Making the decision to be in the Buy Here – Pay Here business can be a difficult one. The BHPH business is unfamiliar territory, even for someone with years of automotive experience. The Buy Here – Pay Here business is not the car business. In the BHPH business, the dealer takes on collection responsibilities normally assumed by the outside lender and that unfamiliar activity is the critical piece to being successful in BHPH. The good news is that there is training and consulting available from outside sources to overcome these issues and assist you in being successful in the BHPH business
The benefits of being in the Buy Here Pay Here business far outweigh any obstacles you might need to overcome. The BHPH business can be an extremely lucrative business to start or add to your existing operations. Those benefits can be divided into 2 distinct areas; benefits to you and benefits to your customers. Let’s take a look at 3 major benefits in each of these 2 areas.
Benefits For You
1. Retail Cars You Currently Wholesale
Whether you are currently a franchise or independent dealer, you take in trade-ins that you feel are not the right merchandise for your retail sales operation. You wholesale these vehicles, typically through an auction. With a Buy Here – Pay Here operation, you are able retail some of these vehicles and make profit margins that are consistently higher than those at most retail only dealerships. Imagine the additional gross profit you could realize by retailing just a portion of the vehicles you currently wholesale through an added BHPH operation.
2. Sell to Prospects You Currently Can’t
Buy Here – Pay Here also offers you the opportunity to sell to customers that do not have the cash to purchase outright and do not meet the qualifications imposed by your lenders. With Buy Here – Pay Here, you decide who you wish to finance, not some outside lender. The segment of the used car market of people needing Buy Here – Pay Here financing continues to grow. A study done last year by Experian shows that 15% of the population has a credit score of 550 or below. According to the latest Experian study, 16.6% of all financed used vehicle purchases were done by BHPH dealers. How many additional sales and how much additional gross could you add to your financial statement if you could serve 100% of the used vehicle market?
3. Additional Income for Your Service Department
Most vehicles you select for your new BHPH operation will need some reconditioning work to make sure they are safe and will run the term of the contract. If you have a service facility and are able to do that work in-house, that department will also benefit from adding BHPH to your dealership. Some dealers even add the cost of a maintenance plan to their BHPH vehicles to make sure the collateral for your loan is serviced properly and that all that service work is run through your shop. Studies show that once a customer begins to do his service work at a particular facility through a maintenance plan, they are more likely to continue to have their vehicle serviced there even after they have to begin paying for it themselves. Adding the additional income for your service operation is like the frosting on the cake.
Benefits For Your Customers
1. Provide Needed Transportation
Credit challenged customers need vehicles just like everyone else. A reliable source of transportation is almost a necessity today. People need a vehicle to get to work in order to earn a paycheck. They need a vehicle to get them anywhere from the grocery store to the doctor’s office. The majority of the customers who purchase vehicles at a Buy Here Pay Here dealership are unable to obtain financing anywhere else. Without BHPH dealerships, many of them would be unable to purchase a vehicle.
2. Help Rebuild Their Credit
It has always been a sort of vicious circle – how can you build or rebuild your credit if you can’t get any credit? A BHPH operation that reports to the credit bureaus can not only provide its customers with the basic transportation they need to live, it can also help them establish credit or rebuild damaged credit. As an installment loan, their financing with you is one of the best and fastest ways to improve a credit rating. As their credit improves, they can qualify for larger loans and better vehicles. And as the dealer that helped them improve their credit, they are more likely to make those new purchases from your dealership. Some customers who have purchased vehicles from you regularly in the past may also have run into credit damaging issues in this latest economic upheaval and, rather than now turning them away, a BHPH operation let’s you keep them buying from you while helping them get reestablished.
3. More Reliable Transportation
We have already discussed how important it is for your potential customers to have a vehicle to go to work and to take care of their family. What do you suppose the alternative is if there were no Buy Here – Pay Here available? Most BHPH customers have between $500 and $1000 to use as a down payment, some less. If there were no BHPH available, the alternative is for them to use that money to buy a cash car. I’m sure you can imagine the quality of a vehicle you can purchase for $500 – $1000. Establishing a BHPH dealership allows these buyers to purchase a much safer, more reliable vehicle for the money they have available and small payments from each paycheck. The payback is that BHPH customers show substantially more dealer loyalty than the norm and are much more likely to provide you with referrals.
A Buy Here Pay Here dealership offers you the unique combination of being able to improve the lives and financial situation of your customers while providing you with an above-average return on your investment. At the same time it enables you to enhance your image and reputation by providing a needed service in your community. Opening a BHPH dealership or adding one to your existing operation is truly a WIN-WIN-WIN for all parties involved.
