New-Car Dealers Help Fuel J.D. Byrider Expansion

By Richard Greene, Auto Remarketing NewsMagazine Editor
September 01, 2006

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CARMEL, Ind. -- J.D. Byrider's growth continues, and company executives said franchised new car dealers are helping to fuel the expansion as they realize the impact a well-run buy-here, pay-here operation can have on their bottom line.

So far this year, J.D. Byrider said it has opened five franchises in Pittsburgh, San Antonio, Salt Lake City, Nashville, Tenn., and Blacksburg, Va. Still to open in 2006 are stores in Pittsburgh as well as in Kernersville, N.C.; Clarksburg, W.Va.; Pinellas Park, Fla.; Fort Worth, Texas; Kansas City, Mo.; and Belleville and Springfield, Ill.

"These new dealerships, opened by existing and new franchisees, are a sure sign that the Byrider business model for selling used cars continues to be healthy and lucrative," said William Ackermann, the corporation's vice president of franchise operations. "This is the strongest possible endorsement of our product. Our franchise owners are smart enough to know a good thing when they see it and own it."

Ackermann noted that J.D. Byrider is following an aggressive five-year business plan that was set up by James DeVoe Sr., founder, and his executive management team long before DeVoe's death in a March plane crash.

The plan accounted for demographic shifts occurring in major metropolitan areas that helped shape which markets would be the most attractive and promising to J.D. Byrider in the long run, Ackermann noted.

"Jim was a brilliant and passionate visionary who knew exactly what he wanted to accomplish, and like any successful entrepreneur, he put into place a business plan that could be carried forward in the event he would no longer be here, whether through retirement or otherwise," Ackermann explained.

"Jim's death was a huge tragedy that obviously shook our company," he added. "But as a tribute to Jim, who had positioned the company for growth, we've been able to move forward and to expand and to succeed financially."

New-Car Dealers to Spark Growth

Presently, Ackermann said J.D. Byrider operates 122 franchisee- and company-owned dealerships in 28 states. "We expect to have 200 stores by the end of 2009," he asserted.

"This is not just optimistic thinking," Ackermann said. "There are numerous contractual agreements in place with many of our existing franchisees who will establish additional dealerships in new markets, so we're experiencing a lot of organic growth. And we also know where we're going to find the other candidates to handle the additional expansion we plan to undertake."

And that's where new-car dealers come in, Ackermann said. "More domestic car dealers are looking to get even deeper into the used car business because the new-car business has not been very friendly to them of late," he explained. "Recently, I've met with about 20 different groups looking to get into this business, and I'd say probably 15 were new-car dealer groups who were taking a serious look at J.D. Byrider."

Ackermann added, "As franchised dealers get squeezed at the new-car level, they are looking more closely at how to get deeper into used cars, and so they're not just only keeping more and more late-model trade-ins, they're also looking to hold onto those five- to six-year-old cars that they'd normally wholesale out. What they're ultimately doing is exploring ways to get into the buy-here, pay-here market."

As a result, Ackermann said the J.D. Byrider franchise system provides a strong platform for launching this type of dealership business and to become successful at it.

Other Factors Shaping Byrider Plans

How are soaring gasoline prices and relatively high wholesale prices affecting inventory decisions?

"We've always concentrated our inventory purchases on reliable transportation, what people really need to get back and forth to work," Ackermann said. "So, from an inventory standpoint, we weren't selling sports cars and full-size SUVs and those type of vehicles any way, so we didn't have a huge scaleback in terms of what we had to buy.

"But clearly, there are probably more compact cars and gas-efficient cars on our lots than there were two years ago," he added. "But we have not had to implement a radical inventory shift."

Wholesale prices are having a more across-the-board impact, Ackermann said. "Finding good cars at good prices is the single most difficult part of our business, bar none," he stated. "We're paying more for our cars today than we were a year ago, and we anticipate we'll pay more for the same car next year.

"More new-car dealers are hanging onto used cars longer than ever before, which is generating an uptick in terms of wholesale prices," Ackermann added. "It takes a lot of effort, and we have to go further, go to more auctions, talk with more wholesalers and more new-car dealers to get the right cars for our customers who are relying upon us. But we're committed to finding those cars at the right price."

Cutting Default Rates

Also helping to keep costs down is the use by all Byrider franchisees of a new software system for underwriting car loans -- the Automated Risk Evaluator -- that is successfully identifying customers who are most likely to default, according to Mike Maenhout, chief information officer.

Maenhout said that this fully implemented software system is enabling Byrider dealers to improve their static-pool and charge-off numbers. This lets them focus on working with customers who represent the least risk and to help them devise a realistic payment plan, he added.

"The Automated Risk Evaluator is enabling us to objectively and consistently evaluate each potential customer. The guidance it provides to the underwriter helps establish a standard level that we expect them to achieve," Maenhout explained. "It provides guidance away from financing a customer who appears to be unable to meet their obligations. This software system helps make it clear who the customers are that will be successful in our program.

"In the end, not only do our franchisees benefit, but more importantly so do our customers," Maenhout said. "By managing our risk, we can continue to provide them with the highest quality used cars and at prices they can afford."

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