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Brent Carmichael

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BHPH Basics: Inventory Acquisition

Vehicles in Lot

One of the hottest topics in the Buy Here Pay Here (BHPH) world is—and has always been—inventory. Not only where to buy vehicles, but also what stock to select and where to find it. Like most other areas of the BHPH business, the most successful dealers are those who focus on the basics. I’m also a firm believer in the K.I.S.S. philosophy: Keep It Simple, Stupid. No need to over think, and thus, over complicate things.

Repeat customers

The first fundamental that successful dealers focus on is repeat business, aiming for 30 to 40 percent of their monthly sales from repeat customers. These people will be either low-balance customers who traded into a new vehicle or previously paid-out customers who have returned to purchase again. With this approach, a sizeable portion of the dealership’s monthly inventory needs could be satisfied with vehicles with known histories. Pretty valuable information to have!

Repossessions

Recycling of repossessions is the next basic. With repossessions, you have the ability and time to check out the vehicle completely to determine its reconditioning need. You also have some historical information for it. Some of my dealer clients are recycling 60 percent of their repossessions each month, on average, to put back out on the lot for sale. The only negative seems to be that the recycled vehicles tend to have a higher reconditioning cost. They may need a little more love to get lot-ready but, overall, this tactic is more cost effective than purchasing at auction.

Auctions

Speaking of auctions, they are an essential you should not overlook. It is true that there are not as many vehicles going across the block these days, but it is still an effective source. One positive to the downturn in vehicle volumes at auction is that auctions must compete for dealer business. Some sales even waive buy or post-sale inspection fees! There is no better time to expand your horizons, so check out as many auctions as travel and expense will allow.

When shopping for new or additional auction sources, don’t limit your choice to just the large national sales. Independent auctions are becoming very aggressive, going after dealer business as well. I may be a little old-fashioned, but I’ve always preferred the independent auction because they seem to provide better service and a better overall buying and selling experience.

Digital options

I also recommend utilizing the internet in your search for an auction pot o’ gold. Most auctions, national and independent, post most—if not all—of their upcoming sale vehicles online with such tools as Smart Auction, Open Lane/Adesa, or OVE. Not only can you use these systems to purchase vehicles, but dealers can also use these resources to research upcoming sales and plan their next visits. You might just stumble on an auction you weren’t even aware existed.

Dealer trades

A final basic in the K.I.S.S. approach to inventory acquisition is dealer trades. New car sales are at an all-time high, so dealers should have a few trades lying around. No, it won’t fill your overall need due to those who are holding on to their trades waiting for the super aggressive subprime market; but, you can still fill a partial need with this buying tactic.

I think the key here is personal contact with the dealer. You aren’t going to get anywhere by just calling the dealer asking what they have! Instead, take the time to visit the dealers … and develop a mutually beneficial relationship for the long run.

Not so basic: private sellers

Not necessarily a basic, but a stone that should not go unturned, would be the private seller. Craigslist, eBay, newspapers, and auto magazines are all sources to find vehicles. I’m not going to lie: I used to turn my nose up at this tactic, feeling it wasn’t worth my time or effort. But with today’s economic challenges, there are sellers out there who need the money to get by and are far more reasonable in their expectations. Will it fill the lot? No, but it could fill part of it, and that is what counts.

When it comes to BHPH inventory acquisition, I think it comes down to two very simple questions: How much do you have in the bank account? And how much of that are you willing to spend? Finding the right inventory for the right price is still possible. Just focus on the basics, and soon you’ll be working smarter, not harder, to fill your lot.

Learn about NCM’s 20 Group and consulting options for your BHPH dealership. And don’t forget to check out our BHPH training options.

About the author

Brent Carmichael

Brent Carmichael

Brent joined NCM in late 2007 as an Executive Conference Moderator. He currently moderates eight 20 Groups, six are Buy-Here Pay-Here groups. Prior to joining NCM, Brent worked 17+ years in sub-prime finance and collections, the last 11 of which were in Buy-Here Pay-Here. He spent 10 years with Auto Master Buy-Here Pay-Here of Northwest Arkansas where he served as Vice President of Portfolio Management. Brent played an integral role in growing Auto Master to 10 locations in 3 states with receivables in excess of $50 million and in the company selling in August of 2006 to a publicly-held company. Brent left Auto Master in early 2007 to join The Car Store in Louisville, Kentucky as the General Manager of their related finance company where he successfully managed a portfolio of over $25 million. He remained with The Car Store until joining the NCM team in late 2007. Brent’s areas of expertise in Buy-Here Pay-Here include sales, collections, reconditioning, generating ups and operations. All of which are put to good use in the groups he moderates. Brent and his wife Janet currently reside in Louisville with their two daughters.

Permanent link to this article: http://blog.ncm20.com/2017/03/bhph-basics-inventory-acquisition/

2 comments

  1. Gene Daughtry

    There is a good service available for vehicles called DRIVIN.
    It is truly been “the used car factory” http://www.drivindealer.com
    It really changed our inventory dynamic. I only have our best sellers
    in inventory (plus a few experiments). Check them out. They provide a great service
    and excellent market data.

  2. Copelon J. Kirklin

    This is slightly off topic but if anyone can help, I’m looking to purchase BHPH portfolios that aren’t performing.

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