4 questions with DealerSocket’s Peter Ord

In the latest installment of the annual Best of BHPH issue of BHPH Report, we go behind the scenes with some of the leading companies in the used-car space and their top executives with a few Q&A features.

Next up in this series is Peter Ord, national sales director at DealerSocket.

BHPH Report: How much more critical is a functional DMS to an operator than it was even two or three years ago?

Peter Ord: Today, dealers are required to comply with more regulations than ever before — and this high-scrutiny environment isn’t going away. Some may not want to accept it, but this is the new normal. In light of that realization, DMS is core to the dealership and has become the central source for control of all dealer functions, from evaluation and acquisition of inventory all the way through to sales, collections and analytics. If dealers want to compete and comply in today’s market, they need a DMS.

Regulators like the CFPB aren’t discriminating based on the size of your dealership either. They regularly make examples of both big and small dealers. Enforcement is only becoming more stringent, necessitating documented, automated processes that an effective DMS can provide. Over and over, we observe that if regulators come into your store and see you’re still operating off pen, paper and unlocked filing cabinets, you may be in for a long ride. However, they are much less likely to dig deep into your business if you have defined processes and proven, automated systems in place.

My philosophy is, you just can’t take chances anymore — not when there are this many regulators going from dealer to dealer, looking to sue them for the benefit of the consumer. If you can prove that you make a solid effort though, you are much more likely to be pardoned for a small mistake. We frequently hear from these regulators that they look for dealers who have inadequate infrastructure to support their business, have systematic failures or act with blatant dishonesty.

I would also add that efficiently managing inventory is the life blood of today’s independent dealer, and that is another function a solid DMS can fulfill. Having a prime physical location is no longer the main indicator to success though. As a matter of fact, a dealer’s digital location (i.e., their website) has become more important than their physical store. So it stands to reason that dealers who invest in inventory syndication through their DMS can gain a clear advantage over those who are still running such processes by hand. 

BHPH Report: What part of a DMS is still confusing or frustrating for a dealer and why?

Peter Ord: Hands down, I believe the user interface is most confusing. The majority of DMS options focus on features without taking the time to understand how those features should be presented to the user. We admittedly had these same issues with our legacy DMS technology. When we built iDMS, however, we spent a significant amount of time studying design, user interface and user experience. We even dedicated entire teams to each one of those concepts. As a result, many of our iDMS beta users thought we had created a slew of new features that had actually been available to them all along. They just could not benefit from them because they were either too hard to find or were not integrated into the correct workflow.

Along the same lines, many DMS options provide heaps of data, but much of it is not actionable. In order for the data to be helpful to dealers, the software must synthesize and present it in a way that dealers can truly use. In the same way, the processes that a DMS handles can be quite complex, and many DMS options on the market today struggle to address these processes with a streamlined, automated approach that reduces errors and saves time.

The bottom line is that any technology platform should be easy enough and serve up enough valuable information that it becomes impossible for the user not to use it. The intuitiveness of the system is ultimately what should convince an employee to use the software, not the threat of consequences from management.

BHPH Report: What three elements should dealers evaluate when considering which DMS to use?

Peter Ord: First, you should examine a system’s reporting and integration capabilities. I’m referring to real-time, web-based integration, not batch integrations that require more human touch and don’t stay up to date throughout the day. DMS technology with these characteristics enable dealers to do their jobs better, easier and faster. We know a DMS cannot solve all a dealer’s problems, but that’s exactly why it must integrate seamlessly with other products. Much of a DMS’ data is valuable and should translate easily into other software, so it can help dealers manage their customer base more effectively. You want tight integrations between your DMS and CRM so you can get, for example, filtered lists of customers that are nearing finance termination that have not been repo’d or just spent more than $500 in your service lane on a repair. That sort of targeting will prove especially useful when proactively reaching out to previous customers for repeat sales.

Second, you should look at whether a platform is web-based or client-based. Can you use your DMS on any device, anywhere? Seven to 10 years ago, people would have thought you were crazy for using a web-based solution. Now, you’re way behind if you’re still on a client-based platform. Web-based solutions offer more agile integration capabilities than web platforms. It’s extremely difficult to integrate with other products on a client-based system. Of course, users also cannot access the platform at a moment’s notice, optimized on their mobile device. I believe one of the aspects that separates the superior operators from the average is using current, live information to make decisions.

Lastly, a DMS in today’s market should offer a custom user experience based on role. It should focus on how each individual user needs to leverage the DMS and tailor the experience based on their needs. The accounting office, controllers, business owners, GMs, sales managers, inventory managers … they all use the DMS. Yet most DMS technology offers the same user experience to every user, regardless of role. Dealers should look for a DMS that allows you to customize the home screen — and really the entire experience — based on the features each user needs for his or her job. For example, if I’m an inventory manager, I don’t need to wade through functionality to desk deals or even see the collections module. I need to be able to efficiently add inventory, add pictures and descriptions, and post to third-party websites. Those functions should be front and center, easy to access, and simple to execute. I believe dealers are frustrated that it takes them way too long to do basic tasks in their DMS. But you can remove five or six clicks from any given task by using a DMS that allows customization by user role.

BHPH Report: What recent technological advancement has helped DMS function better?

Peter Ord: Cloud-based architecture is becoming more robust, with more enhanced, secure environments and more agile integration capabilities. Five years ago, the only way to integrate with another product was to send batch files in the form of an Excel spreadsheet. Today, we can take advantage of real-time web services to give the experience of using one system instead of two, or three or four. Open APIs help facilitate this data sharing, so information moves two ways instead of just one. None of these benefits are available with a client- or server-based platform.

In addition, user-based customized screens are a game changer. If I’m a collector, I want my workflows and home screen elements to focus only on what I need to do my job most efficiently. This allows for quicker, easier training and ramp-up of new employees. It also helps established employees leverage all the features available to them much faster.

I encourage every dealer to ask their potential DMS provider whether they employ dedicated user experience designers. Most don’t, and you won’t want a DMS with a user interface that has zero study or science behind it. If you have a fantastic feature set with a poor user experience, the features don’t even matter because no one can find them. That’s what leads to frustrating, crowded, and hard-to-use technology. I believe both the feature set and the user experience should be weighted equally.

Additional pieces from this series can be found below:

4 questions with Russ Algood of Ace Motor Acceptance

In the latest installment of the annual Best of BHPH issue of BHPH Report, we go behind the scenes with some of the leading companies in the used-car space and their top executives with a few Q&A features.

Next up in this series is Russ Algood, chief executive officer of Ace Motor Acceptance Corp.

BHPH Report: How eager or hesitant had dealers been to sell off their paper in 2016 and why?

Russ Algood: Overall, I would say they’ve become a little less eager to sell paper off to where they no longer participate in it. Over the past couple of years leading up to this one, we’ve seen the bulk purchasers get pretty aggressive on their pricing. It seemed like this year they’ve modified that back some. Still pretty good pricing but not as strong as it was.

Dealers are still more willing to sell paper when they need to raise capital. For a little while there, you were seeing some dealers sell paper because they were getting paid so much for it and it just made sense to sell it rather than keep it.

We’ve also seen this year a lot more dealers reaching out to us to satisfy their capital needs. 

BHPH Report: How prudent and wise have operators been with their lines of credit and floor plan in 2016?

Russ Algood: I can really only speak to our dealers, but our dealers have been very successful this year. They’ve had good years. They’re operating within their lines, meeting their requirements generally speaking.

Overall, I’d have to give them a good rating for how they’re handling it. One thing is a lot of times when dealers first get availability for extra capital, they do have a tendency to maybe want to loosen their underwriting standards and put more on the books. They have to be careful not to do that. Or as they grow and they get more accounts that they’re servicing, they need to be sure they have the collections staff necessary to work the collections on a larger portfolio.

There are also some dealers who want to get financing on their portfolio because they want to open a second lot or add four bays on their service department, things like that.

BHPH Report: How will the new accounting standard for reserving for credit losses impact how working capital can be obtained?

Russ Algood: The standards don’t go into effect for several years yet, so it’s a little hard to say how banks will react. With the new standards, dealers will have to set up more reserves than they do now, which will have an effect on decreasing earnings or decreasing equity or both. They may just set up a one-time charge to kick their reserve up, which really hits equity. Or if they gradually do it, it’s going to impact earnings over time.

A lot of lenders have debt ratios where they’ll only loan you three times the equity you have. Overall, it’s going to lead to a tightening of the credit market. To some extent, it’s a little hard to say how some lenders will react. In our case, the way we underwrite for our BHPH in a Box program, it will have no effect at all.

BHPH Report: What industry trends are you planning to watch closely in the New Year?

Russ Algood: There’s a couple of things we’ve been seeing that we think will actually lead to an increase in the buy-here, pay-here business. One is several of the subprime lenders have either exited the market altogether or they’ve discontinued doing business with independent dealers, things like that, which is leading toward less availability for just straight subprime.

We’ve also seen over the past year or so, our buy-here, pay-here delinquencies have been going down. To the extent that delinquencies and losses in subprime continue ticking up nationwide will push more customers to the buy-here, pay-here dealers.

We look at this as something that will lead to an increase in the buy-here, pay-here business.

Additional pieces from this series can be found below:

4 questions with Ace Christian of the Arizona Independent Automotive Dealers Association
4 questions with Bill Caan, national sales manager at CalAmp
4 questions with NCM Associates’ Brent Carmichael​

4 questions with NCM Associates’ Brent Carmichael

In the latest installment of the annual Best of BHPH issue of BHPH Report, we go behind the scenes with some of the leading companies in the used-car space and their top executives with a few Q&A features.

Next up in this series is Brent Carmichael, executive conference moderator of 20 Groups at NCM Associates.

BHPH Report: What’s your assessment of what it’s been like for the typical BHPH dealer in 2016?

Brent Carmichael: It’s been a lot tougher. Subprime is still the main competitor for us. They’re still really aggressive even though we’re starting to hear that it’s starting to taper off in some areas. But most of them are still pretty aggressive.

The regulatory side of the business obviously has a lot of dealers concerned. The general feel is that lot traffic is down, so there’s not as many people in the market overall. There are just fewer customers to sell to at this point.

From a collections standpoint, there is a little heightened level of frustration with getting customers to pay and pay on time. There seems to be more of a lackadaisical attitude with the customer base as far as making their payments. I think a lot of that’s driven by they have more options now than they ever have before. If they don’t like the car or are having issues with the car or don’t like the way they’re being treated from a collections standpoint, they’ll just give up and go somewhere else to buy a car. It’s been tougher this year than it has the past couple of years, that’s for sure.

BHPH Report: How much more receptive to new ideas have dealers been in your 20 Group meetings this year?

Brent Carmichael: They’re much more receptive. They’re still looking for that silver bullet. Some of them who were kind of closed-minded in the past about changing their business model are starting to look at different business models.

As an example, some used to say that they would never take on a subprime retail environment and now they’re looking at doing that. Some are looking at a higher (actual cash value) car. They are probably more open-minded to change now than they’ve ever been because they realize the subprime thing is not going to go away. The competitive market is going to be there. In the past, we’ve been able to sit back and ride it out for 18 months or maybe two years at the most. But we’re going on year three, and it doesn’t look like it’s going anywhere. Now they’re looking at anything they can do differently. They might even look at something completely different.

Some are even looking to get out of the business at this point, that now might be a good time to exit the business with the current environment and what the future might hold.

BHPH Report: How difficult has it been for operators to work with their customers to keep them current on their contracts?

Brent Carmichael: That’s something we’ve always had the ability to do. We can set our policies and procedures so we can let them be as delinquent as we want to and work with them as much as we can, obviously unless there’s some sort of bank covenant or line of credit covenant that might restrict some of that.

Again, we’ve had dealers in the past who were pretty strict on their collections guidelines who now have opened up and are willing to adjust accounts or accept deferred payments if it’s necessary to keep the customers. They’ve become more open-minded and understanding the value of a customer is probably higher now than it’s ever been. They’re trying to help everyone who is at least trying to make their payments. Some of the customer base hasn’t taken as much pride in ownership as they have in the past, so dealers are more open to working with the ones who are really trying.

Back when I used to be a dealer, we expected the payment to be made on or before the due date. Now we understand that life issues happen and work with customers more than we have in the past.

BHPH Report: What industry trends are you watching as we go into 2017?

Brent Carmichael: With the new ruling against the CFPB and how it’s structured, how that’s going to shake out, I don’t know when we’ll see any benefits of that in the near future. But that’s something that obviously could impact the landscape moving forward.

I think the main focus for most dealers believe it or not is just back to basics more than anything else. They might not be looking to buy the next latest, greatest thing, rather looking internally and making sure they’re doing everything from a blocking-and-tackling standpoint.

Inventory used to be a big issue but it’s not so much anymore. I’m hearing from dealers currently in the group that auction prices are down, so that’s starting to look up for us. There is starting to be some inventory freed up, so that should be a positive going into 2017.

Still the regulatory environment, exactly what rules are we supposed to follow and how we’re supposed to play by them, that’s probably the biggest concern moving forward.

Additional pieces from this series can be found below:

4 questions with Ace Christian of the Arizona Independent Automotive Dealers Association
4 questions with Bill Caan, national sales manager at CalAmp

Rhoads relocates & rebrands BHPH consulting operation

Jim Rhoads not only relocated to a new state; he also is rebranding his buy-here, pay-here consulting operation.

Late last year, Rhoads moved from Sherman, Texas to Sandy, Utah. Operating since 2005 as Four R Consulting, Rhoads announced that his new company has taken the name of BHPH Consulting.

“BHPH Consulting better represents who we are and what we do.” said Rhoads, who has served as a consultant, trainer and analyst with BHPH dealerships and subprime auto finance companies in 26 states and counting. “This is especially true now that we are expanding our services to include mergers and acquisitions and capital solutions for buy-here, pay-here.”

In recent months, Rhoads has started to facilitate the sale of established BHPH dealerships. Serving as a consultant and advisor, Rhoads is connecting buyers and sellers.

“Our experience in that segment allows us to advise dealers in valuation and strategies for a successful exit,” he said. “Plus, having been in buy-here, pay-here since ’97, my professional network is quite large. We know buyers and sellers and lenders and vendors — just about all of those most active in the industry.”

BHPH Consulting is also facilitating lines of credit and other financing services for BHPH dealers, including startups and those in the earliest stages of growth.

“A large part of my career has been in working with startups and helping entrepreneurs to develop a business plan as they enter BHPH,” Rhoads said. “I developed my own cash flow forecasting tool in 2005. We know as well as anyone that BHPH dealers need access to capital, especially in the first 24 months.

“As industry experts and analysts, we are now acting as a ‘watchdog’ in a management capacity on behalf of lenders or investors who wish to lend or invest in the subprime auto space,” he continued. “We monitor the lines of credit by tracking and reporting portfolio performance weekly. We also verify assets and prepare a weekly settlement report for all parties involved.

“Our management and oversight solution becomes an important way to link lenders and self-financed auto dealers,” Rhoads added. “The funding process I designed protects all involved in the most sensible way possible and allows dealers to gain access to growth capital in a space where money has traditionally been scarce.”

More details about his consulting services can be found at

Braeger Financial Group unveils dealer note program with 4 different maturities

Three years after leaving the investment banking world to form Braeger Financial Group with the objective of bringing individual accredited investors directly into auto finance, David Braeger recently rolled out his latest financing products to help buy-here, pay-here and independent dealerships secure more working capital.

Braeger is now offering short-term finance notes to dealers; notes that come in 15-, 20-, 30- and 40-month maturities while annually paying investors 8 percent, 9 percent and 10 percent, respectfully.

The company insisted this new short-term note program has been met with monstrous enthusiasm from dealers because of the simplicity and cost savings.

Braeger explained how the product works using the 15-month note as an example. Dealers pay 1/15th of the principal, plus interest, each month, which is then used to pay the investors. If dealers have a strong history of payment, they can ask for a credit increase at any time.

According to Braeger, “The traditional auto lenders are killing dealers with purchase fees, re-floor fees on flip, title time fees, curtailment fees and offset fees among others. Our system allows the dealers to become entrepreneurs again.

“If we decide to loan them money, they get it up front and pay us according to contract with none of these fees,” he continued. “The pressure is off the dealer to get the car off the lot or get hit with fees. Furthermore, the way many of the finance companies work, you can actually end up paying higher fees in months you turn cars more quickly.”

A Braeger client described his experiences using this product. Dusty Jackson is president and chief executive officer of AutoStart, an operation based in Kansas City, Mo., with 10 locations in Missouri, Kansas and Oklahoma.

“Traditional finance companies charge between 9 and 15 percent interest on financing, but once fees are factored in, the cost is most often three or more times that. Braeger has relieved that.” Jackson said.

“The biggest problem (Braeger) has in my opinion is the demand from the multi-billion dollar independent dealer market is so high for a program like his, even with the secure nature of the investors’ money, protected by the dealer’s inventory, I am not sure how he could ever raise capital fast enough,” Jackson continued.

Sherwood Neiss, co-founder of Crowdfund Capital Advisors, said when Braeger first launched his company that “It’s incredibly innovative. If hecan get it right, he will have more business than he can handle because there will be auto dealers coming to him for solutions who wouldn’t find them elsewhere.”

Now with this note program, Braeger is hopeful about how the company can help dealerships.

“We try and make things as simple as possible for the dealer, which benefits the consumer,” he said. “I have always tried to make the auto finance experience enjoyable for the dealer down to the consumer and that is what has made all parties including investors so happy.”

For more information, visit or call (262) 385-5914.

Opportunity knocks for BHPH in 2017

As the year closes, it is time to look forward and plan for next year. Recent performance data for the subprime auto finance market indicates that better days are ahead for independent buy-here, pay-here operators who can capitalize on the opportunities.

Recent data from Experian Automotive indicates that through the third quarter of 2016, “installment finance contracts with deep-subprime consumers dropped 2.8 percent to the lowest level on record since 2011. Looking specifically at used-vehicle financing, analysts noted that the subprime auto finance sectors saw an even larger decrease. Financing for consumers with deep-subprime credit dropped by 5.3 percent to 5.11 percent; the lowest Experian has seen on record since 2007.”

This market change with deep-subprime customers (who prior to 2014 purchased BHPH vehicles from independent operators) subsequently bought and financed them from franchised dealers, independent finance companies and credit unions. The recent market change now allows independent operators to regain that lost market share.

The third quarter Experian report shows that lenders reduced loans to subprime and deep-subprime risk tiers while increasing loans to consumers with better credit. Although the credit unions continue to aggressively grow market share, the other competitors have tightened underwriting standards and are focusing on consumers with better credit scores.

Independent operators can benefit from the aforementioned market change by regaining market share lost during the last three years if they are positioned to do so. Here are the important things they will need to prosper in 2017 and beyond:

1. Capital availability to fund future growth.

2. A proper business model to “keep the new deals sold” over the life of the installment contracts.

3. They must rebuild their “bond” with previously lost customers and use the web and social media to find new ones.

4. Participate in dealer education to avoid underwriting and collection mistakes that reduce profitability and create costly compliance problems.

5. Carry inventory that provides affordable transportation to credit impaired customers on reasonable terms.

Here are the best ways to get the items needed to succeed:

1. Capital to fund portfolio growth should come from collections, equity or from borrowings under lines of credit or by selling previously originated contracts. Dependence on borrowed capital or by liquidating existing portfolios reduces an operator’s financial flexibility and should not be relied upon. “Keeping contracts sold” and collecting payments is more important than just increasing originations.

2. The best way to evaluate your existing business model is to study past bad debt losses. This analysis requires you to look “under the hood” of your portfolio at year-end when all charge-offs have been recorded. To understand what performance metrics are needed and ways to utilize this information to make better underwriting decisions visit and watch two free videos on the home page of this website.

3. The best way to rebuild customer relationships is to contact past customers via mobile, web and social media technology. You may find that those customers are unable to afford the vehicles sold to them by your competition and are seeking more affordable transportation.

4. Dealer education is needed to become familiar with market and regulatory changes and to avoid making compliance mistakes. At the NABD National BHPH Conference on May 23-25 at Encore in Las Vegas the program will focus on “the changing world of BHPH” and the best ways to meet new challenges. Legal and regulatory updates will also be included in the conference agenda. The more you learn, the more you will earn.

5. Efficient systems are needed to grow portfolio profitability. During the last three years, many independent operators reduced overhead due to reduced sales. Instead of restoring these previous overhead levels, implementing new and improved technology for underwriting, collections and inventory sourcing is a better alternative. Operators can see and evaluate the new technology at upcoming educational conferences.

6. Sourcing, acquiring and reconditioning good inventory has always been challenging. However, the aforementioned market changes has reduced competition, increased supply, and caused wholesale prices to decline. New technology is available to broaden inventory sourcing options and increased repossessions enhance availability.

Independent operators cannot regain lost market share immediately. BHPH portfolios are best built over time and not overnight! In the New Year, operators are encouraged to benefit from competitor’s underwriting mistakes, not repeat them. Good luck.

Ken Shilson is president of Subprime Analytics ( and the National Alliance of Buy-Here, Pay-Here Dealers (  Subprime Analytics uses data mining to perform computerized portfolio analysis for operators and capital providers. NABD is the nation’s largest BHPH special interest group for operators and product providers with more than 13,000 members. NABD will host a National BHPH conference on May 23-25 at Encore in Las Vegas. For more information call (832) 767-4759 or visit He also can be reached at

Dealer Profit Pros hosting free webinar looking ahead to 2017

BHPH Report and NCM Associates are set to join a free webinar hosted by Dealer Profit Pros that’s meant to give buy-here, pay-here dealers constructive information to form strategy for 2017 and beyond.

The session is scheduled for 1 p.m. ET (10 a.m. PT) on Thursday.

“For the last several years we’ve made predictions and revealed new opportunities for dealers to meet or exceed their goals for the upcoming year. Each year dealers have offered great feedback on the information provided,” said webinar host Kenny Atcheson, who is founder of Dealer Profit Pros; a Las Vegas-based company that facilitates dealer marketing programs and more.

“This year will bring bigger changes than ever in part because of a new administration, starting with the president,” Atcheson continued.

Topics will range from how to improve underwriting and collections as well as other parts of your operation along with an update on what’s happening at the Consumer Financial Protection Bureau.

Space is limited for this webinar. Dealers can complete registration for this event by going to this website.

J.D. Byrider hands out 20 dealer awards

Buy-here, pay-here dealership chain J.D. Byrider recognized winners of the company’s annual awards at its November convention in Scottsdale, Ariz.

The Franchise of the Year winners were chosen in three categories: Single (one location), Mid (two to three locations) and Multiple (more than three locations). The winners were:

• Single: Keith Kocourek for his location in Wausau, Wisc.

• Mid: Barry Biggers and team for their locations in Pearl, Miss., and Jackson, Miss.  

• Multiple: Russ Larson and team for his eight locations in Huntsville, Ala.; Burlington, Cedar Rapids, Davenport and Des Moines, Iowa; Columbia and Springfield, Mo.; and Omaha, Neb. This is their 11th consecutive Franchise of the Year award.

J.D. Byrider also distributed 17 President’s Awards, which are given to individual locations based on store earnings, portfolio quality and customer service ratings. This year’s President’s Award winners are located in:

• Arkansas
Springdale at 2737 N. Thompson St., Dave Hanson, owner

• Florida
Jacksonville at 7739 Blanding Blvd., Jim Kagiliery and Jim Thompson, owners

• Illinois
Glendale Heights at 800 North Ave., Mike Burgstone, owner
Joliet at 2323 W. Jefferson St., Mike Burgstone, owner

• Indiana
Bloomington at 2425 W. 3rd St., Terry Gerhart, Mike Bolin, Ben Becht, owners

• Iowa
Burlington at 125 S. Roosevelt Road, Russ Larson, Doug Stewart, Jeff Lee, Daryl Nelson and Gerod Meier, owners
Davenport at 925 W. Kimberly Road, Sheila Schaub, Jeff Nickerson and Tedd Pless, owners
Des Moines at 2426 SE 14th St., Russ Larson, Jeff Lee, Doug Stewart, Daryl Nelson and Paul Newman, owners

• Kentucky
Owensboro at 250 E 18th St., Jeff Anderson, owner

• Mississippi
Jackson at 5719 I-55 N. Frontage Rd., Barry Biggers, owner
Pearl at 2521 Highway 80 E., Barry Biggers, owner

• Missouri
Springfield at 1226 S. Glenstone Ave., Russ Larson, owner

• Ohio
Mansfield at 1810 W. 4th St., Chris McPhie, owner

• South Carolina
Greenville at 2400 Laurens Rd., J.T. Gandolfo, owner

• West Virginia
Parkersburg at 1328 7th St., Billy Rowland, owner

• Wisconsin
Appleton at 2301 W. College Ave., Russ Darrow, Jr., owner
Wausau at 2518 Grand Ave., Keith Kocourek, owner

“We are extremely proud of each of this year’s winners,” said Tom Welter, vice president of franchising for J.D. Byrider. “They have risen to the top of our dealer community with their quality service to customers.

“These awards are a great reminder of the strength within our franchise system and our drive for improvement year after year,” Welter went on to say.

5 ways to see if your BHPH portfolio is maximizing returns

As another year closes, buy-here, pay-here operators must focus on how to make next year better. The answers can’t be found in their year-end financial statements or even by reviewing unit sales numbers.

This article will discuss what every operator should evaluate in order to improve performance and profitability as follows:

1. Indicators that your installment contracts portfolio needs a tune-up.

2. Proactive ways to improve portfolio performance by using metrics as your guide.

3. The proper accounting for bad debt losses and why charging off those losses should not be deferred.

4. Is your business model designed for success or failure?

5. What you can learn from your losses so you do not repeat them!

Here are some indicators that your installment portfolio needs a tune-up:

1. Your receivables are increasing but your collections are decreasing.

2. You are selling more vehicles but your portfolio is not growing at the same rate.

3. Your bad debt losses are increasing and you don’t know why!

4. Your portfolio is more than 50 percent liquidated and you aren’t replacing the “run off” with new originations.

5. Your portfolio performance is worse than the NABD industry benchmarks, which are available at

Hoping that next year will get better is not a prudent strategy. Waiting for the competition to decline or disappear isn’t the answer either. You must take a proactive approach to improving your internal portfolio performance and not depend on the competition declining.

The first step is to develop portfolio metrics: static pool, loss/liquidation, and default rates which are needed so you can compare your performance with your peers and identify performance trends. Here is what you can learn from the aforementioned metric calculations:

• Net Static Pool Rates – measures the frequency and severity of your bad debt losses after recoveries (in dollars) over the life of pools of installment receivables. (This is your performance report card!)

• Net Loss/Liquidation Rates – measures the pace of losses in your portfolio (after recoveries) in dollars before pools of receivables are fully amortized. This measurement is important for projecting cash flow, anticipating future losses, and in identifying changing trends.

• Default Rates – measures the frequency of bad debt losses in units (not dollars) over the life of your installment portfolio. This metric is used to measure volatility and portfolio quality.

If you don’t have these metrics your access to capital to fund portfolio growth will be severely limited. Capital providers use the aforementioned metrics to evaluate credit risk and to project loan repayment. You can’t expect to borrow millions of dollars without these portfolio barometers.

The next step is to charge-off your bad debts when losses become known. Bad debts in BHPH are not like wine; they don’t get better with age. When customers become delinquent 60 to 90 days their ability to “catch up” is unlikely. It is important that delinquent debt be charged off when it is identified so that losses can be mitigated and the appropriate collection action can be taken. If a charged-off account is subsequently collected the recovery should be recorded when received. A timely and consistent charge-off policy provides a realistic picture of your portfolio performance and helps you avoid financial surprises. These bad debt charge-offs are deductible for federal tax purposes so your corresponding tax liability is reduced.

Your business model dictates your BHPH success. You must evaluate your business model periodically for cash efficiency. That means determining the cash return (ROI) on your portfolio investment. You would not make other investments without first considering their ROI and the same holds true for building a BHPH portfolio. These calculations require the use of static pool and loss/liquidation metrics needed to project future cash flow, after bad debts and recoveries. Such projections are used to identify capital needs and predict future financial performance.

A new Credit Loss Measurement Standard passed by the AICPA in June will require you to reserve for future bad debt losses. You must determine how this new standard will affect your loan covenants and borrowing relationship as soon as possible. Metrics are needed to estimate future losses and to adjust your reserve for bad debts in your financial statements.

Those who do not make portfolio adjustments periodically cannot expect better results. The BHPH industry must regain market share by learning from their bad debt losses and not repeating them. Do not enter another year without “looking under the hood” of your own portfolio! The more you learn, the more you will earn! Good Luck!

Ken Shilson is president of Subprime Analytics, which uses data mining to perform computerized portfolio analysis for operators and capital providers to the subprime auto industry. For further information visit or by calling (832) 767-4759.

NIADA hosting first BHPH Summit

There is still time for buy-here, pay-here operators — especially ones who can easily travel to Dallas — to register for the training sessions the National Independent Automobile Dealers Association is organizing for its first BHPH Summit.

The event is set for next Tuesday, Wednesday and Thursday at the Embassy Suites DFW Airport North.

“It’s yet another addition to an NIADA toolbox that continues to expand our level of service to the BHPH industry,” NIADA chief executive officer Steve Jordan said.

Here are some of the agenda highlights of the summit that’s being led by NIADA director of dealer 20 groups Chuck Bonanno as well as the association’s two other 20 group moderators and training consultants — David Brotherton and Mark Dubois:

— 2017 industry trends and opportunities
— Credit reporting
— Remote payment options
— Underwriting in a competitive environment
— Collections best practices
— Network monitoring and cyber security
— Lead management basics
— Future of GPS and starter interrupt technology

Some of the other experts scheduled to be part of the summit include Susan Perlmutter of Sigma Payment Solutions, Steve Levine of Ignite Consulting Partners, Lawrence Pappalardo of Equifax, Robert Wilson of DealerSocket and Bill Neyland of TaxMax.

The association is also assembling a collection of capital providers who will provide their insights into the capital situation facing many of today’s dealers.

NIADA senior vice president of legal and government affairs Shaun Petersen also is on tap to share a regulatory update to summit attendees, as well.

The summit begins with a special welcome reception hosted by Kevin Carr, who is the vice president of financial services at PassTime GPS.

“The entire dealership staff can take something valuable back from this event, and we’re encouraging dealers to bring their managers, salespeople, service staff and collectors by offering discounts for dealerships that bring multiple attendees,” Jordan said.

“While the scope of this event is large, the idea behind it is simple,” he continued. “We want to help every BHPH dealer become stronger, more efficient, more compliant and more profitable. We want to give them the latest information, the best tools and the brightest ideas to make that happen.”

More details about the event can be seen in the video at the top of this page or by going here.

Operators can complete registration for the NIADA’s BHPH Summit by going to this website.