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