OAK BROOK, Ill. — A veteran dealer posed a scenario to vAuto's Dale Pollak recently about getting into the buy-here, pay-here side of the business while maintaining a typical used-vehicle dealership at the same location.

Despite a well-researched plan, Pollak recommended that the dealer not proceed. Why?

First, here is the situation the dealer presents.

The dealer could take over a BHPH operation that has four lots and about 300 vehicles in inventory. The primary method of reaching customers is through Craigslist with $1,500-down deals. The Craigslist ads contain a random amount of photos, resulting in the turn of about 60 to 80 vehicles monthly.

"He is not tapping into the retail market for his vehicles at all and I feel that if I implement what I want to, I can sell all of his inventory every month and do buy-here, pay-here deals at the same time," the dealer told Pollak.

"I believe that doing everything that I want and taking care of the customers properly when they come in, I can achieve the turn of 17-18 times a year like the top performers that use vAuto," the dealer continued.

Here are the rest of the specific points for this dealer's strategy:

—Start retailing all of the vehicles so the store is not just limited to BHPH, with a disclaimer that states the price advertised is the cash/outside financing price.

—Go on Cars.com and AutoTrader.com Premium for 2006 model-year and older, shooting for at least 30,000 VDPs a month.

—Send inventory out to every third-party website possible.

—Monitor and price vehicles using vAuto.

—Enhance website for search-engine optimization.

—Take 32 high quality photos of each vehicle with video.

—Get the vehicles online as fast as possible.

—Post to Craigslist and monitor it.

—Reassess current salespeople and determine if additions or changes are needed.

—Start retailing more expensive vehicles in order to get trades to create the feeling customers are not just at a BHPH lot.

However, Pollak discovered what he calls a fundamental flaw in the dealer's proposal.

"Specifically, I'm referring to the fact that the rules of engagement for a subprime/buy-here, pay-here lot, and traditional used-car sales are completely different," Pollak insisted. "Everything from what you stock to how you value vehicles to how you price and promote them and handle customers is different. 

"Really, the only thing that the secondary and traditional used-car businesses have in common is the fact that there is a car involved in the transaction," he added.

Pollak told the dealer that he's not the first one to put together such a store plan.

"Too many dealers make the mistake of not recognizing these differences and as a consequence, try running two businesses from one lot with one strategy," Pollak declared. The result is that you end up doing a substandard job at each."

Pollak then recommended the dealer take a different approach. 

"The ideal situation if it's possible is to have a different lot, different cars, different pricing, different website, different sales people and so on," he advised the dealer. "When this type of separation is not feasible, you should try and create as much separation as possible because you'll need to operate two separate businesses at the same location. It's just plain difficult to do.

"I'm sorry if I've rained on your parade, but I just think that you need to know the challenges that will await you," Pollak concluded in his message to the dealer.