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Tag Archive: BHPH

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

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Brent Carmichael

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


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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Brent Carmichael

Your Buy Here Pay Here Collection CSI


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.

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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 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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Gene Daughtry

Where Have All The BHPH Customers Gone?

binocI ask a different question. Where did all the customers come from that are buying right now? Have all these customers been waiting for financing to come back to life? Did they all just hang on to the same car for five, six or even ten years? I hope this year helped you realize that there have been many customers in your market who could have used your help, but they would never consider buying a car from you because of their perception of what you do.

There was a long list of decisions to make when you decided to get into BHPH:  What business model; what inventory; your tolerance for risk; how you would collect; shop or no shop; a one-man show or full crew? These decisions were all part of what your motor company would eventually look like. Now comes a new challenge – Special Financing. Special Finance isn’t really new, though. I have been through at least three surges in Special Finance.

Customers wait because they want something “better,” something different than they believe they can get from you. What is the Special Finance dealer offering that you are not? New vehicles with six-year loans or other vehicles you do not offer? Do they have longer warranties or lower interest rates? You should know. You need to know.

Since my start in the car business I have been involved in three unique BHPH operations. One operation financed cars that had low ACVs and fit into what most people perceive a “note lot” looks like. Things like operating out of a single wide trailer on a partially-paved lot while offering little recon and even less service after the sale. From there I moved to an established High Line operation that operated in a very nice facility.  In the late 90s we offered vehicles above the $10,000 ACV range with long term service contracts, GAP and Credit Life. We had a profitable, full-service shop operation. With four-year loans and inventory choices like Cadillac, Lexus, Infiniti, BMW and Mercedes. We had doctors, lawyers, airline pilots and even a federal judge in our portfolio. Bad credit occurs at all levels. I learned quite a bit from both these operations and the original people that set them up, which lead me to the third operation.

This was a startup I handled eight years ago for a franchise dealer and using my own business model.  My goal was to attract the Special Finance customers in that market. I wanted an operation that provided greater service and a better opportunity to our customers than the Special Finance dealers and their lenders could offer. I decided on a business model with an ACV in a $6,000 to $9,000 (average $7,200) range with full recon, including new tires. My experience from the High Line operation confirmed offering a long-term, quality service contract while having side loans available for maintenance and other repairs would have a positive effect on our marketing and portfolio. We offered them along with GAP to each customer. To keep payments affordable, we offered a 36-month term, which helped make early trading easier.

What do your customers want besides a great looking, brand new car that never breaks down, burns gas or has payments? They want the closest thing they can get to that with no money down! Our program advertised flexible down payments; we worked with what the customer had available using a deferred down program. We had a set interest rate for all approved customers of 7.5%. We reported all loans to the credit bureau. All this, and we had a very interesting mix of inventory the customers only saw on our lot. Our program, combined with friendly and helpful customer service (including collections), allowed us to generate above 75% repeat and referral business over the last eight-year period.

You can wait for the latest Special Financing boom to subside and go on doing what you always have, or you can make some changes that will help keep your existing customers and possibly attract a different type of client to buy from you.

Ask yourself and others what you do (or don’t do) that drives customers to the Special Finance dealer down the street. What are your prospects seeing or hearing that makes them stop at your competitors before coming to you? Is it a great website? Is it the inventory? Is it the way they are advertising? Or is it something your operation does or doesn’t do that your customers talk about? Does what you sell, the interest rate, lack of warranty or how you handle collections stop customers in your market from even considering your operation when they need a vehicle? Why not start now to change that perception? Figure out what the customers in your market want from their car dealer, whatever that may be, and let folks know you can provide it.



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Dale Pollak

Dissecting the Two Different Types of Used Vehicle Retailers

used carsIn my conversations and travels, I encounter two different types of dealers.

The first group often struggles with aged units in their used vehicle inventories, persistent wholesale losses and an as-yet unfulfilled desire to increase their sales volumes and overall profitability.

The second group has what I might describe as “higher-order” issues: To be sure, they encounter occasional aged units and wholesale losses, but these aren’t persistent problems. Their biggest challenges relate to fine-tuning and managing processes to help them increase efficiencies, lower costs and maintain improved sales volumes.

In the past several months, I’ve been trying to better understand this disparity: What, exactly, separates these two groups of dealers? Why does one group seem bogged down with aged cars and wholesale losses, while the other appears to have largely found a way to avoid these problems?

I think I’ve found the simplest answer to these questions. The difference between the two groups of dealers boils down to a willingness to own up to mistakes, address them and move on. Put another way, one group of dealers is more willing to take a loss on a used vehicle, while the other resists a potential loss at every turn.

This realization hit home the other day after two distinctly different dealer conversations.

In the first discussion, I was talking to a Midwest dealer with nearly a quarter of his 150-car inventory at or beyond 90 days of age. He’d stocked up this past spring and was trying to “retail out of the problem.” We looked closer and saw that he hadn’t made the pricing adjustments that appeared necessary to actually sell the cars. Why? Because he’d take a loss. Likewise, he didn’t want to wholesale them because “I’d lose my shirt at the auction.”

The second conversation with a Florida dealer revealed a different problem. He wanted my guidance on ways to find more cars more quickly to feed his inventory. He’s got an aggressive 25-day retail window, and turns his 120-car inventory more than 15 times a year. We discussed ways he could expand his reach at auctions and tighten up his trade-in appraisal efforts.

Then I asked how he felt about taking a loss on a vehicle. “I view every loss as two opportunities,” he said. “First, it’s a chance to re-invest my money in a car with a better profit upside. Second, it’s an opportunity for us to figure out what we missed.”

Wow, I thought. This dealer’s definitely a “new school” used vehicle retailer. Unlike his more tradition-minded peers, he’s evolved beyond holding onto cars and hoping for a profit-positive deal. He recognizes losses for what they are — a failure in his team’s efforts to acquire, recondition, price and merchandise a used vehicle, and an opportunity to make his next used vehicle investment decision even better.

Both conversations crystallized my conclusion about the difference between the two types of dealers.

I asked the Florida dealer for three tips to help other dealers adopt some of his “new school” used vehicle management thinking. Here they are:

  1. Recognize the time-sensitive nature of your investment. This dealer’s decision to retail every used vehicle in 25 days is no accident. Previously, his retailing timeline ran 90 days, then 60 days and then 45 days. The dealer settled on 25 days to essentially retail fresh cars all the time. My recommendation for most dealers is a 45-day horizon to retail used vehicles. The dealer’s more aggressive because he believes the shorter window minimizes his exposure to market risks — the mark of a retailer who understands the fast-changing nature of today’s market.
  2. Apply a disciplined, “retail-first” strategy. The dealer doesn’t wholesale too many vehicles, given the store’s “retail-first” strategy. This approach requires disciplined pricing decisions that balance each car’s potential for gross profit against its shelf life as a retail unit. The dealer’s team monitors each vehicle’s online performance against the market of competing cars to calibrate pricing.
  3. Adopt a “total gross” mindset. Part of the reason the Florida dealer is willing to take an occasional loss is that he understands he’s already made money on the unit through reconditioning, and he believes the next car will deliver a greater amount of both back-end and front-end gross profit. Like many velocity dealers, his focus on “total gross” followed years of using “average front-end gross” as his chief management benchmark. “Front-end gross doesn’t give you the whole picture of each car’s value as an investment,” the dealer says. “Total gross is better barometer.”

I shared the Florida dealer’s tips with the Midwest dealer. His comment: “I’m glad that guy’s not in my market. He’d be eating my lunch.”

UV Training

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Gene Daughtry

Controlling Delinquency in Buy Here, Pay Here

Man in debt(2)Underwriting is the first and most important way to control delinquency. In the NCM Institute’s BHPH training programs, “BHPH Underwriting and Collections Management” and “A Culture of Collections,” we discuss underwriting and collections best practices in detail, but the first line of defense against out-of-control delinquencies is to determine the amount of risk you want to endure and design your underwriting to fit that business model. You should sell vehicles that are in a price range aligned with your risk model, so that your losses are tolerable and the customers you are selling to are happy to pay for the vehicle after they purchase it. In my operations we used a strong closing with visual aids to help the customer remember what they agreed to.

From the moment our sales people “upped” a customer, they were working to assist in collections. Our sales people knew there job was to gather information. We trained everyone about the process of underwriting and how it affected the collector long after the car left the lot. One step in our process was after the underwriter approved the customer, our sales people would use a handwritten document to write up trade figures, pickup payments, regular payments and payment dates (always paydays). The handwritten page was signed by the customer and kept on file. Later, if disagreements ensued during collection efforts, having that handwritten page usually ended the argument quickly. Most of the time when a customer disagreed with collector activity it was not about your actions as a dealer. It is usually about their job/family situation or ill-advised spending when they should be paying their bills first.

Another important way to control delinquency is to make sure your collector is being diligent and organized. If a customer cannot pay the full payment due, your collector needs to receive a payment agreement from the customer when they call or come in. Whatever that agreement, your collector must follow up and attempt to make the customer adhere to it. Being flexible is important when dealing with people. Flexible is agreeing to change payment dates when paydays change, helping customers who have fallen behind by waiving late fees, or deferring payments for them if they prove the reason given.  Both sides should follow an agreement put together between customer and collector.

Remembering that you are dealing with human beings is important. Establishing LTR (Like, Trust, Respect) with the “regular contacts” should be a goal of your collectors. I worked with our collection and cashiering staff to make sure they were friendly and understanding (within limits) so customers wouldn’t avoid calling for fear of explaining an issue to an unsympathetic ear. Being flexible is important, but customers are people and you should listen with a dose of skepticism. My collectors asked customers to bring proof of whatever story they are telling (doctor bill, check stub, garnishment notice, funeral program) in exchange for our forgiving a late charge or deferring a payment.

In our operation, I would be the only person who could physically make account changes. That way, I was involved in the decision and the collectors kept me in the back of their minds when talking to someone about an account. If the customer broke two agreements, we picked up the vehicle in an attempt to show the customer we were serious. In many cases, if the car was redeemed, the payments on the repo would be paid more consistently in the future. Do not allow your customers to think you are the easiest of their payments to miss while they pay other bills or buy lottery tickets. Also, give the car back to them. If the customer comes in, seems to understand the importance of keeping current and has some money (and proof of insurance), work with them.

Thirdly, the way you handle mechanical failure plays a huge role in your delinquency rate. If the car won’t go, they won’t pay. You have to decide how you are going to handle breakdowns and make sure your customers understand your policy so expectations are controlled later. We offered a third party, 24,000-mile extended service plan on every vehicle we sold and had penetration on 98 percent of our loans. The policy covered far more than just the power train and allowed our customers to receive repairs for a small deductible while our shop consistently made a profit. The service contract we used offered nationwide roadside assistance and up to 150 miles per incident towing so our vehicles were not left on the side of the road or in a parking lot. Even if the service policy’s expiration date or mileage limit had passed, many of our customers would still call to check coverage, which informed us of a problem.

Controlling delinquency is about anticipating problems that arise in our business and having policies in place to deal with them. In most cases, delinquencies are personal customer issues projected onto you. Making certain your associates and customers understand your expectations in each situation will help you keep better control of your portfolio performance.


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Gene Daughtry

Managing a Healthy BHPH Portfolio: Recency vs. Delinquency

financial_portfolioI have heard how important keeping your accounts current is to the success of a portfolio of receivables. I would put that statement down the list four or five spots when discussing how well your Buy Here, Pay Here portfolio is performing. In Buy Here, Pay Here (BHPH) you need to manage your receivables portfolio differently.  Why? Because in BHPH, many of your customers are going to have trouble keeping up with their payments; it’s simply the nature of the business, but one that with proper processes and oversight, is manageable and will provide an excellent return on your investment.

In my BHPH operations, I would tie a small bonus to the percentage of current accounts to help keep my collectors’ eyes on who is not paying as they should. When a collector has several hundred accounts to maintain, I want their focus on what is most important – cash flow. Because I feel cash flow is the primary bell weather of a successful receivables portfolio, I place higher priority on two other important receivables management metrics: recency and collection potential.

In a BHPH portfolio, your recency metric should generally remain, at a minimum, in the 90’s. This means 92 to 96 percent of your open accounts have made payment in the last 30 days. Collection potential is the amount of payments your portfolio has due each week based on contractual terms. This is the money, the life blood of your operation. If you are taking in 110% of total payment dollars due each week (average weekly payment times number of open accounts) while meeting your recency goals, you will see the performance anticipated from your portfolio and the cash flow you should expect.

There are other dollars coming in, of course:  down payments, deferred payments, wholesales, service income, cash deals, payoffs and other services you may provide. Generally, I experienced 72 to 74 percent of my monthly cash flow as payments. My collectors’ largest incentives each month were tied to recency and collection potential. Both must be met to receive the bonus.

So many dealers I have worked with are very concerned about missed payments. Some of these dealers will repossess a vehicle one or two days after a payment is missed. My approach was different.  I would make every effort to keep the vehicle with the customer. I would try to find ways to collect our money. Yes, if customers break too many promises or skip out then I would advise you go after the car. If the customer comes in and wants the car back, I’d give it to them. The customer and I would have a discussion beforehand, of course. My advice is to require proof of insurance and some money before they drive off, but not require everything that might be due. You want the customer to get the message that you are serious about getting your money, but you also know that if the car is on your lot the money isn’t going to come in, either.

Repossessions are a fact of life in BHPH. Don’t be fearful of them. Even though you will refer to repossessions as “losses” on your P&L, the aggregate of your repossessions should actually be profitable. Look at every deal like a hand of poker. The hand is dealt and must be played out. Folding might save you money but you’ve already made a big investment and you want to win. Winning is making profit on each deal. So stay with your customers as long as they are working with your collectors. Watch your exposure or “cash in deal” as you make decisions on delinquent accounts.

The bottom line in BHPH is that dollars through the payment window is the score to go by. Knowing how much should be coming in and tracking that number will be more important than if all of your accounts are current today or not. As long as you bring in more than what’s scheduled and all of your accounts paid you something this month, then you can focus your attention on your expenses and selling more cars.

Gene Daughtry teaches BHPH Service and Reconditioning Management  for the NCM Institute.  To learn more about management training for BHPH dealers and managers in sales, service and reconditioning, and underwriting and collections management, and to register for our next classes coming up in August and September, click the link below or call NCMi® at 866.756.2620.


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Gene Daughtry

What Happens in Vegas Better NOT Stay in Vegas

I recently attended and participated in the NABD Dealer Academy and the NABD Buy Here, Pay Here (BHPH) Conference and, man, what a week it was! Ken Shilson and Ingram Walters of NABD have a tremendous understanding of the business from two different perspectives, which has honed the Dealer Academy into an excellent learning environment for helping guide new dealers toward success in BHPH. Participants were able to visit with many industry experts, including Brent Carmichael and yours truly, to discuss ways of continuing successful growth and profitability in the future.

During the Academy, there were many automobile dealers and other business people in attendance interested in learning about the BHPH business. The Dealer Academy stepped these entrepreneurs through a series of presentations, including mine on business models to others on benchmarks, underwriting tips and compliance to discussions about having a Related Finance Company or RFC, collections and much more. Other classes covered capital acquisition, finding inventory, reconditioning those vehicles for effective selling and how that aids in a successful portfolio. Additional tracks were about the importance of correct software with pointers on deciding which DMS is best for your operation, along with topics like credit bureaus, payment devices and metrics for monitoring your numbers, including joining a 20 Group.

All the training culminated into dealer roundtables facilitated by industry experts on various subjects. The roundtables had the Dealer Academy participants and experts standing together “eye to eye” discussing specific issues in a format similar to participating in a NCM 20 Group.  I really believe discussion with peers is helpful for the participants to get a deeper understanding of the flood of information they received during the Academy. I held a roundtable on reconditioning which had a tremendous response. The conversation went far beyond the subject and showed me there is a real hunger to learn how to guide a new operation in the right direction – and avoid costly mistakes.

The BHPH National Conference began on Tuesday in grand fashion with the largest exhibit hall in the history of NABD. The education began immediately with the topic of compliance, a major theme throughout the event. There were education tracks that dove deeply into inventory, recovery, social media and customer retention. Each topic was taught by industry experts with contributions from dealer-operators who provided their unique perspectives on the subject.

The last day of the conference included more education from a variety of industry professionals and dealers on collections, current developments, technology and compliance. Everyone heard from John Linnehan Jr., this year’s inductee into the BHPH Hall of Fame. Following the Hall of Fame presentation, NCM moderator and consultant, Brent Carmichael, went through NCM’s benchmarks and trends for the industry relative to the past tax season. Brent’s use of trends established from years of NCM 20 Group benchmarks revealed how the critical first quarter has dramatically changed over the last several years.

The conference ended with a best practices panel, helpful for current and potential dealers who were looking for the right resources to ensure they are operating or will start their operations the right way.  Similar to the advantages of an NCM 20 Group, the attendees of the NABD Dealer Academy and Conference did themselves a huge favor getting together with other dealers who have experienced the same issues and getting to know the vendors the successful dealers work with. What an advantage to  gather invaluable information from their peers and the exhibitors so quickly and all in one convenient place!

Our industry is constantly changing and interest in BHPH is always growing. This was evident by the turnout of dealers and their great questions throughout the events. There is a lot of money that can be made in Buy Here Pay Here – and a lot of headaches that can come with it. Having an opportunity to find guidance from others who have experienced it can potentially save a dealer millions in unnecessary errors.  So in this case, what happened in Vegas better NOT stay in Vegas!

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Gene Daughtry

Why the difference in price?

consumer-protectionIn my 16 years in Buy Here, Pay Here operations, we marketed the business as “in-house” or “bad credit” financing. We sold a few cars for cash, but we were predominantly a Dealer-Controller Financing business.  Since the inception of the Consumer Financial Protection Bureau (CFPB) and its complaint website,, the FTC is watching these dealers more closely than ever.

There are several resources available to assist automotive dealers avoid illegal and deceptive advertising and marketing practices.  I’ve compiled a short list of links to what I consider the most pertinent, but there are other good resources available, as well:

As a dealer, you must be careful that your salespeople are not telling customers that due to their credit, they cannot purchase the car you advertised for the ad price. You know it happens when the customer is declined for “bank financing” but approved for special financing or second-chance financing. The special financing approval requires a large loan discount. Your salesperson goes out and tells the customer they can get the car they want, but the price will be “x” instead of the advertised price. The same happens if the only way to get a deal approved is through the store’s BHPH operation.

Some independent dealers are primarily “retail” where they offer prime and subprime indirect financing. Some of these dealers will offer a few in-house loans to the right customers. If these dealers offer low prices or payment specials in their advertising, they need to be sure how the above scenario is handled by the salesforce. Many BHPH/LHPH dealers do not advertise prices or payment deals in order to prevent false advertising issues or bait-and-switch pricing. BHPH dealers generally advertise what they do — help the consumer with bad credit. Our message is about services available, vehicle dependability and how we can help most everyone get a vehicle.

I always tell retail dealers that almost every process in their retail operation will be opposite in a BHPH operation. Your salespeople in retail generally up the customer, meet and greet, qualify, test drive, trial close if “we can get the figures right,” then go inside and negotiate.  Then they try to get the deal approved. In BHPH or special financing, after a salesperson ups the customer and begins to qualify, the salesman brings the customer inside to find out if they have an approvable deal, which then determines what vehicles to show them.

If you are doing deals in secondary financing or BHPH, you might consider advertising that does not contain vehicle prices or payments. Those ads open the door for possible FTC violations. With commission salespeople and managers it is hard to resist “converting” customers from one to the other. You probably already know that if your customer has landed on a particular vehicle that is “value priced” online or in other ads, your people cannot legally add a discount fee back to the price and do the deal.

The CFPB’s hotline for consumer complaints is just beginning to be known. As dealers, there are enough headaches to go around without creating them yourself. Market into your primary business and attract the customers that fit your business model.

Gene Daughtry is a BHPH executive conference moderator, trainer and consultant for NCM Associates. He’ll be teaching “BHPH Service Management” June 5-6 in Kansas City and he’ll be a presenter at the National Alliance for Buy Here Pay Here Dealers Conference and Dealer Academy in Las Vegas next week.

If you’re a retail dealer thinking about Buy Here, Pay Here, you’ll want to read Gene’s “Straight Talk About Dealer-Controlled Financing” whitepaper. It will help you understand the differences and similarities between franchised and BHPH operations and explains the various types of BHPH business models you need to consider before getting started. Get your copy here or visit Gene at NABD in the NCM exhibit booth, or at our Open House on May 21 in room Alsace I from 2:30 to 3:30 p.m.!

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