern that once a new car store became known1) above.
for selling buy here pay here, the average Fico score5) You need experienced collectors. Your loan portfolio
of its' customers may drop, and the retail bankswill not pay out if you put good cars and good loans
approval rates may go down for their "good" crediton the books, but have poor collection. Buy Here Pay
customers. Some of these may be partially true, butHere is more of a collection business than a sales
the benefits are so strong, and there are ways to dobusiness for the truly successful dealers.
BHPH without having the negatives.6) Many of the trade ins you are currently sending to
You will have to make a commitment to this mentally,auction will be your BHPH inventory. You will also need
financially and with your time. I like to think of it asa special buyer to buy your BHPH inventory. It takes a
another franchise with very good long term possibilities,different look and feel to buy these cars. They are
but it will need some attention.typically higher mileage and older, but need to be solid,
How to start...reliable cars. You may be able to write more new car
1) You need to get an education in Buy Here Paydeals also, as now the older trades are worth a more
Here.to you.
Start by going to the NABD web site (NationalIt's a little work, but like I said, treat it as a another
Association of BHPH Dealers). There are a list offranchise. How much would you invest to have a
resources, seminars and free stuff to get you started.franchise that can sell into a credit challenged market
Both CarBiz and Leedom Associates and manylike we have today?
others offer training also.Check out the rest of my series of articles here at
Then join a twenty group. These are offeredEzines for New Car Dealers and the BHPH franchise!