Buy Here – Pay Here operators across the country have been debating over the last few years whether to embrace the latest innovations in technology or to stick with the traditional way of operating their businesses. It has been almost 15 years since the first payment protection devices hit the market. Since then, new technologies that can be adapted to BHPH seem to appear almost weekly. There is GPS, auto dialing, SMS text messaging, geo fencing, integrated credit card and ACH payment processing, and online payments on the collections side and websites, Internet inventory posting, web based applications and lead generation, and prospect scoring on the sales side.
While all of these seem to hold some value for the BHPH dealer, many dealers still resist them all. They prefer to operate their dealerships in much the same way BHPH dealerships have been run since they first came about in the 1950s. Higher wholesale inventory prices have, for the most part, eliminated the early practice of getting the inventory cost of a vehicle in down payment so that only profit was at risk but, otherwise, most practices in these dealerships look much like they did 50+ years ago.
The most successful dealers find a way to blend these two views. They are not mutually exclusive and technology used the right way without compromising the traditional values and best practices of the past can be highly successful.
A great example of this is the use of payment protection devices. They are a great tool to remind your customers when their payments are due and to keep their vehicles from starting if they fail to pay within a few days of their due date. However, they will not replace a good, strong collection process. They are designed to augment it. Use of GPS tracking devices is very similar.
Advanced methods of making contact with your customers can save your collectors time but cannot replace having the right person contacting your customer. Having the ability to auto dial customers from your DMS software can be convenient but only if you work hard at keeping your customer records current. Text messaging (SMS) can also help you maintain regular contact with your customers but it is best to make sure you have their permission. The Fair Debt Collection Practices Act prohibits you from using any collection methods that cost your customers money and, without their permission, text messaging may fall into this category.
Processing payments over the telephone or online using credit or debit cards is a growing trend in the BHPH industry. These practices certainly make it easier for your customers to make their payments to you and, the theory is, the easier you make it, the more likely they will pay. Traditionalists still want to see the customer and the car every week or two. I started out a traditionalist but, as I’ve watched our client’s data over the last several years, I have been persuaded. We have had no clients who had a rise in delinquency or charge-offs after adopting these payment methods. Use of credit or debit cards also allows you to set up, with permission, to automatically charge payments to the account when they come due. Since these automated payments are generally run in the morning of the day the payment is due, that meansyou know at the start of the day whether that payment is going to be late, not at the end of the day as with traditional methods.
On the sales side, I have always said that the more information you have, the better a decision you can make. That is why I have always advocated pulling credit bureau reports. I think you should pull reports not because you need to know your customer has a low credit score. We can already assume that. You pull credit bureaus to verify the information the customer gives you on the application. Websites with online applications makes gathering some of that information easier for you and more convenient for the prospective customer. Again, the theory is that the easier you make it for the customer, the more likely it is they will choose your dealership. Traditionalists, and I am still one of them here, want a thorough application completed by a trained dealership employee who can probe to get the right information.
The right answer here is yet again a combination of the two. An online application can be used to make sure a prospect lives within your market area, has sufficient job and residence stability and makes the minimum amount for you to consider financing. The details are still collected at the dealership.
Posting inventory online has become immensely popular over the last few years. In some ways, however, I question its value to BHPH dealers. There are compliance issues involved with advertising, especially if you advertise payments which then triggers other disclosures as required by Regulation Z of the Truth in Lending Act. And, as also required by TILA, your cash price must be your finance price so the prices on your cars will look high when compared with traditional retail lenders. In addition, there is no way to limit who sees your inventory to those within your market area. Advertising vehicles can be profitable but make sure you are fully compliant.
Technology and Tradition should work together. Learn more about the latest developments, products and services and see which ones might benefit you. The right technology should blend into your current policies and procedures with little adjustment.