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 https://niada.hazmatu.org.
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 www.asbniadasolutions.com.
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.”
The National Alliance of Buy-Here, Pay-Here Dealers recently announced the details of its 19th annual BHPH Conference at the Wynn/Encore in Las Vegas on May 23 through May 25. NABD president Ken Shilson explained that the theme of this show is “The Changing World of Buy-Here, Pay-Here,” because the event will focus on how operators can compete successfully in the highly competitive subprime auto finance market of today.
The show will begin at 1 p.m. on May 23 with a first-time attendee reception. This reception will be followed by general education sessions that will feature critical decisions for success, a legislative and regulatory update, an evolutionary view of wholesale acquisition and a benchmarks/trends update.
The opening afternoon will conclude with a gala welcome reception with more than 130 exhibitors in what NABD claims will be the largest trade show in BHPH history.
The next day will open with a networking breakfast with attendees and exhibitors. The general education sessions will resume on the morning of May 24 at 9 a.m. with a keynote presentation titled, “Embracing Change” by nationally recognized motivational speaker Richard Flint.
The morning sessions will conclude with a best-operating practices panel and a technology solutions showcase featuring innovative new technology to improve efficiency and profits.
After lunch on May 24 and continuing through the following morning, 12 interactive workshops will begin covering:
—An accounting/tax update
—Capital
—Compliance hot topics
—A current developments update
—Getting your best customers back
—Reconditioning best practices
—Keeping customers paying and increasing recoveries
—Sourcing and financing the right inventory
—Technology solutions for GPS
Shilson said these sessions will allow attendees to ask questions and find solutions to the biggest challenges facing the subprime finance market of today.
“Not only is the BHPH industry different but so is this conference,” he said. “The general education sessions will alert attendees to the biggest challenges they must solve to compete more successfully. Our workshops and the ‘Solutions Hall’ are filled with experts that can help provide the best answers for those challenges.
“This show is a must-attend for both new and experienced operators who need to adopt the changes required to operate successfully today,” Shilson went on to say..
On May 25, breakfast and lunch will be held in the ‘Solutions Hall” to facilitate networking between attendees, experts and sponsors.
All the educational sessions will be at Encore this year which was recently renovated and won the Travelers Magazine award as the finest hotel in Las Vegas. All the Encore rooms are suites and NABD secured $209 discounted room rates with no resort fees while supplies last.
Shilson emphasized the prices for accommodations “make this fabulous facility affordable to everyone.”
Attendees may register online at www.bhphinfo.com or by calling (832) 767-4759. Sponsors who are interested in exhibiting should call the NABD office while space is still available.
“Anyone who is seeking to improve their BHPH business in 2017 is encouraged to attend,” reiterated Shilson, who went into more detail in an online video available here.
A Georgia man running a Virginia dealership retailing repaired salvage units pleaded guilty to operating an odometer fraud scheme involving more than 100 vehicles, according to an announcement from the Department of Justice.
Officials said last week that Paul Robinson, of Lawrenceville, Ga, pleaded guilty in U.S. District Court in Norfolk, Va., to one count of conspiracy to commit securities fraud and odometer tampering.
Robinson owned and operated Affordable Auto Body Repair, a repair shop and licensed salvage vehicle dealer located in Chesapeake, Va. The Justice Department indicated Robinson purchased older vehicles, many of which had been involved in accidents, from an auction specializing in vehicles from insurance companies. On more than 100 of these vehicles, officials said Robinson altered or replaced the odometer to reflect a false, lower mileage.
The Justice Department said Robinson then obtained fraudulent Virginia motor vehicle titles with mileage readings matching the false, lower mileage on the new odometer, and passed these falsified title documents on to the vehicle purchasers.
Officials determined Robinson obtained many of these fraudulent titles from a former DMV Select clerk named Steven Bazemore. In many instances, DOJ said Robinson asked Bazemore to return the documents used to procure the fraudulent titles rather than retaining the documents in the DMV file system. Officials acknowledged this strategy made it more difficult for the DMV to detect the fraud.
On Sept. 22, Bazemore was sentenced to one year of home confinement and ordered to pay restitution to the ultimate purchasers of the vehicles. Robinson’s sentencing is scheduled for June 8.
“We buy vehicles to help assist us in many aspects of our lives,” said acting assistant attorney general Chad Readler of the Justice Department’s Civil Division. “No consumer makes such a significant purchase lightly and we have to be able to trust that a dealer is not selling one car and actually supplying a vastly inferior automobile paired with falsified title documents.
“We are committed to prosecuting individuals who break that trust by rolling back odometers and passing off phony title,” Readler continued.
This case was investigated by National Highway Traffic Safety Administration Office of Odometer Fraud Investigation (NHTSA) and the Virginia DMV. NHTSA estimates that odometer fraud in the United States results in consumer losses of more than $1 billion annually and has established a special hotline to handle odometer fraud complaints.
Individuals having information relating to odometer tampering can call (800) 424-9393 or (202) 366-4761.
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 Susan Perlmutter, chief revenue officer at Sigma Payment Solutions.
BHPH Report: What’s your assessment of how closely collections practices are watched by federal and state regulators nowadays, and how much has it intensified in recent years?
Susan Perlmutter: Debt collection has always been a focus of federal regulators. It started with the implementation of the Fair Debt Collection Practices Act (FDCPA) in 1997, followed in 2010 by the Dodd-Frank Reform and Consumer Protection Act. Dodd-Frank gave the Consumer Financial Protection Bureau (CFPB) the power to become the first agency to issue substantive rules under its statute. With the oversight of the CFPB into this heavily regulated area, debt collection practices now have even deeper focus from an entity that is not known for its investigative processes. The BHPH industry has become lumped into the other perceived areas of high-risk consumer loans, such as installment, payday and title loans. That is tough on today’s BHPH operators — especially considering the business owners themselves are now personally in the path of the CFPB focus, not just the businesses they own. This type of approach to policy enforcement is unprecedented.
BHPH Report: What’s the No. 1 mistake BHPH operators still make in their collections departments and why?
Susan Perlmutter: While I agree personal contact with a customer is still necessary to build the initial relationship, I also believe the No. 1 mistake a BHPH operator can make is thinking the phone is still the king of contact after the sale. Today’s consumer is much more likely to respond to non-confrontational collection methods. Remember the days when customers would put their payments in envelopes and slip them under the door, even though collectors had left numerous messages on their machines? These customers still exist and will gravitate to self-serve methods of communication for information and making payment, if autonomous solutions are made available to them.
I believe operators should take a more scientific approach to their collection portfolio to identify consumer trends within their own accounts. There is a huge misconception among business owners that technology bears a large cost. This simply is not the case. With a little bit of fact finding, technology can assist with the overall management of the entire collection process. Are collectors spending more time leaving messages than actually speaking with a customer? What is the consumer response rate to the current method of contact? What communication methods carry a higher response rate from the customer? What is the average age of the customer? Do certain age groups respond to certain communication methods better than others?
If the phone is the only method of contact and the cashier or collector is the only way to make a payment, the BHPH operator is bearing a huge cost for very little reward when it relates to managing a growing collection portfolio. Collection technology will not replace collectors, but it will allow an operator to grow and manage a portfolio more effectively without increasing collection staff.
BHPH Report: What can an operator who doesn’t have significant resources do to improve collections?
Susan Perlmutter: More collectors making more phone calls is not the answer to improve collections. There are many options for friendly customer contact that are less costly than having an account representative call a customer by phone, the costliest of all contact methods. Good collections come from friendly and constant contact with customers. Developing a process for automated contact and collection of payments — one that is readily and easily adopted by customers — is key for portfolio growth with limited resources. For example, starting the after-sale relationship with a text to say “thank you for your purchase” paves the way for future text communications to remind a customer payment is due or advise a payment is past due.
In addition to managing portfolio growth, adding communication methods that will allow customers to self-serve account information or make loan payments will reduce the pressure put on staff members to answer phones only to collect payment account information or cite balance information.
Limited resources do not have to result in limited collection efforts. Consumer-facing web portals, Interactive Voice Response (IVR) systems and SMS text are all low-cost, alternate methods of communication that have already had large adoption rates by consumers. When evaluating resources and costs, BHPH operators should pair customers with the best and most cost-effective methods of communication, which often enough, is not calling the customer during an 8-to-5 workday.
Having the necessary resources to run a business of any size is always a challenge. Automating collection processes and providing customers options for retrieving their own account information can relieve the strain on a business with limited resources and fill in gaps during a growth or restructuring period.
BHPH Report: What are you watching in the collections space as we go into 2017 and beyond?
Susan Perlmutter: The CFPB has already announced they are planning a separate track involving first-party debt collectors and creditors. Proposed rules by the CFPB for third-party collection may inevitably bleed over to first-party, which will shift the paradigm of how the BHPH industry will approach collecting loan payments. Some of the proposed changes that could directly affect the BHPH operator include the following: credit bureau requirements, limits on number of communication attempts before contact, and easier methods of cease and desist orders to stop communication from a particular source or time of day. BHPH operators have been feeling the increasing compliance with regard to handling the sale of the car — everything from advertising to contracts. I believe they will see more directives and fines in 2017 resulting from the collection of loans and communication, or lack thereof, with customers.
Additional pieces from this series can be found below:
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:
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
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 Bill Caan, national sales manager at CalAmp.
BHPH Report: Since they’ve been used for several years now, how much have payment devices and GPS tracking systems changed the way auto financing occurs in this area of the credit market?
Bill Caan: There’s been a couple of big changes. One is the sophistication of the devices themselves, whether it be going from 2G to 3G or the functionality that the devices offer. They allow a lot more flexibility in the way you can collect on your loans. That being said, it gives you the ability to underwrite more aggressively with the idea that if the loan goes sideways, I can protect my collateral because I can monitor my collateral.
One of the things that will happen over the next couple of years, if it’s not happening already, is that finance companies will start to use GPS tracking devices to monitor risky behavior after the loan has been made. By that I mean, if you think about, everyone has their underwriting scorecard and that’s how you decide how to make the loan. There’s a risk associated with every customer whether it’s credit score, income or down payment, the car. Now you have these GPS devices that can detect risky behavior after the loan has been made. Once you agree to it and fund it, it’s yours. There’s nothing you can do about it. But the GPS devices now are going to help collectors determine when risky activity is happening. They’re going to be able to decide, say, if you got an impound lot alert. The procedure can be to go get the car after one day. If the customer is outside of a 300-mile radius from where he bought the car, that’s potentially risky. If the car hasn’t been driven in a week, that could be risky.
I’m not sure you can manage the incidents, but you could manage the severity of loss. We view GPS devices as being able to cut down on the severity of losses because they’ll have the information when risky activity is happening in the field.
BHPH Report: How careful do BHPH operators need to be as not to soften underwriting simply because of devices’ capabilities?
Bill Caan: You have to be real careful. If you go back to Lending 101, you look at ability to pay, stability and willingness. I’m going to put this guy in a loan he can afford. And based on his credit history, he’s willing to take his paycheck and pay it. You start there.
There’s a false sense of security if you think you can make a loan to anyone because I can just stick a GPS on there. You have to be real careful with that because a buy-here, pay-here dealer controls both sides of the equation. He does the underwriting and the collecting. It’s his money and his car.
If you make a loan just because there’s a GPS on the car, the fact that you get your car back isn’t great. You never want to pick up the car because it’s the last-ditch effort. But at least a buy-here, pay-here dealer can just put it back on the lot and away they go.
But people who underwrite with the GPS on there, you have to take into account what your remarketing costs are as well as the fact the GPS is great when the customer hasn’t tampered with it and it still works. That’s another issue.
You just have to be real careful when you change your underwriting saying I can do anything because I have the GPS on there. You have to look at what your recovery and remarketing costs are, too.
BHPH Report: How closely are federal and state regulators watching the use of devices?
Bill Caan: It’s more on a state-by-state basis right now then a federal basis. We’re addressing through our trade organization a new potential bill in New Jersey. I think there are a whole vanguard of people who are starting to look at the use of GPS.
The CFPB really hasn’t come out with a statement on it. I think they’ve got their hands full with what they’ve got going on right now. I think we can all agree that based on what we believe the CFPB isn’t going away.
One of the things that anyone using a GPS program needs to do is absolutely document what they’re doing. Like everything else for the CFPB, you have to have a complaint section. You have to prove there is no disparate impact with the way you’re using them. You have to be really consistent.
I also think one of the issues that’s coming to the forefront is as a buy-here, pay-here dealer you have to be really aware of who your vendors are. You’re not only responsible for what you do, you’re also responsible for what your vendors do. That’s the next step for dealers, to understand who your vendors are.
BHPH Report: How can these devices help other parts of a BHPH dealership’s operation beyond collections?
Bill Caan: We’re starting to address the use of GPS as a data-gathering device instead of just a pure recovery device. If you look at the risk associated with a car loan, if we can start to let the buy-here, pay-here dealers start to monitor their risk post-underwriting and make decisions based on that, you’re going to cut into the severity of loss. I’m not sure you can change the incidents all that much; that’s more of an underwriting standpoint. But if you start to look at culling information from your device — this car hasn’t been driven, or this car is being driven 4,000 miles a week — all of that information is available through the GPS.
Once we get buy-here, pay-here dealers to start to understand that this is valuable information and they can get a handle on what they should do with their collateral, the lower the severity of loss will be. These cars don’t get more valuable. That’s where this market is going.
Additional pieces from this series can be found below:
4 questions with Ace Christian of the Arizona Independent Automotive Dealers Association
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 www.bhphconsulting.com.
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.
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.
