Everyday battles. Sales waning. Cars breaking down. Lapsed insurance. Repos. Low working capital.

Do you feel like you’re losing?

Every day in buy-here, pay-here operations across this great country, dealers are asking similar questions:

—Where do I go from here?

—Is there something practical I can do to alleviate some of these day-to-day struggles?

I am not sure if you have read any of my educational columns before, but I would like to share some best practices, from my point of view.

Let’s start with Business 101. Your business model is to provide a solution to a basic need for a particular segment of our population: the BHPH customer.

Who is the BHPH customer? They are usually hourly employees with poor credit or limited credit, live paycheck to paycheck and depend heavily on their transportation. As consumers, just like the rest of us, they want to be treated honestly and fairly.

The late Maya Angelou said it best when she said, “People will forget what you said. People will forget what you did. But people will never forget how you made them feel.”

Love Your Customers

The average person in our society, should they have a problem with their vehicle, experience an inconvenience. However, should the BHPH customer have a problem with their car, they face a crisis.

Their car represents their lifeline. Hourly employees do not get paid if they don’t go to work. Any missed work means a smaller pay check.

A smaller pay check means it is more difficult to make their payments to you and their insurance carrier. Now their missed work trickles down to be your problem.

What are the major causes of repossessions?

Repossessions can be broken down in three major categories:

1. Life events, such as divorce, employment separation or unexpected expenses

2. Lapsed insurance

3. Mechanical breakdown

Let’s walk through these scenarios and see if we can come up with a solution.

Handling Major Life Events

This is certainly an area where you have little control over, but an opportunity to love your customer by providing a certain amount of understanding.

If your customers know that you care, and they communicate with you about their troubles, by giving them some leeway, you can create a customer for life.

Remember: People will forget what you said. People will forget what you did. But people will never forget how you made them feel.

The other two causes of repossessions (lapsed insurance and mechanical breakdown), as well as your need for a marketing advantage, and even the need for an additional capital resource, can be greatly alleviated with the addition of a dealer-owned reinsurance company.

When The Insurance Lapses

Full-coverage insurance should be a requirement at your store. But many dealers, faced with overwhelming collection difficulties, turn their head and hope nothing happens.

What if you made a deal with your customers? You can tell them: you pay a little extra each pay period to me. And in return, if you total your car or it’s stolen and not recovered, I will forgive your debt to me.

That is the definition of debt cancellation coverage (DCC).

DCC alleviates the need for you to require full-coverage insurance. You can collect the premium with their monthly payment. Debt cancellation coverage is a solution to relieve the lapsed insurance problem and turn what once was an expensive, never-ending problem into a tremendous profit center.

By capturing the money the customer would be spending with the insurance company and ceding it to your dealer-owned reinsurance company, you profit instead of the insurance company.

You can profit from money that you had required the customer spend with someone else, anyway.

DCC puts you in control when there are claims.

Instead of dealing with insurance adjusters, you have a professional claims team looking out for your best interest, nationwide.

DCC dealers avoid having unprotected collateral on the road and having to absorb uninsured losses.

When the Vehicle Breaks Down

You know it’s going to happen. Why not reserve for it? Why not have a system in place that no matter where your customer drives that vehicle, should they breakdown, you have a plan and the money set aside to get them back on the road and making their payments.

The beautiful thing is that your customer can be the one reserving it for you.

What I suggest is you warranty your vehicles and let your customers provide you the reserve to keep the cars repaired and on the road.

How? Your reinsurance company will provide premium finance for your customer’s warranty; therefore, not requiring you to pay the full price of the warranty up front, which would deplete your lending pool.

A prorated portion of the cost of the warranty is collected from the customer’s payment and forwarded to your reinsurance trust account. This will provide a constant stream of reserve to ensure when problems arise there is a well-funded system in place to take care of those problems.

As you have heard many times, customers do not pay for vehicles that do not run. With a reinsurance company, your customers stay on the road because their vehicles are repaired when problems arise, and they continue making their payments.

Now, it is much easier to show you care when you have a well-funded plan in place to take care of what is sure to happen. And when your customers know you care, they will tell others that you care!

A dealer-owned reinsurance company will boost your profits, increase sales, alleviate problems and provide you with much needed capital. It sounds too good to be true.

However, smart dealers have answered the “plan to win” with their own reinsurance company, a sound business strategy that’s been around for more than 30 years.

Tim Byrd is founder and president of Tim Byrd & Associates, a managing agency located in Gloucester, Va. An auto industry expert on dealer-owned reinsurance companies, BHPH operations and F&I development, Tim has been a trusted adviser to many dealers for more than 25 years. Tim can be reached at or (804) 824-9533.