Dealer Newsletter - January/February 2010
When is the Car Business Not the Car Business?
By: Alan Mosher
The answer is…….. when it’s the bhph business. Of course, on a bhph lot, you sell cars but that is a side effect, if you will. What you primarily do is make loans. Your customers use the proceeds of that loan to purchase an automobile from you but your primary job is to make the loan. Without the loan there is no purchase.
Understanding this fact is critical to the success of your bhph dealership. Your sales system must be structured to provide you with sufficient verified information to make an intelligent decision on whether to loan that customer the money required to purchase one of your vehicles. If you do not make your decision like a loan company and merely sell everyone who wants, or even needs, a car, you will have delinquency issues. If you do not collect sufficient information during the application process, you will have trouble collecting your money.
Like the conventional car business, you should begin to qualify your customer immediately after the meet & greet. However, in the BHPH business, you should be qualifying them on their ability to repay the note rather than focusing on the inventory. You need to know how stable the customer’s residence and job history are, what kind of down payment they have available and what kind of payment they can afford based upon their income and debt level. Once you have that information, you can then move on to showing them the vehicles they can afford. Basically, you need to determine what kind of money you are willing to loan this customer based upon your dealership’s lending criteria and then, and only then, take them shopping with that money.
Delinquency issues can begin with purchasing the wrong inventory but, assuming your inventory is correct, the most important step in controlling delinquency is the application and sales process. If you have obtained the correct information and put the customer in a vehicle they can afford, the next step is to make sure during the loan closing that the customer understands how your system works and what is expected of them during the course of repaying that loan. Do these things and collections will be smoother and easier. Failure to do these things and it will come back to haunt you for the course of that loan.