NIADA survey shows ‘unprecedented’ positivity

Cox Automotive’s Tom Webb said earlier this year that buy-here, pay-here dealers were in a “better position.” Then a few weeks later, Ken Shilson with the National Alliance of Buy-Here, Pay-Here Dealers highlighted how “bad news could be good news for BHPH.”

More upbeat assessments arrived on Monday as the latest installment of the National Independent Automobile Dealers Association's quarterly Business Confidence Survey reflected immense optimism from independent used-vehicle dealers regarding retail sales, consumer traffic, profitability and economic conditions.

The survey, conducted in partnership with Equifax during the first quarter of this year, showed confidence in all of those areas was up substantially from the previous quarter and year-over-year.

Nearly two-thirds of respondents (63 percent) indicated they believe the economy will improve in the next quarter, a significant increase from the previous survey, in which only 34 percent expected economic improvement, and the 36 percent of Q1 2016 — that year’s highest percentage.

Just 2 percent said they expect the economy to decline, down from 22 percent in the Q4 survey.

It’s the first time since Q3 2015 that a majority of survey respondents have expressed a positive outlook on economic conditions.

That optimism is reflected throughout the survey. More than half (53 percent) of the respondents plan to invest in more retail inventory, up from 41 percent in the previous survey, and 54 percent expect to hire new sales staff (up from 32 percent), as 70 percent anticipate retail sales to grow (up from 46 percent) and 71 percent expect customer traffic to increase (up from 36 percent).

On the financial side, the percentage of dealers expecting cash flow to improve (57 percent, up from 34 percent) and credit availability to expand (32 percent, up from 23 percent) over the next quarter was also sharply higher.

“A degree of optimism is always expected with a new year,” Equifax vice president of dealer services John Giamalvo said, “but this level of widespread positivity is unprecedented for this survey as dealers seem primed to ramp up their businesses and position themselves to capitalize on expected opportunities in the year ahead.”

NIADA senior vice president Scott Lilja said it’s no coincidence that the rise in dealer optimism came in the first survey taken since Donald Trump took office as president.

“Certainly the ‘Trump Effect’ has helped drive this newfound enthusiasm in the market,” Lilja said. “The proposed regulatory and tax overhauls promised by the new administration have helped improve the mood of dealers who have long been inundated with federal and state regulatory measures and overly complex tax policy.

“Should some of that burden be lifted by the new administration, the cost of doing business could be substantially reduced,” Lilja added.

Lilja and Giamalvo said other factors driving anticipated retail sales and customer traffic growth include an increase in used vehicle inventory available to meet consumers' ever-shifting needs and the average price differential between new- and used-vehicle average transactions, which hit an all-time high of $11,000 in Q4 of 2016, both of which are expected to bring former new car buyers to independent used car stores to find more affordable transportation.

NIADA adds 2 organizations to National Member Benefit program

NIADA recently welcomed two more members of the National Independent Automobile Dealers Association's National Member Benefit program. The pair includes the Coordinating Committee for Automotive Repair and American Solutions for Business.

The Coordinating Committee for Automotive Repair (CCAR) is a nonprofit organization dedicated to providing best practice information and training resources to the automotive industry.

CCAR, whose suite of auto industry training courses have been accessed by tens of thousands of users, has been recognized as an Occupational Safety and Health Administration (OSHA) Alliance Partner within the automotive industry since 2004.

CCAR’s line of hazardous materials handling courses — known as HazmatU — was specifically created at the request of automotive OEMs.

“NIADA and its members are a perfect fit for the training resources we have to offer,” CCAR president Charles Ayers said. “We welcome the opportunity to broaden our reach and work proactively with the members of the association.”

CCAR's learning management system, autoEHS, includes courses in English and in Spanish.

“We are thrilled to have CCAR bring its renowned automotive safety-related training programs to our independent auto dealer members as an invaluable resource to ensure employee safety, meet state and federal workplace safety guidelines, improve employee productivity and much more,” NIADA senior vice president of member services Scott Lilja said.

 NIADA members can sign up for courses at

Meanwhile, American Solutions for Business has joined the National Independent Automobile Dealers Association's National Member Benefit program to provide NIADA members a one-stop shop for a wide variety of dealership needs.

ASB offers automotive forms and supplies, custom print and promotional products, branded apparel, technology solutions, retail displays, office supplies, tools, warehousing solutions and more.

“We're pleased to partner with NIADA to provide solutions that will streamline processes for automotive dealerships,” ASB automotive director Jason Gange said. “We are proud to be customer-driven, a philosophy that means we find solutions and solve problems for clients every day.”

Association members can take advantage of immediate cost savings by visiting ASB’s exclusive NIADA National Member Benefit eCommerce portal, where they’ll find stock automotive forms and supplies, toner and office supplies at some of the lowest prices in the industry.

The portal is accessible through NIADA's Member Benefits Hub or by visiting

In addition, American Solutions for Business offers a knowledgeable national account management team to assess unique business needs and recommend the best solutions available in the areas of customer retention and growth, marketing, document management, technology, retail merchandising and more.

“ASB brings more than 30 years of small business service solutions and expertise to our independent dealer members,” Lilja said. “It has an extensive local field force to bring best-in-class service and support to our member dealers who use ASB for their numerous office, banking, retail lot and service bay supply needs.”

How 2 major players navigated tax-refund delay

Think your buy-here, pay-here operation has been the only one impacted by the delayed release of tax funds to certain consumers? One of the largest BHPH players as well as a finance company that books plenty of non-prime originations discussed the situation recently.

First, a little information background from Cox Automotive chief economist Tom Webb. Because of the new federal mandate requiring tax refunds involving the Earned Income Tax Credit or the Additional Child Tax Credit to be held until Feb. 15, Webb noted that year-to-date tax refunds though Feb. 10 were down 69 percent, or $65 billion, from a year ago.  “But then the flood gates opened,” according to Webb, and a record $74 billion in tax refunds was distributed during the single week ending Feb. 17.

As of Feb. 24, Webb indicated year-to-date tax refunds were down 10 percent or $15 billion.

“The unusual flow of tax refund monies this year appears to have had less of an effect on dealers than one might expect, especially since other retailers (most notably, TV and appliance stores) did notice a significant impact,” Webb said in his commentary that accompanied the release of the February Manheim Used Vehicle Value Index.

Meanwhile, the leadership at both America’s Car-Mart and Santander Consumer USA (SCUSA) discussed the impact that tax-refund delay has had on their respective businesses. Car-Mart president and chief financial officer Jeff Williams responded to questions about the topic when the company that has a network of 140 BHPH dealerships throughout the Southeast released results from the third quarter of its fiscal year on Feb. 21.

“It’s a little hard to tell,” Williams responded when asked about the percentage of customers in Q3 who typically used their tax refund to purchase a vehicle. Car-Mart reported that its Q3 retail sales softened by 1.3 percent to 10,866 units, down from 11,013 units a year earlier.

“Last year, the tax money was out basically for the last week of January. So we feel like, looking back, that we had maybe 300 sales last year that didn’t happen this year because of the timing of tax refunds. And yes, theoretically that should all roll into the fourth,” Williams said.

“But the money has been delayed a full month. We’re just now receiving it,” he continued. “So there is some risk that it may be a little lower this year, but our expectations at this point are that the initial fall in the third quarter, if we execute the way we’re planning to, should roll into the fourth quarter with the volumes.”

Over at SCUSA, the tax refund topic came up when the finance company hosted its 2017 Analyst and Investor Day in New York. An attendee asked SCUSA about the subject in light of Car-Mart discussing it, too.

“What we did see up until frankly about a week ago was what we normally expect as we get into February, to start to see application volumes start growing due to tax season impact. We had not seen that early in the month.

“We did start seeing at least what appeared to be the initial signs of some higher app volumes about a week ago. So we'll see,” SCUSA chief operating officer Rich Morrin said during the event on Feb. 23. “Obviously we'll have to see if that trend kind of continues, but it seems like, given the delays, it's definitely slowed down how quickly people have been going at least into car dealerships to spend that money.

“We have not seen anything significant in terms of modification differences as a result of the delays. So what we would expect to see if the trend continues over the last week is that maybe the backlog is starting to unwind and people are starting to receive their refunds and we’ll see if they continue to go buy cars with them,” Morrin continued.

SCUSA president and chief executive officer Jason Kulas immediately added, “The key word there is delay. The refunds are coming. They just have been delayed. So I think that's a really important factor to remember.”

Interstate Title Solutions partners with NIADA

This week, Interstate Title Solutions (ITS) joined with the National Independent Automobile Dealers Association as its newest National Member Benefit partner, offering NIADA members discounted access to its out-of-state tax, title and registration tool.

DMV Nationwide, a web-based tool paired with managed service, was designed specifically in response to the challenges dealers experience while making out-of-state deals, especially since some buy-here, pay-here operations have locations in multiple states or sit near a border.

Because the additional time and money spent on those unfamiliar transactions use up so much of dealers' already strained resources, ITS created a simple, point of sale solution that can present a concise summary of the rules and regulations for the customer’s state.

DMV Nationwide also can incorporates the dealer’s sales tax responsibilities, allowing the dealership to successfully convert and manage out-of-state customers while maintaining its own compliance.

“Our top priority with DMV Nationwide was to design a tool that helped dealers manage the out-of-state customer with greater confidence, without having to worry about whether they collected the correct amount of sales tax,” ITS president Marlon Carias said.

“Our innovative solutions have been helping dealers across the U.S. with these complex transactions for more than 14 years and we are proud to support our nation's independent dealers by partnering with NIADA,” Carias continued.

ITS is providing free account activation, maintenance and negotiating tools for NIADA members, waiving the annual maintenance fee for the first year — a $399 value.

“ITS brings state of the art technology to our members' vehicle registration and titling process, enhancing their ability to expand their retail market's geographic footprint and digital marketplace," NIADA senior vice president of member services Scott Lilja said. “We see tremendous value to our members through this just-launched member benefit program offering.”

For more information, visit, call (866) 725-4491 or email

Webb sees BHPH dealers ‘in better position’

Cox Automotive chief economist Tom Webb acknowledged the past few years probably constituted the most difficult span ever encountered by buy-here, pay-here dealers. Finance companies specializing in the subprime space took on contracts deeper down the credit spectrum, leaving operators wondering where their customers went.

But Webb thinks this year could be much better for BHPH operators who have managed to keep their business intact.

“It’s certainly been a very challenging period for them,” Webb said during a recent phone conversation with BHPH Report. “And in this particular cycle as you well know, it was primarily caused by the subprime lenders buying deep subprime and a lot of new lenders using alternative data sources were buying down into the buy-here, pay-here dealers’ traditional customer base.

“There’s been other cycles where they went through a period where they had a hard time acquiring inventory at the price they wanted,” he continued. “But this past couple of years have really been challenging in terms of the subprime lenders buying down into their space. That cycle appears to have run out. So I’m thinking they’re looking to be in a better position this year because those deep subprime lenders have started to pull back a little bit.”

An example of that pullback is the activity by Consumer Portfolio Services, which booked less paper during the fourth quarter.

“Dealers are pushing bad deals towards us. They know we won’t buy it. I mean they’re desperate to get more cars sold,” CPS chairman and chief executive officer Brad Bradley said during the company’s quarterly conference call.

“You hear that from origination folks. Either they’ll tell you that it's really slow at the dealerships or that they’re seeing these bad loans getting pushed to see if we’d buy them. And of course we won't but still it’s the continuing struggle because we also would like to always buy something,” Bradley went on to say.

Webb and his team also addressed the BHPH market in this year’s Manheim Used Car Market Report, which was released in late January. Along with reiterating the competition BHPH dealers encounter with finance companies, the report also detailed how no longer is there what might be considered a “traditional BHPH model.”

The report explained some operators significantly increased the price point of the vehicles they offer while other dealers kept their price point and built in more goodwill policy work as a reserve.

Furthermore, the report showed other operators delved into the lease-here, pay-here model and while perhaps traditionalists simply worked diligently to capture more upfront money in the deal.

“It really is a market that is best served by the buy-here, pay-here dealers that have been serving that market quite well for many years,” Webb said during the phone conversation.

BHPH inventory analysis

The Manheim report pointed out that rising wholesale prices have often caused headaches for BHPH dealers as they need to find vehicles their customers can afford, but that will also be capable of running the term of the note with minimal repairs.

To give a sense of just how much wholesale prices have gone up over time in the lower price tiers, analysts looked at the average mileage on auction vehicles that sold between $4,000 and $6,000 over the past 16 years. If an operator spent $5,000 on average for a vehicle at auction in 2000, on average they acquired a unit with 84,541 miles.

“Average mileage slipped over the following three years as wholesale supplies grew and the overall pricing environment weakened,” the report said.

But between 2003 and 2014, average mileage for the typical $5,000 auction purchase rose every year, except for the recession of 2008 and 2009. In 2015 and 2016, the report noted BHPH dealers got a little reprieve when the average mileage on a $5,000 auction purchase fell below 120,000 miles for the first time since 2012.

“The ideal inventory in terms of a buy-here, pay-here dealer is dealer consignment vehicles that are relatively aged but they’re still in a condition they’re comfortable with and can run the term of the note,” Webb reiterated.

Given the fact that vehicles today, the quality and durability and their ability to run for a long time if they’re properly maintained, it does open an access for the buy-here, pay-here dealer to buy a vehicle regardless of what their preferred price point is. They can probably find good units out there,” he continued.

The fact that the dealer consignment lanes apparently have the inventory BHPH dealers seek also means fewer operators are scouring salvage auctions in hopes of finding units that can be repaired and retailed with a branded title.

“I think it’s fallen off because the other types of inventory is available,” Webb said. “When it was really a tight situation, certainly everyone was looking at all avenues. To a certain extent from a consignor standpoint they even found some of their vehicles might sell better in a salvage sale as opposed to a traditional sale even though the vehicle might not technically be salvage.

“As you know, many buy-here, pay-here dealers do not have any service shop at all,” he continued. “They don’t want to do a lot of reconditioning. They don’t want to rebuild units. That’s more of a game for the wholesalers to play. Basically they are looking for a clean vehicle in relatively good condition.”

5th J.D. Byrider store in Missouri opens

Buy-here, pay-here franchise chain J.D. Byrider recently opened its fifth location in Missouri; the second one in the Show-Me State to join the network so far this year.

The new location is in Rolla at 2603 N. Bishop Ave. This store is the first J.D. Byrider store for local franchise owner Lawrence West.

This facility will be part of the West Family Motors family, which has a 60-year history of community involvement and has recently supported organizations such as the Rolla Cancer Gala Fundraiser, St. James Veterans Home, Phelps County School Parent Teacher Organization, and countless other local causes.

“For more than 27 years, J.D. Byrider has built its reputation on providing quality vehicles for those who have less than perfect credit,” West said. “We are excited to serve Rolla and the surrounding communities partnering with this great company.”

The new facility will offer four service bays for on-site maintenance and $9.99 oil changes. The dealership will initially employ 10 people with room to grow.

“Lawrence West is an exceptional operator and will serve our customers well in the Rolla, Mo., market,” said Tom Welter, vice president of franchising for J.D. Byrider. “He understands the value proposition as it relates to our business model and the customers he will serve.

“This is our second opening in Missouri this year for J.D. Byrider, previously opening Joplin in January,” Welter continued. “Our customers know and trust our brand and the West family is ready to serve their automotive needs in Rolla. We are thrilled to have Lawrence and his team on board.”

Along with Joplin and Rolla, J.D. Byrider also has Missouri franchise locations in Columbia, North Kansas City and Springfield.

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