If any buy-here, pay-here operators were fans of the HBO comedy program “Last Week Tonight with John Oliver,” they might not be any longer after the host’s unflattering portrayal of subprime auto financing, and in particular BHPH dealerships.
The nearly 18-minute segment recounted the story of a vehicle repossessed and resold multiple times, revisited the series published by The Los Angeles Times that triggered significant legislation in California, and included snippets of comments that Ken Shilson, the president and founder of the National Alliance of Buy-Here, Pay-Here Dealers, made during the annual conference hosted by DBA International earlier this summer.
Before operators get too discouraged about being negatively portrayed, BHPH Report found a consumer who has greatly benefitted from the “transportation solution,” as Shilson likes to put it, that dealerships with related finance companies can provide individuals with badly bruised credit histories.
And the anecdote came from a story posted earlier this year by sister publication SubPrime Auto Finance News.
The individual, who was listed as Joy in the comments section and verified by BHPH Report, indicated that delivery came through a DriveTime dealership. One of DriveTime’s former top executives, Mark Sauder, was recently inducted into the NABD Hall of Fame.
Joy recollected, “DriveTime is great if you are responsible. I went to DriveTime because my heart broke every time my son cried because it was too cold to sit at the bus stop.
“My credit was so bad, I was surprised they gave me a car. When I was young I maxed out a bunch on credit cards and was evicted twice. I wouldn't give that person a car. I only had a job for a couple of months, but my baby was crying. So I went to them, and they saved me,” Joy continued.
Joy did some due diligence when selecting a vehicle, too.
“I took my car to two mechanics to be on the safe side. My car was great. It only needed one fix and they paid for it,” Joy wrote in the comments section of this report.
Another portion of the HBO show segment explained how a vehicle with a wholesale value of about $3,500 would cost someone buying from a BHPH operator many times that figure because of interest and the length of the contract.
Joy said, “Having a car has allowed me to go to school, so now I can afford the payments a little better. But I'm not really angry because even though I will pay double for the car, without them I would not have a car at all.”
Joy also touched on one of the most difficult parts of the BHPH business that the HBO segment didn’t paint favorably, either.
When referencing collections, Joy added, “If anyone owed me money, I’d call them all day also. That’s just a given. I don’t understand why people complain so much.”
If you haven’t seen the HBO show material, it’s available here and in the window at the top of this page.
For BHPH dealers who need more encouragement from fellow operators and industry experts, NABD’s next event could be the remedy.
NABD recently released details of its upcoming BHPH Conference set for the first days of November.
The conference, whose theme is “Best Practices to Succeed Now,” is designed for both new and experienced operators. The event marks the 13th annual fall conference hosted by NABD, which is the largest used-vehicle special interest group for BHPH operators with more than 13,000 members.
The conference — to be held Nov. 1-3 at the Rosen Shingle Creek Resort in Orlando, Fla. — features dual-track workshop sessions that will focus on best operating practices, compliance, technology and new developments that operators must learn in order to succeed in today’s highly competitive subprime auto finance market.
Attendees are encouraged to bring their families and enjoy one of the nation’s most popular destinations. NABD has arranged discounted room rates with no resort fees in an effort to make it affordable for everyone. Early registration and member discounts are available, while supplies last, by calling NABD at (832) 767-4759 or going online to www.bhphinfo.com.
A conference agenda and speaker information have been posted and will be updated on the NABD website at www.bhphinfo.com. Attendees and exhibitors are encouraged to register soon while space is still available.
Recent developments in the subprime auto finance market indicate that better days are ahead for the buy-here, pay-here industry. The last 24 months have seen fierce competition for deep subprime customers from credit unions, finance companies and franchised dealers. Much of this competition has been fueled by billions of dollars from auto bond securitizations packaged by Wall Street and sold to investors who were seeking high investment yields.
Some recent indicators suggest that better subprime market conditions are ahead for independent BHPH operators as follows:
1. Some of the deep subprime auto bond securitizations are not performing as projected and further deterioration is expected during the summer months.
2. Inventory availability continues to improve from auto bond repos, off-lease and rental vehicles, and from franchise trade-ins.
3. The deep subprime customers of today who are “car dependent” are finding new and certified pre-owned vehicles unaffordable for their limited financial capacity.
The aforementioned changes do not guarantee that every BHPH operator will automatically regain lost market share. Instead, they need to realize that the old ways of operating may not lead them to BHPH success in the subprime finance market of today.
We must learn from the deep subprime auto bond losses by recognizing the following:
1. Selling late model vehicles to weaker credit borrowers does not end well.
2. Lower down payments and repayments create longer terms, which increases default risk.
3. The higher-cost vehicles collateralizing auto bonds increases loss severity in early defaults.
A proper business model is needed to succeed in the competitive subprime auto finance market of today. Competition for the best customers will always exist so operators must adapt in order to compete successfully by:
1. Evaluating your business model from a cash return perspective. Does it generate a cash return commensurate with your investment in the portfolio?
2. Selling vehicles is important but “keeping them sold” is what generates long term success.
3. Relationships not transactions are needed to keep customers paying over the life of the contracts. These weaker credit customers need a transportation solution, which keeps the vehicle running throughout the contract term.
4. Collecting deep subprime installment contracts requires training, experience, and knowledge of the regulations in order to avoid significant operating and regulatory mistakes, which can cost millions of dollars.
5. There are three important elements in every BHPH deal: the customer, the vehicle and the deal structure. Good underwriting is needed at origination to properly match the customer with a vehicle they can afford.
In response to the changing market opportunities, I have surveyed and will discuss the business models that are working the best in the current environment and the operating practices that generate them at our next NABD conference in Orlando, Fla., on Nov. 1-3. Many of the nation’s best operators and experts will share their tips and techniques to help other operators succeed. The conference theme is “Best Practices to Succeed Now.”
Will your own operation capitalize on these new opportunities? Is your business model designed for future success? Are you making compliance mistakes that will cause failure? Now is the time to take a look “under your hood” to get these answers. Good Luck!
Ken Shilson is president and founder of the National Alliance of Buy-Here, Pay-Here Dealers (NABD), which is the nation’s largest special interest group for this industry. Information is available at www.bhphinfo.com. Ken is also president of Subprime Analytics, which provides portfolio performance improvement analysis for operators and capital providers. For more information on the analytical services visit www.subanalytics.com.
An operator who tries to sell used vehicles to credit-challenged consumers throughout Arkansas received a financial shot in the arm on Tuesday from Westlake Advanced Lending & Portfolio Services (ALPS).
Westlake ALPS, a division of Westlake Financial Services, finalized the formation of a $3.5 million revolving credit line with Star Finance of Hot Springs, Ark., an affiliate of Lloyd’s Auto Sales.
Westlake ALPS replaced Capital One Auto Finance as Lloyd’s exclusive institutional finance company, providing the operation with a secured revolving credit line to facilitate receivables growth for the next two years. Lloyd’s is an independent dealership based out of Hot Springs and serves the entire state.
“I was pleasantly surprised when I initially contacted Westlake,” Star Finance owner Lloyd Robertson said. “Right away, they were eager to assist me in securing a new line of credit. The entire process was easier than I ever expected, and they went above and beyond to expedite my deal and meet all of my financial needs.
“I now have much-needed capital at an affordable rate to help my portfolio grow and expand my business. I look forward to a long and healthy relationship with Westlake,” Robertson continued.
Westlake Financial Services’ ALPS division specializes in providing revolving credit lines to independent dealers throughout the United States. The division also acquires performing and distressed subprime loan portfolios from buy-here, pay-here dealerships and finance companies.
Forging relationships with operations such as Star Finance is the objective.
“We are excited to establish a partnership with Lloyd’s as they have proven to be a strong counterparty for Westlake Financial,” said Todd Laruffa, assistant vice president and division head of ALPS.
“Their business philosophy and growth strategy over the past 26 years is in line with Westlake’s vision, so we believe this partnership will be advantageous for both parties,” Laruffa added.
Dealerships, brokers and finance companies interested in learning more about Westlake’s ALPS can contact ALPS directly at (888) 937-2577.
For dealers who couldn’t make it to Las Vegas for the national events orchestrated by the National Alliance of Buy-Here, Pay-Here Dealers or the National Independent Automobile Dealers Association earlier this year, DealerSocket is going on a road trip to seven states to participate in more dealer events to showcase its soon-to-be released solutions.
DealerSocket is making this journey because the company is in the midst of its largest technology investment ever in the independent market along with sponsorships of several major state dealer associations and a lengthy lineup of convention appearances.
“DealerSocket’s dedication to independent dealers is unprecedented among tech companies in this space,” said Marylou Hastert, director of product marketing at DealerSocket. “We continue to increase our investment in independent product lines, including the release of an advanced new platform, called BlackBird, which will include a dealer management system (named iDMS) built specifically for independent dealers and a game-changing CRM.”
The company’s July appearances include the Georgia and Texas state IADA conferences.
• Georgia IADA Convention & Expo today through Saturday — Todd White, sales director, independent, at DealerSocket will present “Evolve at the Speed of Millennials,” pulling back the curtain on this fast-growing customer base as well as sharing new strategies and technologies to appeal to millennial buyers. Learn more at https://giadaconvention.org/speakers/todd-white.
• Texas IADA Conference & Expo on Sunday through Tuesday — For the first time ever, TIADA will open up the exhibit hall during select, non-exhibit hours for pre-scheduled demos. DealerSocket, a TIADA Business Partner, is now filling time slots on Monday between 2:30 and 5 p.m. for demos of products within its integrated technology platform tailored to independent dealers. Register for a demo at http://info.dealersocket.com/TIADA2016.html.
In addition to Georgia and Texas, DealerSocket will appear at IADA conventions for the Carolinas, Florida, Pennsylvania, Maryland and Delaware, along with NABD’s East Coast conference. The company will conduct live demos throughout each show highlighting its new integrated technology platform tailored to independent dealers, including DMS, CRM, inventory management software, data-mining tools, website offerings and digital marketing services.
A little more than a month after Wayne Reaves Software rolled out an enhancement to its current platform that can provide the capability for buy-here, pay-here dealers to furnish credit data to Equifax, the DMS provider completed an integration with F&I Express, a digital solution that can allow operators to electronically secure customer signatures and transmit contracts and other required data directly to participating sources.
Officials explained the incorporation of F&I Express eContracting within the Wayne Reaves DMS is designed to generate a streamlined process for dealers. Within the DMS, dealers can digitally send the customer’s deal information directly over to F&I Express to complete the contract. F&I managers are ensured of 100 percent accuracy and error-free contracts with a few clicks, sending the contract digitally to the customer for signatures.
Once completed, the digital contract can be easily tracked and submitted.
“This new integration with Wayne Reaves will now further simplify the electronic contracting process — eliminating the need for dealers to re-enter contract data into the DMS,” said Brian Reed, president and chief executive officer of F&I Express.
“The integration with Wayne Reaves allows us to serve a wider range of dealers and provides them with new functionality that streamlines the total process. Dealers who use eContracting with Wayne Reaves DMS integration will find the process to be error-free and even more efficient,” Reed continued.
Reed went on to mention that eContracting can allow operators to significantly modernize their processes. It can automate critical checkpoints by ensuring that required fields and signatures are entered and contract requirements are met during the review process.
In addition, dealers now have access to more than 120 providers through the connection with F&I Express.
The companies added that the integration between Wayne Reaves and F&I Express significantly improves the process for independent dealers and BHPH operators. All Web-based, customers can be met where they choose and the contracts can be completed instantly.
Wayne Reaves president Jason Reaves insisted independent dealers now have more options than ever to serve their customers.
“Wayne Reaves’ car dealer management software provides an easy way to manage every aspect of the business,” Reaves said. “Now with our integration with F&I Express, our customers are able to easily pull accurate rates for providers and submit contracts electronically, 100 percent error-free.”
Of the more than 150 independent dealerships included in Equifax’s latest edition of the National Independent Automobile Dealers Association Business Confidence Survey, a total of 34 percent indicated an anticipation of adding personnel within the next year, even though the expectations for sales growth during the third quarter and beyond softened.
How independent and buy-here, pay-here dealerships might use additional human capital surprised John Giamalvo a bit when the vice president of dealer services at Equifax examined the survey data, which was released on Wednesday during the 2016 NIADA Convention and Expo in Las Vegas.
“What really struck me was the area on which they’re going to increase human resources assets really lacked in the area that they need the most — in the finance area,” Giamalvo told BHPH Report during a phone conversation. “That struck me because it’s completely contradictory to where the business has been going in that space where I would suggest that’s the area that needs to be bolstered the most.”
According to the survey polling dealers during the second quarter of this year, only 4 percent of participating operators who intend to increase their workforce plan to bolster the finance department. The majority (53 percent) expect to reinforce the sales team while another 39 percent plan to increase personnel in the service department.
BHPH Report asked Giamalvo to consider why independent dealers are not pushing more staff into the finance department.
“I think there’s a little bit of legacy here where I think the independent and buy-here, pay-here space looks at traditional finance outlets and having to staff up for those areas, they don’t really look there,” he said.
“When you consider the last 15 years or so, the used-car market has gone from maybe 10 percent or 15 percent using financing for the sale to now well over 50 percent,” Giamalvo continued. “When you consider that, there might be a little legacy there. Certainly you need to have a well-thought-out finance department in place when half of the cars you’re going to put over the curb require financing to do so.”
Beyond what Giamalvo mentioned, Equifax highlighted three other major findings from the latest survey, including:
• Outlook for retail sales growth for the third quarter (44 percent) was less optimistic when compared to the growth expectations for the second quarter (56 percent), while there was an increase in the number of respondents who thought sales would remain the same.
• 48 percent of respondents anticipate their customer traffic will remain consistent, and 51 percent believe overall economic conditions in the auto industry will stay the same.
• 95 percent of dealers plan to maintain or raise their investment in digital marketing, with 30 percent expecting to decrease their spending on traditional media.
“While there are some indicators that show slightly less growth, dealers still see the industry as stable and the fact that investment levels across different marketing channels has increased is a sign that shift to digital and its potential, is a reality,” Giamalvo said.
While Equifax and NIADA have worked together on this survey for some time, it wasn’t until this week that the finding were distributed publicly. Giamalvo explained why independent and BHPH dealers should watch what these trends are doing.
“Independent and buy-here, pay-here dealers don’t have the benefits of the resources from the manufacturers and the benefits of the captive lenders, which tend to be massive and capable of moving the market,” he said. “The independent market and buy-here, pay-here dealers, they don’t have those resources and they don’t have those insights that can be provided by the manufacturers.
“The ability to move the needle that the manufacturers can provide with incentives and what the captives can do by buying deep,” he continued. “The captives buying deep is what’s eating into the buy-here, pay-here market quite a bit. They’re buying deep to move new cars.
“I think the independents and the buy-here, pay-here dealers responding to these surveys and understanding what you’re feeling in one state is aligned with what your brethren is feeling in other states as it relates to the issues these fellas are facing whether it’s financing or compliance, inventory issues, NIADA does a great job of crowd sourcing this information so they can focus in on the pain points and provide the thought leadership and disseminate it,” Giamalvo went on to say.
Equifax and NIADA conducted a presentation on Wednesday where experts from both organizations drilled deeper into the survey results. A video recording of the session can be found soon at www.niadatv.com.
“Partnering with Equifax on this quarterly business confidence survey has allowed us to gauge the pulse of the industry and the needs of our 15,000-plus dealer members,” NIADA senior vice president of dealer services Scott Lilja said about the survey, which can be viewed online here.
J.D. Byrider recently expanded its buy-here, pay-here dealership footprint in Colorado by bringing a new franchisee in the process.
The newest J.D. Byrider dealership is in Denver. It's the second store in Colorado but the first one for franchisee Rick Steenbock.
“My team and I are very excited to expand the J.D. Byrider brand to Denver,” Steenbock said. “We’re dedicated to bringing quality cars with affordable financing and a high level of customer service to a great community.”
The showroom at 6401 N. Federal Blvd. consists of 7,500 square feet along with 10 service bays.
This location is the second J.D. Byrider dealership to open this year as the company rolled out a store in Fort Smith, Ark. The company now has 169 locations in 36 states.
“Rick is an exceptional operator and will serve our customers well with his expansion in Denver,” said Tom Welter, vice president of franchising for J.D. Byrider. “He understands the value of our business model and operational support, both of which are driving the unprecedented unit growth we are experiencing.”
For more details, go to www.jdbyrider.com.
Mark Sauder's reaction when Ken Shilson approached him about becoming the newest member of the NABD Hall of Fame might have come straight from a script you’ve heard on countless TV shows or movies as the police are interrogating someone. Sauder told Shilson, “You’ve got the wrong guy.”
While the exchange between the executive who helped DriveTime Automotive reach immense successes and the president of the National Alliance of Buy-Here, Pay-Here Dealers had nothing to do with law enforcement or illegal activity, the dialogue was the beginning of how Sauder became the latest addition to the NABD Hall of Fame, joining Ed Bass, Julian Codding, Jim DeVoe, Martin Ingram, Bruce Kennett and John Linnehan Jr.
“There is no question that Mark has been an integral part of the success and growth of DriveTime. Anybody you talk to, even the top people at DriveTime, say that Mark is certainly one of the smartest — if not the smartest — guy in the operation, and I’m not taking anything away from (chief executive officer) Ray Fidel and (owner) Ernie Garcia, who deserve a lot of credit for what they’ve done,” Shilson said.
“Without a good financial guy in an operation like theirs, the success and growth would not have been possible,” Shilson continued.
“A top-flight chief financial officer is the difference between the best buy-here, pay-here operators and everybody else. I can point to every single buy-here, pay-here operator that has had the most long-term success, and they all had a top-flight CFO,” Shilson went on to say.
Sauder joined DriveTime in 1997 and became CFO five years later. During his time in that post, DriveTime grew to a nationwide network of stores that Sauder highlighted now make up the fourth-largest vehicle retailer nationwide. DriveTime also streamlined its payment collection processes and improved vehicle quality by incorporating pre-sale inspections along with warranties and vehicle service contracts.
Altogether, it’s been what Sauder described as “transforming of an ugly duckling into DriveTime.” Sauder insisted much of DriveTime’s success came because of Fidel and Garcia.
“Starting back in the 2002 timeframe through today, that whole revolution within what is considered the buy-here, pay-here industry and how we go about business, it’s allowed DriveTime to become the fourth largest vehicle retailer in the entire country,” Sauder said.
“It’s really been an entire revolution in auto retailing for credit-challenged individuals,” he continued.
Sauder also recollected what it was like being DriveTime’s CFO during the Great Recession, a time when many segments of the auto industry struggled and some didn’t make it through.
“In the 2007 and 2008 timeframe when the securitization market went away with the recession and bank lines were dramatically reduced, weathering that financial storm was great,” Sauder said. “The commitment of our owner Ernie Garcia to put money back into the company during that timeframe allowed us not only to survive through that period, but the changes we made through that period really set us up for success we’re enjoying today. That timeframe was definitely a memorable and challenging experience.”
Along with mentioning Fidel and Garcia often during a conversation with BHPH Report, Sauder also praised the entire workforce DriveTime has for the company’s accomplishments.
“I’ve worked with some of the brightest people I know. They have really great hearts and care for each other and for the company. There’s a focus placed on the company’s culture,” Sauder said.
“It truly is and has been a differentiator for DriveTime’s success,” he added.
Sauder hesitated when Shilson stated that NABD’s Hall of Fame committee wanted to induct him during this year’s National Conference for BHPH at the Wynn in Las Vegas.
“When Ken reached out to me, I was actually shocked that I had been nominated for the Hall of Fame,” Sauder said. “My first response was, ‘You’ve got the wrong guy. There are others who deserve it way more than me.’ He encouraged me to accept the nomination, stating the committee wanted to acknowledge the critical importance of a CFO and their role in the success of a buy-here, pay-here company related to finance, analytics, risk, accounting, integrity, controls, transparency, access to capital.
“A buy-here, pay-here or any independent dealer, for them to grow or succeed over the long term requires a strong CFO working in conjunction with the rest of the leadership team,” Sauder continued. “After he walked through all of that, I humbly accepted the honor on behalf of all of the other CFOs who have been instrumental in the success of their companies.
“It’s a very meaningful and humbling,” added Sauder, whose relationship with Shilson dates back nearly 20 years when NABD first started to hold national events to help BHPH operators.
Shilson reiterated why NABD chose Sauder after inducting operators such as Bass, Codding, DeVoe, Ingram, Kennett and Linnehan who spent nearly their entire careers in showrooms hammering out contracts with customers who had damaged credit for one reason or another.
“You have to have somebody in an organization come to you like they do every day in this business and say, ‘I’ve got a great idea. Here’s what we want to do.’ This happens every day in every operation in buy-here, pay-here,” Shilson said.
“You have to have somebody in the operation who will say, ‘OK, let’s look at the impact of what that’s going to do to us, what it’s going to cost, what the cause and effect are going to be and how that’s going to impact our future.’ That’s what a good chief financial officer like a Mark Sauder does. That’s what he is,” Shilson went on to say.
Sauder no longer is the CFO at DriveTime, but he is still with the family of companies owned by Garcia. Sauder recently became the president of SilverRock Holdings, which provides F&I products such as extended vehicle service contracts, global positioning system (GPS) theft recovery products, guaranteed asset protection products (GAP) and auto insurance solutions
“We’re leveraging all of our knowledge gained within DriveTime to offer proven products designed to help independent dealers,” Sauder said. “It’s all designed in such a way to help independent dealers succeed. Our goal is to become the No. 1 F&I provider for independent dealers. We’re committed to making that happen.”
Four of the operators who attended the 18th annual National BHPH Conference hosted by the National Alliance of Buy-Here, Pay-Here Dealers last week offered glowing assessments of what they took away from the Wynn Resort & Casino in Las Vegas.
More than 70 speakers and panelists discussed important subjects collected under the theme of “Navigating the Road to BHPH Success.” Three days of material might seem overwhelming, but Owen Gorman of the Gene Gorman Automotive Group said he enjoyed it very much.
“The sessions were just long enough to be informative and not drawn out,” said Gorman, who operates dealerships in the Florida cities of Port Charlotte and Punta Gorda. “The session moderators are a must, and they did a good job.”
The educational sessions featured 14 different workshops covering:
—Current industry developments
—Accounting and tax updates
—Lowering reconditioning costs
—Add-on products that add value
—Maximizing tax refunds
—Using the web and social media to gain market share
—Payment devices
—Technology solutions for success
—Turning charge-offs into cash
—Capital
—Deal jacket reviews
—Inventory acquisition, disposition and financing.
All sessions were interactive, allowing attendees to ask questions and get answers on these important topics.
“The NABD gives me a front-row seat to all of our industry’s hot-button topics,” said David Bearly, who operates Dave’s Greenlight Auto Sales in Greenville, Ill.
“Now that I know what I don’t know, I can direct my efforts to help improve my customers’ experience while protecting my bottom line,” Bearly added.
Lloyd Robertson called this year’s NABD event a “win-win.” Robertson runs Lloyd’s Auto Sales in Hot Springs, Ark.
“Not only did I learn practices that will make me a better, more efficient operator, I will be much more profitable because I learned what not to do,” Robertson said.
Some of what Robertson and other attendees learned about what not to do likely stemmed from the presentation by Malini Mithal, a director at the Federal Trade Commission. Mithal discussed FTC’s jurisdiction and enforcement authority over the BHPH industry and her presentation included examples of current FTC initiatives involving deceptive practices, fair credit reporting and other violations including the furnisher rule, risk based pricing, privacy and data security and other violations.
Mithal also provided helpful guidance to a jam-packed audience on compliance reference materials.
“This session will help attendees avoid regulatory mistakes that can cost them millions,” said NABD president Ken Shilson. “We are deeply grateful to Milani and to the FTC for their candor and insights.”
Other general education sessions included a presentation by Cox Automotive leaders on “simplifying how vehicles are acquired and sold,” a benchmarks and trends update, and the Hall of Fame induction of Mark Sauder, former chief financial officer of DriveTime.
The program concluded with interactive sessions covering collections best practices, phone skills for success, succession planning and a discussion on how regulators are changing the BHPH business.
“Attendees who stayed to the end derived significant information and value from the Thursday morning sessions,” Shilson said.
John Linnehan Jr. and Tim Byrd of DealerRe conducted a motivational session on the final day that got the attendees in compliance spiritually.
“NABD is extremely grateful for their participation and contribution to the success of this event,” Shilson said.
The conference began with a first-timers reception that had more than 200 attendees.
Donnie Cochran wasn’t a first-time attendee; he has come to NABD’s national conference 11 times.
“Enjoy it every year,” said Cochran, who operates Bayou Auto Sales in New Iberia, La.
NABD sold out its exhibit hall as vendors and service providers enjoyed their time at the Wynn, as well.
“This was the best conference that I have attended in my 21 years in business,” Tax Refund Services and TaxMax founder Bill Neylan said.
“We had a record number of dealers come to our booth to learn about our products, and we even had proactive dealers sign up for our service right in our booth,” Neylan continued. “Dealers at the NABD Conference were dealers who were serious about their businesses and were ready to act on products that can better their dealerships. Congrats on such a great show, NABD!”
CAR Financial president Rick Potter offered this assessment for operators who did not make to Las Vegas this year.
“NABD promised it to be one of the greatest BHPH events in history, and it did not fail to meet this objective,” Potter said. “I witnessed standing-room-only crowds in some of the sessions due to the very robust attendance, and talked to a large number of new and prospective dealers during the vendor showcase periods.
“The seminars and speaker panels were fantastic, and focused on the most influential aspects of our industry today. If you did not attend this event this year, don’t make the same mistake in 2017,” Potter added.
For operators who couldn’t make the trip, conference presentations have been posted on the NABD website at www.bhphinfo.com and can be downloaded for free.
“2016 NABD was the single best presentation of events that I have experienced in my 10 years in this industry,” Cal Amp’s Bill Caan said. “Record attendance and a dynamic lineup of speakers and topics made for an outstanding three days.
“Ken and Ingram (Walters) continue to build on previous shows and their hard work has paid dividends. Future NABD events are a can’t-miss for industry participants and vendors,” Caan went on to say.
NABD announced that its next event will be a BHPH conference Nov. 1-3 at the Rosen Shingle Creek Resort in Orlando, Fla. “This facility is the nicest resort in Orlando and NABD offers discounted room rates with no resort fees while supplies last,” Shilson said.
More information about that conference is available on the NABD website or by calling its headquarters at (832) 767-4759.
“It’s always exciting to see a diverse group of dealers come together with a focus on improving their business and the industry as a whole. I’m already looking forward to the next NABD event,” NextGear Capital’s Lori Kahre said.
NABD also is considering offering BHPH Master Dealer Certification training. A brief survey is available on the NABD website and survey responses are requested.
Leading into the 18th annual National Conference for BHPH hosted by the National Alliance of Buy- Here, Pay-Here Dealers, we spoke with Ken Shilson, the president and founder of NABD, about a host of issues impacting operators.
BHPH Report asked Shilson about the diminishing market presence BHPH dealers possess nowadays, how moves made by investment leaders on Wall Street are impacting dealers on Main Street, as well as some tidbits that dealerships can leverage during the second half of the year.
How are BHPH operators surviving the storm from subprime finance companies that seems to have been going on for several years now?
Based on numbers that Experian has provided through December 2015, it appears that buy-here, pay-here has lost about 40 percent of its market share to subprime finance companies, credit unions and franchised dealers. That’s a pretty big slice out of the market, and therefore it has to result in some adjustments. One of the big adjustments is in order to survive today you have to have financial flexibility and capital availability. You have to get your financial house in order to be able to weather the Storm, so to speak, where all this competition is going on. If you to sell a car today to pay the bills tomorrow you’re in deep trouble because it’s going to take time for us to regain our market share. It’s not going to come back automatically.
You must have a compliance focus today. That’s because in the past the industry has not been scrutinized the way it is now. You cannot ignore that big brother is looking. You can’t ignore it. Whether you’re big or small, or in between, you better get your compliance management system in place.
You have to have consistent underwriting. Trying to match what Wall Street is doing, what franchised dealers are doing and what credit unions have done is not smart. What is smart is to keep a consistent underwriting approach and follow your business model. I have a saying: Never match underwriting with stupidity. If you try to do it, you’ll end up with disastrous results. You need to be consistent and disciplined in your underwriting.
You need to get efficient by embracing technology. With the loss in market share, you have to reduce your costs. You have to operate more efficiently in order to operate more profitably. In other words, you need to be able to do more with less. Th e good news is that once the industry rebounds you’ll make that much more money because you’ve already streamlined things to be more profitable.
No need for specific numbers, but what’s your assessment as to how many good operators have departed the business in the last couple of years? What void is it leaving?
I think that’s a great question and no one has asked me that question before. It’s a very valid question. My answer is none. No good operators have left the business because good operators understand that it’s a marathon, not a 100- yard dash. They’re prepared to stay the course. Operators. What we’ve lost is people who were over-leveraged, who didn’t discipline themselves properly, who tried to match underwriting with stupidity, who didn’t get compliant, who didn’t do any of the things that I just said.
They continue to fail. They will continue to fail as long as they don’t have a long-term plan. I know these guys. I know who the good operators are, not based on subjectivity but based on performance. They’re all still there.
Both Fitch Ratings and Moody’s have shared reports this year about the deterioration of subprime auto ABS. What’s your reaction to the concern shown by Wall Street?
I have been tracking this for two years now. I talk with Wall Street people who are both investors and securitizers. I have said for the last year, maybe the last 18 months, that there are some deep subprime securitizations that were poorly put together and poorly structured. To that end, they are starting to fail. What I mean by that is the securitizers who had no experience in the underwriting or collection of this kind of paper, those who did not structure deals where they matched the right vehicle with the right customer, are failing and will continue to fail. Not all securitizations are bad. Th ere are many that are performing well. Those people who structured them right and those people who did do the right matching process, that paper continues to perform. But I think in the months ahead more of these poorly structured ABS transactions are going to surface. Th is is going to create an enormous opportunity for the buy-here, pay-here industry to get the customers and those vehicles back from the defaults that come out of these poorly structured deep subprime deals.
At the federal level, how informed — or misinformed — are regulators and lawmakers when it comes to how BHPH dealerships operate? What can be done to improve the situation?
There are some regulators that I would consider to be fairly well informed and others who are not. I don’t think it’s fair to generalize one way or the other. What I would say is the key To this is a continuing communication, which needs to exist between the industry leaders and the regulators to try to help more of them to have a clearer understanding of the importance of subprime auto finance industry in America today. How important of a source of transportation it is? Now at the end of the day as the leaders step up to do that — and I want to applaud NIADA’s efforts through their leadership conferences that NABD totally supports — it’s not going to be what NIADA does or what NABD does, it’s what the individual operators do. We’re going to be judged by their actions. If the industry is waiting for us to make all of the problems go away, that’s not going to happen. They’ve got to take compliance seriously. They’ve got to operate properly within regulatory constraints to do the right things or suffer the consequences.
The NABD is approaching 20 years of hosting the National Conference. What’s your assessment of the journey not only for the organization but for the BHPH industry during that span?
We want to thank the tremendous support from the many operators in the industry and other, our sponsors, people who are involved in the industry who have embraced and supported us over that journey. To them I say this: Buy-here, pay-here is a vital source of transportation in America. Without the buy-here, pay-here industry, millions and millions of Americans would not have any transportation at all and would have difficulty working and living. Buy-here, pay-here is a critical component of the American transportation system. Our consumers are car dependent.
Now NABD has championed the cause for the self-financed, buy-here, pay-here operators throughout its entire existence. We believe that the industry continues to need that type of representation. At the end of the day, we believe that the education and the training that we’re providing and offering have never been more important in this journey. The journey is not over. The journey continues.
What pearls of knowledge and wisdom would you like to leave with BHPH operators going into the second half of 2016?
I urge operators to stay the course, to get their capital and financial flexibility in order to continue in the highly competitive environment of today. I urge them to reconnect with their customers, which will help them regain market share. I urge them to take compliance very seriously and to get a compliance management system in place.
I would also say to them if they are not willing to get the education and training necessary to help them do those things, they need to expect the worst results. We’re at a time where you have to have more skill and more knowledge to navigate the course successfully than ever before. That cannot be attained by doing the same old things every day and expecting a different result.
