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Category Archive: Buy-Here-Pay-Here

Dustin Kerr

So, What’s The Secret To A Successful BHPH Business?

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I have the pleasure of meeting buy-here, pay-here owners all over the country when I travel. I see dealers of both small and large operations. Sometimes, I meet a BHPH owner that is just starting out. Other times, one who’s been going strong for many years. I’ve even encountered retail dealers who are seriously considering a jump into our industry.

Even with all these differences, there’s one universal question that unites these people: What’s the best way to run a BHPH business?

You may not like my answer

It’s a question I take very seriously, so I answer it honestly. And, I’m not going to lie. So, generally speaking, they aren’t very satisfied with my answer!

Why? Because I genuinely believe that there are many successful ways to run this business. There’s no cookie-cutter solution. Success depends on your available capital and your day-today involvement, your commitment to collections, and so much more. How the business performs is heavily influenced by your temperament and your market — there are dozens of factors that can make or break BHPH dealerships. I see different business models every day that are highly successful.

Pick your method — but follow best practices

Even though I heartily believe that the right success model depends on your circumstances and attention to detail, each of the profitable BHPH businesses I’ve encountered operate with a few best practices that I believe you should follow to maximize your business and mitigate your exposure to risk.

1. Understand this is a collections business, not just a sales business. I see more dealers struggle with this idea than any other because they just don’t understand this simple, but crucial, point.

It’s especially hard sometimes for someone who has built a successful franchise or independent business where sales, gross and expense control were the keys to success. In the BHPH business, we cannot just sell our way out of bad collections! To make the most of the business, our collectors have to be the dealerships most talented, best trained and best compensated employees. A well-run collections department can make up for a lot of mistakes in other areas.

2. Get serious about compliance. If you don’t have the wherewithal to devote time every day to compliance, I suggest not getting into this business. If you’re already in and still not serious about compliance, I suggest getting out while you still have a business and a choice!

The CFPB and the Department of Justice will do everything they can to put you out of business if they even think you are not following their rules. Ignoring compliance puts everything you have in jeopardy. If you can’t (or won’t) manage that reality, you shouldn’t have a BHPH dealership.

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3. Be an advocate for BHPH businesses. Reread No. 2. If you want the life in BHPH industry to be easier, you have to fight for it. One way is to join the state and national associations that are fighting for your businesses survival against the likes of the CFPB and DOJ. Not only should you be a member, but it is very important you contribute financially to these associations so they can fight for your rights.

Connect with your city council members, senators and state/national representatives and other important political figures in your area. Make sure they understand just how much your business contributes to the local economy—and educate them about the industry, so they realize that you aren’t the “bad guy” consumer advocacy groups like to make you out to be. Figure out their stance on the CFPB and DOJ and vote accordingly.

Remember the quote by Edmond Burke: “The only thing necessary for the triumph of evil is that good men do nothing.” Stand up for yourself and others.

4. Join a 20 Group. The best career move I ever made was joining an NCM 20 Group. Nothing else I tried made me a better operator— or provided a better ROI—than the insights I gained from that group.

The power of peer collaboration and accountability that you receive in a 20 group setting is magnificent. Imagine sitting in a room with 20 other dealers talking about your business. You get to see the good, the bad and the ugly and have, literally, hundreds of years of experience in the room with you! The one warning I will give you, though, is that you must have an open mind and be ready to go back to your dealership and make meaningful change because your fellow 20 group members will hold you accountable to making your business better. Even when you’d prefer they didn’t.

BHPH success is possible — and important

I love this industry. Although we often get a bum rap, BHPH dealerships provide a valuable service to the vulnerable in our community. We help people learn to be financially responsible, and we give them the means to get up on their feet and improving their lives. It’s amazing.

So, no. There’s no perfect business model success in this industry, no matter how many times people may ask me to show them the way. But if you take our work seriously, commit to helping people while making a profit and follow the best practices I’ve outline above, you’ll make it. And, if you encounter bumps along the way, give me a call and I’ll help you out!

Join the NCM Institute and Dustin Kerr for the upcoming class, BHPH Collections: A Customer-Centric Approach.

Article originally published in the March/April 2016 issue of the BHPH Report. Be sure to check out the full issue!

Permanent link to this article: http://blog.ncm20.com/2016/07/so-whats-the-secret-to-a-successful-bhph-business/

Dustin Kerr

Watch Out For Tax Season Temptations

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It’s that time again. Right now, buy-here, pay-here dealers are in their busiest time of the year: tax season.

Although most dealers will tell you that tax season is not nearly as crazy as it used to be, there’s no denying that it’s still a major event in our business. BHPH dealers are likely to sell more cars—and collect more cash—in the next couple of months than any other month for the rest of the year.

Tax season means buyers, but what kind?

Sadly, it’s not all good news. It’s during tax season that we put our worst performing paper on the books. Flush with income tax returns, people walk into our dealerships with $1,000, $2,500, maybe even $4,000 or more down. And, just as giddy as our buyers, we completely forget about our underwriting guidelines and the fact that we are still going to have to collect on this account for the next two to three years.

Now, some dealers simply don’t care how well the paper performs. They feel that the cash down overshadows the risk of bad underwriting. And, many argue, they will just get the car back quickly if the customer defaults.

Now, I don’t entirely disagree with this philosophy. There is a certain point where the amount of cash down mitigates the risk involved. However, I always tell my consulting clients that there’s a way to do both—get the large cash down payments and properly underwrite each loan to ensure the highest probability of success.

And that approach, I think, is better.

 

Don’t lower your standards

The first thing we need to do? Slooowwww dooowwnnn! Hey, I get it. This time of year is very hectic, not only with sales but also with collections. It’s very likely we have more people in our lobby right now than any other time of the year.

When things start to get a little crazy, though, usually the first thing to suffer is attention to detail. Go back and look at the applications that were collected during tax season the last couple of years and compare them to applications collected during the rest of the year. If yours is like most dealerships, you’ll see a significant difference in the quality of information collected.

You need to discuss this situation with your staff ahead of time. Make it very clear that incomplete applications will not be accepted. (And, I mean be stern about it: It’s non-negotiable!)

Remember, you have to collect on this account for the next few years. A quality application is the first step to making sure you can do that.

The next thing I usually see that sets us up for failure is a complete disregard for payment to- income percentages. We all know by now, or should know by now, that accounts with payments greater than 25 percent of net income perform at a much worse rate than those with payments below 25 percent net income.

I’ve found that dealers and managers forget this rule when a large down payment is made. The attitude seems to be, “If they have skin in the game, they’ll make all the payments.”

Sad news, friends, but this just simply isn’t the case with most customers.

 

Don’t forget that tax money is free money

Here’s an important lesson I’ve learned after reviewing hundreds of thousands of loans over the years: The down payment amount has very little to do with how well a loan performs.

As far as our customers are concerned, that sizeable tax return is just free money. This sudden windfall isn’t a result of careful budgeting or pinching pennies for a down payment. No, it’s a bonus with very little emotional attachment.

Don’t compromise your payment to income standards just because the customer has a big down payment. Remember, all that tax money will be spent very soon, and they will only have their weekly paycheck available to make their car payment.

 

Don’t forget the delivery and closing process

Another area I see slip during tax season is the closing process. I consider the application and closing to be the most important aspect of the collections process. And, if you’ve ever read my articles, watched my BHPH Tip of Month video segments, or attended one of my training or consulting sessions through NCM, you know that I firmly believe that an improperly closed loan is a charge off waiting to happen!

In this busy time of year, it may seem like a simple solution to ask our commissioned sales team to close the loan instead of a manager or a collector. Sure, it might speed up the process, but the whole point of having a manager or collector close the loan is to double check and ensure that the salesperson hasn’t missed or skipped an item because they were afraid of losing a deal.

Don’t do be tempted to “streamline” the close; you’ll just pay for it later. Keep your processes intact, and have a dedicated person or team well-trained in the closing procedure review every application. And never let them veer off track just because you are busy.

 

Make the most out of tax season

I know how exciting this time of year is, but you can’t afford to be burned. Remember, these could be the worst-performing deals you make all year.

Make sure you have a great application process in place, follow your payment-to-income guidelines and don’t short-cut your closing procedures. If you do these three things, you can enjoy the cash windfall of February and March without the headaches that come in July and August.

Article originally published in the January/February 2016 issue of the BHPH Report. Be sure to check out the full issue!

 

Permanent link to this article: http://blog.ncm20.com/2016/04/bhph-tax-season-temptations/

Dustin Kerr

Quiz show: Using questions to increase BHPH profits

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As a moderator with NCM® Associates, I make my living with questions. Not only do I challenge my clients with questions about their business practices, but I also must answer to their concerns and worries. Put simply, questions are my life.

It’s a great challenge. I think the habit of questioning things is critically important for all car dealerships, but especially for BHPH dealers who face an ever-changing and detail-oriented business subject to many rules and regulations.

Oddly enough, these rules and regs tend to invite inaction by BHPH dealers. Once we finally figure out a business process that works, it can be very hard for us to even consider changing it. That’s a problem. This reluctance to change can not only cost us potential profit given today’s complicated compliance landscape, but it has the runs the risk of costing us our business entirely.

So what things should we take a look at and question? EVERYTHING! Here’s a few to get you started.

Question your advertising

Are you still pouring the majority of your advertising dollars into television, radio and print?

I’m not saying these media are dead, but I see far too many dealers spending their budget on traditional marketing channels while completely ignoring their own website, digital marketing and social media.

We know that 90 percent of American adults have a cell phone, and more than half of those phones have internet access. In fact, practically half of the U.S. sleeps with their phone so they don’t miss a text or email!

Your BHPH customers aren’t any different. They have a phone, and they use it to shop for cars before they even think about looking in person. Unless they see your dealership online, it’s doubtful they’ll even make it to your lot.

Like everything else, advertising isn’t cut and dry for our BHPH industry. Not only do you need to pick the right platform for your ad, you must be sure to comply with industry regulations. Here’s an example:  Are you still advertising zero down to get customers in the door when in reality virtually no one can qualify for your zero down?

Just open up any industry publication and you will see stories of BHPH dealers getting hammered for this type of advertising. Transparency is the new buzz word in the industry, and if your advertising is misleading in any way you are playing with fire. Don’t get burned.

Question your collections

I could write an entire article on collections compliance but that’s not the point I want to make here. Instead, let’s talk about your collections culture.

Your entire organization needs to understand the BHPH customer. Our customers are likely to have problems making payments at some point. Does your staff understand that it’s their job to help the customer through these times? Or do they still have the attitude of “give me the money or give me the car?” More importantly, are your collectors well-trained in connecting with the customer—empathizing with them and defusing problems—while still demanding payment?

The best collection cultures can sympathize with the customer while successfully collecting payment in full. Most of the time I see departments great at being nice to the customers and truly understanding their situation, or I see collections departments that are great at collecting payment in full. I rarely see collections departments that excel at both.

The collections department is the key to your long-term success. The sales department will sell the first car, but it’s up to the collections department to sell the repeat business. Make sure your collections team is one of the best.

Question vehicle repairs

I’ve found two typical approaches to vehicle repairs: Fix everything or fix nothing.

Let’s think about the “fix everything” approach. Do you help your customer with repairs on their vehicles after the sale? Where do you draw the line? Are you financing that repair if the customer cannot pay for it?

Have you checked with an attorney to see if it is even legal for you to finance the repairs and have it paid back through a “side note?” I’m going to bet that there are a lot of you reading this right now that are financing repairs illegally.

Now, what about those of you who don’t fix anything? While you don’t want to repair all the problems, you might reduce your charge-off rate and your repeat business if you loosened up your repair policy a little bit. Complete a repossession analysis to show how many of your repossessions are related to mechanical problems – would a new repair policy improve that?

Question the sales process

Here’s a little-recognized truth: Repeat and referral business is far more effective in BHPH than in the new-car business. But, I rarely see BHPH dealers training their sales people on how to generate their own leads. Don’t let your sales people rely on you to put enough customers on the lot through advertising.

And, thinking about that customer, does your sales staff actually serve the customer or just take orders. An effective sales team will match the right customer to the right vehicle and process effectively to maximize down payment. When you sales team actually sells, there will be greater collection potential throughout the life of the loan. Use your sales team to plan for success from the beginning of the transaction.

Question accounting and legal advice

When I’m asked to explain the BHPH model, I often say that we’re in the finance business … and we happen to sell cars, too. Our clients need solid financial advice and guidance. When you do it right, not only have you helped someone out, but you’ve also made a profit.

Because finance and law play a major role in our industry, you need well-educated, reliable advisors.

Does your accountant truly understand the BHPH/LHPH model and all the tax implications that come along with it? Just because they are an accountant doesn’t mean they know what’s best in this industry.

The same goes for attorneys. Find someone that is well versed not just in the auto industry but in the BHPH industry, as well. Hire the right financial and legal experts. (And, if you think it’s too expensive, just look at what it’s costing your peers who didn’t hire them.)

Question everything

When I write that I want you to question everything, I mean everything. Don’t just stick to the suggestions I’ve listed above. I challenge you to go into your dealership and play devil’s advocate for every policy and procedure you have in place. Ask your staff how you could change things or do things differently to produce better results.

Once that’s done, take your questioning to the next level. Ask your peers to analyze and critique your business. If you don’t have an established relationship with your peers, take the time to join a 20 Group, which facilitates peer-to-peer collaboration and continuous improvement.

Then do something with your answers

No matter which option you choose—examining your business on your own, enlisting friends for help or joining a 20 group—the most important thing you can do is be willing to listen to the answers. You are likely to find items that need immediate attention. Having critically examined your business, you can start fixing these problems with confidence.

And then you should start questioning again!

Blog originally published in the September/October 2015 issue of the BHPH Report. Be sure to check out the full issue!

Permanent link to this article: http://blog.ncm20.com/2016/03/quiz-show-using-questions-to-increase-bhph-profits/

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/

Dustin Kerr

The Buy Here Pay Here 20 Group – What It Is and How It Will Help

A 20 Group is a peer collaboration model that allows you to meet with other BHPH dealers of similar size from non-competing markets to share best practices, successes, and more importantly, failures. NCM® Associates is the originator of the automotive 20 Group process, and has been empowering dealers to learn from one another since 1947.

A typical BHPH 20 Group meets three times a year at a location chosen by the group. Meetings can range from 1 ½ to 3 days depending on what the group wants to discuss and the location.

The ability to get away from the day-to-day distractions of the dealership and share ideas with some of the brightest, most successful dealers in the industry are some of the key factors that drive profitability amongst NCM® group members.

In addition to the meetings, members receive monthly financial composites that allow them to compare themselves to other group members, as well as comparing themselves against the NCM Benchmarks® across all groups.

The meetings are facilitated by a professional NCM Executive Conference Moderator with years of experience in the BHPH and LHPH industry. The agenda and hot-topic discussion is decided by members of the group.

Topics of discussion include:

  • Compliance
  • Proper Inventory
  • Advertising
  • Collections policy and procedures
  • Hiring and retaining top talent
  • Sales and collection pay plans
  • Employee productivity
  • And much more!

Why choose NCM as your Buy Here Pay Here 20 Group provider?

You have probably realized by now the power of the BHPH 20 Group peer collaboration model, but why should you choose NCM Associates to facilitate your group?

  1. NCM Associates is the originator and pioneer of the 20 Group model. We started our first Ford 20 Group nearly 70 years ago and that group is still in existence today!
  2. Data Integrity- Numbers are only as good as their accuracy. All statements are reviewed personally by a moderator before they are compiled and sent to you in your monthly composite. Our data team manages and processes your data in-house; we don’t outsource it!
  3. Access to an Industry Expert- Your emails and calls are personally answered and returned by your moderator, not an assistant or secretary. Even when we are facilitating meetings, you can expect a return email or call within 24 hours!
  4. Custom Composites- You have the ability to log on to your member website and compare yourself against as many or as few members from your group as you want in whatever categories you want.
  5. It’s All About You- The group gets to decide what goes into the composite, where you want to meet, agenda topics, and much more.
  6. Online Training- Your membership includes training from some of the top experts in the industry that would cost you thousands to obtain on your own. This training is delivered by our OnDemand virtual training site.
  7. No Contracts or Commitment- If you don’t feel like you are getting value from the group, you can resign from the group at any time.
  8. Innovation- As the industry leader, NCM is always working with the brightest minds in the industry to develop tools and strategies to help you become more profitable. As a BHPH 20 Group member, you often get access to these tools for a reduced cost or even free!

In addition to the 20 Group, NCM Associates also offers on and offsite consulting as well as BHPH training for salespeople, collectors, and managers.

If you are ready to join your peers and find out how to achieve a 50% or better ROI, click here or contact me today at 913-827-6677 or dkerr@ncm20.com.

Permanent link to this article: http://blog.ncm20.com/2015/06/buy-here-pay-here-20-group-what-it-is-how-it-will-help/

Dustin Kerr

Oregon Senate Bill 276 – How Could This Affect Your BHPH Operation?

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The Oregon Senate recently introduced a bill that has BHPH dealers in that state up in arms, and for good reason. The bill would drastically change the way some buy here pay here dealers do business. I am not going to try to debate the merits of this bill, or the lack there of. As BHPH dealers, we have all been discussing and fearing the changing landscape of compliance for many years.

The point of this article is to focus on a couple of the provisions in the bill and ask ourselves, “Doesn’t this just make good business sense?” Keep in mind the old saying “Pigs get fat; hogs get slaughtered” and ask yourself if you are running your dealership as a fat, happy pig or as a hog headed for slaughter.

Here’s a quick rundown of the highlights of the bill:

  • Obtain the same type of license from Oregon’s Department of Consumer and Business Services (DCBS) as payday or auto title lenders.
  • Reduce interest rates to account for the amount of the consumer’s down payment.
  • Stop accruing interest once a vehicle has been repossessed.
  • Cap repossession fees at 7.5 percent of the purchase price.
  • Stop using GPS or starter-interrupt devices.
  • Wait to repossess a vehicle until after 30 days from when nonpayment has occurred.
  • Cap interest rates at no more than 20 percent or the federal funds rate plus 17 percent, whichever is lower.
  • Form a good faith belief that the consumer has the ability to perform on the contract by using underwriting standards passed by DCBS.

I want to focus on the last two bullet points of this bill and ask you, as a dealer, to think about how you are handling these two issues in your state?

Cap interest rates at no more than 20 percent or the federal funds rate plus 17 percent, whichever is lower.

Full disclosure here, I used the state max of 21% for nearly every car deal I ever financed and would have probably charged more if the state would have allowed. My question to you though is this: is it good business to charge our customers more than 20% interest? Every 20 Group meeting I have ever been a part of has included conversation on how we reduce the term of our loans and retain our good customers.

Another big conversation is about the cars not lasting the term of the note. Are we sacrificing a few thousand dollars of gross for a few hundred dollars of interest? Interest income is a big part of this business and I have always been on the side of maximizing the interest dollars collected. Although, when do we hit a point of diminishing returns?

Form a good faith belief that the consumer has the ability to perform on the contract by using underwriting standards passed by DCBS.

Now I have no idea what the DCBS will set as underwriting standards should this bill pass, but let’s look closely at the rest of that statement and change it slightly.

What if the motto of our underwriting department was something similar to this? “Form a good faith belief that our customer has the ability to perform on the contract based on our underwriting and verification practices.” Nearly all BHPH dealers want to reduce charge-off losses and regulators on the state and federal level want to make sure you are not setting your customers up for failure. Having a written underwriting policy in place that is based on industry analytics and your own loss ratios will go a long way towards achieving those goals.

Don’t forget the verification part of the process. An application is only as good as the verification to support it. There is little doubt that there are serious changes on the horizon for the BHPH industry and some that may change the way we do business forever. However, some of these items just make good business sense. Is your business a “fat, happy pig” or a “hog headed for slaughter”?


Learn more by attending these upcoming courses:

 


Permanent link to this article: http://blog.ncm20.com/2015/04/oregon-senate-bill-276-how-could-this-affect-your-bhph-operation/

Dustin Kerr

4 Tips to Supercharge Your Buy Here Pay Here Sales Training Program

Is your Buy Here, Pay Here (BHPH) sales training lousy? That is the cleaned up version of what I hear from most dealership owners and managers when I ask how they would rate their overall sales training program.

The good news is that this is one of the quicker and easier problems to fix in your dealership and I am going to give you the tools to implement a very successful BHPH training program.

1. Hiring the Right Person

If I were sitting down with you in your dealership and implementing a long-term strategy for consistently attracting and hiring quality salespeople, we would spend a great deal of time on this subject before moving to anything else.

However, for the sake of this article, I will boil it down to this: quit begging people come to work for you! When we hire out of a classified ad, the majority of the respondents have very little sales skills and then we, compound the problem by conducting a lousy interview.

So what’s the solution? RECRUIT!

You probably notice people every day who would be a good fit as a salesperson in your dealership. Why don’t you get those types of people to apply? The reason is because they are already employed.

I’m not saying there isn’t a place for classified ads, but it should only be part of your strategy. The best people I have ever hired weren’t looking for a job.

2. Proper Job Descriptions

A lot of potentially good salespeople fail because they don’t know exactly what is expected of them every day. If you do not have extremely detailed job descriptions with your sales staff, I would stop right now and get this in place before trying to proceed with any further training.

A description should tell them exactly what their job entails on a daily basis; an objective should tell them what they are expected to produce. For example, an objective might say they are expected to sell at least 13 cars per month with an average down payment of $700.

3. Road to the Sale

Every person that has ever sold a car has been told about the road to the sale, but are your sales people following it? Are they following it every time? How do you know?

It doesn’t matter what your particular road to the sale is as long as it’s in writing and continually trained on. The road to the sale is far more important in the BHPH industry than it is in the new car franchises, yet the new car dealerships train on it every day and most BHPH lots rarely discuss it.

4. “Did it Today” Sheets

Did It Today sheets (or DIT sheets) are one of the best ways to hold your salespeople accountable and to have them show you how they won at work each day.

DIT sheets should list all of the tasks they accomplished for the day such as phone calls made, customer interviews completed, appointments set, etc.

The DIT sheets should be turned in and reviewed every day by the sales supervisor and compared to the goals set at the beginning of the month.

If you will commit today to giving your sales staff complete job descriptions and objectives, making sure they are trained daily and using your road to the sale, and having them fill out daily DIT sheets, I believe you will be very pleased with the results you will see.

In future articles, I will go into more detail on hiring the right person form the beginning, the road to the sale that I teach and believe to be most effective, how to properly use DIT sheets, and much more.

If you have any questions on how to implement any of the processes above or would like me to do sales training for your staff, please contact me anytime.

 


Want to learn more from our BHPH specialists? Click the link below for a free copy of Brent Carmichael‘s whitepaper:tablet

Permanent link to this article: http://blog.ncm20.com/2015/03/4-tips-to-supercharge-your-buy-here-pay-here-sales-training-program/

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

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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/

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