LOUISVILLE, Ky. -

The Sam Swope Automotive Group is the largest dealer group in Kentucky with 17 franchises in Louisville and another seven dealerships in Elizabethtown, Radcliff, Richmond and Lexington.

While it might not seem like it at first glance with so much factory metal in its portfolio of showrooms, one of the most thriving parts of the entire Sam Swope Automotive Group is its buy-here, pay-here operation, a business segment that has been going strong since 1992.

Doug Radcliff has been the general manager of Swope’s BHPH division since it booked its first deal 22 years ago. Radcliff described the “baby steps” the division took to now where it turns about 100 vehicles a month, down a bit from the 140 cars a month during the heyday for all BHPH operators.

Radcliff smiles at fellow franchised dealer managers who might scoff that he’s “only” the overseer of the BHPH division, which the group tags as the Sam Swope Advantage Plan.

“It’s been very good. I can’t complain,” Radcliff told BHPH Report. “I guess being in the large auto group, it’s been pretty neat because I fly under the radar. A lot of people would look down and say, ‘Oh he’s just the general manager of the buy-here, pay-here lot.’ I just smile because I enjoy it.” 

And for good reason, since some franchised dealers struggle to turn 100 new vehicles monthly in an environment where competition is as fierce as ever.

“In today’s changing market, whether it’s strategies, what we can do different, now the times are tougher and completely different in buy-here, pay-here. We’re just very fortunate to have the resources we have that either I wasn’t aware of or they didn’t exist back when we got started in 1992,” Radcliff said.

Beginnings of Sam Swope Advantage Plan

Radcliff remembered the first BHPH deal he originated with Sam Swope. It came about because the customer had poor credit and couldn’t obtain conventional financing but had a “pretty substantial” down payment. The down payment resulted in the dealership making a tidy profit because of the in-house financing.

“The risk seemed pretty small. That jogged our thoughts to possibly doing another one,” Radcliff said.

Radcliff pointed out the idea of having a BHPH operation wasn’t completely foreign to the dealer group. He mentioned founder Sam Swope also did some in-house financing of sales with some of his stores in Orlando, Fla.

Soon after that first deal in 1992, Sam Swope’s operation in Kentucky started to make more BHPH sales.

“We started small. We only did probably about 15 cars a month in our first year,” Radcliff said. “Fortunately for us, we were able to grow into it easily. When we did make mistakes, we didn’t have a huge one. That helped.

“At the time, there wasn’t the availability — or at least, we weren’t aware of it — of the resources that are out there now. We were fortunate to take baby steps at first,” he continued.

Radcliff acknowledged he and other Sam Swope leadership weren’t too sure about how much they wanted to delve into the buy-here, pay-here market. He conceded the reputation of BHPH operators wasn’t too favorable 20 years ago.

“Being part of the largest dealer group in the state of Kentucky representing ranges of new cars from Mitsubishi all the way up to BMW and Lexus, Mr. Swope over those years had established an extremely high name for himself and a pillar of the community. Looking into buy-here, pay-here at first was pretty scary,” Radcliff said.

“Trying to uphold the Better Business Bureau A+ certifications and some of the misnomers about buy-here, pay-here and how it was being done, we were obviously a little bit leery,” Radcliff continued.

“We actually started our operation within a new-car franchise at the time,” he added. “We really wanted to be different from — what I’ll say at the time because it’s gotten a lot better — or a little bit above what we thought was the average BHPH lot.” 

Location & Inventory Strategy 

The Sam Swope Advantage Plan had as many as six locations at one point, but Radcliff reduced that down to two. One lot is located in Louisville and another just across the Ohio River in Clarksville, Ind.

“I know a lot of dealers I’ve spoken to over the years have multiple locations,” Radcliff said. “To me, usually the ones that seem the most successful that have multiple locations are in areas where the locations are 30 to 60 miles away from each other so you’re not cannibalizing the business from the other lot.” 

Like so many BHPH operators, Radcliff has seen sales soft en because of financing that’s being offered to deep subprime customers by special finance companies. That’s trimmed about 30 to 40 vehicles sales a month.

“The secondary market, as we’re all aware, is very aggressive. Like anything, we said, ‘Do we want to be aggressive with them? Do we want to compete with them?’ We have gotten to the point where we didn’t feel like it was smart for us to just concentrate on taking care of our customers, getting down the expenses, so we worked with lowering our interest rates a little bit,” Radcliff said.

“We’ve always been under Kentucky usury laws. We did that by design to be compliant. We’ve lowered them just a little bit more just so we can work with the customer because the cost of money is still attractive right now,” he continued.

And Radcliff and the Sam Swope Advantage Plan team haven’t significantly altered what they stock in inventory, either. If potential buyers are looking for a basic, four-door sedan, they’ll find close to 100 in stock as Radcliff keeps about 60 days’ worth of inventory.

“Over time, we realized that we’re looking for a set of customers different from others,” Radcliff said. “Like a lot of people, we’ll get a lot of customers who come in and say, ‘Hey, I’m down on my luck, and my credit is bad. I need to get my kids to school. I’ve got to get to work. All I want is some good dependable transportation.’ 

“Then it usually goes one of two ways,” he continued. “You take them out and you show them that car that’s not real sexy, the Ford Taurus, Chevy Impala, whatever it might be. You’ll find out if they’re really telling you the truth or they turn their nose up at it say, ‘Hey that doesn’t have leather and sunroof.’ 

“We inventory to try to stay away from those customers that have made mistakes or been in circumstances that are prone to making that same mistake again,” Radcliff went on to say. “I could put out Hummers and all kinds of exotic things, high-line vehicles. If we carried those, we could probably triple or quadruple what we sell. But when you look at the cost for even a headlight on one of those cars, it might be $1,400. Obviously, our customers can’t afford that.” 

Special Service Department 

Over the years, the Sam Swope Advantage Plan has made changes to adapt to its market and how BHPH has evolved. One of the advantages Radcliff and his team have leveraged is the position as a franchised dealer group.

Sam Swope has a separate service center to cater its BHPH customers, a facility with 10,000 square feet that has the same technicians and equipment found at the franchised dealership service drive. The special facility handles everything from routine oil changes to major repairs at cost.

Radcliff indicated this service center opened about a year ago, and it’s staying busy not only with reconditioning work for future BHPH inventory, but also the at-cost approach to service is quite appealing to Sam Swope’s BHPH customer base, which currently consists of about 3,000 active accounts.

“Fortunately with access to a lot of different manufacturers, specialty tools and different things, we centralize not only our reconditioning, but we also opened a service center for our customers,” Radcliff said. “That service center is designed for our customers to not be a profit center, unlike you would have in a retail or separate environment. Typically, our labor rates will run about $40, just enough to cover technicians, the rent on the facility, things like that.

“It’s designed not to make money, because the old saying is if the car’s running, the good chance is the customer is going to pay. From that standpoint, we feel like we’re already asking enough from our customers,” he continued.

Radcliff mentioned that it took the manager of this department about a month or so to grasp the concept. This individual has been a parts manager for 30 years, most of that time at a franchised operation.

“I explained to him that he needed to try to fix these cars as cheap as he could, not make any money,” Radcliff said. “For about a month, it absolutely blew his mind. I didn’t know if he was going to make it or not. He was so used to finding every little angle to make every little penny, but we got that turned around.”