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Brent Carmichael

Brent Carmichael

Author's details

Name: Brent Carmichael
Date registered: April 8, 2013
URL: http://www.ncm20.com

Biography

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.

Latest posts

  1. BHPH Basics: Inventory Acquisition — March 16, 2017
  2. 4 Essentials for Big Sales in the Dog Days of Summer — July 28, 2016
  3. Three Steps to Structure Profitable Car Deals — December 8, 2015
  4. It’s Beginning to Look a Lot Like Christmas for BHPH Dealers — December 11, 2014
  5. Tax Season 2014…How Did It Stack Up for Buy-Here-Pay-Here Dealers? — May 15, 2014

Most commented posts

  1. BHPH Basics: Inventory Acquisition — 2 comments
  2. It’s Beginning to Look a Lot Like Christmas for BHPH Dealers — 1 comment
  3. Tax Season 2014…How Did It Stack Up for Buy-Here-Pay-Here Dealers? — 1 comment
  4. Now Showing: Clash of the BHPH Titans — 1 comment

Author's posts listings

Brent Carmichael

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.

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

Brent Carmichael

4 Essentials for Big Sales in the Dog Days of Summer

cooling down for dog at the beach

The dog days of summer are here. The typical BHPH dealer will sell 30 percent to 35 percent of their annual units in the first three months of the year. They will also realize about the same percentage of their annual profit in the first quarter.

So, if you got off to a slow start this year, summer could be the only way to salvage your annual sales; however, it’s going to be a lot harder.

But you can profit in the summer—with the right plan.

Good sales in the summer are no different than selling in the first-quarter heydays. It just requires more focus and drive because your customers have less money and can be harder to find. The four steps I outline below will give your team the skills and focus on making sales, even in the most challenging months.

Step One: Develop the right skills

The first of the key ingredients, and most important, is simply training. Well-trained salespeople can sell any time of year.

Set up a training schedule to get your team on point. Both phone training and basic sales skills training should be done weekly, at a minimum. Specifically, address how to overcome objections; role playing is a good way to accomplish this.

Educate your staff on how to set effective appointments by recording and reviewing the calls. Lot traffic is at a premium during the dog days, so make sure your people know how to handle effectively what opportunities they do have.

Step Two: Keep up appearances

Appearance is critical. Now, I’m not necessarily talking about your employees’ appearance, which should always be neat and professional, but your overall lot appearance.

Over my many years in the business and as an executive conference moderator with NCM Associates, I’ve discovered that the No. 1 reason BHPH customers choose a dealership is that it looked good when they drove by. Let’s take this at face value and make sure your lot is the best-looking one in town!

Fortunately, improving your lot appearance isn’t difficult. Make sure it is always neat and orderly.

Arrange vehicles evenly and with a good mix of colors and styles; don’t have them face all four directions of the compass! Host a lot party or rodeo at least once a week to force yourself to keep the lot fresh.

And don’t forget the cars themselves. You should consider the vehicles on your lot as your mannequins and treat them the way a fine department store treats theirs. Keep them fresh, neat, clean and always ready to sell. That goes for overall lot appearance as well. A fresh coat of paint and some weed killer can do wonders.

Step Three: Entice your customers

Successful dealerships understand that you can’t just wait for clients. Good marketing brings people to your lot; develop a plan that offers attractive incentives.

Summer is a time when repeat and referral programs really pay dividends. And it is also a good time of year to focus on referrals, not just with your customer base but with outside companies and people as well. (If you are not already paying referrals to non-customers, it’s something that you should give some serious consideration to. I can assure you some, if not all, of your competitors are doing it.)

Marketing also extends to your Web presence. Make sure your website is up to date. Read through your “About Us” sections and any testimonials — do you need to make changes?

Review your employee introductions — has anyone left or been promoted? Do the photos need to be replaced? Reviewing photos is of particular importance if you display inventory: I was on a dealer client’s website the other day, and the inventory photos had SNOW on the vehicles!

It’s also critical that you check any advertised specials. You don’t want someone stopping in for a deal that’s no longer current!

Step Four: Get your message out

If you want to make the most of the dog days of summer, make sure people know about you. In this very competitive industry, advertising in some form or fashion is a must. The two most popular advertising media are, of course, television and radio. And, contrary to popular belief, use doesn’t drop off in the summer.

Advertising is only effective when it reaches the right folks with the right message. When promoting in these channels, remember to advertise to your customer, not yourself. Chances are your buyers watch different television stations than you do and may even listen to different radio stations.

Select ad placements where your clients are watching and listening. If you aren’t certain what media your customers are using, survey both new and existing customers to gauge their entertainment preferences. In other words, just ask them.

Moving past traditional media, there are many options in social media to get your message out. I won’t go into them here, but I recommend you get the basics by reading this great article from Trevor Robinson, NCM Associates’ director of retail solutions, training and development.

As you can see, the formula for selling in the dog days is the same as selling in the heydays. Although there are usually fewer opportunities, you can capitalize on what you have when you pay more attention to detail.

And it doesn’t need to be expensive—the two most important I outlined above are the least expensive. With the right mix of training, lot maintenance, and marketing and advertising, I know you can keep the dogs at bay.

Join the NCM Institute its upcoming Buy Here Pay Here class, BHPH Collections: A Customer-Centric Approach. Article originally published by AutoRemarketing on May 31, 2016. Be sure to check out more insights from them.

Permanent link to this article: http://blog.ncm20.com/2016/07/4-essentials-for-big-sales-in-the-dog-days-of-summer/

Brent Carmichael

Three Steps to Structure Profitable Car Deals

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Whether you are concerned about collecting or about meeting sales goals, there are good reasons to make sure the deals you do make are well-structured. Here are three tips to make that happen.

1. Choose the right term and payment

A sound deal starts with the term. Your deal has to make sense. A low ACV unit on a long-term just because we got a good down payment? That simply doesn’t work. Not because the car won’t run the note, but because the customer won’t run the note. Fewer than half the deals we put on the books in the BHPH industry go to term. Almost a third will charge off, and another 20% will pay off early either through our effective repeat programs or from our competition.

Term should be dictated by two factors: What the customer can afford, based on their verified net income, and your appetite for exposure. If the customer can afford a $300 monthly payment and you are only comfortable with a 30 month term, then that customer’s total contract can only be $9,000. So, you can sell that customer any vehicle on your lot as long as they leave owing you no more than $9,000 in principle and interest.

Obviously, because payment is an integral piece of establishing term, it’s also an important factor in a sound deal structure. What we are looking for here is the same as term. The payment date has to be logical. Payment should be due when the customer gets paid and on their next available paycheck, barring any deferred downs.

Allowing a BHPH customer to go 30 days without a car payment without a deferred down is asking for trouble. We know our customers have had issues with budgeting money in the past, why not help them budget better by starting their payment right away? And, to help them even more, have their payment scheduled for the day they get paid. It’s an easy reminder: get paid; make payment.

2. Select the right rate and add-ons.

Interest rate is the next aspect of deal structure. Now, before I get hate mail, I’m not suggesting you shouldn’t profit from your state’s usury limits. But, I am saying that you may need to adjust this expectation depending on the term and payment deal structure. Yes, interest income is our reward for the risk. However, if the overall deal structure doesn’t make sense, your ability to collect your reward will greatly diminish.

Back end or add-on products are similar to interest in the overall scheme of deal structure. While they are great profit generators, their addition to a deal can effect payment and term, not to mention cash flow.

It’s a balancing act. You have decided how you want to divide the money you collect from the customer. Will it go to principle and interest in order to reduce your risk and increase your reward? Or will it go to recoup cost in a product?

3. Use common sense to help the client pick the right vehicle.

You can’t forget the customer in the deal structure. Yes, the term, payment, rate and additions are all critical to the hard business aspects of the deal, but you need to keep an eye on what they are buying.

Let me give you an example of a deal I came across during a consulting visit. A single mother with four children, two of whom required car seats, was allowed to purchase a Chevrolet Camaro. When I asked the dealer about it, he responded that the customer could afford the payment based on his criteria and the term was within his criteria. Okay. Yes, both of those do make sense, but common sense should tell us the deal doesn’t make sense. Sure enough, the owner wanted to be traded out of the vehicle within the first year because it wasn’t big enough.

Moral to the story? The overall deal structure has to make sense not only for you the dealer, but for the customer, as well.

Bringing it all together: Make the right deal

So, let’s review three main steps you need to take to create the most profitable deal structure.

  1. Term should be dictated by your exposure comfort level.
  2.  Payment needs to fit the customer’s financial ability. Interest and add-ons need not dictate the term and payment; instead, term and payment should impact how you set up interest and add-ons.
  3.  Not only should the vehicle fit not the customer’s financial needs, but it must meet their physical and lifestyle needs, as well.

Does your dealership face challenges collecting during the holiday months? How have you addressed it? Tell us below. 

Permanent link to this article: http://blog.ncm20.com/2015/12/three-steps-to-structure-profitable-car-deals/

Brent Carmichael

It’s Beginning to Look a Lot Like Christmas for BHPH Dealers

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It looks like Christmas is on again for this year. There were some who thought with the current state of the economy, that this might not be true. But I have it from a good source that it is indeed happening again this year. For those of us in the BHPH industry, this is definitely good news. Yes, I said good news. This gives us a golden opportunity to finish the year strong from both the sales and collections side of the business.

I know what you’re thinking. Obviously this guy travels so much he finally missed his flight back to reality. When I first got into this industry I was told there were only two absolutes in the BHPH world. You can’t sell cars or collect money in December. It’s a time to just hang on and wait for tax season. And I bought into that philosophy for my first couple of years.

What changed my philosophy, you ask? Call it ego. Call it ignorance. But more than anything else call it greed. I wanted the 12th month to be just as profitable as the other 11.

How to Make December Successful

The first thing you have to do to make December just as successful as the other months is get your mind right. Without accomplishing this first step, nothing else will matter. Believing it is a “hold on” month will always make it one. It’s like the Henry Ford quote: “Whether you think you can or can’t, you’re right.” 

Now that we have the “I can” mentality, where to start first? We all know this is a collections business. But if we don’t sell some vehicles, there won’t be a whole lot to collect at some point. So let’s start with sales.

The biggest obstacle to selling a vehicle in our industry is not the sale price; it’s not the features and benefits, or lack thereof, of the vehicles we are selling. It’s the down payment. Of course, this is the time of year customers have the least amount available for a down payment. So to make it a successful month, we have to be prepared to overcome that obstacle.

Now don’t think I’m saying this is the time to offer zero downs. What I’m saying is, this is the time of year to get creative in regards to downs. We all know that the amount of down payment received has no bearing on how the customer will perform. If that was the case, the best paper we put on the books would be February deals. Sorry to say, those deals have the worst performance from a static pooling standpoint than any other month.

By “creative” I mean focusing on customer trade-ins. And not just vehicles. I work with quite a few successful dealers who will trade for anything: TV’s, jewelry, video games — you name it, anything of value. They assign the “trade” a dollar value and give the customer the opportunity to buy the “trade” back within a certain number of days.

Another avenue to overcome the down payment obstacle would be to offer a portion of the down payment be deferred, until the customer receives their tax return. There are aggressive dealers out there not only doing this in December, but offering this as far back as late October and early November. There are tax services available that can estimate a prospective customer’s return based on their most recent pay stub.

And of course there are always giveaway promotions. Since the money you want for their down payment would be the money they use for gifts, offering TV’s, video games, and gift cards could be a way of prying those last needed down-dollars free.

Now the same can be said for trying to keep our customers in good standing from their payment standpoint. You have to have the right mindset and be creative.

Giveaways can work here as well. Typically I see gift cards, TV’s, and video games given away on an arbitrary basis or after some sort of registration process. It gives the customer something to give as a gift and still be able to make their payment. Gift cards seem to work best for this type of promotion as the customer can spend it how they see fit.

Deferring of payments during the holidays is something that all the major finance companies have offered to their customers for years. And also as a benefit they offer to their good paying customers to help at this time of year. A word of caution, though: This will definitely establish goodwill with your customers, but can be detrimental from a cash flow standpoint.

The point to all of this is there is no reason for the holiday season to be a time of just hanging on. It should be no different than the other months of the year. The keys are to make this time of year a priority from both a sales and collections standpoint.

There are customers in the market that need transportation. And those same customers will need the financing to obtain it and have the money available to not only purchase it but pay for it as well. The question is, are you willing to be creative enough to capture and collect from those customers — or are you just willing to hang on?

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Permanent link to this article: http://blog.ncm20.com/2014/12/its-beginning-to-look-a-lot-like-christmas-for-bhph-dealers/

Brent Carmichael

Tax Season 2014…How Did It Stack Up for Buy-Here-Pay-Here Dealers?

BHPH Dealers, how was your tax season?Another tax season is on the books. This one, as with last year’s, is showing very mixed reviews. Delayed returns that were sporadic at best, and even more competition for the almighty tax dollar made this another head scratcher of a tax season for BHPH dealers. Add to that, 67% of those polled in a USA Today survey said their number one priority for their tax return would be to pay bills and reduce debt. It’s starting to look like the heyday of tax season may be a thing of the past.

Sales volumes were down 1.3% from 2013. Now that doesn’t sound like much, but when we look at the previous three years, it is the second year in a row of reduced sales for tax season. The last year there was an increase was 2012 over 2011 at a paltry 2.8%. But even this is not that great, in that 2011 was down from 2010. That gives us four straight years of volume decrease.

One of the main contributors to the recent declines seems to be sub-prime and special finance. They seem to be still very aggressive in financing what in the past has been a true BHPH customer by offering very competitive rates and terms that seem to make little to no sense. In past years, sub-prime/spi fi has come into our space fairly aggressively, but as soon as performance started to suffer, exited quite quickly. Their current volumes seem to be outrunning any performance issues. And with the cost of capital at all-time lows, they may be sticking around a while longer before performance chases them off.

The other main contributor I believe is the USA Today survey I mentioned. In the past, our customers had their tax returns spent on what would be considered “luxury items” before they were even received – things like furniture, TV’s, clothes, etc.  Now it seems their focus has been catching up bills and paying off their vehicles. They are starting to see the benefit of not having a weekly car payment. Vehicle quality has contributed to this as well. Vehicles are simply lasting longer. This is something that will continue to directly affect repeat business.

It goes without saying that if volume is off then profitability must be off as well. There is a little good news here in that dealer profitability was off by only 8% from 2013. And the good news would be that 2013 profitability was down almost 15% from 2012, with volume off not even 1% from 2012. What does this mean? Dealers are still optimistic that there will be a tax season. They are still gearing up for it, but have a little more realistic expectation for this year. Dealers were possibly a little gun shy after the 2013 tax season when indications pointed towards a strong tax season. Once bitten, twice shy as they say.

Early indications are that the average tax return was down only 3% from last year. Remember the USA Today survey? Good news from a collection standpoint, right? Not so much. 30+ delinquencies were the highest since 2010 at 5.3%. And the average loss went up for the fourth straight year with the average cost of vehicle sold almost flat for the past three years. What does it all mean? We’re dealing with a lower tier customer due to increased competition, not only from sub-prime, but from other BHPH dealers that have either entered the business or expanded their footprint to more markets. Not to mention a customer that seems to have very lofty and sometimes unreasonable expectations due to the increased competition.

I have had the privilege and honor to be a part of the deep sub-prime industry all of my professional life, 25 years now and counting, with the past 17 in BHPH. I am still very encouraged by the future of this industry. A few tax seasons that haven’t matched past ones don’t bother me one iota. All industries have career years and seasons. The successful ones adapt and persevere and more than make up for the non-career years and seasons.

Brent Carmichael is a popular speaker, trainer and consultant to Buy Here, Pay Here dealer-operators, as well as an executive conference moderator for NCM BHPH 20 Groups.  He’ll be speaking and participating in a number of sessions and panels at NABD’s 2014 Dealer Compliance and Conference May 18-22 at the Wynn Las Vegas. Visit Brent at the NCM booth at both events to have your BHPH questions answered!

NCM Institute Used Vehicle Management and Service Management classes are coming to Detroit in June.

 

Permanent link to this article: http://blog.ncm20.com/2014/05/tax-season-2014how-did-it-stack-up-for-buy-here-pay-here-dealers/

Brent Carmichael

Your Buy Here Pay Here Collection CSI

Cars

How would your collection department Customer Service Index/Indicator (CSI) measure up to everyone in the BHPH industry? Most BHPH operators haven’t given it a second thought. As of yet, there hasn’t been a national BHPH CSI developed, but it’s something that must be tracked and monitored to have any hope of future success.

In today’s highly competitive BHPH marketplace, a low CSI will not only cost you money, but could literally cost you your entire business. Obviously, customer service and satisfaction is important in all facets of the business; from sales to service to collections. But in the recent economic and competitive climate, how the customer is treated during the collection process will set you up for either future success of failure.

The BHPH business is widely recognized, and rightly so, as a collection or risk management business. Yet often times the service after the sale, so to speak, is neglected or simply ignored. The most successful operators thrive on repeat and referral business ‒ a direct result of providing good overall customer service. And those same operators usually experience a better performing portfolio, which, again, is what this business is all about.

One of the biggest challenges to providing effective collection customer service comes from the top. Some operators still cling to an old school train of thought: They have already provided service by selling and financing a vehicle for a customer when more than one other dealer said no. Another car in that same train carries the thought that the customer has signed a contract and that’s where the obligation ends. These thought processes are filtered down and can affect the attitude of everyone in the organization towards their greatest asset, the customer. I’m not saying the customer is always right, but they are becoming more right everyday.

Another sizable challenge to providing good collection customer service is setting the right tone. The first collection customer contact usually occurs when a payment is missed or there is a service issue. Neither of which is particularly positive from the customer’s viewpoint. Too often it is assumed that the customer is either lying in regards to their circumstances or simply trying to get something for nothing. Both of which lead to an overly-aggressive posture in trying to exert some form of control over the customer, usually by bullying or giving ultimatums. This rarely works effectively in the long run.

The key to setting the right tone is getting customers to first like you. If they like you, they will trust you. And if they trust you, they will respect you. Once they respect you, they will be much more likely to accept whatever you have to say, good, bad or indifferent. It all begins with listening. We were given two ears and one mouth for a reason. We should listen twice as much as we speak. The like-trust-respect dynamic is instrumental in setting the right tone. Set the wrong tone and it will be an arduous collection task for the length of the note. But rest assured: if you set the wrong tone, you will not have to worry about your customers, or anyone they know, once their notes are paid off.

There are many ways to develop and foster customer service and satisfaction. Customer rewards programs have proven successful in other industries and are now picking up steam in BHPH. Most everyone has a repeat and referral program, but collection and service reward programs are becoming more prevalent. I can hear those of you on the old school train; “Reward them for doing what they are supposed to do anyway? Never!” In today’s ultra-competitive BHPH market, that may be just what it will take to thrive ‒ anything to separate you from the competition, provide added value to the customer, and keep them paying you. Whether it is the customer receiving credit for making their payments on time, or incentives for keeping up with the regular maintenance of the vehicle, the key is having something in place.

Deciding to renew or extend your commitment to customer service and satisfaction is a step in the right direction. The next step is how to effectively track and monitor progress, or lack thereof. There are a few ways to do this: Written surveys and call recording systems seem to be the most popular and effective.

Written surveys should be simple and concise. Multiple choice and/or number grading are the easiest to track and quantify. Open response surveys can provide a lot of information, but they are often illegible and consequently, not of much value. Surveys can be done at the time of sale, as the customer pays off, or at the time any service is performed, whether it be warranty, customer pay, or best of all, good will. It’s a good practice to include your employees in the survey process; if the right tone was set, who better to know what the customer’s likes and dislikes are? Regardless of whom it’s from or when, all feedback can be valuable.

Call recording systems are also valuable in tracking and monitoring how well your organization is handling your customers. One bit of advice: Remove all sharp objects and anything that can be thrown or broken prior to listening to the first set of recordings. You will be astonished at what and how things are being said to your potential and existing customers by your employees. Once you get past the initial shock, call recordings will provide a great avenue for training and holding your remaining staff accountable. They can also provide a means of verification in a “we said/they said” scenario, thus preventing a possible legal nightmare.

Competition for the BHPH customer is stiffer than ever, especially with how aggressive sub-prime has been for quite some time. Add to that rising compliance standards, and customer service and satisfaction is more important now than ever. The like-trust-respect dynamic will be the key to not only sales success, but more importantly, collection success. Today’s BHPH customer only wants what we all want: to be treated with courtesy and respect. The truly successful operators already understand this and act accordingly. This simple fact, if ignored, will derail the old school train.

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Brent Carmichael Speaking Sessions at NABD 2014:

  • Compliance Expectations from the Capital Markets- Sunday 4:45-5:45 PM
  • Compliance Best Practices Panel – Monday 4:00-5:00 PM
  • Tax Refunds & Increasing Ups – Tuesday 4:00-4:45 PM
  • Benchmarks, Trends Update – Wednesday 5:00-5:45 PM
  • Operators’ Best Practices – Thursday 11:00 AM-12:15 PM

Additionally, you’ll be able to meet with Brent to discuss 20 Groups, education and consulting opportunities at the Dealer Academy between sessions in the Exhibitor Ballroom in booth 1111.

Permanent link to this article: http://blog.ncm20.com/2014/04/your-buy-here-pay-here-collection-csi/

Brent Carmichael

Now Showing: Clash of the BHPH Titans

I just had the pleasure and honor of attending and participating in Innovate 2013. It is Autostar Solutions’ annual user conference. Once a year, they invite their dealer clients down to Ft. Worth for 2 ½ days of one-on-one training sessions on all facets of their software, as well as to learn from industry-specific speakers and panel discussions.

This was my second year to be a part of the conference and I don’t understand why no other software provider does the same. It is a phenomenal opportunity for the attendees to deep dive into the use of the system and educate themselves on current industry trends.

During this year’s conference I had the honor of being the keynote speaker on one of the days and also to be a part of a debate on current issues facing BHPH dealers. The debate was moderated by Allen Dobbins, president of AutoStar, and pitted Chuck Bonnano from Leedom and Associates against myself. We each took opposing views on various topical issues. It was scheduled for an hour and it lasted over an hour and a half.

Throughout the debate, Chuck and I took questions from the attendees and also from the moderator. It was a very interactive session that everyone in attendance seemed to enjoy and get a lot out of. It is the first time I had not only seen, but participated in that type of format.  I truly feel it was more beneficial to those in attendance than your typical panel discussion or Q&A session.

Dealers looking for resources to help them improve their BHPH operations are often confused by what makes one service better than another. They try to filter through the messaging and recommendations, but even then it’s difficult to make a truly educated decision. AutoStar gave their dealers a way to cut through the noise and hear it straight from the mouths of the service providers themselves. And best yet, they took video of the exchange and have made it available to the masses.

The Great Debate: Leedom versus NCM” is entertaining and enlightening, but if you are looking for some help with your BHPH operation and can’t make a decision based upon this, ask your peers about their experiences. Or, drop me an email at bcarmichael@ncm20.com or call 800.756.2620; I’d love to talk with you personally about your operation and how we can work together to achieve your goals.

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Permanent link to this article: http://blog.ncm20.com/2013/10/now-showing-clash-of-the-bhph-titans/

Brent Carmichael

Don’t Be a “Lacky”: The 5 Biggest Mistakes in Buy Here, Pay Here

Brent CarmichaelI have the honor and privilege of traveling this great country of ours and working with all types of BHPH dealers on a consulting, training, and 20 Group basis. I am a firm believer that we learn more from our mistakes than our successes. When I first started to put this article together, I made a list of the most prominent mistakes I see BHPH dealers make. Problem was, the list was about 1,001 mistakes long. Most if not all of which I had made as a dealer myself.

After looking over the list several times, I realized that these mistakes could all fit into one of five main categories. So here they are:

Mistake #1: Lack of a plan.

The days of running a BHPH business by the seat of your pants or intuitively are rapidly coming to an end. Today’s BHPH environment is too competitive. There are more players in the game and more on the way and to insure future success you have to plan for it. Cash flow, sales, and collections plans are the minimal requirements. Always remember a goal without a plan is a wish.

Mistake #2: Lack of the right people. 

In the long run, half an employee will cost you more than 2 employees. What I mean by this is in today’s competitive and regulatory environment, you can no longer afford to have an employee that is only performing up to half of your standards just so you won’t be shorthanded. Practice the old adage of hiring slow and firing fast. Take your time and hire the right person for what you need. And fire those that aren’t cutting it.

Mistake #3: Lack of processes.

If you think your employees know what to do and how to do it because you told them, you are sadly mistaken. What you think is being done and what is actually happening are very often two completely different things. Document as many of your processes and procedures as possible. They don’t have to cover every contingency, but need to cover the basics. With compliance more important than ever, documented processes and procedures could be your “get out of jail free card.”

Mistake #4: Lack of education.

There has never been a better time to be in BHPH. I say this due to the resources available to dealers, both new and experienced, to educate them. When I got into the business, there were little to no resources to educate us on compliance or simply how we were doing compared to other dealers. Dealership Management Systems (DMS) had basic functionality at best and reporting capabilities were almost non-existent. National and state dealer associations, 20 Groups, DMS providers, and trade magazines and periodicals keep you up to date on the latest and greatest in the industry. Ignorance is no longer an excuse.

Mistake #5: Lack of technology.

Technology is the key to current and future success. I think the Internet is the root of all evil, but if you’re not using it to collect, advertise, or purchase vehicles you will get left behind. Our customers, I can assure you, cannot only spell it, but are very proficient with it. And for the lazy of us, what better way to educate ourselves on the industry? DMS and payment devices have also come a long way in recent years. It’s time to join the 21st century.

Every dealer I have ever come in contact with has, or still is, making one if not more of these mistakes. The great thing about this industry is there are a bunch of ways to do it right. By the same token, there are quite a few ways to do it wrong. I’ve listed five that can and will cost you. It’s just a question of how much. Remember these simple tips, and it won’t cost you as much:

  • A goal without a plan is a wish
  • Hire slow and fire fast
  • Document
  • Ignorance is not an excuse
  • Join the 21st century
  • Don’t be a “lacky”

Brent Carmichael, NCM’s resident expert on the Buy Here, Pay Here industry, is a frequent speaker at industry events, and serves six BHPH dealer 20 Groups as an executive conference moderator.  In addition to in-dealership consulting and training, Brent also teaches BHPH sales and collections and underwriting classes for the NCM Institute. To reach Brent about any of these services for your BHPH operation, call 800.756.2620 or email bcarmichael@ncm20.com.

Brent’s two-day training seminars, Sell More, Profit More: Understanding the BHPH Sales Model and Collect the Cash, not the Cars: Effective Underwriting and Collections for BHPH, will be coming to Kansas City next April. Seating is limited, so plan now to attend!

Permanent link to this article: http://blog.ncm20.com/2012/12/dont-be-a-lacky-the-5-biggest-mistakes-in-buy-here-pay-here/

Brent Carmichael

Done Right, BHPH Can Be Your Golden Ticket

h--rek-pictures-blogs-bhph gold ticket-thumb_In the Buy Here, Pay Here business, the average dealer makes $2,000 in net profit per car sold.  Last year, the average NCM® BHPH client dealership made $1.4 million in profit.  As you can imagine, with the state of the automobile industry the past few years, and because of the lack of viable lending sources for this segment of the auto buying public, there is no better time to be in the BHPH business. However, as with any business, BHPH is not for the uneducated, unprepared and undercapitalized.

The days of a $250,000 initial investment and a business model based on selling a few cars and collecting a little money are long gone. Those ingredients in today’s BHPH market would ensure a business life of six months at most. Success in today’s BHPH environment requires a little more sophistication and a lot more understanding.

The first step to a successful BHPH operation—whether you’re just getting started or you’re currently in BHPH—is understanding the two key elements of the business. These two key elements are risk management and capital requirements. Simply put, not understanding and not maintaining the discipline to focus on these elements will lead to a short and unsuccessful foray into the business.

Of the two elements, risk management is primary. BHPH is a collection business, not a sales business. Since the BHPH customer is generally a higher credit risk, understanding how to best mitigate that risk is paramount. Even the best BHPH operators experience loss rates of close to 25%. The reduction of risk is best accomplished through underwriting, deal structure, and collection practices. Effective underwriting grades the customer’s stability and ability more so than other factors. Deal structure will fit the term, payment, and down payment to not only the customer’s needs, but more importantly, to the dealer’s financial model. And collection practices will focus on starting the customer on the right path and keeping them on it. It won’t matter how many are sold if they can’t be collected. All that will be generated is a large book of nearly worthless business.

This segues into understanding the second key element, which is the capital required to effectively operate the business. It is a fairly cash-intensive business, for obvious reasons, and can be more so if there is a lack of understanding and focus on managing risk (the first key element). To gain an understanding of your capital requirements, you must first decide what your objective is for the business—will it be structured for cash flow or for aggressive growth?  This will determine where the money will come from and where it will go.  Then, prepare a cash flow model showing a minimum of three years’ worth of assumptions.  Of course, once the cash flow model is in place, there must be the discipline to manage the business by it. Mismanagement of this aspect of the business will drastically shorten the life of the business.

These two elements go hand in hand. If the risk isn’t managed, all the capital in the world won’t matter. It’s simply throwing good money after bad. And if the capital isn’t managed, it will put the business in a dangerously over-leveraged position.  But despite the risk and capital required, BHPH can be a very profitable business and one that is becoming more appealing as evidenced by the increasing interest.

So while this is a great time to be in BHPH, as with any business, education, preparation, and proper execution of the key elements are paramount to success. The future is very bright for well-run BHPH businesses, so if you need help getting started or need to fine-tune your sales, underwriting and collections processes, consider attending my upcoming BHPH training workshops in Kansas City later this month.

Brent Carmichael is an executive conference moderator for NCM Associates’ BHPH 20 Groups and is the lead instructor for the NCM Institute’s BHPH training programs, including “Sell More, Profit More” and “Collect the Cash, Not the Cars.”  You may reach Brent by email at bcarmichael@ncm20.com or by phone at 913.649.7830.  

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Permanent link to this article: http://blog.ncm20.com/2012/08/done-right-bhph-can-be-your-golden-ticket/

Brent Carmichael

What’s in Store for Your Buy Here, Pay Here Store

I recently had the honor and privilege of hosting a webinar titled, “Understanding the Buy Here, Pay Here Business Model.” I use honor because there were over 400 registered attendees. I use privilege because there are few things I enjoy more than talking BHPH. It’s an industry that has given me so much. h--acb-documents-website-brent_carmichael

Attendees were current Buy Here, Pay Here dealers, those looking to get into the BHPH business and service providers to the industry. We gave a current state of the union and some critical decisions that need to made before entering into the industry. Although we didn’t have time to get to everyone’s questions, the ones we were able to answer were well thought out and relevant.

Earlier this year, I wrote an article about what the BHPH operator should expect in 2011.  It might be a helpful review for those who weren’t able to make the webinar and who have some questions about today’s opportunities in BHPH. Enjoy!

It should be another good year to be in the BHPH industry, although 2011 will not be without its challenges.  In fact, there are certain areas of the BHPH industry that could be more challenging than ever.

To get an idea of what to look forward to in 2011, we first need to review how 2010 treated the BHPH operator.

From a profitability standpoint, the dealers that I have the distinct privilege of working with enjoyed a 22% increase in profitability in 2010 versus 2009.  This sizable increase was due mostly to the rightsizing of overall operations.  Dealers focused on their entire BHPH operations from top to bottom to “cut the fat” and run their operations based on the cash they where generating, instead of relying on lines of credit.

I expect this same focus to continue in 2011.  Although funding sources have become more readily available, overall I think most dealers will be focusing again on generating the capital necessary to run their businesses from their businesses. As always, there will be those dealers looking to grow aggressively through borrowing and rates will continue to make this a very viable option.  I don’t see rates rising drastically in the coming year, so it will still be a good time to borrow. Having said that, I still see it being more difficult to secure new lines of credit in 2011.  It’s going to take some patience and the willingness to educate some institutions on our industry.

With our dealer clients, we saw sales volume increase by almost 3% in 2010 over 2009. Not a record-setting year by any means, but this was driven more by cash management.  Dealers seemed to want to sell what their cash flow dictated rather than sell as much as possible.  We all know that we can sell as many as we want, or have the financial resources to, in this industry.  There doesn’t seem to be a lack of customers needing or wanting what we have to offer.

Same will pretty much hold true for 2011.  We should have the customers in the market to sell as much as we would want. The biggest question will be inventory availability. Now I’m normally a glass half full kind of guy, but when it comes to this, I think the glass may be half empty. Even though the prices had somewhat leveled off the last half of last year, the numbers where dwindling even more than usual.

2010 portfolio performance saw some stabilization from a dollar loss standpoint. But from a number loss standpoint, we saw a slight increase or worsening in 2010. This I believe was driven by a couple of factors, the first being the need for inventory.  I think some dealers accelerated their repo times when a desirable unit was involved.  This also helped stabilize the dollar losses, as the vehicles were repossessed earlier and in better condition and thus garnered higher recovery amounts.  The other factor was renewed focus on underwriting and the overall collection process.  Dealers remained more disciplined in both areas, seeking quality over quantity.

2011 will see more of the same.  Dealers have seen the error of their past ways and are enjoying the spoils of their more disciplined labor.  I expect to see the average charge off to remain essentially the same, the number as a percent of sold to remain higher than in past years, but expect collections dollars to improve as well as overall collection effectiveness.

Biggest thing to affect our industry in 2011 will no doubt come from the compliance front. The Consumer Finance Protection Act was signed in July of last year and with it the establishment of the Consumer Finance Protection Bureau. The “rules” of the Act, per the Act, have to be drafted by August of this year, so we will know what kind of field we will be playing on.  In the interim, I have already heard from a few BHPH dealers who have received a letter from the FTC (The Bureau’s governing body) informing them of pending audits.

This is something that has existing dealers debating whether to remain in the industry, and causing some who are looking at getting into the industry to delay their entry until the rules are set.  What this Act and Bureau are going to do is separate the men from the boys, so to speak. The dealers who are trying to the best of their ability to do the right things will survive and those dealers who like to operate in the gray areas will fall by the wayside.  Sorry to say that the waysiders are going to cause the cost of doing business to increase for everyone else.

So here is the best advice I can give to existing dealers as well as those wanting to get into the business in the coming year: don’t wait. Don’t wait to get compliant.  Don’t wait to spend a little money to do so. Don’t wait to review all processes and procedures.  Don’t wait to review all expenses.  Don’t wait to review all your employees.  Don’t wait to train.  And definitely don’t wait to sell cars, collect money and make profits!

Permanent link to this article: http://blog.ncm20.com/2011/11/whats-in-store-for-your-buy-here-pay-here-store/