Financing

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 www.braegerfinancial.com 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 www.subanalytics.com 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 (www.subanalytics.com) and the National Alliance of Buy-Here, Pay-Here Dealers (www.bhphinfo.com).  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 www.bhphinfo.com. He also can be reached at ken@kenshilson.com.

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 www.subanalytics.com.

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 www.subanalytics.com 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.

It’s unanimous: Attendees rave about NABD’s fall conference

From Kansas to Georgia to across the Atlantic Ocean over to England, attendees evidently received what they wanted when the National Alliance of Buy-Here, Pay-Here Dealers hosted its Best Practices Conference in Orlando, Fla., at the beginning of this month.

President Ken Shilson highlighted that approximately 60 percent of attendees surveyed afterward had never been to an NABD conference previously. What they told Shilson and the NABD team about the three-day event dubbed “Best Practices to Succeed Now” left organizers excited about how the gathering unfolded.

“Attendee evaluations unanimously indicated that the program will help them succeed in 2017 and beyond,” Shilson said. “Our speakers and sponsors did an outstanding job helping attendees achieve their learning objectives.”

One person who gained significant amount of knowledge was Ciara Kimsey of Momentum Motorcars in Marietta, Ga., who might be considered a “green pea” in the BHPH space.

“As a dealer about to convert to BHPH, the information has been beyond helpful,” Kimsey said.

Taryn Meier of Affordable Transportation Co. in Abilene, Kansas, added, “This conference was very informational and helped bring my focus back to what’s most important in BHPH. Loved it!”

Along with attendees from elsewhere in the U.S. as well as Canada, Gavin Leach made the trip to Florida from Berkshire, England.

“I travel 6,000 miles to come to the convention. Need I say more; I always learn something valuable to take back,” Leach said.

The conference opened with 14 different workshop sessions covering vendor compliance, recoveries, millennial marketing, new technology, deal jacket compliance, reconditioning, F&I best practices, tax refunds, payment devices, capital solutions, lease-here, pay-here and the latest accounting and tax developments. All these workshops were interactive so attendees could ask questions and get answers on all these important topics.

General education sessions began with a highly inspirational keynote presentation by Harris Rosen, owner of Rosen Hotels and Resorts in Orlando. His keynote presentation was followed by sessions covering current developments, sourcing and financing inventory using digital channels and a benchmarks and trends update.

The event concluded with sessions on customer communications, an operating best practices dealer panel as well as a collection best practices panel and presentation. The conference also included a first-timer reception with more than 150 attendees and a sold out exhibit hall with more than 70 exhibitors who offered all the latest products and services to make attendees more profitable.

“NABD Orlando did not disappoint as the trend of improved success continued in our exhibitor space,” TaxMax founder Bill Neylan said. “It’s nice to have the ability to get in front of BHPH dealers who are decision makers that are there to take action. We meet new attendees every year who come to NABD with the goal of improving their business.”

NABD also announced that it will hold its 19th annual National BHPH Conference at a new venue — Encore in Las Vegas on May 23-25. Encore is a premier Las Vegas hotel and casino facility, and NABD has arranged unprecedented discounted room rates with no resort fees. The conference will focus on the “changing world of BHPH and of NABD” with an entirely new and exciting program agenda.

“This is a must attend for both new and experienced operators who want to compete successfully in the subprime auto finance market,” Shilson said.

For information or to register, visit www.bhphinfo.com or call (832) 767-4759.

AuctionACCESS adds Vehicle Acceptance to floor-plan platform

AutoTec announced on Tuesday that Vehicle Acceptance Corp. (VAC) is now integrated with the AuctionACCESS floor plan platform.

This integration will enable VAC to automate the transmission of updated credit availability and flooring request messages at AuctionACCESS subscribing auctions.

VAC insisted that the finance company believes in giving independent and buy-here, pay-here dealers choices. As an example, all dealers are offered four different price plans that are available on a per-unit basis and can be switched during the term. The AuctionACCESS connection will offer VAC dealers many more choices in auction locations from which to acquire inventory.

“This integration will make it easier for Vehicle Acceptance dealers to floor cars throughout the wholesale industry,” said Jonathan Neubauer, president and chief executive officer of Vehicle Acceptance.

“We are excited to work with our auction partners on this automation as it creates a more efficient process for our dealers to get in and out of the lanes,” Neubauer continued.

AuctionACCESS is the centralized credentialing authority for more than 285 wholesale auto auctions throughout the country. The company’s automated floor plan platform can provide a centralized portal for finance companies and auctions to communicate credit availability and loan origination information.

“We are excited about adding VAC as a partner on our floor plan platform,” AutoTec vice president of business development Charlie Adams said.

“AuctionACCESS is now integrated with more than 10 lenders, as we have created a centralized and efficient way for auctions and lenders to communicate up-to-date credit availability and real-time floor plan transactions,” Adams went on to say.

PassTime unveils LTE Category 1 Device on the Verizon Wireless network

PassTime recently launched what the wireless GPS telematics products provider called Elite 5, an LTE Category 1-based telematics device serving consumer, dealership, fleet and specialized finance company markets.

The company highlighted The Elite 5 is the first LTE Category 1-based GPS device certified on Verizon’s 4G LTE network to serve the subprime automotive finance market in the U.S.

In addition, PassTime noted the Elite 5 will feature advanced power-saving functionality.

“The Elite 5 is a huge accomplishment for PassTime,” PassTime chief operating officer Chris Macheca said.

Bringing the first LTE Category 1-based device into the payment assurance market will provide our customers with access to the most reliable 4G LTE network and provide for network longevity which is critical to our customers,” Macheca continued.

PassTime has been a valued member of the Verizon Partner Program for nearly two years since launching a CDMA device on Verizon’s wireless network in 2014.  The company continues to provide innovative products and access to the latest technologies, helping ensure its customers have the best technology options to fit their needs.

“PassTime is a valued partner that has made several fleet devices available to Verizon customers,” said Chris Schmidt, executive director at Verizon.

“We are pleased to see cost-effective 4G LTE solutions such as PassTime’s Elite 5 Cat 1 device come to market and provide a new solution to serve the subprime auto finance market that connects to Verizon’s 4G network,” Schmidt went on to say.

For more information on PassTime’s new Elite 5 device, contact the company at (877) 727-7846 or info@passtimegps.com.

DriveTime now gives buyers 3-month SiriusXM subscription

SiriusXM and DriveTime Automotive Group, which operates 140 dealerships across the country and turns more than 145,000 vehicles annually, announced on Thursday that its customers will now receive a three-month subscription to the SiriusXM All Access package when purchasing any pre-owned vehicle with a factory-installed satellite radio.

DriveTime vice president of market strategy Scott Worthington explained why this development will help DriveTime maintain its presence in the buy-here, pay-here market.

“At DriveTime, we are always looking for ways to build on our customer-first approach. This relationship with SiriusXM provides additional value to our customers and gives them a benefit they would receive with a new vehicle,” Worthington said.

The “All Access” package is SiriusXM’s most extensive offering and includes Howard Stern, every NFL, MLB and NBA game, every NASCAR race, plus NHL games, PGA Tour coverage and live college sports, as well as SiriusXM’s wide variety of commercial-free music, plus talk programming, comedy and several exclusive online-only channels. 

All-Access subscribers also can get access to SiriusXM programming outside the vehicle on the SiriusXM app and online at siriusxm.com.

“We are pleased to welcome DriveTime to the more than 23,000 auto dealers across the country already participating in the SiriusXM Pre-Owned Program,” said Gail Berger, vice president of auto remarketing at SiriusXM.

“The SiriusXM All Access package adds value to DriveTime’s satellite radio equipped pre-owned vehicle inventory, and gives their customers access to SiriusXM’s extensive programming lineup — with commercial-free music, plus live sports, comedy, news, exclusive talk and entertainment — as they drive their newly purchased vehicle,” Berger went on to say.

For more information on the SiriusXM Pre-Owned Program, visit www.siriusxmdealerprograms.com.

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